Exhibit 99.1
Tronox Reports Third Quarter 2022 Financial Results
Continued strong margin performance enabled by vertically integrated portfolio despite difficult market conditions
STAMFORD, Conn., Oct. 26, 2022/PRNewswire/ — Tronox Holdings plc (NYSE:TROX) (“Tronox” or the “Company”), the world’s leading integrated manufacturer of titanium dioxide
(“TiO2”) pigment, today reported its financial results for the quarter ending September 30, 2022, as follows:
Third Quarter 2022 Financial Highlights:
| • |
Produced revenue of $895 million, an increase of 3% compared to the prior year,
driven by higher TiO2, zircon and pig iron prices and higher pig iron volumes
|
| • |
Generated income from operations of $163 million and net income of $123 million
|
| • |
Achieved GAAP diluted EPS of $0.77; adjusted diluted EPS of $0.69 (non-GAAP) primarily due to an Australian valuation allowance adjustment of $0.10
|
| • |
Delivered Adjusted EBITDA of $247 million and an Adjusted EBITDA margin of 27.6%
|
| • |
Invested $112 million in capital expenditures, primarily in our vertical integration and newTRON initiatives
|
| • |
Generated free cash flow of $25 million in the quarter
|
| • |
Returned $110 million to shareholders in the nine months ending September 30, 2022 in the form of share repurchases and dividends
|
Outlook
| • |
Q4 2022 Adjusted EBITDA expected to be $140-$170 million, assuming TiO2 volumes decline 25-30% sequentially driven by customer destocking in the fourth quarter and one-time cost impacts
due to reduced production as a result of lower customer demand
|
| • |
Full year 2022 free cash flow expected to be greater than $150 million
|
1 | Page
This outlook is based on Tronox’s views on current global economic activity and is subject to changes and impacts associated with the macroeconomic
conditions, global supply chain, and inflation-related challenges, among others.
Note: For the Company’s guidance with respect to fourth quarter 2022 and full year 2022 non-GAAP measures, we are not able to provide without
unreasonable effort the most directly comparable GAAP financial measure, or reconciliation to such GAAP financial measure, because certain items that impact such measures are uncertain, out of the Company’s control or cannot be reasonably
predicted.
Summary of Select Financial Results for the Quarter Ending September 30, 2022
|
($M unless otherwise noted)
|
Q3 2022
|
Q3 2021
|
Y-o-Y % ∆
|
|
Q2 2022
|
Q-o-Q % ∆
|
|
|||||||||||||
|
Revenue
|
$
|
895
|
$
|
870
|
3
|
%
|
$
|
945
|
(5
|
)%
|
||||||||||
|
TiO2
|
$
|
673
|
$
|
682
|
(1
|
)%
|
$
|
769
|
(12
|
)%
|
||||||||||
|
Zircon
|
$
|
128
|
$
|
116
|
10
|
%
|
$
|
111
|
15
|
%
|
||||||||||
|
Feedstock and other products
|
$
|
94
|
$
|
72
|
31
|
%
|
$
|
65
|
45
|
%
|
||||||||||
|
Income from operations
|
$
|
163
|
$
|
168
|
(3
|
)%
|
$
|
190
|
(14
|
)%
|
||||||||||
|
Net Income
|
$
|
123
|
$
|
113
|
9
|
%
|
$
|
375
|
(67
|
)%
|
||||||||||
|
Net Income attributable to Tronox
|
$
|
121
|
$
|
111
|
9
|
%
|
$
|
375
|
(68
|
)%
|
||||||||||
|
GAAP diluted earnings per share
|
$
|
0.77
|
$
|
0.70
|
10
|
%
|
$
|
2.37
|
(68
|
)%
|
||||||||||
|
Adjusted diluted earnings per share
|
$
|
0.69
|
$
|
0.72
|
(4
|
)%
|
$
|
0.84
|
(18
|
)%
|
||||||||||
|
Adjusted EBITDA
|
$
|
247
|
$
|
252
|
(2
|
)%
|
$
|
275
|
(10
|
)%
|
||||||||||
|
Adjusted EBITDA Margin %
|
27.6
|
%
|
29.0
|
%
|
(140) bps
|
29.1
|
%
|
(150) bps
|
||||||||||||
|
Free cash flow
|
$
|
25
|
$
|
191
|
(87
|
)%
|
$
|
(67
|
)
|
n/m
|
|
|||||||||
|
|
||||||||||||||||||||
|
|
Y-o-Y % ∆
|
|
Q-o-Q % ∆
|
|||||||||||||||||
|
|
Volume
|
Price
|
|
Volume
|
Price
|
|||||||||||||||
|
TiO2
|
(12
|
)%
|
11
|
%
|
(13
|
)%
|
1
|
%
|
||||||||||||
|
Local Currency Basis
|
n/a
|
15
|
%
|
n/a
|
3
|
%
|
||||||||||||||
|
Zircon
|
(23
|
)%
|
33
|
%
|
8
|
%
|
7
|
%
|
||||||||||||
Co-CEOs’ Remarks
“Despite a significant reduction in demand in Europe, Middle East, Africa and Asia Pacific, we generated a gross
profit margin of 25.9% and an Adjusted EBITDA margin of 27.6% against a backdrop of continuing cost pressures,” commented John D. Romano, co-chief executive officer. “Tronox’s third quarter financial results are a demonstration of the strength of
our vertically integrated portfolio and transformed business model. Pricing across all products continued to increase, as a result of the execution against our commercial strategy. I am proud of the Tronox team’s ability to deliver against the
fast-changing backdrop and continued challenges through which we are navigating the Company.”
