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 7, 2011
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 7, 2011, 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 7, 2011 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 7, 2011
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Gregory M. Swalwell, Executive Vice President and Chief Financial Officer
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INDEX TO EXHIBITS
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Item No.
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Exhibit Index
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99.1
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Press release dated March 7, 2011 issued by the registrant.
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KRONOS WORLDWIDE ANNOUNCES FOURTH QUARTER OF 2010 RESULTS
DALLAS, TEXAS…March 7, 2011… Kronos Worldwide, Inc. (NYSE:KRO) today reported net income for the fourth quarter of 2010 of $36.4 million, or $.66 per diluted share compared with net income of $5.1 million, or $.11 per diluted share, in the fourth quarter of 2009. For the full year of 2010, Kronos Worldwide reported net income of $130.6 million, or $2.59 per diluted share, compared with a net loss of $34.7 million, or $.71 per share for the full year 2009. Comparability of the Company’s results was impacted by higher income from operations in 2010 periods principally due to higher sales volumes, higher TiO2 average selling prices and higher production volumes, as well as a $35.2 million non-cash deferred income tax benefit recognized in the first quarter of 2010, in each case as discussed further below.
Net sales of $373.3 million in the fourth quarter of 2010 were $71.4 million, or 24%, higher than the fourth quarter of 2009. Net sales of $1,449.7 million for the full year of 2010 were $307.7 million, or 27%, higher than the full year 2009. Net sales increased in the fourth quarter and the full year 2010 due primarily to higher sales volumes and higher TiO2 average selling prices. TiO2 sales volumes for the fourth quarter of 2010 increased 8% to 119,000 metric tons as compared to the fourth quarter of 2009, and increased 19% in the full year period to 528,000 metric tons. The increase in sales volume for the full year period is a result of increased demand in all markets, and sales volumes for the full year in 2010 were a new record for Kronos. The Company’s TiO2 average selling prices increased 22% in the fourth quarter of 2010 as compared to the fourth quarter of 2009, and increased 11% for the full year as compared to 2009, continuing the improvement in selling prices that began in the second half of 2009. The Company’s TiO2 average selling prices at the end of 2010 were 5% higher as compared to the end of the third quarter of 2010 and such prices were 22% higher than at the end of 2009. Fluctuations in currency exchange rates also impacted net sales, decreasing net sales by approximately $17 million for the fourth quarter and approximately $36 million for the full year 2010. The table at the end of this press release shows how each of these items impacted net sales.
The Company’s TiO2 segment profit (see description of non-GAAP information below) for the fourth quarter of 2010 was $62.5 million compared with segment profit of $13.3 million in the fourth quarter of 2009. For the full year period the Company’s segment profit was $185.8 million compared with a segment loss of $8.1 million for the full year 2009. Segment profit in both 2010 periods increased due to higher sales volumes, higher TiO2 selling prices and lower manufacturing costs per ton resulting from higher production volumes. These increases were partially offset by the unfavorable effects of fluctuations in currency exchange rates which decreased segment profit by approximately $3 million and $27 million in the fourth quarter and the full year period, respectively. The Company’s TiO2 production volumes were 8% higher in the fourth quarter of 2010 as compared to the fourth quarter of 2009, and were 30% higher in the full year period. The Company’s operating rates were at near full capacity throughout 2010, with full-year 2010 production volumes also setting a new record for Kronos. For the full year 2009, the Company’s operating rates were at approximately 76% of capacity, with operating rates at 58% of capacity for the first half of 2009, increasing to 94% of capacity in the second half of 2009. Temporary plant curtailments implemented in the first half of 2009 resulted in approximately $80 million of unabsorbed fixed production costs which were charged directly to cost of sales.
The Company’s income tax benefit in 2010 includes a first quarter $35.2 million ($.72 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 in Germany and an increase in the amount of our German corporate and trade tax net operating loss carryforwards. The Company’s income tax benefit in 2009 includes a fourth quarter $4.7 million ($.10 per diluted share) non-cash deferred income tax benefit related to a net decrease in our reserve for uncertain tax positions.
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Steven L. Watson, Vice Chairman and Chief Executive Officer, said, “We saw significant improvement in our business and the TiO2 industry during 2010. Worldwide demand for our TiO2 products continued to strengthen and our manufacturing facilities successfully operated at near full practical capacity utilization levels, allowing us to achieve new historic records for both sales and production volumes. With favorable industry dynamics, we were able to implement significant increases in our TiO2 selling prices that resulted in increased profitability and cash flows. We continue to believe that profit margins are still significantly lower than necessary to reasonably justify green-field or other major expansions of TiO2 production capacity. Assuming demand for TiO2 products remains strong, we expect the worldwide shortage will continue beyond 2011, and we expect to implement additional increases in our TiO2 selling prices. As a result, we believe we will report additional improvements in our operating and financial performance in 2011 and the foreseeable future as compared to 2010.”
The Company will hold a conference call to discuss its fourth quarter and full year 2010 financial results on Monday, March 7, 2011 at 9:00 a.m. CT.
