10-Q
Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015
 
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-36794
 
The Chemours Company
(Exact Name of Registrant as Specified in Its Charter)
Delaware
 
46-4845564
(State or other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)
1007 Market Street, Wilmington, Delaware 19899
(Address of Principal Executive Offices)
 
(302) 773-1000
(Registrant’s Telephone Number)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that registrant was required to submit and post such files.)  Yes  x   No  o
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
Large Accelerated Filer o
 
Accelerated Filer o
 
 
 
Non-Accelerated Filer x
 
Smaller reporting company o
 
Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes  o   No  x

The Registrant had 180,984,614 shares of common stock, $0.01 par value, outstanding at November 3, 2015.
 
 

Table of Contents

The Chemours Company

Table of Contents
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
7 
 
 
 
 
 
 

1
Table of Contents

PART I.  FINANCIAL INFORMATION
 
Item 1.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 
The Chemours Company
Interim Consolidated Statements of Operations (Unaudited)
(Dollars in millions, except per share)
 
 
Three months ended

Nine months ended


September 30,

September 30,

 
2015

2014

2015

2014

Net sales
$
1,486


$
1,632


$
4,357


$
4,883


Cost of goods sold
1,222


1,273


3,615


3,824


Gross profit
264


359


742


1,059


Selling, general and administrative expense
157


176


481


532


Research and development expense
18


33


68


110


Employee separation and asset related charges, net
184


—


245


21


Goodwill impairment
25

 
—

 
25

 
—

 
Total expenses
384


209


819


663


Equity in earnings of affiliates
7


6


18


18


Interest expense
(51
)

—


(79
)

—


Other income, net
57


(13
)

71


16


(Loss) income before income taxes
(107
)

143


(67
)

430


(Benefit from) provision for income taxes
(78
)

35


(63
)

108


Net (loss) income
(29
)

108


(4
)

322


Less: Net income attributable to noncontrolling interests
—


1


—


1


Net (loss) income attributable to Chemours
$
(29
)

$
107


$
(4
)

$
321















Per share data












Basic (loss) earnings per share of common stock
$
(0.16
)

$
0.59

1 
$
(0.02
)

$
1.77

1 
Diluted (loss) earnings per share of common stock
$
(0.16
)

$
0.59

1 
$
(0.02
)

$
1.77

1 
Dividends per share of common stock
$
0.03


$
—


$
0.58


$
—


 1 On July 1, 2015, E. I. du Pont de Nemours and Company distributed 180,966,833 shares of Chemours' common stock to holders of its common stock. Basic and diluted (loss) earnings per common share for the three and nine months ended September 30, 2014 were calculated using the shares distributed on July 1, 2015. Refer to Note 9 for information regarding the calculation of basic and diluted earnings per share.
See accompanying notes to the interim consolidated financial statements.


2
Table of Contents

The Chemours Company
Interim Consolidated Statements of Comprehensive (Loss) Income (Unaudited)
(Dollars in millions)
 
 
Three months ended September 30,
 
2015
 
2014
 
Pre-Tax
 
Tax
 
After-Tax
 
Pre-Tax
 
Tax
 
After-Tax
Net (loss) income
$
(107
)
 
$
78

 
$
(29
)
 
$
143

 
$
(35
)
 
$
108

Other comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
Cumulative translation adjustments
(52
)
 
—

 
(52
)
 
—

 
—

 
—

Pension benefit plans, net:
 
 
 
 
 
 
 
 
 
 
 
Net gain (loss)
(3
)
 
—

 
(3
)
 
—

 
—

 
—

Prior service benefit
17

 
(2
)
 
15

 
 
 
 
 
 
Effect of foreign exchange rates
4

 
(1
)
 
3

 
—

 
—

 
—

Reclassifications to net income:
 
 
 
 
 
 
 
 
 
 
 
Amortization of prior service cost
1

 
—

 
1

 
—

 
—

 
—

Amortization of loss
4

 
(1
)
 
3

 
—

 
—

 
—

Pension benefit plans, net
23

 
(4
)
 
19

 
—

 
—

 
—

Other comprehensive loss
(29
)
 
(4
)
 
(33
)
 
—

 
—

 
—

Comprehensive (loss) income
(136
)
 
74

 
(62
)
 
143

 
(35
)
 
108

Less: Comprehensive income (loss) attributable to noncontrolling interests
—

 
—

 
—

 
—

 
—

 
—

Comprehensive (loss) income attributable to Chemours
$
(136
)
 
$
74

 
$
(62
)
 
$
143

 
$
(35
)
 
$
108


 
Nine months ended September 30,
 
2015
 
2014
 
Pre-Tax
 
Tax
 
After-Tax
 
Pre-Tax
 
Tax
 
After-Tax
Net (loss) income
$
(67
)
 
$
63

 
$
(4
)
 
$
430

 
$
(108
)
 
$
322

Other comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
Cumulative translation adjustments
(286
)
 
—

 
(286
)
 
—

 
—

 
—

Pension benefit plans, net:
 
 
 
 
 
 
 
 
 
 
 
Net gain
—

 
—

 
—

 
—

 
—

 
—

Prior service benefit
17

 
(2
)
 
15

 
—

 
—

 
—

Effect of foreign exchange rates
27

 
(7
)
 
20

 
—

 
—

 
—

Reclassifications to net income:
 
 
 
 
 
 
 
 
 
 
 
Amortization of prior service cost
3

 
—

 
3

 
—

 
—

 
—

Amortization of loss
11

 
(2
)
 
9

 
—

 
—

 
—

Pension benefit plans, net
58

 
(11
)
 
47

 
—

 
—

 
—

Other comprehensive loss
(228
)
 
(11
)
 
(239
)
 
—

 
—

 
—

Comprehensive (loss) income
(295
)
 
52

 
(243
)
 
430

 
(108
)
 
322

Less: Comprehensive income (loss) attributable to noncontrolling interests
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Comprehensive (loss) income attributable to Chemours
$
(295
)
 
$
52

 
$
(243
)
 
$
431

 
$
(108
)
 
$
323



See accompanying notes to the interim consolidated financial statements.

3
Table of Contents

The Chemours Company
Interim Consolidated Balance Sheets
(Dollars in millions) 
 
September 30,
2015
 
December 31,
2014
 
(Unaudited)
 
 
Assets
 

 
 

Current assets:
 
 
 
Cash
$
215

 
$
—

Accounts and notes receivable - trade, net
1,102

 
846

Inventories
993

 
1,052

Prepaid expenses and other
120

 
43

Deferred income taxes
51

 
21

Total current assets
2,481

 
1,962

Property, plant and equipment
9,043

 
9,282

Less: Accumulated depreciation
(5,873
)
 
(5,974
)
Net property, plant and equipment
3,170

 
3,308

Goodwill
169

 
198

Intangible assets, net
11

 
11

Investments in affiliates
154

 
124

Other assets
466

 
375

Total assets
$
6,451

 
$
5,978

Liabilities and equity
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
1,009

 
$
1,046

Current maturities of long-term debt
38

 
—

Deferred income taxes
14

 
9

Other accrued liabilities
444

 
352

Total current liabilities
1,505

 
1,407

Long-term debt
3,924

 
—

Other liabilities
553

 
464

Deferred income taxes
379

 
434

Total liabilities
6,361

 
2,305

Commitments and contingent liabilities


 


Equity
 

 
 

Common stock (par value $.01 per share; 180,968,795 shares issued and outstanding as of September 30, 2015)
2

 
—

Additional paid in capital
645

 
—

DuPont Company Net Investment, prior to separation
—

 
3,650

Retained (deficit) earnings
(30
)
 
—

Accumulated other comprehensive (loss) income
(531
)
 
19

Total Chemours stockholders' equity
86

 
3,669

Noncontrolling interests
4

 
4

Total equity
90

 
3,673

Total liabilities and equity
$
6,451

 
$
5,978

 

See accompanying notes to the interim consolidated financial statements.
 


4
Table of Contents


The Chemours Company
Interim Consolidated Statements of Stockholders' Equity (Unaudited)
Nine Months Ended September 30, 2015 and 2014
(Dollars in millions)
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares
 
Amount
 
DuPont Company Net Investment
 
Additional Paid In Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Noncontrolling Interests
 
Retained Deficit
 
Total
Balance at
January 1, 2014
 
—

 
—

 
$
3,195

 
$
—

 
$
19

 
$
3

 
$
—

 
$
3,217

Net income
 
—

 
—

 
322

 
—

 
—

 
—

 
—

 
322

Net transfers from DuPont
 
—

 
—

 
365

 
—

 
—

 
—

 
—

 
365

Balance at
September 30, 2014
 
—

 
$
—

 
$
3,882

 
$
—

 
$
19

 
$
3

 
$
—

 
$
3,904

 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
 
Balance at
January 1, 2015
 
—

 
$
—

 
$
3,650

 
$
—

 
$
19

 
$
4

 
$
—

 
$
3,673

Net income
 
—

 
—

 
25

 
—

 
—

 
—

 
(29
)
 
(4
)
Issuance of Common Stock at separation
 
180,966,833

 
2

 
—

 
(2
)
 
—

 
—

 
—

 
—

Common Stock issued - compensation plans
 
1,962

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Establishment of pension plans, net and related accumulated other comprehensive income (loss)
 
—

 
—

 
268

 
—

 
(311
)
 
—

 
—

 
(43
)
Dividend declared
 
—

 
—

 
(100
)
 
(5
)
 
—

 
—

 
—

 
(105
)
Non-cash debt exchange
 
—

 
—

 
(507
)
 
—

 
—

 
—

 
—

 
(507
)
Cash provided at separation by DuPont
 
—

 
—

 
247

 
—

 
—

 
—

 
—

 
247

Elimination of predecessor balances
 
—

 
—

 
(3,583
)
 
643

 
—

 
—

 


 
(2,940
)
Foreign currency translation adjustment
 
—

 
—

 
—

 
—

 
(286
)
 
—

 
—

 
(286
)
Pension, net of tax benefit of $11
 
—

 
—

 
—

 
—

 
47

 
—

 
—

 
47

Stock based compensation expense
 
—

 
—

 
—

 
9

 
—

 
—

 
(1
)
 
8

Balance at September 30, 2015
 
180,968,795

 
$
2

 
$
—

 
$
645

 
$
(531
)
 
$
4

 
$
(30
)
 
$
90


See accompanying notes to the interim consolidated financial statements.


