SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 31, 2003
NL INDUSTRIES, INC.
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(Exact name of registrant as specified in charter)
New Jersey 1-640 13-5267260
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(State or other (Commission File No.) (Employer ID No.)
jurisdiction of
incorporation)
16825 Northchase Dr., Suite 1200, Houston, Texas 77060
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (281) 423-3300
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Not Applicable
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(Former name or former address, if changed since last report)
Item 5. Other Events.
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On January 31, 2003, the Registrant issued the press release attached
hereto as Exhibit 99.1 and incorporated herein in its entirety by this
reference. The press release relates to an announcement by Registrant of its
financial results for the fourth quarter and year ended December 31, 2002. The
foregoing press release shall not be deemed to be "filed" for the purposes of
Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the
liabilities of that Section.
Item 7.
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c) Exhibits
99.1 Press Release dated January 31, 2003.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NL INDUSTRIES, INC.
(Registrant)
/S/ Robert D. Hardy
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Robert D. Hardy
Chief Financial Officer
Vice President & Controller
Dated: January 31, 2003
NL Industries, Inc. Contact: Robert D. Hardy
16825 Northchase Drive, Suite 1200 Chief Financial Officer
Houston, TX 77060 (281) 423-3332
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News Release
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Exhibit 99.1
FOR IMMEDIATE RELEASE
NL REPORTS FOURTH QUARTER RESULTS
HOUSTON, TEXAS - January 31, 2003 -- NL Industries, Inc. (NYSE:NL) today
reported net income for the fourth quarter of 2002 of $.16 per diluted share
compared with $.83 per diluted share in the fourth quarter of 2001. Excluding
the effect of the items summarized in the accompanying table, net income in the
fourth quarter of 2001 was $.12 per diluted share.
Net income for full-year 2002 was $.76 per diluted share compared with net
income for full-year 2001 of $2.44 per diluted share. Excluding the effect of
the items summarized in the accompanying table, net income for full-year 2002
was $.64 per diluted share compared with $1.72 per diluted share for full-year
2001.
The Company's titanium dioxide pigments ("TiO2") operating income in the fourth
quarter of 2002 was $20.1 million compared with $35.9 million in the fourth
quarter of 2001. Operating income in the fourth quarter of 2001 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, Germany
plant in March 2001. Excluding this amount, operating income in the fourth
quarter of 2002 increased 4% compared with the fourth quarter of 2001 primarily
due to higher sales and production volumes partially offset by higher costs.
Compared with the third quarter of 2002, operating income in the fourth quarter
of 2002 decreased $9.5 million or 32% primarily due to lower sales and
production volumes, and higher costs partially offset by higher average selling
prices.
Operating income for full-year 2002 was $96.5 million compared with $169.2
million for full-year 2001 due to 9% lower average selling prices, partially
offset by 13% higher sales volume and 7% higher production volume. Operating
income for full-year 2001 included $27.3 million of business interruption
insurance proceeds related to the Leverkusen fire. The lower sales and
production volumes in 2001 were due in part to the effect of the Leverkusen
fire.
The Company's average selling price in billing currencies (which excludes the
effects of foreign currency translation) during the fourth quarter of 2002 was
comparable to the fourth quarter of 2001 and was 2% higher than the third
quarter of 2002. Compared with the third quarter of 2002, selling prices in
billing currencies increased in all major markets. The average selling price in
billing currencies in December 2002 was 1% higher than the average selling price
for the fourth quarter.
The Company's fourth quarter 2002 average selling price expressed in U.S.
dollars (computed using actual foreign currency exchange rates prevailing during
the respective periods) was 4% higher than the fourth quarter of 2001 and 2%
higher than the third quarter of 2002. The average selling price expressed in
U.S. dollars in December 2002 was 1% higher than the average selling price for
the fourth quarter. The average selling price expressed in U.S. dollars for
full-year 2002 was 7% lower than full-year 2001.
The Company's fourth quarter 2002 sales volume increased 12% from the fourth
quarter of 2001 and decreased 13% from the third quarter of 2002. The increase
Page 1 of 5
from the comparable prior year period was due in part to lost sales volume in
2001 as a result of the Leverkusen fire. Finished goods inventory levels at the
end of the fourth quarter increased 6% from September 2002 levels and
represented approximately two months of sales.
