NL REPORTS THIRD
QUARTER 2016 RESULTS
DALLAS, TEXAS - November 7, 2016 -
NL Industries, Inc. (NYSE: NL) today reported net income
attributable to NL stockholders of $7.4 million, or $.15 per share,
in the third quarter of 2016 compared to $.9 million, or $.02 per
share, in the third quarter of 2015. For the first nine
months of 2016, NL reported a net income attributable to NL
stockholders of $5.7 million, or $.12 per share, compared to a net
loss attributable to NL stockholders of $18.3 million, or $.38 per
share in the first nine months of 2015.
Net sales increased $1.9 million
to $28.4 million in the third quarter of 2016 as compared to the
third quarter of 2015, and income from operations attributable to
CompX increased $1.1 million to $4.5 million, due to higher
Security Product sales to existing government customers coupled
with manufacturing efficiencies and fixed cost leverage resulting
from increased manufacturing volume. Net sales decreased $.7
million in the year-to-date 2016 period compared to the same period
of 2015 primarily due to Security Products sales in 2015 for a
government security end-user program that, as expected, did not
recur in 2016. During the third quarter of 2016, CompX was
awarded a substantial new project with the same customer which
began to ship in August 2016. Income from operations
attributable to CompX was comparable for both year-to-date
periods.
Kronos' net sales of $356.1
million in the third quarter of 2016 were $19.6 million, or 6%,
higher than in the third quarter of 2015. Net sales of
$1,030.6 million in the first nine months of 2016 were $31.2
million, or 3%, lower than in the first nine months of 2015.
Net sales increased in the third quarter as compared to the same
period in 2015 due to higher average TiO2 selling
prices and higher sales volumes. Net sales decreased in the first
nine months of 2016 primarily due to lower average selling prices
partially offset by higher sales volumes. Kronos' average
TiO2 selling
prices were 2% higher in the third quarter of 2016 as compared to
the third quarter of 2015, and were 7% lower in the first nine
months of the year as compared to the same prior year period.
Kronos' average selling prices at the end of the third quarter of
2016 were 6% higher than at the end of the second quarter of 2016,
and 8% higher than at the end of 2015, with higher prices in all
major markets. TiO2 sales volumes
in the third quarter were 6% higher as compared to the third
quarter of 2015 due to higher sales in North American and export
markets, partially offset by lower sales in Latin America.
TiO2 sales
volumes in the first nine months of 2016 were 6% higher than the
same period 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 third quarter and
first nine months of 2016 set an overall new record for a third
quarter and first-nine-months period. Fluctuations in
currency exchange rates (primarily the euro) also affected net
sales comparisons, decreasing net sales by approximately $2 million
in the third quarter and decreasing net sales by approximately $8
million in the first nine 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 third quarter of 2016 was $28.0 million as compared to a loss
from operations of $3.2 million in the third quarter of 2015.
For the year-to-date period, Kronos' income from operations was
$38.2 million as compared to $18.6 million in the first nine months
of 2015. Kronos' income from operations in the 2015
year-to-date period includes an aggregate workforce reduction
charge of $21.5 million (NL's equity interest was $3.6 million, or
$.07 per share, net of income tax benefit), most of which was
recognized in the second quarter. Excluding the impact of the
2015 workforce reduction charge, Kronos' income from operations
increased in the third quarter of 2016 as compared to the third
quarter of 2015 primarily due to the net effects of higher average
TiO2 selling
prices, lower raw material and other production costs, higher sales
volumes and higher production volumes. Excluding the impact
of the 2015 workforce reduction charge, Kronos' income from
operations decreased slightly in the year-to-date comparisons
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 higher production
volumes. Kronos' TiO2 production
volumes were 5% higher in the third quarter, and 1% higher in the
first nine months of 2016 as compared to the same periods of
2015. Kronos operated its production facilities at overall
average capacity utilization rates of 97% in the first nine months
of 2016 (approximately 97%, 95% and 100% of practical capacity in
the first, second and third quarters, respectively) compared to
approximately 96% in the first nine months of 2015 (93%, 100% and
95% in the first, second and third 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 our 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 income from operations by
approximately $2 million in the third quarter and by approximately
$13 million in the year-to-date period.
Kronos' other operating income,
net in the first nine months of 2016 includes an aggregate
first-half 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.
Kronos' securities transactions,
net in the third quarter of 2015 includes an aggregate non-cash
charge of $12.0 million (NL's equity interest was $1.5 million, or
$.03 per share, net of income tax benefit) for an
other-than-temporary impairment on Kronos' investment in a
marketable equity security.
Kronos' income tax expense in the
first nine months of 2015 includes a non-cash deferred income tax
expense of $152.6 million (NL's equity interest was $30.1 million,
or $.62 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, most of which was recognized in the
second quarter. Kronos' income tax expense in the first nine
months of 2016 includes a $5.6 million (NL's equity interest was
$1.1 million, or $.02 per share, net of income taxes) current
income tax benefit related to the execution and finalization of an
Advance Pricing Agreement between the U.S. and Canada which was
recognized in the third quarter, and a non-cash deferred income tax
expense of $2.1 million (NL's equity interest was $.4 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 operation (most of which was recognized in the
second quarter).
