Unaudited Condensed Consolidated Statement of Operations
|
|
Three Months Ended June 30, 2016
|
|
|
Six Months Ended June 30, 2016
|
|
|
|
As
Reported
|
|
|
Adjustment
|
|
|
Revised
|
|
|
As
Reported
|
|
|
Adjustment
|
|
|
Revised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
537
|
|
|
$
|
1
|
|
|
$
|
538
|
|
|
$
|
1,012
|
|
|
$
|
2
|
|
|
$
|
1,014
|
|
Cost of goods sold
|
|
|
480
|
|
|
|
(1
|
)
|
|
|
479
|
|
|
|
935
|
|
|
|
(1
|
)
|
|
|
934
|
|
Gross profit
|
|
|
57
|
|
|
|
2
|
|
|
|
59
|
|
|
|
77
|
|
|
|
3
|
|
|
|
80
|
|
Selling, general and administrative expenses
|
|
|
(50
|
)
|
|
|
(1
|
)
|
|
|
(51
|
)
|
|
|
(97
|
)
|
|
|
(4
|
)
|
|
|
(101
|
)
|
Income (loss) from operations
|
|
|
8
|
|
|
|
1
|
|
|
|
9
|
|
|
|
(21
|
)
|
|
|
(1
|
)
|
|
|
(22
|
)
|
Other expense, net
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
|
|
(9
|
)
|
|
|
(3
|
)
|
|
|
(12
|
)
|
Loss before income taxes
|
|
|
(38
|
)
|
|
|
(2
|
)
|
|
|
(40
|
)
|
|
|
(118
|
)
|
|
|
(4
|
)
|
|
|
(122
|
)
|
Net loss
|
|
|
(48
|
)
|
|
|
(2
|
)
|
|
|
(50
|
)
|
|
|
(140
|
)
|
|
|
(4
|
)
|
|
|
(144
|
)
|
Net loss attributable to Tronox Limited
|
|
|
(50
|
)
|
|
|
(2
|
)
|
|
|
(52
|
)
|
|
|
(141
|
)
|
|
|
(4
|
)
|
|
|
(145
|
)
|
Loss per share, basic and diluted
|
|
|
(0.42
|
)
|
|
|
(0.02
|
)
|
|
|
(0.44
|
)
|
|
|
(1.21
|
)
|
|
|
(0.03
|
)
|
|
|
(1.24
|
)
|
Weighted average shares outstanding, basic and diluted (in thousands)
|
|
|
116,184
|
|
|
|
116,184
|
|
|
|
116,184
|
|
|
|
116,052
|
|
|
|
116,052
|
|
|
|
116,052
|
|
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
|
Three Months Ended June 30, 2016
|
|
Six Months Ended June 30, 2016
|
|
|
As
Reported
|
|
Adjustment
|
|
Revised
|
|
As
Reported
|
|
Adjustment
|
|
Revised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(48
|
)
|
|
$
|
(2
|
)
|
|
$
|
(50
|
)
|
|
$
|
(140
|
)
|
|
$
|
(4
|
)
|
|
$
|
(144
|
)
|
Total comprehensive loss
|
|
|
(46
|
)
|
|
|
(2
|
)
|
|
|
(48
|
)
|
|
|
(84
|
)
|
|
|
(4
|
)
|
|
|
(88
|
)
|
Comprehensive loss attributable to Tronox Limited
|
|
|
(48
|
)
|
|
|
(2
|
)
|
|
|
(50
|
)
|
|
|
(98
|
)
|
|
|
(4
|
)
|
|
|
(102
|
)
|
Unaudited Condensed Consolidated Balance Sheet
|
|
December 31, 2016
|
|
|
|
As Reported
|
|
|
Adjustment
|
|
|
Revised
|
|
Accounts receivable, net of allowance for doubtful accounts
|
|
$
|
421
|
|
|
$
|
3
|
|
|
$
|
424
|
|
Total current assets
|
|
|
1,253
|
|
|
|
3
|
|
|
|
1,256
|
|
Total assets
|
|
|
4,950
|
|
|
|
3
|
|
|
|
4,953
|
|
Accrued liabilities
|
|
|
174
|
|
|
|
11
|
|
|
|
185
|
|
Total current liabilities
|
|
|
522
|
|
|
|
11
|
|
|
|
533
|
|
Total liabilities
|
|
|
3,789
|
|
|
|
11
|
|
|
|
3,800
|
|
Accumulated deficit
|
|
|
(13
|
)
|
|
|
(6
|
)
|
|
|
(19
|
)
|
Accumulated other comprehensive loss
|
|
|
(495
|
)
|
|
|
(2
|
)
|
|
|
(497
|
)
|
Total Tronox Limited shareholders’ equity
|
|
|
1,017
|
|
|
|
(8
|
)
|
|
|
1,009
|
|
Total equity
|
|
|
1,161
|
|
|
|
(8
|
)
|
|
|
1,153
|
|
Total liabilities and equity
|
|
|
4,950
|
|
|
|
3
|
|
|
|
4,953
|
|
Unaudited Condensed Consolidated Statement of Cash Flows
The corresponding amounts have been revised within the statement of cash flows for the six months ended June 30, 2016 with no net impact to operating, investing and financing cash flows.
Recently Adopted Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09,
Improvements to Employee Share-Based Payment Accounting
(“ASU 2016-09”), which amends Accounting Standards Codification (“ASC”) Topic 718,
Compensation – Stock Compensation
. ASU 2016-09 simplifies various aspects related to how share-based payments are accounted for and presented in the financial statements including income taxes and forfeitures of awards. We adopted ASU 2016-09 during the first quarter of 2017. Its adoption did not have a material impact on our unaudited condensed consolidated financial statements.
In March 2016, the FASB issued ASU 2016-05,
Derivatives and Hedging: Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships
(“ASU 2016-05”), which clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument in an existing hedging relationship would not, in and of itself, be considered a termination of the derivative instrument or a change in a critical term of the hedging relationship. As long as all other hedge accounting criteria in ASC 815,
Derivatives and Hedging
(“ASC 815”) are met, a hedging relationship in which the hedging derivative instrument is novated would not be discontinued or require redesignation. This clarification applies to both cash flow and fair value hedging relationships. We adopted ASU 2016-05 during the first quarter of 2017. Its adoption did not have an impact on our unaudited condensed consolidated financial statements.
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. We adopted ASU 2015-11 during the first quarter of 2017. The adoption of ASU 2015-11 did not have an impact on our unaudited condensed consolidated financial statements.
Recently Issued Accounting Pronouncements
We consider the applicability and impact of all recently issued ASUs. Those not listed below were assessed and determined to be either not applicable or expected to have a minimal impact on our consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09,
Compensation—Stock Compensation (Topic 718):
Scope of Modification Accounting
(“ASU 2017-09”), which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under ASU 2017-09, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. ASU 2017-09 is effective prospectively for annual periods beginning on or after December 15, 2017, including interim periods within those periods. Early adoption is permitted. The impact, if any, that ASU 2017-09 will have on our consolidated financial statements will depend on any future award modification.
In March 2017, the FASB issued ASU 2017-07,
Compensation-Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
(“ASU 2017-07”) which amends the requirements in ASC 715, Compensation — Retirement Benefits, which requires employers that sponsor defined benefit pension and/or other postretirement plans to aggregate the various components of net periodic benefit cost for presentation purposes but does not prescribe where they should be presented in the income statement. ASU 2017-07 requires employers to present the service cost component of the net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from service rendered during the period. In addition, only the service cost component will be eligible for capitalization in assets. Employers will present the other components separately from the line item(s) that includes the service cost and outside of any subtotal of operating income, if one is presented. Employers will have to disclose the line item(s) used to present the other components of net periodic benefit cost, if the components are not presented separately in the income statement. ASU 2017-07 is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted as of the beginning of an annual period for which an entity’s financial statements (interim or annual) have not been issued. ASU 2017-07 requires the presentation of the components of net periodic benefit cost in the income statement retrospectively while the guidance limiting the capitalization of net periodic benefit cost in assets to the service component will be applied prospectively. We have not yet determined the impact that ASU 2017-07 will have on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01,
Business Combinations
(Topic 805):
Clarifying the Definition of a Business
(“ASU 2017-01”), which clarifies the definition of a business with the objective of adding guidance to assist companies and other reporting organizations with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Early application of the amendments in ASU 2017-01 is allowed under certain circumstances. The amendments in ASU 2017-01 should be applied prospectively on or after the effective date. The impact, if any, that ASU 2017-01 will have on our consolidated financial statements will depend on the nature of future acquisitions of assets or businesses.
