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Valhi Reports Fourth Quarter 2009 Results

DALLAS, March 10 /PRNewswire-FirstCall/ -- Valhi, Inc. (NYSE: VHI) reported a net loss attributable to Valhi stockholders of $3.6 million, or $.03 per diluted share, in the fourth quarter of 2009 as compared to net income of $28.5 million, or $.25 per diluted share, in the fourth quarter of 2008.  For the full year of 2009, Valhi reported a net loss attributable to Valhi stockholders of $34.2 million, or $.30 per diluted share, compared to a net loss of $.8 million, or $.01 per diluted share, in the full year of 2008.

The Chemicals Segment's sales increased $54.9 million in the fourth quarter of 2009 compared to the fourth quarter of 2008.   Net sales of $1,142.0 million for the full year of 2009 were $174.9 million lower than the full year of 2008.  Net sales increased in the fourth quarter of 2009 primarily due to higher TiO2 sales volumes and the favorable effect of fluctuations in currency exchange rate, which increased sales by approximately $20 million, partially offset by lower average selling prices.  For the full year period, net sales were lower in 2009 primarily due to lower sales volumes and average selling prices and the unfavorable effect of fluctuations in currency exchange rates, which decreased sales by approximately $35 million.  Although the Chemicals Segment's average selling prices were 5% lower in the fourth quarter of 2009 as compared to the fourth quarter of 2008, the Chemicals Segment's average selling prices at the end of the fourth quarter 2009 were 2% higher than at the end of the third quarter 2009.  The table at the end of this release shows how each of these items impacted the overall change in sales.  

The Chemicals Segment's operating income for the fourth quarter of 2009 was $12.6 million compared with $21.4 million in the fourth quarter of 2008.  For the year-to-date period, the Chemicals Segment's operating loss was $10.6 million compared with operating income of $52.0 million for the full year of 2008.  The Chemicals Segment's operating income decreased in the fourth quarter of 2009 as compared to the fourth quarter of 2008 due to lower average TiO2 selling prices and the unfavorable effect of fluctuations in currency exchange rates, which decreased operating income by approximately $10 million.  For the full year 2009, operating income declined primarily due to the negative effects of production curtailments in the first half of the year, which resulted in higher manufacturing costs per ton of pigment production during the year, as well as the effect of lower sales volumes and lower average TiO2 selling prices.  This was partially offset by lower maintenance costs and the favorable effects of fluctuations in currency exchange rates, which increased segment profit by approximately $40 million.  The Chemicals Segment's TiO2 production volumes were 1% lower in the fourth quarter of 2009 and 22% lower in the full year 2009 as compared to the same periods in 2008.  Finished goods inventories at December 31, 2009, which represented approximately 2 months of average sales, were lower compared to December 31, 2008.

The Component Products Segment's sales decreased $8.4 million in the fourth quarter of 2009 as compared to the same quarter of 2008, and declined $49.4 million in the year-to-date period, primarily due to lower order rates from its customers resulting from unfavorable economic conditions in North America. The Component Products Segment's operating loss was $2.0 million in the fourth quarter of 2009 compared to operating income of $3.2 million in the same period of 2008. The Component Products Segment's operating loss was $4.0 million in the full year of 2009 compared to operating income of $5.5 million in the full year of 2008 which included a $10.1 million goodwill impairment charge ( $.06 per diluted share, net of noncontrolling interest) related to our marine components reporting unit.  These declines in operating income were primarily due to reduced coverage of overhead and fixed manufacturing costs from lower sales volume and the related under-utilized capacity, which was partially offset by cost reductions implemented in response to lower sales.  The year-to-date 2009 operating loss also includes $5.3 million related to a write-down of assets held for sale and patent litigation expenses ( $2.1 million in the fourth quarter).  

The Waste Management Segments' sales increased in both the fourth quarter and full year of 2009 compared to the same periods in 2008.   The Waste Management Segments' operating loss increased, in part because we have not achieved sufficient revenues to offset the higher cost structure associated with operating under our new byproduct disposal license as well as because we have not been able to undertake new projects without the receipt of our pending licenses and completion of our new disposal facilities.  The Waste Management Segment is continuing to seek opportunities to obtain certain types of new business that, if obtained, would increase its waste management sales and decrease its waste management operating loss.  In this regard, in January 2009, the Texas Commission on Environmental Quality ("TCEQ") issued to the Waste Management Segment a final license for the near-surface disposal of Class A, B and C low-level radioactive waste ("LLRW") at its site in Andrews County, Texas.  Construction of the LLRW site is expected to commence in mid-2010, following the completion of some pre-construction licensing and administrative matters, and is expected to be operational in early 2011.

Litigation settlement gains in 2009 include (i) a second quarter gain of $11.1 million ( $6.0 million, or $.05 per share, net of income taxes and noncontrolling interest) related to the second closing associated with the settlement of condemnation proceedings on certain real property NL formerly owned that is subject to environmental remediation and (ii) a first quarter gain of $12.0 million ( $7.8 million, or $.07 per diluted share, net of income taxes) related to amounts we received in recovery of past environmental remediation and is related legal costs we had previously incurred.  The $6.3 million gain ( $4.1 million or $.04 per diluted share, net of income taxes) on the sale of a business related to the January 2009 sale of the assets of our research, laboratory and quality control business to Amalgamated Sugar Company LLC.   The 2008 litigation settlement gain of $47.9 million ( $25.8 million, or $.23 per diluted share, net of income taxes and noncontrolling interest) relates to the initial October 2008 closing contained in a settlement agreement related to condemnation proceedings on certain real property formerly owned by NL.

Securities earnings were higher in the full year of 2008 as compared to the same period of 2009 primarily due to $4.3 million of interest income ( $2.3 million, or $.02 per diluted share, net of income taxes and noncontrolling interest) related to certain escrow funds that were received by NL in the second quarter of 2008.  Insurance recoveries relate principally to NL's receipt from certain former insurance carriers in settlements of claims related to certain environmental, indemnity and past litigation defense costs.  These insurance recoveries (net of tax and noncontrolling interest) aggregated $.02 per diluted share in the full year 2009 compared to $.04 per diluted share in the same period of 2008.  

General corporate expenses were higher in 2009 as compared to 2008 due to higher defined benefit pension expense, partially offset by lower litigation and environmental and related costs for the full year of 2009 at NL.  Interest expense was lower in the full year 2009 primarily due the favorable effects of currency exchange rates on the Chemicals Segments' European debt and lower debt balances at our Component Products Segment.

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