Chemtura Corp.
Chemtura CORP (Form: 10-K, Received: 02/22/2017 16:29:46)
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-15339
Chemtura Corporation
(Exact name of registrant as specified in its charter)
Delaware
52-2183153
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
 
 
1818 Market Street, Suite 3700, Philadelphia, Pennsylvania
199 Benson Road, Middlebury, Connecticut
19103
06749
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (203) 573-2000 
Securities registered pursuant to Section 12(b) of the Act: 
 
Title of each class
Name of each exchange on which registered
 
 
 
 
Common Stock, $0.01 par value
New York Stock Exchange
 
 
 
 
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.        Yes x    No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large accelerated file” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. ( Check off ):
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
( Do not check if a smaller reporting company )
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No x
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant, computed as of June 30, 2016, based on the value of the closing price of these shares as quoted on the New York Stock Exchange was $1.6 billion .
The number of voting shares of Common Stock of the registrant outstanding as of January 31, 2017 was 63.2 million .
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No o  
DOCUMENTS INCORPORATED BY REFERENCE  
Portions of the Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held on May 31, 2017 are incorporated by reference into Part III.



TABLE OF CONTENTS
PAGES
 
 
PART I
 
 
Item 1:   Business
 
 
Item 1A: Risk Factors
 
 
Item 1B: Unresolved Staff Comments
 
 
Item 2: Properties
 
 
Item 3: Legal Proceedings
 
 
Item 4: Mine Safety Disclosures
 
 
PART II
 
 
Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
 
Item 6: Selected Financial Data
 
 
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
 
Item 7A: Quantitative and Qualitative Disclosures About Market Risk
 
 
Item 8: Financial Statements and Supplementary Data
 
 
Item 9: Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
 
 
Item 9A: Controls and Procedures
 
 
Item 9B: Other Information
 
 
PART III
 
 
Item 10: Directors, Executive Officers and Corporate Governance
 
 
Item 11: Executive Compensation
 
 
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
 
Item 13: Certain Relationships and Related Transactions, and Director Independence
 
 
Item 14: Principal Accountant Fees and Services
 
 
PART IV
 
 
Item 15. Exhibits and Financial Statement Schedules
 
 
SIGNATURES


1


Note About Forward-Looking Statements
Certain statements in this report, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including without limitation, in the following sections: “Business”, “Risk Factors” and “Management’s Discussion and Analysis.” These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section entitled “Risk Factors” (See Part I, Item 1A of this Form 10-K). We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

PART I
Item 1: Business
When we use the terms “Corporation,” “Company,” “Chemtura,” “Registrant,” “We,” “Us” and “Our,” unless otherwise indicated or the context otherwise requires, we are referring to Chemtura Corporation and our consolidated subsidiaries.
PENDING MERGER TRANSACTION WITH LANXESS
On February 1, 2017, Chemtura's stockholders voted to approve and adopt the agreement and plan of merger (the "Merger Agreement") we entered into on September 25, 2016 with Lanxess Deutschland GmbH, a limited liability company under the laws of Germany ("Lanxess"), and LANXESS Additives Inc., a Delaware corporation and an indirect, wholly-owned subsidiary of Lanxess ("Merger Subsidiary"). Upon the terms, and subject to the conditions set forth in the Merger Agreement, the Merger Subsidiary will merge with and into Chemtura (the "Merger"), with Chemtura surviving the merger in an all-cash transaction in which Chemtura's stockholders will receive $33.50 in cash, without interest, per share of Chemtura common stock, which represented an 18.9% premium to the stock’s closing share price of $28.18 on September 23, 2016, the last trading day prior to the announcement of the Merger.
The Merger remains subject to customary closing conditions including, among others, the receipt of necessary antitrust and regulatory approvals and the accuracy of representations and warranties made in the Merger Agreement. Assuming timely satisfaction of the necessary closing conditions, we currently expect the Merger to close by mid-2017.
Until the Merger has occurred, we will continue to operate as an autonomous company from Lanxess. This Annual Report on Form 10-K has been written based upon that premise. However, as a direct result of the Merger, changes to our common stock, strategic initiatives, structure, markets or locations may occur that would not have occurred if we were to continue as an independent entity.
For a further discussion of the Merger, see Note 2 — Mergers and Divestitures in our Notes to Consolidated Financial Statements.
GENERAL
We are a leading global developer, manufacturer and marketer of performance-driven engineered industrial specialty chemicals. Most of our products are sold to industrial manufacturing customers for use as additives, ingredients or intermediates that add value to their end products. We are committed to global sustainability through “greener technology” and developing engineered chemical solutions that meet our customers’ evolving needs. Our Industrial Performance Products segment is a global manufacturer and marketer of high-performance lubricant additive components, synthetic lubricant base-stocks, synthetic finished fluids, high-performing calcium sulfonate specialty greases and phosphate and polyester based fluids. This segment is also a leader in the development and production of hot cast elastomer pre-polymers. Our Industrial Engineered Products segment is a global developer and manufacturer of bromine and bromine-based products and organometallic compounds.

2


We are the successor to Crompton & Knowles Corporation which was incorporated in 1900 and through several acquisitions and divestitures since that time we renamed ourselves Chemtura Corporation in 2005. In 2013, we divested our antioxidants and UV stabilizers (“Antioxidants”) and Consumer Products businesses, and in 2014, we divested our Chemtura AgroSolutions business.
Our principal executive offices are located at 1818 Market Street, Suite 3700, Philadelphia, Pennsylvania 19103 and at 199 Benson Road, Middlebury, Connecticut 06749. Our telephone numbers in Philadelphia, Pennsylvania and Middlebury, Connecticut are (215) 446-3911 and (203) 573-2000, respectively. Our Internet Web site address is www.chemtura.com. We make available free of charge on or through our Internet Web site (www.chemtura.com) our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after we electronically file such material with, or furnish to, the Securities and Exchange Commission.
Our Corporate Governance Principles, Code of Business Conduct and charters of our Audit, Compensation & Governance and Environmental, Health & Safety Committees are available on our Internet Web site and are free of charge to any stockholder who requests them from the Corporate Secretary at Chemtura Corporation, 199 Benson Road, Middlebury, CT 06749. The information contained on our Internet Web site is not incorporated by reference into this Annual Report on Form 10-K and should not be considered a part of this Annual Report.
Financial information for each of our segments discussed below can be found in Note 16 - Business Segments in our Notes to Consolidated Financial Statements.
OUR COMPETITIVE STRENGTHS
We believe our key competitive strengths are: 
Our Key Businesses Have Industry Leading Positions: Our key businesses and many of our products hold leading positions within the various industries they serve. We believe our scale and global reach in product development and marketing provide us with advantages over many of our smaller competitors.
Broad Diversified Business:
Geographic Diversity. Our worldwide manufacturing , sales and marketing network enables us to serve the needs of both local and global customers worldwide. As of December 31, 2016 , we operated 19 manufacturing facilities in 11 countries. For the year ended December 31, 2016 , 43% of our net sales were generated in the United States and Canada, 31% from Europe, 24% from Asia/Pacific and 2% from Latin America. We market and sell our products in more than 70 countries, providing the opportunity to develop new markets for our products in higher-growth regions. Our historical strength in the United States and Europe has allowed us to expand our business geographically, thereby diversifying our exposure to many different economies.

3


GEOGRAPHIC INFORMATION
CHMT-201512_CHARTX50809A01.JPG
Product and Industry Diversity. We are comprised of a number of distinct businesses based on different chemistries, each of which is subject to a set of varied industry trends. Additionally, the product lines of each of our businesses serve a variety of industries and applications, thereby providing us with further diversification.
Diversified Customer Base. We have a large and diverse global customer base in a broad array of industries and applications. No single customer comprises more than ten percent of our consolidated 2016 net sales.
Unique Industry Positions : We believe our businesses possess significant differentiation within their respective industry segments. Some of our businesses are vertically integrated into key feedstocks or have long lead time product registrations or technical and formulatory know-how. We believe these attributes are difficult to replicate and allow us to attract customers looking for consistent performance, reliability and cost-effective results, and are distinct competitive advantages. Examples include:
Our Industrial Performance Products segment participates in a production joint venture that produces cost competitive alkylated diphenylamine, a building block for our Naugalube ® antioxidants used in lubricants, and develops urethane systems, the production of which is enhanced by our technical and formulatory know-how that permits us to engineer our products to meet specific customer needs.
Our Industrial Engineered Products segment has a strong diversified position in bromine with an extensive brine field operation in South Arkansas and long-term strategic sourcing agreements that provide access to Dead Sea and additional South Arkansas bromine. Bromine is used as a building block for products such as flame retardants used in automotive, electronics, building and construction, and brominated derivatives used in pharmaceutical, agriculture, and energy-based industry segments. Our high-purity organometallics products are based on more than 50 years of innovation and safe handling and provide state of the art solutions to rapidly developing new applications such as the chemical vapor deposition of metal oxide layers in electronics and photovoltaics, pharmaceutical synthesis reagents and next generation polymerization catalysts.

4


Well Positioned to Expand in the Faster Growing Regions: Our businesses’ product portfolios have positioned us to benefit from high-growth regions in the future. We derived 26% of our revenues during 2016 from the faster growing regions of Asia/Pacific and Latin America. Despite current economic uncertainty in the faster growing regions, we will continue to build our presence in these regions as we believe that their polymer production will increase, their manufacturing of electronic products will expand and their automotive industries will build vehicles that have to meet emission standards such that they can be exported to western markets. There are a limited number of suppliers that can supply the products or provide the technical support that customers in these regions require, giving us the opportunity to capture this growth in demand for our products. In 2016, we completed the construction of a multi-purpose manufacturing plant in China which produces high-performance specialty greases, synthetic lubricants and high-performance urethane products to service that region.
OUR STRATEGY
Our primary goal has been to create value by driving profitable revenue growth while continuing to manage our costs. We continue to develop and engineer new products, processes and applications, leverage our global scale for regional growth and manage our portfolio of industrial specialty chemical businesses. Our efforts are directed by the following key business strategies:
Technology-Driven Growth through Industry Focused Innovation. As an industrial specialty chemical developer and manufacturer, our competitive strength lies in continually developing and engineering new products and processes that meet our customers’ changing needs. We are investing in innovation to strengthen our new product pipelines and to reduce the cost of our products and will license or acquire technologies to supplement these initiatives. We focus on the development of products that are sustainable, meet ecological concerns and capitalize on growth trends in the industries we serve.
Growth Expansion in Faster-Growing Regions through Building Global Scale. We are building our local presence in the faster-growing regions notably in Asia Pacific, through sales representation, technical development centers, joint ventures and local manufacturing. We empower our regional teams to serve their growing customer base. We leverage our global scale by sharing service functions and technologies that no one region or business could replicate on its own while utilizing our regional presence to lower raw material costs.
Performance-Driven Culture. We believe we have outstanding people who can deliver superior performance under strong, experienced leaders who instill a culture of accountability. We expect accountability on safety, environmental stewardship, compliance with laws, customer commitments and performance. We are focused on understanding the needs of our customers and meeting such needs by efficiently executing their orders and delivering technology-based solutions that meet their requirements to earn the position as their preferred supplier. We measure our performance against benchmarks and metrics using statistical analysis and drive operational excellence through continuous improvement.
Portfolio and Cost Management. We will continue to build upon our strengths as an industrial specialty chemical company through organic growth that will maximize our global industrial specialty chemical portfolio. We are intent that any Chemtura portfolio business must have sustainable competitive advantages in the industries and applications it serves and can leverage its technology, scale and customer intimacy required to drive profitable growth at returns in excess of its cost of capital. The ability to leverage global demographic and technology trends combined with our in-depth knowledge and expertise will provide our portfolio businesses with the “right to play” in their chosen applications. We will continue to drive value-accreting growth fueled by our focus on innovation and the faster-growing regions. We will continue to increase the differentiation of our products while pruning or exiting under-performing products, driving continuous improvement and managing costs.
Our Business and Segments
Information as to the sales, operating income, depreciation and amortization, assets and capital expenditures attributable to each of our business segments during each of our last three fiscal years, as well as certain geographic information, is set forth in Note 16 - Business Segments in our Notes to Consolidated Financial Statements.
The table below illustrates the Industrial Performance Products and Industrial Engineered Products segments net sales for the year ended December 31, 2016 as well as these segment’s major products, end-use markets and brands.

5


 
 
Industrial 
 
Industrial
 
 
Performance Products
 
Engineered Products
 
 
 
 
 
 
 
 
2016 Net Sales
 
$823 million
 
 
 
$721 million
 
 
 
 
 
 
 
 
 
Key Products
 
• Synthetic Lubricants
 
• Lubricant Additives
 
• Brominated Performance Products
• Fumigants
 
 
• Synthetic Basestocks
 
• Urethanes
 
• Flame Retardants
• Organometallics
 
 
• Specialty Greases
 
 
 
 
 
 
 
 
 
 
 
 
 
Major End-Use Markets
 
 
 
 
 
 
 
 
 
• Adhesives
 
• General Industrial
 
• Agriculture
• Pharmaceuticals
 
 
• Automotive
 
• Lubricants
 
• Building and Construction
• Polymerization Catalysts
 
 
• Aviation
 
• Marine
 
• Coatings
• Energy
 
 
• Building and Construction
 
• Mining
 
• Consumer Durables
    - Mercury Control
 
 
• Coatings
 
• Packaging
 
• Electronics
    - Oilfield
 
 
• Consumer Products
 
• Refrigeration
 
• Furniture
    - Photovoltaic
 
 
• Energy
 
• Sealants
 
• Fine Chemical
• Paints and Coatings
 
 
 
 
 
 
• Fumigants
  Polymerization
 
 
 
 
 
 
• Oil and Gas Exploration
• Transportation
 
 
 
 
 
 
 
 
Key Brands
 
 
 
 
 
 
 
 
 
• Adiprene®
 
• Naugalube®
 
• Axion®
• Ongard®
 
 
• Anderol®
 
• Reolube®
 
• DayStar TM
• Pyrobloc®
 
 
• Durad®
 
• Royco®
 
• Emerald Innovation®
• Reofos®
 
 
• Everest®
 
• Synton®
 
• Firemaster®
• Smokebloc®
 
 
• Fomrez®
 
• Vibrathane®
 
• Fyrebloc™
• Thermoguard®
 
 
• Hatcol®
 
• Witcobond®
 
• GeoBrom®
• Timonox®
 
 
• Hybase®
 
 
 
• Kronitex®
 
 
 
• Lobase®
 
 
 
• Meth-o-Gas®
 

Industrial Performance Products
The Industrial Performance Products segment (also known by the acronym "IPP") develops, manufactures and markets specialty performance chemicals, formulations and polymers. Industrial Performance Products include:
synthetic base-stocks and petroleum additives that enable engine and machine protection through friction reduction, thermal and oxidative stabilization, detergency, corrosion inhibition, and wear protection in transportation and industrial lubricating fluids and greases;
specialty synthetic finished lubricants and greases for aviation, marine, refrigeration, power generation and general industrial applications;
thermoset and thermoplastic urethane polymers engineered to provide superior performance properties in a broad range of industrial and recreational applications; and
polyester polyols for cast polyurethane pre-polymers, flexible polyurethane foams and water-based polyurethane dispersions used in various types of coatings such as wood floor finishes, glass fiber coatings and textile treatments.

These products are supplied to our customers globally through diverse sales channels including selected distribution channel partners .
The Industrial Performance Products segment had net sales of $823 million for 2016 , $886 million for 2015 and $987 million for 2014 . This segment represented 50% , 51% and 45% of our total net sales in 2016 , 2015 and 2014 , respectively. The major product offerings of this segment are described below and in the table above.
Petroleum Additives
We are a global manufacturer and marketer of high-performance base-stocks, additive components, finished synthetic lubricants and specialty greases. Our position along multiple parts of the value chain provides us with unique insight into industry needs and requirements, enabling us to design and develop differentiated solutions for our “blue-chip” customer base.

