The Chemours Company Reports Third Quarter 2018 Results, Solid Earnings Improvement Across All Segments

Interim Consolidated Statements of Operations (Unaudited)

(Dollars in millions, except per share amounts)

Nine Months Ended September 30,

2018

2017

2018

2017

Net sales

$

1,628

$

1,584

$

5,174

$

4,608

Cost of goods sold

1,151

1,119

3,603

3,347

Gross profit

477

465

1,571

1,261

Selling, general, and administrative expense

163

153

466

461

Research and development expense

20

20

61

62

Restructuring, asset-related, and other charges

12

8

32

31

Total other operating expenses

195

181

559

554

Equity in earnings of affiliates

10

9

32

26

Interest expense, net

(47)

(55)

(148)

(160)

Loss on extinguishment of debt

—

—

(38)

(1)

Other income, net

24

12

115

77

Income before income taxes

269

250

973

649

(Benefit from) provision for income taxes

43

119

130

Net income

275

207

854

519

Less: Net income attributable to non-controlling interests

—

—

1

1

Net income attributable to Chemours

$

275

$

207

$

853

$

518

Per share data

Basic earnings per share of common stock

$

1.56

$

1.12

$

4.77

$

2.81

Diluted earnings per share of common stock

1.51

1.08

4.62

2.72

The Chemours Company

Interim Consolidated Balance Sheets

(Dollars in millions, except per share amounts)

(Unaudited)

September 30, 2018

December 31, 2017

Assets

Current assets:

Cash and cash equivalents

$

1,275

$

1,556

Accounts and notes receivable, net

998

919

Inventories

1,086

935

Prepaid expenses and other

89

83

Total current assets

3,448

3,493

Property, plant, and equipment

8,885

8,511

Less: Accumulated depreciation

(5,678)

(5,503)

Property, plant, and equipment, net

3,207

3,008

Goodwill and other intangible assets, net

187

166

Investments in affiliates

179

173

Other assets

491

453

Total assets

$

7,512

$

7,293

Liabilities

Current liabilities:

Accounts payable

$

1,123

$

1,075

Current maturities of long-term debt

14

15

Other accrued liabilities

561

558

Total current liabilities

1,698

1,648

Long-term debt, net

3,985

4,097

Deferred income taxes

220

208

Other liabilities

463

475

Total liabilities

6,366

6,428

Commitments and contingent liabilities

Equity

Common stock (par value $0.01 per share; 810,000,000 shares authorized;
187,149,447 shares issued and 173,849,387 shares outstanding at September 30,
2018; 185,343,034 shares issued and 182,956,628 shares outstanding at December
31, 2017)

2

2

Treasury stock at cost (13,300,060 shares at September 30, 2018;

2,386,406 shares at December 31, 2017)

(636)

(116)

Additional paid-in capital

856

837

Retained earnings

1,358

579

Accumulated other comprehensive loss

(440)

(442)

Total Chemours stockholders' equity

1,140

860

Non-controlling interests

6

5

Total equity

1,146

865

Total liabilities and equity

$

7,512

$

7,293

The Chemours Company

Interim Consolidated Statements of Cash Flows (Unaudited)

(Dollars in millions)

Nine Months Ended September 30,

2018

2017

Cash flows from operating activities

Net income

$

854

$

519

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization

213

204

Asset-related charges

—

3

Gain on sales of assets and businesses

(45)

(14)

Equity in earnings of affiliates, net

(4)

(26)

Loss on extinguishment of debt

38

1

Amortization of debt issuance costs and issue discounts

9

10

Deferred tax provision

3

53

Other operating charges and credits, net

9

26

Decrease (increase) in operating assets:

Accounts and notes receivable, net

(87)

(110)

Inventories and other operating assets

(186)

(91)

(Decrease) increase in operating liabilities:

Accounts payable and other operating liabilities

77

(238)

Cash provided by operating activities

881

337

Cash flows from investing activities

Purchases of property, plant, and equipment

(344)

(246)

Acquisition of business, net

(37)

—

Proceeds from sales of assets and businesses, net

46

39

Foreign exchange contract settlements, net

8

5

Cash used for investing activities

(327)

(202)

Cash flows from financing activities

Proceeds from issuance of debt, net

520

494

Debt repayments

(675)

(24)

Payments related to extinguishment of debt

(29)

(1)

Payments of debt issuance costs

(12)

(6)

Purchases of treasury stock, at cost

(520)

