UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report: August 6, 2004
VALHI, INC.
(Exact name of Registrant as specified in its charter)
Delaware 1-5467 87-0110150
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
5430 LBJ Freeway, Suite 1700, Dallas, TX 75240-2697
(Address of principal executive offices) (Zip Code)
(972) 233-1700
(Registrant's telephone number, including area code)
Item 9: Regulation FD Disclosure
Item 12: Results of Operations and Financial Condition
Pursuant to Items 9 and 12 of this current report, the registrant hereby
furnishes the information set forth in the press release issued on August 6,
2004, 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.
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
----------------------------
Gregory M. Swalwell
Vice President & Controller
Date: August 6, 2004
INDEX TO EXHIBITS
Exhibit No. Description
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99.1 Press release dated August 6, 2004 issued by Valhi, Inc.
FOR IMMEDIATE RELEASE CONTACT:
Valhi, Inc. Bobby D. O'Brien
Three Lincoln Centre Vice President
5430 LBJ Freeway, Suite 1700 (972) 233-1700
Dallas, TX 75240-2697
- -------------------------------------------------------------------------------
News Release
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VALHI REPORTS SECOND QUARTER RESULTS
DALLAS, TEXAS . . August 6, 2004. Valhi, Inc. (NYSE: VHI) reported net
income of $263.7 million, or $2.19 per diluted share, in the second quarter of
2004 compared to net income of $17.8 million, or $.15 per diluted share, in the
second quarter of 2003. For the first six months of 2004, the Company reported
income before cumulative effect of a change in accounting principle of $267.1
million, or $2.22 per diluted share, compared to income of $19.4 million, or
$.16 per diluted share, in the first six months of 2003. The primary reason for
the increase in income in the 2004 periods is due to certain income tax benefits
discussed below.
Chemicals sales increased $29.1 million in the second quarter of 2004
compared to the second quarter of 2003, and increased $39.4 million for the
first six months of the year, as the favorable effect of fluctuations in foreign
currency exchange rates, which increased chemicals sales by approximately $13
million and $35 million, respectively, and higher sales volumes more than offset
the impact of lower average TiO2 selling prices. Kronos' TiO2 sales volumes in
the second quarter of 2004 increased 13% compared to the second quarter of 2003,
as higher volumes in European and export markets more than offset the effect of
lower volumes in Canada, and volumes were 6% higher in the year-to-date period.
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
both the second quarter and first six months of 2004 were 5% lower than the
respective periods of 2003. Expressed in U.S. dollars computed using actual
foreign currency exchange rates prevailing during the respective periods,
Kronos' average TiO2 selling prices in the second quarter of 2004 were
comparable to the second quarter of 2003, and increased 2% for the first six
months of the year. Reflecting the partial implementation of prior price
increase announcements, Kronos' average TiO2 selling prices in the second
quarter of 2004 were generally flat as compared with the first quarter of 2004,
reversing the downward trend in selling prices that had existed since the third
quarter of 2003.
Chemicals operating income in the second quarter of 2004 includes a $6.3
million gain ($3.5 million, or $.03 per diluted share, net of income taxes and
minority interest) related to the settlement of a contract dispute with a
customer. Kronos' operating income comparisons were also favorably impacted by
higher production levels, which increased 3% in the second quarter of 2004
compared to the second quarter of 2003, and increased 1% in the first six months
of 2004. Kronos' operating rates were at near full capacity in all periods
presented, and Kronos' sales and production volumes in the first six months of
2004 were both new records for Kronos. Operating income comparisons were
negatively impacted by the lower average selling prices for TiO2. In addition,
fluctuations in currency exchange rates increased chemicals operating income in
the second quarter and first six months of 2004 by $6 million and $8 million,
respectively, as compared to the same periods in 2003.
Component products sales were higher in the second quarter and first six
months of 2004 as compared to the same periods in 2003 due primarily to higher
volumes of precision slide and security products and increases in certain slide
product surcharges and prices (primarily to recover the increase in raw material
steel prices experienced during 2004). Sales comparisons were also favorably
impacted by relative changes in foreign currency exchange rates, which increased
component product sales by $900,000 in the second quarter of 2004 as compared to
the second quarter of 2003, and increased sales by $3.4 million in the first six
months of the year.
Component products operating income comparisons were favorably impacted by
the effect of certain cost reduction efforts previously undertaken, including
consolidating CompX's two Canadian facilities into one facility and the
restructuring of CompX's operations in the Netherlands. In addition, operating
income comparisons were also favorably impacted by relative changes in product
mix of security products, the price increases for certain products and expenses
of approximately $800,000 incurred during the first six months of 2003 ($400,000
in the second quarter) associated with consolidating the two Canadian
facilities.
Waste management sales declined, and its operating loss increased, in the
2004 year-to-date period due to continued weak demand for waste management
services, higher expenses associated with recent permitting efforts to expand
low-level and mixed-level radioactive waste disposal capabilities and expenses
associated with the enhancement of the operating management team.
TIMET's sales increased from $101.8 million in the second quarter of 2003
to $124.1 million in the second quarter of 2004. TIMET's operating results
improved from an operating loss of $2.1 million in the second quarter of 2003 to
operating income of $7.0 million in the 2004 period. The improvement in TIMET's
results were due in part to a 33% increase in sales volumes of mill products, a
3% increase in sales volumes of melted products (ingot and slab) and an 8%
increase in melted product average selling prices. These increases were
partially offset by a 3% decrease in mill product average selling prices (which
prices were, however, positively impacted by the continued weakening of the U.S.
dollar compared to the British pound sterling and the euro and negatively
impacted by changes in product mix).
