A Brighter Future –
From the Ground Up
Tronox
2012 Annual Report
2012 Tronox Highlights
06/15/12 completed acquisition of exxaro mineral sands; paid $193 million in cash to shareholders
06/18/12 listed on the new york stock exchange
06/26/12 five-to-one share split approved
06/26/12 issuance of quarterly dividends declared
08/21/12 $900 million debt offering
09/27/12 stock repurchase of 12.6 million shares completed (10 percent of outstanding shares)
10/15/12 opening of new corporate offices in stamford, connecticut, usa
11/08/12 issuance of quarterly dividends declared
12/10/12 opening of new corporate offices in sandton, gauteng, south africa
2012 Pigment Sales Volume
by Geography
2012 Pigment Sales Volume
by End-Use Market
Tronox Locations Around
the World
3% Paper & Specialty
APAC
EMEA
Plastics
28%
24%
19%
48%
Americas
78%
Paints &
Coatings
Stamford, CT
Oklahoma City, OK
Henderson, NV
Hamilton, MS
Namakwa Sands, S.A.
Sandton, S.A.
Botlek,
the Netherlands
Shanghai, China
Singapore
Western Australia
KZN Sands, S.A.
On the Cover
Table of Contents
the perfect white. Titanium
ore mined by Tronox is processed by the
company into titanium dioxide (TiO2)
pigment and sold to our customers
to provide whiteness and opacity to
products such as paints, coatings,
plastics, papers, and other products.
Letter to Shareholders
Tronox Overview
The Tronox Values
Corporate Citizenship
Financials
Leadership
Shareholder Information
2
4
10
12
16
65
66
Double profits by 2017.
1,006 mil**
2017
$503 mil*
2012
tronox is positioned for growth as global markets
rebound. People around the globe are aspiring to improve
their standard of living. Expanding ranks of consumers
in the world’s cities and suburbs are driving demand for
housing, infrastructure, cars and new technologies such as
mobile phones and computers. These global megatrends
all share one requirement: the need for paints, plastics and
other products that rely on Tronox’s global product offering.
As the largest fully integrated producer of titanium ore and
titanium dioxide (TiO2) pigment, Tronox has the flexibility
and international platform to meet this expanding market
demand and reach customers around the world.
Armed with compelling strategic advantages, Tronox
has outlined a bold vision for growth. There are three
pillars of our strategy:
First, we are committed to profitable growth. When
opportunities arise, we will expand our own production and
pursue acquisitions and business partnerships in areas related
to our industry and that boost our role in global markets.
Second, we are strengthening our position as a low-cost
provider by implementing our vertical integration strategy,
as well as improving our processes and leveraging our
enhanced scale and technology.
Third, we are building a winning culture rooted in health
& safety, environmental stewardship and corporate citizen-
ship, teamwork, superior customer service, results-driven
performance, and continued investment in our people.
* Adjusted EBITDA FY2012 **Adjusted EBITDA FY2017
1
Dear Shareholder
2012 was an unusual year in an interesting time.
It was a year of great accomplishment, great promise and
great challenge for Tronox. Great accomplishment and
promise because we transformed and strengthened the
company by acquiring Exxaro’s mineral sands business;
great challenge because the titanium dioxide (TiO2)
pigment market went into deep retreat after consecutive
strong years.
The Exxaro Mineral Sands acquisition that we com-
pleted on June 15 has made Tronox the world’s largest
fully integrated producer of titanium feedstock and TiO2.
Tronox is the only major TiO2 producer with more
feedstock supply than our pigment production requires,
bolstering our competitive position and giving us flexibility
during the medium and longer term in which we believe
feedstock supply will be tight. There are three critical
advantages associated with our new structure. First, we
can capture margin wherever it appears on the value chain
by either selling our feedstock to third parties or using it
internally to lower costs and boost our pigment margins.
Second, we have the guaranteed ore supply to cement the
trust of our customers and enter into agreements with them
that many of our competitors can’t. And third, we have the
feedstock necessary to expand pigment production when
promising opportunities arise.
2012. Due to unfavorable legacy purchase agreements,
Tronox’s Mineral Sands division continued to sell portions
of its ore at prices significantly below current market value,
while on the other hand, our Pigment business continued
to consume feedstock at market-prices. Yet despite these
contractual impediments – which will turn into earnings
tailwinds as they unwind in 2013 – the comparatively strong
performance of our titanium feedstock business provided
a cushion against a historically poor year for the pigment
segment during the second half of 2012.
Management took a number of additional measures in
2012 that demonstrated our firm commitment to building
shareholder value. We listed our shares on the New York
Stock Exchange and implemented a 5-to-1 share split,
making our shares more accessible to a wider range of
shareholders. Between the merger consideration, share
buybacks and the adoption of a new dividend policy, we
returned almost $600 million in cash to shareholders.
In August, Tronox capitalized on a favorable borrowing
environment by completing a $900 million debt offering.
We used approximately $326 million of the proceeds to
repurchase just under 10 percent of our outstanding shares.
The remainder will help Tronox strike the balance between
managing risk, maximizing shareholder return and invest-
ing in our organization.
Our balanced composition reduces our cost structure
in a way that protects us against market weakness and gives
us better upside during periods of strength. Its benefits,
however, were limited in the third and fourth quarters of
Many of these accomplishments were overshadowed
by the rapid deterioration of the TiO2 market. Whereas
2011 was a year of rising pigment prices, robust demand
and soaring capacity utilization rates, 2012 was defined
2
t o m c a s e y
Chairman and
Chief Executive Officer
“Tronox goes forward with
tremendous confidence about
the future.”
by declining prices, soft demand and lower fixed-cost
absorption due to lower production levels. Paint companies
destocked large inventories that had been built up during
the first three quarters of 2011 while, to a more limited
extent, also reducing total TiO2 content in their products
(or blending higher-quality, more-expensive TiO2 with
less-expensive but lower-quality materials). Meanwhile,
on the macro side, recessionary conditions in Europe
combined with restrained growth in the United States
and China to suppress buying from our customers.
Tronox’s revenues for its pigment business were down
12 percent for the year, including a 26 percent year-over-
year reduction in the second half. Pigment-segment income
from operations for full-year 2012 fell to $57 million, an
83 percent drop from the prior year.
Heading into 2013, there are reasons for optimism but
it is too soon to assume we are in the clear. TiO2’s higher-
than-normal inventory levels need to be worked down,
plant utilization rates must increase and even then we are
subject to the risk that the U.S. and Chinese economies,
in particular, are slower to pick up as we expect. On the
positive side, however, pigment customers are widely
reported to have run down their inventories. Meanwhile,
the unwinding of Tronox’s legacy mineral sands sales
contracts means that we should have full flexibility to
optimize ore supply by the end of 2013.
GDP growth rate trends play a key role over the longer
term in the vitality of our industry, but we can’t control
them. What we can do is maximize our competitiveness,
become the lowest-cost producer and give ourselves the
best opportunity to grow and create long-term value for our
shareholders. In this capacity, I believe without question
that 2012 was a year of exceptional progress.
Tronox goes forward with tremendous confidence about
the future. We have a large cash position, a strong balance
sheet and a major strategic cost advantage. For these reasons
we have the ability to think big – and management has
responded by committing to a strong board-approved
strategic vision to double our profits by 2017. We will
accomplish this goal through a disciplined focus on cost
reductions, operating efficiencies and diligent cash deploy-
ment into value-creating opportunities, whether in enhanced
investment in our existing assets or acquiring other assets.
In closing, I thank my almost 4,000 colleagues around
the world for their many contributions and commitment to
making the new Tronox an extraordinary company.
I also want to thank our customers and our shareholders
for the trust and confidence they place in us. We look
forward to working with you as we build a brighter future –
from the ground up.
t o m c a s e y
Chairman and Chief Executive Officer
February 28, 2013
3
Dig it.
Separate it.
Process it.
Make it bright.
t r o n o x h a s c r e a t e d a n e w m a r k e t p a r a d i g m
i n t h e p i g m e n t a n d m i n e r a l s a n d s i n d u s t r i e s .
We acquired Exxaro’s mineral sands businesses in June
2012, creating a strategic and competitive force in both
the upstream and downstream segments of the industry.
We are a value-creating company with a strong position
in the mineral sands and pigment businesses, working
together to lower our cost base and capture margin for
our shareholders at every link in the supply chain.
We extract titanium-rich ore from our Northern
Operations mine in Western Australia and our KZN Sands
and Namakwa Sands mines in South Africa. We process
the raw material to produce ilmenite, natural and synthetic
rutile, and titanium slag, as well as zircon, pig iron, and
activated carbon. In this process, we return the remaining
minerals to the mining sites and fully restore the natural
habitat. The titanium feedstock is transferred to our three
chloride-based pigment plants in Hamilton, Mississippi,
USA; Botlek, the Netherlands; and Kwinana, Western
Australia. We sell the zircon, pig iron, staurolite and
activated carbon to third parties as well as the long portion
of titanium feedstock.
Tronox TiO2 pigments and other mineral products are
shipped to approximately 1,000 customers in more than
90 countries worldwide.
4
5
Hard Rock Sand DepositsIlmenite Leucoxene Rutile ZirconTitanium Slag Syn-thetic RutileHigh Purity Pig Iron Chloride TiO2 ProcessSulfate TiO2 Pro-cess Titanium Tet-rachloride TiCl4White Pigment Activated Carbon StauroliteFoundries Paints, Plastics, Paper, Inks Aerospace Welding Electrode Flux Opacifiers Galzers/Refractories The Tronox Advantage
full integration means greater growth potential,
earnings stability and revenue balance. We believe
that most forms of titanium feedstock used in the pigment
production process will be in limited supply over the
medium to longer term. Tronox is protected against price
spikes and supply shortages because it is the only major
titanium dioxide pigment manufacturer in the world that
can internally supply 100 percent of its feedstock demand.
On the pigment side of the business, this full integration
is a key differentiator and gives us unique advantages.
It strengthens our margins and allows us to compete in a
low-cost market because we have access to competitively
priced and quality feedstock. Customers recognize the value
in this supply and demand stability and understand that we
can provide greater long-term supply assurance than any
of our competitors. And since we mine more titanium ore
than we consume, we have the ability to expand pigment
capacity without sourcing feedstock from another company.
Tronox’s experienced marketing and supply-chain
management teams gauge the marketplace to find the best
ways to optimize our ore usage. We have the option to sell
excess ore at competitive market prices to other pigment
producers, giving us additional margin strength.
In 2012 we began to validate the differentiating premise
of vertical integration. Demand for high-grade chloride
feedstock such as natural rutile and synthetic rutile (SR)
sagged as the pigment industry reduced operating rates.
Meanwhile, demand for titanium slag remained relatively
strong. Tronox, being the only large-scale enterprise that
produces and consumes slag and SR, was able to sell slag
but use all of its SR internally. This flexibility enabled the
company to capture the sales margin on the pigment side,
while also selling chloride- and sulfate-grade slag to other
pigment manufacturers at relatively strong margins.
6
A Growth Opportunity
1980 – 2012 GDP vs. TiO2 Demand
)
t
m
s
’
0
0
0
(
d
n
a
m
e
D
2
O
T
i
l
a
b
o
G
l
6000
5000
4000
3000
2000
1000
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
GDP, US$ Constant Prices (Source: IMF, Company and TZMI)
TiO2 Consumption per Capita and Growth Rates
)
a
t
i
p
a
c
/
g
k
(
n
o
i
t
p
m
u
s
n
o
C
2
O
T
i
2.76
2.63
4.88
5
4
3
2
1
0
2.6 Billion people in China and India
0.25kg per capita increase in consumption in these
two countries over 3 years equates to 650,000MT
increase in demand.
2.05
1.77
1.66
1.57
Emerging Markets
1.12
0.93
0.92
Germany
Australia
US
Malaysia
Poland
Japan
Turkey
UK
Brazil
China
’04–’11
CAGR
4%
5%
-4%
>10%
5%
-1%
9%
-8%
6%
8%
(Source: Company and TZMI estimates)
0.64
0.60
0.42
0.17
South
Africa
0%
Russia
Vietnam
India
8%
>10%
>10%
7
g l o b a l tio 2 p i g m e n t
d e m a n d historically tracks
global GDP growth.
t h e t io 2 m a r k e t presents
a favorable long-term supply/
demand dynamic as pigment
consumption growth is expected
from emerging markets. TiO2
usage per capita in emerging
markets such as China and India
is significantly below that seen
in most western countries.
Due to the size of these markets,
an even modest increase in
GDP will increase demand for
pigment signifantly.
Tronox: end-to-end
the tronox value chain As the largest fully integrated
producer of mineral sands and titanium dioxide, Tronox
extracts maximum value by controlling the pigment process
from start to finish. The company’s supply-chain manage-
ment team oversees the related value-chain process and
coordinates with business-unit stakeholders to ensure
efficiency and maximize Tronox’s financial strength.
2.
3.
Mining and
rehabilitation
Tronox performs dredge
mining, dry mining,
hydraulic mining or a
combination of these
processes at its mines at
Cooljarloo, Western
Australia, and KZN Sands
and Namakwa Sands in
South Africa. After mining,
the landscape is fully
rehabilitated.
Wet concentration
The sands extracted from
the mines are put through a
series of mineral separation
processes known as
beneficiation. In this first
phase, a wet concentrator
produces heavy mineral
concentrate.
4.
Dry mineral
separation
5.
Upgrading
Heavy mineral concentrate
is transported to a mineral
separation plant (MSP) for
dry beneficiation. At the
MSP Tronox uses magnetic
and electrostatic processes
to separate the various
minerals. Ilmenite is
recovered from the magnetic
stream. The non-magnetic
stream is separated into
conductive and non-con-
ductive streams. Zircon
and staurolite are recovered
from the non-conductive
material, while rutile and
leucoxene are produced
from the conductive
material. In Australia, the
MSP is called a dry mill.
Ilmenite is transferred from
the MSP to an upgrading
site to produce a higher
titanium-content ore. In
South Africa, lower TiO2-
graded ilmenite is smelted
through an electric arc
furnace to produce slag.
In Australia, higher TiO2-
graded ilmenite is put
through a reduction process
in a kiln to make synthetic
rutile (SR). After the
upgrading process is
complete, the ore (slag
or SR) is ready to be
transported to pigment
customers.
1.
Exploration
To meet future feedstock
needs and take advantage
of our vertical integration,
Tronox continuously seeks
new mine sites through our
mineral sands exploration
programs in Australia,
South Africa and elsewhere.
Our most notable project
is the development of the
Fairbreeze mine at the KZN
Sands operation in South
Africa. Fairbreeze will serve
as a replacement source of
feedstock production for
KZN’s Hillendale mine, which
is expected to end production
operations in 2013. Depending
on the timing of regulatory
approval and subsequent
construction, Fairbreeze
could be operational in the
first half of 2015 and have a
life expectancy of approxi-
mately 15 years.
8
6.
7.
Inbound/outbound
logistics
Chlorination and
purification
8.
Oxidation
TiCl4 is reacted with
oxygen to produce raw
TiO2 pigment.
With assistance from the
company’s supply-chain
management team, Tronox’s
Mineral Sands sales team
works with its Pigment ore
sourcing team to determine
whether to use the ore
internally or to sell it to
third parties. Tronox
determines the optimal
shipping method to meet
business needs.
After arriving at any one of
three Tronox TiO2 pigment
plants – located in Hamilton,
MS, USA; Botlek, the
Netherlands; and Kwinana,
Western Australia – feed-
stock is blended to formulate
the optimal production
mix. It is then processed
in a chlorinator to create
titanium tetrachloride
(TiCl4). Non-valuable
minerals and other
impurities are removed in
a purification process.
9.
10.
Outbound logistics
Tronox’s supply-chain
management team arranges
the transport of pigment
outbound to customers
around the world.
Finishing and
surface treatment
Raw TiO2 pigment is
finished and treated to
create saleable finished
goods pigment. This
phase is where pigment is
customized for customer-
specific applications
according to their unique
needs. Differentiators
include particle sizes,
surface coatings and dry
or slurry formulations.
9
The Tronox Values
t r o n o x o p e r a t e s i n 1 8 l o c a t i o n s a r o u n d
t h e w o r l d . We come from different countries and
diverse backgrounds, yet we are united by common values
that serve as the heartbeat of our company. Together, we
embrace challenges and take responsibility for our commu-
nities, our customers and our performance. We are a team
of committed problem solvers, 4,000 links in an unbroken
chain that brings to market the high-quality products the
global economy needs. Our values elevate Tronox and our
customers and shareholders onto a higher plane, creating
a brighter and more sustainable future for the world.
10
We work safely – all the time
We believe passionately that everyone at Tronox should
experience a safe and healthy workplace. We proactively
identify and manage risk, conduct ourselves responsibly,
exercise good judgment and take responsibility for
our actions.
We care for our environment and communities
We are responsible citizens, as a company and as individuals.
We are stewards of our environment and we are active in
our communities.
People are our most important resource
We create opportunities for development and act intention-
ally to create a diverse and supportive work environment.
Each of us is committed to personal growth and develop-
ment, embraces change, and learns from our successes and
mistakes in order to create a high-performance culture.
We will win – as a team
We collaborate effectively, communicate openly,
engage honestly, treat others respectfully, and make
informed decisions.
It really is all about the customer
Our collective purpose is to create and sell differentiated
and competitive products and services, and to make it easy
for our customers – internal and external – to do business
with us.
We measure, own and deliver results
We encourage creativity and measure results. We set
clearly defined and challenging objectives; we own those
objectives, and we deliver results, with a relentless focus
on operational excellence.
11
Health & SafetyResponsibilityPeopleTeamwork CustomersResults Corporate Citizenship
at tronox, corporate citizenship is an integral
part of our global business. We believe that our
business can and should play an important role in improv-
ing the quality of life in the communities in which we
operate. All around the world we are continually challeng-
ing ourselves to promote sustainable growth, employ green
technologies, be transparent in our business operations,
and make positive contributions in the communities where
we live and work.
The Tronox corporate citizenship strategy is defined
by these key pillars:
• Sustainability/Environment: We understand that our
shareholders and local communities both win when we
build sustainable business operations. Our current growth
enables future growth when we invest in programs that
are consistent with a recognition of our environmental
stewardship for the land from which we obtain our mineral
sands and empower the communities in which we operate
We believe that these efforts promote the long-term
• Education: We are an engineering and science-based
interests of all our stakeholders, including employees,
customers, business partners, investors, local communities,
government officials, and the mining and minerals indus-
tries at large.
business – we are eager to share our expertise and resources
to advance education in these fields
• Equal Rights & Diversity: We are a global business with a
diverse workforce – we are advocates for nondiscrimination
in the workplace and community
• Health & Wellness: The physical welfare of our employees
and community are a core value of Tronox – we actively
work to increase awareness and sponsor programs that
reflect this value
The adjacent page provides an overview of four of the
many corporate citizenship programs Tronox was proud to
support in 2012.
12
McCaw School of Mines
SoundWaters
Tronox’s Henderson, Nevada, USA plant has been a longtime sponsor
of the McCaw School of Mines. The McCaw School of Mines is the only
simulated mine of its kind in the state of Nevada, and teaches students
math, science and the history of the mining industry in a fun way, while
raising awareness about the dangers of vacant mines. In addition to financial
support, Tronox engineers volunteer as teachers and student mentors.
In 2012, Tronox became a corporate sponsor of SoundWaters, the leading
environmental education organization on Long Island Sound based in
Fairfield County, Connecticut, USA. Through experiential education
SoundWaters provides hands-on science enrichment to support and amplify
classroom curricula for more than 25,000 students from pre-school through
high school.
Night Stalk
IMSTUS
Tronox Western Australia has partnered with the Perth Zoo since 2003.
Night Stalk is a nationwide program in Australia promoting environmental
awareness and sustainability. The initiative encourages the public to spot,
record and report on the number and variety of wildlife they discover when
exploring local bush habitats after dark. This event is held annually and
collated data is made available online for use by conservation agencies.
In 2012, Tronox hosted four Night Stalks across Western Australia.
For more than 10 years, Tronox Namakwa Sands has partnered with
the Institute for Mathematics and Science Tuition of the University of
Stellenbosch (IMSTUS) to operate a satellite campus in Vredendal, South
Africa. The programs sponsored by Tronox support development of skills
and capacity in math and science teaching, critical areas in which South
Africa underperforms measured in world standards. Each year over the last
decade, an average of eight schools in the Matzikama area participated in
student mathematics outreach workshops, science road shows and a popular
physics science program, and 22 schools joined teacher workshops. In 2011
the company received the University’s Vice Chancellor’s Award for its
long-standing contributions and support towards the IMSTUS project.
13
Economic
in 2012, tronox generated $2.3 billion
in economic value to local communities
worldwide. Tronox strives to engage local business
partners in every market in which it operates. In addition,
the company is committed to working with women and
minority business owners to the greatest extent possible.
For the past three years, Tronox KZN Sands in
KwaZulu-Natal, South Africa, has supported the creation
of Gabadela Laundry Services, a locally owned and
operated Black Economic Empowerment (BEE) company.
Gabadela employs 14 local workers onsite at KZN’s
Central Processing Complex and has diversified to
providing services to a number of other businesses in
the KwaZulu-Natal region.
Tronox’s new Fairbreeze mine in northern KwaZulu-
Natal, South Africa, will preserve more than 1,000
permanent and contractor positions and is forecast to
create an additional 1,000 indirect jobs during the multi-
year construction phase of the project. Approximately
$64 million will be spent annually on services and products,
with more than half spent with BEE companies.
(Left to right) Trevor Arran, SVP & President Tronox Mineral
Sands Division; Sam Mthembu, owner Gabadela Laundry
Services; Tom Casey, Chairman & CEO, Tronox Limited;
Neels Oosterhuis, General Manager, KZN Sands.
14
Environment
environmental sustainability is an integral
component of our work in all aspects of our
business operations. At our mines in South Africa and
Western Australia, this commitment includes the protection
of native flora and fauna, energy and water conservation,
and the complete rehabilitation of the sites. The company
has been recognized by local and national governments and
numerous environmental organizations for its sustainable
business operations.
