Tronox Incorporated Reports Second Quarter and Six-Month 2011 Results

• Second quarter net sales up 42 percent; income from operations rose 122 percent quarter over quarter

• Strong performance tied to continuing robust volumes and favorable selling prices; momentum driven by global economic recovery, operating improvements and efficiencies and limited global supply of TiO₂

• Significant cash generation supporting working capital and funding the investment in the expansion of the Tiwest Joint Venture

OKLAHOMA CITY, Aug. 18, 2011 /PRNewswire/ — Tronox Incorporated (TROX.PK), the world’s fifth-largest producer and marketer of titanium dioxide pigment, today announced results for the fiscal second quarter and six-month period ending June 30, 2011.  The company, which emerged from bankruptcy on February 14, 2011, applied fresh start accounting as of February 1, 2011, and is reporting its results using both GAAP and non-GAAP metrics.

Second quarter 2011 net sales were $428.3 million, a 42.4 percent increase from $300.8 million reported in the prior-year’s second quarter. Income from operations in the quarter was $84.8 million compared with $38.2 million in the prior-year quarter.  Net income for the quarter was $66.2 million versus $11.8 million in the prior year’s second quarter.

On a non-GAAP basis, second quarter adjusted income from operations was $96.2 million compared with $38.6 million in the prior year, and adjusted net income was $77.4 million compared with $25.9 million in the same period in 2010.  Adjusted second quarter EBITDA, excluding restructuring expenses, was $111.2 million compared with $48.7 million in the prior year.

Dennis L. Wanlass, Tronox’s Chief Executive Officer commented, “Our business continued to benefit from strong global demand for titanium dioxide pigment, especially in key Asia-Pacific markets, a favorable pricing environment and cost and efficiency benefits from our restructuring.  Strong global demand, improved operational efficiencies, and incremental capacity at our Tiwest joint venture expansion position us well to continue meeting the needs of our global customer base and achieving our long-term growth objectives.”

First Six Months 2011 Results

For the first six months of 2011, Tronox reported net sales of $803 million, income from operations of $122.5 million, and net income of $707.7 million.  These results compared favorably with results in 2010, and were driven largely by increases in sales volumes, continued operating improvements and efficiencies and pricing, as strong demand for TiO₂ has continued, especially in the Asia- Pacific region.

Pigment Segment Results

Second Quarter 2011

Pigment sales for the second quarter of 2011 were $398 million compared with $265.5 million during the same period in 2010.  The increase was driven by higher prices and volumes, as a result of the global economic recovery and tight supply industry-wide.  

The pigment segment reported income from operations of $95.7 million in the second quarter of 2011, which represented a $55 million increase over the same period last year.  The increase was primarily due to the effects of higher sales prices and volumes and continued plant operational improvements, partially offset by increased production costs and SG&A expenses.  

Six-month Period

Pigment sales for the first six months of 2011 were $735.1 million, a 43.8 percent increase over the same period in 2010, primarily driven by increased sales volumes and higher TiO₂ prices.  Income from operations for the pigment segment increased $66.4 million to $139.5 million during the first six months of 2011, compared with $73.1 million in the same period of 2010. Income from operations grew due to higher sales volumes, higher TiO₂ prices and continued plant operational improvements, partially offset by the effect of rising input and energy costs.

Electrolytic and Other Chemical Products Results

Second Quarter

Electrolytic and other chemical products sales for the 2011 second quarter decreased $0.1 million to $29.9 million in during the second quarter of 2011, compared with $30 million during the second quarter of 2010.  The decrease was primarily the result of lower prices for manganese dioxide offset by higher volumes on sodium chlorate.  Income from operations for the electrolytic and other chemical products business was $1.8 million for the second quarter of 2011, compared with $2.2 million during the same period last year.  The decrease was the result of lower selling prices and volumes and higher SG&A expenses, slightly offset by lower production and delivery costs.

Six-month Period

Net sales for the first six months of 2011 were $64.9 million compared with $59.1 million in the first six months of 2010.  Income from operations for the first six months of 2011 was $2.8 million compared with $3.9 million in the first six months of 2010.  

