VNTR Venator Materials PLC

Three months ended

March 31,

December
31, 2018

(In millions, except per share amounts)

2019

2018

$

562

$

622

$

484

Net (loss) income attributable to Venator

$

(3)

$

78

$

(69)

Adjusted net income attributable to Venator⁽¹⁾

$

14

$

91

$

19

Adjusted EBITDA⁽¹⁾

$

60

$

157

$

45

Diluted (loss) earnings per share⁽¹⁾

$

(0.03)

$

0.73

$

(0.65)

Adjusted diluted earnings per share⁽¹⁾

$

0.13

$

0.85

$

0.18

Net cash (used in) provided by operating activities

$

(29)

$

51

$

(24)

Free cash flow⁽³⁾

$

(82)

$

(15)

$

(79)

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

10130689

Table 1 — Results of Operations

Three months ended

March 31,

(In millions, except per share amounts)

2019

2018

Revenues

$

562

$

622

Cost of goods sold

486

454

Operating expenses

55

51

Restructuring, impairment and plant closing and transition costs

12

9

Operating income

9

108

Interest expense, net

(11)

(10)

Other income

1

2

(Loss) income before income taxes

(1)

100

Income tax expense

(1)

(20)

Net (loss) income

(2)

80

Net income attributable to noncontrolling interests

(1)

(2)

Net (loss) income attributable to Venator

$

(3)

$

78

Adjusted EBITDA⁽¹⁾

$

60

$

157

Adjusted net income⁽¹⁾

$

14

$

91

Basic (loss) earnings per share

$

(0.03)

$

0.73

Diluted (loss) earnings per share

$

(0.03)

$

0.73

Adjusted earnings per share⁽¹⁾

$

0.13

$

0.86

Adjusted diluted earnings per share⁽¹⁾

$

0.13

$

0.85

Ordinary share information:

Basic shares outstanding

106.5

106.4

Diluted shares

106.8

106.8

Table 2 — Results of Operations by Segment

Three months ended

March 31,

Favorable /

(In millions)

2019

2018

(Unfavorable)

Segment Revenues:

Titanium Dioxide

$

425

$

456

(7)

%

Performance Additives

137

166

(17)

%

Total

$

562

$

622

(10)

%

Segment Adjusted EBITDA⁽¹⁾:

Titanium Dioxide

$

61

$

143

(57)

%

Performance Additives

15

24

(38)

%

Corporate and other

(16)

(10)

(60)

%

Total

$

60

$

157

(62)

%

Table 3 — Factors Impacting Sales Revenue

Three months ended

March 31, 2019 vs. 2018

Average Selling Price^(a)

Local Currency

Exchange Rate

Sales Mix & Other

Sales Volume^(b)

Total

Titanium Dioxide

(6)

%

(4)

%

—

%

3

%

(7)

%

Performance Additives

(2)

%

(2)

%

1

%

(14)

%

(17)

%

Total Company

(5)

%

(4)

%

—

%

(1)

%

(10)

%

^(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

Income Tax
Expense⁽²⁾

Net Income (Loss)

Diluted Earnings
(Loss) Per
Share⁽¹⁾

Three months ended

Three months ended

Three months ended

Three months ended

March 31,

March 31,

March 31,

March 31,

(In millions, except per share amounts)

2019

2018

2019

2018

2019

2018

2019

2018

Net (loss) income

$

(2)

$

80

$

(2)

$

80

$

(0.02)

$

0.75

Net income attributable to noncontrolling interests

(1)

(2)

(1)

(2)

(0.01)

(0.02)

Net (loss) income attributable to Venator

(3)

78

(3)

78

(0.03)

0.73

Interest expense, net

11

10

Income tax expense

1

20

(1)

(20)

Depreciation and amortization

26

34

Business acquisition and integration expenses

2

2

(1)

(1)

1

1

0.01

0.01

Separation expense, net

—

1

—

—

—

1

—

0.01

Amortization of pension and postretirement actuarial losses

4

3

(1)

—

3

3

0.03

0.02

Net plant incident costs

7

—

(2)

—

5

—

0.05

—

Restructuring, impairment, plant closing and transition costs

12

9

(4)

(1)

8

8

0.07

0.07

Adjusted⁽¹⁾

$

60

$

157

$

(9)

$

(22)

$

14

$

91

$

0.13

$

0.85

Adjusted income tax expense⁽²⁾

$

9

$

22

Net income attributable to noncontrolling interests, net of tax

1

2

Adjusted pre-tax income

$

24

$

115

Adjusted effective tax rate

38

%

19

%

EBITDA

Income Tax Benefit (Expense)⁽²⁾

Net Income (Loss)

Diluted Earnings (Loss) Per Share⁽¹⁾

Three months ended December 31,

Three months ended December 31,

Three months ended December 31,

Three months
ended
December 31,

(In millions, except per share amounts)

2018

2018

2018

2018

Net loss

$

(69)

$

(69)

(0.65)

Net income attributable to noncontrolling interests

—

—

—

Net loss attributable to Venator

(69)

(69)

(0.65)

Interest expense, net

10

Income tax benefit

(18)

