2018 Annual Report
Dear Shareholders
In 2018, we took positive steps in our journey to solidify
Venator as a leading global titanium dioxide producer
and concluded our first full year as a public company.
We made significant progress and took meaningful
action to improve the competitiveness of our business.
We are confident in our strategy and committed
to executing on our objectives to deliver increased
shareholder value.
2018 was a tale of two halves: The
strength of the TiO2 market in the first
half of the year was in contrast to the
significant and sudden headwinds
we faced in the second half. Despite
these challenges, Venator delivered
$436 million of adjusted EBITDA and
$2.20 of adjusted earnings per share,
growth of more than 10% and 26%
respectively compared to the prior year.
We delivered a year on year improvement
in our personal safety performance and
advanced our culture program, which is
built on our values of integrity, zero harm,
teamwork, innovation and performance.
Augmenting our leadership position
in higher value specialty TiO2
applications: In September 2018, as a
result of the increased costs and timeline
associated with the reconstruction, we
announced our intention to close our
Pori, Finland titanium dioxide facility
and transfer production of our specialty
TiO2 elsewhere within our manufacturing
network. We believe this decision will
provide a better economic return while
maintaining the breadth and quality
of our specialty TiO2 portfolio that our
customers value. We are underway
and on track with the transfer project.
These actions are expected to enhance
our leadership position in these high-
value and more stable applications.
Our innovation pipeline remains strong,
highlighted by the successful launch
of three new product grades in 2018
for use in specialty and differentiated
applications including packaging, food
and fibers. We will continue to invest in
innovation and leverage our expertise to
deliver high quality solutions that expand
our customer relationships, strengthen
our portfolio and develop the use of TiO2
in new high growth applications.
Fulfilling our commitments to
shareholders: In 2018, we completed
actions to reduce our fixed costs that
improve our annual earnings by $60
million compared to 2016 levels. In
response to rapidly changing business
conditions and a smaller manufacturing
footprint, we implemented a new
comprehensive cost reduction and
operational improvement program. This
2019 Business Improvement Program is
designed to further strengthen our cost
structure, reduce working capital and
pursue a range of measures to improve
our cash flow generation. To that end,
we reshaped our global leadership
and administrative support, improving
our efficiency and lowering costs. In
2018, we successfully optimized our
production capabilities and supply chain
within Performance Additives to improve
its earnings power, in part through the
closure of our Easton, Pennsylvania
and St. Louis, Missouri facilities and
rationalization of our Augusta iron oxides
facility. We believe there are additional
actions that can be taken to further
strengthen this part of our business.
These aggressive actions will strengthen
the profitability profile of Venator
throughout the TiO2 cycle.
Focused on execution: Notwithstanding
transient near-term challenges impacting
our business, longer-term industry
fundamentals remain favorable. We
expect the challenging market dynamics
from the second half of 2018 to diminish
Simon Turner
President and Chief Executive Officer
in the first half of 2019. We are intensely
focused on the announced improvement
actions and on refining our operations
to advance our overall competitiveness
and improve our cash flow generation.
Our financial position affords us the
opportunity to invest in our assets,
explore avenues for growth and consider
a range of options to unlock shareholder
value.
I am confident in our strategy and
the ability of our world-class team of
dedicated associates to deliver on our
shareholder commitments. I am optimistic
about the future and am looking forward
to all that we will accomplish in 2019 and
beyond.
Simon Turner
President and Chief Executive Officer
2018 At-A-Glance
$ in millions
Revenues
Net (loss) income attributable to Venator
Diluted (loss) earnings per share
Adjusted net income(1)
Adjusted diluted earnings per share(1)
Adjusted EBITDA(1)
Free cash flow(2)
Capital expenditures
$ in millions
Total assets
Net debt(3)
2018
$2,265
$(163)
$(1.53)
$235
$2.20
$436
$(38)
$326
2017
$2,209
$134
$1.26
$186
$1.74
$395
$212
$197
December 31,
2018
$2,485
$583
2017
$2,847
$519
Reporting Segment Operating Results
Titanium Dioxide
Performance Additives
$ in millions
Revenue
Adjusted EBITDA
EBITDA Margin %
2018
$ in millions
$1,666
Revenue
$417
Adjusted EBITDA
25% EBITDA Margin %
2018
$599
$62
10%
(1) For a reconciliation see the Results of Operations included within Management’s Discussion and Analysis on pages 8–9.
(2) Free cash flow is defined as cash flows provided by (used in) operating activities from continuing operations and used in investing activities and may be adjusted for
items that affect comparability between periods.
(3) Net debt is defined as total debt excluding debt to affiliates, less total cash and cash equivalents.
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2018 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 and Combined Balance Sheets
Consolidated and Combined Statements of Operations
Consolidated and Combined Statements of Comprehensive (Loss)
Income
Consolidated and Combined Statements of Equity
Consolidated and Combined Statements of Cash Flows
Notes to Consolidated and Combined Financial Statements
Free Cash Flow Reconciliation
Market for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities
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35
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81
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Corporate Information
IBC
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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, 2018 which was filed with the Securities and Exchange Commission on February 20,
2019.
FORWARD-LOOKING STATEMENTS
Certain information set forth in this report contains “forward-looking statements” within the meaning of 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
(“EHS”) 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:
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volatile global economic conditions;
cyclical and volatile TiO2 product applications;
highly competitive industries and the need to innovate and develop new products;
our ability to successfully transfer production of certain specialty and differentiated products from our Pori,
Finland manufacturing facility to other sites within our manufacturing network;
economic conditions and regulatory changes following the likely exit of the United Kingdom (the “U.K.”)
from the European Union (“EU”);
increased manufacturing regulations for some of our products, including the outcome of the pending potential
classification of TiO2 as a carcinogen in the 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;
fluctuations in currency exchange rates and tax rates;
price volatility or interruptions in supply of raw materials and energy;
our ability to realize financial and operational benefits from our business improvement plans and initiatives;
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;
our ability to successfully defend legal claims against us, or to pursue legal claims against third parties;
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our ability to adequately protect our critical information technology systems;
our ability to comply with expanding data privacy regulations;
failure to maintain effective internal controls over financial reporting and disclosure;
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 20, 2019.
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:
Revenues
(Loss) income from continuing operations
(Loss) income per share from continuing operations
attributable to Venator ordinary shareholders
Balance Sheet Data (at year end):
2018
2017
2016
2015
2014
$ 2,265
$ 2,209 $ 2,139
$ 2,162
(157 )
136
(85 )
(362 )
$ 1,549
(171 )
$ (1.53 ) $ 1.19 $ (0.89 ) $ (3.47 ) $ (1.63 )
Total assets
Total long-term liabilities
Total assets from continuing operations(1)
Total long-term liabilities from continuing operations(2)
$ 2,485
1,087
2,485
1,087
$ 2,847 $ 2,661
1,309
2,535
1,231
1,083
2,847
1,083
$ 3,413
1,477
3,205
1,359
$ 3,933
1,579
3,722
1,447
(1) Defined as total assets less current assets of discontinued operations and noncurrent assets of discontinued operations.
(2) 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 24 manufacturing facilities, employ approximately 4,300
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 4,800 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, 2018, we had total revenues of $2,265 million. Adjusted EBITDA for the year
ended December 31, 2018 was $436 million, comprised of $417 million from our Titanium Dioxide segment and $62 million
from our Performance Additives segment.
Our Titanium Dioxide and Performance Additives segments have been transformed in recent years and we have a
well-established position in each of the industries in which we operate. We continue to implement additional business
improvements within our Titanium Dioxide and Performance Additives businesses which will continue to provide
incremental improvements in our earnings as these programs are achieved.
Recent Developments
Potential Acquisition of Tronox European Paper Laminates Business
On July 16, 2018, we announced that we reached an agreement with Tronox Limited (“Tronox”) to purchase the
European paper laminates business (the “8120 Grade”) from Tronox upon the closing of their proposed merger with The
National Titanium Dioxide Company Limited ("Cristal"). In connection with the acquisition, Tronox would supply the 8120
Grade to us under a Transitional Supply Agreement until the transfer of the manufacturing of the 8120 Grade to our
Greatham, U.K., facility has been completed.
Pori Fire
On January 30, 2017, our TiO2 manufacturing facility in Pori, Finland, experienced fire damage. The loss was
covered by insurance for property damage as well as business interruption losses subject to retained deductibles of $15
million and 60 days, respectively. During the twelve months ended December 31, 2018, we recorded $371 million of income
related to insurance recoveries in cost of goods sold while $187 million was recognized in 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. 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. We have restored 20% of the total prior capacity, which is dedicated to production of specialty products.
6
On September 12, 2018, following our review of the Pori facility and options within our manufacturing network,
and as a result of unanticipated cost escalation and extended timeline associated with reconstruction, we announced that we
intend to close our Pori, Finland, TiO2 manufacturing facility and transfer the specialty and differentiated product grades to
other sites. We intend to continue to operate the Pori facility at reduced production rates through the transition period, which
is expected to last through at least 2022, subject to economic and other factors. We currently plan to transfer certain
technology and the production of select product grades, namely for inks, cosmetics, pharmaceutical and food grade
applications, from Pori to other sites within our network. In addition, and as market conditions warrant, we intend to
strengthen the existing manufacturing network by increasing its efficiency and by providing greater manufacturing flexibility.
Recent Trends and Outlook
In 2019, we expect results in our Titanium Dioxide segment to reflect: (i) soft near-term demand largely as a result
of customer destocking; (ii) regional disparities in TiO2 pricing trends reflecting specific supply and demand balances; (iii)
soft economic environment in China and Europe, including the direct and indirect effects of Brexit; (iv) manageable raw
material and energy cost increases; (v) seasonal improvement in volumes in the first half of 2019 compared with the fourth
quarter of 2018; (vi) increased production of specialty and differentiated product grades; and (vii) additional cost
improvement actions. In our Performance Additives segment, we expect near-term business trends to be driven by: (i) a
seasonal improvement in sales volumes compared to the fourth quarter of 2018; (ii) continued pricing momentum; (iii) softer
economic conditions in China and Europe; (iv) increased raw material and energy costs; and (v) additional cost improvement
actions.
We completed the actions to deliver the fixed cost reduction target as part of our 2017 Business Improvement
Program in the fourth quarter of 2018. The full $60 million run rate benefit is expected to be captured in the first quarter of
2019. In the first quarter of 2019 we announced additional cost reduction initiatives which are expected to provide
approximately $40 million of annual adjusted EBITDA benefit compared to 2018. Actions are expected to be complete in
2020 ending 2020 at the full run rate level.
In 2019, we expect to spend approximately $130 million on capital expenditures, which includes spending to
transfer our specialty technology from Pori to other sites in our manufacturing network.
We expect our corporate and other costs will be approximately $50 million in 2019.
7
Results of Operations
The following table sets forth our consolidated and combined results of operations for the years ended December 31,
2018, 2017 and 2016.
(Dollars in millions)
Revenues
Cost of goods sold
Operating expenses(4)
Restructuring, impairment and plant closing and
transition costs
Operating (loss) income
Interest expense, net
Other income (expense)
(Loss) income from continuing operations before
income taxes
Income tax benefit (expense) from continuing operations
(Loss) income from continuing operations
Income from discontinued operations, net of tax
Net (loss) income
Reconciliation of net (loss) income to adjusted
EBITDA:
Year Ended December 31,
2018
$ 2,265
1,550
218
2017
$ 2,209
1,744
226
2016
$ 2,139
1,989
176
628
(131 )
(40 )
6
(165 )
8
(157 )
—
(157 )
52
187
(40 )
39
186
(50 )
136
8
144
35
(61 )
(44 )
(3 )
(108 )
23
(85 )
8
(77 )
Percent Change
Year Ended December 31,
2018 vs.
2017
2017 vs.
