The Chemours Company Reports Strong Second Quarter Results and Increases Full-Year 2017 Outlook

WILMINGTON, Del., Aug. 2, 2017 /PRNewswire/ --

Second Quarter 2017 Highlights

  • Net Sales of $1.6 billion, up 15%
  • Net Income of $161 million, up $179 million with EPS of $0.84, up $0.94 per diluted share
  • Adjusted EBITDA of $361 million, up $174 million, driven by strong year-over-year volume and price improvement in Titanium Technologies and Fluoroproducts
  • Adjusted Net Income of $166 million, up $117 million with Adjusted EPS of $0.87, up $0.60 per diluted share
  • Net leverage1 down to 2.2 times, well below target of 3 times

The Chemours Company (Chemours) (NYSE: CC), a global chemistry company with leading market positions in titanium technologies, fluoroproducts and chemical solutions, today announced financial results for the second quarter 2017.

Chemours President and CEO Mark Vergnano said, "Our strong financial performance is a clear reflection of the quality of our business segments, the engagement of our employees, and the loyalty of our key customers. With two years behind us as a stand-alone company, we are seeing the positive effects of our transformation plan paired with improving end markets. Customer preference for our Ti-Pure™ titanium dioxide delivered another strong quarter for our Titanium Technologies business. Opteon™ refrigerants adoption ramp up remains in full force, leading the double-digit volume growth reported within Fluoroproducts. Overall, these resulted in higher volumes and significant margin improvement year-over-year. We are pleased with the strength of the first half and expect to continue this positive trajectory through 2017."

Second quarter net sales were $1.6 billion, an increase of 15 percent from $1.4 billion in the prior-year quarter. Volume growth in all three segments drove a 15 percent increase in revenue and higher prices primarily for Ti-Pure™ titanium dioxide added another 7 percent. These results were reduced by 6 percent due to the portfolio effects of divestitures and site closure within Chemical Solutions, and a 1 percent currency headwind during the quarter. Second quarter net income of $161 million, or $0.84 per diluted share, increased $179 million versus a net loss of $18 million, or ($0.10) per diluted share in last year's second quarter. Adjusted EBITDA for the second quarter 2017 was $361 million, a 93 percent increase compared to $187 million in the second quarter of 2016. This improvement was primarily driven by increased volume and pricing, which were partially reduced by transformation-related costs, higher performance compensation expenses as compared to the prior year, and the impact of the portfolio changes in Chemical Solutions.

Titanium Technologies
In the second quarter, Titanium Technologies segment sales were $729 million, a 22 percent increase versus the prior-year quarter, driven by higher global average selling prices and demand for Ti-Pure™ titanium dioxide. Segment Adjusted EBITDA was $193 million, a 74 percent year-over-year increase. The improved Ti-Pure™ titanium dioxide pricing and volumes were somewhat offset by higher costs primarily related to transformation activities and performance compensation.  

1 Defined as gross debt minus cash divided by trailing twelve-month Adjusted EBITDA

Fluoroproducts
In the second quarter, Fluoroproducts segment sales were $710 million, an increase of 24 percent versus the prior-year quarter. Expanded adoption of Opteon™ refrigerants and strong demand for fluoropolymers drove higher volume compared to last year's second quarter. Price modestly improved in comparison to last year's second quarter primarily as a result of higher prices of base refrigerants that were partially offset by lower fluoropolymers pricing and customer mix. Segment Adjusted EBITDA was $197 million, an 88 percent increase versus the prior-year quarter, reflecting increased volume partially offset by higher costs related to transformation activities and performance compensation.

Chemical Solutions
Chemical Solutions second quarter 2017 sales were $149 million, a 30 percent decline versus the prior-year quarter, reflecting the impact of portfolio changes. Segment Adjusted EBITDA was $7 million compared to $11 million in the prior-year quarter with the decline primarily related to portfolio changes. Partially offsetting the declines, solid demand for both performance chemicals & intermediates and mining solutions products led to volume increases versus the previous year. In addition, modest price improvements partially offset raw material increases in the quarter.

Corporate and Other
Corporate and Other represented a negative $36 million of Adjusted EBITDA. Expenses in the second quarter of 2017 improved by $4 million versus the prior-year quarter driven by timing of legal costs, partially offset by higher transformation costs. 

