Tronox Limited 2015 Annual Report and Corporate Responsibility Report
Tronox Limited Financial and Operating Highlights
(Millions of U.S. dollars, except per share amount) 2015 2014 2013
Sales
2,112* 1,737 1,922
Net income (loss) (307)*
(417) (90)
Basic earnings per share (2.75) (3.74) (1.11)
Diluted earnings per share (2.75) (3.74) (1.11)
Dividend paid 1.00 1.00 1.00
Total assets 5,072 5,065 5,699
Class A common stock outstanding 64,521,851 63,968,616 62,349,618
*Includes the acquisition of FMC Corporation’s Alkali Chemical business since April 1, 2015.
2015 TiO2 Sales Volume Distribution
by Geography
2015 TiO2 Sales Volume Distribution
by End Use
2015 Full-time Employees by Region
Figures have been rounded up to the nearest whole percent
28%
40%
27%
5%
4%
18%
78%
<1% Asia
14%
7%
44%
35%
(cid:115) North America (cid:115) LATAM (cid:115) APAC (cid:115) EMEA
(cid:115) Coatings (cid:115) Plastic (cid:115) Paper and Specialty
(cid:115) Australia (cid:115) EMEA (cid:115) South Africa (cid:115) USA
2015 Alkali Sales Volume Distribution
by Geography
2015 Alkali Sales Volume Distribution
by End-use
Tronox Total Full-Time Employees and
Temporary Employees/Contractors
9%
19%
48%
24%
3,814
613
Total: 4,427
14%
26%
13%
20%
25%
2%
(cid:115) North America (cid:115) LATAM (cid:115) APAC (cid:115) EMEA
(cid:115) Flat Glass (cid:115) Container Glass (cid:115) Other Glass (cid:115) Chemicals
(cid:115) Detergents (cid:115) Other
Tronox at a Glance. Tronox brightens peoples’ lives. We operate two vertically integrated mining and inorganic chemical businesses. Tronox TiO2 mines and processes titanium ore, zircon,
and other minerals, and manufactures titanium dioxide pigments that add brightness and durability to paints, plastics, paper, and other everyday products. Tronox Alkali mines trona ore
and manufactures natural soda ash, sodium bicarbonate, caustic soda, and other compounds which are used in the production of glass, detergents, baked goods, animal nutrition supple-
ments, pharmaceuticals, and other essential products. We operate mines in Australia, South Africa, and the United States. Our chemical plants are based in Australia, the Netherlands,
and the United States. We are a diverse global workforce of more than 4,400 who are committed to safe and sustainable business practices that bring value to our shareholders, customers,
and business partners. Our two businesses serve more than 1,400 customers worldwide. For more information, visit www.tronox.com
Table of Contents: Letter to Shareholders 1 Tronox 2015 Highlights 4 Tronox Alkali 6 Tronox TiO2 8 Fairbreeze 10 Sustainability 12 Corporate Citizenship 14 Responsibility 16 Financials 19
Board of Directors and Executive Management 67 Shareholder Information 68
Letter to Shareholders
Tronox Shareholders,
2015 was a year of challenge for Tronox. It was also a year of action, as the company
moved aggressively and decisively in the face of global market headwinds. On April 1, we closed
on the acquisition of our Alkali business.
Throughout 2015, selling prices for TiO2 pigments and some feedstock continued to
decline to what we consider to be unsustainable levels. In response, and to position Tronox for
long-term success and growth in the years ahead, the company took several significant steps to
improve our overall financial performance. We initiated a broad program to reduce unnecessary
spending and free up cash where we could.
I am happy to report that the company exceeded its full-year 2015 targets for cash
generated by these measures, delivering $90 million in cash from cost reductions (after the costs to
achieve them) and $98 million of cash through working capital reductions. We ended the year with
$229 million of cash and equivalents and $530 million of total liquidity – a strong position in a
weak market.
As part of our program, we curtailed production at pigment chemical plants and our
slag smelters. These steps were taken to both save money and better match supply and demand.
During the year, we also closed our sodium chlorate plant and worked down inventories, better
reflecting demand and generating cash for the company.
1
Combined revenues for the company exceeded $2.1 billion, compared to revenue of
more than $1.7 billion in 2014. Our Alkali business delivered $129 million in adjusted EBITDA
over the nine months that they were part of Tronox, and our TiO2 business brought in $215 million
of adjusted EBITDA for the year. Overall adjusted EBITDA for the company was $272 million for
the year.
After acquiring the Alkali Chemicals business, we now operate two separate but
complementary vertically integrated businesses: Tronox Alkali and Tronox TiO2. In the three
quarters that it was owned by Tronox, Alkali delivered free cash flow of $127 million to the
company. Domestic and international demand for the natural soda ash and other inorganic
chemicals, such as sodium bicarbonate, manufactured by Tronox Alkali continues to grow. As a
result, we are able to operate at full capacity and sell everything we produce, securing long-term
revenue benefits for the company.
In late 2015, our new Fairbreeze mine in KwaZulu-Natal, South Africa, began produc-
tion. Fairbreeze will produce high-quality ilmenite to feed our arc furnaces at Tronox KZN Sands.
It will also produce rutile and zircon, valuable mining co-products that had not been available in
KZN after the decommissioning of the Hillendale mine in 2013.
Another of the year’s achievements was our emphasis on workplace safety, risk
mitigation, and health awareness across all Tronox operations worldwide. This focus has brought
tangible benefits to our employees and those that visit our facilities, and it remains unabated.
We believe that everyone who works at Tronox should go home in the same condition in which
they came to work.
Our values – Health & Safety; Responsibility; People; Teamwork; Customers; and,
Results – continue to define us both as a company and as individuals. These principles are the
foundation of our business, driving us to maintain the safest possible work environment and
to actively participate in our communities as responsible corporate citizens.
Letter to Shareholders
Tom Casey
Chairman and
Chief Executive Officer
2
Companywide, we continued to make progress in meeting environmental targets
for energy consumption, water use, carbon emissions, waste, and land rehabilitation. Our
sustainability goals reflect our commitment to environmental stewardship as well as the need
to improve operating efficiencies, foster innovation, eliminate risks, and reinforce our focus on
safe production.
We have entered 2016 in a position of strength, with a strong balance sheet and
clear channels for cash generation. On the TiO2 side, we have taken the necessary and appropriate
actions to align our operations with market demand, and we are well-poised to ramp up
production as pricing and demand rise, which we anticipate happening modestly in 2016 and
more profoundly in 2017 and beyond. As I previously noted, Tronox Alkali brings our company
long-term cost advantages and sustained cash generation. As global GDP grows and the correlat-
ing demand for soda ash increases, we anticipate added sales volumes for this business. Essentially,
Alkali will continue to sell as much product as it produces.
On behalf of our more than 4,400 employees worldwide, I want to thank you for
your commitment to Tronox. We look forward to a safe and productive 2016 and your continued
interest in our company.
Sincerely,
Tom Casey, Chairman and Chief Executive Officer
3
2015 Highlights
Tronox Values
Tronox Limited
We are building a lasting foundation for
growth around a set of six core values
that define our approach to doing
business. Our employees are committed
to living, communicating, and reinforcing
these values throughout the company.
Health & Safety
We work safely — all the time
Responsibility
We care for our environment and our
communities
People
People are our most important resource
Teamwork
We will win — as a team
Customers
It really is all about the customer
Results
We measure, own, and deliver results
$272
million
EBITDA
(adjusted)
$2.1
billion
Revenue
$229
million
Cash
Balance
$90
million
Cost
Savings
$530
million
Liquidity
$1.65
billion
Acquisition of
Tronox Alkali
0.77
14
Total Recordable
Injury Rate
Consecutive
quarters of
0.42
Disabling Injury
Rate
Dividends
4
Tronox Alkali
Tronox TiO2
Tronox Limited Global Footprint
$129
million
EBITDA
(adjusted)
(April 1-
December 31)
4.426
Ktons of
trona ore
mined
(full year)
$602
million
Revenue
(April 1-
December 31)
$215
million
EBITDA
(adjusted)
2nd
Best year
on record:
Production
2
months
ahead of
schedule
Fairbreeze
Mine
#1
Best year
ever
first-pass
quality
$1.51
billion
Revenue
Pigment Facilities
Hamilton
Botlek
Kwiwana
Electrolytic Facilities
Henderson (EMD)
Henderson (Boron Products)
Mineral Sands Facilities
Capacity (MT)
225,000
90,000
150,000
Capacity (MT)
27,000
525
Cooljarloo / Chandala
Capacity (MT)
Synthetic Rutile
Zircon
Rutile
Leucoxene
220,000
40,000
15,000
20,000
Namakwa Sands
Capacity (MT)
Titanium Slag
Zircon
Pig Iron
Rutile
KZN Sands
Titanium Slag
Pig Iron / Scrap Iron
Zircon
Rutile
Soda Ash Facilities
Green River
190,000
125,000
100,000
31,000
Capacity (MT)
220,000
121,000
55,000
25,000
Capacity (MT)
3,750,000
5
Tronox Alkali
2015. Operating as Tronox Alkali, it is the world’s largest vertically integrated producer of
natural soda ash (sodium carbonate), accounting for approximately 25 percent of global natural
soda ash production. Natural soda ash is made from mined and beneficiated trona ore. This
method of mining and processing naturally occurring trona gives Tronox a structural cost
advantage compared to producers of synthetic soda ash. As a result of this advantage, coupled
with an evolving mix of high-value specialty product applications, Alkali brings to Tronox a
history of consistently strong year-over-year operational and financial performance across
economic cycles.
Tronox Limited acquired the Alkali Chemicals business from FMC Corporation in April
the world’s largest natural reserve of trona ore. The Green River operations are the largest and
lowest cost soda ash production facilities in the sector. Alkali has a proud record of sustainable
and safe extraction of minerals and production of soda ash and other inorganic chemical
compounds, and is a leading innovator in the marketplace. The company was the first to
introduce longwall mining for trona ore, and it pioneered use of solution mining for trona on a
commercial scale. Both methods are high-yield and low-cost extraction methods. The estimated
current reserve life of mine in Green River exceeds 100 years.
economic strength of consumer markets. Globally, approximately 50 percent of soda ash demand
is for glass, including windows and windshields, containers, light bulbs, tableware, mirrors,
fiberglass, and screens for computers and smart phones. Specialty end uses are also growing for
Alkali’s products, including dairy and poultry feeds, and hemodialysis-grade sodium bicarbonate
for the healthcare industry.
Tronox Alkali mines and produces soda ash in Green River, Wyoming, USA, the site of
Soda ash demand generally correlates with overall industrial production and the
6
Two methods are used to extract dry trona: “room
and pillar” mining and longwall mining. Room and
pillar mining removes some of the ore, creating
rooms, leaving some trona behind as pillars to
support the mine’s tunnels. Longwall mining, pic-
tured on these two pages, is done with a 750-foot
(229 meters) long machine that removes 100 per-
cent of the ore in its path.
Alkali delivered solid 2015 performance through its ability to innovate and collaborate
with customers. As a result, Tronox Alkali achieved higher margins with less volatility than in
prior years. Our soda ash business contributed $127 million of cash to Tronox in 2015, which
was a powerful benefit.
While the domestic demand remains robust, the U.S. natural soda ash industry is
evolving into an export powerhouse. Tronox is in a strong position to capitalize on this shift.
In 2015, natural soda ash was the USA’s largest inorganic chemical export, with global demand
increasing year-over-year. In 2015, Latin America and Asia were among the company’s largest
export markets, but demand in other international markets is rising rapidly, creating new growth
opportunities for Tronox Alkali in the years ahead.
which spans roughly 54 square miles – almost
35,000 acres. Over decades of mining trona in
Green River, some 2,500 miles (4,025 kilometers)
of underground roadways and tunnel systems
have been created, almost twice the amount of
roads in the city of San Francisco, California.
Tronox Alkali operates eight inorganic chemical
processing facilities across two sites in the Green
River area. The Westvaco facility was established
in 1948. It is the largest and one of the lowest-cost
natural soda ash production plants in the world.
The second site, the Granger facility, was acquired
by the company in 1999.
Our primary trona bed is located 1,600 feet (490
meters) underground and the ore seam averages
about 10 feet (3.05 meters) thick. Virtually every
day of the year, Tronox Green River’s mine workers
ride elevators down 170 stories into the mine,
7
Tronox TiO2
Tronox TiO2 is the world’s largest vertically integrated producer of TiO2 pigments.
improve peoples’ lives around the world. They are in the paint on homes, office buildings,
and automobiles, and are widely used in the production of paper and plastics such as PVC
piping. They are even in the casings for smart phones and computers.
We continue to believe that the full integration in our TiO2 business is a key differentiator and
gives us unique advantages. It strengthens our margins and allows us to compete in a low-cost
market because we have access to competitively priced high-quality feedstock at cost. Equally
important, our customers recognize the value in the supply-and-demand stability and under-
stand that we can provide greater long-term supply assurance than any of our competitors.
Tronox’s finished titanium dioxide (TiO2) pigments are the foundation of products that
Namakwa Sands in South Africa, and our Northern Operations, near Perth in Western Australia.
In South Africa, lower TiO2 grade ilmenite is smelted through an arc furnace to produce slag.
In Australia, higher-grade ilmenite is put through a reduction process in a kiln to produce
synthetic rutile. These three operations supply 100 percent of the titanium feedstock used in
our three TiO2 pigment manufacturing plants: Kwinana in Western Australia, Australia, Botlek
in the Netherlands, and Hamilton, Mississippi in the United States of America.
process produces pigment grades with a brighter appearance and greater opacity than those
produced by the sulfate process alternative. Chloride produced pigments are generally preferred
by manufacturers of high-grade coatings and plastics.
titanium feedstock, which includes ilmenite, natural rutile, titanium slag, and synthetic rutile;
and co-production products such as zircon and low-manganese pig iron, which are contained
in the mineral sands extracted to capture natural titanium feedstock.
Tronox utilizes a proprietary chloride process to produce TiO2 pigment. The chloride
The company’s mining and beneficiation operations consists of two product streams –
Tronox operates three separate mine and beneficiation facilities: KZN Sands and
8
Pictured on these two pages, Tronox’s Botlek
facility is the only TiO2 producer in the Netherlands.
It is centrally located in Rotterdam, on the largest
harbor in Europe. The plant receives titanium
feedstock from Tronox mines in South Africa
and Australia, which is then processed into TiO2
pigment for export to Europe, the Middle East,
Africa, the USA, and other global markets.
Innovation remains core to our TiO2 business, with new pigment grades and formulas
under development at our research and development center in Oklahoma, USA. The TiO2
business also operates an electrolytic and specialty chemicals unit that provides products to the
energy storage, automotive, and pharmaceutical industries.
To address the headwinds that faced the TiO2 industry and other commodities in 2015,
and to position the company for growth when conditions rebound, the company took action to
scale production to lower market demand, while maintaining the ability to ramp up production
safely and quickly. The company also enacted measures to improve efficiency and reduce capital
costs and overhead. Through these measures and the inherent economic advantages of vertical
integration, the company has been able to continue to make long-term investments in major
capital projects such as the new Fairbreeze mine in South Africa; safety, maintenance, and skills
training programs; and product innovation.
The Tronox Namakwa Sands operations on the
West Coast of South Africa mines and beneficiates
heavy minerals to produce titanium dioxide feed-
stock (chloride and sulphate grades), zircon, rutile,
and high-purity iron products. The products are
used as feedstock in a wide range of applications
including pigments, metals, ceramics, and
foundries.
Namakwa’s operations are separated into
Northern Operations, which includes mining, a
concentration plant, and a mineral separation
plant; and the smelter, which includes a smelting
slag plant, iron plant, and receiving and dispatch.
Titanium feedstock from Namakwa is processed
into TiO2 pigment at the company’s three plants
in the Netherlands, Australia, and the USA.
Minerals from the facility are also sold and
exported to third parties worldwide.
9
Fairbreeze
schedule and is expected to be under budget.
Phase one of the US$225 million construction project began production ahead of
Fairbreeze will produce high-quality ilmenite to feed our smelters at Tronox KZN
Sands in South Africa, as well as zircon, rutile, and other mining co-products. These co-products
have not been available at the KZN site for the last several years.
delivered its first lode of titanium-rich ore in late 2015. The planning for this mine started
two decades ago. Construction on the 1,036-acre (419 hectare) site began in 2013 and will
conclude in mid-2016.
The new Tronox Fairbreeze mine in KwaZulu-Natal, on the east coast of South Africa,
to clarify process water for recycling. Water used in the hydraulic mining process carries earth,
which undergoes a series of separation and concentration steps to extract the ore. The thickeners
separate the clear reusable water from the remaining solids, which are returned for post-mining
restoration.
communities. When fully operational, Fairbreeze will sustain more than 2,000 direct and indirect
jobs. Tronox is also sponsoring skills training programs for residents of local traditional tribal
areas, leading to employment with Tronox or job placement with other companies.
decommissioned in December 2013. Restored to its pre-mining condition, much of the land is
utilized by local farmers for cash-producing crops.
