VNTR Venator Materials PLC

Three months ended

Nine months ended

September 30,

June 30,
2020

September 30,

(In millions, except per share amounts)

2020

2019

2020

2019

Revenues

$

474

$

526

$

456

$

1,462

$

1,666

Net loss attributable to Venator

$

(42)

$

(19)

$

(19)

$

(54)

$

(1)

Adjusted net (loss) income attributable to Venator⁽¹⁾

$

(18)

$

8

$

(3)

$

(9)

$

36

Adjusted EBITDA⁽¹⁾

$

17

$

50

$

37

$

111

$

171

Diluted loss per share

$

(0.39)

$

(0.18)

$

(0.18)

$

(0.51)

$

(0.01)

Adjusted diluted (loss) earnings per share⁽¹⁾

$

(0.17)

$

0.08

$

(0.03)

$

(0.08)

$

0.34

Net cash provided by (used in) operating activities

$

20

$

14

$

38

$

—

$

(36)

Free cash flow⁽³⁾

$

24

$

(5)

$

18

$

(43)

$

(137)

See end of press release for footnote explanations

Call-in numbers for the conference call:

U.S. participants

1-833-366-1118

International participants                        

1-412-902-6770

(No passcode required)

Call-in numbers for the replay:

U.S. participants

1-877-344-7529

International participants                        

1-412-317-0088

Passcode

10147787

Table 1 — Results of Operations

Three months ended

Nine months ended

September 30,

September 30,

(In millions, except per share amounts)

2020

2019

2020

2019

Revenues

$

474

$

526

$

1,462

$

1,666

Cost of goods sold

454

464

1,336

1,461

Operating expenses

33

50

121

150

Restructuring, impairment and plant closing and transition costs

12

25

24

Operating (loss) income

(26)

—

(20)

31

Interest expense, net

(15)

(10)

(37)

(31)

Other income

5

1

12

3

(Loss) income before income taxes

(36)

(9)

(45)

3

Income tax expense

(8)

(3)

—

Net (loss) income

(39)

(17)

(48)

3

Net income attributable to noncontrolling interests

(3)

(2)

(6)

(4)

Net loss attributable to Venator

$

(42)

$

(19)

$

(54)

$

(1)

Adjusted EBITDA⁽¹⁾

$

17

$

50

$

111

$

171

Adjusted net (loss) income⁽¹⁾

$

(18)

$

8

$

(9)

$

36

Basic loss per share

$

(0.39)

$

(0.18)

$

(0.51)

$

(0.01)

Diluted loss earnings per share

$

(0.39)

$

(0.18)

$

(0.51)

$

(0.01)

Adjusted (loss) earnings per share⁽¹⁾

$

(0.17)

$

0.08

$

(0.08)

$

0.34

Adjusted diluted (loss) earnings per share⁽¹⁾

$

(0.17)

$

0.08

$

(0.08)

$

0.34

Ordinary share information:

Basic shares outstanding

106.7

106.6

106.7

106.5

Diluted shares

106.7

106.6

106.7

106.5

See end of press release for footnote explanations

Table 2 — Results of Operations by Segment

Three months ended

Nine months ended

September 30,

Favorable /

September 30,

Favorable /

(In millions)

2020

2019

2020

2019

(Unfavorable)

Segment Revenues:

Titanium Dioxide

$

343

$

396

(13)%

$

1,083

$

1,260

(14)%

Performance Additives

131

130

1%

379

406

(7)%

Total

$

$

526

(10)%

$

1,462

$

1,666

(12)%

Segment Adjusted EBITDA⁽¹⁾:

Titanium Dioxide

$

21

$

51

(59)%

$

102

$

167

(39)%

Performance Additives

5

13

(62)%

40

44

(9)%

Corporate and other

(9)

(14)

36%

(31)

(40)

23%

Total

$

17

$

50

(66)%

$

111

$

171

(35)%

See end of press release for footnote explanations

Table 3 — Factors Impacting Sales Revenue

Three months ended

September 30, 2020 vs. 2019

Local
Currency

Exchange
Rate

Sales Mix & 
Other

Sales
Volume^(b)

Total

Titanium Dioxide

(2)%

2%

(2)%

(11)%

(13)%

Performance Additives

2%

1%

2%

(4)%

1%

Total Company

(2)%

2%

(1)%

(9)%

(10)%

Nine months ended

September 30, 2020 vs. 2019

Average Selling Price^(a)

Local
Currency

Exchange
Rate

Sales Mix &
Other

Sales
Volume^(b)

