UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of
Report (Date of the earliest event reported)
March
9, 2010
Kronos
Worldwide, Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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1-31763
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76-0294959
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(State
or other jurisdiction of incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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5430
LBJ Freeway, Suite 1700, Dallas, Texas
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75240-2697
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code
(972)
233-1700
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(Former
name or former address, if changed since last report.)
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2):
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
2.02
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Results
of Operations and Financial
Condition.
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Item
7.01
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Regulation
FD Disclosure.
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The
registrant hereby furnishes the information set forth in its press release
issued on March 9, 2010, a copy of which is attached hereto as Exhibit 99.1 and
incorporated herein by reference.
The
information, including the exhibit, the registrant furnishes in this report is
not deemed “filed” for purposes of section 18 of the Securities Exchange Act of
1934, as amended, or otherwise subject to the liabilities of that
section. Registration statements or other documents filed with the
U.S. Securities and Exchange Commission shall not incorporate this information
by reference, except as otherwise expressly stated in such filing.
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Item
9.01
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Financial
Statements and Exhibits.
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(d)
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Exhibits
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Item
No.
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Exhibit
Index
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99.1
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Press
release dated March 9, 2010 issued by the
registrant.
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Kronos
Worldwide, Inc.
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(Registrant)
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By: /s/ Gregory M.
Swalwell
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Date: March
9, 2010
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Gregory
M. Swalwell, Vice President and Chief Financial
Officer
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INDEX
TO EXHIBITS
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Item
No.
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Exhibit
Index
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99.1
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Press
release dated March 9, 2010 issued by the
registrant.
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Kronos
Worldwide, Inc.
Three
Lincoln Centre
5430
LBJ Freeway, Suite 1700
Dallas,
TX 75240-2697
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Contact: Gregory
M. Swalwell
Executive Vice President and Chief Financial Officer
(972) 233-1700
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News
Release
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FOR IMMEDIATE
RELEASE
KRONOS
WORLDWIDE REPORTS FOURTH QUARTER RESULTS
DALLAS,
TEXAS…March 9, 2010… Kronos Worldwide, Inc. (NYSE:KRO) today reported net income
for the fourth quarter of 2009 of $5.1 million, or $.11 per diluted share,
compared to net income of $7.2 million, or $.15 per diluted share, in the fourth
quarter of 2008. For the full year of 2009, Kronos reported a net
loss of $34.7 million, or $.71 per diluted share, compared with net income of
$9.0 million, or $.18 per diluted share in 2008. Comparability of the
Company’s results was impacted by lower income from operations resulting
principally from lower sales volumes and higher manufacturing costs as a result
of temporary plant curtailments the Company implemented during the first half of
2009.
Net sales
of $301.9 million in the fourth quarter of 2009 were $55.0 million, or 22%,
higher than the fourth quarter of 2008. Net sales of $1,142.0
million for the full year 2009 were $174.9 million, or 13%, lower than the full
year 2008. Net sales increased in the fourth quarter of 2009
primarily due to higher TiO2 sales
volumes and the favorable effect of fluctuations in currency exchange rates,
which increased sales by approximately $20 million, partially offset by lower
average selling prices. For the full year period, net sales were
lower in 2009 primarily due to lower sales volumes and average selling prices
and the unfavorable effect of fluctuations in currency exchange rates, which
decreased sales by approximately $35 million. Although the Company’s
average selling prices were 5% lower in the fourth quarter of 2009 as compared
to the fourth quarter of 2008, the Company’s average selling prices at the end
of the fourth quarter 2009 were 2% higher than at the end of the third quarter
2009. The table at the end of this release shows how each of these
items impacted the overall decrease in sales.
The
Company’s TiO2 segment
profit (see description of non-GAAP information below) for the fourth quarter of
2009 was $13.3 million compared with $22.0 million in the fourth quarter of
2008. For the full year period, the Company’s segment loss was $8.1
million compared with a segment profit of $54.6 million for the full year
2008. Segment profit decreased in the fourth quarter of 2009 as
compared to the fourth quarter of 2008 due to lower average TiO2 selling
prices and the unfavorable effect of fluctuations in currency exchange rates,
which decreased segment profit by approximately $10 million. For the
full year 2009, segment profit declined primarily due to the negative effects of
production curtailments in the first half of the year, which resulted in higher
manufacturing costs per ton of pigment production during the year, as well as
the effect of lower sales volumes and lower average TiO2 selling
prices. This was partially offset by lower maintenance costs and the
favorable effects of fluctuations in currency exchange rates, which increased
segment profit by approximately $40 million. The Company’s TiO2 production
volumes were 1% lower in the fourth quarter of 2009 and 22% lower in the full
year 2009 as compared to the same periods in 2008. Finished goods
inventories at December 31, 2009, which represented approximately 2 months of
average sales, were lower compared to December 31, 2008.
