Edgar Filing: Tronox Ltd

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-35573

TRONOX LIMITED

(ACN 153 348 111)

(Exact Name of Registrant as Specified in its Charter)

Western Australia, Australia

98-1026700

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification Number)

One Stamford Plaza

263 Tresser Boulevard, Suite 1100

Stamford, Connecticut 06901

(Address of principal executive offices)

Registrant’s telephone number, including area code: (203) 705-3800

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of October 31, 2012, there were 113,254,634 shares of the Registrant’s Class A ordinary shares and Class B ordinary shares outstanding.

Table of Contents


	Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)		2
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		37
Item 3. Quantitative and Qualitative Disclosures About Market Risk		53
Item 4. Controls and Procedures		54

PART II – OTHER INFORMATION
Item 1. Legal Proceedings		54
Item 1A. Risk Factors		55
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		55
Item 3. Defaults Upon Senior Securities		55
Item 4. Mine Safety Disclosures		55
Item 5. Other Information		55
Item 6. Exhibits		56

Signatures		57

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)


	Page
Condensed Consolidated Balance Sheets as of September 30, 2012 (Successor) and December 31, 2011 (Successor)		3
Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 2012 and 2011 (Successor) and the Nine Months Ended September 30, 2012 (Successor), Eight Months Ended September 30, 2011 (Successor) and One Month Ended January 31, 2011 (Predecessor)		4
Condensed Consolidated Statements of Comprehensive Income for the Nine Months Ended September 30, 2012 (Successor), Eight Months Ended September 30, 2011 (Successor) and One Month Ended January 31, 2011 (Predecessor)		5
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 (Successor), Eight Months Ended September 30, 2011 (Successor) and One Month Ended January 31, 2011 (Predecessor)		6
Condensed Consolidated Statements of Shareholders’ Equity for the Nine Months Ended September 30, 2012 (Successor), Eight Months Ended September 30, 2011 (Successor) and One Month Ended January 31, 2011 (Predecessor)		7
Notes to Condensed Consolidated Financial Statements		8

On September 25, 2011, Tronox Incorporated entered into a definitive agreement (the “Transaction Agreement”) with Exxaro Resources Limited (“Exxaro”) and certain of its affiliated companies, to acquire 74% of its South African mineral sands operations, including its Namakwa and KwaZulu-Natal (“KZN”) Sands mines, separation facilities and slag furnaces, along with Exxaro’s 50% share of the Tiwest Joint Venture in Western Australia (together the “mineral sands business”) (the “Transaction”). In anticipation of the consummation of the Transaction, Tronox Incorporated formed an Australian subsidiary, Tronox Limited.

On June 15, 2012, the date of the Transaction, the existing business of Tronox Incorporated was combined with the mineral sands business under Tronox Limited. The Transaction was effectuated in two primary steps. In the first step, Tronox Incorporated became a subsidiary of Tronox Limited, with Tronox Incorporated stockholders receiving one Class A Share and $12.50 in cash for each share of Tronox Incorporated common stock. In the second step, Tronox Limited issued 9,950,856 Class B ordinary shares (“Class B Shares”) to Exxaro and one of its subsidiaries in consideration for the mineral sands business. Upon completion of the Transaction, former Tronox Incorporated stockholders held 15,413,083 Class A Shares and Exxaro held 9,950,856 Class B Shares, respectively, representing approximately 60.8% and 39.2%, respectively, of the voting interest in Tronox Limited.

These unaudited condensed consolidated financial statements reflect the historical results of operations and financial position of Tronox Limited and the mineral sands business for all periods after June 15, 2012. Prior to June 15, 2012, the date of the Transaction, the unaudited condensed consolidated financial statements included herein represent the financial statements of Tronox Incorporated.

TRONOX LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Millions of dollars, except share and per share data)


	Successor
	September 30, 2012			December 31, 2011
Current Assets
Cash and cash equivalents	$	774.4		$	154.0
Accounts receivable, net of allowance for doubtful accounts of $1.2 and $0.4		364.4			277.8
Inventories		1,033.1			311.2
Prepaid and other assets		31.2			21.7
Deferred income taxes		19.2			4.3

Total Current Assets		2,222.3			769.0
Noncurrent Assets
Property, Plant and Equipment, Net		1,555.8			504.3
Mineral Leaseholds, Net		1,342.8			38.4
Intangible Assets, Net		312.0			325.1
Long-Term Deferred Tax Assets		169.9			9.0
Other Long-Term Assets		63.1			11.6

Total Assets	$	5,665.9		$	1,657.4

Current Liabilities
Accounts payable:
Third party	$	164.7		$	126.9
Related party		—			74.8
Accrued liabilities		177.1			45.7
Short-term debt		30.4			—
Long-term debt due within one year		11.0			5.9
Income taxes payable		29.0			27.6
Deferred income taxes		22.9			—

Total Current Liabilities		435.1			280.9

Noncurrent Liabilities
Long-term debt		1,607.7			421.4
Pension and postretirement healthcare benefits		122.9			142.7
Asset retirement obligations		100.4			29.2
Deferred income taxes		229.2			19.1
Other		27.4			11.8

Total Liabilities		2,522.7			905.1

Contingencies and Commitments (Note 14)
Shareholders’ Equity
Tronox Limited Class A ordinary shares, par value $0.01 — 64,624,924 shares issued and 63,486,889 shares outstanding at September 30, 2012(1)		0.6			—
Tronox Limited Class B ordinary shares, par value $0.01 — 49,754,280 shares issued and outstanding at September 30, 2012(1)		0.5			—
Tronox Incorporated common stock, par value $0.01 —100,000,000 shares authorized, 15,406,803 shares issued and 15,076,691 shares outstanding at December 31, 2011		—			0.1
Capital in excess of par value		1,426.1			579.2
Retained earnings		1,434.5			241.5
Accumulated other comprehensive loss		(21.9	)		(57.0	)
Tronox Incorporated treasury stock, at cost — 94,513 shares at December 31, 2011		—			(11.5	)

Total Shareholders’ Equity		2,839.8			752.3
Noncontrolling interest		303.4			—

Total Equity		3,143.2			752.3

Total Liabilities and Shareholders’ Equity	$	5,665.9		$	1,657.4

(1)

On June 26, 2012, the Board of Directors of Tronox Limited approved a 5-to-1 stock split for holders of its Class A ordinary shares and Class B ordinary shares at the close of business on July 20, 2012, by issuance of four additional shares for each share of the same class by way of bonus issue. All references to number of shares and per share data in the Successor’s unaudited condensed consolidated financial statements have been adjusted to reflect the stock split, unless otherwise noted. See Note 19 for additional information regarding the Company’s stock split.

See notes to unaudited condensed consolidated financial statements.

TRONOX LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Millions of dollars, except share and per share data)


	Successor												Predecessor
	Three Months Ended September 30, 2012			Three Months Ended September 30, 2011			Nine Months Ended September 30, 2012			Eight Months Ended September 30, 2011			One Month Ended January 31, 2011
Net Sales	$	487.3		$	465.4		$	1,349.8		$	1,160.8		$	107.6
Cost of goods sold		(465.8	)		(322.4	)		(1,048.2	)		(862.1	)		(82.3	)

Gross Margin		21.5			143.0			301.6			298.7			25.3
Selling, general and administrative expenses		(59.6	)		(53.8	)		(206.2	)		(111.2	)		(5.4	)
Litigation/arbitration settlement		—			9.8			—			9.8			—
Provision for environmental remediation and restoration, net of reimbursements		—			0.2			—			4.5			—

Income (Loss) from Operations		(38.1	)		99.2			95.4			201.8			19.9
Interest and debt expense		(18.1	)		(8.0	)		(39.0	)		(21.5	)		(2.9	)
Other income (expense)		0.2			(1.3	)		(4.8	)		(1.7	)		1.6
Gain on bargain purchase		—			—			1,045.6			—			—
Reorganization income		—			—			—			—			613.6

Income (Loss) from Continuing Operations before Income Taxes		(56.0	)		89.9			1,097.2			178.6			632.2
Income tax benefit (provision)		38.0			9.0			127.5			(3.3	)		(0.7	)

Income (Loss) from Continuing Operations		(18.0	)		98.9			1,224.7			175.3			631.5
Loss from discontinued operations, net of income tax benefit		—			—			—			—			(0.2	)

Net Income (Loss)		(18.0	)		98.9			1,224.7			175.3			631.3
Income (loss) attributable to noncontrolling interest		(1.3	)		—			(0.8	)		—			—

Net Income (Loss) attributable to Tronox Limited	$	(16.7	)	$	98.9		$	1,225.5		$	175.3		$	631.3

Income (Loss) per Share, Basic and Diluted(1):
Basic —
Continuing operations	$	(0.14	)	$	1.32		$	12.94		$	2.39		$	15.29
Discontinued operations		—			—			—			—			(0.01	)

Net income (loss) per share	$	(0.14	)	$	1.32		$	12.94		$	2.39		$	15.28

Diluted —
Continuing operations	$	(0.14	)	$	1.25		$	12.57		$	2.26		$	15.25
Discontinued operations		—			—			—			—			—

Net income (loss) per share	$	(0.14	)	$	1.25		$	12.57		$	2.26		$	15.25

Weighted Average Shares Outstanding (in thousands):
Basic		122,352			74,910			94,193			73,325			41,311
Diluted		122,352			79,175			96,903			77,660			41,399

(1)

See notes to unaudited condensed consolidated financial statements.

TRONOX LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(Millions of dollars)


	Successor												Predecessor
	Three Months Ended September 30, 2012			Three Months Ended September 30, 2011			Nine Months Ended September 30, 2012			Eight Months Ended September 30, 2011			One Month Ended January 31, 2011
Net Income:
Net Income (Loss)	$	(18.0	)	$	98.9		$	1,224.7		$	175.3		$	631.3
Other Comprehensive Income (Loss):
Foreign currency translation adjustments		14.8			(5.5	)		48.2			(3.3	)		0.9
Retirement and postretirement plans:
Amortization of actuarial gains, net of taxes of nil, nil, nil, nil and nil		—			—			—			—			0.5
Amortization of prior service cost, net of taxes of nil, nil, nil, nil and nil		—			—			—			—			(1.1	)

Other comprehensive income (loss)		14.8			(5.5	)		48.2			(3.3	)		0.3

Total comprehensive income (loss)	$	(3.2	)	$	93.4		$	1,272.9		$	172.0		$	631.6

Comprehensive income (loss) attributable to noncontrolling interest:
Net income (loss)		(1.3	)		—			(0.8	)		—			—
Foreign currency translation adjustments		2.8			—			13.1			—			—

Comprehensive income (loss) attributable to noncontrolling interest		1.5			—			12.3			—			—

Comprehensive income (loss) attributable to Tronox Limited	$	(4.7	)	$	93.4		$	1,260.6		$	172.0		$	631.6

See notes to unaudited condensed consolidated financial statements.

TRONOX LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Millions of dollars)


	Successor						Predecessor
	Nine Months Ended September 30, 2012			Eight Months Ended September 30, 2011			One Month Ended January 31, 2011
Cash Flows from Operating Activities:
Net income	$	1,224.7		$	175.3		$	631.3
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization		120.2			56.8			4.1
Deferred income taxes		(154.1	)		(1.5	)		0.8
Amortization of debt issuance costs		7.5			0.6			0.3
Pension and postretirement healthcare benefit (income) expense, net		3.6			3.2			(0.4	)
Share-based compensation expense		28.6			7.7			—
Gain on bargain purchase, net of cash received		(1,160.4	)		—			—
Other noncash items affecting net income		152.3			4.2			(0.2	)
Reorganization items		—			(14.3	)		(953.7	)
Contributions to employee pension and postretirement plans		(29.9	)		(5.2	)		—
Changes in assets and liabilities (net of effects of acquisition):
(Increase) decrease in accounts receivable		53.3			(69.7	)		(10.2	)
(Increase) decrease in inventories		(216.9	)		29.6			(15.3	)
(Increase) decrease in prepaids and other assets		6.5			20.9			35.4
Increase (decrease) in accounts payable and accrued liabilities		22.4			(20.3	)		23.6
Increase (decrease) in taxes payable		8.5			(1.6	)		0.2
Other, net		1.7			31.9			1.0

Cash provided by (used in) operating activities		68.0			217.6			(283.1	)

Cash Flows from Investing Activities:
Capital expenditures		(91.2	)		(120.7	)		(5.5	)
Cash received in acquisition of minerals sands business		114.8			—			—
Proceeds from sale of assets		—			0.5			—

Cash provided by (used in) investing activities		23.6			(120.2	)		(5.5	)

Cash Flows from Financing Activities
Reductions of debt		(582.6	)		(43.6	)		—
Proceeds from borrowings		1,689.8			22.0			25.0
Debt issuance costs and commitment fees		(20.3	)		(5.5	)		(2.4	)
Merger consideration		(192.6	)		—			—
Class A ordinary share repurchases, including commissions paid		(326.2	)		—			—
Shares purchased for the Employee Participation Program		(14.6	)		—			—
Dividends paid		(31.5	)		—			—
Proceeds from conversion of warrants		0.6			1.3			—
Proceeds from rights offering		—			—			185.0

Cash provided by (used in) financing activities		522.6			(25.8	)		207.6

Effects of Exchange Rate Changes on Cash and Cash Equivalents		6.2			(2.0	)		0.3

Net Increase (Decrease) in Cash and Cash Equivalents		620.4			69.6			(80.7	)
Cash and Cash Equivalents at Beginning of Period		154.0			61.0			141.7

Cash and Cash Equivalents at End of Period	$	774.4		$	130.6		$	61.0

See notes to unaudited condensed consolidated financial statements.

