DALLAS, TEXAS...March 12, 2018...
Kronos Worldwide, Inc. (NYSE:KRO) today reported net income of
$47.4 million, or $.41 per share, in the fourth quarter of 2017
compared to net income of $23.2 million, or $.20 per share, in the
fourth quarter of 2016. For the full year of 2017, Kronos
Worldwide reported net income of $354.5 million, or $3.06 per
share, compared to net income of $43.3 million, or $.37 per share
in 2016. We reported higher net income in the 2017 periods as
compared to the 2016 periods 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. Our results in 2017
include an aggregate net income tax benefit of $136.5 million as a
result of the various items described below.
Net sales of $453.3 million in the
fourth quarter of 2017 were $119.6 million, or 36%, higher than in
the fourth quarter of 2016. Net sales of $1.7 billion in the
full year of 2017 were $364.7 million, or 27%, higher than in the
full year 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 27% higher in the fourth quarter of 2017 as compared to
the fourth quarter of 2016 and were 22% higher in the full year of
2017 as compared to 2016. With higher prices in all major
markets, average selling prices at the end of the fourth quarter of
2017 were 5% higher than at the end of the third quarter of 2017
and were 27% higher than at the end of 2016. TiO2 sales
volumes in the fourth quarter of 2017 were 5% higher as compared to
the fourth quarter of 2016 due to higher sales in the European,
North American and Latin American markets partially offset by lower
sales in export markets. TiO2 sales volumes
in 2017 were 5% higher than in 2016 due to strength in the North
American and European markets. Sales volumes in the fourth
quarter and full year of 2017 set new overall records for a fourth
quarter and full-year period. Fluctuations in currency
exchange rates (primarily the euro) also affected net sales
comparisons, increasing net sales by approximately $18 million in
the fourth quarter of 2017 and by approximately $16 million in the
full year 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 fourth quarter of 2017 was $119.7 million as compared to $45.7
million in the fourth quarter of 2016. For the full year
2017, the Company's segment profit was $344.9 million as compared
to $93.9 million in 2016. Segment profit increased in the
2017 periods 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. Kronos' TiO2 production
volumes were 2% higher in the fourth quarter and 5% higher in the
full year of 2017 as compared to the same periods in 2016.
Our production facilities operated at full practical capacity
utilization rates in 2017 compared to approximately 98% in
2016. Kronos' production volumes in the fourth quarter and
full year of 2017 set a new overall record for a fourth quarter and
full-year period. Fluctuations in currency exchange rates
also affected segment profit comparisons, which increased segment
profit by approximately $1 million in the fourth quarter and
decreased segment profit by approximately $18 million in the
full-year 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
fourth quarter of 2017 was $127.6 million compared to EBITDA of
$52.8 million in the fourth quarter of 2016. For the full
year of 2017, the Company's EBITDA was $373.0 million compared to
$122.2 million in 2016.
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.
In September 2017, we voluntarily
prepaid and terminated our term loan indebtedness using a portion
of the proceeds from the 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 full year 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 recognized in the third
quarter.
The Company's income tax benefit
in 2017 includes (i) a non-cash deferred income tax benefit of
$186.7 million ($1.61 per share) as a result of the reversal of our
deferred income tax asset valuation allowances associated with our
German and Belgian operations ($16.3 million or $.14 per share in
the fourth quarter), (ii) a fourth quarter non-cash deferred income
tax benefit of $18.7 million ($.16 per share) as a result of the
reversal of our deferred income tax asset valuation allowance
related to certain U.S. deferred income tax assets of one of our
non-U.S. subsidiaries (which subsidiary is treated as a dual
resident for U.S. income tax purposes), (iii) a fourth quarter
provisional current income tax expense of $76.2 million ($.66 per
share) as a result of the Tax Cuts and Jobs Act enacted on December
22, 2017 for the one-time repatriation tax imposed on the post-1986
undistributed earnings of our non-U.S. subsidiaries, (iv) an
aggregate income tax benefit of $11.8 million ($.10 per share)
related to the execution and finalization of an Advance Pricing
Agreement between Canada and Germany, mostly in the third quarter,
and (v) a fourth quarter provisional non-cash deferred income tax
expense of $4.5 million ($.04 per share) related to a change in our
conclusions regarding our permanent reinvestment assertion with
respect to the post-1986 undistributed earnings of our European
subsidiaries.
