Delaware
|
20-2868245
|
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(I.R.S.
Employer
Identification
Number)
|
Page
|
|||||
Part
I
|
FINANCIAL
INFORMATION
|
||||
|
Item
1.
|
Financial
Statements (Unaudited)
|
|||
Condensed
Consolidated and Combined Statement of Operations for the Three
and Six
Months Ended June 30, 2006 and 2005
|
1
|
||||
Condensed
Consolidated Balance Sheet at June 30, 2006 and December 31,
2005
|
2
|
||||
Condensed
Consolidated and Combined Statement of Cash Flows for the Six Months
Ended
June 30, 2006 and 2005
|
3
|
||||
Notes
to Condensed Consolidated and Combined Financial
Statements
|
4
|
||||
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
|
36
|
|||
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
47
|
||
|
Item
4.
|
Controls
and Procedures
|
47
|
||
Forward-Looking
Statements
|
47
|
||||
Part
II
|
OTHER
INFORMATION
|
||||
Item
1.
|
Legal
Proceedings
|
48
|
|||
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
49
|
|||
Item
6.
|
Exhibits
|
49
|
|||
SIGNATURES
|
50
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
(Millions
of dollars, except per share data)
|
|||||||||||||
Net
sales
|
$
|
372.9
|
$
|
355.9
|
$
|
709.1
|
$
|
690.1
|
|||||
Cost
of goods sold
|
341.9
|
291.6
|
617.9
|
563.9
|
|||||||||
Gross
margin
|
31.0
|
64.3
|
91.2
|
126.2
|
|||||||||
Selling,
general and administrative expenses
|
25.5
|
29.3
|
61.2
|
57.5
|
|||||||||
Provision
for environmental remediation and restoration, net of
reimbursements
|
—
|
5.8
|
(20.5
|
)
|
16.7
|
||||||||
5.5
|
29.2
|
50.5
|
52.0
|
||||||||||
Interest
and debt expense - third parties
|
(12.3
|
)
|
—
|
(24.3
|
)
|
—
|
|||||||
Other
income (expense)
|
5.3
|
(10.2
|
)
|
9.7
|
(15.2
|
)
|
|||||||
Income
(Loss) from Continuing Operations before Income
Taxes
|
(1.5
|
)
|
19.0
|
35.9
|
36.8
|
||||||||
Income
Tax Provision
|
(4.2
|
)
|
(10.7
|
)
|
(18.0
|
)
|
(16.1
|
)
|
|||||
Income
(Loss) from Continuing Operations
|
(5.7
|
)
|
8.3
|
17.9
|
20.7
|
||||||||
Loss
from Discontinued Operations, net of income tax benefit of $5.1,
$6.4,
$6.9 and $10.9, respectively
|
(8.7
|
)
|
(11.9
|
)
|
(11.7
|
)
|
(20.3
|
)
|
|||||
Net
Income (Loss)
|
$
|
(14.4
|
)
|
$
|
(3.6
|
)
|
$
|
6.2
|
$
|
0.4
|
|||
Income
(Loss) per Common Share
|
|||||||||||||
Basic -
|
|||||||||||||
Continuing operations
|
$
|
(0.14
|
)
|
$
|
0.36
|
$
|
0.44
|
$
|
0.90
|
||||
Discontinued operations
|
(0.22
|
)
|
(0.52
|
)
|
(0.29
|
)
|
(0.88
|
)
|
|||||
Net income (loss)
|
$
|
(0.36
|
)
|
$
|
(0.16
|
)
|
$
|
0.15
|
$
|
0.02
|
|||
Diluted
-
|
|||||||||||||
Continuing
operations
|
$
|
(0.14
|
)
|
$
|
0.36
|
$
|
0.44
|
$
|
0.90
|
||||
Discontinued operations
|
(0.22
|
)
|
(0.52
|
)
|
(0.29
|
)
|
(0.88
|
)
|
|||||
Net income (loss)
|
$
|
(0.36
|
)
|
$
|
(0.16
|
)
|
$
|
0.15
|
$
|
0.02
|
|||
Dividends
Declared per Common Share
|
$
|
—
|
$
|
—
|
$
|
0.05
|
$
|
—
|
|||||
Weighted
Average Shares Outstanding (in thousands)
|
|||||||||||||
Basic
|
40,370
|
22,889
|
40,369
|
22,889
|
|||||||||
Diluted
|
40,370
|
22,889
|
40,885