TRONOX LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

(Millions of dollars)


	Tronox Limited Class A Ordinary Shares			Tronox Limited Class B Ordinary Shares		Tronox Incorporated Common Stock			Capital in Excess of par Value			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Shareholders’ Equity			Non- controlling Interest			Total Equity
Successor: Nine Months Ended September 30, 2012
Balance at December 31, 2011	$	—		$	—	$	0.1		$	579.2		$	241.5		$	(57.0	)	$	(11.5	)	$	752.3		$	—		$	752.3
Fair value of noncontrolling interest on Transaction Date		—			—		—			—			—			—			—			—			291.1			291.1
Net income (loss)		—			—		—			—			1,225.5			—			—			1,225.5			(0.8	)		1,224.7
Other comprehensive income (loss)		—			—		—			—			—			35.1			—			35.1			13.1			48.2
Merger consideration paid		—			—		—			(192.6	)		—			—			—			(192.6	)		—			(192.6	)
Issuance/exchange of Tronox Limited shares		0.1			0.1		(0.1	)		1,370.0			—			—			—			1,370.1			—			1,370.1
Tronox Limited share-based compensation		—			—		—			1.6			—			—			—			1.6			—			1.6
Class A Shares repurchased		(0.1	)		—		—			(326.1	)		—			—			—			(326.2	)		—			(326.2	)
Shares purchases for the Employee Participation Plan		—			—		—			(14.3	)		—			—			—			(14.3	)		—			(14.3	)
Issuance of Tronox Limited shares in stock-split		0.6			0.4		—			—			(1.0	)		—			—			—			—			—
Class A and Class B Share dividend declared		—			—		—			—			(31.5	)		—			—			(31.5	)		—			(31.5	)
Tronox Incorporated warrants exercised		—			—		—			0.6			—			—			—			0.6			—			0.6
Tronox Incorporated stock-based compensation		—			—		—			27.0			—			—			(7.8	)		19.2			—			19.2
Tronox Incorporated common stock cancelled		—			—		—			(19.3	)		—			—			19.3			—			—			—

Balance at September 30, 2012	$	0.6		$	0.5	$	—		$	1,426.1		$	1,434.5		$	(21.9	)	$	—		$	2,839.8		$	303.4		$	3,143.2

(1)


	Tronox Incorporated Common Stock		Tronox Class A Common Stock			Tronox Class B Common Stock			Capital in Excess of par Value			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Stockholders’ Equity
Predecessor: One Month Ended January 31, 2011
Balance at December 31, 2010	$	—	$	0.2		$	0.2		$	496.2		$	(1,128.2	)	$	8.8		$	(7.2	)	$	(630.0	)
Net income		—		—			—			—			631.3			—			—			631.3
Other comprehensive income		—		—			—			—			—			0.3			—			0.3
Stock-based compensation		—		—			—			0.1			—			—			—			0.1
Fresh-start reporting adjustments:
Elimination of predecessor common stock, capital in excess of par value, and accumulated deficit		—		(0.2	)		(0.2	)		(496.3	)		496.9			(9.1	)		7.2			(1.7	)
Issuance of new common stock		0.1		—			—			564.1			—			—			—			564.2

Balance at January 31, 2011	$	0.1	$	—		$	—		$	564.1		$	—		$	—		$	—		$	564.2

Successor: Eight Months ended September 30, 2011
Balance at February 1, 2011	$	0.1	$	—		$	—		$	564.1		$	—		$	—		$	—		$	564.2
Net income		—		—			—			—			175.3			—			—			175.3
Other comprehensive income		—		—			—			—			—			(3.3	)		—			(3.3	)
Shares withheld for claims		—		—			—			—			—			—			(6.9	)		(6.9	)
Warrants exercised		—		—			—			1.3			—			—			—			1.3
Stock-based compensation		—		—			—			7.7			—			—			(2.7	)		5.0

Balance at September 30, 2011	$	0.1	$	—		$	—		$	573.1		$	175.3		$	(3.3	)	$	(9.6	)	$	735.6

See notes to unaudited condensed consolidated financial statements.

TRONOX LIMITED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Millions of dollars, except share and per share data or unless otherwise noted)

1. The Company

Tronox Limited, a public limited company registered under the laws of the State of Western Australia, Australia, and its subsidiaries (collectively referred to as “Tronox” or “the Company”) is a global leader in the production and marketing of titanium bearing mineral sands and titanium dioxide pigment (“TiO₂”). The Company’s world-class, high performance TiO₂ products are critical components of everyday applications such as coatings, plastics, paper and other applications. The Company’s mineral sands business consists primarily of two product streams—titanium feedstock and zircon. Titanium feedstock is used primarily to manufacture TiO₂. Zircon, a hard, glossy mineral, is used for the manufacture of ceramics, refractories, TV glass and a range of other industrial and chemical products. Tronox has global operations in North America, Europe, South Africa and the Asia-Pacific region. The Company operates three TiO₂ facilities at the following locations: Hamilton, Mississippi, Botlek, The Netherlands, and Kwinana, Western Australia, representing approximately 465,000 tonnes of annual TiO₂ production capacity. Additionally, Tronox operates three separate mining operations: KwaZulu-Natal (“KZN”) Sands located in South Africa, Namakwa Sands located in South Africa and the Tiwest Joint Venture located in Western Australia, which have a combined annual production capacity of approximately 723,000 tonnes of titanium feedstock and approximately 265,000 tonnes of zircon.

Tronox Limited was formed on September 21, 2011 for the purpose of the Transaction (see below). Prior to the completion of the Transaction, the Company was wholly-owned by Tronox Incorporated, and had no operating assets or operations. On September 25, 2011, Tronox Incorporated, a Delaware corporation formed on May 17, 2005, in preparation for the contribution and transfer by Kerr-McGee Corporation (“Kerr-McGee” or “KM”) of certain entities, including those comprising substantially all of its chemical business (“Tronox Incorporated”), entered into a definitive agreement (as amended, the “Transaction Agreement”) with Exxaro Resources Limited (“Exxaro”) and certain of its affiliated companies, to acquire 74% of its South African mineral sands operations, including its Namakwa and KZN Sands mines, separation facilities and slag furnaces, along with its 50% share of the Tiwest Joint Venture (together the “mineral sands business”) (the “Transaction”). On June 15, 2012, the date of the Transaction (the “Transaction Date”), the existing business of Tronox Incorporated was combined with the mineral sands business.

Pursuant to a Registration Statement on Form S-4 (File No. 333-178835) declared effective by the Securities and Exchange Commission (the “SEC”) on May 4, 2012 (the “Registration Statement”), Tronox Limited registered Class A ordinary shares (“Class A Shares”) to be issued to stockholders of Tronox Incorporated in connection with the completion of the Transaction. On the Transaction Date, Tronox Limited issued 15,413,083 Class A Shares to stockholders in Tronox Incorporated. In addition, on the Transaction Date, Tronox Limited issued 9,950,856 Class B ordinary shares (“Class B Shares”) to Exxaro and one of its subsidiaries in consideration for the mineral sands business. As part of the Transaction, Exxaro and its subsidiaries retained a 26.0% ownership interest in each of Tronox KZN Sands Pty Ltd and Tronox Mineral Sands Pty Ltd in order to comply with the ownership requirements of the Black Economic Empowerment (“BEE”) legislation in South Africa. Immediately following the Transaction, Tronox Incorporated stockholders and Exxaro held approximately 60.8% and 39.2%, respectively, of the voting securities of Tronox Limited. Under the terms of the Transaction Agreement, Exxaro agreed that for a three-year period after the completion of the Transaction, it would not engage in any transaction or other action, that would result in its beneficial ownership of the voting stock of Tronox Limited exceeding 45.0% of the total issued shares of Tronox Limited.

On June 26, 2012, the Board of Directors of Tronox Limited approved a 5-to-1 stock split for holders of its Class A Shares and Class B Shares at the close of business on July 20, 2012, by issuance of four additional shares for each share of the same class by way of bonus issue. All references to the number of shares and per share data in the Successor’s condensed consolidated financial statements and notes thereto have been adjusted to reflect the stock split, unless otherwise noted or as the context otherwise acquires. See Note 19 for additional information regarding the Company’s stock split.

During the second and third quarters of 2012, the Company repurchased approximately 12.6 million Class A Shares, which was approximately 10% of the total voting securities. As a result of such buyback, Exxaro held approximately 43.5% of the voting securities of Tronox Limited.

On October 4, 2012, Exxaro and J.P. Morgan Securities LLC (“JPMS”) entered into a Purchase Plan Agreement (the “JPMS Tronox Class A Trading Plan”) authorizing JPMS to purchase up to 1,400,000 Class A Shares (approximately 2.2% of Tronox Limited’s outstanding Class A Shares and approximately 1.2% of Tronox Limited’s voting securities) on Exxaro’s behalf beginning on October 5, 2012. The Company’s constitution provides that, subject to certain exceptions, when Exxaro acquires a Class A Share, it automatically converts to a Class B Share. As such, Exxaro generally will not hold Class A Shares. During October 2012, Exxaro purchased 1,400,000 Class A Shares in market purchases pursuant to the JPMS Tronox Class A Trading Plan.

2. Acquisition of the Mineral Sands Business

As discussed above, on September 25, 2011, Tronox Incorporated entered into the Transaction Agreement with Exxaro to acquire the mineral sands business. On June 15, 2012, the existing business of Tronox Incorporated was combined with the mineral sands business under Tronox Limited. The Transaction was effectuated in two primary steps. In the first step, Tronox Incorporated became a subsidiary of Tronox Limited, with Tronox Incorporated stockholders receiving one Class A Share and $12.50 in cash (“Merger Consideration”) for each share of Tronox Incorporated common stock. In the second step, Tronox Limited issued Class B Shares to Exxaro and one of its subsidiaries in consideration for the mineral sands business. Exxaro retained an approximate 26% ownership interest in the South African operations that are part of the mineral sands business in order to comply with the BEE legislation of South Africa. The ownership interest in the South African operations may be exchanged for Class B Shares under certain circumstances.

Prior to the Transaction Date, Tronox Incorporated and Exxaro Australia Sands Pty Ltd., a subsidiary of Exxaro, operated the Tiwest Joint Venture, which operated a chloride process TiO₂ plant located in Kwinana, Western Australia (the “Kwinana Facility”), a mining operation in Cooljarloo, Western Australia, and a mineral separation plant and a synthetic rutile processing facility, both in Chandala, Western Australia. As noted above, in the second step of the Transaction, the Company acquired the mineral sands business, which included Exxaro’s 50.0% interest in the Tiwest Joint Venture. As a result, as of the Transaction Date, the Company owns 100% of the Tiwest Joint Venture.

Purchase price and fair value of assets acquired and liabilities assumed

The Company accounted for the Transaction under Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), which requires recording assets and liabilities at fair value. Under the acquisition method of accounting, each tangible and separately identifiable intangible asset acquired and liabilities assumed were recorded based on their preliminary estimated fair values on the Transaction Date.

Because the total consideration transferred was less than the fair value of the net assets acquired, the excess of the value of the net assets acquired over the fair value of net assets acquired was recorded as an initial bargain purchase gain of approximately $1,061.1 million during the second quarter of 2012. The initial valuations were derived from estimated fair value assessments and assumptions used by management, and were preliminary. While management believes that its preliminary estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could have resulted in different values being assigned to individual assets acquired and liabilities assumed. Subsequent to the Transaction, the Company adjusted its initial valuation, which reduced the gain on bargain purchase to $1,045.6 million. The valuation process remains in progress. The final valuations are pending appraisals of certain tangible and intangible assets acquired, which will result in further adjustments to the amounts recorded and the gain on bargain purchase, which could be material. The bargain purchase gain is not taxable for income tax purposes. See Note 17 for a discussion of the tax impact of the transaction.


	Initial Valuation		Adjustments			Adjusted Valuation
Consideration:
Number of Class B Shares(1)		9,950,856		—			9,950,856
Fair value of Class B Shares on the Transaction Date	$	137.70	$	—		$	137.70

Fair value of equity issued	$	1,370.1	$	—		$	1,370.1
Noncontrolling interest		291.1		—			291.1

	$	1,661.2	$	—		$	1,661.2

Fair Value of Assets Acquired and Liabilities Assumed:
Current Assets:
Cash	$	114.8	$	—		$	114.8
Accounts receivable		199.0		—			199.0
Inventories(2)		621.7		(7.8	)		613.9
Prepaid and other assets		24.1		—			24.1

Total Current Assets		959.6		—			951.8
Property, plant and equipment, net, including mineral leaseholds of $1,366.0		2,319.2		—			2,319.2
Deferred tax asset		26.4		—			26.4
Other long-term assets		19.1		—			19.1

Total Assets	$	3,324.3	$	(7.8	)	$	3,316.5


Current Liabilities:
Accounts payable		36.4		—			36.4
Accrued liabilities		156.9		—			156.9
Short-term debt		76.0		—			76.0
Current deferred tax liability		28.3		—			28.3
Income taxes payable		2.1		—			2.1
Other current liabilities		8.5		—			8.5

Total Current Liabilities		308.2		—			308.2
Long-term debt		18.7		—			18.7
Deferred tax liability		211.5		(3.0	)		208.5
Pension and postretirement healthcare benefits		5.4		—			5.4
Asset retirement obligations		57.1		—			57.1
Other(3)		1.1		10.7			11.8

Total Liabilities		602.0		7.7			609.7
Net Assets (Liabilities)	$	2,722.3	$	(15.5	)	$	2,706.8

Gain on Bargain Purchase	$	1,061.1	$	(15.5	)	$	1,045.6

(1)	The number of Class B Shares issued in connection with the Transaction has not been restated to affect for the 5-for-1 stock split as discussed in Note 19.

(2)	The valuation of certain inventories has been adjusted to more accurately reflect the fair value at the Transaction Date.

