DALLAS, TEXAS . . November 8,
2018. Valhi, Inc. (NYSE: VHI) reported net income from
continuing operations attributable to Valhi stockholders of $142.8
million, or $.42 per diluted share, in the third quarter of 2018
compared to $44.2 million, or $.13 per diluted share, in the third
quarter of 2017. Valhi reported net income from
continuing operations attributable to Valhi stockholders of $205.8
million, or $.60 per diluted share, in the first nine months of
2018 compared to $175.6 million, or $.51 per diluted share in the
first nine months of 2017. Net income from continuing
operations attributable to Valhi stockholders improved from the
2017 periods primarily due to the net effects of a third quarter
2018 recognition of a non-cash deferred income tax benefit related
to Valhi's investment in Kronos, 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 three operating segments in the first nine months
of 2018.
The Chemicals Segment's net sales
of $410.3 million in the third quarter of 2018 were $54.2 million,
or 12%, lower than in the third quarter of 2017. The
Chemicals Segment's net sales of $1.3 billion in the first nine
months of 2018 were $36.8 million, or 3%, higher than in the first
nine months of 2017. The Chemicals Segment's net sales
decreased in the third quarter of 2018 and increased in the first
nine months of 2018 compared to the same periods in 2017 due to the
net effects of higher average TiO2 selling
prices and lower sales volumes. The Chemicals Segment's
average TiO2 selling
prices were 9% higher in the third quarter of 2018 as compared to
the third quarter of 2017 and were 18% higher in the first nine
months of 2018 as compared to the same prior year period. The
Chemicals Segment's average selling prices at the end of the third
quarter of 2018 were 2% lower than at the end of the second quarter
of 2018, and were 1% higher than at the end of 2017. Higher prices
in the European and North American markets were partially offset by
lower prices in the Latin American and export markets (attributable
to changes in customer mix) at the end of the third quarter of 2018
as compared to the end of 2017. TiO2 sales volumes
in the third quarter of 2018 were 19% lower as compared to the
record third quarter sales volumes of 2017 primarily due to lower
sales in the European and export markets reflecting the effects of
reduced shipments as customer inventory levels returned to more
normal levels. The Chemicals Segment's sales volumes in the first
nine months of 2018 were 15% lower than the same period in 2017
primarily due to a combination of factors including (i) lower sales
in all major markets resulting from a controlled ramp-up in January
2018 as we brought the second phase of our new global enterprise
resource planning system online; (ii) 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); (iii) product
availability in the second quarter; and (iv) customer inventory
level changes in the second and third quarters as discussed
above. Fluctuations in currency exchange rates (primarily the
euro) did not materially affect net sales comparisons in the third
quarter but increased net sales by approximately $53 million in the
first nine 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 change in net sales.
The Chemicals Segment's operating income in the third quarter of
2018 was $61.0 million as compared to $98.4 million in the third
quarter of 2017. For the nine months ended September 30,
2018, the Chemicals Segment's operating income was $295.2 million
as compared to $234.7 million in the first nine months of
2017. The Chemicals Segment's operating income decreased in
the third quarter and increased in the year-to-date period of 2018
compared to the 2017 periods primarily due to the net effect of
higher average TiO2 selling
prices, lower sales and production volumes and higher costs for
certain raw materials and other production costs. The
Chemicals Segment's TiO2 production
volumes were 7% lower in the third quarter and 6% lower in the
first nine months of 2018 as compared to the same periods in
2017. The Chemicals Segment's production facilities operated
at 95% of practical capacity in the first nine months of 2018 (95%,
97% and 92% in the first, second and third quarters of 2018,
respectively) compared to full practical capacity utilization rates
for the comparable periods 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 maintenance activities at
certain facilities in 2018, and the implementation of a
productivity-enhancing improvement project at The Chemicals
Segment's Belgian facility in the first quarter of 2018.
Fluctuations in currency exchange rates also affected operating
income comparisons, which increased segment profit by approximately
$7 million in the third quarter of 2018 and by approximately $26
million in the year-to-date 2018 period as compared to the same
periods in 2017.
