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Kronos Worldwide Reports Third Quarter Results

Published on 2004-11-09. Author : SpecialChem

DALLAS -- Kronos Worldwide, Inc. (NYSE: KRO) reported net income for the third quarter of 2004 of $10.0 million, or $.21 per diluted share, compared with net income of $16.0 million, or $.33 per diluted share, in the third quarter of 2003. For the first nine months of 2004, Kronos reported net income of $287.3 million, or $5.87 per diluted share, compared with net income of $74.4 million, or $1.52 per diluted share, in the first nine months of 2003. The increase in net income in the 2004 year-to-date period is primarily due to certain income tax benefits recognized in the second quarter of 2004, as described herein.

Sales of $286.1 million in the third quarter of 2004 were $43.2 million, or 18%, higher than the third quarter of 2003, and sales increased $82.6 million, or 11%, to $845.1 million for the first nine months of 2004 as compared to the first nine months of 2003, as the favorable effect of fluctuations in foreign currency exchange rates, which increased sales by approximately $11 million and $46 million, respectively, and higher TiO2 sales volumes more than offset the impact of lower average TiO2 selling prices.

The Company's TiO2 segment profit for the third quarter of 2004 was $29.8 million compared with $35.4 million in the third quarter of 2003, and was $96.2 million for the first nine months of 2004 compared with $105.2 million for the first nine months of 2003. Segment profit comparability was impacted principally by higher sales and production volumes and lower average TiO2 selling prices. Fluctuations in foreign currency exchange rates favorably impacted segment profit by approximately $7 million for the first nine months of 2004 as compared to the same period in 2003, while the effect of currency exchange rate fluctuations was not significant for the quarter. In addition, segment profit in the first nine months of 2004 includes income in the second quarter of $6.3 million ($4.1 million, or $.08 per diluted share, net of income taxes) related to settlement of a contract dispute with a certain customer.

The Company's average selling prices in billing currencies (which excludes the effects of fluctuations in the value of the U.S. dollar relative to other currencies) during the third quarter and first nine months of 2004 were 1% and 3%, respectively, lower than the comparable periods of 2003. Expressed in U.S. dollars computed using actual foreign currency exchange rates prevailing during the respective periods, the Company's average selling prices in the third quarter of 2004 were 3% higher than the third quarter of 2003 and 2% higher for the first nine months of 2004 compared with 2003. Reflecting the partial implementation of prior price increase announcements, the Company's average selling prices in billing currencies in the third quarter of 2004 were 3% higher compared to the second quarter of 2004, the first quarter with an upward trend in selling prices since the third quarter of 2003.

The Company's third quarter 2004 TiO2 sales volumes increased 16% from the third quarter of 2003, as higher sales volumes in Europe, United States and export markets more than offset the effect of lower volumes in Canada. TiO2 sales volumes for the first nine months of 2004 increased 9% from the first nine months of 2003. The Company's TiO2 production volumes in the third quarter of 2004 were 5% higher than the third quarter of 2003, and 3% higher for the first nine months of 2004 compared to 2003, with operating rates at near full capacity in all periods presented. Finished goods inventories at September 30, 2004, representing 1.6 months of average sales, were lower as compared to December 31, 2003 levels. Sales and production volumes in the first nine months of 2004 were both new records for Kronos.

Interest expense to affiliates in the 2004 periods relates to the Company's $200 million 9% long-term note payable to affiliates issued in December 2003. Other interest expense increased due to relative changes in foreign currency exchange rates, which increased the U.S. dollar equivalent of interest expense on the Company's euro-denominated Senior Secured Notes by approximately $500,000 and $2.2 million in the third quarter and first nine months of 2004, respectively, as compared to the year-ago periods.

The Company's income tax benefit in the first nine months of 2004 includes a second quarter $245.6 million tax benefit ($5.02 per diluted share) related to the reversal of a deferred income tax asset valuation allowance attributable to the Company's income tax attributes in Germany (principally net operating loss carryforwards). The reversal of the German valuation allowance reflects the Company's revised estimate of its ability to utilize its German net operating loss carryforwards in the future under the "more- likely-than-not" recognition criteria. In the second quarter of 2003, the Company recognized a $24.6 million income tax benefit ($.50 per diluted share) related to the previously-reported favorable German court ruling concerning its claim for refund suit.

Kronos Worldwide, Inc. is a major international producer of titanium dioxide pigments.

Source: Kronos Worldwide, Inc.


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