Company Quick10K Filing
Quick10K
Tronox
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$11.50 163 $1,880
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-08-07 Earnings
8-K 2019-06-03 Other Events
8-K 2019-05-30 Regulation FD, Exhibits
8-K 2019-05-22 Shareholder Vote
8-K 2019-05-09 Earnings, Exhibits
8-K 2019-05-09 Officers, Other Events, Exhibits
8-K 2019-05-01 M&A, Regulation FD, Exhibits
8-K 2019-04-10 Enter Agreement, M&A, Sale of Shares, Shareholder Rights, Officers, Other Events, Exhibits
8-K 2019-04-10 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-03-28 Enter Agreement, Off-BS Arrangement, Officers, Exhibits
8-K 2019-03-22 Enter Agreement, Exhibits
8-K 2019-03-14 Enter Agreement, Regulation FD, Exhibits
8-K 2019-03-08 Shareholder Vote
8-K 2018-11-26 Enter Agreement, Regulation FD, Exhibits
8-K 2018-11-15 Other Events, Exhibits
8-K 2018-11-05 Earnings, Exhibits
8-K 2018-08-15 Other Events, Exhibits
8-K 2018-08-01 Earnings, Exhibits
8-K 2018-07-16 Other Events, Exhibits
8-K 2018-07-10 Other Events, Exhibits
8-K 2018-07-04 Other Events, Exhibits
8-K 2018-05-23 Shareholder Vote
8-K 2018-04-06 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-04-04 Officers, Exhibits
8-K 2018-04-02 Officers
8-K 2018-03-27 Other Events, Exhibits
8-K 2018-03-21 Impairments, Other Events, Exhibits
8-K 2018-01-23 Regulation FD, Other Events, Exhibits
MCHP Microchip Technology 21,180
CCK Crown Holdings 7,990
HMN Horace Mann Educators 1,640
FPF Futures Portfolio Fund 1,340
HA Hawaiian Holdings 1,280
AMBR Amber Road 272
MSON Misonix 175
PBPB Potbelly 157
SSWH Sansal Wellness Holdings 0
MWPP Markham Woods Press Publishing Company 0
TROX 2019-06-30
Item 1. Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex31_1.htm
EX-31.2 ex31_2.htm
EX-32.1 ex32_1.htm
EX-32.2 ex32_2.htm

Tronox Earnings 2019-06-30

TROX 10Q Quarterly Report

Balance SheetIncome StatementCash Flow




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 June 30, 2019

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
 
25 Bury Street, 3rd Floor
London SW1Y 2AL, England

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 July 31, 2019, the Registrant had 141,880,996 ordinary shares outstanding.




Table of Contents

Table of Contents

 
 
Page
PART I – FINANCIAL INFORMATION
 
Item 1.
3
Item 2.
33
Item 3.
64
Item 4.
65
PART II – OTHER INFORMATION
 
Item 1.
66
Item 1A.
66
Item 2.
66
Item 3.
67
Item 4.
67
Item 5.
67
Item 6.
68
 
 
 
69


2

Table of Contents
Item 1.
Financial Statements (Unaudited)

Page
No.
 
 
4
5
6
7
8
9



3

Table of Contents
TRONOX HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Millions of U.S. dollars, except share and per share data)

 
Three Months Ended June 30,
   
Six Months Ended June 30,
 
   
2019
   
2018
   
2019
   
2018
 
Net sales
 
$
791
   
$
492
   
$
1,181
   
$
934
 
Cost of goods sold
   
672
     
348
     
979
     
675
 
Contract loss
   
19
     
     
19
     
 
Gross profit
   
100
     
144
     
183
     
259
 
Selling, general and administrative expenses
   
103
     
79
     
170
     
155
 
Restructuring
   
10
     
     
10
     
 
Impairment loss
   
     
     
     
25
 
Income from operations
   
(13
)
   
65
     
3
     
79
 
Interest expense
   
(54
)
   
(48
)
   
(103
)
   
(97
)
Interest income
   
3
     
7
     
12
     
15
 
Loss on extinguishment of debt
   
     
(30
)
   
(2
)
   
(30
)
Other income (expense), net
   
5
     
29
     
3
     
20
 
(Loss) income from continuing operations before income taxes
   
(59
)
   
23
     
(87
)
   
(13
)
Income tax benefit
   
4
     
27
     
2
     
22
 
Net (loss) income from continuing operations
   
(55
)
   
50
     
(85
)
   
