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.
onetenten294200015308042020-01-012020-03-31xbrli:shares00015308042020-04-30iso4217:USD00015308042019-01-012019-03-31iso4217:USDxbrli:shares00015308042020-03-3100015308042019-12-3100015308042018-12-3100015308042019-03-310001530804us-gaap:CommonStockMember2019-12-310001530804us-gaap:AdditionalPaidInCapitalMember2019-12-310001530804us-gaap:RetainedEarningsMember2019-12-310001530804us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001530804us-gaap:ParentMember2019-12-310001530804us-gaap:NoncontrollingInterestMember2019-12-310001530804us-gaap:RetainedEarningsMember2020-01-012020-03-310001530804us-gaap:ParentMember2020-01-012020-03-310001530804us-gaap:NoncontrollingInterestMember2020-01-012020-03-310001530804us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-03-310001530804us-gaap:CommonStockMember2020-01-012020-03-310001530804us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-310001530804us-gaap:CommonStockMember2020-03-310001530804us-gaap:AdditionalPaidInCapitalMember2020-03-310001530804us-gaap:RetainedEarningsMember2020-03-310001530804us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-310001530804us-gaap:ParentMember2020-03-310001530804us-gaap:NoncontrollingInterestMember2020-03-310001530804us-gaap:CommonStockMember2018-12-310001530804us-gaap:AdditionalPaidInCapitalMember2018-12-310001530804us-gaap:RetainedEarningsMember2018-12-310001530804us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310001530804us-gaap:ParentMember2018-12-310001530804us-gaap:NoncontrollingInterestMember2018-12-310001530804us-gaap:RetainedEarningsMember2019-01-012019-03-310001530804us-gaap:ParentMember2019-01-012019-03-310001530804us-gaap:NoncontrollingInterestMember2019-01-012019-03-310001530804us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-03-310001530804us-gaap:CommonStockMember2019-01-012019-03-310001530804us-gaap:AdditionalPaidInCapitalMember2019-01-012019-03-310001530804us-gaap:CommonStockMember2019-03-310001530804us-gaap:AdditionalPaidInCapitalMember2019-03-310001530804us-gaap:RetainedEarningsMember2019-03-310001530804us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-310001530804us-gaap:ParentMember2019-03-310001530804us-gaap:NoncontrollingInterestMember2019-03-310001530804trox:CristalSTitaniumDioxideBusinessMember2019-04-102019-04-100001530804trox:CristalSTitaniumDioxideBusinessMember2019-04-100001530804trox:CristalSTitaniumDioxideBusinessMember2020-03-31xbrli:pure0001530804trox:NationalTitaniumDioxideCompanyLtdMembertrox:NationalIndustrializationCompanyTasneeMember2020-01-012020-03-310001530804us-gaap:DiscontinuedOperationsDisposedOfBySaleMembertrox:CristalSNorthAmericanOperationsMember2019-05-012019-05-010001530804trox:VenatorMaterialsPLCMember2020-01-012020-03-310001530804srt:MaximumMembertrox:VenatorMaterialsPLCMember2020-01-012020-03-31iso4217:EUR0001530804trox:VenatorMaterialsPLCMember2019-04-262019-04-260001530804us-gaap:DiscontinuedOperationsDisposedOfBySaleMembertrox:A8120PaperLaminateGradeMember2019-04-262019-04-260001530804trox:VenatorMaterialsPLCMember2019-04-260001530804trox:VenatorMaterialsPLCMember2020-03-310001530804trox:A8120PaperLaminateGradeMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2019-04-012019-06-300001530804trox:CristalSTitaniumDioxideBusinessMember2020-01-012020-03-310001530804trox:CristalSTitaniumDioxideBusinessMember2019-04-012019-06-3000015308042019-04-102019-04-1000015308042019-10-040001530804trox:CristalSTitaniumDioxideBusinessMember2019-01-012019-03