000153080412/31FALSE2020Q1——9696P3YP3YSegment Information
Prior to and after the Cristal Transaction, we operate our business under one operating segment, TiO2, which is also our reportable segment.  The Company’s chief operating decision maker, who is its CEO, reviews financial information presented at the TiO2 level for purposes of allocating resources and evaluating financial performance. Since we operate our business under one segment, there is no difference between our consolidated results and segment results.
We disaggregate our revenue from contracts with customers by product type and geographic area. We believe this level of disaggregation appropriately depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors and reflects how our business is managed. See Note 4 for further information on revenues.
During the three months ended March 31, 2020 and 2019, our ten largest third-party TiO2 represented 29% and 42%, respectively, of our consolidated net sales. During the three months ended March 31, 2020 and 2019, no single customer accounted for 10% of our consolidated net sales.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to ___________
1-35573
(Commission file number)
TRONOX HOLDINGS PLC
(Exact Name of Registrant as Specified in its Charter) extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

England and Wales 98-1467236
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

263 Tresser Boulevard, Suite 1100
Stamford, Connecticut 06901
Laporte Road, Stallingborough
Grimsby, North East Lincolnshire, DN40 2PR
United Kingdom 
Registrant’s telephone number, including area code: (203) 705-3800
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Ordinary Shares, par value $0.01 per share New York Stock Exchange
Trading Symbol: TROX
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No
As of April 30, 2020, the Registrant had 143,368,056 ordinary shares outstanding.



Table of Contents

2


Item 1. Financial Statements (Unaudited)

3

TRONOX HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Millions of U.S. dollars, except share and per share data)
Three Months Ended March 31,
2020 2019
Net sales $ 722    $ 390   
Cost of goods sold 547    307   
Gross profit 175    83   
Selling, general and administrative expenses 94    67   
Restructuring   —   
Income from operations 79    16   
Interest expense (45)   (49)  
Interest income    
Loss on extinguishment of debt —    (2)  
Other income (expense), net 10    (2)  
Income (loss) before income taxes 47    (28)  
Income tax provision (7)   (2)  
Net income (loss) 40    (30)  
Net income attributable to noncontrolling interest    
Net income (loss) attributable to Tronox Holdings plc $ 32    $ (34)  
Earnings (loss) per share:
Basic $ 0.23    $ (0.27)  
Diluted $ 0.22    $ (0.27)  
Weighted average shares outstanding, basic (in thousands) 142,736    124,296   
Weighted average shares outstanding, diluted (in thousands) 143,596    124,296   
See accompanying notes to unaudited condensed consolidated financial statements.
4

TRONOX HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
(Millions of U.S. dollars)
Three Months Ended March 31,
2020 2019
Net income (loss) $ 40    $ (30)  
Other comprehensive (loss) income:
Foreign currency translation adjustments (188)   —   
Pension and postretirement plans:
Amortization of unrecognized actuarial losses, net of taxes of less than $1 million and nil in the three ended March 31, 2020 and 2019, respectively
  —   
Total pension and postretirement gains (losses)   —   
Realized (gains) losses on derivatives reclassified from accumulated other comprehensive loss to the Condensed Consolidated Statement of Operations   —   
Unrealized (losses) gains on derivative financial instruments, (net of taxes of $10 million and nil for the three months ended March 31, 2020 and 2019, respectively) - See Note 13
(88)   —   
Other comprehensive loss (270)   —   
Total comprehensive loss (230)   (30)  
Comprehensive (loss) income attributable to noncontrolling interest:
Net income    
Foreign currency translation adjustments (47)   11   
Comprehensive (loss) income attributable to noncontrolling interest (39)   15   
Comprehensive loss attributable to Tronox Holdings plc $ (191)   $ (45)  
See accompanying notes to unaudited condensed consolidated financial statements.
5

TRONOX HOLDINGS PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions of U.S. dollars, except share and per share data)
March 31, 2020 December 31, 2019
ASSETS
Current Assets
Cash and cash equivalents $ 420    $ 302   
Restricted cash    
Accounts receivable (net of allowance for credit losses of $4 million and $5 million as of March 31, 2020 and December 31, 2019, respectively)
554    482   
Inventories, net 1,054    1,131   
Prepaid and other assets 115    143   
Income taxes receivable    
Total current assets 2,158    2,073   
Noncurrent Assets
Property, plant and equipment, net 1,630    1,762   
Mineral leaseholds, net 783    852   
Intangible assets, net 202    208   
Lease right of use assets, net 92    101   
Deferred tax assets 107    110   
Other long-term assets 158    162   
Total assets $ 5,130    $ 5,268   
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 280    $ 342   
Accrued liabilities 346    283   
Short-term lease liabilities 37    38   
Short-term debt 212    —   
Long-term debt due within one year 30    38   
Income taxes payable    
Total current liabilities 911    702   
Noncurrent Liabilities
Long-term debt, net 2,954    2,988   
Pension and postretirement healthcare benefits 153    160   
Asset retirement obligations 129    142   
Environmental liabilities 70    65   
Long-term lease liabilities 52    62   
Deferred tax liabilities 139    184   
Other long-term liabilities 43    49   
Total liabilities 4,451    4,352   
Commitments and Contingencies - Note 16 —    —   
Shareholders’ Equity
Tronox Holdings plc ordinary shares, par value $0.01 — 143,366,438 shares issued and outstanding at March 31, 2020 and 141,900,459 shares issued and outstanding at December 31, 2019
   
Capital in excess of par value 1,852    1,846   
Accumulated deficit (471)   (493)  
Accumulated other comprehensive loss (829)   (606)  
Total Tronox Holdings plc shareholders’ equity 553    748   
Noncontrolling interest 126    168   
Total equity 679    916   
Total liabilities and equity $ 5,130    $ 5,268   
See accompanying notes to unaudited condensed consolidated financial statements.
6

TRONOX HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions of U.S. dollars)
7

Three Months Ended
March 31,
2020 2019
Cash Flows from Operating Activities:
Net income (loss) $ 40    $ (30)  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, depletion and amortization 71    47   
Deferred income taxes —    (3)  
Share-based compensation expense    
Amortization of deferred debt issuance costs and discount on debt    
Loss on extinguishment of debt —     
Other non-cash items affecting net (loss) income 14     
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, net (92)   19   
Increase in inventories, net —    (10)  
Increase in prepaid and other assets (3)   (1)  
(Decrease) increase in accounts payable and accrued liabilities (54)    
Net changes in income tax payables and receivables   (3)  
Changes in other non-current assets and liabilities (17)   (6)  
Cash (used in) provided by operating activities (28)   39   
Cash Flows from Investing Activities:
Capital expenditures (38)   (25)  
Loans —    (25)  
Cash used in investing activities (38)   (50)  
Cash Flows from Financing Activities:
Repayments of long-term debt (7)   (101)  
Proceeds from long-term debt —    222   
Proceeds from short-term debt 213    94   
Acquisition of noncontrolling interest —    (148)  
Debt issuance costs —    (4)  
Dividends paid (10)   (7)  
Restricted stock and performance-based shares settled in cash for withholding taxes (3)   (6)  
Cash provided by financing activities 193    50   
Effects of exchange rate changes on cash and cash equivalents and restricted cash (9)   (1)  
Net increase in cash, cash equivalents and restricted cash 118    38   
Cash, cash equivalents and restricted cash at beginning of period 311    1,696   
Cash, cash equivalents and restricted cash at end of period $ 429    $ 1,734   
Supplemental cash flow information:
Interest paid, net $ 24    $ 29   
Income taxes paid $   $  
8

See accompanying notes to unaudited condensed consolidated financial statements.
9

