Chemours Co (CC) FY 2021 MD&A

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) supplements the Consolidated Financial Statements and the related notes thereto included elsewhere herein to help provide an understanding of our financial condition, changes in our financial condition, and the results of our operations for the periods presented. For the year ended December 31, 2019, and changes from the year ended December 31, 2019 to the year ended December 31, 2020, management’s discussion and analysis pertaining to our financial condition, changes in our financial condition, and the results of our operations have been omitted from this MD&A and may be found in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations as included in our Annual report on Form 10-K for the year ended December 31, 2020. This MD&A should be read in conjunction with the Consolidated Financial Statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K.

Our forward-looking statements are based on certain assumptions and expectations of future events that may not be accurate or realized. These statements, as well as our historical performance, are not guarantees of future performance. Forward-looking statements also involve risks and uncertainties that are beyond our control. Additionally, there may be other risks and uncertainties that we are unable to identify at this time or that we do not currently expect to have a material impact on our business. Factors that could cause or contribute to these differences include, but are not limited to, the risks, uncertainties, and other factors discussed within Item 1A – Risk Factors in this Annual Report on Form 10-K.

Overview

We are a leading, global provider of performance chemicals that are key inputs in end-products and processes in a variety of industries. We deliver customized solutions with a wide range of industrial and specialty chemical products for markets, including coatings, plastics, refrigeration and air conditioning, transportation, semiconductor and consumer electronics, general industrial, and oil and gas. Our principal products include TiO2 pigment, refrigerants, industrial fluoropolymer resins, sodium cyanide (prior to the Mining Solutions business sale), and performance chemicals and intermediates. We manage and report our operating results through four reportable segments: Titanium Technologies, Thermal & Specialized Solutions, Advanced Performance Materials, and Chemical Solutions. Our Titanium Technologies segment is a leading, global provider of TiO2 pigment, a premium white pigment used to deliver whiteness, brightness, opacity, and protection in a variety of applications. Our Thermal & Specialized Solutions segment is a leading, global provider of refrigerants, thermal management solutions, propellants, blowing agents, and specialty solvents. Our Advanced Performance Materials segment is a leading, global provider of high-end polymers and advanced materials that deliver unique attributes, including low friction coefficients, extreme temperature resistance, weather resistance, ultraviolet and chemical resistance, and electrical insulation. Our Chemical Solutions segment was a leading provider of industrial chemicals used in gold production prior to the Mining Solutions business sale and continues to be a leading provider of chemicals used in industrial, and consumer applications in the Americas.

Recent Developments

Coronavirus Disease 2019 (“COVID-19”)

The COVID-19 pandemic continues to spread throughout the world. More contagious COVID-19 variants continue to emerge driving up infection rates globally, particularly in jurisdictions where vaccination rates have lagged. As a global provider of performance chemicals that are key inputs in end-products and processes in a variety of industries, a pandemic presents obstacles that can adversely impact customer demand for our products, our manufacturing operations, our supply chain effectiveness and efficiencies, and ultimately, our financial results. Throughout the outbreak and subsequent stages of the COVID-19 pandemic that have occurred thus far, above all, we have remained steadfast in our commitment to the health, safety, and well-being of our employees and their families, while serving our customers, and conserving cash to ensure the continuity of our business operations into the future.

Although COVID-19 infections have continued to spread throughout the Americas, Europe and Asia Pacific, we continue to experience minimal disruption in our operations and business-related processes. Where necessary, based on COVID-19 infection rates and local regulations, we continue to take a number of measures to promote the safety and security of our employees, including requiring remote working arrangements for employees where practicable, the imposition of travel restrictions, limiting non-essential visits to plant sites, performing health checks before every shift, and providing personal protective equipment for our “essential” operations employees at our sites and laboratories. We cannot predict with certainty the potential future impact of the COVID-19 pandemic on our customers’ ability to manufacture their products, as well as any potential future disruptions in our supply chain due to restrictions on travel and transport, regional quarantines, and other social distancing measures. The risks and uncertainties posed by this significant, widespread event are innumerable and far-reaching, including but not limited to those described in Item 1A – Risk Factors in this Annual Report on Form 10-K. Refer to the “Segment Reviews”, “2022 Outlook”, and “Liquidity and Capital Resources” sections within this MD&A for further considerations regarding the quickly evolving market dynamics that are impacting our businesses and our associated response.

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Despite the health and safety, business continuity, and macroeconomic challenges associated with conducting business in the current environment, we remain committed to anticipating and meeting the demands of our customers, as they, like us, continue to navigate uncharted territory. In 2020, we elected to accept tax relief provided by various taxing jurisdictions, resulting in the deferral of approximately $80 million in tax payments, of which approximately $35 million was paid in 2020 and $35 million was paid in 2021, the remainder of which will be paid in 2022. In addition, in 2021, we recorded approximately $15 million of benefit related to the Employee Retention Credit (“ERC”) of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which we expect to receive in 2022. We continue to anticipate that our cash generated from operations, available cash, receivables securitization, and existing debt financing arrangements will provide us with sufficient liquidity through at least February 2023.

Winter Storm Uri

Over several days in mid-February 2021, a major winter storm impacted a significant portion of the United States. In Texas, especially, snow, ice, and record-low temperatures drove higher-than-normal energy and heating demand, leaving millions of residents and businesses without power. Impacts from the storm to our operations were principally at our sites in Corpus Christi, El Dorado and LaPorte in our Thermal & Specialized Solutions segment which experienced physical damage resulting in plant downtime along with significant increases in utility costs during and immediately following the storm. Our sites at DeLisle and New Johnsonville in our Titanium Technologies segment and at Memphis in our Chemical Solutions segment were affected to a lesser degree than those in Thermal & Specialized Solutions. Our Advanced Performance Materials plant sites were not directly impacted by the storm, but the segment did face some challenges in the broader supply chain. The total cost of plant repairs and utility charges in excess of historical averages amount to approximately $21 million. In addition, storm-related downtime resulted in under absorption of plant fixed costs, impacting cost of goods sold by $9 million. We do not expect to receive any storm-related insurance recoveries.

Sale of Mining Solutions Business

In March 2021, we announced the initiation of a strategic review to assess the potential sale of the Mining Solutions business. On July 26, 2021, we entered into a definitive agreement with Manchester Acquisition Sub LLC, a Delaware limited liability company and a subsidiary of Draslovka Holding a.s., (“Draslovka”) to sell the Mining Solutions business of our Chemical Solutions segment (the “Mining Solutions Transaction”). The sale was completed on December 1, 2021 for net cash proceeds of $508 million, net of $13 million cash divested. Upon completion of the sale, we also recorded a net pre-tax gain on sale of $112 million, inclusive of $21 million of transaction costs.

Senior Unsecured Notes Due November 2029

In August 2021, we issued a $650 million aggregate principal amount of 4.625% senior unsecured notes due November 2029 (the “2029 Notes”). We received proceeds of $642 million, net of underwriting fees and other related expenses of $8 million, which are deferred and amortized to interest expense over the term of the 2029 Notes. The net proceeds from the 2029 Notes were used, together with cash on hand, to purchase or redeem, as applicable, the $750 million 7.000% senior notes due May 2025, denominated in U.S. dollars (the “2025 Notes”). In connection with the purchase and redemption of the 2025 Notes, we incurred a loss on extinguishment of $20 million for the year ended December 31, 2021.

Revolving Credit Facility

Our credit agreement, as amended and restated on April 3, 2018 (“Credit Agreement”), provides for a seven-year, senior secured term loan facility and a five-year, $800 million senior secured revolving credit facility (“Revolving Credit Facility”). On October 7, 2021, we entered into an amendment to the credit agreement (“Credit Agreement Amendment”) to, among other things, increase the aggregate commitment under our Revolving Credit Facility to $900 million and extend the maturity date to October 7, 2026.

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Results of Operations and Business Highlights

Results of Operations

The following table sets forth our results of operations for the years ended December 31, 2021 and 2020.

Net Sales

The following table sets forth the impacts of price, volume, currency, and portfolio changes on our net sales for the year ended December 31, 2021.

Our net sales increased by $1.4 billion (or 28%) to $6.3 billion for the year ended December 31, 2021, compared with net sales of $5.0 billion for the same period in 2020. The increase in our net sales for the year ended December 31, 2021 was primarily attributable to an increase in volume of 21% and an increase in price of 7%, partially offset by portfolio change of 2% driven by our Chemical Solutions segment. Volume and price increases in net sales were driven by increases in volume and price across all segments. Favorable currency movements in our Titanium Technologies, Thermal and Specialized Solutions, and Advanced Performance Materials segments added a tailwind of 2% to our net sales.

The drivers of these changes for each of our segments are discussed further under the “Segment Reviews” section within this MD&A.

Cost of Goods Sold

Our cost of goods sold (“COGS”) increased by $1.1 billion (or 27%) to $5.0 billion for the year ended December 31, 2021, compared with COGS of $3.9 billion for the same period in 2020. The increases in our COGS for the year ended December 31, 2021 were primarily attributable to higher net sales, as well as higher raw material costs, higher distribution, freight, and logistics expenses driven by the overall increase in net sales, raw material inflation and supply chain constraints. The increase was also due to plant fixed costs expensed in conjunction with plant downtime at certain of our facilities and under absorption of plant fixed costs due to operational issues and supply chain disruptions related to inclement weather from Winter Storm Uri during the first quarter of 2021, partially offset by a payroll tax credit recognized under the ERC of the CARES Act. The increase in COGS was also driven by $193 million of on-site environmental remediation costs at our Fayetteville Works site in Fayetteville, North Carolina (“Fayetteville”) during 2021, partially offset by Qualified Spend recovery from DuPont and Corteva.

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Selling, General, and Administrative Expense

Our selling, general, and administrative (“SG&A”) expense increased by $65 million (or 12%) to $592 million for the year ended December 31, 2021, compared with SG&A expense of $527 million for the same period in 2020. The increase in our SG&A expense for the year ended December 31, 2021 was primarily attributable to higher performance-based compensation expenses in the current year, $25 million incurred for settlement with the State of Delaware, and cost deferral activities in the prior year related to COVID-19, partially offset by Qualified Spend recovery from DuPont and Corteva.

Research and Development Expense

Our research and development (“R&D”) expense increased by $14 million (or 15%) to $107 million for the year ended December 31, 2021, compared with R&D expense of $93 million for the same period in 2020. The increase in our R&D expense for the year ended December 31, 2021 was primarily attributable to R&D project activities returning to a normalized level following the deferral of activities in 2020 due to COVID-19, growth initiatives in the current year, and our increased focus on product development in our Advanced Performance Materials segment.

Restructuring, Asset-related, and Other Charges

Our restructuring, asset-related, and other charges decreased by $74 million (or 93%) to $6 million for the year ended December 31, 2021, compared with $80 million for the same period in 2020.

