SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2005 Commission file number 333-100047
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KRONOS INTERNATIONAL, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 22-2949593
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972) 233-1700
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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 X No
--- ---
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes No X
--- ---
Number of shares of the Registrant's common stock outstanding on April 29, 2005:
2,968.
The Registrant is a wholly owned subsidiary of Kronos Worldwide, Inc. (File No.
1-31763) and meets the conditions set forth in General Instructions H(1)(a) and
H(1)(b) of Form 10-Q for reduced disclosure format.
KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
Page
number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
December 31, 2004; March 31, 2005 (Unaudited) 3
Consolidated Statements of Income -
Three months ended March 31, 2004 and 2005 (Unaudited) 5
Consolidated Statements of Comprehensive Income -
Three months ended March 31, 2004 and 2005 (Unaudited) 6
Consolidated Statement of Stockholder's Equity -
Three months ended March 31, 2005 (Unaudited) 7
Consolidated Statements of Cash Flows -
Three months ended March 31, 2004 and 2005 (Unaudited) 8
Notes to Consolidated Financial Statements (Unaudited) 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 4. Controls and Procedures 24
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 25
Item 6. Exhibits 25
KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS December 31, March 31,
2004 2005
------------ -----------
(Unaudited)
Current assets:
Cash and cash equivalents $ 17,505 $ 16,100
Restricted cash 1,529 965
Accounts and other receivables 130,729 144,638
Receivables from affiliates 2,517 3,167
Refundable income taxes 2,586 981
Inventories 170,261 175,251
Prepaid expenses 3,141 4,812
Deferred income taxes - 15
---------- ----------
Total current assets 328,268 345,929
---------- ----------
Other assets:
Deferred financing costs, net 10,404 9,310
Restricted marketable debt securities 2,877 2,741
Unrecognized net pension obligation 7,524 7,161
Deferred income taxes 238,284 235,908
Other 1,591 1,139
---------- ----------
Total other assets 260,680 256,259
---------- ----------
Property and equipment:
Land 34,164 32,523
Buildings 153,442 145,851
Equipment 724,904 690,641
Mining properties 71,980 68,596
Construction in progress 13,560 15,208
---------- ----------
998,050 952,819
Less accumulated depreciation and amortization 601,815 580,379
---------- ----------
Net property and equipment 396,235 372,440
---------- ----------
$ 985,183 $ 974,628
========== ==========
KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands)
December 31, March 31,
2004 2005
------------ -----------
(Unaudited)
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt $ 13,792 $ 13,108
Accounts payable and accrued liabilities 126,949 126,649
Payable to affiliates 11,042 13,995
Income taxes 17,080 17,926
Deferred income taxes 2,722 2,386
---------- ----------
Total current liabilities 171,585 174,064
---------- ----------
Noncurrent liabilities:
Long-term debt 519,403 493,145
Deferred income taxes 22,358 20,879
Accrued pension costs 48,441 44,942
Other 16,840 14,426
---------- ----------
Total noncurrent liabilities 607,042 573,392
---------- ----------
Minority interest 76 76
---------- ----------
Stockholder's equity:
Common stock 297 297
Additional paid-in capital 1,944,185 1,944,185
Retained deficit (1,399,118) (1,380,880)
Notes receivable from affiliates (209,526) (209,526)
Accumulated other comprehensive loss:
Currency translation (99,764) (97,386)
Pension liabilities (29,594) (29,594)
---------- ----------
Total stockholder's equity 206,480 227,096
---------- ----------
$ 985,183 $ 974,628
========== ==========
Commitments and contingencies (Notes 7 and 9)
See accompanying notes to consolidated financial statements.
KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three months ended March 31, 2004 and 2005
(In thousands)
(Unaudited)
2004 2005
---- ----
Net sales $ 192,173 $ 209,536
Cost of sales 142,623 147,166
---------- ----------
Gross margin 49,550 62,370
Selling, general and administrative expense 25,411 28,084
Other operating income (expense):
Currency transaction gains, net 446 770
Disposition of property and equipment (23) (34)
Royalty income 1,364 1,502
Other income 17 36
---------- ----------
Income from operations 25,943 36,560
Other income (expense):
Trade interest income 198 74
Interest income from affiliates 5 4,941
Interest expense (9,047) (11,611)
---------- ----------
Income before income taxes and minority interest 17,099 29,964
Provision for income taxes 3,911 11,722
Minority interest in after-tax earnings 8 4
---------- ----------
Net income $ 13,180 $ 18,238
========== ==========
See accompanying notes to consolidated financial statements.
KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three months ended March 31, 2004 and 2005
(In thousands)
(Unaudited)
2004 2005
---- ----
Net income $ 13,180 $ 18,238
Other comprehensive income, net of tax -
currency translation adjustment 283 2,378
--------- ---------
Comprehensive income $ 13,463 $ 20,616
========= =========
See accompanying notes to consolidated financial statements.
KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
Three months ended March 31, 2005
(In thousands)
(Unaudited)
Accumulated other
Notes comprehensive loss
Additional receivable --------------------------- Total
Common paid-in Retained from Currency Pension stockholder's
stock capital deficit affiliates translation liabilities equity
---------- ---------- -------- ---------- ----------- ----------- -------------
Balance at December 31, 2004 $ 297 $1,944,185 $(1,399,118) $ (209,526) $ (99,764) $(29,594) $206,480
Net income - - 18,238 - - - 18,238
Other comprehensive income - - - - 2,378 - 2,378
------ ---------- ----------- ----------- --------- -------- --------
Balance at March 31, 2005 $ 297 $1,944,185 $(1,380,880) $ (209,526) $ (97,386) $(29,594) $227,096
====== ========== =========== =========== ========= ======== ========
See accompanying notes to consolidated financial statements.
KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 2004 and 2005
(In thousands)
(Unaudited)
2004 2005
---- ----
Cash flows from operating activities:
Net income $ 13,180 $ 18,238
Depreciation and amortization 9,488 9,488
Noncash interest expense 536 696
Deferred income taxes (210) 5,435
Minority interest 8 4
Net loss from disposition of property and equipment 23 34
Pension cost, net 1,528 (997)
Other, net 200 (52)
Change in assets and liabilities:
Accounts and other receivables (18,206) (29,733)
Inventories 9,317 (13,624)
Prepaid expenses (162) (1,650)
Accounts with affiliates (9,269) 2,031
Accounts payable and accrued liabilities 6,210 14,953
Income taxes 21,991 3,034
Other, net (727) (4,494)
-------- --------
Net cash provided by operating activities 33,907 3,363
-------- --------
Cash flows from investing activities:
Capital expenditures (3,984) (4,800)
Change in restricted cash, net 556 529
Other, net 30 21
-------- --------
Net cash used in investing activities (3,398) (4,250)
-------- --------
Cash flows from financing activities:
Indebtedness:
Borrowings 99,968 -
Principal payments (67,468) (41)
Dividends paid (60,000) -
-------- --------
Net cash used in financing activities (27,500) (41)
-------- --------
Cash and cash equivalents - net change from:
Operating, investing and financing activities 3,009 (928)
Currency translation (977) (477)
Cash and cash equivalents at beginning of period 37,121 17,505
-------- --------
Cash and cash equivalents at end of period $ 39,153 $ 16,100
======== ========
Supplemental disclosures:
Cash paid (received) for:
Interest, net of amounts capitalized $ 960 $ 171
Income taxes, net (17,823) 3,242
See accompanying notes to consolidated financial statements.
KRONOS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Organization and basis of presentation:
Kronos International, Inc. ("KII") is incorporated in the state of
Delaware, U.S.A., with its seat of management in Leverkusen, Germany. KII is a
wholly-owned subsidiary of Kronos Worldwide, Inc. ("Kronos") (NYSE:KRO). At
March 31, 2005, (i) Valhi held approximately 57% of Kronos' outstanding common
stock and NL Industries, Inc. (NYSE:NL) held an additional 36% of Kronos' common
stock, (ii) Valhi owned approximately 83% of NL's outstanding common stock and
(iii) Contran Corporation and its subsidiaries held approximately 91% of Valhi's
outstanding common stock. Substantially all of Contran's outstanding voting
stock is held by trusts established for the benefit of certain children and
grandchildren of Harold C. Simmons, of which Mr. Simmons is sole trustee, or is
held by Mr. Simmons or persons or other entities related to Mr. Simmons.
Consequently, Mr. Simmons may be deemed to control each of Contran, Valhi, NL,
Kronos and the Company.
The consolidated balance sheet of KII at December 31, 2004 has been
condensed from the Company's audited consolidated financial statements at that
date. The consolidated balance sheet at March 31, 2005, and the consolidated
statements of income, comprehensive income, stockholder's equity and cash flows
for the interim periods ended March 31, 2004 and 2005, have been prepared by the
Company, without audit, in accordance with accounting principles generally
accepted in the United States of America ("GAAP"). In the opinion of management,
all adjustments, consisting only of normal recurring adjustments, necessary to
state fairly the consolidated financial position, results of operations and cash
flows have been made.
The results of operations for the interim periods are not necessarily
indicative of the operating results for a full year or of future operations.
Certain information normally included in financial statements prepared in
accordance with GAAP has been condensed or omitted. The accompanying
consolidated financial statements should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 2004 (the
"2004 Annual Report").
The Company has not issued any stock options to purchase KII common stock.
However, certain employees of the Company have been granted options by NL to
purchase NL common stock. As disclosed in the 2004 Annual Report, the Company
accounts for stock-based employee compensation in accordance with Accounting
Principles Board Opinion ("APBO") No. 25, "Accounting for Stock Issued to
Employees," and its various interpretations. See Note 10. Under APBO No. 25, no
compensation cost is generally recognized for fixed stock options in which the
exercise price is greater than or equal to the market price on the grant date.
Prior to 2004, and following the cash settlement of certain stock options held
by employees of NL and the Company, the Company commenced accounting for its
stock options using the variable accounting method of APBO No. 25 because the
Company could not overcome the presumption that it would not similarly cash
settle the remaining stock options. Under the variable accounting method, the
intrinsic value of all unexercised stock options (including stock options with
an exercise price at least equal to the market price on the date of grant) is
accrued as an expense, with subsequent increases (decreases) in the Company's
market price resulting in the recognition of additional compensation expense
(income). Aggregate compensation expense related to NL stock options held by
employees of the Company was approximately $200,000 in the first quarter of 2004
and approximately $100,000 in the first quarter of 2005.
The following table presents what the Company's consolidated net income
would have been in the first quarter of 2004 and 2005 if the Company and its
subsidiaries had each elected to account for their respective stock-based
employee compensation related to stock options in accordance with the fair
value-based recognition provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," for all
awards granted subsequent to January 1, 1995.
