Tronox Limited
Aug 18, 2011

Tronox Incorporated Reports Second Quarter and Six-Month 2011 Results

OKLAHOMA CITY, Aug. 18, 2011 /PRNewswire/ -- Tronox Incorporated (TROX.PK), the world's fifth-largest producer and marketer of titanium dioxide pigment, today announced results for the fiscal second quarter and six-month period ending June 30, 2011.  The company, which emerged from bankruptcy on February 14, 2011, applied fresh start accounting as of February 1, 2011, and is reporting its results using both GAAP and non-GAAP metrics.

Second quarter 2011 net sales were $428.3 million, a 42.4 percent increase from $300.8 million reported in the prior-year's second quarter. Income from operations in the quarter was $84.8 million compared with $38.2 million in the prior-year quarter.  Net income for the quarter was $66.2 million versus $11.8 million in the prior year's second quarter.

On a non-GAAP basis, second quarter adjusted income from operations was $96.2 million compared with $38.6 million in the prior year, and adjusted net income was $77.4 million compared with $25.9 million in the same period in 2010.  Adjusted second quarter EBITDA, excluding restructuring expenses, was $111.2 million compared with $48.7 million in the prior year.

Dennis L. Wanlass, Tronox's Chief Executive Officer commented, "Our business continued to benefit from strong global demand for titanium dioxide pigment, especially in key Asia-Pacific markets, a favorable pricing environment and cost and efficiency benefits from our restructuring.  Strong global demand, improved operational efficiencies, and incremental capacity at our Tiwest joint venture expansion position us well to continue meeting the needs of our global customer base and achieving our long-term growth objectives."

 U.S. GAAP results, in millions of dollars except per share data and percentages




Successor



Predecessor


Successor



Predecessor


Predecessor


Predecessor




Three Months Ended

June 30,



Three Months Ended

June 30,


Five Months Ended

June 30,



One Month Ended

January 31,


Six Months Ended

June 30,


Twelve Months Ended

December 31,




2011



2010


2011



2011


2010


2010


















Net Sales


$                428.3



$             300.8


$              695.4



$                    107.6


$              579.5


$                 1,217.6


Gross Margin


27.6%



18.0%


22.4%



23.5%


16.9%


18.2%


Income from Operations


$                  84.8



$               38.2


$              102.6



$                      19.9


$              110.5


$                    209.6


Operating Margin


19.8%



12.7%


14.8%



18.5%


19.1%


17.2%


Net Income


$                  66.2



$               11.8


$                76.4



$                    631.3


$                70.8


$                        5.8


Diluted net income per share (Predecessor)


N/A



$               0.29


N/A



$                    15.25


$                1.71


$                      0.14


Diluted net income per share (Successor)


$                  4.18



N/A


$                4.83



N/A


N/A


N/A



Non-GAAP results, in millions of dollars





Successor



Predecessor


Successor



Predecessor


Predecessor


Predecessor




Three Months Ended

June 30,



Three Months Ended

June 30,


Five Months Ended

June 30,



One Month  Ended

January 31,


Six Months Ended

June 30,


Twelve Months Ended

December 31,




2011



2010


2011



2011


2010


2010


















Net Sales


$            428.3



$            300.8


$            695.4



$                  107.6


$            579.5


$            1,217.6


Adjusted Income from Operations


$              96.2



$              38.6


$            153.8



$                    19.9


$              70.9


$               162.3


Adjusted Net Income


$              77.4



$              25.9


$            127.4



$                    17.7


$              41.1


$                 98.0


Adjusted EBITDA


$            111.2



$              48.7


$            179.2



$                    24.3


$              91.9


$               203.1



First Six Months 2011 Results

For the first six months of 2011, Tronox reported net sales of $803 million, income from operations of $122.5 million, and net income of $707.7 million.  These results compared favorably with results in 2010, and were driven largely by increases in sales volumes, continued operating improvements and efficiencies and pricing, as strong demand for TiO2 has continued, especially in the Asia- Pacific region.

Pigment Segment Results

Second Quarter 2011

Pigment sales for the second quarter of 2011 were $398 million compared with $265.5 million during the same period in 2010.  The increase was driven by higher prices and volumes, as a result of the global economic recovery and tight supply industry-wide.  