2 | Page
Mr. Romano continued, “Looking to the remainder of the year, we expect fourth quarter pigment demand to decline 25% to 30% sequentially, driven by customer destocking,
continued weakness in Europe, Middle East, Africa, and Asia Pacific, and seasonal weakness in North America. We believe customer inventory levels remain low relative to previous periods of economic weakness, so we do not believe we will see similar
levels of destocking as we move into 2023.”
Jean-François Turgeon, co-chief executive officer, added, “We continue to be laser-focused on cost reductions and have a number of levers to optimize performance across a
variety of scenarios on which we are executing. As we have highlighted previously, vertical integration investments and newTRON are key projects to support our medium- and long-term profitable growth initiatives. However, we have implemented plans
to significantly reduce our annual capital spend to below $275 million in 2023 to adapt to the macroeconomic environment as it unfolds. Softening demand drove increased TiO2 inventory levels in the third quarter, and allowed us to
replenish our safety stocks, which have been below seasonal normal levels for the last several quarters. As a result, we have taken actions to reduce production levels in the fourth quarter due to lower customer demand. We will continue to balance
cash generation while ensuring we have the product necessary to meet our customers’ needs and are effectively positioning Tronox for future success.”
Third Quarter 2022 Results
(Comparisons are to prior year (Q3 2022 vs. Q3 2021) unless otherwise noted)
The Company recorded third quarter revenue of $895 million, an increase of 3%, driven by higher zircon and other product sales. Revenue from TiO2 sales was
$673 million, a decline of 1% driven by a 12% decline in volumes, partially offset by a 15% increase in average selling prices on a local currency basis, or an 11% increase on a US dollar basis. Sequentially, TiO2 volumes decreased 13%,
driven primarily by lower volumes in Europe, Middle East, Africa and Asia Pacific, partially offset by a 3% increase in average selling prices on a local currency basis, or 1% on a US dollar basis.
Zircon revenue increased 10% to $128 million driven by a 33% increase in average selling prices, partially offset by a 23% decline in volumes. The year-over-year volume
decline was due to higher sales from inventory in 2021. Sequentially, zircon revenue increased 15%, driven by an 8% increase in volumes and a 7% increase in average selling prices.
3 | Page
Revenue from other products was $94 million, an increase of 31% year-over-year and 45% sequentially, primarily driven by higher pig iron volumes and average selling
prices.
Net income attributable to Tronox in the quarter of $121 million included non-recurring items, primarily the Australian tax valuation allowance adjustment of $16 million.
Non-recurring adjustments totaled $13 million or $0.07 per diluted share. Excluding these items, adjusted net income attributable to Tronox (non-GAAP) was $108 million, or $0.69 per diluted share.
Adjusted EBITDA of $247 million represented a 2% decrease driven by higher costs to serve our customers, including increased commodity costs and higher freight costs, as
well as lower volumes, partially offset by higher pricing across all products and favorable exchange rates. Adjusted EBITDA margin was 27.6% for the quarter.
Sequentially, Adjusted EBITDA decreased 10% due to higher costs to serve our customers, including increased commodity costs, as well as lower TiO2 volumes,
partially offset by higher pricing across all products, favorable exchange rates, and higher zircon and other product volumes.
The Company’s selling, general and administrative expenses were $69 million in the quarter, a decrease of 9%. Tronox’s third quarter net interest expense was $30 million,
a 17% decrease due to lower debt levels compared to the prior year. Depreciation, depletion and amortization expense was $66 million.
