The Company also expects to report segment profit in the fourth quarter of 2013 of $1.8 million, compared to segment profit of $4.7 million reported in the fourth quarter of 2012. For the full year of 2013, the Company expects to report a segment loss of $83.6 million compared to segment profit of $373.8 million in 2012. The expected decrease in segment profit in the fourth quarter of 2013 compared to the same period of 2012 is due primarily to the net effects of lower feedstock ore costs, lower average TiO2 selling prices and one-time costs of approximately $9 million resulting from the terms of the new collective bargaining agreement reached with the Company's Canadian workforce mentioned above. Such one-time Canadian costs consist principally of a non-cash pension charge of approximately $7 million due to the curtailment of one of the Company's Canadian defined benefit pension plans, and severance and other back-to-work expenses. The expected decrease in segment profit for the full year 2013 is primarily due to the net effects of lower average TiO2 selling prices, higher raw materials costs, higher sales volumes, a third quarter 2013 litigation settlement charge of $35 million and the one-time Canadian costs. The Company's TiO2 production volumes in the fourth quarter of 2013 are expected to be approximately 115,000 metric tons, or 2% higher than the fourth quarter of 2012. TiO2 production volumes in the full year of 2013 are expected to be approximately 474,000 metric tons, or 1% higher than the full year of 2012. As previously reported, the Company has been operating its Canadian plant at approximately 15% of the plant's stated capacity with non-unionized management employees following commencement of the lockout in mid-June 2013. In addition to the $9 million of one-time costs discussed above, the curtailed production resulting from the lockout resulted in approximately $19 million of unabsorbed fixed production costs and other costs resulting from the lockout charged directly to cost of sales in the second half of 2013. Adjusted EBITDA (EBITDA excluding the $9 million of one-time Canadian costs and the litigation settlement charge, as applicable) is expected to be approximately $21 million in the fourth quarter of 2013 compared to $12 million in the fourth quarter of 2012, and is expected to be an Adjusted EBITDA loss of approximately $38 million for the full year of 2013 compared to $412 million income in 2012.

 

As previously reported, the Company experienced significantly higher purchase costs for raw materials such as third party feedstock ore in 2012 and, to a lesser extent, in the first half of 2013. The Company's cost of sales per metric ton of TiO2 sold in the first half of 2013 was significantly higher than TiO2 sold in the first half of 2012, as a substantial portion of the TiO2 products sold in the first quarter of 2012 (and a portion of the TiO2 products sold in the second quarter of 2012) was produced with lower-cost feedstock ore purchased in 2011, while a substantial portion of the TiO2 products sold in the first quarter of 2013 (and a portion of the TiO2 products sold in the second quarter of 2013) was produced with higher-cost feedstock ore purchased in 2012. Although the Company's purchase cost of third-party feedstock ore has and continues to moderate, such reductions did not begin to be significantly reflected in our cost of sales until the third quarter of 2013. If the third-party feedstock ore costs reflected in the Company's expected cost of sales in the fourth quarter and full year of 2013 had been based on the Company's current cost of third-party feedstock ore procured, the Company's Adjusted EBITDA for the fourth quarter and full year of 2013 would be approximately $13 million and $218 million higher, respectively, as compared to the amounts expected to be reported for such periods.

 

The preliminary results for the Company's fourth quarter and full year of 2013 financial results presented herein are based on management's current estimates and analysis for the quarter ended December 31, 2013, and are subject to the completion of our financial closing procedures (including the filing of our Annual Report on Form 10-K for the year ended December 31, 2013). Those procedures are still in process and have not yet been completed. Accordingly, once our financial closing procedures are completed, the expected financial results reflected in our preliminary results may change and those changes may be material. There can be no assurance the Company will be successful in its efforts to opportunistically access the debt capital markets.