UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2019~~2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-38176

Venator Materials PLC

(Exact name of registrant as specified in its charter)


England and Wales			98-1373159
(State or other jurisdiction			(I.R.S. Employer Identification No.)
of incorporation or organization)

Titanium House, Hanzard Drive, Wynyard Park,

Stockton-On-Tees, TS22 5FD, United Kingdom

+44 (0) 1740 608 001

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary Shares, $0.001 par value per share	VNTR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company," in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑☐

Accelerated filer

☐☑

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

As of ~~October 30, 2019,~~July 28, 2020, the registrant had outstanding ~~106,564,828~~106,735,892 ordinary shares, $0.001 par value per share.

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TABLE OF CONTENTS

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GENERAL

Except when the context otherwise requires or where otherwise indicated, (1) all references to "Venator," the "Company," "we," "us" and "our" refer to Venator Materials PLC and its subsidiaries, (2) all references to "Huntsman" refer to Huntsman Corporation and its subsidiaries, (3) all references to the "Titanium Dioxide" segment or business refer to the titanium dioxide ("TiO₂") business of Venator, (4) all references to the "Performance Additives" segment or business refer to the functional additives, color pigments, timber treatment and water treatment businesses of Venator, and (5) we refer to the internal reorganization prior to our initial public offering ("IPO"), the separation transactions initiated to separate the Venator business from Huntsman’s other businesses, including the entry into and effectiveness of the separation agreement and ancillary agreements, and the financing arrangements and debt, comprising the senior secured term loan facility (the "Term Loan Facility"), the asset-based revolving facility (the "ABL Facility" and, together with the Term Loan Facility, the "Senior Credit Facilities") and the 5.75% senior unsecured notes due 2025 (the "Senior Unsecured Notes"), including the use of the net proceeds of the Senior Credit Facilities and the Senior Unsecured Notes, which were used to repay intercompany debt we owed to Huntsman and to pay related fees and expenses, as the "separation," which occurred on August 8, 2017.

NOTE REGARDING 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 (the "Exchange Act"). All statements other than historical or current 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:

•the impacts and duration of the global outbreak of the Coronavirus Disease 2019 ("COVID-19") pandemic on the global economy and all aspects of our business including our employees, customers, suppliers, partners' results of operations, financial condition and liquidity;

•volatile global economic conditions;

•cyclical and volatile ~~TiO~~₂ product applications;

•highly competitive industries and the need to innovate and develop new products;

•industry production capacity and operating rates;

•~~our ability to successfully transfer production~~high levels of certain specialty and differentiated products from our Pori, Finland manufacturing facility to other sites within our manufacturing network and the costs associated with such transfer and the planned closure of the facility;indebtedness;

•~~economic conditions~~our ability to maintain sufficient working capital to fund our operations and ~~regulatory changes following the likely exit of the United Kingdom (the "U.K.") from the European Union ("EU");~~capital expenditures, and service our debt;

•~~increased manufacturing, labeling and waste disposal regulations associated with some of~~ our ~~products, including the outcome of the pending potential classification of TiO~~ability to obtain future capital on favorable terms;₂ ~~as a carcinogen in the EU, or any increased regulatory scrutiny;~~

~~Table of Contents~~

•planned and unplanned production shutdowns, turnarounds, outages and other disruptions at our or our suppliers' manufacturing facilities;

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•any changes to the prices at which we purchase raw materials and energy, any interruptions in supply of raw materials and energy, or any changes in regulations impacting raw materials and our supply chain;

•increased manufacturing, labeling and waste disposal regulations associated with some of our products, including the classification of TiO₂ as a carcinogen in the European Union ("EU") or any increased regulatory scrutiny;

•our ability to ~~cover costs from~~successfully grow and transform our business including by way of acquisitions, divestments and restructuring activities;

•our ability to successfully transfer production ~~disruptions, including construction costs~~of certain specialty and ~~lost revenue, with insurance proceeds;~~differentiated products formerly produced at our Pori, Finland manufacturing facility to other sites within our manufacturing network;

•our ability to develop new products or successfully transfer production of existing products within our manufacturing network;

•fluctuations in currency exchange rates and tax rates;

•our ability to adequately protect our critical information technology systems;

•impacts on the markets for our products and the broader global economy from the imposition of tariffs by the U.S. and other countries;

•~~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;

•~~our ability to successfully grow and transform our business, including by way of acquisitions, divestments and restructuring initiatives;~~

•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;

•economic conditions and regulatory changes following the exit of the United Kingdom (the "U.K.") from the EU;

•seasonal sales patterns in our ~~ability to adequately protect our critical information technology systems;~~product markets;

•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;

•the effects of public health crises on the global economy, our business, employees, supply chain and customers;

•conflicts, military actions, terrorist attacks, public health crises, including the occurrence of a contagious disease or illness, cyber-attacks and general instability;

•failure to enforce our intellectual property rights; and

•our ability to effectively manage our labor ~~force; and~~

•~~conflicts, military actions, terrorist attacks, cyber-attacks and general instability.~~force.

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 "Part II. Item 1A. Risk Factors."

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PART I – FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

VENATOR MATERIALS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(In millions, except par value)	(In millions, except par value)	September 30, 2019		December 31, 2018		(In millions, except par value)	June 30, 2020		December 31, 2019

ASSETS	ASSETS									ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents^(a)	Cash and cash equivalents^(a)	$	40	$	165	Cash and cash equivalents^(a)	$	188	$	55
Accounts receivable (net of allowance for doubtful accounts of $4 and $5, respectively)^(a)		358		351
Accounts receivable (net of allowance for doubtful accounts of $5 and $4, respectively)^(a)						Accounts receivable (net of allowance for doubtful accounts of $5 and $4, respectively)^(a)	319		321
Accounts receivable from affiliates	Accounts receivable from affiliates	8		—		Accounts receivable from affiliates	13		—
Inventories^(a)	Inventories^(a)	496		538		Inventories^(a)	487		513
Prepaid expenses	Prepaid expenses	24		20		Prepaid expenses	10		21
Other current assets	Other current assets	64		51		Other current assets	58		67
Total current assets	Total current assets	990		1,125		Total current assets	1,075		977
Property, plant and equipment, net^(a)	Property, plant and equipment, net^(a)	936		994		Property, plant and equipment, net^(a)	941		989
Operating lease right-of-use assets^(a)		42		—
Operating lease right-of-use assets, net^(a)						Operating lease right-of-use assets, net^(a)	39		43
Intangible assets, net^(a)	Intangible assets, net^(a)	22		16		Intangible assets, net^(a)	19		21
Investment in unconsolidated affiliates	Investment in unconsolidated affiliates	84		83		Investment in unconsolidated affiliates	98		92
Deferred income taxes	Deferred income taxes	181		178		Deferred income taxes	36		33
Other noncurrent assets	Other noncurrent assets	75		89		Other noncurrent assets	122		110
Total assets	Total assets	$	2,330	$	2,485	Total assets	$	2,330	$	2,265
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY									LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable^(a)	Accounts payable^(a)	$	273	$	382	Accounts payable^(a)	$	242	$	334
Accounts payable to affiliates	Accounts payable to affiliates	14		18		Accounts payable to affiliates	15		17
Accrued liabilities^(a)	Accrued liabilities^(a)	108		135		Accrued liabilities^(a)	99		116
Current operating lease liability^(a)	Current operating lease liability^(a)	8		—		Current operating lease liability^(a)	8		8
Current portion of debt^(a)	Current portion of debt^(a)	16		8		Current portion of debt^(a)	7		13
Total current liabilities	Total current liabilities	419		543		Total current liabilities	371		488
Long-term debt	Long-term debt	737		740		Long-term debt	950		737
Operating lease liability^(a)	Operating lease liability^(a)	35		—		Operating lease liability^(a)	34		37

Other noncurrent liabilities	Other noncurrent liabilities	260		313		Other noncurrent liabilities	281		300
Noncurrent payable to affiliates	Noncurrent payable to affiliates	34		34		Noncurrent payable to affiliates	30		30
Total liabilities	Total liabilities	1,485		1,630		Total liabilities	1,666		1,592
Commitments and contingencies (Notes 12 and 13)
Commitments and contingencies (Notes 11 and 12)						Commitments and contingencies (Notes 11 and 12)
Equity	Equity					Equity
Ordinary shares $0.001 par value, 200 shares authorized, each, 107 and 106 issued and outstanding, respectively		—		—
Ordinary shares $0.001 par value, 200 shares authorized, each, 107 issued and outstanding, each						Ordinary shares $0.001 par value, 200 shares authorized, each, 107 issued and outstanding, each	—		—
Additional paid-in capital	Additional paid-in capital	1,321		1,316		Additional paid-in capital	1,326		1,322
Retained deficit	Retained deficit	(97)		(96)		Retained deficit	(283)		(271)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(387)		(373)		Accumulated other comprehensive loss	(386)		(385)
Total Venator Materials PLC shareholders' equity	Total Venator Materials PLC shareholders' equity	837		847		Total Venator Materials PLC shareholders' equity	657		666
Noncontrolling interest in subsidiaries	Noncontrolling interest in subsidiaries	8		8		Noncontrolling interest in subsidiaries	7		7
Total equity	Total equity	845		855		Total equity	664		673
Total liabilities and equity	Total liabilities and equity	$	2,330	$	2,485	Total liabilities and equity	$	2,330	$	2,265

^(a)At ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the following amounts from consolidated variable interest entities are included in the respective balance sheet captions above: ~~$5 each~~$4 and $2 of cash and cash equivalents; $5 ~~each~~and $4 of accounts receivable, net; $1$2 each of inventories; $5 each of property, plant and equipment, net; $1 ~~and nil~~each of operating lease right-of-use assets; ~~$12~~$10 and ~~$14~~$11 of intangible assets, net; $1 each of accounts payable; $2 and $4$3 of accrued liabilities; $1NaN and ~~nil~~$1 of operating lease liabilities; and $2 ~~each~~and NaN of current portion of debt. See "Note 6.5. Variable Interest Entities."

See notes to unaudited condensed consolidated financial statements.

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VENATOR MATERIALS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


		Three months ended September 30,						Nine months ended September 30,							Three months ended June 30,				Six months ended June 30,
(Dollars in millions, except per share amounts)	(Dollars in millions, except per share amounts)	2019		2018		2019		2018		(Dollars in millions, except per share amounts)	2020		2019		2020		2019
Trade sales, services and fees, net	Trade sales, services and fees, net	$	526	$	533	$	1,666	$	1,781	Trade sales, services and fees, net	$	456	$	578	$	988	$	1,140
Cost of goods sold	Cost of goods sold	464		463		1,461		1,110		Cost of goods sold	411		511		882		997
Operating expenses:	Operating expenses:									Operating expenses:
Selling, general and administrative	Selling, general and administrative	45		52		138		162		Selling, general and administrative	36		45		78		93
Restructuring, impairment, and plant closing and transition costs	Restructuring, impairment, and plant closing and transition costs	12		428		24		573		Restructuring, impairment, and plant closing and transition costs	5		—		12		12
Other operating expense (income), net		5		5		12		(8)
Other operating expense, net										Other operating expense, net	10		—		10		7
Total operating expenses	Total operating expenses	62		485		174		727		Total operating expenses	51		45		100		112
Operating (loss) income	Operating (loss) income	—		(415)		31		(56)		Operating (loss) income	(6)		22		6		31
Interest expense	Interest expense	(13)		(14)		(40)		(41)		Interest expense	(15)		(13)		(28)		(27)
Interest income	Interest income	3		4		9		11		Interest income	3		3		6		6
Other income	Other income	1		4		3		8		Other income	3		1		7		2
(Loss) income before income taxes	(Loss) income before income taxes	(9)		(421)		3		(78)		(Loss) income before income taxes	(15)		13		(9)		12
Income tax (expense) benefit	Income tax (expense) benefit	(8)		55		—		(10)		Income tax (expense) benefit	(2)		9		—		8
Net (loss) income	Net (loss) income	(17)		(366)		3		(88)		Net (loss) income	(17)		22		(9)		20
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	(2)		(2)		(4)		(6)		Net income attributable to noncontrolling interests	(2)		(1)		(3)		(2)
Net loss attributable to Venator		$	(19)	$	(368)	$	(1)	$	(94)
Net (loss) income attributable to Venator										Net (loss) income attributable to Venator	$	(19)	$	21	$	(12)	$	18

Per Share Data:	Per Share Data:									Per Share Data:
Loss attributable to Venator Materials PLC ordinary shareholders, basic		$	(0.18)	$	(3.46)	$	(0.01)	$	(0.88)
Loss attributable to Venator Materials PLC ordinary shareholders, diluted		$	(0.18)	$	(3.46)	$	(0.01)	$	(0.88)
(Loss) earnings attributable to Venator Materials PLC ordinary shareholders, basic										(Loss) earnings attributable to Venator Materials PLC ordinary shareholders, basic	$	(0.18)	$	0.20	$	(0.11)	$	0.17
(Loss) earnings attributable to Venator Materials PLC ordinary shareholders, diluted										(Loss) earnings attributable to Venator Materials PLC ordinary shareholders, diluted	$	(0.18)	$	0.20	$	(0.11)	$	0.17

See notes to unaudited condensed consolidated financial statements.

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VENATOR MATERIALS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Three months ended
September 30, Nine months ended
September 30,
(Dollars in millions) 2019 2018 2019 2018
Net (loss) income $ (17) $ (366) $ 3 $ (88)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment (34) 9 (36) (49)
Pension and other postretirement benefits adjustments 4 3 12 10
Hedging instruments 5 — 10 5
Total other comprehensive (loss) income, net of tax (25) 12 (14) (34)
Comprehensive loss (42) (354) (11) (122)
Comprehensive income attributable to noncontrolling interest (2) (2) (4) (6)
Comprehensive loss attributable to Venator $ (44) $ (356) $ (15) $ (128)


	Three months ended June 30,						Six months ended June 30,
(Dollars in millions)	2020		2019		2020		2019
Net (loss) income	$	(17)	$	22	$	(9)	$	20
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	19		(13)		(17)		(2)
Pension and other postretirement benefits adjustments	4		4		7		8
Hedging instruments	(1)		1		9		5
Total other comprehensive income (loss), net of tax	22		(8)		(1)		11
Comprehensive income (loss)	5		14		(10)		31
Comprehensive income attributable to noncontrolling interest	(2)		(1)		(3)		(2)
Comprehensive income (loss) attributable to Venator	$	3	$	13	$	(13)	$	29

See notes to unaudited condensed consolidated financial statements.

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VENATOR MATERIALS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


		Total Venator Materials PLC Equity																											Total Venator Materials PLC Equity
		Ordinary Shares					Additional Paid-in Capital			Retained Deficit			Accumulated Other Comprehensive Loss			Noncontrolling Interest in Subsidiaries			Total		Ordinary Shares					Additional Paid-in Capital			Retained Deficit		Accumulated Other Comprehensive Loss		Noncontrolling Interest in Subsidiaries		Total
(In millions)	(In millions)	Shares	Amount																				(In millions)					Amount								Noncontrolling Interest in Subsidiaries	Total
Balance, January 1, 2019		106	$	—	$	1,316		$	(96)		$	(373)		$	8		$	855
Balance, January 1, 2020																			Balance, January 1, 2020	107	$	—		$	1,322	$	(271)		$	(385)	$	7	$	673
Net income																			Net income	—	—			—		7			—		1		8
Other comprehensive loss, net of tax																			Other comprehensive loss, net of tax	—	—			—		—			(23)		—		(23)
Dividends paid to noncontrolling interests																			Dividends paid to noncontrolling interests	—	—			—		—			—		(1)		(1)
Activity related to stock plans																			Activity related to stock plans	—	—			2		—			—		—		2
Balance, March 31, 2020																			Balance, March 31, 2020	107	$	—		$	1,324	$	(264)		$	(408)	$	7	$	659
Net (loss) income	Net (loss) income	—	—		—			(3)			—			1			(2)		Net (loss) income	—	—			—		(19)			—		2		(17)
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—	—		—			—			19			—			19		Other comprehensive income, net of tax	—	—			—		—			22		—		22
Dividends paid to noncontrolling interests	Dividends paid to noncontrolling interests	—	—		—			—			—			(1)			(1)		Dividends paid to noncontrolling interests	—	—			—		—			—		(2)		(2)
Activity related to stock plans	Activity related to stock plans	1	—		1			—			—			—			1		Activity related to stock plans	—	—			2		—			—		—		2
Balance, March 31, 2019		107	$	—	$	1,317		$	(99)		$	(354)		$	8		$	872
Net income		—	—		—			21			—			1			22
Other comprehensive loss, net of tax		—	—		—			—			(8)			—			(8)
Dividends paid to noncontrolling interests		—	—		—			—			—			(2)			(2)
Activity related to stock plans		—	—		2			—			—			—			2
Balance, June 30, 2019		107	$	—	$	1,319		$	(78)		$	(362)		$	7		$	886
Net (loss) income		—	—		—			(19)			—			2			(17)
Other comprehensive loss, net of tax		—	—		—			—			(25)			—			(25)
Dividends paid to noncontrolling interests		—	—		—			—			—			(1)			(1)
Activity related to stock plans		—	—		2			—			—			—			2
Balance, September 30, 2019		107	$	—	$	1,321		$	(97)		$	(387)		$	8		$	845
Balance, June 30, 2020																			Balance, June 30, 2020	107	$	—		$	1,326	$	(283)		$	(386)	$	7	$	664


		Total Venator Materials PLC Equity																											Total Venator Materials PLC Equity
		Ordinary Shares					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Noncontrolling Interest in Subsidiaries			Total		Ordinary Shares					Additional Paid-in Capital			Retained Deficit		Accumulated Other Comprehensive Loss		Noncontrolling Interest in Subsidiaries		Total
(In millions)	(In millions)	Shares	Amount																				(In millions)					Amount								Noncontrolling Interest in Subsidiaries	Total
Balance, January 1, 2018		106	$	—	$	1,311		$	67		$	(283)		$	10		$	1,105
Net income		—	—		—			78			—			2			80
Balance, January 1, 2019																			Balance, January 1, 2019	106	$	—		$	1,316	$	(96)		$	(373)	$	8	$	855
Net (loss) income																			Net (loss) income	—	—			—		(3)			—		1		(2)
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—	—		—			—			53			—			53		Other comprehensive income, net of tax	—	—			—		—			19		—		19
Dividends paid to noncontrolling interests	Dividends paid to noncontrolling interests	—	—		—			—			—			(2)			(2)		Dividends paid to noncontrolling interests	—	—			—		—			—		(1)		(1)
Activity related to stock plans	Activity related to stock plans	—	—		1			—			—			—			1		Activity related to stock plans	1	—			1		—			—		—		1
Balance, March 31, 2018		106	$	—	$	1,312		$	145		$	(230)		$	10		$	1,237
Balance, March 31, 2019																			Balance, March 31, 2019	107	$	—		$	1,317	$	(99)		$	(354)	$	8	$	872
Net income	Net income	—	—		—			196			—			2			198		Net income	—	—			—		21			—		1		22
Other comprehensive loss, net of tax	Other comprehensive loss, net of tax	—	—		—			—			(99)			—			(99)		Other comprehensive loss, net of tax	—	—			—		—			(8)		—		(8)
Dividends paid to noncontrolling interests	Dividends paid to noncontrolling interests	—	—		—			—			—			(3)			(3)		Dividends paid to noncontrolling interests	—	—			—		—			—		(2)		(2)
Activity related to stock plans	Activity related to stock plans	—	—		1			—			—			—			1		Activity related to stock plans	—	—			2		—			—		—		2
Balance, June 30, 2018		106	$	—	$	1,313		$	341		$	(329)		$	9		$	1,334
Net (loss) income		—	—		—			(368)			—			2			(366)
Other comprehensive loss, net of tax		—	—		—			—			12			—			12
Dividends paid to noncontrolling interests		—	—		—			—			—			(2)			(2)
Activity related to stock plans		—	—		1			—			—			—			1
Balance, September 30, 2018		106	$	—	$	1,314		$	(27)		$	(317)		$	9		$	979
Balance, June 30, 2019																			Balance, June 30, 2019	107	$	—		$	1,319	$	(78)		$	(362)	$	7	$	886

See notes to unaudited condensed consolidated financial statements.

