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: May 5, 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)
(Former name or address, if changed since last report)
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 May 5, 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: May 5 2004
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- --------------------------------------------------
99.1 Press release dated May 5, 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 FIRST QUARTER RESULTS
DALLAS, TEXAS...May 5, 2004...Kronos Worldwide, Inc. (NYSE:KRO) today reported
net income for the first quarter of 2004 of $9.8 million, or $.20 per diluted
share, compared with income of $16.7 million, or $.34 per diluted share, in the
first quarter of 2003.
Sales of $263.3 million in the first quarter of 2004 were $10.3 million, or 4%,
higher than the first quarter of 2003 as the favorable effect of fluctuations in
foreign currency exchange rates, which increased sales by approximately $21
million, more than offset the impact of lower average selling prices for TiO2.
Despite the increase in sales, TiO2 segment profit (see description of non-GAAP
information below) declined to $26.2 million in the first quarter of 2004
compared with $34.4 million in the first quarter of 2003 due primarily to the
lower average TiO2 selling prices.
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 first quarter of 2004 were 4% lower than the first
quarter of 2003. 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 first quarter of 2004 were 4% higher than the
first quarter of 2003.
The Company's TiO2 sales and production volumes in the first quarter of 2004
approximated its respective sales and production volumes in the first quarter of
2003, with operating rates at near full capacity in both periods. Finished goods
inventories at March 31, 2004, which represented 2.2 months of average sales,
were lower as compared to December 31, 2003.
Interest expense in the first quarter of 2004 increased $5.3 million from the
comparable prior year period primarily due to interest on the Company's $200
million 9% long-term note payable to NL Industries, Inc. that the Company
distributed to NL in December 2003. In addition, interest expense increased due
to relative changes in foreign currency exchange rates, which increased the U.S.
dollar equivalent of interest expense on the Company's euro-denominated Senior
Secured Notes by approximately $1.1 million in the first quarter of 2004 as
compared to the first quarter of 2003.
The Company's effective income tax rate in the first quarter of 2004 was lower
than the first quarter of 2003 due primarily to the utilization of certain
foreign income tax attributes for which the benefit had not previously been
recognized.
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. Among the factors
that could cause actual future results to differ materially include, but are not
limited to:
o Future supply and demand for the Company's products,
o The cyclicality of certain of the Company's businesses,
o Customer inventory levels,
o Changes in raw material and other operating costs,
o The possibility of labor disruptions,
o General global economic and political conditions,
o Competitive products and substitute products,
o Customer and competitor strategies,
o The impact of pricing and production decisions,
o Competitive technology positions,
o Fluctuations in currency exchange rates,
o Operating interruptions,
o The ability of the Company to renew or refinance credit facilities,
o The ultimate outcome of income tax audits, tax settlement initiatives or
other tax controversies, and
o Government laws and regulations and possible changes therein,
o The ultimate resolution of pending litigation, and
o 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 new information, future events
or otherwise.
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, 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.
Kronos Worldwide, Inc. is a major international producer of titanium dioxide
pigments.
KRONOS WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share and metric ton data)
(Unaudited)
Three months ended
March 31,
-----------------------------
2003 2004
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Net sales $ 253.0 $ 263.3
Cost of sales 188.4 202.3
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Gross margin 64.6 61.0
Selling, general and administrative expense 29.4 35.2
Other operating income (expense):
Currency transaction gains (losses), net (1.1) .2
Other, net .1 -
Corporate expense (.8) (.4)
------------- ------------
Income from operations 33.4 25.6
Other income (expense):
Trade interest income .2 .2
Other interest income .4 .2
Interest expense (8.4) (13.7)
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Income before income taxes and minority interest 25.6 12.3
8.9 2.5
------------ ----------
Net income $ 16.7 $ 9.8
============ ==========
Basic and diluted net income per share $ .34 $ .20
============ ==========
Basic and diluted weighted-average shares used in the
calculation of net income per share 48.9 48.9
============= ===========
TiO2 data - metric tons in thousands:
Sales volume 118.4 118.1
Production volume 117.2 116.9
KRONOS WORLDWIDE, INC.
RECONCILIATION OF SEGMENT PROFIT TO
INCOME FROM OPERATIONS
(In millions)
(Unaudited)
Three months ended
March 31,
---------------------------
---------------------------
2003 2004
---------------------------
---------------------------
Segment profit $ 34.4 $ 26.2
Adjustments:
Trade interest income (.2) (.2)
Corporate expense (.8) (.4)
--------- ----------
Income from operations $ 33.4 $ 25.6
========= ==========
RECONCILIATION OF PERCENT CHANGE IN
AVERAGE SELLING PRICES
(Unaudited)
Percent change-
Three months ended
March 31,
2003 vs. 2004
--------------------------
--------------------------
Percent change in average selling prices:
Using actual foreign currency exchange rates +4%
Impact of changes in foreign currency exchange rates -8%
--------
In billing currencies -4%
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