##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-K
  ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT
    OF 1934
 For the fiscal year ended December 31, 2007
  Commission file number 1-32669
  TRONOX INCORPORATED
 (Exact Name of Registrant as
    Specified in its Charter)
  Delaware

20-2868245(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification Number)   One Leadership Square, Suite 300
 211 N. Robinson Ave, Oklahoma City, Oklahoma
    73102
 (Address of principal executive
    offices)
  Registrants telephone number, including area code:
    (405) 775-5000
  Securities Registered Pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredClass A Common Stock, $0.01 par value
    Class B Common Stock, $0.01 par value

New York Stock Exchange
    New York Stock Exchange   No Securities are Registered Pursuant to Section 12(g)
    of the Act.
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




---



##### 





Tronox
    Incorporated
  Form 10-K
  Table of
    Contents
   
 PagePART IItem 1.

Business


1Item 1A.

Risk Factors


15Item 1B.

Unresolved Staff Comments


22Item 2.

Properties


22Item 3.

Legal Proceedings


22Item 4.

Submission of Matters to a Vote of Security
    Holders


24PART IIItem 5.

Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


25Item 6.

Selected Financial Data


27Item 7.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


30Item 7A.

Quantitative and Qualitative Disclosures About
    Market Risk


52Item 8.

Financial Statements and Supplementary Data


53Item 9.

Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


53Item 9A.

Controls and Procedures


54Item 9B.

Other Information


54PART IIIItem 10.

Directors, Executive Officers and Corporate
    Governance


54Item 11.

Executive Compensation


54Item 12.

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


55Item 13.

Certain Relationships and Related Transactions
    and Director Independence


55Item 14.

Principal Accountant Fees and Services


55PART IVItem 15.

Exhibits and Financial Statement Schedules


55Signatures


58Index to Financial Statements and Financial
    Statement Schedule


F-1Subsidiaries of the RegistrantConsent of Ernst & Young LLPConsent of Piercy Bowler Taylor & KernPower of AttorneyCertification Pursuant to 15 U.S.C. Section 7241Certification Pursuant to 15 U.S.C. Section 7241Certification Pursuant to 18 U.S.C. Section 1350Certification Pursuant to 18 U.S.C. Section 1350




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##### Table of Contents



SPECIAL
    NOTE REGARDING FORWARD-LOOKING STATEMENTS
  Form 10-K. Form 10-K.




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##### Table of Contents



TRONOX
    INCORPORATED
  PART I
  Item 1.
    Business  Company
    Background
    2 Form 10-K
      2007


2006


2005(Millions of dollars)United States

$
755.1


$
753.4


$
757.7International


671.2



668.4



617.5$
1,426.3


$
1,421.8


$
1,375.2   Competitive
    Strengths
    Leading
    Market Positions
  2 2 2 2
 1




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##### Table of Contents



Global
    Presence
  2 2 2
  Well-Established
    Relationships with a Diverse Customer Base
  2 2 2
  Innovative,
    High-Performance Products
  2 2 2
  Proprietary
    Production Technology
  2 2 2 2
  Experienced
    Management Team
    Business
    Strategy
    Strong
    Customer Focus
  2
 2




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##### Table of Contents



Technological
    Innovation
  2
  Cornerstone
    Performance Improvement Program
    
    Operations/supply chain cost reductions
    Selling, general and administrative cost reductions
    Accounts receivable reduction in number of days outstanding
    Total inventory reductions
    Land sales programs to monetize stranded assets
    Capital expenditure reductions for ongoing requirements  Operational
    Excellence
  2 2
  Maximize
    Asset Efficiency
  2
  Supply
    Chain Optimization
    Organizational
    Alignment
   3




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##### Table of Contents



Pigment
    Segment
  Background
  2 2 2 2 2 2
  2
  2 2 2 2
  2 2 cost-to-performance
  2 ®
  2
    
    The feasibility study related to the expansion of the Tiwest
    TiO2
    plant in Western Australia was completed during the fourth
    quarter of 2007. Implementation of the expansion is contingent
    upon finalization of the expansion agreements between the joint
    venture partners, which is expected to be completed during the
    first quarter of 2008.
    We have begun a reorganization of our European operations and
    legal entities. The reorganization project will substantially
    reduce the number of Tronox legal entities in Europe and
    establish a new, more cost-effective legal structure for us.
    During August 2007, we announced the following related to a work
    force reduction program and certain changes to our United States
    (U.S.) retirement plans:  
    Our U.S. work force was reduced by 46 employees. We
    will also not be filling 55 previously vacant positions. The
    program was substantially completed as of December 31,
    2007, with two employees remaining into early 2008 for
    transition purposes. In connection with the program, we incurred
    pretax 4




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##### Table of Contents



charges of $10.0 million for severance, special termination
    benefits under our pension plan and other employee related costs.  
    We made changes to our retiree medical and life insurance plans
    related to cost-sharing provisions between us and plan
    participants, life insurance benefits and certain retirement
    eligibility criteria. These changes are effective April 1,
    2009 and have reduced our postretirement obligation by
    approximately $93.1 million and our pretax noncash expense
    by approximately $6.0 million for the fiscal year.
    We made certain prospective amendments to the pension plan
    effective January 1, 2008, which will reduce the related
    net periodic cost for 2008 and future periods.  
    During September 2007, we executed a $100.0 million
    accounts receivable securitization program (the
    Program) with an initial term of one year. At
    December 31, 2007, the net balance in receivables sold by
    us was approximately $57.0 million.  Facilities
      Facility

Capacity


ProcessHamilton, Mississippi


225,000


ChlorideSavannah, Georgia


110,000


ChlorideKwinana, Western Australia


110,000
(1)

ChlorideBotlek, Netherlands


90,000


ChlorideUerdingen, Germany


107,000


SulfateTotal


642,000     (1)
    
    Reflects 100% of the production
    capacity of the pigment plant, which is owned 50% by us and 50%
    by our joint venture partner.  2 2 2
  Manufacturing
    Process
  Production
    Process. 2 Types of Titanium
    Dioxide, 2 2 2
 5




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4 4 4
    Types of Titanium Dioxide. 2 2 2 2
  2 2
  Raw Materials. 2
  The
    Tiwest Joint Venture
  2 2
  Management.
  Heavy Minerals.
 6




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##### Table of Contents



2 2
  Risk Factors  Fluctuations
    in costs of our raw materials or our access to supplies of our
    raw materials could have an adverse effect on our results of
    operations.
  2007

2006

2005(Gross tonnes)Proven and probable reserves (as of year end)


4,918,000



5,281,000



5,145,000Production


339,150



326,250



300,000   End-Use
    Markets and Applications
  2
  2007 Net Sales by Geography


2007 Sales Volume by End-Use MarketAmericas


43
%

Coatings


69
%Europe


30
%

Plastics


22
%Asia-Pacific


27
%

Paper and Specialty


9
%   Coatings End-Use Market. 2 2 sub-markets 2 sub-markets
  Sub-Market

Applications

Growth FactorsArchitectural

Residential and commercial paints

New and existing housing market and interest ratesIndustrial

Appliances, coil coatings, furniture and maintenance

Durable goods spending and environmental regulationsAutomotive

Original equipment manufacture, refinish and electro-coating

Interest rates and environmental regulationsSpecialty

Marine and can coatings, packaging and traffic paint

Fixed capital spending and government regulations   Plastics End-Use Market. 2 2 sub-markets
 7




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##### Table of Contents



2 sub-markets
  Sub-Market

Applications

Growth FactorsPolyolefins

Food packaging, plastic films and agricultural films

Consumer non-durable goods spendingPVC

Vinyl windows, siding, fencing, vinyl leather, roofing and shoes

Construction and renovation markets and consumer non-durable
    goods spendingEngineering plastics

Computer housing, cell phone cases, washing machines and
    refrigerators

Consumer durable goods spending and electronics marketOther plastics

Roofing and flooring

Construction market and durable goods spending   Paper and Specialty End-Use Market. 2 sub-markets 2 sub-markets
  Sub-Market

Applications

Growth FactorsPaper and paper laminate

Filled paper, coated paper for print media, coated board for
    beverage container packaging, wallboard, flooring, cabinets and
    furniture

Consumer non-durable goods spending and construction and
    renovation marketsInks and rubber

Packaging, beverage cans, container printing and rubber flooring

Consumer non-durable goods spendingFood and pharmaceuticals

Creams, sauces, capsules, sunscreen, and face and body care
    products

Consumer non-durable goods spendingCatalysts and electroceramics

Anti-pollution equipment (catalysts) for automobiles and
    power-generators and production of capacitors and resistors

Environmental regulations and electronics   Sales
    and Marketing
  2 2
  2
   8




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##### Table of Contents



Competitive
    Conditions
  2 2 2
  2 2 2 2
  2007 Global


2007 Production Process MixMarket Share


Chloride


SulfateDuPont


22
%


100
%


Cristal


14
%


80
%


20
%Tronox


12
%


83
%


17
%Kronos


10
%


72
%


28
%Huntsman


10
%


31
%


69
%Others


32
%


13
%


87
%     2 2 2 2 2 2
  Titanium
    Dioxide Outlook
  2
  2
 9




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##### Table of Contents



Electrolytic
    and Other Chemical Products
  Background
    Battery Materials.
        Sodium Chlorate.
    Boron.
 10




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##### Table of Contents



Facilities
    Facility

Capacity


ProductHamilton, Mississippi


150,000


Sodium chlorateHenderson, Nevada


27,000


EMDHenderson, Nevada


525


Boron productsSoda Springs, Idaho


720


Lithium manganese oxide   End-Use
    Markets and Applications
    Business Application

Sub-Market

Applications

Growth FactorsBattery Materials: EMD

Non-rechargeable battery materials

Alkaline batteries for use in flashlights, electronic games,
    medical, industrial devices

Consumer durable goods spending and electronics marketBattery Materials: LMO

Rechargeable battery materials

Lithium batteries used in power tools, HEVs/ EVs, laptops, power
    supplies

Consumer durable and non-durable goods spendingSodium Chlorate

Pulp and paper industry

Pulp bleaching

Consumer non-durable goods spendingBoron Trichloride

Specialty gas

Pharmaceuticals, semiconductors, high-performance fibers,
    specialty ceramics and epoxies

Consumer durable goods spending and electronics marketBoron Elemental

Defense, pyrotechnic and air bag industries

Igniter formulations

Consumer non-durable goods spending including defense   Competitive
    Conditions and Outlook
  Battery Materials.
     11




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##### Table of Contents



Sodium Chlorate.
  Boron Products.
  Research
    and Development
            Patents
    and Other Intellectual Property
  2
   12




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##### Table of Contents



Employees
    Government
    Regulations and Environmental Matters
  General
    Environmental
    Matters
      Year Ending December 31,Estimated


Estimated2007


2008


2009(Millions of dollars)Cash expenditures of environmental reserves(1)

$
50.2


$
60.0


$
43.0Recurring operating expenses


46.6



48.9



49.7Environmental capital expenditures associated with ongoing
    operations


17.0



14.8



10.4     (1)
    
    The estimate for 2008 does not
    include $35.0 million related to the Manville, New Jersey,
    site discussed in Environmental Matters
    included in Item 7 of this Annual Report on
    Form 10-K.     13




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##### Table of Contents



and/or
    
    Some sites are in the early stages of investigation, and other
    sites may be identified in the future.
    Remediation activities vary significantly in duration, scope and
    cost from site to site depending on the mix of unique site
    characteristics, applicable technologies and regulatory agencies
    involved.
    Remediation requirements are difficult to predict at sites where
    investigations have not been completed or final decisions have
    not been made regarding remediation requirements, technologies
    or other factors that bear on remediation costs.
    Environmental laws frequently impose joint and several liability
    on all potentially responsible parties, and it can be difficult
    to determine the number and financial condition and possible
    defenses of other potentially responsible parties and their
    respective shares of responsibility for remediation costs.
    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.
    Unanticipated construction problems and weather conditions can
    hinder the completion of environmental remediation.
    Some legal matters are in the early stages of investigation or
    proceeding or their outcomes otherwise may be difficult to
    predict, and other legal matters may be identified in the future.
    The inability to implement a planned engineering design or use
    planned technologies and excavation or extraction methods may
    require revisions to the design of remediation measures, which
    can delay remediation and increase its costs.
    The identification of additional areas or volumes of
    contamination and changes in costs of labor, equipment and
    technology generate corresponding changes in environmental
    remediation costs.  and/or Managements Discussion and Analysis of Financial
    Condition and Results of Operations Form 10-K.
  Availability
    of Reports and Governance Documents
  Form 10-K, Form 10-Q, Form 8-K
 14




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Form 10-K.
  Item 1A.
    Risk
    Factors  We are
    subject to significant liabilities and claims that are in
    addition to those associated with our primary business. These
    liabilities and claims are adversely affecting our financial
    condition and results of operations and we could suffer losses
    as a result of these liabilities and claims even if our primary
    business performs well.
  Form 10-K
  The
    costs of compliance with the extensive environmental, health and
    safety laws and regulations to which we are subject or the
    inability to obtain, update or renew permits required for the
    operation of our business could reduce our profitability or
    otherwise adversely affect us.
      Form 10-K
 15




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##### Table of Contents



The
    actual costs of environmental remediation and restoration could
    exceed estimates.
    clean-up Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Environmental Matters 
    Environmental Costs Form 10-K.
    Business  Government Regulations and
    Environmental Matters Legal
    Proceedings
  Interruptions
    of operations at our facilities may result in liabilities or
    lower operating results.
    
    Piping and storage tank leaks and ruptures
    Mechanical failure 16




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
    Severe weather and natural disasters
    Employee exposure to hazardous substances
    Chemical spills and other discharges or releases of toxic or
    hazardous substances or gases      Violations
    or noncompliance with the extensive environmental, health and
    safety laws and regulations to which we are subject could result
    in unanticipated loss or liability.
    Business  Government Regulations and
    Environmental Matters Legal
    Proceedings
  The
    amount of our debt could adversely affect our financial
    condition, limit our ability to pursue business opportunities,
    reduce our operating flexibility or put us at a competitive
    disadvantage.
    
