Tronox Limited
Tronox Ltd (Form: 10-Q, Received: 05/08/2014 16:07:51)
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-Q

 

 

(Mark One)

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

For the quarterly period ended March 31, 2014

OR

 

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

For the transition period from                        to                      

1-35573

(Commission file number)

 

 

TRONOX LIMITED

(ACN 153 348 111)

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Western Australia, Australia   98-1026700

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification Number)

263 Tresser Boulevard, Suite 1100

Stamford, Connecticut 06901

(Address of principal executive offices)

Registrant’s telephone number, including area code: (203) 705-3800

 

 

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   x     No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes   x     No   ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨       Smaller reporting company   ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x

Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes   x     No   ¨

As of April 30, 2014, the Registrant had 62,558,451 Class A ordinary shares and 51,154,280 Class B ordinary shares outstanding.

 

 

 


Table of Contents

Table of Contents

 

     Page  

PART I – FINANCIAL INFORMATION

  

Item 1. Financial Statements (Unaudited)

     3   

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

     26   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     34   

Item 4. Controls and Procedures

     34   

PART II – OTHER INFORMATION

  

Item 1. Legal Proceedings

     34   

Item 1A. Risk Factors

     34   

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     34   

Item 3. Defaults Upon Senior Securities

     34   

Item 4. Mine Safety Disclosures

     35   

Item 5. Other Information

     35   

Item 6. Exhibits

     35   

SIGNATURES

     36   

 

2


Table of Contents

Item 1. Financial Statements (Unaudited)

 

     Page
No.
 

Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March  31, 2014 and 2013

     4   

Unaudited Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March  31, 2014 and 2013

     5   

Unaudited Condensed Consolidated Balance Sheets at March 31, 2014 and December 31, 2013

     6   

Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March  31, 2014 and 2013

     7   

Unaudited Condensed Consolidated Statements of Equity for the Three Months Ended March 31, 2014 and 2013

     8   

Notes to Unaudited Condensed Consolidated Financial Statements

     9   

 

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TRONOX LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Millions of U.S. dollars, except share and per share data)

 

     Three Months Ended March 31,  
     2014     2013  

Net sales

   $ 418      $ 470   

Cost of goods sold

     393        438   
  

 

 

   

 

 

 

Gross profit

     25        32   

Selling, general and administrative expenses

     (46     (51
  

 

 

   

 

 

 

Loss from operations

     (21     (19

Interest and debt expense

     (34     (27

Other income

     —          2   
  

 

 

   

 

 

 

Loss before income taxes

     (55     (44

Income tax benefit (provision)

     1        (1
  

 

 

   

 

 

 

Net loss

     (54     (45

Net income attributable to noncontrolling interest

     4        12   
  

 

 

   

 

 

 

Net loss attributable to Tronox Limited

   $ (58   $ (57
  

 

 

   

 

 

 

Loss per share, basic and diluted

   $ (0.51   $ (0.50
  

 

 

   

 

 

 

Weighted average shares outstanding, basic and diluted (in thousands)

     113,577        113,317   
  

 

 

   

 

 

 

See notes to unaudited condensed consolidated financial statements.

 

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TRONOX LIMITED

CONDENSED CONSOLIDATED STATEMENTS COMPREHENSIVE LOSS

(Unaudited)

(Millions of U.S. dollars)

 

     Three Months Ended March 31,  
     2014     2013  

Net loss

   $ (54   $ (45

Other comprehensive income (loss):

    

Foreign currency translation adjustments

     (8     (119

Retirement and postretirement plans, net of taxes of less than $1 million in each of the three months ended March 31, 2014 and 2013

     3        1   
  

 

 

   

 

 

 

Other comprehensive loss

     (5     (118
  

 

 

   

 

 

 

Total comprehensive loss

     (59     (163
  

 

 

   

 

 

 

Comprehensive income (loss) attributable to noncontrolling interest:

    

Net income

     4        12   

Foreign currency translation adjustments

     (3     (28
  

 

 

   

 

 

 

Comprehensive income (loss) attributable to noncontrolling interest

     1        (16
  

 

 

   

 

 

 

Comprehensive loss attributable to Tronox Limited

   $ (60   $ (147
  

 

 

   

 

 

 

See notes to unaudited condensed consolidated financial statements.

 

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TRONOX LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Millions of U.S. dollars, except share and per share data)

 

     March 31,     December 31,  
     2014     2013  

ASSETS

    

Current Assets

    

Cash and cash equivalents

   $ 1,403      $ 1,478   

Accounts receivable, net of allowance for doubtful accounts

     327        308   

Inventories, net

     754        759   

Prepaid and other assets

     48        61   

Deferred tax assets

     35        47   
  

 

 

   

 

 

 

Total current assets

     2,567        2,653   

Noncurrent Assets

    

Property, plant and equipment, net

     1,245        1,258   

Mineral leaseholds, net

     1,185        1,216   

Intangible assets, net

     293        300   

Long-term deferred tax assets

     238        192   

Other long-term assets, net

     78        80   
  

 

 

   

 

 

 

Total assets

   $ 5,606      $ 5,699   
  

 

 

   

 

 

 

LIABILITIES AND EQUITY

    

Current Liabilities

    

Accounts payable

   $ 161      $ 164   

Accrued liabilities

     116        146   

Long-term debt due within one year

     19        18   

Income taxes payable

     26        28   

Deferred tax liabilities

     8        7   
  

 

 

   

 

 

 

Total current liabilities

     330        363   

Noncurrent Liabilities

    

Long-term debt

     2,390        2,395   

Pension and postretirement healthcare benefits

     145        148   

Asset retirement obligations

     92        90   

Long-term deferred tax liabilities

     226        204   

Other long-term liabilities

     68        62   
  

 

 

   

 

 

 

Total liabilities

     3,251        3,262   
  

 

 

   

 

 

 

Contingencies and Commitments

    

Shareholders’ Equity

    

Tronox Limited Class A ordinary shares, par value $0.01 — 64,190,320 shares issued and 62,535,672 shares outstanding at March 31, 2014 and 64,046,647 shares issued and 62,349,618 shares outstanding at December 31, 2013

     1        1   

Tronox Limited Class B ordinary shares, par value $0.01 — 51,154,280 shares issued and outstanding at March 31, 2014 and December 31, 2013

     —         —    

Capital in excess of par value

     1,454        1,448   

Retained earnings

     986        1,073   

Accumulated other comprehensive loss

     (286     (284
  

 

 

   

 

 

 

Total shareholders’ equity

     2,155        2,238   

Noncontrolling interest

     200        199   
  

 

 

   

 

 

 

Total equity

     2,355        2,437   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 5,606      $ 5,699   
  

 

 

   

 

 

 

See notes to unaudited condensed consolidated financial statements.

 

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TRONOX LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Millions of U.S. dollars)

 

     Three Months Ended March 31,  
     2014     2013  

Cash Flows from Operating Activities:

    

Net loss

   $ (54   $ (45

Adjustments to reconcile net loss to net cash used in operating activities:

    

Depreciation, depletion and amortization

     73        73   

Deferred income taxes

     —          3   

Share-based compensation expense

     5        5   

Amortization of deferred debt issuance costs and discount on debt

     2        2   

Pension and postretirement healthcare benefit expense

     1        2   

Other noncash items affecting net loss

     8        14   

Contributions to employee pension and postretirement plans

     (2     (1

Changes in assets and liabilities:

    

(Increase) decrease in accounts receivable

     (21     (36

(Increase) decrease in inventories

     4        24   

(Increase) decrease in prepaid and other assets

     13        11   

Increase (decrease) in accounts payable and accrued liabilities

     (32     (41

Increase (decrease) in taxes payable

     (7     (7

Other, net

     (2     (5
  

 

 

   

 

 

 

Cash used in operating activities

     (12     (1
  

 

 

   

 

 

 

Cash Flows from Investing Activities:

    

Capital expenditures

     (31     (45
  

 

 

   

 

 

 

Cash used in investing activities

     (31     (45
  

 

 

   

 

 

 

Cash Flows from Financing Activities:

    

Repayments of debt

     (5     (179

Proceeds from debt

     —          945   

Debt issuance costs and commitment fees

     —          (28

Dividends paid

     (29     (29

Proceeds from the exercise of warrants and options

     1        1   
  

 

 

   

 

 

 

Cash provided by (used in) financing activities

     (33     710   
  

 

 

   

 

 

 

Effects of exchange rate changes on cash and cash equivalents

     1        (5
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (75     659   

Cash and cash equivalents at beginning of period

     1,478        716   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 1,403      $ 1,375   
  

 

 

   

 

 

 

See notes to unaudited condensed consolidated financial statements.

 

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TRONOX LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(Millions of U.S. dollars)

 

     Tronox
Limited
Class A
Ordinary
Shares
     Tronox
Limited
Class B
Ordinary
Shares
     Capital in
Excess of
par Value
     Retained
Earnings
    Accumulated
Other
Comprehensive
Loss
    Total
Shareholders’
Equity
    Non-controlling
Interest
    Total
Equity
 

Balance at December 31, 2013

   $ 1       $ —         $ 1,448       $ 1,073      $ (284   $  2,238      $ 199      $ 2,437   

Net income (loss)

     —          —           —           (58     —          (58     4        (54

Other comprehensive loss

     —           —           —           —          (2     (2     (3     (5

Share-based compensation

     —           —           5         —          —          5        —          5   

Class A and Class B share dividends

     —           —           —           (29     —          (29     —          (29

Warrants and options exercised

     —           —           1         —          —          1        —          1   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2014

   $ 1       $ —         $ 1,454       $ 986      $ (286   $ 2,155      $ 200      $ 2,355   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See notes to unaudited condensed consolidated financial statements.

 

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TRONOX LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)

1.The Company

Tronox Limited and its subsidiaries (collectively referred to as “Tronox,” “we,” “us,” or “our”) is a public limited company registered under the laws of the State of Western Australia, Australia. We are a global leader in the production and marketing of titanium bearing mineral sands and titanium dioxide (“TiO 2 ”) pigment. Our world-class, high performance TiO 2 products are critical components of everyday applications such as paint and other coatings, plastics, paper and other applications. Our mineral sands business consists primarily of three product streams—titanium feedstock, zircon and pig iron. Titanium feedstock is primarily used to manufacture TiO 2 . Zircon, a hard, glossy mineral, is used for the manufacture of ceramics, refractories, TV screen glass and a range of other industrial and chemical products. Pig iron is a metal material used in the steel and metal casting industries to create wrought iron, cast iron and steel. We have global operations in North America, Europe, South Africa, and the Asia-Pacific region. We operate three TiO 2 facilities at the following locations: Hamilton, Mississippi; Botlek, The Netherlands; and Kwinana, Western Australia, and we operate three separate mining operations: KwaZulu-Natal (“KZN”) Sands and Namakwa Sands both located in South Africa, and Cooljarloo located in Western Australia.

At March 31, 2014, Exxaro Resources Limited (“Exxaro”) held approximately 44.4% of the voting securities of Tronox Limited. Exxaro has agreed that through June 15, 2015, it would not engage in any transaction or other action, that would result in its beneficial ownership of the voting shares of Tronox Limited exceeding 45% of the total issued shares of Tronox Limited.

In addition, Exxaro has a 26% ownership interest in each of our Tronox KZN Sands (Pty) Ltd. and Tronox Mineral Sands (Pty) Ltd. subsidiaries in order to comply with the ownership requirements of the Black Economic Empowerment legislation in South Africa. Exxaro is entitled to exchange this interest for approximately 3.2% in additional Class B Shares under certain circumstances. Exxaro also has a 26% ownership interest in certain of our other non-operating subsidiaries. We account for such ownership interest as “Noncontrolling interest” in our condensed consolidated financial statements. During the three months ended March 31, 2014 and 2013, net income attributable to noncontrolling interest was $4 million and $12 million, respectively, with an offsetting comprehensive loss of $3 million and $28 million, respectively.

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited, and have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements, and should be read in conjunction with the audited condensed consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. The Condensed Consolidated Balance Sheet as of December 31, 2013 was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP for complete financial statements.

In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments considered necessary for a fair presentation. Our unaudited condensed consolidated financial statements include the accounts of all majority-owned subsidiary companies. All intercompany balances and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the manner and presentation in the current period.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. It is at least reasonably possible that the effect on the financial statements of a change in estimate within one year of the date of the financial statements due to one or more future confirming events could have a material effect on the financial statements.

 

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Recent Accounting Pronouncements

During 2014, we adopted accounting standards update (“ASU”) 2013-5, Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity , which addresses the treatment of the cumulative translation adjustment into net income when a parent either sells or liquidates a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets within a foreign entity. The adoption of this guidance did not have an impact on our consolidated financial statements.

2. Anadarko Litigation

In May 2009, we commenced an adversary proceeding in the U.S. Bankruptcy Court for the Southern District of New York (Manhattan) (the “Bankruptcy Court”) against Kerr-McGee Corp. (“Kerr-McGee”) and its parent, Anadarko Petroleum Corp. (“Anadarko”), related to the 2005 Spin-Off of Tronox Incorporated (Tronox Incorporated v. Anadarko (In re Tronox Inc.)), 09-1198 (the “Anadarko Litigation”). Pursuant to the plan of reorganization, we assigned the rights to any pre-tax proceeds that may be recovered in the Anadarko Litigation.

On December 12, 2013, the Bankruptcy Court ruled in favor of the plaintiff, and found that Kerr-McGee acted with intent to delay, and hindered Tronox Incorporated’s creditors when it spun off Tronox Incorporated. The court held Anadarko liable, and indicated damages in the range of $5 billion to $14 billion, subject to a set off against claims that Anadarko filed as a creditor in Tronox Incorporated’s 2009 bankruptcy filing.

On April 3, 2014, a proposed settlement was reached with Anadarko for $5.15 billion. We will not receive any portion of the settlement amount. Instead, 88% of the $5.15 billion will go to trusts and other governmental entities for the remediation of polluted sites by Kerr-McGee. The remaining 12% will be distributed to a tort trust to compensate individuals injured as a result of Kerr-McGee’s environmental failures.

We received a private letter ruling from the U.S. Internal Revenue Service confirming that the trusts that held the claims against Anadarko are grantor trusts of Tronox Incorporated solely for federal income tax purposes. As a result, we should be entitled to tax deductions equal to the amount spent by the trusts to remediate environmental matters and to compensate the injured individuals. These deductions will accrue over the life of the trusts as the $5.15 billion is spent. We believe that these expenditures and the accompanying tax deductions may continue for decades.

No provision has been made in our consolidated financial statements for the proposed settlement, as it is subject to Bankruptcy Court approval.

3. Income Taxes

Our operations are conducted through our various subsidiaries in a number of countries throughout the world. We have provided for income taxes based upon the tax laws and rates in the countries in which operations are conducted and income is earned.

 

     Three Months Ended March 31,  
     2014     2013  

Income tax benefit (provision)

   $ 1      $ (1

Loss before income taxes

   $ (55   $ (44

Effective tax rate

     2     (2 )% 

The effective tax rate for each of the three months ended March 31, 2014 and 2013, differs from the Australian statutory rate of 30% primarily due to withholding tax accruals, valuation allowances in the United States, and income in foreign jurisdictions taxed at rates different than 30%.

We continue to maintain a valuation allowance related to the net deferred tax assets in the United States, excluding the deferred benefit for the alternative minimum tax credit. Future provisions for income taxes will include no tax benefits with respect to losses incurred and tax expense only to the extent of current alternative minimum tax and state tax payments until the valuation allowance in the United States is eliminated. Accounting Standards Codification (“ASC 740”), Income Taxes , requires that all available positive and negative evidence be weighted to determine whether a valuation allowance should be recorded.

 

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4. Loss Per Share

The computation of basic and diluted loss per share for the periods indicated is as follows:

 

     Three Months Ended March 31,  
     2014     2013  

Numerator – Basic and Diluted:

    

Net loss

   $ (54   $ (45

Less: Net income attributable to noncontrolling interest

     4        12   
  

 

 

   

 

 

 

Undistributed net loss

     (58     (57

Percentage allocated to ordinary shares (1)

     100     100
  

 

 

   

 

 

 

Loss available to ordinary shares

   $ (58   $ (57
  

 

 

   

 

 

 

Denominator – Basic and Diluted:

    

Weighted-average ordinary shares (in thousands)

     113,577        113,317   
  

 

 

   

 

 

 

Loss per Ordinary Share (2):

    

Basic and diluted loss per ordinary share

   $ (0.51   $ (0.50
  

 

 

   

 

 

 

 

(1) Our participating securities do not have a contractual obligation to share in losses; therefore, when we have a net loss, none of the loss is allocated to participating securities. Consequently, for the three months ended March 31, 2014 and 2013, the two class method did not have an effect on our loss per ordinary share calculation, and as such, dividends paid during the year were not included for purposes of this calculation.
(2) Loss per ordinary share amounts were calculated from exact, not rounded income (loss) and share information.