Balance Sheet, Cash Flow and Capital Allocation
Tronox ended the quarter with $2.6 billion of total debt and a net
leverage ratio of 2.5x. Available liquidity at the end of the quarter totaled $486 million, including $91 million in cash and cash equivalents and $395 million available under revolving credit
agreements. There are no significant debt maturities until 2028 and no financial covenants on the Company’s term loans or bonds.
Free cash flow for the third quarter was $25 million. Third quarter capital expenditures were $112 million,
including investments in key capital projects such as newTRON, the Company’s global business transformation project to improve, automate, and digitize, and Atlas Campaspe, the mining development project in
Eastern Australia that will sustain Tronox’s internalization of feedstocks and associated cost advantages and provide additional zircon supply. These investments are expected to generate returns significantly above the Company’s cost of capital
and sustain Tronox’s position as a leading low-cost producer.
4 | Page
For the nine months ending September 30, 2022, the Company returned $110 million to shareholders through the repurchase of approximately 2.8 million shares at an average
price of $17.38 per share and the payment of $60 million in dividends.
Sustainability
Included in Tronox’s feedstock and other product category are revenues from materials which were previously stockpiled as waste. This includes monazite consisting of high
value rare earth elements, which have a high margin. The demand for the light rare earth elements found in monazite is increasing dramatically given their use in many facets of the emerging green economy including permanent magnets for electric
vehicle (“EV”) motors and wind turbines. While revenue for these co-product streams is less than $30 million year-to-date, the rising interest has driven a 74% increase in high value co-products
revenues year-over-year, enabling Tronox to realize greater value from what was previously viewed as waste. “The increasing interest by EV manufacturers in monazite and other rare earth materials found in our mines provides an opportunity for
Tronox to not only generate incremental earnings, but also support growth in the renewable energy space,” commented Mr. Romano. “We will continue to evaluate opportunities to leverage our expertise in mining and the exposure we have to rare earths
through our operations.”
Q4 and Full Year 2022 Outlook
| • |
Q4 2022 Adjusted EBITDA expected to be $140-$170 million, assuming TiO2 volumes decline 25-30% sequentially driven by customer destocking in the fourth quarter and one-time cost impacts
due to reduced production as a result of lower customer demand
|
| • |
Full year 2022:
|
| o |
Adjusted EBITDA of $902-932 million
|
| o |
Adjusted diluted EPS of $2.29-2.421
|
| o |
Free cash flow expected to be greater than $150 million
|
1Assumes a Q4 corporate effective tax rate of approximately 28%, which may vary depending on jurisdiction of earnings and tax assets.
5 | Page
Mr. Turgeon concluded, “John and I have over 65 years of combined experience in this industry and can confidently say that our business has never been stronger in
previous periods of macroeconomic challenges than it is today. Our vertically integrated portfolio provides a cost advantage that is a differentiator for Tronox and provides us with the flexibility to ensure sufficient liquidity under a variety of
scenarios. We remain focused on executing the strategy we detailed at Investor Day and delivering on our commitments. We will continue to demonstrate the value of our vertically integrated business model by delivering safe, quality, low-cost,
sustainable tons for our customers.”
Webcast Conference Call
Tronox will conduct a webcast conference call on Thursday, October 27, 2022, at 8:00 a.m. ET (New York). The live call is open to the public via internet broadcast and
telephone.
Internet Broadcast: http://investor.tronox.com
Dial-in Telephone Numbers:
United States: 1 (844) 200-6205
International: +1 929 526 1599
Access code: 991340
Conference Call Presentation Slides will be used during the conference call and will be available on our website: http://investor.tronox.com
Conference Call Replay: Available via the internet and telephone beginning on October 27, 2022, by 11:00 a.m. ET (New York), until November 1, 2022, 5:00 p.m. ET (New York)
Internet Replay: http://investor.tronox.com
Replay Dial-in Telephone Numbers:
US Toll Free: 1 (866) 813 9403
International: +44 204 525 0658
Replay Access Code: 243734
6 | Page
About Tronox
Tronox Holdings plc is one of the world’s leading producers of high-quality titanium products, including
titanium dioxide pigment, specialty-grade titanium dioxide products and high-purity titanium chemicals, and zircon. We mine titanium-bearing mineral sands and operate upgrading facilities that produce high-grade titanium feedstock materials, pig
iron and other minerals. With approximately 6,500 employees across six continents, our rich diversity, unmatched vertical integration model, and unparalleled
operational and technical expertise across the value chain, position Tronox as the preeminent titanium dioxide producer in the world. For more information about how our products add
brightness and durability to paints, plastics, paper and other everyday products, visit tronox.com.
