Houston, Texas – July 18, 2001 – NL Industries, Inc. (NYSE:NL) today reported net income for the second quarter of 2001 of $.51 per diluted share, including a $.03 per diluted share after-tax property damage gain discussed below. Net income in the second quarter of 2000 was $1.25 per diluted share, including a $.54 per diluted share previously reported after-tax litigation settlement gain and a $.07 per diluted share previously reported after-tax securities gain discussed below. Excluding these unusual items, net income for the second quarter of 2001 was $.48 per diluted share, down 25% compared to $.64 per diluted share in the second quarter of 2000.
Net income for the first half of 2001 was $1.20 per diluted share compared to net income in the first half of 2000 of $1.71 per diluted share. Excluding litigation settlement gains of $.14 per diluted share in the first quarter of 2001 and the unusual items discussed above, net income in the first half of 2001 was $1.03 per diluted share, down 6% compared to $1.10 per diluted share in the first half of 2000.
Operating income of Kronos' titanium dioxide pigments ("TiO2") business in the second quarter of 2001 decreased 28% to $45.2 million compared to $62.7 million in the second quarter of 2000. The decrease in operating income is primarily due to lower sales and production volumes, partially offset by slightly higher average selling prices in billing currencies.
Operating income in the first half of 2001 decreased 11% to $97.1 million compared to $109.0 million in the first half of 2000 due to 10% lower sales volume and 4% lower production volume, partially offset by 3% higher average selling prices in billing currencies.
Kronos' average selling price in billing currencies (which excludes the effects of foreign currency translation) during the second quarter of 2001 was slightly higher than the second quarter of 2000 and 2% lower than the first quarter of 2001. Compared to the first quarter of 2001, prices in billing currencies were lower in all major markets. The average selling price in billing currencies in June was 1% lower than the average selling price during the second quarter as prices continued to trend downward. Kronos' second-quarter 2001 average selling price expressed in U.S. dollars, computed using actual foreign currency exchange rates prevailing during the respective periods, was 2% lower than the second quarter of 2000 and 4% lower than the first quarter of 2001.
Kronos' second-quarter 2001 sales volume decreased 13% from the record second quarter of 2000 and increased 1% from the first quarter of 2001. Sales volume in the second quarter of 2001 was lower in all major markets compared to the second quarter of 2000. Compared to the first quarter of 2001, sales volume increased by 13% in North America while the European and export markets decreased 4% and 10%, respectively. Sales volume in the first half of 2001 was 10% lower than the record first half of 2000. Finished goods inventory levels at the end of June decreased 7% from March 2001 levels and represent about two months of sales.
J. Landis Martin, President and Chief Executive Officer, stated, "Demand for our product was weak, primarily in the European and export markets. Based on the global economic slowdown, we expect TiO2 prices to continue to trend downward into the fourth quarter. We are hopeful that market conditions will start to improve in the fourth quarter which should reduce the downward pressure on TiO2 prices."
Second-quarter 2001 production volume was 10% lower than the comparable 2000 period with operating rates at 87% in the second quarter of 2001 compared to near full capacity in the second quarter of 2000. The lower production volume was primarily related to lost sulfate-process production at the Company's Leverkusen facility.
During the second quarter of 2001, the Company's insurance carriers approved payment of $10.5 million ($9 million received as of June 30, 2001) as a partial payment for property damage costs and business interruption losses caused by the Leverkusen fire. Five million dollars of this payment represented partial compensation for business interruption losses which was recorded as a reduction of cost of sales to offset unallocated period costs that resulted from lost production. The remaining $5.5 million represented property damage recoveries against which the Company recorded $3.6 million of expenses related to destroyed asset write-offs and related clean-up costs, resulting in a net gain of $1.9 million. Negotiations with the insurance carrier group continue, and the Company expects to receive additional insurance recoveries for property damage and business interruption losses. The Company did not recognize additional insurance proceeds in the second quarter of 2001 because the amounts are not presently determinable.
