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
3, 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 November 3, 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 November 3, 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: November
3, 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 November 3, 2008 issued by the
registrant.
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KRONOS
WORLDWIDE REPORTS THIRD QUARTER RESULTS
DALLAS,
TEXAS…November 3, 2008… Kronos Worldwide, Inc. (NYSE:KRO) today reported a net
loss for the third quarter of 2008 of $3.6 million, or $.07 per diluted share,
compared with a net loss of $81.2 million, or $1.66 per diluted share in the
third quarter of 2007. For the first nine months of 2008, Kronos
reported net income of $1.8 million, or $.04 per diluted share, compared with a
net loss of $68.3 million, or $1.40 per diluted share. Comparability
of the Company’s results was impacted by lower income from operations in 2008
resulting principally from lower sales volumes and higher raw material and
energy costs, income tax charges we recognized in the first nine months of 2007
and an income tax benefit we recognized in the second quarter of
2008.
Net sales
of $345.6 million in the third quarter of 2008 were $2.3 million, or 1%, higher
than the third quarter of 2007. Net sales of $1,070.0 million
for the first nine months of 2008 were $70.1 million, or 7%, higher than the
first nine months of 2007. Net sales increased in 2008 as the
favorable effect of fluctuations in foreign currency exchange rates, which
increased sales by approximately $24 million for the quarter and $77 million in
the year-to-date period, as well as higher average selling prices for the
quarter, more than offset the effect of lower TiO2 sales
volumes. The Company’s average selling prices were 6% higher in the
third quarter of 2008 as compared to the third quarter of
2007. Average selling prices were comparable for the year-to-date
period. 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
2008 was $9.4 million compared with $24.3 million in the third quarter of 2007,
and was $32.6 million for the first nine months of 2008 compared with $80.9
million for the first nine months of 2007. Segment profit decreased
in the third quarter of 2008 compared to the third quarter 2007 due primarily to
higher raw materials, energy and other manufacturing costs and lower TiO2 sales
volumes, partially offset by higher average TiO2 selling
prices and the positive effect of fluctuations in foreign currency exchange
rates which increased segment profit by approximately $1
million. Full year segment profit decreased due to higher raw
materials, energy, and other manufacturing costs, lower TiO2 sales
volumes, and the negative effects of fluctuations in foreign currency exchange
rates, which decreased segment profit by approximately $14 million.
The
Company’s third quarter 2008 TiO2 sales
volumes decreased 12% from the third quarter of 2007, with lower volumes in all
markets. Volumes were 3% lower in the year-to-date period, as higher volumes in
export markets were more than offset by lower volumes in European and North
America markets. The Company’s TiO2 production
volumes in the third quarter of 2008 were comparable to the third quarter of
2007. Production volumes in the first nine months of 2008 were 1%
higher as compared to the first nine months of 2007, with production volumes for
the first nine months of 2008 setting a new record for Kronos. The
Company’s finished goods inventories at September 30, 2008, which represented
approximately 2 months of average sales, were higher compared to June 30,
2008.
The
Company’s effective income tax rate varies significantly from the U.S. statutory
federal income tax rate in both periods of 2007 and 2008. The
Company’s income tax benefit in the first nine months of 2008 includes a $7.2
million ($.15 per diluted share) non-cash deferred income tax benefit in the
second quarter related to a European Court ruling that resulted in the favorable
resolution of certain income tax issues related to our German operations and an
increase in the amount of our German corporate and trade tax net operating loss
carryforwards. 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 $1.1 million income tax benefit ($.02 per
diluted share) due to a net decrease in the Company’s income tax contingency
reserves. The Company’s provision for income taxes in 2007 also includes an $8.7
million ($.18 per diluted share) non-cash charge in the second quarter related
to the adjustment of certain German income tax attributes.
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 or solvency 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
September
30,
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Nine
months ended
September
30,
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|||||||||||||||
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2007
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2008
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2007
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2008
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Net
sales
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$ | 343.3 | $ | 345.6 | $ | 999.9 | $ | 1,070.0 | ||||||||
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Cost
of sales
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276.4 | 295.2 | 799.0 | 903.3 | ||||||||||||
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Gross
margin
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66.9 | 50.4 | 200.9 | 166.7 | ||||||||||||
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Selling,
general and administrative expense
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41.8 | 43.9 | 121.9 | 134.2 | ||||||||||||
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Other
operating income (expense):
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||||||||||||||||
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Currency
transactions, net
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(1.3 | ) | 2.6 | .7 | (.3 | ) | ||||||||||
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Disposition
of property and equipment
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(.3 | ) | (.1 | ) | (.6 | ) | (.6 | ) | ||||||||
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Other
income, net
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.1 | .1 | .4 | .1 | ||||||||||||
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Corporate
expense
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(1.5 | ) | (1.2 | ) | (4.5 | ) | (4.4 | ) | ||||||||
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Income
from operations
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22.1 | 7.9 | 75.0 | 27.3 | ||||||||||||
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Other
income (expense):
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||||||||||||||||
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Trade
interest income
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.7 | .3 | 1.4 | .9 | ||||||||||||
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Other
interest income
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- | - | .3 | - | ||||||||||||
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Interest
expense
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(10.0 | ) | (11.3 | ) | (29.3 | ) | (33.0 | ) | ||||||||
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Income
(loss) before income taxes
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12.8 | (3.1 | ) | 47.4 | (4.8 | ) | ||||||||||
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Provision
for income taxes (benefit)
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94.0 | .5 | 115.7 | (6.6 | ) | |||||||||||
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Net
income (loss)
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$ | (81.2 | ) | $ | (3.6 | ) | $ | (68.3 | ) | $ | 1.8 | |||||
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Basic
and diluted net income (loss) per share
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$ | (1.66 | ) | $ | (.07 | ) | $ | (1.40 | ) | $ | .04 | |||||
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Basic
and diluted weighted-average
shares used
in the calculation of net income 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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138 | 121 | 400 | 389 | ||||||||||||
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Production
volumes
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126 | 126 | 386 | 390 | ||||||||||||
KRONOS
WORLDWIDE, INC.
RECONCILIATION
OF SEGMENT PROFIT TO
INCOME
FROM OPERATIONS
(In
millions)
(Unaudited)
|
Three
months ended
September
30,
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Nine
months ended
September
30,
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|||||||||||||||
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2007
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2008
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2007
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2008
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|||||||||||||
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Segment
profit
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$ | 24.3 | $ | 9.4 | $ | 80.9 | $ | 32.6 | ||||||||
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Adjustments:
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||||||||||||||||
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Trade
interest income
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(.7 | ) | (.3 | ) | (1.4 | ) | (.9 | ) | ||||||||
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Corporate
expense
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(1.5 | ) | (1.2 | ) | (4.5 | ) | (4.4 | ) | ||||||||
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Income
from operations
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$ | 22.1 | $ | 7.9 | $ | 75.0 | $ | 27.3 | ||||||||
IMPACT OF
PERCENTAGE CHANGE IN SALES
(Unaudited)
|
Three
months ended
September
30,
2008 vs. 2007
|
Nine
months ended
September
30,
2008 vs. 2007
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|||||||
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Percent
change in sales:
|
||||||||
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TiO2
product pricing
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6 | % | - | % | ||||
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TiO2
sales volume
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(12 | )% | (3 | )% | ||||
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TiO2
product mix
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- | % | 2 | % | ||||
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Changes
in foreign currency exchange rates
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7 | % | 8 | % | ||||
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Total
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1 | % | 7 | % | ||||