Three months ended March 31,
----------------------------
2004 2005
---- ----
(In millions)
Net income as reported $13.2 $18.2
Adjustments, net of applicable income
tax effects and minority interest:
Stock-based employee compensation expense
determined under APBO No. 25 .1 -
Stock-based employee compensation expense
determined under SFAS No. 123 - -
----- -----
Pro forma net income $13.3 $18.2
===== =====
Note 2 - Accounts and other receivables:
December 31, March 31,
2004 2005
------------ ----------
(In thousands)
Trade receivables $120,969 $134,271
Insurance claims 32 113
Recoverable VAT and other receivables 11,388 11,767
Allowance for doubtful accounts (1,660) (1,513)
--------- --------
$130,729 $144,638
======== ========
Note 3 - Inventories:
December 31, March 31,
2004 2005
------------ ----------
(In thousands)
Raw materials $ 34,303 $ 34,707
Work in process 13,044 13,978
Finished products 90,083 94,053
Supplies 32,831 32,513
-------- --------
$170,261 $175,251
======== ========
Note 4 - Accounts payable and accrued liabilities:
December 31, March 31,
2004 2005
------------ ----------
(In thousands)
Accounts payable $ 67,463 $ 49,846
Employee benefits 27,863 30,034
Interest 152 11,036
Other 31,471 35,733
-------- --------
$126,949 $126,649
======== ========
Note 5 - Long-term debt:
December 31, March 31,
2004 2005
------------ ----------
(In thousands)
8.875% Senior Secured Notes $519,225 $493,015
Bank credit facility 13,622 12,946
Other 348 292
-------- --------
533,195 506,253
Less current maturities 13,792 13,108
-------- --------
$519,403 $493,145
======== ========
As previously reported in the 2004 Annual Report, the Company has pledged
65% of the common stock or other ownership interests of certain of its
first-tier operating subsidiaries as collateral for its Senior Secured Notes.
Such operating subsidiaries are Kronos Titan GmbH, Kronos Denmark ApS, Kronos
Limited and Societe Industrielle Du Titane, S.A.
In April 2005, the Company repaid euro 5.0 million ($6.5 million) on its
Bank credit facility.
Note 6 - Other noncurrent liabilities:
December 31, March 31,
2004 2005
------------ ----------
(In thousands)
Employee benefits $ 5,107 $ 4,826
Insurance claims and expenses 1,505 1,772
Asset retirement obligations 958 962
Other 9,270 6,866
-------- --------
$ 16,840 $ 14,426
======== ========
Note 7 - Provision for income taxes:
Three months ended March 31,
----------------------------
2004 2005
---- ----
(In millions)
Expected tax expense $ 5.9 $10.5
Non-U.S. tax rates (.1) .2
Change in deferred income tax valuation -
allowance, net (3.0)
Nondeductible expenses .8 1.0
Other, net .3 -
----- -----
$ 3.9 $11.7
===== =====
Certain of the Company's tax returns are being examined and tax authorities
have or may propose tax deficiencies, including penalties and interest. For
example:
o Kronos has received a preliminary tax assessment related to 1993 from the
Belgian tax authorities proposing tax deficiencies, including related
interest, of approximately euro 6 million ($8 million at March 31, 2005).
Kronos has filed a protest to this assessment, and believes that a
significant portion of the assessment is without merit. The Belgian tax
authorities have filed a lien on the fixed assets of Kronos' Belgian TiO2
operations in connection with this assessment. In April 2003, Kronos
received a notification from the Belgian tax authorities of their intent to
assess a tax deficiency related to 1999 that, including interest, is
expected to be approximately euro 9 million ($12 million). Kronos believes
the proposed assessment is substantially without merit, and Kronos has
filed a written response.
o The Norwegian tax authorities have notified Kronos of their intent to
assess tax deficiencies of approximately kroner 12 million ($2 million)
relating to the years 1998 through 2000. Kronos has objected to this
proposed assessment.
No assurance can be given that these tax matters will be resolved in the
Company's favor in view of the inherent uncertainties involved in settlement
initiatives, court and tax proceedings. The Company believes that it has
provided adequate accruals for additional taxes and related interest expense
which may ultimately result from all such examinations and believes that the
ultimate disposition of such examinations should not have a material adverse
effect on its consolidated financial position, results of operations or
liquidity.
Note 8 - Employee benefit plans:
The components of net periodic defined benefit pension cost are presented
in the table below.
Three months ended March 31,
----------------------------
2004 2005
---- ----
(In thousands)
Service cost $1,288 $1,616
Interest cost 3,539 3,692
Expected return on plan assets (3,122) (3,204)
Amortization of prior service cost 116 126
Amortization of net transition obligations 91 81
Recognized actuarial losses 578 794
------ ------
$2,490 $3,105
====== ======
Note 9 - Commitments and contingencies:
Reference is made to the 2004 Annual Report for a discussion of certain
other legal proceedings to which the Company is a party.
As noted in the 2004 Annual Report, the Company's principal German
operating subsidiary, Kronos Titan GmbH, leases the land under its Leverkusen
TiO2 production facility pursuant to a lease with Bayer AG that expires in 2050.
The Leverkusen facility, with approximately one-half of the Company's current
TiO2 production capacity, is located within Bayer's extensive manufacturing
complex. Rent for the Leverkusen facility is periodically established by
agreement with Bayer for periods of at least two years at a time. The lease
agreement provides for no formula, index or other mechanism to determine changes
in the rent for the Leverkusen facility; rather, any change in the rent is
subject solely to periodic negotiation between Bayer and the Company. Any change
in the rent based on such negotiations is recognized as part of lease expense
starting from the time such change is agreed upon by both parties, as any such
change in the rent is deemed "contingent rentals" under GAAP.
The Company and its affiliates are from time to time involved in various
environmental, contractual, product liability, patent (or intellectual
property), employment and other claims and disputes incidental to its past and
current operations. In certain cases, the Company has insurance coverage for
such items. The Company currently believes that the disposition of all claims
and disputes, individually or in the aggregate, should not have a material
adverse effect on its consolidated financial position, results of operations or
liquidity.
Note 10 - Accounting principles not yet implemented:
Inventory costs. The Company will adopt SFAS No. 151, "Inventory Costs, an
amendment of ARB No. 43, Chapter 4," for inventory costs incurred on or after
January 1, 2006. SFAS No. 151 requires that the allocation of fixed production
overhead costs to inventory shall be based on normal capacity. Normal capacity
is not defined as a fixed amount; rather, normal capacity refers to a range of
production levels expected to be achieved over a number of periods under normal
circumstances, taking into account the loss of capacity resulting from planned
maintenance shutdowns. The amount of fixed overhead allocated to each unit of
production is not increased as a consequence of idle plant or production levels
below the low end of normal capacity, but instead a portion of fixed overhead
costs is charged to expense as incurred. Alternatively, in periods of production
above the high end of normal capacity, the amount of fixed overhead costs
allocated to each unit of production is decreased so that inventories are not
measured above cost. SFAS No. 151 also clarifies existing GAAP to require that
abnormal freight and wasted materials (spoilage) are to be expensed as incurred.
