false000125764000012576402023-11-022023-11-02

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 earliest event reported)

November 2, 2023

KRONOS WORLDWIDE, INC.

(Exact name of registrant as specified in its charter)

Delaware

    

1-31763

    

76-0294959

(State or other jurisdiction of

(Commission

(IRS Employer

incorporation)

File Number)

Identification No.)

5430 LBJ Freeway, Suite 1700, Dallas, Texas

(Address of principal executive offices)

75240-2620

(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.):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

 

Common Stock

KRO

New York Stock Exchange

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.

Item 2.02Results of Operations and Financial Condition.

The registrant hereby furnishes the information set forth in its press release entitled “Kronos Worldwide, Inc. Reports Third Quarter 2023 Results” that the registrant issued on November 2, 2023, 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.

Item 9.01Financial Statements and Exhibits.

(d)

Exhibits

Item No.

Exhibit Index

99.1

Press release dated November 2, 2023, and issued by the registrant.

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

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.

KRONOS WORLDWIDE, INC.

(Registrant)

Date: November 2, 2023

By:

/s/ Tim C. Hafer

Tim C. Hafer,

Executive Vice President and Chief Financial Officer

Graphic

KRONOS WORLDWIDE, INC. REPORTS THIRD QUARTER 2023 RESULTS

DALLAS, TEXAS…November 2, 2023…Kronos Worldwide, Inc. (NYSE:KRO) today reported a net loss of $20.4 million, or $.18 per share, in the third quarter of 2023 compared to net income of $21.0 million, or $.18 per share, in the third quarter of 2022. For the first nine months of 2023, Kronos Worldwide reported a net loss of $43.8 million, or $.38 per share, compared to net income of $124.4 million, or $1.08 per share, in the first nine months of 2022. Net income decreased in the third quarter of 2023 as compared to the third quarter of 2022 primarily due to lower income from operations as a result of lower sales volumes and lower average TiO2 selling prices. Net income decreased in the first nine months of 2023 as compared to the first nine months of 2022 primarily due to lower income from operations as a result of the combination of lower sales volumes, higher production costs (primarily raw material costs) and lower average TiO2 selling prices. Our results of operations for the first nine months of 2023 were significantly impacted by reduced demand for certain of our products occurring in all major markets and unabsorbed fixed production and other costs, as discussed further below. Comparability of our results was also impacted by the effects of changes in currency exchange rates.

Net sales of $396.9 million in the third quarter of 2023 were $62.7 million, or 14%, lower than in the third quarter of 2022. Net sales of $1.3 billion in the first nine months of 2023 were $321.4 million, or 20%, lower than in the first nine months of 2022. Net sales decreased in the third quarter and first nine months of 2023 compared to the same periods of 2022 due to the effects of lower sales volumes in all our major markets and lower average TiO2 selling prices. TiO2 sales volumes were 6% lower in the third quarter of 2023 as compared to the third quarter of 2022 and 22% lower in the first nine months of 2023 as compared to the first nine months of 2022. Average TiO2 selling prices were 8% lower in the third quarter of 2023 as compared to the third quarter of 2022 and 2% lower in the first nine months of 2023 as compared to the first nine months of 2022. Average TiO2 selling prices at the end of the third quarter of 2023 were 9% lower than at the end of 2022. Changes in product mix positively contributed to net sales, primarily due to higher average selling prices in our complementary businesses which somewhat offset declines in TiO2 sales volumes in the first nine months of 2023. Fluctuations in currency exchange rates (primarily the euro) also affected net sales comparisons, increasing net sales by approximately $12 million in the third quarter of 2023 as compared to the third quarter of 2022. Changes in currency exchange rates had a nominal effect on net sales in the first nine months of 2023 as compared to the first nine months of 2022. The table at the end of this press release shows how each of these items impacted net sales.

