NL REPORTS THIRD QUARTER 2018 RESULTS
November 07 2018 - 4:20PM
DALLAS, TEXAS - November 7, 2018 -
NL Industries, Inc. (NYSE: NL) today reported a net loss
attributable to NL stockholders of $15.4 million, or $.32 per
share, in the third quarter of 2018 compared to net income
attributable to NL stockholders of $17.5 million, or $.36 per
share, in the third quarter of 2017. For the first nine
months of 2018, NL reported a net loss attributable to NL
stockholders of $43.8 million, or $.90 per share compared to net
income attributable to NL stockholders of $67.0 million, or $1.38
per share in the first nine months of 2017. NL reported a net
loss in the third quarter of 2018 due to the recognition of a $35.6
million pre-tax loss on marketable equity securities as discussed
below. NL reported a net loss in the first nine months of
2018 due to the recognition of a $55.9 million pre-tax loss on
marketable equity securities in the year-to-date period, as well as
the second quarter recognition of a $62.0 million pre-tax
litigation settlement expense ($1.01 per share, net of income tax
benefit) as discussed below.
Net sales increased $3.0 million
in the third 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 $3.9 million for the first nine months of 2018
compared to the same period in 2017 due to higher marine components
sales volumes, and to a lesser extent Security Products sales
across the majority of our markets. Income from operations
attributable to CompX increased in the third quarter of 2018
compared to 2017 due to improved coverage of fixed costs over
increased production volumes. Income from operations
attributable to CompX increased in the first nine months of 2018
compared to the same period of 2017 due to favorable changes in
customer and product mix in security products and improved
manufacturing efficiencies facilitated by higher production volumes
at both security products and marine components.
Kronos' net sales of $410.3
million in the third quarter of 2018 were $54.2 million, or 12%,
lower than in the third quarter of 2017. Kronos' net sales of
$1.3 billion in the first nine months of 2018 were $36.8 million,
or 3%, higher than in the first nine months of 2017. Kronos'
net sales decreased in the third quarter of 2018 and increased in
the first nine months of 2018 compared to the same periods in 2017
due to the net effects of higher average TiO2 selling
prices and lower sales volumes. Kronos' average
TiO2 selling
prices were 9% higher in the third quarter of 2018 as compared to
the third quarter of 2017 and were 18% higher in the first nine
months of 2018 as compared to the same prior year period.
Kronos' average selling prices at the end of the third quarter of
2018 were 2% lower than at the end of the second quarter of 2018,
and were 1% higher than at the end of 2017. Higher prices in the
European and North American markets were partially offset by lower
prices in the Latin American and export markets (attributable to
changes in customer mix) at the end of the third quarter of 2018 as
compared to the end of 2017. TiO2 sales volumes
in the third quarter of 2018 were 19% lower as compared to the
record third quarter sales volumes of 2017 primarily due to lower
sales in the European and export markets reflecting the effects of
reduced shipments as customer inventory levels returned to more
normal levels. Kronos' sales volumes in the first nine months of
2018 were 15% lower than the same period in 2017 primarily due to a
combination of factors including (i) 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; (ii) inventory management to
assure adequate supply to our customers during the spring and
summer necessitated by the lower production volumes in the first
three months of the year (as discussed below); (iii) product
availability in the second quarter; and (iv) customer inventory
level changes in the second and third quarters as discussed
above. Fluctuations in currency exchange rates (primarily the
euro) did not materially affect Kronos' net sales comparisons in
the third quarter but increased Kronos' net sales by approximately
$53 million in the first nine 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 change
in net sales.
Kronos' income from operations in
the third quarter of 2018 was $58.1 million as compared to $96.1
million in the third quarter of 2017. For the nine months
ended, Kronos' income from operations was $285.5 million as
compared to $226.8 million in the first nine months of 2017.
Kronos' income from operations decreased in the third quarter and
increased in the year-to-date period of 2018 compared to the 2017
periods primarily due to the net effect of higher average
TiO2 selling
prices, lower sales and production volumes and higher costs for
certain raw materials and other production costs. Kronos'
TiO2 production
volumes were 7% lower in the third quarter and 6% lower in the
first nine months of 2018 as compared to the same periods in
2017. Kronos' income from operations production facilities
operated at 95% of practical capacity in the first nine months of
2018 (95%, 97% and 92% in the first, second and third quarters of
2018, respectively) compared to full practical capacity utilization
rates for the comparable periods 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 maintenance activities at
certain facilities in 2018, and the implementation of a
productivity-enhancing improvement project at Kronos' 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 $7 million in the third quarter of 2018 and by
approximately $26 million in the year-to-date 2018 period as
compared to the same periods in 2017.
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 aggregate income 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.
