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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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): November 10, 2003
NL INDUSTRIES, INC.
(Exact name of registrant as specified in charter)
New Jersey 1-640 13-5267260
(State or other (Commission File No.) (Employer ID No.)
jurisdiction of
incorporation)
5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(972) 233-1700
(Former name or former address, if changed since last report)
Item 9. Regulation FD Disclosure.
Item 12. Results of Operations and Financial Condition.
The registrant hereby furnishes the information set forth in the press
release issued on November 10, 2003, a copy of which is attached hereto as
Exhibit 99.1 and incorporated herein by reference.
The information, including the exhibit, the registrant furnishes in this
report is not deemed "filed" for purposes of section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the liabilities of
that section. Registration statements or other documents filed with the
Securities and Exchange Commission shall not incorporate this information by
reference, except as otherwise expressly stated in such filing.
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)
By: /s/ Gregory M. Swalwell
-----------------------
Gregory M. Swalwell
Vice President, Finance
Date: November 10, 2003
NL Industries, Inc. Contact: Gregory M. Swalwell
Three Lincoln Centre Vice President, Finance
5430 LBJ Freeway, Suite 1700 (972) 233-1700
Dallas, TX 75240-2697
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News Release
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FOR IMMEDIATE RELEASE
NL REPORTS THIRD QUARTER RESULTS
DALLAS, TEXAS -November 10, 2003 -- NL Industries, Inc. (NYSE:NL) today reported
net income for the third quarter of 2003 of $16.6 million, or $.35 per diluted
share, compared with income of $8.8 million, or $.18 per diluted share, in the
third quarter of 2002. For the first nine months of 2003, NL reported net income
of $54.9 million, or $1.15 per diluted share, compared with net income of $29.2
million, or $.60 per diluted share, in the first nine months of 2002.
The Company's titanium dioxide pigments ("TiO2") segment profit (formerly
referred to as "operating income") in the third quarter of 2003 was $35.4
million compared with $29.6 million in the third quarter of 2002. The 20%
increase in segment profit was primarily due to higher average selling prices,
partially offset by lower sales volumes. Segment profit in the first nine months
of 2003 increased 38% to $105.2 million compared with $76.4 million in the first
nine months of 2002 primarily due to higher average selling prices and higher
production volumes, partially offset by higher operating costs, particularly
energy costs.
The Company's average selling prices in billing currencies (which excludes the
effects of fluctuations in the value of the U.S. dollar relative to other
currencies) during the third quarter of 2003 were 2% higher than the third
quarter of 2002, with the greatest improvement being realized in the European
and export markets, and were 5% higher in the first nine months of 2003 compared
to the same period in 2002. 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 third quarter of 2003 were 10% higher
than the third quarter of 2002, and were 15% higher in the first nine months of
2003 compared with the first nine months of 2002.
The Company's third quarter 2003 sales volumes decreased 6% from the third
quarter of 2002, with substantially all of the decrease in the export markets.
Volumes were 1% lower in the first nine months of 2003 compared to the first
nine months of 2002. The Company's third quarter 2003 production volumes were 1%
higher than the third quarter of 2002, and were 6% higher in the first nine
months of 2003 compared to the same period in 2002, with operating rates at near
full capacity in all periods presented. Inventories at September 30, 2003 are
below two months average sales.
Securities gains (losses), net in the first nine months of 2003 included the
previously-reported first quarter $2.3 million noncash securities transaction
gain ($1.5 million, or $.03 per diluted share, net of income taxes) related to
the exchange of the Company's holdings of Tremont Corporation common stock for
shares of Valhi, Inc. common stock as a result of a series of merger
transactions completed in February 2003. Interest income in 2003 was lower than
the same periods of 2002 due to lower average levels of funds available for
investment.
The gain on disposal of fixed assets in 2003 related primarily to the disposal
of certain real property not associated with the Company's TiO2 operations, and
aggregated $5.5 million, or $.12 per diluted share, net of income taxes in the
year-to-date period ($4.8 million, or $.10 per diluted share, for the third
quarter of 2003). The legal settlement gains in both 2002 and 2003 relate to
legal settlements with certain of the Company's former insurance carriers, which
aggregated $1.5 million, or $.03 per diluted share, net of income taxes in the
2002 year-to-date period. The previously-reported $6.3 million foreign currency
transaction gain in 2002, which aggregated $.13 per diluted share, related to
the second quarter extinguishment of certain intercompany indebtedness. Due to
the utilization of certain income tax attributes not previously recognized, no
income taxes were recognized on this foreign currency transaction gain in 2002.
The noncompete agreement income related to a covenant not to compete involving a
formerly owned business unit which became fully amortized in January 2003.
Corporate expense for the first nine months of 2003 increased compared to the
comparable 2002 period primarily due to higher environmental remediation expense
accruals (principally related to one formerly owned site for which the
remediation process is expected to occur over the next several years) and higher
legal expenses.
