EX-99.1 2 d832629dex991.htm EX-99.1 EX-99.1
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Exhibit 99.1

Preliminary and Subject to Completion, dated December 18, 2014

INFORMATION STATEMENT

The Chemours Company

Common Stock, Par Value $0.01 Per Share

 

 

This information statement is being furnished to the holders of common stock of E. I. du Pont de Nemours and Company (DuPont) in connection with the distribution of shares of common stock of The Chemours Company (Chemours). Chemours is a wholly owned subsidiary of DuPont that operates DuPont’s Performance Chemicals segment, which includes its titanium technologies, fluoroproducts and chemical solutions businesses. DuPont will distribute all of the outstanding shares of Chemours common stock on a pro rata basis to DuPont’s common stockholders.

Chemours was organized as a limited liability company under the laws of the State of Delaware, and, prior to the distribution, will be converted to a Delaware corporation.

For every share of DuPont common stock held of record by you as of the close of business on [], 2015, the record date for the distribution, you will receive [] share[s] of Chemours common stock. No fractional shares of Chemours common stock will be issued. Instead, you will receive cash in lieu of any fractional shares. As discussed under “The Distribution — Trading Between the Record Date and Distribution Date,” if you sell your DuPont common stock in the “regular-way” market after the record date and before the separation and distribution, you also will be selling your right to receive shares of Chemours common stock in connection with the separation and distribution. We expect the shares of Chemours common stock to be distributed by DuPont to you on [], 2015. We refer to the date of the distribution of Chemours common stock as the “distribution date.” After the distribution, we will be an independent, publicly traded company.

No vote of DuPont’s stockholders is required to effect the distribution. Therefore, you are not being asked for a proxy to vote on the separation or the distribution, and you are requested not to send us a proxy. You do not need to pay any consideration, exchange or surrender your existing shares of DuPont common stock or take any other action to receive your shares of Chemours common stock.

The distribution is intended to be tax-free to DuPont shareholders for United States federal income tax purposes, except for cash received in lieu of fractional shares. The distribution is subject to the satisfaction or waiver by DuPont of certain conditions, including the continued effectiveness of a private letter ruling that DuPont has received from the U.S. Internal Revenue Service and opinions of tax counsel confirming that the distribution and certain transactions entered into in connection with the distribution generally will be tax-free to DuPont and its shareholders for U.S. federal income tax purposes, except for cash received in lieu of fractional shares. Cash received in lieu of any fractional shares of Chemours common stock will generally be taxable to you.

DuPont currently owns all of the outstanding shares of Chemours. Accordingly, there is no current trading market for Chemours common stock, although we expect that a limited market, commonly known as a “when-issued” trading market, will develop on or shortly before the record date for the distribution, and we expect “regular-way” trading of Chemours common stock to begin on the first trading day following the completion of the separation and distribution. Chemours intends to apply to have its common stock authorized for listing on the New York Stock Exchange, Inc. under the symbol [].

 

 

In reviewing this information statement, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 19.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

References in this information statement to specific codes, legislation or other statutory enactments are to be deemed as references to those codes, legislation or other statutory enactments, as amended from time to time.

The date of this information statement is [], 2014.


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TABLE OF CONTENTS

 

     Page  

INFORMATION STATEMENT SUMMARY

     1   

QUESTIONS AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION

     10   

RISK FACTORS

     19   

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

     35   

THE DISTRIBUTION

     36   

DIVIDEND POLICY

     42   

CAPITALIZATION

     43   

UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

     44   

SELECTED HISTORICAL COMBINED FINANCIAL DATA

     50   

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     51   

BUSINESS

     71   

MANAGEMENT

     102   

COMPENSATION DISCUSSION AND ANALYSIS

     109   

EXECUTIVE COMPENSATION

     115   

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

     119   

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     120   

OUR RELATIONSHIP WITH DUPONT FOLLOWING THE DISTRIBUTION

     122   

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION

     129   

FINANCING ARRANGEMENTS

     132   

DESCRIPTION OF OUR CAPITAL STOCK

     133   

WHERE YOU CAN FIND MORE INFORMATION

     139   


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The following is a summary of material information discussed in this information statement. This summary may not contain all the details concerning the separation and distribution or other information that may be important to you. To better understand the separation, distribution and Chemours’ business and financial position, you should carefully review this entire information statement. Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement, including the combined financial statements of Chemours, which are comprised of the assets and liabilities of DuPont’s Performance Chemicals segment, which includes its titanium technologies, fluoroproducts and chemical solutions businesses, and certain additional assets and liabilities associated with the DuPont business, assumes the completion of all the transactions referred to in this information statement in connection with the separation and distribution. Unless the context otherwise requires, references in this information statement to “The Chemours Company,” “The Chemours Company, LLC,” “Chemours,” “we,” “us,” “our” and “our company” refer to The Chemours Company and its combined subsidiaries. References in this information statement to “DuPont” refer to E. I. du Pont de Nemours and Company, a Delaware corporation, and its consolidated subsidiaries (other than Chemours and its combined subsidiaries), unless the context otherwise requires. References to “DuPont stockholders” refer to stockholders of DuPont in their capacity as holders of common stock only, unless context otherwise requires.

Chemours was organized as a limited liability company under the laws of the State of Delaware. In accordance with the separation and distribution, actions will have been taken so as at the time immediately prior to the distribution, Chemours will have been converted from a limited liability company to a Delaware corporation.

This information statement describes the business to be transferred to Chemours by DuPont in the separation as if the transferred business were our business for all historical periods described. References in this information statement to our historical assets, liabilities, products, businesses or activities of our business are generally intended to refer to the historical assets, liabilities, products, businesses or activities of the transferred business as the business was conducted as part of DuPont and its subsidiaries prior to the separation and distribution.

You should not assume that the information contained in this information statement is accurate as of any date other than the date set forth on the cover. Changes to the information contained in this information statement may occur after that date, and we undertake no obligation to update the information, except in the normal course of our public disclosure obligations.

INFORMATION STATEMENT SUMMARY

Distributing Company

DuPont was founded in 1802 and was incorporated in Delaware in 1915. Today, DuPont is creating higher growth and higher value by extending the company’s leadership in agriculture and nutrition, strengthening and growing capabilities in advanced materials and leveraging cross-company skills to develop a world-leading bio-based industrial business. Through these strategic priorities, DuPont is helping customers find solutions to capitalize on areas of growing global demand — enabling more, safer, nutritious food; creating high-performance, cost-effective energy efficient materials for a wide range of industries; and increasingly delivering renewably sourced bio-based materials and fuels. Total worldwide employment at December 31, 2013, was about 64,000 people. DuPont has operations in more than 90 countries worldwide and about 60 percent of consolidated net sales are made to customers outside the United States of America (U.S.).

Our Company

Chemours is a leading global provider of performance chemicals through three reporting segments: Titanium Technologies, Fluoroproducts and Chemical Solutions. Our performance chemicals are key inputs into products and processes in a variety of industries. Our Titanium Technologies segment is the leading global producer of

 

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titanium dioxide (TiO2), a premium white pigment used to deliver opacity. Our Fluoroproducts segment is a leading global provider of fluoroproducts, such as refrigerants and industrial fluoropolymer resins. Our Chemical Solutions segment is a leading North American provider of industrial and specialty performance chemicals used in gold production, oil refining, agriculture, industrial polymers and other industries. Our position with each of these businesses reflects the strong value proposition we provide to our customers based on our long history of innovation and our reputation within the chemical industry for safety, quality and reliability. We operate 37 production facilities located in 12 countries and serve several thousand customers located in more than 130 countries.

Our Strengths

Our competitive strengths include the following:

Leading Global Market Positions

We are the largest global producer of TiO2, with annual TiO2 capacity of approximately 1.2 million metric tons. We are in the process of expanding capacity at our Altamira, Mexico production facility by 200,000 metric tons. Production at the expansion is scheduled to start up in 2016. Each of our TiO2 production facilities ranks among those with the largest capacity globally, and our production facilities at New Johnsonville, Tennessee and DeLisle, Mississippi are the two largest capacity TiO2 production facilities in the world. We believe that our world-scale assets, consistent quality and delivery reliability differentiate us from our competitors in the TiO2 market.

We are the market leader in fluoroproducts, with leading positions in fluorinated refrigerants, and industrial fluoropolymer resins and downstream products. We have a leading position in hydrofluorocarbon (HFC) refrigerants and are at the forefront of developing high-performance sustainable technologies such as our low global warming potential (GWP) hydrofluoro-olefin (HFO) refrigerants and foam expansion agents. We are also the market leader in industrial fluoropolymer resins and downstream products and coatings, marketed under the well-known Teflon® brand name. Teflon® industrial resins are used in high-performance wire and cable and multiple components in high-tech processing equipment.

We maintain leading market positions in key businesses in our Chemical Solutions segment. We are the largest producer of sodium cyanide, which is used primarily in gold production, in the Americas. In North America, we maintain market leading positions in sulfuric acid, which is used primarily in oil refining; aniline, which is primarily used to make polyurethane, and glycolic acid, which is primarily used in personal care products. We also have a strong market position in disinfectants used for water sanitization, animal health and bio-security.

Our market-leading positions are due to the scale and scope of our operations, our outstanding process technology, our differentiated products, our competitive pricing and efficient manufacturing base and long-standing partnerships with our customers.

Industry-leading Cost Structure

We produce our products in cost-efficient manufacturing facilities that utilize proprietary process technologies to help drive our industry-leading cost structure. We continue to focus on increasing manufacturing efficiencies and mitigating cost inflation through process improvements, selected capital investments and adoption of best practices.

Our Titanium Technologies segment, in particular, has high asset productivity. Our proprietary TiO2 process technology allows us to optimize the use of a variety of titanium-bearing ore types, providing us with a cost advantage. Our world-scale TiO2 production facilities provide significant economies of scale. We operate large individual production lines at high utilization rates. The scale of our production facilities combined with our process technology capabilities, has allowed us to achieve the lowest manufacturing costs per unit in the industry over a sustained period of time. Our new Altamira, Mexico TiO2 production line is expected to be one of the

 

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lowest cost production lines in the world. In addition, we continually strive to improve our productivity and optimize our capacity by applying our engineering and manufacturing technology expertise to our production facilities.

Our leading fluoroproducts capacity, innovative production processes, effective supply chain and sourcing strategies make us highly cost competitive also in the fluoroproducts market. Our use of local contract manufacturing and joint venture partners in selected countries as a source of regional access and asset-light manufacturing (where possible) further enhances the overall cost position of our Fluoroproducts segment.

We believe that we have competitive cost positions within our Chemical Solutions segment as a result of proprietary process technologies, manufacturing scale and efficient supply chain processes. Our Chemical Solutions segment is also expected to benefit from its exploitation of low cost energy and hydrocarbon raw material inputs in North America, where nearly all of our Chemical Solutions production facilities are located.

Leading Technology and Intellectual Property

As part of our DuPont heritage, our businesses have a long history of delivering innovative and high-quality products. We expect sustained technology leadership to be a key differentiator for Chemours, as the majority of our products are critical inputs that significantly impact the functionality, performance and quality of our customers’ products. Our product offerings are enhanced by application technology scientists and laboratories across the globe, whose goal it is to deliver formulation improvements to help our customers achieve lower costs, better performance and higher overall value-in-use from our products compared to those of our competitors.

In our Titanium Technologies segment, we commercialized the chloride process for TiO2 production in 1953, providing products with better opacity and superior whiteness due to lower impurities, and generating lower waste and byproducts than the traditional sulfate production technology. Currently, we are one of the limited number of TiO2 producers with rights to chloride process for production of TiO2. We believe that our proprietary chloride technology enables us to operate plants at a much higher capacity than other chloride technology based TiO2 producers, uniquely utilizing a broad spectrum of titanium bearing ore feedstocks and achieving the highest unit margins in our industry. Our research and development (R&D) and technology efforts focus on improving production processes, developing and yielding TiO2 grades that help customers achieve optimal performance. In our Fluoroproducts segment, we pioneered fluorine chemistry and invented polytetrafluoroethylene (PTFE), as well as developed the first generation of refrigeration agents in the first half of the 20th century. Our continuing innovation focus places us at the forefront of industry and regulatory changes with a focus on sustainable solutions. In fluoroproducts, we led the industry in the Montreal-Protocol (1987) driven transition from chlorofluorocarbons (CFCs) to the lesser ozone depleting hydrochlorofluorocarbons (HCFCs), and non-ozone depleting HFCs. In 1988 we committed to cease production of CFCs and started manufacturing non-ozone depleting HFCs in the early 1990’s. Driven by new and emerging environmental legislations and standards currently being implemented across the U.S., Europe and Japan, we are currently driving the development and commercialization of our next generation Opteon® product line, innovative low global warming potential (GWP) fluorochemicals for refrigeration and other applications. This new patented technology has zero ozone depletion potential and very low GWP and offers similar functionality to current HFC products. Like Titanium Technologies and Fluoroproducts, our Chemical Solutions segment has strong technical capabilities and a reputation for its ability to manage hazardous materials. This ability is a key competitive advantage for Chemical Solutions, as several of its products’ end-users demand the highest level of excellence in the safe manufacturing, handling and shipping of the materials.

Our technological advantage is supported by our intellectual property portfolio of trade secrets, patents and protected innovations, covering process technologies, product formulations and various end-use applications. We maintain a world-renowned trademark portfolio, including the widely recognized brands Ti-Pure® and Vantage® for titanium dioxide products, Suva®, ISCEON®, Freon®, Opteon®, Teflon®, Tefzel®, Viton®, Krytox®, Formacel®, Dymel®, FM 200®, Nafion®, Capstone® for fluoroproducts, and Virkon® and Oxone® for Chemical Solutions.

 

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Positioned to Capitalize on Economic Growth

Demand for TiO2 comes from the coatings, paper and plastics industries and is highly correlated to growth in the global residential housing, commercial construction and packaging markets. Over the long-term, global TiO2 demand has grown in line with gross domestic product (GDP). Growth in emerging markets, including China, however, may be greater than GDP-level growth due in part to the rising middle class in such markets, which has become a key driver of demand for end products that use our TiO2.

Our Fluoroproducts segment, particularly through its low GWP and non-ozone depleting products, is expected to benefit from regulatory changes requiring phase-out and phase-downs of less sustainable incumbent products. In addition, our customers continually require innovative next generation advanced materials, particularly industrial fluoropolymer resins, driving new product development and growth. We believe the fluoroproducts demand growth in developed markets is in line with global GDP, whereas demand growth in emerging markets is higher than GDP. Growth is also expected to be driven by country-specific legislation phasing-down the current HFC refrigerants for which our new HFO-based products and blends are functional substitutes with a low environmental footprint.

Our Chemical Solutions segment serves customers in a diverse range of end markets that we believe generally grow in line with global GDP.

Long Standing Customer Relationships

We serve more than 5,000 customers across a wide range of end markets in more than 130 countries. Many of our commercial and industrial relationships have been in place for decades and are based on our proven value proposition of safely and reliably supplying our customers with the materials needed for their operations. Our customers are comprised of a diverse group of companies, including many industry leaders. Knowledge of our customers’ business needs is at the core of our innovative processes and forms the basis of our product development initiatives. We work closely with our customers to optimize their formulations and products. We also provide ongoing technical support services to these customers, which helps them to maximize the effectiveness of our advanced performance products.

Strong Management Team with Deep Industry Experience

Chemours has a strong executive management team that combines in-depth industry experience and demonstrated leadership. Mark Vergnano, our Chief Executive Officer, previously served as Executive Vice President of DuPont since 2009. His prior experience includes 35 years in a variety of general management, manufacturing and technical leadership positions, including vice president and general manager for DuPont Nonwovens, DuPont Building Innovations and group vice president of DuPont Safety & Protection. Mark Newman, our Senior Vice President and Chief Financial Officer, previously served as senior vice president and chief financial officer of SunCoke Energy Inc. Prior to his time at SunCoke, Mr. Newman served in a number of senior operating and finance leadership roles in the U.S. and China, primarily with the General Motors Corporation where he began his career in 1986. Chemours’ segment presidents are BC Chong, Thierry Vanlancker and Chris Siemer, each of whom has been in chemical industry leadership positions for more than twenty years. Mr. Chong has served as president of DuPont’s Titanium Technologies business since 2011. Previously, he held leadership positions in manufacturing operations, new business development, strategic planning and sales and marketing. Mr. Vanlancker was named president of DuPont’s Fluoroproducts and Chemical Solutions business in 2012. He brings over a decade of experience in managing fluoro-based businesses and has held leadership positions in general management and sales and marketing. Mr. Siemer joined DuPont in 2010 and has managed global industrial and specialty chemical business portfolios for more than twenty years.

In addition to our strong executive management team, we have an experienced group of employees who work to maintain our leading market positions with their commitment to safe and efficient production, technology leadership, expansion of product offerings and customer relationships.

 

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Strong Cash Flow Generation

Chemours has generated strong operating cash flow through various industry and economic cycles evidencing the operating strength of our businesses. For each of the past five fiscal years, we have generated cash flows from operating activities in excess of $[] million, with such cash flows averaging $[] billion per year.

Our cash flow has been more than sufficient to satisfy our capital expenditure requirements, which on average equaled $[] million per year during the past five years, including a significant increase in each of the past three fiscal years due to expenditures relating to the expansion of our TiO2 production facility at Altamira, Mexico. Consequently, for each of the past five fiscal years, we have generated free cash flow (defined as cash flows from operating activities less capital expenditures) of at least $[] million, which averaged $[] billion per year. We expect our capital expenditures to be reduced in 2016 and in the near term thereafter due to the completion of the Altamira expansion, which should further bolster our free cash flow as the new capacity is expected to be accessible in mid-2016.

Our Strategy

Enhance Operational Excellence and Asset Efficiency

Operational excellence, which includes a commitment to safety, environmental stewardship and improved reliability, is key to our future success. We continually evaluate our business to identify opportunities to increase operational efficiency throughout our production facilities with a focus on maintaining operational excellence and maximizing asset efficiency. We continue to set new, stricter operational excellence targets for each of our facilities based on industry-leading benchmarks. We intend to continue focusing on increasing manufacturing efficiencies through selected capital projects, process improvements and best practices in order to lower unit costs. We will also carefully manage our portfolio, especially in our Chemical Solutions segment, and take appropriate actions to address product lines that face challenging market conditions and do not generate returns on invested capital that we believe are sufficient to create long-term shareholder value.

Focus on Cash Flow Generation

Our goal is to focus on cash flow generation and return on invested capital through the continuing optimization of our cost structure, improvement in working capital and supply chain efficiencies, and a disciplined approach to capital expenditures.

We have a proven track record of mitigating fixed cost inflation with cost saving actions and productivity improvements. We intend to continue to identify incremental cost saving opportunities based in large part on benchmarks of industry-leading performance and productivity improvements by utilizing our engineering and manufacturing technology expertise and partnerships with low cost producers. Our goal is to have a cost structure that positions us favorably to compete and grow. Our goal is to continue upgrading our customer and product mix to increase our sales of value-added, differentiated products to achieve premium pricing to improve margins and enhance cash flow.

We intend to actively manage our working capital by increasing inventory turnover and reducing finished goods and raw materials inventory without affecting our ability to deliver products to our customers. We strive to improve our supply chain efficiency by focusing on reducing both operating costs and working capital needs. Our supply chain efforts to lower operating costs have consisted of reducing procurement spending, lowering transportation and warehouse costs and optimizing production scheduling.

We remain focused on disciplined capital allocation among our segments. We plan to allocate our capital expenditures to projects required to enhance the reliability of our manufacturing operations and maintain the overall asset portfolio. This includes key maintenance and repair activities in each segment, and necessary regulatory and maintenance spending to ensure safe operations. We intend to optimize capital spending on growth projects across our various businesses based on a thorough comparison of risk-adjusted returns for each project.

 

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Maintain Strong Customer Focus

A key component of our strategy is to produce innovative, high-performance products that offer enhanced value propositions to our customers at competitive prices. Our goal is to continually work closely with our customers to provide solutions and products that optimize their formulations and products. This market-driven product development enables us to offer a high-quality product portfolio to our customers and provides our businesses with the ability to respond quickly and efficiently to changes in market demands.

Leverage our Leadership to Drive Organic Growth

We plan to continue to capitalize on our global operations network, distribution infrastructure and technology to pursue global growth. We will focus our efforts on those geographic areas and end products that we believe offer the most attractive growth and long-term profitability prospects.

Our strategy in our Titanium Technologies segment is to continue to strengthen our leading position from both product offering and cost perspective in order to increase the segment’s sales and profitability. We intend to continue to position Chemours as the preferred supplier of TiO2 worldwide by delivering the highest quality product offering to our customers coupled with superior technical expertise. We are currently expanding capacity at our Altamira, Mexico production facility, which will increase our global capacity by approximately 17 percent and will be one of the lowest cost TiO2 production lines in the world. Production at the expansion is scheduled to start up in 2016.

Our Fluoroproducts segment plans to make ongoing, selective investments to capitalize on market opportunities based on our innovation capabilities and industry dynamics. We intend to continue to leverage our fluoroproducts and process expertise to develop new high-performance, differentiated offerings and to promote industry transition towards more sustainable technologies. Specifically, our strategy is to focus on development of proprietary, high-value, sustainable specialties (for example, Opteon® YF and HFO-1336, which are designed to meet tighter regulatory standards and replace commodity HFC refrigerants or foaming agents).

Our Chemical Solutions segment intends to capitalize on potential growth opportunities in businesses in which we have strong regional positions, e.g. sulfuric acid and sodium cyanide. We plan to make selective capital investments to grow our sulfur products and sodium cyanide businesses, in which we have leading market positions in the Americas, and to take initiatives to improve profitability in the remainder of the businesses in our Chemical Solutions segment.

Deepen Our Presence in Emerging Markets

Emerging markets are a strategic priority for a number of our businesses. We are well positioned not only to leverage our strong market positions in mature but highly sophisticated markets in North America and Europe, but also to participate in the expected growth of emerging markets in Asia, Eastern Europe and Latin America. We believe that improving living standards and growth in GDP across emerging markets are combining to create increased demand for our products. We expect to capitalize on this growth opportunity by expanding our customer base and local capabilities in order to increase our market share across emerging markets, especially China. To accelerate our penetration of these markets and maintain our competitive cost position, we may develop relationships with leading local partners, especially in businesses where participation in the fast-growing Chinese market is particularly important for long-term sustainable growth. For example, we are well positioned to leverage our strong production technology in our industrial fluoropolymers resins business, where the Chinese market is expected to continue to evolve from low-end fluoropolymer applications to higher value PTFE, copolymer and fluoroelastomer products, as a result of an increasing percentage of aerospace, automotive, semiconductor, electronics and telecommunications manufacturing transitions to China.

 

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Drive Organizational Alignment

We believe that maintaining alignment of the efforts of our employees with our overall business strategy and operational excellence goals is critical to our success. We have outstanding people and assets and, with the commitment to values of safety, customer appreciation, simplicity, collective entrepreneurship and integrity, we believe that we can maintain our competitiveness and help achieve our operational excellence and asset efficiency strategic objectives.

Risks Associated with Our Business

An investment in Chemours common stock is subject to a number of risks. The following list of risk factors is not exhaustive. Please read the information in the section captioned “Risk Factors” for a more thorough description of these and other risks.

 

    Conditions in the global economy and global capital markets may adversely affect our results of operations, financial condition, and cash flows.

 

    Market conditions, as well as global and regional economic downturns that adversely affect the demand for the end-use products that contain TiO2, fluoroproducts or our other products, could adversely affect the profitability of our operations and the prices at which we can sell our products, negatively impacting our financial results.

 

    The markets for many of our products have seasonally affected sales patterns.

 

    Changes in government policies and laws and certain geopolitical conditions and activities could adversely affect our financial results.

 

    Our reported results could be adversely affected by currency exchange rates and currency devaluation could impair our competitiveness.

 

    Price fluctuations in energy and raw materials could have a significant impact on our ability to sustain and grow earnings.

 

    We are subject to extensive environmental, health and safety laws and regulations that may result in unanticipated loss or liability, which could reduce our profitability.

 

    Hazards associated with chemical manufacturing, storage and transportation could adversely affect our results of operations.

 

    The businesses in which we compete are highly competitive. This competition may adversely affect our results of operations and operating cash flows.

 

    Our significant indebtedness could adversely affect our financial condition, and we could have difficulty fulfilling our obligations under our indebtedness, either of which could have a material adverse effect on the value of our common stock.

 

    We may need additional capital in the future and may not be able to obtain it on favorable terms.

 

    The agreements governing our indebtedness will restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.

 

    If we are unable to innovate and successfully introduce new products, or new technologies or processes reduce the demand for our products or the price at which we can sell products, our profitability could be adversely affected.

 

    Our results of operations and financial condition could be seriously impacted by business disruptions and security breaches, including cybersecurity incidents.

 

    If our intellectual property were compromised or copied by competitors, or if our competitors were to develop similar or superior intellectual property or technology, our results of operations could be negatively affected.

 

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    As a result of our current and past operations, including operations related to divested businesses and our discontinued operations, we could incur significant environmental liabilities.

 

    Our results of operations could be adversely affected by litigation and other commitments and contingencies.

The Separation and Distribution

On October 24, 2013, DuPont announced its intention to separate its Performance Chemicals segment, which includes its titanium technologies, fluoroproducts and chemical solutions businesses, from the other businesses of DuPont that comprise its Agriculture, Electronics & Communications, Industrial Biosciences, Nutrition & Health, Performance Materials and Safety & Protection segments (the DuPont Business). The distribution is intended to be generally tax free for U.S. federal income tax purposes.

In furtherance of this plan, on [], 2015, DuPont’s board of directors approved the distribution of all of the issued and outstanding shares of Chemours common stock on the basis of [] share[s] of Chemours common stock for each share of DuPont common stock issued and outstanding on [], 2015, the record date for the distribution. As a result of the distribution, Chemours will become an independent, publicly traded company.

Internal Reorganization

DuPont will transfer the entities and related assets and liabilities that are necessary in advance of the distribution so that Chemours is transferred the entities, assets and liabilities associated with DuPont’s Performance Chemicals segment, which includes its titanium technologies, fluoroproducts and chemical solutions businesses, and certain additional assets and liabilities associated with the DuPont Business. We are currently a wholly owned subsidiary of DuPont. In connection with the distribution, DuPont will undertake a series of internal reorganization transactions to facilitate the transfers of entities and the related assets and liabilities described above. See “Our Relationship with DuPont Following the Distribution — Separation Agreement” for further discussion.

Chemours’ Post-Separation Relationship with DuPont

Chemours will enter into a Separation Agreement with DuPont, which is referred to in this information statement as the “Separation Agreement,” and which will contain the principles governing the internal reorganization discussed above and will specify the terms of the distribution. In connection with the separation and distribution, Chemours will enter into various other agreements to effect the separation and distribution and provide a framework for its relationship with DuPont after the separation and distribution. These other agreements will include a Transition Services Agreement, a Tax Matters Agreement, an Employee Matters Agreement, IP Cross-License Agreements and certain manufacturing and supply arrangements. These agreements will provide for the allocation between Chemours and DuPont of DuPont’s and Chemours’ assets, employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after Chemours’ separation from DuPont, and will govern certain relationships between Chemours and DuPont after the separation. For additional information regarding the Separation Agreement and other transaction agreements, see the sections entitled “Risk Factors — Risks Related to the Separation” and “Our Relationship with DuPont Following the Distribution.”

Regulatory Approvals

Chemours must complete the necessary registration under U.S. federal securities laws of Chemours common stock, as well as the applicable New York Stock Exchange (NYSE) listing requirements for such shares.

Other than the requirements discussed above, we do not believe that any other material governmental or regulatory filings or approvals will be necessary to consummate the distribution.

 

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DuPont’s stockholders will not have any appraisal rights in connection with the distribution.

Corporate Information

Chemours was organized in the state of Delaware on February 18, 2014 as Performance Operations, LLC, and changed its name to the Chemours Company, LLC on April 15, 2014. In accordance with the separation and distribution, actions will have been taken so as at the time immediately prior to the distribution, Chemours will have been converted from a limited liability company to a Delaware corporation. The address of Chemours’ principal executive offices is []. Chemours’ telephone number is [].

 

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QUESTIONS AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION

 

What is Chemours and why is DuPont separating the Chemours business and distributing Chemours’ stock?

Chemours currently is a wholly owned subsidiary of DuPont that was formed to operate DuPont’s Performance Chemicals segment, which includes its titanium technologies, fluoroproducts and chemical solutions businesses. The separation will be effected by a distribution of Chemours common stock on a pro rata basis to DuPont’s stockholders. Following the separation and distribution, Chemours will be a separate company from DuPont, and DuPont will not retain any ownership interest in Chemours.

 

  The separation of Chemours from DuPont and the distribution of Chemours common stock are intended to provide you with equity investments in two separate companies that will be able to focus on each of their respective businesses. DuPont and Chemours expect that the separation will result in enhanced long-term performance of each business for the reasons discussed in the sections entitled “The Distribution — Background of the Distribution” and “The Distribution — Reasons for the Separation and Distribution.”

 

Why am I receiving this document?

DuPont is delivering this document to you because you are a holder of DuPont common stock. If you are a holder of DuPont common stock as of the close of business on [], 2015, the record date for the distribution, you are entitled to receive [] share[s] of our common stock for each share of DuPont common stock that you hold at the close of business on such date. This document will help you understand how the separation and distribution will affect your investment in DuPont and your investment in Chemours after the separation.

 

What are the reasons for the separation?

DuPont’s Board of Directors determined that the separation and distribution of the Chemours business from the DuPont Business would be in the best interests of DuPont and its stockholders and approved the plan of separation. A wide variety of factors were considered by DuPont’s board of directors in evaluating the separation and distribution. Among other things, DuPont’s board of directors considered the following potential benefits of the separation and distribution:

 

   

Closer alignment of DuPont’s businesses with its evolving strategic direction — DuPont’s overall mission is to bring world-class science and engineering to the global marketplace in the form of innovative products, materials and services. Increasingly, DuPont’s strategic direction and business model is focused on advancing the company’s integrated capabilities in biology, chemistry and materials science to further strengthen its leading positions across three strategic priorities: agriculture and nutrition, advanced materials and biobased industrials. DuPont is focused on high potential commercial opportunities in secular growth markets in food, energy, and protection where the company’s innovation, global scale and efficient execution have the potential to create valuable new outcomes. In addition, the Performance Chemicals Segment is highly cyclical and its performance is volatile as

 

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compared to DuPont’s other businesses. Its leading businesses in Titanium Technologies and Fluoroproducts, and Chemical Solutions, well-established positions in attractive markets, and strong cash flow generation will be better positioned as an independent company. The separation and distribution will allow DuPont to continue its transformation into a higher growth, less cyclical company, resulting in greater value creation for its shareholders.

 

    Elimination of capital and other constraints on the Performance Chemicals segment — The separation and distribution will allow Chemours to attract capital to fund opportunities that the Performance Chemicals segment otherwise would not be able to pursue as a component of a company with a different strategic direction. As a stand-alone company, Chemours will have separate access to the debt and equity capital markets.

 

  DuPont’s board of directors considered a number of potentially negative factors in evaluating the separation and distribution, including risks relating to the creation of a new public company, possible increased administrative costs and one-time separation costs, but concluded that the potential benefits of the separation and distribution outweighed these factors. For more information, see the sections entitled “The Distribution — Reasons for the Separation and Distribution” and “Risk Factors” included elsewhere in this information statement.

 

Why is the separation of Chemours structured as a distribution?

The board of directors of DuPont has approved a plan to separate DuPont’s performance chemicals business into a new publicly traded company. DuPont currently believes the separation by way of distribution is the most efficient way to separate its performance chemicals business from DuPont for various reasons. In particular, we believe a separation will (i) provide a high degree of assurance that decisions regarding our capital structure will support future financial stability; (ii) offer a high degree of certainty of completion in a timely manner, lessening disruption to current business operations; and (iii) would generally be a tax-free distribution of Chemours shares to DuPont’s stockholders for U.S. federal income tax purposes. After consideration of strategic opportunities, DuPont believes that a tax-free separation will enhance the long-term value of both DuPont and us. See “The Distribution — Reasons for the Separation and Distribution.”

 

What do I have to do to participate in the distribution?

Nothing. You are not required to take any action to receive your Chemours shares, although you are urged to read this entire document carefully. No stockholder approval of the distribution is required or sought. Therefore, you are not being asked for a proxy to vote on the separation or the distribution, and you are requested not to send us a proxy. You will neither be required to pay anything for the shares of Chemours common stock nor be required to surrender any shares of DuPont common stock to participate in the distribution. Please do not send in your DuPont stock certificates.

 

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What is the record date for the distribution?

DuPont will determine record ownership as of the close of business on [], 2015, which we refer to as the “record date.”

 

What will I receive in distribution?

If you hold DuPont common stock as of the record date, on the distribution date you will receive [] share[s] of our common stock for every [] share[s] of DuPont common stock. You will receive only whole shares of our common stock in the distribution. For a more detailed description, see “The Distribution.”

 

How will fractional shares be treated in the distribution?

You will not receive any fractional shares of our common stock in connection with the distribution. Instead, the distribution agent will aggregate all fractional shares into whole shares and sell the whole shares in the open market at prevailing market prices on behalf of DuPont stockholders entitled to receive a fractional share. The distribution agent will then distribute the aggregate cash proceeds of the sales, net of brokerage fees and other costs, pro rata to these holders (net of any required withholding for taxes applicable to each holder). We anticipate that the distribution agent will make these sales in the “when-issued” market, and when-issued trades will generally settle within two weeks following the distribution date. See “— How will Chemours common stock trade?” for additional information regarding when-issued trading and “The Distribution — The Number of Shares of Chemours Common Stock You Will Receive” for a more detailed explanation of the treatment of fractional shares.

 

Will the number of DuPont shares I own change as a result of the distribution?

No, the number of shares of DuPont common stock you own will not change as a result of the distribution. Your proportionate interest in DuPont will not change as a result of the separation and distribution.

 

How many shares of Chemours common stock will be distributed?

The actual number of shares of our common stock that DuPont will distribute will depend on the number of shares of DuPont common stock outstanding on the record date. The shares of our common stock that DuPont distributes will constitute all of the issued and outstanding shares of our common stock immediately prior to the distribution. For more information on the shares being distributed, see “Description of Our Capital Stock.”

 

When will the distribution occur?

It is expected that the distribution will be effected after the closing of trading on the NYSE on [], 2015, which we refer to as the “distribution date.” On or shortly after the distribution date, the whole shares of our common stock will be credited in book-entry accounts for stockholders entitled to receive the shares in the distribution. We expect the distribution agent, acting on behalf of DuPont, to take about two weeks after the distribution date to fully distribute to DuPont stockholders any cash in lieu of the fractional shares they are entitled to receive. See “— How will DuPont distribute shares of our common stock?” for more information on how to access your book-entry account or your bank, brokerage or other account holding the Chemours common stock you receive in the distribution.

 

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If I sell my shares of DuPont common stock on or before the distribution date, will I still be entitled to receive shares of Chemours common stock in the distribution?

If you hold shares of DuPont common stock on the record date and decide to sell them on or before the distribution date, you may choose to sell your DuPont common stock with or without your entitlement to our common stock. Beginning on or shortly before the record date and continuing up to and through the distribution, it is expected that there will be two markets in DuPont common stock: a “regular-way” market and an “ex-distribution” market. Shares of DuPont common stock that trade in the “regular-way” market will trade with an entitlement to shares of Chemours common stock distributed pursuant to the distribution. Shares that trade in the “ex-distribution” market will trade without an entitlement to shares of Chemours common stock distributed pursuant to the distribution.

 

  You should discuss these alternatives with your bank, broker or other nominee. See “The Distribution — Trading Between the Record Date and Distribution Date” for more information.

 

How will DuPont distribute shares of our common stock?

Registered stockholders: If you are a registered stockholder (meaning you hold physical DuPont stock certificates or you own your shares of DuPont common stock directly through an account with DuPont’s transfer agent, Computershare Trust Company, N.A. (Computershare), the distribution agent will credit the whole shares of our common stock you receive in the distribution to your book-entry account on or shortly after the distribution date. About two weeks after the distribution date, the distribution agent will mail you a book-entry account statement that reflects the number of whole shares of our common stock you own, along with a check for any cash in lieu of fractional shares you are entitled to receive. You will be able to access information regarding your book-entry account holding the Chemours shares at [] using the same credentials that you use to access your DuPont account or via our transfer agent’s interactive voice response system at [].

 

  “Street name” or beneficial stockholders: If you own your shares of DuPont common stock beneficially through a bank, broker or other nominee, your bank, broker or other nominee will credit your account with the whole shares of our common stock you receive in the distribution on or shortly after the distribution date, and the distribution agent will mail you a check for any cash in lieu of fractional shares you are entitled to receive. Please contact your bank, broker or other nominee for further information about your account.

 

  We will not issue any physical stock certificates to any stockholders, even if requested. See “The Distribution — When and How You Will Receive the Distribution” for a more detailed explanation.

 

What are the conditions to the separation and distribution?

The distribution is subject to a number of conditions, including, among others:

 

   

the making of a $[] cash distribution from Chemours to DuPont prior to the distribution, and the determination by DuPont in its sole discretion that following the separation it shall have no further

 

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liability or obligation whatsoever under any financing arrangements that Chemours will be entering into in connection with the separation;

 

    the Securities and Exchange Commission (SEC) having declared effective the registration statement, of which this information statement forms a part, no stop order relating to the registration statement being in effect, nor any proceeding seeking such stop order being pending, and the information statement having been distributed to DuPont’s stockholders;

 

    Chemours common stock having been approved and accepted for listing by the NYSE, subject to official notice of issuance;

 

    DuPont has received a ruling (IRS Ruling) from the U.S. Internal Revenue Service (IRS) substantially to the effect that, among other things, the distribution of our ordinary shares, together with certain related transactions, will qualify under Sections 355 and 368(a) of the Internal Revenue Code of 1986, as amended (Code), with the result that DuPont and DuPont’s shareholders will not recognize any taxable income, gain or loss for U.S. federal income tax purposes as a result of the distribution, except to the extent of cash received in lieu of fractional shares. As a condition to the distribution, the IRS Ruling must remain in effect as of the distribution date. In addition, the distribution is conditioned on the receipt of an opinion of tax counsel (Tax Opinion), in form and substance acceptable to DuPont, substantially to the effect that certain requirements, including certain requirements that the IRS will not rule on, necessary to obtain tax-free treatment, have been satisfied. See “Material U.S. Federal Income Tax Consequences of the Distribution”;

 

    the receipt of an opinion from an independent appraisal firm to the board of directors of DuPont confirming the solvency of each of DuPont and Chemours after the distribution that is in form and substance acceptable to DuPont in its sole discretion;

 

    all permits, registrations and consents required under the securities or blue sky laws of states or other political subdivisions of the United States or of other foreign jurisdictions in connection with the distribution having been received;

 

    no order, injunction, or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation, distribution or any of the related transactions being in effect;

 

    the reorganization of DuPont and Chemours businesses prior to the separation and distribution having been effectuated;

 

    the approval by the board of directors of DuPont of the distribution and all related transactions (and such approval not having been withdrawn);

 

    DuPont’s election of the individuals to be listed as members of our board of directors post-distribution, as described in this information statement, immediately prior to the distribution date;

 

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    Chemours having entered into certain agreements in connection with the separation and distribution and certain financing arrangements prior to or concurrent with the separation; and

 

    no events or developments shall have occurred or exist that, in the sole and absolute judgment of DuPont’s board of directors, make it inadvisable to effect the distribution or would result in the distribution and related transactions not being in the best interest of DuPont or its stockholders.