Fairbreeze replaced the Tronox Hillendale mine located in the same region, which was
Pictured on these two pages is one of two 138-foot (42-meter) diameter thickeners used
The mine brings a significant positive impact to the economies of the surrounding
10
Hydraulic mining is used at Fairbreeze. In this
process, operators remotely control high-pressure
water cannons targeted on the exposed ore body.
As the wall collapses, the slurry flows to collection
sumps and is then sent to the concentrator for
separation.
The concentrator, or primary wet plant, pictured
above, employs a magnetic separator and a series
of spiral banks and cyclones to extract the heavy
mineral concentrate – ilmenite, rutile, and zircon –
from the mined earth.
11
Sustainability
Tronox decommissioned its Hillendale mine in
Gobandlovu, KwaZulu-Natal, South Africa in
December 2013. Pictured on these two pages are
the results of the two-year effort to rehabilitate the
mine site to post mining agricultural use. In 2014
and 2015, the company utilized more than US$6.3
million from its Rehabilitation Trust Funds to restore
Hillendale. By year-end 2015, roughly 85 percent
of all shaping of mined areas had been completed,
and 80 percent of the area was vegetated and ready
for agricultural use.
area of our trona mine. The BLM awards are
presented annually to those solid minerals mining
projects that have shown responsible and sustain-
able mineral resource development.
Tronox has taken a leadership position in operating
its Green River, Wyoming, USA, facility to minimize
potential impact on sage grouse and other sensitive
species. The company developed a detailed conser-
vation management strategy and is collaboratively
working with other mine operators and local graz-
ing and natural gas operators to reduce surface
activities that impact sage grouse. Actions include
minimizing disturbance, sage-grouse population
monitoring, and reclamation and restoration of
habitat.
Tronox received the U.S. Bureau of Land Manage-
ment’s (BLM) 2015 Hardrock Mineral Environmental
Award at a ceremony in Washington, D.C. on
November 9, 2015, for its Sage Grouse Initiative,
which was developed in the Green River, Wyoming
12
The company strives to be a leader in sustainable business practices, environmental
environmental contributions, promote a safe and healthy workplace, and support its
local communities. In 2015, 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.
Tronox invests in sustainable technologies and solutions around the world to improve its
power generation and demand-side management strategies. In addition to lowering overall
energy costs, these initiatives reduce the organization’s global carbon footprint and reliance on
fossil fuels. At locations such as Hamilton, Mississippi, USA, and KZN Sands in South Africa,
we are investing in new waste reduction technologies to substantially lower the need for costly
on-site disposal space. At other locations, including our mining operations in Green River,
Wyoming, USA; Namakwa Sands, Western Cape, South Africa; and our Northern Operations in
Western Australia, Australia, the company has increased the use of recycled and processed water
to lower dependencies on local potable water supplies. This focus reduces the need for waste
water containment ponds and mitigates contamination risks.
stewardship, and operational efficiency. Across the enterprise, Tronox maintains 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. Transparency and ethical business practices are the foundation of the company’s
business strategy. All of Tronox’s stakeholders benefit from the collaborative relationships it
has with local, state, provincial, and national legislative and regulatory authorities worldwide.
These activities are undertaken with the understanding that financial performance and corporate
responsibility are both essential drivers of our long-term business success.
surrounding communities, where our operations and corporate citizenship programs generate
and distribute direct and indirect economic value. We help foster sustainability in the areas
where we operate through the sponsorship of environmental and science-based education pro-
grams, partnerships with local aquaculture and agriculture cooperatives, and other locally based
initiatives.
For example, the company is reducing its energy consumption by investing in clean-
These sustainability efforts reach beyond the boundaries of our facilities into the
13
Corporate Citizenship
“Thank you Tronox for giving us this opportunity.
It is a once-in-a-lifetime chance for me as a young
man, to learn new skills, finish school, and have a
job. There are not enough words to express my
thanks,” said skills training graduate Siphesihle
Chili, age 21.
14
One example is the Skills Development Program Tronox established for its South
quality of life in the communities in which we operate. In 2015, Tronox invested roughly
US$1.5 million in programs to support local communities.
African operations. The initiative hosted 170 men and women from the communities surround-
ing Namakwa Sands on the west coast of South Africa and KZN Sands on the country’s east
coast. At Tronox KZN, the company worked with the seven local tribal authorities – Somopho,
Ogagwini, Macambini, Nzuza, KwaDube, Madlebe and KwaMkhwanazi – to identify and select
candidates for the program.
Tronox believes that our company can and should play a leadership role in improving the
ranging from computer, math, and science education programs for local school children to local
employment and small business development, and from infrastructure improvements in rural
villages to health and wellness programs. In Australia, Tronox 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 USA and the Netherlands, the company’s
efforts included high school and university internships and student scholarships, the funding
of construction projects at local schools, and youth-empowerment education programs focusing
on environmental science, math, and engineering. In addition to our financial support, Tronox
employees across the globe contributed thousands of volunteer hours in their local communities.
At year-end, the students who had completed their course work were hired directly by
Tronox or placed in apprenticeships with local businesses to receive an additional 12 months of
practical training, with salaries paid by Tronox.
cooking, and driving lessons and license testing. Tronox covered all expenses for these
students, including transportation, personal protective equipment, contractor labor, medical
examinations, and tuition.
This program reflects Tronox’s commitment to local communities and underscores our
on-going support of education and our quest to empower our community members.
Other corporate citizenship activities in 2015 included investments in South Africa
Courses offered included bricklaying, roofing, welding, construction, plumbing,
The Perth Zoo – Tronox STEAM (Science, Technology,
Engineering, Art, and Mathematics) initiative reached
more than 900 students in 2015, many from low
socio-economic areas. The program provides a
variety of educational experiences that incorporate
STEAM, while inspiring conservation action, environ-
mental awareness, and possible career paths within
the mining and chemical industries.
“We thank Tronox for investing in innovation, educa-
tion, and the Perth community. Through our valued
and on-going partnership, Tronox is helping Perth
Zoo to effect genuine change in wildlife conserv-
ation through both its sponsorship of the zoo and
support of the Tronox STEAM Education Program,”
said Amy House, the zoo’s partnerships manager.
15
Responsibility
To strengthen our environmental sustainability, in 2015, we applied a keen focus on
Our economic sustainability was strengthened by our April 2015 acquisition of the Alkali
innovation, operational efficiency to reduce per-production-ton power and water consumption,
as well as waste and carbon emissions.
business everywhere we operate. We remained committed to these efforts while facing the
inherent challenges of a weak global market for our TiO2 business.
Chemicals business from FMC Corporation. Tronox Alkali is the world’s largest and lowest-cost
producer of natural soda ash. The year-over-year stability of our new Alkali business serves as a
counter-balance to our more cyclical TiO2 business.
Tronox in 2015 continued its focus on building a sustainable, safe, and responsible
diversity, generate economic value for the local communities in which we live and operate, and
advance our risk avoidance and safety programs. In 2015, total recordable injury frequency rates
were the lowest in history at both our TiO2 and Alkali businesses.
exemplify the Tronox values in every facet of their professional behaviors worldwide, creating value
for all stakeholders.
Our two separate but complimentary vertically integrated businesses embrace and
To strengthen our social sustainability, we implemented a number of initiatives to promote
16
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 (all data, except for number of strikes and lock-outs, as of December 31)
Male
Female
Total number of employees
G4-10
G4-10
G4-10
Percentage of employees covered by collective bargaining agreements G4-11
Total number of contractors
Number of strikes and lock-outs exceeding one week’s duration
MM4
Safety
LA6
Lost Time Injury Frequency Rate employees and contractors
Lost Time Injury Frequency Rate employees only
Disabling Injury Frequency Rate employees and contractors
Disabling Injury Frequency Rate employees only
Total Recordable Injury Frequency Rate employees and contractors
Total Recordable Injury Frequency Rate employees only
Fatalities employees
Fatalities contractors
GRI
Performance Indicator
Unit
2013
2014
2015*
US$ million
US$ million
US$ million
US$ million
mtp
1,931
1,853
2.2
77
1,623,066
1,749
1,706
1.9
44
1,648,251
2,119
2,259
1.0
-141
4,223,878
EC1
EC1
EC1
EC1
EN3
EN8
EN23
EN15/EN16
EN13/MM1
mtCO2eq/mtp
mtCO2eq/mtp
mtCO2eq/mtp
GJ/mtp
GJ/mtp
GJ/mtp
m3/mtp
m3/mtp
m3/mtp
m3/mtp
m3/mtp
m3/mtp
hectares
hectares
hectares
hectares
mt/mtp
mt/mtp
LTIFR
LTIFR
DIFR
DIFR
TRIFR
TRIFR
10.8
14.9
25.7
21.3
14.6
2.4
0.9
3.4
42.7
0.9
1.4
2.2
96,599
4,497
2,193
3,235
0.15
0.43
3,559
2,951
608
47%
1,503
0
0.30
0.28
0.40
0.43
1.15
0.97
2
0
11.0
15.4
26.4
18.3
15.3
0.2
1.1
3.4
38.2
0.9
1.4
2.3
8.2
5.4
13.5
8.5
5.4
0.4
0.3
1.3
15.9
0.9
0.5
1.4
108,406
4,449
2,012
3,702
0.10
0.43
108,142
7,027
2,073
4,536
0.03
0.15
3,510
2,909
601
50%
1,472
0
0.24
0.28
0.36
0.39
0.91
0.99
0
1
3,814
3,678
767
54%
613
0
0.22
0.14
0.42
0.30
0.78
0.62
0
0
* Tronox acquired the Alkali Chemicals business of FMC Corporation on April 1, 2015. Performance data for 2015 consolidates the results of the Alkali business from April 1 through
December 31, 2015.
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
LTIFR = (# of lost time injuries / total hours worked) x 200,000
DIFR = (# of disabling injuries / total hours worked) x 200,000
TRIFR = (# of total recordable injuries / total hours worked)
(when the individual can return to work but cannot perform his/her previously
assigned duties)
x 200,000
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)
17
Additional Responsibility Disclosures
Economic
2015 Production by Product Distribution
in thousands of metric tons
3,000
2,500
2,000
1,500
1,000
500
0
t
n
e
m
g
P
i
i
l
l
a
k
A
r
e
h
t
O
&
h
s
A
a
d
o
S
2014 and 2015 Production by Business
in thousands of metric tons
(cid:115) TiO2
(cid:115) Alkali
3,000
2,500
2,000
1,500
1,000
500
0
l
g
a
s
e
d
i
r
o
h
C
l
n
o
c
r
i
Z
n
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P
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l
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c
i
t
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h
t
n
y
S
l
c
i
t
y
o
r
t
c
e
E
l
e
l
i
t
u
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s
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n
i
f
g
a
S
l
e
n
e
x
o
c
u
e
L
e
t
i
l
o
r
u
a
t
S
n
o
b
r
a
c
d
e
t
a
v
i
t
c
A
2014
2015
Components of Economic
Value Generated 2015 EC1*
Components of Economic
Value Distributed 2015 EC1*
0.3%
28.4%
71.3%
• TIO2
• Alkali
• Interest Income
2.2%
0.1%
13%
18.9%
65.8%
• Operating costs
• Employee wages and benefits
• Payments to providers of capital
• Payments to government
• Community investments
Environment
Restored Habitats at our Mines
Area actively mined at year end (hectares)
Total area restored during fiscal year
(hectares)
Total expenditures on rehabilitation
during fiscal year (US$)
Social
KZN Sands
Namakwa Sands
Northern Operations
2014
0
104
2015
2014
2015
2014
2015
0
56
1,516
1,516
246
73
60
117
53
107
Total
2014
2015
1,576
1,569
467
236
$4,830,660
$2,223,194
$4,718,385 $2.882,829
$2,044,056
$727,528
$11,593,101 $5,833,551
Workforce Representation
by Age LA12**
as of December 31, 2015
• <29 • 30–49 • 50–59 • 60+
Workforce Representation
by Minorities LA12**
as of December 31, 2015
• Unknown • Minority • White
Workforce Representation
by Gender LA12**
as of December 31, 2015
• Male • Female
Employees by Region and
Gender G4-10**
as of December 31, 2015
• Male • Female
100%
80%
60%
40%
20%
0%
100%
80%
60%
40%
20%
0%
100%
80%
60%
40%
20%
0%
100%
80%
60%
40%
20%
0%
/
y
l
l
r
u
o
H
d
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l
l
i
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a
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f
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a
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d
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u
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m
/
d
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l
l
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k
S
t
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e
m
e
g
a
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o
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l
a
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o
s
s
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f
o
r
P
t
n
e
m
e
g
a
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a
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-
d
m
i
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v
i
t
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x
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t
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g
a
n
a
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o
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S
i
s
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d
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e
v
o
G
A
S
U
a
i
l
a
r
t
s
u
A
a
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f
A
-
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S
s
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N
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A
i
*Tronox acquired the Alkali Chemicals business of FMC Corporation on April 1, 2015. Data for 2015 consolidates the results of the Alkali business from April 1 through December 31, 2015.
**GRI Performance Indicator
18
Tronox Financial Section
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
Directors and Executive Management 67 Shareholder Information 68T
Among Tronox Limited, the S&P 500 Index, the S&P Diversified Chemicals Index, and the S&P Materials Index
Comparison of 42-Month Cumulative Total Return*
Table of Contents
Consolidated Statements of Operations 20 Consolidated Statements of Comprehensive Income (Loss)
21 Consolidated Balance Sheets 22 Consolidated Statements of Cash Flows 23 Consolidated Statements of
Changes in Shareholders’ Equity 24 Notes to Consolidated Financial Statements 26 Management’s Report
on Internal Controls Over Financial Reporting 64 Report of Independent Registered Public Accounting
Firm 2015 65 Report of Independent Registered Public Accounting Firm 2014 and 2013 66 Board of
Tronox Limited
S&P Materials
S&P Diversified Chemicals
S&P 500
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
5
1
/
1
5
1
/
2
5
1
/
3
5
1
/
4
5
1
/
5
5
1
/
6
5
1
/
7
5
1
/
8
5
1
/
9
5
1
/
0
1
5
1
/
1
1
5
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© 2016 S&P, a division of McGraw Hill Financial. All rights reserved.
19
Consolidated Statements of Operations
(Millions of U.S. dollars, except share and per share data)
Year Ended December 31,
2015
2014
2013
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Restructuring expense
Income (loss) from operations
Interest and debt expense, net
Net gain (loss) on liquidation of non-operating subsidiaries
Loss on extinguishment of debt
Other income, net
Loss before income taxes
Income tax provision
Net loss
Income attributable to noncontrolling interest
Net loss attributable to Tronox Limited
Loss per share, basic and diluted
Weighted average shares outstanding, basic and diluted (in thousands)
See notes to consolidated financial statements.
$ 2,112
1,992
120
(217)
(21)
(118)
(176)
—
—
28
(266)
(41)
(307)
11
$
$
(318)
$
(2.75)
115,566
$ 1,737
1,530
207
(192)
(15)
—
(133)
(35)
(8)
27
(149)
(268)
(417)
10
$
$
(427)
$ (3.74)
114,281
$ 1,922
1,732
190
(187)
—
3
(130)
24
(4)
46
(61)
(29)
(90)
36
(126)
(1.11)
$
$
$
113,416
20
Consolidated Statements of Comprehensive Income (Loss)
(Millions of U.S. dollars)
Year Ended December 31,
Net loss
Other comprehensive income (loss):
Foreign currency translation adjustments
Pension and postretirement plans:
Actuarial gains (losses), net of taxes of less than $1 million in 2015, and 2014,
and $1 million in 2013
Amortization of unrecognized actuarial losses, net of taxes of less than $1 million
in 2015, 2014 and 2013
Prior service credit, net of taxes of, less than $1 million in 2014 and $1 million in 2013
Pension and postretirement benefit curtailments, net of taxes of $4 million in 2014
Other comprehensive loss
Total comprehensive loss
Comprehensive income (loss) attributable to noncontrolling interest:
Net income
Foreign currency translation adjustments
Comprehensive loss attributable to noncontrolling interest
2015
2014
2013
$
(307)
$
(417)
$
(90)
(292)
(95)
(289)
12
3
—
—
(277)
$
(584)
11
(77)
(66)
(83)
1
(3)
37
(143)
25
2
3
—
(259)
$
(560)
$
(349)
10
(31)
(21)
36
(70)
(34)
Comprehensive loss attributable to Tronox Limited
$
(518)
$
(539)
$
(315)
See notes to consolidated financial statements.
