Tronox Incorporated Reports Preliminary 2008 Second-Quarter Earnings
Wednesday, July 30, 2008 7:00:00 AM ET Tronox Incorporated
(TRX ) today reported a preliminary loss from continuing
operations for the 2008 second quarter of $29.9 million ($0.73 per diluted
common share), compared with a loss from continuing operations for the 2007
second quarter of $20.0 million ($0.49 per diluted common share). The
decrease in the 2008 second-quarter results compared to the prior-year period
was primarily due to significant increases in process chemical, energy and
transportation costs; unplanned production difficulties at the company’s
Uerdingen, Germany and Kwinana, Western Australia titanium dioxide (TiO(2))
plants; a non-cash impairment charge related to goodwill of $13.5 million
($0.33 per share pretax); and a restructuring charge of $4.2 million ($0.10
per share pretax). These were partially offset by increased sales, lower SG&A
and gain on land sales of $12.4 million ($0.30 per share pretax). In addition,
the company recorded a tax benefit in the 2008 second quarter versus a tax
provision in the prior-year period.
Highlights
-- Received in excess of $12 million in proceeds from land sales
-- Achieved an additional $15 million in annual cash cost reductions
through Project Cornerstone for cumulative cash cost reductions of
$93 million since the program began in July 2006
-- Increased net sales 10% in 2008 second quarter versus prior-year period
-- Successfully implemented the first of the announced price increases in
all three regions late in June
-- Completed amendment to senior secured credit facility
Mitigating the positive impact of these highlights, during the second
quarter, the Tiwest joint venture (Tronox 50%) TiO(2) plant in Kwinana
experienced production difficulties after a planned shutdown, delaying restart
of production. The company also experienced processing difficulties at its
Uerdingen facility following a planned maintenance outage that resulted in
reduced production volumes and higher costs. The impact of the Kwinana and
Uerdingen difficulties was approximately $11 million (pretax) in the second
quarter. Higher natural gas costs at Tiwest due to the ongoing curtailment of
natural gas supply resulting from the shutdown of Apache’s facility in Western
Australia had an impact of approximately $2 million (pretax) in the quarter.
In addition, significant increases in process chemical, energy and
transportation costs more than offset the company’s ongoing cost reduction
efforts.
In connection with a workforce reduction announced in May 2008, the
company incurred pretax charges of $1.5 million for severance and other
employee related costs and $2.7 million for noncash special termination
benefits under its pension plan.
Net sales for the quarter increased to $403.8 million compared to $366.5
million in the prior-year quarter, primarily due to increased TiO(2) volumes,
the effects of foreign exchange and increased pricing for acid sales. Net
loss for the quarter, was $34.4 million ($0.84 per share), versus a net loss
of $21.2 million ($0.52 per share) in the 2007 second quarter.
Three Months Six Months
Ended June 30, Ended June 30,
(Millions of dollars, except 2008 2007 2008 2007
per-share amounts)
Loss from Continuing Operations $(29.9) $(20.0) $(31.3) $(29.0)
Loss from Discontinued Operations (4.5) (1.2) (3.3) (1.6)
Net Loss $(34.4) $(21.2) $(34.6) $(30.6)
Diluted Earnings Per Share
Loss from Continuing Operations $(0.73) $(0.49) $(0.76) $(0.71)
Loss from Discontinued Operations (0.11) (0.03) (0.08) (0.04)
Net Loss $(0.84) $(0.52) $(0.84) $(0.75)
Adjusted EBITDA (1) $6.8 $34.7 $41.8 $73.8
(1) Adjusted EBITDA, which is used by management to measure performance,
is a non-GAAP financial measure. Management believes that Adjusted
EBITDA is useful to investors because it is used in the company’s debt
instruments to determine compliance with financial covenants. It is
included as a supplemental measure of the company’s operating
performance because it eliminates items that have less bearing on
operating performance and highlights trends in the core business that
may not otherwise be apparent when relying solely on GAAP financial
measures. In addition, Adjusted EBITDA 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 the company’s financial performance as determined in
accordance with GAAP, such as net income (loss). Because other
companies may calculate Adjusted EBITDA differently, this presentation
of Adjusted EBITDA may not be comparable to other similarly titled
measures of other companies. A detailed reconciliation to the
comparable GAAP financial measures can be found in the tables of this
news release and also can be found in the Investor Relations section
of the company’s website at
http://www.tronox.com /ir/GAAP_reconciliation.htm">http://www.tronox.com /ir/GAAP_reconciliation.htm .
