VALHI REPORTS SECOND QUARTER 2019 RESULTS

Dallas, TX, Aug. 08, 2019 (GLOBE NEWSWIRE) -- Valhi, Inc. (NYSE: VHI) reported net income from continuing operations attributable to Valhi stockholders of $7.1 million, or $.02 per diluted share, in the second quarter of 2019 compared to $11.3 million, or $.03 per diluted share, in the second quarter of 2018.   Valhi reported net income from continuing operations attributable to Valhi stockholders of $25.3 million, or $.07 per diluted share, in the first six months of 2019 compared to $63.0 million, or $.18 per diluted share in the first six months of 2018.  Net income from continuing operations attributable to Valhi stockholders decreased from the 2018 periods primarily due to the net effects of lower operating results in the Company’s Chemicals Segment in 2019 and litigation settlement charges in the second quarters of 2018 and 2019 related to NL.

The Chemicals Segment’s net sales of $484.5 million in the second quarter of 2019 were $12.7 million, or 3%, higher than in the second quarter of 2018.  The Chemicals Segment’s net sales of $921.0 million in the first six months of 2019 were $18.8 million, or 2%, higher than in the first six months of 2018.  The Chemicals Segment’s net sales increased in 2019 due to the net effect of lower average TiO₂ selling prices and higher sales volumes.  The Chemicals Segment’s average TiO₂ selling prices were 8% lower in the second quarter and first six months of 2019 as compared to the same prior year periods.  The Chemicals Segment’s average TiO₂ selling prices at the end of the second quarter of 2019 were 2% higher than at the end of the first quarter with higher prices in all major markets and were 2% lower than at the end of 2018 with lower prices in the European, North American and Latin American markets partially offset by higher prices in the export market.  TiO₂ sales volumes in the second quarter of 2019 were 15% higher as compared to the second quarter of 2018 primarily due to higher sales in the European, North American and export markets. TiO₂ sales volumes in the first six months of 2019 were 15% higher as compared to the same period in 2018 primarily due to higher sales in all major markets.  Fluctuations in currency exchange rates (primarily the euro) also affected net sales comparisons, decreasing net sales by approximately $17 million in the second quarter of 2019 and approximately $32 million in the first six months of 2019 as compared to the same periods in 2018.  The table at the end of this press release shows how each of these items impacted net sales.

               The Chemicals Segment’s operating income in the second quarter of 2019 was $50.5 million as compared to $123.6 million in the second quarter of 2018.  For the year-to-date period, the Chemicals Segment’s operating income was $103.3 million as compared to $234.2 million in the first six months of 2018.  The Chemicals Segment’s operating income decreased in the 2019 periods as the unfavorable effects of lower average TiO₂ selling prices and higher raw materials (primarily third-party feedstock ore) and other production costs more than offset the favorable impact of higher sales volumes.  The Chemicals Segment’s TiO₂ production volumes in the second quarter and first six months of 2019 were comparable to the same periods in 2018.  The Chemicals Segment operated its production facilities at overall average capacity utilization rates of 97% in the first six months of 2019 (97% in the first and second quarters of 2019) compared to 96% in 2018 (95% and 97% in the first and second quarters of 2018, respectively).  Fluctuations in currency exchange rates also affected operating income comparisons, which decreased operating income by approximately $9 million in the second quarter of 2019 and by approximately $1 million in the year-to-date 2019 period as compared to the same periods in 2018.

               The Component Products Segment’s net sales increased 4% in the second quarter of 2019 and 7% in the first six months of 2019 compared to the respective periods of 2018. The Component Products Segment’s net sales increased in 2019 primarily due to higher marine component sales in both periods, primarily surf pipes and wake enhancement systems to an original equipment boat manufacturer. The Component Products Segment’s operating income decreased from $6.0 million in the second quarter of 2018 to $5.6 million in the second quarter of 2019 and decreased from $10.4 million in the first six months of 2018 to $10.0 million in the first six months of 2019, primarily due to higher labor costs for security products and less favorable customer and product mix for marine components.

The Real Estate Management and Development Segment had second quarter 2019 revenue of $10.4 million, including $8.4 million in revenue from land sales, compared to sales of $6.0 million in the second quarter of 2018, including $3.8 million from land sales.   For the first six months of 2019 the Real Estate Management and Development Segment had revenue of $22.3 million, including $17.9 million in revenue from land sales, compared to revenue of $13.2 million in the first six months of 2018, including $9.6 million from land sales.  Land sales revenue is generally recognized over time based on costs inputs, and land sales revenues are dependent on spending for development activities as we balance development requirements with home builder output during the year.  Land sales revenues are also impacted by the relative timing of when new land parcel sales are closed. The Real Estate Management and Development Segment had operating income in the second quarter of 2019 of $9.8 million compared to $.4 million in the second quarter of 2018 and operating income of $13.0 million in the first six months of 2019 compared to $4.2 million in the same period of 2018, primarily due to income related to the recognition of tax increment reimbursement note receivables of $8.8 million ($4.6 million, or $.01 per diluted share, net of income taxes and noncontrolling interest) in the first six months of 2019 (primarily in the second quarter) and $3.1 million in the first quarter of 2018.

