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
13, 2007
Valhi,
Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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1-5467
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87-0110150
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(State
or other jurisdiction of incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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5430
LBJ Freeway, Suite 1700, Dallas, Texas
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75240-2697
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code
(972)
233-1700
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(Former
name or former address, if changed since last report.)
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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):
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Item
2.02
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Results
of Operations and Financial
Condition.
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Item
7.01
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Regulation
FD Disclosure.
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The
registrant hereby furnishes the information set forth in its press release
issued on March 13, 2007, 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 U.S. Securities and
Exchange Commission shall not incorporate this information by reference, except
as otherwise expressly stated in such filing.
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Item
9.01
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Financial
Statements and Exhibits.
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(d)
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Exhibits
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Item
No.
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Exhibit
Index
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99.1
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Press
release dated March 13, 2007 issued by the
registrant.
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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.
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Valhi,
Inc.
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(Registrant)
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By: /s/
Gregory M. Swalwell
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Date:
March 14, 2007
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Gregory
M. Swalwell, Vice President
and Controller
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INDEX
TO EXHIBITS
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Item
No.
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Exhibit
Index
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99.1
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Press
release dated March 14, 2007 issued by the
registrant.
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VALHI
REPORTS 2006 RESULTS
DALLAS,
TEXAS . . March 13, 2007. Valhi, Inc. (NYSE: VHI) reported income from
continuing operations of $80.4 million, or $.68 per diluted share, in the
fourth
quarter of 2006 compared to income of $14.8 million, or $.13 per diluted
share,
in the fourth quarter of 2005. For the full year of 2006, the Company reported
income from continuing operations of $141.7 million, or $1.20 per diluted
share,
compared to income of $82.1 million, or $.69 per diluted share, for 2005.
Chemicals
sales increased $82.8 million in 2006 as compared to 2005 due principally
to
higher TiO2 sales volumes. Kronos’ TiO2 sales volumes in 2006, which were a new
record for Kronos, increased 7% as compared to 2006, with higher volumes
in the
United States, Europe and export markets and lower volumes in Canada. Chemical
sales in the fourth quarter of 2006 were $2.5 million lower than the fourth
quarter of 2005 due primarily to lower TiO2 sales volumes, which declined
by 5%.
Also impacting chemicals sales comparisons were fluctuations in foreign currency
exchange rates, which increased TiO2 sales by approximately $12 million in
the
quarter and approximately $2 million in the year-to-date period. Kronos’ average
TiO2 selling in the fourth quarter and full year of 2006 approximated its
average selling prices for the same periods in 2005. The table at the end
of
this press release shows how each of these items impacted the overall increase
in chemicals sales.
Chemicals
operating income comparisons were favorably impacted by record high TiO2
production volumes, which were 10% higher in the quarter and 5% higher for
the
year. Kronos’ TiO2 production facilities were operating at near full capacity
for both 2005 and 2006, and Kronos’ TiO2 production volumes in 2006 were a new
record for Kronos for the fifth consecutive year. Chemicals operating income
in
the fourth quarter of 2006 includes income of $1.8 million for proceeds of
our
business interruption insurance claim related to Hurricane Rita. Chemicals
operating income comparisons were negatively impacted by higher manufacturing
costs, particularly raw materials and energy costs, and by fluctuations in
foreign currency exchange rates, which decreased chemicals operating income
by
approximately $2 million for the quarter and $20 million for the
year.
In
December 2006, Kronos adopted a new accounting standard related to planned
major
maintenance expense. Under the new standard, Kronos no longer accrues the
cost
of planned major maintenance expense in advance but instead recognizes the
cost
of planned major maintenance when incurred. The new standard is adopted
retroactively, and accordingly the Company’s income from continuing operations
in 2005 is approximately $400,000 higher than previously reported.
Component
products sales increased in 2006 as compared to 2005 due mainly to the net
effect of sales volumes generated from the August 2005 and April 2006
acquisitions of two marine component businesses, higher sales volumes of
security products due to improved demand and lower sales volumes for furniture
component products. Component product sales decreased
in the fourth quarter of 2006 as compared to the fourth quarter of 2005
primarily due to the expiration of a precision slides sale contract which
was
renewed at lower sales volumes. In
addition, component products sales comparisons were favorably impacted by
fluctuations in foreign currency exchange rates, which increased
sales
by
approximately $1.1 million for the year. Component products operating income
comparisons were favorably impacted by an improved product mix and
continued reduction
in manufacturing and overhead costs. In
addition, component products operating income comparison were negatively
impacted by higher
raw material costs, due in part to the expiration of certain commodity raw
material supply contracts resulting in higher costs which could not be
immediately recovered through price increases or surcharges, and by fluctuations
in foreign currency exchange rates, which decreased operating income by
approximately $1.1 million for the year.