5
Table of Contents

The Chemours Company
Interim Consolidated Statements of Cash Flows (Unaudited)
(Dollars in millions)
 
Nine months ended
 
September 30,
 
2015
 
2014
Operating activities
 
 
 
Net (loss) income
$
(4
)
 
$
322

Adjustments to reconcile net (loss) income to cash used for operating activities:
 

 
 

Depreciation and amortization
201

 
185

Other operating charges and credits, net
22

 
6

Equity in earnings of affiliates, net of dividends received of $0 and $1
(18
)
 
(13
)
Deferred tax benefit
(86
)
 
(26
)
Asset related charges
191

 
—

Increase in operating assets:
 
 
 
     Accounts and notes receivable - trade, net
(250
)
 
(189
)
     Inventories and other operating assets
(29
)
 
(6
)
Decrease in operating liabilities:
 
 
 
     Accounts payable and other operating liabilities
(147
)
 
(266
)
Cash (used for) provided by operating activities
(120
)
 
13

Investing activities
 

 
 

Purchases of property, plant and equipment
(392
)
 
(404
)
Proceeds from sales of assets, net
8

 
27

Foreign exchange contract settlements
61

 
—

Investment in affiliates
(32
)
 
—

Cash used for investing activities
(355
)
 
(377
)
Financing activities
 

 
 

Proceeds from issuance of debt, net
3,490

 
—

Debt repayments
(6
)
 
—

Dividends paid
(100
)
 
—

Debt issuance costs
(79
)
 
—

Payments of long-term capital lease obligations
—

 
(1
)
Cash provided at separation by DuPont
247

 
—

Net transfers (to) from DuPont
(2,857
)
 
365

Cash provided by financing activities
695

 
364

Effect of exchange rate changes on cash
$
(5
)
 
$
—

Increase in cash
$
215

 
$
—

Cash at beginning of period
—

 
—

Cash at end of period
$
215

 
$
—

 
 
 
 
SUPPLEMENTAL DISCLOSURE OF SIGNIFICANT NON-CASH INVESTING ACTIVITIES:
 
 
 
Change in property, plant and equipment included in accounts payable
$
(42
)
 
$
(11
)
 

See accompanying notes to the interim consolidated financial statements.



6
Table of Contents
The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)


Note 1. Background and Description of the Business
The Chemours Company (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 (TiO2), refrigerants, industrial fluoropolymer resins, sodium cyanide, sulfuric acid and aniline. Chemours consists of three reportable segments: Titanium Technologies, Fluoroproducts and Chemical Solutions.
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 (U.S.), Canada, Mexico, Brazil, the Netherlands, Belgium, China, Taiwan, Japan, Switzerland, Singapore, Hong Kong, India, the United Kingdom, France and Sweden. As of September 30, 2015, Chemours consists of 36 production facilities globally, five dedicated to Titanium Technologies, 17 dedicated to Fluoroproducts, 12 dedicated to Chemical Solutions and two that support multiple Chemours segments.
Effective prior to the opening of trading on the New York Stock Exchange (NYSE) on July 1, 2015 (the Distribution Date), E. I. du Pont de Nemours and Company (DuPont) completed the previously announced separation of the businesses comprising DuPont’s Performance Chemicals reporting segment, and certain other assets and liabilities, into Chemours, a separate and distinct public company. The separation was completed by way of a distribution of all of the then-outstanding shares of common stock of Chemours through a dividend in kind of Chemours’ common stock (par value $0.01) to holders of DuPont common stock (par value $0.30) as of the close of business on June 23, 2015 (the Record Date) (the transaction referred to herein as the Distribution).
On the Distribution Date, each holder of DuPont's common stock received one share of Chemours' common stock for every five shares of DuPont's common stock held on the Record Date. The spin-off was completed pursuant to a Separation Agreement and other agreements with DuPont related to the spin-off, including an Employee Matters Agreement, a Tax Matters Agreement, a Transition Services Agreement and an Intellectual Property Cross-License Agreement. These agreements govern the relationship between Chemours and DuPont following the spin-off and provided for the allocation of various assets, liabilities, rights and obligations. These agreements also include arrangements for transition services to be provided by DuPont to Chemours.
Unless the context otherwise requires, references in these Notes to the Consolidated Financial Statements to "we," "us," "our," "Chemours" and the "Company" refer to The Chemours Company and its consolidated subsidiaries after giving effect to the Distribution.
Note 2. Basis of Presentation
The accompanying Interim Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments considered necessary for a fair statement of the results for interim periods have been included. Certain reclassifications of prior year's data have been made to conform to current period presentation. Results for interim periods should not be considered indicative of results for a full year. These Interim Consolidated Financial Statements do not represent complete financial statements and should be read in conjunction with the audited Combined Financial Statements for the years ended December 31, 2014, 2013 and 2012, collectively referred to herein as the “Annual Combined Financial Statements” in our Information Statement included in our Registration Statement. Unless otherwise stated, references to years and three and nine month periods relate to Chemours' fiscal years and three and nine month periods. The notes that follow are an integral part of the Interim Consolidated Financial Statements.
Chemours did not operate as a separate, stand-alone entity for the full period covered by the Interim Consolidated Financial Statements. Prior to our spin-off on July 1, 2015, Chemours operations were included in DuPont's financial results in different legal forms, including but not limited to wholly-owned subsidiaries for which Chemours was the sole business, components of legal entities in which Chemours operated in conjunction with other DuPont businesses and a majority owned joint venture. For periods prior to July 1, 2015, the accompanying Interim Consolidated Financial Statements have been prepared from DuPont’s historical accounting records and are presented on a stand-alone basis as if the business operations had been conducted independently from DuPont. Prior to January 1, 2015, aside from a Japanese entity that is a dual-resident for U.S. federal income tax purposes, there was no direct ownership relationship among all the other various legal entities comprising Chemours. Prior to July 1, 2015, DuPont and its subsidiaries’ net investments in these operations is shown in lieu of Stockholder’s Equity in the Interim Consolidated Financial Statements. The Interim Consolidated Financial Statements include the historical operations, assets and liabilities of

7
Table of Contents
The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

the legal entities that are considered to comprise the Chemours business, including certain environmental remediation and litigation obligations for which Chemours has indemnified DuPont.
All of the allocations and estimates in the Interim Consolidated Financial Statements prior to July 1, 2015 are based on assumptions that management believes are reasonable. However, the Interim Consolidated Financial Statements included herein may not be indicative of the financial position, results of operations and cash flows of Chemours in the future or if Chemours had been a separate, stand-alone entity during the periods presented.
The net transfers from DuPont on the Interim Consolidated Statements of Equity include a non-cash contribution from DuPont of $93 for the nine months ended September 30, 2015. This non-cash contribution occurred during physical separation activities at shared production facilities in the United States prior to the spin-off. It was determined that assets previously managed by other DuPont businesses would be transferred to and managed by Chemours.
Note 3. Summary of Significant Accounting Policies
The significant accounting policies are described in the Annual Combined Financial Statements in our Information Statement included in our Registration Statement. The following significant accounting policies have been updated during 2015.
Foreign Currency Translation
Chemours identifies its separate and distinct foreign entities and groups them into two categories: 1) extension of the parent (U.S. dollar functional currency) and 2) self-contained (local functional currency). If a foreign entity does not align with either category, factors are evaluated and a judgment is made to determine the functional currency. Chemours changes the functional currency of its separate and distinct foreign entities only when significant changes in economic facts and circumstances indicate clearly that the functional currency has changed.
During the periods covered by the Interim Consolidated Financial Statements, part of the Chemours business operated within foreign entities. For foreign entities where the U.S. dollar is the functional currency, all foreign currency-denominated asset and liability amounts are remeasured into U.S. dollars at end-of-period exchange rates, except for inventories, prepaid expenses, property, plant and equipment, goodwill and other intangible assets, which are remeasured at historical rates. Foreign currency-denominated income and expenses are remeasured at average exchange rates in effect during the period, except for expenses related to balance sheet amounts remeasured at historical exchange rates. Exchange gains and losses arising from remeasurement of foreign currency-denominated monetary assets and liabilities are included in other income, net in the period in which they occur.
For foreign entities where the local currency is the functional currency, assets and liabilities denominated in local currencies are translated into U.S. dollar at end-of-period exchange rates and the resulting translation adjustments are reported as a component of accumulated other comprehensive (loss) income in equity. Assets and liabilities denominated in other than the functional currency are remeasured into the functional currency prior to translation into U.S. dollars and the resulting exchange gains or losses are included in income in the period in which they occur. Income and expenses are translated into U.S. dollars at average exchange rates in effect during the period.
Beginning in 2015, when the Chemours operations were legally and operationally separated within DuPont in anticipation of the spin-off, some of the resulting newly created Chemours foreign entities set their local currency as the functional currency.
Employee Benefits
Prior to separation, certain of Chemours’ employees participated in defined benefit pension and other post-employment benefit plans (the Plans) sponsored by DuPont and accounted for by DuPont in accordance with accounting guidance for defined benefit pension and other post-employment benefit plans. Substantially all expenses related to these plans were allocated in shared entities and reported within costs of goods sold, selling, general and administrative expenses and research and development expense in the Interim Consolidated Statements of Operations. Chemours considered all plans to be part of a multi-employer plan with DuPont prior to January 1, 2015.
In connection with the spin-off, Chemours retained the existing Netherlands pension plan and an agreement was executed in 2015 to ensure continuance of the plan for both DuPont and Chemours employees and retirees.  As a result of that agreement, Chemours now accounts for the Netherlands plan as a multiple employer plan. 

