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
11, 2009
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 11, 2009, 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 11, 2009 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
11, 2009
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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 11, 2009 issued by the
registrant.
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Kronos
Worldwide, Inc.
Three
Lincoln Centre
5430
LBJ Freeway, Suite 1700
Dallas,
TX 75240-2697
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Contact: Gregory
M. Swalwell
Vice
President, Finance
(972)
233-1700
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News
Release
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||
FOR IMMEDIATE
RELEASE
KRONOS
WORLDWIDE REPORTS FOURTH QUARTER RESULTS
DALLAS,
TEXAS…March 11, 2009…Kronos Worldwide, Inc. (NYSE:KRO) today reported net income
of $7.2 million, or $.15 per diluted share, for the fourth quarter of 2008
compared with net income of $1.6 million, or $.03 per diluted share, in the
fourth quarter of 2007. For the full year of 2008, Kronos reported
net income of $9.0 million, or $.18 per diluted share, compared with a net loss
of $66.7 million, or $1.36 per diluted share, for the full year of
2007. Comparability of the Company’s results was impacted by lower
income from operations in calendar 2008 resulting principally from lower sales
volumes and higher raw material and energy costs, income tax charges we
recognized in 2007 and an income tax benefit we recognized in 2008.
Net sales
of $246.9 million in the fourth quarter of 2008 were $63.5 million, or 21%,
lower than the fourth quarter of 2007. Net sales of $1,316.9
million for the full year of 2008 were $6.6 million, or 1%, higher than the full
year of 2007. Net sales decreased in the fourth quarter of 2008
primarily due to lower sales volumes and the unfavorable effect of fluctuations
in foreign currency exchange rates, which decreased sales by approximately $16
million, partially offset by higher 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 $61 million, and higher average TiO2 selling
prices, partially offset by lower sales volumes. The Company’s
average selling prices were 9% higher in the fourth quarter of 2008 as compared
to the fourth quarter of 2007, and prices were 2% higher for the
year. 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
2008 was $22.0 million compared with $11.3 million in the fourth quarter of
2007, and was $54.6 million for the full year of 2008 compared with $92.2
million for full year of 2007. Segment profit increased in the fourth
quarter of 2008 compared to the fourth quarter 2007 due primarily to higher
average TiO2 selling
prices and the positive effect of fluctuations in foreign currency exchange
rates which increased segment profit by approximately $10
million. This increase was partially offset by lower sales volumes
and higher energy and raw materials costs. 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 $4
million
The
Company’s TiO2 sales
volumes were 26% lower in the fourth quarter of 2008 as compared to the fourth
quarter of 2007, and volumes were 8% lower for the year, as poor overall
economic conditions lead to a global weakening of demand. The Company’s TiO2 production
volumes were 1% lower in the fourth quarter of 2008 as compared to the same
period in 2007, while production volumes increased slightly for the full
year. The Company’s finished goods inventories at December 31, 2008,
which represented approximately 3 months of average sales, were higher compared
to December 31, 2007.
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 2008 includes a $7.2 million ($.15 per diluted
share) non-cash deferred income tax benefit 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 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
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 our products
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·
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The
extent of the dependence of certain of our businesses on certain market
sectors
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·
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The
cyclicality of our businesses
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·
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Customer
inventory levels (such as the extent to which our 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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Possible
disruption of our business or increases in the cost of doing business
resulting from terrorist activities or global
conflicts
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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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Our
ability to renew or refinance credit
facilities
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·
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Our
ability to maintain sufficient
liquidity
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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, the benefits of which
have been recognized under the more-likely-than-not recognition
criteria
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·
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Environmental
matters (such as those requiring compliance with 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
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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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2007
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2008
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2007
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2008
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(Unaudited)
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Net
sales
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$ | 310.4 | $ | 246.9 | $ | 1,310.3 | $ | 1,316.9 | ||||||||
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Cost
of sales
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259.9 | 193.0 | 1,058.9 | 1,096.3 | ||||||||||||
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Gross
margin
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50.5 | 53.9 | 251.4 | 220.6 | ||||||||||||
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Selling,
general and administrative expense
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40.2 | 33.2 | 162.1 | 167.4 | ||||||||||||
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Other
operating income (expense):
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||||||||||||||||
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Currency
transactions, net
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(.5 | ) | .9 | .2 | .6 | |||||||||||
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Disposition
of property & equipment
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(.2 | ) | (.3 | ) | (.8 | ) | (.9 | ) | ||||||||
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Other
income, net
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.9 | .6 | 1.3 | .7 | ||||||||||||
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Corporate
expense
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(.5 | ) | (2.0 | ) | (5.1 | ) | (6.4 | ) | ||||||||
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Income
from operations
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10.0 | 19.9 | 84.9 | 47.2 | ||||||||||||
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Other
income (expense):
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||||||||||||||||
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Trade
interest income
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.8 | .1 | 2.2 | 1.0 | ||||||||||||
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Other
interest income
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- | - | .3 | - | ||||||||||||
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Interest
expense
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(10.2 | ) | (9.2 | ) | (39.4 | ) | (42.2 | ) | ||||||||
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Income
before income taxes
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.6 | 10.8 | 48.0 | 6.0 | ||||||||||||
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Provision
for income taxes (benefit)
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(1.0 | ) | 3.6 | 114.7 | (3.0 | ) | ||||||||||
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Net income
(loss)
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$ | 1.6 | $ | 7.2 | $ | (66.7 | ) | $ | 9.0 | |||||||
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Basic
and diluted net income (loss) per share
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$ | .03 | $ | .15 | $ | (1.36 | ) | $ | .18 | |||||||
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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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119 | 88 | 519 | 478 | ||||||||||||
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Production
volumes
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125 | 124 | 512 | 514 | ||||||||||||
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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2007
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2008
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2007
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2008
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Segment
profit
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$ | 11.3 | $ | 22.0 | $ | 92.2 | $ | 54.6 | ||||||||
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Adjustments:
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||||||||||||||||
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Trade
interest income
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(.8 | ) | (.1 | ) | (2.2 | ) | (1.0 | ) | ||||||||
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Corporate
expense
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(.5 | ) | (2.0 | ) | (5.1 | ) | (6.4 | ) | ||||||||
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Income
from operations
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$ | 10.0 | $ | 19.9 | $ | 84.9 | $ | 47.2 | ||||||||
IMPACT OF
PERCENTAGE CHANGE IN SALES
(Unaudited)
|
Three
months ended
December
31,
2008 vs. 2007
|
Year
ended
December
31,
2008 vs. 2007
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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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9 | % | 2 | % | ||||
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TiO2
sales volume
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(26 | )% | (8 | )% | ||||
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TiO2
product mix
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1 | % | 2 | % | ||||
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Changes
in foreign currency exchange rates
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(5 | )% | 5 | % | ||||
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Total
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(21 | )% | 1 | % | ||||