The Company's fourth quarter 2002 production volume was 11% higher than the
fourth quarter of 2001 and decreased 8% from the third quarter of 2002 with
operating rates at 90% in the fourth quarter of 2002 compared with 83% in the
fourth quarter of 2001. Decreased production volume in the fourth quarter of
2002 was primarily due to maintenance stops. Full-year operating rates were at
96% in 2002 compared with 91% in 2001. The full-year 2001 lower operating rates
were partly due to the effect of the Leverkusen fire.
J. Landis Martin, President and Chief Executive Officer, stated, "This year's
sales volume of 455,000 metric tons was a Company record and was supported by a
Company record 442,000 metric tons of production. TiO2 prices continue to trend
upward and we, and other major TiO2 producers, have recently announced a new
round of price increases. We started 2003 with higher selling prices as compared
to last year, with prices trending upward, not downward as they were at the
start of 2002. We expect full-year 2003 sales volume to be comparable to last
year and full-year 2003 average selling prices to be higher than 2002. Based on
these assumptions, we expect to report higher operating income in 2003 versus
2002. However, it is difficult to predict full-year 2003 results due to
uncertainties surrounding the economy, including the potential for international
conflict."
Securities earnings for the fourth quarter and full-year 2002 decreased $.4
million and $2.2 million, respectively, from the comparable periods in 2001,
primarily due to lower average interest yields on invested funds in 2002.
Corporate income for the fourth quarter of 2002 included a $2.9 million
litigation settlement gain with former insurance carrier groups. Corporate
income for full-year 2002 decreased $7.0 million from full-year 2001 primarily
due to lower litigation settlement gains.
During the fourth quarter of 2002, the Company commenced accounting for its
stock options using the variable accounting method, which requires the intrinsic
value of the stock option to be accrued as an expense. The Company recognized
$3.2 million of compensation expense in the fourth quarter of 2002 related to
its stock options, of which $1.6 million was charged to operating income and
$1.6 million was charged to general corporate expenses.
Corporate expense for the fourth quarter of 2002 increased $1.9 million compared
with the fourth quarter of 2001 primarily due to higher legal expenses and stock
option compensation expense, partially offset by lower environmental expenses.
Compared to the third quarter of 2002, corporate expense in the fourth quarter
of 2002 decreased $.9 million primarily due to lower legal and environmental
expenses partially offset by stock option compensation expense. Full-year 2002
corporate expense increased $11.9 million from full-year 2001 primarily due to
higher legal and stock option compensation expenses.
Interest expense in the fourth quarter of 2002 increased $.8 million from the
fourth quarter of 2001 primarily due to higher levels of outstanding debt,
partially offset by lower interest rates. Interest expense for full-year 2002
increased $2.2 million from full-year 2001 primarily due to additional
second-quarter 2002 interest expense related to the early extinguishment of
debt.
The Company's income tax provision in the fourth quarter of 2002 included a $2.3
million deferred income tax benefit related to the enactment of certain income
tax law changes in Belgium.
Minority interest primarily related to the Company's majority-owned
environmental management subsidiary.
The Company's net debt at December 31, 2002 was $195.5 million, up $130.9
million from September 30, 2002. The increase in net debt during the fourth
quarter of 2002 primarily related to the $2.50 per share additional shareholder
dividend totaling $119.2 million. Net debt at December 31, 2002 was comprised of
total debt of $325.9 million less cash, restricted cash and restricted
marketable debt securities of $130.4 million.
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A conference call regarding NL's earnings announcement is scheduled for January
31, 2003 at 11:00 a.m. (EST). Mr. Martin will host the call. Participants can
access the call by dialing (888) 273-9885 (domestic) and (612) 332-0820
(international). The title of the call is NL Earnings. A taped replay of the
call will be available at 2:30 p.m. (EST) the day of the call through 11:59 p.m.