The Company believes its production cost accounting already complies with the
requirements of SFAS No. 151, and the Company does not expect adoption of SFAS
No. 151 will have a material effect on its consolidated financial statements.
Stock options. As permitted by regulations of the Securities and Exchange
Commission ("SEC") the Company will adopt SFAS No. 123R, "Share-Based Payment,"
as of January 1, 2006. SFAS No. 123R, among other things, eliminates the
alternative in existing GAAP to use the intrinsic value method of accounting for
stock-based employee compensation under APBO No. 25. Upon adoption of SFAS No.
123R, the Company will generally be required to recognize the cost of employee
services received in exchange for an award of equity instruments based on the
grant-date fair value of the award, with the cost recognized over the period
during which an employee is required to provide services in exchange for the
award (generally, the vesting period of the award). No compensation cost will be
recognized in the aggregate for equity instruments for which the employee does
not render the requisite service (generally, if the instrument is forfeited
before it has vested). The grant-date fair value will be estimated using
option-pricing models (e.g. Black-Scholes or a lattice model). Under the
transition alternatives permitted under SFAS No. 123R, the Company will apply
the new standard to all new awards granted on or after January 1, 2006, and to
all awards existing as of December 31, 2005 which are subsequently modified,
repurchased or cancelled. Additionally, as of January 1, 2006, the Company will
be required to recognize compensation cost for the portion of any non-vested
award existing as of December 31, 2005 over the remaining vesting period.
Because the number of non-vested awards as of December 31, 2005 with respect to
options granted by NL to employees of the Company is not expected to be
material, the effect of adopting SFAS No. 123R is not expected to be significant
in so far as it relates to existing stock options. Should the Company or its
subsidiaries and affiliates, however, either grant a significant number of
options to employees of the Company or modify, repurchase or cancel existing
options in the future, the effect on the Company's consolidated financial
statements could be material.
Note 11 - Notes receivable from affiliates:
As disclosed in the 2004 Annual Report, the Company loaned an aggregate of
euro 163.1 million ($209.5 million) to Kronos in the fourth quarter of 2004 in
return for two promissory notes. Interest on both notes is payable to the
Company on a quarterly basis at an annual rate of 9.25%, and such interest is
expected to be paid quarterly to the Company by Kronos. The notes mature on
December 31, 2010, with all principal due at that date. The notes are unsecured,
contain no financial covenants and provide for default only upon Kronos' failure
to pay any amount when due (subject to a short grace period). Due to the
long-term investment nature of these notes, settlement of the principal balance
of the notes is not contemplated within the foreseeable future. The Company
currently expects that settlement of the principal amount of the notes will
occur through a capital transaction (i.e. a non-cash dividend to Kronos in the
form of distributing such notes receivable to Kronos). Accordingly, these notes
receivable have been classified as a separate component of stockholder's equity
in accordance with GAAP. Interest income on such notes, which is expected to be
paid quarterly, is recognized in income when earned. Rather than make a
distribution to Kronos in the form of a cash dividend, the Company loaned the
euro 163.1 million to Kronos pursuant to the two promissory notes. Until such
time as the notes are settled (which, as noted above, is expected to be through
a capital transaction in the form of a non-cash dividend), the Company benefits
from the interest income earned on the promissory notes.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS:
Executive summary
Relative changes in the Company's TiO2 sales and income from operations
during the 2004 and 2005 periods presented are primarily due to (i) relative
changes in TiO2 average selling prices and (ii) relative changes in foreign
currency exchange rates. Selling prices for TiO2 (in billing currencies) were
generally: decreasing during the first half of 2004, and increasing in the last
half of 2004 and the first quarter of 2005.
Forward-looking information
As provided by the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, the Company cautions that the statements in this
Quarterly Report on Form 10-Q relating to matters that are not historical facts
are forward-looking statements that represent management's beliefs and
assumptions based on currently available information. Forward-looking statements
can be identified by the use of words such as "believes," "intends," "may,"
"should," "could," "anticipates," "expected" or comparable terminology, or by
discussions of strategies or trends. 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. The factors that could cause actual future results to
differ materially are the risks and uncertainties discussed in this Quarterly
Report and those described from time to time in the Company's other filings with
the SEC include, but are not limited to, the following:
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 the Company's businesses,
o Customer inventory levels (such as the extent to which the Company's
customers may, from time to time, accelerate purchases of TiO2 in advance
of anticipated price increases or defer purchases of TiO2 in advance of
anticipated price decreases),
o Changes in raw material and other operating costs (such as energy costs),
o The possibility of labor disruptions,
o General global economic and political conditions (such as changes in the
level of gross domestic product in various regions of the world and the
impact of such changes on demand for TiO2),
o Competitive products and substitute products,
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 (such as changes in the exchange
rate between the U.S. dollar and each of the euro, the Norwegian kroner and
the Canadian dollar),
o Operating interruptions (including, but not limited to, labor disputes,
leaks, fires, explosions, unscheduled or unplanned downtime and
transportation interruptions),
o The ability of the Company to renew or refinance credit facilities,
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 (such as those requiring emission and discharge
standards for existing and new facilities),
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 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.