Waste
management sales increased in the full year of 2006, and the waste management
operating loss decreased, as the Company obtained new customers and existing
customers increased their utilization of our waste management services.
On
February 28, 2007 our board of directors declared a special dividend in the
form
of all of the TIMET common stock we own. The dividend is payable March 26,
2007
to stockholders of record on March 12, 2007. After the dividend is complete
the
only ownership interest we will have in TIMET will be a nominal amount through
our subsidiary NL. During 2006, TIMET benefited from significantly increased
demand for titanium from commercial aerospace and military sectors that has
driven melted and mill titanium prices to record levels. TIMET’s sales increased
from $220.8 million in the fourth quarter of 2005 to $323.5 million in the
fourth quarter of 2006, and increased from $749.8 million in 2005 to $1.2
billion in 2006. TIMET’s operating income also improved from $63.0 million to
$109.5 million in the quarter, and from $171.1 million to $382.8 million
for the
year. TIMET’s average selling prices for melted and milled products in the
fourth quarter of 2006 increased 88% and 30%, respectively, over the same
period
in 2005. For the full year of 2006, these average selling prices increased
93%
and 39%, respectively. TIMET’s sales volumes of mill products increased 9% in
the fourth quarter of 2006 as compared to the fourth quarter of 2005, while
sales volumes of TIMET’s melted products increased 5%. For the full year, such
sales volumes were up 12% and 4%, respectively. TIMET’s operating income
comparisons were favorably impacted by improved plant operating rates, which
increased to 88% in 2006 from 80% in 2005. TIMET’s operating income comparisons
were negatively impacted by higher costs for raw materials, primarily titanium
sponge and scrap, increased employee compensation costs as a result of personnel
added to support the expansion of TIMET’s business and certain relocation costs.
TIMET’s
results in the fourth quarter of 2006 include a pre-tax gain of $40.9 million
($10.2 million, or $.09 per diluted share, net of income taxes and minority
interest to Valhi) related to the sale of its minority interest in VALTIMET
SAS.
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 $50.1 million
income tax benefit ($13.7 million, or $.11 per diluted share, net of minority
interest to Valhi) related to the reversal of the valuation allowances
attributable to TIMET’s deferred income tax assets in the U.S. and the
U.K.
General
corporate interest and dividend income was lower in the fourth quarter and
full-year of 2006 as compared to the same periods of 2005 due primarily to
a
lower 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 $14.6 million ($6.6 million, or $.05 per
diluted
share, net of income taxes and minority interest) and (ii) a second quarter
$5.4
million gain ($2.4 million, or $.02 per diluted share, net of income taxes
and
minority interest) related to Kronos’ sale of its passive interest in a
Norwegian smelting operation.
Insurance
recoveries represent NL’s recovery from certain former insurance carriers in
settlements of claims related to certain environmental, indemnity and past
litigation defense costs. These net-of-tax insurance recoveries aggregated
$.01
per diluted share in 2005 and $.03 per diluted share in 2006. The $36.4 million
gain on the sale of fixed assets in the fourth quarter of 2006 ($23.6 million,
or $.20 per diluted share, net of taxes) relates to the sale of certain property
in Nevada not used in any of the Company’s operations. The $22.3 million loss on
prepayment of debt in 2006 ($10.3 million, or $.09 per diluted share, net
of
income tax benefit and minority interest) relates to Kronos’ May 2006 redemption
of its 8.875% Senior Secured Notes.
The
Company’s effective income tax rate varies significantly from the U.S. statutory
federal income tax rate in 2006 due primarily to an aggregate net income
tax
benefit of Kronos of $34.9 million ($24.2 million, or $.21 per diluted share,
net of minority interest) related to the net effect of the withdrawal of
certain
income tax assessments previously made by the Belgian and Norwegian tax
authorities, the favorable resolution of certain income tax issues related
to
Kronos’ German and Belgian operations, the unfavorable resolution of certain
other income tax issues related to Kronos’ German operations, an increase in
Kronos’ income tax contingency reserve principally related to ongoing income tax
audits in Germany and the enactment of a reduction in the Canadian federal
income tax rate. Such income tax benefit includes a net income tax benefit
of
$25.7 million ($17.8 million, or $.15 per diluted share) in the fourth quarter
of 2006.
The
Company’s provision for income taxes in 2005 includes a net non-cash income tax
expense of $6.6 million ($3.3 million, or $.03 per diluted share, net of
minority interest) primarily related to the aggregate effect of developments
of
certain income tax audits of Kronos and NL and a change in CompX’s permanent
reinvestment conclusion regarding certain of its non-U.S.
subsidiaries.
