Tronox Q3 net income swings to profit of US$98.9M from year-ago period's loss of US$25.5M as sales soar 49% to US$465.4M; results boosted by higher selling prices, increased volumes, continued strong demand for TiO2 pigment products

OKLAHOMA CITY, Oklahoma , November 15, 2011 (press release) –
- Higher volumes and selling prices result in increases of 49 percent in net sales and 113 percent in income from operations year over year
- Exxaro transaction on track to close in first half of 2012

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

     

Successor

   

Predecessor

 

Successor

   

Predecessor

 

Predecessor

 

Predecessor

 
     

Three Months Ended

September 30,

   

Three Months Ended

September 30,

 

Eight Months Ended

September 30,

   

One Month Ended

January 31,

 

Nine Months Ended

September 30,

 

Twelve Months Ended

December 31,

 
     

2011

   

2010

 

2011

   

2011

 

2010

 

2010

 
                                 
 

Net Sales

 

$                     465.4

   

$                     312.3

 

$                1,160.8

   

$                107.6

 

$                  891.8

 

$                    1,217.6

 
 

Gross Margin

 

30.7%

   

20.1%

 

25.7%

   

23.5%

 

18.0%

 

18.2%

 
 

Income from Operations

 

$                       99.2

   

$                       46.6

 

$                   201.8

   

$                  19.9

 

$                  157.1

 

$                       209.6

 
 

Operating Margin

 

21.3%

   

14.9%

 

17.4%

   

18.5%

 

17.6%

 

17.2%

 
 

Net Income

 

$                       98.9

   

$                     (25.5)

 

$                   175.3

   

$                631.3

 

$                    45.3

 

$                           5.8

 
 

Diluted net income per share (Predecessor)

 

N/A

   

$                     (0.62)

 

N/A

   

$                15.25

 

$                    1.10

 

$                         0.14

 
 

Diluted net income per share (Successor)

 

$                       6.25

   

N/A

 

$                   11.29

   

N/A

 

N/A

 

N/A

 
                               

 

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.

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.

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