A Brighter Future – From the Ground Up
t r o n o x l i m i t e d
C o r p o r A t e o f f i C e s
Australia
1 Brodie Hall-Drive
Bentley
Western Australia 6102
+61-(0)8-9365-1333
United States
263 Tresser Boulevard
Suite 1100
Stamford, CT 06901
+1-203-705-3800
www.tronox.com
t r o n o x l i m i t e d
2 0 1 3 A n n u A l r e p o r t
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A Brighter Future – From the Ground Up
t r o n o x l i m i t e d
C o r p o r A t e o f f i C e s
Australia
1 Brodie Hall-Drive
Bentley
Western Australia 6102
+61-(0)8-9365-1333
United States
263 Tresser Boulevard
Suite 1100
Stamford, CT 06901
+1-203-705-3800
www.tronox.com
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A Brighter Future – From the Ground Up
t r o n o x l i m i t e d
C o r p o r A t e o f f i C e s
Australia
1 Brodie Hall-Drive
Bentley
Western Australia 6102
+61-(0)8-9365-1333
United States
263 Tresser Boulevard
Suite 1100
Stamford, CT 06901
+1-203-705-3800
www.tronox.com
t r o n o x l i m i t e d
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2013 Tronox Highlights
t r o n o x l i m i t e d
(All monetary units in this report are in US$ unless otherwise noted)
k e y a c c o m p l i s h m e n t s i n 2 0 1 3
t r o n o x l o c a t i o n s a r o u n d t h e W o r l d
• Total net sales of $1.922 billion, an increase of 5 percent over 2012
• Continued vertical integration of the company’s titanium feedstock and TiO2
pigment production
• Appointment of a new Chief Financial Officer, Chief Information Officer,
and an Executive Vice President
• Dividends totaling $115 million issued to shareholders
• Successful financing of a $1.5 billion senior secured loan
• Reduced planned operating expenses by more than $100 million
• Investment in sustainable technologies such as upgraded control systems
to drive efficiency gains while reducing our environmental impact
• Construction began on the Fairbreeze Mine in South Africa
Stamford, CT
Oklahoma City, OK
Henderson, NV
Hamilton, MS
Namakwa Sands, S.A.
Botlek,
the Netherlands
Shanghai,
China
Singapore
Western
Australia
KZN Sands, S.A.
Sandton, S.A.
t a b l e o f c o n t e n t s
Letter to Shareholders
Far & wide
Our Performance
Under any condition
Corporate Citizenship
Tronox Values
Financials
2
4
6
7
12
16
17
Board of Directors and Executive Management 61
Shareholder Information
62
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.
The company that printed our annual report, Universal|Wilde,
is certified by the Rainforest Alliance to the Forest Stewardship
Council™ (FSC®) standard. The plant uses only vegetable-based inks
and it recycles 100% of the excess papers generated by the printing and
finishing process including trims, corrugated and office waste.
Design: SVP Partners, Wilton, CT
Tronox Location Photography:
Tjalling Jan Raukema – the Netherlands
Peta North – Australia
Fred Welch, Dave Smith – United States
Graeme Robinson, Meyer Productions – South Africa
A Brighter Future – From the Ground Up
t r o n o x l i m i t e d
C o r p o r A t e o f f iC e s
Australia
Tronox Limited
1 Brodie Hall-Drive
Bentley
Western Australia 6102
+61-8-9365-1348
United States
263 Tresser Boulevard
Suite 1100
Stamford, CT 06901
+1-203-705-3800
sustainability@tronox.com
www.tronox.com
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A Brighter Future – From the Ground Up
t r o n o x l i m i t e d
C o r p o r A t e o f f iC e s
Unique advantages.
Australia
Tronox Limited
1 Brodie Hall-Drive
Bentley
Western Australia 6102
+61-8-9365-1348
United States
263 Tresser Boulevard
Suite 1100
Stamford, CT 06901
+1-203-705-3800
sustainability@tronox.com
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A Brighter Future – From the Ground Up
t r o n o x l i m i t e d
C o r p o r A t e o f f iC e s
Unique advantages.
Australia
Tronox Limited
1 Brodie Hall-Drive
Bentley
Western Australia 6102
+61-8-9365-1348
United States
263 Tresser Boulevard
Suite 1100
Stamford, CT 06901
+1-203-705-3800
sustainability@tronox.com
t r o n o x l i m i t e d
2 0 1 3 A n n u A l r e p o r t
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www.tronox.com
a b o u t t h e c o v e r s | The cover you see on this copy of the Tronox 2013 Annual Report
is actually one of three covers, each featuring a Tronox employee.
Inspector Lloyd Browne on the job at Botlek Pigment Plant in Botlek, Netherlands
Operator Leonie van den Haak at Botlek Pigment Plant in Botlek, Netherlands
Business Improvement Analayst Lusapho Tom at the Namakwa Sands smelter in Saldanha,
South Africa.
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The global economy is advancing, leading
to the creation of new infrastructure and
housing as growing middle classes drive
demand for consumer products. This
economic activity will lift demand for TiO2.
As the largest fully integrated producer of
mineral sands and TiO2 pigment, Tronox is
poised for success. Controlling the process
from mining titanium ore to selling finished
pigment lowers our cost structure and
makes us a more efficient producer. Spanning
four different continents, our operations
are strategically located to meet global
customer demand.
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Dear Shareholder
tom casey, chairman and chief executive of f icer
2013 marked our first full year as Tronox Limited. It was challeng-
ing for our industry, as the softness in global pricing for titanium
dioxide (TiO2) pigment that began in 2012 continued. Yet, it was a
year that clearly demonstrated the competitive advantage vertical
integration brings Tronox. By controlling both the downstream and
upstream of the industry, we generated higher EBITDA in a volatile
market than had we remained non-integrated.
Throughout 2013, a rebalancing of supply and demand in the
TiO2 value chain made its way upstream. Coatings companies,
which had previously ramped up pigment inventories in response to
rising prices and strong global paint demand, began drawing down
stockpiles in late 2012 and early 2013. Pigment manufacturers
ultimately responded by decreasing capacity utilization in order to
manage down high inventories even as demand returned to normal
levels during 2013. Unlike pure-play pigment companies, Tronox
was better able to weather this tough environment because we
captured margin on all the feedstock we mined. We also benefited
from third-party sales of zircon and pig iron, co-products of
TiO2 production.
As described in this report, we believe that our structure is a key
asset in our mission to create long-term stakeholder value in the face
of increasing competition in our industry. Arming us with assurance
of our long-term costs, our vertical integration gives us an excellent
chance to attain cost structures and operating efficiency levels that
are on par with, or better than, all of our competitors and new market
entrants. However, it doesn’t guarantee the company’s success.
Success requires a common culture that drives the people of a
company to work cohesively and strive for excellence in pursuit
of clear goals. Building such a culture across four continents and
among a culturally diverse workforce is a tremendous challenge
under any circumstances. Doing it against the backdrop of
historically poor market conditions requires a commitment to
teamwork and operational excellence that is exceptional. Yet that’s
exactly what we did in 2013. We dedicated ourselves to putting in
place the winning values that will serve as our foundation for future
growth and achievement – and I could not be prouder of the hard
work and skillfulness of our 3,400 employees and 2,000 contractors
around the globe.
2 Tronox Limited
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Our values – Health & Safety; Responsibility; People;
Over the year, we also initiated a number of significant
additions or improvements in our operations. These steps include
the building of a cogeneration power plant and an Unattritioned
Magnetic Material (UMM) facility to increase ilmenite production
at our Namakwa operations in South Africa; the D-line expansion
at Hamilton which increases the line’s capacity by 7 percent; and,
comprehensive cost-performance projects at Botlek and Kwinana.
We will continue to make investments in safe and sustainable
technologies and systems that improve our business operations
in accordance with our strategic goals.
We have entered 2014 from a position of strength. We have a
robust balance sheet, and we are committed to focused and disciplined
growth as the low-cost provider in both the pigment and mineral
sands sectors. We also expect to benefit in future years from annual
U.S. tax benefits potentially totaling hundreds of millions, or billions,
of dollars stemming from the favorable ruling in the Anadarko
Petroleum litigation. I am optimistic that the market will strengthen
over the course of the year, and when it does Tronox will gain a
competitive advantage.
As always, I want to thank our shareholders and customers for
the continued confidence they have in Tronox. And, I also want to
thank my colleagues at Tronox for their hard work and contributions
to helping us create a brighter future, from the ground up.
Warm regards,
t o m c a s e y , Chairman and Chief Executive Officer
Teamwork; Customers; and Results – define us both as a company
and as individuals, and transcend the differences between our
diverse workforce in terms of background or nationality. These
principles are driving us to maintain the safest possible work
environment, and to promote corporate sustainability so that the
value we create is shared widely for many years to come.
Every day I see or hear impressive examples of our values in action.
To name a few:
• Leaders across the organization are engaging with employees on the
front lines to promote safety as part of our Visible Felt Leadership
programs.
• We responded to falling pigment prices by taking more than
$100 million out of our operating expenses in 2013.
• We obtained a $1.5 billion senior secured term loan that added
$800 million of cash to our balance sheet.
• Across the business, we are investing in sustainable technologies
such as upgraded control systems to drive efficiency gains while
reducing our environmental impact.
• Our Pigment and Electrolytic division has implemented a new
process to optimize the innovation and investment efforts across the
group, enabling Tronox to sharpen our focus on the most promising
projects.
• And in June, our team at the synthetic rutile plant at Chandala in
Western Australia worked together to set a new monthly record by
producing 21,155 metric tons of synthetic rutile.
Our values are also finding expression in the care that our
employees are displaying toward their co-workers, communities
and others in need all over the world. Whether planting trees for
local communities, volunteering at area schools or displaying a
selfless desire to help in the wake of a tragic accident at KZN Sands
or the tornados in Oklahoma, the actions of our people reflect an
admirable sense of camaraderie and responsibility. Further, Tronox
is contributing more than $2 million to corporate citizenship
programs in the areas in which we live and work. These programs
are brightening the lives of thousands in our local communities
by supporting education programs, advocating environmental
stewardship, fighting discrimination, fostering economic opportu-
nity and promoting health and wellness initiatives.
2013 Annual Report 3
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Tronox’s finished pigments help make “quality of life” products
around the world. They are in the paint on homes, office buildings
and automobiles, and are widely used in the production of paper
and plastics, such as PVC piping. They are even in the casings of
consumer electronics such as smart phones and tablets. Growth
in demand for these pigments has traditionally traced global GDP
trend lines.
Tronox’s mineral sands operations consist of two product streams –
titanium feedstock, which includes ilmenite, natural rutile, titanium
slag, and synthetic rutile; and co-production products such as zircon
and low-manganese pig iron (LMPI), which are contained in the
mineral sands extracted to capture natural titanium feedstock.
Tronox operates three separate mining operations: KZN Sands and
Namakwa Sands located in South Africa, and our Northern
Operations, near Perth in Western Australia. Combined, these
mining operations have an annual production capacity of 753,000
metric tons of titanium feedstock, 265,000 metric tons of zircon
and 221,000 metric tons of LMPI. Titanium feedstock is the most
Far & wide.
h av e yo u b e en in co ntac t w it h o ne o f ou r p roducts today?
4 Tronox Limited
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significant raw material used in the manufacture of titanium dioxide
(TiO2). Tronox believes annual production of titanium feedstock
from its mineral sands operations will continue to exceed the raw
material supply requirement for its TiO2 operations.
The company’s three TiO2 production facilities are strategically
positioned in geographies to reach key markets worldwide. Tronox is
one of only five global companies to utilize a chloride process to
produce TiO2. The chloride process, which accounts for 100 percent
of Tronox’s pigment production gross capacity, produces pigment
grades with a brighter appearance that is preferred by manufacturers
of high-grade coatings and plastics.
Titanium Dioxide
Zircon
Low-Manganese
Pig Iron
Activated Carbon
Electrolytic Products
2013 Annual Report 5
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Our Performance
Tronox delivered strong operating cash flow
in 2013, our first full year as an integrated
company, with cash provided by operating
activities improving by $219 million,
at $337 million, up substantially from
$118 million in 2012.
r e s p o n s e t o t h e 2 0 1 3 b u s i n e s s e n v i r o n m e n t
The price of pigment in all regions globally has shown considerable
volatility over the last several years with annual global average
pricing moving up more than 50 percent between 2010 and 2012
and down as much as 21 percent in 2013. In response to last
year’s soft market, the company reduced its operating expenses by
more than $100 million. This cost reduction included more
than $23 million in supply chain management savings and more
than $33 million from integration synergies. By the end of 2013
sales volumes appeared to be back to normal levels.
p o s i t i o n e d f o r G r o w t h
At Tronox, we believe that there is a value in being larger, provided
that we do so in a low-cost vertically integrated structure – a critical
element for successful competition going forward.
In 2013, the company took the opportunity to enter favorable
debt markets to reach two milestones to help achieve this goal.
In March we obtained a $1.5 billion senior secured term loan that
added $800 million of cash to our balance sheet, while at the same
time, significantly reduced restrictive conditions on our debt
structure that limited our flexibility. This strong cash position enables
Tronox to pursue strategic alternatives for growth. We are taking a
focused and disciplined approach regarding our plans for growth and
any use of this cash, be it for internal or strategic investments.
We also believe that Tronox is positioned for growth through
its unique tax-advantages resulting from tax loss carry-forwards
totaling $3 billion in U.S. federal and state, and foreign net
operating losses; and, interest expense deductions of $2 billion
over the next decade resulting from U.S. borrowing activity.
We feel that these tax benefits are amplified by the favorable
December 2013 ruling of a U.S. federal bankruptcy court in the
case of Tronox Incorporated vs. Anadarko Petroleum Corporation. As a
result, subject to a final damages determination by the court and
potential appeal, Tronox Limited should be entitled to potential
tax deductions ranging from $5 billion to $14 billion, or greater,
over several decades.
6 Tronox Limited
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b o t l e k , t h e n e t h e r l a n d s
Jr. Process Engineer Anwar Kasiemkhan monitors
a pressure indicator at the Botlek Raw Pigment
Plant in Botlek, Netherlands.
Under any condition.
tron ox's uniq ue m arket p osit io n.
After acquiring Exxaro Mineral Sands in 2012, Tronox completed
the full integration of its Mineral Sands and Pigment divisions in
2013 to become the largest vertically integrated producer in the
TiO2 industry. The structure means a stronger and more stable
Tronox that is better positioned in any pricing environment for
feedstock and TiO2.
By the second quarter of 2013, Tronox’s Pigment business
sourced 100 percent of its feedstock requirements internally.
We retain the margin in both feedstock and the pigment, meaning
that the cost of ore for that finished pigment – once sold – reflects
only the cost of production and transportation.
Tronox’s access to its own ore stocks provides enduring advan-
tages. The company’s mineral sands segment has a guaranteed buyer
for most of its feedstock production, while the pigment segment
has an assured source of supply. The integrated company can operate
more efficiently and better manage working capital.
2013 Annual Report 7
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o r e u p
p i G m e n t u p
b e c a u s e t r o n o x ’ s o v e r a l l c o s t s a r e l o w e r , the company’s access to
internally sourced ore is especially advantageous in an environment in which
pricing for ore and pigment are both strong. Tronox also sells hundreds of
thousands of tons of feedstock above its current internal requirements to
third parties along with co-products zircon, low-manganese pig iron and
activated carbon. Our bottom line will therefore reflect enhanced profits not
only from more profitable pigment sales, but from third-party sales of
feedstock and co-products as demand rises to meet the increase in pigment
production. With feedstock and pigment utilization rates moving at full
tilt, fixed costs at both the mineral sands and pigment levels are spread out
across more sales volumes.
t r o n o x a s a n i n t e G r a t e d c o m p a n y is in a much better position to
expand production or enter into certain agreements because we have access to
feedstock in the face of a long-term shortage in the marketplace. It also gives
us the ability to be opportunistic in carrying out acquisitions to grow our
pigment capacity.
n o n - i n t e G r a t e d p i G m e n t p r o d u c e r s may have to shop around in a
tight ore environment in order to get the right blends for their pigment
plant operations. This dynamic affected Tronox in 2012 prior to the Exxaro
Mineral Sands acquisition when the company was forced to buy low-quality
slag from China, leading to down time. Vertical integration means that
Tronox’s feedstock blends are more constant, leading to greater operational
efficiency. We never have to shop around when ore is tight.
8 Tronox Limited
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o r e u p
p i G m e n t d o w n
u n d e r t h e d i f f i c u l t s c e n a r i o when pricing is high for ore but weak for
pigment, the margins of non-integrated pigment participants are squeezed
because high process costs do not directly lead to stronger pricing. Indeed,
when it happened in late 2012 and early 2013, a strong performance from
Tronox’s mineral sands segment boosted overall company operating profit.
Tronox’s comparatively stable operating earnings performance throughout
the year reflects the company’s ability to withstand adverse conditions.
o v e r t h e m e d i u m t o l o n G t e r m , Tronox projects high-grade feedstock –
rutile, synthetic rutile (SR), and chloride process (CP) slag – to be in tight
supply as GDP growth in the developing markets further drives TiO2
demand. Whereas non-integrated pigment producers may seek to exit or pull
back from the market, Tronox is well-positioned to go on offense and grow.
t r o n o x i s t h e o n ly m a j o r p r o d u c e r of CP slag, SR, and rutile which
allows us to dynamically shift the mix of ore we consume as opposed to sell
into market. In 2013, for example, sales of SR dropped as some pigment
producers switched to lower-grade feedstock to reduce cost while demand for
pigment was subdued. Since global pigment operations were not running
at high utilization rates, many TiO2 competitors were not willing to pay a
premium to blend SR (which has a higher titanium concentration). As a
result, some companies chose to shutter SR operations until supply fell back
in line with demand. During this period, however, Tronox was able to sell its
high-quality SR in-house to produce higher-margin pigment, while selling
more slag to third parties.
2013 Annual Report 9
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o r e d o w n
p i G m e n t d o w n
a s o u t l i n e d i n o u r b u s i n e s s s t r a t e G y, one of Tronox’s central
strategies is securing and sustaining the lowest-cost position in the industry.
Our focus on operational excellence and vertical integration positions the
company to reach this sustainable business goal and grow our operations.
e v e n u n d e r s u b - o p t i m a l c o n d i t i o n s for both feedstock and pigment,
we are better off than our competition on cost as we leverage our scale and
integrated value chain. And since we have visibility upstream and down-
stream, we are less susceptible to tying up large amounts of precious working
capital into big waves of inventory. These advantages allow Tronox to
ride out the storm while others may be forced to shut plants or mines.
Alternatively, we believe that we would be in position to drive more volume
in order to capture market share and reduce effective production cost per
ton by spreading the company’s cost basis.
w e b e l i e v e t h a t p e r i o d s o f w e a k n e s s in both feedstock and ore
markets will be limited and short in duration. Risk will be mitigated by a
range of supply factors including limited alternatives to TiO2, technological
and operational challenges, and the time- and capital-intensiveness of
bringing on new capacity. Growth, on the other hand, will be supported
by increasing global consumer spending and infrastructure development.
10 Tronox Limited
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o r e d o w n
p i G m e n t u p
i n a s c e n a r i o w h e n p r i c i n G f o r p i G m e n t i s h i G h b u t p r i c i n G
f o r o r e i s s o f t , Tronox benefits from having a guaranteed internal
purchaser for the bulk of its ore production. The guaranteed buyer enables
Tronox’s mineral sands business to weather the difficult environment as
ore supply is brought back online to match renewed demand from pigment
plants. While some ore producers may be forced to shut or slow down their
production, or stop investing because of a lack of cash, we can still make
long-term investments because the overall company is still benefiting from
stronger margins.
i f a b s o l u t e ly n e c e s s a r y, we can slow feedstock production at the
appropriate time given that our mining business has unique insight into
the end-market demand requirements.
“Better off with vertical
integration – under any
condition”
2013 Annual Report 11
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n a m a k w a s a n d s , s o u t h a f r i c a
Tronox partnered with the Doring Bay commu-
nity to establish an abalone farm near Namakwa
Sands in South Africa. Below, workers on the
farm harvest kelp to feed the abalone.
At Tronox, corporate citizenship is an integral part of our global
business. We believe that our business can and should play a
leadership role in improving the quality of life in the communities
in which we operate. All around the world we are continually
challenging ourselves to promote sustainable growth, invest in green
technologies, be transparent in all our business operations, and make
positive contributions in the communities where we live and work.