    Require us to use a substantial portion of our cash flow from
    operations for debt service and reduce the availability of our
    cash flow to fund working capital, capital expenditures,
    acquisitions and other general corporate activities
    Limit our ability to obtain financing for working capital,
    capital expenditures, acquisitions or other general corporate
    activities in the future 17




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##### Table of Contents




    Expose us to greater interest rate risk because the interest
    rates on our senior secured credit facility will vary
    Impair our ability to successfully withstand a downturn in our
    business or the economy in general and place us at a
    disadvantage relative to our less-leveraged competitors    The
    terms of our senior secured credit facility and our indenture
    governing the unsecured notes contain a number of restrictive
    and financial covenants that could limit our ability to pay
    dividends or to operate effectively in the future. If we are
    unable to comply with these covenants, our lenders could
    accelerate the repayment of our indebtedness.
      We may
    need additional capital in the future and may not be able to
    obtain it on favorable terms, if at all.
      Market
    conditions and cyclical factors that adversely affect the demand
    for the end-use products that contain our titanium dioxide could
    adversely affect our results.
  2
 18




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##### Table of Contents



2 2 2
  Our
    business, financial condition and results of operations could be
    adversely affected by global and regional economic downturns and
    other conditions.
  Asia-Pacific 2
  Our
    results of operations may be adversely affected by fluctuations
    in currency exchange rates.
    Quantitative and Qualitative
    Disclosure about Market Risk  Foreign Currency
    Exchange Rate Risk
  Our
    industry and the end-use markets in which we compete are highly
    competitive. This competition may adversely affect our results
    of operations and operating cash flows.
   19




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##### Table of Contents



Business  Pigment Segment 
    Competitive Conditions.
    Fluctuations
    in costs of our raw materials or our access to supplies of our
    raw materials could have an adverse effect on our results of
    operations.
  2
  Business  Pigment Segment
     Manufacturing Process  Raw
    Materials.
  The
    labor and employment laws in many jurisdictions in which we
    operate are more restrictive than in the U.S. Our relationship
    with our employees could deteriorate, which could adversely
    affect our operations.
      Third
    parties may develop new intellectual property rights for new
    processes and/or products that we would want to use, but would
    be unable to do so; or, third parties may claim that the
    products we make or the processes we use infringe their
    intellectual property rights, which may cause us to pay
    unexpected litigation costs or damages or prevent us from
    making, using or selling the products we make or require us to
    alter the processes we use.
   20




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##### Table of Contents



If we
    are not able to continue our technological innovation and
    successful commercial introduction of new products, our
    profitability could be adversely affected.
    If our
    intellectual property were compromised or copied by competitors,
    or if competitors were to develop similar intellectual property
    independently, our results of operations could be negatively
    affected.
       21




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##### Table of Contents



Shared
    control of our joint venture may delay decisions or actions
    important for operations.
        Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties  2,
  Business Form 10-K.
  Item 3.
    Legal
    Proceedings  Savannah
    Plant
   22




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##### Table of Contents



Hamilton
    Plant
    New
    Jersey Wood-Treatment Site
  wood-treatment
    follow-up
     23




---



##### Table of Contents



Forest
    Products
  and/or and/or
    1-10,
  May v. Tronox Avance v. Tronox, Jeans v.
    Tronox
  Form 10-K.
  Item 4.
    Submission
    of Matters to a Vote of Security Holders   24




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##### Table of Contents



PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities      Range of Sales PriceClass A


Class B


Dividends DeclaredHigh


Low


High


Low


per ShareYear ended December 31, 2006First quarter

$
18.10


$
12.95


$
18.20


$
16.40


$
0.05Second quarter


19.35



11.51



19.43



11.51



Third quarter


14.34



9.27



14.39



9.53



0.05Fourth quarter


16.55



11.85



16.15



12.01



0.10Year ended December 31, 2007First quarter

$
15.89


$
13.52


$
15.54


$
13.28


$
0.05Second quarter


14.69



12.30



14.43



11.96



Third quarter


14.73



9.26



14.49



9.03



0.05Fourth quarter


9.57



6.90



9.25



6.82



0.10  25




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##### Table of Contents



COMPARISON
    OF 13 MONTH CUMULATIVE TOTAL RETURN* Among
    Tronox Incorporated, The S & P 500 Index
    And The S & P Chemicals Index
  
  November 22, 2005


December 31, 2005


December 31, 2006


December 31, 2007Tronox


$
100.00



$
93.36



$
115.42



$
65.24S&P 500


$
100.00



$
103.82



$
120.22



$
126.82S&P Chemicals


$
100.00



$
99.99



$
116.45



$
147.91   *
    
    $100 invested on 11/22/05 in stock or on 10/31/05 in
    index-including reinvestment of dividends. Fiscal year ending
    December 31. 26




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##### Table of Contents



Item 6.
    Selected
    Financial Data  Form 10-K. Managements Discussion and
    Analysis of Financial Condition and Results of Operations
  Year Ended December 31,2007


2006


2005


2004


2003(Millions of dollars, except per share)Statement of Operations Data:Net sales

$
1,426.3


$
1,421.8


$
1,375.2


$
1,312.5


$
1,163.5Cost of goods sold


1,310.2



1,246.3



1,145.3



1,169.9



1,026.3Gross margin


116.1



175.5



229.9



142.6



137.2Selling, general and administrative expenses


118.5



127.3



124.9



119.8



103.1Restructuring charges(1)


9.9



(7.1
)






113.0



61.4Arbitration award received(2)






(8.9
)










Provision for environmental remediation and restoration, net of
    reimbursements


2.4



(20.4
)


17.1



4.6



14.9(14.7
)


84.6



87.9



(94.8
)


(42.2
)Interest and debt expense


(50.1
)


(50.4
)


(4.5
)


(0.1
)


(0.1
)Other income (expense)(3)


2.7



13.9



(15.2
)


(25.2
)


(20.5
)Income (loss) from continuing operations before income taxes


(62.1
)


48.1



68.2



(120.1
)


(62.8
)Income tax benefit (provision)(4)


(43.0
)


(23.1
)


(21.8
)


38.3



15.1Income (loss) from continuing operations before cumulative
    effect of change in accounting principle


(105.1
)


25.0



46.4



(81.8
)


(47.7
)Loss from discontinued operations, net of income tax benefit(5)


(1.3
)


(25.2
)


(27.6
)


(45.8
)


(35.8
)Income (loss) before cumulative effect of change in accounting
    principle


(106.4
)


(0.2
)


18.8



(127.6
)


(83.5
)Cumulative effect of change in accounting principle, net of
    income tax(6)


















(9.2
)Net income (loss)

$
(106.4
)

$
(0.2
)

$
18.8


$
(127.6
)

$
(92.7
)Income (loss) from continuing operations per common share:Basic

$
(2.58
)

$
0.62


$
1.89


$
(3.57
)

$
(2.08
)Diluted


(2.58
)


0.61



1.89



(3.57
)


(2.08
)Dividends declared per common share


0.20



0.20



0.05







Balance Sheet Data:Working capital(7)

$
244.9


$
382.2


$
404.4


$
240.2


$
304.5Property, plant and equipment, net


848.9



864.6



839.7



883.0



961.6Total assets(8)


1,723.4



1,823.4



1,758.3



1,595.9



1,809.1Noncurrent liabilities:Long-term debt(9)


475.6



534.1



548.0







Environmental remediation and/or restoration


93.9



128.6



145.9



130.8



135.9All other noncurrent liabilities(8)


276.1



311.5



200.4



215.9



312.2Total liabilities(9)


1,293.8



1,386.1



1,269.3



706.0



797.9Total business/stockholders equity(9)


429.6



437.3



489.0



889.9



1,011.2Supplemental Information:Depreciation and amortization expense


112.3



103.0



103.1



104.6



106.5Capital expenditures


70.9



79.5



87.6



92.5



99.4Adjusted EBITDA(10)


141.2



191.9



232.0



162.2



160.3  27




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##### Table of Contents



(1)
    
    Restructuring charges in 2007
    resulted primarily from a work force reduction program described
    in Note 7 to the Consolidated and Combined Financial
    Statements included in Item 15(a) of this Annual Report on
    Form 10-K.
    Restructuring charges in 2006 resulted from updating our
    estimates of closure costs (including timing) related to our
    former Mobile, Alabama, synthetic rutile facility and the former
    Savannah, Georgia, sulfate facility. Restructuring charges in
    2004 include costs associated with the shutdown of our Savannah,
    Georgia, sulfate plant. Restructuring charges in 2003 include
    costs associated with the shutdown of our plant in Mobile,
    Alabama, and charges in connection with a work force reduction
    program consisting of both voluntary retirements and involuntary
    terminations.(2)
    
    An award by the London Court of
    International Arbitration resulted in the receipt of
    $8.9 million from Kemira Oyj (Kemira). See
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations in Item 7 of
    this Annual Report on
    Form 10-K.(3)
    
    Includes interest expense allocated
    to us by Kerr-McGee prior to November 28, 2005, based on
    specifically identified borrowings from Kerr-McGee at
    Kerr-McGees average borrowing rates. Also includes net
    foreign currency transaction gain (loss), equity in net earnings
    of equity method investees, gain (loss) on accounts receivable
    sales, provision for litigation settlements and other expenses.
    See Note 3 to the Consolidated and Combined Financial
    Statements included in Item 15(a) of this Annual Report on
    Form 10-K.(4)
    
    The 2007 provision includes
    valuation allowances totaling $38.9 million placed on
    Switzerland and certain U.S. deferred tax assets, as discussed
    in Note 13 to the Consolidated and Combined Financial
    Statements included in Item 15(a) of this Annual Report on
    Form 10-K.(5)
    
    See Note 14 to the
    Consolidated and Combined Financial Statements included in Item
    15(a) of this Annual Report on
    Form 10-K.(6)
    
    Reflects our adoption of Statement
    of Financial Accounting Standards (SFAS)
    No. 143, Accounting for Asset Retirement
    Obligations.(7)
    
    Working capital is defined as the
    excess of current assets over current liabilities.(8)
    
    Total assets and all other
    noncurrent liabilities increased in 2006 when we assumed
    employee benefit obligations and associated plan assets upon
    completion of the Distribution. Certain retirement obligations
    and assets were further impacted as of December 31, 2006,
    as a result of our adoption of SFAS No. 158. See
    Note 2 to the Consolidated and Combined Financial
    Statements included in Item 15(a) of this Annual Report on
    Form 10-K.(9)
    
    In the fourth quarter of 2005, we
    completed a recapitalization, whereby our common stock held by
    Kerr-McGee converted into approximately 22.9 million shares
    of Class B common stock. Also in the fourth quarter of 2005, we
    completed an IPO, whereby approximately 17.5 million shares
    of Class A common stock were issued. All of the net
    proceeds from the IPO were distributed to Kerr-McGee. Concurrent
    with the IPO, we issued $350.0 million of senior unsecured
    notes and borrowed $200.0 million under our senior secured
    credit facility.(10)
    
    EBITDA represents net income (loss)
    before net interest expense, income tax benefit (provision), and
    depreciation and amortization expense. Adjusted EBITDA
    represents EBITDA as further adjusted to reflect the items set
    forth in the table below, all of which are required in
    determining our compliance with financial covenants under our
    senior secured credit facility. See Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Financial Condition and
    Liquidity in Item 7 of this Annual Report on
    Form 10-K.Adjusted EBITDA, which is used by
    management to measure performance, is a non-GAAP financial
    measure. Management believes that Adjusted EBITDA is useful to
    investors because it is used in our debt instruments to
    determine compliance with financial covenants. It is included as
    a supplemental measure of our operating performance because it
    eliminates items that have less bearing on operating performance
    and highlights trends in the core business that may not
    otherwise be apparent when relying solely on GAAP financial
    measures. In addition, Adjusted EBITDA is one of the primary
    measures management uses for planning and budgeting processes
    and to monitor and evaluate financial and operating results.
    Adjusted EBITDA is not a recognized term under GAAP and does not
    purport to be an alternative to measures of our financial
    performance as determined in accordance with GAAP, such as net
    income (loss). Because other companies may calculate EBITDA and
    Adjusted EBITDA differently than we do, EBITDA may not be, and
    Adjusted EBITDA as presented in this Annual Report on
    Form 10-K
    is not, comparable to similarly titled measures reported by
    other companies. 28




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##### Table of Contents



Year Ended December 31,2007


2006


2005


2004


2003(Millions of dollars, except per share)Net income (loss)(a)

$
(106.4
)

$
(0.2
)

$
18.8


$
(127.6
)

$
(92.7
)Interest and debt expense


50.1



50.4



4.5



0.1



0.1Net interest expense on borrowings with affiliates and interest
    income(b)


(3.2
)


(2.8
)


11.9



9.5



8.8Income tax provision (benefit)


43.0



8.4



7.0



(63.0
)


(39.3
)Depreciation and amortization expense


112.3



103.0



103.1



104.6



106.5EBITDA


95.8



158.8



145.3



(76.4
)


(16.6
)Savannah sulfate facility shutdown costs














29.0



Loss from discontinued operations(c)


1.3



39.9



42.4



69.7



51.9Provision for environmental remediation and restoration, net of
    reimbursements


2.4



(20.4
)


17.1



4.6



14.9Extraordinary, unusual or non-recurring items(d)


10.0



(6.2
)






(0.3
)


47.0Gain on sale of assets


(1.4
)


(1.3
)










Noncash charges constituting:One-time fees, costs and expenses related to separation from
    Kerr-McGee






1.7











(Gain) loss on sales of accounts receivable(e)


2.9







(0.1
)


8.2



4.8Write-downs of property, plant and equipment and other assets(f)


10.0



2.5



9.3



104.8



29.3Impairment of intangible assets














7.4



Cumulative effect of change in accounting principle


















14.1Asset retirement obligations(g)


(0.1
)


(7.5
)


1.4







Other items(h)


20.3



24.4



16.6



15.2



14.9Adjusted EBITDA

$
141.2


$
191.9


$
232.0


$
162.2


$
160.3     (a)
    