—

Proceeds from exercised stock options, net

15

30

Payments related to tax withholdings on vested restricted stock units

(16)

(10)

Payments of dividends

(106)

(16)

Cash (used for) provided by financing activities

(823)

467

Effect of exchange rate changes on cash and cash equivalents

(12)

31

(Decrease) increase in cash and cash equivalents

(281)

633

Cash and cash equivalents at January 1,

1,556

902

Cash and cash equivalents at September 30,

$

1,275

$

1,535

Supplemental cash flows information

Non-cash investing and financing activities:

Changes in property, plant, and equipment included in accounts payable

$

12

$

(16)

Obligations incurred under build-to-suit lease arrangement

41

—

Purchases of treasury stock not settled by period-end

10

—

The Chemours Company

Segment Financial and Operating Data (Unaudited)

(Dollars in millions)

Segment Net Sales

Three Months

Three Months Ended

Year-Over-Year

Ended

Sequential

September 30,

Increase /

June 30,

Increase /

2018

2017

(Decrease)

2018

(Decrease)

Fluoroproducts

$

682

$

637

$

45

$

801

$

Chemical Solutions

155

148

7

153

2

Titanium Technologies

791

799

862

(71)

Total Net Sales

$

1,628

$

1,584

$

44

$

1,816

$

Segment Adjusted EBITDA

Three Months

Three Months Ended

Year-Over-Year

Ended

Sequential

September 30,

Increase /

June 30,

Increase /

2018

2017

(Decrease)

2018

(Decrease)

Fluoroproducts

$

182

$

158

$

24

$

230

$

(48)

Chemical Solutions

24

18

6

16

8

Titanium Technologies

268

249

19

295

Corporate and Other

(39)

(44)

5

(44)

5

Total Adjusted EBITDA

$

435

$

381

$

54

$

497

$

(62)

Adjusted EBITDA Margin

27%

24%

27%

Quarterly Change in Net Sales from September 30, 2017

Percentage

Percentage Change Due To

September 30, 2018

Net Sales

Change vs.

September 30, 2017

Price

Currency

Total Company

$

1,628

3

%

6

%

(3)

%

—

%

Fluoroproducts

$

682

7

%

1

%

7

%

(1)

%

Chemical Solutions

155

5

%

12

%

(7)

%

—

%

Titanium Technologies

791

(1)

%

9

%

(10)

%

—

%

Quarterly Change in Net Sales from June 30, 2018

Percentage

Percentage Change Due To

September 30, 2018

Net Sales

Change vs.

June 30, 2018

Price

Volume

Currency

Total Company

$

1,628

(10)

%

1

%

(10)

%

(1)

%

Fluoroproducts

$

682

(15)

%

—

%

(14)

%

(1)

%

Chemical Solutions

155

2

%

5

%

-4

%

1

%

Titanium Technologies

791

(8)

%

—

%

(7)

%

(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: interest expense, depreciation, and amortization; non-operating pension and other post-retirement employee benefit costs, which represent 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 assets and businesses; 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, certain amortization, and certain provision for (benefit from) income tax amounts.

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

2018

2017

2018

2018

2017

Net income attributable to Chemours

$

275

$

207

$

281

$

853

$

518

Non-operating pension and other post-retirement

employee benefit income

(4)

(7)

(7)

(18)

(24)

Exchange losses (gains), net

6

4

(2)

4

(3)

Restructuring and other charges

12

8

9

32

31

Asset-related and other charges

—

1

1

—

3

Loss on extinguishment of debt

—

—

38

38

1

Gain on sales of assets and businesses (1)

—

—

(3)

(45)

(14)

Transaction costs (2)

—

1

9

9

3

Legal and other charges (3)

34

7

10

45

18

Adjustments made to income taxes (4,6)

(41)

(11)

(8)

(54)

(24)

Benefit from income taxes relating to reconciling items
(5,6)

(11)

(7)

(14)

(15)

(10)

Adjusted Net Income

271

203

314

849

499

Net income attributable to non-controlling interests

—

—

1

1

1

Interest expense, net

47

55

48

148

160

Depreciation and amortization

71

62

71

213

204

All remaining provision for income taxes (6)

46

61

63

188

164

Adjusted EBITDA

$

435

$

381

$

497

$

1,399

$

1,028

(1)       For the nine months ended September 30, 2018, gain on sale includes a $3 gain and a $42 gain associated with the sales of the Company's East Chicago, Indiana and 
            Linden, New Jersey sites, respectively.  For the nine months ended September 30, 2017, gain on sale includes a $12 gain associated with the sale of the Company's Edge 
            Moor, Delaware site and a $4 gain associated with the sale of the Company's land in Repauno, New Jersey that was previously deferred and realized upon meeting certain 
            milestones, which are offset by a $2 adjustment associated with the sale of the Company's Sulfur business in 2016.  For the three months ended June 30, 2018, gain on sale 
            includes a $3 gain associated with the sale of the Company's East Chicago, Indiana site. 

