Tronox Incorporated Reports Record Third Quarter and Nine-Month 2011 Results

OKLAHOMA CITY, Nov. 15, 2011 /PRNewswire/ -- Tronox Incorporated (TROX.PK), the world's fifth-largest producer and marketer of titanium dioxide pigment, today announced results for the fiscal third quarter and nine-month period ending Sept. 30, 2011.  

Third quarter 2011 net sales were $465.4 million, a 49.0 percent increase from $312.3 million reported in the prior year's third quarter. Income from operations in the quarter was $99.2 million compared with $46.6 million in the prior year quarter.  Net income for the quarter was $98.9 million versus a loss of $25.5 million in the previous year's period.

On a non-GAAP basis, third quarter adjusted income from operations was $110.3 million compared with $46.6 million in the prior year, and adjusted net income was $110.0 million compared with $26.0 million in the same period in 2010.  Adjusted EBITDA for the quarter, excluding restructuring and other non-recurring expenses, was $140.9 million compared with $56.1 million in the prior year.

Tom Casey, Tronox's chairman and chief executive officer commented, "We are pleased with our third quarter performance, as we continued to deliver strong operating and financial results.  Our third quarter performance was driven by significantly higher selling prices, increased volumes and continued favorable global demand for our core TiO2 pigment products."

U.S. GAAP results, in millions of dollars except per share data and percentages

Non-GAAP results, in millions of dollars

First Nine Months 2011 Results

For the first nine months of 2011, Tronox reported net sales of $1,268.4 million, income from operations of $221.7 million, and net income of $806.6 million, including the gains due to fresh-start accounting effected in January, 2011.  Higher sales were driven primarily by a 34.0 percent increase in selling prices and a 7.0 percent increase in volume for TiO2 products. Increases in mineral sales, electrolytic products and changes in foreign currency exchange rates also contributed to the increase in net sales.

Pigment Segment Results

Third Quarter 2011

Pigment sales for the third quarter of 2011 were $429.2 million compared with $271.6 million during the same period in 2010.  Income from operations totaled $124.9 million during the quarter, which represented a $73.6 million increase over the same period last year.  The increases were primarily due to the effects of higher selling prices and increased volumes, partially offset by higher production costs and SG&A expenses.  

Nine-month Period

Pigment sales for the first nine months of 2011 were $1,164.3 million, a 48.8 percent increase over the same period in 2010, primarily driven by increased TiO2 prices and volume growth.  Income from operations for the pigment segment increased $140.0 million to $264.4 million during the first nine months of 2011, compared with $124.4 million in the same period of 2010. Income from operations grew due to higher sales volumes and increased TiO2 prices, partially offset by higher production costs and SG&A expenses.

Electrolytic and Other Chemical Products Results

Third Quarter

Electrolytic and other chemical products sales for the 2011 third quarter increased $1.0 million to $36.0 million, compared with $35.0 million in the third quarter of 2010.  The increase was driven by higher prices of manganese dioxide, which was slightly offset by lower volumes of sodium chlorate.  The electrolytic and other chemical products segment reported a loss from operations of $0.9 million for the third quarter of 2011, compared with income of $0.5 million during the same period last year.  The decrease was primarily the result of higher production costs at our sodium chlorate facility due to an operational outage.

Nine-month Period

Net sales for the first nine months of 2011 were $100.9 million compared with $94.1 million in the first nine months of 2010.  Income from operations for the first nine months of 2011 decreased $2.5 million to $1.9 million from $4.4 million in the first nine months of 2010.  Although revenues increased, costs increased more resulting in the reduced performance.

Corporate and Other

Third Quarter

Corporate and other reported a loss of $24.8 million for the third quarter of 2011, compared with a loss of $5.2 million during the comparable prior year period. The increased loss was primarily due to costs associated with the bankruptcy and the Exxaro Mineral Sands acquisition, including banker fees, legal and professional fees, and the accrual of the registration rights penalty, which totaled approximately $21.6 million.  Audit and professional fees related to the three year audit of the Company's financial statements increased costs by $7.1 million.  Post-emergence accounting for intangible assets, stock compensation, pension and postretirement healthcare benefit costs not allocated to the segment or business lines also contributed to the negative result.

Nine-month Period

For the first nine months of 2011, corporate and other reported a loss of $44.6 million compared to income of $28.3 million during the same period in 2010.  Costs associated with the Exxaro acquisition amounted to $24.2 million, while audit and professional fees were $15.5 million related to a three year audit of the Company's financial statements.  In 2010 the Company recognized a $40.0 million insurance receivable versus a recognition of $4.5 million in 2011.

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 on Nov. 15, 2011, at 11 am Eastern Standard Time to discuss results for the third quarter and first nine-months of 2011.  Interested parties may listen via Tronox's website at or by calling 877-741-4253 in the United States or 719-325-4804 outside the United States. The code for both dial-in numbers will be 4311889. A replay of the call will be available for seven days at 888-203-1112 in the United States or 719-457-0820 outside the United States. The code for the replay will be 4311889. 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 http://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 http://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: [email protected]

Media Contact:  Robert Gibney
Direct: 405-775-5105
E-mail: [email protected]

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