DALLAS, TEXAS . . November 8,
2016. Valhi, Inc. (NYSE: VHI) reported net income
attributable to Valhi stockholders of $3.0 million, or $.01 per
diluted share, in the third quarter of 2016 compared to a net loss
of $11.7 million, or $.03 per diluted share, in the third quarter
of 2015. For the first nine months of 2016, Valhi
reported a net loss attributable to Valhi stockholders of $25.0
million, or $.07 per diluted share, compared to a net loss of
$103.7 million, or $.30 per diluted share in the first nine
months of 2015. We reported a net loss attributable to Valhi
stockholders in the first nine months of 2015 primarily due to the
recognition of a non-cash deferred income tax asset valuation
allowance related to the Chemicals Segment's German and Belgian
operations recognized in the second quarter.
The Chemicals Segment's net sales
of $356.1 million in the third quarter of 2016 were $19.6 million,
or 6%, higher than in the third quarter of 2015. The
Chemicals Segment's net sales of $1,030.6 million in the first nine
months of 2016 were $31.2 million, or 3%, lower than in the first
nine months of 2015. The Chemicals Segment's net sales
increased in the third quarter as compared to the same period in
2015 due to higher average TiO2 selling
prices and higher sales volumes. The Chemicals Segment's net sales
decreased in the first nine months of 2016 primarily due to lower
average selling prices partially offset by higher sales
volumes. The Chemicals Segment's average TiO2
selling prices were 2% higher in the third quarter of 2016 as
compared to the third quarter of 2015, and were 7% lower in the
first nine months of the year as compared to the same prior year
period. The Chemicals Segment's average selling prices at the
end of the third quarter of 2016 were 6% higher than at the end of
the second quarter of 2016, and 8% higher than at the end of 2015,
with higher prices in all major markets. TiO2
sales volumes in the third quarter were 6% higher as compared to
the third quarter of 2015 due to higher sales in North American and
export markets, partially offset by lower sales in Latin
America. TiO2 sales
volumes in the first nine months of 2016 were 6% higher than the
same period of 2015 due to higher sales in European, North American
and export markets in 2016, partially offset by lower sales in
Latin America. The Chemicals Segment's sales volumes in the
third quarter and first nine months of 2016 set an overall new
record for a third quarter and first-nine-months period.
Fluctuations in currency exchange rates (primarily the euro) also
affected net sales comparisons, decreasing net sales by
approximately $2 million in the third quarter and decreasing net
sales by approximately $8 million in the first nine months of
2016. The table at the end of this press release shows how
each of these items impacted the overall decrease in sales.
The Chemicals Segment's operating income in the third quarter of
2016 was $30.1 million as compared to an operating loss of $1.3
million in the third quarter of 2015. For the year-to-date
period, the Chemicals Segment's operating income was $45.8 million
as compared to $24.8 million in the first nine months of
2015. Operating income in the 2015 year-to-date period
includes an aggregate workforce reduction charge of $21.5 million
($10.7 million, or $.03 per share, net of noncontrolling interest
and income tax benefit), most of which was recognized in the second
quarter. Excluding the impact of the 2015 workforce reduction
charge, operating income increased in the third quarter of 2016 as
compared to the third quarter of 2015 primarily due to the net
effects of higher average TiO2 selling
prices lower raw material and other production costs (including
cost savings resulting from workforce reductions implemented in
2015 reflected in both cost of sales and other operating expenses),
higher sales volumes and higher production volumes. Excluding
the impact of the 2015 workforce reduction charge, operating income
decreased slightly in the year-to-date comparisons primarily due to
the net effects of lower average TiO2 selling
prices, lower raw material and other production costs, higher sales
volumes and higher production volumes. Excluding the impact
of the workforce reduction charge, the Chemicals Segment's
operating income was $46.3 million in the first nine months of
2015, and was an operating loss of $.9 million in the third quarter
of 2015. The Chemicals Segment's TiO2 production
volumes were 5% higher in the third quarter, and 1% higher in the
first nine months of 2016 as compared to the same periods of
2015. The Chemicals Segment's operated its production
facilities at overall average capacity utilization rates of 97% in
the first nine months of 2016 (approximately 97%, 95% and 100% of
practical capacity in the first, second and third quarters,
respectively) compared to approximately 96% in the first nine
months of 2015 (93%, 100% and 95% in the first, second and third
quarters of 2015, respectively). The Chemicals Segment's
production rates in the first quarter of 2015 were impacted by the
implementation of certain productivity-enhancing improvement
projects at certain facilities, as well as necessary improvements
to ensure continued compliance with our permit regulations, which
resulted in longer-than-normal maintenance shutdowns in some
instances. Fluctuations in currency exchange rates also
affected operating income comparisons, which increased operating
income by approximately $2 million in the third quarter and by
approximately $13 million in the year-to-date period.
