Tronox Limited
Tronox Ltd (Form: 8-K, Received: 10/02/2017 16:56:09)

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): October 2, 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
263 Tresser Boulevard, Suite 1100
Stamford, Connecticut 06901
Lot 22 Mason Road
Kwinana Beach, WA 6167
Australia

(Address and Zip Code of principal executive offices)
(202) 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:
 
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 EVENTS.
 
Filed as Exhibit 99.1 are the unaudited pro forma condensed combined financial statements and related notes of Tronox Limited (the “Company”) for the years ended December 31, 2016 and 2015, and as of and for the six months ended June 30, 2017, to illustrate the estimated effects of the Company’s previously announced acquisition of The National Titanium Dioxide Company, Ltd.’s TiO 2 business, disposition of its Alkali business and completed refinancing transactions.
 
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
 
(b) Pro forma Financial Information.
 
The Company’s unaudited pro forma condensed combined financial information and related notes for the years ended December 31, 2016 and 2015, and as of and for the six months ended June 30, 2017, are attached as Exhibit 99.1 hereto and incorporated by reference herein.
 
(d) Exhibits
 
Exhibit
Number
  
Description
   
99.1
  
Unaudited pro forma condensed combined financial information and related notes for the years ended December 31, 2016 and 2015, and as of and for the six months ended June 30, 2017.

EXHIBIT INDEX

Exhibit
Number
  
Description
   
  
Unaudited pro forma condensed combined financial information and related notes for the years ended December 31, 2016 and 2015, and as of and for the six months ended June 30, 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.
 
 
TRONOX LIMITED
     
     
 
By:
/s/ Timothy C. Carlson
   
Timothy C. Carlson
   
Senior Vice President and
   
Chief Financial Officer
 
Date: October 2, 2017
 


Exhibit 99.1

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The unaudited pro forma condensed combined financial data contained herein were prepared giving effect to the Cristal Transaction, the Alkali Disposition detailed below and the Refinancing Transactions (as defined herein) (collectively, the “Transactions”).

On February 21, 2017, we entered into a transaction agreement with The National Titanium Dioxide Company, Ltd. (“Cristal”) and Cristal Inorganic Chemicals Netherlands, B.V. (“Cristal Netherlands”), pursuant to which we agreed to acquire Cristal’s TiO 2  business, Cristal and Cristal Netherlands will effect a restructuring under which the assets and operations relating to the TiO 2 business of Cristal will be reorganized under one or more entities owned by Cristal BV, and Cristal will separately establish a new entity in the Kingdom of Saudi Arabia to hold certain assets and operations in the Kingdom of Saudi Arabia. Cristal is a privately held company registered under the laws of the Kingdom of Saudi Arabia and is headquartered in Jeddah, Saudi Arabia. In consideration of the foregoing, we (i) will make an aggregate cash payment equal to $1,673 million, subject to certain adjustments, to Cristal and Cristal Netherlands, and (ii) will issue and deliver to Cristal Netherlands 37,580,000 of our Class A ordinary shares (the “Cristal Transaction”).

On August 2, 2017, we announced that we had entered into a stock purchase agreement to sell our Alkali business to Genesis Energy, L.P. for $1,325 million in cash, subject to a working capital adjustment (the “Alkali Disposition”). The Alkali Disposition closed on September 1, 2017.

 
          On September 22, 2017, we completed an offering by our wholly owned subsidiary, Tronox Finance plc, of 5.750% senior unsecured notes due 2025 for an aggregate principal amount of $450 million  (the ‘‘Notes’’), and we entered into a first lien term loan credit facility (the ‘‘New Term Loan’’) and an asset-based revolving syndicated facility (the ‘‘New ABL Facility’’ and, together with the New Term Loan, the ‘‘New Credit Facilities’’). The New ABL Facility provides Tronox US Holdings Inc. and certain of our other subsidiaries with an aggregate commitment of up to $550 million in principal amount for revolving credit loans, subject to a borrowing base. The New Term Loan provides our wholly owned subsidiaries, Tronox Finance LLC and Tronox Blocked Borrower LLC, with first lien term loans in an aggregate principal amount of $2.150 billion. Six hundred fifty million dollars of the NewTerm Loan was funded into restricted accounts of Tronox Blocked Borrower LLC, an unrestricted subsidiary under the Notes (the ‘‘Blocked New Term Loans’’), and will be available to us upon the closing of the Cristal Transaction. The original issue discount related to the New Term Loan was $11 million.
          