 

Can DuPont decide to cancel the separation even if all the conditions have been met?

Yes. The separation is subject to the satisfaction or waiver by DuPont of certain conditions. See “The Distribution — Conditions to the Distribution.” Even if all such conditions are met, DuPont has the right not to complete the separation if, at any time prior to the distribution, the board of directors of DuPont determines, in its sole discretion, that the separation is not in the best interests of DuPont or its stockholders, that a sale or other alternative is in the best interests of DuPont or its stockholders, or that market conditions or other circumstances are such that it is not advisable at that time to separate the performance chemicals business from DuPont.

 

What are the U.S. federal income tax consequences of the distribution to me?

The distribution is conditioned on the continued validity of the IRS Ruling, which DuPont has received from the IRS, and the receipt and continued validity of the Tax Opinion, in form and substance acceptable to DuPont, substantially to the effect that, among other things, the distribution will qualify as a tax-free transaction under Section 355 and Section 368(a)(1)(D) of the Code, and certain transactions related to the transfer of assets and liabilities to Chemours in connection with the separation will not result in the recognition of any gain or loss to DuPont, Chemours or their stockholders. Such conditions are waivable by DuPont’s board of directors in its sole and absolute discretion. DuPont received the IRS Ruling from the IRS on September 30, 2014. Accordingly, and so long as the distribution so qualifies, for U.S. federal income tax purposes, no gain or loss will be recognized by you, and no amount will be included in your income, upon the receipt of shares of our common stock pursuant to the distribution. However, any cash payments made instead of fractional shares will generally be taxable to you. For a more detailed description, see “The Distribution — Material U.S. Federal Income Tax Consequences of the Distribution.”

 

How will the distribution affect my tax basis in my shares of DuPont common stock?

Assuming that the distribution is tax-free to DuPont stockholders, your tax basis in your DuPont common stock held by you immediately prior to the distribution will be allocated between your DuPont common stock and Chemours common stock that you receive in the distribution in proportion to the relative fair market values of each immediately following the distribution. DuPont will provide its stockholders with information to enable them to compute their tax basis in both DuPont and Chemours shares. This information will be posted on DuPont’s website, www.dupont.com, promptly following the distribution date. You should consult your tax advisor about how this allocation will work in your situation, including a situation where

 

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you have purchased DuPont shares at different times or for different amounts, and regarding any particular consequences of the distribution to you. For a more detailed description, see “The Distribution — Material U.S. Federal Income Tax Consequences of the Distribution.”

 

Will my shares of DuPont common stock continue to trade following the distribution?

DuPont common stock will continue to trade on the NYSE under the symbol “DD” after the distribution.

 

How will Chemours common stock trade?

Currently, there is no public market for our common stock. We intend to list our common stock on the NYSE under the symbol “[].”

 

  We anticipate that trading in our common stock will begin on a “when-issued” basis as early as [] trading days prior to the record date for the distribution and will continue up to and including the distribution date. When-issued trading in the context of a separation refers to a sale or purchase made conditionally on or before the distribution date because the securities of the separated entity have not yet been distributed. When-issued trades generally settle within two weeks after the distribution date. On the first trading day following the distribution date, any when-issued trading of our common stock will end and “regular-way” trading will begin. Regular-way trading refers to trading after the security has been distributed and typically involves a trade that settles on the third full trading day following the date of the trade. See “The Distribution — Trading Between the Record Date and Distribution Date” for more information. We cannot predict the trading prices for our common stock before, on or after the distribution date.

 

What indebtedness will Chemours have following the separation?

We expect that, at the time of distribution, we will have significant third-party indebtedness, which we expect to incur through a bond offering, term loans or a combination of these and other financing arrangements. Subsequent information regarding our indebtedness following the distribution will be provided in subsequent amendments to this information statement.

 

Will the separation affect the trading price of my DuPont common stock?

We expect the trading price of shares of DuPont common stock immediately following the distribution to be lower than immediately prior to the distribution because the trading price will no longer reflect the value of the performance chemicals business. Furthermore, until the market has fully analyzed the value of DuPont without Chemours, the trading price of shares of DuPont common stock may fluctuate. There can be no assurance that, following the distribution, the combined trading prices of DuPont common stock and the Chemours common stock will equal or exceed what the trading price of DuPont common stock would have been in the absence of the separation, and it is possible the post-distribution combined equity value of DuPont and Chemours will be less than DuPont’s equity value prior to the distribution.

 

Are there risks associated with owning shares of Chemours common stock?

Yes. Our business faces both general and specific risks and uncertainties. Our business also faces risks relating to the separation.

 

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Following the separation, we will also face risks associated with being an independent, publicly traded company. Accordingly, you should read carefully the information set forth in the section entitled “Risk Factors” in this information statement.

 

Does Chemours intend to pay cash dividends?

Following the distribution, we expect to pay regular dividends. Prior to the distribution, while we are a wholly-owned subsidiary of DuPont, our board of directors, consisting of DuPont employees, intends to declare a dividend of [] for the third quarter of 2015, to be paid to our stockholders as of a record date following the distribution. The payment and amount of any subsequent dividend will be subject to the sole discretion of our post-distribution, independent board of directors and will depend upon many factors. See “Dividend Policy” for more information.

 

What will Chemours’ relationship be with DuPont following the separation and distribution?

Chemours will enter into a Separation Agreement with DuPont to effect the separation and provide a framework for Chemours’ relationship with DuPont after the separation and distribution and will also enter into certain other agreements, such as a Transition Services Agreement, a Tax Matters Agreement, an Employee Matters Agreement and IP Cross-License Agreements and certain manufacturing and supply arrangements. These agreements will provide for the terms of the separation between Chemours and DuPont of the assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) of DuPont and its subsidiaries attributable to periods prior to, at and after Chemours’ separation from DuPont and will govern the relationship between Chemours and DuPont subsequent to the completion of the separation and distribution. For additional information regarding the Separation Agreement and other transaction agreements, see the sections entitled “Risk Factors — Risks Related to the Separation” and “Our Relationship with DuPont Following the Distribution.”

 

Do I have appraisal rights in connection with the separation and distribution?

No. Holders of DuPont stock are not entitled to appraisal rights in connection with the separation and distribution.

 

Who is the transfer agent and registrar for Chemours common stock?

Following the separation and distribution, [] will serve as transfer agent and registrar for our common stock.

 

  [] has two additional roles in the distribution.

 

    Computershare currently serves and will continue to serve as DuPont’s transfer agent and registrar.

 

    In addition, [] will serve as the distribution agent in the distribution and will assist DuPont in the distribution of our common stock to DuPont’s stockholders.

 

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Where can I get more information?

If you have any questions relating to the mechanics of the distribution, you should contact the distribution agent at:

 

  []

 

  Before the separation and distribution, if you have any questions relating to the separation and distribution, you should contact DuPont at:

 

  Investor Relations

 

  []

 

  Individual Holders: After the separation and distribution, if you have any questions relating to Chemours, you should contact us at:

 

  Investor Relations

 

  []

 

  Individual Holders: After the separation and distribution, if you have any questions relating to DuPont, you should contact them at:

 

  Investor Relations

 

  []

 

  Institutional Holders: After the separation and distribution, if you have any questions relating to Chemours, you should contact us at:

 

  Investor Relations

 

  []

 

  Institutional Holders: After the separation and distribution, if you have any questions relating to DuPont, you should contact them at:

 

  Investor Relations

 

  []

 

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RISK FACTORS

You should carefully consider the following risks and other information in this information statement in evaluating us and our common stock. The risk factors generally have been separated into three groups: risks related to our business, risks related to the separation and risks related to our common stock.

Any of the following risks, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our business, results of operations or financial condition. Our operations could be affected by various risks, many of which are beyond our control. Based on current information, we believe that the following identifies the most significant risk factors that could affect our business, results of operations or financial condition. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. See “Cautionary Statement Concerning Forward-Looking Statements” for more details.

Risks Related to Our Business

Conditions in the global economy and global capital markets may adversely affect our results of operations, financial condition, and cash flows.

Our business and operating results may in the future be adversely affected by global economic conditions, including instability in credit markets, declining consumer and business confidence, fluctuating commodity prices and interest rates, volatile exchange rates, and other challenges such as the changing financial regulatory environment that could affect the global economy. Our customers may experience deterioration of their businesses, cash flow shortages, and difficulty obtaining financing. As a result, existing or potential customers may delay or cancel plans to purchase products and may not be able to fulfill their obligations to us in a timely fashion. Further, suppliers could experience similar conditions, which could impact their ability to supply materials or otherwise fulfill their obligations to us. Because we will have significant international operations, there will be a large number of currency transactions that result from international sales, purchases, investments and borrowings. Also, our effective tax rate may fluctuate because of variability in geographic mix of earnings, changes in statutory rates, and taxes associated with repatriation of non-U.S. earnings. Future weakness in the global economy and failure to manage these risks could adversely affect our results of operations, financial condition and cash flows in future periods.

Market conditions, as well as global and regional economic downturns that adversely affect the demand for the end-use products that contain TiO2, fluoroproducts or our other products, could adversely affect the profitability of our operations and the prices at which we can sell our products, negatively impacting our financial results.

Our revenue and profitability is largely dependent on the TiO2 industry and the industries that are end users of our fluoroproducts. TiO2 and our fluoroproducts, such as refrigerants and resins, are used in many “quality of life” products for which demand historically has been linked to global, regional and local GDP and discretionary spending, which can be negatively impacted by regional and world events or economic conditions. Such events are likely to cause a decrease in demand for our products and, as a result, may have an adverse effect on our results of operations and financial condition. The future profitability of our operations, and cash flows generated by those operations, also will be affected by the available supply of our products in the market, such as TiO2 and our fluoroproducts.

Additionally, our profitability may be affected by the market for, and use of, by-products generated as part of our manufacturing processes. A significant decrease in the demand for such products could adversely impact our operations by limiting our ability to manufacture our products.

The markets for many of our products have seasonally affected sales patterns.

The demand for TiO2, certain of our fluoroproducts and certain of our other products during a given year is subject to seasonal fluctuations. As a result of seasonal fluctuations, our operating cash flow may be negatively

 

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impacted due to demand fluctuations. In particular, because TiO2 is widely used in coatings, demand is higher in the painting seasons of spring and summer. Because certain fluoroproducts are used in refrigerants, such products are in higher demand in the spring and summer in the Northern Hemisphere. We may be adversely affected by anticipated or unanticipated changes in regional weather conditions. For example, poor weather conditions in a region can lead to an abbreviated painting season, which can depress consumer sales of paint products that use TiO2, which could have a negative effect on our cash position.

Changes in government policies and laws and certain geopolitical conditions and activities could adversely affect our financial results.

Sales to customers outside the U.S. constitute about [] percent of our 2014 revenue. We anticipate that international sales will continue to represent a substantial portion of our total sales and that continued growth and profitability will require further international expansion, particularly in developing markets. Sales from developing markets represent [] percent of our revenue in 2014 and our growth plans include focusing on expanding our presence in developing markets. Our financial results could be affected by changes in trade, monetary and fiscal policies, laws and regulations, or other activities of U.S. and non-U.S. governments, agencies and similar organizations. These factors include, but are not limited to, changes in a country’s or region’s economic or political conditions, trade or other economic-based regulations, environmental regulations, including climate change-based regulations or legislation and regulations relating to the transport or shipment of hazardous materials, and policies affecting production, pricing and marketing of products, local labor conditions and regulations, reduced protection of intellectual property rights in some countries, changes in the regulatory or legal environment, restrictions on currency exchange activities, burdensome taxes and tariffs and other trade barriers or policies. International risks and uncertainties, including changing social and economic conditions as well as terrorism, political hostilities and war, could lead to reduced sales and profitability.

Our reported results could be adversely affected by currency exchange rates and currency devaluation could impair our competitiveness.

Due to our international operations, we transact in many foreign currencies and are subject to the effects of changes in foreign currency exchange rates. During times of a strengthening U.S. dollar, our reported net revenues and operating income will be reduced because the local currency will be translated into fewer U.S. dollars. During periods of local economic crisis, local currencies may be devalued significantly against the U.S. dollar, potentially reducing our margin. Chemours may enter forward exchange contracts and other financial contracts in an attempt to mitigate the impact of currency rate fluctuations however cannot be assured such actions will eliminate any adverse impact from variation in currency rates. Also, actions to recover margins may result in lower volume and a weaker competitive position, which may have an adverse effect on our profitability.

Price fluctuations in energy and raw materials could have a significant impact on our ability to sustain and grow earnings.

Our manufacturing processes consume significant amounts of energy and raw materials, the costs of which are subject to worldwide supply and demand as well as other factors beyond our control. Variations in the cost of energy, which primarily reflect market prices for oil and natural gas, and for raw materials, may significantly affect our operating results from period to period. Additionally, consolidation in the industries providing our raw materials may have an impact on the cost and availability of such materials. To the extent we do not have fixed price contracts with respect to specific raw materials, we have no control over the costs of raw materials and such costs may fluctuate widely for a variety of reasons, including changes in availability, major capacity additions or reductions, or significant facility operating problems. These fluctuations could negatively affect our operating margins and our profitability.

We endeavor to offset the effects of higher energy and raw material costs through selling price increases, productivity improvements and cost reduction programs. However, the outcome of these efforts is largely determined by existing competitive and economic conditions, and may be subject to a time delay between the

 

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increase in our raw materials costs and our ability to increase prices, which could vary significantly depending on the market served. If we are not able to fully offset the effects of higher energy or raw material costs, it could have a material adverse effect on our financial results.

Effects of our raw materials contracts, including our inability to renew such contracts, could have a significant impact on our earnings.

When possible we have purchased, and we plan to continue to purchase, raw materials, including titanium bearing ores and fluorospar, through negotiated medium- or long-term contracts to minimize the impact of price fluctuations. To the extent that we have been able to achieve favorable pricing in our existing negotiated long-term contracts, we may not be able to renew such contracts at the current prices, or at all, and this may adversely impact our cash flow from operations. However, to the extent that the prices of raw materials that we utilize significantly decline, we may be bound by the terms of our existing long-term contracts and obligated to purchase such raw materials at higher prices as compared to other market participants.

We are subject to extensive environmental, health and safety laws and regulations that may result in unanticipated loss or liability, which could reduce our profitability.

Our operations and production facilities are subject to extensive environmental and health and safety laws and regulations at national, international and local levels in numerous jurisdictions relating to pollution, protection of the environment, climate change, transporting and storing raw materials and finished products and storing and disposing of hazardous wastes. If we are found to be in violation of these laws or regulations, we may incur substantial costs, including fines, damages, criminal or civil sanctions and remediation costs, or experience interruptions in our operations. We also may be subject to changes in our operations and production based on increased regulation or other changes to, or restrictions imposed by, any such additional regulations. In addition, the manner in which adopted regulations (including environmental regulations) are ultimately implemented may affect our products and results of operations. In the event of a catastrophic incident involving any of the raw materials we use or chemicals we produce, we could incur material costs as a result of addressing the consequences of such event and future reputational costs associated with any such event.

There is also a risk that one or more of our key raw materials or one or more of our products may be found to have, or be characterized as having, a toxicological or health-related impact on the environment or on our customers or employees, which could potentially result in us incurring liability in connection with such characterization and the associated effects of any toxicological or health-related impact. If such a discovery or characterization occurs, we may incur increased costs in order to comply with new regulatory requirements or the relevant materials or products, including products of our customers incorporating our materials or products, may be recalled or banned. Changes in laws and regulations, or their interpretation, and our customers’ perception of such changes or interpretations may also affect the marketability of certain of our products.

Hazards associated with chemical manufacturing, storage and transportation could adversely affect our results of operations.

There are hazards associated with chemical manufacturing and the related storage and transportation of raw materials, products and wastes. These hazards could lead to an interruption or suspension of operations and have an adverse effect on the productivity and profitability of a particular manufacturing facility or on us as a whole. While we endeavor to provide adequate protection for the safe handling of these materials, issues could be created by various events, including natural disasters, severe weather events, acts of sabotage and performance by third parties, and as a result we could face the following potential hazards:

 

    piping and storage tank leaks and ruptures;

 

    mechanical failure;

 

    employee exposure to hazardous substances; and

 

    chemical spills and other discharges or releases of toxic or hazardous substances or gases.

 

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These hazards may cause personal injury and loss of life, damage to property and contamination of the environment, which could lead to government fines, work stoppage injunctions, lawsuits by injured persons, damage to our public reputation and brand, and diminished product acceptance. If such actions are determined adversely to us or there is an associated economic impact to our business, we may have inadequate insurance or cash flow to offset any associated costs. Such outcomes could adversely affect our financial condition and results of operations.

The businesses in which we compete are highly competitive. This competition may adversely affect our results of operations and operating cash flows.

Each of the businesses in which we operate is highly competitive. Competition in the performance chemicals industry is based on a number of factors such as price, product quality and service. We face significant competition from major international and regional competitors. Additionally, our Titanium Technologies business competes with numerous regional producers, including producers in China, which have expanded their readily available production capacity during the previous five years. Additionally, there have also been reports of potential development of chloride production of TiO2 by certain of such producers.

In addition, historically, information about our business and operations was presented as part of the broader DuPont corporate organization. As an independent, publicly traded company, we will be required to publicly provide more detailed information about our business and operations, including financial information, as a stand-alone company. This information will be accessible to our customers, suppliers and competitors, each of which may factor the new information into their commercial dealings with us or the markets in which we operate. The use of such information by third parties in the marketplace could have an adverse effect on us and our results of operations, including our relative level of profitability.

Our significant indebtedness could adversely affect our financial condition, and we could have difficulty fulfilling our obligations under our indebtedness, either of which could have a material adverse effect on the value of our common stock.

Upon the consummation of our separation from DuPont, we expect to have $[] million of indebtedness. Our significant level of indebtedness increases the risk that we may be unable to generate cash sufficient to pay amounts due in respect of our indebtedness. The level of our indebtedness could have other important consequences on our business, including;

 

    making it more difficult for us to satisfy our obligations with respect to indebtedness;

 

    increasing our vulnerability to adverse changes in general economic, industry and competitive conditions;

 

    requiring us to dedicate a significant portion of our cash flow from operations to make payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital and other general corporate purposes;

 

    limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

 

    restricting us from capitalizing on business opportunities;

 

    placing us at a competitive disadvantage compared to our competitors that have less debt; and

 

    limiting our ability to borrow additional funds for working capital, acquisitions, debt service requirements, execution of our business strategy or other general corporate purposes.

The occurrence of any one or more of these circumstances could have a material adverse effect on us.

We may need additional capital in the future and may not be able to obtain it on favorable terms.

Our industry is capital intensive, and we may require additional capital in the future to finance our growth and development, implement further marketing and sales activities, fund ongoing research and development activities

 

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and meet general working capital needs. Our capital requirements will depend on many factors, including acceptance of and demand for our products, the extent to which we invest in new technology and research and development projects, and the status and timing of these developments, as well as general availability of capital from debt and/or equity markets.

However, debt or equity financing may not be available to us on terms we find acceptable, if at all. If we incur additional debt or raise equity through the issuance of our preferred stock, the terms of the debt or our preferred stock issued may give the holders rights, preferences and privileges senior to those of holders of our common stock, particularly in the event of liquidation. If we raise funds through the issuance of additional equity, your ownership in us would be diluted. Also, regardless of the terms of our debt or equity financing, our agreements and obligations under the Tax Matters Agreement may limit our ability to issue stock. For a more detailed discussion, see “— We intend to agree to numerous restrictions to preserve the tax-free treatment of the transactions in the United States, which may reduce our strategic and operating flexibility.” If we are unable to raise additional capital when needed, our financial condition, and thus your investment in us, could be materially and adversely affected.

Additionally, our failure to maintain the credit ratings on our debt securities could negatively affect our ability to access capital and could increase our interest expense on certain existing and future indebtedness. We expect the credit rating agencies to periodically review our capital structure and the quality and stability of our earnings. Deterioration in our capital structure or the quality and stability of our earnings could result in a downgrade of the credit ratings on our debt securities. Any negative ratings actions could constrain the capital available to us and could limit our access to funding for our operations and/or increase the cost of such capital. If, as a result, our ability to access capital when needed becomes constrained, our interest costs could increase, which could have material adverse effect on our results of operations, financial condition and cash flows.

The agreements governing our indebtedness will restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.

The agreements governing our indebtedness contain, and the agreements governing future indebtedness and future debt securities may contain, significant operating and financial maintenance covenants that limit our operations, including the ability to engage in activities that may be in our long-term best interests. These restrictive covenants may limit us, and our restricted subsidiaries, from taking, or give rights to the holders of our indebtedness in the event of, the following actions:

 

    incurring additional indebtedness and guaranteeing indebtedness;

 

    paying dividends or making other distributions in respect of, or repurchasing or redeeming, our capital stock;

 

    making acquisitions or other investments;

 

    prepaying, redeeming or repurchasing certain indebtedness;

 

    selling or otherwise disposing of assets;

 

    selling stock of our subsidiaries;

 

    incurring liens;

 

    entering into transactions with affiliates;

 

    entering into agreements restricting our subsidiaries’ ability to pay dividends;

 

    entering into transactions that result in a change of control of us; and

 

    consolidating, merging or selling all or substantially all of our assets.

Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result in the acceleration of some or all of our indebtedness, which could lead us to bankruptcy, reorganization or insolvency.

 

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If we are unable to innovate and successfully introduce new products, or new technologies or processes reduce the demand for our products or the price at which we can sell products, our profitability could be adversely affected.

Our industries and the end-use markets into which we sell our products experience periodic technological change and product improvement. Our future growth will depend on our ability to gauge the direction of commercial and technological progress in key end-use markets and on our ability to fund and successfully develop, manufacture and market products in such changing end-use markets. We must continue to identify, develop and market innovative products or enhance existing products on a timely basis to maintain our profit margins and our competitive position. We may be unable to develop new products or technology, either alone or with third parties, or license intellectual property rights from third parties on a commercially competitive basis. If we fail to keep pace with the evolving technological innovations in our end-use markets on a competitive basis, including with respect to innovation with regard to the development of alternative uses for, or application of, products developed that utilize such end-use products, our financial condition and results of operations could be adversely affected. We cannot predict whether technological innovations will, in the future, result in a lower demand for our products or affect the competitiveness of our business. We may be required to invest significant resources to adapt to changing technologies, markets, competitive environments and laws and regulations. We cannot anticipate market acceptance of new products or future products. In addition, we may not achieve our expected benefits associated with new products developed to meet new laws or regulations if the implementation of such laws or regulations is delayed.

Our results of operations and financial condition could be seriously impacted by business disruptions and security breaches, including cybersecurity incidents.

Business and/or supply chain disruptions, plant and/or power outages and information technology system and/or network disruptions, regardless of cause including acts of sabotage, employee error or other actions, geo-political activity, weather events and natural disasters could seriously harm our operations as well as the operations of our customers and suppliers. Failure to effectively prevent, detect and recover from security breaches, including attacks on information technology and infrastructure by hackers; viruses; breaches due to employee error or actions; or other disruptions could result in misuse of our assets, business disruptions, loss of property including trade secrets and confidential business information, legal claims or proceedings, reporting errors, processing inefficiencies, negative media attention, loss of sales and interference with regulatory compliance. Like most major corporations, we have been and expect to be the target of industrial espionage, including cyber-attacks, from time to time. We have determined that these attacks have resulted, and could result in the future, in unauthorized parties gaining access to certain confidential business information, and have included the obtaining of trade secrets and proprietary information related to the chloride manufacturing process for TiO2 by third parties. Although we do not believe that we have experienced any material losses to date related to these breaches, there can be no assurance that we will not suffer any such losses in the future. We plan to actively manage the risks within our control that could lead to business disruptions and security breaches. As these threats continue to evolve, particularly around cybersecurity, we may be required to expend significant resources to enhance our control environment, processes, practices and other protective measures. Despite these efforts, such events could materially adversely affect our business, financial condition or results of operations.

If our intellectual property were compromised or copied by competitors, or if our competitors were to develop similar or superior intellectual property or technology, our results of operations could be negatively affected.

Intellectual property rights, including patents, trade secrets, confidential information, trademarks, tradenames and trade dress, are important to our business. We will endeavor to protect our intellectual property rights in key jurisdictions in which our products are produced or used and in jurisdictions into which our products are imported. Our success will depend to a significant degree upon our ability to protect and preserve our intellectual property rights. However, we may be unable to obtain protection for our intellectual property in key jurisdictions. Although we own and have applied for numerous patents and trademarks throughout the world, we may have to rely on judicial enforcement of our patents and other proprietary rights. Our patents and other intellectual

 

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property rights may be challenged, invalidated, circumvented, and rendered unenforceable or otherwise compromised. A failure to protect, defend or enforce our intellectual property could have an adverse effect on our financial condition and results of operations. Similarly, third parties may assert claims against us and our customers and distributors alleging our products infringe upon third party intellectual property rights.

We also rely materially upon unpatented proprietary technology, know-how and other trade secrets to maintain our competitive position. While we maintain policies to enter into confidentiality agreements with our employees and third parties to protect our proprietary expertise and other trade secrets, these agreements may not be enforceable or, even if legally enforceable, we may not have adequate remedies for breaches of such agreements. We also may not be able to readily detect breaches of such agreements. The failure of our patents or confidentiality agreements to protect our proprietary technology, know-how or trade secrets could result in significantly lower revenues, reduced profit margins or loss of market share.

If we must take legal action to protect, defend or enforce our intellectual property rights, any suits or proceedings could result in significant costs and diversion of our resources and our management’s attention, and we may not prevail in any such suits or proceedings. A failure to protect, defend or enforce our intellectual property rights could have an adverse effect on our financial condition and results of operations.

As a result of our current and past operations, including operations related to divested businesses and our discontinued operations, we could incur significant environmental liabilities.

We are subject to various laws and regulations around the world governing the environment, including the discharge of pollutants and the management and disposal of hazardous substances. As a result of our operations, including the operations of divested businesses and certain discontinued operations, we could incur substantial costs, including remediation and restoration costs. The costs of complying with complex environmental laws and regulations, as well as internal voluntary programs, are significant and will continue to be so for the foreseeable future. The ultimate costs under environmental laws and the timing of these costs are difficult to predict. While we establish accruals in accordance with generally accepted accounting principles, the ultimate actual costs and liabilities may vary from the accruals because the estimates on which the accruals are based depend on a number of factors (many of which are outside of our control) including the nature of the matter, the complexity of the site, site geology, the nature and extent of contamination, the type of remedy, the outcome of discussions with regulatory agencies and other Potentially Responsible Parties (PRPs) at multi-party sites and the number and financial viability of other PRPs. See Note 17 to the Annual Combined Financial Statements.

Our results of operations could be adversely affected by litigation and other commitments and contingencies.

We face risks arising from various unasserted and asserted litigation matters, including, but not limited to, product liability, patent infringement, antitrust claims, and claims for third party property damage or personal injury stemming from alleged environmental or other torts. We have noted a nationwide trend in purported class actions against chemical manufacturers generally seeking relief such as medical monitoring, property damages, off-site remediation and punitive damages arising from alleged environmental or other torts without claiming present personal injuries. We also have noted a trend in public and private nuisance suits being filed on behalf of states, counties, cities and utilities alleging harm to the general public. Various factors or developments can lead to changes in current estimates of liabilities such as a final adverse judgment, significant settlement or changes in applicable law. A future adverse ruling or unfavorable development could result in future charges that could have a material adverse effect on us. An adverse outcome in any one or more of these matters could be material to our financial results and could adversely impact the value of any of our brands that are associated with any such matters.

In the ordinary course of business, we may make certain commitments, including representations, warranties and indemnities relating to current and past operations, including those related to divested businesses and issue guarantees of third party obligations. Additionally, we will be required to indemnify DuPont for uncapped

 

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amounts with regard to specified liabilities under certain of the agreements entered into in connection with the separation and distribution, including, among others, the Separation Agreement, the Employee Matters Agreement and the Tax Matters Agreement. If we were required to make payments, such payments could be significant and would exceed the amounts we have accrued with respect thereto, adversely affecting our results of operations.

Risks Related to the Separation

We may be unable to achieve some or all of the benefits that we expect to achieve from our separation from DuPont.

We believe that, as an independent, publicly traded company, we will continue to, among other things, focus our financial and operational resources on our specific business, growth profile and strategic priorities, design and implement corporate strategies and policies targeted to our operational focus and strategic priorities, guide our processes and infrastructure to focus on our core strengths, implement and maintain a capital structure designed to meet our specific needs and more effectively respond to industry dynamics. However, we may be unable to achieve some or all of these benefits. For example, in order to position ourselves for the separation, we are undertaking a series of strategic, structural and process realignment and restructuring actions within our operations. These actions may not provide the benefits we currently expect, and could lead to disruption of our operations, loss of, or inability to recruit, key personnel needed to operate and grow our businesses following the separation, weakening of our internal standards, controls or procedures and impairment of our key customer and supplier relationships. In addition, completion of the proposed separation will require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing our businesses. If we fail to achieve some or all of the benefits that we expect to achieve as an independent company, or do not achieve them in the time we expect, our business, financial condition and results of operations could be materially and adversely affected.

If the distribution, together with certain related transactions, were to fail to qualify for non-recognition treatment for U.S. federal income tax purposes, then we could be subject to significant tax and indemnification liability and stockholders receiving our common stock in the distribution could be subject to significant tax liability.

DuPont has received the IRS Ruling from the IRS substantially to the effect that, among other things, the distribution will qualify as a tax-free transaction under Section 355 and Section 368(a)(1)(D) of the Code. The distribution is conditioned on the continued validity of the IRS Ruling, as well as on receipt of the Tax Opinion, in form and substance acceptable to DuPont, substantially to the effect that, among other things, the distribution will qualify as a tax-free transaction under Section 355 and Section 368(a)(1)(D) of the Code, and certain transactions related to the transfer of assets and liabilities to us in connection with the separation will not result in the recognition of any gain or loss to DuPont, us or our stockholders. The IRS Ruling relies, and the Tax Opinion will rely, on certain facts, assumptions, and undertakings, and certain representations from DuPont and us, regarding the past and future conduct of both respective businesses and other matters, and the Tax Opinion will rely on the IRS Ruling. Notwithstanding the IRS Ruling and the Tax Opinion, the IRS could determine that the distribution or such related transactions should be treated as a taxable transaction if it determines that any of these facts, assumptions, representations, or undertakings is not correct, or that the distribution should be taxable for other reasons, including if the IRS were to disagree with the conclusions in the Tax Opinion that are not covered by the IRS Ruling.

If the distribution ultimately is determined to be taxable, then a stockholder of DuPont that received shares of our common stock in the distribution would be treated as having received a distribution of property in an amount equal to the fair market value of such shares on the distribution date and could incur significant income tax liabilities. Such distribution would be taxable to such stockholder as a dividend to the extent of DuPont’s current and accumulated earnings and profits. Any amount that exceeded DuPont’s earnings and profits would be treated first as a non-taxable return of capital to the extent of such stockholder’s tax basis in its shares of DuPont stock

 

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with any remaining amount being taxed as a capital gain. DuPont would recognize a taxable gain in an amount equal to the excess, if any, of the fair market value of the shares of our common stock held by DuPont on the distribution date over DuPont’s tax basis in such shares. In addition, if certain related transactions fail to qualify for tax-free treatment under U.S. federal, state and/or local tax law and/or foreign tax law, we and DuPont could incur significant tax liabilities under U.S. federal, state, local and/or foreign tax law.

Generally, taxes resulting from the failure of the separation and distribution to qualify for non-recognition treatment for U.S. federal income tax purposes would be imposed on DuPont or DuPont’s stockholders and, under the Tax Matters Agreement that we will enter into with DuPont, DuPont is generally obligated to indemnify us against such taxes. However, under the terms of the Tax Matters Agreement, we also generally will be responsible for any taxes imposed on DuPont that arise from the failure of the distribution to qualify as tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Code or the failure of such related transactions to qualify for tax-free treatment, to the extent such failure to qualify is attributable to actions, events or transactions relating to our, or our affiliates’, stock, assets or business, or any breach of our or our affiliates’ representations, covenants or obligations under the Tax Matters Agreement (or any other agreement we enter into in connection with the separation), the materials submitted to the IRS in connection with the request for the IRS Ruling or the representation letter provided to counsel in connection with the Tax Opinion. Events triggering an indemnification obligation under the agreement include events occurring after the distribution that cause DuPont to recognize a gain under Section 355(e) of the Code. Such tax amounts could be significant. To the extent we are responsible for any liability under the Tax Matters Agreement, there could be a material adverse impact on our business, financial condition, results of operations and cash flows in future reporting periods. For a more detailed discussion, see “Material U.S. Federal Income Tax Consequences of the Distribution.”

We will be subject to continuing contingent tax-related liabilities of DuPont following the distribution.

After the distribution, there will be several significant areas where the liabilities of DuPont may become our obligations. For example, under the Code and the related rules and regulations, each corporation that was a member of DuPont’s consolidated tax reporting group during any taxable period or portion of any taxable period ending on or before the effective time of the distribution is jointly and severally liable for the U.S. federal income tax liability of the entire consolidated tax reporting group for such taxable period. In connection with the separation, we will enter into a Tax Matters Agreement with DuPont that will allocate the responsibility for prior period taxes of DuPont’s consolidated tax reporting group between us and DuPont. For a more detailed description, see “Our Relationship with DuPont Following the Distribution — Tax Matters Agreement.” If DuPont were unable to pay any prior period taxes for which it is responsible, however, we could be required to pay the entire amount of such taxes, and such amounts could be significant. Other provisions of federal, state, local, or foreign law may establish similar liability for other matters, including laws governing tax-qualified pension plans, as well as other contingent liabilities.

We intend to agree to numerous restrictions to preserve the tax-free treatment of the transactions in the United States, which may reduce our strategic and operating flexibility.

Our ability to engage in significant equity transactions could be limited or restricted after the distribution in order to preserve, for U.S. federal income tax purposes, the tax-free nature of the distribution by DuPont. Even if the distribution otherwise qualifies for tax-free treatment under Section 355 of the Code, the distribution may result in corporate-level taxable gain to DuPont under Section 355(e) of the Code if 50 percent or more, by vote or value, of shares of our stock or DuPont’s stock are acquired or issued as part of a plan or series of related transactions that includes the distribution. The process for determining whether an acquisition or issuance triggering these provisions has occurred is complex, inherently factual and subject to interpretation of the facts and circumstances of a particular case. Any acquisitions or issuances of our stock or DuPont’s stock within a two-year period after the distribution generally are presumed to be part of such a plan, although we or DuPont, as

 

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applicable, may be able to rebut that presumption. Accordingly, under the Tax Matters Agreement that we will enter into with DuPont, for the two-year period following the distribution, we will be prohibited, except in certain circumstances, from:

 

    entering into any transaction resulting in the acquisition of [] percent or more of our stock or substantially all of our assets, whether by merger or otherwise;

 

    merging, consolidating or liquidating;

 

    issuing equity securities beyond certain thresholds;

 

    repurchasing our capital stock; or

 

    ceasing to actively conduct our business.

These restrictions may limit our ability to pursue certain strategic transactions or other transactions that we may believe to otherwise be in the best interests of our stockholders or that might increase the value of our business. In addition, under the Tax Matters Agreement, we will be required to indemnify DuPont against any such tax liabilities as a result of the acquisition of our stock or assets, even if we do not participate in or otherwise facilitate the acquisition. For a more detailed description, See “Our Relationship with DuPont Following the Distribution — Tax Matters Agreement.”

We may be unable to make, on a timely or cost-effective basis, the changes necessary to operate as an independent company.

We have historically operated as part of DuPont’s corporate organization, and DuPont has assisted us by providing various corporate functions. Following the separation and distribution, DuPont will have no obligation to provide us with assistance other than the transition services described under “Our Relationship with DuPont Following the Distribution.” These services do not include every service we have received from DuPont in the past, and DuPont is only obligated to provide these services for limited periods from the distribution date. Accordingly, following the separation and distribution, we will need to provide internally or obtain from unaffiliated third parties the services we currently receive from DuPont. These services include information technology, research and development, finance, legal, insurance, compliance and human resources activities, the effective and appropriate performance of which is critical to our operations. We may be unable to replace these services in a timely manner or on terms and conditions as favorable as those we receive from DuPont. In particular, DuPont’s information technology networks and systems are complex, and duplicating these networks and systems will be challenging. Because our business previously operated as part of the wider DuPont organization, we may be unable to successfully establish the infrastructure or implement the changes necessary to operate independently, or we may incur additional costs that could adversely affect our business. If we fail to obtain the quality of administrative services necessary to operate effectively or incur greater costs in obtaining these services, our profitability, financial condition and results of operations may be materially and adversely affected.

Our historical combined and pro forma condensed combined financial data are not necessarily representative of the results we would have achieved as an independent, publicly traded company and may not be a reliable indicator of our future results.

The historical and pro forma financial data we have included in this information statement may not reflect what our business, financial condition, results of operations and cash flows would have been had we been an independent, publicly traded company during the periods presented or what our business, financial condition, results of operations and cash flows will be in the future when we are an independent company. This is primarily because:

 

   

Prior to our separation, our business was operated by DuPont as part of its broader corporate organization, rather than as an independent, publicly traded company. In addition, prior to our separation, DuPont, or one of its affiliates, performed significant corporate functions for us, including

 

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tax and treasury administration and certain governance functions, including internal audit and external reporting. Our historical financial statements reflect allocations of corporate expenses from DuPont for these and similar functions, which are not necessarily representative of the costs we will incur for similar services in the future as an independent company. In addition, while our pro forma financial statements reflect estimates of the costs that we would have incurred as an independent company during the periods presented, the estimates may not accurately reflect the costs we would have incurred as an independent company during such periods, or will incur in the future. Furthermore, following the separation and distribution, we will also be responsible for the additional costs associated with being an independent, publicly traded company, including costs related to corporate governance and external reporting.

