DALLAS, TEXAS . . March 15, 2018. Valhi,
Inc. (NYSE: VHI) reported increased net income from continuing
operations attributable to Valhi stockholders of $141.1 million, or
$.41 per diluted share, in the fourth quarter of 2017 compared to
$15.5 million, or $.05 per diluted share, in the fourth quarter of
2016. For the full year of 2017, Valhi reported net
income from continuing operations attributable to Valhi
stockholders of $316.7 million, or $.93 per diluted share, compared
to $8.1 million, or $.02 per diluted share in the full year of
2016. Valhi reported increased net income attributable to
Valhi stockholders in the 2017 periods primarily due to the
improved operating results of its Chemicals Segment and a net
income tax benefit related to various items discussed below. On
January 26, 2018 Valhi completed the sale of its Waste Management
Segment, the results of operations of which have been reclassified
to discontinued operations for all periods presented.
The Chemicals Segment's 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.
The Chemicals Segment's 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. The Chemicals Segment's 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 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. The Chemicals
Segment's 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 Chemicals Segment's operating
income in the fourth quarter of 2017 was $119.2 million as compared
to $45.2 million in the fourth quarter of 2016. For the full
year 2017, the Chemicals Segment's operating income was $341.1
million as compared to $91.0 million in 2016. The Chemicals
Segment's operating income 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. The Chemicals Segment's 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.
The Chemicals Segment production facilities operated at full
practical capacity utilization rates in 2017 compared to
approximately 98% in 2016. The Chemicals Segment's 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 operating
income comparisons, which increased operating income by
approximately $1 million in the fourth quarter and decreased
operating income by approximately $18 million in the full-year
period.
The Component Products Segment's
net sales decreased $1.2 million, or 5%, in the fourth quarter of
2017 as compared to the same period, and operating income decreased
from $4.1 million in the fourth quarter of 2016 to $2.7 million in
the fourth quarter of 2017. The Component Products Segment's
net sales and operating income decreased in the fourth quarter of
2017 compared to the same period in 2016 primarily due to security
products sales to a single government customer which, as expected,
did not recur in the fourth quarter of 2017. The Component
Products Segment's net sales for the full year of 2017 increased
$3.1 million or 3% primarily due to security products sales to an
existing government security customer, predominately during the
first half of 2017, partially offset by a decline in sales of
security products to an original equipment manufacturer of
recreational transportation products. Operating income
declined slightly from $15.6 million in 2016 to $15.2 million in
2017 due to relative changes in customer and product mix and to a
lesser extent higher raw material costs for security products and
higher manufacturing costs for marine components.
The Real Estate Management and
Development Segment had fourth quarter 2017 sales of $17.5 million,
including $15.4 million in revenue on sales of land held for
development, compared to sales of $30.4 million in the fourth
quarter of 2016, including $28.0 million in sales of land held for
development. For the full year 2017 the Real Estate
Management and Development Segment had sales of $38.4 million,
including $29.9 million in revenue on sales of land held for
development, compared to sales of $46.2 million for the full year
2016, including $37.8 million in sales of land held for
development. The Real Estate Management and Development
Segment had operating income in the fourth quarter of 2017 of $3.5
million, a decrease of $2.4 million compared to operating income of
$5.9 million in the fourth quarter of 2016. The Real Estate
Management and Development Segment had operating income of $6.6
million in the full year 2017 compared to operating income of $.8
million in the full year of 2016. Included in the full year
2016 operating income 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 2018.
Corporate expenses in the fourth quarter of 2017
were comparable to the fourth quarter of 2016 and 6% lower in the
full year 2017 as compared to same periods of 2016, primarily due
to lower administrative and environmental and related costs.
Interest expense increased to $14.7 million in the fourth quarter
of 2017 from $14.5 million in the fourth quarter of 2016 due to
lower average interest rates offset by higher debt balances.
Interest expense increased slightly to $58.9 million in the full
year 2017 from $58.1 million in full year of 2016 as the benefit of
lower interest rates was not realized until September 2017 when our
Chemicals Segment issued its 3.75% Senior Secured Notes noted
below.