In computing diluted loss per share under the two-class method, we considered potentially dilutive shares. At March 31, 2014, 2,939,568 options with an average exercise price of $21.08, 357,295 Series A Warrants and 465,129 Series B Warrants, with exercise prices of $59.30 and $65.44, respectively, and 1,002,232 restricted share units with an average price of $22.04 were not recognized in the diluted loss per share calculation as they were anti-dilutive. At March 31, 2013, 2,027,304 options with an average exercise price of $20.56, 357,570 Series A Warrants and 465,465 Series B Warrants, with exercise prices of $60.81 and $67.11, respectively, and 324,472 restricted share units with an average price of $20.99 were not recognized in the diluted loss per share calculation as they were anti-dilutive.

5. Accounts Receivable

 

     March 31,     December 31,  
     2014     2013  

Trade receivables

   $ 321      $ 304   

Other

     8        6   
  

 

 

   

 

 

 

Gross

     329        310   

Allowance for doubtful accounts

     (2     (2
  

 

 

   

 

 

 

Net

   $ 327      $ 308   
  

 

 

   

 

 

 

Bad debt expense recorded on the unaudited Condensed Consolidated Statements of Operations was less than $1 million for each of the three months ended March 31, 2014 and 2013, respectively.

6. Inventories

 

     March 31,      December 31,  
     2014      2013  

Raw materials

   $ 234       $ 218   

Work-in-process

     49         45   

Finished goods

     362         390   

Materials and supplies, net (1)

     109         106   
  

 

 

    

 

 

 

Total

   $ 754       $ 759   
  

 

 

    

 

 

 

 

(1) Consists of processing chemicals, maintenance supplies, and spare parts, which will be consumed directly and indirectly in the production of our products.

 

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Finished goods includes inventory on consignment to others of $41 million and $48 million at March 31, 2014 and December 31, 2013, respectively. At both March 31, 2014 and December 31, 2013, inventory obsolescence reserves were $13 million. At March 31, 2014, we recognized a $13 million net lower of cost or market charge due to market price declines in ilmenite (feedstock), which is included in “Cost of goods sold” on the unaudited Condensed Consolidated Statements of Operations.

7. Property, Plant and Equipment

 

     March 31,     December 31,  
     2014     2013  

Land and land improvements

   $ 81      $ 79   

Buildings

     192        181   

Machinery and equipment

     1,198        1,156   

Construction-in-progress

     102        133   

Other

     28        28   
  

 

 

   

 

 

 

Total

     1,601        1,577   

Less accumulated depreciation and amortization

     (356     (319
  

 

 

   

 

 

 

Net

   $ 1,245      $ 1,258   
  

 

 

   

 

 

 

Depreciation expense related to property, plant and equipment during the three months ended March 31, 2014 and 2013 was $39 million and $42 million, respectively.

8. Mineral Leaseholds

 

     March 31,     December 31,  
     2014     2013  

Mineral leaseholds

   $ 1,384      $ 1,388   

Less accumulated depletion

     (199     (172
  

 

 

   

 

 

 

Net

   $ 1,185      $ 1,216   
  

 

 

   

 

 

 

Depletion expense related to mineral leaseholds during the three months ended March 31, 2014 and 2013 was $27 million and $24 million, respectively.

9. Intangible Assets

 

     March 31, 2014      December 31, 2013  
     Gross
Cost
     Accumulated
Amortization
    Net Carrying
Amount
     Gross
Cost
     Accumulated
Amortization
    Net Carrying
Amount
 

Customer relationships

   $ 294       $ (64   $ 230       $ 294       $ (59   $ 235   

TiO 2 technology

     32         (5     27         32         (5     27   

Internal-use software

     42         (7     35         42         (6     36   

Other

     7         (6     1         7         (5     2   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 375       $ (82   $ 293       $ 375       $ (75   $ 300   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Amortization expense related to intangible assets during each of the three months ended March 31, 2014 and 2013 was $7 million. Estimated future amortization expense related to intangible assets is $20 million for the remainder of 2014, $27 million for 2015, $25 million for 2016, $25 million for 2017, $25 million for 2018, and $171 million thereafter.

 

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10. Accrued Liabilities

 

     March 31,      December 31,  
     2014      2013  

Employee-related costs and benefits

   $ 47       $ 55   

Taxes other than income taxes

     40         44   

Interest

     8         22   

Sales rebates

     16         18   

Other

     5         7   
  

 

 

    

 

 

 

Total

   $ 116       $ 146   
  

 

 

    

 

 

 

11. Debt

Short-term Debt

UBS Revolver

We have a global senior secured asset-based syndicated revolving credit facility with UBS AG (the “UBS Revolver”) with a maturity date of June 18, 2017. The UBS Revolver provides us with a committed source of capital with a principal borrowing amount of up to $300 million, subject to a borrowing base. At March 31, 2014 and December 31, 2013, our borrowing base was $235 million and $210 million, respectively. During each of the three months ended March 31, 2014 and 2013, we had no borrowings or repayments on the UBS Revolver.

ABSA Revolving Credit Facility

We have a R900 million (approximately $86 million at March 31, 2014) revolving credit facility with ABSA Bank Limited (“ABSA”) acting through its ABSA Capital Division (the “ABSA Revolver”) with a maturity date of June 14, 2017. During the three months ended March 31, 2014, we had no borrowings or repayments on the ABSA Revolver. During the three months ended March 31, 2013, we had no borrowings and repayments of $30 million on the ABSA Revolver. The average effective interest rate was 8.5% during the three months ended March 31, 2013.

Long-term Debt

 

     Original
Principal
     Annual
Interest Rate
    Maturity
Date
     March 31,
2014
    December 31,
2013
 

Term Loan, net of unamortized discount (1)

   $ 1,500         Variable  (2)      3/19/2020       $ 1,479      $ 1,482   

Senior Notes

   $ 900         6.375     8/15/2020         900        900   

Co-generation Unit Financing Arrangement

   $ 16         6.5     2/1/2016         5        6   

Capital leases

             25        25   
          

 

 

   

 

 

 

Total debt

             2,409        2,413   

Less: Long-term debt due in one year

             (19     (18
          

 

 

   

 

 

 

Long-term debt

           $ 2,390      $ 2,395   
          

 

 

   

 

 

 

 

(1) Average effective interest rate of 4.9% and 4.8% during the three months ended March 31, 2014 and 2013, respectively.
(2) The Term Loan bore interest at our option at either: (i) 2.5% plus the base rate defined as the greater of the prime lending rate quoted in the print edition of The Wall Street Journal or the Federal Funds Effective rate in effect on such day plus one half of 1%; provided, however, that the Base Rate is not less than 2% per annum; or (ii) 3.5% plus the greater of the 3 month LIBOR Eurodollar rate or 1%.

Term Loan

On March 19, 2013, we, along with our wholly-owned subsidiary, Tronox Pigments (Netherlands) B.V., and certain of our subsidiaries named as guarantors, entered into a Second Amended and Restated Credit and Guaranty Agreement (the “Second Agreement”) with Goldman Sachs Bank USA, as administrative agent and collateral agent, and Goldman Sachs Bank USA, UBS Securities LLC, Credit Suisse Securities (USA) LLC and RBC Capital Markets, as joint lead arrangers, joint bookrunners and co-syndication agents. Pursuant to the Amended and Restated Credit Agreement, we obtained a $1.5 billion senior secured term loan (the “Term Loan”). The Term Loan was issued net of an original issue discount. At March 31, 2014 and December 31, 2013, the unamortized discount was $10 million and $11 million, respectively. During the three months ended March 31, 2014 we made principal repayments of $4 million. We had no repayments during the three months ended March 31, 2013.

 

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On April 23, 2014, we, along with our wholly-owned subsidiary, Tronox Pigments (Netherlands) B.V., and certain of our subsidiaries named as guarantors, entered into a Third Amendment to the Credit and Guaranty Agreement (the “Third Agreement”) with the lender parties thereto and Goldman Sachs Bank USA, as administrative agent, which amends the Second Agreement. The Third Agreement provides for the re-pricing of the Term Loan by replacing the existing definition of “Applicable Margin” with a grid pricing matrix dependent upon our public corporate family rating as determined by Moody’s and Standard & Poor’s (with the interest rate under the Third Agreement remaining subject to Eurodollar Rate and Base Rate floors, as defined in the Third Agreement). Pursuant to the Third Agreement, based upon our current public corporate family rating by Moody’s and Standard & Poor’s, the current interest rate per annum is 300 basis points plus LIBOR (subject to a LIBOR floor of 1% per annum) compared to 350 basis points plus LIBOR (subject to a LIBOR floor of 1% per annum) in the Second Agreement. The Third Agreement also amended certain provisions of the Second Agreement to permit us and certain of our subsidiaries to obtain new cash flow revolving credit facilities in place of our existing asset based revolving credit facility. The maturity date under the Second Agreement and all other material terms of the Second Agreement remain the same under the Third Agreement.

Senior Notes

Our wholly-owned subsidiary, Tronox Finance LLC, issued $900 million aggregate principal amount of senior notes at par value (the “Senior Notes”). The Senior Notes bear interest semiannually at a rate equal to 6.375%, and are fully and unconditionally guaranteed on a senior, unsecured basis by us and certain of our subsidiaries. The Senior Notes were initially offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States to non-U.S. persons pursuant to Regulation S under the Securities Act. During 2013, we and certain of our subsidiaries filed a Registration Statement on Form S-4 with the SEC, pursuant to which we and such subsidiaries offered to exchange $900 million in aggregate principal amount of registered 6.375% senior notes due 2020 and related guarantees for existing and substantially identical $900 million aggregate principal amount of 6.375% senior notes due 2020, which were previously issued by Tronox Finance LLC.

Capital Leases

We have capital lease obligations in South Africa, which are payable through 2031 at a weighted average interest rate of approximately 14%. At both March 31, 2014 and December 31, 2013, such obligations had a net book value of assets recorded under capital leases aggregating $23 million. During each of the three months ended March 31, 2014 and 2013, we made principal payments of less than $1 million.

Fair Value

Our debt is recorded at historical amounts. At March 31, 2014 and December 31, 2013, the fair value of the Term Loan was $1,500 million and $1,524 million, respectively. At March 31, 2014 and December 31, 2013, the fair value of the Senior Notes was $928 million and $924 million, respectively. We determined the fair value of the Term Loan and the Senior Notes using Bloomberg market prices. The fair value hierarchy for the Term Loan and the Senior Notes is a Level 1 input.

Debt Covenants

At March 31, 2014, we had financial covenants in the UBS Revolver, the ABSA Revolver and the Term Loan; however, only the ABSA Revolver had a financial maintenance covenant that applies to local operations and only when the ABSA Revolver is drawn upon. The Term Loan and the UBS Revolver are subject to an intercreditor agreement pursuant to which the lenders’ respective rights and interests in the security are set forth. We were in compliance with all our financial covenants as of and for the three months ended March 31, 2014.

Security

We have pledged the majority of our U.S. assets and certain assets of our non-U.S. subsidiaries in support of our outstanding debt.

 

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Table of Contents

Interest and Debt Expense

Interest and debt expense consisted of the following:

 

    Three Months Ended March 31,  
    2014     2013  

Debt

  $ 32      $ 24   

Amortization of deferred debt issuance costs and discounts on debt

    2        2   

Other

    1        2   

Capitalized interest

    (1     (1
 

 

 

   

 

 

 

Total interest and debt expense

  $ 34      $ 27   
 

 

 

   

 

 

 

In connection with obtaining debt, we incurred debt issuance costs, which are being amortized through the respective maturity dates using the effective interest method. At March 31, 2014 and December 31, 2013, we had $55 million and $57 million, respectively, of deferred debt issuance costs, which are recorded in “Other long-term assets, net” on the unaudited Condensed Consolidated Balance Sheets.”

12. Asset Retirement Obligations

Asset retirement obligations consist primarily of rehabilitation and restoration costs, landfill capping costs, decommissioning costs, and closure and post-closure costs. A summary of the changes during the three months ended March 31, 2014 and 2013 is as follows:

 

    Three Months Ended March 31,  
    2014     2013  

Beginning balance

  $ 96      $ 113   

Additions

    —          1   

Accretion expense

    1        2   

Remeasurement/translation

    2        (3

Changes in estimates, including cost and timing of cash flows

    1        (1

Settlements/payments

    (2     (1
 

 

 

   

 

 

 

Ending balance

  $ 98      $ 111   
 

 

 

   

 

 

 

Current portion included in accrued liabilities

  $ 6      $ 6   
 

 

 

   

 

 

 

Noncurrent portion

  $ 92      $ 105   
 

 

 

   

 

 

 

Environmental Rehabilitation Trust

In accordance with applicable regulations, we have established an environmental rehabilitation trust for the prospecting and mining operations in South Africa, which receives, holds, and invests funds for the rehabilitation or management of asset retirement obligations. The trustees of the fund are appointed by us, and consist of sufficiently qualified employees capable of fulfilling their fiduciary duties. At March 31, 2014 and December 31, 2013, the environmental rehabilitation trust assets were $21 million and $22 million, respectively, which were recorded in “Other long-term assets, net” on the unaudited Condensed Consolidated Balance Sheets.

13. Commitments and Contingencies

Letters of Credit —At March 31, 2014, we had outstanding letters of credit, bank guarantees, and performance bonds of $45 million, of which $25 million were letters of credit issued under the UBS Revolver, $18 million were bank guarantees issued by ABSA and $2 million were performance bonds issued by Westpac Banking Corporation.

Other Matters —From time to time, we may be party to a number of legal and administrative proceedings involving legal, environmental, and/or other matters in various courts or agencies. These proceedings, individually and in the aggregate, may have a material adverse effect on us. These proceedings may be associated with facilities currently or previously owned, operated or used by us and/or our predecessors, some of which may include claims for personal injuries, property damages, cleanup costs, and other environmental matters. Current and former operations may also involve management of regulated materials that are subject to various environmental laws and regulations including the Comprehensive Environmental Response Compensation and Liability Act, the Resource Conservation and Recovery Act or state equivalents. Similar environmental laws and regulations and other requirements exist in foreign countries in which we operate.

 

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14. Shareholders’ Equity

The changes in outstanding Class A ordinary shares (“Class A Shares”) and Class B ordinary shares (“Class B Shares”) for the three months ended March 31, 2014 were as follows:

 

Class A Shares:

  

Balance at December 31, 2013

     62,349,618   

Shares issued for share-based compensation

     125,618   

Shares issued for warrants exercised

     49   

Shares issued for options exercised

     60,387   
  

 

 

 

Balance at March 31, 2014

     62,535,672   
  

 

 

 

Class B Shares:

  

Balance at December 31, 2013

     51,154,280   
  

 

 

 

Balance at March 31, 2014

     51,154,280   
  

 

 

 

Warrants

Tronox Limited has outstanding Series A Warrants (the “Series A Warrants”) and Series B Warrants (the “Series B Warrants,” and together with the Series A Warrants, the “Warrants”). Holders of the Warrants are entitled to purchase 5.21 Class A Shares and receive $12.50 in cash at an exercise prices of $59.30 for each Series A Warrant and $65.44 for each Series B Warrant. The Warrants have a seven-year term from the date initially issued and will expire on February 14, 2018. A holder may exercise the Warrants by paying the applicable exercise price in cash or exercising on a cashless basis. The Warrants are freely transferable by the holder. At March 31, 2014 there were 357,295 Series A Warrants and 465,129 Series B Warrants outstanding.

Dividends

On February 25, 2014, the Board of Directors declared a quarterly dividend of $0.25 per share to holders of our Class A Shares and Class B Shares at the close of business on March 10, 2014, totaling $29 million, which was paid on March 24, 2014.

Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss were as follows:

 

     Three Months Ended March 31,  
     2014     2013  

Foreign currency translation:

    

Beginning balance

   $ (215   $ 3   

Changes in accumulated foreign currency translation

     (5     (90
  

 

 

   

 

 

 

Ending balance

     (220     (87
  

 

 

   

 

 

 

Pension and postretirement benefit plans:

    

Beginning balance

     (69     (99

Net actuarial gains and amortization of unrecognized actuarial losses, net of taxes

     3        1   
  

 

 

   

 

 

 

Ending balance

     (66     (98
  

 

 

   

 

 

 

Accumulated other comprehensive loss attributable to Tronox Limited

     (286     (185
  

 

 

   

 

 

 

Accumulated other comprehensive loss attributable to noncontrolling interest

     (3     (28
  

 

 

   

 

 

 

Accumulated other comprehensive loss

   $ (289   $ (213
  

 

 

   

 

 

 

 

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15. Share-Based Compensation

Compensation expense consisted of the following:

 

     Three Months Ended March 31,  
     2014      2013  

Restricted shares and restricted share units

   $ 3       $ 2   

Options

     2         2   

T-Bucks Employee Participation Plan

     —           1   
  

 

 

    

 

 

 

Total compensation expense

   $ 5       $ 5   
  

 

 

    

 

 

 

Tronox Limited Management Equity Incentive Plan

On June 15, 2012, we adopted the Tronox Limited Management Equity Incentive Plan (the “MEIP”), which permits the grant of awards that are comprised of incentive options, nonqualified options, share appreciation rights, restricted shares, restricted share units, performance awards, and other share-based awards, cash payments, and other forms as the compensation committee of the Board in its discretion deems appropriate, including any combination of the above. Subject to further adjustment, the maximum number of shares which may be the subject of awards (inclusive of incentive options) is 12,781,225 Class A Shares.

Restricted Shares

During the three months ended March 31, 2014, we granted restricted shares to members of the Board which vest ratably over a three-year period. These awards are classified as equity awards, and are accounted for using the fair value established at the grant date.

The following table presents a summary of activity for the three months ended March 31, 2014:

 

     Number of
Shares
    Weighted Average
Grant Date
Fair Value
 

Outstanding, January 1, 2014

     1,148,795        20.61   

Granted

     38,766        22.17   

Vested

     (80,743     19.06   

Forfeited

     (404     27.98   
  

 

 

   

 

 

 

Outstanding, March 31, 2014

     1,106,414      $ 20.79   
  

 

 

   

 

 

 

Expected to vest, March 31, 2014

     1,095,489      $ 20.77   
  

 

 

   

 

 

 

At March 31, 2014, there was $11 million of unrecognized compensation expense related to nonvested restricted shares, adjusted for estimated forfeitures, which is expected to be recognized over a weighted-average period of two years. The total fair value of restricted shares that vested during the three months ended March 31, 2014 was $2 million.

Restricted Share Units (“RSUs”)

During the three months ended March 31, 2014, we granted RSUs to employees and members of the Board which have time and/or performance requirements. The time-based awards vest ratably over a three-year period, while the performance-based awards cliff vest at the end of the three years. These awards are classified as equity awards, and are accounted for using the fair value established at the grant date.

 

     Number of
Shares
    Weighted Average
Grant Date
Fair Value
 

Outstanding, January 1, 2014

     303,324        21.08   

Granted

     749,025        22.26   

Vested

     (44,875     19.25   

Forfeited

     (5,242     21.34   
  

 

 

   

 

 

 

Outstanding, March 31, 2014

     1,002,232      $ 22.04   
  

 

 

   

 

 

 

Expected to vest, March 31, 2014

     970,161      $ 22.05   
  

 

 

   

 

 

 

 

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At March 31, 2014, there was $18 million of unrecognized compensation expense related to nonvested RSUs, adjusted for estimated forfeitures, which is expected to be recognized over a weighted-average period of three years. The total fair value of RSUs that vested during the three months ended March 31, 2014 was $1 million.

Options

During the three months ended March 31, 2014, we granted options to employees to purchase Class A Shares, which vest ratably over a three-year period and have a ten-year term. The following table presents a summary of activity for the three months ended March 31, 2014:

 

     Number of
Options
    Weighted
Average
Exercise
Price
     Weighted
Average
Contractual
Life (years)
     Intrinsic
Value
 

Outstanding, January 1, 2014

     2,094,771      $ 20.63         8.97       $ 7   

Granted

     910,375        21.98         

Exercised

     (60,387     19.09         

Forfeited

     (5,031     19.52         

Expired

     (160     25.90         
  

 

 

   

 

 

    

 

 

    

 

 

 

Outstanding, March 31, 2014

     2,939,568      $ 21.08         9.06       $ 9   
  

 

 

   

 

 

    

 

 

    

 

 

 

Expected to vest, March 31, 2014

     2,189,782      $ 21.16         9.20       $ 7   
  

 

 

   

 

 

    

 

 

    

 

 

 

Exercisable, March 31, 2014

     678,036      $ 20.85         8.58       $ 2   
  

 

 

   

 

 

    

 

 

    

 

 

 

The aggregate intrinsic values in the table represent the total pre-tax intrinsic value (the difference between our share price at the indicated dates and the options’ exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options at the end of the first quarter. The amount will change based on the fair market value of our stock. Total intrinsic value of options exercised during the three months ended 2014 was less than $1 million. We issue new shares upon the exercise of options. During the three months ended 2014, we received $1 million in cash for the exercise of stock options.

At March 31, 2014, unrecognized compensation expense related to options, adjusted for estimated forfeitures, was $15 million, which is expected to be recognized over a weighted-average period of two years.

Fair value is determined on the grant date using the Black-Scholes option-pricing model and is recognized in earnings on a straight-line basis over the employee service period of three years, which is the vesting period. The assumptions used in the Black-Scholes option-pricing model were as follows:

 

     February 10,
2014
 

Number of options granted

     910,375   

Fair market value and exercise price

   $ 21.98   

Risk-free interest rate

     1.88

Expected dividend yield

     4.55

Expected volatility

     58

Maturity (years)

     10   

Expected term (years)

     6   

Per-unit fair value of options granted

   $ 8.17   

The fair value is based on the closing price of our Class A Shares on the grant date. The risk-free interest rate is based on U.S. Treasury Strips available with maturity period consistent with expected life assumption. The expected volatility assumption is based on historical price movements of our peer group.

 

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Table of Contents

T-Bucks Employee Participation Plan (“T-Bucks EPP”)

During 2012, we established the T-Bucks EPP for the benefit of certain qualifying employees of our South African subsidiaries. We funded the T-Bucks Trust (the “Trust”) with R124 million (approximately $15 million), which was used to acquire Class A Shares. Additional contributions may be made in the future at the discretion of the Board. The T-Bucks EPP is classified as an equity-settled shared-based payment plan, whereby participants were awarded share units in the Trust, which entitles them to receive Class A Shares upon completion of the vesting period on May 31, 2017. Participants are entitled to receive dividends on the shares during the vesting period. Forfeited shares are retained by the Trust, and are allocated to future participants. Compensation costs are recognized over the vesting period using the straight-line method. During 2012, the Trust purchased 548,234 Class A Shares at $25.79 per share, which was the fair value on the date of purchase. The balance at both March 31, 2014 and December 31, 2013 was 548,234 shares.

16. Pension and Other Postretirement Healthcare Benefits

We sponsor a noncontributory defined benefit retirement plan (qualified) in the United States, a contributory defined benefit retirement plan in The Netherlands, a U.S. contributory postretirement healthcare plan, and a South Africa postretirement healthcare plan.

The components of net periodic cost associated with the U.S. and foreign retirement plans recognized in the unaudited Condensed Consolidated Statement of Operations were as follows:

 

     Retirement Plans  
     Three Months Ended March 31,  
     2014     2013  

Net periodic cost:

    

Service cost

   $ 1      $ 1   

Interest cost

     6        5   

Expected return on plan assets

     (6     (5

Net amortization of actuarial loss

     —          1   
  

 

 

   

 

 

 

Total net periodic cost

   $ 1      $ 2   
  

 

 

   

 

 

 

The components of net periodic cost associated with the postretirement healthcare plans for each of the three months ended March 31, 2014 and 2013 were less than $1 million.

17. Segment Information

The reportable segments presented below represent our operating segments for which separate financial information is available and which is utilized on a regular basis by our chief operating decision maker to assess performance and to allocate resources. In identifying our reportable segments, we also considered the nature of services provided by our operating segments. We have two reportable segments, Mineral Sands and Pigment. Our Mineral Sands segment includes the exploration, mining, and beneficiation of mineral sands deposits, as well as heavy mineral production, and produces titanium feedstock, including chloride slag, slag fines, and rutile, as well as pig iron and zircon. Our Pigment segment primarily produces and markets TiO 2 . Corporate and Other is comprised of our electrolytic operations, all of which are located in the United States, as well as our corporate activities.

Segment performance is evaluated based on segment operating profit (loss), which represents the results of segment operations before unallocated costs, such as general corporate expenses not identified to a specific segment, environmental provisions, net of reimbursements, related to sites no longer in operation, interest expense, other income (expense), and income tax expense or benefit.

 

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Net sales and income from operations by segment were as follows:

 

     Three Months Ended March 31,  
     2014     2013  

Mineral Sands segment

   $ 178      $ 298   

Pigment segment

     291        288   

Corporate and Other

     25        27   

Eliminations

     (76     (143
  

 

 

   

 

 

 

Net sales (1)

   $ 418      $ 470   
  

 

 

   

 

 

 

Mineral Sands segment

   $ (17   $ 96   

Pigment segment

     (13     (68

Corporate and Other

     (20     (24

Eliminations

     29        (23
  

 

 

   

 

 

 

Loss from operations

     (21     (19

Interest and debt expense

     (34     (27

Other income

            2   
  

 

 

   

 

 

 

Loss before income taxes

     (55     (44
  

 

 

   

 

 

 

Income tax benefit (provision)

     1        (1
  

 

 

   

 

 

 

Net loss

   $ (54   $ (45
  

 

 

   

 

 

 

 

(1) Net sales to external customers, by geographic region, based on country of production, were as follows:

 

     Three Months Ended March 31,  
     2014      2013  

U.S. operations

   $ 180       $ 187   

International operations:

     

Australia

     95         108   

South Africa

     78         110   

The Netherlands

     65         65   
  

 

 

    

 

 

 

Total

   $ 418       $ 470   
  

 

 

    

 

 

 

During the three months ended March 31, 2014, our ten largest pigment customers and our ten largest third-party mineral sands customers represented approximately 27% and 15%, respectively, of net sales; however, no single customer accounted for more than 10% of total net sales.

Capital expenditures by segment were as follows:

 

     Three Months Ended March 31,  
     2014      2013  

Mineral Sands segment

   $ 21       $ 31   

Pigment segment

     8         13   

Corporate and Other

     2         1   
  

 

 

    

 

 

 

Total

   $ 31       $ 45   
  

 

 

    

 

 

 

Total assets by segment were as follows:

 

     March 31,     December 31,  
     2014     2013  

Mineral Sands segment

   $ 2,983      $ 2,957   

Pigment segment

     1,384        1,559   

Corporate and Other

     1,254        1,227   

Eliminations

     (15     (44
  

 

 

   

 

 

 

Total

   $ 5,606      $ 5,699   
  

 

 

   

 

 

 

 

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18. Guarantor Condensed Consolidating Financial Statements

The obligations of Tronox Finance LLC, our wholly-owned subsidiary, under the Senior Notes are fully and unconditionally (subject to certain customary circumstances providing for the release of a guarantor subsidiary) guaranteed on a senior unsecured basis, jointly and severally, by Tronox Limited (referred to for purposes of this note only as the “Parent Company”) and each of its current and future U.S. restricted subsidiaries, other than excluded subsidiaries, that guarantee any indebtedness of the Parent Company or its restricted subsidiaries (collectively, the “Guarantor Subsidiaries”). The Subsidiary Issuer and each of the Guarantor Subsidiaries are 100% owned, directly or indirectly, by the Parent Company. Our subsidiaries that do not guarantee the Senior Notes are referred to as the “Non-Guarantor Subsidiaries.” The guarantor condensed consolidating financial statements presented below presents the statements of operations, statements of comprehensive income, balance sheets and statements of cash flow data for: (i) the Parent Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries on a consolidated basis (which is derived from Tronox historical reported financial information); (ii) the Parent Company, alone (accounting for our Guarantor Subsidiaries and the Non-Guarantor Subsidiaries on an equity basis under which the investments are recorded by each entity owning a portion of another entity at cost, adjusted for the applicable share of the subsidiary’s cumulative results of operations, capital contributions and distributions, and other equity changes); (iii) the Guarantor Subsidiaries alone; and, (iv) the Non-Guarantor Subsidiaries alone.

The guarantor condensed consolidating financial statements are presented on a legal entity basis, not on a business segment basis. The indenture governing the Senior Notes provides for a Guarantor Subsidiary to be automatically and unconditionally released and discharged from its guarantee obligations in certain customary circumstances, including:

 

    Sale or other disposition of such Guarantor Subsidiary’s capital stock or all or substantially all of its assets and all of the indenture obligations (other than contingent obligations) of such Subsidiary Guarantor in respect of all other indebtedness of the Subsidiary Guarantors terminate upon the consummation of such transaction;

 

    Designation of such Guarantor Subsidiary as an “unrestricted subsidiary” under the indenture;

 

    In the case of certain Guarantor Subsidiaries that incur or guarantee indebtedness under certain credit facilities, upon the release or discharge of such Guarantor Subsidiary’s guarantee or incurrence of indebtedness that resulted in the creation of such guarantee, except a discharge or release as a result of payment under such guarantee;

 

    Legal defeasance, covenant defeasance, or satisfaction and discharge of the indenture obligations;

 

    Payment in full of the aggregate principal amount of all outstanding Senior Notes and all other obligations under the indenture; or

 

    Release or discharge of the Guarantor Subsidiary’s guarantee of certain other indebtedness.

GUARANTOR CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Three Months Ended March 31, 2014

(Unaudited)

(Millions of U.S. dollars)

 

    Consolidated     Eliminations     Parent
Company
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
 

Net sales

  $ 418      $ (52   $ —        $ 277      $ 193   

Cost of goods sold

    393        (78     —          295        176   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    25        26        —          (18     17   

Selling, general and administrative expenses

    (46     2        (4     (33     (11
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

    (21     28        (4     (51     6   

Interest and debt expense

    (34     —          137        (160     (11

Other income (expense)

    —          32        —          (3     (29

Equity in earnings of subsidiary

    —          151        (151 )     —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    (55     211        (18     (214     (34

Income tax benefit (provision)

    1        —          (40     60        (19
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

    (54     211        (58     (154     (53

Net income attributable to noncontrolling interest

    4        —          —          4        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Tronox Limited

  $ (58   $ 211      $ (58   $ (158   $ (53
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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GUARANTOR CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

Three Months Ended March 31, 2013

(Unaudited)

(Millions of U.S. dollars)

 

     Consolidated     Eliminations     Parent
Company
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
 

Net sales

   $ 470      $ (95   $ —        $ 312      $ 253   

Cost of goods sold

     438        (68     —          303        203   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     32        (27     —          9        50   

Selling, general and administrative expenses

     (51     1        (5     (35     (12
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     (19     (26     (5     (26     38   

Interest and debt expense

     (27     —          137        (163     (1

Other income (expense)

     2        —          —          (6     8   

Equity in earnings of subsidiary

     —          150        (150     —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

     (44     124        (18     (195     45   

Income tax benefit (provision)

     (1     —          (39     51        (13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (45     124        (57     (144     32   

Net income attributable to noncontrolling interest

     12        —          —          12        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Tronox Limited

   $ (57   $ 124      $ (57   $ (156   $ 32   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GUARANTOR CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31, 2014

(Unaudited)

(Millions of U.S. dollars)

 

     Consolidated     Eliminations      Parent
Company
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
 

Net income (loss)

   $ (54   $ 211       $ (58   $ (154   $ (53

Other comprehensive income (loss):

           

Foreign currency translation adjustments

     (8     —           —          (4     (4

Pension and postretirement plans

     3        —           —          3        —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Other comprehensive loss

     (5     —           —          (1     (4
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

     (59     211         (58     (155     (57
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to noncontrolling interest:

           

Net income

     4        —           —          4        —     

Foreign currency translation adjustments

     (3     —           —          (3     —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to noncontrolling interest

     1        —           —          1        —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to Tronox Limited

   $ (60   $ 211       $ (58   $ (156   $ (57
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

 

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GUARANTOR CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended March 31, 2013

(Unaudited)

(Millions of U.S. dollars)

 

     Consolidated     Eliminations      Parent
Company
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
 

Net income (loss)