(EST) on February 7, 2003 by calling (800) 475-6701 (domestic) and (320)
365-3844 (international). The access code for the replay is 671880. 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. The Company's 2002 results are subject to completion of an audit
and the filing of its 2002 Annual Report on Form 10-K.
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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,
-------------------- --------------------
2002 2001 2002 2001
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Revenues and other income (expense):
Net sales ..................................... $ 211.9 $ 182.0 $ 875.2 $ 835.1
Other income (expense), excluding corporate ... (.5) 9.1 .8 10.8
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211.4 191.1 876.0 845.9
Cost of sales ..................................... 161.8 130.9 671.8 578.1
Selling, general and administrative, excluding
corporate ....................................... 29.5 24.3 107.7 98.6
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Operating income .......................... 20.1 35.9 96.5 169.2
Insurance recoveries, net ......................... -- 11.6 -- 17.5
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Income before corporate items, income taxes
and minority interest ................... 20.1 47.5 96.5 186.7
Corporate income (expense):
Securities earnings ........................... 1.4 1.8 5.6 7.8
Litigation settlement gains, net and other
income ...................................... 3.9 2.2 9.3 16.3
Currency transaction gains .................... -- -- 6.3 --
Expenses ...................................... (9.7) (7.8) (37.8) (25.9)
Interest expense .............................. (7.6) (6.8) (29.8) (27.6)
--------- --------- --------- ---------
Income before income taxes and minority
interest ................................ 8.1 36.9 50.1 157.3
Income tax benefit (expense) ...................... (.3) 4.0 (12.0) (34.9)
--------- --------- --------- ---------
Income before minority interest ........... 7.8 40.9 38.1 122.4
Minority interest ................................. .2 -- 1.3 1.0
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Net income ................................ $ 7.6 $ 40.9 $ 36.8 $ 121.4
========= ========= ========= =========
Net income per share:
Basic ......................................... $ .16 $ .83 $ .76 $ 2.44
========= ========= ========= =========
Diluted ....................................... $ .16 $ .83 $ .76 $ 2.44
========= ========= ========= =========
Weighted average shares used in the
calculation of net income per share:
Basic shares .................................. 47.8 49.3 48.5 49.7
Dilutive impact of stock options .............. .1 -- .1 .2
========= ========= ========= =========
Diluted shares ................................ 47.9 49.3 48.6 49.9
========= ========= ========= =========
Metric tons in thousands:
Sales volume .................................. 102 91 455 402
Production volume ............................. 107 97 442 412
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NL INDUSTRIES, INC.
COMPONENTS OF DILUTED NET INCOME PER SHARE
(Unaudited)
Three months ended Years ended
December 31, December 31,
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2002 2001 2002 2001
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Litigation settlement gains, net (1) ........... $ .04 $ -- $ .06 $ .14
Stock option compensation expense (2) .......... (.04) -- (.04) --
Early extinguishment of debt (3) ............... -- -- (.03) --
Foreign currency transaction gain (4) .......... -- -- .13 --
Insurance gain (5) ............................. -- .14 -- .22
Business interruption insurance proceeds
attributable to prior 2001 quarters (6) ...... -- .21 -- --
Deferred income tax valuation allowance
adjustment (7) ............................... -- .36 -- .36
Reported net income per share excluding above
items ........................................ .16 .12 .64 1.72
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$ .16 $ .83 $ .76 $ 2.44
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(1) Fourth quarter 2002 and previously-reported litigation settlements
reached with certain principal former insurance carrier groups.
(2) Compensation expense recognized during the fourth quarter of 2002 due to
commencing to account for stock options using the variable accounting
method.
(3) Previously-reported additional interest on early extinguishment of the
Company's 11.75% Senior Secured Notes.
(4) Previously-reported foreign currency transaction gain related to the
extinguishment of certain intercompany indebtedness.
(5) Previously-reported insurance recoveries for property damage related to
the Leverkusen fire.
(6) Previously-reported receipt of business interruption insurance proceeds
in the fourth quarter of 2001 that were attributable to prior 2001
quarters.
(7) Previously-reported net income tax benefit related principally to a
change in estimate of the Company's ability to utilize certain German
tax attributes.
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