At our mines, the top soil and native plants are carefully
removed and preserved during the mineral excavations.
Roughly 5-10 percent of the soil harvested from our mines
is useable ore. The rest of the soil is returned and the
landscape is restored to its natural contour. The area is
rehabilitated with the original top soil and either native
flora is replanted, or the site is used by local farmers for
cash-generating agricultural crops. In 2012 our three mines
spent an aggregate $6.6 million on rehabilitating a total
of 366 hectares (904 acres) of mined land.
Since 2006, our Botlek operation in the Netherlands has
reduced suspended solids in waste water from 5.4 metric
tons per day (MT/day) in 2006 to an average of 1.4 MT/day
in 2012. This reduction took place over a period in which
pigment production increased by 11 percent. Our goal is
to lower this emission to less than 1 MT/day. In addition,
Botlek has launched a pilot program to re-use residual solid
waste as an alternative feedstock for building materials,
thereby reducing the need for primary materials and also
reducing CO2 emissions.
1
3
1
3
2
The progression of site
rehabilitation at Tronox’s
Hillendale Mine in KwaZula
Natal, South Africa.
2
Tronox Northern
Operations mine in Western
Australia: before mining,
during mining, and after
rehabilitation.
Botlek Solid Waste Generation
Waste MT/day
6.0
5.0
4.0
3.0
2.0
1.0
0
2006
2007
2008
2009
2010
2011
2012
15
16
Tronox Financials
Table of Contents
Consolidated Statements of Operations
Consolidated Statements of
Comprehensive Income (Loss)
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders’ Equity
Notes to Consolidated Financial Statements
Independent Auditors’ Report
Board of Directors and Executive Management
Shareholder Information
18
19
20
21
22
24
64
65
66
17
Consolidated Statements of
Operations
tronox limited
(Millions of dollars, except share and per share data)
Net Sales
Cost of goods sold
Gross Margin
Selling, general and administrative expenses
Litigation/arbitration settlement
Provision for environmental remediation and restoration, net of reimbursements
Income from Operations
Interest and debt expense
Other income (expense)
Gain on bargain purchase
Reorganization income (expense)
Income from Continuing Operations before Income Taxes
Income tax benefit (provision)
Income from Continuing Operations
Income from discontinued operations
Net Income
Net loss attributable to noncontrolling interest
Net Income attributable to Tronox Limited Shareholders
Earnings per Share, Basic and Diluted: (1)
Basic
Continuing operations
Discontinued operations
Earnings per share
Diluted
Continuing operations
Discontinued operations
Earnings per share
Successor
Predecessor
Year Ended
December 31,
2012
Eleven Months
Ended
December 31,
2011
One Month
Ended
January 31,
2011
Year Ended
December 31,
2010
$ 1,832
(1,568)
264
(239)
—
—
25
(65)
(7)
1,055
—
1,008
125
1,133
—
1,133
1
$ 1,134
$ 11.37
—
$ 11.37
$ 11.10
—
$ 11.10
$ 1,543
(1,104)
$ 108
(83)
439
(152)
10
5
302
(30)
(10)
—
—
262
(20)
242
—
242
—
242
$
$
3.22
—
$
3.22
$
3.10
—
$
3.10
25
(5)
—
—
20
(3)
2
—
613
632
(1)
631
—
631
—
$ 631
$ 15.28
—
$ 15.28
$ 15.25
—
$ 15.25
$ 1,218
(996)
222
(59)
—
47
210
(50)
(8)
—
(145)
7
(2)
5
1
6
—
6
$
$ 0.11
0.03
$ 0.14
$ 0.11
0.03
$ 0.14
Weighted Average Shares Outstanding (in thousands):
Basic
Diluted
98,985
101,406
74,905
78,095
41,311
41,399
41,232
41,383
(1) On June 26, 2012, the Board of Directors of Tronox Limited approved a 5-to-1 share split for holders of its Class A ordinary shares and Class B ordinary shares at the close of business
on July 20, 2012, by issuance of four additional shares for each share of the same class by way of bonus issue. All references to number of shares and per share data in the Successor’s
consolidated financial statements have been adjusted to reflect the share split, unless otherwise noted. See Note 15 for additional information regarding the Company’s share split.
See notes to consolidated financial statements.
18
Consolidated Statements of
Comprehensive Income (Loss)
tronox limited
Successor
Predecessor
Year Ended
December 31,
2012
Eleven Months
Ended
December 31,
2011
One Month
Ended
January 31,
2011
Year Ended
December 31,
2010
$ 1,133
$
242
$ 631
$
6
10
(6)
1
(48)
—
—
—
—
(38)
$ 1,095
(51)
—
—
—
—
(57)
—
—
—
(1)
—
—
$
185
$ 631
$
(10)
(19)
3
12
(14)
5
(23)
(17)
1
(1)
—
—
—
—
—
—
—
—
—
—
$ 1,095
$
185
$ 631
$
(17)
(Millions of dollars)
Net Income:
Net income
Other Comprehensive Income (Loss):
Foreign currency translation adjustments
Retirement and postretirement plans:
Actuarial losses, net of taxes
Amortization of actuarial gains, net of taxes
Prior service credit, net of taxes
Amortization of prior service cost, net of taxes
Termination of nonqualified benefits restoration plan, net of taxes
Other comprehensive income (loss)
Total Comprehensive Income (Loss)
Comprehensive Income (Loss) Attributable to
Noncontrolling Interest:
Net loss
Foreign currency translation adjustments
Comprehensive income (loss) attributable to
noncontrolling interest
Comprehensive Income (Loss) Attributable to
Tronox Limited Shareholders
See notes to consolidated financial statements
19
Consolidated
Balance Sheets
tronox limited
(Millions of dollars, except share and per share data)
December 31,
Successor
2012
2011
Current Assets
Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts of $3 and less than $1
Inventories
Prepaid and other assets
Deferred income taxes
Total Current Assets
Noncurrent Assets
Property, plant and equipment, net
Mineral leaseholds, net
Intangible assets, net
Long-term deferred tax assets
Other long-term assets
Total Assets
Current Liabilities
Accounts payable:
Third party
Related party
Accrued liabilities
Short-term debt
Long-term debt due within one year
Income taxes payable
Current deferred income taxes
Total Current Liabilities
Noncurrent Liabilities
Long-term debt
Pension and postretirement healthcare benefits
Asset retirement obligations
Deferred income taxes
Other
Total Noncurrent Liabilities
Contingencies and Commitments
Shareholders’ Equity
Tronox Limited ClassA ordinary shares, par value $0.01 –
63,413,288 shares issued and 62,103,989 shares outstanding at December 31, 2012 (1)
Tronox Limited Class B ordinary shares, par value $0.01 –
51,154,280 shares issued and outstanding at December 31, 2012 (1)
Tronox Incorporated common shares, par value $0.01 – 100,000,000 shares authorized,
77,034,015 shares issued and 75,383,455 shares outstanding at December 31, 2011 (1)
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Tronox Incorporated treasury shares, at cost – 472,565 shares at December 31, 2011 (1)
Total Shareholders’ Equity
Noncontrolling interest
Total Equity
Total Liabilities and Shareholders’ Equity
$ 716
391
914
38
114
2,173
1,423
1,439
326
91
59
$ 5,511
$ 189
—
209
30
10
24
5
467
1,605
176
106
222
53
2,162
1
—
—
1,429
1,314
(95)
—
2,649
233
2,882
$ 5,511
$ 154
278
311
22
4
769
504
38
325
9
12
$ 1,657
$ 127
74
46
—
6
28
—
281
421
142
29
19
13
624
—
—
—
579
242
(57)
(12)
752
—
752
$ 1,657
(1) On June 26, 2012, the Board of Directors of Tronox Limited approved a 5-to-1 share split for holders of its Class A ordinary shares and Class B ordinary shares at the close of business
on July 20, 2012, by issuance of four additional shares for each share of the same class by way of bonus issue. All references to number of shares and per share data in the Successor’s
consolidated financial statements have been adjusted to reflect the share split, unless otherwise noted. See Note 15 for additional information regarding the Company’s share split.
See notes to consolidated financial statements.
20
Consolidated Statements of
Cash Flows
tronox limited
Successor
Predecessor
Year Ended
December 31,
2012
Eleven Months
Ended
December 31,
2011
One Month
Ended
January 31,
2011
Year Ended
December 31,
2010
$ 1,133
$
242
$ 631
$
6
211
(162)
31
10
5
(1,055)
—
201
—
(31)
83
(222)
16
(107)
2
3
118
(166)
(1)
115
—
(52)
(585)
1,707
(38)
(193)
(326)
(15)
(61)
1
—
—
490
6
562
154
716
$
79
4
14
1
4
—
—
(7)
—
(8)
(58)
(64)
28
(28)
26
30
263
(133)
—
—
1
(132)
(45)
14
(5)
—
—
—
—
1
—
—
(35)
(3)
93
61
4
1
—
—
—
—
—
—
(954)
—
(10)
(15)
36
24
—
—
(283)
(6)
—
—
—
(6)
—
25
(2)
—
—
—
—
—
185
—
208
—
(81)
142
$
154
$
61
$
$
34
26
$
$
29
8
$
$
3
—
50
(5)
1
9
(11)
—
(49)
5
(37)
(7)
(11)
(7)
20
100
(1)
14
77
(45)
—
—
—
(45)
(425)
425
(15)
—
—
—
—
—
—
(17)
(32)
(1)
(1)
143
$ 142
$
$
40
6
21
(Millions of dollars)
Cash Flows from Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation, depletion and amortization
Deferred income taxes
Share-based compensation expense
Amortization of debt issuance costs and discount on debt
Pension and postretirement healthcare benefit expense (income), net
Gain on bargain purchase
Provision for environmental remediation and restoration,
net of reimbursements
Other noncash items affecting net income
Reorganization items
Contributions to employee pension and postretirement plans
Changes in assets and liabilities (net of effects of acquisition):
(Increase) decrease in accounts receivable
(Increase) decrease in inventories
(Increase) decrease in prepaids and other assets
Increase (decrease) in accounts payable and accrued liabilities
Increase (decrease) in taxes payable
Other, net
Cash provided by (used in) operating activities
Cash Flows from Investing Activities:
Capital expenditures
Cash paid in acquisition of minerals sands business
Cash received in acquisition of minerals sands business
Proceeds from the sale of assets
Cash used in investing activities
Cash Flows from Financing Activities:
Reductions of debt
Proceeds from borrowings
Debt issuance costs and commitment fees
Merger consideration
ClassA ordinary share repurchases
Shares purchased for the Employee Participation Plan
Dividends paid
Proceeds from conversion of warrants
Proceeds from rights offering
Fees related to rights offering and other related debt costs
Cash provided by (used in) financing activities
Effects of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents at End of Period
Supplemental Cash Flow Information:
Interest paid
Net income taxes paid
See notes to consolidated financial statements.
Consolidated Statements of
Shareholders’ Equity
tronox limited
Tronox
Limited Class A
Ordinary Shares
Tronox
Limited Class B
Ordinary Shares
Tronox
Incorporated
Common Shares
Capital in Excess
of par Value
Retained Earnings
Treasury Shares
Shareholders’ Equity
Interest
Total Equity
Total
Non-controlling
Accumulated Other
Comprehensive
Income (Loss)
$ —
—
—
—
—
—
—
—
1
—
—
—
—
—
$ 1
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
$ —
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
$ —
$ 579
—
—
—
(193)
1,370
5
(15)
—
—
(326)
1
27
(19)
$ 1,429
(Millions of dollars)
Successor: Balance at December 31, 2011
Fair value of noncontrolling interest on Transaction Date
Net income (loss)
Other comprehensive income
Merger consideration paid
Issuance of Tronox Limited shares
Share-based compensation
Shares purchased for the Employee Participation Plan
Issuance of Tronox Limited shares in share-split
ClassA and Class B share dividend declared
Tronox Limited Class A shares repurchased
Warrants exercised
Tronox Incorporated share-based compensation
Tronox Incorporated common shares vested/cancelled
Balance at December 31, 2012
(1) On June 26, 2012, the Board of Directors of Tronox Limited approved a 5-to-1 share split for holders of its Class A ordinary shares and Class B ordinary shares at the close of business on
July 20, 2012, by issuance of four additional shares for each share of the same class by way of bonus issue. All references to number of shares and per share data in the Successor’s
consolidated financial statements have been adjusted to reflect the share split, unless otherwise noted. See Note 15 for additional information regarding the Company’s share split.
Tronox
Incorporated
Common Shares
Tronox Class A
Common Shares
Tronox Class B
Common Shares
Capital in
Excess of
par Value
Accumulated Other
Comprehensive
Income (Loss)
Treasury Shares
Total
Shareholders’
Equity
$ —
—
—
$ —
—
—
—
$ —
$ —
—
—
—
—
—
$ —
$ —
—
—
$ —
—
—
—
$ —
$ —
—
—
—
—
—
$ —
(Millions of dollars)
Predecessor: Balance at December 31, 2009
Net income
Other comprehensive loss
Predecessor: Balance at December 31, 2010
Net income
Fresh-start reporting adjustments:
Elimination of predecessor shares, capital in excess of par value, and accumulated deficit
Issuance of new shares
Predecessor: Balance at January 31, 2011
Successor: Balance at February 1, 2011
Net income
Other comprehensive income
Shares withheld for claims
Warrants exercised
Share-based compensation
Successor: Balance at December 31, 2011
See notes to consolidated financial statements.
22
$ 242
—
1,134
—
—
—
—
—
(1)
(61)
—
—
—
—
$ 1,314
$ —
—
—
$ —
—
—
—
$ —
$ —
—
—
—
—
—
$ —
$ (57)
—
—
(38)
—
—
—
—
—
—
—
—
—
—
$ (95)
$ 496
—
—
$ 496
—
(496)
564
$ 564
$ 564
—
—
—
1
14
$ 579
$ (12)
—
—
—
—
—
—
—
—
—
—
—
(7)
19
$ —
Retained
Earnings
$ (1,134)
$ (1,128)
6
—
631
497
—
—
—
—
—
$ —
$ —
242
$
242
$ 752
—
1,134
(38)
(193)
1,370
5
(15)
—
(61)
(326)
1
20
—
$ 2,649
$ 32
—
(23)
$ 9
—
(9)
—
$ —
$ —
—
(57)
—
—
—
$ (57)
$ —
233
(1)
1
—
—
—
—
—
—
—
—
—
—
$ 233
$
(7)
—
—
$
(7)
—
7
—
$ —
$ —
—
—
—
(7)
(5)
$ (12)
$ 752
233
1,133
(37)
(193)
1,370
5
(15)
—
(61)
(326)
1
20
—
$ 2,882
$ (613)
6
(23)
$ (630)
631
(1)
564
$ 564
$ 564
242
(57)
(7)
1
9
$ 752
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
$ —
$ —
—
—
$ —
—
—
—
$ —
$ —
—
—
—
—
—
$ —
$ 579
—
—
—
(193)
1,370
5
(15)
—
—
(326)
1
27
(19)
$ 1,429
$ —
—
—
$ —
—
—
—
$ —
$ —
—
—
—
—
—
$ —
Elimination of predecessor shares, capital in excess of par value, and accumulated deficit
(Millions of dollars)
Predecessor: Balance at December 31, 2009
Net income
Other comprehensive loss
Predecessor: Balance at December 31, 2010
Net income
Fresh-start reporting adjustments:
Issuance of new shares
Predecessor: Balance at January 31, 2011
Successor: Balance at February 1, 2011
Net income
Other comprehensive income
Shares withheld for claims
Warrants exercised
Share-based compensation
Successor: Balance at December 31, 2011
See notes to consolidated financial statements.
(Millions of dollars)
Successor: Balance at December 31, 2011
Fair value of noncontrolling interest on Transaction Date
Net income (loss)
Other comprehensive income
Merger consideration paid
Issuance of Tronox Limited shares
Share-based compensation
Shares purchased for the Employee Participation Plan
Issuance of Tronox Limited shares in share-split
ClassA and Class B share dividend declared
Tronox Limited Class A shares repurchased
Warrants exercised
Tronox Incorporated share-based compensation
Tronox Incorporated common shares vested/cancelled
Balance at December 31, 2012
$ —
—
—
—
—
—
—
—
1
—
—
—
—
—
$ 1
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
$ —
(1) On June 26, 2012, the Board of Directors of Tronox Limited approved a 5-to-1 share split for holders of its Class A ordinary shares and Class B ordinary shares at the close of business on
July 20, 2012, by issuance of four additional shares for each share of the same class by way of bonus issue. All references to number of shares and per share data in the Successor’s
consolidated financial statements have been adjusted to reflect the share split, unless otherwise noted. See Note 15 for additional information regarding the Company’s share split.
Tronox
Limited Class A
Ordinary Shares
Tronox
Limited Class B
Ordinary Shares
Tronox
Incorporated
Common Shares
Capital in Excess
of par Value
Retained Earnings
Accumulated Other
Comprehensive
Income (Loss)
Treasury Shares
Total
Shareholders’ Equity
Non-controlling
Interest
Total Equity
$ 242
—
1,134
—
—
—
—
—
(1)
(61)
—
—
—
—
$ 1,314
$ (57)
—
—
(38)
—
—
—
—
—
—
—
—
—
—
$ (95)
$ (12)
—
—
—
—
—
—
—
—
—
—
—
(7)
19
$ —
$ 752
—
1,134
(38)
(193)
1,370
5
(15)
—
(61)
(326)
1
20
—
$ 2,649
$ —
233
(1)
1
—
—
—
—
—
—
—
—
—
—
$ 233
$ 752
233
1,133
(37)
(193)
1,370
5
(15)
—
(61)
(326)
1
20
—
$ 2,882
Tronox
Incorporated
Common Shares
Tronox Class A
Common Shares
Tronox Class B
Common Shares
Capital in
Excess of
par Value
Retained
Earnings
Accumulated Other
Comprehensive
Income (Loss)
Treasury Shares
Total
Shareholders’
Equity
$ —
—
—
$ —
—
—
—
$ —
$ —
—
—
—
—
—
$ —
$ 496
—
—
$ 496
—
(496)
564
$ 564
$ 564
—
—
—
1
14
$ 579
$ (1,134)
6
—
$ (1,128)
631
497
—
$ —
$ —
242
—
—
—
—
$
242
$ 32
—
(23)
$ 9
—
(9)
—
$ —
$ —
—
(57)
—
—
—
$ (57)
$
(7)
—
—
$
(7)
—
7
—
$ —
$ —
—
—
(7)
—
(5)
$ (12)
$ (613)
6
(23)
$ (630)
631
(1)
564
$ 564
$ 564
242
(57)
(7)
1
9
$ 752
23
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
74% of its South African mineral sands operations, including
its Namakwa and KZN Sands mines, separation facilities
and slag furnaces, along with its 50% share of the Tiwest
Joint Venture (together the “mineral sands business”)
(the “Transaction”). On June 15, 2012, the date of the
Transaction (the “Transaction Date”), the existing business
of Tronox Incorporated was combined with the mineral
sands business in an integrated series of transactions
whereby Tronox Limited became the parent company
in a tax inversion transaction.
On May 4, 2012, Tronox Limited registered Class A
ordinary shares (“Class A Shares”) to be issued to share-
holders of Tronox Incorporated in connection with the
completion of the Transaction. On the Transaction Date,
Tronox Limited issued 15,413,083 Class A Shares to
shareholders in Tronox Incorporated. In addition, on
the Transaction Date, Tronox Limited issued 9,950,856
Class B ordinary shares (“Class B Shares”) to Exxaro and
one of its subsidiaries in consideration for the mineral sands
business. Immediately following the Transaction, Tronox
Incorporated shareholders and Exxaro held approximately
60.8% and 39.2%, respectively, of the voting securities
of Tronox Limited. Under the terms of the Transaction
Agreement, Exxaro agreed that for a three-year period after
the completion of the Transaction, 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.
On June 26, 2012, the Board of Directors of Tronox
Limited (the “Board”) approved a 5-to-1 share split for
holders of its Class A Shares and Class B Shares at the close
of business on July 20, 2012, by issuance of four additional
shares for each share of the same class by way of bonus
issue. All references to the number of shares and per share
data in the consolidated financial statements and notes
thereto have been adjusted to reflect the share split, unless
otherwise noted or as the context otherwise acquires.
See Note 15 for additional information regarding the
Company’s share split.
During 2012, the Company repurchased 12,626,400
Class A Shares, which was approximately 10% of the
total voting securities. During October 2012, Exxaro
purchased 1,400,000 Class A Shares in market purchases.
At December 31, 2012, Exxaro held approximately 44.6%
of the voting securities of Tronox Limited.
1The Company
Tronox Limited, a public limited company registered
under the laws of the State of Western Australia,
Australia, and its subsidiaries (collectively referred to as
“Tronox” or “the Company”) is a global leader in the
production and marketing of titanium bearing mineral
sands and titanium dioxide pigment (“TiO2”). The
Company’s world-class, high performance TiO2 products
are critical components of everyday applications such as
paint and other coatings, plastics, paper and other applica-
tions. The Company’s mineral sands business consists
primarily of two product streams—titanium feedstock and
zircon. Titanium feedstock is primarily used to manufacture
TiO2. Zircon, a hard, glossy mineral, is used for the manu-
facture of ceramics, refractories, TV glass and a range of
other industrial and chemical products. Tronox has global
operations in North America, Europe, South Africa and
Australia. The Company operates three TiO2 facilities at
the following locations: Hamilton, Mississippi, Botlek, The
Netherlands, and Kwinana, Western Australia, representing
approximately 465,000 tonnes of annual TiO2 production
capacity. Additionally, Tronox operates three separate
mining operations: KwaZulu-Natal (“KZN”) Sands located
in South Africa, Namakwa Sands located in South Africa
and Cooljarloo located in Western Australia, which have a
combined annual production capacity of approximately
723,000 tonnes of titanium feedstock and approximately
265,000 tonnes of zircon.
