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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q

☑   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019
OR
☐   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-38176
_________________________________
VNTR-20190930_G1.JPG
Venator Materials PLC
(Exact name of registrant as specified in its charter)
_________________________________
England and Wales 98-1373159
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
Titanium House, Hanzard Drive, Wynyard Park,
Stockton-On-Tees, TS22, 5FD, United Kingdom
+44 (0) 1740 608 001
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Ordinary Shares, $0.001 par value per share VNTR New York Stock Exchange
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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company," in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
_________________________________
As of October 30, 2019, the registrant had outstanding 106,564,828 ordinary shares, $0.001 par value per share.




TABLE OF CONTENTS
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1


GENERAL

Except when the context otherwise requires or where otherwise indicated, (1) all references to "Venator," the "Company," "we," "us" and "our" refer to Venator Materials PLC and its subsidiaries, (2) all references to "Huntsman" refer to Huntsman Corporation and its subsidiaries, (3) all references to the "Titanium Dioxide" segment or business refer to the titanium dioxide ("TiO2") business of Venator, (4) all references to the "Performance Additives" segment or business refer to the functional additives, color pigments, timber treatment and water treatment businesses of Venator, and (5) we refer to the internal reorganization prior to our initial public offering ("IPO"), the separation transactions initiated to separate the Venator business from Huntsman’s other businesses, including the entry into and effectiveness of the separation agreement and ancillary agreements, and the financing arrangements and debt, comprising the senior secured term loan facility (the "Term Loan Facility"), the asset-based revolving facility (the "ABL Facility" and, together with the Term Loan Facility, the "Senior Credit Facilities") and the 5.75% senior notes due 2025 (the "Senior Notes"), including the use of the net proceeds of the Senior Credit Facilities and the Senior Notes, which were used to repay intercompany debt we owed to Huntsman and to pay related fees and expenses, as the "separation," which occurred on August 8, 2017.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain information set forth in this report contains "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 and Exchange Act of 1934 (the "Exchange Act"). All statements other than historical or current factual information are forward-looking statements, including without limitation statements regarding: projections of revenue, expenses, profit, margins, tax rates, tax provisions, cash flows, pension and benefit obligations and funding requirements, our liquidity position or other projected financial measures; management’s plans and strategies for future operations, including statements relating to anticipated operating performance, cost reductions, construction cost estimates, restructuring activities, new product and service developments, competitive strengths or market position, acquisitions, divestitures, spin-offs or other distributions, strategic opportunities, securities offerings, share repurchases, dividends and executive compensation; growth, declines and other trends in markets we sell into; new or modified laws, regulations and accounting pronouncements; legal proceedings, environmental, health and safety ("EHS") matters, tax audits and assessments and other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; general economic and capital markets conditions; the timing of any of the foregoing; assumptions underlying any of the foregoing; and any other statements that address events or developments that we intend or believe will or may occur in the future. In some cases, forward-looking statements can be identified by terminology such as "believes," "expects," "may," "will," "should," "anticipates," "estimates" or "intends" or the negative of such terms or other comparable terminology, or by discussions of strategy. We may also make additional forward-looking statements from time to time. All such subsequent forward-looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary statements.

Forward-looking statements are based on certain assumptions and expectations of future events which may not be accurate or realized. Forward-looking statements also involve risks and uncertainties, many of which are beyond our control. Important factors that may materially affect such forward-looking statements and projections include:
 
volatile global economic conditions;
cyclical and volatile TiO2 product applications;
highly competitive industries and the need to innovate and develop new products;
industry production capacity and operating rates;
our ability to successfully transfer production of certain specialty and differentiated products from our Pori, Finland manufacturing facility to other sites within our manufacturing network and the costs associated with such transfer and the planned closure of the facility;
economic conditions and regulatory changes following the likely exit of the United Kingdom (the "U.K.") from the European Union ("EU");
increased manufacturing, labeling and waste disposal regulations associated with some of our products, including the outcome of the pending potential classification of TiO2 as a carcinogen in the EU, or any increased regulatory scrutiny;
2


planned and unplanned production shutdowns, turnarounds, outages and other disruptions at our or our suppliers' manufacturing facilities;
our ability to cover costs from production disruptions, including construction costs and lost revenue, with insurance proceeds;
fluctuations in currency exchange rates and tax rates;
impacts on the markets for our products and the broader global economy from the imposition of tariffs by the U.S. and other countries;
price volatility or interruptions in supply of raw materials and energy;
our ability to realize financial and operational benefits from our business improvement plans and initiatives;
changes to laws, regulations or the interpretation thereof;
our ability to successfully grow and transform our business, including by way of acquisitions, divestments and restructuring initiatives;
differences in views with our joint venture participants;
high levels of indebtedness;
EHS laws and regulations;
our ability to obtain future capital on favorable terms;
seasonal sales patterns in our product markets;
our ability to successfully defend legal claims against us, or to pursue legal claims against third parties;
our ability to adequately protect our critical information technology systems;
our ability to comply with expanding data privacy regulations;
failure to maintain effective internal controls over financial reporting and disclosure;
our indemnification of Huntsman and other commitments and contingencies;
financial difficulties and related problems experienced by our customers, vendors, suppliers and other business partners;
failure to enforce our intellectual property rights;
our ability to effectively manage our labor force; and
conflicts, military actions, terrorist attacks, cyber-attacks and general instability.

All forward-looking statements, including, without limitation, management’s examination of historical operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them, but there can be no assurance that management’s expectations, beliefs and projections will result or be achieved. All forward-looking statements apply only as of the date made. We undertake no obligation to publicly update or revise forward-looking statements whether because of new information, future events or otherwise, except as required by securities and other applicable law.

There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in or contemplated by this report. Any forward-looking statements should be considered in light of the risks set forth in "Part II. Item 1A. Risk Factors."
3


PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

VENATOR MATERIALS PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except par value) September 30, 2019 December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents(a)
$ 40    $ 165   
Accounts receivable (net of allowance for doubtful accounts of $4 and $5, respectively)(a)
358    351   
Accounts receivable from affiliates   —   
Inventories(a)
496    538   
Prepaid expenses 24    20   
Other current assets 64    51   
Total current assets 990    1,125   
Property, plant and equipment, net(a)
936    994   
Operating lease right-of-use assets(a)
42    —   
Intangible assets, net(a)
22    16   
Investment in unconsolidated affiliates 84    83   
Deferred income taxes 181    178   
Other noncurrent assets 75    89   
Total assets $ 2,330    $ 2,485   
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable(a)
$ 273    $ 382   
Accounts payable to affiliates 14    18   
Accrued liabilities(a)
108    135   
Current operating lease liability(a)
  —   
Current portion of debt(a)
16     
Total current liabilities 419    543   
Long-term debt 737    740   
Operating lease liability(a)
35    —   
Other noncurrent liabilities 260    313   
Noncurrent payable to affiliates 34    34   
Total liabilities 1,485    1,630   
Commitments and contingencies (Notes 12 and 13)
Equity
Ordinary shares $0.001 par value, 200 shares authorized, each, 107 and 106 issued and outstanding, respectively
—    —   
Additional paid-in capital 1,321    1,316   
Retained deficit (97)   (96)  
Accumulated other comprehensive loss (387)   (373)  
Total Venator Materials PLC shareholders' equity 837    847   
Noncontrolling interest in subsidiaries    
Total equity 845    855   
Total liabilities and equity $ 2,330    $ 2,485   

(a) At September 30, 2019 and December 31, 2018, the following amounts from consolidated variable interest entities are included in the respective balance sheet captions above: $5 each of cash and cash equivalents; $5 each of accounts receivable, net; $1 each of inventories; $5 each of property, plant and equipment, net; $1 and nil of operating lease right-of-use assets; $12 and $14 of intangible assets, net; $1 each of accounts payable; $2 and $4 of accrued liabilities; $1 and nil of operating lease liabilities; and $2 each of current portion of debt. See "Note 6. Variable Interest Entities."