 

    Our working capital requirements and capital for our general corporate purposes, including acquisitions and capital expenditures, historically have been satisfied as part of the company-wide cash management practices of DuPont. While our businesses have historically generated sufficient cash to finance our working capital and other cash requirements, following the separation and distribution, we will no longer have access to DuPont’s cash pool. Without the opportunity to obtain financing from DuPont, we may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities or other arrangements.

 

    We will enter into transactions with DuPont that did not exist prior to the separation. See “Our Relationship with DuPont Following the Distribution” for information regarding these transactions.

 

    Other significant changes may occur in our cost structure, management, financing and business operations as a result of our operating as a company separate from DuPont.

We will incur interest expense as part of our incurring debt in connection with the separation and distribution, whereas our historical financial data does not include an allocation of interest expense. After giving pro-forma effect to the separation, our interest expense would have been $[] for the year ended []. In addition, the pro forma financial data included in this information statement is based on the best information available, which in part includes a number of estimates and assumptions. These estimates and assumptions may prove not to be accurate, and accordingly, our pro forma financial data should not be assumed to be indicative of what our financial condition or results of operations actually would have been as a stand-alone company nor to be a reliable indicator of what our financial condition or results of operations actually may be in the future.

For additional information about our past financial performance and the basis of presentation of our financial statements, see “Selected Historical Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the notes thereto included in this information statement.

As an independent, publicly traded company, we may not enjoy the same benefits that we did as a part of DuPont.

There is a risk that, by separating from DuPont, we may become more susceptible to market fluctuations and other adverse events than we would have been if we were still a part of the current DuPont organizational structure. As part of DuPont, we have been able to enjoy certain benefits from DuPont’s operating diversity, purchasing power and opportunities to pursue integrated strategies with DuPont’s other businesses. As an independent, publicly traded company, we will not have similar diversity or integration opportunities and may not have similar purchasing power or access to capital markets. Additionally, as part of DuPont, we have been able to leverage the DuPont historical market reputation and performance and brand identity to recruit and retain key personnel to run our business. As an independent, publicly traded company, we will not have the same historical market reputation and performance or brand identity as DuPont and it may be more difficult for us to recruit or retain such key personnel.

 

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We will incur significant indebtedness in connection with the separation and distribution, and the degree to which we will be leveraged following completion of the distribution may materially and adversely affect our business, financial condition and results of operations.

We are incurring significant indebtedness in connection with the separation. We have historically relied upon DuPont for working capital requirements on a short-term basis and for other financial support functions. After the distribution, we will not be able to rely on DuPont’s earnings, assets or cash flow, and we will be responsible for servicing our own debt, obtaining and maintaining sufficient working capital and paying dividends.

Our ability to make payments on and to refinance our indebtedness, including the debt incurred pursuant to the separation as well as any future debt that we may incur, will depend exclusively on our ability to generate cash in the future from our own operations, financings or asset sales. Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We may not generate sufficient funds to service our debt and meet our business needs, such as funding working capital or the expansion of our operations. If we are not able to repay or refinance our debt as it becomes due, we may be forced to take disadvantageous actions, including reducing spending on marketing, retail trade incentives, advertising and new product innovation, reducing financing in the future for working capital, capital expenditures and general corporate purposes, selling assets or dedicating an unsustainable level of our cash flow from operations to the payment of principal and interest on our indebtedness. In addition, our ability to withstand competitive pressures and to react to changes in our industry could be impaired. The lenders who hold our debt could also accelerate amounts due in the event that we default, which could potentially trigger a default or acceleration of the maturity of our other debt.

Restrictions under the Intellectual Property Cross-License Agreement could limit our ability to develop and commercialize certain products and/or prosecute, maintain and enforce certain intellectual property.

We are dependent to a certain extent on DuPont to prosecute, maintain and enforce certain of the intellectual property licensed under the Intellectual Property Cross-License Agreement. Specifically, DuPont will be responsible for filing, prosecuting and maintaining patents that DuPont licenses to us. DuPont also has the first right to enforce such patents trade secrets and the know-how licensed to us by DuPont. If DuPont fails to fulfill its obligations or chooses to not enforce the licensed patents, trade secrets or know-how under the Intellectual Property Cross-License Agreement, we may not be able to prevent competitors from making, using and selling competitive products (unless we are able to effectively exercise our secondary rights to enforce such patents, trade secrets and know-how).

In addition, our restrictions under the Intellectual Property Cross-License Agreement could limit its ability to develop and commercialize certain products. For example, the licenses granted to us under the agreement may not extend to all new products, services and businesses that we may in the future decide to enter into. These limitations and restrictions may make it more difficult, time consuming or expensive for us to develop and commercialize certain new products and services, or may result in certain of our products or services being later to market than those of our competitors.

Certain of the contracts to be transferred or assigned to us contain provisions requiring the consent of a third party in connection with the transactions contemplated by the distribution. If such consent is not given, we may not be entitled to the benefit of such contracts in the future.

Certain of the contracts to be transferred or assigned to us in connection with the distribution and the internal transactions described below in this information statement contain provisions which require the consent of a third party to the internal transactions, the distribution or both. If we are unable to obtain such consents on commercially reasonable and satisfactory terms, our ability to obtain the benefit of such contracts in the future may be impaired.

 

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Our customers, prospective customers, suppliers or other companies with whom we conduct business may need assurances that our financial stability on a stand-alone basis is sufficient to satisfy their requirements for doing or continuing to do business with them.

Some of our customers, prospective customers, suppliers or other companies with whom we conduct business may need assurances that our financial stability on a stand-alone basis is sufficient to satisfy their requirements for doing or continuing to do business with them, and may require us to provide additional credit support, such as letters of credit or other financial guarantees. Any failure of parties to be satisfied with our financial stability could have a material adverse effect on our business, financial condition, results of operations and cash flows.

In connection with our separation we will assume, and indemnify DuPont for, certain liabilities. If we are required to make payments pursuant to these indemnities to DuPont, we may need to divert cash to meet those obligations and our financial results could be negatively impacted. In addition, DuPont may indemnify us for certain liabilities. The DuPont indemnity may not be sufficient to insure us against the full amount of liabilities for which it will be allocated responsibility, and DuPont may not be able to satisfy its indemnification obligations in the future.

Pursuant to the Separation Agreement, the Employee Matters Agreement and the Tax Matters Agreement with DuPont, we will agree to assume, and indemnify DuPont for, certain liabilities for uncapped amounts, which may include, among other items, associated defense costs, settlement amounts and judgments, as discussed further in “Our Relationship With DuPont Following the Distribution,” “Notes to Unaudited Pro Forma Combined Financial Statements” and “Financial Statements — Notes to the Combined Financial Statements.” Payments pursuant to these indemnities may be significant and could negatively impact our business, particularly indemnities relating to our actions that could impact the tax-free nature of the distribution. Third parties could also seek to hold us responsible for any of the liabilities of the DuPont Business. DuPont will agree to indemnify us for such liabilities, but such indemnity from DuPont may not be sufficient to protect us against the full amount of such liabilities, and DuPont may not be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from DuPont any amounts for which we are held liable, we may be temporarily required to bear these losses ourselves. Each of these risks could negatively affect our business, financial condition, results of operations and cash flows.

Risks Related to Our Common Stock

We cannot be certain that an active trading market for our common stock will develop or be sustained after the distribution, and following the distribution, our stock price may fluctuate significantly.

A public market for our common stock does not currently exist. We anticipate that on or prior to the record date for the distribution, trading of shares of our common stock will begin on a “when-issued” basis and will continue through the distribution date. However, we cannot guarantee that an active trading market will develop or be sustained for our common stock after the distribution. If an active trading market does not develop, you may have difficulty selling your shares of common stock at an attractive price, or at all. In addition, we cannot predict the prices at which shares of our common stock may trade after the distribution.

Similarly, DuPont cannot predict the effect of the distribution on the trading prices of its common stock. After the distribution, DuPont common stock will continue to be listed and traded on the NYSE under the symbol “DD.” Subject to the consummation of the distribution, we expect our common stock to be listed and traded on the NYSE under the symbol “.” The combined trading prices of DuPont common stock and our common stock after the distribution, as adjusted for any changes in the combined capitalization of these companies, may not be equal to or greater than the trading price of DuPont common stock prior to the distribution. Until the market has fully evaluated the business of DuPont without our businesses, or fully evaluated us, the price at which DuPont’s or our common stock trades may fluctuate significantly.

 

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The market price of our common stock may fluctuate significantly due to a number of factors, some of which may be beyond our control, including:

 

    our business profile and market capitalization may not fit the investment objectives of DuPont’s current stockholders, causing a shift in our initial investor base, and our common stock may not be included in some indices in which DuPont common stock is included, causing certain holders to be mandated to sell their shares of our common stock;

 

    our quarterly or annual earnings, or those of other companies in our industry;

 

    the failure of securities analysts to cover our common stock after the distribution;

 

    actual or anticipated fluctuations in our operating results;

 

    changes in earnings estimates by securities analysts or our ability to meet those estimates or our earnings guidance;

 

    the operating and stock price performance of other comparable companies;

 

    overall market fluctuations and domestic and worldwide economic conditions; and

 

    other factors described in these “Risk Factors” and elsewhere in this information statement.

Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the trading price of our common stock.

A number of shares of our common stock are or will be eligible for future sale, which may cause our stock price to decline.

Any sales of substantial amounts of shares of our common stock in the public market or the perception that such sales might occur, in connection with the distribution or otherwise, may cause the market price of our common stock to decline. Upon completion of the distribution, we expect that we will have an aggregate of approximately [] shares of our common stock issued and outstanding. These shares will be freely tradable without restriction or further registration under the U.S. Securities Act of 1933, as amended (the Securities Act), unless the shares are owned by one of our “affiliates,” as that term is defined in Rule 405 under the Securities Act.

We are unable to predict whether large amounts of our common stock will be sold in the open market following the distribution. We are also unable to predict whether a sufficient number of buyers would be in the market at that time. In this regard, a portion of DuPont common stock is held by index funds tied to stock indices. If we are not included in these indices at the time of distribution, these index funds may be required to sell our common stock.

We cannot guarantee the timing, amount, or payment of dividends on our common stock in the future.

Following the distribution, we expect to pay regular dividends. Prior to the distribution, while we are a wholly-owned subsidiary of DuPont, our board of directors, consisting of DuPont employees, intends to declare a dividend of [] for the third quarter of 2015, to be paid to our stockholders as of a record date following the distribution. The payment and amount of any subsequent dividend will be subject to the sole discretion of our post-distribution, independent board of directors and will depend upon many factors, including our financial condition and prospects, our capital requirements and access to capital markets, covenants associated with certain of our debt obligations, legal requirements and other factors that our board of directors may deem relevant, and there can be no assurances that we will continue to pay a dividend in the future. For more information, see the section entitled “Dividend Policy.”

Your percentage of ownership in us may be diluted in the future.

Your percentage ownership in us may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise, including, without limitation, equity awards that we may be granting to our directors, officers and employees. Our employees may have options to purchase shares of our common stock after the distribution as a result of conversion of their DuPont stock options (in whole or in part) to our stock options.

 

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In addition, our amended and restated certificate of incorporation will authorize us to issue, without the approval of our stockholders, one or more classes or series of preferred stock having such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over our common stock with respect to dividends and distributions, as our board of directors generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of our common stock. For example, we could grant the holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we could assign to holders of preferred stock could affect the residual value of our common stock. See the section entitled “Description of Our Capital Stock.”

Certain provisions in our amended and restated certificate of incorporation and amended and restated by-laws, and of Delaware law, may prevent or delay an acquisition of us, which could decrease the trading price of the common stock.

Our amended and restated certificate of incorporation and amended and restated by-laws will contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with our board of directors rather than to attempt a hostile takeover. These provisions include, among others:

 

    the inability of our stockholders to act by written consent;

 

    the limited ability of our stockholders to call a special meeting;

 

    rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings;

 

    the right of our board of directors to issue preferred stock without stockholder approval;

 

    the division of our board of directors into three approximately equal classes of directors, with each class serving a staggered three-year term, which will result in, under Delaware law, stockholders only being permitted to remove directors for cause;

 

    the ability of our directors, and not stockholders, to fill vacancies (including those resulting from an enlargement of the board of directors) on our board of directors; and

 

    the requirement that stockholders holding at least 80 percent of our voting stock are required to amend certain provisions in our amended and restated certificate of incorporation and our amended and restated by-laws.

In addition, following the distribution, we will be subject to Section 203 of the Delaware General Corporations Law (the DGCL). Section 203 provides that, subject to limited exceptions, persons that (without prior board approval) acquire, or are affiliated with a person that acquires, more than 15 percent of the outstanding voting stock of a Delaware corporation shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or its affiliate becomes the holder of more than 15 percent of the corporation’s outstanding voting stock.

We believe these provisions will protect our stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our board of directors and by providing our board of directors with more time to assess any acquisition proposal. These provisions are not intended to make us immune from takeovers. However, these provisions will apply even if an acquisition proposal or offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that our board of directors determines is not in our best interests and our stockholders’. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.

 

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Several of the agreements that we have entered into with DuPont require DuPont’s consent to any assignment by us of our rights and obligations, or a change of control of us, under the agreements. The consent rights set forth in these agreements might discourage, delay or prevent a change of control that you may consider favorable. See the sections entitled “Our Relationship with DuPont Following the Distribution” and “Description of Our Capital Stock” for a more detailed description of these agreements and provisions.

In addition, an acquisition or further issuance of our stock could trigger the application of Section 355(e) of the Code. For a discussion of Section 355(e), see the section entitled “Material U.S. Federal Income Tax Consequences of the Distribution.” Under the Tax Matters Agreement, we would be required to indemnify DuPont for the tax imposed under Section 355(e) of the Code resulting from an acquisition or issuance of its stock, even if it did not participate in or otherwise facilitate the acquisition, and this indemnity obligation might discourage, delay or prevent a change of control that you may consider favorable.

 

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This information statement and other materials DuPont and Chemours have filed or will file with the SEC contain, or will contain, certain statements regarding business strategies, market potential, future financial performance, future action, results and other matters which are “forward-looking” statements within the meaning of the Securities Exchange Act of 1934, as amended (the Exchange Act), and the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “anticipate,” “project,” “estimate,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “objective,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions, among others, generally identify forward-looking statements, which speak only as of the date the statements were made. Additionally, forward-looking statements include, but are not limited to:

 

    Chemours’ expectations as to future sales of products;

 

    Chemours’ ability to protect its intellectual property in the United States and abroad;

 

    Chemours’ estimates regarding its capital requirements and its needs for additional financing;

 

    Chemours’ estimates of its expenses, future revenues and profitability;

 

    Chemours’ estimates of the size of the markets for its products and services;

 

    Chemours’ expectations related to the rate and degree of market acceptance of its products;

 

    The outcome of certain Chemours contingencies, such as litigation and environmental matters; and

 

    Chemours’ estimates of the success of other competing technologies that may become available.

In particular, information included under the sections entitled “Information Statement Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” and “The Distribution” contains forward-looking statements. The matters discussed in these forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. These factors include, but are not limited to, fluctuations in energy and raw material prices; failure to develop and market new products and optimally manage product life cycles; significant litigation and environmental matters; failure to appropriately manage process safety and product stewardship issues; changes in laws and regulations or political conditions; global economic and capital markets conditions, such as inflation, interest and currency exchange rates; business or supply disruptions; security threats, such as acts of sabotage, terrorism or war, weather events and natural disasters; ability to protect, defend and enforce Chemours’ intellectual property rights; increased competition; increasing consolidation of our core customers; changes in relationships with our significant customers and suppliers; unanticipated expenses such as litigation or legal settlement expenses; unanticipated business disruptions; our ability to predict, identify and interpret changes in consumer preferences and demand; our ability to realize the expected benefits of the separation; our ability to complete proposed divestitures or acquisitions; our ability to realize the expected benefits of acquisitions if they are completed; uncertainty regarding the availability of financing to us in the future and the terms of such financing; and disruptions in our information technology networks and systems. Additionally, there may be other risks and uncertainties that we are unable to identify at this time or that we do not currently expect to have a material impact on our business.

Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. Factors that could cause actual results or events to differ materially from those anticipated include the matters described under the sections entitled “Risk Factors,” “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” DuPont and Chemours disclaim and do not undertake any obligation to update or revise any forward-looking statement, except as required by applicable law.

 

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THE DISTRIBUTION

Background of the Distribution

On October 24, 2013, DuPont announced its intention to separate its Performance Chemicals segment through a pro rata distribution of Chemours common stock to stockholders of DuPont. The distribution is intended to be generally tax free for U.S. federal income tax purposes.

In furtherance of this plan, on [], 2015, DuPont’s board of directors approved the distribution of all of the issued and outstanding shares of Chemours common stock on the basis of [] share[s] of Chemours common stock for each share of DuPont common stock issued and outstanding on [], 2015, the record date for the distribution. As a result of the distribution, Chemours and DuPont will become two independent, publicly traded companies.

On [], the distribution date, each DuPont stockholder will receive [] share[s] of Chemours common stock for each share of DuPont common stock held at the close of business on the record date, as described below. You will receive cash in lieu of any fractional shares of Chemours common stock that you would have received as a result of the application of the distribution ratio. You will not be required to make any payment, surrender or exchange your DuPont common stock or take any other action to receive your shares of Chemours common stock in the distribution.

The distribution of Chemours common stock as described in this information statement is subject to the satisfaction or waiver of certain conditions. For a more detailed description of these conditions, see this section under “ — Conditions to the Distribution.”

Reasons for the Separation and Distribution

DuPont’s board of directors determined that the separation and distribution of the Chemours business from the DuPont Business would be in the best interests of DuPont and its stockholders and approved the plan of separation. A wide variety of factors were considered by DuPont’s board of directors in evaluating the separation and distribution. Among other things, DuPont’s board of directors considered the following potential benefits of the separation and distribution:

 

    Closer alignment of DuPont’s businesses with its evolving strategic direction — DuPont’s overall mission is to bring world-class science and engineering to the global marketplace in the form of innovative products, materials and services. Increasingly, DuPont’s strategic direction and business model is focused on advancing the company’s integrated capabilities in biology, chemistry and materials science to further strengthen its industry-leading positions across three strategic priorities: agriculture and nutrition, advanced materials and biobased industrials. DuPont is focused on high potential commercial opportunities in secular growth markets in food, energy, and protection where the company’s innovation, global scale and efficient execution have the potential to create valuable new outcomes. In addition, the Performance Chemicals Segment is highly cyclical and its performance is volatile as compared to DuPont’s other businesses. Its leading businesses in Titanium Technologies and Fluoroproducts, and Chemical Solutions, well-established positions in attractive markets, and strong cash flow generation will be better positioned as an independent company. The separation and distribution will allow DuPont to continue its transformation into a higher growth, less cyclical company, resulting in greater value creation for its shareholders.

 

    Elimination of capital and other constraints on the Performance Chemicals segment — The separation and distribution will allow Chemours to attract capital to fund opportunities that the Performance Chemicals segment otherwise would not be able to pursue as a component of a company with a different strategic direction. As a stand-alone company, Chemours will have separate access to the debt and equity capital markets.

Neither DuPont nor Chemours can assure you that, following the separation and distribution, any of the benefits described above or otherwise will be realized to the extent anticipated or at all.

 

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DuPont’s board of directors also considered a number of potentially negative factors in evaluating the separation and distribution, including the following factors impacting Chemours:

 

    Loss of synergies and joint purchasing power and increased costs — As a current part of DuPont, Chemours takes advantage of DuPont’s size and purchasing power in procuring certain goods and services. After the separation and distribution, as a separate, independent entity, Chemours may be unable to obtain these goods, services, and technologies at prices or on terms as favorable as those DuPont obtained prior to the separation and distribution. Chemours will also incur costs for certain functions previously performed by DuPont, such as accounting, tax, legal, human resources, and other general and administrative functions, that may be higher than the amounts reflected in Chemours’ historical financial statements, which could cause Chemours’ profitability to decrease.

 

    Disruptions to the business as a result of the separation — The actions required to separate DuPont’s and Chemours’ respective businesses could disrupt Chemours’ operations.

 

    Increased significance of certain costs and liabilities — Certain costs and liabilities that were otherwise less significant to DuPont as a whole will be more significant for Chemours as a stand-alone company.

 

    One-time costs of the separation and distribution — Chemours will incur costs in connection with the transition to being a stand-alone public company that will include establishment of accounting, tax, legal, and other professional services costs, recruiting and relocation costs associated with hiring key senior management personnel new to Chemours, and costs to separate information systems.

 

    Inability to realize anticipated benefits of the separation and distribution — Chemours may not achieve the anticipated benefits of the separation and distribution for a variety of reasons, including, among others: (a) the separation and distribution will require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing the Chemours business; (b) following the separation and distribution, Chemours may be more susceptible to market fluctuations and other events particular to one or more of Chemours’ products than if it were still a part of DuPont; and (c) following the separation and distribution, the Chemours business will be less diversified than DuPont’s business prior to the separation and distribution.

DuPont’s board of directors concluded that the potential benefits of the separation and distribution outweighed these factors. However, neither DuPont nor Chemours can assure you that, following the separation and distribution, any of the benefits described above or otherwise will be realized to the extent anticipated or at all.

Formation of a Holding Company Prior to the Distribution

In connection with and prior to the distribution, Chemours was organized by DuPont in the state of Delaware on February 18, 2014 as Performance Operations, LLC, for the purpose of transferring to Chemours assets and liabilities, including any entities holding assets and liabilities, associated with certain of DuPont’s Performance Chemicals segment. Chemours changed its name to the Chemours Company, LLC on April 15, 2014. In accordance with the separation and distribution, actions will have been taken so as at the time immediately prior to the distribution, Chemours will have been converted from a limited liability company to a Delaware corporation.

The Number of Shares of Chemours Common Stock You Will Receive

For each share of DuPont common stock that you own at the close of business on [], 2015, the record date, you will receive [] share[s] of Chemours common stock on the distribution date. DuPont will not distribute any fractional shares of Chemours common stock to its stockholders. Instead, if you are a registered holder, the distribution agent will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing market prices and distribute the aggregate cash proceeds (net of discounts and commissions) of the

 

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sales pro rata (based on the fractional share such holder would otherwise have been entitled to receive) to each holder who otherwise would have been entitled to receive a fractional share in the distribution. The distribution agent, in its sole discretion, without any influence by DuPont or Chemours, will determine when, how, through which broker-dealer and at what price to sell the whole shares. Any broker-dealer used by the transfer agent will not be an affiliate of either DuPont or Chemours. Neither Chemours nor DuPont will be able to guarantee any minimum sale price in connection with the sale of these shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payment made in lieu of fractional shares.

The aggregate net cash proceeds of these sales will be taxable for U.S. federal income tax purposes. See the section entitled “Material U.S. Federal Income Tax Consequences of the Distribution” for an explanation of the material U.S. federal income tax consequences of the distribution. If you hold physical certificates for DuPont common stock and are the registered holder, you will receive a check from the distribution agent in an amount equal to your pro rata share of the aggregate net cash proceeds of the sales. Chemours estimates that it will take approximately two weeks from the distribution date for the distribution agent to complete the distributions of the aggregate net cash proceeds. If you hold your DuPont common stock through a bank or brokerage firm, your bank or brokerage firm will receive, on your behalf, your pro rata share of the aggregate net cash proceeds of the sales and will electronically credit your account for your share of such proceeds.

When and How You Will Receive the Distribution

With the assistance of the distribution agent, the distribution of Chemours common stock is expected to occur on [], 2015, the distribution date, to all holders of outstanding DuPont common stock on [], 2015, the record date. [] will serve as the distribution agent in connection with the distribution, and [] will serve as the transfer agent and registrar for Chemours common stock. DuPont stockholders will receive cash in lieu of any fractional shares of Chemours common stock which they would have been entitled to receive.

If you own DuPont common stock as of the close of business on the record date, Chemours common stock that you are entitled to receive in the distribution will be issued electronically, as of the distribution date, to you or to your bank or brokerage firm on your behalf in direct registration or book-entry form. If you are a registered holder, the distribution agent or the transfer agent will then mail you a direct registration account statement that reflects your shares of Chemours common stock. If you hold your shares through a bank or brokerage firm, your bank or brokerage firm will credit your account for the shares. “Direct registration form” refers to a method of recording share ownership when no physical share certificates are issued to stockholders, as is the case in this distribution. Commencing on or shortly after the distribution date, if you hold physical share certificates that represent your DuPont common stock and you are the registered holder of the shares represented by those certificates, the distribution agent will mail to you an account statement that indicates the number of shares of Chemours common stock that have been registered in book-entry form in your name. If you sell DuPont common stock in the “regular-way” market up to and including the distribution date, you will be selling your right to receive shares of Chemours common stock in the distribution.

Most DuPont stockholders hold their common stock through a bank or brokerage firm. In such cases, the bank or brokerage firm would be said to hold the shares in “street name” and ownership would be recorded on the bank or brokerage firm’s books. If you hold your DuPont common stock through a bank or brokerage firm, your bank or brokerage firm will credit your account for the Chemours common stock that you are entitled to receive in the distribution, and the distribution agent will mail you a check for any cash in lieu of fractional shares you are entitled to receive. If you have any questions concerning the mechanics of having shares held in “street name,” please contact your bank or brokerage firm.

Transferability of Shares You Receive

Shares of Chemours common stock distributed to holders in connection with the distribution will be transferable without registration under the Securities Act, except for shares received by persons who may be deemed to be

 

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Chemours affiliates. Persons who may be deemed to be Chemours’ affiliates after the distribution generally include individuals or entities that control, are controlled by or are under common control with Chemours, which may include certain of Chemours executive officers, directors or principal stockholders. Securities held by Chemours affiliates will be subject to resale restrictions under the Securities Act. Chemours affiliates will be permitted to sell shares of Chemours common stock only pursuant to an effective registration statement or an exemption from the registration requirements of the Securities Act, such as the exemption afforded by Rule 144 under the Securities Act.

Results of the Distribution

After its separation from DuPont, Chemours will be an independent, publicly traded company. The actual number of shares to be distributed will be determined on [], 2015, the record date for the distribution, and will reflect any exercise of DuPont options between the date the DuPont board of directors declares the distribution and the record date for the distribution. The distribution will not affect the number of outstanding DuPont common stock or any rights of DuPont’s stockholders. DuPont will not distribute any fractional shares of Chemours common stock.

Before the distribution, Chemours will enter into a Separation Agreement and other agreements with DuPont to effect the separation and provide a framework for Chemours relationship with DuPont after the separation and distribution. These agreements will provide for the allocation between DuPont and Chemours of DuPont’s assets, liabilities and obligations (including employee benefits, intellectual property, and tax-related assets and liabilities) attributable to periods prior to, at and after Chemours’ separation from DuPont and will govern certain relationships between DuPont and Chemours after the separation and distribution. For a more detailed description of these agreements, see the section entitled “Our Relationship with DuPont Following the Distribution.”

Market for Chemours common stock

There is currently no public trading market for Chemours common stock. Chemours intends to apply to list its common stock on the NYSE under the symbol “.” Chemours has not and will not set the initial price of its common stock. The initial price will be established by the public markets.

Chemours cannot predict the price at which its common stock will trade after the distribution. In fact, the combined trading prices, after the distribution, of the shares of Chemours common stock that each DuPont stockholder will receive in the distribution and DuPont common stock held at the record date may not equal the “regular-way” trading price of a share of DuPont common stock immediately prior to the distribution. The price at which Chemours common stock trades may fluctuate significantly, particularly until an orderly public market develops. Trading prices for Chemours common stock will be determined in the public markets and may be influenced by many factors. See the section entitled “Risk Factors — Risks Related to Our Common Stock.”

Trading Between the Record Date and Distribution Date

Beginning on or shortly before the record date and continuing up to and including through the distribution date, DuPont expects that there will be two markets in DuPont common stock: a “regular-way” market and an “ex- distribution” market. Shares of DuPont common stock that trade on the “regular-way” market will trade with an entitlement to Chemours common stock distributed pursuant to the separation. Shares of DuPont common stock that trade on the “ex-distribution” market will trade without an entitlement to Chemours common stock distributed pursuant to the distribution. Therefore, if you sell DuPont common stock in the “regular-way” market up to and including through the distribution date, you will be selling your right to receive Chemours common stock in the distribution. If you own DuPont common stock at the close of business on the record date and sell those shares on the “ex-distribution” market up to and including through the distribution date, you will receive the shares of Chemours common stock that you are entitled to receive pursuant to your ownership as of the record date of DuPont common stock.

 

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Furthermore, we anticipate that trading in our common stock will begin on a “when-issued” basis as early as [] trading days prior to the record date for the distribution and will continue up to and including the distribution date. “When-issued” trading in the context of a separation refers to a sale or purchase made conditionally on or before the distribution date because the securities of the separated entity have not yet been distributed. The “when-issued” trading market will be a market for Chemours common stock that will be distributed to holders of DuPont common stock on the distribution date. If you owned DuPont common stock at the close of business on the record date, you would be entitled to Chemours common stock distributed pursuant to the distribution. You may trade this entitlement to shares of Chemours common stock, without DuPont common stock you own, on the “when-issued” market. On the first trading day following the distribution date, “when-issued” trading with respect to Chemours common stock will end, and “regular-way” trading will begin.

Conditions to the Distribution

Chemours expects that the distribution will be effective on [], 2015, the distribution date, provided that, among other conditions described in this information statement, the following conditions shall have been satisfied or, if permissible under the Separation Agreement, waived by DuPont:

 

    the making of a $[] cash distribution from Chemours to DuPont prior to the distribution, and the determination by DuPont in its sole discretion that following the separation and distribution it shall have no further liability or obligation whatsoever under any financing arrangements that Chemours will be entering into in connection with the separation;

 

    the SEC having declared effective the registration statement, of which this information statement forms a part, no stop order relating to the registration statement being in effect, nor any proceeding seeking such stop order being pending, and the information statement having been distributed to DuPont’s stockholders;

 

    Chemours common stock having been approved and accepted for listing by the NYSE, subject to official notice of issuance;

 

    DuPont has received the IRS Ruling from the IRS substantially to the effect that, among other things, the distribution of our ordinary shares, together with certain related transactions, will qualify under Sections 355 and 368(a) of the Code, with the result that DuPont and DuPont’s shareholders will not recognize any taxable income, gain or loss for U.S. federal income tax purposes as a result of the distribution, except to the extent of cash received in lieu of fractional shares. As a condition to the distribution, the IRS Ruling must remain in effect as of the distribution date. In addition, the distribution is conditioned on the receipt of the Tax Opinion, in form and substance acceptable to DuPont, substantially to the effect that certain requirements, including certain requirements that the IRS will not rule on, necessary to obtain tax-free treatment, have been satisfied. See “Material U.S. Federal Income Tax Consequences of the Distribution”;

 

    the receipt of an opinion from an independent appraisal firm to the board of directors of DuPont confirming the solvency of each of DuPont and Chemours after the distribution that is in form and substance acceptable to DuPont in its sole discretion;

 

    all permits, registrations and consents required under the securities or blue sky laws of states or other political subdivisions of the United States or of other foreign jurisdictions in connection with the distribution having been received;

 

    no order, injunction, or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation, distribution or any of the related transactions being in effect;

 

    the reorganization of DuPont and Chemours businesses prior to the separation and distribution having been effectuated;

 

    the approval by the board of directors of DuPont of the distribution and all related transactions (and such approval not having been withdrawn);

 

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    DuPont’s election of the individuals to be listed as members of our board of directors post-distribution, as described in this information statement, immediately prior to the distribution date;

 

    Chemours having entered into certain agreements in connection with the separation and distribution and certain financing arrangements prior to or concurrent with the separation; and

 

    no events or developments shall have occurred or exist that, in the sole and absolute judgment of DuPont’s board of directors, make it inadvisable to effect the distribution or would result in the distribution and related transactions not being in the best interest of DuPont or its stockholders.

The fulfillment of the foregoing conditions does not create any obligations on DuPont’s part to effect the distribution, and DuPont’s board of directors has reserved the right, in its sole discretion, to amend, modify or abandon the distribution and related transactions at any time prior to the distribution date.

DuPont Preferred Stock

If you are a holder of shares of DuPont preferred stock, without par value-cumulative, Series $4.50 or DuPont preferred stock, without par value-cumulative, Series $3.50 (collectively, the DuPont Preferred Stock), you will retain your DuPont Preferred Stock and will not have the right to receive any of our common stock as a dividend with respect to such holdings as a result of the distribution.

Regulatory Approvals

Chemours must complete the necessary registration under U.S. federal securities laws of Chemours common stock, as well as the applicable NYSE listing requirements for such shares.

Other than the requirements discussed above, we do not believe that any other material governmental or regulatory filings or approvals will be necessary to consummate the distribution.

No Appraisal Rights

DuPont’s stockholders will not have any appraisal rights in connection with the distribution.

Reasons for Furnishing this Information Statement

We are furnishing this information statement solely to provide information to DuPont’s stockholders who will receive shares of our common stock in the distribution. You should not construe this information statement as an inducement or encouragement to buy, hold or sell any of our securities or any securities of DuPont. We believe that the information contained in this information statement is accurate as of the date set forth on the cover. Changes to the information contained in this information statement may occur after that date, and neither DuPont nor we undertake any obligation to update the information except in the normal course of DuPont’s and our public disclosure obligations and practices.

 

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DIVIDEND POLICY

Following the distribution, we expect to pay regular dividends. Prior to the distribution, while we are a wholly-owned subsidiary of DuPont, our board of directors, consisting of DuPont employees, intends to declare a dividend of [] for the third quarter of 2015, to be paid to our stockholders as of a record date following the distribution.

The payment and amount of any subsequent dividend will be subject to the sole discretion of our post-distribution, independent board of directors and will depend upon many factors, including our financial condition and prospects, our capital requirements and access to capital markets, covenants associated with certain of our debt obligations, legal requirements and other factors that our board of directors may deem relevant, and there can be no assurances that we will continue to pay a dividend in the future. There can also be no assurance that the combined annual dividends on DuPont common stock and our common stock after the distribution, if any, will be equal to the annual dividends on DuPont common stock prior to the distribution.

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of [], 2014, on a historical and on a pro forma basis to give effect to the separation and distribution and the transactions related to the separation and distribution as if they occurred on [], 2014. Explanation of the pro forma adjustments made to our historical combined financial statements can be found under “Unaudited Pro Forma Combined Financial Statements.” The following table should be reviewed in conjunction with “Unaudited Pro Forma Combined Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical combined financial statements and accompanying notes included elsewhere in this information statement.

 

     As of [], 2014
     (dollars in millions)
     Historical      Pro Forma

Cash and cash equivalents:

   $ —        
  

 

 

    

 

Debt, including current and long-term:

     

Current debt

   $ —        

Long-term debt

     —        

Total debt

   $ —        
  

 

 

    

 

Equity:

     

Common stock, par value $0.01

   $ —        

Additional paid-in capital

     —        

DuPont equity and noncontrolling interests

     —       

Total Equity

   $ —        
  

 

 

    

 

Total Capitalization

   $ —        
  

 

 

    

 

We have not yet finalized our post-distribution capitalization. We will have cash on hand in an amount to be determined at or prior to the time of the distribution. We expect that, at the time of distribution, we will have significant third-party indebtedness, which we expect to incur through a bond offering, term loans or a combination of these and other financing arrangements. We intend to update our financial information to reflect our post-distribution capitalization in an amendment to this information statement.

 

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UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

The following Unaudited Pro Forma Combined Financial Statements are derived from the historical combined financial statements of Chemours, prepared in accordance with U.S. generally accepted accounting principles, which are included elsewhere in this information statement.

The Unaudited Pro Forma Combined Income Statements for the fiscal year ended December 31, 2013 and the nine months ended September 30, 2014 give effect to the distribution as if it had occurred on January 1, the first day of fiscal year 2013. The Unaudited Pro Forma Combined Balance Sheet as of September 30, 2014 gives effect to the distribution as if it had occurred on September 30, 2014. These Unaudited Pro Forma Combined Financial Statements include adjustments to reflect the following:

 

  (1) Adjustments required by SEC Staff Accounting Bulletin Topic 1:B-3 including:

 

  a. the inclusion of $[] of debt at an interest rate of []%;

 

  b. the pro-rata distribution of approximately [] shares Chemours common stock to DuPont stockholders;

 

  c. cash injection of $[] from DuPont;

 

  d. the cash dividend of approximately $[] to DuPont.

 

  (2) Other Adjustments required by Article 11 of SEC Regulation S-X including:

 

  a. the contribution by DuPont to Chemours, pursuant to the Separation Agreement, of all the assets and liabilities that comprise the Chemours business;

 

  b. the expected transfer to Chemours, upon completion of the separation of certain assets and liabilities that were not included in Chemours’ Audited Combined Financial Statements;

 

  c. the assets and liabilities related to defined benefit pension and other post-retirement plans that were not included in Chemours’ Audited Combined Financial Statements;

 

  d. the impact of the Separation Agreement, Tax Matters Agreement, Employee Matters Agreement and other commercial agreements between Chemours and DuPont.

Chemours’ Audited Combined Financial Statements include allocations for certain expenses and support functions historically provided by DuPont, such as business shared services, and other selling, general and administrative costs that benefit Chemours. Effective with the Separation, we will assume responsibility for all of these functions and related costs. Chemours will incur incremental costs as an independent public company, including costs to replace services previously provided by DuPont as well as other stand-alone costs. In total, we estimate that these costs will range from $[] million to $[] million, over and above amounts currently included in the Unaudited Combined Financial Statements. Due to the scope and complexity of these activities, the amount and timing of these incremental costs could vary and, therefore, are not included within the Unaudited Pro Forma Combined Financial Statements.

Chemours is expected to incur one-time transaction costs of approximately $[] million related to the Separation after it is completed. No pro forma adjustments have been made to our income statements to reflect the cost and expenses described in this paragraph.

