VNTR Venator Materials PLC

Three months ended

March 31,

December 31,
2021

(In millions, except per share amounts)

2022

Revenues

$    659

$    553

$               535

Net (loss) income attributable to Venator

$      (3)

$     (21)

$                 14

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

$        6

$        1

$                  (5)

Adjusted EBITDA⁽¹⁾

$      57

$      49

$                 40

Diluted (loss) earnings per share ⁽⁴⁾

$  (0.03)

$  (0.20)

$              0.13

Adjusted diluted earnings (loss) per share⁽¹⁾

$   0.06

$   0.01

$             (0.05)

Net cash (used in) provided by operating activities

$     (86)

$     (15)

$                  17

Free cash flow⁽³⁾

$   (103)

$     (27)

$                  (9)

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

2608292

Table 1 — Results of Operations

Three months ended

March 31,

(In millions, except per share amounts)

2022

2021

Revenues

$         659

$         553

Cost of goods sold

596

500

Operating expenses

42

44

Restructuring, impairment and plant closing and transition costs

11

14

Operating income (loss)

10

(5)

Interest expense, net

(15)

(15)

Other income, net

3

5

Loss before income taxes

(2)

(15)

Income tax expense

—

(5)

Net loss

(2)

(20)

Net income attributable to noncontrolling interests

(1)

(1)

Net loss attributable to Venator

$           (3)

$          (21)

Adjusted EBITDA⁽¹⁾

$           57

$           49

Adjusted net income attributable to Venator⁽¹⁾

$             6

$             1

Basic loss per share

$       (0.03)

$       (0.20)

Diluted loss per share⁽⁴⁾

$       (0.03)

$       (0.20)

Adjusted earnings per share⁽¹⁾

$        0.06

$        0.01

Adjusted diluted earnings per share⁽¹⁾

$        0.06

$        0.01

Ordinary share information:

   Basic shares outstanding

107.6

107.1

   Diluted shares⁽⁴⁾

107.7

107.7

See end of press release for footnote explanations

Table 2 — Results of Operations by Segment

Three months ended

March 31,

Favorable /

(In millions)

2022

2021

(Unfavorable)

Segment Revenues:

  Titanium Dioxide

$         510

$         414

23%

  Performance Additives

149

139

7%

    Total

$         659

$         553

19%

Segment Adjusted EBITDA⁽¹⁾:

  Titanium Dioxide

$           49

$           40

23%

  Performance Additives

20

23

(13)%

  Corporate and other

(12)

(14)

14%

    Total

$           57

$           49

16%

See end of press release for footnote explanations 

Table 3 — Factors Impacting Sales Revenue

Three months ended

March 31, 2022 vs. 2021

Local
Currency

Exchange
Rate

Sales Mix
& Other

Sales
Volume^(b)

Divestitures
^(c)

Total

Titanium Dioxide

29%

(6)%

1%

(1)%

—%

23%

Performance Additives

20%

(4)%

1%

(5)%

(5)%

7%

Total Company

27%

(6)%

1%

(2)%

(1)%

19%

^(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

March 31,

March 31,

March 31,

(In millions, except per share amounts)

2022

2021

2022

2021

2022

2021

Net loss

$     (2)

$   (20)

$     (2)

$   (20)

$ (0.02)

$ (0.18)

Net income attributable to noncontrolling interests

(1)

(1)

(1)

(1)

(0.01)

(0.02)

Net loss attributable to Venator

(3)

(21)

(3)

(21)

(0.03)

(0.19)

Interest expense, net

15

15

Income tax expense

—

5

Depreciation and amortization

31

31

(Gain) loss on disposal of businesses/assets

(1)

—

(1)

—

(0.01)

—

Certain legal expenses/settlements

2

1

2

1

0.02

0.01

Amortization of pension and postretirement actuarial losses

—

3

—

3

—

0.03

Net plant incident costs

2

1

2

1

0.02

0.01

Restructuring, impairment, plant closing and transition costs

11

14

11

14

0.10

0.13

Income tax adjustments⁽²⁾

—

—

(5)