In November 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows (Topic 230)
: Restricted Cash (“ASU 2016-18”), which requires that the reconciliation of the beginning-of-period and end-of period amounts shown in the statement of cash flows include restricted cash and restricted cash equivalents. ASU 2016-18 does not define restricted cash or restricted cash equivalents, but an entity will need to disclose the nature of the restrictions. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The guidance should be applied retrospectively to all periods presented. We do not expect the adoption of ASU 2016-18 to have a material impact on our consolidated financial statements.
In October 2016, the FASB issued ASU 2016-16,
Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory
(“ASU 2016-16”), which reduces the complexity in the accounting standards by allowing the recognition of current and deferred income taxes for an intra-entity asset transfer, other than inventory, when the transfer occurs. Historically, recognition of the income tax consequence was not recognized until the asset was sold to an outside party. This amendment should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. ASU 2016-16 is effective for annual periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued or made available for issuance. The impact, if any, that ASU 2016-16 will have on our consolidated financial statements will depend upon future intra-entity transfers of assets other than inventory.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230):
Classification of Certain Cash Receipts and Cash Payments
(“ASU 2016-15”) which provides guidance intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years with early adoption permitted, provided that all of the amendments are adopted in the same period. The guidance requires application using a retrospective transition method. We have not yet determined the impact, if any, that ASU 2016-15 will have on our consolidated financial statements as it will depend on the nature of future cash flow transactions impacted by the new guidance.
In February 2016, the FASB issued ASU 2016-02,
Leases
(“ASU 2016-02”) which includes a lessee accounting model that recognizes two types of leases - finance leases and operating leases. The standard requires that a lessee recognize on the balance sheet assets and liabilities for leases with lease terms of more than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on its classification as a finance or an operating lease. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We have developed an implementation plan for adopting ASU 2016-02, which includes utilizing a software program to manage our lease obligations. We are evaluating the impact that ASU 2016-02 will have on our consolidated financial statements and have concluded that we will not early adopt ASU 2016-02. Refer to Note 14 and 17 included in our Annual Report on Form 10-K for the year ended December 31, 2016 regarding current obligations under lease agreements.
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606)
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. ASU 2014-09 also requires several new disclosures. This guidance is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted, and may be applied either retrospectively or on a modified retrospective basis. Subsequent to the issuance of the May 2014 guidance, several clarifications and updates have been issued on this topic, the most recent of which was issued in February 2017. We have developed an implementation plan for adopting ASU 2014-09 and are currently operating in line with that plan. We have completed our contract evaluation process and are currently validating the results of applying the new revenue guidance. We have also started documenting our accounting policies and evaluating the new disclosure requirements and we expect to complete the evaluation of the impact of the accounting and disclosure requirements on our business processes, controls and systems by the fourth quarter of 2017. We are evaluating the impact that ASU 2014-09 will have on our consolidated financial statements and expect to adopt the new standard using the modified retrospective approach effective January 1, 2018.
2.
|
Restructuring Expenses
|
Restructuring income (expense) in our unaudited Condensed Consolidated Statements of Operations consists of charges related to employee severance and associated costs recorded in March 2017 in connection with our Alkali business cost improvement initiative focused on process improvement at our Wyoming facility (“Wyoming Restructure”), the reversal of restructuring expense pursuant to the settlement of claims previously filed relating to a prior restructure (“Restructuring Settlement”) and our sodium chlorate plant and global TiO
2
restructure initiatives that commenced in 2015 (“2015 Restructuring Initiatives”).
Restructuring income (expense) for the three and six months ended June 30, 2017 and 2016 is as follows:
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Wyoming Restructure
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
Restructuring Settlement
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
2015 Restructuring Initiatives
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
The cumulative amount incurred to date relating to the Wyoming Restructure is $1 million. The cumulative amount incurred relating to our 2015 Restructuring Initiatives completed in 2016 was $20 million.
Restructuring income (expense) by segment for the three and six months ended June 30, 2017 and 2016 was as follows:
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Alkali segment
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
TiO
2
segment
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
(1
|
)
|
Corporate
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
A summary of the changes in the liability established for restructuring included in accrued liabilities is as follows:
|
|
2017
|
|
|
2016
|
|
Balance, January 1
|
|
$
|
—
|
|
|
$
|
15
|
|
Additional provision, net
|
|
|
—
|
|
|
|
1
|
|
Cash (payments) receipts
|
|
|
1
|
|
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
Balance, June 30
|
|
$
|
1
|
|
|
$
|
3
|
|
We paid the remaining $3 million liability as of June 30, 2016 relating to the 2015 Restructuring Initiatives during the third quarter of 2016. We expect to pay the remaining liability of $1 million relating to the Wyoming Restructure during the third quarter of 2017.
Our operations are conducted through our 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.
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Income tax provision
|
|
$
|
(3
|
)
|
|
$
|
(10
|
)
|
|
$
|
(5
|
)
|
|
$
|
(22
|
)
|
Income (loss) before income taxes
|
|
$
|
8
|
|
|
$
|
(40
|
)
|
|
$
|
(28
|
)
|
|
$
|
(122
|
)
|
Effective tax rate
|
|
|
38
|
%
|
|
|
(25
|
)%
|
|
|
(18
|
)%
|
|
|
(18
|
)%
|
During the fourth quarter of 2016, we implemented various steps of an internal corporate restructuring plan to simplify our corporate, finance and legal structure and thereby improve operational, administrative, and commercial synergies within each of our operating segments (the “Corporate Reorganization”). As a result of this Corporate Reorganization, we reduced our cross jurisdictional financing arrangements during 2016; therefore, the three and six months period ended June 30, 2017 is not impacted by withholding tax accruals on interest income. In connection with the Corporate Reorganization during the three months period ended March 31, 2017, Tronox Limited became managed and controlled in the United Kingdom (“U.K”), with no additional impacts to the consolidated provision for income taxes due to the valuation allowances in various jurisdictions.
During the three months ended March 31, 2017, Tronox Limited, the public parent which is registered under the laws of the State of Western Australia, became managed and controlled in the U.K. The statutory tax rate in the U.K. at June 30, 2017 was 19%. During 2016, Tronox Limited was managed and controlled in Australia which has a statutory tax rate of 30%.
The effective tax rate for the three and six months ended June 30, 2017 differs from the U.K. statutory rate of 19% primarily due to valuation allowances, income in foreign jurisdictions taxed at rates different than 19%. The effective tax rate for the three and six months ended June 30, 2016 differs from the Australian statutory rate of 30% primarily due to valuation allowances and income in foreign jurisdictions taxed at rates lower than 30%, and withholding tax accruals on interest income. The income tax provision for the three and six months ended June 30, 2017 differs from the income tax provision for the three and six months ended June, 2016 primarily due to withholding tax accruals on interest income which we made during 2016.
The statutory tax rates in various countries where subsidiaries of Tronox Limited have operations are different than both the U.K. and the Australian tax rates. Tax rates in the United States (“U.S.”) (35% for corporations), South Africa (28% for limited liability companies), the Netherlands (25% for corporations), Switzerland (8.5% for corporations) and Jersey, U.K. (0% for corporations) all impact our effective tax rate.
We continue to maintain full valuation allowances related to the total net deferred tax assets in Australia, the Netherlands, and the U.S., 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, and during the six month period ended June 30, 2017 we established a valuation allowance of $2 million against deferred tax assets in the U.K. which we do not currently expect to utilize.
These conclusions were reached by the application of ASC 740,
Income Taxes
, which require 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 U.S., The Netherlands, and the U.K. 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 and capital gains tax losses which we do not expect to utilize.
The company is currently under audit in Australia and the United States. 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.
