Venator Announces Third Quarter 2022 Results and Signs Agreement to Sell its Iron Oxide Business

Three months ended

Nine months ended

September 30,

June 30

September 30,

(In millions, except per share amounts)

2022

2021

2022

2021

Revenues

$      506

$      557

$       642

$     1,807

$  1,677

Net (loss) income attributable to Venator

$       (50)

$       (47)

$         93

$         40

$     (91)

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

$       (36)

$          3

$         14

$        (15)

$        4

Adjusted EBITDA⁽¹⁾

$         (8)

$        48

$         61

$       110

$     140

Diluted (loss) earnings per share ⁽⁴⁾

$    (0.46)

$    (0.44)

$      0.86

$      0.37

$  (0.85)

Adjusted diluted (loss) earnings per share⁽¹⁾

$    (0.33)

$     0.03

$      0.13

$     (0.14)

$    0.04

Net cash (used in) provided by operating activities

$       (74)

$          7

$         73

$        (87)

$        2

Free cash flow⁽³⁾

$       (90)

$       (13)

$         58

$      (135)

$     (45)

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

6008355

Table 1 — Results of Operations

Three months ended

Nine months ended

September 30,

September 30,

(In millions, except per share amounts)

2022

2021

2022

2021

Revenues

$    506

$    557

$  1,807

$  1,677

Cost of goods sold

508

511

1,677

1,529

Operating expenses

23

42

95

129

Restructuring, impairment and plant closing and transition costs

5

35

21

60

Operating (loss) income

(30)

(31)

14

(41)

Interest expense, net

(16)

(15)

(44)

(44)

Other income, net

2

3

93

10

(Loss) Income before income taxes

(44)

(43)

63

(75)

Income tax expense

(4)

(4)

(18)

(14)

Net (loss) income

(48)

(47)

45

(89)

Net income attributable to noncontrolling interests

(2)

—

(5)

(2)

Net (loss) income attributable to Venator

$     (50)

$     (47)

$      40

$     (91)

Adjusted EBITDA⁽¹⁾

$       (8)

$      48

$    110

$    140

Adjusted net income attributable to Venator⁽¹⁾

$     (36)

$        3

$     (15)

$        4

Basic (loss) income per share

$  (0.46)

$  (0.44)

$   0.37

$  (0.85)

Diluted (loss) income per share⁽⁴⁾

$  (0.46)

$  (0.44)

$   0.37

$  (0.85)

Adjusted (loss) earnings per share⁽¹⁾

$  (0.33)

$   0.03

$  (0.14)

$   0.04

Adjusted diluted (loss) earnings per share^(1),(4)

$  (0.33)

$   0.03

$  (0.14)

$   0.04

Ordinary share information:

Basic shares outstanding

108.0

107.3

107.8

107.2

Diluted shares⁽⁴⁾

108.0

107.5

107.9

107.5

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)

2022

2021

(Unfavorable)

2022

2021

(Unfavorable)

Segment Revenues:

Titanium Dioxide

$    361

$    430

(16) %

$  1,357

$  1,259

8 %

Performance Additives

145

127

14 %

450

418

8 %

Total

$    506

$    557

(9) %

$  1,807

$  1,677

8 %

Segment Adjusted EBITDA⁽¹⁾:

Titanium Dioxide

$       (5)

$      54

(109) %

$      93

$    130

(28) %

Performance Additives

9

5

80 %

48

46

4 %

Corporate and other

(12)

(11)

(9) %

(31)

(36)

14 %

Total

$       (8)

$      48

(117) %

$    110

$    140

(21) %

See end of press release for footnote explanations 

Table 3 — Factors Impacting Sales Revenue

Three months ended

September 30, 2022 vs. 2021

Local
Currency

Exchange
Rate

Sales Mix
& Other

Sales
Volume^(b)

Total

Titanium Dioxide

19 %

(7) %

1 %

(29) %

(16) %

Performance Additives

31 %

(6) %

(3) %

(8) %

14 %

Total Company

22 %

(6) %

— %

(25) %

(10) %

Nine months ended

September 30, 2022 vs. 2021

Average Selling Price^(a)

Local
Currency

Exchange
Rate

Sales Mix
& Other

Sales
Volume^(b)