8
Table of Contents
The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

Additionally, in 2015, Chemours formed new pension plans in Taiwan, Germany, Belgium, Switzerland, Japan, Korea and Mexico that mirror the plans historically operated by DuPont in these countries. The new plans are accounted for under the single employer method.  See Note 18 for additional information.
Derivatives
Prior to 2015, Chemours participated in DuPont’s foreign currency hedging program to reduce earnings and cash flow volatility associated with foreign currency exchange rate changes. DuPont formally documented 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 were allocated by DuPont to Chemours based on projected exposure. Chemours recognized its allocable share of the gains and losses on DuPont’s derivative financial instruments in earnings when the forecasted sales occurred for foreign currency hedges. The foreign currency hedges qualified as cash flow hedges, and the realized gains recognized in earnings were less than $1 for the three and nine months ended months ended September 30, 2014. Chemours’ participation in this program terminated as of January 1, 2015.
Beginning in February 2015, Chemours began entering into forward currency exchange contracts to minimize volatility in earnings related to the foreign exchange gains and losses resulting from remeasuring net monetary assets that Chemours holds which are denominated in non-functional currencies. Chemours does not hold or issue financial instruments for speculative or trading purposes. The derivative assets and liabilities are reported on a gross basis in the Interim Consolidated Balance Sheets. All gains and losses resulting from the revaluation of the derivative assets and liabilities are recognized in other income, net in the Interim Consolidated Statements of Operations during the period in which they occurred. Please refer to Note 17 for additional information.
Fair Value Measurement
Under the accounting for fair value measurements and disclosures, a fair value hierarchy was established that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical asset and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Chemours uses the following valuation techniques to measure fair value for its assets and liabilities:
(a) Level 1—Quoted market prices in active markets for identical assets and liabilities
(b) Level 2—Significant other observable inputs (e.g. quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable, such as interest rate and yield curves, and market-corroborated inputs); and
(c) Level 3—Unobservable inputs for the asset or liability, which are valued based on management's estimates of assumptions that market participants would use in pricing the asset or liability.
Recent Accounting Pronouncements
In June 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-11, "Inventory (Topic 330), Simplifying the Measurement of Inventory," which requires an entity to measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Currently, the inventory standard requires an entity to measure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. The amendment does not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method but apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. The amendment is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, and should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. Chemours is currently evaluating the impact of adopting this guidance.
In May 2015, the FASB issued ASU No. 2015-07, "Fair Value Measurement (Topic 820) - Disclosures for Investment in Certain Entities that Calculate Net Asset Value per Share or its Equivalent." This guidance removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient.

9
Table of Contents
The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

The guidance also removes the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. The amendment is effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. A reporting entity should apply the amendments retrospectively to all periods presented and earlier application is permitted. Chemours is currently evaluating the impact of adopting this guidance.
In April 2015, the FASB issued ASU 2015-05, "Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement," which provides guidance about whether a cloud computing arrangement includes a software license. The customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If the cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. This guidance is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015, and early adoption is permitted. Chemours is currently evaluating the impact of adopting this guidance.
In April 2015, the FASB issued ASU No. 2015-03, “Interest — Imputation of Interest (Subtopic 835-30),” which requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The guidance is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015 with early adoption permitted, including adoption in an interim period. Chemours adopted this guidance for the quarter ending June 30, 2015. The adoption of this standard has no impact on Chemours’ results of operations or cash flows. Due to the accounting change described above, Chemours recorded debt issuance costs incurred for the issuance of its senior secured term loans and senior unsecured notes as a reduction of the liability on the Interim Consolidated Balance Sheets. See Note 15 for additional information.
In February 2015, the FASB issued ASU No. 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis.” The amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities and eliminate the presumption that a general partner should consolidate a limited partnership. The amendment is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. A reporting entity also may apply the amendments retrospectively. Chemours is currently evaluating the impact of adopting this guidance on its financial position and results of operations.
In May 2014, the FASB and the International Accounting Standards Board (IASB) jointly issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)," which clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and International Financial Reporting Standards (IFRS). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. The guidance is effective for public entities for annual and interim periods beginning after December 15, 2016 (original effective date). In July 2015, the FASB approved a deferral of the effective date of this guidance to provide entities with adequate time to effectively implement the new revenue standard and adoption as of the original effective date is permitted. The Company is currently evaluating the impact of adopting this guidance on its financial position and results of operations.
In April 2014, the FASB issued ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” amending existing requirements for reporting discontinued operations and disposals of components of an entity. The amended guidance limits the discontinued operations reporting to disposal transactions that represent strategic shifts having a major effect on operations and financial results. The amendment also enhances disclosures and requires assets and liabilities of a discontinued operation to be classified as such for all periods presented in the financial statements. Chemours adopted this guidance effective on January 1, 2015. Due to the change in requirements for reporting discontinued operations described above, presentation and disclosures of future disposal transactions after adoption may be different than under current standards.
Note 4. Relationship with DuPont and Related Entities
Prior to the spin-off on July 1, 2015, Chemours was managed and operated in the normal course of business with other affiliates of DuPont. Accordingly, certain shared costs were allocated to Chemours and reflected as expenses in the stand-alone Interim Consolidated Financial Statements. Management of DuPont and Chemours considered the allocation methodologies used to be reasonable and appropriate reflections of the historical DuPont expenses attributable to Chemours for purposes of the stand-alone

10
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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

financial statements. The expenses reflected in the Consolidated Financial Statements may not be indicative of expenses that will be incurred by Chemours in the future. All related party transactions approximated market prices.
Subsequent to July 1, 2015, DuPont was no longer a related party of Chemours. Accordingly, beginning July 1, 2015, sales to DuPont businesses are reflected in net sales in our Interim Consolidated Statement of Operations. Purchases of by-products from DuPont businesses are reflected in cost of goods sold in our Interim Consolidated Statements of Operations. Chemours ongoing relationship with DuPont is governed by a Separation Agreement and other agreements with DuPont related to the spin-off, including an Employee Matters Agreement, a Tax Matters Agreement, a Transition Services Agreement and an Intellectual Property Cross-License Agreement. These agreements provided for the allocation of various assets, liabilities, rights and obligations, and include arrangements for transition services to be provided by DuPont to Chemours.
(a) Related Party Purchases and Sales
Prior to the spin-off, including certain periods covered by the Interim Consolidated Financial Statements, Chemours sold finished goods to DuPont and its non-Chemours businesses.
Related party sales to DuPont include the following amounts:
Selling Segment
Three months ended September 30,
 
Nine months ended September 30,
2015
 
2014
 
2015
 
2014
Titanium Technologies
$
—

1 
$
1

 
$
2

1 
$
1

Fluoroproducts
—

1 
10

 
34

1 
34

Chemical Solutions
—

1 
14

 
21

1 
55

Total
$
—

 
$
25

 
$
57

 
$
90

1 Subsequent to the spin-off on July 1, 2015, transactions with DuPont businesses were not considered related party transactions.
(b) Leveraged Services and Corporate Costs
Prior to the spin-off on July 1, 2015, DuPont incurred significant corporate costs for services provided to Chemours as well as other DuPont businesses. These costs included expenses for information systems, accounting, other financial services such as treasury and audit, purchasing, human resources, legal, facilities, engineering, corporate research and development, corporate stewardship, marketing and business analysis support.
A portion of these costs benefited multiple or all DuPont businesses, including Chemours, and were allocated to Chemours and its reportable segments using methods based on proportionate formulas involving total costs or other various allocation methods that management considered consistent and reasonable. Other Chemours corporate costs are not allocated to the reportable segments and are reported in Corporate and Other.
The allocated leveraged functional service expenses and general corporate expenses included in the Interim Consolidated Statements of Operations were $0 and $238 for the three and nine months ended September 30, 2015, respectively, and $121 and $378 for the three and nine months ended September 30, 2014, respectively. Allocated leveraged functional service expenses and general corporate expenses were recorded in the Interim Consolidated Statements of Operations within the following captions:
 
Three months ended September 30,
 
Nine months ended September 30,
2015
 
2014
 
2015
 
2014
Selling, general and administrative expense
$
—

1 
$
105

 
$
205

1 

$
318

Research and development expense
—

1 
8

 
10

1 

35

Cost of goods sold
—

1 
8

 
23

1 

25

Total
$
—

 
$
121

 
$
238

 
$
378

1 Subsequent to the spin-off on July 1, 2015, transactions with DuPont businesses were not considered related party transactions. Accordingly, no costs were allocated after the July 1, 2015 spin-off date.