4.
|
Income (Loss) Per Share
|
The computation of basic and diluted income (loss) per share for the periods indicated is as follows:
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Numerator – Basic and Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
5
|
|
|
$
|
(50
|
)
|
|
$
|
(33
|
)
|
|
$
|
(144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
2
|
|
|
|
2
|
|
|
|
5
|
|
|
|
1
|
|
Undistributed net income (loss) attributable to Tronox Limited
|
|
|
3
|
|
|
|
(52
|
)
|
|
|
(38
|
)
|
|
|
(145
|
)
|
Percentage allocated to ordinary shares
(1)
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
Net income (loss) available to ordinary shares
|
|
$
|
3
|
|
|
$
|
(52
|
)
|
|
$
|
(38
|
)
|
|
$
|
(145
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator – Basic and Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average ordinary shares, basic (in thousands)
|
|
|
119,188
|
|
|
|
116,184
|
|
|
|
118,804
|
|
|
|
116,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average ordinary shares, diluted (in thousands)
|
|
|
124,301
|
|
|
|
116,184
|
|
|
|
118,804
|
|
|
|
116,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per Ordinary Share
(2)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per ordinary share
|
|
$
|
0.02
|
|
|
$
|
(0.44
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(1.24
|
)
|
(1)
|
Our earnings per share for the three months ended June 30, 2017 was calculated under the two-class method using the weighted average shares and participating securities since we had net income for this period. Our participating securities do not have a contractual obligation to share in losses; therefore, when we have a net loss, none of the loss is allocated to participating securities. Consequently, for the six months ended June 30, 2017 and the three and six months ended June 30, 2016, 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 for these periods.
|
(2)
|
Net income (loss) per ordinary share amounts were calculated from exact, not rounded net income (loss) and share information.
|
In computing diluted net income (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 for the six months ended June 30, 2017 and 2016 were as follows:
|
|
June 30, 2017
|
|
|
June 30, 2016
|
|
|
|
Shares
|
|
|
Average
Exercise Price
|
|
|
Shares
|
|
|
Average
Exercise Price
|
|
Options
|
|
|
1,930,616
|
|
|
$
|
21.17
|
|
|
|
2,015,673
|
|
|
$
|
21.19
|
|
Series A Warrants
|
|
|
986,558
|
|
|
$
|
8.51
|
|
|
|
1,438,283
|
|
|
$
|
8.54
|
|
Series B Warrants
|
|
|
1,940,062
|
|
|
$
|
9.37
|
|
|
|
1,947,228
|
|
|
$
|
9.42
|
|
Restricted share units
|
|
|
6,021,045
|
|
|
$
|
11.10
|
|
|
|
5,692,870
|
|
|
$
|
7.22
|
|
5.
|
Accounts Receivable, Net of Allowance for Doubtful Accounts
|
Accounts receivable, net of allowance for doubtful accounts, consisted of the following:
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
Trade receivables
|
|
$
|
436
|
|
|
$
|
403
|
|
Other
|
|
|
23
|
|
|
|
23
|
|
Subtotal
|
|
|
459
|
|
|
|
426
|
|
Allowance for doubtful accounts
|
|
|
(2
|
)
|
|
|
(2
|
)
|
Accounts receivable, net of allowance for doubtful accounts
|
|
$
|
457
|
|
|
$
|
424
|
|
Inventories, net consisted of the following:
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
Raw materials
|
|
$
|
180
|
|
|
$
|
194
|
|
Work-in-process
|
|
|
37
|
|
|
|
41
|
|
Finished goods, net
|
|
|
190
|
|
|
|
204
|
|
Materials and supplies, net
(1)
|
|
|
114
|
|
|
|
107
|
|
Total
|
|
|
521
|
|
|
|
546
|
|
Less: Inventories, net – non-current
|
|
|
(15
|
)
|
|
|
(14
|
)
|
Inventories, net - current
|
|
$
|
506
|
|
|
$
|
532
|
|
(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 include inventory on consignment of $24 million at both June 30, 2017 and December 31, 2016. At June 30, 2017 and December 31, 2016, inventory obsolescence reserves primarily for materials and supplies were $18 and $17 million, respectively. At June 30, 2017 and December 31, 2016, reserves for lower of cost or market were $21 million and $26 million, respectively.
7.
|
Property, Plant and Equipment, Net
|
Property, plant and equipment, net of accumulated depreciation, consisted of the following:
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
Land and land improvements
|
|
$
|
163
|
|
|
$
|
159
|
|
Buildings
|
|
|
322
|
|
|
|
309
|
|
Machinery and equipment
|
|
|
1,945
|
|
|
|
1,888
|
|
Construction-in-progress
|
|
|
149
|
|
|
|
146
|
|
Other
|
|
|
57
|
|
|
|
50
|
|
Subtotal
|
|
|
2,636
|
|
|
|
2,552
|
|
Less accumulated depreciation and amortization
|
|
|
(820
|
)
|
|
|
(721
|
)
|
Property, plant and equipment, net
(1)
|
|
$
|
1,816
|
|
|
$
|
1,831
|
|
(1)
|
Substantially all of these assets are pledged as collateral for our debt. See Note 11.
|
Depreciation expense related to property, plant and equipment during the three months ended June 30, 2017 and 2016 was $46 million and $43 million, respectively, of which $45 million and $42 million, respectively, was recorded in “Cost of goods sold” in the unaudited Condensed Consolidated Statements of Operations and $1 million in each of the periods was recorded in “Selling, general and administrative expenses” in the unaudited Condensed Consolidated Statements of Operations. Depreciation expense related to property, plant and equipment during the six months ended June 30, 2017 and 2016 was $92 million and $82 million, respectively, of which $90 million and $80 million, respectively, was recorded in “Cost of goods sold” in the unaudited Condensed Consolidated Statements of Operations and $2 million each was recorded in “Selling, general and administrative expenses” in the unaudited Condensed Consolidated Statements of Operations.
8.
|
Mineral Leaseholds, Net
|
Mineral leaseholds, net of accumulated depletion, consisted of the following:
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
Mineral leaseholds
|
|
$
|
2,017
|
|
|
$
|
1,996
|
|
Less: accumulated depletion
|
|
|
(409
|
)
|
|
|
(389
|
)
|
Mineral leaseholds, net
|
|
$
|
1,608
|
|
|
$
|
1,607
|
|
Depletion expense related to mineral leaseholds during the three months ended June 30, 2017 and 2016 was $9 million and $10 million, respectively, and during the six months ended June 30, 2017 and 2016 was $18 million and $20 million, respectively which was recorded in “Cost of goods sold” in the unaudited Condensed Consolidated Statements of Operations.
9.
|
Intangible Assets, Net
|
Intangible assets, net of accumulated amortization, consisted of the following:
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
|
|
Gross
Cost
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying
Amount
|
|
|
Gross
Cost
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying
Amount
|
|
Customer relationships
|
|
$
|
291
|
|
|
$
|
(125
|
)
|
|
$
|
166
|
|
|
$
|
291
|
|
|
$
|
(115
|
)
|
|
$
|
176
|
|
TiO
2
technology
|
|
|
32
|
|
|
|
(10
|
)
|
|
|
22
|
|
|
|
32
|
|
|
|
(9
|
)
|
|
|
23
|
|
Internal-use software
|
|
|
45
|
|
|
|
(23
|
)
|
|
|
22
|
|
|
|
45
|
|
|
|
(21
|
)
|
|
|
24
|
|
Intangible assets, net
|
|
$
|
368
|
|
|
$
|
(158
|
)
|
|
$
|
210
|
|
|
$
|
368
|
|
|
$
|
(145
|
)
|
|
$
|
223
|
|
Amortization expense related to intangible assets during the three months ended June 30, 2017 and 2016 was $7 million each, of which $1 million each was recorded in “Cost of goods sold” in the unaudited Condensed Consolidated Statements of Operations and $6 million each was recorded in “Selling, general and administrative expenses” in the unaudited Condensed Consolidated Statements of Operations. Amortization expense related to intangible assets during the six months ended June 30, 2017 and 2016 was $13 million each, of which $1 million each was recorded in “Cost of goods sold” in the unaudited Condensed Consolidated Statements of Operations and $12 million each was recorded in “Selling, general and administrative expenses” in the unaudited Condensed Consolidated Statements of Operations. Estimated future amortization expense related to intangible assets is $13 million for the remainder of 2017, $25 million each for 2018 through 2021, and $97 million thereafter.
