##### 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, 2006
  Commission file number 1-32669
  TRONOX INCORPORATED
 (Exact Name of Registrant as
    Specified in its Charter)
  Delaware

20-2868245(State or Other Jurisdiction
    of

(I.R.S. EmployerIncorporation or
    Organization)

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

New York Stock ExchangeClass B Common Stock,
    $0.01 par value

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. þ
  Rule 12b-2
 o þ 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


13Item 1B.


Unresolved Staff
    Comments


19Item 2.


Properties


20Item 3.


Legal
    Proceedings


22Item 4.


Submission of
    Matters to a Vote of Security Holders


23PART IIItem 5.


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


23Item 6.


Selected Financial
    Data


25Item 7.


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


28Item 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


53Item 9B.


Other
    Information


54PART IIIItem 10.


Directors and
    Executive Officers of the Registrant and Corporate
    Governance


54Item 11.


Executive
    Compensation


54Item 12.


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


54Item 13.


Certain
    Relationships and Related Transactions and Director
    Independence


54Item 14.


Principal
    Accountant Fees and Services


54PART IVItem 15.


Exhibits and
    Financial Statement Schedules


55Signatures


57Index to Financial
    Statements and Financial Statement Schedule


F-1First Amendment to Credit AgreementSubsidiariesConsent of Ernst & Young LLPConsent of Piercy Bowler Taylor & KernPower of AttorneyCertification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to Section 906Certification Pursuant to Section 906




---



##### Table of Contents



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




---



##### Table of Contents



TRONOX
    INCORPORATED
  PART I
  Item 1.
    Business  2 2
  2 ® 2 2 2
  2006


2005


2004(Millions of dollars)United States

$
751.4


$
755.9


$
716.8International


660.2



608.1



585.0$
1,411.6


$
1,364.0


$
1,301.8     The Tiwest Joint Venture 2
  2
  
    We, along with our 50% joint venture partner, a subsidiary of
    Exxaro Resources Limited, announced plans to increase annual
    production capacity at the Tiwest
    TiO2
    plant in Kwinana, Western Australia.
    Increased capacity at the Botlek, the Netherlands, chloride
    process
    TiO2
    plant has been demonstrated through low-cost process
    improvements, improved uptime and debottlenecking.
    We will explore opportunities to optimize the value of our
    sulfate
    TiO2
    process plant located in Uerdingen, Germany, including a
    possible divestiture of the facility.   1




---



##### Table of Contents



2
    Company
    Background
  Form S-1,
      Competitive
    Strengths
    Leading
    Market Positions
  2 2 2 2
  Global
    Presence
  2 2 2
 2




---



##### Table of Contents



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
  Technological
    Innovation
  2
 3




---



##### Table of Contents



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; and
    Capital expenditure reductions for ongoing requirements.  Operational
    Excellence
  2 2
  Maximize
    Asset Efficiency
  2
  Supply
    Chain Optimization
  2
  Organizational
    Alignment
    Industry
    Background
  2
 4




---



##### Table of Contents



Titanium
    Dioxide
  2 2 2 2 2 2
  2
  2 2 2 2
  2 2 cost-to-performance
  Titanium
    Dioxide Outlook
    2
  Manufacturing
    Titanium Dioxide
  Production
    Process. 2 Types of Titanium
    Dioxide, 2 2 2
 5




---



##### Table of Contents



4 4 4
    Types of Titanium Dioxide. 2 2 2 2
  2 2
  Raw Materials. 2 The Tiwest Joint Venture
  Electrolytic
    and Other Chemical Products
  Battery
    Materials
         6




---



##### Table of Contents



Sodium
    Chlorate
      Boron
    End-Use
    Markets and Applications
  Titanium
    Dioxide
  2
  2006 Net Sales by Geography


2006 Sales Volume by End-Use MarketAmericas


46
%

Coatings


66
%Europe


30
%

Plastics


23
%Asia-Pacific


24
%

Paper and Specialty


11
%   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  7




---



##### Table of Contents



Plastics End-Use Market. 2 2 sub-markets 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  8




---



##### Table of Contents



Electrolytic
    and Other Chemical Products
  sub-markets
  Product

Sub-Market

Applications

Growth FactorsBattery materials

Non-rechargeable battery materials

Alkaline and zinc carbon battery
    markets

Consumer non-durable goods spendingBattery materials

Rechargeable battery materials

Rechargeable lithium batteries

Consumer non-durable goods spendingSodium Chlorate

Pulp and paper industry

Pulp bleaching

Consumer non-durable goods spendingBoron Trichloride

Specialty chemical

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

Consumer non-durable goods spendingElemental Boron

Defense, pyrotechnic and air bag
    industries

Igniter formulations

Consumer non-durable goods
    spending   Sales and
    Marketing
  2 2
  2
    Competitive
    Conditions
  Titanium
    Dioxide
  2 2 2
 9




---



##### Table of Contents



2 2 2 2
  2006 Production Process Mix2006 Global Market Share


Chloride


SulfateDuPont


20
%


100
%


Millennium


13
%


77
%


23
%Tronox


12
%


83
%


17
%Kronos


10
%


72
%


28
%Huntsman


10
%


31
%


69
%Others


35
%


13
%


87
%   The Tiwest
    Joint Venture
  Electrolytic
    and Other Chemical Products
  Electrolytic Manganese Dioxide.
  Sodium Chlorate.
  Other Specialties.
  Research
    and Development
         10




---



##### Table of Contents



Patents
    and Other Intellectual Property
  2
    Employees
    Government
    Regulations and Environmental Matters
  General
    Environmental
    Matters
      Year Ending December 31,Estimated


Estimated2006


2007


2008(Millions of dollars)Cash expenditures of environmental
    reserves(1)

$
56.2


$
95.4


$
48.6Recurring operating expenses


45.8



45.7



46.5Capital expenditures


21.0



19.8



9.0     (1)
    
    The estimate for 2007 includes
    $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. 11




---



##### 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
 12




---



##### Table of Contents



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
  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 could adversely affect 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.
     13




---



##### Table of Contents



Form 10-K
  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.
 14




---



##### Table of Contents



Hazards
    associated with chemical manufacturing could adversely affect
    our results of operations.
    
    Piping and storage tank leaks and ruptures;
    Mechanical failure;
    Employee exposure to hazardous substances; and
    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; 15




---



##### Table of Contents




    Expose us to greater interest rate risk because the interest
    rates on our senior secured credit facility will vary; and
    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.
      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
  2 2 2
  Our
    business, financial condition and results of operations could be
    adversely affected by global and regional economic downturns and
    other conditions.
   16




---



##### Table of Contents



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.
  Business  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
   17




---



##### Table of Contents



Business  Industry Background 
    Titanium Dioxide  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.
      If we
    are not able to continue our technological innovation and
    successful commercial introduction of new products, our
    profitability could be adversely affected.
   18




---



##### Table of Contents



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.
        We may
    need additional capital in the future and may not be able to
    obtain it on favorable terms, if at all.
    Item 1B.
    Unresolved
    Staff Comments   19




---



##### Table of Contents



Item 2.
    Properties  Titanium
    Dioxide
  2
  2 The Tiwest
    Joint Venture.
    Titanium
    Dioxide Production Capacity
    As of December 31, 2006
    (Gross tonnes per year)
  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
  The
    Tiwest Joint Venture
  2 2
  Titanium Dioxide Heavy
    Minerals
  Management.
 20




---



##### Table of Contents



Heavy Minerals.
  2 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.
  Heavy-Mineral
    Reserves, Production and Prices
    (Reserves and production in tonnes)
  2006


2005


2004Proven and probable reserves (as
    of year end)


5,281,000



5,145,000



5,570,000Production


326,250



300,000



302,000Average market price (per tonne)

$
196


$
182


$
161   Electrolytic
    and Other Chemical Products
    Electrolytic
    and Other Chemical Capacity
    As of December 31, 2006
    (Gross tonnes per year)
  Facility

Capacity


ProductHamilton, Mississippi


145,000


Sodium chlorateHenderson, Nevada


27,000


EMDHenderson, Nevada


525


Boron productsSoda Springs, Idaho


720


Lithium manganese oxide  21




---



##### Table of Contents



Item 3.
    Legal
    Proceedings  Savannah
    Plant
    New
    Jersey Wood-Treatment Site
    Forest
    Products
  and/or
   22




---



##### Table of Contents



Form 10-K.
  Item 4.
    Submission
    of Matters to a Vote of Security Holders   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, 2005Fourth quarter

















$
0.05Year 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



0.10        23




---



##### Table of Contents



COMPARISON
    OF 13 MONTH CUMULATIVE TOTAL RETURN* Among
    Tronox Incorporated, The S & P 500 Index
    And The S & P Chemicals Index
  
    *
    
    $100 invested on 11/22/05 in stock or on 10/31/05 in
    index-including reinvestment of dividends. Fiscal year ending
    December 31.  November 22,




December 31,




December 31,2005




2005




2006Tronox


$
100.00



$
93.36



$
115.42S&P 500


$
100.00



$
103.82



$
120.22S&P Chemicals


$
100.00



$
99.99



$
116.45  24




---



##### Table of Contents



Item 6.
    Selected
    Financial Data  Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
  Year Ended December 31,2006


2005


2004


2003


2002(Millions of dollars, except per share)Statement of Operations
    Data:Net sales

$
1,411.6


$
1,364.0


$
1,301.8


$
1,157.7


$
1,064.3Cost of goods sold


1,244.7



1,143.8



1,168.9



1,024.7



949.0Gross margin


166.9



220.2



132.9



133.0



115.3Selling, general and administrative
    expenses


118.7



115.2



110.1



98.9



84.0Restructuring charges(1)


(7.1
)






113.0



61.4



11.8Arbitration award received(2)


(8.9
)














Provision for environmental
    remediation and restoration, net of reimbursements


(20.4
)


17.1



4.6



14.9



14.384.6



87.9



(94.8
)


(42.2
)


5.2Interest and debt expense


(50.4
)


(4.5
)


(0.1
)


(0.1
)


(0.1
)Other income (expense)(3)


13.9



(15.2
)


(25.2
)


(20.5
)


(13.1
)Income (loss) from continuing
    operations before income taxes


48.1



68.2



(120.1
)


(62.8
)


(8.0
)Income tax benefit (provision)


(23.1
)


(21.8
)


38.3



15.1



(8.3
)Income (loss) from continuing
    operations before cumulative effect of change in accounting
    principle


25.0



46.4



(81.8
)


(47.7
)


(16.3
)Loss from discontinued operations,
    net of income tax benefit(4)


(25.2
)


(27.6
)


(45.8
)


(35.8
)


(81.0
)Income (loss) before cumulative
    effect of change in accounting principle


(0.2
)


18.8



(127.6
)


(83.5
)


(97.3
)Cumulative effect of change in
    accounting principle, net of income tax(5)














(9.2
)


Net income (loss)

$
(0.2
)

$
18.8


$
(127.6
)

$
(92.7
)

$
(97.3
)Income (loss) from continuing
    operations per common share:Basic

$
0.62


$
1.89


$
(3.57
)

$
(2.08
)

$
(0.71
)Diluted


0.61



1.89



(3.57
)


(2.08
)


(0.71
)Dividends declared per common share


0.20



0.05











Balance Sheet Data:Working capital(6)

$
382.2


$
404.4


$
240.2


$
304.5


$
243.6Property, plant and equipment, net


864.6



839.7



883.0



961.6



944.9Total assets(7)


1,823.4



1,758.3



1,595.9



1,809.1



1,733.6Noncurrent liabilities:Long-term debt(8)


534.1



548.0











Environmental remediation
    and/or
    restoration


128.6



145.9



130.8



135.9



131.4All other noncurrent liabilities(7)


311.5



200.4



215.9



312.2



192.4Total liabilities(8)


1,386.1



1,269.3



706.0



797.9



671.2Total business/stockholders
    equity(8)


