##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-Q
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT OF 1934
  For the quarterly period ended September 30, 2007
  Commission file number 1-32669
  TRONOX INCORPORATED
 (Exact Name of Registrant as
    Specified in its Charter)
  Delaware

20-2868245(State or Other Jurisdiction
    of

(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
   þ o
  Rule 12b-2
  o þ o
  Rule 12b-2 o þ




---



##### 



Tronox
    Incorporated
  Form 10-Q
  Table of
    Contents
  
  PagePART I  FINANCIAL
    INFORMATIONItem 1.


Financial Statements (Unaudited)Condensed Consolidated Statements of Operations
    for the Three and Nine Months Ended September 30, 2007 and
    2006


1Condensed Consolidated Balance Sheets at
    September 30, 2007, and December 31, 2006


2Condensed Consolidated Statements of Cash Flows
    for the Nine Months Ended September 30, 2007 and 2006


3Notes to Condensed Consolidated Financial
    Statements


4Item 2.


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


27Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


35Item 4.


Controls and Procedures


36PART II  OTHER INFORMATIONItem 1.


Legal Proceedings


36Item 1A.


Risk Factors


38Item 2.


Unregistered Sales of Equity Securities and Use
    of Proceeds


38Item 3.


Defaults Upon Senior Securities


38Item 4.


Submission of Matters to a Vote of Security
    Holders


38Item 5.


Other Information


38Item 6.


Exhibits


38Signatures


39Certification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to Section 906Certification Pursuant to Section 906




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##### Table of Contents



PART I 
    FINANCIAL INFORMATION
  Item 1.
    Financial
    Statements  TRONOX
    INCORPORATED
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    (In millions, except per share data)
    (Unaudited)
  Three Months Ended


Nine Months EndedSeptember 30,


September 30,2007


2006


2007


2006Net sales

$
363.1


$
378.6


$
1,068.7


$
1,093.3Cost of goods sold


332.0



334.6



970.4



953.3Gross margin


31.1



44.0



98.3



140.0Selling, general and administrative expenses


27.3



30.0



92.3



96.0Restructuring charges


9.6







9.6



Provision for environmental remediation and restoration, net of
    reimbursements


1.3



0.1



3.0



(20.4
)(7.1
)


13.9



(6.6
)


64.4Interest and debt expense


(12.8
)


(12.6
)


(37.5
)


(36.9
)Other income, net


1.7



0.8



4.1



10.5Income (loss) from continuing operations before income
    taxes


(18.2
)


2.1



(40.0
)


38.0Income tax provision


(0.5
)


(2.8
)


(7.7
)


(20.8
)Income (loss) from continuing operations


(18.7
)


(0.7
)


(47.7
)


17.2Loss from discontinued operations, net of income tax benefit of
    $0.1, $7.8, $1.1 and $14.7, respectively


(0.4
)


(13.3
)


(2.0
)


(25.0
)Net loss

$
(19.1
)

$
(14.0
)

$
(49.7
)

$
(7.8
)Income (loss) per common share:Basic Continuing operations

$
(0.46
)

$
(0.02
)

$
(1.17
)

$
0.43Discontinued operations


(0.01
)


(0.33
)


(0.05
)


(0.62
)Net loss

$
(0.47
)

$
(0.35
)

$
(1.22
)

$
(0.19
)Diluted Continuing operations

$
(0.46
)

$
(0.02
)

$
(1.17
)

$
0.42Discontinued operations


(0.01
)


(0.33
)


(0.05
)


(0.61
)Net loss

$
(0.47
)

$
(0.35
)

$
(1.22
)

$
(0.19
)Dividends declared per common share

$
0.05


$
0.05


$
0.10


$
0.10Weighted average shares outstanding:Basic


40.7



40.4



40.7



40.4Diluted


40.7



40.4



40.7



40.9    1




---



##### Table of Contents



TRONOX
    INCORPORATED
    CONDENSED CONSOLIDATED BALANCE SHEETS
    (In millions, except share data)
    (Unaudited)
  September 30,


