10-Q 1 trox-20220331.htm 10-Q trox-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
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 Wales98-1467236
(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 className of each exchange on which registered
Ordinary Shares, par value $0.01 per shareNew 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 filerAccelerated filer
Non-accelerated filerSmaller 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 20, 2022, the Registrant had 155,821,785 ordinary shares outstanding.




2



3

TRONOX HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Millions of U.S. dollars, except share and per share data)
Three Months Ended March 31,
20222021
Net sales$965 $891 
Cost of goods sold733 685 
Gross profit232 206 
Selling, general and administrative expenses78 81 
Venator settlement85  
Income from operations69 125 
Interest expense(32)(50)
Interest income2 1 
Loss on extinguishment of debt(1)(34)
Other expense, net(4)(10)
Income before income taxes34 32 
Income tax provision(18)(6)
Net income16 26 
Net income attributable to noncontrolling interest 7 
Net income attributable to Tronox Holdings plc$16 $19 
Earnings per share:
Basic $0.10 $0.13 
Diluted$0.10 $0.12 
Weighted average shares outstanding, basic (in thousands)154,629 147,071 
Weighted average shares outstanding, diluted (in thousands)159,577 153,928 
See accompanying notes to unaudited condensed consolidated financial statements.
4

TRONOX HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(Millions of U.S. dollars)
Three Months Ended March 31,
20222021
Net income$16 $26 
Other comprehensive income (loss):
Foreign currency translation adjustments70 (42)
Pension and postretirement plans:
Actuarial losses, (net of tax benefit of nil and less than $1 million in the three months ended March 31, 2022 and 2021, respectively)
 (1)
Amortization of unrecognized actuarial losses, (net of tax benefit of less than $1 million in both the three months ended March 31, 2022 and 2021, respectively)
1 1 
Total pension and postretirement losses1  
Realized (gains) losses on derivatives reclassified from accumulated other comprehensive loss to the Condensed Consolidated Statement of Income (net of tax expense of $1 million and nil in the three months ended March 31, 2022 and 2021, respectively)
(11)(3)
Unrealized (losses) gains on derivative financial instruments, (net of tax expense of $4 million and nil for the three months ended March 31, 2022 and 2021, respectively) - See Note 12
49 11 
Other comprehensive income (loss)109 (34)
Total comprehensive income (loss)125 (8)
Comprehensive income (loss) attributable to noncontrolling interest:
Net income 7 
Foreign currency translation adjustments8 (10)
Comprehensive income (loss) attributable to noncontrolling interest8 (3)
Comprehensive income (loss) attributable to Tronox Holdings plc$117 $(5)
See accompanying notes to unaudited condensed consolidated financial statements.
5

TRONOX HOLDINGS PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions of U.S. dollars, except share and per share data)
March 31, 2022December 31, 2021
ASSETS
Current Assets
Cash and cash equivalents$292 $228 
Restricted cash4 4 
Accounts receivable (net of allowance for credit losses of $4 million and $4 million as of March 31, 2022 and December 31, 2021, respectively)
651 631 
Inventories, net1,050 1,048 
Prepaid and other assets187 132 
Income taxes receivable5 6 
Total current assets2,189 2,049 
Noncurrent Assets
Property, plant and equipment, net1,770 1,710 
Mineral leaseholds, net763 747 
Intangible assets, net229 217 
Lease right of use assets, net86 85 
Deferred tax assets981 985 
Other long-term assets197 194 
Total assets$6,215 $5,987 
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable$490 $438 
Accrued liabilities377 328 
Short-term lease liabilities22 26 
Long-term debt due within one year16 18 
Income taxes payable18 12 
Total current liabilities923 822 
Noncurrent Liabilities
Long-term debt, net2,567 2,558 
Pension and postretirement healthcare benefits117 116 
Asset retirement obligations146 139 
Environmental liabilities66 66 
Long-term lease liabilities61 55 
Deferred tax liabilities176 157 
Other long-term liabilities30 32 
Total liabilities4,086 3,945 
Commitments and Contingencies - Note 15
Shareholders’ Equity
Tronox Holdings plc ordinary shares, par value $0.01155,797,426 shares issued and outstanding at March 31, 2022 and 153,934,677 shares issued and outstanding at December 31, 2021
2 2 
Capital in excess of par value2,049 2,067 
Retained earnings 659 663 
Accumulated other comprehensive loss(637)(738)
Total Tronox Holdings plc shareholders’ equity2,073 1,994 
Noncontrolling interest56 48 
Total equity2,129 2,042 
Total liabilities and equity$6,215 $5,987 
See accompanying notes to unaudited condensed consolidated financial statements.
6