Accrued liabilities consisted of the following:
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
Employee-related costs and benefits
|
|
$
|
71
|
|
|
$
|
83
|
|
Restructuring costs
|
|
|
1
|
|
|
|
—
|
|
Interest
|
|
|
35
|
|
|
|
35
|
|
Sales rebates
|
|
|
19
|
|
|
|
21
|
|
Taxes other than income taxes
|
|
|
7
|
|
|
|
10
|
|
Professional fees and other
|
|
|
48
|
|
|
|
37
|
|
Accrued liabilities
|
|
$
|
181
|
|
|
$
|
186
|
|
Short-term Debt
Our short-term debt consisted of a UBS Revolver, defined below, and was $150 million at both June 30, 2017 and December 31, 2016. Average effective interest rate was 4.8% and 4.7% during the three and six months ended June 30, 2017, respectively, and 4.1% and 4.0% during the three and six months ended June 30, 2016, respectively.
UBS Revolver
On June 18, 2012, we entered into a global senior secured asset-based syndicated revolving credit facility with UBS AG (“UBS”) which has been amended and restated (the “UBS Revolver”). The UBS Revolver provides us with up to $500 million of revolving credit lines, with an $85 million sublimit for letters of credit, with a maturity date of April 1, 2020, provided that the Term Loan, defined below, has not been repaid, refinanced or extended, in which case the maturity date would be December 19, 2019. Availability of revolving credit loans and letters of credit are subject to a borrowing base. Borrowings bear interest at our option, at either an adjusted London Interbank Offered Rate (“LIBOR”), plus an applicable margin that ranges from 1.50% to 2.00%, or a base rate which is at 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%, plus a margin that ranges from 0.50% to 1.00%, in each case, based on the average daily borrowing availability.
On April 1, 2015, we borrowed $150 million against the UBS Revolver, which was outstanding at both June 30, 2017 and December 31, 2016. During the three and six months ended June 30, 2017 and 2016, we had no drawdowns or repayments on the UBS Revolver. At June 30, 2017 and December 31, 2016, our amount available to borrow was $181 million and $190 million, respectively.
ABSA Revolving Credit Facility
Our South African Rand (“R”) R1.3 billion (approximately $100 million at June 30, 2017 exchange rate) revolving credit facility with ABSA Bank Limited (the “ABSA Revolver”) acting through its ABSA Capital Division (the “ABSA”) expired on June 14, 2017. We are currently in discussions with ABSA regarding renewing the facility.
During the three and six months ended June 30, 2017 and 2016, we had no drawdowns or repayments on the ABSA Revolver. At both June 30, 2017 and December 31, 2016, there were no outstanding borrowings on the ABSA Revolver.
Long-term debt, net of an unamortized discount and debt issuance costs, consisted of the following:
|
|
Original
Principal
|
|
|
Annual
Interest Rate
|
|
Maturity
Date
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
Term Loan, net of unamortized discount
(1)
|
|
$
|
1,500
|
|
|
Variable
|
|
3/19/2020
|
|
$
|
1,434
|
|
|
$
|
1,441
|
|
Senior Notes due 2020
|
|
|
900
|
|
|
|
6.375
|
%
|
8/15/2020
|
|
|
896
|
|
|
|
896
|
|
Senior Notes due 2022
|
|
|
600
|
|
|
|
7.50
|
%
|
3/15/2022
|
|
|
584
|
|
|
|
584
|
|
Lease financing
|
|
|
|
|
|
|
|
|
|
|
|
19
|
|
|
|
19
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
2,933
|
|
|
|
2,940
|
|
Less: Long-term debt due within one year
|
|
|
|
|
|
|
|
|
|
|
|
(16
|
)
|
|
|
(16
|
)
|
Debt issuance costs
|
|
|
|
|
|
|
|
|
|
|
|
(31
|
)
|
|
|
(36
|
)
|
Long-term debt, net
|
|
|
|
|
|
|
|
|
|
|
$
|
2,886
|
|
|
$
|
2,888
|
|
(1)
|
Average effective interest rate of 5.1% and 5.0% during the three and six months ended June 30, 2017, respectively, and 4.9% each during the three and six months ended June 30, 2016.
|
At June 30, 2017, the scheduled maturities of our long-term debt were as follows:
|
|
Total
Borrowings
|
|
2017
|
|
$
|
8
|
|
2018
|
|
|
16
|
|
2019
|
|
|
16
|
|
2020
|
|
|
2,298
|
|
2021
|
|
|
1
|
|
Thereafter
|
|
|
598
|
|
Total
|
|
|
2,937
|
|
Remaining accretion associated with the Term Loan
|
|
|
(4
|
)
|
Total borrowings
|
|
$
|
2,933
|
|
Term Loan
On April 23, 2014, we, along with our wholly owned subsidiary, Tronox Pigments (Netherlands) B.V., and certain named guarantor subsidiaries, entered into a Third Amended and Restated Credit and Guaranty Agreement (the “Third Agreement”) with the lender parties thereto and Goldman Sachs Bank USA, as administrative agent. Pursuant to the Third Agreement, we obtained a $1.5 billion senior secured term loan (the “Term Loan”) with a maturity date of March 19, 2020. The Third Agreement defines “Applicable Margin” using a grid pricing matrix dependent upon our public corporate family rating as determined by Moody’s and Standard & Poor’s (“Family Rating”) (with the interest rate subject to Eurodollar Rate and Base Rate floors, as defined). Pursuant to the Third Agreement, based upon our Family Rating, the current interest rate per annum is 350 basis points plus LIBOR (subject to a LIBOR floor of 1% per annum). The Term Loan was issued net of an original issue discount. At June 30, 2017 and December 31, 2016, the unamortized discount was $4 million and $5 million, respectively. During each of the three months ended June 30, 2017 and 2016, we made principal repayments of $4 million, and during the six months ended June 30, 2017 and 2016, we made principal repayments of $8 million and $7 million, respectively. At June 30, 2017 and December 31, 2016, debt issuance costs related to the Term Loan of $14 million and $17 million, respectively, were recorded as a direct reduction to the carrying value of the long term debt as described below.
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 U.S. to non-U.S. persons pursuant to Regulation S under the Securities Act. At June 30, 2017 and December 31, 2016, debt issuance costs related to the Senior Notes Due 2020 of $8 million and $9 million, respectively, were recorded as a direct reduction to the carrying value of the long-term debt as described below.
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 21. There were no repayments during the three and six months ended June 30, 2017. During the six months ended June 30, 2016, we repurchased $4 million of face value of notes at a price of 77% of par, resulting in a net gain of approximately $1 million which was included in “Gain on extinguishment of debt” in the unaudited Condensed Consolidated Statements of Operations.
Senior Notes due 2022
We have $600 million aggregate principal amount, 7.50% Senior Notes due 2022 (the “Senior Notes due 2022”) issued under an indenture dated March 19, 2015 (the “Indenture”). The Senior Notes due 2022 have not been registered under the Securities Act, and may not be offered or sold in the U.S. absent registration or an applicable exemption from registration requirements. There were no repayments during the three and six months ended June 30, 2017. During the six months ended June 30, 2016, we repurchased $16 million of face value of notes at a weighted average price of 76% of par, resulting in a net gain of approximately $3 million which was included in “Gain on extinguishment of debt” in the unaudited Condensed Consolidated Statements of Operations.
The Indenture and the Senior Notes due 2022 provide, among other things, that the Senior Notes due 2022 are senior unsecured 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. At June 30, 2017 and December 31, 2016, debt issuance costs related to the Senior Notes due 2022 of $9 million and $10 million, respectively, were recorded as a direct reduction of the carrying value of the long-term debt as described below.
Liquidity and Capital Resources
As of June 30, 2017, we had $181 million available under the $500 million UBS Revolver and $303 million in cash and cash equivalents.
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 June 30, 2017 and December 31, 2016, assets recorded under capital lease obligations were $22 million and $21 million, respectively. Related accumulated amortization was $7 million and $6 million at June 30, 2017 and December 31, 2016, respectively. During each of the three and six months ended June 30, 2017 and 2016, we made principal payments of less than $1 million.
Fair Value
Our debt is recorded at historical amounts. At June 30, 2017 and December 31, 2016, the fair value of the Term Loan was $1.4 billion and $1.5 billion, respectively. At June 30, 2017 and December 31, 2016, the fair value of the Senior Notes due 2020 was $898 million and $841 million, respectively. At June 30, 2017 and December 31, 2016, the fair value of the Senior Notes due 2022 was $603 million and $544 million, respectively. 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.
