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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
Dallas, Texas 75240-2697
(972) 233-1700
VALHI REPORTS SECOND QUARTER RESULTS
DALLAS, TEXAS . . August 8, 2006. Valhi, Inc. (NYSE: VHI) reported income
from continuing operations of $18.3 million, or $.16 per diluted share, in the
second quarter of 2006 compared to income of $28.3 million, or $.24 per diluted
share, in the second quarter of 2005. For the first six months of 2006, Valhi
reported income from continuing operations of $41.2 million, or $.35 per diluted
share, compared to income of $53.4 million, or $.44 per diluted share, in the
first six months of 2005.
Chemicals sales increased $33.4 million in the second quarter of 2006
compared to the second quarter of 2005, and increased $45.9 million in the first
six months of 2006 compared to the same period in 2005, due to the net effects
of higher TiO2 sales volumes, higher average TiO2 selling prices in the
year-to-date period (lower average TiO2 selling prices in the second quarter)
and the unfavorable effect of fluctuations in foreign currency exchange rates,
which decreased sales by approximately $4 million and $19 million, respectively,
in the 2006 periods. The following table at the end of this press release shows
how each of these items impacted the overall increase in chemicals sales.
The increase in TiO2 sales volumes in 2006 was due primarily to higher
sales volumes in the United States, Europe and in export markets, which were
somewhat offset by lower sales volumes in Canada. Kronos' TiO2 sales volumes in
the first half of 2006 were a new record for Kronos. Chemicals operating income
comparisons were favorably impacted by record high TiO2 production volumes,
which were 2% higher in the second quarter of 2006 as compared to the second
quarter of 2005, and were up 3% in the year-to-date period. Kronos' TiO2
production facilities were operating at near full capacity for both 2005 and
2006. Chemicals operating income comparison were negatively impacted by higher
manufacturing costs, particularly raw material and energy, and by fluctuations
in foreign currency exchange rates, which decreased chemicals operating income
by approximately $11 million for the quarter and $16 million for the
year-to-date period.
Component products sales increased in the second quarter and first six
months of 2006 as compared to the same periods of 2005 due mainly to the net
effect of sales volumes generated from the August 2005 and April 2006
acquisitions of two marine component businesses, a general increase in sales
volumes to existing security products customers and lower sales volumes for
certain furniture component products resulting from increased Asian competition
and an unfavorable Canadian dollar exchange rate which has caused operational
difficulties for many of CompX's Canadian customers. In addition, component
products sales comparisons were favorably impacted by relative changes in
foreign currency exchange rates, which increased sales by approximately $.5
million in the quarter and $.7 million in the first six months of the year.
Component products operating income comparisons were favorably impacted by an
improved product mix due to a decline in lower-margin furniture components sales
and an increase in sales of higher-margin security and marine component
products, as well as the favorable impact of a continuous focus on reducing
costs across all product lines. In addition, component products operating income
comparison were negatively impacted by relative changes in foreign currency
exchange rates, which decreased operating income by approximately $.7 million in
the quarter and $1.0 million in the year-to-date period.
Waste management sales increased, and the waste management operating loss
decreased, in 2006 as compared to the same periods in 2005 as the Company
obtained new customers and existing customers increased their utilization of our
waste management services.
TIMET's sales increased from $183.7 million in the second quarter of 2005
to $300.9 million in the second quarter of 2006, and increased from $339.0
million in the first six months of 2005 to $587.8 million in the first six
months of this year. TIMET's operating income also improved from $36.9 million
to $93.6 million in the quarter, and from $56.3 million to $188.7 million in the
year-to-date period. TIMET's average selling prices for melted and milled
products in the second quarter of 2006 increased 118% and 40%, respectively,
over the same period in 2005. For the first six months of 2006, these average
selling prices increased 114% and 45%, respectively. TIMET's sales volumes of
melted and mill products increased 14% and 12% in the second quarter of 2006 as
compared to the second quarter of 2005, respectively, while such sales volumes
were up 8% and 15% in the year-to-date period. TIMET's operating income
comparisons were favorably impacted by improved plant operating rates, which
increased to 89% in the first six months of 2006 from 80% in the first six
months of 2005. TIMET's operating income comparisons were negatively impacted by
higher costs for raw materials, primarily sponge and scrap. TIMET's results in
the first six months of 2005 include a second quarter pre-tax gain of $13.9
million ($2.6 million, or $.02 per diluted share, net of income taxes and
minority interest to Valhi) related to the sale of certain real property
adjacent to TIMET's facility in Nevada. TIMET's results in the first six months
of 2005 also include a $35.6 million income tax benefit ($9.6 million, or $.08
per diluted share, net of minority interest to Valhi) related to the reversal of
the valuation allowances attributable to TIMET's deferred income tax assets in
the U.S. and the U.K.