TRONOX HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions of U.S. dollars)
Three Months Ended March 31,
20222021
Cash Flows from Operating Activities:
Net income$16 $26 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization68 84 
Deferred income taxes 4 (3)
Share-based compensation expense7 9 
Amortization of deferred debt issuance costs and discount on debt2 3 
Loss on extinguishment of debt1 34 
Venator settlement85  
Other non-cash items affecting net income 2 14 
Changes in assets and liabilities:
Increase in accounts receivable, net of allowance for credit losses(11)(120)
Decrease in inventories, net21 63 
(Increase) decrease in prepaid and other assets(17)32 
Increase in accounts payable and accrued liabilities18 2 
Net changes in income tax payables and receivables7 7 
Changes in other non-current assets and liabilities(14)(16)
Cash provided by operating activities 189 135 
Cash Flows from Investing Activities:
Capital expenditures(103)(58)
Insurance proceeds 1 
Proceeds from sale of assets1  
Cash used in investing activities(102)(57)
Cash Flows from Financing Activities:
Repayments of long-term debt(3)(2,260)
Proceeds from long-term debt 2,375 
Repurchase of common stock(25) 
Call premiums paid (21)
Debt issuance costs (30)
Dividends paid(1)(14)
Restricted stock and performance-based shares settled in cash for withholding taxes (2)
Cash (used in) provided by financing activities(29)48 
Effects of exchange rate changes on cash and cash equivalents and restricted cash6 (7)
Net increase in cash, cash equivalents and restricted cash64 119 
Cash, cash equivalents and restricted cash at beginning of period232 648 
Cash, cash equivalents and restricted cash at end of period$296 $767 
Supplemental cash flow information:
Interest paid, net$34 $30 
Income taxes paid$7 $3 
See accompanying notes to unaudited condensed consolidated financial statements.
7

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, 2022
Tronox
Holdings
plc
Ordinary
Shares (in
thousands)
Tronox
Holdings
plc
Ordinary
Shares
(Amount)
Capital
in
Excess
of par
Value
Retained EarningsAccumulated
Other
Comprehensive
Loss
Total
Tronox
Holdings plc
Shareholders’
Equity
Non-
controlling
Interest
Total
Equity
Balance at December 31, 2021153,935 $2 $2,067 $663 $(738)$1,994 $48 $2,042 
Net income— — — 16 — 16 — 16 
Other comprehensive (loss) income— — — — 101 101 8 109 
Share-based compensation3,254 — 7 — — 7 — 7 
Shares cancelled(9)— — — — — —  
Options exercised3 — — — — — —  
Shares repurchased and cancelled(1,386)— (25)— (25)(25)
Ordinary share dividends ($0.125 per share)
— — — (20)— (20)— (20)
Balance at March 31, 2022155,797 $2 $2,049 $659 $(637)$2,073 $56 $2,129 
See accompanying notes to unaudited condensed consolidated financial statements.
8