For the year ended December 31, 2021, our restructuring, asset-related, and other charges were primarily attributable to $12 million of decommissioning and dismantling related charges in connection with our decision to exit the Aniline business and stop production at our Pascagoula, Mississippi manufacturing plant, partially offset by a net $9 million gain from contract termination with a third-party services provider at our previously owned Mining Solutions facility in Gomez Palacio, Durango, Mexico. This facility was sold as part of the Mining Solutions Transaction.

For the year ended December 31, 2020, our restructuring, asset-related, and other charges were primarily attributable to $37 million in contract termination fees and immediate recognition of prepaid costs in connection with our entry into dispute resolution with a third-party services provider at our previously owned Mining Solutions facility under construction in Gomez Palacio, Durango, Mexico. The facility was sold as part of the Mining Solutions Transaction. We also incurred $15 million of employee-related separation liabilities under various restructuring programs and $10 million of asset-related impairment charges in our Advanced Performance Materials segment, as well as $12 million of charges in connection with our decision to exit the Aniline business and stop production at our Pascagoula, Mississippi manufacturing plant.

Equity in Earnings of Affiliates

Our equity in earnings of affiliates increased by $20 million (or 87%) to $43 million for the year ended December 31, 2021, compared with equity in earnings of affiliates of $23 million for the same period in 2020. The increase in our equity in earnings of affiliates for the year ended December 31, 2021 was primarily attributable to increased demand for our investees’ products, primarily from Chemours-Mitsui Fluorochemicals Company, Ltd.

Interest Expense, Net

Our interest expense, net decreased by $25 million (or 12%) to $185 million for the year ended December 31, 2021, compared with interest expense, net of $210 million for the same period in 2020. The decrease in our interest expense, net for the year ended December 31, 2021 was primarily attributable to a reduction in our outstanding debt obligations and associated rates following the refinancing of our 6.625% senior unsecured notes due May 2021, denominated in U.S. dollars (“2023 Dollar Notes”) in the fourth quarter of 2020, as well as the refinancing of our 2025 Notes in the third quarter of 2021 and lower variable interest rates on our senior secured term loans.

Loss on Extinguishment of Debt

For the year ended December 31, 2021, we recognized a loss on extinguishment of debt of $21 million primarily in connection with our tender offer and make-whole call to purchase any and all of our 2025 Notes.

For the year ended December 31, 2020, we recognized a loss on extinguishment of debt of $22 million in connection with our tender offer and make-whole call to purchase any and all of our remaining outstanding 2023 Dollar Notes.

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Other Income (Expense), Net

Our other income (expense), net increased by $142 million (or over 100%) to $163 million for the year ended December 31, 2021, compared with other income, net of $21 million for the same period in 2020. The increase in our other income, net for the year ended December 31, 2021 was primarily attributable to a net pre-tax gain on sale of $112 million associated with the sale of the Mining Solutions business of our Chemical Solutions segment and favorable changes in net exchange gains and losses of $29 million, driven by the favorable movements in several foreign currencies.

Provision for (Benefit from) Income Taxes

Our provision for (benefit from) income taxes amounted to a provision for income taxes of $68 million and a benefit from income taxes of $40 million for the years ended December 31, 2021 and 2020, respectively. Our provision for (benefit from) income taxes represented effective tax rates of 10% and negative 22% for the years ended December 31, 2021 and 2020, respectively.

The $108 million increase in our provision for income taxes for the year ended December 31, 2021, when compared with the same period in 2020, was primarily attributable to increased profitability, changes to our geographical mix of earnings, and $21 million of income tax expense related to the gain realized from the sale of our Mining Solutions business. In addition, we recorded income tax benefits in 2020 of $18 million related to the U.S. IRS acceptance of a non-automatic method change that allows for the recovery of tax basis for depreciation, which had been previously disallowed, and $11 million related to favorable impacts of certain elections and accounting method changes in connection with the filing of our 2019 U.S. federal income tax return, both of which did not reoccur in 2021. These increases were partially offset by income tax benefits in 2021 of $41 million associated with non-recurring accrued environmental remediation liabilities recorded in 2021, $11 million associated with a 2012 income tax refund received in a foreign subsidiary, and $16 million associated with a reversal of a valuation allowance on a certain foreign subsidiary’s deferred tax assets in relation to the sale of our Mining Solutions business on December 1, 2021.

Segment Reviews

Adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”) is the primary measure of segment profitability used by our Chief Operating Decision Maker (“CODM”) and is defined as income (loss) before income taxes, excluding the following:

A reconciliation of net income (loss) attributable to Chemours to Adjusted EBITDA for the years ended December 31, 2021 and 2020 is included in the “Non-GAAP Financial Measures” section of this MD&A.

The following table sets forth our Adjusted EBITDA by segment for the years ended December 31, 2021 and 2020.

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Titanium Technologies

The following table sets forth the net sales, Adjusted EBITDA, and Adjusted EBITDA margin amounts for our Titanium Technologies segment for the years ended December 31, 2021 and 2020.

The following table sets forth the impacts of price, volume, currency, and portfolio changes on our Titanium Technologies segment’s net sales for the year ended December 31, 2021.

Segment Net Sales

Our Titanium Technologies segment’s net sales increased by $953 million (or 40%) to $3.4 billion for the year ended December 31, 2021, compared with segment net sales of $2.4 billion for the same period in 2020. The increase in segment net sales for the year ended December 31, 2021 was primarily attributable to an increase in volume of 28% and an increase in price of 10%. Volume increases were driven by steady demand and market share recovery for our products across all end-markets and regions. Price increases were due to contracted price changes, as well as spot price increases in our Flex and Distribution channels. Favorable currency movements added a 2% tailwind to the segment’s net sales during the year ended December 31, 2021.

Adjusted EBITDA and Adjusted EBITDA Margin

Segment Adjusted EBITDA increased by $299 million (or 59%) to $809 million and segment Adjusted EBITDA margin increased by approximately 300 basis points to 24% for the year ended December 31, 2021, compared with segment Adjusted EBITDA of $510 million and segment Adjusted EBITDA margin of 21% for the same period in 2020. The increase in Adjusted EBITDA and segment Adjusted EBITDA margin was primarily attributable to the aforementioned increase in volume and price of the segment’s net sales, partially offset by higher raw material and energy costs, and fixed cost headwinds to support the increase in demand.

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Thermal & Specialized Solutions

The following table sets forth the net sales, Adjusted EBITDA, and Adjusted EBITDA margin amounts for our Thermal & Specialized Solutions segment for the years ended December 31, 2021 and 2020.

The following table sets forth the impacts of price, volume, currency, and portfolio changes on our Thermal & Specialized Solutions segment’s net sales for the year ended December 31, 2021.

Segment Net Sales

Our Thermal & Specialized Solutions segment’s net sales increased by $152 million (or 14%) to $1.3 billion for the year ended December 31, 2021, compared with segment net sales of $1.1 billion for the same period in 2020. The increase in segment net sales for the year ended December 31, 2021 was primarily attributable to increases in volume and price of 9% and 4%, respectively. Volumes increased due to higher global customer demand for our refrigerants driven by global market recovery, partially offset by demand headwinds from automotive original equipment manufacturer (“OEM”) related to semiconductor shortages. Overall, prices increased due to actions implemented to offset inflationary headwinds. Favorable currency movements added a 1% tailwind to the segment’s net sales during the year ended December 31, 2021.

Adjusted EBITDA and Adjusted EBITDA Margin

Segment Adjusted EBITDA increased by $58 million (or 16%) to $412 million and segment Adjusted EBITDA margin increased by approximately 100 basis points to 33% for the year ended December 31, 2021, compared with segment Adjusted EBITDA of $354 million and segment Adjusted EBITDA margin of 32% for the same period in 2020. The increase in segment Adjusted EBITDA and segment Adjusted EBITDA margin for the year ended December 31, 2021 was primarily attributable to the increase in stationary pricing in 2021, partially offset by higher raw material costs and plant fixed costs incurred in conjunction with the temporary idling of certain of our facilities due to inclement weather from Winter Storm Uri early in the year.

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Advanced Performance Materials

The following table sets forth the net sales, Adjusted EBITDA, and Adjusted EBITDA margin amounts for our Advanced Performance Materials segment for the years ended December 31, 2021 and 2020.

The following table sets forth the impacts of price, volume, currency, and portfolio changes on our Advanced Performance Materials segment’s net sales for the year ended December 31, 2021.

Segment Net Sales

Our Advanced Performance Materials segment’s net sales increased by $293 million (or 27%) to $1.4 billion for the year ended December 31, 2021, compared with segment net sales of $1.1 billion for the same period in 2020. The increase in segment net sales for the year ended December 31, 2021 was primarily attributable to a 20% increase in volume and a 4% increase in price. Volumes increased due to higher global customer demand across nearly all regions and markets. Global average selling price increased due to customer level pricing actions partially offset by our composition of product and customer mix. Favorable currency movements added a 3% tailwind to the segment’s net sales during the year ended December 31, 2021.

Adjusted EBITDA and Adjusted EBITDA Margin

Segment Adjusted EBITDA increased by $135 million (or over 100%) to $261 million and segment Adjusted EBITDA margin increased by approximately 800 basis points to 19% for the year ended December 31, 2021, compared with segment Adjusted EBITDA of $126 million and segment Adjusted EBITDA margin of 11% for the same period in 2020. The increases in segment Adjusted EBITDA and segment Adjusted EBITDA margin for the year ended December 31, 2021 were primarily attributable to the aforementioned increases in volumes and price, partially offset by growth investments, higher raw material costs and higher fixed costs related to performance-based compensation.

The segment’s operating results for the years ended December 31, 2021 and 2020 included $15 million and $19 million, respectively, of additional costs for process-related waste water treatment at Fayetteville. We expect to continue to incur these costs as we actively work with the North Carolina Department of Environmental Quality (the “NC DEQ”) to resolve the suspension of our National Pollutant Discharge Elimination System (“NPDES”) permit.

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Chemical Solutions

The following table sets forth the net sales, Adjusted EBITDA, and Adjusted EBITDA margin amounts for our Chemical Solutions segment for the years ended December 31, 2021 and 2020.

The following table sets forth the impacts of price, volume, currency, and portfolio changes on our Chemical Solutions segment’s net sales for the year ended December 31, 2021.

Segment Net Sales

Our Chemical Solutions segment’s net sales decreased by $22 million (or 6%) to $336 million for the year ended December 31, 2021, compared with segment net sales of $358 million for the same period in 2020. The decrease in segment net sales for the year ended December 31, 2021 was primarily attributable to portfolio change, which drove a 26% decline in net sales following our exit of the Aniline business at our Pascagoula, Mississippi production facility at the end of 2020 and the sale of our Mining Solutions business on December 1, 2021. The decrease in our net sales was partially offset by an increase in volume of 13% and an increase in price of 7%. Volumes increased due to increased customer demand in our Mining Solutions business prior to the sale on December 1, 2021. Average prices increased primarily due to higher contractual raw material cost pass-through in our Mining Solutions business prior to the sale on December 1, 2021.