(2)       Includes costs associated with the Company's debt transactions, as well as accounting, legal, and bankers' transaction costs incurred in connection with the Company's 
            strategic initiatives. 

(3)       Includes litigation settlements, PFOA drinking water treatment accruals, and other charges, including the $30 estimated liability for our Fayetteville, North Carolina site for the 
            three and nine months ended September 30, 2018, the latter of which is included as a component of selling, general, and administrative expense in our consolidated statements 
            of operations.

(4)       Includes the removal of certain discrete income tax amounts within the Company's (benefit from) provision for income taxes.  For the three months ended September 30, 2018, 
            the Company's adjustments to income taxes includes the following: $19 in tax benefits primarily related to the filing of the Company's 2017 U.S. tax return and the associated 
            adjustments including the revaluation of deferred tax assets and liabilities as a result of the reduced corporate tax rate and other associated adjustments, $17 in tax benefits 
            for the reversal of the Company's valuation allowance on foreign tax credit carryforwards due to changes in normal business operations, $4 in windfall tax benefits on the 
            Company's share-based payments, and $1 in tax benefits resulting from unrealized losses on foreign exchange rates related to toll charges pursuant to U.S. tax reform.  For 
            the nine months ended September 30, 2018, adjustments made to income taxes includes the following: $19 in tax benefits primarily related to the filing of the Company's 2017 
            U.S. tax return and the associated adjustments including the revaluation of deferred tax assets and liabilities as a result of the reduced corporate tax rate and other associated 
            adjustments, $17 in tax benefits for the reversal of the Company's valuation allowance on foreign tax credit carryforwards due to changes in normal business operations, $14 in 
            windfall tax benefits on the Company's share-based payments, and $4 in tax benefits resulting from unrealized losses on foreign exchange rates related to toll charges pursuant 
            to U.S. tax reform.  For the three and nine months ended September 30, 2017, adjustments made to income taxes includes $5 and $18 in windfall tax benefits on the Company's 
            share-based payments, respectively, and the reversal of a reserve for uncertain tax provisions of $6.  For the three months ended June 30, 2018, adjustments made to income 
            taxes includes $5 in windfall tax benefits on the Company's share-based payments and $3 in tax benefits resulting from unrealized losses on foreign exchange rates related to 
            toll charges pursuant to U.S. tax reform.   

(5)       The income tax impacts included in this caption are determined using the applicable rates in the taxing jurisdictions in which income or expense occurred and include both 
            current and deferred income tax expense or benefit based on the nature of the non-GAAP financial measure.

(6)       The total (benefit from) provision for income taxes reconciles to the amount reported in the consolidated statements of operations for the three and nine months ended 
            September 30, 2018 and 2017 and for the three months ended June 30, 2018.

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. Adjusted Diluted EPS accounts for the dilutive impact of stock-based compensation awards, which includes unvested restricted shares. Adjusted Diluted 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.

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

2018

2017

2018

2018

2017

Numerator:

Net income attributable to Chemours

$

275

$

207

$

281

$

853

$

518

Adjusted Net Income

271

203

314

849

499

Denominator:

Weighted-average number of common shares
outstanding - basic

176,489,881

185,431,036

177,798,484

178,765,676

184,641,599

Dilutive effect of the Company's employee
compensation plans

5,387,244

6,206,778

6,022,757

5,891,072

5,909,015

Weighted-average number of common shares
outstanding - diluted

181,877,125

191,637,814

183,821,241

184,656,748

190,550,614

Basic earnings per share of common stock

$

1.56

$

1.12

$

1.58

$

4.77

$

2.81

Diluted earnings per share of common stock

1.51

1.08

1.53

4.62

2.72

Adjusted basic earnings per share of common stock

1.54

1.09

1.77

4.75

2.70

Adjusted diluted earnings per share of common stock

1.49

1.06

1.71

4.60

2.62

2018 Estimated Adjusted EBITDA and Estimated Adjusted EPS to Estimated GAAP Net Income Reconciliation (*)

(Estimated)