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, 2021
Tronox
Holdings
plc
Ordinary
Shares (in
thousands)
Tronox
Holdings
plc
Ordinary
Shares
(Amount)
Capital
in
Excess
of par
Value
Retained EarningsAccumulated
Other
Comprehensive
Loss
Total
Tronox
Holdings plc Shareholders’
Equity
Non-
controlling
Interest
Total
Equity
Balance at December 31, 2020143,557 $1 $1,873 $434 $(610)$1,698 $173 $1,871 
Net income— — — 19 — 19 7 26 
Other comprehensive income (loss)— — — — (24)(24)(10)(34)
Share-based compensation2,545 — 9 — — 9 — 9 
Shares cancelled(101)— (2)— — (2)— (2)
Options exercised11 — — — — — —  
Acquisition of noncontrolling interest7,246 1 158 — (34)125 (125) 
Ordinary share dividends ($0.08 per share)
— — — (13)— (13)— (13)
Balance at March 31, 2021153,258 $2 $2,038 $440 $(668)$1,812 $45 $1,857 
See accompanying notes to unaudited condensed consolidated financial statements.
9

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", the "Company", "we", "us", or "our") operates titanium-bearing mineral sand mines and beneficiation 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 vertically integrated and consume all of our feedstock materials in our own nine TiO2 pigment facilities which we operate in the United States, Australia, Brazil, UK, France, the Netherlands, China and the Kingdom of Saudi Arabia (“KSA”). We believe that 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 and pig iron, which we also supply to customers around the world.
We are a public limited company listed on the New York Stock Exchange and are registered under the laws of England and Wales.
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, 2021.
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, 2022, and its results of operations for the three months ended March 31, 2022 and 2021. 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, among other things, any potential impacts on the economy as a result of macroeconomic conditions, inflationary pressures, political instability, and supply chain disruptions.
Recently Issued Accounting Pronouncements

In March 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. We have conducted an internal assessment to identify items that would be impacted as a result of the dissolution of LIBOR. Based upon this assessment, we have determined that this change will be most impactful to our intercompany debt agreements and interest rate swap agreements. Upon conversion of these benchmark rates, we intend to elect the practical expedients allowed under this standard which is expected to result in an immaterial impact to the financial statements.

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2.    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, 2022, and December 31, 2021, 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. From time to time, 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, 2022 and December 31, 2021 were approximately $6 million and $2 million, respectively. Contract liability balances were reported as “Accounts payable” in the unaudited Condensed Consolidated Balance Sheets.  All material contract liabilities as of December 31, 2021 were recognized as revenue in “Net sales” in the unaudited Condensed Consolidated Statements of Income during the first quarter of 2022.
Disaggregation of Revenue
We operate under one operating and reportable segment, Tronox. 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,
20222021
North America$195 $169 
South and Central America67 63 
Europe, Middle-East and Africa377 357 
Asia Pacific326 302 
Total net sales$965 $891 