Adjusted EBITDA and Adjusted EBITDA Margin

Segment Adjusted EBITDA decreased by $22 million (or 30%) to $51 million and segment Adjusted EBITDA margin decreased by approximately 500 basis points to 15% for the year ended December 31, 2021, compared with segment Adjusted EBITDA of $73 million and segment Adjusted EBITDA margin of 20% for the same period in 2020. The decreases in segment Adjusted EBITDA and segment Adjusted EBITDA margin for the year ended December 31, 2021 were primarily attributable to plant fixed costs incurred in conjunction with the temporary idling of certain of our facilities due to inclement weather from Winter Storm Uri during the first quarter as well as higher raw material and plant fixed costs. Furthermore, the aforementioned exit of the Aniline business at our Pascagoula, Mississippi production facility and the sale of our Mining Solutions business further decreased segment Adjusted EBITDA and segment Adjusted EBITDA margin.

Corporate and Other

Corporate costs and certain legal and environmental expenses, stock-based compensation expenses, and foreign exchange gains and losses arising from the remeasurement of balances in currencies other than the functional currency of our legal entities are reflected in Corporate and Other.

Corporate and Other costs increased by $36 million (or 20%) to $220 million for the year ended December 31, 2021, compared with Corporate and Other costs of $184 million for the same period in 2020. The increase in Corporate and Other costs for the year ended December 31, 2021 was primarily attributable to higher costs associated with legacy environmental remediation matters and higher performance-based compensation expenses.

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2022 Outlook

Our 2022 results will be driven by the following expectations in each of our reportable segments:

We expect that our capital expenditures will be approximately $400 million.

Our outlook for 2022 reflects our current visibility and expectations based on market factors, such as currency movements, macro-economic factors, and end-market demand. In particular, end-market demand may be impacted by factors beyond our control, including the ongoing COVID-19 pandemic. Our ability to meet our expectations are subject to numerous risks, including, but not limited to, those described in Item 1A – Risk Factors.

Liquidity and Capital Resources

Our primary sources of liquidity are cash generated from operations and available cash, along with our receivables securitization and borrowings under our debt financing arrangements, both of which are described in further detail in “Note 20 – Debt” to the Consolidated Financial Statements. Our operating cash flow generation is driven by, among other things, the general global economic conditions at any point in time and their resulting impacts on demand for our products, raw materials and energy prices, and industry-specific issues, such as production capacity and utilization. We have generated strong operating cash flows through various past industry and economic cycles, evidencing the underlying operating strength of our businesses.

Uncertainty continues to exist concerning both the magnitude and the duration of the impacts to our financial results and condition caused by the ongoing COVID-19 pandemic. Regardless of size and duration, the evolving challenges have had and could again, in the future, have an adverse impact on our operating cash flows. We anticipate that our cash generated from operations, available cash, receivables securitization, and existing debt financing arrangements will provide us with sufficient liquidity through at least February 2023. If the macroeconomic situation deteriorates or the duration of the pandemic is further extended, we will evaluate additional cost actions, as necessary, as the operational and financial impacts to our Company continue to evolve.

At December 31, 2021, we had total cash and cash equivalents of $1.5 billion, of which $924 million was held by our foreign subsidiaries. All cash and cash equivalents held by our foreign subsidiaries is readily convertible into currencies used in our operations, including the U.S. dollar. During the year ended December 31, 2021, we received approximately $326 million of net cash in the U.S. through intercompany loans and dividends. Traditionally, the cash and earnings of our foreign subsidiaries have generally been used to finance their operations and capital expenditures, and it is our intention to indefinitely reinvest the historical pre-2018 earnings of our foreign subsidiaries. However, beginning in 2018, management asserts that only certain foreign subsidiaries are indefinitely reinvested. For further information related to our income tax positions, refer to “Note 9 – Income Taxes” to the Consolidated Financial Statements. Management believes that sufficient liquidity is available in the U.S. through at least February 2023, which includes borrowing capacity under our revolving credit facility.

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Over the course of the next 12 months and beyond, we anticipate making significant cash payments for known contractual and other obligations, which we expect to fund through cash generated from operations, available cash, receivables securitization, and our existing debt financing arrangements. Such obligations include:

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We continue to believe our sources of liquidity are sufficient to fund our planned operations and to meet our interest, dividend, and contractual obligations through at least February 2023. Our financial policy seeks to: (i) selectively invest in organic and inorganic growth to enhance our portfolio, including certain strategic capital investments; (ii) maintain appropriate leverage by using free cash flows to repay outstanding borrowings; and, (iii) return cash to shareholders through dividends and share repurchases. Specific to our objective to return cash to shareholders, in recent quarters, we have previously announced dividends of $0.25 per share, amounting to approximately $160 million per year, and, on February 9, 2022, we announced our quarterly cash dividend of $0.25 per share for the first quarter of 2022. Under our 2018 Share Repurchase Program, as further discussed in Item 5 – Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities in this Annual Report on Form 10-K, we also have remaining authority to repurchase $251 million of our outstanding common stock. On December 1, 2021, we completed the sale of the Mining Solutions business of our Chemical Solutions segment to Draslovka and received net cash proceeds of $508 million, net of $13 million cash divested. We expect to use the proceeds from the sale for general corporate purposes as permitted under our Credit Agreement. Subject to approval by our board of directors, we may raise additional capital or borrowings from time to time, or seek to refinance our existing debt. There can be no assurances that future capital or borrowings will be available to us, and the cost and availability of new capital or borrowings could be materially impacted by market conditions. Further, the decision to refinance our existing debt is based on a number of factors, including general market conditions and our ability to refinance on attractive terms at any given point in time. Any attempts to raise additional capital or borrowings or refinance our existing debt could cause us to incur significant charges. Such charges could have a material impact on our financial position, results of operations, or cash flows.

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Cash Flows

The following table sets forth a summary of the net cash provided by (used for) our operating, investing, and financing activities for the years ended December 31, 2021 and 2020.

Operating Activities

We generated $820 million and $807 million in cash flows from our operating activities during the years ended December 31, 2021 and 2020. The increase in our operating cash inflows for the year ended December 31, 2021 was primarily attributable to higher net earnings from operations, collections during the year and timing of payments to vendors, partially offset by payments of taxes previously deferred. The increase was further offset by $125 million of accounts receivables sold to the bank, under our Securitization Facility during the year ended December 31, 2020, compared to $25 million of additional accounts receivables sold during the year ended December 31, 2021. Sale of accounts receivable under our Securitization Facility were pursuant to the Amended Purchase Agreement, dated March 9, 2020 and further amended in 2021. For further information refer to “Note 20 – Debt” to the Consolidated Financial Statements.

Investing Activities

We generated $220 million in cash flows from our investing activities during the year ended December 31, 2021. Our investing cash inflows were primarily attributable to $508 million of cash proceeds, which are net of $13 million cash divested, from the Mining Solutions Transaction. Our investing cash inflows were partially offset by purchases of property, plant, and equipment, amounting to $277 million and $12 million of cash used for the settlement of certain foreign currency contracts. For further information related to the capital projects driving our year-over-year increase in purchases of property, plant, and equipment, refer to the “Capital Expenditures” section within this MD&A.

We used $234 million in cash flows for our investing activities during the year ended December 31, 2020. Our investing cash outflows were primarily attributable to purchases of property, plant, and equipment, amounting to $267 million. Investing cash outflows for the year ended December 31, 2020 were partially offset by $27 million of cash received from the settlement of certain of our foreign currency forward contracts.

Financing Activities

We used $560 million in cash flows for our financing activities during the year ended December 31, 2021. Our financing cash outflows were primarily attributable to $854 million in debt repayments, comprised of the $750 million 2025 notes refinancing and $104 million Senior Secured Term Loan repurchases and repayments. These debt repayments were partially offset by $650 million of proceeds from the issuance of the 2029 Notes, which was used, together with cash on hand to repay the 2025 notes and related fees. Financing cash outflows also include $173 million in purchases of our issued and outstanding common stock under our 2018 Share Repurchase Program, $164 million returned to shareholders in the form of cash dividends paid, and $18 million in premium payments to purchase and redeem the 2025 Notes.

We used $449 million in cash flows for our financing activities during the year ended December 31, 2020. Our financing cash outflows were primarily attributable to our debt refinancing activities, resulting in $908 million in debt repayments and $16 million in premium payments to purchase and redeem the remaining outstanding aggregate principal amount of our 2023 Dollar Notes, partially offset by $800 million of proceeds received in connection with the issuance of our 2028 Notes. We also continued our capital allocation activities to return cash to our shareholders, resulting in $164 million of cash dividends paid. Our financing cash outflows were also attributable to the amendment and restatement of our receivables purchase agreement dated as of July 12, 2019 (the “Original Purchase Agreement”) under our Securitization Facility, resulting in net repayments of $110 million to settle the associated collateralized borrowings. Aside from the payments associated with our debt refinancing activities and our Securitization Facility, we also made $35 million in debt repayments. Our financing cash outflows for the year ended December 31, 2020 are also inclusive of our repayment of $300 million in proceeds received from drawing on our revolving credit facility, which was executed on April 8, 2020 as a precautionary measure in light of macroeconomic uncertainties driven by COVID-19. We also made a $10 million acquisition-related installment payment in 2020, which was associated with our previous acquisition of Southern Ionics Minerals, LLC (“SIM”) in 2019.

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Current Assets

The following table sets forth the components of our current assets at December 31, 2021 and 2020.

Our accounts and notes receivable, net increased by $209 million (or 41%) to $720 million at December 31, 2021, compared with accounts and notes receivable, net of $511 million at December 31, 2020. The increase in our accounts and notes receivable, net at December 31, 2021 was primarily attributable to higher net sales and the timing of collections from our customers. The increase in our accounts and notes receivable, net was partially offset by the increased utilization of our Securitization Facility and transfers of certain accounts and notes receivable, net in connection with the Mining Solutions Transaction.

Our inventories increased by $160 million (or 17%) to $1.1 billion at December 31, 2021, compared with inventories of $939 million at December 31, 2020. The increase in our inventories at December 31, 2021 was primarily attributable to an increase in our finished product and raw materials inventories, which was due to ramp-up in production and higher raw material costs.

Our prepaid expenses and other assets decreased by $3 million (or 4%) to $75 million at December 31, 2021, compared with prepaid expenses and other assets of $78 million at December 31, 2020. The decrease in our prepaid expenses and other assets at December 31, 2021 was primarily attributable to a decrease in our income taxes receivable.

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Current Liabilities

The following table sets forth the components of our current liabilities at December 31, 2021 and 2020.