2016
3 %
(11 )%
(4 )%
1,108 %
NM
— %
(85 )%
NM
NM
NM
(100 )%
NM
3 %
(12 )%
28 %
49 %
NM
(9 )%
NM
NM
NM
NM
— %
NM
Interest expense, net
Income tax (benefit) expense from continuing
operations
Depreciation and amortization
Net income attributable to noncontrolling interests
Other adjustments:
Business acquisition and integration expenses
Separation expense, net
U.S. income tax reform
Net income of discontinued operations, net of tax
Loss (gain) on disposition of businesses/assets
Certain legal settlements and related expenses
Amortization of pension and postretirement actuarial
losses
Net plant incident (credits) costs
Restructuring, impairment and plant closing and
transition costs
Adjusted EBITDA(1)
Net cash provided by operating activities from
continuing operations
Net cash used in investing activities from continuing
operations
Net cash (used in) provided by financing activities from
continuing operations
Capital expenditures
40
40
44
— %
(9 )%
(8 )
132
(6 )
20
2
—
—
2
—
50
127
(10 )
5
7
(34 )
(8 )
—
1
15
(232 )
17
4
628
$ 436
52
$ 395
$
282
337
(23 )
114
(10 )
11
—
—
(8 )
(22 )
2
10
1
35
77
80
NM
4 %
(40 )%
NM
11 %
— %
10 %
413 %
(16 )%
321 %
(321 )
(11 )
(96 )
2,818 %
(89 )%
(18 )
(326 )
(123 )
(197 )
32
(103 )
(85 )%
65 %
NM
91 %
8
(In millions, except per share amounts)
Reconciliation of net (loss) income to
adjusted net income (loss) attributable to
Venator Materials PLC ordinary
shareholders:
Net (loss) income
Net income attributable to noncontrolling
interests
Other adjustments:
Year Ended
December 31, 2018
Gross Tax(3)
Net
Year Ended
December 31, 2017
Gross Tax(3)
Net
Year Ended
December 31, 2016
Net
Gross Tax(3)
$
(157 )
$ 144
$
(77 )
(3)
(5)
20
2 —
— —
Business acquisition and integration
expenses
Separation expense, net
U.S. income tax reform
Significant changes to income tax
valuation allowances(3)
Net income of discontinued operations — —
Loss (gain) on disposition of
businesses/assets
Certain legal settlements and related
expenses
Amortization of pension and
postretirement actuarial losses
Net plant incident (credits) costs
Restructuring, impairment and plant
closing and transition costs
15 —
(232 ) 47
— —
2 —
—
628 (76)
(6 )
(10 )
17
2
—
5
(2 )
7 —
(34 ) 16
3
7
11
—
(18 ) —
(5 )
—
—
(5 ) — —
3
—
(11 )
—
(8 )
—
—
1
(9 )
(10 )
6
—
—
—
(8 )
2
— —
—
(22 )
5
(17 )
—
1 —
1
2
(1 )
15
(185 )
17 —
(1 )
4
17
3
10
1
—
(1 )
552
52
(5 )
47
35
(7 )
1
10
—
28
Adjusted net income (loss) attributable
to Venator Materials PLC ordinary
shareholders(2)
Weighted-average shares-basic
Weighted-average shares-diluted
Net (loss) income attributable to Venator
Materials PLC ordinary shareholders
per share:
Basic
Diluted
Other non-GAAP measures:
Adjusted net income (loss) attributable to
Venator Materials PLC ordinary
shareholders per share:(2)
Basic
Diluted
$
235
106.4
106.7
$ 186
106.3
106.7
$
(67 )
106.3
106.3
$ (1.53 )
$ (1.53 )
$ 1.26
$ 1.26
$ (0.82 )
$ (0.82 )
$
$
2.21
2.20
$ 1.75
$ 1.74
$ (0.63 )
$ (0.63 )
NM—Not meaningful
(1) Our management uses adjusted EBITDA to assess financial performance. Adjusted EBITDA is defined as net
(loss) income before interest expense, net, income tax benefit (expense) from continuing operations,
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 expense, net; (c) U.S.
income tax reform; (d) net income of discontinued operations, net of tax; (e) loss (gain) on disposition of
businesses/assets; (f) certain legal settlements and related expenses; (g) amortization of pension and
9
postretirement actuarial losses; (h) net plant incident (credits) costs; and (i) restructuring, impairment and plant
closing and transition costs. We believe that net income is the performance measure calculated and presented in
accordance with U.S. GAAP that is most directly comparable to adjusted EBITDA.
We believe adjusted EBITDA is useful to investors in assessing our ongoing financial performance and provides
improved comparability between periods through the exclusion of certain items that management believes are not
indicative of our operational profitability and that may obscure underlying business results and trends. However, this
measure should not be considered in isolation or viewed as a substitute for net income or other measures of performance
determined in accordance with U.S. GAAP. Moreover, adjusted EBITDA as used herein is not necessarily comparable to
other similarly titled measures of other companies due to potential inconsistencies in the methods of calculation. Our
management believes this measure is useful to compare general operating performance from period to period and to
make certain related management decisions. Adjusted EBITDA is also used by securities analysts, lenders and others in
their evaluation of different companies because it excludes certain items that can vary widely across different industries
or among companies within the same industry. For example, interest expense can be highly dependent on a company’s
capital structure, debt levels and credit ratings. Therefore, the impact of interest expense on earnings can vary
significantly among companies. In addition, the tax positions of companies can vary because of their differing abilities to
take advantage of tax benefits and because of the tax policies of the various jurisdictions in which they operate. As a
result, effective tax rates and tax expense can vary considerably among companies. Finally, companies employ
productive assets of different ages and utilize different methods of acquiring and depreciating such assets. This can result
in considerable variability in the relative costs of productive assets and the depreciation and amortization expense among
companies.
Nevertheless, our management recognizes that there are limitations associated with the use of adjusted EBITDA in the
evaluation of us as compared to net income. Our management compensates for the limitations of using adjusted EBITDA
by using this measure to supplement U.S. GAAP results to provide a more complete understanding of the factors and
trends affecting the business rather than U.S. GAAP results alone.
In addition to the limitations noted above, adjusted EBITDA excludes items that may be recurring in nature and should
not be disregarded in the evaluation of performance. However, we believe it is useful to exclude such items to provide a
supplemental analysis of current results and trends compared to other periods because certain excluded items can vary
significantly depending on specific underlying transactions or events, and the variability of such items may not relate
specifically to ongoing operating results or trends and certain excluded items, while potentially recurring in future
periods, may not be indicative of future results. For example, while EBITDA from discontinued operations is a recurring
item, it is not indicative of ongoing operating results and trends or future results.
(2) Adjusted net income (loss) attributable to Venator Materials PLC ordinary shareholders is computed by
eliminating the after-tax amounts related to the following from net income attributable to Venator Materials
PLC ordinary shareholders: (a) business acquisition and integration expenses; (b) separation expense, net; (c)
U.S. income tax reform; (d) significant changes to income tax valuation allowances; (e) net income of
discontinued operations; (f) loss (gain) on disposition of businesses/assets; (g) certain legal settlements and
related expenses; (h) amortization of pension and postretirement actuarial losses; (i) net plant incident (credits)
costs; (j) 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. These measures exclude similar non-cash item as Adjusted EBITDA in order to assist our investors in
comparing our performance from period to period and as such, bear similar risks as Adjusted EBITDA as documented in
footnote (1) above. For that reason, adjusted net income and the related per share amounts, should not be considered in
isolation and should be considered only to supplement analysis of U.S. GAAP results.
10
(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 eliminated the effect of significant changes to income
tax valuation allowances from our presentation of adjusted net income to allow investors to better compare our
ongoing financial performance from period to period. We do not adjust for insignificant changes in tax
valuation allowances because we do not believe it provides more meaningful information than is provided
under U.S. GAAP.
(4) As presented within MD&A, operating expense includes selling, general and administrative expenses and other
operating expense (income), net.
Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017
For the year ended December 31, 2018, net loss was $157 million on revenues of $2,265 million, compared with a
net income of $144 million on revenues of $2,209 million for the same period in 2017. The decrease of $301 million in net
income was the result of the following items:
• Revenues for the year ended December 31, 2018 increased by $56 million, or 3%, as compared with the same
period in 2017. The increase was due to a $62 million, or 4%, increase in revenue in our Titanium Dioxide segment
primarily due to an increase in average selling price, partially offset by a $6 million, or 1%, decrease in revenue in
our Performance Additives segment due primarily to decreases in volumes. See “—Segment Analysis” below.
• Our operating expenses for the year ended December 31, 2018 decreased by $8 million, or 4%, as compared to the
same period in 2017, primarily resulting from reduced overhead costs.
• Restructuring, impairment and plant closing and transition costs for the year ended December 31, 2018 increased to
$628 million from $52 million for the same period in 2017. For more information concerning restructuring
activities, see “Note 12. Restructuring, Impairment and Plant Closing and Transition Costs” to our consolidated and
combined financial statements.
• Other income for the year ended December 31, 2018 decreased by $33 million primarily as a result of the
recognition of income in 2017 related to the change in the future payment to Huntsman pursuant to the tax matters
agreement entered into as part of our separation. The change in future expected payment was due to the 2017 Tax
Act’s reduction of the U.S. federal corporate income tax rate from 35% to 21%.
• Our income tax benefit for the year ended December 31, 2018 was $8 million compared to $50 million of income
tax expense for the same period in 2017. 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 19. Income Taxes” to our consolidated and
combined financial statements.
11
Segment Analysis
(in millions)
Revenues
Titanium Dioxide
Performance Additives
Total
Segment adjusted EBITDA
Titanium Dioxide
Performance Additives
Corporate and other
Total
Percent
Change
Favorable
(Unfavorable)
4 %
(1)%
3 %
8 %
(14)%
33 %
10 %
Year Ended
December 31,
2018
2017
$
$
$
$
1,666 $
599
2,265 $
417 $
62
(43 )
436 $
1,604
605
2,209
387
72
(64 )
395
Year Ended December 31, 2018 vs. 2017
Average Selling Price(1)
Local
Currency
Foreign
Currency
Translation
Impact
Mix &
Other
Sales
Volumes(2)
Period-Over-Period Increase (Decrease)
Titanium Dioxide
Performance Additives
13 %
3 %
3 %
2 %
1 %
(2)%
(13 )%
(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 Titanium Dioxide segment generated revenues of $1,666 million in the twelve months ended December 31,
2018, an increase of $62 million, or 4%, compared to the same period in 2017. The increase was primarily due to a 13%
increase in average selling price, a 3% favorable impact from foreign currency translation, and a 1% increase due to mix and
other, offset by a 13% decrease in volumes. The increase in selling prices compared to the prior year reflects more favorable
business conditions allowing for an increase in prices globally. Sales volumes decreased primarily due to customer
destocking and lower availability of certain specialty product grades due, in part, to extended planned maintenance
turnarounds, reduced operating rates at our Pori, Finland manufacturing facility and other plant closures as part of our
restructuring programs. Excluding the impact of the fire at our Pori plant and the impact of plants closed as part of our
restructuring programs, sales volumes decreased by 9% compared to the prior year.
Adjusted EBITDA for the Titanium Dioxide segment increased by $30 million for the year ended December 31,
2018 compared to the same period in 2017. This increase is primarily a result of improvements in pricing, $19 million of
benefits as a result of our 2017 business improvement program, and the sale of $14 million of energy credits in 2018, offset
by the impact of higher raw materials and energy costs and the impact of insurance proceeds received in 2017 to reimburse
lost earnings from our Pori, Finland facility.
12
Performance Additives
The Performance Additives segment generated $599 million of revenue in the twelve months ended December 31,
2018 , a decline of $6 million , or 1% , compared to the same period in 2017 resulting from a 4% decrease in volumes and a
2% decrease due to the unfavorable impact of sales mix and other partially offset by a 3% increase in pricing and a 2%
improvement from the favorable impact of foreign currency translation. The decline in volumes was primarily as a result of
customer destocking in Functional Additives, the discontinuation of sales of certain Timber Treatment products to a large
customer, and plant shutdowns in the second quarter of 2018 as part of our restructuring plans, while the increase in selling
prices is as a result of price increases for certain products within Functional Additives, Color Pigments and Timber Treatment
to offset higher raw material and energy costs.
Adjusted EBITDA in the Performance Additives segment decreased by $10 million, or 14%, for the twelve months
ended December 31, 2018 compared to the same period in 2017, primarily due to higher raw materials and energy costs,
offset by higher average selling prices and $8 million of benefits from our 2017 business improvement program.
Corporate and other
Corporate and other represents expenses which are not allocated to our segments. Losses from Corporate and other
were $43 million, or $21 million lower for the twelve months ended December 31, 2018 than the same period in 2017 as our
costs to operate as a standalone company are lower than those costs historically allocated to us from Huntsman.
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 $50 million, or 28%, 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 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 12. 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 $42 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 19.
Income Taxes” to our consolidated and combined financial statements.
13
Segment Analysis
(in millions)
Revenues
Titanium Dioxide
Performance Additives
Total
Segment adjusted EBITDA
Titanium Dioxide
Performance Additives
Corporate and other
Total
Year
Ended
December 31,
2017
2016
Percent
Change
Favorable
(Unfavorable)
$
$
$
$
1,604 $
605
2,209 $
387 $
72
(64 )
395 $
1,554
585
2,139
61
69
(53 )
77
Year Ended December 31, 2017 vs. 2016
3 %
3 %
3 %
534 %
4 %
(21 )%
413 %
Average Selling Price(1)
Local
Currency
Foreign
Currency
Translation
Impact
Mix &
Other
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 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 2017 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 1% improvement in average selling prices and a 2%
14
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.
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 $87 million, or 33%, 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 12.
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 $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 19. Income Taxes” to our consolidated and combined financial statements.
