2017 Annual Report
4/18/18 3:15 PM
Dear Shareholders
It is my privilege to welcome you as a Venator shareholder
and to report on 2017 as a successful year for our business,
our first as a public company. We made significant progress
during the year and our business is performing well; how-
ever, I believe there is much more to come given Venator’s
potential as a business built for long-term success. With my
leadership team, and under the direction of our Board, we
are committed to unlocking this value for shareholders.
We achieved strong financial results in
2017, reporting a five-fold increase in
adjusted EBITDA, a 14 percentage point
improvement in EBITDA margin compared
to 2016 and free cash in excess of $200
million. These results signpost the sus-
tainable earnings and cash generation our
business can deliver well into the future,
supported by our strong balance sheet,
characterized by low net debt leverage.
We captured $24 million of profit improve-
ment in 2017 as part of our $90 million
Business Improvement Program, well
ahead of where we expected to be at the
year-end. Together with the $200 million
of synergies delivered as part of the
Rockwood acquisition, our profitability
has been transformed at all points in
the cycle.
We completed the reshaping of our man-
ufacturing network in 2017. Our TiO2
network has been optimized to eight
manufacturing facilities in Europe, North
America and Asia and we have completed
site closures in our North American color
pigments business. The fire at our titanium
dioxide facility in Pori, Finland in January
2017 has been a challenge for our business.
The fire caused considerable damage to
the plant, thankfully with no injuries, and
we have been able to utilize our technical
expertise and network of sites to mitigate
the impact on our customers as we priori-
tize the rebuild of our specialty capacity
at the site.
2017 was a landmark year for Venator as
we successfully completed the separation
from Huntsman, an initial public offering
and a follow-on offering. At the same time,
our business remained focused on our
customers and we made great strides in
establishing our new corporate identity –
building on our position as the trusted
experts in satisfying the most challenging
and demanding requirements in pigments
and additives.
We continue to invest to sustain our
market leading positions in high value
applications. 2017 saw the launch of a
new specialty TiO2 product that brings
enhanced whiteness to food and cos-
metics applications and two new TiO2
products for demanding plastics applica-
tions. These are good examples of our
approach to innovation: helping customers
harness improved technology and devel-
oping products with great commercial
potential. As we strengthen our portfolio
of differentiated and specialty applications,
we are also pioneering the broader use
of TiO2, opening new opportunities in
high growth markets such as sustainable
energy technology.
The strength of our market position and
the achievements of 2017 are largely
attributable to the talent and hard work of
our people over a number of years and I
would like to thank all Venator associates
for their considerable efforts and their
continued commitment to our business.
820831cov.indd 4-6
Simon Turner
President and Chief Executive Officer
Looking ahead, we are excited about the
growth opportunities within the business,
with additional benefit from our $90
million Business Improvement Program.
Industry fundamentals support an elon-
gated titanium dioxide cycle and our
market leading positions in higher value
TiO2 applications and sustained ore cost
advantage should further benefit this part
of our business. We are also encouraged
by the improving earnings trajectory of
our performance additives segment,
where actions we have taken to improve
our portfolio and manufacturing network
are expected to result in meaningful
earnings and margin improvement in
2018 and beyond.
Our priorities for 2018 focus on a “zero
harm” working environment, operational
excellence, financial performance and
delivering on our commitments to cus-
tomers, employees and shareholders.
I expect our business to continue to
improve in 2018.
Simon Turner
President and Chief Executive Officer
2017 At-A-Glance
$ in millions, except per share amounts
Revenues
Net income (loss) attributable to Venator
Diluted earnings (loss) per share
Adjusted net income (loss)(1)
Adjusted diluted earnings (loss) per share(1)
Adjusted EBITDA(1)
Free cash flow(2)
Capital expenditures
$ in millions
Total assets
Net debt(3)
Year Ended December 31,
2017
$ 2,209
$ 134
$ 1.26
$ 186
$ 1.74
$ 395
$ 212
$ 197
2016
$ 2,139
$
(87)
$ (0.82)
$
(67)
$ (0.63)
$
$
77
(20)
$ 103
December 31,
2017
2016
$ 2,847
$ 519
$ 2,661
$
(6)
Reporting Segment Operating Results
Titanium Dioxide
Performance Additives
$ in millions
Revenue
Adjusted EBITDA
EBITDA Margin %
2017
$1,604
$ 387
24%
$ in millions
Revenue
Adjusted EBITDA
EBITDA Margin %
2017
$605
$ 72
12%
(1) For a reconciliation see the Results of Operations included within Management’s Discussion and Analysis on pages 9–10.
(2) Free cash flow is defined as cash flows provided by (used in) operating activities from continuing operations and cash flows used in investing activities
from continuing operations. For a reconciliation see the Free Cash Flow Reconciliation on page 78.
(3) Net debt is defined as total debt excluding debt to affiliates, less total cash and cash equivalents.
1
2017 Financial Review and Form 10-K
Definitions and Note Regarding Forward-Looking Statements
Selected Financial Data
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Controls and Procedures
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Statements of Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Free Cash Flow Reconciliation
Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
3
5
6
28
29
30
31
32
33
34
35
36
78
79
Corporate Information
IBC
2
DEFINITIONS
Each capitalized term used without definition in this report has the meaning specified in the Annual Report on
Form 10- K for the year ended December 31, 2017 which was filed with the Securities and Exchange Commission on
February 23, 2018.
FORWARD-LOOKING STATEMENTS
Certain information set forth in this report contains “forward-looking statements” within the meaning the
Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the
Securities and Exchange Act of 1934. All statements other than historical factual information are forward-looking
statements, including without limitation statements regarding: projections of revenue, expenses, profit, margins, tax
rates, tax provisions, cash flows, pension and benefit obligations and funding requirements, our liquidity position or
other projected financial measures; management’s plans and strategies for future operations, including statements
relating to anticipated operating performance, cost reductions, construction cost estimates, restructuring activities, new
product and service developments, competitive strengths or market position, acquisitions, divestitures, spin-offs, or other
distributions, strategic opportunities, securities offerings, share repurchases, dividends and executive compensation;
growth, declines and other trends in markets we sell into; new or modified laws, regulations and accounting
pronouncements; legal proceedings, environmental, health and safety matters, tax audits and assessments and other
contingent liabilities; foreign currency exchange rates and fluctuations in those rates; general economic and capital
markets conditions; the timing of any of the foregoing; assumptions underlying any of the foregoing; and any other
statements that address events or developments that we intend or believe will or may occur in the future. In some cases,
forward-looking statements can be identified by terminology such as “believes,” “expects,” “may,” “will,” “should,”
“anticipates,” “estimates” or “intends” or the negative of such terms or other comparable terminology, or by discussions
of strategy. We may also make additional forward-looking statements from time to time. All such subsequent forward-
looking statements, whether written or oral, by us or on our behalf, are also expressly qualified by these cautionary
statements.
Forward-looking statements are based on certain assumptions and expectations of future events which may not
be accurate or realized. Forward-looking statements also involve risks and uncertainties, many of which are beyond our
control. Important factors that may materially affect such forward-looking statements and projections include:
•
•
•
•
•
volatile global economic conditions;
cyclical and volatile titanium dioxide products markets;
highly competitive industries and the need to innovate and develop new products;
increased manufacturing regulations for some of our products, including the outcome of the pending potential
classification of TiO2 as a carcinogen in the European Union (“EU”) or any increased regulatory scrutiny;
disruptions in production at our manufacturing facilities and our ability to cover resulting costs, including
construction costs, and lost revenue with insurance proceeds, including at our TiO2 manufacturing facility in
Pori, Finland;
•
fluctuations in currency exchange rates and tax rates;
•
price volatility or interruptions in supply of raw materials and energy;
•
changes to laws, regulations or the interpretation thereof;
•
significant investments associated with efforts to transform our business;
•
differences in views with our joint venture participants;
•
high levels of indebtedness;
• EHS laws and regulations;
•
•
•
•
•
•
our ability to obtain future capital on favorable terms;
seasonal sales patterns in our product markets;
legal claims against us, including antitrust claims;
our ability to adequately protect our critical information technology systems;
economic conditions and regulatory changes following the likely exit of the United Kingdom from the EU;
failure to maintain effective internal controls over financial reporting and disclosure;
3
•
•
•
•
•
•
our indemnification of Huntsman and other commitments and contingencies;
financial difficulties and related problems experienced by our customers, vendors, suppliers and other business
partners;
failure to enforce our intellectual property rights;
our ability to effectively manage our labor force;
conflicts, military actions, terrorist attacks and general instability; and
our ability to realize the expected benefits of our separation from Huntsman.
All forward-looking statements, including, without limitation, management’s examination of historical
operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and
projections are expressed in good faith and we believe there is a reasonable basis for them, but there can be no assurance
that management’s expectations, beliefs and projections will result or be achieved. All forward-looking statements apply
only as of the date made. We undertake no obligation to publicly update or revise forward-looking statements whether
because of new information, future events or otherwise, except as required by securities and other applicable law.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the
forward-looking statements contained in or contemplated by this report. Any forward-looking statements should be
considered in light of the risks set forth in our annual report on Form 10-K filed on February 23, 2018.
4
SELECTED FINANCIAL DATA
The selected historical financial data set forth below presents our historical financial data as of and for the dates
and periods indicated. You should read the selected financial data in conjunction with “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and our consolidated and combined financial statements and
accompanying notes.
(in millions, except per share amounts)
Statements of Operations Data:
2017
2016
2015
2014
2013
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,209 $ 2,139 $ 2,162 $ 1,549 $ 1,269
Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . . .
(46)
Income (loss) per share from continuing operations attributable to
(171)
(362)
136
(85)
Venator ordinary shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.19 $ (0.89) $ (3.47) $ (1.63) $ (0.43)
Balance Sheet Data (at period end):
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,847 $ 2,661 $ 3,413 $ 3,933 $ 2,313
Total long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,083 1,309 1,477 1,579
548
Total assets from continuing operations(a) . . . . . . . . . . . . . . . . . . . . . . . . 2,847 2,535 3,205 3,722 2,131
430
Total long-term liabilities from continuing operations(b) . . . . . . . . . . . . 1,083 1,231 1,359 1,447
(a) Defined as total assets less current assets of discontinued operations and noncurrent assets of discontinued
operations.
(b) Defined as total long-term liabilities less noncurrent liabilities of discontinued operations.
5
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
We are a leading global manufacturer and marketer of chemical products that improve the quality of life for
downstream consumers and promote a sustainable future. Our products comprise a broad range of innovative chemicals
and formulations that bring color and vibrancy to buildings, protect and extend product life, and reduce energy
consumption. We market our products globally to a diversified group of industrial customers through two segments:
Titanium Dioxide, which consists of our TiO2 business, and Performance Additives, which consists of our functional
additives, color pigments, timber treatment and water treatment businesses. We are a leading global producer in many of
our key product lines, including TiO2, color pigments and functional additives, a leading North American producer of
timber treatment products and a leading European producer of water treatment products. We operate 26 facilities,
employ approximately 4,500 associates worldwide and sell our products in more than 110 countries.
We operate in a variety of end markets, including industrial and architectural coatings, construction materials,
plastics, paper, printing inks, pharmaceuticals, food, cosmetics, fibers and films and personal care. Within these end
markets, our products serve approximately 6,900 customers globally. Our production capabilities allow us to
manufacture a broad range of functional TiO2 products as well as specialty TiO2 products that provide critical
performance for our customers and sell at a premium for certain end-use applications. Our color pigments, functional
additives and timber treatment products provide essential properties for our customers’ end-use applications by
enhancing the color and appearance of construction materials and delivering performance benefits in other applications
such as corrosion and fade resistance, water repellence and flame suppression. We believe that our global footprint and
broad product offerings differentiate us from our competitors and allow us to better meet our customers’ needs.
For the year ended December 31, 2017, we had total revenues of $2,209 million. Adjusted EBITDA for the year
ended December 31, 2017 was $387 million for our Titanium Dioxide segment and $72 million for our Performance
Additives segment.
Our Titanium Dioxide and Performance Additives segments have been transformed in recent years and we have
established ourselves as a market leader in each of the industries in which we operate. We invested approximately
$1.3 billion in our Titanium Dioxide and Performance Additives segments from January 1, 2014 to December 31, 2017
on acquisitions, restructuring and integration. We continue to implement additional business improvements within our
Titanium Dioxide and Performance Additives businesses. As a result of these efforts, we believe we are well-positioned
to capitalize on the continued strength of the TiO2 market and related growth opportunities.
Recent Developments
Initial Public Offering and Separation
On August 8, 2017, we completed our IPO of 26,105,000 ordinary shares, par value $0.001 per share (the
“ordinary shares”) which included 3,405,000 ordinary shares issued upon the exercise in full by the underwriters of their
option to purchase additional shares, at a public offering price of $20.00 per share. All of the ordinary shares were sold
by Huntsman, and we did not receive any proceeds from the offering. In conjunction with our IPO, Venator assumed the
Titanium Dioxide and Performance Additives businesses of Huntsman and the related assets, liabilities and obligations
and operations and entered into the separation agreement to effect the separation of this business from Huntsman. Prior
to our IPO, Venator was a wholly-owned subsidiary of Huntsman. The ordinary shares began trading August 3, 2017 on
the New York Stock Exchange under the symbol “VNTR.”
In connection with our IPO and the separation, Venator and Huntsman entered into certain agreements that
allocated between Venator and Huntsman the various assets, employees, liabilities and obligations that were previously
part of Huntsman and that govern various interim and ongoing relationships between the parties.
On August 15, 2017, we registered 14,025,000 ordinary shares on Form S-8 which are reserved for issuance in
connection with awards under our 2017 Stock Incentive Plan.
6
On December 4, 2017, we completed a secondary public offering of 21,764,800 ordinary shares. On January 3,
2018, the underwriters purchased an additional 1,948,955 ordinary shares pursuant to their over-allotment option. All of
the ordinary shares were sold by Huntsman through HHN, and we did not receive any proceeds from the offering.
Following our secondary public offering, including the partial exercise of the underwriters’ option to purchase additional
shares, Huntsman owns approximately 53% of Venator’s outstanding ordinary shares.
Senior Credit Facilities and Senior Notes
On August 8, 2017, in connection with the IPO and the separation, we entered into new financing arrangements
and incurred new debt, including borrowings of $375 million under a new senior secured term loan facility with a
maturity of seven years (the “Term Loan Facility”). In addition to the Term Loan Facility, we entered into a
$300 million asset-based revolving lending facility with a maturity of five years (the “ABL Facility” and, together with
the Term Loan Facility, the “Senior Credit Facilities”). On July 14, 2017, in connection with the IPO and the separation,
our subsidiaries Venator Finance S.à.r.l. and Venator Materials LLC (the “Issuers”), issued $375 million in aggregate
principal amount of 5.75% of Senior Notes due 2025 (the “Senior Notes”). Promptly following consummation of the
separation, the proceeds of the Senior Notes were released from escrow and Venator used the net proceeds of the Senior
Notes and borrowings under the Term Loan Facility to repay approximately $732 million of net intercompany debt owed
to Huntsman and to pay related fees and expenses of approximately $18 million.
Pori Fire
On January 30, 2017, our TiO2 manufacturing facility in Pori, Finland experienced fire damage and we continue
to repair the facility. Prior to the fire, 60% of the site capacity produced specialty products which, on average,
contributed greater than 75% of the site EBITDA from January 1, 2015 through January 30, 2017. The Pori facility had a
nameplate capacity of 130,000 metric tons per year, which represented approximately 17% of our total TiO2 nameplate
capacity and approximately 2% of total global TiO2 demand. We are currently operating at 20% of total prior capacity
producing specialty products, and we intend to restore manufacturing of the balance of these more profitable specialty
products by the end of 2018. The remaining 40% of site capacity is more commoditized and, based on current market
and economic conditions, associated costs and projected returns, we currently expect to rebuild this portion of the
facility, but do not expect it to be reintroduced into the market prior to 2020.
We have recorded a loss of $31 million for the write-off of fixed assets and lost inventory in cost of goods sold
in our consolidated and combined statements of operations for the year ended December 31, 2017. In addition, we
recorded a loss of $21 million of costs for cleanup of the facility in cost of goods sold through December 31, 2017. The
site is insured for property damage as well as business interruption losses subject to retained deductibles of $15 million
and 60 days, respectively, with an aggregate limit of $500 million. Due to prevailing strong market conditions, our
TiO2 selling prices continue to improve and our business is benefitting from the resulting improved profitability and cash
flows. This also has the effect of increasing our total anticipated business interruption losses from the Pori site. We
currently believe the combination of increased TiO2 profitability and recently estimated reconstruction costs will result
in combined business interruption losses and reconstruction costs in excess of our $500 million aggregate insurance
limit. We currently estimate that the total cost to rebuild the Pori facility (including the commodity portion) will exceed
the limits of our insurance policy by as much as $325 million, or up to $375 million when providing additional
contingency for the upper limits of our current design and construction cost estimates. This amount results from the
increased contribution from insurance towards business interruption together with increased costs associated with the
faster than normal build schedule of the specialty products portion of the facility, and greater equipment replacement
costs as compared to lower equipment repair costs than previously estimated. We expect to account for our uncovered
costs as capital expenditures and fund them from cash from operations, which will decrease our liquidity in the periods
those costs in excess of our insurance limits are incurred. Based on current and anticipated market conditions, we
currently expect our business interruption losses to be fully reimbursed within our insurance policy limits through 2019.
However, these are preliminary estimates based on a number of significant assumptions, and as a result uninsured costs
could exceed current estimates. Factors that could materially impact our current estimates include our actual future
TiO2 profitability and related impact on our business interruption losses; the accuracy of our current property damage
estimates; the actual costs and timing of our reconstruction efforts; market and other factors impacting our reconstruction
of the commoditized portion of the facility; our ability to secure government subsidies related to our reconstruction
efforts; and a number of other significant market and facility-related assumptions. We have established a process with
7
our insurer to receive timely advance payments for the continued reconstruction of the facility as well as lost profits for
business interruption losses, subject to policy limits. We expect to have pre-funded cash on our balance sheet resulting
from these advance insurance payments. We have agreed with our insurer to have monthly meetings to review relevant
site activities and interim claims as well as regular progress payments.
The fire at our Pori facility did not have a material impact on our 2017 fourth quarter operating results as losses
incurred were offset by insurance proceeds. We received $253 million of non-refundable partial progress payments from
our insurer through December 31, 2017 and we received an additional $62 million payment on January 10, 2018. During
2017, we recorded $187 million of income related to property damage and business interruption insurance recoveries in
cost of goods sold in our consolidated and combined statements of operations to offset property damage and business
interruption losses recorded during the period. In addition, we recorded $68 million as deferred income in accrued
liabilities as of December 31, 2017 for insurance proceeds received for costs not yet incurred. The difference between
payments received from our insurers of $253 million and the sum of income of $187 million and deferred income of
$68 million is related to the foreign exchange movements of the U.S. Dollar against the Euro during 2017.
If we experience delays in construction or equipment procurement relative to the expected restart of the Pori
facility, or we lose customers to alternative suppliers or our insurance proceeds do not timely cover our property damage
and other losses, or if our actual costs exceed our estimates, our business may be adversely impacted.
Recent Trends and Outlook
We expect the following factors to impact our operating results in the near term:
• Favorable environment for TiO2 price increases in the first quarter of 2018.
• Seasonal improvement in sales volumes in the first quarter of 2018 compared with the fourth quarter of 2017.
• We have established a process to receive timely advance insurance payments for the continued reconstruction
of the Pori facility as well as for business interruption losses, subject to policy limits.
• Manageable increases in raw material costs in the near term.
We expect that our corporate and other costs will be approximately $50 million per year, consisting of
$40 million of recurring selling, general and administrative costs to operate our business as a standalone public
company, which is lower than expenses historically allocated to us from Huntsman, and approximately $10 million of
costs that were previously embedded in the Huntsman Pigments and Additives division.
We continue to implement business improvements which we expect to be completed by the end of 2018 and
continue to provide contributions to adjusted EBITDA. Of the $60 million we previously estimated for annualized
savings, we have already realized approximately $23 million of savings through the fourth quarter of 2017 as a result of
these programs, including approximately $9 million of savings realized in the fourth quarter of 2017. If successfully
implemented, we expect the general cost reductions and optimization of our manufacturing network to result in
additional contributions to our adjusted EBITDA of approximately $37 million per year by the first quarter of 2019, with
additional projected contributions to adjusted EBITDA from volume growth (primarily via the launch of new products).
In 2018, we expect to spend approximately $120 million on capital expenditures, excluding reconstruction of
our Pori, Finland facility.
In 2017, our adjusted effective tax rate was 18%. Our tax expense is significantly affected by the mix of income
and losses in tax jurisdictions in which we operate. We expect our adjusted long-term effective tax rate will be
approximately 15% to 20%. We believe the impact of the 2017 Tax Act on our adjusted long-term effective tax rate will
not be material, given the low percentage of our global pre-tax income earned in the United States. As a result of the
2017 Tax Act we have recorded a provisional decrease of $3 million to our net deferred tax assets with a corresponding
net tax expense of $3 million. Additionally, also due to the 2017 Tax Act, other income for the quarter and year ended
December 31, 2017 increased by $34 million as a result of the decrease in the future expected payments to Huntsman
pursuant to the tax matters agreement entered into as part of our separation. We expect our cash tax rate will be between
10% to 15% in 2018.
8
Results of Operations
The following table sets forth our consolidated and combined results of operations for the years ended
December 31, 2017, 2016 and 2015.
(Dollars in millions)
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,209 $ 2,139 $ 2,162
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,738 1,987 2,046
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
262
Restructuring, impairment and plant closing and transition
180
228
Year Ended December 31,
2015
2016
2017
Percent Change
Year Ended December 31,
2017 vs. 2016 2016 vs. 2015
3 %
(13)%
27 %
(1)%
(3)%
(31)%
costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations before
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax (expense) benefit from continuing operations . . . .
Income (loss) from continuing operations . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reconciliation of net income (loss) to adjusted
EBITDA:
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) from continuing operations . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . .
Other adjustments:
Business acquisition and integration expenses . . . . . . . . . . .
Separation (gain) expense, net . . . . . . . . . . . . . . . . . . . . . . . .
U.S. income tax reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on disposition of businesses/assets . . . . . . . . . .
Net income of discontinued operations, net of tax . . . . . . . .
Certain legal settlements and related expenses . . . . . . . . . .
Amortization of pension and postretirement
actuarial losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net plant incident costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring, impairment and plant closing and
52
191
(40)
35
35
220
(63) (366)
(30)
(44)
—
(1)
186 (108) (396)
34
23
(50)
(85) (362)
136
8
10
(352)
144
8
(77)
40
50
127
(10)
44
(23)
114
(10)
30
(34)
100
(7)
5
7
(34)
—
(8)
1
11
—
—
(22)
(8)
2
44
—
—
1
(10)
3
17
4
10
1
9
4
49 %
NM
(9)%
NM
NM
NM
NM
— %
NM
(9)%
NM
11 %
— %
(84)%
(83)%
47 %
NM
(73)%
(32)%
(77)%
(20)%
(78)%
47 %
(32)%
14 %
43 %
transition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjusted EBITDA(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
52
395 $
35
77 $
220
8
413 %
863 %
Net cash provided by (used in) operating activities from
continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
337 $
80 $
(57)
321 %
NM
Net cash used in investing activities from continuing
operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(11)
(96) (100)
(89)%
(4)%
Net cash (used in) provided by financing activities from
continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (123)
185
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (197) (103) (203)
32
NM
91 %
(83)%
(49)%
9
(Dollars in millions)
Reconciliation of net income (loss)
to adjusted net income (loss):
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . .
Other adjustments:
Year Ended
Year Ended
Year Ended
December 31, 2017
Gross Tax(3) Net
December 31, 2016
Gross Tax(3) Net
December 31, 2015
Gross Tax(3) Net
$ 144
(10)
$ (77)
(10)
$ (352)
(7)
Business acquisition and integration expenses . . . . . $ 5 $ (2)
Separation (gain) expense, net . . . . . . . . . . . . . . . . . .
