DALLAS, March 16, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- NL Industries, Inc. (NYSE: NL) today reported income from continuing operations of $5.7 million, or $.12 per diluted share, in the fourth quarter of 2005 compared to $0.7 million, or $.01 per diluted share, in the fourth quarter of 2004. For the full year 2005, the Company reported income from continuing operations of $33.2 million, or $.68 per diluted share, compared to $159.3 million, or $3.30 per diluted share, for 2004.
Component products sales increased in 2005 due primarily to sales volumes associated with a business acquired in August 2005, the favorable effect of fluctuations in currency exchange rates (which increased sales by $1.5 million in the year-to-date period) and increases in selling prices for certain products across all segments to recover volatile raw material prices, partially offset by sales volume decreases for certain products resulting from Asian competition. Component products segment profit for the fourth quarter of 2005 was $5.5 million compared to $3.8 million in the fourth quarter of 2004. Component products segment profit for the full year 2005 was $19.3 million compared to $16.3 million a year ago. Component products segment profit was higher in 2005 as compared to 2004 as the favorable impact of continued reductions in manufacturing, fixed overhead and other overhead costs more than offset the negative impact of foreign currency exchange rate fluctuations (which decreased segment profit by $2.3 million in the year-to- date period) and higher raw material costs.
Following the Company's July 2004 dividend in the form of shares of Kronos Worldwide, Inc. common stock distributed to NL stockholders, the Company's ownership of Kronos was reduced to less than 50%. Consequently, effective July 1, 2004, the Company ceased to consolidate Kronos' financial position, results of operations and cash flows, and the Company commenced accounting for its interest in Kronos by the equity method. The Company continues to report Kronos as a consolidated subsidiary through June 30, 2004, including the consolidation of Kronos' results of operations and cash flows for the first half of 2004.
Kronos' net sales of $301.0 million in the fourth quarter of 2005 were $17.5 million, or 6%, higher than the fourth quarter of 2004. Kronos' net sales of $1,196.7 million for the full year of 2005 were $68.1 million, or 6%, higher than the full year of 2004. For the fourth quarter of 2005, the increase is due primarily to the higher average TiO2 selling prices and sales volumes, partially offset by the effect of fluctuations in foreign currency exchange rates, which decreased sales by approximately $8 million for the period. For the full year of 2005, the increase in sales is due primarily to the net effects of higher average TiO2 selling prices, lower sales volumes and fluctuations in foreign currency exchange rates, which increased sales by approximately $16 million for the full year.
Kronos' average selling prices in billing currencies (which excludes the effects of fluctuations in the value of the U.S. dollar relative to other currencies) were 5% higher in the fourth quarter of 2005 as compared to the fourth quarter of 2004, and were 8% higher for the full year. Expressed in U.S. dollars computed using actual foreign currency exchange rates prevailing during the respective periods, the Company's average selling prices in the fourth quarter of 2005 were 1% higher than the fourth quarter of 2004, and 9% higher for the year.
Kronos' fourth quarter 2005 TiO2 sales volumes increased 4% from the fourth quarter of 2004, as higher volumes in Europe and in export markets more than offset the effect of lower volumes in North America. TiO2 sales volumes for the full year 2005 decreased 4% from the full year 2004. Kronos' TiO2 production volumes were 2% higher for the full year 2005 as compared to 2004 (fourth quarter 2005 production volumes were slightly lower than the same quarter in 2004), with operating rates at near full capacity in all periods presented. Production volumes in 2005 set a new record for Kronos for the fourth consecutive year.
Kronos' TiO2 segment profit for the fourth quarter of 2005 was $34.7 million compared with $23.5 million in the fourth quarter of 2004, and was $181.5 million for the full year of 2005 compared with $119.6 million for the full year of 2004. Segment profit increased in the fourth quarter of 2005 due primarily to higher average TiO2 selling prices and sales volumes. Full year segment profit improved due primarily to higher average TiO2 selling prices and production volumes, partially offset by lower sales volumes. Furthermore, fluctuations in foreign currency exchange rates resulted in an increase in the company's segment profit of approximately $6 million for the full year period and $5 million for the fourth quarter in comparison to the same periods in 2004. Segment profit for the full year of 2004 also includes $6.3 million of income ($2.1 million, or $.04 per diluted share, net of income taxes) in the second quarter related to the settlement of a contract dispute with a customer.