Outlook
Tronox remains focused on achieving announced price increases and reducing
costs through Project Cornerstone initiatives. At the end of the quarter, the
company was able to implement the first of its announced TiO(2) price
increases in all three regions, which it expects to positively impact net
sales for the remainder of the year. Sales volumes were strong and
inventories declined in the second quarter, indicating improving demand.
In the third quarter, the company is continuing to see further price
increases being implemented in all three regions of the world. However, we
are also continuing to see cost increases in process chemicals, energy and
transportation.
As previously announced, Tronox continues to evaluate all strategic
alternatives to improve the business and address ongoing challenges, including
development opportunities, mitigation of legacy liabilities, capital
restructuring, land sales and all other options available to it. The company
has hired financial advisor Rothschild Inc. to further assist in its
evaluation of strategic alternatives.
There is no assurance that the company will be successful in pursuing
alternatives and options or that the current price increases will offset the
continuing cost increases that the company is unable to predict and that
depend on numerous factors beyond its control.
Pigment Results
Pigment sales for the second quarter of 2008 were $374.4 million, compared
with $340.2 million in the prior-year period. The increase was primarily a
result of increased TiO(2) volumes principally due to strong demand in the
Asia-Pacific region, the effect of foreign exchange and increased pricing on
acid sales, partially offset by lower TiO(2) pricing compared to the
prior-year quarter.
Second-quarter 2008 TiO(2) production volumes, including 100% of the
Tiwest Joint Venture, decreased to 143,100 from 147,600 in prior-year quarter,
primarily as a result of unplanned production difficulties at the Kwinana and
Uerdingen plants.
For the 2008 second quarter, pigment recorded an operating loss of $42.3
million, compared with income of $3.7 million for the 2007 second quarter.
The decrease was mainly due to increased process chemical, energy and
transportation costs, production difficulties at the Uerdingen and Kwinana
plants, the effects of foreign exchange and the non-cash impairment charge
related to goodwill.
As a result of the continued cost escalations and compressed margins,
Tronox recorded a $13.5 million non-cash impairment charge related to its
pigment segment goodwill in accordance with Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets."
Electrolytic and Other Chemical Products Results
Electrolytic and other chemical products sales for the 2008 second quarter
were $29.4 million, compared with $26.3 million in the 2007 second quarter,
due to increased pricing.
For the 2008 second quarter, the operating profit for electrolytic and
other chemical products was $0.8 million, compared with $0.6 million in the
second quarter of 2007. The increase was primarily due to improved pricing,
offset in part by increased costs.
Debt and Cash Balances
Total debt at June 30, 2008, was $540.1 million, including $69 million
outstanding on the company’s $250 million revolving credit facility. Cash and
cash equivalents at June 30, 2008, were $23.3 million, resulting in net debt
outstanding of $516.8 million.
Tronox completed the sale of two parcels of 100%-owned property at the end
of June, with net proceeds from the sales totaling approximately $12 million.
The company used $3.2 million of the net proceeds to reduce outstanding debt
under its senior secured credit facility at June 30, 2008, and used the
remainder of the net proceeds, $8.8 million, to reduce outstanding debt in
July.
As a result of unexpected impacts in the second quarter, Tronox requested
and received approval for a waiver to its financial covenants for the 2008
second quarter and an amendment to its leverage ratio financial covenant for
the remainder of the year. Please see Tronox’s current report on Form 8-K
filed on July 21, 2008, with the Securities and Exchange Commission ("SEC")
for a description of the amendment.
