DALLAS, TEXAS - March 12, 2018 -
NL Industries, Inc. (NYSE: NL) today reported net income
attributable to NL stockholders of $49.1 million, or $1.00 per
share, in the fourth quarter of 2017 compared to $9.6 million, or
$.20 per share, in the fourth quarter of 2016. For full year
2017, NL reported net income attributable to NL stockholders of
$116.1 million, or $2.38 per share, compared to $15.3 million, or
$.31 per share in 2016. Net income in the 2017 periods
includes the impact of a fourth quarter $37.5 million non-cash
deferred income tax benefit ($0.77 per diluted share) related to
the revaluation of the Company's net deferred income tax liability
resulting from the reduction in the U.S. federal corporate income
tax rate enacted into law on December 22, 2017.
Net sales decreased $1.2 million
in the fourth quarter of 2017 as compared to the fourth quarter of
2016, and increased $3.1 million for full year 2017 compared to
2016. Income from operations attributable to CompX was $2.7
million in the fourth quarter of 2017 compared to $4.1 million in
the fourth quarter of 2016, and was $15.2 million for the full year
2017 compared to $15.6 million in 2016. Fourth 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 in the
fourth quarter of 2017. Full year 2017 net sales increased
over 2016 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 2017 periods due to the lower Security Products
sales (with respect to the quarter-over-quarter comparison) and
relative changes in customer and product mix in the Security
Products reporting segment, and to a lesser extent higher raw
material costs (mostly zinc and brass) in the Security
Products segment as well as higher manufacturing costs at the
Marine Components segment, including the impact of temporary
personnel turnover in key departments.
Kronos' net sales of $453.3
million in the fourth quarter of 2017 were $119.6 million, or 36%,
higher than in the fourth quarter of 2016. Kronos' net sales
of $1.7 billion in the full year of 2017 were $364.7 million, or
27%, higher than in the full year of 2016. Kronos' net sales
increased in 2017 due to higher average TiO2 selling prices and
higher sales volumes. Kronos' average TiO2 selling prices
were 27% higher in the fourth quarter of 2017 as compared to the
fourth quarter of 2016 and were 22% higher in the full year of 2017
as compared to 2016. Kronos' average selling prices at the
end of the fourth quarter of 2017 were 5% higher than at the end of
the third quarter of 2017 and were 27% higher than at the end of
2016, with higher prices in all major markets. Kronos'
TiO2 sales volumes
in the fourth quarter of 2017 were 5% higher as compared to the
fourth quarter of 2016 due to higher sales in the European, North
American and Latin American markets partially offset by lower sales
in export markets. Kronos' TiO2 sales volumes
the full year of 2017 were 5% higher as compared to 2016 due to
higher sales most notably in the North American market as well as
the European market. Kronos' sales volumes in the fourth
quarter and full year of 2017 set a new overall record for a fourth
quarter and full-year period. Fluctuations in currency
exchange rates (primarily the euro) also affected Kronos' net sales
comparisons, increasing net sales by approximately $18 million in
the fourth quarter of 2017 and by approximately $16 million in the
full year 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 fourth quarter of 2017 was $116.4 million as compared to $42.9
million in the fourth quarter of 2016. For the full year
periods, Kronos' income from operations was $330.4 million in 2017
as compared to $81.1 million in 2016. Kronos' income from
operations increased in the 2017 periods 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' TiO2 production
volumes were 2% higher in the fourth quarter and 5% higher in the
full year of 2017 as compared to the same periods in 2016.
Kronos operated its production facilities at full practical
capacity utilization rates in 2017 compared to approximately 98% in
2016. Kronos' production volumes in the fourth quarter and
full year of 2017 set a new overall record for a fourth quarter and
full-year period. Fluctuations in currency exchange rates
also affected Kronos' income from operations comparisons, which
increased income from operations by approximately $1 million in the
fourth quarter and decreased income from operations by
approximately $18 million in the full-year period.
Kronos' other operating income,
net in 2016 includes an insurance settlement gain of $4.3 million
(NL's equity interest was $.6 million, or $.01 per share, net of
income tax expense) related to two separate business interruptions
claims, of which $.9 million (NL's equity interest was $.1 million,
net of income tax expense) was recognized in the fourth
quarter.
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 full year 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 recognized in the third
quarter.
Kronos' income tax benefit in 2017
includes (i) a non-cash deferred income tax benefit of $186.7
million (NL's equity interest was $36.9 million, or $.76 per share)
as a result of the reversal of its deferred income tax asset
valuation allowances associated with its German and Belgian
operations (including $16.3 million in the fourth quarter, of which
NL's equity interest was $3.2 million or $.07 per share), (ii) a
fourth quarter non-cash deferred income tax benefit of $18.7
million (NL's equity interest was $3.7 million or $.08 per share)
as a result of the reversal of Kronos' deferred income tax asset
valuation allowance related to certain U.S. deferred income tax
assets of one of its non-U.S. subsidiaries (which subsidiary is
treated as a dual resident for U.S. income tax purposes), (iii) a
fourth quarter provisional current income tax expense of $76.2
million (NL's equity interest was $15.1 million or $.31 per share)
as a result of a change in the 2017 Tax Act enacted on December 22,
2017 for the one-time repatriation tax imposed on the undistributed
earnings of Kronos' non-U.S. subsidiaries, (iv) an aggregate
current income tax benefit of $11.8 million (NL's equity interest
was $2.3 million or $.05 per share) related to the execution and
finalization of an Advance Pricing Agreement between Canada and
Germany, mostly in the third quarter, and (v) a fourth quarter
non-cash deferred income tax expense of $4.5 million (NL's equity
interest was $.9 million or $.02 per share) related to a change in
Kronos' conclusions regarding its permanent reinvestment assertion
with respect to the undistributed earnings of its European
subsidiaries.
Corporate expenses were lower in
the fourth quarter and for the full year of 2017 compared to the
same periods of 2016. Lower litigation fees and related
costs and lower administrative expenses in the fourth quarter of
2017 as compared to the same period of 2016 more than offset higher
environmental remediation and related costs. Lower
environmental remediation and related costs and, to a lesser
extent, lower administrative expenses in 2017 as compared to 2016
more than offset higher litigation fees and related costs.
Interest and dividend income increased $.5 million and $1.8 million
in the fourth quarter and full year 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, including future tax
reform
-
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.