2013-03-12 22:31:53 -
DALLAS, TEXAS.March 12, 2013. Kronos Worldwide, Inc. (NYSE:KRO) today reported a
net loss for the fourth quarter of 2012 of $18.1 million, or $.16 per share,
compared to net income of $85.8 million, or $.74 per share, in the fourth
quarter of 2011. For the full year of 2012, Kronos Worldwide reported net
income of $218.5 million, or $1.89 per share, compared with $321.0 million, or
$2.77 per share in 2011. Comparability of the Company's results for the fourth
quarter periods was impacted by lower income from operations in 2012 principally
due to lower average TiO(2) selling prices, higher raw materials costs and lower
production volumes in the fourth quarter of 2012, partially offset by higher
sales volumes. Comparability of the full year periods was impacted by lower
income from
operations in 2012, principally due to lower sales and production
volumes and higher raw materials costs in 2012, partially offset by higher
average TiO(2) selling prices in 2012, as discussed further below.
Net sales of $396.8 million in the fourth quarter of 2012 were $40.6 million, or
9%, lower than in the fourth quarter of 2011. Net sales of $1,976.3 million in
the full year of 2012 were $33.0 million, or 2%, higher than in the full year
2011. Net sales decreased in the fourth quarter of 2012 as compared to the
fourth quarter of 2011 due to lower average TiO(2) selling prices partially
offset by higher sales volumes. Net sales increased in the full year of 2012
primarily due to higher average TiO(2) selling prices, partially offset by lower
sales volumes. The Company's average TiO(2) selling prices decreased 14% in the
fourth quarter of 2012 as compared to the fourth quarter of 2011, and increased
10% for the full year as compared to 2011. The Company's average TiO(2) selling
prices at the end of 2012 were 17% lower than at the end of 2011 and were 10%
lower than at the end of the third quarter of 2012. TiO(2 )sales volumes in the
fourth quarter of 2012 were 6% higher than in the fourth quarter of 2011, while
sales volumes for the full year 2012 were 6% lower than in 2011. Fluctuations
in currency exchange rates also impacted net sales comparisons, decreasing net
sales by approximately $12 million in the fourth quarter and approximately $82
million in the full year 2012 as compared to 2011. The table at the end of this
press release shows how each of these items impacted the overall change in
sales.
The Company's TiO(2) segment profit (see description of non-GAAP information
below) in the fourth quarter of 2012 was $4.7 million compared to segment profit
of $145.9 million in the fourth quarter of 2011. For the full year the
Company's segment profit was $373.8 million compared to $555.8 million in
2011. Segment profit decreased in the fourth quarter of 2012 primarily due to
the negative effects of lower average TiO(2) selling prices, lower production
volumes and higher raw materials costs, offset in part by the higher sales
volumes. Segment profit decreased in the full year of 2012 primarily due to
lower sales and production volumes, higher raw materials costs and the
unfavorable effects of unabsorbed fixed production costs resulting from reduced
production volumes, partially offset by higher TiO(2) selling prices. Kronos'
TiO(2) production volumes were 20% lower in the fourth quarter of 2012 as
compared to the fourth quarter of 2011, and were 15% lower for the year. During
the fourth quarter of 2012, Kronos operated its facilities at approximately 80%
of practical capacity primarily to align production and inventory levels to
current and anticipated near-term customer demand levels. Segment profit
comparisons were also impacted by the effects of fluctuations in currency
exchange rates, which decreased segment profit by approximately $9 million in
the fourth quarter and by approximately $10 million for the year.
We recognized a $3.9 million securities transaction loss in the fourth quarter
of 2012 on the sale, pursuant to a cash tender offer by a third party, of all of
our shares of Titanium Metals Corporation (TIMET) common stock for $70.0
million.