Tronox Limited was formed on September 21, 2011
for the purpose of the Transaction (defined below). Prior to
the completion of the Transaction, Tronox Limited was
wholly owned by Tronox Incorporated, and had no operat-
ing assets or operations. On September 25, 2011, Tronox
Incorporated, a Delaware corporation formed on May 17,
2005 (“Tronox Incorporated”), in preparation for the
contribution and transfer by Kerr-McGee Corporation
(“Kerr-McGee” or “KM”) of certain entities, including
those comprising substantially all of its chemical business,
entered into a definitive agreement (as amended, the
“Transaction Agreement”) with Exxaro Resources Limited
(“Exxaro”) and certain of its affiliated companies, to acquire
24
trox 2012ar
2 Basis of Presentation
Tronox Limited is registered under the laws of
the State of Western Australia, Australia, and is
considered a domestic company in Australia. As such,
Tronox Limited is required to report in Australia under
International Financial Reporting Standards (“IFRS”).
Additionally, as Tronox Limited is not considered a
“foreign private issuer,” the Company is required to
comply with the reporting and other requirements imposed
by the U.S. securities law on U.S. domestic issuers, which,
among other things, requires reporting in the United States
under accounting principles generally accepted in the
United States of America (“U.S. GAAP”). The consolidated
financial statements included in this Annual Report are
prepared in conformity with U.S. GAAP. The Company
publishes its consolidated financial statements, in both
U.S. GAAP and IFRS, in U.S. dollars.
In connection with its emergence from bankruptcy,
Tronox Incorporated applied fresh-start accounting
under Accounting Standards Codification (“ASC”) 852,
Reorganizations (“ASC 852”) as of January 31, 2011.
Accordingly, the financial information of Tronox
Incorporated set forth in this Annual Report, unless
otherwise expressly set forth or as the context otherwise
indicates, reflects the consolidated results of operations
and financial condition on a fresh-start basis for the
period beginning February 1, 2011 (“Successor”), and
on a historical basis for the period through January 31,
2011 (“Predecessor”).
The Consolidated Balance Sheet as of December 31,
2012 relates to Tronox Limited and the Consolidated
Balance Sheet as of December 31, 2011 relates to Tronox
Incorporated. The Consolidated Statement of Operations
and the Consolidated Statement of Cash Flows for the
year ended December 31, 2012 reflect the consolidated
operating results of Tronox Incorporated prior to June 15,
2012, and, from June 15, 2012 through December 31,
2012, reflect the consolidated operating results of Tronox
Limited. The Consolidated Statements of Operations and
the Consolidated Statements of Cash Flows for the eleven
months ended December 31, 2011, one month ended
January 31, 2011 and year ended December 31, 2010 reflect
the consolidated operating results of Tronox Incorporated.
The Company’s consolidated financial statements
include the accounts of all majority-owned subsidiary
companies. Investments in affiliated companies that are
20% to 50% owned are carried as a component of “Other
Long-Term Assets” on the Consolidated Balance Sheets
at cost adjusted for equity in undistributed earnings.
Except for dividends and changes in ownership interest,
changes in equity in undistributed earnings are included
in “Other income (expense)” on the Consolidated
Statements of Operations. All intercompany transactions
have been eliminated.
Prior to the Transaction Date, Tronox Incorporated
operated the Tiwest Joint Venture with Exxaro Australia
Sands Pty Ltd. The Tiwest Joint Venture was a contractual
relationship between Tronox Incorporated and Exxaro
whereby each party held an undivided interest in each asset
of the joint venture, and each party was proportionally
liable for each of the joint venture’s liabilities. The Tiwest
Joint Venture was not a separate legal entity and did not
enter into any transactions. Transactions were entered into
by the joint venture partners who had the right to sell
their own product, collect their proportional share of the
revenues and absorb their share of costs. As such, Tronox
Incorporated did not account for the Tiwest Joint Venture
under the equity method. Instead, Tronox Incorporated
accounted for its share of the Tiwest Joint Venture’s assets
that were jointly controlled and its share of liabilities for
which it was jointly responsible on a proportionate gross
basis in its Consolidated Balance Sheet. Additionally,
Tronox Incorporated accounted for the revenues generated
from its share of the products sold and its share of the
expenses of the joint venture on a gross basis in its
Consolidated Statements of Operations. As such, as of
the Transaction Date, Tronox Limited owns 100% of the
operations formerly operated by the Tiwest Joint Venture.
As such, the Consolidated Balance Sheet as of December
31, 2012 includes 100% of the Tiwest operations assets and
liabilities, while the Consolidated Balance Sheet as of
December 31, 2011 includes Tronox Incorporated’s 50%
undivided interest in each asset and liability of the joint
venture. Additionally, the Consolidated Statement of
Operations for the year ended December 31, 2012 reflects
Tronox Incorporated’s revenues generated from its share of
the products sold and its share of the expenses of the joint
25
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
3 Significant Accounting Policies
Foreign Currency
The U.S. dollar is the functional currency for the
Company’s operations, except for its South African and
European operations. The Company determines the
functional currency of each subsidiary based on a number of
factors, including the predominant currency for revenues,
expenditures and borrowings. Foreign currency transaction
gains or losses are recognized in the period incurred and are
included in “Other income (expense)” on the Consolidated
Statements of Operations.
The Rand is the functional currency of the Company’s
South African operations, and the Euro is the functional
currency for the Company’s European operations. As such,
translation adjustments resulting from translating the
functional currency financial statements into U.S. dollar
equivalents are reflected as a separate component on the
Consolidated Statements of Other Comprehensive Income
(Loss). When the subsidiary’s functional currency is the
U.S. dollar, such as the Company’s Australian operations,
adjustments from the remeasurement of foreign currency
monetary assets and liabilities are presented in “Other
income (expense)” on the Consolidated Statements of
Operations.
Gains and losses on intercompany foreign currency
transactions that are not expected to be settled in the
foreseeable future are reported by the Company in the
same manner as translation adjustments.
For the year ended December 31, 2012, eleven months
ended December 31, 2011 and year ended December 31,
2010, the Company recorded net unrealized and realized
foreign currency losses of $8 million, $8 million and
$13 million, respectively. For the one month ended January
31, 2011, the Company recorded a net unrealized and
realized foreign currency gain of $2 million.
Cash and Cash Equivalents
The Company considers all investments with original
maturities of three months or less to be cash equivalents.
At December 31, 2012 and 2011, total cash and cash
equivalents was $716 million and $154 million, respectively,
of which $50 million and $62 million, respectively, was
held within the United States.
venture on a gross basis prior to June 15, 2012, and, from
June 15, 2012 through December 31, 2012, reflect 100%
of the revenues and expenses of the Tiwest operations.
The Consolidated Statements of Operations for the eleven
months ended December 31, 2011, one month ended
January 31, 2011 and year ended December 31, 2010 reflect
Tronox Incorporated’s revenues generated from its share of
the products sold and its share of the expenses of the joint
venture on a gross basis.
In connection with the Transaction, Exxaro and its
subsidiaries retained a 26% ownership interest in each of
Tronox KZN Sands Pty Ltd. and Tronox Mineral Sands Pty
Ltd. in order to comply with the ownership requirements
of the Black Economic Empowerment (“BEE”) legislation
in South Africa. The Company accounts for such ownership
interest as “Noncontrolling interest” on the Consolidated
Balance Sheets.
In management’s opinion, the accompanying consoli-
dated financial statements reflect all adjustments considered
necessary for a fair presentation. All significant intercom-
pany 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. Such reclassifications did not have
an impact on the Company’s net income or consolidated
results of operations.
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.
26
Accounts Receivable
Accounts receivable are reflected at their net realizable
values, reduced by an allowance for doubtful accounts to
allow for expected credit losses. The allowance is estimated
by management, based on factors such as age of the related
receivables and historical experience, giving consideration
to customer profiles. The Company generally does not
charge interest on accounts receivable, nor require collateral;
however, certain operating agreements have provisions
for interest and penalties that may be invoked, if deemed
necessary. Accounts receivable are aged in accordance
with contract terms and are written off when deemed
uncollectible.
See Note 6 for additional information regarding
accounts receivable.
Inventories
Inventories are stated at the lower of actual cost or market,
net of allowances for obsolete and slow-moving inventory.
The cost of finished goods inventories is determined using
the first-in, first-out method. Carrying values include
material costs, labor and associated indirect manufacturing
expenses. Costs for materials and supplies, excluding ore,
are determined by average cost to acquire. Raw materials
are carried at actual cost.
The Company periodically reviews its inventory for
obsolescence or inventory that is no longer marketable for
its intended use, and records any write-down equal to the
difference between the cost of inventory and its estimated
net realizable value based on assumptions about alternative
uses, market conditions and other factors.
See Note 7 for additional information regarding
inventories.
Property, Plant and Equipment, Net
Property, plant and equipment, net is stated at cost less
accumulated depreciation. Maintenance and repairs are
expensed as incurred, except that costs of replacements
or renewals that improve or extend the lives of existing
properties are capitalized.
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Depreciation – Property, plant and equipment is depreciated
over its estimated useful life by the straight-line method.
Useful lives for certain property, plant and equipment are
as follows:
Buildings
Land improvements
Machinery and equipment
Furniture and fixtures
10 – 40 years
10 – 20 years
3 – 25 years
10 years
Retirements and Sales – The cost and related accumulated
depreciation and amortization are removed from the
respective accounts upon retirement or sale of property,
plant and equipment. Any resulting gain or loss is included
in “Cost of goods sold” or “Selling, general, and adminis-
trative expenses” on the Consolidated Statements of
Operations.
Interest Capitalized – The Company capitalizes interest
costs on major projects that require an extended period of
time to complete. See Note 12 for additional information
regarding capitalized interest.
See Note 8 for additional information regarding
property, plant and equipment.
Mineral Leaseholds, Net
The Company is engaged in the acquisition, exploration
and development of mineral properties. Mineral property
acquisition costs are capitalized in accordance with ASC
805, Business Combinations (“ASC 805”) as tangible assets
when management has determined that probable future
benefits consisting of a contribution to future cash inflows
have been identified and adequate financial resources are
available or are expected to be available as required to meet
the terms of property acquisition and anticipated exploration
and development expenditures. Mineral leaseholds are
depreciated over their useful lives as determined under the
units of production method.
Mineral property exploration costs are expensed
as incurred. When it has been determined that a mineral
property can be economically developed as a result
of establishing proven and probable reserves, the costs
incurred to develop such property through the commence-
ment of production are capitalized.
See Note 9 for additional information regarding
mineral leaseholds.
27
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
Environmental Remediation and Other Contingencies
In accordance with ASC 450 Contingencies (“ASC 450”)
and ASC 410, Asset Retirement and Environmental Obligations
(“ASC 410”), the Company recognizes a loss and records an
undiscounted liability when litigation has commenced or a
claim or assessment has been asserted, or, based on available
information, commencement of litigation or assertion of
a claim or assessment is probable, and the associated costs
can be reasonably estimated. Estimates of environmental
liabilities, which include the cost of investigation and
remediation, are based on a variety of factors, including,
but not limited to, the stage of investigation, the stage
of the remedial design, evaluation of existing remediation
technologies, presently enacted laws and regulations as
well as prior experience in remediation of contaminated
sites. In future periods, a number of factors could change
the Company’s estimate of environmental remediation
costs, such as changes in laws and regulations, or changes
in their interpretation or administration or relevant
cleanup levels; revisions to the remedial design; unantici-
pated construction problems; identification of additional
areas or volumes of contaminated soils and groundwater;
the availability of information to estimate probable but
previously inestimable obligations; and changes in costs
of labor, equipment and technology.
To the extent costs of investigation and remediation
have been incurred and are recoverable from federal, state,
or other governmental agencies and have been incurred
or are recoverable under certain insurance policies or from
other parties and such recoveries are deemed probable, the
Company records a receivable for the estimated amounts
recoverable (undiscounted). Receivables are reflected on
the Consolidated Balance Sheets in either “Accounts
receivable” or as a component of “Other long-term assets,”
depending on the estimated timing of collection.
Self Insurance
The Company is self-insured for certain levels of general
and vehicle liability, property, workers’ compensation and
health care coverage. The cost of these self-insurance
programs is accrued based upon estimated fully developed
settlements for known and anticipated claims. Any resulting
adjustments to previously recorded reserves are reflected
in current operating results. The Company does not accrue
for general or unspecific business risks.
Intangible Assets, Net
Intangible assets are stated at cost less accumulated
amortization. The Company amortizes intangibles on
a straight-line basis over their estimated useful lives,
which range from 5 to 20 years.
See Note 10 for further information related to the
Company’s intangible assets.
Recoverability of Long-Lived Assets
The Company evaluates the recoverability of the carrying
value of long-lived assets (property, plant and equipment,
mineral leaseholds and intangible assets) whenever events
or changes in circumstances indicate that the carrying
value may not be recoverable. Under such circumstances,
the Company assesses whether the projected undiscounted
cash flows of its long-lived assets are sufficient to recover
the existing unamortized cost of its long-lived assets. If the
undiscounted projected cash flows are not sufficient, the
Company calculates the impairment amount by discounting
the projected cash flows using its weighted-average cost of
capital. The amount of the impairment is written off
against earnings in the period in which the impairment
is determined.
Asset Retirement Obligations
To the extent a legal obligation exists, an asset retirement
obligation (“ARO”) is recorded at its estimated fair value,
and accretion expense is recognized over time as the
discounted liability is accreted to its expected settlement
value. Fair value is measured using expected future cash
outflows discounted at the Company’s credit-adjusted
risk-free interest rate. The Company’s consolidated finan-
cial statements classify accretion expense related to asset
retirement obligations as a production cost, which is
included in “Cost of goods sold” on the Consolidated
Statements of Operations.
See Note 13 for additional information regarding asset
retirement obligations.
28
Revenue Recognition
Revenue is recognized when risk of loss and title to the
product is transferred to the customer. All amounts billed
to a customer in a sales transaction related to shipping
and handling represent revenues earned and are reported
as net sales.
Cost of Goods Sold
Cost of goods sold includes the costs of purchasing,
manufacturing and distributing products, including raw
materials, energy, labor, depreciation and other production
costs. Costs incurred by the Company for shipping and
handling are reported in “Cost of goods sold” on the
Consolidated Statements of Operations. Receiving, distri-
bution, freight and warehousing costs are also included
in “Cost of goods sold” on the Consolidated Statements
of Operations.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include costs
related to marketing, sales, agent commissions, research
and development, legal and administrative functions such
as human resources, information technology, investor
relations, accounting, treasury, and tax compliance. Costs
include expenses for salaries and benefits, travel and
entertainment, promotional materials and professional fees.
Research and Development
Research and development costs were $9 million,
$9 million, less than $1 million and $6 million for the
year ended December 31, 2012, eleven months ended
December 31, 2011, one month ended January 31, 2011
and year ended December 31, 2010, respectively, and
were expensed as incurred.
Pension and Postretirement Benefits
The Company provides pension and postretirement
benefits for qualifying employees worldwide, which
are accounted for in accordance with ASC 715,
Compensation – Retirement Benefits (“ASC 715”).
See Note 20 for additional information regarding
pension and postretirement benefits.
Share-based Compensation
The Company accounts for its share-based compensation
in accordance with ASC 718, Compensation-Share-Based
Compensation (“ASC 718”).
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Liability Restricted Share Awards – Certain restricted
share awards have been classified as liability awards and
were re-measured to fair value at each reporting date.
The restricted share awards classified as liabilities contained
only a service condition and had graded vesting provisions.
Equity Restricted Share Awards – The fair value of equity
instruments is measured based on the average share price
on the grant date and is recognized over the vesting period.
The restricted share awards contain service, market and/
or performance conditions. For awards containing only a
service condition, the Company has elected to recognize
compensation costs using the straight-line method over the
requisite service period for the entire award. For awards
containing a market condition, the fair value of the award is
measured using the lattice model. For awards containing
a performance condition, the fair value of the award is equal
to the average share price but compensation expense is not
recognized until the Company concludes that it is probable
that the performance condition will be met. The Company
reassesses the probability each quarter.
Options – The Black-Scholes option pricing model is
utilized to measure the fair value of options. Options
generally contain only service conditions and have graded
vesting provisions. The Company has elected to recognize
compensation costs using the straight-line method over
the requisite service period for the entire award.
See Note 19 for additional information regarding
employee share-based compensation.
Income Taxes
The Company accounts for taxes in accordance with
ASC 740, Income Taxes (“ASC 740”). The Company has
operations in several countries around the world and is
subject to income and similar taxes in these countries.
The estimation of the amounts of income taxes involves
the interpretation of complex tax laws and regulations
and how foreign taxes affect domestic taxes, as well as the
analysis of the realizability of deferred tax assets, tax
audit findings and uncertain tax positions. Although the
Company believes its tax accruals are adequate, differences
may occur in the future, depending on the resolution of
pending and new tax matters.
29
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
Fair Value Measurement
The Company accounts for its financial assets and liabilities
in accordance with ASC 820, Fair Value Measurements
and Disclosures, (“ASC 820”). In measuring fair value on a
recurring basis, the Company utilizes valuation techniques
that maximize the use of observable inputs and minimize
the use of unobservable inputs, to the extent possible,
and considers counterparty credit risk in its assessment
of fair value.
The fair value hierarchy specified by ASC 820 is
as follows:
• Level 1 – Quoted prices in active markets for identical assets
and liabilities.
• Level 2 – Quoted prices for similar assets and liabilities in
active markets, quoted prices for identical or similar assets
and liabilities in markets that are not active or other inputs
that are observable or can be corroborated by observable
market data.
• Level 3 – Unobservable inputs that are supported by little or
no market activity and that are significant to the fair value
of the assets and liabilities.
The carrying amounts for cash and cash equivalents,
accounts receivable, other current assets, accounts payable,
short-term debt and other current liabilities approximate
their fair value because of the short-term nature of these
instruments. See Note 12 for information on the fair value
of the Company’s long-term debt.
Deferred tax assets and liabilities are determined based
on temporary differences between the financial reporting
and tax bases of assets and liabilities using enacted tax rates
expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. A valuation allowance is provided against a deferred
tax asset when it is more likely than not that all or some
portion of the deferred tax asset will not be realized. The
Company periodically assesses the likelihood that it will
be able to recover its deferred tax assets and reflects any
changes in its estimates in the valuation allowance, with
a corresponding adjustment to earnings or other compre-
hensive income (loss), as appropriate. ASC 740 requires
that all available positive and negative evidence be
weighted to determine whether a valuation allowance
should be recorded.
The amount of income taxes the Company pays is
subject to ongoing audits by federal, state and foreign tax
authorities, which may result in proposed assessments.
The Company’s estimate for the potential outcome for any
uncertain tax issue is highly judgmental. The Company
assesses its income tax positions and records tax benefits for
all years subject to examination based upon its evaluation
of the facts, circumstances and information available at
the reporting date. For those tax positions for which it is
more likely than not that a tax benefit will be sustained,
the Company records the amount that has a greater than
50% likelihood of being realized upon settlement with a
taxing authority that has full knowledge of all relevant
information. Interest and penalties are accrued as part of
tax expense, where applicable. If the Company does not
believe that it is more likely than not that a tax benefit will
be sustained, no tax benefit is recognized.
See Note 17 for additional information regarding
income taxes.
30
4 Recent Accounting Pronouncements
In February 2013, the Financial Accounting
Standards Board (the “FASB”) issued ASU 2013-2,
Reporting of Amounts Reclassified Out of Accumulated Other
Comprehensive Income, which requires the presentation of
the effects on the line items of net income of significant
amounts reclassified out of accumulated other comprehen-
sive income, if the item is required under U.S. GAAP to
be reclassified to net income in its entirety in the same
reporting period. The guidance is effective for fiscal years
beginning after December 15, 2012. The adoption of this
guidance is not expected to have a significant impact on
the consolidated financial statements.
On January 1, 2012, the Company adopted the required
guidance under ASU 2011-05, Presentation of Comprehensive
Income (“ASU 2011-05”), which changed the presentation
requirements of comprehensive income by increasing
the prominence of items reported in other comprehensive
income. The adoption of this guidance did not have a
material impact on Tronox Incorporated’s consolidated
financial statements. During 2011, the FASB issued ASU
2011-12, which deferred certain requirements of ASU
2011-05. The Company has not adopted such deferred
requirements.
In May 2011, the FASB issued ASU 2011-04,
Amendments to Achieve Common Fair Value Measurement
and Disclosure Requirements in U.S. GAAP and IFRS (“ASU
2011-04”), which changes certain fair value measurement
and disclosure requirements, clarifies the application of
existing fair value measurement and disclosure require-
ments and provides consistency to ensure that U.S. GAAP
and IFRS fair value measurement and disclosure require-
ments are described in the same way. ASU 2011-04 is
effective for interim and annual periods beginning after
December 15, 2011. The adoption of this guidance did
not have a material impact on the consolidated financial
statements.
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5 Acquisition of the Mineral Sands Business
On September 25, 2011, Tronox Incorporated
entered into the Transaction Agreement with Exxaro
to acquire the mineral sands business. On June 15, 2012,
the existing business of Tronox Incorporated was combined
with the mineral sands business under Tronox Limited.
The Transaction was completed in two principal steps.
First, Tronox Incorporated became a subsidiary of
Tronox Limited, with Tronox Incorporated shareholders
receiving one Class A Share and $12.50 in cash (“Merger
Consideration”) for each share of Tronox Incorporated
common stock. Second, Tronox Limited issued 9,950,856
Class B Shares to Exxaro and one of its subsidiaries in
consideration for the mineral sands business. Exxaro
retained an approximate 26% ownership interest in the
South African operations that are part of the mineral sands
business in order to comply with the BEE legislation of
South Africa. The ownership interest in the South African
operations may be exchanged for Class B Shares under
certain circumstances.
Prior to the Transaction Date, Tronox Incorporated
and Exxaro Australia Sands Pty Ltd., a subsidiary of Exxaro,
operated the Tiwest Joint Venture, which included a
chloride process TiO2 plant located in Kwinana, Western
Australia, a mining operation in Cooljarloo, Western
Australia, and a mineral separation plant and a synthetic
rutile processing facility, both in Chandala, Western
Australia. As part of the Transaction, the Company
acquired Exxaro Australia Sands Pty Ltd. and therefore
Exxaro’s 50% interest in the Tiwest Joint Venture. As a
result, as of the Transaction Date, Tronox Limited owns
100% of the operations formerly operated by the Tiwest
Joint Venture.
