A Brighter Future – From the Ground Up
Tronox Limited Corporate Offices
Australia
1 Brody-Hall Drive
United States
263 Tresser Boulevard, Suite 1100
Bentley, Western Australia 6102
Stamford, CT 06901
+61.(0)8.9365.1333
+1.203.705.3800
www.tronox.com
Local.
Global.
T
r
o
n
o
x
L
i
m
i
t
e
d
2
0
1
4
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
C
o
r
p
o
r
a
t
e
R
e
s
p
o
n
s
i
b
i
l
i
t
y
R
e
p
o
r
t
TNX-1331_Covers_3-17_g.indd 1-3
3/18/15 11:06 AM
Tronox Limited 2014
Annual Report and Corporate
Responsibility Report
Tronox At A Glance
Shareholder Information
Tronox brightens peoples’ lives. We mine and process titanium ore, zircon and other minerals, and
manufacture titanium dioxide pigments that add brightness and durability to paints, plastics, paper, and
other everyday products. We are a diverse global workforce that is committed to safe and sustainable
business practices that bring value to our shareholders, customers, and business partners. We are the
world’s largest fully integrated producer of titanium feedstock and titanium dioxide (Ti02) pigments: we
extract and process heavy minerals from sand deposits at two mines in South Africa and from another in
Australia. Titanium feedstock is further processed into Ti02 at our chloride pigment plants in the United
States, the Netherlands, and Australia. We operate two electrolytic chemical plants in the United States
which serve the paper, battery, automotive, and pharmaceutical industries. Our Ti02 pigments and other
mineral products are shipped to approximately 1,100 customers in more than 90 countries worldwide.
For more information, visit www.tronox.com
Tronox Limited Financial and Operating Highlights
(Millions of U.S. dollars, except per share amounts)
2014
2013
2012
Sales
Net income (loss)
Basic earnings per share
Diluted earnings per share
Dividend paid
Total assets
1,737
(417)
(3.74)
(3.74)
1.00
5,065
1,922
(90)
(1.11)
(1.11)
1.00
5,699
1,832
1,133
11.37
11.10
.50
5,511
Class A common stock outstanding
63,968,616
62,349,618
62,103,989
* Includes net sales and income from operations on a segment basis attributable to the acquired Mineral Sands business since
June 15, 2012.
2014 Pigment Sales Volume
by Geography
2014 Pigment Sales Volume
by End-Use Market
2%
Paper & Specialty
North
America
Plastics
18%
2014 Full-time Employees
by Region
EMEA
8% <1%
Asia
Australia
18%
USA
22%
Tronox Total Full-time Employees and
Temporary Employees/Contractors
dec emb er 31, 20 14
3,397
1,585
APAC
30%
24%
EMEA
41%
5%
LATAM
80%
Coatings
52%
South Africa
2014 Mineral Sands Sales Volume
by Geography
EMEA
30%
1%
LATAM
APAC
36%
33%
North
America
Table of Contents
Letter to Shareholders 1 2014 Financial Highlights 4 Operations 6 Sustainability 10 Communities 12 Responsibilty 14
Financials 17 Board of Directors and Executive Management 62 Shareholder Information Inside back cover
TNX-1331_Covers_3-17_g.indd 4-6
Shareholder Information
Tronox Limited is a public company registered under the laws
of the State of Western Australia, Australia. We have global operations in North
America, Europe, Africa, and Australia.
Shareholder website
www.computershare.com/investor
Shareholder online inquiries
https://www-us.computershare.com/investor/Contact
Certifications
Tronox has included as Exhibits 31.1 and 31.2 to its Annual Report on Form
10-K for fiscal year 2014 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.
Electronic Access
Copies of the Tronox 2014 Annual Report, the proxy, and the 2014 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 15, 2015. 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
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.
This report is made available to shareholders in advance of the annual meeting
of shareholders to be held at 9 a.m. EDT, May 20, 2015, in Stamford, Connecticut.
The proxy will be made available to shareholders on or about April 13, 2015, at
which time proxies for the meeting will be requested.
Information about Tronox, including financial information, can be found on our
Shareholder Information
Computershare Trust Company, N.A. is the transfer agent, registrar and dividend
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.
disbursing agent for Tronox’s common stock. Questions and communications
regarding transfer of stock, dividends and address changes should be directed to:
GHP, the company that printed our annual report, is an
FSC certified printer whose manufacturing processes reflect
a profound commitment to sustainability and environmental
stewardship. The company uses only vegetable-based inks
and recycles both paper and other manufacturing waste.
Design: SVP Partners, Wilton, CT
Corporate Offices
Australia:
Tronox Limited
1 Brodie Hall Drive
Technology Park
Bentley, Western Australia 6102
+61.(0)8.9365.1333
United States:
Tronox Limited
Suite 1100
263 Tresser Boulevard
Stamford, Connecticut 06901
+1.203.705.3800
Web site: www.tronox.com.
Stock Listing
New York Stock Exchange
Ticker Symbol
TROX
Transfer Agent and Registrar
Shareholder correspondence should be mailed to:
College Station, TX, USA 77842-3170
Computershare
P.O. Box 30170
+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
6
3/18/15 11:06 AM
Dear
Shareholder,
The title and theme of our 2014 Annual Report is “Local. Global.”
I believe these two words aptly capture the nature of our operations
and the business environment in which we operate.
We operate locally and compete globally. We strive to be a contributing, valued member of our local communities; a good employer and a good neighbor sustaining
and enhancing the areas in which we live and work. We also recognize that we compete in a global market and that we must remain competitive with companies
around the world in quality and price.
Economic growth and the resulting increases in construction and consumer spending are closely correlated with demand for our products. In many key markets
around the globe the pace of economic recovery is still lagging. To a degree, this has caused inventories in our industries to build and the price of titanium feedstock
sold to all pigment producers to fall dramatically over the past two years. These lower costs have reduced incentives for pigment producers to raise prices. Thus we
faced flat to declining prices in both our principal markets in 2014.
We also responded to these weak market conditions by improving operational efficiencies and lowering operating costs per ton produced. Our pigment business
also benefited from lower ore costs. As a result, pigment revenues grew on higher volume (tons) sold, despite the decline in pigment prices. We moved forward by
staying focused on our business vision and leveraging the unique strengths of our vertical integration.
Heading into 2015, we believe that inventory levels at paint, plastic, and pigment producers, which stabilized in 2014, will remain stable and feedstock inventories
will trend toward their historic levels, marking the last step in normalizing the TiO2 supply chain. With supply back in balance and robust operating rates and cost
discipline at our pigment plants, we are confident that as the market recovers, Tronox’s financial performance will strengthen. Our vertical integration provides double
leverage. Not only will we gain greater profit from improved margins on the pigment that we sell, but we will also earn increased profit from selling feedstock.
As the industry rebounds, our operating and financial performance will be enhanced by the One Tronox organizational structure that we announced last October.
Our mineral sands and pigment divisions no longer operate as two distinct business units with redundant functional organizations such as finance, operations, sales
and marketing, environmental health and safety, and human resources. Our new consolidated structure reduces layers of management, thereby lowering costs and
improving the flow of information and decision-making. These changes are empowering our people throughout the organization to become better leaders, work more
effectively and efficiently, and drive operational excellence.
TNX-1331_Ed_3-17_g.indd 1
1
3/18/15 9:34 AM
Positive signs that our integrated business model is moving forward are evident throughout our business. Every day, we are identifying the safest, fastest, and
most cost-effective and efficient ways to operate. With changes from small to large, we are taking concrete action to achieve improvements. And, by continuing to
capitalize on our advantaged position in the industry, I believe that we will consistently deliver a higher level of earnings on every unit of pigment that we sell.
As the graphs on page two show, our earnings performance has remained strong quarter-over-quarter, in spite of soft market conditions. As I have stated since
Tronox Limited was formed in 2012, controlling both the upstream and downstream segments of the TiO2 industry provides the company with greater overall profit,
and makes it more competitive under any conditions. Our adjusted EBITDA margin and gross margins on sales, which during the latter half of the year reached
their two-year highs, validate our business premise.
I am happy to report that, in 2014, Tronox received the required permitting and full-scale construction has begun at our new Fairbreeze Mine in South Africa.
Fairbreeze is a major step toward ensuring Tronox’s long-term competitiveness. With operations scheduled to begin in late 2015 and early 2016, it will supply
feedstock to slag furnaces at our KZN Sands operations. We expect annual production of about 220,000 metric tons of titanium slag, 30,000 metric tons of rutile,
121,000 metric tons of low-manganese pig iron, and 60,000 metric tons of zircon at Fairbreeze when we get to normal run rates in 2016. Since our Hillendale
EBITDA Profiles
Tronox Quarterly Adjusted EBITDA Profile 2013 — 2014
22%
22%
23%
20%
16%
73
Q1
19%
19%
101
Q2
92
Q3
96
Q4
15%
64
Q1
108
Q2
100
Q3
81
Q4
Adjusted EBITDA $M
2013
2014
Adjusted EBITDA Margin
Mineral Sands Quarterly Adjusted EBITDA Profile 2013 — 2014
53%
157
41%
129
Q1
Q2
39%
38%
95
Q3
93
Q4
Pigment Quarterly Adjusted EBITDA Profile 2013 — 2014
3%
9
Q4
(37)
(26)
Q1
2
Q2
(3)
Q3
21%
37
Q1
6%
17
Q1
36%
35%
30%
81
Q2
11%
37
71
Q3
19%
57
54
Q4
18%
46
Adjusted EBITDA $M
2013
2014
Adjusted EBITDA Margin
Adjusted EBITDA $M
2013
2014
Adjusted EBITDA Margin
Q2
Q3
Q4
TNX-1331_Ed_3-26_for page 2 only_g.indd 2
3/26/15 12:50 PM
Tom Casey
Chairman and
Chief Executive Officer
mine closed at the end of 2013, we have not been producing these quantities of rutile or zircon and the revenue and margin from their reappearance in our products
for sale will drive improved performance.
Everywhere Tronox does business, we apply the same standards for ethical and responsible corporate behavior, including environmental stewardship, maintaining
a safe and sustainable workplace, and serving as a catalyst for positive change in the communities in which we operate. In 2014, companywide and across our
supply chain, Tronox made progress in meeting its environmental targets for energy consumption, water use, carbon emissions, waste, and land rehabilitation.
We continued our work to identify and eliminate risks in the workplace and strengthen a culture of safe production. In addition, we implemented new programs to
promote and maintain a diverse workforce that reflects the world in which we live. We maintain an active dialogue with stakeholders – investors, customers, business
partners, government and non-government entities, community leaders, and employees – actively tailoring initiatives to address their concerns. Tronox makes these
investments with the understanding that financial performance and corporate responsibility are both essential drivers of its long-term business success.
Lastly, in early February 2015, Tronox announced it had signed a definitive agreement to acquire the Alkali Chemical Division of FMC Corporation in a $1.64 billion
cash transaction. While this news is subsequent to the 2014 business performance covered in this report, it is a major milestone for Tronox that I feel warrants an
addition to my commentary on the past year.
Based in Wyoming, USA, the Alkali Chemical business is the largest and lowest-cost producer of natural soda ash, which is used by customers in the glass,
detergent, and chemical manufacturing end markets. With a strong record of safe operations and excellent financial performance, it will diversify our end-market
exposure, broaden our market reach, and deliver stable accretive revenue, EBITDA, cash flow, and earnings. It also affords us greater scale and financial strength
to pursue additional growth opportunities, which will be a key generator of value creation for our shareholders in the future.
On behalf of our 3,400 employees worldwide, thank you for your commitment to Tronox. We look forward to a productive 2015 and thank you for your continued
interest in Tronox. Together, we are building a brighter future, from the ground up.
Sincerely,
Tom Casey
Chairman and Chief Executive Officer
TNX-1331_Ed_3-17_g.indd 3
3
3/18/15 9:34 AM
2014 Financial
Highlights
Revenue of $1.7 billion and adjusted eb itda of $353 million for
20 percent adjusted eb itda margin
Gross margin of 12 percent up from 10 percent in prior year
Strong year end cash position of $1.3 billion
Each of our business segments contributed to our 2014 financial
performance and made progress toward financial, operational
improvement, and quality goals
Pigment revenue of $1.2 billion up 1 percent versus prior year; sales
volumes level are up 4 percent and selling prices are down 3 percent,
versus prior year
4
TNX-1331_Ed_3-17_g.indd 4
3/18/15 9:34 AM
Pigment adjusted ebitda of $157 million, up $214 million versus
prior year; adjusted ebitda margin achieving 13 percent
Mineral Sands revenue of $794 million; revenue level and sales
volumes down 28 percent and 8 percent, respectively, versus prior year
Mineral Sands adjusted ebitda of $243 million versus $474 million
in prior year; adjusted ebitda margin of 31 percent versus 43 percent in
prior year
Quarterly dividend of $0.25 per share paid in all four quarters to
all shareholders
TNX-1331_Ed_3-17_g.indd 5
5
3/18/15 9:34 AM
Operations
Operational Excellence and Procurement
Operational excellence means
continually improving and being
excellent in everything we do. Our
performance level must set us apart
from our competition and serve as
a model for others. Operational
excellence at Tronox has four tenets:
safety – our number one value –
process improvement, quality, and
cost control. The company’s success
is measured on progress in each of
these elements.
In 2014, Tronox assembled a cross-
functional team of internal and
external experts to identify best
practices and bring innovative ideas
to our pigment operations. This group
has identified more than 800 unique
ideas that have been prioritized
into over 70 key components for an
executable improvement plan.
In the coming year, early-stage
implementation of these plans will
begin with a goal of meeting the
growing demands of our customers
in a low-cost and timely manner.
2014 was an active year for the
Tronox R&D team, leading to the
introduction of several high-perfor-
mance products and developed
technology applications.
The company was awarded four
patents, including a new high-opacity
pigment, new plastic grades, and
proprietary TiO2 processing and
manufacturing methods. These new
technologies give the company a
competitive advantage based on
quality and performance in a period
of soft pricing. They also optimize the
6
TNX-1331_Ed_3-17_g.indd 6
3/18/15 9:34 AM
consumption of resources (e.g.,feed-
stock, chemicals, coke, and energy)
to improve production costs and re-
duce our impact on the environment.
The company also established a
global center of excellence team
harnessing the collaborative efforts
of its three pigment plants. The goal
is to develop high-quality chloride-
process TiO2 pigments to supply the
premium market demands of plastics
and coatings customers.
As a buyer of more than $1.3 billion
annually of materials and services
worldwide, Tronox has significant
purchasing scale and a global
footprint that is producing value
in new ways. In 2014, we upgraded
our procurement processes and
business intelligence systems to
lower costs and support global
growth plans.
For example, Tronox Botlek was
historically dependent on a single
supplier for up to 90 percent of a
critical specialty chemical. With one
entity controlling the local market,
Tronox had minimal buying power
and paid high prices, translating
into increased production costs.
The company’s global supply chain
team partnered with other internal
groups to identify competitive options.
In early 2014, Tronox evaluated
multiple options to secure manage-
ment of its entire inbound logistics
chain for a key raw material. One
outcome has been the strengthening
of its bulk terminal handling capacity
and inbound material transportation
TNX-1331_Ed_3-17_g.indd 7
capabilities. Tronox takes control
of the freight, pays the shipping
and insurance costs and manages
the delivery into our supply chain.
These changes have allowed Tronox
to improve its visibility over critical
raw materials, strengthen partner-
ships with key supply chain partners,
and have resulted in significant cost
savings to the company.
Tronox now has new qualified supply
sources that provide a more resilient
supply chain, inbound ownership
with full visibility at a lower total
landed cost.
22M
$US22 million in Supply Chain Costs
Savings Obtained in 2014
7
3/18/15 9:34 AM
Operations
Fairbreeze Gears Up
In 2014 Tronox commenced full-scale
construction at its new Fairbreeze
Mine in KwaZulu-Natal on the east
coast of South Africa. Fairbreeze
replaces the Hillendale mine, which
halted production in December 2013.
It will provide titanium feedstock to
the Tronox KZN slag furnaces, and
produce zircon, pig iron, and other
valuable minerals, to meet global
market demands. Entering 2015,
Fairbreeze construction is on
schedule with operations expected
to begin in late 2015.
Fairbreeze is having a positive
impact on the neighboring economy
through employment of local workers
and contracts with community-owned
businesses. 1,000 new construction
jobs are required to bring Fairbreeze
on line, and almost half of them are
from surrounding villages. When fully
operational, the mine will sustain
more than 2,000 direct and indirect
local jobs.
8
TNX-1331_Ed_3-17_g.indd 8
3/18/15 9:34 AM
The project is having a positive
impact on the local environment
too, through biodiversity offsets,
land management, and waterway
restoration. Non-indigenous
vegetation, such as sugar cane
and eucalyptus trees has been
removed from the site and replaced
with more than 5,000 native shrubs
and trees. Work is also underway to
return a local water catchment to its
natural state.
2K
2,000 local jobs will be sustained
by Fairbreeze
220K
KZN will produce 220,000 metric
tons of titanium slag annually for
global markets by processing new
high-quality ilmenite from the
Fairbreeze Mine
TNX-1331_Ed_3-17_g.indd 9
9
3/18/15 9:34 AM
Each year, Tronox sets targets for
a range of environmental issues,
including energy consumption.
In 2014, the company achieved up
to a 10-percent savings in monthly
electricity consumption across the
Tronox Namakwa Sands operations
on the west coast of South Africa
thanks to its cogeneration plant.
Consisting of eight 1.7-megawatt
General Electric Jenbacher gas
engines burning smelter waste gas,
Sustainability
Saving Energy and the Environment
the power station has a combined
generating capacity exceeding 70
gigawatts per year.
In addition to lowering energy costs,
the cogeneration plant reduces the
Tronox carbon footprint. This use of
the waste gas that was previously
flared to atmosphere has reduced
the amount of coal-generated power
purchased from the national grid.
The cogeneration plant is one of the
first co-generation projects to qualify
under the Clean Development
Mechanism project of the Kyoto
Protocol on climate change.
10
TNX-1331_Ed_3-17_g.indd 10
3/18/15 9:34 AM
The Tronox Namakwa Sands co-
generation plant recently received
three prestigious honors: a 2014
South African National Energy
Association (SANEA) Energy Project
Award, the South African Association
for Energy Efficiency (SAEE) 2014
Energy Project of the Year Award,
and a Special Award at the 2014
Eskom eta Awards.
70G
Tronox Namakwa Sands’ new
cogeneration plant generates 70
gigawatts of clean power per year.
TNX-1331_Ed_3-17_gr3.indd 11
11
3/26/15 12:52 PM
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.
