DALLAS, TEXAS . . August 8,
2017. Valhi, Inc. (NYSE: VHI) reported net income
attributable to Valhi stockholders of $8.8 million, or $.03 per
diluted share, in the second quarter of 2017 compared to net loss
attributable to Valhi stockholders of $8.5 million, or $.02 per
diluted share, in the second quarter of 2016. Valhi
reported net income attributable to Valhi stockholders of $21.5
million, or $.06 per diluted share, in the first six months of 2017
compared to a net loss attributable to Valhi stockholders of $28.0
million, or $.08 per diluted share in the first six months of
2016. We reported net income attributable to Valhi
stockholders in the 2017 periods primarily due to the improved
operating results of our Chemicals Segment and the second quarter
recognition of a non-cash deferred income tax benefit related to
the Chemicals Segment's German and Belgian operations partially
offset by a long-lived asset impairment charge related to our Waste
Management Segment.
The Chemicals Segment's net sales
of $441.4 million in the second quarter of 2017 were $85.4 million,
or 24%, higher than in the second quarter of 2016. The
Chemicals Segment's net sales of $811.2 million in the first six
months of 2017 were $136.7 million, or 20%, higher than in the
first six months of 2016. Net sales increased in 2017 due to
higher average TiO2 selling
prices and higher sales volumes. The Chemicals Segment's
average TiO2 selling
prices were 20% higher in the second quarter of 2017 as compared to
the second quarter of 2016 and were 19% higher in the first six
months of the year as compared to the same prior year period.
The Chemicals Segment's average selling prices at the end of the
second quarter of 2017 were 8% higher than at the end of the first
quarter of 2017, and were 12% higher than at the end of 2016, with
higher prices in all major markets. TiO2 sales
volumes in the second quarter of 2017 were 6% higher as compared to
the same period in 2016 due to higher sales in the North American
and European markets, partially offset by lower sales in the Latin
American market. TiO2 sales volumes
in the first six months of 2017 were 5% higher than the same period
in 2016 due to higher sales in the North American and export
markets, partially offset by lower sales in the Latin American
market. The Chemicals Segment's sales volumes in the second
quarter and first six months of 2017 set a new overall record for a
second quarter and first-six-month period. Fluctuations in
currency exchange rates (primarily the euro) also affected net
sales comparisons, decreasing net sales by approximately $8 million
in the second quarter 2017 and approximately $15 million in the
first six months of 2017 as compared to the same periods in
2016. The table at the end of this press release shows how
each of these items impacted the overall increase in sales.
The Chemicals Segment's
operating income in the second quarter of 2017 was $73.0 million as
compared to $12.7 million in the second quarter of 2016. For
the year-to-date period, the Chemicals Segment's operating income
was $128.0 million as compared to $15.7 million in the first six
months of 2016. The Chemicals Segment's operating income
increased in the 2017 periods primarily due to higher average
TiO2 selling
prices, higher sales and production volumes and lower raw materials
and other production costs. The Chemicals Segment's
TiO2 production
volumes were 8% higher in the second quarter and 9% higher in the
first six months of 2017 as compared to the same periods in
2016. The Chemicals Segment operated its production
facilities at an overall average capacity utilization rates of 100%
in the first six months of 2017 (approximately 100% of practical
capacity in the first and second quarters) compared to
approximately 96% in the first six months of 2016 (97% and 95% in
the first and second quarters of 2016, respectively).
Fluctuations in currency exchange rates also affected operating
income comparisons, which decreased operating income by
approximately $5 million in the second quarter and by approximately
$13 million in the year-to-date period.
The Component Products Segment's
net sales increased 11% in each of the second quarter of 2017 and
first six months of 2017 compared to the respective periods of
2016, primarily due to higher sales volumes to existing government
security customers, partially offset by lower sales to a customer
serving the recreational transportation market. The
Component Products Segment's operating income increased from $3.7
million in the second quarter of 2016 to $4.6 million in the second
quarter of 2017 and increased from $7.1 million in the first six
months of 2016 to $9.1 million in the first six months of 2017,
primarily due to manufacturing efficiencies facilitated by the
higher production volumes at the security products reporting
unit.
