# Chemours Co (CC) FY 2022 MD&A Verbatim Item 7 Management's Discussion and Analysis from Chemours Co's 10-K for fiscal year 2022. SEC filing source: https://www.sec.gov/Archives/edgar/data/1627223/000095017023002467/cc-20221231.htm Accession: 0000950170-23-002467 Filing date: 2023-02-10 Report date: 2022-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/CC/ All MD&A years: /company/CC/mda/ Previous year: /company/CC/mda/fy2021/ (FY 2021) Next year: /company/CC/mda/fy2023/ (FY 2023) 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, 2020, and changes from the year ended December 31, 2020 to the year ended December 31, 2021, 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, 2021. Beginning with reports filed in the first quarter of 2022, we changed our methodology used to allocate certain corporate function expenses to our operating segments, and accordingly, we recast prior year segment information to conform with current year presentation. The change did not have a material impact to management's discussion and analysis pertaining to prior year financial condition, changes in financial condition, and the results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2021. 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 titanium dioxide ("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 three reportable segments: Titanium Technologies, Thermal & Specialized Solutions, and Advanced Performance Materials. 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 Performance Chemicals and Intermediates business and our Mining Solutions business (prior to the business sale in 2021) are presented under Other Segment. 37 The Chemours Company Results of Operations and Business Highlights Results of Operations The following table sets forth our results of operations for the years ended December 31, 2022 and 2021. [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(Dollars in millions, except per share amounts)","","2022","","","2021"],["Net sales","","$","6,794","","","$","6,345"],["Cost of goods sold","","","5,178","","","","4,964"],["Gross profit","","","1,616","","","","1,381"],["Selling, general, and administrative expense","","","710","","","","592"],["Research and development expense","","","118","","","","107"],["Restructuring, asset-related, and other charges","","","16","","","","6"],["Total other operating expenses","","","844","","","","705"],["Equity in earnings of affiliates","","","55","","","","43"],["Interest expense, net","","","(163",")","","","(185",")"],["Gain (loss) on extinguishment of debt","","","7","","","","(21",")"],["Other income, net","","","70","","","","163"],["Income before income taxes","","","741","","","","676"],["Provision for income taxes","","","163","","","","68"],["Net income","","","578","","","","608"],["Net income attributable to Chemours","","$","578","","","$","608"],["Per share data"],["Basic earnings per share of common stock","","$","3.72","","","$","3.69"],["Diluted earnings per share of common stock","","","3.65","","","","3.60"]] [[/GREPCENT_TABLE]] 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, 2022. [[GREPCENT_TABLE]] [["Change in net sales from prior period","","Year Ended December 31, 2022"],["Price","","","19","%"],["Volume","","","(5",")%"],["Currency","","","(3",")%"],["Portfolio","","","(4",")%"],["Total change in net sales","","","7","%"]] [[/GREPCENT_TABLE]] Our net sales increased by $449 million (or 7%) to $6.8 billion for the year ended December 31, 2022, compared with net sales of $6.3 billion for the same period in 2021. The increase in our net sales for the year ended December 31, 2022 was primarily attributable to an increase in price of 19%, partially offset by a decrease in volume of 5%, and portfolio change of 4% driven by the sale of our Mining Solutions business in 2021. Price increased across all our reportable segments and volume increased in our Thermal & Specialized Solutions and Advanced Performance Materials segments. Unfavorable currency movements in all our reportable segments added a headwind of 3% to our net sales. The drivers of these changes for each of our reportable segments are discussed further under the “Segment Reviews” section within this MD&A. 38 The Chemours Company Cost of Goods Sold Our cost of goods sold (“COGS”) increased by $214 million (or 4%) to $5.2 billion for the year ended December 31, 2022, compared with COGS of $5 billion for the same period in 2021. Despite the decreases in sales volume and portfolio change as mentioned above, our COGS increased for the year ended December 31, 2022, primarily attributable to higher raw material costs due to inflation, as well as supply constraints and higher distribution, freight, and logistics expenses. Raw material inflation impact on COGS increased as the year progressed and was more pronounced in the second half of the year relative to the first half of the year. In addition, we recognized a payroll tax credit under the Employee Retention Credit of the Coronavirus Aid, Relief, and Economic Security Act during 2021 that did not recur in 2022. The increase for the year ended December 31, 2022 was partially offset by lower on-site remediation costs incurred at our Fayetteville Works site in Fayetteville, North Carolina (“Fayetteville”) of approximately $124 million during 2022 as compared to 2021 and approximately $22 million of higher Qualified Spend recovery from DuPont and Corteva recognized during 2022 as compared to 2021. Selling, General, and Administrative Expense Our selling, general, and administrative (“SG&A”) expense increased by $118 million (or 20%) to $710 million for the year ended December 31, 2022, compared with SG&A expense of $592 million for the same period in 2021. The increase in our SG&A expense for the year ended December 31, 2022 was primarily attributable to increased off-site environmental remediation costs of approximately $125 million at Fayetteville during 2022 as compared to 2021, largely due to an increase in liabilities to meet drinking water compliance requirements contained in the Consent Order with the North Carolina Department of Environmental Quality ("NC DEQ"). SG&A expense in 2021 included a $25 million charge incurred in connection with our portion of the settlement agreement with the State of Delaware. Research and Development Expense Our research and development (“R&D”) expense increased by $11 million (or 10%) to $118 million for the year ended December 31, 2022, compared with R&D expense of $107 million for the same period in 2021. The increase in our R&D expense for the year ended December 31, 2022 was primarily attributable to 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 increased by $10 million (or over 100%) to $16 million for the year ended December 31, 2022, compared with $6 million for the same period in 2021. For the year ended December 31, 2022, our restructuring, asset-related, and other charges were primarily attributable to $5 million of asset charges resulting from the conflict between Russia and Ukraine and our decision to suspend business with Russian entities, and $9 million of employee separation charges incurred in connection with our 2022 severance programs. 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 sale of our Mining Solutions business in 2021. Equity in Earnings of Affiliates Our equity in earnings of affiliates increased by $12 million (or 28%) to $55 million for the year ended December 31, 2022, compared with equity in earnings of affiliates of $43 million for the same period in 2021. The increase in our equity in earnings of affiliates for the year ended December 31, 2022 was primarily attributable to increased pricing and demand for our investees’ products. Interest Expense, Net Our interest expense, net decreased by $22 million (or 12%) to $163 million for the year ended December 31, 2022, compared with interest expense, net of $185 million for the same period in 2021. The decrease in our interest expense, net for the year ended December 31, 2022 was primarily attributable to a reduction in associated interest rates following the refinancing of our 7.000% senior notes due May 2025 ("2025 Notes") in August of 2021 as well reduction in outstanding debt obligations as a result of open market repurchases in the third quarter 2022 and higher interest income from rate increases in 2022, partially offset by higher interest on our variable interest rate debt. 39 The Chemours Company Gain (Loss) on Extinguishment of Debt For the year ended December 31, 2022, we recognized a net gain on extinguishment of debt of $7 million in connection with the open market repurchases of various portions of our senior unsecured notes. 