Tronox Limited
Tronox Ltd (Form: 8-K, Received: 09/12/2017 11:14:11)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):            September 12, 2017

TRONOX LIMITED
(Exact name of registrant as specified in its charter)

Western Australia, Australia
1-35573
98-1026700
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification No.)


One Stamford Plaza
Lot 22 Mason Road
263 Tresser Boulevard, Suite 1100
Kwinana Beach, WA 6167
Stamford, Connecticut 06901
Australia
(Address and Zip Code of principal executive offices)

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

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see   General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933   (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company           

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



Item 8.01. Other items

On September 12, 2017, Tronox Finance plc*, a public limited company incorporated under the laws of England and Wales (the “Issuer”), and a wholly owned subsidiary of Tronox Limited (the “Company”), commenced an offering of senior notes (the “Notes”). The Notes are being offered in connection with, and the Company intends to use the net proceeds from the offering, together with borrowings under the Company’s proposed new credit facilities to fund the redemption of the $900 million aggregate principal amount of 6.375% senior notes due 2020 issued by Tronox Finance LLC.

In conjunction with the offering of the Notes, the Issuer issued a confidential preliminary offering memorandum dated September 12, 2017 (the “Offering Memorandum”). Certain information contained in the Offering Memorandum is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

The information in Exhibit 99.1 shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Notes in any state in which the offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state. The Notes have not been, and will not be, registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any other jurisdiction. The Issuer may not offer or sell the Notes unless the offer or sale would qualify for a registration exemption under the Securities Act and applicable state securities laws.

On September 12, 2017, the Company issued a press release announcing, among other things, the offering of the Notes by the Issuer. A copy of the Company’s press release is filed as Exhibit 99.2 to this Form 8-K and is incorporated herein by reference.

Filed herewith as Exhibit 99.3 is a revised slide to correct a typographical error on slide 22 from the slide presentation originally filed as Exhibit 99.1 to the Current Report on Form 8-K of Tronox Limited, dated September 7, 2017.
 
* Exercise of borrowing powers by Issuer subject to receipt of trading certificate which has been applied for.
 
Additional Information and Where to Find It

This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote or approval. In connection with the Transaction Agreement (the “Cristal Transaction Agreement”), by and between Tronox, The National Titanium Dioxide Company (“Cristal”) and Cristal Inorganic Chemicals Netherlands Coöperatief W.A. (the “Cristal Transaction”), the Company has filed, and intends to file, relevant materials with the U.S. Securities and Exchange Commission (“SEC”). The Company filed a definitive proxy statement regarding the Cristal Transaction with the SEC on August 31, 2017. Investors and Securityholders are urged to read the proxy statement (including all amendments and supplements thereto) and all other relevant documents regarding the proposed Cristal Transaction filed with the SEC or sent to shareholders as they become available as they will contain important information about the Cristal Transaction. You may obtain a free copy of the proxy statement and other relevant documents filed by the Company with the SEC at the SEC’s website at www.sec.gov. Copies of documents filed by the Company with the SEC will be available free of charge on the Company’s website at www.tronox.com or by contacting the Company’s Investor Relations at +1.203.705.3722.

Certain Information Regarding Participants

The Company, Cristal and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the Cristal Transaction. You can find information about the Company’s directors and executive officers in the Company’s definitive annual proxy statement filed with the SEC on March 16, 2017. Additional information regarding the interests of such potential participants is included in the definitive proxy statement regarding the Cristal Transaction filed with the SEC on August 31, 2017, and will be included in other relevant documents filed with the SEC.


Forward Looking Statements

Statements in this release that are not historical are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. These and other risk factors are discussed in the company’s filings with the SEC, including those under the heading entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016 and our Quarterly Report on Form 10-Q for the period ended June 30, 2017.

Significant risks and uncertainties may relate to, but are not limited to, the risk that the Cristal Transaction does not close due to failure of a closing condition or termination of the Cristal Transaction Agreement in accordance with its terms, causing the Company to seek alternative financing for the Cristal Transaction; the risk that the Cristal Transaction will not close, including by failure to obtain shareholder approval, failure to obtain any necessary financing or the failure to satisfy other closing conditions under the Cristal Transaction Agreement or by the termination of the Cristal Transaction Agreement; failure to plan and manage the Cristal Transaction effectively and efficiently; the risk that a regulatory approval that may be required for the Cristal Transaction is delayed, is not obtained or is obtained subject to conditions that are not anticipated; the risk that expected synergies will not be realized or will not be realized within the expected time period; unanticipated increases in financing and other costs, including a rise in interest rates; reduced access to unrestricted cash; compliance with our bank facility covenants; the price of our shares; general market conditions; our customers potentially reducing their demand for our products; more competitive pricing from our competitors or increased supply from our competitors; operating efficiencies and other benefits expected from the Cristal Transaction.

Item 9.01. Financial Statements and Exhibits.

(d)    Exhibits.

