SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 - For the quarter ended March 31, 2001
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-640
NL INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 13-5267260
- -------------------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
16825 Northchase Drive, Suite 1200, Houston, Texas 77060-2544
- -------------------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (281) 423-3300
--------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) had been subject to such filing
requirements for the past 90 days.
Yes X No
------- -------
Number of shares of common stock outstanding on May 10, 2001: 49,885,084
NL INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - March 31, 2001
and December 31, 2000 3-4
Consolidated Statements of Income - Three
months ended March 31, 2001 and 2000 5
Consolidated Statements of Comprehensive Income
- Three months ended March 31, 2001 and 2000 6
Consolidated Statement of Shareholders' Equity
- Three months ended March 31, 2001 7
Consolidated Statements of Cash Flows - Three
months ended March 31, 2001 and 2000 8-9
Notes to Consolidated Financial Statements 10-24
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 25-31
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 31-32
Item 4. Submission of Matters to a Vote of Security Holders 32
Item 6. Exhibits and Reports on Form 8-K 32
- 2 -
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS March 31, December 31,
2001 2000
---------- ------------
Current assets:
Cash and cash equivalents ........................ $ 99,709 $ 120,378
Restricted cash equivalents ...................... 74,782 69,242
Accounts and notes receivable .................... 161,994 131,540
Receivable from affiliates ....................... 1,522 214
Refundable income taxes .......................... 13,694 12,302
Inventories ...................................... 186,811 205,973
Prepaid expenses ................................. 3,694 2,458
Deferred income taxes ............................ 12,735 11,673
---------- ----------
Total current assets ......................... 554,941 553,780
---------- ----------
Other assets:
Marketable securities ............................ 41,338 47,186
Receivable from affiliate ........................ 12,400 --
Investment in TiO2 manufacturing joint venture ... 148,241 150,002
Prepaid pension cost ............................. 22,392 22,789
Restricted cash equivalents ...................... 11,289 17,942
Other ............................................ 4,440 4,707
---------- ----------
Total other assets ........................... 240,100 242,626
---------- ----------
Property and equipment:
Land ............................................. 23,975 24,978
Buildings ........................................ 123,489 129,019
Machinery and equipment .......................... 507,932 530,920
Mining properties ................................ 65,777 67,134
Construction in progress ......................... 8,946 4,586
---------- ----------
730,119 756,637
Less accumulated depreciation and depletion ...... 421,076 432,255
---------- ----------
Net property and equipment ................... 309,043 324,382
---------- ----------
$1,104,084 $1,120,788
========== ==========
- 3 -
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY March 31, December 31,
2001 2000
------------ -------------
Current liabilities:
Notes payable .............................. $ 67,096 $ 69,970
Current maturities of long-term debt ....... 693 730
Accounts payable and accrued liabilities ... 129,871 147,877
Payable to affiliates ...................... 9,354 10,634
Accrued environmental costs ................ 59,132 53,307
Income taxes ............................... 12,223 13,616
Deferred income taxes ...................... 1,271 1,822
----------- -----------
Total current liabilities .............. 279,640 297,956
----------- -----------
Noncurrent liabilities:
Long-term debt ............................. 195,168 195,363
Deferred income taxes ...................... 149,880 145,673
Accrued environmental costs ................ 51,655 57,133
Accrued pension cost ....................... 19,574 21,220
Accrued postretirement benefits cost ....... 28,887 29,404
Other ...................................... 22,439 23,272
----------- -----------
Total noncurrent liabilities ........... 467,603 472,065
----------- -----------
Minority interest .............................. 6,851 6,279
----------- -----------
Shareholders' equity:
Common stock ............................... 8,355 8,355
Additional paid-in capital ................. 777,595 777,528
Retained earnings .......................... 165,615 141,073
Accumulated other comprehensive loss ....... (201,572) (181,872)
Treasury stock ............................. (400,003) (400,596)
----------- -----------
Total shareholders' equity ............. 349,990 344,488
----------- -----------
$ 1,104,084 $ 1,120,788
=========== ===========
Commitments and contingencies (Note 14)
See accompanying notes to consolidated financial statements.
- 4 -
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three months ended March 31, 2001 and 2000
(In thousands, except per share data)
2001 2000
-------- --------
Revenues and other income:
Net sales ............................................ $226,060 $231,009
Litigation settlement gains, net ..................... 10,582 --
Other, net ........................................... 4,849 4,500
-------- --------
241,491 235,509
-------- --------
Costs and expenses:
Cost of sales ........................................ 149,902 159,265
Selling, general and administrative .................. 32,322 33,390
Interest ............................................. 6,976 7,856
-------- --------
189,200 200,511
-------- --------
Income before income taxes and minority interest . 52,291 34,998
Income tax expense ....................................... 17,146 11,199
-------- --------
Income before minority interest .................. 35,145 23,799
Minority interest ........................................ 586 91
-------- --------
Net income ....................................... $ 34,559 $ 23,708
======== ========
Earnings per share:
Basic ................................................ $ .69 $ .47
======== ========
Diluted .............................................. $ .69 $ .46
======== ========
Weighted average shares used in the calculation
of earnings per share:
Basic ................................................ 50,079 50,920
Dilutive impact of stock options ..................... 270 234
-------- --------
Diluted .............................................. 50,349 51,154
======== ========
See accompanying notes to consolidated financial statements.
- 5 -
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three months ended March 31, 2001 and 2000
(In thousands)
2001 2000
-------- --------
Net income ......................................... $ 34,559 $ 23,708
-------- --------
Other comprehensive income (loss), net of tax:
Marketable securities adjustment ............... (3,802) 58
Currency translation adjustment ................ (15,898) (15,309)
-------- --------
Total other comprehensive loss ............. (19,700) (15,251)
-------- --------
Comprehensive income ................... $ 14,859 $ 8,457
======== ========
See accompanying notes to consolidated financial statements.
- 6 -
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three months ended March 31, 2001
(In thousands)
Accumulated other
comprehensive
income (loss)
Additional ------------------------
Common paid-in Retained Currency Marketable Treasury
stock capital earnings translation securities stock Total
--------- ---------- --------- ----------- ---------- --------- ---------
Balance at December 31, 2000 ......... $ 8,355 $ 777,528 $ 141,073 $(190,757) $ 8,885 $(400,596) $ 344,488
Net income ........................... -- -- 34,559 -- -- -- 34,559
Other comprehensive loss, net ........ -- -- -- (15,898) (3,802) -- (19,700)
Dividends ............................ -- -- (10,017) -- -- -- (10,017)
Tax benefit of stock options exercised -- 67 -- -- -- -- 67
Treasury stock - reissued (35 shares) -- -- -- -- -- 593 593
--------- --------- --------- --------- --------- --------- ---------
Balance at March 31, 2001 ............ $ 8,355 $ 777,595 $ 165,615 $(206,655) $ 5,083 $(400,003) $ 349,990
========= ========= ========= ========= ========= ========= =========
See accompanying notes to consolidated financial statements.
- 7 -
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 2001 and 2000
(In thousands)
2001 2000
-------- --------
Cash flows from operating activities:
Net income ................................................. $ 34,559 $ 23,708
Depreciation, depletion and amortization ................... 7,511 7,875
Deferred income taxes ...................................... 7,555 3,368
Distribution from TiO2 manufacturing joint venture ......... 1,500 3,500
Litigation settlement gain, net included in restricted cash. (10,307) --
Other, net ................................................. (1,606) (1,428)
-------- --------
39,212 37,023
Change in assets and liabilities:
Accounts and notes receivable .......................... (24,788) (12,517)
Inventories ............................................ 11,928 11,092
Prepaid expenses ....................................... (1,348) (712)
Accounts payable and accrued liabilities ............... (14,578) (4,145)
Income taxes ........................................... (2,404) 4,309
Other, net ............................................. 1,248 (1,287)
-------- --------
Net cash provided by operating activities .......... 9,270 33,763
-------- --------
Cash flows from investing activities:
Capital expenditures ....................................... (5,913) (6,153)
Loan to affiliate .......................................... (13,400) --
Purchase of Tremont Corporation common stock ............... -- (9,520)
Change in restricted cash equivalents, net ................. 615 357
Other, net ................................................. 280 57
-------- --------
Net cash used by investing activities .................. (18,418) (15,259)
-------- --------
- 8 -
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Three months ended March 31, 2001 and 2000
(In thousands)
2001 2000
--------- ---------
Cash flows from financing activities:
Dividends paid ................................... $ (10,017) $ (7,595)
Treasury stock:
Purchased .................................... -- (10,331)
Reissued ..................................... 593 317
Principal payments on debt ....................... (177) (89)
--------- ---------
Net cash used by financing activities ........ (9,601) (17,698)
--------- ---------
Cash and cash equivalents:
Net change from:
Operating, investing and financing activities. (18,749) 806
Currency translation ......................... (1,920) (1,332)
Balance at beginning of period ................... 120,378 134,224
--------- ---------
Balance at end of period ......................... $ 99,709 $ 133,698
========= =========
Supplemental disclosures - cash paid for:
Interest ......................................... $ 1,160 $ 141
Income taxes, net ................................ 12,319 3,505
See accompanying notes to consolidated financial statements.
