cc-10q_20170930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-36794

The Chemours Company

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

46-4845564

(State or other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

1007 Market Street, Wilmington, Delaware 19899

(Address of Principal Executive Offices)

(302) 773-1000

(Registrant’s Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit and post such files). Yes ☒ No 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated Filer 

Accelerated Filer 

Non-Accelerated Filer 

Smaller reporting company 

 

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.

Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes No 

The Registrant had 185,163,064 shares of common stock, $0.01 par value, outstanding at October 31, 2017.

 

 

 

 


 

The Chemours Company

Table of Contents

 

 

 

Page

Part I

Financial Information

 

Item 1.

Interim Consolidated Financial Statements

 

 

Interim Consolidated Statements of Operations (Unaudited)

2

 

Interim Consolidated Statements of Comprehensive Income (Unaudited)

3

 

Interim Consolidated Balance Sheets

4

 

Interim Consolidated Statements of Stockholders’ Equity (Unaudited)

5

 

Interim Consolidated Statements of Cash Flows (Unaudited)

6

 

Notes to the Interim Consolidated Financial Statements (Unaudited)

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

34

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

48

Item 4.

Controls and Procedures

49

 

 

 

Part II

Other Information

 

Item 1.

Legal Proceedings

49

Item 1A.

Risk Factors

50

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

53

Item 3.

Defaults Upon Senior Securities

53

Item 4.

Mine Safety Disclosures

53

Item 5.

Other Information

53

Item 6.

Exhibits

53

 

Exhibit Index

 

 

54

 

Signature

 

 

55

 

 

 

1


 

PART I. FINANCIAL INFORMATION

Item 1.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The Chemours Company

Interim Consolidated Statements of Operations (Unaudited)

(Dollars in millions, except per share amounts)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net sales

 

$

1,584

 

 

$

1,398

 

 

$

4,608

 

 

$

4,078

 

Cost of goods sold

 

 

1,117

 

 

 

1,056

 

 

 

3,341

 

 

 

3,267

 

Gross profit

 

 

467

 

 

 

342

 

 

 

1,267

 

 

 

811

 

Selling, general and administrative expense

 

 

148

 

 

 

148

 

 

 

444

 

 

 

454

 

Research and development expense

 

 

20

 

 

 

19

 

 

 

61

 

 

 

60

 

Restructuring and asset-related charges, net

 

 

8

 

 

 

60

 

 

 

31

 

 

 

145

 

Total expenses

 

 

176

 

 

 

227

 

 

 

536

 

 

 

659

 

Equity in earnings of affiliates

 

 

9

 

 

 

9

 

 

 

26

 

 

 

17

 

Interest expense, net

 

 

(55

)

 

 

(51

)

 

 

(161

)

 

 

(157

)

Other income, net

 

 

5

 

 

 

161

 

 

 

53

 

 

 

250

 

Income before income taxes

 

 

250

 

 

 

234

 

 

 

649

 

 

 

262

 

Provision for income taxes

 

 

43

 

 

 

30

 

 

 

130

 

 

 

25

 

Net income

 

 

207

 

 

 

204

 

 

 

519

 

 

 

237

 

Less: Net income attributable to non-controlling interests

 

 

 

 

 

 

 

 

1

 

 

 

 

Net income attributable to Chemours

 

$

207

 

 

$

204

 

 

$

518

 

 

$

237

 

Per share data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share of common stock

 

$

1.12

 

 

$

1.12

 

 

$

2.81

 

 

$

1.31

 

Diluted earnings per share of common stock

 

$

1.08

 

 

$

1.11

 

 

$

2.72

 

 

$

1.30

 

Dividends per share of common stock

 

$

0.03

 

 

$

0.03

 

 

$

0.09

 

 

$

0.09

 

 


See accompanying notes to the interim consolidated financial statements.

