The Chemours Company Reports Third Quarter Results
Third Quarter 2017 Highlights
- Net Sales of
$1.6 billion , up 13% - Net Income of
$207 million , up$3 million with EPS of$1.08 per diluted share, down$0.03 per diluted share - Adjusted EBITDA of
$381 million , up 42% - Adjusted Net Income of
$214 million , up$102 million with Adjusted EPS of$1.12 per diluted share, up$0.51 per diluted share - Full-year outlook reaffirmed
The
Third quarter net sales were
Titanium Technologies
In the third quarter, Titanium Technologies segment sales were
Fluoroproducts
Fluoroproducts segment sales in the third quarter were
Chemical Solutions
Chemical Solutions segment sales in the third quarter 2017 were
Corporate and Other
Corporate and Other represented a negative
During the third quarter 2017, the company realized a cash tax rate of approximately 9 percent. The company expects its cash tax rate to be in the low teens for the full-year 2017, reflecting the company's anticipated geographic mix of earnings.
Liquidity
As of
Cash provided by operating activities for the third quarter of 2017 was
Excluding the PFOA payment, Free Cash Flow in the third quarter of 2017 was
Outlook
"The successful implementation of our Five Point Transformation Plan has given us the solid foundation to build a future focused on growth," commented Vergnano. "We continue to expect our 2017 Adjusted EBITDA to be between
Conference Call
As previously announced,
About The
The
Non-GAAP Financial Measures
We prepare our financial statements in accordance with Generally Accepted Accounting Principles ("GAAP"). Within this press release, we make reference 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
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," "will," "anticipate," "plan," "estimate," "anticipate," "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 may address, among other things, 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 which are beyond
CONTACT
MEDIA
Director,
+1.302.773.4507 media@chemours.com
INVESTORS
Treasurer and Director of Investor Relations
+1.302.773.2263
investor@chemours.com
The Chemours Company | ||||||||||||||||
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 |
The Chemours Company | ||||||||
(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 |
The Chemours Company | ||||||||
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 |
The Chemours Company | ||||||||||||||||||||||||
Segment Net Sales | Three Months | |||||||||||||||||||||||
Three Months Ended | Ended | Sequential | ||||||||||||||||||||||
September 30, | Increase / | June 30, | Increase / | |||||||||||||||||||||
2017 | 2016 | (Decrease) | 2017 | (Decrease) | ||||||||||||||||||||
Titanium Technologies | $ | 799 | $ | 625 | $ | 174 | $ | 729 | $ | 70 | ||||||||||||||
Fluoroproducts | 637 | 591 | 46 | 710 | (73) | |||||||||||||||||||
Chemical Solutions | 148 | 182 | (34) | 149 | (1) | |||||||||||||||||||
Total Net Sales | $ | 1,584 | $ | 1,398 | $ | 186 | $ | 1,588 | $ | (4) | ||||||||||||||
Segment Adjusted EBITDA | Three Months | |||||||||||||||||||||||
Three Months Ended | Ended | Sequential | ||||||||||||||||||||||
September 30, | Increase / | June 30, | Increase / | |||||||||||||||||||||
2017 | 2016 | (Decrease) | 2017 | (Decrease) | ||||||||||||||||||||
Titanium Technologies | $ | 249 | $ | 144 | $ | 105 | $ | 193 | $ | 56 | ||||||||||||||
Fluoroproducts | 158 | 143 | 15 | 197 | (39) | |||||||||||||||||||
Chemical Solutions | 18 | 9 | 9 | 7 | 11 | |||||||||||||||||||
Corporate and Other | (44) | (28) | (16) | (36) | (8) | |||||||||||||||||||
Total Adjusted EBITDA | $ | 381 | $ | 268 | $ | 113 | $ | 361 | $ | 20 | ||||||||||||||
Adjusted EBITDA Margin | 24% | 19% | 23% |
Quarterly Change in Net Sales from September 30, 2016 | ||||||||||||||||||||
Percentage | Percentage Change Due To | |||||||||||||||||||
September 30, 2017 Net Sales | Change vs. September 30, 2016 | Local Price | Volume | Currency Effect | Portfolio / Other | |||||||||||||||
Total Company | $ | 1,584 | 13 | % | 9 | % | 6 | % | 1 | % | (3) | % | ||||||||
Titanium Technologies | $ | 799 | 28 | % | 18 | % | 8 | % | 2 | % | — | % | ||||||||
Fluoroproducts | $ | 637 | 8 | % | 2 | % | 5 | % | 1 | % | — | % | ||||||||
Chemical Solutions | $ | 148 | (19) | % | — | % | 5 | % | — | % | (24) | % |
Quarterly Change in Net Sales from June 30, 2017 | ||||||||||||||||||||
Percentage | Percentage Change Due To | |||||||||||||||||||
September 30, 2017 Net Sales | Change vs. June 30, 2017 | Local Price | Volume | Currency Effect | Portfolio / Other | |||||||||||||||
Total Company | $ | 1,584 | — | % | 3 | % | (4) | % | 1 | % | — | % | ||||||||
Titanium Technologies | $ | 799 | 10 | % | 6 | % | 2 | % | 2 | % | — | % | ||||||||
