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OFFON

VENATOR MATERIALS PLC

(VNTR)
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VENATOR MATERIALS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

05/06/2021 | 10:33am EDT
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.

Recent Trends and Outlook


The COVID-19 pandemic has had a significant adverse impact on our business and
the markets in which we operate beginning in the first quarter of 2020. The
measures implemented by governmental authorities around the world to contain the
virus, including travel bans and restrictions, limits on gatherings,
quarantines, shelter-in-place orders and business shutdowns, drove a decrease in
demand for many of our products. We began to see recovery in the third quarter
of 2020 and by the end of the first quarter of 2021 many of our product lines
had returned to pre-pandemic levels of demand.

We have not experienced significant impacts or interruptions to our supply chain
as a result of the COVID-19 pandemic and have been able to identify alternative
sourcing in those cases where our suppliers' operations were impacted by the
pandemic. While we expect supply chain and logistical challenges to continue to
stabilize throughout 2021, we are proactively managing our supplier network by
maintaining close contact and seeking alternative arrangements in case we
experience a resurgence in the impacts of the COVID-19 pandemic.

We have manufacturing and other operations that are important to our company in
areas that remain affected by the outbreak, particularly in Europe, which is our
largest market and in which we have important manufacturing facilities, and we
continue to take measures to respond to the impacts of the pandemic. We continue
to actively manage our business and have enacted rigorous safety measures across
our organization in response to the COVID-19 pandemic, including stopping
non-essential business travel, increasing 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 and 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.

We anticipate continued recovery throughout 2021 as COVID-19 vaccinations
progress globally and governments continue to roll back restrictions and
protective measures that influence the markets in which we operate. The speed of
recovery will depend on industry-specific factors as further outlined below and
a variety of other factors beyond our control, including the global rollout of
vaccines and the possibility of resurgence of COVID-19 (including any variants)
and its effects on the global economy.

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We expect the following in our Titanium Dioxide segment: (i) strong demand from
our functional products with potential supply limitations as we restore our
production to pre-pandemic levels; (ii) continued recovery for our specialty
products, which have a longer recovery than demand for our functional products
as our specialty business continues to be more sensitive to the impacts of
COVID-19; (iii) TiO2 price increases driven by supply and demand dynamics across
all regions, low inventory levels, and recovery of increased costs, primarily
feedstocks and energy; and (iv) benefit from our 2020 business improvement
program.

We expect the following in our Performance Additives segment: (i) sequential
increase in volumes across the segment due to normal seasonal demand trends and
continued recovery from COVID-19; (ii) rising cost of energy and shipping costs
which will be offset by increases in pricing; (iii) product portfolio
optimization including increased focus on differentiated product sales; and (iv)
benefit from our 2020 business improvement program.

During the third quarter of 2020, we announced our 2020 business improvement
program that will save approximately $55 million compared to 2019. We expect
that this program will be fully implemented by the end of 2022. We realized
approximately $16 million of savings during 2020 and we recognized an
incremental $9 million during the first quarter of 2021.

During the second quarter of 2021, we entered into an agreement to sell our water treatment business for approximately $6 million in cash. The water treatment business is a part of our Performance Additives segment. The transaction is expected to close during the second quarter of 2021.

We expect total capital expenditures in 2021 to be $75 million to $85 million. This includes maintenance capital expenditures and the cost of implementing business improvement projects.

We expect our corporate and other costs will be approximately $45 million in 2021.