|
22,889
|
|||||||||
June
30,
|
December
31,
|
||||||
2006
|
2005
|
||||||
(Millions
of dollars)
|
|||||||
ASSETS
|
|||||||
Current
Assets
|
|||||||
Cash
and cash equivalents
|
$
|
25.9
|
$
|
69.0
|
|||
Accounts
receivable, net of allowance for doubtful accounts of
$12.1 in 2006 and $11.3 in 2005
|
351.4
|
331.6
|
|||||
Inventories
|
333.3
|
312.3
|
|||||
Prepaid
and other assets
|
25.7
|
28.5
|
|||||
Income
tax receivable
|
6.6
|
2.4
|
|||||
Deferred
income taxes
|
38.1
|
35.6
|
|||||
Total
Current Assets
|
781.0
|
779.4
|
|||||
Property,
Plant and Equipment — Net
|
859.2
|
839.7
|
|||||
Long-Term
Receivables, Investments and Other Assets
|
199.5
|
78.8
|
|||||
Goodwill
and Other Intangible Assets
|
63.0
|
60.4
|
|||||
Total
Assets
|
$
|
1,902.7
|
$
|
1,758.3
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Current
Liabilities
|
|||||||
Accounts
payable
|
$
|
193.8
|
$
|
195.3
|
|||
Accrued
liabilities
|
157.5
|
168.9
|
|||||
Long-term
debt due within one year
|
2.0
|
2.0
|
|||||
Income
taxes payable
|
7.5
|
8.8
|
|||||
Total
Current Liabilities
|
360.8
|
375.0
|
|||||
Noncurrent
Liabilities
|
|||||||
Deferred
income taxes
|
86.2
|
79.0
|
|||||
Environmental
remediation and/or restoration
|
140.0
|
145.9
|
|||||
Long-term
debt
|
547.0
|
548.0
|
|||||
Other
|
245.6
|
121.4
|
|||||
Total
Noncurrent Liabilities
|
1,018.8
|
894.3
|
|||||
Commitments
and Contingencies (Notes 12 and 13)
|
|||||||
Stockholders’
Equity
|
|||||||
Class
A common stock, par value $0.01 - 100,000,000 shares authorized,
18,358,133 and 17,886,640 shares issued and outstanding at June
30,
2006
and December 31, 2005, respectively
|
0.2
|
0.2
|
|||||
Class
B common stock, par value $0.01 - 100,000,000 shares authorized,
22,889,431 shares issued and outstanding at June 30, 2006 and
December
31, 2005
|
0.2
|
0.2
|
|||||
Capital
in excess of par value
|
468.6
|
461.5
|
|||||
Accumulated deficit
|
(0.1
|
)
|
(2.9
|
)
|
|||
Deferred compensation
|
—
|
(5.4
|
)
|
||||
Accumulated
other comprehensive income
|
54.4
|
35.4
|
|||||
Treasury
stock
|
(0.2
|
)
|
—
|
||||
Total
Stockholders’ Equity
|
523.1
|
489.0
|
|||||
Total
Liabilities and Stockholders’ Equity
|
$
|
1,902.7
|
$
|
1,758.3
|
Six
Months Ended June 30,
|
|||||||
2006
|
2005
|
||||||
(Millions
of dollars)
|
|||||||
Cash
Flows from Operating Activities
|
|||||||
Net
income
|
$
|
6.2
|
$
|
0.4
|
|||
Adjustments
to reconcile net income to net cash provided by operating activities—
|
|||||||
Depreciation
and amortization
|
49.3
|
53.6
|
|||||
Deferred
income taxes
|
5.6
|
(29.3
|
)
|
||||
Asset
write-downs and impairments
|
—
|
2.9
|
|||||
Provision
for environmental remediation and restoration, net of
reimbursements
|
(10.3
|
)
|
42.7
|
||||
Allocations
from Kerr-McGee
|
—
|
25.5
|
|||||
Other
noncash items affecting net income
|
18.5
|
8.4
|
|||||
Changes
in assets and liabilities
|
(55.9
|
)
|
(142.7
|
)
|
|||
Net
cash provided by (used in) operating activities
|
13.4
|
(38.5
|
)
|
||||
Cash
Flows from Investing Activities
|
|||||||
Capital
