VALHI, INC.
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PRESS RELEASE
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FOR IMMEDIATE RELEASE CONTACT:
Valhi, Inc. Bobby D. O'Brien
Three Lincoln Centre Vice President
5430 LBJ Freeway, Suite 1700 (972) 233-1700
(972) 233-1700
VALHI REPORTS 2003 RESULTS
DALLAS, TEXAS . . February 27, 2004. Valhi, Inc. (NYSE: VHI) reported net
income of $10.7 million, or $.09 per diluted share, in the fourth quarter of
2003 compared to $5.6 million, or $.05 per diluted share, in the fourth quarter
of 2002. For the full year of 2003, the Company reported income before
cumulative effect of a change in accounting principle of $38.9 million, or $.32
per diluted share, compared to income of $1.2 million, or $.01 per diluted
share, for 2002.
Chemicals sales and operating income increased in 2003 compared to the same
periods of 2002 due primarily to higher sales and production volumes for
titanium dioxide pigments ("TiO2"), and higher average TiO2 selling prices 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 the fourth quarter of 2003 were 2% lower than
the fourth quarter of 2002, but were 3% higher in 2003 compared to 2002.
Expressed in U.S. dollars computed using actual foreign currency exchange rates
prevailing during the periods, Kronos' average TiO2 selling prices in the fourth
quarter of 2003 were 8% higher than the fourth quarter of 2002, and were 13%
higher in 2003 compared to 2002.
Kronos' TiO2 sales volumes in the fourth quarter of 2003 increased 9%
compared to the fourth quarter of 2002, with substantially all of the increase
occurring in the European and export markets. Kronos' TiO2 sales volumes in 2003
were 2% higher than 2002. Kronos' TiO2 production volumes in the fourth quarter
of 2003 were 14% higher than the fourth quarter of 2002, and were 8% higher for
the full year, with operating rates at near capacity in all periods presented.
Kronos' sales and production volumes in 2003 were new records.
Component products sales were higher in 2003 compared to the same periods
in 2002 due primarily to the favorable effect of fluctuations in foreign
currency exchange rates. Fluctuations in the value of the U.S. dollar relative
to other currencies increased component products sales by $2.6 million in the
fourth quarter of 2003 as compared to the fourth quarter of 2002, and increased
sales by $8.9 million for the full year. The favorable effect of fluctuations in
foreign currency exchange rates is primarily due to the weakening of the U.S.
dollar in relation to the Canadian dollar and the euro. In addition to the
favorable impact of changes in foreign currency exchange rates, component
products sales increased in the 2003 periods due to the net effects of higher
sales volumes of security products, higher sales volumes of slide products to
North American markets, lower sales volumes of ergonomic products and lower
sales volumes of precision slide products to the European market.
Despite the favorable effect of fluctuations in foreign currency exchange
rates on component products sales, such fluctuations unfavorably impacted
component products operating income by $1.2 million and $3.8 million in the
fourth quarter and full year of 2003, respectively, as compared to the same
periods in 2002. Such unfavorable impact is due primarily to CompX's Canadian
operations, where a majority of its sales are denominated in U.S. dollars while
the majority of its expenses are denominated in Canadian dollars. Component
products operating income comparisons were also affected by (i) a $3.3 million
restructuring charge in the third quarter of 2003 associated with the
implementation of certain headcount reductions in CompX's Netherlands
operations, (ii) $3.5 million of charges in the fourth quarter of 2002 related
to the retooling of one of CompX's manufacturing facilities and
inventory-related charges and (iii) the favorable impact in 2003 resulting from
the retooling of one of CompX's facilities in 2002.
Waste management sales declined in 2003, 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 and permitting activities.
TIMET's sales increased from $85.0 million in the fourth quarter of 2002 to
$100.6 million in the fourth quarter of 2003, and increased from $366.5 million
to $385.3 million for the full year. TIMET's operating results improved from an
operating loss of $4.8 million in the fourth quarter of 2002 to operating income
of $14.3 million in the 2003 period, and increased from an operating loss of
$20.8 million in calendar 2002 to operating income of $5.4 million in 2003. The
improvement in TIMET's results in the fourth quarter of 2003 were due in part to
a 16% increase in sales volumes of mill products and a 143% increase in sales
volumes of melted products (ingot and slab), partially offset by a 7% decrease
in mill product average selling prices (which was mitigated by the weakening of
the U.S. dollar in relation to the British pound sterling and the euro) and
changes in product mix. The improvement in TIMET's year-to-date results was due
in part to a 97% increase in melted product sales volumes, changes in product
mix and the relative changes in foreign currency exchange rates, partially
offset by a 16% decrease in melted product average selling prices.
TIMET's operating results also improved in 2003 due in part to relative
changes in TIMET's LIFO inventory reserves, which favorably impacted TIMET's
operating income by $9.2 million and $20.7 million in the fourth quarter and
full year of 2003, respectively, as compared to the same periods in 2002.
