UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of the earliest event reported)
March 16, 2006
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Valhi, Inc.
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(Exact name of Registrant as specified in its charter)
Delaware 1-5467 87-0110150
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(972) 233-1700
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
Item 7.01 Regulation FD Disclosure.
Pursuant to Items 2.02 and 7.01 of this current report, the registrant
hereby furnishes the information set forth in its press release issued on March
16, 2006, a copy of which is attached hereto as Exhibit 99.1 and incorporated
herein by reference.
The information, including the exhibit, the registrant furnishes in
this report is not deemed "filed" for purposes of section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the liabilities of
that section. Registration statements or other documents filed with the
Securities and Exchange Commission shall not incorporate this information by
reference, except as otherwise expressly stated in such filing.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Item No. Exhibit Index
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99.1 Press Release dated March 16, 2006 issued by the registrant.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VALHI, INC.
(Registrant)
By: /s/ Gregory M. Swalwell
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Gregory M. Swalwell
Vice President
Date: March 16, 2006
INDEX TO EXHIBITS
Exhibit No. Description
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99.1 Press Release dated March 16, 2006 issued by the registrant.
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PRESS RELEASE
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FOR IMMEDIATE RELEASE CONTACT:
Valhi, Inc. Bobby D. O'Brien
Three Lincoln Centre Vice President
5430 LBJ Freeway, Suite 1700 (972) 233-1700
Dallas, Texas 75240-2697
(972) 233-1700
VALHI REPORTS 2005 RESULTS
DALLAS, TEXAS . . March 16, 2006. Valhi, Inc. (NYSE: VHI) reported income
from continuing operations of $14.9 million, or $.13 per diluted share, in the
fourth quarter of 2005 compared to a loss of $31.4 million, or $.26 per diluted
share, in the fourth quarter of 2004. For the full year of 2005, the Company
reported income from continuing operations of $81.7 million, or $.68 per diluted
share, compared to income of $226.3 million, or $1.88 per diluted share, for
2004.
Chemicals sales increased $17.5 million in the fourth quarter of 2005
compared to the fourth quarter of 2004, and increased $68.1 million for the
year. The increase in sales in the fourth quarter of 2005 is due primarily to
higher average TiO2 selling prices and sales volumes, partially offset by the
effect of fluctuations in foreign currency exchange rates, which decreased sales
by approximately $8 million for the period. For the full year of 2005, the
increase in sales is due primarily to the net effects of higher average TiO2
selling prices, lower sales volumes and fluctuations in foreign currency
exchange rates, which increased sales by approximately $16 million for the full
year. Excluding the effect of fluctuations in the value of the U.S. dollar
relative to other currencies, Kronos' average TiO2 selling prices in billing
currencies in the fourth quarter of 2005 were 5% higher as compared to the
fourth quarter of 2004, and were 8% higher for the year. When translated from
billing currencies to U.S. dollars using actual foreign currency exchange rates
prevailing during the respective periods, Kronos' average TiO2 selling prices in
the fourth quarter and full-year 2005 increased 1% and 9%, respectively,
compared to the same periods of 2004.
Kronos' TiO2 sales volumes in the fourth quarter of 2005 were 4% higher
than the fourth quarter of 2004, as higher volumes in Europe and in export
markets more than offset the effect of lower volumes in North America. Sales
volumes for the full year declined by 4%. Kronos' operating income comparisons
were favorably impacted by higher production levels, which increased 2% in
full-year 2005 as compared to 2004. Production volumes in the fourth quarter of
2005 were slightly lower than the fourth quarter of last year. Kronos' operating
rates were at near full capacity in all periods, and Kronos' production volumes
in 2005 were a new record for Kronos for a fourth consecutive year. Fluctuations
in foreign currency exchange rates resulted in approximately a net $6 million
increase in chemicals operating income for the year-to-date period ($5 million
for the quarter-to-quarter comparison). Chemicals operating income in 2004 also
includes $6.3 million of income ($3.5 million, or $.03 per diluted share, net of
income taxes and minority interest) in the second quarter related to Kronos'
settlement of a contract dispute with a customer.