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VENATOR MATERIALS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Nine months ended September 30,							Six months ended June 30,
(Dollars in millions)	(Dollars in millions)	2019		2018		(Dollars in millions)	2020		2019
Operating Activities:	Operating Activities:					Operating Activities:
Net income (loss)		$	3	$	(88)
Net (loss) income						Net (loss) income	$	(9)	$	20

Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Adjustments to reconcile net (loss) income to net cash used in operating activities:						Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	82		102		Depreciation and amortization	56		55
Deferred income taxes	Deferred income taxes	(5)		(6)		Deferred income taxes	(3)		(12)
Noncash restructuring and impairment charges	Noncash restructuring and impairment charges	5		539		Noncash restructuring and impairment charges	2		(2)

Noncash loss (gain) on foreign currency transactions		4		(4)

Other, net	Other, net	7		7		Other, net	12		8
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	(28)		(14)		Accounts receivable	(13)		(77)
Inventories	Inventories	27		(67)		Inventories	22		30
Prepaid expenses	Prepaid expenses	(5)		(9)		Prepaid expenses	10		10
Other current assets	Other current assets	(1)		(17)		Other current assets	3		(2)
Other noncurrent assets	Other noncurrent assets	(1)		(1)		Other noncurrent assets	(10)		—
Accounts payable	Accounts payable	(72)		(18)		Accounts payable	(67)		(44)
Accrued liabilities	Accrued liabilities	(16)		(94)		Accrued liabilities	(16)		(18)
Other noncurrent liabilities	Other noncurrent liabilities	(36)		(24)		Other noncurrent liabilities	(7)		(18)
Net cash (used in) provided by operating activities		(36)		306
Net cash used in operating activities						Net cash used in operating activities	(20)		(50)
Investing Activities:	Investing Activities:					Investing Activities:
Capital expenditures	Capital expenditures	(110)		(272)		Capital expenditures	(47)		(83)

Cash received from unconsolidated affiliates	Cash received from unconsolidated affiliates	33		25		Cash received from unconsolidated affiliates	20		20
Investment in unconsolidated affiliates	Investment in unconsolidated affiliates	(35)		(19)		Investment in unconsolidated affiliates	(26)		(24)
Cash received from notes receivable	Cash received from notes receivable	12		—		Cash received from notes receivable	6		6
Other, net	Other, net	(1)		—		Other, net	—		(1)
Net cash used in investing activities	Net cash used in investing activities	(101)		(266)		Net cash used in investing activities	(47)		(82)
Financing Activities:	Financing Activities:					Financing Activities:

Net borrowings on notes payable		9		—
Net proceeds from short-term debt						Net proceeds from short-term debt	2		—
Net repayments on notes payable						Net repayments on notes payable	(7)		—
Repayment of third-party debt	Repayment of third-party debt	(4)		(10)		Repayment of third-party debt	(3)		(2)
Net borrowings under ABL Facility						Net borrowings under ABL Facility	—		24

Proceeds from the termination of cross currency swap contracts		15		—
Dividends paid to noncontrolling interests	Dividends paid to noncontrolling interests	(4)		(7)		Dividends paid to noncontrolling interests	(3)		(3)

Proceeds from issuance of long-term debt						Proceeds from issuance of long-term debt	221		—
Debt issuance costs paid						Debt issuance costs paid	(6)		—
Other, net	Other, net	(3)		—		Other, net	(4)		(2)

Net cash provided by (used in) financing activities		13		(17)
Effect of exchange rate changes on cash		(1)		(10)
Net cash provided by financing activities						Net cash provided by financing activities	200		17

Net change in cash and cash equivalents	Net change in cash and cash equivalents	(125)		13		Net change in cash and cash equivalents	133		(115)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	165		238		Cash and cash equivalents at beginning of period	55		165
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	40	$	251	Cash and cash equivalents at end of period	$	188	$	50

Supplemental cash flow information:	Supplemental cash flow information:					Supplemental cash flow information:
Cash paid for interest	Cash paid for interest	$	41	$	41	Cash paid for interest	$	18	$	23
Cash paid for income taxes	Cash paid for income taxes	4		28		Cash paid for income taxes	—		3
Supplemental disclosure of noncash activities:	Supplemental disclosure of noncash activities:					Supplemental disclosure of noncash activities:
Capital expenditures included in accounts payable as of September 30, 2019 and 2018, respectively		$	28	$	50
Capital expenditures included in accounts payable as of June 30, 2020 and 2019, respectively						Capital expenditures included in accounts payable as of June 30, 2020 and 2019, respectively	$	21	$	26

See notes to unaudited condensed consolidated financial statements.

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VENATOR MATERIALS PLC AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. General, Description of Business, Recent Developments and Basis of Presentation

Description of Business

Venator became an independent publicly traded company following our IPO and separation from Huntsman Corporation in August 2017. Venator operates in 2 segments: Titanium Dioxide and Performance Additives. The Titanium Dioxide segment primarily manufactures and sells TiO₂, and operates 8seven TiO₂ manufacturing facilities across the ~~globe.~~globe, excluding our plant in Pori, Finland, ongoing closure of which was announced in the third quarter of 2018. 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 globally.

Basis of Presentation

Our unaudited condensed consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP" or "U.S. GAAP") and in management’s opinion reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of results of operations, comprehensive income, financial ~~position~~condition and cash flows for the periods presented. Results for interim periods are not necessarily indicative of those to be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated and combined financial statements and notes to consolidated and combined financial statements included in the Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 for our Company.

The preparation of financial statements in conformity with 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.

In the notes to unaudited condensed consolidated financial statements, all dollar and share amounts, except per share amounts, in tabulations are in millions unless otherwise indicated.

COVID-19

In March 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. COVID-19 has had a material impact on demand for our products in the three months ended June 30, 2020 as sales were impacted by government ordered restrictions on our customers. We expect that the COVID-19 pandemic will continue to have a negative impact on our future results of operations, financial condition and liquidity. The duration and severity of the outbreak and its long-term impacts on our business cannot be fully determined at this time.

Note 2. Recently Issued Accounting Pronouncements

Accounting Pronouncements Adopted During the Period

Effective ~~January~~April 1, ~~2019,~~2020, we adopted ~~Accounting Standards Update ("ASU")~~ASU No. ~~2016-02,~~2019-12, ~~Leases~~Income Taxes (Topic ~~842)~~740). ~~using~~The amendments in this ASU remove certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. The guidance also clarifies and simplifies other areas of ASC Topic 740. Certain adjustments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis and certain amendments must be applied on a modified retrospective ~~approach which applies the provisions of the standard at the effective date without adjusting the comparative periods presented. The adoption of this ASU did not result in~~basis through a ~~cumulative effect~~cumulative-effect adjustment to the opening balance of retained earnings. This ASU requires substantially all leases to be recognized on the balance sheet as right-of-use assets ("ROU assets") and lease obligations. Additional qualitative and quantitative disclosures are also required. Adoption of the new standard resulted in the recording of an operating lease ROU asset of $47 million and a lease liability of $49 million. The adoption of this ASU did not have a material impact on our condensed consolidated statements of operations or cash flows. Our accounting for finance leases remained substantially unchanged.

We elected the following optional practical expedients allowed under the ASU: (i) we applied the package of practical expedients permitting entities not to reassess under the new standard our prior conclusions about lease identification, classification or initial direct costs for any leases existing prior to the effective date; (ii) we elected to account for lease and associated non-lease components as a single lease component for all asset classes with the exception of buildings and (iii) we do not recognize ROU assets and related lease obligations with lease terms of 12 months or less from the commencement date.

~~In February 2018, the Financial Accounting Standards Board ("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~~period of ~~2017 (the "Tax Act"). This standard is effective for interim and annual reporting periods beginning after December 15, 2018.~~adoption. The adoption of this ASU did not have a material impact on our unaudited condensed consolidated ~~statement of comprehensive income.~~financial statements.

Table of Contents

Accounting Pronouncements Pending Adoption in Future Periods

~~In June 2016, the FASB issued ASU No. 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.~~ The amendments in this ASU replace the incurred loss impairment methodology with a methodology that reflects expected credit losses. This update is intended to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The new standard is effective for fiscal years beginning after December 15, 2019, with early adoption permitted for fiscal years beginning after December 15, 2018. We have completed our assessment and we do not anticipate this will have a material impact on our consolidated financial statements.

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. ~~Since~~We do not expect the adoption of this ASU ~~is related~~ to ~~disclosure requirements only, this adoption will not~~ have a material impact on our consolidated financial statements.

~~Note 3. Leases~~

In March 2020, the FASB issued ASU No. 2020-04,

~~We have leases~~Reference Rate Reform (Topic 848). The amendments in this ASU temporarily simplify the accounting for ~~warehouses, office space, land, office equipment, production equipment~~contract modifications, including hedging relationships, due to the transition from London Interbank Offering Rate ("LIBOR") and ~~automobiles. ROU assets and lease obligations are recognized~~other interbank offered rates to alternative reference interest rates. For example, entities can elect not to remeasure the contracts at the ~~lease commencement~~modification date ~~based on~~or reassess a previous accounting determination if certain conditions are met. Additionally, entities can elect to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain conditions are met. This standard was effective upon issuance and generally can be applied to applicable contract modifications through December 31, 2022. We are currently evaluating the ~~present value~~impact of ~~lease payments over~~ the ~~lease term. Operating lease ROU assets and liabilities are included in operating lease right-of-use assets, current operating lease liabilities, and operating lease liabilities~~transition from LIBOR to alternative reference interest rates on our condensed consolidated balance sheet. Finance leases ROU assets are included in property, plant and equipment, net, while finance lease liabilities are included in other non-current liabilities. As the implicit rate is not readily determinable in most of our lease arrangements, we use our incremental borrowing rate based on information available at the commencement date in order to determine the net present value of lease payments. We give consideration to our recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates. We have lease agreements that contain lease and non-lease components.

financial statements.

We determine if an arrangement is a lease or contains a lease at inception. Certain leases contain renewal options that can extend the term of the lease for one year or more. Our leases have remaining lease terms of up to 92 years, some of which include options to extend the lease term for up to 20 years. Options are recognized as part of our ROU assets and lease liabilities when it is reasonably certain that we will extend that option. Sublease arrangements and leases with residual value guarantees, sale leaseback terms or material restrictive covenants, are immaterial. Lease payments include fixed and variable lease components. Variable components are derived from usage or market-based indices, such as the consumer price index. As of September 30, 2019, we do not have leases initiated but not yet commenced which are expected to commence during the remainder of 2019.

~~The components of lease expense were as follows:~~

Lease Cost Three months ended September 30, 2019 Nine months ended September 30, 2019
Operating lease cost $ 3 $ 10
Finance lease cost:
Amortization of right-of-use assets — 1
Interest on lease liabilities — —
Short-term lease cost — 1

~~Table of Contents~~

~~Supplemental balance sheet information related to leases was as follows:~~


~~Leases~~	~~As of September 30, 2019~~
~~Assets~~
~~Operating Lease Right-of-Use Assets~~	$	42

~~Finance Lease Right-of-Use Assets, at cost~~	$	13
~~Accumulated Depreciation~~	~~(4)~~
~~Finance Lease Right-of-Use Assets, net~~	$	9

~~Liabilities~~
~~Operating Lease Obligation~~
~~Current~~	$	8
~~Non-Current~~	35
~~Total Operating Lease Liabilities~~	$	43

~~Finance Lease Obligation~~
~~Current~~	$	1
~~Non-Current~~	9
~~Total Finance Lease Liabilities~~	$	10

~~Cash paid for amounts included in the present value of operating lease liabilities were as follows:~~

Cash Flow Information Three months ended September 30, 2019 Nine months ended September 30, 2019
Operating cash flows from operating leases $ 3 $ 10
Operating cash flows from finance leases — 1
Financing cash flows from finance leases — —


~~Lease Term and Discount Rate~~	~~As of September 30, 2019~~
~~Weighted average remaining lease term (years)~~
~~Operating leases~~	~~12.7~~
~~Finance leases~~	~~7.1~~
~~Weighted average discount rate~~
~~Operating leases~~	~~7.1~~	%
~~Financing leases~~	~~5.2~~	%

~~Table of Contents~~

~~Maturities of lease liabilities were as follows:~~

September 30, 2019 Operating Leases Finance Leases Total
2019 (remaining) $ 3 $ — $ 3
2020 10 2 12
2021 9 1 10
2022 7 1 8
2023 4 1 5
After 2023 40 7 47
Total lease payments $ 73 $ 12 $ 85
Less: Interest 30 2 32
Present value of lease liabilities $ 43 $ 10 $ 53

~~Disclosures related to periods prior to adoption of the New Lease Standard~~

The total expense recorded under operating lease agreements in the consolidated and combined statements of operations was $16 million for the year ended December 31, 2018. Future minimum lease payments under noncancelable operating leases as of December 31, 2018 were as follows:

December 31, Operating Leases Capital Leases
2019 $ 13 $ 1
2020 11 2
2021 9 1
2022 6 1
2023 4 1
Thereafter 40 7
Total $ 83 $ 13
Less: Amounts representing interest 3
Present value of minimum lease payments $ 10
Less: Current portion of capital leases 1
Long-term portion of capital leases $ 9

Note 4.3. Revenue

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 distinct good. 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~~revenues by major geographical region for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018:~~2019:


	Three Months Ended June 30, 2020										Six Months Ended June 30, 2020
	Titanium Dioxide		Performance Additives		Total		Titanium Dioxide		Performance Additives		Total
Europe	$	166	$	42	$	208	$	372	$	92	$	464
North America	74		55		129		150		112		262
Asia	71		18		89		148		38		186
Other	27		3		30		70		6		76
Total Revenues	$	338	$	118	$	456	$	740	$	248	$	988

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Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Titanium Dioxide Performance Additives Total Titanium Dioxide Performance Additives Total
Europe $ 192 $ 43 $ 235 $ 620 $ 147 $ 767
North America 80 53 133 245 175 420
Asia 85 23 108 269 66 335
Other 39 11 50 126 18 144
Total Revenues $ 396 $ 130 $ 526 $ 1,260 $ 406 $ 1,666


		Three Months Ended September 30, 2018										Nine Months Ended September 30, 2018											Three Months Ended June 30, 2019				Six Months Ended June 30, 2019
		Titanium Dioxide		Performance Additives		Total		Titanium Dioxide		Performance Additives		Total			Titanium Dioxide		Performance Additives		Total		Titanium Dioxide		Performance Additives		Total
Europe	Europe	$	192	$	48	$	240	$	661	$	165	$	826	Europe	$	215	$	49	$	264	$	428	$	104	$	532
North America	North America	73		68		141		225		223		448		North America	88		65		153		165		122		287
Asia	Asia	85		21		106		278		78		356		Asia	92		22		114		184		43		227
Other	Other	39		7		46		136		15		151		Other	44		3		47		87		7		94
Total Revenues	Total Revenues	$	389	$	144	$	533	$	1,300	$	481	$	1,781	Total Revenues	$	439	$	139	$	578	$	864	$	276	$	1,140

The following table disaggregates our ~~revenue~~revenues by major product line for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018:~~2019:


		Three Months Ended September 30, 2019										Nine Months Ended September 30, 2019											Three Months Ended June 30, 2020				Six Months Ended June 30, 2020
		Titanium Dioxide		Performance Additives		Total		Titanium Dioxide		Performance Additives		Total			Titanium Dioxide		Performance Additives		Total		Titanium Dioxide		Performance Additives		Total
TiO₂	TiO₂	$	396	$	—	$	396	$	1,260	$	—	$	1,260	TiO₂	$	338	$	—	$	338	$	740	$	—	$	740
Color Pigments	Color Pigments	—		65		65		—		205		205		Color Pigments	—		59		59		—		121		121
Functional Additives	Functional Additives	—		29		29		—		94		94		Functional Additives	—		23		23		—		56		56
Timber Treatment	Timber Treatment	—		31		31		—		91		91		Timber Treatment	—		32		32		—		61		61
Water Treatment	Water Treatment	—		5		5		—		16		16		Water Treatment	—		4		4		—		10		10
Total Revenues	Total Revenues	$	396	$	130	$	526	$	1,260	$	406	$	1,666	Total Revenues	$	338	$	118	$	456	$	740	$	248	$	988


		Three Months Ended September 30, 2018										Nine Months Ended September 30, 2018											Three Months Ended June 30, 2019				Six Months Ended June 30, 2019
		Titanium Dioxide		Performance Additives		Total		Titanium Dioxide		Performance Additives		Total			Titanium Dioxide		Performance Additives		Total		Titanium Dioxide		Performance Additives		Total
TiO₂	TiO₂	$	389	$	—	$	389	$	1,300	$	—	$	1,300	TiO₂	$	439	$	—	$	439	$	864	$	—	$	864
Color Pigments	Color Pigments	—		71		71		—		237		237		Color Pigments	—		70		70		—		140		140
Functional Additives	Functional Additives	—		34		34		—		114		114		Functional Additives	—		33		33		—		65		65
Timber Treatment	Timber Treatment	—		34		34		—		112		112		Timber Treatment	—		31		31		—		60		60
Water Treatment	Water Treatment	—		5		5		—		18		18		Water Treatment	—		5		5		—		11		11
Total Revenues	Total Revenues	$	389	$	144	$	533	$	1,300	$	481	$	1,781	Total Revenues	$	439	$	139	$	578	$	864	$	276	$	1,140

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 for 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 certain volume commitments are 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 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.

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Note 5.4. Inventories

Inventories are stated at the lower of cost or market, with cost determined using first-in, first-out and average cost methods for different components of inventory. Inventories at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 consisted of the following:


		September 30, 2019		December 31, 2018			June 30, 2020		December 31, 2019
Raw materials and supplies	Raw materials and supplies	$	159	$	165	Raw materials and supplies	$	144	$	166
Work in process	Work in process	47		56		Work in process	57		49
Finished goods	Finished goods	290		317		Finished goods	286		298
Total	Total	$	496	$	538	Total	$	487	$	513

Note 6.5. 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 DuPont de Nemours, Inc. Viance markets timber treatment products for Venator. We have determined that the activity that most significantly impacts Viance’s 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.

Creditors of these entities have no recourse to Venator’s general credit. As the primary beneficiary of these variable interest entities at ~~September~~June 30, ~~2019,~~2020, the joint ventures’ assets, liabilities and results of operations are included in Venator’s unaudited condensed consolidated financial statements.

The revenues, income before income taxes and net cash provided by operating activities for our variable interest entities for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 are as follows:


		Three months ended September 30,						Nine months ended September 30,							Three months ended June 30,				Six months ended June 30,
		2019		2018		2019		2018			2020		2019		2020		2019
Revenues	Revenues	$	24	$	28	$	71	$	94	Revenues	$	27	$	25	$	50	$	47
Income before income taxes	Income before income taxes	2		3		7		11		Income before income taxes	4		3		6		5
Net cash provided by operating activities	Net cash provided by operating activities	4		2		10		14		Net cash provided by operating activities	4		4		7		6

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Note 7.6. 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.

Restructuring Activities

Company-wide Restructuring

In January 2019, we implemented a plan to reduce costs and improve efficiency of certain company-wide functions. As part of the program, we recorded restructuring expense of NaN for the three and six months ended June 30, 2020 and $1 million and $5$4 million for the three and ~~nine~~six months ended ~~September~~June 30, 2019, all of which related to workforce reductions. We expect that additional costs related to this plan will be immaterial.

Titanium Dioxide Segment

In July 2016, we implemented a plan to close our Umbogintwini, South Africa ~~Titanium Dioxide~~titanium dioxide manufacturing facility. As part of the program, we recorded restructuring expense of ~~nil and $1 million, respectively,~~NaN for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and $1 million, ~~and $3 million~~each, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018, respectively,~~2019, all of which related to plant shutdown costs. We expect further charges as part of this program to be immaterial.

