2013-03-15 22:03:45 -
DALLAS, TEXAS . . March 15, 2013. Valhi, Inc. (NYSE: VHI) reported a loss
from continuing operations attributable to Valhi stockholders of $12.6 million,
or $.04 per diluted share, in the fourth quarter of 2012 compared to income from
continuing operations attributable to Valhi stockholders of $55.3 million, or
$.16 per diluted share, in the fourth quarter of 2011. For the full year 2012,
Valhi reported income from continuing operations attributable to Valhi
stockholders of $141.4 million, or $.41 per diluted share, compared to $214.5
million, or $.63 per diluted share, in the full year 2011. Changes in reported
net income attributable to Valhi stockholders are
primarily due to changes in
operating results in the Company's Chemicals Segment.
The Chemicals Segment's net sales of $396.7 million in the fourth quarter
of 2012 were $40.7 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 Chemicals
Segment'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 Chemicals Segment'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 Chemicals Segment's operating income was $2.7 million in the fourth
quarter of 2012 compared to operating income of $145.2 million in the fourth
quarter of 2011. For the full year the Chemicals Segment's operating income was
$366.8 million compared to $553.0 million in 2011. The Chemicals Segment's
operating income 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 material costs, offset in part by the higher sales
volumes. The Chemicals Segment's operating income 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. The Chemicals Segment's 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, the Chemicals Segment
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. Operating income comparisons were also impacted by the
effects of fluctuations in currency exchange rates, which decreased operating
income by approximately $9 million in the fourth quarter and by approximately
$10 million for the year.
The Component Products Segment's net sales increased 3% in
the
fourth quarter of 2012 as compared to the fourth quarter 2011 and increased 4%
in the full year 2012 compared to 2011. Net sales increased principally due to
growth in customer demand within both of the Component Products Segment's
businesses resulting from somewhat improved economic conditions in North
America. The Component Products Segment's operating income from continuing
operations decreased to nil and $5.4 million, in the fourth quarter and full
year of 2012, respectively, compared to operating income from continuing
operations of $1.4 million and $6.4 million in the same periods of 2011.
Operating income from continuing operations comparisons were negatively impacted
by higher self-insured medical costs in 2012. In addition, the 2011 and 2012
full year include the impact of write-downs on assets held for sale of $1.1
million and $1.2 million, respectively, of which $.8 million of the 2012
impairment was recognized in the fourth quarter.
The Waste Management Segment's sales increased significantly in the fourth
quarter and full year of 2012 compared to 2011, as we routinely began receiving
low-level radioactive waste ("LLRW") for disposal at the newly completed Compact
disposal facility during the third and fourth quarters of the year. We
recognized a positive gross margin in the fourth quarter of 2012 and
significantly reduced our negative gross margin in the full year 2012 as
compared to 2011 as a result of increased sales. Our Waste Management operating
loss was lower in the fourth quarter and full year 2012 compared to 2011 due to
our increased sales; however we still recognized operating losses in both
periods as the Compact disposal facility sales continue to improve and the
Federal LLRW facility had not yet received LLRW for disposal by the end of
2012. The Compact LLRW site was fully certified and operational in April 2012,
and the Federal LLRW site was fully certified and operational in September
2012.
Insurance recoveries relate to amounts NL received from
certain
of its former insurance carriers, and relate principally to the recovery of
prior lead pigment and asbestos litigation defense costs incurred by NL.
Substantially all of the insurance recoveries we recognized in 2011 relate to a
third quarter settlement we reached with one of our insurance carriers in
September 2011 in which they agreed to reimburse NL for a portion of its past
lead pigment litigation defense costs. These insurance recoveries (net of
income taxes and noncontrolling interest) aggregated $.03 and $.01 per diluted
share in the full years 2011 and 2012, respectively.
The Company recognized a $14.7 million gain in the second quarter of 2012 ($7.8
million, or $.02 per diluted share, net of income taxes and noncontrolling
interest) related to the third and final closing of a settlement agreement
associated with certain real property NL formerly owned. Securities earnings in
the fourth quarter of 2012 include a $21.8 million, $13.2 million or $.04 per
diluted share (net of income taxes and noncontrolling interest) related
principally to the sale of the Company's shares of TIMET common stock in
December 2012, which is included in securities earnings. The Company also
recognized a gain on the sale of certain excess real property owned by NL in the
fourth quarter of 2012 of $3.2 million ($1.7 million or $.01 per diluted share,
net of income taxes and noncontrolling interest). Also included in the fourth
quarter of 2012 is a $6.4 million goodwill impairment charge ($5.3 million or
$.02 per diluted share, net noncontrolling interest) associated with NL's
insurance brokerage subsidiary.