    Net income (loss) includes income
    (loss) associated with our Savannah sulfate facility, which was
    closed in September 2004, of $(3.5) million,
    $3.0 million, $(2.6) million, $(17.8) million and
    $(18.6) million for the years ended December 31, 2007,
    2006, 2005, 2004 and 2003, respectively.(b)
    
    Included as a component of other
    income (expense) in our Consolidated and Combined Statements of
    Operations. Net interest expense on borrowings with affiliates
    was $14.6 million, $12.1 million and
    $10.1 million for the years ended December 31, 2005,
    2004 and 2003, respectively.(c)
    
    Includes provisions for
    environmental remediation and restoration, net of
    reimbursements, related to our former forest products
    operations, thorium compounds manufacturing, uranium and
    refining operations of ($0.8) million, $23.7 million,
    $17.6 million, $61.5 million and $41.1 million
    for the years ended December 31, 2007, 2006, 2005, 2004 and
    2003, respectively.(d)
    
    The 2007 amount represents costs
    associated with a work force reduction program described in
    Note 7 to the Consolidated and Combined Financial
    Statements included in Item 15(a) of this Annual Report on
    Form 10-K.
    The 2006 amount represents an arbitration award received from
    Kemira in the amount of $8.9 million, partially offset by
    legal costs of $2.7 million related to the matter (see
    Managements Discussion and Analysis of Financial
    Condition and Results of Operationsin Item 7 of
    this Annual Report on
    Form 10-K).
    The 2003 amount includes $25.8 million associated with the
    closure of our former Mobile, Alabama, facility for charges not
    reflected elsewhere and $21.2 million for a work force
    reduction program for continuing operations.(e)
    
    (Gain) loss on the sales of
    accounts receivable under an asset securitization, monetization
    or a factoring program, comparable to interest expense.(f)
    
    The 2007 amount includes
    $3.8 million related to the raw materials feed project at
    the companys Savannah, Georgia, facility and
    $3.5 million related to the write-down of a system project
    that will no longer be implemented as originally planned. The
    2004 amount includes $86.6 million associated with the
    shutdown of our Savannah, Georgia, sulfate facility. 29




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##### Table of Contents



(g)
    
    The 2006 amount resulted primarily
    from updating our estimates of closure costs (including timing)
    related to our former Mobile, Alabama, synthetic rutile facility
    and the former Savannah, Georgia, sulfate facility, which
    represents extraordinary, unusual or non-recurring items as
    defined within our credit agreement.(h)
    
    Includes noncash stock-based
    compensation, noncash pension and postretirement cost and
    accretion expense.  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The following discussion should be read in conjunction with
    the selected financial data and the consolidated and combined
    financial statements and the related notes included elsewhere in
    this Annual Report on
    Form 10-K.
  General
  2
  Segment Evaluation.
  period-to-period
  Overview
  General
    Factors Affecting the Results of Continuing
    Operations
  2 2 2 2 2 2
  2
  
    The feasibility study related to the expansion of the Tiwest
    TiO2
    plant in Western Australia was completed during the fourth
    quarter of 2007. Implementation of the expansion is contingent
    upon finalization of the 30




---



##### Table of Contents



expansion agreements between the joint venture partners, which
    is expected to be completed during the first quarter of 2008.  
    We have begun a reorganization of our European operations and
    legal entities. The reorganization project will substantially
    reduce the number of Tronox legal entities in Europe and
    establish a new, more cost-effective legal structure for us.
    During August 2007, we announced the following related to a work
    force reduction program and certain changes to our
    U.S. retirement plans:  
    Our U.S. work force was reduced by 46 employees. We
    will also not be filling 55 previously vacant positions. The
    program was substantially completed as of December 31,
    2007, with two employees remaining into early 2008 for
    transition purposes. In connection with the program, we incurred
    pretax charges of $10.0 million for severance, special
    termination benefits under our pension plan and other employee
    related costs.
    We made changes to our retiree medical and life insurance plans
    related to cost-sharing provisions between us and plan
    participants, life insurance benefits and certain retirement
    eligibility criteria. These changes are effective April 1,
    2009, and have reduced our postretirement obligation by
    approximately $93.1 million and our pretax noncash expense
    by approximately $6.0 million for the fiscal year.
    We made certain prospective amendments to the pension plan
    effective January 1, 2008, which will reduce the related
    net periodic cost for 2008 and future periods.  
    During September 2007, we executed a $100.0 million
    accounts receivable securitization program (the
    Program) with an initial term of one year. At
    December 31, 2007, the net balance of receivables sold by
    us was approximately $57.0 million.       31




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##### Table of Contents



Basis of
    Presentation
  Consolidated
    and Combined Financial Statements
    Form 10-K
  General Corporate Expenses.
  Employee Benefits and Incentives.
  Interest Expense.
    Kerr-McGee
 32




---



##### Table of Contents



Results
    of Operations
  Year
    Ended December 31, 2007 Compared to Year Ended
    December 31, 2006
    Year Ended December 31,2007


2006


$ Change(Millions of dollars)Net salesPigment

$
1,320.6


$
1,320.3


$
0.3Electrolytic and other chemical products


105.7



101.5



4.2Total

$
1,426.3


$
1,421.8


$
4.5            33




---



##### Table of Contents



Year Ended December 31,2007


2006


$ Change(Millions of dollars)Operating profit (loss)Pigment

$
12.2


$
77.9


$
(65.7
)Electrolytic and other chemical products


(2.3
)


25.3



(27.6
)Subtotal


9.9



103.2



(93.3
)Corporate and nonoperating sites


(24.6
)


(18.6
)


(6.0
)Total operating profit (loss)


(14.7
)


84.6



(99.3
)Interest and debt expense


(50.1
)


(50.4
)


0.3Other income, net


2.7



13.9



(11.2
)Income (loss) from continuing operations before income taxes

$
(62.1
)

$
48.1


$
(110.2
)              34




---



##### Table of Contents



Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
    Year Ended December 31,2006


2005


$ Change(Millions of dollars)Net salesPigment

$
1,320.3


$
1,278.2


$
42.1Electrolytic and other chemical products


101.5



97.0



4.5Total

$
1,421.8


$
1,375.2


$
46.6      35




---



##### Table of Contents



Year Ended December 31,2006


2005


$ Change(Millions of dollars)Operating profitPigment

$
77.9


$
101.5


$
(23.6
)Electrolytic and other chemical products


25.3



(5.9
)


31.2Subtotal


103.2



95.6



7.6Corporate and nonoperating sites


(18.6
)


(7.7
)


(10.9
)Total operating profit


84.6



87.9



(3.3
)Interest and debt expense


(50.4
)


(4.5
)


(45.9
)Other income (expense), net


13.9



(15.2
)


29.1Income from continuing operations before income taxes

$
48.1


$
68.2


$
(20.1
)   2
     36




---



##### Table of Contents



Kerr-McGee
        Form 10-K).
 37




---



##### Table of Contents



Financial
    Condition and Liquidity
    December 31,


December 31,


December 31,2007


2006


2005(Millions of dollars)Current ratio(1)


1.5:1



1.9:1



2.1:1Cash and cash equivalents

$
21.0


$
76.6


$
69.0Working capital(2)


244.9



382.2



404.4Total assets(3)


1,723.4



1,823.4



1,758.3Long-term debt


475.6



534.1



548.0Stockholders equity(4)


429.6



437.3



489.0     (1)
    
    Represents a ratio of current
    assets to current liabilities.(2)
    
    Represents excess of current assets
    over current liabilities.(3)
    
    Effective March 30, 2006, we
    assumed certain U.S. benefit plan obligations and received a
    transfer of related assets which resulted in increases in total
    assets of $122.8 million, stockholders equity of
    $2.1 million and total liabilities of $120.7 million.(4)
    
    Effective December 31, 2006,
    we adopted SFAS No. 158 which resulted in a reduction
    of stockholders equity of approximately $95 million
    ($145 million on a pretax basis).        53-acre
 38




---



##### Table of Contents



Kerr-McGee
    Cash
    Flows
  Cash Flows from Operating Activities.
    Cash Flows from Investing Activities.
      Cash Flows from Financing Activities.
   39




---



##### Table of Contents



1 2
  Capital
    Resources
  Credit Agreement.
    and/or
  2007
    Credit Agreement Covenant Amendment
      2008
    Credit Agreement Covenant Amendment
   40




---



##### Table of Contents



Consolidated


ConsolidatedTotal


InterestLeverage Ratio


Coverage RatioFiscal Quarter EndedMarch 31, 2008


4.45:1



1.00:1June 30, 2008


4.90:1



1.00:1September 30, 2008


4.90:1



0.80:1December 31, 2008


4.90:1



0.80:1March 31, 2009


4.50:1



1.25:1June 30, 2009


4.35:1



1.25:1September 30, 2009


3.90:1



1.75:1December 31, 2009


3.50:1



1.75:1     Risk
    Factors, 2
      Senior Unsecured Notes. 1 2
 41




---



##### Table of Contents



Note Payable due July 2014.
  Receivables Securitization. over-collateralization
    Off-Balance
    Sheet Arrangements
    Outlook
    Asia-Pacific
   42




---



##### Table of Contents



Contractual
    Obligations and Commercial Commitments
      Payments Due by Period2009


2011


AfterType of Obligation

Total


2008


-2010


-2012


2012(Millions of dollars)Long-term debt, including current portion

$
484.8


$
9.2


$
2.6


$
473.0


$
Interest payments on current and long-term debt(1)


189.4



40.3



78.9



70.2



Pension and postretirement payments


92.7



12.7



15.4



16.5



48.1Operating leases


88.2



14.0



24.2



19.3



30.7Purchase obligations:Ore contracts(2)


418.7



182.3



172.1



47.1



17.2Other purchase obligations(3)


651.5



134.2



233.6



185.8



97.9Total(4)

$
1,925.3


$
392.7


$
526.8


$
811.9


$
193.9     (1)
    
    Interest on the variable-rate term
    loan is calculated at the weighted-average rate on outstanding
    borrowings under the term loan which was 6.8% at
    December 31, 2007. Interest on the $350 million senior
    unsecured notes is calculated at a fixed rate of 9.5% on the
    aggregate principle amount. Interest on the variable-rate note
    payable, which was paid off in January 2008, was calculated at
    13.26% of principal. See Note 6 to the Consolidated and
    Combined Financial Statements included in Item 15(a) of this
    Annual Report on
    Form 10-K
    for additional discussion regarding long-term debt.(2)
    
    Approximately 33% of annual usage
    acquired from two suppliers under long-term supply contracts.(3)
    
    Includes obligations to purchase
    our requirements of process chemicals, supplies, utilities and
    services.(4)
    
    Excludes liabilities related to
    uncertain tax positions (discussed later in New/Revised
    Accounting Standards) because we cannot make a
    reasonably reliable estimate regarding the periods of cash
    settlement with the respective taxing authorities.  Environmental
    Matters
  Current
    Businesses
   43




---



##### Table of Contents



Legacy
    Businesses
  Environmental Costs Form 10-K.
  Environmental
    Costs
    Year Ended December 31,2007


2006


2005


Total(Millions of dollars)Cash expenditures of environmental reserves

$
50.2


$
56.2


$
61.1


$
167.5Recurring operating expenses


46.6



45.8



41.4



133.8Environmental capital expenditures associated with ongoing
    operations


17.0



21.0



19.7



57.7      44




---



##### Table of Contents



Form 10-K,
       45




---



##### Table of Contents



Form 10-K.
  Total


RemainingExpenditures


Reservethrough


Balance atDecember 31,


December 31,Location of Site

2007


2007


Total(Millions of dollars)EPA Superfund sites on NPLWest Chicago, Illinois (Vicinity areas)

$
185.4


$
42.7


$
228.1Manville, New Jersey


0.6



35.0



35.6Other superfund sites


70.8



5.9



76.7Total

$
256.8


$
83.6


$
340.4Sites under consent order, license or agreement, not on EPA
    Superfund NPLWest Chicago, Illinois (Former manufacturing facility)

$
449.3


$
10.7


$
460.0Cushing, Oklahoma


149.3



9.5



158.8Henderson, Nevada


142.7



24.4



167.1Ambrosia Lake, New Mexico


35.0



9.9



44.9Crescent, Oklahoma


51.8



9.8



61.6Sauget, Illinois


10.6



5.8



16.4Cleveland, Oklahoma


19.3



3.5



22.8Jacksonville, Florida


4.9



5.1



10.0Riley Pass, South Dakota


2.0



1.9



3.9Other sites


220.1



24.6



244.7Total

$
1,085.0


$
105.2


$
1,190.2Total of all sites with reserves

$
1,341.8


$
188.8


$
1,530.6   West Chicago, Illinois (Vicinity
    Areas).
    Manville, New Jersey.
    Other Superfund Sites.
  West Chicago, Illinois (Former Manufacturing
    Facility).
 46




---



##### Table of Contents



Cushing, Oklahoma.
  Henderson, Nevada.
    Ambrosia Lake, New Mexico.
  Crescent, Oklahoma. on-site
  Sauget, Illinois.
  Cleveland, Oklahoma.
  Jacksonville, Florida.
  Riley Pass, South Dakota.
  Other Sites.
    Critical
    Accounting Policies
   47




---



##### Table of Contents



Long-Lived
    Assets
    2 held-for-use
  Restructuring
    and Exit Activities
  Form 10-K.
  Environmental
    Remediation and Other Contingency Reserves
  and/or
 48




---



##### Table of Contents



Environmental Matters Form 10-K.
  Income
    Taxes
          New/Revised Accounting Standards
  Pension
    and Postretirement Accounting
  Employers Accounting for Pensions, Employers Accounting
    for Postretirement Benefits Other Than Pensions Employers Disclosures
    about Pensions and Other Postretirement Benefits  An
    Amendment of FASB Statements No. 87, 88 and 106
    (revised), Employers Accounting for
    Defined Benefit Pension and Other Postretirement Plans
 49