See notes to unaudited condensed consolidated financial statements.
4


VENATOR MATERIALS PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
September 30,
Nine months ended
September 30,
(Dollars in millions, except per share amounts) 2019 2018 2019 2018
Trade sales, services and fees, net $ 526    $ 533    $ 1,666    $ 1,781   
Cost of goods sold 464    463    1,461    1,110   
Operating expenses:
Selling, general and administrative
45    52    138    162   
Restructuring, impairment, and plant closing and transition costs 12    428    24    573   
Other operating expense (income), net     12    (8)  
Total operating expenses 62    485    174    727   
Operating (loss) income —    (415)   31    (56)  
Interest expense (13)   (14)   (40)   (41)  
Interest income       11   
Other income        
(Loss) income before income taxes (9)   (421)     (78)  
Income tax (expense) benefit (8)   55    —    (10)  
Net (loss) income (17)   (366)     (88)  
Net income attributable to noncontrolling interests (2)   (2)   (4)   (6)  
Net loss attributable to Venator $ (19)   $ (368)   $ (1)   $ (94)  
Per Share Data:
Loss attributable to Venator Materials PLC ordinary shareholders, basic $ (0.18)   $ (3.46)   $ (0.01)   $ (0.88)  
Loss attributable to Venator Materials PLC ordinary shareholders, diluted $ (0.18)   $ (3.46)   $ (0.01)   $ (0.88)  

See notes to unaudited condensed consolidated financial statements.
5


VENATOR MATERIALS PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three months ended
September 30,
Nine months ended
September 30,
(Dollars in millions) 2019 2018 2019 2018
Net (loss) income $ (17)   $ (366)   $   $ (88)  
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment
(34)     (36)   (49)  
Pension and other postretirement benefits adjustments
    12    10   
Hedging instruments
  —    10     
Total other comprehensive (loss) income, net of tax (25)   12    (14)   (34)  
Comprehensive loss (42)   (354)   (11)   (122)  
Comprehensive income attributable to noncontrolling interest (2)   (2)   (4)   (6)  
Comprehensive loss attributable to Venator $ (44)   $ (356)   $ (15)   $ (128)  

See notes to unaudited condensed consolidated financial statements.
6


VENATOR MATERIALS PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
Total Venator Materials PLC Equity
Ordinary Shares Additional Paid-in Capital Retained Deficit Accumulated Other Comprehensive Loss Noncontrolling Interest in Subsidiaries Total
(In millions) Shares Amount
Balance, January 1, 2019 106 $ —    $ 1,316    $ (96)   $ (373)   $   $ 855   
Net (loss) income
—    —    (3)   —      (2)  
Other comprehensive income, net of tax
—    —    —    19    —    19   
Dividends paid to noncontrolling interests
—    —    —    —    (1)   (1)  
Activity related to stock plans
1 —      —    —    —     
Balance, March 31, 2019 107 $ —    $ 1,317    $ (99)   $ (354)   $   $ 872   
Net income
—    —    21    —      22   
Other comprehensive loss, net of tax
—    —    —    (8)   —    (8)  
Dividends paid to noncontrolling interests
—    —    —    —    (2)   (2)  
Activity related to stock plans
—      —    —    —     
Balance, June 30, 2019 107 $ —    $ 1,319    $ (78)   $ (362)   $   $ 886   
Net (loss) income
—    —    (19)   —      (17)  
Other comprehensive loss, net of tax
—    —    —    (25)   —    (25)  
Dividends paid to noncontrolling interests
—    —    —    —    (1)   (1)  
Activity related to stock plans
—      —    —    —     
Balance, September 30, 2019 107 $ —    $ 1,321    $ (97)   $ (387)   $   $ 845   

Total Venator Materials PLC Equity
Ordinary Shares Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest in Subsidiaries Total
(In millions) Shares Amount
Balance, January 1, 2018 106 $ —    $ 1,311    $ 67    $ (283)   $ 10    $ 1,105   
Net income
—    —    78    —      80   
Other comprehensive income, net of tax
—    —    —    53    —    53   
Dividends paid to noncontrolling interests
—    —    —    —    (2)   (2)  
Activity related to stock plans
—      —    —    —     
Balance, March 31, 2018 106 $ —    $ 1,312    $ 145    $ (230)   $ 10    $ 1,237   
Net income
—    —    196    —      198   
Other comprehensive loss, net of tax
—    —    —    (99)   —    (99)  
Dividends paid to noncontrolling interests
—    —    —    —    (3)   (3)  
Activity related to stock plans
—      —    —    —     
Balance, June 30, 2018 106 $ —    $ 1,313    $ 341    $ (329)   $   $ 1,334   
Net (loss) income
—    —    (368)   —      (366)  
Other comprehensive loss, net of tax
—    —    —    12    —    12   
Dividends paid to noncontrolling interests
—    —    —    —    (2)   (2)  
Activity related to stock plans
—      —    —    —     
Balance, September 30, 2018 106 $ —    $ 1,314    $ (27)   $ (317)   $   $ 979   

See notes to unaudited condensed consolidated financial statements.
7


VENATOR MATERIALS PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30,
(Dollars in millions) 2019 2018
Operating Activities:
Net income (loss) $   $ (88)  
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization 82    102   
Deferred income taxes (5)   (6)  
Noncash restructuring and impairment charges   539   
Noncash loss (gain) on foreign currency transactions   (4)  
Other, net    
Changes in operating assets and liabilities:
Accounts receivable (28)   (14)  
Inventories 27    (67)  
Prepaid expenses (5)   (9)  
Other current assets (1)   (17)  
Other noncurrent assets (1)   (1)  
Accounts payable (72)   (18)  
Accrued liabilities (16)   (94)  
Other noncurrent liabilities (36)   (24)  
Net cash (used in) provided by operating activities (36)   306   
Investing Activities:
Capital expenditures (110)   (272)  
Cash received from unconsolidated affiliates 33    25   
Investment in unconsolidated affiliates (35)   (19)  
Cash received from notes receivable 12    —   
Other, net (1)   —   
Net cash used in investing activities (101)   (266)  
Financing Activities:
Net borrowings on notes payable   —   
Repayment of third-party debt (4)   (10)  
Proceeds from the termination of cross currency swap contracts 15    —   
Dividends paid to noncontrolling interests (4)   (7)  
Other, net (3)   —   
Net cash provided by (used in) financing activities 13    (17)  
Effect of exchange rate changes on cash (1)   (10)  
Net change in cash and cash equivalents (125)   13   
Cash and cash equivalents at beginning of period 165    238   
Cash and cash equivalents at end of period $ 40    $ 251   
Supplemental cash flow information:
Cash paid for interest $ 41    $ 41   
Cash paid for income taxes   28   
Supplemental disclosure of noncash activities:
Capital expenditures included in accounts payable as of September 30, 2019 and 2018, respectively $ 28    $ 50   