The Component Products Segment's
net sales increased $1.9 million, or 7%, in the third quarter of
2016 as compared to the same period, and operating income increased
from $3.4 million in the third quarter of 2015 to $4.4 million in
the third quarter of 2016, due to higher security product sales to
existing government customers coupled with manufacturing
efficiencies and fixed cost leverage resulting from increased
manufacturing volume. Component Products Segment's net
sales decreased $.7 million, or 1%, in the year-to-date 2016 period
primarily due to security product sales in 2015 for a government
security end-user that, as expected, did not recur in 2016.
During the third quarter of 2016, the Component Product's Segment
was awarded a substantial new project with the same customer which
began to ship in August 2016. Component Product Segment's
operating income was comparable for both year-to-date
periods.
The Waste Management Segment's net
sales increased $3.7 million in the third quarter of 2016 compared
to the same period of 2015 but decreased $5.0 million in the first
nine months of 2016 compared to the same period in 2015.
Disposal volumes for the third quarter and first nine months of
2016 were negatively impacted by a general industry wide slowdown
in shipments of waste for disposal, although mix of higher level of
radioactivity and therefore disposal price was greater in the third
quarter of 2016 as compared to the same period in 2015. Such
decline in disposal volumes was offset by an increase in
transportation related revenue in 2016 as we seek to increase our
logistical capabilities to better manage customer disposal
shipments; however, increases in transportation revenue also add to
our cost of sales as we generally pass through actual logistics
costs plus a service fee to our customers. In addition we
benefited from a one-time disposal campaign related to the
decommissioning of a nuclear power plant which contributed $4.8
million of revenue in the first nine months of 2015, primarily in
the first quarter. Higher revenue in the third quarter of
2016 resulted in better coverage of fixed costs as compared to the
same period of 2015, and the third quarter also benefited from
lower selling, general and administrative expenses as we are
actively taking measures to control costs, where possible. As
a result, our Waste Management Segment had a lower operating loss
in the third quarter of 2016 than the same period of 2015.
Lower disposal volumes in the first nine months of 2016 resulted in
lower coverage of fixed costs as compared to the same period of
2015 somewhat offset by lower selling, general and administrative
expenses noted above. As a result, our Waste Management
Segment had a higher operating loss in the first nine months of
2016 than in the same period of 2015.
The Real Estate Management
and Development Segment had third quarter 2016 sales of $8.7
million, including $6.6 million in revenue on sales of land held
for development, compared to sales of $10.3 million in the third
quarter of 2015, including $7.9 million in sales of land held for
development. For the first nine months of 2016 the Real
Estate Management and Development Segment had sales of $15.8
million, including $9.8 million in revenue on sales of land held
for development, compared to sales of $28.1 million in the first
nine months of 2015, including $21.3 million in sales of land held
for development. In the third quarter of 2016 we closed on a large
commercial retail parcel within the residential planned community,
because a large portion of the work for the overall phase had
previously been completed we were able to recognize a commensurate
percentage of the land sale as revenue immediately at
close. The Real Estate Management and Development
Segment recognized an operating loss in the first nine months of
2016 of $5.1 million compared to operating income of $2.6 million
in the same period of 2015. Included in the 2016 year-to-date
operating loss is a first quarter contract related intangible asset
impairment charge of $5.1 million ($.01 per diluted share, net of
noncontrolling interest and income tax benefit) resulting from an
amendment to a water delivery contract entered into in January
2016. Because the land held for development acquired was
initially recognized at the estimated fair value at December 31,
2013 in connection with the previously-reported acquisition of a
controlling interest in this segment, the Company does not expect
to recognize significant operating income on land sales during
2016.
Corporate expenses were 9% lower
in the third quarter of 2016 as compared to the third quarter of
2015, primarily due to lower administrative costs somewhat offset
by higher environmental remediation and related costs.
Corporate expenses were flat in the first nine months of 2016
compared to the same period of 2015, as lower litigation and
related expenses and administrative costs were offset by higher
environmental and related costs. Interest expense
increased to $15.9 million in the third quarter of 2016 from $14.4
million in the third quarter of 2015 and to $47.4 million in the
first nine months of 2016 from $43.5 million in the same period of
2015 primarily due to higher average debt balances outstanding and
higher average interest rates during 2016 compared to the same
periods of 2015, and the impact of an interest rate swap contract
entered into by our Chemicals Segment effective September 30,
2015.