437.3



489.0



889.9



1,011.2



1,062.4Supplemental
    Information:Depreciation and amortization
    expense


103.0



103.1



104.6



106.5



105.7Capital expenditures


79.5



87.6



92.5



99.4



86.7Adjusted EBITDA(9)


191.9



232.0



162.2



160.3



134.5  25




---



##### Table of Contents



(1)
    
    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. Restructuring charges
    in 2002 represent a write-down of fixed assets for abandoned
    engineering projects.(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, loss on accounts receivable sales
    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)
    
    See Note 14 to the
    Consolidated and Combined Financial Statements included in
    Item 15 (a) of this annual report on
    Form 10-K.(5)
    
    Reflects the companys
    adoption of Statement of Financial Accounting Standards
    (SFAS) No. 143, Accounting for Asset
    Retirement Obligations.(6)
    
    Working capital is defined as the
    excess of current assets over current liabilities.(7)
    
    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
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations  Critical
    Accounting Policies.(8)
    
    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.(9)
    
    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.We have included EBITDA and
    Adjusted EBITDA to provide investors with a supplemental measure
    of our operating performance and information about the
    calculation of some of the financial covenants that are
    contained in our senior secured credit facility. We believe
    EBITDA is an important supplemental measure of operating
    performance because it eliminates items that have less bearing
    on our operating performance and thus highlights trends in our
    core business that may not otherwise be apparent when relying
    solely on generally accepted accounting principles
    (GAAP) financial measures. We also believe that
    securities analysts, investors and other interested parties
    frequently use EBITDA in the evaluation of issuers, many of
    which present EBITDA when reporting their results. Adjusted
    EBITDA is a material component of the covenants imposed on us by
    the senior secured credit facility. Under the senior secured
    credit facility, we are subject to financial covenant ratios
    that are calculated by reference to Adjusted EBITDA. For a
    description of required financial covenant levels, see
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations  Financial
    Condition and Liquidity. Our management also uses
    EBITDA and Adjusted EBITDA in order to facilitate operating
    performance comparisons from period to period, prepare annual
    operating budgets and assess our ability to meet our future debt
    service, capital expenditure and working capital requirements
    and our ability to pay dividends on our common stock.EBITDA and Adjusted EBITDA are not
    presentations made in accordance with GAAP. As discussed above,
    we believe that the presentation of EBITDA and Adjusted EBITDA
    in this annual report on
    Form 10-K
    is appropriate. However, when evaluating our results, you should
    not consider EBITDA and Adjusted EBITDA in isolation of, or as a
    substitute for, measures of our financial performance as
    determined in accordance with GAAP, such as net income (loss).
    EBITDA and Adjusted EBITDA have material limitations as
    performance measures because they exclude items that are
    necessary elements of our costs and operations. 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. 26




---



##### Table of Contents



Year Ended December 31,2006


2005


2004


2003


2002(Millions of dollars, except per share)Net income (loss)(a)

$
(0.2
)

$
18.8


$
(127.6
)

$
(92.7
)

$
(97.3
)Interest and debt expense


50.4



4.5



0.1



0.1



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


(2.8
)


11.9



9.5



8.8



11.1Income tax provision (benefit)


8.4



7.0



(63.0
)


(39.3
)


(35.3
)Depreciation and amortization
    expense


103.0



103.1



104.6



106.5



105.7EBITDA


158.8



145.3



(76.4
)


(16.6
)


(15.7
)Savannah sulfate facility shutdown
    costs










29.0







Loss from discontinued operations(c)


39.9



42.4



69.7



51.9



120.1Provision for environmental
    remediation and restoration, net of reimbursements


(20.4
)


17.1



4.6



14.9



14.3Extraordinary, unusual or
    non-recurring items(d)


(6.2
)






(0.3
)


47.0



Gain on sale of assets


(1.3
)














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


1.7















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






(0.1
)


8.2



4.8



4.7Write-downs of property, plant and
    equipment and other assets(f)


2.5



9.3



104.8



29.3



18.5Impairment of Intangible Assets










7.4







Cumulative effect of change in
    accounting principle














14.1



Asset retirement obligations(g)


(7.5
)


1.4











Other items(h)


24.4



16.6



15.2



14.9



(7.4
)Adjusted EBITDA

$
191.9


$
232.0


$
162.2


$
160.3


$
134.5     (a)
    
    Net income (loss) includes losses
    associated with our Savannah sulfate facility, which was closed
    in September 2004, of $3.0 million, $2.6 million,
    $17.8 million, $18.6 million and $9.6 million for
    the years ended December 31, 2006, 2005, 2004, 2003 and
    2002, respectively.(b)
    
    Included as a component of Other
    income (expense) in the companys Consolidated and Combined
    Statement of Operations. Net interest expense on borrowings with
    affiliates was $14.6 million, $12.1 million,
    $10.1 million and $12.9 million for the years ended
    December 31, 2005, 2004, 2003 and 2002, 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 $23.7 million, $17.6 million,
    $61.5 million, $41.1 million and $61.1 million
    for the years ended December 31, 2006, 2005, 2004, 2003 and
    2002, respectively.(d)
    
    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 monetization program, or a
    factoring program, comparable to interest expense.(f)
    
    The 2004 amount includes
    $86.6 million associated with the shutdown of our Savannah,
    Georgia, sulfate facility.(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. 27




---



##### Table of Contents



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.
  Overview
  2 2 Selected Financial
    Data Form 10-K.
  2 2 2
  2
  2
  
    We, along with our 50% joint venture partner, a subsidiary of
    Exxaro Resources Limited, announced plans to increase annual
    production capacity at the Tiwest
    TiO2
    plant in Kwinana, Western Australia.
    Increased capacity at our Botlek, the Netherlands, chloride
    process
    TiO2
    plant has been demonstrated through low-cost process
    improvements, improved uptime and debottlenecking.
    We will explore opportunities to optimize the value of our
    sulfate
    TiO2
    process plant located in Uerdingen, Germany, including a
    possible divestiture of the facility.  2
   28




---



##### Table of Contents



Contribution of Entities and Distribution of Tronox
    Class B shares.
      Asset Impairment.
 29




---



##### Table of Contents



Basis of
    Presentation
  Consolidated
    and Combined Financial Statements
    Form 10-K
  General Corporate Expenses.
  Employee Benefits and Incentives.
  Interest Expense.
    2005


2004(Millions of dollars)General corporate expenses

$
24.3


$
27.4Employee benefits and incentives(1)


24.0



28.8Interest expense, net


14.6



12.1     (1)
    
    Includes special termination
    benefits, settlement and curtailment losses of nil and
    $9.1 million for 2005 and 2004, respectively.   30




---



##### Table of Contents



Segment
    Evaluation
    period-to-period
 31




---



##### Table of Contents



Year Ended December 31,2006


2005


2004(Millions of dollars)Net
    SalesPigment

$
1,310.1


$
1,267.0


$
1,208.4Electrolytic and other chemical
    products


101.5



97.0



93.4Total

$
1,411.6


$
1,364.0


$
1,301.8Operating Profit
    (Loss)Pigment(1)

$
77.9


$
101.5


$
(86.5
)Electrolytic and other chemical
    products(2)


25.3



(5.9
)


(0.6
)Subtotal


103.2



95.6



(87.1
)Corporate and nonoperating sites(3)


(18.6
)


(2.1
)


(5.5
)Provision for environmental
    remediation and restoration(4)






(5.6
)


(2.2
)Total operating profit (loss)


84.6



87.9



(94.8
)Interest and debt expense


(50.4
)


(4.5
)


(0.1
)Other income (expense)(5)


13.9



(15.2
)


(25.2
)Income tax benefit (provision)


(23.1
)


(21.8
)


38.3Income (loss) from continuing
    operations


25.0



46.4



(81.8
)Discontinued operations, net of
    taxes


(25.2
)


(27.6
)


(45.8
)Net income (loss)

$
(0.2
)

$
18.8


$
(127.6
)     (1)
    
    Includes an arbitiration 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 our estimates of closure costs related
    to our former Mobile, Alabama, synthetic rutile facility and the
    former Savannah, Georgia, sulfate facility.(2)
    
    Includes $20.4 million,
    $(10.3) million and nil in 2006, 2005 and 2004,
    respectively, of environmental charges, net of reimbursements,
    related to ammonium perchlorate at the companys Henderson
    facility.(3)
    
    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 to the
    Consolidated and Combined Financial Statements included in
    Item 15(a) of this annual report on
    Form 10-K.(4)
    
    Includes environmental provisions
    related to various businesses in which the companys
    affiliates are no longer engaged, but that have not met the
    criteria for reporting as discontinued operations.(5)
    
    Includes equity in net earnings of
    equity method investees of $6.3 million, $2.0 million
    and $2.4 million in 2006, 2005 and 2004, respectively. The
    years 2005 and 2004 include interest expense allocated to us by
    Kerr-McGee based on specifically identified borrowings from
    Kerr-McGee at Kerr-McGees average borrowing rates. 32




---



##### Table of Contents



Results
    of Operations
  Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
  Net Sales. year-to-year
  2006


2005


$ Change(Millions of dollars)Net
    salesPigment

$
1,310.1


$
1,267.0


$
43.1Electrolytic and other chemical
    products


101.5



97.0



4.5Total Net sales

$
1,411.6


$
1,364.0


$
47.6   Pigment Segment
  Electrolytic and Other Chemical Products
    Businesses
  Gross Margin.
  Selling, General and Administrative
    Expenses.
  Restructuring Charges.
  Arbitration Award Received. 2
 33




---



##### Table of Contents



Provision for Environmental Remediation and Restoration, net
    of Reimbursements. Form 10-K.
  Operating Profit (Loss).
  2006


2005


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

$
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
)


(2.1
)


(16.5
)Provision for environmental
    remediation and restoration






(5.6
)


5.6Operating profit (loss)

$
84.6


$
87.9


$
(3.3
)   Pigment Segment
    Electrolytic and Other Chemical Products
    Businesses
  Interest and Debt Expense.
 34




---



##### Table of Contents



Other Income (Expense). Form 10-K).
  Income Tax Provision.
  Loss from Discontinued Operations. Form 10-K).
  Year
    Ended December 31, 2005 Compared to Year Ended
    December 31, 2004
  Net Sales.
  2005


2004


$ Change(Millions of dollars)Net
    salesPigment

$
1,267.0


$
1,208.4


$
58.6Electrolytic and other chemical
    products


97.0



93.4



3.6Total Net sales

$
1,364.0


$
1,301.8


$
62.2   Pigment Segment
  Electrolytic and Other Chemical Products
    Businesses
 35




---



##### Table of Contents



Gross Margin. 2
  Selling, General and Administrative
    Expenses.
  Restructuring Charges. 2
    Provision for Environmental Remediation and Restoration, net
    of Reimbursements. Environmental Matters  Environmental
    Costs Form 10-K).
  Operating Profit (Loss).
  2005


2004


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

$
101.5


$
(86.5
)

$
188.0Electrolytic and other chemical
    products


(5.9
)


(0.6
)


(5.3
)Subtotal


95.6



(87.1
)


182.7Corporate and nonoperating sites


(2.1
)


(5.5
)


3.4Provision for environmental
    remediation and restoration


(5.6
)


(2.2
)


(3.4
)Operating profit (loss)

$
87.9


$
(94.8
)

$
182.7   Pigment Segment 2
 36




---



##### Table of Contents



Electrolytic and Other Chemical Products
    Businesses
  Interest and Debt Expense.
  Other Income (Expense).
  Income Tax Benefit (Provision). stand-alone
  Loss from Discontinued Operations. Environmental
    Matters  Environmental Costs Form 10-K).
 37




---



##### Table of Contents



Financial
    Condition and Liquidity
    December 31,


December 31,


December 31,2006


2005


2004(Millions of dollars)Current ratio(1)


1.9:1



2.1:1



1.7:1Cash and cash equivalents

$
76.6


$
69.0


$
23.8Working capital(2)


