Net income for full-year 2001 was $2.44 per diluted share compared with income before extraordinary item in 2000 of $3.06 per diluted share. Excluding the effect of unusual items in both full-year periods discussed below, net income for 2001 was $1.72 per diluted share, down 20% compared with income before extraordinary item of $2.15 per diluted share in 2000.
Operating income of Kronos' titanium dioxide pigments ("TiO2") business in the fourth quarter of 2001 was $35.9 million, which included $16.6 million of business interruption insurance proceeds related to losses (unallocated period costs and lost margin) incurred in prior 2001 quarters resulting from the previously reported fire at the Company's Leverkusen sulfate process plant. Excluding this unusual item, operating income in the fourth quarter of 2001 was $19.3 million, a decrease of 58% compared with fourth quarter 2000 operating income of $46.0 million. The decrease in operating income was primarily due to lower average selling prices in billing currencies and lower production volumes. Operating income for full-year 2001, including business interruption proceeds of $27.3 million, decreased 20% to $169.2 million compared with $212.5 million for full-year 2000. The decrease was primarily due to 3% lower average selling prices in billing currencies, 8% lower sales volume and 6% lower production volume. The effect of the lower sales and production volumes in 2001 was partially offset by business interruption proceeds.
Kronos' average selling price in billing currencies (which excludes the effects of foreign currency translation) during the fourth quarter of 2001 was 12% lower than the fourth quarter of 2000 and 5% lower than the third quarter of 2001. Compared with the third quarter of 2001, selling prices in billing currencies were lower in all major markets. The average selling price in billing currencies in December 2001 was 2% lower than the average selling price during the fourth quarter as prices continued to trend downward.
Kronos' fourth quarter 2001 average selling price expressed in U.S. dollars (computed using actual foreign currency exchange rates prevailing during the respective periods) was 10% lower than the fourth quarter of 2000 and 4% lower than the third quarter of 2001. The average selling price expressed in U.S. dollars for full-year 2001 decreased 5% from full-year 2000. December's average selling price expressed in U.S. dollars was 2% lower than the average selling price for the fourth quarter.
Kronos' fourth quarter 2001 sales volume decreased 1% from the fourth quarter of 2000 and decreased 11% from the third quarter of 2001. Sales volume in the fourth quarter of 2001 decreased 6% in Europe compared with the fourth quarter of 2000, while North American and export volume increased moderately. Compared with the third quarter of 2001, sales volume decreased in all major markets. Finished goods inventory levels at the end of 2001 represented approximately two and one-half months of sales.
Fourth quarter 2001 production volume decreased 14% compared with fourth quarter 2000. Operating rates were 83% in the fourth quarter of 2001 compared with near full capacity in the same prior year period. Decreased production volume in the fourth quarter of 2001 was primarily due to scheduled maintenance stops and the Company's decision to curtail production as demand remains soft. Full-year 2001 operating rates were 91% compared with near full capacity rates for 2000. The 2001 lower operating rates were due, in part, to lost production volume resulting from the Leverkusen fire.
J. Landis Martin, NL's President & Chief Executive Officer, stated, "The fourth quarter was negatively impacted by low TiO2 prices, weak demand and our decision to reduce throughput at our facilities. Regarding our outlook for the first half of 2002, we expect gradual improvement in demand, which should stem the downward pressure on pricing. Looking ahead to the second half of the year, we expect modest improvement in TiO2 prices as demand levels further improve."