TRONOX HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(Millions of U.S. dollars, except for shares)
For the three months ended March 31, 2020
Tronox
Holdings
plc
Ordinary
Shares (in
thousands)
Tronox
Holdings
plc
Ordinary
Shares
(Amount)
Capital
in
Excess
of par
Value
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
Loss
Total
Tronox
Holdings plc
Shareholders’
Equity
Non-
controlling
Interest
Total
Equity
Balance at December 31, 2019 141,900    $   $ 1,846    $ (493)   $ (606)   $ 748    $ 168    $ 916   
Net income —    —    —    32    —    32      40   
Other comprehensive (loss) income —    —    —    (223)   (223)   (47)   (270)  
Share-based compensation 1,779    —      —    —      —     
Shares cancelled (313)   —    (3)   —    —    (3)   —    (3)  
Measurement period adjustment related to Cristal acquisition —    —    —    —    (3)   (3)  
Ordinary share dividends ($0.07 per share)
—    —    —    (10)   —    (10)   —    (10)  
Balance at March 31, 2020 143,366    $   $ 1,852    $ (471)   $ (829)   $ 553    $ 126    $ 679   
See accompanying notes to unaudited condensed consolidated financial statements.
10

TRONOX HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Continued)
(Unaudited)
(Millions of U.S. dollars, except for shares)
For the three months ended March 31, 2019
Tronox
Holdings
plc
Ordinary
Shares (in
thousands)
Tronox
Holdings
plc
Ordinary
Shares
Capital
in
Excess
of par
Value
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
Loss
Total
Tronox
Holdings plc Shareholders’
Equity
Non-
controlling
Interest
Total
Equity
Balance at December 31, 2018 122,934    $   $ 1,579    $ (357)   $ (540)   $ 683    $ 179    $ 862   
Net (loss) income —    —    —    (34)   —    (34)     (30)  
Other comprehensive income (loss) —    —    —    —    (11)   (11)   11    —   
Share-based compensation 3,306    —      —    —      —     
Shares cancelled (502)   —    (6)   —    —    (6)   —    (6)  
Acquisition of noncontrolling interest —    —      —    (61)   (58)   (90)   (148)  
Ordinary share dividends ($0.045 per share)
—    —    —    (6)   —    (6)   —    (6)  
Balance at March 31, 2019 125,738    $   $ 1,584    $ (397)   $ (612)   $ 576    $ 104    $ 680   
See accompanying notes to unaudited condensed consolidated financial statements.
11

TRONOX HOLDINGS PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of U.S. dollars, except share, per share and metric tons data or unless otherwise noted)

1. The Company
Tronox Holdings plc (referred to herein as “Tronox,” “we,” “us,” or “our”) is a public limited company registered under the laws of England and Wales. On April 10, 2019, we completed the acquisition from National Industrialization Company ("Tasnee") of the TiO2 business of The National Titanium Dioxide Company Ltd. (“Cristal”) (the “Cristal Transaction”). In order to obtain regulatory approval for the Cristal Transaction, we were required to divest Cristal's North American TiO2 business, which was sold in May 2019. See Note 2 below for further details on the Cristal Transaction.
Including the Cristal operations, we now operate titanium-bearing mineral sand mines and beneficiation and smelting operations in Australia, South Africa and Brazil to produce feedstock materials that can be processed into TiO2 for pigment, high purity titanium chemicals, including titanium tetrachloride, and Ultrafine© titanium dioxide used in certain specialty applications. It is our long-term strategic goal to be fully vertically integrated and consume all of our feedstock materials in our own TiO2 pigment facilities in the United States, Australia, Brazil, UK, France, the Netherlands, China and the Kingdom of Saudi Arabia (“KSA”). We believe that full vertical integration is the best way to achieve our ultimate goal of delivering low cost, high-quality pigment to our coatings and other TiO2 customers throughout the world. The mining, beneficiation and smelting of titanium bearing mineral sands creates meaningful quantities of zircon, which we also supply to customers around the world.
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited and have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019.
The acquisition of Cristal has impacted the comparability of our financial statements. As the Cristal Transaction was completed on April 10, 2019, in accordance with ASC 805, the three month period ended March 31, 2019 does not include the results of the Cristal business, while the three month period ended March 31, 2020 does include the results of Cristal. However, the balance sheet at both December 31, 2019 and March 31, 2020 includes the impacts of the acquisition of Cristal.
In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, considered necessary for a fair statement of its financial position as of March 31, 2020, and its results of operations for the three months ended March 31, 2020 and 2019. Our unaudited condensed consolidated financial statements include the accounts of all majority-owned subsidiary companies. All intercompany balances and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. It is at least reasonably possible that the effect on the financial statements of a change in estimate due to one or more future confirming events could have a material effect on the financial statements, including any potential impacts on the economy as a result of the Covid-19 pandemic which could impact revenue growth and collectibility of trade receivables.
Recently Adopted Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (“Topic 820”): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The standard modifies the disclosure requirements in Topic 820, Fair Value Measurement, by: removing certain disclosure requirements related to the fair value hierarchy; modifying existing disclosure requirements related to measurement uncertainty; and adding new disclosure requirements, such as disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring
12

Level 3 fair value measurements held at the end of the reporting period and disclosing the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019, with early adoption permitted. We adopted this standard on January 1, 2020 and it did not have a material impact on the Company's consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), as amended. The standard introduces a new accounting model for expected credit losses on financial instruments, including trade receivables, based on estimates of current expected credit losses (CECL). This standard became effective on January 1, 2020, and had an immaterial impact on the Company's consolidated financial statements as our historical bad debt expense has not been material.
Recently Issued Accounting Pronouncements

During the quarter ended March 31, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform Financial Reporting.” This amendment is elective in nature. Amongst other aspects, this standard provides for practical expedients and exceptions to current accounting standards that reference a rate which is expected to be dissolved (e.g. London Interbank Offered Rate “LIBOR”) as it relates to hedge accounting, contract modifications and other transactions that reference this rate, subject to meeting certain criteria. The standard is effective for all entities as of March 12, 2020 through December 31, 2022.The company is currently evaluating the impact of the standard.
2. Cristal Acquisition and Related Divestitures
On April 10, 2019, we completed the acquisition of the TiO2 business of Cristal for $1.675 billion of cash, plus 37,580,000 ordinary shares. The total acquisition price, including the value of the ordinary shares at $14 per share on the closing date of the Cristal Transaction, was approximately $2.2 billion. With the acquisition of our shares, an affiliate of Cristal became our largest shareholder. At March 31, 2020, Cristal International Holdings B.V. (formerly known as Cristal Inorganic Chemical Netherlands Cooperatief W.A.), a wholly-owned subsidiary of National Titanium Dioxide Company Ltd., continues to own 37,580,000 shares of Tronox, or a 26% ownership interest. National Titanium Dioxide Company Ltd. is 79% owned by Tasnee.
In order to obtain regulatory approval for the Cristal Transaction, the FTC required us to divest Cristal's North American TiO2 business, which we sold to INEOS on May 1, 2019, for cash proceeds, net of transaction costs, of $701 million, inclusive of an amount for a working capital adjustment.
In conjunction with the Cristal Transaction, we entered into a transition services agreement with Tasnee and certain of its affiliates under which we and the Tasnee entities will provide certain transition services to one another. See Note 20 for further details of the transition services agreement. In conjunction with the divestiture of Cristal's North American TiO2 business to INEOS, we entered into a transition services agreement with INEOS. Under the terms of the transition services agreement, INEOS agreed to provide the following services to Tronox for manufacturing, technology and innovation, information technology, finance, warehousing and human resources. Similarly, Tronox will provide services to INEOS for information technology, finance, product stewardship, warehousing and human resources.
In addition, in order to obtain regulatory approval by the European Commission, we divested the 8120 paper laminate grade, supplied from our Botlek facility in the Netherlands, to Venator Materials PLC (“Venator”). The divestiture was completed on April 26, 2019. Under the terms of the divestiture, we will supply the 8120 grade product to Venator under a supply agreement for an initial term of 2 years, and extendable up to 3 years, to allow for the transfer of the manufacturing of the 8120 grade to Venator. Total cash consideration is 8 million Euros, of which 1 million Euros was paid at the closing and the remaining 7 million Euros (approximately $7.7 million at March 31, 2020 exchange rate) will be paid in equal installments during the second quarters of 2020 and 2021. We recorded a charge of $19 million during the second quarter of 2019, in “Contract loss” in the Consolidated Statements of Operations, reflecting both the proceeds on sale and the estimated losses we expect to incur under the supply agreement with Venator.
We funded the cash portion of the Cristal Transaction through existing cash, borrowings from our Wells Fargo Revolver, and restricted cash which had been borrowed under the Blocked Term Loan and which became available to us for the purpose of consummating the Cristal Transaction.