2


 

The Chemours Company

Interim Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in millions)

 

 

 

Three Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

 

Pre-Tax

 

 

Tax

 

 

After-Tax

 

 

Pre-Tax

 

 

Tax

 

 

After-Tax

 

Net income

 

$

250

 

 

$

(43

)

 

$

207

 

 

$

234

 

 

$

(30

)

 

$

204

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on net

   investment hedge

 

 

(26

)

 

 

10

 

 

 

(16

)

 

 

(6

)

 

 

 

 

 

(6

)

Cumulative translation

   adjustments

 

 

35

 

 

 

 

 

 

35

 

 

 

10

 

 

 

 

 

 

10

 

Defined benefit plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain

 

 

5

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

 

Effect of foreign

   exchange rates

 

 

(9

)

 

 

2

 

 

 

(7

)

 

 

(3

)

 

 

1

 

 

 

(2

)

Reclassifications to net

   income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of prior service gain

 

 

(1

)

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Amortization of actuarial loss

 

 

5

 

 

 

(1

)

 

 

4

 

 

 

6

 

 

 

(2

)

 

 

4

 

Settlement loss

 

 

1

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

Defined benefit plans, net

 

 

1

 

 

 

1

 

 

 

2

 

 

 

3

 

 

 

(1

)

 

 

2

 

Other comprehensive income

 

 

10

 

 

 

11

 

 

 

21

 

 

 

7

 

 

 

(1

)

 

 

6

 

Comprehensive income

 

 

260

 

 

 

(32

)

 

 

228

 

 

 

241

 

 

 

(31

)

 

 

210

 

Less: Comprehensive income attributable to non-controlling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income attributable to Chemours

 

$

260

 

 

$

(32

)

 

$

228

 

 

$

241

 

 

$

(31

)

 

$

210

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

 

Pre-Tax

 

 

Tax

 

 

After-Tax

 

 

Pre-Tax

 

 

Tax

 

 

After-Tax

 

Net income

 

$

649

 

 

$

(130

)

 

$

519

 

 

$

262

 

 

$

(25

)

 

$

237

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on net

   investment hedge

 

 

(76

)

 

 

20

 

 

 

(56

)

 

 

(9

)

 

 

 

 

 

(9

)

Cumulative translation

   adjustments

 

 

224

 

 

 

 

 

 

224

 

 

 

20

 

 

 

 

 

 

20

 

Defined benefit plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss)

 

 

5

 

 

 

 

 

 

5

 

 

 

(7

)

 

1

 

 

 

(6

)

Effect of foreign

   exchange rates

 

 

(36

)

 

 

8

 

 

 

(28

)

 

 

(5

)

 

 

2

 

 

 

(3

)

Reclassifications to net

   income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of prior service gain

 

 

(1

)

 

 

 

 

 

(1

)

 

 

(1

)

 

 

 

 

 

(1

)

Amortization of actuarial loss

 

 

15

 

 

 

(3

)

 

 

12

 

 

 

18

 

 

 

(5

)

 

 

13

 

Settlement loss

 

 

1

 

 

 

 

 

 

1

 

 

 

(2

)

 

 

1

 

 

 

(1

)

Defined benefit plans, net

 

 

(16

)

 

 

5

 

 

 

(11

)

 

 

3

 

 

 

(1

)

 

 

2

 

Other comprehensive income

 

 

132

 

 

 

25

 

 

 

157

 

 

 

14

 

 

 

(1

)

 

 

13

 

Comprehensive income

 

 

781

 

 

 

(105

)

 

 

676

 

 

 

276

 

 

 

(26

)

 

 

250

 

Less: Comprehensive income attributable to non-controlling interests

 

 

1

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

Comprehensive income attributable to Chemours

 

$

780

 

 

$

(105

)

 

$

675

 

 

$

276

 

 

$

(26

)

 

$

250

 

 

See accompanying notes to the interim consolidated financial statements.

3


 

The Chemours Company

Interim Consolidated Balance Sheets

(Dollars in millions, except per share amounts)

 

 

 

(Unaudited)

 

 

 

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,535

 

 

$

902

 

Accounts and notes receivable - trade, net

 

 

942

 

 

 

807

 

Inventories

 

 

877

 

 

 

767

 

Prepaid expenses and other

 

 

79

 

 

 

77

 

Total current assets

 

 

3,433

 

 

 

2,553

 

Property, plant and equipment

 

 

8,412

 

 

 

7,997

 

Less: Accumulated depreciation

 

 

(5,462

)

 

 

(5,213

)

Property, plant and equipment, net

 

 

2,950

 

 

 

2,784

 

Goodwill and other intangible assets, net

 

 

167

 

 

 

170

 

Investments in affiliates

 

 

166

 

 

 

136

 

Other assets

 

 

404

 

 

 

417

 

Total assets

 

