DALLAS, TEXAS - August 5, 2016 -
NL Industries, Inc. (NYSE: NL) today reported net income
attributable to NL stockholders of $.9 million, or $.02 per share,
in the second quarter of 2016 compared to a net loss attributable
to NL stockholders of $29.2 million, or $.60 per share, in the
second quarter of 2015. For the first six months of 2016, NL
reported a net loss attributable to NL stockholders of $1.6
million, or $.03 per share, compared to a net loss attributable to
NL stockholders of $19.2 million, or $.39 per share in the first
six months of 2015.
Net sales decreased $1.8 million
in the second quarter of 2016 and $2.6 million in the first six
months of 2016 compared to the respective periods in 2015, and
income from operations attributable to CompX decreased to $3.7
million in the second quarter of 2016 from $4.3 million in the
second quarter of 2015 and to $7.1 million in the first six months
of 2016 compared to $8.0 million in the first six months of
2015. Second quarter and year-to-date 2016 net sales and
income from operations attributable to CompX decreased over the
comparable 2015 periods primarily due to CompX's Security Products
business sales for a government security end-user program that, as
expected, did not recur in 2016. The decreases in income from
operations attributable to CompX for both comparative periods were
also impacted by decreased leverage of fixed costs as a result of
decreased production volumes partially offset by higher variable
margins related to changes in customer and product mix, primarily
in CompX's Security Products business line.
Kronos' net sales of $356.1 million in the
second quarter of 2016 were $4.1 million, or 1%, lower than in the
second quarter of 2015. Kronos' sales of $674.5 million in
the first six months of 2016 were $50.8 million, or 7%, lower than
in the first six months of 2015. Net sales decreased in 2016
primarily due to lower average TiO2 selling
prices, partially offset by higher sales volumes. Kronos'
average TiO2 selling
prices were 7% lower in the second quarter of 2016 as compared to
the second quarter of 2015, and were 11% lower in the first six
months of the year as compared to the same prior year period.
Kronos' average selling prices at the end of the second quarter of
2016 were 4% higher than at the end of the first quarter of 2016,
and 2% higher than at the end of 2015, with higher prices in most
major markets except Latin America. TiO2 sales
volumes in the second quarter and first six months of 2016 were 7%
and 6% higher, respectively, than in the same periods of 2015 due
to higher sales in European, North American and export markets in
2016, partially offset by lower sales in Latin America.
Kronos' sales volumes in the second quarter and first six months of
2016 set an overall new record for a second quarter and
first-six-month period. Fluctuations in currency exchange
rates (primarily the euro) also affected net sales comparisons,
increasing net sales by approximately $5 million in the second
quarter and decreasing net sales by approximately $6 million in the
first six months of 2016. The table at the end of this press
release shows how each of these items impacted the overall decrease
in sales.
Kronos' income from operations in
the second quarter of 2016 was $10.5 million compared to a loss
from operations of $10.4 million in the second quarter of 2015. For
the year-to-date period, Kronos' income from operations was $10.2
million as compared to $21.8 million in the first six months of
2015. Kronos' income from operations in the 2015 periods
includes an aggregate second quarter workforce reduction charge of
$21.1 million (NL's equity interest was $3.6 million, or $.07 per
share, net of income tax benefit). Excluding the impact of
the 2015 workforce reduction charge, Kronos' income from operations
decreased in 2016 primarily due to the net effects of lower average
TiO2 selling
prices, lower raw material and other production costs (including
cost savings resulting from workforce reductions implemented in
2015), higher sales volumes and lower production volumes.
Kronos' TiO2 production
volumes were 7% lower in the second quarter, and 1% lower in the
first six months of 2016 as compared to the same periods of
2015. Kronos operated its production facilities at overall
average capacity utilization rates of 96% in the first six months
of 2016 (approximately 97% and 95% of practical capacity in the
first and second quarters, respectively) compared to approximately
97% in the first six months of 2015 (93% and 100% in the first and
second quarters of 2015, respectively). Kronos' production
rates in the first quarter of 2015 were impacted by the
implementation of certain productivity-enhancing improvement
projects at certain facilities, as well as necessary improvements
to ensure continued compliance with its permit regulations, which
resulted in longer-than-normal maintenance shutdowns in some
instances. Fluctuations in currency exchange rates also
affected Kronos' income from operations comparisons, which
increased Kronos' income from operations by approximately $4
million in the second quarter and by approximately $11 million in
the year-to-date period.