 

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Chemours

Unaudited Pro Forma Combined Income Statement

Year Ended December 31, 2013

 

(Dollars in millions, except for share data)

   Chemours      Pro Forma
Historical
Adjustments
     Pro Forma
Other
Adjustments
    

 

     Pro Forma  

Net sales

   $                    $                    $                       $                

Cost of goods sold

              
  

 

 

    

 

 

    

 

 

       

Gross profit

              

Selling, general and administrative expense

             

 

 

(A),(C),(D),

(E),(F),(G), 

(R)              

  

  

  

  

Research and development expense

              

Employee separation/asset related charges, net

           —              —     
  

 

 

    

 

 

    

 

 

       

 

 

 

Total expenses

              

Equity in earnings of affiliates

              

Other income, net

              
  

 

 

    

 

 

    

 

 

       

 

 

 

Income before income taxes

              

Provision for income taxes

              (I)                    
  

 

 

    

 

 

    

 

 

       

 

 

 

Net income

           —              —     
  

 

 

    

 

 

    

 

 

       

 

 

 

Less: Net income attributable to noncontrolling interests

              

Net income attributable to Chemours

   $         $         $            $     
  

 

 

    

 

 

    

 

 

       

 

 

 

Unaudited pro forma earnings per common share

              

Basic (J)

               $     

Diluted (K)

               $     

Average number of shares used in calculating unaudited pro forma earnings per share

              

Basic (J)

              

Diluted (K)

              

See Notes to Unaudited Pro Forma Combined Financial Statements.

 

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Chemours

Unaudited Pro Forma Combined Income Statement

Nine months ended September 30, 2014

 

(Dollars in millions, except for share data)

   Chemours      Pro Forma
Historical
Adjustments
     Pro Forma
Other
Adjustments
    

 

     Pro Forma  

Net sales

   $                    $                    $                       $                

Cost of goods sold

              
  

 

 

    

 

 

    

 

 

       

Gross profit

              

Selling, general and administrative expense

             

 

 

(A),(C),(D),

(E),(F),(G), 

(R)              

  

  

  

  

Research and development expense

              

Employee separation/asset related charges, net

           —              —     
  

 

 

    

 

 

    

 

 

       

 

 

 

Total expenses

              

Equity in earnings of affiliates

              

Other income, net

              
  

 

 

    

 

 

    

 

 

       

Income before income taxes

              

Provision for income taxes

              (I)                    

Net income

           —              —     
  

 

 

    

 

 

    

 

 

       

 

 

 

Less: Net income attributable to noncontrolling interests

              

Net income attributable to Chemours

   $         $         $            $     
  

 

 

    

 

 

    

 

 

       

 

 

 

Unaudited pro forma earnings per common share

              

Basic (J)

               $     

Diluted (K)

               $     

Average Number of shares used in calculating unaudited pro forma earnings per share

              

Basic (J)

              

Diluted (K)

              

See Notes to Unaudited Pro Forma Combined Financial Statements.

 

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Chemours

Unaudited Pro Forma Combined Balance Sheet

As of September 30, 2014

 

(Dollars in millions, except for share data)

   Chemours      Pro Forma
Historical
Adjustments
     Pro Forma
Other
Adjustments
    

 

     Pro Forma  

Assets

              

Current assets:

   $                    $                    $                       $                

Cash and cash equivalents

           (L)         

Accounts and notes receivable — trade, net

              (M)              

Inventories

              

Prepaid expenses and other

              

Deferred income taxes

              (A)              
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total current assets

           —              —     

Property, plant and equipment

              (A)              

Less accumulated depreciation

              

Net property, plant and equipment

           —              —     

Goodwill

           —              —     

Other intangibles, net

              

Investments in affiliates

              

Other assets

           —           (A)                 —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $         $         $            $     

Liabilities and DuPont Company Net Investment

              

Current liabilities:

              

Accounts payable

   $         $         $            $     

Short-term capital lease obligations

              

Short-term borrowings and current maturities of long-term debt

        (N)            

Deferred income taxes

              (A)            

Other accrued liabilities

              (H),(S)      
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total current liabilities

           —              —     

Long-term capital lease obligations

              

Long-term debt

        (N)            

Other liabilities

              (O),(H)      

Deferred income taxes

              (A)            
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

              

Equity

              

DuPont Company Net Investment

        (P)            (B)              

Common stock, $0.01 par value; [] shares authorized; [] issued and outstanding on a pro forma basis

        (Q)            

Capital in excess of par value

        (Q)            

Noncontrolling interests

              

Accumulated other comprehensive income

              (A)              
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total equity

              

Total liabilities and equity

   $         $         $            $     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

See Notes to Unaudited Pro Forma Combined Financial Statements.

 

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CHEMOURS

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

(A) Reflects the impact of assets, liabilities and related expenses that we expect to assume from DuPont that were not included in our Unaudited Combined Financial Statements. There may be additional assets, liabilities or related expenses transferred to us in the separation for which the transfer has not been finalized. This adjustment includes the estimate of net property, plant and equipment retained by DuPont or transferred to Chemours, pursuant to the Separation Agreement, that comprise the Chemours business. The estimate is not expected to be materially different from the amounts currently presented in the Unaudited Combined Financial Statements.

(B) [currently un-used; placeholder]

(C) Reflects higher costs associated with a new insurance structure.

(D) Represents removal of corporate allocations from DuPont to Chemours for the usage of DuPont’s facilities, functions and services; costs for administrative functions and services performed on behalf of Chemours by centralized staff groups within DuPont; a portion of DuPont’s general corporate expenses; and certain pension and other retirement benefit costs. These costs were replaced with the revised cost structure for each service or function.

(E) Represents changes to employee related accruals and costs based upon liabilities assumed under the Employee Matters Agreement and identification of employees to support the Chemours business.

(F) Represents costs that we anticipate incurring, upon completion of separation from DuPont, for incremental selling, general and administrative expense as a result of being a public company. Additionally, we currently depend on DuPont for a number of administrative functions. Prior to the completion of our separation from DuPont, we will enter into a transition services agreement under which DuPont will provide to us, on an interim basis, various corporate support services, for which the costs are reflected above.

(G) Reflects the impact of supply agreements for products and ingredients previously obtained through DuPont. See note (X) to the unaudited pro forma combined balance sheet.

(H) [currently un-used; placeholder]

(I) Reflects the tax effects of the pro forma adjustments at the applicable statutory income tax rate of []. The effective tax rate of Chemours could be different (either higher or lower) depending on activities subsequent to the distribution. The impacts of pro forma adjustments on long-term deferred tax assets and liabilities were offset against existing long-term deferred tax assets and liabilities reflected in our historical Combined Balance Sheet based on jurisdiction.

(J) The number of shares of Chemours common stock used to compute basic earnings per share is based on: (a) the number of shares of Chemours common stock assumed to be outstanding on the distribution date; (b) the number of shares of DuPont common stock outstanding on December 31, 2013 and (c) the number of shares of DuPont common stock outstanding on September 30, 2014, as applicable, assuming a distribution ratio of shares of Chemours common stock for every [] shares of DuPont common stock.

(K) The number of shares used to compute diluted earnings per share is based on the number of shares of Chemours common stock as described in Note (J) above, plus incremental shares assuming exercise of dilutive outstanding options and restricted stock awards. This calculation may not be indicative of the dilutive effect that will actually result from Chemours’ stock-based awards issued in connection with the adjustment of outstanding DuPont stock-based awards or the grant of new stock-based awards. The number of dilutive shares of common stock underlying Chemours’ stock-based awards issued in connection with the adjustment of outstanding DuPont stock-based awards will not be determined until the distribution date or shortly thereafter.

 

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(L) Reflects a $[] distribution to DuPont prior to the distribution based on the assumed net proceeds of the debt described in Note (N).

(M) Related party accounts receivable and accounts payable will be adjusted to reflect the commercial agreement between the parties.

(N) Reflects the anticipated incurrence of $[] of debt, net of estimated debt issuance costs of $[]. We expect the debt to be comprised of long-term debt and other financing arrangements.

(O) Reflects the addition of net benefit plan liabilities that will be transferred to Chemours by DuPont as part of the separation. These net benefit plan liabilities are excluded from the historical combined balance sheet. The benefit plan expenses associated with these liabilities are included in the Chemours’ historical Combined Income Statements.

(P) Reflects the pro forma recapitalization of our equity. As of the distribution date, DuPont Company Net Investment in our business will be exchanged to reflect the distribution of our shares of common stock to DuPont stockholders. DuPont stockholders will receive shares of our common stock based on an expected distribution ratio of [] shares of Chemours common stock for every [] shares of DuPont common stock.

(Q) Represents the elimination of DuPont Company Net Investment and adjustments to capital in excess of par to reflect the following:

1. Elimination of DuPont Company Net Investment and adjustment to capital in excess of par value:

 

   $                

Reclassification of DuPont Company Net Investment

  

Assumption of net assets and liabilities described in Note (A)

  

Accrual for interest expense as described in Note (R)

  

Distribution of cash to DuPont as described in Note (L)

  

Settlement of accounts receivable due from related party described in Note (M)

  

Addition of net benefit plan assets and liabilities described in Note (O)

  

Total DuPont Company Net Investment/Shareholders’ Equity

  

Chemours common stock described in Note (J)

  

Total capital in excess of par value

  

(R) Represents adjustments to interest expense and amortization of debt issuance costs related to approximately $[] million of debt that we expect to incur as described in Note (N). We expect the weighted-average interest rate on the debt to be approximately []%. Interest expense may be higher or lower if our actual interest rate or credit ratings change.

(S) Reflects the carrying value for indemnification of DuPont pursuant to the Separation Agreement, against certain liabilities. Also, pursuant to the Separation Agreement, Chemours will indemnify DuPont against liabilities that may arise in the future in connection with the Chemours business, including tax and product liabilities. The term of this indemnification is indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. Although it is reasonably possible that future payments may exceed amounts accrued, due to the nature of the indemnified items, it is not possible to reasonably estimate the maximum potential loss or a range of loss. No assets are held as collateral and no specific recourse provisions exist.

 

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SELECTED HISTORICAL COMBINED FINANCIAL DATA

The following table presents Chemours’ selected historical combined financial data. The selected historical combined financial data as of December 31, 2013 and 2012, and for the years ended December 31, 2013 and 2012 are derived from audited information and for the year ended December 31, 2011 is derived from unaudited information contained in Chemours’ annual Combined Financial Statements included elsewhere in this information statement. The selected historical combined financial data as of September 30, 2014 and for the nine months ended September 30, 2014 and 2013 are derived from Chemours’ unaudited interim Combined Financial Statements included elsewhere in this information statement. The selected historical combined financial data as of December 31, 2011, and as of and for the year ended December 31, 2010 are derived from Chemours’ unaudited Combined Financial Statements that are not included in this information statement. In management’s opinion, the unaudited interim Combined Financial Statements as of September 30, 2014 and for the nine months ended September 30, 2014 and 2013 have been prepared on the same basis as the audited information in the annual Combined Financial Statements and include all adjustments and allocations, consisting only of ordinary recurring adjustments, necessary for a fair presentation of the information for the periods presented.

The selected historical combined financial data include certain expenses of DuPont that were allocated to Chemours for certain corporate functions including information technology, research and development, finance, legal, insurance, compliance and human resources activities. These costs may not be representative of the future costs Chemours will incur as an independent, publicly traded company. In addition, Chemours’ historical financial information does not reflect changes that Chemours expects to experience in the future as a result of Chemours’ separation and distribution from DuPont, including changes in Chemours’ cost structure, personnel needs, tax structure, capital structure, financing and business operations. Chemours’ Combined Financial Statements also do not reflect the assignment of certain assets and liabilities between DuPont and Chemours as reflected under “Unaudited Pro Forma Combined Financial Statements” included elsewhere in this information statement. Consequently, the financial information included here may not necessarily reflect what Chemours’ financial position, results of operations and cash flows would have been had it been an independent, publicly traded company during the periods presented. Accordingly, these historical results should not be relied upon as an indicator of Chemours’ future performance.

For a better understanding, this section should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Unaudited Pro Forma Combined Financial Statements” and corresponding notes and the Annual Combined Financial Statements and accompanying notes and the unaudited Interim Combined Financial Statements and accompanying notes included elsewhere in this information statement.

 

(Dollars in millions)    Nine months
ended
September 30,
(Unaudited)
     Year ended December 31,  
     2014      2013      2013      2012      2011
(Unaudited)
     2010
(Unaudited)
 

Summary of operations:

                 

Net sales

   $ 4,883       $ 5,203       $ 6,859       $ 7,365       $ 7,972       $ 6,489   

Income before income taxes

   $ 430       $ 429       $ 576       $ 1,485       $ 1,907       $ 969   

Provision for income taxes on continuing operations

   $ 108       $ 116       $ 152       $ 427       $ 474       $ 247   

Net income attributable to Chemours

   $ 321       $ 313       $ 423       $ 1,057       $ 1,431       $ 720   

Financial position at year end:

                 

Working capital

   $ 1,038       $ 881       $ 509       $ 600       $ 593       $ 373   

Total assets

   $ 6,044       $ 5,704       $ 5,621       $ 5,317       $ 5,257       $ 4,948   

Long-term capital lease obligations

   $ —         $ 1       $ 1       $ 1       $ 2       $ 2   

General:

                 

Purchases of property, plant and equipment and investments in affiliates

   $ 404       $ 278       $ 438       $ 432       $ 355       $ 220   

Depreciation and amortization

   $ 185       $ 200       $ 261       $ 266       $ 272       $ 279   

Employees (thousands)

     9         9         9         9         9         9   

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion and analysis presented below refer to and should be read in conjunction with the audited and unaudited combined financial statements (the Annual Combined Financial Statements) and related notes, the unaudited interim combined financial statements (the Interim Combined Financial Statements) and related notes and the unaudited pro forma combined financial statements (the Pro Forma Combined Financial Statements), each included elsewhere in this information statement. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. The words “believe,” “expect,” “anticipate,” “project,” and similar expressions, among others, generally identify “forward-looking statements,” which speak only as of the date the statements were made. The matters discussed in these forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this information statement, particularly in “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements.” We believe the assumptions underlying the combined financial statements are reasonable. However, the combined financial statements included herein may not necessarily reflect our results of operations, financial position and cash flows in the future or what they would have been had we been a separate, stand-alone company during the periods presented.

As explained above, except as otherwise indicated or unless the context otherwise requires, the information included in this discussion and analysis assumes the completion of all the transactions referred to in this information statement in connection with the separation and distribution. Unless the context otherwise requires, references in this information statement to “The Chemours Company,” “The Chemours Company, LLC,” “Chemours,” “we,” “us,” “our” and “our company” refer to The Chemours Company and its combined subsidiaries. References in this information statement to “DuPont” refers to E. I. du Pont de Nemours and Company, a Delaware corporation, and its consolidated subsidiaries (other than Chemours and its combined subsidiaries), unless the context otherwise requires. References to “DuPont stockholders” refer to stockholders of DuPont in their capacity as holders of common stock only, unless context otherwise requires.

Introduction

Management’s discussion and analysis, which we refer to in this information statement as “MD&A,” of our results of operations and financial condition is provided as a supplement to the Annual and Interim Combined Financial Statements and footnotes included elsewhere herein to help provide an understanding of our financial condition, changes in financial condition and results of our operations.

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. Some of the important factors that could cause Chemours’ actual results to differ materially from those projected in any such forward-looking statements are:

 

    Fluctuations in energy and raw material prices;

 

    Failure to develop and market new products and optimally manage product life cycles;

 

    Significant litigation and environmental matters;

 

    Failure to appropriately manage process safety and product stewardship issues;

 

    Changes in laws and regulations or political conditions;

 

    Global economic and capital markets conditions, such as inflation, interest and currency exchange rates, interest rates and commodity prices, as well as regulatory requirements;

 

    Business or supply disruptions;

 

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    Security threats, such as acts of sabotage, terrorism or war, weather events and natural disasters;

 

    Ability to protect, defend and enforce Chemours’ intellectual property rights;

 

    Increased competition;

 

    Increasing consolidation of our core customers;

 

    Changes in relationships with our significant customers and suppliers;

 

    Unanticipated expenses such as litigation or legal settlement expenses;

 

    Unanticipated business disruptions;

 

    Our ability to predict, identify and interpret changes in consumer preference and demand;

 

    Our ability to realize the expected benefits of the separation;

 

    Our ability to complete proposed divestitures or acquisitions, and our ability to realize the expected benefits of acquisitions if they are completed;

 

    Uncertainty regarding the availability of financing to us in the future and the terms of such financing; and,

 

    Disruptions in our information technology networks and systems

Additionally, there may be other risks and uncertainties that we are unable to identify at this time or that we do not currently expect to have a material impact on our business. For further discussion of some of the important factors that could cause Chemours’ actual results to differ materially from those projected in any such forward-looking statements, see the Risk Factors discussion beginning on page 19.

Separation and Distribution

On October 24, 2013, DuPont announced its intention to separate its Performance Chemicals segment through a pro rata distribution of Chemours common stock to stockholders of DuPont. The distribution is intended to be generally tax free for U.S. federal income tax purposes.

Chemours is currently a subsidiary of DuPont. Chemours was organized in the state of Delaware on February 18, 2014 as Performance Operations, LLC, and changed its name to The Chemours Company, LLC on April 15, 2014. In accordance with the separation and distribution, actions will have been taken so as at the time immediately prior to the distribution, Chemours will have been converted from a limited liability company to a Delaware corporation. DuPont will generally transfer to us all the assets and all the liabilities relating to the Chemours business, which DuPont intends to separate from other businesses of DuPont that comprise its Agriculture, Electronics & Communications, Industrial Biosciences, Nutrition & Health, Performance Materials and Safety & Protection segments. DuPont stockholders will not be required to pay for shares of our common stock received in the distribution or to surrender or exchange shares of DuPont common stock in order to receive shares of our common stock or to take any other action in connection with the distribution.

Additionally, we will incur costs as a result of becoming an independent, publicly traded company for transition services and from establishing or expanding the corporate support for our business, including information technology, human resources, treasury, tax, risk management, accounting and financial reporting, investor relations, governance, legal, procurement and other services. We believe our cash flows from operations will be sufficient to fund these corporation expenses.

Overview

Chemours delivers customized solutions with a wide range of industrial and specialty chemical products for markets including plastics and coatings, refrigeration and air conditioning, general industrial, mining and oil refining. Principal products include titanium dioxide, refrigerants, industrial fluoropolymer resins, sodium

 

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cyanide, sulfuric acid and aniline. Chemours consists of three reportable segments including Titanium Technologies, Fluoroproducts and Chemical Solutions. See the section titled, “Business,” included in this information statement for a detailed description of Chemours’ business and segments.

Chemours is globally operated with manufacturing facilities, sales centers, administrative offices, and warehouses located throughout the world. Chemours’ operations are primarily located in the United States, Canada, Mexico, Brazil, the Netherlands, Belgium, China, Taiwan, Japan, Switzerland, Singapore, Hong Kong, India, the United Kingdom, France and Sweden. As of September 30, 2014, Chemours consisted of 40 production facilities globally: six dedicated to Titanium Technologies, 20 dedicated to Fluoroproducts, 12 dedicated to Chemical Solutions and two that supported multiple Chemours segments. At three of these sites, currently shared with other DuPont businesses, DuPont will continue its own manufacturing operations after separation, as well as contract manufacture for Chemours for the products currently produced by the Fluoroproducts segment at these sites.

Results

Nine Months Ended September 30, 2014

Income before income taxes increased to $430 million. Net sales of $4.9 billion decreased six percent due primarily to a portfolio change experienced by the Chemical Solutions segment and lower prices principally for titanium dioxide and refrigerants. The portfolio change involved a customer’s election to exercise a buy-out option of a supply contract and related aniline facility at the end of 2013. Decreased price of titanium dioxide was partially offset by increased volumes for Opteon® YF refrigerant.

Analysis of Operations

Nine Months Ended September 30, 2014 compared to Nine Months Ended September 30, 2013

 

     Nine Months Ended September 30,  
(Dollars in millions)        2014              2013      

NET SALES

   $ 4,883       $ 5,203   

Nine month period ended September 30, 2014 versus nine month period ended September 30, 2013: The table below shows a regional breakdown of combined net sales based on location of customers and related variance percentages for the nine months ended September 30, 2014 and 2013, respectively:

 

     Nine Months Ended
September 30,

2014
     Percent Change vs.
Nine Months Ended
September 30, 2013
    Percent Change Due to:  
(Dollars in millions)         Local Price     Currency     Volume     Portfolio  

Worldwide

   $ 4,883         (6 )%      (4 )%      —       2     (4 )% 

North America

     2,110         (12     (5     —          1        (8

Asia Pacific

     1,138         1        (3     (1     5        —     

EMEA1

     940         (1     (5     3        1        —     

Latin America2

     695         (6     (2     (2     (2     —     

 

1. Europe, Middle East and Africa (EMEA).
2. Latin America includes Mexico.

Sales decreased six percent, reflecting a global reduction of selling prices experienced across all three segments, Titanium Technologies, Fluoroproducts and Chemical Solutions. In addition, Chemical Solutions’ sales decreased due to a customer’s election to exercise a buy-out option of a supply contract and related aniline facility at the end of 2013. These volume and portfolio reductions were partially offset by increased volume in both the Titanium Technologies and Fluoroproducts segments.

 

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     Nine months ended September 30,  
(Dollars in millions)        2014             2013      

COST OF GOODS SOLD

   $ 3,824      $ 4,095   

As a percent of net sales

     78     79

Cost of goods sold (COGS) decreased seven percent to $3.8 billion primarily due to decreased sales. COGS as a percentage of net sales was 78 percent, consistent with the nine months ended September 30, 2013.

 

     Nine months ended September 30,  
(Dollars in millions)      2014         2013    

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

   $ 532      $ 585   

As a percent of net sales

     11     11

Selling, general and administrative expense decreased nine percent to $532 million, primarily due to lower pension costs. Chemours management expects that the allocated corporate and leveraged costs in Chemours’ Combined Financial Statements will approximate operating costs upon separation; however, these expenses may not be indicative of expenses that will be incurred by Chemours in future years (see Note 3 to the Interim Combined Financial Statements for additional information).

Additionally, selling, general and administrative expense for the nine months ended September 30, 2013 includes higher legal fees associated with titanium dioxide antitrust litigation (see Note 13 to the Interim Combined Financial Statements for additional information).

 

     Nine months ended September 30,  
(Dollars in millions)        2014             2013      

RESEARCH AND DEVELOPMENT EXPENSE

   $ 110      $ 123   

As a percent of net sales

     2     2

The $13 million decrease in research and development expense was mainly attributable to lower pension costs.

 

     Nine months ended September 30,  
(Dollars in millions)        2014             2013      

EMPLOYEE SEPARATION/ASSET RELATED CHARGES, NET

   $ 21      $ —     

As a percent of net sales

     —       —  

The employee separation/asset related charges incurred during the nine months ended September 30, 2014 consisted primarily of charges related to the 2014 restructuring program, including $16 million for employee separation costs and $3 million for asset shut-down costs. The actions associated with this charge and all related payments are expected to be substantially complete by December 31, 2015.

Additional details related to the 2014 restructuring program discussed above can be found in Note 5 to the Interim Combined Financial Statements.

 

     Nine months ended September 30,  
(Dollars in millions)        2014              2013      

EQUITY IN EARNINGS OF AFFILIATES

   $ 18       $ 17   

 

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Equity in earnings of affiliates increased $1 million due to an increase in net income recognized by Chemours’ joint ventures in China and Japan.

 

     Nine months ended September 30,  
(Dollars in millions)        2014              2013      

OTHER INCOME, NET

   $ 16       $ 12   

The $4 million increase in other income, net was largely attributable to an $11 million and $6 million increase from the gain on sales of assets and royalty income, respectively. These increases were partially offset by a $3 million increase in exchange losses, driven by the strengthening of the U.S. Dollar versus the Euro in 2014, and a reduction of $3 million for leasing, contract services and miscellaneous income. Furthermore, for the nine months ended September 30, 2013, Chemours recognized a $7 million gain on purchase of equity investment that did not occur in 2014.

 

     Nine months ended September 30,  
(Dollars in millions)        2014             2013      

PROVISION FOR INCOME TAXES

   $ 108      $ 116   

Effective income tax rate

     25     27

For the nine months ended September 30, 2014, Chemours recorded a tax provision on continuing operations of $108 million, reflecting a decrease from the nine months ended September 30, 2013 due primarily to a decrease in earnings. The decrease in the effective tax rate in 2014 compared to 2013 was primarily due to a one-time tax benefit recognized in 2014 relating to a tax accounting method change.

 

     Nine months ended September 30,  
(Dollars in millions)        2014              2013      

NET INCOME

   $ 322       $ 313   

Net income for the nine months ended September 30, 2014 was $322 million compared to $313 million for the nine months ended September 30, 2013. See the above discussion of individual line items for further detail.

Year Ended December 31, 2013

Income before income taxes decreased 61 percent to $576 million due to decreased sales and increased cost of goods sold. Net sales of $6.9 billion decreased seven percent driven by a 12 percent decrease related to lower selling prices, partially offset by a five percent increase in sales volume.

 

(Dollars in millions)    2013      2012      2011  

NET SALES

   $ 6,859       $ 7,365       $ 7,972   

2013 versus 2012 The table below shows a regional breakdown of 2013 combined net sales based on location of customers and percentage variances from 2012:

 

                  Percent Change Due to:  
(Dollars in millions)    2013 Net
Sales
     Percentage
Change vs.
2012
    Local
Price
    Currency
Effect
    Volume  

Worldwide

   $ 6,859         (7 )%      (12 )%      —       5

North America

     3,138         (4     (7     —          3   

Asia Pacific

     1,519         (8     (13     (2     7   

EMEA

     1,237         (6     (16     1        9   

Latin America

     965         (13     (15     —          2   

 

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Sales decreased seven percent, reflecting a global reduction of selling prices experienced in the Titanium Technologies and Fluoroproducts segments. Price reductions were partially offset by volume increases in both segments.

2012 versus 2011 The table below shows a regional breakdown of 2012 combined net sales based on location of customers and percentage variances from 2011:

 

                  Percent Change Due to:  
(Dollars in millions)    2012 Net
Sales
     Percentage
Change vs.
2011
    Local Price     Currency
Effect
    Volume  

Worldwide

   $ 7,365         (8 )%      5     (1 )%      (12 )% 

North America

     3,284         —          9        —          (9

Asia Pacific

     1,654         (16     (2     —          (14

EMEA

     1,318         (18     5        (5     (18

Latin America

     1,109         (1     7        (1     (7

Sales decreased eight percent due to lower sales volume primarily reflective of the decrease in customer demand experienced by the Titanium Technologies and Fluoroproducts segments in all regions. This decrease was partially offset by favorable pricing for titanium dioxide in the first half of 2012.

 

(Dollars in millions)    2013     2012     2011  

COST OF GOODS SOLD

   $ 5,395      $ 5,014      $ 5,375   

As a percent of net sales

     79     68     67

2013 versus 2012 COGS increased eight percent to $5.4 billion, related to an increase in sales volumes in the Titanium Technologies and Fluoroproducts segments. COGS as a percentage of net sales was 79 percent, an 11 percent increase from 2012, principally reflecting the impact of increased raw materials costs, primarily ore. Additionally, Chemours incurred a $72 million charge for titanium dioxide antitrust litigation in 2013 (see Note 17 to the Annual Combined Financial Statements for additional information).

2012 versus 2011 COGS decreased seven percent to $5 billion, driven mainly by a decrease in sales volume in the Titanium Technologies and Fluoroproducts segments. COGS as a percentage of net sales was 68 percent, consistent with 2011.

 

(Dollars in millions)    2013     2012     2011  

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

   $ 768      $ 747      $ 731   

As a percent of net sales

     11     10     9

2013 versus 2012 The 2013 increase of $21 million was largely due to increased direct use of functional support by Chemours.

2012 versus 2011 The 2012 increase of $16 million was primarily due to an increase in pension expense and functional costs, partially offset by a decrease in bonuses related to the short-term incentive plan.

 

(Dollars in millions)    2013     2012     2011  

RESEARCH AND DEVELOPMENT EXPENSE

   $ 164      $ 145      $ 135   

As a percent of net sales

     2     2     2

2013 versus 2012 Research and development expense increased $19 million in 2013 due to increased direct research and development spending by the Fluoroproducts and Chemical Solutions segments.

 

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2012 versus 2011 The $10 million increase was primarily attributable to increased direct research and development expenses across all segments.

 

(Dollars in millions)    2013      2012      2011  

EMPLOYEE SEPARATION/ASSET RELATED CHARGES, NET

   $ 2       $ 36       $ —     

The $36 million in charges recorded during 2012 in employee separation / asset related charges, net consisted of $3 million in charges related to the 2012 restructuring program, and $33 million in asset impairment charges to writedown the carrying value of an asset group to fair value within the Chemical Solutions segment.

Additional details related to the asset impairment discussed above can be found in Note 6 to the Annual Combined Financial Statements.

 

(Dollars in millions)    2013      2012      2011  

EQUITY IN EARNINGS OF AFFILIATES

   $ 22       $ 25       $ 44   

2013 versus 2012 Equity in earnings of affiliates decreased $3 million due to reductions in net income recognized by Chemours’ joint ventures in China and Japan.

2012 versus 2011 Equity in earnings of affiliates decreased $19 million due to reductions in net income recognized by Chemours’ joint ventures in China and Japan.

 

(Dollars in millions)    2013      2012      2011  

OTHER INCOME, NET

   $ 24       $ 37       $ 132   

2013 versus 2012 The $13 million decrease was largely attributable to $26 million higher pre-tax foreign exchange losses which was primarily driven by a strengthening of the U.S. Dollar versus the Venezuelan Bolivar and the Brazilian Real in 2013. This decrease was partially offset by a $7 million gain recognized related to the 2013 purchase of remaining interest on an equity investment and a $6 million increase in leasing, contract services and miscellaneous income.

2012 versus 2011 The $95 million decrease was largely attributable to a $5 million pre-tax exchange loss in 2012 which was primarily driven by a strengthening of the U.S. Dollar versus the Brazilian Real in 2012 and a weakening of the U.S. Dollar versus the Euro in 2011, as compared to a $68 million gain in 2011. Also contributing to the decrease was a $13 million decrease in royalty income as well as a $9 million gain on the sale of assets in 2011 that did not occur in 2012.

Additional information related to Chemours’ other income, net is included in Note 7 to the Annual Combined Financial Statements.

 

(Dollars in millions)    2013     2012     2011  

PROVISION FOR INCOME TAXES

   $ 152      $ 427      $ 474   

Effective income tax rate

     26     29     25

In 2013, Chemours recorded a tax provision on continuing operations of $152 million, reflecting a decrease from 2012 due to a significant decrease in earnings. The decrease in the 2013 effective tax rate compared to 2012 was primarily due to geographic mix of earnings.

In 2012, Chemours recorded a tax provision on continuing operations of $427 million, reflecting a decrease from 2011 due to a significant decrease in earnings. The increase in the 2012 effective tax rate compared to 2011 was primarily due to geographic mix of earnings, in addition to exchange (gains) losses.

 

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See Note 8 to the Annual Combined Financial Statements for additional details related to the provision for income taxes, as well as items that significantly impact Chemours’ effective income tax rate.

 

(Dollars in millions)    2013      2012      2011  

NET INCOME

   $ 424       $ 1,058       $ 1,433   

Net income for 2013 was $424 million compared to $1.1 billion in 2012 and $1.4 billion in 2011. See the above discussion of individual line items for further detail.

Segment Reviews

In general, the accounting policies of the segments are the same as those described in Note 3 of the Annual Combined Financial Statements. Exceptions are noted as follows: (1) Segment sales include transfers to another business segment, (2) Segment adjusted earnings before interest and taxes (adjusted EBIT) is defined as income (loss) before income taxes excluding non-operating pension and other postretirement employee benefit costs, exchange gains (losses) and corporate expenses, and (3) All references to prices are on a U.S. dollar (USD) basis, including the impact of currency.

A reconciliation of segment sales to combined net sales and segment adjusted EBIT to income before income taxes for 2013, 2012 and 2011 is included in Note 20 to the Annual Combined Financial Statements. Segment adjusted EBIT and segment adjusted EBIT margins include certain items that management believes are significant to understanding the segment results discussed below. See Note 20 to the Annual Combined Financial Statements and Note 15 to the Interim Combined Financial Statements for details related to these items.

Titanium Technologies

 

     Nine months ended September 30,     Year ended December 31,  
(Dollars in millions)        2014             2013         2013     2012     2011  

Segment sales

   $ 2,254      $ 2,293      $ 3,026      $ 3,295      $ 3,680   

Adjusted EBIT

   $ 494      $ 438      $ 605      $ 1,339      $ 1,509   

Adjusted EBIT margin

     22     19     20     41     41

 

Change in segment sales from prior period

   September 30,     December 31,  
     2014     2013     2012  

Price

     (4 )%      (21 )%      8

Volume

     2     13     (18 )% 

Portfolio / Other

     —       —       —  
  

 

 

   

 

 

   

 

 

 

Total change

     (2 )%      (8 )%      (10 )% 

Nine months ended 2014 versus 2013 Sales declined by two percent from the nine months ended September 30, 2013 to the nine months ended September 30, 2014 due to a reduction in price, which was partially offset by an increase in volume. Despite the stabilization of titanium dioxide market demand and improved sales volume, prices decreased in 2014 due to low global titanium dioxide industry capacity utilization and lower ore costs.

Adjusted EBIT and adjusted EBIT margin increased primarily due to lower legal expenses. 2013 adjusted EBIT includes a $72 million charge related to titanium dioxide antitrust litigation (see Note 13 to the Interim Combined Financial Statements for additional information).

2013 versus 2012 Sales declined in 2013 versus 2012 by eight percent, primarily due to a reduction in price which was partially offset by an increase in volume. Destocking and weak economic growth in the second half of

 

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2012 and reduced market demand resulted in lower producer utilization levels and downward pricing pressures in 2013. As the titanium dioxide market destocking moderated and stabilized in 2013, sales volumes improved in 2013. However, the slower than expected global economic growth in 2013 continued to minimize growth in demand and depress prices during the year.

2013 adjusted EBIT and adjusted EBIT margin decreased principally on lower selling prices. Volume gains were offset by higher raw material inventory costs, mainly ore costs. 2013 adjusted EBIT includes a $72 million charge related to titanium dioxide antitrust litigation (see Note 17 to the Annual Combined Financial Statements for additional information).

2012 versus 2011 Sales for 2012 experienced a 10 percent decrease as weak economic activity and customer destocking led to reduced demand, partially offset by an increase in selling prices as compared to 2011. Lower industry utilization from lower demand resulted in downward pricing pressures in the second half of 2012. The price decrease was more than offset by higher selling prices in the first half of 2012 resulting from demand exceeding supply, as new capacity was not introduced in the industry during the global economic recovery in the previous years.

2012 adjusted EBIT margin was consistent with 2011. However, adjusted EBIT decreased, primarily as a result of lower demand. Additionally, there was an increase in the cost of raw materials, mainly ore costs that led to decreased adjusted EBIT.

Fluoroproducts

 

     Nine months ended September 30,     Year ended December 31,  
(Dollars in millions)        2014             2013             2013             2012             2011      

Segment sales

   $ 1,752      $ 1,817      $ 2,379      $ 2,559      $ 2,834   

Adjusted EBIT

   $ 167      $ 225      $ 287      $ 444      $ 590   

Adjusted EBIT margin

     10     12     12     17     21

 

Change in segment sales from prior period

   September 30,     Year ended December 31,  
     2014     2013     2012  

Price

     (7 )%      (7 )%      (1 )% 

Volume

     3     —       (9 )% 

Portfolio / Other

     —       —       —  
  

 

 

   

 

 

   

 

 

 

Total change

     (4 )%      (7 )%      (10 )% 

Nine months ended 2014 versus 2013 Sales for the nine months ended September 30, 2014 decreased by four percent, compared to the same period in the prior year, primarily due to lower selling prices for refrigerants and industrial resins. Pricing decreases were partially offset by higher volumes.

Adjusted EBIT and adjusted EBIT margin decreased, primarily due to lower selling prices. 2014 adjusted EBIT included charges of $16 million relating to the 2014 restructuring plan. Margin impact from lower prices and restructuring charges was partially offset by lower business and overhead costs from productivity improvements.

2013 versus 2012 Sales for 2013 decreased seven percent from 2012, as a result of lower sales prices. Lower prices were experienced in all product markets in all regions, except for in the U.S., where prices increased slightly due to higher refrigerant selling prices in 2013. 2013 adjusted EBIT and adjusted EBIT margin decreased, primarily due to lower selling prices.

2012 versus 2011 Sales for 2012 decreased by 10 percent as compared to 2011, due to declines in both selling prices and volume experienced in all regions and markets. Prices declined in 2012 due to increased supply

 

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capacity in the industry as compared to 2011. Volume decreased most significantly in the Asia Pacific region in the finishes, melts processing resins and industrial resins product markets as the operations of various competitors recovered from significant operating issues in 2011. Additionally, volume was down significantly in the EMEA region, in the refrigerants and fire extinguishment product markets.

Adjusted EBIT and adjusted EBIT margin both decreased in 2012 as a result of the previously mentioned economic challenges driving down volumes and selling prices for most products.

Chemical Solutions

 

     Nine months ended September 30,     Year ended December 31,  
(Dollars in millions)        2014             2013         2013     2012     2011  

Segment sales

   $ 882      $ 1,098      $ 1,462      $ 1,515      $ 1,465   

Adjusted EBIT

   $ (6   $ 47      $ 43      $ 61      $ 52   

Adjusted EBIT margin

     (1 )%      4     3     4     4

 

Change in segment sales from prior period

   September 30,     Year ended December 31,  
     2014     2013     2012  

Price

     (3 )%      1     4

Volume

     —       (4 )%      (1 )% 

Portfolio / Other

     (17 )%      —       —  
  

 

 

   

 

 

   

 

 

 

Total change

     (20 )%      (3 )%      3

Nine months ended 2014 versus 2013 September 30, 2014 revenue decreased 20 percent, primarily due to the portfolio impact due to a customer’s election to exercise a buy-out option of a supply contract and related aniline facility at the end of 2013 (see further information in Note 9 to the Annual Combined Financial Statements). Sales decreased further from lower prices across all products.

Adjusted EBIT and adjusted EBIT margin decreased, primarily due to the portfolio impact and lower selling prices.

2013 versus 2012 Sales in 2013 reflected a three percent decrease from 2012, primarily resulting from lower sales volumes of aniline, cyanide and methylamines products. The lower volume was caused by extensive scheduled maintenance shut-downs at MDI (diphenylmethane diisocyanate) producers, lower production output of sodium cyanide and the lower demand of methylamines products in the Asia Pacific region. The overall reduction in sales volume was partially offset by the higher selling prices in aniline and cyanide products.

2013 adjusted EBIT and adjusted EBIT margin decreased primarily as a result of lower sales combined with lower plant utilization while 2012 adjusted EBIT included a $33 million asset impairment charge (see Note 6 to the Annual Combined Financial Statements for additional information).