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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

(c) Cash Management and Financing
For a portion of the periods presented, Chemours participated in DuPont’s centralized cash management and financing programs. Disbursements were made through centralized accounts payable systems which were operated by DuPont. Cash receipts were transferred to centralized accounts, also maintained by DuPont. As cash was disbursed and received by DuPont, it was accounted for by Chemours through DuPont Company Net Investment.
During the third quarter of 2015, Chemours recorded a payable to DuPont in accounts payable in our Interim Consolidated Balance Sheets which represents the amount of cash at spin-off in excess of the target amount pursuant to the Separation Agreement. We expect to pay $49 by December 31, 2015. Additionally, the companies are still finalizing the reconciliation of working capital and other accounts and the net amount due to/from DuPont will be settled in accordance with the Separation Agreement.
(d) Tax Matters Agreement
Chemours and DuPont entered into a Tax Matters Agreement that governs the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes.  In general, under the agreement, DuPont is responsible for any U.S. federal, state and local taxes (and any related interest, penalties or audit adjustments) reportable on a consolidated, combined or unitary return that includes DuPont or any of its subsidiaries and Chemours and/or any of its subsidiaries for any periods or portions thereof ending on or prior to the date of the Separation and Chemours is responsible for any U.S. federal, state, local and foreign taxes (and any related interest, penalties or audit adjustments) that are imposed on Chemours and/or any of its subsidiaries for all tax periods, whether before or after the date of the distribution.
Note 5. Research and Development Expense
Research and development expense directly incurred by Chemours was $18 and $58 for the three and nine months ended September 30, 2015, respectively, and $25 and $75 for the three and nine months ended September 30, 2014, respectively. Research and development expense also includes $0 and $10 for the three and nine months ended September 30, 2015, respectively, and $8 and $35 for the three and nine months ended September 30, 2014, respectively, which represents an assignment of costs associated primarily with DuPont’s Corporate Central Research and Development long-term research activities. This assignment was based on the cost of research projects for which Chemours was determined to be the sponsor or co-sponsor. All research services provided by DuPont’s Central Research and Development to Chemours were specifically requested by Chemours, covered by service-level agreements and billed based on usage. DuPont research and development services were no longer used after separation on July 1, 2015.
Note 6. Employee Separation and Asset Related Charges, Net
For the three and nine months ended, Chemours recorded charges for employee separation and asset related charges as follows:
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Employee Separation Charges
 
$
17

 
$
—

 
$
78

 
$
21

Asset Related Charges - Restructuring
 
122

 
—

 
122

 
—

Asset Related Charges - Impairment 1
 
45

 
—

 
45

 
—

Total
 
$
184

 
$
—

 
$
245

 
$
21

1 See Note 12 for further information.

Transformation Plan
During the third quarter of 2015, Chemours announced a plan to transform the company by reducing structural costs, growing market positions, optimizing its portfolio, refocusing investments, and enhancing its organization. Chemours expects the transformation plan will deliver $500 of Adjusted EBITDA improvement by 2017. Through a combination of higher free cash flow from operations, lower capital spending, and potential proceeds from asset sales, the Company anticipates reducing its leverage (net debt to Adjusted EBITDA) to approximately three times by year-end 2017. Key actions initiated under the Transformation

12
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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

Plan during the quarter included Titanium Technologies plant and production line closures, Fluoroproduct line closures and other cost reduction initiatives.
Titanium Technologies Plant Closures: In August 2015, the Company announced its plan to close its Edge Moor, DE manufacturing site located in the United States. The Edge Moor plant produced TiO2 product for use in the paper industry and other applications where demand has steadily declined, resulting in underused capacity at the plant. In addition, as part of the plan, the Company permanently shut down one underused TiO2 production line at its New Johnsonville, TN plant in the U.S. The Company stopped production at Edge Moor in September 2015 and immediately began decommissioning the plant. The Company expects to complete decommissioning activities in first quarter of 2016 and will begin dismantling thereafter. Dismantling and removal activities are expected to be completed in early 2017.
As a result, in the third quarter of 2015, the Company recorded charges of approximately $126, which consist of property, plant and equipment and other asset impairment charges of $114 and employee separation costs of $12. These charges were allocated to the Titanium Technology segment. The Company also expects to incur additional charges for decommissioning, dismantling and removal costs from fourth quarter 2015 to early 2017, which will be expensed as incurred.

Fluoroproducts Restructuring: During the third quarter of 2015, in connection with the Company’s transformation plan announced in August 2015 and efforts to improve the profitability of the Fluoroproducts segment, management approved the shutdown of certain production lines of the segment’s manufacturing facilities in the United States.  As a result, the Company recorded restructuring charges of approximately $10, which consist of property, plant and equipment accelerated depreciation of $8 and employee separation costs of $2.

Global Restructuring Programs

In 2015, in light of continued weakness in the global titanium dioxide market cycle and continued foreign currency impacts due to the strengthening of the U.S. dollar, Chemours accelerated implementation of its near-term priorities to drive operational and functional effectiveness to achieve both manufacturing and selling, general and administrative fixed cost improvements. Accordingly, in the second quarter of 2015, Chemours implemented a restructuring plan to reduce and simplify its cost structure. We recorded a pre-tax charge of $3 and $64 for employee separation costs in the three and nine months ended September 30, 2015. The actions associated with this charge and all related payments are expected to be substantially complete by the end of 2016 and are expected to result in future cash payments of approximately $41 related to severance and benefits.

In 2014, Chemours implemented a restructuring plan to increase productivity and recorded a pre-tax charge of $19 related to this initiative. The charge consisted of $16 related to employee separation costs and $3 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.

The charges related to our programs and impairments impacted 2015 segment earnings as follows:

For the three months ended
September 30, 2015
 
Titanium Technologies
 
Fluoroproducts
 
Chemical Solutions
 
Total
 
Titanium Technologies Plant Closures
 
126

 
—

 
—

 
126

 
Fluoroproducts Restructuring
 
—

 
10

 
—

 
10

 
PP&E impairment 1
 
—

 
—

 
45

 
45

 
2015 Restructuring
 
1

 
1

 
1

 
3

 
Total
 
127

 
11

 
46

 
184

 
1 See Note 12 for further information.


13
Table of Contents
The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

For the nine months ended
September 30, 2015
 
Titanium Technologies
 
Fluoroproducts
 
Chemical Solutions
 
Total
 
Titanium Technologies Plant Closures
 
126

 
—

 
—

 
126

 
Fluoroproducts Restructuring
 
—

 
10

 
—

 
10

 
PP&E impairment
 
—

 
—

 
45

 
45

 
2015 Restructuring
 
24

 
26

 
14

 
64

1 
Total
 
150

 
36

 
59

 
245

 
1 Includes approximately $13 related to Corporate overhead functions that was allocated to our segments.

For the nine months ended September 30, 2014, segment earnings were impacted by the 2014 restructuring program as shown in the following table. There were no restructuring charges to segment earnings in the three months ended September 30, 2014.
For the nine months ended
September 30, 2014
Titanium Technologies
 
Fluoroproducts
 
Chemical Solutions
 
Total
2014 Restructuring
$
3

 
$
16

 
$
—

 
$
19


The following table shows the change in the liability account balance associated with our restructuring programs.
 
 
Titanium Technologies Site Closures
 
Fluoroproducts
 
2015 Restructuring
 
2014 Restructuring
 
Total
Balance as of December 31, 2014
 
$
—

 
$
—

 
$
—

 
$
12

 
$
12

Charges to income for the nine months ended September 30, 2015
 
12

 
2

 
64

 
—

 
78

Charges to liability accounts:
 
 
 
 
 
 
 
 
 

Payments 1
 
—

 
—

 
(23
)
 
(11
)
 
(34
)
Net currency translation adjustment 2
 
—

 
—

 
—

 
—

 
—

Balance as of September 30, 2015
 
$
12

 
$
2

 
$
41

 
$
1

 
$
56

1 Payments of $15 and $2 were made related to the 2015 and 2014 restructuring programs during the three months ended September 30, 2015, respectively. For the nine months ended September 30, 2015, payments of $23 and $11 were made related to the 2015 and 2014 restructuring programs, respectively. As of September 30, 2015, no payments were made for the Titanium Technologies plant closures.
2 Net currency translation adjustment was less than $1 for all periods presented.
Note 7. Other Income, Net
 
Three months ended September 30,
 
Nine months ended September 30,
 
2015
 
2014
 
2015
 
2014
Leasing, contract services and miscellaneous income 1
$
10

 
$
6

 
$
14

 
$
11

Royalty income 2
3

 
13

 
10

 
22

Gain on sale of assets and businesses 3
—

 
1

 
—

 
12

Exchange gains (losses), net 4
44

 
(33
)
 
47

 
(29
)
Total other income, net
$
57

 
$
(13
)
 
$
71

 
$
16

 
1 Leasing, contract services and miscellaneous income includes accrued interest related to unrecognized tax benefits.
2 Royalty income is primarily for technology and trademark licensing.
3 Gain on sale of assets and businesses primarily relates to a sale of assets in the Fluoroproducts segment.

14
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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

4 Chemours uses foreign currency exchange derivatives to offset its net exposure, by currency, related to its non-functional currency-denominated monetary assets and liabilities. The objective of this program is to maintain an approximately balanced position in non-functional currencies in order to minimize, on an after-tax basis, the effects of exchange rate changes on net monetary asset positions. The pre-tax exchange gains are recorded in other income, net and the related tax impact is recorded in provision for income taxes on Chemours' Interim Consolidated Statements of Operations. The $44 net exchange gain for the three months ended September 30, 2015 includes a gain on derivative contracts of $66, partially offset by a $22 pre-tax exchange loss on non-functional monetary assets and liabilities as a result of the strengthening of the U.S. dollar against the Mexican peso, Chinese yuan, Euro and Brazilian real. The $47 net exchange gain for the nine months ended September 30, 2015 includes a gain on derivatives of $78, partially offset by a $31 pre-tax exchange loss on non-functional monetary assets and liabilities as a result of the strengthening of the U.S. dollar against the Mexican peso, Chinese yuan, Euro and Brazilian real.
Note 8. Income Taxes 
Chemours recorded a tax benefit of $78 and $63 for the three and nine months ended September 30, 2015, respectively, and a provision of $35 and $108 for the three and nine months ended September 30, 2014, respectively. Each year, Chemours and/or its subsidiaries, files income tax returns in the U.S. federal jurisdiction and various states and non-U.S. jurisdictions. These tax returns are subject to examination and possible challenge by the taxing authorities. Positions challenged by the taxing authorities may be settled or appealed by Chemours and/or DuPont in accordance with the Tax Matters Agreement. As a result, income tax uncertainties are recognized in Chemours’ Interim Consolidated Financial Statements in accordance with accounting for income taxes, when applicable. It is reasonably possible that changes to Chemours' global unrecognized tax benefits could be significant; however, due to the uncertainty regarding the timing of completion of audits and possible outcomes, a current estimate of the range of such changes that may occur within the next twelve months cannot be made.
During the third quarter, in connection with the spin-off, the Company deemed approximately $1,300 of unremitted earnings of subsidiaries outside the U.S. as indefinitely reinvested. No deferred tax liability has been recognized with regard to the remittance of such earnings. It is not practical to estimate the income tax liability that might be incurred if such earnings were remitted to the U.S.
Note 9. Earnings Per Share of Common Stock
The table below shows a reconciliation of the numerator and denominator for basic and diluted earnings per share calculations for the periods indicated.
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
 