21
Consolidated Balance Sheets
(Millions of U.S. dollars, except share and per share data)
December 31,
Assets
Current Assets
Cash and cash equivalents
Restricted cash
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
Short-term debt
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
Commitments and Contingencies Shareholders’ Equity
Tronox Limited Class A ordinary shares, par value $0.01 65,443,363 shares issued and
64,521,851 shares outstanding at December 31, 2015 and 65,152,145 shares issued and
63,968,616 shares outstanding at December 31, 2014
Tronox Limited Class B ordinary shares, par value $0.01 — 51,154,280 shares issued and outstanding
at December 31, 2015 and 2014
Capital in excess of par value
Retained earnings
Accumulated other comprehensive loss
Total Tronox Limited shareholders’ equity
Noncontrolling interest
Total equity
Total liabilities and equity
See notes to consolidated financial statements.
22
2015
2014
$
229
5
391
630
46
—
1,301
1,843
1,604
244
12
—
68
$ 1,276
3
277
770
42
13
2,381
1,227
1,058
272
57
9
61
$ 5,072
$ 5,065
$
159
180
150
16
43
—
548
2,955
141
77
143
98
3,962
$
160
147
—
18
32
9
366
2,375
172
85
204
75
3,277
1
1
—
1,500
93
(596)
998
112
1,110
$ 5,072
—
1,476
529
(396)
1,610
178
1,788
$ 5,065
Consolidated Statements of Cash Flows
(Millions of U.S. dollars)
Year Ended December 31,
2015
2014
2013
Cash Flows from Operating Activities:
Net loss
Adjustments to reconcile net 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
Other noncash items affecting net 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
Acquisition of 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
Cash provided by (used in) financing activities
Effects of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental cash flow information:
Interest paid
Income taxes paid
See notes to consolidated financial statements.
$
(307)
$
(417)
$
(90)
294
—
22
11
5
—
—
9
—
(17)
20
157
18
(12)
20
(4)
216
(191)
1
(1,650)
(1,840)
(18)
750
(15)
(117)
3
603
(26)
(1,047)
1,276
$
229
$
$
152
23
295
237
20
10
(3)
35
8
—
3
(18)
23
(101)
9
22
20
(2)
141
(187)
—
—
(187)
(20)
—
(2)
(116)
6
(132)
(21)
(199)
1,475
$ 1,276
$
$
126
3
333
33
18
9
9
(24)
4
(32)
(15)
(6)
58
75
(15)
(16)
(25)
14
330
(165)
1
—
(164)
(189)
945
(29)
(115)
2
614
(18)
762
713
$ 1,475
$
$
123
25
23
Tronox
Limited Class A
Ordinary Shares
Tronox
Limited Class B
Ordinary Shares
Capital in Excess
of par Value
Retained Earnings
Accumulated Other
Comprehensive Loss
Total Tronox Limited
Shareholders’ Equity
Non-controlling
Interest
Total Equity
$ 1
—
—
—
—
—
$ 1
—
—
—
—
—
$ 1
—
—
—
—
—
$ 1
$ —
—
—
—
—
—
$ —
—
—
—
—
—
$ —
—
—
—
—
—
$ —
$ 1,429
—
—
17
—
2
$ 1,448
—
—
22
—
6
$ 1,476
—
—
21
—
3
$ 1,500
$ 1,314
(126)
—
—
(115)
—
$ 1,073
(427)
—
—
(117)
—
$ 529
(318)
—
—
(118)
—
$ 93
$ (95)
—
(189)
—
—
—
$ (284)
—
(112)
—
—
—
$ (396)
—
(200)
—
—
—
$ (596)
$ 2,649
(126)
(189)
(115)
17
2
$ 2,238
(427)
(112)
(117)
22
6
$ 1,610
(318)
(200)
(118)
21
3
$ 998
$ 233
36
(70)
—
—
—
$ 199
10
(31)
—
—
—
$ 178
11
(77)
—
—
—
$ 112
$ 2,882
(90)
(259)
(115)
17
2
$ 2,437
(417)
(143)
(117)
22
6
$ 1,788
(307)
(277)
(118)
21
3
$ 1,110
Consolidated Statements of Changes in Shareholders’ Equity
(Millions of U.S. dollars)
Balance at January 1, 2013
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 loss
Shares-based compensation
Class A and Class B share dividends
Warrants and options exercised
Balance at December 31, 2014
Net income (loss)
Other comprehensive loss
Shares-based compensation
Class A and Class B share dividends
Warrants and options exercised
Balance at December 31, 2015
See notes to consolidated financial statements.
24
(Millions of U.S. dollars)
Balance at January 1, 2013
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 loss
Shares-based compensation
Class A and Class B share dividends
Warrants and options exercised
Balance at December 31, 2014
Net income (loss)
Other comprehensive loss
Shares-based compensation
Class A and Class B share dividends
Warrants and options exercised
Balance at December 31, 2015
See notes to consolidated financial statements.
Tronox
Limited Class A
Ordinary Shares
Tronox
Limited Class B
Ordinary Shares
$ 1
$ —
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$ 1
$ —
$ 1
$ —
$ 1
$ —
Capital in Excess
of par Value
Retained Earnings
Accumulated Other
Comprehensive Loss
Total Tronox Limited
Shareholders’ Equity
Non-controlling
Interest
Total Equity
$ 1,429
—
—
17
—
2
$ 1,448
—
—
22
—
6
$ 1,476
—
—
21
—
3
$ 1,500
$ 1,314
(126)
—
—
(115)
—
$ 1,073
(427)
—
—
(117)
—
$ 529
(318)
—
—
(118)
—
$ 93
$ (95)
—
(189)
—
—
—
$ (284)
—
(112)
—
—
—
$ (396)
—
(200)
—
—
—
$ (596)
$ 2,649
(126)
(189)
17
(115)
2
$ 2,238
(427)
(112)
22
(117)
6
$ 1,610
(318)
(200)
21
(118)
3
$ 998
$ 233
36
(70)
—
—
—
$ 199
10
(31)
—
—
—
$ 178
11
(77)
—
—
—
$ 112
$ 2,882
(90)
(259)
17
(115)
2
$ 2,437
(417)
(143)
22
(117)
6
$ 1,788
(307)
(277)
21
(118)
3
$ 1,110
25
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Tronox Limited
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
(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, and the world’s largest producer of
natural soda ash. 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.
Our TiO2 products are critical components of everyday applications
such as paint and other coatings, plastics, paper, and other uses and our
related mineral sands product streams include titanium feedstock,
zircon, and pig iron. Our soda ash products are used by customers in
the glass, detergent, and chemicals manufacturing industries.
We have global operations in North America, Europe,
South Africa, and the Asia-Pacific region. Within our TiO2 segment,
we operate three pigment production 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.
On April 1, 2015 (the “Alkali Transaction Date”), we com-
pleted the acquisition of 100% of the Alkali Chemicals business
(“Alkali”) from FMC Corporation (“FMC”) for an aggregate purchase
price of $1.65 billion in cash (the “Alkali Transaction”). See Note 4 for
additional information regarding the Alkali Transaction.
As a result of the Alkali Transaction, we produce natural soda
ash from a mineral called trona, which we mine at two facilities we
own near Green River, Wyoming. Our Wyoming facilities process the
trona ore into chemically pure soda ash and specialty sodium products
such as sodium bicarbonate (baking soda). We sell soda ash directly
to customers in the United States, Canada and Europe and to the
American Natural Soda Ash Corporation (“ANSAC”), a non-profit
foreign sales association in which we and two other U.S. soda ash
producers are members, for resale to customers elsewhere around the
world. We use a portion of our soda ash at Green River to produce
specialty sodium products such as sodium bicarbonate and sodium
sesquicarbonate that have uses in food, animal feed, pharmaceutical,
and medical applications.
In June 2012, Tronox Limited issued Class B ordinary shares
(“Class B Shares”) to Exxaro Resources Limited (“Exxaro”) and one
of its subsidiaries in consideration for 74% of Exxaro’s South African
mineral sands business, and 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
(the “Exxaro Transaction”). 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.
At December 31, 2015, Exxaro held approximately 44% of the voting
securities of Tronox Limited. See Note 24 for additional information
regarding Exxaro transactions.
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”). Additionally, as we are not considered a “foreign
private issuer” in the United States (“U.S.”), 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.
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.
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. These adjustments are not
considered material for the year ended December 31, 2013.
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 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.
During the year ended December 31, 2015, we recorded
out-of-period adjustments that should have been recorded in 2012
through 2014 that decreased cost of goods sold by $5 million, decreased
loss before income taxes by $5 million, decreased net loss by $3 million,
26
and decreased loss per share by $0.02. 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 and is not
material to our 2015 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 state-
ments 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 transac-
tions 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,
rebates 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.
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 $13 million, $11 million,
and $10 million during 2015, 2014, and 2013, 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 technol-
ogy, 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 interpreta-
tion 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 periodi-
cally 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.
Cost of Goods Sold
Cost of goods sold includes costs for purchasing, receiving, manufactur-
ing, and distributing products, including raw materials, energy, labor,
depreciation, depletion, shipping and handling, freight, warehousing,
and other production costs.
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
27
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Tronox Limited
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
the Tronox Management Equity Incentive Plan (see Note 22) and
the T-Bucks Employee Participation Plan (see 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.
Accounts Receivable, net of allowance for doubtful accounts
We perform credit evaluations of our customers, and take actions
deemed appropriate to mitigate credit risk. Only in certain specific
occasions do we require collateral in the form of bank or parental
guarantees or guarantee payments. We maintain allowances for
potential credit losses based on specific customer review and current
financial conditions. See Note 10.
Inventories, net
Pigment and Alkali inventories are stated at the lower of actual cost
or market (“LOCM”), net of allowances for obsolete and slow-moving
inventory. The cost of inventories is determined using the first-in,
first-out method (“FIFO”). Carrying values include material costs,
labor, and associated indirect manufacturing expenses. Costs for
materials and supplies, excluding titanium ore, are determined by
average cost to acquire. Mineral Sands inventories including titanium
ore are stated at the lower of the weighted-average cost of production
or market. Inventory costs include those costs directly attributable
to products, including all manufacturing overhead but excluding
distribution costs. Raw materials are carried at actual cost.
We review, annually and at the end of each quarter, the cost of
our inventory in comparison to its net realizable value. We also periodi-
cally 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:
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 December 31, 2015 and 2014, we had restricted cash in
Australia related to outstanding performance bonds of $5 million
and $3 million, respectively.
Land improvements
Buildings
Machinery and equipment
Furniture and fixtures
10 — 20 years
10 — 40 years
3 — 25 years
10 years
Maintenance and repairs are expensed as incurred, except
for costs of replacements or renewals that improve or extend the lives
of existing properties, which are capitalized. Upon retirement or sale,
the cost and related accumulated depreciation are removed from the
respective account, and any resulting gain or loss is included in “Cost
of goods sold” or “Selling, general, and administrative expenses” 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 Note16.
28
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.
Intangible assets are stated at cost less accumulated amortiza-
tion, and are amortized on a straight-line basis over their estimated
useful lives, which range from 3 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 circum-
stances, we assess whether the projected undiscounted cash flows of our
long-lived assets are sufficient to recover the carrying amount of the
asset group being assessed. 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 of long-lived assets is written off against
earnings in the period in which the impairment is determined.
Business Acquisitions
Business acquisitions are accounted for using the acquisition method
under Accounting Standards Codification (“ASC”) 805, Business
Combinations (“ASC 805”), which requires recording assets acquired
and liabilities assumed at fair value as of the acquisition date. Under
the acquisition method of accounting, each tangible and separately
identifiable intangible asset acquired and liabilities assumed is recorded
based on their preliminary estimated fair values on the acquisition
date. The initial valuations are derived from estimated fair value
assessments and assumptions used by management. Acquisition related
costs are expensed as incurred and are included in “Selling, general
and administrative expenses in the Consolidated Statements of
Operations. See Note 4.
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.
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 3 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 Note17.
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.
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.
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.
29
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Tronox Limited
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
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.
Recently Adopted Accounting Pronouncements
In November 2015, the Financial Accounting Standards Board (the
“FASB”) issued Accounting Standards Update (“ASU”) 2015-17, Balance
Sheet Classification of Deferred Taxes (“ASU 2015-17”). ASU 2015-17
simplifies the presentation of deferred income taxes. The new guidance
requires that all deferred tax liabilities and assets, along with any related
valuation allowance, be classified as noncurrent on our consolidated
financial position. We are required to adopt this standard in the first
quarter of 2017. The guidance may be applied either prospectively,
for all deferred tax assets and liabilities, or retrospectively. We have
elected to adopt ASU 2015-17 for 2015, on a prospective basis, and
our disclosure in Note 7 is presented accordingly.
Recently Issued Accounting Pronouncements
In September 2015, the FASB issued ASU 2015-16, Simplifying the
Accounting for Measurement-Period Adjustments (“ASU 2015-16”).
ASU 2015-16 simplifies the accounting for measurement-period
adjustments by eliminating the requirement to restate prior period
financial statements for measurement period adjustments. The new
guidance requires that the cumulative impact of a measurement period
adjustment (including the impact on prior periods) be recognized in
the reporting period in which the adjustment is identified. We are
required to adopt this standard in the first quarter of 2016. We cannot
determine the impact, if any, that ASU 2015-16 will have on our
consolidated financial statements.
In August 2015, the FASB issued ASU 2015-15, Interest
– Imputation of Interest (“ASU 2015-15”) and in April 2015, the FASB
issued ASU 2015-03, Interest— Imputation of Interest (“ASU 2015-03”).
ASU 2015-15 and ASU 2015 - 03 change and simplify the presentation
of debt issuance costs ASU 2015-03 requires that debt issuance costs
related to a recognized debt liability be presented in the balance sheet
as a direct deduction from the carrying amount of that debt liability,
consistent with debt discounts. ASU 2015-15 stated that it would also
be acceptable to present debt issuance costs related a line of credit
arrangement as a direct deduction from the carrying amount of debt.
The recognition and measurement guidance for debt issuance costs
are not affected by the amendments in this ASU. We are required to
adopt these standards retrospectively in the first quarter of 2016. As of
December 31, 2015, we had $49 million of deferred debt issuance costs,
which were recorded in “Other long-term assets” in the Consolidated
Balance Sheets.
In July 2015, as part of its simplification initiative, the FASB
issued ASU 2015-11, Simplifying the Measurement of Inventory (“ASU
2015-11”). ASU 2015-11 simplifies the subsequent measurement of
inventory by requiring entities to remeasure inventory at the lower of
cost and net realizable value, which is defined as the estimated selling
price in the ordinary course of business, less reasonably predictable
costs of completion, disposal, and transportation. This ASU does not
apply to inventory measured using the Last-in, First-Out or the retail
inventory method. We are required to adopt this standard in the first
quarter of 2017. This standard is required to be applied prospectively
with earlier application permitted as of the beginning of an interim or
annual period. The adoption of ASU 2015-11 is not expected to have
a material impact on our consolidated financial statements.
In February 2015, the FASB issued ASU 2015-02,
Consolidation: Amendments to the Consolidation Analysis (“ASU
2015-02”). ASU 2015-02 changes the consolidation evaluation for
entities that are required to evaluate whether they should consolidate
certain legal entities. We are required to adopt this standard in the first
quarter of 2016. The standard permits the use of a modified retrospective
approach by recording a cumulative-effect adjustment to equity as of
the beginning of the fiscal year of adoption, or a reporting entity may
also apply the amendments retrospectively. We have not yet determined
the impact, if any, that ASU 2015-02 will have on our consolidated
financial statements.
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, 2017, and may 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. Restructuring Expense
During 2014, we initiated a cost improvement initiative. The initiative
resulted in a reduction in our workforce by approximately 135 employ-
ees and outside contractor positions. At December 31, 2014, the
remaining liability was $4 million. During 2015, we paid $4 million
of cash related to such restructuring.
In November 2015 we ceased production at our sodium
chlorate plant in Hamilton, Mississippi resulting in a reduction in our
workforce of approximately 50 employees. This action resulted in a
charge, consisting primarily of employee severance costs, of $4 million,
which was recorded in “Restructuring expense” in the Consolidated
Statements of Operations of which $1 million was paid during 2015.
We expect to pay the remaining $3 million liability in 2016.
30
In line with our goal of aligning production output to market
requirements, during the third quarter of 2015, we decided that the
operation of our Cooljarloo North Mine in Western Australia would
be suspended on December 31, 2015, resulting in a reduction in our
workforce of approximately 30 employees. This action resulted in a
charge, consisting primarily of employee severance costs, of $3 million,
which was recorded in “Restructuring expense” in the Consolidated
Statements of Operations and paid during 2015.
In 2015, as part of our commitment to reduce operating
costs and working capital, we have commenced a global restructuring
of our TiO2 segment which we expect to complete during the first half
of 2016. A portion of this initiative involves a reduction in our global
TiO2 workforce by approximately 500 employees and outside contractor
positions. The restructuring seeks to streamline the operations of
our TiO2 segment in order to create a more commercially and opera-
tionally efficient business segment. This action resulted in a charge
of $14 million, which was recorded in “Restructuring expense” in the
Consolidated Statements of Operations of which $2 million was
paid during 2015. The charge consisted of employee severance costs
and other associated costs. We expect to pay the remaining $12 million
in 2016.
