VALHI REPORTS SECOND QUARTER 2018 RESULTS
August 08 2018 - 4:15PM
DALLAS, TEXAS . . August 8,
2018. Valhi, Inc. (NYSE: VHI) reported net income from
continuing operations attributable to Valhi stockholders of $11.3
million, or $.03 per diluted share, in the second quarter of 2018
compared to $117.0 million, or $.35 per diluted share, in the
second quarter of 2017. Valhi reported net income from
continuing operations attributable to Valhi stockholders of $63.0
million, or $.18 per diluted share, in the first six months of 2018
compared to $131.4 million, or $.38 per diluted share in the first
six months of 2017. Net income from continuing operations
attributable to Valhi stockholders declined from the 2017 periods
primarily due to the net effects of a second quarter 2017
recognition of a non-cash deferred income tax benefit related to
the Chemicals Segment's German and Belgian operations, a second
quarter 2018 litigation settlement charge related to NL and
improved operating results from our Chemicals and Component
Products Segments in 2018.
The Chemicals Segment's net sales of $471.8 million in the second
quarter of 2018 were $30.4 million, or 7%, higher than in the
second quarter of 2017. The Chemicals Segment's net sales of
$902.2 million in the first six months of 2018 were $91.0 million,
or 11%, higher than in the first six months of 2017. The
Chemicals Segment's net sales increased in 2018 due to higher
average TiO2 selling
prices partially offset by lower sales volumes. The Chemicals
Segment's average TiO2 selling
prices were 20% higher in the second quarter of 2018 as compared to
the second quarter of 2017 and were 23% higher in the first six
months of 2018 as compared to the same prior year period. The
Chemicals Segment's average TiO2 selling
prices at the end of the second quarter of 2018 were 4% higher than
at the end of 2017, with most of such increase occurring in the
first quarter. Higher prices in the European, North American
and export markets were partially offset by lower prices in Latin
America (attributable to changes in customer mix). The
Chemicals Segment's TiO2 sales volumes
in the second quarter of 2018 were 12% lower as compared to the
record second quarter sales volumes of 2017 reflecting the effects
of product availability issues during the quarter as well as
reduced shipments as customer inventory levels returned to more
normal levels especially in European and export markets, partially
offset by higher sales in the North American market. The
Chemicals Segment's sales volumes in the first six months of 2018
were 13% lower than the same period in 2017 primarily due to lower
sales in all major markets resulting from a controlled ramp-up in
January 2018 as Kronos brought the second phase of its new global
enterprise resource planning system online, and inventory
management to assure adequate supply to our customers during the
spring and summer necessitated by the lower production volumes in
the first three months of the year (as discussed below), as well as
the impact of product availability and customer inventory level
changes in the second quarter discussed above. Fluctuations
in currency exchange rates (primarily the euro) also affected net
sales comparisons, increasing net sales by approximately $22
million in the second quarter of 2018 and approximately $53 million
in the first six months of 2018 as compared to the same periods in
2017. The table at the end of this press release shows how
each of these items impacted the overall increase in net sales.
The Chemicals Segment's operating income in the second quarter of
2018 was $123.6 million as compared to $77.2 million in the second
quarter of 2017. For the year-to-date period, the Chemicals
Segment's operating income was $234.2 million as compared to $136.3
million in the first six months of 2017. The Chemicals
Segment's operating income increased in the 2018 periods primarily
due to higher average TiO2 selling
prices partially offset by lower sales and production volumes and
higher costs for certain raw materials and other production
costs. The Chemicals Segment's TiO2 production
volumes were 4% lower in the second quarter and 6% lower in the
first six months of 2018 as compared to the same periods in
2017. Kronos' production facilities operated at 96% of
practical capacity in 2018 (95% and 97% in the first and second
quarters of 2018, respectively) compared to full practical capacity
utilization rates in 2017. The decrease in TiO2
production volumes in the 2018 periods compared to the production
volumes in the 2017 periods was primarily due to the timing of
scheduled maintenance at certain facilities in 2018 as well as the
implementation of a productivity-enhancing improvement project at
Kronos' Belgian facility in the first quarter of 2018.
Fluctuations in currency exchange rates also affected segment
profit comparisons, which increased operating income by
approximately $18 million in the second quarter of 2018 and by
approximately $19 million in the year-to-date 2018 period as
compared to the same periods in 2017.