Cautionary Statement about Forward-Looking Statements
Statements in this release that are not historical are forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These
forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance, anticipated completion of extensions and upgrades to our mining and
operations, anticipated trends in our business and industry, anticipated costs and benefits of project newTRON and Atlas Campaspe, the Company’s anticipated capital allocation strategy including future capital expenditures, and our sustainability
goals, commitments and programs. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance, actual
synergies, or achievements to differ materially from the results, level of activity, performance, anticipated synergies or achievements expressed or implied by the forward-looking statements. Significant risks and uncertainties may relate to, but
are not limited to, macroeconomic conditions; inflationary pressures and energy costs; currency movements; political instability, including the ongoing Russia and Ukraine conflict and any expansion of such conflict; supply chain disruptions; market
conditions and price volatility for titanium dioxide, zircon and other feedstock materials, as well as global and regional economic downturns, that adversely affect the demand for our end-use products; disruptions in production at our mining and
manufacturing facilities; and other financial, economic, competitive, environmental, political, legal and regulatory factors. These and other risk factors are discussed in the Company’s filings with the Securities and Exchange Commission.
7 | Page
Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for our
management to predict all risks and uncertainties, nor can management assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained
in any forward-looking statements. Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance, synergies or achievements. Neither we nor any
other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Unless otherwise required by applicable laws, we
undertake no obligation to update or revise any forward-looking statements, whether because of new information or future developments.
Use of Non-GAAP Information
To provide investors and others with additional information regarding the financial results of Tronox Holdings plc, we have disclosed in this release certain non-U.S.
GAAP operating performance measures of EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted net income attributable to Tronox, including its presentation on a per share basis, and a non-U.S. GAAP liquidity measure of Free Cash Flow. These
non-U.S. 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-U.S. GAAP financial measures presented by the Company may be different from
non-U.S. GAAP financial measures presented by other companies. Specifically, the Company believes the non-U.S. 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 these non-U.S. GAAP financial measures is not meant to be considered in isolation or as a substitute for results or guidance prepared and
presented in accordance with U.S. GAAP. A reconciliation of the non-U.S. GAAP financial measures to U.S. GAAP results is included herein.
Media Contact: Melissa Zona
+1.636.751.4057
Investor Contact: Jennifer Guenther
+1.646.960.6598
8 | Page
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (U.S. GAAP)
(UNAUDITED)
(Millions of U.S. dollars, except share and per share data)
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
||||||||||||||
|
|
2022
|
2021
|
2022
|
2021
|
||||||||||||
|
Net sales
|
$
|
895
|
$
|
870
|
$
|
2,805
|
$
|
2,688
|
||||||||
|
Cost of goods sold
|
663
|
626
|
2,078
|
2,011
|
||||||||||||
|
Gross profit
|
232
|
244
|
727
|
677
|
||||||||||||
|
Selling, general and administrative expenses
|
69
|
76
|
220
|
234
|
||||||||||||
|
Venator settlement
|
—
|
—
|
85
|
—
|
||||||||||||
|
Income from operations
|
163
|
168
|
422
|
443
|
||||||||||||
|
Interest expense
|
(32
|
)
|
(37
|
)
|
(92
|
)
|
(123
|
)
|
||||||||
|
Interest income
|
2
|
1
|
6
|
4
|
||||||||||||
|
Loss on extinguishment of debt
|
—
|
(3
|
)
|
(21
|
)
|
(60
|
)
|
|||||||||
|
Other income, net
|
8
|
12
|
12
|