General corporate expenses were flat at $7.9 million in the fourth quarter of
2012 compared to $8.0 million in the same period in 2011. Corporate expenses
were 11% higher at $45.3 million in the full year 2012 compared to the same
period in 2011, primarily due to higher environmental remediation and related
expense recognized in the first quarter of 2012.
As previously reported, in March 2011 the Chemicals Segment redeemed €80
million principal amount of Kronos International, Inc.'s 6.5% Senior Secured
Notes due 2013, and in the third quarter of 2011, the Chemicals Segment
repurchased in open market transactions aggregating €30.4 million principal
amount of the Senior Notes. As a result of these redemptions and open market
purchases, the Company's results in the full year of 2011 include a net charge
of $3.1 million ($1.7 million, net of income tax benefit and noncontrolling
interest) consisting of the call premium, gain repurchases and the write-off of
unamortized deferred financing costs and original issue discount associated with
the redeemed and purchased Notes. In June 2012, the Chemicals Segment 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 ($3.7 million or $.01 per share net of income tax benefit and
noncontrolling interest benefit) associated with the early extinguishment of
such remaining Senior Notes.
The Company's provision for income taxes in 2012 includes a net
incremental tax benefit of $3.1 million. As previously reported, the Company
had determined during the third quarter of 2012 that due to global changes in
the business the Company would not remit any dividends from its non-U.S.
jurisdictions. As a result, certain current year tax attributes were available
for carryback to offset prior year tax expense and its 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
of TIMET common stock, which sale provided an opportunity for us 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.
The Company's provision for income taxes in 2011 includes a $17.2 million
provision for U.S. incremental income taxes ($4.0 million in the fourth quarter)
on earnings repatriated from the Chemicals Segment's German subsidiary, which
earnings were used to fund a portion of the redemptions and repurchases of its
Senior Secured Notes. The 2011 income tax provision also includes a non-cash
benefit of $8.5 million ($.02 per diluted share net of noncontrolling interest),
mostly in the third quarter, related to the decrease in the reserve for
uncertain tax positions.
In December 2012, the Company completed the sale of Component Products
Segment's furniture components operations to a competitor for proceeds, net of
expenses, of approximately $58.0 million in cash. The Company recognized a pre-
tax gain of approximately $23.7 million on the disposal of these operations
($15.7 million, or $.05 per diluted share, net of income taxes and
noncontrolling interest). Discontinued operations also includes full-year
income related to the operations of such disposed unit of $3.0 million, or $.01
per diluted share, net of income taxes and noncontrolling interest, in 2011 and
$2.7 million, or $.01 per basic and diluted share, net of income taxes and
noncontrolling interest in 2012. The Company has reclassified our Condensed
Consolidated Statement of Operations to reflect the disposed business as
discontinued operations for all periods.
In May 2012, we implemented a 3-for-1 split of our common stock in the form
of a stock dividend. We have adjusted all share and per-share disclosures for
all periods presented in this press release to give effect to the stock split.
The statements in this press 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 the expectations reflected in such forward-looking statements
are reasonable, it cannot give any assurances that these expectations will 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 predicted. While it is not
possible to identify all factors, the Company continues to face many risks and
uncertainties. Among the factors that could cause our 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 certain of our businesses (such as Kronos' titanium
dioxide pigment ("TiO(2)") operations);
* Customer inventory levels;
* Unexpected or earlier-than-expected industry capacity expansion;
* Changes in raw material and other operating costs (such as energy, ore and
steel costs) and our ability to pass those costs on to our customers or
offset them with reductions in other operating 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, among other things, TiO(2 )and
component products);
* Price and product competition from low-cost manufacturing sources (such as
China);
* Competitive products and substitute products;
* Potential consolidation of our competitors;
* Possible disruption of our business or increases in the cost of doing
business resulting from terrorist activities or global conflicts;
* Customer and competitor strategies;
* The impact of pricing and production decisions;
* Competitive technology positions;
* The introduction of trade barriers;
* The ability of our subsidiaries to pay us dividends;
* The impact of current or future government regulations (including employee
healthcare benefit related regulations);
* Uncertainties associated with new product development and the development of
new product features;
* 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 unplanned downtime,
transportation interruptions and cyber attacks);
* The timing and amounts of insurance recoveries;
* Our ability to renew, amend, refinance or establish credit facilities;
* Our ability to maintain sufficient liquidity;
* The ultimate outcome of income tax audits, tax settlement initiatives or
other tax matters;
* Our ultimate ability to utilize income tax attributes or changes in income
tax rates related to such attributes, the benefits of which have been
recognized under the more-likely-than-not recognition criteria (such as
Kronos' ability to utilize its German net operating loss carryforwards);
* Environmental matters (such as those requiring compliance with emission and
discharge standards for existing and new facilities, or new developments
regarding environmental remediation at sites related to our former
operations);
* Government laws and regulations and possible changes therein (such as
changes in government regulations which might impose various obligations on
former manufacturers of lead pigment and lead-based paint, including NL,
with respect to asserted health concerns associated with the use of such
products);
* The ultimate resolution of pending litigation (such as NL's lead pigment
litigation, environmental and other litigation and Kronos' class action
litigation);
* Our ability to comply with covenants contained in our revolving bank credit
facilities;
* Our ability to complete and comply with the conditions of our licenses and
permits;
* Our ability to successfully defend against any currently-pending or possible
future challenge to WCS' operating licenses and permits; and
* Possible future litigation.