expenditures
|
(43.3
|
)
|
(31.4
|
)
|
|||
Collection
on repurchased receivables
|
—
|
165.0
|
|||||
Other
investing activities
|
0.5
|
0.9
|
|||||
Net
cash provided by (used in) investing activities
|
(42.8
|
)
|
134.5
|
||||
Cash
Flows from Financing Activities
|
|||||||
Repayment
of debt
|
(1.0
|
)
|
—
|
||||
Debt
issuance costs
|
(2.4
|
)
|
—
|
||||
Dividends
paid
|
(2.0
|
)
|
—
|
||||
Net
transfers with affiliates
|
—
|
(30.7
|
)
|
||||
Net
cash used in financing activities
|
(5.4
|
)
|
(30.7
|
)
|
|||
Effects
of Exchange Rate Changes on Cash and Cash
Equivalents
|
(8.3
|
)
|
3.6
|
||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(43.1
|
)
|
68.9
|
||||
Cash
and Cash Equivalents at Beginning of Period
|
69.0
|
23.8
|
|||||
Cash
and Cash Equivalents at End of Period
|
$
|
25.9
|
$
|
92.7
|
|||
Noncash
Investing Activities
Receivables
repurchased and contributed by Kerr-McGee
|
$
|
—
|
$
|
165.0
|
|||
Noncash
Financing Activities
Contribution
of repurchased receivables by Kerr-McGee
|
—
|
(165.0
|
)
|
||||
Three
Months
Ended
|
Six
Months
Ended
|
||||||
June
30, 2005
|
|||||||
(Millions
of dollars, except per share)
|
|||||||
Net
income (loss), as reported
|
$
|
(3.6
|
)
|
$
|
0.4
|
||
Add:
stock-based employee compensation expense included in reported
net income
(loss), net of taxes
|
0.3
|
0.9
|
|||||
Deduct:
stock-based employee compensation expense determined using a fair-value
method, net of taxes
|
(0.5
|
)
|
(1.5
|
)
|
|||
Pro
forma net loss
|
$
|
(3.8
|
)
|
$
|
(0.2
|
)
|
|
Basic
and diluted net income (loss) per common share:
|
|||||||
As
reported
|
$
|
(0.16
|
)
|
$
|
0.02
|
||
Pro
forma
|
(0.17
|
)
|
(0.01
|
)
|
Three
Months Ended
June 30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
(Millions
of dollars)
|
|||||||||||||
Net
income (loss)
|
$
|
(14.4
|
)
|
$
|
(3.6
|
)
|
$
|
6.2
|
$
|
0.4
|
|||
After
tax changes in:
|
|||||||||||||
Foreign currency translation adjustments
|
15.4
|
(23.4
|
)
|
21.4
|
(37.3
|
)
|
|||||||
Deferred gain (loss) on cash flow hedges
|
(1.1
|
)
|
(0.6
|
)
|
(2.4
|
)
|
5.3
|
||||||
Reclassification of realized loss on cash flow hedges to
net income
|
0.1
|
—
|
1.1
|
—
|
|||||||||
Minimum pension liability adjustments
|
—
|
—
|
(1.1
|
)
|
0.2
|
||||||||
Comprehensive
income (loss)
|
$
|
—
|
$
|
(27.6
|
)
|
$
|
25.2
|
$
|
(31.4
|
)
|
June
30,
2006
|
December
31,
2005
|
||||||
(Millions
of dollars)
|
|||||||
Raw
materials
|
$
|
85.0
|
$
|
77.1
|
|||
Work-in-progress
|
13.5
|
15.2
|
|||||
Finished
goods
|
163.6
|
154.7
|
|||||
Materials
and supplies
|
71.2
|
65.3
|
|||||
Total
|
$
|
333.3
|
$
|
312.3
|
June
30,
2006
|
December
31,
2005
|
||||||
(Millions
of dollars)
|
|||||||
Prepaid
pension cost
|
$
|
131.0
|
$
|
11.7
|
|||
Receivables
from insurers (Note 13)
|
23.4
|
23.5
|
|||||
Investments
in equity method investees
|
21.9
|
17.5
|
|||||
Debt
issuance costs
|
12.1
|
12.7
|
|||||
Receivable
from the U.S. Department of Energy (Note 13)
|
5.8
|
12.5
|
|||||
Other
|
5.3
|
0.9
|
|||||
Total
|
$
|
199.5
|
$
|
78.8
|
June
30,
