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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020 

OR

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to          

Commission file number 1-31763

 

KRONOS WORLDWIDE, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

76-0294959

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

5430 LBJ Freeway, Suite 1700

Dallas, Texas 75240-2620

(Address of principal executive offices)

Registrant’s telephone number, including area code: (972233-1700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common stock

 

KRO

 

NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer          

Accelerated filer

Non-accelerated filer

  Smaller reporting company  

Emerging growth company  

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  

Number of shares of the registrant’s common stock, $.01 par value per share, outstanding on July 31, 2020:  115,542,717.

 

 

 


 

KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

INDEX

 

 

  

 

  

Page
number

 

Part I.

  

FINANCIAL INFORMATION

  

 

 

Item 1.

  

Financial Statements

  

 

 

  

 

Condensed Consolidated Balance Sheets -
   December 31, 2019; June 30, 2020 (unaudited)

  

3

 

  

 

Condensed Consolidated Statements of Income (unaudited) -
   Three and six months ended June 30, 2019 and 2020

  

5

 

  

 

Condensed Consolidated Statements of Comprehensive Income (unaudited) -
   Three and six months ended June 30, 2019 and 2020

  

6

 

  

 

Condensed Consolidated Statements of Stockholders’ Equity (unaudited) -
   Three and six months ended June 30, 2019 and 2020

  

7

 

  

 

Condensed Consolidated Statements of Cash Flows (unaudited) -
   Six months ended June 30, 2019 and 2020

  

8

 

  

 

Notes to Condensed Consolidated Financial Statements (unaudited)

  

10

Item 2.

  

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

17

Item 3.

  

 

Quantitative and Qualitative Disclosure About Market Risk

  

27

Item 4.

  

 

Controls and Procedures

  

27

 

Part II.

  

OTHER INFORMATION

  

 

 

Item 1.

  

Legal Proceedings

  

28

Item 1A.

  

 

Risk Factors

  

28

Item 6.

  

 

Exhibits

  

28

 

Items 2, 3, 4 and 5 of Part II are omitted because there is no information to report.

  

 

 

 

 

 

- 2 -


 

KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

 

 

 

December 31,

 

 

June 30,

 

 

2019

 

 

2020

 

 

 

 

 

 

(unaudited)

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

390.8

 

 

$

341.4

 

Restricted cash

 

1.5

 

 

 

1.5

 

Accounts and other receivables, net

 

309.4

 

 

 

320.5

 

Inventories, net

 

503.0

 

 

 

498.4

 

Prepaid expenses and other

 

15.0

 

 

 

9.2

 

 

 

 

 

 

 

 

 

Total current assets

 

1,219.7

 

 

 

1,171.0

 

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

Investment in TiO2 manufacturing joint venture

 

90.2

 

 

 

96.5

 

Marketable securities

 

3.3

 

 

 

1.6

 

Operating lease right-of-use assets

 

29.0

 

 

 

26.7

 

Deferred income taxes

 

127.7

 

 

 

134.3

 

Other

 

5.3

 

 

 

5.9

 

 

 

 

 

 

 

 

 

Total other assets

 

255.5

 

 

 

265.0

 

 

 

 

 

 

 

 

 

Property and equipment:

 

 

 

 

 

 

 

Land

 

40.4

 

 

 

40.2

 

Buildings

 

211.4

 

 

 

208.7

 

Equipment

 

1,113.1

 

 

 

1,109.2

 

Mining properties

 

116.2

 

 

 

107.0

 

Construction in progress

 

54.9

 

 

 

55.8

 

 

 

1,536.0

 

 

 

1,520.9

 

Less accumulated depreciation and amortization

 

1,045.4

 

 

 

1,053.2

 

 

 

 

 

 

 

 

 

Net property and equipment

 

490.6

 

 

 

467.7

 

 

 

 

 

 

 

 

 

Total assets

$

1,965.8

 

 

$

1,903.7

 

 

- 3 -


 

KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In millions)

 

 

 

December 31,

 

 

June 30,

 

 

2019

 

 

2020

 

 

 

 

 

 

(unaudited)

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current maturities of long-term debt

$

1.5

 

 

$

1.5

 

Accounts payable and accrued liabilities

 

259.0

 

 

 

201.3

 

Income taxes

 

10.1

 

 

