DALLAS, TEXAS.March 10, 2017.
Kronos Worldwide, Inc. (NYSE:KRO) today reported net income of
$23.2 million, or $.20 per share, in the fourth quarter of 2016
compared to a net loss of $20.4 million, or $.18 per share, in the
fourth quarter of 2015. For the full year of 2016, Kronos
Worldwide reported net income of $43.3 million, or $.37 per share,
compared to a net loss of $173.6 million, or $1.50 per share in
2015. We reported net income in the 2016 periods as compared to net
losses in the 2015 periods primarily due to higher segment profit
in 2016, as well as a non-cash deferred income tax asset valuation
allowance related to our German and Belgian operations, mostly
recognized in the second quarter of 2015, and an
other-than-temporary impairment (OTTI) charge on our investment in
a marketable equity security recognized in the third quarter of
2015. Our segment profit improved in 2016 due primarily to
the net impact of higher average selling prices in the fourth
quarter of 2016 compared to the fourth quarter of 2015 (average
selling prices in the full year of 2016 were lower as compared to
the full year of 2015), higher sales volumes, higher production
volumes, a charge associated with the implementation of certain
workforce reductions (mostly recognized in the second quarter of
2015), lower raw materials and other production costs (including
cost savings resulting from workforce reductions implemented in
2015), and the recognition of an insurance settlement gain, as
discussed further below.
Net sales of $333.7 million in the
fourth quarter of 2016 were $46.7 million, or 16%, higher than in
the fourth quarter of 2015. Net sales of $1,364.3
million in the full year of 2016 were $15.5 million, or 1%, higher
than in the full year 2015. Net sales increased in the fourth
quarter as compared to the same period in 2015 due to higher
average TiO2 selling
prices and higher sales volumes. Net sales increased in the full
year 2016 primarily due to higher sales volumes partially offset by
lower average selling prices. The Company's average
TiO2 selling
prices were 8% higher in the fourth quarter of 2016 as compared to
the fourth quarter of 2015, and were 3% lower in the full year as
compared to 2015. The Company's average selling prices at the end
of the fourth quarter of 2016 were 2% higher than at the end of the
third quarter of 2016, and were 10% higher than at the end of 2015.
TiO2 sales volumes
in the fourth quarter were 8% higher as compared to the fourth
quarter of 2015 due to higher sales in North American and export
markets, partially offset by lower sales in the European
market. TiO2 sales volumes
in the full year of 2016 were 7% higher than 2015 due to higher
sales in European, North American and export markets, partially
offset by lower sales in Latin America. Kronos' sales volumes
in the fourth quarter and full year 2016 set an overall new record
for a fourth quarter and full-year period. Fluctuations in
currency exchange rates (primarily the euro) also affected net
sales comparisons, decreasing net sales by approximately $1 million
in the fourth quarter 2016 and by approximately $9 million in the
full year 2016 as compared to the comparable periods in 2015.
The table at the end of this press 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) in
the fourth quarter of 2016 was $45.7 million compared to a
TiO2 segment loss
of $16.6 million in the fourth quarter of 2015. For the full
year 2016, the Company's segment profit was $93.9 million compared
to $12.6 million in 2015. Segment profit in the full year of
2015 includes an aggregate workforce reduction charge of
$21.7 million ($18.5 million, or $.16 per share, net of income tax
benefit), most of which was recognized in the second quarter, $10.8
million of which is classified in cost of sales and $10.9 million
of which is classified in selling, general and administrative
expense. Segment profit increased in the fourth quarter of
2016 as compared to the fourth quarter of 2015 primarily due to
higher average TiO2 selling
prices, higher sales and production volumes and lower raw materials
and other production costs. Excluding the impact of the 2015
workforce reduction charge, segment profit increased in the full
year of 2016 primarily due to the net effects of lower average
TiO2 selling
prices, higher sales and production volumes and lower raw materials
and other production costs (including cost savings resulting from
workforce reductions implemented in 2015 reflected in both cost of
sales and other operating expenses). Excluding the impact of
the workforce reduction charge, the Company's TiO2 segment
results were a segment loss of $16.4 million in the fourth quarter
of 2015, and segment profit of $34.3 million in the full year of
2015. Kronos' TiO2 production
volumes were 11% higher in the fourth quarter of 2016 as compared
to the fourth quarter of 2015, and were 3% higher in 2016 over
2015. We operated our production facilities at an overall
average capacity utilization rate of 98% in 2016 (approximately
97%, 95%, 100% and 100% of practical capacity in the first, second,
third and fourth quarters of 2016, respectively) compared to
approximately 95% in 2015 (93%, 100%, 95% and 92% in the first,
second, third and fourth quarters of 2015, respectively). Our
production rates in the first and fourth quarters of 2015 were
impacted by the implementation of certain productivity-enhancing
improvement projects at certain facilities, as well as necessary
improvements to ensure continued compliance with our permit
regulations, which resulted in longer-than-normal maintenance
shutdowns in some instances. Fluctuations in currency
exchange rates also affected segment profit comparisons, which
increased segment profit by approximately $1 million in the fourth
quarter and by approximately $14 million in the year-to-date
period.