We believe that these efforts promote the long-term interests of
all our stakeholders, including employees, customers, business
partners, investors, local communities, government officials, and
the mining and minerals industries at large.
The Tronox corporate citizenship strategy is defined by these
key pillars:
s u s t a i n a b i l i t y/e n v i r o n m e n t | We understand that our
shareholders, employees and local communities all win when we
build sustainable business operations – we invest in programs to
advance environmental stewardship and empower the communities
in which we operate
Corporate
Citizenship
12 Tronox Limited
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e d u c a t i o n | We are an engineering and science-based business –
we are eager to share our expertise and resources to advance
education in these fields
e q u a l r i G h t s & d i v e r s i t y | We are a global business with
a diverse workforce – we are advocates for nondiscrimination and
social justice in the workplace and community
h e a l t h & w e l l n e s s | 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
n i G h t s t a l k : p r o t e c t i n G w i l d l i f e
Tronox has partnered with the Perth Zoo in Western Australia since
2003 on a program to help protect animal wildlife. Through the
“Night Stalk” program, a national-citizen science program where
people search for and catalogue native and invasive flora and fauna in
their local areas, Tronox is engaging employees, their families and
the community in raising public awareness of pressing environmen-
tal issues. The efforts are a manifestation of Tronox’s “responsibility”
value in action.
Human population growth represents one of the greatest threats
to biodiversity because a rising population requires more resources
and space while creating more pollution. In turn, this puts pressure
on native species and ecosystems as habitats are altered through
land clearing for agricultural, commercial or residential purposes,
and by over harvesting our natural resources, which include
livestock and water. Displacement of native species from certain
areas can have dire effects as new competition opens up for food
and habitat. The introduction of new predators may also lead to
the spread of harmful diseases.
c h i l d r e n o f t r o n o x e m p l o y e e s search for frogs as part of a Night Stalk
community event near the Kwinana pigment plant at the Naragebup
Regional Environmental Centre in Rockingham, Western Australia. More
than two hundred people attended the event.
Between September and October 2013, Tronox sponsored 77
Night Stalk events across Australia. The events attracted more than
1,137 participants.
“Tronox’s ongoing support of the Perth Zoo and the Night Stalk
initiative helps the Zoo in its mission of saving wildlife,” said Perth
Zoo Partnerships Manager Ingrid Barnard. “The program connects
the community with local wildlife, furthering knowledge while
engaging the community. In turn, this encourages conservation
action to protect and preserve the important biodiversity that
surrounds us.”
The data compiled from these events is recorded by the Perth
Zoo and distributed to national and international conservation
agencies and environmental organizations. The regular monitoring
helps these groups learn about the health of, and changes to,
local plant and animal habitats.
2013 Annual Report 13
441446.Edt.cs5.indd 13
3/28/14 4:44 PM
Economic
Tronox’s business strategy is founded on sustainable growth that
can be replicated and realized over time in the form of increased
value for our customers, employees, shareholders and communities.
Tronox has implemented safe, sustainable and efficient business
practices at our daily operations across four continents. We believe
we have the low-cost structure in place that gives us the best chance
to deliver on our goals. Access to our own, internally sourced ore
will enable Tronox to grow our pigment business and hold costs in
check as we pursue growth through either organic or inorganic means.
By executing our strategy and investing in our business, we
create economic growth in the regions and countries in which we
operate. For example, Tronox’s new Fairbreeze mine under construc-
tion in northern KwaZulu-Natal, South Africa, will preserve
more than 1,000 permanent and contractor positions and generate
an additional 1,000 indirect jobs. Tronox anticipates spending
approximately $49.8 million (ZAR530 million) on services and
products for the project, more than half of which will go to black
economic empowerment (BEE) companies. The development of
infrastructure for Fairbreeze, such as a new electric power substation
and water pipeline will also benefit the region. Post-mining
rehabilitation of the site will support tourism, land preserves for
ecological research and agriculture.
Just as we invest in our business, we also invest in our local
communities so that they too can become stronger and grow with
us. In 2013, Tronox distributed $1.85 billion in economic value
(as defined by Global Reporting Initiative standards) to local
communities worldwide. We are proud of the impact we have made
as a generator of economic opportunity, and we strive to engage
local business partners – including women- and minority-owned
businesses – wherever we operate.
14 Tronox Limited
P h i n d i l e n g e m a , a farm worker, harvests rose geranium at Shepley Farm
near Tronox’s Fairbreeze Mine. In early 2013, Tronox bought the farm, which
produces essential oils used in lotions and perfumes worldwide.
S h e P l e y F a r m : S o w i n g S e e d S F o r l o c a l g r o w t h
In early 2013, Tronox bought Shepley Farm, a grower of rose
geraniums, adjacent to the Fairbreeze mine and formed a partnership
with the farm’s prior owner. Shortly after, Tronox recapitalized the
on-site essential oils business as a local economic development
project. Essential oils are plant-based aromatic compounds that are
used in cosmetics, perfumes, and other products. The continuing
aim is to assist in the regional prospects of the essential oils business
opportunities by facilitating the formation of agreements between
suppliers of rose geranium and oil distilleries. Through guidance,
planting and facilitation, the KZN Sands rehabilitation team has
made a considerable impact on the local essential oil industry. The
oils produced at Shepley Farm infuse lotions, potions and perfumes
around the world for customers such as Estée Lauder.
441446.Pg.14-15.cs5.indd 14
3/28/14 4:45 PM
Environment
Land rehabilitation is a major component of Tronox’s corporate
citizenship and environmental strategies. Tronox has a deep-seated
appreciation for the richness of the land at our three global
mine-sites and the importance it holds to local communities in
South Africa and Australia.
Roughly 5-10 percent of the soil harvested from our mines is
usable ore. After extracting titanium ore and other valuable minerals,
we return the unused earth to the mining site for rehabilitation.
After mining in an area is completed, the landscape is restored as
close as possible to its natural form. This rehabilitation entails
restoring the original layers of top soil to sustain the replanting of
native flora, or to use the land for the production of cash-generating
agricultural crops by local farmers. In 2013, Tronox spent a
total $10.4 million rehabilitating 3,883 hectares (9,591 acres)
of mined land.
S u g a r c a n e : r e h a b i l i t a t i o n F o r l a S t i n g v a l u e
In 2012, Tronox planted 216 metric tons of locally sourced seed
cane on 14 hectares (35 acres) of rehabilitated soil at KZN’s
Hillendale Mine in South Africa. In May 2013, the sugarcane crop
reached maturity. The result was a great success, owing to the years
of research and tremendous effort put in by the Hillendale mine
team. The sugar harvest surpassed expectations with 1,060 metric
tons delivered to the local Felixton Sugar Mill for the production
of sugar.
Conformance with Tronox’s strict health and safety rules
challenged the company to go above and beyond standard cane
industry practices. Each cane cutter was required to use protective
equipment to reduce the risk of personal injury. Tronox also chose
not to follow the standard industry practice of pre-harvest burning
to remove the foliage from the canes, which generates air pollution
in the form of huge plumes of smoke. Instead, the trashing process
employed by Tronox made use of the leaves and other unwanted
parts of the cane plants to protect the bare soil from erosion during
heavy rains. This alternative use of the trashed waste material
is beneficial as it recycles the nutrients and improves the soil for
future crops.
b o e l a b e k k e r , a rehabilitation specialist and farmer, in the cane fields at
the rehabilitated Hillendale mine site.
“The cane cutters were blown away at the size and extent of the
harvest,” said Boela Bekker, rehabilitation specialist at Hillendale.
“Some areas are yielding close to 150 metric tons per hectare, which
is the equivalent of irrigated sugar fields in the highly productive
nearby areas of KwaZulu Natal.”
Building on this success, the rehabilitation department planted a
further 500 metric tons of commercial sugarcane in 2013, putting
the total area growing cane at year-end 2013 at 54 hectares (134
acres). Seven hundred tons of disease-free commercial seed cane is
expected to be sourced from local farmers to restock parts of the
Hillendale rehabilitated areas.
441446.Pg.14-15.cs5.indd 15
3/28/14 4:45 PM
2013 Annual Report 15
Tronox Values
W e a r e b u i l d i n g a l a s t i n g f o u n d a t i o n f o r g r o W t h a r o u n d a s e t o f s i x c o r e v a l u e s –
Health & Safety, Responsibility, People, Teamwork, Customers, and Results – that define our approach to doing business.
Our leadership team and our roughly 3,400 global employees dedicate tremendous time and resources to living,
communicating and reinforcing these values throughout the business.
Health & Safety
W e W o r k s a f e ly — a l l t h e t i m e
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.
Teamwork
W e W i l l W i n — a s a t e a m
We collaborate effectively, communicate openly,
engage honestly, treat others respectfully, and
make informed decisions.
Responsibility
Customers
W e c a r e f o r o u r e n v i r o n m e n t a n d
i t r e a l ly i s a l l a b o u t t h e c u s t o m e r
o u r c o m m u n i t i e s
We are responsible citizens, as a company and as
individuals. We are stewards of our environment
and active in our communities.
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.
People
Results
2
1
P e o P l e a r e o u r m o s t i m P o r t a n t
W e m e a s u r e , o W n a n d d e l i v e r r e s u l t s
r e s o u r c e
We create opportunities for development and act
intentionally to create a diverse and supportive
work environment. Each of us is committed to
personal growth and development, embraces
change, and learns from our successes and mistakes
in order to create a high-performance culture.
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.
We innovate our processes to continuously deliver
better results.
16 Tronox Limited
441446.Edt.cs5.indd 16
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Tronox Financials
t r o n o x l i m i t e d
(All monetary units in this report are in millions of US$ unless otherwise noted)
t a b l e o f c o n t e n t s
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income (Loss)
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Equity
Notes to Consolidated Financial Statements
Share Price Performance Graph
Management’s Report on Internal Controls Over
Financial Reporting
Independent Auditors’ Reports
Board of Directors and Executive Management
Shareholder Information
18
19
20
21
22
24
57
58
59
61
62
441446.Fin.cs5.indd 17
3/28/14 4:46 PM
2013 Annual Report 17
Consolidated Statements of Operations
(Millions of U.S. dollars, except share and per share data)
n et sales
Cost of goods sold
G ross P rofit
Selling, general and administrative expenses
Litigation/arbitration settlement
Environmental remediation and restoration reimbursements, net
in com e from o P e r ations
Interest and debt expense
Gain on bargain purchase
Reorganization income
Other income (expense)
in com e ( loss) before income tax e s
Income tax benefit (provision)
n et i n com e ( loss)
Net income (loss) attributable to noncontrolling interest
Successor
Year Ended
December 31,
2013
Year Ended
December 31,
2012
Eleven Months
Ended
December 31,
2011
Predecessor
One Month
Ended
December 31,
2011
$ 1,922
1,732
$ 1,832
1,568
$ 1,543
1,104
$ 108
83
190
(187)
—
—
3
(130)
—
—
66
(61)
(29)
(90)
36
264
(239)
—
—
25
(65)
1,055
—
(7)
1,008
125
1,133
(1)
439
(152)
10
5
302
(30)
—
—
(10)
262
(20)
242
—
25
(5)
—
—
20
(3)
—
613
2
632
(1)
631
—
Net Income (Loss) attributable to Tronox Limited
$ (126)
$ 1,134
$ 242
$ 631
earn i n Gs ( loss) Pe r sha re , basic a nd d ilute d: (1)
Basic
Diluted
$
(1.11)
$ 11.37
$ 3.22
$
(1.11)
$ 11.10
$ 3.10
$ 15.28
$ 15.25
Wei Gh ted av e r aGe sha re s o utsta ndinG ( in thousands):
Basic
Diluted
113,416
113,416
98,985
101,406
74,905
78,095
41,311
41,399
(1) On June 26, 2012, the Board of Directors of Tronox Limited approved a 5-to-1 share split for holders of 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 19 for additional information regarding the share split.
See notes to consolidated financial statements.
18 Tronox Limited
441446.Fin.cs5.indd 18
3/28/14 4:46 PM
Consolidated Statements of Comprehensive
Income (Loss)
(Millions of U.S. dollars)
net i n co me ( loss)
Other Comprehensive Income (Loss):
Foreign currency translation adjustments
Retirement and postretirement plans:
Actuarial gains (losses), net of taxes of $1 million in 2013,
$7 million in 2012 and $2 million in 2011
Amortization of unrecognized actuarial losses, net of taxes of
less than $1 million in 2013
Prior service credit, net of taxes of $1 million in 2013
Amortization of prior service credit, net of taxes of less than
$1 million in 2011
o t her c om Pre hensive l oss
to ta l comPre he nsive income (loss)
c om P reh ens ive inco me ( lo ss ) a ttributable to
n on con tr ollin G inte res t:
Net income (loss)
Foreign currency translation adjustments
Comprehensive loss attributable to noncontrolling interest
com P reh e nsive income (loss) attributa ble to tronox limited
See notes to consolidated financial statements.
Successor
Year Ended
December 31,
2013
Year Ended
December 31,
2012
Eleven Months
Ended
December 31,
2011
Predecessor
One Month
Ended
December 31,
2011
$ (90)
$ 1,133
(289)
11
25
(48)
2
3
—
(259)
$ (349)
36
(70)
(34)
$ (315)
—
—
—
(37)
$ 1,096
(1)
1
—
$ 1,096
$ 242
(6)
(51)
—
—
—
(57)
$ 185
—
—
—
$ 185
$ 631
1
—
—
—
(1)
—
$ 631
—
—
—
$ 631
441446.Fin.cs5.indd 19
3/28/14 4:46 PM
2013 Annual Report 19
Consolidated Balance Sheets
(Millions of U.S. dollars, except share and per share data)
December 31,
assets
c urren t asse ts
Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts
Inventories
Prepaid and other assets
Deferred tax assets
t o tal cu rrent assets
nonc ur rent assets
Property, plant and equipment, net
Mineral leaseholds, net
Intangible assets, net
Long-term deferred tax assets
Other long-term assets, net
to ta l ass ets
liab i litie s and e Q uit Y
c urren t lia bilitie s
Accounts payable
Accrued liabilities
Short-term debt
Long-term debt due within one year
Income taxes payable
Deferred tax liabilities
to ta l curre nt liabilities
n on current liabilitie s
Long-term debt
Pension and postretirement healthcare benefits
Asset retirement obligations
Long-term deferred tax liabilities
Other long-term liabilities
to tal lia bilitie s
continGencies and commitments
shareholders’ eQuitY
Tronox Limited Class A ordinary shares, par value $0.01 – 64,046,647 shares issued and
62,349,618 shares outstanding at December 31, 2013 and 63,394,298 shares issued and
62,103,989 shares outstanding at December 31, 2012
Tronox Limited Class B ordinary shares, par value $0.01 – 51,154,280 shares issued and outstanding
at December 31, 2013 and 2012
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
to tal s h are ho ld ers’ e QuitY
Noncontrolling interest
to tal eQuitY
to tal lia b il ities a nd e Q uitY
See notes to consolidated financial statements.
20 Tronox Limited
2013
2012
$ 1,478
308
759
61
47
2,653
1,258
1,216
300
192
80
$ 716
391
914
38
114
2,173
1,423
1,439
326
91
59
$ 5,699
$ 5,511
$
164
146
—
18
28
7
363
2,395
148
90
204
62
3,262
1
—
1,448
1,073
(284)
2,238
199
2,437
$ 189
209
30
10
24
5
467
1,605
176
106
222
53
2,629
1
—
1,429
1,314
(95)
2,649
233
2,882
$ 5,699
$ 5,511
441446.Fin.cs5.indd 20
3/28/14 4:46 PM
Consolidated Statement of Cash Flows
(Millions of U.S. dollars)
c as h flo Ws fro m o P e ratin G a ctivities :
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation, depletion and amortization
Deferred income taxes
Share-based compensation expense
Amortization of deferred debt issuance costs and discount on debt
Pension and postretirement healthcare benefit expense
Gain on bargain purchase
Other noncash items affecting net income (loss)
Reorganization items:
Noncash reorganization items
Cash paid for reorganization items
Environmental and tort settlement funding
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 prepaid 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
Proceeds from the sale of assets
Net cash received in acquisition of minerals sands business
Cash used in investing activities
cash floWs from financinG activities:
Repayments of debt
Proceeds from borrowings
Debt issuance costs and commitment fees
Dividends paid
Proceeds from the exercise of warrants and options
Merger consideration
Class A ordinary share repurchases
Class A ordinary shares purchased for the Employee Participation Plan
Proceeds from rights offering
Cash provided by (used in) financing activities
effec ts of e xc ha n G e r ate cha nGe s on cash and
cas h eQuivale nts
n et i n cre as e ( de cre as e) in cash a nd cash eQuivalents
ca sh an d cash e Quiva le nts at beGinnin G of Period
ca sh an d cash e Quiva le nts at e nd of Pe riod
suP Plem ental cash floW info rmatio n:
Interest paid
Income taxes paid
See notes to consolidated financial statements.
Successor
Year Ended
December 31,
2013
Year Ended
December 31,
2012
Eleven Months
Ended
December 31,
2011
Predecessor
One Month
Ended
January 31,
2011
$
(90)
$ 1,133
$ 242
$ 631
333
33
17
9
9
—
(57)
—
—
—
(6)
58
75
(17)
(11)
(25)
9
337
(172)
1
—
(171)
(189)
945
(29)
(115)
2
—
—
—
—
614
211
(162)
32
10
6
(1,055)
201
—
—
—
(31)
83
(222)
16
(107)
2
1
118
(166)
—
114
(52)
(585)
1,707
(38)
(61)
1
(193)
(326)
(15)
—
490
(18)
762
716
$ 1,478
$
$
123
25
6
562
154
716
34
26
$
$
$
79
4
14
1
5
—
(7)
—
—
—
(8)
(58)
(64)
28
(28)
26
29
263
(133)
1
—
(132)
(45)
14
(5)
—
1
—
—
—
—
(35)
(3)
93
61
$ 154
$
$
29
8
4
1
—
—
—
—
—
(637)
(31)
(286)
—
(10)
(15)
36
24
—
—
(283)
(6)
—
—
(6)
—
25
(2)
—
—
—
—
—
185
208
—
(81)
142
$ 61
$
3
$ —
2013 Annual Report 21
441446.Fin.cs5.indd 21
3/28/14 4:46 PM
Consolidated Statements of Equity
(Millions of U.S. dollars)
suc cessor: bal a nc e at fe brua rY 1, 2 011
Net income
Other comprehensive loss
Share-based compensation
Shares withheld for claims
Warrants exercised
suc cessor: bal a nc e at de ce mbe r 31, 2 011
Fair Value of noncontrolling interest
on Transaction Date
Net income (loss)
Other comprehensive income (loss)
Merger consideration paid
Issuance of Tronox Limited shares
Shares-based compensation
Shares purchased for the Employee
Participation Plan
Issuance of Tronox Limited shares in share-split
Class A and Class B share dividends declared
Tronox Limited Class A shares repurchased
Warrants exercised
Tronox Incorporated share-based compensation
Tronox Incorporated common shares
vested/canceled
suc cessor: bal a nc e at de ce mbe r 31, 2 012
Net income (loss)
Other comprehensive loss
Shares-based compensation
Class A and Class B share dividends declared
Warrants and options exercised
suc cessor: bal a nc e at de ce mbe r 31, 2 013
Tronox
Limited Class A
Ordinary Shares
Tronox
Limited Class B
Ordinary Shares
Tronox
Incorporated
Shares
Capital in Excess
of par Value
Retained Earnings
Treasury Shares
Shareholders’ Equity
Accumulated Other
Comprehensive Loss
Non-controlling
Interest
$ —
—
—
—
—
—
$ —
—
—
—
—
—
—
—
1
—
—
—
—
—
$ 1
—
—
—
—
—
$ 1
$ —
—
—
—
—
—
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
$ —
—
—
—
—
—
$ —
$ —
—
—
—
—
—
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
$ —
—
—
—
—
—
$ —
$ 564
—
—
14
—
1
$ 579
—
—
—
(193)
1,370
5
(15)
—
—
(326)
1
27
(19)
$ 1,429
—
—
17
—
2
$ 1,448
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
Shareholders’ Equity
P red ec essor: ba l an ce at Jan uarY 1, 2 011
Net income
Fresh-start reporting adjustments:
Elimination of predecessor shares,
capital in excess of par value,
and accumulated deficit
Issuance of new shares
P red ec essor: ba l an ce at Jan uarY 3 1, 2 011
See notes to consolidated financial statements.