The Component Products Segment's net sales increased 11% in the
third quarter of 2018 and 4% in the first nine months of 2018
compared to the respective periods of 2017. Third 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 nine months of 2018 compared to the same period in 2017
due to higher marine components sales volumes, and to a lesser
extent security products sales across a majority of our
markets. The Component Products Segment's operating income
increased from $3.4 million in the third quarter of 2017 to $4.5
million in the third quarter of 2018 and increased from $12.5
million in the first nine months of 2017 to $14.9 million in the
first nine 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 third quarter 2018 sales of $14.9 million,
including $13.4 million in revenue on sales of land held for
development, compared to sales of $5.1 million in the third quarter
of 2017, including $2.7 million in sales of land held for
development. For the first nine months of 2018 the Real
Estate Management and Development Segment had sales of $28.1
million, including $23.0 million in revenue on sales of land held
for development, compared to sales of $21.0 million in the first
nine months of 2017, including $14.8 million in sales of land held
for development. The Real Estate Management and Development
Segment had operating income in the third quarter of 2018 of $3.7
million, an increase of $2.4 million compared to operating income
of $1.3 million in the 2017 period, consistent with the higher
revenues. The Real Estate Management and Development Segment
had operating income of $7.9 million in the first nine months of
2018 compared to $3.1 million in the same period of 2017. Land
sales revenue is generally recognized over time based on costs
inputs, and land sales revenues were higher in both periods of 2018
as compared to 2017 primarily due to the relatively higher
percentage completion of land sales in existing development phases
during the third quarter of 2018. Land infrastructure
development spending increased in third quarter of 2018 as we
balanced development requirements with home builder outputs during
the periods along with developing new phases of our master planned
community. Operating income in the first nine months 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 101%
higher in the third quarter of 2018 compared to the third quarter
of 2017, primarily due to higher administrative costs in 2018,
offset in part by lower environmental remediation and related costs
in 2018. Corporate expenses were 65% higher in the first nine
months of 2018 compared to the same period in 2017, primarily due
to higher administrative costs, 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 ($9.5 million, or $.03 per diluted
share, net of income taxes and noncontrolling interest). In
the third quarter of 2018 we recognized a pre-tax securities
transaction gain of $12.5 million ($9.9 million, or $.03 per
diluted share, net of income taxes) related to the sale of our
interest in the Amalgamated Sugar Company LLC.
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
the third quarter of 2017 include a pre-tax charge of $7.1 million
($.01 per diluted share, net of tax and noncontrolling interest)
related to such prepayment.
The Company's income tax benefit
on the third quarter and first nine months of 2018 includes a net
benefit of $113 million ($.33 per diluted share) related to the
recognition of a non-cash deferred income tax benefit related to
Valhi's investment in Kronos. The Company's income tax
benefit in the first nine months of 2017 includes a non-cash
deferred income tax benefit of $170.4 million ($.29 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 ($7.8 million, or $.01 per diluted share,
recognized in the third quarter). The Company's income tax
expense in the third quarter of 2017 includes an $11.3 million
($.02 per diluted share) aggregate income tax benefit related to
the execution and finalization of an Advance Pricing Agreement
between the Canada and Germany associated with our Chemicals
Segment.