Interest expense in the third quarter and first nine months of 2003 increased
$.7 million and $2.5 million, respectively, from the comparable 2002 periods
primarily due to higher levels of outstanding debt and associated currency
effects, partially offset by lower interest rates. As previously reported,
interest expense in the first nine months of 2002 includes a second quarter $2.0
million charge ($1.3 million, or $.03 per diluted share, net of income tax
benefit) related to the early extinguishment of the Company's 11.75% Senior
Secured Notes.
The Company's income tax benefit in the first nine months of 2003 includes the
previously-reported $24.6 million cash income tax benefit ($.51 per diluted
share) related to the favorable German court ruling concerning the Company's
claim for refund suit. The Company currently expects to receive approximately
$15 million of additional German income tax refunds over the next four to nine
months, a portion of which may result in the recognition of additional income
tax benefits.
In an effort to provide investors with additional information regarding the
Company's results as determined by accounting principles generally accepted in
the United States of America ("GAAP"), the Company has disclosed certain
non-GAAP information which the Company believes provides useful information to
investors:
o The Company discloses percentage changes in its 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. o The Company discloses
segment profit (formerly referred to as "operating income"). Segment profit
is used by the Company's management to assess the performance of the
Company's TiO2 operations. The Company believes disclosure of segment
profit provides useful information to investors because it allows investors
to analyze the performance of the Company's TiO2 operations in the same way
that the Company's management assesses performance. The Company defines
segment profit as income before income taxes, minority interest, interest
expense and certain general corporate items. Corporate items excluded from
the determination of segment profit include corporate expense, interest
income not attributable to the Company's TiO2 operations, litigation
settlement gains, securities gains (losses), gains on the disposal of
long-lived assets outside the ordinary course of business or long-lived
assets not associated with the Company's TiO2 operations and noncompete
agreement income
NL Industries, Inc. is a major international producer of titanium dioxide
pigments.
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. 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 pigment litigation, the outcome of other litigation and tax
controversies, 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 Nine months ended
September 30, September 30,
-----------------------------------------------------
2003 2002 2003 2002
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Net sales $ 242.9 $ 234.1 $ 762.5 $ 663.3
Cost of sales 177.4 177.5 563.5 510.0
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Gross margin 65.5 56.6 199.0 153.3
Selling, general and administrative expense 29.8 28.5 90.1 78.2
Other operating income (expense):
Currency transaction gains (losses), net (.4) .7 (4.3) (.8)
Disposition of property and equipment 7.2 (.2) 8.3 .5
Noncompete agreement income - 1.0 .3 3.0
Legal settlement gains - - .7 2.3
Other income .1 .3 .4 .5
Corporate expense (9.7) (10.6) (48.2) (28.2)
Other expense - - (.1) (.1)
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Income from operations 32.9 19.3 66.0 52.3
Other income (expense):
Securities gains (losses), net (.1) - 2.4 (.1)
Trade interest income .2 .7 .6 1.3
Other interest income .8 1.8 2.6 4.4
Foreign currency transaction gain - - - 6.3
Interest expense (8.3) (7.6) (24.7) (22.2)
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Income before income taxes and minority interest 25.5 14.2 46.9 42.0
Income tax expense (benefit) 8.9 4.7 (8.2) 11.7
Minority interest - .7 .2 1.1
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Net income $ 16.6 $ 8.8 $ 54.9 $ 29.2
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Basic and diluted net income per share $ .35 $ .18 $ 1.15 $ .60
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Weighted average shares used in the
calculation of earnings per share:
Basic shares 47.7 48.6 47.7 48.8
Dilutive impact of stock options .1 .1 .1 .1
-----------------------------------------------------
Diluted shares 47.8 48.7 47.8 48.9
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Other Data - metric tons in thousands:
Sales volume 110.9 117.4 350.3 352.4
Production volume 117.5 116.0 354.2 334.9
NL INDUSTRIES, INC.
RECONCILIATION OF SEGMENT PROFIT TO
INCOME FROM OPERATIONS
(In millions)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
-----------------------------------------------------
2003 2002 2003 2002
-----------------------------------------------------
Segment profit $ 35.4 $ 29.6 $ 105.2 $ 76.4
Adjustments:
Trade interest income (.2) (.7) (.6) (1.3)
Gain on disposal of fixed assets 7.4 - 8.5 -
Legal settlement gains - - .7 2.3
Noncompete agreement income - 1.0 .3 3.0
Other income - - .1 .1
Corporate expense (9.7) (10.6) (48.2) (28.2)
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Income from operations $ 32.9 $ 19.3 $ 66.0 $ 52.3
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RECONCILIATION OF PERCENT CHANGE IN
AVERAGE SELLING PRICES
(Unaudited)
Percent change- Percent change-
Three months ended Nine months ended
September 30, September 30,
2003 vs. 2002 2003 vs. 2002
-----------------------------------------------------
Percent change in average selling prices:
Using actual foreign currency exchange rates +10% +15%
Impact of changes in foreign currency exchange rates - 8% - 10%
-----------------------------------------------------
In billing currencies + 2% + 5%
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