Attached files
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| 8-K - VALHI, INC. FORM 8-K DATED AUGUST 9, 2012 - VALHI INC /DE/ | vhiform8k0612.htm |
| EX-99.2 - VALHI DECLARES QUARTERLY DIVIDEND - VALHI INC /DE/ | exhibit992.htm |
VALHI REPORTS SECOND QUARTER 2012 RESULTS
DALLAS, TEXAS . . August 9, 2012. Valhi, Inc. (NYSE: VHI) reported net income attributable to Valhi stockholders of $44.4 million, or $.13 per diluted share, in the second quarter of 2012 compared to $52.4 million, or $.15 per diluted share, in the second quarter of 2011. For the first six months of 2012, Valhi reported net income attributable to Valhi stockholders of $133.3 million, or $.39 per diluted share, compared to $90.4 million, or $.26 per diluted share, in the first six months of 2011. Changes in reported net income attributable to Valhi stockholders are primarily due to changes in operating results in the Company’s Chemicals Segment.
The Chemicals Segment’s net sales of $545.3 million in the second quarter of 2012 were $7.7 million, or 1%, higher than in the second quarter of 2011. Net sales of $1,106.6 million in the first six months of 2012 were $148.6 million, or 16%, higher than in the first six months of 2011. Net sales increased in the second quarter and first six months of 2012 primarily due to higher average TiO2 selling prices partially offset by lower sales volumes and the negative impact of fluctuations in currency exchange rates. The Chemicals Segment’s average TiO2 selling prices increased 24% in the second quarter of 2012 as compared to the second quarter of 2011, and increased 28% in the first six months of the year. The Chemicals Segment’s average TiO2 selling prices at the end of the second quarter of 2012 were comparable to the end of the first quarter of 2012. TiO2 sales volumes in the second quarter and first six months of 2012 were approximately 16% and 7% lower, respectively, than in the comparable periods of 2011 due to lower customer demand, primarily in the European and export markets. Fluctuations in currency exchange rates also impacted net sales, decreasing net sales by approximately $27 million in the second quarter and approximately $36 million in the first six months of 2012. The table at the end of this press release shows how each of these items impacted the overall increase in sales.
The Chemicals Segment’s operating income in the second quarter of 2012 was $112.4 million compared to $145.9 million in the second quarter of 2011. Operating income declined in the second quarter of 2012 due to higher raw materials costs and lower sales and production volumes, partially offset by higher average selling prices. For the year-to-date period, the Chemicals Segment’s operating income was $323.7 million compared to $249.4 million in the first six months of 2011. Operating income for the year-to-date 2012 period increased due to higher TiO2 selling prices partially offset by higher raw materials costs and lower sales and production volumes. The Chemicals Segment’s TiO2 production volumes were 17% lower in the second quarter of 2012 as compared to the second quarter of 2011, and were 6% lower in the year-to-date period. During the second quarter of 2012, the Chemicals Segment operated its facilities at approximately 86% of practical capacity in order to align production and inventory levels with decreased demand. Operating income comparisons were also impacted by the effects of fluctuations in currency exchange rates, which decreased operating income approximately $1 million in the second quarter and decreased operating income by approximately $3 million in the year-to-date period.
The Component Products Segment’s net sales increased by $2.4 million in the second quarter of 2012 and $3.1 million in the first six months of 2012 compared to the same periods of 2011. The increase in sales is primarily due the impact of new ergonomics healthcare product line sales of $1.1 million in the second quarter of 2012 and $2.3 million in the first six months of 2012 relating to the July 2011 acquisition of an ergonomics component products business, and also to a growth in demand from customers across the security products and marine products reporting units resulting from improving economic conditions in North America. The Component Products Segment’s operating income was $3.9 million in the second quarter of 2012 compared to $3.1 million in the same period of 2011. Operating income in the 2011 period was negatively impacted by $.8 million in facility consolidation expenses. The Component Products operating income was $6.8 million in the first six months of 2012 compared to $11.9 million in the same period of 2011. Year-to-date operating income in 2011 was favorably impacted by a $7.5 million patent litigation settlement gain in the first quarter ($2.4 million, or $.01 per diluted share, net of tax and noncontrolling interest) partially offset by $1.8 million in facility consolidation expenses incurred during the period.