-310001530804us-gaap:EmployeeSeveranceMembertrox:CristalSTitaniumDioxideBusinessMember2019-12-310001530804us-gaap:EmployeeSeveranceMembertrox:CristalSTitaniumDioxideBusinessMember2020-01-012020-03-310001530804us-gaap:EmployeeSeveranceMembertrox:CristalSTitaniumDioxideBusinessMember2020-03-31trox:segment0001530804srt:NorthAmericaMember2020-01-012020-03-310001530804srt:NorthAmericaMember2019-01-012019-03-310001530804trox:SouthAndCentralAmericaMember2020-01-012020-03-310001530804trox:SouthAndCentralAmericaMember2019-01-012019-03-310001530804trox:EuropeMiddleEastAndAfricaMember2020-01-012020-03-310001530804trox:EuropeMiddleEastAndAfricaMember2019-01-012019-03-310001530804srt:AsiaPacificMember2020-01-012020-03-310001530804srt:AsiaPacificMember2019-01-012019-03-310001530804trox:TiO2Member2020-01-012020-03-310001530804trox:TiO2Member2019-01-012019-03-310001530804trox:ZirconMember2020-01-012020-03-310001530804trox:ZirconMember2019-01-012019-03-310001530804trox:FeedstockAndOtherProductsMember2020-01-012020-03-310001530804trox:FeedstockAndOtherProductsMember2019-01-012019-03-31trox:customer0001530804us-gaap:CustomerConcentrationRiskMembertrox:TenLargestThirdPartyTiO2CustomersMemberus-gaap:SalesRevenueNetMember2019-01-012019-03-310001530804us-gaap:CustomerConcentrationRiskMembertrox:TenLargestThirdPartyTiO2CustomersMemberus-gaap:SalesRevenueNetMember2020-01-012020-03-310001530804us-gaap:HerMajestysRevenueAndCustomsHMRCMember2019-01-012019-03-310001530804us-gaap:HerMajestysRevenueAndCustomsHMRCMember2020-01-012020-03-310001530804us-gaap:DomesticCountryMemberus-gaap:AustralianTaxationOfficeMember2020-01-012020-03-310001530804us-gaap:InternalRevenueServiceIRSMember2020-01-012020-03-310001530804trox:TaxAndCustomsAdministrationSouthAfricaMemberus-gaap:ForeignCountryMember2020-01-012020-03-310001530804us-gaap:ForeignCountryMemberus-gaap:MinistryOfTheEconomyFinanceAndIndustryFranceMember2020-01-012020-03-310001530804us-gaap:StateAdministrationOfTaxationChinaMemberus-gaap:ForeignCountryMember2020-01-012020-03-310001530804us-gaap:ForeignCountryMemberus-gaap:SecretariatOfTheFederalRevenueBureauOfBrazilMember2020-01-012020-03-310001530804trox:GeneralAuthorityOfZakatAndTaxKingdomOfSaudiArabiaMemberus-gaap:ForeignCountryMember2020-01-012020-03-310001530804us-gaap:TaxAndCustomsAdministrationNetherlandsMemberus-gaap:ForeignCountryMember2020-01-012020-03-310001530804srt:ScenarioForecastMemberus-gaap:ForeignCountryMemberus-gaap:MinistryOfTheEconomyFinanceAndIndustryFranceMember2021-01-012021-06-300001530804us-gaap:TaxAndCustomsAdministrationNetherlandsMembersrt:ScenarioForecastMemberus-gaap:ForeignCountryMember2021-01-012021-06-300001530804srt:MaximumMember2020-01-012020-03-310001530804us-gaap:EmployeeStockOptionMember2020-01-012020-03-310001530804us-gaap:EmployeeStockOptionMember2019-01-012019-03-310001530804us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-03-310001530804us-gaap:RestrictedStockUnitsRSUMember2019-01-012019-03-310001530804us-gaap:LandAndLandImprovementsMember2020-03-310001530804us-gaap:LandAndLandImprovementsMember2019-12-310001530804us-gaap:BuildingMember2020-03-310001530804us-gaap:BuildingMember2019-12-310001530804us-gaap:MachineryAndEquipmentMember2020-03-310001530804us-gaap:MachineryAndEquipmentMember2019-12-310001530804us-gaap:ConstructionInProgressMember2020-03-310001530804us-gaap:ConstructionInProgressMember2019-12-310001530804us-gaap:OtherMachineryAndEquipmentMember2020-03-310001530804us-gaap:OtherMachineryAndEquipmentMember2019-12-310001530804us-gaap:CostOfSalesMember2020-01-012020-03-310001530804us-gaap:CostOfSalesMember2019-01-012019-03-310001530804us-gaap:SellingGeneralAndAdministrativeExpensesMember2020-01-012020-03-310001530804us-gaap:SellingGeneralAndAdministrativeExpensesMember2019-01-012019-03-310001530804us-gaap:CustomerRelationshipsMember2020-03-310001530804us-gaap:CustomerRelationshipsMember2019-12-310001530804us-gaap:PatentedTechnologyMember2020-03-310001530804us-gaap:PatentedTechnologyMember2019-12-310001530804us-gaap:ComputerSoftwareIntangibleAssetMember2020-03-310001530804us-gaap:ComputerSoftwareIntangibleAssetMember2019-12-310001530804trox:NewTermLoanFacilityMember2020-03-310001530804trox:NewTermLoanFacilityMember2019-12-310001530804trox:SeniorNotesDue2025Member2020-03-310001530804trox:SeniorNotesDue2025Member2019-12-310001530804trox:SeniorNotesDue2026Member2020-03-310001530804trox:SeniorNotesDue2026Member2019-12-310001530804trox:StandardBankTermLoanFacilityMember2020-03-310001530804trox:StandardBankTermLoanFacilityMember2019-12-310001530804trox:TikonLoanMember2020-03-310001530804trox:TikonLoanMember2019-12-310001530804trox:AustralianGovernmentLoanMember2020-03-310001530804trox:AustralianGovernmentLoanMember2019-12-310001530804trox:NewTermLoanFacilityMember2020-01-012020-03-310001530804trox:NewTermLoanFacilityMember2019-01-012019-03-310001530804trox:StandardBankTermLoanFacilityMember2020-01-012020-03-310001530804trox:StandardBankTermLoanFacilityMember2019-01-012019-03-310001530804us-gaap:RevolvingCreditFacilityMembertrox:WellsFargoRevolverMember2020-03-310001530804us-gaap:RevolvingCreditFacilityMembertrox:WellsFargoRevolverMember2019-12-310001530804trox:StandardBankCreditFacilityMemberus-gaap:RevolvingCreditFacilityMember2020-03-310001530804trox:StandardBankCreditFacilityMemberus-gaap:RevolvingCreditFacilityMember2019-12-310001530804trox:EmiratesCreditFacilityMemberus-gaap:RevolvingCreditFacilityMember2020-03-310001530804trox:EmiratesCreditFacilityMemberus-gaap:RevolvingCreditFacilityMember2019-12-310001530804trox:SaudiArabianBritishBankFacilityMember2020-03-310001530804trox:SaudiArabianBritishBankFacilityMember2019-12-310001530804us-gaap:RevolvingCreditFacilityMembertrox:WellsFargoRevolverMember2017-09-220001530804us-gaap:RevolvingCreditFacilityMembertrox:WellsFargoRevolverMember2019-03-310001530804us-gaap:RevolvingCreditFacilityMembertrox:WellsFargoRevolverMember2019-01-012019-03-310001530804trox:WellsFargoRevolverMember2020-03-310001530804us-gaap:RevolvingCreditFacilityMembertrox:WellsFargoRevolverMember2019-03-222019-03-220001530804srt:MaximumMembertrox:AbsaRevolverMember2019-07-012019-09-300001530804us-gaap:RevolvingCreditFacilityMember2020-03-012020-03-310001530804trox:SaudiArabianBritishBankFacilityMember2020-01-012020-03-310001530804us-gaap:SeniorNotesMemberus-gaap:SubsequentEventMembertrox:SeniorSecuredNotesDue2025Member2020-05-010001530804us-gaap:LineOfCreditMembertrox:WellsFaroRevolverStandardBankCreditFacilityAndEmiratesCreditFacilityMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:SubsequentEventMember2020-05-012020-05-010001530804us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:ForeignExchangeContractMember2020-03-310001530804us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:ForeignExchangeContractMember2019-12-310001530804us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-03-310001530804us-gaap:InterestRateSwapMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-12-310001530804us-gaap:DesignatedAsHedgingInstrumentMember2020-03-310001530804us-gaap:DesignatedAsHedgingInstrumentMember2019-12-310001530804us-gaap:ForeignExchangeContractMemberus-gaap:NondesignatedMember2020-03-310001530804us-gaap:ForeignExchangeContractMemberus-gaap:NondesignatedMember2019-12-310001530804us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2020-03-310001530804us-gaap:OtherNoncurrentAssetsMember2020-03-310001530804us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2019-12-310001530804us-gaap:OtherNoncurrentAssetsMember2019-12-310001530804us-gaap:InterestRateSwapMember2019-06-300001530804us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMemberus-gaap:InterestRateSwapMember2020-03-310001530804us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMemberus-gaap:InterestRateSwapMember2019-12-31iso4217:ZAR0001530804trox:SouthAfricanRandExchangeContractMember2020-03-31iso4217:AUD0001530804trox:AustralianDollarExchangeContractMember2020-03-310001530804us-gaap:SalesMemberus-gaap:ForeignExchangeContractMember2020-01-012020-03-310001530804us-gaap:CostOfSalesMemberus-gaap:ForeignExchangeContractMember2020-01-012020-03-310001530804us-gaap:ForeignExchangeContractMember2019-01-012019-03-310001530804us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2020-03-310001530804us-gaap:AccumulatedForeignCurrencyAdjustmentIncludingPortionAttributableToNoncontrollingInterestMember2019-12-310001530804trox:ForeignExchangeContractSouthAfricanRandAtMarch312020Memberus-gaap:NondesignatedMember2020-03-310001530804trox:ForeignExchangeContractAustralianDollarsAtMarch312020Memberus-gaap:NondesignatedMember2020-03-310001530804trox:ForeignExchangeContractSouthAfricanRandAtDecember312020Memberus-gaap:NondesignatedMember2019-12-310001530804trox:ForeignExchangeContractSouthAfricanRandAtDecember312020Memberus-gaap:NondesignatedMember2020-03-310001530804trox:ForeignExchangeContractAustralianDollarsAtDecember312020Memberus-gaap:NondesignatedMember2019-12-310001530804trox:ForeignExchangeContractAustralianDollarsAtDecember312020Memberus-gaap:NondesignatedMember2020-03-310001530804trox:TermLoanMemberus-gaap:FairValueInputsLevel1Member2020-03-310001530804trox:TermLoanMemberus-gaap:FairValueInputsLevel1Member2019-12-310001530804us-gaap:FairValueInputsLevel2Membertrox:StandardBankTermLoanFacilityMember2020-03-310001530804us-gaap:FairValueInputsLevel2Membertrox:StandardBankTermLoanFacilityMember2019-12-310001530804us-gaap:FairValueInputsLevel1Membertrox:SeniorNotesDue2025Member2020-03-310001530804us-gaap:FairValueInputsLevel1Membertrox:SeniorNotesDue2025Member2019-12-310001530804trox:SeniorNotesDue2026Memberus-gaap:FairValueInputsLevel1Member2020-03-310001530804trox:SeniorNotesDue2026Memberus-gaap:FairValueInputsLevel1Member2019-12-310001530804us-gaap:FairValueInputsLevel2Membertrox:TikonLoanMember2020-03-310001530804us-gaap:FairValueInputsLevel2Membertrox:TikonLoanMember2019-12-310001530804us-gaap:FairValueInputsLevel2Membertrox:AustralianGovernmentLoanMember2020-03-310001530804us-gaap:FairValueInputsLevel2Membertrox:AustralianGovernmentLoanMember2019-12-310001530804us-gaap:FairValueInputsLevel2Memberus-gaap:InterestRateSwapMember2020-03-310001530804us-gaap:FairValueInputsLevel2Memberus-gaap:InterestRateSwapMember2019-12-310001530804us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeContractMember2020-03-310001530804us-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeContractMember2019-12-310001530804us-gaap:StandbyLettersOfCreditMember2020-03-310001530804us-gaap:GuaranteeOfIndebtednessOfOthersMember2020-03-310001530804trox:VenatorMaterialsPLCVSTronoxLimitedMembertrox:VenatorMaterialsPLCMember2019-05-012019-05-310001530804trox:VenatorMaterialsPLCVSTronoxLimitedMember2019-06-012019-06-300001530804us-gaap:DiscontinuedOperationsDisposedOfBySaleMembertrox:CristalNorthAmericaTiO2BusinessMember2019-05-012019-05-010001530804us-gaap:AccumulatedTranslationAdjustmentMember2019-12-310001530804us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-12-310001530804us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-12-310001530804us-gaap:AccumulatedTranslationAdjustmentMember2020-01-012020-03-310001530804us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-01-012020-03-310001530804us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-01-012020-03-310001530804us-gaap:AccumulatedTranslationAdjustmentMember2020-03-310001530804us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-03-310001530804us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-03-310001530804us-gaap:AccumulatedTranslationAdjustmentMember2018-12-310001530804us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2018-12-310001530804us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-12-310001530804us-gaap:AccumulatedTranslationAdjustmentMember2019-01-012019-03-310001530804us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-01-012019-03-310001530804us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-01-012019-03-310001530804us-gaap:AccumulatedTranslationAdjustmentMember2019-03-310001530804us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-03-310001530804us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-03-310001530804srt:ManagementMembertrox:RestrictedStockUnitsRSUsTimeBasedAwardsMember2020-01-012020-03-310001530804trox:RestrictedStockUnitsRSUsTimeBasedAwardsMembersrt:DirectorMember2020-01-012020-03-310001530804trox:RestrictedStockUnitsRSUsPerformanceBasedAwardsMember2020-01-012020-03-310001530804us-gaap:ShareBasedCompensationAwardTrancheOneMembertrox:RestrictedStockUnitsRSUsPerformanceBasedAwardsMember2020-01-012020-03-310001530804trox:RestrictedStockUnitsRSUsPerformanceBasedAwardsMemberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2020-01-012020-03-31trox:vestingPeriod0001530804us-gaap:PensionPlansDefinedBenefitMember2020-01-012020-03-310001530804us-gaap:PensionPlansDefinedBenefitMember2019-01-012019-03-310001530804us-gaap:DefinedBenefitPostretirementHealthCoverageMember2020-01-012020-03-310001530804us-gaap:DefinedBenefitPostretirementHealthCoverageMember2019-01-012019-03-310001530804us-gaap:PensionPlansDefinedBenefitMember2020-03-310001530804us-gaap:MultiemployerPlansPensionMembercountry:NLus-gaap:CostOfSalesMember2020-01-012020-03-310001530804us-gaap:MultiemployerPlansPensionMembercountry:NLus-gaap:CostOfSalesMember2019-01-012019-03-310001530804trox:ExxaroMembertrox:ExxaroMineralSandsTransactionCompletionAgreementMember2019-05-092019-05-090001530804trox:ExxaroMembertrox:ExxaroMineralSandsTransactionCompletionAgreementMember2019-05-090001530804trox:ExxaroMember2019-12-310001530804trox:ExxaroMembertrox:TronoxSandsLLPMember2019-02-150001530804trox:ExxaroMembertrox:TronoxSandsLLPMember2019-02-152019-02-150001530804trox:TronoxSandsLLPMember2019-02-152019-02-150001530804trox:ExxaroMember2020-03-310001530804trox:ExxaroMembertrox:SouthAfricanSubsidiariesMember2020-03-310001530804trox:SlaggerMembertrox:AdvancedMetalIndustriesClusterCompanyLimitedMember2018-05-090001530804trox:SlaggerMembertrox:AdvancedMetalIndustriesClusterCompanyLimitedMember2020-03-310001530804trox:SlaggerMemberus-gaap:OtherNoncurrentAssetsMembertrox:AdvancedMetalIndustriesClusterCompanyLimitedMember2020-03-310001530804trox:AMICMember2020-01-012020-03-310001530804trox:ReceivableFromTiCl4ProductSalesMembertrox:AMICMembersrt:AffiliatedEntityMember2020-03-310001530804trox:TransitionServicesAgreementMember2020-01-012020-03-310001530804trox:TasneeMember2020-03-310001530804trox:AcquisitionOfAssetsProducingMetalGradeTiCl4Membersrt:AffiliatedEntityMembertrox:AdvancedMetalIndustriesClusterCompanyLimitedMember2019-12-290001530804srt:AffiliatedEntityMembertrox:PurchaseOfChlorineGasMember2020-01-012020-03-310001530804srt:AffiliatedEntityMembertrox:PurchaseOfChlorineGasMembertrox:AdvancedMetalIndustriesClusterAndTohoTitaniumMetalCoLtdATTMMember2020-03-31
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
|
|
|
|
|
|
|
|
|
|
|
|
Page |
|
|
|
|
|
Item 1. |
|
|
|
Item 2. |
|
|
|
Item 3. |
|
|
|
Item 4. |
|
|
|
|
|
|
|
Item 1. |
|
|
|
Item 1A. |
|
|
|
Item 2. |
|
|
|
Item 3. |
|
|
|
Item 4. |
|
|
|
Item 5. |
|
|
|
Item 6. |
|
|
|
|
|
|
|
|
|
|
Item 1. Financial Statements (Unaudited)
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 |
2 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
79 |
|
|
16 |
|
|
|
|
|
|
Interest expense |
(45) |
|
|
(49) |
|
|
|
|
|
|
Interest income |
3 |
|
|
9 |
|
|
|
|
|
|
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 |
8 |
|
|
4 |
|
|
|
|
|
|
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.
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
|
1 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pension and postretirement gains (losses) |
1 |
|
|
— |
|
|
|
|
|
|
Realized (gains) losses on derivatives reclassified from
accumulated other comprehensive loss to the Condensed Consolidated
Statement of Operations |
5 |
|
|
— |
|
|
|
|
|
|
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 |
8 |
|
|
4 |
|
|
|
|
|
|
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.
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 |
9 |
|
|
9 |
|
|
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 |
6 |
|
|
6 |
|
|
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 |
6 |
|
|
1 |
|
|
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
|
1 |
|
|
1 |
|
|
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.
TRONOX HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
9 |
|
|
8 |
|
|
Amortization of deferred debt issuance costs and discount on
debt |
2 |
|
|
2 |
|
|
Loss on extinguishment of debt |
— |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other non-cash items affecting net (loss) income |
14 |
|
|
6 |
|
|
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) |
|
|
8 |
|
|
Net changes in income tax payables and receivables |
2 |
|
|
(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 |
$ |
4 |
|
|
$ |
5 |
|
See accompanying notes to unaudited condensed consolidated
financial statements.
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 |
|
|
$ |
1,846 |
|
|
$ |
(493) |
|
|
$ |
(606) |
|
|
$ |
748 |
|
|
$ |
168 |
|
|
$ |
916 |
|
|
Net income |
— |
|
|
— |
|
|
— |
|
|
32 |
|
|
— |
|
|
32 |
|
|
8 |
|
|
40 |
|
|
Other comprehensive (loss) income |
— |
|
|
— |
|
|
— |
|
|
|
|
|
(223) |
|
|
(223) |
|
|
(47) |
|
|
(270) |
|
|
Share-based compensation |
1,779 |
|
|
— |
|
|
9 |
|
|
— |
|
|
— |
|
|
9 |
|
|
— |
|
|
9 |
|
|
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 |
|
|
$ |
1,852 |
|
|
$ |
(471) |
|
|
$ |
(829) |
|
|
$ |
553 |
|
|
$ |
126 |
|
|
$ |
679 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited condensed consolidated
financial statements.
