Chemours Co. 2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021. This filing reports annual results; it does not provide a clear standalone fourth-quarter income statement in the supplied text. Dollar amounts below are in millions unless stated otherwise.
Business context
Chemours is a global performance-chemicals producer operating through Titanium Technologies, Thermal & Specialized Solutions, Advanced Performance Materials, and Chemical Solutions. Its principal markets include coatings, plastics, refrigeration and air conditioning, transportation, electronics, and industrial applications. In December 2021, Chemours sold its Mining Solutions business, which had accounted for about 70% of Chemical Solutions segment sales for 2021.
Financial performance
| Metric | 2021 | 2020 |
|---|---|---|
| Net sales | $6,345 | $4,969 |
| Gross profit | $1,381 | $1,067 |
| Gross margin | 21.8% | 21.5% |
| Net income attributable to Chemours | $608 | $219 |
| Diluted earnings per share | $3.60 | $1.32 |
| Adjusted EBITDA | $1,313 | $879 |
| Cash provided by operating activities | $820 | $807 |
| Capital expenditures | $277 | $267 |
| Free cash flow (company-defined non-GAAP) | $543 | $540 |
Sales increased 28%, driven by 21% higher volume and 7% higher pricing; currency added 2%, while portfolio changes reduced sales 2%. Net income benefited from stronger operating results and a $112 gain on the Mining Solutions sale. The effective tax rate was 10%, compared with a tax benefit and negative 22% rate in 2020. Adjusted EBITDA and free cash flow are non-GAAP measures and should be read alongside GAAP results.
Segments
| Segment | 2021 sales | Sales change | Adjusted EBITDA | EBITDA margin |
|---|---|---|---|---|
| Titanium Technologies | $3,355 | +40% | $809 | 24% (2020: 21%) |
| Thermal & Specialized Solutions | $1,257 | +14% | $412 | 33% (2020: 32%) |
| Advanced Performance Materials | $1,397 | +27% | $261 | 19% (2020: 11%) |
| Chemical Solutions | $336 | -6% | $51 | 15% (2020: 20%) |
Growth in the three larger segments reflected improved demand and pricing. Chemical Solutions sales and earnings declined amid the Aniline exit and Mining Solutions divestiture, as well as storm-related disruption and higher costs. Corporate and Other costs rose to $220 from $184.
Liquidity, debt, and capital allocation
- Year-end cash and cash equivalents were $1,451; an additional $100 was classified as restricted cash in the PFAS escrow account.
- Total debt principal was $3,782, down from $4,061. Net debt was $2,331 and the company-reported net leverage ratio was 1.8x, compared with 3.4x in 2020.
- The revolving credit facility commitment was increased to $900 and extended to October 2026; no borrowings were outstanding at year-end, while $107 of letters of credit were issued. The separate $150 receivables securitization facility was fully utilized.
- Current assets were $3,345 and current liabilities $1,858. Accounts receivable and inventory increased to $720 and $1,099, respectively.
- In August 2021, Chemours issued $650 of 4.625% notes due 2029 and used proceeds, with cash, to retire $750 of 7.000% notes due 2025. Scheduled debt principal maturities include $1,118 in 2025; the company identified 2025 as its earliest outstanding debt maturity.
- Cash dividends paid were $164. The company announced a $0.25-per-share quarterly dividend for first-quarter 2022 and had $251 remaining under its share repurchase authorization at year-end; it repurchased $173 of shares during 2021.
Material changes and unusual items
- Mining Solutions was sold on December 1, 2021 for net cash proceeds of $508, net of $13 cash divested. Chemours recorded a $112 pretax gain, including $21 of transaction costs.
- Environmental remediation liabilities rose to $562 from $390. Fayetteville Works accounted for $359, including $289 for on-site remediation and $70 for off-site groundwater remediation. The filing says total remediation exposure could be up to approximately $660 above the recorded accrual under adverse changes in circumstances.
- Fayetteville estimates remain uncertain: for the barrier wall and groundwater treatment system, the estimated upper range was $305, of which $170 was accrued. Design, regulatory approvals, construction details, and operating costs could change the estimate. Completion is required by March 15, 2023, subject to specified extensions.
- Winter Storm Uri caused approximately $21 of repair and above-normal utility costs and $9 of fixed-cost under-absorption; Chemours did not expect insurance recovery.
- Other significant 2021 items included $25 of expense for the Delaware settlement, $21 of debt-extinguishment loss, and $193 of Fayetteville remediation costs in cost of goods sold. The filing also reports $36 received from DuPont and Corteva as MOU cost-sharing recovery during 2021.
Outlook, risks, and management commentary
For 2022, management expected continued strength in Titanium Technologies demand, improved refrigerant demand and Opteon adoption, and strong Advanced Performance Materials demand. It also cited raw-material inflation and shortages, energy and logistics costs, customer supply-chain issues, and semiconductor constraints as headwinds. Chemical Solutions’ remaining Glycolic Acid and other Performance Chemicals and Intermediates businesses were expected to grow, with logistics challenges a partial offset. Planned 2022 capital expenditures were approximately $400. The filing provides no specific 2022 revenue or earnings guidance.
- Management expected cash from operations, available cash, receivables securitization, and existing financing arrangements to provide sufficient liquidity through at least February 2023, subject to evolving conditions.
- Under the PFAS MOU, Chemours bears half of covered future legacy PFAS costs with DuPont and Corteva collectively bearing the other half, subject to the MOU’s terms and limits. Chemours deposited $100 into escrow in 2021; a further $100 deposit was scheduled for 2022 and $50 annually thereafter through 2028, subject to the agreement.
- PFAS litigation, environmental remediation, regulatory developments, and indemnification or cost-sharing disputes could materially affect results and cash flows. The company said some potential losses are not reasonably estimable. A New Jersey agency sought a $943 million remediation funding source for Chambers Works; Chemours described the matter as reasonably possible but not estimable at the time of filing.
- Additional risks include COVID-19 effects, energy and raw-material price volatility, currency and interest-rate movements, manufacturing disruptions, cybersecurity, and substantial indebtedness. About $1.2 billion of debt under secured term loans was variable-rate debt.
- Chemours set a goal of net-zero operational greenhouse-gas emissions by 2050 and targets a 60% reduction in Scope 1 and 2 emissions by 2030. The filing also describes regulatory-driven demand opportunities for lower-GWP refrigerants alongside compliance costs and product-regulation risks.
Most important facts for investors to verify
- Review the drivers and sustainability of 2021 earnings, particularly pricing, volume, input-cost inflation, and the $112 Mining Solutions sale gain.
- Track Fayetteville remediation design approvals, spending against the $359 accrued site liability, the $305 upper estimate for the barrier-wall and groundwater system, and any changes to broader environmental exposure.
- Confirm PFAS escrow funding, future cost-sharing recoveries, litigation developments, and the effect of any new regulatory standards or required drinking-water measures.
- Assess liquidity and refinancing needs ahead of the 2025 debt maturities, covenant compliance, variable-rate exposure, and the fully utilized receivables securitization facility.
- Compare 2022 segment demand and margin performance with management’s outlook, especially the impact of raw-material, energy, freight, and supply-chain pressures.
The consolidated financial statements received an unqualified audit opinion, and management and the auditor reported effective internal control over financial reporting as of December 31, 2021. The auditor identified Fayetteville on-site remediation accruals as a critical audit matter.