          We utilized the funds above (excluding the Blocked New Term Loans) and the funds from the Alkali Disposition to, among other things, fund the redemption of the $896 million remaining outstanding balance of 6.375% senior notes due 2020 issued by Tronox Finance LLC, repaid in full and terminated the $1.434 billion remaining outstanding balance of the senior secured term loan entered into by Tronox Pigments (Netherlands) B.V., and repaid in full and terminated the
$150 million remaining outstanding balance of our asset-based syndicated revolving credit facility.
 
          Lastly, we expect to drawdown approximately $125 million under the New ABL Facility upon the closing of the Cristal Transaction (the ‘‘ABL Drawdown’’).
 
          The transactions described above are collectively referred to as the ‘‘Refinancing Transactions. ’’

The pro forma financial statements are presented on the basis that we will finance the Cristal Transaction using certain cash proceeds from the sale of the Alkali business together with proceeds raised from the Refinancing Transactions as described in Note 7(f) and the remainder with cash.

The pro forma financial statements contained herein are presented for illustrative purposes only and may not be an indication of the combined company’s financial condition or results of operations following the Transactions for several reasons. For example, the pro forma financial statements have been derived from our historical financial statements and the historical financial statements of Cristal, and certain adjustments and assumptions have been made regarding the combined company after giving effect to the Transactions. This information upon which these adjustments and assumptions have been made is preliminary, and such adjustments and assumptions are difficult to make with complete accuracy. Further, the final allocation of the purchase price will be determined after the closing of the Cristal Transaction and after completion of an analysis to determine the fair value of the assets and liabilities of Cristal’s TiO 2 business. Accordingly, the final purchase accounting adjustments may be materially different from the unaudited pro forma adjustments.

The following unaudited pro forma condensed combined financial information and related notes present our historical condensed consolidated balance sheet and historical condensed consolidated statements of operations adjusted to reflect the impact of completion of our acquisition of Cristal’s TiO 2 business that are (i) directly attributable to the Cristal Transaction, (ii) factually supportable and (iii) expected to have a continuing impact on our combined financial results in the case of the statement of operations and balance sheet, as well as the Alkali Disposition and Refinancing Transactions.

The unaudited pro forma condensed combined financial information for the years ended December 31, 2016 and 2015 has been derived from our audited consolidated financial statements for the years ended December 31, 2016 and 2015 and the audited consolidated financial statements of Cristal for the year ended December 31, 2016. The unaudited pro forma condensed combined financial information as of and for the six months ended June 30, 2017 has been derived from our unaudited interim condensed consolidated financial statements and unaudited interim financial information of Cristal as of and for the six months ended June 30, 2017. The unaudited pro forma condensed combined financial information has been adjusted for the Cristal Transaction and the Refinancing Transactions as if each had been completed on January 1, 2016, and the Alkali Disposition as if the sale had been completed on January 1, 2015, in the case of the unaudited pro forma condensed combined statement of operations, and on June 30, 2017, in the case of the unaudited pro forma condensed combined balance sheet.

In addition to the sale of the Alkali business and the additional debt described above and described further in Note 7(f) below, the unaudited pro forma condensed combined financial statements include the following adjustments related to the Cristal Transaction:

the acquisition of Cristal’s TiO 2 business for consideration totaling $1,673 million of cash plus 37,580,000 of our Class A ordinary shares;
the impact of converting Cristal’s historical financial information as prepared in accordance with Saudi GAAP, to U.S. GAAP for the year ended December 31, 2016;

1

the impact of converting Cristal’s historical financial information, as prepared in accordance with IFRS, to U.S. GAAP for the six months ended June 30, 2017;
the translation of Cristal’s historical financial information from SR into USD;
the impact of preliminary fair value adjustments to the acquired assets and assumed liabilities of Cristal’s TiO 2 business;
reclassifications needed to conform the accounting policies of Cristal to our policies;
the elimination of acquisition-related transaction costs incurred for the year ended December 31, 2016 and the six months ended June 30, 2017;
the elimination of sales and the impacts of a licensing agreement between us and Cristal for the year ended December 31, 2016 and the six months ended June 30, 2017; and
the related income tax effects of the pro forma adjustments.