15
Segment Analysis
(in millions)
Revenues
Titanium Dioxide
Performance Additives
Total
Segment adjusted EBITDA
Titanium Dioxide
Performance Additives
Corporate and other
Total
Year
Ended
December 31,
2016
2015
$
$
$
$
1,554 $
585
2,139 $
1,584
578
2,162
61 $
69
(53 )
77 $
(8 )
69
(53 )
8
Percent
Change
Favorable
(Unfavorable)
(2 )%
1 %
(1 )%
NM
— %
— %
863 %
Year Ended December 31, 2016 vs. 2015
Average Selling Price(1)
Local
Currency
Foreign
Currency
Translation
Impact
Mix &
Other
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 7% decrease in average selling prices, which includes a 1% increase
due to the impact of foreign currency translation, partially offset by a 4% increase in sales volumes and a 1% increase due to
mix and other. Average selling prices decreased primarily as a result of competitive pressure while sales volumes increased
primarily due to increased end-use demand.
Segment adjusted EBITDA increased by $69 million primarily due to savings resulting from our restructuring
programs and a decrease in other operating expenses of $11 million due to insurance proceeds received relating to a 2015
casualty loss at our Uerdingen, Germany manufacturing facility, partially offset by a $30 million decrease in revenue.
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 4% increase from an increase in sales volumes partially offset by a
1% unfavorable impact of foreign currency translation and a 2% decrease form sales mix and other. Segment adjusted
EBITDA was consistent year over year.
16
Liquidity and Capital Resources
Prior to the separation, our primary source of liquidity and capital resources was 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 $165 million
and $238 million as of December 31, 2018 and 2017, 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.
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 our subsidiaries Venator Finance S.à r.l. and Venator
Materials LLC (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 $732 million of net intercompany debt owed to Huntsman and to pay
related fees and expenses of $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 within the 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. The borrowing base calculation as of
December 31, 2018 is in excess of $268 million, of which $259 million is available to be drawn.
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 $140 million for
the year ended December 31, 2018 as reflected in our consolidated and combined statements of cash flows. For
2019, we expect to spend approximately $130 million on capital expenditures. Our future expenditures include
certain EHS maintenance and upgrades; periodic maintenance and repairs applicable to major units of
manufacturing facilities; expansions of our existing facilities or construction of new facilities; certain cost reduction
projects; and the cost to transfer our specialty and differentiated manufacturing from Pori, Finland to other sites
within our manufacturing network. We expect to fund this spending with cash on hand as well as cash provided by
operations and borrowings.
During the year ended December 31, 2018, we made contributions to our pension and postretirement benefit plans
of $47 million. During the first quarter of 2019, we expect to contribute an additional amount of approximately $6
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, 2018, we had $32 million of accrued restructuring costs of which $18 million is classified as
current. We expect to incur and pay additional restructuring and plant closing costs of approximately $26 million
during 2019. For further discussion of these plans and the costs involved, see “Note 12. Restructuring, Impairment
and Plant Closing and Transition Costs” to our consolidated and combined financial statements.
•
In the first quarter of 2019 we announced additional cost reduction initiatives which are expected to provide
approximately $40 million of annual adjusted EBITDA benefit compared to 2018. Actions will be complete in
2020 ending 2020 at the full run rate level.
17
•
On January 30, 2017, our TiO2 manufacturing facility in Pori, Finland, experienced fire damage. The loss was
covered by insurance for property damage as well as business interruption losses subject to retained deductibles of
$15 million and 60 days, respectively. During the twelve months ended December 31, 2018, we recorded $371
million of income related to insurance recoveries in cost of goods sold while $187 million was recognized in
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. 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. We have restored 20% of the total prior capacity, which
is dedicated to production of specialty products.
On September 12, 2018, following our review of the Pori facility and options within our manufacturing network,
and as a result of unanticipated cost escalation and extended timeline associated with reconstruction, we announced
that we intend to close our Pori, Finland, TiO2 manufacturing facility and transfer the specialty and differentiated
product grades to other sites. We currently intend to continue to operate the Pori facility at reduced production rates
through the transition period, which is expected to last through at least 2022, subject to economic and other factors.
We plan to transfer certain technology and the production of select product grades, namely for inks, cosmetics,
pharmaceutical and food grade applications, from Pori to other sites within our network. In addition, and as market
conditions warrant, we will strengthen the existing manufacturing network by increasing its efficiency and by
providing greater manufacturing flexibility.
• We have $735 million in aggregate principal outstanding under $370 million, 5.75% of Senior Notes due 2025, and
a $365 million Term Loan Facility. See further discussion under "Financing Arrangements."
As of December 31, 2018 and 2017, we had $8 million and $14 million, respectively, classified as current portion of
debt.
As of December 31, 2018 and 2017, we had $36 million and $31 million, respectively, of cash and cash equivalents
held outside of the U.S. and Europe, including our variable interest entities. As of December 31, 2018, our non-U.K.
subsidiaries have no plan to distribute earnings in a manner that would cause them to be subject to material U.K., U.S., or
other local country taxation. As of December 31, 2017, our non-U.K. subsidiaries made no distribution of earnings that
caused them to be subject to material U.K., U.S., or other local country taxation. As of December 31, 2016, there were no
unremitted earnings of subsidiaries to consider for indefinite reinvestment.
Cash Flows for the Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017
Net cash provided by operating activities from continuing operations was $282 million for the twelve months ended
December 31, 2018 while net cash provided by operating activities from continuing operations was $337 million for the
twelve months ended December 31, 2017. The decrease in net cash provided by operating activities from continuing
operations for the twelve months ended December 31, 2018 compared with the same period of 2017 was primarily
attributable to the $301 million decrease in net income described in “—Results of Operations” above, a $263 million
unfavorable variance in changes in assets and liabilities, and an unfavorable decrease in deferred income taxes of $38 million,
partially offset by an increase in noncash restructuring and impairment charges of $584 million.
Net cash used in investing activities from continuing operations was $321 million for the twelve months ended
December 31, 2018, compared to net cash used in investing activities from continuing operations of $11 million for the
twelve months ended December 31, 2017. The increase in net cash used in investing activities from continuing operations for
the twelve months ended December 31, 2018 compared with the same period of 2017 was primarily attributable to a $205
million increase in capital expenditures, net of insurance proceeds for recovery of property damage, an increase in net
payments from affiliates of $121 million year over year, partially offset by a change of $10 million related to cash received
and cash invested in unconsolidated affiliates.
Net cash used in financing activities from continuing operations was $18 million for the twelve months ended
December 31, 2018, compared to net cash used in financing activities from continuing operations of $123 million for the
18
twelve months ended December 31, 2017. The decrease in net cash used in financing activities from continuing operations
for the twelve months ended December 31, 2018 compared with the same period of 2017 was primarily attributable to a
decrease of $732 million final settlement of affiliate balances at separation and a decrease in net repayments on affiliates
accounts payable of $100 million from 2017 to 2018, offset by a decrease in proceeds received 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, 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.
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 decrease 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.
19
Changes in Financial Condition
The following information summarizes our working capital as of December 31, 2018 and 2017:
(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
$
NM—Not meaningful
$
$
December 31, 2018 December 31, 2017 Increase (Decrease) Percent Change
(31 )%
$
(8 )%
(100 )%
19 %
5 %
(23 )%
(73 )
(29 )
(12 )
84
1
(15 )
238
380
12
454
19
66
165
351
—
538
20
51
1,125
382
18
135
8
543
582
$
1,169
385
16
244
14
659
510
$
(44 )
(3 )
2
(109 )
(6 )
(116 )
72
(4 )%
(1 )%
13 %
(45 )%
(43 )%
(18 )%
14 %
Our working capital increased by $72 million as a result of the net impact of the following significant changes:
•
•
•
•
•
Cash and cash equivalents decreased by $73 million primarily due to inflows of $282 million from operating
activities from continuing operations partially offset by $321 million of cash outflows from investing activities
from continuing operations and outflows of $18 million from financing activities of continuing operations.
Accounts receivable decreased by $29 million primarily due to lower sales year over year.
Inventories increased by $84 million primarily due to customer destocking during the year ended December 31,
2018.
Accrued liabilities decreased by $109 million primarily due to capital accruals for the Pori, Finland rebuild at
December 31, 2017 which are no longer in place.
Accounts receivable from and accounts payable to affiliates represent financing arrangements with affiliates of
Huntsman. For further information, see “Note 15. Debt” to our consolidated and combined financial statements as
well as accrued costs for our restructuring programs.
20
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
$
$
December 31, 2017 December 31, 2016 Increase (Decrease) Percent Change
721 %
$
54 %
(95)%
7 %
73 %
12 %
209
133
(231 )
28
8
7
238
380
12
454
19
66
29
247
243
426
11
59
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)
$
1,169
385
16
244
14
659
510
NM—Not meaningful
1,015
297
695
146
10
$
1,148
(133 )
$
154
88
(679 )
98
4
(489 )
643
15 %
30 %
(98)%
67 %
40 %
(43)%
NM
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 15. Debt” to our consolidated and combined financial statements as
well as accrued costs for our restructuring programs.
21
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:
2019
2020
2021
2022
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
$
$
1
2
1
1
8
13
(3 )
10
(1 )
9
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
$732 million of net intercompany debt owed to Huntsman and to pay related fees and expenses of $18 million. The Senior
Notes and the Senior Credit Facilities are described in greater detail in “Note 15. Debt” to our consolidated and combined
financial statements.
Financing Arrangements
For a discussion of financing arrangements, see “Note 15. Debt” to our consolidated and combined financial
statements.
A/R Programs
For a discussion of A/R programs, see “Note 15. Debt – A/R Programs” to our consolidated and combined financial
statements.
Cross-Currency Swap
For a discussion of cross-currency swaps, see “Note 17. Derivative Instruments and Hedging Activities” to our
consolidated and combined financial statements.
22
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, 2018 are summarized below:
(Dollars in millions)
Long-term debt, including current portion(1)
Interest(2)
Operating leases
Purchase commitments(3)
Total(4)(5)
2019
2020-2021
2022-2023
After 2023
Total
$
$
7 $
43
13
110
173 $
9 $
86
20
167
282 $
9 $
89
10
67
175 $
748
723 $
275
57
83
40
25
369
845 $ 1,475
(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 $732 million of net intercompany debt owed to Huntsman and to pay related fees and expenses of $18 million.
For more information, See “—Financing Arrangements.”
(2) Interest calculated using actual and forecasted interest rates as of December 31, 2018 and contractual maturity dates.
(3) We have various purchase commitments extending through 2029 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 2018. 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, 2018, 2017 and 2016, we made minimum payments of nil, $2 million and $1 million, respectively,
under such take or pay contracts without taking the product.
(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
Other postretirement obligations
2019
2020-2021
2022-2023
5-Year
Average
Annual
$
24 $
—
$
54
—
$
58
—
32
—
(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 19. 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
For further discussion of these and other restructuring plans and the costs involved, see “Note 12. Restructuring,
Impairment and Plant Closing and Transition Costs” to our consolidated and combined financial statements.
23
Legal Proceedings
For a discussion of legal proceedings, see “Note 22. 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 on us
in the near term, we cannot predict the longer(cid:827)term effect of any of these regulations or proposals on our future financial
condition. For a discussion of EHS matters, see “Note 23. 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
Projected benefit obligation
Net periodic pension cost
Other postretirement benefit plans
Projected benefit obligation
Net periodic pension cost
2018
2017
2016
2.38 %
2.21 %
3.50 %
3.30 %
2.21%
1.86%
3.38%
3.72%
2.28 %
3.27 %
3.72 %
6.94 %
24
The expected return on plan assets is determined based on asset allocations, historical portfolio results, historical
asset correlations and management's expected long-term return for each asset class. The expected rate of return on U.S. plan
assets was 7.75% in 2018 and 2017, each, and the expected rate of return on non-U.S. plans was 5.21% and 5.68% for 2018
and 2017, respectively.
The expected increase in the compensation levels assumption reflects our long-term actual experience and future
expectations.
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
1% increase
1% decrease
Expected long-term rates of return on plan assets
1% increase
1% decrease
Rate of compensation increase
1% increase
1% decrease
Statement of
Operations(1)
Balance Sheet
Impact(2)
$
$
(12 )
12
(9 )
9
2
(2 )
(154 )
175
—
—
12
(11 )
(1) Estimated (decrease) increase on 2018 net periodic benefit cost
(2) Estimated (decrease) increase on December 31, 2018 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, 2018, we
had total valuation allowances of $220 million. See “Note 19. Income Taxes” to our consolidated and combined financial
statements for more information regarding our valuation allowances.
As of December 31, 2018, 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
25
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 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, 2018, 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 2018 would have been approximately $12 million less or $15 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.
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 12. 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, 2018 and 2017, we had
recognized a liability of $12 million, each, related to these environmental matters. For further information, see “Note 23.
Environmental, Health and Safety Matters” to our consolidated and combined financial statements.
26
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 22. Commitments and
Contingencies —Legal Proceedings” to our consolidated and combined financial statements.