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Results of Operations

The following table sets forth our consolidated results of operations for the three months ended March 31, 2021 and 2020:

                                                                     Three Months Ended
                                                                         March 31,
(Dollars in millions)                                                            2021               2020                % Change
Revenues                                                                     $     553          $     532                       4  %
Cost of goods sold                                                                 500                471                       6  %
Operating expenses(4)                                                               44                 42                       5  %
Restructuring, impairment and plant closing and
transition costs                                                                    14                  7                     100  %
Operating (loss) income                                                             (5)                12                          NM
Interest expense, net                                                              (15)               (10)                    (50  %)
Other income                                                                         5                  4                      25  %
(Loss) income before income taxes                                                  (15)                 6                          NM
Income tax (expense) benefit                                                        (5)                 2                          NM
Net (loss) income                                                                  (20)                 8                          NM
Reconciliation of net income (loss) to adjusted
EBITDA:
Interest expense, net                                                               15                 10                      50  %
Income tax expense (benefit)                                                         5                 (2)                         NM
Depreciation and amortization                                                       31                 28                      11  %
Net income attributable to noncontrolling interests                                 (1)                (1)                      -  %
Other adjustments:
Business acquisition and integration expenses                                        -                  1

(Gain) loss on disposition of business/assets                                        -                  2
Certain legal expenses/settlements                                                   1                  -

Amortization of pension and postretirement actuarial losses

                                                                               3                  3
Net plant incident costs                                                             1                  1
Restructuring, impairment and plant closing and
transition costs                                                                    14                  7
Adjusted EBITDA(1)                                                           $      49          $      57

Net cash used in operating activities                                        $     (15)         $     (58)                    (74  %)
Net cash used in investing activities                                              (15)               (27)                    (44  %)
Net cash (used in) provided by financing activities                                 (2)                56                          NM
Capital expenditures                                                               (12)               (31)                    (61  %)


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                                                                                Three Months Ended                       Three Months Ended
(Dollars in millions, except per share amounts)                                   March 31, 2021                           March 31, 2020

Reconciliation of net (loss) income to adjusted net (loss) income attributable to Venator Materials PLC ordinary shareholders: Net (loss) income

                                                             $               (20)                     $                 8
Net income attributable to noncontrolling interests                                            (1)                                      (1)
Other adjustments:
Business acquisition and integration expenses                                                   -                                        1

(Gain) loss on disposition of business/assets                                                   -                                        2
Certain legal expenses/settlements                                                              1                                        -
Amortization of pension and postretirement actuarial losses                                     3                                        3
Net plant incident costs                                                                        1                                        1
Restructuring, impairment and plant closing and transition costs                               14                                        7
Income tax adjustments(3)                                                     $                 3                      $                (9)

Adjusted net income attributable to Venator Materials PLC ordinary shareholders(2)

                                                      $                 1                      $                12

Weighted-average shares - basic                                                             107.1                                    106.7
Weighted-average shares - diluted(5)                                                        107.7                                    106.7

Net loss attributable to Venator Materials PLC ordinary
shareholders per share:
Basic                                                                                       (0.20)                                    0.07
Diluted(5)                                                                                  (0.20)                                    0.07

Other non-GAAP measures:
Adjusted net income per share(2):
Basic                                                                                        0.01                                     0.11
Diluted                                                                                      0.01                                     0.11



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) loss/gain on
disposition of business/assets; (c) certain legal expenses/settlements; (d)
amortization of pension and postretirement actuarial losses/gains; (e) net plant
incident costs/credits; and (f) restructuring, impairment, and plant closing and
transition costs/credits. We believe that net income is the performance measure
calculated and presented in accordance with U.S. GAAP that is most directly
comparable to adjusted EBITDA.

