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
5, 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 November 5, 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 November 5, 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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Valhi,
Inc.
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(Registrant)
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By: /s/
Gregory M. Swalwell
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Date: November
6, 2007
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Gregory
M. Swalwell, Vice President,
Finance
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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 November 5, 2007 issued by the
registrant.
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KRONOS
WORLDWIDE REPORTS THIRD QUARTER RESULTS
DALLAS,
TEXAS…November 5, 2007…Kronos Worldwide, Inc. (NYSE:KRO) today reported a net
loss of $81.2 million, or $1.66 per diluted share, for the third quarter of
2007
compared with net income of $12.2 million, or $.25 per diluted share, in the
third quarter of 2006. The Company’s results in the third quarter of
2007 include a $90.8 million, or $1.85 per diluted share, non-cash charge for
income taxes, as discussed below. For the first nine months of 2007,
Kronos reported a net loss of $68.3 million, or $1.40 per diluted share,
compared with net income of $40.7 million, or $.83 per diluted share, in the
first nine months of 2006.
Net
sales
of $343.3 million in the third quarter of 2007 were $11.7 million, or 4%, higher
than the third quarter of 2006. Net sales of $999.9 million for
the first nine months of 2007 were $18.9 million, or 2%, higher than the first
nine months of 2006. Net sales increased in the third quarter of 2007
primarily due to higher sales volumes and the favorable effect of fluctuations
in foreign currency exchange rates, which increased sales by approximately
$13
million, partially offset by lower average TiO2 selling
prices. 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 $44 million, and higher sales volumes. This
increase was partially offset by lower average TiO2 selling
prices. The table at the end of this release shows the impact of each
of these items on sales.
The
Company’s TiO2
segment profit (see description of non-GAAP information below) for the third
quarter of 2007 was $24.3 million compared with $37.1 million in the third
quarter of 2006, and was $80.9 million for the first nine months of 2007
compared with $111.6 million for the first nine months of
2006. Segment profit decreased in the third quarter of 2007 compared
to the third quarter 2006 due primarily to lower average TiO2 selling
prices, and
the negative effect of fluctuations in foreign currency exchange rates which
decreased segment profit by approximately $3 million. This decrease was
partially offset by higher sales volumes. Full year segment profit
decreased due to lower average TiO2 selling
prices and
higher manufacturing costs, partially offset by higher sales and production
volumes and the favorable effect of fluctuations in foreign currency exchange
rates, which increased segment profit by approximately $4 million.
The
Company’s third quarter 2007 TiO2 sales volumes
increased 5% from the third quarter of 2006, with higher volumes in North
America and export markets. Volumes were 1% higher in the year-to-date period,
as higher volumes in European and export markets were offset by lower volumes
in
North America. The Company’s TiO2 production
volumes
were comparable in the third quarter of 2007 and were 1% higher for the first
nine months of 2007, as compared to the same periods in 2006. The
Company’s TiO2
sales and production volumes in the first nine months of 2007 were both records
for Kronos. The Company’s finished goods inventories at September 30,
2007, which represented less than 2 months of average sales, were lower compared
to June 30, 2007.
The
$22.3
million loss on prepayment of debt for the first nine months of 2006 ($14.8
million, or $.30 per diluted share, net of income tax benefit) relates to the
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 for the first nine months of 2007
due primarily to the replacement of the 8.875% Notes with the 6.5%
Notes.
The
Company’s provision for income taxes in the third quarter of 2007 includes (i)
a non-cash charge of $90.8 million ($1.85 per diluted share) primarily
related to the reduction in the Company’s net deferred income tax asset in
Germany resulting from the enactment of legislation reducing the income tax
rates and (ii) a $1.2 million income tax benefit ($.02 per diluted share) due
to
a net decrease in the Company’s income tax contingency reserves. As
previously reported, the Company’s provision for income taxes in 2007 includes a
second quarter charge of $8.7 million ($.18 per diluted share) related to the
German tax attribute adjustment.
The
Company’s income tax provision in the first nine months of 2006 includes an
aggregate tax benefit of $9.2 million ($.19 per diluted share) 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, 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 Canadian
income tax rates. 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 $3.4 million provision for income taxes ($.07 per diluted share)
in the third quarter of the year.