The Component Products Segment's net sales increased 8% in the
second quarter of 2018 and 1% in the first six months of 2018
compared to the respective periods of 2017. Second quarter 2018 net
sales increased over the comparable 2017 period primarily due to
higher sales of security products across the majority of our
markets and continued strong growth in sales of marine components
to various marine and industrial markets. Net sales increased for
the first six months of 2018 compared to the same period in 2017
due to higher marine components sales volumes, partially offset by
lower security products sales volumes to existing government
security customers. The Component Products Segment's
operating income increased from $4.6 million in the second quarter
of 2017 to $6.0 million in the second quarter of 2018 and increased
from $9.1 million in the first six months of 2017 to $10.4 million
in the first six months of 2018, principally as a result of
favorable changes in customer and product mix in security products
and improved manufacturing efficiencies facilitated by increased
production volumes and cost reductions.
The Real Estate Management and Development Segment had second
quarter 2018 sales of $6.0 million, including $3.8 million in
revenue on sales of land held for development, compared to sales of
$10.3 million in the second quarter of 2017, including $8.4 million
in sales of land held for development. For the first
six months of 2018 the Real Estate Management and Development
Segment had sales of $13.2 million, including $9.6 million in
revenue on sales of land held for development, compared to sales of
$15.9 million in the first six months of 2017, including $12.1
million in sales of land held for development. The Real
Estate Management and Development Segment had operating income in
the second quarter of 2018 of $.4 million, a decrease of $.9
million compared to operating income of $1.3 million in the 2017
period, consistent with the lower revenues. The Real Estate
Management and Development Segment had operating income of $4.2
million in the first six months of 2018 compared to $1.8 million in
the same period of 2017. Land sales revenue is generally recognized
over time based on costs inputs, and land sales revenues were lower
in both periods of 2018 as compared to 2017 primarily due to lower
infrastructure development in 2018. Land infrastructure
development spending declined in 2018 as we balanced development
requirements with home builder outputs during the periods.
Operating income in the first quarter of 2018 also includes $3.1
million of income in the first quarter related to the recognition
of tax increment reimbursement note receivables. 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 were 69% higher in the second quarter of 2018
and 52% higher in the first six months of 2018 compared to the same
periods in 2017. Corporate expenses increased in both periods due
to higher administrative, litigation fees and related costs, and
environmental remediation and related costs in 2018 compared to
2017. In May 2018, NL entered into a settlement agreement in
the Santa Clara County, California ligation under which, as
supplemented, we recognized a pre-tax $62 million ($40.7 million or
$.12 per diluted share net of income taxes and noncontrolling
interest) litigation settlement expense in the second quarter of
2018. The settlement agreement is subject to a number of
conditions. In the first quarter of 2018 we sold two parcels
of land not used in our operating activities for an aggregate
pre-tax gain of $12.5 million ($9.6 million, or $.03 per diluted
share, net of income taxes and noncontrolling interest).
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).
As previously reported, on January 26, 2018 we completed the sale
of our Waste Management Segment, the results of operations of which
have been reclassified to discontinued operations for all periods
presented. Discontinued operations in the first six months of
2018 consists principally of a first quarter pre-tax gain on the
disposal of this Segment of $58.4 million ($38.6 million, or $.11
per diluted share, net of income taxes).
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.
