UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 earliest event reported): May 6, 2020
Kronos Worldwide, Inc.
(Exact Name of Registrant as Specified in 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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(I.R.S. Employer
Identification No.)
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5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2620
(Address of Principal Executive Offices, and Zip Code)
Registrant’s Telephone Number, Including Area Code
(972) 233-1700
(Former Name or Former Address, if Changed Since Last Report)
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. below):
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☐
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Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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| ☐ | Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common Stock
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KRO
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New York Stock Exchange
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR
§240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
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| Item 2.02 |
Results of Operations and Financial Condition.
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The registrant hereby furnishes the information set forth in its press release entitled “Kronos Worldwide Reports First Quarter 2020 Results” that the registrant issued on May 6, 2020, a copy of which
is attached hereto as Exhibit 99.1 and incorporated herein by reference.
The press release the registrant furnishes as Exhibit 99.1 to this current 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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Regulation FD Disclosure.
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The registrant hereby furnishes the information set forth in its press release issued on May 6, 2020, a copy of which is attached as Exhibit 99.1 and incorporated herein by reference.
The information, including the exhibit, the registrant furnishes in this report under this Item 7.01, and the exhibit in Item 9.01, 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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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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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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Date: May 6, 2020
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By:
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/s/ James W. Brown
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James W. Brown,
Senior Vice President and Chief Financial Officer
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Kronos Worldwide, Inc.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, TX 75240-2620
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Contact: Janet Keckeisen
Vice President, Corporate
Strategy and Investor Relations
(972) 233-1700
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News Release
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FOR IMMEDIATE RELEASE
KRONOS WORLDWIDE REPORTS FIRST QUARTER 2020 RESULTS
DALLAS, TEXAS…May 6, 2020… Kronos Worldwide, Inc. (NYSE:KRO) today reported net income of $27.0 million, or $.23 per share, in the first
quarter of 2020 compared to net income of $30.3 million, or $.26 per share, in the first quarter of 2019. We reported lower net income in the first quarter 2020 as compared to the first quarter of 2019 primarily due to lower income from operations
resulting from the effects of lower sales volumes and higher raw materials and other production costs, as discussed below. Comparability of our results was also impacted by the effects of changes in currency exchange rates, also discussed below.
Net sales of $421.0 million in the first quarter of 2020 were $15.5 million, or 4%, lower than in the first quarter of 2019. Net sales decreased in the
first quarter of 2020 primarily due to lower sales volumes. TiO2 sales volumes were 5% lower in the first quarter of 2020 as compared to the first quarter of 2019 due to lower sales volumes in the North American, Latin American and
export markets partially offset by higher sales volumes in the European market. Our average TiO2 selling prices in the first quarter of 2020 were comparable to our average TiO2 selling prices in the first quarter of 2019. Our average TiO2
selling prices at the end of the first quarter of 2020 were 2% lower than at the end of 2019. Fluctuations in currency exchange rates (primarily the euro) also affected net sales comparisons, decreasing net sales by approximately $7 million in the
first quarter of 2020 as compared to the first quarter of 2019. The table at the end of this press release shows how each of these items impacted net sales.
Our TiO2 segment profit (see description of non-GAAP information below) in the first quarter of 2020 was $47.2 million as compared to $53.3
million in the first quarter of 2019. Segment profit decreased in the first quarter of 2020 primarily due to lower sales volumes and higher raw materials and other production costs. TiO2 production volumes were 1% lower in the first
quarter of 2020 as compared to the first quarter of 2019. We operated our production facilities at overall average capacity utilization rates of 95% and 97% in the first quarters of 2020 and 2019, respectively. Fluctuations in currency exchange
rates also affected segment profit comparisons, which increased segment profit by approximately $11 million in the first quarter of 2020 as compared to the first quarter of 2019.
Our net income before interest expense, income taxes and depreciation and amortization expense (EBITDA) (see description of non-GAAP information below) in
the first quarter of 2020 was $54.9 million compared to EBITDA of $58.5 million in the first quarter of 2019.
Other income (expense) in the first quarter of 2020 includes a pre-tax insurance settlement gain of $1.5 million ($1.2 million, or $.01 per share, net of
income tax expense) related to a property damage claim.
Although the COVID-19 pandemic had limited impact on our operations during the first quarter of 2020, we believe U.S. and worldwide gross domestic product
will be significantly impacted for an indeterminate period, including the demand for our products and those of our customers. Consequently, we expect to report lower sales and earnings than would otherwise have been expected for the remainder of
2020. The extent of the impact will depend on numerous factors, including future developments, and therefore is uncertain and cannot be predicted.