6
|
||||||||||||
|
Income before income taxes
|
141
|
141
|
327
|
270
|
||||||||||||
|
Income tax benefit (provision)
|
(18
|
)
|
(28
|
)
|
187
|
(54
|
)
|
|||||||||
|
Net income
|
123
|
113
|
514
|
216
|
||||||||||||
|
Net income attributable to noncontrolling interest
|
2
|
2
|
2
|
13
|
||||||||||||
|
Net income attributable to Tronox Holdings plc
|
$
|
121
|
$
|
111
|
$
|
512
|
$
|
203
|
||||||||
|
|
||||||||||||||||
|
Earnings per share:
|
||||||||||||||||
|
Basic
|
$
|
0.78
|
$
|
0.72
|
$
|
3.30
|
$
|
1.34
|
||||||||
|
Diluted
|
$
|
0.77
|
$
|
0.70
|
$
|
3.23
|
$
|
1.29
|
||||||||
|
|
||||||||||||||||
|
Weighted average shares outstanding, basic (in thousands)
|
154,548
|
153,762
|
155,027
|
151,472
|
||||||||||||
|
Weighted average shares outstanding, diluted (in thousands)
|
156,948
|
159,020
|
158,201
|
157,148
|
||||||||||||
|
|
||||||||||||||||
|
Other Operating Data:
|
||||||||||||||||
|
Capital expenditures
|
112
|
65
|
314
|
183
|
||||||||||||
|
Depreciation, depletion and amortization expense
|
66
|
72
|
201
|
227
|
||||||||||||
9 | Page
RECONCILIATION OF NON-U.S. GAAP FINANCIAL MEASURES
(UNAUDITED)
(Millions of U.S. dollars, except share and per share data)
RECONCILIATION OF NET INCOME
ATTRIBUTABLE TO TRONOX HOLDINGS PLC (U.S. GAAP)
TO ADJUSTED NET INCOME
ATTRIBUTABLE TO TRONOX HOLDINGS PLC (NON-U.S. GAAP)
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
||||||||||||||
|
|
2022
|
2021
|
2022
|
2021
|
||||||||||||
|
|
||||||||||||||||
|
Net income attributable to Tronox Holdings plc (U.S. GAAP)
|
$
|
121
|
$
|
111
|
$
|
512
|
$
|
203
|
||||||||
|
|
||||||||||||||||
|
Venator settlement (a)
|
—
|
—
|
85
|
—
|
||||||||||||
|
Loss on extinguishment of debt (b)
|
—
|
3
|
21
|
52
|
||||||||||||
|
Severance charges and related costs (c)
|
1
|
—
|
4
|
—
|
||||||||||||
|
Transaction costs (d)
|
—
|
—
|
—
|
18
|
||||||||||||
|
Gain on asset sale (e)
|
—
|
—
|
—
|
(2
|
)
|
|||||||||||
|
Costs associated with former CEO retirement (f)
|
—
|
—
|
—
|
3
|
||||||||||||
|
Costs associated with Exxaro deal (g)
|
—
|
—
|
—
|
1
|
||||||||||||
|
Income tax expense - deferred tax assets (h)
|
1
|
—
|
(7
|
)
|
—
|
|||||||||||
|
Tax valuation allowance (i)
|
(16
|
)
|
—
|
(278
|
)
|
—
|
||||||||||
|
Other (j)
|
1
|
1
|
1
|
2
|
||||||||||||
|
Adjusted net income attributable to Tronox Holdings plc (non-U.S. GAAP) (1)
|
$
|
108
|
$
|
115
|
$
|
338
|
$
|
277
|
||||||||
|
|
||||||||||||||||
|
Diluted net income per share (U.S. GAAP)
|
$
|
0.77
|
$
|
0.70
|
$
|
3.23
|
$
|
1.29
|
||||||||
|
|
||||||||||||||||
|
Venator settlement, per share
|
—
|
—
|
0.54
|
—
|
||||||||||||
|
Loss on extinguishment of debt, per share
|
—
|
0.02
|
0.13
|
0.33
|
||||||||||||
|
Severance charges and related costs, per share
|
0.01
|
—
|
0.03
|
—
|
||||||||||||
|
Transaction costs, per share
|
—
|
—
|
—
|
0.11
|
||||||||||||
|
Gain on asset sale, per share
|
—
|
—
|
—
|
(0.01
|
)
|
|||||||||||
|
Costs associated with former CEO retirement, per share
|
—
|
—
|
—
|
0.02
|
||||||||||||
|
Costs associated with Exxaro deal, per share
|
—
|
—
|
—
|
0.01
|
||||||||||||
|
Income tax expense - deferred tax assets, per share
|
0.01
|
—
|
(0.04
|
)
|
—
|
|||||||||||
|
Tax valuation allowance, per share
|
(0.10
|
)
|
—
|
(1.76
|
)
|
—
|
||||||||||
|
Other, per share
|
0.01
|
0.01
|
—
|
0.01
|
||||||||||||
|
Diluted adjusted net income per share attributable to Tronox Holdings plc (non-U.S. GAAP) (2)
|
$
|
0.69
|
$
|
0.72
|
$
|
2.13
|
$
|
1.76
|
||||||||
|
|
||||||||||||||||
|
Weighted average shares outstanding, diluted (in thousands)
|
156,948
|
159,020
|
158,201
|
157,148
|
||||||||||||
(1) Only the loss on extinguishment of debt in 2021 has been tax impacted. No income tax impacts have been given to any other items as they were
recorded in jurisdictions with full valuation allowances.
(2) Diluted adjusted net income per share attributable to Tronox Holdings plc was calculated from exact, not rounded Adjusted net income attributable
to Tronox Holdings plc and share information.
(a) Represents breakage fee including interest associated with the Venator settlement which were recorded in “Venator settlement” in the unaudited
Condensed Consolidated Statements of Income.