2006
|
December
31,
2005
|
||||||
(Millions
of dollars)
|
|||||||
Pension
and postretirement obligations
|
$
|
124.6
|
$
|
12.6
|
|||
Reserve
for income taxes payable
|
39.5
|
37.2
|
|||||
Asset
retirement obligations
|
31.1
|
27.7
|
|||||
Reserve
for workers’ compensation and general liability claims
|
20.2
|
18.5
|
|||||
Other
|
30.2
|
25.4
|
|||||
Total
|
$
|
245.6
|
$
|
121.4
|
Personnel
Costs
|
Dismantlement
and
Closure
|
Contract
Termination
|
Total(1)(2)
|
||||||||||
(Millions
of dollars)
|
|||||||||||||
Beginning
balance
|
$
|
3.1
|
$
|
4.9
|
$
|
1.0
|
$
|
9.0
|
|||||
Payments
|
(0.2
|
)
|
(0.8
|
)
|
(0.3
|
)
|
(1.3
|
)
|
|||||
Adjustments
|
0.2
|
0.1
|
(0.2
|
)
|
0.1
|
||||||||
Ending
balance
|
$
|
3.1
|
$
|
4.2
|
$
|
0.5
|
$
|
7.8
|
(2)
|
Amounts
include obligations of the discontinued forest products operations
that
have been retained by the company.
|
Three
Months Ended
June 30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
(Millions
of dollars)
|
|||||||||||||
Net
foreign currency transaction gain (loss)
|
$
|
3.8
|
$
|
(3.7
|
)
|
$
|
8.1
|
$
|
(2.2
|
)
|
|||
Equity
in net earnings of equity method investees
|
4.7
|
—
|
4.7
|
0.2
|
|||||||||
Provision
for litigation settlements
|
(3.7
|
)
|
—
|
(3.7
|
)
|
—
|
|||||||
Net
interest expense on borrowings with affiliates and interest
income
|
0.6
|
(4.5
|
)
|
1.3
|
(7.6
|
)
|
|||||||
Loss
on accounts receivables sales
|
—
|
(1.2
|
)
|
—
|
(4.0
|
)
|
|||||||
Other
expense
|
(0.1
|
)
|
(0.8
|
)
|
(0.7
|
)
|
(1.6
|
)
|
|||||
Total
|
$
|
5.3
|
$
|
(10.2
|
)
|
$
|
9.7
|
$
|
(15.2
|
)
|
Three
Months Ended
June 30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
(Millions
of dollars)
|
|||||||||||||
Gross
revenues
|
$
|
25.9
|
$
|
16.0
|
$
|
27.3
|
$
|
17.3
|
|||||
Gross
profit
|
22.0
|
12.9
|
22.6
|
13.5
|
|||||||||
Income
before income taxes
|
20.2
|
11.1
|
19.0
|
9.7
|
|||||||||
Net
income
|
16.7
|
9.1
|
15.9
|
8.1
|
Three
Months Ended
June 30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
(Millions
of dollars)
|
|||||||||||||
U.S.
statutory tax rate - provision (benefit)
|
(35.0
|
)%
|
35.0
|
%
|
35.0
|
%
|
35.0
|
%
|
|||||
Increases
(decreases) resulting from -
|
|||||||||||||
Taxation
of foreign operations
|
294.0
|
15.9
|
13.8
|
5.4
|
|||||||||
State income taxes
|
3.2
|
1.5
|
1.2
|
1.3
|
|||||||||
Permanent adjustments
|
(21.1
|
)
|
2.8
|
(1.1
|
)
|
1.3
|
|||||||
Interest on foreign tax contingency
|
14.0
|
—
|
1.2
|
—
|
|||||||||
Other-net |
24.9
|
1.1
|
—
|
0.8
|
|||||||||
Total
|
280.0
|
%
|
56.3
|
%
|
50.1
|
%
|
43.8
|
%
|
Vesting
|
Cash-
or
|
||||
Contractual
|
Period
|
Vesting
|
Stock-
|
Vesting
and Other
|
|
Life
(Years)
|
(Years)
|
Term
|
Settled
|
Conditions
|
|
Stock
options
|
10
|
3
|
Graded
(1)
|
Stock
|
Employee
service
|
Restricted
stock
|
Not
applicable
|
3
|
Cliff
(2)
|
Stock
|
Employee
service
|
(1) |
An
employee vests in one-third of the award at the end of each year
of
service. Employees terminating their employment due to retirement
fully
vest in their award upon retirement.