In March 2017, we implemented a plan to close the ~~white end~~white-end finishing and packaging operation of our ~~Titanium Dioxide~~titanium dioxide manufacturing facility at our Calais, France site. The announced plan follows the 2015 closure of the ~~black end~~black-end manufacturing operations and would result in the closure of the entire facility. As part of the program, we recorded restructuring expense of $3$1 million and $5$3 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019, respectively,~~2020 and $3$1 million and ~~$12~~$2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018, respectively,~~2019, all of which related to plant shutdown costs. We expect to incur additional plant shutdown costs of approximately ~~$24~~$15 million through ~~2022.~~2023.

In September 2018, we implemented a plan to close our Pori, Finland ~~Titanium Dioxide~~titanium dioxide manufacturing facility. As part of the program, we recorded restructuring expense of $8$4 million for the three months ended ~~September~~June 30, ~~2019,~~2020, of which $6$1 million was related to accelerated depreciation, $1 million related to employee benefits and $1$2 million related to plant shutdown costs. This restructuring expense consists of $3 million of cash expense and a noncash expense of $1 million. We recorded restructuring expense of $8 million for the six months ended June 30, 2020 of which $2 million was related to accelerated depreciation, $2 million related to employee benefits and $4 million related to plant shutdown costs. This restructuring expense consists of $6 million of cash expense and a noncash expense of $2 million.

We recorded a restructuring gain related to our Pori facility of $3 million for the three months ended June 30, 2019, of which a gain of $14 million related to early settlement of contractual obligations was partially offset by $8 million of accelerated depreciation, $2 million of employee benefits, and $1 million of plant shut down costs. This restructuring gain consisted of a noncash gain of $6 million partially offset by $3 million of cash expense. We recorded restructuring expense of ~~$11~~$3 million for the ~~nine~~six months ended ~~September~~June 30, 2019, of which a gain of $14 million related to early settlement of contractual obligation was offset by ~~$17~~$11 million of accelerated depreciation, $5$4 million related to employee benefits, and $3$2 million related to plant shutdown costs. This restructuring expense consists of ~~noncash net expense of $3 million and $8~~$6 million of cash ~~expense. We recorded restructuring~~ expense and a noncash gain, net, of approximately $415 million for the three and nine months ended September 30, 2018, each, of which $367 million was related to accelerated depreciation, $39 million was related to employee benefits, and $9 million was related to the write off of other assets. This restructuring expense consisted of $30 million of cash and $385 million of noncash charges. $3 million.

We expect to incur additional charges related to our Pori facility of approximately ~~$114~~$88 million through the end of 2024, of which ~~$19~~$7 million relates to accelerated depreciation, ~~$86~~$77 million relates to plant shut down costs, $7$2 million relates to other employee costs and $2 million relates to the write off of other assets. Future charges consist of ~~$21~~$9 million of noncash costs and ~~$93~~$79 million of cash costs.

Performance Additives Segment

In September 2017, we implemented a plan to close our Performance Additives manufacturing facilities in St. Louis, Missouri and Easton, Pennsylvania. As part of the program, we recorded restructuring expense of ~~nil~~NaN for the three

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and ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. We recorded restructuring expense of ~~$6 million~~NaN and ~~$13~~$3 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, respectively. We do not expect to incur any additional charges as part of this program.

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In August 2018, we implemented a plan to close our Performance Additives manufacturing site in Beltsville, Maryland. As part of the program, we recorded restructuring expense of ~~nil~~NaN for the three and $2six months ended June 30, 2020 and $1 million for the three and ~~nine~~six months ended ~~September~~June 30, 2019, all of which related to accelerated depreciation. ~~We recorded restructuring expense of nil for the three and nine months ended September 30, 2018. 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 Performance Additives manufacturing facility in Augusta, Georgia. As part of the program, we recorded restructuring expense of nil for the three and nine months ended September 30, 2019. We recorded restructuring expense of nil and $127 million for the three and nine months ended September 30, 2018, respectively, of which $125 million related to accelerated depreciation, $1 million related to other noncash charges and $1 million related to cash charges. We do not expect to incur any additional charges as part of this program.

Accrued Restructuring and Plant Closing and Transition Costs

As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, accrued restructuring and plant closing and transition costs by type of cost and year of initiative consisted of the following:

Workforce reductions⁽¹⁾
Other restructuring costs
Total⁽²⁾
Accrued liabilities as of December 31, 2018 $ 32 $ — $ 32
2019 charges for 2018 and prior initiatives 6 9 15
2019 charges for 2019 initiatives 4 — 4
2019 payments for 2018 and prior initiatives (22) (8) (30)
2019 payments for 2019 initiatives (4) — (4)
Foreign currency effect on liability balance (1) — (1)
Accrued liabilities as of September 30, 2019 $ 15 $ 1 $ 16
Current portion of restructuring reserves 8
Long-term portion of restructuring reserve 8


	Workforce reductions⁽¹⁾		Other restructuring costs		Total⁽²⁾
Accrued liabilities as of December 31, 2019	$	15	$	1	$	16
2020 charges for 2019 and prior initiatives	4		6		10
2020 charges for 2020 initiatives	—		—		—
2020 payments for 2019 and prior initiatives	(7)		(7)		(14)
2020 payments for 2020 initiatives	—		—		—
Foreign currency effect on liability balance	—		—		—
Accrued liabilities as of June 30, 2020	$	12	$	—	$	12

⁽¹⁾The total workforce reduction reserves of ~~$15~~$12 million relate to the termination of ~~342~~151 positions, of which ~~133~~25 positions have been terminated but require future payment as of ~~September~~June 30, ~~2019.~~2020.

⁽²⁾Accrued liabilities remaining at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 by year of initiatives were as follows:


		September 30, 2019		December 31, 2018			June 30, 2020		December 31, 2019
2017 initiatives and prior		$	6	$	18
2018 initiatives		9		14
2018 initiatives and prior						2018 initiatives and prior	$	12	$	16
2019 initiatives	2019 initiatives	1		—		2019 initiatives	—		—
2020 initiatives						2020 initiatives	—		—
Total	Total	$	16	$	32	Total	$	12	$	16

~~Our restructuring accruals are all related~~Details with respect to our ~~Titanium Dioxide segment.~~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 December 31, 2019	$	16	$	—	$	16
2020 charges for 2019 and prior initiatives	9		1		10
2020 charges for 2020 initiative	—		—		—
2020 payments for 2019 and prior initiatives	(13)		(1)		(14)
2020 payments for 2020 initiatives	—		—		—

Accrued liabilities as of June 30, 2020	$	12	$	—	$	12
Current portion of restructuring reserves	$	6			$	6
Long-term portion of restructuring reserve	$	6			$	6

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Restructuring, Impairment and Plant Closing and Transition Costs

Details with respect to major cost type of restructuring charges and impairment of assets for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 by initiative are provided below:

Three months ended Nine months ended
September 30, 2019 September 30, 2019
Cash charges $ 5 $ 19
Early settlement of contractual obligation — (14)
Accelerated depreciation 7 19
Total 2019 Restructuring, Impairment and Plant Closing and Transition Costs $ 12 $ 24

Three months ended Nine months ended
September 30, 2018 September 30, 2018
Cash charges $ 22 $ 34
Pension related charges 24 24
Accelerated depreciation 373 505
Other noncash charges 9 10
Total 2018 Restructuring, Impairment and Plant Closing and Transition Costs $ 428 $ 573


	Three months ended June 30,						Six months ended June 30,
	2020		2019		2020		2019
Cash charges	$	4	$	6	$	10	$	14

Early settlement of contractual obligation	—		(14)		—		(14)
Accelerated depreciation	1		8		2		12

Total Restructuring, Impairment and Plant Closing and Transition Costs	$	5	$	—	$	12	$	12

Note 8.7. Debt

Outstanding debt, net of ~~debt~~unamortized discount and issuance costs of ~~$14~~$25 million and ~~$13~~$14 million as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, consisted of the following:


		September 30, 2019		December 31, 2018			June 30, 2020		December 31, 2019
Senior Notes		$	371	$	370
Term Loan Facility		362		365
Term Loan Facility due August 2024						Term Loan Facility due August 2024	$	360	$	361
Senior Secured Notes due July 2025						Senior Secured Notes due July 2025	214		—
Senior Unsecured Notes due July 2025						Senior Unsecured Notes due July 2025	371		371
Other	Other	20		13		Other	12		18
Total debt	Total debt	753		748		Total debt	957		750
Less: short-term debt and current portion of long-term debt	Less: short-term debt and current portion of long-term debt	16		8		Less: short-term debt and current portion of long-term debt	7		13
Long-term debt	Long-term debt	$	737	$	740	Long-term debt	$	950	$	737

~~The estimated fair value of the Senior Notes was $320 million and $300 million as of September 30, 2019 and December 31, 2018, respectively.~~ The estimated fair value of the Term Loan Facility was ~~$363~~$345 million and ~~$355~~$365 million as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. The estimated fair value of the Senior Secured Notes was $232 million as of June 30, 2020. The estimated fair value of the Senior Unsecured Notes was $266 million and $346 million as of June 30, 2020 and December 31, 2019, respectively. The estimated fair values of the Term Loan Facility, Senior Secured Notes and ~~the Term Loan Facility~~Senior Unsecured Notes are based upon quoted market prices (Level 1).

~~We had 0~~The aggregate principal outstanding under our ABL Facility was NaN as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, each.

~~The weighted average interest rate on our outstanding balances under the Senior Notes and Term Loan Facility as of September 30, 2019 was approximately 5%.~~

~~Senior Notes~~

On July 14, 2017, our subsidiaries Venator Finance S.à.r.l. and Venator Materials LLC (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

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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~~Our Senior Credit Facilities ~~that~~ provide for first lien senior secured financing of up to ~~$675~~$725 million, consisting of:

•the Term Loan Facility in an aggregate principal amount of $375 million, with a maturity of seven years; and

•the ABL Facility in an aggregate principal amount of up to ~~$300~~$350 million, with a maturity of five years.

The Term Loan Facility amortizes in aggregate annual amounts equal to 1% of the original principal amount of the Term Loan Facility and is paid quarterly.

~~On June 20, 2019 the ABL Facility was increased to an aggregate principal amount of up to $350 million, with no change to the maturity dates.~~

Availability to borrow the $350 million of commitments under the ABL Facility is subject to a borrowing base calculation comprised of accounts receivable and inventory in ~~the~~ 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 $350 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.

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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")~~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.

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~~Other Long-Term Obligations~~Senior Secured Notes

~~A note~~On May 22, 2020, we completed an offering of $225 million in aggregate principal amount of senior secured notes (the "Senior Secured Notes") due on July 1, 2025 at 98% of their face value. The Senior Secured Notes are obligations of our wholly owned subsidiaries, Venator Finance S.à r.l. and Venator Materials LLC (the "Issuers") and bear interest of 9.5% per year payable ~~for $8 million, resulting from~~semi-annually in arrears. The Senior Secured Notes are guaranteed on a senior secured basis by Venator and each of Venator's restricted subsidiaries (other than the ~~acquisition~~Issuers and certain other excluded subsidiaries) that is a guarantor under Venator's Term Loan Facility. In the future, the Senior Secured Notes will also be guaranteed on a senior secured basis by each of Venator's restricted subsidiaries (other than the Issuers and certain other excluded subsidiaries) that is a guarantor under Venator's ABL Facility. The Senior Secured Notes are secured on a first-priority basis by liens on all of the ~~intangible~~ assets that secure the Term Loan Facility on a first-priority basis and will be secured on a second-priority basis in all inventory, accounts receivable, deposit accounts, securities accounts, certain related assets and other current assets that secure the ABL Facility on a first-priority basis and the Term Loan Facility on a second-priority basis, in each case, other than certain excluded assets.

Senior Unsecured Notes

Our Senior Unsecured Notes are general unsecured senior obligations of our subsidiaries Venator Finance S.à.r.l. and Venator Materials LLC (the "Issuers") and are guaranteed on a general unsecured senior basis by Venator and certain of Venator’s subsidiaries. The indenture related to the ~~paper laminates product line from Tronox Limited ("Tronox")~~Senior Unsecured Notes imposes certain limitations on ~~April 26, 2019, is included within~~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 Unsecured Notes bear interest of 5.75% per year payable semi-annually and will mature on July 15, 2025. The Issuers may redeem the Senior Unsecured 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 ~~liabilities~~ and ~~other noncurrent liabilities~~unpaid interest, if any, and an early redemption premium, calculated on ~~our unaudited condensed consolidated balance sheet~~an agreed percentage of the outstanding principal amount, providing compensation on a portion of foregone future interest payables. The Senior Unsecured Notes will be redeemable in whole or in part at ~~September 30, 2019. The note is payable~~any time on or after July 15, 2020 at the redemption prices set forth in 2the indenture, plus accrued and unpaid interest, if any, up to, but not including, the redemption date. Upon the occurrence of certain change of control events (other than the separation), holders of the Venator Senior Unsecured Notes will have the right to require that the Issuers purchase all or a portion of such holder’s Senior Unsecured Notes in cash at a purchase price equal ~~installments payable annually through 2021.~~to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase.

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.

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Letters of Credit

As of June 30, 2020 we had $72 million of issued and outstanding letters of credit and bank guarantees to third parties. Of this amount, $48 million were issued by various banks on an unsecured basis with the remaining $24 million issued from our secured ABL Facility.

Note 9.8. 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 3 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 principal 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 exchanging a notional amount of $200 million at a fixed rate of 5.75% for €169 million with a fixed annual rate of 3.43%. These hedges were 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~~had a maturity date of July 2022, which was the best estimate of the repayment date of the intercompany loans.

In August 2019, we terminated the 3 cross-currency interest rate swaps entered into in 2017, resulting in cash proceeds of $15 million. Concurrently, we entered into 3 new cross-currency interest rate swaps which notionally exchanged $200 million at a fixed rate of 5.75% for €181 million on which a weighted average rate of 3.73% is payable. The cross-currency swaps have been designated as cash flow hedges of a fixed rate U.S. Dollar intercompany loan and the economic effect is to eliminate uncertainty on the U.S. Dollar cash flows. The cross-currency swaps are set to mature in July 2024, which is the best estimate of the repayment date on the intercompany loan.

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 income and subsequently recognized in other income in the unaudited condensed consolidated statement 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 $1an asset of $6 million and $6a liability of $3 million at ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, and was recorded as other noncurrent assets and other noncurrent liabilities, respectively, on our unaudited condensed consolidated balance sheets. We estimate the fair values of our cross-currency swaps by taking into consideration valuations obtained from a third-party valuation service that utilizes an income-based industry standard valuation model for which all significant inputs are observable either directly or indirectly. These inputs include foreign currency exchange rates, credit default swap rates and cross-currency basis swap spreads. The cross-currency swap has been classified as Level 2 because the fair value is based upon observable market-based inputs or unobservable inputs that are corroborated by market data.

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For the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, the change in accumulated other comprehensive loss associated with these cash flow hedging activities was a gain of ~~$10~~$9 million and $5 million, respectively. As of ~~September~~June 30, ~~2019,~~2020, we do not expect to reclassify any 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.

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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 risks associated with foreign currency exposure. At ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we had ~~$73~~$72 millionand ~~$89~~$75 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 ~~10.~~9. 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. 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 Venator and cumulative income or losses during the applicable period. Cumulative losses incurred over the period limits our ability to consider other subjective evidence such as our projections for the future. Changes in expected future income in applicable tax jurisdictions could affect the realization of deferred tax assets in those jurisdictions.

We recorded income tax expense of $8$2 million and income tax benefit of ~~$55~~$9 million for the three months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and income tax ~~expense~~benefit of ~~nil~~NaN and income tax benefit of ~~$10~~$8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, respectively. Our tax expense is significantly affected by the mix of income and losses in tax jurisdictions in which we operate, as impacted by the presence of valuation allowances in certain tax jurisdictions.

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 $36 million that we recognized for the year ended December 31, 2017.

Pursuant to the Tax Matters Agreement dated August 7, 2017, entered into by and among Venator Materials PLC and Huntsman (the "Tax Matters Agreement") 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. It is currently 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 are expected to be approximately ~~$34~~$30 million. As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, this "Noncurrent payable to affiliates" was ~~$34~~$30 million, each, on our unaudited condensed consolidated balance sheets. 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.

On March 27, 2020, President Trump signed into U.S. tax law the Coronavirus Aid, Relief and Economic Security (CARES) Act. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer social security payments, net operating loss carryback periods, eliminating NOL limitations, alternative minimum tax credit refunds, and modifications to the net interest deduction limitations. The CARES Act did not have a material impact to our income tax provision for the three or six months ended June 30, 2020.

2018

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Note ~~11.~~10. Earnings Per Share

Basic earnings per share excludes dilution and is computed by dividing net income attributable to Venator ordinary shareholders by the weighted average number of shares outstanding during the period. Diluted earnings per share reflects all potential dilutive ordinary shares outstanding during the period and is computed by dividing net income 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.

Basic and diluted earnings per share are determined using the following information:


		Three months ended September 30,						Nine months ended September 30,							Three months ended June 30,				Six months ended June 30,
		2019		2018		2019		2018			2020		2019		2020		2019
Numerator:	Numerator:									Numerator:

Net loss attributable to Venator Materials PLC ordinary shareholders		$	(19)	$	(368)	$	(1)	$	(94)
Net (loss) income attributable to Venator Materials PLC ordinary shareholders										Net (loss) income attributable to Venator Materials PLC ordinary shareholders	$	(19)	$	21	$	(12)	$	18
Denominator:	Denominator:									Denominator:
Weighted average shares outstanding	Weighted average shares outstanding	106.6		106.4		106.5		106.4		Weighted average shares outstanding	106.7		106.6		106.7		106.5
Dilutive share-based awards	Dilutive share-based awards	—		0.3		—		0.4		Dilutive share-based awards	—		—		—		—
Total weighted average shares outstanding, including dilutive shares	Total weighted average shares outstanding, including dilutive shares	106.6		106.7		106.5		106.8		Total weighted average shares outstanding, including dilutive shares	106.7		106.6		106.7		106.5

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, the number of anti-dilutive employee share-based awards excluded from the computation of diluted earnings per share was 24 million, each. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, the number of anti-dilutive employee share-based awards excluded from the computation of dilutive earnings per share was ~~nil,~~2 million, each.

Note ~~12.~~11. Commitments and Contingencies

Legal Proceedings

Shareholder Litigation

On February 8, 2019 we, certain of 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 (the "Dallas District Court"), by an alleged purchaser of our ordinary shares in connection with our IPO on August 3, 2017 and our secondary offering on November 30, 2017. The plaintiff, Macomb County Employees’ Retirement System, alleges that inaccurate and misleading statements were made regarding the impact to our operations, and prospects for restoration thereof, resulting from the fire that occurred at our Pori, Finland manufacturing facility, among other allegations. Additional complaints making substantially the same allegations were filed in the Dallas District Court by the Firemen's Retirement System of St. Louis on March 4, 2019 and by Oscar Gonzalez on March 13, 2019, with the third case naming two of our directors as additional defendants. A fourth case was filed in the U.S. District Court for the Southern District of New York by the City of Miami General Employees' & Sanitation Employees' Retirement Trust on July 31, 2019, making substantially the same allegations, adding claims under sections 10(b) and 20(a) of the U.S. Exchange Act, and naming all of our directors as additional defendants. A fifth case, filed by Bonnie Yoon Bishop in the U.S. District Court for the Southern District of New York, was voluntarily dismissed without prejudice on October 7, 2019.A sixth case was filed in the U.S. District Court for the Southern District of Texas by the Cambria County Employees Retirement System on September 13, 2019, making substantially the same allegations as those made by the plaintiff in the case pending in the Southern District of New York.

~~The plaintiffs in these cases seek to determine that the proceedings should be certified as class actions and to obtain alleged compensatory damages, costs, rescission and equitable relief.~~

The cases filed in the Dallas District Court ~~have been~~were consolidated into a single action,In re Venator Materials PLC Securities Litigation. ~~On October 29, 2019, the U.S. District Court for the Southern District of New York entered an~~

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order transferring the case brought by the city of Miami General Employees' & Sanitation Employees' Retirement Trust to the U.S. District Court for the Southern District of Texas, where we expect it to be consolidated with the case brought by the Cambria County Employees' Retirement Trust.