See notes to unaudited condensed consolidated financial statements.
8


VENATOR MATERIALS PLC AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. General, Description of Business, Recent Developments and Basis of Presentation

Description of Business

Venator became an independent publicly traded company following our IPO and separation from Huntsman Corporation in August 2017. Venator operates in two segments: Titanium Dioxide and Performance Additives. The Titanium Dioxide segment primarily manufactures and sells TiO2, and operates eight TiO2 manufacturing facilities across the globe. The Performance Additives segment manufactures and sells functional additives, color pigments, timber treatment and water treatment chemicals. This segment operates 16 manufacturing and processing facilities globally.

Basis of Presentation

Our unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP" or "U.S. GAAP") and in management’s opinion reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of results of operations, comprehensive income, financial position and cash flows for the periods presented. Results for interim periods are not necessarily indicative of those to be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated and combined financial statements and notes to consolidated and combined financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2018 for our Company.

In the notes to unaudited condensed consolidated financial statements, all dollar and share amounts, except per share amounts, in tabulations are in millions unless otherwise indicated.

Note 2. Recently Issued Accounting Pronouncements

Accounting Pronouncements Adopted During the Period

Effective January 1, 2019, we adopted Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842) using the modified retrospective approach which applies the provisions of the standard at the effective date without adjusting the comparative periods presented. The adoption of this ASU did not result in a cumulative effect adjustment to the opening balance of retained earnings. This ASU requires substantially all leases to be recognized on the balance sheet as right-of-use assets ("ROU assets") and lease obligations. Additional qualitative and quantitative disclosures are also required. Adoption of the new standard resulted in the recording of an operating lease ROU asset of $47 million and a lease liability of $49 million. The adoption of this ASU did not have a material impact on our condensed consolidated statements of operations or cash flows. Our accounting for finance leases remained substantially unchanged.

We elected the following optional practical expedients allowed under the ASU: (i) we applied the package of practical expedients permitting entities not to reassess under the new standard our prior conclusions about lease identification, classification or initial direct costs for any leases existing prior to the effective date; (ii) we elected to account for lease and associated non-lease components as a single lease component for all asset classes with the exception of buildings and (iii) we do not recognize ROU assets and related lease obligations with lease terms of 12 months or less from the commencement date.

In February 2018, the Financial Accounting Standards Board ("FASB") issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220). This standard provides an option to reclassify stranded tax effects within accumulated other comprehensive income (loss) to retained earnings due to the U.S. federal corporate income tax rate change in the Tax Cuts and Jobs Act of 2017 (the "Tax Act"). This standard is effective for interim and annual reporting periods beginning after December 15, 2018. The adoption of this ASU did not have a material impact on our unaudited condensed consolidated statement of comprehensive income.

9


Accounting Pronouncements Pending Adoption in Future Periods

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendments in this ASU replace the incurred loss impairment methodology with a methodology that reflects expected credit losses. This update is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The new standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for fiscal years beginning after December 15, 2018. We have completed our assessment and we do not anticipate this will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20). The amendments in this ASU add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. This ASU eliminates the requirement to disclose the amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year. The ASU also removes the disclosure requirements for the effects of a one-percentage-point change on the assumed health care costs and the effect of this change in rates on service cost, interest cost and the benefit obligation for postretirement health care benefits. This standard is effective for fiscal years ending after December 15, 2020, and must be applied on a retrospective basis. Since the ASU is related to disclosure requirements only, this adoption will not have a material impact on our consolidated financial statements.

Note 3. Leases

We have leases for warehouses, office space, land, office equipment, production equipment and automobiles. ROU assets and lease obligations are recognized at the lease commencement date based on the present value of lease payments over the lease term. Operating lease ROU assets and liabilities are included in operating lease right-of-use assets, current operating lease liabilities, and operating lease liabilities on our condensed consolidated balance sheet. Finance leases ROU assets are included in property, plant and equipment, net, while finance lease liabilities are included in other non-current liabilities. As the implicit rate is not readily determinable in most of our lease arrangements, we use our incremental borrowing rate based on information available at the commencement date in order to determine the net present value of lease payments. We give consideration to our recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates. We have lease agreements that contain lease and non-lease components.

We determine if an arrangement is a lease or contains a lease at inception. Certain leases contain renewal options that can extend the term of the lease for one year or more. Our leases have remaining lease terms of up to 92 years, some of which include options to extend the lease term for up to 20 years. Options are recognized as part of our ROU assets and lease liabilities when it is reasonably certain that we will extend that option. Sublease arrangements and leases with residual value guarantees, sale leaseback terms or material restrictive covenants, are immaterial. Lease payments include fixed and variable lease components. Variable components are derived from usage or market-based indices, such as the consumer price index. As of September 30, 2019, we do not have leases initiated but not yet commenced which are expected to commence during the remainder of 2019.

The components of lease expense were as follows:
Lease Cost Three months ended September 30, 2019 Nine months ended September 30, 2019
Operating lease cost $   $ 10   
Finance lease cost:
     Amortization of right-of-use assets —     
     Interest on lease liabilities —    —   
Short-term lease cost —     

10


Supplemental balance sheet information related to leases was as follows:
Leases As of September 30, 2019
Assets
    Operating Lease Right-of-Use Assets $ 42   
Finance Lease Right-of-Use Assets, at cost $ 13   
Accumulated Depreciation (4)  
Finance Lease Right-of-Use Assets, net $  
Liabilities
Operating Lease Obligation
Current $  
Non-Current 35   
Total Operating Lease Liabilities $ 43   
Finance Lease Obligation
Current $  
Non-Current  
Total Finance Lease Liabilities $ 10   

Cash paid for amounts included in the present value of operating lease liabilities were as follows:
Cash Flow Information Three months ended September 30, 2019 Nine months ended September 30, 2019
Operating cash flows from operating leases $   $ 10   
Operating cash flows from finance leases —     
Financing cash flows from finance leases —    —   

Lease Term and Discount Rate As of September 30, 2019
Weighted average remaining lease term (years)
Operating leases 12.7
Finance leases 7.1
Weighted average discount rate
Operating leases 7.1  %
Financing leases 5.2  %
11


Maturities of lease liabilities were as follows:
September 30, 2019 Operating Leases Finance Leases Total
2019 (remaining) $   $ —    $  
2020 10      12   
2021     10   
2022      
2023      
After 2023 40      47   
Total lease payments $ 73    $ 12    $ 85   
Less: Interest 30      32   
Present value of lease liabilities $ 43    $ 10    $ 53   