18

Depreciation and amortization

30

Business acquisition and integration expenses

11

—

11

0.10

Separation expense, net

1

—

1

0.01

Significant change to income tax valuation allowance⁽²⁾

—

(5)

(5)

(0.05)

Amortization of pension and postretirement actuarial losses

5

2

7

0.07

Net plant incident costs

20

(3)

17

0.16

Restructuring, impairment, plant closing and transition costs

55

2

57

0.53

Adjusted⁽¹⁾

$

45

$

14

$

19

0.18

Adjusted income tax expense⁽²⁾

$

(14)

Net income attributable to noncontrolling interests, net of tax

—

Adjusted pre-tax income

$

5

Adjusted effective tax rate

(280)

%

Table 5 — Selected Balance Sheet Items

March 31,

December 31,

(In millions)

2019

2018

Cash and cash equivalents

$

80

$

165

Accounts and notes receivable, net

410

351

Inventories

503

538

Prepaid expenses and other current assets

70

71

Property, plant and equipment, net

985

994

Other assets

418

366

Total assets

$

2,466

$

2,485

Accounts payable

$

346

$

400

Other current liabilities

134

135

Current portion of debt

7

8

Long-term debt

739

740

Non-current payable to affiliates

34

34

Other non-current liabilities

334

313

Total equity

872

855

Total liabilities and equity

$

2,466

$

2,485

Table 6 — Outstanding Debt

March 31,

December 31,

(In millions)

2019

2018

Debt:

Senior Notes

$

370

$

370

Term Loan Facility

363

365

Other debt

13

13

Total debt - excluding affiliates

746

748

Total cash

80

165

Net debt - excluding affiliates

$

666

$

583

Table 7 — Summarized Statement of Cash Flows

Three months ended

March 31,

(In millions)

2019

2018

Total cash at beginning of period

$

165

$

238

Net cash (used in) provided by operating activities

(29)

51

Net cash used in investing activities

(53)

(67)

Net cash used in financing activities

(3)

(8)

Effect of exchange rate changes on cash

—

9

Total cash at end of period

$

80

$

223

Supplemental cash flow information:

Cash paid for interest

$

(18)

$

(19)

Cash paid for income taxes

(1)

(15)

Capital expenditures

(52)

(73)

Depreciation and amortization

26

34

Changes in primary working capital:

Accounts receivable

(61)

(50)

Inventories

35

(12)

Accounts payable

(22)

7

$

(48)

$

(55)

Three months ended

March 31,

(In millions)

2019

2018

Free cash flow⁽³⁾:

Net cash (used in) provided by operating activities

$

(29)

$

51

Capital expenditures

(52)

(73)

Cash (investment in) received from unconsolidated affiliates, net

(1)

6

Non-recurring separation costs^(a)

—

1

Total free cash flow

$

(82)

$

(15)

Adjusted EBITDA

$

60

$

157

Capital expenditures excluding cash paid for Pori rebuild

(28)

(20)

Cash paid for interest

(18)

(19)

Cash paid for income taxes

(1)

(15)

Primary working capital change

(48)

(55)

Restructuring

(7)

(9)

Maintenance & other

(4)

(16)

Net cash flows associated with Pori

(36)

(38)

Total free cash flow⁽³⁾

$

(82)

$

(15)

See end of press release for numbered footnote explanations

^(a)

 Represents payments associated with our separation from Huntsman

⁽¹⁾

Our management uses adjusted EBITDA to assess financial performance. Adjusted EBITDA is defined as net income before interest expense, net, income tax expense from continuing operations, depreciation and amortization, and net income attributable to noncontrolling interests, after eliminating the following: (a) business acquisition and integration expenses; (b) separation expense, net; (c) net income of discontinued operations net of tax; (d) loss on disposition of business/assets; (e) certain legal settlements and related expenses; (f) amortization of pension and postretirement actuarial losses; (g) net plant incident costs (credits); and (h) restructuring, impairment, plant closing and transition costs. 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. For example, while EBITDA from discontinued operations is a recurring item, it is not indicative of ongoing operating results and trends or 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; (b) separation expense, net; (c) net income of discontinued operations; (d) loss on disposition of business/assets; (e) certain legal settlements and related expenses; (f) amortization of pension and postretirement actuarial losses; (g) net plant incident costs (credits); (h) restructuring, impairment, plant closing and transition costs. 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. For the periods prior to our IPO, the average number of ordinary shares outstanding used to calculate basic and diluted adjusted net income per share was based on the ordinary shares that were outstanding at the time of our IPO. Adjusted net earnings (loss) and adjusted net earnings (loss) per share amounts are presented solely as supplemental information.

⁽²⁾ 

The income tax impacts, if any, of each adjusting item represent 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. We do not adjust for changes in tax valuation allowances because we do not believe it provides more meaningful information than is provided under U.S. GAAP.

⁽³⁾ 

Management internally uses a free cash flow measure: (a) to evaluate the Company's liquidity, (b) to evaluate strategic investments, (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 consolidated and combined statement of cash flows; however, it may be adjusted for items that affect comparability between periods. Free cash flow is presented as supplemental information.