6


Our specialty synthetic lubricant base-stocks, including high-viscosity SYNTON® polyalphaolefins, REOLUBE® phosphate esters, and a broad portfolio of HATCOL® esters, are used in automotive, aviation, refrigeration, hydraulic systems and various industrial applications. These synthetic base-stocks offer performance benefits versus non-synthetic base-stocks, especially when operating under extreme conditions of temperature or load. Benefits of our synthetic base-stocks include improved thermal stability, oxidative stability, and lower volatility, providing extended drain intervals and reduced oil consumption. Additionally, REOLUBE® phosphate esters provide fire-resistant capability that allows the safe operation of equipment under high-risk situations, such as in nuclear power plants.
Our specialty additive components, such as NAUGALUBE® alkylated diphenylamine antioxidants, play a critical role in meeting rising regulatory mandated automotive standards for engine performance and emissions as well as consumer demand for improved fuel economy and longer service intervals. Our oil-soluble HYBASE® and LOBASE® calcium sulfonate surfactants enable lubricants to keep car, truck and ship engines clean with minimal wear by providing detergency and corrosion protection properties. Additionally, we market a specially-developed overbased magnesium sulfonate detergent to prevent corrosion in turbines which burn heavy fuels for electrical power generation.
Our ANDEROL® and ROYCO® branded specialty and synthetic finished lubricants come with extensive original equipment manufacturer approvals for the aerospace & defense and industrial markets. Additionally, ROYCO® lubricants are approved under the specifications of U.S. military agencies and approving bodies including the US Department of Defense and the Society of Automotive Engineers. We manufacture and sell calcium sulfonate specialty greases and phosphate ester-based fluids for extreme temperature applications, thereby increasing machine durability under harsh conditions. In addition to our branded lubricants, we also manufacture private label finished lubricants for key customers.
Urethanes
We are a leading global supplier of a broad range of low-free monomer and high-performance conventional cast urethane pre-polymers, thermoplastic polyurethanes, custom curatives and urethane chemicals serving a variety of industries. We serve our customers in each region with a dedicated technical team, which, together with our product and formulation development capabilities, allow us to differentiate ourselves in these markets by tailoring our products to the specialized needs of each customer application.
Cast polyurethane products produced from our ADIPRENE® and VIBRATHANE® urethane pre-polymers offer high durability, abrasion resistance, cut resistance, high temperature resistance and chemical resistance for performance-oriented applications. These characteristics allow us to market our urethane pre-polymers for customer applications where such performance qualities are critical, such as oil field pipeline cleaning pigs, industrial printing rolls, mining machinery, semiconductor polishing pads, solid industrial tires and wheels, sporting goods and roller coaster wheels.
Our ULTRALAST® thermoplastic polyurethane ("TPU") polymers can be used in a variety of high performance applications in the oil and gas, mining, construction, and sports equipment industries. ULTRALAST® TPU offers not only superior dynamic properties and longer component life in harsh environments, but also certain processing advantages for our customers.
Our urethane chemicals business consists primarily of two product lines. FOMREZ® polyester polyols serve as raw materials for our pre-polymer line of products and are also utilized in industrial applications such as flexible foam for seating.WITCOBOND® polyurethane dispersions serve a more diverse customer base and are primarily utilized for glass fiber sizing, wood floor coatings and ballistics protection applications.
Industrial Engineered Products
We are a global leader in manufacturing and selling engineered specialty chemicals utilized in the plastics, agriculture, fine chemicals, oil and gas, building and construction, insulation, electronics, mercury control, solar energy, pharmaceutical and automotive industries. Our products include catalyst components, surface treatments, flame retardants and an extensive bromine based product line used as agricultural and pharmaceutical intermediates, completion fluids for oil and gas extraction and mercury control products for coal fired power stations. These products are sold across the entire value chain ranging from direct sales to monomer producers, polymer manufacturers, compounders and fabricators, fine chemical and pharmaceutical manufacturers, photovoltaic panel and LED producers, oilfield service and electricity generation companies to industry distributors.
The Industrial Engineered Products segment had net sales of $721 million for 2016 , $722 million for 2015 and $800 million for 2014 . This segment represented 44% , 41% and 37% of our total net sales in 2016 , 2015 and 2014 , respectively. The major product offerings of this segment are described below and in the table above.

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Great Lakes Solutions
Great Lakes Solutions (also known by the acronym "GLS") is a leading global manufacturer and marketer of bromine, bromine intermediates and flame retardant products and solutions.  We deliver sustainable value to our customers and shareholders through industry diversification, fire safety advocacy and business excellence.  Our flame retardant products are used in applications such as electronic components, electrical enclosures and building products, including insulation and furniture foam, and automotive, while bromine and bromine intermediates are used in the manufacture of a wide variety of industrial and consumer products and energy producing industries.
Great Lakes Solutions is a leading global producer of safe and cost-efficient flame retardants, which reduce or eliminate the flammability of a wide variety of combustible materials. Our additives help stop fire before it starts by resisting ignition and slowing the rate of combustion and are used in a wide variety of applications, including flexible and rigid foams, fabrics and furniture, auto interiors and under the hood, circuit boards and electrical connectors, computer cabinetry and wiring in building and construction.  We work tirelessly to advocate for increased fire safety standards in new and developing economies and, for more than 40 years, we have helped our customers by providing the broadest portfolio of flame retardant products and solutions. We continue to offer new products with exceptional performance along with environmentally friendly characteristics leading to enhanced long-term sustainability.  Our leading products include the Emerald Innovation ® Series, Firemaster® bromine-based flame retardants; Kronitex®, Reofos® phosphorus-based flame retardants; Fyrebloc™ flame retardants; Fire Shield® LSFR, Ongard®, Oncor™, Pyrobloc®, Smokebloc®, Thermoguard® / Timonox® / Trutint® antimony-based flame retardants/synergists; and PetCat® antimony-based catalysts.
Great Lakes Solutions is one of the world’s leading manufacturers of bromine and bromine intermediates which are utilized in many industries including agrochemicals, pharmaceuticals, fine chemicals, butyl rubber, polymers and biocides. Bromine and bromine based intermediates serve as building blocks for developing and engineering highly complex organic molecules that meet specific performance, environmental and quality requirements.  Our expertise in bromine and bromine based chemicals, both in the lab and in full scale production, is built on a foundation of over 60 years of innovation and continuous improvement. Our state of the art Naugatuck Research Campus is staffed by a team of highly experienced scientists skilled in a wide array of synthetic methods and chemical manufacturing processes.  We also operate multi-purpose, flexible pilot facilities that enable us to readily scale up new products and processes from grams to tonnes before the commitment to full scale production. While primarily focused on providing the highest quality and most reliable bromine and brominated intermediate products, our technology team also provides custom synthesis and process development services to customers seeking a development partner.  With access to the world's two main sources of bromine and a modern bromine ISO tank fleet with in-house maintenance capability, Great Lakes Solutions is positioned as the supplier of choice.
Great Lakes Solutions' high quality, solids-free clear brine fluids are an important part of oil exploration and development which are used in the preparation of well equipment for production including insertion of liners, screens, packers and other equipment. Bromide fluids are unique in that they are high density fluids that are suitable for deepwater production and also for high temperature and high pressure oil and gas formations. They allow for well pressure control and help to protect the formation so that oil and gas production is both efficient and economical. Our specialty brine fluids are available in a wide range of densities to meet the unique pressure characteristics of each well and meet the stringent requirements of the oil and gas industry. Bromide fluids are also used for deepwater fracturing operations in order to provide the necessary pressure in the well to successfully fracture the geological formation area that supplies oil and gas to the wellbore so that higher volumes flow to the production piping.
Rounding out our portfolio, our GeoBrom® line of bromine and bromine derivative products is another example of environmentally friendly innovation where we deploy our technology expertise to provide a solution to controlling mercury emissions from coal-fired power stations.  Great Lakes Solutions has a strong position in the United States for bromine production based on access to quality brine resources in areas of South Arkansas which can be economically developed to manufacture high quality bromine for sale to customers or for use to manufacture products like GeoBrom® mercury control solutions.
Great Lakes Solutions is a global product line with expanding footprint and services.  Through our strategic geographic and operational initiatives, we have significantly expanded our shipping container fleet capabilities.  We are backwardly integrated to brine, a primary source of bromine, and since 2009 we have invested a significant amount of capital in infrastructure to redeploy our assets to produce new sustainable innovative brominated flame retardants and increase the efficiency and reliability of our plants and pipelines.  Great Lakes Solutions is well-positioned to support not only growth of our traditional industry segments but also to provide security of supply with expansion capability to our mercury control customers.  Operational excellence initiatives are being designed to bring an improved, cost-competitive and service-oriented footprint to our customers globally.

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Organometallics
Organometallics are a special group of metals containing organic chemicals which play a significant role in a variety of industrial applications. Organometallics are essential catalyst components used to initiate the polymerization reactions that transform monomers into polymers and cure certain paints. They are also used as precursors in glass coatings, metal organic chemical vapor deposition ("MOCVD") agents in the production of semiconductors, LEDs and photovoltaic panels, as well as reagents used in the production of pharmaceutical intermediates.
Building on more than 50 years’ experience, Organometallics (also known as "Organometallic Specialties" or by the acronym "OMS") continues to enhance our portfolio of world-class products and renew our commitment to delivering customer value. Today our OMS business is a leaner and stronger global partner for the development, manufacture and marketing of an impressive array of specialty organometallic products.
Leveraging our history of strength, OMS is poised for a future of growth in a range of high-performance products that serve the fastest growing organometallics applications, such as single-site catalyst systems, high-brightness LEDs and semiconductors, photovoltaics (solar panels), pharmaceuticals and fine chemicals.
PREVIOUSLY DIVESTED BUSINESSES
Chemtura AgroSolutions Business
In November 2014, we sold our Chemtura AgroSolutions business to Platform Specialty Products Corporation (“Platform”). Under the terms of the sale, we retained most of the property, plant and equipment used to manufacture products for the Chemtura AgroSolutions business and will continue to manufacture products for Platform under several supply agreements and a tolling agreement (collectively, the “supply agreements”) with minimum terms between two and four years. The supply agreements include contractual obligations to continue to supply for a period of up to 2 years after the termination of the supply agreement. The Agrochemical Manufacturing segment represents the results of operations for the Chemtura AgroSolutions business prior to the sale and, since the date of the sale, the ongoing operations under the supply agreements. Contemporaneous with the sale, we no longer market the Chemtura AgroSolutions business products to third parties.
Information related to the sale of our Chemtura AgroSolutions business and financial information related to the Agrochemical Manufacturing segment can be found in Note 2 - Mergers and Divestitures and Note 16 - Business Segments in our Notes to Consolidated Financial Statements.
Divestitures Reported as Discontinued Operations
In 2013, we sold our subsidiaries that constituted our Consumer Products business to KIK Custom Products Inc. (“KIK”) and we sold our Antioxidant business to SK Blue Holdings, Ltd. (“SK”), an affiliate of SK Capital Partners III, L.P. During 2014 and 2015, we continued to finalize and complete certain closing terms under the sale agreements, including the customary settlement of working capital.
For further discussion of these divestitures, see Note 2 - Mergers and Divestitures in our Notes to Consolidated Financial Statements.
Sources of Raw Materials
Hydrocarbon-based and inorganic chemicals constitute the majority of the raw materials required to manufacture our products. These materials are generally available from a number of sources. We use significant amounts of chemicals derived from ethylene, propylene, benzene, iso-and, n-butane and n-Octene as well as ethyl and butylchlorides, palm and coconut oil, methanol, phosphorus and urea. In addition, chlorine, caustic, other petrochemicals and metals like tin, aluminum and zinc represent some key materials used in our chemical manufacturing processes. Major requirements for key raw materials are purchased typically pursuant to multi-year contracts. Large increases in the cost of such key raw materials, as well as natural gas, which powers some of our key production facilities, could adversely affect our operating margins if we are not able to pass the higher costs on to our customers through higher sales prices. While temporary shortages of raw materials we use may occur occasionally, key raw materials have generally been available. However, there can be no assurance that unforeseen developments (including markets and political and regulatory conditions) will not affect our raw material supplies, their continuing availability and their cost. For additional information related to these risks, see Item 1A. - Risk Factors.

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Seasonal Business
No material portion of our Industrial Performance Products or Industrial Engineered Products business is significantly seasonal.
Employees
We had approximately 2,500 full time employees at December 31, 2016 .
Backlog
We do not consider backlog to be a significant indicator of the level of future sales activity. In general, we do not manufacture our products against a backlog of orders. Production and inventory levels are based on the level of incoming orders as well as projections of future demand. Therefore, we believe that backlog information is not material to understanding our overall business and should not be considered a reliable indicator of our ability to achieve any particular level of sales or financial performance.
Competitive Conditions
The breadth of our product offering provides multiple channels for growth and mitigates our dependence on any one market or end-use application. We sell our products in more than 70 countries. This worldwide presence reduces our exposure to any one country’s or region’s economy although a majority of our sales are in North America and Europe.
We have a broad customer base and believe that our products, many of which we customize for the specific needs of our customers, allow us to enhance customer loyalty and attract customers that value product innovation and reliable supply.
Product performance, quality, price, and technical and customer service are all important factors in competing in substantially all of our businesses.
We face significant competition in many of the industries in which we operate due to the trends toward global expansion and consolidation by competitors. Many of our existing competitors are larger than we are and may have more resources and better access to capital markets for continued expansion or new product development than we do. Some of our competitors also have a greater product range, are more vertically integrated or have better distribution capability than we do for specific products or geographical areas.
Research and Development
All of our businesses conduct research and development activities to increase competitiveness. Our businesses conduct research and development activities to develop new and optimize existing production technologies, as well as to develop commercially viable new products and applications while also maintaining existing product registrations required by regulatory agencies and customers around the world. Our research and development expense totaled $21 million in 2016 , $20 million in 2015 and $36 million in 2014 .
Intellectual Property and Licenses
We attach great importance to patents and trademarks in order to protect our investment in research and development, manufacturing and marketing. Our policy is to seek wide protection for significant products and process developments on our major applications. We also seek to register trademarks extensively as a means of protecting the brand names of our products.
We have approximately 800 United States and foreign granted patents and pending patent applications and approximately 1,000 United States and foreign registered and pending trademarks. Patents, trademarks, trade secrets in the nature of know-how, formulations, and manufacturing techniques assist us in maintaining the competitive position of certain of our products. Our intellectual property is of particular importance to a number of specialty chemicals we manufacture and sell. However, we do business in countries where protection may be limited and difficult to enforce. We are licensed to use certain patents and technology owned by other companies, including some foreign companies, to manufacture products complementary to our own products, for which we pay royalties in amounts not considered material, in the aggregate, to our consolidated results.
Neither our business as a whole nor any particular segment is materially dependent upon any one particular patent, trademark, copyright or trade secret.

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Regulatory Matters
Chemical companies are subject to extensive environmental laws and regulations concerning, among other things, emissions to the air, discharges to land, surface, subsurface strata and water and the generation, handling, storage, transportation, treatment and disposal of hazardous waste and other materials. Chemical companies are also subject to other federal, state, local and foreign laws and regulations regarding health and safety matters.
Environmental Health and Safety Regulation - We believe that our business, operations and facilities are being operated in substantial compliance, in all material respects, with applicable environmental, health and safety laws and regulations, many of which provide for substantial fines and criminal sanctions for violations. The ongoing operations of chemical manufacturing plants, however, entail risks in these areas and there can be no assurance that material costs or liabilities will not be incurred. In addition, future developments of environmental, health and safety laws and regulations and related enforcement policies, could bring into question the handling, manufacture, use, emission or disposal of substances or pollutants at facilities we own, use or control. These developments could involve potential significant expenditures in our manufacture, use or disposal of certain products or wastes. To meet changing permitting and regulatory standards, we may be required to make significant site or operational modifications, potentially involving substantial expenditures and reduction or suspension of certain operations. In 2016, we incurred $9 million of costs for capital projects and $56 million for operating and maintenance costs related to environmental, health and safety programs at our facilities. In 2017, we expect to incur approximately $12 million of costs for capital projects and $54 million for operating and maintenance costs related to environmental, health and safety programs at our facilities. During 2016, we paid $8 million to remediate previously utilized waste disposal sites and current and past facilities. We expect to spend approximately $13 million during 2017 to remediate such waste disposal sites and current and former facilities.


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Item 1A: Risk Factors
The most significant risks that could materially and adversely affect our financial condition, results of operations or cash flows include, but are not limited to, the factors described below. Except as otherwise indicated, these factors may or may not occur and we cannot predict the likelihood of any such factor occurring.
The proposed Merger may not be completed on a timely basis, or at all, and the failure to complete the Merger could adversely affect our business and the market price of our common stock.
On September 25, 2016, we entered into the Merger Agreement with Lanxess and Merger Subsidiary. Completion of the Merger is subject to the satisfaction of various conditions, including, among other things, the receipt of necessary antitrust and regulatory approvals and the accuracy of representations and warranties made in the Merger Agreement. Failure to complete the Merger could adversely affect our business and the market price of our common stock in a number of ways, including the following:
If the Merger is not completed, and there are no other parties willing and able to acquire Chemtura for consideration that is equivalent or more attractive than that in the Merger Agreement, on terms acceptable to us, our stock price may decline.
We have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed Merger, for which we will have received little or no benefit if the Merger is not completed. Many of these fees and costs will be payable by us even if the Merger is not completed and may relate to activities that we would not have undertaken other than to complete the Merger.

The announcement of the proposed Merger could adversely affect our business, financial condition and results of operations.
The announcement of the proposed Merger could cause disruptions in and create uncertainty surrounding our ongoing business operations, which could have an adverse effect on our financial condition and results of operations, regardless of whether the Merger is completed. These risks to our business include the following, all of which could be exacerbated by a delay in the completion of the Merger:
the diversion of significant management time and resources towards the completion of the Merger;
the impairment of our ability to retain and hire key personnel, including our senior management;
the interim operating restrictions in the Merger Agreement that limit our ability to operate our business;
difficulties maintaining relationships with customers, suppliers and others with whom we conduct business; and
potential litigation relating to the Merger and the costs related thereto.