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. Other Income, Net Our other income, net decreased by $93 million (or 57%) to $70 million for the year ended December 31, 2022, compared with other income, net of $163 million for the same period in 2021. The decrease in our other income, net for the year ended December 31, 2022 was primarily attributable to a net pre-tax gain on sale of $112 million associated with the sale of the Mining Solutions business in 2021, compared to net pre-tax gain on sale recorded in 2022 of $5 million and $18 million associated with the sale of our land related to the Beaumont former operating site (the “Beaumont Transaction”) and the stock sale of certain of our wholly-owned subsidiaries and the remaining assets at our former Aniline business facilities in Pascagoula, Mississippi (the “Pascagoula Transaction”), respectively. In addition, we incurred losses in foreign currency exchange in 2022 driven by the depreciation of the Argentina peso and Asia Pacific currencies. These decreases in other income, net were partially offset by settlement of a patent infringement matter relating to certain copolymer patents associated with our Advanced Performance Materials segment in 2022. Provision for Income Taxes We have a provision for income taxes of $163 million and $68 million for the years ended December 31, 2022 and 2021, respectively. Our provision for income taxes represented effective tax rates of 22% and 10% for the years ended December 31, 2022 and 2021, respectively. The $95 million increase in our provision for income taxes for the year ended December 31, 2022, when compared with the same period in 2021, was primarily attributable to $36 million of income tax expense related to a reserve on transfer pricing positions recorded during the fourth quarter of 2022 and changes to non-recurring items in prior periods, including an $11 million tax benefit associated with a 2012 income tax refund received in a foreign subsidiary and a $16 million benefit associated with a reversal of a valuation allowance of a certain foreign subsidiary's deferred tax assets in relation to the sale of our Mining Solutions business on December 1, 2021. These increases were partially offset by $21 million of income tax expense related to the gain realized from the sale of our Mining Solutions business in 2021, which also did not reoccur in 2022. Changes in geographic mix of earnings and underlying profitability are responsible for the remaining increase in tax expense. 40 The Chemours Company Segment Reviews Beginning with reports filed in the first quarter of 2022, we changed our methodology used to allocate certain corporate function expenses to our operating segments to provide our Chief Operating Decision Maker (“CODM”) with a more meaningful representation of segment profitability. This allocation methodology change reflects corporate function resource usage by each operating segment based on certain commercial drivers, in addition to the cost drivers, as well as consideration of our recent sale of the Mining Solutions business in 2021. The historical segment information, including adjusted earnings before interest, taxes, depreciation, and amortization (“Adjusted EBITDA”), has been recast to conform to the current segment presentation. Adjusted EBITDA is the primary measure of segment profitability used by our CODM and is defined as income (loss) before income taxes, excluding the following: • interest expense, depreciation, and amortization; • non-operating pension and other post-retirement employee benefit costs, which represents the non-service component of net periodic pension (income) costs; • exchange (gains) losses included in other income (expense), net; • restructuring, asset-related, and other charges; • (gains) losses on sales of assets and businesses; and, • other items not considered indicative of our ongoing operational performance and expected to occur infrequently, including Qualified Spend reimbursable by DuPont and/or Corteva as part of our cost-sharing agreement under the terms of the Memorandum of Understanding (“MOU”) that were previously excluded from Adjusted EBITDA. A reconciliation of net income (loss) attributable to Chemours to Adjusted EBITDA for the years ended December 31, 2022 and 2021 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, 2022 and 2021. [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(Dollars in millions)","","2022","","","2021"],["Titanium Technologies","","$","601","","","$","799"],["Thermal & Specialized Solutions","","","603","","","","401"],["Advanced Performance Materials","","","367","","","","284"],["Other Segment","","","2","","","","49"],["Corporate and Other","","","(212",")","","","(220",")"],["Total Adjusted EBITDA","","$","1,361","","","$","1,313"]] [[/GREPCENT_TABLE]] 41 The Chemours Company Titanium Technologies The following table sets forth the net sales, Adjusted EBITDA, and Adjusted EBITDA margin amounts for our Titanium Technologies segment for the years ended December 31, 2022 and 2021. [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(Dollars in millions)","","2022","","","2021"],["Segment net sales","","$","3,380","","","$","3,355"],["Adjusted EBITDA","","","601","","","","799"],["Adjusted EBITDA margin","","","18","%","","","24","%"]] [[/GREPCENT_TABLE]] 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, 2022. [[GREPCENT_TABLE]] [["Change in segment net sales from prior period","","Year Ended December 31, 2022"],["Price","","","17","%"],["Volume","","","(14",")%"],["Currency","","","(2",")%"],["Portfolio","","","\u2014","%"],["Total change in segment net sales","","","1","%"]] [[/GREPCENT_TABLE]] Segment Net Sales Our Titanium Technologies segment’s net sales were largely unchanged at $3.4 billion for the years ended December 31, 2022 and 2021. The slight increase in segment net sales for the year ended December 31, 2022 was attributable to an increase in price of 17%, largely offset by a decrease in volume of 14%. Price increases were due to contractual price changes, as well as price increases with our Flex customers and Distribution partners. Volume decreases were driven by constraints in output due to ore shortages in the first half of the year and demand weakness in the second half of the year. Demand weakness, particularly in Europe and Asia, started in the third quarter of 2022 and weakened further in the fourth quarter of 2022. Unfavorable currency movements added a 2% headwind to the segment's net sales during the year ended December 31, 2022. Adjusted EBITDA and Adjusted EBITDA Margin Segment Adjusted EBITDA decreased by $198 million (or 25%) to $601 million and segment Adjusted EBITDA margin decreased by approximately 600 basis points to 18% for the year ended December 31, 2022, compared with segment Adjusted EBITDA of $799 million and segment Adjusted EBITDA margin of 24% for the same period in 2021. The decrease in Adjusted EBITDA and segment Adjusted EBITDA margin was primarily attributable to the lower fixed cost absorption due to higher ore costs due to ore supply disruption in the first half of 2022, lower operating rates because of aforementioned decrease in sales volumes, and higher other raw material and energy costs. 42 The Chemours Company Thermal & Specialized Solutions The following table sets forth the net sales, Adjusted EBITDA, and Adjusted EBITDA margin amounts for our Thermal & Specialized Solutions segment for the years ended December 31, 2022 and 2021. [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(Dollars in millions)","","2022","","","2021"],["Segment net sales","","$","1,680","","","$","1,257"],["Adjusted EBITDA","","","603","","","","401"],["Adjusted EBITDA margin","","","36","%","","","32","%"]] [[/GREPCENT_TABLE]] 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, 2022. [[GREPCENT_TABLE]] [["Change in segment net sales from prior period","","Year Ended December 31, 2022"],["Price","","","28","%"],["Volume","","","8","%"],["Currency","","","(2",")%"],["Portfolio","","","\u2014","%"],["Total change in segment net sales","","","34","%"]] [[/GREPCENT_TABLE]] Segment Net Sales Our Thermal & Specialized Solutions segment’s net sales increased by $423 million (or 34%) to $1.7 billion for the year ended December 31, 2022, compared with segment net sales of $1.3 billion for the same period in 2021. The increase in segment net sales for the year ended December 31, 2022 was primarily attributable to an increase in price of 28% and an increase in volume of 8%. Prices increased in most markets across the business due to changing market and regulatory dynamics and steady value-based pricing growth within our refrigerants portfolio. Volume increased due to continued adoption of OpteonTM and other specialized solutions. Unfavorable currency movements added a 2% headwind to the segment’s net sales during the year ended December 31, 2022. Adjusted EBITDA and Adjusted EBITDA Margin Segment Adjusted EBITDA increased by $202 million (or 50%) to $603 million and segment Adjusted EBITDA margin increased by approximately 400 basis points to 36% for the year ended December 31, 2022, compared with segment Adjusted EBITDA of $401 million and segment Adjusted EBITDA margin of 32% for the same period in 2021. The increase in segment Adjusted EBITDA and segment Adjusted EBITDA margin for the year ended December 31, 2022 was primarily attributable to the aforementioned increase in price, including favorable product mix, and sales volumes, partially offset by higher raw material and logistics costs. 