- 9 -
NL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and basis of presentation:
NL Industries, Inc. conducts its titanium dioxide pigments ("TiO2")
operations through its wholly owned subsidiary, Kronos, Inc. At March 31, 2001,
Valhi, Inc. and Tremont Corporation, each affiliates of Contran Corporation,
held approximately 60% and 20%, respectively, of NL's outstanding common stock.
At March 31, 2001, Contran and its subsidiaries held approximately 93% of
Valhi's outstanding common stock, and a subsidiary of Valhi and NL held
approximately 80% of Tremont's outstanding common stock. Substantially all of
Contran's outstanding voting stock is held by trusts established for the benefit
of certain children and grandchildren of Harold C. Simmons, of which Mr. Simmons
is sole trustee. Mr. Simmons, the Chairman of the Board of NL and the Chairman
of the Board and Chief Executive Officer of Contran and Valhi and a director of
Tremont, may be deemed to control each of such companies. See Notes 6 and 15.
The consolidated balance sheet of NL Industries, Inc. and Subsidiaries
(collectively, the "Company") at December 31, 2000 has been condensed from the
Company's audited consolidated financial statements at that date. The
consolidated balance sheet at March 31, 2001 and the consolidated statements of
income, comprehensive income, shareholders' equity and cash flows for the
interim periods ended March 31, 2001 and 2000 have been prepared by the Company
without audit. In the opinion of management all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the consolidated
financial position, results of operations and cash flows have been made. The
results of operations for the interim periods are not necessarily indicative of
the operating results for a full year or of future operations.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. Certain prior-year amounts have been
reclassified to conform to the current year presentation. The accompanying
consolidated financial statements should be read in conjunction with the
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2000 (the "2000 Annual Report").
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 133, Accounting for Derivative Instruments and Hedging Activities, as
amended, effective January 1, 2001. SFAS No. 133 establishes accounting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. Under SFAS No. 133, all
derivatives are recognized as either assets or liabilities and measured at fair
value. The accounting for changes in fair value of derivatives is dependent upon
the intended use of the derivative. As permitted by the transition requirements
of SFAS No. 133, as amended, the Company exempted from the scope of SFAS No. 133
all host contracts containing embedded derivatives which were issued or acquired
prior to January 1, 1999. The Company is not a party to any significant
derivative or hedging instrument covered by SFAS No. 133 at March 31, 2001, and
there was no impact on the Company's financial statements from adopting SFAS No.
133.
- 10 -
Note 2 - Earnings per share:
Basic earnings per share is based on the weighted average number of
common shares outstanding during each period. Diluted earnings per share is
based on the weighted average number of common shares outstanding and the
dilutive impact of outstanding stock options.
Note 3 - Business segment information:
The Company's operations are conducted by Kronos in one operating
business segment - the production and sale of TiO2.
Three months ended
March 31,
--------------------------
2001 2000
--------- ---------
(In thousands)
Net sales .................................... $ 226,060 $ 231,009
Other income, excluding corporate ............ 1,242 1,670
--------- ---------
227,302 232,679
Cost of sales ................................ 149,902 159,265
Selling, general and administrative,
excluding corporate ......................... 25,484 27,179
--------- ---------
Operating income ......................... 51,916 46,235
General corporate income (expense):
Securities earnings, net ................. 2,606 1,718
Litigation settlement gains,
net and other income .................... 11,583 1,112
Corporate expenses ....................... (6,838) (6,211)
Interest expense ......................... (6,976) (7,856)
--------- ---------
Income before income taxes
and minority interest ............... $ 52,291 $ 34,998
========= =========
Note 4 - Inventories:
March 31, December 31,
2001 2000
--------- ------------
(In thousands)
Raw materials ............................ $ 41,065 $ 66,061
Work in process .......................... 8,123 7,117
Finished products ........................ 112,676 107,120
Supplies ................................. 24,947 25,675
-------- --------
$186,811 $205,973
======== ========
- 11 -
Note 5 - Marketable securities:
March 31, December 31,
2001 2000
--------- ------------
(In thousands)
Available-for-sale marketable equity securities:
Unrealized gains ................................. $ 11,092 $ 14,912
Unrealized losses ................................ (3,272) (1,244)
Cost ............................................. 33,518 33,518
-------- --------
Aggregate fair value ......................... $ 41,338 $ 47,186
======== ========
Note 6 - Receivable from affiliate:
A majority-owned subsidiary of the Company, NL Environmental Management
Services, Inc. ("EMS"), loaned $13.4 million to Tremont under a reducing
revolving loan agreement in the first quarter of 2001. See Note 1. The loan was
approved by special committees of the Company's and EMS's Board of Directors.
The loan bears interest at prime plus 2% (10.5% at March 31, 2001), is due March
31, 2003 and is collateralized by 10.2 million shares of NL common stock owned
by Tremont. The amount available for borrowing by Tremont is reduced by $250,000
per quarter, with the first reduction occurring on June 30, 2001. As a result,
$1 million of the loan is classified as a current asset on March 31, 2001.
Note 7 - Accounts payable and accrued liabilities:
March 31, December 31,
2001 2000
-------- ------------
(In thousands)
Accounts payable ................................. $ 49,831 $ 64,553
-------- --------
Accrued liabilities:
Employee benefits ............................ 27,067 34,160
Interest ..................................... 10,725 5,019
Deferred income .............................. 4,000 4,000
Other ........................................ 38,248 40,145
-------- --------
80,040 83,324
-------- --------
$129,871 $147,877
======== ========
Note 8 - Other noncurrent liabilities:
March 31, December 31,
2001 2000
--------- ------------
(In thousands)
Insurance claims and expenses .................. $10,325 $10,314
Employee benefits .............................. 7,920 7,721
Deferred income ................................ 3,333 4,333
Other .......................................... 861 904
------- -------
$22,439 $23,272
======= =======
- 12 -
Note 9 - Notes payable and long-term debt:
March 31, December 31,
2001 2000
--------- ------------
(In thousands)
Notes payable - Kronos ........................... $ 67,096 $ 69,970
======== ========
Long-term debt:
NL Industries, Inc. - 11.75% Senior
Secured Notes (See Note 13) ................. $194,000 $194,000
Kronos ....................................... 1,861 2,093
-------- --------
195,861 196,093
Less current maturities .......................... 693 730
-------- --------
$195,168 $195,363
======== ========
Notes payable consists of euro 51 million and NOK 200 million at both
March 31, 2001 and December 31, 2000.
Note 10 - Income taxes:
The difference between the provision for income tax expense attributable
to income before income taxes and minority interest and the amount that would be
expected using the U.S. federal statutory income tax rate of 35% is presented
below.
Three months ended
March 31,
--------------------
2001 2000
-------- --------
(In thousands)
Expected tax expense ................................... $ 18,302 $ 12,249
Non-U.S. tax rates ..................................... (1,443) (991)
Incremental tax on income of companies not included
in NL's consolidated U.S. federal income tax return ... 180 281
Valuation allowance .................................... (653) (1,291)
U.S. state income taxes ................................ 195 141
Other, net ............................................. 565 810
-------- --------
Income tax expense ............................. $ 17,146 $ 11,199
======== ========
Note 11 - Litigation settlement gains, net and other income, net:
Litigation settlement gains, net
The Company reached an agreement in January 2001 with the remaining
members of the second of two principal former insurance carrier groups to settle
certain insurance coverage claims related to environmental remediation. The
Company recognized a $10.3 million net pretax gain in the first quarter of 2001.
A majority of the proceeds from this settlement was transferred in April to a
special-purpose trust established by the insurance carrier group to pay future
remediation and other environmental expenditures of
- 13 -
the Company. No further material settlements relating to litigation concerning
environmental remediation coverage are expected.
The Company also recognized a $.3 million pretax gain related to another
litigation settlement in the first quarter of 2001.