In September 2017, the Chemicals
Segment voluntarily prepaid and terminated its term loan
indebtedness using a portion of the proceeds from the September
2017 issuance by Kronos International, Inc., its wholly-owned
subsidiary, of €400 million principal amount of 3.75% Senior
Secured Notes due September 2025. The Company's results in
2017 include a pre-tax charge of $7.1 million ($.01 per diluted
share) related to such prepayment.
The Company's income tax benefit
in 2017 includes (i) a non-cash deferred income tax benefit of
$186.7 million ($.32 per diluted share) as a result of the reversal
of the deferred income tax asset valuation allowances associated
with the Chemicals Segment's German and Belgian operations ($16.3
million or $.03 per diluted share in the fourth quarter), (ii) a
fourth quarter non-cash deferred income tax benefit of $18.7
million ($.03 per diluted share) as a result of the reversal of a
deferred income tax asset valuation allowance related to certain
U.S. deferred income tax assets of one of the Chemicals
Segment's 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 $76.2 million
($.13 per diluted share) as a result of the Tax Cuts and Jobs Act
(2017 Tax Act) enacted on December 22, 2017 for the one-time
repatriation tax imposed on the post-1986 undistributed earnings of
the Chemicals Segment's non-U.S. subsidiaries, (iv) a fourth
quarter non-cash deferred income tax benefit of $77.1 million ($.22
per diluted share) related to the revaluation of our net deferred
income tax liability resulting from the reduction in the U.S.
federal corporate income tax rate enacted as part of the 2017 Tax
Act, (v) an aggregate income tax benefit of $11.8 million ($.02 per
diluted share) related to the execution and finalization of an
Advance Pricing Agreement between Canada and Germany, mostly in the
third quarter, and (vi) a fourth quarter provisional non-cash
deferred income tax expense of $5.3 million ($.01 per diluted
share) related to a change in our conclusions regarding our
permanent reinvestment assertion with respect to the post-1986
undistributed earnings of the Chemicals Segment's European
subsidiaries.
The Company's income tax expense
in 2016 includes a net $3.4 million ($.01 per diluted share net of
noncontrolling interest) 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 non-cash deferred income tax
benefit related to a net decrease in the deferred income tax asset
valuation related to our Chemicals Segment's German and Belgian
operations, mostly recognized in the second and fourth quarters,
and a $7.2 million ($.02 per diluted share net of noncontrolling
interest) non-cash expense related to the increase in the Company's
reserve for uncertain tax positions, mostly recognized in the
fourth quarter.
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 ore, zinc, brass, aluminum, steel and energy 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
(such as the Chemicals Segment's new enterprise resource planning
system);
-
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, including future tax
reform;
-
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;
-
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 impact of the workforce reduction charge, which is used
by the Company's management to assess the performance of the
Company's Chemicals Segment's operations. The Company
believes disclosure of operating income (loss) 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 Chemicals 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), and real estate management
and development industries.