Three months ended
March 31,
---------------------- %
2004 2005 Change
---- ---- ------
(In millions, except
percentages and volumes)
Net sales $192.2 $209.5 +9%
Cost of sales 142.6 147.1 +3%
------ ------
Gross margin 49.6 62.4 +26%
Selling, general and administrative expense (25.4) (28.1) +11%
Currency transaction gains, net .4 .8
Royalty income 1.3 1.5
------ ------
Income from operations $ 25.9 $ 36.6 +41%
====== ======
TiO2 operating statistics:
Percent change in average selling prices:
Using actual foreign currency exchange rates +12%
Impact of changes in foreign
currency exchange rates - 7%
----
In billing currencies + 5%
====
Sales volumes* 81 77 - 5%
Production volumes* 79 81 + 3%
________________________________
* Thousands of metric tons
The Company's sales increased $17.3 million (9%) in the first quarter of
2005 compared to the first quarter of 2004 due to the net effects of higher
average TiO2 selling prices, lower TiO2 selling volumes and the favorable effect
of fluctuations in foreign currency exchange rates, which increased sales by
approximately $11 million, as further discussed below. Excluding the effect of
fluctuations in the value of the U.S. dollar relative to other currencies, the
Company's average TiO2 selling prices in billing currencies in the first quarter
of 2005 were 5% higher as compared to the first quarter of 2004. When translated
from billing currencies to U.S. dollars using actual foreign currency exchange
rates prevailing during the respective periods, the Company's average TiO2
selling prices in the first quarter of 2005 increased 12% compared to the first
quarter of 2004.
The Company's sales are denominated in various currencies, including the
U.S. dollar, the euro, other major European currencies and the Canadian dollar.
The disclosure of the percentage change in the Company's average TiO2 selling
prices in billing currencies (which excludes the effects of fluctuations in the
value of the U.S. dollar relative to other currencies) is considered a
"non-GAAP" financial measure under regulations of the SEC. The disclosure of the
percentage change in the Company's average TiO2 selling prices using actual
foreign currency exchange rates prevailing during the respective periods is
considered the most directly comparable financial measure presented in
accordance with GAAP ("GAAP measure"). The Company discloses percentage changes
in its average TiO2 prices in billing currencies because the Company believes
such disclosure provides useful information to investors to allow them to
analyze such changes without the impact of changes in foreign currency exchange
rates, thereby facilitating period-to-period comparisons of the relative changes
in average selling prices in the actual various billing currencies. Generally,
when the U.S. dollar either strengthens or weakens against other currencies, the
percentage change in average selling prices in billing currencies will be higher
or lower, respectively, than such percentage changes would be using actual
exchange rates prevailing during the respective periods. The difference between
the 12% increase in the Company's average TiO2 selling prices during the first
quarter of 2005 as compared to the first quarter of 2004 using actual foreign
currency exchange rates prevailing during the respective periods (the GAAP
measure), and the 5% increase in the Company's average TiO2 selling prices in
billing currencies (the non-GAAP measure) during such periods is due to the
effect of changes in foreign currency exchange rates. The above table presents
in a tabular format (i) the percentage change in the Company's average TiO2
selling prices using actual foreign currency exchange rates prevailing during
the respective periods (the GAAP measure), (ii) the percentage change in the
Company's average TiO2 selling prices in billing currencies (the non-GAAP
measure) and (iii) the percentage change due to changes in foreign currency
exchange rates (or the reconciling item between the non-GAAP measure and the
GAAP measure).
The Company's TiO2 sales volumes in the first quarter of 2005 decreased 5%
compared to the first quarter of 2004, due primarily to lower volumes in export
markets. Demand for TiO2 has remained strong throughout 2004 and 2005, and while
the Company believes that the strong demand is largely attributable to the
end-use demand of its customers, it is possible that some portion of the strong
demand resulted from customers increasing their inventory levels of TiO2 in
advance of implementation of announced or anticipated price increases. The
Company's income from operations comparisons were also favorably impacted by
higher production levels, which increased 3% in the first quarter of 2005 as
compared to the same period in 2004. The Company's operating rates were near
full capacity in both periods, and the Company's production volume in the first
quarter of 2005 was a new record for the Company for a first quarter.
The Company's cost of sales increased $4.5 million (3%) in the first
quarter of 2005 compared to the first quarter of 2004 largely due to the
increase in net sales and the effects of translating foreign currencies
(primarily the euro) into U.S. dollars. As a result of the higher average TiO2
selling prices in billing currencies the Company's cost of sales, as a
percentage of net sales, decreased from 74% in the first quarter of 2004 to 70%
in the first quarter of 2005.
The Company's gross margins for the first quarter of 2005 increased $12.8
million (26%) from the first quarter of 2004 due to the net effects of the
aforementioned increases in sales and cost of sales.
Selling, general and administrative expenses increased $2.7 million (11%)
in the first quarter of 2005 as compared to the corresponding period in 2004.
This increase is largely attributable to the impact of translating foreign
currencies (primarily the euro) into U.S. dollars.
The Company's operations and assets are located outside the United States
(particularly in Germany, Belgium and Norway). A significant amount of the
Company's sales generated from its operations are denominated in currencies
other than the U.S. dollar, principally the euro and other major European
currencies. Certain raw materials, primarily titanium-containing feedstocks, are
purchased in U.S. dollars, while labor and other production costs are
denominated primarily in local currencies. Consequently, the translated U.S.
dollar value of the Company's foreign sales and operating results are subject to
currency exchange rate fluctuations which may favorably or adversely impact
reported earnings and may affect the comparability of period-to-period operating
results. Overall, fluctuations in the value of the U.S. dollar relative to other
currencies, primarily the euro, increased TiO2 sales by a net $11 million in the
first quarter of 2005 as compared to the same period in 2004. Fluctuations in
the value of the U.S. dollar relative to other currencies similarly impacted the
Company's foreign currency-denominated operating expenses. The Company's
operating costs that are not denominated in the U.S. dollar, when translated
into U.S. dollars, were higher in the first quarter of 2005 compared to the
first quarter of 2004. Overall, the net impact of currency exchange rate
fluctuations on the Company's operating income comparisons resulted in a net $1
million increase in the Company's income from operations in the first quarter of
2005 as compared to the first quarter of 2004.