Our accounts payable increased by $318 million (or 38%) to $1.2 billion at December 31, 2021, compared with accounts payable of $844 million at December 31, 2020. The increase in our accounts payable at December 31, 2021 was primarily attributable to higher raw material purchases in line with higher production levels, higher raw material costs and the timing of payments to our vendors.

Our compensation and other employee-related costs increased by $66 million (or 62%) to $173 million at December 31, 2021 compared with compensation and other employee-related costs of $107 million at December 31, 2020. The increase in our compensation and other employee-related costs at December 31, 2021 was primarily attributable to increased accruals for employee benefits and performance-based compensation.

Our short-term and current maturities of long-term debt increased by $4 million (or 19%) to $25 million at December 31, 2021, compared with short-term and current maturities of long-term debt of $21 million at December 31, 2020. The increase in our short-term and current maturities of long-term debt at December 31, 2021 was primarily attributable to an increase in our finance lease liabilities.

Our current environmental remediation increased by $78 million (or 82%) to $173 million at December 31, 2021, compared with current environmental remediation of $95 million at December 31, 2020. The increase in our current environmental remediation at December 31, 2021 was primarily attributable to liabilities recorded under the Consent Order and Addendum with the NC DEQ, which includes construction of the barrier wall and operation of the groundwater extraction and treatment system at Fayetteville that we expect to spend in 2022. The increase also relates to a $9 million accrual recorded to resolve the claims asserted by the U.S. Environmental Protection Agency (the “EPA”) related to past indirect costs associated with the 2012 Record of Decision (“ROD”), as amended, and the 2014 agreement entered into with the EPA and the State of Indiana. For more information regarding this matter, refer to “U.S. Smelter and Lead Refinery, Inc., East Chicago, Indiana” under the “Significant Environmental Remediation Sites” within this MD&A.

Our other accrued liabilities decreased by $50 million (or 13%) to $325 million at December 31, 2021, compared with other accrued liabilities of $375 million at December 31, 2020. The decrease in our other accrued liabilities at December 31, 2021 was primarily attributable to the payment of legal fees, the payment of contract termination fees in connection with construction work at our Mining Solutions facility in Gomez Palacio, Durango, Mexico, the payment of $29 million for the Ohio multi-district litigation settlement, and the payment of certain previously deferred income tax liabilities. The decrease in our other accrued liabilities was partially offset by increased accrued customer rebates and the $25 million accrual associated with our portion of the costs to enter into the Settlement Agreement, Limited Release, Waiver and Covenant Not to Sue reflecting Chemours, DuPont, Corteva, EID and the State of Delaware’s agreement to settle and fully resolve claims alleged against the companies.

Credit Facilities and Notes

Refer to “Note 20 – Debt” to the Consolidated Financial Statements for a discussion of our credit facilities and notes.

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Guarantor Financial Information

The following disclosures set forth summarized financial information and alternative disclosures in accordance with Rule 13-01 of Regulation S-X (“Rule 13-01”). These disclosures have been made in connection with certain subsidiaries' guarantees of the 4.000% senior unsecured notes due May 2026, which are denominated in euros and the 5.375% senior unsecured notes due May 2027 (collectively, the “Registered Notes”), which are registered under the Securities Act of 1933, as amended. Each series of the Registered Notes was issued by The Chemours Company (the “Parent Issuer”), and was fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis by the existing and future domestic subsidiaries of the Parent Issuer (together, the “Guarantor Subsidiaries”), subject to certain conditions as set forth in “Note 20 – Debt” to the Consolidated Financial Statements. The assets, liabilities, and operations of the Guarantor Subsidiaries primarily consist of those attributable to The Chemours Company FC, LLC, our primary operating subsidiary in the United States, as well as the other U.S.-based operating subsidiaries as set forth in Exhibit 22 to this Annual Report on Form 10-K. Each of the Guarantor Subsidiaries is 100% owned by the Company. None of our other subsidiaries, either direct or indirect, guarantee the Registered Notes (together, the “Non-Guarantor Subsidiaries”). Pursuant to the indentures governing the Registered Notes, the Guarantor Subsidiaries will be automatically released from those guarantees upon the occurrence of certain customary release provisions.

Our summarized financial information is presented on a combined basis, consisting of the Parent Issuer and Guarantor Subsidiaries (collectively, the “Obligor Group”), in accordance with the requirements under Rule 13-01, and is presented after the elimination of: (i) intercompany transactions and balances among the Parent Issuer and Guarantor Subsidiaries, and (ii) equity in earnings from and investments in the Non-Guarantor Subsidiaries.

There are no significant restrictions that may affect the ability of the Guarantor Subsidiaries in guaranteeing the Parent Issuer’s obligations under our debt financing arrangements. While the Non-Guarantor Subsidiaries do not guarantee the Parent Issuer’s obligations under our debt financing arrangements, we may, from time to time, repatriate post-2017 earnings from certain of these subsidiaries to meet our financing obligations, as well.

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Supplier Financing

We maintain supply chain finance programs with several financial institutions. The programs allow our suppliers to sell their receivables to one of the participating financial institutions at the discretion of both parties on terms that are negotiated between the supplier and the respective financial institution. Our obligations to our suppliers, including the amounts due and scheduled payment dates, are not impacted by our suppliers’ decisions to sell their receivables under this program. At December 31, 2021 and 2020, the total amounts outstanding under these programs were $153 million and $160 million, respectively. Pursuant to their agreement with a financial institution, certain suppliers may elect to be paid early at their discretion. The available capacity under these programs can vary based on the number of investors and/or financial institutions participating in these programs at any point in time.

Off-Balance Sheet Arrangements

In March 2020, through a wholly-owned special purpose entity (“SPE”), we entered into the Amended Purchase Agreement, which amends and restates, in its entirety, the Original Purchase Agreement under our Securitization Facility. In March of 2021, through the SPE we entered into the First Amendment, which among other things, extends the term of the Amended Purchase Agreement and increases the facility limit to $150 million. In November 2021, through the SPE we entered into the Second Amendment, which among other things, extends the term of the Amended Purchase Agreement.

See “Note 20 – Debt” to the Consolidated Financial Statements for further details regarding this off-balance sheet arrangement.

Historically, we have not made any payments to satisfy guarantee obligations; however, we believe we have the financial resources to satisfy these guarantees in the event required.

Capital Expenditures

Our operations are capital intensive, requiring ongoing investment to upgrade or enhance existing operations and to meet environmental and operational regulations. Our capital requirements have consisted, and are expected to continue to consist, primarily of:

The following table sets forth our ongoing and expansion capital expenditures, including certain environmental capital expenditures, for the years ended December 31, 2021 and 2020.

Our capital expenditures increased by $10 million (or 4%) to $277 million for the year ended December 31, 2021, compared with capital expenditures of $267 million for the same period in 2020. The increase in our capital expenditures for the year ended December 31, 2021 was primarily attributable to cost deferral activities in the prior year related to COVID-19 and was largely offset by the timing of payments to our vendors which resulted in an increased outstanding balance of our capital expenditures in accounts payable when compared to December 31, 2020.

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Critical Accounting Policies and Estimates

Our significant accounting policies are more fully described in “Note 3 – Summary of Significant Accounting Policies” to the Consolidated Financial Statements. Management believes that the application of these policies on a consistent basis enables us to provide the users of our financial statements with useful and reliable information about our operating results and financial condition.

The preparation of our consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts, including, but not limited to, receivable and inventory valuations, impairment of tangible and intangible assets, long-term employee benefit obligations, income taxes, restructuring liabilities, environmental matters, and litigation. Management’s estimates are based on historical experience, facts, and circumstances available at the time, and various other assumptions that are believed to be reasonable. We review these matters and reflect changes in estimates as appropriate. Management believes that the following represents some of the more critical judgment areas in the application of our accounting policies, which could have a material effect on our financial position, results of operations, or cash flows.

Provision for (Benefit from) Income Taxes

The provision for (benefit from) income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for (benefit from) income taxes represents income taxes paid or payable for the current year, plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax bases of our assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more-likely-than-not that a tax benefit will not be realized. In evaluating the ability to realize deferred tax assets, we rely on, in order of increasing subjectivity, taxable income in prior carryback years, the future reversals of existing taxable temporary differences, tax planning strategies, and forecasted taxable income using historical and projected future operating results.

The breadth of our operations and the global complexity of tax regulations require assessments of uncertainties and judgments in estimating the taxes that we will ultimately pay. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions, outcomes of tax litigation, and resolutions of disputes arising from federal, state, and international tax audits in the normal course of business. A liability for unrecognized tax benefits is recorded when management concludes that the likelihood of sustaining such positions upon examination by taxing authorities is less than more-likely-than-not. It is our policy to include accrued interest related to unrecognized income tax positions and income tax-related penalties in the provision for (benefit from) income taxes.

We account for the tax impacts of new provisions based on interpretation of existing statutory law, including proposed regulations issued by the U.S. Treasury and the IRS. While there can be no assurances as to the effect of any final regulations on our provision for (benefit from) income taxes, we will continue to evaluate the impacts as any issued regulations become final and adjust our estimates, as appropriate.

Refer to “Note 9 – Income Taxes” to the Consolidated Financial Statements for further information related to our income tax positions.

Long-lived Assets

We evaluate the carrying value of our long-lived assets to be held and used when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. For the purposes of recognition or measurement of an impairment charge, the assessment is performed on the asset or asset group at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. To determine the level at which the assessment is performed, we consider factors such as revenue dependency, shared costs, and the extent of vertical integration. The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from the use and eventual disposition of the asset or asset group are separately identifiable and are less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. The fair value methodology used is an estimate of fair market value, which is made based on prices of similar assets or other valuation methodologies, including present value techniques. Long-lived assets to be disposed of other than by sale are classified as held for use until their disposal. Long-lived assets to be disposed of by sale are classified as held for sale and are reported at the lower of their carrying amount or fair market value, less the estimated costs to sell. Depreciation is discontinued for any long-lived assets classified as held for sale.

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The testing for potential impairment of these assets is significantly dependent on numerous assumptions and reflects management’s best estimates at a particular point in time. The dynamic economic environments in which our segments operate, and key economic and business assumptions with respect to projected selling prices, market growth, and inflation rates, can significantly impact the outcome of our impairment tests. Estimates based on these assumptions may differ significantly from actual results. Changes in the factors and assumptions used in assessing potential impairments can have a significant impact on the existence and magnitude of impairments, as well as the time in which such impairments are recognized. In addition, we continually review our diverse portfolio of assets to ensure that they are achieving their greatest potential and are aligned with our growth strategy. Strategic decisions involving a particular group of assets may trigger an assessment of the recoverability of the related assets. Such an assessment could result in impairment losses. We did not recognize material impairment charges on our long-lived assets during the years ended December 31, 2021 and 2020.

