DALLAS, TEXAS - March 11, 2019 -
NL Industries, Inc. (NYSE: NL) today reported net income
attributable to NL stockholders of $2.8 million, or $.06 per share,
in the fourth quarter of 2018 compared to net income attributable
to NL stockholders of $49.1 million, or $1.00 per share, in the
fourth quarter of 2017. For the full year of 2018, NL
reported a net loss attributable to NL stockholders of $41.0
million, or $.84 per share, compared to net income attributable to
NL stockholders of $116.1 million, or $2.38 per share, in
2017. NL reported a net loss in the full year of 2018 due to
the recognition of a $60.9 million pre-tax loss on marketable
equity securities in 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
income in the 2017 periods includes the impact of a fourth quarter
$37.5 million non-cash deferred income tax benefit ($.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 increased $2.3 million
in the fourth quarter of 2018 as compared to the fourth quarter of
2017, and increased $6.2 million for the full year of 2018 over the
same period in 2017. Net sales increased primarily due to
higher marine component sales volumes to manufacturers of
ski/waterboard boats and larger center-console boats, and to a
lesser extent higher security products sales to certain markets,
particularly transportation and office furniture. Income from
operations attributable to CompX increased for the full year of
2018 compared to 2017 due to improved coverage of fixed costs over
increased production volumes. Income from operations
attributable to CompX was comparable in the fourth quarter of 2018
to the fourth quarter of 2017. For the full year of 2018,
income from operations attributable to CompX increased primarily
due to improved fixed cost leverage facilitated by higher
production volumes for both security products and marine
components.
Kronos' net sales of $349.4
million in the fourth quarter of 2018 were $103.9 million, or 23%,
lower than in the fourth quarter of 2017. Kronos' net sales
of $1.7 billion in the full year of 2018 were $67.1 million, or 4%,
lower than in the full year of 2017. Kronos' net sales
decreased in the fourth quarter of 2018 compared to the same period
in 2017 due to the unfavorable effects of lower average TiO2
selling prices and lower sales volumes. Kronos' net sales
decreased in the full year of 2018 compared to the full year of
2017 due to the net effect of higher average selling prices and
lower sales volumes. Kronos' average TiO2 selling prices were
2% lower in the fourth quarter of 2018 as compared to the fourth
quarter of 2017 and were 13% higher in the full year of 2018 as
compared to 2017. Kronos' average selling prices at the end
of the fourth quarter of 2018 were 4% lower than at the end of the
third quarter of 2018 and were 3% lower than at the end of 2017.
Lower prices in the European, Latin American and export markets
were partially offset by higher prices in North America at the end
of 2018 as compared to the end of 2017. Kronos' TiO2 sales
volumes in the fourth quarter of 2018 were 22% lower as compared to
the record fourth 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 continued
to return to more normal levels partially offset by higher sales in
the North American market. Kronos' sales volumes in the full year
of 2018 were 16% 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 its 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, third and fourth quarters as discussed
above. Fluctuations in currency exchange rates (primarily the
euro) decreased Kronos' net sales by approximately $4 million in
the fourth quarter of 2018 and increased net sales by approximately
$49 million in the full year 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
Kronos' net sales.
Kronos' income from operations in
the fourth quarter of 2018 was $44.6 million as compared to $121.0
million in the fourth quarter of 2017. For the full year of
2018, Kronos' income from operations was $330.1 million as compared
to $347.8 million in 2017. Kronos' income from operations
decreased in the fourth quarter of 2018 compared to the 2017 period
primarily due to the unfavorable effects of lower average TiO2
selling prices, lower sales and production volumes and higher raw
materials and other production costs. Kronos' income from
operations decreased in the full year of 2018 compared to the full
year of 2017 primarily due to the net impact of higher average TiO2
selling prices, lower sales and production volumes and higher raw
materials and other production costs. Kronos' TiO2 production
volumes were 8% lower in the fourth quarter and 7% lower in the
full year of 2018 as compared to the same periods in 2017.
Kronos' production facilities operated at 95% of average practical
capacity utilization rates in 2018 (95%, 97%, 92% and 95% in the
first, second, third and fourth quarters of 2018, respectively)
compared to full practical capacity utilization rates for the
comparable periods in 2017. The decrease in Kronos' TiO2
production volumes in the 2018 periods compared to the production
volumes in the comparable 2017 periods was primarily due to
increased 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 fourth quarter of 2018 and by
approximately $33 million in the full year of 2018 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 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.
Kronos' income tax expense in 2018
includes a fourth quarter current cash income tax expense of $3.7
million (NL's equity interest was $0.9 million, or $.02 per share)
related to tax on global intangible low-tax income and an aggregate
$2.1 million non-cash income expense (NL's equity interest was $0.5
million, or $.01 per share) related to an increase in Kronos'
reserve for uncertain tax positions, recognized in the first and
fourth quarters.