We accounted for the Cristal Transaction within the accompanying unaudited pro forma condensed combined financial information using the acquisition method of accounting in accordance with ASC 805. As valuations and other studies have yet to progress to a stage where there is sufficient information for a definitive measure of fair value, we have assumed that fair values of the tangible and intangible assets acquired and liabilities assumed at the acquisition date to equal their carrying value. Goodwill, as of the acquisition date, was measured as the excess of purchase consideration over the preliminary fair value of net tangible and identifiable intangible assets acquired. The preliminary measurement used for the net tangible and identifiable intangible assets acquired is their carrying value as an estimate of fair value. As a result of that analysis, management may identify differences that, when purchase accounting procedures are completed, could be materially different from the unaudited pro forma condensed combined financial information included herein.

The historical financial information of Cristal for the year ended December 31, 2016 was prepared in accordance with Saudi GAAP and is presented in SR. The unaudited pro forma condensed combined financial information includes adjustments and reclassifications to convert statements of operations of Cristal from Saudi GAAP to U.S. GAAP on a consistent basis with our company and to translate the financial statements from SR to USD.

Effective January 1, 2017, Cristal adopted IFRS and the financial information for the six months ended June 30, 2017 are shown under these reporting standards and presented in SR. The unaudited pro forma condensed combined financial information includes adjustments and reclassifications to convert the historical balance sheet and statements of operations of Cristal from IFRS to U.S. GAAP on a consistent basis with our company and to translate the interim financial information from SR to USD. When the transaction is completed, management will conduct a further review of adjustments and reclassifications to convert the Cristal interim financial information from IFRS to U.S. GAAP on a consistent basis with our company, and as a result, management may identify further differences that could have a material impact on the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information does not purport to project our future operating results. The unaudited pro forma condensed combined financial information does not include the impacts of any: (i) cost or revenue synergies; (ii) potential restructuring actions or (iii) future expected transaction-related costs that may result from our purchase of Cristal’s TiO 2 business, as they currently are not objectively determinable. The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes.

This unaudited pro forma condensed combined financial information, including the related notes, is derived from, and should be read in conjunction with, our audited consolidated financial statements, which are available in our Annual Report on Form 10-K for the years ended December 31, 2016 and 2015, including our Current Report on Form 8-K, filed on June 2, 2017, to provide additional information and details regarding the revision of our previously issued December 31, 2016 financial statements and quarterly financial statements in 2016, and our unaudited interim financial statements, which are available in our Quarterly Report on Form 10-Q for the six months ended June 30, 2017. The audited consolidated financial statements of Cristal for the year ended December 31, 2016 are included in our Definitive Proxy Statement on Schedule 14A, as filed with the SEC on August 31, 2017.

2

Tronox Limited
Unaudited Pro Forma Condensed Combined Balance Sheet
As of June 30, 2017

Millions of U.S. Dollars
Tronox
Historical
June 30,
2017
Alkali
Disposition
Adjustments
(Note 2)
Tronox
Pro Forma
(Subtotal)
Cristal
Historical
June 30,
2017 U.S.
GAAP
(Note 3)
Reclass-
ifications
(Note 4)
Pro Forma
Adjustments
Notes
Pro Forma
Combined
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents (1)
$
305
 
$
1,325
 
$
1,630
 
$
 
$
 
$
(1,454
)
(7f)
$
176
 
Accounts receivable, net of allowance for doubtful accounts
 
457
 
 
(125
)
 
332
 
 
484
 
 
(139
)
 
 
 
 
677
 
Inventories, net
 
506
 
 
(35
)
 
471
 
 
537
 
 
 
 
 
 
 
1,008
 
Prepaid and other assets
 
54
 
 
(28
)
 
26
 
 
 
 
139
 
 
 
 
 
165
 
Total current assets
 
1,322
 
 
1,137
 
 
2,459
 
 
1,021
 
 
 
 
(1,454
)
 
 
2,026
 
Property, plant and equipment, net
 
1,816
 
 
(723
)
 
1,093
 
 
1,601
 
 
 
 
(16
)
(7b)
 
2,678
 
Mineral leaseholds, net
 
1,608
 
 
(727
)
 
881
 
 
 
 
 
 
 
 
 
881
 
Goodwill and intangible assets, net
 
210
 
 
 
 
210
 
 
 
 
 
 
431
 
(6)
 
641
 
Other long-term assets
 
38
 
 
(4
)
 
34
 
 
167
 
 
 
 
 
 
 