The pigment segment reported income from operations of $95.7 million in the second quarter of 2011, which represented a $55 million increase over the same period last year.  The increase was primarily due to the effects of higher sales prices and volumes and continued plant operational improvements, partially offset by increased production costs and SG&A expenses.  

Six-month Period

Pigment sales for the first six months of 2011 were $735.1 million, a 43.8 percent increase over the same period in 2010, primarily driven by increased sales volumes and higher TiO2 prices.  Income from operations for the pigment segment increased $66.4 million to $139.5 million during the first six months of 2011, compared with $73.1 million in the same period of 2010. Income from operations grew due to higher sales volumes, higher TiO2 prices and continued plant operational improvements, partially offset by the effect of rising input and energy costs.

Electrolytic and Other Chemical Products Results

Second Quarter

Electrolytic and other chemical products sales for the 2011 second quarter decreased $0.1 million to $29.9 million in during the second quarter of 2011, compared with $30 million during the second quarter of 2010.  The decrease was primarily the result of lower prices for manganese dioxide offset by higher volumes on sodium chlorate.  Income from operations for the electrolytic and other chemical products business was $1.8 million for the second quarter of 2011, compared with $2.2 million during the same period last year.  The decrease was the result of lower selling prices and volumes and higher SG&A expenses, slightly offset by lower production and delivery costs.

Six-month Period

Net sales for the first six months of 2011 were $64.9 million compared with $59.1 million in the first six months of 2010.  Income from operations for the first six months of 2011 was $2.8 million compared with $3.9 million in the first six months of 2010.  

Corporate and Other

Second Quarter

Corporate and other reported a loss of $12.7 million for the second quarter of 2011, compared with a loss of $4.7 million during the comparable prior-year period.  The higher loss was primarily due to the unallocated portion of the post emergence accounting for intangible assets, stock compensation, variable compensation including pension and postretirement healthcare benefits and audit and professional fees incurred related to a three year audit of the company's financial statements.  Included in SG&A expenses was $0.8 million of amortization of intangible assets recorded as part of the fresh start accounting at emergence from bankruptcy.

Six-month Period

For the first six months of 2011, corporate and other reported a loss of $19.8 million compared to a gain of $33.5 million during the same period in 2010.  The decrease in income from operations was primarily driven by the recognition of a $40 million insurance receivable in the first quarter of 2010 related to clean-up obligations at the Henderson facility, versus recognition of $4.3 million in 2011.  

Business Outlook

The company anticipates that the relatively strong demand for its products will continue to support a favorable pricing environment and sales volumes.  "We will continue to seek to further penetrate emerging markets where opportunities for growth are the strongest, while controlling costs through continuous improvement initiatives across our organization," said Wanlass.

Fresh Start Accounting

On February 14, 2011, (the "Effective Date"), Tronox Incorporated emerged from bankruptcy and continued operations as reorganized Tronox Incorporated.  As a result, the company applied fresh start accounting under ASC 852 as of February 1, 2011 (the "Fresh Start Reporting Date"), whereby the U.S. GAAP financial statements after January 31, 2011 are not comparable to the financial statements prior to that date.  Fresh start accounting required resetting the historical net book values of Tronox's assets and liabilities to their estimated fair values. References to "Successor" refer to Tronox and its consolidated subsidiaries after January 31, 2011, after giving effect to the cancellation of old common stock issued prior to January 31, 2011, the issuance of new common stock and settlement of existing debt and other adjustments in accordance with the reorganization plan, and the application of fresh start accounting. References to "Predecessor" refer to Tronox and its consolidated subsidiaries prior to January 31, 2011.

Conference Call/Webcast

Tronox will host a conference call at 11 a.m. EDT today to discuss second quarter 2011 and first half 2011 results.  Interested parties may listen to the Tronox's second quarter 2011 conference call via Tronox's website at or by calling 1-877-627-6590 in the United States or 719-325-4888 outside the United States. The code for both dial-in numbers will be 8044621. A replay of the call will be available for seven days at 1-888-203-1112 in the United States or 719-457-0820 outside the United States. The code for the replay will be 8044621. The webcast will be archived for 30 days on the company's website. Information on earnings also will be available on the company's website homepage at http://www.tronox.com.

