NL Industries, Inc. (NYSE: NL) today reported net income
attributable to NL stockholders of $4.3 million, or $.09 per share,
in the fourth quarter of 2020 compared to net income attributable
to NL stockholders of $6.3 million, or $.13 per share, in the
fourth quarter of 2019. For the full year of 2020, NL
reported net income attributable to NL stockholders of $14.7
million, or $.30 per share, compared to net income attributable to
NL stockholders of $25.8 million, or $.53 per share in 2019.
NL results include an unrealized loss of $8.7 million in the full
year of 2020 related to the change in value of marketable equity
securities compared to a $.9 million unrealized loss in 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 $30.0 million in the fourth
quarter of 2020 compared to $29.6 million in the fourth quarter of
2019 and $114.5 million for the year ended December 31, 2020
compared to $124.2 million for the full year of 2019. CompX
net sales increased in the fourth quarter of 2020 compared to the
same period in 2019 as lower Security Products sales were more than
offset by increased Marine Components sales, with the towboat
market representing most of the increase in marine sales.
CompX net sales decreased in the full year of 2020 compared
to the full year of 2019 due to lower Security Products sales
primarily resulting from customer disruptions caused by the
COVID-19 pandemic, somewhat offset by higher Marine Components
sales.
Income from operations attributable to CompX was
$2.3 million in the fourth quarter of 2020 compared to $3.5 million
in the fourth quarter of 2019 and $11.8 million in the full year of
2020 compared to $17.7 million in the full year of 2019.
Operating income decreased in the fourth quarter of 2020 compared
to the fourth quarter of 2019 as the improvement in Marine
Components operating income was offset by the decline of Security
Products operating income. Security Products operating income
for the period declined primarily due to the higher cost of sales
noted below, as well as increased medical costs. Operating income
in the full year of 2020 compared to the full year of 2019 was
negatively impacted by higher fixed cost per unit of production as
the result of lower production volumes in the second and third
quarters which increased the cost of inventory produced in these
quarters and sold in the second half of 2020. Additionally,
operating income in the full year of 2020 compared to prior year
was negatively impacted by increased employer paid medical costs
unrelated to the pandemic. In the second half of 2020, CompX
sales began to recover from the historically low levels it
experienced during the second quarter, with sales steadily
improving for the remainder of the year. In the second half of the
year, CompX’s manufacturing operations returned to more normal
production rates as demand from its customers began to return,
although Security Products operations did not recover to
pre-pandemic levels.
NL recognized equity in earnings of Kronos of
$3.1 million in the fourth quarter of 2020 compared to $2.9 million
in the same period of 2019 and $19.4 million in the full year of
2020 compared to $26.5 million in the full year of 2019.
Kronos’ net sales of $414.9 million in the fourth quarter of 2020
were $42.2 million, or 11%, higher than in the fourth quarter of
2019. Kronos’ net sales of $1.6 billion in the full year of
2020 were $92.3 million, or 5%, lower than in the full year of
2019. Kronos’ net sales increased in the fourth quarter of
2020 compared to the same period in 2019 primarily due to higher
sales volumes partially offset by lower average TiO2 selling
prices. Kronos’ net sales decreased in the full year of 2020
compared to the full year of 2019 primarily due to lower sales
volumes and lower average TiO2 selling prices. Kronos’ TiO2
sales volumes were 12% higher in the fourth quarter of 2020 as
compared to the fourth quarter of 2019 primarily due to higher
demand in its European and North American markets. Kronos’ TiO2
sales volumes were 6% lower in the full year of 2020 as compared to
the full year of 2019 due to lower sales volumes in all major
markets, primarily resulting from demand contraction related to the
COVID-19 pandemic, which mainly impacted the second and third
quarters. Kronos’ average TiO2 selling prices were 3% lower in the
fourth quarter of 2020 as compared to the fourth quarter of 2019
and 2% lower in the full year of 2020 as compared to the full year
of 2019. Kronos’ average TiO2 selling prices at the end of
2020 were comparable to its average TiO2 selling prices at the end
of the third quarter of 2020 and 3% lower than the beginning of the
year. Fluctuations in currency exchange rates (primarily the
euro) also affected Kronos’ net sales comparisons, increasing net
sales by approximately $13 million in the fourth quarter of 2020
and increasing net sales by approximately $9 million in the full
year of 2020 as compared to the same periods in 2019.