|
(2) |
An
employee vests in the entire award at the end of the three-year service
period. Employees terminating their employment due to retirement
fully
vest in their award upon retirement.
|
March
30, 2006
|
||||
Risk-free
interest rate
|
4.6
|
%
|
||
Expected
dividend yield
|
1.5
|
%
|
||
Expected
volatility
|
34.5
|
%
|
||
Expected
term (years)
|
6.3
|
|||
Weighted-average
estimated fair value of options converted
|
$
|
9.61
|
||
Stock
fair value on the date of modification
|
$
|
17.47
|
||
Estimated
fair value of the options as a % of the stock fair value on the
date of
modification
|
55.0
|
%
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
(Millions
of dollars)
|
|||||||||||||
Expense
resulting from awards issued originally by Tronox:
|
|||||||||||||
Stock
options
|
$
|
0.2
|
$
|
—
|
$
|
0.3
|
$
|
—
|
|||||
Restricted
stock
|
0.3
|
—
|
0.7
|
—
|
|||||||||
Expense
resulting from awards issued originally by
Kerr-McGee:
|
|||||||||||||
Stock
options
|
0.3
|
—
|
1.5
|
—
|
|||||||||
Restricted
stock and stock opportunity grants
|
0.7
|
0.4
|
3.0
|
1.3
|
|||||||||
Total
stock-based compensation expense, pretax
|
1.5
|
0.4
|
5.5
|
1.3
|
|||||||||
Income
tax benefit
|
(0.5
|
)
|
(0.1
|
)
|
(1.4
|
)
|
(0.4
|
)
|
|||||
Total
stock-based compensation expense, net of taxes
|
$
|
1.0
|
$
|
0.3
|
$
|
4.1
|
$
|
0.9
|
Unamortized
Cost (Pretax)
|
Remaining
period
|
||||||
(Millions
of dollars)
|
(Years)
|
||||||
Stock
options issued by Tronox Incorporated
|
$
|
1.2
|
2.4
|
||||
Restricted
stock issued by Tronox Incorporated
|
3.4
|
2.4
|
|||||
Stock
options converted from Kerr-McGee awards
|
2.0
|
1.4
|
|||||
Restricted
stock and stock opportunity grants converted from Kerr-McGee
awards
|
2.9
|
1.3
|
|||||
$
|
9.5
|
Intrinsic
|
|||||||||||||
Number
of
|
Contractual
|
Value
|
|||||||||||
Options
|
Price (1)
|
Life
(years) (1)
|
(Millions)
(2)
|
||||||||||
Options
outstanding at December 31, 2005
|
345,700
|
$
|
14.00
|
||||||||||
Options
awarded (including those converted from Kerr-McGee awards)
|
923,766
|
9.63
|
|||||||||||
Options
forfeited
|
(24,711
|
)
|
10.71
|
||||||||||
Options
outstanding at June 30, 2006
|
1,244,755
|
$
|
10.83
|
8.6
|
$
|
2.6
|
|||||||
Options
expected to vest
|
1,215,184
|
$
|
10.79
|
8.6
|
$
|
2.6
|
|||||||
Options
exercisable at June 30, 2006
|
350
|
(1) |
Represents
weighted average exercise price and weighted average remaining contractual
life, as applicable.
|
(2) |
Reflects
aggregate intrinsic value based on the difference between the market
price
of Tronox stock at June 30, 2006, and the options' exercise
price.