43 The Chemours Company Advanced Performance Materials The following table sets forth the net sales, Adjusted EBITDA, and Adjusted EBITDA margin amounts for our Advanced Performance Materials segment for the years ended December 31, 2022 and 2021. [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(Dollars in millions)","","2022","","","2021"],["Segment net sales","","$","1,618","","","$","1,397"],["Adjusted EBITDA","","","367","","","","284"],["Adjusted EBITDA margin","","","23","%","","","20","%"]] [[/GREPCENT_TABLE]] 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, 2022. [[GREPCENT_TABLE]] [["Change in segment net sales from prior period","","Year Ended December 31, 2022"],["Price","","","18","%"],["Volume","","","2","%"],["Currency","","","(4",")%"],["Portfolio","","","\u2014","%"],["Total change in segment net sales","","","16","%"]] [[/GREPCENT_TABLE]] Segment Net Sales Our Advanced Performance Materials segment’s net sales increased by $221 million (or 16%) to $1.6 billion for the year ended December 31, 2022, compared with segment net sales of $1.4 billion for the same period in 2021. The increase in segment net sales for the year ended December 31, 2022 was primarily attributable to an increase in price of 18% and an increase in volume of 2%. Global average selling price increased due to increasing sales in high-value end-markets, including advanced electronics, semiconductors, and clean energy, as well as customer level pricing actions to offset increased raw material and energy costs. Volume increased due to high global customer demand across key markets, partially offset by supply chain challenges and lower demand in non-strategic end-markets where volume fade has been anticipated given our strategy to drive higher value, differentiated product offerings. Unfavorable currency movements added a 4% headwind to the segment’s net sales during the year ended December 31, 2022. Adjusted EBITDA and Adjusted EBITDA Margin Segment Adjusted EBITDA increased by $83 million (or 29%) to $367 million and segment Adjusted EBITDA margin increased by approximately 300 basis points to 23% for the year ended December 31, 2022, compared with segment Adjusted EBITDA of $284 million and segment Adjusted EBITDA margin of 20% for the year ended December 31, 2021. The increases in segment Adjusted EBITDA and segment Adjusted EBITDA margin for the year ended December 31, 2022 were primarily attributable to the aforementioned increase in sales volume, favorable product mix and pricing actions, partially offset by higher raw material, energy costs, particularly in Europe, logistics costs and costs related to growth investments. The segment’s operating results for the years ended December 31, 2022 and 2021 included $16 million and $15 million, respectively, of costs for process-related waste water treatment at Fayetteville. We expect to continue to incur these costs as we work with the NC DEQ to reauthorize discharge of such wastewater under our National Pollutant Discharge Elimination System (“NPDES”) permit. 44 The Chemours Company Corporate and Other Corporate and Other reflects certain legacy-related legal and environmental expenses (net of applicable MOU benefit), stock-based compensation expenses and other corporate costs. Corporate and Other costs decreased by $8 million (or 4%) to $212 million for the year ended December 31, 2022, compared with Corporate and Other costs of $220 million for the same period in 2021. The decrease in Corporate and Other costs for the year ended December 31, 2022 was primarily attributable to lower performance-related compensation and higher Qualified Spend recovery from DuPont and Corteva, partially offset by higher legacy environmental costs and other corporate initiatives. 2023 Outlook Our 2023 results will be driven by the following expectations in each of our reportable segments: • Titanium Technologies – Demand to slowly start improving in EMEA and China, but expect pace and timing of overall demand recovery through the year to remain uncertain given uneven macroeconomic conditions in different geographies; • Thermal & Specialized Solutions – Improved customer demand for our refrigerants with typical seasonality and continued OpteonTM adoption in mobile and stationary applications, paired with uncertainty in automotive and construction end-market demand recovery and headwinds from raw material inflation; and • Advanced Performance Materials – Improved customer demand for high-value, differentiated products in the performance solutions portfolio, offset by weak demand for products in the advanced materials portfolio which serves economically sensitive end-markets, demand softening in non-strategic markets, paired with raw material inflation and EU energy costs volatility. We expect that our capital expenditures will be approximately $400 million, with approximately $200 million for growth capital expenditures and approximately $200 million for run and maintain, and sustainability. Our outlook for 2023 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 Russia-Ukraine conflict. 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. 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 2024. At December 31, 2022, we had total cash and cash equivalents of $1.1 billion, of which $587 million was held by our foreign subsidiaries. All cash and cash equivalents held by our foreign subsidiaries are readily convertible into currencies used in our operations, including the U.S. dollar. During the year ended December 31, 2022, we received approximately $581 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 2024, which includes borrowing capacity under our revolving credit facility. 45 The Chemours Company 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: • Principal and interest obligations on long-term debt – We are required to make quarterly principal payments related to our Senior Secured Credit Facilities, with the balance due at maturity. Principal payments are also due at maturity for our 4.000% senior unsecured notes due May 2026, which are denominated in euros, the 5.375% senior unsecured notes due May 2027, the 5.750% senior unsecured notes due November 2028, and the 4.625% senior unsecured notes due November 2029 (collectively, the “Notes”). The earliest maturity date of our outstanding debt is scheduled in 2025. For a schedule of our debt principal maturities for the next five years and thereafter, refer to “Note 20 – Debt” to the Consolidated Financial Statements. Our interest obligations under our Senior Secured Credit Facilities may be paid monthly or quarterly, and our interest obligations in connection with the Notes are paid semi-annually in arrears on May 15 and November 15 of each year. We anticipate that our scheduled interest payments will be approximately $185 million each for the years ended December 31, 2023 and 2024, subject to changes in variable interest rates. In 2025 and 2026, we anticipate that our scheduled interest payments will be approximately $135 million and $110 million, respectively, subject to changes in variable interest rates. • Operating and finance leases – We lease certain office space, laboratory space, equipment, railcars, tanks, barges, tow boats, and warehouses. The majority of our lease population pertains to operating leases, and the remaining terms on our total lease population varies, extending up to 24 years. For a schedule of our lease payments for the next five years and thereafter, refer to “Note 14 – Leases” to the Consolidated Financial Statements. • Purchase obligations – As part of our normal, recurring operations, we enter into enforceable and legally-binding agreements to purchase goods and/or services that specify fixed or minimum quantities, fixed minimum or variable price provisions, and the approximate timing of the agreement. These agreements primarily pertain to our purchases of raw materials and utilities costs and may span multiple years. Based upon our currently executed agreements, we anticipate that our contractually obligated cash payments for raw materials and utilities will approximate $265 million for the year ending December 31, 2023, $240 million for the year ending December 31, 2024, and $200 million annually for each of the three years thereafter. Renewal, modification, or execution of additional agreements for future purchasing obligations may increase or decrease these amounts in future years. • Environmental remediation – We, due to the terms of our Separation-related agreements with EID, are subject to contingencies pursuant to environmental laws and regulations that in the future may require further action to correct the effects on the environment of prior disposal practices or releases of chemical substances, which are attributable to EID’s activities before our spin-off. Much of this liability results from the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), the Resource Conservation and Recovery Act ("RCRA"), and similar federal, state, local, and foreign laws. These laws may require us to undertake certain investigative, remediation, and restoration activities at sites where we conduct or EID once conducted operations or at sites where waste generated by us or EID was disposed. At December 31, 2022, our consolidated balance sheets include $668 million for environmental remediation liabilities, of which $194 million was classified as current, and a portion is subject to recovery under the MOU. Of the current environmental remediation liabilities of $194 million, $139 million relates to Fayetteville. Pursuant to the binding MOU that we entered into with DuPont, Corteva, and EID in January 2021, costs related to potential future legacy PFAS liabilities arising out of pre-July 1, 2015 conduct will be shared until the earlier to occur of: (i) December 31, 2040; (ii) the day on which the aggregate amount of Qualified Spend is equal to $4.0 billion; or, (iii) a termination in accordance with the terms of the MOU. The parties have agreed in the MOU that, during the term of the cost-sharing arrangement, we will bear half of the cost of such future potential legacy PFAS liabilities, and DuPont and Corteva will collectively bear the other half of the cost of such future potential legacy PFAS liabilities. After the term of this arrangement, our indemnification obligations under the Separation Agreement would continue unchanged, subject in each case to certain exceptions set out in the MOU. Through December 31, 2022, aggregate Qualified Spend including settlements, by us, DuPont, and Corteva under the MOU amounted to $314 million. Refer to the “Environmental Matters” section within this MD&A for the anticipated environmental remediation payments over the next three years. Refer to “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements for further discussion of the MOU and Qualified Spend. 