Debt Covenants
At June 30, 2017, we had financial covenants in the UBS Revolver and the Term Loan. 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 three and six months ended June 30, 2017 (including the ABSA Revolver which expired on June 14, 2017).
Interest and Debt Expense, Net
Interest and debt expense, net in the unaudited Condensed Consolidated Statements of Operations consisted of the following:
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Interest on Term loan
|
|
$
|
16
|
|
|
$
|
17
|
|
|
$
|
33
|
|
|
$
|
33
|
|
Interest on Senior Notes due 2020
|
|
|
15
|
|
|
|
14
|
|
|
|
29
|
|
|
|
29
|
|
Interest on Senior Notes due 2022
|
|
|
11
|
|
|
|
11
|
|
|
|
22
|
|
|
|
22
|
|
Amortization of deferred debt issuance costs and discounts on debt
|
|
|
3
|
|
|
|
2
|
|
|
|
6
|
|
|
|
5
|
|
Other
|
|
|
2
|
|
|
|
3
|
|
|
|
4
|
|
|
|
5
|
|
Capitalized interest
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
|
(2
|
)
|
Total interest and debt expense, net
|
|
$
|
46
|
|
|
$
|
46
|
|
|
$
|
92
|
|
|
$
|
92
|
|
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 June 30, 2017, we had deferred debt issuance costs of $3 million related to the UBS Revolver and at December 31, 2016, we had deferred debt issuance costs of $4 million related to the UBS Revolver and ABSA Revolver which are recorded in “Other long-term assets” in the unaudited Condensed Consolidated Balance Sheets. At June 30, 2017 and December 31, 2016, we had $31 million and $36 million, respectively, of debt issuance costs related to the Term Loan, Senior Notes 2020 and Senior Notes 2022, which were recorded as a direct reduction of the carrying value of the long term debt in the unaudited Condensed Consolidated Balance Sheets.
12.
|
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:
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Beginning balance
|
|
$
|
79
|
|
|
$
|
87
|
|
|
$
|
76
|
|
|
$
|
81
|
|
Additions
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
Accretion expense
|
|
|
1
|
|
|
|
2
|
|
|
|
2
|
|
|
|
3
|
|
Remeasurement/translation
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
4
|
|
|
|
2
|
|
Changes in estimates, including cost and timing of cash flows
|
|
|
—
|
|
|
|
(10
|
)
|
|
|
—
|
|
|
|
(9
|
)
|
Settlements/payments
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
—
|
|
Balance, June 30,
|
|
$
|
80
|
|
|
$
|
78
|
|
|
$
|
80
|
|
|
$
|
78
|
|
Asset retirement obligations in our unaudited Condensed Consolidated Balance Sheets at June 30, 2017 and December 31, 2016 consist of a current portion of $4 million and $3 million, respectively, included in “Accrued liabilities” and a noncurrent portion of $76 million and $73 million, respectively, included in “Asset retirement obligations”.
During the three months ended June 30, 2016, we amended our lease agreement for our TiO
2
pigment facility in Botlek, The Netherlands, which included an option to extend the lease term for an additional 25 years. This amendment increased the estimated useful life used in determining the asset retirement obligation and consequently, we recognized a $10 million reduction to this liability.
13.
|
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.
Our businesses rely on natural gas as one of the main fuel sources in our production process. Natural gas prices have historically been volatile. Natural gas prices could increase as a result of reduced domestic drilling and production activity. Drilling and production operations are subject to extensive federal, state, local and foreign laws and government regulations, which could directly curtail such activity or increase the cost of drilling, resulting in reduced levels of drilling activity and, therefore, increased natural gas prices. This exposes us to commodity price risk.
We mitigate our exposures to currency risks by entering into foreign exchange forward contracts to reduce the effects of fluctuating foreign currency exchange rates. We mitigate our exposures to commodity price risks through a controlled program that uses commodity price swap contracts and forward purchase contracts to manage forecasted energy exposure.
We formally document all relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking our hedge transactions. This process includes relating derivatives that are designated as cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. We also formally assess, both at the inception of the hedge and throughout its term, whether each derivative is highly effective in offsetting changes in cash flows of the hedged item. If we determine that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, we discontinue hedge accounting with respect to that derivative prospectively. On the date the derivative instrument is entered into, we assess whether to designate the derivative as a hedge of the variability of cash flows to be received or paid related to a forecasted transaction (cash flow hedge) or not. We recognize all derivatives in the unaudited Condensed Consolidated Balance Sheets at fair value.
We have designated our natural gas commodity price swap contracts, which qualify as cash flow hedges, for hedge accounting treatment under ASC 815. We perform an analysis for effectiveness of the derivatives at the end of each quarter based on the terms of the contract and the underlying item being hedged. The effective portion of the change in the fair value of cash flow hedges is deferred in other comprehensive loss and is subsequently recognized in “Cost of goods sold” in the unaudited Condensed Consolidated Statements of Operations for commodity hedges, when the hedged item impacts earnings. Any portion of the change in fair value of derivatives designated as hedging instruments that is determined to be ineffective is recorded in “Other income (expense), net” in the unaudited Condensed Consolidated Statements of Operations.
At December 31, 2016, we recorded $3 million fair value of the natural gas hedge in “Prepaid and other assets” in the unaudited Condensed Consolidated Balance Sheets. At June 30, 2017, the fair value of the natural gas hedge was not material and the $3 million of unrealized losses during the six months ended June 30, 2017 was recognized in accumulated other comprehensive loss, with no tax impact due to valuation allowances. There were no outstanding currency hedges at June 30, 2017 and December 30, 2016. The current open commodity contract hedges forecasted transactions until December 31, 2018. At June 30, 2017 and December 31, 2016, we had an equivalent of 5.3 MMBTUs (millions of British Thermal Units) and 4.8 MMBTUs, respectively, in aggregate notional volume of outstanding natural gas commodity forward contract to hedge forecasted purchases. The fair value of the natural gas commodity price contract was based on market price quotations and the use of a pricing model. The contract was considered a level 2 input in the fair value hierarchy at June 30, 2017 and December 31, 2016.
14.
|
Commitments and Contingencies
|
Purchase and Capital Commitments
— At June 30, 2017, purchase commitments were $97 million for the remainder of 2017, $81 million for 2018, $50 million for 2019, $45 million for 2020, $28 million for 2021, and $135 million thereafter.
Letters of Credit
—
At June 30, 2017, we had outstanding letters of credit, bank guarantees, and performance bonds of $59 million, of which $34 million were letters of credit issued under the UBS Revolver, $19 million were bank guarantees issued by ABSA, $5 million were bank guarantees issued by Standard Bank and $1 million were 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.
The changes in outstanding Class A Shares and Class B Shares for the six months ended June 30, 2017 were as follows:
Class A Shares:
|
|
|
|
Balance at January 1, 2017
|
|
|
65,165,672
|
|
Shares issued for share-based compensation
|
|
|
2,884,219
|
|
Shares issued upon warrants exercised
|
|
|
295,453
|
|
Shares issued
cancelled for share-based compensation
|
|
|
(618,117
|
)
|
Balance at June 30, 2017
|
|
|
67,727,227
|
|
Class B Shares:
|
|
|
|
|
Balance, at both June 30, 2017 and December 31, 2016
|
|
|
51,154,280
|
|
Warrants
We have outstanding Series A Warrants (the “Series A Warrants”) and Series B Warrants (the “Series B Warrants”), together (the “Warrants”). At June 30, 2017, holders of the
Series A Warrants and the Series B Warrants
were entitled to purchase 6.02 and 6.03 of Class A Shares, respectively, and receive $
12.50
in cash at an exercise price of $51.21 for each Series A Warrant and $
56.51
for each Series B Warrant. The Warrants have a seven-year term from the date initially issued and will expire on February 14, 2018. A holder may exercise the Warrants by paying the applicable exercise price in cash or exercising on a cashless basis. The Warrants are freely transferable by the holder. At June 30, 2017 and December 31, 2016, there were 163,880 and 239,306 Series A Warrants outstanding, respectively, and 321,735 and 323,915 Series B Warrants outstanding, respectively.