Kronos’ income from operations in the fourth
quarter of 2020 was $20.4 million as compared to $17.2 million in
the fourth quarter of 2019. For the full year of 2020, Kronos’
income from operations was $116.2 million as compared to $145.8
million in 2019. Kronos’ income from operations
increased in the fourth quarter of 2020 as compared to the fourth
quarter of 2019 primarily due to higher sales volumes and lower
production costs, partially offset by lower average TiO2 selling
prices. Kronos’ income from operations decreased for the full
year of 2020 compared to the full year of 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 8% lower in the fourth quarter of 2020
and 5% lower in the full year 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 full year
of 2020 (95%, 96%, 86% and 92% in the first, second, third and
fourth quarters of 2020, respectively) compared to 98% in 2019 (97%
in the first, second and third quarters and at full practical
capacity in the fourth quarter of 2019). Early in the third
quarter of 2020, Kronos decreased production levels to correspond
with a temporary decline in market demand, then increased
production levels later in the third quarter and into the fourth
quarter to align with improved demand and its market expectations
for the near term. Fluctuations in currency exchange rates
increased income from operations by approximately $6 million in the
full year of 2020 as compared to the full year of 2019, while
fluctuations in currency exchange rates had only a nominal effect
on the fourth quarter income from operations comparison.
Corporate expenses decreased $1.3 million in the
fourth quarter of 2020 compared to the fourth quarter of 2019
primarily due to lower litigation fees and related costs and lower
administrative expenses. Corporate expenses decreased $3.0
million in the full year of 2020 compared to the full year of 2019
primarily due to lower litigation fees and related costs and lower
administrative expenses partially offset by higher environmental
remediation and related costs. We recognized a $19.3 million
pre-tax litigation settlement expense in 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 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 $5.1 million
($.08 per share, net of income tax expense) in 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 and a gain of $3.0
million ($.05 per share, net of income tax expense) related to the
sale of our insurance and risk management business in the fourth
quarter.
Interest and dividend income decreased $1.0
million in the fourth quarter and $4.1 million in the full year of
2020 compared to the prior year periods primarily due to lower
average balances and lower interest rates on CompX’s revolving
promissory note receivable from Valhi as well as lower average
interest rates on invested balances partially offset by higher cash
and cash equivalents available for investment. Marketable
equity securities represent the change in unrealized gains (losses)
on our portfolio of marketable equity securities during the
periods.