In April 2005, the Company sold its passive interest in a Norwegian
smelting operation, which had a nominal carrying value for financial reporting
purposes, for approximately $5 million. The Company expects to recognize a gain
of approximately $5 million related to such sale in the second quarter of 2005,
and will report such gain as part of income from operations.
Outlook
Reflecting the continued implementation of price increase announcements,
the Company's average TiO2 selling prices in billing currencies in the first
quarter of 2005 were 3% higher than the fourth quarter of 2004. The Company
expects its TiO2 production volumes in the remainder of 2005 will be slightly
higher than its 2004 volumes, with sales volumes comparable to or slightly lower
in 2005 as compared to 2004. The Company's average TiO2 selling prices, which
started to increase during the second half of 2004 and continued to increase
during the first quarter of 2005, are expected to continue to increase during
the remainder of 2005, and consequently, the Company currently expects its
average TiO2 selling prices, in billing currencies, will be higher in 2005 as
compared to 2004. The anticipated higher selling prices in 2005 reflect the
expected continued implementation of selling price announcements, including
Kronos' latest price increases announced in March 2005. The extent to which all
of such price increases, and any additional price increases which may be
announced subsequently in 2005, will be realized will depend on, among other
things, economic factors. Overall, the Company expects its income from
operations in 2005 will be higher than 2004, due primarily to higher expected
selling prices. The Company's expectations as to the future prospects of the
Company and the TiO2 industry are based upon a number of factors beyond the
Company's control, including worldwide growth of gross domestic product,
competition in the marketplace, unexpected or earlier-than-expected capacity
additions and technological advances. If actual developments differ from the
Company's expectations, the Company's results of operations could be unfavorably
affected.
The Company's efforts to debottleneck its production facilities to meet
long-term demand continues to prove successful. Such debottlenecking efforts
included, among other things, the addition of back-end finishing capacity to be
able to process a larger quantity of the base TiO2 produced and equipment
upgrades and enhancements to allow for reduced downtime for maintenance
activities. The Company's production capacity has increased by approximately 30%
over the past ten years due to debottlenecking programs, with only moderate
capital expenditures. The Company believes its annual attainable production
capacity for 2005 is approximately 334,000 metric tons, with some slight
additional capacity available in 2006 through its continued debottlenecking
efforts.
Other income (expense)
Three months ended
March 31,
----------------------
2004 2005 Difference
---- ---- ----------
(In millions)
Trade interest income $ .2 $ .1 $ (.1)
Interest income from affiliates - 4.9 4.9
Interest expense (9.0) (11.6) (2.6)
------ ------ ------
$ (8.8) $ (6.6) $ 2.2
====== ====== ======
Interest income from affiliates increased $4.9 million in the first quarter
of 2005 as compared to the first quarter of 2004 as a result of the Company's
notes receivable from Kronos. The Company expects interest income will continue
to be higher in 2005 as compared to 2004 as these notes receivable from Kronos
are expected to be outstanding during the full year.
The Company has a significant amount of outstanding indebtedness
denominated in the euro, including its euro 375 million Senior Secured Notes.
Accordingly, the reported amount of interest expense will vary depending on
relative changes in foreign currency exchange rates. Interest expense in the
first quarter of 2005 was $11.6 million, an increase of $2.6 million from the
first quarter of 2004. The increase was due primarily to higher levels of
outstanding indebtedness resulting from the issuance of an additional euro 90
million principal amount of KII's Senior Secured Notes in November 2004. In
addition, the increase in interest expense was due to relative changes in
foreign currency exchange rates, which increased the U.S. dollar equivalent of
interest expense on the Company's euro 285 million Senior Secured Notes
outstanding during both periods by approximately $500,000 in the first quarter
of 2005 as compared to the first quarter of 2004. Assuming no significant change
in interest rates or foreign currency exchange rates, interest expense for the
full-year 2005 is expected to be higher than amounts for the same periods in
2004.
Provision for income taxes
The principal reasons for the difference between the Company's effective
income tax rates and the U.S. federal statutory income tax rates are explained
in Note 7 to the Consolidated Financial Statements.
At March 31, 2005, the Company has the equivalent of $633 million and $205
million of income tax loss carryforwards for German corporate and trade tax
purposes, respectively, all of which have no expiration date. As more fully
described in the 2004 Annual Report, during 2004 the Company concluded the
benefit of such net carryforwards met the "more-likely-than-not" recognition
criteria of GAAP, and accordingly in 2004 the Company reversed the deferred
income tax asset valuation allowance related to such German carryforwards and
other net deductible temporary differences related to Germany. Because the
benefit of such net operating loss carryforwards and other deductible temporary
differences in Germany has now been recognized, the Company's effective income
tax rate in the first quarter of 2005 is higher than its effective income tax
rate in the first quarter of 2004, although its current and future cash income
tax rate was not affected by the reversal of the valuation allowance. Prior to
the complete utilization of such carryforwards, it is possible that the Company
might conclude in the future that the benefit of such carryforwards would no
longer meet the "more-likely-than-not" recognition criteria, at which point the
Company would be required to recognize a valuation allowance against the
then-remaining tax benefit associated with the carryforwards.
