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)
August
6, 2007
Kronos
Worldwide, Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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1-31763
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76-0294959
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(State
or other jurisdiction of incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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5430
LBJ Freeway, Suite 1700, Dallas, Texas
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75240-2697
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code
(972)
233-1700
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(Former
name or former address, if changed since last report.)
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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):
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR
240.13e-4(c))
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Item
2.02
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Results
of Operations and Financial
Condition.
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Item
7.01
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Regulation
FD Disclosure.
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The
registrant hereby furnishes the information set forth in its press release
issued on August 6, 2007, 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 U.S. Securities
and
Exchange Commission shall not incorporate this information by reference,
except
as otherwise expressly stated in such filing.
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Item
9.01
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Financial
Statements and Exhibits.
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(d)
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Exhibits
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Item
No.
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Exhibit
Index
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99.1
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Press
release dated August 6, 2007 issued by the
registrant.
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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.
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Kronos
Worldwide, Inc.
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(Registrant)
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By: /s/
Gregory M. Swalwell
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Date:
August 6, 2007
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Gregory
M. Swalwell, Vice President, Finance
and
Chief Financial Officer
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INDEX
TO EXHIBITS
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Item
No.
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Exhibit
Index
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99.1
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Press
release dated August 6, 2007 issued by the
registrant.
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KRONOS
WORLDWIDE REPORTS SECOND QUARTER RESULTS
DALLAS,
TEXAS…August 6, 2007…Kronos Worldwide, Inc. (NYSE:KRO) today reported break even
operations for the second quarter of 2007 compared with net income of $12.8
million, or $.26 per diluted share, in the second quarter of
2006. For the first six months of 2007, Kronos reported net income of
$12.9 million, or $.26 per diluted share, compared with net income of $28.5
million, or $.58 per diluted share, in the first six months of
2006. The Company’s results in the second quarter of 2007 include an
$8.7 million non-cash provision for income taxes, as discussed
below.
Net
sales
of $342.6 million in the second quarter of 2007 were $2.5 million, or 1%, lower
than the second quarter of 2006. Net sales of $656.6 million
for the first six months of 2007 were $7.2 million, or 1%, higher than the
first
six months of 2006. Net sales decreased in the second quarter of 2007
primarily due to lower average TiO2 selling
prices and
sales volumes, partially offset by the favorable effect of fluctuations in
foreign currency exchange rates which increased sales by approximately $15
million. For the year-to-date period, net sales increased due to the
favorable effect of fluctuations in foreign currency exchange rates, increasing
sales by approximately $31 million. This increase was partially
offset by lower average TiO2 selling
prices and
sales volumes. 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 second
quarter of 2007 was $25.5 million compared with $37.3 million in the second
quarter of 2006, and was $56.6 million for the first six months of 2007 compared
with $74.5 million for the first six months of 2006. Segment profit
decreased in the second quarter of 2007 compared to the second quarter 2006
due
to lower average TiO2 selling
prices and
sales and production volumes and slightly higher raw material costs, partially
offset by the positive effect of fluctuations in foreign currency exchange
rates
which increased segment profit by approximately $4 million. Full year
segment profit decreased primarily due to lower average TiO2 selling
prices and
sales volumes and higher raw material and energy costs, partially offset by
the
positive effect of fluctuations in foreign currency exchange rates which
increased segment profit by approximately $7 million.
The
Company’s second quarter 2007 TiO2 sales volumes
decreased 2% from the second quarter of 2006, and volumes were 1% lower in
the
year-to-date period, as higher sales volumes in Europe and export markets were
more than offset by lower volumes in North America. The Company’s TiO2 production
volumes
were 2% lower and 2% higher in the second quarter and first six months of 2007
respectively, as compared to the same periods in 2006, with TiO2 production
volumes
in the first six months of 2007 being a record for Kronos. The
Company’s finished goods inventories at June 30, 2007, which represented
approximately 2 months of average sales, were lower compared to March 31,
2007.
The
$22.3
million loss on prepayment of debt in the second quarter of 2006 ($14.8 million,
or $.30 per diluted share, net of income tax benefit) relates to Company’s May
2006 redemption of its 8.875% Senior Secured Notes, using the proceeds from
its
April 2006 issuance of 6.5% Senior Secured Notes. Interest expense
was lower in the 2007 periods due primarily to such replacement of the 8.875%
Notes with the 6.5% Notes.
The
Company’s provision for income taxes in the second quarter of 2007 includes an
$8.7 million non-cash charge ($.18 per diluted share) related to the adjustment
of certain tax attributes of the Company’s German subsidiary. The
Company’s income tax benefit in the first six months of 2006 includes an
aggregate tax benefit of $12.6 million related to the withdrawal of certain
income tax assessments previously made by the Belgium and Norwegian tax
authorities, the favorable resolution of certain income tax issues related
to
Belgium and Germany and a the enactment of a reduction in Canadian income tax
rates. Substantially all of this aggregate income tax benefit
was recognized in the second quarter of 2006.
Effective
December 31, 2006 the Company adopted a new accounting standard related to
planned major maintenance expense. Under the new standard, the
Company no longer accrues the cost of planned major maintenance expense in
advance but instead recognizes the cost of planned major maintenance when
incurred. The new standard was adopted retroactively, and accordingly
the Company’s net income in the second quarter of 2006 is approximately $.8
million, or $.02 per diluted share, lower than previously
reported. The effect of adopting the new standard did not have a
material impact on the 2006 year-to-date results.