|
2005
|
||||
Risk-free
interest rate
|
4.6
|
%
|
||
Expected
dividend yield
|
1.5
|
%
|
||
Expected
volatility
|
34.5
|
%
|
||
Expected
term (years)
|
6.3
|
|||
Per-unit
fair value of options granted
|
$
|
5.01
|
2005
|
2004
|
||||||
Risk-free
interest rate
|
3.9
|
%
|
3.5
|
%
|
|||
Expected
dividend yield
|
3.5
|
%
|
3.6
|
%
|
|||
Expected
volatility
|
26.4
|
%
|
22.6
|
%
|
|||
Expected
term (years)
|
6.0
|
5.8
|
|||||
Weighted-average
estimate of fair value of options converted
|
$
|
20.96
|
$
|
8.63
|
Number
of
|
Fair
|
||||||
Shares
|
Value
(1)
|
||||||
Balance
at December 31, 2005
|
321,790
|
$
|
13.77
|
||||
Awards
issued (including those converted from Kerr-McGee awards)
|
636,205
|
12.98
|
|||||
Awards
forfeited
|
(16,339
|
)
|
13.70
|
||||
Awards
lapsed (due to retirements)
|
(3,236
|
)
|
11.74
|
||||
Balance
at June 30, 2006
|
938,420
|
$
|
13.24
|
||||
Awards
expected to vest
|
912,168
|
$
|
13.23
|
||||
Vested
at June 30, 2006
|
—
|
(1) |
Represents
the weighted-average grant-date fair
value.
|
Effective
March 30, 2006
|
|||||||
U.S.
Retirement Plans
|
U.S.
Postretirement Plans
|
||||||
(Millions
of dollars)
|
|||||||
Accumulated
benefit obligation
|
$
|
(381.8
|
)
|
$
|
(144.2
|
)
|
|
Projected
benefit obligation
|
$
|
(410.9
|
)
|
$
|
(144.2
|
)
|
|
Fair
value of plan assets
|
450.3
|
—
|
|||||
Funded
status - over (under)
|
39.4
|
(144.2
|
)
|
||||
Unrecognized
prior service cost (credit)
|
16.9
|
(5.7
|
)
|
||||
Unrecognized
actuarial loss
|
59.2
|
35.0
|
|||||
Prepaid/(accrued)
benefit cost
|
$
|
115.5
|
$
|
(114.9
|
)
|
Retirement
Plans
|
Postretirement
Plans
|
||||||||||||
Three
Months Ended June 30,
|
|||||||||||||
2006
|
2005
(1)
|
2006
|
2005
(1)
|
||||||||||
(Millions
of dollars)
|
|||||||||||||
Net
periodic cost -
|
|||||||||||||
Service
cost
|
$
|
2.5
|
$
|
0.4
|
$
|
0.4
|
$
|
—
|
|||||
Interest
cost
|
6.8
|
0.8
|
2.1
|
—
|
|||||||||
Expected
return on plan assets
|
(9.6
|
)
|
(0.6
|
)
|
—
|
—
|
|||||||
Net
amortization -
|
|||||||||||||
Prior
service cost
|
0.7
|
(0.1
|
)
|
(0.3
|
)
|
—
|
|||||||
Net
actuarial (gain) loss
|
0.4
|
0.2
|
0.4
|
—
|
|||||||||
Sub-total
net periodic cost
|
0.8
|
0.7
|
2.6
|
—
|
|||||||||
Allocated
benefit plan expense (credit) from Kerr-McGee
|
—
|
(0.1
|
)
|
—
|
1.7
|
||||||||
Total
retirement expense
|
$
|
0.8
|
$
|
0.6
|
$
|
2.6
|
$
|
1.7
|
(1)
|
Includes
costs associated with active and inactive employees of the company’s
domestic chemical business and does not include costs associated
with
Kerr-McGee corporate employees that became employees of Tronox
after the
IPO.
|
Retirement
Plans
|
Postretirement
Plans
|
||||||||||||
Six
Months Ended June 30,
|
|||||||||||||
2006
|
2005
(1)
|
2006
|
2005
(1)
|
||||||||||
(Millions
of dollars)
|
|||||||||||||
Net
periodic cost -
|
|||||||||||||
Service
cost
|
$
|
3.1
|
$
|
0.9
|
$
|
0.4
|
$
|
—
|
|||||
Interest
cost
|
7.6
|
1.6
|
2.1
|
—
|
|||||||||
Expected
return on plan assets
|
(10.4
|
)
|
(1.3
|
)
|
—
|
—
|
|||||||
Net
amortization -
|
|||||||||||||
Prior
service cost
|
0.7
|
(0.1
|
)
|
(0.3
|
)
|
—
|
|||||||
Net
actuarial (gain) loss
|
0.6
|
0.4
|
0.4
|
—
|
|||||||||
Sub-total
net periodic cost
|
1.6
|
1.5
|
2.6
|
—
|
|||||||||
Allocated
benefit plan expense (credit) from Kerr-McGee
|
0.7
|
(0.2
|
)
|
2.6
|
3.4
|
||||||||
Total
retirement expense
|
$
|
2.3
|
$
|
1.3
|
$
|
5.2
|
$
|
3.4
|
(1) |
|
Includes
costs associated with active and inactive employees of the company’s
domestic chemical business and does not include costs associated
with
Kerr-McGee corporate employees that became employees of Tronox
after the
IPO.
