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 6, 2006
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Kronos Worldwide, Inc.
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(Exact name of Registrant as specified in its charter)
Delaware 1-31763 76-0294959
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(972) 233-1700
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(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 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 November
6, 2006, 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 6, 2006 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/ A. Andrew R. Louis
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A. Andrew R. Louis
Secretary
Date: November 7, 2006
INDEX TO EXHIBITS
Exhibit No. Description
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99.1 Press Release dated November 6, 2006 issued by the registrant.
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 THIRD QUARTER RESULTS
DALLAS, TEXAS...November 6, 2006...Kronos Worldwide, Inc. (NYSE:KRO) today
reported net income for the third quarter of 2006 of $11.6 million, or $.24 per
diluted share, compared with net income of $8.0 million, or $.16 per diluted
share, in the third quarter of 2005. For the first nine months of 2006, Kronos
reported net income of $40.2 million, or $.82 per diluted share, compared with
net income of $62.2 million, or $1.27 per diluted share, in the first nine
months of 2005.
Net sales of $331.6 million in the third quarter of 2006 were $39.5 million, or
14%, higher than the third quarter of 2005. Net sales of $981.0 million for the
first nine months of 2006 were $85.3 million, or 10%, higher than the first nine
months of 2005. Net sales increased in the third quarter of 2006 primarily due
to higher TiO2 sales volumes and the favorable effect of fluctuations in foreign
currency exchange rates (which increased sales by approximately $9 million),
partially offset by lower average TiO2 selling prices. For the year-to-date
period, net sales increased due to higher TiO2 sales volumes, partially offset
by the unfavorable effect of fluctuations in foreign currency exchange rates
(which decreased sales by approximately $11 million). The Company's average TiO2
selling prices in the first nine months of 2006 approximated those of the first
nine months of 2005. The table at the end of this release shows how each of
these items impacted the overall increase in sales.
The Company's TiO2 segment profit (see description of non-GAAP information
below) for the third quarter of 2006 was $36.2 million compared with $39.5
million in the third quarter of 2005, and was $110.8 million for the first nine
months of 2006 compared with $146.8 million for the first nine months of 2005.
Segment profit decreased in the third quarter of 2006 as the favorable effect of
higher sales volumes was more than offset by the unfavorable effect of lower
average TiO2 selling prices, higher manufacturing costs, particularly raw
materials and energy costs and the effect of fluctuations in foreign currency
exchange rates, which decreased segment profit by approximately $3 million. Full
year segment profit decreased as the favorable effect of higher sales volumes
was more than offset by the unfavorable effect of higher raw materials and
energy costs and the effect of fluctuations in foreign currency exchange rates,
which decreased segment profit by approximately $18 million.
The Company's TiO2 sales volumes were 11% higher in both the third quarter and
first nine months of 2006 as compared to the same periods in 2005, with higher
sales volumes in the US, Europe and export markets offsetting the effects of
lower sales volumes in Canada. The Company's TiO2 production volumes were 3%
higher in both the third quarter and first nine months of 2006 as compared to
the same periods in 2005, with operating rates at near full capacity in all
periods. The Company's finished goods inventories at September 30, 2006, which
represent less than 2 months of average sales, were lower compared to June 30,
2006. The Company's TiO2 sales and production volumes in the first nine months
of 2006 were both records for Kronos.
The Company's results for the first nine months of 2005 include a second quarter
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.
As previously reported, in April 2006 the Company's wholly-owned subsidiary,
Kronos International, Inc. ("KII") issued an aggregate of euro 400 million
principal amount of new 6.5% Senior Secured Notes due April 2013. KII used the
proceeds from the issuance of the 6.5% Senior Secured Notes to redeem all of its
8.875% Senior Secured Notes in May 2006 at 104.437% of the aggregate principal
amount of euro 375 million. The Company recognized a $22.3 million pre-tax
charge ($14.8 million, or $.30 per diluted share, net of income tax benefit) in
the second quarter of 2006 related to the early extinguishment of the 8.875%
Senior Secured Notes. Other interest income increased for the third quarter and
the first nine months of 2006, due primarily to the interest earned in the
second quarter from the net proceeds of the new 6.5% Senior Secured Notes which
were held in escrow for approximately one month until the 8.875% Senior Secured
Notes were redeemed.