Our TiO2 segment loss (see description of non-GAAP information below) in the third quarter of 2023 was $21.4 million as compared to our TiO2 segment profit of $34.6 million in the third quarter of 2022. For the first nine months of 2023, the Company’s segment loss was $38.5 million as compared to segment profit of $190.9 million in the first nine months of 2022. Segment profit decreased in the third quarter of 2023 compared to the same period in 2022 primarily due to lower income from operations due to lower sales volumes and lower average TiO2 selling prices. Segment profit decreased in the first nine months of 2023 as compared to the first nine months of 2022 primarily due to lower income from operations as a result of the combination of lower sales volumes, higher production costs (primarily raw material costs) and lower average TiO2 selling prices. In addition, cost of sales in the third quarter and first nine months of 2023 includes $20 million and $74 million, respectively, of unabsorbed fixed production and other manufacturing costs associated with production curtailments at our facilities during the first nine months of 2023 as we adjusted our TiO2 production volumes to align inventory levels with lower demand. TiO2 production volumes were 22% lower in the third quarter of 2023 compared to the third quarter of 2022 and 26% lower in the first nine months of 2023 compared to the same period of 2022. As a result of reduced demand and scheduled maintenance activities, we operated our production facilities at 71% of practical capacity utilization in the first nine months of 2023 (76%, 64% and 73% in the first, second and third quarters of 2023, respectively) compared to 96% in the first nine months

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of 2022 (100%, 95% and 93% in the first, second and third quarters of 2022, respectively). Fluctuations in currency exchange rates (primarily the euro) increased our loss from operations by approximately $10 million in the third quarter of 2023 and decreased our loss from operations by approximately $11 million in the first nine months of 2023 as compared to the same prior year periods.

Our net loss before interest expense, income taxes and depreciation and amortization expense (see description of non-GAAP information below) in the third quarter of 2023 was $12.7 million compared to net income before interest expense, income taxes and depreciation (EBITDA) of $39.4 million in the third quarter of 2022. For the first nine months of 2023, the Company’s net loss before interest expense, income taxes and depreciation and amortization expense was $14.1 million compared to EBITDA of $210.7 million in the first nine months of 2022.

Other operating income, net in the first nine months of 2023 includes an insurance settlement gain of $2.5 million ($2.0 million, or $.02 per share, net of income tax expense) and in the first nine months of 2022 a gain of $2.7 million ($2.2 million, or $.02 per share, net of income tax expense) related to a 2020 business interruption insurance claim. Other components of net periodic pension and OPEB cost in the first nine months of 2023 includes a $1.3 million settlement loss incurred in the second quarter of 2023 related to the termination and buy-out of our UK pension plan ($.9 million, or $.01 per share, net of income tax expense).

Commenting on the operating results and outlook, James M. Buch, President and Chief Executive Officer, said “This is clearly a historic downturn for the TiO2 industry. In response, we are focused on preserving liquidity by operating our plants at reduced rates to ensure inventory levels are aligned with near-term demand. As a team, we have implemented process improvements and manufacturing efficiencies which have reduced the impact of unabsorbed fixed costs recognized as a result of lower operating rates and we have initiated other cost savings measures which should result in improved margins. These decisive steps taken over the last 12 months to preserve our liquidity, improve our manufacturing flexibility and reduce costs will continue to drive value for our business in 2024 and beyond while allowing us to stay focused on our sustainability goals.” Mr. Buch continued, “We are beginning to see improved demand in certain markets and we believe low customer inventories and reduced capacity in the industry will fuel a return to profitability when demand returns to normal levels. Operating at reduced capacity has allowed us to accelerate maintenance in our facilities and I am confident that we have taken the steps necessary to quickly capitalize as industry demand strengthens.”

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:

Future supply and demand for our products
The extent of the dependence of certain of our businesses on certain market sectors
The cyclicality of our business
Customer and producer inventory levels
Unexpected or earlier-than-expected industry capacity expansion
Changes in raw material and other operating costs (such as energy and ore costs)
Changes in the availability of raw materials (such as ore)
General global economic and political conditions that harm the worldwide economy, disrupt our supply chain, increase material and energy 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)
Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions, unscheduled or unplanned downtime, transportation interruptions, cyber-attacks, certain regional and world events or economic conditions and public health crises such as COVID-19)

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Competitive products and substitute products
Customer and competitor strategies
Potential consolidation of our competitors
Potential consolidation of our customers
The impact of pricing and production decisions
Competitive technology positions
Potential difficulties in upgrading or implementing accounting and manufacturing software systems
The introduction of trade barriers or trade disputes
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 and between the euro and the Norwegian krone), or possible disruptions to our business resulting from uncertainties associated with the euro or other currencies
Our ability to renew or refinance credit facilities
Increases in interest rates
Our ability to maintain sufficient liquidity
The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters, including future tax reform
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
Environmental matters (such as those requiring compliance with emission and discharge standards for existing and new facilities)
Government laws and regulations and possible changes therein including new environmental health and safety or other regulations (such as those seeking to limit or classify TiO2 or its use)
Possible future litigation.