Conference Call
Tronox will hold a conference call today at 10 a.m. EDT to discuss its
second-quarter 2008 financial and operating results and expectations for the
future, but does not intend to conduct a question and answer session. The
call will be in listen-only mode. Interested parties may listen to the call
via Tronox’s website at http://www.tronox.com or by calling 1-800-231-7043 in
the United States or 617-597-5414 outside the United States. The code for
both dial-in numbers will be 53922647#. A replay of the call will be
available for seven days at 1-888-286-8010 in the United States or
617-801-6888 outside the United States. The code for the replay will be
97090457#. The webcast will be archived for 30 days on the company’s website.
Conference call participants are encouraged to pre-register for the call
at:
https://cossprereg.btci.com/prereg/key.process?key=PR7BEKATT.
About Tronox
Headquartered in Oklahoma City, Tronox is the world’s third-largest
producer and marketer of titanium dioxide pigment, with an annual production
capacity of 642,000 tonnes. Titanium dioxide is an inorganic white pigment
used in paint, coatings, plastics, paper and many other everyday products.
The company’s five pigment plants, which are located in the United States,
Australia, Germany and the Netherlands, supply high-performance products to
approximately 1,100 customers in 100 countries. In addition, Tronox produces
electrolytic products, including sodium chlorate, electrolytic manganese
dioxide, boron trichloride, elemental boron and lithium manganese oxide.
Results from the second quarter and challenges facing the company will be
further discussed in the company’s quarterly report on Form 10-Q that will be
filed with the SEC on or before Aug. 11, 2008.
Forward-Looking Statements: Some information in this news release
regarding the company’s or management’s intentions, beliefs or expectations,
or that otherwise speak to future events, are "forward-looking statements"
within the meaning of Section 27A of the Securities Exchange Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements include those statements preceded by,
followed by or that otherwise include the words "believes," "will," "expects,"
"anticipates," "intends," "estimates," "projects," "target," "budget," "goal,"
"plans," "objective," "outlook," "should," or similar words. Future results
and developments discussed in these statements may be affected by numerous
factors and risks, such as the accuracy of the assumptions that underlie the
statements, the market value of Tronox’s products, the ability to implement
price increases, demand for consumer products for which Tronox’s businesses
supply raw materials, the market for raw materials that Tronox uses to produce
TiO(2), its inability to predict the prices of such raw materials, the
financial resources of competitors, the market for debt and/or equity
financing, changes in laws and regulations, the ability to respond to
challenges in international markets, changes in currency exchange rates,
political or economic conditions in areas where Tronox operates, trade and
regulatory matters, general economic conditions, and other factors and risks
identified in the Risk Factors Section of Tronox’s Annual Report on Form 10-K
for the year ended Dec. 31, 2007, and subsequent Quarterly Reports on Form
10-Q, as filed with the U.S. Securities and Exchange Commission (SEC), and
other SEC filings. Actual results and developments may differ materially from
those expressed or implied in this news release. The company does not
undertake to update forward-looking statements to reflect the impact of
circumstances or events that arise after the date the forward-looking
statement was made. Investors are urged to consider closely the disclosures
and risk factors in Tronox’s filings with the SEC including its Annual Report
on Form 10-K for the year ended Dec. 31, 2007, available on Tronox’s website,
http://www.tronox.com . This also can be obtained from the SEC by calling
1-800-SEC-0330.