Steven L.
Watson, Vice Chairman and Chief Executive Officer, said, “During the fourth
quarter, we continued our near full capacity production rates from the third
quarter following the production curtailments we implemented in the first half
of the year in order to reduce our finished goods inventories to an appropriate
level necessary to meet customer requirements in each of our markets during the
year. The higher capacity utilization during the second half of 2009
significantly decreased our per unit fixed cost of production, which, along with
higher selling prices produced a return to profitability in the second half of
2009. The increased capacity utilization is expected to continue into
2010. Despite the economic downturn negatively impacting all TiO2 producers
during 2009, we believe the continuing improvement in demand in all key market
segments and the continued implementation of both previously-announced and
future price increases will result in continued improved operating and financial
performance for 2010. In addition, and as a result of a European
Court ruling that resulted in the favorable resolution of certain income tax
issues in Germany, we expect to report a non-cash income tax benefit in the
first quarter of 2010 of approximately $35.2 million (or $.72 per diluted
share).”
The
Company’s effective income tax rate varies from the U.S. statutory federal
income tax rate in both periods of 2008 and 2009. The Company’s
income tax benefit in 2008 includes a $7.2 million ($.15 per diluted share)
non-cash deferred income tax benefit in the second quarter related to a European
Court ruling that resulted in the favorable resolution of certain income tax
issues related to our German operations and an increase in the amount of our
German corporate and trade tax net operating loss carryforwards. The
Company’s income tax benefit in 2009 includes a $4.7 million ($.10 per diluted
share) non-cash deferred income tax benefit in the fourth quarter related to a
net decrease in our reserve for uncertain tax positions.
The
statements in this release relating to matters that are not historical facts are
forward-looking statements that represent management's beliefs and assumptions
based on currently available information. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, it cannot give any assurances that these expectations will prove to
be correct. Such statements by their nature involve substantial risks
and uncertainties that could significantly impact expected results, and actual
future results could differ materially from those described in such
forward-looking statements. While it is not possible to identify all factors,
the Company continues to face many risks and uncertainties. The
factors that could cause actual future results to differ materially include, but
are not limited to, the following:
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·
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Future
supply and demand for our products
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·
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The
extent of the dependence of certain of our businesses on certain market
sectors
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·
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The
cyclicality of our businesses
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·
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Customer
inventory levels (such as the extent to which our customers may, from time
to time, accelerate purchases of TiO2 in
advance of anticipated price increases or defer purchases of TiO2 in
advance of anticipated price
decreases)
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·
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Changes
in raw material and other operating costs (such as energy
costs)
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·
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General
global economic and political conditions (such as changes in the level of
gross domestic product in various regions of the world and the impact of
such changes on demand for TiO2)
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·
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Competitive
products and substitute products
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·
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Customer
and competitor strategies
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Potential
consolidation or solvency of our
competitors
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The
impact of pricing and production
decisions
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·
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Competitive
technology positions
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·
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Possible
disruption of our business or increases in the cost of doing business
resulting from terrorist activities or global
conflicts
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·
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The
introduction of trade barriers
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·
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Fluctuations
in currency exchange rates (such as changes in the exchange rate between
the U.S. dollar and each of the euro, the Norwegian krone and the Canadian
dollar)
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·
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Operating
interruptions (including, but not limited to, labor disputes, leaks,
natural disasters, fires, explosions, unscheduled or unplanned downtime
and transportation interruptions)
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·
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The
timing and amounts of insurance
recoveries
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·
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Our
ability to renew or refinance credit
facilities
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·
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Our
ability to maintain sufficient
liquidity
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·
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The
ultimate outcome of income tax audits, tax settlement initiatives or other
tax matters
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·
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The
ultimate ability to utilize income tax attributes, the benefits of which
have been recognized under the more-likely-than-not recognition
criteria
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·
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Environmental
matters (such as those requiring compliance with emission and discharge
standards for existing and new
facilities)
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·
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Government
laws and regulations and possible changes
therein
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·
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The
ultimate resolution of pending
litigation
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·
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Possible
future litigation
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Should
one or more of these risks materialize (or the consequences of such a
development worsen), or should the underlying assumptions prove incorrect,
actual results could differ materially from those forecasted or
expected. The Company disclaims any intention or obligation to update
or revise any forward-looking statement whether as a result of changes in
information, future events or otherwise.