Communities
Corporate Citizenship
In 2014, we invested almost US$2
million in programs to support our
local communities. Our employees
took an active role in these efforts
by devoting thousands of volunteer
hours throughout the year. The
Tronox corporate citizenship strategy
is defined by these key pillars:
Sustainability/Environment: 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
Education: We are an engineering
and science-based business – we are
eager to share our expertise and
resources to advance education in
these fields
Equal Rights & Diversity: We are a
global business with a diverse
workforce – we are advocates for
nondiscrimination and social justice
in the workplace and community
Health & Wellness: The physical
welfare of our employees and
12
TNX-1331_Ed_3-17_gr2.indd 12
3/26/15 12:02 PM
community are a core value of
Tronox – we actively work to increase
awareness and sponsor programs
that reflect this value
We believe that these efforts pro-
mote the long-term interests of all
our stakeholders, including employ-
ees, customers, business partners,
investors, local communities,
government officials, and the mining
and minerals industries at large.
Corporate responsibility activities in
2014 included significant community
and local business investments in
South Africa ranging from computer,
math, and science education
programs for local school children,
local employment, small business
development, and infrastructure
improvements in rural villages, to
equal rights and health and wellness
programs. In Australia, Tronox
Top left photo (from left to right)
Arianna Rios, Emely Rios, and
AJ Stalteri participated in the 2014
Take Your Child to Work Day at
the Tronox Electrolytic facility in
Henderson, Nevada.
Pictured (right) Sabelo Mngadi, a
student at the Enswingweni Primary
School in KwaZulu-Natal, South
Africa, demonstrates her computer
skills to Mayor Cllr Zulu, of uMlalazi,
at the opening of the Tronox-funded
NzuzaComputer Center.
TNX-1331_Ed_3-17_gr2.indd 13
continued its partnership with
the Western Australia Department
of Parks and Wildlife and the Perth
Zoo to protect and reintroduce
threatened indigenous wildlife.
In the U.S. and the Netherlands,
the company’s efforts included
high-school and university intern-
ships and student scholarships,
the funding of construction projects
at local schools, and youth em-
powerment education programs
focused on environmental science,
math, and engineering. In addition
to our financial support, Tronox
employees across the globe con-
tributed thousands of volunteer
hours in their local communities.
$2M
Almost US$2 million invested in
global corporate responsibility
programs in 2014
13
3/26/15 12:02 PM
Responsibility
Focus Areas
Tronox is the world’s largest fully integrated producer of titanium feed-
stock and TiO2 pigment. We build value by managing the full extent of
our supply chain, from the sands of Australia and South Africa to our
pigment plants on three different continents.
Tronox is making sustainability a driving force behind our business
operations.
Around the globe, we are investing in sustainable technologies and
solutions to lessen our environmental impact and lead our stakeholders
toward a more promising future.
14
TNX-1331_Ed_3-17_g.indd 14
3/18/15 9:34 AM
Performance Data
Economic
Direct economic value generated
Economic value distributed
Community investment
Economic value retained
Total production (metric tons produced)
Environment
Energy Consumption
Direct primary energy consumption
Indirect primary energy consumption
Total primary energy consumption
Water Consumption
Surface water, including water from wetlands, rivers, lakes, and oceans
Ground water
Rainwater collected directly and stored by the reporting organization
Waste water from another organization
Municipal water supplies or other water utilities
Total water consumption
Greenhouse Gas Emissions
Scope 1 GHG emissions
Scope 2 GHG emissions
Total GHG emissions
Land Use
Area protected
Area disturbed (including area actively mined)
Area in rehabilitation
Area restored
Waste Production
Hazardous waste
Non-hazardous waste
Social
Workforce
Total number of employees
Male
Female
Percentage of employees covered by collective bargaining agreements
Total number of contractors
Number of strikes and lock-outs exceeding one week’s duration
Safety
Lost Time Injury Rate employees and contractors
Lost Time Injury Rate employees only
Disabling Injury Rate employees and contractors
Disabling Injury Rate employees only
Total Recordable Injury Rate employees and contractors
Total Recordable Injury Rate employees only
Fatalities employees
Fatalities contractors
GRI
Performance Indicator
Unit
2012
2013
2014
EC1 US$ million
EC1 US$ million
EC1 US$ million
EC1 US$ million
mtp
1,835
2,275
1.2
(440)
1,611,760
1,931
1,853
2.2
77
1,623,066
1,749
1,706
1.5
44
1,648,251
EN3/EN4
EN8
GJ/mtp
GJ/mtp
GJ/mtp
m3/mtp
m3/mtp
m3/mtp
m3/mtp
m3/mtp
m3/mtp
EN16
mtCO2,e/mtp
mtCO2,e/mtp
mtCO2,e/mtp
hectares
hectares
hectares
hectares
mt/mtp
mt/mtp
EN13
MM1
MM1
EN13
EN22
LA1
LA1
LA1
LA4
LA1
MM4
LA7
11.0
15.2
26.2
21.3
15.0
2.3
0.8
3.4
42.8
0.9
1.4
2.3
83,793
4,584
1,867
3,023
0.19
0.37
11.3
14.9
26.2
21.3
14.6
2.4
0.9
3.4
42.7
0.9
1.4
2.2
11.3
15.4
26.7
18.3
15.3
0.2
1.1
3.0
37.7
0.9
1.4
2.3
96,599
4,497
2,193
3,235
0.15
0.39
108,406
4,449
2,012
3,644
0.10
0.39
3,469
2,894
575
47%
1,378
0
3,559
2,951
608
47%
1,503
0
3,510
2,909
601
50%
1,472
0
LTIR
LTIR
DIR
DIR
TRIR
TRIR
0.36
0.25
0.62
0.55
1.31
1.09
0
0
0.30
0.28
0.40
0.43
1.15
0.97
2
0
0.24
0.28
0.36
0.36
0.91
0.97
0
1
15
mt = metric tons
mtp = metric tons produced
GJ = gigajoules
m3 = cubic meters
CO2,e = CO2 equivalent
GRI = Global Reporting Initiative
Lost time injury = An injury that prevents the individual from returning to work the next day
Disabling injury = Either a lost time injury or a restricted work injury
(when the individual can return to work but cannot perform his/her previously assigned duties)
Recordable Injury = A disabling injury or a medical treatment case
(when the individual requires more than basic first aid treatment but can return to work)
LTIR = (# of lost time injuries / total hours worked) x 200,000
DIR = (# of disabling injuries / total hours worked) x 200,000
TRIR = (# of total recordable injuries / total hours worked) x 200,000
TNX-1331_Ed_3-17_g.indd 15
3/18/15 9:34 AM
16Hourly/moderately skilledSkilled/juniormanagementProfessional/mid-managementSeniormanagementGovernancebodies0%20%40%60%80%100%• <29 • 30–49 • 50–59 • 60> •SOCIALWorkforce Representation by Age LA13*as of December 31, 2014 KZN Sands Namakwa Sands Northern Operations Total(Millions of U.S. dollars) 2013 2014 2013 2014 2013 2014 2013 2014Area actively mined at year end (hectares) 2 — 1,359 1,516 51 60 1,412 1,576Total area restored during fiscal year (hectares) 40 46 69 246 103 117 212 409Total expenditures on rehabilitation during fiscal year (US$) $ 3,278,451 $ 4,830,660 $ 5,931,531 $ 4,718,385 $ 1,908,364 $ 2,044,056 $ 11,118,346 $ 11,593,101ENVIRONMENTRestored Habitats at our Mines 0%20%40%60%80%100%• Unknown • Minority • WhiteHourly/moderately skilledSkilled/juniormanagementProfessional/mid-managementSeniormanagementGovernance bodies •0%20%40%60%80%100%• Male • FemaleHourly/moderately skilledSkilled/juniormanagementProfessional/mid-managementSeniormanagementGovernance bodies 0%20%40%60%80%100%• Male • FemaleUSA AustraliaSouth-AfricaNetherlandsAsia-Pacific0100200300400500PigmentChloride slagPig ironSynthetic rutileZirconElectrolyticRutileSulfate slagLeucoxeneActivated carbonZirkwaStauroliteTiokwaECONOMIC2014 Production by Product Distributionin thousands of metric tons2013 and 2014 Production by Businessin thousands of metric tons25.4%67.4%Electrolytic 6.5%Mineral SandsInterest Income 0.7%0.0% Inter-Company EliminationsPigmentComponents of Economic ValueGenerated 2014 EC1*Components of Economic Value Distributed 2014 EC1*61.0%14.6%Paymentsto Providersof CapitalEmployee Wages and Benefits0.1% Community InvestmentsOperatingCosts20.6%Payments to Government 3.7%Additional Responsibility Disclosures02004006008001,0001,200• 2013 • 2014Mineral SandsPigmentElectrolyticWorkforce Representation by Minorities LA13*as of December 31, 2014Workforce Representation by Gender LA13*as of December 31, 2014Employees by Region and Gender LA13*as of December 31, 2014* GRI Performance Indicatortro357034_016r1.pdf 163/24/15 1:24 PM Tronox Financial Section
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
Financials
Comparison of 30-Month Cumulative Total Return*
Among Tronox Limited, the S&P 500 Index, the S&P Diversified Chemicals Index, and the S&P Materials Index
Tronox Limited
S&P 500
S&P Diversified Chemicals
S&P Materials
200
150
100
50
2
1
/
8
1
/
6
2
1
/
6
2
1
/
7
2
1
/
8
2
1
/
9
2
1
/
0
1
2
1
/
1
1
2
1
/
2
1
3
1
/
1
3
1
/
2
3
1
/
3
3
1
/
4
3
1
/
5
3
1
/
6
3
1
/
7
3
1
/
8
3
1
/
9
3
1
/
0
1
3
1
/
1
1
3
1
/
2
1
4
1
/
1
4
1
/
2
4
1
/
3
4
1
/
4
4
1
/
5
4
1
/
6
4
1
/
7
4
1
/
8
4
1
/
9
4
1
/
0
1
4
1
/
1
1
4
1
/
2
1
* $100 invested on 6/18/12 in stock or 5/31/12 in index, including reinvestment of dividends. Fiscal year ending December 31.
Copyright© 2015 S&P, a division of McGraw Hill Financial. All rights reserved.
Table of Contents
Consolidated Statements of Operations 18 Consolidated Statements of Comprehensive Income (Loss) 19 Consolidated
Balance Sheets 20 Consolidated Statements of Cash Flows 21 Consolidated Statements of Changes in Shareholders’
Equity 22 Notes to Consolidated Financial Statements 24 Management’s Report on Internal Controls Over Financial
Reporting 59 Report of Independent Registered Public Accounting Firm 2014 60 Report of Independent Registered
Public Accounting Firm 2013 and 2012 61 Board of Directors and Executive Management 62 Shareholder Information
Inside Back Cover
TNX-1331_Fin_3-17_g.indd 17
17
3/18/15 9:35 AM
Consolidated Statements of Operations
(Millions of U.S. dollars, except share and per share data)
Year Ended December 31,
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Restructuring expense
Income from operations
Interest and debt expense, net
Net gain (loss) on liquidation of non-operating subsidiaries
Loss on extinguishment of debt
Gain on bargain purchase
Other income (expense), net
Income (loss) before income taxes
Income tax benefit (provision)
Net income (loss)
Net income (loss) attributable to noncontrolling interest
Net income (loss) attributable to Tronox Limited
Earnings (loss) per share:(1)
Basic
Diluted
Weighted average shares outstanding (in thousands):
Basic
Diluted
2014
2013
2012
$
1,737
1,530
207
(192)
(15)
—
(133)
(35)
(8)
—
27
(149)
(268)
(417)
10
$ 1,922
1,732
190
(187)
—
3
(130)
24
(4)
—
46
(61)
(29)
(90)
36
$
1,832
1,568
264
(239)
—
25
(65)
—
—
1,055
(7)
1,008
125
1,133
(1)
$
(427)
$
(126)
$
1,134
$
$
(3.74)
(3.74)
114,281
114,281
$
$
(1.11)
(1.11)
113,416
113,416
$
$
11.37
11.10
98,985
101,406
(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 consolidated
financial statements have been adjusted to reflect the share split, unless otherwise noted. See Note 20.
See notes to consolidated financial statements.
18
TNX-1331_Fin_3-17_g.indd 18
3/18/15 9:35 AM
Consolidated Statements of Comprehensive Income (Loss)
(Millions of U.S. dollars)
Year Ended December 31,
Net income (loss)
Other comprehensive income (loss):
Foreign currency translation adjustments
Pension and postretirement plans:
Actuarial gains (losses), with no tax impact in 2014 and net of taxes of
$1 million in 2013 and $7 million in 2012
Amortization of unrecognized actuarial losses, with no tax impact in 2014
and net of taxes of less than $1 million in 2013
Prior service credit, with no tax impact in 2014 and net of taxes of $1 million in 2013
Pension and postretirement benefit curtailments, with no tax impact in 2014
Other comprehensive loss
Total comprehensive income (loss)
Comprehensive income (loss) attributable to noncontrolling interest:
Net income (loss)
Foreign currency translation adjustments
Comprehensive income (loss) attributable to noncontrolling interest
Comprehensive income (loss) attributable to Tronox Limited
See notes to consolidated financial statements.
2014
$ (417)
(95)
(83)
1
(3)
37
(143)
$ (560)
10
(31)
(21)
$ (539)
2013
$ (90)
(289)
25
2
3
—
(259)
$ (349)
36
(70)
(34)
$ (315)
2012
$ 1,133
11
(48)
—
—
—
(37)
$ 1,096
(1)
1
—
$ 1,096
TNX-1331_Fin_3-17_g.indd 19
19
3/18/15 9:35 AM
Consolidated Balance Sheets
(Millions of U.S. dollars, except share and per share data)
December 31,
Assets
Current Assets
Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts
Inventories, net
Prepaid and other assets
Deferred tax assets
Total current assets
Noncurrent Assets
Property, plant and equipment, net
Mineral leaseholds, net
Intangible assets, net
Inventories, net
Long-term deferred tax assets
Other long-term assets
Total assets
Liabilities And Equity
Current Liabilities
Accounts payable
Accrued liabilities
Long-term debt due within one year
Income taxes payable
Deferred tax liabilities
Total current liabilities
Noncurrent Liabilities
Long-term debt
Pension and postretirement healthcare benefits
Asset retirement obligations
Long-term deferred tax liabilities
Other long-term liabilities
Total liabilities
Contingencies and Commitments
Shareholders’ Equity
Tronox Limited Class A ordinary shares, par value $0.01 – 65,152,145 shares issued and
63,968,616 shares outstanding at December 31, 2014 and 64,046,647 shares issued and
62,349,618 shares outstanding at December 31, 2013
Tronox Limited Class B ordinary shares, par value $0.01 – 51,154,280 shares issued and
outstanding at December 31, 2014 and 2013
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Total shareholders’ equity
Noncontrolling interest
Total equity
Total liabilities and equity
See notes to consolidated financial statements.
20
2014
2013
$ 1,279
277
770
42
13
2,381
1,227
1,058
272
57
9
61
$ 5,065
$ 160
147
18
32
9
366
2,375
172
85
204
75
3,277
1
—
1,476
529
(396)
1,610
178
1,788
$ 1,478
308
759
61
47
2,653
1,258
1,216
300
—
192
80
$ 5,699
$ 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
$ 5,065
$ 5,699
TNX-1331_Fin_3-17_g.indd 20
3/18/15 9:35 AM
Consolidated Statements of Cash Flows
(Millions of U.S. dollars)
Year Ended December 31,
Cash Flows from Operating Activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by 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 (income) expense
Net (gain) loss on liquidation of non-operating subsidiaries
Loss on extinguishment of debt
Amortization of fair value inventory step-up and unfavorable ore contracts liability
Gain on bargain purchase
Other noncash items affecting net income (loss)
Contributions to employee pension and postretirement plans
Changes in assets and liabilities:
(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 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 debt
Debt issuance costs
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
Cash provided by (used in) financing activities
Effects of exchange rate changes on cash and cash equivalents
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental cash flow information:
Interest paid
Income taxes paid
See notes to consolidated financial statements.
2014
2013
2012
$ (417)
$
(90)
$ 1,133
295
237
22
10
(3)
35
8
—
—
3
(18)
23
(101)
9
22
20
(4)
141
(187)
—
—
(187)
(20)
—
(2)
(116)
6
—
—
—
(132)
(21)
(199)
1,478
333
33
17
9
9
(24)
4
(32)
—
(15)
(6)
58
75
(15)
(16)
(25)
15
330
(165)
1
—
(164)
(189)
945
(29)
(115)
2
—
—
—
614
(18)
762
716
$ 1,279
$ 1,478
$ 126
$
3
$ 123
$
25
211
(162)
32
10
6
—
—
152
(1,055)
48
(31)
88
(220)
10
(113)
9
6
124
(166)
—
114
(52)
(585)
1,707
(38)
(61)
1
(193)
(326)
(15)
490
—
562
154
$ 716
$
$
34
26
21
TNX-1331_Fin_3-17_g.indd 21
3/18/15 9:35 AM
Consolidated Statements of Changes in Shareholders’ Equity
(Millions of U.S. dollars)
Balance at January 1, 2012
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
Tronox Limited Class A shares repurchased
Warrants exercised
Tronox Incorporated share-based compensation
Tronox Incorporated common shares vested/canceled
Balance at December 31, 2012
Net income (loss)
Other comprehensive loss
Shares-based compensation
Class A and Class B share dividends
Warrants and options exercised
Balance at December 31, 2013
Net income (loss)
Other comprehensive income (loss)
Shares-based compensation
Class A and Class B share dividends
Warrants and options exercised
Balance at December 31, 2014
See notes to consolidated financial statements.
Tronox
Limited Class A
Ordinary Shares
Tronox
Limited Class B
Ordinary Shares
Capital in Excess
of par Value
Retained Earnings
Accumulated Other
Comprehensive Loss
Treasury Shares
Shareholders’ Equity
Total
Non-controlling
Interest
$ —
—
—
—
—
—
—
—
1
—
—
—
—
—
$ 1
—
—
—
—
—
$ 1
—
—
—
—
—
$ 1
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
$ —
—
—
—
—
—
$ —
—
—
—
—
—
$ —
$ 579
—
—
—
(193)
1,370
5
(15)
—
—
(326)
1
27
(19)
$ 1,429
—
—
17
—
2
$ 1,448
—
—
22
—
6
$ 1,476
$ 242
—
1,134
—
—
—
—
—
(1)
(61)
—
—
—
—
$ 1,314
(126)
—
—
(115)
—
$ 1,073
(427)
—
—
(117)
—
$ 529
$ (57)
—
—
(38)
—
—
—
—
—
—
—
—
—
—
$ (95)
—
(189)
—
—
—
$ (284)
—
(112)
—
—
—
$ (396)
$ (12)
$ 752
—
—
—
—
—
—
—
—
—
—
—
(7)
19
$ —
—
—
—
—
—
—
—
—
—
—
$ —
$ —
—
1,134
(38)
(193)
1,370
5
(15)
—
(61)
(326)
1
20
—
$ 2,649
(126)
(189)
(115)
17
2
$ 2,238
(427)
(112)
(117)
22
6
$ 1,610
$ —
233
(1)
1
—
—
—
—
—
—
—
—
—
—
$ 233
36
(70)
—
—
—
$ 199
10
(31)
—
—
—
$ 178
Total Equity
$ 752
233
1,133
(37)
(193)
1,370
5
(15)
—
(61)
(326)
1
20
—
$ 2,882
(90)
(259)
(115)
17
2
$ 2,437
(417)
(143)
(117)
22
6
$ 1,788
22
TNX-1331_Fin_3-17_g.indd 22
3/18/15 9:35 AM
(Millions of U.S. dollars)
Balance at January 1, 2012
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
Tronox Limited Class A shares repurchased
Warrants exercised
Tronox Incorporated share-based compensation
Tronox Incorporated common shares vested/canceled
Balance at December 31, 2012
Net income (loss)
Other comprehensive loss
Shares-based compensation
Class A and Class B share dividends
Warrants and options exercised
Balance at December 31, 2013
Net income (loss)
Other comprehensive income (loss)
Shares-based compensation
Class A and Class B share dividends
Warrants and options exercised
Balance at December 31, 2014
See notes to consolidated financial statements.
