Venator Announces Second Quarter 2021 Results; Sees Strong Demand Environment Across the Business

Table 1 — Results of Operations

Three months ended

Six months ended

June 30,

June 30,

(In millions, except per share amounts)

2021

2020

2021

2020

Revenues

$

567

$

456

$

1,120

$

988

Cost of goods sold

518

411

1,018

882

Operating expenses

43

46

87

88

Restructuring, impairment and plant closing and transition costs

5

25

12

Operating (loss) income

(5)

(6)

(10)

6

Interest expense, net

(14)

(12)

(29)

(22)

Other income

2

3

7

7

Loss before income taxes

(17)

(15)

(32)

(9)

Income tax (expense) benefit

(2)

(10)

—

Net loss

(22)

(17)

(42)

(9)

Net income attributable to noncontrolling interests

(1)

(2)

(2)

(3)

Net loss attributable to Venator

$

(23)

$

(19)

$

(44)

$

(12)

Adjusted EBITDA⁽¹⁾

$

43

$

37

$

92

$

94

Adjusted net (loss) income⁽¹⁾

$

—

$

(3)

$

1

$

9

Basic loss per share

$

(0.21)

$

(0.18)

$

(0.41)

$

(0.11)

Diluted loss per share⁽⁴⁾

$

(0.21)

$

(0.18)

$

(0.41)

$

(0.11)

Adjusted (loss) earnings per share⁽¹⁾

$

—

$

(0.03)

$

0.01

$

0.08

Adjusted diluted (loss) earnings per share⁽¹⁾

$

—

$

(0.03)

$

0.01

$

0.08

Ordinary share information:

Basic shares outstanding

107.3

106.7

107.2

106.7

Diluted shares⁽⁴⁾

108.1

106.7

107.7

106.7

See end of press release for footnote explanations

Table 2 — Results of Operations by Segment

Three months ended

Six months ended

June 30,

Favorable /

June 30,

Favorable /

(In millions)

2021

2020

(Unfavorable)

2021

2020

(Unfavorable)

Segment Revenues:

Titanium Dioxide

$

415

$

338

23%

$

829

$

740

12%

Performance Additives

152

118

29%

291

248

17%

Total

$

$

456

24%

$

1,120

$

988

13%

Segment Adjusted EBITDA⁽¹⁾:

Titanium Dioxide

$

36

$

35

3%

$

76

$

81

(6)%

Performance Additives

18

13

38%

41

35

17%

Corporate and other

(11)

(11)

—%

(25)

(22)

(14)%

Total

$

43

$

37

16%

$

92

$

94

(2)%

See end of press release for footnote explanations

Table 3 — Factors Impacting Sales Revenue

Three months ended

June 30, 2021 vs. 2020^(a)

Average Selling Price^(b)

Local Currency

Exchange Rate

Sales Mix & Other

Sales Volume^(c)

Total

Titanium Dioxide

3%

7%

—%

13%

23%

Performance Additives

1%

6%

12%

10%

29%

Total Company

2%

6%

3%

13%

24%

(a)   Includes water treatment business

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

(c)   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⁾⁽⁴⁾

Three months ended

Three months ended

Three months ended

June 30,

June 30,

June 30,

(In millions, except per share amounts)

2021

2020

2021

2020

2021

2020

Net loss

$

(22)

$

(17)

$

(22)

$

(17)

$

(0.20)

$

(0.15)

Net income attributable to noncontrolling interests

(1)

(2)

(1)

(2)

(0.01)

(0.03)

Net loss attributable to Venator

(23)

(19)

(23)

(19)

(0.21)

(0.18)

Interest expense, net

14

12

Income tax expense

5

2

Depreciation and amortization

29

28

Loss on disposal of businesses/assets

2

—

2

—

0.02

—

Certain legal expenses/settlements

—

3

—

3

—

0.03

Amortization of pension and postretirement actuarial losses

3

4

3

4

0.03

0.04

Net plant incident costs

2

2

2

2

0.02

0.02

Restructuring, impairment, plant closing and transition costs

11

5

11

5

0.10

0.04

Income tax adjustments⁽²⁾

—

—

5

2

0.05

0.01

Adjusted⁽¹⁾

$

43

$

37

$

—

$

(3)

$

—

$

(0.03)

Adjusted income tax expense⁽²⁾

$

—

$

—

Net income attributable to noncontrolling interests, net of tax

1

2

Adjusted pre-tax income

$

1

$

(1)

Adjusted effective tax rate

35%

35%

See end of press release for footnote explanations

Table 5 — Selected Balance Sheet Items

June 30,

December 31,

(In millions)

2021

2020

Cash and cash equivalents

$

182

$

220

Accounts and notes receivable, net

401

324

Inventories

420

440

Prepaid expenses and other current assets

62

73

Property, plant and equipment, net

893

947

Other assets

374

353

Total assets

$

2,332

$

2,357

Accounts payable

$

302

$

262

Other current liabilities

127

126

Current portion of debt

5

7

Long-term debt

949

950

Non-current payable to affiliates

17

17

Other non-current liabilities

344

371

Total equity

588

624

Total liabilities and equity

$

2,332

$

2,357

Table 6 — Outstanding Debt

June 30,

December 31,

(In millions)

2021

2020

Debt:

Term Loan Facility

$

357

$

359

Senior Secured Notes

216

215

Senior Unsecured Notes

372

372

Other debt

9

11

Total debt - excluding affiliates

954

957

Total cash

182

220

Net debt - excluding affiliates

$

772

$

737

Table 7 — Summarized Statement of Cash Flows

Three months ended

Six months ended

June 30,

June 30,

(In millions)

2021

2020

2021

2020

Total cash at beginning of period

$

187

$

25

$

220

$

55

Net cash provided by (used in) operating activities

10

38

(5)

(20)

Net cash used in investing activities

(6)

(20)

(21)

(47)

Net cash (used in) provided by financing activities

(9)

144

(11)

200

Effect of exchange rate changes on cash

—

1

(1)

—

Total cash at end of period

$

182

$

188

$

182

$

188

Supplemental cash flow information:

Cash paid for interest

$

(3)

$

(4)

$

(31)

$

(18)

Cash paid for income taxes

(4)

—

(4)

—

Capital expenditures

(15)

(16)

(27)

(47)

Depreciation and amortization

29

28

60

56

Changes in primary working capital:

Accounts receivable

(31)

49

(81)

(13)

Inventories

20

13

13

22

Accounts payable

(2)

(47)

45

(67)

Total cash (used in) provided by primary working capital

$

(13)

$

15

$

(23)

$

(58)

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 expense/adjustments; (b) loss/gain on disposition of businesses/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 (loss) attributable to Venator Materials PLC ordinary shareholders is computed by eliminating the after-tax amounts related to the following from net income/loss attributable to Venator Materials PLC ordinary shareholders: (a) business acquisition and integration expenses/adjustments; (b) loss/gain on disposition of businesses/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 income 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 income 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 income (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⁾

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, (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 statement of cash flows; however, it may be adjusted for items that affect comparability between periods. Free cash flow is presented as supplemental information.

⁽⁴⁾

The potentially dilutive impact of share-based awards was excluded from the calculation of earnings per share for the three months and six months ended June 30, 2021 because there is an anti-dilutive effect as we are in a net loss position.