Tronox Reports Third Quarter 2020 Financial Results

 

Raising FY2020 Total Acquisition Synergy Target to $235 million

 

 

STAMFORD, Conn., October 28, 2020 – Tronox Holdings plc (NYSE:TROX) (“Tronox” or the “Company”), the world’s leading integrated manufacturer of titanium dioxide pigment, today reported its financial results for the quarter ending September 30, 2020, as follows:

Note: Net income from continuing operations for Q3 2019 is shown on a pro forma basis to exclude a $40 million charge for additional inventory step-up in cost of goods sold in Q3 2019 related to the Cristal acquisition. All other figures in the table are as reported.

Tronox reported revenue of $675 million for the third quarter 2020, a decrease of 12 percent compared to third quarter 2019 revenues of $768 million.  Income from operations of $49 million compared to $48 million in the year-ago quarter.  Net income attributable to Tronox was $896 million, or $6.18 per diluted share, compared to a net loss from continuing operations attributable to Tronox of $13 million, or $(0.09) per diluted share, in the year-ago quarter.  Net income attributable to Tronox in the third quarter 2020 included transaction costs related to the acquisition of TTI, a tax valuation allowance, and other adjustments that totaled $(889) million or $(6.13) per diluted share.  Excluding these items, adjusted net income attributable to Tronox (Non-GAAP) was $7 million, or $0.05 per diluted share.  Adjusted EBITDA of $148 million decreased 20 percent compared to $184 million in the prior-year quarter.

Tronox will conduct a webcast conference call on Thursday, October 29, 2020, at 9:00 a.m. ET (New York).  The live call is open to the public via internet broadcast and telephone.

Dial-in Telephone Numbers:

United States: +1.866.270.1533

International: +1.412.317.0797

Replay Dial-in Telephone Numbers:

United States: +1.877.344.7529

International: +1.412.317.0088

Replay Access Code: 10148822

During the fourth quarter 2020, a member of management is scheduled to present at the following conferences:

Accompanying conference and meeting materials will be available at http://investor.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 including the effects of the COVID-19 pandemic and anticipated synergies based on our growth and other strategies and anticipated trends in our business. 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, the risk that a regulatory approval that may be required for the TTI transaction is delayed, is not obtained or is obtained subject to conditions that are not anticipated; the risk that the TTI transaction does not close or that the related transaction agreement is terminated; the risk that expected synergies, operating efficiencies and other benefits expected from the TTI transaction will not be realized or will not be realized within the expected time period; business and market disruptions related to the COVID-19 pandemic, market conditions and price volatility for titanium dioxide, zircon and other feedstock materials, as well as global and regional economic downturns, including as a result of the COVID-19 pandemic, 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 (SEC).

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 loss 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.

Unaudited Pro Forma Financial Information

On April 10, 2019, we announced the completion of the acquisition of the TiO₂ business of Cristal which impacts the comparability of the reported results for the third quarter of 2020 compared to the third quarter of 2019. Since Tronox and Cristal have combined their respective businesses effective with the merger date of April 10, 2019, the three and nine months ended September 30, 2020 reflect the results of the combined business, while the three and nine months ended September 30, 2019 reflect the results of the combined business from April 10, 2019. To assist with a discussion of the third quarter of 2020 and the third quarter of 2019 results on a comparable basis, certain supplemental unaudited pro forma income statement and Adjusted EBITDA information is provided on a consolidated basis and is referred to as "pro forma information.”  The pro forma information has been prepared on a basis consistent with Article 11 of Regulation S-X, assuming the merger and merger-related divestitures of Cristal's North American TiO₂ business and the 8120 paper laminate grade had been consummated on January 1, 2018. In preparing this pro forma information, the historical financial information has been adjusted to give effect to pro forma adjustments that are (i) directly attributable to the business combination and other transactions presented herein, such as the merger-related divestitures, (ii) factually supportable, and (iii) expected to have a continuing impact on the combined entity’s consolidated results. The pro forma information is based on management's assumptions and is presented for illustrative purposes and does not purport to represent what the results of operations would actually have been if the business combination and merger-related divestitures had occurred as of the dates indicated or what the results would be for any future periods. Also, the pro forma information does not include the impact of any revenue, cost or other operating synergies in the periods prior to the acquisition that may result from the business combination or any related restructuring costs.