On May 8, 2019, we filed a ~~“special appearance”~~"special appearance" in the Dallas District Court action contesting the court’s jurisdiction over the Company and a motion to transfer venue to Montgomery County, Texas and on June 7, 2019 we and certain defendants filed motions to dismiss. On July 9, 2019, a hearing was held on certain of these motions, which were subsequently denied. On ~~October 3, 2019, a hearing was held on our motion to dismiss under the Texas Citizens Participation Act, which was subsequently denied.On October 22, 2019, we and other defendants filed a Petition for Writ of Mandamus in~~January 21, 2020, the Court of Appeals for the Fifth District of Texas ~~seeking relief~~reversed the Dallas District Court’s order that denied the special appearances of Venator and certain other defendants, and rendered judgment dismissing the claims against Venator and certain other defendants for lack of jurisdiction. The Court of Appeals also remanded the case for the Dallas District Court to enter an order transferring the claims against Huntsman to the Montgomery County District Court. On March 19, 2020, plaintiffs from the Dallas District ~~Court’s denial~~Court case filed suit in New York State Court (New York County) against Venator and the other defendants dismissed from the Dallas District

Table of ~~defendants’ Rule 91a motions to dismiss. We also intend to appeal~~Contents

Court case, making substantially the ~~denial of our~~same allegations as were filed in the Dallas District Court. On July 31, 2020, Venator and the other defendants filed a motion to dismiss all claims in the New York State Court case.

An additional case was filed on July 31, 2019, in the U.S. District Court for the Southern District of New York by the City of Miami General Employees' & Sanitation Employees' Retirement Trust, making substantially the same allegations, adding claims under sections 10(b) and 20(a) of the U.S. Exchange Act, and naming all of our directors as additional defendants. A case also was filed in the U.S. District Court for the Southern District of Texas ~~Citizens Participation Act.~~by the Cambria County Employees Retirement System on September 13, 2019, making substantially the same allegations as those made by the plaintiff in the case pending in the Southern District of New York. On October 29, 2019, the U.S. District Court for the Southern District of New York entered an order transferring the case brought by the city of Miami General Employees' & Sanitation Employees' Retirement Trust to the U.S. District Court for the Southern District of Texas, where it was consolidated into a single action with the case brought by the Cambria County Employees' Retirement Trust and is now known as In re: Venator Materials PLC Securities Litigation. On January 17, 2020, plaintiffs in the consolidated federal action filed a consolidated class action complaint. On February 18, 2020, all defendants joined in a motion to dismiss the consolidated complaint, which plaintiffs have opposed, and for which oral argument was heard on May 14, 2020. A decision on the motion to dismiss the consolidated complaint has not been published.

The plaintiffs in these cases seek to determine that the proceedings should be certified as class actions and to obtain alleged compensatory damages, costs, rescission and equitable relief. We may be required to indemnify our executive officers and directors, 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 not accrued for a loss contingency with regard to these matters.

Tronox Litigation

On April 26, 2019, we acquired intangible assets related to the European paper laminates product line from Tronox. A separate agreement with Tronox entered into on July 14, 2018 requires that Tronox promptly pay us a “break fee” of $75 million upon the consummation of Tronox’s merger with The National Titanium Dioxide Company Limited (“Cristal”) once the sale of the European paper laminates business to us was consummated, if the sale of Cristal’s Ashtabula manufacturing complex to us was not completed. The deadline for such payment was May 13, 2019. On April 26, 2019, Tronox publicly stated that it believes it is not obligated to pay the break fee.

On May 14, 2019, we commenced a lawsuit in the Delaware Superior Court against Tronox arising from Tronox's breach of its obligation to pay the break fee. We are seeking a judgment for $75 million, plus pre- and post-judgment interest, and reasonable attorneys' fees and costs. On June 17, 2019, Tronox filed an answer denying that it is obligated to pay the break fee and asserting affirmative defenses and counterclaims of approximately $400 million, alleging that we failed to negotiate the purchase of the Ashtabula complex in good faith. Discovery is ongoing in this matter. Because of the early stage of this litigation, we are unable to reasonably estimate any possible gain, loss or range of gain or loss and we have not made any accrual with regard to this matter.

Neste Engineering Services Matter

We are party to an arbitration proceeding initiated by Neste Engineering Services Oy (“NES”) on December 19, 2018 for payment of invoices allegedly due of approximately €14 million in connection with the delivery of services by NES to the Company in respect of the Pori site rebuild project. We are contesting the validity of these invoices and filed counterclaims against NES on March 8, 2019. ~~The timetable for~~In the arbitration ~~has not yet been set.~~ proceeding, our defense and counterclaim were filed on April 17, 2020.

On July 2, 2019, NES separately instigated a lawsuit in Finland for €1.6 million of unpaid invoices, which we ~~also intend to contest.~~are contesting. We are fully accrued for these invoices and they are reflected in our unaudited condensed consolidated balance sheet as of ~~September~~June 30, ~~2019.~~2020.

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Calais Pipeline Matter

The Region Hauts-de-France (the “Region”) has issued 2 duplicate title perception demands against us requiring repayment of €12 million. This sum was previously paid to us by the Region under a settlement agreement, pursuant to which we were required to move an effluent pipeline at our Calais site. We filed claims with the Administrative Court in Lille, France on February 14, 2018 and April 12, 2018, requesting orders that the demands be set aside, which suspended enforcement of the demands. On July 12, 2018, the court set aside the first demand. The second demand remains suspended, but in dispute. The parties have lodged various arguments and responses regarding the second demand with the court. The court hearing for this matter has been postponed.

Gasum Arbitration

We entered into a natural gas supply agreement with Skangass Oy (now Gasum LNG Oy) in 2015 to supply natural gas to our Pori, Finland manufacturing facility. The initial fixed term of the agreement was ten years. We are entitled to terminate the agreement upon closure of the facility by giving 12 months’ notice of the closure. Upon such termination, a compensation fee would be payable to Gasum.

The agreement requires us to purchase a minimum annual quantity, subject to a mechanism for making up shortfalls. The minimum annual quantity can be reduced (even to zero) in the event of a “Force Majeure Event". We declared that the fire at our Pori facility in January 2017 was a Force Majeure Event under the agreement, reducing the minimum annual quantity to the actual quantity purchased. Gasum alleges that this Force Majeure Event subsequently ceased to apply, and that we were thereafter again obliged to purchase the original minimum annual quantity.

Gasum continues to ~~consider~~supply natural gas to the ~~matter~~Pori facility. On April 17, 2020, Gasum filed arbitration proceedings seeking declaratory relief to require us to take or pay the original minimum annual quantities of natural gas. In their request, Gasum estimated that the monetary value of declaratory relief to be approximately €27 million should we close the Pori facility by the end of 2022. Because of the early stage of this proceeding, we are unable to reasonably estimate any possible loss or range of loss and we ~~anticipate that a hearing on the matter might be held during the first half of 2020. We do~~have not ~~believe~~accrued for a loss ~~is probable and have not made an accrual~~contingency with ~~respect~~regard to this matter.

Other Proceedings

We are a party to various other proceedings instituted by private plaintiffs, governmental authorities and others arising under provisions of applicable laws, including various environmental, products liability and other laws. Except as otherwise disclosed in these unaudited condensed consolidated financial statements, we do not believe that the outcome of any of these matters will have a material effect on our financial condition, results of operations or liquidity.

Note ~~13.~~12. 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 ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~September~~June 30, ~~2018,~~2019, our capital expenditures for EHS matters totaled ~~$18~~$8 million, ~~and $5 million, respectively.~~each. 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. A number of our EHS capital expenditures will be subject to extended timelines as a result of the COVID-19 pandemic. Changes to timelines may be related to regulatory orders or guidelines that cause suppliers or contractors to cease or slow down operational activities, including as a result of changes to social distancing rules, among other factors. The impacts may vary significantly between different jurisdictions.

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

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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 ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we had environmental reserves of $9$8 million and ~~$12~~$9 million, respectively.

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.

In the EU, the Environmental Liability Directive (Directive 2004/35/EC) has established a framework based on the "polluter pays" principle for the prevention and remediation of environmental damage, which establishes measures to prevent and remedy environmental damage. The directive defines "environmental damage" as damage to protected species and natural habitats, damage to water and damage to soil. Operators carrying out dangerous activities listed in the Directive are strictly liable for remediation, even if they are not at fault or negligent.

Under EU Directive 2010/75/EU on industrial emissions, permitted facility operators may be liable for significant pollution of soil and groundwater over the lifetime of the activity concerned. We are in the process of plant

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closures at facilities in the EU and liability to investigate and clean up waste or contamination may arise during the surrender of operators' permits at these locations under the directive and associated legislation such as the Water Framework Directive (Directive 2000/60/EC) and the Groundwater Directive (Directive 2006/118/EC).

Under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") and similar state laws, a current or former owner or operator of real property in the U.S. may be liable for remediation costs regardless of whether the release or disposal of hazardous substances was in compliance with law at the time it occurred, and a current owner or operator may be liable regardless of whether it owned or operated the facility at the time of the release. Outside the U.S., analogous contaminated property laws, such as those in effect in France, can hold past owners and/or operators liable for remediation at former facilities. We have not been notified by third parties of claims against us for cleanup liabilities at former facilities or third-party sites, including, but not limited to, sites listed under CERCLA.

Under the Resource Conservation and Recovery Act in the U.S. and similar state laws, we may be required to remediate contamination originating from our properties as a condition to our hazardous waste permit. Some of our manufacturing sites have an extended history of industrial chemical manufacturing and use, including on-site waste disposal and we have made accruals for related remediation activity. We are aware of soil, groundwater or surface contamination from past operations at some of our sites and have made accruals for related remediation activity, and we may find contamination at other sites in the future. Similar laws exist in a number of locations in which we currently operate, or previously operated, manufacturing facilities.

Pori Remediation

In connection with our previously announced intention to close our TiO₂manufacturing facility in Pori, Finland, we expect to incur environmental costs related to the cleanup of the facility upon its eventual closure, including remediation and closure costs. While we do not currently have enough information to be able to estimate the range of potential costs for the closure of this facility, these costs could be material to our unaudited condensed consolidated financial statements.

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Note ~~14.~~13. Other Comprehensive Income

Other comprehensive income consisted of the following:


		Foreign currency translation adjustment^(a)		Pension and other postretirement benefits adjustments net of tax^(b)		Other comprehensive loss of unconsolidated affiliates		Hedging Instruments		Total		Amounts attributable to noncontrolling interests		Amounts attributable to Venator			Foreign currency translation adjustment^(a)		Pension and other postretirement benefits adjustments net of tax^(b)		Other comprehensive loss of unconsolidated affiliates		Hedging Instruments		Total		Amounts attributable to noncontrolling interests		Amounts attributable to Venator
Beginning balance, January 1, 2019		$	(96)	$	(278)	$	(5)	$	6	$	(373)	$	—	$	(373)
Beginning balance, January 1, 2020																Beginning balance, January 1, 2020	$	(97)	$	(295)	$	(5)	$	12	$	(385)	$	—	$	(385)
Other comprehensive (loss) income before reclassifications, gross	Other comprehensive (loss) income before reclassifications, gross	(36)		—		—		10		(26)		—		(26)		Other comprehensive (loss) income before reclassifications, gross	(17)		—		—		9		(8)		—		(8)
Tax benefit		—		—		—		—		—		—		—
Tax expense																Tax expense	—		—		—		—		—		—		—
Amounts reclassified from accumulated other comprehensive loss, gross^(c)	Amounts reclassified from accumulated other comprehensive loss, gross^(c)	—		12		—		—		12		—		12		Amounts reclassified from accumulated other comprehensive loss, gross^(c)	—		7		—		—		7		—		7
Tax expense	Tax expense	—		—		—		—		—		—		—		Tax expense	—		—		—		—		—		—		—
Net current-period other comprehensive (loss) income	Net current-period other comprehensive (loss) income	(36)		12		—		10		(14)		—		(14)		Net current-period other comprehensive (loss) income	(17)		7		—		9		(1)		—		(1)
Ending balance, September 30, 2019		$	(132)	$	(266)	$	(5)	$	16	$	(387)	$	—	$	(387)
Ending balance, June 30, 2020																Ending balance, June 30, 2020	$	(114)	$	(288)	$	(5)	$	21	$	(386)	$	—	$	(386)

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Foreign currency translation adjustment^(d)
Pension and other postretirement benefits adjustments net of tax^(e)
Other comprehensive loss of unconsolidated affiliates Hedging Instruments Total Amounts attributable to noncontrolling interests Amounts attributable to Venator
Beginning balance, January 1, 2018 $ (6) $ (267) $ (5) $ (5) $ (283) $ — $ (283)
Other comprehensive (loss) income before reclassifications, gross (49) — — 5 (44) — (44)
Tax benefit — — — — — — —
Amounts reclassified from accumulated other comprehensive loss, gross^(c)
— 10 — — 10 — 10
Tax expense — — — — — — —
Net current-period other (loss)
comprehensive income
(49) 10 — 5 (34) — (34)
Ending balance,
September 30, 2018
$ (55) $ (257) $ (5) $ — $ (317) $ — $ (317)


	Foreign currency translation adjustment^(d)		Pension and other postretirement benefits adjustments net of tax^(e)		Other comprehensive loss of unconsolidated affiliates		Hedging Instruments		Total		Amounts attributable to noncontrolling interests		Amounts attributable to Venator
Beginning balance, January 1, 2019	$	(96)	$	(278)	$	(5)	$	6	$	(373)	$	—	$	(373)


Other comprehensive (loss) income before reclassifications, gross	(2)		—		—		5		3		—		3
Tax expense	—		—		—		—		—		—		—
Amounts reclassified from accumulated other comprehensive loss, gross^(c)	—		8		—		—		8		—		8
Tax expense	—		—		—		—		—		—		—
Net current-period other comprehensive (loss) income	(2)		8		—		5		11		—		11
Ending balance, June 30, 2019	$	(98)	$	(270)	$	(5)	$	11	$	(362)	$	—	$	(362)

^(a)Amounts are net of tax of ~~nil~~NaN as of ~~September~~June 30, ~~2019~~2020 and January 1, ~~2019,~~2020, each.

^(b)Amounts are net of tax of $50 million as of ~~September~~June 30, ~~2019~~2020 and January 1, ~~2019,~~2020, each.

^(c)See table below for details about the amounts reclassified from accumulated other comprehensive loss.

^(d)Amounts are net of tax of ~~nil~~NaN as of ~~September~~June 30, ~~2018~~2019 and January 1, ~~2018,~~2019, each.

^(e)Amounts are net of tax of ~~$52~~$50 million as of ~~September~~June 30, ~~2018~~2019 and January 1, ~~2018,~~2019, each.

Three months ended
September 30, Nine months ended
September 30, Affected line item in the statement where net income is presented
2019 2018 2019 2018
Details about Accumulated Other Comprehensive Loss Components^(a):
Amortization of pension and other postretirement benefits:
Actuarial loss $ 3 $ 3 $ 11 $ 10 Other income
Prior service credit 1 — 1 — Other income
Total amortization 4 3 12 10 Total before tax
Income tax expense — — — — Income tax expense
Total reclassifications for the period $ 4 $ 3 $ 12 $ 10 Net of tax

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	Three months ended June 30,						Six months ended June 30,			Affected line item in the statement where net income is presented
	2020		2019		2020		2019
Details about Accumulated Other Comprehensive Loss Components^(a):
Amortization of pension and other postretirement benefits:
Actuarial loss	$	4	$	4	$	7	$	8	Other income
Prior service credit	—		—		—		—		Other income
Total before tax	4		4		7		8
Income tax expense	—		—		—		—		Income tax benefit (expense)
Total reclassifications for the period, net of tax	$	4	$	4	$	7	$	8

^(a)Pension and other postretirement benefit amounts in parentheses indicate credits on our unaudited condensed consolidated statements of operations.

Note ~~15.~~14. Operating Segment Information

We derive our revenues, earnings and cash flows from the manufacture and sale of TiO₂, functional additives, color pigments, timber treatment and water treatment chemicals. We have reported our operations through our 2 segments, Titanium Dioxide and Performance Additives, and organized our business and derived our operating segments around differences in product lines.

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The major product groups of each reportable operating segment are as follows:


Segment						Product Group
Titanium Dioxide						titanium dioxide
Performance Additives						functional additives, color pigments, timber treatment and water treatment chemicals

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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 2 reportable operating segments are as follows:


		Three months ended September 30,						Nine months ended September 30,							Three months ended June 30,				Six months ended June 30,
		2019		2018		2019		2018			2020		2019		2020		2019
Revenues:	Revenues:									Revenues:
Titanium Dioxide	Titanium Dioxide	$	396	$	389	$	1,260	$	1,300	Titanium Dioxide	$	338	$	439	$	740	$	864
Performance Additives	Performance Additives	130		144		406		481		Performance Additives	118		139		248		276
Total	Total	$	526	$	533	$	1,666	$	1,781	Total	$	456	$	578	$	988	$	1,140
Adjusted EBITDA⁽¹⁾	Adjusted EBITDA⁽¹⁾									Adjusted EBITDA⁽¹⁾
Titanium Dioxide	Titanium Dioxide	$	51	$	75	$	167	$	365	Titanium Dioxide	$	35	$	55	$	81	$	116
Performance Additives	Performance Additives	13		12		44		59		Performance Additives	13		16		35		31
		64		87		211		424			48		71		116		147
Corporate and Other		(14)		(10)		(40)		(33)
Corporate and other										Corporate and other	(11)		(10)		(22)		(26)
Total	Total	50		77		171		391		Total	37		61		94		121
Reconciliation of adjusted EBITDA to net income:
Reconciliation of adjusted EBITDA to net (loss) income:										Reconciliation of adjusted EBITDA to net (loss) income:
Interest expense	Interest expense	(13)		(14)		(40)		(41)		Interest expense	(15)		(13)		(28)		(27)
Interest income	Interest income	3		4		9		11		Interest income	3		3		6		6
Income tax (expense) benefit	Income tax (expense) benefit	(8)		55		—		(10)		Income tax (expense) benefit	(2)		9		—		8
Depreciation and amortization	Depreciation and amortization	(27)		(33)		(82)		(102)		Depreciation and amortization	(28)		(29)		(56)		(55)
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	2		2		4		6		Net income attributable to noncontrolling interests	2		1		3		2
Other adjustments:	Other adjustments:									Other adjustments:
Business acquisition and integration expenses		(2)		(5)		(3)		(9)
Separation expense, net		—		—		—		(1)
Business acquisition and integration adjustments (expenses)										Business acquisition and integration adjustments (expenses)	—		1		(1)		(1)

Loss on disposition of business/assets	Loss on disposition of business/assets	(1)		—		(1)		(2)		Loss on disposition of business/assets	—		—		(2)		—
Certain legal settlements and related expenses		(2)		—		(3)		—
Certain legal expenses/settlements										Certain legal expenses/settlements	(3)		(1)		(3)		(1)
Amortization of pension and postretirement actuarial losses	Amortization of pension and postretirement actuarial losses	(3)		(3)		(11)		(10)		Amortization of pension and postretirement actuarial losses	(4)		(4)		(7)		(8)
Net plant incident (costs) credits		(4)		(21)		(17)		252
Net plant incident costs										Net plant incident costs	(2)		(6)		(3)		(13)
Restructuring, impairment and plant closing and transition costs	Restructuring, impairment and plant closing and transition costs	(12)		(428)		(24)		(573)		Restructuring, impairment and plant closing and transition costs	(5)		—		(12)		(12)
Net (loss) income	Net (loss) income	$	(17)	$	(366)	$	3	$	(88)	Net (loss) income	$	(17)	$	22	$	(9)	$	20

⁽¹⁾Adjusted EBITDA is defined as net income/loss of Venator before interest expense, interest income, income tax expense/benefit, depreciation and amortization and net income attributable to noncontrolling interests, as well as eliminating the following adjustments: (a) business acquisition and integration expenses/adjustments; (b) ~~separation expense/gain, net; (c)~~ loss/gain on disposition of business/assets; ~~(d)~~(c) certain legal ~~settlements and related~~ expenses/~~gains; (e)~~settlements; (d) amortization of pension and postretirement actuarial losses/gains; ~~(f)~~(e) net plant incident costs/credits; and ~~(g)~~(f) restructuring, impairment, and plant closing and transition costs/credits.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included in Item 1 hereto.