---



##### Table of Contents



U.S.
    Plans
      
    Discount rate
    Expected long-term rate of return (applies to our
    U.S. qualified plan only)
    Rate of compensation increases  Discount Rate.
  Expected Long-term Rate of Return.
  Rate of Compensation Increases.
  Form 10-K.
 50




---



##### Table of Contents



Pension Benefits(1)


Other Postretirement BenefitsNet Periodic


Projected


Net Periodic


AccumulatedCost


Benefit


Cost


Postretirement(Benefit)


Obligation


(Benefit)


Benefit Obligation(Millions of dollars)Increase of 0.5% in Discount rates

$
(1.3
)

$
(17.2
)

$
(0.2
)

$
(2.7
)Expected return on plan assets


(2.2
)










Rate of compensation increase


1.1



4.8







Decrease of 0.5% in Discount rates

$
1.4


$
18.7


$
0.2


$
3.0Expected return on plan assets(2)


2.2











Rate of compensation increase


(1.1
)


(4.4
)






Change in health care cost trend rate of 1%Increase

$



$



$
1.0


$
5.2Decrease










(0.8
)


(4.3
)     (1)
    
    The sensitivity analysis reflects
    only the impact of assumption changes on our U.S. qualified
    retirement plan. While we sponsor other retirement plans for its
    U.S. employees, the PBO for the U.S. qualified retirement plan
    at December 31, 2007, represented approximately 97% of the
    total PBO for all U.S. retirement plans.(2)
    
    If the actual return on plan assets
    was one percent lower than the expected return, our expected
    cash contributions to our pension and other postretirement
    benefit plans would not significantly change.  Foreign
    Benefit Plans
      
    Discount rate
    Expected long-term rate of return (applies to our plan in the
    Netherlands only)
    Rate of compensation increases     51




---



##### Table of Contents



Form 10-K.
  New/Revised
    Accounting Standards
  Uncertain Tax Positions.
  Fair Value Measurement.
  Fair Value Option.
  Business Combinations.
  Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk  Form 10-K.
  Foreign
    Currency Exchange Rate Risk
   52




---



##### Table of Contents



Interest
    Rate Risk
      FairThere-





Value2008


2009


2010


2011


2012


After


Total


12/31/07(Millions of dollars, except percentages)Fixed-rate debt Principal amount

$



$



$



$



$
350.0


$



$
350.0


$
339.9Interest rate



%



%



%



%


9.50
%



%


9.50
%Variable-rate debt Principal amount

$
9.2


$
1.3


$
1.3


$
123.0


$



$



$
134.8


$
134.8Weighted-average interest rate


12.32
%


6.54
%


6.54
%


6.54
%



%



%


6.93
%     Natural
    Gas Derivatives
    Item 8.
    Financial
    Statements and Supplementary Data  page F-1.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure   53




---



##### Table of Contents



Item 9A.
    Controls
    and Procedures  a)
    Evaluation
    of Disclosure Controls and Procedures    Rules 13a-15(e) 15d-15(e)
  (b)
    Managements
    Annual Report on Internal Control Over Financial
    Reporting  Internal Control  Integrated
    Framework. Form 10-K page F-2 Form 10-K page F-3 Form 10-K.
  c)
    Changes
    in Internal Control over Financial Reporting    Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance    Item 11.
    Executive
    Compensation   54




---



##### Table of Contents



Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules    Form 10-K page F-1
    2
.1

Master Separation Agreement, dated as of November 28, 2005,
    among Kerr-McGee Corporation, Kerr-McGee Worldwide Corporation,
    and Tronox Incorporated (incorporated by reference to
    Exhibit 2.1 of the Registrants current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    December 7, 2005).3
.1

Amended and restated Certificate of Incorporation of Tronox
    Incorporated (incorporated by reference to Exhibit 3.1 of
    the Registrants current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    December 7, 2005).3
.2

Amended and Restated Bylaws of Tronox Incorporated (incorporated
    by reference to Exhibit 3.2 of the Registrants
    current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    December 7, 2005).4
.1

Rights Agreement, dated as of November 28, 2005, between
    Kerr-McGee Corporation and Tronox Incorporated (incorporated by
    reference to Exhibit 4.1 of the Registrants current
    report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    December 7, 2005).10
.1**

Compensation arrangements for the named executive officers of
    Tronox Incorporated (incorporated by reference to
    Exhibit 10.1 of the Registrants current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    November 30, 2005).10
.2**

Continuity Agreement, dated as of November 28, 2005,
    between Tronox Incorporated and Thomas W. Adams (incorporated by
    reference to Exhibit 10.2 of the Registrants current
    report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    November 30, 2005).10
.3**

Continuity Agreement, dated as of November 28, 2005,
    between Tronox Incorporated and Mary Mikkelson
    (incorporated by reference to Exhibit 10.4 of the
    Registrants current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    November 30, 2005). 55




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##### Table of Contents



10
.4**

Continuity Agreement, dated as of November 28, 2005,
    between Tronox Incorporated and Robert Y. Brown (incorporated by
    reference to Exhibit 10.6 of the Registrants current
    report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    November 30, 2005).10
.5**

Continuity Agreement, dated as of November 28, 2005,
    between Tronox Incorporated and Gregory E. Thomas (incorporated
    by reference to Exhibit 10.7 of the Registrants
    current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    November 30, 2005).10
.6

Registration Rights Agreement, dated as of November 28,
    2005, between Kerr-McGee Corporation and Tronox Incorporated
    (incorporated by reference to Exhibit 10.1 of the
    Registrants current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    December 7, 2005).10
.7

Transitional License Agreement, dated as of November 28,
    2005, among Kerr-McGee Worldwide Corporation and Tronox
    Incorporated (incorporated by reference to Exhibit 10.2 of
    the Registrants current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    December 7, 2005).10
.8

Tax Sharing Agreement, dated as of November 28, 2005, among
    Kerr-McGee Corporation and Tronox Incorporated (incorporated by
    reference to Exhibit 10.3 of the Registrants current
    report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    December 7, 2005).10
.9**

Employee Benefits Agreement, dated as of November 28, 2005,
    among Kerr-McGee Corporation and Tronox Incorporated
    (incorporated by reference to Exhibit 10.4 of the
    Registrants current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    December 7, 2005).10
.10

Credit Agreement, dated as of November 28, 2005, among
    Tronox Incorporated, Tronox Worldwide LLC and Lehman Brothers
    Inc. and Credit Suisse (incorporated by reference to
    Exhibit 10.6 of the Registrants current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    December 7, 2005).10
.11

Indenture, dated as of November 28, 2005, among Tronox
    Worldwide LLC, Tronox Finance Corp. and Citibank, N.A.
    (incorporated by reference to Exhibit 10.7 of the
    Registrants current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    December 7, 2005).10
.12

Exchange and Registration Rights Agreement among Tronox
    Worldwide LLC, Tronox Finance Corp. as Issuers, the Guarantors
    and Lehman Brothers Inc. and Credit Suisse First Boston LLC, as
    Representatives of the Several Initial Purchasers (incorporated
    by reference to Exhibit 10.8 of the Registrants
    current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    December 7, 2005).10
.13**

2006 Tronox Annual Incentive Plan Performance Measures
    (incorporated by reference to Exhibit 10.1 of the
    Registrants current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    December 22, 2005).10
.14**

Long Term Incentive Plan (incorporated by reference to
    Exhibit 10.17 of the registrants Annual Report on
    Form 10-K
    filed with the Securities and Exchange Commission on
    March 29, 2006).10
.15**

Continuity Agreement, dated as of November 28, 2005,
    between Tronox Incorporated and Kelly A. Green (as referenced in
    the official notification to shareholders of matters to be
    brought to a vote on Form DEF 14A, filed with the
    Securities and Exchange Commission on April 10, 2006).10
.16

First Amendment to Credit Agreement, dated as of March 12,
    2007, to that certain Credit Agreement, dated as of
    November 28, 2005, among Tronox Incorporated, Tronox
    Worldwide LLC and Lehman Brothers Inc. and Credit Suisse
    (incorporated by reference to Exhibit 10.19 of the
    registrants Annual Report on
    Form 10-K
    filed with the Securities and Exchange Commission on
    March 16, 2007).10
.17

Receivables Sale Agreement among Tronox Funding LLC, as Seller,
    Tronox Worldwide LLC, as Initial Collection Agent, ABN Amro Bank
    N.V. as the Agent, the Committed Purchasers and Amsterdam
    Funding Corporation as Conduit, dated September 26, 2006
    (incorporated by references to Exhibit 10.1 of the
    Registrants current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    October 2, 2007).10
.18

Purchase and Sale Agreement among Tronox LLC and Tronox Pigments
    (Savannah) Inc., as Originators, and Tronox Funding LLC, as
    Buyer, dated September 26, 2007 (incorporated by references
    to Exhibit 10.2 of the Registrants current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    October 2, 2007). 56




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##### Table of Contents



10
.19

Second Amendment to Credit Agreement and First Amendment to
    Guarantee and Collateral Agreement, dated as of February 8,
    2008, among Tronox Incorporated, a Delaware corporation, Tronox
    Worldwide LLC, a Delaware limited liability company, the several
    banks and other financial institutions or entities from time to
    time parties thereto, Lehman Brothers Inc. and Credit Suisse, as
    joint lead arrangers and joint bookrunners, ABN Amro Bank N.V.,
    as syndication agent, JPMorgan Chase Bank, N.A. And Citicorp
    USA, Inc., as co-documentation agents, Lehman Commercial Paper
    Inc., as administrative agent, and the parties listed as
    grantors on the signature pages hereto (incorporated by
    reference to Exhibit 10.1 of Registrants current
    report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    February 13, 2008).21
*

Subsidiaries of Tronox Incorporated23
.1*

Consent of Ernst & Young LLP23
.2*

Consent of Piercy Bowler Taylor & Kern, Certified
    Public Accountants & Business Advisors, A Professional
    Corporation24
*

Power of Attorney31
.1*

Certification Pursuant to 15 U.S.C. Section 7241, as
    adopted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.31
.2*

Certification Pursuant to 15 U.S.C. Section 7241, as
    adopted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.32
.1*

Certification Pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.32
.2*

Certification Pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.     *
    
    Each document marked with an asterisk is filed herewith.**
    
    Management contract or compensatory plan of the company required
    to be filed as an exhibit. 57




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##### Table of Contents



SIGNATURES      By:
    /s/  Thomas
    W. Adams     By:
    /s/  Mary
    Mikkelson   Title:
    Senior Vice President and Chief
    Financial Officer (Principal Financial   By:
    /s/  David
    J. Klvac   Title:
    Vice President and Controller     /s/  Thomas
    W. AdamsThomas
    W. Adams

Director*Jerome
    Adams

Director*Bradley
    C. Richardson

Director*Peter
    D. Kinnear

Director*David
    G. Birney

Director*Robert
    D. Agdern

Director*By:

/s/  Thomas
    W.
    AdamsThomas
    W. AdamsAttorney-in-fact   Form 10-K
 58




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##### Table of Contents



TRONOX
    INCORPORATED
  INDEX
    TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
    SCHEDULE
  Report of Independent Registered Public
    Accounting Firm on Internal Control Over Financial Reporting of
    Tronox Incorporated


F-2Report of Independent Registered Public
    Accounting Firm on Consolidated and Combined Financial
    Statements of Tronox Incorporated


F-3Report of Independent Registered Public
    Accounting Firm on Combined Financial Statements of Basic
    Management, Inc. and Subsidiaries


F-4Consolidated and Combined Statements of
    Operations for the years ended December 31, 2007, 2006 and
    2005


F-5Consolidated Balance Sheets at December 31,
    2007 and 2006


F-6Consolidated and Combined Statements of Cash
    Flows for the years ended December 31, 2007, 2006 and
    2005


F-7Consolidated and Combined Statements of
    Comprehensive Income (Loss) and Business/Stockholders
    Equity for the years ended December 31, 2007, 2006 and
    2005


F-8Notes to Consolidated and Combined Financial
    Statements


F-9Schedule II  Valuation and
    Qualifying Accounts


II-1  F-1




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
    on Internal Control over Financial Reporting                
    F-2




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
    on Consolidated and Combined Financial Statements          Accounting
    for Uncertainty in Income Taxes Share-Based
    Payment, EITF 04-6, Accounting for Stripping Costs Incurred During Production in
    the Mining Industry Inventory Costs  an
    Amendment of ARB No. 43, Chapter 4 Employers
    Accounting for Defined Benefit Pension and Other Postretirement
    Plans  an Amendment of FASB Statements No. 87,
    88, 106 and 132(R).
    