During the second quarter 2017, the company realized a cash tax rate of approximately 11 percent. The company expects its cash tax rate to be in the mid-teens for the full-year 2017, reflecting the company's anticipated geographic mix of earnings.

Liquidity
As of June 30, 2017, gross consolidated debt was approximately $4.1 billion. Debt, net of $1.5 billion cash, was approximately $2.5 billion, resulting in a net debt-to-EBITDA ratio of approximately 2.2 times on a trailing twelve-month basis.

During the quarter, Chemours completed an offering of approximately $500 million aggregate principal amount of 5.375% Senior Notes due 2027, with the intention of using the net proceeds of the offering for general corporate purposes, including funding Chemours' portion of the global settlement of the PFOA multi-district litigation settlement between DuPont and the plaintiffs. The company expects to complete the payment of its portion in August 2017. Following this payment, the company anticipates its net debt-to-EBITDA ratio will remain well below 3 times on a trailing twelve-month basis.

Also during the second quarter of 2017, as previously disclosed, Chemours repriced its existing Term Loan B to lower its interest rate spread. As part of the transaction, Chemours modified its credit agreement to provide a new class of term loans denominated in Euros and U.S. Dollars, in an aggregate principal amount of €400 million and $940 million, respectively.

Cash provided by operating activities for the second quarter of 2017 was $183 million, versus $90 million in second quarter of 2016. Net working capital for the quarter was a use of $83 million of cash, consistent with normal seasonal patterns. Free Cash Flow for the second quarter was $114 million, a $103 million improvement versus the previous-year quarter of $11 million. Improvement in Free Cash Flow was due to higher operating earnings.

In the first half of 2017, cash provided by operating activities was $224 million, versus $126 million in the first half of 2016, which included a $131 million benefit of the prepayment received from DuPont. Excluding the DuPont prepayment, 2017 year-to-date Free Cash Flow of $86 million would represent a $259 million improvement versus the previous-year's first half.

Outlook
Vergnano commented, "We plan to build on the momentum of the first half and now expect to deliver 2017 Adjusted EBITDA within a range of $1.3 to $1.4 billion given the benefits of our transformation plan initiatives, lower levels of transformation-related costs in the second half, and the strength of our improving key end markets. We expect Free Cash Flow to be approximately breakeven, including the anticipated payment for the PFOA MDL settlement."

Conference Call
As previously announced, Chemours will hold a conference call and webcast on Thursday, August 3, 2017 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.

About The Chemours Company
The Chemours Company (NYSE: CC) helps create a colorful, capable and cleaner world through the power of chemistry.  Chemours 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™.  Chemours has approximately 7,000 employees and 26 manufacturing sites serving approximately 4,000 customers in North America, Latin America, Asia-Pacific and Europe. 

Chemours is headquartered in Wilmington, Delaware and is listed on the NYSE under the symbol CC.  For more information please visit chemours.com.

Non-GAAP Financial Measures
We prepare our financial statements in accordance with Generally Accepted Accounting Principles ("GAAP"). Within this press release, we refer to Adjusted Net Income (Loss), Adjusted EPS, Adjusted EBITDA, Adjusted EBITDA margin and Free Cash Flow, which are non-GAAP financial measures. Free Cash Flow is defined as Cash from Operations minus cash used for PP&E purchases. 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 and Free Cash Flow 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 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, that 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 any historical or current fact. The words "believe," "expect," "anticipate," "plan," "estimate," "target," "project" and similar expressions, among others, generally identify "forward-looking statements," which speak only as of the date the statements were made. These forward-looking statements address, among other things, our agreement with DuPont relating to the MDL Settlement, the outcome or resolution of any pending or future environmental liabilities, litigation and other legal proceedings or contingencies, anticipated future operating and financial performance, business plans and prospects, transformation plans, cost savings targets, plans to increase profitability and our outlook for Adjusted EBITDA and free cash flow that 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 which may not be accurate or realized. Forward-looking statements also involve risks and uncertainties, many of which are beyond Chemours' control. 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: whether the MDL Settlement becomes effective; the outcome of any pending or future litigation related to PFOA; the performance by DuPont of its obligations under the MDL Settlement; the terms of any final agreement between Chemours and DuPont relating to the MDL Settlement; and other risks, uncertainties and other factors discussed in our filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2016. Chemours assumes no obligation to revise or update any forward-looking statement for any reason, except as required by law.