Divestitures
^(c)

Total

Titanium Dioxide

26 %

(7) %

1 %

(12) %

— %

8 %

Performance Additives

26 %

(5) %

(1) %

(10) %

(2) %

8 %

Total Company

26 %

(7) %

— %

(12) %

(1) %

6 %

^(a)

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

^(b)

Excludes sales volumes of by-products and raw materials

^(c)

Our water treatment business was disposed of in the second quarter of 2021

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

September 30,

September 30,

September 30,

(In millions, except per share amounts)

2022

2021

2022

2021

2022

2021

Net loss

$   (48)

$   (47)

$   (48)

$   (47)

$ (0.44)

$  (0.44)

Net income attributable to noncontrolling interests

(2)

—

(2)

—

(0.02)

—

Net loss attributable to Venator

(50)

(47)

(50)

(47)

(0.46)

(0.44)

Interest expense, net

16

15

Income tax expense

4

4

Depreciation and amortization

27

29

Certain legal expenses/settlements

—

3

—

3

—

0.03

Amortization of pension and postretirement actuarial losses

1

3

1

3

0.01

0.03

Net plant incident (credits) costs

(11)

6

(11)

6

(0.10)

0.06

Restructuring, impairment, plant closing and transition costs

5

35

5

35

0.05

0.33

Income tax adjustments⁽²⁾

—

—

19

3

0.18

0.03

Adjusted⁽¹⁾

$     (8)

$    48

$   (36)

$      3

$ (0.33)

$ 0.03

Adjusted income tax (benefit) expense⁽²⁾

$   (15)

$      1

Net income attributable to noncontrolling interests, net of tax

2

—

Adjusted pre-tax (loss) income

$   (49)

$      4

Adjusted effective tax rate

35 %

35 %

EBITDA

Net Income
(Loss)

Diluted
Earnings (Loss)
Per Share^(1),(4)

Three months
ended June 30,

Three months
ended June 30,

Three months
ended June 30,

(In millions, except per share amounts)

2022

2022

2022

Net income

$               95

$            95

$            0.88

Net income attributable to noncontrolling interests

(2)

(2)

(0.02)

Net income attributable to Venator

93

93

0.86

Interest expense, net

13

Income tax expense

14

Depreciation and amortization

26

Certain legal expenses/settlements

(85)

(85)

(0.79)

Amortization of pension and postretirement actuarial losses

1

1

0.01

Net plant incident costs

(6)

(6)

(0.06)

Restructuring, impairment, plant closing and transition costs

5

5

0.05

Income tax adjustments⁽²⁾

—

6

0.06

Adjusted⁽¹⁾

$               61

$            14

$            0.13

Adjusted income tax expense⁽²⁾

$              8

Net income attributable to noncontrolling interests, net of tax

2

Adjusted pre-tax income

$            24

Adjusted effective tax rate

35 %

EBITDA

Net Income (Loss)

Diluted Earnings
(Loss) Per
Share^(1),(4)

Nine months
ended

Nine months
ended

Nine months
ended

September 30,

September 30,

September 30,

(In millions, except per share amounts)

2022

2021

2022

2021

2022

2021

Net income (loss)

$    45

$   (89)

$    45

$   (89)

$ 0.42

$  (0.83)

Net income attributable to noncontrolling interests

(5)

(2)

(5)

(2)

(0.05)

(0.02)

Net income (loss) attributable to Venator

40

(91)

40

(91)

0.37

(0.85)

Interest expense, net

44

44

Income tax expense

18

14

Depreciation and amortization

84

89

(Gain) loss on disposal of businesses/assets

(1)

2

(1)

2

(0.01)

0.02

Certain legal expenses/settlements

(83)

4

(83)

4

(0.77)

0.04

Amortization of pension and postretirement actuarial losses

2

9

2

9

0.02

0.08

Net plant incident (credits) costs

(15)

9

(15)

9

(0.14)

0.08

Restructuring, impairment, plant closing and transition costs

21

60

21

60

0.20

0.57

Income tax adjustments⁽²⁾

—

—

21

11

0.19

0.10

Adjusted⁽¹⁾

$  110

$  140

$   (15)

$      4

$ (0.14)