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:
Restructuring Liability
Balance, January 1, 2014
Severance and other related costs
Cash payments
Noncash expense
Balance, December 31, 2014
Severance and other related costs
Cash payments
Balance, December 31, 2015
$ —
15
(10)
(1)
$ 4
21
(10)
$ 15
Restructuring expense by segment during 2015 and 2014
was as follows:
Year Ended December 31,
TiO2 segment
Corporate
Total
4. Acquisition of Alkali Chemicals Group
On April 1, 2015, we acquired Alkali because it diversifies our end
markets and revenue base, and increases our participation in faster
growing emerging market economies. We believe it also provides us
greater opportunity to utilize a portion of our U.S. tax attributes in
future periods. See Note 7 for a discussion of the tax impact of the
Alkali Transaction. We accounted for the Alkali Transaction using the
acquisition method under ASC 805 which requires recording assets
acquired and liabilities assumed at fair value. Under the acquisition
method of accounting, the assets acquired and liabilities assumed were
recorded based on their preliminary estimated fair values on the Alkali
Transaction Date. The results of the Alkali chemical business are
included in the Alkali segment. The initial valuations were derived from
estimated fair value assessments and assumptions used by management,
and are preliminary. Further adjustments may result before the end of
the measurement period, which ends no later than March 31, 2016.
We funded the Alkali Transaction through existing cash and
new debt. See Note 16 for further details of the Alkali Transaction
financing.
Purchase Price Allocation
Consideration:
Purchase price
Fair Value of Assets Acquired and Liabilities Assumed:
Current Assets:
Accounts receivable
Inventories
Prepaid and other assets
Total Current Assets
Property, plant and equipment (1)
Mineral leaseholds (2)
Other long-term assets
Total Assets
Current Liabilities:
Accounts payable
Accrued liabilities
Valuation
$ 1,650
$ 147
48
32
227
767
739
3
$ 1,736
46
28
74
12
86
$ 1,650
(1) The fair value of property, plant and equipment 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,
based on the estimated useful life ranging from 5 to 38 years.
(2) The fair value of mineral rights was determined using the Discounted Cash Flow
(“DCF” ) method, which was based upon the present value of the estimated future cash
flows for the expected life of the asset taking into account the relative risk of achieving
those cash flows and the time value of money. A discount rate of 10.4% was used taking
into account the risks associated with such assets.
31
2015
$ 20
1
$ 21
2014
$ 12
3
$ 15
Total Current Liabilities
Noncurrent Liabilities:
Other
Total Liabilities
Net Assets
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Tronox Limited
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
There are no contingent liabilities currently recorded in the
fair value of net assets acquired as of the Alkali Transaction Date, and
the fair value of net assets acquired includes accounts receivables with
book value that approximates fair value.
Condensed Combined Financial Information
The following condensed financial information presents the resulting
operations of Alkali from the Alkali Transaction Date to December
31, 2015:
Net sales
Income from operations
Net income
For the period April 1, 2015
through December 31, 2015
$ 602
$ 69
$ 52
Supplemental Pro forma financial information
The following unaudited pro forma information gives effect to the
Alkali Transaction as if it had occurred on January 1, 2014. The
unaudited pro forma financial information reflects certain adjustments
related to the acquisition, such as (1) conforming the accounting
policies of Alkali to those applied by Tronox, (2) recording certain
incremental expenses resulting from purchase accounting adjustments,
such as incremental depreciation expense in connection with fair value
adjustments to property, plant and equipment, and depletion expense
in connection with fair value adjustments to mineral leaseholds, (3) to
record the effect on interest expense related to borrowings in connec-
tion with the Alkali Transaction and (4) to record the related tax effects.
The unaudited pro forma financial information was adjusted to include
the effect of certain non-recurring items as of January 1, 2014 such
as the impact of transaction costs related to the Alkali Transaction of
approximately $29 million, inventory step-up amortization of $9
million and $8 million of interest expense incurred on the Bridge
Facility (see Note 16). All of these non-recurring costs were excluded
from the 2015 supplemental pro forma information. The unaudited
pro forma financial information is for illustrative purposes only and
should not be relied upon as being indicative of the historical results
that would have been obtained if the Alkali Transaction had actually
occurred on that date, nor the results of operations in the future.
In accordance with ASC 805, the supplemental pro forma
results of operations for 2015 and 2014, as if the Alkali Transaction
had occurred on January 1, 2014, are as follows:
Year Ended December 31,
2015
2014
Net sales
Income (loss) from operations
Net loss
Loss per share, basic and diluted
$ 2,307
(67)
$
$ (260)
$ (2.25)
$ 2,520
$
67
$ (405)
$ (3.54)
5. Liquidation of Non-Operating Subsidiaries
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-oper-
ating 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.
6. Other Income (Expense), Net
Other income (expense), net is comprised of the following:
Year Ended December 31,
2015
2014
2013
Net realized and unrealized
foreign currency gains
Interest income
Pension and postretirement
benefit curtailment gains (1)
Other
Total
$ 21
7
—
—
$ 28
$ 5
13
9
—
$ 27
$ 39
8
—
(1)
$ 46
(1) During 2014, we recognized curtailment gains related to our U.S. postretirement
healthcare plan and our Netherlands pension plan. See Note 23.
7. Income Taxes
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.
Income (loss) before income taxes is comprised of the
following:
Year Ended December 31,
2015
2014
2013
Australia
International
Loss before income taxes
$ (353)
87
$ (266)
$ (242)
93
$ (149)
$ (185)
124
$ (61)
The income tax benefit (provision) is summarized below:
Year Ended December 31,
2015
2014
2013
Australian:
Current
Deferred
International:
Current
Deferred
$ (17)
—
(24)
$ (15)
(183)
(15)
(55)
Income tax benefit (provision)
$ (41)
$ (268)
$ (11)
35
(23)
(30)
$ (29)
32
The following table reconciles the applicable statutory income
The statutory tax rates on income earned in South Africa
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,
2015
2014
2013
Statutory tax rate
Increases (decreases) resulting from:
Tax rate differences
Disallowable expenditures
Valuation allowances
Anadarko litigation settlement
State NOL limitations
State rate changes
Withholding taxes
Prior year accruals
Change in uncertain tax positions
Foreign exchange
Tax credits
Branch taxation
Other, net
30%
30%
30%
39
(4)
(89)
—
—
17
(15)
3
—
—
1
1
2
78
(17)
(1,577)
1,341
(15)
—
(24)
(2)
—
1
2
4
(1)
191
(10)
(259)
—
—
—
(59)
22
6
17
8
6
—
Effective tax rate
(15)%
(180)%
(48)%
Due to the changes in our state apportionment factors,
statutory rate changes in certain states in which we operate, and the
acquisition of the Alkali entities, our overall effective state tax rate
changed during 2015. This change resulted in an increase to our state
deferred tax assets and is reflected within the State rate changes line
above. The increased tax benefit is offset by a valuation allowance and
results in no impact to the consolidated provision for income taxes
for the year ended December 31, 2015.
The effective tax rate for each of 2015, 2014, and 2013 differs
from the Australian statutory rate of 30%. Historically, the differences
were primarily due to valuation allowances, income in foreign jurisdic-
tions 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. During 2014,
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
which was recorded in 2014 resulted in the loss of $23 million of
deferred tax assets but was fully offset by a reduction of the related
valuation allowances.
(28% for limited liability companies), the Netherlands (25% for
corporations), and the United Kingdom (20.25% 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 Australia,
the Netherlands, and the United States. Our current year tax expense is
primarily related to withholding tax accruals.
As a result of the Alkali Transaction, we expect to offset a
portion of our previously existing US tax attributes with income
generated by the Alkali entities. This expectation, however, does not
change our overall judgement regarding the utilization of existing
deferred tax assets.
Net deferred tax assets (liabilities) at December 31, 2015 and
2014 were comprised of the following:
December 31,
2015
2014
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
$ 1,614
343
$ 626
324
23
26
86
25
1,231
6
445
11
3
15
3,802
87
28
2,118
15
314
11
2
14
3,565
(3,576)
(3,345)
226
220
(222)
(96)
(8)
(40)
(3)
(369)
(266)
(103)
(10)
(25)
(7)
(411)
Net deferred tax asset (liability)
$ (143)
$ (191)
Balance sheet classifications:
Deferred tax assets — current
Deferred tax assets — long-term
Deferred tax liabilities — current
Deferred tax liabilities — long-term
$ —
—
—
(143)
$
13
9
(9)
(204)
Net deferred tax asset (liability)
$ (143)
$ (191)
33
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Tronox Limited
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
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 during 2014, we recorded
additional deferred tax assets of $2.0 billion. This increase was fully
offset by valuation allowances. During 2015, the U.S. net operating loss
increased as the grantor trusts spent a portion of the funds received
from the litigation.
In November 2015, the FASB issued Accounting Standards
Update No. 2015-17 (ASU 2015-17), “Income Taxes (Topic 740):
Balance Sheet Classification of Deferred Taxes.” The standard requires
that deferred tax assets and liabilities be classified as noncurrent on the
balance sheet rather than being separated into current and noncurrent.
ASU 2015-17 is effective for fiscal years, and interim periods within
those years, beginning after December 15, 2016. Early adoption is
permitted and the standard may be applied either retrospectively or
on a prospective basis to all deferred tax assets and liabilities. We early
adopted ASU 2015-17 during the fourth quarter of 2015 on a prospec-
tive basis. Accordingly, we classified all deferred taxes as noncurrent
at December 31, 2015, but did not adjust the balances presented at
December 31, 2014. The adoption did not have a material effect on
our consolidated financial statements.
During 2015 and 2014, the total changes to the valuation
allowance were an increase of $231 million and $2.4 billion, respectively.
The increase during 2015 was primarily related to valuation allowance
offsets to the deferred tax benefits from current year book losses.
The table below sets forth the changes, by jurisdiction:
December 31,
Australia
United States
The Netherlands
South Africa
Total increase in valuation allowances
2015
2014
$ 112
114
6
(1)
$ 231
$ 255
2,058
50
—
$ 2,363
At December 31, 2015, we 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, and require 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
Exxaro 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 2014, we 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 allowances. The expiration of these carryforwards at
December 31, 2015 is shown below. The Australian and South African
tax loss carryforwards do not expire.
Australia
U.S. Federal
U.S. State
$ —
2016
—
2017
—
2018
—
2019
—
2020
Thereafter
—
No Expiration 499
$ —
—
—
—
—
3,534
—
$
8
—
21
1
20
3,527
—
Tax Loss
Carryforwards
Total
Other
$ —
—
—
—
—
189
16
$
8
—
21
1
20
7, 250
515
Total tax loss
carry-
forwards
$499
$ 3,534
$ 3,577
$ 205
$ 7,815
At December 31, 2015, Tronox Limited had foreign subsidiar-
ies with undistributed earnings. Although we would not be subject to
income tax on these earnings, amounts totaling $147 million could be
subject to withholding tax if distributed. Tronox Incorporated had
certain foreign subsidiaries with undistributed earnings totaling $165
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 2015 and 2014 is as follows:
Year Ended December 31,
Balance at January 1
Reductions for tax positions related to prior years
Balance at December 31
2015
$ 1
—
$ 1
2014
$ 1
—
$ 1
34
Included in the balance at December 31, 2015 and 2014,
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 2015, 2014, and 2013, 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, 2015 and 2014, 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 2011, 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 compa-
nies 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.
Anadarko Litigation
On January 23, 2015, Anadarko Petroleum Corp. (“Anadarko”)
paid $5.2 billion, including approximately $65 million of accrued
interest, pursuant to the terms of a settlement agreement with Tronox
Incorporated. We did not receive any portion of the settlement amount.
Instead, 88% of the $5.2 billion went to trusts and other governmental
entities for the remediation of polluted sites by Kerr-McGee
Corporation (“Kerr-McGee”). The remaining 12% was 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 are 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. At December 31, 2014, we had
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 were fully offset by valuation allowances. At December 31,
2015, approximately $2.4 billion of the trust expenditures expected
from the litigation proceeds have been incurred.
8. Loss Per Share
The computation of basic and diluted loss per share for the periods
indicated is as follows:
Year Ended December 31,
2015
2014
2013
Numerator – Basic and Diluted:
Net loss
Less: Net income attributable to
noncontrolling interest
Undistributed net loss
Percentage allocated to
ordinary shares (1)
$ (307)
$ (417)
$ (90)
11
10
36
(318)
(427)
(126)
100%
100%
100%
Net loss available to ordinary shares
$ (318)
$ (427)
$ (126)
Denominator – Basic and Diluted:
Weighted-average ordinary shares
(in thousands)
Net loss per Ordinary Share (2):
Basic and diluted net loss
per ordinary share
115,566
114,281
113,416
$ (2.75)
$ (3.74)
$ (1.11)
(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 2015, 2014, and 2013, the two-class method did not have an effect on
our net loss per ordinary share calculation, and as such, dividends paid during the year did
not impact this calculation.
(2) Net loss per ordinary share amounts were calculated from exact, not rounded net loss
and share information.
In computing diluted net loss per share under the two-class
method, we considered potentially dilutive shares. Anti-dilutive shares
not recognized in the diluted net loss per share calculation were as
follows:
December 31, 2015
December 31, 2014
December 31, 2013
Average
Exercise
Price
Shares
Average
Exercise
Price
Shares
Average
Exercise
Price
Shares
2,189,967 $21.15 2,560,875 $21.14 2,094,771 $20.63
Options
Series A
Warrants (1) 1,354,529 $9.63 1,273,917 $11.04 1,850,814 $11.52
Series B
Warrants (1) 1,833,834 $10.63 1,715,986 $12.19 2,409,404 $12.71
Restricted
share units 1,494,027 $23.04
(1) Series A Warrants and Series B Warrants were converted into Class A Shares at
December 31, 2015, 2014, and 2013 using a rate of 5.66, 5.29, and 5.18, respectively.
See Note 20.
875,776 $22.17
303,324 $21.08
35
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Tronox Limited
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
9. Fair Value Measurement
For financial instruments that are subsequently measured at fair value,
the fair value measurement is grouped into levels. See Note 2.
At December 31, 2015 and 2014, the only financial instrument
measured at fair value was the environmental rehabilitation trust, which
amounted to $12 million and $17 million, respectively, and was
categorized as Level 2. See Note 17.
The carrying amounts for cash and cash equivalents, accounts
11. Inventories, Net
Inventories, net consisted of the following:
December 31,
Raw materials
Work-in-process
Finished goods, net
Materials and supplies, net (1)
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.
Total
Less: Inventories, net – non-current
Inventories, net - current
2015
$ 248
43
245
106
642
(12)
$ 630
2014
$ 329
77
303
118
827
(57)
$ 770
Our debt is recorded at historical amounts. At December 31,
2015 and 2014, the fair value of the Term Loan was $1.3 billion and
$1.5 billion, respectively. At December 31, 2015 and 2014, the fair value
of the Senior Notes due 2020 was $520 million and $903 million,
respectively. At December 31, 2015, the fair value of the Senior Notes
due 2022 was $347 million. We determined the fair value of the Term
Loan, the Senior Notes due 2020 and the Senior Notes due 2022 using
quoted market prices. The fair value hierarchy for the Term Loan, the
Senior Notes due 2020 and the Senior Notes due 2022 is a Level 1 input.
Balances outstanding under our UBS Revolver are carried at contracted
amounts, which approximate fair value based on the short term nature
of the borrowing and the variable interest rate. The fair value hierarchy
for our UBS Revolver is a Level 2 input.
10. Accounts Receivable,
Net of Allowance for Doubtful Accounts
Accounts receivable, net of allowance for doubtful accounts, consisted
of the following:
December 31,
Trade receivables
Other
Subtotal
Allowance for doubtful accounts
Accounts receivable, net of allowance
for doubtful accounts
2015
2014
$ 367
25
392
(1)
$ 272
6
278
(1)
$ 391
$ 277
Bad debt expense was less than $1 million, for each of the
years ended 2015 and 2014 and $1 million for the year ended 2013.
Bad debt expense was recorded in “Selling, general and administrative
expenses” in the Consolidated Statements of Operations.
(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 $30
million and $42 million at December 31, 2015 and 2014, respectively.
At December 31, 2015 and 2014, inventory obsolescence reserves were
$18 million and $14 million, respectively. During 2015 and 2014, we
recognized a net LOCM charge of $54 million and $3 million, respec-
tively, which was included in “Cost of goods sold” in the Consolidated
Statements of Operations. During 2013, we recognized a net LOCM
benefit of $20 million which was included in “Cost of goods sold” in the
Consolidated Statements of Operations. The net LOCM charge for
2015 included a $41 million charge associated with the sale of ilmenite
to a non-TiO2 producer that we expect will generate approximately
$31 million in cash over the course of the next 13 months (subject to
specified extensions) at a contractual price that is below the carrying
cost assigned to such material as part of the Exxaro Transaction.