The Company's income tax expense
in the first nine months of 2015 includes a non-cash deferred
income tax expense of $152.6 million ($.26 per diluted share net of
noncontrolling interest) most of which was recognized in the second
quarter related to the recognition of a deferred income tax asset
valuation allowance related to the Chemicals Segment's German and
Belgian operations. The Company's income tax expense in the
first nine months of 2016 includes an additional non-cash deferred
income tax expense of $2.1 million related to the recognition of a
deferred income tax asset valuation allowance related to the
Chemicals Segment's German and Belgian operations. The Company's
income tax expense in the third quarter of 2016 includes a $5.5
million ($.01 per diluted share) current income tax benefit related
to the execution and finalization of an Advance Pricing Agreement
between the U.S. and Canada associated with our Chemicals
Segment. The Company's income tax expense in the first nine
months of 2015 includes a non-cash income tax benefit of $2.4
million ($.01 per diluted share) related to a net reduction in our
reserve for uncertain tax positions, most of which was recognized
in the first quarter of 2015.
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:
-
Future supply and demand for our
products;
-
The extent of the dependence of certain of our
businesses on certain market sectors;
-
The cyclicality of certain of our businesses
(such as Kronos' TiO2
operations);
-
Customer and producer inventory levels;
-
Unexpected or earlier-than-expected industry
capacity expansion (such as the TiO2
industry);
-
Changes in raw material and other operating
costs (such as energy, ore, zinc and brass costs) and our ability
to pass those costs on to our customers or offset them with
reductions in other operating costs;
-
Changes in the availability of raw materials
(such as ore);
-
General global economic and political conditions
(such as changes in the level of gross domestic product in various
regions of the world and the impact of such changes on demand for,
among other things, TiO2 and component
products);
-
Competitive products and prices and substitute
products, including increased competition from low-cost
manufacturing sources (such as China);
-
Possible disruption of our business or increases
in the cost of doing business resulting from terrorist activities
or global conflicts;
-
Customer and competitor strategies;
-
Potential difficulties in integrating future
acquisitions;
-
Potential difficulties in upgrading or
implementing new accounting and manufacturing software
systems;
-
Potential consolidation of our
competitors;
-
Potential consolidation of our customers;
-
The impact of pricing and production
decisions;
-
Competitive technology positions;
-
The introduction of trade barriers;
-
The ability of our subsidiaries to pay us
dividends;
-
The impact of current or future government
regulations (including employee healthcare benefit related
regulations);
-
Uncertainties associated with new product
development and the development of new product features;
-
Fluctuations in currency exchange rates (such as
changes in the exchange rate between the U.S. dollar and each of
the euro, the Norwegian krone and the Canadian dollar) or possible
disruptions to our business resulting from potential instability
resulting from uncertainties associated with the euro or other
currencies;
-
Operating interruptions (including, but not
limited to, labor disputes, leaks, natural disasters, fires,
explosions, unscheduled or unplanned downtime, transportation
interruptions and cyber attacks);
-
Decisions to sell operating assets other than in
the ordinary course of business;
-
The timing and amounts of insurance
recoveries;
-
Our ability to renew, amend, refinance or
establish credit facilities;
-
Our ability to maintain sufficient
liquidity;
-
The ultimate outcome of income tax audits, tax
settlement initiatives or other tax matters;
-
Our ultimate ability to utilize income tax
attributes, the benefits of which may not presently have been
recognized under the more-likely-than-not recognition
criteria;
-
Environmental matters (such as those requiring
compliance with emission and discharge standards for existing and
new facilities, or new developments regarding environmental
remediation at sites related to our former operations);
-
Government laws and regulations and possible
changes therein (such as changes in government regulations which
might impose various obligations on former manufacturers of lead
pigment and lead-based paint, including NL, with respect to
asserted health concerns associated with the use of such
products);
-
The ultimate resolution of pending litigation
(such as NL's lead pigment litigation, environmental and other
litigation and Kronos' class action litigation);
-
Our ability to comply with covenants contained
in our revolving bank credit facilities;
-
Our ability to complete and comply with the
conditions of our licenses and permits;
-
Our ability to successfully defend against any
possible future challenge to WCS' operating licenses and
permits;
-
Unexpected delays in the operational start-up of
shipping containers procured by WCS;
-
Changes in real estate values and construction
costs in Henderson, Nevada;
-
Water levels in Lake Mead; and
-
Possible future litigation.
Should one or more of these risks materialize (or the consequences
of such development worsen), or should the underlying assumptions
prove incorrect, actual results could differ materially from those
currently forecasted or expected. We disclaim any intention
or obligation to update or revise any forward-looking statement
whether as a result of changes in information, future events or
otherwise.
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:
-
The Company discloses operating income (loss)
before the impact of the workforce reduction charge, which is used
by the Company's management to assess the performance of the
Company's Chemicals Segment's operations. The Company
believes disclosure of operating income (loss) before the impact of
the workforce reduction charge provides useful information to
investors because it similarly allows investors to analyze the
performance of the Company's Chemicals Segment's operations in the
same way that the Company's management assesses performance.