7 —
U.S. income tax reform . . . . . . . . . . . . . . . . . . . . . . . (34) 16
Loss (gain) on disposition of businesses/assets . . . . — — — (22)
(9)
Net income of discontinued operations . . . . . . . . . . . (11)
Certain legal settlements and related expenses . . . .
2
Amortization of pension and postretirement
3 $ 11 $ (5)
36
7 — — — — — —
(18) — — — — — —
1
(17)
(10)
2
1 —
3
(1)
(8) (13)
3
1
3
1 —
6 $ 44 $ (8)
5
1
(1)
(8)
1
actuarial losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 —
(1)
Net plant incident (credits) costs . . . . . . . . . . . . . . . .
Restructuring, impairment and plant closing and
4
17 10 —
1
10
(1) —
3
9 —
(1)
4
9
3
transition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
(5)
47 35
(7)
28 220 (20)
Adjusted net income (loss)(2) . . . . . . . . . . . . . . . . . . .
Weighted-average shares-basic . . . . . . . . . . . . . . . . . . .
Weighted-average shares-diluted . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Venator
Materials PLC ordinary shareholders:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-GAAP measures:
Adjusted net income (loss) per share:(2)
$ 186
106.3
106.7
$ (67)
106.3
106.3
$ 1.26
1.26
$ (0.82)
(0.82)
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1.75
1.74
$ (0.63)
(0.63)
200
$ (118)
106.3
106.3
$ (3.38)
(3.38)
$ (1.11)
(1.11)
NM—Not meaningful
(1) Our management uses adjusted EBITDA to assess financial performance. Adjusted EBITDA is defined as net
income (loss) before interest 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; (b) separation (gain) expense, net; (c) U.S. income tax reform; (d) (gain) loss
on disposition of businesses/assets; (e) net income of discontinued operations, net of tax; (f) certain legal settlements
and related expenses; (g) amortization of pension and postretirement actuarial losses; (h) net plant incident (credits)
costs; and (i) restructuring, impairment and plant closing and transition costs. We believe that net income (loss) 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
10
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.
(2) Adjusted net income (loss) 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 (gain) expense, net; (c) U.S. income tax reform; (d) loss (gain) on disposition of
businesses/assets; (e) net income of discontinued operations; (f) certain legal settlements and related expenses; (g)
amortization of pension and postretirement actuarial losses; (h) net plant incident (credits) costs; (i) restructuring,
impairment and plant closing and transition costs. Basic adjusted net income (loss) per share excludes dilution and is
computed by dividing adjusted net income (loss) by the weighted average number of shares outstanding during the
period. Adjusted diluted net income (loss) 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 (loss) per share was based on the ordinary shares that were outstanding at the time of our IPO.
Adjusted net income (loss) and adjusted net income (loss) per share amounts are presented solely as supplemental
information.
(3) 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.
Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016
For the year ended December 31, 2017, net income was $144 million on revenues of $2,209 million, compared
with a net loss of $77 million on revenues of $2,139 million for the same period in 2016. The increase of $221 million in
net income was the result of the following items:
• Revenues for the year ended December 31, 2017 increased by $70 million, or 3%, as compared with the same
period in 2016. The increase was due to a $50 million, or 3%, increase in revenue in our Titanium Dioxide
segment primarily due to increases in selling price, and a $20 million, or 3%, increase in revenue in our
Performance Additives segment due to increases in selling price and volumes. See “—Segment Analysis”
below.
• Our operating expenses for the year ended December 31, 2017 increased by $48 million, or 27%, as compared
to the same period in 2016, primarily as a result of a $23 million gain on disposals of businesses and a
$6 million gain from an insurance recovery in 2016, both of which were non-recurring. In addition, $14 million
of incremental costs related to our separation from Huntsman were incurred during 2017, along with $6 million
11
of unfavorable foreign currency exchange losses. These increases were partially offset by $6 million in savings
from our restructuring programs.
• Restructuring, impairment and plant closing and transition costs for the year ended December 31, 2017
increased to $52 million from $35 million for the same period in 2016. For more information concerning
restructuring activities, see “Note 11. Restructuring, Impairment and Plant Closing and Transition Costs” to our
consolidated and combined financial statements.
• Other income for the year ended December 31, 2017 increased by $36 million primarily as a result of the
change in the future expected payment to Huntsman pursuant to the tax matters agreement entered into as part
of our separation. The change in future expected payment is due to the 2017 Tax Act’s reduction of the U.S.
federal corporate income tax rate from 35% to 21%.
• Our income tax expense for the year ended December 31, 2017 increased to $50 million from a $23 million
income tax benefit for the same period in 2016. Our income tax expense is significantly affected by the mix of
income and losses in the tax jurisdictions in which we operate, as impacted by the presence of valuation
allowances in certain tax jurisdictions. For further information concerning taxes, see “Note 18. Income Taxes”
to our consolidated and combined financial statements.
Segment Analysis
(in millions)
Revenues
Year
Ended
December 31,
2017
2016
Percent
Change
Favorable
(Unfavorable)
Titanium Dioxide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Performance Additives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,604 $
605
2,209 $
1,554
585
2,139
Segment adjusted EBITDA
Titanium Dioxide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Performance Additives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
387 $
72
(64)
395 $
61
69
(53)
77
3 %
3 %
3 %
534 %
4 %
(21)%
413 %
Year Ended December 31, 2017 vs. 2016
Average Selling
Price(1)
Foreign
Local
Currency
Currency
Translation Mix &
Other
Impact
Sales
Volumes(2)
Period-Over-Period Increase (Decrease)
Titanium Dioxide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance Additives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18 %
1 %
1 %
— %
(2)%
— %
(14)%
2 %
NM—Not meaningful
(1) Excludes revenues from tolling arrangements, by-products and raw materials.
(2) Excludes sales volumes of by-products and raw materials.
Titanium Dioxide
The $50 million, or 3%, increase in revenues in our Titanium Dioxide segment for the year ended December 31,
2017 compared to the same period in 2016 was primarily due to an 19% improvement in selling prices, of which 1% was
due to favorable foreign currency effects, partially offset by a 14% decrease in sales volumes and a 2% decrease due to
product mix and other. The improvements in selling prices were primarily as a result of continued improvement in
business conditions for TiO2, allowing for an increase in prices. Sales volumes decreased primarily as a result of the fire
12
at our Pori, Finland manufacturing facility. Excluding the impact of the fire at our Pori plant, sales volumes decreased by
2% as compared to the same period in 2016.
Segment adjusted EBITDA of our Titanium Dioxide segment increased by $326 million for the year ended
December 31, 2017 compared to the same period in 2016 primarily as a result of an increase in revenue of $321 million
related to higher selling prices and a $36 million reduction in costs, primarily due to our business improvement program,
offset by an increase in other manufacturing costs of $27 million.
Performance Additives
The increase in revenues in our Performance Additives segment of $20 million, or 3%, for the year ended
December 31, 2017 compared to the same period in 2016 was primarily due to a $9 million increase from higher average
selling prices and a 2% increase in sales volumes. The improvement in prices was primarily in our functional additives
product line where we successfully raised prices to offset increases in prices of raw materials.
Segment adjusted EBITDA in our Performance Additives segment increased by $3 million, or 4%, due to
increases in revenues from higher volumes and selling prices. These increases were offset by increased costs and the
release of an environmental reserve relating to a previously owned property in the third quarter of 2016, which drove a
net decrease in segment adjusted EBITDA year over year.
Corporate and other
Corporate and other primarily consists of corporate selling, general and administrative expenses which are not
allocated to our segments. Losses from Corporate and other are $11 million, or 21%, higher than for the same period in
the prior year as the costs allocated to us by our parent in 2017 prior to the separation were higher than both the
historical allocations from prior periods and our cost to operate as a stand alone company after the separation.
Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015
For the year ended December 31, 2016, net loss from continuing operations was $85 million on revenues of
$2,139 million, compared with a net loss from continuing operations of $362 million on revenues of $2,162 million in
2015. The decrease of $277 million in net loss from continuing operations was the result of the following items:
• Revenues for the year ended December 31, 2016 decreased by $23 million, or 1%, as compared with 2015. The
decrease was due to lower average selling prices in all of our segments, partially offset by higher sales volumes
in all of our segments. See “—Segment Analysis” below.
• Our operating expenses for the year ended December 31, 2016 decreased by $82 million, or 31%, as compared
to 2015, primarily related to a $33 million decrease in acquisition expenses, $30 million decrease in other
selling, general and administrative expenses as a result of cost savings from restructuring programs and a
favorable $5 million foreign currency exchange impact of the strengthening U.S. dollar against other major
international currencies.
• Restructuring, impairment and plant closing and transition costs for the year ended December 31, 2016
decreased to $35 million from $220 million in 2015. For more information concerning restructuring activities,
see “Note 11. Restructuring, Impairment and Plant Closing and Transition Costs” to our consolidated and
combined financial statements.
• Our interest expense, net for the year ended December 31, 2016 increased to $44 million from $30 million in
2015, partially due to an increase in interest expense of approximately $7 million from 2015 to 2016 as a result
of higher average levels of notes payable to related parties during 2016 partially offset by a $7 million decrease
in interest income for the year ended December 31, 2016 as compared with 2015 resulting from a significant
decrease in notes receivable from affiliates during 2016 as compared to 2015.
• Our income tax benefit for the year ended December 31, 2016 decreased to $23 million from $34 million in
2015. Our tax benefit is significantly affected by the mix of income and losses in the tax jurisdictions in which
we operate, as impacted by the presence of valuation allowances in certain tax jurisdictions. For further
information concerning taxes, see “Note 18. Income Taxes” to our consolidated and combined financial
statements.
13
Segment Analysis
(in millions)
Revenues
Year
Ended
December 31,
2016
2015
Percent
Change
Favorable
(Unfavorable)
Titanium Dioxide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Performance Additives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,554 $
585
2,139 $
1,584
578
2,162
Segment adjusted EBITDA
Titanium Dioxide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Performance Additives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
61 $
69
(53)
77 $
(8)
69
(53)
8
(2)%
1 %
(1)%
NM
— %
— %
863 %
Year Ended December 31, 2016 vs. 2015
Average Selling
Price(1)
Foreign
Local
Currency
Currency
Translation Mix &
Other
Impact
Sales
Volumes(2)
Period-Over-Period Increase (Decrease)
Titanium Dioxide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance Additives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6)%
— %
(1)%
(1)%
1 %
(2)%
4 %
4 %
NM—Not meaningful
(1) Excludes revenues from tolling arrangements, by-products and raw materials.
(2) Excludes sales volumes of by-products and raw materials.
Titanium Dioxide
The decrease in revenues of $30 million, or 2%, in our Titanium Dioxide segment for the year ended
December 31, 2016 compared to the same period of 2015 was due to a $105 million, or 7%, decrease in average selling
prices, partially offset by a $76 million, or 4%, increase in sales volumes. Average selling prices decreased primarily as a
result of competitive pressure and the foreign currency exchange impact of a stronger U.S. dollar primarily against the
euro. Sales volumes increased primarily due to increased end-use demand.
Segment adjusted EBITDA increased by approximately $69 million primarily due to the decrease in cost of
sales of $68 million, a decrease in selling, general and administrative costs of $19 million, primarily as a result of
restructuring savings and a decrease in other operating expenses of $11 million due to insurance proceeds received
relating to the 2015 nitrogen tank explosion at our Uerdingen, Germany manufacturing facility, partially offset by a
$30 million decrease in revenue. The change in cost of sales was primarily related to a $115 million decrease due to
restructuring savings offset by a $47 million increase in cost of sales due to increased volumes.
Performance Additives
The increase in revenues in our Performance Additives segment of $7 million, or 1%, for the year ended
December 31, 2016 compared to the same period of 2015 was due to an increase of $12 million, or 2%, due to changes
in sales volumes and product mix offset by a $4 million, or 1%, decrease in average selling prices. Segment adjusted
EBITDA remained unchanged as the benefit of higher sales volumes and restructuring savings were offset by lower
average selling prices.
14
Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014
For the year ended December 31, 2015, net loss from continuing operations was $362 million on revenues of
$2,162 million, compared with a net loss from continuing operations of $171 million on revenues of $1,549 million for
the same period in 2014. The increase of $191 million in net loss was the result of the following items:
• Revenues for the year ended December 31, 2015 increased by $613 million, or 40%, as compared with 2014.
The increase was due principally to higher sales volumes due to the impact of the Rockwood acquisition,
partially offset by lower average selling prices in both of our segments. See “—Segment Analysis” below.
• Our operating expenses for the year ended December 31, 2015 increased by $70 million, or 36%, as compared
to 2014, primarily related to the inclusion of $65 million of operating expenses due to the Rockwood
acquisition, offset by an unfavorable $3 million foreign currency exchange impact of the strengthening U.S.
dollar against other major international currencies.
• Restructuring, impairment and plant closing and transition costs for the year ended December 31, 2015
increased to $220 million from $60 million in 2014. For more information concerning restructuring activities,
see “Note 11. Restructuring, Impairment and Plant Closing and Transition Costs” to our consolidated and
combined financial statements.
Interest expense, net for the year ended December 31, 2015 increased to $30 million from $2 million. The
increase was primarily due to the increase in notes payable to related parties.
•
• Our income tax benefit for the year ended December 31, 2015 increased to $34 million from $18 million in
2014. Our tax benefit is significantly affected by the mix of income and losses in the tax jurisdictions in which
we operate, as impacted by the presence of valuation allowances in certain tax jurisdictions. For further
information concerning taxes, see “Note 18. Income Taxes” to our consolidated and combined financial
statements.
Segment Analysis
(in millions)
Revenues
Year
Ended
December 31,
2015
2014
Percent
Change
Favorable
(Unfavorable)
Titanium Dioxide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Performance Additives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,584 $
578
2,162 $
1,411
138
1,549
Segment adjusted EBITDA
Titanium Dioxide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Performance Additives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(8) $
69
(53)
8 $
62
14
(49)
27
12 %
319 %
40 %
NM
393 %
(8)%
(70)%
Year Ended December 31, 2015 vs. 2014
Average Selling
Price(1)
Foreign
Local
Currency
Currency
Translation Mix &
Sales
Impact
Other Volumes(2),(3)
Period-Over-Period Increase (Decrease)
Titanium Dioxide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance Additives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7)%
(10)%
(12) % 36 %
(4) % 337 %
(5)%
(5)%
NM—Not meaningful
(1) Excludes revenues from tolling arrangements, by-products and raw materials.
(2) Includes the impact from the Rockwood acquisition.
(3) Excludes sales volumes of by-products and raw materials.
15
Titanium Dioxide
The increase in revenues in our Titanium Dioxide segment for 2015 compared to 2014 was primarily due to the
impact of the Rockwood acquisition which added $411 million to revenue and $373 million to cost of sales. Fixed costs
increased by $27 million due to recognizing a full year of Rockwood costs. Other than the impact of the Rockwood
acquisition, average selling prices decreased 19% primarily as a result of high TiO2 industry inventory levels and the
foreign currency exchange impact of a stronger U.S. dollar against major European currencies; these factors reduced
revenues by $235 million. Sales volumes decreased 5% in 2015 primarily as a result of lower end-use demand. Other
than the impact of the Rockwood acquisition, fixed costs decreased by $18 million primarily due to the foreign currency
exchange impact of a stronger U.S. dollar against major European currencies and $4 million in cost synergies from
restructuring initiatives. The impact of a nitrogen tank explosion owned and operated by a third party at our Uerdingen,
Germany facility disrupted our manufacturing during the third quarter of 2015 and reduced segment adjusted EBITDA
by approximately $6 million, the impact of which is included in the above figures. The decrease in segment adjusted
EBITDA was primarily due to lower average selling prices, partially offset by the decrease in operating expenses
resulting from restructuring savings, as discussed above, lower raw material and energy prices, and the Rockwood
acquisition.
Performance Additives
The increase in revenues in our Performance Additives segment for 2015 compared to 2014 was primarily due
to the impact of the Rockwood acquisition in October 2014, which added $413 million to revenue and $308 million to
cost of sales. Fixed costs increased by $73 million due to recognizing a full year of Rockwood costs, partially offset by
$6 million of cost synergies. The increase of $55 million in segment adjusted EBITDA was primarily attributable to the
inclusion of a full year of business results due to the Rockwood acquisition.
Liquidity and Capital Resources
Prior to the separation, our primary source of liquidity and capital resources had been cash flows from
operations, our participation in a cash pooling program with Huntsman and debt incurred by Huntsman. Following the
separation, we have not received any funding through the Huntsman cash pooling program. We had cash and cash
equivalents of $238 million and $29 million as of December 31, 2017 and December 31, 2016, respectively. We expect
to have adequate liquidity to meet our obligations over the next 12 months. Additionally, we believe our future
obligations, including needs for capital expenditures will be met by available cash generated from operations and
borrowings under the ABL Facility.
On August 8, 2017, in connection with our IPO and the separation, we entered into new financing arrangements
and incurred new debt, including $375 million of Senior Notes issued by the Issuers, and borrowings of $375 million
under the term loan facility. We used the net proceeds of the Senior Notes and the Term Loan Facility to repay
approximately $732 million of net intercompany debt owed to Huntsman and to pay related fees and expenses of
approximately $18 million. Substantially all Huntsman receivables or payables were eliminated in connection with the
separation, other than a payable to Huntsman for a liability pursuant to the tax matters agreement entered into at the time
of the separation which has been presented as “Noncurrent payable to affiliate” on our consolidated and combined
balance sheet.
In addition to the Senior Notes and the Term Loan Facility, we entered into the ABL Facility. Availability to
borrow under the ABL Facility is subject to a borrowing base calculation comprising both accounts receivable and
inventory in the U.S., Canada, the U.K. and Germany and only accounts receivable in France and Spain. Thus, the base
calculation may fluctuate from time to time and may be further impacted by the lenders’ discretionary ability to impose
reserves and availability blocks that might otherwise incrementally increase borrowing availability. Assuming all
proposed borrowers currently participate in the facility, the borrowing base calculation as of December 31, 2017 is in
excess of $265 million. To participate in the facility, each borrower is required to deliver certain documentation and
security agreements to the satisfaction of the administrative agent, some of which were not fully satisfied until January
of 2018, reducing the borrowing base calculation as of December 31, 2017 to $243 million.
16
Items Impacting Short-Term and Long-Term Liquidity
Our liquidity can be significantly impacted by various factors. The following matters had, or are expected to
have, a significant impact on our liquidity:
• Cash inflows from our accounts receivable and inventory, net of accounts payable, decreased by approximately
$76 million for the year ended December 31, 2017 as reflected in our consolidated and combined statements of
cash flows. We expect volatility in our working capital components to continue due to seasonal changes in
working capital throughout the year.
• During 2017, we spent approximately $103 million on capital expenditures, excluding spending on the
reconstruction of our Pori facility. For 2018, we expect to spend approximately $120 million on capital
expenditures, excluding spending on the reconstruction of our Pori facility. Our future expenditures include
certain EHS maintenance and upgrades; repair of our Pori manufacturing facility; periodic maintenance and
repairs applicable to major units of manufacturing facilities; expansions of our existing facilities or construction
of new facilities; and certain cost reduction projects. We expect to fund this spending with cash provided by
operations.
• During the year ended December 31, 2017, we made contributions to our pension and post retirement benefit
plans of $29 million. During the first quarter of 2018, we expect to contribute an additional amount of
approximately $7 million to these plans.
• We are involved in a number of cost reduction programs for which we have established restructuring accruals.
As of December 31, 2017, we had $34 million of accrued restructuring costs of which $11 million is classified
as current. We expect to incur and pay additional restructuring and plant closing costs of approximately $30
million during 2018. For further discussion of these plans and the costs involved, see “Note 11. Restructuring,
Impairment and Plant Closing and Transition Costs” to our consolidated and combined financial statements.
Further, although the business improvement program is expected to be completed by the end of 2018, we expect
to incur additional restructuring charges well beyond the end of 2018. We expect the business improvement
program to provide additional contributions to adjusted EBITDA during 2018.
• On January 30, 2017, our TiO2 manufacturing facility in Pori, Finland experienced fire damage and we continue
to repair the facility. Prior to the fire, 60% of the site capacity produced specialty products which, on average,
contributed greater than 75% of the site EBITDA from January 1, 2015 through January 30, 2017. The Pori
facility had a nameplate capacity of 130,000 metric tons per year, which represented approximately 17% of our
total TiO2 nameplate capacity and approximately 2% of total global TiO2 demand. We are currently operating at
20% of total prior capacity producing specialty products, and we intend to restore manufacturing of the balance
of these more profitable specialty products by the end of 2018. The remaining 40% of site capacity is more
commoditized and, based on current market and economic conditions, associated costs and projected returns,
we currently expect to rebuild this portion of the facility but do not expect it to be reintroduced into the market
prior to 2020.
The site is insured for property damage as well as business interruption losses subject to retained deductibles of
$15 million and 60 days, respectively, with an aggregate limit of $500 million. Due to prevailing strong market
conditions, our TiO2 selling prices continue to improve and our business is benefitting from the resulting
improved profitability and cash flows. This also has the effect of increasing our total anticipated business
interruption losses from the Pori site. We currently believe the combination of increased TiO2 profitability and
recently estimated reconstruction costs will result in combined business interruption losses and reconstruction
costs in excess of our $500 million aggregate insurance limit. We currently estimate that the total cost to rebuild
the Pori facility (including the commodity portion) will exceed the limits of our insurance policy by as much as
$325 million, or up to $375 million when providing additional contingency for the upper limits of our current
design and construction cost estimates. This amount results from the increased contribution from insurance
towards business interruption together with increased costs associated with the faster than normal build
17
schedule of the specialty products portion of the facility and greater equipment replacement costs as compared
to lower equipment repair costs than previously estimated. We expect to account for our uncovered costs as
capital expenditures and fund them from cash from operations, which will decrease our liquidity in the periods
those costs in excess of our insurance limits are incurred. Based on current and anticipated market conditions,
we currently expect our business interruption losses to be fully reimbursed within our insurance policy limits
through 2019. However, these are preliminary estimates based on a number of significant assumptions, and as a
result uninsured costs could exceed current estimates. Factors that could materially impact our current estimates
include our actual future TiO2 profitability and related impact on our business interruption losses; the accuracy
of our current property damage estimates; the actual costs and timing of our reconstruction efforts; market and
other factors impacting our reconstruction of the commoditized portion of the facility; our ability to secure
government subsidies related to our reconstruction efforts; and a number of other significant market and
facility-related assumptions.
We have established a process with our insurer to receive timely advance payments for the continued
reconstruction of the facility as well as lost profits for business interruption losses, subject to policy limits. We
have agreed with our insurer to have monthly meetings to review relevant site activities and interim claims as
well as regular progress payments.
If we experience delays in construction or equipment procurement relative to the expected restart of the Pori
facility, or we lose customers to alternative suppliers or our insurance proceeds do not timely cover our
property damage and other losses, or if our actual costs exceed our estimates, our business may be adversely
impacted.
•
In connection with our IPO and the separation, we entered into new financing arrangements and incurred new
debt, including the issuance of $375 million in aggregate principal amount of 5.75% of Senior Notes due 2025
and borrowings of $375 million under the Term Loan Facility. In addition to the Term Loan Facility, we
entered into a $300 million ABL Facility. We used the net proceeds of the Senior Notes and the Term Loan
Facility to repay approximately $732 million of net intercompany debt owed to Huntsman and to pay related
fees and expenses of approximately $18 million.
• Following the separation and our IPO, we can no longer rely on Huntsman’s earnings, assets, cash flow or
credit and we are responsible for obtaining and maintaining sufficient working capital and servicing our debt.
As of December 31, 2017 and 2016, we had $14 million and $10 million, respectively, classified as current
portion of debt.
As of December 31, 2017, we had approximately $31 million of cash and cash equivalents held outside of the
U.S. and Europe, including our variable interest entities. As of December 31, 2017 our non-U.K. subsidiaries have no
plan to distribute earnings in a manner that would cause them to be subject to U.K., U.S., or other local country taxation.