Net sales from external customers for each similar type of product were as follows:
Three Months Ended March 31,
20222021
TiO2
$773 $696 
Zircon108 123 
Feedstock and other products84 72 
Total net sales$965 $891 
Feedstock and other products mainly include pig iron, ilmenite, chloride (“CP”) slag, TiCl4 and other mining products.
During the three months ended March 31, 2022 and 2021, our ten largest third-party customers represented 30% and 29%, respectively, of our consolidated net sales. During the three months ended March 31, 2022 and 2021, no single customer accounted for 10% of our consolidated net sales.
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3.    Income Taxes
Our operations are conducted through various subsidiaries in a number of countries throughout the world. We have provided for income taxes based upon the tax laws and rates in the countries in which operations are conducted and income is earned.
Income before income taxes is comprised of the following:
Three Months Ended
March 31,
20222021
Income tax (provision) benefit$(18)$(6)
Income before income taxes$34 $32 
Effective tax rate53 %19 %
Tronox Holdings plc, a U.K. public limited company is the parent company for the business group, and the statutory tax rate in the U.K. at both March 31, 2022 and 2021 was 19%. The effective tax rates for both the three months ended March 31, 2022 and 2021 are influenced by a variety of factors, primarily income and losses in jurisdictions with valuation allowances, disallowable expenditures, prior year accruals, and our jurisdictional mix of income at tax rates different than the U.K. statutory rate. The effective tax rate for the three months ended March 31, 2022 was significantly impacted by the non-deductible Venator settlement, the related interest expense from the Venator settlement in a jurisdiction with a full valuation allowance, and a $7 million deferred tax benefit from statutory tax rate changes in two foreign jurisdictions.
At each reporting date, we perform an analysis to determine the likelihood of realizing our deferred tax assets and whether any valuation allowances are required. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income (including the reversals of deferred tax liabilities) during the periods in which those deferred tax assets will become deductible. Our analysis takes into consideration all available positive and negative evidence, including prior operating results, the nature and reason for any losses, our forecast of future taxable income, utilization of tax planning strategies, and the dates on which any deferred tax assets are expected to expire. These assumptions and estimates require a significant amount of judgment and are made based on current and projected circumstances and conditions.
We continue to maintain full valuation allowances related to the total net deferred tax assets in Australia, Switzerland, and the United Kingdom, 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, particularly in Australia due to its increased level of profitability. 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 South Africa and the United States.
We currently have no uncertain tax positions recorded; however, 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.
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4.    Income Per Share
The computation of basic and diluted income per share for the periods indicated is as follows:
Three Months Ended March 31,
20222021
Numerator - Basic and Diluted:
Net income$16 $26 
Less: Net income attributable to noncontrolling interest 7 
Net income available to ordinary shares$16 $19 
Denominator - Basic and Diluted:
Weighted-average ordinary shares, basic (in thousands)154,629 147,071 
Weighted-average ordinary shares, diluted (in thousands)159,577 153,928 
Basic net income per ordinary share$0.10 $0.13 
Diluted net income per ordinary share$0.10 $0.12 
Net income per ordinary share amounts were calculated from exact, not rounded net income and share information.  Anti-dilutive shares not recognized in the diluted net income per share calculation for the three months ended March 31, 2022 and 2021 were as follows:
Shares
Three Months Ended March 31,
20222021
Options408,641 1,195,305 
Restricted share units1,029,052 924,385 

5.    Accounts Receivable Securitization Program

On March 15, 2022, the Company entered into an accounts receivable securitization arrangement (“Securitization Facility”) with a financial institution, through our wholly owned special purpose bankruptcy-remote subsidiary Tronox Securitization LLC (“ SPE”). The purpose of this arrangement is to enhance the Company's financial flexibility by providing additional liquidity. The Securitization Facility permits the SPE to sell accounts receivable up to $75 million (the “Facility Limit”). Under the Securitization Facility, our wholly owned U.S. operating subsidiary, Tronox LLC (“Originator”), sells its entire accounts receivable on a periodic basis to the SPE. The SPE in turn sells undivided interests in the portion of the receivables that meet certain eligibility criteria, pursuant to the terms of a receivable purchase agreement, to the administrative agent (acting on behalf of the purchaser) in exchange for cash, not to exceed the Facility Limit. The SPE retains the remaining receivables as unsold receivables which are pledged as a collateral for the sold receivables to which the purchaser is granted a first priority security interest.
Following the sale of the receivables by the Originator to the SPE, the receivables are legally isolated from Tronox and its affiliated entities, and upon the subsequent sale and transfer of the receivables from the SPE to the administrative agent, effective control of the receivables is passed to the purchaser, which has all rights, including the right to pledge or sell the receivables. Any new receivables that are not sold to the purchaser by the SPE are added to the unsold receivables held as collateral.
During March 2022, the Company sold accounts receivable having an aggregate face value of $75 million to the purchaser in exchange for cash proceeds of $75 million. At March 31, 2022, we also retained approximately $31 million of unsold receivables which we pledged as collateral for the sold receivables. As this transaction represents a true sale, we derecognized the sold receivables from our Condensed Consolidated Balance Sheet as of March 31, 2022 and classified the cash proceeds as source of cash provided by operating activities in our Condensed Consolidated Statement of Cash Flows. This transaction has a one year term which ends on March 14, 2023.
13