382.2



404.4



240.2Total assets(3)


1,823.4



1,758.3



1,595.9Long-term debt


534.1



548.0



Stockholders equity(4)


437.3



489.0



889.9     (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).  Overview
  Liquidity and
    Capital Resources
     38




---



##### Table of Contents



Liquidity
    and Capital Resources
  Cash
    Flows from Operating Activities,
      2
  Credit Agreement.
  Contractual Obligations and Commercial
    Commitments
 39




---



##### Table of Contents




    Consolidated Total Leverage Ratio of no more than 3.75:1;
    Consolidated Interest Coverage Ratio of at least 2:1; and
    Capital Expenditures of no more than $100 million.      Senior Unsecured Notes. 1 2
    Note Payable due July 2014.
  Cash
    Flows
  Net Cash Flows from Operating Activities. Kerr-McGee
 40




---



##### Table of Contents



Net Cash Flows from Investing Activities.
    Net
    Net Cash Flows from Financing Activities.
  1 2
  Off-Balance
    Sheet Arrangements
   41




---



##### Table of Contents



clean-up
  Outlook
    Contractual
    Obligations and Commercial Commitments
      Payments Due by Period2008


2010


AfterType of Obligation

Total


2007


-2009


-2011


2011(Millions of dollars)Long-term debt, including current
    portion

$
548.8


$
14.7


$
5.4


$
186.5


$
342.2Interest payments on current and
    long-term debt(1)


271.5



49.3



97.6



90.6



34.0Pension and postretirement payments


148.0



13.5



28.4



29.3



76.8Operating leases


57.9



9.8



17.3



13.1



17.7Purchase obligations:Ore contracts


566.8



185.8



281.1



81.5



18.4Other purchase obligations


401.8



110.4



190.1



85.5



15.8Total

$
1,994.8


$
383.5


$
619.9


$
486.5


$
504.9     (1)
    
    Interest on the $200 million
    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, 2006. 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 is currently 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.  Environmental
    Matters
  Current
    Businesses
   42




---



##### Table of Contents



Legacy
    Businesses
  Environmental Costs Form 10-K.
  Environmental
    Costs
    Year Ended December 31,2006


2005


2004


Total(Millions of dollars)Cash expenditures of environmental
    reserves

$
56.2


$
61.1


$
85.2


$
202.5Recurring operating expenses


45.8



41.4



33.4



120.6Capital expenditures


21.0



19.7



21.5



62.2    43




---



##### Table of Contents



Form 10-K,
       44




---



##### Table of Contents



Form 10-K.
  Total


RemainingExpenditures


Reservethrough


Balance atDecember 31,


December 31,Location of Site

2006


2006


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

$
163.6


$
64.4


$
228.0Manville, New Jersey


0.6



35.0



35.6Other superfund sites


70.1



6.5



76.6Total

$
234.3


$
105.9


$
340.2Sites under consent order,
    license or agreement, not on EPA Superfund NPLWest Chicago, Illinois (Former
    manufacturing facility)

$
447.9


$
10.4


$
458.3Cushing, Oklahoma


148.4



10.4



158.8Henderson, Nevada


135.2



28.4



163.6Ambrosia Lake, New Mexico


30.6



8.5



39.1Crescent, Oklahoma


50.8



10.8



61.6Sauget, Illinois


9.6



6.8



16.4Cleveland, Oklahoma


18.9



3.9



22.8Jacksonville, Florida


4.7



5.3



10.0Other sites


211.2



33.5



244.7Total

$
1,057.3


$
118.0


$
1,175.3Total of all sites with reserves

$
1,291.6


$
223.9


$
1,515.5   West Chicago, Illinois (Vicinity
    Areas).
  Form 10-K.
  Manville, New Jersey.
  Form 10-K.
  Other Superfund Sites.
 45




---



##### Table of Contents



West Chicago, Illinois (Former Manufacturing
    Facility).
  Form 10-K.
  Cushing, Oklahoma.
  Henderson, Nevada.
  Form 10-K.
  Ambrosia Lake, New Mexico.
  Crescent, Oklahoma. on-site
  Sauget, Illinois.
  Cleveland, Oklahoma. on-site
  Jacksonville, Florida.
  Other sites.
    Critical
    Accounting Policies
   46




---



##### Table of Contents



Long-Lived
    Assets
    held-for-use
  Restructuring
    and Exit Activities
  Form 10-K.
  Environmental
    Remediation and Other Contingency Reserves
  clean-up
     47




---



##### Table of Contents



Environmental Matters Form 10-K.
  Income
    Taxes
    and/or
      Pension
    and Postretirement Accounting
  Employers Accounting for
    Pensions, Employers Accounting for Postretirement Benefits
    Other
 48




---



##### Table of Contents



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 New
    Pension and Postretirement Accounting Standard
  U.S. Plans
      
    Discount rate;
    Expected long-term rate of return (applies to our
    U.S. qualified plan only); and
    Rate of compensation increases.  Discount Rate.
  Expected Long-term Rate of Return.
  Rate of Compensation Increases.
  Form 10-K.
 49




---



##### Table of Contents



Pension Benefits(1)


Other Postretirement BenefitsNet Periodic


Projected





AccumulatedCost


Benefit


Net Periodic Cost


Postretirement(Benefit)


Obligation


(Benefit)


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

$
(0.4
)

$
(25.6
)

$
(0.3
)

$
(7.3
)Expected return on plan assets


(1.7
)










Rate of compensation increase


0.5



5.9







0.1Decrease of 0.5% in Discount rates

$
2.0


$
28.5


$
0.3


$
8.0Expected return on plan assets(2)


1.7











Rate of compensation increase


(0.5
)


(5.6
)






(0.1
)Change in health care cost trend
    rate of 1%Increase

$



$



$
0.5


$
10.3Decrease










(0.4
)


(8.7
)     (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, 2006, represented
    approximately 98% 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); and
    Rate of compensation increases.     50




---



##### Table of Contents



Form 10-K.
  New
    Pension and Postretirement Accounting Standard
  Form 10-K, Form 10-K.
  New/Revised
    Accounting Standards
  Uncertain Tax Positions.
  Fair Value Measurement.
  Fair Value Option.
  Accounting Changes.
 51




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosure about Market Risk  Form 10-K.
  Foreign
    Currency Exchange Rate Risk
      Weighted-Notional


AverageAmount


Contract Rate(Millions of dollars)December 31, 2006, maturing
    in 2007:Euro

$
(24
)


1.3044Australian dollar


8



.7553December 31, 2005, maturing
    in 2006:Euro

$
(17
)


1.2523Australian dollar


5



.7539   Interest
    Rate Risk
      FairThere-





Value2007


2008


2009


2010


2011


After


Total


12/31/06(Millions of dollars)Fixed-rate debt Principal amount

$



$



$



$



$



$
350.0


$
350.0


$
369.3Interest rate



%



%



%



%



%


9.50
%


9.50
%Variable-rate debt Principal amount

$
3.6


$
2.6


$
2.8


$
3.0


$
183.5


$
3.3


$
198.8


$
198.8Weighted-average interest rate


9.83
%


8.57
%


8.86
%


9.09
%


6.88
%


13.26
%


7.12
%  52




---



##### Table of Contents



Natural
    Gas Derivatives
    U.S. Natural gas purchasesAverageContract Price% Hedged


$/MMBtuQ1, 2007


88
%

$
8.13Q2, 2007


51
%

$
7.60Q3, 2007


31
%

$
7.32Q4, 2007


30
%

$
7.92   Item 8.
    Financial
    Statements and Supplementary Data  page F-1.
 Item 9.  Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Rule 13a-15.
  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.
  Changes in Internal Control Over Financial
    Reporting:
 53




---



##### Table of Contents



Item 9B.
    Other
    Information   PART III  Item 10.
    Directors
    and Executive Officers of the Registrant and Corporate
    Governance    Item 11.
    Executive
    Compensation    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   54




---



##### Table of Contents



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 Marty J.
    Rowland (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
    November 30, 2005).10
.4**

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).10
.5**

Continuity Agreement, dated as of
    November 28, 2005, between Tronox Incorporated and Roger G.
    Addison (incorporated by reference to Exhibit 10.5 of the
    Registrants current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    November 30, 2005).10
.6**

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
.7**

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
.8

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
.9

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). 55




---



##### Table of Contents



10
.10

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
.11**

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
.12

Transition Services Agreement,
    dated as of November 28, 2005, among Kerr-McGee
    Corporation, Kerr-McGee Worldwide Corporation and Tronox
    Incorporated (incorporated by reference to Exhibit 10.5 of
    the Registrants current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    December 7, 2005).10
.13

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
.14

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
.15

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
.16**

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
.17**

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
.18**

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
.19*

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.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. 56




---



##### Table of Contents



SIGNATURES      By:
    /s/  Thomas
    W. Adams   Title:
    Chief Executive Officer  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. Adams   Attorney-in-fact
  Form 10-K attorney-in-fact
 57




---



##### 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 an
    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 Statement of Operations for the years ended
    December 31, 2006, 2005 and 2004


F-5Consolidated
    Balance Sheet at December 31, 2006 and 2005


F-6Consolidated and
    Combined Statement of Cash Flows for the years ended
    December 31, 2006, 2005 and 2004


F-7Consolidated and
    Combined Statement of Comprehensive Income (Loss) and
    Business/Stockholders Equity for the years ended
    December 31, 2006, 2005 and 2004


F-8Notes to
    Consolidated and Combined Financial Statements


F-9Schedule II 
    Valuation and Qualifying Accounts


II-1  F-1




---



##### Table of Contents



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




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
    on Consolidated and Combined Financial Statements           Share-Based Payment, 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).
  Internal Control 
    Integrated Framework
  
    F-3




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm            
       F-4




---



##### Table of Contents



TRONOX
    INCORPORATED
 CONSOLIDATED
    AND COMBINED STATEMENT OF OPERATIONS  For the Years Ended December 31,2006


2005


2004(Millions of dollars, except per share)Net Sales

$
1,411.6


$
1,364.0


$
1,301.8Cost of goods sold


1,244.7



1,143.8



1,168.9Gross Margin


166.9



220.2



132.9Selling, general and
    administrative expenses


118.7



115.2



110.1Restructuring charges


(7.1
)






113.0Arbitration award received


(8.9
)






Provision for environmental
    remediation and restoration, net of reimbursements


(20.4
)


17.1



4.684.6



87.9



(94.8
)Interest and debt expense


(50.4
)


(4.5
)


(0.1
)Other income (expense)


13.9



(15.2
)


(25.2
)Income (Loss) from Continuing
    Operations before Income Taxes


48.1



68.2



(120.1
)Income tax benefit (provision)


(23.1
)


(21.8
)


38.3Income (Loss) from Continuing
    Operations


25.0



46.4



(81.8
)Loss from discontinued operations,
    net of income tax benefit of $14.7, $14.8 and $24.7, respectively


(25.2
)


(27.6
)


(45.8
)Net Income (Loss)

$
(0.2
)

$
18.8


$
(127.6
)Income (Loss) per Common
    Share:Basic Continuing operations

$
0.62


$
1.89


$
(3.57
)Discontinued operations


(0.62
)


(1.12
)


(2.00
)Net income (loss)

$



$
0.77


$
(5.57
)Diluted Continuing operations

$
0.61


$
1.89


$
(3.57
)Discontinued operations


(0.61
)


(1.12
)


(2.00
)Net income (loss)

$



$
0.77


$
(5.57
)Weighted Average
    Shares Outstanding (in thousands):Basic


40,373



24,518



22,889Diluted


40,933



24,518



22,889    F-5




---



##### Table of Contents



TRONOX
    INCORPORATED
 CONSOLIDATED
    BALANCE SHEET  At December 31,2006


2005(Millions of dollars)ASSETSCurrent AssetsCash and cash equivalents

$
76.6


$
69.0Accounts receivable, net of
    allowance for doubtful accounts of $12.7 in 2006 and $11.3 in
    2005


