NL REPORTS SECOND QUARTER 2019 RESULTS
August 07 2019 - 4:20PM
NL Industries, Inc. (NYSE: NL) today reported net income
attributable to NL stockholders of $5.9 million, or $.12 per share,
in the second quarter of 2019 compared to a net loss attributable
to NL stockholders of $42.6 million, or $.87 per share, in the
second quarter of 2018. For the first six months of 2019, NL
reported net income attributable to NL stockholders of $21.1
million, or $.43 per share compared to a net loss attributable to
NL stockholders of $28.3 million, or $.58 per share in the first
six months of 2018. NL’s results included a pre-tax
litigation settlement expense of $19.6 million ($.32 per share, net
of income tax benefit) and $62.0 million ($1.01 per share, net of
income tax benefit) recognized in the second quarters of 2019 and
2018, respectively, as discussed below.
Net sales increased $1.3 million and $4.1
million in the second quarter and for the first six months of 2019,
respectively, compared to the same periods in 2018. The
increase is due to higher marine component sales in both periods,
primarily surf pipes and wake enhancement systems to an original
equipment boat manufacturer. Income from operations attributable to
CompX decreased for both periods due to higher labor costs for
security products and a less favorable customer and product mix for
marine components.
Kronos’ net sales of $484.5 million in the
second quarter of 2019 were $12.7 million, or 3%, higher than in
the second quarter of 2018. Kronos’ net sales of $921.0
million in the first six months of 2019 were $18.8 million, or 2%,
higher than in the first six 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 8% lower in the second quarter and first six
months of 2019 as compared to the same prior year
periods. Kronos’ average TiO2 selling prices at the end
of the second quarter of 2019 were 2% higher than at the end of the
first quarter with higher prices in all major markets and were 2%
lower than at the end of 2018 with lower prices in the European,
North American and Latin American markets partially offset by
higher prices in the export market. Kronos’ TiO2 sales
volumes in the second quarter of 2019 were 15% higher as compared
to the second quarter of 2018 primarily due to higher sales in the
European, North American and export markets. Kronos’ TiO2 sales
volumes in the first six months of 2019 were 15% higher as compared
to the same period in 2018 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 $17 million in the second
quarter of 2019 and approximately $32 million in the first six
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 second
quarter of 2019 was $46.5 million as compared to $119.9 million in
the second quarter of 2018. For the year-to-date period,
Kronos’ income from operations was $95.5 million as compared to
$227.4 million in the first six months of 2018. Kronos’
income from operations decreased in the 2019 periods as the
unfavorable effect of lower average TiO2 selling prices and higher
raw materials (primarily third-party feedstock ore) and other
production costs more than offset the favorable impact of higher
sales volumes. Kronos’ TiO2 production volumes in the second
quarter and first six months of 2019 were comparable to the same
periods in 2018. Kronos’ operated its production facilities
at overall average capacity utilization rates of 97% in the first
six months of 2019 (97% in the first and second quarters of 2019)
compared to 96% in 2018 (95% and 97% in the first and second
quarters of 2018, respectively). Fluctuations in currency
exchange rates also affected income from operations comparisons,
which decreased income from operations by approximately $9 million
in the second quarter of 2019 and by approximately $1 million in
the year-to-date 2019 period as compared to the same periods in
2018.