Kronos' other operating income,
net in the first six months of 2016 includes an insurance
settlement gain of $3.4 million (NL's equity interest was $.5
million, or $.01 per share, net of income tax expense) related to a
2014 business interruption claim, of which $1.4 million was
recognized by Kronos in the second quarter.
Kronos' income tax expense in the
second quarter of 2015 includes a non-cash deferred income tax
expense of $150.3 million (NL's equity interest was $29.7 million,
or $.61 per share, net of income taxes) related to the recognition
of a deferred income tax asset valuation allowance related to its
German and Belgian operations. Kronos' income tax expense in
the second quarter of 2016 includes a non-cash deferred income tax
expense of $2.9 million (NL's equity interest was $.6 million, or
$.01 per share, net of income taxes) related to the recognition of
a deferred income tax asset valuation allowance related to its
German and Belgian operations.
NL's insurance recoveries reflect
in part amounts we received from certain of our former insurance
carriers, and relate to the recovery of prior lead pigment and
asbestos litigation defense costs incurred by us. Such
insurance recoveries were $3.4 million (or $.04 per share, net of
income taxes) in the first six months of 2015 compared to a nominal
amount in the first six months of 2016. Substantially all of the
insurance recoveries we recognized in 2015 relate to a first
quarter settlement we reached with one of our insurance carriers in
which they agreed to reimburse us for a portion of our past lead
pigment litigation defense costs.
Corporate expenses decreased $2.4
million in the second quarter of 2016 as compared to the second
quarter of 2015 due primarily to lower environmental remediation
and related costs, and decreased $.5 million in the first six
months of 2016 as compared to 2015 primarily due to lower
litigation fees and related costs.
As previously reported, our income
tax benefit in the first six months of 2015 includes a non-cash
income tax benefit of $3.0 million (or $.06 per share) related to a
net reduction in our reserve for uncertain tax positions.
The statements in this 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 NL believes that the
expectations reflected in such forward-looking statements are
reasonable, we 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, we continue to face many risks and
uncertainties. Among the factors that could cause actual
future results to differ materially include, but are not limited
to:
-
Future supply and demand for our products
-
The extent of the dependence of certain of our
businesses on certain market sectors
-
The cyclicality 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 energy, ore, zinc and brass 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 material
(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 substitute
products
-
Price and product competition from low-cost
manufacturing sources (such as China)
-
Customer and competitor strategies
-
Potential consolidation of Kronos'
competitors
-
Potential consolidation of Kronos'
customers
-
The impact of pricing and production
decisions
-
Competitive technology positions
-
Potential difficulties in integrating future
acquisitions
-
Potential difficulties in upgrading or
implementing new accounting and manufacturing software
systems
-
The introduction of trade barriers
-
Possible disruption of Kronos' or CompX's
business, or increases in our cost of doing business
resulting from terrorist activities or global conflicts
-
The impact of current or future government
regulations (including employee healthcare benefit related
regulations)
-
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
-
Kronos' ability to renew or refinance credit
facilities
-
Our ability to maintain sufficient
liquidity
-
The timing and amounts of insurance
recoveries
-
The extent to which our subsidiaries or
affiliates were to become unable to pay us dividends
-
The ultimate outcome of income tax audits, tax
settlement initiatives or other tax matters
-
Uncertainties associated with CompX's
development of new product features
-
Our ability to utilize income tax attributes or
changes in income tax rates related to such attributes, the
benefits of which may not 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 us, with respect to
asserted health concerns associated with the use of such
products)
-
The ultimate resolution of pending litigation
(such as our lead pigment and environmental matters)
-
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 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.