325.6



331.6Inventories


319.2



312.3Prepaid and other assets


15.2



28.5Income tax receivable


13.9



2.4Deferred income taxes


43.6



35.6Total Current Assets


794.1



779.4Property, Plant and
    Equipment  Net


864.6



839.7Long-Term Receivables,
    Investments and Other Assets


100.6



78.8Goodwill and Other Intangible
    Assets


64.1



60.4Total Assets

$
1,823.4


$
1,758.3LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent LiabilitiesAccounts payable

$
208.2


$
195.3Accrued liabilities


187.4



168.9Long-term debt due within one year


14.7



2.0Income taxes payable


1.6



8.8Total Current
    Liabilities


411.9



375.0Noncurrent
    LiabilitiesDeferred income taxes


33.6



79.0Environmental remediation
    and/or
    restoration


128.6



145.9Long-term debt


534.1



548.0Other


277.9



121.4Total Noncurrent
    Liabilities


974.2



894.3Contingencies and Commitments
    (Notes 17 and 18)Stockholders
    EquityClass A common stock, par
    value $0.01  100,000,000 shares authorized,
    18,388,202 and 17,886,640 shares issued and outstanding at
    December 31, 2006 and December 31, 2005, 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, 2006 and December 31, 2005, respectively


0.2



0.2Capital in excess of par value


481.6



461.5Accumulated deficit


(12.8
)


(2.9
)Deferred compensation






(5.4
)Accumulated other comprehensive
    income (loss)


(31.4
)


35.4Treasury stock, at
    cost  33,533 shares at December 31, 2006


(0.5
)


Total Stockholders
    Equity


437.3



489.0Total Liabilities and
    Stockholders Equity

$
1,823.4


$
1,758.3    F-6




---



##### Table of Contents



TRONOX
    INCORPORATED
 CONSOLIDATED
    AND COMBINED STATEMENT OF CASH FLOWS  For the Years Ended December 31,2006


2005


2004(Millions of dollars)Cash Flows from Operating
    ActivitiesNet income (loss)

$
(0.2
)

$
18.8


$
(127.6
)Adjustments to reconcile net
    income (loss) to net cash provided by operating
    activities Depreciation and amortization


103.0



103.1



104.6Deferred income taxes


(5.5
)


(31.9
)


(38.2
)Asset write-downs and impairments






12.3



122.4Provision for environmental
    remediation and restoration, net of reimbursements


3.3



34.7



66.1Allocations from Kerr-McGee






48.0



55.1Other noncash items affecting net
    income (loss)


25.7



33.1



37.9Changes in assets and
    liabilities (Increase) decrease in accounts
    receivable


39.2



(154.0
)


(41.6
)(Increase) decrease in inventories


(1.5
)


(42.7
)


59.9(Increase) decrease in prepaid and
    other assets


9.2



3.3



5.6Increase (decrease) in accounts
    payable and accrued liabilities


(27.0
)


12.8



(17.8
)Increase (decrease) in income
    taxes payable


(1.7
)


18.3



6.6Other


(32.9
)


5.7



(42.2
)Net cash flows from operating
    activities


111.6



61.5



190.8Cash Flows from Investing
    ActivitiesCapital expenditures


(79.5
)


(87.6
)


(92.5
)Collection on repurchased
    receivables






165.0



Other investing activities


4.5



5.9



1.1Net cash flows from investing
    activities


(75.0
)


83.3



(91.4
)Cash Flows from Financing
    ActivitiesIssuance of common stock, net






226.0



Proceeds from borrowings






550.0



Repayment of Debt


(11.1
)






Costs of obtaining financing


(2.3
)


(10.9
)


Distributions to Kerr-McGee






(761.8
)


Net transfers with affiliates






(106.6
)


(131.1
)Dividends Paid


(6.2
)






Net cash flows from financing
    activities


(19.6
)


(103.3
)


(131.1
)Effects of Exchange Rate
    Changes on Cash and Cash Equivalents


(9.4
)


3.7



(3.8
)Net Increase (Decrease) in Cash
    and Cash Equivalents


7.6



45.2



(35.5
)Cash and Cash Equivalents at
    Beginning of Year


69.0



23.8



59.3Cash and Cash Equivalents at
    End of Year

$
76.6


$
69.0


$
23.8    F-7




---



##### 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,
    2003

$
946.7


$



$



$



$



$
64.5


$



$



$
1,011.2Comprehensive Income (Loss):Net loss


(127.6
)






























(127.6
)Other comprehensive income






















6.8











6.8Comprehensive loss


































(120.8
)Net transfers to Kerr-McGee


(0.5
)






























(0.5
)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 loss






















(66.8
)










(66.8
)Comprehensive loss


































(67.0
)Contribution from Kerr- McGee














16.5



















16.5Issuance and amortization of
    employee stock-based awards














3.3



(0.2
)






(0.5
)


5.4



8.0Other














0.3



















0.3Dividends declared ($0.20 per
    share)


















(8.1
)














(8.1
)Balance at December 31,
    2006

$



$
0.2


$
0.2


$
481.6


$
(12.8
)

$
(31.4
)

$
(0.5
)

$



$
437.3    F-8




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes
    to Consolidated and Combined Financial Statements
  1.
    The
    Company  2
    Formation
  Form S-1,
        2005


2004(Millions of dollars)General corporate expenses

$
24.3


$
27.4Employee benefits and incentives(1)


24.0



28.8Interest expense, net


14.6



12.1     (1)
    
    Includes special termination
    benefits, settlement and curtailment losses of nil and
    $9.1 million for 2005 and 2004, respectively. F-9




---



##### Table of Contents



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




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    2.
    Significant
    Accounting Policies  Use of
    Estimates
    Foreign
    Currency
          Cash
    Equivalents
    Accounts
    Receivable
    Concentration of Credit Risk. 2
 F-11




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    Inventories
  first-in,
  Property,
    Plant and Equipment
    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 otherinfrastructure assets


25 yearsBuildings


10  40 years   No. 04-2,
    Changes in Estimated Useful Lives
  Retirements and Sales
 F-12




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
   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
    Environmental
    Remediation and Other Contingencies
  and/or
 F-13




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  clean-up
    Self-Insurance
    Asset
    Retirement Obligations
    and/or
    Research
    and Development
   F-14




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
   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; and
    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.      Pro Forma Fair-Value Method.
 F-15




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    2005


2004Net income (loss) as reported

$
18.8


$
(127.6
)Add: stock-based employee
    compensation expense included in reported net income (loss), net
    of taxes


2.8



1.5Deduct: stock-based employee
    compensation expense determined using a fair-value method, net
    of taxes


(3.5
)


(3.6
)Pro forma net income (loss)

$
18.1


$
(129.7
)Basic and diluted net income
    (loss) per common share:As reported

$
0.77


$
(5.57
)Pro forma

$
0.74


$
(5.67
)     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     2005


2004Risk-free interest rate


3.9
%


3.5
%Expected dividend yield


3.5
%


3.6
%Expected volatility


27.4
%


22.6
%Expected life (years)


6.0



5.8Weighted-average fair value of
    options granted

$
12.50


$
8.63     Revenue
    Recognition
   F-16




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    Fair Value Measurement. Fair Value
    Measurements
  Fair Value Option.
  3.
    Statement
    of Operations Data  Other
    Income (Expense)
    2006


2005


2004(Millions of dollars)Net foreign currency transaction
    gain (loss)

$
8.7


$
(3.0
)

$
(5.4
)Equity in net earnings of equity
    method investees


6.3



2.0



2.4Net interest expense on borrowings
    with affiliates and interest income


2.8



(11.9
)


(9.5
)Gain (loss) on accounts
    receivables sales






0.1



(8.2
)Provision for litigation
    settlements(1)


(3.7
)






Other expense


(0.2
)


(2.4
)


(4.5
)Total

$
13.9


$
(15.2
)

$
(25.2
)     (1)
    
    Relates to a former operation that
    does not meet the criteria to be classified as a discontinued
    operation. See Note 17 
    Litigation and Claims  Western
    Fertilizer Contract. F-19




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Earnings
    Per Share
    2006


2005


2004Income








Income








Incomefrom





Per-


from





Per-


from





Per-Continuing





share


Continuing





share


Continuing





shareOperations


Shares


Income


Operations


Shares


Income


Operations


Shares


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

$
25.0



40,373


$
0.62


$
46.4



24,518


$
1.89


$
(81.8
)


22,889


$
(3.57
)Effect of dilutive securities:Restricted stock and stock options






560



(0.01
)






















Diluted earnings per share

$
25.0



40,933


$
0.61


$
46.4



24,518


$
1.89


$
(81.8
)


22,889


$
(3.57
)     4.
    Balance
    Sheet Data  Accounts
    Receivable
    2006


2005(Millions of dollars)Accounts receivable 
    trade

$
281.1


$
290.6Receivable from Kerr-McGee(1)


17.5



8.7Receivable from the
    U.S. Department of Energy (Note 17)(2)


11.0



13.0Receivable from insurers
    (Note 17)(2)


7.4



7.7Other


21.3



22.9338.3



342.9Allowance for doubtful accounts


(12.7
)


(11.3
)Total

$
325.6


$
331.6     (1)
    
    See Note 17 for a description
    of the 2006 environmental-related receivable. The 2005
    receivable from Kerr-McGee represents employee bonuses
    associated with services provided prior to the IPO, net of
    amounts payable to Kerr-McGee for services provided to the
    company under the transition services agreement.(2)
    
    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. F-20




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
     Kerr-McGees
    Inventories
    2006


2005(Millions of dollars)Raw materials

$
67.5


$
77.1Work-in-progress


13.4



15.2Finished goods


174.8



154.7Materials and supplies, net


63.5



65.3Total

$
319.2


$
312.3  F-21




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Property,
    Plant and Equipment
    2006


2005(Millions of dollars)Land

$
72.2


$
63.1Buildings


159.4



145.0Machinery and equipment


1,795.6



1,769.2Other


103.7



111.9Total


2,130.9



2,089.2Less accumulated depreciation


(1,266.3
)


(1,249.5
)Net

$
864.6


$
839.7   Long-Term
    Receivables, Investments and Other Assets
    2006


2005(Millions of dollars)Receivable from the
    U.S. Department of Energy (Note 17)

$
15.9


$
12.5Investments in equity method
    investees


21.1



17.5Receivables from insurers
    (Note 17)


19.6



23.5Debt issuance costs


11.0



12.7Prepaid pension cost (Note 15)


25.3



11.7Other


7.7



0.9Total

$
100.6


$
78.8   Goodwill
    and Other Intangible Assets
    ProprietaryGoodwill(1)


TechnologyBalance at December 31, 2004

$
11.8


$
53.1Change due to foreign currency
    translation


(1.5
)


(3.2
)Balance at December 31, 2005


10.3



49.9Change due to foreign currency
    translation


1.2



2.5Balance at December 31, 2006

$
11.5


$
52.4     (1)
    
    Associated with the companys
    reportable pigment segment. F-22




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
   Accrued
    Liabilities
    2006


2005(Millions of dollars)Employee-related costs and benefits

$
37.2


$
54.2Reserves for environmental
    remediation and restoration  current portion
    (Note 17)


95.3



77.8Other(1)


54.9



36.9Total

$
187.4


$
168.9     (1)
    
    No other individual item is
    material to total current liabilities.    Noncurrent
    Liabilities  Other
    2006


2005(Millions of dollars)Reserve for income taxes payable

$
45.5


$
37.2Asset retirement obligations


23.6



27.7Reserve for workers
    compensation and general liability claims


18.8



18.5Pension and postretirement
    obligations (Note 15)


167.5



12.6Other


22.5



25.4Total

$
277.9


$
121.4  F-23




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  5.
    Asset
    Retirement Obligations    2006