Corporate expenses decreased $1.2 million and
$7.1 million in the second quarter and first six months of 2019
compared to the same periods of 2018 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 second quarter of 2018
related to a litigation settlement agreement. We recognized
an additional $19.6 million pre-tax litigation settlement expense
in the second quarter 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 second quarter of 2019
relate to a new 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 increased $.9
million in the second quarter and $1.3 million in the first six
months of 2019 as compared to the same periods in 2018 primarily
due to interest income earned on the accrued insurance recovery
receivable and CompX’s revolving promissory note receivable from
Valhi. 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 |
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Six months ended |
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June 30, |
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|
June 30, |
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|
2018 |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
32.4 |
|
|
$ |
33.7 |
|
|
$ |
60.8 |
|
|
$ |
64.9 |
|
Cost of sales |
|
21.2 |
|
|
|
22.7 |
|
|
|
40.1 |
|
|
|
44.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
11.2 |
|
|
|
11.0 |
|
|
|
20.7 |
|
|
|
20.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
expense |
|
5.2 |
|
|
|
5.4 |
|
|
|
10.3 |
|
|
|
10.7 |
|
Other operating income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance recoveries |
|
.2 |
|
|
|
4.7 |
|
|
|
.4 |
|
|
|
5.0 |
|
Other
income, net |
|
- |
|
|
|
- |
|
|
|
.6 |
|
|
|
- |
|
Litigation settlement expense |
|
(62.0 |
) |
|
|
(19.6 |
) |
|
|
(62.0 |
) |
|
|
(19.6 |
) |
Corporate expense |
|
(4.8 |
) |
|
|
(3.6 |
) |
|
|
(12.8 |
) |
|
|
(5.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
(60.6 |
) |
|
|
(12.9 |
) |
|
|
(63.4 |
) |
|
|
(10.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of Kronos Worldwide,
Inc. |
|
23.6 |
|
|
|
9.0 |
|
|
|
45.1 |
|
|
|
18.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General corporate items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity securities |
|
(18.7 |
) |
|
|
9.4 |
|
|
|
(20.3 |
) |
|
|
14.9 |
|
Other
components of net periodic pension and OPEB cost |
|
(.1 |
) |
|
|
(.4 |
) |
|
|
(.2 |
) |
|
|
(.8 |
) |
Interest and dividend income |
|
1.2 |
|
|
|
2.1 |
|
|
|
2.3 |
|
|
|
3.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes |
|
(54.6 |
) |
|
|
7.2 |
|
|
|
(36.5 |
) |
|
|
25.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
(12.6 |
) |
|
|
.6 |
|
|
|
(9.3 |
) |
|
|
3.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
(42.0 |
) |
|
|
6.6 |
|
|
|
(27.2 |
) |
|
|
22.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest in net income of
subsidiary |
|
.6 |
|
|
|
.7 |
|
|
|
1.1 |
|
|
|
1.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to NL
stockholders |
$ |
(42.6 |
) |
|
$ |
5.9 |
|
|
$ |
(28.3 |
) |
|
$ |
21.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) per share attributable to NL stockholders |
$ |
(.87 |
) |
|
$ |
.12 |
|
|
$ |
(.58 |
) |
|
$ |
.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in the |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
calculation of net income (loss)
per share |
|
48.7 |
|
|
|
48.7 |
|
|
|
48.7 |
|
|
|
48.7 |
|
NL INDUSTRIES,
INC.COMPONENTS OF INCOME (LOSS) FROM
OPERATIONS(In
millions) (unaudited)
|
Three months ended |
|
|
Six months ended |
|
|
June 30, |
|
|
June 30, |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CompX -
component products |
$ |
6.0 |
|
|
$ |
5.6 |
|
|
$ |
10.4 |
|
|
$ |
9.9 |
|
Insurance
recoveries |
|
.2 |
|
|
|
4.7 |
|
|
|
.4 |
|
|
|
5.0 |
|
Other income,
net |
- |
|
|
|
- |
|
|
|
.6 |
|
|
|
- |
|
Litigation
settlement expense |
|
(62.0 |
) |
|
|
(19.6 |
) |
|
|
(62.0 |
) |
|
|
(19.6 |
) |
Corporate
expense |
|
(4.8 |
) |
|
|
(3.6 |
) |
|
|
(12.8 |
) |
|
|
(5.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations |
$ |
(60.6 |
) |
|
$ |
(12.9 |
) |
|
$ |
(63.4 |
) |
|
$ |
(10.4 |
) |
CHANGE IN KRONOS’ TiO2
SALES(unaudited)
|
Three months ended |
|
Six months ended |
|
June 30, |
|
June 30, |
|
2019 vs. 2018 |
|
2019 vs. 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Percentage change
in net sales: |
|
|
|
|
|
|
|
|
|
|
|
TiO2
product pricing |
|
|
(8 |
) |
% |
|
|
|
(8 |
) |
% |
TiO2 sales
volume |
|
|
15 |
|
|
|
|
|
15 |
|
|
TiO2
product mix/other |
|
|
- |
|
|
|
|
|
(1 |
) |
|
Changes in
currency exchange rates |
|
|
(4 |
) |
|
|
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3 |
|
% |
|
|
|
2 |
|
% |
SOURCE: NL Industries, Inc.
CONTACT: Janet G. Keckeisen, Vice President - Corporate Strategy and Investor Relations, 972.233.1700
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