13

Allocation of the Purchase Price
For the Cristal Transaction, we have applied the acquisition method of accounting in accordance with ASC 805, "Business Combinations", with respect to the identifiable assets and liabilities of Cristal, which have been measured at estimated fair value as of the date of the business combination.
The aggregate purchase price noted above was allocated to the identifiable assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date, primarily using Level 2 and Level 3 inputs (see Note 14 for an explanation of Level 2 and Level 3 inputs). These fair value estimates represent management’s best estimate of future cash flows (including sales, cost of sales, income taxes, etc.), discount rates, competitive trends, market comparables and other factors. Inputs used were generally determined from historical data supplemented by current and anticipated market conditions and growth rates.
During the three months ended March 31, 2020,  we finalized the purchase price allocation which resulted in increasing environmental liabilities by $8 million, increasing property, plant and equipment by $13 million, decreasing noncontrolling interest by $3 million, decreasing deferred taxes by $6 million, increasing liabilities held for sale by $5 million and decreasing inventory by $4 million, as well as other minor adjustments. The adjustments to the unaudited Condensed Consolidated Statement of Operations that would have been recognized in the second quarter of 2019 if the measurement period adjustments had been completed as of the acquisition date would have increased the net loss by approximately $1 million.
The final purchase price consideration and estimated fair value of Cristal's net assets acquired on April 10, 2019 are shown below. The assets and liabilities of Cristal's North American TiO2 business, that was subsequently divested on May 1, 2019, are shown as held for sale in the fair value of assets acquired and liabilities assumed.
Fair Value
Purchase Price Consideration:
Tronox Holdings plc shares issued 37,580,000   
Tronox Holdings plc closing price per share on April 10, 2019 $ 14.00   
Total fair value of Tronox Holdings plc shares issued at acquisition date $ 526   
Cash consideration paid $ 1,675   
Total purchase price $ 2,201   

14

Fair Value
Fair Value of Assets Acquired:
Accounts receivable $ 251   
Inventory 689   
Deferred tax assets 51   
Prepaid and other assets 81   
Property, plant and equipment 759   
Mineral leaseholds 95   
Intangible assets 64   
Lease right of use assets 40   
Other long-term assets 43   
Assets held for sale 850   
Total assets acquired $ 2,923   
Less: Liabilities Assumed
Accounts payable $ 102   
Accrued liabilities 137   
Short-term lease liabilities 13   
Deferred tax liabilities  
Pension and postretirement healthcare benefits 76   
Environmental liabilities 72   
Asset retirement obligations 75   
Long-term debt 22   
Long-term lease liabilities 24   
Other long-term liabilities 20   
Liabilities held for sale 131   
Total liabilities assumed $ 674   
Less noncontrolling interest 48   
Purchase price $ 2,201   

Summary of Significant Fair Value Methods

The methods used to determine the fair value of significant identifiable assets and liabilities included in the allocation of purchase price are included in Note 3 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
3. Restructuring Initiatives
In April 2019, we announced the completion of the Cristal Transaction. During the second quarter of 2019, as a result of the acquisition, we outlined a broad based synergy savings program that is expected to reduce costs, simplify processes and focus the organization’s structure and resources on key growth initiatives. During the three months ended March 31, 2020, we recorded costs of $2 million in our unaudited Condensed Consolidated Statement of Operations of which there were no comparable amounts in the three months ended March 31, 2019. The costs consisted primarily of charges for employee related costs, including severance.
15

The liability balance for restructuring as of March 31, 2020, is as follows:
Employee-
Related Costs
Balance, December 31, 2019 $ 10   
First Quarter 2020 charges  
Cash payments (4)  
Foreign exchange and other  
Balance, March 31, 2020 $  

4. Revenue
We recognize revenue at a point in time when the customer obtains control of the promised products. For most transactions this occurs when products are shipped from our manufacturing facilities or at a later point when control of the products transfers to the customer at a specified destination or time.
Contract assets represent our rights to consideration in exchange for products that have transferred to a customer when the right is conditional on situations other than the passage of time. For products that we have transferred to our customers, our rights to the consideration are typically unconditional and only the passage of time is required before payments become due. These unconditional rights are recorded as accounts receivable. As of March 31, 2020, and December 31, 2019, we did not have material contract asset balances.
Contract liabilities represent our obligations to transfer products to a customer for which we have received consideration from the customer. Infrequently we may receive advance payment from our customers that is accounted for as deferred revenue. Deferred revenue is earned when control of the product transfers to the customer, which is typically within a short period of time from when we received the advanced payment. Contract liability balances as of March 31, 2020 and December 31, 2019 were approximately $3 million and $1 million, respectively. Contract liability balances were reported as “Accounts payable” in the unaudited Condensed Consolidated Balance Sheets.  All contract liabilities as of December 31, 2019 were recognized as revenue in “Net sales” in the unaudited Condensed Consolidated Statements of Operations during the first quarter of 2020.
Disaggregation of Revenue
We operate under one operating and reportable segment, TiO2. We disaggregate our revenue from contracts with customers by product type and geographic area. We believe this level of disaggregation appropriately depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors and reflects how our business is managed.
Net sales to external customers by geographic areas where our customers are located were as follows:
Three Months Ended
March 31,
2020 2019
North America $ 178    $ 138   
South and Central America 40    13   
Europe, Middle-East and Africa 292    130   
Asia Pacific 212    109   
Total net sales $ 722    $ 390   
16


Net sales from external customers for each similar type of product were as follows:
Three Months Ended
March 31,
2020 2019
TiO2
$ 580    $ 277   
Zircon 65    64   
Feedstock and other products 77    49   
Total net sales $ 722    $ 390   
Feedstock and other products mainly include rutile prime, ilmenite, chloride (“CP”) slag and other mining products.
During the three months ended March 31, 2020 and 2019, our ten largest third-party TiO2 represented 29% and 42%, respectively, of our consolidated net sales. During the three months ended March 31, 2020 and 2019, no single customer accounted for 10% of our consolidated net sales.
5. 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:
Three Months Ended
March 31,
2020 2019
Income tax provision $ (7)   $ (2)  
Income (loss) before income taxes $ 47    $ (28)  
Effective tax rate 15  % (7) %
Tronox Holdings plc, a U.K. public limited company, became the public parent during the three months ended March 31, 2019. During the three months ended March 31, 2019, Tronox Limited was the public parent, registered under the laws of the State of Western Australia but managed and controlled in the U.K. The statutory tax rate in the U.K. at both March 31, 2020 and 2019 was 19%. The effective tax rates for the three months ended March 31, 2020 and 2019 are influenced by a variety of factors, primarily income and losses in jurisdictions with full valuation allowances, disallowable expenditures, restructuring impacts, and our jurisdictional mix of income at tax rates different than the U.K. statutory rate.
Upon completion of the Cristal Transaction, we now have additional jurisdictions with operational income.  The statutory tax rates on income earned in Australia (30%), the United States (21%), South Africa (28%), France (28.92%), China (25%), Brazil (34%), the Kingdom of Saudi Arabia (KSA) (20%), and the Netherlands (25%) are higher than the U.K. statutory rate of 19%. Tax rates will be reduced in France and the Netherlands to 25% and 21.7%, respectively, in future years.
We continue to maintain full valuation allowances related to the total net deferred tax assets in Australia and the U.S., as we cannot objectively assert that these deferred tax assets are more likely than not to be realized. It is reasonably possible that a portion of these valuation allowances could be reversed within the next year due to increased profitability levels. For entities acquired in the Cristal Transaction, we have full valuation allowances in Australia, Belgium, Brazil, Switzerland and the U.S. Until these valuation allowances are eliminated, future provisions for income taxes for these jurisdictions will include no tax benefits with respect to losses incurred and tax expense only to the extent of current tax payments. Additionally, we have valuation allowances against specific tax assets in the Netherlands, South Africa, and the U.K.
The Company’s ability to use certain loss and expense carryforwards in the U.S. could be substantially limited if the Company were to experience an ownership change as defined under IRC Section 382. In general, an ownership change would occur if the Company’s “5-percent shareholders,” as defined under IRC Section 382, including certain groups of persons
17