- 1 -
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 we believe that the expectations reflected in such forward-looking statements are reasonable, we 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, we continue 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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Future supply and demand for our products
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The extent of the dependence of certain of our businesses on certain market sectors
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The cyclicality of our business
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Customer and producer inventory levels
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Unexpected or earlier-than-expected industry capacity expansion
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Changes in raw material and other operating costs (such as energy and ore costs)
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Changes in the availability of raw materials (such as ore)
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General global economic and political conditions that harm the worldwide economy, disrupt our supply chain, increase material costs or reduce
demand or perceived demand for our TiO2 products or impair our ability to operate our facilities (including changes in the level of gross domestic product in various regions of the world, natural disasters, terrorist acts, global
conflicts and public health crises such as COVID-19)
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Competitive products and substitute products
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Customer and competitor strategies
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Potential consolidation of our competitors
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Potential consolidation of our customers
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The impact of pricing and production decisions
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Competitive technology positions
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Potential difficulties in upgrading or implementing accounting and manufacturing software systems
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The introduction of trade barriers or trade disputes
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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), or possible disruptions to our business resulting from uncertainties associated with the euro or other currencies
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Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions, unscheduled or unplanned
downtime, transportation interruptions, cyber-attacks and public health crises such as COVID-19)
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Our ability to renew or refinance credit facilities
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Our ability to maintain sufficient liquidity
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The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters, including future tax reform
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Our ability to utilize income tax attributes, the benefits of which may or may not have been recognized under the more-likely-than-not
recognition criteria
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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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Government laws and regulations and possible changes therein including new environmental health and safety regulations such as those seeking to
limit or classify TiO2 or its use
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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.
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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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The Company discloses segment profit, 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 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 as income before income taxes, interest expense and certain general corporate items. Corporate items excluded from the determination of segment profit include corporate expense and
interest income not attributable to the Company’s TiO2 operations; and
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The Company discloses EBITDA, which is also used by the Company’s management to assess the performance of the Company’s TiO2 operations.
The Company believes disclosure of EBITDA 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 EBITDA as net income before interest expense, income taxes and depreciation and amortization expense.
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Kronos Worldwide, Inc. is a major international producer of titanium dioxide products.
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KRONOS WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share and metric ton data)
(Unaudited)
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Three months ended
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March 31,
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2019
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2020
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Net sales
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$
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436.5
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$
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421.0
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Cost of sales
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327.2
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332.9
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Gross margin
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109.3
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88.1
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Selling, general and administrative expense
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57.7
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53.5
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Other operating income (expense):
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Currency transactions, net
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.9
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12.2
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Other income, net
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.3
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Corporate expense
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(3.8
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(3.5
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Income from operations
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49.0
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43.5
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Other income (expense):
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Trade interest income
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.5
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Other interest and dividend income
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1.6
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1.0
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Insurance settlement gain
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1.5
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Marketable equity securities
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.6
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(1.5
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Other components of net periodic pension
and OPEB cost
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(3.8
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(4.7
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Interest expense
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(4.8
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(4.6
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Income before income taxes
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43.1
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35.4
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Income tax expense
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12.8
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8.4
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Net income
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$
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30.3
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$
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27.0
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Net income per basic and diluted share
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$
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.26
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$
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.23
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Weighted average shares used in the
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calculation of net income per share
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115.9
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115.6
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TiO2 data - metric tons in thousands:
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Sales volumes
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143
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136
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Production volumes
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134
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132
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KRONOS WORLDWIDE, INC.
RECONCILIATION OF INCOME FROM
OPERATIONS TO SEGMENT PROFIT
(In millions)
(Unaudited)
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Three months ended
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March 31,
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2019
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2020
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Income from operations
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$
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49.0
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$
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43.5
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Adjustments:
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Trade interest income
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.5
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Corporate expense
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3.8
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3.5
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Segment profit
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$
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53.3
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$
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47.2
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RECONCILIATION OF NET INCOME TO EBITDA
(In millions)
(Unaudited)
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Three months ended
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March 31,
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2019
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2020
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Net income
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$
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30.3
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$
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27.0
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Adjustments:
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Depreciation expense
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10.6
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14.9
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Interest expense
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4.8
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4.6
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Income tax expense
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12.8
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8.4
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EBITDA
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$
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58.5
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$
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54.9
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IMPACT OF PERCENTAGE CHANGE IN NET SALES
(Unaudited)
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Three months ended
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March 31,
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2020 vs. 2019
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Percentage change in net sales:
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TiO2 sales volumes
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(5
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)%
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TiO2 product pricing
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TiO2 product mix/other
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3
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Changes in currency exchange rates
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(2
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Total
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(4
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)%
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- 5 -