Prior to 2017 we were a part of Huntsman’s cash pooling program. As of December 31, 2016, we had
approximately $26 million of cash and cash equivalents held by our non-U.S. subsidiaries, including our variable interest
entities.
Cash Flows for the Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016
Net cash provided by operating activities from continuing operations was $337 million for the twelve months
ended December 31, 2017 while net cash provided by operating activities from continuing operations was $80 million
for the twelve months ended December 31, 2016. The increase in net cash provided by operating activities from
continuing operations for the twelve months ended December 31, 2017 compared with the same period of 2016 was
primarily attributable to the $221 million increase in net income described in “—Results of Operations” above, a
favorable increase in deferred income taxes of $33 million, and a favorable increase in depreciation and amortization
expense of $13 million.
18
Net cash used in investing activities from continuing operations was $11 million for the twelve months ended
December 31, 2017, compared to net cash used in investing activities from continuing operations of $96 million for the
twelve months ended December 31, 2016. The increase in net cash provided by investing activities from continuing
operations for the twelve months ended December 31, 2017 compared with the same period of 2016 was primarily
attributable to an increase in (advances to) payments from affiliates of $126 million year over year. Partially offset by a
net cash outflow of $9 million related to cash received and cash invested in unconsolidated affiliates and an $18 million
increase in capital expenditures, net of insurance proceeds for recovery of property damage.
Net cash used in financing activities from continuing operations was $123 million for the twelve months ended
December 31, 2017, compared to net cash provided by financing activities from continuing operations of $32 million for
the twelve months ended December 31, 2016. The increase in net cash used in financing activities from continuing
operations for the twelve months ended December 31, 2017 compared with the same period of 2016 was primarily
attributable to $732 million final settlement of affiliate balances at separation and an increase in net repayments on
affiliates accounts payable of $147 million from 2016 to 2017 offset by proceeds from the issuance of the Senior
Notes and Senior Credit facilities net of the payment of debt issuance costs of $732 million in 2017.
Cash Flows for the Year Ended December 31, 2016 Compared to the Year Ended December 31, 2015
Net cash provided by operating activities from continuing operations for 2016 was $80 million while net cash
used in operating activities from continuing operations for 2015 was $57 million. The increase in net cash provided by
operating activities from continuing operations during 2016 compared with 2015 was primarily attributable to a $275
million decrease in net loss and an $11 million increase in noncash interest offset by a $57 million unfavorable variance
in operating assets and liabilities for 2016 as compared with 2015 and a $94 million unfavorable variance in noncash
adjustments from 2015 to 2016 for restructuring charges and impairment of assets.
Net cash used in investing activities from continuing operations for 2016 and 2015 was $96 million and
$100 million, respectively. During 2016 and 2015, we paid $103 million and $203 million, respectively, for capital
expenditures. During 2016 and 2015, we made investments in Louisiana Pigment Company, L.P. (“LPC”) of $29 million
and $42 million, respectively, and we received dividends from LPC of $32 million and $48 million, respectively.
Finally, we had an unfavorable variance in advances to affiliates of $102 million from 2015 to 2016.
Net cash provided by financing activities from continuing operations for 2016 and 2015 was $32 million and
$185 million, respectively. The decrease in net cash provided by financing activities from continuing operations was
primarily due to a $147 million decrease in cash inflows related to net borrowings on affiliates accounts payable and a
$6 million increase in dividends paid to noncontrolling interest.
Cash Flows for the Year Ended December 31, 2015 Compared to the Year Ended December 31, 2014
Net cash used in operating activities from continuing operations was $57 million and $71 million for 2015 and
2014, respectively. Net cash used in operating activities from continuing operations during 2015 compared with 2014
reflects a $60 million favorable variance in operating assets and liabilities for 2015 as compared with 2014, a $136
million favorable change due to noncash adjustments in 2015 for restructuring charges and impairment of assets and
noncash interest, offset by an increase in net loss as described in “—Results of Operations” above. See “Note 11.
Restructuring, Impairment and Plant Closing and Transition Costs” to our consolidated and combined financial
statements.
Net cash used in investing activities from continuing operations for 2015 was $100 million compared to net
cash provided by investing activities from continuing operations of $52 million in 2014. During 2015 and 2014, we paid
$203 million and $136 million, respectively, for capital expenditures. During 2015 and 2014, we made investments in
LPC of $42 million and $37 million, respectively, and we received dividends from LPC of $48 million in both periods.
During 2014, we received $77 million in cash in connection with the Rockwood acquisition. We had a decrease of $3
million in net advances to affiliates.
Net cash provided by financing activities from continuing operations for 2015 and 2014 was $185 million and
$53 million, respectively. The increase in net cash provided by financing activities from continuing operations was
19
primarily due to an increase in net borrowings from affiliate accounts payable offset by dividends paid to noncontrolling
interests.
Changes in Financial Condition
The following information summarizes our working capital as of December 31, 2017 and 2016:
(Dollars in millions)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts and notes receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable from affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets from continuing operations . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities from continuing operations . . . . . . . . . . .
Working capital (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
NM—Not meaningful
December 31, December 31,
2017
2016
Increase Percent
(Decrease) Change
238 $
380
12
454
19
66
1,169
385
16
244
14
659
510 $
29 $
247
243
426
11
59
1,015
297
695
146
10
1,148
(133) $
209
133
(231)
28
8
7
154
88
(679)
98
4
(489)
643 NM
721 %
54 %
(95)%
7 %
73 %
12 %
15 %
30 %
(98)%
67 %
40 %
(43)%
Our working capital increased by $643 million as a result of the net impact of the following significant changes:
• Cash and cash equivalents increased by $209 million primarily due to inflows of $337 million from operating
activities from continuing operations partially offset by $11 million of cash outflows from investing activities
from continuing operations and outflows of $123 million from financing activities of continuing operations.
• Accounts receivable increased by $133 million primarily due to higher revenues in the year ended
December 31, 2017 compared to the year ended December 31, 2016 as well as from the impacts of
discontinuing our participation in Huntsman’s accounts receivable securitization program.
• Accrued liabilities increased by $98 million primarily due to deferred income recorded in connection with the
partial progress payment received from our insurer related to the fire at our Pori, Finland manufacturing facility.
• Accounts receivable from and accounts payable to affiliates represent financing arrangements with affiliates of
Huntsman. For further information, see “Note 14. Debt” to our consolidated and combined financial statements.
20
The following information summarizes our working capital as of December 31, 2016 and 2015:
December 31, December 31,
(Dollars in millions)
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts and notes receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable from affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets from continuing operations . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities from continuing operations . . . . . . . . . . .
Working (deficit) capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016
29 $
247
243
426
11
59
1,015
297
695
146
10
1,148
(133) $
2015
Increase Percent
(Decrease) Change
8
5
(139)
(130)
(38)
(4)
(298)
(8)
74
(96)
1
(29)
136 $ (269) NM
21 $
242
382
556
49
63
1,313
305
621
242
9
1,177
38 %
2 %
(36)%
(23)%
(78)%
(6)%
(23)%
(3)%
12 %
(40)%
11 %
(2)%
Our working capital decreased by $269 million as a result of the net impact of the following significant
changes:
• Cash and cash equivalents increased by $8 million primarily due to inflows of $80 million provided by
operating activities from continuing operations and $32 million provided by financing activities from
continuing operations offset by outflows of $96 million used in investing activities from continuing operations.
Inventories decreased by $130 million mainly due to lower inventory volumes and lower raw material costs,
primarily in the Titanium Dioxide segment.
•
• Prepaid expenses decreased by $38 million primarily due to the distribution of employee termination and other
restructuring costs that were prefunded during the fourth quarter of 2015.
• Accounts payable decreased by $8 million primarily due to lower purchases consistent with the lower inventory
balances noted above.
• Accrued liabilities decreased by $96 million primarily due to the distribution of prefunded restructuring costs.
• Accounts receivable from and accounts payable to affiliates represent financing arrangements with affiliates of
Huntsman. For further information, see “Note 14. Debt—Cash Pooling Program” to our consolidated and
combined financial statements.
Capital Leases
We also have lease obligations accounted for as capital leases primarily related to manufacturing facilities
which are included in other long-term debt. The scheduled maturities of our commitments under capital leases are as
follows (dollars in millions):
Year ending December 31:
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total minimum payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Amounts representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Present value of minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Current portion of capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term portion of capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Amount
2
2
2
2
9
17
(3)
14
(2)
12
21
In addition to these capital leases, we entered into certain financing transactions in connection with our IPO,
including the use of the net proceeds of the Senior Notes offering and borrowings under the Term Loan Facility to repay
approximately $732 million of net intercompany debt owed to Huntsman and to pay related fees and expenses of
approximately $18 million. The Senior Notes and the Senior Credit Facilities are described in greater detail in “Note 14.
Debt” to our consolidated and combined financial statements.
Financing Arrangements
For a discussion of financing arrangements, see “Note 14. Debt” to our consolidated and combined financial
statements.
A/R Programs
For a discussion of A/R programs, see “Note 14. Debt – A/R Programs” to our consolidated and combined
financial statements.
Cross Currency Swap
For a discussion of cross currency swaps, see “Note 16. Derivatives – Cross Currency Swaps” to our
consolidated and combined financial statements.
Contractual Obligations and Commercial Commitments
Our obligations under long-term debt (including the current portion), lease agreements and other contractual
commitments from continuing operations as of December 31, 2017 are summarized below:
(Dollars in millions)
Long-term debt, including current portion(1) . . . . . . . . . . $
Interest(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase commitments(3) . . . . . . . . . . . . . . . . . . . . . . . . .
Total(4)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2018
2019 - 2020
2021 - 2022 After 2022
Total
14 $
37
10
525
586 $
10 $
74
9
352
445 $
10 $
74
6
162
252 $
735 $
80
4
68
887 $
769
265
29
1,107
2,170
(1) In connection with our IPO, we entered into the Senior Credit Facilities and two of our subsidiaries issued the
Senior Notes, which includes (i) $375 million of Senior Notes and (ii) borrowings of $375 million under our term
loan facility. In addition, we entered into a $300 million ABL facility at closing of our IPO, which, together with the
term loan facility, we refer to as the Senior Credit Facilities. We used the net proceeds of the Senior Notes offering
and the term loan facility to repay approximately $732 million of net intercompany debt owed to Huntsman and to
pay related fees and expenses of approximately $18 million. For more information, See “—Financing
Arrangements.”
(2) Interest calculated using interest rates as of December 31, 2017 and contractual maturity dates.
(3) We have various purchase commitments extending through 2032 for materials, supplies and services entered into in
the ordinary course of business. Included in the purchase commitments table above are contracts which require
minimum volume purchases that extend beyond one year or are renewable annually and have been renewed for
2017. Certain contracts allow for changes in minimum required purchase volumes in the event of a temporary or
permanent shutdown of a facility. To the extent the contract requires a minimum notice period, such notice period
has been included in the above table. The contractual purchase price for substantially all of these contracts is
variable based upon market prices, subject to annual negotiations. We have estimated our contractual obligations by
using the terms of our current pricing for each contract. We also have a limited number of contracts which require a
minimum payment even if no volume is purchased. We believe that all of our purchase obligations will be utilized
in our normal operations. For each of the years ended December 31, 2017, 2016 and 2015, we made minimum
payments of $2 million, $1 million and nil, respectively, under such take or pay contracts without taking the
product.
22
(4) Totals do not include commitments pertaining to our pension and other postretirement obligations. Our estimated
future contributions to our pension and postretirement plans are as follows:
(Dollars in millions)
Pension plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 28 $
Other postretirement obligations . . . . . . . . . . . . . . . . . . . . —
5-Year
Average
2018 2019 - 2020 2021 - 2022 Annual
31
62 $
—
—
66 $
—
(5) The above table does not reflect expected tax payments and unrecognized tax benefits due to the inability to make
reasonably reliable estimates of the timing and amount of payments. For additional discussion on unrecognized tax
benefits, see “Note 18. Income Taxes” to our consolidated and combined financial statements.
Off-Balance-Sheet Arrangements
No off-balance sheet arrangements exist at this time.
Restructuring, Impairment and Plant Closing and Transition Costs
Following the Rockwood acquisition, we identified business improvement projects in our Titanium Dioxide and
Performance Additives segments. We commenced implementation of such projects in December 2014 and they
collectively have produced significant cost savings and improved global competitiveness for our business. The benefits
of these programs were measured at the individual project level while the cost performance of the business as a whole
was measured against a benchmark period (fiscal year 2014). In total, the successful completion of these programs
delivered more than $200 million of annual cost synergies in 2016 relative to the year ended December 31, 2014, pro
forma for the Rockwood acquisition. Approximately 85% of these cost savings were attributable to costs of goods sold
and 15% were attributable to selling, general and administrative expenses.
In addition, we are currently implementing a business improvement program, which is expected to provide
additional contributions to adjusted EBITDA beginning in 2017 and to be completed by the end of 2018. If successfully
implemented, we expect our business improvement program to result in increased adjusted EBITDA from general cost
reductions, volume growth (primarily via the launch of new products) and further optimization of our manufacturing
network including the closure of certain facilities.
For further discussion of these and other restructuring plans and the costs involved, see “Note 11. Restructuring,
Impairment and Plant Closing and Transition Costs” to our consolidated and combined financial statements.
Augusta Matter
In February 2017, Huntsman filed suit against the legacy owner and certain former executives of Rockwood,
primarily related to the failure of new technology that Huntsman acquired in the Rockwood acquisition that was to be
implemented at the new Augusta, Georgia, facility and subsequently at other facilities. Huntsman is seeking various
forms of legal remedy, including compensatory damages, punitive damages, expectation damages, consequential
damages and restitution. Venator is not party to the suit.
Legal Proceedings
For a discussion of legal proceedings, see “Note 21. Commitments and Contingencies—Legal Matters” to our
consolidated and combined financial statements.
Environmental, Health and Safety Matters
We are subject to extensive environmental regulations, which may impose significant additional costs on our
operations in the future. While we do not expect any of these enactments or proposals to have a material adverse effect
23
on us in the near term, we cannot predict the longer-term effect of any of these regulations or proposals on our future
financial condition. For a discussion of EHS matters, see “Note 22. Environmental, Health and Safety Matters” to our
consolidated and combined financial statements.
Recently Issued Accounting Pronouncements
For a discussion of recently issued accounting pronouncements, see “Note 2. Recently Issued Accounting
Pronouncements” to our consolidated and combined financial statements.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires
management to make judgments, estimates and assumptions that affect the reported amounts in our consolidated and
combined financial statements. Our significant accounting policies are summarized in “Note 1. Description of Business,
Recent Developments, Basis of Presentation and Summary of Significant Accounting Policies” to our consolidated and
combined financial statements. Summarized below are our critical accounting policies:
Employee Benefit Programs
We sponsor several contributory and non-contributory defined benefit plans, covering employees primarily in
the U.S., the U.K., Germany and Finland, but also covering employees in a number of other countries. We fund the
material plans through trust arrangements (or local equivalents) where the assets are held separately from us. We also
sponsor unfunded postretirement plans which provide medical and, in some cases, life insurance benefits covering
certain employees in the U.S. and Canada. Amounts recorded in our consolidated and combined financial statements are
recorded based upon actuarial valuations performed by various third-party actuaries. Inherent in these valuations are
numerous assumptions regarding expected long-term rates of return on plan assets, discount rates, compensation
increases, mortality rates and health care cost trends. We evaluate these assumptions at least annually.
The discount rate is used to determine the present value of future benefit payments at the end of the year. For
our U.S. and non-U.S. plans, the discount rates were based on the results of matching expected plan benefit payments
with cash flows from a hypothetical yield curve constructed with high-quality corporate bond yields.
The following weighted-average discount rate assumptions were used for the defined benefit and other
postretirement plans for the year:
Defined benefit plans
2017
2016
2015
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net periodic pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.21 %
1.86 %
2.28 %
3.27 %
3.27 %
3.12 %
Other postretirement benefit plans
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net periodic pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.38 %
3.72 %
3.72 %
6.94 %
6.94 %
5.65 %
The expected return on plan assets is determined based on asset allocations, historical portfolio results,
historical asset correlations and managements expected long-term return for each asset class. The expected rate of return
on U.S. plan assets was 7.75% and 7.76% in 2017 and 2016, respectively, and the expected rate of return on non-U.S.
plans was 5.68% and 5.19% for 2017 and 2016, respectively.
The expected increase in the compensation levels assumption reflects our long-term actual experience and
future expectations.
24
Management, with the advice of actuaries, uses judgment to make assumptions on which our employee pension
and postretirement benefit plan obligations and expenses are based. The effect of a 1% change in three key assumptions
is summarized as follows (dollars in millions):
Assumptions
Discount rate
Statement of
Operations(1)
Balance Sheet
Impact(2)
1% increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1% decrease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) $
2
(169)
207
Expected long-term rates of return on plan assets
1% increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1% decrease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase
1% increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1% decrease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8)
8
3
(3)
—
—
16
(15)
(1) Estimated (decrease) increase on 2017 net periodic benefit cost
(2) Estimated (decrease) increase on December 31, 2017 pension and postretirement liabilities and accumulated other
comprehensive loss
Income Taxes
We use the asset and liability method of accounting for income taxes. Deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets and liabilities for financial and tax reporting
purposes. We evaluate deferred tax assets to determine whether it is more likely than not that they will be realized.
Valuation allowances are reviewed on a tax jurisdiction basis to analyze whether there is sufficient positive or negative
evidence to support a change in judgment about the realizability of the related deferred tax assets for each jurisdiction.
These conclusions require significant judgment. In evaluating the objective evidence that historical results provide, we
consider the cyclicality of businesses and cumulative income or losses during the applicable period. Cumulative losses
incurred over the period limit our ability to consider other subjective evidence such as our projections for the future.
Changes in expected future income in applicable jurisdictions could affect the realization of deferred tax assets in those
jurisdictions. As of December 31, 2017, we had total valuation allowances of $253 million. See “Note 18. Income
Taxes” to our consolidated and combined financial statements.
As of December 31, 2017, our non-U.K. subsidiaries have no plan to distribute earnings in a manner that would
cause them to be subject to U.K., U.S., or other local country taxation.
Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The
application of income tax law is inherently complex. We are required to determine if an income tax position meets the
criteria of more-likely-than-not to be realized based on the merits of the position under tax law, in order to recognize an
income tax benefit. This requires us to make significant judgments regarding the merits of income tax positions and the
application of income tax law. Additionally, if a tax position meets the recognition criteria of more-likely-than-not we
are required to make judgments and apply assumptions in order to measure the amount of the tax benefits to recognize.
These judgments are based on the probability of the amount of tax benefits that would be realized if the tax position was
challenged by the taxing authorities. Interpretations and guidance surrounding income tax laws and regulations change
over time. As a consequence, changes in assumptions and judgments can materially affect amounts recognized in our
consolidated and combined financial statements.
Long-Lived Assets
The useful lives of our property, plant and equipment are estimated based upon our historical experience,
engineering estimates and industry information and are reviewed when economic events indicate that we may not be able
to recover the carrying value of the assets. The estimated lives of our property range from 3 to 50 years and depreciation
25
is recorded on the straight-line method. Inherent in our estimates of useful lives is the assumption that periodic
maintenance and an appropriate level of annual capital expenditures will be performed. Without on-going capital
improvements and maintenance, the productivity and cost efficiency declines and the useful lives of our assets would be
shorter.
Management uses judgment to estimate the useful lives of our long-lived assets. At December 31, 2017, if the
estimated useful lives of our property, plant and equipment had either been one year greater or one year less than their
recorded lives, then depreciation expense for 2017 would have been approximately $10 million less or $12 million
greater, respectively.
We are required to evaluate the carrying value of our long-lived tangible and intangible assets whenever events
indicate that such carrying value may not be recoverable in the future or when management’s plans change regarding
those assets, such as idling or closing a plant. We evaluate impairment by comparing undiscounted cash flows of the
related asset groups that are largely independent of the cash flows of other asset groups to their carrying values. Key
assumptions in determining the future cash flows include the useful life, technology, competitive pressures, raw material
pricing and regulations. In connection with our asset evaluation policy, we reviewed all of our long-lived assets for
indicators that the carrying value may not be recoverable. During 2017, we recorded an impairment charge of $3 million
related to the impairment of an unconsolidated investment. See “Note 11. Restructuring, Impairment and Plant Closing
and Transition Costs” to our consolidated and combined financial statements.
Restructuring and Plant Closing and Transition Costs
We recorded restructuring charges in recent periods in connection with closing certain plant locations,
workforce reductions and other cost savings programs in each of our business segments. These charges are recorded
when management has committed to a plan and incurred a liability related to the plan. Estimates for plant closing costs
include the write-off of the carrying value of the plant, any necessary environmental and/or regulatory costs, contract
termination and demolition costs. Estimates for workforce reductions and other costs savings are recorded based upon
estimates of the number of positions to be terminated, termination benefits to be provided and other information, as
necessary. Management evaluates the estimates on a quarterly basis and will adjust the reserve when information
indicates that the estimate is above or below the currently recorded estimate. For further discussion of our restructuring
activities, see “Note 11. Restructuring, Impairment and Plant Closing and Transition Costs” to our consolidated and
combined financial statements.
Contingent Loss Accruals
Environmental remediation costs for our facilities are accrued when it is probable that a liability has been
incurred and the amount can be reasonably estimated. Estimates of environmental reserves require evaluating
government regulation, available technology, site-specific information and remediation alternatives. We accrue an
amount equal to our best estimate of the costs to remediate based upon the available information. The extent of
environmental impacts may not be fully known and the processes and costs of remediation may change as new
information is obtained or technology for remediation is improved. Our process for estimating the expected cost for
remediation considers the information available, technology that can be utilized and estimates of the extent of
environmental damage. Adjustments to our estimates are made periodically based upon additional information received
as remediation progresses. As of December 31, 2017 and 2016, we had recognized a liability of $12 million, each,
related to these environmental matters. For further information, see “Note 22. Environmental, Health and Safety
Matters” to our consolidated and combined financial statements.
We are subject to legal proceedings and claims arising out of our business operations. We routinely assess the
likelihood of any adverse outcomes to these matters, as well as ranges of probable losses. A determination of the amount
of the reserves required, if any, for these contingencies is made after analysis of each known claim. We have an active
risk management program consisting of numerous insurance policies secured from many carriers. These policies often
provide coverage that is intended to minimize the financial impact, if any, of the legal proceedings. The required
reserves may change in the future due to new developments in each matter. For further information, see “Note 21.
Commitments and Contingencies—Legal Proceedings” to our consolidated and combined financial statements.
26
Variable Interest Entities—Primary Beneficiary
We evaluate each of our variable interest entities on an on-going basis to determine whether we are the primary
beneficiary. Management assesses, on an on-going basis, the nature of our relationship to the variable interest entity,
including the amount of control that we exercise over the entity as well as the amount of risk that we bear and rewards
we receive in regards to the entity, to determine if we are the primary beneficiary of that variable interest entity.
Management judgment is required to assess whether these attributes are significant. The factors management considers
when determining if we have the power to direct the activities that most significantly impact each of our variable interest
entity’s economic performance include supply arrangements, manufacturing arrangements, marketing arrangements and
sales arrangements. We consolidate all variable interest entities for which we have concluded that we are the primary
beneficiary. For the years ended December 31, 2017, 2016 and 2015, the percentage of revenues from our consolidated
variable interest entities in relation to total revenues that will ultimately be attributable to Venator is approximately
5.7%, 5.4% and 4.6%, respectively. For further information, see “Note 7. Variable Interest Entities” to our consolidated
and combined financial statements.
27
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks, such as changes in interest rates and foreign exchange rates. We manage these
risks through normal operating and financing activities and, when appropriate, through the use of derivative instruments.
We do not invest in derivative instruments for speculative purposes.
Interest Rate Risk
We are exposed to interest rate risk through the structure of our debt portfolio which includes a mix of fixed
and floating rates. Actions taken to reduce interest rate risk include managing the mix and rate characteristics of various
interest bearing liabilities.
The carrying value of our floating rate debt is approximately $367 million at December 31, 2017. A
hypothetical 1% increase in interest rates on our floating rate debt as of December 31, 2017 would increase our interest
expense by approximately $4 million on an annualized basis.