As previously reported, in March 2011 we redeemed €80 million principal amount
of Kronos International, Inc.'s 6.5% Senior Secured Notes due 2013, and in the
third and fourth quarters of 2011, we repurchased in open market transactions an
aggregate €40.8 million principal amount of the Senior Notes. As a result of
these redemptions and open market purchases, the Company's results in 2011
include a net charge of $3.1 million ($2.1 million, or $.02 per share, net of
income tax benefit) consisting of the call premium, the write-off of unamortized
deferred financing costs and original issue discount associated with the
redeemed and purchased Senior Notes. In June 2012, we entered into a new $400
million term loan, and used a portion of the net proceeds to redeem the
remaining €279.2 million principal amount of Senior Notes outstanding. As a
result, we recognized a second quarter 2012 charge of $7.2 million ($4.7
million, or $.04 per share, net of income tax benefit) associated with the early
extinguishment of such remaining Senior Notes.
In February 2013, we voluntarily prepaid an aggregate $290 million principal
amount under the $400 million term loan, using $100 million of available cash as
well as borrowings of $190 million under a new loan from Contran Corporation,
our parent. The loan from Contran provides for borrowings of up to $290
million, and contains terms and conditions substantially identical to the terms
and conditions of the term loan, except that the loan from Contran is unsecured
and contains no financial maintenance covenant. After such prepayment, an
aggregate $100 million principal amount remains outstanding under the term loan.
Our income tax provision in 2012 includes a net incremental tax benefit of $3.1
million. As previously reported, we had determined during the third quarter of
2012 that due to global changes in the business the Company would not remit any
dividends from our non-U.S. jurisdictions. As a result, certain current year
tax attributes were available for carryback to offset prior year tax expense and
our provision for income taxes in the third quarter included an incremental tax
benefit of $11.1 million. However, as a result of a change in circumstances
related to our sale and the sale by certain of our affiliates of their shares of
TIMET common stock, which sale provided an opportunity for us and other members
of our consolidated U.S. federal income tax group to elect to claim foreign tax
credits, we determined that we could tax-efficiently remit non-cash dividends
from our non-U.S. jurisdictions before the end of the year that absent the TIMET
sale would not have been considered. As a result, our provision for income
taxes in the fourth quarter of 2012 includes incremental taxes on the non-cash
dividends remitted in the fourth quarter of $8.0 million. Our income tax
provision in 2011 includes a provision for U.S. incremental income taxes on
earnings repatriated from our German subsidiary of $17.2 million ($4.0 million
in the fourth quarter), which earnings were used to fund a portion of the
repurchases of our Senior Secured Notes.
Steven L. Watson, Vice Chairman and Chief Executive Officer, said "We operated
our production facilities at reduced rates for the majority of 2012 in response
to weaker customer demand and global economic uncertainties. If economic
conditions improve in the various regions of the world during 2013, we expect
demand for our TiO(2) products will increase, and our sales volumes would be
expected to be higher in 2013 as compared to 2012. During 2013, we will
continue to monitor current and anticipated near-term customer demand levels and
align our production levels and inventories accordingly. We experienced
significantly higher costs for our raw materials such as feedstock ore and
petroleum coke in 2012. Although the cost of feedstock ore has moderated
recently, such reductions have been inadequate to compensate for the decline in
selling prices for our products. As a result, the Company expects that it will
implement increases in its selling prices during 2013 in order to adequately
compensate for its raw material production costs."
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:
* Future supply and demand for our products;
* The extent of the dependence of certain of our businesses on certain market
sectors;
* The cyclicality of our business;
* Customer inventory levels;
* Unexpected or earlier-than-expected industry capacity expansion;
* Changes in raw material and other operating costs (such as energy and ore
costs);
* Changes in the availability of raw materials (such as ore);
* 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 TiO(2));
* Competitive products and substitute products;
* Customer and competitor strategies;
* Potential consolidation of our competitors;
* The impact of pricing and production decisions;
* Competitive technology positions;
* The introduction of trade barriers;
* Possible disruption of our business, or increases in our cost of doing
business, resulting from terrorist activities or global conflicts;
* 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), or possible disruptions to our business resulting from
potential instability resulting from uncertainties associated with the euro;
* Operating interruptions (including, but not limited to, labor disputes,
leaks, natural disasters, fires, explosions, unscheduled or unplanned
downtime, transportation interruptions and cyber attacks);
* Our ability to renew or refinance credit facilities;
* Our ability to maintain sufficient liquidity;
* The ultimate outcome of income tax audits, tax settlement initiatives or
other tax matters;
* Our ability to utilize income tax attributes, the benefits of which have
been recognized under the more-likely-than-not recognition criteria;
* Environmental matters (such as those requiring compliance with emission and
discharge standards for existing and new facilities);
* Government laws and regulations and possible changes therein;
* The ultimate resolution of pending litigation; and
* Possible future litigation.
