NL REPORTS SECOND QUARTER 2018 RESULTS
August 07 2018 - 4:20PM
DALLAS, TEXAS - August 7, 2018 -
NL Industries, Inc. (NYSE: NL) today reported a net loss
attributable to NL stockholders of $42.6 million, or $.87 per
share, in the second quarter of 2018 compared to net income
attributable to NL stockholders of $41.1 million, or $.85 per
share, in the second quarter of 2017. For the first six
months of 2018, NL reported a net loss attributable to NL
stockholders of $28.3 million, or $.58 per share compared to net
income attributable to NL stockholders of $49.5 million, or $1.02
per share in the first six months of 2017. NL reported a net
loss in both 2018 periods primarily due to a $62.0 million pre-tax
litigation settlement expense ($1.01 per share, net of income tax
benefit) recognized in the second quarter of 2018 as discussed
below.
Net sales increased $2.3 million
in the second quarter of 2018 over the comparable 2017 period
primarily due to higher sales of security products across the
majority of our markets and continued strong growth in sales of
marine components to various marine and industrial markets. Net
sales increased $.8 million for the first six months of 2018
compared to the same period in 2017 due to higher marine components
sales volumes, partially offset by lower security products sales
volumes to existing government security customers. Income
from operations attributable to CompX increased for both 2018
periods principally as a result of favorable changes in customer
and product mix in security products and improved manufacturing
efficiencies facilitated by increased production volumes and cost
reductions.
Kronos' net sales of $471.8
million in the second quarter of 2018 were $30.4 million, or 7%,
higher than in the second quarter of 2017. Kronos' net sales
of $902.2 million in the first six months of 2018 were $91.0
million, or 11%, higher than in the first six months of 2017.
Kronos' net sales increased in 2018 due to higher average
TiO2 selling
prices partially offset by lower sales volumes. Kronos'
average TiO2 selling
prices were 20% higher in the second quarter of 2018 as compared to
the second quarter of 2017 and were 23% higher in the first six
months of 2018 as compared to the same prior year period.
Kronos' average TiO2 selling
prices at the end of the second quarter of 2018 were 4% higher than
at the end of 2017 with most of such increase occurring in the
first quarter. Higher prices in the European, North American
and export markets, partially offset by lower prices in Latin
America (attributable to customer mix). Kronos'
TiO2 sales volumes
in the second quarter of 2018 were 12% lower as compared to the
record second quarter sales volumes of 2017 primarily due to lower
sales in the European and export markets reflecting the effects of
product availability issues during the quarter as well as reduced
shipments as customer inventory levels returned to more normal
levels especially in European and export markets, partially offset
by higher sales in the North American market. Kronos' sales
volumes in the first six months of 2018 were 13% lower than the
same period in 2017 primarily due to lower sales in all major
markets resulting from a controlled ramp-up in January 2018 as
Kronos brought the second phase of its new global enterprise
resource planning system online, and inventory management to assure
adequate supply to its customers during the spring and summer
necessitated by the lower production volumes in the first three
months of the year (as discussed below), as well as the impact of
product availability and customer inventory level changes in the
second quarter discussed above. Fluctuations in currency
exchange rates (primarily the euro) also affected net sales
comparisons, increasing net sales by approximately $22 million in
the second quarter of 2018 and approximately $53 million in the
first six months of 2018 as compared to the same periods in
2017. The table at the end of this press release shows how
each of these items impacted the overall increase in net sales.
Kronos' income from operations in
the second quarter of 2018 was $119.9 million as compared to $74.3
million in the second quarter of 2017. For the year-to-date
period, Kronos' income from operations was $227.4 million as
compared to $130.7 million in the first six months of 2017.
Kronos' income from operations increased in the 2018 periods
primarily due to higher average TiO2 selling
prices partially offset by lower sales and production volumes and
higher costs for certain raw materials and other production
costs. Kronos' TiO2 production
volumes were 4% lower in the second quarter and 6% lower in the
first six months of 2018 as compared to the same periods in
2017. Kronos' production facilities operated at 96% of
practical capacity in 2018 (95% and 97% in the first and second
quarters of 2018, respectively) compared to full practical capacity
utilization rates in 2017. The decrease in TiO2
production volumes in the 2018 periods compared to the production
volumes in the 2017 periods was primarily due to the timing of
scheduled maintenance at certain facilities in 2018 as well as the
implementation of a productivity-enhancing improvement project at
its Belgian facility in the first quarter of 2018.
Fluctuations in currency exchange rates also affected income from
operations comparisons, which increased income from operations by
approximately $18 million in the second quarter of 2018 and by
approximately $19 million in the year-to-date 2018 period as
compared to the same periods in 2017.
Kronos' income tax benefit in the
first six months of 2017 includes a non-cash deferred income tax
benefit of $162.6 million (NL's equity interest was $32.1 million,
or $.66 per share, net of income tax expense) as a result of a net
decrease in its deferred income tax asset valuation allowance
associated its German and Belgian operations (such income tax
benefit of Kronos was $157.6 million in the second quarter of 2017,
and NL's equity interest was $31.2 million, or $.64 per share, net
of income tax expense).