Tronox
Limited Class A
Ordinary Shares
Tronox
Limited Class B
Ordinary Shares
Capital in Excess
of par Value
$ —
$ —
$ 579
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$ 1
$ —
$ 1
$ —
$ 1
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(193)
1,370
5
(15)
—
—
(326)
1
27
(19)
$ 1,429
—
—
17
—
2
$ 1,448
—
—
22
—
6
$ 1,476
Retained Earnings
Accumulated Other
Comprehensive Loss
Treasury Shares
Total
Shareholders’ Equity
Non-controlling
Interest
Total Equity
$ 242
—
1,134
—
—
—
—
—
(1)
(61)
—
—
—
—
$ 1,314
(126)
—
—
(115)
—
$ 1,073
(427)
—
—
(117)
—
$ 529
$ (57)
—
—
(38)
—
—
—
—
—
—
—
—
—
—
$ (95)
—
(189)
—
—
—
$ (284)
—
(112)
—
—
—
$ (396)
$ (12)
—
—
—
—
—
—
—
—
—
—
—
(7)
19
$ —
—
—
—
—
—
$ —
—
—
—
—
—
$ —
$ 752
—
1,134
(38)
(193)
1,370
5
(15)
—
(61)
(326)
1
20
—
$ 2,649
(126)
(189)
17
(115)
2
$ 2,238
(427)
(112)
22
(117)
6
$ 1,610
$ —
233
(1)
1
—
—
—
—
—
—
—
—
—
—
$ 233
36
(70)
—
—
—
$ 199
10
(31)
—
—
—
$ 178
$ 752
233
1,133
(37)
(193)
1,370
5
(15)
—
(61)
(326)
1
20
—
$ 2,882
(90)
(259)
17
(115)
2
$ 2,437
(417)
(143)
22
(117)
6
$ 1,788
TNX-1331_Fin_3-17_g.indd 23
23
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
1. The Company
Tronox Limited and its subsidiaries (collectively referred to as “Tronox,” “we,”
“us,” or “our”) is a public limited company registered under the laws of the State
of Western Australia. We are a global leader in the production and marketing of
titanium bearing mineral sands and titanium dioxide (“TiO2”) pigment. Our TiO2
products are critical components of everyday applications such as paint and other
coatings, plastics, paper and other applications. Our mineral sands business
consists primarily of three product streams—titanium feedstock, zircon and pig
iron. Titanium feedstock is primarily used to manufacture TiO2. Zircon, a hard,
glossy mineral, is used for the manufacture of ceramics, refractories, TV screen
glass and a range of other industrial and chemical products. Pig iron is a metal
material used in the steel and metal casting industries to create wrought iron,
cast iron and steel. We have global operations in North America, Europe, South
Africa, and the Asia-Pacific region. We operate three 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, a Delaware corporation
formed on May 17, 2005 (“Tronox Incorporated”), and had no operating assets or
operations. On June 15, 2012, (the “Transaction Date”), the existing business of
Tronox Incorporated was combined with 74% of Exxaro Resources Ltd’s (“Exxaro”)
South African mineral sands operations, including its Namakwa and KZN
Sands mines, separation and slag furnaces, along with its 50% share of the
Tiwest Joint Venture in Western Australia (together the “mineral sands
business”) (the “Transaction”). See Note 26.
At both December 31, 2014 and 2013, Exxaro held approximately 44% of the
voting securities of Tronox Limited. Under the terms of the Shareholder’s Deed
entered into upon completion of the Transaction, Exxaro agreed that for a
three-year period after the completion of the Transaction (the “Standstill Period”),
it would not engage in any transaction or other action that would result in its
beneficial ownership of the voting shares of Tronox Limited exceeding 45% of the
total issued shares of Tronox Limited. In addition, except under certain circum-
stances, Exxaro agreed not to sell, pledge or otherwise transfer any such voting
shares during the Standstill Period. After the Standstill Period, Exxaro has agreed
not to acquire any voting shares of Tronox Limited if, following such acquisition,
Exxaro will have a voting interest in Tronox Limited of 50% or more unless Exxaro
brings any proposal to make such an acquisition to the Board of Directors of
Tronox Limited on a confidential basis. In the event an agreement regarding the
proposal is not reached, Exxaro is permitted to make a takeover offer for all
the shares of Tronox Limited not held by affiliates of Exxaro, subject to certain
non-waivable conditions.
Basis of Presentation
We are considered a domestic company in Australia and, as such, are required to
report in Australia under International Financial Reporting Standards (“IFRS”).
24
Additionally, as we are not considered 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.
The Consolidated Balance Sheets at December 31, 2014 and 2013 relate to
Tronox Limited. The Consolidated Statements of Operations and the Consolidated
Statements of Cash Flows for the years ended December 31, 2014 and 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.
Exxaro has a 26% ownership interest in each of our Tronox KZN Sands (Pty) Ltd.
and Tronox Mineral Sands (Pty) Ltd. subsidiaries in order to comply with the
ownership requirements of the Black Economic Empowerment (“BEE”) legislation
in South Africa. We account for such ownership interest as “Noncontrolling
interest” in our consolidated financial statements. See Note 21.
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. At the Transaction Date,
we owned 100% of the joint venture.
Our consolidated financial statements include the accounts of all majority-owned
subsidiary companies. All intercompany balances and transactions have been
eliminated in consolidation. Certain prior period amounts have been reclassified
to conform to the manner and presentation in the current period. For the year
ended December 31, 2013, we decreased cash flows from investing activities by
$7 million with a corresponding decrease in cash flows from operating activities
to adjust for accrued capital expenditures. For the year ended December 31, 2012,
we increased cash flows from operating activities by $6 million with a correspond-
ing decrease in the effects of exchange rate changes on cash and cash equivalents.
These adjustments are not considered material for the year ended December 31,
2013 and 2012.
During the year ended December 31, 2014, we recorded out-of-period adjustments
that should have been recorded during 2012 that decreased cost of goods sold by
$6 million, decreased loss before income taxes by $6 million, decreased net loss
by $5 million and decreased loss per share by $0.03. Also during the year ended
December 31, 2014, we recorded out-of-period adjustments that should have been
recorded during 2013 that increased cost of goods sold by $6 million, increased
selling, general and administrative expenses by $1 million, increased loss before
TNX-1331_Fin_3-17_g.indd 24
3/18/15 9:35 AM
income taxes by $7 million, increased net loss by $5 million and increased loss
per share by $0.04. After evaluating the quantitative and qualitative aspects of
the adjustments, we concluded the effect of these adjustments, individually
and in the aggregate, was not material to our previously issued consolidated
financial statements or to our 2014 consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting periods. It is at least reasonably
possible that the effect on the financial statements of a change in estimate due
to one or more future confirming events could have a material effect on the
financial statements.
2. Significant Accounting Policies
Foreign Currency
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), net” in 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” in 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.
Revenue Recognition
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, which are recorded in “Net sales”
in the Consolidated Statements of Operations, and are based on our historical
experience and current business conditions.
Cost of Goods Sold
Cost of goods sold includes costs for purchasing, receiving, manufacturing,
and distributing products, including raw materials, energy, labor, depreciation,
depletion, shipping and handling, freight, warehousing, and other production
costs.
Research and Development
Research and development costs, included in “Selling, general and administrative
expenses” in the Consolidated Statements of Operation comprising of salaries,
building costs, utilities, administrative expenses, and allocations of corporate
costs, were $11 million, $10 million, and $9 million during 2014, 2013, and 2012,
respectively, and were expensed as incurred.
Selling, General and Administrative Expenses
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.
Income Taxes
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 7.
Earnings per Share
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 22) and the T-Bucks Employee Participation Plan (see
TNX-1331_Fin_3-17_g.indd 25
25
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
Note 22), both of which contain non-forfeitable dividend rights. Our unexercised
options, unexercised Series A and Series B Warrants (see Note 20), 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 8.
Fair Value Measurement
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:
Level 1 – Quoted prices in active markets for identical assets and liabilities;
Level 2 – Quoted prices for similar assets and liabilities in active markets, quoted
prices for identical or similar assets and liabilities in markets that are not active
or other inputs that are observable or can be corroborated by observable market
data; and,
Level 3 – Unobservable inputs that are supported by little or no market activity
and that are significant to the fair value of the assets and liabilities. See Note 9.
Cash and Cash Equivalents
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.
At both December 31, 2014 and 2013, we had restricted cash in Australia related
to outstanding letters of credit of $3 million.
Accounts Receivable, net of allowance for doubtful accounts
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 concentration 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
26
in the form of bank or parental guarantees or guarantee payments. We maintain
allowances for potential credit losses based on specific customer review and
current financial conditions. See Note 10.
Inventories, net
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 the lower of the weighted-average cost of production or market.
We review, annually and at the end of each quarter, 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. Inventories expected to be
sold or consumed within twelve months after the balance sheet date are classified
as current assets and all other inventories are classified as non-current assets.
See Note 11.
Long Lived Assets
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 replace-
ments 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” in the Consolidated Statements of Operations. See Note 12.
We capitalize interest costs on major projects that require an extended period of
time to complete. See Note 16.
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 expenditures. 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 13.
TNX-1331_Fin_3-17_g.indd 26
3/18/15 9:35 AM
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 14.
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.
Share-based Compensation
Equity Restricted Share and Restricted Share Unit Awards – 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
Monte Carlo simulation under a lattice model approach. For awards containing
a performance condition, the fair value is the grant date close price and
compensation expense is not recognized until we conclude that it is probable
that the performance condition will be met. We reassess the probability at
least quarterly. See Note 22.
Long-term Debt
Long-term debt is stated net of unamortized original issue premium or discount.
Premiums or discounts are amortized using the effective interest method with
amortization expense recorded in “Interest and debt expense, net” in the
Consolidated Statements of Operations. Deferred debt issuance costs are recorded
in “Other long-term assets” in the Consolidated Balance Sheets, and are
amortized using the effective interest method with amortization expense recorded
in “Interest and debt expense, net” in the Consolidated Statements of Operations.
See Note 16.
Liability Restricted Share Awards – 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 22.
Option Awards – 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 22.
Asset Retirement Obligations
Asset retirement obligations are recorded at their estimated fair value, and
accretion expense is recognized over time as the discounted liability is accreted
to its expected settlement value. Fair value is measured using expected future
cash outflows discounted at 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” in the Consolidated Statements of Operations. See Note 17.
Derivative Instruments
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), net” in the
Consolidated Statements of Operations. See Note 18.
Environmental Remediation and Other Contingencies
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 19.
Self-Insurance
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.
Recent Accounting Pronouncements
During 2014, we adopted ASU 2013-5, Parent’s Accounting for the Cumulative
Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of
Assets within a Foreign Entity or of an Investment in a Foreign Entity, which
addresses the treatment of the cumulative translation adjustment into net income
when a parent either sells or liquidates a part or all of its investment in a foreign
entity or no longer holds a controlling financial interest in a subsidiary or group of
assets within a foreign entity. The adoption of this guidance did not have an
impact on our consolidated financial statements, as we had previously accounted
for the liquidation of our non-operating subsidiaries in this manner.
In May 2014, the FASB issued ASU 2014-9, Revenue from Contracts with
Customers (“ASU 2014-9”), which states that an entity should recognize revenue
to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. This guidance is effective for periods
beginning after December 31, 2016, and will be applied either retrospectively
or on a modified retrospective basis. We have not yet determined the impact,
if any, that ASU 2014-9 will have on our consolidated financial statements.
3. Anadarko Litigation
In May 2009, we commenced an adversary proceeding in the U.S. Bankruptcy
Court for the Southern District of New York (Manhattan) (the “Bankruptcy Court”)
against Kerr-McGee Corp. (“Kerr-McGee”) and its parent, Anadarko Petroleum
Corp. (“Anadarko”), related to the 2006 spin-off of Tronox Incorporated (Tronox
Incorporated v. Anadarko (In re Tronox Inc.), 09-1198 (the “Anadarko Litigation”).
TNX-1331_Fin_3-17_g.indd 27
27
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
Pursuant to the plan of reorganization, we assigned the rights to any pre-tax
proceeds that may be recovered in the Anadarko Litigation to our creditors.
Restructuring expense by segment during 2014 was as follows:
On May 29, 2014, the Bankruptcy Court approved a settlement with Anadarko
for $5.15 billion. On January 23, 2015, Anadarko paid $5.2 billion, including
approximately $65 million of accrued interest, pursuant to the terms of the
settlement agreement. We did not receive any portion of the settlement amount.
Instead, 88% of the $5.2 billion will go to trusts and other governmental entities
for the remediation of polluted sites by Kerr-McGee. The remaining 12% will
be distributed to a tort trust to compensate individuals injured as a result of
Kerr-McGee’s environmental failures.
We received a private letter ruling from the U.S. Internal Revenue Service
confirming that the trusts that held the claims against Anadarko are grantor
trusts of Tronox Incorporated solely for federal income tax purposes. As a result,
we believe we will be entitled to tax deductions equal to the amount spent by
the trusts to remediate environmental matters and to compensate the injured
individuals. These deductions will accrue over the life of the trusts as the $5.2
billion is spent. We believe that these expenditures and the accompanying tax
deductions may continue for decades. We have recorded deferred tax assets of
$2.0 billion related to the $5.2 billion of expected future tax deductions from trust
expenditures. These deferred tax assets are fully offset by valuation allowances.
Mineral Sands segment
Pigment segment
Corporate and Other
Total
5. Liquidation of Non-Operating Subsidiaries
Restructuring
Expense
$ 7
5
3
$ 15
During 2014, we completed the liquidation of a non-operating subsidiary,
Tronox Pigments International GmbH, for which we recognized a noncash loss
from the realization of cumulative translation adjustments of $35 million, which
was recorded in “Net gain (loss) on liquidation of non-operating subsidiaries”
in the Consolidated Statements of Operations. 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 of $24 million, which
was recorded in “Net gain (loss) on liquidation of non-operating subsidiaries”
in the Consolidated Statements of Operations.
4. Restructuring Expense
6. Other Income (Expense), Net
During 2014, we commenced a cost reduction initiative. The initiative involved a
reduction in our workforce by approximately 135 employees and outside contractor
positions. The charge resulting from this initiative was $15 million, which was
recorded in “Restructuring expense” in the Consolidated Statements of Operations
during 2014. The charges consist of employee severance costs of $13 million,
as well as outplacement services and other associated costs and expenses of
$2 million. Of the total $15 million charge, we incurred $14 million in cash
expenditures, of which $10 million was paid during 2014. We expect to pay the
remaining $4 million during the first half of 2015.
Other income (expense), net is comprised of the following:
Year Ended December 31,
2014
2013
2012
Net realized and unrealized
foreign currency gains (losses)
Interest income
Pension and postretirement
benefit curtailment gains(1)
Other
Total
$ 5
13
9
—
$ 27
$ 39
8
—
(1)
$ 46
$ (8)
2
—
(1)
$ (7)
(1) During 2014, we recognized curtailment gains related to our U.S. postretirement healthcare
plan and our Netherlands pension plan. See Note 23.
A summary in the changes in the liability established for restructuring, which is
included in “Accrued liabilities” in the Consolidated Balance Sheet, is as follows:
7. Income Taxes
Balance, January 1, 2014
Severance, outplacement services and other related costs
Cash payments
Noncash expense
Balance, December 31, 2014
Restructuring
Liability
$ —
15
(10)
(1)
$ 4
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.
28
TNX-1331_Fin_3-17_g.indd 28
3/18/15 9:35 AM
Income (loss) before income taxes is comprised of the following:
Year Ended December 31,
2014
2013
2012
Australia
International
Income (loss) before income taxes
$ (242)
93
$ (149)
$ (185)
124
$ (61)
$ 1,019
(11)
$ 1,008
The income tax benefit (provision) is summarized below:
Year Ended December 31,
2014
2013
2012
Australian:
Current
Deferred
International:
Current
Deferred
Income tax benefit (provision)
$ (15)
(183)
(15)
(55)
$ (268)
$ (11)
35
(23)
(30)
$ (29)
$ (28)
124
(9)
38
$ 125
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.
Year Ended December 31,
2014
2013
2012
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
Anadarko litigation settlement
State NOL limitations
Withholding taxes
Prior year accruals
Change in uncertain tax positions
Foreign exchange
Tax credits
Branch taxation
Other, net
30%
30%
30%
78
(17)
—
—
(1,577)
1,341
(15)
(24)
(2)
—
1
2
4
(1)
191
(10)
—
—
(259)
—
—
(59)
22
6
17
8
6
—
(6)
(1)
(31)
(7)
(1)
—
—
2
—
—
—
—
—
2
Effective tax rate
(180)%
(48)%
(12)%
The effective tax rate for each of the years ended December 31, 2014, 2013,
and 2012 differs from the Australian statutory rate of 30%. Historically,
the differences were primarily due to valuation allowances, income in foreign
jurisdictions taxed at rates lower than 30%, and withholding tax accruals on
interest income. Additionally, the effective tax rate for 2014 is impacted by
$58 million and $255 million, respectively, due to increases to full valuation
allowances in The Netherlands and Australia. The Anadarko Litigation settlement
of $5.2 billion provided us with additional deferred tax assets of $2.0 billion,
which were offset by full valuation allowances in the United States of $2.0 billion.
As a result of an ownership change on June 15, 2012, our ability to use federal
losses was not impacted; however, due to state apportionment impacts and
carryforward periods, our state losses were limited. This limitation resulted in the
loss of $23 million of deferred tax assets but was fully offset by a reduction of
the related valuation allowances.
The statutory tax rates on income earned in South Africa (28% for limited liability
companies), The Netherlands (25% for corporations), and the United Kingdom
(23.25% for corporations and limited liability companies and not applicable for
certain limited liability partners) are lower than the Australian statutory rate
of 30%. The statutory tax rate, applied against losses in the United States (35%
for corporations), is higher than the Australian statutory rate of 30%. Also,
we continue to maintain a full valuation allowance in the United States.