9
 
Net loss from discontinued operations, net of tax
   
(1
)
   
     
(1
)
   
 
Net (loss) income
   
(56
)
   
50
     
(86
)
   
9
 
Net income attributable to noncontrolling interest
   
6
     
14
     
10
     
17
 
Net (loss) income attributable to Tronox Holdings plc
 
$
(62
)
 
$
36
   
$
(96
)
 
$
(8
)
                                 
Net (loss) income per share, basic:
                               
Continuing operations
 
$
(0.41
)
 
$
0.30
   
$
(0.69
)
 
$
(0.07
)
Discontinued operations
 
$
   
$
   
$
   
$
 
Net (loss) income per share, basic
 
$
(0.41
)
 
$
0.30
   
$
(0.69
)
 
$
(0.07
)
Net (loss) income per share, diluted:
                               
Continuing operations
 
$
(0.41
)
 
$
0.29
   
$
(0.69
)
 
$
(0.07
)
Discontinued operations
 
$
   
$
   
$
   
$
 
Net (loss) income per share, diluted
 
$
(0.41
)
 
$
0.29
   
$
(0.69
)
 
$
(0.07
)
Weighted average shares outstanding, basic (in thousands)
   
150,686
     
123,063
     
137,569
     
122,699
 
Weighted average shares outstanding, diluted (in thousands)
   
150,686
     
126,716
     
137,569
     
122,699
 

See accompanying notes to unaudited condensed consolidated financial statements.


4

Table of Contents
TRONOX HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
(Millions of U.S. dollars)

   
Three Months Ended June 30,
   
Six Months Ended June 30,
 
 
 
2019
   
2018
   
2019
   
2018
 
Net (loss) income
 
$
(56
)
 
$
50
   
$
(86
)
 
$
9
 
Other comprehensive income:
                               
Foreign currency translation adjustments
   
22
     
(185
)
   
22
     
(126
)
Pension and postretirement plans:
                               
Amortization of unrecognized actuarial losses, net of taxes of less than $1 million in each of the three and six months ended June 30, 2019 and 2018
   
1
     
1
     
1
     
2
 
Fair value of hedges
   
(1
)
   
     
(1
)
   
 
Unrealized gains (losses) on derivative financial instruments (no tax impact)
   
(22
)
   
     
(22
)
   
 
 
                               
Other comprehensive (loss) income
   
     
(184
)
   
     
(124
)
 
                               
Total comprehensive (loss)
   
(56
)
   
(134
)
   
(86
)
   
(115
)
 
                               
Comprehensive (loss) income attributable to noncontrolling interest:
                               
Net income
   
6
     
14
     
10
     
17
 
Foreign currency translation adjustments
   
4
     
(46
)
   
15
     
(31
)
Comprehensive (loss) income attributable to noncontrolling interest
   
10
     
(32
)
   
25
     
(14
)
 
                               
Comprehensive (loss) income attributable to Tronox Holdings plc
 
$
(66
)
 
$
(102
)
 
$
(111
)
 
$
(101
)

See accompanying notes to unaudited condensed consolidated financial statements.


5

Table of Contents
TRONOX HOLDINGS PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions of U.S. dollars, except share and per share data)

 
 
June 30, 2019
   
December 31, 2018
 
ASSETS
           
Current Assets
           
Cash and cash equivalents
 
$
397
   
$
1,034
 
Restricted cash
   
9
     
662
 
Accounts receivable, net of allowance for doubtful accounts
   
599
     
317
 
Inventories, net
   
1,097
     
479
 
Prepaid and other assets
   
156
     
50
 
Income taxes receivable
   
4
     
2
 
Total current assets
   
2,262
     
2,544
 
Noncurrent Assets
               
Property, plant and equipment, net
   
1,635
     
1,004
 
Mineral leaseholds, net
   
834
     
796
 
Intangible assets, net
   
231
     
176
 
Goodwill
   
68
     
 
Lease right of use assets, net
   
93
     
 
Deferred tax assets
   
123
     
37
 
Other long-term assets
   
170
     
85
 
Total assets
 
$
5,416
   
$
4,642
 
 
               