Should one or more of these risks materialize (or the consequences of such
development worsen), or should the underlying assumptions prove incorrect,
actual results could differ materially from those currently forecasted or
expected. We disclaim any intention or obligation to update or revise any
forward-looking statement whether as a result of changes in information, future
events or otherwise.
Valhi, Inc. is engaged in the titanium dioxide pigments, component products
(security products, furniture components and high performance marine components)
and waste management industries.
* * * * *
VALHI, INC. AND SUBSIDIARIES
CONDENSED SUMMARY OF OPERATIONS
(In millions, except earnings per share)
Three months ended Year ended
December 31, December 31,
------------------------------- ------------------------------
2011 2012 2011 2012
--------------- --------------- -------------- ---------------
(unaudited)
Net sales
Chemicals $ 437.4 $ 396.7 $ 1,943.3 $ 1,976.3
Component 18.6 19.3 79.8
83.2
products
Waste .7 11.4
27.8
management 2.0
Total net $ 456.7 $ 427.4 $ 2,025.1 $
2,087.3
sales
Operating income
(loss)
Chemicals $ 145.2 $ 2.7 $ 553.0 $
366.8
Component 1.4 -
5.4
products 6.4
Waste (10.1) (4.9)
(26.8)
management (38.0)
Total 136.5 (2.2) 521.4
345.4
operating income
(loss)
Equity in earnings (.2) (.1)
of investee (.5) (.2)
General corporate
items:
Securities 7.2 28.7 28.6
50.2
earnings
Insurance .3 .7 16.9
3.3
recoveries
Litigation - - -
14.7
settlement gain
Gain on sale - 3.2 -
3.2
of excess property
Goodwill - (6.4) -
impairment (6.4)
General (8.0) (7.9)
(45.3)
expenses, net (40.7)
Gain (loss) on .1 -
the prepayment of (3.1) (7.2)
debt
Interest expense (13.6) (13.9)
(56.3)
(61.8)
Income
from continuing
operations,
before 122.3 2.1 460.8
301.4
income taxes
Provision for 46.8 15.1 169.9
104.8
income taxes
Income (loss) 75.5 (13.0) 290.9
196.6
from continuing
operations
Income from 0.3 22.2
25.5
discontinued 4.1
operations, net of
tax
Net 75.8 9.2 295.0
222.1
income
Noncontrolling
interest in net
income
of subsidiaries 20.2 5.7
62.3
77.5
Net
income
attributable to
Valhi
$ 55.6 $ 3.5 $ 217.5
$ 159.8
stockholders
VALHI, INC. AND SUBSIDIARIES
CONDENSED SUMMARY OF OPERATIONS (CONTINUED)
(In millions, except earnings per share)
Three months ended Year ended
December 31, December 31,
------------------------------ -------------------------------
2011 2012 2011 2012
--------------- -------------- --------------- ---------------
(unaudited)
Amounts
attributable to
Valhi
stockholders:
Income (loss) $ 55.3 $ (12.6) $ 214.5 $
141.4
from continuing
operations
Income from .3 16.1
18.4
discontinued 3.0
operations
Net income $ 55.6 $ 3.5 $ 217.5
$ 159.8
attributable to
Valhi stockholders
Basic and
diluted net income
per share:
Income (loss) $ .16 $ (.04) $ .63
$ .41
from continuing
operations
Discontinued - .05 .01
.06
operations
Net income
per share
attributable to
Valhi
stockholders $ .16 $ .01 $ .64
$ .47
Basic and diluted
weighted average
shares
outstanding 342.0 342.0 342.1
342.0
VALHI, INC. AND SUBSIDIARIES
IMPACT OF PERCENTAGE CHANGE IN CHEMICAL SEGMENT'S NET SALES
Three months Year ended
ended
December 31, December 31,
2012 vs. 2011 2012 vs.
2011
------------------ ------------
(unaudited)
Percentage change in TiO(2) sales :
TiO(2) product pricing (14) % 10 %
TiO(2) sales volumes 6 (6)
TiO(2) product mix 2 2
Changes in currency exchange rates (3) (4)
Total (9) % 2 %
SOURCE: Valhi, Inc.
CONTACT: Bobby D. O'Brien, Vice President and
Chief Financial Officer
(972) 233-1700
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(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Valhi, Inc. via Thomson Reuters ONE
[HUG#1685727]