46 The Chemours Company • PFAS escrow funding requirements – Pursuant to the binding MOU that we entered into with DuPont, Corteva, and EID in January 2021, the parties have agreed to establish an escrow account in order to support and manage the payments for potential future PFAS liabilities. The MOU provides that: (i) no later than each of September 30, 2021 and September 30, 2022, we shall deposit $100 million into an escrow account and DuPont and Corteva shall together deposit $100 million in the aggregate into an escrow account, and (ii) no later than September 30 of each subsequent year through and including 2028, we shall deposit $50 million into an escrow account and DuPont and Corteva shall together deposit $50 million in the aggregate into an escrow account. Subject to the terms and conditions set forth in the MOU, each party may be permitted to defer funding in any year (excluding 2021). Additionally, if on December 31, 2028, the balance of the escrow account (including interest) is less than $700 million, we will make 50% of the deposits and DuPont and Corteva together will make 50% of the deposits necessary to restore the balance of the escrow account to $700 million. Such payments will be made in a series of consecutive annual equal installments commencing on September 30, 2029 pursuant to the escrow account replenishment terms as set forth in the MOU. Any funds that remain in escrow at termination of the MOU will revert to the party that deposited them. As such, future payments made by us into the escrow account will remain an asset of Chemours, and such payments will be reflected as a transfer to restricted cash on our consolidated balance sheets. No withdrawals are permitted from the escrow account before January 2026, except for funding mutually agreed-upon third-party settlements in excess of $125 million. Starting in January 2026, withdrawals may be made from the escrow account to fund Qualified Spend if the parties’ aggregate Qualified Spend in that particular year is greater than $200 million. Starting in January 2031, the amounts in the escrow account can be used to fund any Qualified Spend. Future payments from the escrow account for potential future PFAS liabilities will be reflected on our consolidated statement of cash flows at that point in time. Refer to “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements for further discussion. • Purchases of property, plant, and equipment – As further discussed under the “Capital Expenditures” section within this MD&A, our operations are capital intensive, requiring ongoing investment to upgrade or enhance existing operations and to meet environmental and operational regulations. For the years ended December 31, 2022 and 2021, our purchases of property, plant, and equipment amounted to $307 million and $277 million, respectively. For the year ending December 31, 2023, we expect that our capital expenditures will be approximately $400 million. Our capital expenditures do not include the estimated future spend at Fayetteville, which is included in our environmental remediation liabilities, as noted in the “Environmental Liabilities” section of “Liquidity and Capital Resources” within this MD&A. We continue to believe our sources of liquidity are sufficient to fund our planned operations and to meet our interest, dividend, income taxes, and contractual obligations through at least February 2024. 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 $155 million per year, and, on February 6, 2023, we announced our quarterly cash dividend of $0.25 per share for the first quarter of 2023. Under our 2022 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 $509 million of our outstanding common stock. Subject to approval by our board of directors, we may raise additional capital or borrowings from time to time, or seek to refinance our existing debt. There can be no assurances that future capital or borrowings will be available to us, and the cost and availability of new capital or borrowings could be materially impacted by market conditions. Further, the decision to refinance our existing debt is based on a number of factors, including general market conditions and our ability to refinance on attractive terms at any given point in time. Any attempts to raise additional capital or borrowings or refinance our existing debt could cause us to incur significant charges. Such charges could have a material impact on our financial position, results of operations, or cash flows. 47 The Chemours Company Cash Flows The following table sets forth a summary of the net cash provided by (used for) our operating, investing, and financing activities for the years ended December 31, 2022 and 2021. [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(Dollars in millions)","","2022","","","2021"],["Cash provided by operating activities","","$","754","","","$","820"],["Cash (used for) provided by investing activities","","","(284",")","","","220"],["Cash used for financing activities","","","(685",")","","","(560",")"]] [[/GREPCENT_TABLE]] Operating Activities We generated $754 million and $820 million in cash flows from our operating activities during the years ended December 31, 2022 and 2021, respectively. The decrease in our operating cash inflows for the year ended December 31, 2022 was primarily attributable to changes in working capital, primarily related to changes in inventory due to higher unit costs, impact of timing of payment on accounts payable and collection of our accounts receivable, higher payments related to environmental remediation at Fayetteville, and payment of the $25 million settlement with the State of Delaware. Investing Activities We used $284 million in cash flows from our investing activities during the year ended December 31, 2022. Our investing cash outflows were primarily attributable to purchases of property, plant, and equipment amounting to $307 million, partially offset by cash proceeds of $17 million related to the Beaumont Transaction and $16 million related to the Pascagoula Transaction during the year ended December 31, 2022. 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 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 sale of our Mining Solutions business. 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. Purchases of property, plant, and equipment for the year ended December 31, 2021 included $22 million of assets acquired in exchange for the termination of a contract with a third-party service provider at our previously owned Mining Solutions facility in Gomez Palacio, Durango, Mexico. Financing Activities We used $685 million in cash flows for our financing activities during the year ended December 31, 2022. Our financing cash outflows were primarily attributable to our capital allocation activities, resulting in $495 million in purchases of our issued and outstanding common stock under our 2022 Share Repurchase Program and our 2018 Share Repurchase Program, $154 million of cash dividends, $68 million in debt repayments including open market repurchases, partially offset by $51 million of cash received from stock option exercises. 