2012 versus 2011 Sales increased by three percent in 2012, largely due to an increase in selling prices for aniline and cyanide products globally and higher sales volume for aniline products. This increase was partially offset by lower sales volume for methylamines, reactive metals and sulfur products in 2012. Increases in selling prices reflect the increased cost of raw materials, mainly benzene and ammonia. Lower volumes were influenced by lower demand for methylamines and reactive metal products as well as lower sales of sulfur products caused by the permanent closure of certain oil refineries in the northeastern U.S.

2012 adjusted EBIT increased as lower volumes were more than offset by higher selling prices, as well as higher plant utilization.

 

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Liquidity & Capital Resources

The primary source of liquidity for Chemours’ business is cash flow provided by operations, which has historically been transferred to DuPont to support its overall cash management strategy. Transfers of cash to and from DuPont’s cash management system have been reflected in DuPont Company Net Investment in the historical Combined Balance Sheets, Statements of Cash Flows and Statements of Changes in DuPont Company Net Investment. Chemours has not reported cash or cash equivalents for the periods presented in the Combined Balance Sheets. Management believes that future cash from operations will provide adequate resources to fund Chemours’ operating and financing needs for at least the next twelve months.

The following tables contain several key measures to gauge our financial condition and liquidity at September 30, 2014 and December 31, 2013 and 2012:

Cash Flows:

 

     Nine months ended September 30,      Year ended December 31,  
(Dollars in millions)        2014              2013          2013      2012      2011  

Cash provided by operating activities

   $ 13       $ 268       $ 798       $ 1,390       $ 1,496   

Cash provided by operating activities decreased $255 million for the nine months ended September 30, 2014 compared to the same period in 2013 primarily due to increased payments of trade accounts payable for raw materials. In addition, Chemours paid $72 million related to titanium dioxide antitrust litigation in 2014 (see Note 17 to the Annual Combined Financial Statements and Note 13 to the Interim Combined Financial Statements for additional information).

Cash provided by operating activities decreased $592 million in 2013 compared to 2012 due to lower cash from earnings.

Cash provided by operating activities decreased $106 million in 2012 compared to 2011 due to lower cash from earnings which was partially offset by a decreased use of cash related to changes in working capital.

 

     Nine months ended September 30,     Year ended December 31,  
(Dollars in millions)        2014             2013         2013     2012     2011  

Cash used for investing activities

   $ (377   $ (277   $ (424   $ (429   $ (345

Cash used for investing activities increased $100 million for the nine months ended September 30, 2014 compared to the same period in 2013 primarily due to the expansion of Titanium Technologies’ Altamira plant in Mexico.

Cash used for investing activities in 2013 decreased $5 million compared to 2012. In 2013, there was an $11 million increase in proceeds from sales of assets largely attributable to a customer’s election to exercise a buy-out option of a supply contract and related aniline facility (see further information in Note 9 to the Annual Combined Financial Statements). This increase in proceeds from sales of assets was partially offset by an increase in purchases of property, plant and equipment. The Titanium Technologies segment increased capital expenditures on the expansion of the Altamira plant in Mexico while the Fluoroproducts and Chemical Solutions segments decreased their capital expenditures in 2013.

Cash used for investing activities increased $84 million in 2012 compared to 2011. The increase was due mainly to the expansion of Titanium Technologies’ Altamira plant in Mexico.

 

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Purchases of property, plant and equipment totaled $438 million, $432 million, and $355 million in 2013, 2012 and 2011, respectively, and $404 million for the nine months ended September 30, 2014. Chemours management expects 2014 purchases of property, plant and equipment to be approximately $570 million.

 

     Nine months ended
September 30,
     Year ended December 31,  
(Dollars in millions)        2014              2013          2013     2012     2011  

Cash provided by (used for) financing activities

   $ 364       $ 9       $ (374   $ (961   $ (1,151

As DuPont manages Chemours’ cash and financing arrangements, all excess cash generated through earnings is remitted to DuPont and all sources of cash are funded by DuPont.

Cash provided by financing activities increased $355 million for the nine months ended September 30, 2014. Earnings decreased for the reasons discussed above, resulting in DuPont transferring cash to Chemours to fund operations.

Cash used for financing activities decreased $587 million in 2013 compared to 2012. Earnings decreased for the reasons discussed above, resulting in less cash transferred to DuPont.

Cash used for financing activities decreased $190 million in 2012 compared to 2011. Earnings decreased for the reasons discussed above, resulting in less cash transferred to DuPont.

 

Current Assets

   September 30,      December 31,  
     2014      2013      2012  

Accounts and note receivable — trade, net

   $ 1,030       $ 841       $ 806   

Inventories

     1,072         1,055         977   

Prepaid expenses and other

     44         40         40   

Deferred income taxes

     73         44         10   
  

 

 

    

 

 

    

 

 

 

Total Current Assets

   $ 2,219       $ 1,980       $ 1,833   

Accounts receivable, net as of September 30, 2014 increased $189 million compared to December 31, 2013 due to timing of collections and higher sales in September 2014 than December 2013 in the Titanium Technologies segment. Chemours’ inventories increased by $17 million, driven by increased inventory of $75 million in the Fluoroproducts segment and $11 million in the Chemical Solutions segment, which was partially offset by a $69 million reduction in inventory in the Titanium Technologies segment.

Accounts receivable, net increased $35 million as of December 31, 2013 compared to December 31, 2012. The change was primarily a result of higher net sales in Titanium Technologies in the fourth quarter of 2013 as compared to the same quarter of 2012. Inventories were $1.1 billion as of December 31, 2013 compared to $977 million as of December 31, 2012. This increase was primarily due to expected higher customer demand for titanium dioxide in the first quarter of 2014.

 

Property, Plant and Equipment

   September 30,      December 31,  
     2014      2013      2012  

Property, plant and equipment, net

   $ 3,163       $ 2,972       $ 2,793   

 

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Property, plant and equipment, net increased $191 million as of September 30, 2014 compared to December 31, 2013, and increased $179 million as of December 31, 2013 compared to December 31, 2012. The increases in property, plant and equipment, net in both periods were primarily due to expansion of Titanium Technologies Altamira plant in Mexico.

 

Current Liabilities

   September 30,      December 31,  
     2014      2013      2012  

Accounts payable

   $ 852       $ 1,057       $ 923   

Deferred income taxes

     8         9         11   

Other accrued liabilities

     321         405         299   
  

 

 

    

 

 

    

 

 

 

Total Current Liabilities

   $ 1,181       $ 1,471       $ 1,233   

Current liabilities decreased to $1.2 billion as of September 30, 2014, compared to $1.5 billion as of December 31, 2013, primarily as a result of decreased accounts payable due to the timing of Chemours’ payments to vendors in the third quarter of 2014 as compared to the fourth quarter of 2013.

Current liabilities as of December 31, 2013 increased to $1.5 billion compared to $1.2 billion as of December 31, 2012. The increase reflects higher accounts payable primarily due to higher purchases of raw material. Additionally, other accrued liabilities increased as a result of the $72 million titanium dioxide litigation accrual (see Note 17 to the Annual Combined Financial Statements for additional information).

Accounting Estimates

Chemours’ significant accounting policies are more fully described in Note 3 to the Annual Combined Financial Statements. Management believes that the application of these policies on a consistent basis enables Chemours to provide the users of the financial statements with useful and reliable information about Chemours’ operating results and financial condition.

The preparation of the Combined Financial Statements in conformity with generally accepted accounting principles in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Combined Financial Statements and the reported amounts of revenues and expenses, including allocations of costs as discussed above, during the reporting period. Management’s estimates are based on historical experience, facts and circumstances available at the time and various other assumptions that are believed to be reasonable. Chemours reviews these matters and reflects changes in estimates as appropriate. Management believes that the following represents some of the more critical judgment areas in the application of Chemours’ accounting policies which could have a material effect on Chemours’ financial position, liquidity or results of operations.

New Accounting Guidance

See Note 3 to the Annual Combined Financial Statements and Note 2 to the Interim Combined Financial Statements for a discussion of recent accounting pronouncements.

Goodwill

The excess of the purchase price over the estimated fair value of the net assets acquired, including identified intangibles, in a business combination is recorded as goodwill. Goodwill is tested for impairment at least annually on October 1; however, impairment tests are performed more frequently when events or changes in circumstances indicate that the asset may be impaired. Impairment exists when carrying value exceeds fair value.

Evaluating goodwill for impairment is a two-step process. In the first step, Chemours compares the carrying value of net assets to the fair value of the related operations. Chemours’ methodology for estimating the fair

 

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value of its reporting units is using the income approach based on the present value of future cash flows. The factors considered in determining the cash flows include: 1) macroeconomic conditions; 2) industry and market considerations; 3) costs in raw materials, labor or other costs having a negative effect on earnings and cash flows; 4) overall financial performance; and 5) other relevant entity-specific events. If the fair value is determined to be less than the carrying value, a second step is performed to compute the amount of the impairment. There were no impairments of goodwill in 2013, 2012 or 2011, and the results of the most recent impairment test indicated that the fair value of each reporting unit substantially exceeded its carrying value.

Valuation of Assets

The assets and liabilities of acquired businesses are measured at their estimated fair values at the dates of acquisitions. The determination and allocation of fair value to the assets acquired and liabilities assumed is based on various assumptions and valuation methodologies requiring considerable management judgment, including estimates based on historical information, current market data and future expectations. The principal assumptions utilized in Chemours’ valuation methodologies include revenue growth rates, operating margin estimates, royalty rates and discount rates. Although the estimates were deemed reasonable by management based on information available at the dates of acquisition, those estimates are inherently uncertain.

Assessment of the potential impairment of property, plant and equipment, other intangible assets and investments in affiliates is an integral part of Chemours’ normal ongoing review of operations. Chemours evaluates the carrying value of long-lived assets to be held and used when events or changes in circumstances indicate the carrying value may not be recoverable. The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from the asset are separately identifiable and are less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. The fair value methodology used is an estimate of fair market value which is made based on prices of similar assets or other valuation methodologies including present value techniques. Long-lived assets to be disposed of other than by sale are classified as held for use until their disposal. Long-lived assets to be disposed of by sale are classified as held for sale and are reported at the lower of carrying amount or fair market value less cost to sell. Depreciation is discontinued for long-lived assets classified as held for sale.

Testing for potential impairment of these assets is significantly dependent on numerous assumptions and reflects management’s best estimates at a particular point in time. The dynamic economic environments in which Chemours’ segments operate, and key economic and business assumptions with respect to projected selling prices, market growth and inflation rates, can significantly affect the outcome of impairment tests. Estimates based on these assumptions may differ significantly from actual results. Changes in factors and assumptions used in assessing potential impairments can have a significant impact on the existence and magnitude of impairments, as well as the time in which such impairments are recognized. In addition, Chemours continually reviews its diverse portfolio of assets to ensure they are achieving their greatest potential and are aligned with Chemours’ growth strategy. Strategic decisions involving a particular group of assets may trigger an assessment of the recoverability of the related assets. Such an assessment could result in impairment losses. During 2012, Chemours recorded an asset impairment charge of $33 million to write-down the carrying value of an asset group to fair value. See Note 6 to the Annual Combined Financial Statements for additional details related to this charge. There was no asset impairment recognized in 2013.

Environmental Liabilities and Expenditures

Environmental liabilities and expenditures included in the Combined Financial Statements represent claims for matters for which Chemours will indemnify DuPont. Accruals for environmental matters are recorded in cost of goods sold when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Accrued liabilities do not include claims against third parties and are not discounted.

Costs related to environmental remediation are charged to expense in the period incurred. Other environmental costs are also charged to expense in the period incurred, unless they increase the value of the property or reduce or prevent contamination from future operations, in which case, they are capitalized and amortized.

 

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Litigation

Litigation liabilities and expenditures included in the Combined Financial Statements represent litigation matters for which Chemours will indemnify DuPont. Accruals for litigation matters are made when the information available indicates that it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Legal costs such as outside counsel fees and expenses are charged to expense in the period services are received.

Income Taxes

Income taxes as presented herein attribute current and deferred income taxes of DuPont to Chemours’ stand-alone financial statements in a manner that is systematic, rational, and consistent with the asset and liability method prescribed by Accounting Standards Codification 740, Income Taxes (ASC 740), issued by the Financial Accounting Standards Board (FASB). Accordingly, Chemours’ income tax provision was prepared following the separate return method. The separate return method applies ASC 740 to the stand-alone financial statements of each member of the consolidated group as if the group member were a separate taxpayer and a stand-alone enterprise. As a result, actual tax transactions included in the consolidated financial statements of DuPont may not be included in the separate Combined Financial Statements of Chemours. Similarly, the tax treatment of certain items reflected in the separate Combined Financial Statements of Chemours may not be reflected in the consolidated financial statements and tax returns of DuPont; therefore, such items as net operating losses, credit carryforwards, and valuation allowances may exist in the stand-alone financial statements that may or may not exist in DuPont’s consolidated financial statements.

The breadth of Chemours’ operations and the global complexity of tax regulations require assessments of uncertainties and judgments in estimating taxes Chemours will ultimately pay. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions, outcomes of tax litigation and resolution of disputes arising from federal, state and international tax audits in the normal course of business.

The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax basis of Chemours’ assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. It is Chemours’ policy to include accrued interest related to unrecognized tax benefits in miscellaneous income and expenses, net, under other income, net. It is Chemours’ policy for income tax related penalties to be included in the provision for income taxes.

In general, the taxable income (loss) of various Chemours entities was included in DuPont’s consolidated tax returns, where applicable in jurisdictions around the world. As such, separate income tax returns were not prepared for many Chemours’ entities. Consequently, income taxes currently payable are deemed to have been remitted to DuPont, in cash, in the period the liability arose and income taxes currently receivable are deemed to have been received from DuPont in the period that a refund could have been recognized by Chemours had Chemours been a separate taxpayer.

As stated in Note 2 to the Annual Combined Financial Statements, aside from a Japanese entity (that is a dual-resident for U.S. income tax purposes), there is no direct ownership relationship among all the other various legal entities comprising Chemours; consequently, no provision has been made for income taxes on unremitted earnings of subsidiaries and affiliates.

 

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Off-Balance Sheet Arrangements

Certain Guarantee Contracts

Information with respect to Chemours’ guarantees is included in Note 17 to the Annual Combined Financial Statements and Note 13 to the Interim Combined Financial Statements. Historically, Chemours has not made significant payments to satisfy guarantee obligations; however, Chemours believes it has the financial resources to satisfy these guarantees.

Contractual Obligations

Information related to Chemours’ significant contractual obligations is summarized in the following table:

 

     Total at
December 31,
2013
     Payments Due In  
(Dollars in millions)       2014      2015 — 2016      2017 — 2018      2019 and
Beyond
 

Operating leases

   $ 247       $ 55       $ 84       $ 51       $ 57   

Purchase obligations1

              

Raw material obligations

     397         348         49         —           —     

Utility obligations

     149         18         29         28         74   

Other

     22         8         10         4         —     

Purchase obligations

     568         374         88         32         74   

Other liabilities

              

Workers’ compensation

     46         7         20         9         10   

Asset retirement obligations

     42         2         8         2         30   

Environmental remediation

     274         47         111         43         73   

Legal settlements

     89         76         5         4         4   

Other2

     18         6         3         1         8   

Other liabilities

     469         138         147         59         125   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total contractual obligations3

   $ 1,284       $ 567       $ 319       $ 142       $ 256   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

1  Represents enforceable and legally binding agreements to purchase goods or services that specify fixed or minimum quantities; fixed, minimum or variable price provisions; and the approximate timing of the agreement.
2  Primarily represents employee-related benefits other than pensions and other long-term employee benefits included in the Combined Balance Sheets.
3  Due to uncertainty regarding the completion of tax audits and possible outcomes, the estimate of obligations related to unrecognized tax benefits cannot be made. See Note 8 to the Annual Combined Financial Statements for additional information.

Raw material purchase obligations at September 30, 2014 increased $0.9 billion versus December 31, 2013 primarily attributable to the commencement of a 20 year supply agreement.

Chemours expects to meet its contractual obligations through its normal sources of liquidity and believes it has the financial resources to satisfy these contractual obligations.

Long-term Employee Benefits

DuPont offers various benefits to Chemours’ employees and retirees. DuPont maintains retirement-related programs in many countries that have a long-term impact on Chemours’ earnings and cash flows. DuPont offers plans that are shared amongst its businesses, including Chemours. In these cases, the participation of employees in these plans is reflected in these financial statements as though Chemours participates in a multiemployer plan with DuPont. A proportionate share of the cost is reflected in these Combined Financial Statements. Assets and

 

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liabilities are retained by DuPont. Further information on DuPont’s plans are included in DuPont’s annual report. As of the separation date, Chemours expects to record the net periodic benefit obligations for any plans that are transferred from DuPont. See “Unaudited Pro Forma Combined Financial Statements” for additional information.

These plans are typically defined benefit pension plans, as well as medical, dental and life insurance benefits for pensioners and survivors and disability benefits for employees (other long-term employee benefits). Approximately 79 percent of Chemours’ worldwide allocation of benefit costs for pensions and essentially all of Chemours’ worldwide allocated costs for other long-term employee benefit obligations are attributable to the U.S. benefit plans. Pension coverage for employees of Chemours’ non-U.S. combined subsidiaries is provided, to the extent deemed appropriate, through separate plans. DuPont regularly explores alternative solutions to meet its global pension obligations in the most cost-effective manner possible as demographics, life expectancy and country-specific pension funding rules change. Where permitted by applicable law, DuPont reserves the right to change, modify or discontinue its plans that provide pension, medical, dental, life insurance and disability benefits.

The majority of employees hired in the U.S. on or after January 1, 2007 are not eligible to participate in DuPont’s pension and post-retirement medical, dental and life insurance plans, but receive benefits in its defined contribution plans.

In January 2012, DuPont contributed approximately $110 million to the principal U.S. pension plan representing an allocation of the contribution in respect of Chemours’ employees and retirees and no such contributions were made in 2011 or 2013. No such contributions are expected to be made to the principal U.S. pension plan in 2014. DuPont expects to make contributions to its principal U.S. pension plan beyond 2014; however, the amount of any contributions is heavily dependent on the future economic environment and investment returns on pension trust assets.

Funding for each pension plan is governed by the rules of the sovereign country in which it operates. Thus, there is not necessarily a direct correlation between pension funding and pension expense. In general, however, improvements in a plan’s funded status tends to moderate subsequent funding needs. DuPont contributed, in respect of Chemours’ employees and retirees, $34 million, $34 million and $28 million to its pension plans other than the principal U.S. pension plan in 2013, 2012 and 2011, respectively, and anticipates that it will make approximately $37 million in contributions in 2014 to pension plans other than the principal U.S. pension plan.

DuPont’s other long-term employee benefits are unfunded. DuPont contributed, in respect of Chemours’ employees and retirees, pre-tax cash requirements to cover actual net claims costs and related administrative expenses for $58 million, $66 million and $80 million in 2013, 2012 and 2011, respectively. This amount is expected to be about $63 million in 2014. Changes in cash requirements reflect the net impact of higher per capita health care costs, demographic changes, plan amendments and changes in participant premiums, co-pays and deductibles.

Chemours’ income can be significantly affected by allocated costs for pension and defined contribution benefits as well as other long-term employee benefits provided by DuPont. The following table summarizes the extent to which Chemours’ income over each of the last three years was affected by allocated pre-tax charges related to long-term employee benefits:

 

(Dollars in millions)    2013      2012      2011  

Long-term employee benefit plan charges1

   $ 164       $ 169       $ 151   

 

1  The figures in this table represent the allocation of costs to Chemours, which were allocated based on active employee headcount. These figures do not represent cash payments to DuPont or DuPont’s plans.

See DuPont’s 2013 10-K for additional information on the financial status of DuPont’s significant plans.

 

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Chemours will not continue the U.S. defined benefit plans post separation.

Environmental Matters

Environmental Expenses

Environmental expenses charged to current operations include environmental operating costs and the increase in the remediation accrual, if any, during the period reported. As a result of its operations, Chemours incurs costs for pollution abatement activities including waste collection and disposal, installation and maintenance of air pollution controls and wastewater treatment, emissions testing and monitoring, and obtaining permits. Chemours also incurs costs for environmental related research and development activities including environmental field and treatment studies as well as toxicity and degradation testing to evaluate the environmental impact of products and raw materials. Management expects that such expenses in 2014 and 2015 will be comparable to 2013 and, therefore, does not believe that year over year changes, if any, in environmental expenses charged to current operations will have a material impact on Chemours’ financial position, liquidity or results of operations.

Remediation Accrual

Changes in the remediation accrual balance are summarized below.

Annual expenditures in the near future are not expected to vary significantly from the range of such expenditures experienced in the past few years. Longer term, expenditures are subject to considerable uncertainty and may fluctuate significantly.

 

(Dollars in millions)       

Balance at December 31, 2011

   $ 269   

Remediation payments

     (58

Increase in remediation accrual

     59   
  

 

 

 

Balance at December 31, 2012

   $ 270   

Remediation payments

     (36

Increase in remediation accrual

     40   
  

 

 

 

Balance at December 31, 2013

   $ 274   

Remediation payments

     (27

Increase in remediation accrual

     51   
  

 

 

 

Balance at September 30, 2014

   $ 298   
  

 

 

 

Chemours is also subject to contingencies pursuant to environmental laws and regulations that in the future may require further action to correct the effects on the environment of prior disposal practices or releases of chemical or petroleum substances by Chemours or other parties. Chemours accrues for environmental remediation activities consistent with the policy as described in Note 3 of the Annual Combined Financial Statements. Much of this liability results from the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, often referred to as Superfund), the Resource Conservation and Recovery Act (RCRA) and similar state and global laws. These laws require certain investigative, remediation and restoration activities at sites where Chemours conducts or once conducted operations or at sites where Chemours-generated waste was disposed. The accrual also includes estimated costs related to a number of sites identified for which it is probable that environmental remediation will be required, but which are not currently the subject of enforcement activities.

As of September 30, 2014 and December 31, 2013, Chemours, through DuPont, has been notified of potential liability under the CERCLA or similar state laws at about 190 sites around the U.S., including approximately 20 sites for which Chemours does not believe it has liability based on current information. Active remediation is under way at approximately 65 of these sites. In addition, at September 30, 2014 and December 31, 2013,

 

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liability at approximately 60 sites, has been resolved either by completing remedial actions with other Potentially Responsible Parties (PRPs) or participating in “de minimis buyouts” with other PRPs whose waste, like Chemours’, represented only a small fraction of the total waste present at a site.

At September 30, 2014 and December 31, 2013, the Combined Balance Sheet included a liability of $298 million and $274 million, respectively, relating to these matters which, in management’s opinion, is appropriate based on existing facts and circumstances. The average time-frame over which the accrued or presently unrecognized amounts may be paid, based on past history, is estimated to be 15 to 20 years. Remediation activities vary substantially in duration and cost from site to site. These activities, and their associated costs, depend on the mix of unique site characteristics, evolving remediation technologies, diverse regulatory agencies and enforcement policies, as well as the presence or absence of other potentially responsible parties. In addition, Chemours, through DuPont, has limited, readily available information for certain sites or is in the early stages of discussions with regulators. For these sites in particular there may be considerable variability between the remediation activities that are currently being undertaken or planned, as reflected in the liability recorded at September 30, 2014, and the ultimate actions that could be required.

Hence, considerable uncertainty exists with respect to these costs and, under adverse changes in circumstances, management estimates that potential liability may range up to 3.5 times the amount accrued at September 30, 2014 and December 31, 2013.

Pompton Lakes

The environmental remediation accrual at September 30, 2014 and December 31, 2013 includes $87 million and $78 million, respectively, related to activities at Chemours’ site in Pompton Lakes, New Jersey. Management estimates that potential liability for remediation activities at this site could range up to $116 million. During the twentieth century, DuPont manufactured blasting caps, fuses and related materials at Pompton Lakes. Operating activities at the site were ceased in the mid 1990’s. Primary contaminants in the soil and sediments are lead and mercury. Ground water contaminants include volatile organic compounds. Under the authority of the EPA and the New Jersey Department of Environmental Protection, remedial actions at the site are focused on investigating and cleaning up the area. Ground water monitoring at the site is ongoing and Chemours, through DuPont, has installed and continues to install vapor mitigation systems at residences within the ground water plume. In addition, Chemours, through DuPont, is further assessing ground water plume/vapor intrusion delineation. In November 2014, the EPA announced a proposed remediation plan that would require Chemours to dredge mercury contamination from a 36 acre area of the lake and remove sediment from two other areas of the lake near the shoreline. The plan is subject to notice and comment. Chemours expects to spend about $60 million over the next two to three years, which is included in the remediation accrual at September 30, 2014, in connection with remediation activities at Pompton Lakes, including activities related to the EPA’s proposed plan. Based on existing facts and circumstances, management does not believe that any loss, in excess of amounts accrued, related to remediation activities at any individual site, other than disclosed, will have a material impact on the financial position, liquidity or results of operations of Chemours.

Environmental Capital Expenditures

As of September 30, 2014, Chemours spent approximately $38 million on environmental capital projects either required by law or necessary to meet Chemours’ internal environmental goals. Chemours currently estimates expenditures for environmental-related capital projects to be approximately $43 million in 2015. In the U.S., additional capital expenditures are expected to be required over the next decade for treatment, storage and disposal facilities for solid and hazardous waste and for compliance with the Clean Air Act (CAA). Until all CAA regulatory requirements are established and known, considerable uncertainty will remain regarding estimates for future capital expenditures. However, management does not believe that the costs to comply with these requirements will have a material impact on the financial position or liquidity of Chemours.

 

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Derivatives and Other Hedging Instruments

Fluctuations in the value of the U.S. dollar compared to foreign currencies may impact Chemours’ earnings. Chemours participates in DuPont’s foreign currency hedging program to reduce earnings volatility associated with remeasurement of foreign currency denominated net monetary assets.

DuPont formally documents the hedge relationships, including identification of the hedging instruments and the hedged items, the risk management objectives and strategies for undertaking the hedge transactions, and the methodologies used to assess effectiveness and measure ineffectiveness. Realized gains and losses on derivative instruments of DuPont are allocated by DuPont to Chemours based on projected exposure. Chemours recognizes its allocable share of the gains and losses on DuPont’s derivative financial instruments in earnings when the forecasted purchases occur for natural gas hedges and when the forecasted sales occur for foreign currency hedges.

Chemours does not hold or issue financial instruments for speculative or trading purposes. Chemours will however evaluate and possibly enter into forward exchange contracts and other financial instruments to help mitigate the adverse impact of currency rate fluctuations on its earnings.

Concentration of Credit Risk

Chemours’ sales are not materially dependent on any single customer. As of December 31, 2013, no one individual customer balance represented more than five percent of Chemours’ total outstanding receivables balance. Credit risk associated with Chemours’ receivables balance is representative of the geographic, industry and customer diversity associated with Chemours’ global businesses.

Chemours also maintains strong credit controls in evaluating and granting customer credit. As a result, it may require that customers provide some type of financial guarantee in certain circumstances. Length of terms for customer credit varies by industry and region.

Commodities Risk

A portion of our products and raw materials are commodities whose prices fluctuate as market supply and demand fundamentals change. Accordingly, product margins and the level of our profitability tend to fluctuate with changes in the business cycle. The Company tries to protect against such instability through various business strategies. These include provisions in sales contracts allowing us to pass on higher raw material costs through timely price increases and formula price contracts to transfer or share commodity price risk.

 

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BUSINESS

Chemours is a leading global provider of performance chemicals through three reporting segments: Titanium Technologies, Fluoroproducts and Chemical Solutions. Our performance chemicals are key inputs into products and processes in a variety of industries. Our Titanium Technologies segment is the leading global producer of TiO2, a premium white pigment used to deliver opacity. Our Fluoroproducts segment is a leading global provider of fluoroproducts, such as refrigerants and industrial fluoropolymer resins. Our Chemical Solutions segment is a leading North American provider of industrial and specialty chemicals used in gold production, oil refining, agriculture, industrial polymers and other industries. Our position with each of these businesses reflects the strong value proposition we provide to our customers based on our long history of innovation and our reputation within the chemical industry for safety, quality and reliability.

We operate 37 production facilities located in 12 countries and serve several thousand customers located in more than 130 countries. The following chart illustrates the global reach of our business:

 

LOGO

Chemours was formed in 2014 as part of a reorganization of the businesses that comprised the Performance Chemicals business of DuPont. In October 2013, DuPont announced its intention to separate the Performance Chemicals segment through a separation by way of a dividend to DuPont shareholders of 100 percent of the shares of common stock of Chemours, which will become an independent, publicly traded company. The distribution is intended to be U.S. tax-free to Chemours, DuPont and their U.S. stockholders. Completion of the transaction is subject to certain conditions, which are set forth in the section entitled “The Distribution — Conditions to the Distribution.”

Chemours is committed to creating value for our customers through the reliable delivery of high quality products and services which enable lifestyle improvements around the globe. In short, we help create a colorful, capable and cleaner world through the power of chemistry. We intend to grow our value to customers and shareholders through (i) operational excellence and asset efficiency, which includes our commitment to safety and environmental stewardship, (ii) strong customer focus to produce innovative, high-performance products, (iii) focus on cash flow generation and return on invested capital through optimization of our cost structure, improvement in working capital and supply chain efficiencies, (iv) organic growth based on leveraging our leadership, (v) expansion in emerging markets and (iv) creation of an organization that is committed to our corporate values of safety, customer appreciation, simplicity, collective entrepreneurship and integrity.

 

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Competitive Strengths

Our competitive strengths include the following:

Leading Global Market Positions

We are the largest global producer of TiO2, with annual TiO2 capacity of approximately 1.2 million metric tons. We are in the process of expanding capacity at our Altamira, Mexico production facility by 200,000 metric tons. Production at the expansion is scheduled to start up in 2016. Each of our TiO2 production facilities ranks among those with the largest capacity globally, and our production facilities at New Johnsonville, Tennessee and DeLisle, Mississippi are the two largest capacity TiO2 production facilities in the world. We believe that our world-scale assets, consistent quality and delivery reliability differentiate us from our competitors in the TiO2 market.

We are the market leader in fluoroproducts, with leading positions in fluorinated refrigerants, and industrial fluoropolymer resins and downstream products. We have a leading position in HFC refrigerants and are at the forefront of developing high-performance sustainable technologies such as our low GWP HFO refrigerants and foam expansion agents. We are also the market leader in industrial fluoropolymer resins and downstream products and coatings, marketed under the well-known Teflon® brand name. Teflon® industrial resins are used in high-performance wire and cable and multiple components in high-tech processing equipment.

We maintain leading market positions in key businesses in our Chemical Solutions segment. We are the largest producer of sodium cyanide, which is used primarily in gold production, in the Americas. In North America, we maintain market leading positions in sulfuric acid, which is used primarily in oil refining; aniline, which is primarily used to make polyurethane, and glycolic acid, which is primarily used in personal care products. We also have a strong market position in disinfectants used for water sanitization, animal health and bio-security.

Our market-leading positions are due to the scale and scope of our operations, our outstanding process technology, our differentiated products, our competitive pricing and efficient manufacturing base and long-standing partnerships with our customers.

Industry-leading Cost Structure

We produce our products in cost-efficient manufacturing facilities that utilize proprietary process technologies to help drive our industry-leading cost structure. We continue to focus on increasing manufacturing efficiencies and mitigating cost inflation through process improvements, selected capital investments and adoption of best practices.

Our Titanium Technologies segment, in particular, has high asset productivity. Our proprietary TiO2 process technology allows us to optimize the use of a variety of titanium-bearing ore types, providing us with a cost advantage. Our world-scale TiO2 production facilities provide significant economies of scale. We operate large individual production lines at high utilization rates. The scale of our production facilities combined with our process technology capabilities, has allowed us to achieve the lowest manufacturing costs per unit in the industry over a sustained period of time. Our new Altamira, Mexico TiO2 production line is expected to be one of the lowest cost production lines in the world. In addition, we continually strive to improve our productivity and optimize our capacity by applying our engineering and manufacturing technology expertise to our production facilities.

Our leading fluoroproducts capacity, innovative production processes, effective supply chain and sourcing strategies make us highly cost competitive also in the fluoroproducts market. Our use of local contract manufacturing and joint venture partners in selected countries as a source of regional access and asset-light manufacturing (where possible) further enhances the overall cost position of our Fluoroproducts segment.

 

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We believe that we have competitive cost positions within our Chemical Solutions segment as a result of proprietary process technologies, manufacturing scale and efficient supply chain processes. Our Chemical Solutions segment is also expected to benefit from its exploitation of low cost energy and hydrocarbon raw material inputs in North America, where nearly all of our Chemical Solutions production facilities are located.

Leading Technology and Intellectual Property

As part of our DuPont heritage, our businesses have a long history of delivering innovative and high-quality products. We expect sustained technology leadership to be a key differentiator for Chemours, as the majority of our products are critical inputs that significantly impact the functionality, performance and quality of our customers’ products. Our product offerings are enhanced by application technology scientists and laboratories across the globe, whose goal it is to deliver formulation improvements to help our customers achieve lower costs, better performance and higher overall value-in-use from our products compared to those of our competitors.

In our Titanium Technologies segment, we commercialized the chloride process for TiO2 production in 1953, providing products with better opacity and superior whiteness due to lower impurities, and generating lower waste and byproducts than the traditional sulfate production technology. Currently, we are one of the limited number of TiO2 producers with rights to chloride process for production of TiO2. We believe that our proprietary chloride technology enables us to operate plants at a much higher capacity than other chloride technology based TiO2 producers, uniquely utilizing a broad spectrum of titanium bearing ore feedstocks and achieving the highest unit margins in our industry. Our R&D and technology efforts focus on improving production processes, developing and yielding TiO2 grades that help customers achieve optimal performance. In our Fluoroproducts segment, we pioneered fluorine chemistry and invented PTFE, as well as developed the first generation of refrigeration agents in the first half of the 20th century. Our continuing innovation focus places us at the forefront of industry and regulatory changes with a focus on sustainable solutions. In fluoroproducts, we led the industry in the Montreal-Protocol (1987) driven transition from CFCs to the lesser ozone depleting HCFCs, and non-ozone depleting HFCs. In 1988 we committed to cease production of CFCs and started manufacturing non-ozone depleting HFCs in the early 1990’s. Driven by new and emerging environmental legislations and standards currently being implemented across the U.S., Europe and Japan, we are currently driving the development and commercialization of our next generation Opteon® product line, innovative low GWP fluorochemicals for refrigeration and other applications. This new patented technology has zero ozone depletion potential and very low GWP and offers similar functionality to current HFC products. Like Titanium Technologies and Fluoroproducts, our Chemical Solutions segment has strong technical capabilities and a reputation for its ability to manage hazardous materials. This ability is a key competitive advantage for Chemical Solutions, as several of its products’ end-users demand the highest level of excellence in the safe manufacturing, handling and shipping of the materials.

Our technological advantage is supported by our intellectual property portfolio of trade secrets, patents and protected innovations, covering process technologies, product formulations and various end-use applications. We maintain a world-renowned trademark portfolio, including the widely recognized brands Ti-Pure® and Vantage® for titanium dioxide products, Suva®, ISCEON®, Freon®, Opteon®, Teflon®, Tefzel®, Viton®, Krytox®, Formacel®, Dymel®, FM 200®, Nafion®, Capstone® for fluoroproducts, and Virkon® and Oxone® for Chemical Solutions.

Positioned to Capitalize on Economic Growth

Demand for TiO2 comes from the coatings, paper and plastics industries and is highly correlated to growth in the global residential housing, commercial construction and packaging markets. Over the long-term, global TiO2 demand has grown in line with GDP. Growth in emerging markets, including China, however, may be greater than GDP-level growth due in part to the rising middle class in such markets, which has become a key driver of demand for end products that use our TiO2.

 

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Our Fluoroproducts segment, particularly through its low GWP and non-ozone depleting products, is expected to benefit from regulatory changes requiring phase-out and phase-downs of less sustainable incumbent products. In addition, our customers continually require innovative next generation advanced materials, particularly industrial fluoropolymer resins, driving new product development and growth. We believe the fluoroproducts demand growth in developed markets is in line with global GDP, whereas demand growth in emerging markets is higher than GDP. Growth is also expected to be driven by country-specific legislation phasing-down the current HFC refrigerants for which our new HFO-based products and blends are functional substitutes with a low environmental footprint.

Our Chemical Solutions segment serves customers in a diverse range of end markets that we believe generally grow in line with global GDP.

Long Standing Customer Relationships

We serve more than 5,000 customers across a wide range of end markets in more than 130 countries. Many of our commercial and industrial relationships have been in place for decades and are based on our proven value proposition of safely and reliably supplying our customers with the materials needed for their operations. Our customers are comprised of a diverse group of companies, including many industry leaders. Knowledge of our customers’ business needs is at the core of our innovative processes and forms the basis of our product development initiatives. We work closely with our customers to optimize their formulations and products. We also provide ongoing technical support services to these customers, which helps them to maximize the effectiveness of our advanced performance products.

Strong Management Team with Deep Industry Experience

Chemours has a strong executive management team that combines in-depth industry experience and demonstrated leadership. Mark Vergnano, our Chief Executive Officer, previously served as Executive Vice President of DuPont since 2009. His prior experience includes 35 years in a variety of general management, manufacturing and technical leadership positions, including vice president and general manager for DuPont Nonwovens, DuPont Building Innovations and group vice president of DuPont Safety & Protection. Mark Newman, our Senior Vice President and Chief Financial Officer, previously served as senior vice president and chief financial officer of SunCoke Energy Inc. Prior to his time at SunCoke, Mr. Newman served in a number of senior operating and finance leadership roles in the U.S. and China, primarily with the General Motors Corporation where he began his career in 1986. Chemours’ segment presidents are BC Chong, Thierry Vanlancker and Chris Siemer, each of whom has been in chemical industry leadership positions for more than twenty years. Mr. Chong has served as president of DuPont’s Titanium Technologies business since 2011. Previously, he held leadership positions in manufacturing operations, new business development, strategic planning and sales and marketing. Mr. Vanlancker was named president of DuPont’s Fluoroproducts and Chemical Solutions business in 2012. He brings over a decade of experience in managing fluoro-based businesses and has held leadership positions in general management and sales and marketing. Mr. Siemer joined DuPont in 2010 and has managed global industrial and specialty chemical business portfolios for more than twenty years.

In addition to our strong executive management team, we have an experienced group of employees who work to maintain our leading market positions with their commitment to safe and efficient production, technology leadership, expansion of product offerings and customer relationships.

Strong Cash Flow Generation

Chemours has generated strong operating cash flow through various industry and economic cycles evidencing the operating strength of our businesses. For each of the past five fiscal years, we have generated cash flows from operating activities in excess of $[] million, with such cash flows averaging $[] billion per year.