201
 
Total assets
$
4,994
 
$
(317
)
$
4,677
 
$
2,789
 
$
 
$
(1,039
)
 
$
6,427
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and stockholders’ equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
$
201
 
$
(48
)
$
153
 
$
440
 
$
(197
)
$
(3
)
(7b)
$
393
 
Accrued liabilities
 
181
 
 
(31
)
 
150
 
 
1
 
 
197
 
 
32
 
(7e)
 
380
 
Short-term debt
 
150
 
 
 
 
150
 
 
8
 
 
 
 
(25
)
(7f)
 
133
 
Long-term debt due within one year
 
16
 
 
 
 
16
 
 
24
 
 
 
 
(5
)
(7f)
 
35
 
Income taxes payable
 
2
 
 
(15
)
 
(13
)
 
 
 
 
 
(2
)
(7a)
 
(15
)
Total current liabilities
 
550
 
 
(94
)
 
456
 
 
473
 
 
 
 
(3
)
 
 
926
 
Noncurrent liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt, net
 
2,886
 
 
 
 
2,886
 
 
59
 
 
 
 
263
 
(7f)
 
3,208
 
Long-term deferred tax liabilities
 
161
 
 
(1
)
 
160
 
 
68
 
 
67
 
 
 
 
 
295
 
Other long-term liabilities
 
222
 
 
(21
)
 
201
 
 
139
 
 
(67
)
 
 
 
 
273
 
Total liabilities
 
3,819
 
 
(116
)
 
3,703
 
 
739
 
 
 
 
260
 
 
 
4,702
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contingencies and Commitments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stockholders’ equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Share capital
 
1,536
 
 
 
 
1,536
 
 
2,013
 
 
 
 
(1,279
)
(7a)
 
2,270
 
Accumulated deficit
 
(69
)
 
(201
)
 
(270
)
 
 
 
 
 
(14
)
(7g)
 
(284
)
Accumulated other comprehensive income (loss)
 
(454
)
 
 
 
(454
)
 
6
 
 
 
 
(6
)
(7a)
 
(454
)
Total Tronox Limited shareholders’ equity
 
1,013
 
 
(201
)
 
812
 
 
2,019
 
 
 
 
(1,299
)
 
 
1,532
 
Noncontrolling interest
 
162
 
 
 
 
162
 
 
31
 
 
 
 
 
 
 
193
 
Total equity
 
1,175
 
 
(201
)
 
974
 
 
2,050
 
 
 
 
(1,299
)
 
 
1,725
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total liabilities and stockholders’ equity
$
4,994
 
$
(317
)
$
4,677
 
$
2,789
 
$
 
$
(1,039
)
 
$
6,427
 
(1) Cash and cash equivalents of Tronox contains $2 million of restricted cash.

See accompanying notes to the unaudited pro forma condensed combined financial information.

3

Tronox Limited
Unaudited Pro Forma Condensed Combined
Statement of Operations
For the Six Months Ended June 30, 2017

Millions of U.S. Dollars (except per share amounts)
Tronox
Historical
June 30,
2017
Alkali
Disposition
Adjustments
(Note 2)
Tronox
Pro Forma
(Subtotal)
Cristal
Historical
June 30,
2017 U.S.
GAAP
(Note 3)
Reclass-

ifications
(Note 4)
Pro Forma
Adjustments
Notes
Pro Forma
Combined
Net sales
$
1,191
 
$
(392
)
$
799
 
$
1,017
 
$
 
$
(27
)
(7b)
$
1,789
 
Cost of goods sold
 
(977
)
 
335
 
 
(642
)
 
(830
)
 
(19
)
 
24
 
(7b)
 
(1,467
)
Gross profit
 
214
 
 
(57
)
 
157
 
 
187
 
 
(19
)
 
(3
)
 
 
322
 
Selling, general and administrative expenses
 
(143
)
 
 
 
(143
)
 
(139
)
 
19
 
 
(3
)
(7c)
 
 
 
 
 
 
 
 
12
 
 
12
 
 
 
 
 
 
 
 
31
 
(7d)
 
(223
)
Restructuring expenses
 
 
 
1
 
 
1
 
 
 
 
 
 
 
 
 
1
 
Income (loss) from operations
 
71
 
 
(44
)
 
27
 
 
48
 
 
 
 
25
 
 
 
100
 
Interest and debt expense, net
 
(92
)
 