Accounting principles not yet implemented
See Note 10 to the Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES:
Consolidated cash flows
The Company's consolidated cash flows from operating, investing and
financing activities for the three months ended March 31, 2004 and 2005 are
presented below:
Three months ended March 31,
----------------------------
2004 2005
---- ----
(In millions)
Well t
Net cash provided (used) by:
Operating activities $ 33.9 $ 3.4
Investing activities (3.4) (4.3)
Financing activities (27.5) -
------ ------
Net cash provided (used) by operating,
investing and financing activities $ 3.0 $ (.9)
====== ======
Summary
The Company's primary source of liquidity on an ongoing basis is its cash
flows from operating activities, which is generally used to (i) fund capital
expenditures, (ii) repay any short-term indebtedness incurred primarily for
working capital purposes and (iii) provide for the payment of dividends. In
addition, from time-to-time the Company will incur indebtedness, generally to
(i) fund short-term working capital needs, (ii) refinance existing indebtedness
or (iii) fund major capital expenditures or the acquisition of other assets
outside the ordinary course of business. Also, the Company will from
time-to-time sell assets outside the ordinary course of business, the proceeds
of which are generally used to (i) repay existing indebtedness (including
indebtedness which may have been collateralized by the assets sold), (ii) make
investments in marketable and other securities, (iii) fund major capital
expenditures or the acquisition of other assets outside the ordinary course of
business or (iv) pay dividends.
Operating activities
The TiO2 industry is cyclical and changes in economic conditions within the
industry significantly impact the earnings and operating cash flows of the
Company. Cash flow from operations is considered the primary source of liquidity
for the Company. Changes in TiO2 pricing, production volume and customer demand,
among other things, could significantly affect the liquidity of the Company.
Trends in cash flows from operating activities (excluding the impact of
significant asset dispositions and relative changes in assets and liabilities)
are generally similar to trends in the Company's earnings. However, certain
items included in the determination of net income are non-cash, and therefore
such items have no impact on cash flows from operating activities. Non-cash
items included in the determination of net income include depreciation and
amortization expense, deferred income taxes and non-cash interest expense.
Non-cash interest expense consists of amortization of deferred financing costs.
Certain other items included in the determination of net income may have an
impact on cash flows from operating activities, but the impact of such items on
cash flows from operating activities will differ from their impact on net
income. For example, the amount of periodic defined benefit pension plan expense
depends upon a number of factors, including certain actuarial assumptions, and
changes in such actuarial assumptions will result in a change in the reported
expense. In addition, the amount of such periodic expense generally differs from
the outflows of cash required to be currently paid for such benefits.
Relative changes in assets and liabilities generally result from the timing
of production, sales, purchases and income tax payments. Such relative changes
can significantly impact the comparability of cash flow from operations from
period to period, as the income statement impact of such items may occur in a
different period from when the underlying cash transaction occurs. For example,
raw materials may be purchased in one period, but the payment for such raw
materials may occur in a subsequent period. Similarly, inventory may be sold in
one period, but the cash collection of the receivable may occur in a subsequent
period.
Cash flows from operating activities decreased from $33.9 million provided
by operating activities in the first three months of 2004 to $3.4 million of
cash provided by operating activities in the first three months of 2005. This
$30.5 million decrease was due primarily to the net effects of (i) higher net
income of $5.1 million, (ii) higher deferred income taxes of $5.6 million, (iii)
a higher amount of net cash used from relative changes in the Company's
inventories, receivables, payables and accruals of $14.4 million in the first
three months of 2005 as compared to the first three months of 2004 and (iv)
higher cash paid for income taxes of $21.1 million, due in large part to a $20.1
million tax refund received during the first three months of 2004. Relative
changes in accounts receivable are affected by, among other things, the timing
of sales and the collection of the resulting receivables. Relative changes in
inventories and accounts payable and accrued liabilities are affected by, among
other things, the timing of raw material purchases and the payment for such
purchases and the relative difference between production volumes and sales
volumes.
Investing and financing activities
The Company's capital expenditures were $4.0 million and $4.8 million in
the first three months of 2004 and 2005, respectively.
At March 31, 2005, unused credit available under the Company's existing
credit facilities approximated $91 million, including approximately $89 million
under its revolving credit facility. At March 31, 2005, KII had approximately
$62 million available for payment of dividends and other restrictive payments as
defined in the Senior Secured Notes indenture. Based upon the Company's
expectations for the TiO2 industry and anticipated demands on the Company's cash
resources as discussed herein, the Company expects to have sufficient liquidity
to meet its future obligations including operations, capital expenditures, debt
service and current dividend policy. To the extent that actual developments
differ from the Company's expectations, the Company's liquidity could be
adversely affected.
Provisions contained in certain of the Company's credit agreements could
result in the acceleration of the applicable indebtedness prior to its stated
maturity for reasons other than defaults from failing to comply with typical
financial covenants. For example, certain credit agreements allow the lender to
accelerate the maturity of the indebtedness upon a change of control (as
defined) of the borrower. In addition, certain credit agreements could result in
the acceleration of all or a portion of the indebtedness following a sale of
assets outside the ordinary course of business. Other than operating leases
discussed in the 2004 Annual Report, neither the Company nor any of its
subsidiaries or affiliates are parties to any off-balance sheet financing
arrangements.
At March 31, 2005, the Company and its subsidiaries had (i) current cash
and cash equivalents aggregating $16.1 million, (ii) current restricted cash
equivalents of $965,000 and (iii) noncurrent restricted marketable debt
securities of $2.7 million.
At March 31, 2005, the Company's outstanding debt was comprised of (i)
$493.0 million related to KII's Senior Secured Notes and (ii) approximately
$13.3 million of other indebtedness, principally $12.9 million related to the
Company's revolving bank credit facility which matures in June 2005. The Company
expects to seek to renew such facility during the second quarter of 2005.
The Company's assets consist primarily of investments in its operating
subsidiaries, and the Company's ability to service its parent level obligations,
including the Senior Secured Notes, depends in large part upon the distribution
of earnings of its subsidiaries, whether in the form of dividends, advances or
payments on account of intercompany obligations, or otherwise. None of the
Company's subsidiaries have guaranteed the Senior Secured Notes, although the
Company has pledged 65% of the common stock or other ownership interest of
certain of its first-tier operating subsidiaries as collateral of such Senior
Secured Notes.
As disclosed in the 2004 Annual Report, the Company may redeem up to 35% of
the Senior Secured Notes on or before June 30, 2005 with the net proceeds of a
qualified public offering of equity securities of either the Company or Kronos.