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:

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 net income before income tax expense and certain general corporate items. These general corporate items include corporate expense and the components of other income (expense) except for trade interest income; and
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.

Kronos Worldwide, Inc. is a major international producer of titanium dioxide products.

Investor Relations Contact:

Bryan A. Hanley

Senior Vice President & Treasurer

Tel: (972) 233-1700

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KRONOS WORLDWIDE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share and metric ton data)

Three months ended

Nine months ended

September 30, 

September 30, 

2022

2023

2022

2023

(unaudited)

Net sales

    

$

459.6

    

$

396.9

    

$

1,587.8

    

$

1,266.4

Cost of sales

 

375.6

 

362.5

 

1,234.0

 

1,157.1

Gross margin

 

84.0

 

34.4

 

353.8

 

109.3

Selling, general and administrative expense

 

59.0

 

53.6

 

183.6

 

156.9

Other operating income (expense):

 

  

 

  

 

  

 

  

Currency transactions, net

 

6.7

 

(3.9)

 

17.1

 

4.6

Other income, net

 

2.8

 

1.4

 

3.4

 

3.5

Corporate expense

 

(3.7)

 

(3.6)

 

(11.4)

 

(10.8)

Income (loss) from operations

 

30.8

 

(25.3)

 

179.3

 

(50.3)

Other income (expense):

 

  

 

  

 

  

 

  

Trade interest income

 

.1

 

.3

 

.2

 

1.0

Other interest and dividend income

 

1.3

 

1.2

 

1.9

 

4.0

Marketable equity securities

 

(2.9)

 

-

 

(.5)

 

(1.3)

Other components of net periodic pension
   and OPEB cost

 

(2.9)

 

(1.0)

 

(9.2)

 

(4.1)

Interest expense

 

(4.2)

 

(4.3)

 

(13.0)

 

(12.8)

Income (loss) before income taxes

 

22.2

 

(29.1)

 

158.7

 

(63.5)

Income tax expense (benefit)

 

1.2

 

(8.7)

 

34.3

 

(19.7)

Net income (loss)

$

21.0

$

(20.4)

$

124.4

$

(43.8)

Net income (loss) per basic and diluted share

$

.18

$

(.18)

$

1.08

$

(.38)

Weighted average shares used in the
   calculation of net income (loss) per share

 

115.5

 

115.0

 

115.5

 

115.1

TiO2 data - metric tons in thousands:

 

  

 

  

 

  

 

  

Sales volumes

 

113

 

107

 

399

 

313

Production volumes

 

131

 

102

 

401

 

296

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KRONOS WORLDWIDE, INC.

RECONCILIATION OF INCOME (LOSS) FROM

OPERATIONS TO SEGMENT PROFIT (LOSS)

(In millions)

Three months ended

Nine months ended

September 30, 

September 30, 

2022

2023

2022

2023

(unaudited)

Income (loss) from operations

$

30.8

$

(25.3)

$

179.3

$

(50.3)

Adjustments:

 

  

 

  

 

  

 

  

Trade interest income

 

.1

 

.3

 

.2

 

1.0

Corporate expense

 

3.7

 

3.6

 

11.4

 

10.8

Segment profit (loss)

$

34.6

$

(21.4)

$

190.9

$

(38.5)

RECONCILIATION OF NET INCOME (LOSS) TO EBITDA

(In millions)

Three months ended

Nine months ended

September 30, 

September 30, 

2022

2023

2022

2023

(unaudited)

Net income (loss)

$

21.0

$

(20.4)

$

124.4

$

(43.8)

Adjustments:

 

  

 

  

 

  

 

  

Depreciation expense

 

13.0

 

12.1

 

39.0

 

36.6

Interest expense

 

4.2

 

4.3

 

13.0

 

12.8

Income tax expense (benefit)

 

1.2

 

(8.7)

 

34.3

 

(19.7)

EBITDA

$

39.4

$

(12.7)

$

210.7

$

(14.1)

IMPACT OF PERCENTAGE CHANGE IN NET SALES

    

Three months ended

 

Nine months ended

 

September 30, 

 

September 30, 

 

2023 vs. 2022

 

2023 vs. 2022

 

(unaudited)

Percentage change in net sales:

 

  

  

TiO2 sales volumes

 

(6)

%

(22)

%

TiO2 product pricing

 

(8)

(2)

TiO2 product mix/other

 

(3)

4

Changes in currency exchange rates

 

3

-

Total

 

(14)

%

(20)

%

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