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: August 3, 2005
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)
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 August
3, 2005, 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 August 3, 2005 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: August 3, 2005
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- --------------------------------------------------
99.1 Press release dated August 3, 2005 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
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FOR IMMEDIATE RELEASE
[LOGO GOES HERE]
KRONOS WORLDWIDE REPORTS SECOND QUARTER RESULTS
DALLAS, TEXAS...August 3, 2005...Kronos Worldwide, Inc. (NYSE:KRO) today
reported net income for the second quarter of 2005 of $32.9 million, or $.67 per
diluted share, compared with net income of $284.8 million, or $5.82 per diluted
share, in the second quarter of 2004. For the first six months of 2005, Kronos
reported net income of $54.3 million, or $1.11 per diluted share, compared with
net income of $294.6 million, or $6.02 per diluted share, in the first six
months of 2004. The primary reason for the difference in net income between the
periods is due to certain income tax benefits recorded in the second quarter of
2004, as described herein.
Net sales of $311.7 million in the second quarter of 2005 were $15.9 million, or
5%, higher than the second quarter of 2004. Net sales of $603.5 million for the
first six months of 2005 were $44.4 million, or 8%, higher than the first six
months of 2004. Both increases are due to the net effects of higher average TiO2
selling prices, lower sales volumes and the favorable effect of fluctuations in
foreign currency exchange rates, which increased sales by approximately $10
million and $21 million, respectively.
The Company's TiO2 segment profit (see description of non-GAAP information
below) for the second quarter of 2005 was $59.2 million compared with $40.1
million in the second quarter of 2004, and was $107.2 million for the first six
months of 2005 compared with $66.4 million for the first six months of 2004.
Segment profit improved due to the net effects of higher average TiO2 selling
prices, higher production volumes and lower sales volumes. Furthermore,
fluctuations in foreign currency exchange rates favorably impacted segment
profit comparisons by approximately $2 million and $3 million for the quarter
and year-to-date periods, respectively. Segment profit in the second quarter of
2004 includes $6.3 million of income ($4.1 million, or $.08 per diluted share,
net of income taxes) related to the settlement of a contract dispute with a
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 second quarter and first six months of 2005 were 11% and
10% higher than the respective periods of 2004. 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 second quarter
of 2005 were 15% higher than the second quarter of 2004 and 14% higher for the
first six months of 2005 compared with 2004. Reflecting the continued
implementation of price increase announcements, the Company's average selling
prices in billing currencies in the second quarter of 2005 were 2% higher
compared to the first quarter of 2005.
The Company's second quarter 2005 TiO2 sales volumes decreased 10% from the
second quarter of 2004, as sales volumes were lower in all markets. TiO2 sales
volumes for the first six months of 2005 decreased 7% from the first six months
of 2004. The Company's TiO2 production volumes were 4% higher in each of the
second quarter and first six months of 2005 as compared to the same periods in
2004, with operating rates at near full capacity in all periods. The Company's
finished goods inventories at June 30, 2005, which represented 2 months of
average sales, were higher compared to March 31, 2005. Production volume in the
first six months of 2005 was a new record for Kronos.
The Company's results in the second quarter of 2005 include a securities
transaction gain of $5.4 million ($3.5 million, or $.07 per diluted share, net
of income taxes) related to a gain on the sale of the company's passive interest
in a Norwegian smelting operation.
Interest expense to affiliates for the second quarter and six months ended June
30, 2004 relates primarily to the Company's $200 million 9% long-term note
payable to affiliates issued in December 2003, which was prepaid in November
2004. Other interest expense increased due primarily to higher levels of
indebtedness resulting from the issuance of an additional (euro)90 million
principal amount of the Company's Senior Secured Notes in November 2004.
Additionally, 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)285 million Senior Secured Notes issued
in June 2002 (and outstanding during the second quarter of 2004) by
approximately $400,000 and $1 million in the second quarter and first six months
of 2005, respectively, as compared to the year-ago periods.
As previously-reported, the Company's income tax benefit in the 2004 periods
includes a second quarter $268.6 million tax benefit ($5.49 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 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. The factors that
could cause actual future results to differ materially include, but are not
limited to, the following:
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 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 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 Six months ended
June 30, June 30,
-----------------------------------------------------
-----------------------------------------------------
2004 2005 2004 2005
-----------------------------------------------------
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Net sales $ 295.8 $ 311.7 $ 559.1 $ 603.5
Cost of sales 227.5 217.1 429.8 424.7
---------- --------- ---------- ---------
Gross margin 68.3 94.6 129.3 178.8
Selling, general and administrative expense 35.0 37.8 70.2 75.1
Other operating income (expense):
Currency transaction gains, net .3 2.4 .6 3.3
Contract dispute settlement 6.3 - 6.3 -
Other income (expense) - (.1) - -
(.8) (1.4) (1.3) (2.9)
---------- --------- --------- ----------
Income from operations 39.1 57.7 64.7 104.1
Other income (expense):
Trade interest income .2 .1 .4 .2
Other interest income .2 .3 .4 .7
Securities transaction gain - 5.4 - 5.4
Interest expense to affiliates (4.5) - (9.0) -
Other interest expense (8.6) (11.6) (17.8) (23.4)
----------- ---------- ---------- ----------
Income before income taxes 26.4 51.9 38.7 87.0
Income tax expense (benefit) (258.4) 19.0 (255.9) 32.7
----------- ----------- ---------- ----------
Net income $ 284.8 $ 32.9 $ 294.6 $ 54.3
=========== ========== =========== ==========
Basic and diluted net income per share $ 5.82 $ .67 $ 6.02 $ 1.11
=========== =========== ============ ==========
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 136 122 255 237
Production volumes 122 127 240 249
KRONOS WORLDWIDE, INC.
RECONCILIATION OF SEGMENT PROFIT TO
INCOME FROM OPERATIONS
(In millions)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
-----------------------------------------------------
-----------------------------------------------------
2004 2005 2004 2005
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Segment profit $ 40.1 $ 59.2 $ 66.4 $ 107.2
Adjustments:
Trade interest income (.2) (.1) (.4) (.2)
Corporate expense (.8) (1.4) (1.3) (2.9)
---------- --------- --------- --------
Income from operations $ 39.1 $ 57.7 $ 64.7 $ 104.1
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RECONCILIATION OF PERCENTAGE CHANGE IN
AVERAGE SELLING PRICES
(Unaudited)
Three months ended Six months ended
June 30, June 30,
2005 vs. 2004 2005 vs. 2004
---------------- ----------------
Percentage change in average selling prices:
Using actual foreign currency exchange rates +15% +14%
Impact of changes in foreign currency exchange rates -4% -4%
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In billing currencies +11% +10%
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