Corporate expenses were 4% lower in the second quarter of 2019 and 24% lower in the first six months of 2019 compared to the same periods in 2018. Corporate expenses decreased in both periods due to lower litigation and related costs and environmental remediation and related costs in 2019 compared to 2018.  The Company recognized a $62.0 million pre-tax ($40.7 million, or $.12 per diluted share, net of income taxes and noncontrolling interest) litigation settlement expense related to a litigation settlement agreement NL reached in the second quarter of 2018, which was ultimately not approved by the court. The Company recognized an additional $19.6 million pre-tax ($12.8 million, or $.04 per diluted share, net of income taxes and noncontrolling interest) litigation settlement expense in the second quarter of 2019 for a settlement agreement in the same case that was approved by the court in July 2019.  In the first quarter of 2018 we sold two parcels of land not used in our operating activities for an aggregate pre-tax gain of $12.5 million ($9.6 million, or $.03 per diluted share, net of income taxes and noncontrolling interest). Insurance recoveries aggregated $5.0 million pre-tax ($3.1 million, or $.01 per diluted share, net of income taxes and noncontrolling interest) in the first six months of 2019, and substantially all of the insurance recoveries recognized in the second quarter of 2019 relate to a new settlement NL reached with a single insurance carrier that agreed to reimburse NL for a portion of its past and future litigation defense costs. 

As previously reported, on January 26, 2018 we completed the sale of our Waste Management Segment, the results of operations of which have been reclassified to discontinued operations for all periods presented.  Discontinued operations in the first six months of 2018 consists principally of a first quarter pre-tax gain on the disposal of this Segment of $58.4 million ($38.6 million, or $.11 per diluted share, net of income taxes). 

The statements in this press release relating to matters that are not historical facts are forward-looking statements that represent management's beliefs and assumptions based on currently available information.  Although the Company believes the expectations reflected in such forward-looking statements are reasonable, it cannot give any assurances that these expectations will 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 predicted. While it is not possible to identify all factors, the Company continues to face many risks and uncertainties.  Factors that could cause our actual future results to differ materially include, but are not limited to, the following:

• Future supply and demand for our products;
• The extent of the dependence of certain of our businesses on certain market sectors;
• The cyclicality of certain of our businesses (such as Kronos’ TiO₂ operations);
• Customer and producer inventory levels;
• Unexpected or earlier-than-expected industry capacity expansion (such as the TiO₂ industry);
• Changes in raw material and other operating costs (such as ore, zinc, brass, aluminum, steel and energy costs) and our ability to pass those costs on to our customers or offset them with reductions in other operating costs;
  
• Changes in the availability of raw materials (such as ore);
• 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, among other things, TiO₂ and component products);
• Competitive products and prices and substitute products, including increased competition from low-cost manufacturing sources (such as China);
• Possible disruption of our business or increases in the cost of doing business resulting from terrorist activities or global conflicts;
• Customer and competitor strategies;
• Potential difficulties in integrating future acquisitions;
• Potential difficulties in upgrading or implementing accounting and manufacturing software systems;
• Potential consolidation of our competitors;
• Potential consolidation of our customers;
• The impact of pricing and production decisions;
• Competitive technology positions;
• The introduction of trade barriers;
• The ability of our subsidiaries to pay us dividends;
• The impact of current or future government regulations (including employee healthcare benefit related regulations);
• Uncertainties associated with new product development and the development of new product features;
• Fluctuations in currency exchange rates (such as changes in the exchange rate between the U.S. dollar and each of the euro, the Norwegian krone and the Canadian dollar) or possible disruptions to our business resulting from potential instability resulting from uncertainties associated with the euro or other currencies;
• Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions, unscheduled or unplanned downtime, transportation interruptions and cyber attacks);
• Decisions to sell operating assets other than in the ordinary course of business;
• The timing and amounts of insurance recoveries;
• Our ability to renew, amend, refinance or establish credit facilities;
• Our ability to maintain sufficient liquidity;
• The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters, including future tax reform;
• Our ultimate ability to utilize income tax attributes, the benefits of which may or may not presently have been recognized under the more-likely-than-not recognition criteria;
• Environmental matters (such as those requiring compliance with emission and discharge standards for existing and new facilities, or new developments regarding environmental remediation at sites related to our former operations);
• Government laws and regulations and possible changes therein (such as changes in government regulations which might impose various obligations on former manufacturers of lead pigment and lead-based paint, including NL, with respect to asserted health concerns associated with the use of such products);
• The ultimate resolution of pending litigation (such as NL’s lead pigment litigation, environmental and other litigation);
  
• Our ability to comply with covenants contained in our revolving bank credit facilities;
• Our ability to complete and comply with the conditions of our licenses and permits;
• Changes in real estate values and construction costs in Henderson, Nevada;
• Water levels in Lake Mead; and
• Possible future litigation.

               Should one or more of these risks materialize (or the consequences of such development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those currently forecasted or expected.  We disclaim any intention or obligation to update or revise any forward-looking statement whether as a result of changes in information, future events or otherwise.

Valhi, Inc. is engaged in the titanium dioxide pigments, component products (security products and recreational marine components), waste management, and real estate management and development industries.

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SOURCE:  Valhi, Inc.
CONTACT:  Janet G. Keckeisen, Vice President - Corporate Strategy and Investor Relations, 972.233.1700