Exhibit No.
       Description
Excerpts from Tronox Finance plc’s confidential preliminary offering memorandum dated September 12, 2017.
Press release issued by the Company dated September 12, 2017.
Corrected Slide – Lender Presentation dated September 7, 2017.



SIGNATURE

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

Date: September 12, 2017

 
TRONOX LIMITED
     
 
By:
/s/ Richard L. Muglia
   
Richard L. Muglia
   
Senior Vice President, General Counsel and Secretary



Exhibit 99.1

Excerpts from Tronox Finance plc’s confidential preliminary offering memorandum dated September 12, 2017.

This offering memorandum contains certain financial measures, in particular the presentation of earnings before interest, tax, depreciation and amortization (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 we believe they provide us and recipients of this presentation with additional insight into our operational 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. A reconciliation of net income (loss) to EBITDA and Adjusted EBITDA is also provided herein.

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following table sets forth summary historical and pro forma financial data as of the dates and for the periods indicated. The statement of operations and balance sheet data for Holdings: (i) as of and for the year ended December 31, 2016 has been derived from Holdings’ audited consolidated financial statements appearing in Holdings’ Annual Report on Form 10-K for year ended December 31, 2016, which do not give effect to the revisions per the Current Report on Form 8-K filed on June 2, 2017 with the SEC to provide additional information and details regarding the revision of the previously issued December 31, 2016 financial statements and (ii) as of and for the six months ended June 30, 2017, has been derived from Holdings’ unaudited interim consolidated financial statements appearing in Holdings’ Quarterly Report on Form 10-Q for the six months ended June 30, 2017, each incorporated by reference in this offering memorandum. On June 2, 2017, Holdings filed a Current Report on Form 8-K to provide additional information and details regarding the revision of its previously issued December 31, 2016 financial statements and quarterly financial statements in 2016. During the quarter ended March 31, 2017, Holdings identified a misstatement in selling, general, and administrative expense for certain prior periods related to a liability resulting from a non-timely filing with a statutory authority. The aggregate misstatement is $11 million, which impacts the previously issued consolidated statements of operations, comprehensive loss, balance sheets and cash flows as of and for the years ended December 31, 2016 and 2015, and the unaudited condensed consolidated financial statements for the third and fourth quarters and corresponding year-to-date periods of 2015, and each quarter and corresponding year-to-date periods of 2016. The statement of operations and balance sheet data for Cristal: (i) as of and for the year ended December 31, 2016 has been derived from Cristal’s audited consolidated financial statements and (ii) as of and for the six months ended June 30, 2017, has been derived from Cristal’s unaudited interim consolidated financial statements, each included in this offering memorandum.

The summary historical financial data of Cristal for the years ended December 31, 2016, 2015 and 2014 was prepared in accordance with Saudi GAAP. A reconciliation of net loss from generally accepted accounting principles in Saudi GAAP to U.S. GAAP is presented for the two most recent years ended December 31, 2016 and 2015. The summary historical financial data of Cristal for the six months ended June 30, 2017 and for the six months ended June 30, 2016 is prepared in accordance with IFRS. In connection with the preparation of the summary unaudited Pro Forma As Adjusted condensed combined statement of operations data, the summary historical financial data of Cristal for the six months ended June 30, 2017 was converted from IFRS to U.S. GAAP.

The table also includes summary unaudited consolidated financial information for the twelve months ended June 30, 2017, adjusted for the Refinancing Transactions (excluding the ABL Drawdown and Blocked New Term Loans) and the Alkali Sale. This information was calculated by taking our audited consolidated financial information for the year ended December 31, 2016, and subtracting our unaudited consolidated financial information for the six months ended June 30, 2016, and adding our unaudited consolidated financial information for the six months ended June 30, 2017, and adjusting the summary statement of operations data to give effect to the Alkali Sale and the Refinancing Transactions (excluding the portion of the term facility to be borrowed by the Blocked Borrower) as if they had been completed on July 1, 2016 and adjusting the summary balance sheet data to give effect to the Alkali Sale and the Refinancing Transactions (excluding the ABL Drawdown and Blocked New Term Loans) as if they had been completed on June 30, 2017. The unaudited consolidated financial information as of and for the twelve months ended June 30, 2017 and the Pro Forma Combined Adjusted EBITDA has been prepared solely for the purposes of this offering memorandum and is for illustrative purposes only and is not necessarily representative of our results of operations for any future period or financial condition at any future date.

Holdings’ summary unaudited Pro Forma As Adjusted condensed combined statement of operations data for the twelve months ended June 30, 2017 is presented in U.S. GAAP as if the Transactions (including the ABL Drawdown and Blocked New Term Loans) had been completed on July 1, 2016. Holdings’ summary unaudited Pro Forma As Adjusted condensed combined balance sheet data as of June 30, 2017 is presented as if the Transactions (including the ABL Drawdown and Blocked New Term Loans) had been completed on June 30, 2017.