 

27.2

 

 

 

 

 

 

 

 

 

Total current liabilities

 

270.6

 

 

 

230.0

 

 

 

 

 

 

 

 

 

Noncurrent liabilities:

 

 

 

 

 

 

 

Long-term debt

 

444.0

 

 

 

445.0

 

Accrued pension costs

 

307.4

 

 

 

307.7

 

Payable to affiliate - income taxes

 

56.6

 

 

 

50.6

 

Operating lease liabilities

 

22.2

 

 

 

20.1

 

Deferred income taxes

 

20.7

 

 

 

22.1

 

Other

 

28.2

 

 

 

26.9

 

 

 

 

 

 

 

 

 

Total noncurrent liabilities

 

879.1

 

 

 

872.4

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

Common stock

 

1.2

 

 

 

1.2

 

Additional paid-in capital

 

1,396.2

 

 

 

1,395.3

 

Retained deficit

 

(132.5

)

 

 

(128.5

)

Accumulated other comprehensive loss

 

(448.8

)

 

 

(466.7

)

 

 

 

 

 

 

 

 

Total stockholders' equity

 

816.1

 

 

 

801.3

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity

$

1,965.8

 

 

$

1,903.7

 

Commitments and contingencies (Notes 11 and 13)

See accompanying notes to Condensed Consolidated Financial Statements.  

 

- 4 -


 

KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share data)

 

 

 

Three months ended

 

 

Six months ended

 

 

June 30,

 

 

June 30,

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

 

(unaudited)

 

Net sales

$

484.5

 

 

$

386.0

 

 

$

921.0

 

 

$

807.0

 

Cost of sales

 

375.0

 

 

 

290.2

 

 

 

702.2

 

 

 

623.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

109.5

 

 

 

95.8

 

 

 

218.8

 

 

 

183.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

57.9

 

 

 

52.7

 

 

 

115.6

 

 

 

106.2

 

Other operating income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency transactions, net

 

(1.1

)

 

 

(6.1

)

 

 

(.2

)

 

 

6.1

 

Other operating expense, net

 

(4.0

)

 

 

(4.0

)

 

 

(7.5

)

 

 

(7.3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

46.5

 

 

 

33.0

 

 

 

95.5

 

 

 

76.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

1.7

 

 

 

.2

 

 

 

3.8

 

 

 

1.4

 

Insurance settlement gain

 

-

 

 

 

-

 

 

 

-

 

 

 

1.5

 

Marketable equity securities

 

1.2

 

 

 

(.2

)

 

 

1.8

 

 

 

(1.7

)

Other components of net periodic pension and OPEB cost

 

(3.8

)

 

 

(4.7

)

 

 

(7.6

)

 

 

(9.4

)

Interest expense

 

(4.7

)

 

 

(4.6

)

 

 

(9.5

)

 

 

(9.2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

40.9

 

 

 

23.7

 

 

 

84.0

 

 

 

59.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

11.4

 

 

 

5.1

 

 

 

24.2

 

 

 

13.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

29.5

 

 

$

18.6

 

 

$

59.8

 

 

$

45.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per basic and diluted share

$

.25

 

 

$

.16

 

 

$

.52

 

 

$

.39

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used in the calculation

  of net income per share

 

115.9

 

 

 

115.5

 

 

 

115.9

 

 

 

115.6

 

 

See accompanying notes to Condensed Consolidated Financial Statements.  

 

- 5 -


 

KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

 

 

 

Three months ended

 

 

Six months ended

 

 

June 30,

 

 

June 30,

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

 

(unaudited)

 

Net income

$

29.5

 

 

$

18.6

 

 

$

59.8

 

 

$

45.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation

 

7.1

 

 

 

18.0

 

 

 

7.0

 

 

 

(23.9

)

Defined benefit pension plans

 

2.2

 

 

 

3.1

 

 

 

4.5

 

 

 

6.1

 

Other postretirement benefit plans

 

-

 

 

 

-

 

 

 

(.1

)

 

 

(.1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss), net

 

9.3

 

 

 

21.1

 

 

 

11.4

 

 

 

(17.9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

$

38.8

 

 

$

39.7

 

 

$

71.2

 

 

$

27.7

 

 

See accompanying notes to Condensed Consolidated Financial Statements.