    F-3




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm            
      F-4




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##### Table of Contents



TRONOX
    INCORPORATED
  CONSOLIDATED
    AND COMBINED STATEMENTS OF OPERATIONS
  For the Years Ended December 31,2007


2006


2005(Millions of dollars, except per share)Net Sales

$
1,426.3


$
1,421.8


$
1,375.2Cost of goods sold


1,310.2



1,246.3



1,145.3Gross Margin


116.1



175.5



229.9Selling, general and administrative expenses


118.5



127.3



124.9Restructuring charges


9.9



(7.1
)


Arbitration award received






(8.9
)


Provision for environmental remediation and restoration, net of
    reimbursements


2.4



(20.4
)


17.1(14.7
)


84.6



87.9Interest and debt expense


(50.1
)


(50.4
)


(4.5
)Other income (expense)


2.7



13.9



(15.2
)Income (Loss) from Continuing Operations before Income
    Taxes


(62.1
)


48.1



68.2Income tax provision


(43.0
)


(23.1
)


(21.8
)Income (Loss) from Continuing Operations


(105.1
)


25.0



46.4Loss from discontinued operations, net of income tax benefit of
    nil, $14.7 and $14.8, respectively


(1.3
)


(25.2
)


(27.6
)Net Income (Loss)

$
(106.4
)

$
(0.2
)

$
18.8Income (Loss) per Common Share:Basic Continuing operations

$
(2.58
)

$
0.62


$
1.89Discontinued operations


(0.03
)


(0.62
)


(1.12
)Net income (loss)

$
(2.61
)

$



$
0.77Diluted Continuing operations

$
(2.58
)

$
0.61


$
1.89Discontinued operations


(0.03
)


(0.61
)


(1.12
)Net income (loss)

$
(2.61
)

$



$
0.77Weighted Average Shares Outstanding (in thousands):Basic


40,692



40,373



24,518Diluted


40,692



40,933



24,518    F-5




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##### Table of Contents



TRONOX
    INCORPORATED
  CONSOLIDATED
    BALANCE SHEETS
  At December 31,2007


2006(Millions of dollars)ASSETSCurrent AssetsCash and cash equivalents

$
21.0


$
76.6Accounts receivable, net of allowance for doubtful accounts of
    $13.9 in 2007 and $12.7 in 2006


290.5



325.6Inventories


350.0



319.2Prepaid and other assets


23.6



15.2Income tax receivable


4.3



13.9Deferred income taxes


3.7



43.6Total Current Assets


693.1



794.1Property, Plant and Equipment  Net


848.9



864.6Goodwill


12.7



11.5Other Long-Term Assets


168.7



153.2Total Assets

$
1,723.4


$
1,823.4LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable

$
234.9


$
183.6Accrued liabilities


197.7



212.0Long-term debt due within one year


9.2



14.7Income taxes payable


6.4



1.6Total Current Liabilities


448.2



411.9Noncurrent LiabilitiesDeferred income taxes


57.2



33.6Environmental remediation and/or restoration


93.9



128.6Long-term debt


475.6



534.1Other


218.9



277.9Total Noncurrent Liabilities


845.6



974.2Contingencies and CommitmentsStockholders EquityClass A common stock, par value $0.01 
    100,000,000 shares authorized, 18,746,329 and
    18,388,202 shares issued and outstanding at
    December 31, 2007 and December 31, 2006, respectively


0.2



0.2Class B common stock, par value $0.01 
    100,000,000 shares authorized, 22,889,431 shares
    issued and outstanding at December 31, 2007 and
    December 31, 2006, respectively


0.2



0.2Capital in excess of par value


490.8



481.6Accumulated deficit


(136.8
)


(12.8
)Accumulated other comprehensive income (loss)


78.2



(31.4
)Treasury stock, at cost  210,638 and
    33,533 shares at December 31, 2007 and
    December 31, 2006, respectively


(3.0
)


(0.5
)Total Stockholders Equity


429.6



437.3Total Liabilities and Stockholders Equity

$
1,723.4


$
1,823.4    F-6




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##### Table of Contents



TRONOX
    INCORPORATED
  CONSOLIDATED
    AND COMBINED STATEMENTS OF CASH FLOWS
  For the Years Ended December 31,2007


2006


2005(Millions of dollars)Cash Flows from Operating ActivitiesNet income (loss)

$
(106.4
)

$
(0.2
)

$
18.8Adjustments to reconcile net income (loss) to net cash provided
    by operating activities Depreciation and amortization


112.3



103.0



103.1Deferred income taxes


24.8



(5.5
)


(31.9
)Asset write-downs and impairments


8.9







12.3Provision for environmental remediation and restoration, net of
    reimbursements


1.6



3.3



34.7Allocations from Kerr-McGee










48.0Other noncash items affecting net income (loss)


33.9



25.7



33.1Changes in assets and liabilities (Increase) decrease in accounts receivable


45.5



39.2



(154.0
)(Increase) decrease in inventories


(20.7
)


(1.5
)


(42.7
)Increase (decrease) in accounts payable


42.4



(4.9
)


7.0Other


(47.0
)


(47.5
)


33.1Net cash flows from operating activities


95.3



111.6



61.5Cash Flows from Investing ActivitiesCapital expenditures


(70.9
)


(79.5
)


(87.6
)Collection on repurchased receivables










165.0Other investing activities


1.7



4.5



5.9Net cash flows from investing activities


(69.2
)


(75.0
)


83.3Cash Flows from Financing ActivitiesRepayment of debt


(64.9
)


(11.1
)


Costs of obtaining financing


(0.3
)


(2.3
)


(10.9
)Issuance of common stock, net


1.6







226.0Proceeds from borrowings










550.0Distributions to Kerr-McGee










(761.8
)Net transfers with affiliates










(106.6
)Dividends paid


(8.3
)


(6.2
)


Net cash flows from financing activities


(71.9
)


(19.6
)


(103.3
)Effects of Exchange Rate Changes on Cash and Cash
    Equivalents


(9.8
)


(9.4
)


3.7Net Increase (Decrease) in Cash and Cash Equivalents


(55.6
)


7.6



45.2Cash and Cash Equivalents at Beginning of Year


76.6



69.0



23.8Cash and Cash Equivalents at End of Year

$
21.0


$
76.6


$
69.0    F-7




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##### Table of Contents



TRONOX
    INCORPORATED
  CONSOLIDATED
    AND COMBINED STATEMENT OF COMPREHENSIVE INCOME (LOSS) AND
 BUSINESS/STOCKHOLDERS
    EQUITY
  Accumulated








TotalClass A


Class B


Capital in





Other








Business/Owners Net


Common


Common


Excess of


Accumulated


Comprehensive


Treasury


Deferred


StockholdersInvestment


Stock


Stock


par Value


Deficit


Income (Loss)


Stock


Compensation


Equity(Millions of dollars)Balance at December 31, 2004

$
818.6


$



$



$



$



$
71.3


$



$



$
889.9Comprehensive Income (Loss):Net income (loss)


19.7















(0.9
)














18.8Other comprehensive loss






















(35.9
)










(35.9
)Comprehensive loss


































(17.1
)Net transfers from Kerr- McGee


155.1































155.1Recapitalization upon contribution from Kerr-McGee


(993.4
)






0.2



993.2



















IPO proceeds, net of offering costs






0.2







224.5



















224.7Distributions to Kerr- McGee














(761.8
)


















(761.8
)Issuance and amortization of employee stock-based awards














5.6















(5.4
)


0.2Dividends declared ($0.05 per share)


















(2.0
)














(2.0
)Balance at December 31, 2005






0.2



0.2



461.5



(2.9
)


35.4







(5.4
)


489.0Cumulative effect of an accounting change


















(1.4
)














(1.4
)Balance at January 1, 2006






0.2



0.2



461.5



(4.3
)


35.4







(5.4
)


487.6Comprehensive Income (Loss):Net loss


















(0.2
)














(0.2
)Other comprehensive income






















28.7











28.7Comprehensive income


































28.5Contribution from Kerr- McGee














16.5



















16.5Stock-based compensation














3.3



(0.2
)






(0.5
)


5.4



8.0Other














0.3



















0.3Dividends declared ($0.20 per share)


















(8.1
)














(8.1
)Adjustment to initially apply SFAS No. 158, net of
    taxes






















(95.5
)










(95.5
)Balance at December 31, 2006






0.2



0.2



481.6



(12.8
)


(31.4
)


(0.5
)






437.3Cumulative effect of an accounting change


















(9.3
)














(9.3
)Balance at January 1, 2007






0.2



0.2



481.6



(22.1
)


(31.4
)


(0.5
)






428.0Comprehensive Income (Loss):Net loss


















(106.4
)














(106.4
)Other comprehensive income






















109.6











109.6Comprehensive income


































3.2Stock-based compensation














9.2











(2.5
)






6.7Dividends declared ($0.20 per share)


















(8.3
)














(8.3
)Balance at December 31, 2007

$



$
0.2


$
0.2


$
490.8


$
(136.8
)

$
78.2


$
(3.0
)

$



$
429.6    F-8




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##### Table of Contents



TRONOX
    INCORPORATED
  Notes
    to Consolidated and Combined Financial Statements
  1.
    The
    Company  2
    Formation
  Form S-1, Kerr-McGee
        2005(Millions of dollars)General corporate expenses

$
24.3Employee benefits and incentives


24.0Interest expense, net


14.6    F-9




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##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
      Basis
    of Presentation
    Kerr-McGee,
     F-10




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##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  
    Sales rebates, previously presented with accounts payable, are
    now presented with accrued liabilities in the companys
    Consolidated Balance Sheets.
    Vendor commissions, previously a reduction of net sales, have
    been reclassified as selling, general and administrative
    expenses. The increases in net sales and selling, general and
    administrative expenses for 2006 and 2005, were
    $3.8 million and $3.6 million, respectively.
    Reimbursements for
    out-of-pocket
    selling expenses previously accounted for as a reduction of
    selling, general and administrative expenses have been
    reclassified as net sales. The increases in net sales and
    selling, general and administrative expenses for 2006 and 2005,
    were $6.4 million and $7.6 million, respectively.
    Railcar expenses previously accounted for as selling, general
    and administrative expenses have been reclassified as cost of
    goods sold. The increases in cost of goods sold and
    corresponding decrease in selling, general and administrative
    expenses for 2006 and 2005 were $1.6 million and
    $1.5 million, respectively.  2.
    Significant
    Accounting Policies  Use of
    Estimates
    Foreign
    Currency
          Cash
    Equivalents
   F-11




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##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Accounts
    Receivable
    Receivables Securitization.
  Concentration of Credit Risk. 2
  Inventories
  first-in,
  Property,
    Plant and Equipment  Net
  equipment-net
  Depreciation
  Mineral leaseholds

Units of ProductionVessel linings, general mechanical and process equipment

3  10 yearsElectrical equipment, process piping and waste treatment ponds

10  15 yearsSupport structures and process tanks

20 yearsElectrical distribution systems, mining equipment and other
    infrastructure assets

25 yearsBuildings

10  40 years   No. 04-2,
 F-12




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##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
        Changes in Estimated Useful Lives
  Retirements and Sales
  Interest Capitalized
  Asset
    Impairments
    Gain
    or Loss on Assets Held for Sale
  held-for-sale,
  Goodwill
    and Other Intangible Assets
    Derivative
    Instruments and Hedging Activities
   F-13




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##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    Environmental
    Remediation and Other Contingencies
  and/or
    Self
    Insurance
    Asset
    Retirement Obligations
     F-14




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  and/or
    Research
    and Development
    Employee
    Stock-Based Compensation
      Fair-Value Method.
  
    Compensation cost for all stock option and stock awards that
    were unvested as of January 1, 2006, based on the
    grant-date fair value estimated in accordance with the original
    provisions of SFAS No. 123
    Compensation cost for all stock options and nonvested stock
    awards granted subsequent to January 1, 2006, based on the
    grant-date fair value estimated in accordance with the
    provisions of SFAS No. 123R     F-15




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Pro Forma Fair-Value Method.
  2005Net income as reported

$
18.8Add: stock-based employee compensation expense included in
    reported net income, net of taxes


2.8Deduct: stock-based employee compensation expense determined
    using a fair-value method, net of taxes


(3.5
)Pro forma net income

$
18.1Basic and diluted net income per common share:As reported

$
0.77Pro forma

$
0.74     2005Risk-free interest rate


4.6
%Expected dividend yield


1.5
%Expected volatility


34.5
%Expected life (years)


6.3Per-unit
    fair value of options granted

$
5.01     2005Risk-free interest rate


3.9
%Expected dividend yield


3.5
%Expected volatility


27.4
%Expected life (years)


6.0Weighted-average fair value of options granted

$
12.50    F-16




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Revenue
    Recognition
    Cost
    of Goods Sold
    Selling,
    General and Administrative Expenses
    Income
    Taxes
  Kerr-McGee and/or
      Earnings
    Per Share
   F-17




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    New/Revised
    Accounting Standards
  Inventory Costs.
  Deferred Stripping Costs. No. 04-6, No. 04-6 No. 04-6
  Pension and Postretirement Accounting.
  Form 10-K Form 10-K
 F-18




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Uncertain Tax Positions.
  Fair Value Measurement. Fair Value
    Measurements
  Fair Value Option.
  Business Combinations.
  3.
    Statement
    of Operations Data  Other
    Income (Expense)
    2007


2006


2005(Millions of dollars)Net foreign currency transaction gain (loss)

$
0.8


$
8.7


$
(3.0
)Equity in net earnings of equity method investees


1.5



6.3



2.0Net interest expense on borrowings with affiliates and interest
    income


3.2



2.8



(11.9
)Gain (loss) on accounts receivables sales


(2.9
)






0.1Provision for litigation settlements(1)






(3.7
)


Other expense


0.1



(0.2
)


(2.4
)Total

$
2.7


$
13.9


$
(15.2
)     (1)
    
    Relates to a former operation that
    does not meet the criteria to be classified as a discontinued
    operation. F-19




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
   Earnings
    Per Share
    2007


2006


2005Loss








Income








Incomefrom





Per-


from





Per-


from





Per-Continuing





share


Continuing





Share


Continuing





ShareOperations


Shares


Loss


Operations


Shares


Income


Operations


Shares


Income(Millions of dollars, except per share amounts, and thousands
    of shares)Basic earnings per share

$
(105.1
)


40,692


$
(2.58
)

$
25.0



40,373


$
0.62


$
46.4



24,518


$
1.89Restricted stock and stock options


















560



(0.01
)










Diluted earnings per share

$
(105.1
)


40,692


$
(2.58
)

$
25.0



40,933


$
0.61


$
46.4



24,518


$
1.89     4.
    Balance
    Sheet Data  Accounts
    Receivable
    2007


2006(Millions of dollars)Accounts receivable  trade(1)

$
238.7


$
281.1Receivable from Kerr-McGee(2)


17.9



17.5Receivable from the U.S. Department of Energy(3)


11.0



11.0Receivable from insurers(3)


7.3



7.4Other


29.5



21.3304.4



338.3Allowance for doubtful accounts


(13.9
)


(12.7
)Total

$
290.5


$
325.6     (1)
    
    Includes $39.5 million
    subordinated retained interest related to the accounts
    receivable securitization program discussed below.(2)
    
    See Note 17 for a description
    of the environmental-related receivable.(3)
    
    Amounts receivable from the U.S.
    Department of Energy and insurers not expected to be collected
    within one year from the balance sheet date are reflected in
    long-term receivables, investments and other assets.  Receivables Securitization
 F-20




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
            Kerr-McGees
 F-21




