DALLAS, TEXAS - November 8, 2017 -
NL Industries, Inc. (NYSE: NL) today reported net income
attributable to NL stockholders of $17.5 million, or $.36 per
share, in the third quarter of 2017 compared to $7.4 million, or
$.15 per share, in the third quarter of 2016. For the first
nine months of 2017, NL reported net income attributable to NL
stockholders of $67.0 million, or $1.38 per share, compared to $5.7
million, or $.12 per share in the first nine months of 2016.
Net sales decreased $1.4 million
in the third quarter of 2017 as compared to the third quarter of
2016, and increased $4.3 million in the first nine months of 2017
compared to the same period in 2016. Income from operations
attributable to CompX was $3.4 million in the third quarter of 2017
compared to $4.5 million in the third quarter of 2016, and was
$12.5 million in the first nine months of 2017 compared to $11.5
million in the first nine months of 2016. Third quarter 2017
net sales decreased over the comparable 2016 period primarily as a
result of the Security Products reporting unit's sales in 2016 to a
single government customer that, as expected, did not recur.
Year-to-date 2017 net sales increased over the comparable 2016
period primarily due to the Security Products reporting unit's
increased sales volumes to existing government customers, partially
offset by a decrease in sales of security products to an original
equipment manufacturer of recreational transportation
products. Income from operations attributable to CompX
decreased in the third quarter of 2017 primarily due to the lower
Security Products sales and unfavorable relative changes in
customer and product mix in the Security Products reporting segment
as well as higher manufacturing costs at the Marine Components
segment. Income from operations attributable to CompX
increased for the first nine months of 2017 compared to the 2016
period principally due to the higher sales at the Security Products
reporting unit.
Kronos' net sales of $464.5
million in the third quarter of 2017 were $108.4 million, or 30%,
higher than in the third quarter of 2016. Net sales of $1.276
billion in the first nine months of 2017 were $245.1 million, or
24%, higher than in the first nine months of 2016. Net sales
increased in 2017 due to higher average TiO2 selling
prices and higher sales volumes. Kronos' average
TiO2 selling
prices were 23% higher in the third quarter of 2017 as compared to
the third quarter of 2016 and were 20% higher 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
2017 were 8% higher than at the end of the second quarter of 2017
and were 21% higher than at the end of 2016, with higher prices in
all major markets. TiO2 sales volumes
in each of the third quarter and year-to-date period of 2017 were
5% higher as compared to the same periods in 2016 due to higher
sales in the European, North American and export markets. Kronos'
sales volumes in the third quarter and first nine months of 2017
set a new overall record for a third quarter and first-nine-month
period. Fluctuations in currency exchange rates (primarily
the euro) also affected Kronos' net sales comparisons, increasing
net sales by approximately $13 million in the third quarter of 2017
and decreasing net sales by approximately $2 million in the first
nine months of 2017 as compared to the same periods in 2016.
The table at the end of this press release shows how each of these
items impacted the overall increase in Kronos' sales.
Kronos' income from operations in
the third quarter of 2017 was $91.6 million as compared to $28.0
million in the third quarter of 2016. For the year-to-date
period, Kronos' income from operations was $214.0 million as
compared to $38.2 million in the first nine months of 2016.
Kronos' income from operations increased in the third quarter of
2017 primarily due to higher average TiO2 selling
prices and higher sales and production volumes partially offset by
higher costs for certain raw materials and other production
costs. Kronos' income from operations in the first nine
months of 2017 increased primarily due to higher average
TiO2 selling
prices, higher sales and production volumes and lower raw materials
and other production costs. Kronos' TiO2
production volumes were 2% higher in the third quarter and 7%
higher in the first nine months of 2017 as compared to the same
periods in 2016. Kronos operated its production facilities at
full practical capacity utilization rates in the first nine months
of 2017 compared to approximately 97% in the first nine months of
2016. Kronos' production volumes in the third quarter and
first nine months of 2017 set a new overall record for a third
quarter and first-nine-month period. Fluctuations in currency
exchange rates also affected segment profit comparisons, which
decreased segment profit by approximately $6 million in the third
quarter and by approximately $19 million in the year-to-date
period.
Kronos' other operating income,
net in the first nine months of 2016 includes an insurance
settlement gain of $3.4 million (NL's equity interest was $.7
million, or $.01 per share, net of income tax expense) related to a
2014 business interruption claim.
In September 2017, Kronos
voluntarily prepaid and terminated its term loan indebtedness using
a portion of the proceeds from its September 2017 issuance of €400
million principal amount of 3.75% Senior Secured Notes due
September 2025. Kronos' results in the third quarter of 2017
include a non-operating pre-tax charge of $7.1 million (NL's equity
interest was $.9 million, or $.02 per share, net of income tax
benefit) related to such prepayment.
Kronos' income tax benefit in the
first nine months of 2017 includes a non-cash deferred income tax
benefit of $170.4 million (NL's equity interest was $33.7 million,
or $.69 per share) as a result of a net decrease in Kronos'
deferred income tax asset valuation allowance related to its German
and Belgian operations (such income tax benefit of Kronos was $7.8
million in the third quarter of 2017, and NL's equity interest was
$1.5 million, or $.03 per share, net of income tax expense).
Kronos' income tax benefit in the third quarter of 2017 also
includes an aggregateincome tax benefit of $11.3 million (NL's
equity interest was $2.2 million, or $.05 per share) related to the
execution and finalization of an Advance Pricing Agreement between
Canada and Germany. Kronos' income tax expense in the first
nine months of 2016 includes a non-cash deferred income tax expense
of $2.1 million (NL's equity interest was $.4 million, or $.01 per
share) as a result of a net increase in Kronos' deferred income tax
asset valuation allowance related to its German and Belgian
operations (most of which was recognized in the second quarter),
and a third quarter current income tax benefit of $5.6 million
(NL's equity interest was $1.1 million, or $.02 per share) related
to the execution and finalization of an Advance Pricing Agreement
between U.S. and Canada.
Corporate expenses were lower in
the third quarter and first nine months of 2017 compared to the
same period of 2016 as lower environmental remediation and related
costs and, to a lesser extent, lower administrative expenses, more
than offset higher litigation fees and related costs in both the
quarter and year-to-date periods. Interest and dividend
income increased $.5 million and $1.4 million in the third quarter
and first nine months of 2017 as compared to the same periods of
2016 primarily due to interest earned on CompX's loan to an
affiliate which was entered into in August 2016.
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 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 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
(such as Kronos' new enterprise resource planning system)
-
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 or 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), chemicals (TiO2) and other
businesses.