 
 
(92
)
 
(5
)
 
(3
)
 
5
 
(7f)
 
(95
)
Other income (expense), net
 
(7
)
 
 
 
(7
)
 
9
 
 
3
 
 
 
 
 
5
 
Income (loss) before income taxes
 
(28
)
 
(44
)
 
(72
)
 
52
 
 
 
 
30
 
 
 
10
 
Income tax (provision) benefit
 
(5
)
 
1
 
 
(4
)
 
2
 
 
 
 
 
 
 
(2
)
Net (income) loss
 
(33
)
 
(43
)
 
(76
)
 
54
 
 
 
 
30
 
 
 
8
 
Net income attributable to noncontrolling interest
 
5
 
 
 
 
5
 
 
3
 
 
 
 
 
 
 
8
 
Net (income) loss attributable to Tronox Limited
$
(38
)
$
(43
)
$
(81
)
$
51
 
$
 
$
30
 
 
$
 
Loss per share, basic and diluted (Note 9)
$
(0.32
)
 
 
 
$
(0.68
)
 
 
 
 
 
 
 
 
 
 
$
(0.00
)
Weighted average shares outstanding, basic and diluted (in thousands):
 
118,804
 
 
 
 
 
118,804
 
 
 
 
 
 
 
 
 
 
 
 
156,384
 

See accompanying notes to the unaudited pro forma condensed combined financial information.

4

Tronox Limited
Unaudited Pro Forma Condensed Combined
Statement of Operations
For The Year Ended December 31, 2016

Millions of U.S. Dollars (except per share amounts)
Tronox
Historical
Fiscal Year
December 31,
2016
Alkali
Disposition
Adjustments
(Note 2)
Tronox
Pro Forma
(Subtotal)
Cristal
Historical
Fiscal Year Ended
December 31,
2016 U.S.
GAAP
(Note 3)
Reclass-
ifications
(Note 4)
Pro Forma
Adjustments
Notes
Pro Forma
Combined
Net sales
$
2,093
 
$
(784
)
$
1,309
 
$
1,737
 
$
 
$
(21
)
(7b)
$
3,025
 
Cost of goods sold
 
(1,846
)
 
671
 
 
(1,175
)
 
(1,582
)
 
(92
)
 
17
 
(7b)
 
(2,832
)
Gross profit
 
247
 
 
(113
)
 
134
 
 
155
 
 
(92
)
 
(4
)
 
 
193
 
Selling, general and administrative expenses
 
(210
)
 
25
 
 
(185
)
 
(241
)
 
93
 
 
(5
)
(7c)
 
(338
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2
 
(7d)
 
2
 
Restructuring expense
 
(1
)
 
 
 
(1
)
 
 
 
(1
)
 
 
 
 
(2
)
Income (loss) from operations
 
36
 
 
(88
)
 
(52
)
 
(86
)
 
 
 
(7
)
 
 
(145
)
Interest and debt expense, net
 
(184
)
 
 
 
(184
)
 
18
 
 
(30
)
 
9
 
(7f)
 
(187
)
Other income (expense) including gain on extinguishment of debt, net
 
(25
)
 
1
 
 
(24
)
 
(1
)
 
30
 
 
 
(7f)
 
5
 
Loss before income taxes
 
(173
)
 
(87
)
 
(260
)
 
(69
)
 
 
 
2
 
 
 
(327
)
Income tax (provision) benefit
 
115
 
 
1
 
 
116
 
 
(9
)
 
 
 
 
 
 
107
 
Net loss
 
(58
)
 
(86
)
 
(144
)
 
(78
)
 
 
 
2
 
 
 
(220
)
Net income attributable to noncontrolling interest
 
1
 
 
 
 
1
 
 
7
 
 
 
 
 
 
 
8
 
Net loss attributable to Tronox Limited
$
(59
)
$
(86
)
$
(145
)
$
(85
)
 
 
$
2
 
 
$
(228
)
Loss per share, basic and diluted (Note 9)
$
(0.50
)
 
 
 
 
(1.25
)
 
 
 
 
 
 
 
 
 
 
$
(1.48
)
Weighted average shares outstanding, basic and diluted (in thousands)
 
116,161
 
 
 
 
 
116,161
 
 
 
 
 
 
 
 
 
 
 
 
153,741
 

See accompanying notes to the unaudited pro forma condensed combined financial information.