(3)	The Company completed the valuation of a Long-Term Incentive Plan for certain employees in South Africa and Australia (see Note 20).

Mineral Sands Business Results of Operations

The following table includes the amount of net sales and earnings from the acquired mineral sands business included in the Company’s results since June 15, 2012.


	Mineral			Pigment			Corporate and Other			Eliminations			Total
Net Sales	$	237.6		$	32.7		$	—		$	(14.7	)	$	255.6
Loss from Operations	$	(5.2	)	$	(8.7	)	$	(0.1	)	$	(7.2	)	$	(21.2	)

The following table includes the amount of net sales and earnings from the acquired mineral sands business included in the Company’s results for the three months ended September 30, 2012.


	Mineral			Pigment			Corporate and Other			Eliminations			Total
Net Sales	$	207.1		$	23.7		$	—		$	(14.7	)	$	216.1
Loss from Operations	$	(9.6	)	$	(7.6	)	$	(0.1	)	$	(7.2	)	$	(24.5	)

For the three and nine months ended September 30, 2012, Income (Loss) from Operations includes $85.2 million and $108.8 million, respectively, of amortization of inventory step-up and unfavorable ore sales contracts from purchase accounting. The amortization of inventory step-up from purchase accounting is based on the fair values assigned, which are not final.

Supplemental Pro forma financial information

The following unaudited pro forma information gives effect to the Transaction as if it had occurred on the first day of the first quarter of fiscal 2011 (January 1, 2011). The unaudited pro forma financial information reflects certain adjustments related to the acquisition, such as (1) converting the mineral sands business financial statements to accounting principles generally accepted in the United States (“U.S. GAAP”), (2) conforming the mineral sands business accounting policies to those applied by Tronox Incorporated, (3) to record certain incremental expenses resulting from purchase accounting adjustments, such as incremental depreciation expense in connection with fair value adjustments to property, plant and equipment, (4) to eliminate intercompany transactions between Tronox Incorporated and the mineral sands business, (5) to record the effect on interest expense related to borrowings in connection with the transaction and (6) to record the related tax effects. The unaudited pro forma financial information also includes adjustments for certain non-recurring items as of the first day of the first quarter of fiscal 2011 (January 1, 2011) such as (1) the impact of transaction costs of approximately $95.1 million, (2) the impact of the adjusted bargain purchase gain of $1,045.6 million and (3) the impact of reorganization income arising from Tronox Incorporated’s emergence from bankruptcy in the one month ended January 31, 2011 of approximately $613.6 million. The unaudited pro forma financial information is for illustrative purposes only and should not be relied upon as being indicative of the historical results that would have been obtained if the Transaction had actually occurred on that date, nor the results of operations in the future.

In accordance with ASC 805, the supplemental pro forma results of operations for the three and nine months ended September 30, 2012 and 2011, as if the mineral sands business had been acquired on January 1, 2011, are as follows:


	Successor					Successor
	Three Months Ended September 30, 2012			Three Months Ended September 30, 2011		Nine Months Ended September 30, 2012		Nine Months Ended September 30, 2011
Net Sales	$	487.3		$	664.6	$	1,637.1	$	1,751.1
Income (Loss) from Operations	$	(27.6	)	$	166.2	$	364.3	$	223.0
Net Income (Loss)	$	(7.5	)	$	150.5	$	339.5	$	1,870.7
Net Income (Loss) attributable to Tronox Limited	$	(7.8	)	$	149.1	$	310.9	$	1,871.4
Basic Net Income (Loss) attributable to Tronox Limited per share	$	(0.06	)	$	1.18	$	2.50	$	14.86
Diluted Net Income (Loss) attributable to Tronox Limited per share	$	(0.06	)	$	1.16	$	2.44	$	14.52

3. Basis of Presentation

The unaudited condensed consolidated balance sheet as of September 30, 2012 relates to Tronox Limited. The unaudited condensed consolidated balance sheet as of December 31, 2011 relates to Tronox Incorporated. The unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2012 and the unaudited condensed consolidated statement of cash flows for the nine months ended September 30, 2012 reflect the consolidated operating results of Tronox Incorporated prior to June 15, 2012, and, from June 15, 2012 through September 30, 2012, reflect the consolidated operating results of Tronox Limited. The unaudited condensed consolidated statements of operations for the three and eight months ended September 30, 2011 and one month ended January 31, 2011 and the unaudited condensed consolidated statements of cash flows for the eight months ended September 30, 2011 and one month ended January 31, 2011 reflect the consolidated operating results of Tronox Incorporated.

As stated above, prior to the Transaction Date, Tronox Incorporated operated the Tiwest Joint Venture with Exxaro Australia Sands Pty Ltd. The Tiwest Joint Venture was a contractual relationship between Tronox Incorporated and Exxaro whereby each party held an undivided interest in each asset of the joint venture, and each party was proportionally liable for each of the joint venture’s liabilities. The Tiwest Joint Venture was not a separate legal entity and did not enter into any transactions. Transactions were entered into by the joint venture partners who had the right to sell their own product, collect their proportional share of the revenues and absorb their share of costs. As such, Tronox Incorporated did not account for the Tiwest Joint Venture under the equity method. Instead, Tronox Incorporated accounted for its share of the Tiwest Joint Venture’s assets that were jointly controlled and its share of liabilities for which it was jointly responsible on a proportionate gross basis in its unaudited Consolidated Balance Sheet. Additionally, Tronox Incorporated accounted for the revenues generated from its share of the products sold and its share of the expenses of the joint venture on a gross basis in its unaudited Condensed Consolidated Statements of Operations. As of the Transaction Date, the Company owns 100% of the Tiwest Joint Venture operations. As such, the unaudited condensed consolidated balance sheet as of September 30, 2012 includes 100% of the joint venture assets and liabilities, while the unaudited condensed consolidated balance sheet as of December 31, 2011 includes Tronox Incorporated’s 50% undivided interest in each asset and liability of the joint venture. Additionally, the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2012 reflect Tronox Incorporated’s revenues generated from its share of the products sold and its share of the expenses of the joint venture on a gross basis prior to June 15, 2012, and, from June 15, 2012 through September 30, 2012, reflect 100% of the revenues and expenses of the joint venture. The unaudited condensed consolidated statements of operations for the three and eight months ended September 30, 2011 and one month ended January 31, 2011 reflect Tronox Incorporated’s revenues generated from its share of the products sold and its share of the expenses of the joint venture on a gross basis.

The accompanying unaudited condensed consolidated financial statements are unaudited and have been prepared pursuant to the rules and regulations of the SEC regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Registration Statement. The December 31, 2011 consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP for complete financial statements.

Tronox Limited is registered under the laws of the State of Western Australia, Australia, and is considered a domestic company in Australia. As a result, Tronox Limited is required to report in Australia under International Financial Reporting Standards (“IFRS”). Additionally, as Tronox Limited is not considered a “foreign private issuer,” the Company is required to comply with the reporting and other requirements imposed by the U.S. securities laws on U.S. domestic issuers, which, among other things, requires reporting in the United States under U.S. GAAP. We publish our consolidated financial statements, both U.S. GAAP and IFRS, in U.S. dollars.

The Company’s unaudited condensed consolidated financial statements include the accounts of all majority-owned subsidiary companies. Investments in affiliated companies that are 20% to 50% owned are carried as a component of “Other Long-Term Assets” on the unaudited Condensed Consolidated Balance Sheets at cost adjusted for equity in undistributed earnings. Except for dividends and changes in ownership interest, changes in equity in undistributed earnings are included in “Other income (expense)” on the unaudited Condensed Consolidated Statements of Operations. All intercompany transactions have been eliminated.

In connection with the Transaction, Exxaro and its subsidiaries retained a 26.0% ownership interest in each of Tronox KZN Sands Pty Ltd and Tronox Mineral Sands Pty Ltd in order to comply with the ownership requirements of the BEE legislation in South Africa. The Company accounts for such ownership interest as “Noncontrolling interest” on the unaudited Condensed Consolidated Balance Sheets.

On January 26, 2011, material conditions to Tronox Incorporated’s plan of reorganization were resolved and it subsequently emerged from bankruptcy protection (see Note 5). In connection with its emergence from bankruptcy, Tronox Incorporated applied fresh-start accounting under ASC 852, Reorganizations (“ASC 852”) as of January 31, 2011. Tronox Incorporated evaluated the activity between January 26, 2011 and January 31, 2011 and, based upon the immateriality of such activity, concluded that the use of January 31, 2011 to reflect the fresh-start accounting adjustments was appropriate for financial reporting purposes. Accordingly, the financial information of Tronox Incorporated set forth in this report, unless otherwise expressly set forth or as the context otherwise indicates, reflects the consolidated results of operations and financial condition on a fresh-start basis for the period beginning February 1, 2011 (“Successor”), and on a historical basis for the period through January 31, 2011 (“Predecessor”). In applying fresh-start accounting on January 31, 2011, Tronox Incorporated recorded assets and liabilities at estimated fair value, except for deferred income taxes and certain liabilities associated with employee benefits, which were recorded in accordance with ASC 852 and ASC 740, Income Taxes (“ASC 740”), respectively. Additionally, Tronox Incorporated recorded gains relating to executing the Plan, gains related to revaluation of assets and “resetting” retained earnings and accumulated other comprehensive income to zero.

In management’s opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. It is at least reasonably possible that the effect on the financial statements of a change in estimate within one year of the date of the financial statements due to one or more future confirming events could have a material effect on the financial statements. The consolidated results of operations for interim periods are not necessarily indicative of results for the entire year.

Certain prior period amounts have been reclassified to conform to the manner and presentation in the current period. Such reclassifications did not have an impact on the Company’s net income (loss) or consolidated results of operations.

4. Recent Accounting Pronouncements

Other Comprehensive Income—In the first quarter of 2012, the Company adopted the amended guidance issued by the Financial Accounting Standards Board (the “FASB”) regarding the presentation of comprehensive income. Such guidance was designed to improve comparability, consistency and transparency. The amendment required that all changes in comprehensive income be presented either in (i) a single continuous statement of comprehensive income or in (ii) two separate but consecutive statements. The Company elected the two-statement method. The amendment was effective for interim and annual periods beginning after December 15, 2011, and is applied retrospectively.

Fair Value Measurements – In the first quarter of 2012, the Company adopted the amended fair value measurements guidance issued by the FASB, which (i) changes certain fair value measurement and disclosure requirements, (ii) clarifies the application of existing fair value measurement and disclosure requirements and (iii) provides consistency to ensure that U.S. GAAP and IFRS fair value measurement and disclosure requirements are described in the same way. The amended guidance was effective for interim and annual periods beginning after December 15, 2011, and is applied prospectively. The adoption of the amended guidance did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

5. Bankruptcy Proceedings and Emergence from Chapter 11

On January 12, 2009 (the “Petition Date”), Tronox Incorporated and certain of its subsidiaries (collectively, the “Debtors”) filed voluntary petitions in the U.S. Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) seeking reorganization relief under the provisions of Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”). The Debtors’ Chapter 11 cases were consolidated for the purpose of joint administration.

On November 30, 2010 (the “Confirmation Date”), the Bankruptcy Court entered an order (the “Confirmation Order”) confirming the Debtors’ First Amended Joint Plan of Reorganization pursuant to Chapter 11 of the Bankruptcy Code, dated November 5, 2010 (as amended and confirmed, the “Plan”). Under Chapter 11 of the Bankruptcy Code, a debtor may reorganize its business for the benefit of its stakeholders with the consummation of a plan of reorganization being the principal objective. Among other things (subject to certain limited exceptions and except as otherwise provided in the Plan or the Confirmation Order), the Confirmation Order discharged the Debtors from any debt arising before the Petition Date, terminated all of the rights and interests of pre-bankruptcy equity security holders and substituted the obligations set forth in the Plan and new common stock for those pre-bankruptcy claims. Under the Plan, claims and equity interests were divided into classes according to their relative priority and other criteria.

Material conditions to the Plan were resolved during the period from the Confirmation Date until January 26, 2011, and subsequently on February 14, 2011 (the “Effective Date”), the Debtors emerged from bankruptcy and continued operations as reorganized Tronox Incorporated.

The Plan was designed to accomplish, and was premised on, a resolution of the Debtor’s legacy environmental (the “Legacy Environmental Liabilities”) and legacy tort liabilities (the “Legacy Tort Liabilities” and collectively, with the Legacy Environmental Liabilities, the “KM Legacy Liabilities”). The Plan ensured that the Debtors emerged from Chapter 11 free of the significant KM Legacy Liabilities and were sufficiently capitalized. A final settlement was reached in November 2010 with respect to the Legacy Environmental Liabilities (the “Environmental Settlement”) and the Legacy Tort Liabilities (the “Tort Settlement” and, together with the Environmental Settlement, the “Settlement”). In exchange, claimants provided the Debtors and the reorganized Tronox Incorporated with discharges and/or covenants not to sue subsequent to the Effective Date with respect to the Debtors’ liability for the Legacy Environmental Liabilities. The Settlement established certain environmental response and tort claims trusts that are now responsible for the KM Legacy Liabilities in exchange for cash, certain non-monetary assets, and the rights to the proceeds of certain ongoing litigation and insurance and other third party reimbursement agreements. The Plan also provided for the creation and funding of a torts claim trust (the “Tort Claims Trust”), which was the sole source of distributions to holders of Legacy Tort Liabilities claims, who were paid in accordance with the terms of such trust’s governing documentation. As a result of the settlement of the Debtors’ pre-petition debt and termination of the rights and interests of pre-bankruptcy equity, the Plan enabled Tronox Incorporated to reorganize around its existing operating locations, including: (a) its headquarters and technical facility at Oklahoma City, Oklahoma; (b) the TiO₂ facilities at Hamilton, Mississippi and Botlek, the Netherlands; (c) the electrolytic chemical businesses at Hamilton, Mississippi and Henderson, Nevada (except that the real property and buildings associated with the Henderson business were transferred to an environmental response trust and reorganized Tronox Incorporated is not responsible for environmental remediation related to historic contamination at such site); and (d) its interest in the Tiwest Joint Venture in Australia.

