KRONOS WORLDWIDE REPORTS THIRD QUARTER 2017 RESULTS
November 08 2017 - 4:18PM
DALLAS, TEXAS.November 8, 2017.
Kronos Worldwide, Inc. (NYSE:KRO) today reported net income of
$73.8 million, or $.64 per share, in the third quarter of 2017
compared to net income of $22.2 million, or $.19 per share, in the
third quarter of 2016. For the first nine months of 2017,
Kronos Worldwide reported net income of $307.1 million, or $2.65
per share, compared to net income of $20.1 million, or $.17 per
share in the first nine months of 2016. We reported higher
net income in the third quarter of 2017 as compared to the third
quarter of 2016 primarily due to higher income from operations
resulting from the net effects of higher average selling prices,
higher sales and production volumes and higher raw materials and
other production costs. We reported higher net income in the
first nine months of 2017 compared to the same period in 2016 in
part due to higher income from operations resulting from the
favorable effects of higher average selling prices, higher sales
and production volumes and lower raw materials and other production
costs. In addition, our results in the 2017 periods include
the recognition of a non-cash deferred income tax benefit as a
result of a net decrease in our deferred income tax asset valuation
allowance related to our German and Belgian operations, as
discussed below.
Net sales of $464.5 million in the
third quarter of 2017 were $108.4 million, or 30%, higher than in
the third quarter of 2016. Net sales of $1.276 billion in the
first nine months of 2017 were $245.1 million, or 24%, higher than
in the first nine months of 2016. Net sales increased in 2017
due to higher average TiO2 selling
prices and higher sales volumes. The Company's average
TiO2 selling
prices were 23% higher in the third quarter of 2017 as compared to
the third quarter of 2016 and were 20% higher in the first nine
months of the year as compared to the same prior year period.
The Company's average selling prices at the end of the third
quarter of 2017 were 8% higher than at the end of the second
quarter of 2017 and were 21% higher than at the end of 2016, with
higher prices in all major markets. TiO2 sales
volumes in each of the third quarter and year-to-date period of
2017 were 5% higher as compared to the same periods in 2016 due to
higher sales in the European, North American and export markets.
Kronos' sales volumes in the third quarter and first nine months of
2017 set a new overall record for a third quarter and
first-nine-month period. Fluctuations in currency exchange
rates (primarily the euro) also affected net sales comparisons,
increasing net sales by approximately $13 million in the third
quarter of 2017 and decreasing net sales by approximately $2
million in the first nine 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 Company's TiO2
segment profit (see description of non-GAAP information below) in
the third quarter of 2017 was $95.0 million as compared to $31.0
million in the third quarter of 2016. For the year-to-date
period, the Company's segment profit was $225.2 million as compared
to $48.2 million in the first nine months of 2016. Segment
profit increased in the third quarter of 2017 primarily due to
higher average TiO2 selling
prices and higher sales and production volumes partially offset by
higher costs for certain raw materials and other production
costs. Segment profit increased in the first nine months of
2017 primarily due to higher average TiO2 selling
prices, higher sales and production volumes and lower raw materials
and other production costs. Kronos' TiO2
production volumes were 2% higher in the third quarter and 7%
higher in the first nine months of 2017 as compared to the same
periods in 2016. We operated our production facilities at
full practical capacity utilization rates in the first nine months
of 2017 compared to approximately 97% in the first nine months of
2016. Kronos' production volumes in the third quarter and
first nine months of 2017 set a new overall record for a third
quarter and first-nine-month period. Fluctuations in currency
exchange rates also affected segment profit comparisons, which
decreased segment profit by approximately $6 million in the third
quarter and by approximately $19 million in the year-to-date
period.
The Company's net income before
income taxes, interest expense (including gains and losses on
prepayment of debt) and depreciation and amortization expense
("EBITDA") (see description of non-GAAP information below) in the
third quarter of 2017 was $102.5 million compared to EBITDA of
$38.0 million in the third quarter of 2016. For the first
nine months of 2017, the Company's EBITDA was $245.4 million
compared to $69.4 million in the first nine months of 2016.
Other operating income, net in the
first nine months of 2016 includes an insurance settlement gain of
$3.4 million ($2.6 million, or $.02 per share, net of income tax
expense) related to a 2014 business interruption claim.
In September 2017, we voluntarily
prepaid and terminated our term loan indebtedness using a portion
of the proceeds from the September 2017 issuance by Kronos
International, Inc., our wholly-owned subsidiary, of €400 million
principal amount of 3.75% Senior Secured Notes due September
2025. The Company's results in the third quarter of 2017
include a pre-tax charge of $7.1 million ($4.6 million, or $.04 per
share, net of income tax benefit) related to such prepayment.
The Company's income tax benefit
in the first nine months of 2017 includes a non-cash deferred
income tax benefit of $170.4 million ($1.47 per share) as a result
of a net decrease in our deferred income tax asset valuation
allowance related to our German and Belgian operations ($7.8
million or $.07 per share recognized in the third quarter) and a
third quarter aggregate income tax benefit of $11.3 million ($.10
per share) related to the execution and finalization of an Advance
Pricing Agreement between Canada and Germany. The Company's
income tax expense in the first nine months of 2016 includes a
non-cash deferred income tax expense of $2.1 million ($.02 per
share) as a result of a net increase in our deferred income tax
asset valuation allowance related to our German and Belgian
operations (most of which was recognized in the second quarter) and
a third quarter current income tax benefit of $5.6 million ($.05
per share) related to the execution and finalization of an Advance
Pricing Agreement between U.S. and Canada.