Corporate expenses increased by
$1.6 million and $4.2 million in the second quarter and first six
months of 2018 compared to the same periods of 2017, respectively,
due to higher litigation fees and related costs in both periods,
and higher environmental remediation and related costs in the
year-to-date period and higher administrative costs in the second
quarter period. In May 2018, we entered into a settlement
agreement with the plaintiffs in the California lead pigment
ligation, and in connection with such settlement agreement, as
supplemented, we recognized a $62.0 million pre-tax litigation
settlement expense in the second quarter of 2018. The
settlement agreement is subject to a number of conditions.
Interest and dividend income
increased $.3 million in the second quarter and $.7 million in the
first half of 2018 primarily due to interest income earned on
CompX's revolving promissory note receivable from Valhi, which
CompX entered into in August 2016. Marketable equity
securities in the second quarter and first six months of 2018
represents unrealized losses on our marketable equity securities
during such periods which are now recognized as a component of
other income (expense) beginning in 2018 as a result of the January
2018 adoption of a new accounting standard.
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.
NL INDUSTRIES,
INC. |
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CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS |
|
|
|
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|
|
(In millions, except
earnings per share) |
|
|
|
|
|
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|
(Unaudited) |
|
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|
|
|
|
|
|
Three months |
|
Six months |
|
ended June 30, |
|
ended June 30, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
|
|
|
|
|
|
Net sales |
$ 30.1 |
|
$
32.4 |
|
$ 60.0 |
|
$
60.8 |
Cost of sales |
20.6 |
|
21.2 |
|
40.8 |
|
40.1 |
|
|
|
|
|
|
|
|
Gross margin |
9.5 |
|
11.2 |
|
19.2 |
|
20.7 |
|
|
|
|
|
|
|
|
Selling, general and administrative expense |
4.9 |
|
5.2 |
|
10.1 |
|
10.3 |
Other operating income (expense): |
|
|
|
|
|
|
|
Insurance recoveries |
- |
|
.2 |
|
.1 |
|
.4 |
Other income, net |
- |
|
- |
|
- |
|
.6 |
Litigation settlement expense |
|
|
(62.0) |
|
|
|
(62.0) |
Corporate expense |
(3.2) |
|
(4.8) |
|
(8.6) |
|
(12.8) |
|
|
|
|
|
|
|
|
Income (loss) from operations |
1.4 |
|
(60.6) |
|
.6 |
|
(63.4) |
|
|
|
|
|
|
|
|
Equity in earnings of Kronos Worldwide, Inc. |
59.7 |
|
23.6 |
|
70.9 |
|
45.1 |
|
|
|
|
|
|
|
|
General corporate item - |
|
|
|
|
|
|
|
Marketable equity securities |
- |
|
(18.7) |
|
- |
|
(20.3) |
Other components of net periodic pension
and OPEB cost |
(.2) |
|
(.1) |
|
(.3) |
|
(.2) |
Interest and dividend income |
.9 |
|
1.2 |
|
1.6 |
|
2.3 |
|
|
|
|
|
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|
Income (loss) before income taxes |
61.8 |
|
(54.6) |
|
72.8 |
|
(36.5) |
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
20.3 |
|
(12.6) |
|
22.5 |
|
(9.3) |
|
|
|
|
|
|
|
|
Net income (loss) |
41.5 |
|
(42.0) |
|
50.3 |
|
(27.2) |
|
|
|
|
|
|
|
|
Noncontrolling interest in net income of
subsidiary |
.4 |
|
.6 |
|
.8 |
|
1.1 |
|
|
|
|
|
|
|
|
Net income (loss) attributable to NL
stockholders |
$ 41.1 |
|
$
(42.6) |
|
$ 49.5 |
|
$
(28.3) |
|
|
|
|
|
|
|
|
Net income (loss) per share attributable
to
NL stockholders |
$ .85 |
|
$
(.87) |
|
$ 1.02 |
|
$
(.58) |
|
|
|
|
|
|
|
|
Weighted average shares used in the |
|
|
|
|
|
|
|
calculation of net income (loss) 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, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
|
|
|
|
|
|
|
|
CompX - component products |
$
4.6 |
|
$ 6.0 |
|
$
9.1 |
|
$ 10.4 |
Insurance recoveries |
- |
|
.2 |
|
.1 |
|
.4 |
Other income, net |
- |
|
- |
|
- |
|
.6 |
Litigation settlement
expense |
- |
|
(62.0) |
|
- |
|
(62.0) |
Corporate expense |
(3.2) |
|
(4.8) |
|
(8.6) |
|
(12.8) |
|
|
|
|
|
|
|
|
Income (loss) from
operations |
$
1.4 |
|
$ (60.6) |
|
$
.6 |
|
$ (63.4) |
NL INDUSTRIES, INC. |
CHANGE IN KRONOS' TiO2
SALES |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three months |
|
Six months |
|
ended June 30, |
|
ended June 30, |
|
2018 vs. 2017 |
|
2018 vs. 2017 |
|
|
|
|
|
|
|
|
Percentage change in
sales: |
|
|
|
|
|
|
|
TiO2 product
pricing |
|
20 |
% |
|
|
23 |
% |
TiO2 sales
volume |
|
(12) |
|
|
|
(13) |
|
TiO2 product
mix/other |
|
(6) |
|
|
|
(5) |
|
Changes in currency
exchange rates |
|
5 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
Total |
|
7 |
% |
|
|
11 |
% |
|
|
|
|
|
|
|
|
SOURCE: NL Industries, Inc.
CONTACT: Janet G. Keckeisen, Vice President
- Corporate Strategy and Investor Relations, 972.233.1700
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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