6.    Inventories, Net
Inventories, net consisted of the following:
March 31, 2022December 31, 2021
Raw materials$269 $265 
Work-in-process117 117 
Finished goods, net458 461 
Materials and supplies, net206 205 
Inventories, net – current$1,050 $1,048 
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, 2022 and December 31, 2021, inventory obsolescence reserves primarily for materials and supplies were $44 million and $43 million, respectively. Reserves for lower of cost or market and net realizable value were $13 million and $11 million at March 31, 2022 and December 31, 2021, respectively.
7.    Property, Plant and Equipment, Net
Property, plant and equipment, net of accumulated depreciation, consisted of the following:
March 31, 2022December 31, 2021
Land and land improvements$189 $188 
Buildings390 365 
Machinery and equipment2,298 2,234 
Construction-in-progress306 263 
Other62 73 
Subtotal3,245 3,123 
Less: accumulated depreciation(1,475)(1,413)
Property, plant and equipment, net$1,770 $1,710 
Substantially all of the property, plant and equipment, net is pledged as collateral for our debt. See Note 11.
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 Income:
Three Months Ended March 31,
20222021
Cost of goods sold$51 $65 
Selling, general and administrative expenses1 1 
Total$52 $66 

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8.    Mineral Leaseholds, Net
Mineral leaseholds, net of accumulated depletion, consisted of the following:
March 31, 2022December 31, 2021
Mineral leaseholds$1,338 $1,306 
Less: accumulated depletion(575)(559)
Mineral leaseholds, net$763 $747 

Depletion expense relating to mineral leaseholds recorded in “Cost of goods sold” in the unaudited Condensed Consolidated Statements of Income was $8 million and $10 million during the three months ended March 31, 2022 and 2021, respectively.
9.    Intangible Assets, Net
Intangible assets, net of accumulated amortization, consisted of the following:
March 31, 2022December 31, 2021
Gross CostAccumulated
Amortization
Net Carrying
Amount
Gross CostAccumulated
Amortization
Net Carrying
Amount
Customer relationships$291 $(216)$75 $291 $(211)$80 
TiO2 technology
93 (32)61 93 (31)62 
Internal-use software and other136 (43)93 120 (45)75 
Intangible assets, net$520 $(291)$229 $504 $(287)$217 
As of March 31, 2022 and December 31, 2021, internal-use software included approximately $89 million and $68 million, respectively, of capitalized software costs which are not being amortized as the software is not ready for its intended use.
The table below summarizes amortization expense related to intangible assets for the periods presented, recorded in the specific line items in our unaudited Condensed Consolidated Statements of Income:
Three Months Ended March 31,
20222021
Selling, general and administrative expenses8 8 
Total$8 $8 
Estimated future amortization expense related to intangible assets is $26 million for the remainder of 2022, $36 million for 2023, $35 million for 2024, $35 million for 2025, $17 million for 2026 and $80 million thereafter.
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10.    Balance Sheet and Cash Flow Supplemental Information
Accrued liabilities consisted of the following:
March 31, 2022December 31, 2021
Employee-related costs and benefits$109 $155 
Related party payables10 1 
Interest16 20 
Sales rebates33 36 
Restructuring1 1 
Taxes other than income taxes21 18 
Asset retirement obligations9 10 
Interest rate swaps 25 
Venator settlement(1)
85  
Other accrued liabilities93 62 
Accrued liabilities$377 $328 
(1) Represents the break fee plus accrued interest related to the Venator settlement. Refer to Note 15 for further details.
Additional supplemental cash flow information for the three months ended March 31, 2022 and 2021 and as of March 31, 2022 and December 31, 2021 is as follows: 
Three Months Ended March 31,
Supplemental non cash information:20222021
Financing activities - Acquisition of noncontrolling interest$ $125 
March 31, 2022December 31, 2021
Capital expenditures acquired but not yet paid$67 $75 