The unaudited pro forma condensed combined financial data contained herein were prepared in connection with the filing of our Definitive Proxy Statement on August 31, 2017 and give effect to assumed incremental indebtedness of $348 million rather than the actual contemplated Refinancing Transactions described herein, which represent an aggregate of $245 million of incremental indebtedness. In addition, such unaudited pro forma condensed combined financial data gives effect to $152 million of cash and cash equivalents to be assumed from Cristal in connection with the Cristal Acquisition even though no cash and cash equivalents will be assumed from Cristal in connection with the Cristal Acquisition.

1

Accordingly, the unaudited pro forma condensed combined financial data presented below and included in our “Summary Historical and Pro Forma Financial Data” included elsewhere in this offering memorandum does not precisely reflect our currently contemplated level of indebtedness, capital structure or our cash and cash equivalents, total assets and total equity. By contrast, our table presented under “Capitalization” reflects the Refinancing Transactions, the level of debt and cash and cash equivalents as contemplated as of the date of this offering memorandum.

This information should be read in conjunction with (i) the audited consolidated financial statements and related notes of Holdings for fiscal year ended December 31, 2016 appearing in Holdings’ Annual Report on Form 10-K for year ended December 31, 2016, which is incorporated by reference into this offering memorandum, (ii) the unaudited interim consolidated financial statements appearing in Holdings’ Quarterly Report on Form 10-Q for the six months ended June 30, 2017, which is incorporated by reference into this offering memorandum, (iii) the audited consolidated financial statements of Cristal as of and for year ended December 31, 2016 included in this offering memorandum, (iv) the unaudited interim consolidated financial statements of Cristal as of and for the six months ended June 30, 2017 included in this offering memorandum and (v) and the “Unaudited Pro Forma Condensed Combined Statements of Operations” appearing elsewhere in this offering memorandum.

2

Summary Consolidated Historical Financial and Pro Forma Financial Data of Tronox and Cristal
(Millions of U.S. Dollars)

 
Tronox
Cristal
Tronox
 
Year Ended
December 31,
2016
Six Months
Ended
June 30,
2017
As Adjusted
Twelve
Months Ended
June 30,
2017 (1)
Year Ended
December 31,
2016
Six Months
Ended
June 30,
2017
Pro Forma
Combined
As Adjusted
Twelve Months
Ended
June 30,
2017 (2)
 
(U.S. GAAP)
(U.S. GAAP)
(U.S. GAAP)
(Saudi GAAP)
(IFRS)
(U.S. GAAP)
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
$
2,093
 
$
1,191
 
$
1,490
 
$
1,737
 
$
1,017
 
$
3,334
 
Cost of goods sold
 
1,846
 
 
977
 
 
1,230
 
 
1,586
 
 
832
 
 
2,855
 
Gross profit
 
247
 
 
214
 
 
260
 
 
151
 
 
185
 
 
479
 
Selling, general and administrative expenses
 
(210
)
 
(143
)
 
(232
)
 
(257
)
 
(142
)
 
(394
)
Restructuring expense
 
(1
)
 
 
 
1
 
 
 
 
 
 
1
 
Impairment of assets
 
 
 
 
 
 
 
(3
)
 
(4
)
 
 
Income (loss) from operations
 
36
 
 
71
 
 
29
 
 
(109
)
 
39
 
 
86
 
Interest and debt expense, net
 
(184
)
 
(92
)
 
(180
)
 
(68
)
 
(48
)
 
(200
)
Gain (loss) on extinguishment of debt
 
4
 
 
 
 
 
 
 
 
 
 
 
Other income (expense), net
 
(29
)
 
(7
)
 
(20
)
 
(10
)
 
1
 
 
(5
)
Income (loss) before income taxes
 
(173
)
 
(28
)
 
(171
)
 
(187
)
 
(8
)
 
(119
)
Income tax (provision) benefit (3)
 
115
 
 
(5
)
 
133
 
 
(3
)
 
3
 
 
123
 
Net income (loss)
$
(58
)
$
(33
)
$
(38
)
$
(190
)
$
(5
)
$
4
 
Net income (loss) attributable to noncontrolling interest
 
1
 
 
5
 
 
5
 
 
7
 
 
3
 
 
13
 
Net income (loss) attributable to company (4)
$
(59
)
$
(38
)
$
(43
)
$
(197
)
$
(8
)
$
(9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Working capital
$
731
 
$
772
 
$
1,625
 
$
570
 
$
664
 
$
1,384
 
Total assets
$
4,950
 
$
4,994
 
$
4,142
 
$
3,753
 
$
3,722
 
$
6,185
 
Total debt, net
$
3,054
 
$
3,052
 
$
2,517
 
$
1,942
 
$
1,896
 
$
3,383
 
Total equity
$
1,161
 
$
1,175
 
$
977
 
$
932
 
$
688
 
$
1,475
 
Supplemental Information:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation, depletion and amortization expense
$
236
 