We believe adjusted EBITDA is useful to investors in assessing our ongoing
financial performance and provides improved comparability between periods
through the exclusion of certain items that management believes are not
indicative of our operational profitability and that may obscure underlying
business results and trends. However, this measure should not be considered in
isolation or viewed as a substitute for net income or other measures of
performance determined in accordance with U.S. GAAP. Moreover, adjusted EBITDA
as used herein is not necessarily comparable to other similarly titled measures
of other companies due to potential inconsistencies in the methods of
calculation. Our management believes this measure is useful to compare general
operating performance from period to period and to make certain related
management decisions. Adjusted EBITDA is also used by securities analysts,
lenders and others in their evaluation of different companies because it
excludes certain items that can vary widely across different industries or among
companies within the same industry. For example, interest
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expense can be highly dependent on a company's capital structure, debt levels
and credit ratings. Therefore, the impact of interest expense on earnings can
vary significantly among companies. In addition, the tax positions of companies
can vary because of their differing abilities to take advantage of tax benefits
and because of the tax policies of the various jurisdictions in which they
operate. As a result, effective tax rates and tax expense can vary considerably
among companies. Finally, companies employ productive assets of different ages
and utilize different methods of acquiring and depreciating such assets. This
can result in considerable variability in the relative costs of productive
assets and the depreciation and amortization expense among companies.

Nevertheless, our management recognizes that there are limitations associated
with the use of adjusted EBITDA in the evaluation of us as compared to net
income. Our management compensates for the limitations of using adjusted EBITDA
by using 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)
loss/gain on disposition of business/assets; (c) certain legal
expenses/settlements; (d) amortization of pension and postretirement actuarial
losses/gains; (e) net plant incident costs/credits; and (f) restructuring,
impairment, and plant closing and transition costs/credits. Basic adjusted net
income per share excludes dilution and is computed by dividing adjusted net
income by the weighted average number of shares outstanding during the period.
Adjusted diluted net income per share reflects all potential dilutive ordinary
shares outstanding during the period increased by the number of additional
shares that would have been outstanding as dilutive securities.

Adjusted net income (loss) and adjusted net income (loss) per share amounts are
presented solely as supplemental information. These measures exclude similar
noncash items as Adjusted EBITDA in order to assist our investors in comparing
our performance from period to period and as such, bear similar risks as
Adjusted EBITDA as documented 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)Income tax expense is adjusted by the amount of additional tax expense or
benefit that we would accrue if we used non-GAAP results instead of GAAP results
in the calculation of our tax liability, taking into consideration our tax
structure. We use a normalized effective tax rate of 35%, which reflects the
weighted average tax rate applicable under the various jurisdictions in which we
operate. This non-GAAP tax rate eliminates the effects of non-recurring and
period specific items which are often attributable to restructuring and
acquisition decisions and can vary in size and frequency. This rate is subject
to change over time for various reasons, including changes in the geographic
business mix, valuation allowances, and changes in statutory tax rates.

We eliminate the effect of significant changes to income tax valuation
allowances from our presentation of adjusted net income to allow investors to
better compare our ongoing financial performance from period to period. We do
not adjust for insignificant changes in tax valuation allowances because we do
not believe it provides more meaningful information than is provided under GAAP.
We believe that our revised approach enables a clearer understanding of the
long-term impact of our tax structure on post tax earnings.

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

(5)The potentially dilutive impact of share-based awards was excluded from the calculation of net loss per share for the three months ended March 31, 2021 because there is an anti-dilutive effect as we are in a net loss position.

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Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020


For the three months ended March 31, 2021, net loss was $20 million on revenues
of $553 million, compared with net income of $8 million on revenues of $532
million for the same period in 2020. The unfavorable variance of $28 million was
the result of the following items:

•Revenues for the three months ended March 31, 2021 increased by $21 million, or
4%, as compared with the same period in 2020. The increase was due to a $12
million increase in revenue in our Titanium Dioxide segment and a $9 million
increase in revenue in our Performance Additives segment. See "-Segment
Analysis" below.

•Our operating expenses for the three months ended March 31, 2021 increased by
$2 million, or 5%, as compared with the same period in 2020 primarily due to
increased personnel costs of $3 million driven by timing of payments, and
unfavorable impact of foreign exchange rates, partially offset by $5 million of
benefit from our 2020 business improvement program in the first quarter of 2021.