31
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
Net
Adjustments
to
Valuation Fair Value
As
Adjusted
Fair Value of Assets Acquired and Liabilities Assumed:
Current Assets:
Cash
Accounts receivable
Inventories
Prepaid and other assets
Total Current Assets
Property, plant and equipment, net (4)
Mineral leaseholds, net(5)
Intangibles, net(4)
Deferred tax asset
Other long-term assets
Total Assets
$ 115
199
622
32
968
1,012
1,299
—
26
19
$ 3,324
$ —
(3)
(69)
(12)
(84)
(132)
158
12
4
—
$ (42)
$ 17
—
2
(1)
(14)
—
4
—
(3)
—
20
21
$ 115
196
553
20
884
880
1,457
12
30
19
$ 3,282
$ 110
25
85
75
14
2
311
19
209
57
27
623
$
93
25
83
76
28
2
307
19
212
57
7
602
$ 2,722
$ 1,061
$ (63)
$ 2,659
$ (6)
$ 1,055
Current Liabilities:
Accounts payable
Accrued liabilities
Unfavorable contracts (6)
Short-term debt
Current deferred tax liability
Income taxes payable
Total Current Liabilities
Long-term debt
Deferred tax liability
Asset retirement obligations
Other
Total Liabilities
Net Assets
Gain on Bargain Purchase (7)
(1) The number of Class B Shares issued in connection with the Transaction has not been
restated to affect for the 5-for-1 share split as discussed in Note 15.
(2) The fair value of the Class B shares issued was determined based the closing market
price of Tronox Incorporated’s common shares on June 14, 2012, less a 15% discount
for marketability due to a restriction that the shares cannot be sold for a period of at
least three years following the Transaction Date.
(3) The fair value of the noncontrolling interest is based upon a structured arrangement
with Tronox Limited, which allows the ownership interest to be exchanged for
approximately 1.45 million additional Class B shares until the earlier of the 10 year
anniversary of the Transaction Date or the date when the South African Department
of Mineral Resources determines that ownership is no longer required under the
BEE legislation.
(4) The fair value of property, plant and equipment and internal use software was
determined using the cost approach, which estimates the replacement cost of each
asset using current prices and labor costs, less estimates for physical, functional and
technological obsolescence.
(5) The fair value of mineral rights was determined using the Discounted Cash Flow
(“DCF”) method, which was based upon the present value of the estimated future cash
flows for the expected life of the asset taking into account the relative risk of achieving
those cash flows and the time value of money. Discount rates of 17% for South Africa
and 15.5% for Australia were used taking into account the risks associated with such
assets, as well as the economic and political environment where each asset is located.
(6) The fair value of unfavorable contracts was determined by multiplying the committed
tonnage in each contract by the difference between the committed price in the
contract versus the estimated market price over the term of the contract.
(7) In accordance with ASC 805-10-25-14, the measurement period for the Transaction
ends in June 2013.
Purchase price and fair value of assets acquired
and liabilities assumed
The Company accounted for the Transaction under ASC
805, which requires recording assets and liabilities at fair
value. Under the acquisition method of accounting, each
tangible and separately identifiable intangible asset acquired
and liabilities assumed were recorded based on their
preliminary estimated fair values on the Transaction Date.
Because the total consideration transferred was less
than the fair value of the net assets acquired, the excess of
the value of the net assets acquired over the fair value of
consideration was recorded as an initial bargain purchase
gain of approximately $1,061 million during the second
quarter of 2012. The initial valuations were derived from
estimated fair value assessments and assumptions used
by management, and were preliminary. Subsequent to the
Transaction, the Company has made adjustments to its
initial valuation, which reduced the gain on bargain purchase
to $1,055 million. Further adjustments may result before
the end of the measurement period, which ends in June
2013. The bargain purchase gain is not taxable for income
tax purposes. See Note 17 for a discussion of the tax impact
of the transaction.
Consideration:
Number of Class B Shares (1)
Fair value of Class B Shares on the
Transaction Date
Fair value of equity issued (2)
Cash paid
Noncontrolling interest (3)
Net
Adjustments
to
Valuation Fair Value
As
Adjusted
9,950,856
— 9,950,856
$ 137.70
$ 1,370
—
291
$ 1,661
$ — $ 137.70
$ — $ 1,370
1
(58)
1
233
$ (57) $ 1,604
32
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Mineral Sands Business Results of Operations
The following table includes net sales and income from
operations on a segment basis attributable to the acquired
mineral sands business since June 15, 2012. The results
of the acquired mineral sands business are included in both
the mineral sands segment and the pigment segment.
Net Sales
Income from Operations
Mineral
Pigment Eliminations
Total
$ 489
$ 8
$ 64
$ (36)
$ (29) $ 524
$ (2) $ (30)
Supplemental Pro forma financial information
The following unaudited pro forma information gives
effect to the Transaction as if it had occurred on the first
day of the first quarter of fiscal 2011 (January 1, 2011).
The unaudited pro forma financial information reflects
certain adjustments related to the acquisition, such as
(1) converting the mineral sands business financial state-
ments to U.S. GAAP, (2) conforming the mineral sands
business accounting policies to those applied by Tronox
Incorporated, (3) to record certain incremental expenses
resulting from purchase accounting adjustments, such as
incremental depreciation expense in connection with
fair value adjustments to property, plant and equipment,
(4) to eliminate intercompany transactions between
Tronox Incorporated and the mineral sands business, (5) to
record the effect on interest expense related to borrowings
in connection with the transaction and (6) to record
the related tax effects. The unaudited pro forma financial
information also includes adjustments for certain non-
recurring items as of the first day of the first quarter of
fiscal 2011 (January 1, 2011) such as (1) the impact
of transaction costs of approximately $95 million, (2) the
impact of the adjusted bargain purchase gain of $1,055
million and (3) the impact of reorganization income arising
from Tronox Incorporated’s emergence from bankruptcy
in the one month ended January 31, 2011 of approximately
$613 million. The unaudited pro forma financial informa-
tion is for illustrative purposes only and should not be
relied upon as being indicative of the historical results
that would have been obtained if the Transaction had
actually occurred on that date, nor the results of operations
in the future.
In accordance with ASC 805, the supplemental pro
forma results of operations for the years ended December
31, 2012 and 2011, as if the mineral sands business had
been acquired on January 1, 2011, are as follows:
Years Ended December 31,
Net Sales
Income from Operations
Net Income
Net Income attributable to Tronox Limited
Shareholders
Basic earnings per share attributable to
Tronox Limited Shareholders
Diluted earnings per share attributable to
Tronox Limited Shareholders
2012
2011
$ 2,120
$ 296
$ 239
$ 2,302
$ 407
$ 2,105
$ 207
$ 2,051
$ 1.70
$ 16.29
$ 1.67
$ 15.91
6 Accounts Receivable
Accounts receivable, net of allowance for doubtful
accounts, consisted of the following:
December 31,
Trade receivables
Related parties
Other
Total
Allowance for doubtful accounts
Net
Successor
2012
2011
$ 371
—
23
394
(3)
$ 391
$ 269
7
2
278
—
$ 278
The Company’s liquidity is concentrated in trade
receivables that arise from sales of TiO2 and titanium
feedstock to customers in the TiO2 industry. The industry
concentration has the potential to impact the Company’s
overall exposure to credit risk, either positively or negatively,
in that its customers may be similarly affected by changes
in economic, industry or other conditions. The Company
performs ongoing credit evaluations of its customers,
and uses credit risk insurance policies from time to time,
as deemed appropriate, to mitigate credit risk, but generally
does not require collateral. The Company maintains
allowances for potential credit losses based on historical
experience. For the year ended December 31, 2012, the
Company’s ten largest TiO2 customers represented approxi-
mately 46% of its total TiO2 net sales; however, no single
customer accounted for more than 10% of total net sales.
33
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
7 Inventories
Inventories at December 31, 2012 and 2011 were
as follows:
9 Mineral Leaseholds
December 31,
Raw materials
Work-in-process
Finished goods (1)
Materials and supplies, net (2)
Total (3)
Successor
2012
2011
December 31,
$ 221
99
477
117
$ 914
$ 124
9
130
48
$ 311
Mineral leaseholds
Less accumulated depletion
Net
Successor
2012
$ 1,502
(63)
$ 1,439
2011
$ 42
(4)
$ 38
(1) Includes inventory on consignment to others of approximately $42 million and
$12 million at December 31, 2012 and 2011, respectively.
(2) Materials and supplies consist of processing chemicals, maintenance supplies and
spare parts, which will be consumed directly and indirectly in the production of the
Company’s products.
(3) The fair value of inventory from the acquired mineral sands business in the
Transaction was $553 million.
Depletion expense related to mineral leaseholds for the
year ended December 31, 2012, the eleven months ended
December 31, 2011, one month ended January 31, 2011 and
year ended December 31, 2010 was $59 million, $4 million,
less than $1 million and $1 million, respectively.
10 Intangible Assets
category, were as follows:
The gross cost and accumulated amortization
of intangible assets, by major intangible asset
Successor
December 31, 2012
Gross
Cost
Accumulated
Amortization
Net Carrying
Amount
Customer relationships
TiO2 technology
Internal-use software (1)
In-process research and development
Trade names
Other
Total
$ 294
32
38
5
3
1
$ 373
$ (39)
(3)
(2)
(2)
(1)
—
$ (47)
$ 255
29
36
3
2
1
$ 326
(1) In connection with the Transaction, the Company acquired internal-use software,
which was valued at $12 million on the Transaction Date. See Note 5.
Customer relationships
TiO2 technology
Internal-use software
In-process research and development
Trade names
Other
Total
Successor
December 31, 2011
Accumulated
Amortization
Net Carrying
Amount
$ (19)
(2)
—
(1)
—
—
$ (22)
$ 275
30
12
4
3
1
$ 325
Gross
Cost
$ 294
32
12
5
3
1
$ 347
8 Property, Plant and Equipment
December 31,
Land and land improvements
Buildings
Machinery and equipment
Construction-in-progress
Furniture and fixtures
Other
Total
Less accumulated depreciation and amortization
Net
Successor
2012
2011
$
80
194
1,158
153
7
6
1,598
(175)
$ 1,423
$ 51
45
405
49
4
3
557
(53)
$ 504
Depreciation expense related to property, plant and
equipment for the year ended December 31, 2012,
the eleven months ended December 31, 2011, one month
ended January 31, 2011 and year ended December 31, 2010
was $127 million, $53 million, $4 million and $49 million,
respectively.
34
Internal-use software relates to internal and external
costs incurred during the development stage, which were
being capitalized during 2011 and 2012. During 2012,
the Company began amortizing such costs. Amortization
expense related to intangible assets for the year ended
December 31, 2012, the eleven months ended December
31, 2011, the one month ended January 31, 2011 and year
ended December 31, 2010 was $25 million, $22 million,
$0 and $0, respectively.
Estimated future amortization expense related to
intangible assets is as follows:
12 Debt
Short-term Debt
December 31,
UBS Revolver (1)
ABSA Revolver (2)
Wells Revolver (3)
Short-term debt
trox 2012ar
Successor
2012
2011
$ —
30
—
$ 30
$ —
—
—
$ —
2013
2014
2015
2016
2017
Thereafter
Total
11Accrued Liabilities
December 31,
Unfavorable sales contracts (1)
Taxes other than income taxes (2)
Employee-related costs and benefits
Interest
Sales rebates
Other
Total
Total
Amortization
$ 27
27
27
25
25
195
$ 326
Successor
2012
$ 64
58
45
22
13
7
$ 209
2011
$ —
5
27
1
8
5
$ 46
(1) In connection with the Transaction, the Company acquired sales contracts at
unfavorable market terms, which were valued at $85 million on the Transaction Date.
See Note 5.
(2) Includes transfer taxes incurred as a result of the Transaction and recorded in selling,
general and administrative expenses on the Consolidated Statements of Operations.
(1) Average effective interest rate of 3.9% in 2012.
(2) Average effective interest rate of 8.5% in 2012.
(3) Average effective interest rate of 4.7% in 2011 and 5.25% in 2012.
UBS Revolver
On June 18, 2012, in connection with the closing of the
Transaction, the Company entered into a global senior
secured asset-based syndicated revolving credit agreement
with UBS AG (the “UBS Revolver”) with a maturity date of
the fifth anniversary of the closing date. The UBS Revolver
provides the Company with a committed source of capital
with a principal borrowing amount of up to $300 million,
subject to a borrowing base. The borrowing base is related
to certain eligible inventory and accounts receivable held
by the Company’s U.S., Australia and Netherlands subsid-
iaries. Obligations under the UBS Revolver are secured
by a first priority lien on substantially all of the Company’s
existing, and future deposit accounts, inventory and account
receivables and certain related assets, excluding those held
by its South African subsidiaries, Netherland’s subsidiaries
and Bahamian subsidiary, and a second priority lien on all of
the Company’s other assets, including capital shares which
serve as security under the Term Facility (as defined below).
At December 31, 2012, the Company’s borrowing base was
$221 million.
35
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
Wells Revolver
On February 14, 2011, Tronox Incorporated entered into
a $125 million senior secured asset-based revolving credit
agreement with Wells Fargo Capital Finance, LLC (the
“Wells Revolver”). The Wells Revolver had a maturity
date of February 14, 2015. The Wells Revolver provided
the Company with a committed source of capital with a
principal borrowing amount of up to $125 million subject
to a borrowing base. Borrowing availability under the
Wells Revolver was subject to a borrowing base, which was
related to certain eligible inventory and receivables held
by the Company’s U.S. subsidiaries. On February 8, 2012,
the Company amended the Wells Revolver to facilitate the
Transaction while keeping the revolver in force. In connec-
tion with refinancing the Wells Revolver, the Company
wrote off deferred financing fees of $4 million. On June 18,
2012, the Company refinanced the Wells Revolver with
the UBS Revolver.
During 2012, the Company borrowed $30 million
against the Wells Revolver, which was repaid with borrow-
ings under the UBS Revolver. During 2011, to facilitate its
exit from bankruptcy and help pay for the buy-in of its 50%
share of the Kwinana facility in Western, Australia TiO2
expansion, the Company borrowed $39 million against the
Wells Revolver, which by December 31, 2011, was fully
repaid using cash generated from operations.
Debt acquired in the Transaction
In connection with the Transaction, the Company acquired
short-term debt of $75 million (see Note 5), which was
repaid during 2012.
The UBS Revolver bears interest at the Company’s
option at either (i) the greater of (a) the lenders’ prime rate,
(b) the Federal funds effective rate plus 0.50% and (c) the
adjusted LIBOR rate for a one-month period plus 1% or (ii)
the adjusted LIBOR rate, in each case plus the applicable
margin. The applicable margin ranges from 1.5% to 2% for
borrowings at the adjusted LIBOR rate, and from 0.5% to
1% for borrowings at the alternate base rate, based upon
the average daily borrowing availability. For the first six
months following the closing date, the applicable margins
shall be deemed to be 1.75% for borrowings at the adjusted
LIBOR rate and 0.75% for borrowings at the alternate
base rate. In connection with obtaining the UBS Revolver,
the Company incurred debt issuance costs of approximately
$7 million. During the year ended December 31, 2012,
amortization expense amounted to $1 million. During
2012, the Company borrowed $30 million against the UBS
Revolver, which was repaid during 2012.
ABSA Revolving Credit Facility
In connection with the Transaction, the Company entered
into a R900 million (approximately $106 million as of
December 31, 2012) revolving credit facility with ABSA
Bank Limited acting through its ABSA Capital Division
(the “ABSA Revolver”) with a maturity date of June 14,
2017. During 2012, the Company had borrowings of R450
million (approximately $54 million) and repayments of
R200 million (approximately $24 million). As of December
31, 2012, the Company had drawn down R250 million
(approximately $30 million) on the ABSA Revolver.
The ABSA Revolver bears interest at (i) the base rate
(defined as one month JIBAR, which is the mid-market
rate for deposits in South African Rand for a period equal
to the relevant period which appears on the Reuters Screen
SAFEY Page alongside the caption YLD) as of 11h00
Johannesburg time on the first day of the applicable period,
plus (ii) the Margin, which is 3.5%. In connection with
obtaining the ABSA Revolver, the Company incurred
debt issuance costs of $1 million. During the year ended
December 31, 2012, amortization expense amounted to
less than $1 million.
36
Long-Term Debt
Initial
Successor
Principal Maturity December December
31, 2011
Amount
31, 2012
Date
Senior Notes
Term Facility (1)
Exit Financing Facility (2)
Co-generation Unit Financing
Arrangement
Lease financing
Total debt
Less: Long-term debt due in one year
Long-term debt
$ 900 8/15/20
$ 700
2/8/18
$ 425 10/21/15
$ 900
691
—
$ 16
2/1/16
$ —
—
421
6
—
427
(6)
$ 421
10
14
1,615
(10)
$ 1,605
(1) Average effective interest rate of 5% in 2012.
(2) Average effective interest rate of 7.1% and 7.2% in 2012 and 2011, respectively.
The Company’s debt is recorded at historical amounts.
At December 31, 2012 the fair value of the Senior Notes
(as defined below) and the Term Facility (as defined below)
was $910 million and $709 million, respectively. The
Company determined the fair value of both the Senior
Notes and the Term Facility using the Bloomberg market
price as of December 31, 2012. At December 31, 2011,
the total carrying value of long-term debt approximated its
fair value due to the variable interest rates and frequent
repricing of such instruments. The fair value hierarchy for
long-term debt is a Level 2 input.
At December 31, 2012, the scheduled maturities of the
Company’s long-term debt were as follows:
2013 (1)
2014
2015
2016
2017
Thereafter
Total
Remaining accretion associated with the Term facility
Total debt
Total Debt
$
11
10
10
8
7
1,575
1,621
(6)
$ 1,615
(1) Includes $1 million of remaining accretion associated with the Term Facility,
which was issued net of an original issue discount of $7 million (see Term Facility
discussion below).
trox 2012ar
Senior Notes
On August 20, 2012, Tronox Limited’s wholly owned
subsidiary, Tronox Finance LLC, issued $900 million
aggregate principal amount of 6.375% senior notes due
2020 (the “Senior Notes”). The Senior Notes were
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.
The Senior Notes bear interest semiannually at a rate equal
to 6.375% and were sold at par value. The Senior Notes are
fully and unconditionally guaranteed on a senior, unsecured
basis by Tronox Limited and certain of its subsidiaries. The
Senior Notes are redeemable at any time at the Company’s
discretion. The Senior Notes and related guarantees have
not been registered under the Securities Act, or any state
securities laws, and unless so registered, may not be offered
or sold in the United States except pursuant to an exemp-
tion from the registration requirements of the Securities
Act and applicable state securities laws.
Approximately $326 million of the proceeds from the
Senior Notes were used for returns of shareholder capital,
in the form of share buybacks. The remainder of the
proceeds have been or will be used for general corporate
purposes, and, are subject to required approvals, may
also be used for further returns of capital to shareholders
from time to time (including by way of dividend).
The Company recorded debt issuance fees of $18
million, which are being amortized over the life of the
debt, and are included in “Other long-term assets” on the
Consolidated Balance Sheets. During the year ended
December 31, 2012, amortization expense amounted to
$1 million.
37
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
The Term Facility is secured by a first priority lien
on substantially all of the Company’s and the subsidiary
guarantors’ existing and future property and assets.
This includes, upon the consummation of the Transaction,
certain assets acquired in the Transaction. The terms of
the Term Facility provide for customary representations
and warranties, affirmative and negative covenants and
events of default. The terms of the covenants, subject to
certain exceptions, restrict, among other things: (i) debt
incurrence; (ii) lien incurrence; (iii) investments, dividends
and distributions; (iv) dispositions of assets and subsidiary
interests; (v) acquisitions; (vi) sale and leaseback transac-
tions; and (vii) transactions with affiliates and shareholders.
In connection with obtaining the Term Facility, Tronox
Incorporated incurred debt issuance costs of $17 million,
of which $5 million was paid in 2011 and $12 million was
paid in 2012. Such costs are recorded in “Other long-term
assets” on the Consolidated Balance Sheets, and are being
amortized through the maturity date. During the year
ended December 31, 2012, amortization expense amounted
to $3 million.
Exit Financing Facility
On February 14, 2011, Tronox Incorporated’s senior
secured super-priority DIP and Exit Credit Agreement with
Goldman Sachs Lending Partners, in accordance with
its terms, converted into a $425 million exit facility with a
maturity date of October 21, 2015 (the “Exit Financing
Facility”). The Exit Financing Facility bore interest at the
greater of a base rate plus a margin of 4% or adjusted
Eurodollar rate plus a margin of 5%. The base rate was
defined as the greater of (i) the prime lending rate as quoted
in the print edition of The Wall Street Journal, (ii) the
Federal Funds Rate plus 0.5%, or (iii) 3%. The adjusted
Eurodollar rate is defined as the greater of (i) the LIBOR
rate in effect at the beginning of the interest period, or
(ii) 2%. Interest was payable quarterly or, if the adjusted
Eurodollar rate applied, it was payable on the last day
of each interest period. On February 8, 2012, Tronox
Incorporated refinanced the Exit Facility with the Term
Facility, as discussed above. In connection with the
refinancing, the Company repaid $421 million.
Term Facility
December 31,
Term Facility
Discount
Term Facility, net
Successor
2012
2011
$ 697
(6)
$ 691
$ —
—
$ —
On February 8, 2012, Tronox Incorporated’s wholly
owned subsidiary, Tronox Pigments (Netherlands) B.V.,
entered into a term loan facility with Goldman Sachs Bank
USA comprised of a $550 million Senior Secured Term
Loan and a $150 million Senior Secured Delayed Draw
Term Loan (together, the “Term Facility”). The Term
Facility has a maturity date of February 8, 2018. The Term
Facility was issued net of an original issue discount of
$7 million, or 1% of the initial principal amount, which is
being amortized over the life of the Term Facility. On June
14, 2012, in connection with the closing of the Transaction,
Tronox Pigments (Netherlands) B.V. drew down the
$150 million Senior Secured Delayed Draw Term. During
the year ended December 31, 2012, the Company made
principal repayments of approximately $3 million.