CONTACT

MEDIA
Alvenia Scarborough
Director, Corporate Communications and Brand Marketing
+1.302.773.4507 [email protected]   

INVESTORS
Alisha Bellezza
Treasurer and Director of Investor Relations
+1.302.773.2263 [email protected]

 

 

The Chemours Company

Interim Consolidated Statements of Operations (Unaudited)

(Dollars in millions, except per share amounts)










Three Months Ended June 30,



Six Months Ended June 30,




2017



2016



2017



2016


Net sales


$

1,588



$

1,383



$

3,024



$

2,680


Cost of goods sold



1,147




1,116




2,225




2,212


Gross profit



441




267




799




468


Selling, general and administrative expense



157




174




301




307


Research and development expense



21




17




40




40


Restructuring and asset-related charges, net



6




67




18




85


Total expenses



184




258




359




432


Equity in earnings of affiliates



10




4




17




9


Interest expense, net



(55)




(50)




(106)




(106)


Other income (expense), net



13




(4)




48




89


Income (loss) before income taxes



225




(41)




399




28


Provision for (benefit from) income taxes



64




(23)




87




(5)


Net income (loss)



161




(18)




312




33


Less: Net income attributable to non-controlling interests









1





Net income (loss) attributable to Chemours


$

161



$

(18)



$

311



$

33


Per share data

















Basic earnings (loss) per share of common stock


$

0.87



$

(0.10)



$

1.69



$

0.18


Diluted earnings (loss) per share of common stock


$

0.84



$

(0.10)



$

1.64



$

0.18


Dividends per share of common stock


$

0.03



$

0.03



$

0.06



$

0.06


 

The Chemours Company

Interim Consolidated Balance Sheets

(Dollars in millions, except per share amounts)











(Unaudited)








June 30,



December 31,




2017



2016


Assets









Current assets:









Cash and cash equivalents


$

1,529



$

902


Accounts and notes receivable - trade, net



994




807


Inventories



848




767


Prepaid expenses and other



69




77


Total current assets



3,440




2,553


Property, plant and equipment



8,288




7,997


Less: Accumulated depreciation



(5,386)




(5,213)


Property, plant and equipment, net



2,902




2,784


Goodwill and other intangible assets, net



168




170


Investments in affiliates



158




136


Other assets



384




417


Total assets


$

7,052



$

6,060


Liabilities and equity









Current liabilities:









Accounts payable


$

985



$

884


Current maturities of long-term debt



14




15


Other accrued liabilities



751




872


Total current liabilities



1,750




1,771


Long-term debt, net



4,056




3,529


Deferred income taxes



159




132


Other liabilities



515




524


Total liabilities



6,480




5,956


Commitments and contingent liabilities









Equity









Common stock (par value $0.01 per share; 810,000,000 shares authorized)



2




2


Additional paid-in capital



820




789


Retained earnings (accumulated deficit)



186




(114)


Accumulated other comprehensive loss



(441)




(577)


Total Chemours stockholders' equity



567




100


Non-controlling interests



5




4


Total equity



572




104


Total liabilities and equity


$

7,052



$

6,060


 

The Chemours Company

Interim Consolidated Statements of Cash Flows (Unaudited)

(Dollars in millions)







Six Months Ended June 30,




2017



2016


Operating activities









Net income


$

312



$

33


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









Depreciation and amortization



142




139


Amortization of deferred financing costs and issuance discount



7




11


Gain on sale of assets and businesses



(14)




(88)


Equity in earnings of affiliates



(17)




(9)


Deferred tax provision (benefit)



38




(36)


Asset-related charges



2




63


Other operating charges and credits, net



13




14


(Increase) decrease in operating assets:









Accounts and notes receivable - trade, net



(170)




(92)


Inventories and other operating assets



(43)




85


(Decrease) increase in operating liabilities:









Accounts payable and other operating liabilities



(46)