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 of cash dividends, and $18 million in premium payments to purchase and redeem the 2025 Notes. The lower cash dividends paid in 2022, when compared to prior year, was due to the decrease in our outstanding common stock following the share repurchases completed throughout the year. 48 The Chemours Company Current Assets The following table sets forth the components of our current assets at December 31, 2022 and 2021. [[GREPCENT_TABLE]] [["","","December 31,"],["(Dollars in millions)","","2022","","","2021"],["Cash and cash equivalents","","$","1,102","","","$","1,451"],["Accounts and notes receivable, net","","","626","","","","720"],["Inventories","","","1,404","","","","1,099"],["Prepaid expenses and other","","","82","","","","75"],["Total current assets","","$","3,214","","","$","3,345"]] [[/GREPCENT_TABLE]] Our accounts and notes receivable, net decreased by $94 million (or 13%) to $626 million at December 31, 2022, compared with accounts and notes receivable, net of $720 million at December 31, 2021. The decrease in our accounts and notes receivable, net at December 31, 2022 was primarily attributable to lower net sales in the fourth quarter of 2022 when compared to the same period in 2021, as well as the timing of collections from our customers. Our inventories increased by $305 million (or 28%) to $1.4 billion at December 31, 2022, compared with inventories of $1.1 billion at December 31, 2021. The increase in our inventories at December 31, 2022 was primarily attributable to build-up of our finished product inventories, along with an increase in the value of our raw material inventories due to higher raw material costs. Our prepaid expenses and other assets increased by $7 million (or 9%) to $82 million at December 31, 2022, compared with prepaid expenses and other assets of $75 million at December 31, 2021. The increase in our prepaid expenses and other current assets at December 31, 2022 was primarily attributable to an increase in our income taxes receivable due to higher estimated income tax payments made during the year in several jurisdictions where we operate. 49 The Chemours Company Current Liabilities The following table sets forth the components of our current liabilities at December 31, 2022 and 2021. [[GREPCENT_TABLE]] [["","","December 31,"],["(Dollars in millions)","","2022","","","2021"],["Accounts payable","","$","1,251","","","$","1,162"],["Compensation and other employee-related costs","","","121","","","","173"],["Short-term and current maturities of long-term debt","","","25","","","","25"],["Current environmental remediation","","","194","","","","173"],["Other accrued liabilities","","","300","","","","325"],["Total current liabilities","","$","1,891","","","$","1,858"]] [[/GREPCENT_TABLE]] Our accounts payable increased by $89 million (or 8%) to $1.3 billion at December 31, 2022, compared with accounts payable of $1.2 billion at December 31, 2021. The increase in our accounts payable at December 31, 2022 was primarily attributable to higher raw material prices and the timing of payments to our vendors. Our compensation and other employee-related costs decreased by $52 million (or 30%) to $121 million at December 31, 2022 compared with compensation and other employee-related costs of $173 million at December 31, 2021. The decrease in our compensation and other employee-related costs at December 31, 2022 was primarily attributable to decreased accruals for employee benefits and performance-based compensation. Our current environmental remediation increased by $21 million (or 12%) to $194 million at December 31, 2022, compared with current environmental remediation of $173 million at December 31, 2021. The increase in our current environmental remediation at December 31, 2022 was primarily attributable to increased accruals for construction of the barrier wall at Fayetteville, as well as off-site groundwater testing and water treatment system installations at qualifying third-party properties primarily in Bladen and Cumberland counties surrounding Fayetteville and for the assessment and for sampling related to potential PFAS contamination of groundwater and supply, alternative drinking water, and mitigation in New Hanover and three other counties downstream from Fayetteville. Our other accrued liabilities decreased by $25 million (or 8%) to $300 million at December 31, 2022, compared with other accrued liabilities of $325 million at December 31, 2021. The decrease in our other accrued liabilities at December 31, 2022 was primarily attributable to a decrease in accrued litigation following the payment of the $25 million settlement with the State of Delaware, as well as a decrease in income taxes payable following higher estimated income tax payments made during the year. The decrease in other accrued liabilities was partially offset by the $20 million accrual for our portion of the potential loss in the single matter not included in the Leach settlement. For more information regarding this matter, refer to "PFOA" within this "Note 22 - Commitments and Contingent Liabilities" to the Consolidated Financial Statements. 50 The Chemours Company Credit Facilities and Notes Refer to “Note 20 – Debt” to the Consolidated Financial Statements for a discussion of our credit facilities and notes. 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 certain U.S.-based operating subsidiaries included 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. [[GREPCENT_TABLE]] [["(Dollars in millions)","","Year Ended December 31, 2022"],["Net sales","","$","4,423"],["Gross profit","","","854"],["Income before income taxes","","","316"],["Net income","","","233"],["Net income attributable to Chemours","","","233"]] [[/GREPCENT_TABLE]] (1) Net sales includes intercompany sales to the Non-Guarantor Subsidiaries. [[GREPCENT_TABLE]] [["","","December 31,"],["(Dollars in millions)","","2022","","","2021"],["Assets"],["Current assets (1,2,3)","","$","1,553","","","$","1,554"],["Long-term assets (4)","","","3,485","","","","3,720"],["Liabilities"],["Current liabilities (2)","","$","1,554","","","$","1,504"],["Long-term liabilities","","","4,528","","","","4,497"]] [[/GREPCENT_TABLE]] (1) Current assets includes $514 million and $525 million of cash and cash equivalents at December 31, 2022 and 2021, respectively. (2) Current assets includes $326 million and $407 million of intercompany accounts receivable from the Non-Guarantor Subsidiaries at December 31, 2022 and 2021, respectively. Current liabilities includes $318 million and $328 million of intercompany accounts payable to the Non-Guarantor Subsidiaries at December 31, 2022 and 2021, respectively. (3) As of December 31, 2022 and 2021, $46 million and $76 million of accounts receivable generated by the Obligor Group, respectively, remained outstanding with one of the Non-Guarantor Subsidiaries under the Securitization Facility. (4) Long-term assets includes $303 million and $729 million of intercompany notes receivable from the Non-Guarantor Subsidiaries at December 31, 2022 and 2021, respectively. 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. 51 The Chemours Company 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, 2022 and 2021, the total amounts outstanding under these programs were $158 million and $153 million, respectively. Pursuant to their agreement with a financial institution, certain suppliers may elect to be paid early at their discretion. The available capacity under these programs can vary based on the number of investors and/or financial institutions participating in these programs at any point in time. Off-Balance Sheet Arrangements Information with respect to guarantees, including our securitization program, are included in "Note 20 - Debt" to the Consolidated Financial Statements. Historically, we have not made any payments to satisfy guarantee obligations; however, we believe we have the financial resources to satisfy these guarantees in the event required. Capital Expenditures Our operations are capital intensive, requiring ongoing investment to upgrade or enhance existing operations and to meet environmental and operational regulations. Our capital requirements have consisted, and are expected to continue to consist, primarily of: • ongoing capital expenditures, such as those required to maintain equipment reliability, maintain the integrity and safety of our manufacturing sites, comply with environmental regulations, and meet our Corporate Responsibility Commitments; • investments in our existing facilities to help support the introduction of new products and de-bottleneck to expand capacity and grow our business; and, • investments in projects to reduce future operating costs and enhance productivity. The following table sets forth our ongoing and expansion capital expenditures, including certain environmental capital expenditures, for the years ended December 31, 2022 and 2021. [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(Dollars in millions)","","2022","","","2021"],["Titanium Technologies","","$","149","","","$","104"],["Thermal & Specialized Solutions","","","30","","","","26"],["Advanced Performance Materials","","","115","","","","103"],["Other Segment","","","6","","","","39"],["Corporate and Other","","","7","","","","5"],["Total purchases of property, plant, and equipment","","$","307","","","$","277"]] [[/GREPCENT_TABLE]] Our capital expenditures increased by $30 million (or 11%) to $307 million for the year ended December 31, 2022, compared with capital expenditures of $277 million for the same period in 2021. The increase in our capital expenditures for the year ended December 31, 2022 was primarily attributable to higher capital investment in Titanium Technologies related to mining operations in Florida, investments in Advanced Performance Materials segment related to growth in performance solutions business, partially offset by decrease in capital expenditures in Other Segment due to the divestiture of the Mining Solutions business. 52 The Chemours Company 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 and amortization are ceased for a disposal group upon it being classified as held for sale. 53 The Chemours Company 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, 2022 and 2021. 