treated as “5-percent shareholders,” collectively increased their ownership in the Company by more than 50 percentage points over a rolling three-year period. If an ownership change does occur during 2020, the resulting impact could be a limitation of up to $5.3 billion composed of both U.S. net operating losses and interest limitation carryforwards. We believe there would be minimal impact on the $2.3 billion future Grantor Trust deductions from an IRC Section 382 change.
We currently have no uncertain tax positions recorded; however, we continue to evaluate the companies acquired in the Cristal Transaction, and it is reasonably possible that this could change in the next 12 months.
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, adjustments to our provisions may be necessary and/or reclassifications of noncurrent tax liabilities to current may occur in the future.
6. Income (Loss) Per Share
The computation of basic and diluted loss per share for the periods indicated is as follows:
Three Months Ended
March 31,
2020 2019
Numerator - Basic and Diluted:
Net income (loss) $ 40    $ (30)  
Less: Net income attributable to noncontrolling interest    
Net income (loss) available to ordinary shares $ 32    $ (34)  
Denominator - Basic and Diluted:
Weighted-average ordinary shares, basic (in thousands) 142,736    124,296   
Weighted-average ordinary shares, diluted (in thousands) 143,596    124,296   
Basic net income (loss) operations per ordinary share $ 0.23    $ (0.27)  
Diluted net income (loss) operations per ordinary share $ 0.22    $ (0.27)  
Net income (loss) per ordinary share amounts were calculated from exact, not rounded net income (loss) and share information.  Anti-dilutive shares not recognized in the diluted net income (loss) per share calculation for the three months ended March 31, 2020 and 2019 were as follows:
Shares
Three Months Ended March 31,
2020 2019
Options 1,216,456    1,307,735   
Restricted share units 7,322,644    5,176,210   

18

7. Inventories, Net
Inventories, net consisted of the following:
March 31,
2020
December 31,
2019
Raw materials $ 186    $ 205   
Work-in-process 101    129   
Finished goods, net 566    573   
Materials and supplies, net 201    224   
Inventories, net – current $ 1,054    $ 1,131   
Materials and supplies, net consists of processing chemicals, maintenance supplies and spare parts, which will be consumed directly and indirectly in the production of our products.
At March 31, 2020 and December 31, 2019, inventory obsolescence reserves primarily for materials and supplies were $42 million and $39 million, respectively. Reserves for lower of cost or market and net realizable value were $13 million and $25 million at March 31, 2020 and December 31, 2019, respectively.
8. Property, Plant and Equipment, Net
Property, plant and equipment, net of accumulated depreciation, consisted of the following:
March 31,
2020
December 31,
2019
Land and land improvements $ 175    $ 191   
Buildings 319    340   
Machinery and equipment 1,893    2,028   
Construction-in-progress 156    156   
Other 54    54   
Subtotal 2,597    2,769   
Less: accumulated depreciation (967)   (1,007)  
Property, plant and equipment, net $ 1,630    $ 1,762   
The decline in property, plant and equipment, net from December 31, 2019 to March 31, 2020 is primarily a result of impact of foreign currency translation due to the devaluation of the South African rand and Brazilian real.
Substantially all of the property, plant and equipment, net is pledged as collateral for our debt. See Note 12.
The table below summarizes depreciation expense related to property, plant and equipment for the periods presented, recorded in the specific line items in our unaudited Condensed Consolidated Statements of Operations:
Three Months Ended
March 31,
2020 2019
Cost of goods sold $ 59    $ 32   
Selling, general and administrative expenses    
Total $ 60    $ 33   

19

9. Mineral Leaseholds, Net
Mineral leaseholds, net of accumulated depletion, consisted of the following:
March 31,
2020
December 31,
2019
Mineral leaseholds $ 1,293    $ 1,352   
Less: accumulated depletion (510)   (500)  
Mineral leaseholds, net $ 783    $ 852   

The decline in mineral leaseholds, net from December 31, 2019 to March 31, 2020 is primarily a result of the impact of foreign currency translation due to the devaluation of the South African rand. Depletion expense relating to mineral leaseholds recorded in “Cost of goods sold” in the unaudited Condensed Consolidated Statements of Operations was $2 million and $8 million during the three months ended March 31, 2020 and 2019, respectively.
10. Intangible Assets, Net
Intangible assets, net of accumulated amortization, consisted of the following:
March 31, 2020 December 31, 2019
Gross Cost Accumulated
Amortization
Net Carrying
Amount
Gross Cost Accumulated
Amortization
Net Carrying
Amount
Customer relationships $ 291    $ (178)   $ 113    $ 291    $ (173)   $ 118   
TiO2 technology
93    (20)   73    92    (17)   75   
Internal-use software 50    (34)   16    49    (34)   15   
Intangible assets, net $ 434    $ (232)   $ 202    $ 432    $ (224)   $ 208   
Amortization expense related to intangible assets recorded in "Selling, general and administrative expenses" in the unaudited Condensed Consolidated Statements of Operations was $9 million and $6 million during the three months ended March 31, 2020 and 2019, respectively.
Estimated future amortization expense related to intangible assets is $23 million for the remainder of 2020, $31 million for 2021, $29 million for 2022, $27 million for 2023, $26 million for 2024 and $66 million thereafter.
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11. Accrued Liabilities
Accrued liabilities consisted of the following:
March 31,
2020
December 31,
2019
Employee-related costs and benefits $ 82    $ 103   
Related party payables    
Interest 32    16   
Sales rebates 42    39   
Restructuring   10   
Taxes other than income taxes 12     
Asset retirement obligations 13    16   
Interest rate swaps 54    22   
Currency contracts 47    —   
Professional fees and other 48    60   
Liabilities held for sale    
Accrued liabilities $ 346    $ 283   