Goodwill

The excess of the purchase price over the estimated fair value of the net assets acquired in a business combination, including any identified intangible assets, is recorded as goodwill. We test our goodwill for impairment at least annually on October 1; however, these tests are performed more frequently when events or changes in circumstances indicate that the asset may be impaired. Goodwill is evaluated for impairment at the reporting unit level, which is defined as an operating segment. A reporting unit is the level at which discrete financial information is available and reviewed by business management on a regular basis. An impairment exists when the carrying value of a reporting unit exceeds its fair value. The amount of impairment loss recognized in the consolidated statements of operations is equal to the excess of a reporting unit’s carrying value over its fair value, which is limited to the total amount of goodwill allocated to the reporting unit.

The fair values of our reporting units were determined by using a combination of income-based and/or market-based valuation techniques. These valuation models incorporated a number of assumptions and judgments surrounding general market and economic conditions, short- and long-term revenue growth rates, gross margins, and prospective financial information surrounding future cash flows of the reporting units. Projections are based on internal forecasts of future business performance and are based on growth assumptions, which exclude business growth opportunities not yet fully realized. Discount rate and market multiple assumptions were determined based on relevant peer companies in the chemicals sector.

As of October 1, 2021, we performed our annual goodwill impairment tests for all reporting units. Based upon the results of our annual goodwill impairment tests, no adjustments to the carrying value of goodwill were necessary during the year ended December 31, 2021. In consideration of the results of our annual goodwill impairment tests, as well as the carrying amounts of goodwill held by each of our reporting units, further information and sensitivity analyses for certain of our reporting units have been included below.

The consideration offered for the Mining Solutions business in the definitive agreement entered into on July 26, 2021 with Draslovka to sell the Mining Solutions business of our Chemical Solutions segment, indicated the reporting unit had a fair value of $520 million at the test date, which was used in the most recent goodwill analysis. The estimated fair value is 46% higher than the reporting unit's carrying value. Mining Solutions had $51 million of goodwill and no impairment of this balance existed as of the test date. The $51 million of goodwill was allocated to the disposal group in determining the gain on sale of our Mining Solutions business to Draslovka on December 1, 2021.

The estimated fair value of the Advanced Performance Materials reporting unit was determined by utilizing a discount rate of 9.95% and a market multiple of 5.2 times Adjusted EBITDA, resulting in an estimated fair value 14% higher than its carrying value. Advanced Performance Materials has $56 million of goodwill. Changing the weighting of the market and income approaches used for Advanced Performance Materials could result in a maximum reduction of the excess of estimated fair value over carrying value to 9%. Assuming all other factors remain the same, a 200-basis point increase in the discount rate would decrease the excess of estimated fair value over carrying value to 2%; a 1% decrease in the long-term growth rate would decrease the excess of estimated fair value over carrying value to 9%; and, a 15% decrease in the market multiple assumption would decrease the excess of estimated fair value over carrying value to 6%. Under each of these sensitivity scenarios, the Advanced Performance Materials reporting unit's fair value exceeded its carrying value.

In consideration of the COVID-19 pandemic, we note that a deterioration in general market conditions, a sustained trend of weaker than anticipated Company financial performance, a decline in the Company’s share price for a sustained period of time, or an increase in the market-based weighted average cost of capital, among other factors, could significantly impact our impairment analyses and may result in future goodwill impairment charges that, if incurred, could have a material adverse effect on our results of operations.

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Employee Benefits

The amounts recognized in our consolidated financial statements related to pension and other long-term employee benefits plans are determined from actuarial valuations. Inherent in these valuations are assumptions including, but not limited to, the expected returns on plan assets, discount rates at which liabilities are expected to be settled, rates of increase in future compensation levels, and mortality rates. These assumptions are updated annually and are disclosed in “Note 27 – Long-term Employee Benefits” to the Consolidated Financial Statements. In accordance with GAAP, actual results that differed from the assumptions are accumulated and amortized over future periods and, therefore, affect expense recognized and obligations recorded in future periods.

We use discount rates that are developed by matching the expected cash flows of each benefit plan to various yield curves constructed from a portfolio of high-quality, fixed income instruments provided by the plan’s actuary as of the measurement date. As of December 31, 2021, the weighted-average discount rate was 1.4%.

The expected long-term rates of return on plan assets are determined by performing a detailed analysis of historical and expected returns based on the strategic asset allocation of the underlying asset class applicable to each country. We also consider our historical experience with the pension funds’ asset performance. The expected long-term rates of return on plan assets are assumptions and not what is expected to be earned in any one particular year. The weighted-average long-term rates of return on plan assets assumptions used for determining our net periodic pension cost for 2021 was 1.2%.

A 50 basis point increase in the discount rate would result in a decrease of $4 million to the net periodic benefit cost for 2022, while a 50 basis point decrease in the discount rate would result in an increase of approximately $5 million. A 50 basis point increase in the expected return on plan assets assumption would result in a decrease of approximately $3 million to the net periodic benefit cost for 2022, while a 50 basis point decrease in the expected return on plan assets assumption would result in an increase of approximately $3 million.

Litigation

We accrue for litigation matters when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Litigation liabilities and expenditures included in our consolidated financial statements include litigation matters that are liabilities of EID and its subsidiaries, which we may be required to indemnify pursuant to the Separation-related agreements executed prior to the Separation. Disputes between us and EID may arise with respect to indemnification of these matters, including disputes based on matters of law or contract interpretation. If, and to the extent these disputes arise, they could materially adversely affect our results of operations. Legal costs such as outside counsel fees and expenses are charged to expense in the period services are received.

Environmental Liabilities and Expenditures

We accrue for environmental remediation costs when it is probable that a liability has been incurred and a reasonable estimate of the liability can be made. Where the available information is sufficient to estimate the amount of liability, that estimate has been used. Where the information is only sufficient to establish a range of probable liability, and no point within the range is more likely than any other, the lower end of the range has been used. Estimated liabilities are determined based on existing remediation laws and technologies and our planned remedial responses, which are derived from environmental studies, sampling, testing, and other analyses. Inherent uncertainties exist in such evaluations, primarily due to unknown environmental conditions, changing governmental regulations regarding liability, and emerging remediation technologies. These accruals are adjusted periodically as remediation efforts progress and as additional technology, regulatory, and legal information become available.

Environmental liabilities and expenditures include claims for matters that are liabilities of EID and its subsidiaries, which we may be required to indemnify pursuant to the Separation-related agreements executed prior to the Separation. These accrued liabilities are undiscounted and do not include claims against third parties.

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

Recent Accounting Pronouncements

Refer to “Note 3 – Summary of Significant Accounting Policies” to the Consolidated Financial Statements for a discussion about recent accounting pronouncements.

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Environmental Matters

Consistent with our values and our Environment, Health, Safety, and Corporate Responsibility policy, we are committed to preventing releases to the environment at our manufacturing sites to keep our people and communities safe, and to be good stewards of the environment. We are also subject to environmental laws and regulations relating to the protection of the environment. We believe that, as a general matter, our policies, standards, and procedures are properly designed to prevent unreasonable risk of harm to people and the environment, and that our handling, manufacture, use, and disposal of hazardous substances are in accordance with applicable environmental laws and regulations.

Environmental Expenditures

We incur costs for pollution abatement activities, including waste collection and disposal, installation and maintenance of air pollution controls and waste water treatment, emissions testing and monitoring, and obtaining permits. Annual expenses charged to current operations include environmental operating costs and increases in remediation accruals, if any, during the period reported.

The charges described in this section include $359 million accrued for costs associated with the Consent Order (“CO”) between us and NC DEQ, which is further described in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements. These accrued liabilities represent on-site remediation, off-site groundwater remediation, and toxicology studies related to Fayetteville.

Our environmental remediation expenditures are subject to considerable uncertainty and may fluctuate significantly. In the U.S., additional capital expenditures associated with ongoing operations (as described below) are expected to be required over the next decade for treatment, storage, and disposal facilities for solid and hazardous waste and for compliance with the Clean Air Act (“CAA”). Until all CAA regulatory requirements are established and known, considerable uncertainty will remain regarding estimates for our future capital and remediation expenditures.

Environmental Capital Expenditures

For the years ended December 31, 2021 and 2020, we spent $69 million and $33 million, respectively, on environmental capital projects that were either required by law or necessary to meet our internal environmental objectives. The increase in our environmental capital expenditures for the year ended December 31, 2021, when compared with the same period in 2020, was primarily attributable to increases in our Titanium Technologies and Advanced Performance Materials segments related to projects focused on the reduction of air and water emissions in line with our Corporate Responsibility Commitment (“CRC”).

We expect our future capital expenditures for environmental matters will continue to vary, based on the success of our deployed solutions, changes in our operations, technological advancements, developments in environmental requirements, and stakeholder expectations.

Environmental Remediation

In large part, because of past operations, operations of predecessor companies, or past disposal practices, we, like many other similar companies, have clean-up responsibilities and associated remediation costs, and are subject to claims by other parties, including claims for matters that are liabilities of EID and its subsidiaries that we may be required to indemnify pursuant to the Separation-related agreements executed prior to the Separation.

We accrue for clean-up activities consistent with the policy described under “Critical Accounting Policies and Estimates” discussed within this MD&A and in “Note 3 – Summary of Significant Accounting Policies” to the Consolidated Financial Statements. Our environmental liabilities include estimated costs, including certain accruable costs associated with on-site capital projects. The accruable costs relate to a number of sites for which it is probable that environmental remediation will be required, whether or not subject to enforcement activities, as well as those obligations that result from environmental laws such as the CERCLA, RCRA, and similar federal, state, local, and foreign laws. These laws may require certain investigative, remediation, and restoration activities at sites where we conduct or EID once conducted operations or at sites where our generated waste was disposed. At December 31, 2021 and 2020, our consolidated balance sheets include environmental remediation liabilities of $562 million and $390 million, respectively, relating to these matters, which, as discussed in further detail below, include $359 million and $194 million, respectively, for Fayetteville.

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The following table sets forth the activities related to our environmental remediation liabilities for the years ended December 31, 2021 and 2020.

Our estimated liability for environmental remediation covered 211 sites at December 31, 2021 and 2020.

The following table sets forth our environmental remediation liabilities by site category.

As part of our legacy as a former subsidiary of EID, we are cleaning-up historical impacts to soil and groundwater that have occurred in the past at the 23 sites that we own. These operating and former operating sites make up approximately 86% of our environmental remediation liabilities at December 31, 2021.