* * * * *
VALHI, INC. AND
SUBSIDIARIES |
|
|
|
CONDENSED
SUMMARY OF OPERATIONS |
|
|
|
(In millions,
except earnings per share) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Year ended |
|
December 31, |
|
December 31, |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
|
(unaudited) |
|
Net sales |
|
|
|
|
|
|
|
Chemicals |
$ 333.7 |
|
$
453.3 |
|
$1,364.3 |
|
$1,729.0 |
Component products |
26.3 |
|
25.1 |
|
108.9 |
|
112.0 |
Real estate management and
development |
30.4 |
|
17.5 |
|
46.2 |
|
38.4 |
|
|
|
|
|
|
|
|
Total net
sales |
$ 390.4 |
|
$
495.9 |
|
$1,519.4 |
|
$1,879.4 |
|
|
|
|
|
|
|
|
Operating
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemicals |
$ 45.2 |
|
$
119.2 |
|
$ 91.0 |
|
$
341.1 |
Component products |
4.1 |
|
2.7 |
|
15.6 |
|
15.2 |
Real estate management and
development |
5.9 |
|
3.5 |
|
0.8 |
|
6.6 |
|
|
|
|
|
|
|
|
Total operating
income |
55.2 |
|
125.4 |
|
107.4 |
|
362.9 |
|
|
|
|
|
|
|
|
General corporate items: |
|
|
|
|
|
|
|
Securities earnings |
7.2 |
|
7.9 |
|
27.2 |
|
29.5 |
Insurance recoveries |
- |
|
.2 |
|
.4 |
|
.4 |
General expenses, net |
(8.5) |
|
(8.5) |
|
(37.3) |
|
(35.0) |
Loss on prepayment of debt |
- |
|
- |
|
- |
|
(7.1) |
Interest expense |
(14.5) |
|
(14.7) |
|
(58.1) |
|
(58.9) |
|
|
|
|
|
|
|
|
Income from continuing
operations before |
|
|
|
|
|
|
|
beforeincome taxes |
39.4 |
|
110.3 |
|
39.6 |
|
291.8 |
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
15.3 |
|
(52.5) |
|
18.6 |
|
(120.0) |
|
|
|
|
|
|
|
|
Net income from
continuing operations |
24.1 |
|
162.8 |
|
21.0 |
|
411.8 |
|
|
|
|
|
|
|
|
Loss from discontinued
operations |
(6.3) |
|
(1.0) |
|
(24.0) |
|
(109.2) |
|
|
|
|
|
|
|
|
Net income (loss) |
17.8 |
|
161.8 |
|
(3.0) |
|
302.6 |
|
|
|
|
|
|
|
|
Noncontrolling interest in net income |
|
|
|
|
|
|
|
of subsidiaries |
8.6 |
|
21.7 |
|
12.9 |
|
95.1 |
|
|
|
|
|
|
|
|
Net income (loss)
attributable to Valhi |
|
|
|
|
|
|
|
stockholders |
$ 9.2 |
|
$
140.1 |
|
$ (15.9) |
|
$
207.5 |
|
|
|
|
|
|
|
|
VALHI, INC. AND
SUBSIDIARIES |
|
|
|
CONDENSED
SUMMARY OF OPERATIONS (Continued) |
|
|
|
(In millions,
except earnings per share) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Year ended |
|
December 31, |
|
December 31, |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
|
(unaudited) |
|
Amounts attributable to Valhi stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
$ 15.5 |
|
$
141.1 |
|
$ 8.1 |
|
$
316.7 |
Loss from discontinued operations |
(6.3) |
|
(1.0) |
|
(24.0) |
|
(109.2) |
|
|
|
|
|
|
|
|
Net income attributable
to Valhi |
|
|
|
|
|
|
|
stockholders |
$ 9.2 |
|
$
140.1 |
|
$ (15.9) |
|
$
207.5 |
|
|
|
|
|
|
|
|
Basic and diluted net income
(loss) per share |
|
|
|
|
|
|
|
Income from continuing operations |
$ 0.05 |
|
$
0.41 |
|
$ 0.02 |
|
$
0.93 |
Loss from discontinued operations |
(0.02) |
|
- |
|
(0.07) |
|
(0.32) |
|
|
|
|
|
|
|
|
Loss from discontinued operations |
$ .03 |
|
$
.41 |
|
$ (.05) |
|
$
.61 |
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Year ended |
|
December 31, |
|
December 31, |
|
2017 vs. 2016 |
|
2017 vs. 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage change in TiO2 net sales
: |
|
|
|
|
|
|
|
TiO2 product
pricing |
|
27 |
% |
|
|
22 |
% |
TiO2 sales
volumes |
|
5 |
|
|
|
5 |
|
TiO2 product
mix |
|
(1) |
|
|
|
(1) |
|
Changes in currency exchange rates |
|
5 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
Total |
|
36 |
% |
|
|
27 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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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