Disclosures related to periods prior to adoption of the New Lease Standard
The total expense recorded under operating lease agreements in the consolidated and combined statements of operations was $16 million for the year ended December 31, 2018. Future minimum lease payments under noncancelable operating leases as of December 31, 2018 were as follows:
 December 31, Operating Leases Capital Leases
2019 $ 13    $  
2020 11     
2021    
2022    
2023    
Thereafter 40     
Total $ 83    $ 13   
Less: Amounts representing interest  
Present value of minimum lease payments $ 10   
Less: Current portion of capital leases  
Long-term portion of capital leases $  

Note 4. Revenue

We generate substantially all of our revenues through sales of inventory in the open market and via long-term supply agreements. At contract inception, we assess the goods promised in our contracts and identify a performance obligation for each promise to transfer to the customer a distinct good. In substantially all cases, a contract has a single performance obligation to deliver a promised good to the customer. Revenue is recognized when the performance obligations under the terms of our contracts are satisfied. Generally, this occurs at the time of shipping, at which point the control of the goods transfers to the customer. Further, in determining whether control has transferred, we consider if there is a present right to payment and legal title, along with risks and rewards of ownership having transferred to the customer. Revenue is measured as the amount of consideration we expect to receive in exchange for transferred goods. Sales, value added, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. We have elected to account for all shipping and handling activities as fulfillment costs. We recognize these costs for shipping and handling when control over products have transferred to the customer as an expense in cost of goods sold. We have also elected to expense commissions when incurred as the amortization period of the commission asset that we would have otherwise recognized is less than one year.

The following table disaggregates our revenue by major geographical region for the three and nine months ended September 30, 2019 and 2018:
12


Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Titanium Dioxide Performance Additives Total Titanium Dioxide Performance Additives Total
Europe $ 192    $ 43    $ 235    $ 620    $ 147    $ 767   
North America 80    53    133    245    175    420   
Asia 85    23    108    269    66    335   
Other 39    11    50    126    18    144   
Total Revenues $ 396    $ 130    $ 526    $ 1,260    $ 406    $ 1,666   

Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
Titanium Dioxide Performance Additives Total Titanium Dioxide Performance Additives Total
Europe $ 192    $ 48    $ 240    $ 661    $ 165    $ 826   
North America 73    68    141    225    223    448   
Asia 85    21    106    278    78    356   
Other 39      46    136    15    151   
Total Revenues $ 389    $ 144    $ 533    $ 1,300    $ 481    $ 1,781   

The following table disaggregates our revenue by major product line for the three and nine months ended September 30, 2019 and 2018:
Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Titanium Dioxide Performance Additives Total Titanium Dioxide Performance Additives Total
TiO2
$ 396    $ —    $ 396    $ 1,260    $ —    $ 1,260   
Color Pigments —    65    65    —    205    205   
Functional Additives —    29    29    —    94    94   
Timber Treatment —    31    31    —    91    91   
Water Treatment —        —    16    16   
Total Revenues $ 396    $ 130    $ 526    $ 1,260    $ 406    $ 1,666   
Three Months Ended September 30, 2018 Nine Months Ended September 30, 2018
Titanium Dioxide Performance Additives Total Titanium Dioxide Performance Additives Total
TiO2
$ 389    $ —    $ 389    $ 1,300    $ —    $ 1,300   
Color Pigments —    71    71    —    237    237   
Functional Additives —    34    34    —    114    114   
Timber Treatment —    34    34    —    112    112   
Water Treatment —        —    18    18   
Total Revenues $ 389    $ 144    $ 533    $ 1,300    $ 481    $ 1,781   

The amount of consideration we receive and revenue we recognize is based upon the terms stated in the sales contract, which may contain variable consideration such as discounts or rebates. We also give our customers a limited right to return products that have been damaged, do not satisfy their specifications, or for other specific reasons. Payment terms on product sales to our customers typically range from 30 days to 90 days. Although certain exceptions exist where standard payment terms are exceeded, these instances are infrequent and do not exceed one year. Discounts are allowed for some customers for early payment or if certain volume commitments are met. As our standard payment terms are less than one year, we have elected to not assess whether a contract has a significant financing component. In order to estimate the applicable variable consideration at the time of revenue recognition, we use historical and current trend information to estimate the amount of discounts, rebates, or returns to which customers are likely to be entitled. Historically, actual discount or rebate adjustments relative to those estimated and accrued at the point of which revenue is recognized have not materially differed.

13


Note 5. Inventories

Inventories are stated at the lower of cost or market, with cost determined using first-in, first-out and average cost methods for different components of inventory. Inventories at September 30, 2019 and December 31, 2018 consisted of the following:
September 30, 2019 December 31, 2018
Raw materials and supplies $ 159    $ 165   
Work in process 47    56   
Finished goods 290    317   
Total $ 496    $ 538   


Note 6. Variable Interest Entities

We evaluate our investments and transactions to identify variable interest entities for which we are the primary beneficiary. We hold a variable interest in the following joint ventures for which we are the primary beneficiary:

Pacific Iron Products Sdn Bhd is our 50%-owned joint venture with Coogee Chemicals that manufactures products for Venator. It was determined that the activities that most significantly impact its economic performance are raw material supply, manufacturing and sales. In this joint venture we supply all the raw materials through a fixed cost supply contract, operate the manufacturing facility and market the products of the joint venture to customers. Through a fixed price raw materials supply contract with the joint venture we are exposed to the risk related to the fluctuation of raw material pricing. As a result, we concluded that we are the primary beneficiary.

Viance, LLC ("Viance") is our 50%-owned joint venture with DuPont de Nemours, Inc. Viance markets timber treatment products for Venator. We have determined that the activity that most significantly impacts Viance’s economic performance is manufacturing. The joint venture sources all of its products through a contract manufacturing arrangement at our Harrisburg, North Carolina facility and we bear a disproportionate amount of working capital risk of loss due to the supply arrangement whereby we control manufacturing on Viance’s behalf. As a result, we concluded that we are the primary beneficiary.

Creditors of these entities have no recourse to Venator’s general credit. As the primary beneficiary of these variable interest entities at September 30, 2019, the joint ventures’ assets, liabilities and results of operations are included in Venator’s unaudited condensed consolidated financial statements.

The revenues, income before income taxes and net cash provided by operating activities for our variable interest entities for the three and nine months ended September 30, 2019 and 2018 are as follows:
Three months ended
September 30,
Nine months ended
September 30,
2019 2018 2019 2018
Revenues $ 24    $ 28    $ 71    $ 94   
Income before income taxes       11   
Net cash provided by operating activities     10    14   



14


Note 7. Restructuring, Impairment, and Plant Closing and Transition Costs

Venator has initiated various restructuring programs in an effort to reduce operating costs and maximize operating efficiency.

Restructuring Activities

Company-wide Restructuring

In January 2019, we implemented a plan to reduce costs and improve efficiency of certain company-wide functions. As part of the program, we recorded restructuring expense of $1 million and $5 million for the three and nine months ended September 30, 2019, all of which related to workforce reductions. We expect that additional costs related to this plan will be immaterial.