We were also assigned numerous clean-up obligations from EID, which pertain to 86 sites previously owned by EID and/or us, as well as sites that we or EID never owned or operated. We are meeting our obligations to clean up those sites. The majority of these non-owned sites are multi-party Superfund sites that we, through EID, have been notified of potential liability under CERCLA, RCRA, or similar state laws and which, in some cases, may represent a small fraction of the total waste that was allegedly disposed of at a site. These sites represent approximately 14% of our environmental remediation liabilities at December 31, 2021. Included in the 86 sites are 36 inactive sites for which there has been no known investigation, clean-up, or monitoring activity, and no remediation obligation is imposed or required; as such, no remediation liabilities are recorded.

The remaining 102 sites, which are Superfund sites and other sites not owned by us, are either already closed or settled, or sites for which we do not believe we have clean-up responsibility based on current information.

With the exception of Fayetteville, our remediation portfolio is relatively mature, with many sites under active clean-up and moving towards final completion.

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The following graph sets forth the number of remediation sites by site clean-up phase and our environmental remediation liabilities by site clean-up phase as of December 31, 2021 and 2020.

As remediation efforts progress, sites move from the investigation phase (“Investigation”) to the active clean-up phase (“Active Remediation”), and as construction is completed at Active Remediation sites, those sites move to the operation, maintenance, and monitoring (“OM&M”), or closure phase. As final clean-up activities for some significant sites are completed over the next several years, we expect our annual expenses related to these active sites to decline over time. The time frame for a site to go through all phases of remediation (Investigation and Active Remediation) may take about 15 to 20 years, followed by several years of OM&M activities. Remediation activities, including OM&M 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, and diverse regulatory requirements, as well as the presence or absence of other Potentially Responsible Parties (“PRPs”). In addition, for claims that we may be required to indemnify EID pursuant to the Separation-related agreements, we and EID may have limited available information for certain sites or are in the early stages of discussions with regulators. For these sites, there may be considerable variability between the clean-up activities that are currently being undertaken or planned and the ultimate actions that could be required. Therefore, considerable uncertainty exists with respect to environmental remediation costs, and, under adverse changes in circumstances, although deemed remote, the potential liability may range up to approximately $660 million above the amount accrued at December 31, 2021. In general, uncertainty is greatest and the range of potential liability is widest in the Investigation phase, narrowing over time as regulatory agencies approve site remedial plans. As a result, uncertainty is reduced, and sites ultimately move into OM&M, as needed. As more sites advance from Investigation to Active Remediation to OM&M or closure, the upper end of the range of potential liability is expected to decrease over time.

Some remediation sites will achieve site closure and will require no further action to protect people and the environment and comply with laws and regulations. At certain sites, we expect that there will continue to be some level of remediation activity due to ongoing OM&M of remedial systems. In addition, portfolio changes, such as an acquisition or divestiture, or notification as a PRP for a multi-party Superfund site, could result in additional remediation activity and potentially additional accrual.

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 our financial position or cash flows for any given year, as such obligation can be satisfied or settled over many years.

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Significant Environmental Remediation Sites

While there are many remediation sites that contribute to our total accrued environmental remediation liabilities at December 31, 2021 and 2020, the following table sets forth the liabilities of the four sites that are deemed the most significant, together with the aggregate liabilities of the 69 other sites.

The four sites listed above represent 80% and 69% of our total accrued environmental remediation liabilities at December 31, 2021 and 2020, respectively. For these four sites, we expect to spend, in the aggregate, $215 million over the next three years. For all other sites, we expect to spend $68 million over the next three years.

Chambers Works, Deepwater, New Jersey (“Chambers Works”)

The Chambers Works complex is located on the eastern shore of the Delaware River in Deepwater, Salem County, New Jersey. The site comprises the former Carneys Point Works in the northern area and the Chambers Works manufacturing area in the southern area. Site operations began in 1892 when the former Carneys Point smokeless gunpowder plant was constructed at the northern end of Carneys Point. Site operations began in the manufacturing area around 1914 and included the manufacture of dyes, aromatics, elastomers, chlorofluorocarbons, and tetraethyl lead. We continue to manufacture a variety of fluoropolymers and finished products at Chambers Works. In addition, two tenants operate processes at Chambers Works. As a result of over 100 years of continuous industrial activity, site soils and groundwater have been impacted by chemical releases.

In response to identified groundwater contamination, a groundwater interceptor well system (“IWS”) was installed in 1970, which was designed to contain contaminated groundwater and restrict off-site migration. Additional remediation is being completed under a federal RCRA Corrective Action permit. The site has been studied extensively over the years, and more than 25 remedial actions have been completed to date and engineering and institutional controls put in place to ensure protection of people and the environment. In the fourth quarter of 2017, a site perimeter sheet pile barrier intended to more efficiently contain groundwater was completed.

Remaining work beyond continued operation of the IWS and groundwater monitoring includes completion of various targeted studies on site and in adjacent water bodies to close investigation data gaps, as well as selection and implementation of final remedies under RCRA Corrective Action for various solid waste management units and areas of concern not yet addressed through interim measures. In the first quarter of 2021, in connection with ongoing discussions with EPA and the New Jersey Department of Environmental Protection (the “NJ DEP”) relating to such remaining work as well as the scope of remedial programs and investigation relating to the Chambers Works site, we recorded an adjustment of $7 million related to the remediation estimate associated with certain areas of the site relating to historic industrial activity as well as ongoing remedial programs.

Fayetteville Works, Fayetteville, North Carolina

Fayetteville is located southeast of the City of Fayetteville in Cumberland and Bladen counties, North Carolina. The facility encompasses approximately 2,200 acres, which were purchased by EID in 1970, and are bounded to the east by the Cape Fear River and to the west by North Carolina Highway 87. Currently, the Company manufactures fluorinated monomers, fluorinated vinyl ethers, NafionTM membranes and dispersions, and fluoropolymer processing aids at the site. A former manufacturing area, which was sold in 1992, produced nylon strapping and elastomeric tape. EID sold its Butacite® and SentryGlas® manufacturing units to Kuraray America, Inc. in September 2014. In July 2015, upon our Separation from EID, we became the owner of the Fayetteville land assets along with fluoromonomers, Nafion™ membranes, and the related polymer processing aid manufacturing units. A polyvinyl fluoride resin manufacturing unit remained with EID.

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Beginning in 1996, several stages of site investigation were conducted under oversight by NC DEQ, as required by the facility's hazardous waste permit. In addition, the site has voluntarily agreed to agency requests for additional investigations of the potential release of “PFAS” (perfluoroalkyl and polyfluoroalkyl substances) beginning with “PFOA” (collectively, perfluorooctanoic acids and its salts, including the ammonium salt) in 2006. As a result of detection of GenX in on-site groundwater wells during our investigations in 2017, NC DEQ issued a Notice of Violation (“NOV”) on September 6, 2017 alleging violations of North Carolina water quality statutes and requiring further response. Since that time, and in response to three additional NOVs issued by NC DEQ and pursuant to the CO (as discussed below), we have worked cooperatively with the agency to investigate and address releases of PFAS to on-site and off-site groundwater and surface water.

As discussed in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements, we, along with NC DEQ and Cape Fear River Watch (“CFRW”), a non-profit organization, have filed a final CO that comprehensively addressed various issues, NOVs, and court filings made by NC DEQ regarding Fayetteville and resolved litigations filed by NC DEQ and CFRW. In connection with the CO, a thermal oxidizer (“TO”) became fully operational at the site in December 2019 to reduce aerial PFAS emissions from Fayetteville.

In August 2020, we, along with NC DEQ and CFRW, reached agreement on the terms of an addendum to the CO (the “Addendum”). The Addendum establishes the procedure to implement specified remedial measures for reducing PFAS loadings from Fayetteville to the Cape Fear River, including construction of a barrier wall with groundwater extraction system to be completed by March 15, 2023. After a period of public comment, the Addendum was approved by the North Carolina Superior Court for Bladen County on October 12, 2020 and establishes the procedure to implement specified remedial measures for reducing PFAS loadings from Fayetteville to the Cape Fear River, including construction of a barrier wall with a groundwater extraction system to be completed by March 15, 2023.

Following issuance of an NPDES permit by NC DEQ on September 18, 2020, we began operation of a capture and treatment system from the site’s old outfall channel on September 30, 2020. In January 2021, the operation of the old outfall treatment system was interrupted on two occasions, and notice was provided to NC DEQ of the low treatment flow conditions through the system. On January 26, 2021, we received an NOV from NC DEQ, alleging violations of the CO and the NPDES water permit arising from the design and operation of the treatment system related to the old outfall. Along with our third-party service provider, we have taken, and continue to take, interim actions intended to improve the operation of the old outfall treatment system and address challenges posed by substantial rain events, sediment loading into the system, and variability in water influent conditions. In addition, along with our third-party service provider, we are actively working on long-term enhancements to the treatment system based on learnings from the recent challenges. An incremental $64 million was accrued in 2021, representing approximately $3 million per year for 20 years of estimated operation of the system, primarily related to the probable enhancements and the long-term operation of the water treatment system in accordance with the requirements of the CO. System enhancements completed or being implemented consist of a holding pond, installation of new ultra-filtration units and additional water pretreatment equipment which is anticipated to be completed by the second quarter of 2022.

In 2021, work commenced on the detailed engineering design of the barrier wall and refinement of models for the planned groundwater extraction system. Engineering designs for our major construction projects are typically reviewed at 30, 60 and 90% complete. In June 2021, we reviewed the 30% complete design and associated preliminary vendor estimates for the construction and operation of a barrier wall and groundwater treatment system at Fayetteville. Following the completion of the 30% design, we recorded $109 million of additional accrual as further discussed below.

The current planned construction site of the future barrier wall, that will address both on-site groundwater and long-term seep remediation, is expected to be located at an approximately 30 feet higher elevation above the Cape Fear River as compared to the initial, conceptual design that was prepared in support of the Corrective Action Plan (“CAP”) submission to NC DEQ on December 31, 2019, which addressed groundwater only. The CAP submission unit cost estimate was the principal basis of unit costs for our liability estimates through March 31, 2021. It was determined, based upon the 30% design information completed during the second quarter of 2021, that there was significantly increased construction complexity and related vendor and other design costs to be incurred. For example, the steep slope of the revised construction site results in the depth of the wall increasing from the original estimates of approximately 65 feet to approximately 85 feet below ground along most of its length. Construction of approximately 64 pumping wells, a more than 50% increase from the conceptual design, are expected to be required to extract groundwater for treatment based on studies of groundwater flows that were completed in May 2021. The wells will also need to be drilled deeper into the ground based on the revised location. A 2-mile access road, with retaining walls above and below the road to reduce slope erosion and landslides, will now be required for large, heavy construction equipment to access the barrier wall location safely. The estimated cost for construction as a result of these changes is based on third-party contractor estimates provided in late May 2021. Together, all these modifications to the design resulted in an additional $49 million accrual for construction of the barrier wall in 2021.