We operate on an international scale and are exposed to risks in the countries in which we have significant operations or interests.
We are dependent, in large part, on the economies of the countries in which we manufacture and market our products. Of our 2016 net sales, 43% were to customers in the United States and Canada, 31% to Europe, 24% to the Asia/Pacific region and 2% to Latin America. As such, we are subject to risks inherent in multinational operations. Those risks include:
compliance with U.S. laws affecting operations outside of the United States, such as Office of Foreign Assets Control trade sanction regulations and anti-boycott regulations;
compliance with anti-corruption laws, including Foreign Corrupt Practices Act and U.K. Bribery Act;
compliance with antitrust and competition laws, data privacy laws, and a variety of other local, national and multi-national regulations and laws in multiple regimes;
changes in tax laws, interpretation of tax laws and tax audit outcomes;
fluctuations or devaluations in currency values, especially in emerging markets;
changes in capital controls, including currency exchange controls, government currency policies or other limits on our ability to import raw materials or finished product or repatriate cash from outside the United States;
changes in local regulations and laws, the uncertainty of enforcement of remedies in foreign jurisdictions, and foreign ownership restrictions and the potential for nationalization or expropriation of property or other resources;
discriminatory or conflicting fiscal policies;
increased sovereign risk, such as default by or deterioration in the economies and credit worthiness of local governments;
varying abilities to enforce intellectual property and contractual rights;

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greater risk of uncollectible accounts and longer collection cycles;
design and implementation of effective control environment processes across our diverse operations and employee base; and
imposition of more or new tariffs, quotas, trade barriers, and similar restrictions on our sales or regulations, taxes or policies that might negatively affect our sales.
In addition, political and economic changes or volatility, geopolitical regional conflicts, terrorist activity, political unrest, civil strife, acts of war, public corruption, expropriation and other economic or political uncertainties could interrupt and negatively affect our business operations or customer demand. A slowdown in economic growth or high unemployment in some emerging markets could constrain consumer spending, and declining consumer purchasing power could adversely impact our profitability. Continued instability in the banking and governmental sectors of certain countries in the European Union and in emerging markets could adversely affect us. All of these factors could result in increased costs or decreased revenues, and could materially and adversely affect our product sales, financial condition, results of operations and cash flows.
Increases in the price of the raw materials or energy utilized for our products may have a material adverse effect on our operating results.
We purchase significant amounts of raw materials and energy for our businesses. The cost of these raw materials and energy, in the aggregate, represents a substantial portion of our operating expenses.  The prices and availability of the raw materials we utilize vary with market conditions and may be highly volatile.  From time to time in the past, we have experienced significant cost increases in purchases of raw materials and energy which has had a negative impact on our operating results.
Although we have attempted, and will continue to attempt, to match increases in the prices of raw materials or energy with corresponding increases in sales prices for the products produced with these materials, we may not be able to immediately raise product prices, if at all.  Ultimately, our ability to pass on increases in the cost of raw materials or energy to customers is highly dependent upon market conditions and contractual terms. Specifically, there is a risk that raising prices charged to our customers could result in a loss of sales volume.  In the past, we have not always been able to pass on increases in the prices of raw materials and energy to our customers, in whole or in part, and there will likely be periods in the future when we will not be able to pass on these price increases. Reactions by our customers and competitors to our price increases could cause us to reevaluate and possibly reverse such price increases, which would negatively affect operating results.
Any disruption in the availability of the raw materials or energy utilized for our products may have a material adverse effect on our operating results.
Across our businesses, there are a limited number of suppliers for some of our raw materials and utilities and, in some cases, the number of sources for and availability of raw materials and utilities is specific to the particular geographic region in which a facility is located. It is also common in the chemical industries for a facility to have a sole, dedicated source for its utilities, such as steam, electricity and gas. Having a sole or limited number of suppliers may result in our having limited negotiating power, particularly during times of rising raw material costs. Having a sole source supplier also increases the vulnerability and severity of disruptions in the supply of raw materials. Even where we have multiple suppliers for a raw material or utility, these suppliers may not make up for the loss of a major supplier. Moreover, any new supply agreements we enter into may not have terms as favorable as those contained in our current supply agreements. For some of our products, the facilities or distribution channels of raw material and utility suppliers and our production facilities form an integrated system, which limits our ability to negotiate favorable terms in supply agreements.
In addition, as part of an increased trend towards vertical integration in the chemicals industry, other chemical companies are purchasing raw material suppliers. This is further reducing the available suppliers for certain raw materials.
If one or more of our significant raw material or utility suppliers were unable to meet its obligations under present supply arrangements, raw materials may become unavailable within the geographic area from which they are now sourced, or supplies may otherwise be constrained or disrupted, our businesses could be forced to incur increased costs for our raw materials or utilities, which would have a direct negative impact on plant operations and may adversely affect our financial condition, results of operations and cash flows.
Production facilities are subject to operating risks that may adversely affect our financial condition, results of operations and cash flows.
We are dependent on the continued operation of our production facilities.  Such production facilities are subject to hazards inherent in the manufacturing and marketing of chemical products, which include chemical spills, pipeline or storage tank leaks

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and ruptures, discharges or releases of toxic or hazardous substances or gases and exposure to hazardous substances related to the manufacturing, storage and transportation of dangerous chemicals.
Disruptions at any of our facilities could be caused by maintenance outages; prolonged power failures or reductions; explosions or fires; a breakdown, failure or substandard performance of any of our equipment; the effect of noncompliance with material environmental requirements or permits; disruptions in the transportation infrastructure, including railroad tracks, ports, bridges, tunnels or roads; fires, floods, earthquakes, hurricanes or other catastrophic disasters; an act of terrorism; cyber-attack on operating systems; or other operational problems.
Any prolonged disruption in operations at any of our facilities could cause significant lost production. Losses related to any such disruption in operations may be either uninsured or underinsured. Moreover, we could incur significantly higher costs and longer lead times associated with distributing our products to our customers during the time that it takes for us to reopen or replace a damaged facility. If any of these events were to occur, it could cause our customers to seek other suppliers and could have a material adverse effect on our business, financial condition, operating results and cash flows.
Many potential hazards can cause bodily injury and loss of life, severe damage to or destruction of property and equipment and environmental damage, and may result in suspension of operations and the imposition of civil or criminal penalties and liabilities. Furthermore, we are subject to present and future claims with respect to workplace exposure, including workers compensation, exposure of persons located nearby our premises as well as other matters. In addition, we are subject to various claims and litigation in the ordinary course of business.
We maintain property, business interruption, products liability and casualty insurance policies which we believe are in accordance with customary industry practices, as well as insurance policies covering other types of risks, but we are not fully insured against all potential hazards and risks incident to our business. Each of these insurance policies is subject to customary exclusions, deductibles and coverage limits, in accordance with industry standards and practices. As a result of market conditions, premiums and deductibles for certain insurance policies can increase substantially and, in some instances, certain insurance may become unavailable or available only for reduced amounts or terms of coverage. If we were to incur a significant liability for which we were not fully insured, it could have a material adverse effect on our business, results of operations, financial condition and liquidity.
Maintenance, expansion and refurbishment of our facilities or the construction of new facilities involve significant risks.
Our facilities may require periodic upgrading and improvement. Any unexpected operational or mechanical failure, including failure associated with breakdowns and forced outages, could reduce our facilities' production capacity below expected levels which would reduce our revenues. Unanticipated capital expenditures associated with maintaining, upgrading or repairing our facilities may also reduce profitability.
If we make any major modifications to our facilities, we may be required to install the best available control technology or to achieve the lowest achievable discharge or emissions rates as such terms are defined under applicable law. Any such modifications likely would result in substantial additional capital expenditures and may prolong the time necessary to bring the facility on line. We may also choose to refurbish or upgrade our facilities based on our assessment that such activity will provide adequate financial returns. However, such activities require time for development and capital expenditures before commencement of commercial operations, and key assumptions underpinning a decision to make such an investment may prove incorrect, including assumptions regarding construction costs and timing which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Finally, the construction of new manufacturing facilities entails a number of risks, including the ability to begin production within the cost and timeframe estimated and to attract a sufficient number of skilled workers to meet the needs of the new facility. Additionally, our assessment of the projected benefits associated with the construction of new manufacturing facilities is subject to a number of estimates and assumptions, which in turn are subject to significant economic, competitive and other uncertainties that are beyond our control. If we experience delays or increased costs, our estimates and assumptions are incorrect, or other unforeseen events occur, our business, ability to supply customers, financial condition, results of operations and cash flows could be adversely impacted.
Failure to develop and market new products and manage product life cycles could impact our competitive position and have an adverse effect on our business, financial condition and results of operations.
Our operating results are largely dependent on our assessment and management of our portfolio of current, new and developing products and our ability to bring those products to market. We plan to grow earnings by focusing on developing markets and

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solutions to meet increasing demand for products. Our ability to execute this strategy and our other growth plans successfully could be adversely affected by difficulties or delays in product development such as the inability to identify viable new products, successfully complete research and development, obtain relevant regulatory approvals, effectively manage our manufacturing process or costs, obtain intellectual property protection, or gain market acceptance of new products and services. Because of the lengthy and costly development process, technological challenges and intense competition, we cannot assure you that any of the products we are currently developing, or could begin to develop in the future, will achieve commercial success. Further, sales of our new products could replace sales of some of our current products, offsetting the benefit of even a successful product introduction. We must also successfully anticipate and adapt our products to the changing requirements of our customers. If we do not keep our products current with our customers’ needs, they may seek alternative suppliers. A failure to develop commercially successful products, to develop additional uses for existing products or to keep existing products at the cutting edge of product performance, could materially adversely affect our business, financial condition, results of operations and cash flows.
The cyclical nature of the chemicals industry causes significant fluctuations in our results of operations and cash flows.
Our historical operating results reflect the cyclical and volatile nature of the supply and demand balance of the chemicals industry.  The chemicals industry has experienced alternating periods of inadequate capacity and supply, allowing prices and profit margins to increase, followed by periods when substantial capacity is added, resulting in oversupply, overcapacity, corresponding declining utilization rates and, ultimately, declining prices and profit margins.  Some of the markets in which our customers participate, such as the automotive, aviation, electronics, energy and building and construction industries, are cyclical in nature, thus posing a risk to us. These markets are highly competitive, are driven to a large extent by end-use markets and may experience overcapacity, all of which may affect demand for and pricing of our products and result in volatile operating results and cash flows over our business cycle.  Future growth in product demand may not be sufficient to utilize current or future capacity.  Excess industry capacity may continue to depress our volumes and margins on some products.  Our operating results, accordingly, may be volatile as a result of these changes in industry capacity.
Failure to accurately forecast market and customer trends for our products could adversely affect our business and financial results or operating efficiencies.
Our ability to meet the product demands of our customers require that we accurately forecast market and customer trends for our products. If we are unable to accurately forecast market and customer trends for our products, our revenues and operating results could be adversely affected.
We may experience excess capacity with respect to the products we have agreed to supply to the purchaser of our Chemtura AgroSolutions business under the post-closing supply agreements. If such supply agreements are terminated at the end of their minimum contract terms and we are unable to find additional production to fill the vacated capacity, we may experience declining utilization rates which could have an adverse impact on our operating results.
Decline in general economic conditions and other external factors may adversely impact our operations.
External factors, including domestic and global economic conditions, international events and circumstances, competitor actions and government regulation, are beyond our control and can cause fluctuations in demand and volatility in the prices of raw materials and other costs that can intensify the impact of economic cycles on our operations. We produce a broad range of products that are used as additives and components in other products in a wide variety of end-use markets. As a result, our products may be negatively impacted by supply and demand instability in other industries and the effects of that instability on supply chain participants. Economic and political conditions in countries in which we operate may also adversely impact our operations. For example, some countries in Europe have been particularly adversely affected by rising government deficits and debt levels, which require certain countries to adopt deflationary fiscal and monetary policies that could negatively affect our businesses. Although our diversified product portfolio and international presence lessens our dependence on a single market and exposure to economic conditions or political instability in any one country or region, our businesses are nonetheless sensitive to changes in economic conditions. For example, in 2016 , 24% of our net sales were from the Asia/Pacific region. To further our growth strategies in the Asia/Pacific region, we completed the construction of a manufacturing facility in Nantong, People's Republic of China. An economic downturn in China could negatively impact our growth strategies in the Asia/Pacific region. Financial crises and economic downturns anywhere in the world could adversely affect our results of operations, cash flows and financial condition.

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Competition may adversely impact our results of operations.
We face significant competition in many of the markets in which we operate due to the trend toward global expansion and consolidation by competitors.  Many of our existing competitors are larger than we are and may have more resources and better access to capital markets to facilitate continued expansion or new product development. Additionally, some of our competitors have a greater product range and distributional capability than we do for certain products and in specific regions. We also expect that we will continue to face new competitive challenges as well as additional risks inherent in international operations in developing regions. We are susceptible to price competition in certain markets in which customers are sensitive to changes in price. At the same time, we also face downward pressure on prices from industry overcapacity, lower cost structures in certain businesses and lower energy and raw material prices. The further use and introduction of generic and alternative products by our competitors may result in increased competition and could require us to reduce our prices and take other steps to compete effectively. These measures could negatively affect our financial condition, results of operations and cash flows.  Alternatively, if we were to increase prices in response to this competition, the reactions of our competitors and customers to such price increases could cause us to reevaluate and possibly reverse such price increases or risk a loss in sales volumes.
The loss of or a significant reduction in purchases by our largest customers could adversely affect our operations.
While some of our largest customers have entered into supply contracts with us, these customers may not continue to purchase the same levels of our products in the future due to a variety of reasons. Some of our major customers could decide to purchase the products we provide to them from other third-party providers. If any of our major customers substantially reduces or altogether ceases purchasing our products, depending on market conditions, we could suffer a material adverse effect on our business, financial condition, results of operations and cash flows.
Our products are subject to extensive government scrutiny and regulation.
We are subject to regulation by federal, state, local and foreign government authorities. In some cases, we need government approval of our products, manufacturing processes and facilities before we may sell certain products. Many products are required to be registered with the U.S. Environmental Protection Agency (the "EPA") and with comparable government agencies in the European Union and elsewhere. We are also subject to ongoing reviews of our products, manufacturing processes and facilities by government authorities, and must also produce product data and comply with detailed regulatory requirements.
The REACh legislation requires chemical manufacturers and importers in the European Union to demonstrate the safety of the chemical substances contained in their products via a substance registration process. The registration process requires capital and resource commitments to compile and file comprehensive chemical dossiers regarding the use and attributes of each chemical substance manufactured or imported by Chemtura and requires us to perform chemical safety assessments. Successful registration under REACh is a functional prerequisite to the continued sale of our products in the European Union market. Thus, REACh and other similar regulations present a risk to the continued sale of our products in the European Union should we be unable or unwilling to complete the registration process or if the European Union seeks to ban or materially restrict the production or importation of the chemical substances used in our products.
The Frank R. Lautenberg Chemical Safety for the 21 st Century Act (the "Lautenberg Act"), signed into law in June 2016, amends existing chemical safety laws it the United States, giving the EPA significant new powers in the regulation of not only new but also existing chemicals. Under the Lautenberg Act, the EPA has a mandate to review chemicals that are on the Toxic Substances Control Act Inventory to assess whether they present an unreasonable risk, and the EPA is authorized to impose restrictions on its use if it determines they do. We may have to perform chemical safety assessments in conjunction with the EPA reviews, and we may find that the availability of some of the chemicals we use in our processes is restricted or eliminated over time.
New or stricter laws and regulations may be introduced that could result in additional compliance costs and prevent or inhibit the development, manufacture, distribution and sale of our products. Such outcomes could adversely impact our results of operations, financial position and cash flows.
Environmental, health and safety regulation matters could have a negative impact on our results of operations and cash flows.
We are subject to extensive federal, state, local and foreign environmental, health and safety laws and regulations concerning, among other things, emissions in the air, discharges to land, surface, subsurface strata and water and the generation, handling, storage, transportation, treatment and disposal of hazardous waste and other materials.  Our operations bear the risk of

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violations of those laws and sanctions for violations such as clean-up and removal costs, long-term monitoring and maintenance costs, costs of waste disposal, natural resource damages and payments for property damage and personal injury.  Although it is our policy to comply with such laws and regulations, it is possible that we have not been or may not be at all times in compliance with all of these requirements.
Additionally, these requirements, and enforcement of these requirements, may become more stringent in the future.  The ultimate additional cost of compliance with any such requirements could be material.  Non-compliance could subject us to material liabilities such as government fines or orders, criminal sanctions, third-party lawsuits, remediations and settlements, the suspension, modification or revocation of necessary permits and licenses, or the suspension of non-compliant operations.  We may also be required to make significant site or operational modifications at substantial cost or pay remediation costs at current or former facilities.  In addition, various federal and state statutes impose strict liability upon various classes of persons with respect to costs associated with the investigation and remediation of waste disposal sites. Future regulatory or other developments could also restrict or eliminate the use of, or require us to make modifications to, our products, packaging, manufacturing processes and technology, which could have a significant adverse impact on our financial condition, results of operations and cash flows.
At any given time, we may be involved in claims, litigation, administrative proceedings, settlements and investigations of various types in a number of jurisdictions involving potential environmental liabilities, including clean-up costs associated with hazardous waste disposal sites, natural resource damages, property damage, personal injury and regulatory compliance or non-compliance.  The resolution of these environmental matters could have a material adverse effect on our results of operations and cash flows.
Current and future litigation, governmental investigations, prosecutions and administrative claims, including antitrust-related governmental investigations and lawsuits, could harm our financial condition, results of operations and cash flows.
We have been involved in several significant lawsuits and claims relating to environmental and chemical exposure matters, and may in the future be involved in similar litigation. Additionally, we are routinely subject to other civil claims, litigation and arbitration and regulatory investigations arising in the ordinary course of our business as well as with respect to our divested businesses. We could become subject to additional claims. An adverse outcome of these claims could have a materially adverse effect on our business, financial conditions, results of operations and cash flows.
We have also been involved in a number of governmental investigations, prosecutions and administrative claims in the past, including antitrust-related governmental investigations and civil lawsuits, and may in the future be subject to similar claims. Additionally, we have incurred and could again incur expenses in connection with antitrust-related matters, including expenses related to our cooperation with governmental authorities and defense-related civil lawsuits.
Conflicts, military actions, terrorist attacks and general instability along with increased security regulations related to our industry, could adversely affect our business.
Conflicts, military actions and terrorist attacks have precipitated economic instability and turmoil in financial markets. The uncertainty and economic disruption resulting from hostilities, military action or acts of terrorism may impact our facilities and operations or those of our suppliers or customers. Accordingly, any conflict, military action or terrorist attack that impacts us or any of our suppliers or customers, could have a material adverse effect on our business, results of operations, financial condition and cash flows.
Federal regulations aimed at increasing security at certain chemical production plants and similar legislation that may be proposed in the future could require us to enhance plant security and to alter or discontinue our production of certain chemical products, thereby increasing our operating costs and causing an adverse effect on our results of operations.
Regulations have been implemented by the U.S. Department of Homeland Security (“DHS”) aimed at decreasing the risk, and effects, of potential terrorist attacks on chemical plants located within the United States. Pursuant to these regulations, these goals would be accomplished in part through the requirement that certain high-priority facilities develop a prevention, preparedness, and response plan after conducting a vulnerability assessment. In addition, companies may be required to evaluate the possibility of using less dangerous chemicals and technologies as part of their vulnerability assessments and prevention plans and implementing feasible safer technologies in order to minimize potential damage to their facilities from a terrorist attack. While we have registered certain of our sites with DHS in accordance with these regulations, have conducted vulnerability assessments at applicable sites and have received DHS review and approval of our security plans. DHS is