2015
 
2014
 
2015
 
2014
 
Numerator:
 
 
 
 
 
 
 
 
 
Income from continuing operations attributable to Chemours
 
$
(29
)
 
$
107

1 
$
(4
)
 
$
321

1 
Denominator:
 
 
 
 
 
 
 
 
 
Weighted-average number of common shares outstanding- Basic
 
180,968,049

 
180,966,833

 
180,968,049

 
180,966,833

 
Dilutive effect of the company's employee compensation plans 2
 
—

 
—

 
—

 
—

 
Weighted average number of common shares outstanding - Diluted
 
180,968,049

 
180,966,833

 
180,968,049

 
180,966,833

 
1 2014 amounts do not reflect interest expense on approximately $4,003 of debt issued during the second quarter of 2015 in connection with the spin-off. See Note 15 for additional information.
2 Diluted earnings (loss) per share is calculated using net income (loss) available to common shareholders divided by diluted weighted-average shares of common shares outstanding during each period, which includes unvested restricted shares. Diluted earnings per share considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect.                             
The following average number of stock options were antidilutive and, therefore, were not included in the diluted earnings per share calculation:

15
Table of Contents

 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2015
 
2014
 
2015
 
2014
Average number of stock options
 
8,401,821

 
—

 
8,401,821

 
—


Note 10. Accounts and Notes Receivable – Trade, Net
 
 
September 30, 2015
 
December 31, 2014
Accounts receivable—trade, net 1
 
$
969

 
$
746

VAT, GST and other taxes 2 
 
88

 
62

Advances and deposits
 
13

 
15

Leases receivable—current
 
13

 
12

Notes receivable—trade 3
 
19

 
11

Total
 
$
1,102

 
$
846

1 Accounts receivable – trade is net of allowances of $4 and $4 as of September 30, 2015 and December 31, 2014, respectively. Allowances are equal to the estimated uncollectible amounts.
2 Value Added Tax (VAT) and Goods and Services Tax (GST) receivables are generally recorded at the legal entity level and allocated to Chemours within shared legal entities.
3 Notes receivable – trade primarily consists of $9 of derivative assets and loan receivables with terms of one year or less which are primarily concentrated in China. As of September 30, 2015, there were no past due notes receivable, nor were there any impairments related to current loan agreements.
Accounts and notes receivable are carried at amounts that approximate fair value. Bad debt expense was less than $1 for the three and nine months ended September 30, 2015. Bad debt expense was less than $1 for the three and nine months ended September 30, 2014.
Direct Financing Leases
At two of its facilities in the U.S. (Borderland and Morses Mill), Chemours has constructed fixed assets on land that it leases from third parties. Management has analyzed these arrangements and determined these assets represent a direct financing lease, whereby Chemours is the lessor of this equipment. Chemours has recorded leases receivable of $141 and $149 at September 30, 2015 and December 31, 2014 respectively, which represent the balance of the minimum future lease payments receivable. The current portion of leases receivable is included in accounts and notes receivable - trade, net, as shown above. The long-term portion of leases receivable are included in other assets, as shown in Note 14. Management has evaluated the realizable value of these leased assets and determined no impairment existed at September 30, 2015 or December 31, 2014. There is no estimated future residual value of these leased assets.
Note 11. Inventories 
 
September 30, 2015
 
December 31, 2014
Finished products
$
662

 
$
611

Semi-finished products
186

 
173

Raw materials, stores and supplies
395

 
521

Subtotal
1,243

 
1,305

Adjustment of inventories to a last-in, first-out (LIFO) basis
(250
)
 
(253
)
   Total
$
993

 
$
1,052

Inventory values, before LIFO adjustment, are generally determined by the average cost method, which approximates current cost. Inventories are valued under the LIFO method at substantially all of the U.S. locations, which comprised $719 and $684 or 58% and 52% of inventories before the LIFO adjustments at September 30, 2015 and December 31, 2014, respectively. The remainder of inventory held in international locations and certain U.S. locations is valued under the average cost method.

16
Table of Contents
The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

Note 12. Property, Plant and Equipment
Depreciation expense amounted to $69 and $198 for the three and nine months ended September 30, 2015, respectively and $56 and $183 for the three and nine months ended September 30, 2014, respectively. Property, plant and equipment includes gross assets under capital leases of $7 at September 30, 2015 and $6 at December 31, 2014.
We evaluate long-lived assets and finite-lived identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset groupings may not be recoverable. When undiscounted future cash flows are not expected to be sufficient to recover an asset’s carrying amount, the asset is written down to its fair value based on a discounted cash flow analysis utilizing market participant assumptions.
During the three months ended September 30, 2015, in connection with the strategic evaluation of the Chemical Solutions portfolio, excluding cyanides, the Company determined that a Chemical Solutions manufacturing facility’s carrying value may not be recoverable given the strategic decision to discontinue investment in the business. An impairment evaluation was performed which indicated that the carrying amount of this asset group in the U.S. was not recoverable when compared to the expected undiscounted cash flows. Based on management’s assessment of the fair value of the asset group, the Company determined that the carrying value of that asset group exceeded the fair value and as a result, a $45 pre-tax impairment charge was recorded in the Chemical Solutions segment. The fair value of the asset group was determined using an income approach based on the present value of the estimated future cash flows. The key assumptions used included growth rates and cash flow projections, discount rate, tax rate and an estimated terminal value. The amount was recorded in employee separation and asset related charges, net in the Interim Consolidated Statement of Operations. Refer to Note 6 for additional information.
Note 13. Goodwill and Intangible Assets, Net
Goodwill: The following table summarizes changes in the carrying amount of goodwill by reportable segment as of September 30, 2015:
 
 
Titanium Technologies
 
Fluoroproducts
 
Chemical Solutions
 
Total
Balance as of December 31, 2014
 
$
13

 
$
85

 
$
100

 
$
198

Impairment charge
 
—

 
—

 
(25
)
 
(25
)
Other adjustments
 
—

 
—

 
(4
)
 
(4
)
Balance as of September 30, 2015
 
$
13

 
$
85

 
$
71

 
$
169

In the third quarter of 2015, in connection with the strategic evaluation of the Chemical Solutions portfolio, the Company realigned the reporting structure of the portfolio, specifically the level at which segment management regularly reviews operating results. The Company now identifies seven reporting units for purposes of goodwill allocation and impairment assessment. These seven reporting units are Aniline, Clean & Disinfect, Cyanides, Methylamines, Reactive Metal Solutions, Sulfur, and Vazo. Chemical Solutions remains an operating segment.
In addition, in connection with the spin-off on July 1, 2015, the Fluoroproducts reportable segment changed its organizational structure, which changed its reporting units from Fluorochemicals and Fluoropolymers to Fluorochemicals, Industrial Resins and Diversified Technologies, each of which is an operating segment. For reporting purposes, the three operating segments are aggregated into one reportable segment due to similar operating characteristics.
The reporting unit changes in Chemical Solutions and Fluoroproducts did not impact our reportable segments.
As a result of the changes discussed above, management allocated the historical goodwill of Fluoropolymers and Chemical Solutions to their new reporting units based on relative fair value.
Chemours tests goodwill 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. 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. In connection with the goodwill allocation to the new reporting units and strategic evaluation of Chemical Solutions, we evaluated the reporting units for impairment and determined that the estimated fair

17
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values of those reporting units, except for the Sulfur reporting unit, were substantially in excess of the carrying value, indicating that goodwill was not impaired. We performed the second step of the impairment test for Sulfur and determined that the implied fair value of goodwill was lower than its carrying value, resulting in a full impairment of the Sulfur reporting unit's goodwill. As a result, Chemours recorded a $25 million pre-tax impairment charge for goodwill during the quarter ended September 30, 2015 in the Chemicals Solutions segment.
Chemours estimates the fair value of its reporting units using the income approach based on the present value of estimated future cash flows, discounted at a risk-adjusted market rate, including a growth rate to calculate the terminal value. The Company’s forecasted future cash flows, which incorporate anticipated future revenue growth and related expenses to support the growth, were used to calculate fair value. The factors considered in determining the cash flows include: 1) macroeconomic conditions; 2) industry and market considerations; 3) costs of 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. The discount rate used represents the weighted average cost of capital for the reporting units considering the risks and uncertainty inherent in the cash flows of the reporting units and in the internally developed forecasts. The implied fair value of the goodwill in step two was determined by allocating the fair value of the reporting units to all of the assets and liabilities as if the reporting units had been acquired in a business combination and its fair value was the purchase price paid to be acquired. The use of these unobservable inputs resulted in the fair value estimate being classified as a Level 3 asset measured at fair value on a nonrecurring basis subsequent to its original recognition.
The determination of whether or not goodwill is impaired involves a significant level of judgment in the assumptions underlying the approaches used to determine the estimated fair value of our reporting units. Chemours believes that assumptions and rates used in the impairment assessment are reasonable. However, these assumptions are judgmental and variations in any assumptions could result in materially different calculations of fair value. The Company will continue to evaluate goodwill on an annual basis as of October 1, and whenever events or changes in circumstances, such as significant adverse changes in operating results, market conditions or changes in management’s business strategy, indicate that there may be a probable indicator of impairment. It is possible that the assumptions used by management related to the evaluation may change or that actual results may vary significantly from management’s estimates.
Intangible Assets, Net: The following table summarizes the gross carrying amounts and accumulated amortization of other intangible assets by major class:
 
September 30, 2015
 
December 31, 2014
 
Gross
 
Accumulated
Amortization
 
Net
 
Gross
 
Accumulated
Amortization
 
Net
Customer lists
$
20

 
$
(17
)
 
$
3

 
$
19

 
$
(16
)
 
$
3

Patents
20

 
(17
)
 
3

 
20

 
(16
)
 
4

Purchased trademarks
18

 
(15
)
 
3

 
18

 
(14
)
 
4

Purchased and licensed technology
20

 
(18
)
 
2

 
17

 
(17
)
 
—

Total
$
78

 
$
(67
)
 
$
11

 
$
74

 
$
(63
)
 
$
11

The aggregate pre-tax amortization expense for definite-lived intangible assets was $1 and $3 for the three and nine months ended September 30, 2015 and $1 and $2 for the three and nine months ended September 30, 2014, respectively. Definite-lived intangible assets are amortized over their estimated useful lives, generally for periods ranging from 5 to 20 years. The reasonableness of the useful lives of these assets is continually evaluated. There are no material indefinite-lived intangible assets.