6


Cash provided by operating activities



224




126


Investing activities









Purchases of property, plant and equipment



(138)




(168)


Proceeds from sales of assets and businesses, net



38




150


Foreign exchange contract settlements, net



2





Cash used for investing activities



(98)




(18)


Financing activities









Proceeds from issuance of debt, net



494





Debt repayments



(20)




(95)


Dividends paid



(11)




(11)


Deferred financing fees



(6)




(2)


Proceeds from exercised stock options



26





Cash provided by (used for) financing activities



483




(108)


Effect of exchange rate changes on cash and cash equivalents



18




17


Increase in cash and cash equivalents



627




17


Cash and cash equivalents at beginning of the period



902




366


Cash and cash equivalents at end of the period


$

1,529



$

383


Non-cash investing activities









Change in property, plant and equipment included in accounts payable


$

(5)



$

10


 

The Chemours Company

Segment Financial and Operating Data (Unaudited)

(Dollars in millions)









Segment Net Sales

Three months ended




Three months ended

Sequential



June 30,

Increase /



March 31,

Increase /



2017

2016

(Decrease)



2017

(Decrease)


Titanium Technologies

$


729



$


596



$


133



$

646



$


83


Fluoroproducts



710





573





137




652





58


Chemical Solutions



149





214





(65)




139





10


Net sales

$


1,588



$


1,383



$


205



$


1,437



$


151



























 

Segment Adjusted EBITDA

Three months ended




Three months ended

Sequential



June 30,

Increase /



March 31,

Increase /



2017

2016

(Decrease)



2017

(Decrease)


Titanium Technologies

$


193



$


111



$


82



$


159



$


34


Fluoroproducts



197





105





92





155





42


Chemical Solutions



7





11





(4)





12





(5)


Corporate and Other



(36)





(40)





4





(41)





5


Total Adjusted EBITDA

$


361



$


187



$


174



$


285



$


76











Adjusted EBITDA Margin

23%



14%






20%





 

Quarterly Change in Net Sales from June 30, 2016









Percentage


Percentage change due to:



June 30, 2017

Net Sales



Change vs

June 30, 2016


Local Price


Volume


Currency Effect


Portfolio / Other


Total Company

$


1,588




15

%


7

%


15

%


(1)%



(6)%























Titanium Technologies

$


729




22

%


15

%


8

%


(1)%



%

Fluoroproducts

$

710




24

%


1

%


23

%


%


%

Chemical Solutions

$

149




(30)%



1

%


9

%


%


(40)%


 

Quarterly Change in Net Sales from March 31, 2017













Percentage


Percentage change due to:



June 30, 2017 

Net Sales



Change vs 

March 31, 2017


Local Price


Volume


Currency Effect


Portfolio / Other


Total Company

$


1,588




11

%


4

%


6

%


1

%


%






















Titanium Technologies

$

729




13

%


5

%


7

%


1

%


%

Fluoroproducts

$

710




9

%


4

%


4

%


1

%


%

Chemical Solutions

$

149




7

%


%


7

%


%


%

 

The Chemours Company

Reconciliations of Non-GAAP Information (Unaudited)

GAAP Net Income (Loss) to Adjusted Net Income and Adjusted EBITDA Tabular Reconciliations

(Dollars in millions, except per share amounts)










Three months ended



Six months ended




June 30,



March 31,



June 30,




2017



2016



2017



2017



2016


Net income (loss) attributable to Chemours


$


161



$


(18)



$


150



$


311



$


33


Non-operating pension and other post-retirement employee benefit income




(10)





(7)





(8)





(18)





(14)


Exchange (gains) losses




(2)





14





(5)





(7)





20


Restructuring charges




6





9





12





18





27


Asset-related charges




2





63








2





63


Loss (gain) on sale of assets or businesses




2





1





(16)





(14)





(88)


Transaction costs1




2





12








2





15


Legal and other charges2




10





13





7





17





19


(Benefit from) provision for income taxes relating to reconciling items3




(5)





(38)





2





(3)





(15)


Adjusted Net Income




166





49





142





308





60


Net income attributable to non-controlling interests










1





1





Interest expense, net




55





50





51





106





106


Depreciation and amortization




71





73





71





142





139


All remaining provision for income taxes3




69





15





20





90





10


Adjusted EBITDA


$


361



$


187



$


285



$


647



$


315


1     Includes accounting, legal and bankers transaction fees incurred related to the Company's strategic initiatives.

2     Includes litigation settlements, water treatment accruals related to PFOA, employee separation costs and lease termination charges.