|
Reserves
for
Litigation
|
Reserves
for
Environmental
Remediation(1)
|
Reimbursements
Receivable(1)
|
||||||||
(Millions
of dollars)
|
||||||||||
Balance
at December 31, 2005
|
$
|
9.2
|
$
|
223.7
|
$
|
56.7
|
||||
Provisions
/ Accruals
|
3.7
|
15.0
|
25.3
|
|||||||
Payments
/ Settlements
|
(1.5
|
)
|
(17.7
|
)
|
(35.1
|
)
|
||||
Balance
at June 30, 2006
|
$
|
11.4
|
$
|
221.0
|
$
|
46.9
|
(1)
|
Provisions
for environmental remediation and restoration include $14.3 million
related to the company’s former forest products operations, thorium
compounds manufacturing, uranium and refining operations. Accrual
of
reimbursements receivable includes $4.2 million related to the
company’s
former thorium compounds manufacturing. These amounts are reflected
in the
Condensed Consolidated and Combined Statement of Operations as
a component
of loss from discontinued operations (net of
tax).
|
· |
Some
sites are in the early stages of investigation, and other sites may
be
identified in the future.
|
· |
Remediation
activities vary significantly in duration, scope and cost from site
to
site depending on the mix of unique site characteristics, applicable
technologies and regulatory agencies
involved.
|
· |
Remediation
requirements are difficult to predict at sites where remedial
investigations have not been completed or final decisions have not
been
made regarding remediation requirements, technologies or other factors
that bear on remediation costs.
|
· |
Environmental
laws frequently impose joint and several liability on all potentially
responsible parties, and it can be difficult to determine the number
and
financial condition of other potentially responsible parties and
their
respective shares of responsibility for cleanup
costs.
|
· |
Environmental
laws and regulations, as well as enforcement policies, are continually
changing, and the outcome of court proceedings and discussions with
regulatory agencies are inherently
uncertain.
|
· |
Unanticipated
construction problems and weather conditions can hinder the completion
of
environmental remediation.
|
· |
Some
legal matters are in the early stages of investigation or proceeding
or
their outcomes otherwise may be difficult to predict, and other legal
matters may be identified in the future.
|
· |
The
inability to implement a planned engineering design or use planned
technologies and excavation methods may require revisions to the
design of
remediation measures, which delay remediation and increase costs.
|
· |
The
identification of additional areas or volumes of contamination and
changes
in costs of labor, equipment and technology generate corresponding
changes
in environmental remediation costs.
|
Three
Months Ended
June 30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
(Millions
of dollars)
|
|||||||||||||
Net
sales
|
|||||||||||||
Pigment
|
$
|
349.0
|
$
|
331.4
|
$
|
658.0
|
$
|
642.2
|
|||||
Electrolytic
and other chemical products
|
23.9
|
24.5
|
51.1
|
47.9
|
|||||||||
Total
|
$
|
372.9
|
$
|
355.9
|
$
|
709.1
|
$
|
690.1
|
|||||
Operating
profit
|
|||||||||||||
Pigment
|
$
|
10.2
|
$
|
33.5
|
$
|
35.9
|
$
|
65.2
|
|||||
Electrolytic
and other chemical products(1)
|
1.3
|
1.9
|
23.1
|
(6.8
|
)
|
||||||||
11.5
|
35.4
|
59.0
|
58.4
|
||||||||||
Corporate
and nonoperating sites(2)
|
(6.0
|
)
|
(0.6
|
)
|
(8.5
|
)
|
(0.8
|
)
|
|||||
Provision
for environmental remediation and restoration(3)
|
—
|
(5.6
|
)
|
—
|
(5.6
|
)
|
|||||||
Total
operating profit
|
5.5
|
29.2
|
50.5
|
52.0
|
|||||||||
Interest
and debt expense - third parties
|
(12.3
|
)
|
—
|
(24.3
|
)
|
—
|
|||||||
Other
income (expense)
|
5.3
|
(10.2
|
)
|
9.7
|
(15.2
|
)
|
|||||||
Income
tax provision
|
(4.2
|
)
|
(10.7
|
)
|
(18.0
|
)
|
(16.1
|
)
|
|||||
Income
(loss) from continuing operations
|
$
|
(5.7
|
)
|
$
|
8.3
|
$
|
17.9
|
$
|
20.7
|
(1)
|
Includes
$0.1 million and nil for the three months ended June 30, 2006 and
2005 and
$(20.4) million and $11.0 million for the six month ended June
30, 2006
and 2005, respectively, of environmental charges, net of reimbursements,
related to ammonium perchlorate at the company’s Henderson facility.