$

7,120

 

 

$

6,060

 

Liabilities and equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,010

 

 

$

884

 

Current maturities of long-term debt

 

 

14

 

 

 

15

 

Other accrued liabilities

 

 

546

 

 

 

872

 

Total current liabilities

 

 

1,570

 

 

 

1,771

 

Long-term debt, net

 

 

4,081

 

 

 

3,529

 

Deferred income taxes

 

 

175

 

 

 

132

 

Other liabilities

 

 

489

 

 

 

524

 

Total liabilities

 

 

6,315

 

 

 

5,956

 

Commitments and contingent liabilities

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Common stock (par value $0.01 per share; 810,000,000 shares authorized; 185,092,058 and 182,600,533 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively)

 

 

2

 

 

 

2

 

Additional paid-in capital

 

 

830

 

 

 

789

 

Retained earnings (accumulated deficit)

 

 

388

 

 

 

(114

)

Accumulated other comprehensive loss

 

 

(420

)

 

 

(577

)

Total Chemours stockholders’ equity

 

 

800

 

 

 

100

 

Non-controlling interests

 

 

5

 

 

 

4

 

Total equity

 

 

805

 

 

 

104

 

Total liabilities and equity

 

$

7,120

 

 

$

6,060

 

 

See accompanying notes to the interim consolidated financial statements.

4


 

The Chemours Company

Interim Consolidated Statements of Stockholders’ Equity (Unaudited)

(Dollars in millions)

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

(Accumulated Deficit) Retained

 

 

Accumulated

Other

Comprehensive

 

 

Non-controlling

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

(Loss) Income

 

 

Interests

 

 

Total

 

Balance at

   January 1, 2016

 

 

181,069,751

 

 

$

2

 

 

$

775

 

 

$

(115

)

 

$

(536

)

 

$

4

 

 

$

130

 

Net income

 

 

 

 

 

 

 

 

 

 

 

237

 

 

 

 

 

 

 

 

 

237

 

Common stock issued -   compensation plans

 

 

650,971

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

 

 

 

 

 

 

 

(11

)

 

 

(5

)

 

 

 

 

 

 

 

 

(16

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

 

 

 

13

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

 

 

 

17

 

Balance at

   September 30, 2016

 

 

181,720,722

 

 

$

2

 

 

$

781

 

 

$

117

 

 

$

(523

)

 

$

4

 

 

$

381

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at

   January 1, 2017

 

 

182,600,533

 

 

$

2

 

 

$

789

 

 

$

(114

)

 

$

(577

)

 

$

4

 

 

$

104

 

Net income

 

 

 

 

 

 

 

 

 

 

 

518

 

 

 

 

 

 

1

 

 

 

519

 

Common stock issued - compensation plans

 

 

504,098

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

 

 

 

 

 

 

 

 

 

 

(16

)

 

 

 

 

 

 

 

 

(16

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

157

 

 

 

 

 

 

157

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

21

 

 

 

 

 

 

 

 

 

 

 

 

21

 

Cancellation of unissued stock awards withheld to cover taxes

 

 

 

 

 

 

 

 

(10

)

 

 

 

 

 

 

 

 

 

 

 

(10

)

Exercise of stock options, net

 

 

1,987,427

 

 

 

 

 

 

30

 

 

 

 

 

 

 

 

 

 

 

 

30

 

Balance at

   September 30, 2017

 

 

185,092,058

 

 

$

2

 

 

$

830

 

 

$

388

 

 

$

(420

)

 

$

5

 

 

$

805

 

 

See accompanying notes to the interim consolidated financial statements.

5


 

The Chemours Company

Interim Consolidated Statements of Cash Flows (Unaudited)

(Dollars in millions)

 

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

Operating activities

 

 

 

 

 

 

 

 

Net income

 

$

519

 

 

$

237

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

204

 

 

 

212

 

Amortization of deferred financing costs and issuance discount

 

 

10

 

 

 

15

 

Gain on sale of assets and businesses

 

 

(14

)

 

 

(258

)

Equity in earnings of affiliates

 

 

(26

)

 

 

(17

)

Deferred tax provision (benefit)

 

 

53

 

 

 

(29

)

Asset-related charges

 

 

3

 

 

 

109

 

Other operating charges and credits, net

 

 

26

 

 

 

33

 

(Increase) decrease in operating assets:

 

 

 

 

 

 

 

 

Accounts and notes receivable - trade, net

 

 

(110

)

 

 

(63

)

Inventories and other operating assets

 

 

(91

)

 

 

113

 

(Decrease) increase in operating liabilities:

 

 

 

 

 

 

 

 

Accounts payable and other operating liabilities

 

 

(238

)

 

 

(28

)

Cash provided by operating activities

 

 

336

 

 

 

324

 

Investing activities

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(246

)

 

 

(235

)

Proceeds from sales of assets and businesses, net

 

 

39

 

 

 

707

 

Foreign exchange contract settlements, net

 

 

5

 

 

 

(1

)

Investment in affiliates

 

 

 

 

 

(2

)

Cash (used for) provided by investing activities

 

 

(202

)

 

 

469

 

Financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of debt, net

 

 

494

 

 

 

 

Debt repayments

 

 

(24

)

 

 

(212

)

Dividends paid

 

 

(16

)

 

 

(16

)

Deferred financing fees

 

 

(6

)

 

 

(2

)

Tax payments related to withholdings on vested restricted stock units

 

 

(10

)

 

 

 

Proceeds from exercised stock options, net

 

 

30

 

 

 

 

Cash provided by (used for) financing activities

 

 

468

 

 

 

(230

)

Effect of exchange rate changes on cash and cash equivalents

 

 

31

 

 

 

28

 

Increase in cash and cash equivalents

 

 

633

 

 

 

591

 

Cash and cash equivalents at beginning of the period

 

 

902

 

 

 

366

 

Cash and cash equivalents at end of the period

 

$

1,535

 

 

$

957

 

Non-cash investing activities

 

 

 

 

 

 

 

 

Change in property, plant and equipment included in accounts payable

 

$

(16

)

 

$

9

 

 

 

 

See accompanying notes to the interim consolidated financial statements.

6


The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

Note 1. Basis of Presentation

The accompanying interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the United States of America (U.S.) for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included. Results for interim periods should not be considered indicative of results for a full year and the year-end consolidated balance sheet does not include all disclosures required by U.S. GAAP. As such, these interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016.

Certain prior period amounts have been reclassified to conform to the current period presentation, the effect of which was not material to the interim consolidated financial statements.

Unless the context otherwise requires, references herein to “The Chemours Company”, “Chemours”, “the Company”, “our Company”, “we”, “us” and “our” refer to The Chemours Company and its consolidated subsidiaries. References herein to “DuPont” refer to E.I. du Pont de Nemours and Company, a Delaware corporation, and its consolidated subsidiaries, unless the context otherwise requires.

Note 2. Recent Accounting Pronouncements

Accounting Guidance Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).”  The objective of this standard is to remove inconsistent practices with regard to revenue recognition between U.S. GAAP and International Financial Reporting Standards. The standard intends to improve the comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Subsequent to the issuance of ASU No. 2014-09, the FASB issued multiple clarifying updates in connection with Topic 606. The provisions of ASU No. 2014-09 and its related updates will be effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted for annual periods beginning after December 15, 2016. The Company will adopt the standard on January 1, 2018 under the modified retrospective transition method.

The Company’s project plan includes a three-phase approach to implementing the standard update. Phase one, the assessment phase, was completed in the first quarter of 2017. In this initial phase, the Company (a) conducted internal surveys of its businesses, (b) held revenue recognition workshops with sales and business unit finance leadership and (c) reviewed a representative sample of revenue arrangements across all businesses to initially identify a set of applicable qualitative revenue recognition changes related to the standard. The Company has also completed phase two of the project, which included (a) establishing and documenting key accounting positions, (b) assessing new disclosure requirements, business process and control impacts and (c) beginning to determine the initial quantitative impacts resulting from the standard. Phase three will include (a) finalizing any changes to accounting policies, (b) preparing new disclosures, (c) implementing new business processes and controls as needed and (d) quantifying the effect of adoption on opening retained earnings.