 

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Our cash flow has been more than sufficient to satisfy our capital expenditure requirements, which on average equaled $[] million per year during the past five years, including a significant increase in each of the past three fiscal years due to expenditures relating to the expansion of our TiO2 production facility at Altamira, Mexico. Consequently, for each of the past five fiscal years, we have generated free cash flow (defined as cash flows from operating activities less capital expenditures) of at least $[] million, which averaged $[] billion per year. We expect our capital expenditures to be reduced in 2016 and in the near term thereafter due to the completion of the Altamira expansion, which should further bolster our free cash flow as the new capacity is expected to be accessible in mid-2016.

Business Strategies

Enhance Operational Excellence and Asset Efficiency

Operational excellence, which includes a commitment to safety, environmental stewardship and improved reliability, is key to our future success. We continually evaluate our business to identify opportunities to increase operational efficiency throughout our production facilities with a focus on maintaining operational excellence and maximizing asset efficiency. We continue to set new, stricter operational excellence targets for each of our facilities based on industry-leading benchmarks. We intend to continue focusing on increasing manufacturing efficiencies through selected capital projects, process improvements and best practices in order to lower unit costs. We will also carefully manage our portfolio, especially in our Chemical Solutions segment, and take appropriate actions to address product lines that face challenging market conditions and do not generate returns on invested capital that we believe are sufficient to create long-term shareholder value.

Focus on Cash Flow Generation

Our goal is to focus on cash flow generation and return on invested capital through the continuing optimization of our cost structure, improvement in working capital and supply chain efficiencies, and a disciplined approach to capital expenditures.

We have a proven track record of mitigating fixed cost inflation with cost saving actions and productivity improvements. We intend to continue to identify incremental cost saving opportunities based in large part on benchmarks of industry-leading performance and productivity improvements by utilizing our engineering and manufacturing technology expertise and partnerships with low cost producers. Our goal is to have a cost structure that positions us favorably to compete and grow. Our goal is to continue upgrading our customer and product mix to increase our sales of value-added, differentiated products to achieve premium pricing to improve margins and enhance cash flow.

We intend to actively manage our working capital by increasing inventory turnover and reducing finished goods and raw materials inventory without affecting our ability to deliver products to our customers. We strive to improve our supply chain efficiency by focusing on reducing both operating costs and working capital needs. Our supply chain efforts to lower operating costs have consisted of reducing procurement spending, lowering transportation and warehouse costs and optimizing production scheduling.

We remain focused on disciplined capital allocation among our segments. We plan to allocate our capital expenditures to projects required to enhance the reliability of our manufacturing operations and maintain the overall asset portfolio. This includes key maintenance and repair activities in each segment, and necessary regulatory and maintenance spending to ensure safe operations. We intend to optimize capital spending on growth projects across our various businesses based on a thorough comparison of risk-adjusted returns for each project.

Maintain Strong Customer Focus

A key component of our strategy is to produce innovative, high-performance products that offer enhanced value propositions to our customers at competitive prices. Our goal is to continually work closely with our customers to

 

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provide solutions and products that optimize their formulations and products. This market-driven product development enables us to offer a high-quality product portfolio to our customers and provides our businesses with the ability to respond quickly and efficiently to changes in market demands.

Leverage our Leadership to Drive Organic Growth

We plan to continue to capitalize on our global operations network, distribution infrastructure and technology to pursue global growth. We will focus our efforts on those geographic areas and end products that we believe offer the most attractive growth and long-term profitability prospects.

Our strategy in our Titanium Technologies segment is to continue to strengthen our leading position from both product offering and cost perspective in order to increase the segment’s sales and profitability. We intend to continue to position Chemours as the preferred supplier of TiO2 worldwide by delivering the highest quality product offering to our customers coupled with superior technical expertise. We are currently expanding capacity at our Altamira, Mexico production facility, which will increase our global capacity by approximately 17 percent and will be one of the lowest cost TiO2 production lines in the world. Production at the expansion is scheduled to start up in 2016.

Our Fluoroproducts segment plans to make ongoing, selective investments to capitalize on market opportunities based on our innovation capabilities and industry dynamics. We intend to continue to leverage our fluoroproducts and process expertise to develop new high-performance, differentiated offerings and to promote industry transition towards more sustainable technologies. Specifically, our strategy is to focus on development of proprietary, high-value, sustainable specialties (for example, Opteon® YF and HFO-1336, which are designed to meet tighter regulatory standards and replace commodity HFC refrigerants or foaming agents).

Our Chemical Solutions segment intends to capitalize on potential growth opportunities in businesses in which we have strong regional positions, e.g. sulfuric acid and sodium cyanide. We plan to make selective capital investments to grow our sulfur products and sodium cyanide businesses, in which we have leading market positions in the Americas, and to take initiatives to improve profitability in the remainder of the businesses in our Chemical Solutions segment.

Deepen Our Presence in Emerging Markets

Emerging markets are a strategic priority for a number of our businesses. We are well positioned not only to leverage our strong market positions in mature but highly sophisticated markets in North America and Europe, but also to participate in the expected growth of emerging markets in Asia, Eastern Europe and Latin America. We believe that improving living standards and growth in GDP across emerging markets are combining to create increased demand for our products. We expect to capitalize on this growth opportunity by expanding our customer base and local capabilities in order to increase our market share across emerging markets, especially China. To accelerate our penetration of these markets and maintain our competitive cost position, we may develop relationships with leading local partners, especially in businesses where participation in the fast-growing Chinese market is particularly important for long-term sustainable growth. For example, we are well positioned to leverage our strong production technology in our industrial fluoropolymers resins business, where the Chinese market is expected to continue to evolve from low-end fluoropolymer applications to higher value PTFE, copolymer and fluoroelastomer products, as a result of an increasing percentage of aerospace, automotive, semiconductor, electronics and telecommunications manufacturing transitions to China.

Drive Organizational Alignment

We believe that maintaining alignment of the efforts of our employees with our overall business strategy and operational excellence goals is critical to our success. We have outstanding people and assets and, with the

 

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commitment to values of safety, customer appreciation, simplicity, collective entrepreneurship and integrity, we believe that we can maintain our competitiveness and help achieve our operational excellence and asset efficiency strategic objectives.

Titanium Technologies Segment

Our Titanium Technologies segment is the leading global manufacturer of TiO2. TiO2 is a pigment used to deliver whiteness, opacity, brightness and protection from sunlight in applications such as architectural and industrial coatings, flexible and rigid plastic packaging, PVC window profiles, laminate papers, coated paper and coated paperboard used for packaging. We sell our TiO2 products under the Ti-Pure® brand name to approximately 850 customers globally. We believe our leading competitive position is the result of our industry-leading manufacturing cost position as well as our ability to offer superior product quality, delivery reliability and high quality technical services. We produce TiO2 at six production facilities: four in the United States, including a mineral sands mining operation, one in Mexico and another in Taiwan. In addition we have a large-scale repackaging and distribution facility in Belgium. In total, we have a TiO2 production capacity of 1.2 million metric tons per year. We are currently expanding our TiO2 production facility in Altamira, Mexico which will increase our total TiO2 production capacity to 1.4 million metric tons per year.

Highly efficient large scale assets based on our proprietary chloride technology and superior feedstock flexibility have historically provided us with a cost advantage in producing TiO2. All of our production facilities use our proprietary chloride process technology, providing us with the industry’s lowest manufacturing cost position. We have the ability to deliver superior product quality and consistency to our customers.

A breakdown of our TiO2 sales by region and by category is shown in the charts below:

 

LOGO

Industry demand for TiO2 is generally expected to be in line with global GDP, but can be cyclical due to economic and industry specific demand and inventory fluctuations. In developing economies, industry demand is projected to be approximately twice that of developed economies.

History of TiO2 Production

Titanium dioxide was first commercially introduced in the 1930s and was produced by mixing sulfuric acid with titanium-bearing ores in order to dissolve and separate titanium from the underlying ore, which is known as the sulfate process.

DuPont entered the TiO2 market in 1931 with the acquisition of Krebs Pigment, based in Wilmington, Delaware. The site is known today as the Edge Moor plant. In the 1940s, DuPont began developing a new TiO2 manufacturing process, which is known as the chloride process that delivers a higher quality product with superior opacity and fewer impurities than the sulfate process. Moreover, the waste and by-products generated by

 

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the chloride process were only 20-30 percent of the waste and by-products generated from the sulfate process at that time. DuPont began commercializing TiO2 product using the chloride process at the Edge Moor plant in 1953. Today, the chloride process is the only TiO2 production technology used by Chemours. The chloride process currently accounts for substantially all of North American TiO2 production and approximately 45 percent of global capacity.

We operate two other production facilities in the United States, located in New Johnsonville, TN and DeLisle, MS. These production facilities began operations in 1959 and 1979, respectively, and are the two largest TiO2 production facilities in the world. In 1994, we began operating our Taiwan production facility, which primarily serves the Asia Pacific region. In addition, in 1976 we began chloride production at our Altamira, Mexico production facility, which is currently being expanded to include a new production line for TiO2. Customers in Europe are supplied through a large-scale repackaging and distribution facility in Kallo-Antwerpen, Belgium, that receives bulk TiO2 shipments from our U.S. production lines.

TiO2 Chloride Manufacturing Process

The chloride process uses high temperature chlorination of titanium-bearing ores to separate titanium from iron and other metals. The resulting titanium tetrachloride is then oxidized to produce TiO2 particles in a high temperature reactor. This method of manufacture produces the rutile crystal of TiO2 while the early sulfate process produced the anatase crystal form of TiO2. The rutile form delivers better opacity than the anatase form and was a step-change in product quality at the time of introduction. Rutile TiO2 is preferred over anatase TiO2 for many of the largest end-use applications, such as coatings and plastics, because its superior opacity imparts better hiding power at lower quantities than the anatase form and it is more suitable for outdoor use because it is more durable. As process technologies evolved over time, sulfate technology has improved and today is also able to produce the rutile crystal form of TiO2 and products which perform comparably to chloride products in several applications. However, the TiO2 produced by chloride process remains the preferred pigment for many higher end applications of TiO2.

 

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All of our TiO2 is produced using the chloride process. Our chloride process technology is the industry leader on the basis of cost efficiency of our manufacturing operations, feedstock ore flexibility and product quality and consistency. Moreover, our process is unique in its ability to chlorinate ilmenite ore, which has significantly less titanium content than rutile ore and is a cheaper feedstock source as a result. The creation of TiO2 is the result of numerous complex and hazardous chemical processes. We emphasize employee and process safety, which is evidenced by our strong safety track record.

 

LOGO

Business

We are the world’s largest producer of TiO2. We market our products under the Ti-Pure® brand for a diverse range of industrial applications primarily in coatings, plastics, laminates and paper products end markets. Our leading competitive position is the result of our low manufacturing cost and ability to offer superior quality, delivery reliability and technical services for our customers. Our ability to deliver high quality on a consistent basis leads to greater customer satisfaction and consequently increased customer loyalty.

Our proprietary chloride process is unique in the industry as it reflects the long-standing technology advantage that we have relative to our competitors. Our process technology delivers best-in-class productivity, operating rates, manufacturing scale, product consistency and feedstock flexibility and allows us to achieve an advantaged cost position that we believe is sustainable, relative to our major competitors that produce similar quality product offerings. Additionally, our ability to use lower grade ilmenite ore feedstock to produce high quality product is an advantage that we believe is currently unmatched by any of our major competitors.

We are constructing a new 200,000 metric ton line at our Altamira facility in Mexico. Production at the expansion is scheduled to start up in 2016 and is expected to either increase our worldwide TiO2 production capacity to approximately 1.4 million metric tons per year or improve the profitability of our existing capacity. This new line incorporates our latest TiO2 production technology with the ability to use various grades of ore to produce high quality TiO2 products. This line is expected to be one of the lowest cost TiO2 production lines in the world and will benefit from Altamira’s existing integration into our global supply chain.

 

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We have operated a titanium mine in Starke, Florida since 1952. The mine provides us with access to a low cost source of domestic, high quality ilmenite feedstock. Co-products of our mining operations are zircon (zirconium silicate) and staurolite minerals. We are a major supplier of high quality zircon in North America, primarily focused on the precision investment casting (PIC) industry, foundry and specialty applications, and ceramics. Our staurolite blasting abrasives, sold as Starblast™, are widely used in steel preparation and maintenance, and paint removal.

Our plants and equipment are maintained and in good operating condition. We believe we have sufficient production capacity to meet demand in 2015. Properties are primarily owned by the company; however, certain properties are leased. No title examination of the properties has been made for the purpose of this report and certain properties are shared with other tenants under long-term leases.

We recognize that the security and safety of our operations are critical to our employees, community and to the future of Chemours. Physical security measures will be combined with process safety measures (including the use of inherently safer technology), administrative procedures and emergency response preparedness into an integrated security plan. Prior to the separation, DuPont conducted vulnerability assessments at our operating facilities in the U.S. and high priority sites worldwide and identified and implemented appropriate measures to protect these facilities from physical and cyber-attacks. We intend to conduct similar vulnerability assessments periodically post-separation. We are partnering with carriers, including railroad, shipping and trucking companies, to secure chemicals in transit.

We sell approximately 25 different grades or forms of TiO2, each tailored for different applications. Key Ti-Pure® titanium dioxide products are shown in the table below along with their respective key applications:

 

Titanium Technologies

Product Group

  

Key Products

  

Key Applications

Coating Applications   

•    Ti-Pure® R902+

 

•    Ti-Pure® R706

 

•    Ti-Pure® R931

 

•    Ti-Pure® R960

 

•    Ti-Pure® Select 6200

 

•    Ti-Pure® R746

 

•    Ti-Pure® R741

 

•    Ti-Pure® Select 6300

  

•    Easily dispersed universal grade

 

•    Blue undertone universal grade

 

•    Flat/matte finish coatings

 

•    High durability coatings

 

•    High dispersion, high durability

 

•    Slurry form universal grade

 

•    Slurry form of flat/matte finish grade

 

•    New, high efficiency flat/matte grade

Plastics Applications   

•    Ti-Pure® R101

 

•    Ti-Pure® R103

 

•    Ti-Pure® R104

 

•    Ti-Pure® R105

 

•    Ti-Pure® R350

  

•    Polyolefin and chalking PVC

 

•    Urethane, rubber, ABS applications

 

•    High dispersion for polyolefin masterbatches

 

•    PVC and highly durable polyolefin

 

•    Semi-durable polyolefin and ABS

Paper and Laminates Applications   

•    Ti-Pure® T796+

  

•    Coated paperboard, coated paper, filled sheet

 

•    Light stable laminate papers

As shown above, the product groups for which TiO2 is a critical input are coatings, plastics, and paper and laminates. In coatings, TiO2 is used to provide opacity, brightness and durability in industrial coatings. TiO2 is also used in coatings for home interiors and exteriors, automobiles, aircraft, machines, appliances, traffic paint

 

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and other special purpose coatings. In plastics, TiO2 is used to improve the optical and physical properties, including whiteness and opacity, in plastic items such as containers and packaging materials, and in vinyl products such as windows, doors and siding. TiO2 is also used to provide hiding power, neutral undertone, brightness and surface durability for plastic housewares, appliances, toys, computer cases and food packages. In paper, TiO2 is used to provide whiteness, brightness, opacity and color stability. TiO2 is also used in paper laminates, to help to prevent the material from fading or changing color, including after prolonged exposure to sunlight.

TiO2 Industry Overview and Competitors

Worldwide capacity in January 2012 was estimated to be approximately 7.0 million metric tons. This capacity base was sufficient to serve worldwide demand for TiO2 in 2011 of approximately 5.4 million metric tons.

The global TiO2 market in which we operate is highly competitive. Competition is based primarily on product price, quality and technical service. We face competition from producers using the chloride process as well as those using the sulfate process. Furthermore, due to the low cost of transporting TiO2, there is also competition between producers with production facilities located in different geographies, with the cost advantage belonging to the production facility that is closest to the customer.

In most regions of the world, we compete primarily against large multinational producers such as The National Titanium Dioxide Company, Ltd. (Cristal), Huntsman International LLC, Kronos Worldwide, Inc. and Tronox Limited. In recent years, manufacturing capacity of those multinational producers has only modestly increased, primarily due to de-bottlenecking of the industry’s existing production facilities.

In addition to these multinational producers, we also compete against numerous smaller producers, including Chinese producers, who have significantly expanded their TiO2 production capacity over the last decade. However, most Chinese producers primarily utilize the sulfate process to produce a product line that, while cost competitive in China, is suitable principally for lower-end applications. We believe that some local producers in China may be required over time to incur additional capital expenditures to meet increasing environmental standards. In fact, due to increasing concerns about pollution in China, the government has enacted the TiO2 Industry Access Conditions and the Environmental Protection Law which is scheduled to go into effect in 2015. These laws are expected to exert pressure on the heavily polluting small and medium-sized enterprises.

TiO2 is an approximately $15 billion annual market globally, as of 2011. Global growth in TiO2 demand tracks GDP growth in developed markets, but regional and application specific growth rates may vary depending on application technology, and the relative rate of growth in the housing, construction, automobile manufacturing, white goods and packaging industries.

Research and Development

Our research and development team has responsibility for improving chloride production processes, improving product quality and strengthening our competitive position by developing new applications. Our research and development efforts in titanium technologies are focused on the following areas:

 

    Process technology innovations, which deliver cost efficiencies by lowering raw material and energy consumption and enhancing ore source flexibility, while effectively managing the impurities contained in those ores;

 

    Process technology innovations that enable us to significantly increase the throughput capacity of current production lines at investment levels far below those of brownfield or greenfield lines;

 

    Innovations based on the unique TiO2 particle formation capability of our chloride process which enable greater product differentiation relative to competitors; and

 

    Improved product offerings to enable more efficient usage of TiO2 in our customers’ products, thereby resulting in lower cost or better product performance for our customers.

 

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Raw Materials

The primary raw materials used in the manufacture of TiO2 are titanium-bearing ores, chlorine, calcined petroleum coke and energy. We source titanium-bearing ores from a number of suppliers around the globe, who are primarily located in Australia, South Africa, Canada and Madagascar. To ensure proper supply volume and to minimize pricing volatility, we generally enter into contracts in which volume is requirement-based and pricing is determined by a range of mechanisms structured to help us achieve competitive pricing relative to the market. To ensure availability of supply, we typically enter into long-term supply contracts and source our raw material from multiple suppliers across different regions and from multiple sites per supplier. Furthermore, we typically purchase multiple grades of ore from each supplier to limit our exposure to any single supplier for any single grade of ore. Historically, we have not experienced any problems renewing such contracts for raw materials or securing our supply of titanium-bearing ores. Nevertheless, when such contracts expire we may be subject to current market pricing for the underlying raw materials.

We encourage the development of ore sources by offering off-take agreements to suppliers. We also play an active role in ore source development around the globe, especially for those ores which can only be used by us, given the capability of our unique process technology. Supply chain flexibility allows for ore purchase and use optimization to manage short-term demand fluctuations and for long-term competitive advantage. Our process technology and ability to use lower grade ilmenite ore gives us the flexibility to alter our ore mix to the lowest cost configuration based on sales, demand and projected ore pricing. Lastly, we have taken steps to optimize routes for distribution and increase storage capacity at our production facilities.

We are the largest buyer of chlorine in the United States. Transporting chlorine is becoming increasingly costly due to its hazardous nature and we have taken steps to reduce our exposure to this expense. In 2011, we entered into an agreement with Occidental Chemical Corporation, a subsidiary of Occidental Petroleum Corporation, to construct an onsite chlor-alkali production facility at our Johnsonville location. The chlor-alkali production facility began operation in May 2014. Calcined petroleum coke is an important raw material input to our process. We source calcined petroleum coke from well-established suppliers in North America and China, typically under contracts that run multiple years to facilitate material and logistics planning through the supply chain. Pricing depends on various market factors including refinery crude quality trends and coal price. Distribution efficiency is enhanced through use of bulk ocean, barge and rail transportation modes.

Lastly, energy is another key input cost into TiO2 manufacturing process, representing approximately 15 percent of the production cost. Chemours has access to natural gas based energy at our four U.S. and Mexico TiO2 production facilities and Florida minerals plant, supporting advantaged energy costs given the low cost shale gas in the United States. We continually evaluate investments to replace aging coal- and oil-based steam supply assets with natural gas at our sites. Natural gas-based cogeneration of steam and electricity is being extended as part of the major expansion at one of our TiO2 production facilities.

Sales, Marketing and Distribution

We sell the majority of our products through our direct sales force across 32 countries. We also utilize third-party sales agents and distributors who are authorized to sell our products in specific areas.

TiO2 represents a significant raw material cost for our customers and as a result, purchasing decisions are often made by our customers’ senior management team. Our sales organization works to develop and maintain close relationships with key decision makers.

In addition, our sales team and technical service team work together to develop relationships with all layers of our customers’ organizations to ensure that we meet our customers’ commercial and technical requirements. When appropriate, we collaborate closely with customers to solve formulation or application problems by modifying product characteristics or developing new product grades.

 

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To ensure an efficient distribution, we own or lease approximately 650 railcars, which are predominantly used for outbound distribution of products in the United States and Canada. Lease terms are typically staggered, which provides us with a competitive cost position as well as flexibility to on-hire and off-hire containers in response to changes in market conditions. A dedicated logistics team, along with external partners, continually optimizes the assignment of our transportation equipment to product lines and geographic regions in order to maximize utilization and maintain an efficient supply chain.

Customers

Globally, we serve approximately 850 customers through our Titanium Technologies segment. In 2013, our ten largest Titanium Technologies customers accounted for approximately 30 percent of the segment’s sales. No single Titanium Technologies customer represented more than 10 percent of our sales in 2013. Our larger customers in the United States and Europe are typically served through direct sales and tend to have medium to long-term contracts. We serve our small- and mid-size customers through a combination of our direct sales and distribution network.

Our direct customers in Titanium Technologies are producers of decorative coatings, automotive and industrial coatings, polyolefin masterbatches, polyvinylchloride window profiles, engineering polymers, laminate paper, coatings paper and coated paperboard. We focus on developing long-term partnerships with key market participants in each of these sectors. We also deliver a high level of technical service to satisfy our customers’ specific needs, which helps us maintain strong customer relationships.

Seasonality

The demand for TiO2 is subject to moderate seasonality because certain applications, such as decorative coatings, are influenced by weather conditions or holiday seasons. As a result, our TiO2 sales volume is typically lowest in the first quarter, highest in the second and third quarters and moderate in the fourth quarter. This pattern applies to the entire TiO2 market, but may vary by region, country or application. It can also be altered by economic or other demand cycles.

Fluoroproducts Segment

Our Fluoroproducts segment creates products for high-performance applications across a broad array of industries and is the global leader in providing sustainable fluoroproducts, such as refrigerants and industrial fluoropolymer resins and derivatives. We own the well-known brands Freon® and Teflon®, which are used across multiple products and end markets, including consumer cookware, chemical processing industry and electronics/semiconductors.

Our Fluoroproducts segment is a global leader in providing most sustainable fluorine-based advanced materials solutions. Our Fluoroproducts segment was the pioneer of fluorine chemistry in the first half of the 20th century and has continued to develop leading and innovative fluoroproduct technologies. Consequently, we have strong market positions in fluorochemical gases, fluoropolymer resins, fluoromonomers, fluorotelomers, fluoroelastomers, coatings, films and membranes. The unique chemical properties of fluorine, including chemical and electrical resistance, thermal stability and low surface energy, make fluoroproducts suitable as critical inputs in many applications across a broad variety of industries, including refrigeration, automotive, aerospace, personal care, wire & cable and electronics. Our Teflon® brand is globally well recognized and used in a diverse array of product applications and licensing agreements with partners. The success of the Fluoroproducts segment is based on our core competencies of leadership in fluorine chemistry and materials science, market-driven application development and commercialization, customer and channel knowledge, proactive development of sustainable solutions, strong intellectual property rights, process development and process safety management. Our Fluoroproducts segment supplies customers from 19 production facilities around the world with approximately half of our sales in North America.

 

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A breakdown of Fluoroproducts’ 2013 sales by region and product group is shown in the charts below:

 

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History

Our Fluoroproducts segment was established in the first half of the 20th century, when DuPont pioneered the development of fluorine chemistry. Since then, DuPont has remained a leader in fluoroproduct innovation and continues to re-invent the category. We developed much of the science that makes air conditioning and refrigeration possible. Key milestones in the history of the Fluoroproducts segment are listed below:

1930: Freon® CFCs are first manufactured by DuPont in a JV with General Motors

1930s: DuPont commercializes Freon® CFCs and HCFCs

1938: DuPont scientists invent PTFE, the first fluoropolymer

1945: DuPont trademarks the fluoropolymer as Teflon®

1960s: Development of new technologies for fluoroplastics ion exchange membranes and fluorolubricants

1961: Cookware with DuPont Teflon® Nonstick Coatings was first introduced to retailers in the U.S.

1970s: DuPont identifies HFCs as a potential lower ozone depletion replacement for CFCs

1987: The Montreal Protocol details the phase out of CFCs/HCFCs over a 35-year period

1990s: DuPont commercializes HFCs to replace CFCs and HCFCs

2000s: DuPont introduces ISCEON® HFC blends as a drop-in replacement for HCFC

2006: The EU bans HFC-134a in car air conditioning starting 2012 and fully phased out in new cars by 2017

2007: DuPont and Honeywell jointly develop HFO-1234yf (Chemours brand Opteon® YF), as a low GWP HFC-134a replacement for car air conditioning

2011: First commercial shipment of Opteon® YF

2011: HFO-1336 foaming agent and liquid refrigerant development

 

    2013: Low global warming HFO refrigerants are commercialized

Business

The Fluoroproducts segment’s specialty chemicals are critical for numerous industrial applications. We have established a global leadership position in fluoroproducts because of our leadership in fluorine chemistry and materials science, continuous innovation and market driven application development based on deep knowledge of our customers’ product needs.

 

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We are cost competitive in our key markets due to our manufacturing expertise, scale and integrated global supply chain. We also benefit from the geographic proximity of our technical resources to key customers and our high quality product offering. Our strategy is to maximize productivity for our most mature product lines while investing differentially in higher growth, higher performance and more sustainable new fluoroproduct offerings.

Our integrated manufacturing process is shown in the chart below:

 

LOGO

Fluorine chemistry is highly complex; however, as one of the pioneers of fluorine chemistry, we have decades of experience. To liberate elemental fluorine, we transform calcium fluorite (fluorspar ore) into hydrofluoric acid. Multiple chemical processes are then utilized to transform hydrofluoric acid into fluorochemicals, fluoroplastics, fluoropolymers, fluoromonomers, fluorotelomers, fluoroelastomers, films, membranes and coatings.

The manufacturing of fluoroproducts involves intermediates that are highly corrosive and hazardous in complex processes. We have an industry-leading safety culture and apply world-class technical expertise to ensure that our operations are run safely and reliably. These capabilities also enable us to continuously improve production yields, reduce unplanned downtime and increase our throughput, which in turn improves our overall manufacturing efficiency.

The high value, advanced materials created by Chemours enable global markets and industries to address challenging science and technology requirements where traditional chemicals and engineered materials break down or do not perform as effectively. Fluorine-based advanced materials have numerous beneficial properties including high chemical inertness, high temperature resistance, UV resistance, low friction properties, dielectric strength and non-flammability. Consequently, they are uniquely suited for markets such as cooling, refrigeration, lubrication, electrical insulation, non-stick coatings and fire suppression. For many applications, fluoroproducts provide significant performance and cost advantages over potential substitute products.

 

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Our Fluoroproducts segment sells products through two principal groups: fluorochemicals and fluoropolymers, the key products and key applications for which are shown in the table below:

 

Fluoroproducts

Product Group

  

Key Products

  

Key Applications

Fluorochemicals   

•   ISCEON®, Freon®, Opteon® Refrigerants

 

•   Formacel® Foam Expansion Agents

 

•   Dymel® Aerosol Propellants

 

•   FM 200® Clean Agent Fire Extinguishants

  

•   Commercial Refrigeration

 

•   Refrigerated Transport

 

•   Residential, Commercial and Automotive Air Conditioning

 

•   Foam Expansion Agent for Construction

 

•   Propellants for Personal Care

 

•   Clean Agent Fire Suppression Systems for data rooms

Fluoropolymers   

•   Teflon® PTFE Resins

 

•   Teflon® and Tefzel®Melt Processable Fluoropolymer Resins

 

•   Viton® Fluoroelastomers

 

•   Krytox® Performance Lubricants

 

•   Nafion® Ion Exchange Membranes

 

•   Teflon® Consumer and Industrial finishes

 

•   Capstone® and Teflon® Surface Active Agents

  

•   Aerospace Materials

 

•   Chemical Processing

 

•   Semiconductor Manufacturing

 

•   Telecom Wire and Cabling

 

•   Automotive Hoses, Gaskets

 

•   Sintered bearings lubrication

 

•   Chloralkali production

 

•   Non-stick Cookware

 

•   Upholstery

 

•   Industrial Bakeware

 

•   Surfactants in Paint

 

•   Fire Fighting Foams in Oil & Gas

Fluorochemicals

Our fluorochemicals products include refrigerants, foam expansion agents, propellants and fire extinguishants.

Refrigerants include more than twenty fluorinated gases and liquids and blends; applications include automotive air conditioning, commercial refrigeration and refrigerated transport. We are the leading global refrigerants producer due to our ability to produce innovative products and we have been able to effectively transition from one product generation to the next over three significant waves in refrigerant technology.

Change in the refrigerants industry is primarily driven by environmental regulatory change. As new regulations are implemented, customers are required to transition to new products and technologies to meet tighter regulatory standards. Chemours was the first manufacturer of CFCs based refrigerants and has continued up until today to stay at the forefront of industry and regulatory changes, proactively driving development and leading industry transitions to more sustainable technologies over time. We took a leadership role in the transition from ozone-depleting CFCs to less ozone-depleting HCFCs and were once again at the forefront in leading the industry transition from HCFCs to non-ozone depleting HFCs as stipulated by the Montreal Protocol. Chemours currently produces both second generation HCFC products (such as HCFC-22) and third generation HFC products (such as ISCEON®). As a result of additional regulatory changes, the typically higher GWP HFCs are also gradually being phased down over time. In response, we are currently developing a fourth generation HFO platform, including HFO-1234yf (which

 

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Chemours markets and sells under the brand name Opteon® YF), an innovative, low-GWP refrigerant jointly developed by Chemours, through DuPont, and Honeywell International, Inc. in response to the European Union’s (EU) Mobile Air Conditioning (MAC) Directive. This patented technology is both zero ozone depleting and has very low GWP while keeping the functionality of HFCs. Even though the joint development activities resulted in a commercially available refrigerant satisfying the MAC Directive, the European Commission launched an investigation in 2011 and in October 2014, announced its preliminary view that the agreements between the companies regarding production may have hindered competition in violation of the EU’s antitrust laws. The Commission seeks fines and equitable relief to increase competition, including cessation of cooperation between the companies. Chemours and Honeywell have always marketed and sold the refrigerant separately and independently. Chemours, through DuPont, has complied at all times with applicable laws in the development and production of HFO-1234yf and plans to vigorously defend against the Commission’s allegations and preliminary conclusions. Chemours does not expect this matter to have a material impact on its results of operations.

Chemours’ proprietary Opteon® YF is a next generation of car refrigerants and has a lower cost per vehicle versus alternative products, as it is designed as a substitute for refrigerants in the current car air conditioning systems. As a result of regulatory trends in the European Union, the United States and Japan, and its combination of safety, performance, sustainability and cost benefits, Opteon® YF is a strong candidate to replace HFC-134a, the HFC car refrigerant currently used in car air conditioning applications in those regions. Opteon® YF represents a significant scientific breakthrough as it has 99.9 perecnt lower GWP than HFC-134a- and well below the 150 GWP threshold required by the MAC Directive. It offers car manufacturers an optimal balance of performance, cost, energy efficiency and improved sustainability. ISCEON® is part of our third-generation HFC product family and serves as a drop-in replacement for HCFCs which are being phased out under the Montreal Protocol. ISCEON® enables the continued use of existing equipment with minimal downtime for retrofitting and the avoidance of costly equipment replacement. ISCEON® is patent protected and continues to be an important product for the Fluoroproducts segment.

Our future performance in refrigerants will be driven in part by our ability to successfully manage product line transitions by continuing to meet demand for products that are being phased down, while remaining a leader in the introduction of new, more sustainable, cost-effective and easy to implement solutions that allow customers to adopt products to meet new regulatory requirements. We have consistently demonstrated expertise in these core capabilities by developing sustainable technology trade secrets and patents.

Our Formacel® foam expansion agents (FEA) are used in a variety of construction, appliance, transportation, packaging and other applications in the thermoset and thermoplastic industries. We are developing a novel fourth generation foam expansion agent for polyurethane foams, HFO-1336mzz, which will be marketed as Formacel® 1100 foam expansion agent. The product not only has zero ozone depletion potential (ODP) and less than one percent of the GWP of the HFCs currently used in rigid polyurethane insulating foam, but is non-flammable and offers superior insulation performance compared to alternative technologies.

Chemours’ Dymel® propellants are used in a broad variety of applications including household products, such as hair sprays and air fresheners and industrial products, such as adhesives, spray paints and insulating foams. Our Dymel® propellants are used as safe alternatives to smog forming and volatile organic compounds (VOC) or flammable propellants. Due to their low VOC formulation potential, Dymel® 152a propellants enable manufacturers to comply with local, state and federal air quality standards.

Our clean agent fire extinguishants offer increased safety, non-conductivity, non-corrosiveness and the absence of residue upon usage. Because of these properties, they are preferred solutions for applications such as computer rooms, museums, hospitals, laboratories and airplanes where suppressing fire quickly while protecting people and assets is paramount. Our clean agent product lines are branded and include the leading FM-200® and FE-25™ trademarks.

We maintain strong positions in the markets for clean agents fire extinguishants and propellants due to our competitive cost position and leading regulatory and product stewardship.

 

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Fluoropolymers

Our fluoropolymers products include a broad range of industrial fluoropolymer resins and diversified products such as Krytox® performance lubricants, Nafion® ion exchange membranes, Teflon® consumer and industrial finishes and Capstone® and Teflon® surface active agents.

Industrial fluoropolymer resins products fall into three principal product lines: Teflon® branded PTFE resins, melt processable fluoropolymers such as Teflon® branded fluorinated ethylene propylene and perfluoroalkoxy and Tefzel® branded ethylene-tetrafluoroethelyne fluoroplastics, and Viton® branded fluoroelastomers. Industrial fluoropolymer resins are used across a broad range of applications in various industries such as automotive, wire and cable, aerospace, semiconductors and chemical processing.

Our industrial fluoroplastic resins business includes a broad range of PTFE applications and a portion of the branded Teflon® franchise, principally Teflon® films and numerous other industrial applications, such as automotive, cabling materials, aerospace and renewable energy. PTFE is a versatile industrial fluoropolymer resin and its various grades are used in both specialized and lower-end product applications. For lower-end applications such as stock shapes for chemical processing equipment, PTFE is commoditized and subject to potential pricing pressure. For higher-end applications such as in aerospace, PTFE is available as a differentiated product, including dispersions with distinct capabilities and therefore better shielded from being commoditized

In general, Chemours has strong leadership positions in high-end fluoroplastic product lines used in high-value applications, many of which require specification with industrial customers. We continue to introduce differentiated offerings to meet customers’ critical needs. Our ECCtreme™ ECA 3000 fluoroplastic resin is an industry-changing class of high-temperature perfluoroplastic (HTP) that combines the beneficial properties of typical perfluoroplastics with the potential capability to maintain operational performance under extreme temperatures and extreme conditions. The first of its kind, ECCtreme™ ECA 3000 fluoroplastic resin, the first thermoplastic with a UL® certification for continued use above 300°C addresses the demand for HTPs in sustainable energy production, particularly in wire and cable applications.

Industrial products developed with Teflon® fluoroplastic resins have exceptional resistance to high temperatures, chemical reaction, corrosion and stress cracking. The properties of Teflon® make it the preferred solution for many industrial applications and different processing techniques. Teflon® continues to have strong brand recognition and customer preference due to its unique properties, which will drive growth in branded fluoropolymer offerings.

Viton®, our leading fluoroelastomer, is used to improve systems durability, minimize systems downtime and repair seal failures because of its high chemical and temperature resistance. It is the most specified fluoroelastomer for fuel system seals and hoses, O-rings and gaskets in automotive applications.

In the industrial fluoropolymer resins market, product differentiation, productivity and cost management are becoming increasingly important to our success. Going forward, the industrial fluoropolymer resins business will continue to focus on commercializing higher-end products and branded offerings at a premium price while also prioritizing manufacturing cost reductions through process innovation as well as asset productivity and capacity release programs.

With Krytox® Performance Lubricants, Chemours is one of the global leaders in the perfluoropolyether (PFPE) oils and greases markets. Krytox® offers a combination of outstanding lubrication and highly desirable chemical properties that increase the service life and productivity of industrial machinery and components in the automotive and aerospace industries. Krytox® oils and greases are nontoxic, can be regenerated and last longer than conventional lubricants. They are also non-flammable, chemically inert and maintain their lubricity and viscosity in extreme low or high temperatures, humidity and 100 percent liquid or gaseous oxygen service, and when combined with reactive chemicals.

 

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We are one of the global leaders in the ion exchange perfluorinated membranes market through our ion-exchange product, Nafion®. Our membranes offer high conductivity to cations, chemical resistance and high operating temperature. The primary application for Nafion® is production of chlorine and caustic soda by electrolysis. This technology is environmentally sound and has become the preferred method for chlorine and caustic soda production because of its significant operating cost advantages over the older mercury and diaphragm technologies. Other uses for Nafion® membranes are fuel cell applications.

Fluoropolymers business also includes our globally recognized Teflon® branded line of finishes, which are, for example, used as coatings in the manufacturing of easy-to-clean, non-stick cookware. The brand is also used in conjunction with our industrial finishes, as well as fluoroadditives, which are used in textiles to provide oil and water repellency and in paints to provide easy-to-clean functionality. Our broad family of surface active agents includes fluoroadditives, repellants and surfactants commercialized under the Capstone® and Teflon® trademarks. They are used in a wide variety of industries and applications around the world such as fluorosurfactants in architectural paint.

Industry Overview and Competitors

Our Fluoroproducts segment is the global leader in providing sustainable, fluorine-based, advanced material solutions. Our Fluoroproducts segment competes against a broad variety of global manufacturers, including Honeywell, Arkema, Mexichem, Daikin, Solvay and Dyneon, as well as local Chinese and Indian manufacturers. We have a leadership position in fluorine chemistry and materials science, a broad scope and scale of operations, market driven application development and deep customer knowledge.