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 $3.5 million (or $.05 per share, net of
income taxes) in the first nine months of 2015 compared to $.4
million in the first nine 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 increased $2.0
million in the third quarter of 2016 as compared to the third
quarter of 2015 primarily due to higher environmental remediation
and related costs. Corporate expenses increased $1.4 million
in the first nine months of 2016 compared to 2015 primarily due to
higher environmental remediation and related costs, partially
offset by lower litigation and related costs.
As previously reported, our income
tax benefit in the first nine 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 |
|
Nine
months |
|
ended September 30, |
|
ended September 30, |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
|
|
|
|
|
Net sales |
$ 26.5 |
|
$
28.4 |
|
$ 83.3 |
|
$
82.6 |
Cost of sales |
18.4 |
|
19.0 |
|
57.5 |
|
56.5 |
|
|
|
|
|
|
|
|
Gross margin |
8.1 |
|
9.4 |
|
25.8 |
|
26.1 |
|
|
|
|
|
|
|
|
Selling, general and administrative expense |
4.7 |
|
4.9 |
|
14.4 |
|
14.6 |
Other operating income (expense): |
|
|
|
|
|
|
|
Insurance recoveries |
.1 |
|
.1 |
|
3.5 |
|
.4 |
Other income, net |
.1 |
|
- |
|
.1 |
|
- |
Corporate expense |
(2.6) |
|
(4.6) |
|
(12.1) |
|
(13.5) |
|
|
|
|
|
|
|
|
Income (loss) from operations |
1.0 |
|
- |
|
2.9 |
|
(1.6) |
|
|
|
|
|
|
|
|
Equity in earnings (losses) of Kronos Worldwide,
Inc. |
(3.6) |
|
6.8 |
|
(46.6) |
|
6.1 |
|
|
|
|
|
|
|
|
General corporate item - |
|
|
|
|
|
|
|
Interest and dividend income |
.3 |
|
.4 |
|
.9 |
|
1.2 |
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
(2.3) |
|
7.2 |
|
(42.8) |
|
5.7 |
|
|
|
|
|
|
|
|
Income tax benefit |
(3.5) |
|
(.6) |
|
(25.5) |
|
(1.0) |
|
|
|
|
|
|
|
|
Net income (loss) |
1.2 |
|
7.8 |
|
(17.3) |
|
6.7 |
|
|
|
|
|
|
|
|
Noncontrolling interest in net income of
subsidiary |
.3 |
|
.4 |
|
1.0 |
|
1.0 |
|
|
|
|
|
|
|
|
Net income (loss) attributable to NL
stockholders |
$ 0.9 |
|
$ 7.4 |
|
$
(18.3) |
|
$ 5.7 |
|
|
|
|
|
|
|
|
Net income (loss) per share
attributable to
NL stockholders |
$
.02 |
|
$ .15 |
|
$
(.38) |
|
$ .12 |
|
|
|
|
|
|
|
|
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 |
|
Nine months |
|
ended September 30, |
|
ended September 30, |
|
2015 |
|
2016 |
|
2015 |
|
2016 |
|
|
|
|
|
|
|
|
CompX
- component products |
$ 3.4 |
|
$ 4.5 |
|
$ 11.4 |
|
$ 11.5 |
Insurance recoveries |
.1 |
|
.1 |
|
3.5 |
|
.4 |
Other
income, net |
.1 |
|
- |
|
.1 |
|
- |
Corporate expense |
(2.6) |
|
(4.6) |
|
(12.1) |
|
(13.5) |
|
|
|
|
|
|
|
|
Income (loss) from operations |
$ 1.0 |
|
$ - |
|
$ 2.9 |
|
$ (1.6) |
|
|
|
|
|
|
|
|
CHANGE IN KRONOS'
TiO2
SALES
(Unaudited)
|
Three months |
|
Nine months |
|
ended September 30, |
|
ended September 30, |
|
2016 vs. 2015 |
|
2016 vs. 2015 |
|
|
|
|
|
|
|
|
Percentage change in sales: |
|
|
|
|
|
|
|
TiO2 product
pricing |
|
2 |
% |
|
|
(7) |
% |
TiO2 sales
volume |
|
6 |
|
|
|
6 |
|
TiO2 product
mix/other |
|
(1) |
|
|
|
(1) |
|
Changes in currency exchange rates |
|
(1) |
|
|
|
(1) |
|
|
|
|
|
|
|
|
|
Total |
|
6 |
% |
|
|
(3) |
% |
|
|
|
|
|
|
|
|
SOURCE: NL Industries, Inc.
CONTACT: Gregory M. Swalwell, Executive Vice President and
Chief Financial Officer
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq 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
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