UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report: February 24, 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)
Item 9: Regulation FD Disclosure
Item 12: Results of Operations and Financial Condition
Pursuant to Items 9 and 12 of this current report, the registrant hereby
furnishes the information set forth in the press release issued on February 24,
2004, a copy of which is attached hereto as Exhibit 99.1 and incorporated herein
by reference.
The information, including the exhibit, the registrant furnishes in this
report is not deemed "filed" for purposes of section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to the liabilities of
that section. Registration statements or other documents filed with the
Securities and Exchange Commission shall not incorporate this information by
reference, except as otherwise expressly stated in such filing.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NL INDUSTRIES, INC.
(Registrant)
By: /s/ Gregory M. Swalwell
----------------------------
Gregory M. Swalwell
Vice President, Finance
Date: February 24, 2004
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- --------------------------------------------------
99.1 Press release dated February 24, 2004 issued by NL Industries,
Inc.
NL Industries, Inc. Contact: Gregory M. Swalwell
Three Lincoln Centre Vice President, Finance
5430 LBJ Freeway, Suite 1700 (972) 233-1700
Dallas, TX 75240-2697
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News Release
- -------------------------------------------------------------------------------
FOR IMMEDIATE RELEASE
NL REPORTS FOURTH QUARTER RESULTS
DALLAS, TEXAS -February 24, 2004 -- NL Industries, Inc. (NYSE:NL) today reported
net income for the fourth quarter of 2003 of $8.8 million, or $.18 per diluted
share, compared with income of $7.6 million, or $.16 per diluted share, in the
fourth quarter of 2002. For the full year 2003, NL reported net income of $63.7
million, or $1.33 per diluted share, compared with net income of $36.8 million,
or $.76 per diluted share, for the full year 2002.
The Company's titanium dioxide pigments ("TiO2") segment profit (formerly
referred to as "operating income") in the fourth quarter of 2003 was $32.2
million compared with $20.1 million in the fourth quarter of 2002. The increase
in fourth quarter segment profit was primarily due to higher production and
sales volumes and lower maintenance costs. Segment profit for the full year 2003
increased to $137.4 million compared with $96.5 million for full year 2002,
primarily due to higher average selling prices and higher production volumes.
The Company's average selling prices in billing currencies (which excludes the
effects of fluctuations in the value of the U.S. dollar relative to other
currencies) during the fourth quarter of 2003 were 2% lower than the fourth
quarter of 2002, due primarily to sales to the North American and export
markets, but were 3% higher for the full year 2003 compared to 2002 primarily
due to sales to the European market. Expressed in U.S. dollars computed using
actual foreign currency exchange rates prevailing during the respective periods,
the Company's average selling prices in the fourth quarter of 2003 were 8%
higher than the fourth quarter of 2002, and were 13% higher for the full year
2003 compared with 2002.
The Company's fourth quarter 2003 sales volumes increased 9% from the fourth
quarter of 2002, with substantially all of the increase in the European and
export markets. Sales volumes for the full year 2003 set a new record,
increasing 2% from the previous record achieved in 2002. The Company's fourth
quarter 2003 production volumes were 14% higher than the fourth quarter of 2002,
and were 8% higher for the full year 2003 compared to 2002, with operating rates
at near full capacity in all periods presented. The Company's production volume
also set a new record in 2003. Inventories were higher at December 31, 2003 as
compared to December 31, 2002, and represented 2.2 months of average sales.
Certain of the sales generated by the Company's European and Canadian operations
are denominated in the U.S. dollar, and such operations routinely hold U.S.
dollar-denominated receivables. Primarily as a result of the weakening of the
U.S. dollar as compared to the Canadian dollar and the euro throughout the year,
the Company's results in the fourth quarter and full year 2003 included net
currency transaction losses of $3.4 million and $7.7 million, respectively. Due
to a more stable dollar in 2002, the Company recognized net currency transaction
gains of $300,000 in the fourth quarter of 2002 and net currency transaction
losses of $500,000 for the full year.
Securities 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, Inc. common
stock as a result of a series of merger transactions completed in February 2003.
Interest income in 2003 was lower than 2002 due to lower average levels of funds
available for investment.