Other income, net
Three months ended
March 31,
----------------------
2001 2000
------- -------
(In thousands)
Corporate interest and dividend income ........... $ 2,606 $ 1,718
Currency transaction gains, net .................. 1,067 1,241
Noncompete agreement income ...................... 1,000 1,000
Disposition of property and equipment ............ (361) (402)
Trade interest income ............................ 593 357
Other, net ....................................... (56) 586
------- -------
$ 4,849 $ 4,500
======= =======
Note 12 - Leverkusen fire and insurance claim:
A fire on March 20, 2001 damaged a section of the Company's Leverkusen,
Germany 35,000 metric ton sulfate-process TiO2 plant ("Sulfate Plant") and, as a
result, production of TiO2 at the Leverkusen facility was halted. The fire did
not enter the Company's adjacent 125,000 metric ton chloride-process TiO2 plant
("Chloride Plant"), but did damage certain support equipment necessary to
operate that plant. The damage to the support equipment resulted in a temporary
shutdown of the Chloride Plant.
On April 8, 2001, repairs to the damaged support equipment were
substantially completed and full production resumed at the Chloride Plant. In
April, the undamaged section of the Sulfate Plant resumed limited production (5%
to 20% of capacity) of an intermediate form of TiO2 ("Hydrated TiO2"). The
Hydrated TiO2 is being transported to the Company's Nordenham, Germany
sulfate-process TiO2 plant to be further processed and finished into certain
grades of TiO2. The Company's ability to produce the Hydrated TiO2 at the
Sulfate Plant is limited by the available excess capacity at its Nordenham
plant. The Company expects the Sulfate Plant to become 50% to 70% operational in
August 2001 and fully operational in October 2001.
The Company believes that the damage to property and the business
interruption losses caused by the fire are covered by insurance, but the effect
on the financial results of the Company on a quarter-to-quarter basis or a
year-to-year basis will depend on the timing and amount of insurance recoveries.
No insurance proceeds have been recognized during the first quarter of 2001 for
the business interruption portion of the loss because the amount of such
proceeds is presently not determinable. No provision for impairment of the
damaged fixed assets has been recognized because the Company believes the
insurance proceeds will exceed their carrying value.
- 14 -
Note 13 - Condensed consolidating financial information:
The Company's 11.75% Senior Secured Notes are collateralized by a series
of intercompany notes to NL (the "Parent Issuer"). The Notes are also
collateralized by a first priority lien on the stock of Kronos. A second
priority lien on the stock of NL Capital Corporation ("NLCC") collateralized the
notes until February 2000, at which time it was merged into KII and became
included in the first priority lien on the stock of Kronos.
In the event of foreclosure, the holders of the Notes would have access
to the consolidated assets, earnings and equity of the Company. The Company
believes the collateralization of the Notes, as described above, is the
functional economic equivalent of a joint and several, full and unconditional
guarantee of the Notes by Kronos and, prior to its merger into KII, NLCC.
Management believes that separate financial statements would not provide
additional material information that would be useful in assessing the financial
position of Kronos and NLCC (the "Guarantor Subsidiaries"). In lieu of providing
separate financial statements of the Guarantor Subsidiaries, the Company has
included condensed consolidating financial information of the Parent Issuer,
Guarantor Subsidiaries and non-guarantor subsidiaries in accordance with Rule
3-10 (e) of the SEC's Regulation S-X. The Guarantor Subsidiaries and the
non-guarantor subsidiaries comprise all of the direct and indirect subsidiaries
of the Parent Issuer.
Investments in subsidiaries are accounted for by NL under the equity
method, wherein the parent company's share of earnings is included in net
income. Elimination entries eliminate (i) the parent's investments in
subsidiaries and the equity in earnings of subsidiaries, (ii) intercompany
payables and receivables and (iii) other transactions between subsidiaries.
- 15 -
NL INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidating Balance Sheet
March 31, 2001
(In thousands)
NL Combined
Industries, Non-guarantor
Inc. Kronos, Inc. Subsidiaries Eliminations Consolidated
------------- ------------- ------------- ------------ ------------
ASSETS
Current assets:
Cash and cash equivalents .................... $ 3,361 $ 45,860 $ 50,488 $ -- $ 99,709
Restricted cash equivalents .................. 74,782 -- -- -- 74,782
Accounts and notes receivable ................ 10,953 150,968 73 -- 161,994
Receivable from affiliates ................... 11,985 -- 1,311 (11,774) 1,522
Refundable income taxes ...................... 10,557 3,137 -- -- 13,694
Inventories .................................. -- 186,811 -- -- 186,811
Prepaid expenses ............................. 382 3,312 -- -- 3,694
Deferred income taxes ........................ 7,315 5,420 -- -- 12,735
----------- ----------- ----------- ----------- -----------
Total current assets ..................... 119,335 395,508 51,872 (11,774) 554,941
----------- ----------- ----------- ----------- -----------
Other assets:
Investment in subsidiaries ................... 695,105 -- 285 (695,390) --
Marketable securities ........................ 492 -- 40,846 -- 41,338
Notes receivable from affiliates ............. 194,000 301,695 35,400 (518,695) 12,400
Investment in TiO2 manufacturing joint venture -- 148,241 -- -- 148,241
Prepaid pension cost ......................... 1,879 20,513 -- -- 22,392
Restricted cash equivalents .................. 11,289 -- -- -- 11,289
Other ........................................ 1,615 2,825 -- -- 4,440
----------- ----------- ----------- ----------- -----------
----------- ----------- -----------
Total other assets ....................... 904,380 473,274 76,531 (1,214,085) 240,100
----------- ----------- ----------- ----------- -----------
Property and equipment, net ...................... 4,251 304,792 -- -- 309,043
----------- ----------- ----------- ----------- -----------
$ 1,027,966 $ 1,173,574 $ 128,403 $(1,225,859) $ 1,104,084
=========== =========== =========== =========== ===========
-16-
NL INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidating Balance Sheet, (Continued)
March 31, 2001
(In thousands)
NL Combined
Industries, Non-guarantor
Inc. Kronos, Inc. Subsidiaries Eliminations Consolidated
------------ ------------- ------------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable .......................... $ -- $ 67,096 $ -- $ -- $ 67,096
Current maturities of long-term debt ... -- 693 -- -- 693
Accounts payable and accrued liabilities 35,820 101,481 51,702 -- 189,003
Payable to affiliates .................. 9,648 10,859 621 (11,774) 9,354
Income taxes ........................... -- 12,222 1 -- 12,223
Deferred income taxes .................. -- 1,271 -- -- 1,271
----------- ----------- ----------- ----------- -----------
Total current liabilities .......... 45,468 193,622 52,324 (11,774) 279,640
----------- ----------- ----------- ----------- -----------
Noncurrent liabilities:
Long-term debt ......................... 194,000 1,168 -- -- 195,168
Notes payable to affiliate ............. 324,695 194,000 -- (518,695) --
Deferred income taxes .................. 76,361 74,592 (1,073) -- 149,880
Accrued pension cost ................... 1,442 18,132 -- -- 19,574
Accrued postretirement benefits cost ... 14,983 13,904 -- -- 28,887
Other .................................. 21,027 16,466 36,601 -- 74,094
----------- ----------- ----------- ----------- -----------
Total noncurrent liabilities ....... 632,508 318,262 35,528 (518,695) 467,603
----------- ----------- ----------- ----------- -----------
Minority interest .......................... -- 290 6,561 -- 6,851
----------- ----------- ----------- ----------- -----------
Shareholders' equity ....................... 349,990 661,400 33,990 (695,390) 349,990
----------- ----------- ----------- ----------- -----------
$ 1,027,966 $ 1,173,574 $ 128,403 $(1,225,859) $ 1,104,084
=========== =========== =========== =========== ===========
-17-
NL INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidating Balance Sheet
December 31, 2000
(In thousands)
NL Combined
Industries, Non-guarantor
Inc. Kronos, Inc. Subsidiaries Eliminations Consolidated
------------ ------------- ------------- ------------ ------------
ASSETS
Current assets:
Cash and cash equivalents .............. $ 3,632 $ 52,979 $ 63,767 $ -- $ 120,378
Restricted cash equivalents ............ 69,242 -- -- -- 69,242
Accounts and notes receivable .......... 172 131,295 73 -- 131,540
Receivable from affiliates ............. 6,189 -- 216 (6,191) 214
Refundable income taxes ................ 10,512 1,790 -- -- 12,302
Inventories ............................ -- 205,973 -- -- 205,973
Prepaid expenses ....................... 347 2,111 -- -- 2,458
Deferred income taxes .................. 6,394 5,279 -- -- 11,673
----------- ----------- ----------- ----------- -----------
Total current assets ............... 96,488 399,427 64,056 (6,191) 553,780
----------- ----------- ----------- ----------- -----------
Other assets:
Investment in subsidiaries ............. 687,300 -- 285 (687,585) --
Marketable securities .................. 452 -- 46,734 -- 47,186
Notes receivable from affiliates ....... 194,000 301,695 23,000 (518,695) --
Investment in TiO2 manufacturing joint venture -- 150,002 -- -- 150,002
Prepaid pension cost ................... 1,772 21,017 -- -- 22,789
Restricted cash equivalents ............ 17,942 -- -- -- 17,942
Other .................................. 1,739 2,968 -- -- 4,707
----------- ----------- ----------- ----------- -----------
Total other assets ................. 903,205 475,682 70,019 (1,206,280) 242,626
----------- ----------- ----------- ----------- -----------