Total

Titanium Dioxide

(2)%

—%

(1)%

(11)%

(14)%

Performance Additives

2%

(1)%

—%

(8)%

(7)%

Total Company

(1)%

—%

(1)%

(10)%

(12)%

^(a)

Excludes revenues from tolling arrangements, by-products and raw materials

^(b) 

Excludes sales volumes of by-products and raw materials

Table 4 — Reconciliation of U.S. GAAP to Non-GAAP Measures

EBITDA

Net Income (Loss)

Diluted Earnings
(Loss) Per Share⁽¹⁾

Three months
ended

Three months
ended

Three months
ended

September 30,

September 30,

September 30,

(In millions, except per share amounts)

2020

2019

2020

2019

2020

2019

Net (loss) income

$

(39)

$

(17)

$

(39)

$

(17)

$

(0.36)

$

(0.16)

Net income attributable to noncontrolling interests

(3)

(2)

(3)

(2)

(0.03)

(0.02)

Net (loss) income attributable to Venator

(42)

(19)

(42)

(19)

(0.39)

(0.18)

Interest expense, net

15

10

Income tax expense (benefit)

3

8

Depreciation and amortization

29

27

Business acquisition and integration adjustments

—

2

—

2

—

0.02

(Gain) loss on disposal of businesses/assets

(6)

1

(6)

1

(0.06)

0.01

Certain legal expenses/settlements

—

2

—

2

—

0.02

Amortization of pension and postretirement actuarial losses

3

3

3

3

0.03

0.03

Net plant incident costs

2

4

2

4

0.02

0.04

Restructuring, impairment, plant closing and transition costs

13

12

13

12

0.12

0.11

Income tax adjustments⁽²⁾

—

—

12

3

0.11

0.03

Adjusted⁽¹⁾

$

17

$

50

$

(18)

$

8

$

(0.17)

$

0.08

Adjusted income tax expense⁽²⁾

$

(9)

$

5

Net income attributable to noncontrolling interests, net of tax

3

2

Adjusted pre-tax (loss) income

$

(24)

$

15

Adjusted effective tax rate

35%

35%

EBITDA

Net Income
(Loss)

Diluted Earnings
(Loss) Per
Share⁽¹⁾

Three months
ended June 30,

Three months
ended June 30,

Three months
ended June 30,

(In millions, except per share amounts)

2020

2020

2020

Net loss

$

(17)

$

(17)

$

(0.16)

Net income attributable to noncontrolling interests

(2)

(2)

(0.02)

Net loss attributable to Venator

(19)

(19)

(0.18)

Interest expense, net

12

Income tax benefit

2

Depreciation and amortization

28

Certain legal expenses/settlements

3

3

0.03

Amortization of pension and postretirement actuarial losses

4

4

0.04

Net plant incident costs

2

2

0.02

Restructuring, impairment, plant closing and transition costs

5

5

0.05

Income tax adjustments⁽²⁾

—

2

0.01

Adjusted⁽¹⁾

$

$

(3)

$

(0.03)

Adjusted income tax expense⁽²⁾

$

—

Net income attributable to noncontrolling interests, net of tax

2

Adjusted pre-tax loss

$

(1)

Adjusted effective tax rate

35

%

EBITDA

Net Income
(Loss)

Diluted Earnings
(Loss) Per
Share⁽¹⁾

Nine months
ended

Nine months
ended

Nine months
ended

September 30,

September 30,

September 30,

(In millions, except per share amounts)

2020

2019

2020

2019

2020

2019

Net (loss) income

$

(48)

$

3

$

(48)

$

3

$

(0.45)

$

0.03

Net income attributable to noncontrolling interests

(6)

(4)

(6)

(4)

(0.06)

(0.04)

Net loss attributable to Venator

(54)

(1)

(54)

(1)

(0.51)

(0.01)

Interest expense, net

37

31

Income tax benefit

3

—

Depreciation and amortization

85

82

Business acquisition and integration expenses

1

3

1

3

0.01

0.03

(Gain) loss on disposal of businesses/assets

(4)

1

(4)

1

(0.04)

0.01

Certain legal expenses/settlements

3

3

3

3

0.03

0.03

Amortization of pension and postretirement actuarial losses

10

11

10

11

0.09

0.10

Net plant incident costs

5

17

5

17

0.05

0.16

Restructuring, impairment, plant closing and transition costs

25

24

25

24

0.24

0.23

Income tax impact of adjustments⁽²⁾

—

—

5

(22)

0.05

(0.21)

Adjusted⁽¹⁾

$

111

$

171

$

(9)

$

36

$

(0.08)