12. Property, Plant and Equipment
Property, plant and equipment, net of accumulated depreciation and
amortization, consisted of the following:
December 31,
2015
2014
Land and land improvements
Buildings
Machinery and equipment
Construction-in-progress
Other
Total
Less accumulated depreciation and amortization
Property, plant and equipment, net (1)
$ 143
189
1,765
261
44
2,402
(559)
$ 1,843
$
80
187
1,225
149
35
1,676
(449)
$ 1,227
(1) Substantially all of these assets are pledged as collateral for our debt. See Note 16.
Depreciation expense related to property, plant and equip-
ment during 2015, 2014, and 2013 was $187 million, $158 million, and
$191 million, respectively, of which $183 million, $155 million, and
$187 million, respectively, was recorded in “Cost of goods sold” in the
Consolidated Statements of Operations and $4 million, $3 million, and
$4 million, respectively, was recorded in “Selling, general and adminis-
trative expenses” in the Consolidated Statements of Operations.
36
13. Mineral Leaseholds
Mineral leaseholds, net of accumulated depletion, consisted of the
following:
15. Accrued Liabilities
Accrued liabilities consisted of the following:
December 31,
Mineral leaseholds
Less accumulated depletion
Mineral leaseholds, net
2015
2014
$ 1,948
(344)
$ 1,604
$ 1,336
(278)
$ 1,058
December 31,
Employee-related costs and benefits
Restructuring costs
Interest
Sales rebates
Taxes other than income taxes
Other
Depletion expense related to mineral leaseholds during
Accrued liabilities
2015, 2014, and 2013 was $81 million, $110 million, and $115 million,
respectively, and 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, 2015
December 31, 2014
Net
Gross Accumulated Carrying
Cost Amortization Amount
Net
Gross Accumulated Carrying
Cost Amortization Amount
Customer
relationships $294
TiO2 technology 32
Internal-use
software
Other
37
9
$(98) $196
24
(8)
$294
32
$(79) $215
26
(6)
(13)
(9)
24
—
39
9
(10)
(7)
29
2
Intangible
assets, net
$372
$(128) $244
$374
$(102) $272
Amortization expense related to intangible assets was
$26 million during 2015 and $27 million each during 2014 and 2013,
of which $25 million was recorded during 2015 and $26 million each
during 2014 and 2013 in “Selling general and administrative expenses”
in the Consolidated Statements of Operations. During 2015, 2014 and
2013, $1 million each of amortization expense was recorded in “Cost
of goods sold” in the Consolidated Statement of Operations. Estimated
future amortization expense related to intangible assets is $25 million
for 2016, $25 million for 2017, $25 million for 2018, $25 million for
2019, $25 million for 2020, and $119 million thereafter.
2015
$ 69
15
35
28
11
22
$ 180
2015
$ 150
$ 150
2014
$ 58
$ 4
22
19
37
7
$ 147
2014
$ —
$ —
16. Debt
Short-term debt consisted of the following:
December 31,
UBS Revolver
Short-term debt (1)
(1) Average effective interest rate of 3.5% during 2015.
UBS Revolver
We have a global senior secured asset-based syndicated revolving
credit facility with UBS AG (“UBS”) with a maturity date of June 18,
2017 (the “UBS Revolver”). Through March 31, 2015, the UBS Revolver
provided us with a committed source of capital with a principal
borrowing amount of up to $300 million, subject to a borrowing base.
Balances due under the UBS Revolver are carried at contracted amounts,
which approximate fair value based on the short term nature of the
borrowing and the variable interest rate.
On April 1, 2015, in connection with the Alkali Transaction,
we entered into an amended and restated asset-based revolving
syndicated facility agreement with UBS, which provides for up to $500
million of revolving credit lines, with a $85 million sublimit for letters
of credit with a new maturity that is the earlier of the date which is five
(5) years after the closing date and the date which is 3 months prior to
the maturity of the Term Loan Agreement; provided that in no event
shall the Revolving Maturity be earlier than June 18, 2017. Availability
of revolving credit loans and letters of credit are subject to a borrowing
base. Borrowings bear interest at our option, at either a base rate or
an adjusted London Interbank Offered Rate (“LIBOR”) as the greatest
of (a) the Administrative Agent’s prime rate, (b) the Federal funds
effective rate plus 0.50% and (c) the adjusted LIBOR for a one-month
period plus 1.00%. The applicable margin ranges from 0.50% to 1.00%
for borrowings at the base rate and from 1.50% to 2.00% for borrow-
ings at the adjusted LIBOR, in each case, based on the average daily
borrowing availability.
37
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Tronox Limited
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
On April 1, 2015, we borrowed $150 million against the UBS
At December 31, 2015, the scheduled maturities of our
long-term debt were as follows:
2016
2017
2018
2019
2020
Thereafter
Total
Remaining accretion associated with the Term Loan
Total borrowings
Total Borrowings
$
16
16
16
16
2,301
612
2,977
(6)
$ 2,971
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, 2015 and 2014, the unamortized discount was $6 million
and $7 million, respectively. We made principal repayments during
2015 and 2014 of $15 million and $17 million, respectively.
On April 23, 2014, we, along with our wholly owned subsid-
iary, 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 350 basis points plus 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
Revolver, which was outstanding at December 31, 2015. At December
31, 2014, there were no outstanding borrowings on the UBS Revolver.
We had no drawdowns or repayments on the UBS Revolver during
2014. During 2015, we incurred $2 million of deferred debt issuance
costs related to the UBS Revolver, which were capitalized and included
in “Other long-term assets” in the Consolidated Balance Sheet at
December 31, 2015. At December 31, 2015 and 2014, our amount
available to borrow was $217 million and $276 million, respectively.
ABSA Revolving Credit Facility
We have a R1.3 billion (approximately $84 million at December 31,
2015) revolving credit facility with ABSA Bank Limited (“ABSA”) acting
through its ABSA Capital Division with a maturity date of June 14, 2017
(the “ABSA Revolver”). The ABSA Revolver bears interest at (i) the base
rate (defined as one month JIBAR, which is the mid-market rate for
deposits in South African Rand for a period equal to the relevant period
which appears on the Reuters Screen SAFEY Page alongside the caption
YLD) as of 11h00 Johannesburg time on the first day of the applicable
period, plus (ii) the Margin, which is 3.9%.
During 2015 and 2014, we had no drawdowns or repayments
on the ABSA Revolver. During 2013, we had no drawdowns and a
repayment of $30 million. The weighted average interest rate was 8.5%
during 2013. At December 31, 2015 and 2014, there were no outstand-
ing borrowings on the ABSA Revolver.
Long-term debt, net of an unamortized discount, consisted of
the following:
Original
Principal
Annual
Interest
Rate
Maturity December December
31, 2015
31, 2014
Date
Term Loan, net of
unamortized
discount (1)
Senior Notes due 2020 $ 900
Senior Notes due 2022 $ 600
Co-generation Unit
Financing
Arrangement
Lease financing
$ 16
Total borrowings
Less: Long-term debt
due within one year
Long-term debt
$1,500 Variable
3/19/2020 $1,454
900
600
6.375% 8/15/2020
7.50% 3/15/2022
$1,468
900
—
6.50% 2/1/2016
1
16
3
22
2,971
2,393
(16)
(18)
$2,955
$2,375
(1) Average effective interest rate of 4.7% and 4.6% during 2015 and 2014, respectively.
38
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 extinguish-
ment 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 due 2020
On August 20, 2012, our wholly owned subsidiary, Tronox Finance
LLC (“Tronox Finance”), completed a private placement offering
of $900 million aggregate principal amount of senior notes at par
value (the “Senior Notes due 2020”). The Senior Notes due 2020 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 due 2020 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 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 due 2020 are guaranteed by Tronox and certain of its subsidiaries.
See Note 26.
Senior Notes due 2022
On March 6, 2015, Evolution Escrow Issuer LLC (“Evolution”), a special
purpose limited liability company organized under the laws of Delaware,
was formed. Evolution was wholly owned by Stichting Evolution
Escrow, a Dutch foundation not affiliated with the Company.
On March 19, 2015, Evolution closed an offering of $600
million aggregate principal amount of its 7.50% Senior Notes due 2022
(the “Senior Notes due 2022”). The Senior Notes due 2022 were offered
and sold by Evolution in reliance on an exemption pursuant to Rule
144A and Regulation S under the Securities Act. The Senior Notes due
2022 were issued under an Indenture, dated as of March 19, 2015
(the “Indenture”), between Evolution and Wilmington Trust, National
Association (the “Trustee”).
On April 1, 2015, in connection with the Alkali Transaction,
Evolution merged with and into Tronox Finance, Tronox Finance
assumed the obligations of Evolution under the Indenture and the
Senior Notes due 2022, and the proceeds from the offering were
released to us to partially pay the purchase price for the Alkali
Transaction. We and certain of our subsidiaries entered into a supple-
mental indenture (the “First Supplemental Indenture”), by and among
us, Tronox Finance, the guarantors party thereto, and the Trustee,
pursuant to which we and such subsidiaries became guarantors of the
Senior Notes due 2022 under the Indenture. The Senior Notes due
2022 have not been registered under the Securities Act, and may not be
offered or sold in the United States absent registration or an applicable
exemption from registration requirements. Debt issuance costs related
to the Senior Notes due 2022 of $13 million were capitalized and
included in “Other long-term assets” in the Consolidated Balance
Sheets at December 31, 2015.
The Indenture and the Senior Notes due 2022 provide,
among other things, that the Senior Notes due 2022 are senior unse-
cured obligations of Tronox Finance. Interest is payable on March 15
and September 15 of each year beginning on September 15, 2015 until
their maturity date of March 15, 2022. The terms of the Indenture,
among other things, limit, in certain circumstances, the ability of us
to: incur certain additional indebtedness and issue preferred stock;
make certain dividends, distributions, investments and other restricted
payments; sell certain assets; incur liens; agree to any restrictions on
the ability of certain subsidiaries to make payments to the Company;
consolidate or merge with or into, or sell substantially all of our assets
to, another person; enter into transactions with affiliates; and enter
into new lines of business.
As of December 31, 2015 we had $217 million available under
the $500 million UBS Revolver, $84 million available under the ABSA
Revolver and $229 million in cash and cash equivalents. In the next
twelve months, we expect that our operations and available borrowings
under our revolving credit agreements will provide sufficient cash to
fund our operating expenses, capital expenditures, interest payments,
debt repayments, and dividends.
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, 2015 and 2014, such obligations had a net book
value of assets recorded under capital leases aggregating $14 million
and $20 million, respectively. During 2015, 2014, and 2013 we made
principal payments of less than $1 million for all periods.
39
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Tronox Limited
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
At December 31, 2015, future minimum lease payments,
including interest, were as follows:
2016
2017
2018
2019
2020
Thereafter
Total
Principal
Repayments
Interest
Total
Payments
$ 1
1
1
1
1
11
16
$ 2
2
2
2
2
12
22
$ 3
3
3
3
3
23
38
Bridge Facility
In connection with the Alkali Transaction, we entered into a $600 million
senior unsecured bridge facility (the “Bridge Facility”). The Bridge
Facility was not utilized and terminated with the completion of the
Alkali Transaction. During 2015, we incurred $8 million of financing
fees related to the Bridge Facility, which were included in “Interest
and debt expense, net” in the Consolidated Statements of Operations.
Debt Covenants
At December 31, 2015, 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, 2015.
Interest and Debt Expense, Net
Interest and debt expense, net consisted of the following:
Year Ended December 31,
Interest on debt
Amortization of deferred debt
issuance costs and discounts
on debt
Bridge Facility
Other
Capitalized interest
2015
$ 160
11
8
3
(6)
Total interest and debt expense, net
$ 176
2014
$ 124
10
—
2
(3)
$ 133
2013
$ 122
9
—
4
(5)
$ 130
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, 2015 and 2014, we
had $49 million and $44 million, respectively, of deferred debt issuance
costs, which were recorded in “Other long-term assets” in the
Consolidated Balance Sheets.
40
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,
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”
Noncurrent portion included in
“Asset retirement obligations”
2015
$ 90
3
5
(12)
(3)
(2)
$ 81
$ 4
$ 77
2014
$ 96
5
4
(9)
—
(6)
$ 90
$ 5
$ 85
We used the following assumptions in determining asset
retirement obligations at December 31, 2015: inflation rates between
2.5% - 5.5% per year; credit adjusted risk-free interest rates between
3.2% -16.7%; the life of mines between 21- 35 years and the useful life
of assets of between 1-24 years.
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, 2015 and 2014, the environmental rehabilitation trust
assets were $12 million and $17 million, respectively, which were
recorded in “Other long-term assets” in the Consolidated Balance Sheets.
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 transactions. 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 2015, 2014, and 2013, we recorded
a net gain of less than $1 million, a net loss of $1 million and a net
gain of $2 million, respectively. At December 31, 2015 and 2014, we
did not have any forward contracts in place.
19. Commitments and Contingencies
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 recorded in “Cost
of goods sold” in the Consolidated Statements of Operations was
$38 million, $24 million and $40 million during 2015, 2014 and 2013,
respectively. Total rental expense related to operating leases recorded
in “Selling, general and administrative expense” in the Consolidated
Statements of Operations, was $3 million during 2015 and $2 million
each during 2014 and 2013.
At December 31, 2015, minimum rental commitments under
non-cancelable operating leases were as follows:
2016
2017
2018
2019
2020
Thereafter
Total
Operating
$ 39
23
14
14
13
77
$ 180
Purchase Commitments—At December 31, 2015, purchase commit-
ments were $128 million for 2016, $98 million for 2017, $89 million for
2018, $61 million for 2019, $50 million for 2020, and $291 million
thereafter.
Letters of Credit—At December 31, 2015, we had outstanding letters
of credit, bank guarantees, and performance bonds of $65 million, of
which $41 million were letters of credit issued under the UBS Revolver,
$16 million were bank guarantees issued by ABSA, $4 million each
were bank guarantees issued by Standard Bank and performance bonds
issued by Westpac Banking Corporation.
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 our business, financial condition or results of operations.
20. Shareholders’ Equity
The changes in outstanding Class A ordinary shares (“Class A Shares”)
and Class B Shares for 2015 were as follows:
Class A Shares:
Balance at January 1, 2014
Shares issued for share-based compensation
Shares issued upon warrants exercised
Shares issued upon options exercised
Balance at December 31, 2014
Shares issued for share-based compensation
Shares issued upon warrants exercised
Shares issued upon options exercised
Balance at December 31, 2015
Class B Shares:
Balance at December 31, 2015 and 2014
62,349,618
467,823
836,518
314,657
63,968,616
403,213
8,549
141,473
64,521,851
51,154,280
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, 2015, holders of the
Warrants were entitled to purchase 5.66 Class A Shares and receive
$12.50 in cash at an exercise price of $54.50 for each Series A Warrant
and $60.15 for each Series B Warrant. The Warrants have a seven-year
term from the date initially is Business Combinations sued and will
expire on February 14, 2018. A holder may exercise the Warrants by
paying the applicable exercise price in cash or exercising on a cashless
basis. The Warrants are freely transferable by the holder. At December
31, 2015 and 2014, there were 239,316 and 240,816 Series A Warrants
outstanding, respectively, and 323,999 and 324,383 Series B Warrants
outstanding, respectively.
41
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Tronox Limited
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
Dividends
During 2015 and 2014, we declared and paid quarterly dividends to
holders of our Class A Shares and Class B Shares as follows:
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Dividend per share
Total dividend
Record date
(close of business) March 9 May 18 August 19 November 16
$0.25
$ 29
$0.25
$ 30
$0.25
$ 30
$0.25
$ 29
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Dividend per share
Total dividend
Record date
(close of business) March 10 May 19 August 18 November 17
$0.25
$ 29
$0.25
$ 29
$0.25
$ 29
$0.25
$ 30
Accumulated Other Comprehensive Loss Attributable
to Tronox Limited
The tables below present changes in accumulated other comprehensive
loss by component for 2015, 2014 and 2013.
Cumulative
Translation
Adjustment
Pension
Liability
Adjustment
$
4
(195)
$ (99)
28
(24)
$ (215)
(99)
35
$ (279)
(215)
2
$ (69)
(46)
(2)
$ (117)
12
Total
$ (95)
(167)
(22)
$ (284)
(145)
33
$ (396)
(203)
—
$ (494)
3
3
$ (102)
$ (596)
Balance, January 1, 2013
Other comprehensive income (loss)
Amounts reclassified
from accumulated other
comprehensive loss
Balance, December 31, 2013
Other comprehensive loss
Amounts reclassified
from accumulated other
comprehensive loss
Balance, December 31, 2014
Other comprehensive income (loss)
Amounts reclassified
from accumulated other
comprehensive loss
Balance, December 31, 2015
42
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 Black Economic
Empowerment (“BEE”) legislation in South Africa. Exxaro is entitled to
exchange this interest for approximately 3.2% in additional Class B
Shares under certain circumstances. 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 the consoli-
dated financial statements.