Dividends
During 2017, we declared and paid quarterly dividends to holders of our Class A Shares and Class B Shares as follows:
|
|
Three Months
Ended March 31,
2017
|
|
|
Three Months
Ended June 30,
2017
|
|
Dividend per share
|
|
$
|
0.045
|
|
|
$
|
0.045
|
|
Total dividend
|
|
$
|
6
|
|
|
$
|
6
|
|
Record date (close of business)
|
|
March 6
|
|
|
May 15
|
|
During 2016, we declared and paid quarterly dividends to holders of our Class A Shares and Class B Shares as follows:
|
|
Three Months
Ended March 31,
2016
|
|
|
Three Months
Ended June 30,
2016
|
|
Dividend per share
|
|
$
|
0.25
|
|
|
$
|
0.045
|
|
Total dividend
|
|
$
|
30
|
|
|
$
|
5
|
|
Record date (close of business)
|
|
March 4
|
|
|
May 16
|
|
Accumulated Other Comprehensive Loss Attributable to Tronox Limited
The tables below present changes in accumulated other comprehensive income (loss) by component for the three months ended June 30, 2017 and 2016.
|
|
Cumulative
Translation
Adjustment
|
|
|
Pension
Liability
Adjustment
|
|
|
Unrealized
Gains (Losses)
on
Derivatives
|
|
|
Total
|
|
Beginning balance
|
|
$
|
(390
|
)
|
|
$
|
(91
|
)
|
|
$
|
1
|
|
|
$
|
(480
|
)
|
Other comprehensive income (loss)
|
|
|
27
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
26
|
|
Balance, June 30, 2017
|
|
$
|
(363
|
)
|
|
|
(91
|
)
|
|
|
—
|
|
|
|
(454
|
)
|
|
|
Cumulative
Translation
Adjustment
|
|
|
Pension
Liability
Adjustment
|
|
|
Unrealized
Gains (Losses)
on
Derivatives
|
|
|
Total
|
|
Beginning balance
|
|
$
|
(456
|
)
|
|
$
|
(101
|
)
|
|
$
|
—
|
|
|
$
|
(557
|
)
|
Other comprehensive income (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
2
|
|
Balance, June 30, 2016
|
|
$
|
(456
|
)
|
|
$
|
(101
|
)
|
|
$
|
2
|
|
|
$
|
(555
|
)
|
The tables below present changes in accumulated other comprehensive income (loss) by component for the six months ended June 30, 2017 and 2016.
|
|
Cumulative
Translation
Adjustment
|
|
|
Pension
Liability
Adjustment
|
|
|
Unrealized
Gains (Losses)
on
Derivatives
|
|
|
Total
|
|
Beginning balance
|
|
$
|
(408
|
)
|
|
$
|
(92
|
)
|
|
$
|
3
|
|
|
$
|
(497
|
)
|
Other comprehensive income (loss)
|
|
|
45
|
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
42
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
Balance, June 30, 2017
|
|
$
|
(363
|
)
|
|
|
(91
|
)
|
|
|
—
|
|
|
|
(454
|
)
|
|
|
Cumulative
Translation
Adjustment
|
|
|
Pension
Liability
Adjustment
|
|
|
Unrealized
Gains (Losses)
on
Derivatives
|
|
|
Total
|
|
Beginning balance
|
|
$
|
(496
|
)
|
|
$
|
(102
|
)
|
|
$
|
—
|
|
|
$
|
(598
|
)
|
Other comprehensive income (loss)
|
|
|
40
|
|
|
|
—
|
|
|
|
2
|
|
|
|
42
|
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
Balance, June 30, 2016
|
|
$
|
(456
|
)
|
|
$
|
(101
|
)
|
|
$
|
2
|
|
|
$
|
(555
|
)
|
16.
|
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 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 unaudited condensed consolidated financial statements.
Noncontrolling interest activity for the three and six months ended June 30, 2017 and 2016 was as follows:
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Beginning balance
|
|
$
|
153
|
|
|
$
|
124
|
|
|
$
|
144
|
|
|
$
|
112
|
|
Net income attributable to noncontrolling interest
|
|
|
2
|
|
|
|
2
|
|
|
|
5
|
|
|
|
1
|
|
Effect of exchange rate changes
|
|
|
7
|
|
|
|
—
|
|
|
|
13
|
|
|
|
13
|
|
Balance, June 30,
|
|
$
|
162
|
|
|
$
|
126
|
|
|
$
|
162
|
|
|
$
|
126
|
|
17. Share-Based Compensation
Share-based compensation expense consisted of the following:
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Restricted shares and restricted share units
|
|
$
|
8
|
|
|
$
|
4
|
|
|
$
|
22
|
|
|
$
|
8
|
|
Options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
T-Bucks Employee Participation Plan
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
Total share-based compensation expense
|
|
$
|
8
|
|
|
$
|
5
|
|
|
$
|
22
|
|
|
$
|
10
|
|
Tronox Limited Management Equity Incentive Plan
Restricted Shares
We did not grant any restricted shares during the six months ended June 30, 2017.
The following table presents a summary of activity for the six months ended June 30, 2017:
|
|
Number of
Shares
|
|
|
Weighted Average
Grant Date
Fair Value
|
|
Outstanding, January 1, 2017
|
|
|
284,400
|
|
|
$
|
6.09
|
|
Vested
|
|
|
(107,928
|
)
|
|
|
8.00
|
|
Outstanding, June 30, 2017
|
|
|
176,472
|
|
|
$
|
4.92
|
|
Expected to vest, June 30, 2017
|
|
|
176,472
|
|
|
$
|
4.92
|
|
At June 30, 2017, there was $1 million of unrecognized compensation expense related to nonvested restricted shares which is expected to be recognized over a weighted-average period of 1.3 years.
Since the restricted shares were granted only to certain members of our Board, the unrecognized compensation expense was not adjusted for estimated forfeitures.
The total fair value of restricted shares that vested during the six months ended June 30, 2017 was $1 million.
Restricted Share Units (“RSUs”)
During the six months ended June 30, 2017, 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. For the time-based awards, 1,075 RSUs vested immediately, 14,053 RSUs vest ratably over a six-month period, 100,160 RSUs vest ratably over a one-year period and 773,774 RSUs vest ratably over a three-year period, and are valued at the weighted average grant date fair value. For the performance-based awards, 1,145,933 cliff vest at the end of the three years and 883,538 cliff vest at the end of forty months. Included in the performance-based awards are 773,774 RSUs for which vesting is determined based on a relative 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. A total of 1,255,697 RSUs were granted, pursuant to an Integration Incentive Award program (the “Integration Incentive Award”) established in connection with the Cristal Transaction, to certain executive officers and managers with significant integration accountability. If the Cristal Transaction does not close by July 1, 2018, then the Integration Incentive Award granted will be cancelled.
The following table presents a summary of activity for the six months ended June 30, 2017
|
|
Number of
Shares
|
|
|
Weighted Average
Grant Date
Fair Value
|
|
Outstanding, January 1, 2017
|
|
|
5,587,331
|
|
|
$
|
7.19
|
|
Granted
|
|
|
2,918,533
|
|
|
|
17.16
|
|
Vested
|
|
|
(2,228,057
|
)
|
|
|
9.29
|
|
Forfeited
|
|
|
(256,762
|
)
|
|
|
10.71
|
|
Outstanding, June 30, 2017
|
|
|
6,021,045
|
|
|
$
|
11.10
|
|
Expected to vest, June 30, 2017
|
|
|
7,009,320
|
|
|
$
|
9.58
|
|
At June 30, 2017, there was $45 million of unrecognized compensation expense related to nonvested RSUs, adjusted for estimated forfeitures, which is expected to be recognized over a weighted-average period of 2.2 years. The weighted-average grant-date fair value of RSUs granted during the six months ended June 30, 2017 and 2016 was $ 17.16 per share and $4.02 per share, respectively. The total fair value of RSUs that vested during the six months ended June 30, 2017 was $21 million.
