WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report: May 5, 2004
NL INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
New Jersey 1-640 13-5267260
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
5430 LBJ Freeway, Suite 1700, Dallas, TX 75240-2697
(Address of principal executive offices) (Zip Code)
(972) 233-1700
(Registrant's telephone number, including area code)
(Former name or address, if changed since last report)
Item 9: Regulation FD Disclosure
Item 12: Results of Operations and Financial Condition
Pursuant to Items 9 and 12 of this current report, the registrant hereby
furnishes the information set forth in the press release issued on May 5, 2004 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 hereunto duly authorized.
NL INDUSTRIES, INC.
(Registrant)
By: /s/ Gregory M. Swalwell
-----------------------
Gregory M. Swalwell
Vice President, Finance
Date: May 5 2004
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- --------------------------------------------------
99.1 Press release dated May 5, 2004 issued by NL Industries, Inc.
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 FIRST QUARTER RESULTS
DALLAS, TEXAS...May 5, 2004...NL Industries, Inc. (NYSE:NL) today reported net
income for the first quarter of 2004 of $4.1 million, or $.08 per diluted share,
compared with income of $9.4 million, or $.20 per diluted share, in the first
quarter of 2003.
The Company conducts its titanium dioxide pigments ("TiO2") business through its
majority-owned subsidiary, Kronos Worldwide, Inc. Kronos' sales of $263.3
million in the first quarter of 2004 were $10.3 million, or 4%, higher than the
first quarter of 2003 as the favorable effect of fluctuations in foreign
currency exchange rates, which increased sales by approximately $21 million,
more than offset the impact of lower average selling prices for TiO2. Despite
the increase in sales, TiO2 segment profit (see description of non-GAAP
information below) declined to $26.2 million in the first quarter of 2004
compared with $34.4 million in the first quarter of 2003 due primarily to lower
average TiO2 selling prices.
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)
during the first quarter of 2004 were 4% lower than the first quarter of 2003.
Expressed in U.S. dollars computed using actual foreign currency exchange rates
prevailing during the respective periods, Kronos' average selling prices in the
first quarter of 2004 were 4% higher than the first quarter of 2003.
Kronos's TiO2 sales and production volumes in the first quarter of 2004
approximated its respective sales and production volumes in the first quarter of
2003, with operating rates at near full capacity in both periods. Finished goods
inventories at March 31, 2004, which represented 2.2 months of average sales,
were lower as compared to December 31, 2003.
Corporate expense for 2004 decreased compared to 2003 primarily due to lower
environmental remediation and legal expenses.
Securities transactions, net for 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 expense in the first quarter of 2004 increased $1.2 million from the
comparable 2003 period, primarily due to relative changes in foreign currency
exchange rates, which increased the U.S. dollar equivalent of interest expense
on Kronos International's euro-denominated Senior Secured Notes by approximately
$1.1 million in the first quarter of 2004 as compared to the first quarter of
2003.
The Company's effective income tax rate in the first quarter of 2004 was lower
than the first quarter of 2003 due primarily to the utilization of certain
income tax attributes for which the benefit had not previously been recognized.
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. Among the factors that could cause actual future results to
differ materially include, but are not limited to:
o Future supply and demand for the Company's products,
o The cyclicality of certain of the Company's businesses,
o Customer inventory levels,
o Changes in raw material and other operating costs,
o The possibility of labor disruptions,
o General global economic and political conditions,
o Competitive products and substitute products,
o Customer and competitor strategies,
o The impact of pricing and production decisions,
o Competitive technology positions,
o Fluctuations in currency exchange rates,
o Operating interruptions,
o The ability of the Company to renew or refinance credit facilities,
o The ultimate outcome of income tax audits, tax settlement initiatives or
other tax controversies,
o Environmental matters,
o Government laws and regulations and possible changes therein,
o The ultimate resolution of pending litigation, and
o 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 new information, future events
or otherwise.
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 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.
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 TiO2 operations of Kronos. The Company believes
disclosure of segment profit provides useful information to investors
because it allows investors to analyze the performance of the 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 TiO2
operations, securities gains (losses) and noncompete agreement income.
NL Industries, Inc., through its majority-owned subsidiary Kronos Worldwide
Inc., is a major international producer of titanium dioxide pigments.
NL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share and metric ton data)
(Unaudited)
Three months ended
March 31,
----------------------------
----------------------------
2003 2004
-------------- -------------
-------------- -------------
Net sales $ 253.0 $ 263.3
Cost of sales 188.4 202.3
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Gross margin 64.6 61.0
Selling, general and administrative expense 29.4 35.2
Other operating income (expense):
Currency transaction gains (losses), net (1.1) .2
Noncompete agreement income .3 -
Other income .1 -
Corporate expense (15.3) (6.6)
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Income from operations 19.2 19.4
Other income (expense):
Trade interest income .2 .2
Other interest income .9 .7
Securities transactions, net 2.2 -
Interest expense (8.0) (9.2)
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Income before income taxes and minority interest 14.5 11.1
Provision for income taxes 5.1 2.2
Minority interest in after-tax earnings -- 4.8
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Net income $ 9.4 $ 4.1
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Basic and diluted net income per share $ .20 $ .08
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Weighted-average shares used in the
calculation of earnings per share:
Basic shares 47.7 48.1
Dilutive impact of stock options
- .2
---------------------------
Diluted shares 47.7 48.3
============ ===========
TiO2 data - metric tons in thousands:
Sales volume 118.4 118.1
Production volume 117.2 116.9
NL INDUSTRIES, INC.
RECONCILIATION OF SEGMENT PROFIT TO
INCOME FROM OPERATIONS
(In millions)
(Unaudited)
Three months ended
March 31,
--------------------------
--------------------------
2003 2004
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Segment profit $ 34.4 $ 26.2
Adjustments:
Trade interest income (.2) (.2)
Noncompete agreement income .3 -
Corporate expense (15.3) (6.6)
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Income from operations $ 19.2 $ 19.4
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RECONCILIATION OF PERCENT CHANGE IN
AVERAGE SELLING PRICES
(Unaudited)
Percent change-
Three months ended
March 31,
2003 vs. 2004
--------------------------
--------------------------
Percent change in average selling prices:
Using actual foreign currency exchange rates +4%
Impact of changes in foreign currency exchange rates -8%
---------
In billing currencies -4%
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