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 regard 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, 2018, 2017 and 2016, the percentage of revenues from our consolidated variable interest entities in relation to
total revenues that will ultimately be attributable to Venator is 5.2%, 5.7% and 5.4%, respectively. For further information,
see “Note 8. 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 $365 million at December 31, 2018. A hypothetical 1% increase in
interest rates on our floating rate debt as of December 31, 2018 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, 2018 and 2017 we had $89 million and $109 million notional amount
(in U.S. dollar equivalents) outstanding in 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 2019, the amount of accumulated other comprehensive loss at December 31, 2018 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 to 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,
2018 and 2017.
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, 2018 , 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,
2018 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
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our
internal control framework and processes are designed to provide reasonable assurance to management and our Board of
Directors regarding the reliability of financial reporting and the preparation of our consolidated financial statements in
accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that:
•
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of our Company;
provide reasonable assurance that transactions are recorded properly to allow for the preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of our Company are being made only in accordance with authorizations of management and
our Board of Directors;
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on our consolidated financial statements; and
provide reasonable assurance as to the detection of fraud.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable
assurance and may not prevent or detect misstatements. Further, because of changing conditions, effectiveness of internal
control over financial reporting may vary over time.
Our management assessed the effectiveness of our internal control over financial reporting and concluded that, as of
December 31, 2018, such internal control is effective. In making this assessment, management used the criteria set forth by
the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013)
(“COSO”).
Our independent registered public accountants, Deloitte LLP, with direct access to our Board of Directors through
our Audit Committee, have audited our consolidated and combined financial statements and have issued an attestation report
on internal control over financial reporting.
29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Venator Materials PLC
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Venator Materials PLC and subsidiaries (the “Company”) as
of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established
in Internal Control - Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated financial statements as of and for the year ended December 31, 2018, of the Company and our
report dated February 20, 2019 expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte LLP
Leeds, United Kingdom
February 20, 2019
30
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 balance sheet of Venator Materials PLC and subsidiaries (the "Company")
as of December 31, 2018, the related consolidated statements of operations, comprehensive (loss) income, equity and cash
flows for the year ended December 31, 2018, the related notes, and the schedule listed in the Index at Item 15 (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, 2018, and the results of its operations and its cash flows for the year
ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 20, 2019, expressed an unqualified opinion on the Company's internal control
over financial reporting.
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 audit. We are a public accounting firm registered with the 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 audit 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. Our audit 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 audit 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 audit provides a reasonable basis for our opinion.
/s/ Deloitte LLP
Leeds, United Kingdom
February 20, 2019
We have served as the Company's auditor since 2018.
31
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 sheet of Venator Materials PLC and subsidiaries (the
"Company") as of December 31, 2017, the related consolidated and combined statements of operations, comprehensive
income (loss), equity, and cash flows, for each of the two years in the period ended December 31, 2017, and the related notes
listed in the Index for Item 8 and Schedule II - Valuation and Qualifying Accounts included in Item 15 (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 the results of its operations and its cash flows for each of the two
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 period 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 began serving as the Company’s auditor in 2016. In 2018, we became the predecessor auditor.
32
VENATOR MATERIALS PLC AND SUBSIDIARIES
CONSOLIDATED AND COMBINED BALANCE SHEETS
(In millions, except par value)
ASSETS
Current assets:
Cash and cash equivalents(a)
Accounts receivable (net of allowance for doubtful accounts of $5, each)(a)
Accounts receivable from affiliates
Inventories(a)
Prepaid expenses
Other current assets
Total current assets
Property, plant and equipment, net(a)
Intangible assets, net(a)
Investment in unconsolidated affiliates
Deferred income taxes
Other noncurrent assets
Total assets
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable(a)
Accounts payable to affiliates
Accrued liabilities(a)
Current portion of debt(a)
Total current liabilities
Long-term debt
Other noncurrent liabilities
Noncurrent payable to affiliates
Total liabilities
Commitments and contingencies (Notes 22 and 23)
Equity
Ordinary shares $0.001 par value, 200 shares authorized, 106 each issued and 106 each
outstanding, respectively
Additional paid-in capital
Retained (deficit) earnings
Accumulated other comprehensive loss
Total Venator
Noncontrolling interest in subsidiaries
Total equity
Total liabilities and equity
December 31,
2018
December 31,
2017
$
$
$
$
165
351
—
538
20
51
1,125
994
16
83
178
89
2,485
382
18
135
8
543
740
313
34
1,630
—
1,316
(96 )
(373 )
847
8
855
2,485
$
$
$
$
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
—
1,311
67
(283 )
1,095
10
1,105
2,847
(a) At December 31, 2018 and 2017 respectively, $5 each of cash and cash equivalents, $5 and $7 of accounts
receivable (net), $1 and $2 of inventories, $5 each of property, plant and equipment (net), $14 and $17 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 8. Variable Interest Entities.”
See notes to consolidated and combined financial statements.
33
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 of nil, $62 and $104, respectively)
Restructuring, impairment and plant closing and transition costs
Other operating expense (income), net
Total operating expenses
Operating (loss) income
Interest expense
Interest income
Other income (expense), net
(Loss) income from continuing operations before income taxes
Income tax benefit (expense)
(Loss) income from continuing operations
Income from discontinued operations, net of tax
Net (loss) income
Net income attributable to noncontrolling interests
Net (loss) income attributable to Venator
Basic (losses) earnings per share:
(Loss) income from continuing operations attributable to Venator
Materials PLC ordinary shareholders
Income from discontinued operations attributable to Venator
Materials PLC ordinary shareholders
Net (loss) income attributable to Venator Materials PLC
ordinary shareholders
Diluted (losses) earnings per share:
(Loss) income from continuing operations attributable to Venator
Materials PLC ordinary shareholders
Income from discontinued operations attributable to Venator
Materials PLC ordinary shareholders
Net (loss) income attributable to Venator Materials PLC
ordinary shareholders
Year ended December 31,
2017
2018
2,265 $
1,550
2,209 $
1,744
$
2016
2,139
1,989
212
628
6
846
(131 )
(53 )
13
6
(165 )
8
(157 )
—
(157 )
(6 )
(163 ) $
216
52
10
278
187
(100 )
60
39
186
(50 )
136
8
144
(10 )
134 $
221
35
(45 )
211
(61 )
(59 )
15
(3 )
(108 )
23
(85 )
8
(77 )
(10 )
(87 )
(1.53 ) $
1.19 $
(0.89 )
—
0.07
0.07
(1.53 ) $
1.26 $
(0.82 )
(1.53 ) $
1.18 $
(0.89 )
—
0.08
0.07
(1.53 ) $
1.26 $
(0.82 )
$
$
$
$
$
See notes to consolidated and combined financial statements.
34
VENATOR MATERIALS PLC AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Dollars in millions)
Net (loss) income
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment
Pension and other postretirement benefits adjustments
Hedging instruments
Other comprehensive (loss) income, net of tax
Comprehensive (loss) income
Comprehensive income attributable to noncontrolling interest
Comprehensive (loss) income attributable to Venator
$
Year ended December 31,
2017
2018
2016
$
(157 ) $
144 $
(90 )
(11 )
11
(90 )
(247 )
(6 )
(253 ) $
106
39
(5 )
140
284
(10 )
274 $
(77 )
32
(54 )
—
(22 )
(99 )
(10 )
(109 )
See notes to consolidated and combined financial statements.
35
VENATOR MATERIALS PLC AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF EQUITY
Parent's Net
Investment
and
(Dollars in millions)
Advances
Balance, January 1, 2016 $ 1,112
(87 )
Total Venator Materials PLC Equity
Ordinary
Shares
$ —
—
Additional
Paid-In
Capital
Retained
(Deficit)
Earnings
$ — $ —
—
—
$
Accumulated
Other
Comprehensive
Loss
(401 )
—
Noncontrolling
Interest in
Subsidiaries
$
Net (loss) income
Net changes in other
comprehensive loss
Dividends paid to
noncontrolling interests
Net changes in parent’s
net investment and
advances
Balance,
December 31, 2016
Net income
Net changes in other
comprehensive loss
Dividends paid to
noncontrolling interests
Net changes in parent’s
net investment and
advances
Conversion of parent's net
investment and advances
to paid-in capital
Activity related to stock
plans
Balance,
December 31, 2017
Net (loss) income
Net changes in other
comprehensive loss
Dividends paid to
noncontrolling interests
Activity related to stock
plans
Balance,
December 31, 2018
—
—
(437 )
—
—
—
—
—
—
—
—
—
(22 )
—
—
$
588
67
$ —
—
$ — $ —
67
—
$
(423 )
—
$
—
—
653
—
—
—
—
—
—
—
—
—
$ (1,308 )
$ —
$ 1,308 $ —
$
$ —
$ —
$
3 $ —
$
$ —
—
$ —
—
—
—
—
—
—
—
$ 1,311 $
—
—
—
5
$
67
(163 )
—
—
—
140
—
—
—
—
(283 )
—
(90 )
—
—
$
$
$
$ —
$ —
$ 1,316 $
(96 ) $
(373 )
$
See notes to consolidated and combined financial statements.
36
Total
$ 728
(77 )
(22 )
(14 )
(438 )
$ 177
144
140
(12 )
653
$ —
$
3
$ 1,105
(157 )
(90 )
(8 )
5
$ 855
17
10
—
(14 )
(1 )
12
10
—
(12 )
—
—
—
10
6
—
(8 )
—
8
VENATOR MATERIALS PLC AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(Dollars in millions)
2018
Year ended December 31,
2017
2016
Operating Activities:
Net (loss) income
Income from discontinued operations, net of tax
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
$
(157 ) $
—
144
$
(8 )
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 (gain) loss on foreign currency transactions
Other, net
Changes in 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 operating activities from continuing operations
Net cash provided by operating activities from discontinued operations
Net cash provided by 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
Payments on notes 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 financing activities from discontinued operations
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash
(Decrease) increase 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
$
$
$
132
(19 )
—
591
—
1
(6 )
9
25
(103 )
(1 )
(13 )
(49 )
(27 )
(96 )
(5 )
282
—
282
(326 )
—
34
(30 )
—
—
1
(321 )
—
(321 )
—
—
(6 )
—
(4 )
(8 )
—
—
(18 )
—
(18 )
(16 )
(73 )
238
165
$
$
$
46
34
70
—
—
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
(77 )
(8 )
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
See notes to consolidated and combined financial statements.
37
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 16 manufacturing and processing facilities in Europe, North America,
Asia and Australia.
Recent Developments
Potential Acquisition of Tronox European Paper Laminates Business
On July 16, 2018, we announced that we reached an agreement with Tronox Limited (“Tronox”) to purchase the
European paper laminates business (the “8120 Grade”) from Tronox upon the closing of their proposed merger with The
National Titanium Dioxide Company Limited ("Cristal"). In connection with the acquisition, Tronox would supply the 8120
Grade to us under a Transitional Supply Agreement until the transfer of the manufacturing of the 8120 Grade to our
Greatham, U.K., facility has been completed.
Pori Fire
On January 30, 2017, our TiO2 manufacturing facility in Pori, Finland, experienced fire damage. The loss was
covered by insurance for property damage as well as business interruption losses subject to retained deductibles of $15
million and 60 days, respectively. 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.
Prior to the fire, 60% of the site capacity produced specialty products. We have restored 20% of the total prior capacity,
which is dedicated to production of specialty products.
On April 13, 2018, we received a final payment from our insurers of €191 million, or $236 million, bringing our
total insurance receipts to €468 million, or $551 million, which was the limit of our insurance proceeds. We elected to
receive the insurance proceeds in Euro in order to match the currency of the related business interruption losses and capital
expenditures resulting from the Pori fire. For the twelve months ended December 31, 2018, we received €243 million, or
$298 million, of insurance proceeds, while €225 million, or $253 million, was received during 2017.
During the twelve months ended December 31, 2018, we recorded $371 million of income related to insurance
recoveries in cost of goods sold while $187 million was recognized in 2017. The difference between payments received from
our insurers of $551 million and the insurance recovery income of $558 million is related to the foreign exchange movements
of the U.S. Dollar against the Euro during the periods.
$68 million of deferred income for insurance recoveries was reported in accrued liabilities as of December 31, 2017.
38
We recorded a loss of $10 million and $21 million for cleanup and other non-capital reconstruction costs in cost of
goods sold for the twelve months ended December 31, 2018 and 2017, respectively. We 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 twelve months ended December 31, 2017.
On September 12, 2018, following our review of the Pori facility and options within our manufacturing network,
and as a result of unanticipated cost escalation and extended timeline associated with reconstruction, we announced that we
intend to close our Pori, Finland, TiO2 manufacturing facility and transfer the specialty and differentiated product grades to
other sites.
We intend to continue to operate the Pori facility at reduced production rates through the transition period, which is expected
to last through at least 2022, subject to economic and other factors. We currently plan to transfer certain technology and the
production of select product grades, namely for inks, cosmetics, pharmaceutical and food grade applications, from Pori to
other sites within our network. In addition, and as market conditions warrant, we intend to strengthen the existing
manufacturing network by increasing its efficiency and by providing greater manufacturing flexibility. As part of the plan,
we recorded restructuring expense of $465 million for the twelve months ended December 31, 2018, of which $417 million
related to acceleration depreciation, $39 million related to employee benefits, and $9 million related to the write-off of other
assets. This restructuring expense consists of $39 million of cash and $426 million of noncash charges.