$ —
—
—
—
$ —
22 Tronox Limited
$ —
—
—
—
$ —
$ 496
—
(496)
564
$ 564
$ (1,128)
631
497
—
$ —
441446.Fin.cs5.indd 22
3/28/14 4:46 PM
Total
$ 564
242
(57)
9
(7)
1
$ 752
—
1,134
(38)
(193)
1,370
5
(15)
—
(61)
(326)
1
20
—
$ 2,649
(126)
(189)
(115)
17
2
$ 2,238
$ —
—
—
—
—
—
$ —
233
(1)
1
—
—
—
—
—
—
—
—
—
—
$ 233
36
(70)
—
—
—
$ 199
Total Equity
$ 564
242
(57)
(7)
9
1
$ 752
233
1,133
(37)
(193)
1,370
5
(15)
—
(61)
(326)
1
20
—
$ 2,882
(90)
(259)
(115)
17
2
$ 2,437
$ —
242
—
—
—
—
$ 242
—
1,134
—
—
—
—
—
(1)
(61)
—
—
—
—
$ 1,314
(126)
—
—
(115)
—
$ 1,073
$
9
—
(9)
—
$ —
$ —
—
(57)
—
—
—
$ (57)
—
—
(38)
—
—
—
—
—
—
—
—
—
—
$ (95)
—
(189)
—
—
—
$ (284)
$
(7)
—
7
—
$ —
$ —
—
—
(5)
(7)
—
$ (12)
—
—
—
—
—
—
—
—
—
—
—
(7)
19
$ —
—
—
—
—
—
$ —
Total
$ (630)
631
(1)
564
$ 564
successor: b al ance at februar Y 1, 2011
(Millions of U.S. dollars)
Net income
Other comprehensive loss
Share-based compensation
Shares withheld for claims
Warrants exercised
successor: b al ance at decemb er 31, 2011
Fair Value of noncontrolling interest
on Transaction Date
Net income (loss)
Other comprehensive income (loss)
Merger consideration paid
Issuance of Tronox Limited shares
Shares-based compensation
Shares purchased for the Employee
Participation Plan
Issuance of Tronox Limited shares in share-split
Class A and Class B share dividends declared
Tronox Limited Class A shares repurchased
Warrants exercised
Tronox Incorporated share-based compensation
Tronox Incorporated common shares
vested/canceled
successor: b al ance at decemb er 31, 2012
Net income (loss)
Other comprehensive loss
Shares-based compensation
Class A and Class B share dividends declared
Warrants and options exercised
successor: b al ance at decemb er 31, 2013
Predecessor: b al ance at JanuarY 1, 2011
Net income
Fresh-start reporting adjustments:
Elimination of predecessor shares,
capital in excess of par value,
and accumulated deficit
Issuance of new shares
Predecessor: b al ance at JanuarY 31, 2011
See notes to consolidated financial statements.
$ —
—
—
—
—
—
$ —
—
—
—
—
—
—
—
1
—
—
—
—
—
$ 1
—
—
—
—
—
$ 1
Tronox
Class A
$ —
—
—
—
$ —
$ —
—
—
—
—
—
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
$ —
—
—
—
—
—
$ —
Tronox
Class B
$ —
—
—
—
$ —
$ —
—
—
—
—
—
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
$ —
—
—
—
—
—
$ —
$ 496
—
(496)
564
$ 564
$ 564
—
—
14
—
1
$ 579
—
—
—
(193)
1,370
5
(15)
—
—
(326)
1
27
(19)
$ 1,429
—
—
17
—
2
$ 1,448
$ (1,128)
631
497
—
$ —
Tronox
Limited Class A
Ordinary Shares
Tronox
Limited Class B
Ordinary Shares
Tronox
Incorporated
Shares
Capital in Excess
of par Value
Retained Earnings
Accumulated Other
Comprehensive Loss
Treasury Shares
Total
Shareholders’ Equity
Non-controlling
Interest
Total Equity
$ —
242
—
—
—
—
$ 242
—
1,134
—
—
—
—
—
(1)
(61)
—
—
—
—
$ 1,314
(126)
—
—
(115)
—
$ 1,073
$ —
—
(57)
—
—
—
$ (57)
—
—
(38)
—
—
—
—
—
—
—
—
—
—
$ (95)
—
(189)
—
—
—
$ (284)
$ —
—
—
(5)
(7)
—
$ (12)
—
—
—
—
—
—
—
—
—
—
—
(7)
19
$ —
—
—
—
—
—
$ —
$ 564
242
(57)
9
(7)
1
$ 752
—
1,134
(38)
(193)
1,370
5
(15)
—
(61)
(326)
1
20
—
$ 2,649
(126)
(189)
17
(115)
2
$ 2,238
$ —
—
—
—
—
—
$ —
233
(1)
1
—
—
—
—
—
—
—
—
—
—
$ 233
36
(70)
—
—
—
$ 199
$ 564
242
(57)
9
(7)
1
$ 752
233
1,133
(37)
(193)
1,370
5
(15)
—
(61)
(326)
1
20
—
$ 2,882
(90)
(259)
17
(115)
2
$ 2,437
Common Shares
Common Shares
Retained Earnings
Capital in Excess
of par Value
Accumulated
Other Comprehensive
Income (Loss)
Treasury Shares
Total
Shareholders’ Equity
$
9
—
(9)
—
$ —
$
(7)
—
7
—
$ —
$ (630)
631
(1)
564
$ 564
441446.Fin.cs5.indd 23
3/28/14 4:46 PM
2013 Annual Report 23
Notes to Consolidated Financial Statements
t r o n o x l i m i t e d
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
1 . t h e c o m P a n Y
Tronox Limited and its subsidiaries (collectively referred to
as “Tronox,” “we,” “us,” or “our”) is a public limited company
registered under the laws of the State of Western Australia,
Australia. We are a global leader in the production and marketing
of titanium bearing mineral sands and titanium dioxide pigment
(“TiO2”). We have global operations in North America, Europe,
South Africa, and Australia. We operate three TiO2 facilities at the
following locations: Hamilton, Mississippi; Botlek, the Netherlands;
and Kwinana, Western Australia, and we operate three separate
mining operations: KwaZulu-Natal (“KZN”) Sands and Namakwa
Sands both located in South Africa, and Cooljarloo located in
Western Australia.
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 operating assets or operations. On
September 25, 2011, Tronox Incorporated, a Delaware corporation
formed on May 17, 2005 (“Tronox Incorporated”), entered into a
definitive agreement (as amended, the “Transaction Agreement”)
with Exxaro Resources Limited (“Exxaro”) and certain of its
affiliated companies, to acquire 74% of Exxaro’s mineral sands
operations, along with its 50% share of the Tiwest Joint Venture
(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.
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.
At December 31, 2013, Exxaro held approximately 44.4% of the
voting securities of Tronox Limited.
2 . b a s i s o f P r e s e n t a t i o n
We are considered a domestic company in Australia and, as such,
are required to report in Australia under International Financial
Reporting Standards (“IFRS”). Additionally, as we are not consid-
ered a “foreign private issuer” in the United States, we are 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 under accounting principles
generally accepted in the United States of America (“U.S. GAAP”).
The consolidated financial statements included in this Form 10-k
are prepared in conformity with U.S. GAAP. We publish our
consolidated financial statements, in both U.S. GAAP and IFRS,
in U.S. dollars.
24 Tronox Limited
The Consolidated Balance Sheets at December 31, 2013 and
2012 relate to Tronox Limited. The Consolidated Statement of
Operations and the Consolidated Statement of Cash Flows for the
year ended December 31, 2013 reflect the consolidated operating
results of Tronox Limited. 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 and one month ended
January 31, 2011 reflect the consolidated operating results of Tronox
Incorporated.
Prior to the Transaction Date, Tronox Incorporated operated the
Tiwest Joint Venture, located in Western Australia, with Exxaro
Australia Sands Pty Ltd. Tronox Incorporated accounted for its share
of the 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, along with its share of the expenses on a gross
basis in its Consolidated Statements of Operations through June 15,
2012. As of the Transaction Date, we own 100% of the joint venture
(the “Western Australia operations”).
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 Form 10-k, 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”). All references to 2011 refer to
the combined twelve month period ended December 31, 2011,
which includes the Successor period and the Predecessor period,
unless otherwise indicated.
On June 26, 2012, the Board of Directors of Tronox Limited
(the “Board”) approved a 5-to-1 share split for holders of Class A
ordinary shares (“Class A Shares”) and Class B ordinary shares (“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 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 19.
In management’s opinion, the accompanying consolidated
financial statements reflect all adjustments considered necessary for
a fair presentation. Our consolidated financial statements include the
accounts of all majority-owned subsidiary companies. All 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 reclassifica-
tions did not have an impact on our net income or consolidated
results of operations.
441446.Fin.cs5.indd 24
3/28/14 4:46 PM
The preparation of financial statements in conformity with
U.S. GAAP requires management to make estimates and assump-
tions 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.
3 . s i G n i f i c a n t a c c o u n t i n G P o l i c i e s
f o r e i G n c u r r e n c Y
The U.S. dollar is the functional currency for our operations, except
for our South African operations, whose functional currency is the
rand, and our European operations, whose functional currency is
the euro. We determine the functional currency of each subsidiary
based on a number of factors, including the predominant currency
for revenues, expenditures and borrowings. Adjustments from
the remeasurement of non-functional currency monetary assets
and liabilities are recorded in “Other income (expense)” on the
Consolidated Statements of Operations. When the subsidiary’s
functional currency is not the U.S. dollar, translation adjustments
resulting from translating the functional currency financial
statements into U.S. dollar equivalents are recorded in
“Accumulated other comprehensive loss” on the Consolidated
Balance Sheets.
Gains and losses on intercompany foreign currency transactions
that are not expected to be settled in the foreseeable future are
reported in the same manner as translation adjustments.
r e v e n u e r e c o G n i t i o n
Revenue is recognized when risk of loss and title to the product is
transferred to the customer, pricing is fixed or determinable, and
collection is reasonably assured. All amounts billed to a customer
in a sales transaction related to shipping and handling represent
revenues earned and are reported as net sales. Accruals are made for
sales returns and other allowances based on our historical experience.
c o s t o f G o o d s s o l d
Cost of goods sold includes costs for purchasing, receiving,
manufacturing, and distributing products, including raw materials,
energy, labor, depreciation, shipping and handling, freight,
warehousing, and other production costs.
r e s e a r c h a n d d e v e l o P m e n t
Research and development costs, which include salaries, building
costs, utilities, administrative expenses, and allocations of corporate
costs, were $10 million, $9 million, and $9 million during 2013,
2012, and 2011, respectively, and were expensed as incurred.
s e l l i n G , G e n e r a l a n d a d m i n i s t r a t i v e e x P e n s e s
Selling, general and administrative expenses include costs related
to marketing, agent commissions, and legal and administrative
functions such as corporate management, human resources,
information technology, investor relations, accounting, treasury,
and tax compliance.
i n c o m e t a x e s
We use the asset and liability method of accounting for income
taxes. 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.
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. We
periodically assess the likelihood that we will be able to recover our
deferred tax assets, and reflect any changes in our estimates in the
valuation allowance, with a corresponding adjustment to earnings or
other comprehensive income (loss), as appropriate. All available
positive and negative evidence is weighted to determine whether a
valuation allowance should be recorded.
The amount of income taxes we pay is subject to ongoing audits
by federal, state, and foreign tax authorities, which may result
in proposed assessments. Our estimate for the potential outcome
for any uncertain tax issue is highly judgmental. We assess our
income tax positions, and record tax benefits for all years subject to
examination based upon our 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, we record 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 we
do not believe that it is more likely than not that a tax benefit will
be sustained, no tax benefit is recognized. See Note 6.
2013 Annual Report 25
441446.Fin.cs5.indd 25
3/28/14 4:46 PM
Notes to Consolidated Financial Statements
t r o n o x l i m i t e d
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
e a r n i n G s P e r s h a r e
Basic and diluted earnings per share are calculated using the
two-class method. Under the two-class method, earnings used
to determine basic earnings per share are reduced by an amount
allocated to participating securities. Participating securities
include restricted shares issued under the Tronox Management
Equity Incentive Plan (see Note 21) and the T-Bucks Employee
Participation Plan (see Note 21), both of which contain non-
forfeitable dividend rights. Our unexercised options, unexercised
Series A and Series B Warrants (see Note 19), and unvested
restricted share units do not contain non-forfeitable rights to
dividends and, as such, are not considered in the calculation of basic
earnings per share. Our unvested restricted shares do not have a
contractual obligation to share in losses; therefore, when we record
a net loss, none of the loss is allocated to participating securities.
Consequently, in periods of net loss, the two-class method does not
have an effect on basic loss per share.
Diluted earnings per share is calculated by dividing net earnings
allocable to ordinary shares by the weighted-average number of
ordinary shares outstanding for the period, as adjusted for the
potential dilutive effect of non-participating restricted share units,
options, and Series A and Series B Warrants. The options and Series
A and Series B Warrants are included in the calculation of diluted
earnings per ordinary share utilizing the treasury stock method.
See Note 7.
f a i r v a l u e m e a s u r e m e n t
We measure fair value on a recurring basis utilizing valuation
techniques that maximize the use of observable inputs and minimize
the use of unobservable inputs, to the extent possible, and consider
counterparty credit risk in our assessment of fair value. The fair
value hierarchy is as follows:
• l e v e l 1 — Quoted prices in active markets for identical assets
and liabilities;
• l e v e l 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; and,
• l e v e l 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.
See Note 8.
c a s h a n d c a s h e Q u i v a l e n t s
We consider all investments with original maturities of three
months or less to be cash equivalents. We maintain cash and cash
equivalents in bank deposit and money market accounts that may
exceed federally insured limits. The financial institutions where our
cash and cash equivalents are held are generally highly rated and
geographically dispersed, and we have a policy to limit the amount
of credit exposure with any one institution. We have not experienced
any losses in such accounts and believe we are not exposed
to significant credit risk.
26 Tronox Limited
a c c o u n t s r e c e i v a b l e
A significant portion of our liquidity is concentrated in trade
accounts receivable that arise from sales of TiO2 and titanium
feedstock to customers in the TiO2 industry. The industry concentra-
tion has the potential to impact our overall exposure to credit
risk, either positively or negatively, in that our customers may be
similarly affected by changes in economic, industry or other
conditions. In addition, due to our international operations, we are
subject to potential trade restrictions and sovereign risk in certain
countries we operate in. We perform credit evaluations of our
customers, and take actions deemed appropriate to mitigate credit
risk. Only in certain specific occasions do we require collateral in
the form of bank or parental guarantees or guarantee payments. We
maintain allowances for potential credit losses based on historical
experience resulting in monthly reserve positions relating to a
percentage taken from the overall outstanding balances. See Note 9.
i n v e n t o r i e s
Pigment 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. Mineral Sands inventories
are stated at a weighted-average cost of production. We periodically
review the cost of our inventory in comparison to its net realizable
value. We also periodically review our inventory for obsolescence
(inventory that is no longer marketable for its intended use).
In either case, we record 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 10.
l o n G - l i v e d a s s e t s
Property, plant and equipment, net is stated at cost less accumulated
depreciation, and is depreciated over its estimated useful life using
the straight-line method as follows:
Land improvements
Buildings
Machinery and equipment
Furniture and fixtures
10 – 20 years
10 – 40 years
3 – 25 years
10 years
Maintenance and repairs are expensed as incurred, except for
costs of replacements or renewals that improve or extend the lives of
existing properties, which are capitalized. Upon retirement or sale,
the cost and related accumulated depreciation are removed from the
respective account, and any resulting gain or loss is included in
“Cost of goods sold” or “Selling, general, and administrative expenses”
on the Consolidated Statements of Operations. See Note 11.
441446.Fin.cs5.indd 26
3/28/14 4:46 PM
We capitalize interest costs on major projects that require an
extended period of time to complete. See Note 15.
Mineral property acquisition costs are capitalized as tangible
assets when management determines 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 expendi-
tures. Mineral leaseholds are depleted 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 commencement of
production are capitalized. See Note 12.
Intangible assets are stated at cost less accumulated amortization,
and are amortized on a straight-line basis over their estimated useful
lives, which range from 5 to 20 years. See Note 13.
We evaluate the recoverability of the carrying value of long-lived
assets whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Under such circumstances,
we assess whether the projected undiscounted cash flows of our
long-lived assets are sufficient to recover the existing unamortized
cost of our long-lived assets. If the undiscounted projected cash
flows are not sufficient, we calculate the impairment amount by
discounting the projected cash flows using our weighted-average
cost of capital. The amount of the impairment is written off against
earnings in the period in which the impairment is determined.
l o n G - t e r m d e b t
Long-term debt is stated net of unamortized original issue premium
or discount. Premiums or discounts are amortized on the effective
interest method with amortization expense recorded in “Interest
and debt expense” on the Consolidated Statements of Operations.
Deferred debt issuance costs are recorded in “Other long-term
assets” on the Consolidated Balance Sheets, and are amortized on
the effective interest method with amortization expense recorded
in “Interest and debt expense” on the Consolidated Statements of
Operations. See Note 15.
a s s e t r e t i r e m e n t o b l i G a t i o n s
Asset retirement obligations are recorded at their estimated fair
value, and accretion expense is recognized over time as the dis-
counted liability is accreted to its expected settlement value. Fair
value is measured using expected future cash outflows discounted at
our credit-adjusted risk-free interest rate, which are considered Level
2 inputs. We 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 16.
d e r i v a t i v e i n s t r u m e n t s
Derivative instruments are recorded in the Consolidated Balance
Sheets at their fair values. Changes in the fair value of derivative
instruments not designated for hedge accounting treatment
are recorded in “Other income (expense)” on the Consolidated
Statements of Operations. See Note 17.
e n v i r o n m e n t a l r e m e d i a t i o n a n d o t h e r
c o n t i n G e n c i e s
We recognize a loss and record 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. See Note 18.
s e l f - i n s u r a n c e
We are 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. We do not accrue for general or unspecific
business risks.
s h a r e - b a s e d c o m P e n s a t i o n
e Q u i t Y r e s t r i c t e d s h a r e a n d r e s t r i c t e d s h a r e u n i t
a W a r d s — The fair value of equity instruments is measured
based on the share price on the grant date and is recognized over
the vesting period. These awards contain service, market, and/or
performance conditions. For awards containing only a service or a
market condition, we have 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, otherwise
the fair value is the grant date close price. For awards containing a
performance condition, compensation expense is not recognized
until we conclude that it is probable that the performance condition
will be met. We reassess the probability quarterly. See Note 21.
l i a b i l i t Y r e s t r i c t e d s h a r e a W a r d s — Restricted share
awards classified as liability awards contain only a service condition,
and have graded vesting provisions. Liability awards are re-measured
to fair value at each reporting date. See Note 21.
o P t i o n a W a r d s — The Black-Scholes option pricing model is
utilized to measure the fair value of options on the grant date. The
options contain only service conditions, and have graded vesting
provisions. We have elected to recognize compensation costs using
the straight-line method over the requisite service period for the
entire award. See Note 21.
441446.Fin.cs5.indd 27
3/28/14 4:46 PM
2013 Annual Report 27
Notes to Consolidated Financial Statements
t r o n o x l i m i t e d
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
4 . r e c e n t a c c o u n t i n G P r o n o u n c e m e n t s
6 . i n c o m e t a x e s
Our operations are conducted through various subsidiaries in a
number of countries throughout the world. We have provided for
income taxes based upon the tax laws and rates in the countries in
which operations are conducted and income is earned. For the years
ended December 31, 2013 and 2012, Tronox Limited was the public
parent registered under the laws of the State of Western Australia.
For the eleven months ended December 31, 2011 and one month
ended January 31, 2011, Tronox Incorporated was the public parent,
a Delaware corporation, registered in the United States.