The Waste Management Segment's net
sales increased $9.4 million and $25.7 million in the second
quarter and first six months of 2017, respectively, compared to the
same periods of 2016. The increase in net sales was led by an
increase in disposal volumes. In both the second quarter and first
six months of 2017 there was an increase in the lower margin low
activity waste disposal related to two projects (both of which are
expected to continue for another six to nine months). In the
first quarter of 2017 we completed a back-log disposal campaign for
a waste consolidator that contributed $4.0 million to revenue for
the first six months of 2017 (which is not expected to
recur). Also contributing to the increase in sales in 2017
was an increase in transportation related revenue as we seek to
increase our logistical capabilities to better manage customer
disposal shipments; however, increases in transportation revenue
also add to our cost of sales as we generally pass through actual
logistics costs plus a service fee to our customers. As
a result, increases in transportation revenue of $4.8 million and
$9.9 million in the second quarter and first six months of 2017,
respectively, compared to the same periods in 2016 are offset by
increases in cost of sales over the same period. Higher
disposal volumes in the second quarter and first six months of 2017
resulted in higher coverage of fixed costs as compared to the same
periods of 2016. As a result, our Waste Management Segment's
operating loss before the long-lived asset impairment charge
improved in both periods to $1.0 million and $.4 million,
respectively, in the second quarter and first six months of 2017
compared to $7.1 million and $17.9 million in the same periods of
2016. Following the previously-reported June 2017 termination of
the agreement to sell our Waste Management Segment, the Company
concluded the long-lived assets associated with the Waste
Management Segment were impaired. Accordingly, the Company
recognized an aggregate $170.6 million pre-tax impairment charge as
of June 30, 2017 ($105.5 million, or $.31 per diluted share, net of
income tax benefit), to reduce the carrying value of the Waste
Management Segment's long-lived assets recognized for financial
reporting purposes to their estimated fair value.
The Real Estate Management and
Development Segment had second quarter 2017 sales of $10.2 million,
including $8.3 million in revenue on sales of land held for
development, compared to sales of $4.4 million in the second
quarter of 2016, including $2.2 million in sales of land held for
development. For the first six months of 2017 the Real
Estate Management and Development Segment had sales of $15.9
million, including $11.9 million in revenue on sales of land held
for development, compared to sales of $7.1 million in the first six
months of 2016, including $3.2 million in sales of land held for
development. The Real Estate Management and Development
Segment had operating income in the second quarter of 2017 of $1.2
million, an increase of $.7 million compared to operating income of
$.5 million in the 2016 period, consistent with the higher
revenues. The Real Estate Management and Development Segment
had operating income of $1.8 million in the first six months of
2017 compared to an operating loss of $5.4 million in the same
period of 2016. Included in the year-to-date 2016 operating
loss is a contract related intangible asset impairment charge of
$5.1 million ($.01 per diluted share) resulting from an amendment
to a water delivery contract entered into in January 2016.
Because the land held for development acquired was initially
recognized at the estimated fair value at December 31, 2013 in
connection with the previously-reported acquisition of a
controlling interest in this segment, the Company does not expect
to recognize significant operating income on land sales during
2017.
Corporate expenses were 75% higher
in the second quarter of 2017 and 35% higher in the first six
months of 2017 compared to the same period of 2016, primarily due
to transaction costs related to the now terminated agreement to
sell our Waste Management Segment. The Company received a
$4.0 million fee in the second quarter of 2017 related to the
termination of the agreement to sell our Waste Management Segment,
which is recognized as part of other non-operating income in the
quarter.
The Company's income tax benefit
in the first six months of 2017 includes a non-cash deferred income
tax benefit of $162.6 million ($.28 per diluted share) as a result
of a net decrease in our deferred income tax asset valuation
allowance related to our Chemicals Segment's German and Belgian
operations ($157.6 million, or $.27 per diluted share, recognized
in the second quarter). The Company's income tax expense in
the second quarter and first six months of 2016 includes a non-cash
deferred income tax expense of $2.9 million ($.01 per share) as a
result of a net increase in our deferred income tax asset valuation
allowance related to our German and Belgian operations.
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' TiO2
operations);
-
Customer and producer inventory levels;
-
Unexpected or earlier-than-expected industry
capacity expansion (such as the TiO2
industry);
-
Changes in raw material and other operating
costs (such as energy, ore, zinc and brass 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, TiO2 and component
products);
-
Competitive products and prices and substitute
products, including increased competition from low-cost
manufacturing sources (such as China);
-
Possible disruption of our business or increases
in the cost of doing business resulting from terrorist activities
or global conflicts;
-
Customer and competitor strategies;
-
Potential difficulties in integrating future
acquisitions;
-
Potential difficulties in upgrading or
implementing new accounting and manufacturing software
systems;
-
Potential consolidation of our
competitors;
-
Potential consolidation of our customers;
-
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 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);
-
Decisions to sell operating assets other than in
the ordinary course of business;
-
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, the benefits of which may or may not presently 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, 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
possible future challenge to WCS' operating licenses and
permits;
-
Unexpected delays in the operational start-up of
shipping containers procured by WCS;
-
Our ability to increase disposal volumes and
obtain new business at WCS;
-
Our ability to generate positive operating
results or cash flows at WCS;
-
The impact of our inability to complete the
previously-reported sale of WCS;
-
Changes in real estate values and construction
costs in Henderson, Nevada;
-
Water levels in Lake Mead; 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.
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 operating income (loss)
before the long-lived asset impairment charge related to our Waste
Management Segment, which is used by the Company's management to
assess the performance of the Company's Waste Management Segment's
operations. The Company believes disclosure of operating
income (loss) before the impact of the long-lived asset impairment
charge provides useful information to investors because it allows
investors to analyze the performance of the Company's Waste
Management Segment's operations in the same way that the Company's
management assesses performance.