LIABILITIES AND EQUITY
               
Current Liabilities
               
Accounts payable
 
$
297
   
$
133
 
Accrued liabilities
   
330
     
140
 
Short-term lease liabilities
   
30
     
 
Long-term debt due within one year
   
58
     
22
 
Income taxes payable
   
3
     
5
 
Total current liabilities
   
718
     
300
 
Noncurrent Liabilities
               
Long-term debt, net
   
3,136
     
3,139
 
Pension and postretirement healthcare benefits
   
146
     
93
 
Asset retirement obligations
   
163
     
68
 
Environmental liabilities
   
36
     
1
 
Long-term lease liabilities
   
59
     
 
Long-term deferred tax liabilities
   
175
     
163
 
Other long-term liabilities
   
54
     
16
 
Total liabilities
   
4,487
     
3,780
 
 
               
Commitments and Contingencies
               
Shareholders’ Equity
               
Tronox Holdings plc ordinary shares, par value $0.01144,377,289 shares issued and outstanding at June 30, 2019 and 123,015,301 shares issued and 122,933,845 shares outstanding at December 31, 2018
   
1
     
1
 
Capital in excess of par value
   
1,860
     
1,579
 
Accumulated deficit
   
(466
)
   
(357
)
Accumulated other comprehensive loss
   
(616
)
   
(540
)
Total Tronox Holdings plc shareholders’ equity
   
779
     
683
 
Noncontrolling interest
   
150
     
179
 
Total equity
   
929
     
862
 
Total liabilities and equity
 
$
5,416
   
$
4,642
 

See accompanying notes to unaudited condensed consolidated financial statements.

6

Table of Contents


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

 
 
Six Months Ended
June 30,
 
 
 
2019
   
2018
 
Cash Flows from Operating Activities:
           
Net (loss) income
 
$
(86
)
 
$
9
 
Net (loss) from discontinued operations, net of tax
   
(1
)
   
 
Net (loss) income from continuing operations
 
$
(85
)
 
$
9
 
Adjustments to reconcile net (loss) income from continuing operations to net cash provided by operating activities, continuing operations:
               
Depreciation, depletion and amortization
   
131
     
97
 
Deferred income taxes
   
(13
)
   
(30
)
Share-based compensation expense
   
15
     
9
 
Amortization of deferred debt issuance costs and discount on debt
   
4
     
7
 
Loss on extinguishment of debt
   
2
     
30
 
Contract loss
   
19
     
 
Impairment losses
   
     
25
 
Acquired inventory step-up recognized in earnings
   
55
     
 
Other non-cash items affecting net (loss) income from continuing operations
   
17
     
(3
)
Changes in assets and liabilities:
               
Increase in accounts receivable, net
   
(43
)
   
(33
)
Decrease (increase) in inventories, net
   
31
     
(14
)
Increase in prepaid and other assets
   
(8
)
   
(27
)
Increase (decrease) in accounts payable and accrued liabilities
   
32
     
(36
)
Net changes in income tax payables and receivables
   
(8
)
   
6
 
Changes in other non-current assets and liabilities
   
(16
)
   
(9
)
Cash provided by operating activities- continuing operations
   
133
     
31
 
 
               
Cash Flows from Investing Activities:
               
Capital expenditures
   
(81
)
   
(55
)
Cristal Acquisition
   
(1,603
)
   
 
Proceeds from sale of Ashtabula
   
707
     
 
Insurance proceeds
   
10
     
 
Loans
   
(25
)
   
(14
)
Proceeds from sale of assets
   
1
     
 
Cash used in investing activities- continuing operation
   
(991
)
   
(69
)
 
               
Cash Flows from Financing Activities:
               
Repayments of long-term debt
   
(215
)
   
(595
)
Proceeds of short-term debt
   
     
 
Proceeds from long-term debt
   
222
     
615
 
Repurchase of common stock
   
(252
)
   
 
Acquisition of noncontrolling interest
   
(148
)
   
 
Call premium paid
   
     
(22
)
Debt issuance costs
   
(4
)
   
(10
)
Proceeds from the exercise of options and warrants
   
     
6
 
Dividends paid
   
(14
)
   
(12
)
Restricted stock and performance-based shares settled in cash for withholding taxes
   
(6
)
   
(6
)
Cash used in financing activities- continuing operations
   
(417
)
   
(24
)
 
               
Discontinued Operations:
               
Cash used in operating activities
   
(15
)
   
 
Cash used in investing activities
   
(1
)
   
 
Net cash flows used by discontinued operations
   
(16
)
   
 
                 
Effects of exchange rate changes on cash and cash equivalents and restricted cash
   
1
     
(15
)
 
               
Net (decrease) increase in cash, cash equivalents and restricted cash
   
(1,290
)
   
(77
)
Cash, cash equivalents and restricted cash at beginning of period
   
1,696
     
1,769
 
Cash, cash equivalents and restricted cash at end of period
 
$
406
   
$
1,692
 

See accompanying notes to unaudited condensed consolidated financial statements.