Net deferred tax assets (liabilities) at December 31, 2014 and 2013 were
comprised of the following:
December 31,
2014
2013
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)
$ 626
324
26
87
28
2,118
15
314
11
2
14
3,565
(3,345)
220
(266)
(103)
(10)
(25)
(7)
(411)
$ (191)
$
13
9
(9)
(204)
$ (191)
$ 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
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. Additionally, as a
result of the resolution of the Anadarko Litigation of $5.2 billion, we have recorded
additional deferred tax assets of $2.0 billion. This increase has been fully offset
by valuation allowances. See Note 3 for discussion of the resolution of the
Anadarko Litigation.
TNX-1331_Fin_3-17_g.indd 29
29
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
During 2014 and 2013, the total changes to the valuation allowance were an
increase of $2.4 billion and an increase of $229 million, respectively. The table
below sets forth the changes, by jurisdiction:
December 31,
Australia
United States
The Netherlands
South Africa
Total increase in valuation allowances
2014
2013
$ 255
2,058
50
—
$ 2,363
$ 118
87
25
(1)
$ 229
At December 31, 2014, we now maintain full valuation allowances related to the
total net deferred tax assets in Australia, the United States, and The Netherlands,
as we cannot objectively assert that these deferred tax assets are more likely than
not to be realized. Future provisions for income taxes will include no tax benefits
with respect to losses incurred and tax expense only to the extent of current state
tax payments until the valuation allowances are eliminated. Additionally, we have
valuation allowances against specific tax assets in South Africa.
These conclusions were reached by the application of ASC 740, Income Taxes,
which requires that all available positive and negative evidence be weighted to
determine whether a valuation allowance should be recorded. The more significant
evidential matter in Australia, the United States, and The Netherlands relates to
recent book losses and the lack of sufficient projected taxable income. The more
significant evidential matter for South Africa relates to assets that cannot be
depleted or depreciated for tax purposes.
An ownership change occurred during 2012, as a result of the Transaction.
These ownership 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 income
tax liabilities; however, for the year ended December 31, 2014, we have now
reduced our state net operating loss carryforwards and the related deferred tax
benefits. The loss of these benefits is offset by a corresponding reduction in
the valuation allowances.
The deferred tax assets generated by tax loss carryforwards in Australia, the
United States, and The Netherlands have been fully offset by valuation allow-
ances. The expiration of these carryforwards at December 31, 2014 is shown
below. The Australian and South African tax loss carryforwards do not expire.
Australia U.S. Federal
U.S. State
$ —
—
—
—
—
—
306
$
—
—
—
—
—
1,231
—
$ —
8
—
4
1
776
—
Tax Loss
Carryforwards
Total
Other
$ —
—
—
—
—
152
47
$
—
8
—
4
1
2,159
353
$ 306
$ 1,231
$ 789
$ 199
$ 2,525
2015
2016
2017
2018
2019
Thereafter
No Expiration
Total tax loss
carryforwards
30
At December 31, 2014, Tronox Limited had foreign subsidiaries with undistributed
earnings. Although we would not be subject to income tax on these earnings,
amounts totaling $118 million could be subject to withholding tax if distributed.
Tronox Incorporated had certain foreign subsidiaries with undistributed earnings
totaling $179 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.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits
for 2014 and 2013 is as follows:
Year Ended December 31,
Balance at January 1
Reductions for tax positions related to prior years
Balance at December 31
2014
2013
$ 1
—
$ 1
$ 4
(3)
$ 1
Included in the balance at December 31, 2014 and 2013, 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. None of these net benefits, if recognized, would impact 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 2014, 2013, and 2012, we did not recognize any gross interest or penalties
in “Income tax benefit (provision)” in the Consolidated Statements of Operations
related to unrecognized tax benefits. At December 31, 2014 and 2013, 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 $1 million, respectively, as the reserve
for uncertain tax positions.
Our Australian returns are closed through 2011. However, under Australian tax
laws, transfer pricing issues have no limitation period. Our U.S. returns are
closed for years through 2010, with the exception of an amendment filed for the
2007 tax year. Our Netherlands returns are closed through 2012. 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 examination; 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.
TNX-1331_Fin_3-17_g.indd 30
3/18/15 9:35 AM
8. Earnings Per Share
9. Fair Value Measurement
The computation of basic and diluted earnings (loss) per share for the periods
indicated is as follows:
For financial instruments that are subsequently measured at fair value, the fair
value measurement is grouped into levels. See Note 2.
Year Ended December 31,
2014
2013
2012
Numerator – Basic 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
Denominator – Basic:
Weighted-average ordinary
shares (in thousands)
Add: Effect of dilutive securities:
Restricted stock
Warrants
Denominator – Dilutive
$
(417)
$
(90)
$ 1,133
10
36
(1)
(427)
—
(427)
(126)
—
(126)
1,134
(61)
1,073
100%
100%
99.3%
(427)
(126)
1,065
—
—
60
$
(427)
$
(126)
$ 1,125
At December 31, 2014 and 2013, the only financial instrument measured at fair
value was the environmental rehabilitation trust, which amounted to $17 million
and $22 million, respectively, and was categorized as Level 1. See Note 17.
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.
Our debt is recorded at historical amounts. At both December 31, 2014 and
2013, the fair value of the Term Loan was $1.5 billion. At December 31, 2014 and
2013, the fair value of the Notes was $903 million and $924 million, respectively.
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.
114,281
113,416
98,985
10. Accounts Receivable, Net of Allowance for Doubtful Accounts
—
—
—
—
49
2,372
114,281
113,416
101,406
Accounts receivable, net of allowance of doubtful accounts, consisted of the
following:
Earnings (loss) per ordinary share:(1)
Basic earnings (loss) per ordinary share
Diluted earnings (loss) per ordinary share
$
$
(3.74)
(3.74)
$
$
(1.11)
$ 11.37
December 31,
(1.11)
$ 11.10
(1) Our participating securities do not have a contractual obligation to share in losses; therefore,
when we have a net loss, none of the loss is allocated to participating securities. Consequently,
for the years ended December 31, 2014 and 2013, the two class method did not have an effect
on our loss per ordinary share calculation, and as such, dividends paid during the year did not
impact this calculation.
(2) Loss per ordinary share amounts were calculated from exact, not rounded income (loss) and
share information.
Trade receivables
Other
Gross
Allowance for doubtful accounts
Net
2014
2013
$ 272
6
278
(1)
$ 277
$ 304
6
310
(2)
$ 308
In computing diluted loss per share under the two-class method, we considered
potentially dilutive shares. Anti-dilutive shares not recognized in the diluted
earnings per share calculation were as follows:
Bad debt expense was less than $1 million, $1 million and $1 million for the years
ended December 31, 2014, 2013 and 2012, respectively, and was recorded in
“Selling, general and administrative expenses” in the Consolidated Statements
of Operations.
December 31, 2014
December 31, 2013
December 31, 2012
Average
Exercise
Price
Shares
Average
Exercise
Price
Shares
Average
Exercise
Price
Shares
Options
Series A
Warrants(1)
Series B
Warrants(1)
Restricted
share units
2,560,875 $ 21.14
2,094,771 $ 20.63
612,439 $ 24.81
1,273,917 $ 11.04
1,850,814 $ 11.52
1,715,986 $ 12.19
2,409,404 $ 12.71
— $
— $
—
—
875,776 $ 22.17
303,324 $ 21.08
18,990 $ 21.10
(1) Series A Warrants and Series B Warrants were converted into Class A Shares at December 31,
2014 and 2013 using a rate of 5.29 and 5.18, respectively. See Note 20.
TNX-1331_Fin_3-17_g.indd 31
31
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
11. Inventories, Net
13. Mineral Leaseholds
Inventories, net consisted of the following:
Minerals leaseholds, net of accumulated depletion, consisted of the following:
December 31,
2014
2013
December 31,
Raw materials
Work-in-process
Finished goods
Materials and supplies, net(1)
Total
Less: Inventories, net – non-current
Inventories, net – current
$ 329
77
303
118
827
(57)
$ 770
$ 320
24
310
105
759
—
$ 759
(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 of $42 million and $48 million
at December 31, 2014 and 2013, respectively. At December 31, 2014 and 2013,
inventory obsolescence reserves were $14 million and $13 million, respectively.
During 2014, 2013, and 2012, we recognized a net lower of cost or market charge
of $3 million, a net lower of cost or market benefit of $20 million, and a net
lower of cost or market charge of $47 million, respectively, which was included
in “Cost of goods sold” in the Consolidated Statements of Operations.
12. Property, Plant and Equipment
Property, plant and equipment, net of accumulated depreciation and amortization,
consisted of the following:
December 31,
2014
2013
Land and land improvements
Buildings
Machinery and equipment
Construction-in-progress
Other
Total
Less accumulated depreciation and amortization
Property, plant and equipment, net
$
80
187
1,225
149
35
1,676
(449)
$ 1,227
$
79
181
1,156
133
28
1,577
(319)
$ 1,258
Depreciation expense related to property, plant and equipment during 2014, 2013,
and 2012 was $158 million, $191 million, and $127 million, respectively, of which
$155 million, $187 million, and $125 million, respectively, was recorded in “Cost
of goods sold” in the Consolidated Statements of Operations and $3 million,
$4 million, and $2 million, respectively, was recorded in “Selling, general and
administrative expenses” in the Consolidated Statements of Operations
Mineral leaseholds
Less accumulated depletion
Net
2014
2013
$ 1,336
(278)
$ 1,058
$ 1,388
(172)
$ 1,216
Depletion expense related to mineral leaseholds during 2014, 2013, and 2012
was $110 million, $115 million, and $59 million, respectively, which was recorded
in “Cost of goods sold” in the Consolidated Statements of Operations.
14. Intangible Assets
Intangible assets, net of accumulated amortization, consisted of the following:
December 31, 2014
December 31, 2013
Net
Gross Accumulated Carrying
Amount
Cost Amortization
Net
Gross Accumulated Carrying
Cost Amortization Amount
Customer
relationships
TiO2 technology
Internal-use
software
Other
Total
$ 294
32
39
9
$ 374
$ (79)
(6)
(10)
(7)
$ (102)
$ 215
26
29
2
$ 272
$ 294
32
40
9
$ 375
$ (59)
(5)
$ 235
27
(6)
(5)
$ (75)
34
4
$ 300
Amortization expense related to intangible assets during 2014, 2013, and 2012
was $27 million, $27 million, and $25 million, respectively, which was recorded in
“Selling, general and administrative expenses” in the Consolidated Statements
of Operations. Estimated future amortization expense related to intangible assets
is $27 million for 2015, $25 million for 2016, $25 million for 2017, $25 million
for 2018, $25 million for 2019, and $145 million thereafter.
15. Accrued Liabilities
Accrued liabilities of the following:
December 31,
2014
2013
Employee-related costs and benefits
Taxes other than income taxes
Interest
Sales rebates
Other
Total
$ 62
37
22
19
7
$ 147
$ 55
44
22
18
7
$ 146
32
TNX-1331_Fin_3-17_g.indd 32
3/18/15 9:35 AM
16. Debt
Original
Principal
Maturity December 31, December 31,
2013
2014
Date
UBS Revolver
We have a global senior secured asset-based syndicated revolving credit
facility with UBS AG (the “UBS Revolver”) with a maturity date of June 18, 2017.
The UBS Revolver provides us with a committed source of capital with a principal
borrowing amount of up to $300 million, subject to a borrowing base. 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, 2014 and
2013, our borrowing base was $276 million and $210 million, respectively.
During 2014 and 2013, we had no drawdowns or repayments on the UBS Revolver.
At both December 31, 2014 and 2013, there were no outstanding borrowings on
the UBS Revolver.
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 London Interbank Offered Rate (“LIBOR”) for a one-month
period plus 1%) or (ii) the adjusted LIBOR, in each case plus the applicable
margin. The applicable margin ranges from 1.5% to 2% for borrowings at the
adjusted LIBOR, and from 0.5% to 1% for borrowings at the alternate base
rate, based upon the average daily borrowing availability.
ABSA Revolving Credit Facility
We have a R1.3 billion (approximately $113 million at December 31, 2014)
revolving credit facility with ABSA Bank Limited (“ABSA”) acting through its ABSA
Capital Division (the “ABSA Revolver”) with a maturity date of June 14, 2017.
On December 12, 2014, we entered into a First Amended and Restated Revolving
Credit Facility Agreement with ABSA, whereby the ABSA Revolver was increased
from R900 million to R1.3 billion, and the margin increased from 3.5% to 3.9%.
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 3.9%.
During 2014, we had no drawdowns or repayments on the ABSA Revolver. During
2013, we had no drawdowns and a repayment of $30 million. During 2012, we had
drawdowns of $54 million and repayments of $24 million. The weighted average
interest rate was 8.5% during both 2013 and 2012. At both December 31, 2014
and 2013, there were no outstanding borrowings on the ABSA Revolver.
Term Loan, net of
unamortized discount(1)
Senior Notes
Co-generation Unit
Financing Arrangement
Lease financing
Total borrowings
Less: Noncurrent borrowings
due in one year
Noncurrent borrowings
$ 1,500
$ 900
3/19/2020
8/15/2020
$ 1,468
900
$ 1,482
900
$
16
2/1/2016
3
22
6
25
2,393
2,413
(18)
(18)
$ 2,375
$ 2,395
(1) Average effective interest rate of 4.6% during 2014 and 5% during 2013.
At December 31, 2014, the scheduled maturities of our long-term debt were
as follows:
2015
2016
2017
2018
2019
Thereafter
Total
Remaining accretion associated with the Term Loan
Total borrowings
Total
Borrowings
$
18
16
16
16
16
2,318
2,400
(7)
$ 2,393
Term Loan
On March 19, 2013, we, along with our wholly owned subsidiary, Tronox Pigments
(Netherlands) B.V., and certain of our subsidiaries named as guarantors, entered
into a Second Amended and Restated Credit and Guaranty Agreement (the
“Second Agreement”) with Goldman Sachs Bank USA, as administrative agent
and collateral agent, and Goldman Sachs Bank USA, UBS Securities LLC, Credit
Suisse Securities (USA) LLC and RBC Capital Markets, as joint lead arrangers,
joint bookrunners and co-syndication agents. Pursuant to the Second Agreement,
we obtained a $1.5 billion senior secured term loan (the “Term Loan”). The Term
Loan was issued net of an original issue discount. At December 31, 2014 and
2013, the unamortized discount was $7 million and $11 million, respectively.
We made principal repayments during 2014 and 2013 of $17 million and
$8 million, respectively.
On April 23, 2014, we, along with our wholly owned subsidiary, Tronox Pigments
(Netherlands) B.V., and certain of our subsidiaries named as guarantors, entered
into a Third Amendment to the Credit and Guaranty Agreement (the “Third
Agreement”) with the lender parties thereto and Goldman Sachs Bank USA, as
administrative agent, which amends the Second Agreement. The Third Agreement
provides for the re-pricing of the Term Loan by replacing the existing definition
of “Applicable Margin” with a grid pricing matrix dependent upon our public
corporate family rating as determined by Moody’s and Standard & Poor’s (with
the interest rate under the Third Agreement remaining subject to Eurodollar Rate
and Base Rate floors, as defined in the Third Agreement). Pursuant to the Third
Agreement, based upon our current public corporate family rating by Moody’s and
Standard & Poor’s, the current interest rate per annum is 300 basis points plus
TNX-1331_Fin_3-17_g.indd 33
33
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
LIBOR (subject to a LIBOR floor of 1% per annum) compared to 350 basis points
plus LIBOR (subject to a LIBOR floor of 1% per annum) in the Second Agreement.
The Third Agreement also amended certain provisions of the Second Agreement to
permit us and certain of our subsidiaries to obtain new cash flow revolving credit
facilities in place of our existing asset based revolving credit facility. The maturity
date under the Second Agreement and all other material terms of the Second
Agreement remain the same under the Third Agreement.
The Third Agreement resulted in a modification for certain lenders and an
extinguishment for other lenders. Accordingly, we recognized an $8 million charge
during 2014 for the early extinguishment of debt resulting from the write-off
of deferred debt issuance costs and discount on debt associated with the Second
Agreement. We also paid $2 million of new debt issuance costs related to the
Third Agreement during 2014, which were recorded in “Other long-term assets”
in the Consolidated Balance Sheets.
Senior Notes
On August 20, 2012, our wholly owned subsidiary, Tronox Finance LLC, completed
a private placement offering of $900 million aggregate principal amount of
senior notes at par value (the “Senior Notes”). The Senior Notes bear interest
semiannually at a rate equal to 6.375%, and are fully and unconditionally
guaranteed on a senior, unsecured basis by us and certain of our subsidiaries.
The Senior Notes were initially offered to qualified institutional buyers pursuant to
Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”),
and outside the United States to non-U.S. persons pursuant to Regulation S under
the Securities Act.
On September 17, 2013, Tronox Finance LLC issued $900 million in aggregate
principal amount of registered 6.375% Senior Notes due 2020 in exchange for
its then existing $900 million in aggregate principal amount of its 6.375%
Senior Notes due 2020. The Senior Notes are guaranteed by Tronox and certain
of its subsidiaries. See Note 27.
Lease Financing
We have capital lease obligations in South Africa, which are payable through 2031
at a weighted average interest rate of approximately 14%. At December 31, 2014
and 2013, such obligations had a net book value of assets recorded under capital
leases aggregating $20 million and $23 million, respectively. During 2014, 2013,
and 2012, we made principal payments of less than $1 million for all periods.
At December 31, 2014, future minimum lease payments, including interest,
were as follows:
Principal
Repayments
Interest
Total
Payments
$ 1
1
1
1
1
18
$ 23
$ 3
3
3
3
2
18
$ 32
$ 4
4
4
4
3
36
$ 55
2015
2016
2017
2018
2019
Thereafter
Total
34
Debt Covenants
At December 31, 2014, we had financial covenants in the UBS Revolver, the ABSA
Revolver and the Term Loan; however, only the ABSA Revolver had a financial
maintenance covenant that applies to local operations and only when the ABSA
Revolver is drawn upon. The Term Loan and the UBS Revolver are subject to an
intercreditor agreement pursuant to which the lenders’ respective rights and
interests in the security are set forth. We were in compliance with all our financial
covenants as of and for the year ended December 31, 2014.
Interest and debt expense, net
Interest and debt expense in the Consolidated Statements of Operations consisted
of the following:
Year Ended December 31,
2014
2013
Bank borrowings
Amortization of deferred debt issuance
costs and discounts on debt
Other
Capitalized interest
Total interest and debt expense, net
$ 124
$ 122
10
2
(3)
$ 133
9
4
(5)
$ 130
2012
$ 53
10
4
(2)
$ 65
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, 2014 and 2013, we had $44 million and $57 million,
respectively, of deferred debt issuance costs, which are recorded in “Other
long-term assets” in the Consolidated Balance Sheets.”