December 31,2007


2006ASSETSCurrent assets:Cash and cash equivalents

$
64.9


$
76.6Accounts receivable, net


287.6



325.6Inventories, net


325.1



319.2Prepaid and other assets


19.1



15.2Income tax receivable


4.4



13.9Deferred income taxes


35.0



43.6Total current assets


736.1



794.1Property, plant and equipment, net


855.1



864.6Goodwill


12.4



11.5Other long-term assets


144.7



153.2Total assets

$
1,748.3


$
1,823.4LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
180.9


$
183.6Accrued liabilities


223.0



212.0Long-term debt due within one year


2.3



14.7Income taxes payable


2.5



1.6Total current liabilities


408.7



411.9Long-term liabilities:Deferred income taxes


48.0



33.6Environmental remediation and/or restoration


100.2



128.6Long-term debt


503.0



534.1Other long-term liabilities


226.4



277.9Total long-term liabilities


877.6



974.2Commitments and contingencies (Notes 13 and 14)Stockholders equityClass A common stock, par value $0.01 
    100,000,000 shares authorized, 18,744,905 and
    18,388,202 shares, respectively, issued and outstanding


0.2



0.2Class B common stock, par value $0.01 
    100,000,000 shares authorized, 22,889,431 shares
    issued and outstanding


0.2



0.2Capital in excess of par value


489.3



481.6Accumulated deficit


(76.0
)


(12.8
)Accumulated other comprehensive income (loss)


51.1



(31.4
)Treasury stock, at cost  192,674 shares and
    33,533 shares, respectively


(2.8
)


(0.5
)Total stockholders equity


462.0



437.3Total liabilities and stockholders equity

$
1,748.3


$
1,823.4    2




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##### Table of Contents



TRONOX
    INCORPORATED
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In millions)
    (Unaudited)
  Nine Months EndedSeptember 30,2007


2006Cash flows from operating activitiesNet loss

$
(49.7
)

$
(7.8
)Adjustments to reconcile net cash flows from operating
    activities Depreciation and amortization


82.8



74.4Deferred income taxes


(1.6
)


(9.3
)Provision for environmental remediation and restoration, net of
    reimbursements


2.1



7.6Other noncash items affecting net loss


30.7



24.2Changes in assets and liabilities


32.1



(26.2
)Net cash flows from operating activities


96.4



62.9Cash flows from investing activitiesCapital expenditures


(51.5
)


(61.3
)Other investing activities


1.0



1.5Net cash flows from investing activities


(50.5
)


(59.8
)Cash flows from financing activitiesRepayment of debt


(44.6
)


(2.6
)Debt issuance costs


(0.3
)


(2.3
)Stock option exercises


1.6



Dividends paid


(6.2
)


(4.1
)Net cash flows from financing activities


(49.5
)


(9.0
)Effects of exchange rate changes on cash and cash
    equivalents


(8.1
)


(6.9
)Net change in cash and cash equivalents


(11.7
)


(12.8
)Cash and cash equivalents at beginning of period


76.6



69.0Cash and cash equivalents at end of period

$
64.9


$
56.2    3




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##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS
  1.
    The
    Company  2
    Formation
        2.
    Basis of
    Presentation and Accounting Policies  Form 10-K
    
    Sales rebates, previously presented with accounts payable, are
    now presented with accrued liabilities in the companys
    Condensed Consolidated Balance Sheets. 4




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##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    Vendor commissions, previously a reduction of net sales, have
    been reclassified as selling, general and administrative
    expenses. The increase in net sales and selling, general and
    administrative expenses for the three and nine-month periods
    ending September 30, 2006, were $1.0 million and
    $2.9 million, respectively.
    Reimbursements for out-of-pocket selling expenses previously
    accounted for as a reduction of selling, general and
    administrative expenses have been reclassified as net sales. The
    increase in net sales and selling, general and administrative
    expenses for the three and nine-month periods ending
    September 30, 2006, were $1.3 million and
    $5.1 million, respectively.
    Railcar expenses previously accounted for as selling, general
    and administrative expenses have been reclassified as cost of
    goods sold. The increase in cost of goods sold and corresponding
    decrease in selling, general and administrative expenses for the
    three and nine-month periods ending September 30, 2006,
    were $0.5 million and $1.3 million, respectively.  Employers Accounting
    for Defined Benefit Pension and Other Postretirement Plans Form 10-K Form 10-K
  Accounting for Uncertainty in Income Taxes, an interpretation
    of FASB Statement No. 109, Accounting for Income Taxes
  Fair Value Measurements
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities  including an Amendment of FASB Statement
    No. 115 Accounting for Certain Investments in Debt
    and Equity Securities
 5