$ 0.04

Adjusted income tax (benefit) expense⁽²⁾

$     (3)

$      3

Net income attributable to noncontrolling interests, net of tax

5

2

Adjusted pre-tax income

$   (13)

$      9

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)

2022

2021

Cash and cash equivalents

$             45

$           156

Accounts and notes receivable, net

340

371

Inventories

596

478

Prepaid expenses and other current assets

101

84

Property, plant and equipment, net

693

848

Other assets

369

427

Total assets

$         2,144

$        2,364

Accounts payable

$            352

$           377

Other current liabilities

113

131

Current portion of debt

24

5

Long-term debt

947

949

Non-current payable to affiliates

21

21

Other non-current liabilities

262

313

Total equity

425

568

Total liabilities and equity

$         2,144

$        2,364

Table 6 — Outstanding Debt

September 30,

December 31,

(In millions)

2022

2021

Debt:

Term Loan Facility

$            354

$           356

Senior Secured Notes

219

217

Senior Unsecured Notes

373

372

Other debt

25

9

Total debt - excluding affiliates

971

954

Total cash

45

156

Net debt - excluding affiliates ⁽⁵⁾

$            926

$           798

Table 7 — Summarized Statement of Cash Flows

Three months ended

Nine months ended

September 30,

September 30,

(In millions)

2022

2021

2022

2021

Total cash at beginning of period

$     109

$     182

$     156

$     220

Net cash (used in) provided by operating activities

(74)

7

(87)

2

Net cash used in investing activities

(19)

(26)

(55)

(47)

Net cash provided by (used in) financing activities

32

(1)

37

(12)

Effect of exchange rate changes on cash

(3)

(1)

(6)

(2)

Total cash at end of period

$      45

$     161

$      45

$     161

Supplemental cash flow information:

Cash paid for interest

$     (27)

$     (27)

$     (57)

$     (58)

Cash paid for income taxes

(1)

(1)

(5)

(5)

Capital expenditures

(16)

(20)

(48)

(47)

Depreciation and amortization

27

29

84

89

Restructuring

(2)

(2)

(16)

(7)

Net cash flows associated with Pori

7

(3)

(9)

(10)

Changes in primary working capital:

Accounts receivable

112

2

(11)

(79)

Inventories

(94)

(5)

(198)

8

Accounts payable

(48)

19

38

64

Total cash (used in) provided by primary working capital

$     (30)

$      16

$   (171)

$       (7)

Three months ended

Nine months ended

September 30,

September 30,

(In millions)

2022

2021

2022

2021

Free cash flow⁽³⁾:

Net cash provided by (used in) operating activities

$     (74)

$        7

$     (87)

$        2

Capital expenditures

(16)

(20)

(48)

(47)

Free cash flow⁽³⁾

$     (90)

$     (13)

$   (135)

$     (45)

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) loss/gain on disposition of businesses/assets; (b) certain legal expenses/settlements; (c) amortization of pension and postretirement actuarial losses/gains; (d) net plant incident costs/credits; and (e) 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) loss/gain on disposition of businesses/assets; (b) certain legal expenses/settlements; (c) amortization of pension and postretirement actuarial losses/gains; (d) net plant incident costs/credits; (e) restructuring, impairment, and plant closing and transition costs/credits and (f) income tax adjustments. 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 (loss) 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. Free cash flow is defined as cash flows provided by (used in) operating activities from continuing operations less capital expenditures. The Company updated its definition of free cash flow during the third quarter of 2021 to conform to the definition more commonly used by publicly traded companies. Prior to the third quarter of 2021, free cash flow was defined as cash flows provided by (used in) operating activities from continuing operations and used in investing activities. Prior period comparatives within this release have been restated for the updated definition. 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 ended September 30, 2022 and the three and nine months ended September 30, 2021 and adjusted diluted earnings per share for the three and nine months ended September 30, 2022 because there was an anti-dilutive effect as we were in a net loss and adjusted net loss position.

⁽⁵⁾

Net debt" is not a defined term under U.S. GAAP. We define net debt as debt (the most comparable GAAP measure, calculated as long-term obligations plus short-term borrowings) minus cash and cash equivalents. Management believes that net debt is an important measure to monitor leverage and evaluate the balance sheet.