VALHI REPORTS THIRD QUARTER 2019 RESULTS
November 08 2019 - 4:15PM
Valhi, Inc. (NYSE: VHI) reported net income from continuing
operations attributable to Valhi stockholders of $13.1 million, or
$.04 per diluted share, in the third quarter of 2019 compared to
$142.8 million, or $.42 per diluted share, in the third quarter of
2018. Valhi reported net income from continuing
operations attributable to Valhi stockholders of $38.5 million, or
$.11 per diluted share, in the first nine months of 2019 compared
to $205.8 million, or $.60 per diluted share, in the first nine
months of 2018. Net income from continuing operations
attributable to Valhi stockholders declined from the 2018 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, lower operating results in the
Company’s Chemicals segment in 2019 and litigation settlement
charges in the second quarters of 2018 and 2019 related to NL.
The Chemicals Segment’s net sales of $437.4
million in the third quarter of 2019 were $27.1 million, or 7%,
higher than in the third quarter of 2018. The Chemicals
Segment’s net sales of $1.4 billion in the first nine months of
2019 were $45.9 million, or 3%, higher than in the first nine
months of 2018. The Chemicals Segment’s net sales increased
in 2019 due to the net effect of lower average TiO2 selling prices
and higher sales volumes. The Chemicals Segment’s average
TiO2 selling prices were 5% lower in the third quarter and 7% lower
in the first nine months of 2019 as compared to the same prior year
periods. The Chemicals Segment’s average TiO2 selling prices
at the end of the third quarter of 2019 were 2% higher than at the
end of the second and were comparable to the end of 2018. At the
end of the third quarter of 2019, higher prices in the North
American and export markets were offset by lower prices in the
European and Latin American markets as compared to year end 2018.
TiO2 sales volumes were 17% higher in the third quarter and 16%
higher in the first nine months of 2019 as compared to the same
prior year periods primarily due to higher sales in all major
markets. Fluctuations in currency exchange rates (primarily
the euro) also affected net sales comparisons, decreasing net sales
by approximately $9 million in the third quarter of 2019 and
approximately $41 million in the first nine months of 2019 as
compared to the same periods in 2018. The table at the end of
this press release shows how each of these items impacted net
sales.
The Chemicals Segment’s operating income in the third quarter of
2019 was $36.3 million as compared to $61.0 million in the third
quarter of 2018. For the year-to-date period, the Chemicals
Segment’s operating income was $139.6 million as compared to $295.2
million in the first nine months of 2018. The Chemicals
Segment’s operating income decreased in the 2019 periods as the
unfavorable effects of lower average TiO2 selling prices and higher
raw materials (primarily third-party feedstock) and other
production costs more than offset the favorable impact of higher
sales volumes. The Chemicals Segment’s TiO2 production
volumes were 4% higher in the third quarter and 1% higher in the
first nine months of 2019 as compared to the same periods in
2018. The Chemicals Segment operated its production
facilities at overall average capacity utilization rates of 97% in
the first nine months of 2019 (97% in the first, second and third
quarters of 2019) compared to 95% in 2018 (95%, 97% and 92% in the
first, second and third quarters of 2018, respectively).
Fluctuations in currency exchange rates also affected operating
income comparisons, which increased operating income by
approximately $6 million in the third quarter of 2019 and by
approximately $5 million in the year-to-date 2019 period as
compared to the same periods in 2018.
The Component Products Segment’s net sales decreased 1% in the
third quarter of 2019 compared to the same period of 2018. Third
quarter 2019 net sales decreased over the comparable 2018 period as
higher marine components sales to the towboat market were more than
offset by lower security products sales across a variety of
markets. The Component Products Segment’s net sales increased 4% in
the first nine months of 2019 compared to the same period of 2018.
Net sales increased for the first nine months of 2019
compared to the same period in 2018 due to strong sales growth for
marine components partially offset by lower sales of security
products, predominantly in the third quarter. The Component
Products Segment’s operating income decreased from $4.5 million in
the third quarter of 2018 to $4.3 million in the third quarter of
2019 and decreased from $14.9 million in the first nine months of
2018 to $14.3 million in the first nine months of 2019, principally
as a result of the decline in security products gross margin.