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##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  3.
    Statement
    of Operations Data    Three Months


Nine MonthsEnded


EndedSeptember 30,


September 30,2007


2006


2007


2006(In millions)Net foreign currency transaction gain (loss)

$
2.2


$
(1.2
)

$
0.7


$
6.9Equity in net earnings (loss) of equity method investees


(0.1
)


1.3



1.9



6.0Provision for litigation settlements














(3.7
)Interest income


0.4



0.5



1.7



1.8Loss on sale of accounts receivable


(0.7
)






(0.7
)


Other income (expense)


(0.1
)


0.2



0.5



(0.5
)Total

$
1.7


$
0.8


$
4.1


$
10.5     Three Months Ended


Three Months EndedSeptember 30, 2007


September 30, 2006Loss from








Loss fromContinuing





Per-Share


Continuing





Per-ShareOperations


Shares


Loss


Operations


Shares


Loss(In millions, except per share amounts)Basic earnings per share

$
(18.7
)


40.7


$
(0.46
)

$
(0.7
)


40.4


$
(0.02
)Effect of dilutive securities:Restricted stock and stock options






















Diluted earnings per share

$
(18.7
)


40.7


$
(0.46
)

$
(0.7
)


40.4


$
(0.02
)   Nine Months Ended


Nine Months EndedSeptember 30, 2007


September 30, 2006Loss from








Income fromContinuing





Per-Share


Continuing





Per-ShareOperations


Shares


Loss


Operations


Shares


Income(In millions, except per share amounts)Basic earnings per share

$
(47.7
)


40.7


$
(1.17
)

$
17.2



40.4


$
0.43Effect of dilutive securities:Restricted stock and stock options


















0.5



(0.01
)Diluted earnings per share

$
(47.7
)


40.7


$
(1.17
)

$
17.2



40.9


$
0.42    6




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##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  4.
    Balance
    Sheet Data    September 30,


December 31,2007


2006(In millions)Accounts receivable  trade (1)

$
239.8


$
281.1Receivable from Kerr-McGee


17.8



17.5Receivable from the U.S. Department of Energy


11.0



11.0Receivable from insurers


8.3



7.4Other


24.8



21.3Accounts receivable, gross


301.7



338.3Allowance for doubtful accounts


(14.1
)


(12.7
)Accounts receivable, net

$
287.6


$
325.6     (1)
    
    Includes $39.8 million
    subordinated retained interest related to the accounts
    receivable securitization program discussed below.  Receivables securitization
     7




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##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      September 30,


December 31,2007


2006(In millions)Raw materials

$
59.1


$
67.5Work-in-progress


13.4



13.4Finished goods


188.0



174.8Materials and supplies


72.7



71.4Inventories, gross


333.2



327.1Allowance for obsolescence on materials and supplies


(8.1
)


(7.9
)Inventories, net

$
325.1


$
319.2     September 30,


December 31,2007


2006(In millions)Land

$
72.1


$
72.2Buildings


165.6



159.4Machinery and equipment (1)


1,851.6



1,812.2Other (1)


85.9



87.1Property, plant and equipment, gross


2,175.2



2,130.9Less accumulated depreciation


(1,320.1
)


(1,266.3
)Property, plant and equipment, net

$
855.1


$
864.6     (1)
    
    Balances at December 31, 2006,
    include a reclassification of $16.6 million of construction
    in process related to the companys European operations
    from Other to Machinery and equipment to be consistent with the
    current year presentation.    September 30,


December 31,2007


2006(In millions)Investments in equity method investees

$
22.6


$
21.1Receivable from the U.S. Department of Energy


13.1



15.9Receivables from insurers


14.9



19.6Debt issuance costs, net


9.1



11.0Prepaid pension cost


23.0



25.3Intangible asset  proprietary technology (1)


54.5



52.6Other


7.5



7.7Total other long-term assets

$
144.7


$
153.2     (1)
    