Noncontrolling interest activity was as follows:
Balance at January 1, 2013
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
Balance at December 31, 2014
Net income attributable to noncontrolling interest
Effect of exchange rate changes
Balance at December 31, 2015
$ 233
36
(70)
199
10
(31)
$ 178
11
(77)
$ 112
22. Share-based Compensation
Compensation expense consisted of the following:
Year Ended December 31,
2015
2014
2013
Restricted shares and restricted
share units
Options
T-Bucks Employee Participation Plan
Long-term incentive plan
Total share-based compensation
expense
$ 15
5
2
—
$ 22
$ 13
7
2
(2)
$ 20
$ 10
5
2
1
$ 18
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 apprecia-
tion 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 of Directors (the “Board”) in its
discretion deems appropriate, including any combination of the above.
Subject to further adjustment, the maximum number of shares which
may be the subject of awards (inclusive of incentive options) is
12,781,225 Class A Shares.
Restricted Shares
During 2015, 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 2015:
Number of Shares
Weighted Average
Grant Date
Fair Value
Outstanding, January 1, 2015
Granted
Vested
Forfeited
Outstanding, December 31, 2015
Expected to vest, December 31, 2015
635,295
66,108
(197,545)
(130,580)
373,278
372,713
$ 22.82
22.60
22.07
26.14
$ 22.02
$ 22.02
At December 31, 2015, there was $1 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 1.3 years. The weighted-average grant-date
fair value of restricted shares granted during 2015, 2014 and 2013 was
$22.60 per share, $22.17 per share, and $21.18 per share, respectively.
The total fair value of restricted shares that vested during 2015, 2014
and 2013 was $4 million, $8 million, and $2 million, respectively.
Restricted Share Units (“RSUs”)
During 2015, 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 2015:
Outstanding, January 1, 2015
Granted
Vested
Forfeited
Number of Shares
875,776
948,487
(265,172)
(65,064)
Outstanding, December 31, 2015
1,494,027
Expected to vest, December 31, 2015
1,460,857
Weighted Average
Grant Date
Fair Value
$ 22.17
23.47
21.69
22.96
$ 23.04
$ 23.03
At December 31, 2015, there was $17 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 1.7 years. The weighted-average grant-date fair value of
restricted share units granted during 2015, 2014 and 2013 was $23.47
per share, $22.37 per share, and $21.06 per share, respectively. The total
fair value of RSUs that vested during 2015, 2014 and 2013 was $6 million,
$3 million and less than $1 million, respectively.
Options
During the 2015, 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 2015:
Outstanding,
January 1, 2015
Granted
Exercised
Forfeited
Expired
Number of
Options
2,560,875
2,380
(141,473)
(231,815)
—
Weighted
Average
Exercise
Price
Weighted
Average
Contractual
Life (years)
Intrinsic
Value
7.88
$ 8
$21.14
22.69
19.37
22.13
—
Outstanding,
December 31, 2015 2,189,967
$21.15
7.39
Expected to vest,
December 31, 2015
906,337
$20.78
7.71
Exercisable,
December 31, 2015 1,275,676
$21.41
7.16
$—
$—
$—
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 2015, 2014 and 2013 was less than $1 million, $2 million,
and less than $1 million, respectively. We issue new shares upon the
exercise of options. During 2015 and 2014, we received $3 million
and $6 million, respectively, in cash for the exercise of stock options.
43
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Tronox Limited
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
At December 31, 2015, unrecognized compensation expense
related to options, adjusted for estimated forfeitures, was $3 million,
which is expected to be recognized over a weighted-average period of
1 year.
During 2015 and 2014, we granted 2,380 and 915,988 options,
respectively, with a weighted average grant date fair value of $7.04 and
$8.19, respectively.
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:
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
January 5, 2015
2,380
$ 22.69
1.83%
4.41%
48%
10
6
$ 7.04
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 volatility assumption is based
on historical price movements of our peer group.
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 contri-
butions 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, 2015 and 2014 was 548,234 shares.
Long-Term Incentive Plan
We have a long-term incentive plan (the “LTIP”) for the benefit of
certain qualifying employees of Tronox subsidiaries in South Africa and
Australia. The LTIP is classified as a cash settled compensation plan,
and is re-measured to fair value at each reporting date. At December 31,
2015 and 2014, the LTIP plan liability was less than $1 million and
$1 million, respectively.
44
23. Pension and Other Postretirement Healthcare Benefits
We sponsor two noncontributory defined benefit retirement plans,
the qualified retirement plan and Alkali qualified retirement plan in the
United States, a defined benefit retirement plan in the Netherlands,
a collective defined contribution plan in the Netherlands, and a South
Africa postretirement 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 held exclusively
for the benefit of the plan participants. Benefits under the U.S. Qualified
Plan were generally calculated based on years of service and final
average pay. The U.S. Qualified Plan was frozen and closed to new
participants on June 1, 2009.
Postretirement Healthcare Plan — We sponsored an unfunded U.S.
postretirement healthcare plan. Effective January 1, 2015, we eliminated
the pre-65 retiree medical programs. Participants who retired prior
to January 1, 2015 received a one-time subsidy aggregating to less
than $1 million towards medical cost through a health reimbursement
arrangement (“HRA”) that we established for them. Benefits under
this plan for participants who have not retired by January 1, 2015 were
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 during 2014, 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 during 2014.
Tronox Alkali Qualified Retirement Plan — As part of the Alkali
Transaction, we established the Tronox Alkali Corporation Union
Retirement Plan (the “Alkali Qualified Plan”) to cover eligible employees
of Tronox Alkali Corporation effective April 1, 2015. The plan is open
to union employees of Alkali. The Alkali Qualified Plan is the same as
the FMC Corporation Employees’ Retirement Program Part II Union
Hourly Employees’ Retirement Plan provided to eligible participants
for services prior to the Alkali Transaction Date. These two plans are
aggregated to form the full pension for eligible participants. Under the
Tronox Alkali Qualified Plan, each eligible employee will automatically
become a participant upon completion of one year of credited services.
Retirement benefits under this plan are calculated based on the total
years of service of an eligible participant, multiplied by a specified benefit
rate in effect at the termination of the plan participant’s years of service.
FMC will be responsible for the portion of this total benefit accrued to
eligible participants for all the years of service up to March 31, 2015,
and we will be responsible for the portion of the total benefit accrued
to participants from April 1, 2015 up to the date of termination of a
participant’s years of service.
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. During the fourth quarter
of 2014, in response to the tax and pension legislation changes in the
Netherlands, our benefit committee approved to end future benefit
accruals under the Netherlands Plan and replaced it with a multiemployer
plan effective January 1, 2015. As a result of this decision, effective from
January 1, 2015, benefit contributions commenced under the multiem-
ployer plan while the Netherlands Plan became effectively “frozen”. This
action ended future benefit accrual for participants under the current
plan, resulting in a curtailment gain of $3 million, which was recognized
in “Other income (expense), net” in the Consolidated Statements of
Operations during 2014. Such amounts had previously been recognized
as unamortized prior service costs in “Accumulated other comprehen-
sive loss” 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 at December 31, 2014.
Netherlands Collective Contribution Plan — Effective January 1,
2015, we ceased offering benefits under the Netherlands Plan to
qualifying employees and established a multiemployer plan, the
collective contribution plan (“CDC plan”). Under the CDC plan,
employees earn benefits based on their pensionable salaries each year
determined using a career average benefit formula. The collective
bargaining agreement between us and the participants require us to
contribute 20.6% of the participants’ pensionable salaries into a pooled
fund administered by the industrywide Pension Fund for Graphical
Industry (“PGB”). The pensionable salary is the annual income of
employees subject to a cap, which is adjusted each year to reflect the
current requirements of the Netherlands’ Wages and Salaries Tax Act
of 1964. Our obligation under this new plan is limited to the fixed
percentage contribution we make each year. That is, investment risks,
mortality risks and other actuarial risks typically associated with a
defined benefit plan are borne by the employees. Additionally, the
employees are entitled to any returns generated from the investment
activities of the fund.
The following table outlines the details of our participation in
the CDC plan for the year ended December 31, 2015. The CDC disclo-
sures provided herein are based on the fund’s 2014 annual report, which
is the most recently available public information. On the basis of the
total plan assets and accumulated benefit obligation information in the
plan’s annual report, the zone status was green as of December 31, 2014.
A green zone status indicates that the plan was at least 80 percent funded.
The “FIP/RP Status Pending/Implemented” column indicates whether
a financial improvement plan (FIP) or a rehabilitation plan (RP) is either
pending or has been implemented. As of December 31, 2015, we are
not aware of any financial improvement or rehabilitation plan being
implemented or pending. The last column lists the expiration date of
the collective-bargaining agreement to which the plan is subject.
Pension Protection Act Zone Status
Tronox Contributions
Pension
Fund
PGB
EIN/Pension
Plan Number
NA
2015
NA
FIP/RP
Pending/
Implememted
2014
Green
No
2015
$4
2014
NA
2013
NA
Surcharge
Imposed
No
Expiration Date
of Collective
Bargaining
Agreememt
12/31/2019
On the basis of the information available in the plan’s
2014 annual report, our contribution does not constitute more than
5 percent of the total contribution to the plan by all participants.
During 2015, the fund did not impose any surcharge on us.
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 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-retire-
ment and death-in-service benefits; and, (iii) members employed on
or after January 1, 2002 receive no post-retirement and death-in-
service benefits.
45
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Tronox Limited
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
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, 2015 and 2014. The benefit obligations and plan assets
associated with our principal benefit plans are measured on December 31.
Year Ended December 31,
2015
2014
2015
2014
Retirement Plans
Postretirement
Healthcare Plans
$ 581
4
19
(42)
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
—
—
—
—
(31)
(4)
(16)
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
rate changes
Benefits paid (1)
Administrative expenses
Fair value of plan assets,
end of year
Net over (under) funded
status of plans
$ 524
4
21
113
$ 8
—
1
—
$ 23
1
1
1
(19)
(2)
(1)
1
(27)
—
—
(33)
(3)
511
581
417
(8)
17
—
(14)
(31)
(4)
398
53
17
1
(16)
(33)
(3)
—
—
—
—
—
—
7
—
—
—
—
—
—
—
—
(13)
(3)
—
(1)
—
8
—
—
1
—
—
(1)
—
377
417
—
—
$ (134)
$ (164)
$ (7)
$ (8)
Classification of amounts recognized in the
Consolidated Balance Sheets:
Accrued liabilities
Pension and postretirement
healthcare benefits
(164)
$ —
(134)
$ —
Total liabilities
Accumulated other
comprehensive
(income) loss
Total
(134)
(164)
104
$ (30)
117
$ (47)
$ —
$ —
(7)
(7)
(2)
$ (9)
(8)
(8)
(2)
$ (10)
(1) We expect 2016 contributions to be $15 million and $5 million for the qualified
retirement plan and Alkali qualified retirement plan, respectively.
46
At December 31, 2015, our qualified retirement plan was in an
underfunded status of $116 million. As a result, we have a projected
minimum funding requirement of $18 million for 2015, which will be
payable in 2016.
December 31, 2015
December 31, 2014
The
Alkali
Qualified Qualified Netherlands
Plan
Plan
Plan
Qualified
Plan
Alkali
The
Qualified Netherlands
Plan
Plan
Accumulated
benefit
obligation
Projected benefit
obligation
$ 370
(370)
$ 5
$ 135
$ 429
$ —
$ 152
(5)
(135)
(429)
—
(152)
Fair value of
plan assets
Funded status –
underfunded $ (116) $ (3)
254
2
121
280
—
137
$ (14)
$ (149)
$ —
$ (15)
Expected Benefit Payments — The following table shows the
expected cash benefit payments for the next five years and in the
aggregate for the years 2021 through 2025:
2016
2017
2018
2019
2020 2021-2015
$30
$30
Retirement Plans (1)
Postretirement
$2
$—
Healthcare Plan
(1) Includes benefit payments expected to be paid from the U.S. qualified retirement plans
of $28 million in 2016, $28 million in 2017, $27 million in 2018 $27 million in 2019, $28 million
in 2020, and $134 million in the aggregate for the period 2021 through 2025.
$153
$—
$—
$—
$—
$31
$30
$30
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 2015, 2014, and 2013:
Retirement Plans
Healthcare Plans
Year Ended December 31,
2015
2014
2013
2015
2014
2013
Net periodic cost:
Service cost
Interest cost
Expected return
on plan assets
Net amortization
of actuarial loss
Curtailment gains
Total net periodic
cost (income)
$ 4
19
$ 4
21
$ 5
20
$ —
1
$ 1
1
$ 1
1
(22)
(23)
(20)
—
—
—
3
—
1
(3)
2
—
—
—
1
(6)
—
—
$ 4
$ —
$ 7
$ 1
$ (3)
$ 2
Pretax amounts that are expected to be reclassified from
“Accumulated other comprehensive loss” in the Consolidated Balance
Sheets to retirement expense during 2016 related to unrecognized actuarial
gains are $2 million for the U.S. retirement plans and unrecognized
settlement gain of $3 million for the U.S. postretirement healthcare plan.
Assumptions — The following weighted average assumptions were used to determine net periodic cost:
2015
Alkali
Qualified
Plan
Qualified Netherlands
Plan
Plan
Qualified
Plan
Discount rate
Expected return on plan assets
Rate of compensation increases
3.75%
5.95%
—
4.15%
4.46%
—
2.25%
4.75%
—
4.50%
6.50%
—
2014
Alkali
Qualified
Plan
—
—
—
Netherlands
Plan
Qualified
Plan
3.50%
4.75%
3.25%
3.75%
5.30%
—
2013
Alkali
Qualified
Plan
—
—
—
Netherlands
Plan
3.50%
4.75%
3.50%
The following weighted average assumptions were used in estimating the actuarial present value of the plans’ benefit obligations:
2015
Alkali
Qualified
Plan
Qualified Netherlands
Plan
Plan
Qualified
Plan
Discount rate
Rate of compensation increases
4.75%
—
5.00%
—
2.25%
—
3.75%
—
2014
Alkali
Qualified
Plan
—
—
Netherlands
Plan
Qualified
Plan
2.25%
—
4.50%
—
2013
Alkali
Qualified
Plan
—
—
Netherlands
Plan
3.50%
3.25%
Discount Rate — The discount rates selected for estimation of the
actuarial present value of the benefit obligations the qualified plan
were 4.75% and 3.75% as of December 31, 2015 and 2014, respectively.
The 2015 and 2014 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.
The discount rates selected for estimating the actuarial
present value of the benefit obligation of Alkali plan was 5.0% as of
December 31, 2015 which was selected based on the results of a cash
flow matching analysis, which projected the expected cash flows of the
plan using Aon Hewitt AA Above Median yield curve developed from a
U.S. currency corporate bonds with at least $250 million outstanding.
The discount rates selected for estimating the actuarial
present value of the benefit obligation of the Netherlands plan was
2.25% both as of December 31, 2015 and 2014, which is based
on long-term Euro corporate bond index rates that correlate with
anticipated cash flows associated with future benefit payments.
During 2014, the Society of Actuaries issued an updated
mortality table and improvement scale that indicated significant
mortality improvement over the prior table. We concluded that the
updated table represented our best estimate of mortality. This change
in assumption resulted in an increase in our projected benefit obligation
of $36 million as compared to December 31, 2013. In 2015, the mortality
improvement scale that had been used in the 2014 mortality table
was updated by the Society of Actuaries to reflect actual experience in
mortality rates. We updated our mortality assumption accordingly
resulting in a decrease of $8 million to our projected benefit obligation
as compared to December 31, 2014.
The following weighted-average assumptions were used in
determining the actuarial present value of the South African
Postretirement Healthcare Plan:
Discount rate
10.94%
9.16%
10.14%
2015
2014
2013
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 contribu-
tions 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.
47
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
Plan Assets — Asset categories and associated asset allocations for our
funded retirement plans at December 31, 2015 and 2014:
December 31,
2015
2014
Actual
Target
Actual
Target
Qualified Plan:
Equity securities
Debt securities
Cash and cash
equivalents
37%
61
2
38%
62
—
37%
62
1
Total
100%
100%
100%
Alkali Qualified Plan:
Debt securities
Total
Netherlands:
Equity securities
Debt securities
Real estate
Cash and cash
equivalents
100%
100%
100%
100%
24%
64
11
1
25%
62
10
3
—
—
35%
63
—
2
38%
62
—
100%
—
—
35%
62
—
3
Total
100%
100%
100%
100%
The U.S. Qualified Retirement Plan is administered by a
board-appointed committee that has fiduciary responsibility for the
plan’s management. The committee maintains an investment policy
stating the guidelines for the performance and allocation of plan assets,
performance review procedures and updating of the policy. At least
annually, the U.S. plan’s asset allocation guidelines are reviewed in light
of evolving risk and return expectations.
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.
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 Alkali plan is administered by a board-appointed
committee that has fiduciary responsibility for the plan’s management.