   $ (45   $ 124       $ (57   $ (144   $ 32   

Other comprehensive income (loss):

           

Foreign currency translation adjustments

     (119     —           —          —          (119

Pension and postretirement plans

     1        —           —          —          1   
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Other comprehensive loss

     (118     —           —          —          (118
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

     (163     124         (57     (144     (86
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to noncontrolling interest:

           

Net income

     12        —           —          12        —     

Foreign currency translation adjustments

     (28     —           —          (28     —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to noncontrolling interest

     (16     —           —          (16     —     
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to Tronox Limited

   $ (147   $ 124       $ (57   $ (128   $ (86
  

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

GUARANTOR CONDENSED CONSOLIDATING BALANCE SHEETS

As of March 31, 2014

(Unaudited)

(Millions of U.S. dollars)

 

     Consolidated      Eliminations     Parent
Company
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
 

ASSETS

           

Cash and cash equivalents

   $ 1,403       $ —        $ 118      $ 1,063      $ 222   

Investment in subsidiaries

     —           (1,311     (772     1,626        457   

Property, plant and equipment, net

     1,245         —          —          708        537   

Mineral leaseholds, net

     1,185         —          —          679        506   

Other assets

     1,773         (9,764 )     6,835        2,482        2,220   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 5,606       $ (11,075   $ 6,181      $ 6,558      $ 3,942   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

           

Long-term debt

   $ 2,390       $ (7,246   $ 804      $ 7,271      $ 1,561   

Other liabilities

     861         (2,501 )     696       2,155        511   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     3,251         (9,747     1,500        9,426        2,072   

Total equity

     2,355         (1,328     4,681        (2,868     1,870   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 5,606       $ (11,075   $ 6,181      $ 6,558      $ 3,942   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

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GUARANTOR CONDENSED CONSOLIDATING BALANCE SHEETS

As of December 31, 2013

(Unaudited)

(Millions of U.S. dollars)

 

     Consolidated      Eliminations     Parent
Company
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
 

ASSETS

           

Cash and cash equivalents

   $ 1,478       $ —        $ 179      $ 1,094      $ 205   

Investment in subsidiaries

     —             (952     (1,095     1,590        457   

Property, plant and equipment, net

     1,258         —          —          710        548   

Mineral leaseholds, net

     1,216         —          —          701        515   

Other assets

     1,747         (9,645 )     6,687        2,501        2,204   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 5,699       $ (10,597   $ 5,771      $ 6,596      $ 3,929   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

           

Long-term debt

   $ 2,395       $ (7,268   $ 825      $ 7,272      $ 1,566   

Other liabilities

     867         (2,333 )     658       2,037        505   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     3,262         (9,601     1,483        9,309        2,071   

Total equity

     2,437         (996     4,288        (2,713     1,858   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 5,699       $ (10,597   $ 5,771      $ 6,596      $ 3,929   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

GUARANTOR CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

Three Months Ended March 31, 2014

(Unaudited)

(Millions of U.S. dollars)

 

     Consolidated     Eliminations     Parent
Company
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
 

Cash Flows from Operating Activities:

          

Net income (loss)

   $ (54   $ 211      $ (58   $ (154   $ (53

Other

     42        (211     25        146        82   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash provided by (used in) operating activities

     (12     —          (33     (8     29   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash Flows from Investing Activities:

          

Capital expenditures

     (31     —          —          (23     (8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash used in investing activities

     (31     —          —          (23     (8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash Flows from Financing Activities:

          

Repayments of debt

     (5     —          —          —          (5

Dividends paid

     (29     —          (29     —          —     

Proceeds from the exercise of warrants and options

     1        —          1        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash used in financing activities

     (33     —          (28     —          (5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effects of exchange rate changes on cash and cash equivalents

     1        —          —          —          1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (75     —          (61     (31     17   

Cash and cash equivalents at beginning of period

     1,478        —          179        1,094        205   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 1,403      $ —        $ 118      $ 1,063      $ 222   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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GUARANTOR CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

Three Months Ended March 31, 2013

(Unaudited)

(Millions of U.S. dollars)

 

     Consolidated     Eliminations     Parent
Company
    Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
 

Cash Flows from Operating Activities:

          

Net income (loss)

   $ (45   $ 124      $ (57   $ (144   $ 32   

Other

     44        (124     742        201        (775
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash provided by (used in) operating activities

     (1     —          685        57        (743
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash Flows from Investing Activities:

          

Capital expenditures

     (45     —          —          (14     (31
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash used in investing activities

     (45     —          —          (14     (31
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash Flows from Financing Activities:

          

Repayments of debt

     (179     —          —          —          (179

Proceeds from borrowings

     945        —          —          —          945   

Debt issuance costs

     (28     —          —          —          (28

Dividends paid

     (29     —          (29     —          —     

Proceeds from the exercise of warrants

     1        —          1        —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash provided by (used in) financing activities

     710        —          (28     —          738   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effects of exchange rate changes on cash and cash equivalents

     (5     —          —          —          (5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     659        —          657        43        (41

Cash and cash equivalents at beginning of period

     716        —          533        82        101   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 1,375      $ —        $ 1,190      $ 125      $ 60   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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I tem 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with Tronox Limited’s unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2013. This discussion and other sections in this Quarterly Report on Form 10-Q contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties, and actual results could differ materially from those discussed in the forward-looking statements as a result of numerous factors. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements also can be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains certain financial measures, in particular the presentation of EBITDA and Adjusted EBITDA, which are not presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). We are presenting these non-U.S. GAAP financial measures because they provide us and readers of this Form 10-Q with additional insight into our operational performance relative to earlier periods and relative to our competitors. We do not intend for these non-U.S GAAP financial measures to be a substitute for any U.S. GAAP financial information. Readers of these statements should use these non-U.S. GAAP financial measures only in conjunction with the comparable U.S. GAAP financial measures. A reconciliation of Net income to EBITDA and Adjusted EBITDA is also provided herein.

Executive Overview

We are a global leader in the production and marketing of titanium bearing mineral sands and titanium dioxide (“TiO 2 ”) pigment. We are the third largest global producer and marketer of TiO 2 manufactured via chloride technology, as well as the third largest global producer of titanium feedstock and a leader in global zircon production. We have operations in North America, Europe, South Africa, and the Asia-Pacific region. We operate three TiO 2 pigment facilities at the following locations: Hamilton, Mississippi; Botlek, The Netherlands; and Kwinana, Western Australia, representing an aggregate of approximately 465,000 metric tons of annual TiO 2  production capacity. Additionally, we operate three separate mining operations: KwaZulu-Natal (“KZN”) Sands located in South Africa, Namakwa Sands located in South Africa and Cooljarloo Sands located in Western Australia, which have a combined annual production capacity of approximately 753,000 metric tons of titanium feedstock and approximately 265,000 metric tons of zircon.

We have two reportable operating segments, Mineral Sands and Pigment. Corporate and Other is comprised of our electrolytic manufacturing and marketing operations, as well as our corporate activities.

The Mineral Sands segment includes the exploration, mining, and beneficiation of mineral sands deposits. These operations produce titanium feedstock, including chloride slag, slag fines, and rutile, as well as zircon and pig iron. Titanium feedstock is used primarily to manufacture TiO 2 pigment. Zircon is a mineral which is primarily used as an opacifier in ceramic glazes for tiles, plates, dishes, and industrial products. Pig iron is a metal material used in the steel and metal casting industries to create wrought iron, cast iron, and steel.

The Pigment segment primarily produces and markets TiO 2, which is used in a wide range of products due to its ability to impart whiteness, brightness, and opacity. TiO pigment is used extensively in the manufacture of paint and other coatings, plastics and paper, and in a wide range of other applications, including inks, fibers, rubber, food, cosmetics, and pharmaceuticals. Moreover, it is a critical component of everyday consumer applications due to its superior ability to cover or mask other materials effectively and efficiently relative to alternative white pigments and extenders. We believe that, at present, TiO 2  has no effective substitute because no other white pigment has the physical properties for achieving comparable opacity and brightness or can be incorporated in a cost-effective manner.

Recent Developments

Dividends — On May 6, 2014, the Board of Directors declared a quarterly dividend of $0.25 per share to holders of our Class A ordinary shares (“Class A Shares”) and Class B ordinary shares (“Class B Shares”) at the close of business on May 19, 2014, totaling $29 million, which will be paid on June 2, 2014. On February 25, 2014, the Board of Directors declared a quarterly dividend of $0.25 per share to holders of our Class A Shares and Class B Shares at the close of business on March 10, 2014, totaling $29 million, which was paid on March 24, 2014.

Amendments to Term Loan — On April 23, 2014, we entered into a Third Amendment to the Credit and Guaranty Agreement, which provides for the re-pricing of our $1.5 billion senior secured term loan (the “Term Loan”). See Note 11 of Notes to unaudited Condensed Consolidated Financial Statements.

 

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Litigation Settlement — On April 3, 2014, a proposed settlement was reached with Anadarko Petroleum Corp. (“Anadarko”) for $5.15 billion. We will not receive any portion of the settlement amount. Instead, 88% of the $5.15 billion will go to trusts and other governmental entities for the remediation of polluted sites by Kerr-McGee Corp. (“Kerr-McGee”). The remaining 12% will be distributed to a tort trust to compensate individuals injured as a result of Kerr-McGee’s environmental failures. See Note 2 of Notes to unaudited Condensed Consolidated Financial Statements.

Changes in Certifying Accountant — On April 7, 2014, our Audit Committee of the Board of Directors nominated PricewaterhouseCoopers LLP (“PWC”) for appointment to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2014. Such appointment is subject to the dismissal of Grant Thornton LLP (“Grant Thornton”), our current independent registered public accounting firm, which dismissal is conditioned upon and will be effective upon (i) the required consent of the Australian Securities and Investments Commission to Grant Thornton Audit Pty Ltd’s resignation as our Australian statutory auditor, which was submitted to the Audit Committee of the Board of Directors on April 7, 2014, and (ii) the approval of our shareholders of the appointment of PWC at our Annual General Meeting of Shareholders to be held on May 21, 2014.

Executive Management Appointment — On March 1, 2014, we appointed Richard L. Muglia, our former Deputy General Counsel, as Senior Vice President, General Counsel and Secretary.

Executive Management Departure — On February 28, 2014, we entered into a Separation Letter Agreement (the “Separation Agreement”) with Michael J. Foster, former Senior Vice President, General Counsel and Secretary. Pursuant to the Separation Agreement, Mr. Foster resigned as General Counsel and Secretary effective March 1, 2014. Mr. Foster will remain in the role of Senior Vice President and Counsel through May 31, 2014 or such earlier date as is mutually agreed by us and Mr. Foster.

Business Environment

The following discussion includes trends and factors that may affect future operating results.

The price of TiO 2 pigment in all regions globally showed volatility during 2013; however, by the end of 2013, prices appeared to be back to normal levels. We expect pigment prices to remain stable with positive movement in the second half of 2014. Sales volumes during 2014 have increased slightly from the end of 2013, primarily in the North America and Europe. The demand for TiO 2 during a given year is subject to seasonal fluctuations. Because TiO 2 is widely used in paint and other coatings, titanium feedstock is in higher demand prior to the painting season in the Northern Hemisphere (spring and summer).

We believe the feedstock market continues to be oversupplied. During the first quarter of 2014, we have seen feedstock prices decrease due to excess supply in the market. At March 31, 2014, we recognized a $13 million net lower of cost or market charge due to market price declines in ilmenite (feedstock). The ilmenite market is different from high quality feedstock, which is our primary market. There are only three major producers of high quality feedstock in the world, including us. As pigment producers begin to utilize their inventory on hand, we expect pigment production to increase thereby increasing the demand for high quality feedstock.

We continue to be uniquely tax-advantaged by the following factors:

 

    Tax loss carryforwards totaling $2 billion of U.S. federal and state, and foreign net operating losses;

 

    Interest expense deductions of $2 billion over ten years resulting from U.S. borrowing activity, subject to an annual taxable income limitation;

 

    Deductions for cash and property we contributed to litigation trusts in connection with our emergence from bankruptcy (originally $350 million, currently in the amount of $290 million), which we will be able to claim as the trusts spend the money: and

 

    On April 3, 2014, a proposed settlement was reached with Anadarko for $5.15 billion. We will not receive any portion of the settlement amount. Instead, 88% of the $5.15 billion will go to trusts and other governmental entities for the remediation of polluted sites by Kerr-McGee. The remaining 12% will be distributed to a tort trust to compensate individuals injured as a result of Kerr-McGee’s environmental failures. However, we should be entitled to tax deductions equal to the amount spent by the trusts to remediate environmental matters and to compensate the injured individuals. These deductions will accrue over the life of the trusts as the $5.15 billion is spent. We believe that these expenditures and the accompanying tax deductions may continue for decades.

These tax-advantaged factors are not currently recognized as assets on our balance sheet, but create opportunities for our operations to benefit for years to come.

Planned construction on the Fairbreeze mine has continued during 2014. The Fairbreeze mine will serve as a replacement source of feedstock production for our Hillendale mine, which ceased mining operations in December 2013. Depending on the timing of regulatory approval and subsequent construction, we expect the Fairbreeze mine to begin operations in the second half of 2015, and be fully operational in 2016. The Fairbreeze mine is estimated to have a life expectancy of approximately 15 years.

 

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Going forward, we will continue to review strategic opportunities both in the U.S. and in foreign jurisdictions. We believe we bring a strong set of attributes to the table in either an acquisition or a business combination. As such, we will continue to seek opportunities to realize those value creating attributes, whether in the form of a single transaction with a large party, or a series of transactions to expand our portfolio.

Consolidated Results of Operations

Three Months Ended March 31, 2014 compared to the Three Months Ended March 31, 2013

 

     Three Months Ended March 31,        
     2014     2013     Change  
     (Millions of U.S. dollars)  

Net sales

   $ 418      $ 470      $ (52

Cost of goods sold

     393        438        (45
  

 

 

   

 

 

   

 

 

 

Gross profit

     25        32        (7

Selling, general and administrative expenses

     (46     (51     5   
  

 

 

   

 

 

   

 

 

 

Income from operations

     (21     (19     (2

Interest and debt expense

     (34     (27     (7

Other income

     —         2        (2
  

 

 

   

 

 

   

 

 

 

Loss before income taxes

     (55     (44     (11

Income tax benefit (provision)

     1        (1     2  
  

 

 

   

 

 

   

 

 

 

Net loss

   $ (54   $ (45   $ (9
  

 

 

   

 

 

   

 

 

 

Net sales for the first quarter of 2014 decreased 11% compared to the first quarter of 2013 primarily due to the impact of lower selling prices and product mix of $42 million and lower volumes of $12 million. Selling prices were lower in both businesses, while lower volumes in our Mineral Sands business were partially offset by higher volumes in our Pigment business. During the first quarter of 2014, the effect of changes in foreign currency translation positively impacted net sales by $2 million.

Cost of goods sold decreased 10% compared to the same period in the prior year which principally reflects the impact of lower volumes of $34 million, lower noncash amortization of inventory step-up and unfavorable ore sales contracts liability of $8 million (which concluded at the end of 2013) and favorable foreign currency translation of $27 million. These amounts were offset by a net lower of cost or market charge of $13 million related to market price declines in ilmenite (feedstock) and higher production costs of $11 million.

During the first quarter of 2014, gross profit was 6% of net sales compared to 7% of net sales in the first quarter of 2013. The decrease was principally due to lower selling prices, net lower of cost or market charge related to market price declines in ilmenite, and an unfavorable change in product mix, partially offset by lower production costs and favorable foreign currency translation impacts.

Selling, general and administrative expenses decreased 10% in the first quarter of 2014 compared to the first quarter of 2013. The net decrease is primarily due to decreases in spending for professional services and corporate initiatives.

The increase in interest and debt expense is attributable to interest expense on the Term Loan of $17 million during 2014 compared to $8 million on the Term Loan and a term facility (which included a $550 million senior secured term loan and a $150 million senior secured delayed draw) (the “Term Facility”) during 2013, partially offset by miscellaneous increases and decreases in interest and debt expense on other debt.

The change in other income is attributable to a loss on foreign currency translation of $3 million in the first quarter of 2014 compared to a $6 million gain in the first quarter of 2013 due to a strengthening U.S. dollar as compared to the South African Rand and Australian dollar, partially offset by a $4 million loss on the early extinguishment of debt during 2013 and other miscellaneous income and expenses of $3 million.

