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)
March
12, 2008
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 March 12, 2008, 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 March 12, 2008 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: March
12, 2008
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Gregory
M. Swalwell, Vice President and
Controller
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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 March 12, 2008 issued by the
registrant.
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KRONOS
WORLDWIDE REPORTS FOURTH QUARTER RESULTS
DALLAS,
TEXAS…March 12, 2008…Kronos Worldwide, Inc. (NYSE:KRO) today reported net income
of $1.6 million, or $.03 per diluted share, for the fourth quarter of 2007
compared with net income of $41.3 million, or $.84 per diluted share, in the
fourth quarter of 2006. For the full year of 2007, Kronos reported a
net loss of $66.7 million, or $1.36 per diluted share, compared with net income
of $82.0 million, or $1.67 per diluted share, for the full year of
2006. The Company’s annual results include a net non-cash provision
for income taxes of $97.5 million, or $1.99 per diluted share, in 2007 and a net
non-cash income tax benefit of $34.9 million, or $.71 per diluted share, in
2006, as discussed below.
Net sales
of $310.4 million in the fourth quarter of 2007 were $12.0 million, or 4%,
higher than the fourth quarter of 2006. Net sales of $1,310.3
million for the full year of 2007 were $30.9 million, or 2%, higher than the
full year of 2006. Net sales increased in the fourth 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 $21
million, partially offset by lower average TiO2 selling
prices. For the full year period, net sales increased due to the
favorable effect of fluctuations in foreign currency exchange rates, increasing
sales by approximately $65 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 fourth quarter of
2007 was $11.3 million compared with $39.6 million in the fourth quarter of
2006, and was $92.2 million for the full year of 2007 compared with $151.3
million for full year of 2006. Segment profit decreased in the fourth
quarter of 2007 compared to the fourth quarter 2006 due primarily to lower
average TiO2 selling
prices, higher manufacturing costs (primarily maintenance), and the negative
effect of fluctuations in foreign currency exchange rates which decreased
segment profit by approximately $7 million. This decrease was partially offset
by higher sales volumes and lower utilities costs. Full year segment
profit decreased due to lower average TiO2 selling
prices, higher manufacturing costs and the negative effect of fluctuations in
foreign currency exchange rates which decreased full year segment profit by
approximately $4 million, partially offset by higher sales volumes and lower
utilities costs.
The
Company’s fourth quarter 2007 TiO2 sales
volumes increased 2% from the fourth quarter of 2006, with higher volumes in the
United States and export markets. For the full year of 2007, sales volumes
increased 1% as compared to 2006, as higher volumes in European and export
markets offset the effects of lower volumes in North America. The
Company’s TiO2 sales
volume for 2007 was a record for Kronos. The Company’s TiO2 production
volumes were 6% lower in the fourth quarter of 2007 and were 1% lower for the
full year of 2007, as compared to the same periods in 2006. The
Company’s finished goods inventories at December 31, 2007, which represented
less than 2 months of average sales, were lower compared to December 31,
2006.
The $22.3
million loss on prepayment of debt for the full year 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 2007 due primarily to the replacement of the 8.875% Notes with the
6.5% Notes.
The
Company’s income tax expense in 2007 includes 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, a non-cash charge of $8.7 million
($.18 per diluted share) related to the adjustment of certain German income tax
attributes and a non-cash income tax benefit of $2.0 million ($.04 per diluted
share) related to a net reduction in the Company’s reserve for uncertain
income tax positions.
The
Company’s income tax benefit for 2006 includes an aggregate tax benefit of $34.9
million, or $.71 per diluted share ($25.7 million, or $.52 per diluted share, in
the fourth quarter), 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 audit issues related
to the Company’s German and Belgian operations, the unfavorable resolution of
certain other income tax issues related to the 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.
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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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)
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Three
months ended
December
31,
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Year
ended
December
31,
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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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(Unaudited)
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Net
sales
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$ | 298.4 | $ | 310.4 | $ | 1,279.4 | $ | 1,310.3 | ||||||||
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Cost
of sales
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221.0 | 259.9 | 968.9 | 1,058.9 | ||||||||||||
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Gross
margin
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77.4 | 50.5 | 310.5 | 251.4 | ||||||||||||
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Selling,
general and administrative expense
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39.6 | 40.2 | 158.1 | 162.1 | ||||||||||||
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Other
operating income (expense):
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||||||||||||||||
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Currency
transactions, net
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(.7 | ) | (.5 | ) | (3.6 | ) | .2 | |||||||||
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Disposition
of property & equipment
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(.2 | ) | (.2 | ) | (1.9 | ) | (.8 | ) | ||||||||
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Other
income, net
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1.8 | .9 | 2.1 | 1.3 | ||||||||||||
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Corporate
expense
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(1.8 | ) | (.5 | ) | (5.8 | ) | (5.1 | ) | ||||||||
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Income
from operations
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36.9 | 10.0 | 143.2 | 84.9 | ||||||||||||
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Other
income (expense):
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Trade
interest income
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.9 | .8 | 2.3 | 2.2 | ||||||||||||
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Other
interest income
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.1 | - | 1.3 | .3 | ||||||||||||
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Loss
on prepayment of debt
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- | - | (22.3 | ) | - | |||||||||||
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Interest
expense
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(9.7 | ) | (10.2 | ) | (43.2 | ) | (39.4 | ) | ||||||||
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Income
before income taxes
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28.2 | .6 | 81.3 | 48.0 | ||||||||||||
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Provision
(benefit) for income taxes
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(13.1 | ) | (1.0 | ) | (.7 | ) | 114.7 | |||||||||
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Net income
(loss)
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$ | 41.3 | $ | 1.6 | $ | 82.0 | $ | (66.7 | ) | |||||||
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Basic
and diluted net income (loss) per share
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$ | .84 | $ | .03 | $ | 1.67 | $ | (1.36 | ) | |||||||
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Basic
and diluted weighted-average shares used in the calculation of net
income (loss) per share
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49.0 | 49.0 | 49.0 | 49.0 | ||||||||||||
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TiO2 data
– metric tons in thousands:
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||||||||||||||||
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Sales
volumes
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116 | 119 | 511 | 519 | ||||||||||||
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Production
volumes
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133 | 125 | 516 | 512 | ||||||||||||
KRONOS
WORLDWIDE, INC.
RECONCILIATION
OF SEGMENT PROFIT TO
INCOME
FROM OPERATIONS
(In
millions)
(Unaudited)
|
Three
months ended
December
31,
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Year
ended
December
31,
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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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Segment
profit
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$ | 39.6 | $ | 11.3 | $ | 151.3 | $ | 92.2 | ||||||||
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Adjustments:
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||||||||||||||||
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Trade
interest income
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(.9 | ) | (.8 | ) | (2.3 | ) | (2.2 | ) | ||||||||
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Corporate
expense
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(1.8 | ) | (.5 | ) | (5.8 | ) | (5.1 | ) | ||||||||
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Income
from operations
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$ | 36.9 | $ | 10.0 | $ | 143.2 | $ | 84.9 | ||||||||
IMPACT
OF PERCENTAGE CHANGE IN SALES
(Unaudited)
|
Three
months ended
December
31,
2007 vs.
2006
|
Year
ended
December
31,
2007 vs.
2006
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|||||||
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Percent
change in sales:
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||||||||
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TiO2
product pricing
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(5 | )% | (4 | )% | ||||
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TiO2
sales volume
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2 | % | 1 | % | ||||
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TiO2
product mix
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- | % | - | % | ||||
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Changes
in foreign currency exchange rates
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7 | % | 5 | % | ||||
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Total
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4 | % | 2 | % | ||||