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)
November 8, 2004
Kronos Worldwide, Inc.
(Exact name of Registrant as specified in its charter)
New Jersey 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)
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 communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
Item 7.01 Regulation FD Disclosure.
Pursuant to Items 2.02 and 7.01 of this current report, the registrant
hereby furnishes the information set forth in its press release issued on
November 8, 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.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Item No. Exhibit Index
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99.1 Press Release dated November 8, 2004
issued by the registrant.
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: November 8, 2004
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- --------------------------------------------------
99.1 Press Release dated November 8, 2004 issued by the registrant.
Kronos Worldwide, Inc. Contact: Gregory M. Swalwell
Three Lincoln Centre Vice President, Finance and
5430 LBJ Freeway, Suite 1700 Chief Financial Officer
Dallas, TX 75240-2697 (972) 233-1700
- --------------------------------------------------------------------------------
News Release
- --------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
[LOGO GOES HERE]
KRONOS WORLDWIDE REPORTS THIRD QUARTER RESULTS
DALLAS, TEXAS...November 8, 2004...Kronos Worldwide, Inc. (NYSE:KRO) today
reported net income for the third quarter of 2004 of $10.0 million, or $.21 per
diluted share, compared with net income of $16.0 million, or $.33 per diluted
share, in the third quarter of 2003. For the first nine months of 2004, Kronos
reported net income of $287.3 million, or $5.87 per diluted share, compared with
net income of $74.4 million, or $1.52 per diluted share, in the first nine
months of 2003. The increase in net income in the 2004 year-to-date period is
primarily due to certain income tax benefits recognized in the second quarter of
2004, as described herein.
Sales of $286.1 million in the third quarter of 2004 were $43.2 million, or 18%,
higher than the third quarter of 2003, and sales increased $82.6 million, or
11%, to $845.1 million for the first nine months of 2004 as compared to the
first nine months of 2003, as the favorable effect of fluctuations in foreign
currency exchange rates, which increased sales by approximately $11 million and
$46 million, respectively, and higher TiO2 sales volumes more than offset the
impact of lower average TiO2 selling prices.
The Company's TiO2 segment profit (see description of non-GAAP information
below) for the third quarter of 2004 was $29.8 million compared with $35.4
million in the third quarter of 2003, and was $96.2 million for the first nine
months of 2004 compared with $105.2 million for the first nine months of 2003.
Segment profit comparability was impacted principally by higher sales and
production volumes and lower average TiO2 selling prices. Fluctuations in
foreign currency exchange rates favorably impacted segment profit by
approximately $7 million for the first nine months of 2004 as compared to the
same period in 2003, while the effect of currency exchange rate fluctuations was
not significant for the quarter. In addition, segment profit in the first nine
months of 2004 includes income in the second quarter of $6.3 million ($4.1
million, or $.08 per diluted share, net of income taxes) related to settlement
of a contract dispute with a certain customer.
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 third quarter and first nine months of 2004 were 1% and
3%, respectively, lower than the comparable periods 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 third
quarter of 2004 were 3% higher than the third quarter of 2003 and 2% higher for
the first nine months of 2004 compared with 2003. Reflecting the partial
implementation of prior price increase announcements, the Company's average
selling prices in billing currencies in the third quarter of 2004 were 3% higher
compared to the second quarter of 2004, the first quarter with an upward trend
in selling prices since the third quarter of 2003.
The Company's third quarter 2004 TiO2 sales volumes increased 16% from the third
quarter of 2003, as higher sales volumes in Europe, United States and export
markets more than offset the effect of lower volumes in Canada. TiO2 sales
volumes for the first nine months of 2004 increased 9% from the first nine
months of 2003. The Company's TiO2 production volumes in the third quarter of
2004 were 5% higher than the third quarter of 2003, and 3% higher for the first
nine months of 2004 compared to 2003, with operating rates at near full capacity
in all periods presented. Finished goods inventories at September 30, 2004,
representing 1.6 months of average sales, were lower as compared to December 31,
2003 levels. Sales and production volumes in the first nine months of 2004 were
both new records for Kronos.