On September 22, 2005, the chloride-process TiO2 facility operated by
Kronos' 50%-owned joint venture, Louisiana Pigment Company ("LPC"), temporarily
halted production due to Hurricane Rita. Although storm damage to core
processing facilities was not extensive, a variety of factors, including loss of
utilities, limited access and availability of employees and raw materials,
prevented the resumption of partial operations until October 9, 2005 and full
operations until late 2005. LPC expects the majority of its property damage and
unabsorbed fixed costs for periods in which normal production levels were not
achieved will be covered by insurance, and Kronos believes insurance will cover
its lost profits (subject to applicable deductibles) resulting from its share of
the lost production from LPC. Insurance proceeds from the lost profit for
product that Kronos was not able to sell as a result of the loss of production
from LPC are expected to be recognized by Kronos during 2006, although the
amount and timing of such insurance recoveries is not presently determinable.
The effect on Kronos' financial results will depend on the timing and amount of
insurance recoveries. Kronos' warehouse and slurry facilities located near LPC's
facility were also temporarily closed due to the storm, but property damage to
these facilities was not significant.
Component product sales were higher in 2005 as compared to 2004 principally
due to increases in selling prices for certain products across all segments to
recover volatile raw material prices, sales volume associated with a business
acquired in 2005 and the net effect of fluctuations in currency exchange rates,
which increased sales by $1.5 million in the year-to-date period, partially
offset by sales volume decreases for certain products resulting from Asian
competition. Component products operating income increased in 2005 as compared
to 2004 as the favorable impact of continued reductions in manufacturing, fixed
overhead and other overhead costs more than offset the negative impact of
changes in foreign currency exchange rates, which decreased operating income by
approximately $2.3 million in the year-to-date period, and higher raw material
costs. Waste management sales increased in 2005, but its operating loss also
increased, as higher operating costs more than offset the effect of higher
utilization of certain waste management services.
As previously reported, effective January 1, 2005, TIMET (an equity method
investee of the Company) changed its method of accounting for approximately 40%
of its inventories from the last-in, first-out ("LIFO") method to the specific
identification cost method, representing all of its inventories previously
accounted for under the LIFO method. In accordance with accounting principles
generally accepted in the United States of America ("GAAP"), the Company has
retroactively restated its consolidated financial statements to reflect its
results of operations as if TIMET had accounted for such inventories under the
new method for all periods presented. As a result, the Company's income from
continuing operations in the fourth quarter and full-year of 2004 is $1.3
million and $2.1 million, respectively, higher than previously reported.
TIMET's sales increased from $137.0 million in the fourth quarter of 2004
to $220.8 million in the fourth quarter of 2005, with sales up from $501.8
million to $749.8 million for the year. TIMET's operating income increased in
the fourth quarter of 2005 from $17.8 million to $63.0 million, with full-year
operating income increasing from $43.0 million to $171.1 million. The
improvement in TIMET's operating results in 2005 was due in part to increases in
average selling prices for melted products (ingot and slab) of 62% in the fourth
quarter and 48% for the year, and increases in TIMET's mill product average
selling prices of 39% and 30%, respectively. TIMET's mill products sales volumes
were also higher in 2005, increasing 15% in the fourth quarter and 11% in the
year-to-date period, and sales volumes of melted products increased 8% and 6%,
respectively. TIMET's operating results comparisons were also favorably impacted
by improved plant operating rates, which increased from 73% for 2004 to 80% for
2005, and higher gross margin from the sale of titanium scrap and other non-mill
products. In addition, TIMET's operating results comparisons were negatively
impacted by higher costs for raw materials and energy and accruals for certain
performance-based employee compensation. TIMET's results in 2005 include a
second quarter pre-tax gain of $13.9 million ($2.6 million, or $.02 per diluted
share, net of income taxes and minority interest to Valhi) related to the sale
of certain real property adjacent to TIMET's facility in Nevada. TIMET's results
in 2005 also include a $50.2 million income tax benefit ($13.7 million, or $.11
per diluted share, net of minority interest to Valhi) related to reversal of the
valuation allowances attributable to TIMET's deferred income tax assets in the
U.S. and U.K. Equity in earnings of TIMET in 2004 includes income of (i) $6.3
million in the third quarter ($4.1 million, or $.03 per diluted share, net of
income taxes) related to a nonoperating gain recognized by TIMET upon the
exchange of substantially all of its convertible preferred debt securities for a
new issue of TIMET preferred stock, and (ii) $1.7 million ($1.1 million, or $.01
per diluted share, net of taxes) in the fourth quarter related to an income tax
benefit recognized by TIMET resulting from utilization of a capital loss
carryforward, the benefit of which had not been previously recognized by TIMET.