2005(Millions of dollars)Balance, January 1

$
34.9


$
30.9Obligations incurred






4.4Accretion expense


1.1



0.9Changes in estimates, including
    cost and timing of cash flows


(6.8
)


1.0Asset retirement expenditures


(2.3
)


(2.3
)Balance, December 31

$
26.9


$
34.9Current portion(1)

$
3.2


$
7.2Noncurrent portion(2)

$
23.7


$
27.7     (1)
    
    Included in accrued liabilities(2)
    
    Included in noncurrent
    liabilities  other    2 2
  2
 F-24




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
     6.
    Long-Term
    Debt    2006


20059.5% Senior Unsecured Notes
    due December 2012

$
350.0


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


190.0



200.0Variable-rate note payable due in
    installments through July 2014


8.8



Total debt


548.8



550.0Less: Current portion of long-term
    debt


(14.7
)


(2.0
)Total long-term debt

$
534.1


$
548.0     
    In July 2006, Tronox Western Australia Pty Ltd, a wholly-owned
    subsidiary of the company, completed the purchase of a 50%
    undivided interest in additional mining tenements and related
    mining assets. The company acquired the mine tenements by
    entering into an eight-year note payable agreement. As a result,
    the company recorded noncash capital additions of approximately
    $9.4 million and has additional debt outstanding of
    $8.8 million, following a principal payment during the
    third quarter of 2006. The debt requires scheduled payments
    through 2014, with an early payment option at the end of 2007.
    Interest is currently accrued at the rate of 13.26% per
    annum on the outstanding balance as of the first day of January
    of each calendar year and is calculated through
    December 31, with payments made on July 28 of each year in
    which an installment is due.
    In December 2006, in accordance with the provisions of the
    credit facility discussed below, the company made an optional
    prepayment of term loan principal in the amount of
    $8.0 million.     F-25




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
      
    Consolidated Total Leverage Ratio of no more than 3.75:1
    Consolidated Interest Coverage Ratio of at least 2:1
    Capital Expenditures were limited to $100 million      1 2
      2007

$
14.72008


2.62009


2.82010


3.02011


183.52012 and thereafter


342.2Total debt

$
548.8   7.
    Restructuring
    and Exit Activities   F-26




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
      Restructuring and Exit Activities.
  2006


2005Personnel


Dismantlement


Contract





Personnel


Dismantlement


ContractCosts


and Closure


Termination


Total(1)


Costs


and Closure


Termination


Total(1)(Millions of dollars)Beginning balance

$
3.1


$
4.9


$
1.0


$
9.0


$
7.1


$
10.4


$
4.3


$
21.8Provisions


(0.2
)










(0.2
)


(0.2
)


(0.2
)






(0.4
)Payments


(0.4
)


(2.2
)


(0.6
)


(3.2
)


(2.2
)


(4.1
)


(3.3
)


(9.6
)Adjustments


0.2



0.1



(0.2
)


0.1



(1.6
)


(1.2
)






(2.8
)Ending balance

$
2.7


$
2.8


$
0.2


$
5.7


$
3.1


$
4.9


$
1.0


$
9.0     (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-27




---



##### Table of Contents



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


Class BCommon


CommonStock


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






22,889Shares issued at Initial Public
    Offering


17,480



Issuance of restricted stock


407



Balance at December 31, 2005


17,887



22,889Adjustment to restricted stock
    issued


(85
)


Class B shares distributed by
    Kerr-McGee






(22,889
)Class B shares owned by the
    public






22,889Issuance of restricted stock


586



Forfeiture of restricted stock


(33
)


Balance at December 31, 2006


18,355



22,889   Form S-1,
     F-28




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
   9.
    Other
    Comprehensive Income (Loss)    2006


2005


2004(Millions of dollars)Foreign currency translation
    adjustments

$
31.0


$
(41.7
)

$
20.0Unrealized gain (loss) on cash
    flow hedges, net of taxes of $1.9, $(2.5), and $(0.8)


(3.5
)


4.1



0.6Reclassification of realized
    (gain) loss on cash flow hedges to net income (loss), net of
    taxes of $(1.4), $2.5, and $2.8


2.2



(3.2
)


(7.7
)Minimum pension liability
    adjustments, net of taxes of $(1.4), $(2.4), and $3.6


1.8



4.9



(6.1
)Unrecognized actuarial loss, net
    of taxes of $47.7 (Note 15)


(93.0
)






Unrecognized prior service cost,
    net of taxes of $3.1 (Note 15)


(5.3
)






$
(66.8
)

$
(35.9
)

$
6.8     2006


2005(Millions of dollars)Foreign currency translation
    adjustments

$
68.5


$
37.5Unrealized loss on cash flow hedges


(1.6
)


(0.3
)Minimum pension liability
    adjustments






(1.8
)Unrecognized actuarial loss
    (Note 15)


(93.0
)


Unrecognized prior service cost
    (Note 15)


(5.3
)


$
(31.4
)

$
35.4   10.
    Cash Flow
    Statement Data    2006


2005


2004(Millions of dollars)Income tax payments

$
18.5


$
11.9


$
8.0Less refunds received


(1.6
)


(11.4
)


(0.2
)Net income tax payments

$
16.9


$
0.5


$
7.8Interest payments

$
47.0


$
0.4


$
0.1    F-29




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
     2006


2005


2004(Millions of dollars)Stock-based compensation(1)

$
8.5


$
5.8


$
2.5Pension and postretirement cost(1)


14.6



9.9



15.5Litigation provision


7.9



8.7



0.2Asset retirement obligations


(7.5
)


1.1



Equity in net earnings of equity
    method investees


(6.3
)


(2.0
)


(2.4
)Loss on retirements of property
    and equipment


2.5



0.9



9.7All other(2)


6.0



8.7



12.4Total

$
25.7


$
33.1


$
37.9     (1)
    
    2005 and 2004 amounts consist
    primarily of cost allocations from Kerr-McGee.(2)
    
    No other individual item is
    material to net cash flows from operating activities.    2006


2005


2004(Millions of dollars)Environmental expenditures

$
(56.2
)

$
(61.1
)

$
(85.2
)Reimbursements of environmental
    expenditures


38.4



71.4



50.5Cash abandonment expenditures


(2.3
)


(2.3
)


(3.2
)Employer contributions to pension
    and postretirement plans


(6.1
)


(7.0
)


(1.9
)All other(1)


(6.7
)


4.7



(2.4
)Total

$
(32.9
)

$
5.7


$
(42.2
)     (1)
    
    No other individual item is
    material to net cash flows from by operating activities.    2006


2005


2004(Millions of dollars)Noncash Investing
    Activities Receivables repurchased and
    contributed by Kerr-McGee

$



$
165.0


$
Acquisition of mining tenements
    through issuance of debt


(9.4
)






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






165.0



Issuance of debt to acquire mine
    tenements


9.4







    F-30




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
   11.
    Derivative
    Instruments    12.
    Financial
    Instruments    December 31, 2006


December 31, 2005Carrying


Estimated


Carrying


EstimatedValue


Fair Value


Value


Fair Value(Millions of dollars)Cash and cash equivalents

$
76.6


$
76.6


$
69.0


$
69.0Long-term receivables


35.5



30.8



35.9



30.5Grantor trust assets


4.5



4.5







Total debt


548.8



568.1



550.0



558.2    F-31




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
   13.
    Income
    Taxes    2006


2005


2004(Millions of dollars)U.S. Federal Current

$
(18.3
)

$
(28.5
)

$
26.7Deferred


2.3



10.5



17.5(16.0
)


(18.0
)


44.2International Current


(4.7
)


(8.8
)


(13.8
)Deferred


(6.8
)


7.4



7.9(11.5
)


(1.4
)


(5.9
)State Current


(0.2
)


(2.8
)


Deferred


4.6



0.4



4.4



(2.4
)


Total (provision) benefit

$
(23.1
)

$
(21.8
)

$
38.3     2006


2005


2004U.S. statutory tax rate


35.0
%


35.0
%


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


(11.0
)


(2.6
)


3.4Taxation of foreign operations


15.2



(8.2
)


(5.8
)Tax contingencies


9.1



2.5



State income taxes


(6.2
)


2.3



Adjustment of prior years
    tax attributes from parent






(2.9
)


Effect of certain stock based
    compensation adjustments


2.7







Tax on repatriated foreign earnings






6.8



Other  net


3.2



(0.9
)


(0.7
)Effective tax rate


48.0
%


32.0
%


31.9
%  F-32




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    2006


2005(Millions of dollars)Deferred tax
    liabilities Property, plant and equipment

$
135.5


$
145.9Investments


7.3



6.1Reserves for environmental
    remediation and restoration, net


2.7



Intercompany notes and payables


14.3



11.6Intangible assets


9.0



9.1Inventory


5.5



2.3Accounts receivable and payable


6.9



Other


5.7



5.0Total deferred tax liabilities


186.9



180.0Deferred tax assets Net operating loss and other
    carryforwards


(42.4
)


(40.2
)Reserves for environmental
    remediation and restoration, net


(73.7
)


(71.1
)Obligations for pension and other
    employee benefits


(54.5
)


(5.0
)Litigation


(3.1
)


(0.8
)State and local tax


(1.3
)


Bad debt allowance


(7.1
)


(6.7
)Inventory






(2.0
)Accrued insurance costs


(0.3
)


(8.3
)Other accrued liabilities


(10.0
)


Other


(11.8
)


(8.3
)Total deferred tax assets


(204.2
)


(142.4
)Valuation allowance associated
    with loss carryforwards


7.3



5.8Net deferred tax assets


(196.9
)


(136.6
)Net deferred tax (asset) liability

$
(10.0
)

$
43.4     2006


2005


2004(Millions of dollars)United States

$
31.2


$
53.2


$
(130.2
)International


16.9



15.0



10.1Total

$
48.1


$
68.2


$
(120.1
)    F-33




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
      and/or
        Tax Sharing Agreement and Tax Allocations
 F-34




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
        14.
    Discontinued
    Operations     F-35




---



##### 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,
    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









$
27.6Year ended December 31,
    2004:Total pretax loss

$
61.5


$
9.0


$
70.5Tax benefit










(24.7
)Total after tax loss









$
45.8     (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.  15.
    Employee
    Retirement and Savings Investment Plans  Retirement
    Plans
  Overview
  Establishment of U.S. Plans
 F-36




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
   New Accounting Standard
  Before





AfterApplication





Applicationof SFAS No.





of SFAS No.158


Adjustments


158(Millions of dollars)Balances as of
    December 31, 2006:Long-term receivables, investments
    and other assets

$
206.9


$
(106.3
)

$
100.6Total Assets


1,929.7



(106.3
)


1,823.4Accrued liabilities


190.4



(3.0
)


187.4Total Current
    Liabilities


414.9



(3.0
)


411.9Deferred income taxes


82.8



(49.2
)


33.6Other noncurrent liabilities


236.5



41.4



277.9Total Noncurrent
    Liabilities


982.0



(7.8
)


974.2Accumulated other comprehensive
    income (loss)


64.1



(95.5
)


(31.4
)Total Stockholders
    Equity


532.8



(95.5
)


437.3      PostretirementRetirement


Health & LifePlans


Plans(Millions of dollars)Balances in accumulated other
    comprehensive income (loss) as of December 31,
    2006:Unrecognized actuarial loss

$
(103.7
)

$
(37.0
)Unrecognized prior service credit
    (cost)


(13.3
)


4.9Amounts expected to be
    reclassified from accumulated other comprehensive income (loss)
    during 2007:Unrecognized actuarial loss

$
(4.2
)

$
(1.7
)Unrecognized prior service credit
    (cost)


(2.8
)


1.0  F-37




---



##### Table of Contents



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


Health and Life Plans2006


2005


2006


2005(Millions of dollars)


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

$
81.4


$
82.5


$



$
Establishment of U.S. Plans


410.9







144.2



Service cost


8.4



2.0



1.2



Interest cost


21.6



3.6



6.3



Plan amendments






0.4







Net actuarial loss


21.6



5.2



3.2



Foreign currency rate changes


9.6



(11.1
)