The effective tax rate for both 2014 and 2013 differs from the Australian statutory rate of 30% primarily due to withholding tax accruals, valuation allowances in various jurisdictions, and income in foreign jurisdictions taxed at rates different than 30%.

 

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Operations Review of Segment Revenue and Profit

We currently operate our business in two reportable segments, Mineral Sands and Pigment. Corporate and Other is comprised of our electrolytic operations, all of which are located in the United States, as well as our corporate activities. We evaluate reportable segment performance based on segment operating profit (loss), which represents the results of segment operations before unallocated costs, such as general corporate expenses not identified to a specific segment, environmental provisions, net of reimbursements, related to sites no longer in operation, interest expense, other income (expense), and income tax expense or benefit. See Note 17 of Notes to unaudited Condensed Consolidated Financial Statements.

Net Sales

Net sales by segments were as follows:

 

     Three Months Ended March 31,        
     2014     2013     Change  
     (Millions of U.S. dollars)  

Mineral Sands segment

   $ 178      $ 298      $ (120

Pigment segment

     291        288        3   

Corporate and Other

     25        27        (2

Eliminations

     (76     (143     67   
  

 

 

   

 

 

   

 

 

 

Net sales

   $ 418      $ 470      $ (52
  

 

 

   

 

 

   

 

 

 

Mineral Sands segment

Net sales during the first quarter of 2014 decreased 40% compared to the same period in 2013 primarily due to lower selling prices of $78 million and decreased volumes of $42 million. Mineral Sands selling prices declined for our titanium feedstock (which includes a portion sold to our pigments business) due to oversupply in the market. Mineral sales volumes were lower for titanium feedstock and zircon.

Pigment segment

Pigment segment net sales increased 1% during the first quarter of 2014 compared to the first quarter of 2013 primarily due to higher volumes of $14 million, offset by a decrease in selling prices and product mix of $13 million. The volume impact reflects increased shipments to the European and North American regions. Slightly lower prices were experienced in all regions of the world. During the first quarter of 2014, the effect of changes in foreign currency translation positively impacted Pigment net sales by $2 million.

Corporate and Other

Corporate and Other includes our electrolytic and other chemical products business. Net sales were $2 million lower during the first quarter of 2014 as compared to the same period in 2013, primarily as a result of lower sales volumes of electrolytic manganese dioxide. Sodium chlorate sales were essentially flat as higher volumes were offset by lower pricing.

Eliminations

Eliminations include the impact of transactions between our segments, principally sales from our Mineral Sands business to our Pigment business. Lower selling prices for titanium feedstock, and to a lesser extent lower sales volumes, contributed to the change.

 

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Loss from Operations

Loss from operations by segments was as follows:

 

     Three Months Ended March 31,        
     2014     2013     Change  
     (Millions of U.S. dollars)  

Mineral Sands segment

   $ (17   $ 96      $ (113

Pigment segment

     (13     (68     55   

Corporate and Other

     (20     (24     4   

Eliminations

     29        (23     52   
  

 

 

   

 

 

   

 

 

 

Loss from operations

     (21     (19   $ (2
      

 

 

 

Interest and debt expense

     (34     (27  

Other income

     —         2     
  

 

 

   

 

 

   

Loss before income taxes

     (55     (44  
  

 

 

   

 

 

   

Income tax benefit (provision)

     1        (1  
  

 

 

   

 

 

   

Net loss

   $ (54   $ (45  
  

 

 

   

 

 

   

Mineral Sands segment

During the first quarter of 2014, we had a loss of $17 million compared to income of $96 million during the same period in 2013. The change is primarily attributable to a $78 million decrease in selling prices, lower volumes of $19 million, a lower of cost or market charge of $23 million and higher production costs of $29 million, partially offset by favorable foreign currency translation of $28 million and lower noncash amortization of inventory step-up and unfavorable ore sales contracts liability of $8 million (which concluded at the end of 2013).

Pigment segment

During the first quarter of 2014, loss from operations decreased 81% compared to the first quarter of 2013, which was primarily driven by lower ore and production costs of $71 million, offset by the negative impact of price and product mix of $16 million.

Corporate and Other

During the first quarter of 2014, Corporate and Other results improved by $4 million compared to the same period in 2013 due to decreases in spending for professional services and corporate initiatives and to a lesser extent, a slight improvement in the operations of the electrolytic and other chemical products business.

Eliminations

Eliminations principally reflect the change in deferred profit in inventory resulting from our Mineral Sands sales to our Pigment business. The net benefits (charges) included in eliminations were as follows:

 

     Three Months Ended March 31,  
     2014     2013  
     (Millions of U.S. dollars)  

Increase in intercompany profit in inventory

   $ (11   $ (55

Release of intercompany profit in inventory

     30        32   

Reversal of the portion of the Mineral Sands lower of cost or market charge that relates to intercompany activity with our Pigment business

     10        —     
  

 

 

   

 

 

 

Eliminations

   $ 29      $ (23
  

 

 

   

 

 

 

 

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Non-U.S. GAAP Financial Measures

EBITDA and Adjusted EBITDA, which are used by management to measure performance, are not presented in accordance with U.S. GAAP. Management believes that EBITDA is useful to investors, as it is commonly used in the industry as a means of evaluating operating performance. We do not intend for these non-U.S GAAP financial measures to be a substitute for any U.S. GAAP financial information. Readers of these statements should use these non-U.S. GAAP financial measures only in conjunction with the comparable U.S. GAAP financial measures. Because other companies may calculate EBITDA and Adjusted EBITDA differently than we do, EBITDA and Adjusted EBITDA, as presented herein, may not be comparable to similarly titled measures reported by other companies.

Management believes these non-U.S. GAAP financial measures:

 

    Reflect our ongoing business in a manner that allows for meaningful period-to-period comparison and analysis of trends in our business, as they exclude income and expense that are not reflective of ongoing operating results;

 

    Provide useful information in understanding and evaluating our operating results and comparing financial results across periods;

 

    Provide a normalized view of our operating performance by excluding items that are either noncash or non-recurring in nature;

 

    Assist investors in assessing our compliance with financial covenants under our debt instruments; and,

 

    Adjusted EBITDA is one of the primary measures management uses for planning and budgeting processes, and to monitor and evaluate financial and operating results. In addition, Adjusted EBITDA is a factor in evaluating management’s performance when determining incentive compensation.

The following table reconciles net income to EBITDA and Adjusted EBITDA for the periods presented:

 

     Three Months Ended March 31,  
     2014     2013  
     (Millions of U.S. dollars)  

Net loss

   $ (54   $ (45

Interest and debt expense, net of interest income

     31        26   

Income tax (benefit) provision

     (1     1   

Depreciation, depletion and amortization expense

     73        73   
  

 

 

   

 

 

 

EBITDA

     49        55   

Loss on extinguishment of debt

     —          4   

Share-based compensation

     5        5   

Amortization of inventory step-up and unfavorable ore sales contracts liability

     —          8   

Foreign currency remeasurement

     6        (6

Other items(a)

     4        7   
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 64      $ 73   
  

 

 

   

 

 

 

 

(a) Includes noncash pension and postretirement costs, accretion expense, severance expense, and other non-recurring items.

Liquidity and Capital Resources

Our total liquidity at March 31, 2014 was $1,724 million, which was comprised of $235 million available under the $300 million UBS Revolver (as defined below), $86 million available under the ABSA Revolver (as defined below), and $1,403 million in cash and cash equivalents.

Historically, we have funded our operations and met our commitments through cash generated by operations. During 2012, we issued $900 million aggregate principal amount of 6.375% senior notes due August 15, 2020 (the “Senior Notes”) at par value. Additionally, during 2013, we obtained a $1.5 billion Term Loan, which matures on March 19, 2020.

In addition to these cash resources, we have a $300 million global senior secured asset-based syndicated revolving credit facility with UBS AG (the “UBS Revolver”) with a borrowing base of $235 million at March 31, 2014, and a R900 million (approximately $86 million at March 31, 2014) revolving credit facility with ABSA Bank Limited (“ABSA”) acting through its ABSA Capital Division (the “ABSA Revolver”). As of March 31, 2014, we had not drawn on either revolver. At March 31, 2014, we had outstanding letters of credit, bank guarantees, and performance bonds of $45 million, of which $25 million were letters of credit issued under the UBS Revolver, $18 million were bank guarantees issued by ABSA and $2 million were performance bonds issued by Westpac Banking Corporation.

 

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In the near term, we expect that our operations will provide sufficient cash to fund our operating expenses, capital expenditures, debt repayments, and dividends. Working capital (calculated as current assets less current liabilities) was $2,237 million at March 31, 2014 compared to $2,290 at December 31, 2013, a decrease of $53 million, which is primarily due to cash used in operations, as well as dividends paid of $29 million and capital expenditures of $31 million.

Principal factors that could affect the availability of our internally-generated funds include (i) the deterioration of our revenues in either of our business segments; (ii) changes in our working capital requirements; or (iii) an increase in our expenses.

Principal factors that could affect our ability to obtain cash from external sources include (i) debt covenants that limit our total borrowing capacity; (ii) increasing interest rates applicable to our floating rate debt; (iii) credit rating downgrades, which could limit our access to additional debt; (iv) a decrease in the market price of our common stock; or (v) volatility in public debt and equity markets.

Our credit rating with Standard & Poor’s is BB, and our credit rating with Moody’s is Ba3.

Cash and Cash Equivalents

We consider all investments with original maturities of three months or less to be cash equivalents. As of March 31, 2014, our cash and cash equivalents were primarily invested in money market funds. We maintain cash and cash equivalents in bank deposit and money market accounts that may exceed federally insured limits. The financial institutions where our cash and cash equivalents are held are generally highly rated and geographically dispersed, and we have a policy to limit the amount of credit exposure with any one institution. We have not experienced any losses in such accounts and believe we are not exposed to significant credit risk.

The use of our cash includes servicing our interest and debt repayment obligations, making pension contributions, making quarterly dividend payments and funding capital expenditures for innovative initiatives, productivity enhancements and maintenance and safety requirements.

Repatriation of Cash

At March 31, 2014, we held $1,403 million in cash and cash equivalents in these respective jurisdictions: $750 million in Europe, $282 million in Australia, $195 million in South Africa, and $176 million in the United States. Our credit facilities limit transfers of funds from subsidiaries in the United States to certain foreign subsidiaries.

Tronox Limited has foreign subsidiaries with positive undistributed earnings at March 31, 2014. We have made no provision for deferred taxes related to these undistributed earnings because they are considered to be indefinitely reinvested in the foreign jurisdictions.

Cash Dividends on Class A and Class B Shares

On March 24, 2014, we paid a quarterly cash dividend of $0.25 per share, totaling $29 million. See Note 14 of Notes to unaudited Condensed Consolidated Financial Statements.

Debt Obligations

The following table summarizes our debt obligations:

 

     Original
Principal
     Annual
Interest Rate
    Maturity
Date
     March 31,
2014
    December 31,
2013
 
     (Millions of U.S. dollars)  

Term Loan, net of unamortized discount

   $ 1,500         Variable        3/19/2020       $ 1,479      $ 1,482   

Senior Notes

   $ 900         6.375     8/15/2020         900        900   

Co-generation Unit Financing Arrangement

   $ 16         6.5     2/1/2016         5        6   

Lease financing

             25        25   
          

 

 

   

 

 

 

Total debt

             2,409        2,413   

Less: Long-term debt due in one year

             (19     (18
          

 

 

   

 

 

 

Long-term debt

           $ 2,390      $ 2,395   
          

 

 

   

 

 

 

 

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At March 31, 2014, we had financial covenants in the UBS Revolver, the ABSA Revolver and the Term Loan; however, only the ABSA Revolver had a financial maintenance covenant that applies to local operations and only when the ABSA Revolver is drawn upon. The Term Loan and the UBS Revolver are subject to an intercreditor agreement pursuant to which the lenders’ respective rights and interests in the security are set forth. We were in compliance with all our financial covenants as of and for the three months ended March 31, 2014.

On April 23, 2014, we, along with our wholly-owned subsidiary, Tronox Pigments (Netherlands) B.V., and certain of our subsidiaries named as guarantors, entered into a Third Amendment to the Credit and Guaranty Agreement (the “Third Agreement”) with the lender parties thereto and Goldman Sachs Bank USA, as administrative agent. The Third Agreement amends the Second Amended and Restated Credit and Guaranty Agreement (“Second Agreement”) with Goldman Sachs Bank USA, as administrative agent and collateral agent, and Goldman Sachs Bank USA, UBS Securities LLC, Credit Suisse Securities (USA) LLC and RBC Capital Markets, as joint lead arrangers, joint bookrunners and co-syndication agents dated March 19, 2013. The Third Agreement provides for the re-pricing of the Term Loan by replacing the existing definition of “Applicable Margin” with a grid pricing matrix dependent upon our public corporate family rating as determined by Moody’s and Standard & Poor’s (with the interest rate under the Third Agreement remaining subject to Eurodollar Rate and Base Rate floors, as defined in the Third Agreement). Pursuant to the Third Agreement, based upon our current public corporate family rating by Moody’s and Standard & Poor’s, the current interest rate per annum is 300 basis points plus LIBOR (subject to a LIBOR floor of 1% per annum) compared to 350 basis points plus LIBOR (subject to a LIBOR floor of 1% per annum) in the Second Agreement. The Third Agreement also amended certain provisions of the Second Agreement to permit us and certain of our subsidiaries to obtain new cash flow revolving credit facilities in place of our existing asset based revolving credit facility. The maturity date under the Second Agreement and all other material terms of the Second Agreement remain the same under the Third Agreement.

At March 31, 2014 and December 31, 2013, our net debt (excess debt over cash and cash equivalents) was $1,006 million and $935 million, respectively.

Cash Flows

The following table presents cash flow for the periods indicated:

 

     Three Months Ended March 31,  
     2014     2013  
     (Millions of U.S. dollars)  

Net cash used in operating activities

   $ (12   $ (1

Net cash used in investing activities

     (31     (45

Net cash provided by (used in) financing activities

     (33     710   

Effect of exchange rate changes on cash

     1        (5
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

   $ (75   $ 659   
  

 

 

   

 

 

 

Cash Flows from Operating Activities — The use of funds during the first quarter of 2014 was primarily attributable to cash used in operations, resulting in an increase in accounts receivable, as well as a decrease in accrued liabilities related to interest expense and accrued employee costs. The use of funds during the first quarter of 2013 was primarily attributable to cash used in operations, which resulted in increased accounts receivable and decreased accounts payable, offset by a decrease in inventories.

Cash Flows from Investing Activities — The use of funds for both periods presented is attributable to capital expenditure purchases. Capital expenditures for the remainder of 2014 are expected to be in the range of $210 million to $230 million.

Cash Flows from Financing Activities— Net cash used in financing activities during the first quarter of 2014 was primarily attributable to $4 million of principal repayments on the Term Loan, as well as repayments of other debt of $1 million. Additionally, during the first quarter of 2014 we paid dividends of $29 million. Net cash provided by financing activities during the first quarter of 2013 was primarily attributable to proceeds of $945 million for the refinancing of the Term Loan, which were offset by repayments of other debt of $179 million, and payments of debt issuance costs associated with the refinancing of the Term Loan of $28 million. Additionally, during the first quarter of 2013, we paid dividends of $29 million.

Recent Accounting Pronouncements

See Note 1 of Notes to unaudited Condensed Consolidated Financial Statements for recently issued accounting pronouncements.

 

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Environmental Matters

We are subject to a broad array of international, federal, state, and local laws and regulations relating to safety, pollution, protection of the environment, and the generation, storage, handling, transportation, treatment, disposal, and remediation of hazardous substances and waste materials. In the ordinary course of business, we are subject to frequent environmental inspections and monitoring, and occasional investigations by governmental enforcement authorities. Under these laws, we are or may be required to obtain or maintain permits or licenses in connection with our operations. In addition, under these laws, we are or may be required to remove or mitigate the effects on the environment of the disposal or release of chemical, petroleum, low-level radioactive and other substances at our facilities. We may incur future costs for capital improvements and general compliance under environmental, health, and safety laws, including costs to acquire, maintain, and repair pollution control equipment. Environmental laws and regulations are becoming increasingly stringent, and compliance costs are significant and will continue to be significant in the foreseeable future. There can be no assurance that such laws and regulations or any environmental law or regulation enacted in the future will not have a material effect on our business. We are in compliance with applicable environmental rules and regulations in all material respects. Currently, we do not have any outstanding notices of violations or orders from regulatory agencies.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

This Item should be read in conjunction with Item 7A - Quantitative and Qualitative Disclosures About Market Risk in our Annual Report on Form 10-K for the year ended December 31, 2013 (the “Form 10-K”).