General corporate interest and dividend income was higher in the fourth
quarter and full-year of 2005 as compared to the same periods of 2004 due
primarily to a higher level of dividend income related to the Company's
investment in The Amalgamated Sugar Company LLC. The $21.6 million write-off of
accrued interest receivable in the fourth quarter of 2005 relates to the
previously-reported forgiveness of interest receivable on the Company's loan to
Snake River Sugar Company, which loan was prepaid in October 2005. Net
securities transactions gains in 2005 relate principally to (i) NL's sale of
shares of Kronos common stock in market transactions of $14.7 million ($6.6
million, or $.05 per diluted share, net of income taxes and minority interest)
and (ii) Kronos' $5.4 million gain ($3.1 million, or $.03 per diluted share, net
of income taxes and minority interest) related to the sale of its passive
interest in a Norwegian smelting operation. Net securities transactions gains in
the fourth quarter of 2004 include a $2.2 million gain ($1.2 million, or $.01
per diluted share, net of income taxes and minority interest) related to NL's
sale of shares of Kronos common stock in market transactions. General corporate
expenses were higher in 2005 due primarily to higher legal expenses of NL.
Interest expense was higher due primarily to higher outstanding levels of debt
at Kronos.
The Company's income tax expense in 2005 includes the net non-cash effects
of (i) the aggregate favorable effects of recent developments with respect to
certain non-U.S. income tax audits of Kronos, principally in Belgium and Canada,
of $12.5 million ($10.8 million, or $.09 per diluted share, net of minority
interest), (ii) the favorable effect of recent developments with respect to
certain income tax items of NL of $7.4 million ($6.2 million, or $.05 per
diluted share, net of minority interest), (iii) the unfavorable effect with
respect to the loss of certain income tax attributes of Kronos in Germany of
$17.5 million ($15.2 million, or $.13 per diluted share, net of minority
interest) and (iv) the unfavorable effect with respect to a change in CompX's
permanent reinvestment conclusion regarding its non-U.S. subsidiaries of $9.0
million ($5.1 million, or $.04 per diluted share, net of minority interest). As
previously reported, the Company's income tax benefit in 2004 includes (i) a
$268.6 million non-cash income tax benefit ($230.2 million, or $1.91 per diluted
share, net of minority interest) related to the reversal of a deferred income
tax asset valuation allowance attributable to Kronos' income tax attributes in
Germany (principally net operating loss carryforwards) and (ii) a $48.5 million
non-cash income tax benefit ($40.4 million, or $.34 per diluted share, net of
minority interest) related to income tax attributes of a subsidiary of NL.
As previously reported, in January 2005 CompX completed the sale of its
Thomas Regout operations in The Netherlands, and accordingly the results of
operations of Thomas Regout are classified as discontinued operations for all
periods presented. Discontinued operations in the fourth quarter of 2004 include
a $6.5 million impairment charge to write-down CompX's investment in the Thomas
Regout operations to its estimated net realizable value. Such impairment charge
represented an impairment of goodwill. Discontinued operations in the fourth
quarter of 2004 also includes a $4.2 million income tax benefit associated with
the U.S. capital loss realized in the first quarter of 2005 upon the completion
of the sale of the Thomas Regout operations. Recognition of the benefit of such
capital loss by the Company was appropriate under GAAP at the time such
operations were classified as held for sale Discontinued operations in 2005
relate primarily to additional expenses associated with the disposal of the
Thomas Regout operations.
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. Among the factors
that could cause actual future results to differ materially include, but are not
limited to:
o Future supply and demand for the Company's products,
o The extent of the dependence of certain of the Company's businesses on
certain market sectors,
o The cyclicality of certain of the Company's businesses,
o The impact of certain long-term contracts on certain of the Company's
businesses,
o Customer inventory levels,
o Changes in raw material and other operating costs,
o The possibility of labor disruptions,
o General global economic and political conditions,
o Competitive products and substitute products,
o Customer and competitor strategies,
o The impact of pricing and production decisions,
o Competitive technology positions,
o The introduction of trade barriers,
o Fluctuations in currency exchange rates,
o Operating interruptions,
o The timing and amount of insurance recoveries,
o The ability of the Company to renew or refinance credit facilities,
o Uncertainties associated with new product development,
o The ultimate outcome of income tax audits, tax settlement initiatives
or other tax matters,
o The ultimate ability to utilize income tax attributes, the benefit of
which has been recognized under the "more-likely-than-not" recognition
criteria,
o Environmental matters,
o Government laws and regulations and possible changes therein,
o The ultimate resolution of pending litigation, and
o 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. The Company's 2005 results are subject to completion of an
audit and the filing of its Annual Report on Form 10-K for the year ended
December 31, 2005, as more fully described in the 15-day extension of the filing
deadline of such Form 10-K filed today by the Company.