Options
The following table presents a summary of activity for the six months ended June 30, 2017:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Contractual
Life (years)
|
|
|
Intrinsic
Value
|
|
Outstanding, January 1, 2017
|
|
|
1,970,481
|
|
|
$
|
21.19
|
|
|
|
6.38
|
|
|
$
|
—
|
|
Forfeited
|
|
|
(2,285
|
)
|
|
|
21.98
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(37,580
|
)
|
|
|
22.28
|
|
|
|
|
|
|
|
|
|
Outstanding, June 30, 2017
|
|
|
1,930,616
|
|
|
$
|
21.17
|
|
|
|
4.93
|
|
|
$
|
—
|
|
Expected to vest, June 30, 2017
|
|
|
2,266
|
|
|
$
|
27.26
|
|
|
|
7.26
|
|
|
$
|
—
|
|
Exercisable, June 30, 2017
|
|
|
1,928,335
|
|
|
$
|
21.16
|
|
|
|
4.93
|
|
|
$
|
—
|
|
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 period. The amount will change based on the fair market value of our stock. No options were exercised during the three and six months ending June 30, 2017 and 2016 and consequently, there was no related intrinsic value. We issue new shares upon the exercise of options. As there were no stock options exercised during the three and six months ended June 30, 2017 and 2016, no cash was received.
At June 30, 2017,
we had less than $1 million of
unrecognized compensation expense related to options, adjusted for estimated forfeitures. We did not issue any options during the six months ended June 30, 2017.
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 a T-Bucks Trust (the “Trust”) with R124 million (approximately $15 million), which was used to acquire Class A Shares. On May 31, 2017, the shares held by the Trust became fully vested. The Trust sold 546,403 shares in June 2017 on behalf of the participants who elected to receive cash. The remaining participants elected to receive shares.
Long-Term Incentive Plan (“LTIP”)
We have a 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. We did not have an outstanding liability for LTIP at both June 30, 2017 and December 31, 2016.
18.
|
Pension and Other Postretirement Healthcare Benefits
|
We sponsor two noncontributory defined benefit retirement plans in the U. S., the qualified retirement plan and Alkali qualified retirement plan (the “U.S. Defined Benefit Plans”). We also have a collective defined contribution plan (a multiemployer plan) in the Netherlands, and a postretirement healthcare plan in South Africa. We had a defined benefit retirement plan in the Netherlands which was settled in the fourth quarter of 2016.
The components of net periodic cost associated with our U.S. defined benefit plans and The Netherlands defined benefit plan recognized in the unaudited Condensed Consolidated Statements of Operations were as follows
:
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net periodic cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
3
|
|
|
$
|
2
|
|
Interest cost
|
|
|
4
|
|
|
|
5
|
|
|
|
8
|
|
|
|
10
|
|
Expected return on plan assets
|
|
|
(4
|
)
|
|
|
(5
|
)
|
|
|
(8
|
)
|
|
|
(10
|
)
|
Net amortization of actuarial loss and prior service credit
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
1
|
|
Total net periodic cost
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
3
|
|
The components of net periodic cost associated with the postretirement healthcare plans was less than $1 million each for the three and six months ended June 30, 2017 and 2016.
For each of the three and six month periods ended June 30, 2017 and 2016, we contributed $1 million and $2 million, respectively, to The Netherlands multiemployer plan, which was primarily recognized in “Cost of goods sold” in the unaudited Condensed Consolidated Statement of Operations.
Exxaro
We have service level agreements with Exxaro for research and development that expire in 2017. Such service level agreements amounted to less than $1 million of expense during each of the three and six months ended June 30, 2017 and 2016 and was included in “Selling, general and administrative expense” in the unaudited Condensed Consolidated Statements of Operations. Additionally, we had a professional service agreement with Exxaro related to the Fairbreeze construction project which ended in January 2017. We did not make any payment, and less than $1 million of payment, respectively, to Exxaro relating to Fairbreeze during the during the three months ended June 30, 2017 and 2016 and made less than $1 million and $1 million of payments, respectively, during the six months ended June 30, 2017 and 2016. These payments were capitalized and included in “Property, plant and equipment, net” in our unaudited Condensed Consolidated Balance Sheets. At both June 30, 2017 and December 31, 2016, we had less than $1 million of related party payables, which were recorded in “Accounts payable” in our unaudited Condensed Consolidated Balance Sheets.
ANSAC
We sell soda ash directly to customers in the U.S., 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 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, the European community, the European Free Trade Association and the Southern 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 unaudited Condensed Consolidated Statement 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 $1 million and $2 million for each of the three month and six months ended June 30, 2017 and 2016, respectively. During the three months ended June 30, 2017 and 2016, we recorded net sales to ANSAC of $79 million and $70 million, respectively, and $154 million and $130 million for the six months ended June 30, 2017 and 2016, respectively, which was included in “Net sales” in the unaudited Condensed Consolidated Statements of Operations. At June 30, 2017 and December 31, 2016, we had $53 million and $60 million, respectively, of related party receivables from ANSAC, which were recorded in “Accounts receivable, net of allowance for doubtful accounts” in our unaudited Condensed Consolidated Balance Sheets. At both June 30, 2017 and December 31, 2016, we had related party payables due to ANSAC of $1 million recorded in “Accounts payable” in our unaudited Condensed Consolidated Balance Sheets. Additionally, during each of the three and six month ended June 30, 2017, “Cost of goods sold” in the unaudited Condensed Consolidated Statements of Operations included $1 million of charges to us by ANSAC, for freight costs incurred on our behalf and $1 million and $3 million, respectively, during the three and six months ended June 30, 2016. We did not have a liability payable to ANSAC for freight costs incurred on our behalf at both June 30, 2017 and December 31, 2016.
Natron
X
Technologies LLC
On April 1, 2015, we completed the acquisition of 100% of the Alkali Chemicals business from FMC Corporation (“FMC”) for an aggregate purchase price of $1.65 billion in cash (the “Alkali Transaction”).
In connection with the Alkali Transaction, we acquired FMC’s one-third ownership interest in a joint venture, Natron
x
Technologies LLC (“Natron
x
”). Natron
x
manufactures and markets sodium-based, dry sorbents for air pollution control in electric utility and industrial boiler operations. Pursuant to an agreement with Natron
x
, 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 Natron
x
under a service level agreement (the “SLA”). We are reimbursed by Natron
x
for the related costs incurred under the Supply Agreement and the SLA. At June 30, 2017, we did not have an outstanding receivable related to these agreements and less than $1 million of such receivables at December 31, 2016, which were recorded in “Accounts receivable, net of allowance for doubtful accounts” in the unaudited Condensed Consolidated Balance Sheets.
On June 30, 2016, Natron
x
ceased its operations and ended deliveries of products to its customers. In September of 2016, the Natron
x
board of directors approved the demolition of the plant located at Alkali’s Westvaco facility and other costs associated with dissolving the joint venture. At both June 30, 2017 and December 31, 2016, a reserve of $1 million representing our one-third share of the estimated expenses related to the termination of the Natron
x
business, including severance and other exit activities, was included in “Accrued liabilities” in our unaudited Condensed Consolidated Balance Sheets. We do not expect to incur any additional future expenses related to the termination of the Natron
x
business.
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 to assess performance and to allocate resources.
Our TiO
2
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 TiO
2;
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 derivatives: 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), net and income tax expense or benefit.