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Note 14. Other Assets
 
 
September 30, 2015
 
December 31, 2014
Leases receivable - non-current 1
 
$
128

 
$
137

Capitalized repair and maintenance costs
 
133

 
185

Pension assets 2
 
132

 
—

Advances and deposits
 
4

 
17

Deferred income taxes - non-current
 
30

 
9

Miscellaneous 3
 
39

 
27

Total
 
$
466

 
$
375

1 Leases receivable includes direct financing leases of property at two locations. See Note 10 for further information.
2 Pension assets represent pension plans commencing in 2015. See Note 18 for further information.
3 Miscellaneous includes prepaid expenses for royalty fees, vendor supply agreements and taxes other than income taxes, deferred financing fees related to the Revolving Credit Facility of $22, as well as capitalized expenses for the preparation of future landfill cells at Titanium Technologies’ New Johnsonville plant site.
Note 15. Debt
In conjunction with Chemours' separation from DuPont, Chemours entered into approximately $4,003 of financing transactions on May 12, 2015. Long-term debt, net of an unamortized discount on the Term Loan Facility of $7, was comprised of the following at September 30, 2015:
 
 
September 30, 2015
Long-term debt:
 
 
Senior secured term loan, net of issue discount
 
$
1,489

Senior unsecured notes:
 
 
6.625%, due May 2023
 
1,350

7.00%, due May 2025
 
750

6.125%, due May 2023 (€360)
 
403

Other
 
26

Total
 
4,018

Less: Unamortized debt issuance costs
 
56

Less: Current maturities
 
38

Total long-term debt
 
$
3,924

Senior Secured Credit Facilities
On May 12, 2015, Chemours entered into a credit agreement that provides for a seven-year senior secured term loan (the Term Loan Facility) in a principal amount of $1,500 repayable in equal quarterly installments at a rate of one percent of the original principal amount per year, with the balance payable on the final maturity date. The Term Loan Facility was issued with a $7 original issue discount and bears variable interest rate subject to a floor of 3.75%. The proceeds from the Term Loan Facility were used to fund a portion of the distribution to DuPont, along with related fees and expenses.
The credit agreement also provides for a five-year $1,000 senior secured revolving credit facility (the Revolving Credit Facility). The proceeds of any loans made under the Revolving Credit Facility can be used for capital expenditures, acquisitions, working capital needs and other general corporate purposes. We had no borrowings outstanding under our Revolving Credit Facility at September 30, 2015, and we had $129 in letters of credit issued and outstanding under this facility. The Revolving Credit Facility bears variable interest of a range based on our total net leverage ratio between (a) 0.50% and 1.25% for base rate loans and (b) 1.50% and 2.25% for LIBOR loans. The applicable margin was 1.00% for base rate loans and 2.00% for LIBOR loans as of

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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

September 30, 2015. In addition, we are required to pay a commitment fee on the average daily unused amount of the Revolving Credit Facility at a rate based on our total net leverage ratio, between 0.20% and 0.35%. Commitment fees are currently assessed at a rate of 0.30%.
The credit agreement contains financial covenants which, solely with respect to the Revolving Credit Facility, require Chemours (i) not to exceed a maximum total net leverage ratio and, (ii) unless Chemours has achieved an investment grade rating (as specified in the credit agreement), to maintain a minimum interest coverage ratio of greater than or equal to 3.00 to 1.00. In addition, the credit agreement contains customary affirmative and negative covenants that, among other things, limit or restrict Chemours and its subsidiaries' ability, subject to certain exceptions, to incur liens, merge, consolidate or sell, transfer or lease assets, make investments, pay dividends, transact with subsidiaries and incur indebtedness. The credit agreement also contains customary representations and warranties and events of default.
During the third quarter of 2015, Chemours and its Revolving Credit Facility lenders agreed to amend certain provisions of the credit agreement that relate to the Revolving Credit Facility, strengthening Chemours' financial position by providing enhanced liquidity to implement the Transformation Plan. The amendment modified the consolidated EBITDA definition in the covenant calculation to include pro forma benefits of announced cost reduction initiatives.
Chemours’ obligations under the senior secured credit facilities are guaranteed on a senior secured basis by all of its material domestic subsidiaries, subject to certain agreed upon exceptions. The obligations under the senior secured credit facilities are also, subject to certain agreed upon exceptions, secured by a first priority lien on substantially all of Chemours and its material wholly-owned domestic subsidiaries’ assets, including 100% of the stock of domestic subsidiaries and 65% of the stock of certain foreign subsidiaries.
Senior Unsecured Notes
On May 12, 2015, Chemours issued senior unsecured notes (the Notes) with an aggregate principal of approximately $2,503 in a private placement subject to a registration rights arrangement.
All of the notes, including the 2023 notes with an aggregate principal amount of $1,350, the 2025 notes with an aggregate principal amount of $750 and the 2023 Euro notes with an aggregate principal amount of €360 ($403), require payment of principal at maturity and interest semi-annually in cash in arrears on May 15 and November 15 of each year.
The proceeds from the Notes were used to fund the cash and in-kind distributions to DuPont and to pay related fees and expenses. The in-kind distribution to DuPont of $507 aggregate principal amount of Chemours 2025 Notes were exchanged by DuPont with third parties for certain DuPont notes.
Chemours is required to register the Notes with the SEC within 465 days after the original issue date. If Chemours fails to do so, it would be required to pay additional interest at a rate of 0.25% for the first 90 days following a registration default and additional 0.25% per annum with respect to each subsequent 90-day period, up to a maximum rate of 0.50%, until the registration requirements are met. Application is also expected to be made to the Irish Stock Exchange for the approval of listing particulars in relation to the Euro notes prior to the first anniversary of the issue date of the Euro notes.
Maturities
There are no debt maturities in each of the next seven years, except, in accordance with the credit agreement, Chemours has required quarterly principal payments related to the Term Loan Facility equivalent to 1.00% per annum beginning September 2015 through March 2022, with the balance due at maturity. Term Loan principal maturities over the next five years are $4 during the fourth quarter of 2015 and $15 in each year from 2016 to 2021. Debt maturities related to the Term Loan Facility and the Notes in 2021 and beyond will be $3,920.
Debt Fair Value
The fair values of the Term Loan Facility, the 2023 notes, the 2025 notes and the 2023 Euro notes at September 30, 2015 were approximately $1,362, $906, $494 and $268, respectively. The estimated fair values of the Term Loan Facility and the Notes are based on quotes received from third party brokers, and are classified as Level 2 in the fair value hierarchy.


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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

Note 16. Commitments and Contingent Liabilities 
(a) Guarantees
Chemours has directly guaranteed various obligations of customers, suppliers and other third parties. At September 30, 2015 and December 31, 2014, Chemours had directly guaranteed $9 and $41 of such obligations, respectively. These represent the maximum potential amount of future (undiscounted) payments that Chemours could be required to make under the guarantees in the event of default by the guaranteed parties. No amounts were accrued at September 30, 2015 and December 31, 2014.
Chemours assesses the payment and performance risk by assigning default rates based on the duration of the guarantees. These default rates are assigned based on the external credit rating of the counterparty or through internal credit analysis and historical default history for counterparties that do not have published credit ratings. For counterparties without an external rating or available credit history, a cumulative average default rate is used.
(b) Litigation
In addition to the matters discussed below, Chemours, by virtue of its status as a subsidiary of DuPont prior to the Distribution, is subject to various pending legal proceedings arising out of the normal course of the Chemours business including product liability, intellectual property, commercial, environmental and antitrust lawsuits. It is not possible to predict the outcome of these various proceedings. Except for the PFOA litigation for which a separate assessment is provided in this Note, while management believes it is reasonably possible that Chemours could incur losses in excess of the amounts accrued, if any, for the aforementioned proceedings, it does not believe any such loss would have a material impact on Chemours' consolidated financial position, results of operations or liquidity. With respect to the litigation matters discussed below, management's estimate of the probability of loss in excess of the amounts accrued, if any, is addressed individually for each matter.
Asbestos
At September 30, 2015, there were approximately 2,360 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 U.S. and are individually set for trial. Most of the actions were brought by contractors who worked at sites 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 or DuPont employees. Finally, certain lawsuits allege personal injury as a result of exposure to DuPont products. At September 30, 2015 and December 31, 2014, Chemours had an accrual of $38 related to this matter. Additionally, Chemours had an accrual for $2 for asbestos cases outside the U.S. at September 30, 2015. Management believes that the likelihood is remote that Chemours would incur losses in excess of the amounts accrued in connection with this matter.
Benzene
In the separation, DuPont assigned its Benzene docket to Chemours. There are 28 pending cases against DuPont alleging benzene-related illnesses. These cases consist of premises matters involving contractors and deceased former employees who claim exposure to benzene while working at DuPont sites primarily in the 1960s through the 1980s, and product liability claims based on alleged exposure to benzene found in trace amounts in aromatic hydrocarbon solvents used to manufacture DuPont products, such as paints, thinners and reducers.
A benzene case (Hood v. DuPont) was tried to a verdict in Texas state court on October 20, 2015. Plaintiffs alleged that Mr. Hood's Acute Myelogenous Leukemia (AML) was the result of 24 years of occupational exposure to trace benzene found in DuPont automotive paint products and that DuPont negligently failed to warn him that its paints, reducers and thinners contained benzene that could cause cancer or leukemia. The jury found in the Plaintiffs favor awarding $6.9 in compensatory damages and $1.5 in punitive damages. Through DuPont, Chemours will appeal the verdict based upon substantial errors made at the trial court. Management believes that a loss is reasonably possible related to these matters; however, given the evaluation of each Benzene matter is highly fact driven and impacted by disease, exposure and other factors, a range of such losses cannot be reasonably estimated at this time.
PFOA
Prior to the fourth quarter of 2014, 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