Basis of Presentation
Venator’s consolidated and combined financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (“GAAP” or “U.S. GAAP”). Prior to the separation, Venator’s
operations 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 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 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 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 prior to the separation reflect the combination of these legal entities under
common control, the historical consolidated and combined financial information prior to the separation includes the results of
operations of other Huntsman businesses that are not a part of our operations after the separation. We report the results of
those other businesses as discontinued operations. Please see “Note 16. Discontinued Operations.”
For purposes of these consolidated and combined financial statements, all significant transactions with 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.
Prior to our separation, Huntsman performed certain administrative and other services for Venator. These expenses
were incurred by Huntsman and allocated to Venator based on either specific services provided or based on Venator’s total
revenues, total assets, and total employees in proportion to those of Huntsman. Management believes that such expense
allocations were reasonable. Corporate allocations include allocated selling, general, and administrative expenses of nil, $62
million and $104 million for the years ended December 31, 2018, 2017 and 2016, 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.
39
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 13. 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.
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 15. 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 consolidated and combined balance sheets at fair value. Prior to January 1,
2018, the effective portion of changes in the fair value of derivatives designated as hedges were recorded in other
comprehensive income (loss) until the hedge item impacts earnings at which point the accumulated gains and losses were
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 were recognized in earnings. Beginning January 1, 2018, the gains and losses on derivative instruments designated as
40
cash flow hedges are recorded in accumulated other comprehensive income (loss) and recognized in income (expense), when
the hedged item impacts earnings. See “Note 17. 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 23. 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, current portion of 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.
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 expense (income), net in the consolidated and
combined statements of operations and were net gains of $6 million, net losses of $1 million, and net gains of $9 million for
the years ended December 31, 2018, 2017 and 2016, 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 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’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 businesses and variable interest entities in which Venator is the primary beneficiary.
The consolidated and combined financial statements have been prepared from Huntsman’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
41
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 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 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 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. 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. 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
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 19. 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
42
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 leasehold improvements
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 $17 million, $16 million and $15 million for the years
ended December 31, 2018, 2017 and 2016, respectively.
Revenue Recognition
Venator generates substantially all of its revenues through sales of inventory in the open market and via long-term
supply agreements. Revenue is recognized when the performance obligations under the terms of our contracts are satisfied, at
which point the control of the goods transfers to the customer, there is a present right to payment and legal title, and the risks
and rewards of ownership have transferred to the customer. Revenues is measured as the amount of consideration we expect
to receive in exchange for transferred goods.
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 results of operations of other businesses of
Huntsman to discontinued operations. See "Note 16. 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
43
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 Adopted During the Period
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”)
No. 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU along with subsequently issued amendments,
outline a single comprehensive model for entities to use in accounting for revenues arising from contracts with customers and
supersedes most previously issued revenue recognition guidance. Under this guidance, revenue is recognized at the time a
good or service is transferred to a customer for the amount of consideration received. These ASUs are effective for annual
reporting periods beginning after December 15, 2017, including interim periods within that reporting period. We adopted
these ASUs effective January 1, 2018 and we have elected the modified retrospective approach as the transition method. As a
result of the adoption of these amendments, we revised our accounting policy for revenue recognition as detailed in “Note 3.
Revenue.” The adoption of these ASUs did not have a significant impact on our consolidated and combined financial
statements.
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 adopted the amendments of this ASU
effective January 1, 2018, and the initial adoption of the amendment in this ASU did not impact our consolidated and
combined 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 consolidated and combined
statements of operations 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 consolidated and combined
statements of operations 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. We adopted the amendments of
this ASU effective January 1, 2018, which impacted the presentation of our financial statements. Our historical presentation
of service cost components was consistent with the amendments in this ASU. The other components of net periodic pension
and postretirement benefit costs are presented within other nonoperating income, whereas we historically presented these
within cost of goods sold and selling, general and administrative expenses. As a result of the retrospective adoption of this
ASU, for the years ended December 31, 2017 and 2016, cost of goods sold increased by $6 million and $2 million,
respectively, selling, general and administrative expenses decreased by $2 million and $4 million, respectively, and other
income increased by $4 million and decreased by $2 million, respectively, within our consolidated and combined statements
of operations.
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
44
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 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 adopted the amendments of this ASU effective January 1, 2018, and
the initial adoption of the amendment in this ASU did not have an impact on our consolidated and combined financial
statements.
Accounting Pronouncements Pending Adoption in Future Periods
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 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. We expect to use the package of practical expedients that allows us to not reassess: (1) whether any
expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases and (3) initial
direct costs for any expired or existing leases. We plan to apply the short-term lease exception, therefore we will not record a
right-of-use asset or corresponding lease liability for leases with a term of twelve months or less and instead recognize a
single lease cost allocated over the lease term, generally on a straight-line basis. We plan to adopt ASU 2016-02 using the
alternative transition method set forth in ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, issued in July 2018,
which allows for the recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period
of adoption. The adoption of the new standard will have a material impact on our consolidated and combined balance sheet
due to the recognition of right-of-use assets and lease liabilities. Because of the transition method we will use to adopt the
new standard, it will not be applied to periods prior to adoption and the adoption will have no impact on our previously
reported results or disclosure. We are additionally assessing the impact of the new standard on our internal controls over
financial reporting. Upon adoption, we expect to record approximately $50 million to $55 million of additional right-of-use
assets and lease obligations. The difference between the additional lease assets and lease liabilities, net of the deferred tax
impact, will be recorded as an adjustment to retained earnings. We do not anticipate that this standard will have a material
impact on our statement of operations or statement of cash flows.
In February 2018, the FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income (Topic
220). This standard provides an option to reclassify stranded tax effects within accumulated other comprehensive income
(loss) to retained earnings due to the U.S. federal corporate income tax rate change in the Tax Cuts and Jobs Act of 2017 (the
"Tax Act"). This standard is effective for interim and annual reporting periods beginning after December 15, 2018, and early
adoption is permitted. We have completed our assessment and we do not anticipate this will have a material impact on our
statement of comprehensive income.
In August 2018, the FASB issued ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—
General (Subtopic 715-20). The amendments in this ASU add, remove, and clarify disclosure requirements related to defined
benefit pension and other postretirement plans. This ASU eliminates the requirement to disclose the amounts in accumulated
other comprehensive income expected to be recognized as part of net periodic benefit cost over the next year. The ASU also
removes the disclosure requirements for the effects of a one-percentage-point change on the assumed health care costs and
the effect of this change in rates on service cost, interest cost and the benefit obligation for postretirement health care
benefits. This standard is effective for fiscal years ending after December 15, 2020 and must be applied on a retrospective
basis. We are evaluating the effect of adopting this new accounting guidance, but do not expect adoption will have a material
impact on our financial position.
45
NOTE 3. REVENUE
We account for revenues from contracts with customers under ASC 606, Revenue from Contracts with Customers,
which became effective January 1, 2018. As part of the adoption of ASC 606, we applied the new standard on a modified
retrospective basis analyzing open contracts as of January 1, 2018. However, no cumulative effect adjustment to retained
earnings was necessary as no revenue recognition differences were identified when comparing the revenue recognition
criteria under ASC 606 to previous requirements.
We generate substantially all of our revenues through sales of inventory in the open market and via long-term supply
agreements. At contract inception, we assess the goods promised in our contracts and identify a performance obligation for
each promise to transfer to the customer a good that is distinct. In substantially all cases, a contract has a single performance
obligation to deliver a promised good to the customer. Revenue is recognized when the performance obligations under the
terms of our contracts are satisfied. Generally, this occurs at the time of shipping, at which point the control of the goods
transfers to the customer. Further, in determining whether control has transferred, we consider if there is a present right to
payment and legal title, along with risks and rewards of ownership having transferred to the customer. Revenue is measured
as the amount of consideration we expect to receive in exchange for transferred goods. Sales, value-added, and other taxes we
collect concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the
context of the contract are recognized as expense. We have elected to account for all shipping and handling activities as
fulfillment costs. We recognize these costs for shipping and handling when control over products have transferred to the
customer as an expense in cost of goods sold. We have also elected to expense commissions when incurred as the
amortization period of the commission asset that we would have otherwise recognized is less than one year.
The following table disaggregates our revenue by major geographical region for the years ended December 31,
2018, 2017 and 2016:
Titanium
Dioxide
2018
Performance
Additives
Total
Titanium
Dioxide
2017
Performance
Additives
Total
Titanium
Dioxide
2016
Performance
Additives
Total
$ 573 $ 281 $
$ 582 $ 260 $
1,034
466
192
794
349
180
301
194
97
13
988
446
193
733
336
225
291
187
90
17
$ 551
920
426
242
599
$ 2,265 $ 1,604 $
605
$ 2,209 $ 1,554 $
585
$ 2,139
North
America $ 296 $
Europe
Asia
Other
Total
Revenues $ 1,666 $
828
368
174
277
206
98
18
and 2016:
The following table disaggregates our revenue by major product line for the years ended December 31, 2018, 2017
2018
Performance
Additives
Titanium
Dioxide
$ 1,666 $ —
294
140
142
23
$ 1,666 $ 599
—
—
—
—
2017
Performance
Additives
Titanium
Dioxide
Total
$ 1,666 $ 1,604 $ —
302
130
151
22
$ 2,265 $ 1,604 $ 605
294
140
142
23
—
—
—
—
Total
Titanium
Dioxide
2016
Performance
Additives
$ 1,604 $ 1,554 $ —
296
126
140
23
$ 2,209 $ 1,554 $ 585
302
130
151
22
—
—
—
—
Total
$ 1,554
296
126
140
23
$ 2,139
TiO2
Color Pigments
Functional Additives
Timber Treatment
Water Treatment
Total Revenues
The amount of consideration we receive and revenue we recognize is based upon the terms stated in the sales
contract, which may contain variable consideration such as discounts or rebates. We also give our customers a limited right to
return products that have been damaged, do not satisfy their specifications, or other specific reasons. Payment terms on
product sales to our customers typically range from 30 days to 90 days. Although certain exceptions exist where standard
payment terms are exceeded, these instances are infrequent and do not exceed one year. Discounts are allowed for some
customers for early payment or if a certain volume is met. As our standard payment terms are less than one year, we have
elected to not assess whether a contract has a significant financing component. In order to estimate the applicable variable
46
consideration at the time of revenue recognition, we use historical and current trend information to estimate the amount of
discounts, rebates, or returns to which customers are likely to be entitled. Historically, actual discount or rebate adjustments
relative to those estimated and accrued at the point of which revenue is recognized have not materially differed.
NOTE 4. EARNINGS (LOSSES) PER SHARE
Basic earnings (losses) per share excludes dilution and is computed by dividing net (loss) income 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:
Numerator:
Basic and diluted (loss) income from continuing operations:
(Loss) income from continuing operations attributable to Venator
Materials PLC ordinary shareholders
$
Basic and diluted income from discontinued operations:
Income from discontinued operations attributable to Venator
Materials PLC ordinary shareholders
Basic and diluted net (loss) income:
Net (loss) income attributable to Venator Materials PLC ordinary
shareholders
Denominator:
$
$
Weighted average shares outstanding
Dilutive share-based awards
Total weighted average shares outstanding, including dilutive
shares
For the years ended December 31,
2017
2018
2016
(163 ) $
126 $
(95 )
— $
8 $
8
(163 ) $
134 $
(87 )
106.4
0.3
106.7
106.3
0.4
106.7
106.3
—
106.3
The number of anti-dilutive employee share-based awards excluded from the computation of diluted EPS was 1
million for the year ended December 31, 2018, and not significant for each of the years ended December 31, 2017 and 2016.
NOTE 5. 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, 2018 and 2017 consisted of the following:
Raw materials and supplies
Work in process
Finished goods
Total
December 31,
2018
2017
$
$
165 $
56
317
538 $
149
46
259
454
47
NOTE 6. PROPERTY, PLANT AND EQUIPMENT
The cost and accumulated depreciation of property, plant and equipment at December 31, 2018 and 2017 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,
2018
2017
98 $
236
1,926
144
2,404
(1,410 )
994 $
101
236
2,048
255
2,640
(1,273 )
1,367
$
$
Depreciation expense for the years ended December 31, 2018, 2017 and 2016 was $129 million, $124 million and
$110 million, respectively.
NOTE 7. INVESTMENT IN UNCONSOLIDATED AFFILIATES
Investments in companies in which we exercise significant influence, but do not control, are accounted for using the
equity 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 $83 million and $86 million at
December 31, 2018 and 2017 , respectively.
NOTE 8. 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 DowDuPont. 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.