Media Contact: Melissa Zona

+1.636.751.4057

 

Investor Contact: Jennifer Guenther

+1.646.960.6598

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Net sales		$	675			$	768			$	1,975			$	1,949
Cost of goods sold			536				635				1,532				1,614
Contract loss			-				-				-				19
Gross profit			139				133				443				316
Selling, general and administrative expenses			89				82				263				252
Restructuring			1				3				3				13
Income from operations			49				48				177				51
Interest expense			(48	)			(51	)			(140	)			(154	)
Interest income			1				4				6				16
Loss on extinguishment of debt			-				-				-				(2	)
Other income (expense), net			7				(1	)			19				2
Income (loss) from continuing operations before income taxes			9				-				62				(87	)
Income tax benefit (provision)			893				(12	)			876				(10	)
Net income (loss) from continuing operations			902				(12	)			938				(97	)
Net income from discontinued operations, net of tax			-				6				-				5
Net income (loss)			902				(6	)			938				(92	)
Net income attributable to noncontrolling interest			6				7				14				17
Net income (loss) attributable to Tronox Holdings plc		$	896			$	(13	)		$	924			$	(109	)
Net income (loss) per share, basic:
Continuing operations		$	6.24			$	(0.13	)		$	6.45			$	(0.82	)
Discontinued operations		$	-			$	0.04			$	-			$	0.04
Net income (loss) per share, basic		$	6.24			$	(0.09	)		$	6.45			$	(0.78	)
Net income (loss) per share, diluted:
Continuing operations		$	6.18			$	(0.13	)		$	6.42			$	(0.82	)
Discontinued operations		$	-			$	0.04			$	-			$	0.04
Net income (loss) per share, diluted		$	6.18			$	(0.09	)		$	6.42			$	(0.78	)
Weighted average shares outstanding, basic (in thousands)			143,579				142,278				143,245				139,158
Weighted average shares outstanding, diluted (in thousands)			145,067				142,278				143,969				139,158
Other Operating Data:
Capital expenditures			47				59				129				140
Depreciation, depletion and amortization expense			76				74				219				205

		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Net income (loss) attributable to Tronox Holdings plc (U.S. GAAP)		$	896			$	(13	)		$	924			$	(109	)
Net income from discontinued operations, net of tax (U.S. GAAP)			-				6				-				5
Net income (loss) from continuing operations attributable to Tronox Holdings plc (U.S. GAAP)		$	896			$	(19	)		$	924			$	(114	)
Inventory step-up (a)			-				38				-				88
Contract loss (b)			-				-				-				14
Transaction costs (c)			6				-				10				29
Restructuring (d)			1				3				2				13
Integration costs (e)			1				4				9				8
Loss on extinguishment of debt (f)			-				-				-				2
Reversal of U.S. tax valuation allowance (g)			(895	)			-				(895	)			-
Other (h)			(2	)			-				(2	)			-
Tax valuation allowance (i)			-				-				(2	)			-
Charge for capital gains tax payment to Exxaro (j)			-				4				-				6
Adjusted net income from continuing operations attributable to Tronox Holdings plc (non-U.S. GAAP)  (1)		$	7			$	30			$	46			$	46
Diluted net income (loss) per share from continuing operations (U.S. GAAP)		$	6.18			$	(0.13	)		$	6.42			$	(0.82	)
Inventory step-up, per share			-				0.26				-				0.63
Contract loss, per share			-				-				-				0.10
Transaction costs, per share			0.04				-				0.07				0.21
Restructuring, per share			0.01				0.02				0.01				0.09
Integration costs, per share			0.01				0.03				0.06				0.06
Loss on extinguishment of debt, per share			-				-				-				0.02
Reversal of tax valuation allowance, per share			(6.17	)			-				(6.22	)			-
Other, per share			(0.02	)			-				(0.01	)			-
Tax valuation allowance, per share			-				-				(0.01	)			-
Charge for capital gains tax payment to Exxaro, per share			-				0.03				-				0.04
Diluted adjusted net income per share from continuing operations attributable to Tronox Holdings plc (non-U.S. GAAP)		$	0.05			$	0.21			$	0.32			$	0.33
Weighted average shares outstanding, diluted (in thousands)			145,067				142,984				143,969				140,288