The Term Facility bears interest at a base rate plus a
margin of 2.25% or adjusted Eurodollar rate plus a margin
of 3.25% (in each case with a possible 0.25% increase or
decrease based on the Company’s public credit rating). The
base rate is defined as the greater of (i) the prime lending
rate as quoted in the print edition of The Wall Street
Journal, (ii) the Federal funds rate plus 0.5%, or (iii) 2%.
38
trox 2012ar
The terms of the UBS Revolver provide for customary
representations and warranties, affirmative and negative
covenants and events of default. The terms of the cove-
nants, subject to certain exceptions, restrict, among other
things: (i) debt incurrence; (ii) lien incurrence; (iii) invest-
ments, dividends and distributions; (iv) dispositions of
assets and subsidiary interests; (v) acquisitions; (vi) sale
and leaseback transactions; and (vii) transactions with
affiliates and shareholders. The UBS Revolver requires
the Company to maintain a Consolidated Fixed Charge
Coverage Ratio of not less than 1 to 1 calculated on a
quarterly basis only if excess availability on the UBS
Revolver is less than the greater of (A) $20 million and (B)
10% of the lesser of (x) the aggregate commitments in
effect at such time and (y) the borrowing base at such time.
If the Company is required to maintain the Consolidated
Fixed Charge Coverage Ratio then it will be required to
maintain such ratio until, during the preceding 60 consecu-
tive days, borrowing availability would have been at all
times greater than the greater of (i) $20 million and (ii)
10% of the aggregate commitments in effect at such time.
The ABSA Revolver requires the ratio of (i) South
African Consolidated EBITDA, as defined in the agreement,
to South African Net Interest Expense shall not be less
than 5:1 and (ii) South African Consolidated Net Debt to
South African Consolidated EBITDA, as defined in the
agreement, shall be less than 2:1.
Co-generation Unit Financing Arrangement
In March 2011, the Tiwest Joint Venture acquired a
steam and electricity gas fired co-generation plant,
adjacent to its Kwinana pigment plant, through a five year
financing arrangement. Tronox Western Australia Pty Ltd,
the Company’s wholly-owned subsidiary, owned a 50%
undivided interest in the co-generation plant through the
Tiwest Joint Venture. In order to finance its share of
the asset purchase, Tronox Incorporated incurred debt
totaling $8 million. In connection with the Transaction, the
Company acquired the remaining 50% undivided interest
in the co-generation plant from Exxaro, along with its debt
of $6 million. Under the financing arrangement, monthly
payments are required and interest accrues on the outstand-
ing balance at the rate of 6.5%per annum. During the year
ended December 31, 2012, the Company made principal
repayments of approximately $2 million.
Lease Financing
In connection with the Transaction, the Company acquired
capital lease obligations in South Africa, which are payable
through 2032 at a weighted average interest rate of approxi-
mately 17%. At December 31, 2012, such obligations had
a net book value of assets recorded under capital leases
aggregating $9 million. During 2012, the Company made
payments of less than $1 million.
Financial Covenants
At December 31, 2012, the Company had financial
covenants in the UBS Revolver, the ABSA Revolver and
the Term Facility.
39
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
13 Asset Retirement Obligations
To the extent a legal obligation exists, an
ARO is recorded at its estimated fair value
and accretion expense is recognized over time as the
discounted liability is accreted to its expected settlement
value. Fair value is measured using expected future cash
outflows discounted at Tronox’s credit-adjusted risk-free
interest rate. The Company’s consolidated financial state-
ments classify accretion expense related to asset retirement
obligations as a production cost, which is included in
“Cost of goods sold” on the Consolidated Statements of
Operations.
The Company’s AROs are as follows:
• the KZN mine and the Namakwa Sands mine, both
in South Africa, to restore the areas that have been
disturbed as required under the mining leases;
• decommissioning on wet and dry separation plants and
smelting operations in South Africa;
• mine closure and rehabilitation costs in Western Australia
to restore the area that has been disturbed, as required
under the mining lease;
• plant closure and exit costs associated with certain industrial
sites in Western Australia, whereby the Company is
required to return the sites to their original states under
licensing conditions;
The Term Facility requires that a leverage ratio,
as defined in the agreement, not exceed, as of the last day
of any fiscal quarter, the correlative ratio as follows:
Fiscal Quarter Ending
Total Leverage Ratio
December 31, 2012 through December 31, 2015
March 31, 2016 and thereafter
3:1
2.25:1
The Term Facility 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. The Company was in compliance with its
financial covenants at December 31, 2012.
The Company’s has pledged the majority of our U.S.
assets and certain assets of its non-U.S. subsidiaries in
support of our outstanding debt.
Interest Expense
Successor
Predecessor
Year
Ended
Eleven
Months
Ended
December December
31, 2011
31, 2012
One
Month
Ended
Year
Ended
January December
31, 2010
31, 2011
$ 53
$ 29
$ 3
$ 40
Interest expense (1)
Amortization of deferred debt
issuance costs and discount
on debt
Other
Capitalized interest
Interest and debt expense
10
4
(2)
$ 65
1
1
(1)
$ 30
—
—
—
$ 3
9
1
—
$ 50
• plant closure and exit costs associated with the Botlek, the
Netherlands facility, whereby the Company is required to
return the site back to its original state at the end of its
long-term lease; and
(1) For the one month ended January 31, 2011, interest expense excludes $3 million,
which would have been payable under the terms of the Company’s $350 million 9.5%
senior unsecured notes.
• landfill closure costs at the Hamilton, Mississippi facility to
address one-time closure costs (cap with liner and cover
with soil) and annual monitoring costs of the closed landfill
under applicable state environmental laws in Mississippi.
40
A summary of the changes in the AROs during the year
ended December 31, 2012 is as follows:
Successor
Predecessor
Year
Ended
Eleven
Months
Ended
December December
31, 2011
31, 2012
Beginning balance
Additions
Accretion expense
Changes in estimates, including cost and
timing of cash flows
Settlements/payments
AROs acquired in the acquisition of the
mineral sands business
Fresh-start adjustments
Ending balance
Current portion included in
accrued liabilities
Noncurrent portion
$ 30
7
5
9
(1)
58
—
$ 108
$ 2
$ 106
$ 29
—
2
1
(2)
—
—
$ 30
$ 1
$ 29
One
Month
Ended
January
31, 2011
$ 19
—
—
—
—
—
10
$ 29
$ 1
$ 28
A summary of the AROs is included in the table below:
Australia
South Africa
Botlek
Hamilton
Total AROs
$ 62
34
11
1
$ 108
Environmental Rehabilitation Trust
The Company has established an environmental rehabili-
tation trust in respect of the prospecting and mining
operations in South Africa in accordance with applicable
regulations. The trustees of the fund are appointed by
the Company and consist of sufficiently qualified Tronox
Limited employees capable of fulfilling their fiduciary
duties. The environmental rehabilitation trust received,
holds, and invests funds for the rehabilitation or manage-
ment of negative environmental impacts associated with
mining and exploration activities. The contributions are
aimed at providing sufficient funds at date of estimated
closure of mining activities to address the rehabilitation and
environmental impacts. Funds accumulated for a specific
mine or exploration project can only be utilized for the
rehabilitation and environmental impacts of that specific
mine or project. Currently, the funds are invested in highly
liquid, short-term instruments; however, the investment
trox 2012ar
growth strategy has not been finalized. If a mine or explora-
tion project withdraws from the fund for whatever valid
reason, the funds accumulated for such mine or exploration
project are transferred to a similar fund approved by
management. At December 31, 2012, the environmental
rehabilitation trust assets were $20 million, which were
recorded in “Other long-term assets” on the Consolidated
Balance Sheets.
14 Commitments and Contingencies
Leases – At December 31, 2012, minimum rental commit-
ments, primarily for buildings, land, equipment and railcars
under non-cancellable operating leases was $29 million
for 2013, $27 million for 2014, $25 million for 2015,
$23 million for 2016, $23 million for 2017 and $157 million
thereafter. Total rental expense related to operating leases
was $8 million, $12 million, $1 million and $15 million,
respectively, for the year ended December 31, 2012, eleven
months ended December 31, 2011, one month ended
January 31, 2011 and year ended December 31, 2010.
Future minimum lease payments under capital leases at
December 31, 2012 were not significant. See Note 12.
Purchase Commitments – At December 31, 2012, purchase
commitments were $344 million for 2013, $318 million for
2014, $257 million for 2015, $7 million for 2016, $7 million
for 2017 and $58 million thereafter.
Letters of Credit – At December 31, 2012, the Company
had outstanding letters of credit, bank guarantees and
performance bonds of approximately $55 million, of which
$29 million in letters of credit were issued under the
UBS Revolver.
41
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
arising from that share transfer. The OSR has not made an
assessment at this time and continues discussions with the
Company and its legal advisors. The Company has accrued
stamp duty on the 2002 transaction in the amount of $3
million based upon its position that the Company was not
land rich at the time of the share transfers. The Company
intends to exercise all of its legal and administrative
remedies in the event that the OSR makes an assessment
based upon its claim that it is land rich.
During 2011, the outstanding legal disputes between
the Company and RTI Hamilton, Inc., dating back to 2008
came to a close with the parties reaching an agreement
in principle. The agreement reflects a compromise and
settlement of disputed claims in complete accord and
satisfaction thereof. RTI Hamilton paid Tronox the sum
of $11 million, of which $1 million constituted payment
for capital costs incurred by the Company in relation to
the agreement, plus interest.
Other Matters – 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.
Environmental Contingencies – In accordance with ASC 450,
the Company recognizes a loss and records an undiscounted
liability when litigation has commenced or a claim or an
assessment has been asserted or, based on available informa-
tion, commencement of litigation or assertion of a claim
or assessment is probable, and the associated costs can be
estimated. It is not possible for the Company to reliably
estimate the amount and timing of all future expenditures
related to environmental matters because, among other
reasons, environmental laws and regulations, as well as
enforcement policies and clean up levels, are continually
changing, and the outcome of court proceedings, alterna-
tive dispute resolution proceedings (including mediation)
and discussions with regulatory agencies are inherently
uncertain.
The Company believes that it has reserved adequately
for the probable and reasonably estimable costs of known
contingencies. There is no environmental litigation,
claim or assessment that has been asserted nor is there any
probability of an assessment or a claim for which the
Company has not recorded a liability. However, additions
to the reserves may be required as additional information
is obtained that enables the Company to better estimate
its liabilities. The Company cannot reliably estimate the
amount of future additions to the reserves at this time.
In certain situations, reserves may be probable but not
estimable. Additionally, sites may be identified in the future
where the Company could have potential liability for
environmental related matters. If a site is identified, the
Company will evaluate to determine what reserve, if any,
should be established.
Legal – The Western Australia Office of State Revenue
(the “OSR”) continues to review their technical position on
the imposition of stamp duty on the transfer of Tronox
Incorporated’s shares related to Kerr-McGee’s restructuring
in 2002 and from the share transfer related to the spinoff
of Tronox Incorporated from Kerr-McGee in 2005. On
January 17, 2012, the OSR contacted the Company seeking
additional information related to the 2005 spinoff. In
addition, the OSR informed the Company that it has made
a preliminary determination that the Company was land
rich at the time of the 2002 share transfers and, as a result,
the Company may be liable for stamp duty and penalties
42
15 Shareholders’ Equity
Share split Declared
On June 26, 2012, the Board approved a 5-to-1 share split
for holders of its Class A Shares and Class B Shares at the
close of business on July 20, 2012, by issuance of four
additional shares for each share of the same class.
As a result of the share split, the Company recorded an
increase to Class A and Class B Shares of $1 million with
corresponding decreases to “Retained earnings” on the
Consolidated Balance Sheets.
Outstanding Shares
The changes in outstanding and treasury shares for the year
ended December 31, 2012 were as follows:
Tronox Limited Class A Shares outstanding:
Balance at December 31, 2011
Shares issued in connection with the Transaction (1)
Shares issued for share-based compensation
Shares issued for warrants exercised
Shares purchased by the T-Bucks Trust (2)
Class A Shares purchased by Exxaro, and converted
to Class B Shares
Shares repurchased/cancelled (3)
Balance at December 31, 2012
Tronox Limited Class B Shares outstanding:
Balance at December 31, 2011
Shares issued in connection with the Transaction
Class A Shares purchased by Exxaro, and converted
to Class B Shares
Balance at December 31, 2012
Tronox Incorporated shares outstanding:
Balance at December 31, 2011
Shares issued for share-based compensation
Shares issued for warrants exercised
Shares issued for claims
Shares exchanged in connection with the Transaction (1)
Balance at December 31, 2012
Tronox Incorporated shares held as treasury:
Balance at December 31, 2011
Shares issued for share-based compensation
Shares cancelled in connection with the Transaction (1)
Balance at December 31, 2012
—
76,644,650
24,620
9,353
(548,234)
(1,400,000)
(12,626,400)
62,103,989
—
49,754,280
1,400,000
51,154,280
75,383,455
570,785
690,385
25
(76,644,650)
—
472,565
239,360
(711,925)
—
(1) Shares issued in connection with the Transaction have been adjusted for the 5-for-1
share split. On the Transaction Date, the Company issued 15,328,930 Class A Shares
and 9,950,856 Class B Shares.
(2) During the third quarter of 2012, the Company created the T-Bucks Employee
Participation Plan for the benefit of certain employees in South Africa. See Note 19
for additional information.
(3) In accordance with Australian law, the Company is not permitted to hold shares
of its own ordinary shares. As such, all Class A Shares that were repurchased by
the Company have been cancelled. Additionally, all shares of Tronox Incorporated
common stock that were held by Tronox Incorporated on the Transaction date
were cancelled in connection with the Transaction. The number of Class A Shares
repurchased has been adjusted for the 5-for-1 share split.
trox 2012ar
Warrants
As part of its emergence from bankruptcy, Tronox
Incorporated issued to existing holders of its equity,
warrants in two tranches, Series A warrants and Series B
warrants (collectively, the “Tronox Incorporated
Warrants”), to purchase up to an aggregate of 1,216,216
shares, or 7.5%, Tronox Incorporated’s shares. In connec-
tion with the Transaction, and pursuant to the terms of the
Tronox Incorporated Warrant Agreement, Tronox Limited
entered into an amended and restated warrant agreement,
dated as of the Transaction Date, whereby the holders of
the Tronox Limited Warrants are entitled to purchase
one Class A Share and receive $12.50 in cash at the initial
exercise prices of $62.13 for each Series A Warrant (the
“Series A Warrants”) and $68.56 for each Series B Warrant
(the “Series B Warrants,” collectively with the Series A
Warrants, the “Warrants”). On the Transaction Date,
there were 841,302 Warrants outstanding. 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 on a cashless basis. The Warrants are freely transferable
by the holder thereof.
In connection with the share split, holders of the
Warrants are entitled to purchase five Class A Shares and
receive $12.50 in cash at the initial exercise prices of $62.13
for each Series A Warrant and $68.56 for each Series B
Warrant. As of December 31, 2012 there were 364,817
Series A Warrants and 474,421 Series B Warrants
outstanding.
Share Repurchases
On June 26, 2012, the Board authorized the repurchase
of 10% of Tronox Limited voting securities in open market
transactions. During 2012, the Company repurchased
12,626,400 Class A Shares, affected for the 5-for-1 share
split, at an average price of $25.84 per share, inclusive of
commissions, for a total cost of $326 million. Repurchased
shares were subsequently cancelled in accordance with
Australian law. On September 27, 2012, the Company
announced the successful completion of its share
repurchase program.
43
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
Exxaro Share Purchases
The Company’s constitution provides that, subject to
certain exceptions, when Exxaro acquires a Class A Share, it
automatically converts to a Class B Share. As such, Exxaro
generally will not hold Class A Shares. During October
2012, Exxaro purchased 1,400,000 Class A Shares in market
purchases, which converted to Class B Shares.
A reconciliation of the beginning and ending balances
of noncontrolling interest on the Company’s Consolidated
Balance Sheets is presented below.
Balance at January 1, 2012
Fair value of noncontrolling interest on the Transaction Date
Net loss attributable to noncontrolling interest
Effect of exchange rate changes
Balance at December 31, 2012
$ —
233
(1)
1
$ 233
17 Income Taxes
The Company’s operations are conducted
through its various subsidiaries in a number of
countries throughout the world. The Company has pro-
vided for income taxes based upon the tax laws and rates
in the countries in which operations are conducted and
income is earned. For the year ended December 31, 2012,
Tronox Limited is the public parent registered under the
laws of the State of Western Australia. For the year ended
December 31, 2011, one month ended January 31, 2011 and
year ended December 31, 2010, Tronox Incorporated was
the public parent, a Delaware corporation, registered in the
United States.
Income (loss) from continuing operations before income
taxes is comprised of the following:
Successor
Predecessor
Year
Ended
Eleven
Months
Ended
December December
31, 2011
31, 2012
One
Month
Ended
Year
Ended
January December
31, 2010
31, 2011
Australia
United States
Other
Total
$ 1,019
10
(21)
$ 1,008
$ 70
120
72
$ 262
$ 107
497
28
$ 632
$ 2
(10)
15
$ 7
Dividends Declared
On November 8, 2012, the Board declared a quarterly
dividend of $0.25 per share to holders of Class A Shares
and Class B Shares, totaling approximately $29 million.
On June 26, 2012, the Board declared a quarterly dividend
of $0.25 per share to holders of Class A Shares and Class B
Shares, totaling $32 million.
Tronox Incorporated Common Shares
On August 6, 2012, Tronox Limited and Tronox
Incorporated filed post-effective amendment No. 1 to the
Registration Statement on Form S-1 (File No. 333-181842)
declared effective by the SEC on July 11, 2012 (the “Form
S-1”) to deregister the Tronox Incorporated Class A
common shares and exchangeable shares which were not
issued on the date of the Transaction.
16 Noncontrolling Interest
In connection with the Transaction, Exxaro
and its subsidiaries retained a 26% ownership
interest in each of Tronox KZN Sands Pty Ltd and
Tronox Mineral Sands Pty Ltd in order to comply with
the ownership requirements of the BEE legislation in
South Africa. Exxaro is entitled to exchange this interest
for approximately 3.2% in additional Class B Shares under
certain circumstances (i.e., the earlier of the termination
of the Empowerment Period or the tenth anniversary of
completion of the Transaction).
44
The income tax benefit (provision) from continuing
The application of business combination accounting
trox 2012ar
operations is summarized below:
Successor
Predecessor
Year
Ended
Eleven
Months
Ended
December December
31, 2011
31, 2012
One
Month
Ended
Year
Ended
January December
31, 2010
31, 2011
Australian:
Current
Deferred
U.S. Federal & State:
Current
Deferred
Other:
Current
Deferred
$ (28)
124
(9)
—
—
38
$ (1)
(4)
—
—
(14)
(1)
$ —
(1)
—
—
—
—
$ (6)
5
—
—
(1)
—
Total benefit (provision)
from continuing operations
$ 125
$ (20)
$ (1)
$ (2)
In the following table, the applicable statutory income
tax rates are reconciled to the Company’s effective income
tax rates for “Income (Loss) from Continuing Operations”
as reflected in the Consolidated Statements of Operations.
Successor
Predecessor
Year
Ended
Eleven
Months
Ended
December December
31, 2011
31, 2012
One
Month
Ended
Year
Ended
January December
31, 2010
31, 2011
30%
35%
35%
35%
Statutory tax rate
Increases (decreases) resulting from:
Tax rate differences
Foreign exchange
Disallowable expenditures
Foreign interest disallowance
Gain on bargain purchase
(net of tax)
Resetting of tax basis to market value
Permanent adjustment for fresh
start (net of tax)
Prior year accruals
Change in uncertain tax positions
U.S. state income taxes
Valuation allowances
Withholding taxes
Other, net
Effective tax rate
(6)
—
(1)
—
(5)
—
7
2
—
—
—
—
(31)
(7)
—
—
—
—
—
(1)
(6)
2
(25)
—
(1)
—
—
—
—
(1)
2
2
(12%)
(29)
—
—
—
(1)
—
(5)
93
39
166
61
—
—
—
23
54
(15)
(427)
—
1
on June 15, 2012, resulted in the remeasurement of
deferred income taxes associated with recording the assets
and liabilities of the acquired entities at fair value pursuant
to ASC 805. As a result, deferred income taxes of $185
mil lion were recorded in accordance with ASC 740.
Additionally, certain subsidiaries of the Company
re-domiciled in Australia subsequent to the Transaction.
Because the Australian tax laws provide for a resetting of
the tax basis of the business assets to market value, the
Company recorded a tax benefit related to this market value
basis adjustment. The overall tax benefit from this basis
adjustment increase was partially offset by a valuation
allowance. Because this basis change did not pertain to an
entity acquired in the Transaction, this net tax benefit
was recorded through tax expense and did not impact the
Company’s gain on bargain purchase.
The application of fresh-start accounting on January 31,
2011, resulted in the re-measurement of deferred income
tax liabilities associated with the revaluation of Tronox
Incorporated and subsidiaries’ assets and liabilities pursuant
to ASC 852. As a result, deferred income taxes were
recorded at amounts determined in accordance with ASC
740 of $12 million as part of reorganization income.
Additionally, during 2011, Tronox Incorporated released
valuation allowances against certain of its deferred tax assets
in the Netherlands and Australia resulting from this
re-measurement.
For U.S. federal income tax purposes, typically the
amount of cancellation of debt income (“CODI”)
recognized, and accordingly the amount of tax attributes
that may be reduced, depends in part on the fair market
value of non-cash consideration given to creditors. On
Tronox Incorporated’s date of emergence, the fair market
8%
0%
30%
45
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
value of non-cash consideration given was such that the
creditors received consideration in excess of their claims.