As part of the Debtor’s emergence from the Chapter 11 proceedings, Tronox Incorporated relied on a combination of debt financing and money from new equity issued to certain existing creditors. Specifically, such funding included: (i) total funded exit financing of no more than $470.0 million; (ii) the proceeds of a $185.0 million rights offering (the “Rights Offering”) open to substantially all unsecured creditors and backstopped by certain groups; (iii) settlement of government claims related to the Legacy Environmental Liabilities through the creation of certain environmental response trusts and a litigation trust; (iv) settlement of claims related to the Legacy Tort Liabilities through the establishment of a torts claim trust; (v) issuance of common stock whereby holders of the allowed general unsecured claims received their pro rata share of 50.9% of the Tronox Incorporated common stock on the Effective Date, and the opportunity to participate in the Rights Offering for an aggregate of 49.1% of the Tronox Incorporated common stock, also issued on the Effective Date; and (vi) issuance of warrants, on the Effective Date, to the holders of equity in the Predecessor to purchase their pro rata share of a combined total of 7.5% of the Tronox Incorporated common stock, after and including the issuance of any Tronox Incorporated common stock upon exercise of such warrants.

6. Accounts Receivable

Accounts receivable, net of allowance for doubtful accounts, consisted of the following:


	Successor
	September 30, 2012			December 31, 2011
Accounts receivable — trade	$	346.0		$	268.7
Related parties		0.3			6.9
Other		19.3			2.6

Total		365.6			278.2
Allowance for doubtful accounts		(1.2	)		(0.4	)

Net	$	364.4		$	277.8

7. Inventories

Minerals inventories are determined using the weighted-average cost to produce or acquire, while finished goods pigment inventories are determined using the first-in, first-out method. At September 30, 2012, the fair value of inventory from the acquired mineral sands business was $613.9 million.


	Successor
	September 30, 2012		December 31, 2011
Raw materials	$	227.7	$	123.5
Work-in-process		164.9		9.0
Finished goods(1)		554.3		130.3
Materials and supplies, net(2)		86.2		48.4

Total	$	1,033.1	$	311.2

(1)	Includes inventory on consignment to others of approximately $33.1 million at September 30, 2012 and $12.0 million at December 31, 2011.

(2)	Materials and supplies consist of processing chemicals, maintenance supplies and spare parts, which will be consumed directly and indirectly in the production of the Company’s products.

8. Property, Plant and Equipment and Mineral Leaseholds


	Successor
	September 30, 2012			December 31, 2011
Land and land improvements	$	93.2		$	50.5
Buildings		208.0			44.9
Machinery and equipment		1,229.1			405.3
Construction-in-progress		145.2			49.1
Furniture and fixture					4.0
Other		8.7			2.8

Total		1,684.2			556.6
Less accumulated depreciation, depletion and amortization		(128.4	)		(52.3	)

Net	$	1,555.8		$	504.3

Depreciation expense related to property, plant and equipment for the three months ended September 30, 2012 and 2011 was $47.7 million and $15.3 million, respectively. Depreciation expense related to property, plant and equipment and for the nine months ended September 30, 2012, eight months ended September 30, 2011 and one month ended January 31, 2011 was $84.4 million, $34.9 million, and $3.8 million, respectively.


	Successor
	September 30, 2012			December 31, 2011
Mineral leaseholds	$	1,370.7		$	42.0
Less accumulated depreciation, depletion and amortization		(27.9	)		(3.6	)

Net	$	1,342.8		$	38.4

Depreciation expense related to mineral leaseholds for the three months ended September 30, 2012 and 2011 was $13.2 million and $0.8 million, respectively. Depreciation expense related to mineral leaseholds for the nine months ended September 30, 2012, eight months ended September 30, 2011 and one month ended January 31, 2011 was $17.2 million, $2.6 million and nil, respectively.

9. Intangible Assets

The gross cost and accumulated amortization of intangible assets, by major intangible asset category, were as follows:


	Successor
	September 30, 2012
	Gross Cost		Accumulated Amortization			Net Carrying Amount
Customer relationships	$	293.9	$	(33.8	)	$	260.1
TiO₂ technology		31.9		(2.7	)		29.2
Internal-use software		17.4		(0.9	)		16.5
In-process research and development		5.0		(1.7	)		3.3
Trade names		3.6		(1.2	)		2.4
Other		0.6		(0.1	)		0.5

Total	$	352.4	$	(40.4	)	$	312.0


	Successor
	December 31, 2011
	Gross Cost		Accumulated Amortization			Net Carrying Amount
Customer relationships	$	293.9	$	(18.6	)	$	275.3
TiO₂ technology		31.9		(1.5	)		30.4
Internal-use software		11.8		—			11.8
In-process research and development		5.0		(0.9	)		4.1
Trade names		3.6		(0.7	)		2.9
Other		0.7		(0.1	)		0.6

Total	$	346.9	$	(21.8	)	$	325.1

Internal-use software relates to internal and external costs incurred during the development stage, which were being capitalized at December 31, 2011. During the second quarter of 2012, the Company began amortizing such costs. Amortization expense related to intangible assets for the three months ended September 30, 2012 and 2011 was $6.4 million and $6.0 million, respectively. Amortization expense related to intangible assets for the nine months ended September 30, 2012 and eight months ended September 30, 2011 was $18.6 million and $15.8 million, respectively. There was no amortization expense related to intangible assets for the one month ended January 31, 2011.

Estimated future amortization expense related to intangible assets is as follows:


	Total Amortization
2012	$	6.3
2013		25.4
2014		24.6
2015		24.6
2016		23.0
Thereafter		208.1

Total	$	312.0

10. Accrued Liabilities


	Successor
	September 30, 2012		December 31, 2011
Unfavorable sales contracts(1)	$	68.6	$	—
Taxes other than income taxes(2)		39.8		5.2
Employee-related costs and benefits		45.9		26.3
Sales rebates		11.0		8.2
Asset retirement obligations		1.9		0.9
Interest		7.5		1.3
Other		2.4		3.8

Total	$	177.1	$	45.7

(1)	In connection with the Transaction, the Company acquired sales contracts at unfavorable market terms, which were valued at $83.0 million on the Transaction Date. See Note 2.

(2)	Includes transfer taxes incurred as a result of the Transaction which were recorded in selling, general and administrative expenses on the unaudited Condensed Consolidated Statements of Operation.

11. Debt

Short-term Debt


	Successor
	September 30, 2012		December 31, 2011
UBS Revolver(1)	$	—	$	—
ABSA Revolver(2)		30.4		—
Wells Revolver(3)		—		—

Short-term debt	$	30.4	$	—

(1)	Average effective interest rate of 3.9% in 2012.

(2)	Average effective interest rate of 8.7% in 2012.

(3)	Average effective interest rate of 4.7% in 2011 and 5.25% in 2012.

UBS Revolver

On June 18, 2012, in connection with the closing of the Transaction, the Company entered into a global senior secured asset-based syndicated revolving credit agreement with UBS AG, Stamford branch (the “UBS Revolver”) with a maturity date of the fifth anniversary of the closing date. The UBS Revolver provides the Company with a committed source of capital with a principal borrowing amount of up to $300.0 million, subject to a borrowing base. The borrowing base is related to certain eligible inventory and accounts receivable held by the Company’s U.S., Australia and Netherlands subsidiaries. Obligations under the UBS Revolver are secured by a first priority lien on substantially all of the Company’s existing, and future deposit accounts, inventory and account receivables and certain related assets, excluding those held by its South African subsidiaries, Netherland’s subsidiaries and Bahamian subsidiary, and a second priority lien on all of the Company’s other assets, including capital stock which serve as security under the Term Facility. At September 30, 2012, the Company’s borrowing base was $268.0 million.

The UBS Revolver bears interest at the Company’s option at either (i) the administrative agent’s corporate base rate (defined to mean a rate that is the greatest of (a) the lenders’ prime rate, (b) the Federal funds effective rate plus 0.50% and (c) the adjusted LIBOR rate for a one-month period plus 1.00%) or (ii) the adjusted LIBOR rate, in each case plus the applicable margin. The applicable margin ranges from 1.50% to 2.00% for borrowings at the adjusted LIBOR rate, and from 0.50% to 1.00% for borrowings at the alternate base rate, based upon the average daily borrowing availability. For the first six months following the closing date, the applicable margins shall be deemed to be 1.75% for borrowings at the adjusted LIBOR rate and 0.75% for borrowings at the alternate base rate. In connection with obtaining the ABSA Revolver, the Company incurred debt issuance costs of $6.5 million.

ABSA Revolving Credit Facility

In connection with the Transaction, the Company entered into a R900.0 million (approximately $110.0 million as of September 30, 2012) revolving credit facility with ABSA Bank Limited acting through its ABSA Capital Division (the “ABSA Revolver”) with a maturity date of June 14, 2017. During the third quarter of 2012, the Company had repayments of R200.0 million (approximately $24.1 million) and borrowings of R250.0 million (approximately $30.4 million). As of September 30, 2012, the Company had drawn down 250.0 million Rand (approximately $30.4 million) on the ABSA Revolver.

The ABSA Revolver bears interest at (i) the base rate (defined as one month JIBAR, which is the mid-market rate for deposits in South African Rand for a period equal to the relevant period which appears on the Reuters Screen SAFEY Page alongside the caption YLD) as of 11h00 Johannesburg time on the first day of the applicable period, plus (ii) the Margin, which is 3.50%. In connection with obtaining the ABSA Revolver, the Company incurred debt issuance costs of $1.5 million.

Wells Revolver

On February 14, 2011, Tronox Incorporated entered into a $125.0 million senior secured asset-based revolving credit agreement with Wells Fargo Capital Finance, LLC (the “Wells Revolver”). The Wells Revolver had a maturity date of February 14, 2015. The Wells Revolver provided the Company with a committed source of capital with a principal borrowing amount of up to $125.0 million subject to a borrowing base. Borrowing availability under the Wells Revolver was subject to a borrowing base, which was related to certain eligible inventory and receivables held by the Company’s U.S. subsidiaries. On February 8, 2012, the Company amended the Wells Revolver to facilitate the Transaction while keeping the revolver in force. In connection with refinancing the Wells Revolver, the Company incurred fees of $0.6 million. On June 18, 2012, the Company refinanced the Wells Revolver with the UBS Revolver.

During 2012, the Company borrowed $30.0 million against the Wells Revolver, which was repaid with borrowings under the UBS Revolver. During 2011, to facilitate its exit from bankruptcy and help pay for the buy-in of its 50% share of the Kwinana Facility TiO₂ expansion, the Company borrowed $39.0 million against the Wells Revolver, which by December 31, 2011, was fully repaid using cash generated from operations.

Long-Term Debt


	Initial				Successor
	Principal Amount		Maturity Date		September 30, 2012			December 31, 2011
Secured bonds	$	900.0		8/15/2020	$	900.0		$	—
Term Facility(1)	$	700.0		2/8/2018		692.1			—
Exit Financing Facility(2)	$	425.0		10/21/2015		—			420.8
Co-generation Unit Financing Arrangement	$	16.0		2/1/2016		11.0			6.5
Lease financing						15.6			—

Total debt						1,618.7			427.3
Less: Long-term debt due in one year						(11.0	)		(5.9	)

Long-term debt					$	1,607.7		$	421.4

(1)	Average effective interest rate of 5.1% in 2012.

(2)	Average effective interest rate of 7.1% and 7.2% in 2012 and 2011, respectively.

The Company’s debt is recorded at historical amounts. At September 30, 2012 the fair value of the secured notes and the term facility was $916.3 million and $707.0 million, respectively. The Company determined the fair value of both the secured notes and the term facility using the Bloomberg market price as of September 28, 2012. At December 31, 2011, the total carrying value of long-term debt approximated its fair value due to the variable interest rates and frequent repricing of such instruments. The fair value hierarchy for long-term debt is a Level 2 input.

At September 30, 2012, the scheduled maturities of the Company’s long-term debt were as follows:


	Total Debt
2012	$	2.8
2013		10.7
2014		10.6
2015		10.6
2016		7.6
Thereafter		1,582.5

Total debt	$	1,624.8

On August 20, 2012, Tronox Limited’s wholly-owned subsidiary, Tronox Finance LLC, issued $900.0 million aggregate principal amount of 6.375% senior notes due 2020 (the “Senior Notes”). The Senior Notes were offered to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and outside the United States to non-U.S. persons pursuant to Regulation S under the Securities Act. The Senior Notes bear interest semiannually at a rate equal to 6.375% and were sold at par value. The Senior Notes are fully and unconditionally guaranteed on a senior, unsecured basis by Tronox Limited and certain of its subsidiaries. The Senior Notes are redeemable at any time at the Company’s discretion. The Senior Notes and related guarantees have not been registered under the Securities Act, or any state securities laws, and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities laws.

Approximately $326.2 million of the proceeds from the Senior Notes were used for returns of shareholder capital, in the form of share buybacks. The remainder of the proceeds will be used for general corporate purposes, and subject to required approvals may also be used for further returns of capital to shareholders from time to time (including by way of dividend).

The Company recorded debt issuance fees of $16.9 million, which are being amortized over the life of the debt, and are included in other long-term assets on the unaudited Condensed Consolidated Balance Sheet. During the three and nine months ended September 30, 2012, amortization expense amounted to$0.3 million.