Foreign Exchange Rate Risk
We are exposed to market risks associated with foreign exchange risk. Our cash flows and earnings are subject
to fluctuations due to exchange rate variation. Our revenues and expenses are denominated in various foreign currencies.
We enter into foreign currency derivative instruments to minimize the short-term impact of movements in foreign
currency rates. Where practicable, we generally net multicurrency cash balances among our subsidiaries to help reduce
exposure to foreign currency exchange rates. Certain other exposures may be managed from time to time through
financial market transactions, principally through the purchase of spot or forward foreign exchange contracts (generally
with maturities of three months or less). We do not hedge our foreign currency exposures in a manner that would
eliminate the effect of changes in exchange rates on our cash flows and earnings. At December 31, 2017 we had
approximately $109 million notional amount (in U.S. dollar equivalents) outstanding in foreign currency contracts with a
term of approximately one month.
Prior to the separation, Huntsman International, or its subsidiaries, entered into foreign currency derivatives on
our behalf. As of December 31, 2016, Huntsman International or its subsidiaries, on behalf of Venator, had
approximately $88 million in notional amount (in U.S. dollar equivalents) outstanding, respectively, in forward foreign
currency contracts with a term of approximately one month.
In December 2017, we entered into three cross-currency swap agreements to convert a portion of our
intercompany fixed-rate, U.S. dollar denominated notes, including the semi-annual interest payments and the payment of
remaining principle at maturity, to a- fixed-rate, Euro denominated debt. The economic effect of the swap agreement
was to eliminate the uncertainty of the cash flows in U.S. Dollars associated with the notes by fixing the principle
amount at €169 million with a fixed annual rate of 3.43%. These hedges have been designated as cash flow hedges and
the critical terms of the cross-currency swap agreements correspond to the underlying hedged item. These swaps mature
in July 2022, which is our best estimate of the repayment date of these intercompany loans. The amount and timing of
the semi-annual principle payments under the cross-currency swap also correspond with the terms of the intercompany
loans. Gains and losses from these hedges offset the changes in the value of interest and principal payments as a result of
changes in foreign exchange rates.
During 2018, the amount of accumulated other comprehensive loss at December 31, 2017 related to hedging
transactions that is expected to be reclassified to earnings is immaterial. The actual amount that will be reclassified to
earnings over the next twelve months may vary from this amount due to changing market conditions.
Commodity Price Risk
A portion of our products and raw materials are commodities whose prices fluctuate as market supply and
demand fundamentals change. Accordingly, product margins and the level of our profitability tend to fluctuate with the
changes in the business cycle. We try protect against such instability through various business strategies. These include
provisions in sales contracts allowing us to pass on higher raw material costs through timely price increases and formula
price contracts to transfer or share commodity price risk. We did not have any commodity derivative instruments in
place as of December 31, 2017 and 2016.
28
Evaluation of Disclosure Controls and Procedures
CONTROLS AND PROCEDURES
As required by rule 13-a 15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
we have evaluated, under the supervision and with the participation of our management, including our principal
executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period
covered by this annual report. Based on this evaluation, our principal executive officer and principal financial officer
have concluded that, as of December 31, 2017, our disclosure controls and procedures were effective, in that they ensure
that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is (1)
recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (2)
accumulated and communicated to our management, including our principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting during the three months ended December
31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).
Management’s Report on Internal Control Over Financial Reporting
This annual report does not include a report of management's assessment regarding internal control over
financial reporting or an attestation report of the Company’s registered public accounting firm due to a transition period
established by rules of the SEC for newly public companies.
29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Venator Materials PLC
Opinion on the Financial Statements
We have audited the accompanying consolidated and combined balance sheets of Venator Materials PLC and
subsidiaries (the "Company") as of December 31, 2017 and 2016, the related consolidated and combined statements of
operations, comprehensive income (loss), equity, and cash flows, for each of the three years in the period ended
December 31, 2017, and the related notes (collectively referred to as the "financial statements"). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of December 31,
2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect
to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of
internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Emphasis of a Matter
As discussed in Note 1 to the financial statements, the financial statements include allocations of direct and indirect
corporate expenses from Huntsman Corporation through the date of separation and are presented on a stand-alone basis
as if Venator's operations had been conducted independently from Huntsman Corporation; however, prior to Separation,
Venator did not operate as a separate, stand-alone entity for the periods presented and, as such, the financial statements
may not be fully indicative of Venator's financial position, results of operations and cash flows as an unaffiliated
company from Huntsman Corporation.
/s/ DELOITTE & TOUCHE LLP
Houston, Texas
February 23, 2018
We have served as the Company's auditor since 2016.
30
VENATOR MATERIALS PLC AND SUBSIDIARIES
CONSOLIDATED AND COMBINED BALANCE SHEETS
(In millions, except par value)
Current assets:
ASSETS
December 31,
2017
December 31,
2016
$
$
$
Cash and cash equivalents(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable (net of allowance for doubtful accounts of $5 and $4, respectively)(a) . . . . . .
Accounts receivable from affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in unconsolidated affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes receivable from affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current portion of debt(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent payable to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies (Notes 21 and 22)
Equity
$
$
$
238
380
12
454
19
66
—
1,169
1,367
20
86
167
—
38
—
2,847
385
16
244
14
—
659
743
—
—
306
34
—
1,742
29
247
243
426
11
59
84
1,099
1,178
23
85
142
57
35
42
2,661
297
695
146
10
27
1,175
13
882
12
324
—
78
2,484
Parent’s net investment and advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ordinary shares $0.001 par value, 200 shares authorized, 106 and nil issued and 106 and nil
outstanding, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Venator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interest in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
—
588
—
1,311
67
(283)
1,095
10
1,105
2,847
$
—
—
—
(423)
165
12
177
2,661
(a) At December 31, 2017 and 2016 respectively, $5 and $4 of cash and cash equivalents, $7 and $6 of accounts
receivable (net), $2 and $1 of inventories, $5 and $4 of property, plant and equipment (net), $17 and $20 of
intangible assets (net), $1 each of accounts payable, $4 each of accrued liabilities, and $2 each of current portion of
debt from consolidated variable interest entities are included in the respective balance sheet captions above. See
“Note 7. Variable Interest Entities.”
See notes to consolidated and combined financial statements.
31
VENATOR MATERIALS PLC AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(Dollars in millions, except per share amounts)
Trade sales, services and fees, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:
Selling, general and administrative (includes corporate allocations from
Huntsman Corporation of $62, $104 and $90 respectively) . . . . . . . . . . . . . . .
Restructuring, impairment and plant closing and transition costs . . . . . . . . . . .
Other expense (income), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations before income taxes . . . . . . . . . . . .
Income tax (expense) benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Venator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Year ended December 31,
2016
2,139 $
1,987
2017
2,209 $
1,738
2015
2,162
2,046
218
52
10
280
191
(100)
60
35
186
(50)
136
8
144
(10)
134 $
225
35
(45)
215
(63)
(59)
15
(1)
(108)
23
(85)
8
(77)
(10)
(87) $
263
220
(1)
482
(366)
(52)
22
—
(396)
34
(362)
10
(352)
(7)
(359)
Basic earnings (losses) per share:
Income (loss) from continuing operations attributable to
Venator Materials PLC ordinary shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.19 $
(0.89) $
(3.47)
Income from discontinued operations attributable to
Venator Materials PLC ordinary shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.07
0.07
0.09
Net income (loss) attributable to Venator Materials PLC ordinary
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.26 $
(0.82) $
(3.38)
Diluted earnings (losses) per share:
Income (loss) from continuing operations attributable to
Venator Materials PLC ordinary shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.18 $
(0.89) $
(3.47)
Income from discontinued operations attributable to
Venator Materials PLC ordinary shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.08
0.07
0.09
Net income (loss) attributable to Venator Materials PLC ordinary
shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1.26 $
(0.82) $
(3.38)
See notes to consolidated and combined financial statements.
32
VENATOR MATERIALS PLC AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in millions)
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other comprehensive loss, net of tax:
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension and other postretirement benefits adjustments . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income attributable to noncontrolling interest . . . . . . . . . . . . . . .
Comprehensive income (loss) attributable to Venator . . . . . . . . . . . . . . . . . . . $
Year ended December 31,
2016
2015
2017
144 $
(77) $
(352)
106
39
(5)
140
284
(10)
274 $
32
(54)
—
(22)
(99)
(10)
(109) $
(71)
(10)
(1)
(82)
(434)
(7)
(441)
See notes to consolidated and combined financial statements.
33
VENATOR MATERIALS PLC AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF EQUITY
Total Venator Materials PLC Equity
(Dollars in millions)
Balance, January 1, 2015 . . . . . . . . . . . $ 1,714 $ — $ — $ — $
—
—
(359)
—
Loss
Subsidiaries Total
20 $ 1,415
7 (352)
(319) $
—
Ordinary Paid-in
Advances Shares Capital Earnings
Retained Comprehensive
Parent’s Net
Investment
and
Additional
Accumulated
Other
Noncontrolling
Interest in
Net loss . . . . . . . . . . . . . . . . . . . . . . . . .
Net changes in other
comprehensive income . . . . . . . . . . .
—
—
Dividends paid to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
(82)
—
(82)
—
(8)
(8)
Net changes in parent’s net
investment and advances . . . . . . . . . .
—
Balance, December 31, 2015 . . . . . . . . $ 1,112 $ — $ — $ — $
—
—
—
(243)
(87)
—
—
Net loss . . . . . . . . . . . . . . . . . . . . . . . . .
Net changes in other
—
(401) $
—
(2) (245)
17 $ 728
(77)
10
comprehensive income . . . . . . . . . . .
—
—
Dividends paid to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
—
—
(22)
—
(22)
—
(14)
(14)
Net changes in parent’s net
investment and advances . . . . . . . . . .
Balance, December 31, 2016 . . . . . . . . $
Net income . . . . . . . . . . . . . . . . . . . . . .
Net changes in other comprehensive
—
(437)
—
588 $ — $ — $ — $
67
67
—
—
—
income . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Dividends paid to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Net changes in parent’s net
investment and advances . . . . . . . . . .
653
—
—
—
—
—
—
—
—
(423) $
—
(1) (438)
12 $ 177
144
10
140
—
140
—
—
(12)
(12)
—
653
Conversion of parent's net
investment and advances to paid-in
capital . . . . . . . . . . . . . . . . . . . . . . . . .
Activity related to stock plans . . . . . . .
Balance, December 31, 2017 . . . . . . . . $
(1,308)
—
— $ — $ 1,311 $
—
—
1,308
3
—
—
67 $
—
—
(283) $
— —
3
—
10 $ 1,105
See notes to consolidated and combined financial statements.
34
VENATOR MATERIALS PLC AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(Dollars in millions)
Operating Activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss (gain) on disposal of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncash restructuring and impairment charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance proceeds for business interruption, net of gain on recovery . . . . . . . . . . . . . . . . . . . . . .
Noncash interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncash loss (gain) on foreign currency transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) operating activities from continuing operations . . . . . . . . . . . .
Net cash provided by (used in) operating activities from discontinued operations . . . . . . . . . . . . . .
Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investing Activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Insurance proceeds for recovery of property damage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash received from unconsolidated affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in unconsolidated affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayment of government grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net payments from (advances to) affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of businesses/assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities from continuing operations . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financing Activities:
Proceeds from short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (repayments) borrowings from affiliate accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . .
Final settlement of affiliate balances at separation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid to noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by financing activities from continuing operations . . . . . . . . . . . .
Net cash (used in) provided by financing activities from discontinued operations . . . . . . . . . . . . . .
Net cash (used in) provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increase (decrease) in cash and cash equivalents, including discontinued operations . . . . . . . . . . . .
Cash and cash equivalents at beginning of period, including discontinued operations . . . . . . . . . . .
Cash and cash equivalents at end of period, including discontinued operations . . . . . . . . . . . .
Supplemental cash flow information:
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncash investing and financing activities:
The amount of capital expenditures in accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Received noncash settlements of notes receivable from affiliates . . . . . . . . . . . . . . . . . . . . . . . . .
Settled noncash long-term debt to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ended December 31,
2016
2017
2015
$
$
144
(8)
$
(77)
(8)
(352)
(10)
127
19
1
7
21
18
1
13
(24)
8
(2)
(1)
9
51
13
(60)
337
1
338
(197)
76
44
(50)
(5)
121
—
(11)
(1)
(12)
1
(100)
(732)
(12)
(12)
750
(18)
(123)
—
(123)
5
208
30
238
28
21
39
57
792
$
$
$
114
(14)
(22)
10
—
44
(9)
1
(12)
106
1
(4)
(9)
17
(40)
(18)
80
17
97
(103)
—
32
(29)
—
(5)
9
(96)
(22)
(118)
1
47
—
(2)
(14)
—
—
32
(2)
30
(1)
8
22
30
5
7
21
270
145
$
$
$
100
(28)
1
104
—
33
(4)
1
34
94
(42)
10
2
5
29
(34)
(57)
(6)
(63)
(203)
—
48
(42)
—
97
—
(100)
(39)
(139)
1
194
—
(2)
(8)
—
—
185
9
194
(3)
(11)
33
22
4
8
25
256
39
$
$
$
See notes to consolidated and combined financial statements.
35
VENATOR MATERIALS PLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS, RECENT DEVELOPMENTS, BASIS OF PRESENTATION AND
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
For convenience in this report, the terms “our,” “us,” “we” or “Venator” may be used to refer to Venator
Materials PLC and, unless the context otherwise requires, its subsidiaries.
Description of Business
Venator operates in two segments: Titanium Dioxide and Performance Additives. The Titanium Dioxide
segment manufactures and sells primarily TiO2, and operates eight TiO2 manufacturing facilities across the globe,
predominantly in Europe. The Performance Additives segment manufactures and sells functional additives, color
pigments, timber treatment and water treatment chemicals. This segment operates 18 manufacturing and processing
facilities in Europe, North America, Asia and Australia.
Recent Developments
U.S. Tax Reform
On December 22, 2017, the 2017 Tax Act was signed into law. The 2017 Tax Act significantly changed the
U.S. corporate income tax regime by, among other things, lowering the U.S. federal corporate income tax rate from 35%
to 21%, effective January 1, 2018.
As a result of the 2017 Tax Act, the Company recorded a provisional tax expense of $3 million due to a
remeasurement of deferred tax assets and liabilities which represents the Company’s current best estimate. Any
adjustments recorded to the provisional amounts through calendar year 2018 will be included in income as an adjustment
to tax expense in the period of the adjustment. The provisional amounts incorporate assumptions made based upon the
Company’s current interpretation of the 2017 Tax Act and may change as additional clarification and implementation
guidance becomes available. See “Note 18. Income Taxes.”
Initial Public Offering and Separation
On August 8, 2017, we completed our IPO of 26,105,000 ordinary shares, par value $0.001 per share (the
“ordinary shares”) which included 3,405,000 ordinary shares issued upon the exercise in full by the underwriters of their
option to purchase additional shares, at a public offering price of $20.00 per share. All of the ordinary shares were sold
by Huntsman, and we did not receive any proceeds from the offering. In conjunction with our IPO, Venator assumed the
Titanium Dioxide and Performance Additives businesses of Huntsman and the related assets, liabilities and obligations
and operations and entered into the separation agreement to effect the separation of this business from Huntsman. Prior
to our IPO, Venator was a wholly-owned subsidiary of Huntsman. The ordinary shares began trading August 3, 2017 on
the New York Stock Exchange under the symbol “VNTR.”
In connection with our IPO and the separation, Venator and Huntsman entered into certain agreements that
allocated between Venator and Huntsman the various assets, employees, liabilities and obligations that were previously
part of Huntsman and that govern various interim and ongoing relationships between the parties.
On August 15, 2017, we registered 14,025,000 ordinary shares on Form S-8 which are reserved for issuance in
connection with awards under our 2017 Stock Incentive Plan (the “LTIP”).
On December 4, 2017, we completed a secondary public offering of 21,764,800 ordinary shares. On January 3,
2018, the underwriters purchased an additional 1,948,955 ordinary shares pursuant to their over-allotment option. All of
36
the ordinary shares were sold by Huntsman, through HHN, and we did not receive any proceeds from the offering.
Following our secondary public offering, including the partial exercise of the underwriters’ option to purchase additional
shares, Huntsman owns approximately 53% of Venator’s outstanding ordinary shares.
Senior Credit Facilities and Senior Notes
On August 8, 2017, in connection with the IPO and the separation, we entered into new financing arrangements
and incurred new debt, including borrowings of $375 million under a new senior secured term loan facility with a
maturity of seven years (the “Term Loan Facility”). In addition to the Term Loan Facility, we entered into a
$300 million asset-based revolving lending facility with a maturity of five years (the “ABL Facility” and, together with
the Term Loan Facility, the “Senior Credit Facilities”). On July 14, 2017, in connection with the IPO and the separation,
our subsidiaries Venator Finance S.à.r.l. and Venator Materials LLC (the “Issuers”), issued $375 million in aggregate
principal amount of 5.75% of Senior Notes due 2025 (the “Senior Notes”). Promptly following consummation of the
separation, the proceeds of the Senior Notes were released from escrow and Venator used the net proceeds of the Senior
Notes and borrowings under the Term Loan Facility to repay approximately $732 million of net intercompany debt owed
to Huntsman and to pay related fees and expenses of approximately $18 million.
Pori Fire
On January 30, 2017, our TiO2 manufacturing facility in Pori, Finland experienced fire damage and we continue
to repair the facility. We have recorded a loss of $31 million for the write-off of fixed assets and lost inventory in cost of
goods sold in our consolidated and combined statements of operations for the year ended December 31, 2017. In
addition, we recorded a loss of $21 million of costs for cleanup of the facility in cost of goods sold through December
31, 2017. The site is insured for property damage as well as business interruption losses subject to retained deductibles
of $15 million and 60 days, respectively, with an aggregate limit of $500 million.
The fire at our Pori facility did not have a material impact on our 2017 fourth quarter operating results as losses
incurred were offset by insurance proceeds. We received $253 million of non-refundable partial progress payments from
our insurer through December 31, 2017 and we received an additional $62 million payment on January 10, 2018. During
2017, we recorded $187 million of income related to property damage and business interruption insurance recoveries in
cost of goods sold in our consolidated and combined statements of operations to offset property damage and business
interruption losses recorded during the period. In addition, we recorded $68 million as deferred income in accrued
liabilities as of December 31, 2017 for insurance proceeds received for costs not yet incurred. The difference between
payments received from our insurers of $253 million and the sum of income of $187 million and deferred income of $68
million is related to the foreign exchange movements of the U.S. Dollar against the Euro during 2017.
Basis of Presentation
Venator’s consolidated and combined financial statements have been prepared in accordance with generally
accepted accounting principles in the United States (“GAAP” or “U.S. GAAP”). Prior to the separation, Venator’s
operations were included in Huntsman Corporation’s financial results in different legal forms, including but not limited
to: (1) wholly-owned subsidiaries for which the Titanium Dioxide and Performance Additives businesses were the sole
businesses; (2) legal entities which are comprised of other businesses and include the Titanium Dioxide and Performance
Additives businesses; and (3) variable interest entities in which the Titanium Dioxide and Performance Additives and
other businesses are the primary beneficiaries. The consolidated and combined financial statements include all revenues,
costs, assets, liabilities and cash flows directly attributable to Venator, as well as allocations of direct and indirect
corporate expenses, which are based upon an allocation method that in the opinion of management is reasonable. Such
corporate cost allocation transactions between Venator and Huntsman Corporation have been considered to be
effectively settled for cash in the consolidated and combined financial statements at the time the transaction is recorded
and the net effect of the settlement of these intercompany transactions is reflected in the consolidated and combined
statements of cash flows as a financing activity. Because the historical consolidated and combined financial information
for the periods indicated reflect the combination of these legal entities under common control, the historical consolidated
and combined financial information includes the results of operations of other Huntsman businesses are not a part of our
37
operations after the separation. We report the results of those other businesses as discontinued operations. Please see
“Note 15. Discontinued Operations.”
For purposes of these consolidated and combined financial statements, all significant transactions with
Huntsman International LLC (“Huntsman International”), a wholly-owned subsidiary of Huntsman through which
Huntsman operates all of its businesses, have been included in group equity. All intercompany transactions within the
consolidated and combined business have been eliminated.
Huntsman Corporation’s executive, information technology, environmental, health and safety and certain other
corporate departments perform certain administrative and other services for Venator. Additionally, Huntsman
Corporation performs certain site services for Venator. Expenses incurred by Huntsman Corporation and allocated to
Venator are determined based on specific services provided or are allocated based on Venator’s total revenues, total
assets, and total employees in proportion to those of Huntsman Corporation. Management believes that such expense
allocations are reasonable. Corporate allocations include allocated selling, general, and administrative expenses of
$62 million, $104 million and $90 million for the years ended December 31, 2017, 2016 and 2015, respectively.
In the notes to consolidated and combined financial statements, all dollar and share amounts in tabulations are
in millions of dollars and shares, respectively, unless otherwise indicated.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Summary of Significant Accounting Policies
Asset Retirement Obligations
Venator accrues for asset retirement obligations, which consist primarily of asbestos abatement costs,
demolition and removal costs, leasehold remediation costs and landfill closure costs, in the period in which the
obligations are incurred. Asset retirement obligations are initially recorded at estimated fair value. When the related
liability is initially recorded, Venator capitalizes the cost by increasing the carrying amount of the related long-lived
asset. Over time, the liability is accreted to its estimated settlement value and the capitalized cost is depreciated over the
useful life of the related asset. Upon settlement of the liability, Venator will recognize a gain or loss for any difference
between the settlement amount and the liability recorded. See “Note 12. Asset Retirement Obligations.”
Carrying Value of Long-Lived Assets
Venator reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of these assets may not be recoverable. Recoverability is based upon current and anticipated
undiscounted cash flows, and Venator recognizes an impairment when such estimated cash flows are less than the
carrying value of the asset. Measurement of the amount of impairment, if any, is based upon the difference between
carrying value and fair value. Fair value is generally estimated by discounting estimated future cash flows using a
discount rate commensurate with the risks involved.
Cash and Cash Equivalents
Venator considers cash in bank accounts and short-term highly liquid investments with remaining maturities of
three months or less at the date of purchase to be cash and cash equivalents.
38
Prior to the separation, Venator participated in Huntsman International’s cash pooling program. The cash
pooling program was an intercompany borrowing arrangement designed to reduce Venator’s dependence on external
short-term borrowing. See “Note 14. Debt.”
Cost of Goods Sold
Venator classifies the costs of manufacturing and distributing its products as cost of goods sold. Manufacturing
costs include variable costs, primarily raw materials and energy, and fixed expenses directly associated with production.
Manufacturing costs include, among other things, plant site operating costs and overhead costs (including depreciation),
production planning and logistics costs, repair and maintenance costs, plant site purchasing costs, and engineering and
technical support costs. Distribution, freight, and warehousing costs are also included in cost of goods sold.
Derivative Transactions and Hedging Activities
All derivatives are recorded on Venator’s balance sheet at fair value. The effective portion of changes in the fair
value of derivatives designated as hedges are recorded in other comprehensive income (loss) until the hedge item
impacts earnings at which point the accumulated gains and losses are recognized in other income (expense), net in the
consolidated and combined statements of operations. The ineffective portion of the change in fair value of derivatives
accounted for as hedges and the gains and losses of derivatives not designated as hedges are recognized in earnings. See
“Note 16. Derivative Instruments and Hedging Activities.”
Environmental Expenditures
Environmental-related restoration and remediation costs are recorded as liabilities when site restoration and
environmental remediation and cleanup obligations are either known or considered probable and the related costs can be
reasonably estimated. Other environmental expenditures that are principally maintenance or preventative in nature are
recorded when expended and incurred and are expensed or capitalized as appropriate. See “Note 22. Environmental,
Health and Safety Matters.”