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requiring new risk assessments of all chemical facilities in 2017, which may increase the number of our facilities requiring security plans. These regulations may be revised further and additional legislation may be proposed in the future on this topic. It is possible that such future legislation could contain terms that are more restrictive than what has recently been passed and which would be more costly to us. We cannot predict the final form of currently pending legislation or other related legislation that may be passed and we can provide no assurance that such legislation will not have an adverse effect on our results of operations in a future reporting period. In addition, we may incur liabilities for subsequent damages in the event that we fail to comply with these regulations.
Our businesses depend upon many proprietary technologies, including patents, licenses and trademarks.  Our competitive position could be adversely affected if we fail to protect our patents or other intellectual property rights or if we become subject to claims that we are infringing upon the rights of others. Our patents may not provide full protection against competing manufacturers outside of the United States, the European Union countries and certain other developed countries.  Weaker protection may adversely impact our sales and results of operations.
Our intellectual property is of particular importance for a number of the specialty chemicals that we manufacture and sell. The trademarks and patents that we own may be challenged, and because of such challenges, we could eventually lose our exclusive rights to use and enforce such patented technologies and trademarks, which could adversely affect our competitive position and results of operations. We are licensed to use certain patents and technology owned by other companies, including foreign companies, to manufacture products complementary to our own products. We pay royalties for these licenses in amounts not considered material, in the aggregate, to our consolidated results.
In some of the countries in which we operate, such as China, the laws protecting patent holders are significantly weaker than in the United States, countries in the European Union and certain other developed countries.  Weaker protection may assist competing manufacturers in becoming more competitive in markets in which they might not have otherwise been able to introduce competing products for a number of years. As a result, we tend to rely more heavily upon trade secret and know-how protection in these regions, as applicable, rather than patents.
We also rely on unpatented proprietary know-how and continuing technological innovation and other trade secrets in all regions to develop and maintain our competitive position. Although it is our policy to enter into confidentiality agreements with our employees and third parties to restrict the use and disclosure of trade secrets and proprietary know-how, those confidentiality agreements may be breached. Additionally, adequate remedies may not be available in the event of an unauthorized use or disclosure of such trade secrets and know-how, and others could obtain knowledge of such trade secrets through independent development or other access by legal means. The failure of our patents, trademarks or confidentiality agreements to protect our processes, apparatuses, technology, trade secrets or proprietary know-how and the brands under which we market and sell our products could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We cannot be assured that our products or methods do not infringe on the patents, trademarks or other intellectual property rights of others. Infringement and other intellectual claims or proceedings brought against us, whether successful or not, could result in substantial costs and harm our reputation. Such claims and proceedings can also distract and divert management and key personnel from other tasks important to the success of our business. In addition, intellectual property litigation or claims could force us to do one or more of the following:
cease selling products that contain asserted intellectual property;
pay substantial damages for past use of the asserted intellectual property;
obtain a license from the holder of the asserted intellectual property, which may not be available on reasonable terms; and
redesign or rename, in the case of trademark claims, our products to avoid infringing the rights of third parties.
Such requirements could adversely affect our revenue, increase costs, and harm our financial condition.
Cybersecurity attack, acts of cyber-terrorism, failure of technology systems and other disruptions to our information technology systems could compromise our information, disrupt our operations, and expose us to liability, which may adversely impact our operations.
In the ordinary course of our business, we store sensitive data, including intellectual property, our proprietary business information and that of our customers, suppliers and business partners, and personally identifiable information of our employees in our information technology systems, including in our data centers and on our networks. The secure processing, maintenance and transmission of this data is critical to our operations. Despite our security measures, our information technology systems may be vulnerable to attacks by hackers or breached or disrupted due to employee error, malfeasance or

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other disruptions. Any such attack, breach or disruption could compromise our information technology systems and the information stored in them could be accessed, publicly disclosed, lost or stolen and our business operations could be disrupted. Any such access, disclosure or other loss of information or business disruption could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and damage to our reputation, which could adversely impact our operations.
Legislative and regulatory initiatives related to global warming and climate change could have an adverse effect on our operations and the demand for specialty chemicals.
Due to concerns about the risks of global warming and climate change, a number of various international, national and regional legislative and regulatory initiatives to limit greenhouse gas emissions are currently in various stages of discussion or implementation. Legislative and regulatory programs to reduce emissions of greenhouse gases could require us to incur substantially increased capital, operating, maintenance, and compliance costs, such as costs to purchase and operate emissions control systems, costs to acquire emissions allowances, and costs to comply with new regulatory or reporting requirements. In addition, increasing regulation of fuel emissions could substantially increase the distribution and supply chain costs associated with our products. Consequently, legislative and regulatory programs to reduce emissions of greenhouse gases could have an adverse effect on our business, financial condition, results of operations, and cash flows.
In addition, there has been public discussion that climate change may be associated with more extreme weather conditions, such as increased frequency and severity of storms, droughts, and floods. Extreme weather conditions can interfere with our development and production activities, increase our costs of operations or reduce the efficiency of our operations, and potentially increase costs for insurance coverage in the aftermath of such conditions. Significant physical effects of climate change could also have an indirect effect on our financing and operations by disrupting the transportation or process- related services provided by companies or suppliers with whom we have a business relationship.
We are dependent upon a trained, dedicated sales force, the loss of which could materially affect our operations.
Many of our products are sold and supported through dedicated staff and specifically trained personnel.  The loss of this sales force due to market or other conditions could affect our ability to sell and support our products effectively, which could have an adverse effect on our results of operations.
Our results of operations are subject to exchange rate and other currency risks.  A significant movement in exchange rates could adversely impact our results of operations.
Significant portions of our businesses are conducted in currencies other than the U.S. dollar. Accordingly, foreign currency exchange rates affect our operating results. Effects of exchange rate fluctuations upon our future operating results cannot be predicted because of the number of currencies involved, the variability of currency exposure and the potential volatility of currency exchange rates. We face risks arising from the imposition of exchange controls and currency devaluations. Exchange controls may limit our ability to convert foreign currencies into U.S. dollars or to remit dividends and other payments by our foreign subsidiaries or businesses located in or conducted within a country imposing controls. In certain foreign countries, some components of our cost structure are denominated in U.S. dollars while our revenues are denominated in the local currency. In those cases, currency devaluation could adversely impact our operating margins.
Our unfunded and underfunded defined benefit pension plans and post-retirement health care plans could adversely impact our financial condition, results of operations and cash flows.
The cost of our defined benefit pension and post-retirement health care plans is recognized through operations over extended periods of time and involves many uncertainties during those periods of time. Our funding policy for defined benefit pension plans is to accumulate plan assets through our cash contributions and prudent investment returns, such that, over the long run, they will approximate the present value of projected benefit obligations. Our pension cost is materially affected by certain factors and assumptions, including the discount rate used to measure pension obligations, changes in the life expectancy of plan beneficiaries, the level of plan assets available to fund those obligations at the measurement date and the expected long-term rate of return on plan assets. Significant changes in investment performance or a change in the portfolio mix of invested assets can result in corresponding increases and decreases in the valuation of plan assets or in a change of the expected rate of return on plan assets. Similarly, our post-retirement health care cost is materially affected by certain factors and assumptions, including the discount rate used to measure these obligations, as well as by changes in the actual cost of providing these medical benefits.

19


We have underfunded obligations under our U.S. tax-qualified defined benefit pension plans totaling approximately $11 million on a projected benefit obligation basis as of December 31, 2016 . Declines in the value of the plan investments, the discount rate used to measure liabilities, increases in life expectancy of beneficiaries or unfavorable changes in law or regulations that govern pension plan funding could materially change the timing and amount of required funding. Additionally, we sponsor other foreign and non-qualified U.S. pension plans under which there are substantial unfunded liabilities totaling approximately $73 million on a projected benefit obligation basis as of December 31, 2016 . Foreign regulatory authorities may seek to have Chemtura and/or certain of our non-sponsoring subsidiaries take responsibility for some portion of these obligations. Mandatory funding contributions with respect to these obligations and potential unfunded benefit liability claims could have a material adverse effect on our financial condition, results of operations or future cash flows. In addition, we have unfunded post-retirement health care plan liabilities totaling approximately $86 million on a projected benefit obligation basis at December 31, 2016 . Our actual costs with respect to our post-retirement health care plans could exceed our current actuarial projections.
Restrictive covenants in our credit facilities may limit our ability to engage in certain transactions.
Our credit facilities contain various covenants that limit our ability to engage in specified types of transactions.  The covenants limit our ability to, among other things, incur additional indebtedness or repay certain indebtedness, create liens, pay dividends on or make other distributions on or repurchase capital stock or make other restricted payments, make investments, and enter into acquisitions, dispositions and joint ventures.  Such restrictions in our credit facilities could result in us having to obtain the consent of our lenders in order to take certain actions.  We may be unable to obtain such consents from our lenders, or obtaining such consents may be difficult or costly for us.  Our ability to expand our business or to address declines in our business may be limited if we are unable to obtain (or hindered from obtaining) such consents.
A breach of any of these covenants could result in a default under our credit facilities and other debt obligations.  Upon the occurrence of an event of default, the lenders could elect to declare all amounts outstanding under our credit facilities immediately due and payable and terminate all commitments to extend further credit.  If we were unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure our indebtedness.  Our subsidiaries have pledged a significant portion of their assets as collateral under our credit facilities.  If the lenders under credit facilities accelerate the repayment of borrowings, we may not have sufficient assets to repay amounts borrowed under the credit facilities which could have a material adverse effect on our cash flow and on the value of our stock.
Future events may impact our deferred tax asset position related to our utilization of net operating losses ("NOLs") and U.S. deferred federal income taxes on undistributed earnings of international affiliates that are considered to be reinvested indefinitely.
We evaluate our ability to utilize deferred tax assets and our need for valuation allowances based on available evidence. This process involves significant management judgment about assumptions that are subject to change from period to period based on changes in tax laws or variances between future projected operating performance and actual results. We are required to establish a valuation allowance for deferred tax assets if we determine, based on available evidence at the time the determination is made, that it is more likely than not that some portion or all of the deferred tax assets will not be utilized. In making this determination, we evaluate all positive and negative evidence as of the end of each reporting period. Future adjustments (either increases or decreases), to a deferred tax asset valuation allowance are determined based upon changes in the expected realization of the net deferred tax assets. The utilization of our deferred tax assets ultimately depends on the existence of sufficient taxable income in either the carry-back or carry-forward periods under the applicable tax law. Due to significant estimates used to establish a valuation allowance and the potential for changes in facts and circumstances, it is reasonably possible that we will be required to record adjustments to a valuation allowance in future reporting periods. Changes to a valuation allowance or the amount of deferred taxes could have a materially adverse effect on our business, financial condition and results of operations. Further, while we have no current intention to do so in the foreseeable future, should we change our assertion regarding the permanent reinvestment of the undistributed earnings in foreign operations, a deferred tax liability may need to be established.
If our goodwill, intangible assets or long-lived assets become impaired, we may be required to record a significant charge to earnings.
Under U.S. generally accepted accounting principles (“GAAP”), we review our intangible assets and long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is tested for impairment on July 31 of each year, or more frequently if required. Factors that may be considered a change in circumstances, indicating that the carrying value of our goodwill, intangible assets or long-lived assets may not be recoverable, include, but are not limited to, a decline in stock price and market capitalization, reduced future cash flow estimates, and slower

20


growth rates in our industry. We may be required to record a significant charge in our financial statements during the period in which any impairment of our goodwill, intangible assets or long-lived assets is determined, negatively impacting our results of operations.
If our estimates or judgments relating to our accounting policies prove to be incorrect, our operating results could be adversely affected.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in Management's Discussion and Analysis of Financial Condition and Results of Operations. The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include, among others, those related to allowance for uncollectible accounts receivable, inventories, environmental matters, pension and other post-retirement benefits expense, income taxes and the carrying value of goodwill and long-lived assets. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in the price of our common stock.
If we fail to establish and maintain adequate internal controls over financial reporting, we may not be able to report our financial results in a timely and reliable manner, which could harm our business and impact the value of our securities.
We depend on our ability to produce accurate and timely financial statements in order to run our business. If we fail to do so, our business could be negatively affected and our independent registered public accounting firm may be unable to attest to the fair presentation of our Consolidated Financial Statements in accordance with U.S. GAAP and the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Effective internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. If we cannot provide reliable financial reports and effectively prevent fraud, our reputation and operating results could be harmed. Even effective internal controls have inherent limitations including the possibility of human error, the circumvention or overriding of controls, or fraud. Therefore, even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. In addition, projections of any evaluation of effectiveness of internal control over financial reporting in future periods are subject to the risk that the control may become inadequate because of changes in conditions or a deterioration in the degree of compliance with the policies or procedures.
If we fail to maintain adequate internal controls, including any failure to implement new or improved controls, or if we experience difficulties in their implementation, we could fail to meet our reporting obligations, and there could be a material adverse effect on our business and financial results. In the event that our current control practices deteriorate, we may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market price of our securities may be adversely affected.
If we issue additional shares of common stock in the future, it will result in the dilution of our existing stockholders.
Our certificate of incorporation authorizes the issuance of 500 million shares of common stock, of which 100.6 million shares were issued and 63.0 million shares outstanding as of December 31, 2016 . Our board of directors (the "Board") has the authority to issue additional shares of common stock up to the authorized capital stated in the certificate of incorporation. The issuance of any new shares of common stock may result in a reduction of the book value or market price of the outstanding shares of our common stock. Additionally, we have an incentive plan that allows for the issuance of up to 11 million shares (currently 4.0 million shares remain available for future grants).

Item 1B: Unresolved Staff Comments
None.

21


Item 2: Properties
The following table sets forth information regarding our principal operating properties and other significant properties as of December 31, 2016 . All of the following properties are owned except where otherwise indicated. In general, our operating properties are well maintained, suitably equipped and in good operating condition.
Location
 
Facility
 
Reporting Segment
 
 
 
 
 
NORTH AMERICA
 
 
 
 
United States
 
 
 
 
Arkansas
 
 
 
 
El Dorado
 
Plant
 
Industrial Engineered Products
Connecticut
 
 
 
 
Middlebury*
 
Executive Offices
 
Shared Service Center, Business and Corporate Office
Naugatuck
 
Research Center
 
Industrial Engineered Products, Industrial Performance Products
Illinois
 
 
 
 
Mapleton
 
Plant
 
Industrial Engineered Products
New Jersey
 
 
 
 
East Hanover
 
Plant
 
Industrial Performance Products
Fords
 
Plant
 
Industrial Performance Products
Perth Amboy
 
Plant
 
Industrial Performance Products
North Carolina
 
 
 
 
Gastonia
 
Plant
 
Industrial Performance Products, Agrochemical Manufacturing
Pennsylvania
 
 
 
 
Philadelphia*
 
Executive Offices
 
Corporate Offices
Canada
 
 
 
 
Elmira
 
Plant
 
Industrial Performance Products, Agrochemical Manufacturing
West Hill
 
Plant
 
Industrial Performance Products
EUROPE
 
 
 
 
Germany
 
 
 
 
Bergkamen*
 
Plant, Research Center
 
Industrial Engineered Products
Italy
 
 
 
 
Latina
 
Plant
 
Industrial Performance Products, Agrochemical Manufacturing
The Netherlands
 
 
 
 
Amsterdam *
 
Plant
 
Agrochemical Manufacturing, Industrial Performance Products
Switzerland
 
 
 
 
Frauenfeld*
 
Office
 
Business and Corporate Office
United Kingdom
 
 
 
 
Accrington
 
Plant
 
Industrial Performance Products
Trafford Park
 
Plant, Office
 
Industrial Engineered Products, Industrial Performance Products, Shared Service Center, Corporate
 
 
 
 
 

22


Location
 
Facility
 
Reporting Segment
 
 
 
 
 
ASIA
 
 
 
 
Japan
 
 
 
 
Tokyo*
 
Office
 
Industrial Engineered Products, Industrial Performance Products
People's Republic of China
 
 
 
 
Nantong
 
Plant
 
Industrial Performance Products
Nanjing
 
Research Center
 
Industrial Engineered Products, Industrial Performance Products
Shanghai*
 
Office
 
Shared Service Center, Business and Corporate Office
South Korea
 
 
 
 
Hyeongok
 
Plant
 
Industrial Engineered Products
Taiwan
 
 
 
 
Kaohsiung
 
Plant
 
Industrial Performance Products
LATIN AMERICA
 
 
 
 
Brazil
 
 
 
 
Rio Claro
 
Plant
 
Industrial Performance Products, Agrochemical Manufacturing, Corporate
Mexico
 
 
 
 
Altamira
 
Plant
 
Industrial Performance Products
Mexico City*
 
Office
 
Industrial Engineered Products, Industrial Performance Products
Reynosa
 
Plant
 
Industrial Engineered Products

* Leased property.