In an
effort to provide investors with additional information regarding the Company's
results of operations as determined by accounting principles generally accepted
in the United States of America (“GAAP”), the Company has disclosed certain
non-GAAP information, which the Company believes provides useful information to
investors:
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·
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The
Company discloses segment profit (loss), which is used by the Company’s
management to assess the performance of the Company’s TiO2
operations. The Company believes disclosure of segment
profit (loss) provides useful information to investors because it allows
investors to analyze the performance of the Company’s TiO2
operations in the same way that the Company’s management assesses
performance. The Company defines segment profit (loss) as
income (loss) before income taxes, interest expense and certain general
corporate items. Corporate items excluded from the
determination of segment profit (loss) include corporate expense and
interest income not attributable to the Company’s TiO2
operations.
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Kronos
Worldwide, Inc. is a major international producer of titanium dioxide
products.
KRONOS
WORLDWIDE, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In
millions, except per share and metric ton data)
(Unaudited)
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Three
months ended
December
31,
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Twelve
months ended
December
31,
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|||||||||||||||
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2008
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2009
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2008
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2009
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Net
sales
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$ | 246.9 | $ | 301.9 | $ | 1,316.9 | $ | 1,142.0 | ||||||||
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Cost
of sales
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193.0 | 249.3 | 1,096.3 | 1,011.7 | ||||||||||||
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Gross
margin
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53.9 | 52.6 | 220.6 | 130.3 | ||||||||||||
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Selling,
general and administrative expense
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33.2 | 40.0 | 167.4 | 148.2 | ||||||||||||
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Other
operating income (expense):
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||||||||||||||||
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Currency
transactions, net
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.9 | .8 | .6 | 9.9 | ||||||||||||
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Disposition
of property & equipment
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(.3 | ) | (.6 | ) | (.9 | ) | (.9 | ) | ||||||||
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Other
Income, net
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.6 | .5 | .7 | .6 | ||||||||||||
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Corporate
expense
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(2.0 | ) | (2.0 | ) | (6.4 | ) | (7.4 | ) | ||||||||
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Income
(loss) from operations
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19.9 | 11.3 | 47.2 | (15.7 | ) | |||||||||||
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Other
income (expense):
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Trade
interest income
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.1 | - | 1.0 | .2 | ||||||||||||
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Interest
expense
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(9.2 | ) | (10.8 | ) | (42.2 | ) | (41.4 | ) | ||||||||
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Income
(loss) before income taxes
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10.8 | .5 | 6.0 | (56.9 | ) | |||||||||||
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Provision
for income taxes (benefit)
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3.6 | (4.6 | ) | (3.0 | ) | (22.2 | ) | |||||||||
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Net income
(loss)
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$ | 7.2 | $ | 5.1 | $ | 9.0 | $ | (34.7 | ) | |||||||
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Basic
and diluted net income (loss) per share
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$ | .15 | $ | .11 | $ | .18 | $ | (.71 | ) | |||||||
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Basic
and diluted weighted-average shares used in the calculation of
net income per share
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49.0 | 49.0 | 49.0 | 49.0 | ||||||||||||
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TiO2 data
– metric tons in thousands:
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||||||||||||||||
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Sales
volumes
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88 | 110 | 478 | 445 | ||||||||||||
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Production
volumes
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124 | 122 | 514 | 402 | ||||||||||||
KRONOS
WORLDWIDE, INC.
RECONCILIATION
OF SEGMENT PROFIT TO
INCOME
FROM OPERATIONS
(In
millions)
(Unaudited)
|
Three
months ended
December
31,
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Twelve
months ended
December
31,
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|||||||||||||||
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2008
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2009
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2008
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2009
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Segment
profit (loss)
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$ | 22.0 | $ | 13.3 | $ | 54.6 | $ | (8.1 | ) | |||||||
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Adjustments:
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||||||||||||||||
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Trade
interest income
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(.1 | ) | - | (1.0 | ) | (.2 | ) | |||||||||
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Corporate
expense
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(2.0 | ) | (2.0 | ) | (6.4 | ) | (7.4 | ) | ||||||||
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Income
(loss) from operations
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$ | 19.9 | $ | 11.3 | $ | 47.2 | $ | (15.7 | ) | |||||||
IMPACT OF
PERCENTAGE CHANGE IN SALES
(Unaudited)
|
Three
months ended
December
31,
2009 vs. 2008
|
Twelve
months ended
December
31,
2009 vs. 2008
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|||||||
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Percent
change in sales:
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||||||||
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TiO2
product pricing
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(5 | )% | (1 | )% | ||||
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TiO2
sales volume
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25 | % | (7 | )% | ||||
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TiO2
product mix
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(6 | )% | (2 | )% | ||||
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Changes
in foreign currency exchange rates
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8 | % | (3 | )% | ||||
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Total
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22 | % | (13 | )% | ||||