		September 30, 2020				December 31, 2019
ASSETS
Current Assets
Cash and cash equivalents		$	722			$	302
Restricted cash			27				9
Accounts receivable (net of allowance for credit losses of $4 million and $5 million as of September 30, 2020 and December 31, 2019, respectively)			484				482
Inventories, net			1,176				1,131
Prepaid and other assets			174				143
Income taxes receivable			3				6
Total current assets			2,586				2,073
Noncurrent Assets
Property, plant and equipment, net			1,651				1,762
Mineral leaseholds, net			776				852
Intangible assets, net			203				208
Lease right of use assets, net			86				101
Deferred tax assets			997				110
Other long-term assets			177				162
Total assets		$	6,476			$	5,268
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable		$	306			$	342
Accrued liabilities			364				283
Short-term lease liabilities			38				38
Short-term debt			6				-
Long-term debt due within one year			48				38
Income taxes payable			2				1
Total current liabilities			764				702
Noncurrent Liabilities
Long-term debt, net			3,424				2,988
Pension and postretirement healthcare benefits			138				160
Asset retirement obligations			152				142
Environmental liabilities			70				65
Long-term lease liabilities			46				62
Deferred tax liabilities			152				184
Other long-term liabilities			42				49
Total liabilities			4,788				4,352
Commitments and Contingencies			-				-
Shareholders’ Equity
Tronox Holdings plc ordinary shares, par value $0.01 — 143,530,571 shares issued and outstanding at September 30, 2020 and 141,900,459 shares issued and outstanding at December 31, 2019			1				1
Capital in excess of par value			1,862				1,846
Retained earnings (accumulated deficit)			400				(493	)
Accumulated other comprehensive loss			(712	)			(606	)
Total Tronox Holdings plc shareholders’ equity			1,551				748
Noncontrolling interest			137				168
Total equity			1,688				916
Total liabilities and equity		$	6,476			$	5,268

		Nine Months Ended September 30,
		2020				2019
Cash Flows from Operating Activities:
Net income (loss)		$	938			$	(92	)
Net income from discontinued operations, net of tax			-				5
Net income (loss) from continuing operations		$	938			$	(97	)
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities, continuing operations:
Depreciation, depletion and amortization			219				205
Reversal of U.S. valuation allowance			(895	)			-
Deferred income taxes - other			9				(7	)
Share-based compensation expense			19				24
Amortization of deferred debt issuance costs and discount on debt			7				6
Loss on extinguishment of debt			-				2
Contract loss			-				19
Acquired inventory step-up recognized in earnings			-				95
Other non-cash items affecting net (loss) income from continuing operations			44				20
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, net of allowance for credit losses			(13	)			(34	)
(Increase) decrease in inventories, net			(100	)			14
(Increase) decrease in prepaid and other assets			(38	)			2
Increase in accounts payable and accrued liabilities			18				6
Net changes in income tax payables and receivables			-				(5	)
Changes in other non-current assets and liabilities			(52	)			(13	)
Cash provided by operating activities - continuing operations			156				237
Cash Flows from Investing Activities:
Capital expenditures			(129	)			(140	)
Cristal Acquisition			-				(1,675	)
Proceeds from sale of Ashtabula			-				708
Insurance proceeds			1				10
Loans			(24	)			(25	)
Proceeds from sale of assets			1				2
Cash used in investing activities - continuing operations			(151	)			(1,120	)
Cash Flows from Financing Activities:
Repayments of short-term debt			(7	)			-
Repayments of long-term debt			(23	)			(272	)
Proceeds from long-term debt			500				222
Proceeds from short-term debt			13				-
Repurchase of common stock			-				(288	)
Acquisition of noncontrolling interest			-				(148	)
Debt issuance costs			(10	)			(4	)
Dividends paid			(30	)			(21	)
Restricted stock and performance-based shares settled in cash for withholding taxes			(3	)			(6	)
Cash provided by (used in) financing activities - continuing operations			440				(517	)
Discontinued Operations:
Cash used in operating activities			-				29
Cash used in investing activities			-				(1	)
Net cash flows used by discontinued operations			-				28
Effects of exchange rate changes on cash and cash equivalents and restricted cash			(7	)			(8	)
Net increase (decrease) in cash, cash equivalents and restricted cash			438				(1,380	)
Cash, cash equivalents and restricted cash at beginning of period			311				1,696
Cash, cash equivalents and restricted cash at end of period		$	749			$	316