Item 3: Legal Proceedings
Information regarding our legal proceedings can be found in Note 15 – Legal Proceedings and Contingencies in our Notes to Consolidated Financial Statements and is incorporated by reference herein.
Item 4: Mine Safety Disclosure
Not applicable.

23


PART II

Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock is listed on the New York Stock Exchange (the “NYSE”) under the ticker symbol “CHMT”. As of December 31, 2016 , 100.6 million shares were issued and 63.0 million shares were outstanding.
The Merger Agreement does not permit the payment of any cash dividends. We may retain earnings, if any, for future operations, expansions or debt repayments. Any decision to declare and pay dividends in the future will be made at the discretion of our Board and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our Board may deem relevant. In addition, our debt agreements contain covenants restricting the payment of dividends by us and by each of our subsidiaries that are party to such facilities, which is subject to a number of specific exceptions.
The following table summarizes the range of market prices for our common stock as reported by the NYSE by quarter during the past two years:
 
 
2016
 
 
First
 
Second
 
Third
 
Fourth
Market price per common share:
 
 
 
 
 
 
 
 
High
 
$
27.36

 
$
29.99

 
$
32.99

 
$
33.35

Low
 
$
23.50

 
$
24.62

 
$
25.11

 
$
32.63

 
 
 
 
 
 
 
 
 
 
 
2015
 
 
First
 
Second
 
Third
 
Fourth
High
 
$
27.35

 
$
31.10

 
$
28.99

 
$
32.34

Low
 
$
21.23

 
$
26.64

 
$
24.89

 
$
26.32


The number of holders of record of our common stock on December 31, 2016 was approximately 4,000.
Our common stock is subject to the Merger, see Item 1A – Risk Factors for a more complete discussion of risks related to our common stock including the Merger.

24


PERFORMANCE GRAPH
The following graph compares the cumulative total return on our common stock for the last five fiscal years with the returns of the Standard & Poor’s 500 Stock Index and the Dow Jones US Chemicals Index, assuming an investment of $100 on December 31, 2011 and the reinvestment of all dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG CHEMTURA CORPORATION,
S&P 500 AND DOW JONES CHEMICAL INDEX
CHMT-201512_CHARTX50833A01.JPG
 
 
12/31/2011
 
12/31/2012
 
12/31/2013
 
12/31/2014
 
12/31/2015
 
12/31/2016
CHEMTURA CORPORATION
 
$
100.0

 
$
187.5

 
$
246.2

 
$
218.1

 
$
240.5

 
$
292.8

S&P500
 
$
100.0

 
$
115.5

 
$
151.8

 
$
171.9

 
$
174.1

 
$
194.2

DOW JONES US CHEMICAL INDEX
 
$
100.0

 
$
122.0

 
$
158.3

 
$
171.7

 
$
163.4

 
$
185.2


25


Item 6: Selected Financial Data
The following reflects selected financial data for each of our last five fiscal years and has been reclassified to reflect the effects of the antioxidants and UV stabilizers (“Antioxidants”) and Consumer Products businesses as discontinued operations. The divestiture of our Chemtura AgroSolutions business did not meet the criteria to be accounted for as a discontinued operation and, therefore, we have included the results of that business as part of our continuing operations. The information below should be read in conjunction with Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8 - Financial Statements and Supplementary Data of this Annual Report. The financial information presented may not be indicative of future performance.
(In millions of dollars, except per share data)
 
2016
 
2015
 
2014
 
2013
 
2012
Summary of Operations
 
 
 
 
 
 
 
 
 
 
Net sales (a)
 
$
1,654

 
$
1,745

 
$
2,190

 
$
2,231

 
$
2,196

Gross profit
 
473

 
433

 
508

 
510

 
581

Selling, general and administrative
 
143

 
151

 
234

 
229

 
246

Depreciation and amortization
 
85

 
93

 
102

 
101

 
100

Research and development
 
21

 
20

 
36

 
40

 
41

Facility closures, severance and related costs
 
1

 
3

 
25

 
42

 
11

Merger and integration costs (b)
 
13

 

 

 

 

Loss (gain) on sale of business (c)
 
1

 
4

 
(529
)
 

 

Impairment charges
 
1

 
1

 

 

 

Pension settlement (d)
 
162

 

 
21

 

 

Equity (income) loss
 

 
(1
)
 

 

 
4

Operating income
 
46

 
162

 
619

 
98

 
179

Interest expense
 
(32
)
 
(30
)
 
(45
)
 
(60
)
 
(64
)
Loss on early extinguishment of debt
 

 

 
(7
)
 
(50
)
 
(1
)
Other income, net
 

 
20

 
12

 
8

 
15

Earnings (loss) from continuing operations before income taxes
 
14

 
152

 
579

 
(4
)
 
129

Income tax (expense) benefit
 
(29
)
 
(16
)
 
192

 
(18
)
 
(26
)
(Loss) earnings from continuing operations
 
$
(15
)
 
$
136

 
$
771

 
$
(22
)
 
$
103

 
 
 
 
 
 
 
 
 
 
 
Per Share information - attributable to Chemtura
 
 
 
 
 
 
 
 
 
 
(Loss) earnings from continuing operations - Basic
 
$
(0.24
)
 
$
2.01

 
$
8.55

 
$
(0.23
)
 
$
1.04

(Loss) earnings from continuing operations - Diluted
 
$
(0.24
)
 
$
1.98

 
$
8.43

 
$
(0.23
)
 
$
1.04

 
 
 
 
 
 
 
 
 
 
 
Other Per Share Data
 
 
 
 
 
 
 
 
 
 
Common stock trading range - High
 
$
33.35

 
$
32.34

 
$
27.94

 
$
28.17

 
$
21.69

Common stock trading range - Low
 
$
23.50

 
$
21.23

 
$
21.02

 
$
19.05

 
$
11.36

Average shares outstanding - Basic
 
63.8

 
67.8

 
90.2

 
97.7

 
98.2

Average shares outstanding - Diluted
 
63.8

 
68.8

 
91.5

 
97.7

 
98.8



26



(In millions)
 
2016
 
2015
 
2014
 
2013
 
2012
Financial Position
 
 
 
 
 
 
 
 
 
 
Working capital (e)
 
$
555

 
$
617

 
$
811

 
$
1,041

 
$
1,101

Current ratio (e)
 
2.8

 
2.7

 
3.0

 
3.2

 
3.2

Total assets (e)
 
$
2,168

 
$
2,360

 
$
2,660

 
$
2,694

 
$
3,021

Total debt, including short-term borrowings (e)
 
$
476

 
$
511

 
$
567

 
$
888

 
$
867

Total equity
 
$
978

 
$
1,002

 
$
1,054

 
$
999

 
$
1,068

Total capital employed (e)
 
$
1,454

 
$
1,513

 
$
1,621

 
$
1,887

 
$
1,935

Debt to total capital % (e)
 
32.7
%
 
33.8
%
 
35.0
%
 
47.1
%
 
44.8
%
(In millions of dollars, except for number of employees)
 
 

 
 

 
 

 
 

 
 

Other Statistics
 
 

 
 

 
 

 
 

 
 

Net cash provided by (used in) operations
 
$
137

 
$
159

 
$
(78
)
 
$
79

 
$
218

Capital spending from continuing operations
 
$
88

 
$
80

 
$
113

 
$
159

 
$
136

Depreciation from continuing operations
 
$
78

 
$
81

 
$
87

 
$
82

 
$
80

Amortization from continuing operations
 
$
7

 
$
12

 
$
15

 
$
19

 
$
20

Approximate number of employees at end of year
 
2,500

 
2,500

 
2,700

 
3,300

 
4,600

 
(a)
Net sales include $38 million, $38 million and $6 million in 2016, 2015 and 2014, respectively, related to the non-cash portion of the recognition of our fulfillment, net of accretion, of our below-market contract obligations associated with the sale of our Chemtura AgroSolutions business in 2014.
(b)
Merger and integration costs primarily are comprised of legal and other fees associated with the signing of the Merger Agreement with Lanxess. For further information, see Note 2 — Mergers and Divestitures in our Notes to Consolidated Financial Statements.
(c)
Gain on sale of business primarily included a $529 million gain on the sale of our Chemtura AgroSolutions business in 2014.
(d)
In February 2016, the Chemtura Corporation Retirement Plan entered into a purchase agreement for a group annuity contract transferring payment responsibility for the pension benefits of certain retirees. As a result, we recorded a pre-tax non-cash pension settlement charge in 2016 of $162 million. In September 2014, we offered vested pension plan participants in our U.S. qualified pension plan who were no longer employed by the Company a limited time opportunity to take their pension benefits as a one-time single lump sum or an immediate annuity. As a result, we recorded a pre-tax non-cash pension settlement charge in 2014 of $21 million.
(e)
In the fourth quarter of 2015, we elected to early adopt on a prospective basis the provisions of Accounting Standards Update ("ASU")No. 2015-17, Balance Sheet Classification of Deferred Taxes ("ASU 2015-17"), which requires that deferred tax liabilities and assets and related valuation allowances be classified as non-current on the balance sheet. Previous to this adoption, deferred tax assets or liabilities and related valuation allowances could be classified as either current or non-current depending on the nature of the assets or liability that gave rise to the deferred tax position. Given that we elected prospective adoption, we did not reclassify prior year information to conform with ASU 2015-17. In the first quarter of 2016, we adopted the provisions of ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs ("ASU 2015-03"), which requires that debt issuance costs be presented as a direct deduction from the carrying amount of the related liability. We applied ASU 2015-03 retrospectively to all periods presented.


27


Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements included in Item 8 of this Form 10-K.
PENDING MERGER TRANSACTION WITH LANXESS
On September 25, 2016, we entered into an agreement and plan of merger (the "Merger Agreement") with Lanxess Deutschland GmbH, a limited liability company under the laws of Germany ("Lanxess"), and LANXESS Additives Inc., a Delaware corporation and an indirect, wholly owned subsidiary of Lanxess ("Merger Subsidiary"). Upon the terms, and subject to the conditions set forth in the Merger Agreement, Merger Subsidiary will merge with and into Chemtura (the "Merger"), with Chemtura surviving the merger in an all-cash transaction in which Chemtura's stockholders will receive $33.50 in cash, without interest, per share of Chemtura common stock, which represented an 18.9% premium to the stock’s closing share price of $28.18 on September 23, 2016, the last trading day prior to the announcement of the Merger.
The Merger is subject to customary closing conditions including, among others, the receipt of necessary antitrust and regulatory approvals and the accuracy of representations and warranties made in the Merger Agreement. Assuming timely satisfaction of the necessary closing conditions, we currently expect the Merger to close by mid-2017.
Contemporaneous with the execution of the Merger Agreement, we entered into an agreement with SK Blue Holdings, Ltd., and Addivant USA Holdings Corp (collectively, "Addivant") that committed us to surrender our shares of Addivant preferred stock to Addivant, a cash payment of $1 million to Addivant and certain other changes to our continuing supply agreements with Addivant contingent upon the completion of the Merger in exchange for a modification of a non-compete agreement entered into in conjunction with the sale of our antioxidants business to Addivant in 2013. Reflecting the terms of this agreement, in the third quarter of 2016, we took a charge of $5 million which is included in merger and integration costs.
For further discussion of the Merger, see Note 2 — Mergers and Divestitures in our Notes to Consolidated Financial Statements.
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Report contains “forward-looking statements” within the meaning of Section 27(a) of the Securities Act of 1933, as amended and Section 21(e) of the Exchange Act of 1934 as amended. We use words such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will” and similar expressions to identify forward-looking statements. Such statements include, among others, those concerning our expected financial performance and strategic and operational plans, as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and that a number of risks and uncertainties could cause actual results to differ materially from those anticipated in the forward-looking statements.
Such risks and uncertainties include, but are not limited to:
The failure to receive, on a timely basis or otherwise, the required approvals by government or regulatory agencies with regard to the Merger Agreement;
The failure of the Merger to be completed on a timely basis or at all for any other reason;
The risks that Chemtura’s business may suffer as a result of uncertainties surrounding the Merger or if the Merger is not completed;
Risks associated with significant international operations and interests;
Increases in the price of raw materials or energy and our ability to recover cost increases through increased sales prices for our products;
Disruptions in the availability of raw materials or energy;
Operating risks at our production facilities;
Risks associated with maintenance of existing facilities and construction of new facilities;
Failure to develop new products and our ability to remain technologically innovative and offer improved products in a cost-effective manner;
The cyclical nature of the global chemicals industry;
Failure to accurately forecast market and customer trends for our products;
Declines in general economic conditions;
Significant competition in many of the markets in which we operate;

28


Loss of or significant reduction in purchases by our largest customers;
Our products are subject to extensive government scrutiny and regulation;
Environmental, health and safety regulations;
Current and future litigation, governmental investigations, prosecutions and administrative proceedings;
Military conflicts and terrorist attacks;
Federal regulations aimed at increasing security at certain chemical production plants;
Our ability to protect our patents or other intellectual property rights;
Our ability to reduce the risks of cyber incidents and protect our information technology;
Risks associated with possible climate change legislation, regulation and international accords;
Our dependence upon a trained, dedicated sales force;
Exchange rate and other currency risks;
Our unfunded and underfunded defined benefit pension plans and post-retirement welfare benefit plans;
Restrictive covenants in our credit facilities;
Deferred tax assets and utilization of our net operating losses;
The ability to support the carrying value of the goodwill and long-lived assets related to our businesses;
Estimates and judgments relating to our accounting policies;
Our ability to maintain adequate internal controls over financial reporting;
Issuance of additional shares of stock and resulting dilution; and
Other risks and uncertainties detailed in Item 1A - Risk Factors in our filings with the Securities and Exchange Commission.

These statements are based on our estimates and assumptions and on currently available information. The forward-looking statements include information concerning our possible or assumed future results of operations, and our actual results may differ significantly from the results discussed. Forward-looking information is intended to reflect opinions as of the date this Form 10-K was filed. We undertake no duty to update any forward-looking statements to conform the statements to actual results or changes in our operations.

OUR BUSINESS
We are a global, United States publicly traded specialty chemicals company dedicated to delivering innovative, performance-driven engineered specialty chemical solutions which are used as additives, ingredients or intermediates that add value to our customers' end products. We are committed to global sustainability through “greener technology” and developing engineered chemical solutions that meet our customers’ evolving needs. We operate in a wide variety of end-use industries, including automotive, building and construction, electronics, lubricants, packaging and transportation. We are a leader in many of our key product lines and transact business in more than 70 countries. Our principal executive offices are located in Philadelphia, Pennsylvania and Middlebury, Connecticut.
Pending Merger
In September 2016, we entered into Merger Agreement with Lanxess, LANXESS Additives Inc., and a Merger Subsidiary.
Upon the terms, and subject to the conditions set forth in the Merger Agreement, the Merger Subsidiary will merge with and into Chemtura (the "Merger"), with Chemtura surviving the merger in an all-cash transaction in which Chemtura's stockholders will receive $33.50 in cash, without interest, per share of Chemtura common stock, which represented an 18.9% premium to the stock’s closing share price of $28.18 on the last trading day prior to the announcement of the Merger.
The Merger remains subject to customary closing conditions including, among others, the receipt of necessary antitrust and regulatory approvals and the accuracy of representations and warranties made in the Merger Agreement. Assuming timely satisfaction of the necessary closing conditions, we currently expect the Merger to close by mid-2017. See risks that may occur related to this pending merger included in Item 1A - Risk Factors.
Current Operations
We are comprised of two strategic business reporting segments, Industrial Performance Products and Industrial Engineered Products. In addition, we have our Agrochemical Manufacturing reporting segment which represents ongoing activity with Platform Specialty Products Corporation (“Platform”) under the supply agreements and a tolling agreement (collectively, the “supply agreements”) that we entered into in connection with the sale of our Chemtura AgroSolutions business to Platform in 2014.