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In addition, the volume of groundwater, seep water, and stormwater (up to a 0.5 inch rain event in any 24 hours period per the Addendum) intercepted for treatment is estimated to be up to a maximum of 1,500 gallons per minute (“gpm”) based on groundwater flow modeling completed in the second quarter of 2021. Until the pre-design investigation and groundwater modeling was complete, the volume of water captured for treatment was estimated to be approximately 1,200 gpm, and the pretreatment requirements to remove dissolved solids had not been determined. Hence, we determined in 2021 that construction of a larger treatment plant than previously considered in the conceptual design and previous cost estimates was required. Consistent with prior periods, we accrued 20 years of ongoing monitoring and maintenance for Fayetteville environmental remediation systems based on the CO and Addendum. The revised estimate to process higher volumes of groundwater than originally contemplated resulted in an additional accrual (change in estimate) of $60 million in 2021 related to estimated higher power consumption, ongoing monitoring, pretreatment, filtering supplies, principally carbon and regular maintenance of the system over a 20-year period of estimated operation starting in 2023.

In August 2021, we reviewed the 60% complete design and associated updated preliminary vendor estimates, which was submitted to NC DEQ for review and approval. There were no changes in estimate upon completing the review of the 60% design. Additionally, applications for the necessary permit for the groundwater extraction system have been submitted.

On September 15, 2021, we received a ‘conditional approval’ of the 60% design of the barrier wall and groundwater extraction and treatment system which included comments that NC DEQ requested us to address within forty-five days (i.e., by October 30). We responded to the comments on October 5, 2021. We believe that the design of the barrier wall and groundwater extraction and treatment system meets the requirements for this project under the Addendum. However, it is reasonably possible that additional costs could be incurred for the project, or that the 90% design completion or project construction work be delayed, pending resolution of NC DEQ comments. These costs are not estimable at this time due to the uncertainty around the objective and scope of NC DEQ comments as well as additional design basis that may be required. The NC DEQ’s comments also addressed other onsite remediation activities under the CO, but unrelated to the design of the barrier wall and groundwater treatment system. It is reasonably possible that additional costs could be incurred to address the areas raised by NC DEQ, but cannot be estimated at this time as it would require additional pre-design investigation work that has not yet been scoped or performed.

Pre-construction site preparation activities are in progress and construction of the water treatment facility is expected to commence in 2022. Construction of the barrier wall is expected to commence in 2022 with completion planned in the first quarter of 2023. At December 31, 2021, several significant uncertainties remain, principally related to the resolution of comments received from NC DEQ on the 60% design, an extension of the barrier wall along Willis Creek at the northern end of the site, additional wetlands mitigation fees, finalization of the volume of water to be treated, contract negotiations with key construction and water treatment vendors and the estimated future time period of OM&M. Accordingly, we have increased the upper range of our cost estimates for the barrier wall and groundwater OM&M from $111 million at December 31, 2020 to $305 million at December 31, 2021, of which $170 million is accrued. We have not accrued for the incremental costs in the upper range, including the extension of the barrier wall. While we believe that extension of the barrier wall along Willis Creek is technically impracticable and not necessary to comply with the terms of the CO and Addendum, an estimate of the cost for the barrier wall extension was included in the upper range of the cost estimate of approximately $30 million.

The final cost of the on-site groundwater treatment system primarily depends on receiving timely NC DEQ design and permit approvals and thus the timely finalization of certain significant design details, notably the actual barrier wall location, depth, and length, number and configuration of extraction wells, water extraction rates and estimated carbon usage. Pending resolution of NC DEQ comments on the 60% design, the engineering design is expected to be approximately 90% complete in the first quarter of 2022, which will form the basis of a submission for the approval by NC DEQ which is required to be submitted by us as provided by the Addendum. Per the Addendum, NC DEQ shall use best efforts to complete its review and notify us whether the design is approved within 30 days after submittal. If not approved within 30 days, subsequent deadlines shall be extended by the time required for NC DEQ approval in excess of 30 days. Unanticipated schedule delays or other factors beyond our control could lead to further increases in the cost of the barrier wall and groundwater treatment system, which could be material. Changes in estimates are recorded in results of operations in the period that the events and circumstances giving rise to such changes occur. If we do not achieve project completion of the barrier wall and groundwater treatment system by March 15, 2023, subject to extensions provided above, the Addendum specifies penalties of $0.15 million plus an additional $0.02 million per week until installation is completed.

Accordingly, based on the CO, the Addendum, the CAP, and management’s plans, which are based on current regulations and technology, we have accrued $289 million and $140 million at December 31, 2021 and 2020, respectively, related to the estimated cost of on-site remediation, which is within the existing estimated range of potential outcomes, based on current potential remedial options, and projected to be paid over a period of approximately 20 years. The final costs of any selected remediation will depend primarily on the final approved design and actual labor and material costs. Accordingly, as discussed above, during 2021, we revised, in accordance with ASC 250 – Accounting Changes and Error Corrections, our estimated liability to comply with the CO and Addendum. In accordance with ASC 410 – Asset Retirement and Environmental Obligations, these amounts were recorded as a component of cost of goods sold as we only capitalize environmental costs if the costs extend the useful life of the property, increase the property’s capacity, and/or reduce or prevent contamination from future operations.

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It is possible that issues relating to site discharges in various transport pathways, the selection of remediation alternatives to achieve PFAS loading reductions, or the operating effectiveness of the TO could result in further litigation and/or regulatory demands with regards to Fayetteville, including potential permit modifications or penalties under the CO and the Addendum. It is also possible that, as additional data is collected on the transport pathways and dialogue continues with NC DEQ and other stakeholders, the type or extent of remediation actions required to achieve the objectives committed to in the CO may change (increase or decrease) or remediation activities could be delayed. If such issues arise, or if the CO is further amended, an additional loss is reasonably possible, but not estimable at this time. With respect to the Addendum, at this time, we believe that payment of any of the stipulated financial penalties for untimeliness or noncompliance is remote.

As of December 31, 2021, based on the CO, the Addendum, the CAP, and our plans, which are based on current regulations and technology, we have accrued $289 million and $70 million related to the estimated cost of on-site and off-site remediation, respectively. For the year ended December 31, 2021, we accrued an additional $228 million, of which $193 million was attributable to our on-site and plant remediation and $35 million was attributable to off-site groundwater testing and water treatment system installations at additional qualifying third-party properties in the vicinity surrounding Fayetteville. Off-site installation, maintenance, and monitoring may be impacted by additional changes in estimates as actual experience may differ from management’s estimates.

On November 3, 2021, NC DEQ notified us of the potential need to revise our off-site drinking water program under the CO in light of EPA’s recently published final toxicity assessment for GenX compounds and plan to develop a drinking water health advisory in the Spring of 2022. We cannot estimate the potential impact or additional cost due to the uncertainties on the potential EPA drinking water health advisories.

Also on November 3, 2021, NC DEQ sent a notice to us regarding PFAS contamination from the Cape Fear River of groundwater monitoring wells and water supply wells in New Hanover County and potentially three other downstream counties based on new sampling data by NC DEQ and its determination of our obligations for such contamination. NC DEQ directed us to submit, within 90 days of receipt of the notice (due February 1, 2022), for its review and approval a comprehensive groundwater contamination assessment in such counties, as well as, an updated drinking water program to provide for sampling under the CO in such counties. We submitted our response on February 1, 2022, and accordingly, for the year ended December 31, 2021, we recorded $11 million for the assessment and for sampling related to potential PFAS contamination of groundwater and supply of alternative drinking water in New Hanover and three other downstream counties. The liability is based on management’s preliminary assessment of the facts and circumstances for this matter. The estimated liability was based on certain assumptions, which management believes are reasonable under the circumstances and include, but are not limited to, implementation of the soil and groundwater assessment, the source and cause of PFAS contamination within the four counties, the estimated number of properties at which sampling is conducted and whether such property will qualify for an alternative drinking water supply, other potentially responsible parties and the method of long-term alternative water supply, if any.

Management’s estimate of the ultimate liability for this matter is dependent upon obtaining additional information, including, but not limited to, those items identified above. Given the level of uncertainties noted above, we are not able to provide a reasonable high-end estimate beyond the $11 million accrued at December 31, 2021. The ultimate resolution of this matter could have a material adverse effect on our financial position, results of operations and cash flow.

Pompton Lakes, New Jersey

During the 20th century, blasting caps, fuses, and related materials were manufactured at Pompton Lakes, Passaic County, New Jersey. Operating activities at the site were ceased in the mid-1990s. The primary contaminants in the soil and sediments are lead and mercury. Groundwater contaminants include volatile organic compounds. Under the authority of EPA and NJ DEP, remedial actions at the site are focused on investigating and cleaning-up the area. Groundwater monitoring at the site is ongoing, and we have installed and continue to install vapor mitigation systems at residences within the groundwater plume. In addition, we are further assessing groundwater conditions. In September 2015, EPA issued a modification to the site’s RCRA permit that requires us to dredge mercury contamination from a 36-acre area of the lake and remove sediment from two other areas of the lake near the shoreline. The remediation activities commenced when permits and implementation plans were approved in May 2016, and work on the lake dredging project is now complete. In April 2019, we submitted a revised Corrective Measures Study (“CMS”) proposing actions to address on-site soils impacted from past operations that exceed applicable clean-up criteria. We received comments on the CMS from EPA and NJ DEP in March 2020, and we responded to their comments in June 2020 and continue to seek resolution with EPA.

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U.S. Smelter and Lead Refinery, Inc., East Chicago, Indiana

The U.S. Smelter and Lead Refinery, Inc. (“USS Lead”) Superfund site is located in the Calumet neighborhood of East Chicago, Lake County, Indiana. The site includes the former USS Lead facility along with nearby commercial, municipal, and residential areas. The primary compounds of interest are lead and arsenic which may be found in soils within the impacted area. The EPA is directing and organizing remediation on this site, and we are one of a number of parties working cooperatively with EPA on the safe and timely completion of this work. EID’s former East Chicago manufacturing facility was located adjacent to the site, and EID assigned responsibility for the site to us in the Separation Agreement.

The USS Lead Superfund site was listed on the National Priorities List in 2009. To facilitate negotiations with PRPs, EPA divided the residential part of the USS Lead Superfund site into three zones, referred to as Zone 1, Zone 2, and Zone 3. The division into three zones resulted in Atlantic Richfield Co. (“Atlantic Richfield”) and EID entering into an agreement in 2014 with EPA and the State of Indiana to reimburse EPA’s costs to implement clean-up in Zone 1 and Zone 3. In March 2017, we and three other parties – Atlantic Richfield, EID, and the U.S. Metals Refining Co. (“U.S. Metals”) – entered into an administrative order on consent to reimburse EPA’s costs to clean-up a portion of Zone 2. In March 2018, EPA issued a Unilateral Administrative Order for the remainder of the Zone 2 work to five parties, including us, Atlantic Richfield, EID, U.S. Metals, and USS Lead Muller Group, and these parties entered into an interim allocation agreement to perform that work. As of the end of 2019, the required work in Zone 3 had been completed, and Zone 2 was nearly complete by the end of 2020. The determination of a final allocation for Zone 2 and/or the other Zones is ongoing, and additional PRPs may be identified.