$

0.34

Adjusted income tax expense⁽²⁾

$

(2)

$

22

Net income attributable to noncontrolling interest, net of tax

6

4

Adjusted pre-tax (loss) income

$

(5)

$

62

Adjusted effective tax rate

35

%

35

%

See end of press release for footnote explanations

Table 5 — Selected Balance Sheet Items

September 30,

December 31,

(In millions)

2020

2019

Cash and cash equivalents

$

208

$

55

Accounts and notes receivable, net

306

321

Inventories

438

513

Prepaid expenses and other current assets

77

88

Property, plant and equipment, net

940

989

Other assets

331

299

Total assets

$

2,300

$

2,265

Accounts payable

$

215

$

351

Other current liabilities

107

124

Current portion of debt

7

13

Long-term debt

950

737

Non-current payable to affiliates

30

30

Other non-current liabilities

328

337

Total equity

663

673

Total liabilities and equity

$

2,300

$

2,265

Table 6 — Outstanding Debt

September 30,

December 31,

(In millions)

2020

2019

Debt:

Term Loan Facility

$

359

$

361

Senior Secured Notes

215

—

Senior Unsecured Notes

371

371

Other debt

12

18

Total debt - excluding affiliates

957

750

Total cash

208

55

Net debt - excluding affiliates

$

749

$

695

Table 7 — Summarized Statement of Cash Flows

Three months ended

Nine months ended

September 30,

September 30,

(In millions)

2020

2019

2020

2019

Total cash at beginning of period

$

188

$

50

$

55

$

165

Net cash provided by (used in) operating activities

20

14

—

(36)

Net cash provided by (used in) investing activities

4

(19)

(43)

(101)

Net cash (used in) provided by financing activities

(5)

(4)

195

13

Effect of exchange rate changes on cash

1

(1)

1

(1)

Total cash at end of period

$

208

$

40

$

208

$

40

Supplemental cash flow information:

Cash paid for interest

$

(17)

$

(18)

$

(35)

$

(41)

Cash paid for income taxes

—

(1)

—

(4)

Capital expenditures

(7)

(27)

(54)

(110)

Depreciation and amortization

29

27

85

82

Changes in primary working capital:

   Accounts receivable

33

49

20

(28)

   Inventories

65

(3)

87

27

   Accounts payable

(46)

(28)

(113)

(72)

   Total cash provided by (used in) primary working capital

$

52

$

18

$

(6)

$

(73)

Three months ended

Nine months ended

September 30,

September 30,

(In millions)

2020

2019

2020

2019

Free cash flow⁽³⁾:

Net cash provided by (used in) operating activities

$

20

$

14

$

—

$

(36)

Capital expenditures

(7)

(27)

(54)

(110)

Other investing activities

11

8

11

9

   Total free cash flow⁽³⁾

$

24

$

(5)

$

(43)

$

(137)

Adjusted EBITDA⁽¹⁾

$

17

$

50

$

111

$

171

Capital expenditures excluding cash paid for Pori rebuild

(8)

(25)

(54)

(73)

Cash paid for interest excluding hedging activity

(17)

(18)

(35)

(41)

Cash paid for income taxes

—

(1)

—

(4)

Primary working capital change

52

18

(6)

(73)

Restructuring

(2)

(5)

(7)

(22)

Pension & other

(21)

(22)

(49)

(40)

Net cash flows associated with Pori

3

(2)

(3)

(55)

   Total free cash flow⁽³⁾

$

24

$

(5)

$

(43)

$

(137)

See end of press release for numbered footnote explanations

Footnotes

⁽¹⁾

Our management uses adjusted EBITDA to assess financial performance. Adjusted EBITDA is defined as net income/loss before interest income/expense, net, income tax expense/benefit, depreciation and amortization, and net income attributable to noncontrolling interests, as well as eliminating the following adjustments: (a) business acquisition and integration expenses/adjustments; (b) loss/gain on disposition of business/assets; (c) certain legal expenses/settlements; (d) amortization of pension and postretirement actuarial losses/gains; (e) net plant incident costs/credits; and (f) restructuring, impairment, and plant closing and transition costs/credits. We believe that net income is the performance measure calculated and presented in accordance with U.S. GAAP that is most directly comparable to adjusted EBITDA.