Creditors of these entities have no recourse to Venator’s general credit. As the primary beneficiary of these variable
interest entities at December 31, 2018, the joint ventures’ assets, liabilities and results of operations are included in Venator’s
consolidated and combined financial statements.
48
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
NOTE 9. INTANGIBLE ASSETS
$
Year ended December 31,
2017
2018
2016
117 $
13
16
127 $
21
25
116
21
26
The cost and accumulated amortization of intangible assets at December 31, 2018 and 2017 were as follows:
Carrying
Amount
December 31, 2018
Accumulated
Amortization
Net
Carrying
Amount
December 31, 2017
Accumulated
Amortization
Net
Patents, trademarks and
technology
Other intangibles
Total
$
$
18 $
14
32 $
9
7
16
$
$
9 $
7
16 $
17 $
15
32 $
6
6
12
$
$
11
9
20
Amortization expense was $3 million, $3 million and $4 million for the years ended December 31, 2018, 2017 and
2016, respectively.
Our estimated future amortization expense for intangible assets over the next five years is as follows:
Year ending December 31,
2019
2020
2021
2022
2023
NOTE 10. OTHER NONCURRENT ASSETS
Other noncurrent assets at December 31, 2018 and 2017 consisted of the following:
Amount
$
3
3
3
3
3
Spare parts inventory
Notes receivable
Pension assets
Debt issuance costs
Other
Total
December 31,
2018
2017
25 $
10
46
4
4
89 $
13
9
1
4
11
38
$
$
49
NOTE 11. ACCRUED LIABILITIES
Accrued liabilities at December 31, 2018 and 2017 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,
2018
2017
$
$
49 $
18
19
—
10
2
1
—
36
135 $
50
11
22
14
19
2
1
69
56
244
50
NOTE 12. 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, 2018, 2017 and 2016, accrued restructuring and plant closing costs by type of cost and
initiative consisted of the following:
Accrued liabilities as of January 1, 2016
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
2018 charges for 2017 and prior initiatives
2018 charges for 2018 initiatives
2018 payments for 2017 and prior initiatives
2018 payments for 2018 initiatives
Foreign currency effect on liability balance
Accrued liabilities as of December 31, 2018
Workforce
reductions(1)
90
3
6
(36 )
(36 )
(6 )
21
—
33
(1 )
(12 )
(8 )
1
34
2
17
(17 )
(2 )
(2 )
32
$
$
$
$
$
$
$
$
Other
restructuring
costs
Total(2)
—
16
—
—
(16 )
—
—
8
4
—
(8 )
(4 )
—
—
16
2
(16 )
(2 )
—
—
$
$
$
$
90
19
6
(36 )
(52 )
(6 )
21
8
37
(1 )
(20 )
(12 )
1
34
18
19
(33 )
(4 )
(2 )
32
(1) The total workforce reduction reserves of $32 million relate to the termination of 591 positions, of which three positions
had been terminated but not yet paid as of December 31, 2018.
(2) Accrued liabilities remaining at December 31, 2018, 2017 and 2016 by year of initiatives were as follows:
2016 initiatives and prior
2017 initiatives
2018 initiatives
Total
2018
December 31,
2017
2016
$
$
4 $
14
14
32 $
9 $
25
—
34 $
21
—
—
21
51
Details with respect to our reserves for restructuring, impairment and plant closing and transition costs are provided
below by segment and initiative:
Titanium
Dioxide
Performance
Additives
Total
Accrued liabilities as of January 1, 2016
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
2018 charges for 2017 and prior initiatives
2018 charges for 2018 initiative
2018 payments for 2017 and prior initiatives
2018 payments for 2018 initiatives
Foreign currency effect on liability balance
Accrued liabilities as of December 31, 2018
Current portion of restructuring reserves
Long-term portion of restructuring reserve
$
$
$
$
$
$
$
$
$
$
57
3
6
(23 )
(23 )
(6 )
(2 )
12
4
34
(1 )
(9 )
(10 )
—
30
18
15
(28 )
(1 )
(2 )
32
18
14
$
$
$
$
$
33
16
—
(13 )
(29 )
—
2
9
4
3
—
(11 )
(2 )
1
4
—
4
(5 )
(3 )
—
—
—
—
90
19
6
(36 )
(52 )
(6 )
—
21
8
37
(1 )
(20 )
(12 )
1
34
18
19
(33 )
(4 )
(2 )
32
18
14
52
Details with respect to cash and noncash restructuring charges for the years ended December 31, 2018, 2017 and
2016 by initiative are provided below:
Cash charges
Pension-related charges
Accelerated depreciation
Other non-cash charges
Total 2018 Restructuring, Impairment of Plant Closing and Transition Costs
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 and Plant Closing and Transition Costs
$
$
$
$
$
$
37
25
556
10
628
45
3
3
1
52
25
8
1
1
35
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 were reducing our workforce by
approximately 900 positions. In connection with this restructuring program, we recorded restructuring expense of nil, nil, $3
million for the years ended December 31, 2018, 2017, and 2016, respectively. We do not expect to incur any additional
charges as part of this program.
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 $3 million, $4 million and $6 million for the years ended December 31,
2018, 2017 and 2016, respectively. We recorded an impairment charge of $1 million for our Umbogintwini facility in 2016.
We expect to incur additional charges of approximately $7 million through 2022.
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 $15 million and $34 million in the years ended December 31, 2018 and 2017, respectively. 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 2022.
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 $16 million and $7 million for the years ended December 31, 2018 and 2017,
respectively, of which $14 million and $3 million was accelerated depreciation, respectively. We do not expect to incur any
additional charges as part of this program.
In May 2018, we implemented a plan to close portions of our Color Pigments manufacturing facility in Augusta,
Georgia. As part of the program, we recorded restructuring expense of $129 million for the year ended December 31, 2018 of
which $125 million was accelerated depreciation. We expect to incur additional charges of approximately $1 million through
the end of 2019.
53
In August 2018, we implemented a plan to close our Color Pigments manufacturing sites in Beltsville, Maryland. As
part of the program, we expect to incur charges of approximately $2 million through 2019, of which $1 million relates to
accelerated depreciation.
In September 2018, we announced a plan to close our Pori, Finland TiO2 manufacturing facility. As part of the
program, we recorded restructuring expense of $465 million for the year ended December 31, 2018, of which $417 million
related to accelerated depreciation, $39 million related to employee benefits, and $9 million related to the write-off of other
assets. This restructuring expense consists of $39 million of cash and $426 million related of noncash charges. We expect to
incur additional charges of approximately $170 million through the end of 2024, of which $68 million relates to accelerated
depreciation, $97 million relates to plant shut down costs, $3 million relates to other employee costs, and $2 million relates to
the write-off of other assets. Future charges consist of $70 million of noncash costs and $100 million of cash costs.
NOTE 13. 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 14. OTHER NONCURRENT LIABILITIES
December 31,
2018
2017
$
$
45 $
2
—
(8 )
(2 )
37 $
Other noncurrent liabilities at December 31, 2018 and 2017 consisted of the following:
Pension liabilities
Employee benefit accrual
Asset retirement obligations
Other postretirement benefits
Environmental reserves
Restructuring and plant closing costs
Other
Total
December 31,
2018
2017
$
$
253 $
4
27
3
11
14
1
313 $
39
2
5
(5 )
4
45
230
4
26
3
11
23
9
306
54
NOTE 15. DEBT
Outstanding debt, net of issuance costs of $13 million and $12 million as of December 31, 2018 and December 31,
2017, respectively, consisted of the following:
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 long-term debt
December 31,
2018
December 31,
2017
370
365
13
748
8
740
—
740
$
$
$
$
370
367
20
757
14
743
—
743
$
$
$
$
The estimated fair value of the Senior Notes was $300 million and $396 million as of December 31, 2018 and 2017,
respectively. The estimated fair value of the Term Loan Facility was $355 million and $378 million as of December 31, 2018
and 2017, respectively. The estimated fair values of the Senior Notes and the Term Loan Facility are based upon quoted
market prices (Level 1).
The weighted average interest rate on our outstanding balances under the Senior Notes, Term Loan Facility and
cross-currency swaps as of December 31, 2018 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
55
•
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 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.
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
Substantially all Huntsman receivables or payable 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 affiliates" on our consolidated and combined balance sheets. See " Note 19. 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 Special Purpose Entity, which
56
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 A/R
Programs by Venator and at which time we discontinued our participation in the A/R Programs.
The entities' allocated losses on the A/R Programs for the years ended December 31, 2018, 2017 and 2016 were nil,
$1 million and $5 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.
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,
2019
2020
2021
2022
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
Maturities
Amount
1
2
1
1
8
13
(3 )
10
(1 )
9
$
$
The scheduled maturities of our debt (excluding debt to affiliates) by year as of December 31, 2018 are as follows:
Year ended December 31,
2019
2020
2021
2022
2023
Thereafter
Total
Amount
7
4
5
4
5
723
748
$
$
NOTE 16. 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
57
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.
The following table summarizes the operations data for discontinued operations:
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 from Huntsman of nil, $1 and $7, respectively)
Restructuring, impairment and plant closing costs
Other income, net
Total operating expenses
Income from discontinued operations before tax
Income tax expense
Net income from discontinued operations
Year ended December 31,
2017
2018
2016
$
$
— $
—
—
—
—
—
—
—
—
—
— $
15 $
17
32
26
(7 )
1
1
(5 )
11
(3 )
8 $
110
60
170
147
15
—
(1 )
14
9
(1 )
8
NOTE 17. 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.
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 changes in the fair value of the swaps are deferred in other comprehensive loss and subsequently recognized in
other income in the audited 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 an asset of $6 million and a liability of $5 million at December 31, 2018 and 2017, respectively, and was
recorded as other long-term assets and other long-term liabilities on our consolidated and combined balance sheets,
respectively. We estimate the fair values of our cross-currency swaps by taking into consideration valuations obtained from a
58
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 2018 and 2017 the changes in accumulated other comprehensive loss associated with these cash flow
hedging activities was a gain of $11 million and a loss of $5 million, respectively. As of December 31, 2018, accumulated
other comprehensive loss of nil is expected to be reclassified to earnings during the next twelve months. 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, 2018 and 2017 we had $89 million and $109
million, respectively, 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).
NOTE 18. 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, 2018, we were
authorized to grant up to 12.8 million shares under the LTIP. As of December 31, 2018, we had 11.1 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 nil, $2 million and $2 million for the years ended December 31, 2018 , 2017 and 2016 ,
respectively. 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 $6 million and $3 million in compensation
cost related to the converted awards and new awards granted under the LTIP for the years ended December 31, 2018 and
59
2017, respectively. The total income tax benefit recognized in the statement of operations for stock-based compensation
arrangements was $1 million, $1 million and nil for the years ended December 31, 2018, 2017 and 2016, 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’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.
Dividend yield
Expected volatility
Risk-free interest rate
Expected life of stock options granted during the period
Converted Awards
Year ended December 31,
2016
2017
2.4%
56.9%
2.0%
5.9 years
5.6 %
57.9 %
1.4 %
5.9 years
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 was 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’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
2017
Dividend yield
Expected volatility
Risk-free interest rate
Expected life of stock options granted during the period
New Grants
—
39.6%
1.9%
5.5 years
—
39.2 %
1.8 %
4.7 years
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’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 2018 and 2017 under the LTIP.
Dividend yield
Expected volatility
Risk-free interest rate
Expected life of stock options granted during the period
60
Year ended December 31,
2017
2018
—
38.8%
2.8%
6.0 years
—
41.0%
2.0%
6.0 years
The table below presents the changes in stock option awards for our ordinary shares from December 31, 2017
through December 31, 2018.
Outstanding at December 31, 2017
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2018
Exercisable at December 31, 2018
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
(in millions)
12.24
21.82
—
14.10
—
16.10
11.74
8.5 $
7.3
—
—
$
Shares
(in thousands)
628
412
—
(37 )
—
1,003
290
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, 2018, 2017 and 2016, the total intrinsic value of stock options exercised
was nil, each.
The weighted-average grant-date fair value of stock options granted during 2018, 2017 and 2016 was $9.12, $7.68
and $2.21 per option, respectively. As of December 31, 2018, there was $3 million of total unrecognized compensation cost
related to nonvested stock option arrangements granted under the LTIP and Huntsman Plans. That cost is expected to be
recognized over a weighted-average period of 1.9 years.
Restricted Stock Units
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 year ended December 31, 2016,
the weighted-average expected volatility rate was 39.3% and the weighted average risk-free interest rate was 0.9%. For the
performance awards granted during the year ended December 31, 2016, the number of shares earned varies based upon
Huntsman achieving certain performance criteria over two -year and three -year performance periods. The performance
criteria are total stockholder return of Huntsman’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 was revalued based on Venator’s closing share price, and the performance awards were revalued using the Monte
Carlo valuation.
61
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 December 31, 2017 through
December 31, 2018.
