NL REPORTS THIRD QUARTER 2020 RESULTS
November 04 2020 - 4:30PM
NL Industries, Inc. (NYSE: NL) today reported net income
attributable to NL stockholders of $3.9 million, or $.08 per share,
in the third quarter of 2020 compared to a net loss attributable to
NL stockholders of $1.6 million, or $.03 per share, in the third
quarter of 2019. For the first nine months of 2020, NL
reported net income attributable to NL stockholders of $10.4
million, or $.21 per share, compared to net income of $19.5
million, or $.40 per share for the first nine months of 2019.
NL results include an unrealized loss of $11.1 million in the first
nine months of 2020 related to the change in value of marketable
equity securities compared to a $.4 million unrealized loss in the
first nine months of 2019. NL also recognized a pre-tax
litigation settlement expense of $19.3 million ($.31 per share, net
of income tax benefit) mainly in the second quarter of 2019.
CompX net sales were $28.4 million for the third
quarter of 2020 compared to $29.7 million in the third quarter of
2019 and $84.5 million for the nine months ended September 30, 2020
compared to $94.6 million for the same prior year period.
Income from operations attributable to CompX was $2.1 million for
the third quarter of 2020 compared to $4.3 million for the third
quarter of 2019 and $9.5 million for the first nine months of 2020
compared to $14.2 million for the same prior year period. In
the third quarter of 2020, CompX sales began to recover from the
historically low levels experienced during the second quarter,
although the COVID-19 pandemic continues to impact CompX’s
operations and demand for its products. CompX income from
operations for the third quarter and the first nine months of 2020
compared to the same periods in 2019 was negatively impacted by
higher fixed cost per unit of production as the result of lower
production volumes in the second quarter which increased the cost
of inventory produced in the second quarter and sold in the third
quarter of 2020. In the third quarter, CompX’s manufacturing
operations returned to more normal production rates as demand from
its customers began to return, although for the most part, below
pre-pandemic levels.
NL recognized equity in earnings of Kronos of
$2.4 million in the third quarter of 2020 compared to $5.4 million
in the same period of 2019 and $16.3 million in the first nine
months of 2020 compared to $23.6 million in the same period of
2019. Kronos’ net sales of $416.9 million in the third
quarter of 2020 were $20.5 million, or 5%, lower than in the third
quarter of 2019. Kronos’ net sales of $1.2 billion in the
first nine months of 2020 were $134.5 million, or 10%, lower than
in the first nine 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
6% lower in the third quarter of 2020 as compared to the third
quarter of 2019 primarily due to lower demand in European and
export markets and 11% lower in the first nine months of 2020 as
compared to the same prior year period due to lower sales volumes
in all major markets resulting from the demand contraction related
to the COVID-19 pandemic. Kronos’ average TiO2 selling prices were
4% lower in the third quarter and 2% lower in the first nine months
of 2020 as compared to the same periods in 2019. Kronos’
average TiO2 selling prices at the end of the third quarter of 2020
were comparable to average TiO2 selling prices at the end of the
second quarter of 2020 and 3% lower than the beginning of the
year. Fluctuations in currency exchange rates (primarily the
euro) also affected net sales comparisons, increasing net sales by
approximately $7 million in the third quarter of 2020 and
decreasing net sales by approximately $4 million in the first nine
months of 2020 as compared to the same periods in 2019.
Kronos’ income from operations in the third
quarter of 2020 was $19.3 million as compared to $33.1 million in
the third quarter of 2019. For the year-to-date period, Kronos’
income from operations was $95.8 million as compared to $128.6
million in the first nine months of 2019. Kronos’
income from operations decreased in the third quarter of 2020 as
compared to the third quarter of 2019 primarily due to the effects
of lower sales volumes and lower average TiO2 selling prices,
partially offset by lower production costs. Kronos’ income
from operations decreased in the first nine months of 2020 compared
to the same period in 2019 primarily due to the effects of lower
sales volumes, lower average TiO2 selling prices and higher raw
materials and other production costs. Kronos’ TiO2 production
volumes were 11% lower in the third quarter of 2020 and 5% lower in
the year-to-date period of 2020 as compared to the same periods in
2019. Kronos operated its production facilities at overall
average capacity utilization rates of 92% in the first nine months
of 2020 (95%, 96% and 86% in the first, second and third quarters
of 2020, respectively) compared to 97% in 2019 (97% in the first,
second and third quarters of 2019). Early in the third
quarter of 2020, Kronos decreased production levels to align with
demand and its market expectations for the near term as a result of
the COVID-19 pandemic, and late in the third quarter Kronos began
increasing production levels as demand improved. Fluctuations in
currency exchange rates also affected income from operations
comparisons, which decreased income from operations by
approximately $5 million in the third quarter of 2020 as compared
to the same period in 2019 and increased income from operations by
approximately $6 million in the year-to-date 2020 period as
compared to the same period of 2019.
Corporate expenses decreased $1.0 million in the
third quarter of 2020 compared to the third quarter of 2019
primarily due to lower litigation fees and related costs.
Corporate expenses decreased $1.7 million in the first nine 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 $19.3 million pre-tax litigation settlement expense in
the first nine months 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 first nine months 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 $5.2 million ($.08 per share, net of income tax expense)
in the first nine months of 2019.
Other income, net in 2019 includes a gain of
$4.4 million ($.07 per share, net of income tax expense) related to
a sale of excess property in the third quarter.