Our results of operations for 2020 were
significantly impacted by the COVID-19 pandemic, primarily in the
second and third quarters, due to government mandated closures and
reduced demand for many of CompX’s and Kronos’ products resulting
from the rapid contraction of vast areas of the global economy. The
extent of the impact of the COVID-19 pandemic on our future
operations will depend on the time period and degree to which the
COVID-19 pandemic persists in the global economy, including the
timing and extent to which CompX’s 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 and between the euro and
the Norwegian krone), 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)
|
Three months ended |
|
|
Year ended |
|
|
December 31, |
|
|
December 31, |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
Net sales |
$ |
29.6 |
|
|
$ |
30.0 |
|
|
$ |
124.2 |
|
|
$ |
114.5 |
|
Cost of sales |
|
20.6 |
|
|
|
22.3 |
|
|
|
85.2 |
|
|
|
81.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin |
|
9.0 |
|
|
|
7.7 |
|
|
|
39.0 |
|
|
|
32.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
expense |
|
5.5 |
|
|
|
5.4 |
|
|
|
21.3 |
|
|
|
21.0 |
|
Other operating income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance
recoveries |
|
(.1 |
) |
|
|
- |
|
|
|
5.1 |
|
|
|
.1 |
|
Other income, net |
|
3.0 |
|
|
|
- |
|
|
|
7.4 |
|
|
|
- |
|
Litigation settlement expense, net |
|
- |
|
|
|
- |
|
|
|
(19.3 |
) |
|
|
- |
|
Corporate
expense |
|
(3.4 |
) |
|
|
(2.1 |
) |
|
|
(12.5 |
) |
|
|
(9.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations |
|
3.0 |
|
|
|
.2 |
|
|
|
(1.6 |
) |
|
|
2.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of Kronos Worldwide,
Inc. |
|
2.9 |
|
|
|
3.1 |
|
|
|
26.5 |
|
|
|
19.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and
dividend income |
|
1.5 |
|
|
|
.5 |
|
|
|
6.7 |
|
|
|
2.6 |
|
Marketable equity securities |
|
(.5 |
) |
|
|
2.4 |
|
|
|
(.9 |
) |
|
|
(8.7 |
) |
Other components
of net periodic pension and
OPEB cost |
|
(.1 |
) |
|
|
(.2 |
) |
|
|
(1.4 |
) |
|
|
(.8 |
) |
Interest
expense |
|
(.4 |
) |
|
|
(.3 |
) |
|
|
(.7 |
) |
|
|
(1.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before
income taxes |
|
6.4 |
|
|
|
5.7 |
|
|
|
28.6 |
|
|
|
13.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
(.3 |
) |
|
|
1.1 |
|
|
|
.6 |
|
|
|
(2.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
6.7 |
|
|
|
4.6 |
|
|
|
28.0 |
|
|
|
16.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest in net income of
subsidiary |
|
.4 |
|
|
|
.3 |
|
|
|
2.2 |
|
|
|
1.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to NL
stockholders |
$ |
6.3 |
|
|
$ |
4.3 |
|
|
$ |
25.8 |
|
|
$ |
14.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
share attributable to NL stockholders |
$ |
.13 |
|
|
$ |
.09 |
|
|
$ |
.53 |
|
|
$ |
.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in the
calculation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of net income 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 |
|
|
Year ended |
|
|
December 31, |
|
|
December 31, |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CompX - component
products |
$ |
3.5 |
|
|
$ |
2.3 |
|
|
$ |
17.7 |
|
|
$ |
11.8 |
|
Insurance
recoveries |
|
(.1 |
) |
|
|
- |
|
|
|
5.1 |
|
|
|
.1 |
|
Other income,
net |
|
3.0 |
|
|
|
- |
|
|
|
7.4 |
|
|
|
- |
|
Litigation
settlement expense, net |
|
- |
|
|
|
- |
|
|
|
(19.3 |
) |
|
|
- |
|
Corporate
expense |
|
(3.4 |
) |
|
|
(2.1 |
) |
|
|
(12.5 |
) |
|
|
(9.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
$ |
3.0 |
|
|
$ |
.2 |
|
|
$ |
(1.6 |
) |
|
$ |
2.4 |
|
CHANGE IN KRONOS’ TiO2
SALES(unaudited)
|
Three months ended |
|
Year ended |
|
December 31, |
|
December 31, |
|
2020 vs. 2019 |
|
2020 vs. 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Percentage change
in net sales: |
|
|
|
|
|
|
|
|
|
|
|
TiO2 sales volume |
|
|
(3 |
) |
% |
|
|
|
(2 |
) |
% |
TiO2 product pricing |
|
|
12 |
|
|
|
|
|
(6 |
) |
|
TiO2 product mix/other |
|
|
(2 |
) |
|
|
|
|
2 |
|
|
Changes in currency exchange
rates |
|
|
4 |
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
11 |
|
% |
|
|
|
(5 |
) |
% |
SOURCE: NL Industries, Inc.
CONTACT: Janet G. Keckeisen, Vice President - Corporate Strategy and Investor Relations, 972.233.1700
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