Interest expense to affiliates in the 2004 periods relates to the Company's $200
million 9% long-term note payable to affiliates issued in December 2003. Other
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 $500,000 and
$2.2 million in the third quarter and first nine months of 2004, respectively,
as compared to the year-ago periods.
The Company's income tax benefit in the first nine months of 2004 includes a
second quarter $245.6 million tax benefit ($5.02 per diluted share) related to
the reversal of a deferred income tax asset valuation allowance attributable to
the Company's income tax attributes in Germany (principally net operating loss
carryforwards). The reversal of the German valuation allowance reflects the
Company's revised estimate of its ability to utilize its German net operating
loss carryforwards in the future under the "more-likely-than-not" recognition
criteria. In the second quarter of 2003, the Company recognized a $24.6 million
income tax benefit ($.50 per diluted share) related to the previously-reported
favorable German court ruling concerning its claim for refund suit.
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 matters,
o The ultimate ability to utilize income tax attributes, the benefit of
which has been recognized under the "more-likely-than-not" recognition
criteria,
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 forecast 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 TiO2 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 TiO2 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 Nine months ended
September 30, September 30,
-----------------------------------------------------
-----------------------------------------------------
2003 2004 2003 2004
-----------------------------------------------------
-----------------------------------------------------
Net sales $ 242.9 $ 286.1 $ 762.5 $ 845.1
Cost of sales 177.4 219.4 563.5 649.1
---------- --------- ---------- ---------
Gross margin 65.5 66.7 199.0 196.0
Selling, general and administrative expense 29.7 35.8 90.1 106.0
Other operating income (expense):
Currency transactions, net (.5) (1.4) (4.3) (.8)
Contract dispute settlement - - - 6.3
Other expense (.1) - - -
Corporate expense (.9) (.6) (2.6) (1.9)
---------- -------- ---------- ----------
Income from operations 34.3 28.9 102.0 93.6
Other income (expense):
Trade interest income .2 .3 .6 .7
Interest income from affiliates - - .7 -
Other interest income .1 .3 .1 .6
Interest expense to affiliates - (4.5) (.7) (13.5)
Other interest expense (8.4) (8.7) (24.7) (26.5)
---------- -------- ----------- ----------
Income before income taxes 26.2 16.3 78.0 54.9
Income tax expense (benefit) 10.2 6.3 3.6 (232.4)
---------- ---------- ----------- ----------
Net income $ 16.0 $ 10.0 $ 74.4 $ 287.3
========== ========= =========== ==========
Basic and diluted net income per share $ .33 $ .21 $ 1.52 $ 5.87
========== ========= =========== ==========
Basic and diluted weighted-average shares
used in the calculation of net income per share 48.9 48.9 48.9 48.9
TiO2 data - metric tons in thousands:
Sales volumes 110.9 128.1 350.3 382.7
Production volumes 117.5 123.3 354.2 363.0
KRONOS WORLDWIDE, INC.
RECONCILIATION OF SEGMENT PROFIT TO
INCOME FROM OPERATIONS
(In millions)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
-----------------------------------------------------
-----------------------------------------------------
2003 2004 2003 2004
-----------------------------------------------------
-----------------------------------------------------
Segment profit $ 35.4 $ 29.8 $ 105.2 $ 96.2
Adjustments:
Trade interest income (.2) (.3) (.6) (.7)
Corporate expense (.9) (.6) (2.6) (1.9)
--------- --------- --------- --------
Income from operations $ 34.3 $ 28.9 $ 102.0 $ 93.6
========= ========= ========= ========
RECONCILIATION OF PERCENTAGE CHANGE IN
AVERAGE TiO2 SELLING PRICES
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2004 vs. 2003 2004 vs. 2003
------------------ -----------------
Percentage change in average selling prices:
Using actual foreign currency exchange rates +3% +2%
Impact of changes in foreign currency exchange rates -4% -5%
-------- --------
In billing currencies -1% -3%
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