Our exposure to interest rate risk is minimized by the fact that our $1.5 billion of floating rate debt includes a Libor floor of 1%. As such, Libor would need to increase from the rate in effect at March 31, 2014 to greater than 1% before our borrowing rate would increase. Using a sensitivity analysis as of March 31, 2014, a hypothetical 1% increase in interest rates would result in an increase to pre-tax income of approximately $11 million on an annualized basis. This is due to the fact that earnings on our floating rate financial assets of $1.5 billion at March 31, 2014 would increase by the full 1% while the interest expense on our floating rate debt would increase by less than the full 1%.

There have been no other significant changes in market risk during the quarter ended March 31, 2014.

Item 4. Controls and Procedures

(a)  Disclosure Controls and Procedures

As of March 31, 2014, our management, including our Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.

(b)  Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended March 31, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company may be party to a number of legal and administrative proceedings involving environmental and/or other matters in various courts or agencies. These proceedings, individually and in the aggregate, may have a material adverse effect on the Company. These proceedings may be associated with facilities currently or previously owned, operated or used by the Company and/or its predecessors, some of which may include claims for personal injuries, property damages, cleanup costs and other environmental matters. Current and former operations of the Company may also involve management of regulated materials, which are subject to various environmental laws and regulations including the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”), the Resource Conservation and Recovery Act (“RCRA”) or state equivalents. Similar environmental laws and regulations and other requirements exist in foreign countries in which the Company operates.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed under “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2013 (the “Form 10-K”). The risks described in the Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. There have been no material changes from the risk factors disclosed under the heading “Risk Factors” in our Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

 

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Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

 

Exhibit No.

    
10.1*    Employment Agreement entered into as of March 1, 2014 by and between Tronox LLC and Richard L. Muglia.
10.2*    Separation Agreement entered into as of March 1, 2014 by and between Tronox Limited and Michael J. Foster.
10. 3    Third Amendment to Credit and Guaranty Agreement, dated as of April 23, 2014, among Tronox Pigments (Netherlands) B.V., Tronox Limited, the guarantors listed therein, the lender parties thereto and Goldman Sachs Bank USA (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by Tronox Limited on April 29, 2014, Commission File No. 1-35573).
31.1    Rule 13a-14(a) Certification of Thomas Casey.
31.2    Rule 13a-14(a) Certification of Katherine C. Harper.
32.1    Section 1350 Certification for Thomas Casey.
32.2    Section 1350 Certification for Katherine C. Harper.
101.INS    XBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema Document
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB    XBRL Taxonomy Extension Label Linkbase Document
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document

 

* Indicates management contract or compensatory plan or arrangement.

 

35


Table of Contents

SIGNATURES

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

Date: May 8, 2014

 

TRONOX LIMITED

(Registrant)

By:  

/s/ Katherine C. Harper

Name:   Katherine C. Harper
Title:   Senior Vice President and Chief Financial Officer

 

36

Exhibit 10.1

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (this “Agreement”) made as of the 1 st day of March, 2014 by and between Richard L. Muglia, residing at the address indicated following his signature below (hereinafter referred to as “Executive”) and Tronox LLC, a Delaware limited liability company, having its principal place of business at 263 Tresser Boulevard, Suite 1100, Stamford, CT 06901 (hereinafter referred to as the “Company”).

1. Employment . The Company hereby employs Executive and Executive agrees to work for the Company as Senior Vice President and General Counsel during the Term (as defined below) of and upon the terms and conditions set forth in this Agreement.

2. Term . The term of this Agreement (the “Term”) shall be for a period beginning on March 1, 2014 (the “Commencement Date”) and continuing until the third anniversary of the Commencement Date, unless earlier terminated in accordance with this Agreement, If either party elects not to renew this Agreement at the end of the Term, such party shall give the other party not less than 30 days written notice of non-renewal.

3. Position and Duties . The Executive shall have the duties, responsibilities and authorities customarily associated with the positions of Senior Vice President and General Counsel in a public company the size and nature of the Company and will perform such additional duties as the Chief Executive Officer of the Company (the “CEO”) shall determine. The Executive shall report directly to the CEO. The Executive agrees to serve, without additional compensation, as a member of the board of directors and/or as an officer of any Affiliate (as defined in Section 14(c) below) of the Company. The Executive agrees to devote his full business time, attention and energies to the business of the Company and its Affiliates and the performance of his duties hereunder. Executive shall not, without the prior written consent of the Company, directly or indirectly, during the Term, render services, for compensation or otherwise, to or for any other person or firm; provided that nothing herein shall be interpreted to preclude Executive from serving on the Board of Directors of any charitable or other tax exempt or civic organization with the prior consent of the CEO, but only to the extent that such service does not materially interfere with the performance of the Executive’s duties and responsibilities hereunder and such service does not adversely reflect on the reputation of the Company or conflict with the business goals of the Company, as determined in the sole discretion of the CEO. The Executive may also manage his personal and family investments, to the extent such activities do not materially interfere with the performance of his duties and responsibilities hereunder.

4. Place of Performance . The Executive shall be based primarily at the Company’s principal executive offices, currently located in Stamford, Connecticut, or such other Company location as may be reasonably required by the CEO.

5. Compensation/Benefits .

(a) Base Salary . During the Term of this Agreement, the Company agrees to pay Executive a base annual salary of $450,000 (“Base Salary”), less applicable deductions. Such Base Salary shall be reviewed no less frequently than annually during the term of this

 

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Agreement and may be increased by the compensation committee of the Board of Directors of the Company (the “Compensation Committee”). Such Base Salary shall be payable in accordance with the Company’s normal business practices or in such other amounts and at such other times as the parties may mutually agree.

(b) Regular Annual Bonus . During the Term of this Agreement, the Executive shall be eligible for an annual cash performance bonus (the “Annual Bonus”) of up to sixty-five percent (65%) of Base Salary under the Company’s annual bonus plan (as in effect from time to time for senior executives), based upon the Company’s achievement of performance targets established by the Compensation Committee, after consultation with the CEO, no later than 60 days after the commencement of the relevant fiscal year (the ‘Target Bonus”). These targets will be revised annually within sixty (60) days of the beginning of each fiscal year in consultation with the Executive. The Annual Bonus is discretionary, may be cancelled or revised by the Company at any time, and may be structured as a part of a deferred compensation arrangement.

(c) Long-Term Incentive Award . During the Term of this Agreement, the Executive shall be eligible for an annual long term incentive award (the “LTIP Grant”) pursuant to one or more award agreements to be executed by the Executive under the Tronox Limited Management Equity Incentive Plan (as in effect from time to time for senior executives) (the “LTIP Plan”) having a grant date value of up one hundred thirty percent (130%) of Base Salary, as determined by the Compensation Committee. The LTIP Grant is discretionary, may be cancelled or revised by the Company at any time, and may be structured as a part of a deferred compensation arrangement.

(d) Stock Ownership Guidelines . The Executive understands that he is subject to the Company’s Stock Ownership Guidelines, a copy of which has been made available to the Executive, as amended from time to time (the “Stock Ownership Guidelines”). To the extent not covered by other shares of Executive in the Company, the LTIP Grant and any other equity-based compensation will be considered under the Stock Ownership Guidelines as provided therein. Such Stock Ownership Guidelines include among other things a requirement that the Executive hold Company common stock equal to at least three times his Base Salary. The Executive will have five years to satisfy such stock ownership requirement.

(e) Benefits/Vacation . During the Term of this Agreement, the Company shall provide Executive with such other benefits, including medical, dental, life insurance, retirement and other plans as are made generally available to senior executive employees of the Company from time to time. Executive shall be entitled to five (5) weeks of paid vacation in accordance with the applicable policies of the Company, which shall be accrued and used in accordance with such policies. In addition, the Executive will be eligible to participate in the Company’s Executive Financial Counseling Program, and utilize the financial advisors of his own choosing provided that the Company will not reimburse the Executive for more than $10,000 per year for this service. Nothing in this Agreement shall be construed to require the Company to establish any benefit plans or to prevent the modification or termination of any benefit plans once established.

 

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(f) Expenses . During the Term of this Agreement, the Company shall reimburse Executive for the reasonable business expenses incurred by Executive in the course of performing his duties for the Company hereunder in accordance with the procedures then in place for such reimbursement.

6. Early Termination .

(a) Events of Termination . The Executive’s employment hereunder shall be terminated and, other than the obligations listed in Section 6(c), the Company’s obligations hereunder shall cease, including the obligation to pay compensation for any period after the date of termination.

(i) Death : without the necessity of notice, upon the death of the Executive;

(ii) By the Company :

 

  a. upon the Disability of the Executive, or

 

  b. without Cause, or

 

  c. with Cause. In order to invoke a termination for Cause, (1) the Company must provide written notice to the Executive stating the basis for the termination for “Cause,” and (2) as to clauses (A), (B) or (E) of Section 6 (b)(ii), the Executive has failed to cure the conduct that is the basis of the determination of Cause, to the extent curable, within fifteen (15) days of the giving of such notice.

(iii) By the Executive :

 

  a. upon thirty (30) days advance written notice, or

 

  b. for Good Reason. In order to invoke a termination for Good Reason, (A) the Executive must provide written notice to the Company within ninety (90) days of the occurrence of any event of “Good Reason,” (B) the Company must fail to cure such event within thirty (30) days of the giving of such notice and (C) the Executive must terminate employment within thirty (30) days following the expiration of the Company’s cure period.

(b) Definitions . As used herein, the following terms shall have the meanings set forth below:

(i) The term “Disability” shall mean the inability of the Executive efficiently to perform the essential functions of his job, even with reasonable accommodation, as a result of a disability or illness, as such terms are defined by the Americans with Disabilities

 

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Act, which inability is expected to exceed one hundred eighty (180) days (including weekends and holidays) in any three hundred sixty-five (365)-day period. ‘‘Disability” shall be determined by agreement of the Executive’s treating physician and a physician appointed by the Company or, if such physicians cannot agree on Disability, they shall together appoint a third independent physician whose determination of Disability shall be final. The Executive shall make himself available for examination by the physician or physicians making the determination of Disability as the Company may reasonably request.

(ii) The term “Cause” shall mean a finding by the CEO that the Executive has (A) acted with negligence or engaged in misconduct in connection with the performance of his duties hereunder, (B) engaged in an act of insubordination, (C) engaged in common law fraud against the Company or its employees, (D) been convicted of, or pleaded nolo contenders to, a crime (other than minor traffic violations), (E) acted against the best interests of the Company in a manner that has or could have a material adverse affect on the financial condition of the Company, as determined by the CEO in his sole discretion, or (F) materially breached this Agreement or the Non-Disclosure, Non-Competition and Assignment of Work Product Agreement (as defined below).

(iii) The term “Good Reason” shall mean (A) any material diminution in the Executive’s title, duties or authority; (B) a reduction in the Executive’s Base Salary; (C) the assignment of duties substantially inconsistent with the Executive’s status as an executive officer of the Company; (D) any other material breach of this Agreement; or (E) the failure of the Company to obtain the assumption in writing of its obligations under this Agreement by any successor to all or substantially all of the assets of the Company after a merger, consolidation, sale or similar transaction in which such Agreement is not assumed by operation of law.

(c) Payments Upon Termination .

(i) Upon the death or Disability of the Executive, the Executive or his estate or legal representative shall be entitled to all compensation and benefits earned but not yet paid to and including the date of termination, including (i) Base Salary, (ii) determined but unpaid Annual Bonus approved by the Compensation Committee for the prior year, (iii) accrued and unused vacation days, (iv) any amounts or benefits owing to the Executive or to the Executive’s beneficiaries under then applicable benefit plans of the Company (excluding any severance plan, program, agreement or arrangement) and (v) reimbursement of expenses properly incurred by the Executive (together, the “Accrued Benefits”). In addition, the Executive or his estate or legal representative shall be entitled to a lump sum amount equal to a pro rated portion, through the last day of the calendar month immediately preceding the date of termination, of the Annual Bonus for the current year, based on the achievement of the applicable performance criteria for the year of the Executive’s death (the “Pro Rated Bonus Amount”). In the event of the Executive’s Disability, any amounts payable as compensation during the period of disability or illness shall be reduced by any amounts paid during such period under any disability plan or similar insurance of the Company.

(ii) Upon termination of this Agreement by the Company for any reason other than death, Disability or Cause, and upon termination of this Agreement by the Executive for Good Reason, Executive shall be entitled to (i) all Accrued Benefits, (ii) the Pro

 

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Rated Bonus Amount and (iii) payment of severance in an amount equal to the sum of his annual Base Salary plus his Annual Bonus for one year (together, the “Severance Amount”), which shall be payable in equal installments over the course of twelve (12) months in accordance with the Company’s normal payroll practices, or in such other amounts and at such other times as the parties may mutually agree in writing. In addition, the Executive and his covered dependents shall be entitled to continued participation for the one-year period following the date of termination in such medical, dental and hospitalizalion insurance coverage in which the Executive and his eligible dependents were participating immediately prior to the date of termination, on the same terms and conditions as applicable immediately prior to the Executive’s termination.

(iii) Upon termination of this Agreement by the Company for Cause, upon termination of this Agreement by the Executive without Good Reason, and upon the expiration of this Agreement, Executive shall be entitled to all Accrued Benefits and no other payments.

(d) Timing of Payments . The Executive shall be paid the Base Salary through date of termination, determined but unpaid prior year Annual Bonus and accrued and unused vacation and sick days included in the Accrued Benefits promptly after the date of termination. The remaining Accrued Benefits shall be paid in accordance with Company plans and policies in effect from time to time. The Pro Rated Bonus Amount, if any, shall be paid at the time bonuses are generally paid by the Company. Except as set forth herein, following payment of the Accrued Benefits, the Pro Rated Bonus Amount, if applicable, and the Severance Amount, if applicable, the Company shall have no further obligations to the Executive or his estate or legal representative under this Agreement.

(e) Release . As a condition of receiving any and all amounts payable and benefits or additional rights provided pursuant to this Agreement, other than the Accrued Benefits, the Executive must execute and deliver to the Company and not revoke a general release of claims in favor of the Company in substantially the form attached on Annex B hereto. Such release must be executed and delivered (and no longer subject to revocation, if applicable) within sixty (60) days following the Executive’s date of termination. The Company shall deliver to the Executive the appropriate form of release of claims for the Executive to execute within five (5) business days following the date of termination.

(f) Certain Payment Delays . Notwithstanding anything to the contrary set forth herein, to the extent that the payment of any amount described in Section 6(c) constitutes “nonqualified deferred compensation” for purposes of Code Section 409A (as defined in Section 21 (a) hereof), any such payment scheduled to occur during the first sixty (60) days following the termination of employment shalt not be paid until the first regularly scheduled pay period following the sixtieth (60th) day following such termination and shall include payment of any amount that was otherwise scheduled to be paid prior thereto.

(g) No Offset . The Executive shall be under no obligation to seek other employment and there shall be no offset against amounts due to him on account of any remuneration or benefits provided by any subsequent employment he may obtain.

 

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(h) Resignations . If the Executive’s employment is terminated for any reason, voluntary or involuntary, the Executive will resign as a director and officer of each of the Company’s Affiliates, as applicable, and from any other entity in which he is serving as a director or officer at the request of the Company, Such resignations shall be effective no later than the date of termination of the Executive’s employment with the Company.

7. Employer’s Authority . Executive agrees to observe and comply with the rules and regulations of the Company as adopted by the Company’s Board of Directors or the CEO respecting the performance of his duties and to carry out and perform orders, directions and policies communicated to him from time to time.

8. Non-Competition; Non-Disclosure and Assignment of Work Product . Executive will execute the Non-Disclosure, Non-Competition and Assignment of Work Product Agreement of the Company, a copy of which is attached as Annex A hereto and made a part hereof (the “Non-Disclosure, Non-Competition and Assignment of Work Product Agreement”). Said agreement shall survive termination of employment hereunder.

9. Mutual Non-Disparagement . During the Term and for the two (2) year period following the date of termination, the Executive agrees not to make public statements or communications that disparage the Company, its business, services, products or Affiliates or its or their current, former or future directors, executive officers or shareholders (in their capacity as such). During the Term and for the two (2) year period following the date of termination, the Company agrees that it shall not, and that it shall instruct its directors and executive officers to not, make public statements or communications that disparage the Executive, The foregoing shall not be violated by truthful statements in response to legal process, required governmental testimony or filings, or administrative or arbitral proceedings (including, without limitation, depositions in connection with such proceedings).