Financial Instruments
The carrying amounts reported in the balance sheets for cash and cash equivalents, accounts receivable,
amounts receivable from affiliates, accounts payable, amounts payable to affiliates, and accrued liabilities approximate
their fair value because of the immediate or short-term maturity of these financial instruments. The fair value of non-
qualified employee benefit plan investments is estimated using prevailing market prices. The estimated fair values of
Venator’s long-term debt are based on quoted market prices for the identical liability when traded as an asset in an active
market. Such fair value approximates carrying value.
Foreign Currency Translation
Venator is domiciled in the U.K. which uses the British pound sterling, however, we report in U.S. dollars. The
accounts of Venator’s operating subsidiaries outside of the U.S. consider the functional currency to be the currency of
the economic environment in which they operate. Accordingly, assets and liabilities are translated at rates prevailing at
the balance sheet date. Revenues, expenses, gains and losses are translated at a weighted average rate for the period.
Cumulative translation adjustments are recorded to equity as a component of accumulated other comprehensive loss.
Foreign currency transaction gains and losses are recorded in other income (expense) in the consolidated and
combined statements of operations and were net losses of $1 million for the year ended December 31, 2017 and net gains
of $9 million and $4 million for the years ended December 31, 2016 and 2015, respectively.
Income Taxes
Venator uses the asset and liability method of accounting for income taxes. Deferred income taxes reflect the
net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial and tax
39
reporting purposes. Venator evaluates deferred tax assets to determine whether it is more likely than not that they will be
realized. Valuation allowances are reviewed on a tax jurisdiction basis to analyze whether there is sufficient positive or
negative evidence to support a change in judgment about the realizability of the related deferred tax assets for each
jurisdiction. These conclusions require significant judgment. In evaluating the objective evidence that historical results
provide, Venator considers the cyclicality of Venator and cumulative income or losses during the applicable period.
Cumulative losses incurred over the period limits Venator’s ability to consider other subjective evidence such as
Venator’s projections for the future. Changes in expected future income in applicable tax jurisdictions could affect the
realization of deferred tax assets in those jurisdictions.
Venator is comprised of operations in various tax jurisdictions. Prior to the separation, Venator’s operations
were included in Huntsman Corporation’s financial results in different legal forms, including but not limited to wholly-
owned subsidiaries for which Venator was the sole business, components of legal entities in which Venator operated in
conjunction with other Huntsman Corporation businesses and variable interest entities in which Venator is the primary
beneficiary.
The consolidated and combined financial statements have been prepared from Huntsman Corporation’s
historical accounting records through the separation and are presented on a stand-alone basis as if Venator’s operations
had been conducted separately from Huntsman; however, Venator did not operate as a separate, stand-alone entity for
the periods presented prior to the separation and, as such, the tax results and attributes presented prior to the separation
in these consolidated and combined financial statements would not be indicative of the income tax expense or benefit,
income tax related assets and liabilities and cash taxes had Venator been a stand-alone company.
Prior to the separation, the consolidated and combined financial statements were prepared under the anticipated
legal structure of Venator such that the historical results of legal entities are presented as follows: The historical tax
results of legal entities which file separate tax returns in their respective tax jurisdictions and which need no
restructuring before being contributed are included without adjustment, including the inclusion of any currently held
subsidiaries. The historical tax results of legal entities in which Venator operated in conjunction with other Huntsman
Corporation businesses for which new legal entities were formed for Venator operations are presented on a stand-alone
basis as if their operations had been conducted separately from Huntsman and any adjustments to current taxes payable
have been treated as adjustments to parent’s net investment and advances. The historical tax results of legal entities in
which Venator operated in conjunction with other Huntsman Corporation businesses for which the Huntsman business
were transferred out have been presented without adjustment, including the historical results of the Huntsman businesses
which are unrelated to Venator operating businesses.
Prior to the separation, pursuant to tax-sharing agreements, subsidiaries of Huntsman Corporation were charged
or credited, in general, with an amount of income taxes as if they filed separate income tax returns. Adjustments to
current income taxes payable by Venator have been treated as adjustments to parent’s net investment and advances.
Prior to the separation, Venator included the U.S. Titanium Dioxide and Performance Additives subsidiaries of
Huntsman International which were treated for U.S. tax purposes as divisions of Huntsman International. Huntsman
International was included in the U.S. consolidated tax return of its parent, Huntsman Corporation. The U.S. tax
expense, deferred tax assets, and deferred tax liabilities in these financial statements do not necessarily reflect the tax
expense, deferred tax assets, or deferred tax liabilities that would have resulted had Venator not been operated as a U.S.
income tax branch structure in combination with Huntsman Corporation. A 2% U.S. state income tax rate (net of federal
benefit) was estimated for Venator based upon the estimated apportionment factors and actual income tax rates in state
tax jurisdictions where it had nexus. U.S. foreign tax credits relating to taxes paid by non-U.S. business entities were
generated and utilized by Huntsman. On a separate entity basis, these foreign tax credits would not have been generated
or utilized, therefore, no additional allocation of Huntsman foreign tax credits was necessary. Additionally, Huntsman
had no U.S. net operating loss carryforward amounts (“NOLs”) or similar attributes to allocate. Venator believes this
methodology is reasonable and complies with Staff Accounting Bulletin Topic 1B, Allocation of Expenses and Related
Disclosure in Financial Statements of Subsidiaries, Divisions or Lesser Business Components of Another Entity.
Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The
40
application of income tax law is inherently complex. Venator is required to determine if an income tax position meets
the criteria of more-likely-than-not to be realized based on the merits of the position under tax law, in order to recognize
an income tax benefit. This requires Venator to make significant judgments regarding the merits of income tax positions
and the application of income tax law. Additionally, if a tax position meets the recognition criteria of more-likely-than-
not, Venator is required to make judgments and apply assumptions in order to measure the amount of the tax benefits to
recognize. The judgments are based on the probability of the amount of tax benefits that would be realized if the tax
position was challenged by the taxing authorities. Interpretations and guidance surrounding income tax laws and
regulations change over time. As a consequence, changes in assumptions and judgments can materially affect amounts
recognized in the consolidated and combined financial statements. See “Note 18. Income Taxes.”
Intangible Assets
Intangible assets are stated at cost (fair value at the time of acquisition) and are amortized using the straight-line
method over the estimated useful lives or the life of the related agreement as follows:
Patents, trademarks and technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5 - 30 years
5 - 15 years
Inventories
Inventories are stated at the lower of cost or market, with cost determined using the first-in, first-out and
average costs methods for different components of inventory.
Legal Costs
Venator expenses legal costs, including those legal costs incurred in connection with a loss contingency, as
incurred.
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is computed using
the straight-line method over the estimated useful lives or lease term as follows:
Buildings and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5 - 50 years
3 - 30 years
Normal maintenance and repairs of plant and equipment are charged to expense as incurred. Renewals,
betterments, and major repairs that significantly extend the useful life of the assets are capitalized and the assets
replaced, if any, are retired.
Research and Development
Research and development costs are expensed as incurred and recorded in selling, general and administrative
expense. Research and development costs charged to expense were $16 million, $15 million and $17 million for
the years ended December 31, 2017, 2016 and 2015, respectively.
Revenue Recognition
Venator generates substantially all of its revenues through sales in the open market and long-term supply
agreements. Venator recognizes revenue when it is realized or realizable and earned. Revenue for product sales is
recognized when a sales arrangement exists, risk and title to the product transfer to the customer, collectability is
reasonably assured, and pricing is fixed or determinable. The transfer of risk and title to the product to the customer
usually occurs at the time shipment is made. The revenue recognition policy for sales to related parties does not differ
from the policy described above.
41
Share-based Compensation
We measure the cost of employee services received in exchange for an award of equity instruments based on
the grant-date fair value of the award. That cost will be recognized over the period during which the employee is
required to provide services in exchange for the award.
Reclassification
Certain amounts in the consolidated and combined financial statements for prior periods have been reclassified
to conform with the current presentation. These reclassifications were to record the assets and liabilities as held for sale
and results of operations of other businesses of Huntsman to discontinued operations. See "Note 15. Discontinued
Operations.”
Earnings (Losses) Per Share
Basic earnings (losses) per share excludes dilution and is computed by dividing net income (loss) attributable to
Venator Materials PLC ordinary shareholders by the weighted average number of shares outstanding during the period.
Diluted earnings (losses) per share reflects all potential dilutive ordinary shares outstanding during the period and is
computed by dividing net income (loss) attributable to Venator Materials PLC ordinary shareholders by the weighted
average number of shares outstanding during the period increased by the number of additional shares that would have
been outstanding as dilutive securities.
NOTE 2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Accounting Pronouncements Pending Adoption in Future Periods
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update
(“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), outlining a single comprehensive model for
entities to use in accounting for revenues arising from contracts with customers and supersedes most current revenue
recognition guidance. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers
(Topic 606): Deferral of the Effective Date, deferring the effective date of ASU No. 2014-09 for all entities by one year.
Further, in March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606):
Principal versus Agent Considerations (Reporting Revenue Gross versus Net), clarifying the implementation guidance
on principal versus agent considerations, in April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts
with Customers (Topic 606): Identifying Performance Obligations and Licensing, clarifying the implementation
guidance on identifying performance obligations in a contract and determining whether an entity’s promise to grant a
license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in
time) or a right to access the entity’s intellectual property (which is satisfied over time), in May 2016, the FASB issued
ASU No. 2016-12, Revenue from Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,
providing clarifications and practical expedients for certain narrow aspects in Topic 606, and in December 2016, the
FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with
Customers. The amendments in these ASUs are effective for annual reporting periods beginning after December 15,
2017, including interim periods within that reporting period. The amendments in ASU No. 2014-09, ASU No. 2016-08,
ASU No. 2016-10, ASU No. 2016-12 and ASU No. 2016-20 should be applied retrospectively, and early application is
permitted. We are substantially complete with our analysis to identify areas that will be impacted by the adoption of the
amendments in ASU No. 2014-09, ASU No. 2016-08, ASU No. 2016-10, ASU No. 2016-12 and ASU No. 2016-20 on
our financial statements. At this time, other than additional required disclosures, we do not expect the adoption of the
amendments in these ASUs to have a significant impact on our financial statements. The standard will be adopted in our
fiscal year 2018 and we have elected the modified retrospective approach as the transition method.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments in this ASU will
increase transparency and comparability among entities by recognizing lease assets and lease liabilities on the balance
sheet and disclosing key information about leasing arrangements. The amendments in this ASU will require lessees to
recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use
42
asset representing its right to use the underlying asset for the lease term. The amendments in this ASU are effective for
fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early application of the
amendments in this ASU is permitted for all entities. Reporting entities are required to recognize and measure leases
under these amendments at the beginning of the earliest period presented using a modified retrospective approach. We
are currently evaluating the impact of the adoption of the amendments in this ASU on our financial statements and
believe, based on our preliminary assessment, that we will record significant additional right-of-use assets and lease
obligations.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of
Certain Cash Receipts and Cash Payments. The amendments in this ASU clarify and include specific guidance to
address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash
flows. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The
amendments in this ASU should be applied using a retrospective transition method to each period presented. We do not
expect the adoption of the amendments in this ASU to have a significant impact on our financial statements.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of
Assets Other Than Inventory. The amendments in this ASU require entities to recognize the current and deferred income
taxes for an intra-entity transfer of an asset other than inventory when the transfer occurs, as opposed to deferring the
recognition of the income tax consequences until the asset has been sold to an outside party. The amendments in this
ASU are effective for annual reporting periods beginning after December 31, 2017, including interim reporting periods
within those annual reporting periods. Early adoption is permitted for all entities as of the beginning of an annual
reporting period for which financial statements (interim or annual) have not been issued or made available for issuance.
The amendments in this ASU should be applied on a modified retrospective basis through a cumulative-effect
adjustment directly to retained earnings as of the beginning of the period of adoption. We do not expect the adoption of
the amendments in this ASU to have a significant impact on our financial statements.
In March 2017, the FASB issued ASU No. 2017-07, Compensation—Retirement Benefits (Topic 715):
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The
amendments in this ASU require that an employer report the service cost component of net periodic pension cost and net
periodic postretirement benefit cost in the same line items as other compensation costs arising from services rendered by
the pertinent employees during the period. The other components of net benefit cost are required to be presented in the
income statement separately from the service cost component and outside of income from operations. The amendments
in this ASU also allow only the service cost component to be eligible for capitalization when applicable (for example, as
a cost of internally manufactured inventory or a self-constructed asset). The amendments in this ASU are effective for
fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The amendments in
this ASU should be applied retrospectively for the presentation of the service cost component and the other components
of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on
and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net
periodic postretirement benefit cost in assets. The amendments in this ASU will impact the presentation of our financial
statements. Our current presentation of service cost components is consistent with the amendments in this ASU. Upon
adoption of the amendments in this ASU, we expect to present the other components within other nonoperating income,
whereas we currently present these within cost of goods sold and selling, general and administrative expenses. We do
not expect the adoption of this standard to impact our net income.
In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted
Improvements to Accounting for Hedging Activities. The amendments in this ASU better align an entity’s risk
management activities and financial reporting for hedging relationships through changes to both the designation and
measurement guidance for qualifying hedging relationships as well as the recognition and presentation of the effects of
the hedging instrument and the hedged item in the financial statements to increase the understandability of the results of
an entity’s intended hedging strategies. The amendments in this ASU also include certain targeted improvements to ease
the application of current guidance related to the assessment of hedge effectiveness. The amendments in this ASU are
effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early
application is permitted in any interim period after the issuance of this ASU. Transition requirements and elections
43
should be applied to hedging relationships existing on the date of adoption. For cash flow and net investment hedges, an
entity should apply a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness,
and the amended presentation and disclosure guidance is required only prospectively. We do not expect the adoption of
this ASU to have a significant impact on our financial statements.
NOTE 3. EARNINGS (LOSSES) PER SHARE
Basic earnings (losses) per share excludes dilution and is computed by dividing net loss attributable to Venator
ordinary shareholders by the weighted average number of shares outstanding during the period. Diluted earnings (losses)
per share reflects all potential dilutive ordinary shares outstanding during the period and is computed by dividing net
income (loss) available to Venator ordinary shareholders by the weighted average number of 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 earnings
(losses) per share was based on the ordinary shares that were outstanding at the time of our IPO.
Basic and diluted earnings (losses) per share is determined using the following information:
For the years ended December 31,
2015
2016
2017
Numerator:
Basic and diluted income (loss) from continuing operations:
Income (loss) from continuing operations attributable to
Venator Materials PLC ordinary shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
126 $
(95) $
(369)
Basic and diluted income from discontinued operations:
Income from discontinued operations attributable to
Venator Materials PLC ordinary shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
8 $
8 $
10
Basic and diluted net income (loss):
Net income (loss) attributable to Venator Materials PLC
ordinary shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
134 $
(87) $
(359)
Denominator:
Weighted average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dilutive share-based awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total weighted average shares outstanding, including dilutive shares . . . . . . . . . . . .
106.3
0.4
106.7
106.3
—
106.3
106.3
—
106.3
For each of the years ended December 31, 2017, 2016 and 2015, the number of anti-dilutive employee share-
based awards excluded from the computation of diluted EPS was not significant.
NOTE 4. INVENTORIES
Inventories are stated at the lower of cost or market, with cost determined using first-in, first-out and average
cost methods for different components of inventory. Inventories at December 31, 2017 and 2016 consisted of the
following:
Raw materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
149 $
46
259
454 $
134
46
246
426
December 31,
2017
2016
44
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
The cost and accumulated depreciation of property, plant and equipment at December 31, 2017 and 2016 were
as follows:
Land and land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant, and equipment—net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
December 31,
2017
101 $
236
2,048
255
2,640
(1,273)
1,367 $
2016
96
214
1,789
102
2,201
(1,023)
1,178
Depreciation expense for the years ended December 31, 2017, 2016 and 2015 was $124 million, $110 million
and $99 million, respectively.
NOTE 6. INVESTMENT IN UNCONSOLIDATED AFFILIATES
Investments in companies in which we exercise significant influence, but do not control, are accounted for
using the equity method. Investments in companies in which we do not exercise significant influence are accounted for
using the cost method.
Tioxide Americas Inc., a wholly-owned subsidiary of Venator, has a 50% interest in Louisiana Pigment
Company, L.P. (“LPC”). Located in Lake Charles, Louisiana, LPC is a joint venture that produces TiO2 for the exclusive
benefit of each of the joint venture partners. In accordance with the joint venture agreement, this plant operates on a
break-even basis. This investment is accounted for using the equity method and totaled $86 million and $81 million at
December 31, 2017 and 2016, respectively.
During 2012, we made a $3 million investment in White Mountain Titanium Corporation, which reflects a 3%
ownership interest. This investment was accounted for using the cost method and totaled $3 million at December 31,
2016. In 2017, the investment was impaired and written off to nil due to the company going bankrupt.
NOTE 7. VARIABLE INTEREST ENTITIES
We evaluate our investments and transactions to identify variable interest entities for which we are the primary
beneficiary. We hold a variable interest in the following joint ventures for which we are the primary beneficiary:
• Pacific Iron Products Sdn Bhd is our 50%-owned joint venture with Coogee Chemicals that manufactures
products for Venator. It was determined that the activities that most significantly impact its economic
performance are raw material supply, manufacturing and sales. In this joint venture we supply all the raw
materials through a fixed cost supply contract, operate the manufacturing facility and market the products of the
joint venture to customers. Through a fixed price raw materials supply contract with the joint venture we are
exposed to the risk related to the fluctuation of raw material pricing. As a result, we concluded that we are the
primary beneficiary.
• Viance, LLC (“Viance”) is our 50%-owned joint venture with Dow. Viance markets timber treatment products
for Venator. Our joint venture interest in Viance was acquired as part of the Rockwood acquisition. It was
determined that the activity that most significantly impacts its economic performance is manufacturing. The
joint venture sources all of its products through a contract manufacturing arrangement at our Harrisburg, North
Carolina facility and we bear a disproportionate amount of working capital risk of loss due to the supply
arrangement whereby we control manufacturing on Viance’s behalf. As a result, we concluded that we are the
primary beneficiary and began consolidating Viance upon the Rockwood acquisition on October 1, 2014.
45
Creditors of these entities have no recourse to Venator’s general credit. As the primary beneficiary of these
variable interest entities at December 31, 2017, the joint ventures’ assets, liabilities and results of operations are included
in Venator’s consolidated and combined financial statements.
The revenues, income from continuing operations before income taxes and net cash provided by operating
activities for our variable interest entities are as follows:
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Income from continuing operations before income taxes . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
127 $
116 $
21
25
21
26
NOTE 8. INTANGIBLE ASSETS
Year ended
December 31,
2016
2017
2015
100
13
17
Patents, trademarks and technology . . . . . . . . . . . . . . . $
Other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
17 $
15
32 $
6 $
6
12 $
11 $
9
20 $
18 $
14
32 $
1 $
8
9 $
17
6
23
December 31, 2017
December 31, 2016
Carrying Accumulated
Amount Amortization
Carrying Accumulated
Amount Amortization
Net
Net
Amortization expense was $3 million, $4 million and $1 million for the years ended December 31, 2017, 2016
and 2015, respectively.
Our estimated future amortization expense for intangible assets over the next five years is as follows:
Year ending December 31,
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amount
$
3
4
3
4
3
NOTE 9. OTHER NONCURRENT ASSETS
Other noncurrent assets at December 31, 2017 and 2016 consisted of the following:
Spare parts inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
December 31,
2017
2016
13 $
9
1
4
11
38 $
13
7
4
—
11
35
46
NOTE 10. ACCRUED LIABILITIES
Accrued liabilities at December 31, 2017 and 2016 consisted of the following:
Payroll and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Restructuring and plant closing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rebate accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset retirement obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxes other than income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other miscellaneous accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
December 31,
2017
2016
50 $
11
22
14
19
2
1
69
56
244 $
50
14
25
4
13
2
1
—
37
146
NOTE 11. RESTRUCTURING, IMPAIRMENT AND PLANT CLOSING AND TRANSITION COSTS
Venator has initiated various restructuring programs in an effort to reduce operating costs and maximize
operating efficiency. As of December 31, 2017, 2016 and 2015, accrued restructuring and plant closing costs by type of
cost and initiative consisted of the following:
Workforce
reductions(1)
Other
restructuring
costs
Total(2)
59
Accrued liabilities as of January 1, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
59 $
— $
Adjustment to Titanium Dioxide and Performance Additives
opening balance sheet liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 charges for 2014 and prior initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 charges for 2015 initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 payments for 2014 and prior initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 payments for 2015 initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency effect on liability balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities as of December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016 charges for 2015 and prior initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 charges for 2016 initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution of prefunded restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 payments for 2015 and prior initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 payments for 2016 initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities as of December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 charges for 2016 and prior initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 charges for 2017 initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reversal of reserves no longer required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 payments for 2016 and prior initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 payments for 2017 initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency effect on liability balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities as of December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1
67
23
(44)
(10)
(6)
90 $
3
6
(36)
(36)
(6)
21 $
—
33
(1)
(12)
(8)
1
34 $
—
15
6
(15)
(6)
—
— $
16
—
—
(16)
—
— $
8
4
—
(8)
(4)
—
— $
1
82
29
(59)
(16)
(6)
90
19
6
(36)
(52)
(6)
21
8
37
(1)
(20)
(12)
1
34
(1) The total workforce reduction reserves of $34 million relate to the termination of 205 positions, of which zero
positions had been terminated as of December 31, 2017.
47
(2) Accrued liabilities remaining at December 31, 2017, 2016 and 2015 by year of initiatives were as follows:
2017
December 31,
2016
2015
2015 initiatives and prior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016 initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
9 $
—
25
34 $
21 $
—
—
21 $
90
—
—
90
Details with respect to our reserves for restructuring, impairment and plant closing and transition costs are
provided below by segment and initiative:
Titanium Performance
Dioxide
Additives
Total
Accrued liabilities as of January 1, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
49 $
10 $
59
Adjustment to Titanium Dioxide and Performance Additives opening
balance sheet liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 charges for 2014 and prior initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 charges for 2015 initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 payments for 2014 and prior initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 payments for 2015 initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency effect on liability balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities as of December 31, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2016 charges for 2015 and prior initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 charges for 2016 initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution of prefunded restructuring costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 payments for 2015 and prior initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 payments for 2016 initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency effect on liability balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities as of December 31, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2017 charges for 2016 and prior initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 charges for 2017 initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reversal of reserves no longer required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 payments for 2016 and prior initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 payments for 2017 initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency effect on liability balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities as of December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current portion of restructuring reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long-term portion of restructuring reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
46
29
(46)
(16)
(5)
57 $
3
6
(23)
(23)
(6)
(2)
12 $
4
34
(1)
(9)
(10)
—
30 $
7 $
23
1
36
—
(13)
—
(1)
33 $
16
—
(13)
(29)
—
2
9 $
4
3
—
(11)
(2)
1
4 $
4 $
—
1
82
29
(59)
(16)
(6)
90
19
6
(36)
(52)
(6)
—
21
8
37
(1)
(20)
(12)
1
34
11
23
48
Details with respect to cash and noncash restructuring charges for the years ended December 31, 2017, 2016
and 2015 by initiative are provided below:
Cash charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accelerated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-cash charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total 2017 Restructuring, Impairment of Plant Closing and Transition Costs . . . . . . . . . . . . . $
Cash charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accelerated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-cash charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total 2016 Restructuring, Impairment of Plant Closing and Transition Costs . . . . . . . . . . . . . $
Cash charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Pension-related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accelerated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-cash charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total 2015 Restructuring, Impairment and Plant Closing and Transition Costs. . . . . . . . . . . . $
45
3
3
1
52
25
8
1
1
35
113
3
68
19
17
220
In December 2014, we implemented a comprehensive restructuring program to improve the global
competitiveness of our Titanium Dioxide and Performance Additives segments. As part of the program, we are reducing
our workforce by approximately 900 positions. In connection with this restructuring program, we recorded restructuring
expense of $3 million for the year ended December 31, 2016. We recorded charges of $61 million for workforce
reductions, $3 million for pension related charges and $15 million in other restructuring costs associated with this
initiative in 2015.