•Restructuring, impairment and plant closing and transition costs for the three
months ended March 31, 2021 increased to $14 million from $7 million for the
same period in 2020. For more information concerning restructuring and plant
closing activities, see "Note 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 March 31, 2021 was $5 million
compared to a $2 million benefit for the same period in 2020. 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 9. Income Taxes" of the notes to unaudited condensed
consolidated financial statements.

Segment Analysis
                                                                    Three Months Ended                  Percent Change
                                                                         March 31,                        Favorable
(Dollars in millions)                                             2021               2020               (Unfavorable)
Revenues
Titanium Dioxide                                              $      414          $    402                           3  %
Performance Additives                                                139               130                           7  %
Total                                                         $      553          $    532                           4  %
Adjusted EBITDA
Titanium Dioxide                                              $       40          $     46                         (13  %)
Performance Additives                                                 23                22                           5  %
                                                                      63                68                          (7  %)
Corporate and other                                                  (14)              (11)                        (27  %)
Total                                                         $       49          $     57                         (14  %)



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Three Months Ended March 31, 2021 vs. 2020

                                                            Average Selling Price(1)
                                                        Local            Foreign Currency
                                                       Currency         Translation Impact         Mix & Other         Sales Volumes(2)
Period-Over-Period Increase (Decrease)
Titanium Dioxide                                           (1  %)                      6  %              (1  %)                   (1  %)
Performance Additives                                       -  %                       4  %               2  %                     1  %




(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 $414 million for the three
months ended March 31, 2021, an increase of $12 million, or 3%, compared to the
same period in 2020. The increase was primarily due to a 6% favorable impact
from foreign currency translation, primarily between the Euro and the U.S.
Dollar, partially offset by a 1% decline in TiO2 sales volumes, a 1% decrease in
average local currency selling prices and a 1% unfavorable impact due to mix and
other.

Adjusted EBITDA for the Titanium Dioxide segment was $40 million for the three
months ended March 31, 2021, a decrease of $6 million, or 13%, compared to the
same period in 2020. The decrease was primarily attributable to an $11 million
increase from higher raw material, energy and shipping costs, partially offset
by $5 million of benefits from our 2020 business improvement program and $3
million net benefit from foreign currency translation.

Performance Additives


The Performance Additives segment generated revenues of $139 million for the
three months ended March 31, 2021, an increase of $9 million, or 7%, compared to
the same period in 2020. The increase was primarily attributable to a 4%
favorable impact of foreign currency translation, primarily between the Euro and
the U.S. Dollar, a 2% favorable impact of mix and other and a 1% increase in
volumes.

Adjusted EBITDA for the Performance Additives segment was $23 million for the
three months ended March 31, 2021, an increase of $1 million, or 5%, compared to
the same period in 2020. The increase was primarily attributable to the increase
in sales during the period and $2 million of benefits from our 2020 business
improvement program, partially offset by the negative overall impact of foreign
currency translation on our costs.

Corporate and other


Corporate and other represents expenses which are not allocated to our segments.
Losses from Corporate and other were $14 million in the three months ended March
31, 2021, or $3 million higher compared to the same period in 2020. This was
primarily due to an increase in personnel costs in the first quarter of 2021
compared to the same period of 2020, driven by the timing of payments and an
unfavorable variance in foreign exchange rates compared to the prior year,
partially offset by $2 million of benefit from our 2020 business improvement
program.

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Liquidity and Capital Resources

The COVID-19 pandemic had a significant impact on our liquidity during 2020 and
we took active measures to manage our cash flows during the pandemic. These
measures included our COVID-19 response program put into place during 2020,
whereby savings were realized through managing our production network to align
with customer demand, managing our inventories and reducing planned capital
expenditures during 2020. We expect that the cost savings from our COVID-19
response program will be replaced by savings from our 2020 business improvement
program which began in the third quarter of 2020. We are cautiously optimistic
about the global economic recovery from the impacts of the COVID-19 pandemic and
its effect on our liquidity and cash flow, and we expect our efforts to manage
our cash flows to enable us to better respond to any recurrence of the pandemic
and its effects on the economy.