The Company's income tax expense
in 2016 includes a non-cash deferred income tax benefit of $2.2
million ($.02 per share) as a result of a net decrease in our
deferred income tax asset valuation allowance associated with our
German and Belgian operations (mostly recognized in the second and
fourth quarters), a net $3.4 million ($.03 per share) current
income tax benefit related to the execution and finalization of an
Advance Pricing Agreement between U.S. and Canada 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
(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, including future tax
reform
-
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)
|
Three months
ended |
|
Year ended |
|
December 31, |
|
December 31, |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
Net sales |
$ 333.7 |
|
$
453.3 |
|
$ 1,364.3 |
|
$
1,729.0 |
Cost of sales |
248.1 |
|
279.8 |
|
1,107.3 |
|
1,170.1 |
|
|
|
|
|
|
|
|
Gross margin |
85.6 |
|
173.5 |
|
257.0 |
|
558.9 |
|
|
|
|
|
|
|
|
Selling, general and administrative expense |
42.9 |
|
54.8 |
|
172.6 |
|
207.2 |
Other operating income (expense): |
|
|
|
|
|
|
|
Currency transactions, net |
2.3 |
|
.5 |
|
5.5 |
|
(7.5) |
Other income, net |
.7 |
|
.2 |
|
3.9 |
|
.1 |
Corporate expense |
(2.8) |
|
(3.0) |
|
(12.7) |
|
(13.9) |
|
|
|
|
|
|
|
|
Income from operations |
42.9 |
|
116.4 |
|
81.1 |
|
330.4 |
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
Trade interest income |
- |
|
.3 |
|
.1 |
|
.6 |
Other interest and dividend income |
.1 |
|
.4 |
|
.5 |
|
.8 |
Loss on prepayment of debt, net |
- |
|
- |
|
- |
|
(7.1) |
Interest expense |
(5.1) |
|
(4.5) |
|
(20.5) |
|
(19.0) |
|
|
|
|
|
|
|
|
Income before income taxes |
37.9 |
|
112.6 |
|
61.2 |
|
305.7 |
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
14.7 |
|
65.2 |
|
17.9 |
|
(48.8) |
|
|
|
|
|
|
|
|
Net income |
$ 23.2 |
|
$ 47.4 |
|
$ 43.3 |
|
$ 354.5 |
|
|
|
|
|
|
|
|
Net income per basic and diluted share |
$ .20 |
|
$ .41 |
|
$ .37 |
|
$ 3.06 |
|
|
|
|
|
|
|
|
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 |
129 |
|
136 |
|
559 |
|
586 |
Production volumes |
145 |
|
149 |
|
546 |
|
576 |
KRONOS WORLDWIDE, INC.
RECONCILIATION OF INCOME FROM
OPERATIONS TO SEGMENT PROFIT
(In millions)
(Unaudited)
|
Three months
ended |
|
Year ended |
|
December
31, |
|
December
31, |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
|
|
|
|
|
|
|
|
Income from operations |
$ 42.9 |
|
$116.4 |
|
$ 81.1 |
|
$330.4 |
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
Trade interest income |
- |
|
.3 |
|
.1 |
|
.6 |
Corporate expense |
2.8 |
|
3.0 |
|
12.7 |
|
13.9 |
|
|
|
|
|
|
|
|
Segment profit |
$ 45.7 |
|
$119.7 |
|
$ 93.9 |
|
$344.9 |
RECONCILIATION OF NET INCOME TO
EBITDA
(In millions)
(Unaudited)
|
Three months
ended |
|
Year ended |
|
December
31, |
|
December
31, |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
|
|
|
|
|
|
|
|
Net income |
$ 23.2 |
|
$
47.4 |
|
$ 43.3 |
|
$354.5 |
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
Depreciation and amortization expense |
9.8 |
|
10.5 |
|
40.5 |
|
41.2 |
Interest expense (includes loss
on
prepayment of debt) |
5.1 |
|
4.5 |
|
20.5 |
|
26.1 |
Income tax expense (benefit) |
14.7 |
|
65.2 |
|
17.9 |
|
(48.8) |
|
|
|
|
|
|
|
|
EBITDA |
$ 52.8 |
|
$127.6 |
|
$122.2 |
|
$373.0 |
IMPACT OF PERCENTAGE CHANGE IN
SALES
(Unaudited)
|
|
Three months
ended |
|
Year ended |
|
|
December 31, |
|
December 31, |
|
|
2017 vs.
2016 |
|
2017 vs.
2016 |
|
|
|
|
|
Percentage change in sales: |
|
|
|
|
TiO2 product
pricing |
|
|
27 |
% |
|
|
22 |
% |
TiO2 sales
volumes |
|
|
5 |
|
|
|
5 |
|
TiO2 product
mix/other |
|
|
(1) |
|
|
|
(1) |
|
Changes in currency exchange rates |
|
|
5 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
36 |
% |
|
|
27 |
% |
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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