Use of Non-GAAP Financial Information

The non-GAAP and supplemental information provided in this press release is a supplement to, and not a substitute for or superior to, the company's financial results presented in accordance with U.S. GAAP. The non-GAAP financial measures presented by the company may be different than non-GAAP financial measures presented by other companies.

The non-GAAP and supplemental information is provided to enhance the user's overall understanding of the company's operating performance. Specifically, the company believes the non-GAAP information provides useful measures to investors regarding the company's financial performance by excluding certain costs and expenses that the company believes are not indicative of its core operating results. The presentation of non-GAAP and supplemental information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with U.S. GAAP. A reconciliation of each non-GAAP financial measure to the most direct, comparable GAAP financial measure is included below.

About Tronox

Tronox (TROX.PK) is the fifth largest titanium dioxide producer in the world with proprietary chloride technology. One of the company's most valuable assets, the chloride process technology yields consistently whiter, brighter pigment grades preferred in paint, coatings and plastics.  The company is the fifth-largest producer of titanium dioxide pigments and also operates an electrolytic and specialty chemicals business. Through the company's global operations, Tronox serves more than 1,000 customers in approximately 90 countries. For more information, visit http://www.tronox.com.

Cautionary Statement

This release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that these forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those statements. The risks and uncertainties include the company's ability to: manage costs; achieve adequate liquidity; execute its new strategic focus; reach a sustainable business model; survive as a stand-alone entity; reach operational efficiency; and reach and sustain profitability. Additional risks related to the company's recent emergence from bankruptcy include: any negative impacts on the company's business, results of operations, financial position or cash management arrangements; the negative impact on relationships with employees, customers, suppliers and contract manufacturers and other stakeholders; and the failure of the company to successfully implement the plan of reorganization. In addition, the instability of the global economy and tight credit markets could continue to adversely impact the company's business in several respects, including adversely impacting credit quality and insolvency risk of the company and its customers and business partners, including suppliers and distributors; bookings; and reductions and deferrals of demand for Tronox products.

The company urges investors to review in detail the risks and uncertainties discussed in the financial statements published on our website, in conjunction with the filings in our Chapter 11 cases and the Company's prior filings with the Securities and Exchange Commission. Unless otherwise required by applicable laws, the company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Investor Contact:  Michael Smith
Direct:  405-775-5413
E-Mail: Michael.smith@tronox.com

Media Contact:  Robert Gibney
Direct: 405-775-5105
E-mail: Robert.gibney@tronox.com

Tronox Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In millions of dollars, except per share amounts)





Successor



Predecessor


Successor



Predecessor


Predecessor


Predecessor





Three Months Ended

June 30,



Three Months Ended

June 30,


Five Months Ended

June 30,



One Month  Ended

January 31,


Six Months Ended

June 30,


Twelve Months Ended

December 31,





2011



2010


2011



2011


2010


2010


Net sales

$                     428.3



$            300.8


$            695.4



$                  107.6


$            579.5


$                    1,217.6



Cost of goods sold

309.9



246.7


539.7



82.3


481.5


996.1


Gross margin

118.4



54.1


155.7



25.3


98.0


221.5




















Selling, general, and administrative expenses

37.9



15.5


57.4



5.4


27.1


59.2



Provision for environmental remediation and restoration,

















net of reimbursements

(4.3)



0.4


(4.3)



-


(39.6)


(47.3)


Income from operations

84.8



38.2


102.6



19.9


110.5


209.6



Interest and debt expense

(8.2)



(12.5)


(13.5)



(2.9)


(24.9)


(49.9)



Gain on liquidation of subsidiary

0.2



-


0.2



-


9.0


5.3



Other income (expense)

(1.6)



2.4


(0.6)



1.6


(0.5)


(13.6)



Reorganization expense (income)

-



(13.7)


-



613.6


(18.9)


(144.8)


Income from continuing operations before

75.2



14.4


88.7



632.2


75.2


6.6



income taxes
















Income tax provision

(9.0)



(3.2)


(12.3)



