NL REPORTS FIRST QUARTER 2020 RESULTS
May 06 2020 - 4:20PM
NL Industries, Inc. (NYSE: NL) today reported net income
attributable to NL stockholders of $1.9 million, or $.04 per share,
in the first quarter of 2020 compared to net income attributable to
NL stockholders of $15.2 million, or $.31 per share, in the first
quarter of 2019 primarily due to an unrealized loss of $12.1
million in the first quarter of 2020 related to the change in value
of marketable equity securities compared to a $5.5 million
unrealized gain in the first quarter of 2019.
Net sales at CompX of $32.3 million in the first
quarter of 2020 increased $1.1 million compared to the first
quarter of 2019 primarily due to higher security products sales to
existing government security customers, partially offset by lower
sales to transportation and distribution customers. Marine
components also contributed higher sales for the quarter, mainly to
the towboat and center console boat markets, partially offset by
lower sales to distribution customers. Income from operations
attributable to CompX increased to $5.0 million in the first
quarter of 2020 compared to $4.3 million in the first quarter of
2019 due to the favorable effects of customer and product mix on
higher sales, partially offset by increased medical costs for both
security products and marine components.
Kronos’ net sales of $421.0 million in the first
quarter of 2020 were $15.5 million, or 4%, lower than in the first
quarter of 2019. Kronos’ net sales decreased in the first
quarter of 2020 primarily due to lower sales volumes. Kronos’
TiO2 sales volumes were 5% lower in the first quarter of 2020 as
compared to the first quarter of 2019 due to lower sales volumes in
the North American, Latin American and export markets partially
offset by higher sales volumes in the European market.
Kronos’ average TiO2 selling prices in the first quarter of 2020
were comparable to its average TiO2 selling prices in the first
quarter of 2019. Kronos’ average TiO2 selling prices at the
end of the first quarter of 2020 were 2% lower than at the end of
2019. Fluctuations in currency exchange rates (primarily the
euro) also affected net sales comparisons, decreasing net sales by
approximately $7 million in the first quarter of 2020 as compared
to the first quarter of 2019. 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 first
quarter of 2020 was $43.5 million as compared to $49.0 million in
the first quarter of 2019. Kronos’ income from operations
decreased in the first quarter of 2020 primarily due to lower sales
volumes and higher raw materials and other production costs.
Kronos’ TiO2 production volumes were 1% lower in the first quarter
of 2020 as compared to the first quarter of 2019. Kronos
operated its production facilities at overall average capacity
utilization rates of 95% and 97% in the first quarters of 2020 and
2019, respectively. Fluctuations in currency exchange rates
also affected income from operations, which increased income from
operations by approximately $11 million in the first quarter of
2020 as compared to the first quarter of 2019.
Kronos’ other income (expense) in the first
quarter of 2020 includes a pre-tax insurance settlement gain of
$1.5 million (NL’s equity interest was $.4 million, or $.01 per
share, net of income tax expense) related to a property damage
claim.
Corporate expense increased by $.4 million in
the first quarter of 2020 compared to the first quarter of 2019
primarily due to higher environmental remediation and related costs
partially offset by lower litigation fees and related costs.
Interest and dividend income decreased $.4 million in the first
quarter of 2020 as compared to the first quarter of 2019 primarily
due to lower average outstanding balances under CompX’s revolving
promissory note receivable from Valhi and lower average interest
rates partially offset by higher cash and cash equivalents and
restricted cash and cash equivalent balances available for
investment. Marketable equity securities represent unrealized
gains (losses) on our portfolio of marketable equity securities
during the periods.
Although the COVID-19 pandemic had limited
impact on our operations during the first quarter of 2020, we
believe U.S. and worldwide gross domestic product will be
significantly impacted for an indeterminate period, including the
demand for our products and those of our customers. Consequently,
we expect to report lower sales and earnings than would otherwise
have been expected for the remainder of 2020. The extent of the
impact will depend on numerous factors, including future
developments, and therefore is uncertain and cannot be
predicted.