Nonvested at December 31, 2017
Granted
Vested (1)
Forfeited
Nonvested at December 31, 2018
$
Shares
(in thousands)
504
219
(251 )
(24 )
448
Weighted
Average
Grant-Date
Fair Value
13.96
21.83
12.34
14.17
18.71
(1) As of December 31, 2018, a total of 53,779 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, 2018, 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 1.8 years.
NOTE 19. 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:
Income tax (benefit) expense:
U.K.
Current
Deferred
Non-U.K.
Current
Deferred
Total
Year ended December 31,
2017
2018
2016
$
$
2 $
—
9
(19 )
(8 ) $
— $
—
30
20
50 $
—
—
(9 )
(14 )
(23 )
62
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:
(Loss) income from continuing operations before income taxes
Expected tax expense (benefit) at U.K. statutory rate of
19%, 19% and 20%, respectively
Change resulting from:
Non-U.K. tax rate differentials
Other non-U.K. tax effects, including nondeductible expenses, tax
effect of rate changes and transfer pricing adjustments
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
comprehensive income
Change in valuation allowance
Effects of U.S. tax reform
Other, net
Total income tax expense (benefit)
$
$
$
Year ended December 31,
2017
2018
2016
(165 ) $
186 $
(108 )
(31 ) $
35 $
(7 )
(5 )
—
—
—
—
39
—
(4 )
(8 ) $
(1 )
—
—
7
1
—
3
3
2
50 $
(22 )
(19 )
(7 )
(3 )
1
(1 )
(1 )
27
—
2
(23 )
Venator operates in over 20 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 or lower than the U.K. statutory rate. Losses earned in countries with higher
average statutory rates than the U.K., resulted in higher tax benefit of $7 million for the year ended December 31, 2018.
Income earned in countries with lower average statutory rates than the U.K., resulted in lower tax expense of $1 million and
$19 million, respectively, for the years ended December 31, 2017 and 2016, 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, 2018, this resulted in a tax expense of nil. For 2017, this resulted in a tax expense of $7 million. For 2016, this
resulted in a tax benefit of $1 million.
The components of income (loss) before income taxes were as follows:
U.K.
Non-U.K.
Total
Year ended December 31,
2017
2018
2016
$
$
80 $
(245 )
(165 ) $
76 $
110
186 $
(20 )
(88 )
(108 )
63
Components of deferred income tax assets and liabilities at December 31, 2018 and 2017 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,
2018
2017
313 $
48
28
6
43
438 $
(32 ) $
(4 )
(4 )
(40 ) $
398 $
(220 )
178 $
178
—
178 $
325
50
47
13
41
476
(55 )
—
(1 )
(56 )
420
(253 )
167
167
—
167
$
$
$
$
$
$
$
Venator has NOLs of $1,132 million in various jurisdictions, all of which have no expiration dates except for $157
million which expires on December 31, 2028 and is subject to a valuation allowance. Venator has total net deferred tax
assets, before valuation allowance, of $398 million, including $313 million of tax-effected NOLs. After taking into account
deferred tax liabilities, Venator has recognized valuation allowance on net deferred tax assets of $220 million , including
valuation allowances in the following countries: Finland, France, Italy, Spain, South Africa, and the U.K. Venator also has
net deferred tax assets of $178 million , not subject to valuation allowances, primarily in Germany, Malaysia, and the U.S.
Venator’s NOLs are principally located in Finland, France, Germany, Italy, Spain, South Africa, U.S. 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 2018, Venator established valuation allowances of $54 million in Finland in connection with our
announcement to close our Pori, Finland manufacturing facility. Given ongoing costs related to the restructuring we do not
expect sufficient positive income to utilize net deferred tax assets. In addition, based on the increased and sustained
profitability in our TiO2 business in Spain, Venator released valuation allowances on certain net deferred tax assets. Because
Spain places limitation on the utilization of NOLs, we recorded a partial valuation allowance release of $5 million. We do not
currently anticipate releasing any valuation allowances in the U.K. due to insufficient positive evidence based on our 2018
results and future forecast.
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.
64
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,
$
$
2018
2017
2016
23 $
2
—
—
(7 )
(1 )
17 $
20 $
—
1
—
—
2
23 $
22
—
(1 )
—
—
(1 )
20
As of December 31, 2018, 2017 and 2016, the amount of unrecognized tax benefits that, if recognized, would affect
the effective tax rate is $14 million, $13 million and $11 million, respectively.
In accordance with Venator’s accounting policy, it recognizes interest and penalties accrued related to unrecognized
tax benefits in income tax expense, which were insignificant for each of the years ended December 31, 2018, 2017 and 2016.
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
Finland
France
Germany
Italy
Malaysia
Spain
United Kingdom
United States federal
Open Tax Years
2012 and later
2015 and later
2007 and later
2013 and later
2013 and later
2008 and later
2017 and later
2015 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 $2
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. We have included the effects of
these provisions in 2018.
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
65
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.
As a result of our initial analysis of the impact of the 2017 Tax Act, we recorded a provisional decrease of $3
million to our deferred tax assets, with a corresponding net deferred tax expense of $3 million, related to the re-measurement
of our deferred taxes in connection with the reduced U.S. federal income tax rate for the year ended December 31, 2017. We
have completed our accounting for the income tax effects of the 2017 Tax Act in 2018 with no material adjustment to our
provisional estimate initially recorded.
In addition, for U.S. federal income tax purposes Huntsman recognized 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 was 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 and 2018.
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, 2018, our non-U.K. subsidiaries have no plan to distribute earnings in a manner that would
cause them to be subject to material U.K., U.S., or other local country taxation. As of December 31, 2017, our non-U.K.
subsidiaries made no distribution of earnings that caused them to be subject to material U.K., U.S., or other local country
taxation. As of December 31, 2016, there were no unremitted earnings of subsidiaries to consider for indefinite reinvestment.
NOTE 20. 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, 2018
and 2017, the amount related to the U.S. benefit plans is $10 million and $11 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, 2018 and 2017 was $7
million and $8 million, respectively, or 1% each.
66
The following table sets forth the funded status of the plans for Venator and the amounts recognized in the
consolidated and combined balance sheets at December 31, 2018 and 2017:
Change in benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial gain
Gross benefits paid
Plan amendments
Exchange rates
Curtailments
Transfers
Benefit obligation at end of year
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:
Noncurrent asset
Current liability
Noncurrent liability
Total
Amounts recognized in accumulated other comprehensive
loss:
Net actuarial loss (gain)
Prior service cost (credit)
Total
Defined Benefit
Plans
Other
Postretirement
Benefit Plans
2018
2017
2018
2017
$
$
$
$
$
$
$
$
$
$
1,136 $
5
25
(60 )
(58 )
6
(56 )
23
—
1,021 $
983
906 $
(34 )
47
(58 )
—
(48 )
813 $
1,053 $
5
25
(1 )
(55 )
—
116
(4 )
(3 )
1,136 $
1,091
790 $
63
29
(55 )
(5 )
84
906 $
813 $
(1,021 )
906 $
(1,136 )
(208 ) $
(230 ) $
46 $
(1 )
(253 )
(208 ) $
1 $
(1 )
(230 )
(230 ) $
302 $
11
313 $
296 $
7
303 $
3
—
—
—
—
—
—
—
—
3
—
—
—
—
—
—
—
$
$
$
$
$
—
(3 )
(3 ) $
$
—
—
(3 )
(3 ) $
(4 ) $
(1 )
(5 ) $
3
—
—
—
—
—
—
—
—
3
—
—
—
—
—
—
—
—
(3 )
(3 )
—
—
(3 )
(3 )
(4 )
(1 )
(5 )
67
The amounts in accumulated other comprehensive loss that are expected to be recognized as components of net
periodic benefit cost during the next fiscal year are as follows:
Actuarial loss
Prior service cost
Total
Defined
Benefit Plans
15
1
16
$
$
$
$
Other
Postretirement
Benefit Plans
—
—
—
Components of net periodic benefit costs for the years ended December 31, 2018, 2017 and 2016 were as follows:
2018
Defined Benefit Plans
2017
2016
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service cost
Curtailment loss (gain)
Net periodic benefit cost
Amortization of actuarial loss
Amortization of prior service credit
Net periodic benefit credit
$
$
$
5 $
25
(47 )
15
3
23
24 $
$
5
25
(43 )
16
1
(4 )
—
$
Other Postretirement Benefit Plans
2017
2018
2016
—
—
— $
1
(3 )
(2 ) $
4
31
(39 )
10
1
—
7
—
—
—
The amounts recognized in net periodic benefit cost and other comprehensive (loss) income for the years ended
December 31, 2018, 2017 and 2016 were as follows:
Defined Benefit Plans
2017
2018
2016
Current year actuarial gain (loss)
Amortization of actuarial loss
Current year prior service cost
Amortization of prior service cost
Curtailment effects
Other
Total recognized in other comprehensive income (loss)
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 comprehensive income
(loss)
$
45 $
(15 )
5
(3 )
(23 )
—
9
—
9
24
(24 ) $
(16 )
—
(1 )
4
(3 )
(40 )
—
(40 )
—
$
33 $
(40 ) $
86
(11 )
—
(1 )
—
—
74
(8 )
66
7
81
68
Other Postretirement Benefit Plans
2017
2018
2016
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 comprehensive
loss
$
$
— $
—
—
—
—
—
— $
(1 ) $
(1 )
—
3
1
(2 )
(1 ) $
—
—
(2 )
—
(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
Net periodic pension cost:
Discount rate
Rate of compensation increase
Expected return on plan assets
Projected benefit obligation:
Discount rate
Net periodic pension cost:
Discount rate
2018
Defined Benefit Plans
2017
2016
2.38 %
3.69 %
2.21 %
3.74 %
5.23 %
2.21%
3.74%
1.86%
3.53%
5.71%
2.28 %
3.79 %
3.27 %
3.24 %
5.22 %
Other Postretirement Benefit Plans
2017
2018
2016
3.50 %
3.30 %
3.38%
3.72%
3.72 %
6.94 %
At December 31, 2018 and 2017, the health care trend rate used to measure the expected increase in the cost of
benefits was assumed to be 4.90% and 6.75%, respectively, decreasing to 3.90% 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
December 31,
2018
2017
$
385 $
131
364
133
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, 2018 and 2017 were as follows:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
69
$
December 31,
2018
2017
385 $
375
131
364
355
133
Expected future contributions and benefit payments are as follows:
2019 expected employer contributions:
To plan trusts
Expected benefit payments:
2019
2020
2021
2022
2023
2024 - 2028
Defined
Benefit Plans
Other
Postretirement
Benefit Plans
$
25
$
38
41
43
44
46
236
—
—
—
—
—
—
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 $813 million and $906 million at December 31, 2018 and
2017, respectively. The following plan assets are measured at fair value on a recurring basis:
Asset Category
Pension plans:
Equities
Fixed income
Real estate/other
Cash and cash equivalents
Total pension plan assets
Fair Value
Amounts Using
Quoted Prices in
Active Markets
for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
December 31,
2018
$
$
213
547
34
19
813
$
$
202 $
39
—
19
260 $
11
501
6
—
518
$
$
—
7
28
—
35
70
Asset Category
Pension plans:
Equities
Fixed income
Real estate/other
Cash and cash equivalents
Total pension plan assets
Fair Value
Amounts Using
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
December 31,
2017
$
$
265
598
33
10
906
$
$
252 $
41
—
5
298 $
13
550
3
5
571
$
$
—
7
30
—
37
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
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
Real Estate/Other
Year ended December 31,
2017
2018
$
$
$
$
30 $
(1 )
(1 )
—
—
28 $
Fixed Income
Year ended December 31,
2017
2018
7 $
—
—
—
7 $
27
5
(2 )
—
—
30
6
1
—
—
7
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 5.71%. The asset allocation for our pension
plans at December 31, 2018 and 2017 and the target allocation for 2019, by asset category, are as follows:
Asset category
Pension plans:
Equities
Fixed income
Real estate/other
Cash
Total pension plans
Target
allocation
2019
Allocated at
December 31,
2018
Allocated at
December 31,
2017
29 %
61 %
1 %
9 %
100 %
26 %
64 %
1 %
9 %
100 %
29 %
66 %
4 %
1 %
100 %
71
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 2018.
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”). Venator has not determined whether the medical benefits provided by these postretirement benefit plans are
actuarially equivalent to those provided by the Act. Venator does not collect 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, 2018, 2017 and
2016 was $8 million, $8 million and $7 million, respectively, primarily related to the 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.
72
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, $3 million and $1 million for
the years ended December 31, 2018, 2017 and 2016, respectively.
NOTE 21. RELATED PARTY TRANSACTIONS
Transactions with Huntsman
We are party to a variety of transactions and agreements with Huntsman, our former parent and largest shareholder.
Prior to the separation, Huntsman’s executive, information technology, EHS and certain other corporate departments
performed certain administrative and other services for Venator. Additionally, Huntsman performed certain site services for
Venator. Expenses incurred by Huntsman 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.
