UNITED STATES
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 the earliest event reported)
November 8, 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)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2):
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
Item 7.01 Regulation FD Disclosure.
Pursuant to Items 2.02 and 7.01 of this current report, the registrant
hereby furnishes the information set forth in its press release issued on
November 8, 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.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Item No. Exhibit Index
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99.1 Press Release dated November 8, 2004 issued
by the registrant.
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: November 8, 2004
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- --------------------------------------------------
99.1 Press Release dated November 8, 2004 issued by the registrant.
NL Industries, Inc. Contact: Gregory M. Swalwell
Three Lincoln Centre Vice President, Finance and Chief
5430 LBJ Freeway, Suite 1700 Financial Officer
Dallas, TX 75240-2697 (972) 233-1700
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News Release
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FOR IMMEDIATE RELEASE
[LOGO GOES HERE]
NL REPORTS THIRD QUARTER RESULTS
DALLAS, TEXAS...November 8, 2004...NL Industries, Inc. (NYSE:NL) today reported
net income for the third quarter of 2004 of $8.5 million, or $.18 per diluted
share, compared with net income of $16.3 million, or $.34 per diluted share, in
the third quarter of 2003. For the first nine months of 2004, the Company
reported net income of $195.0 million, or $4.03 per diluted share, compared with
net income of $55.2 million, or $1.15 per diluted share, in the first nine
months of 2003. The increase in net income in the 2004 year-to-date period is
primarily due to certain second quarter income tax benefits described below.
On September 24, 2004, the Company purchased 10,374,000 shares of CompX
International Inc. common stock, representing approximately 68% of the
outstanding shares of CompX common stock, from Valhi, Inc. and a wholly-owned
subsidiary of Valhi. Because Valhi, NL and CompX are all entities under the
common control of Contran Corporation, the Company's acquisition of the shares
of CompX common stock resulted in a change in reporting entity, and the Company
has retroactively restated its consolidated financial statements to reflect the
consolidation of CompX for all periods presented.
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 two quarters of
2004.
The Company conducts its component products business through CompX. Component
products sales of $56.0 million in the third quarter of 2004 were $3.4 million,
or 7% higher than the third quarter of 2003, and sales increased $12.5 million,
or 8%, to $165.8 million for the first nine months of 2004 as compared to the
first nine months of 2003, due primarily to higher sales volumes of precision
slide and security products and increases in certain slide product surcharges
and prices (primarily to recover the increase in raw material steel prices
experienced during 2004). Sales comparisons were also favorably impacted by
relative changes in foreign currency exchange rates, which increased sales by
$1.1 million in the third quarter of 2004 as compared to the third quarter of
2003, and increased sales by $4.5 million in the first nine months of the year.
Component products segment profit for the third quarter of 2004 was $5.8 million
compared with an operating loss of $400,000 in the third quarter of 2003.
Component products segment profit for the first nine months of 2004 was $14.7
million compared with $1.8 million for the first nine months of 2003. Component
products segment profit comparisons were favorably impacted by the effect of
certain cost reduction efforts previously undertaken, including consolidating
CompX's two Canadian facilities into one facility and the restructuring of
CompX's operations in the Netherlands. In addition, segment profit comparisons
were also impacted by an unfavorable change in product mix of security products,
the effect of selling price increases for certain products, higher raw material
and medical costs and expenses of approximately $900,000 incurred during the
first nine months of 2003 (mostly in the first half of the year) associated with
the consolidation of the two Canadian facilities. In addition, the component
products segment loss in the third quarter of 2003 includes a $3.5 million
restructuring charge associated with the implementation of certain headcount
reductions at CompX's Netherlands operations.
Kronos' sales of $286.1 million in the third quarter of 2004 were $43.2 million,
or 18%, higher than the third quarter of 2003, and sales increased $82.6
million, or 11%, to $845.1 million for the first nine months of 2004 as compared
to the first nine months of 2003, as the favorable effect of fluctuations in
foreign currency exchange rates, which increased sales by approximately $11
million and $46 million, respectively, and higher TiO2 sales volumes more than
offset the impact of lower average TiO2 selling prices.
Kronos' segment profit for the third quarter of 2004 was $29.8 million compared
with $35.4 million in the third quarter of 2003, and was $96.2 million for the
first nine months of 2004 compared with $105.2 million for the first nine months
of 2003. Segment profit comparability was impacted principally by higher sales
and production volumes and lower average TiO2 selling prices. Fluctuations in
foreign currency exchange rates favorably impacted segment profit by
approximately $7 million for the first nine months of 2004 as compared to the
same period in 2003, while the effect of currency exchange rate fluctuations was
not significant for the quarter. In addition, segment profit in the first nine
months of 2004 includes income in the second quarter of $6.3 million ($.04 per
diluted share of NL, net of income taxes and minority interest) related to
Kronos' settlement of a contract dispute with a certain customer.
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 third quarter and first nine months of 2004 were 1% and 3%,
respectively, lower than the comparable periods 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 third quarter of
2004 were 3% higher than the third quarter of 2003 and 2% higher for the first
nine months of 2004 compared with 2003. Reflecting the partial implementation of
prior price increase announcements, the Company's average selling prices in
billing currencies in the third quarter of 2004 were 3% higher compared to the
second quarter of 2004, the first quarter with an upward trend in selling prices
since the third quarter of 2003.