10. Execution, Delivery and Performance . Executive represents and warrants to the Company as follows:

(a) The execution, delivery and performance by Executive of this Agreement or any other agreement, instrument or document contemplated herein or hereby will not result in a breach of or conflict with any terms of any other agreement, instrument or document to which Executive is a party or by which Executive or his property is bound.

(b) No consent or approval of any person or entity, other than those that have been obtained by Executive, is required for Executive to execute, deliver and perform its obligations under this Agreement or any agreement, instrument or document contemplated herein or hereby.

11. Indemnification . During the Term and thereafter, the Company agrees to indemnify and hold the Executive and the Executive’s heirs and representatives harmless, to the maximum extent permitted by law, against any and all damages, costs, liabilities, losses and expenses (including reasonable attorneys’ fees) as a result of any claim or proceeding (whether civil, criminal, administrative or investigative), or any threatened claim or proceeding (whether civil, criminal, administrative or investigative), against the Executive that arises out of or relates

 

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to the Executive’s service as an officer, director or employee, as the case may be, of the Company, or the Executive’s service in any such capacity or similar capacity with an Affiliate or other entity at the request of the Company, both prior to and after the Commencement Date, and to promptly advance to the Executive or the Executive’s heirs or representatives such expenses upon written request with appropriate documentation of such expense upon receipt of an undertaking by the Executive or on the Executive’s behalf to repay such amount if it shall ultimately be determined that the Executive is not entitled to be indemnified by the Company, During the Term and thereafter, the Company also shall provide the Executive with coverage under its current directors’ and officers’ liability policy to the same extent that it provides such coverage to its other executive officers. If the Executive has any knowledge of any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, as to which the Executive may request indemnity under this provision, the Executive will give the Company prompt written notice thereof; provided that the failure to give such notice shall not affect the Executive’s right to indemnification. The Company shall be entitled to assume the defense of any such proceeding and the Executive will use reasonable efforts to cooperate with such defense. To the extent that the Executive in good faith determines that there is an actual or potential conflict of interest between the Company and the Executive in connection with the defense of a proceeding, the Executive shall so notify the Company and shall be entitled to separate representation at the Company’s expense by counsel selected by the Executive (provided that the Company may reasonably object to the selection of counsel within ten (10) business days after notification thereof which counsel shall cooperate, and coordinate the defense, with the Company’s counsel and minimize the expense of such separate representation to the extent consistent with the Executive’s separate defense. This Section 11 shall continue in effect after the termination of the Executive’s employment or the termination of this Agreement.

12. Notices . Any notice permitted or required hereunder shall be deemed sufficient when hand-delivered or mailed by certified mail, postage prepaid, return receipt requested or delivered by nationally recognized overnight courier service and addressed if to the Company at the address indicated above and if to the Executive at the address indicated below (or to such other address as may be provided by written notice received at least five (5) business days prior to the hand delivery or mailing of any such notice).

13. Survival . The provisions of Sections 6, 8, 9, 11, 12, 14, 15, 16, 17, 18, 19, 20 and 21 hereof and this Section 13 shall survive the termination of employment of the Executive, In addition, all obligations of the Company to make payments hereunder shall survive any termination of this Agreement on the terms and conditions set forth herein.

14. Miscellaneous . (a) This Agreement, together with the other agreements referenced herein, (i) constitutes the entire agreement between the parties concerning the subjects hereof, there being no representations, warranties or commitments except as set forth herein, and supersedes and replaces all other agreements related to the subject matter hereof, (ii) shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, legal representatives, successors and assigns, (iii) may be executed in one or more counterparts, each of which shall be an original and all of which shall be deemed to constitute one and the same instrument (iv) may not be assigned by Executive without the prior written consent of the Company, and (v) may be assigned by the Company to any Affiliate of the Company or to the successors or assigns of the Company, provided such successors or assigns carry on substantially the Company’s business as conducted at the time of assignment and shall be binding upon, and inure to the benefit of, any such Affiliate, successor or assign.

 

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(b) Headings herein are for convenience of reference only and shall not define, limit or interpret the contents hereof.

(c) As used herein, the term “Affiliate” shall mean any individual or entity controlling, controlled by or under common control with the Company, or any officer or director of the Company, now or in the future, including without limitation, partnerships, limited liability companies or joint ventures in which the Company or any Affiliate acquires a controlling interest.

15. Amendment; Waiver . This Agreement may be amended, modified or supplemented by the mutual consent of the parties in writing, but no oral amendment, modification or supplement shall be effective. No waiver of any provision of this Agreement or any breach hereunder shall be deemed a waiver of any other provision or subsequent breach, nor shall any such waiver constitute a continuing waiver. Delay or failure of any party to insist on strict performance or observance of any provision of this Agreement or to exercise any rights or remedies hereunder shall not be deemed a waiver. Any waiver shall be effective only if in writing and signed by the waiving party.

16. Severability . The provisions of this Agreement are severable. The invalidity of any provision shall not affect the validity of any other provision.

17. Governing Law . This Agreement shall be construed and regulated in all respects under the internal laws of the State of Connecticut, without reference to conflicts of laws rules.

18. Rights Cumulative . The rights and remedies set forth in this Agreement are in addition to, and cumulative with, any rights or remedies of the parties at law or in equity.

19. Arbitration . In the event of any dispute between the parties, including but not limited to any claims arising from or related to this Agreement or the termination of this Agreement, any claims related to Executive’s employment or the termination of the Executive’s employment, or any claims arising under the state and federal laws governing employment (including without limitation discrimination claims), such dispute will be determined, upon the written request of either party, by binding arbitration under the auspices of and pursuant to the Employment Dispute Resolution Rules of the American Arbitration Association. Such arbitration shall be conducted in Stamford, Connecticut before a single arbitrator. The arbitrator will have no power to add to, subtract from, or modify any of the terms of this Agreement except that a provision otherwise invalid, illegal or unenforceable shall be modified or subtracted from to the least extent necessary to make it valid, legal and enforceable. The decision of the arbitrator shall be final and may be enforced by any court of competent jurisdiction, and both parties hereto consent to the personal jurisdiction of the state and federal courts of Connecticut for such purposes. Notwithstanding the foregoing, the Company shall be entitled to seek injunctive relief against the Executive in the state and federal courts of Connecticut for any breach or threatened breach of any provisions of this Agreement. In addition, in the event that the Company prevails in any such action for injunctive relief, the Executive shall be liable to the Company for all of its attorneys’ fees and legal costs incurred in such action, as well as all damages or other remedies available at law.

 

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20. Withholding . The Company may withhold from any benefit payment under this Agreement all federal, state, city or other taxes or other amounts as shall be required pursuant to any law or governmental regulation or ruling.

21. Section 409A .

(a) The intent of the parties is that payments and benefits under this Agreement comply with Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (collectively “Code Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith. If the Executive notifies the Company (with specificity as to the reason therefor) that the Executive believes that any provision of this Agreement (or of any award of compensation, including equity compensation or benefits) would cause the Executive to incur any additional tax or interest under Code Section 409A and the Company concurs with such belief or the Company (without any obligation whatsoever to do so) independently makes such determination, the Company shall, after consulting with the Executive, reform such provision to attempt to comply with Code Section 409A through good faith modifications to the minimum extent reasonably appropriate to conform with Code Section 409A. To the extent that any provision hereof is modified in order to comply with Code Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to the Executive and the Company of the applicable provision without violating the provisions of Code Section 409A.

(b) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination ”, “termination of employment” or like terms shall mean “separation from service.” If the Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered deferred compensation under Code Section 409A payable on account of a “separation from service,” such payment or benefit shall be made or provided at the date which is the earlier of (A) the expiration of the six (6)-month period measured from the date of such “separation from service” of the Executive, and (B) the date of the Executive’s death, to the extent required under Code Section 409A. Upon the expiration of the foregoing delay period, all payments and benefits delayed pursuant to this Section 24(b) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

(c) To the extent that reimbursements or other in-kind benefits under this Agreement constitute “nonqualified deferred compensation” for purposes of Code Section 409A, (A) all expenses or other reimbursements hereunder shall be made on or prior to the last day of

 

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the taxable year following the taxable year in which such expenses were incurred by the Executive, (B) any right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (C) no such reimbursement, expenses eligible for reimbursement, or in-kind benefits provided in any taxable year shall in any way affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year.

(d) For purposes of Code Section 409A, the Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the solo discretion of the Company.

(e) Notwithstanding any other provision of this Agreement to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” for purposes of Code Section 409A be subject to offset by any other amount unless otherwise permitted by Code Section 409A.

[Balance of page intentionally left blank]

 

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IN WITNESS WHEREOF, this Agreement is entered into as of the date and year first above written.

 

TRONOX LLC
By:  

/s/ Thomas J. Casey

 

Thomas J. Casey

Chairman and Chief Executive Officer

EXECUTIVE

/s/ Richard L. Muglia

Richard L. Muglia

75 Deforest Road

Wilton, CT 06897

 

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Annex A

NON-DISCLOSURE, NON-COMPETITION AND ASSIGNMENT OF INVENTIONS

AGREEMENT

 

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Annex B

GENERAL RELEASE

I, Richard L. Muglia, in consideration of and subject to the performance by Tronox LLC (together with its parent companies and subsidiaries, the “ Company ”), of its obligations under Section 6 of the Employment Agreement, dated as of [•] (the “Agreement”), do hereby release and forever discharge as of the date hereof the Company and its respective affiliates and subsidiaries and all present, former and future directors, officers, agents, representatives, employees, successors and assigns of the Company and/or its respective affiliates and subsidiaries and direct or indirect owners (collectively, the “ Released Parties ”) to the extent provided herein (this “ General Release ”). The Released Parties are intended third-party beneficiaries of this General Release, and this General Release may be enforced by each of them in accordance with the terms hereof in respect of the rights granted to such Released Parties hereunder. Terms used herein but not otherwise defined shall have the meanings given to them in the Agreement.

1. I understand that, other than the Accrued Benefits, the payments or benefits paid or granted to me under Section 6 of the Agreement represent, in part, consideration for signing this General Release and are not salary, wages or benefits to which I was already entitled. I understand and agree that I will not receive the payments and benefits specified in Section 6 of the Agreement, other than the Accrued Benefits, unless I execute this General Release and do not revoke this General Release within the time period permitted hereafter or breach this General Release. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy or arrangement maintained or hereafter established by the Company or its affiliates.

2. Except as provided in Section 4 below and except for the provisions of the Agreement which expressly survive the termination of my employment with the Company, I knowingly and voluntarily (for myself, my heirs, executors, administrators and assigns) release and forever discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross-claims, counter-claims, demands, debts, compensatory damages, liquidated damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ lees, or liabilities of any nature whatsoever in law and in equity, both past and present (through the date that this General Release becomes effective and enforceable) and whether known or unknown, suspected, or claimed against the Company and/or any of the Released Parties which I, my spouse, or any of my heirs, executors, administrators or assigns, ever had, now have, or hereafter may have, by reason of any matter, cause, or thing whatsoever, from the beginning of my initial dealings with the Company to the date of this General Release, and particularly, but without limitation of the foregoing general terms, any claims arising from or relating in any way to my employment relationship with Company, the

 

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terms and conditions of that employment relationship, and the termination of that employment relationship (including, but not limited to, any allegation, claim or violation, arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act); the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993: the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; any applicable Executive Order Programs; the Fair Labor Standards Act; or their state or local counterparts, including but not limited to the Connecticut Fair Employment Practices Act (“CFMLA”), the Connecticut Family and Medical Leave Act (“CFMLA”), the Connecticut wage and hour statutes; or under any other federal, state or local civil or human rights law, or under any other local, state, or federal law, regulation or ordinance; or under any public policy, contract or tort, or under common law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of contract, infliction of emotional distress, defamation; or any claim for unpaid wages, unpaid bonuses, unpaid vacation time, unpaid overtime (other than the “Accrued Benefits” as that term in the Employment Agreement) or costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (all of the foregoing collectively referred to herein as the “ Claims ”). I understand and intend that this General Release constitutes a general release of all claims and that no reference herein to a specific form of claim, statute or type of relief is intended to limit the scope of this General Release.

3. I represent that I have made no assignment or transfer of any right, claim, demand, cause of action, or other matter covered by Section 2 above.

4. I agree that this General Release does not waive or release any rights or claims that I may have under the Age Discrimination in Employment Act of 1967 which arise after the date I execute this General Release. I acknowledge and agree that my separation from employment with the Company in compliance with the terms of the Agreement shall not serve as the basis for any claim or action (including, without limitation, any claim under the Age Discrimination in Employment Act of 1967).

5. I agree that I hereby waive all rights to sue or obtain equitable, remedial or punitive relief from any or all Released Parties of any kind whatsoever, including, without limitation, reinstatement back pay, front pay, and any form of injunctive relief. Notwithstanding the foregoing, I acknowledge that I am not waiving and am not being required to waive any right that cannot be waived under law, including the right to file an administrative charge or participate in an administrative investigation or proceeding; provided, however, that I disclaim and waive any right to share or participate in any monetary award resulting from the prosecution of such charge or investigation or proceeding.

 

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6. In signing this General Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the Claims hereinabove mentioned or implied. I expressly consent that this General Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected Claims (notwithstanding any state or local statute that expressly limits the effectiveness of a general release of unknown, unsuspected and unanticipated Claims), if any, as well as those relating to any other Claims hereinabove mentioned or implied, I acknowledge and agree that this waiver is an essential and material term of this General Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event that I should bring a Claim seeking damages against the Company, or in the event that I should seek to recover against the Company in any Claim brought by a governmental agency on my behalf, this General Release shall serve as a complete defense to such Claims to the maximum extent permitted by law. I further agree that I am not aware of any pending claim, or of any facts that could give rise to a claim, of the type described in Section 2 as of the execution of this General Release.

7. I agree that neither this General Release, nor the furnishing of the consideration for this General Release, shall be deemed or construed at any time to be an admission by the Company, any Released Party or myself of any improper or unlawful conduct.

8. I agree that I will forfeit all amounts payable by the Company pursuant to the Agreement if I challenge the validity of this General Release, I also agree that if I violate this General Release by suing the Company or the other Released Parties, I will pay all costs and expenses of defending against the suit incurred by the Released Parties, including reasonable attorneys’ fees, and return all payments received by me pursuant to the Agreement on or after the termination of my employment.

9. I agree that this General Release and the Agreement are confidential and agree not to disclose any information regarding the terms of this General Release or the Agreement, except to my immediate family and any tax, legal or other counsel that I have consulted regarding the meaning or effect hereof or as required by law, and I will instruct each of the foregoing not to disclose the same to anyone.

10. Any non-disclosure provision in this General Release does not prohibit or restrict me (or my attorney) from responding to any inquiry about this General Release or its underlying facts and circumstances by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), or any other self-regulatory organization or governmental entity.

11. I hereby acknowledge that Sections 6, 8, 9, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20 and 21 of the Agreement shall survive my execution of this General Release.

12. I represent that I am not aware of any Claim by me, and I acknowledge that I may hereafter discover Claims or facts in addition to or different than those which I now know or believe to exist with respect to the subject matter of the release set forth in Section 2 above and which, if known or suspected at the time of entering into this General Release, may have materially affected this General Release and my decision to enter into it.

 

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13. Notwithstanding anything in this General Release to the contrary, this General Release shall not relinquish, diminish, or in any way ailed to any rights or claims arising out of any breach by the Company or by any Released Party of the Agreement after the date hereof.

14. Whenever possible, each provision of this General Release shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this General Release is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this General Release shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. This General Release constitutes the complete and entire agreement and understanding among the parties, and supersedes any and all prior or contemporaneous agreements, commitments, understandings or arrangements, whether written or oral, between or among any of the parties, in each ease concerning the subject matter hereof.