29


The primary economic factors that influence the operations and net sales of our Industrial Performance Products (“Industrial Performance”) and Industrial Engineered Products (“Industrial Engineered”) segments (collectively referred to as “Industrials”) are demand conditions in industrial, electronics, energy, residential and commercial construction, and transportation markets. Other factors affecting our financial performance include industry capacity, customer demand, raw material and energy costs, and sales prices. Selling prices are heavily influenced by the global demand and supply for the products we produce and competitor behavior. We seek to pursue selling prices that reflect the value our products deliver to our customers, while seeking to pass on higher costs for raw material and energy to preserve our profit margins. The risks that may impact our performance are included in Item 1A - Risk Factors.
OVERVIEW OF OUR PERFORMANCE
In 2016, we continued to deliver shareholder value. We increased segment operating income compared to 2015 despite weakness in demand and increased competition in several of the markets we serve. We took initiatives to continue to strengthen our balance sheet and generate net cash provided by operations. We executed upon our stated strategy to gain scale in industrial specialty chemicals to accelerate shareholder value creation. Some of our major accomplishments in 2016 included:
In September 2016, we entered into the Merger Agreement with Lanxess. The transaction will provide our businesses the scale we have sought in industrial specialty chemicals while accelerating value creation for our shareholders. The $33.50 purchase price per share is more than twice the value of our common stock upon the emergence from Chapter 11 reorganization in 2010.
Our Industrial Engineered segment increased operating income in 2016 by 62% compared to 2015. Our Industrial Performance segment increased operating income in 2016 by 5% compared to the prior year despite difficult demand conditions in a number of the markets they serve. On a consolidated basis, excluding the non-cash pension settlement charge of $162 million (related to the pension annuity transaction discussed below) and costs associated with the Lanxess transaction of $13 million, operating income increased by 36% in 2016, compared to 2015.
In February 2016, our Chemtura Corporation Retirement Plan (the "US Qualified Plan") entered into a purchase agreement for a group annuity contract, transferring payment responsibility for retirement pension benefits of approximately 5,000 U.S. retirees, or their designated beneficiaries. As a result, our overall projected pension benefit obligation was reduced by $363 million based on the valuation date of February 17, 2016. This pension annuity transaction was another step in our successful initiatives over the last five years to de-risk our pension benefit obligations.
In June 2016, we repaid $39 million of our senior secured term loan facility due August 2016 (the "Term Loan") with cash-on-hand and then amended and restated the facility, extending maturity of the remaining $1 million balance to preserve flexibility for any future financing needs.
During 2016 , we purchased 4.5 million shares for $116 million under our share repurchase program. Due to the pending merger transaction with Lanxess, we have ceased share repurchases and the share repurchase program expired in December 2016. However, since the inception of this program in 2011, we have returned almost $1 billion in value to shareholders through the purchase of 42.3 million of our shares of common stock at an average price of $23.10 per share.
We continued to demonstrate positive cash flows from operating activities. Net cash flow provided by operating activities was $137 million in 2016. Excluding the $35 million special cash contribution to the US Qualified Plan after the pension annuity transaction and cash costs of $9 million associated with the Lanxess transaction, net cash flow provided by operating activities was $181 million in 2016 compared with $159 million in 2015.
With the combination of improved operating profitability and cash flows and the reduction in debt outstanding, we ended 2016 with our total debt lower than our long term financial goal of 2 times Adjusted EBITDA (Adjusted EBITDA is defined in this section under the heading ADJUSTED EBITDA) at 1.7 times.
We continued to reduce the number of our legal entities, primarily through liquidation or merger, reducing regulatory and other compliance cost and simplifying our operations. As a result, in the fourth quarter of 2016, we recorded a $2 million loss due to the release of accumulated foreign currency translation adjustments on these liquidations.


30


RESULTS OF OPERATIONS
2016 COMPARED TO 2015
Overview
Consolidated net sales were $1.7 billion in 2016 or $91 million lower than 2015 due to lower sales volume of $72 million , lower sales prices of $18 million and unfavorable foreign currency translation of $1 million .
The decrease in net sales from the prior year reflected the impact of certain market conditions on our volumes coupled with reductions in sales price under contractual requirements. Our Industrial Performance segment reported the majority of the sales price decline where we lowered sales prices for our petroleum additives products as we passed along the benefit of raw material cost reductions to our customers as required under formula-based pricing agreements coupled with lower sales prices for urethane products used in mining and gas applications due to weak market conditions throughout 2016. Our Industrial Engineered segment reported improved sales prices, primarily for Emerald Innovation 3000 TM and bromine and bromine-based derivative products which offset lower prices for certain of our organometallics products. All of our segments reported lower volumes with the most significant reductions in both our Industrial Performance and Agrochemical Manufacturing segments. Volume in the Industrial Performance segment grew in our detergents, inhibitor and intermediate products; however, those improvements were offset primarily by weak market conditions for products used in mining and oil and gas production applications, lower volumes in certain synthetic lubricants and base stock products and unfavorable product mix. Our Industrial Engineered segment reflected strong volumes in our Emerald Innovation 3000 TM , bromine and bromine-based derivative and organometallic products. However, the impact of the weak market conditions for our clear brine fluids used in offshore deep oil well drilling and the termination of certain supply agreements in June 2015 offset these improvements. Our Agrochemical Manufacturing segment showed a revenue decline as a result of changing from a supply agreement to a tolling agreement at our Brazil location. Under the tolling arrangement, the customer now supplies certain raw materials for our Brazilian facility to convert to finished products and as a result the sales prices were reduced by the value of the raw material cost we no longer had to incur.
Gross profit in 2016 was $473 million , an increase of $40 million compared to $433 million in 2015. Gross profit as a percentage of sales increased to 29% in 2016 compared with 25% in 2015. The increase in gross profit was primarily due to lower raw material and distribution costs, favorable manufacturing absorption variances primarily for our Emerald Innovation 3000™ and organometallics products, overall favorable product mix and the favorable effect of foreign currency exchange translation offset in part by the effect of lower sales prices. In addition, 2015 included a charge of $8 million related to an increase in our inventory reserves for a discontinued product.
Selling, general and administrative (“SG&A”) expense of $143 million was $8 million lower than 2015. The reduction in SG&A from the prior year is primarily related to lower pension and other post-retirement benefit accruals, a reduction in outside consulting and other fees related to cost saving initiatives that showed the full impact in 2016 and the receipt of certain licensing income offset in part by higher accruals for our management incentive programs as a result of our strong performance in 2016.
Facility closures, severance and related costs in 2016 were $1 million compared with $3 million for 2015 primarily related to initiatives to reduce manufacturing and SG&A costs within our Industrials businesses. Our restructuring plans are described in more detail in Note 3 - Restructuring and Assets Impairment Activities in our Notes to Consolidated Financial Statements.
Merger and integration costs reported in 2016 were $13 million which are primarily comprised of legal and other fees associated with the signing of the Merger Agreement with Lanxess. Additionally, included in these costs is a charge related to the commitment to surrender our Addivant preferred shares along with a cash payment of $1 million related to a modification of a non-compete agreement entered into in conjunction with the sale of our antioxidants business to Addivant in 2013, which was modified contemporaneously with the signing of our Merger Agreement with Lanxess.
In February 2016, the Qualified Plan entered into a purchase agreement for a group annuity contract transferring payment responsibility for the pension benefits of certain retirees. As a result, we recorded a pre-tax non-cash pension settlement charge of $162 million. For further information on this pension annuity transaction, see Note 13 - Pension and Other Post-Retirement Benefit Plans in our Notes to Consolidated Financial Statements.
Other Non-Operating Income and Expense
Interest expense of $32 million during 2016 was $2 million higher than 2015, primarily due to lower capitalized interest offset by lower interest expense from the repayment of our Term Loan.

31


Other expense, net was less than a million for 2016 compared with other income, net of $20 million for 2015. Other expense, net in 2016 included a loss of $2 million related to the release of cumulative translation adjustments associated with the rationalization of certain European subsidiaries that were no longer required offset by realized and unrealized foreign exchange gains and losses. Other income, net in 2015 included a gain of $8 million related to the release of cumulative translation adjustments associated with the rationalization of certain European subsidiaries that were no longer required and a gain of $3 million related to the sale of the 2 million shares of Platform common stock received from the sale of the Chemtura AgroSolutions business. The remaining activity primarily reflected realized and unrealized foreign exchange gains or losses, most significantly related to the strengthening of the U.S. Dollar against foreign currencies.
The income tax expense in 2016 was $29 million compared with $16 million in 2015. The tax expense reported in 2016 reflected a tax benefit of $33 million, recorded in the first quarter of 2016, related to the pension annuity transaction. The tax expense reported in 2015 reflected a benefit of $22 million for foreign tax credits generated in the current year and carried back to 2014 to offset previously paid taxes.
Loss from continuing operations for 2016 was $15 million , or $0.24 per diluted share, as compared with earnings from continuing operations of $136 million , or $1.98 per diluted share in 2015.
The following table describes the major factors impacting net sales and operating income for each of our segments:
Net Sales (in millions)
 
Industrial Performance
Industrial Engineered
Agrochemical Manufacturing
Total
2015
 
$
886

$
722

$
137

$
1,745

Changes in sales prices
 
(30
)
12


(18
)
Unit volume and mix
 
(31
)
(14
)
(27
)
(72
)
Foreign currency
 
(2
)
1


(1
)
2016
 
$
823

$
721

$
110

$
1,654

Operating Income (in millions)
 
Industrial Performance
Industrial Engineered
Agrochemical Manufacturing
General corporate expense
Other charges (b)
Total
2015
 
$
141

$
58

$
35

$
(64
)
$
(8
)
$
162

Price over raw materials (a)
 
3

20




23

Unit volume and mix
 

(4
)
2



(2
)
Foreign currency
 
3

3




6

Manufacturing cost and absorption
 
2

13




15

Distribution cost
 
5

(2
)



3

Depreciation and amortization expense
 
(2
)
5


5


8

Facility closures, severance and related costs
 




2

2

Merger and integration costs
 




(13
)
(13
)
Sale of business
 
 
 

 
3

3

Pension settlement
 




(162
)
(162
)
Other
 
(4
)
1


4


1

2016
 
$
148

$
94

$
37

$
(55
)
$
(178
)
$
46


(a)
Price over raw materials is the sum of the net changes in sales prices and the net changes in raw material costs between the two periods. As the reduction in the costs of certain raw materials result in certain circumstances in reductions in sales prices under certain contractual and negotiated agreements, the change in sales prices net of changes in raw material costs provides a better measure of the impact of sales price changes on our profitability (referred to as "price over raw materials").
(b)
Includes facility closures, severance and related costs, merger and integration costs, loss on sale of business, impairment charges and pension settlement.
The following is a discussion of the results of our segments for 2016 compared with 2015.
Industrial Performance Products
Our Industrial Performance segment reported higher operating income on lower net sales for 2016 as compared with 2015.

32


The decline in net sales reflected volume declines, weaker product mix and lower overall sales prices. Our petroleum additives products reported modestly higher volumes with improvement in our detergents, inhibitors and intermediates product lines. Our inhibitor and intermediate products benefited from the market tightness with the temporary shutdown of one of our Asian competitor’s plants during the third quarter of 2016 while the improvement in detergent products was the result of new business. The benefit of these gains were partially offset by lower volumes for certain synthetic lubricants and base stock products and an overall weaker product mix. Our urethane products reflected lower volumes throughout 2016 due to soft demand for mining and oil and gas applications. Lower average sales prices reflected price reductions which were the result of passing along the benefit of raw material cost reductions to our customers, as required under formula-based contract pricing agreements coupled with some additional declines in price to respond to competitive conditions in weaker demand environments such as those for urethanes products in mining and oil and gas production applications.
Despite the reduction in net sales, operating income compared with 2015 was $7 million higher due to favorable price over raw materials, lower manufacturing and distribution costs, favorable inventory adjustments and the favorable impact of foreign currency exchange on our costs partially offset by higher SG&A expense. Included in 2016 is the recognition of approximately $2 million in income on a technology license and a $2 million charge related to the resolution of a disputed multi-year state excise tax matter.

Additionally, during the fourth quarter of 2016, our Amsterdam, The Netherlands facility experienced a process incident which has temporarily shutdown our PAO plant for further investigation and subsequent repair. Certain costs, as a result of the incident, have been reimbursed by our insurer and we anticipate the remaining costs of the repair will be covered by insurance. We expensed the insurance deductible in the fourth quarter of 2016 and charged the incurred unabsorbed fixed costs of the facility to cost of goods sold. We have fulfilled through December 31, 2016 and will continue to fulfill our customers' supply needs from production at our Elmira, Canada facility and inventory on hand.

Industrial Engineered Products
Our Industrial Engineered segment reported lower net sales but higher operating income for 2016 compared with 2015.
Net sales for our Industrial Engineered segment reflected overall increases in sales prices despite reductions in volume and unfavorable product mix. Sales prices in our Emerald Innovation 3000 TM products and bromine and bromine derivative sustained the gains made during 2015 and offset some decline in sales prices for certain of our organometallic products due both to competitive conditions and growth initiatives. We experienced notable volume increases in our polymerization co-catalyst and tin specialty products as a result of an increase in our customer base over 2015. Our Emerald Innovation 3000 TM volumes and the return of our bromine sales to levels prior to the strike of our supplier in 2015 partially offset volume declines in our clear brine fluids used in offshore deep oil well drilling, the termination of certain supply agreements due to our choice to close our Adrian, MI facility which occurred in June 2015 and the timing of orders for our industrial water treatment products. The reduced volumes in our clear brine fluid products was seen most strongly in the first half of 2016 due to lower exploration activity caused by the reduction in oil prices. Volumes improved in the second half of 2016 but remained significantly below 2015 levels.
In 2016, we generated $94 million in operating profit, a $36 million increase over 2015. The effect of the volume decline on sales was partly mitigated in our gross margin by favorable product mix, where a larger portion of the reduced volume was related to our lower margin products. Operating income further benefited from the full-year benefit of the increases in sales prices in 2015, lower raw material costs and favorable manufacturing absorption variances primarily related to the increased production for Emerald Innovation 3000 TM and organometallics products. Included in 2015 was a charge of $8 million to increase our inventory reserves for a discontinued product. Increases in distribution costs are related to the increase in volumes noted above and were offset by reductions in SG&A primarily due the full realization of cost reduction actions taken in 2015.

Agrochemical Manufacturing
The Agrochemical Manufacturing segment reported lower net sales and slightly higher operating income in 2016 compared with 2015.
The decrease in net sales is primarily the result of a change from a supply agreement to a tolling agreement in Brazil which occurred in the second quarter of 2016. The change to a tolling agreement does not impact our gross margin, as the agreement continues to only reimburse costs incurred. However, subsequent to the change we no longer purchase or sell the raw material component of the products produced which reduced the value of net sales and cost of sales by similar amounts. The results for 2016 and 2015 included $38 million in net sales and operating income related to the non-cash amortization, net of accretion, of a below-market contract obligation that was recorded as part of the Chemtura AgroSolutions divestiture in 2014.

33


Corporate
Included in our general corporate expenses are costs of a general nature or managed on a corporate basis. These costs, net of allocations to the business segments, primarily represent corporate stewardship and administration activities together with costs associated with legacy activities and intangible asset amortization. Functional costs are allocated between the business segments and general corporate expense.
Corporate expense was $55 million and $64 million in 2016 and 2015, respectively, which included amortization expense related to intangible assets and depreciation expense of $9 million and $14 million in 2016 and 2015, respectively. The remaining decrease in our corporate expense in 2016 is primarily related to a decrease in our pension and other post-retirement benefit expense and lower accruals for environmental obligations and project costs. The reductions were offset in part by higher accruals for our management incentive plans as a result of our improved performance in 2016.

2015 COMPARED TO 2014
The sale of our Chemtura AgroSolutions business in November 2014 did not meet the criteria to be reported as a discontinued operation and, therefore, our results from continuing operations include the historical financial information of that business through the date of sale. Given the sale of our Chemtura AgroSolutions business to Platform in 2014, a discussion of the results of operations for the consolidated Company for the year ended December 31, 2015 compared with 2014 is less meaningful to investors due to the sale and the change in the nature of the operations associated with our Agrochemical Manufacturing business from a market participant to a supplier of products to Platform under the supply agreements.
We determined that the most effective way to present to investors the change in results of continuing operations for the year ended December 31, 2015 compared with the year ended December 31, 2014, is to provide separate discussions of the changes in our consolidated results for the Industrial Performance and Industrial Engineered segments, coupled with our Corporate reporting segment (collectively referred to as our "Core Segments") and then separately for the Agrochemical Manufacturing segment.
The table below presents the results of operations of the consolidated Company including the Agrochemical Manufacturing segment through operating income. The table then segregates the results of operations for our Core Segments and our Agrochemical Manufacturing segment. The discussion of the components of operating income included in the section titled Overview only reflect changes related to the Core Segments. A separate discussion regarding the changes in results of operations of the Agrochemical Manufacturing segment is presented in each section under the heading “Agrochemical Manufacturing”.
Components of net income which are not included in operating income are affected by other factors in addition to the inconsistency in the results of operations after the sale of our Chemtura AgroSolutions business. We therefore have not included net income in the tables. As a result, the comparison discussions for the changes in those components which are not part of operating income are presented for the Company as a whole.
For a further discussion on the sale of our Chemtura AgroSolutions business and the ongoing supply agreements with Platform, as well as the sale of our Antioxidant and Consumer Products businesses, see Note 2 - Mergers and Divestitures in our Notes to Consolidated Financial Statements.
Additionally, the following discussion relates only to our income from continuing operations and does not include our discontinued operations reported only in 2014.

34


 
 
2015
 
2014
 
 
 
Agrochemical
Core
 
 
Agrochemical
Core
(in millions)
 
Consolidated
Manufacturing
Segments
 
Consolidated
Manufacturing
Segments
Net Sales
 
$
1,745

$
137

$
1,608

 
$
2,190

$
403

$
1,787

Cost of goods sold (1)
 
1,312

97

1,215

 
1,682

239

1,443

Gross Profit (1)
 
433

40

393

 
508

164

344

Selling, general and administrative
 
151

1

150

 
234

60

174

Depreciation and amortization
 
93

4

89

 
102

8

94

Research and development
 
20


20

 
36

10

26

Facility closures, severance and related costs
 
3


3

 
25


25

Loss (gain) on sale of business
 
4


4

 
(529
)

(529
)
Impairment charges
 
1


1

 



Pension settlement
 



 
21


21

Equity income
 
(1
)

(1
)
 



Operating Income
 
$
162

$
35

$
127

 
$
619

$
86

$
533

(1) - Excludes depreciation and amortization expense which are shown separately.

