UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of the earliest event reported)
September 24, 2004
NL Industries, Inc.
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(Exact name of Registrant as specified in its charter)
New Jersey 1-640 13-5267260
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(972) 233-1700
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
The Registrant hereby amends Item 9.01 of this Current Report on Form 8-K to
provide the financial statements required by Item 9.01(a) and Item 9.01(b) and
Exhibit 23.1.
Item 9.01 Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
The audited consolidated financial statements of CompX International Inc.
included in CompX's Annual Report on Form 10-K for the year ended December 31,
2003 (File No. 1-13905) are included herein as Exhibit 99.4.
The unaudited consolidated financial statements of CompX International Inc.
included in CompX's Quarterly Report on Form 10-Q for the quarter ended June 30,
2004 (File no. 1-13905) are included herein as Exhibit 99.6.
(b) Pro forma financial information.
The Unaudited Pro Forma Condensed Consolidated Financial Statements of NL
Industries, Inc. are included herein as Exhibit 99.5
(c) Exhibits.
Item No. Exhibit Index
---------- -----------------------------------------------------------
10.1* Stock Purchase Agreement dated September 24, 2004 between
Valhi, Inc. and Valcor, Inc., as sellers, and NL Industries,
Inc. as purchaser. The disclosure schedule attachment to
this Exhibit 10.1 has not been filed; upon request, the
registrant will furnish supplementally to the Securities and
Exchange Commission a copy of this attachment.
10.2* Promissory Note dated September 24, 2004 in the original
principal amount of $31,422,500.00 payable to the order of
NL Industries, Inc. and executed by Kronos Worldwide, Inc.
23.1** Consent of PricewaterhouseCoopers LLP.
99.1* Promissory Note dated September 24, 2004 in the original
principal amount of $162,500,000.00 payable to the order of
Valcor, Inc. and executed by Kronos Worldwide, Inc.
99.2* Promissory Note dated September 24, 2004 in the original
principal amount of $6,077,500.00 payable to the order of
Valhi, Inc. and executed by Kronos Worldwide, Inc.
99.3* Press release jointly issued by Valhi, Inc. and NL
Industries, Inc. on September 24, 2004.
99.4** Audited consolidated financial statements of CompX
International Inc. - incorporated by reference to CompX's
Annual Report on Form 10-K (File No. 1-13905) for the year
ended December 31, 2003.
99.5** Unaudited Pro Forma Condensed Consolidated Financial
Statements of NL Industries, Inc.
99.6** Unaudited consolidated financial statements of CompX
International Inc. - incorporated by reference to CompX's
Quarterly Report on Form 10-Q (File No. 1-13905) for the
quarter ended June 30, 2004.
* Previously filed.
** Filed herewith.
(d) 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 and
Chief Financial Officer
Date: October 27, 2004
INDEX TO EXHIBITS
Item No. Exhibit Index
---------- -----------------------------------------------------------
10.1* Stock Purchase Agreement dated September 24, 2004 between
Valhi, Inc. and Valcor, Inc., as sellers, and NL Industries,
Inc. as purchaser. The disclosure schedule attachment to
this Exhibit 10.1 has not been filed; upon request, the
registrant will furnish supplementally to the Securities and
Exchange Commission a copy of this attachment.
10.2* Promissory Note dated September 24, 2004 in the original
principal amount of $31,422,500.00 payable to the order of
NL Industries, Inc. and executed by Kronos Worldwide, Inc.
23.1** Consent of PricewaterhouseCoopers LLP.
99.1* Promissory Note dated September 24, 2004 in the original
principal amount of $162,500,000.00 payable to the order of
Valcor, Inc. and executed by Kronos Worldwide, Inc.
99.2* Promissory Note dated September 24, 2004 in the original
principal amount of $6,077,500.00 payable to the order of
Valhi, Inc. and executed by Kronos Worldwide, Inc.