Term Facility


	Successor
	September 30, 2012			December 31, 2011
Term Facility	$	698.2		$	—
Discount		(6.1	)		—

Secured bonds, net	$	692.1		$	—

On February 8, 2012, Tronox Incorporated’s wholly-owned subsidiary, Tronox Pigments (Netherlands) B.V., entered into a term loan facility with Goldman Sachs Bank USA comprised of a $550.0 million Senior Secured Term Loan and a $150.0 million Senior Secured Delayed Draw Term Loan (together, the “Term Facility”). The Term Facility has a maturity date of February 8, 2018. The Term Facility was issued net of an original issue discount of $7.0 million, or 1.0% of the initial principal amount, which is being amortized over the life of the Term Facility. At September 30, 2012, the original issue discount was $6.1 million. On June 14, 2012, in connection with the closing of the Transaction, Tronox Pigments (Netherlands) B.V. drew down the $150.00 million Senior Secured Delayed Draw Term. During 2012, the Company has made principal repayments of $1.8 million.

The Term Facility bears interest at a base rate plus a margin of 2.25% or adjusted Eurodollar rate plus a margin of 3.25% (in each case with a possible 0.25% increase or decrease based on the Company’s public credit rating). The base rate is defined as the greater of (i) the prime lending rate as quoted in the print edition of The Wall Street Journal, (ii) the Federal funds rate plus 0.50%, or (iii) 2%.

The Term Facility is secured by a first priority lien on substantially all of the Company’s and the subsidiary guarantors’ existing and future property and assets. This includes, upon the consummation of the Transaction, certain assets acquired in the Transaction. The terms of the Term Facility provide for customary representations and warranties, affirmative and negative covenants and events of default. The terms of the covenants, subject to certain exceptions, restrict, among other things: (i) debt incurrence; (ii) lien incurrence; (iii) investments, dividends and distributions; (iv) dispositions of assets and subsidiary interests; (v) acquisitions; (vi) sale and leaseback transactions; and (vii) transactions with affiliates and shareholders.

In connection with obtaining the Term Facility, Tronox Incorporated incurred debt issuance costs of $17.2 million, of which $5.5 million was paid in 2011 and $11.7 million was paid in 2012. Such costs are recorded in “Prepaid and other assets” on the unaudited Condensed Consolidated Balance Sheet and are being amortized through the maturity date.

Exit Financing Facility

On February 14, 2011, Tronox Incorporated’s senior secured super-priority DIP and Exit Credit Agreement with Goldman Sachs Lending Partners, in accordance with its terms, converted into a $425.0 million exit facility with a maturity date of October 21, 2015 (the “Exit Financing Facility”).

The Exit Financing Facility bore interest at the greater of a base rate plus a margin of 4.0% or adjusted Eurodollar rate plus a margin of 5.0%. The base rate was defined as the greater of (i) the prime lending rate as quoted in the print edition of The Wall Street Journal, (ii) the Federal Funds Rate plus 0.50%, or (iii) 3%. The adjusted Eurodollar rate is defined as the greater of (i) the LIBOR rate in effect at the beginning of the interest period, or (ii) 2.0%. Interest was payable quarterly or, if the adjusted Eurodollar rate applied, it was payable on the last day of each interest period. On February 8, 2012, Tronox Incorporated refinanced the Exit Facility with the Term Facility, as discussed above.

Co-generation Unit Financing Arrangement

In March 2011, the Tiwest Joint Venture acquired a steam and electricity gas fired co-generation plant, adjacent to its Kwinana pigment plant, through a five year financing arrangement. Tronox Western Australia Pty Ltd, the Company’s wholly owned subsidiary, owned a 50% undivided interest in the co-generation plant through the Tiwest Joint Venture. In order to finance its share of the asset purchase, Tronox Incorporated incurred debt totaling $8.0 million. In connection with the Transaction, the Company acquired the remaining 50% undivided interest in the co-generation plant from Exxaro, along with its debt of $5.8 million. Under the financing arrangement, monthly payments are required and interest accrues on the remaining balance owed at the rate of 6.5% per annum.

Lease Financing

In connection with the Transaction, the Company acquired capital lease obligations, which are payable through 2032 at a weighted average interest rate of approximately 19.1%. At September 30, 2012, such obligations had a net book value of assets recorded under capital leases aggregating $9.1 million.

Financial Covenants

At September 30, 2012, the Company had financial covenants in the UBS Revolver, the ABSA Revolver and the Term Facility.

The terms of the UBS Revolver provide for customary representations and warranties, affirmative and negative covenants and events of default. The terms of the covenants, subject to certain exceptions, restrict, among other things: (i) debt incurrence; (ii) lien incurrence; (iii) investments, dividends and distributions; (iv) dispositions of assets and subsidiary interests; (v) acquisitions; (vi) sale and leaseback transactions; and (vii) transactions with affiliates and shareholders. The UBS Revolver requires the Company to maintain a Consolidated Fixed Charge Coverage Ratio of not less than 1.0 to 1.0 calculated on a quarterly basis only if excess availability on the UBS Revolver is less than the greater of (A) $20.0 million and (B) 10% of the lesser of (x) the aggregate commitments in effect at such time and (y) the borrowing base at such time. If the Company is required to maintain the Consolidated Fixed Charge Coverage Ratio then it will be required to maintain such ratio until, during the preceding 60 consecutive days, borrowing availability would have been at all times greater than the greater of (i) $20.0 million and (ii) 10% of the aggregate commitments in effect at such time.

The ABSA Revolver requires the ratio of (i) South African Consolidated EBITDA, as defined in the agreement, to South African Net Interest Expense shall not be less than 5.00: 1.00 and (ii) South African Consolidated Net Debt to South African Consolidated EBITDA, as defined in the agreement, shall be less than 2.00:1.00.

The Term Facility requires that a leverage ratio, as defined in the agreement, not exceed, as of the last day of any fiscal quarter, the correlative ratio as follows:


Fiscal Quarter Ending	Total Leverage Ratio
June 30, 2012 through December 31, 2015		3.00:1.00
March 31, 2016 and thereafter		2.75:1.00

The Term Facility and the UBS Revolver are subject to an intercreditor agreement pursuant to which the lenders’ respective rights and interests in the security are set forth.

The Company was in compliance with its financial covenants at September 30, 2012. A breach of any of the covenants imposed on the Company by the terms of the UBS Revolver or the Term Facility could result in a default under the agreement. In the event of a default, the lenders could terminate their commitments to the Company and could accelerate the repayment of all of the Company’s indebtedness under the agreement. In such case, the Company may not have sufficient funds to pay the total amount of accelerated obligations, and its lenders could proceed against the collateral pledged.

Interest Expense


	Successor												Predecessor
	Three Months Ended September 30, 2012			Three Months Ended September 30, 2011			Nine Months Ended September 30, 2012			Eight Months Ended September 30, 2011			One Month Ended January 31, 2011
Interest expense	$	16.3		$	8.0		$	31.1		$	21.1		$	2.6
Amortization of deferred debt issuance costs and discount on debt		1.2			0.3			7.5			0.6			0.3
Other		0.7			—			1.0			0.4			—
Capitalized interest		(0.1	)		(0.3	)		(0.6	)		(0.6	)		—

Interest and debt expense	$	18.1		$	8.0		$	39.0		$	21.5		$	2.9

For the one month ended January 31, 2011, interest expense excludes $2.8 million, which would have been payable under the terms of the Company’s $350.0 million 9.5% senior unsecured notes.

12. Asset Retirement Obligations

To the extent a legal obligation exists, an asset retirement obligation (“ARO”) is recorded at its estimated fair value and accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value. Fair value is measured using expected future cash outflows discounted at Tronox’s credit-adjusted risk-free interest rate. The Company’s unaudited condensed consolidated financial statements classify accretion expense related to asset retirement obligations as a production cost, which is included in “Cost of goods sold” on the unaudited Consolidated Statements of Operations.

The Company’s AROs are as follows:

•

the KZN mine and the Namakwa Sands mine, both in South Africa, to restore the areas that have been disturbed as required under the mining leases;

•

mine closure and rehabilitation costs in Western Australia to restore the area that has been disturbed, as required under the mining lease;

•

plant closure and exit costs associated with certain industrial sites in Western Australia, whereby the Company is required to return the sites to their original states under licensing conditions:

•

plant closure and exit costs associated with the Botlek, the Netherlands facility, whereby the Company is required to return the site back to its original state at the end of its long-term lease; and

•

landfill closure costs at the Hamilton, Mississippi facility to address one-time closure costs (cap with liner and cover with soil) and annual monitoring costs of the closed landfill under applicable state environmental laws in Mississippi, which is expected to be completed in 2015.

A summary of the changes in the AROs during the nine months ended September 30, 2012 is as follows:


Balance, December 31, 2011	$	30.1
AROs acquired in the acquisition of the minerals sands business		57.1
Additions		5.8
Settlements/payments		(1.2	)
Accretion expense		2.0
Other, including changes in estimates and remeasurement		8.5

Balance, September 30, 2012	$	102.3

Current portion included in accrued liabilities	$	1.9

Noncurrent portion	$	100.4

A summary of the AROs by site is included in the table below:


Australia	$	57.0
South Africa		34.0
Botlek		10.2
Hamilton		1.1

Total AROs	$	102.3

13. Other Assets and Other Liabilities

Prepaid and Other Current Assets


	Successor
	September 30, 2012		December 31, 2011
Prepaid expenses	$	21.5	$	10.2
Cash collateralized letters of credit and surety bonds		1.4		4.9
Other		8.3		6.6

Total	$	31.2	$	21.7

Other Long-Term Assets


	Successor
	September 30, 2012		December 31, 2011
Debt issuance costs, net	$	39.2	$	8.4
Environmental rehabilitation trust(1)		20.7		—
Other, net		3.2		3.2

Total	$	63.1	$	11.6

(1)

The Company has established an environmental rehabilitation trust in respect of the prospecting and mining operations in South Africa in accordance with applicable regulations. Subsequent to the Transaction Date, Exxaro has transferred the South African assets of the mineral sands business from its existing environmental rehabilitation trust to the new environmental rehabilitation trust.

Noncurrent Liabilities — Other


	Successor
	September 30, 2012		December 31, 2011
Long-term incentive plan (see Note 20)	$	9.7	$	—
Reserve for workers’ compensation and general liability claims		8.7		8.5
Reserve for uncertain tax positions		3.4		0.9
Other		5.6		2.4

Total	$	27.4	$	11.8

14. Commitments and Contingencies

Letters of Credit—At September 30, 2012, the Company had outstanding letters of credit in the amount of approximately $36.9 million, of which $29.4 million were issued under the Wells Revolver and were backstopped by a letter of credit issued under the UBS Revolver.

Other Commitments – Tronox Incorporated entered into certain agreements prior to the bankruptcy that required it to indemnify third parties for losses related to environmental matters, litigation and other claims. No material obligations are presently known and, thus, no reserve has been recorded in connection with such indemnification agreements.

Environmental Contingencies—In accordance with ASC 450, Contingencies, and ASC 410, Asset Retirement and Environmental Obligations, the Company recognizes a loss and records an undiscounted liability when litigation has commenced or a claim or an assessment has been asserted, or, based on available information commencement of litigation or assertion of a claim or assessment is probable, and the associated costs can be estimated. It is not possible for the Company to reliably estimate the amount and timing of all future expenditures related to environmental matters because, among other reasons, environmental laws and regulations, as well as enforcement policies and clean up levels, are continually changing, and the outcome of court proceedings, alternative dispute resolution proceedings (including mediation) and discussions with regulatory agencies are inherently uncertain.

The Company believes that it has reserved adequately for the probable and reasonably estimable costs of known contingencies. There is no environmental litigation, claim or assessment that has been asserted nor is there any probability of an assessment or a claim for which the Company has not recorded a liability. However, additions to the reserves may be required as additional information is obtained that enables the Company to better estimate its liabilities. The Company cannot reliably estimate the amount of future additions to the reserves at this time. In certain situations, reserves may be probable but not estimable. Additionally, sites may be identified in the future where the Company could have potential liability for environmental related matters. If a site is identified, the Company will evaluate to determine what reserve, if any, should be established.

Legal – The Western Australia Office of State Revenue (the “OSR”) continues to review their technical position on the imposition of stamp duty on the transfer of Tronox Incorporated’s shares related to Kerr-McGee’s restructuring in 2002 and from the share transfer related to the spinoff of Tronox Incorporated from Kerr-McGee in 2005. On January 17, 2012, the OSR contacted the Company seeking additional information related to the 2005 spinoff. In addition, the OSR informed the Company that it has made a preliminary determination that the Company was land rich at the time of the 2002 share transfers and, as a result, the Company may be liable for stamp duty and penalties arising from that share transfer. A company is considered “land rich” if the value of its land, goods, wares and merchandise is greater than 60% of the total value of all the property that the entity owns. The OSR has not made an assessment at this time and continues discussions with the Company and its legal advisors. The Company has accrued stamp duty on the 2002 transaction in the amount of $3.2 million based upon its position that the Company was not land rich at the time of the share transfers. The Company intends to exercise all of its legal and administrative remedies in the event that the OSR makes an assessment based upon its claim that it is land rich.

In August 2011, the outstanding legal disputes between the Company and RTI Hamilton, Inc. dating back to 2008 came to a close with the parties reaching an agreement in principle. The agreement reflects a compromise and settlement of disputed claims in complete accord and satisfaction thereof. RTI Hamilton paid Tronox the sum of $10.5 million within five business days of receipt of the Bankruptcy Court Approval. Of the total payment, $0.7 million constitutes payment for capital costs incurred by Tronox in relation to the agreement, plus interest.