12. Debt
Long-Term Debt
Long-term debt, net of an unamortized discount and debt issuance costs, consisted of the following:
Original
Principal
Annual
Interest Rate
Maturity
Date
March 31, 2020 December 31, 2019
Term Loan Facility, net of unamortized discount (1)
$ 2,150    Variable 9/22/2024 $ 1,805    $ 1,805   
Senior Notes due 2025 450    5.75  % 10/1/2025 450    450   
Senior Notes due 2026 615    6.50  % 4/15/2026 615    615   
Standard Bank Term Loan Facility (1)(2)
222    Variable 3/25/2024 117    158   
Tikon Loan N/A Variable 5/23/2021 16    16   
Australian Government Loan, net of unamortized discount N/A N/A 12/31/2036    
Finance leases 12    15   
Long-term debt 3,016    3,060   
Less: Long-term debt due within one year (30)   (38)  
Debt issuance costs (32)   (34)  
Long-term debt, net $ 2,954    $ 2,988   
_______________
(1)Average effective interest rate on the Term Loan Facility of 5.0% and 5.6% during the three months ended March 31, 2020 and 2019, respectively. Average effective interest rate on the Standard Bank Term Loan Facility of 9.5% and 10.6% during the three months ended March 31, 2020 and 2019, respectively.
(2)The Standard Bank Term Loan Facility contains financial covenants relating to certain ratio tests.
Short-Term Debt
Short-term debt consisted of the following:
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Annual Interest Rate Maturity Date March 31, 2020 December 31, 2019
Wells Fargo Revolver(1)
Variable 9/22/2022 $ 125    $ —   
Standard Bank Revolver(2)
Variable 3/25/2022 34    —   
Emirates Revolver(3)
Variable 3/31/2021 40    —   
SABB Credit Facility Variable 11/30/2020 13    —   
Short-term debt(4)
$ 212    $ —   
_______________
(1) In March 2019, the Wells Fargo Revolver was amended, which amongst other things, modified certain components of the borrowing base in order to increase the potential availability of credit.  We also voluntarily reduced the revolving credit lines under the Wells Fargo Revolver from $550 million to $350 million. As a result of this modification, we accelerated the recognition of a portion of the deferred financing costs related to the Wells Fargo Revolver and during the three months ended March 31, 2019, recorded a charge of $2 million in “Loss on extinguishment of debt” within the unaudited Condensed Consolidated Statement of Operations. At March 31, 2020, there were $30 million of issued and undrawn letters of credit under the Wells Fargo Revolver.
The Wells Fargo Revolver contains a springing financial covenant that requires the Company and its restricted subsidiaries to maintain a consolidated fixed charge coverage ratio of at least 1.0:1.0 during certain test periods based on borrowing availability under the Wells Fargo Revolver or following the occurrence of specified events of default.
(2) In connection with the Standard Bank Credit Facility ("Standard Bank Revolver") entered into on March 25, 2019, the ABSA Revolving Credit Facility ("ABSA Revolver") was terminated on March 26, 2019. As a result of the termination, we accelerated the recognition of the remaining deferred financing costs related to the ABSA Revolver during the three months ended March 31, 2019 and recorded less than $1 million in “Loss on extinguishment of debt” within the unaudited Condensed Consolidated Statement of Operations.
(3) In March 2020, the Company entered into an amendment to, amongst other things, extend the maturity date of the Emirates Revolver from March 31, 2020 to March 31, 2021.
(4) In March 2020, the Company drew down $200 million of borrowings under its Wells Fargo, Standard Bank, and Emirates revolvers in order to increase liquidity and preserve financial flexibility. Additionally, during the three months ended March 31, 2020, our KSA subsidiary drew down $13 million on its SABB Credit Facility for local working capital purposes. At March 31, 2020, the short-term debt balance was $212 million based on the March 31, 2020 exchange rate. There were no comparable amounts outstanding as of December 31, 2019.
Debt Covenants
At March 31, 2020, we are in compliance with all financial covenants in our debt facilities.
New Debt
On May 1, 2020, Tronox Incorporated, a wholly-owned indirect subsidiary of the Company, issued 6.5% senior secured notes due 2025 for an aggregate principal amount of $500 million (the "6.5% Senior Secured Notes due 2025"), which were issued under an indenture dated May 1, 2020. A portion of the proceeds of this debt offering was utilized to repay the $200 million of the Company's outstanding borrowings under its Wells Fargo, Standard Bank, and Emirates revolvers.
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13. Derivative Financial Instruments
The following table is a summary of the fair value of derivatives outstanding at March 31, 2020 and December 31, 2019:
Fair Value
March 31, 2020 December 31, 2019
Assets(a) Accrued Liabilities Assets(a) Accrued Liabilities
Derivatives Designated as Cash Flow Hedges
Currency Contracts $   $ 37    $ 30    $ —   
Interest Rate Swaps $ —    $ 54    $ —    $ 22   
Total Hedges $   $ 91    $ 30    $ 22   
Derivatives Not Designated as Cash Flow Hedges
Currency Contracts $ —    $ 10    $   $ —   
Total Derivatives $   $ 101    $ 37    $ 22   
(a) At March 31, 2020, current assets of $1 million are recorded in prepaid and other current assets and long-term assets of $5 million are recorded in other long-term assets. At December 31, 2019, current assets of $34 million were recorded in prepaid and other current assets and long-term assets of $3 million are recorded in other long-term assets.
Interest Rate Risk
During the second quarter of 2019, we entered into interest-rate swap agreements with an aggregate notional value of $750 million, representing a portion of our Term Loan Facility, which effectively converts the variable rate to a fixed rate for that portion of the loan. The agreements expire in September 2024. The Company’s objectives in using the interest-rate swap agreements are to add stability to interest expense and to manage its exposure to interest rate movements. These interest rate swaps have been designated as cash flow hedges and involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
Fair value gains or losses on these cash flow hedges are recorded in other comprehensive (loss) income and are subsequently reclassified into interest expense in the same periods during which the hedged transactions affect earnings. At March 31, 2020 and December 31, 2019, the net unrealized loss of $54 million and $22 million, respectively, was recorded in "Accumulated other comprehensive loss" on the unaudited Condensed Consolidated Balance Sheet. For the three months ended March 31, 2020, the amounts recorded in interest expense related to the interest-rate swap agreements were not material.
Foreign Currency Risk
During the third quarter of 2019 and the first quarter of 2020, we entered into foreign currency contracts used to hedge forecasted third party non-functional currency sales for our South African subsidiaries and forecasted non-functional currency cost of goods sold for our Australian subsidiaries. These foreign currency contracts are designated as cash flow hedges. Changes to the fair value of these foreign currency contracts are recorded as a component of other comprehensive (loss) income, if these contracts remain highly effective, and are recognized in net sales or costs of goods sold in the period in which the forecasted transaction affects earnings or are recognized in other income (expense) when the transactions are no longer probable of occurring.
As of March 31, 2020, we had notional amounts of (i) 2.9 billion South African rand (or approximately $163 million at March 31, 2020 exchange rate) that expire between April 29, 2020 and February 25, 2021 to reduce the exposure of our South African subsidiaries’ third party sales to fluctuations in currency rates, and (ii) $691 million Australian dollars (or approximately $422 million at March 31, 2020 exchange rate) that expire between April 29, 2020 and December 30, 2021 to reduce the exposure of our Australian subsidiaries’ cost of sales to fluctuations in currency rates. For the three months ended March 31, 2020, we recorded a loss of $1 million and a loss of $4 million in “Net sales” and "Cost of goods sold", respectively, on the unaudited Condensed Consolidated Statement of Operations, related to our cash flow hedges. There were
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no amounts recognized for foreign currency cash flow hedges in the comparative period of 2019. At March 31, 2020 and December 31, 2019, there was an unrealized net loss of $30 million and an unrealized net gain of $30 million, respectively, recorded in "Accumulated other comprehensive loss" on the unaudited Condensed Consolidated Balance Sheet, of which $25 million is expected to be recognized in earnings over the next twelve months.
We enter into foreign currency contracts for the South African rand and Australian dollar to reduce exposure of our subsidiaries’ balance sheet accounts not denominated in our subsidiaries’ functional currency to fluctuations in foreign currency exchange rates. We use a combination of zero-cost collars or forward contracts to reduce the exposure.  For accounting purposes, these foreign currency contracts are not considered hedges. The change in fair value associated with these contracts is recorded in “Other expense, net” within the unaudited Condensed Consolidated Statement of Operations and partially offsets the change in value of third party and intercompany-related receivables not denominated in the functional currency of the subsidiary. At March 31, 2020, there was (i) 638 million South African rand (or approximately $36 million at March 31, 2020 exchange rate) and (ii) $82 million Australian dollars (or approximately $50 million at March 31, 2020) of notional amount outstanding foreign currency contracts with a fair value of a loss of $10 million. At December 31, 2019, there was (i) 712 million South African rand (or approximately $40 million at March 31, 2020 exchange rate) and (ii) $89 million Australian dollars (or approximately $54 million at March 31, 2020 exchange rate) of notional amounts outstanding foreign currency contracts with a fair value of a gain of less than $1 million.  For the three months ended March 31, 2020 and 2019, we have recorded losses of $16 million and gains of $5 million, respectively, related to foreign currency contracts in our unaudited Condensed Consolidated Statement of Operations.
14. Fair Value
Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The accounting standards also have established a fair value hierarchy, which prioritizes the inputs to valuation techniques used in measuring fair value into three broad levels as follows:
Level 1 -Quoted prices in active markets for identical assets or liabilities
Level 2 -Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly
Level 3 -Unobservable inputs based on the Company’s own assumptions
Our debt is recorded at historical amounts. The following table presents the fair value of our debt and derivative contracts at both March 31, 2020 and December 31, 2019:
March 31,
2020
December 31,
2019
Term Loan Facility $ 1,607    $ 1,820   
Standard Bank Term Loan Facility 117    158   
Senior Notes due 2025 375    459   
Senior Notes due 2026 557    636   
Tikon Loan 16    16   
Australian Government Loan    
Interest rate swaps 54    22   
Foreign currency contracts, net 41    37   
We determined the fair value of the Term Loan Facility, the Senior Notes due 2025 and the Senior Notes due 2026 using quoted market prices, which under the fair value hierarchy is a Level 1 input. We determined the fair value of the Standard Bank Term Loan Facility and Tikon Loan utilizing transactions in the listed markets for identical or similar liabilities, which under the fair value hierarchy is a Level 2 input. The fair value of the Australian Government Loan is based on the contracted amount which is a Level 2 input.
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We determined the fair value of the foreign currency contracts and the interest rate swaps using inputs other than quoted prices in active markets that are observable either directly or indirectly. The fair value hierarchy for the foreign currency contracts and interest rate swaps is a Level 2 input.
The carrying value of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, accrued liabilities and short-term debt approximate fair value due to the short-term nature of these items.
See Note 2, “Cristal Acquisition and Related Divestitures”, for the assets and liabilities measured on a non-recurring basis at fair value associated with our acquisition.
15. Asset Retirement Obligations
Asset retirement obligations consist primarily of rehabilitation and restoration costs, landfill capping costs, decommissioning costs, and closure and post-closure costs. Activities related to asset retirement obligations were as follows:
Three Months Ended
March 31,
2020 2019
Beginning balance $ 158    $ 74   
Accretion expense    
Remeasurement/translation (21)   —   
Settlements/payments (2)   —   
Measurement period adjustment related to Cristal acquisition   —   
Balance, March 31, $ 142    $ 75   

