HOUSTON, Jul 30, 2002 /PRNewswire-FirstCall via COMTEX/ -- NL Industries, Inc. (NYSE: NL) today reported net income for the second quarter of 2002 of $.29 per diluted share compared with $.51 per diluted share in the second quarter of 2001. Excluding the effect of unusual items discussed below, net income in the second quarter of 2002 was $.19 per diluted share compared with $.48 per diluted share in the second quarter of 2001.
Net income for the first half of 2002 was $.42 per diluted share compared with net income in the first half of 2001 of $1.20 per diluted share. Excluding the unusual items discussed below, net income in the first half of 2002 was $.29 per diluted share compared with $1.03 per diluted share in the first half of 2001.
Operating income of Kronos' titanium dioxide pigments ("TiO2") business in the second quarter of 2002 was $24.7 million compared with $45.2 million in the second quarter of 2001. Kronos' operating income in the second quarter of 2001 included $5.0 million of business interruption insurance proceeds related to the previously reported fire at the Company's Leverkusen, Germany plant in 2001. The decrease in operating income was primarily due to lower average selling prices, partially offset by higher sales and production volumes. Compared to the first quarter of 2002, operating income in the second quarter of 2002 increased 11% on higher sales and production volumes.
Operating income in the first half of 2002 was $46.8 million compared with $97.1 million in the first half of 2001 due to 15% lower average selling prices, partially offset by 13% higher sales volume and 6% higher production volume.
Kronos' average selling price in billing currencies (which excludes the effects of foreign currency translation) during the second quarter of 2002 was 14% lower than the second quarter of 2001 and was flat compared with the first quarter of 2002. Compared with the first quarter of 2002, selling prices in billing currencies increased in the European and export markets and decreased in the North American market. The average selling price in billing currencies in June 2002 was flat compared with the average selling price for the second quarter.
Kronos' second quarter 2002 average selling price expressed in U.S. dollars (computed using actual foreign currency exchange rates prevailing during the respective periods) was 13% lower than the second quarter of 2001 and 2% higher than the first quarter of 2002. June's average selling price expressed in U.S. dollars was 2% higher than the average selling price for the second quarter reflecting the strengthening of the euro against the U.S. dollar that occurred during June.
Kronos' second-quarter sales volume of 123,000 metric tons represented the highest quarter in Kronos' history. Second quarter 2002 sales volume increased 17% from the second quarter of 2001 and increased 9% from the first quarter of 2002 reflecting sustained demand in all major regions. Sales volume in the first half of 2002 was 27,000 metric tons higher, or 13%, than the first half of 2001.
The Company's second quarter 2002 production volume was 14% higher than the second quarter of 2001 and increased 7% from the first quarter of 2002 with operating rates near full capacity in the second quarter of 2002. The increase from the prior year period was due in part to lost sulfate-process production in 2001 as a result of the Leverkusen fire. Finished goods inventory levels at the end of the second quarter decreased 12% from March 2002 levels and represented approximately two months of sales.
J. Landis Martin, President and Chief Executive Officer, stated, "Demand for TiO2 in the first half of 2002 was strong in all regions, reflecting improving economic conditions, some seasonality, and customer restocking of inventories ahead of previously announced price increases. We expect sales volume in the second half of 2002 to be lower than the first half of the year. The downward price trend we experienced during 2001 and the first quarter of 2002 abated in the second quarter and we anticipate higher selling prices in the second half of 2002 compared to the first half of the year. We are hopeful that the second round of price increases, announced in May 2002, can be implemented later this year. However, the extent to which we will realize such price increases will depend on worldwide market conditions."
Securities earnings in the second quarter of 2002 were comparable to the second quarter of 2001, while securities earnings for the first half of 2002 were $1.2 million lower compared with the first half of 2001, primarily due to lower interest rates and lower outstanding cash balances in the first half of 2002.
Corporate expense in the second quarter and first half of 2002 increased $2.6 million and $6.0 million, respectively, from the comparable 2001 periods primarily due to higher environmental expenses and higher legal expenses. Compared to the first quarter of this year, corporate expense in the second quarter of 2002 decreased 26% primarily due to lower environmental expenses.
As previously reported, on June 28, 2002, the Company's indirect wholly owned subsidiary, Kronos International, Inc. ("KII"), completed a private placement offering of euro 285 million ($281 million at the exchange rate at closing) 8.875% Senior Secured Notes (the "Notes") due 2009. KII used the net proceeds of the Notes offering to repay certain intercompany indebtedness owed to the Company, a portion of which the Company used to redeem at par all of its outstanding 11.75% Senior Secured Notes due 2003, plus accrued interest.
In addition to the Notes offering, certain operating subsidiaries of KII entered into a three year euro 80 million secured revolving credit facility. Approximately euro 40 million ($39 million at the exchange rate at closing) was drawn to refinance KII's existing short-term notes payable. The revolving credit facility will be used to fund working capital requirements and for general corporate purposes of certain operating subsidiaries of KII.