The committee is responsible for the oversight and management of
the plan’s investments. The committee maintains an investment policy
that provides guidelines for selection and retention of investment
managers or funds, allocation of plan assets and performance review
procedures and updating of the policy. At least annually, the Alkali
plan’s asset allocation guidelines are reviewed in light of evolving risk
and return expectations.
The objective of the committee’s investment policy is to
manage the plan assets in such a way that will allow for the on-going
payment of the Company’s obligation to the beneficiaries. To meet this
objective, the committee has structured a portfolio that will provide
liquidity to meet the plan benefit payments and expense payable from
the plan under ERISA and manage the plan asset in a liability frame-
work. To provide adequate liquidity and control risk, the investment
policy sets our broad investment guidelines that permit investment
managers and funds to invest in liability-hedging assets to control the
plan’s surplus volatility. This includes investment in high-quality,
investment grade bonds with durations that approximate the durations
of the liabilities.
Fixed income portfolio managers are permitted to use fixed
income derivative contracts to achieve general portfolio objectives in
accordance with the risk management and internal control procedures
agreed between the manager and the committee’s advisor. The overall
performance of the liability-hedging assets will be determined primarily
by how they track the investable custom liability-hedging mandate they
are designed to hedge. Cash equivalents can he held to meet the benefits
obligations of the plan and to pay fees. The plan’s cash equivalents
investments could be invested in a diversified mix of high-quality,
short-term debt securities, including commercial paper, bankers’
acceptance, certificates of deposits and US government obligations.
Investment in return seeking assets is prohibited.
48
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. 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,
2015 are summarized below:
U.S. Qualified Pension
Fair Value Measurement at December 31, 2015, Using:
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Netherlands Pension
Fair Value Measurement at December 31, 2015, Using:
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Asset category:
Equity securities —
Non-U.S.
Pooled Funds
Debt securities —
Non-U.S.
Pooled Funds
Real Estate
Pooled Funds
Cash equivalents
Total at fair value
$ —
$ 29(1)
$ —
$ 29
—
—
—
$ —
77(2)
13(3)
2(4)
$ 121
—
—
—
$ —
77
13
2
$ 121
(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 are therefore 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 are therefore deemed Level 2 inputs.
(4) For cash equivalents, the fair value is based on observable inputs but do not solely rely
on quoted market prices and are therefore deemed level 2 inputs.
$ —
$ 93(1)
$ —
$ 93
—
155(2)
—
155
2014 are summarized below:
The fair values of pension investments as of December 31,
Asset category:
Commingled
Equity Funds
Debt securities
Commingled Fixed
Income Funds
Cash & cash equivalents
Commingled Cash
Equivalents Fund
Total at fair value
—
$ —
6(3)
$ 254
—
$ —
6
$ 254
(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.
Alkali Pension
Fair Value Measurement at December 31, 2015, Using:
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Asset category:
Debt securities
US Fixed Income
Funds
Commingled Fixed
Income Funds
Total at fair value
$ 1(1)
—
$ 1
$ —
1(2)
$ 1
$ —
—
$ —
(1) For US fixed income funds owned by the funds, fair value is based on observable
quoted prices on active exchanges, which are Level 1.
(2) For commingled fixed income funds, fair value is based on observable inputs of
comparable market transactions, which are Level 2 inputs.
Total
$ 1
1
$ 2
U.S. Pension
Fair Value Measurement at December 31, 2014, Using:
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
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
(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.
49
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
Netherlands Pension
Fair Value Measurement at December 31, 2015, Using:
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
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)
$ —
$ 36
—
—
$ —
86(2)
15(3)
$ 137
—
—
$ —
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.
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 2015, 2014 and
2013, our matching contribution was 100% of the first 6% of employee
contributions. The Board has approved an additional company
discretionary contribution of 6% of pay for 2015, 2014 and 2013. 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 $5 million, $4 million,
and $3 million during 2015, 2014, and 2013, respectively, which
was included in “Selling, general and administrative expenses” in the
Consolidated Statements of Operations. Compensation expense
associated with our discretionary contribution was $5 million, $4
million, and $4 million during 2015, 2014, and 2013, respectively,
which was included in “Selling, general and administrative 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 with the
investment options elected by plan participants. Compensation expense
associated with our matching contribution to the SRP was $1 million,
$1 million, and less than $1 million during 2015, 2014, and 2013,
respectively, which was included in “Selling, general and administrative
expenses” in the Consolidated Statements of Operations.
24. Related Party Transactions
Exxaro
We have service level agreements with Exxaro for services including
research and development, as well as information technology services,
which expired during 2014. Such service level agreements amounted
to $2 million, $3 million, and $5 million of expense during 2015, 2014,
and 2013, respectively, which was included in “Selling general and
administrative expense” in the Consolidated Statements of Operations.
Additionally, we have a professional service agreement with Exxaro
related to the Fairbreeze construction project. During 2015, 2014, and
2013, we paid $3 million each to Exxaro, which was capitalized in
“Property, plant and equipment, net” on our Consolidated Balance
Sheets. At December 31, 2015 and 2014, we had $1 million of related
party payables, which were recorded in “Accounts payable” on our
Consolidated Balance Sheets.
Agreements and Transactions with Affiliates
We hold a membership in ANSAC, which is responsible for promoting
exports of US-produced soda ash. Under the ANSAC membership
agreement, Alkali’s exports of soda ash to all markets except Canada,
European community, European Free Trade Association and the South
African Customs Union are exclusively through ANSAC. Certain sales
and marketing costs incurred by ANSAC are charged directly to us.
Selling, general and administrative expenses in the Consolidated
Statements of Operations include amounts charged to us by ANSAC
principally consisting of salaries, benefits, office supplies, professional
fees, travel, rent and certain other costs, amounted to $3 million for
2015. These transactions do not necessarily represent arm’s length
transactions and may not represent all costs if Alkali operated on a
stand-alone basis. During 2015, we recorded net sales to ANSAC of
$210 million which was included in “Net sales” in the Consolidated
Statements of Operations. At December 31, 2015, we had $47 million of
related party receivable from ANSAC and $2 million of related party
payables to ANSAC, which were recorded in “Accounts receivable” and
“Accounts payable”, respectively, on our Consolidated Balance Sheets.
Additionally, at December 31, 2015, we had a $1 million payable to
50
ANSAC for freight costs incurred on our behalf, which was included in
“Accounts payable” in the Consolidated Balance Sheet.
In connection with the Alkali Transaction, we acquired FMC’s
one-third ownership interest in a joint venture, Natronx Technologies
LLC “Natronx”. Natronx manufactures and markets sodium-based,
dry sorbents for air pollution control in electric utility and industrial
boiler operations. Pursuant to an agreement with Natronx, we purchase
ground trona from a third-party vendor as an agent on its behalf (the
“Supply Agreement”). We also provide certain administrative services
such as accounting, technology and customer services to Natronx under
a service level agreement (the “SLA”). We are reimbursed by Natronx
for the related costs incurred under the Supply Agreement and the SLA.
At December 31, 2015, we had $1 million of receivables related to
these agreements, which were recorded in “Accounts receivable, net of
allowance for doubtful accounts” on the 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 Executive Officer,
who is our chief operating decision maker (“CODM”), to assess
performance and to allocate resources.
Prior to the Alkali Transaction, we had two operating and
reportable segments, Mineral Sands and Pigment, based on the way
the management team was organized and our CODM monitored
performance, aligned strategies, and allocated resources. As a result of
the increased interdependency between the Mineral Sands and Pigment
businesses and related organizational changes, our CODM determined
that it was better to review the Mineral Sands and Pigment businesses,
along with our electrolytic business, as a combined one, TiO2, and to
assess performance and allocate resources at that level. Following the
Alkali Transaction, we restructured our organization to reflect two
business segments, TiO2 and Alkali. The change in reportable segments
for financial reporting purposes that occurred in the second quarter of
2015 has been retrospectively applied.
Our TiO2 operating segment includes the following:
• exploration, mining, and beneficiation of mineral sands deposits;
• production of titanium feedstock (including chloride slag, slag fines,
and rutile), pig iron, and zircon;
• production and marketing of TiO2; and
• electrolytic manganese dioxide manufacturing and marketing.
Our Alkali operating segment includes the mining of trona
ore for the production from trona of natural soda ash and its deriva-
tives: sodium bicarbonate, sodium sesquicarbonate and caustic soda
(collectively referred to as “alkali-products”).
Segment performance is evaluated based on segment
operating income (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.
Net sales and income (loss) from operations by segment were
as follows:
Year Ended December 31,
2015
2014
2013
TiO2 segment
Alkali segment
Net sales
TiO2 segment
Alkali segment
Corporate
Income (loss) from operations
Interest and debt expense, net
Net gain (loss) on liquidation of
non-operating subsidiaries
Loss on extinguishment of debt
Other income, net
$ 1,510
602
$ 2,112
$ (123)
69
(64)
(118)
(176)
—
—
28
$ 1,737
—
$ 1,737
$
78
—
(78)
—
(133)
(35)
(8)
27
Loss before income taxes
Income tax provision
(266)
(41)
(149)
(268)
$ 1,922
—
$ 1,922
$
70
—
(67)
3
(130)
24
(4)
46
(61)
(29)
Net loss
$ (307)
$ (417)
$
(90)
Net sales to external customers, by geographic region, based
on country of production, were as follows:
Year Ended December 31,
2015
2014
2013
U.S. operations
International operations:
Australia
South Africa
The Netherlands
Total net sales
$ 1,223
$ 749
$ 793
380
313
196
$ 2,112
426
329
233
$ 1,737
424
481
224
$ 1,922
Net sales from external customers for each similar product
were as follows:
Year Ended December 31,
2015
2014
2013
Pigment
Alkali
Titanium feedstock and co-products
Electrolytic
Total net sales
$ 976
602
426
108
$ 2,112
$ 1,179
—
445
113
$ 1,737
$ 1,169
—
625
128
$ 1,922
During 2015, our ten largest third-party TiO2 customers and
our ten largest Alkali customers represented approximately 29% and
18%, respectively, of our consolidated net sales. ANSAC accounted for
10% of our consolidated net sales. See Note 24 for further details.
51
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
Depreciation, amortization and depletion by segment were
as follows:
Year Ended December 31,
TiO2 segment
Alkali segment
Corporate
2015
$ 246
42
6
2014
$ 289
—
6
2013
$ 327
—
6
Total depreciation, amortization
and depletion
$ 294
$ 295
$ 333
Capital expenditures by segment were as follows:
Year Ended December 31,
TiO2 segment
Alkali segment
Corporate
Total capital expenditures
2015
$ 164
26
1
$ 191
2014
$ 184
—
3
$ 187
2013
$ 159
—
6
$ 165
Total assets by segment were as follows:
December 31,
TiO2 segment
Alkali segment
Corporate
Total
2015
2014
$ 3,055
1,690
327
$ 5,072
$ 3,821
—
1,244
$ 5,065
Property, plant and equipment, net and mineral leaseholds,
net, by geographic region, were as follows:
Tronox Finance, 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 due 2020 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 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 distribu-
tions, and other equity changes); (iii) the Guarantor Subsidiaries alone;
(iv) the Non-Guarantor Subsidiaries alone; and (v) the subsidiary
issuer, Tronox Finance.
The guarantor condensed consolidating financial statements
are presented on a legal entity basis, not on a business segment basis.
The indentures governing the Senior Notes due 2020 provide 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;
December 31,
U.S. operations
International operations:
South Africa
Australia
The Netherlands
Total
2015
2014
• Designation of such Guarantor Subsidiary as an “unrestricted
$ 1,687
$ 211
747
968
45
$ 3,447
941
1,083
50
$ 2,285
subsidiary” under the indenture;
• 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 due 2020 and all other obligations under the indenture;
or
• Release or discharge of the Guarantor Subsidiary’s guarantee of
certain other indebtedness.
26. Guarantor Condensed Consolidating Financial Statements
The obligations of Tronox Finance, our wholly-owned subsidiary, under
the Senior Notes due 2020 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,
52
Guarantor Condensed Consolidating Statements of Operations
Year Ended December 31, 2015
(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
Restructuring expenses
Income (loss) from operations
Interest and debt expense, net
Intercompany interest income (expense)
Other income (expense), net
Equity in earnings of subsidiary
Income (loss) before income taxes
Income tax benefit (provision)
Net income (loss)
Net income attributable to noncontrolling interest
$ 2,112
1,992
120
(217)
(21)
(118)
(176)
—
28
—
(266)
(41)
(307)
11
Net income (loss) attributable to Tronox Limited $ (318)
$ (178)
(165)
(13)
3
—
(10)
—
—
(1)
672
661
—
661
11
$ 650
$ —
—
—
(1)
—
(1)
(103)
—
—
—
(104)
31
(73)
—
$ (73)
$ —
—
—
(23)
—
(23)
—
518
4
(616)
(117)
(201)
(318)
—
$ (318)
$ 1,636
1,527
109
(155)
(15)
(61)
(7)
(568)
(2)
(56)
(694)
133
(561)
—
$ (561)
$ 654
630
24
(41)
(6)
(23)
(66)
50
27
—
(12)
(4)
(16)
—
$ (16)
Guarantor Condensed Consolidating Statements of Comprehensive Income (Loss)
Year Ended December 31, 2015
(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
$ (307)
$ 661
(292)
15
(277)
(584)
11
(77)
(66)
508
(14)
494
1,155
11
(77)
(66)
$ (73)
—
—
—
(73)
—
—
—
$ (318)
$ (561)
$ (16)
(215)
15
(200)
(518)
(293)
18
(275)
(836)
(292)
(4)
(296)
(312)
—
—
—
—
—
—
—
—
—
$ (518)
$ 1,221
$ (73)
$ (518)
$ (836)
$ (312)
53
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
Guarantor Condensed Consolidating Balance Sheets
As of December 31, 2015
(Millions of U.S. dollars)
Assets
Cash and cash equivalents
Restricted cash
Accounts receivable
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
Short-term debt
Other current liabilities
Long-term debt
Intercompany loans payable
Other long-term liabilities
Total liabilities
Total equity
Total liabilities and equity
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
$ 229
5
391
630
46
—
1,843
1,604
—
324
$ 5,072
$ 150
398
2,955
—
459
3,962
1,110
$ 5,072
$ —
—
—
(24)
(4,345)
2,596
—
—
(7,106)
—
$ (8,879)
$ —
(4,345)
—
(7,106)
—
(11,451)
2,572
$ (8,879)
$ —
—
—
—
657
—
—
—
692
32
$ 1,381
$ —
45
1,498
9
—
1,552
(171)
$ 1,381
$
1
—
—
—
1,473
(3,274)
—
—
5,936
—
$ 4,136
$ —
2,443
—
694
1
3,138
998
$ 4,136
$
165
5
303
439
1,149
678
1,388
1,266
72
258
$ 5,723
$
150
2,081
—
6,334
267
8,832
(3,109)
$ 5,723
63
$
—
88
215
1,112
—
455
338
406
34
$ 2,711
$ —
174
1,457
69
191
1,891
820
$ 2,711
54
Guarantor Condensed Consolidating Statements of Cash Flows
Year Ended December 31, 2015
(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 on sale of assets
Acquisition of business
Investment in subsidiaries
Return of capital from subsidiaries
Collections of intercompany loans
Intercompany loans
Cash provided by (used in) investing activities
Cash Flows from Financing Activities:
Repayments of debt
Repayments of intercompany loans
Proceeds from debt
Proceeds from intercompany loans
Contribution from parent
Return of capital to parent
Partnership distribution to parent
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
$
(307)
294
229
216
(191)
1
(1,650)
—
—
—
—
(1,840)
(18)
—
750
—
—
—
—
(15)
(117)
3
603
661
$
—
(662)
(1)
—
—
—
1,526
(24)
(725)
1,386
2,163
—
725
—
(1,386)
(1,526)
24
1
—
—
—
(2,162)
$ (73)
—
596
523
—
—
—
—
—
79
(589)
(510)
—
—
—
—
—
—
—
(13)
—
—
(13)
$ (318)
—
352
34
—
—
—
(1,526)
24
26
(3)
(1,479)
—
(103)
—
1,380
—
—
—
—
(117)
3
1,163
$ (561)
232
542
213
(68)
1
(1,650)
—
—
43
(237)
(1,911)
(2)
(602)
150
3
1,526
(24)
(1)
(2)
—
—
1,048
$ (16)
62
(599)
(553)
(123)
—
—
—
—
577
(557)
(103)
(16)
(20)
600
3
—
—
—
—
—
—
567
(26)
—
—
—
—
(26)
(1,047)
—
—
(282)
(650)
(115)
$ 1,276
$ 229
$ —
$ —
$ —
$ —
$
$
283
1
$
$
815
165
$ 178
$ 63
We revised each of our guarantor condensed consolidating financial statements as of December 31, 2014 and 2013 and for the two years
then ended as follows:
• Certain amounts within the guarantor condensed consolidating statements of comprehensive income (loss) were revised to primarily reflect the
proportionate share of cumulative translation adjustments between the Parent Company and Eliminations column.