    Associated with the companys
    reportable pigment segment. 8




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##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     September 30,


December 31,2007


2006(In millions)Reserves for environmental remediation and
    restoration  current portion

$
103.4


$
95.3Employee-related costs and benefits


40.9



37.2Sales rebates


21.2



24.7Other


57.5



54.8Total accrued liabilities

$
223.0


$
212.0     September 30,


December 31,2007


2006(In millions)Reserve for uncertain tax positions

$
69.5


$
Reserve for income taxes payable






45.5Pension and postretirement obligations (1)


84.4



167.5Asset retirement obligations


24.7



23.6Reserve for workers compensation and general liability
    claims


16.3



18.8Other


31.5



22.5Total other long-term liabilities

$
226.4


$
277.9     (1)
    
    The companys postretirement
    obligation was remeasured and reduced in the third quarter of
    2007 in connection with the plan changes announced in August and
    described in Note 11.  5.
    Summarized
    Combined Financial Information of Affiliates    Three Months


Nine MonthsEnded


EndedSeptember 30,


September 30,2007


2006


2007


2006(In millions)Gross revenues

$
2.7


$
7.9


$
19.5


$
35.2Gross profit


1.7



6.9



14.5



29.5Income (loss) before taxes


(0.1
)


5.5



9.3



24.5Net income (loss)


(0.2
)


4.2



7.9



20.1   6.
    Work
    Force Reduction   9




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##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    7.
    Long-Term
    Debt      and/or
  1 2
 10




---



##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  8.
    Comprehensive
    Income (Loss)    Three Months


Nine MonthsEnded


EndedSeptember 30,


September 30,2007


2006


2007


2006(In millions)Net loss

$
(19.1
)

$
(14.0
)

$
(49.7
)

$
(7.8
)After tax changes in:Foreign currency translation adjustments


14.2



(2.7
)


21.1



18.7Cash flow hedge activity:Unrealized gain (loss)


(0.9
)


(1.0
)


(0.5
)


(2.6
)Reclassification adjustments


0.6



0.7



1.4



1.0Benefit plan activity:Amortization of net actuarial loss


0.8







2.5



Amortization of net prior service cost


(0.5
)










Postretirement plan changes (1)


58.0







58.0



Minimum pension liability adjustment














(1.1
)Total comprehensive income (loss)

$
53.1


$
(17.0
)

$
32.8


$
8.2     (1)
    
    The companys postretirement
    obligation was remeasured and reduced in the third quarter of
    2007 in connection with the plan changes announced in August and
    described in Note 11.  9.
    Income
    Taxes    Three Months


Nine MonthsEnded


EndedSeptember 30,


September 30,2007


2006


2007


2006U.S. statutory tax rate


35.0
%


35.0
%


35.0
%


35.0
%Increases (decreases) resulting from Taxation of foreign operations


(20.5
)


48.6



(33.0
)


14.6Adjustment of deferred tax balances due to tax rate changes


3.7







1.7



Valuation allowances established


(38.3
)






(17.4
)


State income taxes


1.4



(20.8
)


(0.5
)


(0.4
)Permanent adjustments






74.2







3.0Prior-year accrual adjustments


0.9



(20.2
)


0.4



Interest on foreign tax contingency


0.3



7.1







1.6Changes in unrecognized tax benefits


13.0







(5.1
)


Other  net


1.8



9.4



(0.4
)


0.9Effective income tax rate


(2.7
)%


133.3
%


(19.3
)%


54.7
%    11




---



##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
               12




---



##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  10.
    Discontinued
    Operations    Three Months Ended


Nine Months EndedSeptember 30,


September 30,2007


2006


2007


2006(In millions)Environmental provisions (reimbursements) (1)

$
(1.2
)

$
17.8


$
(0.9
)

$
28.0Litigation provisions, legal and other costs (1)


1.7



3.3



4.0



11.7Total pretax loss


0.5



21.1



3.1



39.7Tax benefit


(0.1
)


(7.8
)


(1.1
)


(14.7
)Total after-tax loss

$
0.4


$
13.3


$
2.0


$
25.0     (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.  11.
    Retirement
    Plans    Retirement