We believe adjusted EBITDA is useful to investors in assessing our ongoing financial performance and provides improved comparability between periods through the exclusion of certain items that management believes are not indicative of our operational profitability and that may obscure underlying business results and trends. However, this measure should not be considered in isolation or viewed as a substitute for net income or other measures of performance determined in accordance with U.S. GAAP. Moreover, adjusted EBITDA as used herein is not necessarily comparable to other similarly titled measures of other companies due to potential inconsistencies in the methods of calculation. Our management believes this measure is useful to compare general operating performance from period to period and to make certain related management decisions. Adjusted EBITDA is also used by securities analysts, lenders and others in their evaluation of different companies because it excludes certain items that can vary widely across different industries or among companies within the same industry. For example, interest expense can be highly dependent on a company's capital structure, debt levels and credit ratings. Therefore, the impact of interest expense on earnings can vary significantly among companies. In addition, the tax positions of companies can vary because of their differing abilities to take advantage of tax benefits and because of the tax policies of the various jurisdictions in which they operate. As a result, effective tax rates and tax expense can vary considerably among companies. Finally, companies employ productive assets of different ages and utilize different methods of acquiring and depreciating such assets. This can result in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among companies.

Nevertheless, our management recognizes that there are limitations associated with the use of adjusted EBITDA in the evaluation of us as compared to net income. Our management compensates for the limitations of using adjusted EBITDA by using this measure to supplement U.S. GAAP results to provide a more complete understanding of the factors and trends affecting the business rather than U.S. GAAP results alone.

In addition to the limitations noted above, adjusted EBITDA excludes items that may be recurring in nature and should not be disregarded in the evaluation of performance. However, we believe it is useful to exclude such items to provide a supplemental analysis of current results and trends compared to other periods because certain excluded items can vary significantly depending on specific underlying transactions or events, and the variability of such items may not relate specifically to ongoing operating results or trends and certain excluded items, while potentially recurring in future periods, may not be indicative of future results.

Adjusted net income is computed by eliminating the after-tax amounts related to the following from net income attributable to Venator Materials PLC ordinary shareholders: (a) business acquisition and integration expenses/adjustments; (b) loss/gain on disposition of business/assets; (c) certain legal expenses/settlements; (d) amortization of pension and postretirement actuarial losses/gains; (e) net plant incident costs/credits; and (f) restructuring, impairment, and plant closing and transition costs/credits. Basic adjusted net earnings per share excludes dilution and is computed by dividing adjusted net income by the weighted average number of shares outstanding during the period. Adjusted diluted net earnings per share reflects all potential dilutive ordinary shares outstanding during the period increased by the number of additional shares that would have been outstanding as dilutive securities.

Adjusted net income (loss) and adjusted net earnings (loss) per share amounts are presented solely as supplemental information. These measures exclude similar noncash items as Adjusted EBITDA in order to assist our investors in comparing our performance from period to period and as such, bear similar risks as Adjusted EBITDA as documented above. For that reason, adjusted net income and the related per share amounts, should not be considered in isolation and should be considered only to supplement analysis of U.S. GAAP results.

⁽²⁾

Prior to the second quarter of 2019, the income tax impacts, if any, of each adjusting item represented a ratable allocation of the total difference between the unadjusted tax expense and the total adjusted tax expense, computed without consideration of any adjusting items using a with and without approach.

Beginning in the three- and six-month periods ended June 30, 2019, income tax expense is adjusted by the amount of additional tax expense or benefit that we would accrue if we used non-GAAP results instead of GAAP results in the calculation of our tax liability, taking into consideration our tax structure. We use a normalized effective tax rate of 35%, which reflects the weighted average tax rate applicable under the various jurisdictions in which we operate. This non-GAAP tax rate eliminates the effects of non-recurring and period specific items which are often attributable to restructuring and acquisition decisions and can vary in size and frequency. This rate is subject to change over time for various reasons, including changes in the geographic business mix, valuation allowances, and changes in statutory tax rates.

We eliminate the effect of significant changes to income tax valuation allowances from our presentation of adjusted net income to allow investors to better compare our ongoing financial performance from period to period. We do not adjust for insignificant changes in tax valuation allowances because we do not believe it provides more meaningful information than is provided under GAAP. We believe that our revised approach enables a clearer understanding of the long term impact of our tax structure on post tax earnings.

⁽³⁾

Management internally uses a free cash flow measure: (a) to evaluate the Company's liquidity, (b) to evaluate strategic investments and (c) to evaluate the Company's ability to incur and service debt. Free cash flow is not a defined term under U.S. GAAP, and it should not be inferred that the entire free cash flow amount is available for discretionary expenditures. The Company defines free cash flow as cash flows provided by (used in) operating activities from continuing operations and used in investing activities. Free cash flow is typically derived directly from the Company's condensed consolidated statement of cash flows; however, it may be adjusted for items that affect comparability between periods. Free cash flow is presented as supplemental information.