Income (loss) before income taxes is comprised of the following:
Successor
Predecessor
Year Ended
December
31, 2013
Year Ended
December
31, 2012
Eleven
Months
Ended
December
31, 2011
$ (185)
(285)
409
$ 1,019
10
(21)
$ 70
120
72
One
Month
Ended
January
31, 2011
$ 107
497
28
$ (61)
$ 1,008
$ 262
$ 632
Australia
United States
Other
Income (loss) before
income taxes
The income tax benefit (provision) is summarized below:
Successor
Predecessor
Year Ended
December
31, 2013
Year Ended
December
31, 2012
Eleven
Months
Ended
December
31, 2011
One
Month
Ended
January
31, 2011
$ (11)
35
Australian:
Current
Deferred
U.S. Federal & State:
Current
Deferred
Other:
Current
1
Deferred
(31)
Income tax benefit (provision) $ (29)
(24)
1
$ (28)
124
(9)
—
—
38
$ 125
$ (1)
(4)
—
—
(14)
(1)
$ (20)
$ —
(1)
—
—
—
—
$ (1)
In March 2013, the Financial Accounting Standards Board
(the “FASB”) issued accounting standards update (“ASU”) 2013-5,
Parent’s Accounting for the Cumulative Translation Adjustment upon
Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign
Entity or of an Investment in a Foreign Entity, which addresses the
treatment of the cumulative translation adjustment into net income
when a parent either sells or liquidates a part or all of its investment
in a foreign entity or no longer holds a controlling financial
interest in a subsidiary or group of assets within a foreign entity.
This guidance is effective prospectively for periods beginning
after December 15, 2013; however, early adoption is permitted.
The adoption of this guidance is not anticipated to have a
significant impact on our consolidated financial statements.
During 2013, we adopted 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
comprehensive 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 adoption of this guidance did not have a significant
impact on our consolidated financial statements.
During 2013, we adopted ASU 2013-01, Clarifying the Scope of
Disclosures about Offsetting Assets and Liabilities, to clarify previously
issued guidance related to derivatives that are either offset or subject
to an enforceable master netting arrangement or similar agreement.
The adoption of this guidance did not have a significant impact on
our consolidated financial statements.
5 . o t h e r i n c o m e ( e x P e n s e )
Successor
Predecessor
Year Ended
December
31, 2013
Year Ended
December
31, 2012
Eleven
Months
Ended
December
31, 2011
One
Month
Ended
January
31, 2011
Net realized and
unrealized foreign
currency gains (losses)
Net gain on liquidation of
non-operating subsidiaries(1)
Interest income
Loss on extinguishment
of debt
Other
Total
$ 39
24
8
(4)
(1)
$ 66
$ (8)
$ (8)
—
2
—
(1)
$ (7)
—
1
—
(3)
$ (10)
$ 2
—
—
—
—
$ 2
(1) During 2013, we completed the liquidation of two non-operating subsidiaries:
Tronox (Luxembourg) Holdings S.a.r.l. and Tronox Luxembourg S.a.r.l for which
we recognized a net noncash gain from the realization of cumulative translation
adjustments.
28 Tronox Limited
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The following table reconciles the applicable statutory income
tax rates to our effective income tax rates for “Income tax benefit
(provision)” as reflected in the Consolidated Statements of Operations.
Net deferred tax assets (liabilities) at December 31, 2013 and
2012 were comprised of the following:
December 31,
2013
2012
Successor
Predecessor
Year Ended
December
31, 2013
Year Ended
December
31, 2012
Eleven
Months
Ended
December
31, 2011
One
Month
Ended
January
31, 2011
30%
30%
35%
35%
191
(10)
(6)
(1)
(5)
7
—
(31)
—
(7)
(1)
2
—
(25)
—
—
—
—
—
2
(1)
(6)
2
Statutory tax rate
Increases (decreases)
resulting from:
Tax rate differences
Disallowable expenditures
Gain on bargain purchase,
net of tax
Resetting of tax basis
to market value
Valuation allowances
Withholding taxes
Foreign interest
disallowance
Prior year accruals
Change in uncertain
tax positions
U.S. state income taxes
Permanent adjustment for
fresh-start, net of tax
Foreign exchange
AMT and other credits
Branch taxation
Other, net
Effective tax rate
—
(259)
(59)
—
22
6
—
—
17
8
6
—
(48%)
—
—
—
—
2
(12%)
—
—
—
—
(1)
8%
(29)
—
—
—
(5)
0%
—
—
—
—
(1)
—
—
—
—
—
The application of business combination accounting in connec-
tion with the Transaction resulted in the remeasurement of deferred
income taxes associated with recording the assets and liabilities
of the acquired entities at fair value (see Note 26). As a result,
we recorded deferred income taxes of $185 million.
Subsequent to the Transaction, certain subsidiaries re-domiciled
in Australia. Because the Australian tax laws provide for a resetting
of the tax basis of the business assets to market value, we 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 gain on
bargain purchase.
Upon emergence from bankruptcy in 2011, Tronox Incorporated
experienced an ownership change. Another ownership change
occurred during 2012, as a result of the Transaction. These owner-
ship changes resulted in a limitation under IRC Sections 382 and
383 related to U.S. net operating losses. We do not expect that
the application of these net limitations will have any material effect
on our U.S. federal or state income tax liabilities.
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
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
Unrealized foreign exchange gains
Other
Total deferred tax liabilities
Net deferred tax asset (liability)
Balance sheet classifications:
Deferred tax assets – current
Deferred tax assets – long-term
Deferred tax liabilities – current
Deferred tax liabilities – long-term
Net deferred tax asset (liability)
$ 659
293
28
72
32
100
9
226
20
3
13
1,455
(982)
473
(288)
(108)
(19)
(22)
(8)
(445)
$ 28
$ 47
192
(7)
(204)
$ 28
$ 664
197
31
79
31
109
2
76
50
10
8
1,257
(753)
504
(386)
(110)
(22)
(3)
(5)
(526)
(22)
$
$ 114
91
(5)
(222)
(22)
$
The net deferred tax assets (liabilities) reflected in the above table
include deferred tax assets related to grantor trusts, which were
established as Tronox Incorporated emerged from bankruptcy during
2011. The balances relate to the assets contributed to such grantor
trusts by Tronox Incorporated, and do not include estimates for
tax benefits we may receive upon the resolution of the Anadarko
Petroleum Corporation (“Anadarko”) litigation.
On December 12, 2013, the U.S. Bankruptcy Court for the
Southern District of New York determined that the defendant,
Anadarko, should be liable for damages in the range of $5 billion
to $14 billion for fraudulent conveyance claims. Because the final
damages to be awarded continue to be uncertain, we have not
included the tax benefit we will receive when the grantor trusts
receive the proceeds resulting from the resolution of the litigation.
Once these benefits are determined and recognized, we expect
them to be fully offset by valuation allowances. See Note 27.
During 2013 and 2012, the total change to the valuation
allowance was an increase of $229 million and an increase of
$192 million, respectively.
2013 Annual Report 29
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Notes to Consolidated Financial Statements
t r o n o x l i m i t e d
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
The deferred tax assets generated by tax loss carryforwards have
been partially offset by valuation allowances. The expiration of these
carryforwards at December 31, 2013 is shown below. These
expiration amounts are comprised of Australian, U.S. federal and
state, and other jurisdictional losses.
Australia U.S. Federal
U.S. State
Tax Loss
Carryforwards
Total
Other
$ —
—
—
—
—
306
$ —
—
—
—
—
1,241
$ —
—
11
—
6
1,431
$ —
—
—
—
—
263
$ —
—
11
—
6
3,241
$ 306
$ 1,241
$ 1,448
$ 263
$ 3,258
2014
2015
2016
2017
2018
Thereafter
Total tax loss
carryforwards
At December 31, 2013, Tronox Limited had foreign subsidiaries
with undistributed earnings. Although we would not be subject
to income tax on these earnings, amounts totaling approximately
$83 million could be subject to withholding tax if distributed.
Tronox Incorporated had certain foreign subsidiaries with undistrib-
uted earnings totaling approximately $148 million. We have made
no provision for deferred taxes for either Tronox Limited or Tronox
Incorporated related to these undistributed earnings because they
are considered to be indefinitely reinvested outside of the parents’
taxing jurisdictions.
We continue to maintain a valuation allowance related to the
net deferred tax assets in the United States, excluding the deferred
benefit for the alternative minimum tax credit. Future provisions
for income taxes will include no tax benefits with respect to losses
incurred and tax expense only to the extent of state tax payments
until the valuation allowance in the United States is eliminated.
A reconciliation of the beginning and ending amounts of
unrecognized tax benefits for 2013 and 2012 is as follows:
December 31,
Balance at January 1
Additions for tax positions related to prior years
Reductions for tax positions related to prior years
Balance at December 31
2013
$ 4
—
(3)
$ 1
2012
$ 2
2
—
$ 4
Included in the balance at December 31, 2013 and 2012, 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 less than $1 million and $3 million of the December
31, 2013 and 2012 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 our gross unrecognized tax benefits from timing differences
may decrease within the next twelve months by $1 million.
During 2013, 2012, and 2011, we recognized less than
$1 million, less than $1 million, and $(10) million, respectively,
in gross interest and penalties in “Income tax benefit (provision)” on
the Consolidated Statements of Operations. At December 31, 2013
and 2012, we 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 Sheets
reflected $1 million and $4 million, respectively, as the reserve for
uncertain tax positions.
Our Australian returns are closed through 2008. However,
under Australian tax laws, transfer pricing issues have no limitation
period. Our U.S. returns are closed for years through 2009, with
the exception of an amendment filed for the 2007 tax year. Our
Netherlands returns are closed through 2005. Our Switzerland
returns are closed through 2009. In accordance with the Transaction
Agreement, we are not liable for income taxes of the acquired
companies with respect to periods prior to the Transaction Date.
We believe that we have made adequate provision for income
taxes that may be payable with respect to years open for examina-
tion; however, the ultimate outcome 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.
30 Tronox Limited
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7 . e a r n i n G s P e r s h a r e
The computation of basic and diluted earnings (loss) per share for
the periods indicated is as follows:
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.”
Successor
Predecessor
Eleven
Months
Year Ended Year Ended
Ended
December December December
31, 2011
31, 2012
31, 2013
One
Month
Ended
January
31, 2011
(90)
36
(126)
—
(126)
100%
$
n ume rator – b as ic and diluted :
Net Income (loss)
Net income (loss) attributable
to noncontrolling interest
Net Income (Loss) attributable
to Tronox Limited
Less: Dividends paid(2)
Undistributed earnings (loss)
Percentage allocated to
ordinary shares
Undistributed earnings (loss)
allocated to ordinary shares
Add: Dividends paid allocated
to ordinary shares(2)
Earnings (loss) available
to ordinary shares
$
$ 1,133
$ 242 $
631
(1)
—
1,134
(61)
1,073
242
—
242
—
631
—
631
99.3%
100%
100%
(126)
1,065
242
—
60
—
631
—
8 . f a i r v a l u e m e a s u r e m e n t
For financial instruments that are subsequently measured at fair
value, the fair value measurement is grouped into levels. See Note 3
for additional information regarding the Level 1, Level 2, and Level
3 descriptions.
At December 31, 2013 and 2012, the only financial instrument
measured at fair value was the environmental rehabilitation trust.
At December 31, 2013 and 2012, the environmental rehabilitation
trust of $22 million and $20 million, respectively, was categorized
as Level 1. See Note 16 for additional information related to the
environmental rehabilitation trust.
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 15 for
additional information regarding the fair value of debt.
(126)
$ 1,125
$ 242 $
631
9 . a c c o u n t s r e c e i v a b l e
Denominator – Basic:
Weighted-average ordinary
shares (in thousands)
113,416
98,985
74,905
41,311
add : effec t o f d ilutive s e curitie s:
—
Restricted stock
Warrants
—
Options
—
113,416
Denominator – Dilutive
49
2,372
—
101,406
275
2,895
20
78,095
88
—
—
41,399
December 31,
Trade receivables
Other
Gross
Allowance for doubtful accounts
Net
2013
2012
$ 304
6
310
(2)
$ 308
$ 371
23
394
(3)
$ 391
earn i n G s ( lo ss ) Pe r o rdina r Y s ha re : (1)
Basic earnings (loss) per
ordinary share
$ (1.11)
$ 11.37
$ 3.22
$ 15.28
Bad debt expense recorded on the Consolidated Statements of
Operations was $1 million for each of the years ended December 31,
2013, 2012 and 2011.
Diluted earnings (loss)
per ordinary share
$ (1.11)
$ 11.10
$ 3.10
$ 15.25
1 0 . i n v e n t o r i e s
(1) Earnings (loss) per ordinary share amounts were calculated from exact, not rounded
income (loss) and share information.
(2) Our participating securities do not have a contractual obligation to share in losses;
therefore, when we have a net loss, none of the loss is allocated to participating
securities. Consequently, for 2013, the two-class method does not have an effect on
basic loss per share, and as such, dividends paid during the year were not included
for purposes of this calculation.
December 31,
Raw materials
Work-in-process
Finished goods
Materials and supplies, net(1)
Total
2013
2012
$ 191
45
417
106
$ 759
$ 221
99
477
117
$ 914
In computing diluted earnings (loss) per share under the
two-class method, we considered potentially dilutive shares. At
December 31, 2013, 2,094,771 options with an average exercise
price of $20.63, 357,300 Series A Warrants and 465,136 Class B
Warrants, with exercise prices of $59.66 and $65.84, respectively,
and 303,324 restricted share units, with an average price of $21.08
were not recognized in the diluted earnings per share calculation as
they were anti-dilutive. At December 31, 2012, 612,439 options
with an average exercise price of $24.81 and 18,990 restricted share
units with an average price of $21.10 were not recognized in the
diluted earnings per share calculation as they were anti-dilutive.
(1) Consists of processing chemicals, maintenance supplies, and spare parts, which will
be consumed directly and indirectly in the production of our products.
Finished goods includes inventory on consignment to others of
approximately $48 million and $42 million at December 31, 2013
and 2012, respectively. At December 31, 2013 and 2012, inventory
obsolescence reserves were $13 million and $11 million, respectively.
2013 Annual Report 31
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Notes to Consolidated Financial Statements
t r o n o x l i m i t e d
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
1 1 . P r o P e r t Y, P l a n t a n d e Q u i P m e n t
1 4 . a c c r u e d l i a b i l i t i e s
December 31,
2013
2012
December 31,
2013
2012
Land and land improvements
Buildings
Machinery and equipment
Construction-in-progress
Other
Total
Less accumulated depreciation and amortization
Net
$
79
181
1,141
133
43
1,577
(319)
$ 1,258
$
80
194
1,158
153
13
1,598
(175)
$ 1,423
Employee-related costs and benefits
Taxes other than income taxes
Interest
Sales rebates
Unfavorable sales contracts
Other
Total
Depreciation expense related to property, plant and equipment
1 5 . d e b t
during 2013, 2012, and 2011 was $191 million, $127 million,
and $57 million, respectively.
s h o r t - t e r m d e b t
$ 55
44
22
18
—
7
$ 146
$ 45
58
22
13
64
7
$ 209
2013
$ —
—
$ —
2012
$ —
30
$ 30
December 31,
UBS Revolver (1)
ABSA Revolver (2)
Short-term debt
(1) Average effective interest rate of 3.9% during 2012.
(2) Average effective interest rate of 8.5% during both 2013 and 2012.
u b s r e v o lv e r
On June 18, 2012, in connection with the closing of the Transaction,
we entered into a global senior secured asset-based syndicated
revolving credit facility with UBS AG (the “UBS Revolver”) with
a maturity date of the fifth anniversary of the closing date. The UBS
Revolver provides us with a committed source of capital with
a principal borrowing amount of up to $300 million, subject to a
borrowing base. In connection with the Amended and Restated
Credit Agreement on March 19, 2013, we amended the UBS
Revolver to allow for the increased size of the Term Loan over
the Term Facility (see “Term Facility” and “Term Loan” below).
Obligations under the UBS Revolver are collateralized by a first
priority lien on substantially all of our existing, and future deposit
accounts, inventory, and account receivables, and certain related
assets, excluding those held by our South African subsidiaries,
Netherland’s subsidiaries, and Bahamian subsidiary, and a second
priority lien on all of our other assets, including capital shares.
At December 31, 2013, our borrowing base was $210 million.
The UBS Revolver bears interest at our 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.
1 2 . m i n e r a l l e a s e h o l d s
December 31,
Mineral leaseholds
Less accumulated depletion
Net
2013
2012
$ 1,388
(172)
$ 1,216
$ 1,502
(63)
$ 1,439
Depletion expense related to mineral leaseholds during 2013,
2012, and 2011 was $115 million, $59 million, and $4 million,
respectively.
1 3 . i n t a n G i b l e a s s e t s
December 31, 2013
December 31, 2012
Gross Accumulated Net Carrying Gross Accumulated Net Carrying
Amount
Cost Amortization
Cost Amortization
Amount
Customer
relationships $294
TiO2 technology 32
Internal-use
software
Other
Total
40
9
$375
$(59)
(5)
(6)
(5)
$(75)
$235 $294
32
27
34
4
38
9
$300 $373
$(39)
(3)
(2)
(3)
$(47)
$255
29
36
6
$326
Amortization expense related to intangible assets during 2013,
2012, and 2011 was $27 million, $25 million, and $22 million,
respectively. Estimated future amortization expense related to
intangible assets is $27 million for 2014, $27 million for 2015,
$25 million for 2016, $25 million for 2017, $25 million for 2018,
and $171 million thereafter.
32 Tronox Limited
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a b s a r e v o lv i n G c r e d i t f a c i l i t Y
In connection with the Transaction, we entered into a R900 million
(approximately $86 million as of December 31, 2013) revolving
credit facility with ABSA Bank Limited acting through its ABSA
Capital Division (the “ABSA Revolver”) with a maturity date of
June 14, 2017. 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%.
At December 31, 2012, we had drawn down R250 million
(approximately $30 million), which was repaid during the first
quarter of 2013. At December 31, 2013, we had no amounts
drawn on the ABSA Revolver.
l o n G - t e r m d e b t
Long-term debt consisted of the following:
Original
Principal
Maturity
Date
December
31, 2013
December
31, 2012
Term Loan, net of unamortized
discount of $11 million at
December 31, 2013 (1)
Senior Notes
Term Facility, net of
unamortized discount
of $6 million at
December 31, 2012 (2)
Co-generation Unit
Financing Arrangement
Lease financing
Total borrowings
Less: Noncurrent borrowings
due in one year
Noncurrent borrowings
$
$ 1,500 3/19/2020
$ 900 8/15/2020
$ 1,482
900
$ —
900
$ 700
2/8/2018
—
691
16
2/1/2016
6
25
2,413
10
14
1,615
(18)
$ 2,395
(10)
$ 1,605
(1) Average effective interest rate of 5% during 2013.
(2) Average effective interest rate of 5% and 5% during 2013 and 2012, respectively.
At December 31, 2013, the scheduled maturities of our
long-term debt were as follows:
2014
2015
2016
2017
2018
Thereafter
Total
Remaining accretion associated with the Term Loan
Total borrowings
Total Borrowings
$
18
18
16
16
16
2,340
2,424
(11)
$ 2,413
t e r m l o a n
On March 19, 2013, we, along with our wholly owned subsidiary,
Tronox Pigments (Netherlands) B.V., and certain of our subsidiaries
named as guarantors, entered into an Amended and Restated
Credit and Guaranty Agreement with Goldman Sachs Bank USA,
as Administrative Agent and Collateral Agent, and Goldman Sachs
Bank USA, UBS Securities LLC, Credit Suisse Securities (USA) LLC
and RBC Capital Markets, as Joint Lead Arrangers, Joint Bookrunners
and Co-Syndication Agents. Pursuant to the Amended and Restated
Credit Agreement, we obtained a $1.5 billion senior secured term
loan (the “Term Loan”), which matures in March 2020. The terms
of the Amended and Restated Credit Agreement are substantially
similar to our prior Term Facility (defined below). The Term Loan
was issued net of an original issue discount of $7 million, or 0.5% of
the principal balance. During the year ended December 31, 2013,
we made principal repayments of $8 million.
The Term Loan bears interest at the option of Tronox at either:
(i) 2.5% plus the base rate defined as the greater of the prime
lending rate quoted in the print edition of The Wall Street Journal
or the federal funds effective rate in effect on such day plus one
half of 1%; provided, however, that the Base Rate is not less than
2% per annum; or (ii) 3.5% plus the greater of the 3 month LIBOR
Eurodollar rate or 1%.
n o t e s
On August 20, 2012, our wholly owned subsidiary, Tronox
Finance LLC, issued $900 million aggregate principal amount of
6.375% senior notes due 2020 (the “Existing Notes”) at par value.
The Existing 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.