Corporate and Other

Second Quarter

Corporate and other reported a loss of $12.7 million for the second quarter of 2011, compared with a loss of $4.7 million during the comparable prior-year period.  The higher loss was primarily due to the unallocated portion of the post emergence accounting for intangible assets, stock compensation, variable compensation including pension and postretirement healthcare benefits and audit and professional fees incurred related to a three year audit of the company’s financial statements.  Included in SG&A expenses was $0.8 million of amortization of intangible assets recorded as part of the fresh start accounting at emergence from bankruptcy.

Six-month Period

For the first six months of 2011, corporate and other reported a loss of $19.8 million compared to a gain of $33.5 million during the same period in 2010.  The decrease in income from operations was primarily driven by the recognition of a $40 million insurance receivable in the first quarter of 2010 related to clean-up obligations at the Henderson facility, versus recognition of $4.3 million in 2011.  

Business Outlook

The company anticipates that the relatively strong demand for its products will continue to support a favorable pricing environment and sales volumes.  “We will continue to seek to further penetrate emerging markets where opportunities for growth are the strongest, while controlling costs through continuous improvement initiatives across our organization,” said Wanlass.

Fresh Start Accounting

On February 14, 2011, (the “Effective Date”), Tronox Incorporated emerged from bankruptcy and continued operations as reorganized Tronox Incorporated.  As a result, the company applied fresh start accounting under ASC 852 as of February 1, 2011 (the “Fresh Start Reporting Date”), whereby the U.S. GAAP financial statements after January 31, 2011 are not comparable to the financial statements prior to that date.  Fresh start accounting required resetting the historical net book values of Tronox’s assets and liabilities to their estimated fair values. References to “Successor” refer to Tronox and its consolidated subsidiaries after January 31, 2011, after giving effect to the cancellation of old common stock issued prior to January 31, 2011, the issuance of new common stock and settlement of existing debt and other adjustments in accordance with the reorganization plan, and the application of fresh start accounting. References to “Predecessor” refer to Tronox and its consolidated subsidiaries prior to January 31, 2011.

Conference Call/Webcast

Tronox will host a conference call at 11 a.m. EDT today to discuss second quarter 2011 and first half 2011 results.  Interested parties may listen to the Tronox’s second quarter 2011 conference call via Tronox’s website at or by calling 1-877-627-6590 in the United States or 719-325-4888 outside the United States. The code for both dial-in numbers will be 8044621. A replay of the call will be available for seven days at 1-888-203-1112 in the United States or 719-457-0820 outside the United States. The code for the replay will be 8044621. The webcast will be archived for 30 days on the company’s website. Information on earnings also will be available on the company’s website homepage at https://www.tronox.com.

Use of Non-GAAP Financial Information

The non-GAAP and supplemental information provided in this press release is a supplement to, and not a substitute for or superior to, the company’s financial results presented in accordance with U.S. GAAP. The non-GAAP financial measures presented by the company may be different than non-GAAP financial measures presented by other companies.

The non-GAAP and supplemental information is provided to enhance the user’s overall understanding of the company’s operating performance. Specifically, the company believes the non-GAAP information provides useful measures to investors regarding the company’s financial performance by excluding certain costs and expenses that the company believes are not indicative of its core operating results. The presentation of non-GAAP and supplemental information is not meant to be considered in isolation or as a substitute for results prepared and presented in accordance with U.S. GAAP. A reconciliation of each non-GAAP financial measure to the most direct, comparable GAAP financial measure is included below.

About Tronox

Tronox (TROX.PK) is the fifth largest titanium dioxide producer in the world with proprietary chloride technology. One of the company’s most valuable assets, the chloride process technology yields consistently whiter, brighter pigment grades preferred in paint, coatings and plastics.  The company is the fifth-largest producer of titanium dioxide pigments and also operates an electrolytic and specialty chemicals business. Through the company’s global operations, Tronox serves more than 1,000 customers in approximately 90 countries. For more information, visit https://www.tronox.com.