|
(2)
|
Includes
general corporate expenses not identified to a specific segment
and
general expenses related to various businesses in which the company’s
affiliates are no longer engaged, but that have not met the criteria
for
reporting as discontinued
operations.
|
(3)
|
Includes
environmental provisions related to various businesses in which
the
company’s affiliates are no longer engaged, but that have not met the
criteria for reporting as discontinued
operations.
|
Tronox
Incorporated
|
Issuers
|
Guarantor
Subsidiaries
|
Non-Guarantor
Subsidiaries
|
Eliminations
|
Consolidated
|
||||||||||||||
(Millions
of dollars)
|
|||||||||||||||||||
Net
sales
|
$
|
—
|
$
|
—
|
$
|
214.3
|
$
|
196.7
|
$
|
(38.1
|
)
|
$
|
372.9
|
||||||
Cost
of goods sold
|
—
|
—
|
191.3
|
186.2
|
(35.6
|
)
|
341.9
|
||||||||||||
Gross
margin
|
—
|
—
|
23.0
|
10.5
|
(2.5
|
)
|
31.0
|
||||||||||||
Selling,
general and administrative expenses
|
0.8
|
0.1
|
14.7
|
10.9
|
(1.0
|
)
|
25.5
|
||||||||||||
Provision
for environmental remediation and restoration, net of
reimbursements
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||
(0.8
|
)
|
(0.1
|
)
|
8.3
|
(0.4
|
)
|
(1.5
|
)
|
5.5
|
||||||||||
Interest
and debt expense - third parties
|
—
|
(13.0
|
)
|
0.4
|
0.3
|
—
|
(12.3
|
)
|
|||||||||||
Other
income (expense)
|
(13.7
|
)
|
(2.1
|
)
|
(2.1
|
)
|
2.1
|
21.1
|
5.3
|
||||||||||
Income
(Loss) from Continuing Operations before Income
Taxes
|
(14.5
|
)
|
(15.2
|
)
|
6.6
|
2.0
|
19.6
|
(1.5
|
)
|
||||||||||
Income
Tax Benefit (Provision)
|
0.1
|
1.7
|
(1.1
|
)
|
(4.9
|
)
|
—
|
(4.2
|
)
|
||||||||||
Income
(Loss) from Continuing Operations
|
(14.4
|
)
|
(13.5
|
)
|
5.5
|
(2.9
|
)
|
19.6
|
(5.7
|
)
|
|||||||||
Loss
from Discontinued Operations, net of taxes
|
—
|
(0.2
|
)
|
(8.5
|
)
|
—
|
—
|
(8.7
|
)
|
||||||||||
Net
Income (Loss)
|
$
|
(14.4
|
)
|
$
|
(13.7
|
)
|
$
|
(3.0
|
)
|
$
|
(2.9
|
)
|
$
|
19.6
|
$
|
(14.4
|
)
|
Issuer
|
Guarantor
Subsidiaries
|
Non-Guarantor
Subsidiaries
|
Eliminations
|
Combined
|
||||||||||||
(Millions
of dollars)
|
||||||||||||||||
Net
sales
|
$
|
—
|
$
|
206.3
|
$
|
186.7
|
$
|
(37.1
|
)
|
$
|
355.9
|