The environmental accrual for USS Lead continues to include completion of the remaining obligations under the 2012 Record of Decision (“ROD”) and Statement of Work, which principally encompasses completion of Zone 1. The EPA released a proposed amendment to the 2012 ROD (the “ROD Amendment”) for a portion of Zone 1 in December 2018 (following its August 2018 Feasibility Study Addendum), with its recommended option based on future residential use. The EPA’s ROD Amendment for modified Zone 1 was released in March 2020, and selects as the preferred remedy one which requires a clean-up to residential standards based on the current applicable residential zoning. The ROD Amendment for modified Zone 1 also sets forth a selected contingent remedy which requires clean-up to commercial/industrial standards if the future land use becomes commercial/industrial. In November 2019, a Letter of Intent was executed by the City of East Chicago, Indiana and Industrial Development Advantage, LLC, relating to modified Zone 1 development, and EPA has indicated that it is “more likely” that future land use in this area will be commercial/industrial and not residential. During the second quarter of 2021, we accrued an additional $3 million based on a remediation estimate provided by Industrial Development Advantage, LLC. We expect that our future costs for modified Zone 1 will be further contingent on the development of this area and implementation under the ROD Amendment, as well as any final allocation between PRPs. In the third quarter of 2021, we recorded an additional $9 million to resolve the claims asserted by EPA related to past indirect costs associated with the 2012 ROD as amended, and the 2014 agreement entered into with EPA and the State of Indiana.

New Jersey Department of Environmental Protection Directives and Litigation

In March 2019, NJ DEP issued two Directives, one being a state-wide PFAS Directive, and filed four lawsuits against Chemours and other defendants, including allegations relating to clean-up and removal costs at four sites including Chambers Works. In December 2021, a consolidated order was entered in the lawsuits granting, in part, and denying, in part a motion to dismiss or strike parts of the Second Amended Complaints. In January 2022, NJ DEP filed a motion for a preliminary injunction requiring EID and Chemours to establish a remediation funding source (“RFS”) in the amount of $943 million for Chambers Works, the majority of which is for non-PFAS remediation items. Further discussion related to these matters is included in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements.

PFOA

See our discussion under the heading “PFOA” in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements.

GenX

In June 2019, the Member States Committee of the European Chemicals Agency (“ECHA”) voted to list HFPO Dimer Acid as a Substance of Very High Concern. The vote was based on Article 57(f) – equivalent level of concern having probable serious effects to the environment. This identification does not impose immediate regulatory restriction or obligations, but may lead to a future authorization or restriction of the substance. On September 24, 2019, Chemours filed an application with the EU Court of Justice for the annulment of the decision of ECHA to list HFPO Dimer Acid as a Substance of Very High Concern. In September 2021, the General Court held an oral hearing on the written submissions and the court has provided notice that its ruling will be provided in February 2022.

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PFAS

Refer to our discussion under the heading “PFAS” in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements.

In May 2020, ECHA announced that five Member States (Germany, the Netherlands, Norway, Sweden, and Denmark) launched a call for evidence to inform a PFAS restriction proposal. Companies producing or using PFAS, as well as selling mixture or products containing PFAS, were invited to provide input. This call for evidence closed July 31, 2020. Thousands of substances meet the definition of PFAS as outlined in the call for evidence. This very broad definition covers substances with a variety of physical and chemical properties, health and environmental profiles, uses, and benefits. We submitted information on the substances covered by the call for evidence to the Member State competent authority for Germany, which is the Federal Institute for Occupational Safety and Health (“BAuA”).

In May 2020, five European countries began an initiative to restrict the manufacture, placing on the market and use of PFAS in the EU. In this regulatory process, more than 4,000 substances, including F-gases and fluoropolymers are being considered as part of this broad regulatory action. On July 15, 2021, the countries submitted their restriction proposal, which informs ECHA of the intent to prepare a PFAS restriction dossier for fluorinated substances within a defined structural formula scope, including branched fluoroalkyl groups and substances containing ether linkages, fluoropolymers and side chain fluorinated polymers. The restriction dossier will include information on hazards and risks, available information on alternatives and an analysis of the risk management instrument for addressing the identified risks. The submitting countries indicate that they expect to submit the restriction dossier to ECHA in July 2022.  As part of the preparation of the restriction dossier, stakeholders were requested to provide relevant information and, based on risk and socio-economic information, derogations from the proposed restriction may be proposed by the submitting countries. If a derogation is not proposed by the submitting countries, the relevant stakeholders may do so during a consultation process. The draft dossier will be reviewed by the ECHA committees Risk Assessment Committee (“RAC”) and Socio-economic Analysis Committees (“SEAC”) and proposals submitted to the EU Commission in 2023. The estimated entry into force of restrictions is 2025. The impacts of restrictions and regulatory measures could lead to material adverse effects on our results of operations, financial condition, and cash flows.

On October 18, 2021, EPA released its PFAS Strategic Roadmap, identifying a comprehensive approach to addressing PFAS. The PFAS Strategic Roadmap sets timelines by which EPA plans to take specific actions through 2024, including establishing a national primary drinking water regulation for PFOA and perfluorooctanesulfonic acid (“PFOS”) and taking Effluent Limitations Guidelines actions to regulate PFAS discharges from industrial categories among other actions. As provided under its roadmap, EPA also released on the same day its National PFAS Testing Strategy, under which the agency will identify and select certain PFAS compounds for which it will require PFAS manufacturers to conduct testing pursuant to the Toxic Substances Control Act (“TSCA”) orders. EPA has indicated that we will receive orders for certain of such compounds, including seven of the testing orders will be issued for PFAS compounds alleged to be associated with Fayetteville. On October 25, 2021, EPA published a final toxicity assessment for GenX compounds that decreased the draft reference dose for GenX compounds based on EPA’s review of new studies and analyses. Under the PFAS Strategic Roadmap, EPA indicated they plan to develop non-regulatory drinking water health advisories for certain PFAS compounds that have final EPA toxicity assessments, including GenX compounds in the Spring of 2022. We are currently evaluating the impact of EPA’s final toxicity assessment, including new data and analysis utilized by the agency, and have met with the agency to discuss process-related and technical concerns about the assessment. It is reasonably possible that additional costs could be incurred in connection with EPA’s actions, however, we cannot estimate the potential impact or additional cost due to the uncertainties on the potential drinking water health advisories or other actions. The environmental remediation liabilities recorded for Fayetteville and certain other sites, such as Washington Works, Parkersburg, West Virginia and Chambers Works, Deepwater, New Jersey as of December 31, 2021 are based upon the existing Consent Orders, agreements and/or voluntary commitments with EPA, state and other local regulators and depending on the ultimate outcome of EPA’s actions, could require adjustment to meet higher drinking water standards.

Delaware Chancery Court Lawsuit

In May 2019, we filed a lawsuit in Delaware Chancery Court (“Chancery Court”) against DuPont, Corteva, and EID concerning EID’s contention that it is entitled to unlimited indemnity from us for specified liabilities that EID assigned to us in the spin-off. The lawsuit requested a declaratory judgment limiting EID’s indemnification rights against us and the transfer of liabilities to us to the actual “high-end (maximum) realistic exposures” it stated in connection with the spin-off, or, in the alternative, requiring the return of the approximate $4.0 billion dividend EID extracted from us in connection with the spin-off. In March 2020, the Chancery Court granted EID’s Motion to Dismiss, placing the matter in non-public binding arbitration. The dismissal was affirmed by the Delaware Supreme Court. In January 2021, the parties entered into a binding MOU, addressing the allegations in the lawsuit and arbitration. Pursuant to the MOU, the parties have agreed to dismiss the arbitration. Many of the potential litigation liabilities discussed in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements are included in the MOU.

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Non-GAAP Financial Measures

We prepare our consolidated financial statements in accordance with GAAP. To supplement our financial information presented in accordance with GAAP, we provide the following non-GAAP financial measures – Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings per Share (“EPS”), Free Cash Flows (“FCF”), Return on Invested Capital (“ROIC”), and Net Leverage Ratio – in order to clarify and provide investors with a better understanding of our performance when analyzing changes in our underlying business between reporting periods and provide for greater transparency with respect to supplemental information used by management in its financial and operational decision-making. We utilize Adjusted EBITDA as the primary measure of segment profitability used by our CODM.

Adjusted EBITDA is defined as income (loss) before income taxes, excluding the following:

Adjusted Net Income is defined as our net income (loss), adjusted for items excluded from Adjusted EBITDA, except interest expense, depreciation, amortization, and certain provision for (benefit from) income tax amounts. Adjusted EPS is calculated by dividing Adjusted Net Income by the weighted-average number of our common shares outstanding. Diluted Adjusted EPS accounts for the dilutive impact of our stock-based compensation awards, which includes unvested restricted shares. FCF is defined as our cash flows provided by (used for) operating activities, less purchases of property, plant, and equipment as shown in our consolidated statements of cash flows. ROIC is defined as Adjusted Earnings before Interest and Taxes (“EBIT”), divided by the average of our invested capital, which amounts to our net debt, or debt less cash and cash equivalents, plus equity. Net Leverage Ratio is defined as our total debt principal, net, or our total debt principal outstanding less cash and cash equivalents, divided by Adjusted EBITDA.

We believe the presentation of these non-GAAP financial measures, when used in conjunction with GAAP financial measures, is a useful financial analysis tool that can assist investors in assessing our operating performance and underlying prospects. This analysis should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. In the future, we may incur expenses similar to those eliminated in this presentation. Our presentation of Adjusted EBITDA, Adjusted Net Income, Adjusted EPS, FCF, ROIC, and Net Leverage Ratio should not be construed as an inference that our future results will be unaffected by unusual or infrequently occurring items. The non-GAAP financial measures we use may be defined differently from measures with the same or similar names used by other companies. This analysis, as well as the other information provided in this Annual Report on Form 10-K, should be read in conjunction with the Consolidated Financial Statements and notes thereto included in this report.

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The following table sets forth a reconciliation of our net income (loss) attributable to Chemours to Adjusted Net Income, Adjusted EBITDA, and Adjusted EPS for the years ended December 31, 2021 and 2020.

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The following table sets forth a reconciliation of our cash flows provided by (used for) operating activities to FCF for the years ended December 31, 2021 and 2020.

The following table sets forth a reconciliation of Adjusted EBIT and average invested capital, and their nearest respective GAAP measures, to ROIC for the periods presented.

The following table sets forth a reconciliation of our total debt principal, cash and cash equivalents, and Adjusted EBITDA to Net Leverage Ratio.

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