Chemours has global leadership positions in a number of fluoroproduct categories as set forth in the table below:

 

Fluoroproducts Leadership Positions

Product Group

  

Position

  

Key Applications

  

Key Competitors

Fluorochemicals    #1 Globally    Refrigeration and Air
conditioning
   Honeywell, Arkema,
Mexichem, Solvay,
Dongyue, Juhua
Fluoropolymers    #1 Globally    Diversified industrial
applications
   Daikin, 3M, Solvay,
Asahi Glass Company,
Dongyue, Chenguang,
Whitford

We believe the size of the global fluoroproducts end markets that we serve was approximately $10 to 12 billion in 2013. We believe the fluoroproducts demand growth in developed markets is in line with global GDP, whereas demand growth in emerging markets is higher than GDP. Developed markets represent the largest fluoroproducts markets today. Emerging markets and especially China present the largest potential growth markets driven primarily by the emergence of a very large middle class and the increasing demand for consumer electronics, telecommunications, automobiles, refrigerators, air conditioners and an expanding infrastructure, all of which require fluoroproducts to operate effectively.

Research and Development

Our Fluoroproducts segment conducts R&D at dedicated research facilities, technical service labs and production facilities. We have 11 research and technical service locations in the U.S., Europe and Asia Pacific, with the highest concentration of researchers in Wilmington, Delaware.

 

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Our current R&D focus is on the implementation of asset productivity programs and the development of new products for sustainable growth such as new zero ODP and low GWP refrigerants and foam expansion agents and high value fluoropolymers with superior chemical, temperature resistance and strong electrical properties. A deep understanding of our customers is at the core of our innovation process.

Raw Materials

The primary raw materials required to support the Fluoroproducts segment are fluorspar, chlorinated organics, hydrofluoric acid and vinylidene fluoride. Fluorspar is available in many countries and not concentrated in any particular region.

Our supply chains are designed for maximum competitiveness through advantaged sourcing of key raw materials. Starting with our sourcing agreements, we use a mixture of fixed and market-based pricing and we engage in long-term supply contracts to ensure a reliable supply of raw materials. Our global commodity sourcing teams work closely with supply chain and production leadership to develop strategies that assure adequate supplies of raw materials. Although the fluoroproduct industry has historically relied primarily on fluorspar exports from China, we have diversified our sourcing through multiple geographic regions and suppliers to ensure a stable and cost competitive supply.

Sales, Marketing and Distribution

With more than 85 years of innovation and development in fluorine science, our technical, marketing and sales teams around the world have deep expertise in our products and their end-uses and work with customers to select the appropriate fluoroproducts to meet their performance needs. We sell our products through direct channels and through resellers. Selling agreements vary by product line and markets served and include both spot pricing arrangements and longer term contracts with a typical duration of one-year.

We maintain one of the largest fleets of rail cars, tank trucks and containers in the fluoroproducts industry. For the portion of the fleet that is leased, related lease terms are usually staggered, which provides us with a competitive cost position as well as the ability to adjust the size of our fleet in response to changes in market conditions. A dedicated logistics team, along with external partners, continually optimizes the assignment of our transportation equipment to product lines and geographic regions in order to maximize utilization and flexibility of the supply chain.

Customers

We serve thousands of customers and distributors globally and in many instances these commercial relationships have been in place for decades. No single Fluoroproducts customer represented more than 10 percent of our sales in 2013.

Seasonality

Fluoroproducts sales fluctuate by season; sales in the first half of the year are on average approximately 10 percent higher than sales in the second half of the year. This trend is primarily a result of inventory build in the first half of the year by refrigerant customers in the Northern hemisphere as they prepare for the summer season.

Chemical Solutions Segment

Our Chemical Solutions segment comprises a diverse portfolio of industrial and specialty chemical businesses primarily operating in the Americas. Chemical Solutions’ products are used by a diverse group of industries in which they serve as important raw materials and effect chemicals for industries including, among others, gold production, oil refining agriculture and industrial polymers. We are the leading provider of several Chemical

 

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Solutions products, including cyanide and sulfuric acid. Chemical Solutions generates value through the use of market leading manufacturing technology, safety performance and product stewardship, and differentiated logistics capabilities.

Chemical Solutions operates at 14 production facilities, which are concentrated in North America. Chemical Solutions sells our products and solutions through three primary product groups: Cyanides, Sulfur Products, and Performance Chemicals & Intermediates. Performance Chemicals & Intermediates business includes a number of product lines including Clean & Disinfect chemicals, Aniline, Methylamines and Reactive Metals. A breakdown of Chemical Solutions’ 2013 sales by region and primary product groups is shown in the charts below.

 

LOGO

Note: Excludes sales from the Baytown facility divested on December 31, 2013.

Business

The industrial and specialty chemicals produced by our Chemical Solutions segment are important raw materials for a wide range of industries and end markets. We hold a long standing reputation for high quality and the safe handling of hazardous products such as sodium cyanide and sulfuric acid. We believe that we have leading cost positions in cyanides, sulfur products and our clean & disinfect products. We believe that our costs positions in these products are the result of our process technology, manufacturing scale, efficient supply chain and proximity to large customers. Our Chemical Solutions segment also holds, and occasionally licenses, what we believe to be the leading process technologies for the production of aniline, a key building block for polyurethanes, and for hydrogen and sodium cyanide, which are used in industrial polymers and in gold production.

 

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Our Chemical Solutions segment consists of three primary product groups, the key products and key applications for which are summarized as follows:

 

Chemical Solutions

Product Group

  

Key Products

  

Key Applications

Cyanides

  

•      Sodium Cyanide

 

•      Hydrogen Cyanide

 

•      Potassium Cyanide

  

•     Gold and Silver Mining

 

•     Acrylics

 

•     Plating/Pharmaceuticals

 

Sulfur Products

  

•      Non-Fuming Sulfuric Acid

 

•      Spent Acid Regeneration

 

•      Sulfur Derivatives – Oleums, SO3, Chlorosulfonic Acid (CSA)

 

  

•     Refining

 

•     Chemicals, Paper, Metal Water Treatment

 

•     Surfactants, Personal Care

Performance Chemicals & Intermediates

     
  

•      Chlorine Dioxide

 

•      Virkon® Disinfectants

 

•      Glycolic Acid

 

•      Oxone® Chlorine free oxidizer –

  

•     Water Sanitation and Treatment, Oil and Gas

 

•     Animal and Human Health, Bio-security

 

•     Industrial Cleaning

 

•     High Purity Anti-aging Ingredient

 

•     Pool and Spa care

 

  

•      Aniline

 

•      Nitrobenzene

 

•      Nitric Acid

  

•     MDI (methylene diphenyl disocyanate) for Rigid Polyurethane Foam for Construction and Refrigerators Insulation

 

•     Rubber Chemicals, Dyes and Pigments

 

  

•      Amines – MMA, DMA, TMA

 

•      Amides – MMF, DMF

 

•      DMAc

 

•      DMS

 

•      Vazo® Azo Free Radical Initiator –

  

•     Agricultural Chemicals

 

•     Water Treatment Chemicals

 

•     Oil and Gas Drilling

 

•     Electronics

 

•     Industrial Solvents

 

•     Surfactants, Fabric Softeners

 

  

•      Sodium Metal

 

•      Lithium Metal

  

•     Pulp and Paper, Titanium, Silicon

 

•     Life Sciences, Batteries

 

•     Bio-Diesel

 

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Cyanides

The principal product of our Cyanides product group is solid sodium cyanide, of which we are a leading producer in the Americas. Solid sodium cyanide is primarily sold for gold and silver production because it is the most efficient and lowest cost method to leach ore. Among the on-purpose producers of solid sodium cyanide, we hold a superior delivered-cost position in the Americas primarily due to higher hydrogen cyanide yields, attractive raw material cost (ammonia and natural gas), economies of scale and close proximity to our customer base. Though sodium cyanide only represents two to three percent of ore extraction cost, it is essential to the ore extraction process. Demand for solid sodium cyanide in the Americas has increased substantially over the last decade because of increased gold mining activity due to the region’s structurally lower ore and refining costs, and resulting increases in production.

Our leading position in cyanides is attributable to our proprietary advanced technological capabilities in next-generation hydrogen cyanide and sodium cyanide manufacturing, best-in-class product stewardship and global distribution capabilities. Our ability to source and produce locally coupled with our strong distribution capabilities through strategically located warehouses, re-packing terminals and differentiated packaging are key differentiators. In addition, our reputation for supply safety is highly valued by our customers. Since operations began approximately 60 years ago, the cyanides business has had a leading safety record, lending confidence to customers that our products will be delivered safely.

Sulfur Products

The U.S.-based Sulfuric Acid Products product group is a leading producer of both non-fuming sulfuric acid products and higher value sulfur derivative products (HVSDs) such as oleum, sulfur trioxide and chlorosulfonic acid. We also provide spent acid regeneration and sulfur gas recovery services to the oil refining industry, where our merchant regeneration capacity is ranked #1 and #2 in the U.S. Northeast and Gulf Coast, respectively. Non-fuming sulfuric acid is one of the most produced chemicals in the world by volume and it is an input in a broad range of industrial applications including inorganic and organic chemicals, catalysts, paper, water treatment and chemical process water removal. HVSDs are primarily used in surfactants, flame retardants and shampoos. As part of our suite of services, our Sulfur Products business offers customers the option to transport spent sulfuric acid back to us to be recovered and regenerated.

Our Sulfur Products operations rely on an advantaged supply chain that leverages multiple cost-competitive U.S. plant sites, best-in-class process technology via our Acid Technology Center and deep and long-held customer relationships. We are the industry leader in acid plant reliability and provide our customers with a secure supply of sulfuric acid and HVSDs.

Performance Chemicals & Intermediates

Performance Chemicals & Intermediates business manufactures a wide range of products including Clean & Disinfect chemicals, Aniline, Methylamines and Reactive Metals. Clean & Disinfect chemicals consist of chlorine dioxide (ClO2), disinfectants, glycolic acid and Oxone®. These chemicals have leading positions in a number of segments including animal production bio-security through our Virkon® products, household and industrial cleaning solutions through our glycolic acid and Oxone® products and water disinfection through our ClO2 offerings. Clean & Disinfect chemicals are well positioned to take advantage of potential growth in each of these end markets due to our technological expertise, product pipeline and broad global market access through our network of channel partners. Aniline is a critical raw material in methylene diphenyl diisocyanate (MDI) production, an essential component of polyurethane. Besides use in MDI production, aniline is used in rubber processing chemicals, specialty aramid fibers such as aromatic polyamide, agricultural chemicals such as amide herbicides, dyes and pigments. In Methylamines we provide key industries, including water treatment, agricultural chemicals and specialty fibers, a reliable domestic source of primary amines and the only domestic source for amides, dimethyleacetamide, dimethylformamide and dimethylsulfate in the U.S. In the Asia-Pacific region, Methylamines business primarily serves the specialty fibers and electronics segments. Methylamines

 

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business also manages the manufacture and sales of Vazo®, azo free radical initiators, which are used in a range of chemical processes. We are the leading North American sodium metal producer serving the silicon, titanium, pulp and paper industries. We also produce lithium metal, which is sold for the production of butyl lithium.

 

Chemical Solutions Leadership Positions

Product (Product Group)

  

Position

  

Key Applications

  

Key Competitors

Cyanides

  

#1 in Solid Sodium Cyanide in Americas

 

   Gold Production    Orica, Cyanco,
Samsung

Sulfur Products

  

#1 in Spent Acid Regeneration in U.S. Northeast Region

 

#2 in Spent Acid Regeneration in U.S. Gulf Coast Region

 

   Refining    Solvay, Chemtrade

Performance Chemicals & Intermediates

   Leading positions in U.S. in number of products e.g.      
   Chlorine Dioxide    Water treatment    Evoqua, OxyChem
   Glycolic Acid    Household,
institutional and
industrial cleaning,
Personal care
   CABB, Taicang
Xinmao
   Oxone®    Recreational Water
treatment, dentures
cleaning
   United Initiators

Research and Development

The Chemical Solutions research and development team is primarily focused on developing and improving chemical production processes to improve asset safety, sustainability, capacity, productivity and product quality. The team also supports, from time to time, the licensing of proprietary technologies to generate incremental profitability and improving asset productivity across all businesses. The segment’s new product research and development is limited and highly focused.

Raw Materials

Key raw materials for Chemical Solutions include ammonia, methanol, sulfur, natural gas, formaldehyde, hydrogen and caustic soda. We source raw materials from global and regional suppliers where possible and maintain multiple supplier relationships to protect against supply disruptions and potential price increases. To further mitigate the risk of raw material availability and cost fluctuation, Chemical Solutions has also taken steps to optimize routes for distribution, increase the storage capacity at our production facilities, lock-in long-term contracts with key suppliers and increase the number of customer contracts with raw material price pass-through terms. We do not believe that the loss of any particular supplier would be material to our business.

Sales, Marketing and Distribution

Our technical, marketing and sales teams around the world have deep expertise with our products and their end markets. We predominantly sell directly to customers, although we do also use a network of distributors for specific product lines and geographies. Sales may take place through either spot transactions or via long-term contracts.

 

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Most of Chemical Solutions’ raw materials and products can be delivered by efficient bulk transportation. As such, we maintain one of the largest fleets of rail cars, tank trucks and containers in the chemicals industry. For the portion of the fleet that is leased, related lease terms are usually staggered, which provides us with a competitive cost position as well as the ability to adjust the size of our container fleet in response to changes in market conditions. A dedicated logistics team, along with external partners, continually optimizes the assignment of our transportation equipment to product lines and geographic regions in order to maximize utilization and flexibility of the supply chain.

The strategic placement of our production facilities in locations designed to serve our key customer base gives us robust distribution capabilities.

Customers

Our Chemical Solutions segment focuses on developing long-term partnerships with key market participants. Many of our commercial and industrial relationships have been in place for decades and are based on our proven value proposition of safely and reliably supplying our customers with the materials needed for their operations. Our reputation and long-term track record is a key competitive advantage as several of the products’ end users demand the highest level of excellence in safe manufacturing, distribution, handling and storage. Chemical Solutions has Department of Transportation Special Permits and Approvals in place for distribution of various materials associated with each of our business lines as required. Our Chemical Solutions segment serves several hundred customers globally. No single Chemical Solutions customer represented more than 10 percent of our sales in 2013.

Seasonality

Our sales are subject to minimal seasonality. Our Sulfur Products business is influenced by seasonal fluctuations as in the warmer summer months we typically sell a higher volume of acid due to oil refinery customers operating at higher capacities.

Chemours Intellectual Property

Intellectual property, including trade secrets, certain patents, trademarks, copyrights, know-how and other proprietary rights, is a critical part of maintaining the technology leadership and competitive edge. Our business strategy is to file patent and trademark applications globally for proprietary new product and application development technologies. We work actively on a global basis to create, protect and enforce our intellectual property rights. The protection afforded by these patents and trademarks varies based on country, scope of individual patent and trademark coverage, as well as the availability of legal remedies in each country. Although certain proprietary intellectual property rights are important to the success of our company, we do not believe that we are materially dependent on any particular patent or trademark. We believe that securing our intellectual property is critical to maintaining our technology leadership and our competitive position, especially with respect to new technologies or the extensions of existing technologies. Our proprietary process technology is also a source of incremental income through licensing arrangements.

Our Titanium Technologies segment in particular relies upon unpatented proprietary knowledge and continuing technological innovation and other trade secrets to develop and maintain our competitive position in this space. Our proprietary chloride production process is an important part of our technology and our business could be harmed if our trade secrets are not maintained in confidence. In our Titanium Technologies intellectual property portfolio, we consider our trademark Ti-Pure® to be a valuable asset and have registered this trademark in a number of countries.

Our Fluoroproducts segment is the technology leader in the markets in which it participates. We have one of the largest patent portfolios in the fluorine derivatives industry. In our Fluoroproducts intellectual property portfolio, we consider our Suva®, ISCEON®, Freon®, Opteon®, Teflon®, Tefzel®, Viton®, Krytox®, Formacel®, Dymel®, FM 200®, Nafion® and Capstone®, trademarks to be valuable assets.

 

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Our Chemical Solutions segment is a manufacturing and application development technology leader in a majority of the markets in which it participates. In our Chemical Solutions intellectual property portfolio, we consider our Virkon® and Oxone® trademarks to be valuable assets. Trade secrets are one of the key elements of our intellectual property security in Chemical Solutions as most of the segment’s manufacturing and application development technologies are no longer under patent coverage.

Please also see the section entitled “Our Relationship with DuPont Following the Distribution” for a description of the material terms of the intellectual property license arrangements that we intend to enter into with DuPont prior to the consummation of the separation and distribution.

Chemours Production Facilities and Technical Centers

Our corporate headquarters are in [], [], and we will maintain a global network of production facilities and technical centers located in cost-effective and strategic locations. We will also use contract manufacturing and joint venture partners in order to provide regional access or to lower manufacturing costs as appropriate. The following chart lists our production facilities:

 

Production Facilities

    

Titanium Technologies

  

Fluoroproducts

  

Chemical Solutions

  

Shared Locations

North America

  

•     Edge Moor, DE

 

•     DeLisle, MS

 

•     New Johnsonville, TN

 

•     Starke, FL (Mine)

 

  

•     El Dorado, AR

 

•     Elkton, MD

 

•     Louisville, KY

 

•     Fayetteville, NC

 

•     Deepwater, NJ

 

•     Corpus Christi, TX

 

•     LaPorte, TX

 

•     Washington, WV

 

•     Maitland, Canada

 

  

•      Red Lion, DE

 

•      Wurtland, KY

 

•      Burnside, LA

 

•      Morses Mill, NJ

 

•      Niagara, NY

 

•      Fort Hill, OH

 

•      N. Kingstown, RI

 

•      Memphis, TN

 

•      Beaumont, TX

 

•      Borderland, TX

 

•      James River, VA

  

•     Pascagoula, MS (Chemical Solutions and Fluoroproducts)

 

•     Belle, WV (Chemical Solutions and Fluoroproducts)

 

EMEA

     

•     Mechelen, Belgium

 

•     Villers St. Paul, France

 

•     Dordrecht, Netherlands

 

•     Malmo, Sweden

  

•      Sudbury, UK

  

Latin America

  

•     Altamira, Mexico

  

•     Barra Mansa, Brazil

     

Asia Pacific

  

•     Kuan Yin, Taiwan

  

•     Changshu, China

 

•     Chiba, Japan (Joint Venture)

 

•     Shimizu, Japan (Joint Venture)

     

 

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We have technical centers and R&D facilities located at number of our production facilities. We also maintain standalone technical centers to serve our customers and provide technical support. The following chart lists our standalone technical centers:

 

Technical Centers

Region

 

Titanium Technologies

 

Fluoroproducts

 

Chemical Solutions

 

Shared Locations

North America    

•      Akron, OH

   

•     Wilmington, DE (Chemical Solutions, Fluoroproducts and Titanium Technologies)1

EMEA  

•     Moscow, Russia

 

•      Mantes, France

•      Meyrin, Switzerland

   
Latin America  

•     Paulinia, Brazil

•     Mexico City-Zurich, Mexico

     
Asia Pacific    

•      Utsonomyia, Japan

   

•     Shanghai, China (Titanium Technologies and Fluoroproducts)

 

1  There are two facilities in this location.

The company’s plants and equipment are maintained and in good operating condition. The company believes it has sufficient production capacity for its primary products to meet demand in 2015. Properties are primarily owned by the company; however, certain properties are leased. No title examination of the properties has been made for the purpose of this report and certain properties are shared with other tenants under long-term leases.

Chemours recognizes that the security and safety of its operations are critical to its employees, community, and to the future of the company. Physical security measures have been combined with process safety measures (including the use of inherently safer technology), administrative procedures and emergency response preparedness into an integrated security plan. Prior to the separation, DuPont conducted vulnerability assessments at operating facilities in the U.S. and high priority sites worldwide and identified and implemented appropriate measures to protect these facilities from physical and cyber-attacks. Chemours intends to conduct similar vulnerability assessments periodically post-separation. Chemours is partnering with carriers, including railroad, shipping and trucking companies, to secure chemicals in transit.

Chemours Employees

We have approximately 9,100 employees, approximately 29 percent of whom are represented by unions. Management believes its relations with its employees to be good.

Regulatory

Chemours operates in a constantly evolving regulatory environment and we are subject to numerous and varying regulatory requirements for our operations and end products. It is our practice to identify potential regulatory risks early in the research and development process and manage them proactively throughout the product lifecycle through use of routine assessments, protocols, standards, performance measures and audits. Governing bodies regularly issue new regulations and changes to existing regulations and we have implemented global systems and procedures designed to ensure compliance with existing laws and regulations.

 

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We continuously analyze and improve our practices, processes and products to reduce their risk and impact through the product life cycle. For example, in 2013, we met our commitment to no longer make, use or buy perfluorooctanoic acid (PFOA) by 2015, two years ahead of the U.S. EPA PFOA Stewardship Program.

We work collaboratively with a number of stakeholder groups including government agencies, trade associations and non-governmental organizations to proactively engage in federal, state, and international public policy processes ranging from climate change to chemical management. We also have ongoing interactions with our suppliers, carriers, distributors, and customers to achieve similar product stewardship.

Environmental Matters

Chemours’ global manufacturing, product handling and distribution facilities are subject to a broad array of environmental laws and regulations. Such rules are subject to change by the implementing governmental agency, and Chemours monitors these changes closely. Company policy requires that all operations fully meet or exceed legal and regulatory requirements. In addition, Chemours implements voluntary programs to reduce air emissions, minimize the generation of hazardous waste, decrease the volume of water use and discharges, increase the efficiency of energy use and reduce the generation of persistent, bioaccumulative and toxic materials. Management has noted a global upward trend in the amount and complexity of proposed chemicals regulation. The costs to comply with complex environmental laws and regulations, as well as internal voluntary programs and goals, are significant and will continue to be significant for the foreseeable future. Annual expenditures are expected to continue to increase in the near future; however, they are not expected to vary significantly from the range of such expenditures experienced in the past few years. Longer term, expenditures are subject to considerable uncertainty and may fluctuate significantly.

Climate Change

Chemours believes that climate change is an important global issue that presents risks and opportunities. Expanding upon significant global greenhouse gas (GHG) emissions and other environmental footprint reductions made in the period 1990-2004, Chemours reduced its environmental footprint achieving in 2013 reductions of 19 percent in GHG emissions and six percent in water consumption versus our 2004 baselines. Chemours continuously evaluates opportunities for existing and new product and service offerings in light of the anticipated demands of a low-carbon economy. About $177 million of Chemours’ 2013 revenue was generated from sales of products that help direct and downstream customers reduce GHG emissions.

Legislative efforts to control or limit GHG emissions could affect Chemours’ energy source and supply choices as well as increase the cost of energy and raw materials derived from fossil fuels. Such efforts are also anticipated to provide the business community with greater certainty for the regulatory future, help guide investment decisions, and drive growth in demand for low-carbon and energy-efficient products, technologies, and services. Similarly, demand is expected to grow for products that facilitate adaptation to a changing climate.

At the national and regional level, there are existing efforts to address GHG emissions. Several of Chemours’ facilities in the EU are regulated under the EU Emissions Trading Scheme. China has begun pilot programs for trading of GHG emissions in selected areas and South Korea will begin to implement its emission trading scheme in 2015. In the EU, U.S. and Japan, policy efforts to reduce the GHG emissions associated with gases used in refrigeration and air conditioning create market opportunities for lower GHG solutions. The current unsettled policy environment in the U.S. adds an element of uncertainty to business decisions particularly those relating to long-term capital investments. If in the absence of federal legislation, states were to implement programs mandating GHG emissions reductions, Chemours, its suppliers and customers could be competitively disadvantaged by the added costs of complying with a variety of state-specific requirements.

In 2010, EPA launched a phased-in scheme to regulate GHG emissions first from large stationary sources under the existing Clean Air Act permitting requirements administered by state and local authorities. As a result, large

 

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capital investments may be required to install Best Available Control Technology on major new or modified sources of GHG emissions. This type of GHG emissions regulation by EPA, in the absence of or in addition to federal legislation, could result in more costly, less efficient facility-by-facility controls versus a federal program that incorporates policies that provide an economic balance that does not severely distort markets. Differences in regional or national legislation could present challenges in a global marketplace highlighting the need for coordinated global policy action. In 2013 EPA proposed more stringent regulations for new Electric Generating Units (EGU’s) that may affect the long-term price and supply of electricity. The precise impact is uncertain.

Legal Proceedings

Chemours is subject to various litigation matters, including, but not limited to, product liability, antitrust claims, and claims for third party property damage or personal injury stemming from alleged environmental or other torts.

Pursuant to the Separation Agreement, Chemours indemnifies DuPont against certain liabilities, including the litigation and environmental liabilities discussed below that arose prior to the distribution. The term of this indemnification is indefinite and includes defense costs and expenses, as well as monetary and non-monetary settlements and judgments. Also, pursuant to the Separation Agreement, Chemours indemnifies DuPont against liabilities that may arise in the future in connection with the Chemours business, including environmental, tax and product liabilities. For additional information see Note 17 to the Annual Combined Financial Statements.

Litigation

Asbestos

At September 30, 2014, there were about 2,455 lawsuits pending against DuPont alleging personal injury from exposure to asbestos. These cases are pending in state and federal court in numerous jurisdictions in the United States and are individually set for trial. Most of the actions were brought by contractors who worked at sites at some point between 1950 and the 1990s. A small number of cases involve similar allegations by DuPont employees. A limited number of the cases were brought by household members of contractors and DuPont employees. Finally, certain lawsuits allege personal injury as a result of exposure to DuPont products. At September 30, 2014, Chemours had accruals of $40 million related to this matter.

PFOA: Environmental and Litigation Proceedings

Chemours used PFOA (collectively, perfluorooctanoic acids and its salts, including the ammonium salt), as a processing aid to manufacture some fluoropolymer resins at various sites around the world including its Washington Works plant in West Virginia. At September 30, 2014, Chemours had accruals of $14 million related to this matter.

The accrual includes charges related to DuPont’s obligations under agreements with the U. S. Environmental Protection Agency and voluntary commitments to the New Jersey Department of Environmental Protection. These obligations and voluntary commitments include surveying, sampling and testing drinking water in and around certain company sites and offering treatment or an alternative supply of drinking water if tests indicate the presence of PFOA in drinking water at or greater than the national Provisional Health Advisory.

Drinking Water Actions

In August 2001, a class action, captioned Leach v DuPont, was filed in West Virginia state court alleging that residents living near the Washington Works facility had suffered, or may suffer, deleterious health effects from exposure to PFOA in drinking water.

 

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DuPont and attorneys for the class reached a settlement in 2004 that binds about 80,000 residents. In 2005, DuPont paid the plaintiffs’ attorneys’ fees and expenses of $23 million and made a payment of $70 million, which class counsel designated to fund a community health project. Chemours, through DuPont, funded a series of health studies which were completed in October 2012 by an independent science panel of experts (the C8 Science Panel). The studies were conducted in communities exposed to PFOA to evaluate available scientific evidence on whether any probable link exists, as defined in the settlement agreement, between exposure to PFOA and human disease.

The C8 Science Panel found probable links, as defined in the settlement agreement, between exposure to PFOA and pregnancy-induced hypertension, including preeclampsia; kidney cancer; testicular cancer; thyroid disease; ulcerative colitis; and diagnosed high cholesterol.

In May 2013, a panel of three independent medical doctors released its initial recommendations for screening and diagnostic testing of eligible class members. In September 2014, the medical panel recommended follow-up screening and diagnostic testing three years after initial testing, based on individual results. The medical panel has not communicated its anticipated schedule for completion of its protocol. Through DuPont, Chemours is obligated to fund up to $235 million for a medical monitoring program for eligible class members and, in addition, administrative cost associated with the program, including class counsel fees. In January 2012, Chemours, through DuPont, put $1 million in an escrow account to fund medical monitoring as required by the settlement agreement. The court appointed Director of Medical Monitoring has established the program to implement the medical panel’s recommendations. Under the program, notice has been given and the registration process, as well as eligibility screening, to participate in diagnostic testing has begun. At each of September 30, 2014 and December 31, 2013, no money has been disbursed from the fund.

In addition, under the settlement agreement, DuPont must continue to provide water treatment designed to reduce the level of PFOA in water to six area water districts, including the Little Hocking Water Association (LHWA), and private well users.

Class members may pursue personal injury claims against DuPont only for those human diseases for which the C8 Science Panel determined a probable link exists. Class members began filings lawsuits alleging such claims in 2012. At September 30, 2014, there were approximately 2,545 lawsuits filed in various federal and state courts in Ohio and West Virginia, an increase of about 2,460 and 2520, respectively over December 31, 2013 and 2012. In accordance with a stipulation reached in the third quarter 2014 and other court procedures, these lawsuits have been or will be served and consolidated in multi-district litigation in Ohio federal court (MDL). The majority of the lawsuits allege personal injury claims associated with high cholesterol and thyroid disease from exposure to PFOA in drinking water. There are 18 lawsuits alleging wrongful death. In the third quarter 2014, six plaintiffs from the MDL were selected for individual trial. The first trial is scheduled to begin in September 2015, and the second in November 2015. Chemours, through DuPont, denies the allegations in these lawsuits and is defending itself vigorously.

Additional Actions

An Ohio action brought by the LHWA is ongoing. In addition to general claims of PFOA contamination of drinking water, the action claims “imminent and substantial endangerment to health and or the environment” under the Resource Conservation and Recovery Act (RCRA). In the second quarter 2014, DuPont filed a motion for summary judgment which if granted, will be dispositive of this matter. The LHWA has moved for partial summary judgment. Chemours, through DuPont, denies these claims and is defending itself vigorously.

While it is probable that the company will incur costs related to the medical monitoring program, such costs cannot be reasonably estimated due to uncertainties surrounding the level of participation by eligible class members and the scope of testing. Chemours believes that it is reasonably possible that it could incur losses related to the other PFOA matters discussed above; however, a range of such losses, if any, cannot be reasonably estimated at this time.

 

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Environmental Proceedings

Chambers Works Plant, Deepwater, New Jersey

In 2010, the government initiated an enforcement action alleging that the facility violated recordkeeping requirements of certain provisions of the CAA and the Federal Clean Air Act Regulations (FCAR) governing Leak Detection and Reporting (LDAR) and that it failed to report emissions of a compound from Chambers Works’ waste water treatment facility under EPCRA. The alleged non-compliance was identified by EPA in 2007 and 2009 following separate environmental audits. DuPont is in settlement negotiations with EPA and DOJ.

 

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MANAGEMENT

Executive Officers Following the Distribution

The following sets forth information regarding individuals who are expected to serve as our executive officers, including their positions after the distribution. Additional executive officers will be selected prior to the distribution to serve as executive officers after the distribution, and information concerning those executive officers will be included in an amendment to this information statement. While some of these individuals currently serve as officers and employees of DuPont, after the distribution, none of our executive officers will be executive officers or employees of DuPont.

Mark P. Vergnano, age 56, will serve as our President and Chief Executive Officer. In October 2009, Mr. Vergnano was appointed Executive Vice President and was responsible for businesses in the Chemours segment: DuPont Chemicals & Fluoroproducts and Titanium Technologies. Prior to that, he had several assignments in manufacturing, technology, marketing, sales and business strategy. In June 2006, he was named Group Vice President of DuPont Safety & Protection. In February 2003, he was named Vice President and General Manager — Nonwovens and Vice President and General Manager — Surfaces and Building Innovations in October 2005. Mr. Vergnano joined DuPont in 1980 as a process engineer.

Mark E. Newman, age 51, will serve as our Senior Vice President and Chief Financial Officer. Mr. Newman joined Chemours in November 2014 from SunCoke Energy where he was SunCoke Energy’s Senior Vice President and Chief Financial Officer and led its financial, strategy, business development and information technology functions. Mr. Newman joined SunCoke’s leadership team in March 2011 to help drive SunCoke’s separation from its parent company, Sunoco, Inc. He led SunCoke through an initial public offering and championed a major restructuring of SunCoke, which resulted in the initial public offering of SunCoke Energy Partners in January 2013, creating the first coke-manufacturing master limited partnership. Prior to joining SunCoke, Mr. Newman served as Vice President Remarketing & Managing Director of SmartAuction, Ally Financial Inc (previously General Motors Acceptance Corporation). Mr. Newman began his career at General Motors in 1986 as an Industrial Engineer and progressed through several financial and operational leadership roles within the global automaker, including Vice President and Chief Financial Officer of Shanghai General Motors Limited; Assistant Treasurer of General Motors Corporation; and North America Vice President and CFO.

Boo Ching (B.C.) Chong, age 53, will serve as our President — Titanium Technologies. Mr. Chong was named president — DuPont Titanium Technologies in January 2011. In October 2009, he was named vice president — DuPont Performance Coatings, Asia Pacific. In July 2008, he was named vice president and general manager of DuPont Automotive OEM Coatings. From 2004 to 2007, he was global business director — DuPont Packaging & Industrial Polymers, Ethylene Copolymers. Mr. Chong was named vice president and general manager — DuPont Packaging & Industrial Polymers in June 2007. From 2001 to 2003, he was global business director for Delrin® polyacetal and Asia Pacific regional director for Engineering Polymers before assuming the additional role of managing director for DuPont in Singapore. Mr. Chong joined DuPont in 1989 in Singapore as operations manager for DuPont Engineering Polymers.

Thierry F.J. Vanlancker, age 50, will serve as our President — Fluoroproducts. Mr. Vanlancker was named president — DuPont Chemicals & Fluoroproducts in May 2012. He was named vice president for DuPont Performance Coatings — EMEA in November 2010. In 2006, he moved to Wilmington, Delaware to serve as global business and market director — Fluorochemicals. In 2004, after two years as sales manager for all Refinish Brands EMEA, he was appointed as regional director — Fluoroproducts EMEA based in Geneva, Switzerland. He moved to Belgium in 1999 to be part of the Herberts Acquisition/Integration Team within the newly formed DuPont Performance Coatings business and in 2000 was appointed business manager for the Spies Hecker Refinish paint brand based in Cologne, Germany. In 1996, he transferred to Wilmington, Delaware as global technical service manager for P&IP and was appointed global product manager Vamac® ethylene acrylic

 

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elastomers in 1998. In 1993 he transferred to Bad Homburg, Germany, and was appointed market development consultant for P&IP Europe, Middle East & Africa (EMEA). Mr. Vanlancker joined DuPont in 1988 in Belgium as a sales representative.

Christian W. Siemer, age 56, will serve as our President — Chemical Solutions. Mr. Siemer joined DuPont in 2010 as the Managing Director of Clean Technologies, a business unit of DuPont Sustainable Solutions focused on process technology development and licensing. He led the successful acquisition of MECS Inc., the global leader in technology for the production of sulfuric acid. Mr. Siemer began his career in 1980 with Stauffer Chemicals as a process engineer. Following Stauffer’s acquisition by ICI plc, Mr. Siemer moved through a range of commercial roles and overseas assignments managing portfolios of international industrial and specialty chemical businesses.

David C. Shelton, age 51, will serve as our General Counsel and Corporate Secretary. In 2011, Mr. Shelton was appointed Associate General Counsel, DuPont, and was responsible for the US Commercial team — the business lawyers and paralegals counseling all the DuPont business units with the exception of Agriculture and Pioneer. Since 2002, Mr. Shelton was the Commercial attorney to a variety of DuPont businesses including the Performance Materials platform, which he advised on international assignment in Geneva, and the businesses now comprising the DuPont Chemicals and Fluoroproducts business unit. Prior to that, Mr. Shelton advised the company on environmental and remediation matters as part of the environmental legal team. Mr. Shelton joined DuPont in 1996, after seven years in private practice as a litigator in Pennsylvania and New Jersey.

E. Bryan Snell, age 58, will serve as Senior Vice President — Corporate Strategy and Productivity. Mr. Snell was appointed Planning Director — DuPont Performance Chemicals in May, 2014. Prior to that, he held leadership positions in DuPont Titanium Technologies, including Planning Director (2011-12 in Wilmington, DE and 2012-13 in Singapore) and Global Sales and Marketing Director (2008-2010). Mr. Snell served as Regional Operations Director — DuPont Coatings and Color Technologies Platform in 2007 and 2008. He was posted in Taiwan from 2002 to 2006, in the roles of Plant Manager — Kuan Yin Plant and Asia/Pacific Regional Director, DuPont Titanium Technologies. Mr. Snell joined DuPont in 1978 as a process engineer and has experience in nuclear and petrochemical operations, as well as sales, business strategy and M&A.

Beth Albright, age 47, will serve as our Senior Vice President Human Resources. Mrs. Albright joined DuPont in Oct 2014. She became Senior Vice-President Human Resources for Day & Zimmermann in May 2011. In July 2009 she took her first top Human Resources role as the Global Vice President Human Resources for Tekni-Plex. She joined Rohm and Haas in 2000 and held various Human Resources supporting global businesses, technology, manufacturing and staff functions. In 1995 she joined FMC as site Human Resources manager at a manufacturing site and progressed into the corporate office. Mrs. Albright began her career with Fluor Daniel Construction in their Industrial Relations department in 1989.

Board of Directors Following the Distribution

The following sets forth information with respect to those persons who are expected to serve on our Board of Directors following the distribution. We may name and present additional nominees for election prior to the distribution. After the distribution, none of these individuals will be directors or employees of DuPont.

Upon completion of the distribution, Chemours’ board of directors will be divided into three classes, each comprised of three directors. The directors designated as Class I directors will have terms expiring at the first annual meeting of stockholders following the distribution, which Chemours expects to hold in 2016. The directors designated as Class II directors will have terms expiring at the following year’s annual meeting of stockholders, which Chemours expects to hold in 2017, and the directors designated as Class III directors will have terms expiring at the following year’s annual meeting of stockholders, which Chemours expects to hold in 2018. Chemours expects that Class I will directors will be comprised of []; Class II directors will be comprised

 

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of []; and Class III directors will be comprised of []. Commencing with the first annual meeting of stockholders following the separation, directors for each class will be elected at the annual meeting of stockholders held in the year in which the term for that class expires and thereafter will serve for a term of three years. At any meeting of stockholders for the election of directors at which a quorum is present, the election will be determined by a majority of the votes cast by the stockholders entitled to vote in the election, with directors not receiving a majority of the votes cast required to tender their resignations for consideration by the board, expect that in the case of a contested election, the election will be determined by a plurality of the votes cast by the stockholders entitled to vote in the election.

We are in the process of identifying individuals who will serve on our board of directors following the distribution, and we expect to provide information regarding these individuals in an amendment to this information statement.