Titanium Dioxide Segment

In July 2016, we implemented a plan to close our Umbogintwini, South Africa Titanium Dioxide manufacturing facility. As part of the program, we recorded restructuring expense of nil and $1 million, respectively, for the three and nine months ended September 30, 2019 and $1 million and $3 million for the three and nine months ended September 30, 2018, respectively, all of which related to plant shutdown costs. We expect further charges as part of this program to be immaterial.

In March 2017, we implemented a plan to close the white end finishing and packaging operation of our Titanium Dioxide manufacturing facility at our Calais, France site. The announced plan follows the 2015 closure of the black end manufacturing operations and would result in the closure of the entire facility. As part of the program, we recorded restructuring expense of $3 million and $5 million for the three and nine months ended September 30, 2019, respectively, and $3 million and $12 million for the three and nine months ended September 30, 2018, respectively, all of which related to plant shutdown costs. We expect to incur additional plant shutdown costs of approximately $24 million through 2022.

In September 2018, we implemented a plan to close our Pori, Finland Titanium Dioxide manufacturing facility. As part of the program, we recorded restructuring expense of $8 million for the three months ended September 30, 2019, of which $6 million was related to accelerated depreciation, $1 million related to employee benefits, and $1 million related to plant shutdown costs. This restructuring expense consists of a noncash expense of $6 million and $2 million of cash expense. We recorded restructuring expense of $11 million for the nine months ended September 30, 2019, of which a gain of $14 million related to early settlement of contractual obligation was offset by $17 million of accelerated depreciation, $5 million related to employee benefits, and $3 million related to plant shutdown costs. This restructuring expense consists of noncash net expense of $3 million and $8 million of cash expense. We recorded restructuring expense of approximately $415 million for the three and nine months ended September 30, 2018, each, of which $367 million was related to accelerated depreciation, $39 million was related to employee benefits, and $9 million was related to the write off of other assets. This restructuring expense consisted of $30 million of cash and $385 million of noncash charges. We expect to incur additional charges of approximately $114 million through the end of 2024, of which $19 million relates to accelerated depreciation, $86 million relates to plant shut down costs, $7 million relates to other employee costs and $2 million relates to the write off of other assets. Future charges consist of $21 million of noncash costs and $93 million of cash costs.

Performance Additives Segment

In September 2017, we implemented a plan to close our Performance Additives manufacturing facilities in St. Louis, Missouri and Easton, Pennsylvania. As part of the program, we recorded restructuring expense of nil for the three and nine months ended September 30, 2019. We recorded restructuring expense of $6 million and $13 million for the three and nine months ended September 30, 2018, respectively. We do not expect to incur any additional charges as part of this program.

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In August 2018, we implemented a plan to close our Performance Additives manufacturing site in Beltsville, Maryland. As part of the program, we recorded restructuring expense of nil and $2 million for the three and nine months ended September 30, 2019, all of which related to accelerated depreciation. We recorded restructuring expense of nil for the three and nine months ended September 30, 2018. We do not expect to incur any additional charges as part of this program.

In May 2018, we implemented a plan to close portions of our Performance Additives manufacturing facility in Augusta, Georgia. As part of the program, we recorded restructuring expense of nil for the three and nine months ended September 30, 2019. We recorded restructuring expense of nil and $127 million for the three and nine months ended September 30, 2018, respectively, of which $125 million related to accelerated depreciation, $1 million related to other noncash charges and $1 million related to cash charges. We do not expect to incur any additional charges as part of this program.

Accrued Restructuring and Plant Closing and Transition Costs

As of September 30, 2019 and December 31, 2018, accrued restructuring and plant closing and transition costs by type of cost and year of initiative consisted of the following:
Workforce reductions(1)
Other restructuring costs
Total(2)
Accrued liabilities as of December 31, 2018 $ 32    $ —    $ 32   
2019 charges for 2018 and prior initiatives     15   
2019 charges for 2019 initiatives   —     
2019 payments for 2018 and prior initiatives (22)   (8)   (30)  
2019 payments for 2019 initiatives (4)   —    (4)  
Foreign currency effect on liability balance (1)   —    (1)  
Accrued liabilities as of September 30, 2019 $ 15    $   $ 16   
Current portion of restructuring reserves  
Long-term portion of restructuring reserve  

(1)The total workforce reduction reserves of $15 million relate to the termination of 342 positions, of which 133 positions have been terminated but require future payment as of September 30, 2019.
(2)Accrued liabilities remaining at September 30, 2019 and December 31, 2018 by year of initiatives were as follows:
September 30, 2019 December 31, 2018
2017 initiatives and prior $   $ 18   
2018 initiatives   14   
2019 initiatives   —   
Total $ 16    $ 32   

Our restructuring accruals are all related to our Titanium Dioxide segment.

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Restructuring, Impairment and Plant Closing and Transition Costs

Details with respect to major cost type of restructuring charges and impairment of assets for the three and nine months ended September 30, 2019 and 2018 by initiative are provided below:
Three months ended Nine months ended
September 30, 2019 September 30, 2019
Cash charges $   $ 19   
Early settlement of contractual obligation —    (14)  
Accelerated depreciation   19   
Total 2019 Restructuring, Impairment and Plant Closing and Transition Costs
$ 12    $ 24   
Three months ended Nine months ended
September 30, 2018 September 30, 2018
Cash charges $ 22    $ 34   
Pension related charges 24    24   
Accelerated depreciation 373    505   
Other noncash charges   10   
Total 2018 Restructuring, Impairment and Plant Closing and Transition Costs
$ 428    $ 573   

Note 8. Debt

Outstanding debt, net of debt issuance costs of $14 million and $13 million as of September 30, 2019 and December 31, 2018, respectively, consisted of the following:
September 30, 2019 December 31, 2018
Senior Notes $ 371    $ 370   
Term Loan Facility 362    365
Other 20    13
Total debt 753    748
Less: short-term debt and current portion of long-term debt 16    8
Long-term debt $ 737    $ 740   

The estimated fair value of the Senior Notes was $320 million and $300 million as of September 30, 2019 and December 31, 2018, respectively. The estimated fair value of the Term Loan Facility was $363 million and $355 million as of September 30, 2019 and December 31, 2018, respectively. The estimated fair values of the Senior Notes and the Term Loan Facility are based upon quoted market prices (Level 1).

We had no aggregate principal outstanding under our ABL Facility as of September 30, 2019 and December 31, 2018, each.

The weighted average interest rate on our outstanding balances under the Senior Notes and Term Loan Facility as of September 30, 2019 was approximately 5%.