3     Total of provision for (benefit from) income taxes reconciles to the amount reported in the Interim Consolidated Statements of Operations for the three and six months ended June 30, 2017 and 2016.

Adjusted Net Income diluted earnings per share is calculated using Adjusted Net Income divided by diluted weighted-average shares of common shares outstanding during each period, which includes unvested restricted shares.  The table below shows a reconciliation of the numerator and denominator for basic and diluted earnings per share and adjusted earnings per share calculations for the periods indicated:

 



Three months ended



Six months ended




June 30,



March 31,



June 30,




2017



2016



2017



2017



2016


Numerator:
















Net income (loss) attributable to Chemours


$


161



$


(18)



$


150



$


311



$


33


Adjusted Net Income


$


166



$


49



$


142



$


308



$


60


Denominator:
















Weighted-average number of common shares outstanding - Basic




185,069,436





181,477,672





183,408,309





184,243,461





181,379,419


Dilutive effect of the company's employee compensation plans1




6,057,203








5,741,621





5,899,412





668,410


Weighted average number of common shares outstanding - Diluted




191,126,639





181,477,672





189,149,930





190,142,873





182,047,829


















Earnings (loss) per share - basic


$


0.87



$


(0.10)



$


0.82



$


1.69



$


0.18


Earnings (loss) per share - diluted1


$


0.84



$


(0.10)



$


0.79



$


1.64



$


0.18


Adjusted earnings per share - basic


$


0.90



$


0.27



$


0.77



$


1.67



$


0.33


Adjusted earnings per share - diluted1


$


0.87



$


0.27



$


0.75



$


1.62



$


0.33


1     Diluted earnings (loss) per share is calculated using net income (loss) available to common shareholders divided by diluted weighted-average shares of common shares outstanding during each period, which includes unvested restricted shares. Diluted earnings (loss) per share considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an antidilutive effect.

 

The Chemours Company

Reconciliations of Non-GAAP Information (Unaudited)

(Dollars in millions)

2017 Estimated GAAP Net Income to Estimated Adjusted EBITDA Tabular Reconciliation




Estimated Net Income 1


$605 - 680

Provision for income taxes 1 2


195 - 220

Interest expense, net


~ 220

Depreciation and amortization


~ 280

Other reconciling items 1 3


~ (0)

Estimated Adjusted EBITDA 1


$1,300 - 1,400

1     Our estimates reflect our current visibility and expectations of market factors, such as but not limited to, currency movements, TiO2 prices and end-market demand.  Actual results could differ materially from the current estimates due to market factors and unknown or uncertainty of other factors, such as, an estimate of non-operating pension benefit costs with respect to our foreign pension plans including settlements or curtailments, cost savings actions that may be taken in the future, the impact of currency movements on our results including exchange gains and losses and the related tax effects. 

2     Provision for income tax is based on our current estimate of geographic mix of earnings and does not include potential tax effect of future discrete items.

3     Includes non-operating pension benefit income, exchange gains and losses, gain on sale of assets, restructuring and other charges recognized in the first half of 2017.

 

GAAP Cash Flow to Free Cash Flow Tabular Reconciliations










Three months ended



Six months ended




June 30,



March 31,



June 30,




2017



2016



2017



2017



2016


Cash flow provided by operating activities


$


183



$


90



$


41



$


224



$


126


Cash flow used for purchases of property, plant and equipment




(69)





(79)





(69)





(138)





(168)


Free cash flows 1


$


114



$


11



$


(28)



$


86



$


(42)


1     Cash flows from operating activities for the six months ended June 30, 2017 and 2016 include the DuPont prepayment of $190 million received in the first quarter of 2016, of which $0 million and $131 million remain outstanding as of June 30, 2017 and 2016, respectively.  Excluding the DuPont prepayment, free cash flows for the six months ended June 30, 2016 would have been negative $173 million.

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SOURCE The Chemours Company