The gain on disposal of fixed assets in 2003 related primarily to the disposal
of certain real property not associated with the Company's TiO2 operations, and
aggregated $6.7 million, or $.14 per diluted share, net of income taxes for the
year ($1.2 million, or $.02 per diluted share, for the fourth quarter of 2003).
The legal settlement gains in both 2002 and 2003 relate to legal settlements
with certain of the Company's former insurance carriers, which aggregated $3.4
million, or $.07 per diluted share, net of income taxes in 2002 ($1.9 million,
or $.04 per diluted share, in the fourth quarter of 2002). The
previously-reported $6.3 million foreign currency transaction gain in 2002,
which aggregated $.13 per diluted share, related to the second quarter
extinguishment of certain intercompany indebtedness. Due to the utilization of
certain income tax attributes not previously recognized, no income taxes were
recognized on this foreign currency transaction gain in 2002. The noncompete
agreement income related to a covenant not to compete involving a formerly owned
business unit which became fully amortized in January 2003.
Corporate expense for 2003 increased compared to 2002 primarily due to higher
environmental remediation expense accruals (principally related to one formerly
owned site for which the remediation process is expected to occur over the next
several years) and higher legal expenses.
Interest expense in the fourth quarter and full year 2003 increased $700,000 and
$3.3 million, respectively, from the comparable 2002 periods primarily due to
higher levels of outstanding debt and associated currency effects, partially
offset by lower interest rates. As previously reported, interest expense in 2002
includes a second quarter $2.0 million charge ($1.3 million, or $.03 per diluted
share, net of income tax benefit) related to the early extinguishment of the
Company's 11.75% Senior Secured Notes.
The Company's income tax benefit for 2003 includes the previously-reported $24.6
million cash income tax benefit ($.51 per diluted share) related to the
favorable German court ruling concerning the Company's claim for refund suit.
In an effort to provide investors with additional information regarding the
Company's results as determined by accounting principles generally accepted in
the United States of America ("GAAP"), the Company has disclosed certain
non-GAAP information which the Company believes provides useful information to
investors:
o The Company discloses percentage changes in its average TiO2 selling prices
in billing currencies, which excludes the effects of foreign currency
translation. The Company believes disclosure of such percentage changes
allows investors to analyze such changes without the impact of changes in
foreign currency exchange rates, thereby facilitating period-to-period
comparisons of relative changes in average selling prices in the actual
various billing currencies. Generally, when the U.S. dollar either
strengthens or weakens against other currencies, the percentage change in
average selling prices in billing currencies will be higher or lower,
respectively, than such percentage changes would be using actual exchange
rates prevailing during the respective periods. o The Company discloses
segment profit (formerly referred to as "operating income"). Segment profit
is used by the Company's management to assess the performance of the
Company's TiO2 operations. The Company believes disclosure of segment
profit provides useful information to investors because it allows investors
to analyze the performance of the Company's TiO2 operations in the same way
that the Company's management assesses performance. The Company defines
segment profit as income before income taxes, minority interest, interest
expense and certain general corporate items. Corporate items excluded from
the determination of segment profit include corporate expense, interest
income not attributable to the Company's TiO2 operations, litigation
settlement gains, securities gains (losses), gains on the disposal of
long-lived assets outside the ordinary course of business or long-lived
assets not associated with the Company's TiO2 operations and noncompete
agreement income
NL Industries, Inc., through its majority-owned subsidiary Kronos Worldwide
Inc., is a major international producer of titanium dioxide pigments.
The statements in this release relating to matters that are not historical facts
are forward-looking statements that represent management's beliefs and
assumptions based on currently available information. Forward-looking statements
can be identified by the use of words such as "believes," "intends," "may,"
"will," "should," "could," "anticipates," "expects," or comparable terminology
or by discussions of strategy or trends. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it
cannot give any assurances that these expectations will prove to be correct.