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 third quarter of 2006 is approximately $.6
million, or $.01 per diluted share, higher than originally reported ($.5
million, or $.01 per diluted share, in the year-to-date period).
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 tons data)
(Unaudited)
|
Three
months ended
September
30,
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Nine
months ended
September
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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$ |
331.6
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$ |
343.3
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$ |
981.0
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$ |
999.9
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||||||||
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Cost
of sales
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255.3
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276.4
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748.0
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799.0
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||||||||||||
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Gross
margin
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76.3
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66.9
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233.0
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200.9
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||||||||||||
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Selling,
general and administrative expense
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39.4
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41.8
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118.5
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121.9
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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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-
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(1.3 | ) | (2.9 | ) |
.7
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||||||||||
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Disposition
of property & equipment
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(.6 | ) | (.3 | ) | (1.7 | ) | (.6 | ) | ||||||||
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Other
income, net
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.2
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.1
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.2
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.4
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||||||||||||
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Corporate
expense
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(1.3 | ) | (1.5 | ) | (3.9 | ) | (4.5 | ) | ||||||||
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Income
from operations
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35.2
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22.1
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106.2
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75.0
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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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.6
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.7
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1.5
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1.4
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||||||||||||
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Other
interest income
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.2
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-
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1.2
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.3
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||||||||||||
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Loss
on prepayment of debt
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-
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-
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(22.3 | ) |
-
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|||||||||||
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Interest
expense
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(9.7 | ) | (10.0 | ) | (33.5 | ) | (29.3 | ) | ||||||||
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Income
before income taxes
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26.3
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12.8
|
53.1
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47.4
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||||||||||||
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Provision
for income taxes
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14.1
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94.0
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12.4
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115.7
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||||||||||||
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Net
income (loss)
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$ |
12.2
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$ | (81.2 | ) | $ |
40.7
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$ | (68.3 | ) | ||||||
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Basic
and diluted net income (loss) per share
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$ |
.25
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$ | (1.66 | ) | $ |
.83
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$ | (1.40 | ) | ||||||
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Basic
and diluted weighted-average
shares used
in the calculation of net income (loss) per share
|
49.0
|
49.0
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49.0
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49.0
|
||||||||||||
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TiO2
data – metric
tons in thousands:
|
||||||||||||||||
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Sales
volumes
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132
|
138
|
396
|
400
|
||||||||||||
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Production
volumes
|
126
|
126
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383
|
386
|
||||||||||||
KRONOS
WORLDWIDE, INC.
RECONCILIATION
OF SEGMENT PROFIT TO
INCOME
FROM OPERATIONS
(In
millions)
(Unaudited)
|
Three
months ended
September
30,
|
Nine
months ended
September
30,
|
|||||||||||||||
|
2006
|
2007
|
2006
|
2007
|
|||||||||||||
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Segment
profit
|
$ |
37.1
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$ |
24.3
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$ |
111.6
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$ |
80.9
|
||||||||
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Adjustments:
|
||||||||||||||||
|
Trade
interest income
|
(.6 | ) | (.7 | ) | (1.5 | ) | (1.4 | ) | ||||||||
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Corporate
expense
|
(1.3 | ) | (1.5 | ) | (3.9 | ) | (4.5 | ) | ||||||||
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Income
from operations
|
$ |
35.2
|
$ |
22.1
|
$ |
106.2
|
$ |
75.0
|
||||||||
IMPACT
OF
PERCENTAGE CHANGE IN SALES
(Unaudited)
|
Three
months ended
September
30,
2007
vs. 2006
|
Nine
months ended
September
30,
2007
vs. 2006
|
|||||||
|
Percent
change in sales:
|
||||||||
|
TiO2
product
pricing
|
(5 | )% | (4 | )% | ||||
|
TiO2
sales
volume
|
5 | % | 1 | % | ||||
|
TiO2
product
mix
|
- | % | 1 | % | ||||
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Changes
in foreign currency exchange rates
|
4 | % | 4 | % | ||||
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Total
|
4 | % | 2 | % | ||||