In February 2015, we announced a plan to close the black end manufacturing operations and ancillary activities
at our Calais, France site, which will reduce our TiO2 capacity by approximately 100 kilotons, or 11% of our global TiO2
capacity. In connection with this closure, we recorded restructuring expense of $1 million in the year ended
December 31, 2016. In 2015 we recorded accelerated depreciation of $68 million as restructuring impairment, and plant
closing costs, we recorded charges of $30 million primarily for workforce reductions and we recorded non-cash charges
of $17 million. All expected charges have been incurred as of the end of 2016.
In July 2016, we announced plans to close our Umbogintwini, South Africa TiO2 manufacturing facility. As
part of the program, we recorded restructuring expense of approximately $4 million and $6 million for the years ended
December 31, 2017 and 2016, respectively. We recorded an impairment charges of $1 million and $19 million for our
Umbogintwini facility in 2016 and 2015, respectively. We expect to incur additional charges of approximately $11
million through 2021.
In March 2017, we announced a plan to close the white end finishing and packaging operation of our TiO2
manufacturing facility at our Calais, France site. The announced plan follows the 2015 closure of the black end
manufacturing operations and would result in the closure of the entire facility. In connection with this closure, we
recorded restructuring expense of $34 million in the year ended December 31, 2017. We recorded $8 million of
accelerated depreciation on the remaining long-lived assets associated with this manufacturing facility during the year
ended December 31, 2016. We expect to incur additional charges of approximately $44 million through the end of 2021.
In September 2017, we announced a plan to close our St. Louis and Easton manufacturing facilities. As part of
the program, we recorded restructuring expense of approximately $7 million for the year ended December 31, 2017 of
which $3 million was accelerated depreciation. We expect to incur $21 million of accelerated depreciation and $1
million of other non-cash charges through the end of 2018.
49
NOTE 12. ASSET RETIREMENT OBLIGATIONS
Asset retirement obligations consist primarily of asbestos abatement costs, demolition and removal costs,
leasehold remediation costs and landfill closure costs. Venator is legally required to perform capping and closure and
post-closure care on the landfills and asbestos abatement on certain of its premises. For each asset retirement obligation,
Venator recognized the estimated fair value of a liability and capitalized the cost as part of the cost basis of the related
asset.
The following table describes changes to Venator’s asset retirement obligation liabilities:
Asset retirement obligations at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities settled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency effect on reserve balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset retirement obligations at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
NOTE 13. OTHER NONCURRENT LIABILITIES
December 31,
2017
2016
39
2
5
(5)
4
45
$
$
44
2
—
(4)
(3)
39
Other noncurrent liabilities at December 31, 2017 and 2016 consisted of the following:
Pension liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee benefit accrual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset retirement obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other postretirement benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Environmental reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and plant closing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
NOTE 14. DEBT
December 31,
2017
2016
230
4
26
3
11
23
9
306
$
$
266
5
26
3
12
7
5
324
Outstanding debt, net of issuance costs of $12 million as of December 31, 2017, consisted of the following:
December 31,
2017
December 31,
2016
Senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Term loan facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt—excluding debt to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: short-term debt and current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . .
Total long-term debt—excluding debt to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
370
367
20
757
14
743
—
743
$
$
$
$
—
—
23
23
10
13
882
895
The estimated fair values of the Term Loan Facility, was $378 million as of December 31, 2017. The estimated
fair value of the Senior Notes, was $396 million as of December 31, 2017. The estimated fair values of the Senior Notes
and the Term Loan Facility are based upon quoted market prices (Level 1).
50
The weighted average interest rate on our outstanding balances under the Senior notes and Term loan facility as
of December 31, 2017 is approximately 5%.
Senior Notes
On July 14, 2017, the Issuers entered into an indenture in connection with the issuance of the Senior Notes. The
Senior Notes are general unsecured senior obligations of the Issuers and are guaranteed on a general unsecured senior
basis by Venator and certain of Venator’s subsidiaries. The indenture related to the Senior Notes imposes certain
limitations on the ability of Venator and certain of its subsidiaries to, among other things, incur additional indebtedness
secured by any principal properties, incur indebtedness of non-guarantor subsidiaries, enter into sale and leaseback
transactions with respect to any principal properties and consolidate or merge with or into any other person or lease, sell
or transfer all or substantially all of its properties and assets. The Senior Notes bear interest of 5.75% per year payable
semi-annually and will mature on July 15, 2025. The Issuers may redeem the Senior Notes in whole or in part at any
time prior to July 15, 2020 at a price equal to 100% of the principal amount thereof plus accrued and unpaid interest, if
any, and an early redemption premium, calculated on an agreed percentage of the outstanding principal amount,
providing compensation on a portion of foregone future interest payables. The Senior Notes will be redeemable in whole
or in part at any time on or after July 15, 2020 at the redemption prices set forth in the indenture, plus accrued and
unpaid interest, if any, up to, but not including, the redemption date. In addition, at any time prior to July 15, 2020, the
Issuers may redeem up to 40% of the aggregate principal amount of the Senior Notes with an amount not greater than the
net cash proceeds of certain equity offerings or contributions to Venator’s equity at 105.75% of the principal amount
thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date. Upon the occurrence of
certain change of control events (other than the separation), holders of the Venator Notes will have the right to require
that the Issuers purchase all or a portion of such holder’s Senior Notes in cash at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase.
Senior Credit Facilities
On August 8, 2017, we entered into the Senior Credit Facilities that provide for first lien senior secured
financing of up to $675 million, consisting of:
•
•
the Term Loan Facility in an aggregate principal amount of $375 million, with a maturity of seven years; and
the ABL Facility in an aggregate principal amount of up to $300 million, with a maturity of five years.
The Term Loan Facility will amortize in aggregate annual amounts equal to 1% of the original principal amount
of the Term Loan Facility, payable quarterly commencing in the fourth quarter of 2017.
Availability to borrow under the $300 million of commitments under the ABL Facility is subject to a borrowing
base calculation comprised of accounts receivable and inventory in U.S., Canada, the U.K., Germany and accounts
receivable in France and Spain, that fluctuate from time to time and may be further impacted by the lenders’
discretionary ability to impose reserves and availability blocks that might otherwise incrementally increase borrowing
availability. As a result, the aggregate amount available for extensions of credit under the ABL Facility at any time is the
lesser of $300 million and the borrowing base calculated according to the formula described above minus the aggregate
amount of extensions of credit outstanding under the ABL Facility at such time.
Borrowings under the Term Loan Facility bear interest at a rate equal to, at Venator’s option, either (a) a
London Interbank Offering Rate (“LIBOR”) based rate determined by reference to the costs of funds for Eurodollar
deposits for the interest period relevant to such borrowing, adjusted for certain additional costs subject to an interest rate
floor to be agreed or (b) a base rate determined by reference to the highest of (i) the rate of interest per annum
determined from time to time by JPMorgan Chase Bank, N.A. as its prime rate in effect at its principal office in New
York City, (ii) the federal funds rate plus 0.50% per annum and (iii) the one-month adjusted LIBOR plus 1.00% per
annum, in each case plus an applicable margin to be agreed upon. Borrowings under the ABL Facility bear interest at a
variable rate equal to an applicable margin based on the applicable quarterly average excess availability under the ABL
Facility plus either a LIBOR or a base rate. The applicable margin percentage is calculated and established once every
51
three calendar months and varies from 150 to 200 basis points for LIBOR loans depending on the quarterly average
excess availability under the ABL Facility for the immediately preceding three month period.
Guarantees
All obligations under the Senior Credit Facilities are guaranteed by Venator and substantially all of our
subsidiaries (the “Guarantors”), and are secured by substantially all of the assets of Venator and the Guarantors, in each
case subject to certain exceptions. Lien priority as between the Term Loan Facility and the ABL Facility with respect to
the collateral will be governed by an intercreditor agreement.
Substantially all of our U.S. operations and certain of their foreign subsidiary holdings fully and
unconditionally guaranteed Huntsman International’s outstanding notes. Upon the separation, such operations and
entities no longer guarantee Huntsman International’s outstanding notes. As of December 31, 2016, Huntsman
International and its guarantors had third-party debt outstanding of $3,793 million. As of December 31, 2016, our U.S.
operations and certain of our foreign subsidiaries had total assets, excluding intercompany amounts, of $502 million.
Cash Pooling Program
Prior to the separation, Venator addressed cash flow needs by participating in a cash pooling program with
Huntsman. Cash pooling transactions were recorded as either amounts receivable from affiliates or amounts payable to
affiliates and are presented as “Net advances to affiliates” and “Net borrowings on affiliate accounts payable” in the
investing and financing sections, respectively, in the consolidated and combined statements of cash flows. Interest
income was earned if an affiliate was a net lender to the cash pool and paid if an affiliate was a net borrower from the
cash pool based on a variable interest rate determined historically by Huntsman. Venator exited the cash pooling
program prior to the separation and all receivables and payables generated through the cash pooling program were
settled in connection with the separation.
Notes Receivable and Payable of Venator to Subsidiaries of Huntsman International
As of December 31, 2017 and 2016, Venator had notes receivable outstanding from affiliates of nil and
$57 million, respectively, long-term debt to affiliates totaling nil and $882 million, respectively, and noncurrent payable
to affiliates of $34 million and nil, respectively. The borrowers and lenders are subsidiaries of Huntsman International
and the notes are unsecured. All Huntsman receivables and payables were eliminated in connection with the separation,
other than a payable to Huntsman for a liability pursuant to the Tax Matters Agreement dated August 7, 2017, by and
among Venator Materials PLC and Huntsman Corporation (the “Tax Matters Agreement”) entered into at the same time
of the separation which has been presented as “Noncurrent payable to affiliates” on our consolidated and combined
balance sheet. See “Note 18. Income Taxes” for further discussion.
A/R Programs
Certain of our entities participated in the accounts receivable securitization programs (“A/R Programs”)
sponsored by Huntsman International. Under the A/R Programs, these entities sell certain of their trade receivables to
Huntsman International. Huntsman International grants an undivided interest in these receivables to a SPE, which serve
as security for the issuance of debt of Huntsman International. On April 21, 2017, Huntsman International amended its
accounts receivable securitization facilities, which among other things removed existing receivables sold into the
program by Venator and at which time we discontinued our participation in the A/R Programs.
As of December 31, 2016, Huntsman International had $106 million of net receivables in their A/R Programs
and reflected on their balance sheet associated with Venator. The entities allocated losses on the A/R Programs for
the years ended December 31, 2017, 2016 and 2015 were $1 million, $5 million and $3 million, respectively. The
allocation of losses on sale of accounts receivable is based upon the pro-rata portion of total receivables sold into the
securitization program as well as other program and interest expenses associated with the A/R Programs.
52
Capital Leases
Venator also has lease obligations accounted for as capital leases primarily related to manufacturing facilities
which are included in other long-term debt. The scheduled maturities of Venator’s commitments under capital leases are
as follows:
Year ending December 31:
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total minimum payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Amounts representing interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Present value of minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Current portion of capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term portion of capital leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Amount
2
2
2
2
9
17
(3)
14
(2)
12
Maturities
The scheduled maturities of our debt (excluding debt to affiliates) by year as of December 31, 2017 are as
follows:
Year ending December 31:
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Amount
14
5
5
5
5
735
769
NOTE 15. DISCONTINUED OPERATIONS
The Titanium Dioxide, Performance Additives and other businesses were included in Huntsman’s financial
results in different legal forms, including, but not limited to: (1) wholly-owned subsidiaries for which the Titanium
Dioxide and Performance Additives businesses were the sole businesses; (2) legal entities that are comprised of other
businesses and include the Titanium Dioxide and/or Performance Additives businesses; and (3) variable interest entities
in which the Titanium Dioxide, Performance Additives and other businesses are the primary beneficiaries. Because the
historical consolidated and combined financial information for the periods indicated reflect the combination of these
legal entities under common control, the historical consolidated and combined financial information includes the results
of operations of other Huntsman businesses that are not a part of our operations after the separation. The legal entity
structure of Huntsman was reorganized during the fourth quarter of 2016 and the second quarter of 2017 such that the
other businesses would not be included in Venator’s legal entity structure and as such, the discontinued operations
presented below reflect financial results of the other businesses through the date of such reorganization.
53
The following table summarizes the balance sheet data for discontinued operations:
December 31,
2016
Current assets:
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable (net of allowance for doubtful accounts of $1) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable from affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LIABILITIES
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable to affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
The following table summarizes the operations data for discontinued operations:
1
10
61
9
1
2
84
19
2
21
42
126
7
2
18
27
1
77
78
105
Year ended December 31,
2016
2015
2017
Revenues:
Trade sales, services and fees, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Related party sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:
Selling, general, and administrative (includes corporate allocations of
$1, $7 and $6, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring, impairment and plant closing costs . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations before tax . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income from discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
15 $
17
32
26
110 $
60
170
147
108
60
168
146
(7)
1
1
(5)
11
(3)
8 $
15
—
(1)
14
9
(1)
8 $
8
3
(2)
9
13
(3)
10
NOTE 16. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
To reduce cash flow volatility from foreign currency fluctuations, we enter into forward and swap contracts to
hedge portions of cash flows of certain foreign currency transactions. We do not use derivative financial instruments for
trading or speculative purposes.
54
Cross Currency Swaps
In December 2017, we entered into three cross-currency swap agreements to convert a portion of our
intercompany fixed-rate, U.S. dollar denominated notes, including the semi-annual interest payments and the payment of
remaining principle at maturity, to a fixed-rate, Euro denominated debt. The economic effect of the swap agreement was
to eliminate the uncertainty of the cash flows in U.S. Dollars associated with the notes by fixing the principle amount at
€169 million with a fixed annual rate of 3.43%. These hedges have been designated as cash flow hedges and the critical
terms of the cross-currency swap agreements correspond to the underlying hedged item. These swaps mature in
July 2022, which is our best estimate of the repayment date of these intercompany loans. The amount and timing of the
semi-annual principle payments under the cross-currency swap also correspond with the terms of the intercompany
loans. Gains and losses from these hedges offset the changes in the value of interest and principal payments as a result of
changes in foreign exchange rates.
We formally assessed the hedging relationship at the inception of the hedge in order to determine whether the
derivatives that are used in the hedging transactions are highly effective in offsetting cash flows of the hedged item and
we will continue to assess the relationship on an ongoing basis. We use the hypothetical derivative method in
conjunction with regression analysis to measure effectiveness of our cross-currency swap agreement. The portion of the
hedge that is ineffective will be recorded in earnings in other income (expense). We did not record any ineffectiveness
during 2017.
The effective portion of the changes in the fair value of the swaps are deferred in other comprehensive loss and
subsequently recognized in “other income (expense), net” in the consolidated and combined statements of operations
when the hedged item impacts earnings. Cash flows related to our cross currency swap that relate to our periodic interest
settlement will be classified as operating activities and the cash flows that relates to principal balances will be designated
as financing activities. The fair value of these hedges was $5 million at December 31, 2017 and was recorded as other
long-term liabilities on our consolidated and combined balance sheets. We estimate the fair values of our cross currency
swaps by taking into consideration valuations obtained from a third-party valuation service that utilizes an income-based
industry standard valuation model for which all significant inputs are observable either directly or indirectly. These
inputs include foreign currency exchange rates, credit default swap rates and cross-currency basis swap spreads. The
cross currency swap has been classified as Level 2 because the fair value is based upon observable market-based inputs
or unobservable inputs that are corroborated by market data.
During 2017 the changes in accumulated other comprehensive loss associated with these cash flow hedging
activities was a loss of approximately $5 million. During 2018, the amount of accumulated other comprehensive loss at
December 31, 2017 related to hedging transactions that is expected to be reclassified to earnings is immaterial. The
actual amount that will be reclassified to earnings over the next twelve months may vary from this amount due to
changing market conditions.
We would be exposed to credit losses in the event of nonperformance by a counterparty to our derivative
financial instruments. We continually monitor our position and the credit rating of our counterparties, and we do not
anticipate nonperformance by the counterparties.
Forward Currency Contracts Not Designated as Hedges
We transact business in various foreign currencies and we enter into currency forward contracts to offset the
risk associated with the risks of foreign currency exposure. At December 31, 2017 we had approximately $109 million
notional amount (in U.S. dollar equivalents) outstanding in foreign currency contracts with a term of approximately one
month. The contracts are valued using observable market rates (Level 2).
Prior to the separation, Huntsman International, or its subsidiaries, entered into foreign currency derivatives on
our behalf. As of December 31, 2016, Huntsman International or its subsidiaries, on behalf of Venator, had
approximately $88 million in notional amount (in U.S. dollar equivalents) outstanding, respectively, in forward foreign
currency contracts with a term of approximately one month.
55
NOTE 17. SHARE-BASED COMPENSATION PLAN
On August 1, 2017, our compensation committee and board of directors adopted the Venator Materials 2017
Stock Incentive Plan (the “LTIP”) to provide for the granting of non-qualified stock options, incentive stock options,
stock appreciation rights, restricted stock, phantom shares, performance awards and other stock-based awards to our
employees, directors and consultants and to employees and consultants of our subsidiaries, provided that incentive stock
options may be granted solely to employees. The terms of the grants are fixed at the grant date. As of December 31,
2017, we were authorized to grant up to 12.8 million shares under the LTIP. As of December 31, 2017, we had
approximately 11.6 million shares remaining under the LTIP available for grant. Stock option awards have a maximum
contractual term of 10 years and generally must have an exercise price at least equal to the market price of Venator’s
ordinary shares on the date the stock option award is granted. Share-based awards generally vest over a three-year
period; certain performance awards vest over a two-year period and awards to Venator’s directors vest on the grant date.
Awards granted by Huntsman prior to the separation (referred to as “Huntsman awards”), which consisted of
stock options, restricted stock, performance awards and phantom shares, were generally treated as follows in connection
with the separation:
• All vested Huntsman awards remained as Huntsman awards.
• After the separation, unvested Huntsman awards were converted to Venator awards. Huntsman stock options
were converted to Venator stock options and Huntsman restricted stock, performance awards and phantom
shares were converted to Venator restricted stock units.
39 employees were affected by the conversion.
•
• Each Huntsman award was converted to approximately 1.33 Venator awards.
• The converted awards are generally subject to the same vesting, expiration and other terms and conditions as
applied to the underlying Huntsman awards immediately prior to the separation.
The compensation cost from continuing operations under the Huntsman Stock Incentive Plan (“Huntsman
Plan”) allocated to Venator was approximately $2 million each for the years ended December 31, 2017, 2016 and 2015.
The allocation was determined annually based upon the outstanding number of shares of each type of award granted to
individuals employed by Venator. After the separation, we incurred approximately $3 million in compensation cost
related to the converted awards and new awards granted under the LTIP. The total income tax benefit recognized in the
statement of operations for stock-based compensation arrangements was $1 million, nil and nil for the years ended
December 31, 2017, 2016 and 2015, respectively.
Stock Options
Huntsman Plan
Under the Huntsman Plan, the fair value of each stock option award was estimated on the date of grant using
the Black-Scholes valuation model that uses the assumptions noted in the following table. Expected volatilities were
based on the historical volatility of Huntsman Corporation’s common stock through the grant date. The expected term of
stock options granted was estimated based on the contractual term of the instruments and employees’ expected exercise
and post-vesting employment termination behavior. The risk-free rate for periods within the contractual life of the option
was based on the U.S. Treasury yield curve in effect at the time of grant. The assumptions noted below represent the
weighted averages of the assumptions utilized for all stock options granted during the year until the separation.
Year ended December 31,
2016
2015
2017
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life of stock options granted during the period . . . . . . . . . . . . . . . . . . .
2.4 %
56.9 %
2.0 %
5.9 years
5.6 %
57.9 %
1.4 %
5.9 years
2.3 %
57.6 %
1.4 %
5.9 years
56
Converted Awards
After the separation, the unvested Huntsman stock option awards were converted to Venator stock option
awards. On the date of conversion, the fair value of the stock option awards were revalued using the Black-Scholes
valuation model that uses the assumptions noted in the following table. Expected volatilities were based on the historical
volatility of Huntsman Corporation’s common stock through the conversion date. The expected term of stock options
converted was estimated based on the safe harbor approach calculated as the vesting period plus remaining contractual
term divided by two. The risk-free rate for periods within the expected life of the option was based on the U.S. Treasury
yield curve in effect at the time of conversion. The assumptions noted below represent the weighted averages of
assumptions utilized for all unvested stock options that were converted after the separation.
Year ended December 31,
2016
2015
2017
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life of stock options granted during the period . . . . . . . . . . . . . . . . . . .
— %
39.6 %
1.9 %
5.5 years
— %
39.2 %
1.8 %
4.7 years
— %
40.9 %
1.6 %
4.0 years
New Grants
After the separation, stock option awards were granted under the LTIP. The fair value of the stock option
awards were estimated using the Black-Scholes valuation model that uses the assumptions noted in the following table.
Expected volatilities were based on the historical volatility of Huntsman Corporation’s common stock through the grant
date. The expected term of stock options granted was estimated on the safe harbor approach calculated as the vesting
period plus remaining contractual term divided by two. The risk-free rate for the periods within the expected life of the
option was based on the U.S. Treasury yield curve in effect at the time of grant. The assumptions noted below represent
the weighted average of assumptions utilized for stock options granted during 2017 under the LTIP.
Year ended December 31,
2017
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life of stock options granted during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— %
41.0 %
2.0 %
6.0 years
The table below presents the changes in stock option awards for our ordinary shares from August 3, 2017
through December 31, 2017. Stock options outstanding on August 3, 2017 represent the stock option awards that were
converted from Huntsman awards to Venator awards. The stock option awards granted in 2017 represent the new awards
granted under the LTIP.
Stock Option Awards
Outstanding at August 3, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . .
Exercisable at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . .
Shares
(in thousands)
554
74
—
—
—
628
554
Weighted
Weighted
Average
Exercise
Price
Average
Remaining
Contractual
Term
(years)
Aggregate
Intrinsic
Value
(in millions)
$
10.82
22.83
—
—
—
12.24
10.82
$
8.8
8.5
6
6
57
Intrinsic value is the difference between the market value of our common stock and the exercise price of each
stock option multiplied by the number of stock options outstanding for those stock options where the market value
exceeds their exercise price. During the years ended December 31, 2017, 2016 and 2015, the total intrinsic value of stock
options exercised was nil, each.
The weighted-average grant-date fair value of stock options granted during 2017, 2016 and 2015 was $7.68,
$2.21 and $7.63 per option, respectively. As of December 31, 2017, there was $2 million of total unrecognized
compensation cost related to nonvested stock option arrangements granted under the Huntsman Plan. That cost is
expected to be recognized over a weighted-average period of approximately 2.1 years.
Nonvested Shares
Huntsman Plan
Nonvested shares granted under the Huntsman Plan consisted of restricted stock and performance shares, which
are accounted for as equity awards, and phantom stock, which is accounted for as a liability award because it can be
settled in either stock or cash.
The fair value of each performance share unit award was estimated using a Monte Carlo simulation model that
uses various assumptions, including an expected volatility rate and a risk-free interest rate. For the years ended
December 31, 2016 and 2015, the weighted-average expected volatility rate was 39.3% and 30.0%, respectively and the
weighted average risk-free interest rate was 0.9% and 0.7%, respectively. For the performance awards granted during
the years ended December 31, 2016 and 2015, the number of shares earned varies based upon Huntsman Corporation
achieving certain performance criteria over two-year and three-year performance periods. The performance criteria are
total stockholder return of Huntsman Corporation’s common stock relative to the total stockholder return of a specified
industry peer-group for the two-year and three-year performance periods.
Converted Awards
After the separation, the unvested Huntsman restricted stock, performance awards and phantom shares were
converted to Venator restricted stock units. On the date of conversion, the fair value of the restricted stock and phantom
share awards were revalued based on Venator’s closing share price, and the performance awards were revalued using the
Monte Carlo valuation.
New Grants
After the separation, restricted stock unit awards were granted under the LTIP. The fair value of the restricted
stock is based on the closing share price on the date of grant.