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    Inventories
    2007


2006(Millions of dollars)Raw materials

$
69.6


$
67.5Work-in-process


12.8



13.4Finished goods(1)


200.6



174.8Materials and supplies, net


67.0



63.5Total

$
350.0


$
319.2     (1)
    
    Includes inventory on consignment
    to others of approximately $20.8 million and
    $21.8 million in 2007 and 2006, respectively.  Property,
    Plant and
    Equipment-Net
  equipment-net
  2007


2006(Millions of dollars)Land

$
83.8


$
72.2Buildings


167.3



159.4Machinery and equipment


1,798.6



1,754.6Construction-in-progress


38.3



57.6Other


88.0



87.1Total


2,176.0



2,130.9Less accumulated depreciation


(1,327.1
)


(1,266.3
)Net

$
848.9


$
864.6   Other
    Long-Term Assets
    2007


2006(Millions of dollars)Receivable from the U.S. Department of Energy

$
16.1


$
15.9Investments in equity method investees


21.3



21.1Receivables from insurers


15.3



19.6Debt issuance costs, net


8.4



11.0Prepaid pension cost


46.5



25.3Intangible asset  proprietary technology


55.2



52.6Other, net


5.9



7.7Total

$
168.7


$
153.2  F-22




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Goodwill
    Goodwill(1)(Millions of dollars)Balance at December 31, 2005

$
10.3Change due to foreign currency translation


1.2Balance at December 31, 2006


11.5Change due to foreign currency translation


1.2Balance at December 31, 2007

$
12.7     (1)
    
    Associated with the companys
    reportable pigment segment.  Accrued
    Liabilities
    2007


2006(Millions of dollars)Employee-related costs and benefits

$
37.6


$
37.2Reserves for environmental remediation and
    restoration  current portion


94.9



95.3Sales rebates


23.3



24.7Other(1)


41.9



54.8Total

$
197.7


$
212.0     (1)
    
    No other individual item is
    material to total current liabilities.   F-23




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Noncurrent
    Liabilities  Other
    2007


2006(Millions of dollars)Reserve for income taxes payable

$



$
45.5Reserve for uncertain tax positions


69.7



Asset retirement obligations


26.6



23.6Reserve for workers compensation and general liability
    claims


16.6



18.8Pension and postretirement obligations


77.6



167.5Other


28.4



22.5Total

$
218.9


$
277.9   5.
    Asset
    Retirement Obligations    2007


2006(Millions of dollars)Balance, January 1

$
26.9


$
34.9Obligations incurred


0.7



Accretion expense


2.1



1.1Changes in estimates, including cost and timing of cash flows


0.7



(6.8
)Asset retirement expenditures


(1.8
)


(2.3
)Balance, December 31

$
28.6


$
26.9Current portion(1)

$
2.0


$
3.2Noncurrent portion(2)

$
26.6


$
23.7     (1)
    
    Included in accrued liabilities(2)
    
    Included in noncurrent
    liabilities  other    2 2
 F-24




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    2
    2
  6.
    Long-Term
    Debt    2007


2006(Millions of dollars)9.5% Senior Unsecured Notes due December 2012

$
350.0


$
350.0Variable-rate term loan due in installments through November 2011


126.9



190.0Variable-rate note payable due in installments through July 2014


7.9



8.8Total debt


484.8



548.8Less: Current portion of long-term debt


(9.2
)


(14.7
)Total long-term debt

$
475.6


$
534.1     
    In April 2007, the company made a mandatory prepayment of
    $11.1 million, based on its Excess Cash Flow Percentage at
    year-end 2006, as required under the terms of the credit
    agreement discussed below.
    In September 2007, as a result of implementing an accounts
    receivable securitization program, the company made a mandatory
    prepayment of term loan principal in the amount of
    $30.3 million from the proceeds of receivables sales.
    In October 2007, an optional prepayment of $20.0 million
    was made on term loan principal.   F-25




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
          Consolidated


ConsolidatedTotal


InterestLeverage


CoverageRatio


RatioFiscal Quarter EndedMarch 31, 2008


4.45:1



1.00:1June 30, 2008


4.90:1



1.00:1September 30, 2008


4.90:1



0.80:1December 31, 2008


4.90:1



0.80:1March 31, 2009


4.50:1



1.25:1June 30, 2009


4.35:1



1.25:1September 30, 2009


3.90:1



1.75:1December 31, 2009


3.50:1



1.75:1    F-26




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  and/or
    1 2
      Total Debt(Millions of dollars)2008(1)

$
9.22009


1.32010


1.32011


123.02012


350.0Total debt

$
484.8     (1)
    
    Includes early payment in January
    2008 of the eight-year note payable agreement.  7.
    Restructuring
    and Exit Activities     F-27




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    Restructuring and Exit Reserves.
  2007


2006Personnel


Dismantlement


Contract





Personnel


Dismantlement


ContractCosts


and Closure


Termination


Total(1)


Costs


and Closure


Termination


Total(1)(Millions of dollars)Beginning balance

$
2.7


$
2.8


$
0.2


$
5.7


$
3.1


$
4.9


$
1.0


$
9.0Provisions


4.2



(0.2
)


(0.1
)


3.9



(0.2
)










(0.2
)Payments


(4.6
)


(1.1
)


(0.1
)


(5.8
)


(0.4
)


(2.2
)


(0.6
)


(3.2
)Adjustments


0.2



0.1







0.3



0.2



0.1



(0.2
)


0.1Ending balance

$
2.5


$
1.6


$



$
4.1


$
2.7


$
2.8


$
0.2


$
5.7     (1)
    
    Amounts exclude AROs and pension
    reserves and include obligations of the discontinued forest
    products operations that have been retained by the company.    Asset Impairment.
 F-28




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  8.
    Capital
    Stock    Class A


Class BCommon


Common


TreasuryStock


Stock


Stock(Thousands of shares)Shares owned by Kerr-McGee






22,889



Shares issued at Initial Public Offering


17,480







Issuance of restricted stock


407







Balance at December 31, 2005


17,887



22,889



Adjustment to restricted stock issued


(85
)






Class B shares distributed by Kerr-McGee






(22,889
)


Class B shares owned by the public






22,889



Issuance of restricted stock


586







Forfeiture of restricted stock










33Balance at December 31, 2006


18,388



22,889



33Issuance of restricted stock


164







Unrestricted shares exercised


194







Restricted shares used for withholding taxes










95Forfeiture of restricted stock










82Balance at December 31, 2007


18,746



22,889



210     9.
    Other
    Comprehensive Income (Loss)    2007


2006


2005(Millions of dollars)Foreign currency translation adjustments

$
27.8


$
31.0


$
(41.7
)Unrealized gain (loss) on cash flow hedges, net of taxes of
    $0.8, $1.9 and $(2.5)


(1.2
)


(3.5
)


4.1Reclassification of realized (gain) loss on cash flow hedges to
    net income (loss), net of taxes of $(1.2), $(1.4) and $2.5


1.9



2.2



(3.2
)Activity related to the companys retirement and
    postretirement plans:Minimum pension liability adjustments, net of taxes of $0.6 and
    $(2.4)






(1.0
)


4.9Amortization of actuarial gain, net of taxes of $(1.7)


3.0







Unrecognized actuarial gain due to plan changes, net of taxes of
    $(6.3)


10.3







Unrecognized actuarial loss, net of taxes of $(7.0)


21.1







Amortization of prior service credit, net of taxes of $0.7


(1.2
)






Unrecognized prior service credit due to plan changes, net of
    taxes of $(28.8)


47.7







Unrecognized prior service cost, net of taxes of $(0.2)


0.2







$
109.6


$
28.7


$
(35.9
)  F-29




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    2007


2006(Millions of dollars)Foreign currency translation adjustments

$
96.3


$
68.5Unrealized loss on cash flow hedges


(0.9
)


(1.6
)Unrecognized actuarial loss


(58.6
)


(93.0
)Unrecognized prior service credit (cost)


41.4



(5.3
)$
78.2


$
(31.4
)   10.
    Cash Flow
    Statement Data    2007


2006


2005(Millions of dollars)Income tax payments

$
9.3


$
18.5


$
11.9Less refunds received


(5.2
)


(1.6
)


(11.4
)Net income tax payments

$
4.1


$
16.9


$
0.5Interest payments

$
46.7


$
47.0


$
0.4       2007


2006


2005(Millions of dollars)Stock-based compensation(1)

$
6.8


$
8.5


$
5.8Pension and postretirement cost(1)


17.1



14.6



9.9Litigation provision (benefit)


(1.5
)


7.9



8.7Asset retirement obligations


0.8



(7.5
)


1.1Equity in net earnings of equity method investees


(1.5
)


(6.3
)


(2.0
)Loss (gain) on disposal of property and equipment


(0.3
)


2.5



0.9All other(2)


12.5



6.0



8.7Total

$
33.9


$
25.7


$
33.1     (1)
    
    2005 amounts consist primarily of
    cost allocations from Kerr-McGee.(2)
    
    No other individual item is
    material to net cash flows from operating activities. F-30




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
     2007


2006


2005(Millions of dollars)Environmental expenditures

$
(50.2
)

$
(56.2
)

$
(61.1
)Reimbursements of environmental expenditures


17.3



38.4



71.4Cash abandonment expenditures


(1.8
)


(2.3
)


(2.3
)Employer contributions to pension and postretirement plans


(7.1
)


(6.1
)


(7.0
)All other


(5.2
)


(21.3
)


32.1Total

$
(47.0
)

$
(47.5
)

$
33.1     2007


2006


2005(Millions of dollars)Noncash Investing Activities Receivables repurchased and contributed by Kerr-McGee

$



$



$
165.0Acquisition of mining tenements through issuance of debt






(9.4
)


Noncash Financing Activities Contribution of repurchased receivables by Kerr-McGee










165.0Issuance of debt to acquire mine tenements






(9.4
)


     11.
    Derivative
    Instruments       F-31




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
      12.
    Financial
    Instruments    December 31, 2007


December 31, 2006Carrying


Estimated


Carrying


EstimatedValue


Fair Value


Value


Fair Value(Millions of dollars)Cash and cash equivalents

$
21.0


$
21.0


$
76.6


$
76.6Long-term receivables


31.4



31.4



35.5



35.5Grantor trust assets


4.0



4.0



4.5



4.5Total debt


484.8



474.7



548.8



568.1    F-32




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  13.
    Income
    Taxes    2007


2006


2005(Millions of dollars)U.S. Federal Current

$
(0.7
)

$
(18.3
)

$
(28.5
)Deferred


(19.5
)


2.3



10.5Noncurrent


0.7







(19.5
)


(16.0
)


(18.0
)International Current


(17.6
)


(4.7
)


(8.8
)Deferred


(0.7
)


(6.8
)


7.4Noncurrent


(0.3
)






(18.6
)


(11.5
)


(1.4
)FIN No. 48


(4.7
)






State Current


(0.1
)


(0.2
)


(2.8
)Deferred


0.1



4.6



0.4Noncurrent


(0.2
)






(0.2
)


4.4



(2.4
)Total provision

$
(43.0
)

$
(23.1
)

$
(21.8
)     2007


2006


2005U.S. statutory tax rate


35.0
%


35.0
%


35.0
%Increases (decreases) resulting from Adjustment of deferred tax balances due to tax rate changes


2.5



(11.0
)


(2.6
)Taxation of foreign operations


(33.5
)


15.2



(8.2
)Tax contingencies


(0.5
)


9.1



2.5State income taxes


(0.3
)


(6.2
)


2.3Adjustment of prior years tax attributes from parent










(2.9
)Effect of certain stock-based compensation adjustments






2.7



Tax on repatriated foreign earnings










6.8FIN No. 48


(7.6
)






Valuation allowances


(62.7
)






Other  net


(2.1
)


3.2



(0.9
)Effective tax rate


(69.2
)%


48.0
%


32.0
%  F-33




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    2007


2006(Millions of dollars)Deferred tax liabilities Property, plant and equipment

$
124.6


$
135.5Investments


8.3



7.3Receivables for environmental remediation and restoration


5.8



2.0Intercompany notes and payables


19.8



14.3Intangible assets


12.7



9.0Inventory






5.5Accounts receivable and payable


2.1



6.9Other


2.1



5.7Total deferred tax liabilities


175.4



186.2Deferred tax assets Net operating loss and other carryforwards


(59.0
)


(42.4
)Reserves for environmental remediation and restoration


(56.1
)


(73.0
)Obligations for pension and other employee benefits


(13.7
)


(54.5
)Accounts receivable and payable


(1.7
)


Litigation


(5.2
)


(3.1
)State and local tax


(4.3
)


(1.3
)Bad debt allowance


(7.3
)


(7.1
)Inventory


(1.2
)


Other accrued liabilities


(6.6
)


(10.0
)Other


(13.8
)


(12.1
)Total deferred tax assets


(168.9
)


(203.5
)Valuation allowance associated with deferred tax assets


47.0



7.3Net deferred tax assets


(121.9
)


(196.2
)Net deferred tax (asset) liability

$
53.5


$
(10.0
)      F-34




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
          2007


2006


2005(Millions of dollars)United States

$
(32.2
)

$
31.2


$
53.2International


(29.9
)


16.9



15.0Total

$
(62.1
)

$
48.1


$
68.2      F-35




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    2007(Millions of dollars)Balance at January 1, 2007

$
46.5Reductions for tax positions related to the current year


(0.2
)Additions for tax positions of prior years


13.3Reductions for tax positions of prior years


(3.7
)Reductions due to lapse of applicable statute of limitations


(1.3
)Balance at December 31, 2007

$
54.6           and/or
  Tax Sharing Agreement and Tax Allocations
 F-36




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
        14.
    Discontinued
    Operations     F-37




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    LitigationEnvironmental


Provisions, LegalProvisions(1)


and Other Costs(1)


Total(Millions of dollars)Year ended December 31, 2007:Total pretax loss

$
(0.8
)

$
2.1


$
1.3Tax benefit










Total after tax loss









$
1.3Year ended December 31, 2006:Total pretax loss

$
23.7


$
16.2


$
39.9Tax benefit










(14.7
)Total after tax loss









$
25.2Year ended December 31, 2005:Total pretax loss

$
17.6


$
24.8


$
42.4Tax benefit










(14.8
)Total after tax loss









$
27.6     (1)
    
