false Chemours Co 0001627223 0001627223 2020-05-05 2020-05-05

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

May 5, 2020

Date of Report (Date of Earliest Event Reported)

The Chemours Company

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware		001-36794		46-4845564
(State or Other Jurisdiction		(Commission		(I.R.S. Employer
Of Incorporation)		File Number)		Identification No.)

 

1007 Market Street

Wilmington, Delaware, 19801

(Address of principal executive offices)

 

Registrant’s telephone number, including area code: (302) 773-1000

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class		Trading Symbol(s)		Name of Exchange on Which Registered
Common Stock ($0.01 par value)		CC		New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company

☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

 

---

Item 2.02Results of Operations and Financial Condition.

 

On May 5, 2020, The Chemours Company (the “Company”) issued a press release regarding its first quarter 2020 financial results. A copy of the press release is furnished hereto as Exhibit 99.1.

 

The information furnished with this report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and it will not be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

 

Item 8.01Other Events.

 

The following risk factor supplements the “Risk Factors” in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

 

A pandemic, epidemic, or other outbreak of infectious disease may have a material adverse effect on our business operations, results of operations, financial condition, and cash flows.

 

Our operational and financial condition may be negatively impacted by the widespread outbreak of any illnesses or communicable diseases, as well as any associated public health crises that may ensue. In December 2019, a novel coronavirus disease (“COVID-19”) was identified in Wuhan, China. COVID-19 has continued to spread globally, including areas in which we operate and sell our products. In March 2020, the World Health Organization declared COVID-19 a global pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. Throughout early 2020, the COVID-19 pandemic has negatively impacted the global economy, disrupting global supply chains and creating significant uncertainty and volatility in financial markets. We are closely monitoring the effects of the COVID-19 pandemic on all aspects of our business, including its adverse impacts on our employees, customers, suppliers, vendors, business partners, and supply and distribution channels, as well as our ability to execute our business strategies and objectives. As a multi-national corporation, we are also closely monitoring the operational and financial impacts of recently introduced restrictive local and national laws and regulations, as well as recommendations set forth by public health organizations and governmental organizations to impede the spread of COVID-19.

 

---

The extent to which the COVID-19 pandemic will adversely impact our Company depends on currently evolving factors, as well as future developments that we are not able to predict with certainty. Such factors and potential developments may include but are not limited to:

•

the duration, intensity, and spread of the virus, including how quickly and to what extent normal economic and operating conditions can resume;

•

the health of our employees, and our ability to meet staffing needs at our manufacturing sites and in other critical functions;

•

the health of the workforce of certain third-party service providers or contractors, and their ability to provide contracted services at our manufacturing sites or in other critical functions;

•

federal, state, local, and foreign governmental and/or self-imposed actions that promote general safety and well-being, such as restrictions on travel and transport, regional quarantines, temporary site or office closures, and other social distancing measures;

•

volatility in the broader financial markets, which may negatively impact our credit rating and our ability to obtain additional financial liquidity through either capital or debt offerings at acceptable terms, if at all;

•

our ability to pay dividends or repurchase common stock in the future;

•

consumer and business confidence and the resulting decreases in our customers’ demand and spending patterns, as well as their respective abilities to fulfill any existing purchasing obligations;

•

generation of sufficient cash flows to fulfill our indebtedness and general business obligations;

•

increased operating costs to deal with the impacts of COVID-19;

•

supply chain inefficiencies or ineffectiveness driven by the impacts of COVID-19 on our suppliers, as well as any increases in freight expense or other costs of transport;

•

modifications to our operating footprint driven by potential future developments, such as decreases in consumer demand and additional restrictive federal, state, local, and foreign government actions;

•

impairments to our fixed and/or intangible assets, including goodwill, that may be recorded as a result of weaker prolonged economic conditions;

•

interruptions in any services provided by our business partners; and,

•

the potential negative impacts on our internal controls over financial reporting, including potential future significant deficiencies or material weaknesses, as a result of changes in working environments.

 

The widespread outbreak of any illness or communicable disease could result in, and in the instance of the COVID-19 pandemic has resulted in, a significant health crisis that adversely affects local and global economies and financial markets, including the companies that operate within these conditions. Each of the above considerations related to the COVID-19 pandemic remain highly uncertain and subject to change, continue to evolve, and have the potential to have a material adverse impact on our business operations, results of operations, financial condition, and cash flows.  However, we cannot predict with certainty the magnitude of such impacts at this time. The impact of COVID-19 may also exacerbate our other risks, as described in Item 1A – Risk Factors included in our Annual Report on Form 10-K for the year ended December 31, 2019, any of which could have a material effect on us. The situation continues to evolve at a rapid pace, and additional impacts of which we are not currently aware may also arise.