Securities transactions gains in 2005 relate principally to a $14.7 million gain ($8.0 million, or $.17 per diluted share, net of income taxes) related to the Company's sale of shares of Kronos common stock in market transactions. Insurance recoveries in 2005 include $2.2 million received from certain insolvent former insurance carriers relating to settlement of excess insurance coverage claims. Interest expense decreased primarily due to the change in accounting for Kronos to the equity method as of July 1, 2004. Prior to July 1, 2004, interest expense related to Kronos' debt was included in the Company's consolidated financial statements. CompX International Inc. has a nominal amount of outstanding debt at December 31, 2005.
The Company's income tax expense in 2005 includes the net non-cash effects of (i) the favorable effect of recent developments with respect to certain income tax items of NL of $7.4 million (or $.15 per diluted share) and (ii) the unfavorable effect with respect to a change in CompX's permanent reinvestment conclusion regarding its non-U.S. subsidiaries of $9.0 million ($6.1 million, or $.13 per diluted share, net of minority interest). As previously reported, the Company's income tax benefit in 2004 includes (i) a $268.6 million second quarter non-cash tax benefit ($135.7 million, or $2.80 per diluted share, net of minority interest) related to the reversal of a deferred income tax asset valuation allowance attributable to Kronos' income tax attributes in Germany (principally net operating loss carryforwards) and (ii) a $48.5 million income non-cash tax benefit ($1.00 per diluted share) related to income tax attributes of a subsidiary of the Company.
As previously reported, in January 2005 CompX completed the sale of its Thomas Regout operations in the Netherlands, and accordingly the results of operations of Thomas Regout are classified as discontinued operations for all periods presented. Discontinued operations in the fourth quarter of 2004 include a $6.5 million impairment charge to write down CompX's investment in the Thomas Regout operations to its estimated net realizable value. Such impairment charge represented an impairment of goodwill. Discontinued operations in the fourth quarter of 2004 also includes a $4.2 million tax benefit associated with the U.S. capital loss realized in the first quarter of 2005 upon the completion of the sale of the Thomas Regout operations. Recognition of the benefit of such capital loss by the Company was appropriate under GAAP at the time such operations were classified as held for sale. Discontinued operations in 2005 relate primarily to additional expenses associated with the disposal of the Thomas Regout operations.
NL also announced today that its board of directors has declared a regular quarterly dividend of twelve and one-half cents ($0.125) per share on its common stock to be paid in cash. The dividend is payable on March 31, 2006 to shareholders of record at the close of business on March 27, 2006.
The statements in this release relating to matters that are not historical facts are forward-looking statements that represent management's beliefs and assumptions based on currently available information. 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 substantial risks and uncertainties that could significantly impact expected results, and actual future results could differ materially from those described in such forward- looking statements. While it is not possible to identify all factors, the Company continues to face many risks and uncertainties. The factors that could cause actual future results to differ materially include, but are not limited to, the following:
* Future supply and demand for the Company's products,
* The extent of the dependence of certain of the Company's businesses
on certain market sectors,
* The cyclicality of certain of the Company's businesses,
* Customer inventory levels,
* Changes in raw material and other operating costs,
* The possibility of labor disruptions,
* General global economic and political conditions,
* Demand for office furniture,
* Competitive products and substitute products, including increased
competition from low-cost manufacturing sources,
* Customer and competitor strategies,
* The impact of pricing and production decisions,
* Competitive technology positions,
* The introduction of trade barriers,
* Service industry employment levels,
* Fluctuations in currency exchange rates,
* Operating interruptions,
* The timing and amounts of insurance recoveries,
* The ability of the Company to renew or refinance credit facilities,
* The ultimate outcome of income tax audits, tax settlement initiatives
or other tax matters,
* Potential difficulties in integrating completed or future acquisitions,
* Decisions to sell operating assets other than in the ordinary course of
business,
* Uncertainties associated with new product development,
* The ultimate ability to utilize income tax attributes, the benefit of
which has been recognized under the "more-likely-than-not" recognition
criteria,
* Environmental matters,
* Government laws and regulations and possible changes therein,
* The ultimate resolution of pending litigation, and
* Possible future litigation.