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 nine months of 2018 consists principally of a first
quarter pre-tax gain on the disposal of this Segment of $58.5
million ($39.3 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 |
|
Nine months ended |
|
September 30, |
|
September 30, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
|
(unaudited) |
|
(unaudited) |
Net sales |
|
|
|
|
|
|
|
Chemicals |
$ 464.5 |
|
$
410.3 |
|
$1,275.7 |
|
$1,312.5 |
Component products |
26.9 |
|
30.0 |
|
86.9 |
|
90.8 |
Real estate management and
development |
5.1 |
|
14.9 |
|
21.0 |
|
28.1 |
|
|
|
|
|
|
|
|
Total net
sales |
$ 496.5 |
|
$
455.2 |
|
$1,383.6 |
|
$1,431.4 |
|
|
|
|
|
|
|
|
Operating
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemicals |
$ 98.4 |
|
$
61.0 |
|
$ 234.7 |
|
$
295.2 |
Component products |
3.4 |
|
4.5 |
|
12.5 |
|
14.9 |
Real estate management and
development |
1.3 |
|
3.7 |
|
3.1 |
|
7.9 |
|
|
|
|
|
|
|
|
Total operating
income |
103.1 |
|
69.2 |
|
250.3 |
|
318.0 |
|
|
|
|
|
|
|
|
General corporate items: |
|
|
|
|
|
|
|
Securities earnings |
7.5 |
|
19.3 |
|
21.6 |
|
36.1 |
Insurance recoveries |
0.1 |
|
0.5 |
|
0.2 |
|
0.9 |
Gain on land sales |
- |
|
- |
|
- |
|
12.5 |
Other components of net periodic pension
and OPEB expense |
(4.5) |
|
(3.7) |
|
(12.9) |
|
(11.2) |
Litigation settlement expense |
- |
|
- |
|
- |
|
(62.0) |
Loss on prepayment of debt |
(7.1) |
|
- |
|
(7.1) |
|
- |
General expenses, net |
(7.2) |
|
(14.4) |
|
(26.4) |
|
(43.6) |
Interest expense |
(15.0) |
|
(14.0) |
|
(44.2) |
|
(45.4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing
operations before income taxes |
76.9 |
|
56.9 |
|
181.5 |
|
205.3 |
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
14.7 |
|
(91.4) |
|
(67.5) |
|
(33.2) |
|
|
|
|
|
|
|
|
Net income from
continuing operations |
62.2 |
|
148.3 |
|
249.0 |
|
238.5 |
|
|
|
|
|
|
|
|
Income (loss) from
discontinued operations |
1.7 |
|
0.7 |
|
(108.2) |
|
38.7 |
|
|
|
|
|
|
|
|
Net income |
63.9 |
|
149.0 |
|
140.8 |
|
277.2 |
|
|
|
|
|
|
|
|
Noncontrolling interest in net income |
|
|
|
|
|
|
|
of subsidiaries |
18.0 |
|
5.5 |
|
73.4 |
|
32.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to Valhi stockholders |
$ 45.9 |
|
$
143.5 |
|
$ 67.4 |
|
$
244.5 |
|
|
|
|
|
|
|
|
VALHI, INC. AND
SUBSIDIARIES |
|
|
|
CONDENSED
SUMMARY OF INCOME (Continued) |
|
|
|
(In millions,
except earnings per share) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
September 30, |
|
September 30, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
|
(unaudited) |
|
(unaudited) |
Amounts attributable to Valhi stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
$ 44.2 |
|
$
142.8 |
|
$ 175.6 |
|
$
205.8 |
Income (loss) from discontinued
operations |
1.7 |
|
0.7 |
|
(108.2) |
|
38.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to Valhi stockholders |
$ 45.9 |
|
$
143.5 |
|
$ 67.4 |
|
$
244.5 |
|
|
|
|
|
|
|
|
Basic and diluted net income
per share |
|
|
|
|
|
|
|
Income from continuing operations |
$ 0.13 |
|
$
0.42 |
|
$ 0.51 |
|
$
0.60 |
Income (loss) from discontinued
operations |
- |
|
- |
|
(0.31) |
|
0.11 |
|
|
|
|
|
|
|
|
Net income attributable
to Valhi stockholders |
$ 0.13 |
|
$ 0.42 |
|
$ 0.20 |
|
$ 0.71 |
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares
outstanding |
342.0 |
|
342.1 |
|
342.0 |
|
342.0 |
|
|
|
|
|
|
|
|
VALHI, INC. AND
SUBSIDIARIES |
|
|
|
|
IMPACT OF
PERCENTAGE CHANGE IN CHEMICAL SEGMENT'S NET SALES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
September 30, |
|
September 30, |
|
2018 vs. 2017 |
|
2018 vs. 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage change in TiO2 net sales
: |
|
|
|
|
|
|
|
TiO2 product
pricing |
|
9 |
% |
|
|
18 |
% |
TiO2 sales
volumes |
|
(19) |
|
|
|
(15) |
|
TiO2 product
mix |
|
(2) |
|
|
|
(4) |
|
Changes in currency exchange rates |
|
0 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
Total |
|
(12) |
% |
|
|
3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE: Valhi,
Inc.
CONTACT: Janet G. Keckeisen, Vice President - Corporate
Strategy and Investor Relations, 972.233.1700
This
announcement is distributed by West Corporation on behalf of West
Corporation 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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