NL REPORTS THIRD QUARTER 2019 RESULTS
08 November 2019 - 8:20AM
DALLAS, TEXAS – November 7, 2019 - NL Industries, Inc. (NYSE: NL)
today reported a net loss attributable to NL stockholders of $1.6
million, or $.03 per share, in the third quarter of 2019 compared
to a net loss attributable to NL stockholders of $15.4 million, or
$.32 per share, in the third quarter of 2018. For the first
nine months of 2019, NL reported net income attributable to NL
stockholders of $19.5 million, or $.40 per share compared to a net
loss attributable to NL stockholders of $43.8 million, or $.90 per
share in the first nine months of 2018. NL’s results included
a pre-tax litigation settlement expense of $19.3 million ($.31 per
share, net of income tax benefit) and $62.0 million ($1.01 per
share, net of income tax benefit) recognized in the first nine
months of 2019 and 2018, respectively, as discussed below.
Net sales decreased $.3 million in the third
quarter of 2019 compared to the same period in 2018 as higher
marine component sales to the towboat market were more than offset
by lower security products sales across a variety of markets.
Net sales increased $3.8 million in the first nine months of 2019
compared to the same period in 2018 due to strong sales growth at
marine components, partially offset by lower security products
sales predominantly in the third quarter. Income from
operations attributable to CompX decreased for both periods
primarily due to lower sales volumes and increased labor rates and
associated payroll costs for security products, partially offset by
the effect of higher sales volumes for marine components.
Kronos’ net sales of $437.4 million in the third
quarter of 2019 were $27.1 million, or 7%, higher than in the third
quarter of 2018. Kronos’ net sales of $1.4 billion in the
first nine months of 2019 were $45.9 million, or 3%, higher than in
the first nine months of 2018. Kronos’ net sales increased in
2019 due to the net effect of lower average TiO2 selling prices and
higher sales volumes. Kronos’ average TiO2 selling prices
were 5% lower in the third quarter of 2019 as compared to the third
quarter of 2018 and 7% lower in the first nine months of 2019 as
compared to the same prior year period. Kronos’ average
TiO2 selling prices at the end of the third quarter of 2019 were 2%
higher than at the end of the second quarter of 2019 and comparable
to the end of 2018. Kronos’ TiO2 sales volumes were 17%
higher in the third quarter of 2019 and 16% higher in the first
nine months of 2019 as compared to the same prior year periods
primarily due to higher sales in all major markets. Fluctuations in
currency exchange rates (primarily the euro) also affected net
sales comparisons, decreasing net sales by approximately $9 million
in the third quarter of 2019 and approximately $41 million in the
first nine months of 2019 as compared to the same periods in
2018. The table at the end of this press release shows how
each of these items impacted net sales.
Kronos’ income from operations in the third
quarter of 2019 was $33.1 million as compared to $58.1 million in
the third quarter of 2018. For the year-to-date period,
Kronos’ income from operations was $128.6 million as compared to
$285.5 million in the first nine months of 2018. Kronos’
income from operations decreased in the 2019 periods as the
unfavorable effects of lower average TiO2 selling prices and higher
raw materials and other production costs more than offset the
favorable impact of higher sales volumes. Kronos’ TiO2
production volumes were 4% higher in the third quarter of 2019 and
1% higher in the first nine months of 2019 as compared to the same
periods in 2018. Kronos’ operated its production facilities
at overall average capacity utilization rates of 97% in the first
nine months of 2019 (97% in each of the first, second and third
quarters of 2019) compared to 95% in 2018 (95%, 97% and 92% in the
first, second and third quarters of 2018, respectively).
Fluctuations in currency exchange rates also affected income from
operations comparisons, which increased income from operations by
approximately $6 million in the third quarter of 2019 and by
approximately $5 million in the year-to-date 2019 period as
compared to the same periods in 2018.
Corporate expense increased $1.8 million in the
third quarter of 2019 compared to the third quarter of 2018
primarily due to higher environmental remediation and related costs
and decreased $5.3 million in the first nine months of 2019
compared to the same prior year period primarily due to lower
environmental remediation and related costs and lower litigation
fees and related costs in 2019. We recognized a $62.0 million
pre-tax litigation settlement expense in the first nine months of
2018 related to a litigation settlement agreement. We
recognized an additional $19.3 million pre-tax litigation
settlement expense in the first nine months of 2019 for a
settlement agreement in the same case 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 in the second quarter. 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 increased $4.4 million ($.07
per share, net of income tax expense) in the third quarter and
first nine months of 2019 as compared to the same prior year
periods due to a gain from the sale of excess property.
Interest and dividend income increased $.3
million in the third quarter of 2019 and $1.6 million in the first
nine months of 2019 as compared to the same periods in 2018
primarily due to higher interest earned on cash and cash
equivalents and restricted cash and cash equivalents and CompX’s
revolving promissory note receivable from Valhi. We also
recognized $.6 million of accrued interest income on the insurance
recovery receivable in the second quarter of 2019. Marketable
equity securities represents unrealized gains (losses) on our
portfolio of marketable equity securities during the periods.