(b) 2022 amount represents the loss in connection with the redemption of the 6.5% Senior Secured Notes and issuance of a new term loan which closed
in April 2022. 2021 amount represents the loss in connection with the following: 1) termination of its Wells Fargo Revolver, 2) amendment and restatement of its term loan facility including the new revolving credit facility, 3) termination of
its Senior Notes due 2026 and its Senior Notes due 2025, 4) issuance of its Senior Notes due 2029, and 5) voluntary prepayments made on the new Term Loan Facility.
(c) Represents severance charges for employees whose position was eliminated from the Company which were recorded in “Selling, general and
administrative expenses” in the unaudited Condensed Consolidated Statements of Income.
(d) Represents breakage fee and other costs associated with the termination of the TTI Transaction which were primarily recorded in “Other income,
net” in the unaudited Condensed Consolidated Statements of Income.
(e) Represents the gain on European Union carbon credits sold in March 2021 which were recorded in “Cost of goods sold” in the unaudited Condensed
Consolidated Statement of Income.
(f) Represents costs associated with the retirement agreement of the former CEO, which includes $2 million for the acceleration of stock based
compensation, which were recorded in “Selling, general and administrative expenses” in the unaudited Condensed Consolidated Statements of Income.
(g) Represents costs associated with the Exxaro flip-in transaction which were recorded in “Selling, general and administrative expenses” in the
unaudited Condensed Consolidated Statements of Income.
(h) Represents a charge to tax expense for the impact on deferred tax assets from a change in tax rates in foreign tax jurisdictions.
(i) Represents the reversal of the tax valuation allowance associated with unlimited lived deferred tax assets within our Australian jurisdiction.
(j) Represents other activity not representative of ongoing operations of the Company.
10 | Page
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Millions of U.S. dollars, except share and per share data)
|
|
September 30, 2022
|
December 31, 2021
|
||||||
|
ASSETS
|
||||||||
|
Current Assets
|
||||||||
|
Cash and cash equivalents
|
$
|
91
|
$
|
228
|
||||
|
Restricted cash
|
—
|
4
|
||||||
|
Accounts receivable (net of allowance for credit losses of $4 million and $4 million as of
September 30, 2022 and December 31, 2021, respectively)
|
584
|
631
|
||||||
|
Inventories, net
|
1,132
|
1,048
|
||||||
|
Prepaid and other assets
|
155
|
132
|
||||||
|
Income taxes receivable
|
5
|
6
|
||||||
|
Total current assets
|
1,967
|
2,049
|
||||||
|
|
||||||||
|
Noncurrent Assets
|
||||||||
|
Property, plant and equipment, net
|
1,749
|
1,710
|
||||||
|
Mineral leaseholds, net
|
693
|
747
|
||||||
|
Intangible assets, net
|
251
|
217
|
||||||
|
Lease right of use assets, net
|
82
|
85
|
||||||
|
Deferred tax assets
|
1,216
|
985
|
||||||
|
Other long-term assets
|
201
|
194
|
||||||
|
Total assets
|
$
|
6,159
|
$
|
5,987
|
||||
|
|
||||||||
|
LIABILITIES AND EQUITY
|
||||||||
|
Current Liabilities
|
||||||||
|
Accounts payable
|
$
|
426
|
$
|
438
|
||||
|
Accrued liabilities
|
262
|
328
|
||||||
|
Short-term lease liabilities
|
18
|
26
|
||||||
|
Short-term debt
|
84
|
—
|
||||||
|
Long-term debt due within one year
|
22
|
18
|
||||||
|
Income taxes payable
|
26
|
12
|
||||||
|
Total current liabilities
|
838
|
822
|
||||||
|
|
||||||||
|
Noncurrent Liabilities
|
||||||||
|
Long-term debt, net
|
2,463
|
2,558
|
||||||
|
Pension and postretirement healthcare benefits
|
108
|
116
|
||||||
|
Asset retirement obligations
|
136
|
139
|
||||||
|
Environmental liabilities
|
64
|
66
|
||||||
|
Long-term lease liabilities
|
55
|
55
|
||||||
|
Deferred tax liabilities
|
143
|
157
|
||||||
|
Other long-term liabilities
|
30
|
32
|
||||||
|
Total liabilities
|
3,837
|
3,945
|
||||||
|
|
||||||||
|
Commitments and Contingencies
|
||||||||