Registration Rights Agreement—On the Effective Date, Tronox Incorporated entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with certain stockholders of Tronox Incorporated party thereto. Pursuant to the Registration Rights Agreement, among other things, Tronox Incorporated was required to file with the SEC, pursuant to Section 13(a) of the Exchange Act, a registration statement for its common stock prior to September 30, 2011. Tronox Incorporated did not meet the September 30, 2011 deadline, and therefore, was subject to liquidation damages of approximately $2.0 million. Tronox Incorporated accrued $2.0 million related to such liability during 2011 and, as of December 31, 2011, Tronox Incorporated received and paid claims in the amount of $0.6 million. The remaining $1.4 million of claims were received and paid during the first quarter of 2012.

Other Matters—From time to time, the Company may be party to a number of legal and administrative proceedings involving environmental and/or other matters in various courts or agencies. These proceedings, individually and in the aggregate, may have a material adverse effect on the Company. These proceedings may be associated with facilities currently or previously owned, operated or used by the Company and/or its predecessors, some of which may include claims for personal injuries, property damages, cleanup costs and other environmental matters. Current and former operations of the Company may also involve management of regulated materials, which are subject to various environmental laws and regulations including the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”), the Resource Conservation and Recovery Act (RCRA) or state equivalents. Similar environmental laws and regulations and other requirements exist in foreign countries in which the Company operates.

15. Noncontrolling Interest

In connection with the Transaction, Exxaro and its subsidiaries retained a 26.0% ownership interest in each of Tronox KZN Sands (Pty) Ltd and Tronox Mineral Sands (Pty) Ltd in order to comply with the ownership requirements of the BEE legislation in South Africa. Exxaro is entitled to exchange this interest for approximately 3.2% in additional Class B Shares under certain circumstances (i.e., the earlier of the termination of the Empowerment Period or the tenth anniversary of completion of the Transaction).

A reconciliation of the beginning and ending balances of noncontrolling interest on the Company’s unaudited Condensed Consolidated Balance Sheets is presented below.


Balance at January 1, 2012	$	—
Fair value of noncontrolling interest on the Transaction Date(1)		291.1
Earnings attributable to noncontrolling interest		(0.8	)
Effect of exchange rate changes		13.1

Balance at September 30, 2012	$	303.4


(1) The fair value of noncontrolling interest is preliminary and based upon valuations derived from estimated fair value assessments and assumptions used by management. While management believes that its preliminary estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different values being assigned.

16. Other Income (Expense)


	Successor												Predecessor
	Three Months Ended September 30, 2012			Three Months Ended September 30, 2011			Nine Months Ended September 30, 2012			Eight Months Ended September 30, 2011			One Month Ended January 31, 2011
Net unrealized and realized foreign currency gain (loss)	$	(1.6	)	$	(0.6	)	$	(6.3	)	$	(1.1	)	$	1.5
Interest income		0.5			0.2			0.9			0.4			0.1
Other		1.3			(0.9	)		0.6			(1.0	)		—

Total	$	0.2		$	(1.3	)	$	(4.8	)	$	(1.7	)	$	1.6

17. Income Taxes

The following table presents the income tax provisions, along with income from continuing operations and the effective tax rates:


	Successor												Predecessor
	Three Months Ended September 30, 2012			Three Months Ended September 30, 2011			Nine Months Ended September 30, 2012			Eight Months Ended September 30, 2011			One Month Ended January 31, 2011
Income tax benefit (provision)	$	38.0		$	9.0		$	127.5		$	(3.3	)	$	(0.7	)
Income (Loss) from Continuing Operations Before Income Taxes		(56.0	)		89.9			1,097.2			178.6			632.2
Effective Tax Rate		67.9	%		(10.0	)%		(11.6	)%		1.8	%		0.1	%

The negative effective tax rate for the 2012 Successor nine months ended September 30, 2012, differs from the U.S. statutory rate of 35% primarily as a consequence of the Company re-domiciling in Australia. Because the Australian tax laws provide for a resetting of the tax basis of the business assets to market value, the Company recorded a tax benefit related to this market value basis adjustment. The overall tax benefit from this basis adjustment increase was partially offset by a valuation allowance established for the portion of the tax benefit which the Company believes will not be realized. Because this basis change did not pertain to an entity acquired in the Transaction, this net tax benefit was recorded through tax expense and did not impact the Company’s gain on bargain purchase.

Additionally, the effective tax rate for the nine months ended September 30, 2012, was impacted by the release of a valuation allowance in the Netherlands, continuing valuation allowances in the United States, income in foreign jurisdictions taxed at rates lower than 35%, and the Company’s gain on the bargain purchase, which was recorded net of the financial tax impact and is not subject to income tax in any jurisdiction.

The high effective tax rate for the three months ended September 30, 2012, differs from the U.S. statutory rate of 35% primarily because the Company incurred a book operating loss for the quarter while recording a tax benefit from the release of a valuation allowance in the Netherlands.

The effective tax rates for the 2011 Successor periods differ from the U.S. statutory rate of 35% primarily due to valuation allowances in the United States, income in foreign jurisdictions taxed at rates lower than 35% and statute lapses in a foreign jurisdiction which released significant liabilities related to uncertain tax positions. In the one month ended January 31, 2011, the effective tax rate for the Predecessor period differs from the U.S. statutory rate of 35% primarily due to fresh-start adjustments, which were recorded net of tax. Additionally, the Predecessor period effective tax rate was impacted by valuation allowances in multiple jurisdictions and income in foreign jurisdictions taxed at rates lower than 35%.

The application of business combination accounting on June 15, 2012 resulted in the re-measurement of deferred income taxes associated with recording the assets and liabilities of acquired entities at fair value pursuant to ASC 805. As a result, deferred income taxes of $202.3 million were recorded at amounts determined in accordance with ASC 740 as part of the Company’s gain on bargain purchase.

The application of fresh-start accounting on January 31, 2011, resulted in the re-measurement of deferred income tax liabilities associated with the revaluation of Tronox Incorporated’s assets and liabilities pursuant to ASC 852. As a result, deferred income taxes were recorded at amounts determined in accordance with ASC 740 of $11.8 million as part of reorganization income. Additionally, during 2011, Tronox Incorporated released valuation allowances against certain of its deferred tax assets in the Netherlands and Australia resulting from this re-measurement.

For U.S. federal income tax purposes, typically the amount of cancellation of debt income (“CODI”) recognized, and accordingly the amount of tax attributes that may be reduced, depends in part on the fair market value of non-cash consideration given to creditors. On Tronox Incorporated’s date of emergence, the fair market value of non-cash consideration given was such that the creditors received consideration in excess of their claims. For this reason, Tronox Incorporated did not recognize any CODI and retained all of its U.S. tax attributes. In addition, Tronox Incorporated reflected a tax deduction for the premium paid to the creditors of $1,129.7 million. This deduction will increase the Company’s net operating losses (“NOL’s”) in the United States and in various states where the Company has filing requirements. The resulting federal tax benefit of $395.4 million and the estimated corresponding state tax benefit of $51.0 million, net of the deferred federal effect, have been fully offset by a valuation allowance in accordance with ASC 740, after considering all available positive and negative evidence. Because the financial offset for the consideration given to creditors was recorded through equity, neither the tax benefits nor the offsetting valuation allowance impacts were shown in the effective tax rate calculations. Instead, the excess tax benefit, which netted to zero with the valuation allowance, was reflected as an equity adjustment.

The Company does not believe an ownership change occurred as a result of the Transaction. Upon the Company’s emergence from bankruptcy in the period ended January 31, 2011 the Company experienced an ownership change resulting in a limitation under IRC Sections 382 and 383 related to its U.S. NOL’s generated prior to emergence from bankruptcy. The Company does not expect that the application of these limitations will have any material affect upon its U.S. federal or state income tax liabilities.

Earnings of certain foreign subsidiaries of Tronox Incorporated, which were undistributed to the U.S., totaled $144.0 million at December 31, 2011. Under the new Australian holding company, it is expected that undistributed earnings of certain subsidiaries will continue to increase. At September 30, 2012, no provision for deferred U.S. or Australian income taxes has been made for these earnings because they were considered to be indefinitely reinvested outside of the parent’s taxing jurisdictions. The distribution of these earnings in the form of dividends or otherwise may subject the Company to U.S. federal and state or foreign income taxes and, possibly, foreign withholding taxes. However, because of the complexities of taxation of foreign earnings, it is not practicable to estimate the amount of additional tax that might be payable on the eventual remittance of these earnings to their parent corporations.

The Company continues to maintain a valuation allowance related to the net deferred tax assets in the United States. Future provisions for income taxes will include no tax benefits with respect to losses incurred and tax expense only to the extent of current alternative minimum tax and state tax payments until the valuation allowance in the United States is eliminated. ASC 740 requires that all available positive and negative evidence be weighted to determine whether a valuation allowance should be recorded.

18. Earnings Per Share

Certain unvested awards issued under the Tronox Limited Management Equity Incentive Plan and the T-Bucks Employee Participation Plan, as further discussed in Note 20, contain non-forfeitable rights to dividends declared on Class A Shares. Any unvested shares that participate in dividends are considered participating securities, and are included in the Company’s computation of basic and diluted earnings per share using the two-class method, unless the effect of including such shares would be antidilutive. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for each class of ordinary shares and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings.

Basic earnings per share is computed utilizing the two-class method, and is calculated based on weighted-average number of common shares outstanding during the periods presented. Diluted earnings per share is computed using the weighted-average number of common and common equivalent shares outstanding during the periods utilizing the two-class method for nonvested restricted shares, warrants and options. As we recognized a net loss for the three months ended September 30, 2012, the unvested share-based payments and options were not recognized in the diluted earnings per share calculations as they were antidilutive.

The following table sets forth the number of shares utilized in the computation of basic and diluted earnings per share from continuing operations for the periods indicated. The weighted average shares outstanding, potentially dilutive shares, earnings per share and anti-dilutive shares of the Successor have been restated to affect the 5-for-1 stock split discussed in Note 19.


	Successor												Predecessor
	Three Months Ended September 30, 2012			Three Months Ended September 30, 2011			Nine Months Ended September 30, 2012			Eight Months Ended September 30, 2011			One Month Ended January 31, 2011
Numerator – Basic and Diluted:
Income (Loss) from Continuing Operations	$	(18.0	)	$	98.9		$	1,224.7		$	175.3		$	631.5
Less: Income attributable to noncontrolling interest		(1.3	)		—			(0.8	)		—			—
Less: Dividends paid		—			—			31.5			—			—

Undistributed earnings (losses)		(16.7	)		98.9			1,194.0			175.3			631.5
Percentage allocated to common shares		100	%		100	%		99.42	%		100	%		100	%


Undistributed earnings allocated to common shares		(16.7	)		98.9			1,187.1			175.3			631.5
Add: Dividends declared allocated to common shares		—			—			31.4			—			—

Earnings available to common shares	$	(16.7	)	$	98.9		$	1,218.5		$	175.3		$	631.5


Denominator – Basic:
Weighted-average common shares (In thousands)		122,352			74,910			94,193			73,325			41,311
Add: Effect of Dilutive Securities:
Restricted shares		—			1,120			66			1,200			88
Warrants		—			3,145			2,638			3,135			—
Options		—			—			6			—			—

Denominator – Diluted		122,352			79,175			96,903			77,660			41,399


Earnings per Share:
Basic Income (Loss) per Share	$	(0.14	)	$	1.32		$	12.94		$	2.39		$	15.29

Diluted Income (Loss) per Share	$	(0.14	)	$	1.25		$	12.57		$	2.26		$	15.25

In computing diluted earnings per share under the two-class method, the Company considered potentially dilutive shares. For the three months ended September 30, 2012, 308,555 options with an average exercise price of $27.91 were not recognized in the diluted earnings per share calculation as they were antidilutive. For the one month ended January 31, 2011, 1,152,408 options with an average exercise price of $9.54 were anti-dilutive because they were not “in the money.” There were no options outstanding during the three and eight months ended September 30, 2011.

During the third quarter of 2012, the Company created the T-Bucks Employee Purchase Plan for the benefit of certain employees at Tronox subsidiaries in South Africa. Shares held by the Trust are not considered outstanding for purposes of computing earnings per share. See Note 20 for additional information on the T-Bucks Employee Purchase Plan.

19. Shareholders’ Equity

Stock Split Declared

On June 26, 2012, the Board approved a 5-to-1 stock split for holders of its Class A Shares and Class B Shares at the close of business on July 20, 2012, by issuance of four additional shares for each share of the same class. As a result of the stock split, the Company recorded an increase to “Tronox Limited Class A ordinary shares” of $0.6 million and an increase to “Tronox Limited Class B ordinary shares” of $0.4 million, with corresponding decreases to “Retained earnings” on the unaudited Condensed Consolidated Balance Sheets.

Ordinary Shares and Common Stock

The changes in ordinary shares and common stock outstanding and treasury shares for the nine months ended September 30, 2012 were as follows:


Tronox Limited Class A Shares outstanding:
Balance at December 31, 2011	—
Shares issued in connection with the Transaction(1)	76,644,650
Shares issued for share-based compensation	7,550
Shares issued for warrants exercised	9,323
Shares purchased by the T-Bucks Trust(2)	(548,234	)
Shares repurchased/cancelled(3)	(12,626,400	)

Balance at September 30, 2012	63,486,889


Tronox Limited Class B Shares outstanding:
Balance at December 31, 2011	—
Shares issued in connection with the Transaction(1)	49,754,280

Balance at September 30, 2012	49,754,280


Tronox Incorporated common stock outstanding:
Balance at December 31, 2011	75,383,455
Shares issued for stock-based compensation	570,785
Shares issued for warrants exercised	690,385
Shares issued for claims	25
Shares exchanged in connection with the Transaction(1)	(76,644,650	)

Balance at September 30, 2012	—


Tronox Incorporated common stock held as treasury:
Balance at December 31, 2011	472,565
Shares issued for stock-based compensation	239,360
Shares cancelled in connection with the Transaction(3)	(711,925	)

Balance at September 30, 2012	—

(1)	Shares issued in connection with the Transaction have been adjusted for the 5-for-1 stock split. On the Transaction Date, the Company issued 15,328,930 Class A Shares and 9,950,856 Class B Shares.