PostretirementPlans


PlansThree Months Ended September 30,2007


2006


2007


2006(In millions)Service cost

$
2.9


$
2.7


$
0.5


$
0.3Interest cost


7.0



7.1



1.0



2.1Expected return on plan assets


(9.9
)


(10.0
)






Net amortization Prior service cost (credit)


0.7



0.7



(1.4
)


(0.2
)Net actuarial loss


0.9



0.5



0.2



0.4Sub-total net periodic cost


1.6



1.0



0.3



2.6Special termination benefits (1)


5.7











Total retirement expense

$
7.3


$
1.0


$
0.3


$
2.6     (1)
    
    The 2007 special termination
    benefits are associated with the work force reduction program
    announced by the company and discussed in Note 6.  13




---



##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Retirement


PostretirementPlans


PlansNine Months Ended September 30,2007


2006


2007


2006(In millions)Service cost

$
8.8


$
5.8


$
1.3


$
0.7Interest cost


21.1



14.7



5.2



4.2Expected return on plan assets


(29.6
)


(20.4
)






Net amortization Prior service cost (credit)


2.1



1.4



(2.0
)


(0.5
)Net actuarial loss


2.6



1.1



1.1



0.8Sub-total net periodic cost


5.0



2.6



5.6



5.2Special termination benefits (1)


5.7











Allocated benefit plan expense from Kerr-McGee






0.7







2.6Total retirement expense

$
10.7


$
3.3


$
5.6


$
7.8     (1)
    
    The 2007 special termination
    benefits are associated with the work force reduction program
    announced by the company and discussed in Note 6.        12.
    Employee
    Stock-Based Compensation   14




---



##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      January 2007AssumptionsGrant-date share price

$
15.19Exercise price

$
15.19Risk-free interest rate


4.67
%Expected dividend yield


1.32
%Expected volatility


36
%Expected life (years)


6.4Per-unit
    fair value of options granted

$
5.89      15




---



##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  13.
    Contingencies    Reserves forReserves for


Environmental


ReimbursementsLitigation


Remediation(1)


Receivable(2)(In millions)Balance, December 31, 2006

$
15.0


$
223.9


$
71.4Provisions/accruals


0.5



12.4



10.3Payments/settlements


(3.8
)


(32.7
)


(16.5
)Balance, September 30, 2007

$
11.7


$
203.6


$
65.2     (1)
    
    Provisions for environmental
    remediation and restoration include $8.2 million related to
    the companys former forest products, uranium and nuclear
    operations. These charges are reflected in the Condensed
    Consolidated Statements of Operations as a component of loss
    from discontinued operations (net of taxes).(2)
    
    Accruals for environmental
    remediation and restoration reimbursements include
    $9.1 million related to the companys former thorium
    compounds manufacturing, uranium, nuclear and refining
    operations, which are reflected in the Condensed Consolidated
    Statements of Operations as a component of loss from
    discontinued operations (net of taxes).      
    Some sites are in the early stages of investigation, and other
    sites may be identified in the future.
    Remediation activities vary significantly in duration, scope and
    cost from site to site depending on the mix of unique site
    characteristics, applicable technologies and regulatory agencies
    involved.
    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 and 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 cleanup costs.
    Environmental laws and regulations, as well as enforcement
    policies and cleanup levels, are continually changing, and the
    outcome of court proceedings, alternative dispute resolution
    proceedings (including mediation) and discussions with
    regulatory agencies are inherently uncertain.
    Unanticipated construction problems and weather conditions can
    hinder the completion of environmental remediation. 16




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##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    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
       17




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##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Financial Reserves 
  Litigation
  Insurance Reimbursement 10-year,
    West
    Chicago, Illinois
    Closed Facility
 18




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##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Vicinity Areas
    Financial Reserves
  Government Reimbursement
    Ambrosia
    Lake, New Mexico
   19




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##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  and/or
    Financial Reserves
  Litigation
  Crescent,
    Oklahoma
    Financial Reserves
 20




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##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  New
    Jersey Wood-Treatment Site
      Financial Reserves
  MSA Reimbursement
  Sauget,
    Illinois
  60-acre
  Financial Reserves
 21




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##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Cleveland,
    Oklahoma
  on-site
  Financial Reserves
  Cushing,
    Oklahoma
          Financial Reserves
  Jacksonville,
    Florida
    Financial Reserves
 22