This section contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in any forward-looking statement because of various factors, including those described in the section titled "Note Regarding Forward-Looking Statements" and "Part II. Item 1A. Risk Factors."

Executive Summary

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.

COVID-19

The COVID-19 pandemic and related economic repercussions have created significant disruption to the global economy and have had an adverse effect on our business and the markets in which we operate, the full extent of which cannot be determined at this time.

We have not yet experienced significant impacts or interruptions to our supply chain as a result of the COVID-19 pandemic. However, certain of our suppliers have faced difficulties maintaining operations due to government-ordered restrictions and shelter-in-place mandates. While we have thus far been able to identify alternative sourcing arrangements without disrupting our supply chain, financial hardship on our suppliers caused by the COVID-19 pandemic could cause material disruptions in our raw material supply. We are proactively managing our supplier network by maintaining close contact and seeking alternative arrangements in case our primary suppliers are impacted by the COVID-19 pandemic.

During the three months ended June 30, 2020, COVID-19 had a material impact on demand for our products as sales were impacted by government-ordered restrictions on our customers. We cannot currently predict the duration and severity of impacts to our business from the global economic slowdown caused by the COVID-19 pandemic. Because of this, we cannot reasonably estimate with any degree of certainty the future adverse impact the COVID-19 pandemic may have on our results of operations, financial position, or liquidity; however, the future impact could be material. See further discussion of the potential impact to our liquidity under "Liquidity and Capital Resources." See "Part II. Item 1A. Risk Factors" for further details of the risks that the COVID-19 pandemic may present to our business.

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Recent Developments

On May 22, 2020, we completed an offering of $225 million in aggregate principal amount of Senior Secured Notes due on July 1, 2025 at 98% of their face value. The Senior Secured Notes are obligations of our wholly owned subsidiaries, Venator Finance S.à r.l. and Venator Materials LLC and bear interest of 9.5% per year payable semi-annually in arrears. The Senior Secured Notes are guaranteed on a senior secured basis by Venator and each of Venator's restricted subsidiaries (other than the Issuers and certain other excluded subsidiaries) that is a guarantor under Venator's Term Loan Facility. In the future, the Senior Secured Notes will also be guaranteed on a senior secured basis by each of Venator's restricted subsidiaries (other than the Issuers and certain other excluded subsidiaries) that is a guarantor under Venator's ABL Facility. The Senior Secured Notes are secured on a first-priority basis by liens on all of the assets that secure the Term Loan Facility on a first-priority basis and will be secured on a second-priority basis in all inventory, accounts receivable, deposit accounts, securities accounts, certain related assets and other current assets that secure the ABL Facility on a first-priority basis and the Term Loan Facility on a second-priority basis, in each case, other than certain excluded assets.

Recent Trends and Outlook

We expect near-term business trends in our Titanium Dioxide segment ~~over the next year~~ to be driven ~~by:~~by the following factors: (i) ~~a soft~~the global economic environment ~~primarily~~impacted by the COVID-19 pandemic resulting in ~~China~~decreased demand for our products; (ii) geopolitical events including Brexit and ~~Europe, including the effects of China-U.S.~~ongoing trade negotiations between the U.S. and ~~potential impacts from Brexit; (ii)~~China; (iii) the phased reopening of economies, the pace and timing of which will differ by region and country, and its impact on our mix of sales; (iv) variability in demand for our products based on end-use application; (v) TiO₂ pricing to reflect regional supply and demand balances, ~~and~~ increased competition in certain regions for certain ~~products; (iii)~~of our products and our customer-tailored approach; (vi) a manageable increase in the average cost of our mix of ore feedstocks; (vii) lower raw material ~~cost increases, including higher~~and energy costs, excluding ore ~~costs; (iv) volume trends to reflect historical seasonal patterns; (v) increased sales of new TiO~~₂ ~~product grades; (vi) lower utilization rates; and (vii)~~feedstocks; (viii) reduced operating rates at our manufacturing facilities; (ix) additional benefit ~~through~~from our 2019 Business Improvement Program; and (x) benefits from additional cost and operational improvement actions, ~~as part of our 2019 Business Improvement Program.~~including those we have taken in response to the COVID-19 pandemic.

In ~~the~~our Performance Additives segment, we expect near-term business trends ~~over the next year~~ to be driven ~~by:~~by the following factors: (i) ~~challenging~~the global economic environment impacted by the COVID-19 pandemic resulting in decreased demand for our products; (ii) geopolitical events including Brexit and ongoing trade negotiations between the U.S. and China; (iii) the phased reopening of economies, the pace and timing of which will differ by region and country, and its impact on our mix of sales; (iv) a soft but improving demand environment for certain products, primarily those in the automotive, ~~plastic~~coatings, and certain construction end-use applications; (ii) a soft economic environment, primarily in China and Europe, including the effects of China-U.S. trade negotiations and the potential impacts from Brexit; (iii) raw material costs inflation; and (iv)(v) reduced operating rates at our manufacturing facilities; (vi) portfolio optimization actions; (vii) additional benefit ~~through~~from our 2019 Business Improvement Program; and (viii) benefits from additional cost and operational improvement actions, ~~as part of our 2019 Business Improvement Program.~~including those we have taken in response to COVID-19.

In the fourth quarter of 2018, we commenced our 2019 Business Improvement Program and ~~are underway with the implementation, having realized $15~~have delivered $28 million of savings through the ~~third~~second quarter of ~~2019.~~2020, $4 million of which was achieved in the second quarter of 2020. We continue to expect that when fully implemented, this cost and operational improvement program will provide approximately $40 million of annual adjusted EBITDA benefit compared to year-end 2018. We currently expect ~~the program will be fully implemented in 2020, ending~~to end the year at the full run-rate ~~level.~~level; however, the timing, constituent elements and expected benefit may be adjusted in response to the COVID-19 pandemic. We continue to evaluate the impact of COVID-19 on our 2019 Business Improvement Program.

In ~~2019,~~the first quarter of 2020, and in response to the expected adverse impact of the COVID-19 pandemic, we implemented a range of measures to reduce our costs. These measures include reducing employee compensation, including a reduction in salaries, changes and reductions to bonus schemes and employee furloughs, and reduced spending on other discretionary items. In the second quarter of 2020, we delivered $7 million of savings related to these actions.

In 2020, total ~~expected~~ capital expenditures ~~have been reduced~~are expected to be approximately ~~$115~~$60 million. ~~This includes~~We do not expect any material capital expenditures relating to the transfer of our specialty ~~technology~~and differentiated business from our Pori, Finland manufacturing site to other sites in our manufacturing network during 2020. We intend to optimize the remaining transfer of our specialty and ~~excludes other~~differentiated business from our Pori, ~~site~~Finland TiO₂ manufacturing facility, but the timing of

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this transfer will be elongated, due in part to the COVID-19 pandemic, and may result in a lower total expected capital ~~expenditures.~~outlay and a lower associated adjusted EBITDA benefit than originally estimated.

We expect our corporate and other costs will be approximately ~~$55~~$45 million in ~~2019.~~2020.

In addition, within our German business we continue to evaluate whether sufficient positive evidence exists to support the recognition of its associated deferred tax assets without a valuation allowance. If we conclude there is insufficient positive evidence this could result in the recognition of a valuation allowance against net deferred tax assets of up to approximately $140 million in the next 12 months.

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Results of Operations

The following table sets forth our consolidated results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018:~~2019:

Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in millions) 2019 2018 % Change 2019 2018 % Change
Revenues $ 526 $ 533 (1 %) $ 1,666 $ 1,781 (6 %)
Cost of goods sold 464 463 — % 1,461 1,110 32 %
Operating expenses⁽⁴⁾
50 57 (12 %) 150 154 (3 %)
Restructuring, impairment and plant closing and transition costs 12 428 (97 %) 24 573 (96 %)
Operating income — (415) (100 %) 31 (56) NM
Interest expense, net (10) (10) — % (31) (30) (3 %)
Other income 1 4 (75 %) 3 8 (63 %)
Income before income taxes (9) (421) (98 %) 3 (78) NM
Income tax (expense) benefit (8) 55 NM — (10) (100 %)
Net (loss) income (17) (366) (95 %) 3 (88) NM
Reconciliation of net (loss) income to adjusted EBITDA:
Interest expense, net 10 10 — % 31 30 3 %
Income tax expense (benefit) 8 (55) NM — 10 (100 %)
Depreciation and amortization 27 33 (18 %) 82 102 (20 %)
Net income attributable to noncontrolling interests (2) (2) — % (4) (6) 33 %
Other adjustments:
Business acquisition and integration expenses 2 5 3 9
Separation expense, net — — — 1
Loss on disposition of business/assets 1 — 1 2
Certain legal settlements and related expenses 2 — 3 —
Amortization of pension and postretirement actuarial losses 3 3 11 10
Net plant incident costs (credits) 4 21 17 (252)
Restructuring, impairment and plant closing and transition costs 12 428 24 573
Adjusted EBITDA⁽¹⁾
$ 50 $ 77 $ 171 $ 391
Net cash (used in) provided by operating activities $ (36) $ 306 NM
Net cash used in investing activities (101) (266) (62 %)
Net cash provided by (used in) financing activities 13 (17) NM
Capital expenditures (110) (272) (60 %)


	Three Months Ended								Six Months Ended
	June 30,								June 30,
(Dollars in millions)	2020		2019		% Change		2020		2019		% Change
Revenues	$	456	$	578	(21	%)	$	988	$	1,140	(13	%)
Cost of goods sold	411		511		(20	%)	882		997		(12	%)
Operating expenses⁽⁴⁾	46		45		2	%	88		100		(12	%)
Restructuring, impairment and plant closing and transition costs	5		—		NM		12		12		—	%
Operating (loss) income	(6)		22		NM		6		31		(81	%)
Interest expense, net	(12)		(10)		(20	%)	(22)		(21)		(5	%)
Other income	3		1		200	%	7		2		250	%
(Loss) income before income taxes	(15)		13		NM		(9)		12		NM
Income tax (expense) benefit	(2)		9		NM		—		8		(100	%)
Net (loss) income	(17)		22		NM		(9)		20		NM
Reconciliation of net (loss) income to adjusted EBITDA:
Interest expense, net	12		10		20	%	22		21		5	%
Income tax expense (benefit)	2		(9)		NM		—		(8)		(100	%)
Depreciation and amortization	28		29		(3	%)	56		55		2	%
Net income attributable to noncontrolling interests	(2)		(1)		(100	%)	(3)		(2)		(50	%)
Other adjustments:
Business acquisition and integration (adjustments) expenses	—		(1)				1		1

Loss on disposition of business/assets	—		—				2		—
Certain legal expenses/settlements	3		1				3		1
Amortization of pension and postretirement actuarial losses	4		4				7		8
Net plant incident costs	2		6				3		13
Restructuring, impairment and plant closing and transition costs	5		—				12		12
Adjusted EBITDA⁽¹⁾	$	37	$	61			$	94	$	121

Net cash used in operating activities							$	(20)	$	(50)	(60	%)
Net cash used in investing activities							(47)		(82)		(43	%)
Net cash provided by financing activities							200		17		1,076	%
Capital expenditures							(47)		(83)		(43	%)

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Three Months Ended Three Months Ended
(Dollars in millions, except per share amounts) September 30, 2019 September 30, 2018
Reconciliation of net income to adjusted net income attributable to Venator Materials PLC ordinary shareholders:
Net loss $ (17) $ (366)
Net income attributable to noncontrolling interests (2) (2)
Other adjustments:
Business acquisition and integration expenses 2 5
Loss on disposition of business/assets 1 —
Certain legal settlements and related expenses 2 —
Amortization of pension and postretirement actuarial losses 3 3
Net plant incident costs 4 21
Restructuring, impairment and plant closing and transition costs 12 428
Income tax adjustments⁽³⁾
3 (55)
Adjusted net income attributable to Venator Materials PLC ordinary shareholders⁽²⁾
$ 8 $ 34
Weighted-average shares-basic 106.6 106.4
Weighted-average shares-diluted 106.6 106.7
Net loss attributable to Venator Materials PLC ordinary shareholders per share:
Basic $ (0.18) $ (3.46)
Diluted $ (0.18) $ (3.46)
Other non-GAAP measures:
Adjusted net income per share⁽²⁾:
Basic $ 0.08 $ 0.32
Diluted $ 0.08 $ 0.32


	Three Months Ended		Three Months Ended
(Dollars in millions, except per share amounts)	June 30, 2020		June 30, 2019

Reconciliation of net (loss) income to adjusted net (loss) income attributable to Venator Materials PLC ordinary shareholders:
Net (loss) income	$	(17)	$	22
Net income attributable to noncontrolling interests	(2)		(1)
Other adjustments:
Business acquisition and integration adjustments	—		(1)



Certain legal expenses/settlements	3		1
Amortization of pension and postretirement actuarial losses	4		4
Net plant incident costs	2		6
Restructuring, impairment and plant closing and transition costs	5		—
Income tax adjustments⁽³⁾	2		(17)
Adjusted net (loss) income attributable to Venator Materials PLC ordinary shareholders⁽²⁾	$	(3)	$	14

Weighted-average shares-basic	106.7		106.6
Weighted-average shares-diluted	106.7		106.6

Net (loss) income attributable to Venator Materials PLC ordinary shareholders per share:
Basic	$	(0.18)	$	0.20
Diluted	$	(0.18)	$	0.20

Other non-GAAP measures:
Adjusted net (loss) income per share⁽²⁾:
Basic	$	(0.03)	$	0.13
Diluted	$	(0.03)	$	0.13

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		Nine months ended		Nine months ended			Six Months Ended		Six Months Ended
(Dollars in millions, except per share amounts)	(Dollars in millions, except per share amounts)	September 30, 2019		September 30, 2018		(Dollars in millions, except per share amounts)	June 30, 2020		June 30, 2019

Reconciliation of net income to adjusted net income attributable to Venator Materials PLC ordinary shareholders:
Net income (loss)		$	3	$	(88)
Reconciliation of net (loss) income to adjusted net income attributable to Venator Materials PLC ordinary shareholders:						Reconciliation of net (loss) income to adjusted net income attributable to Venator Materials PLC ordinary shareholders:
Net (loss) income						Net (loss) income	$	(9)	$	20
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	(4)		(6)		Net income attributable to noncontrolling interests	(3)		(2)
Other adjustments:	Other adjustments:					Other adjustments:
Business acquisition and integration expenses	Business acquisition and integration expenses	3		9		Business acquisition and integration expenses	1		1
Separation expense, net		—		1

Loss on disposition of business/assets	Loss on disposition of business/assets	1		2		Loss on disposition of business/assets	2		—
Certain legal settlements and related expenses		3		—
Certain legal expenses/settlements						Certain legal expenses/settlements	3		1
Amortization of pension and postretirement actuarial losses	Amortization of pension and postretirement actuarial losses	11		10		Amortization of pension and postretirement actuarial losses	7		8
Net plant incident costs (credits)		17		(252)
Net plant incident costs						Net plant incident costs	3		13
Restructuring, impairment and plant closing and transition costs	Restructuring, impairment and plant closing and transition costs	24		573		Restructuring, impairment and plant closing and transition costs	12		12
Income tax adjustments⁽³⁾	Income tax adjustments⁽³⁾	(22)		(33)		Income tax adjustments⁽³⁾	$	(7)	$	(25)
Adjusted net income attributable to Venator Materials PLC ordinary shareholders⁽²⁾	Adjusted net income attributable to Venator Materials PLC ordinary shareholders⁽²⁾	$	36	$	216	Adjusted net income attributable to Venator Materials PLC ordinary shareholders⁽²⁾	$	9	$	28

Weighted-average shares-basic	Weighted-average shares-basic	106.5		106.4		Weighted-average shares-basic	106.7		106.5
Weighted-average shares-diluted	Weighted-average shares-diluted	106.5		106.8		Weighted-average shares-diluted	106.7		106.5

Net income attributable to Venator Materials PLC ordinary shareholders per share:
Net (loss) income attributable to Venator Materials PLC ordinary shareholders per share:						Net (loss) income attributable to Venator Materials PLC ordinary shareholders per share:
Basic	Basic	$	(0.01)	$	(0.88)	Basic	(0.11)		0.17
Diluted	Diluted	$	(0.01)	$	(0.88)	Diluted	(0.11)		0.17

Other non-GAAP measures:	Other non-GAAP measures:					Other non-GAAP measures:
Adjusted net income per share⁽²⁾:	Adjusted net income per share⁽²⁾:					Adjusted net income per share⁽²⁾:
Basic	Basic	$	0.34	$	2.03	Basic	0.08		0.26
Diluted	Diluted	$	0.34	$	2.02	Diluted	0.08		0.26

NM—Not meaningful

⁽¹⁾Our management uses adjusted EBITDA to assess financial performance. Adjusted EBITDA is defined as net income/loss before interest income/expense, net, income tax expense/benefit, depreciation and amortization, and net income attributable to noncontrolling interests, as well as eliminating the following adjustments: (a) business acquisition and integration expenses/adjustments; (b) ~~separation expense/gain, net; (c)~~ loss/gain on disposition of business/assets; ~~(d)~~(c) certain legal ~~settlements and related~~ expenses/~~gains; (e)~~settlements; (d) amortization of pension and postretirement actuarial losses/gains; ~~(f)~~(e) net plant incident costs/credits; and ~~(g)~~(f) restructuring, impairment, and plant closing and transition costs/credits. We believe that net income is the performance measure calculated and presented in accordance with ~~generally accepted accounting principles in the United States ("~~U.S. ~~GAAP" or "GAAP")~~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

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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

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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~~it 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.

⁽²⁾Adjusted net income 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/adjustments; (b) ~~separation expense/gain, net; (c)~~ loss/gain on disposition of business/assets; ~~(d)~~(c) certain legal ~~settlements and related~~ expenses/~~gains; (e)~~settlements; (d) amortization of pension and postretirement actuarial losses/gains; ~~(f)~~(e) net plant incident costs/credits; and ~~(g)~~(f) restructuring, impairment, and plant closing and transition costs/credits. Basic adjusted net income per share excludes dilution and is computed by dividing adjusted net income by the weighted average number of shares outstanding during the period. Adjusted diluted net income per share reflects all potential dilutive ordinary shares outstanding during the period increased by the number of additional shares that would have been outstanding as dilutive securities.

Adjusted net income (loss) and adjusted net income (loss) per share amounts are presented solely as supplemental information. These measures exclude similar noncash items as Adjusted EBITDA in order to assist our investors in comparing our performance from period to period and as such, bear similar risks as Adjusted EBITDA as documented 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.

⁽³⁾Prior to the second quarter of 2019, the income tax impacts, if any, of each adjusting item represented 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.

Beginning in the three and six-month periods ended June 30, 2019, income tax expense is adjusted by the amount of additional tax expense or benefit that we would accrue if we used non-GAAP results instead of GAAP results in the calculation of our tax liability, taking into consideration our tax structure. We use a normalized effective tax rate of 35%, which reflects the weighted average tax rate applicable under the various jurisdictions in which we operate. This non-GAAP tax rate eliminates the effects of non-recurring and period specific items which are often attributable to restructuring and acquisition decisions and can vary in size and frequency. This rate is subject to change over time for various reasons, including changes in the geographic business mix, valuation allowances, and changes in statutory tax rates.

We eliminate the effect of significant changes to income tax valuation allowances from our presentation of adjusted net income to allow investors to better compare our ongoing financial performance from period to period. We do not adjust for insignificant changes in tax valuation allowances because we do not believe it provides more meaningful

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information than is provided under GAAP. We believe that our revised approach enables a clearer understanding of the long-term impact of our tax structure on post tax earnings.

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⁽⁴⁾As presented within Item 2, operating expenses includes selling, general and administrative expenses and other operating expense (income), net.