(0.7)


(4.1)


(2.0)


Income from continuing operations

66.2



11.2


76.4



631.5


71.1


4.6



Income  (loss) from discontinued operations, net of income

















tax benefit of nil, nil, nil, nil, nil and nil, respectively

-



0.6


-



(0.2)


(0.3)


1.2


Net Income

$                       66.2



$              11.8


$              76.4



$                  631.3


$              70.8


$                           5.8



















Earnings (loss) per share, basic and diluted
















Basic---

















Continued operations

$                       4.42



$              0.27


$              5.11



$                  15.29


$              1.73


$                         0.11




Discontinued operations

-



0.02


-



(0.01)


(0.01)


0.03




Net income

$                       4.42



$              0.29


$              5.11



$                  15.28


$              1.72


$                         0.14



Diluted---

















Continuing operations

$                       4.18



$              0.27


$              4.83



$                  15.25


$              1.72


$                         0.11




Discontinued operations

-



0.02


-



-


(0.01)


0.03




Net income

$                       4.18



$              0.29


$              4.83



$                  15.25


$              1.71


$                         0.14


Dividends declared per common share

-



-


-



-


-


-



















Weighted average shares outstanding:
















Basic

14,963



41,235


14,947



41,311


41,229


41,232



Diluted

15,841



41,385


15,826



41,399


41,383


41,383



Tronox Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In millions of dollars)









Successor



Predecessor


ASSETS


June 30, 2011



December 31, 2010


Current Assets







Cash and cash equivalents


$                                87.1



$                           141.7


Accounts receivable:








Third party, net of allowance for doubtful accounts of nil and $0.8


293.8



243.8



Related party


0.5



2.7


Inventories


214.3



198.4


Prepaid and other assets


44.7



144.8


Deferred income taxes


5.9



4.3



Total Current Assets


646.3



735.7



Property, Plant, and Equipment, net


525.3



315.5



Intangible Assets, net


365.5



-



Other Long-Term Assets


17.1



46.7




Total Assets


$                          1,554.2



$                       1,097.9














LIABILITIES AND STOCKHOLDERS' EQUITY







Current Liabilities







Accounts payable








Third party


$                              101.8



$                           134.7



Related party


112.1



64.3


Accrued liabilities


46.2



45.7


Short-term debt


39.0



-


Long-term debt due within one year


5.9



4.3


Income taxes payable


15.0



3.3



Total Current Liabilities


320.0



252.3


Noncurrent







Long-term debt


424.7



420.7


Pension and postretirement benefits


96.8



107.2


Deferred income taxes


11.5



-


Other


60.6



47.4



Total Noncurrent Liabilities


593.6



575.3



Liabilities subject to compromise


-



900.3


Stockholders' Equity







Successor new common stock, par value $0.01— 100,000,000 shares authorized, 15,048,198 issued


0.1



-


Class A common stock, par value $0.01 — 100,000,000 shares
 authorized, 19,107,467 issued


-



0.2


Class B common stock, par value $0.01 — 100,000,000 shares
 authorized, 22,889,431 shares issued


-



0.2


Capital in excess of par value


570.7



496.2


Retained earnings (accumulated deficit)


76.4



(1,128.2)


Accumulated other comprehensive income


2.2



8.8


Treasury stock, at cost — 70,326 shares and 623,953 shares,
 respectively


(8.8)



(7.2)



Total Stockholders' Equity


640.6



(630.0)




Total Liabilities and Stockholders' Equity


$                          1,554.2



$                       1,097.9



Tronox Inc.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In millions of dollars)




Successor



Predecessor


Predecessor


Predecessor




Five Months Ended

June 30, 2011



One Month Ended

January 31, 2011


Six Months Ended

June 30, 2010


For the Year Ended

December 31, 2010


Cash flows from operating activities











Net Income


$                            76.4



$                          631.3


$                            70.8


$                              5.8


Adjustments to reconcile net income to net cash provided by operating activities —











 Depreciation, depletion and amortization


34.2



4.1


24.9


50.1


 Deferred income taxes


10.9



0.2


(1.0)


(5.1)


 Provision for environmental remediation and restoration, net of reimbursements  


-



-


(39.6)


