Tronox Reports First Quarter 2020 Financial Results

First Quarter 2020 Financial Highlights:

Revenue of $722 million
Income from operations of $79 million; Net income of $40 million
Adjusted EBITDA of $174 million; Adjusted EBITDA margin of 24 percent (Non-GAAP)
Total acquisition synergies of $45 million, with $38 million reflected within EBITDA (Non-GAAP) and $7 million within taxes and other synergies
GAAP diluted EPS of $0.22; Adjusted diluted EPS of $0.29 (Non-GAAP)
TiO2 sales volumes up 7 percent and selling prices level sequentially
Zircon sales volumes remained level sequentially, offset by 8 percent lower selling prices which were partially influenced by a continued shift to standard grade from premium grade
All sites remain operational and have been designated as essential given the applications of TiO2, Zircon, and other co-products in critical products
Strong Financial Position and Cash Flow:

Over $1 billion of available liquidity following our recent debt offering, including over $700 million in pro forma cash and cash equivalents as of March 31, 2020(1)
No near-term maturities on our term loan or notes until 2024
Reducing expected full year 2020 capital expenditures by at least $50 million to $225 million and working capital to $40-50 million from $75-100 million

CEO Commentary
Jeffry N. Quinn, chairman and chief executive officer commented, “Tronox’s first quarter results came in slightly above our previously announced preliminary results, as we delivered Adjusted EBITDA of $174 million, with an Adjusted EBITDA margin of 24 percent, and Adjusted EPS of $0.29. These strong results were attributable to the benefits of our geographic diversity, vertically integrated global footprint, favorable end market exposure, and delivery of Cristal acquisition synergies. I am grateful to our employees around the world who have continued to deliver safe, quality, low-cost tons for our customers, while adapting our operations to manage through the ongoing COVID-19 pandemic.

“Our focus during the ongoing COVID-19 pandemic continues to be on protecting the health and safety of our employees. To this end, we have implemented stringent and prudent protocols at all our worldwide locations. Our operations have been designated as essential given the applications of TiO2, Zircon, and other co-products in critical products such as food and medical packaging, medical equipment, pharmaceuticals, and personal protective gear. All our sites are operating, and we continue to work diligently to ensure business continuity to meet our customers’ needs.

“We continue to monitor the market conditions which are evolving each day. Demand for TiO2 remains mixed across regions, with North America being the most resilient and China improving, offset by weaker demand in regions hit hardest by the virus, such as southern Europe, Brazil, and India. Zircon demand also remains mixed with recovering volumes in China offset by weaker demand in southern Europe and India.

“Based upon the evolving status of social restrictions, the uncertain plans for the re-opening of economies around the world, and our most recent conversations with and public statements by our customers, our current expectation is for second quarter TiO2 volumes to decline in the high teens to low twenties percent range versus first quarter 2020. Zircon volumes for the second quarter are anticipated to remain largely in line with the first quarter.

“Our liquidity remains strong. Last week, we successfully completed the offering of our $500 million 6.5% 2025 senior secured notes, with the proceeds to be used for general corporate purposes, including the repayment of existing indebtedness, capital expenditures, strategic investments and transactions, working capital and other business opportunities. We used a portion of the proceeds to pay down the $200 million drawn on our ABL and revolving credit facilities at the end of March.

Financial Summary for the Quarter Ending March 31, 2020(1)
Tronox reported revenue of $722 million for the first quarter 2020, in line with first quarter 2019 revenues of $720 million on a pro forma basis. Income from operations of $79 million compared to $46 million in the year-ago quarter on a pro forma basis. Net income attributable to Tronox was $32 million, or $0.22 per diluted share, compared to a net loss attributable to Tronox of $23 million, or $0.14 per diluted share, in the year-ago quarter on a pro forma basis. Net income attributable to Tronox in the first quarter 2020 included restructuring and integration costs related to the Cristal acquisition that totaled $9 million or $0.07 per diluted share. Excluding these items, adjusted net income attributable to Tronox (Non-GAAP) was $41 million, or $0.29 per diluted share. Adjusted EBITDA of $174 million increased 23 percent compared to $141 million on a pro forma basis in the prior-year quarter.

(1) Net income, Adjusted EBITDA and Adjusted EPS increased from preliminary results due to purchase accounting related adjustments.

Note: Since Tronox and Cristal combined their respective businesses on April 10, 2019 and to assist in the following discussion of first quarter 2020 performance compared to the first quarter 2019, we have provided the results on both a pro forma basis and a reported basis.
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