NL REPORTS SECOND QUARTER 2020 RESULTS
August 05 2020 - 4:25PM
NL Industries, Inc. (NYSE: NL) today reported net income
attributable to NL stockholders of $4.6 million, or $.09 per share,
in the second quarter of 2020 compared to net income attributable
to NL stockholders of $5.9 million, or $.12 per share, in the
second quarter of 2019. For the first six months of 2020, NL
reported net income attributable to NL stockholders of $6.5
million, or $.13 per share, compared to net income of $21.1
million, or $.43 per share for the first six months of 2019.
NL results include an unrealized loss of $14.3 million in the first
six months of 2020 related to the change in value of marketable
equity securities compared to a $14.9 million unrealized gain in
the first six months of 2019. NL also recognized a pre-tax
litigation settlement expense of $19.6 million ($.32 per share, net
of income tax benefit) in the second quarter of 2019.
CompX net sales were $23.8 million for the
second quarter of 2020 compared to $33.7 million in the second
quarter of 2019 and $56.1 million for the six months ended June 30,
2020 compared to $64.9 million for the same prior year
period. Income from operations attributable to CompX was $2.4
million for the second quarter of 2020 compared to $5.6 million for
the second quarter of 2019 and $7.4 million for the first six
months of 2020 compared to $9.9 million for the same prior year
period. The COVID-19 pandemic impacted CompX’s operations
during the second quarter of 2020 due to government mandated
closures and reduced demand for its products which resulted in a
decrease in net sales and operating income in the second quarter
and for the first six months of 2020 compared to the same periods
in 2019.
NL recognized equity in earnings of Kronos of
$5.7 million in the second quarter of 2020 compared to $9.0 million
in the same period of 2019 and $13.9 million in the first six
months of 2020 compared to $18.2 million in the same period of
2019. Kronos’ net sales of $386.0 million in the second
quarter of 2020 were $98.5 million, or 20%, lower than in the
second quarter of 2019. Kronos’ net sales of $807.0 million
in the first six months of 2020 were $114.0 million, or 12%, lower
than in the first six months of 2019. Kronos’ net sales
decreased in the 2020 periods primarily due to lower sales volumes
and lower average TiO2 selling prices. Kronos’ TiO2 sales
volumes were 22% lower in the second quarter of 2020 as compared to
the second quarter of 2019 and 14% lower in the first six months of
2020 as compared to the same prior year period due to lower sales
volumes in all major markets primarily due to demand contraction
related to the COVID-19 pandemic. Kronos’ average TiO2 selling
prices were 1% lower in the second quarter and first six months of
2020 as compared to the same periods in 2019. Kronos’ average
TiO2 selling prices at the end of the second quarter of 2020 were
comparable to the end of the first quarter of 2020.
Fluctuations in currency exchange rates (primarily the euro) also
affected net sales comparisons, decreasing net sales by
approximately $4 million in the second quarter of 2020 and
approximately $11 million in the first six months of 2020 as
compared to the same periods in 2019.
Kronos’ income from operations in the second
quarter of 2020 was $33.0 million as compared to $46.5 million in
the second quarter of 2019. For the year-to-date period, Kronos’
income from operations was $76.5 million as compared to $95.5
million in the first six months of 2019. Kronos’ income
from operations decreased in the 2020 periods primarily due to the
unfavorable effects of lower sales volumes, lower average TiO2
selling prices and higher raw materials and other production
costs. Kronos’ TiO2 production volumes were 2% lower in the
second quarter and year-to-date periods of 2020 as compared to the
same periods in 2019. Kronos operated its production
facilities at overall average capacity utilization rates of 95% in
the first six months of 2020 (95% and 96% in the first and second
quarters of 2020, respectively) compared to 97% in 2019 (97% in the
first and second quarters of 2019). Fluctuations in currency
exchange rates also affected the year-to-date income from
operations comparison, which increased income from operations by
approximately $11 million in the year-to-date 2020 period as
compared to the same period of 2019. Fluctuations in currency
exchange rates had a nominal effect on the second quarter income
from operations comparison.
Corporate expenses decreased $1.1 million in the
second quarter of 2020 compared to the second quarter of 2019
primarily due to lower litigation fees and related costs.
Corporate expenses decreased $.7 million in the first six months of
2020 compared to the same period of 2019 primarily due to lower
litigation fees and related costs partially offset by higher
environmental remediation and related costs. We recognized an
additional $19.6 million pre-tax litigation settlement expense in
the second quarter of 2019 for a settlement agreement that was
approved by the court in July 2019.
Insurance recoveries represent amounts we
receive from certain of our former insurance carriers and generally
relate to the recovery of past lead pigment and asbestos litigation
defense costs we have incurred. Substantially all of the
insurance recoveries we recognized in the second quarter of 2019
relate to a settlement we reached with a single insurance carrier
that agreed to reimburse us for a portion of our past and future
litigation defense costs. Such insurance recoveries
aggregated $5.0 million ($3.9 million, or $.08 per share, net of
income tax expense) in the first six months of 2019.
Interest and dividend income decreased $1.6
million in the second quarter and $2.0 million in the first six
months of 2020 compared to the prior year periods 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 equivalents balances available for
investment. Marketable equity securities represent unrealized
gains (losses) on our portfolio of marketable equity securities
during the periods.