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 or revise any forward-looking statement whether as a result of changes in information, future events or otherwise.
In an effort to provide investors with additional information regarding the Company's results as determined by GAAP, the Company has disclosed certain non-GAAP information the Company believes provides useful information to investors:
* The Company discloses percentage changes in Kronos' average TiO2
selling prices in billing currencies, which excludes the effects of
foreign currency translation. The Company believes disclosure of such
percentage changes allows investors to analyze such changes without the
impact of changes in foreign currency exchange rates, thereby
facilitating period-to-period comparisons of relative changes in
average selling prices in the actual various billing currencies.
Generally, when the U.S. dollar either strengthens or weakens against
other currencies, the percentage change in average selling prices in
billing currencies will be higher or lower, respectively, than such
percentage changes would be using actual exchange rates prevailing
during the respective periods.
NL Industries, Inc. is engaged in the component products (precision ball bearing slides, security products and ergonomic computer support systems), chemicals (titanium dioxide pigments) and other businesses.
NL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except earnings per share)
Three months ended Year ended
December 31, December 31,
2004 2005 2004 2005
(Unaudited)
Net sales:
Chemicals $-- $-- $559.1 $--
Component products 46.6 46.8 182.6 186.4
$46.6 $46.8 $741.7 $ 186.4
Segment profit:
Chemicals $-- $-- $66.4 $--
Component products 3.8 5.5 16.3 19.3
Total segment
profit 3.8 5.5 82.7 19.3
General corporate items:
Interest and dividend
income from affiliates 1.3 .5 8.0 2.3
Other interest income .4 .8 1.3 3.3
Securities transactions
gains, net 2.1 -- 2.1 14.6
Insurance recoveries -- .6 .6 3.0
General corporate
expenses, net (2.1) (6.0) (17.1) (19.9)
Other income .2 .1 .3 .4
Interest expense (.1) (.1) (18.3) (.4)
5.6 1.4 59.6 22.6
Equity in earnings of
Kronos Worldwide, Inc. 4.6 3.1 9.6 25.5
Income from continuing
operations before
income taxes and
minority interest 10.2 4.5 69.2 48.1
Provision for income
taxes (benefit) 8.9 (1.9) (239.7) 14.6
Minority interest in
after-tax earnings .6 .7 149.6 .3
Income from continuing
operations .7 5.7 159.3 33.2
Discontinued operations 3.1 -- 3.5 (.3)
Net income $3.8 $5.7 $162.8 $32.9
NL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(In millions, except earnings per share)
Three months ended Year ended
December 31, December 31,
2004 2005 2004 2005
(Unaudited)
Basic and diluted earnings
per share:
Continuing
operations $.01 $.12 $3.30 $.68
Discontinued
operations .06 -- .07 --
Net income $.07 $.12 $3.37 $.68
Weighted-average shares
used in the calculation
of earnings per share:
Basic shares 48.4 48.6 48.3 48.5
Dilutive impact of
stock options .1 -- .1 .1
Diluted shares 48.5 48.6 48.4 48.6
NL INDUSTRIES, INC.
RECONCILIATION OF PERCENTAGE CHANGE IN
KRONOS' AVERAGE TiO2 SELLING PRICES
(Unaudited)
Three months ended Year ended
December 31, December 31,
2005 vs. 2004 2005 vs. 2004
Percentage change in average
selling prices:
Using actual foreign currency
exchange rates +1% +9%
Impact of changes in foreign
currency exchange rates +4% -1%
In billing currencies +5% +8%
SOURCE NL Industries, Inc.
Gregory M. Swalwell, Vice President, Finance and Chief Financial Officer of NL Industries, Inc., +1-972-233-1700
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