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: February 24, 2004
Kronos Worldwide, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 1-31763 76-0294959
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
5430 LBJ Freeway, Suite 1700, Dallas, TX 75240-2697
(Address of principal executive offices) (Zip Code)
(972) 233-1700
(Registrant's telephone number,
including area code)
Item 9: Regulation FD Disclosure
Item 12: Results of Operations and Financial Condition
Pursuant to Items 9 and 12 of this current report, the registrant hereby
furnishes the information set forth in the press release issued on February 24,
2004, 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
Securities and Exchange Commission shall not incorporate this information by
reference, except as otherwise expressly stated in such filing.
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)
By: /s/ Gregory M. Swalwell
----------------------------
Gregory M. Swalwell
Vice President, Finance
Date: February 24, 2004
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- --------------------------------------------------
99.1 Press release dated February 24, 2004 issued by Kronos Worldwide,
Inc.
Kronos Worldwide, Inc. Contact: Gregory M. Swalwell
Three Lincoln Centre Vice President, Finance
5430 LBJ Freeway, Suite 1700 (972) 233-1700
Dallas, TX 75240-2697
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News Release
- -------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
KRONOS WORLDWIDE REPORTS FOURTH QUARTER RESULTS
DALLAS, TEXAS -February 24, 2004 -- Kronos Worldwide, Inc. (NYSE:KRO) today
reported net income for the fourth quarter of 2003 of $13.1 million, or $.27 per
diluted share, compared with income of $9.2 million,. or $.19 per diluted share,
in the fourth quarter of 2002. For the full year 2003, Kronos reported net
income of $87.5 million, or $1.79 per diluted share, compared with net income of
$66.3 million, or $1.35 per diluted share, for the full year 2002.
The Company's titanium dioxide pigments ("TiO2") segment profit (see description
of non-GAAP information below) for the fourth quarter of 2003 was $32.2 million
compared with $20.1 million in the fourth quarter of 2002. The increase in
fourth quarter segment profit was primarily due to higher production and sales
volumes and lower maintenance costs. Segment profit for the full year 2003
increased to $137.4 million compared with $96.5 million for full year 2002,
primarily due to higher average selling prices and higher production volumes.
The Company's average selling prices in billing currencies (which excludes the
effects of fluctuations in the value of the U.S. dollar relative to other
currencies) during the fourth quarter of 2003 were 2% lower than the fourth
quarter of 2002, due primarily to sales to the North American and export
markets, but were 3% higher for the full year 2003 compared to 2002, primarily
due to sales to the European market. Expressed in U.S. dollars computed using
actual foreign currency exchange rates prevailing during the respective periods,
the Company's average selling prices in the fourth quarter of 2003 were 8%
higher than the fourth quarter of 2002, and were 13% higher for the full year
2003 compared with 2002.
The Company's fourth quarter 2003 sales volumes increased 9% from the fourth
quarter of 2002, with substantially all of the increase in the European and
export markets. Sales volumes for the full year 2003 set a new record,
increasing 2% from the previous record achieved in 2002. The Company's fourth
quarter 2003 production volumes were 14% higher than the fourth quarter of 2002,
and were 8% higher for the full year 2003 compared to 2002, with operating rates
at near full capacity in all periods presented. The Company's production volume
also set a new record in 2003. Inventories were higher at December 31, 2003 as
compared to December 31, 2002, and represented 2.2 months of average sales.
Certain of the sales generated by the Company's European and Canadian operations
are denominated in the U.S. dollar, and such operations routinely hold U.S.
dollar-denominated receivables. Primarily as a result of the weakening of the
U.S. dollar as compared to the Canadian dollar and the euro throughout the year,
the Company's results in the fourth quarter and full year 2003 included net
currency transaction losses of $3.4 million and $7.7 million, respectively. Due
to a more stable dollar in 2002, the Company recognized net currency transaction
gains of $200,000 in the fourth quarter of 2002 and net currency transaction
losses of $600,000 for the full year.
The previously-reported $6.3 million foreign currency transaction gain in 2002,
which aggregated $.13 per diluted share, related to the second quarter
extinguishment of certain intercompany indebtedness. Due to the utilization of
certain income tax attributes not previously recognized, no income taxes were
recognized on this foreign currency transaction gain in 2002. Interest expense
for the fourth quarter and full year 2003 increased $700,000 and $16.2 million,
respectively, from the comparable prior year periods, primarily due to higher
levels of outstanding debt and associated currency effects, partially offset by
lower interest rates.
The Company's effective income tax rate for 2003 reflects the
previously-reported $24.6 million cash income tax benefit ($.50 per diluted
share) related to the favorable German court ruling concerning the Company's
claim for refund suit.