0.1


 Amortization of debt issuance costs


0.3



0.3


5.3


9.2


 Pension and postretirement healthcare (income) expense


2.0



(0.4)


(5.9)


(10.5)


 Gain on liquidation of subsidiary


(0.2)



-


(9.0)


(5.3)


 Stock compensation expense


5.8



-


0.3


-


 Other noncash items not affecting net income


1.9



0.2


(0.2)


3.6


Reorganization Items-











    Noncash reorganization items


-



(636.6)


(4.6)


97.6


    Environmental settlement funding  


-



(270.0)


-


-


    Claims paid with cash


(14.2)



(18.6)


(20.2)


(82.6)


    Tort settlement funding


-



(16.5)


-


-


    Professional and legal fees


-



(12.0)


(26.7)


-


Changes in assets and liabilities-











     (Increase) decrease in trade accounts receivable


(45.3)



(8.1)


(2.0)


(12.5)


     (Increase) decrease in related parties accounts receivable


4.3



(2.1)


(4.6)


0.9


     (Increase) decrease in inventories


33.2



(15.3)


17.6


(6.6)


     (Increase) decrease in prepaids and other assets


5.6



35.4


(1.5)


(4.8)


     Increase (decrease) in accounts payable and accrued liabilities


(46.1)



23.1


5.7


17.7


     Increase (decrease) in related parties accounts payable


47.3



0.5


2.1


17.0


     Increase (decrease) in taxes payable


(2.0)



0.4


0.2


-


     Other , net


2.4



1.0


(3.8)


2.3


 Cash provided by (used in) operating activities


116.5



(283.1)


7.8


76.9


Cash flows from investing activities











 Capital expenditures


(99.1)



(5.5)


(16.5)


(45.0)


 Proceeds from sale of assets


(0.6)



-


-


-


 Cash used in investing activities


(99.7)



(5.5)


(16.5)


(45.0)


Cash flows from financing activities











  Reductions of long-term debt


(2.4)



-


-


(425.0)


  Proceeds from borrowings


14.0



25.0


-


425.0


  Debt issuance costs


-



(2.4)


-


(15.4)


  Proceeds from rights offering


-



185.0


-


(16.8)


  Cash provided by (used in) financing activities


11.6



207.6


-


(32.2)


Effects of Exchange Rate Changes on Cash and Cash Equivalents


(2.3)



0.3


(5.9)


(1.3)


Net Increase (Decrease) in Cash and Cash Equivalents


26.1



(80.7)


(14.6)


(1.6)


Cash and Cash Equivalents at Beginning of Period


61.0



141.7


143.3


143.3


Cash and Cash Equivalents at End of Period


$                            87.1



$                            61.0


$                          128.7


$                          141.7



Use of Non-GAAP Financial Information

To provide investors and others with additional information regarding Tronox's operating results, we have disclosed in this press release certain non-GAAP financial measures, including, Adjusted Income from Operations, Adjusted Net Income, and Adjusted EBITDA, excluding restructuring cost. These non-GAAP financial measures are a supplement to, and not a substitute for or superior to, the company's results presented in accordance with U.S. GAAP. The non-GAAP financial measures presented by the company may be different than non-GAAP financial measures presented by other companies.

The non-GAAP financial measures are provided to enhance the user's overall understanding of the company's operating performance. Specifically, the company believes the non-GAAP information provides useful measures to investors regarding the company's financial performance by excluding certain costs and expenses that the company believes are not indicative of its core operating results, as well as the impact of fresh start accounting. The presentation of these non-GAAP financial measures are not meant to be considered in isolation or as a substitute for results or guidance prepared and presented in accordance with U.S. GAAP.