March 31, 2020 December 31, 2019
Current portion included in “Accrued liabilities” $ 13    $ 16   
Noncurrent portion included in “Asset retirement obligations” 129    142   
Asset retirement obligations $ 142    $ 158   

16. Commitments and Contingencies
Purchase and Capital Commitments — Includes obligations for purchase requirements of process chemicals, supplies, utilities and services entered into in the ordinary course of business. At March 31, 2020, purchase commitments were $166 million for 2020, $77 million for 2021, $55 million for 2022, $41 million for 2023, $36 million for 2024, and $76 million thereafter.
Letters of Credit—At March 31, 2020, we had outstanding letters of credit and bank guarantees of $71 million, of which $34 million were letters of credit and $37 million were bank guarantees. Amounts for performance bonds were not material.
Environmental Matters— It is our policy to record appropriate liabilities for environmental matters when remedial efforts are probable and the costs can be reasonably estimated. Such liabilities are based on our best estimate of the undiscounted future costs required to complete the remedial work. The recorded liabilities are adjusted periodically as remediation efforts progress or as additional technical, regulatory or legal information becomes available. Given the uncertainties regarding the status of laws, regulations, enforcement policies, the impact of other potentially responsible parties, technology and information related to individual sites, we do not believe it is possible to develop an estimate of the range of reasonably possible environmental loss in excess of our recorded liabilities. We expect to fund expenditures for these matters from operating cash flows. The timing of cash expenditures depends principally on the timing of remedial investigations and feasibility studies, regulatory approval of cleanup projects, remedial techniques to be utilized and agreements with other parties.  Included in these environmental matters are the following:
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Hawkins Point Plant.  Residual waste mud, known as Batch Attack Mud, and a spent sulfuric waste stream were deposited in an onsite repository (the “Batch Attack Lagoon”) at a former TiO2 manufacturing site, Hawkins Point Plant in Baltimore, Maryland, operated by Cristal USA, Inc. from 1954 until 2011.  We assumed responsibility for remediation of the Hawkins Point Plant when we acquired the TiO2 business of Cristal in April 2019.  In 1984, a predecessor of Cristal and the Maryland Department of the Environment (“MDE”) entered into a consent decree (the “Consent Decree”) to address the Batch Attack Lagoon.  The Consent Decree required that Cristal close the Batch Attack Lagoon when the Hawkins Point Plant ceased operations.  In addition, we are investigating whether hazardous substances are migrating from the Batch Attack Lagoon.   A provision of $61 million has been made in our financial statements for the Hawkins Point Plant consistent with the accounting policy described above. We are in discussions with the MDE regarding a new consent decree to address both the Batch Attack Lagoon as well as other environmental contamination issues associated with the Hawkins Point Plant.
Other Matters— We are subject to a number of other lawsuits, investigations and disputes (some of which involve substantial amounts claimed) arising out of the conduct of our business, including matters relating to commercial transactions, prior acquisitions and divestitures, including our acquisition of Cristal, employee benefit plans, intellectual property, and environmental, health and safety matters. We recognize a liability for any contingency that is probable of occurrence and reasonably estimable. We continually assess the likelihood of adverse judgments of outcomes in these matters, as well as potential ranges of possible losses (taking into consideration any insurance recoveries), based on a careful analysis of each matter with the assistance of outside legal counsel and, if applicable, other experts. Included in these other matters is the following:
Venator Materials plc v. Tronox Limited.  In May 2019, Venator Materials plc (“Venator”) filed an action in the Superior Court of the State of Delaware alleging among other things that we owed Venator a $75 million “Break Fee” pursuant to the terms of a preliminary agreement dated July 14, 2018 (the “Exclusivity Agreement”). The Exclusivity Agreement required, among other things, Tronox and Venator to use their respective best efforts to negotiate a definitive agreement to sell the entirety of the National Titanium Dioxide Company Limited’s (“Cristal’s”) North American operations to Venator if a divestiture of all or a substantial part of these operations were required to secure the approval of the Federal Trade Commission for us to complete our acquisition of Cristal’s TiO2 business. In June 2019, we denied Ventaor's claims and counterclaimed against Venator seeking to recover $400 million in damages from Venator that we suffered as a result of Venator’s breaches of the Exclusivity Agreement. Specifically, we alleged, among other things, that Venator’s failure to use best efforts constituted a material breach of the Exclusivity Agreement and directly resulted in and caused us to sell Cristal’s North American operations to an alternative buyer for $701 million, $400 million less than the price Venator had agreed to in the Exclusivity Agreement. Though we believe that our interpretation of the Exclusivity Agreement is correct, there can be no assurance that we will prevail in litigation.
17. Accumulated Other Comprehensive Loss Attributable to Tronox Holdings plc
The tables below present changes in accumulated other comprehensive loss by component for the three months ended March 31, 2020 and 2019.
Cumulative
Translation
Adjustment
Pension
Liability
Adjustment
Unrealized
Gains
(Losses) on
Hedges
Total
Balance, January 1, 2020 $ (503)   $ (104)   $   $ (606)  
Other comprehensive loss (141)   —    (88)   (229)  
Amounts reclassified from accumulated other comprehensive income (loss) —         
Balance, March 31, 2020 $ (644)   $ (103)   $ (82)   $ (829)  