    Legal and environmental costs are
    allocated to discontinued operations on a specific
    identification basis. Other costs are primarily comprised of
    insurance and ad valorem taxes on properties of these former
    businesses under remediation.  15.
    Employee
    Retirement and Savings Investment Plans  Retirement
    Plans
  Overview
  Establishment of U.S. Plans
   F-38




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
        Benefit Obligations and Funded Status
  PostretirementRetirement Plans


Health and Life Plans2007


2006


2007


2006(Millions of dollars)Change in benefit obligations Benefit obligation, beginning of year

$
529.1


$
81.4


$
150.5


$
Establishment of U.S. Plans






410.9







144.2Service cost


11.8



8.4



1.5



1.2Interest cost


28.2



21.6



6.3



6.3Plan changes










(76.5
)


Net actuarial (gains) losses


(39.9
)


21.6



(20.5
)


3.2Foreign currency rate changes


9.6



9.6







Contributions by plan participants


0.5



0.5



2.7



2.0Special termination benefits


5.7











Benefits paid


(49.1
)


(23.9
)


(6.7
)


(6.4
)Administrative expenses


(1.7
)


(1.0
)






Benefit obligation, end of year


494.2



529.1



57.3



150.5 F-39




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  PostretirementRetirement Plans


Health and Life Plans2007


2006


2007


2006(Millions of dollars)Change in plan assets Fair value of plan assets, beginning of year


525.7



62.2







Establishment of U.S. Plans






450.3







Actual return on plan assets


23.8



28.2







Employer contributions(1)


3.0



1.7



4.0



4.4Participant contributions


0.5



0.5



2.7



2.0Foreign currency rate changes


7.6



7.3







Benefits paid(1)


(48.6
)


(23.5
)


(6.7
)


(6.4
)Administrative expenses


(1.7
)


(1.0
)






Fair value of plan assets, end of year(2)


510.3



525.7







Net over (under) funded status of plans

$
16.1


$
(3.4
)

$
(57.3
)

$
(150.5
)Classification of amounts recognized in the Consolidated
    Balance Sheets Prepaid pension cost

$
46.5


$
25.3


$



$
Current accrued benefit liability


(1.1
)


(0.6
)


(9.0
)


(11.1
)Noncurrent accrued benefit liability


(29.3
)


(28.1
)


(48.3
)


(139.4
)Sub-total of assets and liabilities(3)


16.1



(3.4
)


(57.3
)


(150.5
)Accumulated other comprehensive loss (pretax)


86.6



117.0



(61.7
)


32.1Total

$
102.7


$
113.6


$
(119.0
)

$
(118.4
)     (1)
    
    The company expects 2008
    contributions to be approximately $2.6 million for the
    Netherlands plan and 2008 net benefits paid to be approximately
    $9.0 million for the U.S. postretirement plans,
    $0.6 million for the U.S. nonqualified plans and
    $0.5 million for the Germany retirement plan. No
    contributions are expected in 2008 for the U.S. qualified
    retirement plan.(2)
    
    Excludes the grantor trust assets
    of $4.0 million at year-end 2007 and $4.5 million at
    year-end 2006 associated with a nonqualified U.S. plan sponsored
    by the company. The company does not anticipate making any
    contributions to the grantor trust in 2008.(3)
    
    SFAS No. 158 requires
    that the plan sponsor carry the funded status of all plans on
    the balance sheet.    At December 31, 2007


At December 31, 2006U.S.


U.S.


Germany


U.S.


U.S.


GermanyNonqualified


Postretirement


Retirement


Nonqualified


Postretirement


RetirementPlans(1)


Plan


Plan


Plans


Plan


Plan(Millions of dollars)


(Millions of dollars)Accumulated benefit obligation

$
10.8


$
57.3


$
15.0


$
5.0


$
150.5


$
15.0Projected benefit obligation


11.2



57.3



15.7



6.5



150.5



15.7     (1)
    
    Although not considered plan
    assets, a grantor trust was established from which payments for
    certain U.S. supplemental benefits are made. The trust assets
    had a balance of $4.0 million at year-end 2007.   F-40




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  At December 31, 2007


At December 31, 2006U.S.


The Netherlands


U.S.


The NetherlandsQualified


Retirement


Qualified


RetirementPlan


Plan


Plan


Plan(Millions of dollars)


(Millions of dollars)Accumulated benefit obligation

$
366.9


$
75.7


$
398.9


$
68.8Projected benefit obligation

$
385.1


$
82.3


$
427.4


$
79.5Market value of plan assets


431.6



78.8



452.7



73.0Funded status  (under)/over funded

$
46.5


$
(3.5
)

$
25.3


$
(6.5
)   Expected Benefit Payments
  2013-2008


2009


2010


2011


2012


2017(Millions of dollars)Retirement Plans(1)

$
3.7


$
4.0


$
4.2


$
4.4


$
4.7


$
29.3Postretirement Health and Life Plans


9.0



3.6



3.7



3.8



3.7



18.8     (1)
    
    The benefit payments expected to be
    paid from the U.S. qualified retirement plan trust are expected
    to be $28.4 million, $28.2 million,
    $28.6 million, $28.8 million and $29.5 million in
    each year, 2008 through 2012, respectively, and
    $163.0 million in the aggregate for the period 2013 through
    2017.  Retirement Expense
  PostretirementRetirement Plans


Health and Life Plans2007


2006


2005


2007


2006


2005(Millions of dollars)


(Millions of dollars)Net periodic cost Service cost

$
11.8


$
8.5


$
2.0


$
1.5


$
1.1


$
Interest cost


28.2



21.7



3.6



6.4



6.3



Expected return on plan assets


(39.5
)


(30.3
)


(3.1
)










Special termination benefits(1)


5.7



















Net amortization  Prior service cost (credit)


2.8



2.1



(0.3
)


(4.7
)


(0.8
)


Net actuarial (gain) loss


3.5



1.5



1.1



1.4



1.2



Sub-total net periodic cost


12.5



3.5



3.3



4.6



7.8



Allocated retirement plan expense (credit) from Kerr-McGee






0.7



(0.4
)






2.6



7.0Total

$
12.5


$
4.2


$
2.9


$
4.6


$
10.4


$
7.0     (1)
    
    The 2007 special termination
    benefits are associated with the work force reduction program
    announced by the company and discussed in Note 7. F-41




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
     PostretirementRetirement


Health & LifePlans


Plans(Millions of dollars)Amounts expected to be reclassified from accumulated other
    comprehensive income (loss) during 2008:Unrecognized actuarial loss

$
1.5


$
0.7Unrecognized prior service (credit) cost


2.8



(10.2
)   Assumptions
  2007


2006


2005United





United





UnitedStates


International


States


International


States


InternationalDiscount rate


5.75
%


4.50
%


6.00
%


4.25
%


n/a



4.75
%Expected return on plan assets


8.00
%


5.25
%


8.00
%


5.25
%


n/a



5.50
%Rate of compensation increases


3.50
%


3.42
%


3.50
%


3.42
%


n/a



3.42
%     2007


2006


2005United





United





UnitedStates


International


States


International


States


InternationalDiscount rate


6.25
%


5.50
%


5.75
%


4.50
%


n/a



4.25
%Rate of compensation increases


3.50
%


3.42
%


3.50
%


3.42
%


n/a



3.42
%        F-42




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Plan Assets
  U.S. Plan Assets


The Netherlands Plan Assets2007


2006


2007


2006Equity securities


49
%


55
%


24
%


35
%Debt securities


33



42



58



58Real estate










11



Cash and cash equivalents


18



3



7



7Total


100
%


100
%


100
%


100
%           Savings
    Investment Plan
   F-43




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    16.
    Employee
    Stock-Based Compensation  Overview
      Vesting





Cash- orContractual

Period


Vesting


Stock-


Vesting and OtherLife (Years)

(Years)


Terms


Settled


ConditionsStock options

10


3



Graded(1
)


Stock


Employee serviceRestricted stock-based awards(2)

Not applicable


3



Cliff(3
)


Stock


Employee servicePerformance Shares(4)

Not applicable


3



Cliff(3
)


Cash


Employee servicePerformance Units(4)

3


3



Cliff(3
)


Cash


Employee service 
    and achievement of
    specified stockholder
    return targets     (1)
    
    An employee vests in one-third of
    the award at the end of each year of service. Employees
    terminating their employment due to retirement fully vest in
    their award upon retirement.(2)
    
    Restricted stock-based awards
    include restricted stock, restricted stock units and stock
    opportunity grants, all of which are valued and accounted for in
    a similar manner. Restricted stock units and stock opportunity
    grants do not result in certificates being issued until service
    has been rendered. As such, holders of these awards do not have
    the right to receive dividends and do not have the right to vote
    their shares until the restrictions lapse.(3)
    
    An employee vests in the entire
    award at the end of the three-year service period. Employees
    terminating their employment due to retirement fully vest in
    their award upon retirement.(4)
    
    Performance shares are valued by
    reference to the closing Class A common stock price at each
    measurement date. Performance units are valued using the Monte
    Carlo simulation and provide an employee with a potential cash
    payment at the end of a three-year performance cycle based on
    Tronoxs total shareholder return (shareholder return
    assuming dividend reinvestment) relative to selected peer
    companies. Payout levels vary depending upon Tronoxs rank
    relative to its peers. F-44




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
   Effect of Tronox Separation from Kerr-McGee
    March 30, 2006Risk-free interest rate


4.6
%Expected dividend yield


1.5
%Expected volatility


34.5
%Expected term (years)


6.3Weighted-average estimated fair value of options converted

$
9.61Stock fair value on the date of modification

$
17.47Estimated fair value of the options as a % of the stock fair
    value on the date of modification


55.0
%     Compensation Expense
  2007


2006


2005(Millions of dollars)Stock options

$
2.8


$
2.8


$
0.8Restricted stock-based awards


3.6



5.7



3.5Performance awards


0.4







Total stock-based compensation expense, pretax


6.8



8.5



4.3Income tax benefit


(2.1
)


(2.3
)


(1.5
)Total stock-based compensation expense, net of taxes

$
4.7


$
6.2


$
2.8  F-45




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    Unamortized


RemainingCost (Pretax)


Period(Millions of dollars)


(Years)Stock options

$
1.6



1.9Restricted stock-based awards


2.3



1.5Performance awards


0.4



1.5$
4.3



1.6   Stock Options
  IntrinsicNumber of





Contractual


ValueOptions


Price(1)


Life (Years)(1)


(Millions)(2)Options outstanding at December 31, 2006


1,220,455


$
10.85Options awarded(3)


463,870



15.19






$
(2.9
)Options exercised(4)


(167,560
)


9.45






$
(0.1
)Options expired


(24,568
)


11.70Options forfeited


(114,658
)


13.03Options outstanding at December 31, 2007


1,377,539


$
12.28



7.7


$
(4.8
)Options exercisable at December 31, 2007


605,099


$
11.23



7.2


$
(1.5
)Outstanding options vested and expected to vest


1,327,991


$
12.18



7.7


$
(4.4
)     (1)
    
    Represents weighted average
    exercise price and weighted average remaining contractual life,
    as applicable.(2)
    
    Reflects aggregate intrinsic value
    based on the difference between the market price of Tronox stock
    at December 31, 2007, and the options exercise price.(3)
    
    The weighted average grant-date
    fair value related to the options awarded in 2007 was $5.89 per
    option.(4)
    
    Cash received during 2007 as a
    result of option exercises was $1.6 million.  Valuation and cost attribution
    methods.
 F-46




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Tronox Stock Option valuation.
  2007


2005Risk-free interest rate


4.7
%


4.6
%Expected dividend yield


1.3
%


1.5
%Expected volatility


36.0
%


34.5
%Expected term (years)


6.4



6.3Per-unit
    fair value of options granted

$
5.89


$
5.01   Expected Volatility
  Expected Term
  Kerr-McGee Stock Option valuation. Kerr-McGee
  2005Risk-free interest rate


3.9
%Expected dividend yield


3.5
%Expected volatility


26.4
%Expected term (years)


6.0Weighted-average estimate of fair value of options converted

$
20.96   Restricted Stock Awards and Stock Opportunity
    Grants
  Number of


FairShares


Value(1)Balance at December 31, 2006


938,380


$
13.25Awards issued


171,954



15.19Awards forfeited


(89,667
)


14.35Awards earned


(303,097
)


11.17Balance at December 31, 2007


717,570


$
14.37Outstanding awards expected to vest


708,823


$
14.45     (1)
    
    Represents the weighted-average
    grant-date fair value. F-47




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
   Valuation and cost attribution
    method.
  Performance Awards
  Number of


Fair


Number of


FairShares


Value(1)


Units


Value(1)Balance at December 31, 2006


57,750







Awards issued










5,048,039Awards forfeited


(3,080
)






(520,815
)Awards earned


(1,120
)






(267,351
)Balance at December 31, 2007


53,550


$
8.90



4,259,873


$
0.086Outstanding awards expected to vest


52,404







4,231,251     (1)
    
    Represents the weighted-average
    measurement-date fair value.  Valuation and cost attribution
    method.
 F-48




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  17.
    Contingencies    Reserves forReserves for


Environmental


ReimbursementsLitigation(1)


Remediation(2)


Receivable(3)(Millions of dollars)Balance at December 31, 2004

$
2.6


$
215.8


$
93.8Provisions /Accruals


8.7



69.0



34.3Payments /Settlements


(2.1
)


(61.1
)


(71.4
)Balance at December 31, 2005


9.2



223.7



56.7Provisions /Accruals


7.9



56.4



53.1Payments /Settlements


(2.1
)


(56.2
)


(38.4
)Balance at December 31, 2006


15.0



223.9



71.4Provisions /Accruals


(1.5
)


15.1



13.5Payments /Settlements


(3.9
)


(50.2
)


(17.3
)Balance at December 31, 2007

$
9.6


$
188.8


$
67.6     (1)
    