$
123
 
$
182
 
$
174
 
$
85
 
$
344
 
Capital expenditures
$
119
 
$
56
 
$
94
 
$
107
 
$
41
 
$
121
 
(1) As Adjusted figures represent the summary historical financial data of Holdings as adjusted to give effect to the Alkali Sale and the Refinancing Transactions (excluding the Blocked New Term Loans and the ABL Drawdown) as if they had been completed on July 1, 2016 in the case of summary statement of operations data, and adjusted to give effect to the Alkali Sale and the Refinancing Transactions (excluding the Blocked New Term Loans and the ABL Drawdown) as if they had been completed on June 30, 2017 in the case of summary balance sheet data.
(2) Pro Forma Combined As Adjusted figures represent the summary historical financial data of Holdings as adjusted to give effect to the Transactions (including the Blocked New Term Loans and the ABL Drawdown) as if they had completed on July 1, 2016 in the case of the summary statement of operations, and adjusted to give effect to the Transactions (including the Blocked New Term Loans and the ABL Drawdown) as if they had been completed on June 30, 2017 in the case of the summary balance sheet data.

3

(3) During the fourth quarter of 2016, Holdings implemented various steps of a corporate reorganization plan to simplify its corporate structure and thereby improve operational, administrative, and commercial synergies within each of its operating segments (the “ Corporate Reorganization ”). As a result of this Corporate Reorganization, Holdings reduced its cross jurisdictional financing arrangements and consequently reversed the deferred tax assets related to intercompany interest deductions. The related withholding tax amounts were also reversed as a result of the Corporate Reorganization. Additionally, Holdings reduced its deferred tax assets related to loss carryforwards which will no longer be available to utilize. The changes to deferred taxes are offset by valuation allowances and result in no impact to the consolidated provision for income taxes for the year ended December 31, 2016. The impact on the income tax provision for the year ended December 31, 2016 was a tax benefit of $107 million, reflecting a net reduction in withholding tax accruals of $110 million, offset by a foreign currency loss of $3 million.
(4) Net income (loss) attributable to company refers, in the case of Holdings and pro forma data, to Holdings and in the case of Cristal, to Cristal, as applicable.

Other Financial and Pro Forma Data

The following represents the assumed financing structure for the Cristal Acquisition. It does not give effect to the Refinancing Transactions. No revisions to this financial information have been made to account for the Refinancing Transactions (or any component thereof) as described herein. You should read such unaudited pro forma condensed combined financial data in conjunction with the “Capitalization” section of this offering memorandum.

Pro Forma Combined Adjusted EBITDA

 
Year
Ended
December 31,
2016
Year
Ended
December 31,
2015
Twelve
Months
Ended
June 30,
2017 (1)
Six
Months
Ended
June 30,
2017
Six
Months
Ended
June 30,
2016
 
(U.S. GAAP)
Tronox
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
$
(58.0
)
$
(307.0
)
$
49.0
 
$
(33.0
)
$
(144.0
)
Interest and debt expense, net
 
184.0
 
 
176.0
 
 
184.0
 
 
92.0
 
 
92.0
 
Interest income
 
(3.0
)
 
(7.0
)
 
(3.0
)
 
(2.0
)
 
(2.0
)
Income tax provision (benefit)
 
(115.0
)
 
41.0
 
 
(132.0
)
 
5.0
 
 
22.0
 
Depreciation, depletion and amortization expense
 
236.0
 
 
294.0
 
 
244.0
 
 
123.0
 
 
115.0
 
EBITDA
 
244.0
 
 
197.0
 
 
342.0
 
 
185.0
 
 
83.0
 
Share-based compensation (a)
 
25.0
 
 
22.0
 
 
37.0
 
 
22.0
 
 
10.0
 
Restructuring expense (b)
 
1.0
 
 
21.0
 
 
 
 
 
 
1.0
 
Foreign currency remeasurement (c)
 
32.0
 
 
(21.0
)
 
31.0
 
 
6.0
 
 
18.0
 
Transaction costs (d)
 
 
 
 
 
20.0
 
 
20.0
 
 
 
Other items (e)
 
16.0
 
 
26.0
 
 
14.0
 
 
8.0
 
 
3.0
 
Amortization of inventory step-up from purchase accounting (f)
 
 
 
9.0
 
 
 
 
 
 
 
Net loss (gain) on liquidation of non-operating subsidiaries
 
 
 
 
 
 
 
 
 
 
(Gain) loss on extinguishment of debt (g)
 
(4.0
)
 
 
 
 
 
 
 
(4.0
)
Adjustment of transfer tax due to 2012 acquisition
 
 
 
(11.0
)
 
 
 
 
 
 
Alkali acquisition costs (h)
 
 
 
29.0
 
 
 
 
 
 
 
Pension and postretirement benefit curtailment gains
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA (i)
$
314.0
 