As previously reported, the Company reached an agreement and settled the coverage claim involving the Leverkusen fire during the fourth quarter of 2001. As a result, the Company recorded additional insurance recoveries in the fourth quarter of 2001 of $37.9 million ($28.4 million received as of December 31, 2001, with the remaining $9.5 million received in January 2002), of which $19.3 million related to business interruption and $18.6 million related to property damage, clean-up costs and other extra expenses. The Company recognized an $11.6 million pre-tax gain in the fourth quarter of 2001 ($.14 per diluted share, net of income taxes) related to the property damage recovery after deducting $7.0 million of clean-up costs and other extra expenses incurred. The $19.3 million of business interruption proceeds recognized in the fourth quarter of 2001 were allocated between other income, excluding corporate, which reflects recovery of lost margin ($7.2 million) and as a reduction of cost of sales to offset unallocated period costs ($12.1 million). Of such $19.3 million business interruption proceeds, $16.6 million ($.21 per diluted share, net of income taxes) was attributable to recovery of lost margin and unallocated period costs related to prior 2001 quarters and $2.7 million was attributable to the fourth quarter. Full-year 2001 insurance recovery proceeds were $56.4 million ($27.3 million for business interruption and $29.1 million for property damage, clean-up costs and other extra expenses). No additional insurance recoveries related to the Leverkusen fire are expected to be received.
Corporate expense in the fourth quarter of 2001 was $7.8 million, or $1.2 million higher than the fourth quarter of 2000, primarily as a result of higher environmental expenses. Corporate expense in full-year 2001 was $25.9 million or $3.7 million lower than 2000, primarily due to lower legal expenses and lower variable compensation expense.
Interest expense for the fourth quarter and full-year 2001 decreased $1.0 million and $3.6 million, respectively, from the comparable periods in 2000 primarily due to reduced levels of outstanding debt.
The Company's net debt at December 31, 2001 was $43.7 million, down $14.8 million from December 31, 2000. Net debt at December 31, 2001 was comprised of total debt of $242.7 million less cash, restricted cash and liquid government securities of $199.0 million.
During the fourth quarter of 2001, the Company completed a restructuring of its German subsidiaries, and as a result, the Company recognized a $17.6 million ($.36 per diluted share) net income tax benefit. This benefit related principally to a change in estimate of the Company's ability to utilize certain German income tax attributes for which the benefit had not been previously recognized. The Company expects its 2002 income tax rate to approximate statutory income tax rates.
Minority interest primarily related to the Company's majority-owned environmental management subsidiary.
The fourth quarter 2000 extraordinary item related to after-tax costs associated with the prepayment of $50.0 million (par value) of its 11.75% Senior Secured Notes.
Previously reported unusual items in the first three quarters of 2001 and full-year 2000 included the following:
-- In the second and third quarters of 2001, the Company included property
damage gains of $1.9 million ($.03 per diluted share, net of income
taxes) and $3.9 million ($.05 per diluted share, net of income taxes),
respectively.
-- In the first quarter of 2001, the Company included in corporate income
a $10.6 million ($.14 per diluted share, net of income taxes)
litigation settlement gain with former insurance carrier groups.
-- In the fourth quarter of 2000, the Company included in corporate income
a $26.5 million ($.34 per diluted share, net of income taxes)
litigation settlement gain with former insurance carrier groups and a
$3.0 million noncash pre-tax securities loss ($.04 per diluted share,
net of income taxes) related to an other-than-temporary decline in the
value of certain marketable securities.
-- In the second quarter of 2000, the Company included in corporate income
a $43.0 million ($.54 per diluted share, net of income taxes)
litigation settlement gain with former insurance carrier groups and a
$5.6 million pre-tax securities gain ($.07 per diluted share, net of
income taxes) related to common stock received from the demutualization
of an insurance company.
A conference call regarding NL's earnings announcement is scheduled for January
28, 2002 at 10:30 a.m. (EST). Mr. Martin will host the call. Participants can
access the call by dialing (888) 273-9885 (domestic) and (612) 332-1020
(international). The title of the call is NL Earnings. A taped replay of the
call will be available at 1:00 p.m. (EST) the day of the call through 11:59 p.m.