The Company's effective income tax rate varies significantly from the U.S.
statutory federal income tax rate in 2006 due primarily to an aggregate net
income tax benefit of $9.2 million, or $.19 per diluted share, related to the
net effect of the withdrawal of certain income tax assessments previously made
by the Belgian and Norwegian tax authorities, the favorable resolution of
certain income tax issues related to the Company's German and Belgian
operations, the unfavorable resolution of certain other income tax issues
related to the Company's German operations, an increase in the Company's income
tax contingency reserve principally related to ongoing income tax audits in
Germany and the enactment of a reduction in the Canadian federal income tax
rate. Such net $9.2 million income tax benefit includes a net income tax benefit
of $12.6 million recognized in the first six months of 2006, and a net $3.4
million provision for income taxes, or $.07 per diluted share, in the third
quarter of the year. The Company's provision for income taxes in 2005 includes a
third quarter aggregate non-cash income tax expense of $5.0 million, or $.10 per
diluted share, related to the effect of developments of certain the Company's
non-U.S. income tax audits.
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 extent of the dependence of certain of the Company's businesses on
certain market sectors,
o The cyclicality of the Company's businesses,
o Customer inventory levels (such as the extent to which the Company's
customers may, from time to time, accelerate purchases of TiO2 in advance
of anticipated price increases or defer purchases of TiO2 in advance of
anticipated price decreases),
o Changes in raw material and other operating costs (such as energy costs),
o The possibility of labor disruptions,
o General global economic and political conditions (such as changes in the
level of gross domestic product in various regions of the world and the
impact of such changes on demand for TiO2),
o Competitive products and substitute products,
o Customer and competitor strategies,
o The impact of pricing and production decisions,
o Competitive technology positions,
o The introduction of trade barriers,
o Fluctuations in currency exchange rates (such as changes in the exchange
rate between the U.S. dollar and each of the euro, the Norwegian kroner and
the Canadian dollar),
o Operating interruptions (including, but not limited to, labor disputes,
leaks, natural disasters, fires, explosions, unscheduled or unplanned
downtime and transportation interruptions),
o The timing and amounts of insurance recoveries,
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 Environmental matters (such as those requiring emission and discharge
standards for existing and new facilities),
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 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:
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,
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2005 2006 2005 2006
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Net sales $ 292.1 $ 331.6 $ 895.7 $ 981.0
Cost of sales 216.2 256.2 640.9 748.8
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Gross margin 75.9 75.4 254.8 232.2
Selling, general and administrative expense 36.9 39.4 112.0 118.5
Other operating income (expense):
Currency transaction gains (losses), net .2 - 3.5 (2.9)
Disposition of property & equipment (.3) (.6) (.4) (1.7)
Other income .3 .2 .4 .2
(1.0) (1.3) (3.9) (3.9)
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Income from operations 38.2 34.3 142.4 105.4
Other income (expense):
Trade interest income .3 .6 .5 1.5
Other interest income .1 .2 .7 1.2
Securities transaction gain - - 5.4 -
Loss on prepayment of debt - - - (22.3)
Interest expense (10.6) (9.7) (34.0) (33.5)
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Income before income taxes 28.0 25.4 115.0 52.3
Provision for income taxes 20.0 13.8 52.8 12.1
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Net income $ 8.0 $ 11.6 $ 62.2 $ 40.2
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Basic and diluted net income per share $ .16 $ .24 $ 1.27 $ .82
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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 119 132 356 396
Production volumes 122 126 371 383
KRONOS WORLDWIDE, INC.
RECONCILIATION OF SEGMENT PROFIT TO
INCOME FROM OPERATIONS
(In millions)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
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2005 2006 2005 2006
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Segment profit $ 39.5 $ 36.2 $ 146.8 $ 110.8
Adjustments:
Trade interest income (.3) (.6) (.5) (1.5)
Corporate expense (1.0) (1.3) (3.9) (3.9)
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Income from operations $ 38.2 $ 34.3 $ 142.4 $ 105.4
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IMPACT OF PERCENTAGE CHANGE IN SALES
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2006 vs. 2005 2006 vs. 2005
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Percent change in sales:
TiO2 product pricing -1% -%
TiO2 sales volume +11% +11%
TiO2 product mix +1% -%
Changes in foreign currency exchange rates +3% -1%
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Total + 14% + 10%
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