Securities transactions, net in
2015 includes a third quarter aggregate non-cash charge of $12.0
million ($7.8 million, or $.07 per share, net of income tax
benefit) for an OTTI on our investment in a marketable equity
security.
Other operating income, net in
2016 includes an insurance settlement gain of $4.3 million ($3.2
million, or $.03 per share, net of income tax expense) related to
two separate business interruption claims, of which $.9 million
($.6 million, or $.01 per share, net of income tax expense) was
recognized in the fourth quarter.
The Company's income tax expense
in 2015 includes a non-cash deferred income tax expense of $159.0
million ($1.37 per share) related to the recognition of a deferred
income tax asset valuation allowance associated with our German and
Belgian operations, most of which was recognized in the second
quarter. The Company's income tax expense in 2016 includes a
net $3.4 million ($.03 per share) current income tax benefit
related to the execution and finalization of an Advance Pricing
Agreement between the U.S. and Canada, a $2.2 million ($.02 per
share) non-cash deferred income tax benefit related to a net
decrease in the deferred income tax asset valuation related to our
German and Belgian operations, mostly recognized in the second and
fourth quarters, and a $2.4 million ($.02 per share) non-cash
expense related to the increase in our reserve for uncertain tax
positions, mostly recognized in the fourth quarter.
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 and producer 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
TiO2)
-
Competitive products and substitute
products
-
Customer and competitor strategies
-
Potential consolidation of our competitors
-
Potential consolidation of our customers
-
The impact of pricing and production
decisions
-
Competitive technology positions
-
Potential difficulties in upgrading or
implementing new accounting and manufacturing software
systems
-
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 or other
currencies
-
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 may not 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
-
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 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.
-
The Company also discloses segment profit before
the impact of the workforce reduction charge, which is also used by
the Company's management to assess the performance of the Company's
TiO2
operations. The Company believes disclosure of segment profit
before the impact of the workforce reduction charge provides useful
information to investors because it similarly allows investors to
analyze the performance of the Company's TiO2
operations in the same way that the Company's management assesses
performance.
Kronos Worldwide, Inc. is a major international
producer of titanium dioxide products.
KRONOS
WORLDWIDE, INC. |
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS |
(In millions,
except per share and metric ton data) |
|
Three months
ended |
|
Year ended |
|
December 31, |
|
December
31, |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
(Unaudited) |
|
|
|
|
|
|
Net sales |
$ 287.0 |
|
$
333.7 |
|
$ 1,348.8 |
|
$
1,364.3 |
Cost of sales |
261.8 |
|
248.1 |
|
1,156.5 |
|
1,107.3 |
|
|
|
|
|
|
|
|
Gross margin |
25.2 |
|
85.6 |
|
192.3 |
|
257.0 |
|
|
|
|
|
|
|
|
Selling, general and administrative expense |
40.7 |
|
42.9 |
|
178.0 |
|
172.6 |
Other operating income (expense): |
|
|
|
|
|
|
|
Currency transactions, net |
(.7) |
|
2.3 |
|
(.1) |
|
5.5 |
Other income (expense), net |
(.4) |
|
.7 |
|
(1.7) |
|
3.9 |
Corporate expense |
(3.1) |
|
(2.8) |
|
(13.6) |
|
(12.7) |
|
|
|
|
|
|
|
|
Income (loss) from operations |
(19.7) |
|
42.9 |
|
(1.1) |
|
81.1 |
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
Trade interest income |
- |
|
- |
|
.1 |
|
.1 |
Other interest and dividend income |
.2 |
|
.1 |
|
.7 |
|
.5 |
Securities transactions, net |
- |
|
- |
|
(12.0) |
|
- |
Interest expense |
(5.2) |
|
(5.1) |
|
(18.5) |
|
(20.5) |
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
(24.7) |
|
37.9 |
|
(30.8) |
|
61.2 |
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
(4.3) |
|
14.7 |
|
142.8 |
|
17.9 |
|
|
|
|
|
|
|
|
Net income (loss) |
$ (20.4) |
|
$
23.2 |
|
$ (173.6) |
|
$
43.3 |
|
|
|
|
|
|
|
|
Net income (loss) per basic and diluted
share |
$ (.18) |
|
$
.20 |
|
$ (1.50) |
|
$
.37 |
|
|
|
|
|
|
|
|
Weighted-average shares used in the |
|
|
|
|
|
|
|
calculation of net income (loss) per
share |
115.9 |
|
115.9 |
|
115.9 |
|
115.9 |
|
|
|
|
|
|
|
|
TiO2 data - metric
tons in thousands: |
|
|
|
|
|
|
|
Sales volumes |
119 |
|
129 |
|
525 |
|
559 |
Production volumes |
131 |
|
145 |
|
528 |
|
546 |
KRONOS
WORLDWIDE, INC. |
RECONCILIATION
OF SEGMENT PROFIT (LOSS) TO |
INCOME (LOSS)
FROM OPERATIONS |
(In
millions) |
(Unaudited) |
Source: Kronos Worldwide, Inc.
Contact: Janet Keckeisen, Vice President,
Corporate Strategy and Investor Relations, (972) 233-1700