During the second quarter of 2013, we and certain of our
subsidiaries filed a Registration Statement on Form S-4, pursuant
to which we and such subsidiaries offered to exchange $900 million
in aggregate principal amount of registered 6.375% senior notes
due 2020 (the “New Notes”) and related guarantees for the Existing
Notes and related guarantees. The New Notes are substantially
identical to the Existing Notes. On September 17, 2013, Tronox
Finance issued the New Notes in exchange for the Existing Notes
(together the “Notes”). At December 31, 2013, there was $900
million in aggregate principal amount of New Notes outstanding
and less than $1 million in aggregate amount of Existing Notes
outstanding.
The Notes bear interest semiannually at a rate equal to 6.375%,
and are fully and unconditionally guaranteed on a senior, unsecured
basis by us and certain of our subsidiaries. The Notes are redeemable
at any time at our discretion.
2013 Annual Report 33
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Notes to Consolidated Financial Statements
t r o n o x l i m i t e d
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
t e r m f a c i l i t Y
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 (the “Senior Secured Term Loan”)
and a $150 million Senior Secured Delayed Draw Term Loan
(the “Senior Secured Delayed Draw” together, the “Term Facility”).
The Term Facility was issued net of an original issue discount of
$7 million, or 1% of the initial principal amount, which was 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. During 2012, we made principal repayments of
$3 million.
On February 28, 2013, Tronox Pigments (Netherlands) B.V.
repaid the outstanding principal balance of $149 million, plus
interest, related to the $150 million Senior Secured Delayed Draw.
We accounted for such repayment as an extinguishment of debt,
and recognized a $4 million loss on the early extinguishment of debt
related to the allocated portion of the unamortized original issue
discount and debt issuance costs, which is recorded in “Other
income (expense)” on the Consolidated Statements of Operations.
We allocated these amounts between the $550 million Senior
Secured Term Loan and the $150 million Senior Secured Delayed
Draw as follows:
Outstanding
Balance
Percentage of
Outstanding
Balance
Allocation of
Loss on
Unamortized Extinguishment
of Debt
Costs
Senior Secured
Term Loan
Senior Secured
Delayed Draw
Total
$547
149
$696
79%
21%
100%
$16
4
$20
$—
4
$4
The outstanding principal balance of the Senior Secured Term
Loan of $547 million became part of the Term Loan, and was
accounted for as a debt modification. As such, the unamortized
original issue discount of $5 million and debt issuance costs
of $11 million related to the Term Facility are being amortized
over the life of the Term Loan.
c o - G e n e r a t i o n u n i t f i n a n c i n G a r r a n G e m e n t
In March 2011, in order to finance its share of an asset purchased
for the Tiwest Joint Venture, Tronox Incorporated incurred debt
totaling $8 million. In connection with the Transaction, we 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 outstanding balance at the rate of 6.5% per annum. During
2013 and 2012, we made principal repayments of $3 million and
$2 million, respectively.
34 Tronox Limited
l e a s e f i n a n c i n G
We have capital lease obligations in South Africa, which are payable
through 2032 at a weighted average interest rate of approximately
15%. At December 31, 2013 and 2012, such obligations had a
net book value of assets recorded under capital leases aggregating
$23 million and $9 million, respectively. During 2013 and 2012,
we made principal payments of less than $1 million and less than
$1 million, respectively.
f a i r v a l u e
Our debt is recorded at historical amounts. At December 31, 2013,
the fair value of the Term Loan was $1,524 million. At December
31, 2013 and 2012, the fair value of the Notes was $924 million
and $910 million, respectively. At December 31, 2012, the fair
value of the Term Facility was $709 million. We determined the
fair value of the Term Loan, the Notes and the Term Facility
using Bloomberg market prices. The fair value hierarchy for the
Term Loan and the Notes is a Level 1 input.
d e b t c o v e n a n t s
At December 31, 2013, we had financial covenants in the UBS
Revolver, the ABSA Revolver and the Term Loan; however, only the
ABSA Revolver had a financial maintenance covenant that applies to
local operations and only when the ABSA Revolver is drawn upon.
The terms of the Term Loan are substantially similar to our prior
Term Facility except that the Term Loan (i) eliminates financial
maintenance covenants (ii) permits, subject to certain conditions,
incurrence of additional senior secured debt up to a leverage ratio
of 2:1, (iii) increases our ability to incur debt in connection with
permitted acquisitions and our ability to incur unsecured debt,
and (iv) allows for the payment of a $0.25 per share dividend each
fiscal quarter. Otherwise, the terms of the Term Loan 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) disposition of assets and subsidiary interests;
(v) acquisitions; (vi) sale and leaseback transactions; and (vii)
transactions with affiliates and shareholders.
The Term Loan and the UBS Revolver are subject to an inter-
creditor agreement pursuant to which the lenders’ respective
rights and interests in the security are set forth. We were in
compliance with all our financial covenants as of and for the
year ended December 31, 2013.
We have pledged the majority of our U.S. assets and
certain assets of our non-U.S. subsidiaries in support of our
outstanding debt.
441446.Fin.cs5.indd 34
3/28/14 4:46 PM
i n t e r e s t a n d d e b t e x P e n s e
Interest and debt expense consisted of the following:
Successor
Eleven
Months
Ended
Year Ended
December 31, December 31, December 31,
2011
Year Ended
2012
2013
Predecessor
One
Month
Ended
January 31,
2011
Bank borrowings
Amortization of deferred
debt issuance costs and
discounts on debt
Other
Capitalized interest
Total interest and
debt expense
$ 122
$ 53
$ 29
$ 3
9
4
(5)
10
4
(2)
1
1
(1)
$ 130
$ 65
$ 30
—
—
—
$ 3
In connection with obtaining debt, we incurred debt issuance
costs, which are being amortized through the respective maturity
dates using the effective interest method. At December 31, 2013
and 2012, we had $57 million and $38 million, respectively,
of deferred debt issuance costs, which are recorded in “Other
long-term assets” on the Consolidated Balance Sheets.”
1 6 . a s s e t r e t i r e m e n t o b l i G a t i o n s
Asset retirement obligations (“AROs”) consist primarily of
rehabilitation and restoration costs, landfill capping costs, decom-
missioning costs, and closure and post-closure costs. A summary
of the changes in AROs during 2013 and 2012 is as follows:
December 31,
2013
2012
Beginning balance
Additions
Accretion expense
Remeasurement/translation
Changes in estimates, including cost and
timing of cash flows
Settlements/payments
AROs acquired in the Transaction
Ending balance
$ 113
—
2
(16)
(1)
(2)
—
$ 96
$ 30
7
5
7
4
(1)
61
$ 113
Current portion included in accrued liabilities
$ 6
$ 7
Noncurrent portion
$ 90
$ 106
We used the following assumptions in determining asset
retirement obligations at December 31, 2013: inflation rates
between 2.5%-5.3% per year; credit adjusted risk-free interest rates
between 4.52%-7%; and the life of mines between 11-39 years.
e n v i r o n m e n t a l r e h a b i l i t a t i o n t r u s t
In accordance with applicable regulations, we have established an
environmental rehabilitation trust for the prospecting and mining
operations in South Africa, which receives, holds, and invests
funds for the rehabilitation or management of asset retirement
obligations. The trustees of the fund are appointed by us, and
consist of sufficiently qualified employees capable of fulfilling their
fiduciary duties. At December 31, 2013 and 2012, the environmen-
tal rehabilitation trust assets were $22 million and $20 million,
respectively, which were recorded in “Other long-term assets” on
the Consolidated Balance Sheets.
1 7 . d e r i v a t i v e i n s t r u m e n t s
We manufacture and market our products in a number of countries
throughout the world and, as a result, are exposed to changes in
foreign currency exchange rates, particularly in South Africa,
Australia, and the Netherlands. Costs in South Africa and Australia
are primarily incurred in local currencies, while the majority of
revenues are in U.S. dollars. In Europe, the majority of revenues and
costs are in the local currency. This leaves us exposed to movements
in the South African rand and the Australian dollar versus the
U.S. dollar.
In order to manage this risk, we entered into currency forward
contracts to buy and sell foreign currencies as “economic hedges”
for these foreign currency transactions during 2013. Our currency
forward contracts were not designated for hedge accounting
treatment under ASC 815, Derivatives and Hedging, (“ASC 815”).
As such, changes in the fair value were recorded in “Other income
(expense)” on the Consolidated Statements of Operations. During
2013, we recorded a net gain of $2 million. At December 31, 2013
and 2012, we did not have any forward contracts in place.
1 8 . c o m m i t m e n t s a n d c o n t i n G e n c i e s
l e a s e s — The Company leases office space, storage, and equipment
under non-cancelable lease agreements, which expire on various
dates through 2023. Total rental expense related to operating leases
was $42 million, $8 million, and $13 million during 2013, 2012,
and 2011, respectively. See Note 15 for additional information
regarding lease financing.
At December 31, 2013, minimum rental commitments under
non-cancelable operating leases were as follows:
2014
2015
2016
2017
2018
Thereafter
Total
Operating
$ 43
29
10
10
6
6
$ 104
2013 Annual Report 35
441446.Fin.cs5.indd 35
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Notes to Consolidated Financial Statements
t r o n o x l i m i t e d
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
P u r c h a s e c o m m i t m e n t s — At December 31, 2013, purchase
commitments were $253 million for 2014, $151 million for 2015,
$112 million for 2016, $105 million for 2017, $77 million for
2018, and $160 million thereafter.
In accordance with Australian law, Tronox Limited is not
permitted to hold its own ordinary shares. As such, shares
repurchased during 2012 were canceled.
t r o n o x i n c o r P o r a t e d
The changes in outstanding and treasury shares for the year ended
December 31, 2012 were as follows:
shares outstandin G :
Balance at January 1, 2012
Shares issued for share-based compensation
Shares issued for warrants exercised
Shares issued for claims
Shares exchanged in connection with the Transaction
Balance at December 31, 2012
shares held as treasur Y:
Balance at January 1, 2012
Shares issued for share-based compensation
Shares canceled in connection with the Transaction
Balance at December 31, 2012
75,383,455
570,785
690,385
25
(76,644,650)
—
472,565
239,360
(711,925)
—
In accordance with Australian law, Tronox Limited is not
permitted to hold its own ordinary shares. As such, Tronox
Incorporated shares held in treasury on the Transaction date were
canceled in connection with the Transaction.
W a r r a n t s
Tronox Limited has outstanding Series A Warrants (the “Series A
Warrants”) and Series B Warrants (the “Series B Warrants,” and
together with the Series A Warrants, the “Warrants”). Holders of the
Warrants are entitled to purchase five Class A Shares and receive
$12.50 in cash at an exercise prices of $59.66 for each Series A
Warrant and $65.84 for each Series B Warrants. The Warrants have
a seven-year term from the date initially issued and will expire on
February 14, 2018. A holder may exercise the Warrants by paying
the applicable exercise price in cash or exercising on a cashless basis.
The Warrants are freely transferable by the holder. As of December
31, 2013 there were 357,300 Series A Warrants and 465,136 Series
B Warrants outstanding.
d i v i d e n d s d e c l a r e d
During 2013 and 2012, we declared and paid quarterly dividends to
holders of our Class A Shares and Class B Shares as follows:
Q3
2012
Q4
2012
Q1
2013
Q2
2013
Q3
2013
Q4
2013
Dividend per share $0.25
Total dividend
$32
Record date
(close of business)
$0.25
$29
$0.25 $0.25
$28
$29
$0.25
$29
$0.25
$29
July November March May August November
18
13
19
20
23
6
l e t t e r s o f c r e d i t — At December 31, 2013, we had outstand-
ing letters of credit, bank guarantees, and performance bonds of
approximately $45 million, of which $25 million in letters of credit
were issued under the UBS Revolver and $18 million were bank
guarantees issued by ABSA.
o t h e r m a t t e r s — From time to time, we may be party to a
number of legal and administrative proceedings involving legal,
environmental, and/or other matters in various courts or agencies.
These proceedings, individually and in the aggregate, may have a
material adverse effect on us. These proceedings may be associated
with facilities currently or previously owned, operated or used by
us and/or our predecessors, some of which may include claims for
personal injuries, property damages, cleanup costs, and other
environmental matters. Current and former operations may also
involve management of regulated materials that are subject to
various environmental laws and regulations including the
Comprehensive Environmental Response Compensation and
Liability Act, the Resource Conservation and Recovery Act or state
equivalents. Similar environmental laws and regulations and other
requirements exist in foreign countries in which we operate.
1 9 . s h a r e h o l d e r s ’ e Q u i t Y
t r o n o x l i m i t e d
The changes in outstanding Class A Shares and Class B Shares for
the years ended December 31, 2013 and 2012 were as follows:
c las s a s h are s :
Balance at January 1, 2012
Shares issued in connection with the Transaction
Shares issued for share-based compensation
Shares issued for warrants exercised
Shares purchased by the T-Bucks Trust
Class A Shares purchased by Exxaro, converted to
Class B Shares
Shares repurchased and canceled
Balance at December 31, 2012
Shares issued for share-based compensation
Shares issued for warrants exercised
Shares issued for options exercised
Balance at December 31, 2013
—
76,644,650
24,620
9,353
(548,234)
(1,400,000)
(12,626,400)
62,103,989
109,790
84,088
51,751
62,349,618
c las s b s h are s :
Balance at January 1, 2012
—
Shares issued in connection with the Transaction
49,754,280
Class A Shares purchased by Exxaro, converted to Class B Shares 1,400,000
Balance at December 31, 2012
Balance at December 31, 2013
51,154,280
51,154,280
36 Tronox Limited
441446.Fin.cs5.indd 36
3/28/14 4:46 PM
a c c u m u l a t e d o t h e r c o m P r e h e n s i v e l o s s
The changes in accumulated other comprehensive loss were as
follows:
Successor
Predecessor
Eleven
Months
Year Ended Year Ended
Ended
December December December
31, 2011
31, 2012
31, 2013
One
Month
Ended
January
31, 2011
Foreign currency translation:
Beginning balance
Changes in accumulated
foreign currency translation
Liquidation of non-operating
subsidiaries (recognized in
the consolidated statements
of operations)
Elimination in accordance
w ith fresh-start accounting
Ending balance
Pension and postretirement
benefit plans:
Beginning balance
Actuarial gain (loss) and prior
service credit, net of
amortization and taxes
Elimination in accordance
with fresh-start accounting
Ending balance
Accumulated other
comprehensive loss attributable
to Tronox Limited
Accumulated other
comprehensive income
(loss) attributable to
noncontrolling interest
Accumulated other
comprehensive loss
$
4
$ (6)
$ —
$ (122)
(195)
10
(6)
1
(24)
—
—
—
—
(215)
—
4
—
(6)
121
—
(99)
(51)
—
113
30
(48)
(51)
(1)
—
(69)
—
(99)
—
(51)
(112)
—
(284)
(95)
(57)
—
(70)
$ 1
—
—
$ (354)
$ (94)
$ (57)
$ —
s h a r e s P l i t
On June 26, 2012, the Board approved a 5-to-1 share split for
holders of 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. As a result of the share
split, we recorded an increase to Class A Shares and Class B Shares
of $1 million and a corresponding decrease to “Retained earnings”
on the Consolidated Balance Sheets.
s h a r e r e P u r c h a s e s
On June 26, 2012, the Board authorized the repurchase of 10%
of Tronox Limited voting securities in open market transactions.
During 2012, we 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 canceled in accordance
with Australian law. On September 27, 2012, we announced
the successful completion of our share repurchase program.
2 0 . n o n c o n t r o l l i n G i n t e r e s t
In connection with the Transaction, Exxaro 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. 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). Exxaro also retained a 26% ownership interest
in certain other non-operating subsidiaries.
A reconciliation of the beginning and ending balances of
noncontrolling interest on the Consolidated Balance Sheets is
as follows:
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
Net income attributable to noncontrolling interest
Effect of exchange rate changes
Balance at December 31, 2013
$ —
233
(1)
1
233
36
(70)
$ 199
2 1 . s h a r e - b a s e d c o m P e n s a t i o n
Compensation expense consisted of the following:
Successor
Predecessor
Eleven
Months
Year Ended Year Ended
Ended
December December December
31, 2011
31, 2012
31, 2013
One
Month
Ended
January
31, 2011
Restricted shares and
restricted share units
Options
T-Bucks EPP
Total compensation expense
$ 10
5
2
$ 17
$ 29
2
1
$ 32
$ 14
—
—
$ 14
$ —
—
—
$ —
The income tax benefits associated with compensation expense
for 2013 and 2012 were $2 million and $6 million, respectively,
net of valuation allowances. The tax benefit associated with
compensation expense during 2011 had a corresponding offset to
the valuation allowance, yielding no overall income tax benefit.
2013 Annual Report 37
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Notes to Consolidated Financial Statements
t r o n o x l i m i t e d
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
t r o n o x l i m i t e d m a n a G e m e n t e Q u i t Y
i n c e n t i v e P l a n
On the Transaction Date, we adopted the Tronox Limited
Management Equity Incentive Plan (the “Tronox Limited MEIP”),
which permits the grant of awards that are comprised of incentive
options, nonqualified options, share appreciation rights, restricted
shares, restricted share units, performance awards, and other
share-based awards, cash payments, and other forms as the compen-
sation 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.
r e s t r i c t e d s h a r e s
During 2013 and 2012, we granted 479,258 and 322,765 restricted
shares, respectively, to employees, which have both time require-
ments and performance requirements. The time provisions are
graded vesting over 3 years, while the performance provisions are
cliff vesting and have a variable payout at the end of 3 years. During
2013 and 2012, we granted 45,114 and 34,740 restricted shares,
respectively, with three-year graded vesting to members of the
Board. All restricted share awards issued during 2013 are classified
as equity awards, and are accounted for using the fair value
established at the grant date.
The following table presents a summary of activity for the years
ended December 31, 2013 and 2012:
Number of
Shares
Weighted Average
Grant Date
Fair Value
Outstanding, January 1, 2012
Converted in connection with the Transaction
Granted
Vested
Forfeited
Outstanding, December 31, 2012
Granted
Vested
Forfeited
Outstanding, December 31, 2013
—
420,765
357,505
(24,620)
(11,575)
742,075
524,372
(100,540)
(17,112)
1,148,795
$ —
16.99
25.18
20.87
29.32
20.61
21.18
22.91
24.24
$ 20.61
Expected to vest, December 31, 2013
1,135,905
$ 20.60
At December 31, 2013, there was $12 million in unrecognized
compensation expense related to nonvested restricted shares,
adjusted for estimated forfeitures, which is expected to be recog-
nized over a weighted-average period of 2 years. The total fair value
of restricted shares that vested during the years ended December 31,
2013 and 2012 was $2 million and $1 million, respectively.
r e s t r i c t e d s h a r e u n i t s ( “ r s u s ” )
During 2013 and 2012, we granted 269,037 and 18,990 RSUs,
respectively, to employees, which have both time requirements
and performance requirements. The time provisions are graded
vesting over a period of 3 years, while the performance provisions
are cliff vesting and have a variable payout at the end of 3 years.
During 2013, we granted 26,618 RSUs with 3-year graded vesting
to members of the Board. All RSUs issued during 2013 are
classified as equity awards, and are accounted for using the fair
value established at the grant date.
Outstanding, January 1, 2012
Granted
Outstanding, December 31, 2012
Granted
Vested
Forfeited
Outstanding at December 31, 2013
Number of
Shares
Weighted Average
Grant Date
Fair Value
—
18,990
18,990
295,655
(7,775)
(3,546)
303,324
$ —
21.10
21.10
21.06
20.43
21.36
$ 21.08
Expected to vest, December 31, 2013
294,542
$ 21.07
At December 31, 2013, there was $3 million unrecognized
compensation expense related to nonvested RSUs, adjusted for
estimated forfeitures, which is expected to be recognized over
a weighted-average period of 2 years. The total fair value of RSUs
that vested during the year ended December 31, 2013 was less
than $1 million.