TIMET's results in 2003 also include a $6.8 million third quarter charge related
to the termination of TIMET's purchase and sales agreement with Wyman-Gordon
Company. The Company's equity in losses of TIMET in 2002 includes (i) a third
quarter impairment provision of $15.7 million ($8.0 million, or $.07 per diluted
share, net of income tax benefit and minority interest) related to an other than
temporary decline in value of the Company's investment in TIMET and (ii) 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 impairment for an
other than temporary decline in value of certain preferred securities held by
TIMET.
General corporate expenses were higher in calendar 2003 compared to 2002
due primarily to higher environmental expense accruals of NL related principally
to one formerly-owned site for which the remediation process is expected to
occur over the next several years. The legal settlement gains in both 2002 and
2003 (which aggregated $1.5 million, or $.01 per diluted share, net of income
taxes and minority interest in the fourth quarter of 2002 and $2.7 million, or
$.02 per diluted share, in calendar 2002) related to legal settlements with
certain of NL's former insurance carriers. The foreign currency transaction gain
in 2002 ($4.7 million, or $.04 per diluted share, net of income taxes and
minority interest) related principally to the second quarter extinguishment of
certain intercompany indebtedness of NL.
The gain on the disposal of fixed assets, which aggregated $5.7 million, or
$.05 per diluted share, net of income taxes and minority interest in calendar
2003 ($1.0 million, or $.01 per diluted share, in the fourth quarter), related
primarily to the sale of certain real property of NL not associated with Kronos'
TiO2 operations. Securities transactions gains in the 2002 periods, which
aggregated $4.2 million, or $.04 per diluted share, net of income taxes in 2002
($2.9 million, or $.03 per diluted share, in the fourth quarter) related to the
disposal of certain marketable securities.
The Company recognized a $24.6 million income tax benefit in 2003 ($20.8
million, or $.17 per diluted share, net of minority interest) related to NL's
previously-reported second quarter favorable German court ruling concerning NL's
claim for refund suit. The provision for income taxes in the fourth quarter of
2002 includes a $2.7 million tax benefit ($2.2 million, or $.02 per diluted
share, net of minority interest) related to certain changes in the Belgian
income tax law. The provision for income taxes in 2002 also varies from the U.S.
statutory income tax rate in part because no income tax was recognized on NL's
general corporate foreign currency transaction gain, as NL offset such income
tax by utilizing certain income tax attributes, the benefit of which had not
previously been recognized.
The cumulative effect of the change in accounting principle in 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 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. The
Company's 2003 results are subject to completion of an audit and the filing of
its 2003 Annual Report on Form 10-K.
* * * * *
VALHI, INC. AND SUBSIDIARIES
SUMMARY OF OPERATIONS
(Unaudited)
(In millions, except earnings per share)
Three months ended Years ended
December 31, December 31,
2002 2003 2002 2003
Net sales
Chemicals $211.9 $245.7 $ 875.2 $1,008.2
Component products 47.7 54.2 196.1 207.5
Waste management 3.2 1.1 8.4 4.1
$262.8 $301.0 $1,079.7 $1,219.8
Operating income
Chemicals $ 16.9 $ 28.2 $ 84.4 $ 122.3
Component products (1.1) 1.8 4.5 3.6
Waste management (.4) (2.8) (7.0) (11.5)
Total operating income 15.4 27.2 81.9 114.4
Equity in:
TIMET (1.2) 5.6 (32.9) 1.9
Other .3 .1 .6 .8
General corporate items, net:
Interest and dividend income 8.4 8.0 34.3 32.3
Securities transaction gains, net 4.5 - 6.4 .5
Legal settlement gains, net 2.8 .1 5.2 .8
Foreign currency transaction gain - - 6.3 -
Gain on disposal of fixed assets - 1.8 1.6 10.3
General expenses, net (11.5) (9.3) (44.5) (64.0)
Interest expense (14.8) (14.7) (60.2) (58.5)
Income (loss) before income taxes 3.9 18.8 (1.3) 38.5
Provision for income taxes (benefit) (4.4) 5.9 (6.1) (11.1)
Minority interest in after-tax earnings 2.7 2.2 3.6 10.7
Income before cumulative effect of change
in accounting principle 5.6 10.7 1.2 38.9
Cumulative effect of change in
accounting principle - - - .6
Net income $ 5.6 $ 10.7 $ 1.2 $ 39.5
Basic and diluted earnings per share
Income before cumulative effect of
change in accounting principle $ .05 $ .09 $ .01 $ .32
Cumulative effect of change in
accounting principle - - - .01
Net income $ .05 $ .09 $ .01 $ .33
Shares used in calculation of per share amounts
Basic earnings 115.6 120.2 115.4 119.7
Diluted earnings 115.8 120.5 115.8 119.9
VALHI, INC. AND SUBSIDIARIES
RECONCILIATION OF PERCENT CHANGE IN
KRONOS' AVERAGE TIO2 SELLING PRICES
(Unaudited)
Percent change- Percent change-
Three months ended Year ended
December 31, December 31,
2002 vs. 2003 2002 vs. 2003
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Percent change in average selling prices:
Using actual foreign currency exchange rates + 8% +13%
Impact of changes in foreign currency
exchange rates -10% -10%
In billing currencies - 2% + 3%