We had cash and cash equivalents of $187 million and $220 million as of March
31, 2021 and December 31, 2020, respectively. We have an ABL Facility with an
available aggregate principal amount of up to $350 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 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 March 31, 2021 is approximately $281 million, of which
$247 million is available to be drawn as a result of approximately $35 million
of letters of credit issued and outstanding at March 31, 2021.

Our financing arrangements also include borrowings of $375 million under the
Term Loan Facility, $225 million of Senior Secured Notes, and $375 million of
Senior Unsecured Notes, issued by our subsidiaries Venator Finance S.à r.l. and
Venator Materials LLC (the "Issuers"). We have a related-party note payable to
Huntsman for a liability pursuant to the tax matters agreement entered into at
the time of the separation of which $17 million has been presented as Noncurrent
payable to affiliate and $3 million is included within accounts payable to
affiliates on our unaudited condensed consolidated balance sheets.

Items Impacting Short-Term and Long-Term Liquidity
Our liquidity can be significantly impacted by various factors in addition to
those described below. The following matters had, or are expected to have, a
significant impact on our liquidity:

•Cash outflows from accounts receivable and inventory, net of cash inflows from
accounts payable, as reflected in our unaudited condensed consolidated
statements of cash flows decreased by $63 million for the three months ended
March 31, 2021 as compared to the same period in the prior year. We expect our
working capital to be a use of liquidity in 2021.

•We expect total capital expenditures in 2021 to be $75 million to $85 million. This includes maintenance capital expenditures and the cost of implementing business improvement projects.


•During the three months ended March 31, 2021, we made contributions to our
pension and postretirement benefit plans of $10 million. During the second
quarter of 2021, we expect to contribute an additional amount up to $6 million
to these plans. We are currently engaged in a valuation for our largest pension
plan which will determine the contributions for the remainder of 2021 and future
periods.

•We are involved in a number of cost reduction programs for which we have
established restructuring accruals. As of March 31, 2021, we had $27 million of
accrued restructuring costs of which $19 million is classified as current. We
expect to incur additional restructuring and plant closing costs of
approximately $23 million, $2 million of which are for noncash charges, and pay
approximately $25 million through the remainder of 2021. For further discussion
of these plans and the costs involved, see "Note 6. Restructuring, Impairment,
and Plant Closing and Transition Costs" of the notes to unaudited condensed
consolidated financial statements.

•During the third quarter of 2020, we announced our 2020 business improvement
program that will save approximately $55 million compared to 2019. We expect
that this program will be fully implemented by the
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end of 2022. We realized approximately $16 million of savings during 2020 and we
recognized an incremental $9 million during the first quarter of 2021.

•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 our specialty and differentiated
business to other sites in our manufacturing network. We intend to operate the
Pori facility at reduced production rates through the transition period, subject
to economic and other factors. We do not expect any material capital
expenditures relating to the transfer during 2021. 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.

We have $945 million in debt outstanding under our $358 million Term Loan
Facility, $215 million of 9.5% Senior Secured Notes due 2025 and $372 million of
5.75% Senior Unsecured Notes due 2025. Through March 31, 2021, 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. As of
March 31, 2021 and December 31, 2020, we had $7 million, each, classified as
current portion of debt.

As of March 31, 2021 and December 31, 2020, we had $21 million and $15 million,
respectively, of cash and cash equivalents held outside of the U.K., U.S. and
Europe, including our variable interest entities. As of March 31, 2021, our
non-U.K. subsidiaries have no plan to distribute funds in a manner that would
cause them to be subject to U.K., U.S., or other local country taxation.

Cash Flows for the Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020


Net cash used in operating activities was $15 million for the three months ended
March 31, 2021, compared to $58 million for the three months ended March 31,
2020. The favorable variance in net cash used in operating activities for the
three months ended March 31, 2021 compared with the same period in 2020 was
primarily attributable to a $65 million favorable variance in cash flows from
changes in operating assets and liabilities inclusive of a $67 million positive
variance from accounts payable, partially offset by a $22 million decrease in
cash inflows from net income.