For this reason, Tronox Incorporated did not recognize
any CODI and retained all of its U.S. tax attributes. In
addition, Tronox Incorporated reflected a tax deduction for
the premium paid to the creditors of $1,130 million. This
deduction will increase the Company’s net operating losses
(“NOL’s”) in the United States and in various states where
the Company has filing requirements. The resulting federal
tax benefit of $395 million and the estimated corresponding
state tax benefit of $51 million, net of the deferred federal
effect, have been fully offset by a valuation allowance in
accordance with ASC 740, after considering all available
positive and negative evidence. Because the financial offset
for the consideration given to creditors was recorded
through equity, neither the tax benefits nor the offsetting
valuation allowance impacts were shown in the effective
tax rate calculations. Instead, the excess tax benefit, which
netted to zero with the valuation allowance, was reflected
as an equity adjustment.
The Company does not believe an ownership change
occurred as a result of the Transaction. Upon the
Company’s emergence from bankruptcy in the period
ended January 31, 2011 the Company experienced an
ownership change resulting in a limitation under IRC
Sections 382 and 383 related to its U.S. NOL’s generated
prior to emergence from bankruptcy. The Company
does not expect that the application of these limitations
will have any material affect upon its U.S. federal or state
income tax liabilities.
Net deferred tax assets (liabilities) at December 31, 2012
and 2011 were comprised of the following:
December 31,
Deferred tax assets:
Net operating loss and other carryforwards
Property, plant and equipment
Reserves for environmental remediation and restoration
Obligations for pension and other employee benefits
Investments
Grantor trusts
Inventory
Interest
Other accrued liabilities
Long-term notes payable
Unrealized foreign exchange losses
Other
Total deferred tax assets
Valuation allowance associated with deferred tax assets
Net deferred tax assets
Deferred tax liabilities:
Property, plant and equipment
Intangibles
Inventory
Other
Total deferred tax liabilities
Net deferred tax asset (liability)
Balance sheet classifications:
Deferred tax assets – current
Deferred tax assets – long-term
Deferred tax liability – current
Deferred tax liability – long-term
Net deferred tax asset
Successor
2012
2011
$ 664
197
31
79
31
109
2
24
50
52
10
8
1,257
(753)
504
(386)
(110)
(22)
(8)
(526)
$
(22)
$ 114
91
(5)
(222)
$
(22)
$ 495
6
6
57
34
123
4
—
16
—
1
1
743
(561)
182
(67)
(118)
(1)
(2)
(188)
$
(6)
$
4
9
—
(19)
$
(6)
During the years ended December 31, 2012 and 2011,
the total change to the valuation allowance was an increase
of $192 million and an increase of $215 million, respectively.
The deferred tax assets generated by tax loss carryfor-
wards have been partially offset by valuation allowances.
The expiration of these carryforwards at December 31,
2012, is shown below. These expiration amounts are
comprised of Australian, United States, state, and other
jurisdictional losses.
2013
2014
2015
2016
2017
Thereafter
Total tax losses
46
Australia
$ —
—
—
—
—
253
$ 253
U.S.
Federal
$
—
—
—
—
—
1,226
$ 1,226
U.S.
State
$
—
—
—
11
—
1,431
$ 1,442
Tax Loss
Carryforwards
Total
$
22
52
31
17
3
3,232
$ 3,357
Other
$ 22
52
31
6
3
322
$ 436
trox 2012ar
At December 31, 2012, Tronox Limited, the new
A reconciliation of the beginning and ending amounts
Australian holding company, has no undistributed earnings
of foreign subsidiaries. Tronox Incorporated has certain
foreign subsidiaries with undistributed earnings which total
$199 million. The Company has made no provision for
deferred taxes for these undistributed earnings because they
are considered to be indefinitely reinvested outside of the
parents’ taxing jurisdictions. The distribution of these
earnings in the form of dividends or otherwise may subject
the Company to U.S. federal and state income taxes and
potentially to foreign withholding taxes. However, because
of the complexities of taxation of foreign earnings, it is
not practicable to estimate the amount of additional tax
that might be payable on the eventual remittance of these
earnings to their parent corporations.
The Company continues to maintain a valuation
allowance related to the net deferred tax assets in the
United States. 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. ASC 740
requires that all available positive and negative evidence
be weighted to determine whether a valuation allowance
should be recorded.
A reconciliation of the beginning and ending amounts
of unrecognized tax benefits for 2012 is as follows:
Balance at January 1
Additions for tax positions related to prior year
Balance at December 31
Successor
2012
$ 2
2
$ 4
of unrecognized tax benefits is as follows:
Predecessor: Balance at January 1
Successor: Balance at January 31
Additions for tax positions related to the current year
Decrease due to settlements
Decrease due to lapse of applicable statute of limitations
Successor: Balance at December 31
2011
$ 13
13
1
(3)
(9)
$ 2
Included in the balance at December 31, 2012 and 2011,
were tax positions of $1 million and $1 million, respectively,
for which the ultimate deductibility is highly certain, but
for which there is uncertainty about the timing of such
deductibility. The net benefit associated with approximately
$3 million and $1 million of the December 31, 2012 and
2011 reserve, respectively, for unrecognized tax benefits, if
recognized, would affect the effective income tax rate.
As a result of potential settlements, it is reasonably
possible that the Company’s gross unrecognized tax benefits
for interest deductibility may decrease within the next
twelve months by an amount up to $4 million.
The Company recognizes interest and penalties related
to unrecognized tax benefits in “Income tax benefit (provi-
sion)” on the Consolidated Statements of Operations.
During the year ended December 31, 2012, eleven months
ended December 31, 2011, one month ended January 31,
2011, and year ended December 31, 2010, the Company
recognized approximately $0 million, $(10) million,
$0 million, and $2 million, respectively, in gross interest
and penalties in the Consolidated Statement of Operations.
At December 31, 2012 and 2011, the Company had no
remaining accruals for the gross payment of interest and
penalties related to unrecognized tax benefits and the
noncurrent liability section of the Consolidated Balance
Sheet reflected $4 million and $2 million, respectively,
as the reserve for uncertain tax positions.
47
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
The following table sets forth the number of shares
utilized in the computation of basic and diluted earnings
per share from continuing operations for the periods
indicated. The weighted average shares outstanding,
potentially dilutive shares, earnings per share and anti-
dilutive shares of the Successor have been restated to
affect the 5-for-1 share split discussed in Note 15.
Successor
Predecessor
Year
Ended
Eleven
Months
Ended
December December
31, 2011
31, 2012
One
Month
Ended
Year
Ended
January December
31, 2010
31, 2011
Numerator – Basic and Diluted:
Income from Continuing
Operations
Add: Loss attributable to
noncontrolling interest
Less: Dividends paid
Undistributed earnings
Percentage allocated
to ordinary shares
Undistributed earnings allocated
to ordinary shares
Add: Dividends paid allocated
to ordinary shares
Earnings available
to ordinary shares
Denominator – Basic:
Weighted-average ordinary
shares (in thousands)
Add: Effect of Dilutive Securities:
Restricted stock
Warrants
Options
Denominator – Dilutive
Earnings per Share:
Basic earnings per Share (1)
$ 1,133
$ 242
$ 631
$
5
1
(61)
1,073
—
—
—
—
—
—
242
631
5
99.26%
100%
100%
100%
1,065
242
631
5
60
—
—
—
$ 1,125
$ 242
$ 631
$
5
98,985
74,905
41,311
41,232
49
2,372
—
101,406
275
2,895
20
78,095
88
—
—
151
—
—
41,399
41,383
$ 11.37
$ 3.22
$ 15.28
$ 0.11
Diluted earnings per Share (1)
$ 11.10
$ 3.10
$ 15.25
$ 0.11
(1) The basic and diluted earnings per share amounts were computed from exact,
not rounded, income and share information.
The Australian returns of the Company are closed
through 2004. The U.S. returns are closed for years
through 2008, with the exception of issues for which
the Kerr-McGee Corporation refund claim is being
pursued in the United States Court of Federal Claims.
The Netherlands returns are closed through 2005.
The Switzerland returns are closed through 2009. In
accordance with the Transaction Agreement, the Company
is not liable for income taxes of the acquired companies
with respect to periods prior to the Transaction Date.
The Company believes that it has made adequate
provision for income taxes that may be payable with respect
to years open for examination; however, the ultimate out -
come is not presently known and, accordingly, additional
provisions may be necessary and/or reclassifications of
noncurrent tax liabilities to current may occur in the future.
18 Earnings Per Share
Basic earnings per share is computed utilizing
the two-class method, and is calculated based on
weighted-average number of ordinary shares outstanding
during the periods presented. Diluted earnings per share is
computed using the weighted-average number of ordinary
and ordinary equivalent shares outstanding during the
periods utilizing the two-class method for nonvested
restricted shares, warrants and options.
Certain unvested awards issued under the Tronox
Limited Management Equity Incentive Plan and the
T-Bucks Employee Participation Plan, as further discussed
in Note 19, contain non-forfeitable rights to dividends
declared on Class A Shares. Any unvested shares that
participate in dividends are considered participating
securities, and are included in the Company’s computation
of basic and diluted earnings per share using the two-class
method, unless the effect of including such shares would be
antidilutive. The two-class method of computing earnings
per share is an earnings allocation formula that determines
earnings per share for each class of ordinary shares and
participating security according to dividends declared
(or accumulated) and participation rights in undistributed
earnings.
48
In computing diluted earnings per share under the
two-class method, the Company considered potentially
dilutive shares. For the year ended December 31, 2012,
528,759 options with an average exercise price of $25.16
were not recognized in the diluted earnings per share
calculation as they were antidilutive. For the one month
ended January 31, 2011, 1,152,408 options with an average
exercise price of $9.54 were anti-dilutive because they
were not “in the money.”
During 2012, the Company created the T-Bucks
Employee Purchase Plan for the benefit of certain employ-
ees at Tronox subsidiaries in South Africa. Shares held by
the Trust are not considered outstanding for purposes of
computing earnings per share. See Note 19 for additional
information on the T-Bucks Employee Purchase Plan.
19 Share-based Compensation
Compensation expense related to restricted
share awards was $29 million, $14 million,
less than $1 million and $1 million for the year ended
December 31, 2012, eleven months ended December 31,
2011, one month ended January 31, 2011 and year ended
December 31, 2010, respectively. Compensation expense
related to the Company’s nonqualified option awards was
$2 million, less than $1 million, $0 million and less than
$1 million for the year ended December 31, 2012, eleven
months ended December 31, 2011, one month ended
January 31, 2011 and year ended December 31, 2010,
respectively. During the one month ended January 31,
2011, the tax benefit associated with compensation expense
had a corresponding offset to the valuation allowance,
yielding no overall income tax benefit.
As of December 31, 2012, unrecognized compensation
expense related to the Company’s restricted shares and
options, adjusted for estimated forfeitures, was approxi-
mately $30 million, with such unrecognized compensation
expense expected to be recognized over a weighted-average
period of approximately 3 years. The ultimate amount
of such expense is dependent upon the actual number of
restricted shares and options that vest. The Company
periodically assesses the forfeiture rates used for such
estimates. A change in estimated forfeiture rates would
cause the aggregate amount of compensation expense
recognized in future periods to differ from the estimated
unrecognized compensation expense above.
trox 2012ar
Tronox Limited Management Equity Incentive Plan
On the Transaction Date, Tronox Limited adopted
the Tronox Limited management equity incentive plan
(the “Tronox Limited MEIP”), which permits the grant
of awards that constitute incentive options, nonqualified
options, share appreciation rights, restricted shares,
restricted share units, performance awards and other
share-based awards, cash payments and other forms such 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 2012, the Company granted 341,755 restricted
share awards to employees, which have both time require-
ments and performance requirements. The time provisions
are graded vesting, while the performance provisions are
cliff vesting and have a variable payout. During 2012,
the Company granted 34,740 restricted share awards with
graded vesting to members of the Board. In accordance
with ASC 718, the restricted share awards issued during
2012 are classified as equity awards and are accounted
for using the fair value established at the grant date.
The following table summarizes restricted share activity
for the year ended December 31, 2012.
Balance at December 31, 2011
Awards converted from Tronox Incorporated
to Tronox Limited in connection
with the Transaction
Awards granted
Awards earned
Awards forfeited
Balance at December 31, 2012
Outstanding awards expected to vest
(1) Represents the weighted-average grant-date fair value.
Number
of Shares
Fair
Value (1)
—
$ —
420,765
376,495
(24,620)
(11,575)
16.99
24.97
20.87
29.32
761,065
$ 20.62
754,162
$ 20.57
49
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
Options
On October 26, 2012 and November 12, 2012, the
Company granted 88,233 and 711 options, respectively, to
employees to purchase Class A Shares, respectively, which
vest over a three year period. The following table presents a
summary of activity for the year ended December 31, 2012:
Balance at December 31, 2011
Options converted to Tronox
Limited in connection
with the Transaction
Options issued
Options forfeited
Options vested
Outstanding at
December 31, 2012
Outstanding awards expected
to vest
Number
of Options
Contractual
Life
Years (1)
Price (1)
Intrinsic
Value (2)
—
$ —
—
$ —
517,330
247,904
(159,880)
(76,595)
24.56
23.83
22.55
22.25
9.10
9.62
—
—
—
—
—
—
528,759
$ 25.16
9.38
$ —
491,416
$ 25.23
9.40
$ —
(1) Represents weighted average exercise price and weighted average remaining
contractual life, as applicable. The fair value of awards granted in connection with
the share split has been affected to reflect the estimated fair value on the date of
such share split.
(2) Reflects aggregate intrinsic value based on the difference between the market price of
the Company’s shares at December 31, 2012 and the options’ exercise price. Options
issued in connection with the share split had no effect on the intrinsic value of
outstanding options.
October 26, 2012 Grants
Valuation and Cost Attribution Methods – Options’ fair
value was determined on the date of grant using the
Black-Scholes option-pricing model and was recognized in
earnings on a straight-line basis over the employee service
period of three years necessary to earn the awards, which
is the vesting period. The Company ran the Black-Scholes
option-pricing model for the 88,233 options granted on
October 26, 2012 and used the following assumptions:
The Company used the fair market value and exercise
price of $20.64, which was the adjusted closing price of
Class A Shares, New York Stock Exchange symbol TROX,
recorded on October 26, 2012.
Expected Volatility – In setting the volatility assumption, the
Company considered the most recent reported volatility of
each compensation peer company. For the 2012 valuation,
the peer company group included the following companies:
Cabot Corporation, Celanese Corporation, Cliffs Natural
Resources Inc., Cytec Industries Inc., Eastman Chemical
Company, FMC Corporation, Freeport-McMoRan
Copper& Gold Inc., Georgia Gulf Corporation, Huntsman
Corporation, Kronos Worldwide, Inc., PPG Industries,
Inc., Rockwood Holdings, Inc., RPM International Inc.,
The Sherwin-Williams Company, Southern Copper
Corporation, Teck Resources Limited, The Valspar
Corporation, W.R. Grace& Co, and Westlake Chemical
Corporation.
Risk-free interest rate – The Company used a risk-free
interest rate of 1.02%, which was the risk-free interest
rate based on U.S. Treasury Strips available with maturity
period consistent with expected life assumption.
November 12, 2012 Grants
Valuation and Cost Attribution Methods – Options’ fair
value was determined on the date of grant using the
Black-Scholes option-pricing model and was recognized in
earnings on a straight-line basis over the employee service
period of three years necessary to earn the awards, which is
the vesting period. The Company ran the Black-Scholes
option-pricing model for the 711 options granted on
November 12, 2012 and used the following assumptions:
Risk-free interest rate
Expected dividend yield
Expected volatility
Expected term (years)
Per-unit fair value of options granted
Risk-free interest rate
Expected dividend yield
Expected volatility
Expected term (years)
Per-unit fair value of options granted
2012
1.02%
4.84%
56%
10
$ 7.03
2012
0.87%
5.34%
56%
10
$ 6.07
50
trox 2012ar
The Company used the fair market value and exercise
On September 3, 2012, the Participants were awarded
price of $18.72, which was the adjusted closing price of
Class A Shares, New York Stock Exchange symbol TROX,
recorded on November 12, 2012.
Expected Volatility – In setting the volatility assumption, the
Company considered the most recent reported volatility of
each compensation peer company. For the 2012 valuation,
the peer company group included the following companies:
Cabot Corporation, Celanese Corporation, Cliffs Natural
Resources Inc., Cytec Industries Inc., Eastman Chemical
Company, FMC Corporation, Freeport-McMoRan
Copper& Gold Inc., Georgia Gulf Corporation, Huntsman
Corporation, Kronos Worldwide, Inc., PPG Industries,
Inc., Rockwood Holdings, Inc., RPM International Inc.,
The Sherwin-Williams Company, Southern Copper
Corporation, Teck Resources Limited, The Valspar
Corporation, W.R. Grace& Co, and Westlake Chemical
Corporation.
Risk-free interest rate – The Company used a risk-free
interest rate of 0.87%, which was the risk-free interest rate
based on U.S. Treasury Strips available with maturity
period consistent with expected life assumption.
T-Bucks Employee Participation Plan (“T-Bucks EPP”)
During 2012, the Company established the T-Bucks
EPP for the benefit of certain qualifying employees (the
“Participants”) of Tronox subsidiaries in South Africa
(the “Employer Companies”). In accordance with the terms
of the Trust Deed of the T-Bucks Trust (the “T-Bucks
Trust Deed”), the Employer Companies funded the
T-Bucks Trust (the “Trust”) in the amount of R124 million
(approximately $15 million), which represents a capital
contribution equal to R75,000 for each Participant. The
funded amount was used to acquire 548,234 Class A Shares.
Additional contributions may be made in the future at the
discretion of the Board.
share units in the Trust which entitles them to receive
shares of Tronox Limited upon completion of the vesting
period on May 31, 2017. The Participants are also entitled
to receive dividends on the Tronox shares during the
vesting period. Forfeited shares are retained by the Trust
and are allocated to future participants in accordance
with the Trust Deed. Under certain conditions, as outlined
in the Trust Deed, Participants may receive share units
awarded before May 31, 2017. The fair value of the awards
is the fair value of the shares determined at the Grant Date.
Compensation costs are recognized over the vesting period
using the straight-line method. Compensation expense
for the year ended December 31, 2012 was $1 million.
In accordance with ASC 718, the T-Bucks EPP is classified
as an equity-settled shared-based payment plan.
Balance at December 31, 2011
Shares acquired by the Trust
Balance at December 31, 2012
Number
of Shares
—
548,234
548,234
Fair
Value (1)
—
$ 25.79
$ 25.79
Outstanding awards expected to vest
548,234
$ 25.79
(1) Represents the fair value on the date of purchase by the Trust.
Long-Term Incentive Plan
In connection with the Transaction, the Company assumed
a long-term incentive plan (the “LTIP”) for the benefit
of certain qualifying employees of Tronox subsidiaries in
South Africa and Australia. The LTIP is classified as a
cash settled compensation plan and is re-measured to fair
value at each reporting date. At December 31, 2012,
the LTIP plan liability was approximately $8 million.
51
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
Options
The following table presents a summary of activity for the
Tronox Incorporated options for the year ended December
31, 2012:
Balance at December 31, 2011
Options issued
Options converted to Tronox
Limited in connection
with the Transaction
Outstanding at
December 31, 2012
Number
of Options
Contractual
Life
Years (1)
Price (1)
Intrinsic
Value (2)
345,000
172,330
$ 22.00
29.69
9.95
9.87
$ 0.7
—
(517,330)
24.56
9.59
0.7
—
$ —
—
$ —
(1) Represents weighted average exercise price and weighted average remaining
contractual life, as applicable.
(2) Reflects aggregate intrinsic value based on the difference between the market price
of the Company’s shares at December 31, 2012 and the options’ exercise price.
Predecessor
Upon emergence from bankruptcy, all predecessor common
stock equivalents, including but not limited to options and
restricted stock units of Tronox Incorporated were vested
and immediately cancelled with the plan of reorganization.
Overview – Tronox Incorporated’s Long Term Incentive Plan
(the “Predecessor LTIP”) authorized the issuance of shares
of Tronox Incorporated common stock to certain employees
and non-employee directors any time prior to November
16, 2015, in the form of fixed-price options, restricted stock,
stock appreciation rights or performance awards. As of the
date of emergence from bankruptcy, all stock-based awards
previously issued under the Predecessor’s LTIP plan vested
and were immediately cancelled.
Tronox Incorporated Management
Equity Incentive Plan
In connection with its emergence from bankruptcy,
Tronox Incorporated adopted the Tronox Incorporated
management equity incentive plan (the “Tronox
Incorporated MEIP”), which permitted the grant of awards
that constitute incentive options, nonqualified options,
share appreciation rights, restricted share, restricted share
units, performance awards and other share-based awards,
cash payments and other forms such as the compensation
committee of the Tronox Incorporated Board of Directors
in its discretion deems appropriate, including any combina-
tion of the above. The number of shares available for
delivery pursuant to the awards granted under the Tronox
Incorporated MEIP was 1.2 million shares.
On the Transaction Date, 748,980 restricted shares
of Tronox Incorporated vested in connection with the
Transaction. The remaining restricted shares of Tronox
Incorporated were converted to Tronox Limited
restricted shares.
Restricted Shares
During 2012, Tronox Incorporated granted 52,915 shares
to employees, which have graded vesting provisions.
The plan allows Tronox Incorporated to withhold, for tax
purposes, the highest combined maximum rate imposed
under all applicable federal, state, local and foreign tax laws
on behalf of the employees that have received these awards.
In accordance with ASC 718, such restricted share awards
were classified as liability awards and were re-measured to
fair value at each reporting date.
The following table summarizes restricted shares
activity during the year ended December 31, 2012.
Balance at December 31, 2011
Awards granted
Awards earned
Awards converted to Tronox Limited restricted
shares in connection with the Transaction
Balance at December 31, 2012
(1) Represents the weighted-average grant-date fair value.