Three Months Ended ~~September~~June 30, ~~2019~~2020 Compared to the Three Months Ended ~~September~~June 30, ~~2018~~2019

For the three months ended ~~September~~June 30, ~~2019,~~2020, net loss was $17 million on revenues of ~~$526~~$456 million, compared with net ~~loss~~income of ~~$366~~$22 million on revenues of ~~$533~~$578 million for the same period in ~~2018.~~2019. The decrease in net ~~loss~~income of ~~$349~~$39 million was the result of the following items:

•Revenues for the three months ended ~~September~~June 30, ~~2019~~2020 decreased by $7$122 million, or 1%21%, as compared with the same period in ~~2018.~~2019. The decrease was due to a ~~$14~~$101 million decrease in revenue in our Titanium Dioxide segment and a $21 million decrease in revenue in our Performance Additives ~~segment, partially offset by a $7 million increase in revenue in our Titanium Dioxide~~ segment. See "—Segment Analysis" below.

•Our operating expenses for the three months ended ~~September~~June 30, ~~2019 decreased~~2020 increased by $7$1 million, or ~~12%~~2%, as compared with the same period in ~~2018,~~2019, primarily related to a $7$2 million ~~decrease~~increase in ~~selling, general~~other operating expenses and ~~administrative expenses which is comprised~~$4 million negative impact of ~~decreases~~foreign exchange rates partially offset by $5 million reduction of personnel related expense due to cost savings initiatives, partially in ~~depreciation expense, personnel expense, and costs related~~response to ~~the planned closure of our Pori plant incurred during the prior year period.~~COVID-19.

•Restructuring, impairment and plant closing and transition costs for the three months ended ~~September~~June 30, ~~2019 decreased~~2020 increased to ~~$12~~$5 million from ~~$428 million~~nil for the same period in ~~2018 primarily as a result of the planned closure of our Pori, Finland plant which commenced in the third quarter of 2018.~~2019. For more information concerning restructuring and plant closing activities, see "Note 7.6. Restructuring, Impairment, and Plant Closing and Transition Costs" of the notes to unaudited condensed consolidated financial statements.

•Our income tax expense for the three months ended ~~September~~June 30, ~~2019~~2020 was $8$2 million compared to income tax benefit of ~~$55~~$9 million for the same period in ~~2018.~~2019. Our income taxes are 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 ~~10.~~9. Income Taxes" of the notes to unaudited condensed consolidated financial statements.

Segment Analysis


		Three Months Ended								Percent Change Favorable (Unfavorable)		Three Months Ended						Percent Change Favorable (Unfavorable)
		September 30,												June 30,					Percent Change Favorable (Unfavorable)
(Dollars in millions)	(Dollars in millions)	2019		2018				Percent Change Favorable (Unfavorable)			2020			2019			Percent Change Favorable (Unfavorable)
Revenues	Revenues
Titanium Dioxide	Titanium Dioxide	$	396	$	389	2	%			338		$	439		(23	%)
Performance Additives	Performance Additives	130		144		(10	%)	Performance Additives	118			139			(15	%)
Total	Total	$	526	$	533	(1	%)	Total	$	456		$	578		(21	%)
Adjusted EBITDA	Adjusted EBITDA							Adjusted EBITDA
Titanium Dioxide	Titanium Dioxide	$	51	$	75	(32	%)	Titanium Dioxide	$	35		$	55		(36	%)
Performance Additives	Performance Additives	13		12		8	%	Performance Additives	13			16			(19	%)
		64		87		(26	%)		48			71			(32	%)
Corporate and Other		(14)		(10)		(40	%)
Corporate and other								Corporate and other	(11)			(10)			(10	%)
Total	Total	$	50	$	77	(35	%)	Total	$	37		$	61		(39	%)

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Three Months Ended September 30, 2019 vs. 2018
Average Selling Price⁽¹⁾
Local Currency Foreign Currency Translation Impact Mix & Other
Sales Volumes⁽²⁾
Period-Over-Period Increase (Decrease)
Titanium Dioxide (7 %) (2 %) (1 %) 12 %
Performance Additives 2 % (2 %) (2 %) (8 %)


	Three Months Ended June 30, 2020 vs. 2019
	Average Selling Price⁽¹⁾
	Local Currency		Foreign Currency Translation Impact		Mix & Other		Sales Volumes⁽²⁾
Period-Over-Period Increase (Decrease)
Titanium Dioxide	—	%	(1	%)	(1	%)	(21	%)
Performance Additives	3	%	(1	%)	(1	%)	(16	%)

⁽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 ~~$396~~$338 million infor the three months ended ~~September~~June 30, ~~2019, an increase~~2020, a decrease of $7$101 million, or 2%23%, compared to the same period in ~~2018.~~2019. The ~~increase~~decrease was primarily due to a ~~12% increase in sales volumes, partially offset by a 7%~~21% decline in ~~the average~~ TiO₂ ~~selling price,~~sales volumes, a 2%1% unfavorable impact from foreign currency translation and a 1% unfavorable impact due to mix and other. ~~Sales~~TiO₂ sales volumes ~~increased compared~~declined across all product categories and regions, most notably in Europe, primarily due to ~~the prior year quarter~~lower demand as a result of ~~higher sales~~the impact of ~~new products, increased product availability at certain manufacturing sites and increased demand.~~COVID-19. The ~~decline in the~~ average TiO₂ selling price ~~was primarily attributable~~remained stable compared to ~~lower global average functional TiO~~₂ ~~prices with regional variations.~~the prior year period and the first quarter of 2020.

Adjusted EBITDA for the Titanium Dioxide segment was ~~$51~~$35 million for the three months ended ~~September~~June 30, ~~2019,~~2020, a decrease of ~~$24~~$20 million compared to the same period in ~~2018.~~2019. The decline was primarily as a result of ~~lower~~a decline in overall TiO₂ ~~margins driven by a lower average TiO~~₂ ~~selling price, higher raw material costs and unfavorable fixed cost absorption related to planned maintenance.~~sales volumes. This was partially offset by ~~higher TiO~~₂ ~~sales volumes~~a reduction in costs, primarily related to actions taken in response to the COVID-19 pandemic, and a $5benefit of more than $3 million ~~benefit~~ from our 2019 Business Improvement Program. In the third quarter of 2019, we had a $6 million benefit due to a change in plant utilization rates, which increased our overhead absorption and corresponding inventory valuation at certain facilities.

Performance Additives

The Performance Additives segment generated ~~$130~~revenues of $118 million ~~of revenues in~~for the three months ended ~~September~~June 30, ~~2019,~~2020, a decline of ~~$14~~$21 million, or ~~10%~~15%, compared to the same period in ~~2018.~~2019. The decline was primarily ~~due~~attributable to ~~an 8%~~a 16% decrease in sales volumes, a 2%1% unfavorable impact of mix and other and a 1% unfavorable impact of foreign currency translation, ~~and a 2% unfavorable impact of mix and other,~~ partially offset by a 2%3% increase in the average selling price. The decline in sales volumes was primarily ~~attributable to~~a result of lower ~~sales into construction-related applications, softer~~ demand in ~~coatings~~our color pigments and ~~plastics, principally related~~functional additives businesses due to ~~automotive and electronics end-use applications and a discontinuation~~the impact of ~~sales of a product to a timber treatment customer.~~the COVID-19 pandemic. The average selling price increased ~~due to the~~primarily as a result of favorable mix ~~of sales~~ within our ~~functional additives,~~color pigments and timber treatment ~~and color pigments~~ businesses.

Adjusted EBITDA infor the Performance Additives segment was $13 million ~~an increase of $1 million~~ for the three months ended ~~September~~June 30, ~~2019~~2020, a decrease of $3 million compared to the same period in ~~2018. A higher average price, lower overhead~~2019. The decrease was primarily attributable to a decline in sales volumes due to the impact of COVID-19, partially offset by a reduction in costs, primarily related to actions taken in response to the COVID-19 pandemic, and a $2benefit of less than $1 million ~~benefit~~ from our 2019 Business Improvement Program was offset by lower sales volumes. In the third quarter of 2019, we had a $2 million benefit due to a change in plant utilization rates, which increased our overhead absorption and corresponding inventory valuation at certain facilities.Program.

Corporate and ~~Other~~other

Corporate and ~~Other~~other represents expenses which are not allocated to our segments. Losses from Corporate and ~~Other~~other were ~~$14~~$11 million ~~or $4 million higher~~ in the three months ended ~~September~~June 30, ~~2019~~2020, or $1 million higher compared to the same period in ~~2018.~~2019. This was primarily as a result of ~~the~~ unfavorable ~~impact of~~ foreign currency ~~translation, partially offset by a $1~~translation. We expect Corporate and other to be approximately $45 million ~~benefit from our 2019 Business Improvement Program.~~

for the full year 2020.

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~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 Compared to the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019

For the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, net ~~income~~loss was $3$9 million on revenues of ~~$1,666~~$988 million, compared with net ~~loss~~income of ~~$88~~$20 million on revenues of ~~$1,781~~$1,140 million for the same period in ~~2018.~~2019. The ~~increase~~decrease of ~~$91~~$29 million in net income was the result of the following items:

•Revenues for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 decreased by ~~$115~~$152 million, or 6%13%, as compared with the same period in ~~2018.~~2019. The decrease was due to a ~~$40~~$124 million, or 3%14%, decline in revenue in our Titanium Dioxide segment ~~primarily related to lower average TiO~~₂ ~~selling prices partially offset by higher volumes,~~ and a ~~$75~~$28 million, or ~~16%~~10%, decline in revenue in our Performance Additives segment, primarily due to lower sales volumes. See “—Segment Analysis” below.

•Cost of goods sold for the nine months ended September 30, 2019 increased by $351 million from the same period in the prior year primarily as a result of the recognition of $325 million of insurance proceeds which was a credit to cost of goods sold in 2018.

•Our operating expenses for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 decreased by $4$12 million, or 3%12%, as compared with the same period in ~~2018,~~2019, primarily related to a ~~$16~~$14 million savings from personnel ~~reductions,~~related expense due to cost savings initiatives, partially in response to COVID-19, partially offset by a $4$1 million ~~decrease~~increase in other operating expenses in 2020 and ~~a $7~~$1 million ~~decline in depreciation expense, partially offset by a $14 million increase as a result of carbon credits sold in 2018 and an $8 million increase due to the negative impacts~~unfavorable impact of foreign exchange rates.

•Restructuring, impairment and plant closing and transition costs for the ~~nine~~six months ended ~~September~~June 30, ~~2019 decreased~~2020 was $12 million compared to ~~$24 million from $573~~$12 million for the same period in 2018 primarily as a result of the closure of a portion of our Augusta, Georgia plant in the second quarter of 2018 and the planned closure of our plant in Pori, Finland beginning in the third quarter of 2018.2019. For more information concerning restructuring activities, see "Note 7.6. Restructuring, Impairment, and Plant Closing and Transition Costs" of the notes to unaudited condensed consolidated financial statements.

•Our income tax expense for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was nil compared to ~~$10~~income tax benefit of $8 million for the same period in ~~2018.~~2019. Our income tax expense is significantly affected by the mix of income and losses in the tax jurisdictions in which we operated, as impacted by the presence of valuation allowances in certain tax jurisdictions. For further information concerning taxes, see "Note ~~10.~~9. Income Taxes" of the notes to unaudited condensed consolidated financial statements.

~~Segment Analysis~~

Nine Months Ended Percent Change Favorable (Unfavorable)
September 30,
(Dollars in millions) 2019 2018
Revenues
Titanium Dioxide $ 1,260 $ 1,300 (3 %)
Performance Additives 406 481 (16 %)
Total $ 1,666 $ 1,781 (6 %)
Segment adjusted EBITDA
Titanium Dioxide $ 167 $ 365 (54 %)
Performance Additives 44 59 (25 %)
211 424 (50 %)
Corporate and Other (40) (33) (21 %)
Total $ 171 $ 391 (56 %)

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Nine Months Ended September 30, 2019 vs. 2018
Average Selling Price⁽¹⁾
Local Currency Foreign Currency Translation Impact Mix & Other
Sales Volumes⁽²⁾
Period-Over-Period Increase (Decrease)
Titanium Dioxide (7 %) (4 %) — % 8 %
Performance Additives — % (2 %) — % (14 %)
Segment Analysis


	Six Months Ended						Percent Change Favorable (Unfavorable)
	June 30,
(Dollars in millions)	2020		2019
Revenues
Titanium Dioxide	$	740	$	864	(14	%)
Performance Additives	248		276		(10	%)
Total	$	988	$	1,140	(13	%)
Segment adjusted EBITDA
Titanium Dioxide	$	81	$	116	(30	%)
Performance Additives	35		31		13	%
	116		147		(21	%)
Corporate and other	(22)		(26)		15	%
Total	$	94	$	121	(22	%)


	Six Months Ended June 30, 2020 vs. 2019
	Average Selling Price⁽¹⁾
	Local Currency		Foreign Currency Translation Impact		Mix & Other		Sales Volumes⁽²⁾
Period-Over-Period Increase (Decrease)
Titanium Dioxide	(1	%)	(1	%)	(1	%)	(11	%)
Performance Additives	2	%	(1	%)	(1	%)	(10	%)

⁽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 ~~$1,260~~$740 million infor the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, a decrease of ~~$40~~$124 million, or 3%14%, compared to the same period in ~~2018.~~2019. The ~~decline~~decrease was primarily ~~due~~attributable to an 11% decline in TiO₂ sales volumes, a 7%1% decrease in the average TiO₂ selling price, ~~and~~ a 4%1% unfavorable impact of foreign ~~exchange rates, partially offset by an 8% increase~~currency translation and a 1% unfavorable impact due to mix and other. The decline in TiO₂sales ~~volumes. The decrease~~volumes was primarily a result of the impact of the COVID-19 pandemic on demand in the ~~average selling price~~second quarter of 2020. The decline in demand was ~~primarily attributable to lower European prices~~broadly across all regions and ~~softer business conditions in Asia Pacific. Sales volumes increased in both~~for functional, differentiated and specialty TiO₂ ~~due to~~products, and partially offset by higher ~~availability of certain products, increased sales of~~demand for new products and ~~higher demand.~~for plastics applications. The average TiO₂ selling price was approximately stable compared to the prior year period.

Adjusted EBITDA for ~~our~~the Titanium Dioxide segment ~~decreased $198~~was $81 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020, a decrease of $35 million, or 30%, compared to the same period in ~~2018.~~2019. The ~~decrease~~decline was primarily a result of ~~lower~~a decline in overall TiO₂ ~~margins, due to~~sales volumes as a ~~lower average TiO~~₂ ~~selling price,~~result of the impact of COVID-19 and higher ~~raw material costs, $14 million of carbon credits sold in the nine months ended September 30, 2018 and $41 million of lost earnings attributable to our Pori, Finland TiO~~₂ ~~manufacturing facility, which were reimbursed through insurance proceeds in the comparable period of 2018. The decline~~ore costs. This was partially offset by ~~higher sales volumes,~~an improvement in other costs, including selling, general and administrative costs, primarily related to actions taken in response to the COVID-19 pandemic, a ~~$6 million benefit due to a change~~decline in ~~plant utilization which increased our overhead absorption rates at certain facilities~~other raw material costs, and a ~~$10~~benefit of approximately $7 million ~~benefit~~ from our 2019 Business Improvement Program.

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Performance Additives

The Performance Additives segment generated ~~$406~~revenue of $248 million ~~of revenue in~~for the ~~nine~~six months ended ~~September~~June 30, ~~2019, which is $75~~2020, a decline of $28 million, or ~~16%~~10%, ~~lower~~ compared to the same period in ~~2018 resulting from~~2019. The decline was primarily due to a ~~14%~~10% decrease in sales volumes, a 1% unfavorable impact of mix and other and a 2%1% unfavorable impact of foreign ~~exchange rates. Sales~~currency translation, partially offset by a 2% increase in the average selling price. The decline in sales volumes ~~reflect~~was primarily a result of lower ~~construction activity in North America, softer~~ demand for color pigments and functional additives products ~~used in automotive, electronics, plastics and coatings applications,~~due to the impact of ~~plant shutdowns as part of prior restructuring actions~~COVID-19 on demand for construction, coatings and ~~a discontinuation of sales of a product to a timber treatment customer.~~automotive end-use applications. The average selling price ~~remained stable compared to the prior year period due to the composition~~increased primarily as a result of ~~sales~~favorable mix within our ~~functional additives,~~color pigments and timber treatment ~~and color pigments~~ businesses.

Adjusted EBITDA in ~~our~~the Performance Additives segment ~~decreased by $15~~was $35 million, an increase of $4 million, or ~~25%~~13%, for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the same period in ~~2018,~~2019. The increase was primarily ~~due lower sales volumes~~attributable to an improvement in manufacturing costs, including raw materials and energy costs, and selling general and administrative costs primarily related to actions taken in response to the COVID-19 pandemic and a benefit of approximately $1 million from our 2019 Business Improvement Program, and partially offset by ~~lower costs,~~ a ~~$2 million benefit~~decline in sales volumes due to ~~a change in plant utilization which increased our overhead absorption rates at certain facilities and a $4 million benefit from our Business Improvement Program.~~the impact of COVID-19.

Corporate and ~~Other~~other

Corporate and ~~Other~~other represents expenses which are not allocated to our segments. Losses from Corporate and ~~Other~~other were ~~$40~~$22 million, or $7$4 million ~~higher~~lower for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 than the same period in ~~2018~~2019. This was primarily as a result ~~the timing~~ of ~~the unfavorable impact~~lower costs in various corporate functions and a benefit of ~~foreign currency translation arising from weakness in the Euro versus the U.S. Dollar, partially offset by a~~ $1 million ~~benefit~~ from our 2019 Business Improvement Program.

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Liquidity and Capital Resources

We had cash and cash equivalents of ~~$40~~$188 million and ~~$165~~$55 million as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, 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, as Issuers, and borrowings of $375 million under the Term Loan Facility.~~ ~~A payable to Huntsman for a liability pursuant to the Tax Matters Agreement has been presented as "Noncurrent payable to affiliates" on our unaudited condensed consolidated balance sheets.~~

~~In addition to the Senior Notes and the Term Loan Facility, we entered into the ABL Facility.~~ ~~On June 20, 2019 the~~an ABL Facility ~~was increased to~~with an available aggregate principal amount of up to $350 ~~million with no change to the maturity dates.~~million. 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~~fluctuates 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 ~~September~~June 30, ~~2019~~2020 is ~~in excess of~~ approximately $289 million~~$295 million,~~, of which ~~$285~~$265 million is available to be drawn.

As we cannot predict the duration or scope of the COVID-19 pandemic and its impact on our customers and suppliers, the potential adverse financial impact to our results cannot be reasonably estimated, but could be material. We are actively managing the business to improve cash flow and ensure adequate liquidity, which we believe will help us emerge from this environment a stronger and more resilient company. Such measures, which are incremental to ongoing improvement programs, include implementing additional actions to reduce costs, managing our production network to align with customer demand, managing our inventories and reducing planned capital expenditures. In addition, various governments in the countries and localities in which we operate have established economic relief and stimulus programs to support their economies during the COVID-19 pandemic. We are participating in certain smaller value programs and we continue to assess the potential for the impact that other programs may have on our liquidity as they become available. We may also seek to take advantage of opportunities to raise or refinance capital through debt financing, and may, from time to time, discuss such opportunities with potential lenders or investors.

Items Impacting Short-Term and Long-Term Liquidity

Our liquidity can be significantly impacted by various ~~factors.~~factors in addition to those described below. The following matters had, or are expected to have, a significant impact on our liquidity:

•Cash invested in our accounts receivable and inventory, net of accounts payable, as reflected in our unaudited condensed consolidated statements of cash flows decreased by ~~$26~~$33 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 as compared to the same period in the prior year. We expect ~~volatility in~~ our working capital ~~components~~ to ~~continue due~~be a source of liquidity in 2020 as we take measures to ~~seasonal changes~~respond to the impact of the COVID-19 pandemic, which are

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incremental to efforts already in ~~working capital throughout the year.~~place, including managing our production network and inventory levels to align with customer demand.

•We expect to spend approximately ~~$115~~$60 million on capital expenditures during ~~2019.~~ 2020, which reflects a decrease from the expected 2020 capital expenditures of $80 million to $90 million reported in the fourth quarter of 2019, primarily as a result of actions we expect to take to preserve liquidity in response to the impact of the COVID-19 pandemic.