Call in number for U.S. participants (800) 295-4740
Call in number for international participants (617) 614-3925
Participant passcode 18694092
The conference call will be available via webcast and can be accessed from the investor relations section of the company’s website at http://www.kronosww.com.
The conference call will be available for replay beginning March 7, 2011 and ending March 15, 2011.
Call in number for the replay:
U.S. participants (888) 286-8010
International participants (617) 801-6888
Passcode 24373812
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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Future supply and demand for our products;
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The extent of the dependence of certain of our businesses on certain market sectors;
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The cyclicality of our businesses;
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Customer inventory levels;
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Changes in raw material and other operating costs (such as energy and ore costs);
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Changes in the availability of raw materials (such as ore);
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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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Competitive products and substitute products;
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Customer and competitor strategies;
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Potential consolidation of our competitors;
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The impact of pricing and production decisions;
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Competitive technology positions;
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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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The introduction of trade barriers;
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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 krone and the Canadian dollar);
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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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Our ability to renew or refinance credit facilities;
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Our ability to maintain sufficient liquidity;
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The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters;
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Our 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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Environmental matters (such as those requiring compliance with emission and discharge standards for existing and new facilities);
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Government laws and regulations and possible changes therein;
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The ultimate resolution of pending litigation; and
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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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The Company discloses segment profit (loss), 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 (loss) 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 (loss) as income (loss) before income taxes, interest expense and certain general corporate items. Corporate items excluded from the determination of segment profit (loss) 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 products.
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KRONOS WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share and metric ton data)
(Unaudited)
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Three months ended
December 31,
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Twelve months ended
December 31,
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2009
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2010
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2009
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2010
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Net sales
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$ | 301.9 | $ | 373.3 | $ | 1,142.0 | $ | 1,449.7 | ||||||||
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Cost of sales
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249.3 | 269.9 | 1,011.7 | 1,104.4 | ||||||||||||
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Gross margin
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52.6 | 103.4 | 130.3 | 345.3 | ||||||||||||
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Selling, general and administrative expense
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40.0 | 43.4 | 148.2 | 166.7 | ||||||||||||
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Other operating income (expense):
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Currency transactions, net
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.8 | 3.1 | 9.9 | 7.8 | ||||||||||||
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Other income (expense), net
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(.1 | ) | (.7 | ) | (.3 | ) | (.8 | ) | ||||||||
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Corporate expense
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(2.0 | ) | (1.5 | ) | (7.4 | ) | (7.2 | ) | ||||||||
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Income (loss) from operations
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11.3 | 60.9 | (15.7 | ) | 178.4 | |||||||||||
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Other income (expense):
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Trade interest income
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- | .1 | .2 | .2 | ||||||||||||
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Other interest income
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- | .5 | - | .5 | ||||||||||||
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Interest expense
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(10.8 | ) | (9.6 | ) | (41.4 | ) | (38.8 | ) | ||||||||
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Income (loss) before income taxes
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.5 | 51.9 | (56.9 | ) | 140.3 | |||||||||||
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Income tax expense (benefit)
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(4.6 | ) | 15.5 | (22.2 | ) | 9.7 | ||||||||||
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Net income (loss)
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$ | 5.1 | $ | 36.4 | $ | (34.7 | ) | $ | 130.6 | |||||||
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Net income (loss) per basic and diluted share
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$ | .11 | $ | .66 | $ | (.71 | ) | $ | 2.59 | |||||||
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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 | 54.8 | 49.0 | 50.4 | ||||||||||||
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TiO2 data – metric tons in thousands:
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Sales volumes
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110 | 119 | 445 | 528 | ||||||||||||
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Production volumes
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122 | 132 | 402 | 524 | ||||||||||||
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KRONOS WORLDWIDE, INC.
RECONCILIATION OF SEGMENT PROFIT TO
INCOME FROM OPERATIONS
(In millions)
(Unaudited)
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Three months ended
December 31,
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Twelve months ended
December 31,
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2009
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2010
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2009
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2010
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Segment profit (loss)
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$ | 13.3 | $ | 62.5 | $ | (8.1 | ) | $ | 185.8 | |||||||
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Adjustments:
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Trade interest income
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- | (.1 | ) | (.2 | ) | (.2 | ) | |||||||||
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Corporate expense
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(2.0 | ) | (1.5 | ) | (7.4 | ) | (7.2 | ) | ||||||||
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Income (loss) from operations
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$ | 11.3 | $ | 60.9 | $ | (15.7 | ) | $ | 178.4 | |||||||
IMPACT OF PERCENTAGE CHANGE IN SALES
(Unaudited)
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Three months ended
December 31,
2010 vs. 2009
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Twelve months ended
December 31,
2010 vs. 2009
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Percent change in sales:
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TiO2 product pricing
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22 | % | 11 | % | ||||
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TiO2 sales volume
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8 | 19 | ||||||
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TiO2 product mix
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- | - | ||||||
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Changes in currency exchange rates
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(6 | ) | (3 | ) | ||||
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Total
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24 | % | 27 | % | ||||
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