|
Shareholders’ Equity
|
||||||||
|
Tronox Holdings plc ordinary shares, par value $0.01 — 154,460,592 shares issued and outstanding
at September 30, 2022 and 153,934,677 shares issued and outstanding at December 31, 2021
|
2
|
2
|
||||||
|
Capital in excess of par value
|
2,038
|
2,067
|
||||||
|
Retained earnings
|
1,116
|
663
|
||||||
|
Accumulated other comprehensive loss
|
(885
|
)
|
(738
|
)
|
||||
|
Total Tronox Holdings plc shareholders’ equity
|
2,271
|
1,994
|
||||||
|
Noncontrolling interest
|
51
|
48
|
||||||
|
Total equity
|
2,322
|
2,042
|
||||||
|
Total liabilities and equity
|
$
|
6,159
|
$
|
5,987
|
||||
11 | Page
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Millions of U.S. dollars)
|
|
Nine Months Ended September 30,
|
|||||||
|
|
2022
|
2021
|
||||||
|
Cash Flows from Operating Activities:
|
||||||||
|
Net income
|
$
|
514
|
$
|
216
|
||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
|
Depreciation, depletion and amortization
|
201
|
227
|
||||||
|
Deferred income taxes
|
(241
|
)
|
13
|
|||||
|
Share-based compensation expense
|
21
|
23
|
||||||
|
Amortization of deferred debt issuance costs and discount on debt
|
6
|
8
|
||||||
|
Loss on extinguishment of debt
|
21
|
60
|
||||||
|
Other non-cash items affecting net income
|
51
|
23
|
||||||
|
Changes in assets and liabilities:
|
||||||||
|
Decrease (increase) in accounts receivable, net of allowance for credit losses
|
7
|
(95
|
)
|
|||||
|
(Increase) decrease in inventories, net
|
(151
|
)
|
104
|
|||||
|
Decrease in prepaid and other assets
|
16
|
36
|
||||||
|
(Decrease) Increase in accounts payable and accrued liabilities
|
(55
|
)
|
26
|
|||||
|
Net changes in income tax payables and receivables
|
17
|
14
|
||||||
|
Changes in other non-current assets and liabilities
|
(49
|
)
|
(54
|
)
|
||||
|
Cash provided by operating activities
|
358
|
601
|
||||||
|
|
||||||||
|
Cash Flows from Investing Activities:
|
||||||||
|
Capital expenditures
|
(314
|
)
|
(183
|
)
|
||||
|
Insurance proceeds
|
—
|
1
|
||||||
|
Loans
|
—
|
—
|
||||||
|
Proceeds from sale of assets
|
3
|
1
|
||||||
|
Cash used in investing activities
|
(311
|
)
|
(181
|
)
|
||||
|
|
||||||||
|
Cash Flows from Financing Activities:
|
||||||||
|
Repayments of short-term debt
|
(24
|
)
|
—
|
|||||
|
Repayments of long-term debt
|
(511
|
)
|
(3,008
|
)
|
||||
|
Proceeds from long-term debt
|
396
|
2,375
|
||||||
|
Proceeds from short-term debt
|
87
|
—
|
||||||
|
Repurchase of common stock
|
(50
|
)
|
—
|
|||||
|
Call premiums paid
|
(18
|
)
|
(40
|
)
|
||||
|
Debt issuance costs
|
(4
|
)
|
(36
|
)
|
||||
|
Proceeds from the exercise of options
|
—
|
6
|
||||||
|
Dividends paid
|
(60
|
)
|
(46
|
)
|
||||
|
Restricted stock and performance-based shares settled in cash for withholding taxes
|
—
|
(3
|
)
|
|||||
|
Cash used in financing activities
|
(184
|
)
|
(752
|
)
|
||||
|
|
||||||||
|
Effects of exchange rate changes on cash and cash equivalents and restricted
cash
|
(4
|
)
|
(3
|
)
|
||||
|
|
||||||||
|
Net decrease in cash, cash equivalents and restricted cash
|
(141
|
)
|
(335
|
)
|
||||
|
Cash, cash equivalents and restricted cash at beginning of period
|
232
|
648
|
||||||
|
Cash, cash equivalents and restricted cash at end of period
|
$
|
91
|
$
|
313
|
||||
12 | Page
RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA (NON-U.S. GAAP)
(UNAUDITED)
(Millions of U.S. dollars)
|
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
||||||||||||||
|
|
2022
|
2021
|
2022
|
2021
|
||||||||||||
|
|
||||||||||||||||
|
Net income (U.S. GAAP)
|
$
|
123
|
$
|
113
|
$
|
514
|
$
|
216
|
||||||||
|
Interest expense
|
32
|
37
|
92
|
123
|
||||||||||||
|
Interest income
|
(2
|
)
|
(1
|
)
|
(6
|
)
|
(4
|
)
|
||||||||
|
Income tax provision (benefit)
|
18
|
28
|
(187
|
)
|
54
|
|||||||||||
|
Depreciation, depletion and amortization expense
|
66
|
72
|
201
|
227
|
||||||||||||
|
EBITDA (non-U.S. GAAP)
|
237
|
249
|
614
|
616
|
||||||||||||
|
Share-based compensation (a)
|
7
|
7
|
21
|