Interest and dividend income decreased $1.1
million in the third quarter and $3.1 million in the first nine
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 on invested balances partially offset by higher cash and cash
equivalents and restricted cash and cash equivalents 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 first nine
months of 2020 were significantly impacted by the COVID-19
pandemic, primarily in the second and third quarters, 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
OPERATIONS(In millions, except earnings per
share)(unaudited)
|
Three months ended |
|
|
Nine months ended |
|
|
September 30, |
|
|
September 30, |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
29.7 |
|
|
$ |
28.4 |
|
|
$ |
94.6 |
|
|
$ |
84.5 |
|
Cost of sales |
|
20.2 |
|
|
|
21.1 |
|
|
|
64.6 |
|
|
|
59.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin |
|
9.5 |
|
|
|
7.3 |
|
|
|
30.0 |
|
|
|
25.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
expense |
|
5.2 |
|
|
|
5.2 |
|
|
|
15.8 |
|
|
|
15.6 |
|
Other operating income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance
recoveries |
|
.2 |
|
|
|
- |
|
|
|
5.2 |
|
|
|
.1 |
|
Other income, net |
|
4.4 |
|
|
|
- |
|
|
|
4.4 |
|
|
|
- |
|
Litigation settlement expense, net |
|
.3 |
|
|
|
- |
|
|
|
(19.3 |
) |
|
|
- |
|
Corporate
expense |
|
(3.4 |
) |
|
|
(2.4 |
) |
|
|
(9.1 |
) |
|
|
(7.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations |
|
5.8 |
|
|
|
(.3 |
) |
|
|
(4.6 |
) |
|
|
2.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of Kronos Worldwide,
Inc. |
|
5.4 |
|
|
|
2.4 |
|
|
|
23.6 |
|
|
|
16.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and
dividend income |
|
1.6 |
|
|
|
.5 |
|
|
|
5.2 |
|
|
|
2.1 |
|
Marketable equity securities |
|
(15.3 |
) |
|
|
3.2 |
|
|
|
(.4 |
) |
|
|
(11.1 |
) |
Other components
of net periodic pension and
OPEB cost |
|
(.5 |
) |
|
|
(.2 |
) |
|
|
(1.3 |
) |
|
|
(.6 |
) |
Interest
expense |
|
(.3 |
) |
|
|
(.3 |
) |
|
|
(.3 |
) |
|
|
(1.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss)
before income taxes |
|
(3.3 |
) |
|
|
5.3 |
|
|
|
22.2 |
|
|
|
7.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
(2.3 |
) |
|
|
1.2 |
|
|
|
.9 |
|
|
|
(3.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) |
|
(1.0 |
) |
|
|
4.1 |
|
|
|
21.3 |
|
|
|
11.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest in net income of
subsidiary |
|
.6 |
|
|
|
.2 |
|
|
|
1.8 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to NL
stockholders |
$ |
(1.6 |
) |
|
$ |
3.9 |
|
|
$ |
19.5 |
|
|
$ |
10.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) per share attributable
to NL stockholders |
$ |
(.03 |
) |
|
$ |
.08 |
|
|
$ |
.40 |
|
|
$ |
.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in the
calculation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
net income (loss) per share |
|
48.8 |
|
|
|
48.8 |
|
|
|
48.7 |
|
|
|
48.8 |
|
NL INDUSTRIES,
INC.COMPONENTS OF INCOME (LOSS) FROM
OPERATIONS(In
millions)(unaudited)
|
Three months ended |
|
|
Nine months ended |
|
|
September 30, |
|
|
September 30, |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CompX - component
products |
$ |
4.3 |
|
|
$ |
2.1 |
|
|
$ |
14.2 |
|
|
$ |
9.5 |
|
Insurance
recoveries |
|
.2 |
|
|
|
- |
|
|
|
5.2 |
|
|
|
.1 |
|
Other income,
net |
|
4.4 |
|
|
|
- |
|
|
|
4.4 |
|
|
|
- |
|
Litigation
settlement expense, net |
|
.3 |
|
|
|
- |
|
|
|
(19.3 |
) |
|
|
- |
|
Corporate
expense |
|
(3.4 |
) |
|
|
(2.4 |
) |
|
|
(9.1 |
) |
|
|
(7.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
$ |
5.8 |
|
|
$ |
(.3 |
) |
|
$ |
(4.6 |
) |
|
$ |
2.2 |
|
CHANGE IN KRONOS’ TiO2
SALES(unaudited)
|
Three months ended |
|
Nine months ended |
|
September 30, |
|
September 30, |
|
2020 vs. 2019 |
|
2020 vs. 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Percentage change
in net sales: |
|
|
|
|
|
|
|
|
|
|
|
TiO2 sales volume |
|
|
(6 |
) |
% |
|
|
|
(11 |
) |
% |
TiO2 product pricing |
|
|
(4 |
) |
|
|
|
|
(2 |
) |
|
TiO2 product mix/other |
|
|
3 |
|
|
|
|
|
3 |
|
|
Changes in currency exchange
rates |
|
|
2 |
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
(5 |
) |
% |
|
|
|
(10 |
) |
% |
SOURCE: NL Industries, Inc.
CONTACT: Janet G. Keckeisen, Vice President - Corporate Strategy and Investor Relations, 972.233.1700
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