Number
of Shares
Fair
Value (1)
1,177,995
52,915
(810,145)
$ 22.01
24.36
24.30
(420,765)
—
16.99
—
$
52
trox 2012ar
The following table summarizes information about restricted stock award, performance award and option activity for
the one month ended January 31, 2011:
Restricted Stock Awards &
Stock Opportunity Grants
Restricted Shares
Number
of Shares
Balance at December 31, 2010
Awards vested/cancelled
148,053
(148,053)
Balance at January 31, 2011
—
Fair
Value (1)
$ 4.92
—
$ —
Performance
Awards
Number
of Units
2,689,150
(2,689,150)
—
Number
of Options
1,152,408
(1,152,408)
—
Options
Price (2)
$ 9.54
—
$ —
Contractual
Life (Years) (2)
5.31
—
—
Intrinsic
Value (3)
$ 9.54
—
$ —
(1) Represents the weighted average grant date fair value.
(2) Represents weighted average exercise price and weighted average remaining contractual life, as applicable.
(3) Reflects aggregate intrinsic value based on the difference between the market price of the Company’s stock and the options’ exercise price.
20 Pension and Other Postretirement
Healthcare Benefits
The Company sponsors noncontributory
defined benefit retirement plans (qualified and nonqualified
plans) in the United States, a contributory defined benefit
retirement plan in the Netherlands, a U.S. contributory
postretirement healthcare plan and a South Africa postre-
tirement healthcare plan.
U.S. Plans
Qualified Benefit Plan – The Company sponsors a
noncontributory qualified defined benefit plan (funded)
(the “U.S. Qualified Plan”) in accordance with the
Employee Retirement Income Security Act of 1974
(“ERISA”) and the Internal Revenue Code. The Company
made contributions into funds managed by a third-party,
and those funds are held exclusively for the benefit of the
plan participants. Benefits under the U.S. Qualified Plan
were generally calculated based on years of service and
final average pay. The U.S. Qualified Plan was frozen and
closed to new participants on June 1, 2009.
Postretirement Healthcare Plan – The Company sponsors
an unfunded U.S. postretirement healthcare plan. Under
the plan, substantially all U.S. employees are eligible for
postretirement healthcare benefits provided they reach
retirement age while working for the Company. The plan
provides medical and dental benefits to U.S. retirees and
their eligible dependents.
Foreign plans
Netherlands Plan – On January 1, 2007, the Company
established the TDF-Botlek Pension Fund Foundation
(the” Netherlands Plan”) to provide defined pension
benefits to qualifying employees of Tronox Pigments
(Holland) B.V. and its related companies. The Netherlands
Plan is a contributory benefit plan under which participants
contribute 4% of the costs. Contributions by the Company
and participants are held in the fund for the sole benefit
of the participants. Benefits are determined by applying the
benefit formula to the pensionable salary, and are payable to
participants upon retirement. Under the Netherlands Plan,
a participant’s surviving spouse and children are entitled to
benefits subject to certain benefit thresholds.
South Africa Postretirement Healthcare Plan – As part of the
Transaction, the Company established a post-employment
healthcare plan, which provides medical and dental benefits
to certain Namakwa Sands employees, retired employees
and their registered dependants (the “South African Plan”).
The South African Plan provides benefits as follows:
(i) members employed before March 1, 1994 receive 100%
post-retirement and death-in-service benefits; (ii) members
employed on or after March 1, 1994 but before January
1, 2002 receive 2% per year of completed service subject
to a maximum of 50% post-retirement and death-in-
service benefits; and (iii) members employed on or after
January 1, 2002 receive no post-retirement and death-
in-service benefits.
53
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
At December 31, 2012, the Company’s U.S. qualified
retirement plan was in an underfunded status of $134
million. As a result, the Company has a projected minimum
funding requirement of $13 million for 2012, which will be
payable in 2013.
Funded Status – The following table summarizes the
accumulated benefit obligation, the projected benefit
obligation, the market value of plan assets and the funded
status of the Company’s funded retirement plans.
December 31,
Successor
Successor
2012
2011
The
U.S. Netherlands
The
U.S. Netherlands
Qualified Retirement Qualified Retirement
Plan
Plan
Plan
Plan
Accumulated benefit obligation
Projected benefit obligation
Market value of plan assets
$ 420
(420)
286
$ 117
(137)
112
$ 392
(393)
259
$ 79
(90)
91
Funded status –
(under)/over funded
$ (134)
$ (25) $ (134)
$ 1
Expected Benefit Payments – The following table shows
the expected cash benefit payments for the next five years
and in the aggregate for the years 2018 through 2022:
2013
2014
2015
2016
2017
2018 –
2022
Retirement
Plans (1)
Postretirement
Healthcare Plan 1
$32
$31
$31
$30
$31
$153
1
1
1
1
6
(1) Includes benefit payments expected to be paid from the U.S. qualified retirement plan
of $29 million, $28 million, $27 million, $27 million and $27 million in each year,
2013 through 2017, respectively, and $131 million in the aggregate for the period 2018
through 2022.
Plan financial information
Benefit Obligations and Funded Status – The following
provides a reconciliation of beginning and ending benefit
obligations, beginning and ending plan assets, funded status
and balance sheet classification of the Company’s pension
and other postretirement healthcare plans as of and for the
years ended December 31, 2012 and 2011. The benefit
obligations and plan assets associated with the Company’s
principal benefit plans are measured on December 31.
Retirement Plans
Postretirement
Healthcare Plans
Successor Successor Successor Successor
December 31,
2012
2011
2012
2011
Change in benefit obligations:
Benefit obligation,
beginning of year
Service cost
Interest cost
Net actuarial (gains) losses
Foreign currency rate changes
Contributions by plan participants
Acquired in the Transaction
Special termination benefits
Termination of the nonqualified
benefits restoration plan
Benefits paid
Administrative expenses
$ 483
3
22
78
2
1
—
—
—
(29)
(3)
$ 481
3
23
20
(3)
1
—
1
(9)
(32)
(2)
Benefit obligation, end of year
557
483
Change in plan assets:
Fair value of plan assets,
beginning of year
Actual return on plan assets
Employer contributions (1)
Participant contributions
Foreign currency rate changes
Benefits paid (1)
Administrative expenses
Fair value of plan assets,
end of year
Net over (under) funded status
of plans
350
47
30
1
2
(29)
(3)
372
7
7
1
(3)
(32)
(2)
$ 9
1
1
2
—
1
6
—
—
(2)
—
18
—
—
1
1
—
(2)
—
$ 9
—
—
1
—
1
—
—
—
(2)
—
9
—
—
1
1
—
(2)
—
398
350
—
—
$ (159)
$ (133)
$ (18)
$ (9)
Classification of amounts recognized in
the Consolidated Balance Sheets:
$ —
Noncurrent asset
—
Current accrued benefit liability
Noncurrent accrued benefit liability (159)
(159)
Sub-total of liabilities
Accumulated other
comprehensive loss
Total
94
$ (65)
$
1
—
(134)
(133)
50
$ (83)
$ —
(1)
(17)
(18)
5
$ (13)
$ —
(1)
(8)
(9)
1
$ (8)
(1) The Company expects 2013 contributions to be approximately $4 million for the
Netherlands plan and $6 million for the U.S. qualified retirement plan, while net
benefits paid are expected to be approximately $1 million for the U.S. postretirement
healthcare plan.
54
trox 2012ar
Retirement Expense — The tables below present the components of net periodic cost (income) associated with the U.S. and
foreign retirement plans recognized in the Consolidated Statement of Operations for the year ended December 31, 2012,
the eleven months ended December 31, 2011, one month ended January 31, 2011 and year ended December 31, 2010:
Retirement Plans
Postretirement Healthcare Plans
Successor
Predecessor
Successor
Predecessor
Year
Ended
Eleven
Months
Ended
December 31, December 31,
2011
2012
One
Month
Ended
Eleven
Months
Ended
January 31, December 31, December 31, December 31,
2011
Year
Ended
Year
Ended
2010
2012
2011
Month
Ended
Year
Ended
January 31, December 31,
2011
2010
Net periodic cost:
Service cost
Interest cost
Expected return on plan assets
Net amortization of prior service credit
Net amortization of actuarial loss
Total net periodic cost (income)
$ 3
22
(21)
—
—
$ 4
$ 3
21
(20)
—
—
$ 4
$ —
2
(2)
—
1
$ 1
$ 2
25
(30)
—
4
$ 1
$ 1
1
—
—
—
$ 2
$ 1
—
—
—
—
$ 1
$ —
—
—
(1)
—
$ (1)
$ —
1
—
(14)
—
$ (13)
The following table shows the pretax amounts that
are expected to be reclassified from “Accumulated other
comprehensive income” on the Consolidated Balance
Sheets to retirement expense during 2013:
Unrecognized actuarial loss
Unrecognized prior service cost (credit)
$ 2
—
$ —
—
Retirement
Plans
Postretirement
Healthcare Plans
Assumptions — The following weighted average assumptions were used to determine the net periodic cost:
Discount rate (1)
Expected return on plan assets
Rate of compensation increases
Successor
2012
2011
United
States
4.50%
5.75%
—
Netherlands
5.25%
5.25%
3.50%
United
States
5.25%
6.44%
3.50%
Netherlands
5.25%
5.25%
3.50%
Predecessor
2010
United
States
5.50%
7.50%
3.50%
Netherlands
5.25%
5.75%
3.50%
The following weighted average assumptions were used in estimating the actuarial present value of the plans’
benefit obligations:
Discount rate (1)
Rate of compensation increases
Successor
2012
2011
United
States
3.75%
—
Netherlands
3.50%
3.50%
United
States
4.5%
3.5%
Netherlands
5.25%
3.5%
Predecessor
2010
United
States
5.0%
3.5%
Netherlands
5.0%
3.5%
(1) The discount rate on the South African Plan was 9.45% at December 31, 2012, which is not included in the table above.
55
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
Health Care Cost Trend Rates – At December 31, 2012, the
assumed health care cost trend rates used to measure the
expected cost of benefits covered by the U.S. postretire-
ment healthcare plan was 9% in 2013, gradually declining
to 5% in 2018 and thereafter. A 1% increase in the assumed
health care cost trend rate for each future year would
increase the accumulated postretirement benefit obligation
at December 31, 2012 by $1 million, while the aggregate
of the service and interest cost components of the 2012 net
periodic postretirement cost would increase by less than
$1 million. A 1% decrease in the trend rate for each future
year would reduce the accumulated benefit obligation at
December 31, 2012 by $1 million and decrease the aggre-
gate of the service and interest cost components of the net
periodic postretirement cost for 2012 by less than $1 million.
Plan Assets – Asset categories and associated asset allocations
for the Company’s funded retirement plans at December
31, 2012 and 2011:
December 31,
United States:
Equity securities
Debt securities
Cash and cash equivalents
Total
Netherlands:
Equity securities
Debt securities
Real estate
Cash and cash equivalents
Total
Successor
Successor
2012
2011
Actual
Target
Actual
Target
38%
61
1
100%
41%
53
—
6
100%
38%
62
—
100%
40%
55
—
5
100%
57%
40
3
45%
55
—
100%
100%
40%
51
9
—
25%
58
10
7
100%
100%
The U.S. plan is administered by a board-appointed
committee that has fiduciary responsibility for the plan’s
management. The committee maintains an investment
policy stating the guidelines for the performance and
allocation of plan assets, performance review procedures
and updating of the policy. At least annually, the U.S.
plan’s asset allocation guidelines are reviewed in light of
evolving risk and return expectations.
Expected Return on Plan Assets – In forming the assumption
of the U.S. long-term rate of return on plan assets, the
Company took into account the expected earnings on funds
already invested, earnings on contributions expected to be
received in the current year, and earnings on reinvested
returns. The long-term rate of return estimation methodol-
ogy for U.S. plans is based on a capital asset pricing model
using historical data and a forecasted earnings model. An
expected return on plan assets analysis is performed which
incorporates the current portfolio allocation, historical
asset-class returns and an assessment of expected future
performance using asset-class risk factors. The Company’s
assumption of the long-term rate of return for the
Netherlands plan was developed considering the portfolio
mix and country-specific economic data that includes the
rates of return on local government and corporate bonds.
Discount Rate – The discount rate selected for all U.S.
plans was 3.75% as of both December 31, 2012 and 2011.
The 2012 rate was selected based on the results of a cash
flow matching analysis, which projected the expected cash
flows of the plans using a yield curves model developed
from a universe of Aa-graded U.S. currency corporate
bonds (obtained from Bloomberg) with at least $50 million
outstanding. Bonds with features that imply unreliable
pricing, a less than certain cash flow, or other indicators of
optionality are filtered out of the universe. The remaining
universe is categorized into maturity groups, and within
each of the maturity groups yields are ranked into
percentiles.
For 2011 and 2010, the discount rate for the Company’s
U.S. qualified plan and postretirement healthcare plan
was based on a discounted cash flow analysis performed by
its independent actuaries utilizing the Citigroup Pension
Discount Curve as of the end of the year. For the foreign
plans, the Predecessor bases the discount rate assumption
on local corporate bond index rates.
56
Substantially all of the plan’s assets are invested with
The fair values of pension investments as of December
trox 2012ar
nine equity fund managers, three fixed-income fund
managers and one money-market fund manager. To control
risk, equity fund managers are prohibited from entering
into the following transactions, (i) investing in commodi-
ties, including all futures contracts, (ii) purchasing letter
stock, (iii) short selling, and (iv) option trading. In addition,
equity fund managers are prohibited from purchasing on
margin and are prohibited from purchasing Tronox securi-
ties. Equity managers are monitored to ensure investments
are in line with their style and are generally permitted to
invest in U.S. common stock, U.S. preferred stock, U.S.
securities convertible into common stock, common stock of
foreign companies listed on major U.S. exchanges, common
stock of foreign companies listed on foreign exchanges,
covered call writing, and cash and cash equivalents.
Fixed-income fund managers are prohibited from
investing in (i) direct real estate mortgages or commingled
real estate funds, (ii) private placements above certain
portfolio thresholds, (iii) tax exempt debt of state and local
governments above certain portfolio thresholds, (iv) fixed
income derivatives that would cause leverage, (v) guaran-
teed investment contracts and (vi) Tronox securities. They
are permitted to invest in debt securities issued by the U.S.
government, its agencies or instrumentalities, commercial
paper rated A3/P3, FDIC insured certificates of deposit
or bankers’ acceptances and corporate debt obligations.
Each fund manager’s portfolio has an average credit rating
of A or better.
The Netherlands plan is administered by a pension
committee representing the employer, the employees and
the pensioners. The pension committee has six members,
whereby three members are elected by the employer, two
members are elected by the employees and one member is
elected by the pensioners, and each member has one vote.
The pension committee meets at least quarterly to discuss
regulatory changes, asset performance and asset allocation.
The plan assets are managed by one Dutch fund manager
against a mandate set at least annually by the pension
committee. In accordance with policies set by the pension
committee, a new fund manager was appointed effective
December 1, 2006. Simultaneous with the change in fund
manager, the asset allocation was modified using committee
policy guidelines. The plan assets are evaluated annually
by a multinational benefits consultant against state defined
actuarial tests to determine funding requirements.
31, 2012 are summarized below:
U.S. Pension
Fair Value Measurement at December 31, 2012, Using:
Quoted
Prices in
Markets for
Active Significant
Significant
Other
Identical Observable Unobservable
Inputs
Inputs
(Level 3)
(Level 2)
Assets
(Level 1)
Total
Asset category:
Commingled Equity Fund.
Debt securities
Corporate
Government
Mortgages
Commingled Fixed
Income Funds
Cash & cash equivalents
Commingled Cash
Equivalents Fund
Total at fair value
$ —
$ 110 (1)
$ —
$ 110
—
11 (4)
—
8 (5)
1 (5)
16 (5)
—
—
—
8
12
16
—
137 (2)
—
137
—
$ 11
3 (3)
—
3
$ 275
$ —
$ 286
(1) For commingled equity fund owned by the funds, fair value is based on observable
quoted prices on active exchanges, which are Level 1 inputs.
(2) For commingled fixed income funds, fair value is based on observable inputs of
comparable market transactions, which are Level 2 inputs.
(3) For commingled cash equivalents funds, fair value is based on observable inputs of
comparable market transactions, which are Level 2 inputs.
(4) For government debt securities that are traded on active exchanges, fair value is based
on observable quoted prices, which are Level 1 inputs.
(5) For corporate, government, and mortgage related debt securities, fair value is based
on observable inputs of comparable market transactions, which are Level 2 inputs.
Netherlands Pension
Fair Value Measurement at December 31, 2012, Using:
Quoted
Prices in
Markets for
Active Significant
Significant
Other
Identical Observable Unobservable
Inputs
Inputs
(Level 3)
(Level 2)
Assets
(Level 1)
Total
Asset category:
Equity securities –
Non-U.S. Pooled Funds
Debt securities –
Non-U.S. Pooled Funds
Cash
Total at fair value
$ —
$ 46 (1)
$ —
$ 46
—
—
$ —
60 (2)
6
$ 112
—
—
$ —
60
6
$ 112
(1) For equity securities in the form of fund units that are redeemable at the measurement
date, the unit value is deemed as a Level 2 input.
(2) For pooled fund debt securities, the fair value is based on observable inputs, but do not
solely rely on quoted market prices, and therefore are deemed Level 2 inputs.
57
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
The fair values of pension investments as of December
31, 2011 are summarized below:
The following tables set forth the changes in the fair
value of Level 3 plan assets for the year ended December
31, 2011:
U.S. Pension
Fair Value Measurement at December 31, 2011, Using:
Quoted
Prices in
Markets for
Active Significant
Significant
Other
Identical Observable Unobservable
Inputs
Inputs
(Level 3)
(Level 2)
Assets
(Level 1)
Balance at December 31, 2010
Transfers to Level 2
Total
Balance at December 31, 2011
U.S. Level 3 Assets
International
Commingled
Funds U.S.
Equity
$ 22
(22)
$ —
Total
$ 22
(22)
$ —
Defined Contribution Plans
U.S. Savings Investment Plan
On March 30, 2006, the Company established the U.S.
Savings Investment Plan (the “SIP”), a qualified defined
contribution plan under section 401(k) of the Internal
Revenue Code. Under the SIP, the Company’s regular
full-time and part-time employees contribute a portion of
their earnings, and the Company matches these contribu-
tions up to a predefined threshold. During 2011 and 2012,
the Company’s matching contribution was 100% of the first
3% of employees’ contribution and 50% of the next 3%.
On January 1, 2011, the Board approved a discretionary
company contribution of up to 6% of employees’ pay. The
discretionary contribution is subject to approval each year
by the Board. The Company’s matching contribution to the
SIP vests immediately; however, the Company’s discretion-
ary contribution is subject to vesting conditions that must
be satisfied over a three year vesting period. Contributions
under SIP, including the Company’s match, are invested
in accordance with the investment options elected by
plan participants. Compensation expense associated with
the Company’s matching contribution to the SIP was
$2 million, $2 million, $0 million and $1 million for the
years ended December 31, 2012, eleven months ended
Asset category:
Equity securities – U.S.
Debt securities
Corporate
U.S. Mutual Funds
Government
Asset-backed
Mortgages
International Commingled
Fixed Income Funds
Cash & cash equivalents
Commingled Cash
Equivalents Fund
Total at fair value
$ 147 (1)
$ —
$ —
$ 147
—
52 (2)
10 (5)
—
—
13 (6)
—
1 (6)
1 (6)
24 (6)
—
3 (3)
—
$ 209
8 (4)
$ 50
—
—
—
—
—
—
—
$ —
13
52
11
1
24
3
8
$ 259
(1) For equity securities owned by the funds, fair value is based on observable quoted
prices on active exchanges, which are Level 1 inputs.
(2) For mutual funds, fair value is based on nationally recognized pricing services,
which are Level 1 inputs.
(3) For commingled fixed income funds, fair value is based on observable inputs of
comparable market transactions, which are Level 2 inputs.
(4) For commingled cash equivalents funds, fair value is based on observable inputs of
comparable market transactions, which are Level 2 inputs.
(5) For government debt securities that are traded on active exchanges, fair value is
based on observable quoted prices, which are Level 1 inputs.
(6) For corporate, government, asset-backed, and mortgage related debt securities,
fair value is based on observable inputs of comparable market transactions, which are
Level 2 inputs.
Netherlands Pension
Fair Value Measurement at December 31, 2011, Using:
Quoted
Prices in
Markets for
Active Significant
Significant
Other
Identical Observable Unobservable
Inputs
Inputs
(Level 3)
(Level 2)
Assets
(Level 1)
Total
Asset category:
Equity securities –
Non-U.S. Pooled Funds
Debt securities –
Non-U.S. Pooled Funds
Real Estate Pooled Fund
Total at fair value
$ —
—
—
$ —
$ 37 (1)
$ —
$ 37
46 (2)
8 (3)
$ 91
—
—
$ —
46
8
$ 91
(1) For equity securities in the form of fund units that are redeemable at the measurement
date, the unit value is deemed as a Level 2 input.
(2) For pooled fund debt securities, the fair value is based on observable inputs, but do not
solely rely on quoted market prices, and therefore are deemed Level 2 inputs.
(3) For real estate pooled funds, the fair value is based on observable inputs, but do not
solely rely on quoted market prices, and therefore are deemed Level 2 inputs.
58
trox 2012ar
22 Related Party Transactions
Prior to the Transaction Date, Tronox
Incorporated conducted transactions with
Exxaro Australia Sands Pty Ltd, Tronox Incorporated’s 50%
partner in the Tiwest Joint Venture. Tronox Incorporated
purchased, at open market prices, raw materials used in its
production of TiO2, as well as Exxaro Australia Sands Pty
Ltd’s share of TiO2 produced by the Tiwest Joint Venture.
Tronox Incorporated also provided administrative services
and product research and development activities, which
were reimbursed by Exxaro. For the year ended December
31, 2012, eleven months ended December 31, 2011, one
month ended January 31, 2011 and year ended December
31, 2010, Tronox Incorporated made payments of
$173 million, $316 million, $44 million and $109 million,
respectively, and received payments of $9 million,
$8 million, less than $1 million and $2 million, respectively.
Subsequent to the Transaction Date, such transactions are
considered intercompany transactions and are eliminated
in consolidation.
Subsequent to the Transaction, the Company began
purchasing transition services from Exxaro, which
amounted to $7 million since the Transaction Date.