Corporate expenses increased by
$1.0 million in the fourth quarter 2018 compared to the same period
of 2017, and increased by $4.3 million in the full year 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 fourth quarter and $1.5 million in the
full year of 2018 primarily due to interest income earned on
CompX's revolving promissory note receivable from Valhi. As
noted above, marketable equity securities in the 2018 periods
represent 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
-
Our ability to protect or defend intellectual
property rights
-
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),
including new environmental health and safety regulations
-
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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Three
months ended |
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Year
ended |
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December 31, |
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December 31, |
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2017 |
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2018 |
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2017 |
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2018 |
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(Unaudited) |
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Net sales |
$ |
25.1 |
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$ |
27.4 |
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$ |
112.0 |
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$ |
118.2 |
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Cost of sales |
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17.7 |
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19.5 |
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77.2 |
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79.9 |
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Gross margin |
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7.4 |
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7.9 |
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34.8 |
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38.3 |
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Selling, general and administrative
expense |
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4.7 |
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5.0 |
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19.6 |
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20.5 |
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Other operating income (expense): |
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Insurance recoveries |
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.2 |
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.4 |
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.4 |
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1.3 |
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Other income, net |
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.1 |
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- |
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.2 |
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.6 |
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Litigation settlement
expense |
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- |
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- |
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- |
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(62.0 |
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Corporate expense |
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(3.0 |
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(4.0 |
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(14.1 |
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(18.4 |
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Income (loss) from operations |
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- |
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(.7 |
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1.7 |
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(60.7 |
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Equity in earnings of Kronos Worldwide,
Inc. |
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14.4 |
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7.3 |
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107.8 |
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62.3 |
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General corporate item - |
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Marketable equity
securities |
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- |
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(5.0 |
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- |
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(60.9 |
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Other components of net
periodic pension and OPEB cost |
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(.3 |
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.1 |
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(.8 |
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(.1 |
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Interest and dividend income |
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1.0 |
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1.4 |
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3.5 |
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5.0 |
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Income (loss) before income taxes |
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15.1 |
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3.1 |
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112.2 |
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(54.4 |
) |
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Income tax expense (benefit) |
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(34.5 |
) |
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- |
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(5.6 |
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(15.4 |
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Net income (loss) |
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49.6 |
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3.1 |
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117.8 |
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(39.0 |
) |
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Noncontrolling interest in net income of
subsidiary |
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.5 |
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.3 |
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1.7 |
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2.0 |
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Net income (loss) attributable to NL
stockholders |
$ |
49.1 |
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$ |
2.8 |
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$ |
116.1 |
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$ |
(41.0 |
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Net income (loss) per share
attributable to
NL stockholders |
$ |
1.00 |
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$ |
.06 |
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$ |
2.38 |
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$ |
(.84 |
) |
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Weighted average shares used in the |
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calculation of net income (loss) per
share |
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48.7 |
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48.7 |
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48.7 |
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48.7 |
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NL INDUSTRIES,
INC.
COMPONENTS OF INCOME (LOSS) FROM
OPERATIONS
(In millions)
(Unaudited)
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Three
months ended |
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Year
ended |
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December 31, |
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December 31, |
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2017 |
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2018 |
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2017 |
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2018 |
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CompX - component
products |
$ |
2.7 |
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$ |
2.9 |
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$ |
15.2 |
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$ |
17.8 |
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Insurance recoveries |
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.2 |
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.4 |
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.4 |
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1.3 |
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Other income, net |
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.1 |
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.0 |
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.2 |
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.6 |
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Litigation settlement
expense |
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.0 |
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.0 |
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.0 |
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(62.0 |
) |
Corporate expense |
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(3.0 |
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(4.0 |
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(14.1 |
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(18.4 |
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Income (loss) from
operations |
$ |
- |
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$ |
(0.7 |
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$ |
1.7 |
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$ |
(60.7 |
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NL
INDUSTRIES, INC. |
CHANGE
IN KRONOS' TiO2
SALES |
(Unaudited) |
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Three
months ended |
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Year
ended |
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December 31, |
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December 31, |
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2018 vs. 2017 |
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2018 vs. 2017 |
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Percentage change in
sales: |
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TiO2 product
pricing |
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(2 |
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% |
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13 |
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% |
TiO2 sales
volume |
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(22 |
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(16 |
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TiO2 product
mix/other |
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2 |
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(4 |
) |
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Changes in currency
exchange rates |
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(1 |
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3 |
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Total |
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(23 |
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% |
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(4 |
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% |
SOURCE: NL Industries,
Inc.
CONTACT: Janet G. Keckeisen, Vice President, Corporate
Strategy and Investor Relations, 972.233.1700 |
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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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