NL Industries, Inc. is engaged in the component
products (security products and performance marine components),
chemical (TiO2) and other
businesses
NL INDUSTRIES,
INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(In millions, except earnings per
share)
(Unaudited)
.
|
Three
months |
|
Six months |
|
ended June
30, |
|
ended June
30, |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
|
|
|
|
|
Net sales |
$ 28.9 |
|
$
27.1 |
|
$ 56.8 |
|
$
54.2 |
Cost of sales |
19.8 |
|
18.6 |
|
39.1 |
|
37.5 |
|
|
|
|
|
|
|
|
Gross margin |
9.1 |
|
8.5 |
|
17.7 |
|
16.7 |
|
|
|
|
|
|
|
|
Selling, general and administrative expense |
4.8 |
|
4.8 |
|
9.7 |
|
9.6 |
Other operating income (expense): |
|
|
|
|
|
|
|
Insurance recoveries |
.3 |
|
.2 |
|
3.4 |
|
.3 |
Corporate expense |
(5.7) |
|
(3.3) |
|
(9.5) |
|
(9.0) |
|
|
|
|
|
|
|
|
Income (loss) from operations |
(1.1) |
|
.6 |
|
1.9 |
|
(1.6) |
|
|
|
|
|
|
|
|
Equity in earnings (losses) of Kronos Worldwide,
Inc. |
(48.6) |
|
.5 |
|
(43.0) |
|
(.7) |
|
|
|
|
|
|
|
|
General corporate item - |
|
|
|
|
|
|
|
Interest and dividend income |
.3 |
|
.4 |
|
.6 |
|
.8 |
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
(49.4) |
|
1.5 |
|
(40.5) |
|
(1.5) |
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
(20.6) |
|
.3 |
|
(22.0) |
|
(.5) |
|
|
|
|
|
|
|
|
Net income (loss) |
(28.8) |
|
1.2 |
|
(18.5) |
|
(1.0) |
|
|
|
|
|
|
|
|
Noncontrolling interest in net income of
subsidiary |
.4 |
|
.3 |
|
.7 |
|
.6 |
|
|
|
|
|
|
|
|
Net income (loss) attributable to NL
stockholders |
$ (29.2) |
|
$
.9 |
|
$ (19.2) |
|
$
(1.6) |
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to
NL stockholders |
$ (.60) |
|
$
.02 |
|
$ (.39) |
|
$
(.03) |
|
|
|
|
|
|
|
|
Weighted average shares used in the |
|
|
|
|
|
|
|
calculation of net income per share |
48.7 |
|
48.7 |
|
48.7 |
|
48.7 |
NL INDUSTRIES,
INC.
COMPONENTS OF INCOME (LOSS) FROM
OPERATIONS
(In millions)
(Unaudited)
|
Three
months |
|
Six months |
|
ended June
30, |
|
ended June
30, |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
|
|
|
|
|
|
|
CompX - component products |
$ 4.3 |
|
$
3.7 |
|
$ 8.0 |
|
$
7.1 |
Insurance recoveries |
.3 |
|
.2 |
|
3.4 |
|
.3 |
Corporate expense |
(5.7) |
|
(3.3) |
|
(9.5) |
|
(9.0) |
|
|
|
|
|
|
|
|
Income (loss) from operations |
$ (1.1) |
|
$
.6 |
|
$ 1.9 |
|
$
(1.6) |
|
|
|
|
|
|
|
|
CHANGE IN KRONOS'
TiO2
SALES
(Unaudited)
|
Three
months |
|
Six months |
|
ended June 30, |
|
ended June 30, |
|
2016 vs.
2015 |
|
2016 vs.
2015 |
|
|
|
|
|
|
|
|
Percentage change in sales: |
|
|
|
|
|
|
|
TiO2 product
pricing |
|
(7) |
% |
|
|
(11) |
% |
TiO2 sales
volume |
|
7 |
|
|
|
6 |
|
TiO2 product
mix/other |
|
(2) |
|
|
|
(1) |
|
Changes in currency exchange rates |
|
1 |
|
|
|
(1) |
|
|
|
|
|
|
|
|
|
Total |
|
(1) |
% |
|
|
(7) |
% |
|
|
|
|
|
|
|
|
Source: NL Industries, Inc.
Contact: Gregory M. Swalwell, Executive Vice President and
Chief Financial Officer, (972) 233-1700
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: NL Industries via Globenewswire
HUG#2033429
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