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Cumulative
Translation
Adjustment
Pension
Liability
Adjustment
Unrealized
Gains
(Losses) on
Hedges
Total
Balance, January 1, 2019 $ (445)   $ (95)   $ —    $ (540)  
Other comprehensive loss (11)   —    —    (11)  
Acquisition of noncontrolling interest (61)   —    —    (61)  
Balance, March 31, 2019 $ (517)   $ (95)   $ —    $ (612)  

18. Share-Based Compensation
Restricted Share Units (“RSUs”)
2020 Grant - During the first quarter of 2020, the Company granted both time-based and performance-based awards to certain members of management and to members of the Board of Directors ("BOD"). A total of 1,577,273 of time-based awards were granted to management which will vest ratably over a three-year period ending March 5, 2023. A total of 21,654 of time-based awards were granted to members of the BOD which will vest in June 2020. A total of 1,487,120 of performance-based awards were granted, of which 743,560 of the awards vest based on a relative Total Shareholder Return ("TSR") calculation and 743,560 of the awards vest based on certain performance metrics of the Company. The non-TSR performance-based awards vest on March 5, 2023 based on the achievement against the target average company performance of three separate performance periods, commencing on January 1 of each 2020, 2021, and 2022 and ending on December 31 of each 2020, 2021 and 2022, for which, for each performance period, the performance metric is an average annual operating return on net assets (ORONA). Similar to the Company's historical TSR awards granted in prior years, the TSR awards vest based on the Company's three-year TSR versus the peer group performance levels. Given these terms, the TSR metric is considered a market condition for which we used a Monte Carlo simulation to determine the grant date fair value of $10.07. The following weighted average assumptions were utilized to value the TSR grant:
2020
Dividend yield 2.13  %
Expected historical volatility 58.30  %
Risk free interest rate 1.42  %
Expected life (in years) 3
The unrecognized compensation cost associated with all unvested awards at March 31, 2020 was $58 million, adjusted for estimated forfeitures, which is expected to be recognized over a weighted-average period of approximately 2.1 years.
Options
There were no options exercised during the three months ended March 31, 2020.