Net sales and income (loss) from operations by segment were as follows:
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
TiO
2
segment
|
|
$
|
421
|
|
|
$
|
333
|
|
|
$
|
799
|
|
|
$
|
618
|
|
Alkali segment
|
|
|
201
|
|
|
|
205
|
|
|
|
392
|
|
|
|
396
|
|
Net sales
|
|
$
|
622
|
|
|
$
|
538
|
|
|
$
|
1,191
|
|
|
$
|
1,014
|
|
TiO
2
segment
|
|
$
|
61
|
|
|
$
|
7
|
|
|
$
|
93
|
|
|
$
|
(29
|
)
|
Alkali segment
|
|
|
23
|
|
|
|
12
|
|
|
|
42
|
|
|
|
33
|
|
Corporate
|
|
|
(29
|
)
|
|
|
(10
|
)
|
|
|
(64
|
)
|
|
|
(26
|
)
|
Income (loss) from operations
|
|
|
55
|
|
|
|
9
|
|
|
|
71
|
|
|
|
(22
|
)
|
Interest and debt expense, net
|
|
|
(46
|
)
|
|
|
(46
|
)
|
|
|
(92
|
)
|
|
|
(92
|
)
|
Gain on extinguishment of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
Other expense, net
|
|
|
(1
|
)
|
|
|
(3
|
)
|
|
|
(7
|
)
|
|
|
(12
|
)
|
Income (loss) before income taxes
|
|
|
8
|
|
|
|
(40
|
)
|
|
|
(28
|
)
|
|
|
(122
|
)
|
Income tax provision
|
|
|
(3
|
)
|
|
|
(10
|
)
|
|
|
(5
|
)
|
|
|
(22
|
)
|
Net income (loss)
|
|
$
|
5
|
|
|
$
|
(50
|
)
|
|
$
|
(33
|
)
|
|
$
|
(144
|
)
|
During the three months ended June 30, 2017, our ten largest third-party TiO
2
customers and our ten largest third-party Alkali customers represented approximately 25% and 22%, respectively, of our consolidated net sales. During the three months ended June 30, 2016, our ten largest third-party TiO
2
customers and our ten largest third-party Alkali customers represented approximately 25% and 24%, respectively, of our consolidated net sales. During each of the three months ended June 30, 2017 and 2016, ANSAC accounted for 13% of our consolidated net sales. During the six months ended June 30, 2017, our ten largest third-party TiO
2
customers and our ten largest third-party Alkali customers represented approximately 25% and 22%, respectively, of our consolidated net sales; ANSAC accounted for 13% of our consolidated net sales. During the six months ended June 30, 2016, our ten largest third-party TiO
2
customers and our ten largest Alkali customers represented approximately 22% and 25%, respectively, of our consolidated net sales; ANSAC accounted for 13% of our consolidated net sales.
Capital expenditures by segment were as follows:
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
TiO
2
segment
|
|
$
|
19
|
|
|
$
|
18
|
|
|
$
|
39
|
|
|
$
|
35
|
|
Alkali segment
|
|
|
4
|
|
|
|
4
|
|
|
|
16
|
|
|
|
20
|
|
Corporate
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
Total
|
|
$
|
24
|
|
|
$
|
22
|
|
|
$
|
56
|
|
|
$
|
55
|
|
Total assets by segment were as follows:
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
TiO
2
segment
|
|
$
|
3,017
|
|
|
$
|
2,991
|
|
Alkali segment
|
|
|
1,641
|
|
|
|
1,671
|
|
Corporate
|
|
|
336
|
|
|
|
291
|
|
Total
|
|
$
|
4,994
|
|
|
$
|
4,953
|
|
21.
|
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, 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 distributions, and other equity changes); (iii) the Guarantor Subsidiaries alone; (iv) the Non-Guarantor Subsidiaries alone; and (v) the Subsidiary Issuer, Tronox Finance.
The guarantor unaudited 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;
|
|
•
|
Designation of such Guarantor Subsidiary as an “unrestricted 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.
|
At December 31, 2016, certain entities which were created as part of the Corporate Reorganization were designated as non-guarantor entities. Pursuant to the Seventh Supplemental Indenture, dated as of February 14, 2017, to the Indenture, dated August 20, 2012 among Tronox Finance LLC, as Issuer, Tronox Limited as Parent, the guarantors named therein and Wilmington Trust, National Association, as trustee, these entities have been designated as guarantor entities. Consequently, the unaudited guarantor condensed consolidating financial information for these entities has been revised, retrospectively, to reflect the change in structure.
GUARANTOR CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended June 30, 2017
(Unaudited)
(Millions of U.S. dollars)
|
|
Consolidated
|
|
|
Eliminations
|
|
|
Tronox
Finance LLC
|
|
|
Parent
Company
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-
Guarantor
Subsidiaries
|
|
Net sales
|
|
$
|
622
|
|
|
$
|
(56
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
487
|
|
|
$
|
191
|
|
Cost of goods sold
|
|
|
498
|
|
|
|
(61
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
400
|
|
|
|
159
|
|
Gross profit
|
|
|
124
|
|
|
|
5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
87
|
|
|
|
32
|
|
Selling, general and administrative expenses
|
|
|
(69
|
)
|
|
|
1
|
|
|
|
—
|
|
|
|
(16
|
)
|
|
|
(42
|
)
|
|
|
(12
|
)
|
Restructuring income (expense)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
—
|
|
Income (loss) from operations
|
|
|
55
|
|
|
|
6
|
|
|
|
—
|
|
|
|
(15
|
)
|
|
|
44
|
|
|
|
20
|
|
Interest and debt expense, net
|
|
|
(46
|
)
|
|
|
—
|
|
|
|
(26
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
(19
|
)
|
Intercompany interest income (expense)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
1
|
|
|
|
—
|
|
Other income (expense), net
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
4
|
|
|
|
(3
|
)
|
Equity in earnings of subsidiary
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
21
|
|
|
|
(27
|
)
|
|
|
—
|
|
Income (loss) before income taxes
|
|
|
8
|
|
|
|
12
|
|
|
|
(26
|
)
|
|
|
3
|
|
|
|
21
|
|
|
|
(2
|
)
|
Income tax benefit (provision)
|
|
|
(3
|
)
|
|
|
—
|
|
|
|
8
|
|
|
|
—
|
|
|
|
(14
|
)
|
|
|
3
|
|
Net income (loss)
|
|
|
5
|
|
|
|
12
|
|
|
|
(18
|
)
|
|
|
3
|
|
|
|
7
|
|
|
|
1
|
|
Net income attributable to noncontrolling interest
|
|
|
2
|
|
|
|
2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net income (loss) attributable to Tronox Limited
|
|
$
|
3
|
|
|
$
|
10
|
|
|
$
|
(18
|
)
|
|
$
|
3
|
|
|
$
|
7
|
|
|
$
|
1
|
|
GUARANTOR CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Six Months Ended June 30, 2017
(Unaudited)
(Millions of U.S. dollars)
|
|
Consolidated
|
|
|
Eliminations
|
|
|
Tronox
Finance LLC
|
|
|
Parent
Company
|
|
|
Guarantor
Subsidiaries
|
|
|
Non-
Guarantor
Subsidiaries
|
|
Net sales
|
|
$
|
1,191
|
|
|
$
|
(121
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
945
|
|
|
$
|
367
|
|
Cost of goods sold
|
|
|
977
|
|
|
|
(125
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
796
|
|
|
|
306
|
|
Gross profit
|
|
|
214
|
|
|
|
4
|
|
|
|
—
|
|
|
|
—
|
|
|
|
149
|
|
|
|
61
|
|
Selling, general and administrative expenses
|
|
|
(143
|
)
|
|
|
2
|
|
|
|
—
|
|
|
|
(35
|
)
|
|
|
(88
|
)
|
|
|
(22
|
)
|
Restructuring income (expense)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
—
|
|
Income (loss) from operations
|
|
|
71
|
|
|
|
6
|
|
|
|
—
|
|
|
|
(34
|
)
|
|
|
60
|
|
|
|
39
|
|
Interest and debt expense, net
|
|
|
(92
|
)
|
|
|
—
|
|
|
|
(52
|
)
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
(38
|
)
|
Intercompany interest income (expense)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4
|
|
|
|
(4
|
)
|
|
|
—
|
|
Other income (expense), net
|
|
|
(7
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(5
|
)
|
|
|
6
|
|
|
|
(8
|
)
|
Equity in earnings of subsidiary
|
|
|
—
|
|
|
|
45
|
|
|
|
—
|
|
|
|
4
|
|
|
|
(49
|
)
|
|
|
—
|
|
Income (loss) before income taxes
|
|
|
(28
|
)
|
|
|
51
|
|
|
|
(52
|
)
|
|
|
(31
|
)
|
|
|
11
|
|
|
|
(7
|
)
|
Income tax benefit (provision)
|
|
|
(5
|
)
|
|
|
—
|
|
|
|
16
|
|
|
|
(7
|
)
|
|
|
(22
|
)
|
|
|
8
|
|
Net income (loss)
|
|
|
(33
|
)
|
|
|
51
|
|
|
|
(36
|
)
|
|
|
(38
|
)
|
|
|
(11
|
)
|
|
|
1
|
|
Net income attributable to noncontrolling interest
|
|
|
5
|
|
|
|
5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Net income (loss) attributable to Tronox Limited
|
|
$
|
(38
|
)
|
|
$
|
46
|
|
|
$
|
(36
|
)
|
|
$
|
(38
|
)
|
|
$
|
(11
|
)
|
|
$
|
1
|
|