Year Ended December 31, 2018

Low

High

Net income attributable to Chemours

$

980

$

1,075

Other adjustments

(45)

(45)

Restructuring, asset-related, and other charges, net

40

30

Provision for income taxes relating to reconciling items (1)

5

5

Adjusted Net Income

980

1,065

Interest expense, net

200

200

Depreciation and amortization

280

280

All remaining provision for income taxes

240

230

Adjusted EBITDA

$

1,700

$

1,775

Weighted average number of common shares outstanding - basic (2)

177,000,000

177,000,000

Dilutive effect of the Company's employee compensation plans (2)

6,000,000

6,000,000

Weighted average number of common shares outstanding - diluted (2)

183,000,000

183,000,000

Basic earnings per share of common stock

$

5.54

$

6.07

Diluted earnings per share of common stock

5.36

5.89

Adjusted basic earnings per share of common stock

5.54

6.01

Adjusted diluted earnings per share of common stock

5.36

5.84

(1)       The income tax impacts included in this caption are determined using the applicable rates in the taxing jurisdictions in which income or expense occurred and include both 
            current and deferred income tax expense or benefit based on the nature of the non-GAAP financial measure. 

(2)       The Company's estimates for the weighted-average number of common shares outstanding - basic and diluted reflect results for the year ended December 31, 2017, which 
            are carried forward for the projection period and updated for the estimated impacts of the Company's 2018 share repurchase and other activity on a weighted-average basis.

(*)        The Company's estimates reflect its current visibility and expectations of market factors; including, but not limited to:  currency movements, titanium dioxide prices, and end-
            market demand.  Actual results could differ materially from the current estimates due to market factors and unknown or uncertain other factors, such as the impact of currency 
            movements on the Company's results, including exchange gains and losses, impacts of new accounting pronouncements, cost savings actions that may be taken in the future, 
            in addition to employee benefit activity with respect to the Company's foreign pension plans, including settlements or curtailments. 

The Chemours Company

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

(Dollars in millions)

Free Cash Flows to GAAP Cash Flows 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.

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

2018

2017

2018

2018

Cash provided by operating activities (1)

$

342

$

112

$

343

$

881

$

337

Less: Purchases of property, plant, and equipment

(116)

(108)

(126)

(344)

(246)

Free Cash Flows

$

226

$

4

$

217

$

537

$

91

(1)       Cash provided by operating activities for the three and nine months ended September 30, 2017 include PFOA MDL settlement payments of $320 and $335, respectively.  
            Excluding the PFOA MDL settlement payments, Free Cash Flows for the three and nine months ended September 30, 2017 would have been $324 and $426, respectively.

2018 Estimated Free Cash Flows to GAAP Cash Flows Provided by Operating Activities Reconciliation (*)

(Estimated)

Year Ended December 31,

2018

Cash provided by operating activities

~ $1,150

Less: Purchases of property, plant, and equipment

~ (500)

Free Cash Flows

(*)     The Company's estimates reflect its current visibility and expectations of market factors; including, but not limited to:  currency movements, titanium dioxide prices, and end-
          market demand.  Actual results could differ materially from the current estimates due to market factors and unknown or uncertain other factors, such as the impact of currency 
          movements on the Company's results, including exchange gains and losses, impacts of new accounting pronouncements, cost savings actions that may be taken in the future, 
          in addition to employee benefit activity with respect to the Company's foreign pension plans, including settlements or curtailments.  

Return on Invested Capital Reconciliation

Return on Invested Capital 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.

Twelve Months Ended September 30,

2018

2017

Adjusted EBITDA (1)

$

1,794

$

1,266

Less: Depreciation and amortization (1)

(281)

(276)

Adjusted EBIT

1,513

990

Total debt

3,999

4,095

Total equity

1,146

805

Less: Cash and cash equivalents

(1,275)

(1,535)

Invested capital, net

$

3,870

$

3,365

Average invested capital (2)

$

3,637

$

3,102

Return on Invested Capital

41.6

%

31.9

%

(1)       Based on amounts for the trailing 12 months ended September 30, 2018 and 2017.  Reconciliations of Adjusted EBITDA to net income (loss) attributable to Chemours are 
            provided on a quarterly basis.  See the preceding tables for the reconciliation of Adjusted EBITDA to net income attributable to Chemours for the three and nine months ended 
            September 30, 2018 and 2017.

(2)       Average invested capital is based on a five-quarter trailing average of invested capital, net.