•Our future capital expenditures include certain EHS maintenance and upgrades, planned 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 specialty and differentiated manufacturing from Pori, Finland to other sites within our manufacturing network. This excludes other Pori site capital expenditures. We expect to fund this spending with cash on hand as well as cash provided by operations and borrowings.

•During the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, we made contributions to our pension and postretirement benefit plans of ~~$27~~$12 million. During the remainder of ~~2019,~~2020, we expect to contribute an additional amount of approximately ~~$10~~$23 million to these plans.

•We are involved in a number of cost reduction programs for which we have established restructuring accruals. As of ~~September~~June 30, ~~2019~~,2020, we had ~~$16~~$12 million of accrued restructuring costs of which $8$6 million is classified as current. We expect to incur additional restructuring and plant closing costs of approximately ~~$14~~$10 million, including $5$1 million for noncash charges, and pay approximately ~~$12~~$16 million through the remainder of ~~2019.~~2020. For further discussion of these plans and the costs involved, see "Note 7.6. Restructuring, Impairment, and Plant Closing and Transition Costs" of the notes to unaudited condensed consolidated financial statements.

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•In the fourth quarter of 2018, we commenced ~~additional~~our 2019 Business Improvement Program and have delivered $28 million of savings through the second quarter of 2020, $4 million of which was achieved in the second quarter of 2020. We continue to expect that when fully implemented, this cost ~~reduction initiatives which are expected to~~and operational improvement program will provide approximately $40 million of annual adjusted EBITDA benefit compared to year-end 2018. ~~$5 million has been paid through September 30, 2019 to implement these initiatives and is included in the restructuring expenditures discussed above.~~ We currently expect to ~~pay an additional $8 million of restructuring and capital expenditures to implement this program. We expect actions will be complete in 2020, ending~~end the year at the full run-rate ~~level.~~level; however, the timing, constituent elements and expected benefit may be adjusted in response to the COVID-19 pandemic We continue to evaluate the impact of COVID-19 on our 2019 Business Improvement Program.

•In the first quarter of 2020, and in response to the expected adverse impact of the COVID-19 pandemic, we implemented a range of measures to reduce our costs. These measures include reducing employee compensation, including a reduction in salaries, changes and reductions to bonus schemes and employee furloughs, and reduced spending on other discretionary items. In the second quarter of 2020, we delivered $7 million of savings related to these actions.

•On January 30, 2017, our TiO₂ manufacturing facility in Pori, Finland, experienced fire damage. We are in the process of closing our Pori, Finland, TiO₂ manufacturing facility and transferring ~~the production of~~our specialty and differentiated ~~product grades~~business to other sites ~~within~~in our ~~existing~~manufacturing network. ~~In the first nine months of 2019, we had capital expenditures of $37 million related to project wind-down and closure costs.~~ We intend 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 do not expect any material capital expenditures relating to the transfer during 2020. We intend to optimize the remaining transfer of our specialty and differentiated business from our Pori, Finland manufacturing site to other sites in our manufacturing network, but the timing of this transfer will be elongated, due in part to the COVID-19 pandemic, and may result in a lower total expected capital outlay and a lower associated adjusted EBITDA benefit than originally estimated.

•In ~~August 2019,~~the first quarter of 2020, we ~~terminated~~initiated consultations with employee representatives on a proposal to restructure our manufacturing facility at our German operations. Until the ~~three cross-currency swaps entered into in 2017, resulting in~~consultation process is concluded, the restructuring is not considered probable, and the total potential costs associated with this contemplated proposal, which are expected to be significant, cannot be determined. If the consultation process is successfully concluded, the Company would expect, at that time, to record charges related to the program including employee severance costs, accelerated depreciation and other costs associated with restructuring our

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manufacturing facility. The amount and timing of the recognition of these charges and the related cash ~~proceeds~~expenditures will depend on a number of ~~$15 million.~~factors, including the timing of the completion of the consultation process and the negotiated elements of the associated plan. We expect the cash benefit of this potential restructuring to more than offset cash expenditures to be incurred for its implementation.

•We have ~~$733~~$945 million in ~~aggregate principal~~debt outstanding ~~consisting~~under our $371 million Term Loan Facility, $214 million of ~~$371~~9.5% Senior Secured Notes due 2025 and $360 million of 5.75% Senior Unsecured Notes due ~~2025,~~2025. Through June 30, 2020, we are in compliance with all applicable financial covenants included in the terms of our Senior Credit Facility, Senior Secured Notes and Senior Unsecured Notes. In July 2017, the U.K.'s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. We are currently evaluating the potential effect of the eventual replacement of LIBOR on our financial statements. Accounting guidance has been recently issued to ease the transition to alternative reference rates from a ~~$362 million Term Loan Facility.~~financial reporting perspective. See "Note 2. Recently Issued Accounting Pronouncements" of the notes to unaudited condensed consolidated financial statements. See further discussion under "Financing Arrangements."

As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019, we had ~~$16~~$7 million and $8$13 million, respectively, classified as current portion of debt.

As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019, we had ~~$14~~$12 million and ~~$36~~$16 million, respectively, of cash and cash equivalents held outside of the U.S. and Europe, including our variable interest entities. As of ~~September~~June 30, ~~2019~~2020, our non-U.K. subsidiaries have no plan to distribute funds in a manner that would cause them to be subject to U.K., or other local country taxation. In the first quarter of 2019, a non-U.K. subsidiary distributed $12 million to a U.K. subsidiary subject to a 5% withholding tax.

Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020 Compared to the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019

Net cash used in operating activities was ~~$36~~$20 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019 while net cash provided by operating activities was $306~~2020, compared to $50 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The ~~unfavorable~~favorable variance in net cash ~~from~~used in operating activities for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared with the same period in ~~2018~~2019 was primarily attributable to a ~~$534~~$41 million ~~decrease~~favorable variance in ~~noncash restructuring~~operating assets and ~~impairment charges as a result of the closure of a portion of our Augusta, Georgia plant and the planned closure of our Pori, Finland facility both announced in 2018~~liabilities and a ~~$20~~$9 million ~~decrease~~favorable variance in ~~depreciation and amortization,~~deferred income taxes for 2020 as compared with the same period in 2019, partially offset by a ~~$91~~$29 million ~~increase~~decrease in net income as described in "—Results of Operations" ~~above and a $112 million favorable variance in operating assets and liabilities for 2019 as compared with the same period in 2018.~~above.

Net cash used in investing activities was ~~$101~~$47 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, compared to ~~$266~~$82 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The decrease in net cash used in investing activities was primarily attributable to a decrease in capital expenditures of ~~$162 million as a result of higher capital expenditures related to our TiO~~₂ ~~manufacturing facility in Pori, Finland in the prior year period.~~$36 million.

Net cash provided by financing activities was ~~$13~~$200 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, compared to $17 million ~~used in~~provided by financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The ~~decrease~~increase in net cash ~~used in~~provided by financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared with the same period in ~~2018~~2019 was primarily attributable to ~~$15 million received from the termination of a cash flow hedge derivative, $9~~$221 million of proceeds from issuance of ~~short-term~~long-term debt, ~~and a $7~~partially offset by $24 million decrease in ~~repayment of long-term debt.~~net borrowings under the ABL Facility.

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Changes in Financial Condition

The following information summarizes our working capital as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019:


(Dollars in millions)	(Dollars in millions)	September 30, 2019		December 31, 2018		Increase (Decrease)		Percent Change		(Dollars in millions)	June 30, 2020		December 31, 2019		Increase (Decrease)		Percent Change
Cash and cash equivalents	Cash and cash equivalents	$	40	$	165	$	(125)	(76	%)	Cash and cash equivalents	$	188	$	55	$	133	242	%
Accounts receivable, net	Accounts receivable, net	358		351		7		2	%	Accounts receivable, net	319		321		(2)		(1	%)
Accounts receivable from affiliates	Accounts receivable from affiliates	8		—		8		NM		Accounts receivable from affiliates	13		—		13		NM
Inventories	Inventories	496		538		(42)		(8	%)	Inventories	487		513		(26)		(5	%)
Prepaid expenses	Prepaid expenses	24		20		4		20	%	Prepaid expenses	10		21		(11)		(52	%)
Other current assets	Other current assets	64		51		13		25	%	Other current assets	58		67		(9)		(13	%)
Total current assets	Total current assets	$	990	$	1,125	$	(135)	(12	%)	Total current assets	$	1,075	$	977	$	98	10	%
Accounts payable	Accounts payable	273		382		(109)		(29	%)	Accounts payable	242		334		(92)		(28	%)
Accounts payable to affiliates	Accounts payable to affiliates	14		18		(4)		(22	%)	Accounts payable to affiliates	15		17		(2)		(12	%)
Accrued liabilities	Accrued liabilities	108		135		(27)		(20	%)	Accrued liabilities	99		116		(17)		(15	%)
Current operating lease liability	Current operating lease liability	8		—		8		NM		Current operating lease liability	8		8		—		—
Current portion of debt	Current portion of debt	16		8		8		100	%	Current portion of debt	7		13		(6)		(46	%)
Total current liabilities	Total current liabilities	$	419	$	543	$	(124)	(23	%)	Total current liabilities	$	371	$	488	$	(117)	(24	%)
Working capital	Working capital	$	571	$	582	$	(11)	(2	%)	Working capital	$	704	$	489	$	215	44	%

Our working capital decreased by ~~$11~~$215 million as a result of the net impact of the following significant changes:

•Cash and cash equivalents ~~decreased~~increased by ~~$125~~$133 million primarily due to inflows of $200 million provided by financing activities, partially offset by outflows of ~~$36~~$20 million from operating activities and ~~$101~~$47 million from investing activities ~~partially offset by inflows~~as described in the statement of ~~$13 million provided by financing activities.~~cash flows analysis above.

•Accounts receivable ~~increased~~decreased by $7$2 million, ~~primarily due~~or less than 1%, from December 31, 2019 to ~~seasonally higher revenues~~June 30, 2020. Collections on accounts receivable during the first half of 2020 have not been materially impacted by COVID-19 although we cannot currently predict the impact that the pandemic will have in ~~the third quarter of 2019 compared to the fourth quarter of 2018.~~future periods.

•Inventory decreased ~~$42~~$26 million ~~reflecting lower levels of finished goods~~ at ~~September~~June 30, ~~2019~~2020 as compared to the prior year end reflecting a decrease in raw materials as ~~a result of seasonality and efforts across the organization to~~we manage our inventory levels ~~partially offset by an $8 million increase~~to respond to reductions in ~~inventory due to a change in plant utilization rates which increased our overhead absorption and corresponding inventory valuation at certain facilities in~~customer demand during the ~~third quarter of 2019.~~COVID-19 pandemic.

•Accounts payable decreased by ~~$113~~$94 million primarily as a result of $25 million less in capital accruals and the impact of timing of cash payments versus the receipt of raw ~~materials and a $42 million reduction in capital accruals.~~materials.

•Accrued liabilities decreased by ~~$27~~$17 million primarily due to a ~~reduction~~decrease in accrued ~~interest and accrued payroll which is a reflection of the timing of the payments versus the amounts accrued at September 30, 2019 as compared to December 31, 2018.~~

•~~Current operating lease liability increased by $8 million as a result of the adoption of ASU No. 2016-02,~~ ~~Leases (Topic 842)~~ in the first quarter of 2019. See "Note 2. Recently Issued Accounting Pronouncements" of the notes to unaudited condensed consolidated financial statements for further discussion of the implementation of this accounting standard.compensation costs.

•Current portion of debt ~~increased~~decreased by $8$6 million primarily due to net payments on notes payable during the ~~issuance~~first half of ~~short-term debt during 2019.~~2020.

Financing Arrangements

For a discussion of financing arrangements see "Note 8.7. Debt" of the notes to unaudited condensed consolidated financial statements.

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Restructuring, Impairment and Plant Closing and Transition Costs

For a discussion of our restructuring plans and the costs involved, see "Note 7.6. Restructuring, Impairment, and Plant Closing and Transition Costs" of the notes to unaudited condensed consolidated financial statements.

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Legal Proceedings

For a discussion of legal proceedings, see "Note ~~12.~~11. Commitments and Contingencies—Legal Matters" of the notes to unaudited condensed consolidated financial statements.

Environmental, Health and Safety Matters

As noted in the ~~2018~~2019 Form 10-K, specifically within "Part I. Item 1. Business—Environmental, Health and Safety Matters" and "Part I. Item 1A. Risk Factors," 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-term effect of any of these regulations or proposals on our future financial condition. For a discussion of EHS matters, see "Note ~~13.~~12. Environmental, Health and Safety Matters" of the notes to unaudited condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

For a discussion of recently issued accounting pronouncements, see "Note 2. Recently Issued Accounting Pronouncements" of the notes to unaudited condensed consolidated 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 unaudited condensed consolidated financial statements. There have been no changes to our critical accounting policies or estimates. See the Company’s critical accounting policies in "Part 2. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies" in the ~~2018~~2019 Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks, such as changes in interest rates, foreign exchange rates, and commodity prices. 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 ~~$362~~$371 million at ~~September~~June 30, ~~2019.~~2020. A hypothetical 1% increase in interest rates on our floating rate debt as of ~~September~~June 30, ~~2019~~2020, 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.~~exchange, including the impact of the COVID-19 pandemic. 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

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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 ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, we had ~~$73~~$72 million and ~~$89~~$75 million, respectively,

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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 exchanging a notional amount of $200 million at a fixed rate of 5.75% for €169 million with a fixed annual rate of 3.43%. These hedges were 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 was the best estimate of the repayment date of the intercompany loans.

In August 2019 ~~we terminated the three cross-currency swaps entered into in 2017, resulting in cash proceeds of $15 million. Concurrently,~~ we entered into three new fixed to fixed cross-currency swaps which notionally exchanged $200 million at a fixed rate of 5.75% for €181 million on which a weighted average rate of 3.73% is payable. The cross-currency swaps have been designated as cash flow hedges of a fixed rate U.S. Dollar intercompany loan and the economic effect is to eliminate uncertainty on the U.S. Dollar cash flows. The cross-currency swaps are set to mature July 2024, which is the best estimate of the repayment date on the intercompany loan.

During ~~2019,~~2020, the changes in accumulated other comprehensive loss associated with these cash flow hedging activities was a gain of ~~$10~~$9 million.

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 ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As required by Rule 13-a 15(b) under 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 Quarterly Report. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of ~~September~~June 30, ~~2019,~~2020, 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 Security and Exchange Commission’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.

Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting during the three months ended ~~September~~June 30, ~~2019~~2020 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). However, we can only give reasonable assurance that our internal control over financial reporting will prevent or detect material misstatements on a timely

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basis. Ineffective internal control over financial reporting could cause investors to lose confidence in our reported financial information and could result in a lower trading price for our securities. We have determined that no material changes to our internal controls over financial reporting are required in response to the measures we have taken related to the COVID-19 pandemic, including remote working arrangements for many of our employees. We are continually monitoring and assessing the impact of COVID-19 on our internal controls in an effort to ensure that our internal controls respond to any changes in our operating environment.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~Other than~~Except as ~~described~~set forth below, ~~during the three months ended September 30, 2019,~~ there have been no material developments with respect to ~~material~~the legal proceedings referenced in ~~“Part I.~~Part I, Item ~~3. Legal Proceedings”~~3 of our ~~2018~~Annual Report on Form 10-K ~~and in "Part II. Item 1. Legal Proceedings" of our quarterly report on Form 10-Q~~ for the ~~quarter~~year ended ~~June 30,~~December 31, 2019.

Shareholder Litigation

~~The plaintiffs in these cases seek to determine that the proceedings should be certified as class actions and to obtain alleged compensatory damages, costs, rescission and equitable relief.~~

The cases filed in the Dallas District Court ~~have been~~were consolidated into a single action,In re Venator Materials PLC Securities Litigation. On October 29, 2019, the U.S. District Court for the Southern District of New York entered an order transferring the case brought by the city of Miami General Employees' & Sanitation Employees' Retirement Trust to the U.S. District Court for the Southern District of Texas, where we expect it to be consolidated with the case brought by the Cambria County Employees' Retirement Trust.

On May 8, 2019, we filed a ~~“special appearance”~~"special appearance" in the Dallas District Court action contesting the court’s jurisdiction over the Company and a motion to transfer venue to Montgomery County, Texas and on June 7, 2019 we and certain defendants filed motions to dismiss. On July 9, 2019, a hearing was held on certain of these motions, which were subsequently denied. On ~~October 3, 2019, a hearing was held on our motion to dismiss under the Texas Citizens Participation Act, which was subsequently denied.On October 22, 2019, we and other defendants filed a Petition for Writ of Mandamus in~~January 21, 2020, the Court of Appeals for the Fifth District of Texas ~~seeking relief~~reversed the Dallas District Court’s order that denied the special appearances of Venator and certain other defendants, and rendered judgment dismissing the claims against Venator and certain other defendants for lack of jurisdiction. The Court of Appeals also remanded the case for the Dallas District Court to enter an order transferring the claims against Huntsman to the Montgomery County District Court. On March 19, 2020, plaintiffs from the Dallas District ~~Court’s denial of defendants’ Rule 91a motions to dismiss. We also intend to appeal~~Court case filed suit in New York State Court (New York County) against Venator and the ~~denial of our~~other defendants dismissed from the Dallas District Court case, making substantially the same allegations as were filed in the Dallas District Court. On July 31, 2020, Venator and the other defendants filed a motion to dismiss all claims in the New York State Court case.

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~~Tronox Litigation~~

On April 26, 2019, we acquired intangible assets related to the European paper laminates product line from Tronox. A separate agreement with Tronox entered into on July 14, 2018 requires that Tronox promptly pay us a “break fee” of $75 million upon the consummation of Tronox’s merger with Cristal once the sale of the European paper laminates business to us was consummated, if the sale of Cristal’s Ashtabula manufacturing complex to us was not completed. The deadline for such payment was May 13, 2019. On April 26, 2019, Tronox publicly stated that it believes it is not obligated to pay the break fee.

ITEM 1A. RISK FACTORS

As of the date of this filing, the Company and its operations continue to be subject to the risk factors previously disclosed in "Part I. Item 1A. Risk Factors" of our ~~2018~~2019 Form ~~10-K and in "Part II. Item 1A. Risk Factors" to of our quarterly report on Form 10-Q for the quarter ended June 30, 2019.~~10-K. In addition to these risk factors, the following risk factors are applicable to us:

~~The classification of TiO~~₂Declines in worldwide economic conditions as a ~~Category 2 Carcinogen in~~result of the ~~EU, or any increased regulatory scrutiny, could decrease~~COVID-19 pandemic have caused demand for our products to decrease and have adversely affected our business and we expect to continue to experience lower demand.

The COVID-19 pandemic has caused a significant global economic slowdown. Demand for our products has declined and our business has been adversely affected. Sales volumes decreased by approximately 19% in the second quarter of 2020 compared to the prior year period. Our products are used in housing, construction and "quality of life" end-use applications for which demand historically has been linked to global, regional and local gross domestic product and discretionary spending, which can be negatively impacted by regional and world events or economic conditions such as the COVID-19 pandemic. We have previously experienced significant revenue deterioration due to downturns in the global economy. Our industry is also affected by seasonal shifts in demand, subject usto global, regional, end-use applications and other factors. Selling prices for our products are one of the main factors that affect the level of our profitability. In addition, our margins are impacted by significant changes in major input costs such as energy, raw material and other feedstocks.

We are unable to predict the duration or severity of the current economic downturn, nor are we able to predict the timing, duration or severity of any future downturns in the chemical industry or our customers’ industries. During downturns and periods of decreasing demand, including the current downturn, our revenues are reduced, and we typically experience greater pricing pressure and shifts in products and mix. In particular, greater substitution of product imports from China may occur. Uncertain and volatile economic, political, public health or business conditions in any of the regions in which we operate can impact demand for our products. These conditions can cause material adverse changes in our results of operations and financial condition, including:

•a decline in demand for our products, which will have an immediate impact on our revenues;

•lower utilization of our manufacturing facilities as a result of measures taken to respond to such conditions, the health and well-being of our employees, availability of goods and services necessary to operate our plant, and other factors that could influence our plant utilization, which could lead to lower margins;

•potential impairment charges relating to manufacturing equipment or other long-lived assets, to the extent that any downturn indicates that the carrying amount of the asset may not be recoverable;

•greater challenges in forecasting results of operations, making business decisions, and ~~waste disposal regulations that~~identifying and prioritizing business risks;

•additional cost reduction efforts, including additional restructuring activities, which may adversely affect our ability to capitalize on opportunities;

•an increase in reserves for accounts receivable due to our customers' inability to pay us; and

•higher financing costs which could ~~significantly increase~~impact our ~~costs.~~ability to invest in our business.