38 Tronox Limited
441446.Fin.cs5.indd 38
3/28/14 4:46 PM
o P t i o n s
During 2013 and 2012, we granted options to employees to
purchase Class A Shares, which vest ratably over a three-year period
and have a ten-year term. The following table presents a summary
of activity for the years ended December 31, 2013 and 2012:
Fair value is determined on the grant date using the Black-
Scholes option-pricing model, and is recognized in earnings on a
straight-line basis over the employee service period of three years,
which is the vesting period. The assumptions used in the Black-
Scholes option-pricing model were as follows:
Number of
Options
Weighted Weighted
Average
Contractual
Life (years)
Average
Exercise
Price
Intrinsic
Value
Outstanding,
January 1, 2012
Converted in connection
with the Transaction
Issued
Forfeited
Outstanding,
December 31, 2012
Issued
Exercised
Forfeited
Expired
Outstanding,
December 31, 2013
Expected to vest,
December 31, 2013
Exercisable,
December 31, 2013
—
$ —
517,330
247,904
(152,795)
612,439
1,590,438
(51,751)
(22,861)
(33,494)
24.56
23.83
22.39
24.81
19.17
21.90
20.54
25.65
2,094,771
$ 20.63
8.97
$ 7
1,822,535
$ 20.19
9.05
$ 6
226,822
$ 24.32
8.27
$ —
The aggregate intrinsic values in the table represent the total
pre-tax intrinsic value (the difference between our share price
at December 31, 2013 and the options’ exercise price, multiplied
by the number of in-the-money options) that would have been
received by the option holders had all option holders exercised their
in-the-money options at the end of the year. The amount will
change based on the fair market value of our stock. Total intrinsic
value of options exercised during 2013 was less than $1 million.
We issue new shares upon the exercise of options. During 2013,
we received approximately $1 million in cash for the exercise of
stock options. The associated tax benefit was less than $1 million.
At December 31, 2013, unrecognized compensation expense
related to options, adjusted for estimated forfeitures, was $10
million, which is expected to be recognized over a weighted-average
period of 2 years.
February 25,
2013
March 11, September 3,
2013
2013
Number of options granted
Fair market value and exercise price
Risk-free interest rate
Expected dividend yield
Expected volatility
Maturity
Expected term (years)
Per-unit fair value of options granted
1,544,872
$ 19.09
1.04%
5.24%
56%
10
6
$ 6.28
8,238
$ 21.49
1.19%
4.65%
56%
10
6
$ 7.48
37,328
$ 21.94
2.10%
4.56%
56%
10
6
$ 7.92
The fair value is based on the closing price of our Class A Shares
on the grant date. The risk-free interest rate is based on U.S.
Treasury Strips available with maturity period consistent with
expected life assumption. The expected volatility assumption
is based on historical price movements of our peer group.
t - b u c k s e m P l o Y e e P a r t i c i P a t i o n P l a n ( “ t - b u c k s e P P ” )
During 2012, we established the T-Bucks EPP for the benefit of
certain qualifying employees of our South African subsidiaries.
We funded the T-Bucks Trust (the “Trust”) with R124 million
(approximately $15 million), which was used to acquire Class A
Shares. Additional contributions may be made in the future at
the discretion of the Board. The T-Bucks EPP is classified as an
equity-settled shared-based payment plan, whereby participants
were awarded share units in the Trust, which entitles them to
receive Class A Shares upon completion of the vesting period on
May 31, 2017. Participants are entitled to receive dividends on
the shares during the vesting period. Forfeited shares are retained by
the Trust, and are allocated to future participants. Compensation
costs are recognized over the vesting period using the straight-line
method. During 2012, the Trust purchased 548,234 Class A
Shares at $25.79 per share, which was the fair value on the date
of purchase. The balance at both December 31, 2013 and 2012
was 548,234 shares.
441446.Fin.cs5.indd 39
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2013 Annual Report 39
Notes to Consolidated Financial Statements
t r o n o x l i m i t e d
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
t r o n o x i n c o r P o r a t e d m a n a G e m e n t e Q u i t Y
i n c e n t i v e P l a n
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 were comprised of incentive options,
nonqualified options, share appreciation rights, restricted shares,
restricted share units, performance awards, and other share-based
awards and cash payments. 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 connec-
tion with the Transaction. The remaining restricted shares of Tronox
Incorporated were converted to Tronox Limited restricted shares.
r e s t r i c t e d s h a r e s
During 2012, Tronox Incorporated granted shares to employees with
graded vesting provisions over a 3-year time period. All restricted
share awards issued during 2012 were classified as equity awards
and accounted for using the fair value established at the grant date.
All Tronox Incorporated shares granted in 2012 that did not vest
with the Transaction were converted into the Tronox Limited
MEIP on the date of the Transaction.
o P t i o n s
During 2012, Tronox Incorporated granted options to employees
to purchase Class A Shares with graded vesting provisions over a
3 year time period and carrying a ten year term option. Fair value
was determined on the grant date using the Black-Scholes option-
pricing model, and recognized in earnings on a straight-line
basis over the employee service period. All Tronox Incorporated
options granted in 2012 that did not vest with the Transaction
were converted to the Tronox Limited MEIP on the date of the
Transaction.
The following table presents a summary of activity for the years
ended December 31, 2012 and 2011:
Number of
Shares
Weighted Average
Grant Date
Fair Value
Balance at January 1, 2011
Issued
Balance at December 31, 2011
Issued
Converted in connection with the Transaction
Outstanding at December 31, 2012
—
345,000
345,000
172,330
(517,330)
—
$ —
22.00
$ 22.00
29.69
24.56
$ —
2 2 . P e n s i o n a n d o t h e r P o s t r e t i r e m e n t
The following table summarizes restricted shares activity during
h e a l t h c a r e b e n e f i t s
the years ended December 31, 2012 and 2011:
Number of
Shares
Weighted Average
Grant Date
Fair Value
Balance, January 1, 2011
Granted
Vested
Forfeited
Balance, December 31, 2011
Granted
Vested
Earned in connection with the Transaction
Converted in connection with the Transaction
Balance, December 31, 2012
—
1,734,090
(545,675)
(10,420)
1,177,995
52,915
(61,165)
(748,980)
(420,765)
—
$ —
22.81
24.50
24.50
22.01
24.36
24.50
24.57
16.99
$ —
We sponsor a noncontributory defined benefit retirement
plan (qualified) in the United States, a contributory defined
benefit retirement plan in the Netherlands, a U.S. contributory
postretirement healthcare plan, and a South Africa postretirement
healthcare plan.
u . s . P l a n s
Q u a l i f i e d r e t i r e m e n t P l a n – We sponsor 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. We 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.
40 Tronox Limited
441446.Fin.cs5.indd 40
3/28/14 4:46 PM
Pos tre tirement healthcare Plan — We sponsor 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 us. The plan
provides medical and dental benefits to U.S. retirees and their
eligible dependents.
f o r e i G n P l a n s
n e t h e r l a n d s P l a n — On January 1, 2007, we 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 us
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.
s o u t h a f r i c a P o s t r e t i r e m e n t h e a l t h c a r e P l a n —
As part of the Transaction, we established a post-employment
healthcare plan, which provides medical and dental benefits to
certain Namakwa Sands employees, retired employees and their
registered dependents (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.
P l a n f i n a n c i a l i n f o r m a t i o n
b e n e f i t o b l i G a t i o n s a n d f u n d e d s t a t u s — The following
provides a reconciliation of beginning and ending benefit obliga-
tions, beginning and ending plan assets, funded status, and balance
sheet classification of our pension and postretirement healthcare
plans as of and for the years ended December 31, 2013 and 2012.
The benefit obligations and plan assets associated with our principal
benefit plans are measured on December 31.
Year Ended December 31,
2013
2012
2013
2012
Retirement Plans
Postretirement
Healthcare Plans
$ 557
5
20
(31)
chan G e in benefit obli Gations:
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
Plan amendments
Benefits paid
Administrative expenses
Benefit obligation,
end of year
—
(4)
(27)
(3)
524
6
1
$ 483
3
22
78
2
1
—
—
(29)
(3)
$ 19
1
1
4
(1)
—
—
—
(1)
—
$ 9
1
1
2
—
1
7
—
(2)
—
557
23
19
chan G e 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
398
350
19
5
1
5
(27)
(3)
47
30
1
2
(29)
(3)
—
—
1
—
—
(1)
—
—
—
1
1
—
(2)
—
398
398
—
—
$ (126)
$ (159)
$ (23)
$ (19)
$ —
classification of am ounts reco Gnized
in the consolidated balance sheets:
Accrued liabilities
Pension and postretirement
healthcare benefits
Total liabilities
Accumulated other
comprehensive loss
Total
60
$ (66)
(126)
(126)
(159)
(159)
94
$ (65)
$ —
$ (1)
(22)
(23)
9
$ (14)
$ (2)
(17)
(19)
6
$ (13)
(1) We expect 2014 contributions to be approximately $5 million for The Netherlands
Plan and $17 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.
2013 Annual Report 41
441446.Fin.cs5.indd 41
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Notes to Consolidated Financial Statements
t r o n o x l i m i t e d
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
At December 31, 2013, our U.S. qualified retirement plan was
in an underfunded status of $106 million. As a result, we have a
projected minimum funding requirement of $13 million for 2013,
which will be payable in 2014.
December 31, 2013
December 31, 2012
The
U.S. Netherlands
Retirement
Plan
Qualified
Plan
The
U.S. Netherlands
Retirement
Plan
Qualified
Plan
Accumulated
benefit obligation
Projected benefit obligation
Fair value of plan assets
Funded status –
underfunded
$ 378
(378)
272
$ 127
(146)
126
$ 420
(420)
286
$ 117
(137)
112
$ (106)
$ (20)
$ (134)
$ (25)
e x P e c t e d b e n e f i t P aY m e n t s — The following table shows
the expected cash benefit payments for the next five years and in the
aggregate for the years 2019 through 2023:
2014
2015
2016
2017
2018
2019–
2023
Retirement Plans (1)
$32
$1
Postretirement Healthcare Plan
(1) Includes benefit payments expected to be paid from the U.S. qualified retirement
$30 $150
$7
$1
$31
$1
$30
$1
$30
$1
plan of $28 million, $27 million, $27 million, $26 million and $26 million in each
year, 2014 through 2018, respectively, and $127 million in the aggregate for the
period 2019 through 2023.
r e t i r e m e n t a n d P o s t r e t i r e m e n t h e a l t h c a r e e x P e n s e — The table below presents the components of net periodic cost
(income) associated with the U.S. and foreign plans recognized in the Consolidated Statements of Operations for the years ended December
31, 2013 and 2012, eleven months ended December 31, 2011 and one month ended January 31, 2011:
Retirement Plans
Postretirement Healthcare Plans
Successor
Predecessor
Successor
Year
Ended
Eleven
Months
Ended
December 31, December 31, December 31,
2011
Year
Ended
2013
2012
One
Month
Ended
Eleven
Months
Ended
January 31, December 31, December 31, December 31,
2011
Year
Ended
Year
Ended
2013
2012
2011
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)
$ 5
20
$ 3
22
$ 3
21
(20)
(21)
(20)
—
2
$ 7
—
—
$ 4
—
—
$ 4
$ —
2
(2)
—
1
$ 1
$ 1
1
—
—
—
$ 2
$ 1
1
—
—
—
$ 2
$ 1
—
—
—
—
$ 1
Predecessor
One
Month
Ended
January 31,
2011
$ —
—
—
(1)
—
$ (1)
42 Tronox Limited
441446.Fin.cs5.indd 42
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d i s c o u n t r a t e — The discount rates selected for estimation of
the actuarial present value of the benefit obligations for both U.S.
plans were 4.50% and 3.75% as of December 31, 2013 and 2012,
respectively. The 2013 and 2012 rates were 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 devel-
oped 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, the discount rate for our U.S. qualified
plan and postretirement healthcare plan was based on a discounted
cash flow analysis performed by our independent actuaries utilizing
the Citigroup Pension Discount Curve as of the end of the year.
h e a l t h c a r e c o s t t r e n d r a t e s — At December 31, 2013,
the assumed health care cost trend rates used to measure the
expected cost of benefits covered by the U.S. postretirement
healthcare plan was 8% in 2014, gradually declining to 5% in 2020
and thereafter. A 1% increase in the assumed health care cost trend
rate for each future year would increase the accumulated postretire-
ment benefit obligation at December 31, 2013 by $2 million,
while the aggregate of the service and interest cost components of
the 2013 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,
2013 by $1 million and decrease the aggregate of the service and
interest cost components of the net periodic postretirement cost for
2013 by less than $1 million.
Pretax amounts that are expected to be reclassified from
“Accumulated other comprehensive income” on the Consolidated
Balance Sheets to retirement expense during 2014 related to
unrecognized actuarial losses are $1 million and $1 million for
retirement and postretirement healthcare plans, respectively.
a s s u mP t i o n s — The following weighted average assumptions
were used to determine net periodic cost:
2013
2012
2011
United
States Netherlands
United
States Netherlands
States Netherlands
United
Discount rate
Expected return
on plan assets
Rate of
compensation
increases
3.75%
3.50% 4.50%
5.25% 5.25% 5.25%
5.30%
4.75% 5.75%
5.25% 6.44% 5.25%
—
3.50% —
3.50% —
3.50%
The following weighted average assumptions were used in
estimating the actuarial present value of the plans’ benefit
obligations:
2013
2012
2011
United
States Netherlands
United
States Netherlands
States Netherlands
United
Discount rate
Rate of
compensation
increases
4.50%
3.50% 3.75%
3.50% 4.50% 5.25%
—
3.25% —
3.50% —
3.50%
The following weighted average assumptions were used in
determining the actuarial present value of the South African
Postretirement Healthcare Plan:
Discount rate
10.14%
9.45%
—
2013
2012
2011
e x P e c t e d r e t u r n o n P l a n a s s e t s — In forming the
assumption of the U.S. long-term rate of return on plan assets, we
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 methodology 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. Our 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.
441446.Fin.cs5.indd 43
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2013 Annual Report 43
Notes to Consolidated Financial Statements
t r o n o x l i m i t e d
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
P l a n a s s e t s — Asset categories and associated asset allocations for
our funded retirement plans at December 31, 2013 and 2012:
United States:
Equity securities
Debt securities
Cash and cash equivalents
Total
Netherlands:
Equity securities
Debt securities
Cash and cash equivalents
Total
December 31, 2013
December 31, 2012
Actual
Target
Actual
Target
38%
61
1
100%
36%
55
9
100%
38%
62
—
100%
35%
62
3
100%
38%
61
1
100%
41%
53
6
100%
38%
62
—
100%
40%
55
5
100%
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.
The U.S. plan is administered by a board-appointed committee
The fair values of pension investments as of December 31, 2013
are summarized below:
U.S. Pension
Fair Value Measurement at December 31, 2013, Using:
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Significant
Observable Unobservable
Inputs
(Level 3)
Inu=puts
(Level 2)
Total
$ 104
3
11
10
$ —
$ 104(1)
$ —
—
—
—
3(5)
1(5)
10(5)
—
10(4)
—
—
—
$ 10
141(2)
—
141
3(3)
$ 262
—
$ —
3
$ 272
Asset category:
Commingled Equity
Funds
Debt securities
Corporate
Government
Mortgages
Commingled Fixed
Income Funds
Cash & cash equivalents
Commingled Cash
Equivalents Fund
Total at fair value
(1) For commingled equity funds owned by the funds, fair value is based on observable
inputs of comparable market transactions, which are Level 2 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.
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.
Substantially all of the plan’s assets are invested with 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 transac-
tions, (i) investing in commodities, 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
securities. 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) guaranteed 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.
44 Tronox Limited
441446.Fin.cs5.indd 44
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Netherlands Pension
Netherlands Pension
Fair Value Measurement at December 31, 2013, Using:
Fair Value Measurement at December 31, 2012, Using:
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Significant
Observable Unobservable
Inputs
(Level 3)
Inu=puts
(Level 2)
Asset category:
Equity securities –
Non-U.S. Pooled Funds
Debt securities –
Non-U.S. Pooled Funds
Cash
Total at fair value
$ —
—
—
$ —
$ 48(1)
70(2)
8
$ 126
$ —
—
—
$ —
Total
$ 48
70
8
$ 126
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Significant
Observable Unobservable
Inputs
(Level 3)
Inu=puts
(Level 2)
Asset category:
Equity securities –
Non-U.S. Pooled Funds
Debt securities –
Non-U.S. Pooled Funds
Cash
Total at fair value
$ —
—
—
$ —
$ 46(1)
60(2)
6
$ 112
$ —
—
—
$ —
Total
$ 46
60
6
$ 112
(1) For equity securities in the form of fund units that are redeemable at the
(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.
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.
(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.
The fair values of pension investments as of December 31, 2012
d e f i n e d c o n t r i b u t i o n P l a n s
are summarized below:
U.S. Pension
Fair Value Measurement at December 31, 2012, Using:
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Significant
Observable Unobservable
Inputs
(Level 3)
Inu=puts
(Level 2)
Asset category:
Commingled Equity
Funds
Debt securities
Corporate
Government
Mortgages
Commingled Fixed
Income Funds
Cash & cash equivalents
Commingled Cash
Equivalents Fund
Total at fair value
$ —
$ 110(1)
—
11(4)
—
8(5)
1(5)
16(5)
—
137(2)
—
$ 11
3(3)
$ 275
$ —
—
—
—
—
—
$ —
Total
$ 110
8
12
16
137
3
$ 286
(1) For commingled equity funds owned by the funds, fair value is based on observable
inputs of comparable market transactions, which are Level 2 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.
u . s . s a v i nG s i n v e s t m e n t P l a n
On March 30, 2006, we 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, our regular
full-time and part-time employees contribute a portion of their
earnings, and we match these contributions up to a predefined
threshold. During 2013, our matching contribution was 100% of
the first 6% of employee contributions. During 2011 and 2012,
our matching contribution was 100% of the first 3% of employees’
contribution and 50% of the next 3%. Effective January 1, 2012,
the Board increased the discretionary contribution to 7.5% of
employee pay for 2012 from 6% during 2011. The discretionary
contribution is subject to approval each year by the Board. Our
matching contribution to the SIP vests immediately; however, our
discretionary contribution is subject to vesting conditions that must
be satisfied over a three year vesting period. Contributions under
SIP, including our match, are invested in accordance with the
investment options elected by plan participants. Compensation
expense associated with our matching contribution to the SIP
was $3 million, $2 million, and $2 million during 2013, 2012,
and 2011, respectively. Compensation expense associated with
our discretionary contribution was $4 million, $4 million, and
$3 million during 2013, 2012, and 2011, respectively.
441446.Fin.cs5.indd 45
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2013 Annual Report 45
Notes to Consolidated Financial Statements
t r o n o x l i m i t e d
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
u . s . s a v i nG s r e s t o r a t i o n P l a n
On March 30, 2006, we 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. Our matching contribution under the SRP is the
same as the SIP. Our matching contribution under this plan vests
immediately to plan participants. Contributions under the SRP,
including our match, are invested in accordance with the investment
options elected by plan participants. Compensation expense
associated with our matching contribution to the SRP was less
than $1 million, $1 million, and $1 million during 2013, 2012,
and 2011, respectively.
2 3 . c a s h f l o W s s t a t e m e n t d a t a
Other noncash items included in the reconciliation of net income to
net cash flows from operating activities include the following:
Successor
Eleven
Months
Ended
Year Ended
December 31, December 31, December 31,
2011
Year Ended
2013
2012
Predecessor
One
Month
Ended
January 31,
2011
Amortization of fair
value inventory step-up
and unfavorable ore
contracts liability
Net gain on liquidation
of non-operating
subsidiaries
Accrued transfer taxes
Other net adjustments
Total
$ (32)
$ 152
$ —
$ —
(24)
—
(1)
$ (57)
—
37
12
$ 201
—
—
(7)
$ (7)
—
—
—
$ —
Cash flows from investing and financing activities for 2013
exclude $13 million related to new lease financing in “Capital
expenditures” and “Proceeds from borrowings,” respectively.
2 4 . r e l a t e d P a r t Y t r a n s a c t i o n s
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. During 2012 and 2011, Tronox Incorporated made
payments of $173 million and $360 million, respectively, and
received payments of $9 million and $8 million, respectively.
Subsequent to the Transaction Date, such transactions are considered
intercompany transactions and are eliminated in consolidation.
Subsequent to the Transaction, we have service level agreements
with Exxaro for services such as tax preparation, information
technology services, research and development, and treasury, which
amounted to $5 million and $7 million during 2013 and 2012,
respectively.
2 5 . s e G m e n t i n f o r m a t i o n
The reportable segments presented below represent our operating
segments for which separate financial information is available and
which is utilized on a regular basis by our chief operating decision
maker to assess performance and to allocate resources. In identifying
our reportable segments, we also considered the nature of services
provided by our operating segments. We have two reportable
segments, Mineral Sands and Pigment. Our Mineral Sands segment
includes the exploration, mining, and beneficiation of mineral sands
deposits, as well as heavy mineral production, and produces
titanium feedstock, including chloride slag, slag fines, and rutile,
as well as pig iron and zircon. Our Pigment segment primarily
produces and markets TiO2. Corporate and Other is comprised
of our electrolytic manufacturing and marketing operations, all of
which are located in the United States, as well as our corporate
activities.