17. Asset Retirement Obligations
Asset retirement obligations consist primarily of rehabilitation and restoration
costs, landfill capping costs, decommissioning costs, and closure and post-
closure costs. Activity related to asset retirement obligations was as follows:
Year Ended December 31,
2014
2013
Beginning balance
Additions
Accretion expense
Remeasurement/translation
Changes in estimates, including cost and timing of cash flows
Settlements/payments
Ending balance
Current portion included in “Accrued liabilities”
$ 96
5
4
(9)
—
(6)
$ 90
$ 5
Noncurrent portion included in “Asset retirement obligations”
$ 85
$ 113
—
2
(16)
(1)
(2)
$ 96
$ 6
$ 90
We used the following assumptions in determining asset retirement obligations
at December 31, 2014: inflation rates between 2.5%-6.8% per year; credit
adjusted risk-free interest rates between 3.2%-15.4%; and the life of mines
between 2-36 years.
TNX-1331_Fin_3-17_g.indd 34
3/18/15 9:35 AM
Environmental Rehabilitation Trust
In accordance with applicable regulations, we have established an environmental
rehabilitation trust for the prospecting and mining operations in South Africa,
which receives, holds, and invests funds for the rehabilitation or management
of asset retirement obligations. The trustees of the fund are appointed by us,
and consist of sufficiently qualified employees capable of fulfilling their fiduciary
duties. At December 31, 2014 and 2013, the environmental rehabilitation trust
assets were $17 million and $22 million, respectively, which were recorded
in “Other long-term assets” in the Consolidated Balance Sheets.
Purchase Commitments – At December 31, 2014, purchase commitments were
$225 million for 2015, $115 million for 2016, $68 million for 2017, $63 million for
2018, $60 million for 2019, and $306 million thereafter.
Letters of Credit – At December 31, 2014, we had outstanding letters of credit,
bank guarantees, and performance bonds of $47 million, of which $24 million
were letters of credit issued under the UBS Revolver, $20 million were bank
guarantees issued by ABSA and $3 million were performance bonds issued by
Westpac Banking Corporation.
18. Derivative Instruments
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 enter into currency forward contracts to buy and
sell foreign currencies as “economic hedges” for these foreign currency transac-
tions. Our currency forward contracts were not designated for hedge accounting
treatment under ASC 815, Derivatives and Hedging. As such, changes in the
fair value were recorded in “Other income (expense), net” in the Consolidated
Statements of Operations. During 2014 and 2013, we recorded a net loss of
$1 million and a net gain of $2 million, respectively. At December 31, 2014 and
2013, we did not have any forward contracts in place. We did not utilize forward
contracts during 2012.
19. Commitments and Contingencies
Other Matters – From time to time, we may be party to a number of legal and
administrative proceedings involving legal, environmental, and/or other matters
in various courts or agencies. These proceedings, individually and in the aggregate,
may have a material adverse effect on us. These proceedings may be associated
with facilities currently or previously owned, operated or used by us and/or our
predecessors, some of which may include claims for personal injuries, property
damages, cleanup costs, and other environmental matters. Current and former
operations may also involve management of regulated materials that are subject
to various environmental laws and regulations including the Comprehensive
Environmental Response Compensation and Liability Act, the Resource
Conservation and Recovery Act or state equivalents. Similar environmental
laws and regulations and other requirements exist in foreign countries in which
we operate. Currently, we are not party to any pending legal or administrative
proceedings that may have a material adverse effect, either individually or in
the aggregate, on its business, financial condition or results of operations.
20. Shareholders’ Equity
Tronox Limited
The changes in outstanding Class A Shares and Class B Shares for the years
ended December 31, 2014 and 2013 were as follows:
Leases – We lease 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 $26 million, $42 million, and $8 million
during 2014, 2013, and 2012, respectively.
At December 31, 2014, minimum rental commitments under non-cancelable
operating leases were as follows:
Class A Shares:
Balance at January 1, 2013
Shares issued for share-based compensation
Shares issued for warrants exercised
Shares issued for options exercised
Balance at December 31, 2013
Shares issued for share-based compensation
Shares issued for warrants exercised
Shares issued for options exercised
Balance at December 31, 2014
Operating
Class B Shares:
Balance at December 31, 2013
Balance at December 31, 2014
62,103,989
109,790
84,088
51,751
62,349,618
467,823
836,518
314,657
63,968,616
51,154,280
51,154,280
$ 19
19
12
6
3
21
$ 80
2015
2016
2017
2018
2019
Thereafter
Total
TNX-1331_Fin_3-17_g.indd 35
Warrants
We have 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”). At December 31, 2014, holders of the Warrants were entitled
to purchase 5.29 Class A Shares and receive $12.50 in cash at an exercise price
of $58.41 for each Series A Warrant and $64.46 for each Series B Warrant. The
Warrants have a seven-year term from the date initially issued and will expire on
35
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
February 14, 2018. A holder may exercise the Warrants by paying the applicable
exercise price in cash or exercising on a cashless basis. The Warrants are freely
transferable by the holder. At December 31, 2014 and 2013, there were 240,816
and 357,300 Series A Warrants outstanding, respectively, and 324,383 and
465,136 Series B Warrants outstanding, respectively.
Dividends Declared
During 2014 and 2013, we declared and paid quarterly dividends to holders of
our Class A Shares and Class B Shares as follows:
Dividend per share
Total dividend
Record date
(close of business)
Dividend per share
Total dividend
Record date
(close of business)
Q1 2014
Q2 2014
Q3 2014
Q4 2014
$ 0.25
$ 29
$ 0.25
$ 29
$ 0.25
$ 29
$ 0.25
$ 30
March 10
May 19
August 18 November 17
Q1 2013
Q2 2013
Q3 2013
Q4 2013
$ 0.25
$ 29
$ 0.25
$ 28
$ 0.25
$ 29
$ 0.25
$ 29
March 6
May 20
August 19 November 18
Accumulated Other Comprehensive Loss
The tables below present changes in accumulated other comprehensive loss by
component for the years ended December 31, 2014, 2013 and 2012.
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.
21. Noncontrolling Interest
Exxaro has a 26% ownership interest in each of our Tronox KZN Sands (Pty) Ltd.
and Tronox Mineral Sands (Pty) Ltd. subsidiaries in order to comply with the
ownership requirements of the BEE legislation in South Africa. Exxaro is entitled to
exchange this interest for approximately 3.2% in additional Class B Shares under
certain circumstances. Exxaro also has a 26% ownership interest in certain of
our other non-operating subsidiaries. We account for such ownership interest as
“Noncontrolling interest” in our consolidated financial statements.
Noncontrolling interest activity was 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
Net income attributable to noncontrolling interest
Effect of exchange rate changes
$ —
233
(1)
1
233
36
(70)
199
10
(31)
$ 178
Cumulative
Translation
Adjustment
Pension
Liability
Adjustment
Total
Balance at December 31, 2014
Balance, January 1, 2012
Other comprehensive loss
Amounts reclassified from
accumulated other comprehensive loss
Balance, December 31, 2012
Other comprehensive loss
Amounts reclassified from accumulated
other comprehensive loss
Balance, December 31, 2013
Other comprehensive income
Amounts reclassified from accumulated
other comprehensive loss
$
(6)
10
—
$
4
(195)
(24)
$ (215)
(99)
$ (51)
(10)
(38)
$ (99)
28
2
$ (69)
(46)
$ (57)
—
(38)
$ (95)
(167)
(22)
$ (284)
(145)
35
(2)
33
Balance, December 31, 2014
$ (279)
$ (117)
$ (396)
Share Split
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 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 correspond-
ing decrease to “Retained earnings” in the Consolidated Balance Sheets.
Share Repurchases
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
22. Share-based Compensation
Share-based compensation expense, which is recorded in both “Cost of goods
sold” and “Selling, general and administrative expenses” in the Consolidated
Statements of Operations, consisted of the following:
Year Ended December 31,
Restricted shares and restricted share units
Options
T-Bucks Employee Participation Plan
Total compensation expense
2014
$ 13
7
2
$ 22
2013
$ 10
5
2
$ 17
2012
$ 29
2
1
$ 32
Tronox Limited Management Equity Incentive Plan
On June 15, 2012, we adopted the Tronox Limited Management Equity Incentive
Plan (the “MEIP”), which permits the grant of awards that are comprised of
incentive options, nonqualified options, share appreciation rights, restricted
shares, restricted share units, performance awards, and other share-based
awards, cash payments, and other forms as the compensation committee of
the Board in its discretion deems appropriate, including any combination
of the above. Subject to further adjustment, the maximum number of shares
which may be the subject of awards (inclusive of incentive options) is
12,781,225 Class A Shares.
36
TNX-1331_Fin_3-17_g.indd 36
3/18/15 9:35 AM
Restricted Shares
During 2014, we granted restricted shares which vest ratably over a three-year
period. These awards are classified as equity awards, and are accounted for using
the fair value established at the grant date.
The following table presents a summary of activity for the year ended December
31, 2014:
Outstanding, January 1, 2014
Granted
Vested
Forfeited
Outstanding, December 31, 2014
Expected to vest, December 31, 2014
Number of
Shares
Weighted Average
Grant Date
Fair Value
1,148,795
38,766
(459,985)
(92,281)
635,295
633,939
$ 20.62
22.17
18.17
18.41
$ 22.82
$ 22.83
At December 31, 2014, there was $5 million of unrecognized compensation
expense related to nonvested restricted shares, adjusted for estimated forfeitures,
which is expected to be recognized over a weighted-average period of 1 year.
The weighted-average grant-date fair value of restricted shares granted during
the years ended December 31, 2014, 2013 and 2012 was $22.17 per share,
$21.18 per share and $25.18 per share, respectively. The total fair value of
restricted shares that vested during the years ended December 31, 2014, 2013
and 2012 was $8 million, $2 million and $1 million, respectively.
Restricted Share Units (“RSUs”)
During 2014 and 2013, we granted RSUs which have time and/or performance
conditions. Both the time-based awards and the performance-based awards
are classified as equity awards. The time-based awards vest ratably over a
three-year period, and are valued at the weighted average grant date fair value.
The performance-based awards cliff vest at the end of the three years. Included
in the performance-based awards are RSUs for which vesting is determined by a
Total Stockholder Return (“TSR”) calculation over the applicable measurement
period. The TSR metric is considered a market condition for which we use a Monte
Carlo simulation to determine the grant date fair value.
The following table presents a summary of activity for the year ended December
31, 2014:
Outstanding, January 1, 2014
Granted
Vested
Forfeited
Outstanding at December 31, 2014
Expected to vest, December 31, 2014
Number of
Shares
Weighted Average
Grant Date
Fair Value
303,324
765,366
(121,941)
(70,973)
875,776
860,814
21.08
22.37
20.79
21.97
$ 22.17
$ 22.17
At December 31, 2014, there was $12 million of unrecognized compensation
expense related to nonvested RSUs, adjusted for estimated forfeitures, which
is expected to be recognized over a weighted-average period of 2 years. The
weighted-average grant-date fair value of restricted share units granted during
the years ended December 31, 2014, 2013 and 2012 was $22.37 per share,
$21.06 per share and $21.10 per share, respectively. The total fair value of RSUs
that vested during the years ended December 31, 2014 and 2013 was $3 million
and less than $1 million, respectively. There were no RSUs that vested during the
year ended December 31, 2012.
Options
During 2014 and 2013, we granted options 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 year ended December 31, 2014:
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (years)
Intrinsic
Value
Number of
Options
8.97
$ 7
2,094,771
915,988
(314,657)
(135,227)
—
$ 20.63
22.02
20.63
20.52
—
2,560,875
$ 21.14
7.88
1,763,957
$ 20.92
8.56
770,379
$ 21.63
6.30
$ 8
$ 6
$ 3
Outstanding,
January 1, 2014
Issued
Exercised
Forfeited
Expired
Outstanding,
December 31, 2014
Expected to vest,
December 31, 2014
Exercisable,
December 31, 2014
The aggregate intrinsic values in the table represent the total pre-tax intrinsic
value (the difference between our share price at the indicated dates and the
options’ exercise price, multiplied by the number of in-the-money options) that
would have been received by the option holders had all option holders exercised
their in-the-money options at the end of the year. The amount will change based
on the fair market value of our stock. Total intrinsic value of options exercised
during 2014 and 2013 was $2 million and less than $1 million, respectively. There
were no options exercised during the year ended December 31, 2012. We issue new
shares upon the exercise of options. During 2014, we received $6 million in cash
for the exercise of stock options.
At December 31, 2014, unrecognized compensation expense related to options,
adjusted for estimated forfeitures, was $8 million, which is expected to be
recognized over a weighted-average period of 2 years.
During 2014 and 2013, we issued 915,988 and 1,590,438 options, respectively,
with a weighted average grant date fair value of $8.19 and $6.33, respectively.
TNX-1331_Fin_3-17_g.indd 37
37
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
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 on the grant date were as follows:
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.
Number of options granted
Fair market value and exercise price
Risk-free interest rate
Expected dividend yield
Expected volatility
Maturity (years)
Expected term (years)
Per-unit fair value of options granted
February 10,
2014
June 19,
2014
August 15,
2014
910,375
$ 21.98
1.88%
4.55%
58%
10
6
8.17
$
1,155
$ 27.25
2.07%
3.67%
57%
10
6
$ 10.80
4,458
$ 29.68
1.86%
3.37%
57%
10
6
$ 12.00
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 a
maturity period consistent with the expected life assumption. The expected
dividend yield is based on an annual dividend of $1.00 per share. The expected
volatility assumption is based on historical price movements of our peer group.
The expected term is based on the simplified method, which permits use of the
midpoint between the average vesting and full term.
T-Bucks Employee Participation Plan (“T-Bucks EPP”)
During 2012, we established the T-Bucks EPP for the benefit of certain qualifying
employees of our South African subsidiaries. We funded the T-Bucks Trust (the
“Trust”) with R124 million (approximately $15 million), which was used to acquire
Class A Shares. Additional contributions may be made in the future at the
discretion of the Board. The T-Bucks EPP is classified as an equity-settled
shared-based payment plan, whereby participants were awarded share units in
the Trust, which entitles them to receive Class A Shares upon completion of the
vesting period on May 31, 2017. Participants are entitled to receive dividends on
the shares during the vesting period. Forfeited shares are retained by the Trust,
and are allocated to future participants. Compensation costs are recognized
over the vesting period using the straight-line method. During 2012, the Trust
purchased 548,234 Class A Shares at $25.79 per share, which was the fair value
on the date of purchase. The balance at both December 31, 2014 and 2013 was
548,234 shares.
23. Pension and Other Postretirement Healthcare Benefits
We sponsor a noncontributory defined benefit retirement plan (qualified) in the
United States, a contributory defined benefit retirement plan in The Netherlands,
a U.S. contributory postretirement healthcare plan, and a South Africa postretire-
ment healthcare plan.
U.S. Plans
Qualified Retirement Plan – 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
Postretirement 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. During the fourth quarter of 2014, our benefits
committee approved changes to this plan which includes eliminating the pre-65
retiree medical programs effective January 1, 2015. Participants who have retired
prior to January 1, 2015 will receive a one-time subsidy aggregating to less than
$1 million towards medical cost through a health reimbursement arrangement
(“HRA”) that we will be establishing for them. Benefits under this plan for
participants who have not retired by January 1, 2015 have been eliminated. As a
result of this action, we recorded a curtailment gain of $6 million, which was
included in “Other income (expense), net” in the Consolidated Statements of
Operations, and reduced the projected benefit obligation by $16 million.
Additionally, this action resulted in a settlement gain of $3 million, which was
recorded in “Accumulated other comprehensive income” in the Consolidated
Balance Sheets, and which will be recognized when the settlement of the one-time
subsidy occurs, which is expected in 2015.
Foreign Plans
Netherlands Plan – 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. During
the fourth quarter of 2014, in response to the tax and pension legislation changes
in The Netherlands, our benefit committee approved changes to The Netherlands
plan which includes moving the plan from a defined benefit plan to a multi-
employer plan to be administered by the industrywide Pension Fund for the
Graphical Industry (“PGB”), effective January 1, 2015. This action will end future
benefit accrual for participants under the current plan effective January 1, 2015,
resulting in a curtailment gain of $3 million which was recognized in “Other
income (expense), net” in the Consolidated Statements of Operations. Such
amounts had previously been recognized as unamortized prior service costs in
“Accumulated other comprehensive income” in the Consolidated Balance Sheets.
The changes also resulted in a reduction of the projected benefit obligation by
$27 million, which was recognized in “Accumulated other comprehensive income”
in the Consolidated Balance Sheets.
South Africa Postretirement Healthcare Plan – 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
38
TNX-1331_Fin_3-17_g.indd 38
3/18/15 9:35 AM
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.
Benefit Obligations and Funded Status – The following provides a reconciliation
of beginning and ending benefit obligations, beginning and ending plan assets,
funded status, and balance sheet classification of our pension and postretirement
healthcare plans as of and for the years ended December 31, 2014 and 2013.
The benefit obligations and plan assets associated with our principal benefit
plans are measured on December 31.
Year Ended December
2014
2013
2014
2013
Retirement Plans
Postretirement
Healthcare Plans
Change in benefit obligations:
Benefit obligation,
beginning of year
Service cost
Interest cost
Net actuarial (gains) losses
Foreign currency
rate changes
Contributions by
plan participants
Curtailment
Settlement
Plan amendments
Benefits paid
Administrative expenses
Benefit obligation,
end of year
Change in plan assets:
Fair value of plan assets,
beginning of year
Actual return on
plan assets
Employer contributions(1)
Participant contributions
Foreign currency r
ate changes
Benefits paid(1)
Administrative expenses
Fair value of plan assets,
end of year
Net over (under) funded
status of plans
Classification of amounts recognized
in the Consolidated Balance Sheets:
Accrued liabilities
Pension and postretirement
healthcare benefits
Total liabilities
Accumulated other
comprehensive (income) loss
Total
$ 524
4
21
113
$ 557
5
20
(31)
$ 23
1
1
1
$ 19
1
1
4
(19)
1
(27)
—
—
(33)
(3)
6
1
—
—
(4)
(27)
(3)
(1)
(1)
—
(13)
(3)
—
(1)
—
—
—
—
—
(1)
—
$ 581
$ 524
$ 8
$ 23
$ 398
$ 398
53
17
1
(16)
(33)
(3)
19
5
1
5
(27)
(3)
$ —
—
1
—
—
(1)
—
$ —
—
1
—
—
(1)
—
$ 417
$ 398
$ —
$ —
$ (164)
$ (126)
$ (8)
$ (23)
$ —
$ —
$ —
(164)
(164)
117
$ (47)
(126)
(126)
60
(8)
(8)
(2)
$ (1)
(22)
(23)
9
$ (66)
$ (10)
$ (14)
At December 31, 2014, our U.S. qualified retirement plan was in an underfunded
status of $149 million. As a result, we have a projected minimum funding
requirement of $15 million for 2014, which will be payable in 2015.