3

(0.05)

0.03

Adjusted⁽¹⁾

$    57

$    49

$      6

$      1

$ 0.06

$ 0.01

Adjusted income tax expense⁽²⁾

$      5

$      2

Net income attributable to noncontrolling interests, net of tax

1

1

Adjusted pre-tax income (loss)

$    12

$      4

Adjusted effective tax rate

35%

35%

EBITDA

Net Income
(Loss)

Diluted
Earnings (Loss)
Per Share⁽¹⁾

Three months
ended
December 31,

Three months
ended
December 31,

Three months
ended
December 31,

(In millions, except per share amounts)

2021

2021

2021

Net loss

$                                  15

$                      15

$                     0.14

Net income attributable to noncontrolling interests

(1)

(1)

(0.01)

Net loss attributable to Venator

14

14

0.13

Interest expense, net

15

Income tax expense

(45)

Depreciation and amortization

30

Business acquisition and integration expenses

1

1

0.01

Separation gain

3

3

0.03

Loss on disposal of businesses/assets

7

7

0.07

Certain legal expenses/settlements

1

1

0.01

Amortization of pension and postretirement actuarial losses

2

2

0.02

Net plant incident costs

4

4

0.04

Restructuring, impairment, plant closing and transition costs

8

8

0.07

Income tax adjustments⁽²⁾

—

(45)

(0.42)

Adjusted⁽¹⁾

$                                  40

$                      (5)

$                    (0.05)

Adjusted income tax expense⁽²⁾

$                      —

Net income attributable to noncontrolling interests, net of tax

1

Adjusted pre-tax loss

$                      (4)

Adjusted effective tax rate

35    %

See end of press release for footnote explanations 

Table 5 — Selected Balance Sheet Items

March 31,

December 31,

(In millions)

2022

2021

Cash and cash equivalents

$             46

$           156

Accounts and notes receivable, net

489

371

Inventories

473

478

Prepaid expenses and other current assets

89

84

Property, plant and equipment, net

816

848

Other assets

427

427

Total assets

$         2,340

$        2,364

Accounts payable

$            401

$           377

Other current liabilities

112

131

Current portion of debt

5

5

Long-term debt

949

949

Non-current payable to affiliates

21

21

Other non-current liabilities

306

313

Total equity

546

568

Total liabilities and equity

$         2,340

$        2,364

Table 6 — Outstanding Debt

March 31,

December 31,

(In millions)

2022

2021

Debt:

  Term Loan Facility

$            355

$           356

  Senior Secured Notes

218

217

  Senior Unsecured Notes

372

372

Other debt

9

9

Total debt - excluding affiliates

954

954

Total cash

46

156

Net debt - excluding affiliates

$            908

$           798

Table 7 — Summarized Statement of Cash Flows

Three months ended

March 31,

(In millions)

2022

2021

Total cash at beginning of period

$     156

$     220

   Net cash provided by operating activities

(86)

(15)

   Net cash (used in) provided by investing activities

(21)

(15)

   Net cash provided by (used in) financing activities

(3)

(2)

   Effect of exchange rate changes on cash

—

(1)

Total cash at end of period

$      46

$     187

Supplemental cash flow information:

   Cash paid for interest

$     (25)

$     (28)

   Cash paid for income taxes

(1)

—

   Capital expenditures

(17)

(12)

   Depreciation and amortization

31

31

   Restructuring

(11)

(3)

   Net cash flows associated with Pori

(10)

(4)

Changes in primary working capital:

   Accounts receivable

(122)

(50)

   Inventories

(1)

(7)

   Accounts payable

36

47

     Total cash provided by (used in) primary working capital

$     (87)

$     (10)

Three months ended

March 31,

(In millions)

2022

2021

Free cash flow⁽³⁾:

   Net cash (used in) operating activities

$     (86)

$     (15)

   Capital expenditures

(17)

(12)

     Free cash flow⁽³⁾

$   (103)

$     (27)

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. 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 March 31, 2022 because there is an anti-dilutive effect as we are in a 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.