Senior Notes 

On July 14, 2017, our subsidiaries Venator Finance S.à.r.l. and Venator Materials LLC (the "Issuers") entered into an indenture in connection with the issuance of the Senior Notes. The Senior Notes are general unsecured senior obligations of the Issuers and are guaranteed on a general unsecured senior basis by Venator and certain of Venator’s subsidiaries. The indenture related to the Senior Notes imposes certain limitations on the ability of Venator and certain of its subsidiaries to, among other things, incur additional indebtedness secured by any principal properties, incur
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indebtedness of non-guarantor subsidiaries, enter into sale and leaseback transactions with respect to any principal properties and consolidate or merge with or into any other person or lease, sell or transfer all or substantially all of its properties and assets. The Senior Notes bear interest of 5.75% per year payable semi-annually and will mature on July 15, 2025. The Issuers may redeem the Senior Notes in whole or in part at any time prior to July 15, 2020 at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest, if any, and an early redemption premium, calculated on an agreed percentage of the outstanding principal amount, providing compensation on a portion of foregone future interest payables. The Senior Notes will be redeemable in whole or in part at any time on or after July 15, 2020 at the redemption prices set forth in the indenture, plus accrued and unpaid interest, if any, up to, but not including, the redemption date. In addition, at any time prior to July 15, 2020, the Issuers may redeem up to 40% of the aggregate principal amount of the Senior Notes with an amount not greater than the net cash proceeds of certain equity offerings or contributions to Venator’s equity at 105.75% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date. Upon the occurrence of certain change of control events (other than the separation), holders of the Venator Notes will have the right to require that the Issuers purchase all or a portion of such holder’s Senior Notes in cash at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase.

Senior Credit Facilities

On August 8, 2017, we entered into the Senior Credit Facilities that provide for first lien senior secured financing of up to $675 million, consisting of:

the Term Loan Facility in an aggregate principal amount of $375 million, with a maturity of seven years; and
the ABL Facility in an aggregate principal amount of up to $300 million, with a maturity of five years.

The Term Loan Facility amortizes in aggregate annual amounts equal to 1% of the original principal amount of the Term Loan Facility and is paid quarterly.

On June 20, 2019 the ABL Facility was increased to an aggregate principal amount of up to $350 million, with no change to the maturity dates.

Availability to borrow the $350 million of commitments under the ABL Facility is subject to a borrowing base calculation comprised of accounts receivable and inventory in the U.S., Canada, the U.K., Germany and accounts receivable in France and Spain, that fluctuate and may be further impacted by the lenders’ discretionary ability to impose reserves and availability blocks that might otherwise incrementally increase borrowing availability. As a result, the aggregate amount available for extensions of credit under the ABL Facility at any time is the lesser of $350 million and the borrowing base calculated according to the formula described above minus the aggregate amount of extensions of credit outstanding under the ABL Facility at such time.

Borrowings under the Term Loan Facility bear interest at a rate equal to, at Venator’s option, either (a) a London Interbank Offering Rate ("LIBOR") based rate determined by reference to the costs of funds for Eurodollar deposits for the interest period relevant to such borrowing, adjusted for certain additional costs subject to an interest rate floor to be agreed or (b) a base rate determined by reference to the highest of (i) the rate of interest per annum determined from time to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at its principal office in New York City, (ii) the federal funds rate plus 0.50% per annum and (iii) the one-month adjusted LIBOR plus 1.00% per annum, in each case plus an applicable margin to be agreed upon. Borrowings under the ABL Facility bear interest at a variable rate equal to an applicable margin based on the applicable quarterly average excess availability under the ABL Facility plus either a LIBOR or a base rate. The applicable margin percentage is calculated and established once every three calendar months and varies from 150 to 200 basis points for LIBOR loans depending on the quarterly average excess availability under the ABL Facility for the immediately preceding three-month period.

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Other Long-Term Obligations

A note payable for $8 million, resulting from the acquisition of the intangible assets related to the paper laminates product line from Tronox Limited ("Tronox") on April 26, 2019, is included within accrued liabilities and other noncurrent liabilities on our unaudited condensed consolidated balance sheet at September 30, 2019. The note is payable in two equal installments payable annually through 2021.

Guarantees

All obligations under the Senior Credit Facilities are guaranteed by Venator and substantially all of our subsidiaries (the "Guarantors"), and are secured by substantially all of the assets of Venator and the Guarantors, in each case subject to certain exceptions. Lien priority as between the Term Loan Facility and the ABL Facility with respect to the collateral will be governed by an intercreditor agreement.

Note 9. Derivative Instruments and Hedging Activities

To reduce cash flow volatility from foreign currency fluctuations, we enter into forward and swap contracts to hedge portions of cash flows of certain foreign currency transactions. We do not use derivative financial instruments for trading or speculative purposes.

Cross-Currency Swaps

In December 2017, we entered into three cross-currency swap agreements to convert a portion of our intercompany fixed-rate, U.S. Dollar denominated notes, including the semi-annual interest payments and the payment of remaining principal at maturity, to a fixed-rate, Euro denominated debt. The economic effect of the swap agreement was to eliminate the uncertainty of the cash flows in U.S. Dollars associated with the notes by exchanging a notional amount of $200 million at a fixed rate of 5.75% for €169 million with a fixed annual rate of 3.43%. These hedges were designated as cash flow hedges and the critical terms of the cross-currency swap agreements correspond to the underlying hedged item. These swaps mature in July 2022, which was the best estimate of the repayment date of the intercompany loans.

In August 2019, we terminated the three cross-currency interest rate swaps entered into in 2017, resulting in cash proceeds of $15 million. Concurrently, we entered into three new cross-currency interest rate swaps which notionally exchanged $200 million at a fixed rate of 5.75% for €181 million on which a weighted average rate of 3.73% is payable. The cross-currency swaps have been designated as cash flow hedges of a fixed rate U.S. Dollar intercompany loan and the economic effect is to eliminate uncertainty on the U.S. Dollar cash flows. The cross-currency swaps are set to mature in July 2024, which is the best estimate of the repayment date on the intercompany loan.

We formally assessed the hedging relationship at the inception of the hedge in order to determine whether the derivatives that are used in the hedging transactions are highly effective in offsetting cash flows of the hedged item and we will continue to assess the relationship on an ongoing basis. We use the hypothetical derivative method in conjunction with regression analysis to measure effectiveness of our cross-currency swap agreement.

The changes in the fair value of the swaps are deferred in other comprehensive income and subsequently recognized in other income in the unaudited condensed consolidated statement of operations when the hedged item impacts earnings. Cash flows related to our cross-currency swap that relate to our periodic interest settlement will be classified as operating activities and the cash flows that relates to principal balances will be designated as financing activities. The fair value of these hedges was $1 million and $6 million at September 30, 2019 and December 31, 2018, respectively, and was recorded as other noncurrent assets on our unaudited condensed consolidated balance sheets. We estimate the fair values of our cross-currency swaps by taking into consideration valuations obtained from a third-party valuation service that utilizes an income-based industry standard valuation model for which all significant inputs are observable either directly or indirectly. These inputs include foreign currency exchange rates, credit default swap rates and cross-currency basis swap spreads. The cross-currency swap has been classified as Level 2 because the fair value is based upon observable market-based inputs or unobservable inputs that are corroborated by market data.
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For the nine months ended September 30, 2019 and 2018, the change in accumulated other comprehensive loss associated with these cash flow hedging activities was a gain of $10 million and $5 million, respectively. As of September 30, 2019, accumulated other comprehensive loss of nil is expected to be reclassified to earnings during the next twelve months. The actual amount that will be reclassified to earnings over the next twelve months may vary from this amount due to changing market conditions.