(2)	During the third quarter of 2012, the Company created the T-Bucks Employee Participation Plan for the benefit of certain employees at Tronox subsidiaries in South Africa. See Note 20 for additional information on the Employee Participation Plan.

(3)

In accordance with Australian law, the Company is not permitted to hold its own ordinary shares. As such, all Class A Shares that were repurchased by the Company have been cancelled. Additionally, all shares of Tronox Incorporated common stock that were held by Tronox Incorporated on the Transaction date were cancelled in connection with the Transaction. The number of Class A Shares repurchased has been adjusted for the 5-for-1 stock split.

Warrants

As part of its emergence from bankruptcy, Tronox Incorporated issued warrants to existing holders of its equity in two tranches, Series A warrants and Series B warrants (collectively, the “Tronox Incorporated Warrants”), to purchase up to an aggregate of 1,216,216 shares, or 7.5%, of Tronox Incorporated’s common stock. In connection with the Transaction, and pursuant to the terms of the Tronox Incorporated Warrant Agreement, Tronox Limited entered into an amended and restated warrant agreement, dated as of the Transaction Date, whereby the holders of the Tronox Limited Warrants were entitled to purchase one Class A Share and receive $12.50 in cash at the initial exercise prices of $62.13 for each Series A Warrant (the “Series A Warrants”) and $68.56 for each Series B Warrant (the “Series B Warrants”, collectively with the Series A Warrants, the “Warrants”). On the Transaction Date, there were 841,302 Warrants outstanding. The Warrants have a seven-year term from the date initially issued and will expire on February 14, 2018. A holder may exercise the Warrants by paying the applicable exercise price in cash or on a cashless basis. The Warrants are freely transferable by the holder thereof.

In connection with the stock split, holders of the Warrants are entitled to purchase five Class A Shares and receive $12.50 in cash at the initial exercise prices of $62.13 for each Series A Warrant and $68.56 for each Series B Warrants. As a result of the dividend declared on June 26, 2012, the exercise price of the Series A and Series B Warrants were reduced to $61.84 and $68.24, respectively, as of the close of business on July 13, 2012. As of September 30, 2012 there were 364,819 Series A Warrants and 474,425 Series B Warrants outstanding.

Share Repurchases

On June 26, 2012, the Board authorized the repurchase of 10% of Tronox Limited’s Class A shares in open market transactions. During the three months and nine months ended September 30, 2012, the Company repurchased 12,541,400 Class A Shares, affected for the 5-for-1 stock split, at an average price of $25.85 per share, inclusive of commissions, for a total cost of $324.2 million and 12,626,400 Class A Shares, affected for the 5-for-1 stock split, at an average price of $25.84 per share, inclusive of commissions, for a total cost of $326.2 million, respectively. Repurchased shares were subsequently cancelled in accordance with Australian law. On September 27, 2012, the Company announced the successful completion of its share repurchase program.

20. Share-Based Compensation

Compensation expense related to employee restricted share awards was $1.1 million and $1.4 million for the three months ended September 30, 2012 and 2011, respectively, and $24.1 million and $6.6 million for the nine months ended September 30, 2012 and the eight months ended September 30, 2011, respectively. Compensation expense related to restricted share awards granted to the Board of Directors was $0.3 million and $0.4 million for the three months ended September 30, 2012 and 2011, respectively, and $3.4 million and $1.1 million for the nine months ended September 30, 2012 and the eight months ended September 30, 2011, respectively. Compensation expense related to the Company’s nonqualified option awards for the three and nine months ended September 30, 2012 was $0.2 million and $1.1 million, respectively.

Tronox Limited Management Equity Incentive Plan

On the Transaction Date, Tronox Limited adopted the Tronox Limited management equity incentive plan (the “Tronox Limited MEIP”), which permits the grant of awards that constitute incentive options, nonqualified options, share appreciation rights, restricted shares, restricted share units, performance awards and other share-based awards, cash payments and other forms such as the compensation committee of the Board in its discretion deems appropriate, including any combination of the above. Subject to further adjustment, the maximum number of shares which may be the subject of awards (inclusive of incentive options) is 12,781,225 Class A Shares.

Restricted Shares

During 2012, the Company granted 161,411 restricted share awards to employees, which have both time requirements and performance requirements. The time provisions are graded vesting, while the performance provisions are cliff vesting and have a variable payout. During 2012, the Company granted 23,160 restricted share awards with graded vesting to members of its Board of Directors. In accordance with ASC 718, Compensation – Stock Compensation, the restricted share awards issued during 2012 are classified as equity awards and are accounted for using the fair value established at the grant date.

The following table summarizes restricted share activity with employees for the nine months ended September 30, 2012.


	Number of Shares			Fair Value(1)
Balance at December 31, 2011		—			—
Awards converted from Tronox Incorporated to Tronox Limited in connection with the Transaction		420,765			16.99
Awards granted		161,411			27.28
Awards earned		(7,550	)		25.90
Awards forfeited		(7,985	)		29.29

Balance at September 30, 2012		566,641		$	19.62

Outstanding awards expected to vest		559,727		$	19.53

(1)	Represents the weighted-average grant-date fair value.

The following table summarizes restricted share activity with Tronox Limited Board of Directors for the nine months ended September 30, 2012.


	Number of Shares		Fair Value(1)
Balance at December 31, 2011		—		—
Awards granted		23,160		25.90

Balance at September 30, 2012		23,160	$	25.90

Outstanding awards expected to vest		23,160	$	25.90

(1)	Represents the weighted-average grant-date fair value.

Options

During 2012, the Company granted 158,960 options to employees to purchase Class A Shares, which vest over a three year period. The following table presents a summary of activity for the Tronox Limited options for the nine months ended September 30, 2012:


	Number of Options			Price (1)		Contractual Life Years (1)		Intrinsic Value(2)
Balance at December 31, 2011		—		$	—		—	$	—
Options converted to Tronox Limited in connection with the Transaction		517,330			24.56		9.34		—
Options issued		158,960			25.62		9.75		—
Options forfeited		(152,320	)		22.38		—		—

Outstanding at September 30, 2012		523,970		$	25.52		9.49	$	0.1

Outstanding options expected to vest		488,791		$	25.59		9.50	$	0.1

(1)	Represents weighted average exercise price and weighted average remaining contractual life, as applicable. The fair value of awards granted in connection with the stock split has been adjusted to reflect the estimated fair value on the date of such stock split.

(2)	Reflects aggregate intrinsic value based on the difference between the market price of the Company’s share at September 30, 2012 and the options’ exercise price. Options issued in connection with the stock split had no effect on the intrinsic value of outstanding options.

July 31, 2012 Grant

Valuation and Cost Attribution Methods. The fair value of the options issued was determined on the date of grant using the Black-Scholes option-pricing model and is recognized in earnings on a straight-line basis over the employee service period of three years necessary to earn the awards.

The Company ran the Black-Scholes option-pricing model for the 15,808 options granted on July 31, 2012 and used the following assumptions:


	2012
Risk-free interest rate		0.83	%
Expected dividend yield		4.32	%
Expected volatility		56	%
Expected term (years)		10.0
Per-unit fair value of options granted	$	8.21

The Company used the fair market value and exercise price of $23.17, which was the closing price of Class A Shares, New York Stock Exchange symbol TROX, recorded on July 31, 2012.

Expected Volatility — In setting the volatility assumption, the Company considered the most recent reported volatility of each compensation peer company. For the 2012 valuation, the peer company group included the following companies: Cabot Corporation, Celanese Corporation, Cliffs Natural Resources Inc., Cytec Industries Inc., Eastman Chemical Company, FMC Corporation, Freeport-McMoRan Copper & Gold Inc., Georgia Gulf Corporation, Huntsman Corporation, Kronos Worldwide, Inc., PPG Industries, Inc., Rockwood Holdings, Inc., RPM International Inc., The Sherwin-Williams Company, Southern Copper Corporation, Teck Resources Limited, The Valspar Corporation, W.R. Grace & Co, and Westlake Chemical Corporation.

Risk-free interest rate — The Company used a risk-free interest rate of 0.83%, which was the risk-free interest rate based on U.S. Treasury Strips available with maturity period consistent with expected life assumption.

August 31, 2012 Grant

Valuation and Cost Attribution Methods. Options’ fair value was determined on the date of grant using the Black-Scholes option-pricing model and is recognized in earnings on a straight-line basis over the employee service period of three years necessary to earn the awards. The Company ran the Black-Scholes option-pricing model for the 7,257 options granted on August 31, 2012 and used the following assumptions:


	2012
Risk-free interest rate		0.85	%
Expected dividend yield		3.88	%
Expected volatility		56	%
Expected term (years)		10.0
Per-unit fair value of options granted	$	9.51

The Company used the fair market value and exercise price of $25.79, which was the closing price of Class A Shares, New York Stock Exchange symbol TROX, recorded on August 31, 2012.

Risk-free interest rate — The Company used a risk-free interest rate of 0.85%, which was the risk-free interest rate based on U.S. Treasury Strips available with maturity period consistent with expected life assumption.

T-Bucks Employee Participation Plan (“T-Bucks EPP”)

During the third quarter of 2012, the Company created the T-Bucks EPP for the benefit of certain qualifying employees (the “Participants”) of Tronox subsidiaries in South Africa (the “Employer Companies”). In accordance with the terms of the Trust Deed of the T-Bucks Trust (the “T-Bucks Trust Deed”), the Employer Companies funded the T-Bucks Trust (the “Trust”) in the amount of R123.8 million (approximately $14.6 million), which represents a capital contribution equal to R75,000 for each Participant. The funded amount was used to acquire 548,234 Class A Shares. Additional contributions may be made in the future at the discretion of the Board.

On September 3, 2012, the Participants were awarded shares units in the Trust which entitles them to receive shares of Tronox Limited upon completion of the vesting period on May 31, 2017. The Participants are also entitled to receive dividends on the Tronox shares during the vesting period. Forfeited shares are retained by the Trust and are allocated to future participants in accordance with the Trust Deed. Under certain conditions, as outlined in the Trust Deed, Participants may receive share units awarded before May 31, 2017. The fair value of the awards is the fair value of the shares determined at the Grant Date. Compensation costs are recognized over the vesting period using the straight-line method. Compensation expense for the three months ended September 30, 2012 was $0.2 million. In accordance with ASC 718, the T-Bucks EPP is classified as an equity-settled shared-based payment plan.


	Number of Shares		Fair Value(1)
Balance at December 31, 2011		—		—
Shares acquired by the Trust		548,234		25.79

Balance at September 30, 2012		548,234	$	25.79

Outstanding awards expected to vest		548,234	$	25.79

(1)	Represents the fair value on the date of purchase by the Trust.

Long-Term Incentive Plan

In connection with the Transaction, the Company acquired a long-term incentive plan (the “LTIP”) for the benefit of certain qualifying employees of Tronox subsidiaries in South Africa and Australia. The LTIP is classified as cash settled compensation plan and is re-measured to fair value at each reporting date. At the Transaction Date, the fair value of the LTIP plan was $10.5 million.

Tronox Incorporated Management Equity Incentive Plan

On the Effective Date, Tronox Incorporated adopted the Tronox Incorporated management equity incentive plan (the “Tronox Incorporated MEIP”), which permitted the grant of awards that constitute incentive options, nonqualified options, share appreciation rights, restricted share, restricted share units, performance awards and other share-based awards, cash payments and other forms such as the compensation committee of the Tronox Incorporated Board of Directors in its discretion deems appropriate, including any combination of the above. The number of shares available for delivery pursuant to the awards granted under the Tronox Incorporated MEIP was 1.2 million shares.

On the Transaction Date, 748,980 shares of Tronox Incorporated restricted stock vested in connection with the Transaction. The remaining shares of Tronox Incorporated restricted stock were converted to Tronox Limited restricted shares.

Grants to Tronox Incorporated Board Members

As noted above, the Tronox Incorporated MEIP authorized the issuance of restricted shares to eligible directors who were serving on the Tronox Incorporated Board of Directors on the Effective Date.

The following table summarizes restricted shares activity with Board of Directors of Tronox Incorporated members for the nine months ended September 30, 2012.


	Primary Award					Secondary Award
Restricted Shares	Number Of Shares			Weighted-Avg. Grant Date Fair Value		Number of Shares			Weighted-Avg. Grant Date Fair Value
Balance at December 31, 2011		50,040		$	24.50		122,485		$	24.50
Awards earned		(50,040	)		24.50		(122,485	)		24.50

Balance at September 30, 2012		—		$	—		—		$	—

Outstanding awards expected to vest		—		$	—		—		$	—

Grants to employees

During 2012, Tronox Incorporated granted 52,915 shares to employees, which have graded vesting provisions. The plan allows Tronox Incorporated to withhold, for tax purposes, the highest combined maximum rate imposed under all applicable federal, state, local and foreign tax laws on behalf of the employees that have received these awards. In accordance with ASC 718, such restricted share awards were classified as liability awards and were re-measured to fair value at each reporting date. The following table summarizes restricted share activity with employees for the nine months ended September 30, 2012.


	Number of Shares			Fair Value(1)
Balance at December 31, 2011		1,005,470		$	21.58
Awards granted		52,915			24.36
Awards earned		(637,620	)		24.21
Awards converted to Tronox Limited restricted shares in connection with the Transaction		(420,765	)		16.99

Balance at September 30, 2012		—		$	—

(1)	Represents the weighted-average grant-date fair value.