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##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Columbus,
    Mississippi
    Financial Reserves
  Other
    Sites
    Master
    Separation Agreement
       23




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##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Litigation
    and Claims
  Birmingham,
    Alabama
    Forest
    Products Litigation
  and/or and/or
      May v.
    Tronox Avance v.
    Tronox Jeans v. Tronox
  Financial Reserves
 24




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##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Savannah
    Plant
    Financial Reserves
  Other
    Matters
  and/or and/or and/or
  14.
    Commitments     25




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##### Table of Contents



TRONOX
    INCORPORATED
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   15.
    Reporting
    by Business Segment  2
  Nine MonthsThree Months


EndedEnded September 30,


September 30,2007


2006


2007


2006(In millions)Net salesPigment

$
335.6


$
351.4


$
991.2


$
1,015.0Electrolytic and other chemical products


27.5



27.2



77.5



78.3Total net sales

$
363.1


$
378.6


$
1,068.7


$
1,093.3Operating profit (loss)Pigment

$
8.5


$
15.6


$
19.5


$
51.5Electrolytic and other chemical products (1)


0.2



1.7



(1.4
)


24.88.7



17.3



18.1



76.3Corporate and nonoperating sites


(15.8
)


(3.4
)


(24.7
)


(11.9
)Total operating profit (loss)


(7.1
)


13.9



(6.6
)


64.4Interest and debt expense


(12.8
)


(12.6
)


(37.5
)


(36.9
)Other income, net (2)


1.7



0.8



4.1



10.5Income tax provision


(0.5
)


(2.8
)


(7.7
)


(20.8
)Income (loss) from continuing operations

$
(18.7
)

$
(0.7
)

$
(47.7
)

$
17.2     (1)
    
    The nine months ended
    September 30, 2006, includes $20.5 million of
    reimbursements related to ammonium perchlorate at the
    companys Henderson facility.(2)
    
    The three months ended
    September 30, 2007 and 2006, includes net earnings (losses)
    of equity method investees of ($0.1) million and
    $1.3 million, respectively. The nine months ended
    September 30, 2007 and 2006, includes net earnings of
    equity method investees of $1.9 million and
    $6.0 million, respectively.  16.
    Related
    Party Transactions  2 2
 26




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-K
  Overview
  2
        General
    Factors Affecting Financial Condition and Results of
    Operations
    2
  2 2
     27




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##### Table of Contents




    Our U.S. work force was reduced by 45 employees. We
    will also not be filling 55 previously vacant positions. The
    program was substantially completed as of September 30,
    2007, with two employees remaining into early 2008 for
    transition purposes. In connection with the program, we incurred
    pretax charges of $9.7 million for severance, special
    termination benefits under our pension plan and other employee
    related costs.
    Changes to our retiree medical and life insurance plans related
    to cost-sharing provisions between the company and plan
    participants, life insurance benefits and certain retirement
    eligibility criteria, which are effective April 1, 2009,
    have reduced our postretirement obligation by approximately
    $93.1 million and pretax noncash expense approximately
    $2.3 million during the third quarter of 2007 and
    approximately $6.0 million for the fiscal year.
    The company will make certain amendments to the pension plan
    effective January 1, 2008, which will reduce the related
    net periodic cost for 2008 and future periods.  Asset Impairment.
  Results
    of Operations
  Three
    Months Ended September 30, 2007 Compared to Three Months
    Ended September 30, 2006
    Three Months Ended September 30,2007


2006


$ Change(In millions)Net salesPigment

$
335.6


$
351.4


$
(15.8
)Electrolytic and other chemical products


27.5



27.2



0.3Total

$
363.1


$
378.6


$
(15.5
)        28




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##### Table of Contents



Three Months Ended September 30,2007


2006


$ Change(In millions)Operating profit (loss)Pigment

$
8.5


$
15.6


$
(7.1
)Electrolytic and other chemical products


0.2



1.7



(1.5
)Subtotal


8.7



17.3



(8.6
)Corporate and nonoperating sites


(15.8
)


(3.4
)


(12.4
)Total operating profit (loss)


(7.1
)