Net cash used in investing activities was $15 million for the three months ended
March 31, 2021, compared to $27 million for the three months ended March 31,
2020. The decrease in net cash used in investing activities was primarily
attributable to a decrease in capital expenditures of $19 million.

Net cash used in financing activities was $2 million for the three months ended
March 31, 2021, compared to net cash provided by financing activities of $56
million for the three months ended March 31, 2020. The unfavorable variance in
net cash (used in) provided by financing activities for the three months ended
March 31, 2021 compared with the same period in 2020 was primarily attributable
to net cash inflows in the first quarter of 2020 including $63 million of
proceeds from short-term debt in the first quarter of 2020, as a result of a
draw on our revolving line of credit during that period.

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Changes in Financial Condition

The following information summarizes our working capital as of March 31, 2021 and December 31, 2020:


                                                                         December 31,           Increase
(Dollars in millions)                             March 31, 2021             2020              (Decrease)          Percent Change
Cash and cash equivalents                        $          187          $      220          $        (33)                (15  %)
Accounts and notes receivable, net                          365                 324                    41                  13  %
Accounts receivable from affiliates                           1                   -                     1                      NM
Inventories                                                 439                 440                    (1)                  -  %
Prepaid expenses                                             19                  24                    (5)                (21  %)
Other current assets                                         46                  49                    (3)                 (6  %)
Total current assets                             $        1,057          $    1,057          $          -                   -  %
Accounts payable                                            283                 240                    43                  18  %
Accounts payable to affiliates                               20                  22                    (2)                 (9  %)
Accrued liabilities                                         100                 118                   (18)                (15  %)
Current operating lease liability                             8                   8                     -                   -
Current portion of debt                                       7                   7                     -                   -  %
Total current liabilities                        $          418          $      395          $         23                   6  %
Working capital                                  $          639          $      662          $        (23)                 (3  %)


Our working capital decreased by $23 million as a result of the net impact of the following significant changes:


•Cash and cash equivalents decreased by $33 million primarily due to $15 million
of cash outflows due to operating activities, $15 million of cash outflows for
investing activities primarily for capital expenditures in the first quarter of
2021, and outflows of $2 million for financing activities.
•Accounts receivable increased by $41 million, or 13%, from December 31, 2020 to
March 31, 2021. This increase is as a result of the increase in sales from the
fourth quarter of 2020 to the first quarter of 2021, and an incremental $7
million of VAT receivable due to the implementation of new VAT arrangements as a
result of Brexit.
•Inventory decreased $1 million at March 31, 2021 as compared to the prior
year-end, reflecting a decrease in finished goods of $15 million driven by
strong customer demand outpacing production, and a $14 million increase in raw
materials driven by the timing of ore shipments.
•Accounts payable increased by $43 million primarily as a result of the timing
of payments and receipt of raw material shipments.
•Accrued liabilities decreased by $18 million primarily due to a decrease in
accrued compensation and accrued interest as a result of the timing of payments,
partially offset by an increase in accrued restructuring. For more information
concerning restructuring and plant closing activities, see "Note 6.
Restructuring, Impairment, and Plant Closing and Transition Costs" of the notes
to unaudited condensed consolidated financial statements.

Financing Arrangements

For a discussion of financing arrangements see "Note 7. Debt" of the notes to unaudited condensed consolidated financial statements.

Restructuring, Impairment and Plant Closing and Transition Costs


For a discussion of our restructuring plans and the costs involved, see "Note 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 11. Commitments and Contingencies-Legal Matters" of the notes to unaudited condensed consolidated financial statements.

Environmental, Health and Safety Matters


As noted in the 2020 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 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 2020 Form 10-K.

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