The Waste Management Segment’s sales increased in the second quarter and first six months of 2012 as it accepted limited shipments for storage until it could be disposed of once the new facilities are fully operational. The low-level (“LLRW”) disposal license authorizing both Compact and Federal Waste disposal activities was signed in September 2009. Construction of the Compact and Federal LLRW disposal facilities began in January 2011. Construction of the Compact LLRW site was substantially complete in November 2011, and the Federal LLRW site was substantially complete in February 2012. The Compact LLRW site was fully certified and operational in April 2012, and we expect the Federal LLRW site to be fully certified and operational in the third quarter of 2012.
Insurance recoveries relate to amounts NL received from certain of its former insurance carriers, and relate principally to the recovery of prior lead pigment and asbestos litigation defense costs incurred by NL. The Company recognized a $14.7 million gain in the second quarter of 2012 ($7.8 million, or $.02 per diluted share, net of income taxes and noncontrolling interest) related to the third and final closing of a settlement agreement associated with certain real property NL formerly owned. General corporate expenses were 45% lower at $9.2 million in the second quarter of 2012 compared to $16.8 million in the same period in 2011, primarily due to lower environmental remediation and related expense recognized in the second quarter of 2012. Corporate expenses were 26% higher at $29.5 million in the first six months of 2012 compared to the same period in 2011, primarily due to higher environmental remediation and related expense recognized in the first quarter of 2012.
As previously reported, in March 2011 the Chemicals Segment redeemed €80 million principal amount of its Senior Secured Notes at the redemption price of 102.167% of the principal amount. The Company’s results in the first quarter of 2011 include an aggregate $3.3 million charge ($1.7 million, net of tax and noncontrolling interest) associated with the early extinguishment of such Senior Notes. In June 2012, the Chemicals Segment entered into a new $400 million term loan, and used a portion of the net proceeds to redeem the remaining €279.2 million principal amount outstanding. As a result, the Company recognized a second quarter 2012 charge of $7.2 million ($3.7 million or $.01 per share net of income tax and noncontrolling interest benefit) associated with the early extinguishment of such remaining Senior Notes. Interest expense decreased to $13.5 million in the second quarter of 2012 from $17.2 million in the second quarter of 2011 primarily due to the net effects of the March 2011 prepayment and open market purchases of a portion of the Senior Notes made in the third and fourth quarters of 2011.
The Company’s effective income tax rate varies from the U.S. statutory federal income tax rate in the second quarters of 2012 and 2011. The changes in our income tax provision in 2012 are primarily due to changes in operating income as well as the litigation settlement gain recognized in the second quarter of 2012.
In May 2012, we implemented a 3-for-1 split of our common stock in the form of a stock dividend. We have adjusted all share and per-share disclosures for all periods presented in this press release to give effect to the stock split.
The statements in this press release relating to matters that are not historical facts are forward-looking statements that represent management's beliefs and assumptions based on currently available information. Although the Company believes the expectations reflected in such forward-looking statements are reasonable, it cannot give any assurances that these expectations will be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results, and actual future results could differ materially from those predicted. While it is not possible to identify all factors, the Company continues to face many risks and uncertainties. Among the factors that could cause our actual future results to differ materially include, but are not limited to, the following:
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Future supply and demand for our products;
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The extent of the dependence of certain of our businesses on certain market sectors;
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The cyclicality of certain of our businesses (such as Kronos’ titanium dioxide pigment (“TiO2”) operations);
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Customer inventory levels;
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Changes in raw material and other operating costs (such as energy, ore and steel costs) and our ability to pass those costs on to our customers or offset them with reductions in other operating costs;
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Changes in the availability of raw materials (such as ore);
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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);
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Competitive products and prices, including increased competition from low-cost manufacturing sources (such as China);
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Possible disruption of our business or increases in the cost of doing business resulting from terrorist activities or global conflicts;
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Customer and competitor strategies;
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The impact of pricing and production decisions;
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Competitive technology positions;
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The introduction of trade barriers;
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The ability of our subsidiaries to pay us dividends;
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The impact of current or future government regulations (including employee healthcare benefit related regulations);
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Uncertainties associated with new product development and the development of new product features;
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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, the Canadian dollar and the New Taiwan dollar) or possible disruptions to our business resulting from potential instability resulting from uncertainties associated with the euro;
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Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions, unscheduled or unplanned downtime and transportation interruptions);
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The timing and amounts of insurance recoveries;
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Our ability to renew, amend, refinance or establish credit facilities;
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Our ability to maintain sufficient liquidity;
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The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters;
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Our ultimate ability to utilize income tax attributes or changes in income tax rates related to such attributes, the benefits of which have been recognized under the more-likely-than-not recognition criteria (such as Kronos’ ability to utilize its German net operating loss carryforwards);
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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);
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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);
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The ultimate resolution of pending litigation (such as NL's lead pigment litigation, environmental and other litigation and Kronos’ class action litigation);
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Our ability to comply with covenants contained in our revolving bank credit facilities;
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Our ability to complete, obtain approval of and comply with the conditions of our licenses and permits (such as approval by the Texas Commission on Environmental Quality of license conditions of WCS’s LLRW disposal license including its financial assurance provisions);
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Our ability to successfully overturn any currently-pending or possible future challenge to WCS’ operating licenses and permits; and
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Possible future litigation.
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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, furniture components and high performance marine components) and waste management industries.
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VALHI, INC. AND SUBSIDIARIES
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CONDENSED SUMMARY OF OPERATIONS
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(In millions, except earnings per share)
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Six months ended
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June 30,
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June 30,