    Provisions for litigation in 2005,
    2006 and 2007 include $8.7 million, $4.0 million and
    ($2.0) million, respectively, related to the companys
    former forest products operations, thorium compounds
    manufacturing and refining operations and, therefore, are
    reflected in loss from discontinued operations (net of taxes) in
    the Consolidated and Combined Statement of Operations.(2)
    
    Provisions for environmental
    remediation and restoration in 2005, 2006 and 2007 include
    $29.9 million, $55.8 million and $11.6 million,
    respectively, related to the companys former forest
    products operations, thorium compounds manufacturing, uranium
    and refining operations. These charges are reflected in the
    Consolidated and Combined Statement of Operations as a component
    of loss from discontinued operations (net of taxes).(3)
    
    Reimbursements for environmental
    remediation and restoration in 2005, 2006 and 2007 include
    $12.3 million, $32.1 million and $12.4 million,
    respectively, related to the companys former forest
    products operations, uranium, refining and thorium compounds
    manufacturing operations, which are reflected in the
    Consolidated and Combined Statement of Operations as a component
    of loss from discontinued operations (net of taxes).      
    Some sites are in the early stages of investigation, and other
    sites may be identified in the future.
    Remediation activities vary significantly in duration, scope and
    cost from site to site depending on the mix of unique site
    characteristics, applicable technologies and regulatory agencies
    involved. F-49




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
   
    Remediation requirements are difficult to predict at sites where
    remedial investigations have not been completed or final
    decisions have not been made regarding remediation requirements,
    technologies or other factors that bear on remediation costs.
    Environmental laws frequently impose joint, several liability on
    all potentially responsible parties (PRPs), and it
    can be difficult to determine the number and financial condition
    and possible defenses of PRPs and their respective shares of
    responsibility for
    clean-up
    costs.
    Environmental laws and regulations, as well as enforcement
    policies and cleanup levels, are continually changing, and the
    outcome of court proceedings, alternative dispute resolution
    proceedings (including mediation) and discussions with
    regulatory agencies are inherently uncertain.
    Unanticipated construction problems and weather conditions can
    hinder the completion of environmental remediation.
    Some legal matters are in the early stages of investigation or
    proceeding or their outcomes otherwise may be difficult to
    predict, and other legal matters may be identified in the future.
    The inability to implement a planned engineering design or use
    planned technologies and excavation or extraction methods may
    require revisions to the design of remediation measures, which
    can delay remediation and increase costs.
    The identification of additional areas or volumes of
    contamination and changes in costs of labor, equipment and
    technology generate corresponding changes in environmental
    remediation costs.  and/or
 F-50




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    ReserveBalance atProvisions/


December 31,Location of Site

Accruals


2007(Millions of dollars)Henderson, Nevada(1)

$
3.4


$
24.4West Chicago, Illinois(2)


1.8



53.4Ambrosia Lake, New Mexico(3)


5.7



9.9Crescent, Oklahoma






9.8Manville, New Jersey






35.0Sauget, Illinois






5.8Cleveland, Oklahoma






3.5Cushing, Oklahoma






9.5Jacksonville, Florida






5.1Riley Pass, South Dakota(4)


1.5



1.9Other sites


2.7



30.5Total of all sites with reserves

$
15.1


$
188.8     (1)
    
    Provisions include
    $2.7 million in 2007 related to expanded sampling and the
    development of a risk assessment plan pertaining to the 1996
    agreement with the NDEP.(2)
    
    Provisions include
    $1.8 million in 2007 as a result of a determination that
    additional groundwater monitoring would be needed to meet state
    requirements.(3)
    
    Provisions include
    $5.7 million in 2007 for the additional NRC requirements.(4)
    
    Provisions include
    $1.5 million in 2007 related to completing the approved
    work plan, to construct preliminary erosion control features and
    an estimate to complete two cells for the disposal of identified
    material above the cleanup threshold.  Environmental
  Henderson,
    Nevada
     F-51




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
      Litigation
  Insurance Reimbursement 10-year,
   F-52




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  West
    Chicago, Illinois
    Closed Facility
  Vicinity Areas
    Government Reimbursement
   F-53




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
      Ambrosia
    Lake, New Mexico
  and/or
    Litigation
  Crescent,
    Oklahoma
   F-54




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    New
    Jersey Wood-Treatment Site
      follow-up
      MSA Reimbursement 
 F-55




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
   Sauget,
    Illinois
  60-acre
  Cleveland,
    Oklahoma
  on-site
    Cushing,
    Oklahoma
          Jacksonville,
    Florida
   F-56




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    Riley
    Pass, South Dakota
    Other
    Sites
    Master
    Separation Agreement
    Kerr-McGee,
 F-57




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    Litigation
    and Claims
  Birmingham,
    Alabama
    Forest
    Products Litigation
  and/or and/or
      May v.
    Tronox Avance v.
    Tronox
 F-58




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Jeans v. Tronox
  Financial Reserves
  Savannah
    Plant
    Financial Reserves
  Other
    Matters
  and/or and/or and/or
 F-59




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  18.
    Commitments  Lease
    and Purchase Obligations
        Payments Due by YearAfterType of Obligation

2008


2009


2010


2011


2012


2012


Total(Millions of dollars)Operating leases

$
14.0


$
13.5


$
10.7


$
9.9


$
9.4


$
30.7


$
88.2Purchase obligations Ore contracts(1)


182.3



116.9



55.2



29.9



17.2



17.2



418.7Other purchase obligations


134.2



120.9



112.7



95.5



90.3



97.9



651.5Total

$
330.5


$
251.3


$
178.6


$
135.3


$
116.9


$
145.8


$
1,158.4     (1)
    
    Approximately 33% of annual usage
    acquired from two suppliers under long-term supply contracts.    Letters
    of Credit and Other
  clean-up
    19.
    Summarized
    Combined Financial Information of Affiliates   F-60




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##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    At December 31,2007


2006(Millions of dollars)Current assets

$
35.0


$
37.7Noncurrent assets


75.1



72.0Current liabilities


6.9



9.8Noncurrent liabilities


32.7



31.4   For the Years Ended December 31,2007


2006


2005(1)(Millions of dollars)Departmental revenues

$
20.9


$
39.3


$
21.2Departmental income


7.7



25.1



8.0Income before income taxes


7.3



25.2



7.0Net income


6.2



21.2



5.9     (1)
    
    Unaudited  20.
    Reporting
    by Business Segment and Geographic Locations  2
  F-61




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##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  2007


2006


2005(Millions of dollars)Net SalesPigment

$
1,320.6


$
1,320.3


$
1,278.2Electrolytic and other chemical products


105.7



101.5



97.0Total

$
1,426.3


$
1,421.8


$
1,375.2Operating Profit (Loss)Pigment(1)

$
12.2


$
77.9


$
101.5Electrolytic and other chemical products(2)


(2.3
)


25.3



(5.9
)9.9



103.2



95.6Corporate and nonoperating sites(3)


(24.6
)


(18.6
)


(7.7
)Total operating profit (loss)


(14.7
)


84.6



87.9Interest and debt expense


(50.1
)


(50.4
)


(4.5
)Other income (expense)(4)


2.7



13.9



(15.2
)Income tax benefit (provision)


(43.0
)


(23.1
)


(21.8
)Income (loss) from continuing operations

$
(105.1
)

$
25.0


$
46.4Depreciation, Depletion and Amortization, Including
    Write-Downs
    of Property, Plant and EquipmentPigment

$
104.2


$
95.5


$
99.1Electrolytic and other chemical products


8.1



7.5



9.9112.3



103.0



109.0Discontinued operations










Total

$
112.3


$
103.0


$
109.0     (1)
    
    In 2007, includes $2.3 million
    of severance and special termination benefits associated with
    the companys work force restructuring. In 2006, includes
    an arbitration award received from Kemira in the amount of
    $8.9 million, partially offset by legal costs of
    $2.7 million related to the matter; additionally, includes
    a credit of $7.1 million resulting from updating the
    companys estimates of closure costs related to the former
    Mobile, Alabama, synthetic rutile facility and the former
    Savannah, Georgia, sulfate facility.(2)
    
    Includes nil, $(20.4) million,
    and $10.3 million and nil in 2007, 2006 and 2005,
    respectively, of environmental charges, net of reimbursements,
    related to ammonium perchlorate at the companys Henderson
    facility.(3)
    
    Includes $0.7 million,
    $5.6 million and $2.2 million in 2007, 2006, and 2005,
    respectively, of environmental provisions related to various
    businesses in which the companys affiliates are no longer
    engaged, but that have not met the criteria for reporting as
    discontinued operations. The 2007 amount also includes
    $7.0 million of severance and special termination benefits
    associated with the companys work force restructuring. The
    2006 amount includes additional administrative costs incurred as
    a stand-alone company and approximately $3.7 million
    (excluding interest of $1.3 million) representing
    Mississippi franchise tax and related interest. See further
    discussion in Note 4.(4)
    
    Includes equity in net earnings of
    equity method investees of $1.5 million, $6.3 million
    and $2.0 million in 2007, 2006 and 2005, respectively. The
    year 2005 includes interest expense allocated to us by
    Kerr-McGee based on specifically identified borrowings from
    Kerr-McGee at Kerr-McGees average borrowing rates.  F-62




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##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  2007


2006


2005(Millions of dollars)Capital ExpendituresPigment

$
63.2


$
74.6


$
83.5Electrolytic and other chemical products


7.7



4.8



4.170.9



79.4



87.6Other






0.1



Total

$
70.9


$
79.5


$
87.6Total AssetsPigment

$
1,448.8


$
1,539.7


$
1,514.2Electrolytic and other chemical products


106.5



125.5



108.31,555.3



1,665.2



1,622.5Corporate and nonoperating sites


168.1



158.2



135.8Total

$
1,723.4


$
1,823.4


$
1,758.3Net Sales(1)U.S. operations

$
755.1


$
753.4


$
757.7International operationsGermany


251.5



247.0



224.9The Netherlands


168.9



172.1



146.5Australia


250.7



249.2



246.0Other


0.1



0.1



0.1Total

$
1,426.3


$
1,421.8


$
1,375.2Net Property, Plant and EquipmentU.S. operations

$
415.8


$
456.6


$
475.8International operationsGermany


121.8



114.5



92.4The Netherlands


207.6



196.0



182.1Australia


103.7



97.5



89.4Total

$
848.9


$
864.6


$
839.7     (1)
    
    Based on country of production.  21.
    Related
    Party Transactions    2 2
 F-63




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##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
      22.
    Quarterly
    Financial Information (Unaudited)    Income (Loss) fromIncome





Continuing(Loss) from





Operations perNet


Gross


Continuing


Net Income


Common ShareSales


Margin


Operations


(Loss)


Basic


Diluted(Millions of dollars, except per share)2007 Quarter Ended March 31

$
339.1


$
37.8


$
(9.0
)

$
(9.4
)

$
(0.22
)

$
(0.22
)June 30


366.5



29.4



(20.0
)


(21.2
)


(0.49
)


(0.49
)September 30


363.1



31.1



(18.7
)


(19.1
)


(0.46
)


(0.46
)December 31


357.6



17.8



(57.4
)


(56.7
)


(1.41
)


(1.41
)Total

$
1,426.3


$
116.1


$
(105.1
)

$
(106.4
)

$
(2.58
)

$
(2.58
)2006 Quarter Ended March 31

$
338.8


$
62.8


$
23.6


$
20.6


$
0.58


$
0.58June 30


375.9



33.2



(5.7
)


(14.4
)


(0.14
)


(0.14
)September 30


378.6



44.0



(0.7
)


(14.0
)


(0.02
)


(0.02
)December 31


328.5



35.5



7.8



7.6



0.19



0.19Total

$
1,421.8


$
175.5


$
25.0


$
(0.2
)

$
0.62


$
0.61   Significant
    Fourth Quarter 2007 Transactions
    
    A valuation allowance of $29.9 million was established in
    relation to certain deferred tax assets relating to the
    U.S. consolidated group (federal and state). The
    $29.9 million valuation allowance was recorded primarily
    due to the three-year cumulative pretax book loss in the
    U.S. Of the $29.9 million valuation allowance,
    $20.1 million related to deferred tax assets recorded at
    December 31, 2006. The valuation allowance was established
    in accordance with SFAS No. 109 and does not affect
    the companys ability to benefit from the deferred tax
    assets in future periods.
    The company recorded a charge of $3.8 million reflected in
    cost of goods sold in the Consolidated and Combined Statement of
    Operations for the year ended December 31, 2007, to write
    off certain projects that were in development at the
    companys Savannah, Georgia, pigment facility.
    Additionally, other assets at the F-64




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##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  plant with a total net book value of $1.1 million were not
    currently in use and were written off to cost of goods sold in
    2007. F-65




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##### Table of Contents



SCHEDULE II



TRONOX
    INCORPORATED
    VALUATION ACCOUNTS AND RESERVES AdditionsBalance at


Charged


Charged


Deductions


Balance atBeginning


to Profit


to Other


from


Endof Year


and Loss


Accounts


Reserves


of Year(Millions of dollars)Year Ended December 31, 2007Deducted from asset accounts allowance for doubtful notes and
    accounts receivable

$
22.7


$
1.6


$
(0.1
)

$
0.3


$
23.9Materials and supplies obsolescence


7.9



3.7



2.1



2.4



11.3Total

$
30.6


$
5.3


$
2.0


$
2.7


$
35.2Year Ended December 31, 2006Deducted from asset accounts allowance for doubtful notes and
    accounts receivable

$
21.3


$
1.7


$
0.3


$
0.6


$
22.7Materials and supplies obsolescence


10.0



1.0



(0.8
)


2.3



7.9Total

$
31.3


$
2.7


$
(0.5
)

$
2.9


$
30.6Year Ended December 31, 2005Deducted from asset accounts allowance for doubtful notes and
    accounts receivable

$
19.7


$
2.2


$
(0.3
)

$
0.3


$
21.3Materials and supplies obsolescence


11.8



2.2







4.0



10.0Total

$
31.5


$
4.4


$
(0.3
)

$
4.3


$
31.3  II-1