The table below presents the changes in nonvested awards for our ordinary shares from August 3, 2017 through
December 31, 2017. Nonvested awards outstanding on August 3, 2017 represent the unvested restricted stock,
performance shares and phantom shares granted under the Huntsman Plan that were converted to restricted stock units
under the LTIP:
Nonvested at August 3, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Nonvested at December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
58
Weighted
Average
Grant-Date
Fair Value
$
13.11
22.83
19.45
—
13.96
Shares
(in thousands)
467
58
(20)
—
504
(1) As of December 31, 2017, a total of 26,334 restricted stock units were vested but not yet issued. These shares have
not been reflected as vested shares in the table because, in accordance with the restricted stock unit agreements,
these shares are not issued for vested restricted stock until termination of employment.
As of December 31, 2017, there was $4 million of total unrecognized compensation cost related to nonvested
share compensation arrangements granted under the LTIP and the Huntsman Plan. That cost is expected to be recognized
over a weighted-average period of approximately 1.8 years.
NOTE 18. INCOME TAXES
Our income tax basis of presentation is summarized in “Note 1. Description of Business, Recent Developments,
Basis of Presentation and Summary of Significant Accounting Policies.”
A summary of the provisions for current and deferred income taxes is as follows:
Year ended
December 31,
2016
2015
2017
Income tax (benefit) expense:
U.K.
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $
—
— $
—
Non-U.K.
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
30
20
50 $
(9)
(14)
(23) $
—
—
(6)
(28)
(34)
The reconciliation of the differences between the U.K. income taxes at the U.K. statutory rate to Venator’s
provision for income taxes is as follows:
Income (loss) from continuing operations before income taxes . . . . . . . . . . . . . . $
Expected tax expense (benefit) at U.K. statutory rate of 19%, 20% and
Year ended
December 31,
2016
(108) $
2017
186 $
2015
(396)
20.25% for the years 2017, 2016 and 2015, respectively . . . . . . . . . . . . . . . . . . $
35 $
(22) $
(80)
Change resulting from:
Non-U.K. tax rate differentials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-U.K. tax effects, including nondeductible expense, tax effect of
rate changes, transfer pricing adjustments and various withholding taxes . . . . .
Non-taxable portion of gain on sale of businesses . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized currency exchange gains and losses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax authority audits and dispute resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit of losses with valuation allowances as a result of other
(1)
—
—
7
1
(19)
(7)
(3)
1
(1)
comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effects of U.S. tax reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
3
3
2
50 $
(1)
27
—
2
(23) $
(37)
7
—
(21)
4
(1)
96
—
(2)
(34)
Venator operates in over 25 non-U.K. tax jurisdictions with no specific country earning a predominant amount
of its off-shore earnings. Some of these countries have income tax rates that are approximately the same as the U.K.
statutory rate, while other countries have rates that are higher than the U.K statutory rate. Income earned in countries
59
with lower average statutory rates than the U.K., resulted in lower tax expense of $1 million, $19 million, and and $37
million, respectively, for the years ended December 31, 2017, 2016 and 2015, reflected in the reconciliation above.
In certain tax jurisdictions, Venator’s U.S. GAAP functional currency is different than the local tax functional
currency. As a result, foreign exchange gains and losses will impact Venator’s effective tax rate. For the year ended
December 31, 2017, this resulted in a tax expense of $7 million. For 2016, this resulted in a tax expense of $1 million.
For 2015, this resulted in a tax benefit of $11 million ($21 million of benefit included in “unrealized currency exchange
gains and losses” in the reconciliation above, net of $10 million of expense related to establishing contingent liabilities
for potential non-deductibility of these foreign currency losses included in “tax authority audits and dispute resolutions”
in the reconciliation above). During 2015, a number of Venator’s intercompany liabilities that were denominated in U.S.
dollars were owed by entities whose tax currency was the euro. As a result of the depreciation in the euro opposite the
U.S. dollar, these entities recorded a tax only foreign exchange loss. Most of the receivables associated with these same
U.S. dollar denominated intercompany debts were held by entities with a tax currency of the U.S. dollar which,
therefore, resulted in no taxable gain.
The components of income (loss) before income taxes were as follows:
U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
76 $
110
186 $
(20) $
(88)
(108) $
Year ended
December 31,
2016
2017
2015
(90)
(306)
(396)
Components of deferred income tax assets and liabilities at December 31, 2017 and 2016 were as follows:
Deferred income tax assets:
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Pension and other employee compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total deferred income tax liabilities:
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Pension and other employee compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net deferred tax assets before valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Non-current deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-current deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
December 31,
2017
2016
325 $
50
47
13
41
476 $
(55) $
—
(1)
(56) $
420 $
(253)
167 $
167
—
167 $
365
58
28
19
36
506
(126)
(1)
(4)
(131)
375
(245)
130
142
(12)
130
Venator has NOLs of $1,150 million in various jurisdictions, all of which have no expiration date except for
$196 million, which will expire on January 1, 2018 and is subject to a valuation allowance.
Venator has total net deferred tax assets, before valuation allowance, of $420 million, including $325 million of
tax-effected NOLs. After taking into account deferred tax liabilities, Venator has recognized valuation allowance on net
deferred tax assets of $253 million, including valuation allowances in the following countries: France, Italy, Spain,
South Africa, and the U.K. Venator also has net deferred tax assets of $167 million, not subject to valuation allowances,
60
primarily in Finland, Germany, Malaysia, and the U.S. Venator’s NOLs are principally located in France, Germany,
Italy, Spain, South Africa and the U.K.
Valuation allowances are reviewed each period on a tax jurisdiction by jurisdiction basis to analyze whether
there is sufficient positive or negative evidence to support a change in judgment about the realizability of the related
deferred tax assets. Uncertainties regarding expected future income in certain jurisdictions could affect the realization of
deferred tax assets in those jurisdictions and result in additional valuation allowances in future periods.
During 2016, Venator released valuation allowances of $6 million in France, as a result of deferred tax
liabilities offsetting deferred tax assets, which previously had a valuation allowance.
During 2015, Venator established valuation allowances of $12 million. In Italy, Venator established $10 million
of valuation allowances on certain net deferred tax assets as a result of cumulative losses, and, in South Africa, Venator
established a full valuation allowance on $2 million of deferred tax assets as a result of current year losses shifting it
from a net deferred tax liability position.
The following is a reconciliation of the unrecognized tax benefits:
Unrecognized tax benefits as of January 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Gross increases and decreases—tax positions taken during a prior period . . . . . . . .
Gross increases and decreases—tax positions taken during the current period . . . .
Decreases related to settlements of amounts due to tax authorities . . . . . . . . . . . . . .
Reductions resulting from the lapse of statutes of limitation . . . . . . . . . . . . . . . . . . .
Foreign currency movements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized tax benefits as of December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
20 $
—
1
—
—
2
23 $
22 $
—
(1)
—
—
(1)
20 $
24
3
7
(1)
(8)
(3)
22
2017
2016
2015
As of December 31, 2017, 2016 and 2015, the amount of unrecognized tax benefits that, if recognized, would
affect the effective tax rate is $13 million, $11 million and $12 million, respectively.
In accordance with Venator’s accounting policy, it recognizes interest and penalties accrued related to
unrecognized tax benefits in income tax expense:
Interest included in income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Penalties expense included in tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— $
—
— $
—
(2)
—
Accrued liability for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
—
December 31,
2017
2016
Year ended
December 31,
2016
2017
2015
61
Venator conducts business globally and, as a result, files income tax returns in the U.S. federal, various U.S.
state and various non-U.S. jurisdictions. The following table summarizes the tax years that remain subject to
examination by major tax jurisdictions:
Tax Jurisdiction
France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Open Tax Years
2002 and later
2007 and later
2012 and later
2012 and later
2002 and later
2016 and later
2014 and later
Certain of Venator’s U.S. and non-U.S. income tax returns are currently under various stages of audit by
applicable tax authorities and the amounts ultimately agreed upon in resolution of the issues raised may differ materially
from the amounts accrued.
Venator estimates that it is reasonably possible that certain of its unrecognized tax benefits could change within
12 months of the reporting date with a resulting decrease in the unrecognized tax benefits within a possible range of nil
to $4 million. For the 12-month period from the reporting date, Venator would expect that a minority portion of the
decrease in its unrecognized tax benefits would result in a corresponding benefit to its income tax expense.
On December 22, 2017, the 2017 Tax Act was signed into law. The 2017 Tax Act includes a number of changes
to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. federal corporate income tax
rate from 35% to 21% for tax years beginning after December 31, 2017. The 2017 Tax Act also provides for the
acceleration of depreciation for certain assets placed in service after September 27, 2017, as well as limitations on the
deductibility of interest expense and the creation of the base erosion anti-abuse tax, a new minimum tax.
The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting
for the tax effects of the 2017 Tax Act. SAB 118 provides a measurement period that should not extend beyond one year
from the 2017 Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with
SAB 118, a company must reflect the income tax effects of those aspects of the Act for which the accounting under ASC
740 is complete. To the extent that a company’s accounting for certain income tax effects of the 2017 Tax Act is
incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial
statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should
continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the
enactment of the 2017 Tax Act.
We have not completed our accounting for the income tax effects of certain elements of the 2017 Tax Act. If we
were able to make reasonable estimates of the effects of elements for which our analysis is not yet complete, we
recorded provisional adjustments. If we were not yet able to make reasonable estimates of the impact of certain
elements, we have not recorded any adjustments related to those elements and have continued accounting for them in
accordance with ASC 740 on the basis of the tax laws in effect before the 2017 Tax Act.
The 2017 Tax Act reduces the U.S. federal corporate tax rate to 21%, effective January 1, 2018. For our net
deferred tax assets we have recorded a provisional decrease of $3 million, with a corresponding net deferred tax expense
of $3 million for the year ended December 31, 2017. While we are able to make a reasonable estimate of the impact of
the reduction in corporate rate, it may be affected by other analyses related to the 2017 Act, including, but not limited to,
return to accrual adjustments including completion of computations and analysis of 2017 expenditures that qualify for
immediate expensing.
As we complete our analysis of the 2017 Tax Act, collect and prepare necessary data, and interpret any
additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, we may make
62
adjustments to the provisional amounts. Those adjustments may materially impact our provision for income taxes in the
period in which the adjustments are made.
In addition, for U.S. federal income tax purposes Huntsman will recognize a gain as a result of the IPO and the
separation to the extent the fair market value of the assets associated with our U.S. businesses exceeded the basis of such
assets for U.S. federal income tax purposes at the time of the separation. As a result of such gain recognized, the basis of
the assets associated with our U.S. businesses has increased. This basis step-up gave rise to a deferred tax asset of $77
million that we recognized for the quarter ended September 30, 2017. Due to the 2017 Tax Act’s reduction of the U.S.
federal corporate income tax rate from 35% to 21%, the deferred tax asset associated with the basis step-up was reduced
to $36 million as of the date of enactment, reflected as part of the $3 million provisional deferred tax expense discussed
above. Pursuant to the tax matters agreement entered into at the time of the separation, we are required to make a future
payment to Huntsman for any actual U.S. federal income tax savings we recognize as a result of any such basis increase
for tax years through December 31, 2028. For the quarter ended September 30, 2017 we estimated (based on a value of
our U.S. businesses derived from the IPO price of our ordinary shares and current tax rates) that the aggregate future
payments required by this provision were expected to be approximately $73 million. Due to the 2017 Tax Act’s
reduction of the U.S. federal corporate income tax rate, we estimate that the aggregate future payments required by this
provision are expected to be approximately $34 million. We have recognized a noncurrent liability for this amount as of
December 31, 2017. Moreover, any subsequent adjustment asserted by U.S. taxing authorities could increase the amount
of gain recognized and the corresponding basis increase, and could result in a higher liability for us under the tax matters
agreement.
As of December 31, 2016, there were no unremitted earnings of subsidiaries to consider for indefinite
reinvestment. As of December 31, 2017 our non-U.K. subsidiaries have no plan to distribute earnings in a manner that
would cause them to be subject to U.K., U.S., or other local country taxation.
NOTE 19. EMPLOYEE BENEFIT PLANS
Defined Benefit and Other Postretirement Benefit Plans
Venator sponsors defined benefit plans in a number of countries outside of the U.S. in which employees of
Venator participate. The availability of these plans and their specific design provisions are consistent with local
competitive practices and regulations.
The disclosures for the defined benefit and other postretirement benefit plans within the U.S. are combined with
the disclosures of the plans outside of the U.S. Of the total projected benefit obligations for Venator as of December 31,
2017 and 2016, the amount related to the U.S. benefit plans is $11 million and $15 million, respectively, or 1% each. Of
the total fair value of plan assets for Venator, the amount related to the U.S. benefit plans for December 31, 2017 and
2016 was $8 million and $11 million, respectively, or 1% each.
Certain plans are shared by Venator and other Huntsman International subsidiaries unrelated to Venator. In
such cases, the projected benefit obligation is allocated based upon individual employee census data and the fair value of
plan assets is allocated based upon a relevant percentage of projected benefit obligation.
63
The following table sets forth the funded status of the plans for Venator and the amounts recognized in the
combined balance sheets at December 31, 2017 and 2016:
Defined Benefit
Plans
Other
Postretirement
Benefit Plans
2017
2016
2017
2016
5
25
(1)
—
(55)
—
116
(4)
(3)
4
31
184
1
(48)
—
(156)
—
—
Change in benefit obligation
Benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,053 $ 1,037 $
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions/disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,136 $ 1,053 $
Accumulated benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . .
Change in plan assets
Fair value of plan assets at beginning of year . . . . . . . . . . . . . . . . . . . . . . $
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Funded status
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amounts recognized in balance sheet:
805 $
147
22
(48)
—
(136)
790 $
790 $
63
29
(55)
(5)
84
906 $
(230) $
(263) $
(1,053)
(1,136)
790 $
906 $
1,091
1,001
Noncurrent asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Current liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncurrent liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amounts recognized in accumulated other comprehensive loss:
1 $
(1)
(230)
(230) $
4 $
(1)
(266)
(263) $
3 $
—
—
—
—
—
—
—
—
—
3 $
— $
—
—
—
—
—
— $
— $
(3)
(3) $
— $
—
(3)
(3) $
Net actuarial loss (gain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prior service cost (credit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
296 $
7
303 $
335 $
8
343 $
(4) $
(1)
(5) $
The amounts in accumulated other comprehensive (loss) income that are expected to be recognized as
components of net periodic benefit cost during the next fiscal year are as follows:
5
—
1
—
—
(1)
(2)
—
—
—
3
—
—
1
(1)
—
—
—
—
(3)
(3)
—
—
(3)
(3)
(3)
(3)
(6)
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
64
Defined
Benefit Plans
Other
Postretirement
Benefit Plans
—
—
—
13 $
1
14 $
Components of net periodic benefit costs for the years ended December 31, 2017, 2016 and 2015 were as
follows:
Defined
Benefit Plans
2016
2015
2017
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Special termination benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailment gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
5 $
25
(43)
16
1
—
(4)
— $
4 $
31
(39)
10
1
—
—
7 $
6
35
(51)
9
1
2
—
2
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net periodic benefit credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
— $
—
1
(3)
(2) $
— $
—
—
—
— $
Other
Postretirement
Benefit Plans
2016
2017
2015
—
—
—
—
—
The amounts recognized in net periodic benefit cost and other comprehensive (loss) income as of December 31,
2017, 2016 and 2015 were as follows:
Current year actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current year prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Curtailment effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total recognized in other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . .
Amount related to discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total recognized in other comprehensive income (loss) from continuing
operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total recognized in net periodic benefit cost and other
Defined
Benefit Plans
2016
2015
2017
(24) $
(16)
—
(1)
4
(3)
(40)
—
86 $
(11)
—
(1)
—
—
74
(8)
(40)
—
66
7
11
(11)
9
(1)
—
—
8
4
12
2
comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(40) $
81 $
10
65
Current year actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Amortization of actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current year prior service credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total recognized in other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . .
Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total recognized in net periodic benefit cost and other
Other
Postretirement
Benefit Plans
2016
2017
(1) $
(1)
—
3
1
(2)
— $
—
(2)
—
(2)
—
2015
—
—
(2)
—
(2)
—
comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1) $
(2) $
(2)
The following weighted-average assumptions were used to determine the projected benefit obligation at the
measurement date and the net periodic pension cost for the year:
Projected benefit obligation:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.21 %
3.74 %
2.28 %
3.79 %
3.27 %
3.24 %
Net periodic pension cost:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.86 %
3.53 %
5.71 %
3.27 %
3.24 %
5.22 %
3.12 %
3.66 %
5.99 %
Defined
Benefit Plans
2016
2015
2017
Other
Postretirement
Benefit Plans
2016
2017
2015
Projected benefit obligation:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.38 %
3.72 %
6.94 %
Net periodic pension cost:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.72 %
6.94 %
5.65 %
At December 31, 2017 and 2016, the health care trend rate used to measure the expected increase in the cost of
benefits was assumed to be 6.75% and 5.82%, respectively, decreasing to 4.44% after 2030. Assumed health care cost
trend rates can have a significant effect on the amounts reported for the postretirement benefit plans. A one-percent point
change in assumed health care cost trend rates would not have a significant effect.
The projected benefit obligation and fair value of plan assets for the defined benefit plans with projected benefit
obligations in excess of plan assets as were as follows:
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
364 $
133
2017
2016
1,033
766
December 31,
66
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the defined
benefit plans with an accumulated benefit obligation in excess of plan assets as of December 31, 2017 and 2016 were as
follows:
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
364 $
355
133
2017
2016
1,033
986
766
December 31,
Expected future contributions and benefit payments are as follows:
Defined
Benefit Plans
Postretirement
Benefit Plans
Other
2018 expected employer contributions:
To plan trusts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
28 $
—
Expected benefit payments:
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 - 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41
41
44
45
46
244
—
—
—
—
—
1
Our investment strategy with respect to pension assets is to pursue an investment plan that, over the long term,
is expected to protect the funded status of the plan, enhance the real purchasing power of plan assets and not threaten the
plan’s ability to meet currently committed obligations. Additionally, our investment strategy is to achieve returns on plan
assets, subject to a prudent level of portfolio risk. Plan assets are invested in a broad range of investments. These
investments are diversified in terms of domestic and international equities, both growth and value funds, including small,
mid and large capitalization equities; short-term and long-term debt securities; real estate; and cash and cash equivalents.
The investments are further diversified within each asset category. The portfolio diversification provides protection
against a single investment or asset category having a disproportionate impact on the aggregate performance of the plan
assets.
Our pension plan assets are managed by outside investment managers. The investment managers value our plan
assets using quoted market prices, other observable inputs or unobservable inputs. For certain assets, the investment
managers obtain third-party appraisals at least annually, which use valuation techniques and inputs specific to the
applicable property, market or geographic location. We have established target allocations for each asset category.
Venator’s pension plan assets are periodically rebalanced based upon our target allocations.
The fair value of plan assets for the pension plans was $906 million and $790 million at December 31, 2017 and
2016, respectively. The following plan assets are measured at fair value on a recurring basis:
Fair Value
Amounts Using
Quoted Prices in
Active Markets for Observable Unobservable
Significant
Other
Significant
Asset Category
Pension plans:
December 31,
2017
Identical Assets
(Level 1)
Inputs
(Level 2)
Inputs
(Level 3)
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fixed income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate/other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total pension plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
265 $
598
33
10
906 $
252 $
41
—
5
298 $
13 $
550
3
5
571 $
—
7
30
—
37
67
Fair Value
Amounts Using
Quoted Prices in
Active Markets for Observable Unobservable
Significant
Other
Significant
Asset Category
Pension plans:
December 31,
2016
Identical Assets
(Level 1)
Inputs
(Level 2)
Inputs
(Level 3)
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fixed income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate/other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total pension plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
212 $
542
32
4
790 $
206 $
40
—
4
250 $
6 $
496
5
—
507 $
—
6
27
—
33
Real Estate/
Other
Year ended
December 31,
2017
2016
Fair Value Measurements of Plan Assets Using Significant Unobservable Inputs
(Level 3)
Balance at the beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Return on pension plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases, sales and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers (out of) into Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at the end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
27 $
5
(2)
—
—
30 $
8
—
19
—
—
27
Fixed Income
Year ended
December 31,
2017
2016
Fair Value Measurements of Plan Assets Using Significant Unobservable Inputs
(Level 3)
Balance at the beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Return on pension plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases, sales and settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers (out of) into Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at the end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
6 $
1
—
—
7 $
—
—
6
—
6
Based upon historical returns, the expectations of our investment committee and outside advisors, the expected
long-term rate of return on the pension assets is estimated to be between 5.22% and 5.99%. The asset allocation for our
pension plans at December 31, 2017 and 2016 and the target allocation for 2017, by asset category, are as follows:
Asset category
Pension plans:
Target
allocation
2018
Allocation at Allocation at
December 31, December 31,
2017
2016
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate/other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total pension plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29 %
66 %
4 %
1 %
100 %
29 %
66 %
4 %
1 %
100 %
27 %
69 %
4 %
— %
100 %
Equity securities in Venator’s pension plans did not include any equity securities of Huntsman Corporation or
Venator and its affiliates at the end of 2017.
68
U.S. Benefit Plans
Venator’s U.S. employees participated in a trusteed, non-contributory defined benefit pension plan (the “Plan”)
that covered substantially all of Huntsman International’s full-time U.S. employees. In July 2004, the Plan formula for
employees not covered by a collective bargaining agreement was converted to a cash balance design. For represented
employees, participation in the cash balance design was subject to the terms of negotiated contracts. For participating
employees, benefits accrued under the prior formula were converted to opening cash balance accounts. The new cash
balance benefit formula provides annual pay credits from 4% to 12% of eligible pay, depending on age and service, plus
accrued interest. Participants in the plan as of July 1, 2004 were eligible for additional annual pay credits from 1% to
8%, depending on their age and service as of that date, for up to five years. Beginning July 1, 2014, the Huntsman
Defined Benefit Pension Plan was closed to new, non-union entrants and as of April 1, 2015, it was closed to new union
entrants. After closure, new hires were provided with a defined contribution plan with a non-discretionary employer
contribution of 6% of pay and a company match of up to 4% of pay, for a total company contribution of up to 10% of
pay. In connection with the separation, Venator adopted a non-contributory defined benefit pension plan for union
entrants prior to April 2015.
Our eligible employees (who were employed by Huntsman prior to August 1, 2015) also participate in an
unfunded postretirement benefit plan, which provides medical and life insurance benefits. This plan is sponsored by
Venator.
Our U.S. employees participate in a postretirement benefit plan that provides a fully insured Medicare Part D
plan including prescription drug benefits affected by the Medicare Prescription Drug, Improvement and Modernization
Act of 2003 (the “Act”). Neither Venator nor Huntsman can determine whether the medical benefits provided by these
postretirement benefit plans are actuarially equivalent to those provided by the Act. Neither Venator nor Huntsman
collects a subsidy, and our net periodic postretirement benefits cost, and related benefit obligation, do not reflect an
amount associated with the subsidy.
Non-U.S. Defined Contribution Plans
We have defined contribution plans in a variety of non-U.S. locations.
Venator’s combined expense for these defined contribution plans for the years ended December 31, 2017, 2016
and 2015 was $8 million, $7 million and $8 million, respectively, primarily related to the Huntsman UK Pension Plan.
All U.K. associates are eligible to participate in the Huntsman U.K. Pension Plan, a contract based arrangement
with a third party. Company contributions vary by business during a five year transition period. Plan participants elect to
make voluntary contributions to this plan up to a specified amount of their compensation. We contribute a matching
amount not to exceed 12% of the participant’s salary for new hires and 15% of the participant’s salary for all other
participants.
U.S. Defined Contribution Plans
Huntsman provided a money purchase pension plan covering substantially all of its domestic employees who
were hired prior to January 1, 2004. Employer contributions were made based on a percentage of employees’ earnings
(ranging up to 8%). During 2014, Huntsman closed this plan to non-union participants and in 2015, Huntsman closed
this plan to union associates. We continue to provide equivalent benefits to those who were covered under this plan into
their salary deferral accounts.