Such statements by their nature involve risks and uncertainties, including, but
not limited to, the cyclicality of the titanium dioxide industry, global
economic and political conditions, changes in global productive capacity,
changes in customer inventory levels, changes in product pricing, changes in
product costing, changes in foreign currency exchange rates, competitive
technology positions, operating interruptions (including, but not limited to,
labor disputes, leaks, fires, explosions, unscheduled downtime, transportation
interruptions, war and terrorist activities), the ultimate resolution of pending
or possible future lead pigment litigation and legislative developments related
to the lead pigment litigation, the outcome of other litigation and tax
controversies, and other risks and uncertainties detailed in the Company's
Securities and Exchange Commission filings. Should one or more of these risks
materialize (or the consequences of such a development worsen), or should the
underlying assumptions prove incorrect, actual results could differ materially
from those forecasted or expected. The Company disclaims any intention or
obligation to update publicly or revise such statements, whether as a result of
new information, future events or otherwise. The Company's 2003 results are
subject to the completion of an audit and the filing of its 2003 Annual Report
on Form 10-K.
NL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share and metric ton data)
(Unaudited)
Three months ended Year ended
December 31, December 31,
-----------------------------------------------------
2002 2003 2002 2003
-----------------------------------------------------
Net sales $ 211.9 $ 245.6 $ 875.2 $1,008.2
Cost of sales 161.8 175.7 671.8 739.2
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Gross margin 50.1 69.9 203.4 269.0
Selling, general and administrative expense 29.6 34.3 107.7 124.4
Other operating income (expense):
Currency transaction gains (losses), net .3 (3.4) (.5) (7.7)
Disposition of property and equipment (1.1) 1.5 (.6) 9.8
Noncompete agreement income 1.0 - 4.0 .3
Legal settlement gains 2.9 .1 5.2 .8
Other income .1 .2 .5 .6
Corporate expense (9.6) (9.2) (37.9) (57.4)
Other expense (.1) - (.2) (.1)
-----------------------------------------------------
Income from operations 14.0 24.8 66.2 90.9
Other income (expense):
Securities gains (losses), net - - (.1) 2.4
Trade interest income .4 .2 1.7 .7
Other interest income 1.3 .7 5.7 3.2
Foreign currency transaction gain - - 6.3 -
Interest expense (7.6) (8.3) (29.7) (33.0)
-----------------------------------------------------
Income before income taxes and minority interest 8.1 17.4 50.1 64.2
Provision for income taxes (benefit) .3 6.7 12.0 (1.4)
Minority interest in after-tax earnings .2 1.9 1.3 1.9
-----------------------------------------------------
Net income $ 7.6 $ 8.8 $ 36.8 $ 63.7
=====================================================
Basic and diluted net income per share $ .16$ .18 $ .76 $ 1.33
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Weighted average shares used in the
calculation of earnings per share:
Basic shares 47.8 47.8 48.5 47.7
Dilutive impact of stock options .1 .1 .1 .1
-----------------------------------------------------
Diluted shares 47.9 47.9 48.6 47.8
=====================================================
Other Data - metric tons in thousands:
Sales volume 102.4 111.7 454.8 462.0
Production volume 107.1 121.9 441.9 476.1
NL INDUSTRIES, INC.
RECONCILIATION OF SEGMENT PROFIT TO
INCOME FROM OPERATIONS
(In millions)
(Unaudited)
Three months ended Year ended
December 31, December 31,
-----------------------------------------------------
2002 2003 2002 2003
-----------------------------------------------------
Segment profit $ 20.1 $ 32.2 $ 96.5 $ 137.4
Adjustments:
Trade interest income (.4) (.2) (1.7) (.7)
Disposition of property and equipment - 1.9 - 10.4
Legal settlement gains 2.9 .1 5.2 .8
Noncompete agreement income 1.0 - 4.0 .3
Other income - - .1 .1
Corporate expense (9.6) (9.2) (37.9) (57.4)
-----------------------------------------------------
Income from operations $ 14.0 $ 24.8 $ 66.2 $ 90.9
=====================================================
RECONCILIATION OF PERCENT CHANGE IN
AVERAGE SELLING PRICES
(Unaudited)
Percent change- Percent change-
Three months ended Year ended
December 31, December,
2003 vs. 2002 2003 vs. 2002
-----------------------------------------------------
Percent change in average selling prices:
Using actual foreign currency exchange rates +8% +13%
Impact of changes in foreign currency exchange rates -10% - 10%
-----------------------------------------------------
In billing currencies -2% + 3%
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