December 31, 2014
December 31, 2013
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
$ 429
(429)
280
$ (149)
$ 152
(152)
137
$ (15)
$ 378
(378)
272
$ (106)
$ 127
(146)
126
$ (20)
Expected Benefit Payments – The following table shows the expected cash
benefit payments for the next five years and in the aggregate for the years 2020
through 2024:
2015
2016
2017
2018
2019
2020-
2024
Retirement Plans(1)
Postretirement Healthcare Plan
$ 32
$ —
$ 32
$ —
$ 31
$ —
$ 30 $ 31 $ 155
$ — $ — $ 2
(1) Includes benefit payments expected to be paid from the U.S. qualified retirement plan of $30
million in 2015, $29 million in 2016, $28 million in 2017, $27 million in 2018 $27 million in
2019, and $133 million in the aggregate for the period 2020 through 2024.
Retirement and Postretirement Healthcare Expense – 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, 2014, 2013, and 2012:
Retirement Plans
Postretirement
Healthcare Plans
Year Ended December 31,
2014
2013
2012
2014
2013
2012
Net periodic cost:
Service cost
Interest cost
Expected return on plan assets
Net amortization of actuarial loss
Curtailment gains
$ 4
21
(23)
1
(3)
$ 5
20
(20)
2
—
$ 3
22
(21)
—
—
Total net periodic cost (income)
$ —
$ 7
$ 4
$ 1
1
—
1
(6)
$ (3)
$ 1
1
—
—
—
$ 2
$ 1
1
—
—
—
$ 2
Pretax amounts that are expected to be reclassified from “Accumulated other
comprehensive income” in the Consolidated Balance Sheets to retirement expense
during 2015 related to unrecognized actuarial losses are $3 million for the U.S.
retirement plans and unrecognized settlement gain of $3 million for postretire-
ment healthcare plans.
(1) We expect 2015 contributions to be $15 million for the U.S. qualified retirement plan.
TNX-1331_Fin_3-17_g.indd 39
39
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
Assumptions – The following weighted average assumptions were used to
determine net periodic cost:
2014
2013
2012
United
States Netherlands
United
States Netherlands
United
States Netherlands
Discount rate(1)
Expected return on
plan assets
Rate of compensation
increases
4.50%
3.50%
3.75%
3.50%
4.50%
5.25%
6.50%
4.75%
5.30%
4.75%
5.75%
5.25%
—
3.25%
—
3.50%
—
3.50%
The following weighted average assumptions were used in estimating the
actuarial present value of the plans’ benefit obligations:
2014
2013
2012
United
States Netherlands
United
States Netherlands
United
States Netherlands
Discount rate
Rate of compensation
increases
3.75%
2.25%
4.50%
3.50%
3.75%
3.50%
—
—
—
3.25%
—
3.50%
During 2014, the Society of Actuaries issued an updated mortality table and
improvement scale that suggests significant mortality improvement over the prior
table. We concluded that the updated table represents our best estimate of
mortality. This change in assumption resulted in an increase in our projected
benefit obligation of $36 million.
The following weighted-average assumptions were used in determining the
actuarial present value of the South African Postretirement Healthcare Plan:
Discount rate
9.16%
10.14%
9.45%
2014
2013
2012
Expected Return on Plan Assets – 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.
Discount Rate – The discount rates selected for estimation of the actuarial
present value of the benefit obligations for both U.S. plans were 3.75% and
4.50% as of December 31, 2014 and 2013, respectively. The 2014 and 2013
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
developed from a universe of Aa-graded U.S. currency corporate bonds (obtained
from Bloomberg) with at least $50 million outstanding. Bonds with features
that imply unreliable pricing, a less than certain cash flow, or other indicators of
optionality are filtered out of the universe. The remaining universe is categorized
into maturity groups, and within each of the maturity groups yields are ranked
into percentiles.
Plan Assets – Asset categories and associated asset allocations for our funded
retirement plans at December 31, 2014 and 2013:
December 31, 2014
December 31, 2013
Actual
Target
Actual
Target
United States:
Equity securities
Debt securities
Cash and cash equivalents
37%
62
1
38%
62
—
38%
61
1
38%
62
—
Total
100%
100%
100%
100%
Netherlands:
Equity securities
Debt securities
Cash and cash equivalents
35%
63
2
35%
62
3
36%
55
9
35%
62
3
Total
100%
100%
100%
100%
The U.S. plan is administered by a board-appointed committee that has fiduciary
responsibility for the plan’s management. The committee maintains an invest-
ment 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
transactions, (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.
40
TNX-1331_Fin_3-17_g.indd 40
3/18/15 9:35 AM
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.
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 fair values of pension investments as of December 31, 2014 are
summarized below:
U.S. Pension
Fair Value Measurement at December 31, 2014, Using:
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Significant
Observable Unobservable
Inputs
(Level 3)
Inputs
(Level 2)
Total
Asset category:
Commingled Equity Funds
Debt securities
Commingled Fixed
Income Funds
Cash & cash equivalents
Commingled Cash
Equivalents Fund
Total at fair value
$ —
$ 104(1)
$ —
$ 104
—
172(2)
—
172
—
$ —
4(3)
$ 280
—
$ —
4
$ 280
Netherlands Pension
Fair Value Measurement at December 31, 2014, Using:
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Significant
Observable Unobservable
Inputs
(Level 3)
Inputs
(Level 2)
Asset category:
Equity securities —
Non-U.S. Pooled Funds
Debt securities —
Non-U.S. Pooled Funds
Real Estate Pooled Funds
Total at fair value
$ —
—
—
$ —
$ 36(1)
86(2)
15(3)
$ 137
$ —
—
—
$ —
Total
$ 36
86
15
$ 137
(1) For equity securities in the form of fund units that are redeemable at the measurement date,
the unit value is deemed a Level 2 input.
(2) For pooled fund debt securities, the fair value is based on observable inputs, but do not solely
rely on quoted market prices, and therefore are deemed Level 2 inputs.
(3) For real estate pooled funds, the fair value is based on observable inputs, but do not solely
rely on quoted market prices, and therefore are deemed Level 2 inputs.
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)
Inputs
(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
$ —
$ 104(1)
$ —
—
10(4)
—
3(5)
1(5)
10(5)
—
—
—
—
141(2)
—
—
$ 10
3(3)
$ 262
—
$ —
Total
$ 104
3
11
10
141
3
$ 272
(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.
(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.
(4) For government debt securities that are traded on active exchanges, fair value is based on
observable quoted prices, which are Level 1 inputs.
(2) For commingled fixed income funds, fair value is based on observable inputs of comparable
market transactions, which are Level 2 inputs.
(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.
(3) For commingled cash equivalents funds, fair value is based on observable inputs of comparable
market transactions, which are Level 2 inputs.
TNX-1331_Fin_3-17_g.indd 41
41
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
with the investment options elected by plan participants. Compensation expense
associated with our matching contribution to the SRP was $1 million, less than
$1 million, and $1 million during 2014, 2013, and 2012, respectively, which was
included in “Selling, general and administrative expenses” in the Consolidated
Statements of Operations.
24. Related Party Transactions
Prior to the Transaction Date, Tronox Incorporated conducted transactions
with Exxaro Australia Sands Pty Ltd, Tronox Incorporated’s 50% partner in the
Tiwest Joint Venture. Tronox Incorporated purchased, at open market prices,
raw materials used in its production of TiO2, as well as Exxaro Australia Sands
Pty Ltd’s share of TiO2 produced by the Tiwest Joint Venture. Tronox Incorporated
also provided administrative services and product research and development
activities, which were reimbursed by Exxaro. During 2012, Tronox Incorporated
made payments of $173 million and received payments of $9 million. Subsequent
to the Transaction Date, such transactions are considered intercompany
transactions and are eliminated in consolidation.
We have service level agreements with Exxaro for services such as tax preparation
and research and development, both of which expire during 2015, as well as
information technology services, which expired during 2014. Such service level
agreements amounted to $3 million, $5 million and $7 million of expense during
2014, 2013 and 2012, respectively. Additionally, we have a professional service
agreement with Exxaro related to the Fairbreeze construction project. During
2014 and 2013, we paid $3 million and $3 million, respectively, to Exxaro, which
was capitalized in “Property, plant and equipment, net” on our Consolidated
Balance Sheets.
25. Segment Information
The reportable segments presented below represent our operating segments for
which separate financial information is available and which is utilized on a
regular basis by our chief operating decision maker to assess performance and to
allocate resources. In identifying our reportable segments, we also considered
the nature of services provided by our operating segments. We have two reportable
segments, Mineral Sands and Pigment. Our Mineral Sands segment includes
the exploration, mining, and beneficiation of mineral sands deposits, as well as
heavy mineral production, and produces titanium feedstock, including chloride
slag, slag fines, and rutile, as well as pig iron and zircon. Our Pigment segment
primarily produces and markets TiO2. Corporate and Other is comprised of our
electrolytic operations, all of which are located in the United States, as well as
our corporate activities.
Netherlands 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)
Inputs
(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
(1) For equity securities in the form of fund units that are redeemable at the measurement date,
the unit value is deemed as a Level 2 input.
(2) For pooled fund debt securities, the fair value is based on observable inputs, but do not solely
rely on quoted market prices, and therefore are deemed Level 2 inputs.
Defined Contribution Plans
U.S. Savings Investment Plan
In 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 2014 and 2013, our matching contribution was 100% of the first 6%
of employee contributions. During 2012, our matching contribution was 100%
of the first 3% of employees’ contribution and 50% of the next 3%. The Board
has approved an additional company discretionary contribution of 6% of pay for
2014 and 2013. During 2012, the discretionary contribution was 7.5% of pay.
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 $4 million,
$3 million, and $2 million during 2014, 2013, and 2012, respectively, which was
included in “Selling, general and administrative expenses” in the Consolidated
Statements of Operations. Compensation expense associated with our discretion-
ary contribution was $4 million, $4 million, and $4 million during 2014, 2013,
and 2012, respectively, which was included in “Selling, general and administra-
tive expenses” in the Consolidated Statements of Operations.
U.S. Savings Restoration Plan
In 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
42
TNX-1331_Fin_3-17_g.indd 42
3/18/15 9:35 AM
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, interest
expense, other income (expense), and income tax expense or benefit. Sales
between segments are generally priced at market. Any resulting profit remaining
in the inventory of the acquiring segment is eliminated in consolidation.
Capital expenditures by segment were as follows:
Year Ended December 31,
2014
2013
2012
Mineral Sands segment
Pigment segment
Corporate and Other
Total
$ 127
48
12
$ 187
$ 102
48
15
$ 165
$ 96
39
31
$ 166
Net sales and income from operations by segment were as follows:
Total assets by segment were as follows:
Year Ended December 31,
2014
2013
2012
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, net
Net gain (loss) on liquidation of
non-operating subsidiaries
Loss on extinguishment of debt
Gain on bargain purchase
Other income (expense), net
$ 794
1,179
113
(349)
$ 1,737
$
1
49
(83)
33
—
(133)
(35)
(8)
—
27
$ 1,103
1,169
128
(478)
$ 1,922
$ 238
(179)
(70)
14
3
(130)
24
(4)
—
46
$ 760
1,246
128
(302)
$ 1,832
$ 156
57
(139)
(49)
25
(65)
—
—
1,055
(7)
Income (loss) before income taxes
$ (149)
$
(61)
$ 1,008
(1) Net sales to external customers, by geographic region, based on country of production,
were as follows:
December 31,
Mineral Sands segment
Pigment segment
Corporate and Other
Eliminations
Total
2014
2013
$ 2,624
1,184
1,268
(11)
$ 5,065
$ 2,957
1,559
1,227
(44)
$ 5,699
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
2014
2013
$ 211
$ 203
941
1,083
50
$ 2,285
1,008
1,208
55
$ 2,474
Year Ended December 31,
2014
2013
2012
26. Acquisition of the Mineral Sands Business
U.S. operations
International operations:
Australia
The Netherlands
South Africa
Total
$ 749
$ 793
$ 843
426
233
329
$ 1,737
424
224
481
443
248
298
$ 1,922
$ 1,832
During 2014, our ten largest pigment customers and our ten largest third-party
mineral sands customers represented 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:
Year Ended December 31,
2014
2013
2012
Mineral Sands segment
Pigment segment
Corporate and Other
Total
$ 204
78
13
$ 295
$ 234
83
16
$ 333
$ 125
71
15
$ 211
On September 25, 2011, Tronox Incorporated entered into the Transaction
Agreement with Exxaro to acquire 74% of Exxaro’s South African mineral sands
operations, including its Namakwa and KZN Sands mines, separation and
slag furnaces, along with its 50% share of the Tiwest Joint Venture in Western
Australia (together the “mineral sands business”). On June 15, 2012, 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. We accounted for the Transaction under
ASC 805, Business Combinations, 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 measurement period ended in June 2013. The bargain purchase gain was not
taxable for income tax purposes. See Note 7.
TNX-1331_Fin_3-17_g.indd 43
43
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
Valuation
27. Guarantor Condensed Consolidating Financial Statements
Consideration:
Number of Class B Shares(1)
Fair value of Class B Shares on the Transaction Date
Fair value of equity issued(2)
Cash paid
Noncontrolling interest(3)
9,950,856
137.70
1,370
1
233
$
1,604
Fair Value of Assets Acquired and Liabilities Assumed:
Current Assets:
Cash and cash equivalents
Accounts receivable, net of allowance for doubtful accounts
Inventories
Prepaid and other assets
$
115
196
553
20
884
880
1,457
12
30
19
$
3,282
110
25
85
75
14
2
311
19
209
57
27
623
$
$
2,659
1,055
The obligations of Tronox Finance LLC, our wholly owned subsidiary, under the
Senior Notes are fully and unconditionally (subject to certain customary
circumstances providing for the release of a guarantor subsidiary) guaranteed on
a senior unsecured basis, jointly and severally, by Tronox Limited (referred to for
purposes of this note only as the “Parent Company”) and each of its current and
future restricted subsidiaries, other than excluded subsidiaries, that guarantee
any indebtedness of the Parent Company or its restricted subsidiaries (collectively,
the “Guarantor Subsidiaries”). The Subsidiary Issuer, Tronox Finance LLC, and
each of the Guarantor Subsidiaries are 100% owned, directly or indirectly, by the
Parent Company. Our subsidiaries that do not guarantee the Senior Notes are
referred to as the “Non-Guarantor Subsidiaries.” The guarantor condensed
consolidating financial statements presented below presents the statements of
operations, statements of comprehensive income (loss), balance sheets and
statements of cash flow data for: (i) the Parent Company, the Guarantor
Subsidiaries, the Non-Guarantor Subsidiaries, and the subsidiary issuer, on a
consolidated basis (which is derived from Tronox historical reported financial
information); (ii) the Parent Company, alone (accounting for our Guarantor
Subsidiaries, the Non-Guarantor Subsidiaries, and Tronox Finance LLC 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;
(iv) the Non-Guarantor Subsidiaries alone; and (v) the subsidiary issuer, Tronox
Finance LLC.
The guarantor condensed consolidating financial statements are presented on a
legal entity basis, not on a business segment basis. The indenture governing the
Senior Notes provides for a Guarantor Subsidiary to be automatically and
unconditionally released and discharged from its guarantee obligations in certain
customary circumstances, including:
• Sale or other disposition of such Guarantor Subsidiary’s capital stock or all or
substantially all of its assets and all of the indenture obligations (other than
contingent obligations) of such Subsidiary Guarantor in respect of all other
indebtedness of the Subsidiary Guarantors terminate upon the consummation
of such transaction;
• Designation of such Guarantor Subsidiary as an “unrestricted subsidiary”
under the indenture;
Total Current Assets
Noncurrent 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 Assets
Current Liabilities:
Accounts payable
Accrued liabilities
Unfavorable contracts(6)
Short-term debt
Deferred tax liabilities
Income taxes payable
Total Current Liabilities
Noncurrent Liabilities:
Long-term debt
Long-term deferred tax liability
Asset retirement obligations
Other long-term liabilities
Total Liabilities
Net Assets
Gain on Bargain Purchase
(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 20.
(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 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.
44
TNX-1331_Fin_3-17_g.indd 44
3/18/15 9:35 AM
• In the case of certain Guarantor Subsidiaries that incur or guarantee
indebtedness under certain credit facilities, upon the release or discharge of
such Guarantor Subsidiary’s guarantee or incurrence of indebtedness that
resulted in the creation of such guarantee, except a discharge or release as
a result of payment under such guarantee;
• Legal defeasance, covenant defeasance, or satisfaction and discharge of
the indenture obligations;
• Payment in full of the aggregate principal amount of all outstanding Senior
Notes and all other obligations under the indenture; or
• Release or discharge of the Guarantor Subsidiary’s guarantee of certain
We revised each of our guarantor condensed consolidated financial statements as
of December 31, 2014 and 2013 and for the two years then ended, as well as
the 2012 condensed consolidating statement of cash flows. Our revision relates to
two subsidiaries which were incorrectly classified as “Non-guarantor subsidiaries”
and have been reclassified to “Guarantor Subsidiaries” in the revised condensed
consolidated financial statements. The revision, which we determined is not
material to our prior year condensed financial statements or consolidated financial
statements based on quantitative and qualitative considerations, did not affect
our consolidated financial position, consolidated results of operations or
consolidated cash flows.
other indebtedness.