Overview
Consolidated net sales of our Core Segments were $1.6 billion in 2015, $179 million lower than in 2014 due to lower sales volume of $129 million, unfavorable foreign currency translation of $38 million and lower sales prices of $12 million.
The larger portion of the decline in sales volume was attributable to our Industrial Engineered segment. Our Industrial Performance segment also reflected some sales volume declines as well as the effects of unfavorable product mix as compared with 2014. Our Industrial Engineered segment reported a decline in overall volume, despite volume improvement in the sales of our Emerald Innovation 3000™ product used in the manufacture of insulation foam for building and construction applications and in clear brine fluids used in oilfield applications. However, due to the impact of a strike at a supplier of elemental bromine in the first half of 2015 and the disruptions in the import and export of hazardous materials in China as a result of the fire at the Tianjin, China port, we experienced a decline in sales volumes for our elemental bromine-based products and products used in energy and electronic applications. Additionally, decreased demand for flame retardant products used in furniture foam applications and the discontinuance of certain products late in 2014 and in 2015 led to further sales volume declines. Our Industrial Performance segment also experienced a decline in overall sales volume; however, unfavorable product mix particularly in the automotive, power generation, mining, oil and gas application products was a primary driver of lower net sales. Increased overall sales prices in our Industrial Engineered segment products were offset by sales price declines in our Industrial Performance segment due to our obligation to pass along the reductions in raw material costs resulting from lower oil prices to certain customers under formula based pricing contracts. Throughout 2015, we experienced the unfavorable effects of the stronger U.S. Dollar compared to other major currencies which reduced the U.S. Dollar value of our net sales denominated in foreign currencies.
Gross profit for our Core Segments in 2015 was $393 million, an increase of $49 million compared to $344 million in 2014. Gross profit as a percentage of sales increased to 24% in 2015 compared with 19% in 2014. The increase in gross profit was primarily due to lower raw material costs resulting from lower oil prices, lower manufacturing costs as a result of our cost reduction initiatives, lower distribution costs and favorable foreign currency translation, partly offset by lower sales volume, unfavorable product mix and lower sales prices and a charge of $8 million related to an increase in our inventory reserves for a discontinued product.
SG&A expense of $150 million was $24 million lower than 2014. Our SG&A for 2014 included $18 million of expenses we incurred in connection with the sale of our Chemtura AgroSolutions business. The remaining reduction in SG&A expense from 2014 is the result of our various cost savings initiatives that we announced at the end of 2014, including the elimination of stranded costs associated with our Chemtura AgroSolutions business, offset in part by higher cost accruals under our employee benefit and management incentive plans in 2015 compared to last year due to our improved performance.
Facility closures, severance and related costs in 2015 were $3 million compared with $25 million for 2014. The expense related to the cost reduction initiatives we announced in 2014 and 2013. The restructuring plans in 2014 and 2015 related to both the elimination of stranded costs associated with the sale of our Chemtura AgroSolutions, Consumer Products and Antioxidant businesses as well as initiatives to reduce manufacturing and SG&A costs within our Industrials businesses. Our

35


restructuring plans are described in more detail in Note 3 - Restructuring and Assets Impairment Activities of our Notes to Consolidated Financial Statements.
The loss on sale of business of $4 million in 2015 and the gain on sale of business of $529 million in 2014 are related to the sale of our Chemtura AgroSolutions business to Platform in 2014 and the settlement of working capital adjustments and finalization of other post-closing terms of the sale and purchase agreement in 2015.
In September 2014, we offered vested pension plan participants in our U.S. qualified pension plan who were no longer employed by the Company a limited time opportunity to take their pension benefits as a one-time single lump sum or an immediate annuity. As a result, we recorded a pre-tax non-cash pension settlement charge of $21 million. For further information on this pension annuity transaction, see Note 13 - Pension and Other Post-Retirement Benefit Plans in our Notes to Consolidated Financial Statements.
Other Non-Operating Income and Expense
The following discussion about income and expense components that are not included in the computation of operating income are presented on a total company basis, which is the sum of the Core Segments and the Agrochemical Manufacturing segment.
Interest expense of $30 million during 2015 was $15 million lower than 2014, primarily the result of our repayments of debt utilizing net after-tax cash proceeds from the sale of Chemtura AgroSolutions.
Loss on the early extinguishment of debt of $7 million for 2014 included a call premium and the write-off of unamortized capitalized financing costs and original issuance discount.
Other income, net was $20 million for 2015 compared with $12 million for 2014. Other income, net in 2015 included a gain of $8 million related to the release of cumulative translation adjustments associated with the rationalization of certain European subsidiaries that were no longer required and a gain of $3 million related to the sale of the Platform shares. The remaining activity primarily reflected realized and unrealized foreign exchange gains or losses, most significantly related to the strengthening of the U.S. Dollar against foreign currencies which began in the fourth quarter of 2014.
The income tax expense in 2015 was $16 million compared with a benefit of $192 million in 2014. The tax benefit reported in 2014 included a release of U.S. valuation allowance in the amount of $406 million and the tax expense related to the sale of our Chemtura AgroSolutions business. In 2014, we concluded that the positive evidence that we can utilize our U.S. deferred tax assets before they expire outweighed the negative evidence and as a result we released a majority of our U.S. valuation allowance.
Earnings from continuing operations for 2015 was $136 million, or $1.98 per diluted share, as compared with $771 million, or $8.43 per diluted share in 2014. The after tax gain on the sale of Chemtura AgroSolutions and the tax benefit from the release of the majority of the valuation allowance against our U.S. deferred tax assets were the largest contributors to diluted earnings per share in 2014.
Earnings from discontinued operations, net of tax for 2014, was $1 million, or $0.01 per diluted share, which related to the Consumer Products business.
Loss on sale of discontinued operations, net of tax for 2014, was $9 million, or $0.10 per diluted share, which primarily represented post-closing adjustments and obligations, settlement of working capital claims and fees associated with those adjustments and claims related to the sale of our Consumer Products business.
The following table describes the major factors impacting net sales and operating income for each of our segments:
Net Sales (in millions)
 
Industrial Performance Products
Industrial Engineered Products
Subtotal Core Segments
Agrochemical Manufacturing
Total
2014
 
$
987

$
800

$
1,787

$
403

$
2,190

Changes in sales prices
 
(24
)
12

(12
)

(12
)
Unit volume and mix
 
(55
)
(74
)
(129
)
(2
)
(131
)
Foreign currency
 
(22
)
(16
)
(38
)

(38
)
Below market contract obligation
 



32

32

Divestiture
 



(296
)
(296
)
2015
 
$
886

$
722

$
1,608

$
137

$
1,745


36


Operating Income (in millions)
 
Industrial Performance Products
Industrial Engineered Products
General corporate expense
Other charges (b)
Subtotal Core Segments
Agrochemical Manufacturing
Total
2014
 
$
106

$
16

$
(72
)
$
483

$
533

$
86

$
619

Sale of business
 



(533
)
(533
)

(533
)
Costs associated with the sale of Chemtura AgroSolutions
 


18


18


18

Divestitures
 





(86
)
(86
)
Subtotal
 
106

16

(54
)
(50
)
18


18

Price over raw materials (a)
 
32

28



60


60

Unit volume and mix
 
(27
)
(17
)


(44
)
(1
)
(45
)
Foreign currency
 
6

1



7


7

Manufacturing cost and absorption
 
11

17



28


28

Distribution cost
 
(3
)
9



6


6

Below market contract obligation
 





32

32

Depreciation and amortization expense
 
6

(3
)
2


5

4

9

Pension settlement
 



21

21


21

Facility closures, severance and related costs
 



22

22


22

Impairment charges
 



(1
)
(1
)

(1
)
Other
 
10

7

(12
)

5


5

2015
 
$
141

$
58

$
(64
)
$
(8
)
$
127

$
35

$
162


(a)
Price over raw materials is the sum of the net changes in sales prices and the net changes in raw material costs between the two periods. As the reduction in the costs of certain raw materials result in certain circumstances in reductions in sales prices under certain contractual and negotiated agreements, the change in sales prices net of changes in raw material costs provides a better measure of the impact of sales price changes on our profitability (referred to as "price over raw materials").
(b)
Includes facility closures, severance and related costs, gain (loss) on sale of business, impairment charges and pension settlement.
The following is a discussion of the results of our segments for 2015 compared with 2014.
Industrial Performance Products
Our Industrial Performance segment reported higher operating income on lower net sales for 2015 as compared with 2014.
The decline in net sales resulted from changes in product mix predominantly in our petroleum additives products coupled with overall lower sales volume in both petroleum additives and urethanes product lines. Net sales further declined due to overall lower average sales prices, the result of lower raw material costs and the unfavorable effects of foreign currency translation. As 2015 progressed, we felt the effects of lower demand as our customers began to manage inventory as demand in mining and oil and gas application products weakened. This weakening affected our product mix as we retained a higher volume of some of our lower margin products. Net sales were further impacted by the strengthening of the U.S. Dollar against major foreign currencies resulting in the value of net sales in foreign currency translating to lower U.S. Dollar sales in 2015 as compared with 2014. Overall lower sales prices particularly for our petroleum additives products were principally the result of our contractual and negotiated agreements that in certain circumstances result in reductions in sales prices when certain raw material costs decline.

Despite the reduction in net sales, operating income compared with 2014 was $35 million higher due to the benefit of our ability to hold sales prices for our more specialty products, lower raw material and manufacturing costs and lower SG&A and research and development ("R&D", collectively, “SGA&R”) expense primarily the result of implementing many of the cost reduction initiatives we announced in 2014. The changes in foreign exchange rates provided a net benefit due to the location of our manufacturing footprint such that the reduction in foreign currency denominated production and administrative costs in U.S. dollar terms more than offset the unfavorable translation of foreign currency denominated net sales. These benefits more than offset the impacts of unfavorable volume and product mix described above.

Industrial Engineered Products
Our Industrial Engineered segment reported lower net sales but higher operating income for 2015 compared with 2014.

37


The decline in net sales was primarily related to a decline in overall volume and product mix offset in part by increases in average sales prices. We experienced lower sales volume in our flame retardant products used in energy and electronic applications and in flexible urethane foams used in furniture applications coupled with a reduction in bromine products used in fine chemical applications offset in part by increases in demand for our Emerald Innovation 3000™ product used in insulation foam applications in building and construction and clear brine fluids used in oilfield applications. The growth in net sales of clear brine fluids occurred despite the overall decline in oil and gas exploration in 2015. This is likely due to the timing of the completion of the deep water drilling projects in which our products are used and may not be indicative of future net sales for these products in these applications.

During the first half of 2015, we experienced an interruption in the supply of elemental bromine due to a strike at a third-party supplier. While the strike ended early in the third quarter, it took until the end of the year for supply to fully recover. The fire and explosion at the Tianjin, China port in August caused disruptions to the import and export of hazardous materials in China which led to unfavorable volume impacts on certain of our products. Additionally, the discontinuance of sales of certain phosphorus-based flame products toward the end of 2014 and the discontinuation of sales of certain bromine based biocides when we closed our Adrian, MI manufacturing facility in June 2015 resulted in further sales volume declines year-over-year. Sales prices for our bromine and bromine derivative products started to recover as 2015 progressed, particularly for electronic flame retardant applications. This benefit was offset in part by unfavorable currency translation due to the strengthening of the U.S. Dollar against foreign currencies in 2015.

The benefit of our cost savings initiatives and the increase in sales prices offset the reduction in net sales. In 2015, we generated $58 million in operating profit, a $42 million increase over 2014. The effect of sales volume declines on operating income were offset by the benefit of price over raw material costs, lower manufacturing and distribution costs and lower SGA&R. Operating profit in 2015 was impacted by an $8 million charge to increase our inventory reserves for a discontinued product. By the third quarter of 2015, we had realized the full benefit of our cost reduction initiatives announced in the fourth quarter of 2014, although part of that benefit was offset by the absorption effects of lower sales volume and the increase in our inventory reserves.

Corporate
General corporate expense was $64 million and $72 million in 2015 and 2014, respectively, which included amortization expense related to intangible assets and depreciation expense of $14 million and $16 million in 2015 and 2014, respectively. Our 2014 corporate expense included $18 million of non-recurring costs related to the sale of our Chemtura AgroSolutions business. The remaining increase in corporate expense in 2015 is the result of higher accruals under our employee benefit and management incentive plans in 2015 compared to last year due to improved performance coupled with higher accruals for environmental obligations and project costs partly offset by lower costs as a result of our cost savings initiatives.
Agrochemical Manufacturing
In the first ten months of 2014, our Chemtura AgroSolutions business manufactured and resold agrochemical products to third party distributors and customers. In November 2014, we sold our Chemtura AgroSolutions business to Platform. Under the terms of the sale agreement with Platform, we retained most of the property, plant and equipment used to manufacture products for the Chemtura AgroSolutions business and are continuing to manufacture products for Platform under the supply agreements. We operated under the supply agreements for the two months ended December 31, 2014 and for the twelve months ended December 31, 2015. Therefore, the results of operations in 2014 are not comparable to the result of operations in 2015. In light of the incomparability, we have only provided discussion of the results of operations for 2015 and the net sales and operating profit of this segment prior to the sale in 2014.
Supply Agreement Results
The supply agreements with Platform are designed to recover the actual cash costs incurred to manufacture the products under the agreements. Accordingly, the supply agreements are considered below-market contracts for their full term. Contemporaneous with the sale, we accrued in 2014 an obligation of $230 million, on a discounted basis, which represents the loss of profit on these products over the terms of the supply agreements, including contractual obligations to continue to supply for a period of up to 2 years after termination of the supply agreements. The recognition of the obligation, along with the accretion of the obligation to its undiscounted value of $345 million, will be recorded as net sales on a straight-line basis over the term of each supply agreement.
For the year ended December 31, 2015, the Agrochemical Manufacturing segment net sales were $137 million, which included $38 million related to the recognition of our fulfillment of the obligation, net of accretion, related to the below-market supply agreements. For the two month period ended December 31, 2014, the Agrochemical Manufacturing segment net sales were $22

38


million, which included $6 million related to the recognition of our fulfillment of the obligation, net of accretion related to the below-market supply agreements.
Operating income for the year ended December 31, 2015 was $35 million compared with $6 million for the two months ended December 31, 2014. As the contracts were designed to recover a majority of the costs incurred, operating income reflected the recognition of the obligation, net of accretion, related to the below-market supply agreements, less a small amount of depreciation and amortization that is not included as part of the recoverable costs.
Previous Results of the Chemtura AgroSolutions Business (Pre-Divestiture)
Net sales of the Chemtura AgroSolutions business for the ten months ended October 31, 2014 were $381 million and operating income was $80 million.
ADJUSTED EBITDA
Adjusted EBITDA is a financial measure that is not calculated or presented in accordance with generally accepted accounting principles (“GAAP”). While we believe that such measures are useful in evaluating our performance, investors should not consider them to be a substitute for financial measures prepared in accordance with GAAP. In addition, the financial measures may differ from similarly titled financial measures used by other companies and do not provide a comparable view of our performance relative to other companies in similar industries. Adjusted EBITDA for 2016 , 2015 and 2014 was calculated as follows:
(In millions)
 
2016
 
2015
 
2014
Net (loss) earnings
 
$
(15
)
 
$
136

 
$
763

Interest expense
 
32

 
30

 
45

Loss on early extinguishment of debt
 

 

 
7

Other income, net
 

 
(20
)
 
(12
)
Income tax expense (benefit)
 
29

 
16

 
(192
)
Earnings from discontinued operations, net of tax
 

 

 
(1
)
Loss on sale of discontinued operations, net of tax
 

 

 
9

 
 
 
 
 
 
 
Operating income
 
46

 
162

 
619

Depreciation and amortization
 
85

 
93

 
102

Agrochemical Manufacturing supply agreements
 
(38
)
 
(38
)
 
(6
)
Operational facility closures, severance and related costs
 
1

 
3

 
25

Merger and integration costs
 
13

 

 

Loss (gain) on sale of business
 
1

 
4

 
(529
)
Pension settlement
 
162

 

 
21

UK pension benefit matter
 

 

 
(4
)
Non-cash share-based compensation
 
13

 
12

 
14

Costs associated with the sale of Chemtura AgroSolutions
 

 

 
18

Other adjustments
 
(1
)
 
1

 
2

Adjusted EBITDA
 
$
282

 
$
237

 
$
262


LIQUIDITY AND CAPITAL RESOURCES
We believe that our cash flow from operations, borrowing capacity under our U.S. and international credit facilities and our current cash and cash equivalents provide sufficient liquidity to maintain our current operations and capital expenditure requirements, service our debt and pursue other strategic initiatives.
The following is a discussion of significant factors affecting our liquidity and use of capital resources.
Financing Facilities
Our financing facilities are comprised of public debt, several loans and a revolving line of credit.
Senior Notes