Net securities transactions gains in 2005 relate principally to (i) NL's
sale of shares of Kronos common stock in market transactions of $14.7 million in
the first six months of 2005 ($6.6 million, or $.05 per diluted share, net of
income taxes and minority interest) and (ii) a second quarter $5.4 million gain
($3.1 million, or $.03 per diluted share, net of income taxes and minority
interest) related to Kronos' sale of its passive interest in a Norwegian
smelting operation. Insurance recoveries represent NL's recovery from certain
former insurance carriers in settlements of claims related to certain
environmental, indemnity and past litigation defense costs. These net-of-tax
insurance recoveries aggregated $.01 per diluted share in the first six months
of 2006. The $22.3 million loss on prepayment of debt ($10.3 million, or $.09
per diluted share, net of income tax benefit and minority interest) relates to
Kronos' May 2006 redemption of its 8.875% Senior Secured Notes.
The Company's effective income tax rate varies significantly from the U.S.
statutory federal income tax rate in 2006 due primarily to an aggregate tax
benefit of $12.6 million income ($8.8 million, or $.07 per diluted share, net of
minority interest) related to related to the withdrawal of certain income tax
assessments previously made by the Belgian and Norwegian tax authorities, the
favorable resolution of certain income tax issues related to Germany and Belgium
and the enactment of a reduction in Canadian federal income tax rates.
Substantially all of this aggregate $12.6 million income tax benefit was
recognized in the second quarter of 2006.
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 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 the Company's 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 Possible disruption of business or increases in the cost of doing
business resulting from terrorist activities or global conflicts,
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 timing and amount of insurance recoveries,
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 currently 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.
Valhi, Inc. is engaged in the titanium dioxide pigments, component products
(security products, furniture components and performance marine components),
titanium metals products and waste management industries.
* * * * *
VALHI, INC. AND SUBSIDIARIES
SUMMARY OF OPERATIONS
(Unaudited)
(In millions, except earnings per share)
Three months ended Six months ended
June 30, June 30,
--------------------- ---------------------
2005 2006 2005 2006
------ ---- ------ ----
(unaudited)
Net sales
Chemicals $311.7 $345.1 $603.6 $649.4
Component products 45.8 50.2 92.6 97.2
Waste management 2.0 4.3 4.5 7.3
------ ------ ------ ------
Total net sales $359.5 $399.6 $700.7 $753.9
Operating income
Chemicals $ 55.1 $ 34.3 $ 98.7 $ 66.5
Component products 4.8 5.7 8.9 10.8
Waste management (3.5) (1.1) (6.3) (3.7)
------ ------ ------ ------
Total operating income 56.4 38.9 101.3 73.6
Equity in:
TIMET 15.8 20.4 32.6 42.5
Other (.3) (.3) (.2) (2.0)
General corporate items, net
Interest and dividend income 9.3 10.6 19.5 20.4
Securities transaction gains, net 5.6 - 20.2 .2
Insurance recoveries 1.2 .6 1.2 2.8
Loss on prepayment of debt - (22.3) - (22.3)
General expenses, net (7.7) (8.6) (15.9) (15.0)
Interest expense (17.8) (19.2) (35.7) (36.0)
------ ------ ------ ------
Income before income taxes 62.5 20.1 123.0 64.2
Provision for income taxes (benefit) 29.4 (.5) 59.3 18.1
Minority interest in after-tax earnings 4.8 2.3 10.3 4.9
------ ------ ------ ------
Income from continuing operations 28.3 18.3 53.4 41.2
Discontinued operations, net of tax - (.1) (.3) (.1)
------ ------ ------ ------
Net income $ 28.3 18.2 $ 53.1 $ 41.1
====== ====== ====== ======
Basic earnings per share
Income from continuing operations $ .24 $ .16 $ .45 $ .35
Discontinued operations - - - -
------ ------ ------ ------
Net income $ .24 $ .16 $ .45 $ .35
====== ====== ====== ======
Diluted earnings per share
Income from continuing operations $ .24 $ .16 $ .44 $ .35
Discontinued operations - - - -
------ ------ ------ ------
Net income $ .24 $ .16 $ .44 $ .35
====== ====== ====== ======
Shares used in calculation of per share amounts
Basic earnings 118.0 116.4 119.1 116.5
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Diluted earnings 118.4 116.8 119.5 116.9
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VALHI, INC. AND SUBSIDIARIES
IMPACT OF PERCENTAGE CHANGE IN CHEMICALS SALES
Three months ended Six months ended
June 30, June 30,
2006 vs. 2005 2006 vs. 2005
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(unaudited)
Percent change in sales:
TiO2 product pricing -1% +1%
TiO2 sales volumes +14% +11%
TiO2 product mix -1% -1%
Changes in foreign currency exchange rates -1% -3%
---- ----
Total +11% +8%
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