$
272.0
 
$
444.0
 
$
241.0
 
$
111.0
 

4

 
Year
Ended
December 31,
2016
Year
Ended
December 31,
2015
Twelve
Months
Ended
June 30,
2017
Six
Months
Ended
June 30,
2017
Six
Months
Ended
June 30,
2016
 
(U.S. GAAP)
Cristal
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) (j)
$
(185.9
)
$
(455.9
)
$
(82.8
)
$
(4.8
)
$
(107.9
)
Interest and debt expense, net
 
68.0
 
 
44.5
 
 
79.5
 
 
48.1
 
 
36.6
 
Income tax provision
 
3.2
 
 
26.2
 
 
5.0
 
 
(2.9
)
 
(4.7
)
Depreciation, depletion and amortization expense
 
174.3
 
 
150.7
 
 
173.9
 
 
84.6
 
 
85.0
 
U.S. GAAP Adjustments (k)
 
(1.0
)
 
(4.8
)
 
0.8
 
 
(0.1
)
 
(1.9
)
EBITDA
 
58.6
 
 
(239. 3
)
 
176. 4
 
 
124. 9
 
 
7.1
 
Restructuring expense (l)
 
1.2
 
 
31.6
 
 
2.2
 
 
1.7
 
 
0.7
 
Asset Impairment (m)
 
2.7
 
 
74.9
 
 
6.8
 
 
3.6
 
 
(0.5
)
Transaction costs (n)
 
 
 
 
 
10.1
 
 
10.1
 
 
 
Foreign currency remeasurement (o)
 
 
 
(5.9
)
 
0.7
 
 
(0.6
)
 
(1.2
)
Loss on derivative instruments (p)
 
2.0
 
 
97.1
 
 
5.3
 
 
4.0
 
 
0.7
 
Other items (q)
 
(9.2
)
 
39.8
 
 
(4.7
)
 
1.9
 
 
(2.6
)
U.S. GAAP Adjustments (r)
 
(0.2
)
 
(63.9
)
 
(0.2
)
 
 
 
 
Adjusted EBITDA
$
55.1
 
$
(65.7
)
$
196. 6
 
$
145. 6
 
$
4.2
 
 
Year
Ended
December 31,
2016
Year
Ended
December 31,
2015
Twelve
Months
Ended
June 30,
2017
Six
Months
Ended
June 30,
2017
Six
Months
Ended
June 30,
2016
 
(U.S. GAAP)
Pro Forma Tronox
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported Tronox Adjusted EBITDA
 
314.0
 
 
272.0
 
 
444.0
 
 
241.0
 
 
111.0
 
Reported Cristal Adjusted EBITDA
 
55.1
 
 
(65.7
)
 
196.6
 
 
145.7
 
 
4.2
 
Pro Forma Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Removal of Tronox Alkali
 
(149.0
)
 
(129.0
)
 
(165.0
)
 
(79.0
)
 
(63.0
)
Removal of Cristal AMIC (s)
 
7.8
 
 
 
 
15.7
 
 
7.9
 
 
 
Pro Forma Combined EBITDA before synergies (2)
$
227. 9
 
$
77.3
 
$
491. 3
 
$
315. 5
 
$
5 2 .2
 
(1) The data above related to the twelve months ended June 30, 2017 is derived from Holdings’ Annual Report on Form 10-K for year ended December 31, 2016 and Holdings’ Quarterly Report on Form 10-Q for the six months ended June 30, 2016 which do not give effect to the revisions per the Current Report on Form 8-K filed on June 2, 2017 to provide additional information and details regarding the revision of its previously issued December 31, 2016 financial statements and quarterly financial statements in 2016.
(2) This does not include estimated year 1 synergies of $100 million. We expect there will be costs associated with realizing such synergies, and those costs may be material. Any one time costs incurred to realize synergies would be treated as adjusted and added back to EBITDA for management reporting consistent with current practice.

Tronox

(a) Represents non-cash share-based compensation.
(b) Represents severance and other costs associated with the shutdown of our sodium chlorate plant, and other global restructuring efforts which was recorded in “Restructuring income (expense)” in the audited annual Consolidated Statements of Operations and the unaudited interim Consolidated Statements of Operations.
(c) Represents foreign currency remeasurement which is included in “Other income (expense), net” in the audited annual Consolidated Statements of Operations and the unaudited interim Consolidated Statements of Operations.
(d) Represents transaction costs associated with the Cristal Acquisition which were recorded in “Selling, general and administrative expenses” in the audited annual Consolidated Statements of Operations and the unaudited interim Consolidated Statements of Operations.
(e) Includes non-cash pension and postretirement costs, severance expense, insurance settlement gain and other items included in “Selling, general and administrative expenses” and “Cost of goods sold” in the audited annual Consolidated Statements of Operations and the unaudited interim Consolidated Statements of Operations.