46 Tronox Limited
441446.Fin.cs5.indd 46
3/28/14 4:46 PM
During 2013, our ten largest pigment customers and our ten
largest third-party mineral sands customers represented approxi-
mately 27% and 13%, respectively, of net sales; however, no single
customer accounted for more than 10% of total net sales.
Depreciation, amortization and depletion by segment was as
follows:
Successor
Eleven
Months
Ended
Year Ended
December 31, December 31, December 31,
2011
Year Ended
2012
2013
Predecessor
One
Month
Ended
January 31,
2011
Mineral Sands segment
Pigment segment
Corporate and Other
Total
$ 234
83
16
$ 333
$ 125
71
15
$ 211
$ —
67
12
$ 79
$ —
3
1
$ 4
Capital expenditures by segment were as follows:
Successor
Eleven
Months
Ended
Year Ended
December 31, December 31, December 31,
2011
Year Ended
2013
2012
Predecessor
One
Month
Ended
January 31,
2011
Mineral Sands segment
Pigment segment
Corporate and Other
Total
$ 107
49
16
$ 172
$ 96
39
31
$ 166
$ —
117
16
$ 133
$ —
4
2
$ 6
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.
Net sales and income from operations by segment were as
follows:
Successor
Eleven
Months
Ended
Year Ended
December 31, December 31, December 31,
2011
Year Ended
2013
2012
$ 1,103
1,169
128
(478)
$ 1,922
$ 238
(179)
(70)
14
3
(130)
—
—
66
$ 760
1,246
128
(302)
$ 1,832
$ 156
57
(139)
(49)
25
(65)
1,055
—
(7)
$ 160
1,327
133
(77)
$ 1,543
$
42
323
(54)
(9)
302
(30)
—
—
(10)
Predecessor
One
Month
Ended
January 31,
2011
$ 8
89
14
(3)
$ 108
$ 2
20
(1)
(1)
20
(3)
—
613
2
(61)
1,008
262
632
(29)
(90)
$
125
$ 1,133
(20)
$ 242
(1)
$ 631
Mineral Sands segment
Pigment segment
Corporate and Other
Eliminations
Net Sales (1)
Mineral Sands segment
Pigment segment
Corporate and Other
Eliminations
Income from operations
Interest and debt expense
Gain on bargain purchase
Reorganization income
Other income (expense)
Income (loss) before
income taxes
Income tax benefit
(provision)
Net income (loss)
(1) Net sales to external customers, by geographic region, based on country of
production, were as follows:
Successor
Eleven
Months
Ended
Year Ended
December 31, December 31, December 31,
2011
Year Ended
2013
2012
Predecessor
One
Month
Ended
January 31,
2011
U.S. operations
International operations:
Australia
The Netherlands
South Africa
Total
$ 793
$ 843
$ 793
424
224
481
$ 1,922
443
248
298
$ 1,832
475
275
—
$ 1,543
$ 60
33
15
—
$ 108
441446.Fin.cs5.indd 47
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2013 Annual Report 47
Notes to Consolidated Financial Statements
t r o n o x l i m i t e d
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
Total assets by segment were as follows:
December 31,
Mineral Sands segment
Pigment segment
Corporate and Other
Eliminations
Total
2013
2012
$ 2,957
1,559
1,227
(44)
$ 5,699
$ 3,164
1,680
725
(58)
$ 5,511
consideration:
Number of Class B Shares (1)
Fair value of Class B Shares on the Transaction Date
fair value of e Quit Y issued (2)
Cash paid
Noncontrolling interest (3)
Valuation
9,950,856
$ 137.70
$ 1,370
1
233
$ 1,604
Property, plant and equipment, net and mineral leaseholds, net,
by geographic region, were as follows:
December 31,
U.S. operations
International operations:
South Africa
Australia
The Netherlands
Total
2013
2012
$ 203
$ 196
1,008
1,208
55
$ 2,474
1,263
1,348
55
$ 2,862
2 6 . a c Q u i s i t i o n o f t h e m i n e r a l s a n d s
b u s i n e s s
On September 25, 2011, Tronox Incorporated entered into the
Transaction Agreement with Exxaro to acquire 74% of Exxaro’s
mineral sands operations. We accounted for the Transaction under
ASC 805, Business Combinations, (“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 liability assumed was 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 fair value of the
net assets acquired over the value of consideration was recorded as a
bargain purchase gain. The valuations were derived from fair value
assessments and assumptions used by management. The measure-
ment period ended in June 2013. The bargain purchase gain was not
taxable for income tax purposes. See Note 6 for a discussion of the
tax impact of the Transaction.
fair value of assets acQ uired and l iabilities assum ed:
current assets:
Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts
Inventories
Prepaid and other assets
total c urrent assets
non current assets:
Property, plant and equipment, net (4)
Mineral leaseholds, net (5)
Intangibles, net (4)
Long-term deferred tax asset
Other long-term assets, net
total a ssets
$
115
196
553
20
884
880
1,457
12
30
19
$ 3,282
current liabilities:
Accounts payable
Accrued liabilities
Unfavorable contracts (6)
Short-term debt
Deferred tax liabilities
Income taxes payable
total c urrent liabilities
non current liabilities:
Long-term debt
Long-term deferred tax liability
Asset retirement obligations
Other long-term liabilities
total liabilities
net a ssets
Gain on bar Gain Pu rchase
$
110
25
85
75
14
2
311
19
209
57
27
623
$ 2,659
$ 1,055
(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 19.
(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 on 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 prices
in the contract versus the estimated market price over the term of the contract.
48 Tronox Limited
441446.Fin.cs5.indd 48
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2 7 . e m e r G e n c e f r o m c h a P t e r 1 1
On January 12, 2009, the petition date, Tronox Incorporated and
certain of its subsidiaries (collectively, the “Debtors”) filed voluntary
petitions in the U.S. Bankruptcy Court for the Southern District
of New York (the “Bankruptcy Court”) seeking reorganization 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.
In May 2009, we commenced an adversary proceeding in
the Bankruptcy Court against Kerr-McGee and its new parent,
Anadarko, related to the 2005 Spin-Off of Tronox (Tronox Inc.
v. Anadarko (In re Tronox Inc.), 09-1198, U.S. Bankruptcy
Court, Southern District New York (Manhattan)) (the “Anadarko
Litigation”). Pursuant to the Plan, we assigned the rights to any
pre-tax proceeds that may be recovered in the Anadarko Litigation
to our creditors.
On November 30, 2010 (the “Confirmation Date”), the
Bankruptcy Court entered an 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”). 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. On June 13, 2013,
the Bankruptcy Court entered a Final Decree and ordered that
the bankruptcy cases, other than the adversary proceedings with
Anadarko, be closed.
On December 12, 2013, the Bankruptcy Court ruled in the
case of Tronox Incorporated vs. Anadarko. Ruling in favor of the
plaintiff, the Bankruptcy Court found that Kerr-McGee acted with
intent to delay, and hinder Tronox’s creditors when it spun off
Tronox Incorporated. The court held Anadarko liable and indicated
ultimate damages in the range of $5 billion to $14 billion, subject
to a set off against claims that Anadarko filed as a creditor in
Tronox Incorporated’s 2009 bankruptcy filing. The value of those
claims will be determined following the submission of additional
court papers.
Tronox will receive no immediate or direct benefit from such
ruling. Instead, 88% of the judgment will go to trusts and other
governmental entities to remediate polluted sites. The remaining 12
percent of any funds ultimately received will be distributed to a tort
trust to compensate individuals injured as a result of Kerr-McGee’s
environmental failures.
Tronox received a private letter ruling from the U.S. Internal
Revenue Service confirming that the trusts that held the claims
against Anadarko are grantor trusts of Tronox solely for federal
income tax purposes. As a result, subject to a final damages
determination by the court and potential appeal, Tronox Limited
should be entitled to tax deductions equal to the amount spent
by the trusts to remediate environmental matters and to compensate
the injured individuals. These deductions will accrue over the life
of the trusts as the funds received by the judgment are spent.
Tronox believes that these expenditures and the accompanying tax
deductions may continue for decades, and therefore, it expects that
this tax benefit may continue for a lengthy period.
2 8 . G u a r a n t o r c o n d e n s e d c o n s o l i d a t i n G
f i n a n c i a l s t a t e m e n t s
Our obligations under the Senior Notes are fully and uncondition-
ally guaranteed on a senior unsecured basis, jointly and severally,
by each current and future U.S. restricted subsidiary, other than
excluded subsidiaries that guarantee any indebtedness of Tronox
Limited or our restricted subsidiaries. Our subsidiaries that do not
guarantee the Senior Notes are referred to as the “Non-Guarantor
Subsidiaries.” The Guarantor Condensed Consolidating Financial
Data presented below presents the statements of operations,
statements of comprehensive income, balance sheets and statements
of cash flow data for: (i) Tronox Limited (the “Parent Company”),
the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries on a
consolidated basis (which is derived from Tronox historical reported
financial information); (ii) the Parent Company, alone (accounting
for our Guarantor Subsidiaries and the Non-Guarantor Subsidiaries
on an equity basis under which the investments are recorded by each
entity owning a portion of another entity at cost, adjusted for the
applicable share of the subsidiary’s cumulative results of operations,
capital contributions and distributions, and other equity changes);
(iii) the Guarantor Subsidiaries alone; and, (iv) the Non-Guarantor
Subsidiaries alone.
The guarantor condensed consolidating financial statements are
presented on a legal entity basis, not on a business segment basis.
441446.Fin.cs5.indd 49
3/28/14 4:46 PM
2013 Annual Report 49
Notes to Consolidated Financial Statements
t r o n o x l i m i t e d
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
G u a r a n t o r c o n d e n s e d c o n s o l i d a t i n G s t a t e m e n t s o f o P e r a t i o n s
Year Ended December 31, 2013
(Millions of U.S. dollars)
Consolidated
Eliminations
Parent Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
net sales
Cost of goods sold
G ros s Profit
Selling, general and administrative expenses
In co me ( l oss) from oP erations
Interest and debt expense
Other income (expense)
Equity in earnings of subsidiary
income ( lo ss) be fore income t axes
Income tax benefit (provision)
net i n co me ( loss)
Income attributable to noncontrolling interest
net i n co me ( loss) attributable to t ronox limited
$ 1,922
1,732
190
(187)
3
(130)
66
—
(61)
(29)
(90)
36
$ (126)
$ (330)
(337)
7
4
11
—
(43)
473
441
—
441
—
$ 441
$ —
—
—
(34)
(34)
547
1
(473)
41
(166)
(125)
—
$ (125)
$ 1,297
1,242
55
(113)
(58)
(644)
(14)
—
(716)
168
(548)
36
$ (584)
$ 955
827
128
(44)
84
(33)
122
—
173
(31)
142
—
$ 142
G u a r a n t o r c o n d e n s e d c o n s o l i d a t i n G s t a t e m e n t s o f o P e r a t i o n s
Year Ended December 31, 2012
(Millions of U.S. dollars)
Consolidated
Eliminations
Parent Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
net s ales
Cost of goods sold
G ros s Profit
Selling, general and administrative expenses
income ( lo ss) from oP erations
Interest and debt expense
Other income (expense)
Gain on bargain purchase
Equity in earnings of subsidiary
income ( lo ss) be fore income t axes
Income tax benefit (provision)
Net Income (Loss)
Loss attributable to noncontrolling interest
net i n co me ( loss) attributable to t ronox limited
$ 1,832
1,568
264
(239)
25
(65)
(7)
1,055
—
1,008
125
1,133
(1)
$ 1,134
$ (153)
(104)
(49)
4
(45)
—
432
—
1,142
1,529
—
1,529
—
$ 1,529
$ —
—
—
(98)
(98)
297
(95)
1,055
(1,144)
15
(60)
(45)
—
(45)
$
$ 1,340
1,057
283
(115)
168
(356)
(337)
—
2
(523)
139
(384)
(1)
$ (383)
$ 645
615
30
(30)
—
(6)
(7)
—
—
(13)
46
33
—
$ 33
50 Tronox Limited
441446.Fin.cs5.indd 50
3/28/14 4:46 PM
G u a r a n t o r c o n d e n s e d c o n s o l i d a t i n G s t a t e m e n t s o f o P e r a t i o n s
Eleven Months Ended December 31, 2011
(Millions of U.S. dollars)
Consolidated
Eliminations
Parent Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
net s ales
Cost of goods sold
G ros s Profit
Selling, general and administrative expenses
Litigation/arbitration settlement
Environmental remediation and restoration
reimbursements, net
income ( loss) from oP erations
Interest and debt expense
Other income (expense)
Equity in earnings of subsidiary
income ( loss) be fore income t axes
Income tax benefit (provision)
net i n co m e ( l o ss)
$ 1,543
1,104
439
(152)
10
5
302
(30)
(10)
—
262
(20)
$ 242
$ 9
22
(13)
3
—
—
(10)
—
31
(72)
(51)
—
$ (51)
$ —
—
—
—
—
—
—
—
—
—
—
—
$ —
$ 1,207
856
351
(142)
10
5
224
(20)
(35)
72
241
6
$ 247
$ 327
226
101
(13)
—
—
88
(10)
(6)
—
72
(26)
$ 46
G u a r a n t o r c o n d e n s e d c o n s o l i d a t i n G s t a t e m e n t s o f o P e r a t i o n s
One Month Ended January 31, 2011
(Millions of U.S. dollars)
Consolidated
Eliminations
Parent Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
net s ales
Cost of goods sold
G ros s Profit
Selling, general and administrative expenses
income f rom oP erations
Interest and debt expense
Other income
Equity in earnings of subsidiary
income ( loss) be fore income t axes
Income tax benefit (provision)
net i n co me ( loss)
$ 108
83
25
(5)
20
(3)
615
—
632
(1)
$ 631
$ (23)
(22)
(1)
1
—
—
2
(63)
(61)
—
$ (61)
$ —
—
—
—
—
—
—
—
—
—
$ —
$ 111
89
22
(5)
17
(3)
550
63
627
(1)
$ 626
$ 20
16
4
(1)
3
—
63
—
66
—
$ 66
441446.Fin.cs5.indd 51
3/28/14 4:46 PM
2013 Annual Report 51
Notes to Consolidated Financial Statements
t r o n o x l i m i t e d
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
G u a r a n t o r c o n d e n s e d c o n s o l i d a t i n G s t a t e m e n t s o f c o m P r e h e n s i v e i n c o m e
Year Ended December 31, 2013
(Millions of U.S. dollars)
Consolidated
Eliminations
Parent Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
net i n co me ( loss):
Net Income (Loss)
o t her c o m Prehensive income ( l oss):
Foreign currency translation adjustments
Pension and postretirement plans
o t her c om Prehensive income (loss)
t o tal co m Prehensive income ( l oss)
c om Prehe n sive income ( l oss) a ttributable
t o no nc on trol linG interest:
Net income
Foreign currency translation adjustments
Comprehensive income (loss) attributable to
noncontrolling interest
c om Prehe n sive income ( l oss) a ttributable
t o tro no x limited
$ (90)
(289)
30
(259)
(349)
36
(70)
(34)
$ (315)
$ 441
—
—
—
441
—
—
—
$ 441
$ (125)
—
—
—
(125)
—
—
—
$ (548)
23
26
49
(499)
36
(70)
(34)
$ 142
(312)
4
(308)
(166)
—
—
—
$ (125)
$ (465)
$ (166)
G u a r a n t o r c o n d e n s e d c o n s o l i d a t i n G s t a t e m e n t s o f c o m P r e h e n s i v e i n c o m e
Year Ended December 31, 2012
(Millions of U.S. dollars)
Consolidated
Eliminations
Parent Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
net i n co me ( loss):
Net Income (Loss)
o t her c o m Prehensive income ( l oss):
Foreign currency translation adjustments
Pension and postretirement plans
o t her c om Prehensive income (loss)
t o tal co m Prehensive income ( l oss)
c om Prehe n sive income ( l oss) a ttributable
t o no nc on trol linG interest:
Net loss
Foreign currency translation adjustments
Comprehensive income (loss) attributable to
noncontrolling interest
c om Prehe n sive income ( l oss) a ttributable
t o tro no x limited
$ 1,133
11
(48)
(37)
1,096
(1)
1
—
$ 1,096
$ 1,529
19
—
19
1,548
—
—
—
$ 1,548
$ (45)
—
—
—
(45)
—
—
—
$ (45)
$ (384)
(2)
(47)
(49)
(433)
(1)
1
—
$ (433)
$ 33
(6)
(1)
(7)
26
—
—
—
$ 26
52 Tronox Limited
441446.Fin.cs5.indd 52
3/28/14 4:46 PM
G u a r a n t o r c o n d e n s e d c o n s o l i d a t i n G s t a t e m e n t s o f c o m P r e h e n s i v e i n c o m e
Eleven Months Ended December 31, 2011
(Millions of U.S. dollars)
Consolidated
Eliminations
Parent Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
net i n co me ( loss):
Net Income (Loss)
o t her c o m Pre hensive income ( l oss):
Foreign currency translation adjustments
Pension and postretirement plans
o t her c om Pre hensive income (loss)
t o tal co m Pre hensive income ( l oss)
$ 242
(6)
(51)
(57)
$ 185
$ (51)
—
—
—
$ (51)
$ —
—
—
—
$ —
$ 247
(130)
(37)
(167)
$ 80
$ 46
124
(14)
110
$ 156
G u a r a n t o r c o n d e n s e d c o n s o l i d a t i n G s t a t e m e n t s o f c o m P r e h e n s i v e i n c o m e
One Month Ended January 31, 2011
(Millions of U.S. dollars)
Consolidated
Eliminations
Parent Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
net i n co me ( loss):
Net Income (Loss)
o t her c o m Pre hensive income ( l oss):
Foreign currency translation adjustments
Pension and postretirement plans
o t her c om Pre hensive income (loss)
t o tal co m Pre hensive income ( l oss)
$ 631
1
(1)
—
$ 631
$ (61)
—
—
—
$ (61)
$ —
—
—
—
$ —
$ 626
—
—
—
$ 626
$ 66
1
(1)
—
$ 66
441446.Fin.cs5.indd 53
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2013 Annual Report 53
Notes to Consolidated Financial Statements
t r o n o x l i m i t e d
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
G u a r a n t o r c o n d e n s e d c o n s o l i d a t i n G b a l a n c e s h e e t s
As of December 31, 2013
(Millions of U.S. dollars)
Consolidated
Eliminations
Parent Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
ass ets
Cash and cash equivalents
Investment in subsidiaries
Other current assets
Property, plant and equipment, net
Mineral leaseholds, net
Other long-term assets
t o tal ass et s
liab i litie s and e Q uit Y
Current liabilities
Long-term debt
Other long-term liabilities
t o tal lia bi lities
t o tal eQ u it Y
t o tal lia bi lities and eQ uit Y
$ 1,478
—
1,175
1,258
1,216
572
$ 5,699
$ 363
2,395
504
3,262
2,437
$ 5,699
$
—
(952)
(9,645)
—
—
—
$ (10,597)
$ (2,333)
(7,268)
—
(9,601)
(996)
$ (10,597)
$
179
(1,095)
6,599
—
—
88
$ 5,771
$ 658
825
—
1,483
4,288
$ 5,771
$ 1,094
1,590
2,125
710
701
376
$ 6,596
$ 1,801
7,272
236
9,309
(2,713)
$ 6,596
$ 205
457
2,096
548
515
108
$ 3,929
$ 237
1,566
268
2,071
1,858
$ 3,929
G u a r a n t o r c o n d e n s e d c o n s o l i d a t i n G b a l a n c e s h e e t s
As of December 31, 2012
(Millions of U.S. dollars)
Consolidated
Eliminations
Parent Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
ass ets
Cash and cash equivalents
Investment in subsidiaries
Other current assets
Property, plant and equipment, net
Mineral leaseholds, net
Other long-term assets
t o tal ass et s
liab i litie s and e Q uit Y
Current liabilities
Long-term debt
Other long-term liabilities
t o tal lia bi lities
t o tal eQ u it Y
t o tal lia bi lities and eQ uit Y
$ 716
—
1,457
1,423
1,439
476
$ 5,511
$ 467
1,605
557
2,629
2,882
$ 5,511
$ —
(1,595)
(8,298)
—
—
—
$ (9,893)
$ (1,023)
(7,223)
—
(8,246)
(1,647)
$ (9,893)
$ 533
(622)
6,047
—
—
(3)
$ 5,955
$ 560
882
—
1,442
4,513
$ 5,955
85
$
1,760
2,178
748
796
398
$ 5,965
$ 574
7,188
249
8,011
(2,046)
$ 5,965
$
98
457
1,530
675
643
81
$ 3,484
$ 356
758
308
1,422
2,062
$ 3,484
54 Tronox Limited
441446.Fin.cs5.indd 54
3/28/14 4:46 PM
G u a r a n t o r c o n d e n s e d c o n s o l i d a t i n G s t a t e m e n t s o f c a s h f l o W s
Year Ended December 31, 2013
(Millions of U.S. dollars)
Consolidated
Eliminations
Parent Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
c ash f lo Ws from oP eratin G activities
Net income (loss)
Other
Cash provided by (used in) operating activities
c ash f lo Ws from i nvestin G activities:
Capital expenditures