December 31, 2011, one month ended January 31, 2011 and
year ended December 31, 2010, respectively. Compensation
expense associated with the Company’s discretionary contri-
bution was $4 million and $3 million, respectively, for the
years ended December 31, 2012 and eleven months ended
December 31, 2011. Compensation expense during the one
month ended January 31, 2011 and year ended December
31, 2010 was less than $1 million.
U.S. Savings Restoration Plan
On March 30, 2006, the Company established the U.S.
Savings Restoration Plan (the “SRP”), a nonqualified
defined contribution plan, for employees whose eligible
compensation is expected to exceed the IRS compensation
limits for qualified plans. Under the SRP, participants can
contribute up to 20% of their annual compensation and
incentive. The Company’s matching contribution under
the SRP is the same as the SIP. The Company’s matching
contribution under this plan vests immediately to plan
participants. Contributions under the SRP, including
the Company’s match, are invested in accordance with
the investment options elected by plan participants.
Compensation expense associated with the Company’s
matching contribution to the SRP was $1 million and
$1 million, respectively, for the years ended December 31,
2012 and eleven months ended December 31, 2011.
Compensation expense for the one month ended January
31, 2011 and year ended December 31, 2010 was less
than $1 million.
21Cash Flows Statement Data
Other noncash items included in the reconcilia-
tion of net income to net cash flows from
operating activities include the following:
Successor
Predecessor
Year
Ended
Eleven
Months
Ended
December December
31, 2011
31, 2012
One
Month
Ended
Year
Ended
January December
31, 2011
31, 2010
Accrued transfer taxes
Amortization of fair value
inventory step-up
Other net adjustments
Total
$ 37
$ —
$ —
152
12
$ 201
—
(7)
$ (7)
—
—
$ —
$ —
—
5
$ 5
59
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
The Plan was designed to accomplish, and was premised
on, a resolution of the Debtor’s legacy environmental
(the “Legacy Environmental Liabilities”) and legacy tort
liabilities (the “Legacy Tort Liabilities” and collectively,
with the Legacy Environmental Liabilities, the “KM
Legacy Liabilities”). The Plan ensured that the Debtors
emerged from Chapter 11 free of the significant KM
Legacy Liabilities and were sufficiently capitalized. A final
settlement was reached in November 2010 with respect to
the Legacy Environmental Liabilities (the “Environmental
Settlement”) and the Legacy Tort Liabilities (the “Tort
Settlement” and, together with the Environmental
Settlement, the “Settlement”). In exchange, claimants
provided the Debtors and the reorganized Tronox
Incorporated with discharges and/or covenants not to
sue subsequent to the Effective Date with respect to the
Debtors’ liability for the Legacy Environmental Liabilities.
The Settlement established certain environmental response
and tort claims trusts that are now responsible for the
KM Legacy Liabilities in exchange for cash, certain non-
monetary assets, and the rights to the proceeds of certain
ongoing litigation and insurance and other third-party
reimbursement agreements. The Plan also provided for
the creation and funding of a torts claim trust (the “Tort
Claims Trust”), which was the sole source of distributions
to holders of Legacy Tort Liabilities claims, who were
paid in accordance with the terms of such trust’s governing
documentation. As a result of the settlement of the Debtors’
pre-petition debt and termination of the rights and interests
of pre-bankruptcy equity, the Plan enabled Tronox
Incorporated to reorganize around its existing operating
locations, including: (a) its headquarters and technical
facility at Oklahoma City, Oklahoma; (b) the TiO2 facilities
at Hamilton, Mississippi and Botlek, the Netherlands;
(c) the electrolytic chemical businesses at Hamilton,
Mississippi and Henderson, Nevada (except that the real
property and buildings associated with the Henderson
business were transferred to an environmental response
trust and reorganized Tronox Incorporated is not responsible
for environmental remediation related to historic contami-
nation at such site); and (d) its interest in the Tiwest Joint
Venture in Australia.
23 Emergence from Chapter 11
On January 12, 2009 (the “Petition Date”),
Tronox Incorporated and certain of its subsid-
iaries (collectively, the “Debtors”) filed voluntary petitions
in the U.S. Bankruptcy Court for the Southern District
of New York (the “Bankruptcy Court”) seeking reorganiza-
tion relief under the provisions of Chapter 11 of Title 11
of the United States Code (the “Bankruptcy Code”).
The Debtors’ Chapter 11 cases were consolidated for
the purpose of joint administration.
On November 30, 2010 (the “Confirmation Date”),
the Bankruptcy Court entered an order (the “Confirmation
Order”) confirming the Debtors’ First Amended Joint
Plan of Reorganization pursuant to Chapter 11 of the
Bankruptcy Code, dated November 5, 2010 (as amended
and confirmed, the “Plan”). Under Chapter 11 of the
Bankruptcy Code, a debtor may reorganize its business
for the benefit of its stakeholders with the consummation
of a plan of reorganization being the principal objective.
Among other things (subject to certain limited exceptions
and except as otherwise provided in the Plan or the
Confirmation Order), the Confirmation Order discharged
the Debtors from any debt arising before the Petition Date,
terminated all of the rights and interests of pre-bankruptcy
equity security holders and substituted the obligations set
forth in the Plan and new shares for those pre-bankruptcy
claims. Under the Plan, claims and equity interests were
divided into classes according to their relative priority and
other criteria.
Material conditions to the Plan were resolved during
the period from the Confirmation Date until January
26, 2011, and subsequently on February 14, 2011 (the
“Effective Date”), the Debtors emerged from bankruptcy
and continued operations as reorganized Tronox
Incorporated.
60
As part of the Debtor’s emergence from the Chapter 11
proceedings, Tronox Incorporated relied on a combination
of debt financing and money from new equity issued
to certain existing creditors. Specifically, such funding
included: (i) total funded exit financing of no more than
$470 million; (ii) the proceeds of a $185 million rights
offering (the “Rights Offering”) open to substantially all
unsecured creditors and backstopped by certain groups;
(iii) settlement of government claims related to the Legacy
Environmental Liabilities through the creation of certain
environmental response trusts and a litigation trust; (iv)
settlement of claims related to the Legacy Tort Liabilities
through the establishment of a torts claim trust; (v) issuance
of shares whereby holders of the allowed general unsecured
claims received their pro rata share of 50.9% of the Tronox
Incorporated shares on the Effective Date, and the oppor-
tunity to participate in the Rights Offering for an aggregate
of 49.1% of the Tronox Incorporated shares, also issued
on the Effective Date; and (vi) issuance of warrants, on the
Effective Date, to the holders of equity in the Predecessor
to purchase their pro rata share of a combined total of
7.5% of the Tronox Incorporated shares, after and includ-
ing the issuance of any Tronox Incorporated shares upon
exercise of such warrants.
The Company applied fresh-start accounting pursuant
to ASC 852 as of January 31, 2011. ASC 852 provides
for, among other things, a determination of the value to
be assigned to the assets of the reorganized Company.
In applying fresh-start accounting on January 31, 2011,
Tronox Incorporated recorded assets and liabilities at
estimated fair value, except for deferred income taxes and
certain liabilities associated with employee benefits, which
were recorded in accordance with ASC 852 and ASC 740,
respectively. Additionally, Tronox Incorporated recorded
gains relating to executing the plan of reorganization, gains
related to revaluation of assets and “resetting” retained
earnings and accumulated other comprehensive income
to zero.
trox 2012ar
Reorganization Income (Expense)
For the one month ended January 31, 2011 and the year
ended December 31, 2010, the Company recognized
$613 million of reorganization income and $145 million of
reorganization expense, respectively, which were classified
as “Reorganization income (expense)” on the Consolidated
Statements of Operations. Upon emergence from bank-
ruptcy, the Company no longer reports reorganization
income (expense). Any residual costs are included in
“Selling, general and administrative expenses” on the
Consolidated Statements of Operations.
24 Segment Information
Prior to the Transaction, Tronox Incorporated
had one reportable segment representing its
pigment business. The Pigment segment primarily produced
and marketed TiO2 and included heavy minerals produc-
tion. The heavy minerals production was integrated with its
Australian pigment plant, but also had third-party sales of
minerals not utilized by its pigment operations. In connec-
tion with the Transaction, the Company acquired 74% of
Exxaro’s South African mineral sands operations, including
its Namakwa and KZN Sands mines, separation facilities
and slag furnaces, along with its 50% share of the Tiwest
Joint Venture in Western Australia. As such, the Company
evaluated its new operations under ASC 280, Segments, and
determined that the mineral sands operations qualify as a
separate segment.
Subsequent to the Transaction, the Company has two
reportable segments, Mineral Sands and Pigment. The
Mineral Sands segment includes the exploration, mining
and beneficiation of mineral sands deposits, as well as heavy
mineral production. These operations produce titanium
feedstock, including ilmenite, chloride slag, slag fines and
rutile, as well as pig iron and zircon. The Pigment segment
primarily produces and markets TiO2 and has production
facilities in the United States, Australia, and the Netherlands.
Corporate and Other is comprised of corporate activities
and businesses that are no longer in operation, as well as its
electrolytic manufacturing and marketing operations, all of
which are located in the United States.
61
Notes to Consolidated
Financial Statements
tronox limited
(Millions of dollars, except share, per share and tonnes data or unless otherwise noted)
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.
Successor: Twelve Months Ended December 31, 2012
Net Sales
Income (Loss) from operations
Interest and debt expense
Other income (expense)
Gain on bargain purchase
Income (Loss) from Continuing Operations before Income Taxes
Total Assets
Depreciation, Depletion and Amortization
Capital Expenditures
Successor: Eleven Months Ended December 31, 2011
Net Sales
Income (Loss) from operations
Interest and debt expense
Other income (expense)
Income (Loss) from Continuing Operations before Income Taxes
Total Assets
Depreciation, Depletion and Amortization
Capital Expenditures
Predecessor: January 1 through January 31, 2011
Net Sales
Income (Loss) from operations
Interest and debt expense
Other income
Reorganization income
Income from Continuing Operations before Income Taxes
Total Assets
Depreciation, Depletion and Amortization
Capital Expenditures
Predecessor: Twelve Months Ended December 31, 2010
Net Sales
Income (Loss) from operations
Interest and debt expense
Other income (expense)
Reorganization expense
Income (Loss) from Continuing Operations before Income Taxes
Total Assets
Depreciation, Depletion and Amortization
Capital Expenditures
Mineral
Sands
$ 760
156
$ 3,164
125
96
$ 160
42
$ 228
—
—
$
8
2
$ 221
—
—
$ 109
7
Pigment
$ 1,246
57
$ 1,680
71
39
$ 1,327
323
$ 1,217
67
117
$
89
20
$ 987
3
4
$ 1,005
163
$ 152
—
—
$ 564
40
37
Corporate
And Other
Eliminations
Total
$ 128
(139)
$ (302)
(49)
$ 725
15
31
$ 133
(54)
$ 224
12
16
$ 14
(1)
$ 241
1
1
$ 153
40
$ 382
10
8
$ (58)
—
—
$ (77)
(9)
$ (12)
—
—
$
(3)
(1)
$
(1)
—
1
$ (49)
—
$ —
—
—
$ 1,832
25
(65)
(7)
1,055
$ 1,008
$ 5,511
211
166
$ 1,543
302
(30)
(10)
$ 262
$ 1,657
79
133
$ 108
20
(3)
2
613
$ 632
$ 1,448
4
6
$ 1,218
210
(50)
(8)
(145)
$
7
$ 1,098
50
45
62
trox 2012ar
25 Quarterly Results of Operations (Unaudited)
The following represents the Company’s
unaudited quarterly results for the years ended
December 31, 2012. These quarterly results were prepared
in conformity with generally accepted accounting principles
and reflect all adjustments that are, in the opinion of
management, necessary for a fair statement of the results.
Net sales
Cost of goods sold
Gross margin
Net income (loss)
Net income (loss) per share
from continuing operations:
Basic
Diluted
Jan 1 –
April 1 –
July 1 –
Oct. 1 –
March 31
June 30 (1) Sept. 30 (1) Dec. 31
$ 434
(277)
157
$ 86
$ 429
(304)
125
$ 1,144
$ 487
(444)
43
(1)
$
$ 482
(543)
(61)
(96)
$
$ 1.14
$ 1.10
$ 13.46
$ 13.00
$ (0.03)
$ (0.03)
$ (0.82)
$ (0.82)
(1) Subsequent to the Transaction, the Company adjusted its initial valuation. In
accordance with ASC 805, the Company recorded these adjustments retroactive to
the second quarter. As such, the quarterly results of operations for the second and
third quarter have been revised. See Note 5.
Successor
Predecessor
Year
Ended
Eleven
Months
Ended
December December
31, 2011
31, 2012
One
Month
Ended
Year
Ended
January December
31, 2010
31, 2011
Net Sales (1)
U.S. operations
International operations:
Australia
The Netherlands
South Africa
Total
(1) Based on country of production.
$ 843
$ 793
$
60
$ 692
443
248
298
$ 1,832
475
275
—
33
15
—
317
209
—
$ 1,543
$ 108
$ 1,218
December 31,
Net Property, Plant and Equipment
and Net Mineral Leaseholds (1)
U.S. operations
International operations:
South Africa
Australia
The Netherlands
Total
(1) Based on country of production.
Successor
2012
2011
$ 196
$ 184
1,263
1,348
55
$ 2,862
—
304
54
$ 542
The following represents the Company’s unaudited results for the one month ended January 31, 2011, two months
ended March 31, 2011 and quarters ended June 30, 2011, September 30, 2011 and December 31, 2011. These results were
prepared in conformity with U.S. GAAP and reflect all adjustments that are, in the opinion of management, necessary for
a fair statement of the results.
Net sales
Cost of goods sold
Gross margin
Net income (loss)
Net income (loss) per share from continuing operations:
Basic
Diluted
January 1 –
January 31
February 1 –
March 31
April 1 –
June 30
July 1 –
October 1 –
September 30
December 31
$ 108
(83)
25
$ 631
$ 15.28
$ 15.25
$ 267
(230)
37
$ 10
$ 0.14
$ 0.13
$ 428
(310)
118
$ 66
$ 0.89
$ 0.85
$ 465
(322)
143
$ 99
$ 1.32
$ 1.25
$ 383
(242)
141
$ 67
$ 0.88
$ 0.85
The sum of the quarterly per share amounts may not
equal the annual per share amounts due to relative changes
in the weighted average number of shares used to calculate
net income (loss) per share.
26 Subsequent Events
On February 19, 2013, the Board declared a
quarterly dividend of $0.25 per share payable
on March 20, 2013 to holders of our Class A Shares and
Class B Shares at close of business on March 6, 2013.
On February 9, 2013, Daniel Greenwell voluntarily
resigned as Chief Financial Officer, effective March 31,
2013. In connection with Mr. Greenwell’s resignation,
Mr. Greenwell and the Company executed a separation
agreement.
63
Report of
Independent Registered
Public Accounting Firm
board of directors and shareholders
tronox limited
We have audited the accompanying consolidated balance sheets of Tronox Limited and subsidiaries (the Company) as
of December 31, 2012 (Successor Company) and 2011 (Successor Company), and the related consolidated statements of
operations, comprehensive income (loss), shareholders’ equity and cash flows for the year ended December 31, 2012
(Successor Company), the eleven months ended December 31, 2011 (Successor Company), the one month ended January
31, 2011 (Predecessor Company) and the year ended December 31, 2010 (Predecessor Company). These financial state-
ments are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to
perform an audit of its internal control over financial reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly,
we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by manage-
ment, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of Tronox Limited and subsidiaries as of December 31, 2012 (Successor Company) and 2011 (Successor
Company), and the results of their operations and their cash flows for the year ended December 31, 2012 (Successor
Company), the eleven months ended December 31, 2011 (Successor Company), the one month ended January 31, 2011
(Predecessor Company) and the year ended December 31, 2010 (Predecessor Company), in conformity with accounting
principles generally accepted in the United States of America.
As discussed in Note 2 and 23 to the consolidated financial statements, Tronox Incorporated and certain of its subsid-
iaries filed voluntary petitions for reorganization under Chapter 11 of Title 11 of the United States Bankruptcy Code
on January 12, 2009. Material conditions to the Company’s Plan of Reorganization were resolved on January 26, 2011 and
the Company subsequently emerged from bankruptcy protection. In connection with its emergence from bankruptcy, the
Company adopted the guidance for fresh start accounting in accordance with FASB ASC Topic 852, Reorganizations, as of
January 31, 2011.
Oklahoma City, Oklahoma
February 28, 2013
64
Directors and
Executive Management
t r o n o x l i m i t e d b o a r d
o f d i r e c t o r s
Tom Casey
Chairman & Chief Executive Officer,
Tronox Limited
Daniel Blue 1, 2, 3
Senior Commercial Partner,
Holding Redlich
Andrew P. Hines 1*
Principal,
Hines and Associates
Wayne A. Hinman 2, 3*
Former V.P. and G.M.,
Air Products & Chemicals, Inc.
Peter Johnston 3
Managing Director &
Chief Executive Officer,
Minara Resources Pty Ltd
t r o n o x l i m i t e d
m a n a g e m e n t t e a m
Tom Casey*
Chairman & Chief Executive Officer
Trevor Arran*
Senior Vice President & President,
Mineral Sands
John D. Romano*
Senior Vice President & President,
Pigment & Electrolytic
Willem Van Niekerk*
Senior Vice President, Strategic
Planning and Business Development
Daniel Greenwell*
Senior Vice President &
Chief Financial Officer
t r o n o x l i m i t e d Board of Directors at the December 2012 meeting in Capetown, South Africa.
From left to right: Ilan Kaufthal, Wim de Klerk, Jeffry N. Quinn, Daniel Blue, Tom Casey, Andrew
P. Hines, Sipho Nkosi, Peter Johnston, and Wayne A. Hinman.
Ilan Kaufthal 1, 2, 3
Chairman,
East Wind Advisors
Jeffry N. Quinn 2*
Chairman, Chief Executive Officer,
The Quinn Group, LLC
Wim de Klerk
Finance Director & Board Member,
Exxaro Resources Limited
Sipho Nkosi
Chief Executive Officer
& Board Member,
Exxaro Resources Limited
committees
1. Audit
2. Human Resources and Compensation
3. Corporate Governance and Nominating
*Committee Chair
Michael J. Foster*
Senior Vice President, General
Counsel & Corporate Secretary
Chuck Mancini
Senior Vice President, Chief
Integration & Performance Officer
Bud Grebey
Vice President, Communications
Machiel Keegel
Vice President, Strategy
Kevin V. Mahoney
Vice President, Corporate Controller
Sonja Narcisse
Senior Vice President, Chief Human
Resources Officer
John Merturi
Vice President, Treasurer
Brennen Arndt
Vice President, Investor Relations
Peter Brooks
Vice President, Risk Management
& Corporate Audit
Lalit Panda
Vice President & Chief Information
Officer
Scott Preston
Vice President, Global Supply Chain
& Chief Procurement Officer
* Tronox Officer
65
Shareholder Information
tronox limited
Shareholder Information
Tronox Limited is a public company registered under the
laws of the State of Western Australia, Australia. We have
global operations in North America, Europe, South Africa,
and Australia
Transfer Agent and Registrar
Computershare Trust Company, N.A. is the transfer
agent, registrar and dividend disbursing agent for Tronox’s
common stock. Questions and communications regarding
transfer of stock, dividends and address changes should be
directed to:
Corporate Offices
Australia:
Tronox Limited
1 Brodie Hall Drive
Technology Park
Bentley, Western Australia 6102
+61 (0)8 9365 1333
United States:
Tronox Limited
Suite 1100
263 Tresser Boulevard
Stamford, Connecticut 06901
+203.705.3800
This report is made available to shareholders in advance
of the annual meeting of shareholders to be held at 9 a.m.
EDT, May 21, 2013, in Stamford, Connecticut. The proxy
will be made available to shareholders on or about April
13, 2013, at which time proxies for the meeting will
be requested.
Information about Tronox, including financial information,
can be found on our Web site: www.tronox.com.
Stock Listing
New York Stock Exchange
Ticker Symbol
TROX
Computershare Trust Company, N.A.
250 Royall Street
Canton, MA 02021
+781.575.2879
+800.884.4225
TDD +312.588.4110
www.computershare.com
Certifications
Annually, Tronox submits to the New York Stock Exchange
(NYSE) a certificate of the company’s Chief Executive
Officer certifying that he was not aware of any violation by
Tronox of NYSE corporate governance listing standards
as of the date of the certification.
Electronic Access
Copies of the Tronox 2012 Annual Report, the proxy, and
the 2012 International Financial Report Standards (IFRS)
statement are available at www.proxydocs.com/TROX
The company’s IFRS statement will be available to
shareholders not later than April 30, 2013. A copy of the
company’s Form 10-k and other filings with the U.S.
Securities and Exchange Commission are available at
investor.tronox.com/sec.cfm
Shareholder Information
Our Internet site www.tronox.com provides shareholders
easy access to Tronox’s financial results. Shareholders
may also contact our investor relations department at
+203.705.3800.
66
Tronox and its operating unit names, logos, and
product service designators are either the
registered or unregistered trademarks or trade
names of Tronox Limited and its subsidiaries.
This report is printed on Monadnock Astrolite
PC 100®, which is 100% post-consumer recycled
material. Monadnock uses post-consumer fiber
from waste sources that are carefully selected
and controlled. The entire report is printed on
papers that are manufactured with 100%
renewable green energy, and made 100%
carbon neutral.
The company that printed our annual report,
RR Donnelley, is the international leader in the
number of production facilities that are triple
certified to the Forest Stewardship Council™
(FSC®) and other respected forest sustainability
standards. It recycles not only excess papers
but a wide variety of other production materials
as well.
Design: SVP Partners, Wilton, CT
A Brighter Future – From the Ground Up
Tronox Limited Corporate Offices
Corporate Offices
Australia:
1 Brodie Hall Drive
Technology Park
Bentley, Western Australia 6102
+61 (0)8 9365 1333
United States:
Suite 1100
263 Tresser Boulevard
Stamford, Connecticut 06901
+203.705.3800
www.tronox.com