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2011
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2012
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2011
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2012
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(unaudited)
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Net sales
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Chemicals
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$ 537.6
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$ 545.3
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$ 958.0
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$ 1,106.6
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Component products
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35.2
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37.6
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70.0
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73.1
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Waste management
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.3
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.9
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.8
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2.0
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Total net sales
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$ 573.1
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$ 583.8
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$ 1,028.8
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$ 1,181.7
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Operating income (loss)
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Chemicals
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$ 145.9
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$ 112.4
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$ 249.4
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$ 323.7
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Component products
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3.1
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3.9
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11.9
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6.8
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Waste management
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(9.2)
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(11.3)
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(18.2)
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(20.9)
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Total operating income
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139.8
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105.0
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243.1
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309.6
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Equity in earnings of investee
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(.1)
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(.1)
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(.2)
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-
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General corporate items, net:
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Securities earnings
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7.4
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7.1
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14.8
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14.2
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Insurance recoveries
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.1
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.3
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.5
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1.4
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Litigation settlement gain
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-
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14.7
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14.7
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General expenses, net
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(16.8)
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(9.2)
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(23.4)
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(29.5)
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Loss on the prepayment of debt
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-
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(7.2)
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(3.3)
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(7.2)
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Interest expense
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(15.9)
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(14.4)
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(33.1)
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(27.9)
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Income before income taxes
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114.5
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96.2
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198.4
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275.3
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Provision for income taxes
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41.6
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34.6
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72.3
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94.2
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Net income
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72.9
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61.6
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126.1
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181.1
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Noncontrolling interest in net income
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of subsidiaries
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20.5
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17.2
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35.7
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47.8
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Net income attributable to Valhi
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stockholders
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$ 52.4
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$ 44.4
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$ 90.4
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$ 133.3
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Basic and diluted earnings attributable to
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Valhi stockholders per share
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$ .15
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$ .13
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$ .26
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$ .39
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Basic and diluted weighted average shares
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outstanding
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341.9
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342.0
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342.2
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342.0
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VALHI, INC. AND SUBSIDIARIES
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IMPACT OF PERCENTAGE CHANGE IN CHEMICAL SEGMENT'S NET SALES
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Six months ended
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June 30,
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June 30,
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2012 vs. 2011
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2012 vs. 2011
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(unaudited)
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Percentage change in TiO2 sales :
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TiO2 product pricing
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24
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28
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TiO2 sales volumes
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(16)
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(7)
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TiO2 product mix
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(2)
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(1)
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Changes in currency exchange rates
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(5)
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(4)
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Total
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1
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%
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16
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%
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