Management believes that such expense allocations are reasonable. Corporate allocations include allocated selling, general,
and administrative expenses of nil, $62 million and $104 million for the years ended December 31, 2018, 2017 and 2016,
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 15. Debt” and
“Note 17. Derivatives and Hedging Activities.” See description of our arrangement with Huntsman as part of the separation
in “Note 19. 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 $65 million, $64 million and $67 million for the years ended
December 31, 2018, 2017 and 2016, respectively. Proceeds from this arrangement are recorded as a reduction of cost of
goods sold in Venator’s consolidated and combined statements of operations. Related to this same arrangement, purchases of
finished goods from LPC were $167 million, $158 million and $158 million for the years ended December 31, 2018, 2017
and 2016, respectively. The related accounts receivable from affiliates and accounts payable to affiliates as of December 31,
2018 and 2017 are recognized in the consolidated and combined balance sheets.
NOTE 22. COMMITMENTS AND CONTINGENCIES
Purchase Commitments
We have various purchase commitments extending through 2029 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 2019. 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 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
73
all of our purchase obligations will be utilized in our normal operations. For the years ended December 31, 2018, 2017 and
2016, we made minimum payments under such take or pay contracts without taking the product of nil, $2 million and $1
million, respectively. Total purchase commitments as of December 31, 2018 were as follows:
Year ended December 31,
2019
2020
2021
2022
2023
Thereafter
Operating Leases
$
Amount
110
105
62
61
6
25
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 $16 million, $13
million and $9 million for the years ended December 31, 2018, 2017 and 2016, respectively.
Future minimum lease payments under noncancelable operating leases as of December 31, 2018 were as follows:
Year ended December 31,
2019
2020
2021
2022
2023
Thereafter
Total
Legal Proceedings
Shareholder Litigation
Amounts
$
$
13
11
9
6
4
40
83
On February 8, 2019 we, certain or our executive officers, Huntsman and certain banks who acted as underwriters in
connection with our IPO and secondary offering were named as defendants in a proposed class action civil suit filed in the
District Court for the State of Texas, Dallas County, by a purchaser of our ordinary shares in connection with our IPO on
August 3, 2017 and our secondary offering on December 1, 2017. The plaintiff, Macomb County Employees’ Retirement
System, alleges that inaccurate and misleading statements were made regarding our response to the fire that occurred at our
Pori, Finland manufacturing facility, among other allegations. The plaintiff seeks to determine that the proceeding is a class
action, and to obtain alleged compensatory damages, costs, rescission and equitable relief. We may be required to indemnify
our executive officers, Huntsman and the banks who acted as underwriters in our IPO and secondary offerings for losses
incurred by them in connection with these matters pursuant to our agreements with such parties. Because of the early stage of
this litigation, we are unable to reasonably estimate any possible loss or range of loss and we have made no accrual with
regard to this matter.
Other Matters
We are a party to various 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.
74
NOTE 23. 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, 2018, 2017 and 2016, our capital
expenditures for EHS matters totaled $9 million, $10 million and $11 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, liabilities 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 the EU, 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.
In connection with our previously announced intention to close our TiO2 manufacturing facility in Pori, Finland, we
expect to incur environmental costs related to the cleanup of the facility upon its eventual closure, including remediation
costs related to the landfill located on the site. While we do not currently have enough information to be able to estimate the
range of potential costs for the cleanup of this facility, these costs could be material to our consolidated and combined
financial statements.
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, 2018 and 2017, we had
environmental reserves of $12 million, each. We may incur additional losses for environmental remediation.
75
NOTE 24. OTHER COMPREHENSIVE LOSS
Other comprehensive loss consisted of the following:
Foreign
currency
translation
adjustment(1)
Pension and
other
postretirement
benefits
adjustments,
net of tax(2)
(112 )
(306 )
Other
comprehensive
income of
unconsolidated
affiliates
Beginning balance,
January 1, 2017
Adjustment due to
discontinued
operations
Tax expense
Other comprehensive
(loss) income before
reclassifications
Tax expense
Amounts reclassified
from accumulated
other comprehensive
loss, gross(3)
Tax expense
Net current-period
other comprehensive
(loss) income
Ending balance,
December 31, 2017
Adjustment due to
discontinued
operations
Tax expense
Other comprehensive
(loss) income before
reclassifications
Tax expense
Amounts reclassified
from accumulated
other comprehensive
loss, gross(3)
Tax expense
Net current-period
other comprehensive
(loss) income
Ending balance,
December 31, 2018
5
—
101
—
—
—
106
(6 )
—
—
(90 )
—
—
—
(90 )
(96 )
$
24
(3 )
4
(1 )
15
—
39
(267 )
—
—
(27 )
(2 )
18
—
(11 )
$
(278 )
$
Hedging
instruments Total
(423 )
—
Amounts
attributable to
noncontrolling
interests
—
—
—
(5 )
—
—
—
(5 )
(5 )
—
—
11
—
—
—
11
6
29
(3 )
100
(1 )
15
—
140
(283 )
—
—
(106 )
(2 )
18
—
(90 )
$ (373 ) $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
Amounts
attributable
to
Venator
(423 )
29
(3 )
100
(1 )
15
—
140
(283 )
—
—
(106 )
(2 )
18
—
(90 )
$
(373 )
(1) Amounts are net of tax of nil each as of January 1, 2017, December 31, 2017 and December 31, 2018.
(2) Amounts are net of tax of $56 million, $52 million and $50 million as of January 1, 2017, December 31, 2017 and
December 31, 2018, respectively.
(3) See table below for details about the amounts reclassified from accumulated other comprehensive loss.
(5 )
—
—
—
—
—
—
—
(5 )
—
—
—
—
—
—
—
(5 )
76
Year ended
December 31,
2018
2017
Affected line item in the statement
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
$
$
15 $
3
18
—
18 $
17
(2 )
15
—
15
(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 20. Employee Benefit Plans.”
NOTE 25. 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. We have
historically conducted other business within components of legal entities we operated in conjunction with Huntsman
businesses, and such businesses are included within the corporate and other line item below.
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:
77
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 (loss) income:
Interest expense
Interest income
Income tax benefit (expense)—continuing operations
Depreciation and amortization
Net income attributable to noncontrolling interests
Other adjustments:
Business acquisition and integration expenses
Separation expense, net
U.S. income tax reform
Net income of discontinued operations, net of tax
(Loss) gain on disposition of business/assets
Certain legal settlements and related expenses
Amortization of pension and postretirement actuarial losses
Net plant incident credits (costs)
Restructuring, impairment and plant closing and transition costs
Net (loss) income
Depreciation and Amortization:
Titanium Dioxide
Performance Additives
Corporate and other
Total
Capital Expenditures:
Titanium Dioxide
Performance Additives
Corporate and other
Total
Total Assets(2):
Titanium Dioxide
Performance Additives
Corporate and other
Total
$
$
$
$
$
$
$
$
$
$
$
2018
Year ended December 31,
2017
2016
1,666
599
2,265
$
$
1,604
605
2,209
$
$
1,554
585
2,139
$
417
62
(43 )
436
$
$
387
72
(64 )
395
$
(53 )
13
8
(132 )
6
(20 )
(2 )
—
—
(2 )
—
(15 )
232
(628 )
(157 ) $
93
27
12
132
$
$
(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
Year ended December 31,
2017
2018
2016
301
24
1
326
1,631
592
262
2,485
$
$
$
$
178
17
2
197
1,794
703
350
2,847
$
$
$
$
73
30
—
103
1,561
764
210
2,535
(1) Adjusted EBITDA is defined as net (loss) income before interest expense, interest income, income tax benefit (expense),
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 expense, net; (c) U.S. income tax reform; (d)
(loss) gain 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
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.
78
By Geographic Area
Revenues(1):
United States
Germany
China
Italy
United Kingdom
Spain
France
India
Canada
Other nations
Total
Long Lived Assets:
Germany
United Kingdom
Italy
United States
Finland(2)
Other nations
Total
Year ended December 31,
2017
2018
2016
518 $
257
131
126
116
96
89
65
55
812
2,265 $
263 $
180
164
111
69
207
994 $
526 $
230
112
126
114
86
94
63
56
802
2,209 $
256 $
208
170
253
257
223
1,367 $
491
210
113
130
102
79
98
54
59
803
2,139
215
198
155
263
146
201
1,178
$
$
$
$
(1) Geographic information for revenues is based upon countries into which product is sold.
(2) The Pori, Finland plant closure was announced in the third quarter of 2018 and is anticipated to be completed in
2022.
79
Second
Quarter
626 $
193
136
198
198
196
$
Third
Quarter
533
463
428
(366 )
(366 )
(368 )
Fourth
Quarter
484
440
55
(69 )
(69 )
(69 )
1.84
1.84
1.84
1.84
562
480
7
34
34
31
0.29
0.29
0.29
0.29
(3.46 )
(0.65 )
(3.46 )
(0.65 )
(3.46 )
(0.65 )
(3.46 )
(0.65 )
582
448
16
53
53
51
0.48
0.48
0.48
0.48
528
388
3
70
70
68
0.64
0.64
0.64
0.64
NOTE 26. SELECTED UNAUDITED QUARTERLY FINANCIAL DATA
2018
Revenue
Cost of goods sold
Restructuring, impairment and plant closing and transition costs
Income (loss) from continuing operations
Net income (loss)
Net income (loss) attributable to Venator
Basic income (loss) per share:
First Quarter
$
$
622
454
9
80
80
78
Income (loss) from continuing operations attributable to Venator
Materials PLC ordinary shareholders
Net income (loss) attributable to Venator Materials PLC ordinary
shareholders
Diluted income (loss) per share:
Income (loss) per share from continuing operations attributable to
Venator Materials PLC ordinary shareholders
Net income (loss) per share attributable to Venator Materials PLC
ordinary shareholders
2017
Revenue
Cost of goods sold
Restructuring, impairment and plant closing and transition costs
(Loss) income from continuing operations
Net (loss) income
Net (loss) income attributable to Venator
Basic (loss) income per share:
(Loss) income per share from continuing operations attributable to
Venator Materials PLC ordinary shareholders
Net (loss) income per share attributable to Venator Materials PLC
ordinary shareholders
Diluted (loss) income per share:
(Loss) income per share from continuing operations attributable to
Venator Materials PLC ordinary shareholders
Net (loss) income per share attributable to Venator Materials PLC
ordinary shareholders
0.73
0.73
0.73
0.73
537
465
26
(21 )
(13 )
(16 )
(0.23 )
(0.15 )
(0.23 )
(0.15 )
80
FREE CASH FLOW RECONCILIATION
Year Ended December 31,
2018
2017
Free cash flow(a):
Net cash provided by operating activities from continuing operations
$
282
$
Capital expenditures
Cash received from (investment in) 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)
Total free cash flow
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
Net cash flows associated with Pori
Total free cash flow(a)
(326 )
4
—
2
$
(38) $
$
436 $
(114 )
(46 )
(34 )
(105 )
(37 )
(78 )
(60 )
$
(38) $
337
(197)
(6)
71
7
212
395
(103)
(28)
(21)
35
(33)
(2)
(31)
212
(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.
81
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 12, 2019, there were three shareholders of record and the closing price of our ordinary
shares on the New York Stock Exchange was $5.52 per share.
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.
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, 2018.
October
November
December
Total
Total
number of
shares
purchased(1)
Average price
paid per
share(1)
— $
—
24,021
24,021 $
—
—
4.19
4.19
Total number of
shares purchased
as part of publicly
announced plans
or programs
—
—
—
—
Maximum number (or
approximate dollar value) of
shares that may yet be
purchased under the plans or
programs
$
$
—
—
—
—
(1) Represents shares purchased from employees to satisfy the tax withholding obligations in connection with the
vesting of restricted stock units.
82
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
$140
$120
$100
$80
$60
$40
$20
$0
08/03/17
09/30/17
12/31/17
03/31/18
06/30/18
09/30/18
12/31/18
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.
83
Board of Directors
Peter R. Huntsman
Chairman
Sir Robert J. Margetts
Vice Chairman and Lead
Independent Director
Douglas D. Anderson
Independent Director
Daniele Ferrari
Independent Director
Kathy Patrick
Independent Director
Simon Turner
President and Chief
Executive Officer
Management Team
Simon Turner
President and Chief
Executive Officer
Mahomed Maiter
Executive Vice President,
Business Operations
Kurt Ogden
Executive Vice President
and Chief Financial
Officer
Russ Stolle
Executive Vice President,
General Counsel and
Chief Compliance Officer
Dr Rob Portsmouth
Senior Vice President
EHS, Innovation and
Technology
Investor Information
Global Headquarters
Titanium House, Hanzard Drive
Wynyard Park, Stockton-on-Tees
TS22 5FD, United Kingdom
Independent Registered Public
Accounting Firm
Deloitte 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: +1 832-663-4656
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 2019 Annual General Meeting of
shareholders will take place on Tuesday,
June 11, 2019 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
www.venatorcorp.com