5

(f) Amortization of inventory step-up from purchase accounting related to the acquisition of the Alkali business which is included in “Cost of goods sold” in the audited annual Consolidated Statements of Operations and the unaudited interim Consolidated Statements of Operations.
(g) During 2016, we recognized $4 million of gain associated with the repurchase of $20 million face value of our 2020 Notes and 2022 Notes, which was recorded in “Gain (loss) on extinguishment of debt” in the Consolidated Statements of Operations. See Note 14 of notes to the audited annual consolidated financial statements.
(h) During 2015, transaction costs consist of costs associated with the acquisition of the Alkali business, including banking, legal, and professional fees.
(i) No income tax impact given full valuation allowance except for South Africa related restructuring costs.

Cristal

(j) Represents net income for the year ended December 31, 2016 and 2015 prepared in accordance with U.S. GAAP as presented in Note 37 to Cristal’s audited consolidated financial statements included in this offering memorandum. This includes total Cristal presentation of net income, EBITDA and Adjusted EBITDA; however, pro forma EBITDA excludes AMIC as it is not being acquired as part of the Cristal Acquisition.
(k) Represents adjustments to depreciation, depletion and amortization expense, income tax provision, and interest and debt expense necessary to convert the company’s financial statements from Saudi GAAP and IFRS to U.S. GAAP. Refer to Note 37 to Cristal’s audited consolidated financial statements included in this offering memorandum.
(l) Represents employee terminations and other costs incurred to reorganized Cristal’s operations and established a shared services organization for TASNEE and its subsidiaries, including Cristal.
(m) Represents the write-down of assets at Cristal’s metal powders business due to a change in the manufacturing process from a continuous operation to a batch process. In addition, the revised business plan’s cash flows required a further impairment of intangible assets and goodwill.
(n) Represents transaction costs associated with the proposed acquisition of Cristal by Holdings, which were recorded in selling, general and administrative expenses.
(o) Represents foreign currency remeasurement which is included in “Other income (expense), net” in Cristal’s audited Consolidated statement of income included in this offering memorandum.
(p) Represents losses realized on derivative financial instruments. Refer to Note 33 to Cristal’s audited consolidated financial statements included in this offering memorandum.
(q) Includes unusual and non-recurring litigation settlements, non-cash pension costs and other non-cash items in the audited Consolidated Statements of income included in this offering memorandum.
(r) Represents adjustments to impairments, pensions and other non-cash items necessary to convert the company’s financial statements from Saudi GAAP and IFRS to U.S. GAAP. Refer to Note 37 to Cristal’s audited consolidated financial statements included in this offering memorandum. This includes total Cristal presentation of net income, EBITDA and Adjusted EBITDA; however, pro forma EBITDA excludes AMIC as it is not being acquired as part of the Cristal Acquisition.
(s) Holdings will not acquire, as part of the Cristal Acquisition, Cristal’s 50% interest in AMIC.

6

THE NATIONAL TITANIUM DIOXIDE
COMPANY LIMITED (CRISTAL)
UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2017

F-2

The National Titanium Dioxide Company Limited (Cristal)
INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 
 
30 Jun 17
SR’ 000
31 Dec 16
SR’ 000
1 Jan 16
SR’ 000
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
 
568,723
 
 
436,633
 
 
719,358
 
Accounts receivable and prepayments
 
 
 
 
1,814,218
 
 
1,521,084
 
 
1,477,018
 
Inventories
 
 
 
 
2,014,958
 
 
2,252,471
 
 
3,356,706
 
Due from related parties
 
10
 
 
215,058
 
 
137,500
 
 
 
TOTAL CURRENT ASSETS
 
 
 
 
4,612,957
 
 
4,347,688
 
 
5,553,082
 
NON-CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Property, plant and equipment
 
 
 
 
6,241,019
 
 
6,222,981
 
 
7,098,749
 
Investments
 
7
 
 
592,355
 
 
612,609
 
 
648,366
 
Goodwill
 
 
 
 
644,600
 
 
644,600
 
 
649,831
 
Other intangible assets
 
 
 
 
325,909
 
 
339,394
 
 
377,085
 
Due from related parties
 
10
 
 
783,746
 
 
762,099
 
 
516,136
 
Deferred income tax assets
 
 
 
 
270,295
 
 
233,426
 
 
307,334
 
Exploration and evaluation cost
 
 
 
 
368,157
 
 
392,337
 
 
229,815
 
Other assets
 
 
 
 
117,574
 
 
124,302
 
 
63,572
 
TOTAL NON-CURRENT ASSETS
 
 
 
 
9,343,655
 
 
9,331,748
 
 
9,890,888
 
TOTAL ASSETS
 
 
 
 
13,956,612
 
 
13,679,436
 
 
15,443,970
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable and accruals
 
 
 
 
1,725,219
 
 
1,793,399
 
 
1,900,065
 
Employees’ terminal benefits
 
 
 
 
3,221
 
 
3,221
 
 
 