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:
* The Company discloses segment profit, which is used by the Company's
management to assess the performance of the Company's TiO(2 )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 TiO(2 )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 TiO(2 )operations.
Kronos Worldwide, Inc. is a major international producer of titanium dioxide
products.
Source: Kronos Worldwide, Inc.
Contact: Janet Keckeisen, Vice President, Investor Relations, 972-233-1700
KRONOS WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share and metric ton data)
Three months Year
ended December 31, ended December 31,
------------------------------ ------------------------------
2011 2012 2011 2012
-------------- --------------- --------------- --------------
(Unaudited)
Net sales $ 437.4 $ 396.8 $ 1,943.3 $ 1,976.3
Cost of sales 243.3 347.2 1,194.9 1,415.9
Gross margin 194.1 49.6 748.4
560.4
Selling, general
and 50.3 44.2 195.0
183.4
administrative
expense
Other operating
income (expense):
Currency
transaction gains 2.6 (.5) 3.0
(1.0)
(losses), net
Other (.3)
(2.5)
expense, net (.6) (.9)
Corporate (2.5) (3.5) (9.0)
(13.9)
expense
Income 143.3 1.1 546.5
359.6
from operations
Other income
(expense):
Trade .1 .1
interest income .3 .3
Other
interest and 2.4 2.3 6.7
8.7
dividend income
Securities
transaction (.6) (3.9) (.6)
(3.9)
losses, net
Gain (loss)
on prepayment of .1 - (3.1)
(7.2)
debt, net
Interest (6.5) (6.7) (32.7)
(26.7)
expense
Income
(loss) before 138.8 (7.1) 517.1
330.8
income taxes
Income tax 53.0 11.0 196.1
112.3
expense
Net $ 85.8 $ (18.1) $ 321.0
$ 218.5
income (loss)
Net income (loss)
per basic and $ .74 $ (.16) $ 2.77
$ 1.89
diluted share
Weighted-average
shares used in
the
calculation
of net income 115.9 115.9 115.9
115.9
(loss) per share
TiO(2) data -
metric tons in
thousands:
Sales 97 102 503
470
volumes
Production 141 113 550
469
volumes
KRONOS WORLDWIDE, INC.
RECONCILIATION OF SEGMENT PROFIT TO
INCOME FROM OPERATIONS
(In millions)
(Unaudited)
Three months Year
ended December 31, ended December 31,
------------------------------- -----------------------------
2011 2012 2011 2012
--------------- --------------- --------------- -------------
Segment profit $ 145.9 $ 4.7 $ 555.8 $ 373.8
Adjustments:
Trade (.1) (.1)
(.3)
interest income (.3)
Corporate (2.5) (3.5) (9.0)
(13.9)
expense
Income from $ 143.3 $ 1.1 $ 546.5 $ 359.6
operations
KRONOS WORLDWIDE, INC.
IMPACT OF PERCENTAGE CHANGE IN SALES
(Unaudited)
Three months Year ended
ended
December 31, December 31,
2012 vs. 2011 2012 vs.
2011
---------------- -------------
Percentage change in sales:
TiO(2) product pricing (14) % 10 %
TiO(2) sales volume 6 % (6) %
TiO(2) product mix 2 % 2 %
Changes in currency exchange rates (3) % (4) %
Total (9) % 2 %
This announcement is distributed by Thomson Reuters on behalf of
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(i) the releases contained herein are protected by copyright and
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(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Kronos Worldwide via Thomson Reuters ONE
[HUG#1684731]