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
SUMMARY OF INCOME |
|
|
|
(In millions,
except earnings per share) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Six months ended |
|
June 30, |
|
June 30, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
|
(unaudited) |
|
(unaudited) |
Net sales |
|
|
|
|
|
|
|
Chemicals |
$ 441.4 |
|
$
471.8 |
|
$ 811.2 |
|
$
902.2 |
Component products |
30.1 |
|
32.4 |
|
60.0 |
|
60.8 |
Real estate management and
development |
10.3 |
|
6.0 |
|
15.9 |
|
13.2 |
|
|
|
|
|
|
|
|
Total net
sales |
$ 481.8 |
|
$
510.2 |
|
$ 887.1 |
|
$
976.2 |
|
|
|
|
|
|
|
|
Operating
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemicals |
$ 77.2 |
|
$
123.6 |
|
$ 136.3 |
|
$
234.2 |
Component products |
4.6 |
|
6.0 |
|
9.1 |
|
10.4 |
Real estate management and
development |
1.3 |
|
0.4 |
|
1.8 |
|
4.2 |
|
|
|
|
|
|
|
|
Total operating
income |
83.1 |
|
130.0 |
|
147.2 |
|
248.8 |
|
|
|
|
|
|
|
|
General corporate items: |
|
|
|
|
|
|
|
Securities earnings |
7.1 |
|
8.5 |
|
14.1 |
|
16.8 |
Insurance recoveries |
- |
|
.2 |
|
.1 |
|
.4 |
Gain on land sales |
- |
|
- |
|
- |
|
12.5 |
Other components of net periodic pension
and OPEB expense |
(4.3) |
|
(3.8) |
|
(8.4) |
|
(7.5) |
Litigation settlement expense |
- |
|
(62.0) |
|
- |
|
(62.0) |
General expenses, net |
(8.7) |
|
(14.9) |
|
(19.2) |
|
(29.2) |
Interest expense |
(14.7) |
|
(16.0) |
|
(29.2) |
|
(31.4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations before income taxes |
62.5 |
|
42.0 |
|
104.6 |
|
148.4 |
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
(100.8) |
|
22.0 |
|
(82.2) |
|
58.2 |
|
|
|
|
|
|
|
|
Net income from
continuing operations |
163.3 |
|
20.0 |
|
186.8 |
|
90.2 |
|
|
|
|
|
|
|
|
Income (loss) from
discontinued operations |
(108.2) |
|
0.4 |
|
(109.9) |
|
38.0 |
|
|
|
|
|
|
|
|
Net income |
55.1 |
|
20.4 |
|
76.9 |
|
128.2 |
|
|
|
|
|
|
|
|
Noncontrolling interest in net income |
|
|
|
|
|
|
|
of subsidiaries |
46.3 |
|
8.7 |
|
55.4 |
|
27.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to Valhi stockholders |
$ 8.8 |
|
$
11.7 |
|
$ 21.5 |
|
$
101.0 |
|
|
|
|
|
|
|
|
VALHI, INC. AND
SUBSIDIARIES |
|
|
|
CONDENSED
SUMMARY OF INCOME (Continued) |
|
|
|
(In millions,
except earnings per share) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Six months ended |
|
June 30, |
|
June 30, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
|
(unaudited) |
|
(unaudited) |
Amounts attributable to Valhi stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
$ 117.0 |
|
$
11.3 |
|
$ 131.4 |
|
$
63.0 |
Income (loss) from discontinued
operations |
(108.2) |
|
0.4 |
|
(109.9) |
|
38.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to Valhi stockholders |
$ 8.8 |
|
$
11.7 |
|
$ 21.5 |
|
$
101.0 |
|
|
|
|
|
|
|
|
Basic and diluted net income
per share |
|
|
|
|
|
|
|
Income from continuing operations |
$ 0.35 |
|
$
0.03 |
|
$ 0.38 |
|
$
0.18 |
Income (loss) from discontinued
operations |
(0.32) |
|
- |
|
(0.32) |
|
0.11 |
|
|
|
|
|
|
|
|
Net income attributable
to Valhi stockholders |
$ .03 |
|
$
.03 |
|
$ .06 |
|
$
.29 |
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares
outstanding |
342.0 |
|
342.0 |
|
342.0 |
|
342.0 |
|
|
|
|
|
|
|
|
IMPACT OF
PERCENTAGE CHANGE IN CHEMICAL SEGMENT'S NET SALES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Six months ended |
|
June 30, |
|
June 30, |
|
2018 vs. 2017 |
|
2018 vs. 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage change in TiO2 net sales
: |
|
|
|
|
|
|
|
TiO2 product
pricing |
|
20 |
% |
|
|
23 |
% |
TiO2 sales
volumes |
|
(12) |
|
|
|
(13) |
|
TiO2 product
mix |
|
(6) |
|
|
|
(5) |
|
Changes in currency exchange rates |
|
5 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
Total |
|
7 |
% |
|
|
11 |
% |
|
|
|
|
|
|
|
|
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
Valhi (NYSE:VHI)
Historical Stock Chart
From Aug 2024 to Sep 2024
Valhi (NYSE:VHI)
Historical Stock Chart
From Sep 2023 to Sep 2024