7

Table of Contents

TRONOX HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(Millions of U.S. dollars, except for shares)

For the three months and six months ended June 30, 2019

   
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, 2018
   
122,934
   
$
1
   
$
1,579
   
$
(357
)
 
$
(540
)
 
$
683
   
$
179
   
$
862
 
Net (loss) income
   
     
     
     
(34
)
   
     
(34
)
   
4
     
(30
)
Other comprehensive (loss) income
   
     
     
     
     
(11
)
   
(11
)
   
11
     
 
Shares-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
 
                                                                 
Net (loss) income
   
     
     
     
(62
)
   
     
(62
)
   
6
     
(56
)
Other comprehensive (loss) income
   
     
     
     
     
(4
)
   
(4
)
   
4
     
 
Shares-based compensation
   
20
     
     
7
     
     
     
7
     
     
7
 
Shares cancelled
   
(4
)
   
     
     
     
     
     
     
 
Shares issued for acquisition
   
37,580
     
     
526
     
     
     
526
     
     
526
 
Shares repurchased and cancelled
   
(18,957
)
   
     
(257
)
   
     
     
(257
)
   
     
(257
)
Cristal acquisition
   
     
     
     
     
     
     
36
     
36
 
Ordinary share dividends ($0.045 per share)
   
     
     
     
(7
)
   
     
(7
)
   
     
(7
)
Balance at June 30, 2019
   
144,377
   
$
1
   
$
1,860
   
$
(466
)
 
$
(616
)
 
$
779
   
$
150
   
$
929
 

For the three months and six months ended June 30, 2018

   
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, 2017
   
121,271
   
$
1
   
$
1,558
   
$
(327
)
 
$
(403
)
 
$
829
   
$
186
   
$
1,015
 
Net (loss) income
   
     
     
     
(44
)
   
     
(44
)
   
3
     
(41
)
Other comprehensive income (loss)
   
     
     
     
     
45
     
45
     
15
     
60
 
Shares-based compensation
   
1,099
     
     
7
     
     
     
7
     
     
7
 
Shares cancelled
   
(222
)
   
     
(4
)
   
     
     
(4
)
   
     
(4
)
Warrants and options exercised
   
338
     
     
2
     
     
     
2
     
     
2
 
Ordinary share dividends ($0.045 per share)
   
     
     
     
(6
)
   
     
(6
)
   
     
(6
)
Balance at March 31, 2018
   
122,486
   
$
1
   
$
1,563
   
$
(377
)
 
$
(358
)
 
$
829
   
$
204
   
$
1,033
 
                                                                 
Net (loss) income
   
     
     
     
36
     
     
36
     
14
     
50
 
Other comprehensive income (loss)
   
     
     
     
     
(138
)
   
(138
)
   
(46
)
   
(184
)
Shares-based compensation
   
215
     
     
6
     
     
     
6
     
     
6
 
Shares cancelled
   
(93
)
   
     
(2
)
   
     
     
(2
)
   
     
(2
)
Warrants and options exercised
   
292
     
     
     
     
     
     
     
 
Ordinary share dividends ($0.045 per share)
   
     
     
     
(6
)
   
     
(6
)
   
     
(6
)
Balance at June 30, 2018
   
122,900
   
$
1
   
$
1,567
   
$
(347
)
 
$
(496
)
 
$
725
   
$
172
   
$
897
 

See accompanying notes to unaudited condensed consolidated financial statements.

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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

Prior to March 27, 2019, Tronox Limited,a public limited company registered under the laws of the State of Western Australia, was the ultimate parent company of the Tronox group of companies. Effective March 27, 2019, Tronox Limited effected a redomiciliation transaction (the “Re-domicile Transaction”), effectively changing its jurisdiction of incorporation from Western Australia to England and Wales, by “top-hatting” the Tronox group of companies with Tronox Holdings plc (referred to herein as “Tronox,” “we,” “us,” or “our”), 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.  The Re-domicile Transaction was implemented by two schemes of arrangement, pursuant to which Tronox Limited’s Class A and Class B ordinary shares were exchanged on a one-for-one basis for ordinary shares in Tronox Holdings plc, par value US $0.01 per share. As a result, the Class A ordinary shares of Tronox Limited were delisted from the New York Stock Exchange (“NYSE”) and the ordinary shares of Tronox Holdings plc were listed on the NYSE in its place. The Re-domicile Transaction had an impact on capital gains tax for our ordinary shares held by Exxaro Resources Limited (“Exxaro”). See “Exxaro Mineral Sands Transaction Completion Agreement” below for a discussion of our agreement with Exxaro associated with South African capital gains tax.
 