Short term loans
 
8
 
 
28,886
 
 
63,217
 
 
1,936,475
 
Due to related parties
 
10
 
 
273,295
 
 
260,993
 
 
57,035
 
Current portion of long term loans
 
9
 
 
91,728
 
 
119,705
 
 
2,002,891
 
TOTAL CURRENT LIABILITIES
 
 
 
 
2,122,349
 
 
2,240,535
 
 
5,896,466
 
NON-CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
 
Long term loans
 
9
 
 
6,987,775
 
 
7,101,008
 
 
4,702,327
 
Employees’ terminal benefits
 
 
 
 
304,470
 
 
279,267
 
 
290,747
 
Due to related parties
 
10
 
 
1,225,235
 
 
969,517
 
 
692,331
 
Deferred income tax liabilities
 
 
 
 
252,830
 
 
260,155
 
 
460,788
 
Other liabilities
 
 
 
 
483,759
 
 
494,932
 
 
394,979
 
TOTAL NON-CURRENT LIABILITIES
 
 
 
 
9,254,069
 
 
9,104,879
 
 
6,541,172
 
TOTAL LIABILITIES
 
 
 
 
11,376,418
 
 
11,345,414
 
 
12,437,638
 
SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
Equity attributable to the shareholders’ of the parent company
 
 
 
 
 
 
 
 
 
 
 
 
Capital
 
 
 
 
2,362,500
 
 
2,362,500
 
 
2,362,500
 
Statutory reserve
 
 
 
 
507,202
 
 
507,202
 
 
507,202
 
Capital contribution
 
 
 
 
305,320
 
 
239,403
 
 
100,578
 
Retained earnings
 
 
 
 
(732,079
)
 
(703,656
)
 
58,265
 
Other comprehensive income
 
 
 
 
22,522
 
 
(180,751
)
 
(90,937
)
Total equity attributable to the shareholders’ of the parent company
 
 
 
 
2,465,465
 
 
2,224,698
 
 
2,937,608
 
NON-CONTROLLING INTEREST
 
15
 
 
114,729
 
 
109,324
 
 
68,724
 
TOTAL SHAREHOLDERS’ EQUITY
 
 
 
 
2,580,194
 
 
2,334,022
 
 
3,006,332
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
13,956,612
 
 
13,679,436
 
 
15,443,970
 

The attached notes 1 to 19 form part of these unaudited interim condensed consolidated financial statements.

F-3

The National Titanium Dioxide Company Limited (Cristal)
INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS

 
3 months ended
30 Jun 17
SR ’000
3 months ended
30 Jun 16
SR ’000
6 months ended
30 Jun 17
SR ’000
6 months ended
30 Jun 16
SR ’000
Sales
 
2,017,279
 
 
1,707,264
 
 
3,810,382
 
 
3,248,807
 
Cost of sales
 
(1,611,937
)
 
(1,545,384
)
 
(3,115,290
)
 
(3,063,126
)
GROSS PROFIT / (LOSS)
 
405,342
 
 
161,880
 
 
695,092
 
 
185,681
 
EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
Selling and distribution
 
(112,684
)
 
(100,553
)
 
(216,686
)
 
(202,843
)
General and administration
 
(164,348
)
 
(167,604
)
 
(316,891
)
 
(299,944
)
Impairment of assets
 
(13,599
)
 
(390
)
 
(13,599
)
 
1,954
 
 
 
(290,631
)
 
(268,547
)
 
(547,176
)
 
(500,833
)
PROFIT / (LOSS) FROM OPERATIONS
 
114,711
 
 
(106,667
)
 
147,916
 
 
(315,152
)
Other income / (expenses), net
 
(22,360
)
 
31,160
 
 
3,051
 
 
15,858
 
Financial charges
 
(85,552
)
 
(73,515
)
 
(180,249
)
 
(137,104
)
PROFIT / (LOSS) BEFORE ZAKAT AND INCOME TAX AND NON-CONTROLLING INTEREST
 
6,799
 
 
(149,022
)
 
(29,282
)
 
(436,398
)
Zakat and income tax
 
7,405
 
 
19,905
 
 
10,870
 
 
17,655
 
NET PROFIT / (LOSS) BEFORE
NON-CONTROLLING INTEREST
 
14,204
 
 
(129,117
)
 
(18,412
)
 
(418,743
)
(Income) / loss attributable to non-controlling interest
 
(4,761
)
 
(4,980
)
 
(10,011
)
 
(5,973
)
NET PROFIT / (LOSS) FOR THE PERIOD
 
9,443
 
 
(134,097
)
 
(28,423
)
 
(424,716
)
OTHER COMPREHENSIVE INCOME
 
 
 
 
 
 
 
 
 
 
 
 
NET PROFIT / (LOSS) FOR THE PERIOD AFTER ZAKAT AND INCOME TAX
 
14,204
 
 
(129,117
)
 
(18,412
)
 
(418,743
)
Items to be classified to profit or loss in subsequent periods
 
 
 
 
 
 
 
 
 
 
 