5

Tronox Limited
Unaudited Pro Forma Condensed Combined Statement of Operations
For The Year Ended December 31, 2015

Millions of U.S. Dollars (except per share amounts)
Tronox
Historical
Fiscal Year
December 31,
2015
Alkali
Disposition
Adjustments
(Note 2)
Tronox
Pro Forma
Net sales
$
2,112
 
$
(602
)
$
1,510
 
Cost of goods sold
 
(1,992
)
 
505
 
 
(1,487
)
Gross profit
 
120
 
 
(97
)
 
23
 
Selling, general and administrative expenses
 
(217
)
 
25
 
 
(192
)
Restructuring expense
 
(21
)
 
 
 
(21
)
Loss from operations
 
(118
)
 
(72
)
 
(190
)
Interest and debt expense, net
 
(176
)
 
 
 
(176
)
Other income, net
 
28
 
 
1
 
 
29
 
Loss before income taxes
 
(266
)
 
(71
)
 
(337
)
Income tax (provision) benefit
 
(41
)
 
1
 
 
(40
)
Net loss
 
(307
)
 
(70
)
 
(377
)
Net income attributable to noncontrolling interest
 
11
 
 
 
 
11
 
Net loss attributable to Tronox Limited
$
(318
)
$
(70
)
$
(388
)
Loss per share, basic and diluted (Note 9)
$
(2.75
)
 
 
 
 
(3.36
)
Weighted average shares outstanding, basic and diluted (in thousands):
 
115,566
 
 
 
 
 
115,566
 

See accompanying notes to the unaudited pro forma condensed combined financial information.

6

Tronox Limited
Notes to Unaudited Pro Forma Condensed Combined Financial Information
(In Millions of U.S. Dollars, unless otherwise noted)

Note 1 Basis of Presentation

The unaudited pro forma condensed combined balance sheet as of June 30, 2017 is presented as if the acquisition of Cristal’s TiO 2 business and the Refinancing Transactions had occurred on June 30, 2017 and the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2016 and the six months ended June 30, 2017 is presented as if the acquisition of Cristal’s TiO 2 business, the Refinancing Transactions and the sale of the Alkali business for $1,325 million in cash had occurred on January 1, 2016. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015 displays the pro forma results of Tronox excluding those of the Alkali business as if the Alkali Disposition had occurred on January 1, 2015 and does not include the adjustments for the acquisition of Cristal or the Refinancing Transactions.

Note 2 Unaudited Disposition Adjustments – Sale of the Alkali Business

On August 2, 2017 Tronox announced that it had entered into a definitive agreement to sell the Alkali business to Genesis Energy, L.P. for $1,325 million in cash, subject to customary closing conditions and working capital adjustment. The pro forma financial information was adjusted to exclude the Alkali business. The Alkali Disposition closed on September 1, 2017.

The unaudited pro forma condensed combined balance sheet as of June 30, 2017 reflects a preliminary estimate of the Alkali assets and liabilities, net of cash, of $1,642 million and $116 million, respectively. The unaudited condensed combined statement of operations reflects the removal of the Alkali net income of $43 million, $86 million and $70 million for the six months ended June 30, 2017 and years ended December 31, 2016 and 2015, respectively. The estimated pre-tax loss of $201 million resulting from the sale of the Alkali business below its estimated book value at June 30, 2017 is included in the unaudited pro forma condensed combined balance sheet as a reduction to retained earnings. The estimated loss has not been reflected in the unaudited pro forma condensed combined statement of operations as it is considered nonrecurring in nature.

The unaudited pro forma condensed combined balance sheet includes a $2 million income tax benefit, which will result from the sale of Alkali and this estimate is subject to change based on the final Alkali purchase price. Further, the deferred tax liabilities that have been identified to Alkali within the pro forma financial information could materially change and Tronox will continue to monitor any changes up through the closing date.

