HOUSTON, Nov. 7 /PRNewswire-FirstCall/ -- Kronos International, Inc. ("KII" or the "Company"), an indirect wholly owned subsidiary of NL Industries, Inc. (NYSE: NL) today reported net income for the third quarter of 2002 of $11.2 million compared with $31.4 million in the third quarter of 2001. Excluding the effect of an unusual item discussed below, net income in the third quarter of 2001 was $28.8 million.
Net income for the first nine months of 2002 was $48.8 million compared with net income in the first nine months of 2001 of $72.5 million. Excluding the unusual items discussed below, net income in the first nine months of 2002 was $49.8 million compared with $68.6 million in the first nine months of 2001.
EBITDA (defined as operating income plus depreciation, depletion and amortization expense) was $24.6 million for the third quarter of 2002, a decrease of 14% compared with the third quarter of 2001. Compared with the second quarter of 2002, EBITDA increased $1.6 million, or 7%. For the first nine months of 2002, EBITDA was $68.2 million, a decrease of $44.4 million, or 39% from the first nine months of 2001.
The Company's titanium dioxide pigments ("TiO2") operating income in the third quarter of 2002 decreased 23% to $17.4 million compared with $22.7 million in the third quarter of 2001. Operating income in the third quarter of 2001 included $3.0 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 from 2001 was primarily due to lower average selling prices, partially offset by higher sales and production volumes. Compared with the second quarter of 2002, operating income in the third quarter of 2002 increased 5% on higher average selling prices and higher production volume, partially offset by lower sales volume.
Operating income in the first nine months of 2002 was $48.2 million compared with $94.4 million in the first nine months of 2001 due to 13% lower average selling prices, partially offset by 14% higher sales volume and 8% higher production volume. Operating income in the first nine months of 2001 included $8.0 million of business interruption insurance proceeds.
KII's average selling price in billing currencies (which excludes the effects of foreign currency translation) during the third quarter of 2002 was 7% lower than the third quarter of 2001 and was 4% higher than the second quarter of 2002. The average selling price in billing currencies in September 2002 was 1% higher compared with the average selling price for the third quarter.
The Company's third quarter 2002 sales volume increased 11% from the third quarter of 2001 and decreased 5% from the record second quarter of 2002. The increase from the comparable prior year period was due in part to lost sales volume in 2001 as a result of the Leverkusen fire.
The Company's third quarter 2002 production volume was 9% higher than the third quarter of 2001 and increased 4% from the second quarter of 2002 with operating rates near full capacity in the third 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 third quarter increased 12% from June 2002 levels and represented just over one and one-half months of sales.
Capital expenditures in the third quarter and first nine months of 2002 were $5.2 million and $15.3 million, respectively, and included an aggregate of $.4 million and $2.6 million, respectively, of expenditures related to the reconstruction of the Leverkusen sulfate plant damaged in the March 2001 fire. Capital expenditures in the third quarter and first nine months of 2001 were $13.9 million and $29.6 million, respectively, and included an aggregate of $8.3 million and $11.7 million, respectively, of expenditures related to the reconstruction of the Leverkusen sulfate plant damaged in the fire.
Interest expense to third parties in the third quarter and first nine months of 2002 increased $6.5 million and $5.9 million, respectively, from the comparable prior-year periods primarily due to higher levels of outstanding debt, partially offset by lower interest rates. Interest expense to affiliates decreased $10.1 million and $5.2 million from the third quarter and first nine months of 2001, respectively, due to the repayment of loans from affiliates in June 2002 using proceeds from the Company's euro 285 million Senior Secured Notes offering (the "Notes"). During the third quarter of 2002, the Company repaid net euro-equivalent 12.7 million ($12.4 million) of the revolving credit facility of certain of the Company's subsidiaries with excess cash flow from operations.
Interest income from affiliates decreased $6.5 million and $3.3 million from the third quarter and first nine months of 2001, respectively, due to the redemption and extinguishment of all notes receivable from affiliates in July 2002.
Corporate currency transaction gains and losses, net, related primarily to the Company's dollar-denominated, 11.75% Second-tier Senior Mirror Note payable to Kronos, Inc., which was repaid in June 2002 using a portion of the proceeds from the Notes offering.
The Company's provision for income taxes differs from the normally expected statutory rates due to the geographic mix of earnings, currency transaction gains and losses on which no income taxes are provided, adjustment to certain other deferred liabilities and the utilization of certain tax attributes that previously did not meet the "more-likely-than-not" recognition criteria.
Previously reported unusual items recorded in prior 2002 and 2001 quarters were as follows:
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In the second quarter of 2002, interest expense to affiliates included $1.5 million ($1.0 million, net of income taxes) related to the early extinguishment of certain intercompany indebtedness; and
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In the second and third quarters of 2001, the Company recognized property damage gains of $1.9 million ($1.3 million, net of income taxes) and $3.9 million ($2.7 million, net of income taxes), respectively, related to the Leverkusen fire.
A conference call regarding KII's earnings announcement is scheduled for November 7, 2002 at 9:00 a.m. (EST). Dr. Lawrence A. Wigdor, KII's Chief Executive Officer will host the call. Participants can access the call by dialing (800) 230-1074 (domestic) and (612) 288-0340 (international). The title of the call is KII Earnings. A taped replay of the call will be available at 12:30 p.m. (EST) the day of the call through 11:59 p.m. (EST) on November 14, 2002 by calling (800) 475-6701 (domestic) and (320) 365-3844 (international). The access code for the replay is 658069. 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.
KII conducts NL's titanium dioxide pigments operations in Europe. 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 NL and KII believe 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 NL's and KII'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. NL and KII disclaim any intention or obligation to update publicly or revise such statements, whether as a result of new information, future events or otherwise.
KRONOS INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except metric ton data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2002 2001 2002 2001
Revenues and other
income (expense):
Net sales $154.3 $134.7 $440.0 $434.1
Other income (expense),
excluding corporate 2.4 (.1) 5.6 5.1
156.7 134.6 445.6 439.2
Cost of sales 120.1 95.7 344.8 294.9
Selling, general and
administrative,
excluding corporate 19.2 16.2 52.6 49.9
Operating income 17.4 22.7 48.2 94.4
Insurance recoveries, net - 3.9 - 5.8
Income before corporate
items and income taxes 17.4 26.6 48.2 100.2
Corporate income (expense):
Currency transaction
gain (loss), net - 12.1 15.8 (2.9)
Interest expense (7.6) (1.1) (9.3) (3.4)
Interest expense to
affiliates - (10.1) (18.7) (23.9)
Interest income from
affiliates 3.6 10.1 22.7 26.0
Income before income
taxes 13.4 37.6 58.7 96.0
Income tax expense 2.2 6.2 9.9 23.5
Net income 11.2 31.4 48.8 72.5
Dividends and accretion
applicable to redeemable
preferred stock and
profit participation
certificates (1.2) (19.3) (78.6) (30.8)
Net income (loss)
available to common
stock $10.0 $12.1 $(29.8) $41.7
Metric tons in thousands:
Sales volume 75 67 233 205
Production volume 77 71 224 207
Capital expenditures $5.2 $13.9 $15.3 $29.6
Depreciation, depletion
and amortization expense $7.2 $6.0 $20.0 $18.2
EBITDA (A) $24.6 $28.7 $68.2 $112.6
(A) Defined as operating income plus depreciation, depletion and
amortization expense.
SOURCE NL Industries, Inc.
CONTACT:
Robert D. Hardy, Chief Financial Officer of NL Industries,
Inc.
1-281-423-3332