Property and equipment, net ................ 4,425 319,957 -- -- 324,382
----------- ----------- ----------- ----------- -----------
$ 1,004,118 $ 1,195,066 $ 134,075 $(1,212,471) $ 1,120,788
=========== =========== =========== =========== ===========
-18-
NL INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidating Balance Sheet, (Continued)
December 31, 2000
(In thousands)
NL Combined
Industries, Non-guarantor
Inc. Kronos, Inc. Subsidiaries Eliminations Consolidated
------------ ------------- ------------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable .......................... $ -- $ 69,970 $ -- $ -- $ 69,970
Current maturities of long-term debt ... -- 730 -- -- 730
Accounts payable and accrued liabilities 29,144 123,555 48,485 -- 201,184
Payable to affiliates .................. 2,140 14,073 612 (6,191) 10,634
Income taxes ........................... -- 13,604 12 -- 13,616
Deferred income taxes .................. -- 1,822 -- -- 1,822
----------- ----------- ----------- ----------- -----------
Total current liabilities .......... 31,284 223,754 49,109 (6,191) 297,956
----------- ----------- ----------- ----------- -----------
Noncurrent liabilities:
Long-term debt ......................... 194,000 1,363 -- -- 195,363
Notes payable to affiliate ............. 324,695 194,000 -- (518,695) --
Deferred income taxes .................. 70,985 73,699 989 -- 145,673
Accrued pension cost ................... 1,438 19,782 -- -- 21,220
Accrued postretirement benefits cost ... 15,039 14,365 -- -- 29,404
Other .................................. 22,189 16,511 41,705 -- 80,405
----------- ----------- ----------- ----------- -----------
Total noncurrent liabilities ....... 628,346 319,720 42,694 (518,695) 472,065
----------- ----------- ----------- ----------- -----------
Minority interest .......................... -- 299 5,980 -- 6,279
----------- ----------- ----------- ----------- -----------
Shareholders' equity ....................... 344,488 651,293 36,292 (687,585) 344,488
----------- ----------- ----------- ----------- -----------
$ 1,004,118 $ 1,195,066 $ 134,075 $(1,212,471) $ 1,120,788
=========== =========== =========== =========== ===========
-19-
NL INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidating Statement of Income
Three months ended March 31, 2001
(In thousands)
NL Combined
Industries, Non-guarantor
Inc. Kronos, Inc. Subsidiaries Eliminations Consolidated
------------ ------------- ------------- ------------ ------------
Revenues and other income:
Net sales .............................. $ -- $ 226,060 $ -- $ -- $ 226,060
Interest and dividends ................. 7,140 6,595 1,559 (12,095) 3,199
Equity in income of subsidiaries ....... 37,477 -- -- (37,477) --
Litigation settlement gains, net ....... 10,582 -- -- -- 10,582
Other income, net ...................... 1,001 649 -- -- 1,650
----------- ----------- ----------- ----------- -----------
56,200 233,304 1,559 (49,572) 241,491
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Cost of sales .......................... -- 149,902 -- -- 149,902
Selling, general and administrative .... 6,641 26,215 (534) -- 32,322
Interest ............................... 12,162 6,909 -- (12,095) 6,976
----------- ----------- ----------- ----------- -----------
18,803 183,026 (534) (12,095) 189,200
----------- ----------- ----------- ----------- -----------
Income before income taxes and minority
interest .......................... 37,397 50,278 2,093 (37,477) 52,291
Income tax expense ......................... 2,838 14,308 -- -- 17,146
----------- ----------- ----------- ----------- -----------
Income before minority interest .... 34,559 35,970 2,093 (37,477) 35,145
Minority interest .......................... -- 5 581 -- 586
----------- ----------- ----------- ----------- -----------
Net income ......................... $ 34,559 $ 35,965 $ 1,512 $ (37,477) $ 34,559
=========== =========== =========== =========== ===========
-20-
NL INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidating Statement of Income
Three months ended March 31, 2000
(In thousands)
NL Combined Combined
Industries, Guarantor Non-guarantor
Inc. Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------- ------------- ------------ ------------
Revenues and other income:
Net sales .............................. $ -- $ 231,009 $ -- $ -- $ 231,009
Interest and dividends ................. 7,634 5,800 1,400 (12,759) 2,075
Equity in income of subsidiaries ....... 73,153 -- -- (73,153) --
Other income, net ...................... 1,112 1,313 -- -- 2,425
----------- ----------- ----------- ----------- -----------
81,899 238,122 1,400 (85,912) 235,509
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Cost of sales .......................... -- 159,265 -- -- 159,265
Selling, general and administrative .... 5,031 27,942 417 -- 33,390
Interest ............................... 12,567 8,048 -- (12,759) 7,856
----------- ----------- ----------- ----------- -----------
17,598 195,255 417 (12,759) 200,511
----------- ----------- ----------- ----------- -----------
Income before income taxes and minority
interest .......................... 64,301 42,867 983 (73,153) 34,998
Income tax expense (benefit) ............... 40,593 (29,394) -- -- 11,199
----------- ----------- ----------- ----------- -----------
Income before minority interest .... 23,708 72,261 983 (73,153) 23,799
Minority interest .......................... -- 21 70 -- 91
----------- ----------- ----------- ----------- -----------
Net income ......................... $ 23,708 $ 72,240 $ 913 $ (73,153) $ 23,708
=========== =========== =========== =========== ===========
-21-
NL INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidating Statement of Cash Flows
Three months ended March 31, 2001
(In thousands)
NL Combined
Industries, Non-guarantor
Inc. Kronos, Inc. Subsidiaries Eliminations Consolidated
------------ ------------- ------------- ------------ ------------
Net cash provided (used) by operating
activities ................................ $ 6,896 $ 10,608 $ 124 $ (8,358) $ 9,270
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures ................... -- (5,913) -- -- (5,913)
Loan to Tremont Corporation ............ -- -- (13,400) -- (13,400)
Change in restricted cash .............. 2,257 -- -- (1,642) 615
Other, net ............................. -- 280 -- -- 280
----------- ----------- ----------- ----------- -----------
Net cash provided (used) by investing
activities ........................ 2,257 (5,633) (13,400) (1,642) (18,418)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Treasury stock reissued ................ 593 -- -- -- 593
Dividends, net ......................... (10,017) (10,000) -- 10,000 (10,017)
Principal payments on debt ............. -- (177) -- -- (177)
----------- ----------- ----------- ----------- -----------
Net cash provided (used) by financing
activities ........................ (9,424) (10,177) -- 10,000 (9,601)
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents:
Net change from:
Operating, investing and financing
activities ........................ (271) (5,202) (13,276) -- (18,749)
Currency translation ............... -- (1,917) (3) -- (1,920)
----------- ----------- ----------- ----------- -----------
(271) (7,119) (13,279) -- (20,669)
Balance at beginning of year ........... 3,632 52,979 63,767 -- 120,378
----------- ----------- ----------- ----------- -----------
Balance at end of year ................. $ 3,361 $ 45,860 $ 50,488 $ -- $ 99,709
=========== =========== =========== =========== ===========
-22-
NL INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Consolidating Statement of Cash Flows
Three months ended March 31, 2000
(In thousands)
NL Combined Combined
Industries, Guarantor Non-guarantor
Inc. Subsidiaries Subsidiaries Eliminations Consolidated
------------ ------------- ------------- ------------ ------------
Net cash provided (used) by operating
activities ................................ $ 25,429 $ 36,104 $ 230 $ (28,000) $ 33,763
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures ................... -- (6,153) -- -- (6,153)
Purchase of Tremont Corporation common stock (9,520) -- -- -- (9,520)
Change in restricted cash .............. 357 -- -- -- 357
Loans to affiliates .................... -- (64,277) 68,000 (3,723) --
Other, net ............................. -- 57 -- -- 57
----------- ----------- ----------- ----------- -----------
Net cash provided (used) by investing
activities ........................ (9,163) (70,373) 68,000 (3,723) (15,259)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Treasury stock:
Purchased .......................... (10,331) -- -- -- (10,331)
Reissued ........................... 317 -- -- -- 317
Dividends, net ......................... (7,595) (28,000) -- 28,000 (7,595)
Principal payments on debt ............. -- (89) -- -- (89)
Loans from affiliates .................. (3,723) -- -- 3,723 --
----------- ----------- ----------- -----------
Net cash provided (used) by financing
activities ........................ (21,332) (28,089) -- 31,723 (17,698)
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents:
Net change from:
Operating, investing and financing
activities ........................ (5,066) (62,358) 68,230 -- 806
Currency translation ............... -- (1,329) (3) -- (1,332)
----------- ----------- ----------- ----------- -----------
(5,066) (63,687) 68,227 -- (526)
Balance at beginning of year ........... 13,415 113,062 7,747 -- 134,224
----------- ----------- ----------- ----------- -----------
Balance at end of year ................. $ 8,349 $ 49,375 $ 75,974 $ -- $ 133,698
=========== =========== =========== =========== ===========
-23-
Note 14 - Commitments and contingencies:
For descriptions of certain legal proceedings, income tax and other
commitments and contingencies related to the Company, reference is made to (i)
Management's Discussion and Analysis of Financial Condition and Results of
Operations, (ii) Part II, Item 1 - "Legal Proceedings" and (iii) the 2000 Annual
Report.