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 |
|
|
$ |
1,579 |
|
|
$ |
(357) |
|
|
$ |
(540) |
|
|
$ |
683 |
|
|
$ |
179 |
|
|
$ |
862 |
|
|
Net (loss) income |
— |
|
|
— |
|
|
— |
|
|
(34) |
|
|
— |
|
|
(34) |
|
|
4 |
|
|
(30) |
|
|
Other comprehensive income (loss) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(11) |
|
|
(11) |
|
|
11 |
|
|
— |
|
|
Share-based compensation |
3,306 |
|
|
— |
|
|
8 |
|
|
— |
|
|
— |
|
|
8 |
|
|
— |
|
|
8 |
|
|
Shares cancelled |
(502) |
|
|
— |
|
|
(6) |
|
|
— |
|
|
— |
|
|
(6) |
|
|
— |
|
|
(6) |
|
|
Acquisition of noncontrolling interest |
— |
|
|
— |
|
|
3 |
|
|
— |
|
|
(61) |
|
|
(58) |
|
|
(90) |
|
|
(148) |
|
|
Ordinary share dividends ($0.045 per share)
|
— |
|
|
— |
|
|
— |
|
|
(6) |
|
|
— |
|
|
(6) |
|
|
— |
|
|
(6) |
|
|
Balance at March 31, 2019 |
125,738 |
|
|
$ |
1 |
|
|
$ |
1,584 |
|
|
$ |
(397) |
|
|
$ |
(612) |
|
|
$ |
576 |
|
|
$ |
104 |
|
|
$ |
680 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited condensed consolidated
financial statements.
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
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.
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 |
|
|
|
|
|
|
|
|
|
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 |
2 |
|
|
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.
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 |
2 |
|
|
Cash payments |
(4) |
|
|
Foreign exchange and other |
1 |
|
|
Balance, March 31, 2020 |
$ |
9 |
|
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 |
|
|
|
|
|
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
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 |
8 |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
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 |
1 |
|
|
1 |
|
|
|
|
|
|
Total |
$ |
60 |
|
|
$ |
33 |
|
|
|
|
|
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.
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 |
4 |
|
|
7 |
|
|
Interest |
32 |
|
|
16 |
|
|
Sales rebates |
42 |
|
|
39 |
|
|
Restructuring |
9 |
|
|
10 |
|
|
Taxes other than income taxes |
12 |
|
|
6 |
|
|
Asset retirement obligations |
13 |
|
|
16 |
|
|
Interest rate swaps |
54 |
|
|
22 |
|
|
Currency contracts |
47 |
|
|
— |
|
|
Professional fees and other |
48 |
|
|
60 |
|
|
Liabilities held for sale |
3 |
|
|
|
4 |
|
|
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 |
|
1 |
|
|
1 |
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
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 |
$ |
6 |
|
|
|
$ |
37 |
|
|
|
$ |
30 |
|
|
|
$ |
— |
|
|
Interest Rate Swaps |
$ |
— |
|
|
|
$ |
54 |
|
|
|
$ |
— |
|
|
|
$ |
22 |
|
|
Total Hedges |
$ |
6 |
|
|
|
$ |
91 |
|
|
|
$ |
30 |
|
|
|
$ |
22 |
|
|
Derivatives Not Designated as Cash Flow Hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency Contracts |
$ |
— |
|
|
|
$ |
10 |
|
|
|
$ |
7 |
|
|
|
$ |
— |
|
|
Total Derivatives |
$ |
6 |
|
|
|
$ |
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
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 |
1 |
|
|
1 |
|
|
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.
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 |
3 |
|
|
1 |
|
|
|
|
|
|
Remeasurement/translation |
(21) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlements/payments |
(2) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measurement period adjustment related to Cristal
acquisition |
4 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
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) |
|
|
$ |
1 |
|
|
$ |
(606) |
|
|
Other comprehensive loss |
(141) |
|
|
— |
|
|
(88) |
|
|
(229) |
|
|
Amounts reclassified from accumulated other comprehensive income
(loss) |
— |
|
|
1 |
|
|
5 |
|
|
6 |
|
|
Balance, March 31, 2020 |
$ |
(644) |
|
|
$ |
(103) |
|
|
$ |
(82) |
|
|
$ |
(829) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost |
$ |
1 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost |
5 |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected return on plan assets |
(6) |
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amortization of actuarial loss and prior service
credit |
1 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net periodic cost |
$ |
1 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
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.
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
•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.