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
(such as our new enterprise resource planning system)
-
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 or 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;
and
-
The Company discloses EBITDA, which is also used
by the Company's management to assess the performance of the
Company's TiO2
operations. The Company believes disclosure of EBITDA
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 EBITDA as net income before
income taxes, interest expense (including gains and losses on
prepayment of debt) and depreciation and amortization
expense.
Kronos Worldwide, Inc. is a major international
producer of titanium dioxide products.
KRONOS WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share and metric ton data)
(Unaudited)
|
Three months ended |
|
|
Nine months ended |
|
|
September 30, |
|
|
September 30, |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
|
|
|
|
|
Net sales |
$ |
356.1 |
|
|
$ |
464.5 |
|
|
$ |
1,030.6 |
|
|
$ |
1,275.7 |
|
Cost of sales |
|
280.6 |
|
|
|
312.3 |
|
|
|
859.2 |
|
|
|
890.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
75.5 |
|
|
|
152.2 |
|
|
|
171.4 |
|
|
|
385.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expense |
|
43.6 |
|
|
|
53.0 |
|
|
|
129.7 |
|
|
|
152.4 |
|
Other operating income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency transactions, net |
|
(1.0 |
) |
|
|
(4.3 |
) |
|
|
3.2 |
|
|
|
(8.0 |
) |
Other income (expense), net |
|
- |
|
|
|
(.1 |
) |
|
|
3.2 |
|
|
|
(.1 |
) |
Corporate expense |
|
(2.9 |
) |
|
|
(3.2 |
) |
|
|
(9.9 |
) |
|
|
(10.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
28.0 |
|
|
|
91.6 |
|
|
|
38.2 |
|
|
|
214.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade interest income |
|
.1 |
|
|
|
.2 |
|
|
|
.1 |
|
|
|
.3 |
|
Other interest and dividend income |
|
- |
|
|
|
.2 |
|
|
|
.4 |
|
|
|
.4 |
|
Loss on prepayment of debt, net |
|
- |
|
|
|
(7.1 |
) |
|
|
- |
|
|
|
(7.1 |
) |
Interest expense |
|
(5.2 |
) |
|
|
(5.0 |
) |
|
|
(15.4 |
) |
|
|
(14.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
22.9 |
|
|
|
79.9 |
|
|
|
23.3 |
|
|
|
193.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
.7 |
|
|
|
6.1 |
|
|
|
3.2 |
|
|
|
(114.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
22.2 |
|
|
$ |
73.8 |
|
|
$ |
20.1 |
|
|
$ |
307.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per basic and diluted share |
$ |
.19 |
|
|
$ |
.64 |
|
|
$ |
.17 |
|
|
$ |
2.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used in the |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
calculation of net income per share |
|
115.9 |
|
|
115.9 |
|
|
|
115.9 |
|
|
115.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TiO2 data - metric
tons in thousands: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales volumes |
|
143 |
|
|
150 |
|
|
|
430 |
|
|
450 |
|
Production volumes |
|
139 |
|
|
141 |
|
|
|
401 |
|
|
427 |
|
KRONOS WORLDWIDE, INC.
RECONCILIATION OF INCOME FROM
OPERATIONS TO SEGMENT PROFIT
(In millions)
(Unaudited)
|
Three months ended |
|
|
Nine months ended |
|
|
September 30, |
|
|
September 30, |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
$ |
28.0 |
|
|
$ |
91.6 |
|
|
$ |
38.2 |
|
|
$ |
214.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade interest income |
|
.1 |
|
|
|
.2 |
|
|
|
.1 |
|
|
|
.3 |
|
Corporate expense |
|
2.9 |
|
|
|
3.2 |
|
|
|
9.9 |
|
|
|
10.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit |
$ |
31.0 |
|
|
$ |
95.0 |
|
|
$ |
48.2 |
|
|
$ |
225.2 |
|
RECONCILIATION OF NET INCOME TO
EBITDA
(In millions)
(Unaudited)
|
Three months ended |
|
|
Nine months ended |
|
|
September 30, |
|
|
September 30, |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
22.2 |
|
|
$ |
73.8 |
|
|
$ |
20.1 |
|
|
$ |
307.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
9.9 |
|
|
|
10.5 |
|
|
|
30.7 |
|
|
|
30.7 |
|
Interest expense (includes loss on
prepayment of debt) |
|
5.2 |
|
|
|
12.1 |
|
|
|
15.4 |
|
|
|
21.6 |
|
Income tax expense (benefit) |
|
.7 |
|
|
|
6.1 |
|
|
|
3.2 |
|
|
|
(114.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
$ |
38.0 |
|
|
$ |
102.5 |
|
|
$ |
69.4 |
|
|
$ |
245.4 |
|
IMPACT OF PERCENTAGE CHANGE IN
SALES
(Unaudited)
|
|
Three months ended |
|
Nine months ended |
|
|
September 30, |
|
September 30, |
|
|
2017 vs. 2016 |
|
2017 vs. 2016 |
|
|
|
|
|
Percentage change in sales: |
|
|
|
|
TiO2 product
pricing |
|
|
|
23 |
|
% |
|
|
|
20 |
|
% |
TiO2 sales
volumes |
|
|
|
5 |
|
|
|
|
|
5 |
|
|
TiO2 product
mix/other |
|
|
|
(2 |
) |
|
|
|
|
(1 |
) |
|
Changes in currency exchange rates |
|
|
|
4 |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
30 |
|
% |
|
|
|
24 |
|
% |
Source: Kronos Worldwide, Inc.
Contact: Janet 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: Kronos Worldwide via Globenewswire
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