Kronos' third quarter 2004 TiO2 sales volumes increased 16% from the third
quarter of 2003, as higher sales volumes in Europe, United States and export
markets more than offset the effect of lower volumes in Canada. TiO2 sales
volumes for the first nine months of 2004 increased 9% from the first nine
months of 2003. Kronos' TiO2 production volumes in the third quarter of 2004
were 5% higher than the third quarter of 2003, and 3% higher for the first nine
months of 2004 compared to 2003, with operating rates at near full capacity in
all periods presented. Sales and production volumes in the first nine months of
2004 were both new records for Kronos.
Interest and dividend income from affiliates is higher in the 2004 periods
compared to the 2003 periods due primarily to the Company's interest income
related to its note receivable from Kronos, which prior to July 1, 2004 was
eliminated in the Company's consolidated financial statement. Securities
transactions gains (losses), 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 common stock as
a result of a series of merger transactions completed in February 2003.
The gain on disposal of fixed assets relates primarily to the sale of certain
real property of NL. General corporate expenses, net for 2004 decreased compared
to 2003 primarily due to lower environmental remediation and legal expenses.
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 has a nominal amount of outstanding indebtedness at September
30, 2004.
The Company's income tax benefit in the first nine months of 2004 includes a
second quarter $245.6 million tax benefit ($2.57 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). The reversal of the German
valuation allowance reflects Kronos' revised estimate of its ability to utilize
its German net operating loss carryforwards in the future under the
"more-likely-than-not" recognition criteria. The first nine months of 2004 also
includes a second quarter tax benefit attributable to the Company's recognition
of a $43.1 million income tax benefit ($.89 per diluted share) related to income
tax attributes of a certain subsidiary. This income tax benefit resulted from a
settlement agreement reached with the U.S. IRS concerning the IRS' previously
reported examination of a certain restructuring transaction involving this
subsidiary and includes (i) a $12.6 million tax benefit related to a reduction
in the amount of additional income taxes and interest which the Company
estimates it will be required to pay related to this matter as a result of the
settlement agreement and (ii) a $30.5 million tax benefit related to the
reversal of a deferred income tax asset valuation allowance related to certain
tax attributes of this subsidiary (including a U.S. net operating loss
carryforward) which the Company now believes meets the "more-likely-than-not"
recognition criteria.
The Company recognized a $24.6 million income tax benefit ($.52 per diluted
share) in the second quarter of 2003 related to Kronos' previously-reported
favorable German court ruling concerning its claim for refund suit.
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 extent of the dependence of certain of the Company's businesses on
certain market sectors,
o The cyclicality of certain of the Company's businesses,
o The impact of certain long-term contracts on 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 The introduction of trade barriers,
o Fluctuations in currency exchange rates,
o Operating interruptions,
o The ability to implement headcount reductions in certain operations in
a cost effective manner with the constraints of non-U.S. governmental
regulations, and the timing and amount of any such cost savings
realized,
o The ability of the Company to renew or refinance credit facilities,
o Uncertainties associated with new product development,
o The ultimate outcome of income tax audits, tax settlement initiatives
or other tax matters,
o The ultimate ability to utilize income tax attributes, the benefit of
which has been recognized under the "more-likely-than-not" recognition
criteria,
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 forecast 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.
NL Industries, Inc. is engaged in the component products (ergonomic computer
support systems, precision ball bearing slides and security products) and
titanium dioxide pigments industries.
NL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except earning per share)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------------- --------------------------
------------------------- --------------------------
2003 2004 2003 2004
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Net sales:
Chemicals $ 242.9 $ - $ 762.5 $ 559.1
Component products 52.6 56.0 153.3 165.8
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$ 295.5 $ 56.0 $ 915.8 $ 724.9
========== ======== ========== =========
Segment profit (loss):
Chemicals $ 35.4 $ - $ 105.2 $ 66.4
Component products (.4) 5.8 1.8 14.7
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Total segment profit 35.0 5.8 107.0 81.1
General corporate items:
Interest and dividend income from affiliates .3 4.5 .8 5.0
Interest and dividend income .5 .4 1.8 1.5
Securities transactions gains (losses), net (.1) - 2.4 (.1)
Gain on disposal of fixed assets 7.2 - 8.3 -
Legal settlement gains, net - - .7 .5
General corporate expenses, net (9.7) (3.7) (48.2) (15.0)
Noncompete agreement income - - .3 -
Other income .2 .1 .3 .1
Interest expense (8.6) (.1) (25.7) (18.2)
---------- --------- ----------- ----------
24.8 7.0 47.7 54.9
Equity in earnings of Kronos Worldwide, Inc. - 5.0 - 5.0
---------- -------- ----------- ----------
Income before income taxes and minority interest 24.8 12.0 47.7 59.9
Income tax expense (benefit) 8.6 2.2 (7.8) (275.7)
Minority interest in after-tax earnings (.1) 1.3 - 140.6
----------- --------- ----------- ---------
Net income $ 16.3 $ 8.5 $ 55.2 $ 195.0
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Basic and diluted net income per share $ .34 $ .18 $ 1.15 $ 4.03
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Weighted-average shares used in the
calculation of earnings per share:
Basic shares 47.7 48.4 47.7 48.3
Dilutive impact of stock options .1 .1 .1 .1
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Diluted shares 47.8 48.5 47.8 48.4
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NL INDUSTRIES, INC.
RECONCILIATION OF PERCENTAGE CHANGE IN
KRONOS' AVERAGE TiO2 SELLING PRICES
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2004 vs. 2003 2004 vs. 2003
---------------- ----------------
Percentage change in average selling prices:
Using actual foreign currency exchange rates +3% +2%
Impact of changes in foreign currency exchange rates -4% -5%
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In billing currencies -1% -3%
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