The Real Estate Management and Development
Segment had third quarter 2019 sales of $8.1 million, including
$6.3 million in revenue on sales of land held for development,
compared to sales of $14.9 million in the third quarter of 2018,
including $13.4 million in sales of land held for
development. For the first nine months of 2019 the Real
Estate Management and Development Segment had sales of $30.5
million, including $24.3 million in revenue on sales of land held
for development, compared to sales of $28.1 million in the first
nine months of 2018, including $23.0 million in sales of land held
for development. Land sales revenue is generally recognized
over time based on costs inputs, and land sales revenues are
dependent on spending for development activities as we balance
development requirements with home builder output during the
year. Land sales revenues are also impacted by the relative
timing of when new land parcel sales are closed. The Real Estate
Management and Development Segment had operating income in the
third quarter of 2019 of $.8 million, a decrease of $2.9 million
compared to operating income of $3.7 million in the 2018 period,
consistent with the lower revenues. The Real Estate
Management and Development Segment had operating income of $13.7
million in the first nine months of 2019 compared to $7.9 million
in the same period of 2018, primarily due to income related to the
recognition of tax increment reimbursement note receivables of $8.8
million ($4.6 million, or $.01 per diluted share, net of income
taxes and noncontrolling interest) in the first nine months of 2019
(primarily in the second quarter) and $3.1 million in the first
quarter of 2018 and due to an increase in the amount of acreage
sold in 2019 as compared to 2018.
Corporate expenses were 30% higher in the third
quarter of 2019 compared to the third quarter of 2018 primarily due
to an environmental remediation and related credit recognized in
2018. Corporate expenses were 13% lower in the first nine months of
2019 compared to the same period in 2018, primarily due to lower
litigation and related costs and environmental remediation and
related costs in 2019 compared to 2018. The Company
recognized a $62.0 million pre-tax ($40.7 million, or $.12 per
diluted share, net of income taxes and noncontrolling interest)
litigation settlement expense related to a litigation settlement
agreement NL reached in the second quarter of 2018, which was
ultimately not approved by the court. The Company recognized an
additional $19.3 million pre-tax ($12.6 million, or $.04 per
diluted share, net of income taxes and noncontrolling interest)
litigation settlement expense primarily in the second quarter of
2019 for a settlement agreement in the same case that was approved
by the court in July 2019. 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). In the third quarter of 2019 we sold one parcel of land
not used in our operations for a pre-tax gain of $4.4 million ($2.9
million, or $.01 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. Insurance recoveries aggregated $5.2 million pre-tax
($3.3 million, or $.01 per diluted share, net of income taxes and
noncontrolling interest) in the first nine months of 2019, and
substantially all of the insurance recoveries recognized in 2019
relate to a new settlement NL reached in the second quarter with a
single insurance carrier that agreed to reimburse NL for a portion
of its past and future litigation defense costs.
The Company’s income tax benefit in 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.
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 pre-tax
gain on the disposal of this segment of approximately $58 million
recognized primarily in the first quarter ($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. 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;
- Potential consolidation of our competitors;
- Potential consolidation of our customers;
- The impact of pricing and production decisions;
- Competitive technology positions;
- Our ability to protect or defend intellectual property
rights;
- 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) including new
environmental health and safety regulations;
- The ultimate resolution of pending litigation (such as NL’s
lead pigment and environmental matters);
- 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) and real estate management and
development industries.
* * * * *
VALHI,
INC. AND SUBSIDIARIES |
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CONDENSED
SUMMARY OF INCOME |
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|
|
|
(In
millions, except earnings per share) |
|
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Three months ended |
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Nine months ended |
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September 30, |
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September 30, |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
(unaudited) |
|
|
(unaudited) |
|
Net
sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chemicals |
$ |
410.3 |
|
|
$ |
437.4 |
|
|
$ |
1,312.5 |
|
|
$ |
1,358.4 |
|
Component products |
|
30.0 |
|
|
|
29.7 |
|
|
|
90.8 |
|
|
|
94.6 |
|
Real estate management
and development |
|
14.9 |
|
|
|
8.1 |
|
|
|
28.1 |
|
|
|
30.5 |
|
|
|
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|
|
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|
Total net sales |
$ |
455.2 |
|
|
$ |
475.2 |
|
|
$ |
1,431.4 |
|
|
$ |
1,483.5 |
|
|
|
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Operating
income |
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Chemicals |
$ |
61.0 |
|
|
$ |
36.3 |
|
|
$ |
295.2 |
|
|
$ |