13.9



(21.0
)Interest and debt expense


(12.8
)


(12.6
)


(0.2
)Other income, net


1.7



0.8



0.9Income (loss) from continuing operations before income taxes

$
(18.2
)

$
2.1


$
(20.3
)            29




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##### Table of Contents



Nine
    Months Ended September 30, 2007 Compared to Nine Months
    Ended September 30, 2006
    Nine Months EndedSeptember 30,2007


2006


$ Change(In millions)Net salesPigment

$
991.2


$
1,015.0


$
(23.8
)Electrolytic and other chemical products


77.5



78.3



(0.8
)Total

$
1,068.7


$
1,093.3


$
(24.6
)        30




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##### Table of Contents



Nine Months Ended September 30,2007


2006


$ Change(In millions)Operating profit (loss)Pigment

$
19.5


$
51.5


$
(32.0
)Electrolytic and other chemical products


(1.4
)


24.8



(26.2
)Subtotal


18.1



76.3



(58.2
)Corporate and nonoperating sites


(24.7
)


(11.9
)


(12.8
)Total operating profit


(6.6
)


64.4



(71.0
)Interest and debt expense


(37.5
)


(36.9
)


(0.6
)Other income, net


4.1



10.5



(6.4
)Income (loss) from continuing operations before income taxes

$
(40.0
)

$
38.0


$
(78.0
)          31




---



##### Table of Contents



Financial
    Condition and Liquidity
  General
       32




---



##### Table of Contents



53-acre
    Cash Flows from Operating Activities.
  Cash Flows from Investing Activities.
        Cash Flows from Financing Activities.
  Credit Agreement.
       33




---



##### Table of Contents



and/or
    Note Payable due July 2014.
  Receivables securitization.
  Off-Balance
    Sheet Arrangements
    Outlook
   34




---



##### Table of Contents



New
    Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes, an interpretation
    of FASB Statement No. 109, Accounting for Income Taxes
  Fair
    Value Measurements.
  The
    Fair Value Option for Financial Assets and Financial
    Liabilities  including an Amendment of FASB Statement
    No. 115, Accounting for Certain Investments in Debt and
    Equity Securities
  Item 3.
    Quantitative
    and Qualitative Disclosure about Market Risk      Notional


Weighted-AverageAmount


Contract Rate(In millions)Maturing in 2007 Euro

$
(4.6
)


1.3213Australian dollar

$
1.9



.7781Maturing in 2008 Australian dollar

$
6.3



.8139    35




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##### Table of Contents



Item 4.
    Controls
    and Procedures  a)
    Evaluation
    of Disclosure Controls and Procedures    Rules 13a-15(e) 15d-15(e)
  b)
    Changes
    in Internal Control over Financial Reporting  Form 10-Q
  SPECIAL
    NOTE REGARDING FORWARD-LOOKING STATEMENTS
  Form 10-Q. Form 10-Q Form 10-K.
  PART II 
    OTHER INFORMATION
  Item 1.
    Legal
    Proceedings  Savannah
    Plant
   36




---



##### Table of Contents



Forest
    Products
  and/or and/or
      May v. Tronox Avance v. Tronox, Jeans v. Tronox
    Form 10-K Form 10-Q.
 37




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##### Table of Contents



Item 1A.
    Risk
    Factors  Form 10-K
  Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds    Item 3.
    Defaults
    Upon Senior Securities    Item 4.
    Submission
    of Matters to a Vote of Security Holders    Item 5.
    Other
    Information    Item 6.
    Exhibits  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).10
.1

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

Purchase and Sale Agreement among Tronox LLC and Tronox Pigments
    (Savannah) Inc., as Originators, and Tronox Funding LLC, as
    Buyer, dated September 26, 2007 (incorporated by references
    to Exhibit 10.2 of the Registrants current report on
    Form 8-K,
    filed with the Securities and Exchange Commission on
    October 2, 2007).31
.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. 38




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##### Table of Contents



SIGNATURES
      By:
    /s/  Thomas
    W. Adams   Title:
    Chief Executive Officer  By:
    /s/  Mary
    Mikkelson   Title:
    Senior Vice President and    By:
    /s/  David
    J. Klvac   Title:
    Vice President and Controller  39