23
|
||||||||||||
|
Transaction costs (b)
|
—
|
—
|
—
|
18
|
||||||||||||
|
Venator settlement (c)
|
—
|
—
|
85
|
—
|
||||||||||||
|
Loss on extinguishment of debt (d)
|
—
|
3
|
21
|
60
|
||||||||||||
|
Costs associated with former CEO retirement (e)
|
—
|
—
|
—
|
1
|
||||||||||||
|
Gain on asset sale (f)
|
—
|
—
|
—
|
(2
|
)
|
|||||||||||
|
Foreign currency remeasurement (g)
|
(5
|
)
|
(10
|
)
|
(1
|
)
|
(14
|
)
|
||||||||
|
Costs associated with Exxaro deal (h)
|
—
|
—
|
—
|
1
|
||||||||||||
|
Severance charges and related costs (i)
|
1
|
—
|
4
|
—
|
||||||||||||
|
Other items (j)
|
7
|
3
|
18
|
11
|
||||||||||||
|
Adjusted EBITDA (non-U.S. GAAP)
|
$
|
247
|
$
|
252
|
$
|
762
|
$
|
714
|
||||||||
(a) Represents non-cash share-based compensation.
(b) Represents breakage fee and other costs associated with the termination of the TTI Transaction which were primarily recorded in “Other income,
net” in the unaudited Condensed Consolidated Statements of Income.
(c) Represents breakage fee including interest associated with the Venator settlement which were recorded in “Venator settlement” in the unaudited
Condensed Consolidated Statements of Income.
(d) 2022 amount represents the loss in connection with the redemption of the 6.5% Senior Secured Notes and the issuance of a new term loan which
closed in April 2022. 2021 amount represents the loss in connection with the following: 1) termination of its Wells Fargo Revolver, 2) amendment and restatement of its term loan facility including the new revolving credit facility, 3) termination
of its Senior Notes due 2026 and its Senior Notes due 2025, 4) issuance of its Senior Notes due 2029 and 5) voluntary prepayments made on the new Term Loan Facility.
(e) Represents costs, excluding share-based compensation, associated with the retirement agreement of the former CEO which were recorded in
“Selling, general and administrative expenses” in the unaudited Condensed Consolidated Statements of Income. The $2 million of share based compensation expense associated with the former CEO is included in the total share-based compensation
amount of $23 million in the table above.
(f) Represents the gain on European Union carbon credits sold in March 2021 which were recorded in “Cost of goods sold” in the unaudited Condensed
Consolidated Statement of Income.
(g) Represents realized and unrealized gains and losses associated with foreign currency remeasurement related to third-party and intercompany
receivables and liabilities denominated in a currency other than the functional currency of the entity holding them, which are included in “Other income, net” in the unaudited Condensed Consolidated Statements of Income.
(h) Represents costs associated with the Exxaro flip-in transaction which are included in “Selling, general and administrative expenses” in the
unaudited Condensed Consolidated Statements of Income.
(i) Represents severance charges for employees whose position was eliminated from the Company which were recorded in “Selling, general and
administrative expenses” in the unaudited Condensed Consolidated Statements of Income.
(j) Includes noncash pension and postretirement costs, asset retirement obligation remeasurements, asset write-offs, accretion expense and other
items included in “Selling general and administrative expenses”, “Cost of goods sold” and “Other income, net” in the unaudited Condensed Consolidated Statements of Income.
13 | Page
FREE CASH FLOW (NON-U.S. GAAP)
(UNAUDITED)
(Millions of U.S. dollars)
The following table reconciles cash used in operating activities to free cash flow for the three and nine months ended September 30,
2022:
|
|
Nine Months Ended
September 30, 2022
|
Six Months Ended
June 30, 2022
|
Three Months Ended
September 30, 2022
|
|||||||||
|
Cash provided by operating activities
|
$
|
358
|
$
|
221
|
$
|
137
|
||||||
|
Capital expenditures
|
(314
|
)
|
(202
|
)
|
(112
|
)
|
||||||
|
Free cash flow (non-U.S. GAAP)
|
$
|
44
|
$
|
19
|
$
|
25
|
||||||
14 | Page