The following table shows the comparison of the Tronox pro forma statement of operations that excludes the results of Alkali without the adjustments for the acquisition of Cristal for the years ended December 31, 2016 and 2015 as if the Alkali Disposition had occurred on January 1, 2015:

 
Tronox
Pro Forma
December 31,
2016
Tronox
Pro Forma
December 31,
2015
Net sales
$
1,309
 
$
1,510
 
Cost of goods sold
 
(1,175
)
 
(1,487
)
Gross profit
 
134
 
 
23
 
Selling, general and administrative expenses
 
(185
)
 
(192
)
Restructuring expense
 
(1
)
 
(21
)
Loss from operations
 
(52
)
 
(190
)
Interest and debt expense, net
 
(184
)
 
(176
)
Other income (expense), net
 
(24
)
 
29
 
Loss before income taxes
 
(260
)
 
(337
)
Income tax (provision) benefit
 
116
 
 
(40
)
Net loss
 
(144
)
 
(377
)
Net income attributable to noncontrolling interest
 
1
 
 
11
 
Net loss attributable to Tronox Limited
$
(145
)
$
(388
)
Loss per share, basic and diluted (Note 9)
$
(1.25
)
$
(3.36
)
Weighted average shares outstanding, basic and diluted (in thousands):
 
116,161
 
 
115,566
 

   

7

Note 3 Presentation of Cristal Financial Information

For pro forma purposes for the year ended December 31, 2016, U.S. GAAP adjustments were made to the historical financial statements of Cristal, prepared under Saudi GAAP in SR, to align with Tronox’s U.S. GAAP accounting policies in USD. Such adjustments relate primarily to (1) income taxes, (2) exploration and evaluation costs, (3) long-lived asset impairment, (4) impairment reversals, (5) asset retirement obligations (“ARO”), (6) goodwill, (7) goodwill impairment and (8) employee terminal benefits. The U.S. GAAP adjustments and reclassifications column included in this note represents the aggregate presentation differences between Saudi GAAP and U.S. GAAP as well as the reclassifications necessary to present the Cristal financial information consistent with that of Tronox as further discussed in Note 4.

For pro forma purposes for the six months ended June 30, 2017, U.S. GAAP adjustments were made to the historical financial information of Cristal, prepared under IFRS in SR, to align with Tronox’s U.S. GAAP accounting policies in USD. Such adjustments relate primarily to (1) income taxes, (2) exploration and evaluation costs, (3) long-lived asset impairment, (4) impairment reversals, (5) ARO, (6) goodwill, (7) goodwill impairment and (8) employee terminal benefits which are discussed in further detail herein. The U.S. GAAP adjustments and reclassifications column included in this note represents the aggregate presentation differences between IFRS and U.S. GAAP as well as the reclassifications necessary to present Cristal’s financial information consistent with that of Tronox as further discussed in Note 4.

The historical balance sheet and statement of operations of Cristal for the six-month period ended June 30, 2017 and statement of operations for the year ended December 31, 2016 were translated for the purpose of preparing the pro forma financial information using the SR to USD exchange rate of 3.75. The Kingdom of Saudi Arabia is included within the Gulf Cooperation Council of countries who peg their national currency to the USD to avoid currency fluctuation. The SR is pegged to the USD at an exchange rate of 3.75, therefore, both the spot and average rate used for translation purposes below are the same.

The following table illustrates the impact of these adjustments and reclassifications in arriving at Cristal’s balance sheet at June 30, 2017, including the adjustments to exclude the assets and liabilities and related income and expenses, not conferring to Tronox as part of the transaction and the translation from SR to USD, as presented in the unaudited pro forma condensed combined balance sheet:

 
Cristal
Historical
IFRS as of
June 30,
2017
(SR)
U.S. GAAP
Adjustments &
Reclassifications
(SR)
Notes
Cristal Assets
& Liabilities
Excluded (SR)
Note (k)
Total
Cristal
(SR)
Total Cristal
Net Assets
Acquired
(USD)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
569
 
 
 
 
 
 
 
(569
)
 
 
 
 
Accounts receivable and prepayments
 
1,814
 
 
1
 
(a)
 
 
 
1,815
 
 
484
 
Due from related parties
 
215
 
 
 
 
 
(215
)
 
 
 
 
Inventories
 
2,015
 
 
 
 
 
 
 
2,015
 
 
537
 
Total current assets
 
4,613
 
 
1
 
 
 
(784
)
 
3,830
 
 
1,021
 
Property, plant and equipment
 
 
 
 
(56
)
(b)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
71
 
(c)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(56
)
(d)
 
 
 
 
 
 
 
 
 
 
 
6,241
 
 
(198
)
(e)
 
 
 
6,002
 
 
1,601
 
Investments
 
592
 
 
365
 
(f)
 
(952
)
 
5
 
 
1
 
Goodwill
 
 
 
 
10
 
(g)
 
 
 
 
 
 
 