We would be exposed to credit losses in the event of nonperformance by a counterparty to our derivative financial instruments. We continually monitor our position and the credit rating of our counterparties, and we do not anticipate nonperformance by the counterparties.

Forward Currency Contracts Not Designated as Hedges

We transact business in various foreign currencies and we enter into currency forward contracts to offset the risks associated with foreign currency exposure. At September 30, 2019 and December 31, 2018, we had $73 million and $89 million, respectively, notional amount (in U.S. Dollar equivalents) outstanding in foreign currency contracts with a term of approximately one month. The contracts are valued using observable market rates (Level 2).

Note 10. Income Taxes

Venator uses the asset and liability method of accounting for income taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial and tax reporting purposes. We evaluate deferred tax assets to determine whether it is more likely than not that they will be realized. Valuation allowances are reviewed on a tax jurisdiction basis to analyze whether there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related deferred tax assets for each jurisdiction. These conclusions require significant judgment. In evaluating the objective evidence that historical results provide, we consider the cyclicality of Venator and cumulative income or losses during the applicable period. Cumulative losses incurred over the period limits our ability to consider other subjective evidence such as our projections for the future. Changes in expected future income in applicable tax jurisdictions could affect the realization of deferred tax assets in those jurisdictions.

We recorded income tax expense of $8 million and income tax benefit of $55 million for the three months ended September 30, 2019 and 2018, respectively, and income tax expense of nil and of $10 million for the nine months ended September 30, 2019 and 2018, respectively. Our tax expense is significantly affected by the mix of income and losses in tax jurisdictions in which we operate, as impacted by the presence of valuation allowances in certain tax jurisdictions.

For U.S. federal income tax purposes Huntsman recognized a gain as a result of the IPO and the separation to the extent the fair market value of the assets associated with our U.S. businesses exceeded the basis of such assets for U.S. federal income tax purposes at the time of the separation. As a result of such gain recognized, the basis of the assets associated with our U.S. businesses was increased. This basis step up gave rise to a deferred tax asset of $36 million that we recognized for the year ended December 31, 2017.

Pursuant to the Tax Matters Agreement dated August 7, 2017, entered into by and among Venator Materials PLC and Huntsman (the "Tax Matters Agreement") at the time of the separation, we are required to make a future payment to Huntsman for any actual U.S. federal income tax savings we recognize as a result of any such basis increase for tax years through December 31, 2028. It is currently estimated (based on a value of our U.S. businesses derived from the IPO price of our ordinary shares and current tax rates) that the aggregate future payments required by this provision are expected to be approximately $34 million. As of September 30, 2019 and December 31, 2018, this "Noncurrent payable to affiliates" was $34 million, each, on our unaudited condensed consolidated balance sheets. Moreover, any subsequent adjustment asserted by U.S. taxing authorities could increase the amount of gain recognized and the corresponding basis increase, and could result in a higher liability for us under the Tax Matters Agreement.

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Note 11. Earnings Per Share

Basic earnings per share excludes dilution and is computed by dividing net income attributable to Venator ordinary shareholders by the weighted average number of shares outstanding during the period. Diluted earnings per share reflects all potential dilutive ordinary shares outstanding during the period and is computed by dividing net income available to Venator ordinary shareholders by the weighted average number of shares outstanding during the period increased by the number of additional shares that would have been outstanding as dilutive securities.
 
Basic and diluted earnings per share are determined using the following information:
Three months ended
September 30,
Nine months ended
September 30,
2019 2018 2019 2018
Numerator:
Net loss attributable to Venator Materials PLC ordinary shareholders
$ (19)   $ (368)   $ (1)   $ (94)  
Denominator:
Weighted average shares outstanding 106.6    106.4    106.5    106.4   
Dilutive share-based awards —    0.3    —    0.4   
Total weighted average shares outstanding, including dilutive shares 106.6    106.7    106.5    106.8   


For the three and nine months ended September 30, 2019, the number of anti-dilutive employee share-based awards excluded from the computation of diluted earnings per share was 2 million, each. For the three and nine months ended September 30, 2018, the number of anti-dilutive employee share-based awards excluded from the computation of dilutive earnings per share was nil, each.

Note 12. Commitments and Contingencies

Legal Proceedings

Shareholder Litigation

On February 8, 2019 we, certain of our executive officers, Huntsman and certain banks who acted as underwriters in connection with our IPO and secondary offering were named as defendants in a proposed class action civil suit filed in the District Court for the State of Texas, Dallas County (the "Dallas District Court"), by an alleged purchaser of our ordinary shares in connection with our IPO on August 3, 2017 and our secondary offering on November 30, 2017. The plaintiff, Macomb County Employees’ Retirement System, alleges that inaccurate and misleading statements were made regarding the impact to our operations, and prospects for restoration thereof, resulting from the fire that occurred at our Pori, Finland manufacturing facility, among other allegations. Additional complaints making substantially the same allegations were filed in the Dallas District Court by the Firemen's Retirement System of St. Louis on March 4, 2019 and by Oscar Gonzalez on March 13, 2019, with the third case naming two of our directors as additional defendants. A fourth case was filed in the U.S. District Court for the Southern District of New York by the City of Miami General Employees' & Sanitation Employees' Retirement Trust on July 31, 2019, making substantially the same allegations, adding claims under sections 10(b) and 20(a) of the U.S. Exchange Act, and naming all of our directors as additional defendants. A fifth case, filed by Bonnie Yoon Bishop in the U.S. District Court for the Southern District of New York, was voluntarily dismissed without prejudice on October 7, 2019. A sixth case was filed in the U.S. District Court for the Southern District of Texas by the Cambria County Employees Retirement System on September 13, 2019, making substantially the same allegations as those made by the plaintiff in the case pending in the Southern District of New York.

The plaintiffs in these cases seek to determine that the proceedings should be certified as class actions and to obtain alleged compensatory damages, costs, rescission and equitable relief.

The cases filed in the Dallas District Court have been consolidated into a single action, In re Venator Materials PLC Securities Litigation. On October 29, 2019, the U.S. District Court for the Southern District of New York entered an
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order transferring the case brought by the city of Miami General Employees' & Sanitation Employees' Retirement Trust to the U.S. District Court for the Southern District of Texas, where we expect it to be consolidated with the case brought by the Cambria County Employees' Retirement Trust.

On May 8, 2019, we filed a “special appearance” in the Dallas District Court action contesting the court’s jurisdiction over the Company and a motion to transfer venue to Montgomery County, Texas and on June 7, 2019 we and certain defendants filed motions to dismiss. On July 9, 2019, a hearing was held on certain of these motions, which were subsequently denied. On October 3, 2019, a hearing was held on our motion to dismiss under the Texas Citizens Participation Act, which was subsequently denied. On October 22, 2019, we and other defendants filed a Petition for Writ of Mandamus in the Court of Appeals for the Fifth District of Texas seeking relief from the Dallas District Court’s denial of defendants’ Rule 91a motions to dismiss. We also intend to appeal the denial of our motion to dismiss under the Texas Citizens Participation Act.