Based on the analysis conducted to date, the Company believes that the adoption of the standard will not have a material impact on its consolidated financial statements. Substantially all of the Company’s revenue consists of sales of products that represent a single performance obligation where control transfers at the point in time title and risk of loss pass to the customer. The Company continues to evaluate the impact of the standard update on its consolidated financial statements and related disclosures and additional differences may be identified as new or amended contracts with customers that will impact future periods are executed. The Company expects that disclosure in the notes to the consolidated financial statements related to revenue recognition will be expanded in line with the requirements of the standard to further describe the nature, timing and uncertainty of revenue and cash flows arising from contracts with customers.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”, which supersedes the leases requirements in Topic 840. The core principle of Topic 842 is that a lessee should recognize on the balance sheet the lease assets and lease liabilities that arise from all lease arrangements with terms greater than 12 months. Recognition of these lease assets and lease liabilities represents an improvement over previous U.S. GAAP, which did not require lease assets and lease liabilities to be recognized for operating leases. Qualitative disclosures along with specific quantitative disclosures will be required to provide enough information to supplement the amounts recorded in the financial statements so that users can understand more about the nature of an entity’s leasing activities.

7


The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, which includes a number of optional practical expedients that entities may elect to apply. The amendments in this update are effective for the Company’s fiscal year beginning January 1, 2019, including interim periods within that fiscal year. Early application of the amendments in this update is permitted for all entities. At adoption, the Company will recognize a right-of-use asset and a lease liability initially measured at the present value of its operating lease payments. The Company is currently evaluating the other impacts of adopting this guidance on its financial position, results of operations and cash flows.

In August 2016, the FASB issued various updates to ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”, which clarifies and amends the presentation and classification of certain cash receipts and cash payments in the statement of cash flows. The guidance is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments should be applied using a retrospective transition method (unless impractical to do so) for each period presented and earlier application is permitted. Chemours does not expect that the adoption will have a significant impact on its cash flows.

In March 2017, the FASB issued ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715)”, which requires that employers offering their employees defined benefit pension plans disaggregate the service cost component from the other components of net benefit cost. The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization. The guidance is effective for public business entities for annual periods beginning after December 15, 2017, as well as interim periods within those annual periods. The amendments in this update should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic post-retirement benefit cost in the income statement, and prospectively for the capitalization of the service cost component of net periodic pension cost and net periodic post-retirement benefit in assets. Early adoption is permitted within the first interim period of an annual period for which financial statements have not been issued or made available for issuance. Chemours does not expect that the adoption will have a significant impact on its financial position, results of operations or cash flows.

In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815)”, which simplifies financial statement reporting for qualifying hedging relationships by eliminating the requirement to separately measure and report hedge ineffectiveness. For net investment hedges, the entire change in fair value of the hedging instruments is recorded in the currency translation adjustment section of other comprehensive income or loss. Pursuant to the amendments, these amounts are required to be subsequently reclassified to earnings in the same income statement line item in which the earnings effect of the hedged item is presented when the hedged item affects earnings. The guidance is effective for public business entities for fiscal years beginning after December 15, 2018, as well as interim periods within those fiscal years. Early adoption is permitted in any interim period. The amendments in this update should be applied to hedging relationships existing on the date of adoption, which includes a cumulative-effect adjustment to eliminate any ineffectiveness recorded to accumulated other comprehensive income or loss with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year in which adoption occurred. Presentation and disclosure amendments are required to be applied prospectively. Chemours is currently evaluating the impact of adopting this guidance on its financial position, results of operations and cash flows.

Recently Adopted Accounting Guidance

In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718).”  The update sets forth areas for simplification within several aspects of the accounting for shared-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Chemours adopted this guidance effective January 1, 2017, and the adoption did not have a significant impact on the Company’s financial position, results of operations or cash flows except for the impact of windfall income tax benefits on share-based payments and the classification of employee withholding tax payments on vested restricted stock units (RSUs) as a financing activity on the statements of cash flows. Specific to the impact of windfall tax benefits, the Company expects the guidance will cause volatility in its income tax rates going forward. As of the adoption date, there were no windfall tax benefits from prior periods recognized; therefore, prior period adjustments were not required under a modified retrospective basis. For the three and nine months ended September 30, 2017, Chemours recognized $5 and $18 of windfall tax benefits, respectively, primarily from significant options exercised and RSUs vested, which were included in the provision for income taxes in the consolidated statements of operations.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which eliminates the requirement to determine the fair value of the individual assets and liabilities of a

8


The Chemours Company

Notes to the Interim Consolidated Financial Statements (Unaudited)

(Dollars in millions, except per share amounts)

 

reporting unit