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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

Washington Works plant in West Virginia. Chemours had accruals of $14 related to the PFOA matters discussed below at September 30, 2015 and December 31, 2014.
The accruals include charges related to DuPont’s obligations under agreements with the U.S. Environmental Protection Agency (EPA) 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.
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 and made a payment of $70, 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 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 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 and the registration process, as well as eligibility screening, is ongoing. Diagnostic screening and testing has begun and associated payments to service providers are being disbursed from the escrow account. As of September 30, 2015, less than $1 has been disbursed from the escrow account related to medical monitoring.
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. At September 30, 2015, there were approximately 3,500 lawsuits filed in various federal and state courts in Ohio and West Virginia. These lawsuits are consolidated in multi-district litigation in Ohio federal court (MDL). Based on the information currently available to the company, 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 37 lawsuits alleging wrongful death. In the third quarter of 2014, six plaintiffs from the MDL were selected for individual trial. The first case (Bartlett v. DuPont) was tried to a verdict on October 7, 2015. The Plaintiff alleged that PFOA in drinking water caused her kidney cancer with causes of action for negligence and negligent infliction of emotional distress. Ohio law applied to the causes of action and damages. The jury found in favor of the Plaintiff awarding $1.1 in damages for negligence and $0.5 for emotional distress. The jury found that DuPont’s conduct did not warrant punitive damages. Chemours, through DuPont, will appeal the verdict based upon substantial errors made at the trial court. The second case (Wolf v. DuPont) is set for trial in March 2016. This case involves a Plaintiff alleging damages for ulcerative colitis. West Virginia law will apply to the causes of action and damages.
Chemours, through DuPont, denies the allegations in these lawsuits and is defending itself vigorously. No claims have been settled or resolved during the periods presented.
Additional Actions
An Ohio action brought by the LHWA against DuPont 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 of 2014, DuPont filed a motion for summary judgment.  The LHWA  moved for

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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

partial summary judgment. During the second quarter, the court granted in part and denied in part both parties' motions for summary judgment. A settlement conference is scheduled for November 2015 and a trial is set for January 2016.  Chemours, through DuPont, denies these claims and is defending itself vigorously. Ohio law will apply to the causes of action and damages.
PFOA Summary
While it is probable that the company will incur costs related to the medical monitoring program discussed above, 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 LHWA and MDL in Ohio federal court discussed above but such losses cannot be estimated at this time.  In the MDL in Ohio federal court, a range of such losses cannot be reasonably estimated at this time due to the uniqueness of the individual MDL plaintiff's claims and Chemours' defenses to those claims, both as to potential liability and damages on an individual claim basis, among other factors. The trials and appeals of these matters will occur over the course of many years. Significant unfavorable outcomes in a number of cases in the MDL could have a material adverse effect on Chemours' consolidated financial position, results of operations or liquidity.
(c) Environmental
Chemours, by virtue of its status as a subsidiary of DuPont prior to the Distribution, is 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 substances by Chemours or other parties. Chemours accrues for environmental remediation activities consistent with the policy set forth in Note 3 to the Annual Combined Financial Statements in our Information Statement included in our Registration Statement. Much of this liability results from the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA, often referred to as Superfund), RCRA and similar state and global laws. These laws require Chemours to undertake 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.
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. At September 30, 2015, the Interim Consolidated Balance Sheets included a liability of $300, 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. Therefore, considerable uncertainty exists with respect to environmental remediation costs and, under adverse changes in circumstances, the potential liability may range up to approximately $630 above the amount accrued at September 30, 2015. Except for Pompton Lakes, which is discussed further below, 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 will have a material impact on the financial position, liquidity or results of operations of Chemours.
Pompton Lakes
The environmental remediation accrual at September 30, 2015 includes $88 related to activities at Chemours’ site in Pompton Lakes, New Jersey. Management believes that it is reasonably possible that potential liability for remediation activities at this site could range up to $119 including previously accrued amounts. This could have a material impact on the liquidity of Chemours in the period recognized. During the twentieth century, blasting caps, fuses and related materials were manufactured at Pompton Lakes. Operating activities at the site were ceased in the mid 1990s. 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 has installed and continues to install vapor mitigation systems at residences within the ground water plume. In addition, Chemours is further assessing ground water conditions. In June 2015, the EPA issued a modification to the site's RCRA permit that requires 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. Chemours expects to spend about $50 over the next two to three years in connection with remediation activities commencing in mid-2016 at Pompton Lakes, including activities related to the EPA’s proposed plan. These amounts are included in the remediation accrual at September 30, 2015.

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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

Note 17. Financial Instruments
Derivative Instruments
Objectives and Strategies for Holding Derivative Instruments
In the ordinary course of business, Chemours enters into contractual arrangements (derivatives) to reduce its exposure to foreign currency risks. The Company has established a derivative program to be utilized for financial risk management. This program reflects varying levels of exposure coverage and time horizons based on an assessment of risk. The derivative program has procedures consistent with Chemours’ financial risk management policies and guidelines.
Foreign Currency Forward Contracts
Chemours uses foreign currency forward contracts to reduce its net exposure, by currency, related to non-functional currency-denominated monetary assets and liabilities of its operations so that exchange gains and losses resulting from exchange rate changes are minimized. These derivative instruments are not part of a cash flow hedge program or a fair value hedge program, and have not been designated as a hedge. Although all of the forward contracts are subject to an enforceable master netting agreement, Chemours has elected to present the derivative assets and liabilities on a gross basis in the Interim Consolidated Balance Sheets. No collateral has been required for these contracts. All gains and losses resulting from the revaluation of the derivative assets and liabilities are recognized in other income, net in the Interim Consolidated Statements of Operations during the period in which they occurred.
At September 30, 2015, there were 64 forward exchange currency contracts outstanding with an aggregate gross notional value of $1,030. Chemours recognized a gain of $66 and $78 for the three and nine month periods ended September 30, 2015, respectively in other income, net in the Interim Consolidated Statements of Operations. There were no forward contracts outstanding in 2014.
Net Investment Hedge - Foreign Currency Borrowings
On July 1, 2015, Chemours designated its €360 million Euro notes (see Note 15) as a hedge of its net investments in certain of its international subsidiaries that use the Euro as functional currency in order to reduce the volatility in stockholders’ equity caused by the changes in foreign currency exchange rates of the Euro with respect to the U.S. Dollar. Chemours used the spot method to measure the effectiveness of the net investment hedge. Under this method, for each reporting period, the change in the carrying value of the Euro notes due to remeasurement of the effective portion is reported in accumulated other comprehensive loss in the Interim Consolidated Balance Sheet and the remaining change in the carrying value of the ineffective portion, if any, is recognized in other income, net in the Interim Consolidated Statements of Operations. Chemours evaluates the effectiveness of its net investment hedge quarterly. For the three and nine months ended September 30, 2015, Chemours did not record any ineffectiveness and recognized gains of less than $1 on its net investment hedges within cumulative translation adjustment in AOCI. There were no net investment hedges in 2014.
Fair Value of Derivative Instruments
The table below presents the fair value of Chemours’ derivative assets and liabilities within the fair value hierarchy, as described in Note 3 to the Interim Consolidated Financial Statements.
 
 
Fair Value Using Level 2 Inputs
 
Balance Sheet Location
September 30, 2015
 
December 31, 2014
Asset derivatives:
 
 
 
 
Foreign currency forward contracts
Accounts and notes receivable - trade, net
$
9

 
$
—

     Total asset derivatives
 
$
9

 
$
—

 
 
 
 
 
Liability derivatives
 
 
 
 
Foreign currency forward contracts
Other accrued liabilities
$
3

 
$
—

     Total liability derivatives
 
$
3

 
$
—


24
Table of Contents
The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

We classify our foreign currency forward contracts in Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments. For derivative assets and liabilities, standard industry models are used to calculate the fair value of the various financial instruments based on significant observable market inputs, such as foreign exchange rates and implied volatilities obtained from various market sources. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance/quality checks.
Note 18. Long-Term Employee Benefits 
Plans Covering Employees in the U.S.
On July 1, 2015, in connection with the separation from DuPont, Chemours employees stopped participating in various DuPont plans, including the DuPont Pension and Retirement Plan in the U.S. and certain other long-term employee benefits. DuPont retained all liabilities related to its U.S. plans post-separation.
Chemours sponsors a defined contribution plan, which covers all U.S. employees. The plan is a tax-qualified contributory profit sharing plan, with cash or deferred arrangement, and any eligible employee of Chemours may participate. Chemours contributes 100% of the first 6% of the employee’s contribution election and also contributes 3% of each eligible employee’s eligible compensation regardless of the employee’s contribution. The plan's matching contributions vest immediately upon contribution. The 3% non-matching contribution vests for employees with at least three years of service. Enhanced 401(k) benefits are also provided to former participants of the DuPont pension plan.
Plans Covering Employees Outside the U.S.
Pension coverage for employees of Chemours non-U.S. subsidiaries is provided, to the extent deemed appropriate, through separate plans established after separation and comparable to the DuPont plans in those countries. Obligations under such plans are funded by depositing funds with trustees, covered by insurance contracts or remain unfunded.
Participation in the Plans
Prior to July 1, 2015, Chemours participated in DuPont’s U.S. and non-U.S. plans as though they were participants in a multi-employer plan with the other businesses of DuPont. More information on the financial status of DuPont’s significant plans can be found in DuPont’s Annual Report on Form 10-K. The following table presents the expense for DuPont’s significant plans in which Chemours participated prior to separation and are accounted for as multi-employer plans.
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
Plan Name
 