Fluoroproducts | $ | 637 | (10) | % | 2 | % | (13) | % | 1 | % | — | % | ||||||||
Chemical Solutions | $ | 148 | (1) | % | (4) | % | 3 | % | — | % | — | % |
The Chemours Company | |||||||||||||||||||||||||
GAAP Net Income to Adjusted Net Income and Adjusted EBITDA Tabular Reconciliations | |||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
September 30, | June 30, | September 30, | |||||||||||||||||||||||
2017 | 2016 | 2017 | 2017 | 2016 | |||||||||||||||||||||
Net income attributable to Chemours | $ | 207 | $ | 204 | $ | 161 | $ | 518 | $ | 237 | |||||||||||||||
Non-operating pension and other post-retirement employee benefit income | (7) | (5) | (10) | (24) | (19) | ||||||||||||||||||||
Exchange losses (gains) | 4 | 17 | (2) | (3) | 37 | ||||||||||||||||||||
Restructuring charges | 8 | 14 | 6 | 31 | 41 | ||||||||||||||||||||
Asset-related charges | 1 | 46 | 2 | 3 | 109 | ||||||||||||||||||||
(Gain) loss on sale of assets or businesses | — | (169) | 2 | (14) | (258) | ||||||||||||||||||||
Transaction costs 1 | 1 | 2 | 2 | 3 | 18 | ||||||||||||||||||||
Legal and other charges 2 | 7 | 5 | 10 | 18 | 24 | ||||||||||||||||||||
Benefit from income taxes relating to reconciling items 3 | (7) | (2) | (5) | (10) | (16) | ||||||||||||||||||||
Adjusted Net Income | 214 | 112 | 166 | 522 | 173 | ||||||||||||||||||||
Net income attributable to non-controlling interests | — | — | — | 1 | — | ||||||||||||||||||||
Interest expense, net | 55 | 51 | 55 | 161 | 157 | ||||||||||||||||||||
Depreciation and amortization | 62 | 73 | 71 | 204 | 212 | ||||||||||||||||||||
All remaining provision for income taxes 3 | 50 | 32 | 69 | 140 | 41 | ||||||||||||||||||||
Adjusted EBITDA | $ | 381 | $ | 268 | $ | 361 | $ | 1,028 | $ | 583 |
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 (benefit from) provision for income taxes reconciles to the amount reported in the Interim Consolidated Statements of Operations for the three and nine months ended
GAAP Earnings per Share and Adjusted Earnings per Share – Basic and Diluted
Adjusted Net Income diluted earnings per share is calculated using Adjusted Net Income divided by diluted weighted-average 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 | Nine Months Ended | ||||||||||||||||||||||||
September 30, | June 30, | September 30, | |||||||||||||||||||||||
2017 | 2016 | 2017 | 2017 | 2016 | |||||||||||||||||||||
Numerator: | |||||||||||||||||||||||||
Net income attributable to Chemours | $ | 207 | $ | 204 | $ | 161 | $ | 518 | $ | 237 | |||||||||||||||
Adjusted Net Income | $ | 214 | $ | 112 | $ | 166 | $ | 522 | $ | 173 | |||||||||||||||
Denominator: | |||||||||||||||||||||||||
Weighted-average number of common shares outstanding - basic | 185,431,036 | 181,596,161 | 185,069,436 | 184,641,599 | 181,452,194 | ||||||||||||||||||||
Dilutive effect of the Company's employee compensation plans 1 | 6,206,778 | 1,932,395 | 6,057,203 | 5,909,015 | 1,089,738 | ||||||||||||||||||||
Weighted-average number of common shares outstanding - diluted 1 | 191,637,814 | 183,528,556 | 191,126,639 | 190,550,614 | 182,541,932 | ||||||||||||||||||||
Earnings per share - basic | $ | 1.12 | $ | 1.12 | $ | 0.87 | $ | 2.81 | $ | 1.31 | |||||||||||||||
Earnings per share - diluted 1 | $ | 1.08 | $ | 1.11 | $ | 0.84 | $ | 2.72 | $ | 1.30 | |||||||||||||||
Adjusted earnings per share - basic | $ | 1.15 | $ | 0.62 | $ | 0.90 | $ | 2.83 | $ | 0.95 | |||||||||||||||
Adjusted earnings per share - diluted 1 | $ | 1.12 | $ | 0.61 | $ | 0.87 | $ | 2.74 | $ | 0.95 |
1 Diluted earnings per share is calculated using net income available to common shareholders divided by diluted weighted-average common shares outstanding during each period, which includes unvested restricted shares. Diluted earnings 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 anti-dilutive effect.
The Chemours Company | |||
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 effects 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 Provided by Operating Activities to Free Cash Flow Tabular Reconciliation | |||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
September 30, | June 30, | September 30, | |||||||||||||||||||||||
2017 | 2016 | 2017 | 2017 | 2016 | |||||||||||||||||||||
Cash flow provided by operating activities 1 2 | $ | 112 | $ | 198 | $ | 183 | $ | 336 | $ | 324 | |||||||||||||||
Cash flow used for purchases of property, plant and equipment | (108) | (67) | (69) | (246) | (235) | ||||||||||||||||||||
Free Cash Flow | $ | 4 | $ | 131 | $ | 114 | $ | 90 | $ | 89 |
1 Cash flow provided by operating activities for the nine months ended
2 Cash flow provided by operating activities for the three and nine months ended
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