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 an operating segment or one level below 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, 2022, we performed our annual goodwill impairment tests for all reporting units. Based upon the results of our annual goodwill impairment tests, no impairments to the carrying value of goodwill were necessary during the year ended December 31, 2022. We have one reporting unit with goodwill of $56 million, where the fair value exceeds the book value by between 20% and 50%. The fair value exceeds the book value of all other reporting units by over 150% with goodwill aggregating to $46 million. Accordingly, we do not believe that any of our reporting units are at risk of failing step one of the annual goodwill impairment test. 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, 2022, the weighted-average discount rate was 3.6%. 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 2022 was 1%. A 50 basis point increase in the discount rate would result in a decrease of $3 million to the net periodic benefit cost for 2023, while a 50 basis point decrease in the discount rate would result in an increase of approximately $3 million. A 50 basis point increase in the expected return on plan assets assumption would result in a decrease of approximately $2 million to the net periodic benefit cost for 2023, while a 50 basis point decrease in the expected return on plan assets assumption would result in an increase of approximately $2 million. 54 The Chemours Company Litigation 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. We are also involved in various claims and legal proceedings. We regularly review the status of each significant matter and assess its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, we accrue a liability for the estimated loss. When a material loss contingency is reasonably possible, but not probable, we do not record a liability, but instead disclose the nature of the matter and an estimate of the loss or range of loss, to the extent such estimate can be made. Significant judgment is required in both the determination of probability and whether an exposure is reasonably estimable. Our judgments are subjective based on the status of the legal or regulatory proceedings, the merits of our defenses and consultation with in-house and outside legal counsel. Because of uncertainties related to these matters, accruals are based on the best information available at the time. As additional information becomes available, we reassess the potential liability related to pending claims and litigation and may revise our estimates accordingly. Due to the inherent uncertainties of the legal and regulatory process in the multiple jurisdictions in which we operate, our judgments may be materially different than the actual outcomes. Legal costs such as outside counsel fees and expenses are charged to expense in the period services are rendered. 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. 55 The Chemours Company 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. 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 these 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, 2022 and 2021, we spent $43 million and $69 million, respectively, on environmental capital projects that were either required by law or necessary to meet our internal environmental objectives. The decrease in our environmental capital expenditures for the year ended December 31, 2022, when compared with the same period in 2021, was primarily attributable to our Advanced Performance Materials segment where higher spend in 2021 relative to 2022 is driven by the timing of projects focused on the reduction of water emissions in line with our Corporate Responsibility Commitment. 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 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, 2022 and 2021, our consolidated balance sheets include environmental remediation liabilities of $668 million and $562 million, respectively, relating to these matters, which, as discussed in further detail below, include $465 million and $359 million, respectively, for Fayetteville. 56 The Chemours Company The following table sets forth the activities related to our environmental remediation liabilities for the years ended December 31, 2022 and 2021. [[GREPCENT_TABLE]] [["","","December 31,"],["(Dollars in millions)","","2022","","","2021"],["Balance at January 1,","","$","562","","","$","390"],["Increase in remediation accrual","","","269","","","","269"],["Remediation payments (1)","","","(159",")","","","(97",")"],["Divestitures","","","(4",")","","","\u2014"],["Balance at December 31,","","$","668","","","$","562"]] [[/GREPCENT_TABLE]] (1) Remediation payments do not include Qualified Spend that we have been reimbursed for by DuPont and/or Corteva as part of our cost-sharing agreement under the terms of the MOU. Our estimated liability for environmental remediation covered 211 sites at December 31, 2022 and 2021. The following table sets forth our environmental remediation liabilities by site category. [[GREPCENT_TABLE]] [["(Dollars in millions)","","December 31, 2022","","","December 31, 2021"],["Site Category","","Number of Sites","","","Remediation Accrual","","","Number of Sites","","","Remediation Accrual"],["Chemours-owned","","","21","","","$","589","","","","23","","","$","486"],["Multi-party Superfund/non-owned (1)","","","88","","","","79","","","","86","","","","76"],["Closed or settled","","","102","","","","\u2014","","","","102","","","","\u2014"],["Total sites","","","211","","","$","668","","","","211","","","$","562"]] [[/GREPCENT_TABLE]] (1) Sites not owned by Chemours, including sites previously owned by EID or Chemours, where remediation obligations are imposed by environmental remediation laws, such as CERCLA, RCRA, or similar state laws. 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 21 sites that we own. These Chemours-owned sites make up approximately 88% of our environmental remediation liabilities at December 31, 2022. We were also assigned numerous clean-up obligations from EID, which pertain to 88 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 12% of our environmental remediation liabilities at December 31, 2022. Included in the 88 sites are 37 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. 57 The Chemours Company 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, 2022 and 2021. (1) Number of sites does not include the 37 and 36 inactive sites for which there has been no known investigation, clean-up, or monitoring activities as of December 31, 2022 and 2021, respectively. (2) Dollars in millions. (3) As of December 31, 2022 and 2021, Active Remediation included $465 million and $359 million, respectively, for on-site remediation and off-site groundwater remediation at Fayetteville. 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, we currently estimate the potential liabilities may range up to approximately $730 million above the amount accrued at December 31, 2022. This estimate is not intended to reflect an assessment of our maximum potential liability. The 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 analyses. Inherent uncertainties exist in such evaluations, primarily due to unknown environmental conditions, changing governmental regulations regarding liability, and emerging remediation technologies. We will continue to evaluate as new or additional information becomes available in the determination of our environmental remediation liability. 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. 58 The Chemours Company 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. Significant Environmental Remediation Sites While there are many remediation sites that contribute to our total accrued environmental remediation liabilities at December 31, 2022 and 2021, the following table sets forth the liabilities of the five sites that are deemed the most significant and together with the aggregate liabilities of the 67 other sites represent the 72 sites with environmental remediation. [[GREPCENT_TABLE]] [["","","December 31,"],["(Dollars in millions)","","2022","","","2021"],["Chambers Works, Deepwater, New Jersey","","$","30","","","$","27"],["Fayetteville Works, Fayetteville, North Carolina","","","465","","","","359"],["Pompton Lakes, New Jersey","","","41","","","","42"],["USS Lead, East Chicago, Indiana","","","17","","","","24"],["Washington Works, West Virginia","","","17","","","","11"],["All other sites","","","98","","","","99"],["Total environmental remediation","","$","668","","","$","562"]] [[/GREPCENT_TABLE]] The five sites listed above represent 85% and 82% of our total accrued environmental remediation liabilities at December 31, 2022 and 2021, respectively. For these five sites, we expect to spend, in the aggregate, $246 million over the next three years. For all other sites, we expect to spend $99 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 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. Discussions are ongoing with the 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 historic industrial activity as well as ongoing remedial programs. 59 The Chemours Company 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. 