The Company currently has no plans to so redeem the Senior Secured Notes,
although until the June 30, 2005 date passes, the Company retains the right to
so redeem the Senior Secured Notes.
Pricing within the TiO2 industry is cyclical, and changes in industry
economic conditions significantly impact the Company's earnings and operating
cash flows. Cash flows from operations is considered the primary source of
liquidity for the Company. Changes in TiO2 pricing, production volumes and
customer demand, among other things, could significantly affect the liquidity of
the Company.
Based upon the Company's expectations for the TiO2 industry and anticipated
demand for the Company's cash resources as discussed herein, the Company expects
to have sufficient short-term and long-term liquidity to meet its obligations
including operations, capital expenditures, debt service and dividends. To the
extent that actual developments differ from the Company's expectations, the
Company's liquidity could be adversely affected.
See Note 7 to the Consolidated Financial Statements for certain income tax
examinations currently underway with respect to certain of the Company's income
tax returns in various U.S. and non-U.S. jurisdictions, and see Note 9 to the
Consolidated Financial Statements with respect to certain legal proceedings with
respect to the Company.
The Company periodically evaluates its liquidity requirements, alternative
uses of capital, capital needs and availability of resources in view of, among
other things, its dividend policy, its debt service and capital expenditure
requirements and estimated future operating cash flows. As a result of this
process, the Company has in the past and may in the future seek to reduce,
refinance, raise additional capital, repurchase shares of its common stock,
modify its dividend policy, restructure ownership interests, sell interests in
subsidiaries or other assets, or take a combination of such steps or other steps
to manage its liquidity and capital resources. In the normal course of its
business, the Company may review opportunities for acquisitions, divestitures,
joint ventures or other business combinations in the chemicals or other
industries, as well as the acquisition of interests in, and loans to, related
entities. In the event of any such transaction, the Company may consider using
its available cash, issuing its equity securities or increasing its indebtedness
to the extent permitted by the agreements governing the Company's existing debt.
The Company's operations are located outside the United States where the
functional currency is not the U.S. dollar. As a result, the reported amounts of
the Company's assets and liabilities related to its non-U.S. operations, and
therefore the Company's consolidated net assets, will fluctuate based upon
changes in currency exchange rates.
Non-GAAP financial measures
In an effort to provide investors with additional information regarding the
Company's results of operations as determined by GAAP, the Company has disclosed
certain non-GAAP information which the Company believes provides useful
information to investors.
o The Company discloses percentage changes in its average TiO2 selling prices
in billing currencies, which excludes the effects of foreign currency
translation. The Company believes disclosure of such percentage changes
allows investors to analyze such changes without the impact of changes in
foreign currency exchange rates, thereby facilitating period-to-period
comparisons of the relative changes in average selling prices in the actual
various billing currencies. Generally, when the U.S. dollar either
strengthens or weakens against other currencies, the percentage change in
average selling prices in billing currencies will be higher or lower,
respectively, than such percentage changes would be using actual exchange
rates prevailing during the respective periods.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. The Company maintains a
system of disclosure controls and procedures. The term "disclosure controls and
procedures," as defined by regulations of the SEC, means controls and other
procedures that are designed to ensure that information required to be disclosed
in the reports that the Company files or submits to the SEC under the Securities
Exchange Act of 1934, as amended (the "Act"), is recorded, processed, summarized
and reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits to the SEC under the Act is
accumulated and communicated to the Company's management, including its
principal executive officer and its principal financial officer, or persons
performing similar functions, as appropriate to allow timely decisions to be
made regarding required disclosure. Each of Harold C. Simmons, the Company's
Chief Executive Officer, and Gregory M. Swalwell, the Company's Vice President,
Finance and Chief Financial Officer, has evaluated the Company's disclosure
controls and procedures as of March 31, 2005. Based upon their evaluation, these
executive officers have concluded that the Company's disclosure controls and
procedures are effective as of the date of such evaluation.
Internal Control Over Financial Reporting. The Company also maintains
internal control over financial reporting. The term "internal control over
financial reporting," as defined by regulations of the SEC, means a process
designed by, or under the supervision of, the Company's principal executive and
principal financial officers, or persons performing similar functions, and
effected by the Company's board of directors, management and other personnel, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with GAAP, and includes those policies and procedures that:
o Pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the assets of the
Company,
o Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP, and
that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors of the Company,
and
o Provide reasonable assurance regarding prevention or timely detection of an
unauthorized acquisition, use or disposition of the Company's assets that
could have a material effect on the Company's Consolidated Financial
Statements.
There has been no change to the Company's internal control over financial
reporting during the quarter ended March 31, 2005 that has materially affected,
or is reasonably likely to materially affect, the Company's internal control
over financial reporting.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to the 2004 Annual Report and Note 9 to the Consolidated
Financial Statements for descriptions of certain legal proceedings.
Item 6. Exhibits
31.1 - Certification
31.2 - Certification
32.1 - Certification
The Company has retained a signed original of any of the above exhibits
that contains signatures, and the Company will provide such exhibit to the
Commission or its staff upon request. The Company will also furnish, without
charge, a copy of Kronos' Code of Business Conduct and Ethics, its Audit
Committee Charter and its Corporate Governance Guidelines, each as adopted by
Kronos' board of directors, upon request. Such requests should be directed to
the attention of Kronos' Corporate Secretary at Kronos' corporate offices
located at 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KRONOS INTERNATIONAL, INC.
-----------------------------------
(Registrant)
Date May 4, 2005 By /s/ Gregory M. Swalwell
--------------- ------------------------------
Gregory M. Swalwell
Vice President, Finance and
Chief Financial Officer
(Principal Financial Officer)
Date May 4, 2005 By /s/ James W. Brown
--------------- ------------------------------
James W. Brown
Vice President and Controller
(Principal Accounting Officer)