 
Exchange adjustments on translation
 
62,996
 
 
(88,268
)
 
206,089
 
 
42,695
 
Cash flow hedges
 
(1,568
)
 
(11,807
)
 
(2,815
)
 
(20,436
)
Net other comprehensive income / (loss) to be reclassified to profit or loss in subsequent periods
 
61,428
 
 
(100,075
)
 
203,274
 
 
22,259
 
Items not to be classified to profit or loss in subsequent periods
 
 
 
 
 
 
 
 
 
 
 
 
Re-measurement of defined benefit plan
 
 
 
(2,435
)
 
(1
)
 
(3,436
)
Net other comprehensive income / (loss) not to be reclassified to profit or loss in subsequent periods
 
 
 
(2,435
)
 
(1
)
 
(3,436
)
TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE PERIOD
 
75,632
 
 
(231,627
)
 
184,861
 
 
(399,920
)

The attached notes 1 to 19 form part of these unaudited interim condensed consolidated financial statements.

F-4

The National Titanium Dioxide Company Limited (Cristal)
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

 
6 months ended
30 Jun 17
SR ’000
6 months ended
30 Jun 16
SR ’000
OPERATING ACTIVITIES
 
 
 
 
 
 
Profit / (Loss) before zakat and income tax and non-controlling interest
 
(29,282
)
 
(436,398
)
Adjustments for:
 
 
 
 
 
 
Depreciation
 
257,362
 
 
259,359
 
Asset impairment
 
13,599
 
 
(1,954
)
Deferred income tax
 
(33,324
)
 
(2,014
)
Loss on disposal of assets
 
721
 
 
2,761
 
Employees’ terminal benefits, net
 
25,203
 
 
25,211
 
 
 
234,279
 
 
(153,035
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
Accounts receivable and prepayments
 
(293,134
)
 
(305,230
)
Inventories
 
237,513
 
 
519,864
 
Accounts payable and accruals
 
(68,180
)
 
81,568
 
Due to related parties
 
29,746
 
 
33,266
 
Due from related parties
 
(99,205
)
 
(10,716
)
Other assets and liabilities
 
(4,445
)
 
76,301
 
Net cash provided by / (used in) operating activities
 
36,574
 
 
242,018
 
INVESTING ACTIVITIES
 
 
 
 
 
 
Purchase of property, plant and equipment
 
(155,037
)
 
(456,839
)
Investments
 
20,254
 
 
161,209
 
Other intangible assets
 
13,485
 
 
19,599
 
Exploration and evaluation costs, net
 
24,180
 
 
(144,523
)
Foreign currency translation
 
(134,683
)
 
173,174
 
Net cash provided by / (used in) investing activities
 
(231,801
)
 
(247,380
)
FINANCING ACTIVITIES
 
 
 
 
 
 
Net movement in short term loans
 
(34,331
)
 
69,700
 
Capital contributions from shareholders
 
65,917
 
 
71,221
 
Borrowings of subordinated loans from shareholders
 
238,274
 
 
127,545
 
Foreign currency movement in non-controlling interest
 
(4,606
)
 
12,038
 
Net movement in long term loans
 
(141,210
)
 
(640,629
)
Net cash provided by / (used in) financing activities
 
124,044
 
 
(360,125
)
NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS
 
(71,183
)
 
(365,487
)
Cash and cash equivalent at the beginning of the period
 
436,633
 
 
719,358
 
Foreign currency translation adjustments and other reserves movements
 
203,273
 
 
18,825
 
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD
 
568,723
 
 
372,696
 

The attached notes 1 to 19 form part of these unaudited interim condensed consolidated financial statements.

F-5

The National Titanium Dioxide Company Limited (Cristal)
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 
Available to owners of the parent
 
 
 
 
 
 
 
 
Other Comprehensive Income Reserves
 
 
 
Capital
SR’ 000
Statutory
reserve
SR’ 000
Additional
contribution by
shareholders’
SR’ 000
Capital
contribution
Retained
earnings
SR’ 000
Foreign
currency
translation
reserve
SR’ 000
Hedging
reserve
SR’ 000
Employee
benefits
reserve
SR’ 000
Total
SR’ 000
Non-
controlling
interest
SR’ 000
Total
SR’ 000
Balance as at 1 January 2016 (audited)
 
2,362,500
 
 
507,202
 
 
734,894
 
 
 
 
2,085,965
 
 
(1,584,805
)
 
9,291
 
 
(46,490
)
 
(1,622,004
)
 
68,724
 
 
4,137,281
 
IFRS adjustments (note 14)
 
 
 
 
 
(734,894
)
 
100,578
 
 
(2,027,700
)
 
1,584,805
 
 
 
 
(53,738
)
 
1,531,067
 
 
 
 
(1,130,949
)
Balance as at 1 January 2016 (restated)
 
2,362,500
 
 
507,202
 
 
 
 
100,578
 
 
58,265
 
 
 
 
9,291