 

Item 9.01Financial Statements and Exhibits.

 

(d) Exhibits.

 

99.1Press release dated May 5, 2020.

 

104 The cover page from this Current Report on Form 8-K, formatted in Inline XBRL.

 

 

---

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

THE CHEMOURS COMPANY
By:		/s/ Sameer Ralhan
		Sameer Ralhan
		Senior Vice President, Chief Financial
		Officer and Treasurer
Date:		May 5, 2020

 

 

 

EXHIBIT 99.1

 

 

The Chemours Company Reports First Quarter 2020 Results

Preserving Strong Balance Sheet and Liquidity Position behind Solid Q1 Results

 

WILMINGTON, Del., May 5, 2020 /PRNewswire/ --

 

First Quarter 2020 Highlights

 

 

Update on COVID-19 Response

 

 

The Chemours Company (Chemours) (NYSE: CC), a global chemistry company with leading market positions in Fluoroproducts, Chemical Solutions and Titanium Technologies, today announced its financial results for the first quarter 2020 and its response to the COVID-19 pandemic.

 

"Our Q1 results were consistent with our expectations thanks, in part, to improved operating performance across our network. At the same time, we did begin to feel the early impact of COVID-19 in some areas of the business," said Chemours President and CEO Mark Vergnano. “We are laser focused on the safety of our employees and the support of our customers. I am proud to report that our quick implementation of health screening procedures and procurement of additional protective equipment has allowed us to operate our manufacturing facilities with minimal coronavirus-related disruption. In addition, we have enacted a broad set of initiatives to reduce costs that will help improve our financial flexibility and enable us to promptly respond to changing conditions in the near term."

 

First quarter 2020 net sales were $1.3 billion in comparison to $1.4 billion in the prior-year first quarter. Results were driven primarily by higher volume in Titanium Technologies, more than offset by lower volume in Fluoroproducts and lower global average prices across all segments. First quarter net income was $100 million, or $0.61 per diluted share. Adjusted Net Income was $118 million, with Adjusted EPS of $0.71 up 8% and 13% respectively from the prior year. Adjusted EBITDA for the first quarter 2020 was $257 million in comparison to $262 million in the previous year first quarter, a result of lower F-Gas quota sales and prices, partially offset by reduced costs year-over-year.

 

Fluoroproducts
In the first quarter 2020, Fluoroproducts segment net sales were $600 million in comparison to $687 million in the prior-year. Softer demand was primarily driven by the impact of COVID-19 in Asia Pacific and several end markets globally, resulting in lower volumes versus last year's first quarter. Average price was down 4 percent on a year-over-year basis. Segment Adjusted EBITDA of $140 million decreased 12 percent versus the prior-year quarter, negatively impacted by limited F-gas quota sales due to illegal imports of HFC refrigerants into the EU. This was partially offset by the improved efficiency from the Corpus Christi Opteon™ facility ramp up, lower costs due to improved operational execution and cost reductions across the business.  Margins improved sequentially from 19% in the fourth quarter 2019 to 23% in the first quarter 2020.

 

---

EXHIBIT 99.1

 

Chemical Solutions
Chemical Solutions segment net sales were $92 million, a 31 percent decrease versus the prior-year first quarter. Volumes were lower year-over-year primarily driven by the Methylamines and Methylamides business divestiture in the fourth quarter 2019. Lower average prices were driven by lower raw material price pass-throughs and regional customer mix. Adjusted EBITDA of $15 million was flat in comparison to the prior-year quarter, reflecting a 500 bps improvement in margins to 16% from 11% in the prior-year.

 

Titanium Technologies
Titanium Technologies segment net sales in the first quarter were $613 million, up 10% in comparison to the prior-year quarter. Volumes improved 19% on year-over-year basis and 2% on a sequential basis. The higher volume of Ti-Pure™ titanium dioxide was driven by a combination of steady demand and expected market share regain in plastics. Global average selling prices declined by 2% sequentially and 8% year-over-year. Segment Adjusted EBITDA increased by 10% to $138 million, in comparison to $126 million in last year’s first quarter. Margins improved sequentially from 19% in the fourth quarter 2019 to 23% in the first quarter 2020 reflecting improved fixed cost absorption.

 

Corporate and Other
Corporate and Other in the first quarter 2020 represented a $36 million offset to Adjusted EBITDA, versus a $38 million offset in the prior-year quarter. This decrease was primarily attributable to lower external spend.

 

The company realized an Adjusted Effective Tax Rate of approximately 5 percent for the quarter. 

 

Liquidity
As of March 31, 2020, consolidated gross debt was $4.1 billion. Debt, net of $714 million cash, was $3.4 billion, resulting in a net leverage ratio of approximately 3.3 times on a trailing twelve-month Adjusted EBITDA basis.  Total liquidity was $1.4 billion, comprised of $714 million of cash and $699 million of revolver capacity.  