Cautionary Statement

This release contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that these forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those statements. The risks and uncertainties include the company’s ability to: manage costs; achieve adequate liquidity; execute its new strategic focus; reach a sustainable business model; survive as a stand-alone entity; reach operational efficiency; and reach and sustain profitability. Additional risks related to the company’s recent emergence from bankruptcy include: any negative impacts on the company’s business, results of operations, financial position or cash management arrangements; the negative impact on relationships with employees, customers, suppliers and contract manufacturers and other stakeholders; and the failure of the company to successfully implement the plan of reorganization. In addition, the instability of the global economy and tight credit markets could continue to adversely impact the company’s business in several respects, including adversely impacting credit quality and insolvency risk of the company and its customers and business partners, including suppliers and distributors; bookings; and reductions and deferrals of demand for Tronox products.

The company urges investors to review in detail the risks and uncertainties discussed in the financial statements published on our website, in conjunction with the filings in our Chapter 11 cases and the Company’s prior filings with the Securities and Exchange Commission. Unless otherwise required by applicable laws, the company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Investor Contact:  Michael Smith
Direct:  405-775-5413
E-Mail: Michael.smith@tronox.com

Media Contact:  Robert Gibney
Direct: 405-775-5105
E-mail: Robert.gibney@tronox.com

Use of Non-GAAP Financial Information

To provide investors and others with additional information regarding Tronox’s operating results, we have disclosed in this press release certain non-GAAP financial measures, including, Adjusted Income from Operations, Adjusted Net Income, and Adjusted EBITDA, excluding restructuring cost. These non-GAAP financial measures are a supplement to, and not a substitute for or superior to, the company’s results presented in accordance with U.S. GAAP. The non-GAAP financial measures presented by the company may be different than non-GAAP financial measures presented by other companies.

The non-GAAP financial measures are provided to enhance the user’s overall understanding of the company’s operating performance. Specifically, the company believes the non-GAAP information provides useful measures to investors regarding the company’s financial performance by excluding certain costs and expenses that the company believes are not indicative of its core operating results, as well as the impact of fresh start accounting. The presentation of these non-GAAP financial measures are not meant to be considered in isolation or as a substitute for results or guidance prepared and presented in accordance with U.S. GAAP.

Tronox has provided a reconciliation of the non-GAAP financial measures used in this release to the most directly comparable GAAP financial measures:

• Adjusted income from operations differs from GAAP income from operations in that it excludes the impact of non-recurring items, fresh start accounting related adjustments, and other bankruptcy related charges or credits.
• Adjusted net income differs from GAAP net income in that it (i) excludes the impact of non-recurring items, fresh start accounting related adjustments, and reorganization charges or credits, and (ii) is adjusted for the associated tax impact of all these changes.
• Adjusted EBITDA differs from GAAP net income in that it (i) excludes interest expenses, taxes, depreciation, amortization and stock based compensation charges, and (ii) excludes the impact of non-recurring items, fresh start accounting related adjustments, and reorganization charges or credits and write-off of financing costs completed prior to emergence from bankruptcy.

Management believes these non-GAAP financial measures:

• Reflect Tronox’s ongoing business in a manner that allows for meaningful period-to-period comparison and analysis of trends in Tronox’s business, as they exclude expenses that are not reflective of ongoing operating results;
• Provide useful information to investors and others in understanding and evaluating Tronox’s operating results and future prospects in the same manner as management and in comparing financial results across accounting periods;
• Provide additional view of the operating performance of the company by adding interest expenses, taxes, depreciation and amortization to the net income. Further adjustments due to fresh start accounting, and stock based compensation charges attempt to exclude items that are either non-cash or non-recurring in nature; and
• Enable investors to assess the company’s compliance with financial covenants under its debt instruments Tronox’s term loan has maintenance financial covenants that use EBITDA as part of the measures, e.g. Consolidated Leverage ratio, which is a ratio of Indebtedness to Consolidated EBITDA; and Consolidated Interest Coverage Ratio which is a ratio of Consolidated EBITDA to interest expenses.
• In addition, Adjusted EBITDA, excluding restructuring expenses, is one of the primary measures management uses for planning and budgeting processes and to monitor and evaluate financial and operating results. Adjusted EBITDA is not a recognized term under GAAP and does not purport to be an alternative to measures of our financial performance as determined in accordance with GAAP, such as net income (loss). Because other companies may calculate EBITDA and Adjusted EBITDA differently than we do, EBITDA may not be, and Adjusted EBITDA as presented in this release is not, comparable to similarly titled measures reported by other companies.

SOURCE Tronox Incorporated