BY SIGNING THIS GENERAL RELEASE, I REPRESENT AND AGREE THAT;

 

  (i) I HAVE READ IT CAREFULLY;

 

  (ii) I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, AS AMENDED, THE EQUAL PAY ACT OF 1963, THE AMERICANS WITH DISABILITIES ACT OF’ 1990 AND THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED;

 

  (iii) I VOLUNTARILY CONSENT TO EVERYTHING IN IT;

 

  (iv) I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT AND I HAVE DONE, SO OR, AFTER CAREFUL READING AND CONSIDERATION, I HAVE CHOSEN NOT TO DO SO OF MY OWN VOLITION;

 

  (v) I HAVE HAD AT LEAST [21][45] DAYS FROM THE DATE OF MY RECEIPT OF THIS RELEASE TO CONSIDER IT AND THE CHANGES MADE SINCE MY RECEIPT OF THIS RELEASE ARE NOT MATERIAL OR WERE MADE AT MY REQUEST AND WILL NOT RESTART THE REQUIRED [21][45]-DAY PERIOD;

 

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  (vi) I UNDERSTAND THAT I HAVE SEVEN (7) DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;

 

  (vii) I HAVE SIGNED THIS GENERAL RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND

 

  (viii) I AGREE THAT THE PROVISIONS OF THIS GENERAL RELEASE MAY NOT BE AMENDED, WAIVED, CHANGED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.

 

SIGNED:   

 

   DATE:   

 

IN WITNESS WHEREOF, the undersigned have duly executed and delivered this General Release; or have caused this General Release to be duly executed and delivered on their behalf.

 

TRONOX LLC
By:   /s/ Thomas J. Casey
 

Name: Thomas J. Casey

Title: Chairman and Chief Executive Officer

 

EXECUTIVE
 

 

Richard L. Muglia

 

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Exhibit 10.2

TRONOX LIMITED

One Stamford Plaza

263 Tresser Blvd., Suite 1100

Stamford, CT 06901

February 28, 2014

Mr. Michael J. Foster

c/o Tronox Limited

263 Tresser Blvd., Suite 1100

Stamford, CT 06901

 

  Re: Separation Letter Agreement

Dear Mr. Foster:

This letter agreement (the “Agreement”) will confirm our understanding with regard to your resignation as General Counsel on March 1, 2014, your continuing service as Senior Vice President and Counsel until May 31, 2014, and your separation of employment from Tronox Limited, together with its affiliates and subsidiaries (the “Company”).

1. Separation . Your last day of work with the Company and your employment separation date will be (a) May 31, 2014 or (b) such earlier date as may be mutually agreed upon in writing by you and the Company (the “ Separation Date ”). You will resign all of your positions at the Company and its affiliates (and as a fiduciary of any benefit plan of the Company and its affiliates) as of the Separation Date, and you will execute such additional documents as reasonably requested by the Company to evidence the foregoing. Except as otherwise expressly provided for herein, the Separation Date will be the separation date of your employment for purposes of active participation in and coverage under all benefit plans and programs sponsored by or through the Company. For the avoidance of doubt, your separation of employment from the Company hereunder shall be treated as a resignation for all purposes, including, without limitation, the Employment Agreement by and between you and the Company entered into to be effective as of January 11, 2011 (the “ Employment Agreement ”). As of March 1, 2014, you shall resign from your position as General Counsel, and from March 1, 2014 until the Separation Date, you will continue to serve the Company in the role of Senior Vice President and Counsel, and you will execute all the required duties of that office in a professional and capable manner through the Separation Date.

2. Severance Benefits.

(a) Cash Severance . In consideration for your execution of a general release of claims as provided in paragraph 7 hereof, unless you are terminated for Cause (as defined below) prior to the Separation Date, you will receive an aggregate cash severance payment equal to seven hundred thirty thousand seven hundred eighty five dollars ($730,785.00), less all applicable federal, state and local taxes and withholdings, payable not later than thirty (30) days following


the Separation Date, which reflects one year of your base salary ($442,900.00) plus your target bonus ($287,885.00). Notwithstanding the foregoing, payment of such cash severance only will occur following your execution of the general release of claims as provided in paragraph 7 hereof and the expiration of any applicable revocation period thereunder. For the avoidance of doubt, if your employment shall terminate prior to the Separation Date on account of your death or Disability (as defined in the Employment Agreement) or by any action by the Company, (i) you or your estate, as the case may be, shall remain entitled to the benefits of this Agreement as if your employment terminated on the Separation Date; provided that you (or in the case of your death or incapacity, your estate or legal representative) executes and returns the general release of claims as provided in paragraph 7 hereof, and (ii) in the case of death or Disability, nothing herein shall be deemed to be a waiver by you (or your estate or designated beneficiary) of any right to any life insurance and/or disability insurance.

(b) Prorated 2014 Bonus . In further consideration for your execution of a general release of claims as provided in paragraph 7 hereof, unless you are terminated for Cause (as defined below) prior to the Separation Date, you shall be eligible to receive an annual bonus for 2014 as determined under the Company’s 2014 bonus plan and as prorated based on your Separation Date. Such prorated 2014 bonus shall be payable in 2015 at the same time that bonuses under the 2014 bonus plan are paid to other senior executives of the Company.

(c) COBRA Coverage . As additional consideration for your execution of a general release of claims as provided in paragraph 7 hereof, unless you are terminated for Cause (as defined below) prior to the Separation Date, subject to your timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall provide you, and your dependents, with payments for the insurance premiums for you and your dependents to continue your health benefits through May 31, 2015 at the Company’s expense, provided that you complete the necessary paperwork for COBRA coverage and are eligible and remain eligible for COBRA coverage; and provided, further, that in the event that you obtain other employment that offers group health benefits, such continuation of coverage by the Company shall immediately cease. Following May 31, 2015, you may thereafter continue to receive COBRA coverage (to the extent permitted under applicable law and the applicable plan) for the remainder of the applicable COBRA coverage period, subject to your payment of the full COBRA premiums required for such coverage.

Payments and benefits provided in paragraphs 2(a) - 2(c) hereof shall be in lieu of any termination or severance payments or benefits for which you may be eligible under any of the plans, policies or programs of the Company or under the Worker Adjustment Retraining Notification Act of 1988 or any other federal, state or local statute or regulation. Payment and benefits provided in paragraphs 2(a) - 2(c) hereof are the only severance benefits you shall receive from the Company, and these fully supersede any and all payment and/or benefits pursuant to the Employment Agreement and/or any other severance plan, policy or program of the Company.

(d) Accrued Obligations . In addition, regardless of whether you sign this Agreement, within thirty (30) days following the Separation Date, you will be paid for any accrued, unused vacation days and sick days, any accrued but unpaid base salary (which will cover the pay period ending on the Separation Date), any unreimbursed business expenses entitled to reimbursement

 

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in accordance with Company policies, and any other accrued and vested benefits to which you are legally entitled under the employee benefit plans of the Company. You are entitled to these accrued obligations regardless of whether you sign this Agreement or the general release of claims contemplated by paragraph 7 hereof. The Company has calculated that as of the Separation Date, you will have accrued an estimated eight (8) weeks of vacation (equal to $68,138.46) and eight hundred sixty eight (868) hours of sick pay (equal to $184,825.58), for a total payment of $252,964.04, less all applicable federal, state and local taxes and withholdings. If you do elect to sign this Agreement, your signature will indicate your agreement with the payment calculations and amounts set forth in this paragraph.

(e) Cause Definition . For purposes of this Agreement, “Cause” shall have the meaning ascribed thereto in the Employment Agreement; provided that, notwithstanding anything set forth in such definition to the contrary, you shall not be terminated for ‘Cause” unless (I) written notice stating the basis for the termination is provided to you and (II) as to clauses (ii) or (iv) of such definition, you are given fifteen (15) days to cure the neglect or conduct that is the basis of such claim, to the extent curable.

(f) Fees . In the event the Company terminates you for Cause and withholds any payments due to you pursuant to this Agreement, and you seek recovery of such amounts and prevail, in addition to the benefits you recover in such action, you shall also be entitled to recover all reasonable attorneys’ fees and costs of bringing and pursuing such action.

3. Incentive Equity Treatment . You and the Company acknowledge and agree that you have previously been granted equity awards by the Company in accordance with, and subject to, the terms of certain equity award agreements and equity incentive plans. As of the Separation Date, all outstanding vested equity awards will remain outstanding in accordance with the terms and conditions of the applicable award agreement and equity plan under which such awards were granted, including, without limitation, any post-termination exercise period applicable thereto. Notwithstanding anything to the contrary in this Agreement or any other applicable agreement or plan, you and the Company acknowledge and agree that, unless you are terminated for Cause (as defined above) prior to the Separation Date, the following equity awards shall vest as of the Separation Date:

 

  (a) 9,880 stock options awarded to you in 2012 at an exercise price of $25.90;

 

  (b) 5,745 stock options awarded to you in 2013 at an exercise price of $19.09;

 

  (c) 5,034 shares of restricted stock awarded to you in 2012;

 

  (d) 854 shares of restricted stock awarded to you in 2013.

In addition, based on your 2013 performance award, you shall remain eligible to receive 4,880 shares of stock on or about February 25, 2016.

Other than as set forth above, all remaining unvested awards will be immediately forfeited and cancelled as of the Separation Date without any consideration being paid therefor and otherwise without any further action of the Company whatsoever; provided that if your employment shall terminate prior to the Separation date on account of your death or disability (as defined in the

 

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Employment Agreement), your outstanding restricted shares and options shall fully vest upon such termination date and you or your estate, as the case may be, shall be entitled to the post-termination exercise period for such a termination. You shall also remain entitled to any dividends payable on your restricted shares (including the unvested shares for dividends payable prior to the Separation Date) and freely tradable shares for the vested restricted shares shall be delivered to you immediately following the Separation Date.

4. Additional Equity Grant . In addition to the foregoing, as additional consideration for your execution of a general release of claims as provided in paragraph 7 hereof, unless you are terminated for Cause (as defined above) prior to the Separation Date, the Company shall grant you on the Separation Date an award of 6,800 shares of Company stock, less all applicable federal, state and local taxes and withholdings. Such shares shall be granted to you at the closing market price on the Separation Date.

5. Change in Control . Notwithstanding any other provisions of this Agreement to the Contrary, in the event that a Change in Control, as defined in the Employment Agreement, is consummated prior to May 31, 2014, the first business day following the consummation of the Change in Control shall be considered the date of termination of your employment and you shall be entitled to receive all severance, equity grants and other benefits (the “Change in Control Severance”) that would be available to you pursuant to a termination following a Change in Control as set out in the Employment Agreement and all outstanding equity grant agreements. The Change in Control Severance set out in this paragraph 5 shall be the full and complete compensation, severance or other benefits that you will be entitled to following a Change in Control.

6. No Other Compensation or Benefits . You acknowledge that, except as expressly provided in this Agreement or as otherwise required by applicable law, you will not receive any additional compensation, severance or other benefits of any kind following the Separation Date.

7. Release . Any and all amounts payable and benefits or additional rights contemplated by paragraphs 2(a), 2(b), and 4 hereof will only be payable if you deliver to the Company and do not revoke a general release of claims in favor of the Company in the form attached on Exhibit A hereto. Such release must be executed and delivered (and no longer subject to revocation, if applicable) by you within sixty (60) days following the Separation Date.

8. No Mitigation/No Offset. Y ou shall be under no obligation to seek other employment following the Separation Date and there shall be no offset against amounts, entitlements or benefits due to you hereunder on account of any remuneration or benefits provided by any subsequent employment you may obtain, except as otherwise provided in paragraph 2(c) above.

9. Restrictive Covenants; Survival . The Company and you hereby (a) reaffirm the Company’s and your mutual rights and obligations under Section 7 (entitled Confidentiality, Non-Disclosure and Non-Competition Agreement) and Section 8 (entitled Mutual Non-Disparagement) of the Employment Agreement, and (b) understand, acknowledge and agree that such rights and obligations will survive your separation of employment with the Company and

 

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remain in full force and effect in accordance with all of the terms and conditions thereof. If you violate any of your obligations under Section 7 or Section 8 of your Employment Agreement, which are incorporated by reference herein to this Agreement, you no longer shall be entitled to any of the consideration set forth above in paragraphs 2(a), 2(b), 2(c), 3 and 4, and to the extent that you already have received such consideration, you shall be obligated to repay it to the Company. Prior to the Separation Date, to the extent feasible, the Company shall provide you with a reasonable opportunity prior to release to review and comment on any formal public statements or press releases made by the Company relating to your separation of employment with the Company and shall consider such comments in good faith, and such statements and releases shall state in form and substance that you are voluntarily resigning. Except to the extent consistent with the preceding sentence, you acknowledge and agree that you shall not make any public statements regarding your separation of employment with the Company and shall remain subject to the provisions of Section 8 of the Employment Agreement. In addition, Sections 11, 12, 15, and 24 of the Employment Agreement are incorporated in full into this Agreement with full force and effect, provided that any reference to “the Executive” shall be deemed to be a reference to you and any reference to “this Agreement” shall be deemed to be a reference to this Agreement.

10. Governing Law . This Agreement will be governed by, and construed under and in accordance with, the laws of the State of New York, without regard to the choice of law rules thereof.

11. Tax Matters . The Company may withhold from any and all amounts payable under this Agreement such federal, state, or local taxes as may be required to be withheld pursuant to any applicable law or regulation. The intent of the parties is that payments and benefits contemplated under this Agreement either comply with, or be exempt from, the requirements of Code Section 409A (as defined in Section 24(a) of the Employment Agreement). To the extent that the payments and benefits contemplated by this Agreement are not exempt from the requirements of Code Section 409A, this Agreement is intended to comply with the requirements of Code Section 409A to the maximum extent possible, and shall be limited, construed and interpreted in accordance with such intent. You and the Company hereby agree that your separation of employment on the Separation Date will constitute a “separation from service” within the meaning of Code Section 409A.

12. Entire Agreement . Except as otherwise expressly provided herein, this Agreement and the exhibit attached hereto constitute the entire agreement between you and the Company with respect to the subject matter hereof and supersede any and all prior agreements or understandings between you and the Company with respect to the subject matter hereof, whether written or oral (including, without limitation, the Employment Agreement, any award agreements that you may have entered with the Company and any equity plans under which such awards were granted). This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, and their respective heirs, successors and assigns, provided that you may not assign your rights or obligations hereunder (except as otherwise contemplated in Section 15 of the Employment Agreement in the event of your death). This Agreement may be amended or modified only by a written instrument executed by you and the Company.

 

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If this Agreement accurately reflects your understanding as to the terms and conditions of your separation of employment with the Company, please sign and date one copy of this Agreement in the space provided below and return the same to me for the Company’s records.

On behalf of the Company, I wish you the best of luck in your future endeavors.

 

Very truly yours,

 

TRONOX LIMITED

By:   /s/ Thomas J. Casey
  Name: Thomas J. Casey
  Title: Chairman and CEO

The above terms and conditions accurately reflect my understanding regarding the terms and conditions of my separation of employment with the Company, and I hereby confirm my agreement to the same.

 

Dated: 28 Feb. 2014       /s/ Michael J. Foster
      Michael J. Foster

Separation Letter Agreement Signature Page

EXHIBIT 31.1

SECTION 302 CERTIFICATION

I, Thomas Casey, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 of Tronox Ltd (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: May 8, 2014

 

/s/ Thomas Casey

Thomas Casey

Chairman and Chief Executive Officer

EXHIBIT 31.2

SECTION 302 CERTIFICATION

I, Katherine C. Harper, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 of Tronox Ltd (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: May 8, 2014

 

/s/ Katherine C. Harper

Katherine C. Harper

Senior Vice President and Chief Financial Officer

EXHIBIT 32.1

WRITTEN STATEMENT OF CHIEF EXECUTIVE OFFICER

FURNISHED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002 (18 USC. SECTION 1350)

AND FOR THE PURPOSE OF COMPLYING WITH RULE 13a-14(b)

OF THE SECURITIES EXCHANGE ACT OF 1934.

May 8, 2014

Securities and Exchange Commission

100 F Street, NE

Washington, DC 20549

Pursuant to 18 U.S.C. § 1350, the undersigned officer of Tronox Limited (the “Registrant”) hereby certifies that the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

/s/ Thomas Casey

Thomas Casey

Chairman and Chief Executive Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.

EXHIBIT 32.2

WRITTEN STATEMENT OF PRINCIPAL FINANCIAL OFFICER

FURNISHED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002 (18 USC. SECTION 1350)

AND FOR THE PURPOSE OF COMPLYING WITH RULE 13a-14(b)

OF THE SECURITIES EXCHANGE ACT OF 1934.

May 8, 2014

Securities and Exchange Commission

100 F Street, NE

Washington, DC 20549

Pursuant to 18 U.S.C. § 1350, the undersigned officer of Tronox Limited (the “Registrant”) hereby certifies that the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

/s/ Katherine C. Harper

Katherine C. Harper

Senior Vice President and Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.