Corporate expenses decreased by
$1.0 million in the third quarter 2018 compared to the same period
of 2017 due to lower environmental remediation and related costs
somewhat offset by higher administrative expenses in the third
quarter of 2018. Corporate expenses increased $3.2 million in
the first nine months of 2018 compared to the same period of 2018
due to higher litigation fees and related costs and higher
administrative expenses. 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 $.4 million in the third quarter and $1.1 million in the
first nine months of 2018 primarily due to interest income earned
on CompX's revolving promissory note receivable from Valhi, which
CompX entered into in August 2016. As noted above, marketable
equity securities in the third quarter and first nine 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 |
|
Nine months |
|
ended September 30, |
|
ended September 30, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
|
|
|
|
|
|
Net sales |
$ 27.0 |
|
$
30.0 |
|
$ 86.9 |
|
$
90.8 |
Cost of sales |
18.8 |
|
20.4 |
|
59.5 |
|
60.5 |
|
|
|
|
|
|
|
|
Gross margin |
8.2 |
|
9.6 |
|
27.4 |
|
30.3 |
|
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|
|
|
|
|
|
Selling, general and administrative expense |
4.8 |
|
5.1 |
|
14.9 |
|
15.4 |
Other operating income (expense): |
|
|
|
|
|
|
|
Insurance recoveries |
.1 |
|
.5 |
|
.2 |
|
.9 |
Other income, net |
.1 |
|
- |
|
.1 |
|
.6 |
Litigation settlement expense |
- |
|
- |
|
- |
|
(62.0) |
Corporate expense |
(2.6) |
|
(1.6) |
|
(11.1) |
|
(14.4) |
|
|
|
|
|
|
|
|
Income (loss) from operations |
1.0 |
|
3.4 |
|
1.7 |
|
(60.0) |
|
|
|
|
|
|
|
|
Equity in earnings of Kronos Worldwide, Inc. |
22.4 |
|
9.9 |
|
93.4 |
|
55.0 |
|
|
|
|
|
|
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General corporate item - |
|
|
|
|
|
|
|
Marketable equity securities |
- |
|
(35.6) |
|
- |
|
(55.9) |
Other components of net periodic pension
and OPEB cost |
(.1) |
|
(.1) |
|
(.5) |
|
(.2) |
Interest and dividend income |
1.0 |
|
1.3 |
|
2.5 |
|
3.6 |
Interest expense |
- |
|
- |
|
- |
|
- |
|
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|
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Income (loss) before income taxes |
24.3 |
|
(21.1) |
|
97.1 |
|
(57.5) |
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|
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Income tax expense (benefit) |
6.5 |
|
(6.2) |
|
28.9 |
|
(15.4) |
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|
|
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|
Net income (loss) |
17.8 |
|
(14.9) |
|
68.2 |
|
(42.1) |
|
|
|
|
|
|
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Noncontrolling interest in net income of
subsidiary |
.3 |
|
.5 |
|
1.2 |
|
1.7 |
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|
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|
Net income (loss) attributable to NL
stockholders |
$ 17.5 |
|
$
(15.4) |
|
$ 67.0 |
|
$
(43.8) |
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|
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Net income (loss) per share attributable
to
NL stockholders |
$ .36 |
|
$
(.32) |
|
$ 1.38 |
|
$
(.90) |
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Weighted average shares used in the |
|
|
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|
|
|
|
calculation of net income (loss) per
share |
48.7 |
|
48.7 |
|
48.7 |
|
48.7 |
|
|
|
|
|
|
|
|
|
Three months |
|
Nine months |
|
ended September 30, |
|
ended September 30, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
|
|
|
|
|
|
|
|
CompX - component products |
$
3.4 |
|
$ 4.5 |
|
$
12.5 |
|
$ 14.9 |
Insurance recoveries |
.1 |
|
.5 |
|
.2 |
|
.9 |
Other income, net |
.1 |
|
- |
|
.1 |
|
.6 |
Litigation settlement
expense |
- |
|
- |
|
- |
|
(62.0) |
Corporate expense |
(2.6) |
|
(1.6) |
|
(11.1) |
|
(14.4) |
|
|
|
|
|
|
|
|
Income (loss) from
operations |
$
1.0 |
|
$ 3.4 |
|
$
1.7 |
|
$ (60.0) |
|
|
|
|
|
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NL INDUSTRIES, INC. |
CHANGE IN KRONOS' TiO2
SALES |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three months |
|
Nine months |
|
ended September 30, |
|
ended September 30, |
|
2018 vs. 2017 |
|
2018 vs. 2017 |
|
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Percentage change in
sales: |
|
|
|
|
|
|
|
TiO2 product
pricing |
|
9 |
% |
|
|
18 |
% |
TiO2 sales
volume |
|
(19) |
|
|
|
(15) |
|
TiO2 product
mix/other |
|
(2) |
|
|
|
(4) |
|
Changes in
currency exchange rates |
- |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
Total |
|
(12) |
% |
|
|
3 |
% |
|
|
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|
|
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|
SOURCE: NL INDUSTRIES, INC.
CONTACT: Janet G. Keckeisen, Vice President
Corporate Strategy and Investor Relations, 972.233.1700
This
announcement is distributed by West Corporation on behalf of West
Corporation 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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