Options

The following table presents a summary of activity for the Tronox Incorporated options for the nine months ended September 30, 2012:


	Number of Options			Price (1)		Contractual Life Years (1)		Intrinsic Value(2)
Balance at December 31, 2011		345,000		$	22.00		9.95	$	0.7
Options issued		172,330			29.69		9.87		—
Options converted to Tronox Limited in connection with the Transaction		(517,330	)		24.56		9.59		0.7

Outstanding at September 30, 2012		—		$	—		—	$	—

(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 the Company’s shares at September 30, 2012 and the options’ exercise price.

Predecessor

Upon emergence from bankruptcy, all predecessor common stock equivalents, including but not limited to stock options and restricted stock units of Tronox Incorporated were vested and immediately cancelled with the Plan.

Overview — Tronox Incorporated’s Long Term Incentive Plan (the “Predecessor LTIP”) authorized the issuance of shares of Tronox Incorporated common stock to certain employees and non-employee directors any time prior to November 16, 2015, in the form of fixed-price stock options, restricted stock, stock appreciation rights or performance awards. As of the Effective Date, all stock-based awards previously issued under the Predecessor’s LTIP plan vested and were immediately cancelled.

For the one month ended January 31, 2011, Tronox Incorporated recognized $0.1 million of compensation expense related to restricted stock-based awards, which was based on the fair value of the awards. During the one month ended January 31, 2011, the tax benefit associated with compensation expense had a corresponding offset to the valuation allowance, yielding no overall income tax benefit.

The following table summarizes information about restricted stock award, performance award and stock option activity for the one month ended January 31, 2011:


	Restricted Stock Awards & Stock Opportunity Grants					Performance Awards			Stock Options
Restricted Shares	Number of Shares			Fair Value(1)		Number Of Units			Number of Options			Price(2)		Contractual Life (Years)(2)		Intrinsic Value(3)
Balance at December 31, 2010		148,053		$	4.92		2,689,150			1,152,408		$	9.54		5.31	$	9.54
Awards vested/cancelled		(148,053	)		—		(2,689,150	)		(1,152,408	)		—		—		—

Balance at January 31, 2011		—		$	—		—			—		$	—		—	$	—

(1)	Represents the weighted average grant date fair value.

(2)	Represents weighted average exercise price and weighted average remaining contractual life, as applicable.

(3)	Reflects aggregate intrinsic value based on the difference between the market price of the Company’s stock and the options’ exercise price.

21. Cash Flows Statement Data

Other noncash items included in the reconciliation of net income (loss) to net cash flows from operating activities include the following:


	Successor				Predecessor
	Nine Months Ended September 30, 2012		Eight Months Ended September 30, 2011		One Month Ended January 31, 2011
Amortization of fair value inventory step-up and unfavorable ore sales contracts	$	108.8	$	—	$	—
Accrued transfer taxes		37.0		—		—
Other net adjustments		6.5		4.2		(0.2	)

Total	$	152.3	$	4.2	$	(0.2	)

Reorganization items included in the reconciliation of net income (loss) to net cash flows from operating activities include the following:


	Successor					Predecessor
	Nine Months Ended September 30, 2012		Eight Months Ended September 30, 2011			One Month Ended January 31, 2011
Noncash reorganization items	$	—	$	—		$	(636.6	)
Environmental settlement funding		—		—			(270.0	)
Claims paid with cash		—		(14.3	)		(18.6	)
Tort settlement funding		—		—			(16.5	)
Professional and legal fees		—		—			(12.0	)

Total	$	—	$	(14.3	)	$	(953.7	)

Other, net, included in the reconciliation of net income to net cash flows from operating activities includes the following:


	Successor					Predecessor
	Nine Months Ended September 30, 2012		Eight Months Ended September 30, 2011			One Month Ended January 31, 2011
Environmental expenditures, net of reimbursements	$	—	$	33.1		$	—
Other net adjustments		1.7		(1.2	)		1.0

Total	$	1.7	$	31.9		$	1.0

22. Pension and Other Postretirement Healthcare Benefits

Defined Benefit Retirement Plans

The Company is the sponsor of noncontributory defined benefit retirement plans in the United States, a contributory defined benefit retirement plan in the Netherlands and a U.S. contributory postretirement plan for health care insurance. Substantially all U.S. employees may become eligible for the postretirement healthcare benefits if they reach retirement age while working for the Company.

The components of net periodic pension and postretirement healthcare cost for the three months ended September 30, 2012 and 2011, and the nine months ended September 30, 2012, eight months ended September 30, 2011 and one month ended January 31, 2011 were as follows:


	Retirement Plans
	Successor												Predecessor
	Three Months Ended September 30, 2012			Three Months Ended September 30, 2011			Nine Months Ended September 30, 2012			Eight Months Ended September 30, 2011			One Month Ended January 31, 2011
Net periodic cost:
Service cost	$	0.6		$	0.8		$	1.9		$	2.0		$	0.2
Interest cost		5.4			6.0			16.3			15.7			1.9
Expected return on plan assets		(5.0	)		(5.6	)		(15.2	)		(14.8	)		(2.0	)
Net amortization:
Net amortization — Actuarial (gain) loss		0.1			—			0.1			—			0.5

Net periodic cost	$	1.1		$	1.2		$	3.1		$	2.9		$	0.6


	Postretirement Healthcare Plans
	Successor								Predecessor
	Three Months Ended September 30, 2012		Three Months Ended September 30, 2011		Nine Months Ended September 30, 2012		Eight Months Ended September 30, 2011		One Month Ended January 31, 2011
Net periodic cost:
Service cost	$	—	$	0.1	$	0.2	$	0.2	$	—
Interest cost		0.1		0.1		0.3		0.3		—
Net Amortization:
Net amortization — Prior service cost (credit)		—		—		—		—		(1.1	)
Net amortization — Actuarial (gain) loss		—		—		—		—		0.1

Net periodic cost (income)	$	0.1	$	0.2	$	0.5	$	0.5	$	(1.0	)

Post-Employment Health Care

In connection with the Transaction, the Company provides post-employment health care benefits to certain Namakwa Sands employees, retired employees and their registered dependants. Members can participate in the Anglo Medical Scheme, Bonitas Medical Fund or Discovery Health Medical Scheme. The Company provides benefits as follows: (i) members employed before March 1, 1994 receive 100% post-retirement and death-in-service benefits, (ii) members employed on or after March 1, 1994 but before January 1, 2002 receive 2% per year of completed service subject to a maximum of 50% post-retirement and death-in-service benefits, and (iii) members employed on or after January 1, 2002 receive 0% post-retirement and death-in-service benefits.

In anticipation of the Transaction, the Company’s actuaries performed a valuation report as of May 31, 2012.

The post-employment health care liabilities have been valued by the Company’s independent actuaries using the Projected Unit Credit Method, which was used to determine the past-service liability at the valuation date and projected annual expense in the year following the valuation date.

The components of net periodic post-employment healthcare cost for the three and nine months ended September 30, 2012 was $0.2 million.

The following key assumptions as of May 31, 2012 were used in the Company’s calculations:


	Rate
Discount rate assumption		9.65	%
Health care cost inflation assumption		8.15	%

A 1% increase in the assumed health care cost trend rate for each future year would increase the past-service contractual liability at May 31, 2012 by 23.3%, while the aggregate of the service and interest cost components would increase by 24.3% million. A 1% decrease in the trend rate for each future year would reduce the past-service contractual liability at May 31, 2012 by 18.1%, while the aggregate of the service and interest cost components would decrease by 18.8%.

Expected Benefit Payments—The expected cash benefit payments for the next five years and in the aggregate for the years 2012 through 2017 are estimated to be less than $0.5 million.

23. Related Party Transactions

Prior to the Transaction Date, Tronox Incorporated conducted transactions with Exxaro Australia Sands Pty Ltd, Tronox Incorporated’s 50% partner in the Tiwest Joint Venture. Tronox Incorporated purchased, at open market prices, raw materials used in its production of TiO₂, as well as Exxaro Australia Sands Pty Ltd’s share of TiO₂ produced by the Tiwest Joint Venture. Tronox Incorporated also provided administrative services and product research and development activities, which were reimbursed by Exxaro. From January 1, 2012 through the Transaction Date, Tronox Incorporated made payments of $173.0 million and received payments of $9.2 million. During the three months ended September 30, 2011, the company made payments of $87.7 million and received payments of $2.7 million, and during the eight months ended September 30, 2011 and one month ended January 31, 2011, Tronox Incorporated made payments of $232.7 million and $44.0 million, respectively, and received payments of $6.4 million and nil, respectively. The total payments to Exxaro of $232.7 million in the eight months ended September 30, 2011 includes $79.1 million related to the Company’s purchase of its 50% share of the Tiwest Joint Venture Kwinana Facility expansion in June 2011. Subsequent to the Transaction Date, such transactions are considered intercompany transactions and are eliminated in consolidation.

Subsequent to the Transaction, the Company began purchasing transition services from Exxaro, which amounted to $1.2 million since the Transaction Date.

24. Segment Information

Prior to the Transaction, Tronox Incorporated had one reportable segment representing its pigment business. The pigment segment primarily produced and marketed TiO_2,and included heavy minerals production. The heavy minerals production was integrated with its Australian pigment plant, but also had third-party sales of minerals not utilized by its pigment operations. In connection with the Transaction, the Company acquired 74% of Exxaro’s South African mineral sands operations, including its Namakwa and KZN Sands mines, separation facilities and slag furnaces, along with its 50% share of the Tiwest Joint Venture in Western Australia. As such, the Company evaluated its new operations under ASC 280, Segments, and determined that the mineral sands operations qualify as a separate segment.

Subsequent to the Transaction, the Company has two reportable segments, minerals and pigment. The minerals segment includes the exploration, mining and beneficiation of mineral sands deposits, as well as heavy mineral production. These operations produce titanium feedstock, including ilmenite, chloride slag, slag fines and rutile, as well as pig iron and zircon. The pigment segment primarily produces and markets TiO_2, and has production facilities in the United States, Australia, and the Netherlands. Corporate and Other is comprised of corporate activities and businesses that are no longer in operation, as well as its electrolytic manufacturing and marketing operations, all of which are located in the United States.

Segment performance is evaluated based on segment operating profit (loss), which represents the results of segment operations before unallocated costs, such as general corporate expenses not identified to a specific segment, environmental provisions, net of reimbursements, related to sites no longer in operation, interest expense, other income (expense) and income tax expense or benefit.


	Minerals		Pigment			Corporate And Other			Eliminations			Total
Successor: Three Months Ended September 30, 2012
Net Sales	$	271.7	$	279.8		$	38.6		$	(102.8	)	$	487.3
Income (Loss) from operations		19.4		(13.2	)		(25.6	)		(18.7	)		(38.1	)
Interest and debt expense													(18.1	)
Other income (expense)													0.2
Income (Loss) from Continuing Operations before Income Taxes												$	(56.0	)
Total Assets	$	3,128.4	$	1,710.0		$	858.4		$	(30.9	)	$	5,665.9
Depreciation, Depletion and Amortization		43.1		20.1			4.1			—			67.3
Capital Expenditures		27.2		9.8			6.7			—			43.7

Successor: Three Months Ended September 30, 2011
Net Sales	$	44.0	$	399.4		$	37.5		$	(15.5	)	$	465.4
Income (Loss) from operations		13.3		111.6			(25.7	)		—			99.2
Interest and debt expense													(8.0	)
Other income													(1.3	)
Income from Continuing Operations before Income Taxes												$	89.9
Total Assets	$	224.8	$	1,154.1		$	211.0		$	(2.0	)	$	1,587.9
Depreciation, Depletion and Amortization		4.2		14.6			3.8			—			22.6
Capital Expenditures		2.8		6.0			4.8			—			13.6

Successor: Nine Months Ended September 30, 2012
Net Sales	$	443.6	$	990.1		$	96.6		$	(180.5	)	$	1,349.8
Income (Loss) from operations		110.4		137.4			(129.7	)		(22.7	)		95.4
Interest and debt expense													(39.0	)
Other income (expense)													(4.8	)
Gain on bargain purchase													1,045.6
Income (Loss) from Continuing Operations before Income Taxes												$	1,097.2
Total Assets	$	3,128.4	$	1,710.0		$	858.4		$	(30.9	)	$	5,665.9
Depreciation, Depletion and Amortization		58.7		50.7			10.8			—			120.2
Capital Expenditures	$	46.7	$	25.2		$	19.3		$	—		$	91.2

Successor: Eight Months Ended September 30, 2011
Net Sales	$	107.9	$	1,002.2		$	93.3		$	(42.6	)	$	1,160.8
Income (Loss) from operations		24.3		219.4			(41.3	)		(0.6	)		201.8
Interest and debt expense													(21.5	)
Other income (expense)													(1.7	)
Income (Loss) from Continuing Operations before Income Taxes												$	178.6
Total Assets	$	224.8	$	1,154.1		$	211.0		$	(2.0	)	$	1,587.9
Depreciation, Depletion and Amortization		11.7		36.1			9.0			—			56.8
Capital Expenditures		5.4		104.6			10.7			—			120.7
Predecessor: January 1 through January 31, 2011
Net Sales	$	7.6	$	88.5		$	14.5		$	(3.0	)	$	107.6
Income (Loss) from operations		1.9		20.3			(1.4	)		(0.9	)		19.9
Interest and debt expense													(2.9	)
Other income													1.6
Reorganization income													613.6
Income from Continuing Operations before Income Taxes												$	632.2
Total Assets	$	221.0	$	987.2		$	241.3		$	(1.4	)	$	1,448.1
Depreciation, Depletion and Amortization		0.6		2.7			0.8			—			4.1
Capital Expenditures		—		4.2