In an effort to provide investors with additional information regarding the
Company's results of operations as determined by GAAP, the Company has disclosed
certain non-GAAP information which the Company believes provides useful
information to investors:
o The Company discloses percentage changes in Kronos' average TiO2
selling prices in billing currencies, which excludes the effects of
foreign currency translation. The Company believes disclosure of such
percentage changes allows investors to analyze such changes without
the impact of changes in foreign currency exchange rates, thereby
facilitating period-to-period comparisons of the relative changes in
average selling prices in the actual various billing currencies.
Generally, when the U.S. dollar either strengthens or weakens against
other currencies, the percentage change in average selling prices in
billing currencies will be higher or lower, respectively, than such
percentage changes would be using actual exchange rates prevailing
during the respective periods.
Valhi, Inc. is engaged in the titanium dioxide pigments, component products
(precision ball bearing slides, security products and ergonomic computer support
systems), titanium metals products and waste management industries.
VALHI, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
(In millions, except earnings per share)
Three months ended Years ended
December 31, December 31,
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2004 2005 2004 2005
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(Unaudited)
Net sales
Chemicals $283.5 $301.0 $1,128.6 $1,196.7
Component products 46.5 46.6 182.6 186.3
Waste management 2.3 2.3 8.9 9.8
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$332.3 $349.9 $1,320.1 $1,392.8
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Operating income
Chemicals $ 19.3 30.7 $ 103.5 $ 164.9
Component products 3.7 5.5 16.2 19.3
Waste management (2.9) (3.0) (10.2) (12.1)
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Total operating income 20.1 33.2 109.5 172.1
Equity in:
TIMET 7.8 16.8 22.7 64.9
Other (.3) 1.2 2.2 3.6
General corporate items, net:
Interest and dividend income 9.2 28.9 34.6 57.8
Write-off accrued interest receivable - (21.6) - (21.6)
Securities transaction gains, net 2.1 - 2.1 20.2
Gain on disposal of fixed assets - - .6 -
Insurance recoveries - .6 .5 3.0
General expenses, net (6.4) (10.1) (28.0) (33.2)
Interest expense (17.0) (16.8) (62.9) (69.2)
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Income before income taxes 15.5 33.2 81.3 197.6
Provision for income taxes (benefit) 45.6 15.5 (193.3) 104.2
Minority interest in after-tax earnings 1.3 1.8 48.3 11.7
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Income (loss) from continuing operations (31.4) 14.9 226.3 81.7
Discontinued operations 3.3 - 3.7 (.3)
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Net income (loss) $(28.1) $ 14.9 $ 230.0 $ 81.4
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VALHI, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS (CONTINUED)
(In millions, except earnings per share)
Three months ended Years ended
December 31, December 31,
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2004 2005 2004 2005
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(Unaudited)
Basic earnings per share
Continuing operations $ (.26) $ .13 $ 1.89 $ .69
Discontinued operations .03 - .03 -
------ ------ ------ ------
Net income (loss) $ (.23) $ .13 $ 1.92 $ .69
====== ====== ====== ======
Diluted earnings per share
Continuing operations $ (.26) $ .13 $ 1.88 $ .68
Discontinued operations .03 - .03 -
------ ------ ------ ------
Net income (loss) $ (.23) $ .13 $ 1.91 $ .68
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Shares used in calculation of per share amounts
Basic earnings 120.2 116.8 120.2 118.2
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Diluted earnings 120.2 117.2 120.4 118.5
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VALHI, INC. AND SUBSIDIARIES
RECONCILIATION OF PERCENT CHANGE IN
KRONOS' AVERAGE TIO2 SELLING PRICES
(Unaudited)
Three months ended Years ended
December 31, December 31,
2005 vs. 2004 2005 vs. 2004
--------------------------------------------------------
Percent change in average selling prices:
Using actual foreign currency exchange rates +1% +9%
Impact of changes in foreign currency
exchange rates +4% -1%
-- --
In billing currencies +5% +8%
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