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”) in September 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 Consent Order ("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. The CO requires us to provide permanent replacement drinking water supplies, via connection to public water supply, whole building filtration units and/or reverse osmosis units, to qualifying surrounding residents, businesses, schools, and public buildings with private drinking water wells. 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, or an extended date in accordance with the Addendum. After a period of public comment, the Addendum was approved by the North Carolina Superior Court for Bladen County in October 2020. Further discussion related to Fayetteville is included under the heading “Fayetteville Works, Fayetteville, North Carolina” in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements. 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. 60 The Chemours Company 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 includes 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 ("IDA"), 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. In 2021, we resolved 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. In September 2022, EPA confirmed the selection of remedial actions for modified Zone 1 and provided notice to all relevant parties, including IDA, to cause the agreements between EPA, DOJ, the State of Indiana, Chemours and other PRPs to become effective. We expect that our future costs relating to the USS Lead site will be contingent on implementation of these agreements, resolution of EPA’s costs as well as any final allocation between PRPs. Washington Works, Parkersburg, West Virginia (“Washington Works”) The Washington Works complex is located on the eastern shore of the Ohio River south of Parkersburg, West Virginia. The facility encompasses approximately 400 acres, which were purchased by EID in the late 1940’s. Other nearby land parcels purchased by EID included Blennerhassett Island, and three separate properties where West Virginia Department of Environmental Protection ("WV DEP") permitted landfills were operated. Site operations began in 1948 and included the manufacture of nylon, filaments, and acrylics. In 1949, fluoropolymer manufacturing began, and in 1959, Delrin production was started. Landfill operations occurred from the 1960’s through the early 2000’s when all three were closed according to WV DEP approved closure plans. Through 2014, EID used PFOA as a processing aid to manufacture some fluoropolymer resins at Washington Works. In July 2015, upon our separation from EID, we became the owner of the Washington Works complex. The site has implemented environmental investigations, including Verification Investigation in 1992 and RCRA Facility Investigation ("RFI") in 1999 pursuant to corrective action requirements of its RCRA Part B and HSWA Permit under EPA and the West Virginia Department of Natural Resources oversight. The RFI was approved in 2012 and a CMS was completed in 2015 that recommended certain remedial actions, including capping of the former on-site landfill and ponds, which had already been completed, sitewide groundwater hydraulic control, drinking water supply well treatment via granular activated carbon, and long-term groundwater monitoring. These actions were memorialized in a RCRA final remedy implementation plan approved by the agencies in 2018 and integrated into the updated RCRA permit in August 2020. The remedial actions required by the RCRA final remedy implementation plan have been completed or are part of routine operations, maintenance and monitoring. Landfill post closure care include systems to treat surface water, leachate or groundwater, landfill cover or cap maintenance, monitoring and reporting. Additionally, upgrades to the Local landfill cover are being developed. Accruals related to these remedial actions were $17 million and $11 million as of December 31, 2022 and 2021, respectively. 61 The Chemours Company Chemours Washington Works discharges, through outfalls at the site, wastewater and stormwater pursuant to a NPDES permit issued by the WV DEP. In connection with actions being taken by us to comply with certain NPDES effluent limits, including for PFOA and hexafluoropropylene oxide dimer acid, we submitted a permit modification to WV DEP relating to groundwater abatement for certain process water used at the facility, a temperature reduction project and realigning discharge flows to certain outfalls. In July 2021, EPA provided a specific objection to the draft modification based on Clean Water Act (“CWA”) regulations and requirements. In August 2021, WV DEP issued a NPDES permit modification to provide for the start-up of an abatement unit at the facility and to extend compliance dates for certain limits to December 2021 due to delays from the COVID-19 pandemic. In September 2021, WV DEP issued a further NPDES modification, including for the operation of an abatement unit from the site’s Ranney Well, and the site is taking additional actions to reduce PFAS discharges associated with wet weather flows and continuing to assess future stormwater discharges and permitting. Pursuant to an Order on Consent ("OC"), entered into by EID with EPA since 2006, Chemours provides alternate drinking water supplies, via granular activated carbon ("GAC") treatment or other approved supply, to residential well owners and local public drinking water systems near the Washington Works complex whose PFOA concentration exceeds 70 parts per trillion. We also provide regular sampling and GAC change outs activities as per OC requirements. Accruals related to this matter were $15 million and $14 million as of December 31, 2022 and 2021, respectively, and were included in Accrued Litigation liability in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements. 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 us 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 us 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 February 2022, the General Court dismissed the annulment action and we have appealed such decision. 62 The Chemours Company 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 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 fluorinated-gases ("F-gases") and fluoropolymers are being considered as part of this broad regulatory action. 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”). 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 was submitted to ECHA in January 2023, and in February 2023 ECHA published a report and supporting annexes on the restriction proposal, which includes identified concerns for in-scope PFAS and their degradation products and the proposed restriction of a full ban with certain use-specific time-limited derogation periods. The restriction 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. In October 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 that will be issued for PFAS compounds alleged to be associated with Fayetteville. In June 2022, EPA issued its first TSCA Section 4(a)(2) order under this program to five recipients, including us and EID, and we met with the agency in July 2022 to discuss the order and respond to it. In January 2023, EPA issued a second TSCA Section 4(a)(2) order under this program to four recipients, including us and EID. The timing of the remaining TSCA orders is not determinable at this time. Also in October 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. On March 18, 2022, we filed a petition to EPA requesting it withdraw and correct its toxicity assessment for GenX compounds, and this petition was denied by EPA on June 14, 2022. The next day, on June 15, 2022, EPA released health advisories for four PFAS, including interim updated lifetime drinking water health advisories for PFOA and PFOS, and final health advisories for GenX compounds, including HFPO Dimer Acid and another PFAS compound (PFBS). On July 13, 2022, we filed a Petition for Review of the GenX compounds health advisory. We continue to evaluate the impact of EPA’s June 15th health advisories and the PFAS Strategic Roadmap. 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 at this time, due in part to the uncertainties on EPA’s development of maximum contaminant levels for PFOA and PFOS and the implementation of the June 15th health advisories. The environmental remediation liabilities and accrued litigation, as applicable, recorded for Fayetteville, Washington Works, Parkersburg, West Virginia and Chambers Works, Deepwater, New Jersey as of December 31, 2022 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 any new drinking water standards. Refer to our discussion under the heading “Fayetteville Works, Fayetteville, North Carolina” in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements. 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. 63 The Chemours Company 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: • interest expense, depreciation, and amortization; • non-operating pension and other post-retirement employee benefit costs, which represents the non-service component of net periodic pension (income) costs; • exchange (gains) losses included in other income (expense), net; • restructuring, asset-related, and other charges; • (gains) losses on sales of assets and business; and, • other items not considered indicative of our ongoing operational performance and expected to occur infrequently, including Qualified Spend reimbursable by DuPont and/or Corteva as part of our cost-sharing agreement under the terms of the MOU that were previously excluded from Adjusted EBITDA. 