Valhi, Inc. is engaged in the
titanium dioxide pigments, component products (security products
and high performance marine components), waste management, and real
estate management and development industries.
* * * * *
VALHI, INC. AND
SUBSIDIARIES |
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS |
|
|
|
(In millions,
except earnings per share) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
September 30, |
|
September 30, |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
|
|
|
Net sales |
|
|
|
|
|
|
|
Chemicals |
$ 336.5 |
|
$
356.1 |
|
$ 1,061.8 |
|
$
1,030.6 |
Component products |
26.5 |
|
28.4 |
|
83.3 |
|
82.6 |
Waste management |
9.9 |
|
13.6 |
|
34.9 |
|
29.9 |
Real estate management and
development |
10.3 |
|
8.7 |
|
28.1 |
|
15.8 |
|
|
|
|
|
|
|
|
Total net
sales |
$ 383.2 |
|
$
406.8 |
|
$ 1,208.1 |
|
$
1,158.9 |
|
|
|
|
|
|
|
|
Operating income
(loss) |
|
|
|
|
|
|
|
Chemicals: |
|
|
|
|
|
|
|
Before workforce reduction charge |
$ (0.9) |
|
$
30.1 |
|
$ 46.3 |
|
$
45.8 |
Workforce reduction charge |
(0.4) |
|
- |
|
(21.5) |
|
- |
Total Chemicals |
(1.3) |
|
30.1 |
|
24.8 |
|
45.8 |
Component products |
3.4 |
|
4.4 |
|
11.4 |
|
11.5 |
Waste management |
(8.3) |
|
(5.1) |
|
(19.3) |
|
(23.0) |
Real estate management and
development |
1.2 |
|
0.3 |
|
2.6 |
|
(5.1) |
|
|
|
|
|
|
|
|
Total operating income
(loss) |
(5.0) |
|
29.7 |
|
19.5 |
|
29.2 |
|
|
|
|
|
|
|
|
General corporate items: |
|
|
|
|
|
|
|
Securities earnings |
6.5 |
|
6.8 |
|
19.9 |
|
20.5 |
Insurance recoveries |
.1 |
|
0.1 |
|
3.5 |
|
.4 |
General expenses, net |
(10.0) |
|
(9.1) |
|
(29.4) |
|
(29.2) |
Interest expense |
(14.4) |
|
(15.9) |
|
(43.5) |
|
(47.4) |
|
|
|
|
|
|
|
|
Income (loss)
beforeincome taxes |
(22.8) |
|
11.6 |
|
(30.0) |
|
(26.5) |
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
(9.5) |
|
2.6 |
|
105.4 |
|
(5.8) |
|
|
|
|
|
|
|
|
Net income
(loss) |
(13.3) |
|
9.0 |
|
(135.4) |
|
(20.7) |
|
|
|
|
|
|
|
|
Noncontrolling interest in net income (loss) |
|
|
|
|
|
|
|
of subsidiaries |
(1.6) |
|
6.0 |
|
(31.7) |
|
4.3 |
|
|
|
|
|
|
|
|
Net income (loss)
attributable to Valhi stockholders |
$ (11.7) |
|
$
3.0 |
|
$ (103.7) |
|
$
(25.0) |
|
|
|
|
|
|
|
|
Basic and diluted net loss per share: |
|
|
|
|
|
|
|
Net income (loss) per share attributable
to Valhi |
|
|
|
|
|
|
|
stockholders |
$ (.03) |
|
$
.01 |
|
$ (.30) |
|
$
(.07) |
|
|
|
|
|
|
|
|
Basic and diluted weighted average
shares |
|
|
|
|
|
|
|
outstanding |
342.0 |
|
342.0 |
|
342.0 |
|
342.0 |
VALHI, INC. AND
SUBSIDIARIES |
|
|
|
|
IMPACT OF
PERCENTAGE CHANGE IN CHEMICAL SEGMENT'S NET SALES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
September 30, |
|
September 30, |
|
2016 vs. 2015 |
|
2016 vs. 2015 |
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
Percentage change in TiO2 sales : |
|
|
|
|
|
|
|
TiO2 product
pricing |
|
2 |
% |
|
|
(7) |
% |
TiO2 sales
volumes |
|
6 |
|
|
|
6 |
|
TiO2 product
mix |
|
(1) |
|
|
|
(1) |
|
Changes in currency exchange rates |
|
(1) |
|
|
|
(1) |
|
|
|
|
|
|
|
|
|
Total |
|
6 |
% |
|
|
(3) |
% |
|
|
|
|
|
|
|
|
SOURCE: Valhi, Inc.
CONTACT: Janet G. Keckeisen, Vice President - Corporate
Strategy and Investor Relations, (972) 233-1700
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Valhi, Inc. via Globenewswire
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