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 we believe
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. 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
energy, ore, zinc, aluminum, steel and brass 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 that harm the
worldwide economy, disrupt our supply chain, increase material
costs or reduce demand or perceived demand for Kronos’ TiO2 and our
products or impair our ability to operate our facilities (including
changes in the level of gross domestic product in various regions
of the world, natural disasters, terrorist acts, global conflicts
and public health crises such as COVID-19)
- 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 accounting
and manufacturing software systems
- The introduction of trade barriers or trade disputes
- 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 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, cyber-attacks
and public health crises such as COVID-19)
- 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 ability of our subsidiaries or affiliates to pay us
dividends
- Uncertainties associated with CompX’s development of new
products and product features
- The ultimate outcome of income tax audits, tax settlement
initiatives or other tax matters, including future tax reform
- 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 such as those seeking
to limit or classify TiO2 or its use
- 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 recreational marine components),
chemicals (TiO2) and other businesses.
NL INDUSTRIES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
INCOME(In millions, except earnings per
share)
|
Three months ended |
|
|
March 31, |
|
|
2019 |
|
|
2020 |
|
|
(unaudited) |
|
Net sales |
$ |
31.2 |
|
|
$ |
32.3 |
|
Cost of sales |
|
21.6 |
|
|
|
21.9 |
|
|
|
|
|
|
|
|
|
Gross margin |
|
9.6 |
|
|
|
10.4 |
|
|
|
|
|
|
|
|
|
Selling, general and administrative
expense |
|
5.3 |
|
|
|
5.4 |
|
Other operating income (expense): |
|
|
|
|
|
|
|
Insurance recoveries |
|
.3 |
|
|
|
- |
|
Corporate expense |
|
(2.1 |
) |
|
|
(2.5 |
) |
|
|
|
|
|
|
|
|
Income from operations |
|
2.5 |
|
|
|
2.5 |
|
|
|
|
|
|
|
|
|
Equity in earnings of Kronos Worldwide,
Inc. |
|
9.2 |
|
|
|
8.2 |
|
|
|
|
|
|
|
|
|
General corporate items: |
|
|
|
|
|
|
|
Interest and dividend income |
|
1.5 |
|
|
|
1.1 |
|
Marketable equity securities |
|
5.5 |
|
|
|
(12.1 |
) |
Other components of net periodic
pension and OPEB cost |
|
(.4 |
) |
|
|
(.2 |
) |
Interest expense |
|
- |
|
|
|
(.3 |
) |
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
18.3 |
|
|
|
(.8 |
) |
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
2.6 |
|
|
|
(3.3 |
) |
|
|
|
|
|
|
|
|
Net income |
|
15.7 |
|
|
|
2.5 |
|
|
|
|
|
|
|
|
|
Noncontrolling interest in net income of
subsidiary |
|
.5 |
|
|
|
.6 |
|
|
|
|
|
|
|
|
|
Net income attributable to NL
stockholders |
$ |
15.2 |
|
|
$ |
1.9 |
|
|
|
|
|
|
|
|
|
Net income per
share attributable to NL stockholders |
$ |
.31 |
|
|
$ |
.04 |
|
|
|
|
|
|
|
|
|
Weighted average shares used in the |
|
|
|
|
|
|
|
calculation of net income per
share |
|
48.7 |
|
|
|
48.8 |
|
NL INDUSTRIES,
INC.COMPONENTS OF INCOME FROM
OPERATIONS(In
millions) (unaudited)
|
Three months ended |
|
|
March 31, |
|
|
2019 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
CompX -
component products |
$ |
4.3 |
|
|
$ |
5.0 |
|
Insurance
recoveries |
|
.3 |
|
|
|
- |
|
Corporate
expense |
|
(2.1 |
) |
|
|
(2.5 |
) |
|
|
|
|
|
|
|
|
Income
from operations |
$ |
2.5 |
|
|
$ |
2.5 |
|
CHANGE IN KRONOS’ TiO2
SALES(unaudited)
|
Three months ended |
|
March 31, |
|
2020 vs. 2019 |
|
|
|
|
|
|
Percentage
change in net sales: |
|
|
|
|
|
TiO2
sales volume |
|
|
(5 |
) |
% |
TiO2
product pricing |
|
|
- |
|
|
TiO2
product mix/other |
|
|
3 |
|
|
Changes
in currency exchange rates |
|
|
(2 |
) |
|
|
|
|
|
|
|
Total |
|
|
(4 |
) |
% |
SOURCE: NL Industries, Inc.
CONTACT: Janet G. Keckeisen, Vice President, Corporate Strategy and Investor Relations, 972.233.1700
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