Tronox has provided a reconciliation of the non-GAAP financial measures used in this release to the most directly comparable GAAP financial measures:


Management believes these non-GAAP financial measures:


Reconciliation of U.S. GAAP to non-GAAP financial measures


















Income from Operations to Adjusted Income from Operations















Successor



Predecessor


Successor



Predecessor


Predecessor


Predecessor




Three Months Ended

June 30,



Three Months Ended

June 30,


Five Months Ended

June 30,



One Month  Ended

January 31,


Six Months Ended

June 30,


Twelve Months Ended

December 31,




2011



2010


2011



2011


2010


2010


(Millions of dollars)
















Income from Operations


$                      84.8



$                    38.2


$                102.6



$                     19.9


$                   110.5


$                       209.6


Add: fresh start adjustments
















  Depreciation


0.9



-


0.9



-


-




  Amortization of intangibles


7.0



-


11.7



-


-


-


  Inventory mark-up


3.4



-


35.5



-


-


-


  Pension and postretirement


4.4



-


7.4



-


-


-


(Less)/add: Provision for environmental remediation and restoration, net of reimbursements


(4.3)



0.4


(4.3)



-


(39.6)


(47.3)


















Adjusted Income from Operations


$                      96.2



$                    38.6


$                153.8



$                     19.9


$                     70.9


$                       162.3




































Net Income to Adjusted Net Income(1)


















Successor



Predecessor


Successor



Predecessor


Predecessor


Predecessor




Three Months Ended

June 30,



Three Months Ended

June 30,


Five Months Ended

June 30,



One Month Ended

January 31,


Six Months Ended

June 30,


Twelve Months Ended

December 31,




2011



2010


2011



2011


2010


2010


(Millions of dollars)
















Net Income


$                      66.2



$                    11.8


$                  76.4



$                   631.3


$                     70.8


$                           5.8


(Less)/add: fresh start adjustments
















   Gain on fresh start accounting


-



-


-



(659.1)


-


-


   Depreciation


0.9



-


0.9



-


-


-


   Amortization from intangibles


7.0



-


11.7



-


-


-


   Inventory mark-up


3.4



-


35.5



-


-


-


   Pension and postretirement


4.4



-


7.4



-


-


-


(Less)/add: Provision for environmental remediation and restoration, net of reimbursements


(4.3)



0.4


(4.3)



-


(39.6)


(47.3)


Less: Noncash gain on liquidation of subsidiary


(0.2)



-


(0.2)



-


(9.0)


(5.3)


Add: reorganization expense


-



13.7


-



45.5


18.9


144.8


















Adjusted Net Income


$                      77.4



$                    25.9


$                127.4



$                     17.7


$                     41.1


$                         98.0




Net Income to Adjusted EBITDA


















Successor



Predecessor


Successor



Predecessor


Predecessor


Predecessor




Three Months Ended

June 30,



Three Months Ended

June 30,


Five Months Ended

June 30,



One Month Ended

January 31,


Six Months Ended

June 30,


Twelve Months Ended

December 31,




2011



2010


2011



2011


2010


2010


(Millions of dollars)
















Net income


$                      66.2



$                    11.8


$                  76.4



$                   631.3


$                     70.8


$                           5.8


Add: Interest


8.2



12.5


13.5



2.9


24.9


49.9


Add: Taxes


9.0



3.2


12.3



0.7


4.1


2.0


Add: Depreciation and amortization


21.1



12.4


34.2



4.1


24.9


50.1


Add: Reorganization expense


-



13.7


-



45.5


18.9


144.8


Less: Gain on fresh start accounting


-



-


-



(659.1)


-


-


Less: Noncash gain on liquidation of subsidiary


(0.2)



-


(0.2)



-


(9.0)


(5.3)


(Less)/add: Provision for environmental remediation and restoration, net of reimbursements


(4.3)



0.4


(4.3)



-


(39.6)


(47.3)


Add: Plant closure costs


-



0.3


0.2



0.1


1.2


1.3


Add: Fresh start inventory mark-up


3.4



-


35.5



-


-


-


Add: Stock based compensation charges


3.2



0.1


6.1



-


0.2


0.5


Add: Foreign currency remeasurement


2.1



(3.0)


2.0



(1.3)


(1.2)


11.8


















Add: Other items


2.5



(2.7)


3.5



0.1


(3.3)


(10.5)


















Adjusted EBITDA


$                    111.2



$                    48.7


$                179.2



$                     24.3


$                     91.9


$                       203.1




(1) Excludes tax effects due to valuation allowances that were recognized which offset deferred taxes and NOLs in the U.S.

SOURCE Tronox Incorporated