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 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:
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·
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Future
supply and demand for the Company’s products,
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·
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The
extent of the dependence of certain of the Company’s businesses on certain
market sectors,
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·
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The
cyclicality of certain of the Company's businesses,
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·
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The
impact of certain long-term contracts on certain of the Company's
businesses,
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·
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Customer
inventory levels,
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·
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Changes
in the Company’s raw material and other operating costs,
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·
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The
possibility of labor disruptions,
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·
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General
global economic and political conditions,
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·
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Competitive
products and substitute products,
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·
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Possible
disruption of business or increases in the cost of doing business
resulting from terrorist activities or global
conflicts,
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·
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Customer
and competitor strategies,
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·
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The
impact of pricing and production decisions,
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·
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Competitive
technology positions,
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·
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The
introduction of trade barriers,
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·
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Fluctuations
in currency exchange rates,
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·
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Operating
interruptions,
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·
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The
timing and amount of insurance
recoveries,
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·
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The
ability of the Company to renew or refinance credit
facilities,
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·
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The
extent to which our subsidiaries were to become unable to pay
dividends,
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·
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Uncertainties
associated with new product development,
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·
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The
ultimate outcome of income tax audits, tax settlement initiatives
or other
tax matters,
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·
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The
ultimate ability to utilize income tax attributes, the benefit
of which
has been recognized under the “more-likely-than-not” recognition
criteria,
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·
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Environmental
matters,
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·
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Government
laws and regulations and possible changes
therein,
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·
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The
ultimate resolution of pending litigation, and
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·
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Possible
future litigation.
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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 currently 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.
Valhi,
Inc. is engaged in the titanium dioxide pigments, component products (security
products, furniture components and performance marine components), titanium
metals products and waste management industries.
*
* * *
*
VALHI,
INC. AND SUBSIDIARIES
CONDENSED
SUMMARY OF OPERATIONS
(In
millions, except earnings per share)
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Three
months ended
December
31,
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Year
ended
December
31,
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|||
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2005
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2006
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2005
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2006
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(Unaudited)
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Net
sales
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Chemicals
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$301.0
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$298.5
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$1,196.7
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$1,279.5
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Component products
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46.6
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44.1
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186.3
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190.1
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Waste management
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2.3
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1.8
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9.8
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11.8
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Total net sales
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$349.9
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$344.4
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$1,392.8
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$1,481.4
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Operating income
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||||
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Chemicals
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$
30.3
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$
38.7
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$ 165.6
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$
138.1
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Component products
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5.5
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3.6
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19.3
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20.6
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Waste management
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(3.0)
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(3.4)
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(12.1)
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(9.5)
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Total operating income
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32.8
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38.9
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172.8
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149.2
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Equity in:
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||||
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TIMET
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16.8
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39.4
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64.9
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101.1
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Other
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1.2
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1.2
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3.6
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3.8
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General corporate items, net:
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||||
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Interest and dividend income
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28.9
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10.8
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57.8
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41.6
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Securities transaction gains, net
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-
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.3
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20.2
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.7
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Write-off accrued interest receivable
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(21.6)
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-
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(21.6)
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-
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Gain on disposal of fixed assets
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-
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36.4
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-
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36.4
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Insurance recoveries
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.6
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4.7
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3.0
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7.6
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General expenses, net
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(10.1)
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(7.5)
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(33.2)
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(33.0)
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Loss on prepayment of debt
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-
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-
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-
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(22.3)
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Interest expense
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(16.8)
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(15.8)
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(69.2)
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(67.6)
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Income before income taxes
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31.8
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108.4
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198.3
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217.5
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Provision for income taxes
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15.4
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23.2
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104.6
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63.8
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Minority interest in after-tax earnings
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1.6
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4.8
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11.6
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12.0
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Income from continuing operations
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14.8
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80.4
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82.1
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141.7
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||||
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Discontinued operations, net of tax
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-
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.1
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(.3)
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-
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Net income
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$
14.8
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$ 80.5
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$ 81.8
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$ 141.7
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Net income per share
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||||
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Basic earnings
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$ .13
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$ .70
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$ .69
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$ 1.22
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Diluted earnings
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$ .13
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$ .68
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$ .69
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$ 1.20
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Shares used in calculation of per share amounts
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||||
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Basic earnings
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116.8
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115.3
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118.2
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116.1
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Diluted earnings
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117.2
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115.6
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118.5
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116.5
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VALHI,
INC. AND SUBSIDIARIES
IMPACT
OF PERCENTAGE CHANGE IN CHEMICALS SALES
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Three
months ended
December
31,
2006
vs. 2005
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Year
ended
December
31,
2006
vs. 2005
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||
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(unaudited)
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|||
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Percent
change in sales:
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|||
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TiO2 product pricing
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-%
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-%
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TiO2 sales volumes
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-5%
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7%
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TiO2 product mix
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-%
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-%
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Changes in foreign currency exchange rates
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+4%
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-%
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|||
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Total
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-1%
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7%
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