Revised Guarantor Condensed Consolidating Statements of Operations
Year Ended December 31, 2014
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Net sales
Cost of goods sold
$ 1,737
(1,530)
$ (211)
238
$ —
—
$ —
—
$ 1,224
(1,113)
$ 724
(655)
Gross profit
Selling, general and administrative expenses
Restructuring expense
Income (loss) from operations
Interest and debt expense, net
Intercompany interest income (expense)
Net loss on liquidation of non-operating subsidiaries
Loss on extinguishment of debt
Other income (expense)
Equity in earnings of subsidiary
Income (loss) before income taxes
Income tax benefit (provision)
Net income (loss)
Net income attributable to noncontrolling interest
207
(192)
(15)
—
(133)
—
(35)
(8)
27
—
(149)
(268)
(417)
10
27
3
—
30
—
—
—
—
53
759
842
—
842
10
—
—
—
—
(59)
—
—
—
—
—
(59)
18
(41)
—
—
(13)
—
(13)
—
546
—
—
1
(706)
(172)
(255)
(427)
—
111
(140)
(6)
(35)
(4)
(578)
(33)
(2)
(15)
(53)
(720)
20
(700)
—
69
(42)
(9)
18
(70)
32
(2)
(6)
(12)
—
(40)
(51)
(91)
—
Net income (loss) attributable to Tronox Limited
$ (427)
$ 832
$ (41)
$ (427)
$ (700)
$ (91)
TNX-1331_Fin_3-17_g.indd 45
45
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
As Previously Filed Guarantor Condensed Consolidating Statements of Operations
Year Ended December 31, 2014
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Net sales
Cost of goods sold
$ 1,737
(1,530)
$ (222)
237
$ —
—
$ —
—
$ 1,235
(1,112)
$ 724
(655)
Gross profit
Selling, general and administrative expenses
Restructuring expense
Income (loss) from operations
Interest and debt expense, net
Intercompany interest income (expense)
Net loss on liquidation of non-operating subsidiaries
Loss on extinguishment of debt
Other income (expense)
Equity in earnings of subsidiary
Income (loss) before income taxes
Income tax benefit (provision)
Net income (loss)
Net income attributable to noncontrolling interest
207
(192)
(15)
—
(133)
—
(35)
(8)
27
—
(149)
(268)
(417)
10
15
15
—
30
—
—
—
—
53
753
836
—
836
10
—
—
—
—
(59)
—
—
—
—
—
(59)
18
(41)
—
—
(13)
—
(13)
—
546
—
—
1
(706)
(172)
(255)
(427)
—
123
(140)
(6)
(23)
(4)
(578)
(33)
(2)
(36)
(47)
(723)
22
(701)
—
69
(54)
(9)
6
(70)
32
(2)
(6)
9
—
(31)
(53)
(84)
—
Net income (loss) attributable to Tronox Limited
$ (427)
$ 826
$ (41)
$ (427)
$
(701)
$ (84)
Revised Guarantor Condensed Consolidating Statements of Comprehensive Income (Loss)
Year Ended December 31, 2014
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Net income (loss)
Other comprehensive income (loss):
Foreign currency translation adjustments
Pension and postretirement plans
Other comprehensive income (loss)
Total comprehensive income (loss)
Comprehensive income (loss) attributable to
noncontrolling interest:
Net income
Foreign currency translation adjustments
Comprehensive income (loss) attributable to
noncontrolling interest
Comprehensive income (loss) attributable to
Tronox Limited
$ (417)
$ 842
$ (41)
$ (427)
$ (700)
$ (91)
(95)
(48)
(143)
(560)
10
(31)
(21)
217
50
267
1,109
10
—
10
—
—
—
(41)
—
—
—
(95)
(48)
(143)
(570)
—
(31)
(31)
(85)
(47)
(132)
(832)
—
—
—
(132)
(3)
(135)
(226)
—
—
—
$ (539)
$ 1,099
$ (41)
$ (539)
$ (832)
$ (226)
46
TNX-1331_Fin_3-17_g.indd 46
3/18/15 9:35 AM
As Previously Filed Guarantor Condensed Consolidating Statements of Comprehensive Income (Loss)
Year Ended December 31, 2014
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Net income (loss)
Other comprehensive income (loss):
Foreign currency translation adjustments
Pension and postretirement plans
Other comprehensive income (loss)
Total comprehensive income (loss)
Comprehensive income (loss) attributable to
noncontrolling interest:
Net income
Foreign currency translation adjustments
Comprehensive income (loss) attributable to
noncontrolling interest
$ (417)
$ 836
$ (41)
$ (427)
$
(701)
$ (84)
(95)
(48)
(143)
(560)
10
(31)
(21)
217
50
267
1,103
10
—
10
$ 1,093
—
—
—
(41)
—
—
—
$ (41)
(95)
(48)
(143)
(570)
—
(31)
(31)
$ (539)
(85)
(47)
(132)
(833)
—
—
—
$
(833)
(132)
(3)
(135)
(219)
—
—
—
$ (219)
Comprehensive income (loss) attributable to Tronox Limited
$ (539)
Revised Guarantor Condensed Consolidating Balance Sheets
As of December 31, 2014
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Assets
Cash and cash equivalents
Inventories, net
Other current assets
Investment in subsidiaries
Property, plant and equipment, net
Mineral leaseholds, net
Intercompany loans receivable
Other long-term assets
Total assets
Liabilities and Equity
Total current liabilities
Long-term debt
Intercompany loans payable
Other long-term liabilities
Total liabilities
Total equity
Total liabilities and equity
$ 1,279
770
332
—
1,227
1,058
—
399
$ 5,065
$ 366
2,375
—
536
3,277
1,788
$ 5,065
$ —
(13)
(2,857)
2,934
—
—
(7,130)
—
$ (7,066)
$ (2,857)
—
(7,130)
—
(9,987)
2,921
$ (7,066)
$ —
—
35
—
—
—
773
23
$ 831
$ 22
898
9
—
929
(98)
$ 831
$ 283
—
973
(3,961)
—
—
5,937
(1)
$ 3,231
$ 846
—
774
1
1,621
1,610
$ 3,231
$ 818
448
907
1,027
696
599
92
331
$ 4,918
$ 2,152
—
6,257
284
8,693
(3,775)
$ 4,918
$ 178
335
1,274
—
531
459
328
46
$ 3,151
$ 203
1,477
90
251
2,021
1,130
$ 3,151
TNX-1331_Fin_3-17_g.indd 47
47
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
As Previously Filed Guarantor Condensed Consolidating Balance Sheets
As of December 31, 2014
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Assets
Cash and cash equivalents
Inventories, net
Other current assets
Investment in subsidiaries
Property, plant and equipment, net
Mineral leaseholds, net
Intercompany loans receivable
Other long-term assets
Total assets
Liabilities and Equity
Total current liabilities
Long-term debt
Intercompany loans payable
Other long-term liabilities
Total liabilities
Total equity
Total liabilities and equity
$ 1,279
770
332
—
1,227
1,058
—
399
$ 5,065
$ 366
2,375
—
536
3,277
1,788
$ 5,065
$ —
(13)
(2,273)
2,921
—
—
(7,149)
—
$ (6,514)
$ (2,272)
—
(7,149)
—
(9,421)
2,907
$ (6,514)
$ —
—
35
—
—
—
773
23
$ 831
$ 22
898
9
—
929
(98)
$ 831
$ 283
—
973
(3,961)
—
—
5,937
(1)
$ 3,231
$ 846
—
774
1
1,621
1,610
$ 3,231
$ 173
448
883
1,040
696
599
111
331
$ 4,281
$ 1,515
—
6,257
284
8,056
(3,775)
$ 4,281
$ 823
335
714
—
531
459
328
46
$ 3,236
$ 255
1,477
109
251
2,092
1,144
$ 3,236
Revised Guarantor Condensed Consolidating Statements of Cash Flows
Year Ended December 31, 2014
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Cash Flows from Operating Activities:
Net income (loss)
Depreciation, depletion and amortization
Other
Cash provided by (used in) operating activities
Cash Flows from Investing Activities:
Capital expenditures
Collections of intercompany debt
Cash used in investing activities
Cash Flows from Financing Activities:
Repayments of debt
Repayments of intercompany debt
Debt issuance costs
Dividends paid
Proceeds from the exercise of warrants and options
Cash provided by (used in) financing activities
$ (417)
295
263
141
(187)
—
(187)
(20)
—
(2)
(116)
6
(132)
Effects of exchange rate changes on cash and cash equivalents
(21)
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
(199)
$ 1,478
$ 1,279
48
$ 842
—
(842)
—
—
(51)
(51)
—
51
—
—
—
51
—
—
$ —
$ —
$ (41)
—
(10)
(51)
—
51
51
—
—
—
—
—
—
—
—
$ —
$ —
$ (427)
—
692
265
—
—
—
—
(51)
—
(116)
6
(161)
—
104
$ 179
$ 283
$ (700)
217
286
(197)
(76)
—
(76)
(3)
—
—
—
—
(3)
—
(276)
$ 1,094
$ 818
$ (91)
78
137
124
(111)
—
(111)
(17)
—
(2)
—
—
(19)
(21)
(27)
$ 205
$ 178
TNX-1331_Fin_3-17_g.indd 48
3/18/15 9:35 AM
As Previously Filed Guarantor Condensed Consolidating Statements of Cash Flows
Year Ended December 31, 2014
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Cash Flows from Operating Activities:
Net income (loss)
Depreciation, depletion and amortization
Other
Cash provided by (used in) operating activities
Cash Flows from Investing Activities:
Capital expenditures
Collections of intercompany debt
Cash used in investing activities
Cash Flows from Financing Activities:
Repayments of debt
Repayments of intercompany debt
Debt issuance costs
Dividends paid
Proceeds from the exercise of warrants and options
Cash provided by (used in) financing activities
Effects of exchange rate changes on cash and
cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
$ (417)
295
263
141
(187)
—
(187)
(20)
—
(2)
(116)
6
(132)
(21)
(199)
$ 1,478
$ 1,279
$ 836
—
(836)
—
—
(51)
(51)
—
51
—
—
—
51
—
—
$ —
$ —
$ (41)
—
(10)
(51)
—
51
51
—
—
—
—
—
—
—
—
$ —
$ —
$ (427)
—
692
265
—
—
—
—
(51)
—
(116)
6
(161)
—
104
$ 179
$ 283
$ (701)
217
362
(122)
(76)
—
(76)
(3)
—
—
—
—
(3)
—
(201)
$ 374
$ 173
$ (84)
78
55
49
(111)
—
(111)
(17)
—
(2)
—
—
(19)
(21)
(102)
$ 925
$ 823
In our Form 10-K filed on February 25, 2015, we revised each of our guarantor condensed consolidating financial statements as of December 31, 2013 and for the two
years then ended regarding the presentation of intercompany activities between the Parent Company, the Guarantor Subsidiaries, the Non-Guarantor Subsidiaries,
and the subsidiary issuer. These revisions, which we determined are not material to our prior year condensed financial statements or consolidated financial statements
based on quantitative and qualitative considerations, did not affect our consolidated financial position, consolidated results of operations or consolidated cash flows.
The revisions were as follows:
• The condensed consolidating financial statements previously issued were not prepared under the equity method of accounting. In accordance with Rule 3-10
of Regulation S-X, we have properly prepared our revised condensed consolidating financial statements under the equity method of accounting.
• In the condensed consolidating financial statements previously issued, Tronox Finance LLC, the subsidiary issuer, was included in the “Parent Company” column.
In the revised condensed consolidating financial statements, we have properly included Tronox Finance LLC in a separate column.
• Two subsidiaries which were incorrectly classified as “Guarantor Subsidiaries” have been reclassified to “Non-guarantor Subsidiaries” in the revised condensed
consolidating financial statements.
• Certain financial statement line items have been expanded and reclassifications were made to enhance transparency.
TNX-1331_Fin_3-17_g.indd 49
49
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
Revised Guarantor Condensed Consolidating Statements of Operations
Year Ended December 31, 2013
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Net sales
Cost of goods sold
$ 1,922
1,732
$ (275)
(282)
$ —
—
$ —
—
$ 1,298
1,242
Gross profit
Selling, general and administrative expenses
Income (loss) from operations
Interest and debt expense, net
Intercompany interest income (expense)
Net gain (loss) on liquidation of non-operating subsidiary
Loss on extinguishment of debt
Other income (expense)
Equity in earnings of subsidiary
Income (loss) before income taxes
Income tax benefit (provision)
Net income (loss)
Income attributable to noncontrolling interest
190
(187)
3
(130)
—
24
(4)
46
—
(61)
(29)
(90)
36
7
4
11
—
—
—
—
1
348
360
—
360
36
—
—
—
(59)
—
—
—
—
—
(59)
18
(41)
—
—
(34)
(34)
—
546
—
—
1
(473)
40
(166)
(126)
—
56
(113)
(57)
(6)
(579)
(23)
(3)
12
125
(531)
150
(381)
—
$ 899
772
127
(44)
83
(65)
33
47
(1)
32
—
129
(31)
98
—
Net income (loss) attributable to Tronox Limited
$ (126)
$ 324
$ (41)
$ (126)
$ (381)
$ 98
As Previously Filed Revised Guarantor Condensed Consolidating Statements of Operations
Year Ended December 31, 2013
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Income (loss) from operations
Interest and debt expense, net
Intercompany interest income (expense)
Net gain (loss) on liquidation of non-operating subsidiary
Loss on extinguishment of debt
Other income (expense)
Equity in earnings of subsidiary
Income (loss) before income taxes
Income tax benefit (provision)
Net income (loss)
Income attributable to noncontrolling interest
$ 1,922
1,732
190
(187)
3
(130)
—
24
(4)
46
—
(61)
(29)
(90)
36
$ (292)
(282)
(10)
21
11
—
—
—
—
1
342
354
—
354
36
$ —
—
$ —
—
$ 1,315
1,242
—
—
—
(59)
—
—
—
—
—
(59)
18
(41)
—
—
(34)
(34)
—
546
—
—
1
(473)
40
(166)
(126)
—
73
(113)
(40)
(6)
(577)
(23)
(3)
(17)
131
(535)
153
(382)
—
$ 899
772
127
(61)
66
(65)
31
47
(1)
61
—
139
(34)
105
—
Net income (loss) attributable to Tronox Limited
$ (126)
$ 318
$ (41)
$ (126)
$ (382)
$ 105
50
TNX-1331_Fin_3-17_g.indd 50
3/18/15 9:35 AM
Guarantor Condensed Consolidating Statements of Operations
Year Ended December 31, 2012
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Income (loss) from operations
Interest and debt expense, net
Intercompany interest income (expense)
Gain on bargain purchase
Other income (expense)
Equity in earnings of subsidiary
Income (loss) before income taxes
Income tax benefit (provision)
Net income (loss)
Loss attributable to noncontrolling interest
$ 1,832
1,568
$ (125)
(76)
$ —
—
$ —
—
$ 1,340
1,057
264
(239)
25
(65)
—
1,055
(7)
—
1,008
125
1,133
(1)
(49)
4
(45)
—
—
—
434
1,849
2,238
—
2,238
(1)
—
—
—
(22)
—
—
—
—
(22)
7
(15)
—
—
(98)
(98)
—
297
1,055
1,379
(1,439)
1,194
(60)
1,134
—
283
(115)
168
(13)
(320)
—
(1,813)
(410)
(2,388)
133
(2,255)
—
$ 617
587
30
(30)
—
(30)
23
—
(7)
—
(14)
45
31
—
Net income (loss) attributable to Tronox Limited
$ 1,134
$ 2,239
$ (15)
$ 1,134
$ (2,255)
$ 31
Revised Guarantor Condensed Consolidating Statements of Comprehensive Income (Loss)
Year Ended December 31, 2013
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Net income (loss)
Other comprehensive income (loss):
Foreign currency translation adjustments
Pension and postretirement plans
Other comprehensive income (loss)
Total comprehensive income (loss)
Comprehensive income (loss) attributable to
noncontrolling interest:
Net income
Foreign currency translation adjustments
Comprehensive income (loss) attributable to
noncontrolling interest
$ (90)
$ 360
$ (41)
$ (126)
$ (381)
$ 98
(289)
30
(259)
(349)
36
(70)
(34)
574
(31)
543
903
36
—
36
$ 867
—
—
—
(41)
—
—
—
$ (41)
(289)
30
(259)
(385)
—
(70)
(70)
$ (315)
(264)
27
(237)
(618)
—
—
—
$ (618)
(310)
4
(306)
(208)
—
—
—
$ (208)
Comprehensive income (loss) attributable to Tronox Limited
$ (315)
TNX-1331_Fin_3-17_g.indd 51
51
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
As Previously Filed Guarantor Condensed Consolidating Statements of Comprehensive Income (Loss)
Year Ended December 31, 2013
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Net income (loss)
Other comprehensive income (loss):
Foreign currency translation adjustments
Pension and postretirement plans
Other comprehensive income (loss)
Total comprehensive income (loss)
Comprehensive income (loss) attributable to
noncontrolling interest:
Net income
Foreign currency translation adjustments
Comprehensive income (loss) attributable to
noncontrolling interest
$ (90)
$ 354
$ (41)
$ (126)
$ (382)
$ 105
(289)
30
(259)
(349)
36
(70)
(34)
574
(31)
543
897
36
—
36
$ 861
—
—
—
(41)
—
—
—
$ (41)
(289)
30
(259)
(385)
—
(70)
(70)
$ (315)
(264)
27
(237)
(619)
—
—
—
$ (619)
(310)
4
(306)
(201)
—
—
—
$ (201)
Comprehensive income (loss) attributable to Tronox Limited
$ (315)
Guarantor Condensed Consolidating Statements of Comprehensive Income (Loss)
Year Ended December 31, 2012
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Net income (loss)
Other comprehensive income (loss):
Foreign currency translation adjustments
Pension and postretirement plans
Other comprehensive income (loss)
Total comprehensive income (loss)
Comprehensive income (loss) attributable to
noncontrolling interest:
Net income
Foreign currency translation adjustments
Comprehensive income (loss) attributable to
noncontrolling interest
$ 1,133
$ 2,238
$ (15)
$ 1,134
$ (2,255)
$ 31
11
(48)
(37)
7
48
55
1,096
2,293
(1)
1
—
(1)
—
(1)
$ 2,294
—
—
—
(15)
—
—
—
$ (15)
11
(48)
(37)
(1)
(47)
(48)
1,097
(2,303)
—
1
1
$ 1,096
—
—
—
$ (2,303)
(6)
(1)
(7)
24
—
—
—
$ 24
Comprehensive income (loss) attributable to Tronox Limited
$ 1,096
52
TNX-1331_Fin_3-17_g.indd 52
3/18/15 9:35 AM
Revised Guarantor Condensed Consolidating Balance Sheets
As of December 31, 2013
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Assets
Cash and cash equivalents
Inventory
Other current assets
Investment in subsidiaries
Property, plant and equipment, net
Mineral leaseholds, net
Intercompany loans receivable
Other long-term assets
Total assets
Liabilities and Equity
Total current liabilities
Long-term debt
Intercompany loans payable
Other long-term liabilities
Total liabilities
Total equity
Total liabilities and equity
$ 1,478
759
416
—
1,258
1,216
—
572
$ 5,699
$ 363
2,395
—
504
3,262
2,437
$ 5,699
$ —
(44)
(2,287)
1,855
—
—
(7,228)
—
$ (7,704)
$ (2,287)
—
(7,228)
—
(9,515)
1,811
$ (7,704)
$ —
—
25
—
—
—
825
12
$ 862
$ 22
897
—
—
919
(57)
$ 862
$ 179
—
556
(3,145)
—
—
6,043
88
$ 3,721
$ 658
—
825
—
1,483
2,238
$ 3,721
$ 1,094
474
788
1,290
710
700
31
364
$ 5,451
$ 1,797
3
6,372
235
8,407
(2,956)
$ 5,451
$ 205
329
1,334
—
548
516
329
108
$ 3,369
$ 173
1,495
31
269
1,968
1,401
$ 3,369
As Previously Filed Guarantor Condensed Consolidating Balance Sheets
As of December 31, 2013
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Assets
Cash and cash equivalents
Inventory
Other current assets
Investment in subsidiaries
Property, plant and equipment, net
Mineral leaseholds, net
Intercompany loans receivable
Other long-term assets
Total assets
Liabilities and Equity
Total current liabilities
Long-term debt
Intercompany loans payable
Other long-term liabilities
Total liabilities
Total equity
Total liabilities and equity
$ 1,478
759
416
—
1,258
1,216
—
572
$ 5,699
$ 363
2,395
—
504
3,262
2,437
$ 5,699
$ —
(44)
(1,605)
1,849
—
—
(7,302)
—
$ (7,102)
$ (1,605)
—
(7,302)
—
(8,907)
1,805
$ (7,102)
$ —
—
25
—
—
—
825
12
$ 862
$ 22
897
—
—
919
(57)
$ 862
$ 179
—
556
(3,145)
—
—
6,043
88
$ 3,721
$ 658
—
825
—
1,483
2,238
$ 3,721
$ 374
474
721
1,296
710
700
105
364
$ 4,744
$ 1,091
3
6,372
235
7,701
(2,957)
$ 4,744
$ 925
329
719
—
548
516
329
108
$ 3,474
$ 197
1,495
105
269
2,066
1,408
$ 3,474
53
TNX-1331_Fin_3-17_g.indd 53
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
Revised Guarantor Condensed Consolidating Statements of Cash Flows
Year Ended December 31, 2013
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Cash Flows from Operating Activities:
Net income (loss)
Depreciation, depletion and amortization
Other
Cash provided by (used in) operating activities
Cash Flows from Investing Activities:
Capital expenditures
Proceeds from the sale of assets
Collections of intercompany debt
Cash provided by (used in) investing activities
Cash Flows from Financing Activities:
Repayments of debt
Repayments of intercompany debt
Proceeds from debt
Debt issuance costs
Dividends paid
Proceeds from the exercise of warrants and options
Cash provided by (used in) financing activities