Director Independence

It is anticipated that all of our Board of Directors, except our Chief Executive Officer, who will be an employee of Chemours, will meet the criteria for independence as defined by the rules of the NYSE and the corporate governance guidelines to be adopted by the Board of Directors. The corporate governance guidelines, including our independence standards, will be posted to our website prior to the completion of the distribution.

Committees of the Board of Directors

Effective upon the completion of the distribution, our Board of Directors will have the following standing committees: an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Our Board of Directors will adopt a written charter for each of these committees, which will be posted on our website.

Audit Committee

The responsibilities of the Audit Committee will be more fully described in our Audit Committee Charter and will include, among other duties:

 

    Reviewing annual audited and quarterly financial statements, as well as our disclosures under “Management’s Discussion and Analysis of Financial Conditions and Results of Operations,” with management and the independent auditors.

 

    Obtaining and reviewing periodic reports, at least annually, from management assessing the effectiveness of our internal controls and procedures for financial reporting.

 

    Reviewing our processes to assure compliance with all applicable laws, regulations and corporate policy.

 

    Recommending the public accounting firm to be proposed for appointment by the stockholders as our independent auditors and review the performance of the independent auditors.

 

    Reviewing the scope of the audit and the findings and approve the fees of the independent auditors.

 

    Satisfying itself as to the independence of the independent auditors and ensuring receipt of their annual independence statement.

 

    Reviewing proposed borrowings and issuances of securities.

 

    Recommending to the Board of Directors the dividends to be paid on our common stock.

 

    Reviewing cash management policies.

The Audit Committee will consist entirely of independent directors, and we intend that each will meet the independence requirements set forth in the listing standards of NYSE and Rule 10A under the Exchange Act. Each member of the Audit Committee will be financially literate and have accounting or related financial

 

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management expertise, as such terms are interpreted by our Board of Directors in its business judgment. Additionally, at least one member of the Audit Committee will be an “audit committee financial expert” under SEC rules and the NYSE listing standards applicable to audit committees. The initial members of the Audit Committee will be determined prior to the completion of the distribution.

Compensation Committee

The responsibilities of the Compensation Committee will be more fully described in our Compensation Committee Charter and will include, among other duties:

 

    Assessing current and future senior leadership talent, including assisting our Board of Directors in Chief Executive Officer succession planning.

 

    Reviewing and approving our programs for executive development, performance and skill evaluations.

 

    Overseeing the performance evaluation of the Chief Executive Officer based on input from other independent directors.

 

    Recommending, for approval by the independent directors, Chief Executive Officer compensation.

 

    Recommending and approving the principles guiding our executive compensation and benefits plans.

 

    Reviewing our incentive compensation arrangements to determine whether they encourage excessive risk-taking, and evaluating compensation policies and practices that could mitigate any such risk.

 

    Working with management to develop the Compensation Discussion and Analysis in regard to executive compensation disclosure.

 

    Considering the voting results of any say-on-pay or related stockholder proposals.

The Compensation Committee will consist entirely of independent directors, and we intend that each will meet the independence requirements set forth in the listing standards of NYSE. We also intend the members of the Compensation Committee to be “non-employee directors” (within the meaning of Rule 16b-3 of the Exchange Act) and “outside directors” (within the meaning of Section 162(m) of the Code). The initial members of the Compensation Committee will be determined prior to the completion of the distribution.

Nominating and Corporate Governance Committee

The responsibilities of the Nominating and Corporate Governance Committee will be more fully described in our Nominating and Corporate Governance Committee Charter and will include, among other duties:

 

    Identifying individuals qualified to become directors and recommend the candidates for all directorships.

 

    Recommending individuals for election as officers.

 

    Reviewing our Corporate Governance Guidelines and making recommendations for changes.

 

    Considering questions of independence and possible conflicts of interest of directors and executive officers.

 

    Taking an oversight role in shaping our policies and procedures.

The Nominating and Corporate Governance Committee will consist entirely of independent directors, and we intend that each will meet the independence requirements set forth in the listing standards of NYSE. The initial members of the Nominating and Corporate Governance Committee will be determined prior to the completion of the distribution.

 

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Stockholder Recommendations for Director Nominees and Director Qualification Standards

The Chemours Nominating and Corporate Governance Committee considers potential candidates suggested by Board members, as well as management, stockholders and others.

The Board’s Corporate Governance Guidelines describe qualifications for directors. Directors are selected for their integrity and character; sound, independent judgment; breadth of experience, insight and knowledge; and business acumen. Leadership skills, scientific or technology expertise, familiarity with issues affecting global businesses, prior government service, and diversity are among the relevant criteria, which will vary over time depending on the needs of the Board. Additionally, directors are expected to be willing and able to devote the necessary time, energy and attention to assure diligent performance of their responsibilities.

When considering candidates for nomination, the Committee takes into account these factors to assure that new directors have the highest personal and professional integrity, have demonstrated exceptional ability and judgment and will be most effective, in conjunction with other directors, in serving the long-term interest of all stockholders. The Committee will not nominate for election as a director a partner, member, managing director, executive officer or principal of any entity that provides accounting, consulting, legal, investment banking or financial advisory services to Chemours.

The Committee will consider candidates for director suggested by stockholders, applying the factors for potential candidates described above and taking into account the additional information described below. Stockholders wishing to suggest a candidate for director should write to the Corporate Secretary and include: (i) a statement that the writer is a stockholder of record (or providing appropriate support of ownership of Chemours stock); (ii) the name of and contact information for the candidate; (iii) a statement of the candidate’s business and educational experience; (iv) information regarding each of the factors described above in sufficient detail to enable the Committee to evaluate the candidate; (v) a statement detailing any relationship between the candidate and any customer, supplier or competitor of Chemours or any other information that bears on potential conflicts of interest, legal considerations or a determination of the candidate’s independence; (vi) information concerning service as an employee, officer or member of a board of any charitable, educational, commercial or professional entity; (vii) detailed information about any relationship or understanding between the proposing stockholder and the potential candidate; and (viii) a statement by the potential candidate that s/he is willing to be considered and to serve as a director if nominated and elected.

Once the Committee has identified a prospective candidate, the Committee makes an initial determination as to whether to conduct a full evaluation of the candidate. This initial determination is based on whatever information is provided to the Committee with the recommendation of the prospective candidate, as well as the Committee’s own knowledge of the prospective candidate. This may be supplemented by inquiries to the person making the recommendation or others. The preliminary determination is based primarily on the likelihood that the prospective nominee can satisfy the factors described above. If the Committee determines, in consultation with the Chair of the Board and other Board members as appropriate, that further consideration is warranted, it may gather additional information about the prospective nominee’s background and experience.

The Committee also considers other relevant factors as it deems appropriate, including the current composition of the Board and specific needs of the Board to assure its effectiveness. In connection with this evaluation, the Committee determines whether to interview the prospective nominee. One or more members of the Committee and other directors, as appropriate, may interview the prospective nominee in person or by telephone. After completing this evaluation, the Committee concludes whether to make a recommendation to the full Board for its consideration.

Compensation Committee Interlocks and Insider Participation

During fiscal 2014, Chemours did not exist and did not have a compensation committee or any other committee serving a similar function. Decisions as to the compensation of those who currently serve as our executive officers were made by DuPont, as described in “Compensation Discussion and Analysis.”

 

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Corporate Governance Guidelines

Our Board of Directors will adopt governance guidelines designed to assist Chemours and our Board of Directors in implementing effective corporate governance practices. The governance guidelines will be reviewed regularly by the Nominating and Corporate Governance Committee in light of changing circumstances in order to continue serving our best interests and the best interests of our stockholders.

Communications with the Board of Directors and Procedures for Treatment of Complaints Regarding Accounting, Internal Accounting Controls and Auditing Matters

Stockholders and other parties interested in communicating directly with the Board, Chair, Lead Director or other outside director may do so by writing in care of the Corporate Secretary, []. The Board’s independent directors have approved procedures for handling correspondence received by Chemours and addressed to the Board, Chair, Lead Director or other outside director. Concerns relating to accounting, internal controls, auditing or ethical matters are immediately brought to the attention of the internal audit function and handled in accordance with procedures established by the Audit Committee with respect to such matters, which include an anonymous toll-free hotline ([]) and a website through which to report issues [(https:[]).]

Board Leadership Structure

Our governing documents allow the roles of Chairman and CEO to be filled by the same or different individuals. This approach allows the Board flexibility to determine whether the two roles should be separated or combined based upon our needs and the Board’s assessment of our leadership from time to time. It is expected that the Board will regularly consider the advantages of having an independent chairman and a combined chairman and CEO and is open to different structures as circumstances may warrant.

At this time, the Board believes that separating the roles of chairman and CEO serves the best interests of Chemours and its stockholders. By having an independent chairman, the CEO can focus primarily on our business strategy and operations at a time when Chemours becomes an independent, publicly traded company. While our CEO and senior management, working with the Board, set the strategic direction for Chemours and our CEO provides day-to-day leadership, the independent Chairman leads the Board in the performance of its duties and serves as the principal liaison between the independent directors and the CEO.

Code of Ethics

The Board has adopted a Code of Business Conduct and Ethics for Directors. In addition, Chemours has a Code of Conduct applicable to all Chemours employees, including executive officers, and a Code of Ethics for the Chief Executive Officer, Chief Financial Officer and Controller.

Director Compensation

Following the distribution, director compensation will be determined by our Board of Directors with the assistance of its Nominating and Corporate Governance Committee. It is anticipated that such compensation will consist of the following:

 

    a cash retainer in the amount of $[] per year and

 

    an initial equity award of restricted stock units with a grant date fair value of approximately $[].

In addition, we anticipate that the Chairman of our Board of Directors will receive an additional cash retainer in the amount of $[] per year and that the chairs of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee will receive an additional cash retainer in the amount of $[], $[] and $[] per year, respectively. We will not provide directors who are also our employees any additional compensation for serving as a director.

 

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Stock Ownership Guidelines

We expect to adopt stock ownership guidelines for directors that will require them to hold all annual equity awards until retirement or, at their election, until a later time as described below under “Management — Director Compensation — Deferred Compensation.”

Deferred Compensation

Under the Chemours Stock Accumulation and Deferred Compensation Plan for Directors we expect to adopt, a director will be eligible to defer all or part of his or her Board retainer and committee chair fees in cash or stock units until retirement as a director or until a specified year after retirement. Interest will accrue on deferred cash payments, and dividend equivalents will accrue on deferred stock units. This deferred compensation will be an unsecured obligation of the company.

 

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COMPENSATION DISCUSSION AND ANALYSIS

While Chemours has discussed its anticipated executive compensation programs and policies with the Human Resources & Compensation Committee of DuPont’s Board of Directors (the DuPont Compensation Committee), those programs and policies remain subject to review and approval by Chemours’ own Compensation Committee. Chemours is currently a part of DuPont, and its Compensation Committee has not yet been formed. Accordingly, this Compensation Discussion and Analysis (CD&A) discusses DuPont’s historical compensation programs as applied to certain individuals who are expected to be our “named executive officers” and outlines certain aspects of Chemours’ anticipated post-distribution compensation structure for those individuals.

For purposes of this CD&A, we refer to the following individuals as our “named executive officers” (or NEOs):

 

    Mark P. Vergnano, who is expected to serve as our President and Chief Executive Officer (CEO).

 

    Mark E. Newman, who is expected to serve as our Senior Vice President and Chief Financial Officer.

 

    Our three most highly paid other executive officers based on compensation earned during 2014 from DuPont.

Because 2014 is not yet over, and thus total compensation for 2014 has not yet been determined, it is not yet possible to identify our NEOs other than Mr. Vergnano and Mr. Newman, and it is not yet possible to describe all of the 2014 compensation our NEOs will have received from DuPont. Accordingly, additional information regarding the 2014 compensation of our NEOs will be provided by amendment to the registration statement on Form 10 of which this information statement is a part.

I. Compensation Philosophy and Design Principles

We expect our executive compensation program upon the distribution will generally include the same elements as DuPont’s executive compensation programs. Following the distribution, our Compensation Committee will review all aspects of compensation and may make adjustments that it believes are appropriate in structuring our executive compensation arrangements.

DuPont’s compensation programs are designed and administered around the following core principles:

 

  1. Establish a strong link between pay and performance

 

  2. Align executives’ interests with stockholders’ interests

 

  3. Reinforce business strategies and drive long-term sustained stockholder value

 

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Consistent with these principles, the DuPont Compensation Committee has adopted executive compensation programs with a strong link between pay and achievement of short and long-term goals. The primary elements of the DuPont executive compensation programs are:

 

   

Total Direct Compensation

Pay Element

  Description of Element

Base salary

  Fixed cash compensation.
Short-term incentive (STIP) awards   Annual cash incentive compensation where any award is based on performance, which for 2013 was measured against pre-defined annual operating earnings per share, after-tax operating income, revenue, cash flow from operations, dynamic planning factor, as well as individual performance goals.
Long-term incentive (LTI) awards   Performance-based long-term incentive compensation that is aligned with DuPont’s stock price and is awarded in the form of stock options, restricted stock units (RSUs) and performance stock units (PSUs). The vesting of PSUs granted in 2013 was based upon DuPont’s revenue growth (intermediate-term) and total stockholder return relative to companies in its peer group.

Consistent with a pay-for-performance philosophy, more than two-thirds of targeted total direct compensation for DuPont executive officers is contingent upon performance and, therefore, fluctuates with financial results and share price.

II. Compensation Decision Making Process

Following the distribution, we expect our Board of Directors will adopt a Compensation Committee Charter that initially will grant our Compensation Committee similar responsibilities to those of the DuPont Compensation Committee. Our Compensation Committee Charter will include the authority to retain an independent advisor for the purpose of reviewing and providing guidance related to executive compensation programs.

 

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Summarized in the table below are oversight responsibilities for DuPont’s executive compensation programs. We expect our allocation of responsibilities will initially be similar.

 

DuPont Compensation Committee

 

•    Establishes executive compensation philosophy

 

 

•    Approves incentive compensation programs and target performance expectations for STIP and PSU awards

 

 

•    Approves all compensation actions for the executive officers, other than the CEO, including base salary, target and actual STIP, LTI grants, and target and actual PSU awards

 

 

•    Recommends to the full Board compensation actions for the CEO, including base salary, target and actual STIP, LTI grant, and target and actual PSU awards

All Independent Board Members

 

•    Assess performance of the CEO

 

 

•    Approve all compensation actions for the CEO, including base salary, target and actual STIP, LTI grant, and target and actual PSU awards

Independent Advisor

 

•    Provides independent advice, research, and analytical services on a variety of subjects, including compensation of executive officers, nonemployee director compensation and executive compensation trends

 

 

•    Participates in DuPont Compensation Committee meetings as requested and communicates with the Chair of such committee between meetings

 

CEO

 

•    Provides a performance assessment of the other executive officers

 

 

•    Recommends compensation targets and actual awards for the other executive officers

We expect our Compensation Committee with the assistance of its compensation advisor will make reference to published compensation surveys and peer group practices in determining appropriate NEO compensation practices. We expect the Chemours peer group will initially include the following companies (though the list of companies is subject to the approval of, and change by, our Compensation Committee after the distribution): PPG Industries Inc., Ecolab Inc., Praxair, Inc., Huntsman Corporation, The Sherwin-Williams Company, Air Products & Chemicals, Inc., Eastman Chemcial Company, The Mosaic Company, Ashland Inc., Celanese Corporation, Axiall Corporation, RPM International Inc., Valspar Corporation, Polyone Corporation and W. R. Grace & Co.

 

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III. Compensation Program Description

The following table summarizes the elements, objectives, risk mitigation factors and other key features of DuPont’s total direct compensation program for officers. We expect similar features will initially apply to our NEO compensation program. Following the distribution, our Compensation Committee will review the compensation programs and may make certain changes to align them with our compensation philosophy and their view of our business needs and strategic priorities.

 

Pay Element

 

Objective of Element Including Risk Mitigation Factors

  

How Amounts Are Determined

Base salary

 

•    Provides regular source of income for NEOs.

 

•    Provides foundation for other pay components.

 

•    To avoid encouraging excessive risk-taking, it is important that an appropriate level of cash compensation is not variable.

  

Based on wide range of factors, including market pay surveys, business results, and individual performance.

 

Targeted to market median on average (based on survey information).

STIP awards

 

•    Align executives with annual goals and objectives.

 

•    Create a direct link between executive pay and annual financial and operational performance.

 

•    Amount of compensation earned cannot exceed a maximum payout of 200% of individual target levels and is also subject to a claw-back in the event of a financial restatement or misconduct.

  

Actual payout is based on performance of company, business unit and individual.

 

Target award is approximately market median.

LTI awards

 

•    Link pay and performance — accelerate growth, profitability and stockholder return.

 

•    Align the interests of executives with stockholders.

 

•    Balance plan costs, such as accounting and dilution, with employee-perceived value, potential wealth creation opportunity and employee share ownership expectations.

  

Actual value realized is based on company performance over a 3-year time frame or linked to stock price.

 

Targeted to market median on average.

 

Performance Share Units:

•    To serve as a long-term incentive based on the achievement of pre-established performance objectives in relation to the peer group in revenue growth and total stockholder return.

 

•    Amount earned cannot exceed a maximum payout of 200% of individual target levels and is also subject to a claw-back in the event of a financial restatement or misconduct.

 

•    Overlapping performance cycles to assure sustainability of performance.

   Based on financial performance in relation to the peer group in revenue growth and total stockholder return.
 

Stock Options / Restricted Stock Units:

•    Aligns the interests of the officers and stockholders.

 

•    Awards provide a balanced approach between risk and retention.

 

•    Awards are subject to a claw-back in the event of a financial restatement or misconduct.

  

Actual value realized is linked

to stock price.

 

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In addition to the annual and long-term direct compensation programs designed to align pay with performance, DuPont provides its executives with the benefits, retirement plans, and limited perquisites summarized below. We expect these additional compensation features generally will be made available to our NEOs upon the distribution, though again all such features are subject to change by our Compensation Committee once it is established.

 

Pay Element

 

Role in Program/Objectives

 

How Amounts Are Determined

Standard benefits and retirement plans  

•    Same tax-qualified retirement, medical, dental, vacation benefit, life insurance, and disability plans provided to other employees

 

•    Nonqualified retirement plans that restore benefits above the Code limits for tax-qualified retirement plans as provided to other employees

 

•    Nonqualified deferred compensation plan that allows for deferral of base salary, STIP and LTI awards

 

 

Tax-qualified plans are targeted to peer group median

 

Nonqualified retirement plans are provided to restore benefits due to Code limits

Severance benefits (change in control)  

•    Severance benefits upon a change in control and termination (double-trigger) to ensure continuity of management in a potential change in control environment

 

•    A change in control does not automatically entitle an executive to this severance benefit. An executive must lose his/her job within two years of the change in control

 

Cash payment of two times base salary and target annual incentive (three times for the CEO)

 

Pro-rated payment of the target annual incentive for the year of termination. Financial counseling and outplacement services for two years (three for the CEO)

Limited perquisites

 

•    Very limited perquisites or personal benefits

 

•    Personal financial counseling (excluding tax preparation) at a cost of generally less than $10,000 per executive

 

IV. Other Compensation and Tax Matters

Change in Control Benefits. To ensure DuPont executives remain focused on company business during a period of potential uncertainty, DuPont has adopted certain change in control benefits. For any benefits to be earned, a change in control must occur and the executive’s employment must be terminated within two years following the change in control, either by the employer without cause or by the executive for good reason. No tax gross ups are payable under the change in control arrangements. We have not yet established any change in control benefits for our NEOs. If any such benefits are adopted, however, we expect it will be on a “double trigger” basis only and that no tax gross-ups will be payable.

Stock Ownership Guidelines. DuPont requires its executive officers to accumulate and hold shares of DuPont Common Stock with a value equal to a specified multiple of base pay. Our Compensation Committee will adopt stock ownership guidelines based on our compensation philosophy, business needs and corporate governance guidelines.

Compensation Recovery Policy (Clawbacks). DuPont has in place a compensation recovery policy that covers each current and former employee of DuPont or an affiliated company who is, or was, a grantee of incentive-based compensation. If a grantee engages in misconduct, then: (i) he/she forfeits any right to receive any future awards or other equity-based incentive compensation; (ii) DuPont may demand repayment of any awards or cash

 

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payments already received by the grantee; and (iii) the grantee is required to provide repayment within ten days following demand. We expect our Compensation Committee will adopt similar recoupment policies to ensure incentive compensation paid as the result of any fraud or intentional misconduct leading to a restatement of our financial statements, would be recoverable.

Tax Considerations. Section 162(m) of the Code generally precludes a public corporation from taking a deduction for compensation in excess of $1,000,000 for its CEO or any of its three next-highest-paid executive officers (other than the Chief Financial Officer), unless certain specific and detailed criteria are satisfied. This limitation does not apply to qualified performance-based compensation. To qualify as performance-based, compensation must, among other things, be paid pursuant to a stockholder approved plan upon the attainment of objective performance criteria. We expect our Compensation Committee will develop compensation programs and designs that allow certain variable compensation paid to our NEOs to qualify as performance-based within the meaning of Section 162(m) so as to be tax deductible. However, our Compensation Committee may choose to adopt elements of our compensation programs that would not qualify as performance-based within the meaning of Section 162(m) as it determines appropriate. In any event, the requirement for stockholder approval of our compensation programs to qualify under Section 162(m) will not apply until our first annual meeting of stockholders that occurs at least one year after the distribution (i.e. our 2017 annual meeting).

New Equity Incentive Plan

Information regarding our contemplated new equity incentive plan will be provided by amendment to the registration statement on Form 10 of which this information statement is a part.

 

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EXECUTIVE COMPENSATION

The following tables will be populated with information in regard to our NEOs for the fiscal year ending December 31, 2014 by amendment to the registration statement on Form 10 of which this information statement is a part. All of the compensation shown will relate to the compensation, if any, paid by DuPont to the NEO for 2014. We will not have paid our NEOs any compensation for 2014.

Summary Compensation Table

 

Name and Principal Position

   Year    Salary    Stock
Awards
   Option
Awards
   Non-Equity
Incentive
Plan
Compensation
   Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
   All Other
Compensation
   Total
($)
                       
                       
                       

2014 Grants of Plan-Based Awards

The following table will provide information on STIP awards, stock options, RSUs and PSUs granted in 2014 to each NEO.

 

       

 

 

Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards

 

 

 

Estimated Future Payouts
Under Equity
Incentive Plan Awards

  All
Other
Stock
Awards:
Number
of
Shares
of

Stock or
Units

(#)
  All Other
Option
Awards:
Number of
Securities

Underlying
Options

(#)
  Exercise
or Base
Price of
Option

Awards
($/Share)
  Grant
Date
Fair
Value
of
Stock

and
Option
Awards

Name

  Grant
Date
  Threshold   Target   Maximum   Threshold
(#)
  Target
(#)
  Maximum
(#)
       
                     
                     
                     
                     
                     
                     
                     
                     
                     

 

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Outstanding Equity Awards at December 31, 2014

The following table will show the number of shares underlying exercisable and unexercisable options and unvested and, as applicable, unearned RSUs and PSUs (in each case denominated in shares of DuPont Common Stock) held by our NEOs at December 31, 2014. Market or payout values in the table below will be based on the closing price of DuPont Common Stock as of December 31, 2014.

 

Name

   Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
   Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
   Option
Exercise
Price
($)
   Option
Expiration
Date
   Number of
Shares or
Units of
Stock
Held That
Have Not
Vested (#)
   Market
Value of
Shares or
Units of
Stock
Held That
Have Not
Vested ($)
   Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
(#)
   Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($)
                       
                       
                       
                       
                       
                       
                       
                       
                       
                       
                       
                       
                       
                       
                       

2014 Option Exercises and Stock Vested

The table below will show the number of shares of DuPont Common Stock acquired upon the exercise of stock options and the vesting of RSUs and PSUs during 2014.

 

     Option Awards    Stock Awards

Name

   Number of
Shares
Acquired on
Exercise

(#)
   Value
Realized
Upon Exercise
($)
   Number of
Shares
Acquired on
Vesting

(#)
   Value
Realized
Upon Vesting
($)
           
           
           

 

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Pension Benefits as of December 31, 2014

The table below will show the present value of accumulated benefits for the NEOs under the tax qualified and nonqualified pension plans of DuPont (the Pension Plan and Pension Restoration Plan, respectively), as of December 31, 2014.

 

Name

   Plan Name    Number of
Years of
Credited
Service
   Present
Value of
Accumulated
Benefit(1)
        
        
        

The Pension Plan is a tax-qualified defined benefit pension plan that covers a majority of the U.S. DuPont employees, except those hired or rehired after December 31, 2006. The Pension Plan provides employees with a lifetime retirement income based on years of service and the employees’ final average pay near retirement. The normal form of benefit for married individuals is a 50 percent qualified joint and survivor annuity. The normal form of benefit for unmarried individuals is a single life annuity, which is actuarially equivalent to the normal form for married individuals. Normal retirement age under the Pension Plan is generally age 65, and benefits are vested after five years of service. Under the provisions of the Pension Plan, employees are eligible for unreduced pensions when they meet one of the following conditions:

 

  Age 65 or older with at least five years of service

 

  Age 58 with age plus service equal to or greater than 85

 

  Permanent incapacity to perform duties, with at least 15 years of service

An employee who is not eligible for retirement with an unreduced pension is eligible for retirement with a reduced pension if he/she is age 50 with at least 15 years of service. His/her pension is reduced by the greater of five percent for every year that his/her age plus service is less than 85 or five percent for every year that his/her age is less than 58. In no event will the reduction exceed 50 percent.

The primary pension formula that applies to the DuPont executive officers provides a monthly retirement benefit equal to:

 

LOGO

Average monthly compensation is based on the employee’s three highest-paid years or, if greater, the 36 consecutive highest-paid months. Compensation for a given month includes regular compensation plus one-twelfth of an individual’s STIP award for the relevant year. Other bonuses are not included in the calculation of average monthly compensation.

If benefits provided under the Pension Plan exceed the applicable Code compensation or benefit limits, the excess benefit is paid under the Pension Restoration Plan, an unfunded nonqualified plan. Effective January 1, 2007, the form of benefit under the Pension Restoration Plan for participants not already in pay status is a lump sum. The mortality tables and interest rates used to determine lump sum payments are the Applicable Mortality Table and the Applicable Interest Rate prescribed by the Secretary of the Treasury in Section 417(e)(3) of the Code.

 

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DuPont has not granted the NEOs any extra years of credited service.

Nonqualified Deferred Compensation As of December 31, 2014

The following table will provide information on DuPont’s defined contribution or other plans that during 2014 provided for deferrals of compensation on a basis that is not tax-qualified.

 

Name

   Executive
Contributions
in 2014
   Registrant
Contributions
in 2014
   Aggregate
Earnings
in 2014
   Aggregate
Balance
as of
12/31/2014
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           

Potential Payments upon Termination or Change In Control

This section will provide information on the compensation and benefits that would have been provided to the NEOs had a change in control of DuPont occurred on December 31, 2014 or had their employment terminated on that date under certain specified circumstances. All of the compensation will be compensation, if any, that would have been paid under DuPont arrangements applicable to the NEOs at that time (exclusive of plans that are generally available to all salaried employees and that do not discriminate in scope, terms, or operation in favor of executive officers). The amounts to be shown will not necessarily be indicative of what we will pay under similar circumstances because we have not yet determined what change in control or termination plans we will adopt and because in any event a wide variety of factors can affect payment amounts, which as a result can be determined with certainty only when an actual change in control or termination event occurs.

 

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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

Review and Approval of Transactions with Related Persons

Our board of directors is expected to adopt written policies and procedures relating to the approval or ratification of “Related Person Transactions.” Under the policies and procedures, the Governance Committee (or its Chair, under some circumstances) will review the relevant facts of all proposed Related Person Transactions and either approve or disapprove of the entry into the Related Person Transaction, by taking into account, among other factors it deems appropriate: (i) the commercial reasonableness of the transaction; (ii) the materiality of the Related Person’s direct or indirect interest in the transaction; (iii) whether the transaction may involve a conflict of interest, or the appearance of one; (iv) whether the transaction was in the ordinary course of business; and (v) the impact of the transaction on the Related Person’s independence under the Corporate Governance Guidelines and applicable regulatory and listing standards.

No director will participate in any discussion or approval of a Related Person Transaction for which he/she or any of his/her immediate family members is the Related Person. Related Person Transactions will be approved or ratified only if they are determined to be in the best interests of us and our stockholders.

If a Related Person Transaction that has not been previously approved or previously ratified is discovered, the Related Person Transaction will be presented to the Governance Committee for ratification. If the Governance Committee does not ratify the Related Person Transaction, then we either ensures all appropriate disclosures regarding the transaction are made or, if appropriate, takes all reasonable actions to attempt to terminate its participation in the transaction.

It is expected that under our policies and procedures to be adopted, a “Related Person Transaction” will generally be include any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships in which: (i) we were, are or will be a participant;(ii) the aggregate amount involved exceeds $[] in any fiscal year; and (iii) any Related Person had, has or will have a direct or indirect material interest.

It is expected that under our policies and procedures to be adopted, a “Related Person” will generally be any person who is, or at any time since the beginning of our last fiscal year was: (i) a director or an executive officer of us or a nominee to become a director of us; (ii) any person who is known to be the beneficial owner of more than five percent of any class of our outstanding common stock; or (iii) any immediate family member of any of the persons mentioned above.

Our Governance Committee will be charged with reviewing issues involving independence and all Related Person Transactions. It is expected that we and our subsidiaries may purchase products and services from and/or sell products and services to companies of which certain of our directors or executive officers, or their immediate family members, are employees. The Governance Committee and our board of directors will have reviewed such transactions and relationships and make a determination as to the materiality of such transactions.

Restrictions on Certain Types of Transactions

We expect to adopt a policy that prohibits directors and officers from engaging in the following types of transactions with respect to our stock: short-term trading; short sales; hedging transactions; margin accounts and pledging securities. This policy will also strongly recommend that all other employees refrain from entering into these types of transactions.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Before the distribution, all of the outstanding shares of our common stock will be owned beneficially and of record by DuPont. The following table sets forth information with respect to the expected beneficial ownership of our common stock by: (1) each person who is known by us who will beneficially own more than five percent of our common stock, (2) each expected director, director nominee and named executive officers and (3) all of our expected directors, director nominees and executive officers as a group. Except as noted below, we based the share amounts on each person’s beneficial ownership of DuPont common stock on [], 2015, giving effect to a distribution ratio of [] shares of our common stock for each common stock of DuPont. Immediately following the distribution, we estimate that [] million of our shares of common stock will be issued and outstanding based on DuPont common stock expected to be outstanding as of the record date. The actual number of our outstanding shares of our common stock following the distribution will be determined on [], 2015, the record date.

Security Ownership of Certain Beneficial Owners

Based solely on the information filed on Schedule 13G for the year ended December 31, 2013, reporting beneficial ownership of DuPont common stock, we anticipate the following stockholders will beneficially own more than five percent of our common stock following the distribution.

 

Name and Address of Beneficial Owner

   Number of Shares of
DuPont Common Stock
    Number of Share
of Our Common Stock
   Percent of
Shares
Outstanding
 

Blackrock, Inc.

40 East 52nd Street

New York, NY 10022

     57,492,034 (1)         6.20 (1) 

The Vanguard Group

100 Vanguard Blvd.

Malvern, PA 19355

     47,220,623 (2)         5.09 (2) 

 

(1) Based solely on Schedule 13G/A filed with the Securities and Exchange Commission on February 10, 2014, Blackrock, Inc., reported that it has sole voting power with respect to 46,909,081 shares and sole dispositive power with respect to 57,492,034 shares as of December 31, 2013.
(2) Based solely on a Schedule 13G filed with the Securities and Exchange Commission on February 12, 2014, The Vanguard Group reported it has sole voting power with the respect to 1,511,866 shares, sole dispositive power with respect to 45,804,463 shares, and shared dispositive power with respect to 1,416,160 shares as of December 31, 2013.

Security Ownership of Directors and Executive Officers

The following table provides information regarding beneficial ownership of our named executive officers, our expected directors, direct nominees and all of our expected directors, director nominees and executive officers as a group.

 

     Amount and Nature of Beneficial
Ownership (Number of Shares)
 

Name

   Direct(1)    Indirect(2)    Right to
Acquire(3)
   Total    Percent of
Class
 

Mark P. Vergnano(4)

                 *   

Mark E. Newman(5)

                 *   

Directors and Officers as a Group

                 *   

 

* Less than one percent
(1) These shares are held individually or jointly with others, or in the name of a bank, broker or nominee for the individual’s account.

 

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(2) This column includes other shares over which directors and executive officers have or share voting or investment power, including shares directly owned by certain relatives with whom they are presumed to share voting and/or investment power, and shares held under the RSP.
(3) This column includes shares which directors and executive officers had a right to acquire beneficial ownership of within 60 days from December 31, 2013, through the exercise of stock options or through the conversion of RSUs or deferred stock units granted or held under DuPont’s equity-based compensation plans.
(4) Mr. Vergnano’s share ownership includes: [].
(5) Mr. Newman’s share ownership includes: [].

 

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OUR RELATIONSHIP WITH DUPONT FOLLOWING THE DISTRIBUTION

Following the separation, we and DuPont will operate separately, each as an independent public company. Prior to the separation, we and DuPont will enter into certain agreements that will effect the separation, provide a framework for our relationship with DuPont after the separation and provide for the allocation between us and DuPont of DuPont’s assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after our separation from DuPont. The following is a summary of the terms of the material agreements that we intend to enter into with DuPont prior to the separation. When used in this section, “distribution date” refers to the date on which DuPont distributes our common stock to the holders of DuPont common stock.

The material agreements described below will be filed as exhibits to the registration statement on Form 10 of which this information statement is a part, and the summaries of each of these agreements set forth the terms of the agreements that we believe are material. These summaries are qualified in their entireties by reference to the full text of the applicable agreements, which are incorporated by reference into this information statement. The terms of the agreements described below that will be in effect following the separation have not yet been finalized; changes to these agreements, some of which may be material, may be made prior to our separation from DuPont.

Separation Agreement

We intend to enter into a Separation Agreement with DuPont prior to the distribution of our common stock to DuPont stockholders. The Separation Agreement will set forth our agreements with DuPont regarding the principal actions to be taken in connection with the separation. It will also set forth other agreements that govern certain aspects of our relationship with DuPont following the separation and distribution. This summary of the Separation Agreement is qualified in its entirety by reference to the full text of the agreement, which is incorporated by reference into this information statement.

Transfer of Assets and Assumption of Liabilities. The Separation Agreement will identify assets to be transferred, liabilities to be assumed and contracts to be assigned to each of DuPont and us as part of the internal reorganization transaction described herein, and will describe when and how these transfers, assumptions and assignments will occur, though many of the transfers, assumptions and assignments will have already occurred prior to the parties’ entering into the Separation Agreement. The Separation Agreement will provide for those transfers of assets and assumptions of liabilities that are necessary in connection with the separation so that we and DuPont retain the assets necessary to operate our respective businesses and retain or assume the liabilities allocated in accordance with the separation. The Separation Agreement will also provide for the settlement or extinguishment of certain liabilities and other obligations between us and DuPont. In particular, the Separation Agreement will provide that, subject to the terms and conditions contained in the Separation Agreement:

 

    All of the assets, including the equity interests of our subsidiaries, assets reflected on our pro forma balance sheet and assets exclusively relating to our business will be retained by or transferred to us or one of our subsidiaries, except as set forth in one of the other agreements described below.

 

    All of the liabilities (including whether accrued, contingent or otherwise, and subject to certain exceptions) primarily related to, arising out of or resulting from our business will be retained by or transferred to us or one of our subsidiaries, except as set forth in one of the other agreements described below.

 

    Liabilities (including whether accrued, contingent or otherwise) related to, arising out of or resulting from certain businesses of DuPont that were previously terminated or divested will be generally allocated among the parties to the extent formerly owned or primarily managed or otherwise operated by such parties or their respective businesses.

 

   

Liabilities (including whether accrued, contingent or otherwise) relating to environmental matters, including liabilities relating to remediation, hazardous substances and off-site liability arising from or

 

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related to our business, property or assets and certain other specified environmental liabilities, will be retained by or transferred to us or one of our subsidiaries.

 

    Liabilities (including whether accrued, contingent or otherwise) relating to legal proceedings, including actions primarily relating to or arising out our business and certain other specified actions, including with respect to PFOA, will be retained by or transferred to us or one of our subsidiaries.

 

    Liabilities (including whether accrued, contingent or otherwise) relating to, arising out of or resulting from infringement, misappropriation or other violations of any intellectual property relating to the conduct of our business will be retained by or transferred to us or one of our subsidiaries.

 

    Liabilities (including whether accrued, contingent or otherwise) relating to, arising out of or resulting from any form, registration statement, schedule or similar disclosure document filed or furnished with the U.S. Securities and Exchange Commission, to the extent the liability arising therefrom related to matters related to our business will be retained by or transferred to us or one of our subsidiaries.

 

    We will generally assume all other liability (including whether accrued, contingent or otherwise) relating to, arising out of or resulting from disclosure documents filed or furnished with the U.S. Securities and Exchange Commission that are related to the separation (including the Form 10 and this information statement).

 

    Except as expressly set forth in the Separation Agreement or any other agreements, each party shall be responsible for its own internal fees, costs and expenses incurred following the distribution date, including any costs and expenses relating to such party’s disclosure documents filed following the distribution date.

 

    All assets and liabilities (including whether accrued, contingent or otherwise) of DuPont will be retained by or transferred to DuPont or one of its subsidiaries (other than us or one of our subsidiaries), except as set forth in one of the other agreements described below and except for other limited exceptions that will result in us retaining or assuming certain other specified liabilities.

The allocation of liabilities with respect to taxes, except for payroll taxes and reporting and other tax matters expressly covered by the employee matters agreement, are solely covered by the tax matters agreement.

Except as may expressly be set forth in the Separation Agreement or any ancillary agreement, all assets will be transferred on an “as is,” “where is” basis and the respective transferees will bear the economic and legal risks that any conveyance will prove to be insufficient to vest in the transferee good title, free and clear of any security interest, that any necessary consents or governmental approvals are not obtained and that any requirements of laws or judgments are not complied with. In general, neither we nor DuPont will make any representations or warranties regarding any assets or liabilities transferred or assumed, any consents or approvals that may be required in connection with such transfers or assumptions, or any other matters.

Information in this information statement with respect to the assets and liabilities of the parties following the separation is presented based on the allocation of such assets and liabilities pursuant to the Separation Agreement, unless the context otherwise requires. Certain of the liabilities and obligations to be assumed by one party or for which one party will have an indemnification obligation under the Separation Agreement and the other agreements relating to the separation are, and following the separation may continue to be, the legal or contractu