Note 15 - Subsequent event:
In May 2001, a wholly owned subsidiary of EMS loaned $20 million to the
Harold C. Simmons Family Trust #2 (the "Trust"), one of the trusts described in
Note 1, under a new $25 million revolving credit agreement. The Trust owns
16,855 shares, or approximately 43%, of Contran's outstanding Class A voting
common stock. The loan was approved by special committees of the Company's and
EMS's Board of Directors. The loan bears interest at prime (7.5% at the time of
the loan), is due on demand with 60 days notice and is collateralized by 15,768
shares of the Contran Class A common stock held by the Trust.
-24-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Three months ended %
March 31, Change
------------------ ------
2001 2000
---- ----
(In millions, except
percentages and
metric tons)
Net sales and operating income
Net sales .......................................... $226.1 $231.0 -2%
Operating income ................................... $ 51.9 $ 46.2 +12%
Operating income margin percentage ................. 23% 20%
TiO2 operating statistics
Percent change in average selling prices
(in billing currencies) ........................... +5%
Sales volume (metric tons in thousands) ............ 103 111 -7%
Production volume (metric tons in thousands) ....... 108 106 +2%
Kronos' operating income in the first quarter of 2001 increased $5.7
million or 12% from the first quarter of 2000 due to higher average selling
prices in billing currencies and higher production volume, partially offset by
lower sales volume.
Kronos' average selling price in billing currencies (which excludes the
effects of foreign currency translation) during the first quarter of 2001 was 5%
higher than the first quarter of 2000 and 1% lower than the fourth quarter of
2000. Compared to the fourth quarter of 2000, prices were lower in all major
markets. The average selling price in billing currencies in March was 1% lower
than the average selling price during the first quarter. Market conditions in
the TiO2 industry have generally stalled the Company's efforts to increase
prices. The Company believes worldwide economic conditions will determine
whether any price increases will be realized during the remainder of the year.
Kronos' first-quarter 2001 sales volume decreased 7% from the record
first quarter of 2000 and increased 11% from the fourth quarter of 2000. Sales
volume in the first quarter of 2001 was 7% and 11% lower in Europe and North
America, respectively, compared to the first quarter of 2000 while export volume
increased by 7%. Compared to the fourth quarter of 2000, sales volume increased
by more than 10% in each of Kronos' major markets. Finished goods inventory
levels at the end of March increased slightly from December 2000 levels and
represent about two months of sales.
First-quarter 2001 production volume was 2% higher than the comparable
2000 period with operating rates near full capacity in both periods. Production
at the Company's Leverkusen facility was adversely affected late in the first
quarter by a fire on March 20, 2001. See Note 12 to the Consolidated Financial
Statements. Production rates at the Company's Leverkusen chloride-process plant
returned to full capacity on April 8th, and the Company's Leverkusen
sulfate-process plant is expected to be 50% to 70% operational in August 2001
and fully operational in October 2001.
The Company believes that the damage to property and the business
interruption losses caused by the fire are covered by insurance, but the effect
on the financial results of the Company on a quarter-to-quarter basis or a
year-to-year basis will depend on the timing and amount of insurance recoveries.
No insurance
-25-
proceeds have been recognized during the first quarter of 2001 for the business
interruption portion of the loss because the amount of such proceeds is
presently not determinable. No provision for impairment of the damaged fixed
assets has been recognized because the Company believes the insurance proceeds
will exceed their carrying value.
Kronos anticipates its TiO2 sales and production volumes for full-year
2001 will be lower than that of 2000, in part due to the effect of the fire.
Kronos expects its full-year 2001 operating income, excluding fire- related
insurance recoveries, will be lower than 2000 primarily because of lower sales
and production volumes and higher costs, particularly for energy. Although the
Company believes its average selling price in billing currencies could continue
a downward trend throughout the rest of 2001, it expects its average selling
price for full-year 2001 to be only slightly below the full-year average price
in 2000.
Kronos' cost of sales as a percentage of net sales decreased in the
first quarter of 2001 primarily due to higher average selling prices in billing
currencies and higher production volume. Excluding the effects of foreign
currency translation, which decreased the Company's expenses in the first
quarter of 2001 compared to year-earlier period, the Company's selling, general
and administrative expenses, excluding corporate expenses, in the first quarter
of 2001 were comparable to the first quarter of 2000.
A significant amount of Kronos' sales and operating costs are
denominated in currencies other than the U.S. dollar. Fluctuations in the value
of the U.S. dollar relative to other currencies, primarily a stronger U.S.
dollar compared to the euro in the first quarter of 2001 versus the year-earlier
period, decreased the dollar value of sales in the first quarter of 2001 by a
net $11 million compared to the first quarter of 2000. When translated from
billing currencies to U.S. dollars using currency exchange rates prevailing
during the respective periods, Kronos' first-quarter 2001 average selling price
in U.S. dollars was approximately 1% higher than in the first quarter of 2000
and 2% higher than the fourth quarter of 2000. The effect of the stronger U.S.
dollar on Kronos' operating costs that are not denominated in U.S. dollars
reduced operating costs in the 2001 period compared to the year-earlier period.
In addition, sales to export markets are typically denominated in U.S. dollars
and a stronger U.S. dollar improves margins on these sales at the Company's
non-U.S. subsidiaries. The favorable margin on export sales tends to offset the
unfavorable effect of translating local currency profits to U.S. dollars when
the dollar is stronger. As a result, the net impact of currency exchange rate
fluctuations on operating income in the first quarter of 2001 was not
significant when compared to the first quarter of 2000.
General corporate
The following table sets forth certain information regarding general
corporate income (expense).
Three months ended
March 31, Difference
--------------------- ----------
2001 2000
---- ----
(In millions)
Securities earnings ............... $ 2.6 $ 1.7 $ .9
Corporate income .................. 11.6 1.1 10.5
Corporate expense ................. (6.8) (6.1) (.7)
Interest expense .................. (7.0) (7.9) .9
------- ------- -------
$ .4 $ (11.2) $ 11.6
======= ======= =======
-26-
Corporate income in the first quarter of 2001 includes $10.6 million of
net insurance settlement gains, including a $10.3 million net gain from a
settlement with the remaining members of the second of the Company's two
principal former insurance carrier groups. See Note 11 to the Consolidated
Financial Statements. No further material settlements relating to litigation
concerning environmental remediation coverage are expected.
Corporate expense was higher in the first quarter of 2001 primarily due
to higher environmental remediation accruals and higher legal fees.
Interest expense in the first quarter of 2001 decreased 11% from the
comparable period in 2000 primarily due to lower average interest rates as a
result of the December 2000 refinancing of $50 million of the Company's high
fixed-rate public debt with lower variable-rate bank debt and lower levels of
outstanding debt. The Company expects its full-year 2001 interest expense will
be lower than 2000.
Provision for income taxes
The Company reduced its deferred income tax valuation allowance by $.7
million in the first quarter of 2001 and $1.3 million in the first quarter of
2000 primarily as a result of utilization of certain tax attributes for which
the benefit had not been previously recognized under the "more-likely-than-not"
recognition criteria.