General corporate expenses were lower in the second quarter and first six
months of 2004 compared to the same periods of 2003 due primarily to lower
environmental remediation and legal expenses of NL.
Kronos recognized a $245.6 million income tax benefit in the second quarter
of 2004 ($210.5 million, or $1.75 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). The reversal of the German valuation allowance
reflects the Company's revised estimate of its ability to utilize its German net
operating loss carryforwards in the future under the "more-likely-than-not"
recognition criteria.
Also, in the second quarter of 2004, NL recognized a $43.1 million income
tax benefit ($35.9 million, or $.30 per diluted share, net of minority interest)
related to income tax attributes of NL Environmental Management Services, Inc.
("EMS"), a subsidiary of NL. This income tax benefit resulted from a settlement
agreement recently reached with the U.S. IRS concerning the IRS'
previously-reported examination of a certain restructuring transaction involving
EMS, and includes (i) a $12.6 million tax benefit related to a reduction in the
amount of additional income taxes and interest which NL estimates it will be
required to pay related to this matter as a result of the settlement agreement
and (ii) a $30.5 million tax benefit related to the reversal of a deferred
income tax asset valuation allowance related to certain tax attributes of EMS
(including a U.S. net operating loss carryforward) which NL now believes meet
the "more-likely-than-not" recognition criteria.
In the second quarter of 2003, the Company recognized a $24.6 million
income tax benefit ($20.8 million, or $.17 per diluted share, net of minority
interest) related to Kronos' previously-reported favorable German court ruling
concerning its claim for refund suit.
The cumulative effect of the change in accounting principle in the first
six months of 2003 related to the Company's first quarter adoption of Statement
of Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations, effective January 1, 2003. Such change in accounting relates
principally to accounting for closure and post-closure obligations at the
Company's waste management 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 ability to implement headcount reductions in certain operations in
a cost effective manner within the constraints of non-U.S.
governmental regulations, and the timing and amount of any such cost
savings realized,
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.
In an effort to provide investors with additional information regarding the
Company's results of operations as determined by accounting principles generally
accepted in the United States of America ("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
(ergonomic computer support systems, precision ball bearing slides and security
products), titanium metals products and waste management industries.
VALHI, INC. AND SUBSIDIARIES
STATEMENTS OF INCOME
(Unaudited)
(In millions, except earnings per share)
Three months ended Six months ended
June 30, June 30,
------------------ ------------
2003 2004 2003 2004
---- ---- ---- ----
Net sales
Chemicals $266.6 $ 295.7 $519.6 $ 559.0
Component products 49.7 56.8 100.7 109.9
Waste management 1.1 1.4 2.5 2.2
------ ------- ------ -------
$317.4 $ 353.9 $622.8 $ 671.1
====== ======= ====== =======
Operating income
Chemicals $ 31.7 $ 36.2 $ 62.4 $ 58.4
Component products .9 5.9 2.2 8.8
Waste management (3.6) (3.6) (5.6) (6.8)
------ ------- ------ -------
Total operating income 29.0 38.5 59.0 60.4
General corporate items, net
Interest and dividend income 8.0 8.0 16.3 16.1
Legal settlement gains, net .7 .5 .7 .5
Securities transaction gains, net .2 - .5 -
Expenses, net (24.8) (5.8) (41.9) (14.8)
Interest expense (14.7) (15.1) (29.1) (30.7)
------ ------- ------ -------
(1.6) 26.1 5.5 31.5
Equity in:
TIMET (1.1) 2.1 (3.9) 2.5
Other (.2) - .5 .1
------ ------- ------ -------
Income (loss) before income taxes (2.9) 28.2 2.1 34.1
Income tax benefit (25.4) (283.2) (23.4) (282.5)
Minority interest in after-tax earnings 4.7 47.7 6.1 49.5
------ ------- ------ -------
Income before cumulative effect of change
in accounting principle 17.8 263.7 19.4 267.1
Cumulative effect of change in accounting
principle - - .6 -
------ ------- ------ -----
Net income $ 17.8 $ 263.7 $ 20.0 $ 267.1
====== ======= ====== =======
Basic and diluted earnings per share
Income before cumulative effect
of change in accounting principle $ .15 $ 2.19 $ .16 $ 2.22
Cumulative effect of change in accounting
principle - - .01 -
------ ------- ------ -----
Net income $ .15 $ 2.19 $ .17 $ 2.22
====== ======= ====== =======
Shares used in calculation of per share amounts
Basic earnings 120.2 120.2 119.2 120.2
====== ======= ====== =======
Diluted earnings 120.3 120.3 119.4 120.4
====== ======= ====== =======
VALHI, INC. AND SUBSIDIARIES
RECONCILIATION OF PERCENTAGE CHANGE IN
KRONOS' AVERAGE TIO2 SELLING PRICES
(Unaudited)
Three months ended Six months ended
June 30, June 30,
2003 vs. 2004 2003 vs. 2004
----------------- ---------------
Percentage change in average selling prices:
Using actual foreign currency exchange rates -% +2%
Impact of changes in foreign currency
exchange rates -5% -7%
--- ---
In billing currencies -5% -5%
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