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:
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·
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Future
supply and demand for the Company’s
products,
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·
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The
extent of the dependence of certain of the Company’s businesses on certain
market sectors,
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·
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The
cyclicality of the Company's
businesses,
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·
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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),
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·
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Changes
in raw material and other operating costs (such as energy
costs),
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·
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The
possibility of labor disruptions,
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·
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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),
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·
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Competitive
products and substitute products,
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·
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Customer
and competitor strategies,
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·
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Potential
consolidation of our competitors
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·
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The
impact of pricing and production
decisions,
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·
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Competitive
technology positions,
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·
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The
introduction of trade barriers,
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·
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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),
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·
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Operating
interruptions (including, but not limited to, labor disputes, leaks,
natural disasters, fires, explosions, unscheduled or unplanned downtime
and transportation interruptions),
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·
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The
timing and amounts of insurance
recoveries,
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·
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The
ability of the Company to renew or refinance credit
facilities,
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·
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The
ultimate outcome of income tax audits, tax settlement initiatives
or other
tax matters,
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·
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The
ultimate ability to utilize income tax attributes or changes in income
tax
rates related to such attributes, the benefit of which has been recognized
under the more-likely-than-not recognition
criteria,
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·
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Environmental
matters (such as those requiring emission and discharge standards
for
existing and new facilities),
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·
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Government
laws and regulations and possible changes
therein,
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·
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The
ultimate resolution of pending litigation,
and
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·
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Possible
future litigation.
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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:
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·
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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.
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Kronos
Worldwide, Inc. is a major international producer of titanium dioxide
pigments.
KRONOS
WORLDWIDE, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(In
millions, except per share and metric ton data)
(Unaudited)
|
Three
months ended
June
30,
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Six
months ended
June
30,
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|||||||||||||||
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2006
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2007
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2006
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2007
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Net
sales
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$ |
345.1
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$ |
342.6
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$ |
649.4
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$ |
656.6
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||||||||
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Cost
of sales
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264.2
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279.0
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492.7
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522.6
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Gross
margin
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80.9
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63.6
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156.7
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134.0
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||||||||||||
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Selling,
general and administrative expense
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41.3
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40.7
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79.1
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80.1
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||||||||||||
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Other
operating income (expense):
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||||||||||||||||
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Currency
transactions, net
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(2.0 | ) |
2.2
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(2.9 | ) |
2.1
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||||||||||
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Disposition
of property & equipment
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(.7 | ) | (.1 | ) | (1.1 | ) | (.3 | ) | ||||||||
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Other
income, net
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-
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.2
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-
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.2
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||||||||||||
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Corporate
expense
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(1.3 | ) | (1.6 | ) | (2.6 | ) | (3.0 | ) | ||||||||
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Income
from operations
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35.6
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23.6
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71.0
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52.9
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||||||||||||
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Other
income (expense):
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||||||||||||||||
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Trade
interest income
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.4
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.3
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.9
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.7
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||||||||||||
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Other
interest income
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1.0
|
.1
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1.0
|
.3
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||||||||||||
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Loss
on prepayment of debt
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(22.3 | ) |
-
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(22.3 | ) |
-
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||||||||||
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Interest
expense
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(13.1 | ) | (9.8 | ) | (23.8 | ) | (19.3 | ) | ||||||||
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Income
before income taxes
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1.6
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14.2
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26.8
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34.6
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||||||||||||
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Provision
for income taxes (benefit)
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(11.2 | ) |
14.2
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(1.7 | ) |
21.7
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||||||||||
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Net
income
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$ |
12.8
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$ |
-
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$ |
28.5
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$ |
12.9
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||||||||
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Basic
and diluted net income per share
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$ |
.26
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$ |
-
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$ |
.58
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$ |
.26
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||||||||
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Basic
and diluted weighted-average shares used in the calculation of net
income per share
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48.9
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49.0
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48.9
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49.0
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||||||||||||
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TiO2
data – metric
tons in thousands:
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||||||||||||||||
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Sales
volumes
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139
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137
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264
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262
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||||||||||||
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Production
volumes
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130
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128
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257
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261
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||||||||||||
KRONOS
WORLDWIDE, INC.
RECONCILIATION
OF SEGMENT PROFIT TO
INCOME
FROM OPERATIONS
(In
millions)
(Unaudited)
|
Three
months ended
June
30,
|
Six
months ended
June
30,
|
|||||||||||||||
|
2006
|
2007
|
2006
|
2007
|
|||||||||||||
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Segment
profit
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$ |
37.3
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$ |
25.5
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$ |
74.5
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$ |
56.6
|
||||||||
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Adjustments:
|
||||||||||||||||
|
Trade
interest income
|
(.4 | ) | (.3 | ) | (.9 | ) | (.7 | ) | ||||||||
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Corporate
expense
|
(1.3 | ) | (1.6 | ) | (2.6 | ) | (3.0 | ) | ||||||||
|
Income
from operations
|
$ |
35.6
|
$ |
23.6
|
$ |
71.0
|
$ |
52.9
|
||||||||
IMPACT
OF
PERCENTAGE CHANGE IN SALES
(Unaudited)
|
Three
months ended
June
30,
2007
vs. 2006
|
Six
months ended
June
30,
2007
vs. 2006
|
|||||||
|
Percent
change in sales:
|
||||||||
|
TiO2
product
pricing
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(4)%
|
(3)%
|
||||||
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TiO2
sales
volume
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(2)%
|
(1)%
|
||||||
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TiO2
product
mix
|
1
%
|
-
%
|
||||||
|
Changes
in foreign currency exchange rates
|
4
%
|
5
%
|
||||||
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Total
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(1)%
|
1
%
|
||||||