(EST) on February 4, 2002 by calling (800) 475-6701 (domestic) and (320)
365-3844 (international). The access code for the replay is 624098. The call
will also be broadcast live on the Internet at the Corporate Communications
Broadcast Network ("CCBN") website at http://www.ccbn.com/index.html. In order
to listen to the call, your computer must have Windows Media Player or
RealPlayer installed which can be downloaded prior to the call from the CCBN
website. An online replay will be available approximately one hour after the
call.
NL Industries, Inc. is a major international producer of titanium dioxide pigments.
The statements in this release (and statements made in the conference call referred to above) relating to matters that are not historical facts are forward-looking statements that represent management's beliefs and assumptions based on currently available information. Forward-looking statements can be identified by the use of words such as "believes," "intends," "may," "will," "should," "anticipates," "expects," or comparable terminology or by discussions of strategy or trends. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it cannot give any assurances that these expectations will prove to be correct. Such statements by their nature involve risks and uncertainties, including, but not limited to, the cyclicality of the titanium dioxide industry, global economic and political conditions, global productive capacity, customer inventory levels, changes in product pricing, changes in product costing, changes in foreign currency exchange rates, competitive technology positions, operating interruptions (including, but not limited to, labor disputes, leaks, fires, explosions, unscheduled downtime, transportation interruptions, war and terrorist activities), recoveries from insurance claims and the timing thereof, the ultimate resolution of pending or possible future lead pigment litigation and legislative developments related to the lead paint litigation, the outcome of other litigation, and other risks and uncertainties detailed in the Company's Securities and Exchange Commission filings. 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 forecasted or expected. The Company disclaims any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise. The Company's 2001 results are subject to completion of an audit and the filing of its 2001 Annual Report on Form 10-K.
NL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share and metric ton data)
(Unaudited)
Three months ended Years ended
December 31, December 31,
2001 2000 2001 2000
Revenues and other income:
Net sales $182.0 $197.9 $835.1 $922.3
Other income, excluding
corporate, net 9.1 2.6 10.8 8.2
191.1 200.5 845.9 930.5
Cost of sales 130.9 128.1 578.1 610.4
Selling, general and
administrative, excluding
corporate 24.3 26.4 98.6 107.6
Operating income 35.9 46.0 169.2 212.5
Insurance recoveries, net 11.6 -- 17.5 --
Income before corporate
items, income taxes and
minority interest 47.5 46.0 186.7 212.5
Corporate income (expense):
Securities earnings 1.8 (.7) 7.8 10.8
Litigation settlement
gains, net and other
income 2.2 27.5 16.3 73.7
Expenses (7.8) (6.6) (25.9) (29.6)
Interest expense (6.8) (7.8) (27.6) (31.2)
Income before income
taxes, minority
interest and
extraordinary item 36.9 58.4 157.3 236.2
Income tax benefit
(expense) 4.0 (19.6) (34.9) (78.5)
Income before minority
interest and
extraordinary item 40.9 38.8 122.4 157.7
Minority interest -- .8 1.0 2.4
Income before
extraordinary item 40.9 38.0 121.4 155.3
Extraordinary item -- (.7) -- (.7)
Net income $40.9 $37.3 $121.4 $154.6
Basic earnings per share:
Income before
extraordinary item $.83 $ .76 $2.44 $3.08
Extraordinary item -- (.01) -- (.01)
Net income $.83 $ .75 $2.44 $3.07
Diluted earnings per share:
Income before extraordinary
item $.83 $ .75 $2.44 $3.06
Extraordinary item -- (.01) -- (.01)
Net income $.83 $ .74 $2.44 $3.05
Weighted average shares used in the calculation of
earnings per share:
Basic shares 49.3 50.0 49.7 50.4
Dilutive impact of stock
options -- .4 .2 .3
Diluted shares 49.3 50.4 49.9 50.7
Metric tons in thousands:
Sales volume 91 93 402 436
Production volume 97 112 412 441
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SOURCE NL Industries, Inc.
CONTACT: Robert D. Hardy, Chief Financial Officer of NL Industries,
Inc., +1-281-423-3332
URL: http://www.nl-ind.com
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