16

11.    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, 2022December 31, 2021
Term Loan Facility, net of unamortized discount (1)
1,300 Variable3/11/2028897 897 
Senior Notes due 2029 1,075 4.63 %3/15/20291,075 1,075 
6.5% Senior Secured Notes due 2025500 6.50 %5/1/2025500 500 
Standard Bank Term Loan Facility (1)
98 Variable11/11/202698 92 
Australian Government Loan, net of unamortized discountN/AN/A12/31/20361 1 
MGT Loan(2)
36VariableVariable32 33 
Finance leases15 14 
Long-term debt2,618 2,612 
Less: Long-term debt due within one year(16)(18)
Debt issuance costs(35)(36)
Long-term debt, net$2,567 $2,558 
_______________
(1)The average effective interest rate on the Term Loan Facility and Standard Bank Term Loan Facility was 4.5% and 6.3%, respectively, during the three months ended March 31, 2022. The average effective interest rate on the previous Term Loan Facility and previous Standard Bank Term Loan Facility was 4.5% and 6.5%, respectively, during the three months ended March 31, 2021. The increase in the Standard Bank Term Loan Facility from December 31, 2021 to March 31, 2022 is primarily a result of the impact of foreign currency translation due to the appreciation of the South African Rand.
(2)The MGT loan is a related party debt facility. The average effective interest rate on the MGT loan was 3.23% and 3.11% during the three months ended March 31, 2022 and March 31, 2021, respectively.
Emirates Revolver
During the three months ended March 31, 2022, the Company entered into an amendment to extend the maturity date of the Emirates Revolver from March 31, 2022 to March 31, 2023.
Term Loan Facility
During the three months ended March 31, 2021, we amended and restated our prior Term Loan Facility with a new first lien credit agreement. As a result of this transaction and in accordance with ASC 470, we recognized approximately $4 million in "Loss on Extinguishment of Debt" recorded in the unaudited condensed Consolidated Statement of Income for the three months ended March 31, 2021.
The Term Loan Facility bears interest at either the base rate or an adjusted LIBOR rate, in each case plus an applicable margin. Based on our first lien net leverage ratio pursuant to the Term Loan Facility agreement, the applicable margin under the New Term Loan Facility as of March 31, 2022 was LIBOR plus a margin of 2.25%.
Senior Notes due 2029
During the three months ended March 31, 2021, Tronox Incorporated closed an offering of $1,075 million aggregate principal amount of its 4.625% senior notes due 2029 (the "Senior Notes due 2029"). As a result of this transaction, the Company repaid the outstanding principal balance of $615 million on its Senior Notes due 2026 and recorded $30 million of debt
17