On April 10, 2019, we completed the acquisition of the TiO2 business of The National Titanium Dioxide Company Ltd., a limited company organized under the laws of the Kingdom of Saudi Arabia (“Cristal”) ( 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 where nano-particulate TiO2 is required. We intend to consume all of our feedstock materials in our own TiO2 pigment facilities in the United States, Australia, Brazil, UK, France, Netherlands, China and the Kingdom of Saudi Arabia (“KSA”) with a 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. See Note 2 below for further details on the Cristal Transaction.
 
In order to obtain regulatory approval for the Cristal Transaction, the Federal Trade Commission (“FTC”) required us to divest Cristal's North American TiO2 business, which we sold  to INEOS Enterprises ("INEOS") on May 1, 2019, for proceeds of approximately $700 million, plus an additional amount for working capital, which is subject to an adjustment. The operating results of Cristal’s North American TiO2 business, from the acquisition date to the date of divestiture, are included in a single caption entitled “Loss from discontinued operations, net of tax” in our unaudited Condensed Consolidated Statements of Operations.
 
Jazan Slagger and Option Agreement
 
On May 9, 2018, we entered into an Option Agreement (the “Option Agreement”) with Advanced Metal Industries Cluster Company Limited (“AMIC”), which is owned equally by the National Industrialization Company (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 June 30, 2019, 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 within “Other long-term assets” on the unaudited Condensed Consolidated Balance Sheet at June 30, 2019. The Option Agreement did not have a significant impact on the financial statements as of or for the period ended June 30, 2019.
 

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Exxaro Mineral Sands Transaction Completion Agreement
 
On November 26, 2018, we, certain of our subsidiaries and Exxaro entered into the Exxaro Mineral Sands Transaction Completion Agreement (the “Completion Agreement”). The Completion Agreement (i) provides for the orderly sale of Exxaro’s remaining ownership interest in us, subject to market conditions, (ii) helped to facilitate the Re-domicile Transaction, and (iii) 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, we repurchased 14 million shares from Exxaro for an aggregate purchase price of approximately $200 million or $14.3185 per share. 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, and the imputed gain or loss if Exxaro was to sell its remaining 14.7 million shares, we have recorded a liability of approximately $2 million related to the estimated net payment to Exxaro, which is included in “Accrued liabilities” in our unaudited Condensed Consolidated Balance Sheets as of June 30, 2019. See Note 23 for additional information.

Furthermore, 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 June 30, 2019, Exxaro continues to own approximately 14.7 million shares of Tronox, or a 10.2% ownership interest, as well as their 26% ownership interest in our South African operating subsidiaries. Under the terms of the Completion Agreement, Exxaro has the right to sell its ownership in Tronox at anytime on or after August 11, 2019.
  
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/A for the year ended December 31, 2018. The unaudited Condensed Consolidated Balance Sheet as of December 31, 2018 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP.

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 and six month periods ended June 30, 2019, only include the results of the Cristal business since the date of the acquisition, while the three and six month periods ended June 30, 2018 do not include any results of Cristal. Likewise, the balance sheet at June 30, 2019 includes the impacts of the acquisition of Cristal while the balance sheet at December 31, 2018 does not.

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. 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.
 

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Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”) which includes a lessee accounting model that recognizes two types of leases - finance leases and operating leases. The new standard requires a lessee to recognize on the balance sheet, for all leases of more than 12 months, a lease liability, which corresponds to the discounted obligation of future lease payments arising from a lease, and a right-of-use (“ROU”) asset, which represents the lessee’s right to use, or control the use of, the underlying asset over the lease term.

On January 1, 2019, we adopted the new standard using the cumulative-effect adjustment approach and recorded a lease liability and related right-of-use asset of $66 million and $64 million, respectively.We elected the package of practical expedients under the transition guidance, which does not require the reassessment of whether existing contracts contain a lease or whether the classification or unamortized initial direct costs of existing leases would be different under the new guidance. As an accounting policy election, we excluded short-term leases (leases that have a term of 12 months or less and do not include a purchase option that we are reasonably certain to exercise) from the balance sheet presentation. Additionally, we elected to account for non-lease components in a contract as part of a single lease component for all asset classes. We implemented a new lease accounting system and updated our business processes and internal controls to address relevant risks associated with the implementation of the new standard including the preparation of the required financial information and disclosures.  See Note 16 for details.