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. 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 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 (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 accounting
and manufacturing software systems
- 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
- Uncertainties associated with CompX’s development of new
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
- 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, |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
30.0 |
|
|
$ |
29.7 |
|
|
$ |
90.8 |
|
|
$ |
94.6 |
|
Cost of sales |
|
20.4 |
|
|
|
20.2 |
|
|
|
60.5 |
|
|
|
64.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
9.6 |
|
|
|
9.5 |
|
|
|
30.3 |
|
|
|
30.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expense |
|
5.1 |
|
|
|
5.2 |
|
|
|
15.4 |
|
|
|
15.8 |
|
Other operating income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance recoveries |
|
.5 |
|
|
|
.2 |
|
|
|
.9 |
|
|
|
5.2 |
|
Other income, net |
|
- |
|
|
|
4.4 |
|
|
|
.6 |
|
|
|
4.4 |
|
Litigation settlement
expense |
|
- |
|
|
|
.3 |
|
|
|
(62.0 |
) |
|
|
(19.3 |
) |
Corporate expense |
|
(1.6 |
) |
|
|
(3.4 |
) |
|
|
(14.4 |
) |
|
|
(9.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
3.4 |
|
|
|
5.8 |
|
|
|
(60.0 |
) |
|
|
(4.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of Kronos Worldwide, Inc. |
|
9.9 |
|
|
|
5.4 |
|
|
|
55.0 |
|
|
|
23.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General corporate items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity
securities |
|
(35.6 |
) |
|
|
(15.3 |
) |
|
|
(55.9 |
) |
|
|
(.4 |
) |
Other components of net
periodic pension and OPEB cost |
|
(.1 |
) |
|
|
(.5 |
) |
|
|
(.2 |
) |
|
|
(1.3 |
) |
Interest and dividend income |
|
1.3 |
|
|
|
1.6 |
|
|
|
3.6 |
|
|
|
5.2 |
|
Interest expense |
|
- |
|
|
|
(.3 |
) |
|
|
- |
|
|
|
(.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
(21.1 |
) |
|
|
(3.3 |
) |
|
|
(57.5 |
) |
|
|
22.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
(6.2 |
) |
|
|
(2.3 |
) |
|
|
(15.4 |
) |
|
|
.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
(14.9 |
) |
|
|
(1.0 |
) |
|
|
(42.1 |
) |
|
|
21.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest in net income of subsidiary |
|
.5 |
|
|
|
.6 |
|
|
|
1.7 |
|
|
|
1.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to NL stockholders |
$ |
(15.4 |
) |
|
$ |
(1.6 |
) |
|
$ |
(43.8 |
) |
|
$ |
19.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share
attributable to NL stockholders |
$ |
(.32 |
) |
|
$ |
(.03 |
) |
|
$ |
(.90 |
) |
|
$ |
.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in the |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
calculation of net income (loss) per share |
|
48.7 |
|
|
|
48.8 |
|
|
|
48.7 |
|
|
|
48.7 |
|
COMPONENTS OF INCOME (LOSS) FROM
OPERATIONS(In
millions) (unaudited)
|
Three months ended |
|
|
Nine months ended |
|
|
September 30, |
|
|
September 30, |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CompX - component
products |
$ |
4.5 |
|
|
$ |
4.3 |
|
|
$ |
14.9 |
|
|
$ |
14.2 |
|
Insurance recoveries |
|
.5 |
|
|
|
.2 |
|
|
|
.9 |
|
|
|
5.2 |
|
Other income, net |
|
- |
|
|
|
4.4 |
|
|
|
.6 |
|
|
|
4.4 |
|
Litigation settlement
expense |
|
- |
|
|
|
.3 |
|
|
|
(62.0 |
) |
|
|
(19.3 |
) |
Corporate expense |
|
(1.6 |
) |
|
|
(3.4 |
) |
|
|
(14.4 |
) |
|
|
(9.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
operations |
$ |
3.4 |
|
|
$ |
5.8 |
|
|
$ |
(60.0 |
) |
|
$ |
(4.6 |
) |
CHANGE IN KRONOS’ TiO2
SALES(unaudited)
|
Three months ended |
|
Nine months ended |
|
September 30, |
|
September 30, |
|
2019 vs. 2018 |
|
2019 vs. 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Percentage change in net
sales: |
|
|
|
|
|
|
|
|
|
|
|
TiO2 product
pricing |
|
|
(5 |
) |
% |
|
|
|
(7 |
) |
% |
TiO2 sales volume |
|
|
17 |
|
|
|
|
|
16 |
|
|
TiO2 product
mix/other |
|
|
(3 |
) |
|
|
|
|
(3 |
) |
|
Changes in currency
exchange rates |
|
|
(2 |
) |
|
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
7 |
|
% |
|
|
|
3 |
|
% |
SOURCE: NL Industries, Inc.
CONTACT: Janet G. Keckeisen, Vice President Corporate Strategy and Investor Relations, 972.233.1700
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