Other
Minority interest primarily relates to the Company's majority-owned
environmental management subsidiary, NL Environmental Management Services, Inc.
("EMS").
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated cash flows from operating, investing and
financing activities for the three months ended March 31, 2001 and 2000 are
presented below.
Three months ended
March 31,
-------------------
2001 2000
------- -------
(In millions)
Net cash provided (used) by:
Operating activities:
Before changes in assets and liabilities ....... $ 39.2 $ 37.0
Changes in assets and liabilities .............. (29.9) (3.2)
------- -------
9.3 33.8
Investing activities ................................. (18.4) (15.3)
Financing activities ................................. (9.6) (17.7)
------- -------
Net cash provided (used) by operating,
investing, and financing activies .............. $ (18.7) $ .8
======= =======
Operating activities
The TiO2 industry is cyclical and changes in economic conditions within
the industry significantly affect the earnings and operating cash flows of the
Company. Cash flow from operations, before changes in assets
-27-
and liabilities, in the 2001 period increased slightly from the comparable
period in 2000 primarily due to higher operating income, partially offset by
lower cash distributions from the Company's TiO2 manufacturing joint venture.
The net cash used to fund changes in the Company's inventories, receivables and
payables (excluding the effect of currency translation) in the first quarter of
2001 was significantly higher than the first quarter of 2000 due to higher
accounts receivable balances and decreases in accounts payable and accrued
liabilities in the first quarter of 2001.
Investing activities
In February 2001, EMS loaned $13.4 million to Tremont under a reducing
revolving loan agreement. See Note 1 to the Consolidated Financial Statements.
The loan was approved by special committees of the Company's and EMS's Board of
Directors. The maximum amount available under the agreement is $13.4 million,
which will decrease by $250,000 each quarter beginning June 30, 2001. The loan
bears interest at prime plus 2% (10.5% at March 31, 2001), is due March 31, 2003
and is collateralized by 10.2 million shares of NL common stock owned by
Tremont.
In May 2001, a wholly owned subsidiary of EMS loaned $20 million to the
Harold C. Simmons Family Trust #2 (the "Trust"), one of the trusts described in
Note 1 to the Consolidated Financial Statements, under a new $25 million
revolving credit agreement. The Trust owns 16,855 shares, or approximately 43%,
of Contran's outstanding Class A voting common stock. The loan was approved by
special committees of the Company's and EMS's Board of Directors. The loan bears
interest at prime (7.5% at the time of the loan), is due on demand with 60 days
notice and is collateralized by 15,768 shares of the Contran Class A common
stock held by the Trust.
Financing activities
In the first quarter of 2001, the Company paid a regular quarterly
dividend to shareholders of $.20 per share, aggregating $10 million. On May 9,
2001, the Company's Board of Directors declared a regular quarterly dividend of
$.20 per share to shareholders of record as of June 13, 2001 to be paid on June
27, 2001.
Cash, cash equivalents, restricted cash equivalents and borrowing availability
At March 31, 2001, the Company had cash and cash equivalents aggregating
$100 million ($39 million held by non-U.S. subsidiaries) and an additional $86
million of restricted cash equivalents held by U.S. subsidiaries, of which $11
million was classified as a noncurrent asset. The Company's subsidiaries had $15
million available for borrowing at March 31, 2001 under existing non-U.S. credit
facilities.
Income tax contingencies
Certain of the Company's tax returns in various U.S. and non-U.S.
jurisdictions are being examined and tax authorities have proposed or may
propose tax deficiencies, including interest.
The Company has received tax assessments from the Norwegian tax
authorities proposing tax deficiencies, including related interest, of
approximately NOK 40 million ($4.3 million at March 31, 2001) pertaining to 1994
and 1996. The Company is currently litigating the primary issue related to the
1994 assessment, and in February 2001 the Norwegian Appeals Court ruled in favor
of the Norwegian tax authorities.
-28-
The Company has appealed the case to the Norwegian Supreme Court and believes
that the outcome of the 1996 case is dependent on the eventual outcome of the
1994 case. The Company has granted a lien on its Fredrikstad, Norway TiO2 plant
in favor of the Norwegian tax authorities.
The Company has received preliminary tax assessments for the years 1991
to 1997 from the Belgian tax authorities proposing tax deficiencies, including
related interest, of approximately euro 12.9 million ($11.4 million at March 31,
2001). The Company has filed protests to the assessments for the years 1991 to
1996 and expects to file a protest for 1997. The Company is in discussions with
the Belgian tax authorities and believes that a significant portion of the
assessments are without merit.
No assurance can be given that the Company's tax matters will be
favorably resolved due to the inherent uncertainties involved in court and tax
proceedings. The Company believes that it has provided adequate accruals for
additional taxes and related interest expense which may ultimately result from
all such examinations and believes that the ultimate disposition of such
examinations should not have a material adverse effect on the Company's
consolidated financial position, results of operations or liquidity.
Environmental matters and litigation
The Company has been named as a defendant, potentially responsible party
("PRP"), or both, in a number of legal proceedings associated with environmental
matters, including waste disposal sites, mining locations and facilities
currently or previously owned, operated or used by the Company, certain of which
are on the U.S. Environmental Protection Agency's (the "U.S. EPA") Superfund
National Priorities List or similar state lists. On a quarterly basis, the
Company evaluates the potential range of its liability at sites where it has
been named as a PRP or defendant, including sites for which EMS has
contractually assumed the Company's obligation. The Company believes it has
adequate accruals ($111 million at March 31, 2001) for reasonably estimable
costs of such matters, but the Company's ultimate liability may be affected by a
number of factors, including changes in remedial alternatives and costs and the
allocations of such costs among PRPs. It is not possible to estimate the range
of costs for certain sites. The upper end of the range of reasonably possible
costs to the Company for sites for which it is possible to estimate costs is
approximately $170 million. The Company's estimates of such liabilities have not
been discounted to present value, and the Company has not recognized any
potential insurance recoveries. No assurance can be given that actual costs will
not exceed either accrued amounts or the upper end of the range for sites for
which estimates have been made, and no assurance can be given that costs will
not be incurred with respect to sites as to which no estimate presently can be
made. The imposition of more stringent standards or requirements under
environmental laws or regulations, new developments or changes with respect to
site cleanup costs or allocation of such costs among PRPs, or a determination
that the Company is potentially responsible for the release of hazardous
substances at other sites, could result in expenditures in excess of amounts
currently estimated by the Company to be required for such matters. Furthermore,
there can be no assurance that additional environmental matters will not arise
in the future.
Lead pigment litigation
The Company is also a defendant in a number of legal proceedings seeking
damages for personal injury and property damage arising out of the sale of lead
pigments and lead-based paints. There is no assurance that the Company will not
incur future liability in respect of this pending litigation in view of the
inherent uncertainties involved in court and jury rulings in pending and
possible future cases. However, based on, among other things, the results of
such litigation to date, the Company believes that the pending lead
-29-
pigment and paint litigation is without merit. The Company has not accrued any
amounts for such pending litigation. Liability that may result, if any, cannot
reasonably be estimated. In addition, various legislation and administrative
regulations have, from time to time, been enacted or proposed that seek to (a)
impose various obligations on present and former manufacturers of lead pigment
and lead-based paint with respect to asserted health concerns associated with
the use of such products and (b) effectively overturn court decisions in which
the Company and other pigment manufacturers have been successful. Examples of
such proposed legislation include bills which would permit civil liability for
damages on the basis of market share, rather than requiring plaintiffs to prove
that the defendant's product caused the alleged damage, and bills which would
revive actions barred by the statute of limitations. The Company currently
believes the disposition of all claims and disputes, individually and in the
aggregate, should not have a material adverse effect on the Company's
consolidated financial position, results of operations or liquidity. There can
be no assurance that additional matters of these types will not arise in the
future. See Item 1 - "Legal Proceedings."
Other
The Company periodically evaluates its liquidity requirements,
alternative uses of capital, capital needs and availability of resources in view
of, among other things, its debt service and capital expenditure requirements
and estimated future operating cash flows. As a result of this process, the
Company in the past has sought, and in the future may seek, to reduce,
refinance, repurchase or restructure indebtedness; raise additional capital;
issue additional securities; repurchase shares of its common stock; modify its
dividend policy; restructure ownership interests; sell interests in subsidiaries
or other assets; or take a combination of such steps or other steps to manage
its liquidity and capital resources. In the normal course of its business, the
Company may review opportunities for the acquisition, divestiture, joint venture
or other business combinations in the chemicals or other industries, as well as
the acquisition of interests in, and loans to, related companies. In the event
of any acquisition or joint venture transaction, the Company may consider using
available cash, issuing equity securities or increasing its indebtedness to the
extent permitted by the agreements governing the Company's existing debt.