Contributions by plan participants


0.5



0.4



2.0



Benefits paid


(23.9
)


(1.6
)


(6.4
)


Administrative expenses


(1.0
)










Benefit obligation, end of year


529.1



81.4



150.5



Change in plan
    assetsFair value of plan assets,
    beginning of year


62.2



59.2







Establishment of U.S. Plans


450.3











Actual return on plan assets


28.2



5.1







Employer contributions(1)


1.7



7.0



4.4



Participant contributions


0.5



0.4



2.0



Foreign currency rate changes


7.3



(8.2
)






Benefits paid


(23.5
)


(1.3
)


(6.4
)


Administrative expenses


(1.0
)










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


525.7



62.2







Net under funded status of plans

$
(3.4
)

$
(19.2
)

$
(150.5
)

$
Amounts not recognized in the
    Consolidated Balance
    SheetPrior service costs

$



$
(1.4
)

$



$
Net actuarial loss






21.0







$



$
19.6


$



$
Classification of amounts
    recognized in the Consolidated
    Balance SheetPrepaid pension cost

$
25.3


$
11.7


$



$
Accrued benefit liability


(28.7
)


(14.5
)


(150.5
)


Sub-total
    of assets and liabilities(3)


(3.4
)


(2.8
)


(150.5
)


Accumulated other comprehensive
    loss (pretax)


117.0



3.2



32.1



Total

$
113.6


$
0.4


$
(118.4
)

$
  F-38




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    (1)
    
    The company expects 2007
    contributions to be $0.2 million for the
    U.S. nonqualified plans, $11 million for the
    U.S. postretirement plans and approximately
    $2.2 million for the foreign retirement plans. No
    contributions are expected in 2007 for the U.S. qualified
    retirement plan.(2)
    
    Excludes the grantor trust assets
    of $4.5 million at year-end 2006 and 2005 associated with
    the companys supplemental nonqualified U.S. plans.
    The company does not anticipate making any contributions to the
    grantor trust in 2007.(3)
    
    SFAS No. 158 requires
    that the plan sponsor carry the funded status of all plans on
    the balance sheet.    At December 31, 2006


At December 31, 2005U.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)Accumulatedbenefit obligation

$
5.0


$
150.5


$
15.0


$



$



$
13.0Projected benefitobligation


6.5



150.5



15.7











13.7     (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 $4.5 million at year-end 2006.    At December 31, 2006


At December 31, 2005U.S.


The Netherlands


U.S.


The NetherlandsQualified


Retirement


Qualified


RetirementPlan


Plan


Plan


Plan(Millions of dollars)


(Millions of dollars)Accumulated benefit obligation

$
398.9


$
68.8


$



$
59.3Projected benefit obligation

$
427.4


$
79.5


$



$
67.7Market value of plan assets


452.7



73.0







62.2Funded status 
    (under)/over funded

$
25.3


$
(6.5
)

$



$
(5.5
)   Expected Benefit Payments
  2012-2007


2008


2009


2010


2011


2016(Millions of dollars)Retirement Plans(1)

$
2.4


$
2.9


$
3.2


$
3.3


$
3.5


$
22.9Postretirement Health and Life
    Plans


11.0



11.2



11.2



11.2



11.3



53.9     (1)
    
    The benefit payments expected to be
    paid from the U.S. qualified retirement plan trust are
    expected to be $28.1 million, $28.4 million,
    $28.7 million, $30.0 million and $30.7 million in
    each year, 2007 through 2011, respectively, and
    $180.3 million in the aggregate for the period 2012 through
    2016.   F-39




---



##### Table of Contents



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


Health and Life Plans2006


2005


2004


2006


2005


2004(Millions of dollars)


(Millions of dollars)Net periodic cost Service cost

$
8.5


$
2.0


$
1.9


$
1.1


$



$
Interest cost


21.7



3.6



3.4



6.3







Expected return on plan assets


(30.3
)


(3.1
)


(3.0
)










Net amortization Prior service cost (credit)


2.1



(0.3
)


(0.2
)


(0.8
)






Net actuarial (gain) loss


1.5



1.1



0.5



1.2







Sub-total
    net periodic cost


3.5



3.3



2.6



7.8







Allocated retirement plan expense
    (credit) from
    Kerr-McGee:Net periodic cost (credit)


0.7



(0.4
)


(6.2
)


2.6



7.0



10.0Special termination benefits,
    settlement and curtailment losses










8.6











0.5Total

$
4.2


$
2.9


$
5.0


$
10.4


$
7.0


$
10.5     Assumptions
  2006


2005


2004United





United





UnitedStates


International


States


International


States


InternationalDiscount rate


6.00
%


4.25
%



%


4.75
%



%


5.29
%Expected return on plan assets


8.00
%


5.25
%



%


5.50
%



%


5.75
%Rate of compensation increases


3.50
%


3.42
%



%


3.42
%



%


2.81
%     2006


2005


2004United





United





UnitedStates


International


States


International


States


InternationalDiscount rate


5.75
%


4.50
%



%


4.25
%



%


4.75
%Rate of compensation increases


3.50
%


3.42
%



%


3.42
%



%


3.42
%    F-40




---



##### Table of Contents



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


The Netherlands Plan Assets2006


2006


2005Equity securities


55
%


35
%


28
%Debt securities


42



58



63Cash and cash equivalents


3



7



9Total


100
%


100
%


100
%        F-41




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
      Savings
    Investment Plan
    16.
    Employee
    Stock-Based Compensation  Overview
   F-42




---



##### Table of Contents



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


Not applicable



3



Cliff (2
)


Stock



Employee servicePerformance Shares


Not applicable



3



Cliff (2
)


Cash



Employee service     (1)
    
    An employee vests in one-third of
    the award at the end of each year of service. Employees
    terminating their employment due to retirement fully vest in
    their award upon retirement.(2)
    
    An employee vests in the entire
    award at the end of the three-year service period. Employees
    terminating their employment due to retirement fully vest in
    their award upon retirement.  sub-plans sub-plans
    Effect of Tronox Separation from Kerr-McGee
 F-43




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
     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
%   liability-to-equity
  Compensation Expense
  2006


2005


2004(Millions of dollars)Expense resulting from awards
    issued originally by Tronox:Stock options

$
0.8


$



$
Restricted stock-based awards


1.6



0.2



Expense resulting from awards
    issued originally by Kerr-McGee:Stock options


2.0



0.8



Restricted stock and stock
    opportunity grants


4.1



3.3



2.3Total stock-based compensation
    expense, pretax


8.5



4.3



2.3Income tax benefit


(2.3
)


(1.5
)


(0.8
)Total stock-based compensation
    expense, net of taxes

$
6.2


$
2.8


$
1.5    F-44




---



##### Table of Contents



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


RemainingCost (Pretax)


Period(Millions of dollars)


(Years)Stock options issued by Tronox
    Incorporated

$
1.1



1.9Restricted stock-based awards
    issued by Tronox Incorporated


2.9



1.9Performance shares issued by
    Tronox Incorporated


0.8



1.9Stock options converted from
    Kerr-McGee awards


1.2



1.0Restricted stock and stock
    opportunity grants converted from Kerr-McGee awards


1.5



1.0$
7.5



1.6   Stock Options
  IntrinsicNumber of





Contractual


ValueOptions


Price(1)


Life (Years)(1)


(Millions)(2)Options outstanding at
    December 31, 2005


345,700


$
14.00Options awarded (primarily those
    converted from Kerr-McGee awards)


927,666



9.65Options forfeited


(52,911
)


10.39Options outstanding at
    December 31, 2006


1,220,455


$
10.85



8.1


$
6.2Options exercisable at
    December 31, 2006


115,087Outstanding options vested and
    expected to vest


1,150,764


$
10.82



8.1


$
5.8     (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, 2006, and the options exercise price.    Options Outstanding


Options ExercisableWeighted-


Weighted-





Weighted-Average


Average





AverageRemaining


Exercise





ExerciseRange of Exercise




Contractual


Price per





Price perPrices per Option

Options


Life (Years)


Option


Options


Option$8.68-9.93


876,139



7.7


$
9.08






$
$9.94-16.26


344,316



8.9



13.07



115,087



14.001,220,455



8.1


$
10.85



115,087


$
14.00   Valuation and cost attribution
    methods.
 F-45




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    Tronox Stock Option valuation.
  2005Risk-free interest rate


4.6
%Expected dividend yield


1.5
%Expected volatility


34.5
%Expected term (years)


6.3Per-unit
    fair value of options granted

$
5.01   Expected Volatility
  Expected Term
  Kerr-McGee Stock Option valuation.
  2005


2004Risk-free interest rate


3.9
%


3.5
%Expected dividend yield


3.5
%


3.6
%Expected volatility


26.4
%


22.6
%Expected term (years)


6.0



5.8Weighted-average estimate of fair
    value of options converted

$
20.96


$
8.63   Restricted Stock Awards and Stock Opportunity
    Grants
  Number of


FairShares


Value(1)Balance at December 31, 2005


321,790


$
13.77Awards issued (including those
    converted from Kerr-McGee awards)


660,210



12.98Awards forfeited


(37,534
)


13.22Awards earned (due to retirements)


(6,086
)


12.22Balance at December 31, 2006


938,380


$
13.25Vested at December 31, 2006


Outstanding awards expected to vest


881,889


$
13.19  F-46




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    (1)
    
    Represents the weighted-average
    grant-date fair value.  Valuation and cost attribution
    method.
  17.
    Contingencies    Reserves forReserves for


Environmental


ReimbursementsLitigation(1)


Remediation(2)


Receivable(3)(Millions of dollars)Balance at December 31, 2003

$
5.8


$
219.6


$
130.1Provisions / Accruals


0.2



81.4



14.2Payments / Settlements


(3.4
)


(85.2
)


(50.5
)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


$
71.4     (1)
    
    Provisions for litigation in 2004,
    2005 and 2006 include nil, $8.7 million and
    $4.0 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 2004, 2005 and 2006 include
    $75.7 million, $29.9 million and $55.8 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 2004, 2005 and 2006 include
    $14.2 million, $12.3 million and $32.1 million,
    respectively, related to the companys former forest
    products operations 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).   F-47




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
     
    Some sites are in the early stages of investigation, and other
    sites may be identified in the future.
    Remediation activities vary significantly in duration, scope and
    cost from site to site depending on the mix of unique site
    characteristics, applicable technologies and regulatory agencies
    involved.
    Remediation requirements are difficult to predict at sites where
    remedial investigations have not been completed or final
    decisions have not been made regarding remediation requirements,
    technologies or other factors that bear on remediation costs.
    Environmental laws frequently impose joint, 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
    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 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
    Environmental
  Henderson,
    Nevada
   F-48




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
        Financial Reserves  
  Litigation
  Insurance 10-year, clean-up clean-up clean-up
 F-49




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
   clean-up
  West
    Chicago, Illinois
    Closed Facility
  Vicinity Areas clean-up
  Financial Reserves
  Government Reimbursement clean-up clean-up
  clean-up
 F-50




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    Ambrosia
    Lake, New Mexico
  and/or
    Financial Reserves
  Litigation
  Crescent,
    Oklahoma
   F-51




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    Financial Reserves
  New
    Jersey Wood-Treatment Site
    Financial Reserves
  Reimbursement
  Sauget,
    Illinois
  60-acre
  Financial Reserves
 F-52




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
   Cleveland,
    Oklahoma
  on-site
  Financial Reserves
  Cushing,
    Oklahoma
          Financial Reserves
  Jacksonville,
    Florida
    Financial Reserves clean-up
 F-53




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
   Other
    Sites
    Master
    Separation Agreement
        Litigation
    and Claims
  Western
    Fertilizer Contract
   F-54




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    Financial Reserves
  Birmingham,
    Alabama
    Forest
    Products Litigation
  and/or and/or
       F-55