We may be required to indemnify our executive officers and directors, Huntsman, and the banks who acted as underwriters in our IPO and secondary offerings, for losses incurred by them in connection with these matters pursuant to our agreements with such parties. Because of the early stage of this litigation, we are unable to reasonably estimate any possible loss or range of loss and we have not accrued for a loss contingency with regard to these matters.

Tronox Litigation

On April 26, 2019, we acquired intangible assets related to the European paper laminates product line from Tronox. A separate agreement with Tronox entered into on July 14, 2018 requires that Tronox promptly pay us a “break fee” of $75 million upon the consummation of Tronox’s merger with The National Titanium Dioxide Company Limited (“Cristal”) once the sale of the European paper laminates business to us was consummated, if the sale of Cristal’s Ashtabula manufacturing complex to us was not completed. The deadline for such payment was May 13, 2019. On April 26, 2019, Tronox publicly stated that it believes it is not obligated to pay the break fee.

On May 14, 2019, we commenced a lawsuit in the Delaware Superior Court against Tronox arising from Tronox's breach of its obligation to pay the break fee. We are seeking a judgment for $75 million, plus pre- and post-judgment interest, and reasonable attorneys' fees and costs. On June 17, 2019, Tronox filed an answer denying that it is obligated to pay the break fee and asserting affirmative defenses and counterclaims of approximately $400 million, alleging that we failed to negotiate the purchase of the Ashtabula complex in good faith. Discovery is ongoing in this matter. Because of the early stage of this litigation, we are unable to reasonably estimate any possible gain, loss or range of gain or loss and we have not made any accrual with regard to this matter.

Neste Engineering Services Matter

We are party to an arbitration proceeding initiated by Neste Engineering Services Oy (“NES”) on December 19, 2018 for payment of invoices allegedly due of approximately €14 million in connection with the delivery of services by NES to the Company in respect of the Pori site rebuild project. We are contesting the validity of these invoices and filed counterclaims against NES on March 8, 2019. The timetable for the arbitration has not yet been set. On July 2, 2019, NES separately instigated a lawsuit in Finland for €1.6 million of unpaid invoices, which we also intend to contest. We are fully accrued for these invoices and they are reflected in our unaudited condensed consolidated balance sheet as of September 30, 2019.

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Calais Pipeline Matter

The Region Hauts-de-France (the “Region”) has issued two duplicate title perception demands against us requiring repayment of €12 million. This sum was previously paid to us by the Region under a settlement agreement, pursuant to which we were required to move an effluent pipeline at our Calais site. We filed claims with the Administrative Court in Lille, France on February 14, 2018 and April 12, 2018, requesting orders that the demands be set aside, which suspended enforcement of the demands. On July 12, 2018, the court set aside the first demand. The second demand remains suspended, but in dispute. The parties have lodged various arguments and responses regarding the second demand with the court. The court continues to consider the matter and we anticipate that a hearing on the matter might be held during the first half of 2020. We do not believe a loss is probable and have not made an accrual with respect to this matter.

Other Proceedings

We are a party to various other proceedings instituted by private plaintiffs, governmental authorities and others arising under provisions of applicable laws, including various environmental, products liability and other laws. Except as otherwise disclosed in these unaudited condensed consolidated financial statements, we do not believe that the outcome of any of these matters will have a material effect on our financial condition, results of operations or liquidity.

Note 13. Environmental, Health and Safety Matters

Environmental, Health and Safety Capital Expenditures

We may incur future costs for capital improvements and general compliance under EHS laws, including costs to acquire, maintain and repair pollution control equipment. For the nine months ended September 30, 2019 and September 30, 2018, our capital expenditures for EHS matters totaled $18 million and $5 million, respectively. Because capital expenditures for these matters are subject to evolving regulatory requirements and depend, in part, on the timing, promulgation and enforcement of specific requirements, our capital expenditures for EHS matters have varied significantly from year to year and we cannot provide assurance that our recent expenditures are indicative of future amounts we may spend related to EHS and other applicable laws.

Environmental Reserves

We accrue liabilities relating to anticipated environmental cleanup obligations, site reclamation and closure costs, and known penalties. Liabilities are recorded when potential liabilities are either known or considered probable and can be reasonably estimated. Our liability estimates are calculated using present value techniques as appropriate and are based upon requirements placed upon us by regulators, available facts, existing technology, and past experience. The environmental liabilities do not include amounts recorded as asset retirement obligations. As of September 30, 2019 and December 31, 2018, we had environmental reserves of $9 million and $12 million, respectively.

Environmental Matters

We have incurred, and we may in the future incur, liabilities to investigate and clean up waste or contamination at our current or former facilities or facilities operated by third parties at which we may have disposed of waste or other materials. Similarly, we may incur costs for the cleanup of waste that was disposed of prior to the purchase of our businesses. Under some circumstances, the scope of our liability may extend to damages to natural resources.

In the EU, the Environmental Liability Directive (Directive 2004/35/EC) has established a framework based on the "polluter pays" principle for the prevention and remediation of environmental damage, which establishes measures to prevent and remedy environmental damage. The directive defines "environmental damage" as damage to protected species and natural habitats, damage to water and damage to soil. Operators carrying out dangerous activities listed in the Directive are strictly liable for remediation, even if they are not at fault or negligent.

Under EU Directive 2010/75/EU on industrial emissions, permitted facility operators may be liable for significant pollution of soil and groundwater over the lifetime of the activity concerned. We are in the process of plant
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closures at facilities in the EU and liability to investigate and clean up waste or contamination may arise during the surrender of operators' permits at these locations under the directive and associated legislation such as the Water Framework Directive (Directive 2000/60/EC) and the Groundwater Directive (Directive 2006/118/EC).

Under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") and similar state laws, a current or former owner or operator of real property in the U.S. may be liable for remediation costs regardless of whether the release or disposal of hazardous substances was in compliance with law at the time it occurred, and a current owner or operator may be liable regardless of whether it owned or operated the facility at the time of the release. Outside the U.S., analogous contaminated property laws, such as those in effect in France, can hold past owners and/or operators liable for remediation at former facilities. We have not been notified by third parties of claims against us for cleanup liabilities at former facilities or third-party sites, including, but not limited to, sites listed under CERCLA.

Under the Resource Conservation and Recovery Act in the U.S. and similar state laws, we may be required to remediate contamination originating from our properties as a condition to our hazardous waste permit. Some of our manufacturing sites have an extended history of industrial chemical manufacturing and use, including on-site waste disposal and we have made accruals for related remediation activity. We are aware of soil, groundwater or surface contamination from past operations at some of our sites and have made accruals for related remediation activity, and we may find contamination at other sites in the future. Similar laws exist in a number of locations in which we currently operate, or previously operated, manufacturing facilities.

Pori Remediation

In connection with our previously announced intention to close our TiO2 manufacturing facility in Pori, Finland, we expect to incur environmental costs related to the cleanup of the facility upon its eventual closure, including remediation and closure costs. While we do not currently have enough information to be able to estimate the range of potential costs for the closure of this facility, these costs could be material to our unaudited condensed consolidated financial statements.

Note 14. Other Comprehensive Income

Other comprehensive income consisted of the following:
Foreign currency translation adjustment(a)
Pension and other postretirement benefits adjustments net of tax(b)