19. Pension and Other Postretirement Healthcare Benefits
The components of net periodic cost associated with our U.S. and foreign pension plans recognized in the unaudited Condensed Consolidated Statements of Operations were as follows:
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Pensions
Three Months Ended March 31,
2020 2019
Net periodic cost:
Service cost $   $ —   
Interest cost    
Expected return on plan assets (6)   (3)  
Net amortization of actuarial loss and prior service credit   —   
Total net periodic cost $   $ —   
The components of net periodic cost associated with our other postretirement healthcare plans were less than $1 million for each of the three months ended March 31, 2020 and 2019.
Tronox estimates that 2020 required contributions to its pension plans will be approximately $16 million, of which $4 million have been made through March 31, 2020.
For the three months ended March 31, 2020 and 2019, we contributed $1 million and $1 million, respectively, to the Netherlands Multiemployer Plan, which was primarily recognized in “Cost of goods sold” in the unaudited Condensed Consolidated Statement of Operations.
20. Related Parties
Exxaro
On November 26, 2018, we, certain of our subsidiaries and Exxaro entered into the Completion Agreement. The Completion Agreement provides for the orderly sale of Exxaro’s remaining ownership interest in us, subject to market conditions, helped to facilitate the Re-domicile Transaction, as well as addressed several legacy issues related to our 2012 acquisition of Exxaro’s mineral sands business. Pursuant to the terms of the Completion Agreement, Tronox has covenanted to pay Exxaro an amount equal to any South African capital gains tax assessed on Exxaro in respect of any profit arising to it on a disposal of any of its ordinary shares subsequent to the Re-domicile Transaction where such tax would not have been assessed but for the Re-domicile Transaction.  Similarly, Exxaro has covenanted to pay Tronox an amount equal to any South African tax savings Exxaro may realize in certain situations from any tax relief that would not have arisen but for the Re-domicile Transaction.
Pursuant to the terms of the Completion Agreement, on May 9, 2019, Exxaro exercised their right under the agreement to sell 14 million shares to us for an aggregate purchase price of approximately $200 million or $14.319 per share, plus fees of approximately $1 million. The share price was based upon a 5% discount to the 10 day volume weighted average price as of the day that Exxaro exercised their sale notice to us. Upon repurchase of the shares by the Company, the shares were cancelled. As a result of the sale of the $14 million shares on May 9, 2019, we recorded a liability of approximately $4 million which was included in “Accrued liabilities” in our Consolidated Balance Sheets as of December 31, 2019 and was subsequently paid in January 2020.
Futhermore, pursuant to the Completion Agreement, the parties agreed to accelerate our purchase of Exxaro's 26% membership interest in Tronox Sands LLP, a U.K. limited liability partnership ("Tronox Sands"). On February 15, 2019, we completed the redemption of Exxaro's ownership interest in Tronox Sands for consideration of approximately ZAR 2.06 billion (or approximately $148 million in cash), which represented Exxaro's indirect share of the loan accounts in our South African subsidiaries.
At March 31, 2020, Exxaro continues to own approximately 14.7 million shares of Tronox, or a 10.3% ownership interest, as well as their 26% ownership interest in our South African operating subsidiaries.
At the present time, we are unable to reasonably determine when and if Exxaro will sell its remaining shares in the foreseeable future, and as a result, we are not able to estimate what the capital gains tax impacts would be should Exxaro sell its remaining shares.
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Tasnee/Cristal
On April 10, 2019, we announced the completion of the acquisition of the TiO2 business of Cristal for $1.675 billion of cash, subject to a working capital and noncurrent liability adjustment, plus 37,580,000 ordinary shares. At March 31, 2020, Cristal International Holdings B.V. (formerly known as Cristal Inorganic Chemical Netherlands Cooperatief W.A.), a wholly-owned subsidiary of Tasnee, continues to own 37,580,000 shares of Tronox, or a 26% ownership interest. In February 2020, Tronox and Cristal resolved the working capital and noncurrent liability adjustment by agreeing that no payment was required by either party.
On May 9, 2018, we entered into an Option Agreement with AMIC which is owned equally by Tasnee and Cristal. Under the terms of the Option Agreement, AMIC granted us an option (the “Option”) to acquire 90% of a special purpose vehicle (the “SPV”), to which AMIC’s ownership in a titanium slag smelter facility (the “Slagger”) in The Jazan City for Primary and Downstream Industries in KSA will be contributed together with $322 million of AMIC indebtedness (the “AMIC Debt”). As of March 31, 2020, we have loaned $89 million for capital expenditures and operational expenses to facilitate the start-up of the Slagger and we have recorded this loan payment and related interest of $4 million within “Other long-term assets” on the unaudited Condensed Consolidated Balance Sheet at March 31, 2020. The Option did not have a significant impact on the financial statements as of or for the periods ended March 31, 2020.
Prior to the Cristal acquisition, the Company also acquired feedstock from AMIC for consumption in production. There were no purchases of feedstock for the three months ended March 31, 2020. In addition, from time to time, Tronox sells Titanium Tetrachloride (TiCl4) to AMIC for use at a sponge plant facility. During the three months ended March 31, 2020, Tronox recorded $6 million for TiCl4 product sales made to AMIC and such amounts were recorded in “Net sales” on the unaudited Condensed Consolidated Statement of Operations. At March 31, 2020, Tronox had a receivable from AMIC of $2 million from the sale of TiCl4 that is recorded within “Prepaid and other assets”on the unaudited Condensed Consolidated Balance Sheet.
In conjunction with the acquisition on April 10, 2019 we entered into a transition services agreement with Tasnee, Cristal and AMIC. Under the terms of the transition services agreement, Tasnee and its affiliates will provide services to Tronox related to information technology support and infrastructure, logistics, safety, health and environmental, treasury and tax. Similarly, Tronox will provide services to Tasnee and its affiliates for information technology support and infrastructure, finance and accounting, tax, treasury, human resources, logistics, research and development and business development.
As part of the transition services agreement, Tronox recorded a net reduction of approximately $1 million in “Selling, general and administrative expenses” for the three months ended March 31, 2020 in the unaudited Condensed Consolidated Statement of Operations. The net reduction of selling, general and administrative expenses associated with the transition services agreement generally represents a recovery of the related costs. At March 31, 2020, Tronox had a receivable due from Tasnee of $15 million and a payable due to Tasnee of $4 million that are recorded within “Prepaid and other assets” and “Accrued liabilities”, respectively, on the unaudited Condensed Consolidated Balance Sheet. The balance in prepaid and other assets and remaining balances in accrued liabilities primarily relate to pre-acquisition activity and those balances are expected to be settled in the near term.
On December 29, 2019, we entered into an agreement, subject to regulatory approval, with Cristal to acquire certain assets co-located at our Yanbu facility that had been not included in the Cristal Transaction and which assets produce metal grade TiCl4 for a $36 million note payable. Under such agreement, the metal grade TiCl4 will be purchased by Advanced Metal Industries Cluster and Toho Titanium Metal Co. Ltd (ATTM), a joint venture between AMIC and Toho Titanium Company Ltd. ATTM uses the TiCl4, which we supply by pipeline, for the production of titanium sponge. We expect this transaction to close in 2020. During the three months ended March 31, 2020, Tronox recorded $1 million for purchase of chlorine gas from ATTM and such amounts are recorded in "Cost of goods sold" on the unaudited Condensed Consolidated Statement of Operations. The amount due to ATTM as of March 31, 2020 for the purchase of chlorine gas was less than $1 million and is recorded within “Accounts payable”on the unaudited Condensed Consolidated Balance Sheet.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with Tronox Holdings plc’s unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2019. This discussion and other sections in this Quarterly Report on Form 10-Q contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties, and actual results could differ materially from those discussed in the forward-looking statements as a result of numerous factors. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements also can be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains certain financial measures, in particular the presentation of earnings before interest, taxes, depreciation and amortization (“EBITDA”) and Adjusted EBITDA, which are not presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). We are presenting these non-U.S. GAAP financial measures because we believe they provide us and readers of this Form 10-Q with additional insight into our operational performance relative to earlier periods and relative to our competitors. We do not intend for these non-U.S. GAAP financial measures to be a substitute for any U.S. GAAP financial information. Readers of these statements should use these non-U.S. GAAP financial measures only in conjunction with the comparable U.S. GAAP financial measures. A reconciliation of net income (loss) to EBITDA and Adjusted EBITDA is also provided herein.
Overview
Tronox Holdings plc (referred to herein as “Tronox,” “we,” “us,” or “our”) is a public limited company registered under the laws of England and Wales. As a result of the Re-domicile Transaction, Tronox Limited became a wholly-owned subsidiary of Tronox Holdings plc. On April 10, 2019, we completed the acquisition from National Industrialization Company ("Tasnee") of the TiO2 business of The National Titanium Dioxide Company Ltd. (“Cristal”) (the “Cristal Transaction”). In order to obtain regulatory approval for the Cristal Transaction, we were required to divest Cristal's North American TiO2 business, which was sold in May 2019. See Note 2 for further details on the Cristal Transaction.
Including the Cristal operations, we now operate titanium-bearing mineral sand mines and beneficiation and smelting operations in Australia, South Africa and Brazil to produce feedstock materials that can be processed into TiO2 for pigment, high purity titanium chemicals, including titanium tetrachloride, and Ultrafine© titanium dioxide used in certain specialty applications. It is our long-term strategic goal to be fully vertically integrated and consume all of our feedstock materials in our own TiO2 pigment facilities in the United States, Australia, Brazil, UK, France, the Netherlands, China and the Kingdom of Saudi Arabia (“KSA”). We believe that full vertical integration is the best way to achieve our ultimate goal of delivering low cost, high-quality pigment to our coatings and other TiO2 customers throughout the world. The mining, beneficiation and smelting of titanium bearing mineral sands creates meaningful quantities of zircon, which we also supply to customers around the world.
Tronox Synergy Savings Program
On April 10, 2019, we completed the Cristal Transaction. During the second quarter of 2019 as part of our strategy for realizing value from the acquisition, we announced our goal of achieving approximately $220 million in operating synergies by 2022. These synergies are expected to be realized from the following areas:
operational enhancements through, among other things, technology exchange, optimization of feedstock cost at pigment plants and performance improvements at the Yanbu plant in Saudi Arabia;
feedstock initiatives including, among other things, maximizing synthetic rutile and slag output and better utilizing our diverse types of feedstock in our TiO2 plants and other initiatives that more efficiently integrate our global feesdtock chain;
supply chain savings from, among other things, volume purchasing discounts for a range of raw materials and services, including shipping and freight, and rationalizing the production of our broad portfolio of TiO2 grades; and
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reductions in selling, general and administrative expenses primarily from employee-related costs and indirect spend consolidation.
In connection with realizing the synergies discussed above, during the year ended December 31, 2019 and including the three months ended March 31, 2020, we incurred restructuring costs of $24 million for employee related costs, including severance. See Note 3 of notes to unaudited condensed consolidated financial statements for further information on restructuring.
During the first quarter of 2020, we have delivered total synergies of $45 million, of which $38 million have been reflected in our EBITDA in the first quarter of 2020 and $7 million are cash and other synergies not reflected in EBITDA. Our synergy targets continue to be $190 million for 2020, $275 million for 2021 and $325 million for 2022.
Business Environment
The following discussion includes trends and factors that may affect future operating results:
During the current coronavirus pandemic, our operations have been designated as essential to support the continued manufacturing of products such as food and medical packaging, medical equipment, pharmaceuticals, and personal protective gear. As of the end of the quarter, all of our sites were running to planned production levels, excluding South Africa where we elected to shutdown the mining of ilmenite for a period of time near the end of the first quarter of 2020 and into a portion of the second quarter of 2020. During that time, we utilized our existing inventories of ilmenite to operate our smelters which operated at near-full rates to produce chloride slag with a reduced workforce through the 21-day countrywide lockdown period. On April 13, 2020, our South African mines and concentrators were back up and running at full capacity.
Our first quarter revenue increased 4% sequentially driven primarily by higher TiO2 volumes.  Average TiO2 selling prices remained stable, while Zircon average selling prices were 8% lower. The Covid-19 pandemic has impacted, and will continue to impact, our industry and business. Demand for TiO2 in North America has been the most resilient, as we benefit from our exposure to do-it-yourself coatings and packaging applications. Regions hit hardest by the virus have experienced lower than normal demand, including southern Europe, Brazil and India. Zircon demand remains mixed, with recovering volumes in China offset by weaker demand in southern Europe and India. Zircon volumes for the first quarter were in-line with fourth quarter 2019 volumes. Based upon the status of social restrictions, the announced plans for the re-opening of economies around the world, and our conversations with and public statements by our customers, we anticipate declines in second quarter TiO2 volumes versus first quarter 2020, while we expect Zircon volumes for the second quarter to remain largely in line with the first quarter.

Gross margin improved sequentially from the fourth quarter 2019 to the first quarter 2020 due to the favorable impacts of volume and mix, reductions in production costs and favorable impacts of foreign currency on costs. These impacts were partially offset by the negative impacts of average selling prices.
As of March 31, 2020, our total available liquidity was $570 million, including $420 million in cash and cash equivalents and $150 million available under revolving credit agreements including $123 million available under our Asset Backed Lending ("ABL") facility. Our total debt was $3.2 billion and net debt to trailing-twelve month Adjusted EBITDA pro forma for the Cristal transaction was 3.9x. There are no upcoming maturities on the Company’s term loan or bonds until 2024. The Company also has no financial covenants on its term loan or bonds and only one springing financial covenant on its ABL facility, which we do not expect to be triggered based on our current scenario planning.