 

Cash provided by operating activities for the first quarter of 2020 was $44 million, versus $(44) million in the prior-year quarter. Capital expenditures for the first quarter 2020 were $106 million, versus $133 million in last year's first quarter. Free Cash Flow for the first quarter 2020 was a $62 million outflow versus the prior-year quarter of a $177 million outflow.

 

As previously announced, the company drew down $300 million of the revolving credit facility on April 8, 2020 as a precautionary action. The repayment of these borrowings is expected to occur when the uncertainty in the global markets subsides.

 

Outlook
Vergnano said: "In light of the uncertainty created by this pandemic, we are withdrawing our full-year 2020 guidance. However, Chemours is quickly taking steps to best weather the current conditions, including protocols to safeguard the health and well-being of our employees as COVID-19 runs its course. At the same time, we have taken decisive action to reduce FY 2020 costs by reducing overhead, discretionary spend, and CAPEX. The entire Chemours team is fully engaged to serve our customers, render aid in our communities around the world, and assist in the fight against COVID-19." 

 

Conference Call
As previously announced, Chemours will hold a conference call and webcast on Wednesday, May 6, 2020 at 8:30 AM EDT. The webcast and additional presentation materials can be accessed by visiting the Events & Presentations page of Chemours' investor website, investors.chemours.com. A webcast replay of the conference call will be available on the Chemours investor website.

 

---

EXHIBIT 99.1

 

About The Chemours Company
The Chemours Company (NYSE: CC) is a global leader in titanium technologies, fluoroproducts, and chemical solutions, providing its customers with solutions in a wide range of industries with market-defining products, application expertise and chemistry-based innovations. Chemours ingredients are found in plastics and coatings, refrigeration and air conditioning, mining, and general industrial manufacturing. Our flagship products include prominent brands such as Teflon™, Ti-Pure™, Krytox™, Viton™, Opteon™, Freon™ and Nafion™. In 2019, Chemours was named to Newsweek’s list of America’s Most Responsible Companies. The company has approximately 7,000 employees and 30 manufacturing sites serving approximately 3,700 customers in over 120 countries. Chemours is headquartered in Wilmington, Delaware and is listed on the NYSE under the symbol CC.

 

For more information, we invite you to visit chemours.com or follow us on Twitter @Chemours or LinkedIn. 

 

Non-GAAP Financial Measures
We prepare our financial statements in accordance with Generally Accepted Accounting Principles (GAAP). Within this press release, we may make reference to Adjusted Net Income (Loss), Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Adjusted Effective Tax Rate, Return on Invested Capital and Net Leverage Ratio which are non-GAAP financial measures. The company includes these non-GAAP financial measures because management believes they are useful to investors in that they provide for greater transparency with respect to supplemental information used by management in its financial and operational decision making.

 

Management uses Adjusted Net Income (Loss), Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Adjusted Effective Tax Rate, Return on Invested Capital and Net Leverage Ratio to evaluate the company's performance excluding the impact of certain noncash charges and other special items which we expect to be infrequent in occurrence in order to have comparable financial results to analyze changes in our underlying business from quarter to quarter.

 

Accordingly, the company believes the presentation of these non-GAAP financial measures, when used in conjunction with GAAP financial measures, is a useful financial analysis tool that can assist investors in assessing the company's operating performance and underlying prospects. This analysis should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. This analysis, as well as the other information in this press release, should be read in conjunction with the company's financial statements and footnotes contained in the documents that the company files with the U.S. Securities and Exchange Commission. The non-GAAP financial measures used by the company in this press release may be different from the methods used by other companies. For more information on the non-GAAP financial measures, please refer to the attached schedules or the table, "Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures" and materials posted to the company's website at investors.chemours.com.

 

Forward-Looking Statements
This press release contains forward-looking statements, within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to a historical or current fact. The words "believe," "expect," "will," "anticipate," "plan," "estimate," "target," "project" and similar expressions, among others, generally identify "forward-looking statements," which speak only as of the date such statements were made. These forward-looking statements may address, among other things, the outcome or resolution of any pending or future environmental liabilities, the commencement, outcome or resolution of any regulatory inquiry, investigation or proceeding, the initiation, outcome or settlement of any litigation, changes in environmental regulations in the U.S. or other jurisdictions that affect demand for or adoption of our products, anticipated future operating and financial performance, business plans, prospects, targets, goals and commitments, capital investments and projects, plans for dividends or share repurchases, sufficiency or longevity of intellectual property protection, cost reductions or savings targets, plans to increase profitability and growth, our ability to make acquisitions, integrate acquired businesses or assets into our operations, and achieve anticipated synergies or cost savings, all of which are subject to substantial risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Forward-looking statements are based on certain assumptions and expectations of future events that may not be accurate or realized. These statements are not guarantees of future performance. Forward-looking statements also involve risks and uncertainties that are beyond Chemours' control. In addition, the current COVID-19 pandemic has significantly impacted the national and global economy and commodity and financial markets. The full extent and impact of the pandemic is unknown and to date has included extreme volatility in