We also have a salary deferral plan covering substantially all U.S. employees. Plan participants may elect to
make voluntary contributions to this plan up to a specified amount of their compensation. New hires are provided a
defined contribution plan with a non-discretionary employer contribution of 6% of pay and a company match of up to
4% of pay, for a total company contribution of up to 10% of pay.
69
Along with the introduction of the cash balance formula within the defined benefit pension plan, the money
purchase pension plan was closed to new hires. At the same time, the employer match in the salary deferral plan was
increased, for new hires, to a 100% match, not to exceed 4% of the participant’s compensation.
Our total combined expense for the above defined contribution plans was $3 million, $1 million and nil for
the years ended December 31, 2017, 2016 and 2015, respectively.
NOTE 20. RELATED PARTY TRANSACTIONS
Transactions With Huntsman Corporation
We are party to a variety of transactions and agreements with Huntsman Corporation, our former parent and
controlling shareholder.
Prior to the separation, Huntsman Corporation’s executive, information technology, EHS and certain other
corporate departments perform certain administrative and other services for Venator. Additionally, Huntsman
Corporation performed certain site services for Venator. Expenses incurred by Huntsman Corporation and allocated to
Venator were determined based on specific services provided or were allocated based on our total revenues, total assets,
and total employees in proportion to those of Huntsman Corporation. Management believes that such expense
allocations are reasonable. Corporate allocations include allocated selling, general, and administrative expenses of
$62 million, $104 million and $90 million for the years ended December 31, 2017, 2016 and 2015, respectively.
On August 11, 2017, we entered into a separation agreement with Huntsman to effect the separation and to
provide a framework for the relationship with Huntsman. This agreement governs the relationship between Venator and
Huntsman subsequent to the completion of the separation and provides for the allocation between Venator and
Huntsman of assets, liabilities and obligations attributable to periods prior to the separation. Because these agreements
were entered into in the context of a related party transaction, the terms may not be comparable to terms that would be
obtained in a transaction between unaffiliated parties.
See description of our financing arrangements with Huntsman before and after the separation in “Note 14.
Debt” and “Note 16. Derivatives and Hedging Activities”. See description of our arrangement with Huntsman as part of
the separation in “Note18. Income Taxes”.
Other Related Party Transactions
We also conduct transactions in the normal course of business with parties under common ownership. Sales of
raw materials to LPC as part of a sourcing arrangement were $64 million, $67 million and $80 million for the years
ended December 31, 2017, 2016 and 2015, respectively. Proceeds from this arrangement are recorded as a reduction of
cost of goods sold in Venator’s combined statements of operations. Related to this same arrangement, purchases of
finished goods from LPC were $158 million, $158 million and $163 million for the years ended December 31, 2017,
2016 and 2015, respectively. The related accounts receivable from affiliates and accounts payable to affiliates as of
December 31, 2017 and 2016 are recognized in the consolidated and combined balance sheets.
NOTE 21. COMMITMENTS AND CONTINGENCIES
Purchase Commitments
We have various purchase commitments extending through 2032 for materials, supplies and services entered
into in the ordinary course of business. Included in the purchase commitments table below are contracts which require
minimum volume purchases that extend beyond one year or are renewable annually and have been renewed for 2017.
Certain contracts allow for changes in minimum required purchase volumes in the event of a temporary or permanent
shutdown of a facility. To the extent the contract requires a minimum notice period; such notice period has been
included in the table below. The contractual purchase prices for substantially all of these contracts are variable based
upon market prices, subject to annual negotiations. We have estimated our contractual obligations by using the terms of
70
our current pricing for each contract. We also have a limited number of contracts which require a minimum payment
even if no volume is purchased. We believe that all of our purchase obligations will be utilized in our normal operations.
For the years ended December 31, 2017, 2016 and 2015, we made minimum payments under such take or pay contracts
without taking the product of $2 million, $1 million and nil, respectively. Total purchase commitments as of
December 31, 2017 were as follows:
Year ending December 31,
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Amount
525
223
129
83
79
68
Operating Leases
We lease certain premises, automobiles, and office equipment under long-term lease agreements. The total
expense recorded under operating lease agreements in the consolidated and combined statements of operations was
approximately $13 million, $9 million and $9 million for the years ended December 31, 2017, 2016 and 2015,
respectively.
Future minimum lease payments under noncancelable operating leases as of December 31, 2017 were as
follows:
Year ending December 31,
2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
Amounts
10
5
4
4
2
4
29
Legal Proceedings
Antitrust Matters
In the past, we were named as a defendant in multiple civil antitrust suits alleging that we, our co-defendants
and other alleged co-conspirators conspired to fix prices of TiO2 sold in the U.S. We settled litigation involving both
direct purchasers of TiO2 and purchasers who opted out of the direct purchaser litigation for amounts immaterial to our
consolidated and combined financial statements.
We were also named as a defendant in a class action civil antitrust suit filed on March 15, 2013 in the U.S.
District Court for the Northern District of California by purchasers of products made from TiO2 (the “Indirect
Purchasers”) making essentially the same allegations as did the direct purchasers. On October 14, 2014, plaintiffs filed
their Second Amended Class Action Complaint narrowing the class of plaintiffs to those merchants and consumers of
architectural coatings containing TiO2. On August 11, 2015, the court granted our motion to dismiss the Indirect
Purchasers litigation with leave to amend the complaint. A Third Amended Class Action Complaint was filed on
September 29, 2015 further limiting the class to consumers of architectural paints. Plaintiffs have raised state antitrust
claims under the laws of 15 states, consumer protection claims under the laws of nine states, and unjust enrichment
claims under the laws of 16 states. On November 4, 2015, we and our co-defendants filed another motion to dismiss. On
June 13, 2016, the court substantially denied the motion to dismiss except as to consumer protection claims in one state.
The parties have agreed to settle this matter. The court preliminarily approved the settlement on December 13, 2017 and
the final approval hearing is scheduled for August 16, 2018.
71
On August 23, 2016, we were named as a defendant in a fourth civil antitrust suit filed in the U.S. District Court
for the Northern District of California by an Indirect Purchaser of TiO2, Home Depot. Home Depot is an Indirect
Purchaser of TiO2 primarily through paints it purchases from various manufacturers. Home Depot makes the same
claims as the Direct and Indirect Purchasers. On January 13, 2017, we filed a motion to dismiss the Home Depot case,
which remains pending. We do not expect this matter to have a material impact on our consolidated financial statements.
The Indirect Purchasers seek to recover injunctive relief, treble damages or the maximum damages allowed by
state law, costs of suit and attorneys’ fees. We are not aware of any illegal conduct by us or any of our employees.
Nevertheless, we have incurred costs relating to these claims and could incur additional costs in amounts which in the
aggregate could be material to us. Because of the overall complexity of these cases, we are unable to reasonably estimate
any possible loss or range of loss and we have not made an accrual with respect to these claims.
Other Proceedings
We are a party to various other proceedings instituted by private plaintiffs, governmental authorities and others
arising under provisions of applicable laws, including various environmental, products liability and other laws. Except as
otherwise disclosed in these consolidated and combined financial statements, we do not believe that the outcome of any
of these matters will have a material effect on our financial condition, results of operations or liquidity.
NOTE 22. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS
Environmental, Health and Safety Capital Expenditures
We may incur future costs for capital improvements and general compliance under EHS laws, including costs to
acquire, maintain and repair pollution control equipment. For the years ended December 31, 2017, 2016 and 2015, our
capital expenditures for EHS matters totaled $10 million, $11 million and $21 million, respectively. Because capital
expenditures for these matters are subject to evolving regulatory requirements and depend, in part, on the timing,
promulgation and enforcement of specific requirements, our capital expenditures for EHS matters have varied
significantly from year to year and we cannot provide assurance that our recent expenditures are indicative of future
amounts we may spend related to EHS and other applicable laws.
Environmental Matters
We have incurred and we may in the future incur, liability to investigate and clean up waste or contamination at
our current or former facilities or facilities operated by third parties at which we may have disposed of waste or other
materials. Similarly, we may incur costs for the cleanup of waste that was disposed of prior to the purchase of our
businesses. Under some circumstances, the scope of our liability may extend to damages to natural resources.
Under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and similar
state laws, a current or former owner or operator of real property in the U.S. may be liable for remediation costs
regardless of whether the release or disposal of hazardous substances was in compliance with law at the time it occurred,
and a current owner or operator may be liable regardless of whether it owned or operated the facility at the time of the
release. Outside the U.S., analogous contaminated property laws, such as those in effect in France, can hold past owners
and/or operators liable for remediation at former facilities. We have not been notified by third parties of claims against
us for cleanup liabilities at former facilities or third-party sites, including, but not limited to, sites listed under CERCLA.
Under the Resource Conservation and Recovery Act in the U.S. and similar state laws, we may be required to
remediate contamination originating from our properties as a condition to our hazardous waste permit. Some of our
manufacturing sites have an extended history of industrial chemical manufacturing and use, including on-site waste
disposal and we have made accruals for related remediation activity. We are aware of soil, groundwater or surface
contamination from past operations at some of our sites and have made accruals for related remediation activity, and we
may find contamination at other sites in the future. Similar laws exist in a number of locations in which we currently
operate, or previously operated, manufacturing facilities, such as France and Italy.
72
Environmental Reserves
We accrue liabilities relating to anticipated environmental cleanup obligations, site reclamation and closure
costs, and known penalties. Liabilities are recorded when potential liabilities are either known or considered probable
and can be reasonably estimated. Our liability estimates are calculated using present value techniques as appropriate and
are based upon requirements placed upon us by regulators, available facts, existing technology, and past experience. The
environmental liabilities do not include amounts recorded as asset retirement obligations. As of December 31, 2017 and
2016, we had environmental reserves of $12 million, each. We may incur additional losses for environmental
remediation.
NOTE 23. OTHER COMPREHENSIVE LOSS
Other comprehensive loss consisted of the following:
Pension and
other
Other
postretirement comprehensive
Foreign
currency
translation adjustments, unconsolidated Hedging
income of
benefits
adjustment(a) net of tax(b)
affiliates
Instruments Total
Amounts
Amounts
attributable to attributable
noncontrolling
interests
Venator
to
Beginning balance, January 1, 2016 . . . . . . $
Adjustment due to discontinued operations . .
Tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income before
reclassifications . . . . . . . . . . . . . . . . . . . . .
Tax expense . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from accumulated
other comprehensive loss, gross(c) . . . . . . .
Tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . .
Net current-period other comprehensive
(loss) income . . . . . . . . . . . . . . . . . . . . . . .
Ending balance, December 31, 2016 . . . . . .
Adjustment due to discontinued operations . .
Tax expense . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income before
reclassifications . . . . . . . . . . . . . . . . . . . . .
Tax expense . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from accumulated
other comprehensive loss, gross(c) . . . . . . .
Tax expense . . . . . . . . . . . . . . . . . . . . . . . . .
Net current-period other comprehensive
(144) $
(3)
—
35
—
—
—
32
(112)
5
—
101
—
—
—
(252) $
(8)
2
(53)
(7)
11
1
(54)
(306)
24
(3)
4
(1)
15
—
(5) $
—
—
—
—
—
—
—
(5)
—
—
—
—
—
—
— (401)
(11)
—
2
—
—
—
(18)
(7)
—
—
11
1
—
(22)
— (423)
29
—
(3)
—
(5)
—
100
(1)
—
—
15
—
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(401)
(11)
2
(18)
(7)
11
1
(22)
(423)
29
(3)
100
(1)
15
—
(loss) income . . . . . . . . . . . . . . . . . . . . . . .
Ending balance, December 31, 2017 . . . . . . $
106
(6) $
39
(267) $
—
(5) $
140
(5)
(5) $ (283) $
—
— $
140
(283)
(a) Amounts are net of tax of nil each as of January 1, 2016, December 31, 2016 and December 31, 2017.
(b) Amounts are net of tax of $60, $56 and $52 as of January 1, 2016, December 31, 2016 and December 31, 2017,
respectively.
73
(c) See table below for details about the amounts reclassified from accumulated other comprehensive loss.
Year ended
December 31,
Affected line item in the statement
2017
2016
where net income is presented
Details about Accumulated Other Comprehensive Loss
Components:
Amortization of pension and other postretirement benefits:
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total reclassifications for the period . . . . . . . . . . . . . . . . . . . . . $
17 $
(2)
15
—
15 $
10
1
11
1
12
(a)
(a)
Total before tax
Income tax (expense) benefit
Net of tax
(a) These accumulated other comprehensive loss components are included in the computation of net periodic pension
costs. See “Note 19. Employee Benefit Plans.”
NOTE 24. OPERATING SEGMENT INFORMATION
We derive our revenues, earnings and cash flows from the manufacture and sale of a wide variety of commodity
chemical products. We have reported our operations through our two segments, Titanium Dioxide and Performance
Additives, and organized our business and derived our operating segments around differences in product lines.
The major product groups of each reportable operating segment are as follows:
Segment
Titanium Dioxide . . . . . . . . .
Performance Additives . . . . .
Product Group
titanium dioxide
functional additives, color pigments, timber treatment and water treatment chemicals
Sales between segments are generally recognized at external market prices and are eliminated in consolidation.
Adjusted EBITDA is presented as a measure of the financial performance of our global business units and for reporting
the results of our operating segments. The revenues and adjusted EBITDA for each of the two reportable operating
segments are as follows:
74
Adjusted EBITDA for each of the two reportable operating segments are as follows:
Revenues:
Titanium Dioxide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Performance Additives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Segment adjusted EBITDA(1):
Titanium Dioxide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Performance Additives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Reconciliation of adjusted EBITDA to net income (loss):
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax (expense) benefit—continuing operations . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to noncontrolling interests . . . . . . . . . . . . . . . . . . .
Other adjustments:
Business acquisition and integration expenses . . . . . . . . . . . . . . . . . . . . . .
Separation gain (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. income tax reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income of discontinued operations, net of tax . . . . . . . . . . . . . . . . . . .
Gain (loss) on disposition of business/assets . . . . . . . . . . . . . . . . . . . . . . .
Certain legal settlements and related expenses . . . . . . . . . . . . . . . . . . . . .
Amortization of pension and postretirement actuarial losses . . . . . . . . . .
Net plant incident costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring, impairment and plant closing and transition costs . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Depreciation and Amortization:
Titanium Dioxide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Performance Additives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Year ended December 31,
2016
2015
2017
1,604 $
605
2,209 $
1,554
585
2,139
387 $
72
(64)
395 $
(100)
60
(50)
(127)
10
(5)
(7)
34
8
—
(1)
(17)
(4)
(52)
144 $
85 $
36
6
127 $
61
69
(53)
77
(59)
15
23
(114)
10
(11)
—
8
22
(2)
(10)
(1)
(35)
(77)
87
19
8
114
$
$
$
$
$
$
$
1,584
578
2,162
(8)
69
(53)
8
(52)
22
34
(100)
7
(44)
—
10
(1)
(3)
(9)
(4)
(220)
(352)
72
20
8
100
Year ended December 31,
2016
2015
2017
Capital Expenditures:
Titanium Dioxide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Performance Additives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Total Assets(2):
Titanium Dioxide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Performance Additives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
178 $
17
2
197 $
73
30
—
103
1,794 $
703
350
2,847 $
1,561
764
210
2,535
$
$
$
$
124
79
—
203
1,707
783
715
3,205
(1) Adjusted EBITDA is defined as net income (loss) before interest expense, 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; (b) separation (gain) expense, net; (c) U.S.
income tax reform; (d) (gain) loss on disposition of businesses/assets; (e) net income of discontinued operations, net
75
of tax; (f) certain legal settlements and related expenses; (g) amortization of pension and postretirement actuarial
losses; (h) net plant incident costs; and (i) restructuring, impairment and plant closing and transition costs.
(2) Defined as total assets less current assets of discontinued operations and noncurrent assets of discontinued
operations.
By Geographic Area
Revenues(1):
Year ended December 31,
2016
2015
2017
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other nations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long Lived Assets:
Finland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other nations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
526 $
230
126
112
114
94
86
56
13
852
2,209 $
257 $
256
253
208
170
223
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,367 $
491
210
130
113
102
98
79
59
11
846
2,139
146
215
263
198
155
201
1,178
$
$
$
$
501
235
117
97
105
94
71
59
16
867
2,162
150
216
256
252
163
240
1,277
(1) Geographic information for revenues is based upon countries into which product is sold.
76
NOTE 25. SELECTED UNAUDITED QUARTERLY FINANCIAL DATA
2017
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring, impairment and plant closing and
First Quarter Second Quarter Third Quarter Fourth Quarter
528
387
537 $
463
562 $
479
582 $
446
transition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Loss) income from continuing operations . . . . . . . . . . . . . . . . .
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) income attributable to Venator . . . . . . . . . . . . . . . . . .
Basic income (loss) per share:
(Loss) income from continuing operations attributable to
26
(21)
(13)
(16)
7
34
34
31
16
53
53
51
3
70
70
68
Venator Materials PLC ordinary shareholders . . . . . . . . . . . .
(0.23)
0.29
0.48
0.64
Net (loss) income attributable to Venator Materials PLC
ordinary shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.15)
0.29
0.48
0.64
Diluted income (loss) per share:
(Loss) income per share from continuing operations
attributable to Venator Materials PLC
ordinary shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) income per share attributable to
(0.23)
0.29
0.48
0.64
Venator Materials PLC ordinary shareholders . . . . . . . . . . . .
(0.15)
0.29
0.48
0.64
2016
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring, impairment and plant closing and
transition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from continuing operations . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss attributable to Venator . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic loss per share:
Loss per share from continuing operations attributable to
540
513
11
(53)
(48)
(50)
576
543
13
(24)
(23)
(26)
532
491
7
(4)
(2)
(5)
491
440
4
(4)
(4)
(6)
Venator Materials PLC ordinary shareholders . . . . . . . . . . . .
(0.52)
(0.25)
(0.07)
(0.06)
Net loss per share attributable to
Venator Materials PLC ordinary shareholders . . . . . . . . . . . .
(0.47)
(0.24)
(0.05)
(0.06)
Diluted loss per share:
Loss per share from continuing operations attributable to
Venator Materials PLC ordinary shareholders . . . . . . . . . . . .
(0.52)
(0.25)
(0.07)
(0.06)
Net loss per share attributable to Venator Materials PLC
ordinary shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.47)
(0.24)
(0.05)
(0.06)
77
FREE CASH FLOW RECONCILIATION
Year Ended December 31
2017
2016
Free cash flow(a):
Net cash provided by operating activities from continuing operations . . . . . . .
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Investment in) cash received from unconsolidated affiliates, net . . . . . . . . . . .
Other investing activities excluding transactions with former parent and
cash flows related to sales of businesses/assets . . . . . . . . . . . . . . . . . . . . . . . .
Non-recurring separation costs(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
337
(197)
(6)
71
7
Total free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
212 $
Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Expenditures excluding cash paid for Pori rebuild . . . . . . . . . . . . . . . .
Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Primary working capital change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance & other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Total free cash flow(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
395 $
(103)
(28)
(21)
35
(33)
(33)
212
$
80
(103)
3
—
—
(20)
77
(103)
(5)
(7)
111
(58)
(35)
(20)
(a) 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 cash flows used in investing activities from continuing operations. 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.
(b) Represents payments associated with our separation from Huntsman
78
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information and Holders
Our ordinary shares, $0.001 par value per share, are listed on the New York Stock Exchange (“NYSE”) under
the symbol “VNTR.” As of February 16, 2018, there were approximately 3 shareholders of record and the closing price
of our ordinary shares on the New York Stock Exchange was $21.74 per share.
Our ordinary shares started trading on the NYSE on August 3, 2017. Prior to August 3, 2017, there was no
public market for our ordinary shares. The reported high and low sale prices of our ordinary shares on the New York
Stock Exchange for each of the periods set forth below are as follows:
Period
2017
High
Low
Third Quarter (beginning August 3, 2017) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23.44 $
26.90
17.85
20.10
Dividend Policy
For the foreseeable future, we do not expect to pay dividends. However, we anticipate that our board of
directors will consider the payment of dividends from time to time to return a portion of our profits to our shareholders
when we experience adequate levels of profitability and associated reduced debt leverage. If our board of directors
determines to pay any dividend in the future, there can be no assurance that we will continue to pay such dividends or
the amount of such dividends. In addition, English law and our debt agreements place certain restrictions on our ability
to pay cash dividends.
Purchases of Equity Securities by the Company
The following table provides information with respect to shares of equity-based awards granted under our share
incentive plans that we withheld upon vesting to satisfy our tax withholding obligations during the three months ended
December 31, 2017.
Total
number of
Average price as part of publicly
shares
purchased(1)
paid per
share(1)
announced plans
or programs
shares that may yet be
purchased under the plans or
programs
Total number of
shares purchased approximate dollar value) of
Maximum number (or
October . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,277 $
—
2,249
6,526 $
24.40
—
22.12
23.61
— $
—
—
— $
—
—
—
—
(1) Represents shares purchased from employees to satisfy the tax withholding obligations in connection with the
vesting of restricted stock units.
79
Stock Performance Graph
The following graph presents the cumulative total shareholder return for Venator common stock compared with
the Standard & Poor’s (S&P) 500 Chemicals index and the S&P MidCap 400 index since August 3, 2017, the effective
date that Venator’s common stock began trading on the New York Stock Exchange.
Comparison of Cumulative Total Return
$125
$120
$115
$110
$105
$100
$95
8/3/17
8/31/17
9/30/17
10/31/17
11/30/17
12/31/17
Venator Materials PLC
S&P 500 Chemicals Index
S&P MidCap 400 Index
The graph assumes that the values of Venator’s common stock, the S&P 500 Chemicals index and the S&P
MidCap 400 index were each $100 on August 3, 2017, and that all dividends were reinvested.
80
Board of Directors
Investor Information
Peter R. Huntsman
Chairman
Sir Robert J. Margetts
Vice Chairman and
Lead Independent Director
Simon Turner
President and
Chief Executive Officer
Douglas D. Anderson
Independent Director
t
Daniele Ferrari
Independent Director
Kathy Patrick
Independent Director
Management Team
Simon Turner
President and
Chief Executive Officer
Kurt Ogden
Senior Vice President and
Chief Financial Officer
Russ Stolle
Senior Vice President,
General Counsel and
Chief Compliance Officer
Mahomed Maiter
Senior Vice President,
White Pigments
Jan Buberl
Vice President, Color Pigments
and Timber Treatment
Antje Gerber
Vice President,
Specialty Business
Phil Wrigley
Vice President, EHS and
Manufacturing Excellence
Global Headquarters
Titanium House
Hanzard Drive
Wynyard Park
Stockton-on-Tees
TS22 5FD, United Kingdom
Independent Registered Public
Accounting Firm
Deloitte & Touche LLP
Stockholder Inquiries
Inquiries from stockholders and other
interested parties regarding our company
are always welcome. Please direct your
request to Investor Relations at our Global
Headquarters address listed above, or
use the contact details below:
Tel: +44 (0) 1740 608 001
Email: ir@venatorcorp.com
Stock Transfer Agent
By Regular Mail:
Computershare
P.O. Box 43078
Providence, RI 02940
By overnight delivery:
Computershare
250 Royall Street
Canton, MA 02021
Telephone inquiries:
TFN: 1-866-644-4127 (US, Canada,
Puerto Rico)
TN: 1-781-575-2906 (non-US)
TTY—Hearing Impaired Toll Free:
1-800-952-9245
TTY—Hearing Impaired International:
+1-781-575-4592
Website: www.computershare.com/investor
Stock Listing
Our common stock is listed on the
New York Stock Exchange under
the symbol VNTR.
Annual General Meeting
The 2018 Annual General Meeting of
shareholders will take place on Thursday,
May 31, 2018 at 15:00 local time at the
offices of:
Latham & Watkins LLP
99 Bishopsgate
London EC2M 3XF
United Kingdom
+44 (0) 20 7710 7000
Website
www.venatorcorp.com
4/18/18 3:15 PM
www.venatorcorp.com
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