Special note regarding forward-looking statements
The statements contained in this Report on Form 10-Q ("Quarterly
Report") which are not historical facts, including, but not limited to,
statements found under the captions "Results of Operations" and "Liquidity and
Capital Resources" above, 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," "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, global productive
capacity, 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 and
transportation interruptions), recoveries from insurance claims and the timing
thereof, 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 included in
this Quarterly Report and in the 2000 Annual Report, and the uncertainties set
forth from time to time in the Company's other public reports and filings.
Should one or more of these risks materialize (or the consequences of such a
development worsen), or should the underlying
-30-
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.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the 2000 Annual Report for descriptions of
certain previously reported legal proceedings.
Jackson, et al. v. The Glidden Co., et al. (No. 236835). In March
2001 the trial court denied plaintiffs' motion for class certification.
State of Rhode Island v. Lead Industries Association, et al. (No.
99-5226). In April 2001 the trial court dismissed all claims for special
education costs; granted defendants' motions to dismiss the equitable-
relief-to-children claim, the Unfair Trade Practices Act claim except insofar as
it seeks to recover damages for post-1970 conduct, and the strict liability,
negligence and misrepresentation claims except insofar as they relate to
state-owned buildings; and denied defendants' motions to dismiss the public
nuisance, civil conspiracy, unjust enrichment, and indemnity claims.
City of St. Louis v. Lead Industries Association, et al. (No.
002-245). In March 2001 the federal court remanded the case to state court.
County of Santa Clara v. Atlantic Richfield Company, et al. (No.
CV788657). In March 2001 defendants renewed their demurrers and motions to
strike all claims. The court has not ruled.
Lewis, et al. v. Lead Industries Association, et al. (No. CH09800).
In March 2001 defendants moved to dismiss all claims. The court has not ruled.
Borden, et al. v. The Sherwin Williams Company, et al. (No.
2000-587). In March 2001 defendants removed to Federal court and moved to
dismiss the fraudulent concealment and misrepresentation and negligence claims.
In April 2001 plaintiffs moved to remand to State court.
In April 2001 a complaint was filed in City of Milwaukee v. NL
Industries, Inc. and Mautz Paint (Circuit Court, Civil Division, Milwaukee
County, Wisconsin, Case No. 01CV003066). Plaintiff seeks compensatory and
equitable relief for lead hazards in Milwaukee homes, restitution for amounts it
has spent to abate lead, and punitive damages. The complaint asserts public
nuisance, restitution, and conspiracy claims against the Company. The Company
has not been served. The Company intends to deny all allegations of wrongdoing
and liability and to defend itself vigorously.
In April 2001 a complaint was filed in Harris County, Texas v. Lead
Industries Association, et al. (No. 2001-21413). The complaint seeks actual and
punitive damages and asserts the Company, six other former manufacturers of lead
pigment and a trade association are jointly and severally liable for past and
future damages due to the presence of lead paint in County-owned buildings. The
Complaint asserts claims for strict liability, negligence, fraudulent
misrepresentation, negligent misrepresentation, concert of action, public
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nuisance, restitution, and conspiracy. The Company has not been served. The
Company intends to deny all allegations of wrongdoing and liability and to
defend itself vigorously.
It is possible that other governmental entities or other plaintiffs
may file claims related to lead pigment and paint similar to those described
above and in the 2000 Annual Report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on May 9, 2001.
All the nominees for director were elected with the voting results for each as
follows:
Director Shares For Shares Withheld
-------- ---------- ---------------
Mr. J. Landis Martin 48,783,251 406,332
Mr. Kenneth R. Peak 48,891,042 298,541
Mr. Glenn R. Simmons 48,777,982 411,601
Mr. Harold C. Simmons 48,813,024 376,559
General Thomas P. Stafford 48,855,904 333,679
Mr. Steven L. Watson 48,795,275 394,308
Dr. Lawrence A. Wigdor 48,828,367 361,216
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 - Intercorporate Services Agreement by and between Contran
Corporation and the Registrant effective as of January 1, 2001.
10.2 - Intercorporate Services Agreement by and between Tremont
Corporation and the Registrant effective as of January 1, 2001.
(b) Reports on Form 8-K
There were no Reports on Form 8-K filed during the quarter ended
March 31, 2001 and through the date of this report:
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SIGNATURES
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)
Date: May 10, 2001 By /s/ Susan E. Alderton
- ------------------- ----------------------------------
Susan E. Alderton
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: May 10, 2001 By /s/ Robert D. Hardy
- ------------------- ----------------------------------
Robert D. Hardy
Vice President and Controller
(Principal Accounting Officer)
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Exhibit 10.1
INTERCORPORATE SERVICES AGREEMENT
This INTERCORPORATE SERVICES AGREEMENT (the "Agreement"), effective as of
January 1, 2001, amends and supersedes (i) that certain Intercorporate Services
Agreement effective as of January 1, 2000 between CONTRAN CORPORATION, a
Delaware corporation ("Contran"), and NL INDUSTRIES, INC., a New Jersey
corporation ("NL") and (ii) that certain Intercorporate Services Agreement
effective as of January 1, 2000 between VALHI, INC., a Delaware corporation, and
NL.
Recitals
A. NL desires to have the services of certain Contran personnel and
Contran is willing to provide such services under the terms of this Agreement.
B. Contran desires to have the services of certain NL personnel and NL is
willing to provide such services under the terms of this Agreement.
C. The costs of maintaining the additional personnel necessary to perform
the functions provided for by this Agreement would exceed the amount charged to
such party that is contained in the net fee set forth in Section 4 of this
Agreement and that the terms of this Agreement are no less favorable to each
party than could otherwise be obtained from a third party for comparable
services.
D. Each party desires to continue receiving the services presently
provided by the other party and its affiliates and each party is willing to
continue to provide such services under the terms of this Agreement.
Agreement
For and in consideration of the mutual premises, representations and
covenants contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto mutually agree as follows:
Section 1. Contran Services to be Provided. Contran agrees to make
available to NL, upon request, the following services (the "Contran Services")
to be rendered by the internal staff of Contran and affiliates of Contran:
(a) Consultation and assistance in the development and
implementation of NL's corporate business strategies, plans and
objectives;
(b) Consultation and assistance in management and conduct of
corporate affairs and corporate governance consistent with the charter and
bylaws of NL;
(c) Consultation and assistance in maintenance of financial records
and controls, including preparation and review of periodic financial
statements and reports to be filed with public and regulatory entities and
those required to be prepared for financial institutions or pursuant to
indentures and credit agreements;
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(d) Consultation and assistance in cash management and in arranging
financing necessary to implement the business plans of NL;
(e) Consultation and assistance in tax management and
administration, including, without limitation, preparation and filing of
tax returns, tax reporting, examinations by government authorities and tax
planning; and
(f) Such other services as may be requested by NL from time to time.
Section 2. NL Services to be Provided. NL agrees to make available to
Contran, upon request, the following services (the "NL Services," and
collectively with the Contran Services, the "Services") to be rendered by the
internal staff of NL:
(a) certain administration and management services with respect to
Contran's insurance and risk management needs, including, without
limitations, administration of Contran's:
(i) property and casualty insurance program,
(ii) claims management program,
(iii) property loss control program, and
(b) Such other services as may be requested by Contran from time to
time.
This Agreement does not apply to, and the Services provided for herein do not
include, any services that Harold C. Simmons, Glenn R. Simmons or Steven L.
Watson may provide to Recipient in their roles members of Recipient's board of
directors or any other activity related to such board of directors.
Section 3. Miscellaneous Services. It is the intent of the parties hereto
that each party to this Agreement provide (a "Providing Party") only such
Services as are requested by the other party (a "Receiving Party") in connection
with routine management, financial and administrative functions related to the
ongoing operations of the Receiving Party and not with respect to special
projects, including corporate investments, acquisitions and divestitures. The
parties hereto contemplate that the Services rendered by a Providing Party in
connection with the conduct of each Receiving Party's business will be on a
scale compared to that existing on the effective date of this Agreement,
adjusted for internal corporate growth or contraction, but not for major
corporate acquisitions or divestitures, and that adjustments may be required to
the terms of this Agreement in the event of such major corporate acquisitions,
divestitures or special projects. Each Receiving Party will continue to bear all
other costs required for outside services including, but not limited to, the
outside services of attorneys, auditors, trustees, consultants, transfer agents
and registrars, and it is expressly understood that each Providing Party assumes
no liability for any expenses or services other than those stated in this
Agreement to be provided by such party.