 

---

EXHIBIT 99.1

 

financial and commodity markets, a significant slowdown in economic activity, and increased predictions of a global recession. The public and private sector response has led to significant restrictions on travel, temporary business closures, quarantines, stock market volatility, and a general reduction in consumer and commercial activity globally. Matters outside our control have affected our business and operations and may or may continue to limit travel of employees to our business units domestically and internationally, adversely affect the health and welfare of our personnel, significantly reduce the demand for our products, hinder our ability to provide goods and services to customers, cause disruptions in our supply chains, adversely affect our business partners or cause other unpredictable events. Additionally, there may be other risks and uncertainties that Chemours is unable to identify at this time or that Chemours does not currently expect to have a material impact on its business. Factors that could cause or contribute to these differences include the risks, uncertainties and other factors discussed in our filings with the U.S. Securities and Exchange Commission, including in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and in our Annual Report on Form 10-K for the year ended December 31, 2019. Chemours assumes no obligation to revise or update any forward-looking statement for any reason, except as required by law.

 

CONTACT:

 

INVESTORS 
Jonathan Lock 
VP, Corporate Development and Investor Relations 
+1.302.773.2263 
investor@chemours.com 

 

NEWS MEDIA 
David Rosen
Global Leader, Media Relations and Strategic Communications
+1.302.773.2711
media@chemours.com

 

 

---

EXHIBIT 99.1

 

 

The Chemours Company

Interim Consolidated Statements of Operations (Unaudited)

(Dollars in millions, except per share amounts)

 

 

---

EXHIBIT 99.1

 

 

The Chemours Company

Interim Consolidated Balance Sheets

(Dollars in millions, except per share amounts)

 

 

---

EXHIBIT 99.1

 

 

The Chemours Company

Interim Consolidated Statements of Cash Flows (Unaudited)

(Dollars in millions)

 

 

---

EXHIBIT 99.1

 

 

The Chemours Company

Segment Financial and Operating Data (Unaudited)

(Dollars in millions)

 

 

 

 

 

---

EXHIBIT 99.1

 

 

The Chemours Company

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures (Unaudited)

(Dollars in millions)

 

Adjusted EBITDA and Adjusted Net Income to GAAP Net Income Reconciliation

 

Adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”) is defined as income (loss) before income taxes, excluding the following items: interest expense, depreciation, and amortization; non-operating pension and other post-retirement employee benefit costs, which represents the components of net periodic pension (income) costs excluding the service cost component; exchange (gains) losses included in other income (expense), net; restructuring, asset-related, and other charges; asset impairments; (gains) losses on sales of businesses or assets; and, other items not considered indicative of the Company’s ongoing operational performance and expected to occur infrequently. Adjusted Net Income is defined as net income (loss) attributable to Chemours, adjusted for items excluded from Adjusted EBITDA, except interest expense, depreciation, amortization, and certain provision for (benefit from) income tax amounts.

 

 

---

EXHIBIT 99.1

 

 

The Chemours Company

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures (Unaudited)

(Dollars in millions, except per share amounts)

 

Adjusted Earnings per Share to GAAP Earnings per Share Reconciliation

 

Adjusted earnings per share (“EPS”) is calculated by dividing Adjusted Net Income by the weighted-average number of common shares outstanding. Diluted Adjusted EPS accounts for the dilutive impact of stock-based compensation awards, which includes unvested restricted shares. Diluted Adjusted EPS considers the impact of potentially-dilutive securities, except in periods in which there is a loss because the inclusion of the potentially-dilutive securities would have an anti-dilutive effect.

 

 

 

---

EXHIBIT 99.1

 

 

The Chemours Company

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures (Unaudited)

(Dollars in millions)

 

Free Cash Flows to GAAP Cash Flow Provided by Operating Activities Reconciliation

 

Free Cash Flows is defined as cash flows provided by (used for) operating activities, less purchases of property, plant, and equipment as shown in the consolidated statements of cash flows.

 

 

 

Return on Invested Capital Reconciliation

 

Return on Invested Capital (“ROIC”) is defined as Adjusted EBITDA, less depreciation and amortization (“Adjusted EBIT”), divided by the average of invested capital, which amounts to net debt, or debt less cash and cash equivalents, plus equity.