139.6 |
|
Component products |
|
4.5 |
|
|
|
4.3 |
|
|
|
14.9 |
|
|
|
14.3 |
|
Real estate management
and development |
|
3.7 |
|
|
|
.8 |
|
|
|
7.9 |
|
|
|
13.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating
income |
|
69.2 |
|
|
|
41.4 |
|
|
|
318.0 |
|
|
|
167.6 |
|
|
|
|
|
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|
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|
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General corporate items: |
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|
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Securities
earnings |
|
19.3 |
|
|
|
2.6 |
|
|
|
36.1 |
|
|
|
9.0 |
|
Insurance
recoveries |
|
.5 |
|
|
|
.2 |
|
|
|
.9 |
|
|
|
5.2 |
|
Gain on land sales |
|
- |
|
|
|
4.4 |
|
|
|
12.5 |
|
|
|
4.4 |
|
Changes in market value
of Valhi common stock held by subsidiaries |
|
(7.1 |
) |
|
|
(3.1 |
) |
|
|
(11.2 |
) |
|
|
(.1 |
) |
Other components of net
periodic pension and OPEB expense |
|
(3.7 |
) |
|
|
(4.1 |
) |
|
|
(11.2 |
) |
|
|
(12.3 |
) |
Litigation settlement
expense |
|
- |
|
|
|
.3 |
|
|
|
(62.0 |
) |
|
|
(19.3 |
) |
General expenses,
net |
|
(7.3 |
) |
|
|
(9.5 |
) |
|
|
(32.4 |
) |
|
|
(28.2 |
) |
Interest expense |
|
(14.0 |
) |
|
|
(10.3 |
) |
|
|
(45.4 |
) |
|
|
(30.7 |
) |
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Income from continuing
operations before income taxes |
|
56.9 |
|
|
|
21.9 |
|
|
|
205.3 |
|
|
|
95.6 |
|
|
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|
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|
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Income tax expense
(benefit) |
|
(91.4 |
) |
|
|
4.7 |
|
|
|
(33.2 |
) |
|
|
31.8 |
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
Net income from
continuing operations |
|
148.3 |
|
|
|
17.2 |
|
|
|
238.5 |
|
|
|
63.8 |
|
|
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|
|
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Income from
discontinued operations |
|
.7 |
|
|
|
- |
|
|
|
38.7 |
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|
|
- |
|
|
|
|
|
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|
|
|
|
|
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|
Net income |
|
149.0 |
|
|
|
17.2 |
|
|
|
277.2 |
|
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|
63.8 |
|
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Noncontrolling interest in net
income |
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of subsidiaries |
|
5.5 |
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|
4.1 |
|
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|
32.7 |
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|
25.3 |
|
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|
Net income attributable
to Valhi stockholders |
$ |
143.5 |
|
|
$ |
13.1 |
|
|
$ |
244.5 |
|
|
$ |
38.5 |
|
VALHI,
INC. AND SUBSIDIARIES |
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|
CONDENSED
SUMMARY OF INCOME (Continued) |
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|
(In
millions, except earnings per share) |
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|
Three months ended |
|
|
Nine months ended |
|
|
September 30, |
|
|
September 30, |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
(unaudited) |
|
|
(unaudited) |
|
Amounts attributable to Valhi
stockholders: |
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|
|
Income from continuing
operations |
$ |
142.8 |
|
|
$ |
13.1 |
|
|
$ |
205.8 |
|
|
$ |
38.5 |
|
Income from
discontinued operations |
|
.7 |
|
|
|
- |
|
|
|
38.7 |
|
|
|
- |
|
|
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|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
Net income attributable
to Valhi stockholders |
$ |
143.5 |
|
|
$ |
13.1 |
|
|
$ |
244.5 |
|
|
$ |
38.5 |
|
|
|
|
|
|
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|
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|
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|
Basic and diluted net income
per share |
|
|
|
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|
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|
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|
|
|
|
Income from continuing
operations |
$ |
.42 |
|
|
$ |
.04 |
|
|
$ |
.60 |
|
|
$ |
.11 |
|
Income from
discontinued operations |
|
- |
|
|
|
- |
|
|
|
.11 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to Valhi stockholders |
$ |
.42 |
|
|
$ |
.04 |
|
|
$ |
.71 |
|
|
$ |
.11 |
|
|
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|
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|
|
|
|
|
|
|
|
Basic and diluted
weighted average shares outstanding |
|
342.1 |
|
|
|
342.1 |
|
|
|
342.0 |
|
|
|
342.1 |
|
VALHI,
INC. AND SUBSIDIARIES |
|
|
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|
IMPACT OF
PERCENTAGE CHANGE IN CHEMICAL SEGMENT'S NET SALES |
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|
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|
Three months ended |
|
Nine months ended |
|
September 30, |
|
September 30, |
|
2019 vs. 2018 |
|
2019 vs. 2018 |
|
|
|
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Percentage change in TiO2 net
sales : |
|
|
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|
|
|
|
|
|
|
|
TiO2 product
pricing |
|
|
(5 |
) |
% |
|
|
|
(7 |
) |
% |
TiO2 sales volumes |
|
|
17 |
|
|
|
|
|
16 |
|
|
TiO2 product mix |
|
|
(3 |
) |
|
|
|
|
(3 |
) |
|
Changes in currency
exchange rates |
|
|
(2 |
) |
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
7 |
|
% |
|
|
|
3 |
|
% |
SOURCE: Valhi, Inc.
CONTACT: Janet G. Keckeisen, Vice President Corporate Strategy and Investor Relations, 972.233.1700
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