extinguishment costs, including a call premium of $21 million, in "Loss on Extinguishment of Debt" on the Condensed Consolidated Statement of Income for the three months ended March 31, 2021.
2022 Term Loan Facility
On April 4, 2022, Tronox Finance LLC (the "Borrower"), the Borrower's indirect parent company, Tronox Holdings plc (the "Company"), certain of the Company's subsidiaries, the incremental term lender party thereto, and HSBC Bank USA. National Association, as Administrative Agent and Collateral Agent, entered into Amendment No. 1 to the Amended and Restated First Lien Credit Agreement (the "Amendment"). The Amendment provides the Borrower with a new seven-year incremental term loan facility (the "2022 Term Loan Facility" and, the loans thereunder, the "2022 Incremental Term Loans") under its credit agreement in an aggregate initial principal amount of $400 million.
The proceeds of the 2022 Incremental Term Loans were used on April 4, 2022, along with cash on hand, to redeem all outstanding 6.5% Senior Secured Notes due 2025 issued by Tronox Incorporated under the Indenture dated as of May 1, 2020 with Wilmington Trust, National Association, as Trustee and Collateral Agent and to pay transaction related costs and expenses. In connection with such redemption, all security interests and liens granted to Wilmington Trust, National Association, were automatically terminated and discharged.
As a result of this transaction, we recognized approximately $1 million in "Loss on Extinguishment of Debt" on the unaudited Consolidated Statement of Income for the three months ended March 31, 2022. Additionally, we estimate that we will recognize approximately $20 million (which includes a call premium of $18 million) of "Loss on Extinguishment of Debt" in the second quarter of 2022.
Debt Covenants
As of March 31, 2022, we are in compliance with all financial covenants in our debt facilities.
12.    Derivative Financial Instruments
Derivatives recorded on the Condensed Consolidated Balance Sheet:
The following table is a summary of the fair value of derivatives outstanding at March 31, 2022 and December 31, 2021:
Fair Value
March 31, 2022December 31, 2021
Assets(a) Accrued Liabilities Assets(a)Accrued Liabilities
Derivatives Designated as Cash Flow Hedges
Currency Contracts $22 $ $3 $1 
Interest Rate Swaps $3 $ $ $25 
Natural Gas Hedges$3 $ $1 $ 
Total Hedges $28 $ $4 $26 
Derivatives Not Designated as Cash Flow Hedges
Currency Contracts $5 $ $ $ 
Total Derivatives $33 $ $4 $26 
(a) At March 31, 2022 and December 31, 2021, current assets of $33 million and $4 million, respectively, are recorded in prepaid and other current assets on the Condensed Consolidated Balance Sheets.
Derivatives' Impact on the Condensed Consolidated Statement of Income:
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The following table summarizes the impact of the Company's derivatives on the unaudited Condensed Consolidated Statement of Income:
Amount of Pre-Tax Gain (Loss) Recognized in Earnings Amount of Pre-Tax Gain (Loss) Recognized in Earnings
Revenue Cost of Goods SoldOther Expense, netRevenueCost of Goods SoldOther Expense, net
Three Months Ended March 31, 2022Three Months Ended March 31, 2021
Derivatives Not Designated as Hedging Instruments
Currency Contracts$ $ $7 $ $ $1 
Derivatives Designated as Hedging Instruments
Currency Contracts $3 $9 $ $ $3 $ 
Natural Gas Hedges$ $1 $ $ $ $ 
Total Derivatives $3 $10 $7 $ $3 $1 
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 previous 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. There was no impact associated with the new Term Loan Facility as the hedge remained highly effective.
Fair value gains or losses on these interest rate 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, 2022 and December 31, 2021, the net unrealized gain of $3 million and the net unrealized loss of $25 million, respectively, was recorded in "Accumulated other comprehensive loss" on the unaudited Condensed Consolidated Balance Sheet. For the three months ended March 31, 2022 and March 31, 2021, the amount recorded in interest expense related to the interest-rate swap agreements was $4 million and $4 million, respectively.
Foreign Currency Risk
From time to time, we enter 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. Historically, we have used a combination of zero-cost collars or forward contracts to reduce the exposure.  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, 2022, we had notional amounts of 338 million Australian dollars (or approximately $254 million at March 31, 2022 the exchange rate) that expire between April 28, 2022 and December 30, 2022 to reduce the exposure of our Australian subsidiaries’ cost of sales to fluctuations in currency rates. As of March 31, 2022, we had notional amounts of 3.2 billion South African Rand (approximately $222 million at the March 31, 2022 exchange rate) that expire between April 28, 2022 and December 30, 2022 to reduce the exposure of our South African subsidiaries' third party sales to fluctuations in currency rates. At March 31, 2022 and December 31, 2021, there was an unrealized net gain of $27 million and $15 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. Of the $25 million, $23 million is expected to be recognized in earnings during the remainder of 2022.
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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. Historically, we have used 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 Income 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, 2022, there was (i) 638 million South African Rand (or approximately $44 million at March 31, 2022 exchange rate) and (ii) 167 million Australian dollars (or approximately $125 million at the March 31, 2022 exchange rate) of notional amounts of outstanding foreign currency contracts. At December 31, 2021, there was (i) 510 million South African Rand (or approximately $35 million at the March 31, 2022 exchange rate) and (ii) 172 million Australian dollars (or approximately $129 million at the March 31, 2022 exchange rate) of notional amounts outstanding foreign currency contracts.
13.    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, 2022 and December 31, 2021:
March 31,
2022
December 31,
2021
AssetLiability AssetLiability
Term Loan Facility— 887 — 895 
Standard Bank Term Loan Facility— 98 — 92