Valhi, Inc. is engaged in the
titanium dioxide pigments, component products (security products
and high performance marine components), waste management, and real
estate management and development industries.
* * * * *
VALHI, INC. AND
SUBSIDIARIES |
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS |
|
|
|
(In millions,
except earnings per share) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Six months ended |
|
June 30, |
|
June 30, |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
|
(unaudited) |
|
(unaudited) |
Net sales |
|
|
|
|
|
|
|
Chemicals |
$ 356.0 |
|
$
441.4 |
|
$ 674.5 |
|
$
811.2 |
Component products |
27.1 |
|
30.1 |
|
54.2 |
|
60.0 |
Waste management |
11.1 |
|
20.5 |
|
16.3 |
|
42.0 |
Real estate management and
development |
4.4 |
|
10.2 |
|
7.1 |
|
15.9 |
|
|
|
|
|
|
|
|
Total net
sales |
$ 398.6 |
|
$
502.2 |
|
$ 752.1 |
|
$
929.1 |
|
|
|
|
|
|
|
|
Operating income
(loss) |
|
|
|
|
|
|
|
Waste management: |
|
|
|
|
|
|
|
Before long-lived asset impairment
charge |
$ (7.1) |
|
$
(1.0) |
|
$ (17.9) |
|
$
(0.4) |
Long-lived asset impairment charge |
- |
|
(170.6) |
|
- |
|
(170.6) |
Total Waste Management |
(7.1) |
|
(171.6) |
|
(17.9) |
|
(171.0) |
Chemicals |
12.7 |
|
73.0 |
|
15.7 |
|
128.0 |
Component products |
3.7 |
|
4.6 |
|
7.1 |
|
9.1 |
Real estate management and
development |
0.5 |
|
1.2 |
|
(5.4) |
|
1.8 |
|
|
|
|
|
|
|
|
Total operating income
(loss) |
9.8 |
|
(92.8) |
|
(0.5) |
|
(32.1) |
|
|
|
|
|
|
|
|
General corporate items: |
|
|
|
|
|
|
|
Securities earnings |
6.9 |
|
7.2 |
|
13.7 |
|
14.2 |
Insurance recoveries |
0.2 |
|
- |
|
.3 |
|
.1 |
Termination fee |
- |
|
4.0 |
|
- |
|
4.0 |
General expenses, net |
(8.6) |
|
(14.7) |
|
(20.1) |
|
(27.1) |
Interest expense |
(15.8) |
|
(16.0) |
|
(31.5) |
|
(31.6) |
|
|
|
|
|
|
|
|
Loss
beforeincome taxes |
(7.5) |
|
(112.3) |
|
(38.1) |
|
(72.5) |
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
0.2 |
|
(167.4) |
|
(8.4) |
|
(149.4) |
|
|
|
|
|
|
|
|
Net income
(loss) |
(7.7) |
|
55.1 |
|
(29.7) |
|
76.9 |
|
|
|
|
|
|
|
|
Noncontrolling interest in net income (loss) |
|
|
|
|
|
|
|
of subsidiaries |
0.8 |
|
46.3 |
|
(1.7) |
|
55.4 |
|
|
|
|
|
|
|
|
Net income (loss)
attributable to Valhi stockholders |
$ (8.5) |
|
$
8.8 |
|
$ (28.0) |
|
$
21.5 |
|
|
|
|
|
|
|
|
Basic and diluted net loss per share: |
|
|
|
|
|
|
|
Net income (loss) per share attributable
to Valhi |
|
|
|
|
|
|
|
stockholders |
$ (.02) |
|
$
.03 |
|
$ (.08) |
|
$
.06 |
|
|
|
|
|
|
|
|
Basic and diluted weighted average
shares |
|
|
|
|
|
|
|
outstanding |
342.0 |
|
342.0 |
|
342.0 |
|
342.0 |
VALHI, INC. AND
SUBSIDIARIES |
|
|
|
|
IMPACT OF
PERCENTAGE CHANGE IN CHEMICAL SEGMENT'S NET SALES |
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|
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|
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|
|
|
|
|
|
|
|
Three months ended |
|
Six months ended |
|
June 30, |
|
June 30, |
|
2017 vs. 2016 |
|
2017 vs. 2016 |
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
Percentage change in TiO2 sales : |
|
|
|
|
|
|
|
TiO2 product
pricing |
|
20 |
% |
|
|
19 |
% |
TiO2 sales
volumes |
|
6 |
|
|
|
5 |
|
TiO2 product
mix |
|
- |
|
|
|
(2) |
|
Changes in currency exchange rates |
|
(2) |
|
|
|
(2) |
|
|
|
|
|
|
|
|
|
Total |
|
24 |
% |
|
|
20 |
% |
|
|
|
|
|
|
|
|
SOURCE: Valhi, Inc.
CONTACT: Janet G. Keckeisen, Vice President
- Corporate Strategy and Investor Relations, 972-233-1700
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Valhi, Inc. via Globenewswire
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