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    Financial Reserves
  Kemira
  2
  Savannah
    Plant
    Other
    Matters
  and/or and/or clean-up and/or
 F-56




---



##### 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

2007


2008


2009


2010


2011


2011


Total(Millions of dollars)Operating leases

$
9.8


$
9.1


$
8.2


$
7.0


$
6.1


$
17.7


$
57.9Purchase obligations Ore contracts


185.8



169.1



112.0



52.0



29.5



18.4



566.8Other purchase obligations


110.4



98.0



92.1



74.4



11.1



15.8



401.8Total

$
306.0


$
276.2


$
212.3


$
133.4


$
46.7


$
51.9


$
1,026.5     Letters
    of Credit and Other
  clean-up
    19.
    Summarized
    Combined Financial Information of Affiliates   F-57




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
    At December 31,2006


2005(1)(Millions of dollars)Current assets

$
37.7


$
34.4Noncurrent assets


72.0



72.2Current liabilities


9.8



16.0Noncurrent liabilities


31.4



33.8   For the Years Ended December 31,2006


2005(1)


2004(1)(Millions of dollars)Gross revenues

$
39.3


$
21.2


$
28.8Gross profit


32.4



15.3



17.1Income before taxes


25.2



7.0



8.6Net income


21.2



5.9



7.8     (1)
    
    Unaudited  20.
    Reporting
    by Business Segment and Geographic Locations  2
  F-58




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  2006


2005


2004(Millions of dollars)Net SalesPigment

$
1,310.1


$
1,267.0


$
1,208.4Electrolytic and other chemical
    products


101.5



97.0



93.4Total

$
1,411.6


$
1,364.0


$
1,301.8Operating Profit
    (Loss)Pigment(1)

$
77.9


$
101.5


$
(86.5
)Electrolytic and other chemical
    products(2)


25.3



(5.9
)


(0.6
)103.2



95.6



(87.1
)Corporate and nonoperating sites(3)


(18.6
)


(2.1
)


(5.5
)Provisions for environmental
    remediation and restoration(4)






(5.6
)


(2.2
)Total operating profit (loss)


84.6



87.9



(94.8
)Interest and debt expense


50.4



4.5



0.1Other income (expense)(5)


13.9



(15.2
)


(25.2
)Income tax benefit (provision)


(23.1
)


(21.8
)


38.3Income (loss) from continuing
    operations

$
25.0


$
46.4


$
(81.8
)Depreciation, Depletion and
    Amortization, Including Write-Downs of Property, Plant and
    EquipmentPigment

$
95.5


$
99.1


$
181.3Electrolytic and other chemical
    products


7.5



9.9



14.5103.0



109.0



195.8Discontinued operations










0.8Total

$
103.0


$
109.0


$
196.6     (1)
    
    Includes an arbitiration 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 $20.4 million,
    $(10.3) million and nil in 2006, 2005 and 2004,
    respectively, of environmental charges, net of reimbursements,
    related to ammonium perchlorate at the companys Henderson
    facility.(3)
    
    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 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.(5)
    
    Includes equity in net earnings of
    equity method investees of $6.3 million, $2.0 million
    and $2.4 million in 2006, 2005 and 2004, respectively. The
    years 2005 and 2004 include interest expense allocated to us by
    Kerr-McGee based on specifically identified borrowings from
    Kerr-McGee at Kerr-McGees average borrowing rates.  F-59




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  2006


2005


2004(Millions of dollars)Capital ExpendituresPigment

$
74.6


$
83.5


$
82.8Electrolytic and other chemical
    products


4.8



4.1



9.079.4



87.6



91.8Other


0.1







0.7Total

$
79.5


$
87.6


$
92.5Total AssetsPigment

$
1,539.7


$
1,514.2


$
1,349.8Electrolytic and other chemical
    products


125.5



108.3



115.41,665.2



1,622.5



1,465.2Corporate and nonoperating sites


158.2



135.8



127.3Assets held for sale










3.4Total

$
1,823.4


$
1,758.3


$
1,595.9Net
    Sales(1)U.S. operations

$
751.4


$
755.9


$
716.8International operationsGermany


245.4



223.5



221.9The Netherlands


170.9



145.6



137.5Australia


243.8



238.9



225.5Other


0.1



0.1



0.1Total

$
1,411.6


$
1,364.0


$
1,301.8Net Property, Plant and
    EquipmentU.S. operations

$
456.6


$
475.8


$
487.3International operationsGermany


114.5



92.4



97.1The Netherlands


196.0



182.1



205.6Australia


97.5



89.4



93.0Total

$
864.6


$
839.7


$
883.0     (1)
    
    Based on country of production.  21.
    Condensed
    Consolidating and Combining Financial Information   F-60




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
         Condensed
    and Consolidating Statement of Income for the Year Ended
    December 31, 2006
  Tronox





Guarantor


Non-GuarantorIncorporated


Issuers


Subsidiaries


Subsidiaries


Eliminations


Consolidated(Millions of dollars)Net Sales

$



$



$
764.0


$
763.4


$
(115.8
)

$
1,411.6Cost of goods sold










654.2



700.2



(109.7
)


1,244.7Gross Margin










109.8



63.2



(6.1
)


166.9Selling, general and
    administrative expenses


2.5



0.5



70.2



51.2



(5.7
)


118.7Restructuring charges










(7.1
)










(7.1
)Arbitration award received










(8.9
)










(8.9
)Provision for environmental
    remediation and restoration, net of reimbursements










(20.4
)










(20.4
)(2.5
)


(0.5
)


76.0



12.0



(0.4
)


84.6Interest and debt expense






(51.0
)






0.6







(50.4
)Other income (expense)


1.4



46.9



(8.7
)


4.6



(30.3
)


13.9Income (Loss) from Continuing
    Operations before Income Taxes


(1.1
)


(4.6
)


67.3



17.2



(30.7
)


48.1Income tax benefit (provision)


0.9



7.6



(18.8
)


(12.8
)






(23.1
)Income (Loss) from Continuing
    Operations


(0.2
)


3.0



48.5



4.4



(30.7
)


25.0Loss from discontinued operations,
    net of taxes






(1.6
)


(23.6
)










(25.2
)Net Income (Loss)

$
(0.2
)

$
1.4


$
24.9


$
4.4


$
(30.7
)

$
(0.2
)  F-61




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Condensed
    Consolidating Statement of Operations for the Year Ended
    December 31, 2005
  Tronox





Guarantor


Non-GuarantorIncorporated


Issuers


Subsidiaries


Subsidiaries


Eliminations


Consolidated(Millions of dollars)Net Sales

$



$



$
767.1


$
721.5


$
(124.6
)

$
1,364.0Cost of goods sold










624.6



639.3



(120.1
)


1,143.8Gross Margin










142.5



82.2



(4.5
)


220.2Selling, general and
    administrative expenses


0.2



0.5



56.7



64.3



(6.5
)


115.2Provision for environmental
    remediation and restoration, net of reimbursements










17.1











17.1(0.2
)


(0.5
)


68.7



17.9



2.0



87.9Interest and debt expense






(4.5
)














(4.5
)Other income (expense)


(0.7
)


162.4



141.0



(2.1
)


(315.8
)


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


(0.9
)


157.4



209.7



15.8



(313.8
)


68.2Income tax benefit (provision)


(0.1
)


2.7



(24.4
)










(21.8
)Income (Loss) from Continuing
    Operations


(1.0
)


160.1



185.3



15.8



(313.8
)


46.4Loss from discontinued operations,
    net of taxes






(3.3
)


(24.3
)










(27.6
)Net Income (Loss)

$
(1.0
)

$
156.8


$
161.0


$
15.8


$
(313.8
)

$
18.8  F-62




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Condensed
    Consolidating Statement of Operations for the Year Ended
    December 31, 2004
  Guarantor


Non-GuarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


Consolidated(Millions of dollars)Net Sales

$



$
731.2


$
711.7


$
(141.1
)

$
1,301.8Cost of goods sold






674.7



629.3



(135.1
)


1,168.9Gross Margin






56.5



82.4



(6.0
)


132.9Selling, general and
    administrative expenses


4.2



57.7



58.0



(9.8
)


110.1Restructuring charges






113.0











113.0Provision for environmental
    remediation and restoration, net of reimbursements






4.6











4.6(4.2
)


(118.8
)


24.4



3.8



(94.8
)Interest and debt expense










(0.1
)






(0.1
)Other income (expense)


(101.9
)


12.8



(11.5
)


75.4



(25.2
)Income (Loss) from Continuing
    Operations before Income Taxes


(106.1
)


(106.0
)


12.8



79.2



(120.1
)Income tax benefit (provision)


0.8



45.3



(7.8
)






38.3Income (Loss) from Continuing
    Operations


(105.3
)


(60.7
)


5.0



79.2



(81.8
)Loss from Discontinued Operations,
    net of taxes


(5.5
)


(40.3
)










(45.8
)Net Income (Loss)

$
(110.8
)

$
(101.0
)

$
5.0


$
79.2


$
(127.6
)  F-63




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Condensed
    Consolidating Balance Sheet as of December 31,
    2006
  Tronox





Guarantor


Non-GuarantorIncorporated


Issuers


Subsidiaries


Subsidiaries


Eliminations


Consolidated(Millions of dollars)ASSETSCurrent AssetsCash and cash equivalents

$



$



$
24.4


$
52.2


$



$
76.6Intercompany receivables










41.3



11.6



(52.9
)


Accounts receivable, net of
    allowance for doubtful accounts


0.5



0.2



152.0



174.3



(1.4
)


325.6Inventories










201.8



118.9



(1.5
)


319.2Prepaid and other assets


1.1



0.1



3.3



10.7







15.2Income tax receivable










5.3



8.6







13.9Deferred income taxes






12.3



38.5



1.9



(9.1
)


43.6Total Current Assets


1.6



12.6



466.6



378.2



(64.9
)


794.1Property, Plant and
    Equipment  Net






9.8



446.7



408.1







864.6Investments in
    Subsidiaries


2,231.9



1,007.8



176.2







(3,415.9
)


Long-Term Receivables,
    Investments and Other Assets


81.2



11.5



59.5







(51.6
)


100.6Goodwill and Other Intangible
    Assets










28.2



35.9







64.1Total Assets

$
2,314.7


$
1,041.7


$
1,177.2


$
822.2


$
(3,532.4
)

$
1,823.4LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent LiabilitiesIntercompany borrowings

$
535.5


$



$
51.4


$
249.7


$
(836.6
)

$
Accounts payable






7.2



86.8



115.6



(1.4
)


208.2Accrued liabilities and other


15.4



14.0



123.1



28.9



6.0



187.4Long-term debt due within one year






13.0







1.7







14.7Income taxes payable














1.6







1.6Total Current
    Liabilities


550.9



34.2



261.3



397.5



(832.0
)


411.9Noncurrent
    LiabilitiesDeferred income taxes










62.0



32.3



(60.7
)


33.6Environmental remediation
    and/or
    restoration






2.4



126.2











128.6Long-term debt






526.9







7.2







534.1Other


145.7



8.1



42.3



81.6



0.2



277.9Total Noncurrent
    Liabilities


145.7



537.4



230.5



121.1



(60.5
)


974.2Total Stockholders
    Equity


1,618.1



470.1



685.4



303.6



(2,639.9
)


437.3Total Liabilities and
    Stockholders Equity

$
2,314.7


$
1,041.7


$
1,177.2


$
822.2


$
(3,532.4
)

$
1,823.4  F-64




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Condensed
    Consolidating Balance Sheet as of December 31,
    2005
  Tronox





Guarantor


Non-GuarantorIncorporated


Issuers


Subsidiaries


Subsidiaries


Eliminations


Consolidated(Millions of dollars)ASSETSCurrent AssetsCash and cash equivalents

$



$



$
23.8


$
45.2


$



$
69.0Intercompany receivables










53.0



11.4



(64.4
)