 

- 6 -


 

KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions)

 

 

Three months ended June 30, 2019 and 2020 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Retained

 

 

other

 

 

 

 

 

 

 

 

 

 

Common

 

 

paid-in

 

 

earnings

 

 

comprehensive

 

 

Treasury

 

 

 

 

 

 

stock

 

 

capital

 

 

(deficit)

 

 

income (loss)

 

 

stock

 

 

Total

 

 

 

 

Balance at March 31, 2019

$

1.2

 

 

$

1,399.1

 

 

$

(126.8

)

 

$

(422.2

)

 

$

-

 

 

$

851.3

 

Net income

 

-

 

 

 

-

 

 

 

29.5

 

 

 

-

 

 

 

-

 

 

 

29.5

 

Other comprehensive income, net of tax

 

-

 

 

 

-

 

 

 

-

 

 

 

9.3

 

 

 

-

 

 

 

9.3

 

Issuance of common stock

 

-

 

 

 

.1

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

.1

 

Dividends paid - $.18 per share

 

-

 

 

 

-

 

 

 

(20.8

)

 

 

-

 

 

 

-

 

 

 

(20.8

)

Treasury stock acquired

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1.4

)

 

 

(1.4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2019

$

1.2

 

 

$

1,399.2

 

 

$

(118.1

)

 

$

(412.9

)

 

$

(1.4

)

 

$

868.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2020

$

1.2

 

 

$

1,396.2

 

 

$

(126.3

)

 

$

(487.8

)

 

$

(1.0

)

 

$

782.3

 

Net income

 

-

 

 

 

-

 

 

 

18.6

 

 

 

-

 

 

 

-

 

 

 

18.6

 

Other comprehensive income, net of tax

 

-

 

 

 

-

 

 

 

-

 

 

 

21.1

 

 

 

-

 

 

 

21.1

 

Issuance of common stock

 

-

 

 

 

.1

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

.1

 

Dividends paid - $.18 per share

 

-

 

 

 

-

 

 

 

(20.8

)

 

 

-

 

 

 

-

 

 

 

(20.8

)

Treasury stock retired

 

-

 

 

 

(1.0

)

 

 

-

 

 

 

-

 

 

 

1.0

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2020

$

1.2

 

 

$

1,395.3

 

 

$

(128.5

)

 

$

(466.7

)

 

$

-

 

 

$

801.3

 

 

 

 

Six months ended June 30, 2019 and 2020 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Retained

 

 

other

 

 

 

 

 

 

 

 

 

 

Common

 

 

paid-in

 

 

earnings

 

 

comprehensive

 

 

Treasury

 

 

 

 

 

 

stock

 

 

capital

 

 

(deficit)

 

 

income (loss)

 

 

stock

 

 

Total

 

 

 

 

Balance at December 31, 2018

$

1.2

 

 

$

1,399.1

 

 

$

(136.2

)

 

$

(424.3

)

 

$

-

 

 

$

839.8

 

Net income

 

-

 

 

 

-

 

 

 

59.8

 

 

 

-

 

 

 

-

 

 

 

59.8

 

Other comprehensive income, net of tax

 

-

 

 

 

-

 

 

 

-

 

 

 

11.4

 

 

 

-

 

 

 

11.4

 

Issuance of common stock

 

-

 

 

 

.1

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

.1

 

Dividends paid - $.36 per share

 

-

 

 

 

-

 

 

 

(41.7

)

 

 

-

 

 

 

-

 

 

 

(41.7

)

Treasury stock acquired

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1.4

)

 

 

(1.4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2019

$

1.2

 

 

$

1,399.2

 

 

$

(118.1

)

 

$

(412.9

)

 

$

(1.4

)

 

$

868.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

$

1.2

 

 

$

1,396.2

 

 

$

(132.5

)

 

$

(448.8

)

 

$

-

 

 

$

816.1

 

Net income

 

-

 

 

 

-

 

 

 

45.6

 

 

 

-

 

 

 

-

 

 

 

45.6

 

Other comprehensive loss, net of tax

 

-

 

 

 

-

 

 

 

-

 

 

 

(17.9

)

 

 

-

 

 

 

(17.9

)

Issuance of common stock

 

-

 

 

 

.1

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

.1

 

Dividends paid - $.36 per share

 

-