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VALHI REPORTS SECOND QUARTER RESULTS
DALLAS, TEXAS . . August 5, 2003. Valhi, Inc. (NYSE: VHI) reported net
income of $17.8 million, or $.15 per diluted share, in the second quarter of
2003 compared to net income of $6.4 million, or $.05 per diluted share, in the
second quarter of 2002. For the first six months of 2003, the Company reported
income before cumulative effect of a change in accounting principle of $19.4
million, or $.16 per diluted share, compared to income of $2.7 million, or $.02
per diluted share, in the first six months of 2002.
Chemicals sales and operating income increased in 2003 compared to the
same periods of 2002 due primarily to higher average selling prices for titanium
dioxide pigments ("TiO2") and higher TiO2 production volumes, partially offset
by higher operating costs (particularly for energy). Excluding the effect of
fluctuations in the value of the U.S. dollar relative to other currencies, NL's
average TiO2 selling prices in billing currencies in the second quarter of 2003
were 7% higher than the second quarter of 2002, with the greatest improvements
realized in European and export markets, and were 6% higher in the first six
months of 2003 compared to the first six months of 2002. Expressed in U.S.
dollars computed using actual foreign currency exchange rates prevailing during
the periods, NL's average TiO2 selling prices in the second quarter of 2003 were
19% higher than the second quarter of 2002, and were 18% higher in the first six
months of 2003 compared to the same period in 2002.
NL's TiO2 sales volumes in the second quarter of 2003 decreased 1%
compared to the record second quarter of 2002. NL's TiO2 sales volumes in the
first six months of 2003, a new record for NL, were 2% higher than the first six
months of 2002. NL's TiO2 production volumes in the second quarter of 2003 were
6% higher than the second quarter of 2002, and were 8% higher in the first six
months of 2003 compared to the same period of 2002. NL's TiO2 production volumes
in the second quarter of 2003 were an all-time quarterly record for NL, and
production volumes in the first six months of 2003 were an all-time first half
record for NL as well.
Component products sales were slightly lower in the second quarter of
2003 compared to the second quarter in 2002 due primarily to lower sales volumes
of slide products, partially offset by the favorable effect of fluctuations in
foreign currency exchange rates. Component products sales were slightly higher
in the first six months of 2003 compared to the same period in 2002 as the
favorable effect of fluctuations in foreign currency exchange rates more than
offset the unfavorable effect of lower sales volumes of ergonomic products.
Component products operating income declined in the second quarter and first six
months of 2003 compared to the same periods in 2002 due to the unfavorable
effect of fluctuations in foreign currency exchange rates, relative changes in
product mix and expenses associated with the consolidation of its two Canadian
facilities into one facility.
Waste management sales declined, and its operating loss increased, due
to continued weak demand for waste management services as well as costs incurred
in 2003 related to certain licensing activities.
TIMET reported higher sales, and a lower operating loss, in the second
quarter of 2003 compared to the second quarter of 2002. During the second
quarter of 2003, TIMET's sales volumes for mill products increased 2% compared
to the second quarter of 2002, while volumes for melted products increased 109%.
The improvement in melted product sales volumes reflects new customer
relationships, share gains and changes in product mix. TIMET's average selling
prices in billing currencies for mill products in the second quarter of 2003 (as
adjusted to exclude the effect of changes in product mix) were 8% lower than the
second quarter of 2002, and such selling prices for melted products declined
13%. Expressed in U.S. dollars computed using actual foreign currency exchange
rates prevailing during the periods, TIMET's average selling prices for mill
products (as adjusted to exclude the effect of changes in product mix) decreased
2% in the second quarter of 2003 compared to the second quarter of 2002.
Substantially all of TIMET's melted products are sold in U.S. dollars. TIMET's
average selling prices in the second quarter of 2003 for mill and melted
products (using actual product mix and foreign currency exchange rates
prevailing during the respective periods) decreased 3% and 16%, respectively,
from the year-ago period. TIMET continues to work on reducing its costs as well
as lowering its inventories. The Company's equity in losses of TIMET in the
first six months of 2002 includes a $10.6 million first quarter charge ($5.4
million, or $.05 per diluted share, net of income tax benefit and minority
interest) related to TIMET's previously-reported impairment for an other than
temporary decline in value of certain preferred securities held by TIMET.