Accounts receivable, net of
    allowance for doubtful accounts


0.8







173.9



156.9







331.6Inventories










192.2



121.3



(1.2
)


312.3Prepaid and other assets


0.8







12.8



14.9







28.5Income tax receivable














2.4







2.4Deferred income taxes






8.4



26.6



3.1



(2.5
)


35.6Total Current Assets


1.6



8.4



482.3



355.2



(68.1
)


779.4Property, Plant and
    Equipment  Net










475.8



363.9







839.7Investments in
    Subsidiaries


2,222.4



996.8



203.5







(3,422.7
)


Long-Term Receivables,
    Investments and Other Assets






13.2



53.9



11.7







78.8Goodwill and Other Intangible
    Assets










28.2



32.2







60.4Total Assets

$
2,224.0


$
1,018.4


$
1,243.7


$
763.0


$
(3,490.8
)

$
1,758.3LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent LiabilitiesIntercompany borrowings

$
543.1


$



$
111.5


$
214.7


$
(869.3
)

$
Accounts payable


0.3



2.2



75.4



117.4







195.3Accrued liabilities


2.0



15.8



119.8



31.3







168.9Long-term debt due within one year






2.0















2.0Income taxes payable


2.2







6.3



0.3







8.8Total Current
    Liabilities


547.6



20.0



313.0



363.7



(869.3
)


375.0Noncurrent
    LiabilitiesDeferred income taxes


0.3







54.2



27.0



(2.5
)


79.0Environmental remediation
    and/or
    restoration






17.4



128.5











145.9Long-term debt






548.0















548.0Other






1.2



56.4



66.1



(2.3
)


121.4Total Noncurrent
    Liabilities


0.3



566.6



239.1



93.1



(4.8
)


894.3Total Stockholders
    Equity


1,676.1



431.8



691.6



306.2



(2,616.7
)


489.0Total Liabilities and
    Stockholders Equity

$
2,224.0


$
1,018.4


$
1,243.7


$
763.0


$
(3,490.8
)

$
1,758.3  F-65




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Condensed
    and Consolidating Statement of Cash Flows For the Year Ended
    December 31, 2006
  Tronox





Guarantor


Non-GuarantorIncorporated


Issuers


Subsidiaries


Subsidiaries


Eliminations


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

$
(0.2
)

$
1.4


$
24.9


$
4.4


$
(30.7
)

$
(0.2
)Adjustments to reconcile net
    income (loss) to net cash provided by operating
    activities Depreciation and amortization










57.0



46.0







103.0Deferred income taxes


(2.2
)


2.3



(14.0
)


8.4







(5.5
)Equity in earnings of subsidiaries


(1.4
)


(19.3
)


(9.6
)






30.3



Provision for environmental
    remediation and restoration, net of reimbursements






0.9



2.4











3.3Other noncash items affecting net
    income (loss)


0.1



3.0



17.3



5.3







25.7Changes in assets and liabilities


0.1



(17.5
)


(0.6
)


3.3







(14.7
)Net cash flows from operating
    activities


(3.6
)


(29.2
)


77.4



67.4



(0.4
)


111.6Cash Flows from Investing
    ActivitiesCapital expenditures










(31.1
)


(48.4
)






(79.5
)Other investing activities










4.5











4.5Net cash flows from investing
    activities










(26.6
)


(48.4
)






(75.0
)Cash Flows from Financing
    ActivitiesRepayment of debt






(10.0
)






(1.1
)






(11.1
)Costs of obtaining financing






(2.3
)














(2.3
)Dividends paid


(6.2
)


















(6.2
)Net transfers with affiliates


9.8



41.5



(50.2
)


(1.5
)


0.4



Net cash flows from financing
    activities


3.6



29.2



(50.2
)


(2.6
)


0.4



(19.6
)Effects of Exchange Rate
    Changes on Cash and Cash Equivalents














(9.4
)






(9.4
)Net Increase in Cash and Cash
    Equivalents










0.6



7.0







7.6Cash and Cash Equivalents at
    Beginning of Year










23.8



45.2







69.0Cash and Cash Equivalents at
    End of Year

$



$



$
24.4


$
52.2


$



$
76.6  F-66




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Condensed
    and Consolidating Statement of Cash Flows For the Year Ended
    December 31, 2005
  Tronox





Guarantor


Non-GuarantorIncorporated


Issuers


Subsidiaries


Subsidiaries


Eliminations


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

$
(1.0
)

$
156.8


$
161.0


$
15.8


$
(313.8
)

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










57.5



45.6







103.1Deferred income taxes










(25.4
)


(6.5
)






(31.9
)Asset write-downs and impairments






1.3



11.0











12.3Equity in earnings of subsidiaries


0.7



(160.3
)


(25.2
)






184.8



Provision for environmental
    remediation and restoration, net of reimbursements






3.8



30.9











34.7Allocations from Kerr-McGee






0.5



51.0



(3.5
)






48.0Other noncash items affecting net
    income (loss)






0.3



15.9



16.9







33.1Changes in assets and liabilities


(1.6
)


(11.0
)


(43.6
)


(100.3
)


(0.1
)


(156.6
)Net cash flows from operating
    activities


(1.9
)


(8.6
)


233.1



(32.0
)


(129.1
)


61.5Cash Flows from Investing
    ActivitiesCapital expenditures










(36.8
)


(50.8
)






(87.6
)Collection on repurchased
    receivables










70.3



94.7







165.0Other investing activities










4.4



1.5







5.9Net cash flows from investing
    activities










37.9



45.4







83.3Cash Flows from Financing
    ActivitiesIssuance of common stock, net


226.0



















226.0Proceeds from borrowings






550.0















550.0Costs of obtaining financing






(10.9
)














(10.9
)Distributions to Kerr-McGee


(761.8
)


















(761.8
)Net transfers with affiliates


537.7



(530.5
)


(252.0
)


9.1



129.1



(106.6
)Net cash flows from financing
    activities


1.9



8.6



(252.0
)


9.1



129.1



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














3.7







3.7Net Increase in Cash and Cash
    Equivalents










19.0



26.2







45.2Cash and Cash Equivalents at
    Beginning of Year










4.8



19.0







23.8Cash and Cash Equivalents at
    End of Year

$



$



$
23.8


$
45.2


$



$
69.0  F-67




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  Condensed
    and Consolidating Statement of Cash Flows For the Year Ended
    December 31, 2004
  Guarantor


Non-GuarantorIssuer


Subsidiaries


Subsidiaries


Eliminations


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

$
(110.8
)

$
(101.0
)

$
5.0


$
79.2


$
(127.6
)Adjustments to reconcile net
    income (loss) to net cash provided by operating
    activities Depreciation and amortization






57.3



47.3







104.6Deferred income taxes


(0.8
)


(29.4
)


(8.0
)






(38.2
)Asset write-downs and impairments


3.9



118.5











122.4Equity in earnings of subsidiaries


101.5



(26.1
)






(75.4
)


Provision for environmental
    remediation and restoration, net of reimbursements


8.7



57.4











66.1Allocations from Kerr-McGee


0.4



51.7



3.0







55.1Other noncash items affecting net
    income (loss)


0.2



24.8



12.9







37.9Changes in assets and liabilities


(13.5
)


(19.3
)


3.3







(29.5
)Net cash flows from operating
    activities


(10.4
)


133.9



63.5



3.8



190.8Cash Flows from Investing
    ActivitiesCapital expenditures






(46.8
)


(45.7
)






(92.5
)Other investing activities






1.1











1.1Net cash flows from investing
    activities






(45.7
)


(45.7
)






(91.4
)Cash Flows from Financing
    ActivitiesNet transfers with affiliates


10.4



(86.5
)


(51.2
)


(3.8
)


(131.1
)Net cash flows from financing
    activities


10.4



(86.5
)


(51.2
)


(3.8
)


(131.1
)Effects of Exchange Rate
    Changes on Cash and Cash Equivalents










(3.8
)






(3.8
)Net Increase (Decrease) in Cash
    and Cash Equivalents






1.7



(37.2
)






(35.5
)Cash and Cash Equivalents at
    Beginning of Year






3.1



56.2







59.3Cash and Cash Equivalents at
    End of Year

$



$
4.8


$
19.0


$



$
23.8  F-68




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
  22.
    Related
    Party Transactions    2 2
    23.
    Subsequent
    Events  2 2
 F-69




---



##### Table of Contents



TRONOX
    INCORPORATED
  Notes to
    Consolidated and Combined Financial
    Statements  (Continued)
   24.
    Quarterly
    Financial Information (Unaudited)    Income(Loss) from





Income (Loss) from ContinuingNet


Gross


Continuing


Net Income


Operations per Common ShareSales


Profit


Operations


(Loss)


Basic


Diluted(Millions of dollars, except per share)2006 Quarter Ended March 31

$
336.2


$
60.2


$
23.6


$
20.6


$
0.58


$
0.58June 30


372.9



31.0



(5.7
)


(14.4
)


(0.14
)


(0.14
)September 30


376.2



42.1



(0.7
)


(14.0
)


(0.02
)


(0.02
)December 31


326.3



33.6



7.8



7.6



0.19



0.19Total

$
1,411.6


$
166.9


$
25.0


$
(0.2
)

$
0.62


$
0.612005 Quarter Ended March 31

$
334.2


$
61.9


$
12.4


$
4.0


$
0.54


$
0.54June 30


355.9



64.3



8.3



(3.6
)


0.36



0.36September 30


327.4



43.7



13.7



12.2



0.60



0.60December 31


346.5



50.3



12.0



6.2



0.41



0.41Total

$
1,364.0


$
220.2


$
46.4


$
18.8


$
1.89


$
1.89   Significant
    Fourth Quarter 2006 Transactions
    
    Restructuring charges of $7.1 million (pretax) resulted
    from updating our estimates of closure costs related to our
    former Mobile, Alabama, synthetic rutile facility and the former
    Savannah, Georgia, sulfate facility.
    An award by the London Court of International Arbitration
    resulted in the receipt of $8.9 million from Kemira Oyj
    (Kemira).
    In 2006, the company recorded a pretax provision of
    $5 million representing taxes and interest associated with
    an assessment of Mississippi franchise tax related to the audit
    of Kerr-McGee Worldwide Corporation covering tax years 2002
    through 2004. Under the tax sharing agreement with Kerr-McGee
    dated November 28, 2005, Tronox is the controlling party
    for any Mississippi audit being conducted of Kerr-McGee
    Worldwide Corporation and would be potentially liable for the
    entire assessment. Although, Tronox believes that appropriate
    tax filings were made during the years under audit, a reserve
    for additional tax and interest of approximately $5 million
    was reflected in the companys financial statements as of
    December 31, 2006. F-70




---



##### 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,
    2006Deducted from asset accountsAllowance for doubtful notes and
    accounts receivable

$
21.3


$
1.7


$
0.3


$
0.6


$
22.7Valuation allowance for deferred
    tax assets


5.8







1.5







7.3Warehouse inventory obsolescence


10.0



1.0



(0.8
)


2.3



7.9Total

$
37.1


$
2.7


$
1.0


$
2.9


$
37.9Year Ended December 31,
    2005Deducted from asset accountsAllowance for doubtful notes and
    accounts receivable

$
19.7


$
2.2


$
(0.3
)

$
0.3


$
21.3Valuation allowance for deferred
    tax assets


6.1



(0.3
)










5.8Warehouse inventory obsolescence


11.8



2.2







4.0



10.0Total

$
37.6


$
4.1


$
(0.3
)

$
4.3


$
37.1Year Ended December 31,
    2004Deducted from asset accountsAllowance for doubtful notes and
    accounts receivable

$
17.8


$
3.5


$
(0.1
)

$
1.5


$
19.7Valuation allowance for deferred
    tax assets


5.0



1.1











6.1Warehouse inventory obsolescence


7.3



5.3



0.1



0.9



11.8Total

$
30.1


$
9.9


$



$
2.4


$
37.6     II-1