		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Net income (loss) (U.S. GAAP)		$	902			$	(6	)		$	938			$	(92	)
Income from discontinued operations, net of tax (U.S. GAAP)			-				6				-				5
Net income (loss) from continuing operations (U.S. GAAP)			902				(12	)			938				(97	)
Interest expense			48				51				140				154
Interest income			(1	)			(4	)			(6	)			(16	)
Income tax provision (benefit)			(893	)			12				(876	)			10
Depreciation, depletion and amortization expense			76				74				219				205
EBITDA (non-U.S. GAAP)			132				121				415				256
Inventory step-up (a)			-				40				-				95
Contract loss (b)			-				-				-				19
Share-based compensation (c)			8				9				19				24
Transaction costs (d)			6				-				10				29
Restructuring (e)			1				3				3				13
Integration costs (f)			1				4				10				8
Loss on extinguishment of debt (g)			-				-				-				2
Foreign currency remeasurement (h)			(2	)			(1	)			(10	)			(5	)
Charge for capital gains tax payment to Exxaro (i)			-				4				-				6
Other items (j)			2				4				17				12
Adjusted EBITDA (non-U.S. GAAP)		$	148			$	184			$	464			$	459

		Consolidated
Cash provided by operating activities - continuing operations		$	156
Capital expenditures			(129	)
Free cash flow (non-U.S. GAAP)		$	27

		Proforma amounts								Proforma amounts
		September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Net sales		$	675			$	768			$	1,975			$	2,315
Cost of goods sold			536				595				1,532				1,822
Gross profit			139				173				443				493
Selling, general and administrative expenses			89				82				263				262
Restructuring			1				3				3				13
Income from operations			49				88				177				218
Interest expense			(48	)			(51	)			(140	)			(160	)
Interest income			1				4				6				10
Loss on extinguishment of debt			-				-				-				(2	)
Other expense, net			7				(1	)			19				1
Income from continuing operations before income taxes			9				40				62				67
Income tax benefit (provision)			893				(14	)			876				(27	)
Net income from continuing operations			902				26				938				40
Net income attributable to noncontrolling interest			6				7				14				18
Net income from continuing operations attributable to Tronox Holdings plc		$	896			$	19			$	924			$	22
Net income from continuing operations per share, diluted		$	6.18			$	0.13			$	6.42			$	0.14
Weighted average shares outstanding, diluted (in thousands)			145,067				142,984				143,969				153,916

		Proforma amounts								Proforma amounts
		Three Months Ended September 30,								Nine Months Ended September 30,
		2020				2019				2020				2019
Net income from continuing operations attributable to Tronox Holdings plc (U.S. GAAP)		$	896			$	19			$	924			$	22
Transaction costs			6				-				10				-
Restructuring			1				3				2				13
Integration costs			1				4				9				8
Loss on extinguishment of debt			-				-				-				2
Reversal of tax valuation allowance			(895	)			-				(895	)			-
Other			(2	)			-				(2	)			-
Tax valuation allowance			-				-				(2	)			-
Charge for capital gains tax payment to Exxaro			-				4				-				6
Adjusted net income attributable to Tronox Holdings plc (non-U.S. GAAP)		$	7			$	30			$	46			$	51
Diluted net income per share from continuing operations (U.S. GAAP)		$	6.18			$	0.13			$	6.42			$	0.14
Transaction costs, per share			0.04				-				0.07				-
Restructuring, per share			0.01				0.02				0.01				0.09
Integration costs, per share			0.01				0.03				0.06				0.05
Loss on extinguishment of debt, per share			-				-				-				0.01
Reversal of tax valuation allowance, per share			(6.17	)			-				(6.22	)			-
Other, per share			(0.02	)			-				(0.01	)			-
Tax valuation allowance, per share			-				-				(0.01	)			-
Charge for capital gains tax payment to Exxaro, per share			-				0.03				-				0.04
Diluted adjusted net income per share attributable to Tronox Holdings plc (non-U.S. GAAP)		$	0.05			$	0.21			$	0.32			$	0.33
Weighted average shares outstanding, diluted (in thousands)			145,067				142,984				143,969				153,916

		Pro Forma Three Months Ended September 30,								Pro Forma Nine Months Ended September 30,
		2020				2019				2020				2019
Net income from continuing operations (U.S. GAAP)		$	902			$	26			$	938			$	40
Interest expense			48				51				140				160
Interest income			(1	)			(4	)			(6	)			(10	)
Income tax provision (benefit)			(893	)			14				(876	)			27
Depreciation, depletion and amortization expense			76				74				219				248
EBITDA (non-U.S. GAAP)			132				161				415				465
Share-based compensation			8				9				19				24
Transaction costs			6				-				10				-
Restructuring			1				3				3				13
Integration costs			1				4				10				8
Loss on extinguishment of debt			-				-				-				2
Foreign currency remeasurement			(2	)			(1	)			(10	)			(5	)
Charge for capital gains tax payment to Exxaro			-				4				-				6
Other items			2				4				17				12
Adjusted EBITDA (non-U.S. GAAP)		$	148			$	184			$	464			$	525