Our results of operations for the second quarter
of 2020 were significantly impacted by the COVID-19 pandemic,
specifically through reduced demand for many of CompX and Kronos’
products resulting from the rapid contraction of vast areas of the
global economy. The extent of the COVID-19 impact on our future
operations will depend on the time period and degree to which the
COVID-19 pandemic persists in the global economy thereby reducing
customer demand for certain of CompX and Kronos’ products,
including the timing and extent to which CompX and Kronos’
customers’ operations continue to be impacted, their customers’
perception as to when consumer demand for their products will
return to pre-pandemic levels and on any future disruptions in
their operations or their suppliers’ operations, all of which
are difficult to predict.
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)(unaudited)
|
Three months ended |
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|
Six months ended |
|
|
June 30, |
|
|
June 30, |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
33.7 |
|
|
$ |
23.8 |
|
|
$ |
64.9 |
|
|
$ |
56.1 |
|
Cost of sales |
|
22.7 |
|
|
|
16.4 |
|
|
|
44.3 |
|
|
|
38.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
11.0 |
|
|
|
7.4 |
|
|
|
20.6 |
|
|
|
17.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
expense |
|
5.4 |
|
|
|
5.0 |
|
|
|
10.7 |
|
|
|
10.4 |
|
Other operating income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance recoveries |
|
4.7 |
|
|
|
.1 |
|
|
|
5.0 |
|
|
|
.1 |
|
Litigation settlement expense, net |
|
(19.6 |
) |
|
|
- |
|
|
|
(19.6 |
) |
|
|
- |
|
Corporate expense |
|
(3.6 |
) |
|
|
(2.5 |
) |
|
|
(5.7 |
) |
|
|
(5.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
(12.9 |
) |
|
|
- |
|
|
|
(10.4 |
) |
|
|
2.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of Kronos Worldwide,
Inc. |
|
9.0 |
|
|
|
5.7 |
|
|
|
18.2 |
|
|
|
13.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General corporate items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income |
|
2.1 |
|
|
|
.5 |
|
|
|
3.6 |
|
|
|
1.6 |
|
Marketable equity securities |
|
9.4 |
|
|
|
(2.2 |
) |
|
|
14.9 |
|
|
|
(14.3 |
) |
Other components of net periodic
pension and OPEB cost |
|
(.4 |
) |
|
|
(.2 |
) |
|
|
(.8 |
) |
|
|
(.4 |
) |
Interest expense |
|
- |
|
|
|
(.4 |
) |
|
|
- |
|
|
|
(.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
7.2 |
|
|
|
3.4 |
|
|
|
25.5 |
|
|
|
2.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
.6 |
|
|
|
(1.5 |
) |
|
|
3.2 |
|
|
|
(4.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
6.6 |
|
|
|
4.9 |
|
|
|
22.3 |
|
|
|
7.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest in net income of
subsidiary |
|
.7 |
|
|
|
.3 |
|
|
|
1.2 |
|
|
|
.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to NL
stockholders |
$ |
5.9 |
|
|
$ |
4.6 |
|
|
$ |
21.1 |
|
|
$ |
6.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
share attributable to NL stockholders |
$ |
.12 |
|
|
$ |
.09 |
|
|
$ |
.43 |
|
|
$ |
.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in the |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
calculation of net income per
share |
|
48.7 |
|
|
|
48.8 |
|
|
|
48.7 |
|
|
|
48.8 |
|
NL INDUSTRIES,
INC.COMPONENTS OF INCOME FROM
OPERATIONS(In
millions) (unaudited)
|
Three months ended |
|
|
Six months ended |
|
|
June 30, |
|
|
June 30, |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CompX - component
products |
$ |
5.6 |
|
|
$ |
2.4 |
|
|
$ |
9.9 |
|
|
$ |
7.4 |
|
Insurance
recoveries |
|
4.7 |
|
|
|
.1 |
|
|
|
5.0 |
|
|
|
.1 |
|
Litigation
settlement expense, net |
|
(19.6 |
) |
|
|
- |
|
|
|
(19.6 |
) |
|
|
- |
|
Corporate
expense |
|
(3.6 |
) |
|
|
(2.5 |
) |
|
|
(5.7 |
) |
|
|
(5.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from operations |
$ |
(12.9 |
) |
|
$ |
- |
|
|
$ |
(10.4 |
) |
|
$ |
2.5 |
|
CHANGE IN KRONOS’ TiO2
SALES(unaudited)
|
Three months ended |
|
Six months ended |
|
June 30, |
|
June 30, |
|
2020 vs. 2019 |
|
2020 vs. 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Percentage
change in net sales: |
|
|
|
|
|
|
|
|
|
|
|
TiO2
sales volume |
|
|
(22 |
) |
% |
|
|
|
(14 |
) |
% |
TiO2
product pricing |
|
|
(1 |
) |
|
|
|
|
(1 |
) |
|
TiO2
product mix/other |
|
|
4 |
|
|
|
|
|
4 |
|
|
Changes
in currency exchange rates |
|
|
(1 |
) |
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
(20 |
) |
% |
|
|
|
(12 |
) |
% |
SOURCE: NL Industries, Inc.
CONTACT: Janet G. Keckeisen, Vice President - Corporate Strategy and Investor Relations, 972.233.1700
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