EIN / Pension Number
 
2015
 
2014
 
2015
 
2014
DuPont Pension and Retirement Plan (U.S.)
 
51-0014090/001
 
$
—

 
$
13

 
$
48

 
$
38

All other U.S. and non-U.S. Plans
 
 
 
—

 
(1
)
 
5

 
2

The above table does not include pension plans covering Chemours' employees in various non-U.S. plans. See below for further discussion of these plans. For purposes of these financial statements, the amounts in the tables above represent the allocation of cost to Chemours included in the income statements of Chemours, which was allocated based on active employee headcount. These figures do not represent cash payments to DuPont, or DuPont’s plans.
Single and Multiple Employer Plans
Beginning in the first quarter of 2015, Chemours has accounted for the plans covering its employees in the Netherlands and Taiwan as a multiple employer plan and a single employer plan, respectively. In the third quarter of 2015, in connection with the separation, additional plans in Germany, Belgium, Japan, Korea, Mexico and Switzerland were established. As of September 30, 2015, these plans were all accounted for as single employer plans. The pre-tax amounts recognized in accumulated other comprehensive (loss) income are summarized below:

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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

Pension Benefits
 
September 30, 2015
Net loss
 
$
362

Prior service cost
 
(8
)
Total amount recognized in accumulated other comprehensive (loss) income
 
$
354

At January 1, 2015, the accumulated benefit obligation and projected benefit obligation for the non-U.S. plans were $1,186 and $1,309, respectively. The fair value of assets in the non-U.S. plans, net of plan liabilities was $1,288, which includes a contribution of $28 to the Taiwan plan in 2015 made by DuPont, on behalf of Chemours. Valuations for the single and multiple employer plans covering Chemours' employees were obtained as of January 1, 2015 and the information presented is in accordance with the valuation of these plans as of that date.
Pension Benefits
 
Three Months Ended September 30, 2015
 
Nine Months Ended September 30, 2015
Components of net periodic pension cost:
 
 
 
 
Net periodic benefit (credit) cost:
 
 
 
 
Service cost
 
$
5

 
$
11

Interest cost
 
5

 
14

Expected return on plan assets
 
(21
)
 
(61
)
Amortization of loss
 
1

 
8

Amortization of prior service cost
 
4

 
6

Net periodic benefit (credit) cost
 
$
(6
)
 
$
(22
)
The estimated pre-tax net loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive (loss) income into net periodic benefit cost during the remainder of 2015 is $5.
Assumptions
For the non-U.S. plans, the Company utilizes prevailing long-term high quality corporate bond indices to determine the discount rate applicable to each country at the measurement date. For these plans, the long term rate of return on assets reflects economic assumptions applicable to each country.
The following assumptions have been used to determine the benefit obligations and net benefit cost:
Weighted average assumptions used to determine benefit obligations as of January 1, 2015 and benefit cost for the nine months ended September 30, 2015
 
Pension Benefit Obligations at January 1, 2015
 
Benefits Cost for the nine months ended September 30, 2015
Discount rate
 
2
%
 
3
%
Expected return on plan assets
 
7
%
 
7
%
Rate of compensation increase 1
 
4
%
 
4
%
1 The rate of compensation increase represents the single annual effective salary increase that an average plan participant would receive during the participant's entire career at Chemours.
Plan Assets
The non-U.S. plan assets are maintained by Chemours. Each pension plan's assets are invested through a master trust fund. The strategic asset allocation for this trust fund is selected by management, reflecting the results of comprehensive asset and liability modeling. Chemours establishes strategic asset allocation percentage targets and appropriate benchmarks for significant asset classes with the aim of achieving a prudent balance between return and risk. Strategic asset allocations in countries are selected in accordance with the laws and practices of those countries.
The weighted average target allocation for Chemours' pension plan assets is summarized as follows:

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Table of Contents
The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

 
January 1, 2015
U.S. equity securities
25
%
Non-U.S.equity securities
25
%
Fixed income securities
50
%
Total
100
%
Fixed income securities include corporate issued, government issued and asset backed securities. Corporate debt investments include a range of credit risk and industry diversification. U.S. fixed income investments are weighted more heavily than non-U.S. fixed income securities.
Fair value calculations may not be indicative of net realizable value or reflective of future fair values. Furthermore, although Chemours believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The table below presents the fair values of Chemours' pension assets by level within the fair value hierarchy, as described in Note 3 of the Interim Consolidated Financial Statements, as of January 1, 2015.
 
Total
 
Level 1
 
Level 2
Asset Category:
 
 
 
 
 
Debt - government issued
$
553

 
$
24

 
$
529

Debt - corporate issued
150

 
52

 
98

Debt - asset backed
38

 
3

 
35

U.S. and non U.S. equities
538

 
52

 
486

Derivatives - asset position
33

 
—

 
33

Derivatives - liability position
(12
)
 
—

 
(12
)
Other
5

 
2

 
3

 
1,305

 
$
133

 
$
1,172

Pension trust payables 1
(17
)
 
 
 
 
Total
$
1,288

 
 
 
 
1 Primarily payables for investment securities purchased.    
For pension plan assets classified as Level 1, total fair value is either the price of the most recent trade at the time of the market close or the official close price, as defined by the exchange on which the asset is most actively traded on the last trading day of the period, multiplied by the number of units held without consideration of transaction costs.
For pension or other postretirement benefit plan assets classified as Level 2, where the security is frequently traded in less active markets, fair value is based on the closing price at the end of the period; where the security is less frequently traded, fair value is based on the price a dealer would pay for the security or similar securities, adjusted for any terms specific to that asset or liability. Market inputs are obtained from well-established and recognized vendors of market data and subjected to tolerance and quality checks. For derivative assets and liabilities, standard industry models are used to calculate the fair value of the various financial instruments based on significant observable market inputs, such as foreign exchange rates, commodity prices, swap rates, interest rates and implied volatilities obtained from various market sources.
Cash Flow
Defined Benefit Plan
DuPont contributed, on behalf of Chemours, $35 to its pension plans other than the principal U.S. pension plan in 2014. DuPont contributed, on behalf of Chemours, $66 to its other long-term employee benefit plans in 2014. DuPont contributed $38 in the first half of 2015 and Chemours contributed $4 in the third quarter of 2015. Chemours expects to contribute an additional $4 to

27
Table of Contents
The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

its pension plans, and expects contributions to its other long-term employee benefit plans to be approximately the same as contributions in 2014.
Estimated future benefit payments
The following benefit payments, which are related to non-U.S. plans that are predominantly Chemours and reflect future service, as appropriate, are expected to be paid:
Year ended December 31,
 
Benefits
Remainder of 2015
 
$
10

2016
 
44

2017
 
48

2018
 
47

2019
 
49

2020-2024
 
265

Note 19. Stock-based Compensation

Total stock-based compensation cost included in the Consolidated Statements of Operations was $8 and $13 for the three and nine months ended September 30, 2015, respectively, and $2 and $6 for the three and nine months ended September 30, 2014, respectively. The income tax benefits related to stock-based compensation arrangements were $3 and $5 for the three and nine months ended September 30, 2015, respectively and less than $1 and $2 for the three and nine months ended September 30, 2014, respectively.

Stock-based compensation expense in 2014 and until separation on July 1, 2015 was allocated to Chemours based on the portion of DuPont’s incentive stock program in which Chemours employees participated.  Adopted at separation, The Chemours Company Equity and Incentive Plan grants certain employees, independent contractors, or non-employee directors of the Company different forms of benefits, including stock options and restricted stock units (RSUs).

In accordance with the Employee Matters Agreement between DuPont and Chemours, certain executives and employees were entitled to receive equity compensation awards of Chemours in replacement of previously outstanding awards granted under various DuPont stock incentive plans prior to the separation. In connection with the spin-off, these awards were converted into new Chemours equity awards using a formula designed to preserve the intrinsic value of the awards immediately prior to the July 1, 2015 spin-off. As a result of the conversion of these awards, we recorded an approximate $3 incremental charge in the third quarter of 2015. The terms and conditions of the DuPont awards were replicated and as necessary, adjusted to ensure that the vesting schedule and economic value of the awards was unchanged by the conversion.

Stock Options

Chemours granted non-qualified options to employees in July 2015 representing replacement of previously granted performance stock unit awards at DuPont. Other than those options, Chemours' expense related to stock options was entirely related to options granted to replace outstanding option awards from DuPont that were converted to Chemours options on July 1, 2015.

The expense related to stock options granted in the three and nine months ended September 30, 2015 was based on the assumptions shown in the table below.


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The Chemours Company
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Dollars in millions, except per share)

 
Assumptions used to calculate expense for stock options
 
For the three and nine months ended September 30, 2015
 
 
Risk-free interest rate
 
1.5
%
 
Average life of options (years)
 
5.4

 
Volatility
 
42.0
%
 
Dividend yield
 
6.9
%
 
Fair value per stock option
 
$
3.17



The following table summarizes Chemours stock option activity for the three months ended September 30, 2015.

 
Number of Shares
(in thousands)
 
Weighted Average Exercise Price(per share)
 
Weighted Average Remaining Contractual Term (years)
 
Aggregate Intrinsic Value (in thousands)
Outstanding, June 30, 2015
—

 
N/A

 
 
 
 
Converted on July 1, 2015
7,793

 
14.56

 
 
 
 
Granted
662

 
16.04

 
 
 
 
Exercised
—

 
N/A

 
 
 
 
Forfeited
(107
)
 
17.16

 
 
 
 
Canceled
—

 
N/A

 
 
 
 
Outstanding, September 30, 2015
8.348

 
14.65