In an effort to provide investors with additional information regarding the
Company's results 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:
o The Company discloses percentage changes in its average TiO2 selling prices
in billing currencies, which excludes the effects of foreign currency
translation. The Company believes disclosure of such percentage changes
allows investors to analyze such changes without the impact of changes in
foreign currency exchange rates, thereby facilitating period-to-period
comparisons of relative changes in average selling prices in the actual
various billing currencies. Generally, when the U.S. dollar either
strengthens or weakens against other currencies, the percentage change in
average selling prices in billing currencies will be higher or lower,
respectively, than such percentage changes would be using actual exchange
rates prevailing during the respective periods. o 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, minority interest, interest expense and certain general corporate
items. Corporate items excluded from the determination of segment profit
include corporate expense, interest income not attributable to the
Company's TiO2 operations, securities gains (losses) and gains on the
disposal of long-lived assets outside the ordinary course of business or
long-lived assets not associated with the Company's TiO2 operations.
Kronos Worldwide, Inc. is a major international producer of titanium dioxide
pigments.
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. Forward-looking statements
can be identified by the use of words such as "believes," "intends," "may,"
"will," "should," "could," "anticipates," "expects," or comparable terminology
or by discussions of strategy or trends. 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 risks and uncertainties, including, but
not limited to, the cyclicality of the titanium dioxide industry, global
economic and political conditions, changes in global productive capacity,
changes in customer inventory levels, changes in product pricing, changes in
product costing, changes in foreign currency exchange rates, competitive
technology positions, operating interruptions (including, but not limited to,
labor disputes, leaks, fires, explosions, unscheduled downtime, transportation
interruptions, war and terrorist activities), the outcome of tax controversies
and other contingencies, and other risks and uncertainties detailed in the
Company's Securities and Exchange Commission filings. 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 publicly or revise such statements, whether as
a result of new information, future events or otherwise. The Company's 2003
results are subject to completion of an audit and the filing of its 2003 Annual
Report on Form 10-K.
KRONOS WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share and metric ton data)
(Unaudited)
Three months ended Year ended
December 31, December 31,
-----------------------------------------------------
2002 2003 2002 2003
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Net sales $ 211.9 $ 245.6 $ 875.2 $ 1,008.2
Cost of sales 161.8 175.7 671.8 739.2
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Gross margin 50.1 69.9 203.4 269.0
Selling, general and administrative expense 29.6 34.3 107.7 124.4
Other operating income (expense):
Currency transaction gains (losses), net .2 (3.4) (.6) (7.7)
Disposition of property and equipment (1.1) (.2) (.6) (.5)
Other income .1 .1 .5 .4
Corporate expense (.9) (1.5) (3.3) (4.2)
Other expense - (.1) (.2) (.1)
-----------------------------------------------------
Income from operations 18.8 30.5 91.5 132.5
Other income (expense):
Interest expense to affiliates (.1) (1.2) (12.3) (1.8)
Interest income from affiliates .1 - 20.7 .7
Trade interest income .4 .2 1.7 .7
Other interest income .2 - .7 .2
Foreign currency transaction gain - - 6.3 -
Interest expense (7.6) (8.3) (16.8) (33.0)
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Income before income taxes and minority interest 11.8 21.2 91.8 99.3
Provision for income taxes 2.6 8.1 25.5 11.7
Minority interest in after-tax earnings - - - .1
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Net income $ 9.2$ 13.1 $ 66.3 $ 87.5
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Basic and diluted net income per share $ .19$ .27 $ 1.35 $ 1.79
=====================================================
Basic and diluted weighted average shares used in the
calculation of net income per share 48.9 48.9 48.9 48.9
Other Data - metric tons in thousands:
Sales volume 102.4 111.7 454.8 462.0
Production volume 107.1 121.9 441.9 476.1
KRONOS WORLDWIDE, INC.
RECONCILIATION OF SEGMENT PROFIT TO
INCOME FROM OPERATIONS
(In millions)
(Unaudited)
Three months ended Year ended
December 31, December 31,
-----------------------------------------------------
2002 2003 2002 2003
-----------------------------------------------------
Segment profit $ 20.1 $ 32.2 $ 96.5 $ 137.4
Adjustments:
Trade interest income (.4) (.2) (1.7) (.7)
Corporate expense (.9) (1.5) (3.3) (4.2)
-----------------------------------------------------
Income from operations $ 18.8 $ 30.5 $ 91.5 $ 132.5
=====================================================
RECONCILIATION OF PERCENT CHANGE IN
AVERAGE SELLING PRICES
(Unaudited)
Percent change- Percent change-
Three months ended Year ended
December 31, December 31,
2003 vs. 2002 2003 vs. 2002
-----------------------------------------------------
Percent change in average selling prices:
Using actual foreign currency exchange rates +8% +13%
Impact of changes in foreign currency exchange rates - 10% - 10%
-----------------------------------------------------
In billing currencies - 2% + 3%
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