2
In addition to the amounts charged to a Receiving Party for Services provided
pursuant to this Agreement, such Receiving Party will pay the Providing Party
the amount of out-of-pocket costs incurred by the Providing Party in rendering
such Services.
Section 4. Net Fee for Services. NL agrees to pay to Contran a net annual
fee of $1,195,000 payable in quarterly installments of $298,750 each, commencing
as of January 1, 2001, pursuant to this Agreement. In addition to the net annual
fee:
(a) Contran shall credit or pay to NL additional amounts plus all
related out-of-pocket costs, all as agreed to by the parties, for all NL
Services provided under Subsection 2(b); and
(b) NL shall credit or pay to Contran additional amounts plus all
related out-of-pocket costs, all as agreed to by the parties, for all
Contran Services provided under Subsection 1(f).
Section 5. Original Term. Subject to the provisions of Section 6 hereof,
the original term of this Agreement shall be from January 1, 2001 to December
31, 2001.
Section 6. Extensions. This Agreement shall be extended on a
quarter-to-quarter basis after the expiration of its original term unless
written notification is given by Contran or NL thirty (30) days in advance of
the first day of each successive quarter or unless it is superseded by a
subsequent written agreement of the parties hereto.
Section 7. Limitation of Liability. In providing Services hereunder, each
Providing Party shall have a duty to act, and to cause its agents to act, in a
reasonably prudent manner, but no Providing Party nor any officer, director,
employee or agent of such party nor or its affiliates shall be liable to a
Receiving Party for any error of judgment or mistake of law or for any loss
incurred by the Receiving Party in connection with the matter to which this
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Providing Party.
Section 8. Indemnification. Each Receiving Party shall indemnify and hold
harmless the Providing Party, its affiliates and their respective officers,
directors and employees from and against any and all losses, liabilities,
claims, damages, costs and expenses (including attorneys' fees and other
expenses of litigation) to which such Providing Party or person may become
subject arising out of the Services provided by such Providing Party to the
Receiving Party hereunder, provided that such indemnity shall not protect any
person against any liability to which such person would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence on the part of such
person.
Section 9. Further Assurances. Each of the parties will make, execute,
acknowledge and deliver such other instruments and documents, and take all such
other actions, as the other party may reasonably request and as may reasonably
be required in order to effectuate the purposes of this Agreement and to carry
out the terms hereof.
3
Section 10. Notices. All communications hereunder shall be in writing and
shall be addressed, if intended for Contran, to Three Lincoln Centre, 5430 LBJ
Freeway, Suite 1700, Dallas, Texas 75240, Attention: President, or such other
address as it shall have furnished to NL in writing, and if intended for NL, to
Two Greenspoint Plaza, 16825 Northchase Drive, Suite 1200, Houston, Texas 77060,
Attention: President, or such other address as it shall have furnished to
Contran in writing.
Section 11. Amendment and Modification. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated other than by
agreement in writing signed by the parties hereto.
Section 12. Successor and Assigns. This Agreement shall be binding upon
and inure to the benefit of Contran and NL and their respective successors and
assigns, except that neither party may assign its rights under this Agreement
without the prior written consent of the other party.
Section 13. Governing Law. This Agreement shall be governed by, and
construed and interpreted in accordance with, the laws of the state of Texas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
CONTRAN CORPORATION
By: /s/Steven L. Watson
----------------------------------
Steven L. Watson
President
NL INDUSTRIES, INC.
By: /s/Robert D. Hardy
----------------------------------
Robert D. Hardy
Vice President
Exhibit 10.2
INTERCORPORATE SERVICES AGREEMENT
INTERCORPORATE SERVICES AGREEMENT effective as of January 1, 2001 by and
between Tremont Corporation ("Tremont"), a Delaware corporation, and NL
Industries, Inc. ("NL"), a New Jersey corporation.
WHEREAS, Tremont desires that NL provide certain tax services and use of
NL's corporate aircraft to Tremont, and NL is willing to provide such services
to Tremont pursuant to the terms of this Agreement.
NOW, THEREFORE, in consideration of the premises and promises set forth
herein, the parties to this Agreement agree as follows:
1. Services Provided. NL will make available to Tremont the
following services (the "Services"):
(a) consultation and assistance in tax management and
administration, including, without limitation, preparation and
filing of tax returns, tax reporting, examinations by
government authorities and tax planning; and
(b) use of corporate aircraft.
2. Fees for Services and Reimbursement of Expenses. During the Term (as
defined below) of this Agreement, Tremont shall pay to NL an annual fee of
$79,725 (the "Annual Fee") for the Services described in paragraph 1(a) above
payable in quarterly installments of $19,931 plus all out-of-pocket expenses
incurred in connection with the performance of such Services. Regarding Services
described in Paragraph 1(b), Tremont will pay to NL within thirty (30) days
after receipt of an invoice an amount equal to Tremont's share of NL's corporate
aircraft expenses which includes Tremont's share of the monthly management fee
(computed on a per hour basis) and actual flight hour costs at a rate of $1,875
per hour (subject to annual escalation) plus fuel variable charges, segment fees
and excise taxes. Notwithstanding the foregoing, in the event that Tremont
determines, in its sole discretion, that it no longer desires certain of the
Services or NL determines, in its sole discretion, that it no longer desires to
provide certain of the Services, then Tremont or NL, as appropriate, shall
provide the other party with a thirty (30) day prior written notice of
cancellation describing the Services to be terminated or discontinued and
Tremont and NL during such ninety-day period shall agree to a pro-rata reduction
of the fees due hereunder for such terminated or discontinued Services.
3. Limitation of Liability. In providing Services hereunder, NL shall have
a duty to act, and to cause its agents to act, in a reasonably prudent manner,
1
but neither NL nor any officer, director, employee or agent of NL shall be
liable to Tremont or its subsidiaries for any error of judgment or mistake of
law or for any loss incurred by Tremont or its subsidiaries in connection with
the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of NL or from
NL's reckless disregard of obligations and duties under this Agreement.
4. Indemnification of NL by Tremont. Tremont shall indemnify and hold
harmless NL, its subsidiaries and their respective officers, directors and
employees from and against any and all losses, liabilities, claims, damages,
costs and expenses (including reasonable attorneys' fees and other expenses of
litigation) to which such party may become subject arising out of the provision
by NL to Tremont and its subsidiaries of any of the Services, provided that such
indemnity shall not protect any such party against any liability to which such
person would otherwise by subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations and duties hereunder.
5. Further Assurance. Each of the parties will make, execute, acknowledge
and deliver such other instruments and documents, and take all such other
actions, as the other party may reasonably request and as may reasonably be
required in order to effectuate the purposes of this Agreement and to carry out
the terms hereof.
6. Notices. All communications hereunder shall be in writing and shall be
addressed to:
If to NL: NL Industries, Inc.
16825 Northchase Drive, Suite 1200
Houston, Texas 77060
Attention: General Counsel
If to Tremont: Tremont Corporation
1999 Broadway, Suite 4300
Denver, Colorado 80202
Attention: General Counsel
or such other address as the parties shall have specified in
writing.
7. Amendment and Modification. Neither this Agreement nor any item hereof
may be changed, waived, discharged or terminated other than by agreement in
writing signed by the parties hereto.
8. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties hereto,
provided that this Agreement may not be assigned by either of the parties hereto
without the prior written consent of the other party.
2
9. Miscellaneous. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
instrument. This Agreement shall be governed in all respects, including
validity, interpretation and affect, by the laws of the State of Texas.
10. Term of Agreement. This Agreement shall be effective as of January 1,
2001, and shall remain in effect for a term of one year until December 31, 2001
(the "Term"); provided, however, the Agreement shall be extended on a
quarter-to-quarter basis after the expiration of the Term unless written
notification is given by either party thirty (30) days in advance of the first
day of each successive quarter or unless it is terminated or superseded by a
subsequent written agreement of the parties hereto. Upon such termination or
upon the expiration of this Agreement, the parties' rights and obligations
hereunder shall cease and terminate except with respect to rights and
obligations arising on or prior to the date of expiration or termination and the
rights and obligations arising under paragraph 4 above.
3
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the 9th day of May, 2001, which Agreement will be deemed to be effective as of
January 1, 2001.
NL INDUSTRIES, INC.
By: /s/Robert D. Hardy
---------------------------
Robert D. Hardy
Vice President
TREMONT CORPORATION
By: /s/Mark A. Wallace
---------------------------
Mark A. Wallace
Vice President