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 (“Adjusted 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 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. 64 The Chemours Company 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, 2022 and 2021. [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(Dollars in millions, except per share amounts)","","2022","","","2021"],["Net income attributable to Chemours","","$","578","","","$","608"],["Non-operating pension and other post-retirement employee benefit income","","","(5",")","","","(9",")"],["Exchange losses (gains), net","","","15","","","","(3",")"],["Restructuring, asset-related, and other charges (1)","","","15","","","","6"],["(Gain) loss on extinguishment of debt","","","(7",")","","","21"],["Gain on sales of assets and businesses (2)","","","(21",")","","","(115",")"],["Natural disasters and catastrophic events (3)","","","\u2014","","","","21"],["Transaction costs (4)","","","\u2014","","","","4"],["Qualified spend recovery (5)","","","(58",")","","","(20",")"],["Legal and environmental charges, net (6,7)","","","227","","","","230"],["Adjustments made to income taxes (8)","","","30","","","","(27",")"],["Benefit from income taxes relating to reconciling items (9)","","","(36",")","","","(42",")"],["Adjusted Net Income","","","738","","","","674"],["Interest expense, net","","","163","","","","185"],["Depreciation and amortization","","","291","","","","317"],["All remaining provision for income taxes","","","169","","","","137"],["Adjusted EBITDA","","$","1,361","","","$","1,313"],["Weighted-average number of common shares outstanding - basic","","","155,359,361","","","","164,943,575"],["Dilutive effect of our employee compensation plans","","","2,943,646","","","","3,754,864"],["Weighted-average number of common shares outstanding - diluted","","","158,303,007","","","","168,698,439"],["Per share data"],["Basic earnings per share of common stock (10)","","$","3.72","","","$","3.69"],["Diluted earnings per share of common stock (10)","","","3.65","","","","3.60"],["Adjusted basic earnings per share of common stock (10)","","","4.75","","","","4.09"],["Adjusted diluted earnings per share of common stock (10)","","","4.66","","","","4.00"]] [[/GREPCENT_TABLE]] (1) In 2022, restructuring, asset-related, and other charges primarily includes asset charges and write-offs resulting from the conflict between Russia and Ukraine and our decision to suspend our business with Russian entities. In 2021, restructuring, asset-related, and other charges primarily includes a net $9 million gain resulting from contract termination with a third-party services provider at our previously owned Mining Solutions facility in Gomez Palacio, Durango, Mexico. (2) Refer to “Note 8 – Other Income (Expense), Net” to the Consolidated Financial Statements for further details. (3) In 2021, natural disasters and catastrophic events pertains to the total cost of plant repairs and utility charges in excess of historical averages caused by Winter Storm Uri. (4) 2021 includes costs associated with our accounting, legal, and bankers’ transaction costs incurred in connection with the sale of the Mining Solutions business. (5) Qualified spend recovery represents costs and expenses that were previously excluded from Adjusted EBITDA, reimbursable by DuPont and/or Corteva as part of our cost-sharing agreement under the terms of the MOU which is discussed in further detail in "Note 22 – Commitments and Contingent Liabilities" to the Consolidated Financial Statements. (6) Legal charges pertains to litigation settlements, PFOA drinking water treatment accruals, and other legal charges which are discussed in further detail in “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements. For the year ended December 31, 2022, legal charges primarily include proceeds from a settlement in a patent infringement matter relating to certain copolymer patents associated with our Advanced Performance Materials segment and $20 million associated with our portion of the potential loss in the single matter not included in the Leach settlement. For the year ended December 31, 2021, legal charges primarily include $25 million associated with our portion of the costs to enter into a 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. Refer to “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements for further details. (7) Environmental charges pertains to management’s assessment of estimated liabilities associated with certain environmental remediation expenses at various sites. For the years ended December 31, 2022 and 2021, environmental charges primarily include $196 million and $169 million, respectively, related to on-site and off-site remediation costs at Fayetteville. Refer to “Note 22 – Commitments and Contingent Liabilities” to the Consolidated Financial Statements for further details. (8) Includes the removal of certain discrete income tax impacts within our provision for income taxes, such as certain uncertain tax position adjustments related to prior years, shortfalls and windfalls on share-based payments, certain return-to-accrual adjustments, valuation allowance adjustments, unrealized gains and losses on foreign exchange rate changes, and other discrete income tax items. (9) The income tax impacts included in this caption are determined using the applicable rates in the taxing jurisdictions in which income or expense occurred and represent both current and deferred income tax expense or benefit based on the nature of the non-GAAP financial measure. (10) Figures may not recalculate exactly due to rounding. Basic and diluted earnings per share are calculated based on unrounded numbers. 65 The Chemours Company The following table sets forth a reconciliation of our cash flows provided by (used for) operating activities to FCF for the years ended December 31, 2022 and 2021. [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(Dollars in millions)","","2022","","","2021"],["Cash provided by operating activities","","$","754","","","$","820"],["Less: Purchases of property, plant, and equipment (1)","","","(307",")","","","(277",")"],["Free Cash Flows","","$","447","","","$","543"]] [[/GREPCENT_TABLE]] (1) The year ended December 31, 2021 includes $22 million related to construction-in-progress assets acquired in exchange for the termination of a contract with a third-party service provider at our under-construction Mining Solutions facility in Gomez Palacio, Durango, Mexico. In December 2021, the assets at the Mining Solutions facility in Gomez Palacio, Durango, Mexico were sold as part of the divestiture of our Mining Solutions Business. The following table sets forth a reconciliation of Adjusted EBIT and average invested capital, and their nearest respective GAAP measures, to ROIC for the periods presented. [[GREPCENT_TABLE]] [["","","Year Ended December 31,"],["(Dollars in millions)","","2022","","","2021"],["Adjusted EBITDA (1)","","$","1,361","","","$","1,313"],["Less: Depreciation and amortization (1)","","","(291",")","","","(317",")"],["Adjusted EBIT","","$","1,070","","","$","996"],["","","As of December 31,"],["(Dollars in millions)","","2022","","","2021"],["Total debt (2)","","$","3,615","","","$","3,749"],["Total equity","","","1,107","","","","1,082"],["Less: Cash and cash equivalents","","","(1,102",")","","","(1,451",")"],["Invested capital, net","","$","3,620","","","$","3,380"],["Average invested capital (3)","","$","3,607","","","$","3,705"],["Return on Invested Capital","","","30","%","","","27","%"]] [[/GREPCENT_TABLE]] (1) Reconciliations of net income (loss) attributable to Chemours to Adjusted EBITDA are provided on a quarterly basis. Refer to the preceding table for the reconciliation of net income (loss) attributable to Chemours to Adjusted EBITDA for the years ended December 31, 2022 and 2021. (2) Total debt principal minus unamortized issue discounts of $4 million and $5 million and debt issuance costs of $22 million and $28 million at December 31, 2022 and 2021, respectively. (3) Average invested capital is based on a five-quarter trailing average of invested capital, net. The following table sets forth a reconciliation of our total debt principal, cash and cash equivalents, and Adjusted EBITDA to Net Leverage Ratio. [[GREPCENT_TABLE]] [["","","As of December 31,"],["(Dollars in millions)","","2022","","","2021"],["Total debt principal","","$","3,641","","","$","3,782"],["Less: Cash and cash equivalents","","","(1,102",")","","","(1,451",")"],["Total debt principal, net","","$","2,539","","","$","2,331"],["","","Year Ended December 31,"],["(Dollars in millions)","","2022","","","2021"],["Adjusted EBITDA (1)","","$","1,361","","","$","1,313"],["Net Leverage Ratio","","1.9x","","","1.8x"]] [[/GREPCENT_TABLE]] (1) Reconciliations of net income (loss) attributable to Chemours to Adjusted EBITDA are provided on a quarterly basis. Refer to the preceding table for the reconciliation of net income (loss) attributable to Chemours to Adjusted EBITDA for the years ended December 31, 2022 and 2021. 66 The Chemours Company