39


In July 2013, we issued in a registered public offering $450 million of 5.75% Senior Notes due 2021 (the "2021 Senior Notes"). As of December 31, 2016 , $450 million remained outstanding. The 2021 Senior Notes are callable at pre-determined fixed rates under the terms described in the 2021 Senior Notes indenture. If we experience certain kinds of changes in control coupled with certain kinds of credit rating downgrades of the 2021 Senior Notes, in each case as defined in the indenture governing the 2021 Senior Notes (the "2021 Indenture"), we may be required to offer to repurchase all of the 2021 Senior Notes at a redemption price (subject to limitations as described in the 2021 Indenture) equal to 101% of the aggregate principal amount plus accrued and unpaid interest. Our Merger with Lanxess would constitute a change of control as defined in the 2021 Indenture.
Loans
In August 2010, we entered into a senior secured term loan facility due 2016 with Bank of America, N.A., as administrative agent, and other lenders party thereto, for an aggregate principal amount of $295 million (the "Term Loan"). The balance outstanding was reduced over time by prepayments of principal, such that by June 30, 2016 only $1 million of principal remained outstanding. In July 2016, we amended our Term Loan to provide for a new $1 million term loan to refinance the outstanding principal of the existing Term Loan. The interest rate for the new term loan is identical to and maintains substantially identical collateral, covenants, events of default, representations and warranties and other terms as the original Term Loan, but with an extended maturity date to July 2017, a waiver of the prepayment requirements for proceeds of asset sales and annual excess cash flow, and a reduction of the annual administrative agency fee. As of December 31, 2016 , $1 million remained outstanding.
We maintain a 5 year secured credit facility of CNY 250 million (approximately $40 million) available through December 2017 (the “China Bank Facility”) with Agricultural Bank of China, Nantong Branch (“ABC Bank”).  The China Bank Facility has been used for funding construction of our manufacturing facility in Nantong, China and is secured by land, property and machinery of our subsidiary Chemtura Advanced Materials (Nantong) Co., Ltd.. Repayments of principal are made in semi-annual installments through December 2017. As of December 31, 2016 , $8 million remained outstanding under the China Bank Facility, which is classified as short term borrowings in our Consolidated Balance Sheet as it matures in December 2017.
Revolving Credit Facilities
In December 2013, we entered into a five-year senior secured revolving credit facility that provides for $175 million available to our domestic subsidiaries (the "US ABL Facility") and €60 million available to Chemtura Sales Europe B.V., a Netherlands subsidiary (the “Foreign ABL Facility”, and together with the US ABL Facility, the “2018 ABL Facility”), subject in each case to availability under a borrowing base. The 2018 ABL Facility provides a $125 million letter of credit sub-facility.
At December 31, 2016 , we had no borrowings under the 2018 ABL Facility. However, we had $14 million of outstanding letters of credit (primarily related to insurance obligations, environmental obligations and banking credit facilities) which utilized available capacity under the facility. At December 31, 2016 , based upon the available borrowing base, we had approximately $154 million of undrawn availability under the 2018 ABL Facility. The 2018 ABL Facility Agreement contains change in control provisions. Our Merger with Lanxess would constitute a change in control under the 2018 ABL Facility Agreement.
We have an uncommitted revolving facility with Bank of America, N.A., Shanghai Branch for supporting the general working capital requirements of our Chinese entities. The facility currently provides for borrowings of up to $10 million. The loans under the facility bear interest at a rate determined from time to time by the bank based on the prevailing People's Bank of China Lending Rate. At December 31, 2016, we had borrowings of $8 million under this facility.
Covenants
These financing facilities, excluding the China Bank Facility and the revolving facility with Bank of America, N.A., Shanghai Branch, contain covenants that limit, among other things, our ability to enter into certain transactions, such as creating liens, incurring additional indebtedness or repaying certain indebtedness, making investments, paying dividends, and entering into acquisitions, dispositions and joint ventures. As of December 31, 2016 , we were in compliance with the maintenance covenant requirements of these financing facilities.
For further discussion of the financing facilities, see Note 7 – Debt in the Notes to our Consolidated Financial Statements.

40


Share Repurchase Program
In October 2014, the Board approved a share repurchase authorization of up to $500 million conditioned upon the sale of our Chemtura AgroSolutions business. In August 2015, the Board authorized an increase to the October 2014 authorization by $150 million, up to $650 million in the aggregate when combined with the October 2014 authorization, and extended the program to December 1, 2016.
During 2016 , we purchased 4.5 million shares for $116 million under our share repurchase program. Due to the pending Merger Transaction with Lanxess, we have ceased share repurchases and the program expired in December 2016.
A further discussion of our share repurchase programs is included in Note 10 - Capital Stock and Earnings (Loss) per Common Share in our Notes to Consolidated Financial Statements.
Pension Annuity Transactions
In February 2016, the US Qualified Plan entered into a purchase agreement for a group annuity contract transferring payment responsibility for retirement pension benefits of approximately 5,000 retirees in the U.S. or their designated beneficiaries. By irrevocably transferring the pension obligations, our overall projected pension benefit obligation was reduced by $363 million, based on the valuation date as of February 17, 2016. The annuity purchase price was $354 million and was funded by the assets of the US Qualified Plan. Additionally, we contributed $35 million of cash to the US Qualified Plan during the first quarter of 2016 to maintain the US Qualified Plan's funded status at the approximate level that existed prior to the pension annuity transaction. With this cash contribution, we did not make any further cash contributions to the US Qualified Plan in 2016 and the level of cash contributions in future years will now be lower than we would have projected prior to the pension annuity transaction.
In September 2014, we offered vested pension plan participants in our U.S. qualified pension plan who were no longer employed by the Company a limited time opportunity to take their pension benefits as a one-time single lump sum or an immediate annuity. Based on the elections received, we reduced our projected benefit obligation and plan assets by $52 million which resulted in a settlement charge in 2014 of $21 million.
Additional information is included in Note 13 - Pension and Other Post-Retirement Benefit Plans in our Notes to Consolidated Financial Statements.
Non-Cash Income
In November 2014, we completed the sale of our Chemtura AgroSolutions business to Platform Specialty Products Corporation ("Platform") and have continued to manufacture products for Platform under several supply agreements and a tolling agreement (collectively, the "supply agreements"). The supply agreements have minimum terms of between two and four years.
The supply agreements with Platform are designed to recover the cash costs incurred to manufacture the products under the agreement. As such, the supply agreements are considered below-market contracts for their full term. In 2014, we recorded an obligation of $230 million, on a discounted basis, which represents the loss of profit on the sale of these products over the terms of the supply agreements, including contractual obligations to continue supply for a period of up to 2 years after the termination of the supply agreements. The recognition of the obligation, along with the accretion of the obligation to its undiscounted value of $345 million, is being recorded as net sales on a straight-line basis over the term of each supply agreement. Although the recognition of the obligation will be recorded as net sales to the Agrochemical Manufacturing segment over this period, this recognition will not generate cash flows during the term of the supply agreements. The change in this obligation that is included in net sales for the year ended December 31, 2016 was $38 million.
For further discussion of the Chemtura AgroSolutions sale, see Note 2 — Mergers and Divestitures in our Notes to Consolidated Financial Statements.
Cash Flows from Operating Activities
Net cash provided by operating activities was $137 million in 2016 compared with net cash provided by operating activities of $159 million in 2015 and net cash used in operating activities of $78 million in 2014 . Changes in key accounts are summarized below:

41


Provided by (used in)
 
 
 
 
 
 
(In millions)
 
2016
 
2015
 
2014
Accounts receivable
 
$
(11
)
 
$
24

 
$
(89
)
Inventories
 
(5
)
 
(5
)
 
(31
)
Accounts payable
 
5

 
(18
)
 
4

Pension and post-retirement health care liabilities
 
(60
)
 
(28
)
 
(48
)

Cash Flows in 2016
During the year ended December 31, 2016, accounts receivable used cash flows of $11 million since December 31, 2015, primarily driven by an increase in days sales outstanding in our Industrial Engineered and Agrochemical Manufacturing segments in the fourth quarter of 2016 compared with the same quarter of 2015 offset by lower sales in our Industrial Performance segment for the same comparison periods.
Inventory used cash flows of $5 million since December 31, 2015 primarily driven by higher inventory levels in our Industrial Engineered segment. The higher inventory levels for the Industrial Engineered segment was primarily due to planned increases in inventory to accommodate the switch of products and the timing of their manufacturing. These inventory increases were partly offset by the utilization of inventory on hand in our Industrial Performance segment to fill orders while our PAO plant in Amsterdam, The Netherlands facility was idled following a process incident and as a result of inventory management strategies.
Accounts payable represented a source of cash flows of $5 million for the year ended December 31, 2016 primarily the result of increased purchases in our Industrial Engineered segment, particularly for our organometallic products, for raw materials related to an increase in product demand and an increase in our Agrochemical Manufacturing segment as we begin to prepare for increases in demand due to the agricultural growing season in early 2017. Our Corporate segment reported an increase related to higher value added tax collections in the last quarter of 2016 as compared to the same quarter in 2015. These increases were partly offset by a decline in purchases in our Industrial Performance segment where we utilized inventory-on-hand to fulfill orders and strategically manage inventory levels.
We used $60 million of cash flow for pension and post-retirement health care liabilities in large part due to our $35 million contribution to the US Qualified Plan described earlier. Cash contributions to fund pension and post-retirement benefit liabilities were $60 million for the year ended December 31, 2016 which included $44 million for domestic plans and $16 million for international plans.
Cash flows from operating activities in 2016 were adjusted by the impact of certain non-cash and other charges, which primarily included the pension settlement charge of $162 million in connection with the pension annuity transaction, depreciation and amortization expense of $85 million , share-based compensation expense of $13 million and merger and integration costs related to the modification of the non-compete agreement with Addivant of $4 million , offset by the recognition of the obligation, net of accretion, for the below-market obligations with Platform of $38 million .
Cash Flows in 2015
During the year ended December 31, 2015, accounts receivable generated cash flows of $24 million since December 31, 2014, primarily driven by decreases in the accounts receivable balances of our Industrial Performance and Industrial Engineered segments. The Industrial Performance segment's decline in accounts receivable was the result of lower net sales and lower sales prices as we passed along a reduction in raw material costs to certain customers in accordance with formula-based contract pricing agreements. Our Industrial Engineered segment's accounts receivable was lower due primarily to lower net sales, primarily related to volume declines coupled with an improvement in collections as compared to 2014. Accounts receivable in our Agrochemical Manufacturing segment also declined from last year due to improved collections from Platform.
Inventory used cash flows of $5 million since December 31, 2014 primarily driven by an increase in our Industrial Engineered segment's inventory balance due principally to a build of inventory coupled with unfavorable absorption variances that were capitalized into inventory during the fourth quarter of 2015 offset by an increase in our inventory reserves related to a discontinued product. This increase was offset by a decrease in inventory in our Industrial Performance segment primarily the result of lower raw material costs. Inventory in our Agrochemical Manufacturing segment remained consistent with levels at December 31, 2014.

42


Accounts payable used cash flows of $18 million for the year ended December 31, 2015 primarily the result of a decrease in accounts payable in our Industrial Performance segment most notably related to the lower cost of raw materials and the timing of our purchases coupled with lower capital spending for our Nantong, China facility since December 31, 2014. This decrease was offset by an increase in accounts payable in our Industrial Engineered segment principally related to negotiated longer payment terms with our vendors. Our Agrochemical Manufacturing segment accounts payable decreased since December 31, 2014 due to the timing of production for Platform under the supply agreements.
We used $28 million of cash flow for pension and post-retirement health care liabilities in large part due to cash contributions to fund pension and post-retirement benefit liabilities of $31 million for the year ended December 31, 2015 which included $24 million for domestic plans and $7 million for international plans.
Cash flows from operating activities in 2015 were adjusted by the impact of certain non-cash and other charges, which primarily included depreciation and amortization expense of $ 93 million , stock-based compensation expense of $12 million and a loss on the sale of our Chemtura AgroSolutions business of $4 million offset by the recognition of the obligation, net of accretion, for the below-market obligations with Platform of $38 million and a gain of $8 million recorded for the release of cumulative translation adjustment associated with the liquidation of certain wholly-owned subsidiaries.
Cash Flows in 2014
The impact of changes in working capital of the Chemtura AgroSolutions business through the date of sale in November 2014 are included in the table above. During the year ended December 31, 2014, accounts receivable represented a use of cash of $89 million since December 31, 2013, primarily driven by increases in the accounts receivable balances of our Agrochemical Manufacturing and Industrial Engineered segments. The Agrochemical Manufacturing segment's increase was primarily due to the increase in demand particularly in North America and Europe for the 2014 growing season, extended terms for certain products in North America, a reduction in the utilization of financing facilities with banks in Brazil coupled with an increase in amounts due from Platform related to production under the supply agreements. The increase in our Industrial Engineered segment accounts receivable was due primarily to stronger sales and longer payment terms in Asia during the last months of 2014 coupled with slower payments from customers in Europe.
Inventory represented a use of cash of $31 million during the year ended December 31, 2014 primarily driven by increases in inventory balances in our Agrochemical Manufacturing and Industrial Performance segments, offset by inventory decreases in our Industrial Engineered segment. Our Agrochemical Manufacturing segment continued to build inventory both prior and subsequent to the sale of the Chemtura AgroSolutions business in anticipation of the 2015 growing season. Increased inventory balances in our Industrial Performance segment from December 31, 2013 is primarily the result of higher raw material prices, lower sales volume in intermediate, inhibitor and detergent petroleum additive products and a build of inventory at our new Amsterdam, The Netherlands plant as production increased throughout 2014. These increases were offset by a reduction in inventory in our Industrial Engineered segment primarily related to additional sales volumes in Emerald Innovation TM 3000 products and clear brine fluids and lower unfavorable manufacturing variances capitalized in 2014 compared with 2013, offset by lower sales volumes for bromine based and PCC products.
Accounts payable represented a source of cash of $4 million for the year ended December 31, 2014, primarily in our Industrial Performance segment due to higher inventory purchases.
Pension and post-retirement health care liabilities represented a use of cash of $48 million primarily due to the funding of benefit obligations.  Cash contributions to fund pension and post-retirement benefit liabilities amounted to $49 million for the year ended December 31, 2014 which included $27 million for domestic plans and $22 million for international plans.
Cash flows from operating activities in 2014 were adjusted by the impact of certain non-cash and other charges, which primarily included a gain on the sale of our Chemtura AgroSolutions business of $529 million (the cash flows associated with the gain being reported in investing activities), a deferred tax benefit of $274 million primarily related to a release of the U.S valuation allowance on certain of our deferred tax assets, depreciation and amortization expense of $102 million, a charge related to the settlement of a pension obligation of $21 million, stock-based compensation expense of $14 million, loss on sale of discontinued operations of $9 million, loss on early extinguishment of debt of $7 million and the recognition of the obligation, net of accretion, for the below-market obligations with Platform of $6 million for the two month period subsequent to the sale.

43


Cash Flows from Investing and Financing Activities
Investing Activities
Net cash used in investing activities was $82 million for 2016.  Investing activities included capital expenditures of $88 million for U.S. and international facilities, environmental and other compliance requirements offset by $6 million from the collection of the remaining receivable from the sale in 2011 of our 50% interest in Tetrabrom Technologies Ltd.
Net cash used in investing activities was $23 million for 2015.  Investing activities included capital expenditures of $80 million for U.S. and international facilities, environmental and other compliance requirements offset by proceeds from the sale of the Platform shares of $54 million. Also included in investing activities were remaining proceeds net of transaction costs of $3 million primarily from the sale of our Chemtura AgroSolutions business.
Net cash provided by investing activities was $871 million for 2014.  Investing activities included proceeds net of transaction costs and cash transferred of $965 million, $3 million and $3 million from the sale of our Chemtura AgroSolutions, Antioxidant and Consumer Products businesses, respectively, and $13 million from the collection of a receivable from the sale of our 50% interest in Tetrabrom Technologies Ltd. in 2011. Investing activities also included capital expenditures of $113 million for U.S. and international facilities, environmental and other compliance requirements.
Financing Activities
Net cash used in financing activities was $151 million for 2016. Financing activities primarily included the repurchase of $116 million of our common stock under our share repurchase programs and the repayment of $39 million in principal of the Term Loan.
Net cash used in financing activities was $189 million for 2015. Financing activities primarily included the repurchase of $150 million of our common stock under our share repurchase programs, the repayment of $42 million in principal of the Term Loan, the repayment of $15 million of our facility with the Agricultural Bank of China, Nantong Branch and payments on other long-term borrowings of $3 million, which were funded from the net after-tax cash proceeds of our business divestitures and cash on hand. Other financing sources in the period were proceeds from the exercise of stock options of $20 million.
Net cash used in financing activities was $935 million for 2014. Financing activities primarily included the repurchase of $618 million of our common stock under our share repurchase programs, the repayment of $236 million in principal of the Term Loan, the purchase of the remaining 7.875% Senior Notes due 2018 (the "2018 Senior Notes") of $105 million (including the call premium of $4 million) and payments on other long-term borrowings of $9 million, which were funded through our business divestitures and cash on hand. Other financing sources in the period were borrowings for capital improvements related to our facility in Nantong, China of $16 million and proceeds from the exercise of stock options of $10 million.
Contractual Obligations and Other Cash Requirements
We have obligations to make future cash payments under contracts and commitments, including long-term debt agreements, lease obligations, environmental liabilities, post-retirement health care liabilities and other long-term liabilities.
The following table summarizes our significant contractual obligations and other cash commitments as of December 31, 2016 .
( In millions )
 
Payments Due by Period
 
 
Contractual Obligations and Other Cash Commitments*
 
Total
 
2017
 
2018
 
2019
 
2020
 
2021
 
2022 and Thereafter
 
 
Total debt
 
$
471

 
$
19

 
$
2

 
$

 
$

 
$
450

 
$

 
(a)
Operating leases
 
34

 
8

 
7

 
7

 
3

 
2

 
7

 
(b)
Interest payments
 
133

 
28

 
27

 
26

 
26

 
26

 

 
(c)
Environmental liabilities
 
61

 
13

 
5

 
5

 
6

 
4

 
28

 
(d)
Post-retirement health care liabilities
 
86

 
8

 
7

 
7

 
7

 
6

 
51

 
(e)
Total
 
$
785

 
$