Media contact: Debbie Schramm
Direct: 405-775-5177
Cell: 405-830-6937
debbie.schramm@tronox.com
Investor contact: Robert Gibney
Direct: 405-775-5105
robert.gibney@tronox.com
TRONOX INCORPORATED AND SUBSIDIARY COMPANIES
Preliminary and Unaudited
Second Quarter Ended Six Months Ended
June 30, June 30,
(Millions of dollars, except
per-share amounts) 2008 2007 2008 2007
Consolidated Statements of Operations
Net sales $403.8 $366.5 $752.9 $705.6
Cost of sales 403.6 336.5 727.2 638.4
Gross margin 0.2 30.0 25.7 67.2
Selling, general and administrative
expenses 27.2 30.0 54.8 65.0
Impairment charge 13.5 - 13.5 -
Gain on land sales (12.4) - (17.7) -
Restructuring charges 4.2 - 4.2 -
Provision for environmental remediation
and restoration, net of reimbursements 0.5 1.5 0.5 1.7
(32.8) (1.5) (29.6) 0.5
Interest and debt expense (12.7) (12.4) (25.0) (24.7)
Other income, net 0.7 0.7 6.8 2.4
Loss from continuing operations before
income taxes (44.8) (13.2) (47.8) (21.8)
Income tax (provision) benefit 14.9 (6.8) 16.5 (7.2)
Loss from continuing operations (29.9) (20.0) (31.3) (29.0)
Loss from discontinued operations, net
of income taxes (4.5) (1.2) (3.3) (1.6)
Net loss $(34.4) $(21.2) $(34.6) $(30.6)
Income (loss) per common share:
Basic -
Continuing operations $(0.73) $(0.49) $(0.76) $(0.71)
Discontinued operations (0.11) (0.03) (0.08) (0.04)
Net loss $(0.84) $(0.52) $(0.84) $(0.75)
Diluted -
Continuing operations $(0.73) $(0.49) $(0.76) $(0.71)
Discontinued operations (0.11) (0.03) (0.08) (0.04)
Net loss $(0.84) $(0.52) $(0.84) $(0.75)
Weighted average shares outstanding
(thousands):
Basic 40,981 40,698 40,958 40,653
Diluted 40,981 40,698 40,958 40,653
TRONOX INCORPORATED AND SUBSIDIARY COMPANIES
Preliminary and Unaudited
Second Quarter Ended Six Months Ended
June 30, June 30,
(Millions of dollars) 2008 2007 2008 2007
Segment Information
Net sales
Pigment $374.4 $340.2 $696.0 $655.6
Electrolytic and other chemical
products 29.4 26.3 56.9 50.0
Total $403.8 $366.5 $752.9 $705.6
Operating profit (loss)
Pigment $(42.3) $3.7 $(45.3) $11.2
Electrolytic and other chemical
products 0.8 0.6 2.5 (0.2)
(41.5) 4.3 (42.8) 11.0
Corporate and nonoperating sites (3.2) (4.4) (4.0) (8.9)
Gain on land sales 12.4 - 17.7 -
Provision for environmental
remediation and restoration (0.5) (1.4) (0.5) (1.6)
Total operating profit (loss) (32.8) (1.5) (29.6) 0.5
Interest and debt expense (12.7) (12.4) (25.0) (24.7)
Other income, net 0.7 0.7 6.8 2.4
Income tax (provision) benefit 14.9 (6.8) 16.5 (7.2)
Loss from discontinued operations, net
of income taxes (4.5) (1.2) (3.3) (1.6)
Net loss $(34.4) $(21.2) $(34.6) $(30.6)
Other income, net
Net foreign currency transaction
gain (loss) $0.8 $(1.2) $7.8 $(1.5)
Equity in net earnings (loss) of equity
method investees (0.1) 1.3 (0.4) 2.0
Interest income 0.1 0.5 0.3 1.3
Loss on sale of accounts receivable (0.7) - (1.5) -
Other income 0.6 0.1 0.6 0.6
Total $0.7 $0.7 $6.8 $2.4
TRONOX INCORPORATED AND SUBSIDIARY COMPANIES
Preliminary and Unaudited
Second Quarter Ended Six Months Ended
June 30, June 30,
(Volumes and capacity in thousands
of tonnes) 2008 2007 2008 2007
Selected Information
Titanium Dioxide Operating Statistics
Production volumes
100% owned facilities 122.9 120.8 244.7 240.2
50% owned production - Tiwest joint
venture 10.1 13.4 22.4 26.3
Total Tronox production 133.0 134.2 267.1 266.5