The EUCOVID-19 pandemic has ~~adopted~~caused us to experience lower demand and we expect to experience additional adverse impacts, but we cannot predict the ~~Globally Harmonised System of~~degree to which they will occur. For the ~~United Nations for~~three months ended June 30, 2020, we experienced a ~~uniform system for~~decline in orders across our business reflecting the ~~classification, labelling~~economic downturn and packaging of chemical substances in Regulation (EC) No 1272/2008 (the "CLP"). Pursuant to the CLP, an EU Member State can propose a classification for a substance to the European Chemicals Agency ("ECHA"), which upon review by ECHA’s Committee for Risk Assessment (the "RAC"), can be submitted to the European Commission for adoption by regulation. On May 31, 2016, the French Agency for Food, Environmental and Occupational Health and Safety ("ANSES") submitted a proposal to ECHA that would classify TiO₂ as a Category 1B Carcinogen presumed to have carcinogenic potential for humans by inhalation. On June 8, 2017, the RAC announced its preliminary conclusion that certain evidence meets the criteria under CLP to classify TiO₂ as a Category 2 Carcinogen (described by the EU regulation as appropriate for "suspected human carcinogens") for humans by inhalation. The RAC published their final opinion on September 14, 2017, which proposed that TiO₂ be classified as a Category 2 carcinogen by inhalation. In addition, the RAC proposed a note in their opinion to the effect that coated particles must be evaluated to assess whether a higher category (Category 1B or 1A) should be applied and additional routes of exposure (oral or dermal) should be included. After discussion with Member States and stakeholders, the European Commission concluded without a vote of the Member States that the classification of TiO₂~~as a Category 2 Carcinogen under the CLP Regulation is an appropriate measure. The European Commission first presented the proposed wording for the Entry of TiO~~₂ in Annex VI to the CLP Regulation on June 12, 2018, and this wording has since been further amended. The latest version was published in the draft Commission Delegated Regulation on October 4, 2019 and would apply to TiO₂ in powder form meeting the size criteria in the proposed note. This classification is subject to further clarification. The regulation has been sent for scrutiny by the European Parliament and the Council of the EU, and the scrutiny period will come to an end in early December 2019. Until the final regulation enters into effect, the text of the proposed entry, and in particular the proposed notes, may be changed and such changes may affect the impact of government ordered restrictions. We cannot reasonably estimate with any degree of certainty the ~~classification~~future adverse impacts the COVID-19 pandemic may have on ~~various downstream use applications~~our results of operations, financial position or liquidity; however, the impacts could be material. Furthermore, to remain competitive, we must invest in our infrastructure and maintain the ability to respond to any increases in demand, and our ~~manufacturing operations, including the~~inability to respond appropriately to significant changes in demand may impact ~~on the disposal of waste from~~ our facilities. If no objections are raised, it will enter into force 20 days after its publication in the Official Journal of the European Union and will apply as of the date 18 months after its publication. Member States, however, may choose to apply the regulation at any time after publication.profitability.

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~~Adoption~~The COVID-19 pandemic and related economic repercussions have created significant disruptions to the global economy and have adversely affected our business. The duration of the ~~Category 2 Carcinogen classification will require that many end-use products manufactured with TiO~~₂pandemic and its ultimate impacts on the global economy and our business remain unknown and we may not be ~~classified and labeled as containing a potentially carcinogenic component, which could negatively impact public perception~~able to effectively mitigate such impacts, any of ~~products containing TiO~~₂. Such classification would also affect our manufacturing operations by subjecting us to new workplace safety requirements that could significantly increase costs. In addition, any classification, use restriction, or authorization requirement for use imposed by ECHA could trigger heightened regulatory scrutiny in countries outside the EU based on health or safety grounds, which could have a ~~wider~~material adverse ~~impact geographically on market demand for and prices of TiO~~₂ ~~or other products containing TiO~~₂ ~~and increase our compliance obligations outside the EU. Any increased regulatory scrutiny could affect consumer sentiment or limit the marketability of and demand for TiO~~₂ ~~or products containing TiO~~₂, which could have spill-over, restrictive effects under other EU laws, e.g., those affecting medical and pharmaceutical applications, cosmetics, food packaging and food additives. Pursuant to the proposed regulation, the classification could also require that all waste meeting the powder specifications in the proposed note be handled as hazardous waste, as separately determined by each Member State, which could result in significant impactseffect on our ~~customers’ products, wastes from our~~results of operations, financial condition and the implementation of Circular Economy efforts within the EU. It is also possible that heightened regulatory scrutiny could lead to claims by consumers of such products alleging adverse health impacts. Finally, the classification of TiO₂ as a Category 2 Carcinogen could lead the ECHA to evaluate other products with similar particle characteristics (such as iron oxides or functional additives) for human carcinogenic potential by inhalation, which may ultimately have similar negative impacts on other products within our portfolio.liquidity.

~~Sales~~On March 11, 2020, the World Health Organization designated the COVID-19 outbreak as a global pandemic. As a result of ~~TiO~~₂the COVID-19 pandemic, governmental authorities have implemented and are continuing to implement numerous and constantly evolving measures to try to contain the virus, such as travel bans and restrictions, limits on gatherings, quarantines, shelter-in-place orders, and business shutdowns. We have manufacturing and other operations that are important to our company in areas significantly affected by the ~~EU represented 44%~~outbreak. Measures providing for business shutdowns generally exclude certain essential services, and those essential services commonly include critical infrastructure and the businesses that support that critical infrastructure. We believe our manufacturing facilities generally are considered essential services, and while all of our ~~revenues for the year ended December 31, 2018.~~facilities remain operational, these measures have impacted and may further impact our workforce and operations, as well as those of our customers, partners and suppliers.

~~Restrictions~~While certain governments have relaxed measures initially put in place, there remains considerable uncertainty regarding the duration of those measures currently in place and potential future measures, including with respect to a potential “second wave” of COVID-19 infections. Existing or future restrictions on ~~disposal of waste from~~ our manufacturing, ~~processes~~operations or employees, or similar limitations for our customers, partners and suppliers, could limit our ability to meet customer demand and could have a material adverse effect on our results of operations and financial condition. Furthermore, restrictions or disruptions of transportation, such as reduced availability of air transport, port closures and increased border controls or closures, have started to result in higher costs and ~~negatively~~delays, which harm our profitability, and could make our products less competitive or cause our customers to seek alternative suppliers as these restrictions remain in place or become more restrictive in future periods. In addition, restrictions in certain countries could result in delays in obtaining needed approvals by governmental and regulatory authorities, including approvals for applications, renewals or extensions of waste disposal permits at our sulfate manufacturing sites.

We have a team focused on managing our business through the pandemic and we have enacted rigorous safety measures across our organization, including stopping non-essential business travel, increasing the personal protective equipment requirements at our manufacturing sites, removing non-essential contractors from our sites, increasing cleaning and sanitizing measures, implementing social distancing protocols, requiring work-from-home arrangements as appropriate, and reducing the amount of employees working at a site at any given time. We continue to evaluate the appropriate measures to have in place to safeguard our employees and our business. We may take further actions as government authorities require or recommend, or as we determine to be in the best interest of our employees, customers, partners and suppliers. While we are following the requirements of governmental authorities and taking additional preventative and protective measures to ensure the safety of our workforce, we cannot be certain that these measures will be successful in ensuring the health of our workforce. For example, if an employee at one of our sites were to contract COVID-19, this could result in temporary closures, reduced production hours, and increased cleaning and logistical costs. Workforce disruptions of this nature could significantly impact our ability to ~~operate~~maintain our ~~manufacturing facilities.~~

~~Our manufacturing processes generate byproducts, some of which are saleable~~operations and others of which are not and must be reused or disposed of as waste. Storage, transportation, reuse and disposal of waste are generally regulated by governmental authorities in the jurisdictions in which we operate. If existing arrangements for reuse or disposal of waste cease to be available to us,adversely affect our financial results. In addition, as a result of new rules, regulations or interpretations thereof, exhaustion of reclamation activities, landfill closures, or otherwise, we will need to find new arrangements for reuse or disposal, which could resultthe pandemic and the related increase in ~~increased costs to us and negatively impact our consolidated financial statements. For example, gypsum is generated~~remote working by our ~~TiO~~₂ ~~manufacturing facilities that use~~personnel and personnel of other companies, the ~~sulfate process, such as~~risk of cyber-attacks, breaches or similar events, whether through our systems or those ~~at Scarlino, Italy and Teluk Kalong, Malaysia. The gypsum from our Scarlino facility is currently used in the reclamation~~ of ~~a nearby former quarry. We received an extension of our existing permit,~~third parties on which ~~will allow the facility to continue to use the material to reclaim the site for approximately 13 months and~~ we are seeking an additional extension to the extent physical capacity remains available. We are also currently pursuing replacement options for sale, reuse and/or disposal of gypsum produced at the Scarlino facility. Such options generally require governmental approval and there can be no assurance that such approvals will be received in a timely manner or at all. Any classification of our waste material as hazardous is likely to have an adverse impact on obtaining such approvals. Failure to find viable new disposal arrangements for our manufacturing byproducts, including those originating at our Scarlino, Italy site, could significantly impact our manufacturing operations, up to and including the temporary or permanent closure of related manufacturing facilities.rely, has increased.

~~In addition, in connection with the classification in the European Union of TiO~~₂We have not yet experienced significant impacts or interruptions to our supply chain as a ~~Category 2 Carcinogen, Member States~~result of the COVID-19 pandemic. However, certain of our suppliers have faced difficulties maintaining operations due to government-ordered restrictions and shelter-in-place mandates. While we have thus far been able to identify alternative sourcing arrangements without disrupting our supply chain, financial hardship on our suppliers caused by the COVID-19 pandemic could ~~require that~~cause material disruptions in our raw material supply. While we are proactively managing our supplier network by maintaining close contact and seeking alternative arrangements in case our primary suppliers are impacted by the COVID-19 pandemic, some of our suppliers are sole-source suppliers for which we may have no alternative source of supply. Further, if we, our suppliers or customers are unable to perform our contractual obligations due to the COVID-19 pandemic, a force majeure event may be declared, rendering us, our suppliers or our customers unable to deliver all, ~~waste mixtures in~~or a ~~powder form meeting~~portion of, any impacted orders or other contractual arrangements. If this were to occur, we may be forced to limit production and our customers could choose to discontinue or decrease the ~~specifications in the proposed note be classified~~purchase of our products as ~~hazardous waste. This could~~a result in significant changes to how wastes from our operations in Europe (including at our Scarlino, Italy site and elsewhere) are handled, including additional or more stringent manufacturing regulations, labelling requirements, transportation logistics, and other requirements regarding the ability to reuse or sell byproducts, or otherwise dispose of ~~such materials. Any such regulations~~these measures. Such force majeure events could have a significant ~~impact~~negative impacts on our ~~manufacturing operations and results of operations.~~

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We cannot be certain that the measures we have taken to mitigate the impact of COVID-19 will be effective. As the COVID-19 pandemic continues, we may experience additional adverse impacts on our results of operations, including our ability to access capital on favorable terms. Although the duration and ultimate impact of the COVID-19 pandemic is unknown at this time, a decline in economic conditions as a result of the COVID-19 pandemic may materially adversely impact our business, results of operations, financial condition and liquidity. Further, additional actions by health or other governmental authorities requiring the closure of our facilities or recommending other measures could create additional negative impacts on all aspects of our business, including our employees, customers, suppliers, partners, results of operations, financial condition and liquidity. Our 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.In the event the COVID-19 pandemic and related measures cause a recession or other downturn in the worldwide economy, and decreases demand for our products, our availability to borrow under our ABL Facility would likely decline as well as our cash flow from operations.Like many others in our industry, our share price has declined sharply as a result of COVID- 19 and related impacts, which may impact our ability to raise capital through equity markets.

Our indebtedness is substantial, and a meaningful portion of our indebtedness is subject to variable interest rates. Our indebtedness may make us more vulnerable to financial market volatility and economic downturns and may limit our ability to respond to market conditions, to obtain additional financing or to refinance our debt. We may also incur more debt in the future.

As of June 30, 2020, we had $945 million in debt outstanding under our $360 million Term Loan Facility due 2024, $214 million of 9.5% Senior Secured Notes due 2025 which were issued on May 22, 2020, $371 million of 5.75% Senior Unsecured Notes due 2025, and borrowings under our ABL facility (with $265 million of available borrowing capacity). Our debt level and the fact that a significant percentage of our cash flow is required to make payments on our debt, could have important consequences for our business, including but not limited to the following:

•we may be more vulnerable to business, industry or economic downturns, making it more difficult to respond to market conditions;

•cash flow available for other purposes, including the growth of our business, may be reduced;

•our ability to refinance or obtain additional financing may be constrained, particularly during periods when the capital markets are unsettled;

•our competitors with lower debt levels may have a competitive advantage relative to us; and

•part of our debt is subject to variable interest rates, which makes us more vulnerable to increases in interest rates (for example, assuming all commitments were available and all loans under the ABL Facility were fully drawn, a 1% increase in interest rates, without giving effect to interest rate hedges or other offsetting items, would increase our annual interest expense by approximately $4 million).

Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, would materially and adversely affect our financial position and results of operations.

In addition, the availability and cost of credit for our businesses may be significantly affected by credit ratings. The credit rating agencies periodically review our ratings, considering factors such as our capital structure, earnings profile, and the condition of our industry and the credit markets generally. Credit ratings are subject to revision or withdrawal at any time by the assigning rating organization.A drop in our credit ratings, such as that which occurred

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during the second quarter of 2020, could adversely impact our business, cash flows, results of operations, financial condition, liquidity and our ability to obtain additional financing or to refinance our debt.

Negative rating actions can adversely affect our ability to access capital at rates and on terms that are attractive. A negative rating action can also adversely impact our business relationships with suppliers and operating partners, who may be less willing to extend credit or offer us similarly favorable terms as secured in the past under such circumstances.The result of such impacts may be material and could adversely affect our cash flows, results of operations and financial condition.

We may need additional capital in the future and may not be able to obtain it on favorable terms.

Our business is capital intensive, and our success depends to a significant degree on our ability to develop and market innovative products and to maintain and update our facilities and process technology. We may require additional capital in the future to finance our growth and development, restructure our business, implement further marketing and sales activities, fund ongoing research and development activities, fund the ongoing closure of our Pori, Finland manufacturing facility and meet general working capital needs. Our capital requirements will depend on many factors, including acceptance of, and demand for, our products, the extent to which we invest in new technology and research and development projects, and the status and timing of these developments, as well as general availability of capital from debt and/or equity markets. We issued $225 million of 9.5% Senior Secured Notes in May 2020 for general corporate purposes and to enhance our liquidity position. Additional financing may not be available when needed on terms favorable to us, or at all. Further, the terms of our debt and other agreements may limit our ability to incur additional indebtedness or issue additional equity. If we are unable to obtain adequate funds on acceptable terms, we may be unable to develop or enhance our products, take advantage of future opportunities or respond to competitive pressures, which could harm our business.

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ITEM 6. EXHIBITS

Each exhibit identified below is filed as a part of this report. Exhibits designated with an "*" are filed as an exhibit to this Quarterly Report on Form ~~10-Q and Exhibits designated with an "+" indicates a management contract or compensatory plan.~~10-Q.

~~Incorporated by Reference~~

~~Exhibit~~

~~Number~~

~~Description~~

~~Schedule~~

~~Form~~

~~Exhibit~~

~~Filing Date~~

31.1*

~~Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

31.2*

~~Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~

32.1*

~~Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

32.2*

~~Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~

~~101.INS~~

~~XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.~~

101.SCH*

~~XBRL Taxonomy Extension Schema Document~~

101.CAL*

~~XBRL Taxonomy Extension Calculation Linkbase Document~~

101.DEF*

~~XBRL Taxonomy Definition Linkbase Document~~

101.LAB*

~~XBRL Taxonomy Extension Labels Linkbase Document~~

101.PRE*

~~XBRL Taxonomy Extension Presentation Linkbase Document~~

Incorporated by Reference

Exhibit

Number

Description

Schedule

Form

Exhibit

Filing Date

3.1

Amended and Restated Articles of Association of Venator Materials PLC.

8-K

3.1

June 19, 2020

10.1

Amended and Restated Venator Materials 2017 Stock Incentive Plan.

8-K

10.1

June 19, 2020

10.2*

Amendment to Terms and Conditions of Employment (US), dated April 29, 2020, between Venator Americas LLC, Venator Materials UK Limited and Kurt D. Ogden.

10.3*

Amendment to Terms and Conditions of Employment (US), dated April 29, 2020, between Venator Americas LLC, Venator Materials UK Limited and Russell R. Stolle

10.4*

Amendment to Terms and Conditions of Employment (US), dated April 29, 2020, between Venator Materials UK Limited and Mahomed A. Maiter.

10.5*

First Amendment to the Venator Executive Elective Deferral Plan, dated April 29, 2020

31.1*

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*

Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*

Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*

XBRL Taxonomy Extension Schema Document

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

XBRL Taxonomy Definition Linkbase Document

101.LAB*

XBRL Taxonomy Extension Labels Linkbase Document

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

104*

The cover page to this Quarterly Report on Form 10-Q, formatted in XBRL

4547

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

VENATOR MATERIALS PLC
(Registrant)

Date:

~~November 6, 2019~~August 4, 2020

By:

/s/ Kurt D. Ogden

Kurt D. Ogden

Executive Vice President and Chief Financial Officer

Date:

~~November 6, 2019~~August 4, 2020

By:

/s/ Stephen Ibbotson

Stephen Ibbotson

Vice President and Controller

4648


		Page
~~GENERAL~~G eneral			2

~~NOTE REGARDING FORWARD-LOOKING STATEMENTS~~Note R egarding F orwa rd-looking Statements			2

PART I	FINANCIAL INFORMATION	4

ITEM 1.	Condensed Consolidated Financial Statements (Unaudited)	4

	Condensed Consolidated Balance Sheets	4

	Condensed Consolidated Statements of Operations	5

	Condensed Consolidated Statements of Comprehensive Income	6

	Condensed Consolidated Statements of Equity	7

	Condensed Consolidated Statements of Cash Flows	8

	Notes to Unaudited Condensed Consolidated Financial Statements	9

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2726

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	3940

ITEM 4.	Controls and Procedures	4041

PART II	OTHER INFORMATION	42

ITEM 1.	Legal Proceedings	42

ITEM 1A.	Risk Factors	4342

ITEM 6.	Exhibits	4547

Signatures		4648


Lease Cost	Three months ended September 30, 2019		Nine months ended September 30, 2019
Operating lease cost	$	3	$	10
Finance lease cost:
Amortization of right-of-use assets	—		1
Interest on lease liabilities	—		—
Short-term lease cost	—		1


Cash Flow Information	Three months ended September 30, 2019		Nine months ended September 30, 2019
Operating cash flows from operating leases	$	3	$	10
Operating cash flows from finance leases	—		1
Financing cash flows from finance leases	—		—


September 30, 2019	Operating Leases		Finance Leases		Total
2019 (remaining)	$	3	$	—	$	3
2020	10		2		12
2021	9		1		10
2022	7		1		8
2023	4		1		5
After 2023	40		7		47
Total lease payments	$	73	$	12	$	85
Less: Interest	30		2		32
Present value of lease liabilities	$	43	$	10	$	53


December 31,	Operating Leases		Capital Leases
2019	$	13	$	1
2020	11		2
2021	9		1
2022	6		1
2023	4		1
Thereafter	40		7
Total	$	83	$	13
Less: Amounts representing interest			3
Present value of minimum lease payments			$	10
Less: Current portion of capital leases			1
Long-term portion of capital leases			$	9