Dr. Lawrence A. Wigdor, Kronos' President and Chief Executive Officer, stated, "We continue to focus on reducing our costs and improving our plants' operating efficiencies. We have made significant progress in rebuilding the Leverkusen sulfate-process plant, which we expect to be over 50% operational in August 2001 and fully operational in October 2001. Excluding our Leverkusen sulfate-process plant, we intend to operate our plants near full capacity for the remainder of the year to replenish our inventory, which was reduced as a result of the Leverkusen fire, in order to meet anticipated customer demand in the future."
Securities earnings in the second quarter and first half of 2001 were down $6.2 million and $5.4 million, respectively, from the comparable periods in 2000 primarily due to a $5.6 million second-quarter 2000 securities gain from the demutualization of an insurance company. Corporate income in the first quarter of 2001 and the second quarter of 2000 includes litigation settlement gains with former insurance carrier groups of $10.6 million and $43 million, respectively.
Corporate expenses in the second quarter and first half of 2001 declined $5.1 million and $4.6 million, respectively, from the comparable periods in 2000 primarily due to lower environmental and legal expenses in the second quarter of 2001.
The Company's net debt at
June 30, 2001 was $72 million (total debt of $256 million less cash of $184
million).
A conference call regarding NL's earnings announcement is scheduled for July
18, 2001 at 11:00 a.m. (EDT). Mr. Martin will host the call. Participants can
access the call by dialing 888-423-3271 (domestic) and 612-332-0725 (international).
The passcode is NL Earnings. A taped replay of the call will be available after
2:30 p.m. (EDT) the day of the call through 11:59 p.m. (EDT) on July 25, 2001
by calling 800-475-6701 (domestic) and 320-365-3844 (international), and using
access code 594091. The call will also be broadcast live on the Internet at
StreetEvents.com and 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 and transportation interruptions), 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.
|
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In millions, except per share data) (Unaudited) |
||||
|
June 30, |
June 30, |
|||
|
2001 |
2000 |
2001 |
2000 |
|
| Revenues and other income: | ||||
| Net sales |
$220.1 |
$251.1 |
$446.2 |
$482.1 |
| Other income, excluding corporate |
.8 |
2.5 |
2.0 |
4.1 |
|
220.9 |
253.6 |
448.2 |
486.2 |
|
| Cost of sales |
151.3 |
164.0 |
301.2 |
323.3 |
| Selling,
general and administrative, excluding corporate |
24.4 |
26.9 |
49.9 |
53.9 |
|
45.2 |
62.7 |
97.1 |
109.0 |
| Insurance recoveries, net |
1.9
|
-
|
1.9
|
-
|
| Income before corporate items, income taxes and minority interest |
47.1
|
62.7
|
99.0
|
109.0
|
| Corporate income (expense) | ||||
| Securities earnings |
1.2 |
7.4 |
3.8 |
9.2 |
| Litigation
settlement gain, net and other income |
1.4 |
44.1 |
13.0 |
45.2 |
| Expenses |
(4.9) |
(10.0) |
(11.7) |
(16.3) |
| Interest expense |
(6.9) |
(7.9) |
(13.9) |
(15.8) |
| Income
before income taxes and minority interest |
37.9 |
96.3 |
90.2 |
131.3 |
| Income tax expense |
12.1 |
32.8 |
29.2 |
44.0 |
| Income before minority interest |
25.8 |
63.5 |
61.0 |
87.3 |
| Minority interest |
.4 |
.1 |
1.0 |
.2 |
|
$25.4 |
$63.4 |
$60.0 |
$87.1 |
| Earnings per share - net income: | ||||
| Basic |
$ .51 |
$1.26 |
$1.20 |
$1.72 |
| Diluted |
$ .51 |
$1.25 |
$1.20 |
$1.71 |
| Weighted
average shares used in the calculation of earnings per share: |
||||
| Basic shares |
49.9 |
50.5 |
50.0 |
50.7 |
| Dilutive impact of stock options |
.1 |
.4 |
.2 |
.3 |
| Diluted shares |
50.0 |
50.9 |
50.2 |
51.0 |
| Metric tons in thousands: | ||||
| Sales volume |
105
|
120
|
208
|
231
|
| Production volume |
99
|
110
|
207
|
215
|