Robert D. Hardy, Chief Financial Officer, stated, "The favorable bond market conditions in Europe for industrial-type credits allowed us to extend the maturity of our long-term debt from 2003 to 2009 on very attractive terms, resulting in a near 300 basis point reduction in the cost of the Company's fixed-rate, long-term debt. Net proceeds from the offering should provide greater financial flexibility to the Company. In addition, we now have a better matching of our significant euro-denominated assets with euro- denominated liabilities."
As a result of the refinancing, the Company recognized a one-time foreign currency transaction gain of $6.3 million ($.13 per diluted share) in the second quarter of 2002 related to the extinguishment of certain intercompany indebtedness. Such foreign currency transaction gain is reported as a component of corporate income and expense. Due to the utilization of certain income tax attributes not previously recognized, no income taxes were recognized on these gains.
Interest expense in the second quarter of 2002 included $2.0 million ($.03 per diluted share, net of income taxes) related to the early extinguishment of the Company's 11.75% Senior Secured Notes, as the amount paid to extinguish the debt in June 2002 included interest for the month of July. Excluding this unusual item, interest expense in the second quarter of 2002 was $6.1 million, down 12% compared with second quarter 2001 primarily due to reduced levels of outstanding debt.
The Company's net debt at June 30, 2002 was $73.7 million, up $12.8 million from March 31, 2002. Net debt at June 30, 2002 was comprised of total debt of $325.0 million less cash, restricted cash and restricted marketable debt securities of $251.3 million.
Minority interest primarily related to the Company's majority-owned environmental management subsidiary.
Previously reported unusual items recorded in prior 2002 and 2001 quarters were as follows:
-- In the first quarter of 2002, the Company included in corporate
income a $1.9 million ($.02 per diluted share, net of income taxes)
litigation settlement gain with former insurance carrier groups
related to environmental remediation claims.
-- In the second quarter of 2001, the Company included property damage
gains of $1.9 million ($.03 per diluted share, net of income taxes)
related to the Leverkusen fire.
-- 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.
A conference call regarding NL's earnings announcement is scheduled for July 30, 2002 at 9:00 a.m. (EDT). Mr. Martin will host the call. Participants can access the call by dialing (888) 273-9890 (domestic) and (612) 332-0819 (international). The title of the call is NL Earnings. A taped replay of the call will be available at 12:30 p.m. (EDT) the day of the call through 11:59 p.m. (EDT) on August 9, 2002 by calling (800) 475-6701 (domestic) and (320) 365-3844 (international). The access code for the replay is 645510. The call will also be broadcast live on the Internet at the Corporate Communications Broadcast Network ("CCBN") website at http://www.companyboardroom.com/ . 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," "could," "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, changes in global productive capacity, changes in 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), 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.
NL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share and metric ton data)
(Unaudited)
Three months ended Six months ended
June 30, June 30,
2002 2001 2002 2001
Revenues and other income
(expense):
Net sales $226.9 $220.1 $429.3 $446.2
Other income (expense),
excluding corporate (1.1) .8 (.3) 2.0
225.8 220.9 429.0 448.2
Cost of sales 176.2 151.3 332.5 301.2
Selling, general and
administrative, excluding
corporate 24.9 24.4 49.7 49.9
Operating income 24.7 45.2 46.8 97.1
Insurance recoveries, net --- 1.9 --- 1.9
Income before corporate items,
income taxes and
minority interest 24.7 47.1 46.8 99.0
Corporate income (expense):
Securities earnings 1.3 1.2 2.6 3.8
Litigation settlement gains,
net and other income 1.4 1.4 4.4 13.0
Currency transaction gains 6.3 --- 6.3 ---
Expenses (7.5) (4.9) (17.7) (11.7)
Interest expense (8.1) (6.9) (14.6) (13.9)
Income before income taxes
and minority interest 18.1 37.9 27.8 90.2
Income tax expense 3.9 12.1 7.0 29.2
Income before minority
interest 14.2 25.8 20.8 61.0
Minority interest .2 .4 .4 1.0
Net income $14.0 $25.4 $20.4 $60.0
Earnings per share - net income:
Basic $.29 $.51 $.42 $1.20
Diluted $.29 $.51 $.42 $1.20
Weighted average shares used
in the calculation of
earnings per share:
Basic shares 48.8 49.9 48.8 50.0
Dilutive impact of stock
options .2 .1 .1 .2
Diluted shares 49.0 50.0 48.9 50.2
Metric tons in thousands:
Sales volume 123 105 235 208
Production volume 113 99 219 207
SOURCE NL Industries, Inc.
CONTACT:
Robert D. Hardy
Chief Financial Officer of NL Industries,
Inc.
1-281-423-3332
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