Recently Issued 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 will assess the impact, if any, that the standard may have on our disclosure requirements.
 
In August 2018, the FASB also issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Topic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. The standard modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing and adding certain disclosures for these plans. The eliminated disclosures include (a) the amounts in Accumulated Other Comprehensive Income expected to be recognized in net periodic benefit costs over the next fiscal year, (b) the amount and timing of plan assets expected to be returned to the employer, and (c) the effects of a one-percentage-point change in assumed health care cost trend rates on the net periodic benefit costs and the benefit obligation for postretirement health care benefits. The new disclosures include the interest crediting rates for cash balance plans and an explanation of significant gains and losses related to changes in benefit obligations. This standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2020, with early adoption permitted. We will assess the impact, if any, that the standard may have on our disclosure requirements.



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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, subject to a working capital and noncurrent liability adjustment, 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, subject to a working capital and noncurrent liability adjustment. With the acquisition of our shares, an affiliate of Cristal became our largest shareholder. At June 30, 2019, 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 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 of approximately $700 million plus an additional amount for working capital, which is subject to adjustment. The operating results of Cristal’s North American TiO2 business from the acquisition date to the date of divestiture are included in a single caption entitled “Loss from discontinued operations, net of tax” in our unaudited Condensed Consolidated Statements of Operations.

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 23 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 will provide 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, the previously announced divestiture of the 8120 paper laminate grade to Venator Materials PLC (“Venator”), which we were required to undertake by the European Commission in order to consummate the Cristal Transaction, was completed on April 26, 2019.  Under the terms of the agreement, 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 will be paid in equal installments during the second quarters of 2020 and 2021. We recorded a charge of approximately $19 million during the second quarter of 2019, in “Contract loss” in the unaudited Condensed 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. See Note 13 for further details of the Cristal Transaction financing.

We have applied the acquisition method of accounting in accordance with the FASB’s 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 major categories of assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date using primarily Level 2 and Level 3 inputs (see Note 15 for an explanation of Level 2 and Level 3 inputs).  These Level 2 and Level 3 valuation inputs include an estimate of future cash flows and discount rates. The estimated fair values are based, in part, upon outside preliminary appraisals by a third-party valuation firm for certain assets, including specifically-identified intangible assets.

The allocation of the purchase price to the assets acquired and liabilities assumed, including the residual amount allocated to goodwill, is based upon preliminary information and subject to change. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair value of inventories, property, plant and equipment, intangible assets, leases, legal reserves, contingent liabilities, including uncertain tax positions, deferred tax assets and liabilities other assets and liabilities and noncontrolling interest. Further adjustments may result before the end of the measurement period, which ends one year from the date of the acquisition. During the measurement period, if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in revised estimated values of those assets or liabilities as of that date, we will revise the preliminary purchase price allocation. The effect of measurement period adjustments to the estimated fair values will be calculated as if the adjustments had been completed on the acquisition date. The impact of all changes that do not qualify as measurement period adjustments will be included in current period earnings.

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The purchase price consideration and preliminary estimated fair value of Cristal’s net assets acquired as of the acquisition date 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
 
$
1,603
 
    Liability for additional cash consideration
 
$
72
 
Total purchase price
 
$
2,201
 


 
Fair Value
 
Fair Value of Assets Acquired:
     
Accounts receivable
 
$
231
 
Inventory
   
706
 
Deferred taxes
   
70
 
Prepaid and other assets
   
104
 
Property, plant and equipment
   
624
 
Mineral leaseholds
   
57
 
Intangible assets
   
69
 
Lease right of use assets
   
39
 
Other long-term assets
   
59
 
Assets held for sale
   
807
 
Goodwill
   
68
 
Total assets acquired
 
$
2,834
 
Less: Liabilities Assumed
       
Accounts payable
 
$
92
 
Accrued liabilities
   
127
 
Short-term lease liabilities
   
12
 
Pension and postretirement healthcare benefits
   
67
 
Deferred tax liabilities
   
5
 
Environmental liabilities
   
36
 
Asset retirement obligations