 
 
 
 
645
 
 
67
 
(h)
 
(722
)
 
 
 
 
Other intangible assets
 
326
 
 
133
 
(c)
 
(459
)
 
 
 
 
Due from related parties
 
784
 
 
(15
)
(i)
 
(769
)
 
 
 
 
Deferred income tax
 
270
 
 
(20
)
(e)
 
 
 
250
 
 
67
 
Exploration and evaluation cost
 
368
 
 
(115
)
(b)
 
 
 
253
 
 
68
 
Other assets
 
118
 
 
 
 
 
 
 
118
 
 
31
 
Total assets
 
13,957
 
 
187
 
 
 
(3,686
)
 
10,458
 
 
2,789
 

   

8

 
Cristal
Historical
IFRS as of
June 30,
2017
(SR)
U.S. GAAP
Adjustments &
Reclassifications
(SR)
Notes
Cristal Assets
& Liabilities
Excluded (SR)
Note (k)
Total
Cristal
(SR)
Total Cristal
Net Assets
Acquired
(USD)
Liabilities and shareholders’ equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accounts payable and accruals
 
1,725
 
 
 
 
 
(76
)
 
1,649
 
 
440
 
Employees’ terminal benefits
 
3
 
 
 
 
 
 
 
3
 
 
1
 
Short term loans
 
29
 
 
 
 
 
 
 
29
 
 
8
 
Due to related parties
 
273
 
 
 
 
 
(273
)
 
 
 
 
Current portion of long term loans
 
92
 
 
 
 
 
 
 
92
 
 
24
 
Total current liabilities
 
2,122
 
 
 
 
 
(349
)
 
1,773
 
 
473
 
Long term loans, net
 
6,988
 
 
 
 
 
(6,766
)
 
222
 
 
59
 
Employees’ terminal benefits
 
304
 
 
 
 
 
 
 
304
 
 
81
 
Due to related parties
 
1,225
 
 
(756
)
(i)
 
(469
)
 
 
 
 
Deferred income tax liabilities
 
 
 
 
6
 
(a)
 
 
 
 
 
 
 
 
 
 
 
253
 
 
(4
)
(b)
 
 
 
255
 
 
68
 
Other liabilities
 
484
 
 
(266
)
(e)
 
 
 
218
 
 
58
 
Total liabilities
 
11,376
 
 
(1,020
)
 
 
(7,584
)
 
2,772
 
 
739
 
Shareholders’ equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital
 
2,363
 
 
 
 
 
3,898
 
 
6,261
 
 
1,669
 
Statutory reserve
 
507
 
 
 
 
 
 
 
507
 
 
135
 
Capital contributions
 
305
 
 
 
 
 
 
 
305
 
 
81
 
Retained earnings
 
(732
)
 
1,207
 
(j)
 
 
 
475
 
 
128
 
Other comprehensive income
 
23
 
 
 
 
 
 
 
23
 
 
6
 
Noncontrolling Interest
 
115
 
 
 
 
 
 
 
115
 
 
31
 
Total shareholders’ equity
 
2,581
 
 
1,207
 
 
 
3,898
 
 
7,686
 
 
2,050
 
Total liabilities and shareholders’ equity
 
13,957
 
 
187
 
 
 
(3,686
)
 
10,458
 
 
2,789
 

The following table illustrates the impact of these adjustments and reclassifications in arriving at Cristal’s statement of operations for the six month period ended June 30, 2017, including the adjustments to exclude the assets and liabilities and related income and expenses, not conferring to Tronox as part of the transaction and the translation from SR to USD as presented in the unaudited pro forma condensed combined statement of operations:

 
Cristal
Historical
IFRS Period
Ended
June 30,
2017
(SR)
U.S. GAAP
Adjustments &
Reclassifications
(SR)
Notes
Cristal Income
& Expenses
Excluded (SR)
Note (p)
Total
Cristal
(SR)
Total Cristal
Net Income
(USD)
Sales
 
3,810
 
 
 
 
 
 
 
 
 
3,810
 
 
1,017
 
Cost of sales
 
 
 
 
3
 
(l)
 
 
 
 
 
 
 
 
 
 
(3,115
)
 
(1
)
(m)
 
 
 
(3,113
)
 
(830
)
Gross profit
 
695
 
 
2
 
 
 
 
 
697
 
 
187
 
Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Selling and distribution
 
(217
)