Product purchased from Tiwest joint
venture partner 10.1 13.4 22.4 26.3
Total production available to be
marketed by Tronox 143.1 147.6 289.5 292.8
Production capacity - period to date
100% owned facilities 132.7 132.7 263.8 263.8
50% owned production - Tiwest joint
venture 13.7 13.7 27.3 27.3
Total Tronox production capacity 146.4 146.4 291.1 291.1
Production capacity of Tiwest joint
venture partner 13.7 13.7 27.3 27.3
Production capacity available to be
marketed by Tronox 160.1 160.1 318.4 318.4
Percentage change in average TiO(2)
selling price in U.S. dollars
Q2, 2008 vs. Q1, 2008 flat
At At
June 30, Dec. 31,
(Millions of dollars) 2008 2007
Selected Balance Sheet Information
Cash and cash equivalents $23.3 $21.0
Current assets 703.5 693.1
Total assets 1,710.8 1,723.4
Current liabilities 408.0 448.2
Long-term debt classified as current 529.8 -
Long-term debt - 475.6
Stockholders’ equity 446.7 429.6
Shares outstanding at period-end
(thousands) 41,622 41,425
Second Quarter Ended Six Months Ended
June 30, June 30,
(Millions of dollars) 2008 2007 2008 2007
Selected Cash Flow Information
Net cash flows from operating
activities $(11.4) $29.0 $(38.6) $14.1
Depreciation and amortization 29.0 27.9 57.5 55.8
Capital expenditures 7.3 19.5 15.6 33.8
TRONOX INCORPORATED AND SUBSIDIARY COMPANIES
Preliminary and Unaudited
Second Quarter Ended Six Months Ended
June 30, June 30,
(Millions of dollars) 2008 2007 2008 2007
Adjusted EBITDA
Net loss $(34.4) $(21.2) $(34.6) $(30.6)
Interest and debt expense 12.7 12.4 25.0 24.7
Interest income (0.1) (0.5) (0.3) (1.3)
Income tax provision (14.9) 6.0 (16.5) 6.2
Depreciation and amortization expense 29.0 27.9 57.5 55.8
EBITDA (7.7) 24.6 31.1 54.8
Loss from discontinued operations 4.5 2.0 3.3 2.6
Provision for environmental
remediation and restoration,
net of reimbursements 0.5 1.5 0.5 1.7
Extraordinary, unusual or
non-recurring items (a) 4.2 - 4.2 -
Gain on sale of assets (12.3) (0.3) (17.7) (0.3)
Noncash charges constituting:
Loss on sales of accounts
receivable 0.7 - 1.5 -
Write-downs of property, plant and
equipment and other assets 0.2 0.2 0.3 0.3
Impairment charge 13.5 - 13.5 -
Other items (b) 3.2 6.7 5.1 14.7
Adjusted EBITDA $6.8 $34.7 $41.8 $73.8
(a) Includes costs associated with a work force reduction program.
(b) Includes noncash stock-based compensation, noncash pension and
postretirement cost and accretion.
Adjusted EBITDA, which is used by management to measure performance, is a
non-GAAP financial measure. Management believes that adjusted EBITDA is
useful to investors because it is used in the company’s debt instruments to
determine compliance with financial covenants. It is included as a
supplemental measure of the company’s operating performance because it
eliminates items that have less bearing on operating performance and
highlights trends in the core business that may not otherwise be apparent when
relying solely on GAAP financial measures. In addition, adjusted EBITDA 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 the company’s financial performance as
determined in accordance with GAAP, such as net income (loss). Because other
companies may calculate adjusted EBITDA differently, this presentation of
adjusted EBITDA may not be comparable to other similarly titled measures of
other companies.
SOURCE Tronox Incorporated
http://www.tronox.com