• Certain financial statement line items have been expanded and reclassifications were made to enhance transparency.
These revisions, which we determined are not material to our prior year condensed financial statements or consolidated financial state-
ments based on quantitative and qualitative considerations, did not affect our consolidated financial position, consolidated results of operations or
consolidated cash flows.
55
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
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
Net income (loss) attributable to Tronox Limited
$ (427)
As Previously Filed Guarantor Condensed Consolidating Statements of Operations
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
$ (211)
(238)
27
3
—
30
—
—
—
—
53
759
842
—
842
10
$ 832
$ —
—
—
—
—
—
(59)
—
—
—
—
—
(59)
18
(41)
—
$ (41)
$ —
—
—
(13)
—
(13)
—
546
—
—
1
(706)
(172)
(255)
(427)
—
$ (427)
$ 1,224
1,113
111
(140)
(6)
(35)
(4)
(578)
(33)
(2)
(15)
(53)
(720)
20
(700)
—
$ (700)
$ 724
655
69
(42)
(9)
18
(70)
32
(2)
(6)
(12)
—
(40)
(51)
(91)
—
$ (91)
$ (211)
238
27
3
—
30
—
—
—
—
53
759
842
—
842
10
$ 832
$ —
—
—
—
—
—
(59)
—
—
—
—
—
(59)
18
(41)
—
$ (41)
$ —
—
—
(13)
—
(13)
—
546
—
—
1
(706)
(172)
(255)
(427)
—
$ (427)
$ 1,224
(1,113)
111
(140)
(6)
(35)
(4)
(578)
(33)
(2)
(15)
(53)
(720)
20
(700)
—
$ (700)
$ 724
(655)
69
(42)
(9)
18
(70)
32
(2)
(6)
(12)
—
(40)
(51)
(91)
—
$ (91)
Year Ended December 31, 2014
(Millions of U.S. dollars)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Restructuring expenses
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), net
Equity in earnings of subsidiary
Income (loss) before income taxes
Income tax benefit (provision)
Net income (loss)
Net income attributable to noncontrolling interest
Year Ended December 31, 2014
(Millions of U.S. dollars)
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Restructuring expenses
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), net
Equity in earnings of subsidiary
Income (loss) before income taxes
Income tax benefit (provision)
Net income (loss)
Net income attributable to noncontrolling interest
$ 1,737
1,530
207
(192)
(15)
—
(133)
—
(35)
(8)
27
—
(149)
(268)
(417)
10
$ 1,737
(1,530)
207
(192)
(15)
—
(133)
—
(35)
(8)
27
—
(149)
(268)
(417)
10
Net income (loss) attributable to Tronox Limited
$ (427)
56
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
(95)
(48)
(143)
(560)
10
(31)
(21)
186
50
236
1,078
10
(31)
(21)
$ (41)
—
—
—
(41)
—
—
—
$ (427)
$ (700)
$ (91)
(64)
(48)
(112)
(539)
(85)
(47)
(132)
(832)
—
—
—
—
(132)
(3)
(135)
(226)
—
—
—
—
—
$ (539)
$ 1,099
$ (41)
$ (539)
$ (832)
$ (226)
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
Comprehensive income (loss) attributable
to Tronox Limited
$ (417)
$ 842
(95)
(48)
(143)
(560)
10
(31)
(21)
217
50
267
1,109
10
—
10
$ (41)
—
—
—
(41)
—
—
—
$ (427)
$ (700)
(95)
(48)
(143)
(570)
(85)
(47)
(132)
(832)
—
(31)
—
—
(31)
—
$ (91)
(132)
(3)
(135)
(226)
—
—
—
$ (539)
$ 1,099
$ (41)
$ (539)
$ (832)
$ (226)
57
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 Balance Sheets
As of December 31, 2014
(Millions of U.S. dollars)
Assets
Cash and cash equivalents
Restricted cash
Accounts receivable
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
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
$ 1,276
3
277
770
55
—
1,227
1,058
—
399
$ 5,065
$ 366
2,375
—
536
3,277
1,788
$ 5,065
$ —
—
—
(13)
(2,857)
2,934
—
—
(7,130)
(1)
$ (7,067)
$ (2,857)
—
(7,130)
(1)
(9,988)
2,921
$ (7,067)
$ —
—
—
—
35
—
—
—
773
23
$ 831
$ 22
898
9
—
929
(98)
$ 831
$ 283
—
—
—
973
(3,961)
—
—
5,937
—
$ 3,232
$ 846
—
774
2
1,622
1,610
$ 3,232
$ 815
3
188
448
719
1,027
696
599
92
331
$ 4,918
$ 2,152
—
6,257
284
8,693
(3,775)
$ 4,918
$ 178
—
89
335
1,185
—
531
459
328
46
$ 3,151
$ 203
1,477
90
251
2,021
1,130
$ 3,151
As Previous Filed Guarantor Condensed Consolidating Balance Sheets
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
$ 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
As of December 31, 2014
(Millions of U.S. dollars)
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
58
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 loans
Cash provided by (used in) investing activities
Cash Flows from Financing Activities:
Repayments of debt
Repayments of intercompany loans
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)
$ 842
—
(842)
—
—
(51)
(51)
—
51
—
—
—
51
(21)
—
(199)
$ 1,475
$ 1,276
—
$ —
$ —
$ (41)
—
(10)
(51)
—
51
51
—
—
—
—
—
—
—
—
$ —
$ —
$ (427)
—
692
265
—
—
—
—
(51)
—
(116)
6
(161)
$ (700)
217
286
(197)
(76)
—
(76)
(3)
—
—
—
—
(3)
—
—
104
$ 179
$ 283
(276)
$ 1,091
$ 815
$ (91)
78
137
124
(111)
—
(111)
(17)
—
(2)
—
—
(19)
(21)
(27)
$ 205
$ 178
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 provided by (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)
$ 842
—
(842)
—
—
(51)
(51)
—
51
—
—
—
51
(21)
—
(199)
$ 1,478
$ 1,279
—
$ —
$ —
$ (41)
—
(10)
(51)
—
51
51
—
—
—
—
—
—
—
—
$ —
$ —
$ (427)
—
692
265
—
—
—
—
(51)
—
(116)
6
(161)
$ (700)
217
286
(197)
(76)
—
(76)
(3)
—
—
—
—
(3)
—
—
104
$ 179
$ 283
(276)
$ 1,094
$ 818
$ (91)
78
137
124
(111)
—
(111)
(17)
—
(2)
—
—
(19)
(21)
(27)
$ 205
$ 178
59
Notes to Consolidated Financial Statements
Tronox Limited
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)
Guarantor Condensed Consolidating Statements of Operations
Year Ended December 31, 2013
(Millions of U.S. dollars)
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 subsidiaries
Loss on extinguishment of debt
Other income (expense), net
Equity in earnings of subsidiary
Income (loss) before income taxes
Income tax benefit (provision)
Net income (loss)
Net income attributable to noncontrolling interest
$ 1,922
1,732
190
(187)
3
(130)
—
24
(4)
46
—
(61)
(29)
(90)
36
Net income (loss) attributable to Tronox Limited
$ (126)
Consolidated
Eliminations
Tronox
Finance LLC
Parent
Company
Guarantor
Subsidiaries
Non-Guarantor
Subsidiaries
$ (275)
(282)
7
4
11
—
—
—
—
1
348
360
—
360
36
$ 324
$ —
—
—
—
—
(59)
—
—
—
—
—
(59)
18
(41)
—
$ (41)
$ —
—
—
(34)
(34)
—
546
—
—
1
(473)
40
(166)
(126)
—
$ (126)
$ 1,298
1,242
56
(113)
(57)
(6)
(579)
(23)
(3)
12
125
(531)
150
(381)
—
$ (381)
$ 899
772
127
(44)
83
(65)
(33)
47
(1)
32
—
129
(31)
98
—
$ 98
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
Comprehensive income (loss) attributable
to Tronox Limited
$ (90)
(289)
30
(259)
(349)
36
(70)
(34)
$ 360
504
(31)
473
833
36
(70)
(34)
$ (41)
—
—
—
(41)
—
—
—
$ (126)
$ (381)
$ 98
(219)
30
(189)
(315)
(264)
27
(237)
(618)
—
—
—
—
—
—
(310)
4
(306)
(208)
—
—
—
$ (315)
$ 867
$ (41)
$ (315)
$ (618)
$ (208)
60
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
Comprehensive income (loss) attributable
to Tronox Limited
$ (90)
$ 360
(289)
30
(259)
(349)
36
(70)
(34)
$ (315)
574
(31)
543
903
36
—
36
$ 867
$ (41)
—
—
—
(41)
—
—
—
$ (126)
$ (381)
$ 98
(289)
30
(259)
(385)
(264)
27
(237)
(618)
—
(70)
—
—
(70)
—
(310)
4
(306)
(208)
—
—
—
$ (41)
$ (315)
$ (618)
$ (208)
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 loans
Cash provided by (used in) investing activities
Cash Flows from Financing Activities:
Repayments of debt
Repayments of intercompany loans
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
$ 360
—
(360)
—
—
—
(57)
(57)
—
57
—
—
—
—
57
(18)
—
762
$ 713
$ 1,475
—
$ —
$ —
$ (41)
—
(16)
(57)
—
—
57
57
—
—
—
—
—
—
—
—
—
$ —
$ —
$ (126)
—
(58)
(184)
—
—
—
—
—
(57)
—
—
(115)
2
(170)
$ (381)
221
1,243
1,083
(71)
—
—
(71)
(3)
—
—
—
—
—
(3)
$ 98
112
(722)
(512)
(94)
1
—
(93)
(186)
—
945
(29)
—
—
730
—
—
(18)
(354)
1,009
$ 533
$ 179
$
82
$ 1,091
107
$ 98
$ 205
61
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 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 loans
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
$ 360
—
(360)
—
—
—
(57)
(57)
—
57
—
—
—
—
57
(18)
—
762
$ 716
$ 1,478
—
$ —
$ —
$ (41)
—
(16)
(57)
—
—
57
57
—
—
—
—
—
—
—
—
—
$ —
$ —
$ (126)
—
(58)
(184)
—
—
—
—
—
(57)
—
—
(115)
2
(170)
$ (381)
221
1,243
1,083
(71)
—
—
(71)
(3)
—
—
—
—
—
(3)
$ 98
112
(722)
(512)
(94)
1
—
(93)
(186)
—
945
(29)
—
—
730
—
—
(18)
(354)
1,009
$ 533
$ 179
$
85
$ 1,094
107
$ 98
$ 205
62
27. Quarterly Results of Operations (Unaudited)
The following represents our unaudited quarterly results for the years ended December 31, 2015 and 2014. 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 2015:
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
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
$ 385
350
35
(46)
3
$ (49)
$ (0.42)
$ 617
593
24
(118)
1
$ (119)
$ (1.03)
$ 575
536
39
(54)
6
$ (60)
$ (0.52)
$ 535
513
22
(89)
1
$ (90)
$ (0.78)
Unaudited quarterly results for 2014:
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Net sales
Cost of goods sold
Gross profit
Net income (loss)
Net income attributable to noncontrolling interest
Net loss attributable to Tronox Limited
Loss per share, basic and diluted
$ 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)
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.
The $275 million net loss in the fourth quarter of 2014 reflects, in part, a $255 million increase to a full tax valuation allowance
for Australia.
63
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, 2015. In making this
assessment, management used the criteria in Internal Control-Integrated Framework (2013) set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on our assessment using those criteria, management concluded that our internal
control over financial reporting as of December 31, 2015 was effective.
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.
In accordance with SEC guidance, management has elected to exclude Alkali from its December 31, 2015 assessment of internal
control over financial reporting. Alkali is a wholly owned subsidiary and reportable segment, acquired in a purchase business combination on
April 1, 2015 whose total assets and net sales represent 33% and 29%, respectively, of the related consolidated financial statement amounts as
of and for the year ended December 31, 2015.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2015 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.
64
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
Tronox Limited
In our opinion, the accompanying consolidated balance sheets as of December 31, 2015 and 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 years ended December 31,
2015 and December 31, 2014 present fairly, in all material respects, the financial position of Tronox Limited and its subsidiaries at December 31,
2015 and 2014, and the results of their operations and their cash flows for the years ended December 31, 2015 and 2014 in conformity with
accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2015 based on criteria established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 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 the accompanying Management’s Report on Internal Control Over Financial Reporting.
Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on
our integrated 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 audits 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 audits
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 presenta-
tion. 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 audits also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audits provide 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.
As described in the accompanying Management’s Report on Internal Control Over Financial Reporting, management has excluded
Alkali Chemicals from its assessment of internal control over financial reporting as of December 31, 2015 because it was acquired by the
Company in a purchase business combination during 2015. We have also excluded Alkali Chemicals from our audit of internal control over
financial reporting. Alkali Chemicals is a wholly-owned subsidiary whose total assets and total net sales represent 33% and 29%, respectively,
of the related consolidated financial statement amounts as of and for the year ended December 31, 2015.
Stamford, Connecticut
February 24, 2016
65
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders
Tronox Limited
We have audited the accompanying consolidated statements of operations, comprehensive income (loss), cash flows, and changes in shareholders’
equity of Tronox Limited and subsidiaries (the “Company”) for the year 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 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. 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the results of operations
and cash flows of Tronox Limited and subsidiaries for the year 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 26,
which is as of March 8, 2015).
66
Directors and Executive Management
Tronox Limited Board of Directors
Tronox Limited Executive Management Team
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, 4*
Former V.P. and G.M., Global Merchant Gases,
Air Products & Chemicals, Inc.
Peter Johnston 3, 4
Former Head of Global Nickel Assets,
Glencore
Ilan Kaufthal 1, 2, 3, 4
Chairman,
East Wind Advisors
Wim de Klerk
Finance Director & Board Member,
Exxaro Resources Limited
Sipho Nkosi
Chief Executive Officer & Board Member,
Exxaro Resources Limited
Tom Casey*
Chairman & Chief Executive Officer
Jean-François Turgeon*
Executive Vice President and President, Tronox TiO2
Edward Flynn*
Executive Vice President and President, Tronox Alkali
Katherine C. Harper*
Senior Vice President & Chief Financial Officer
Richard L. Muglia*
Senior Vice President, General Counsel & Corporate Secretary
Willem Van Niekerk*
Senior Vice President, Strategic Planning and
Business Development
John D. Romano*
Senior Vice President & Chief Commercial Officer, Tronox TiO2
Chuck Mancini
Senior Vice President, Chief Integration & Performance Officer
Brennen Arndt
Vice President, Investor Relations
Bud Grebey
Vice President, Corporate Affairs & Communications
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
4. Nominating Subcommittee
Jogita Khilnani
Vice President, Corporate Assurance
Kevin V. Mahoney
Vice President & Controller
John Merturi
Vice President, Treasurer
* Committee Chair
* Tronox Officer
67
67
Shareholder website
https://investor.broadridge.com
Shareholder email inquiries
shareholder@broadridge.com
Electronic Access
https://materials.proxyvote.com/Q9235V
Copies of the Tronox 2015 Annual Report, the proxy, and the 2015
International Financial Report Standards (IFRS) statement are
available at https://materials.proxyvote.com/Q9235V. The company’s
IFRS statement will be available to shareholders no later than
April 29, 2016. 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
Certifications
Tronox has included as Exhibits 31.1, 31.2, 32.1, and 32.2 to its Annual
Report on Form 10-K for fiscal year 2015 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.
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.
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 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.
Corporate Offices
Australia:
Tronox Limited
Lot 22, Mason Road, Kwinana Beach, Western Australia 6167
Postal address: P.O. Box 305, Kwinana, Western Australia 6966
+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 25, 2016,
in Stamford, Connecticut. The proxy will be made available to
shareholders on or about April 14, 2016, 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
Transfer Agent and Registrar
Broadridge Corporate Issuer Solutions
Shareholder Services Telephone:
+1.855.449.0975
Shareholder correspondence should be mailed to:
Regular Mail:
Broadridge Corporate Issuer Solutions
P.O. Box 1342
Brentwood, NY 11717
Overnight Mail:
Broadridge Corporate Issuer Solutions
ATTN: IWS
1155 Long Island Ave
Edgewood, NY 11717
68
This paper has been certified to meet the environmental and social standards of the Forest
Stewardship Council (FSC) and comes from well-managed forests and other responsible
sources.
Design: SVP Partners, Wilton, CT
www.tronox.com
A Brighter Future – From the Ground Up
Tronox Limited Corporate Offices
Australia
Lot 22, Mason Road, Kwinana Beach,
Western Australia 6167
United States
Suite 1100
263 Tresser Boulevard
Stamford, Connecticut 06901
+1.203.705.3800
Postal address: P.O. Box 305
Kwinana, Western Australia 6966
+61.(0)8.9365.1333