Effects of exchange rate changes on cash and
cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
$
(90)
333
87
330
(165)
1
—
(164)
(189)
—
945
(29)
(115)
2
614
(18)
762
716
$ 1,478
$ 360
—
(360)
—
—
—
(57)
(57)
—
57
—
—
—
—
57
—
—
—
$ —
$ (41)
—
(16)
(57)
—
—
57
57
—
—
—
—
—
—
—
—
—
—
$ —
$ (126)
—
(58)
(184)
—
—
—
—
—
(57)
—
—
(115)
2
(170)
—
(354)
533
$ 179
$ (381)
221
1,243
1,083
(71)
—
—
(71)
(3)
—
—
—
—
—
(3)
—
1,009
85
$ 1,094
$ 98
112
(722)
(512)
(94)
1
—
(93)
(186)
—
945
(29)
—
—
730
(18)
107
98
$ 205
54
TNX-1331_Fin_3-17_g.indd 54
3/18/15 9:35 AM
As Previously Filed Guarantor Condensed Consolidating Statements of Cash Flows
Year Ended December 31, 2013
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Cash Flows from Operating Activities:
Net income (loss)
Depreciation, depletion and amortization
Other
Cash provided by (used in) operating activities
Cash Flows from Investing Activities:
Capital expenditures
Proceeds from the sale of assets
Collections of intercompany debt
Cash provided by (used in) investing activities
Cash Flows from Financing Activities:
Repayments of debt
Repayments of intercompany debt
Proceeds from debt
Debt issuance costs
Dividends paid
Proceeds from the exercise of warrants and options
Cash provided by (used in) financing activities
Effects of exchange rate changes on cash and
cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
$
(90)
333
87
330
(165)
1
—
(164)
(189)
—
945
(29)
(115)
2
614
(18)
762
716
$ 1,478
$ 354
—
(354)
—
—
—
(57)
(57)
—
57
—
—
—
—
57
—
—
—
$ —
$ (41)
—
(16)
(57)
—
—
57
57
—
—
—
—
—
—
—
—
—
—
$ —
$ (126)
—
(58)
(184)
—
—
—
—
—
(57)
—
—
(115)
2
(170)
—
(354)
533
$ 179
$ (382)
221
531
370
(71)
—
—
(71)
(3)
—
—
—
—
—
(3)
—
296
78
$ 374
$ 105
112
(16)
201
(94)
1
—
(93)
(186)
—
945
(29)
—
—
730
(18)
820
105
$ 925
TNX-1331_Fin_3-17_g.indd 55
55
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
Revised Guarantor Condensed Consolidating Statements of Cash Flows
Year Ended December 31, 2012
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Cash Flows from Operating Activities:
Net income (loss)
Depreciation, depletion and amortization
Gain on bargain purchase
Other
Cash provided by (used in) operating activities
Cash Flows from Investing Activities:
Capital expenditures
Net cash received in acquisition of mineral sands business
Collections of intercompany debt
Cash provided by (used in) investing activities
Cash Flows from Financing Activities:
Repayments of debt
Repayments of intercompany debt
Proceeds from debt
Debt issuance costs
Dividends paid
Proceeds from the exercise of warrants and options
Merger consideration
Class A ordinary shares repurchased
Shares purchased for the Employee Participation Plan
Cash provided by (used in) financing activities
Effects of exchange rate changes on cash and
cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
$ 1,133
211
(1,055)
(165)
124
(166)
114
—
(52)
(585)
—
1,707
(38)
(61)
1
(193)
(326)
(15)
490
—
562
154
$ 2,238
—
233
(2,471)
—
—
—
(883)
(883)
—
883
—
—
—
—
—
—
—
883
—
—
—
$
(15)
—
—
(1,750)
(1,765)
—
—
883
883
—
—
900
(18)
—
—
—
—
—
882
—
—
—
$ 1,134
—
(115)
862
1,881
—
114
—
114
—
(883)
—
—
(61)
1
(193)
(326)
—
(1,462)
—
533
—
$ (2,255)
146
(410)
3,096
577
(90)
—
—
(90)
(557)
—
60
(12)
—
—
—
—
—
(509)
—
(22)
107
Cash and cash equivalents at end of period
$ 716
$ —
$ —
$ 533
$
85
$ 31
65
(763)
98
(569)
(76)
—
—
(76)
(28)
—
747
(8)
—
—
—
—
(15)
696
—
51
47
$ 98
56
TNX-1331_Fin_3-17_g.indd 56
3/18/15 9:35 AM
As Previously Filed Guarantor Condensed Consolidating Statements of Cash Flows
Year Ended December 31, 2012
(Millions of U.S. dollars)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Cash Flows from Operating Activities:
Net income (loss)
Depreciation, depletion and amortization
Gain on bargain purchase
Other
Cash provided by (used in) operating activities
Cash Flows from Investing Activities:
Capital expenditures
Net cash received in acquisition of mineral sands business
Collections of intercompany debt
Cash provided by (used in) investing activities
Cash Flows from Financing Activities:
Repayments of debt
Repayments of intercompany debt
Proceeds from debt
Debt issuance costs
Dividends paid
Proceeds from the exercise of warrants and options
Merger consideration
Class A ordinary shares repurchased
Shares purchased for the Employee Participation Plan
Cash provided by (used in) financing activities
Effects of exchange rate changes on cash and
cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
$ 1,133
211
(1,055)
(165)
124
(166)
114
—
(52)
(585)
—
1,707
(38)
(61)
1
(193)
(326)
(15)
490
—
562
154
$ 2,238
—
233
(2,471)
—
—
—
(883)
(883)
—
883
—
—
—
—
—
—
—
883
—
—
—
$
(15)
—
—
(1,750)
(1,765)
—
—
883
883
—
—
900
(18)
—
—
—
—
—
882
—
—
—
$ 1,134
—
(115)
862
1,881
—
114
—
114
—
(883)
—
—
(61)
1
(193)
(326)
—
(1,462)
—
533
—
$ (2,255)
146
(410)
3,089
570
(90)
—
—
(90)
(557)
—
60
(12)
—
—
—
—
—
(509)
—
(29)
107
Cash and cash equivalents at end of period
$ 716
$ —
$ —
$ 533
$
78
$ 31
65
(763)
105
(562)
(76)
—
—
(76)
(28)
—
747
(8)
—
—
—
—
(15)
696
—
58
47
$ 105
TNX-1331_Fin_3-17_g.indd 57
57
3/18/15 9:35 AM
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
28. Quarterly Results of Operations (Unaudited)
The following represents our unaudited quarterly results for the year ended December 31, 2014 and 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, and were of
a normal recurring nature.
Unaudited quarterly results for 2014:
Net sales
Cost of goods sold
Gross profit
Net income (loss)
Net income attributable to noncontrolling interest
Net income (loss) attributable to Tronox Limited
Loss per share, basic and diluted
Unaudited quarterly results for 2013:
Net sales
Cost of goods sold
Gross profit
Net loss
Net income attributable to noncontrolling interest
Net loss attributable to Tronox Limited
Loss per share, basic and diluted
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
$ 418
393
25
(54)
4
$ (58)
$ (0.51)
$ 490
430
60
2
2
$ —
$ —
$ 429
361
68
$ (90)
3
$ (93)
$ (0.82)
$ 400
346
54
$ (275)
1
$ (276)
$ (2.40)
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
$ 470
438
32
(45)
12
$ (57)
$ (0.50)
$ 525
475
50
(1)
12
$ (13)
$ (0.11)
$ 491
437
54
$ (41)
8
$ (49)
$ (0.43)
$ 436
382
54
(3)
$
4
$
(7)
$ (0.06)
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.
29. Subsequent Event
On February 3, 2015, we announced that we signed a definitive agreement with FMC Corporation to acquire its Alkali Chemicals Group for $1.64 billion. We will fund
the acquisition through existing cash and new debt pursuant to signed commitments from multiple banks. The transaction, which has been approved by the board of
directors of both companies, is expected to close in the first quarter of 2015, and is subject to customary closing conditions.
58
TNX-1331_Fin_3-17_g.indd 58
3/18/15 9:35 AM
Management’s Report on 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, 2014. In making this assessment, management used
the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 2013 Internal Control-Integrated Framework. Based on
management’s assessment and those criteria, management concluded that the Company did not maintain effective internal control over financial reporting as of
December 31, 2014. See Item 9A included in our 2014 SEC Form 10-K filing for further details.
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, PricewaterhouseCoopers LLP, audited our internal controls over financial reporting as of December 31, 2014 as
stated in their report which appears under “Report of Independent Registered Public Accounting Firm.”
TNX-1331_Fin_3-17_g.indd 59
59
3/18/15 9:35 AM
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Tronox Limited
In our opinion, the accompanying consolidated balance sheet as of December 31, 2014 and the related consolidated statements of operations, of comprehensive income
(loss), of changes in shareholders’ equity, and of cash flows for the year then ended present fairly, in all material respects, the financial position of Tronox Limited and
its subsidiaries at December 31, 2014 and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting
as of December 31, 2014 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) because three material weaknesses in internal control over financial reporting existed as of that date related to: (a) the controls over the
information and communication related to the South African operations were improperly designed and not effective, as information required to execute control activities
to completely and accurately record and disclose transactions was not communicated timely to the individuals responsible for executing control activities, which led to
(b) the controls over the calculation for accrued royalty expense relating to the mining operations in Namakwa, South Africa were improperly designed and not effective,
and (c) the controls over restricted access and segregation of duties within the SAP systems were improperly designed and not effective, as certain personnel have
inappropriate access to execute conflicting transactions, as well as the ability to prepare and post journal entries without an independent review required by someone
other than the preparer. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses
referred to above are described in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. We considered these material
weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2014 consolidated financial statements, and our opinion regarding
the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements. The Company’s
management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness
of internal control over financial reporting included in management’s report referred to above. Our responsibility is to express opinions on these financial statements
and on the Company’s internal control over financial reporting based on our integrated 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
the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects.
Our audit of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control
over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
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 (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (ii) 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 (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
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.
Stamford, Connecticut
February 25, 2015, except with respect to our opinion on the consolidated financial statements insofar as it relates to the effect of the Guarantor Condensed
Consolidating Financial Statement revision as described in Note 27, as to which the date is March 8, 2015
60
TNX-1331_Fin_3-17_g.indd 60
3/18/15 9:35 AM
Report of Independent Registered Public Accounting Firm
Board of Directors and Shareholders
Tronox Limited
We have audited the accompanying consolidated balance sheet of Tronox Limited and subsidiaries (the Company) as of December 31, 2013, and the related consolidated
statements of operations, comprehensive income (loss), cash flows, and changes in shareholders’ equity for each of the two years in the period ended December 31,
2013. 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 the results of their operations and their cash flows for each of the two years in the period ended December 31, 2013, in conformity with
accounting principles generally accepted in the United States of America.
Oklahoma City, Oklahoma
February 27, 2014 (except for the adjustments to the statements of cash flows described in Note 1 under the caption of Basis of Presentation, which is as of
February 25, 2015, and for the revisions to the guarantor condensed consolidating financial statements described in Note 27, which is as of March 8, 2015)
TNX-1331_Fin_3-17_g.indd 61
61
3/18/15 9:35 AM
Directors and Executive Management
Tronox Limited Board of Directors
Tronox Limited Management Team
Tom Casey*
Chairman & Chief Executive Officer
Jean-François Turgeon*
Executive Vice President
Willem Van Niekerk*
Senior Vice President, Strategic Planning and
Business Development
Katherine C. Harper*
Senior Vice President & Chief Financial Officer
Richard L. Muglia*
Senior Vice President, General Counsel & Corporate Secretary
John D. Romano*
Senior Vice President & Chief Commercial Officer
Chuck Mancini
Senior Vice President, Chief Integration & Performance Officer
Sonja Narcisse
Senior Vice President, Chief Human Resources Officer
Brennen Arndt
Vice President, Investor Relations
Bud Grebey
Vice President, Corporate Affairs & Communications
Kevin V. Mahoney
Vice President & Controller
John Merturi
Vice President, Treasurer
Scott Preston
Vice President, Global Supply Chain & Chief Procurement Officer
*Tronox Officer
Tom Casey
Chairman & Chief Executive Officer,
Tronox Limited
Daniel Blue 1, 2, 3
Attorney
Andrew P. Hines 1*
Principal,
Hines & Associates
Wayne A. Hinman 2, 3*
Former V.P. and G.M.,
Air Products & Chemicals, Inc.
Peter Johnston 3
Head of Global Nickel Assets,
Glencore
Ilan Kaufthal 1, 2, 3
Chairman,
East Wind Advisors
Wim de Klerk
Finance Director & Board Member,
Exxaro Resources Limited
Sipho Nkosi
Chief Executive Officer & Board Member,
Exxaro Resources Limited
Jeffry N. Quinn 2*
Chairman, Chief Executive Officer,
The Quinn Group, LLC and Quinpario Partners, LLC
Committees
1. Audit
2. Human Resources and Compensation
3. Corporate Governance and Nominating
* Committee Chair
62
TNX-1331_Fin_3-17_g.indd 62
3/18/15 9:35 AM
Tronox At A Glance
Shareholder Information
Tronox brightens peoples’ lives. We mine and process titanium ore, zircon and other minerals, and
manufacture titanium dioxide pigments that add brightness and durability to paints, plastics, paper, and
other everyday products. We are a diverse global workforce that is committed to safe and sustainable
business practices that bring value to our shareholders, customers, and business partners. We are the
world’s largest fully integrated producer of titanium feedstock and titanium dioxide (Ti02) pigments: we
extract and process heavy minerals from sand deposits at two mines in South Africa and from another in
Australia. Titanium feedstock is further processed into Ti02 at our chloride pigment plants in the United
States, the Netherlands, and Australia. We operate two electrolytic chemical plants in the United States
which serve the paper, battery, automotive, and pharmaceutical industries. Our Ti02 pigments and other
mineral products are shipped to approximately 1,100 customers in more than 90 countries worldwide.
For more information, visit www.tronox.com
Tronox Limited Financial and Operating Highlights
(Millions of U.S. dollars, except per share amounts)
2014
2013
2012
1,737
(417)
(3.74)
(3.74)
1.00
5,065
1,922
(90)
(1.11)
(1.11)
1.00
5,699
1,832
1,133
11.37
11.10
.50
5,511
Class A common stock outstanding
63,968,616
62,349,618
62,103,989
* Includes net sales and income from operations on a segment basis attributable to the acquired Mineral Sands business since
June 15, 2012.
2014 Pigment Sales Volume
2014 Pigment Sales Volume
2014 Full-time Employees
by Geography
by End-Use Market
by Region
Tronox Total Full-time Employees and
Temporary Employees/Contractors
2%
Paper & Specialty
EMEA
8% <1%
Asia
decembe r 31, 2014
North
America
Plastics
18%
Australia
18%
USA
22%
3,397
1,585
80%
Coatings
52%
South Africa
Letter to Shareholders 1 2014 Financial Highlights 4 Operations 6 Sustainability 10 Communities 12 Responsibilty 14
Financials 17 Board of Directors and Executive Management 62 Shareholder Information Inside back cover
Sales
Net income (loss)
Basic earnings per share
Diluted earnings per share
Dividend paid
Total assets
APAC
30%
24%
EMEA
41%
5%
LATAM
2014 Pigment Sales Volume
by Geography
1%
LATAM
EMEA
30%
APAC
36%
33%
North
America
Table of Contents
TNX-1331_Covers_3-17_g.indd 4-6
Shareholder Information
Tronox Limited is a public company registered under the laws
of the State of Western Australia, Australia. We have global operations in North
America, Europe, Africa, and Australia.
Shareholder website
www.computershare.com/investor
Shareholder online inquiries
https://www-us.computershare.com/investor/Contact
Corporate Offices
Australia:
Tronox Limited
1 Brodie Hall Drive
Technology Park
Bentley, Western Australia 6102
+61.(0)8.9365.1333
United States:
Tronox Limited
Suite 1100
263 Tresser Boulevard
Stamford, Connecticut 06901
+1.203.705.3800
This report is made available to shareholders in advance of the annual meeting
of shareholders to be held at 9 a.m. EDT, May 20, 2015, in Stamford, Connecticut.
The proxy will be made available to shareholders on or about April 13, 2015, at
which time proxies for the meeting will be requested.
Information about Tronox, including financial information, can be found on our
Web site: www.tronox.com.
Stock Listing
New York Stock Exchange
Ticker Symbol
TROX
Certifications
Tronox has included as Exhibits 31.1 and 31.2 to its Annual Report on Form
10-K for fiscal year 2014 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.
Electronic Access
Copies of the Tronox 2014 Annual Report, the proxy, and the 2014 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 15, 2015. A copy of the company’s Form 10-k
and other filings with the U.S. Securities and Exchange Commission are available
at investor.tronox.com/sec.cfm
Shareholder Information
Our Internet site www.tronox.com provides shareholders easy access to Tronox’s
financial results. Shareholders may also contact Brennen Arndt, Vice President,
Investor Relations at +203.705.3800.
Transfer Agent and Registrar
Computershare Trust Company, N.A. is the transfer agent, registrar and dividend
disbursing agent for Tronox’s common stock. Questions and communications
regarding transfer of stock, dividends and address changes should be directed to:
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.
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
GHP, the company that printed our annual report, is an
FSC certified printer whose manufacturing processes reflect
a profound commitment to sustainability and environmental
stewardship. The company uses only vegetable-based inks
and recycles both paper and other manufacturing waste.
Design: SVP Partners, Wilton, CT
6
3/18/15 11:06 AM
A Brighter Future – From the Ground Up
Tronox Limited Corporate Offices
Australia
1 Brody-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
Local.
Global.
T
r
o
n
o
x
L
i
m
i
t
e
d
2
0
1
4
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
C
o
r
p
o
r
a
t
e
R
e
s
p
o
n
s
i
b
i
l
i
t
y
R
e
p
o
r
t
TNX-1331_Covers_3-17_g.indd 1-3
3/18/15 11:06 AM
Tronox Limited 2014
Annual Report and Corporate
Responsibility Report