Proceeds from the sale of assets
Cash used in investing activities
c ash f lo Ws from f inancin G activities
Repayments of debt
Proceeds from borrowings
Debt issuance costs
Dividends paid
Proceeds from the conversion of warrants
Cash provided by (used in) financing activities
eff ec t s of exchan Ge rate c han Ges on cash and
c ash eQ uivalents
net i n cre ase ( decrease) in cash and cash eQuivalents
c ash a nd cash eQuivalents at beG innin G of Period
c ash a nd cash eQuivalents at end of Period
$
(90)
427
337
(172)
1
(171)
(189)
945
(29)
(115)
2
614
(18)
762
716
$ 1,478
$ 441
(441)
—
—
—
—
—
—
—
—
—
—
—
—
—
$ —
$ (125)
(116)
(241)
—
—
—
—
—
—
(115)
2
(113)
—
(354)
533
$ 179
$ (548)
1,628
1,080
(71)
—
(71)
—
—
—
—
—
—
—
1,009
85
$ 1,094
$ 142
(644)
(502)
(101)
1
(100)
(189)
945
(29)
—
—
727
(18)
107
98
$ 205
G u a r a n t o r c o n d e n s e d c o n s o l i d a t i n G s t a t e m e n t s o f c a s h f l o W s
Year Ended December 31, 2012
(Millions of U.S. dollars)
Consolidated
Eliminations
Parent Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
c ash f lo Ws from oP eratin G activities
Net income (loss)
Gain on bargain purchase
Other
Cash provided by (used in) operating activities
c ash f lo Ws from i nvestin G activities:
Capital expenditures
Net cash received in acquisition of mineral sands
business
Cash provided by (used in) investing activities
c ash f lo Ws from f inancin G activities
Repayments of debt
Proceeds from borrowings
Debt issuance costs
Dividends paid
Proceeds from the exercise of warrants
Merger consideration
Class A ordinary shares repurchased
Shares purchased for the Employee Participation Plan
Cash provided by (used in) financing activities
eff ec t s of exchan Ge rate c han Ges on cash and
c ash eQ uivalents
net i n cre ase ( decrease) in cash and cash eQuivalents
c ash a nd cash eQuivalents at beG innin G of Period
c ash a nd cash eQuivalents at end of Period
$ 1,133
(1,055)
40
118
(166)
114
(52)
(585)
1,707
(38)
(61)
1
(193)
(326)
(15)
490
6
562
154
$ 716
$ 1,529
—
(1,529)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$ —
(45)
$
(1,055)
2,098
998
—
114
114
—
—
—
(61)
1
(193)
(326)
—
(579)
—
533
—
$ 533
$ (384)
—
(14)
(398)
(89)
—
(89)
(481)
960
(19)
—
—
—
—
—
460
8
(19)
104
$ 85
$ 33
—
(515)
(482)
(77)
—
(77)
(104)
747
(19)
—
—
—
—
(15)
609
(2)
48
50
$ 98
441446.Fin.cs5.indd 55
3/28/14 4:46 PM
2013 Annual Report 55
Notes to Consolidated Financial Statements
t r o n o x l i m i t e d
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
G u a r a n t o r c o n d e n s e d c o n s o l i d a t i n G s t a t e m e n t s o f c a s h f l o W s
Eleven Months Ended December 31, 2011
(Millions of U.S. dollars)
Consolidated
Eliminations
Parent Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
c ash f lo Ws from oP eratin G activities
Net income (loss)
Other
Cash provided by operating activities
c ash f lo Ws from i nvestin G activities:
Capital expenditures
Proceeds from the sale of assets
Cash used in investing activities
c ash f lo Ws from f inancin G activities
Repayments of debt
Proceeds from borrowings
Debt issuance costs and commitment fees
Proceeds from the exercise of warrants
Cash used in financing activities
eff ec t s of exchan Ge rate c han Ges on cash and
c ash eQ u ivalents
net i n cre as e in c ash and c ash eQ uivalents
c ash a nd c as h eQuivalents at beG innin G of Pe riod
c ash a nd c as h eQuivalents at end of Period
$ 242
21
263
(133)
1
(132)
(45)
14
(5)
1
(35)
(3)
93
61
$ 154
$ (51)
51
—
—
—
—
—
—
—
—
—
—
—
—
$ —
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
$ —
$ 247
(36)
211
(125)
1
(124)
(45)
14
(5)
1
(35)
—
52
52
$ 104
$ 46
6
52
(8)
—
(8)
—
—
—
—
—
(3)
41
9
$ 50
G u a r a n t o r c o n d e n s e d c o n s o l i d a t i n G s t a t e m e n t s o f c a s h f l o W s
One Months Ended January 1, 2011
(Millions of U.S. dollars)
Consolidated
Eliminations
Parent Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
c ash f lo Ws from oP eratin G activities
Net income (loss)
Reorganization items
Other
Cash used in operating activities
c ash f lo Ws from i nvestin G activities:
Capital expenditures
Cash used in investing activities
c ash f lo Ws from f inancin G activities
Proceeds from borrowings
Debt issuance costs
Proceeds from the rights offering
Cash provided by financing activities
eff ec t s of exchan Ge rate c han Ges on cash and
c ash eQ u ivalents
net d ec reas e in c ash and c ash eQ uivalents
c ash a nd c as h eQuivalents at beG innin G of Pe riod
c ash a nd c as h eQuivalents at end of Period
$ 631
(954)
40
(283)
(6)
(6)
25
(2)
185
208
—
(81)
142
$ 61
$ (61)
—
61
—
—
—
—
—
—
—
—
—
—
$ —
$ —
—
—
—
—
—
—
—
—
—
—
—
—
$ —
$ 626
(954)
61
(267)
(6)
(6)
25
(2)
185
208
—
(65)
117
$ 52
$ 66
—
(82)
(16)
—
—
—
—
—
—
—
(16)
25
$ 9
56 Tronox Limited
441446.Fin.cs5.indd 56
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2 9 . Q u a r t e r lY r e s u l t s o f o P e r a t i o n s
( u n a u d i t e d )
The following represents our unaudited quarterly results for the year
ended December 31, 2013. 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 Profit
Net income (loss)
Net income (loss)
attributable to
noncontrolling interest
net i n co m e ( l o ss)
at tri bu t able to
t ronox limited
January 1 –
March 31
April 1 –
June 30 September 30 December 31
July 1 – October 1 –
$ 470
438
32
(45)
$
$ 525
475
50
(1)
$
$ 491
437
54
(41)
$
$ 436
382
54
(3)
$
12
12
8
4
$
(57)
$ (13)
$ (49)
$
(7)
Net income (loss) per share:
Basic
Diluted
$ (0.50)
$ (0.50)
$ (0.11)
$ (0.11)
$ (0.43)
$ (0.43)
$ (0.06)
$ (0.06)
The following represents our unaudited quarterly results for
the year 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. Subsequent
to the Transaction, we adjusted the initial valuation, and recorded
these adjustments retroactive to the second quarter. As such, the
quarterly results of operations for the second and third quarter have
been revised.
Net sales
Cost of goods sold
Gross Profit
Net income (loss)
Net income (loss)
attributable to
noncontrolling interest
net i ncome ( loss)
attributable to
tronox limited
January 1 –
March 31
April 1 –
June 30 September 30 December 31
July 1 – October 1 –
$ 434
277
157
$ 86
$ 429
304
125
$ 1,144
$ 487
444
43
(1)
$
$ 482
543
(61)
(96)
$
—
—
2
(3)
$ 86
$ 1,144
$
(3)
$
(93)
Net income (loss) per share:
Basic
Diluted
$ 1.14
$ 1.10
$ 13.46
$ 13.00
$ (0.03)
$ (0.03)
$ (0.82)
$ (0.82)
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.
c o m P a r i s o n o f 1 8 - m o n t h c u m u l a t i v e t o t a l r e t u r n *
Among Tronox Limited, the S&P 500 Index, the S&P Diversified Chemicals Index, and the S&P Materials Index
S&P MATERIALS
S&P DIVERSIFIED CHEMICALS
S&P 500
TRONOX LIMITED
200
150
100
50
6/12
6/12
7/12
8/12
9/12
10/12
11/12
12/12
1/13
2/13
3/13
4/13
5/13
6/13
7/13
8/13
9/13
10/13
11/13
12/13
* $100 invested on 6/18/12 in stock or 5/31/12 in index, including reinvestment of dividends.
Fiscal year ending December 31.
2013 Annual Report 57
441446.Fin.cs5.indd 57
3/28/14 4:46 PM
Management’s Report of Internal Controls
Over Financial Reporting
Management of Tronox Limited and its subsidiaries is responsible for establishing and maintaining adequate internal controls over
financial reporting. Internal controls over financial reporting is a process designed under the supervision of our principal executive and
principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the
Company’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
Our internal controls over financial reporting include those policies and procedures that:
• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company;
• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with
authorizations of the Company’s management and directors; and
• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that
could have a material effect on the financial statements.
Management assessed the effectiveness of our internal controls over financial reporting as of December 31, 2013. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
in the 1992 Internal Control – Integrated Framework. Based on management’s assessment and those criteria, management believes that
the Company maintained effective internal controls over financial reporting as of December 31, 2013.
Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our independent registered public accounting firm, Grant Thornton LLP, audited our internal controls over financial reporting as
of December 31, 2013 as stated in their report which appears under “Reports of Independent Registered Public Accounting Firm.”
58 Tronox Limited
441446.Fin.cs5.indd 58
3/28/14 4:46 PM
Report of Independent Registered
Public Accounting Firm
b o a r d o f d i r e c t o r s a n d s h a r e h o l d e r s
t r o n o x l i m i t e d
We have audited the accompanying consolidated balance sheets of Tronox Limited and subsidiaries (the Company) as of December 31,
2013 and 2012 (Successor), and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity,
and cash flows for the years ended December 31, 2013 and 2012 (Successor), the eleven months ended December 31, 2011 (Successor) and
the one month ended January 31, 2011 (Predecessor). These financial statements 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, 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, 2013 and 2012 (Successor), and the results of its operations and its cash flows for
the years ended December 31, 2013 and 2012 (Successor), the eleven months ended December 31, 2011 (Successor) and the one month
ended January 31, 2011 (Predecessor) in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 2 and 27 to the consolidated financial statements, Tronox Incorporated and certain of its subsidiaries
(“Predecessor”) 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 Accounting Standards Codification 852, Reorganizations, as of January
31, 2011.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the Company’s internal control over financial reporting as of December 31, 2013, based on criteria established in the 1992 Internal Control –
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated
February 27, 2014 expressed an unqualified opinion.
Oklahoma City, Oklahoma
February 27, 2014
441446.Fin.cs5.indd 59
3/28/14 4:46 PM
2013 Annual Report 59
Report of Independent Registered
Public Accounting Firm
b o a r d o f d i r e c t o r s a n d s h a r e h o l d e r s
t r o n o x l i m i t e d
We have audited the internal control over financial reporting of Tronox Limited and subsidiaries (the Company) as of December 31, 2013,
based on criteria established in the 1992 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit.
We conducted our audit 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 effective internal control over
financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthor-
ized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2013, based on criteria established in the 1992 Internal Control – Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated financial statements of the Company as of and for the year ended December 31, 2013, and our report dated February 27,
2014 expressed an unqualified opinion on those financial statements.
Oklahoma City, Oklahoma
February 27, 2014
60 Tronox Limited
441446.Fin.cs5.indd 60
3/28/14 4:46 PM
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
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
t o m c a s e Y
Chairman & Chief Executive Officer,
Tronox Limited
d a n i e l b l u e 1, 2, 3
Senior Commercial Partner,
Holding Redlich
a n d r e W P . h i n e s 1*
Executive Vice President & Chief Financial Officer,
Sonar Entertainment
W aY n e a . h i n m a n 2, 3*
Former V.P. and G.M.,
Air Products & Chemicals, Inc.
P e t e r J o h n s t o n 3
Head of Global Nickel Assets,
Glencore
i l a n k a u f t h a l 1, 2, 3
Chairman,
East Wind Advisors
W i m d e k l e r k
Finance Director & Board Member,
Exxaro Resources Limited
s i P h o n k o s i
Chief Executive Officer & Board Member,
Exxaro Resources Limited
J e f f r Y n . Q u i n n 2*
Chairman, Chief Executive Officer,
The Quinn Group, LLC and Quinpario Partners, LLC
c o m m i t t e e s
1. Audit
2. Human Resources and Compensation
3. Corporate Governance and Nominating
* Committee Chair
t o m c a s e Y *
Chairman & Chief Executive Officer
J e a n - f r a nÇ o i s t u r G e o n *
Executive Vice President
t r e v o r a r r a n *
Senior Vice President & President, Mineral Sands
J o h n d . r o m a n o *
Senior Vice President & President, Pigment & Electrolytic
W i l l e m v a n n i e k e r k *
Senior Vice President, Strategic Planning and
Business Development
k a t h e r i n e c . h a r P e r *
Senior Vice President & Chief Financial Officer
r i c h a r d l . m u G l i a *
Senior Vice President, General Counsel & Corporate Secretary
c h u c k m a n c i n i
Senior Vice President, Chief Integration & Performance Officer
s o n J a n a r c i s s e
Senior Vice President, Chief Human Resources Officer
b u d G r e b e Y
Vice President, Communications
m a c h i e l k e e G e l
Vice President, Strategy
k e v i n v . m a h o n e Y
Vice President & Controller
l a l i t P a n d a
Vice President & Chief Information Officer
s c o t t P r e s t o n
Vice President, Global Supply Chain & Chief Procurement Officer
* Tronox Officer
441446.Fin.cs5.indd 61
3/28/14 4:46 PM
2013 Annual Report 61
Shareholder Information
s h a r e h o l d e r i n f o r m a t i o n
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, Africa, and Australia.
t r a n s f e r a G e n t a n d r e G i s t r a r
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:
c o r P o r a t e o f f i c e s
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, 2014, in Stamford, Connecticut. The proxy will be
made available to shareholders on or about April 13, 2014,
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.
s t o c k l i s t i n G
New York Stock Exchange
t i c k e r s Y m b o l
TROX
Shareholder correspondence should be mailed to:
Computershare
P.O. Box 30170
College Station, TX, USA 77842-3170
+781.575.2879
+800.884.4225
TDD +312.588.4110
Overnight correspondence should be sent to:
Computershare
211 Quality Circle, Suite 210
College Station, TX, USA 77845
Shareholder website
www.computershare.com/investor
Shareholder online inquiries
https://www-us.computershare.com/investor/Contact
c e r t i f i c a t i o n s
Tronox has included as Exhibit 31 to its Annual Report on
Form 10-k for fiscal year 2013 filed with the Securities and
Exchange Commission certificates of its Chief Executive Officer
and Chief Financial Officer certifying, among other things,
the information contained in the Form 10-k.
Annually Tronox submits to the New York Stock Exchange
(NYSE) a certificate of Tronox’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.
e l e c t r o n i c a c c e s s
Copies of the Tronox 2013 Annual Report, the proxy, and the
2013 International Financial Report Standards (IFRS) statement
are available at https://materials.proxyvote.com/Q9235V. The
company’s IFRS statement will be available to shareholders not
later than April 30, 2014. 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
s h a r e h o l d e r i n f o r m a t i o n
Our Internet site www.tronox.com provides shareholders easy
access to Tronox’s financial results. Shareholders may also
contact Brennen Arndt, Vice President, Investor Relations at
+203.705.3800.
62 Tronox Limited
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2013 Tronox Highlights
t r o n o x l i m i t e d
(All monetary units in this report are in US$ unless otherwise noted)
k e y a c c o m p l i s h m e n t s i n 2 0 1 3
t r o n o x l o c a t i o n s a r o u n d t h e W o r l d
• Total net sales of $1.922 billion, an increase of 5 percent over 2012
• Continued vertical integration of the company’s titanium feedstock and TiO2
pigment production
• Appointment of a new Chief Financial Officer, Chief Information Officer,
and an Executive Vice President
• Dividends totaling $115 million issued to shareholders
• Successful financing of a $1.5 billion senior secured loan
• Reduced planned operating expenses by more than $100 million
• Investment in sustainable technologies such as upgraded control systems
to drive efficiency gains while reducing our environmental impact
• Construction began on the Fairbreeze Mine in South Africa
Stamford, CT
Oklahoma City, OK
Henderson, NV
Hamilton, MS
Namakwa Sands, S.A.
Botlek,
the Netherlands
Shanghai,
China
Singapore
Western
Australia
KZN Sands, S.A.
Sandton, S.A.
t a b l e o f c o n t e n t s
Letter to Shareholders
Far & wide
Our Performance
Under any condition
Corporate Citizenship
Tronox Values
Financials
2
4
6
7
12
16
17
Board of Directors and Executive Management 61
Shareholder Information
62
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.
The company that printed our annual report, Universal|Wilde,
is certified by the Rainforest Alliance to the Forest Stewardship
Council™ (FSC®) standard. The plant uses only vegetable-based inks
and it recycles 100% of the excess papers generated by the printing and
finishing process including trims, corrugated and office waste.
Design: SVP Partners, Wilton, CT
Tronox Location Photography:
Tjalling Jan Raukema – the Netherlands
Peta North – Australia
Fred Welch, Dave Smith – United States
Graeme Robinson, Meyer Productions – South Africa
A Brighter Future – From the Ground Up
t r o n o x l i m i t e d
C o r p o r A t e o f f iC e s
Australia
Tronox Limited
1 Brodie Hall-Drive
Bentley
Western Australia 6102
+61-8-9365-1348
United States
263 Tresser Boulevard
Suite 1100
Stamford, CT 06901
+1-203-705-3800
sustainability@tronox.com
www.tronox.com
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A Brighter Future – From the Ground Up
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C o r p o r A t e o f f iC e s
Unique advantages.
Australia
Tronox Limited
1 Brodie Hall-Drive
Bentley
Western Australia 6102
+61-8-9365-1348
United States
263 Tresser Boulevard
Suite 1100
Stamford, CT 06901
+1-203-705-3800
sustainability@tronox.com
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A Brighter Future – From the Ground Up
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Unique advantages.
Australia
Tronox Limited
1 Brodie Hall-Drive
Bentley
Western Australia 6102
+61-8-9365-1348
United States
263 Tresser Boulevard
Suite 1100
Stamford, CT 06901
+1-203-705-3800
sustainability@tronox.com
t r o n o x l i m i t e d
2 0 1 3 A n n u A l r e p o r t
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www.tronox.com
a b o u t t h e c o v e r s | The cover you see on this copy of the Tronox 2013 Annual Report
is actually one of three covers, each featuring a Tronox employee.
Inspector Lloyd Browne on the job at Botlek Pigment Plant in Botlek, Netherlands
Operator Leonie van den Haak at Botlek Pigment Plant in Botlek, Netherlands
Business Improvement Analayst Lusapho Tom at the Namakwa Sands smelter in Saldanha,
South Africa.
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A Brighter Future – From the Ground Up
t r o n o x l i m i t e d
C o r p o r A t e o f f i C e s
Australia
1 Brodie Hall-Drive
Bentley
Western Australia 6102
+61-(0)8-9365-1333
United States
263 Tresser Boulevard
Suite 1100
Stamford, CT 06901
+1-203-705-3800
www.tronox.com
t r o n o x l i m i t e d
2 0 1 3 A n n u A l r e p o r t
Unique advantages.
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