General corporate expenses were higher in the second quarter and first
six months of 2003 compared to the same periods of 2002 due primarily to higher
environmental expense accruals of NL (principally related to one formerly-owned
site for which the remediation process is expected to occur over the next
several years) and higher legal expenses of NL. The legal settlement gains in
both 2002 and 2003 (which aggregated $1.2 million, or $.01 per diluted share,
net of income taxes and minority interest, in the first six months of 2002)
related to legal settlements with certain of NL's former insurance carriers. The
foreign currency transaction gain in the second quarter of 2002 ($4.7 million,
or $.04 per diluted share, net of income taxes and minority interest) related to
the extinguishment of certain intercompany indebtedness of NL. The gain on the
disposal of fixed assets in the second quarter of 2002 related to the sale of
certain real estate, and securities transactions gains in both periods (which
aggregated $1.2 million, or $.01 per diluted share, net of income taxes, in the
first six months of 2002) related to the disposal of certain marketable
securities.
The Company recognized a $24.6 million income tax benefit in the second
quarter of 2003 ($20.8 million, or $.17 per diluted share, net of minority
interest) related to NL's previously-reported favorable German court ruling
concerning NL's claim for refund suit. Based on amended German tax returns filed
by NL in the second quarter of 2003, the German tax authorities refunded to NL
the equivalent of approximately $24.6 million in early July. NL currently
expects to receive the equivalent of approximately $15 million of additional
German income tax refunds over the next six to nine months, a portion of which
may result in an additional income tax benefit.
The cumulative effect of the change in accounting principle in the
first six months of 2003 relates to the Company's 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 Recoveries from insurance claims and the timing thereof,
o Potential difficulties in integrating completed acquisitions,
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 controversies,
o Environmental matters,
o Government laws and regulations and possible changes therein, and
o The ultimate resolution of pending litigation and 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 new 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 may provide
useful information to investors:
o The Company discloses percentage changes in NL's average TiO2 selling
prices in billing currencies, which excludes the effects of foreign
currency translation. The Company discloses percentage changes in
TIMET's average mill and melted product selling prices excluding the
effects of changes in product mix. In addition, TIMET also discloses
percentage changes in its average mill product selling prices in
billing currencies, as further adjusted to exclude the effects of
changes in product mix. In each case, such percentage changes are
disclosed to facilitate period-to-period comparisons. 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. Depending on the composition of changes in product mix, the
percentage change in average selling prices excluding the effect of
changes in product mix can be higher, or lower, than such percentage
change would be using the actual product mix 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,
------------------ ------------
2002 2003 2002 2003
---- ---- ---- ----
Net sales
Chemicals $226.9 $266.6 $429.3 $519.6
Component products 51.1 49.7 99.6 100.7
Waste management 1.1 1.1 3.9 2.5
------ ------ ------ ------
$279.1 $317.4 $532.8 $622.8
====== ====== ====== ======
Operating income
Chemicals $ 21.7 $ 31.7 $ 41.0 $ 62.4
Component products 2.2 .9 4.3 2.2
Waste management (2.1) (3.6) (4.1) (5.6)
------ ------ ------ ------
Total operating income 21.8 29.0 41.2 59.0
Equity in:
TIMET (2.7) (1.1) (14.5) (3.9)
Other - (.2) .3 .5
General corporate items, net
Interest and dividend income 8.4 8.0 16.9 16.3
Securities transaction gains, net - .2 1.9 .5
Legal settlement gains, net .5 .7 2.4 .7
Foreign currency transaction gain 6.3 - 6.3 -
Gain on disposal of fixed assets 1.6 - 1.6 -
Expenses, net (9.0) (24.8) (20.5) (41.9)
Interest expense (16.0) (14.7) (30.4) (29.1)
------ ------ ------ ------
Income (loss) before income taxes 10.9 (2.9) 5.2 2.1
Provision for income taxes (benefit) 1.6 (25.4) .4 (23.4)
Minority interest in after-tax earnings 2.9 4.7 2.1 6.1
------ ------ ------ ------
Income before cumulative effect of
change in accounting principle 6.4 17.8 2.7 19.4
Cumulative effect of change in accounting
principle - - - .6
------ ------ ------ ------
Net income $ 6.4 $ 17.8 $ 2.7 $ 20.0
====== ====== ====== ======
Basic and diluted earnings per share:
Income before cumulative effect of
change in accounting principle $ .05 $ .15 $ .02 $ .16
Cumulative effect of change in
accounting principle - - - .01
------ ------ ------ ------
Net income $ .05 $ .15 $ .02 $ .17
====== ====== ====== ======
Shares used in calculation of per share amounts
Basic earnings 115.3 120.2 115.3 119.2
====== ====== ====== ======
Diluted earnings 115.6 120.3 115.8 119.4
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