VALHI REPORTS FOURTH QUARTER 2012 RESULTS

DALLAS, TEXAS . . March 15, 2013.  Valhi, Inc. (NYSE: VHI) reported a loss from continuing operations attributable to Valhi stockholders of $12.6 million, or $.04 per diluted share, in the fourth quarter of 2012 compared to income from continuing operations attributable to Valhi stockholders of $55.3 million, or $.16 per diluted share, in the fourth quarter of 2011.  For the full year 2012, Valhi reported income from continuing operations attributable to Valhi stockholders of $141.4 million, or $.41 per diluted share, compared to $214.5 million, or $.63 per diluted share, in the full year 2011. Changes in reported net income attributable to Valhi stockholders are primarily due to changes in operating results in the Company’s Chemicals Segment.

The Chemicals Segment’s net sales of $396.7 million in the fourth quarter of 2012 were $40.7 million, or 9%, lower than in the fourth quarter of 2011.  Net sales of $1,976.3 million in the full year of 2012 were $33.0 million, or 2%, higher than in the full year 2011.  Net sales decreased in the fourth quarter of 2012 as compared to the fourth quarter of 2011 due to lower average TiO2 selling prices partially offset by higher sales volumes.  Net sales increased in the full year of 2012 primarily due to higher average TiO2 selling prices, partially offset by lower sales volumes.  The Chemicals Segment’s average TiO2 selling prices decreased 14% in the fourth quarter of 2012 as compared to the fourth quarter of 2011, and increased 10% for the full year as compared to 2011.  The Chemicals Segment’s average TiO2 selling prices at the end of 2012 were 17% lower than at the end of 2011 and were 10% lower than at the end of the third quarter of 2012.  TiO2 sales volumes in the fourth quarter of 2012 were 6% higher than in the fourth quarter of 2011, while sales volumes for the full year 2012 were 6% lower than in 2011.  Fluctuations in currency exchange rates also impacted net sales comparisons, decreasing net sales by approximately $12 million in the fourth quarter and approximately $82 million in the full year 2012 as compared to 2011.  The table at the end of this press release shows how each of these items impacted the overall change in sales.

The Chemicals Segment’s operating income was $2.7 million in the fourth quarter of 2012 compared to operating income of $145.2 million in the fourth quarter of 2011.  For the full year the Chemicals Segment’s operating income was $366.8 million compared to $553.0 million in 2011.  The Chemicals Segment’s operating income decreased in the fourth quarter of 2012 primarily due to the negative effects of lower average TiO2 selling prices, lower production volumes and higher raw material costs, offset in part by the higher sales volumes.  The Chemicals Segment’s operating income decreased in the full year of 2012 primarily due to lower sales and production volumes, higher raw materials costs and the unfavorable effects of unabsorbed fixed production costs resulting from reduced production volumes, partially offset by higher TiO2 selling prices.  The Chemicals Segment’s TiO2 production volumes were 20% lower in the fourth quarter of 2012 as compared to the fourth quarter of 2011, and were 15% lower for the year.  During the fourth quarter of 2012, the Chemicals Segment operated its facilities at approximately 80% of practical capacity primarily to align production and inventory levels to current and anticipated near-term customer demand levels.  Operating income comparisons were also impacted by the effects of fluctuations in currency exchange rates, which decreased operating income by approximately $9 million in the fourth quarter and by approximately $10 million for the year.

The Component Products Segment’s net sales increased 3% in the fourth quarter of 2012 as compared to the fourth quarter 2011 and increased 4% in the full year 2012 compared to 2011.  Net sales increased principally due to growth in customer demand within both of the Component Products Segment’s businesses resulting from somewhat improved economic conditions in North America.  The Component Products Segment’s operating income from continuing operations decreased to nil and $5.4 million, in the fourth quarter and full year of 2012, respectively, compared to operating income from continuing operations of $1.4 million and $6.4 million in the same periods of 2011.  Operating income from continuing operations comparisons were negatively impacted by higher self-insured medical costs in 2012.  In addition, the 2011 and 2012 full year include the impact of write-downs on assets held for sale of $1.1 million and $1.2 million, respectively, of which $.8 million of the 2012 impairment was recognized in the fourth quarter.

The Waste Management Segment’s sales increased significantly in the fourth quarter and full year of 2012 compared to 2011, as we routinely began receiving low-level radioactive waste (“LLRW”) for disposal at the newly completed Compact disposal facility during the third and fourth quarters of the year. We recognized a positive gross margin in the fourth quarter of 2012 and significantly reduced our negative gross margin in the full year 2012 as compared to 2011 as a result of increased sales.  Our Waste Management operating loss was lower in the fourth quarter and full year 2012 compared to 2011 due to our increased sales; however we still recognized operating losses in both periods as the Compact disposal facility sales continue to improve and the Federal LLRW facility had not yet received LLRW for disposal by the end of 2012.  The Compact LLRW site was fully certified and operational in April 2012, and the Federal LLRW site was fully certified and operational in September 2012. 

 Insurance recoveries relate to amounts NL received from certain of its former insurance carriers, and relate principally to the recovery of prior lead pigment and asbestos litigation defense costs incurred by NL. Substantially all of the insurance recoveries we recognized in 2011 relate to a third quarter settlement we reached with one of our insurance carriers in September 2011 in which they agreed to reimburse NL for a portion of its past lead pigment litigation defense costs. These insurance recoveries (net of income taxes and noncontrolling interest) aggregated $.03 and $.01 per diluted share in the full years 2011 and 2012, respectively.

The Company recognized a $14.7 million gain in the second quarter of 2012 ($7.8 million, or $.02 per diluted share, net of income taxes and noncontrolling interest) related to the third and final closing of a settlement agreement associated with certain real property NL formerly owned. Securities earnings in the fourth quarter of 2012 include a $21.8 million, $13.2 million or $.04 per diluted share (net of income taxes and noncontrolling interest) related principally to the sale of the Company’s shares of TIMET common stock in December 2012, which is included in securities earnings.  The Company also recognized a gain on the sale of certain excess real property owned by NL in the fourth quarter of 2012 of $3.2 million ($1.7 million or $.01 per diluted share, net of income taxes and noncontrolling interest).  Also included in the fourth quarter of 2012 is a $6.4 million goodwill impairment charge ($5.3 million or $.02 per diluted share, net noncontrolling interest) associated with NL’s insurance brokerage subsidiary.

General corporate expenses were flat at $7.9 million in the fourth quarter of 2012 compared to $8.0 million in the same period in 2011.  Corporate expenses were 11% higher at $45.3 million in the full year 2012 compared to the same period in 2011, primarily due to higher environmental remediation and related expense recognized in the first quarter of 2012.

 
 

The following information was filed by Valhi Inc (VHI) on Friday, March 15, 2013 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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