99.3* Press release jointly issued by Valhi, Inc. and NL
Industries, Inc. on September 24, 2004.
99.4** Audited consolidated financial statements of CompX
International Inc. - incorporated by reference to CompX's
Annual Report on Form 10-K (File No. 1-13905) for the year
ended December 31, 2003.
99.5** Unaudited Pro Forma Condensed Consolidated Financial
Statements of NL Industries, Inc.
99.6** Unaudited consolidated financial statements of CompX
International Inc. - incorporated by reference to CompX's
Quarterly Report on Form 10-Q (File No. 1-13905) for the
quarter ended June 30, 2004.
* Previously filed.
** Filed herewith.
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the (i) Registration
Statement on Form S-8 (File No. 33-29287) and related Prospectus pertaining to
the 1989 Long-Term Performance Incentive Plan of NL Industries, Inc., (ii)
Registration Statement on Form S-8 (File No. 33-25913) and related Prospectus
pertaining to the NL Industries, Inc. Retirement Savings Plan, (iii)
Registration Statement on Form S-8 (File No. 333-65817) and related Prospectus
pertaining to the 1998 Long-Term Incentive Plan of NL Industries, Inc. and (iv)
Registration Statement on Form S-8 (File No. 333-48145) and related Prospectus
pertaining to the 1992 Non-Employee Directors Stock Option Plan of NL
Industries, Inc., of our report dated February 23, 2004 relating to the
consolidated financial statements of CompX International Inc., which is
incorporated by reference in this Amendment No. 1 to Current Report on Form 8-K
of NL Industries, Inc dated September 24, 2004.
PricewaterhouseCoopers LLP
Dallas, Texas
October 26, 2004
Exhibit 99.5
NL INDUSTRIES, INC. UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30,
2004 gives effect to the following transaction as if such transaction had
occurred on June 30, 2004. The Unaudited Pro Forma Condensed Consolidated
Statements of Income for the year ended December 31, 2003 and the six months
ended June 30, 2004 gives effect to such transaction as if it had occurred as of
January 1, 2003:
o NL's acquisition of an aggregate of 10,374,000 shares of common stock of
CompX International Inc. from Valhi, Inc. and Valcor, Inc. (a wholly-owned
subsidiary of Valhi) for a purchase price of $16.25 per share, or an
aggregate of approximately $168.6 million, using as consideration the
transfer to Valhi and Valcor of a portion of NL's $200 million long-term
note receivable from Kronos Worldwide, Inc. equal to the aggregate $168.6
million purchase price.
You should read this information in conjunction with:
o The accompanying Notes to Pro Forma Condensed Consolidated Financial
Statements;
o The audited consolidated financial statements of NL as of and for the year
ended December 31, 2003 included in NL's Annual Report on Form 10-K for the
year ended December 31, 2003, filed with the Securities and Exchange
Commission ("SEC"), and the unaudited consolidated financial statement of
NL as of and for the six months ended June 30, 2004 included in NL's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, as filed
with the SEC; and
o The audited consolidated financial statements of CompX as of and for the
year ended December 31, 2003 included in CompX's Annual Report on Form 10-K
for the year ended December 31, 2003 filed with the SEC, and the unaudited
consolidated financial statement of CompX as of and for the six months
ended June 30, 2004 included in CompX's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2004, as filed with the SEC.
The Unaudited Pro Forma Condensed Consolidated Financial Statements are
presented to aid you in your analysis of the financial aspects of NL's
acquisition of the shares of CompX common stock. The Unaudited Pro Forma
Condensed Consolidated Financial Statements have been derived from NL's and
CompX's historical consolidated financial statements. The pro forma adjustments,
as described in the notes that follow, are based upon available information and
upon certain assumptions that NL believes to be reasonable and factually
supportable. The Unaudited Pro Forma Condensed Consolidated Financial Statements
are not necessarily indicative of what NL's financial position or results of
operations actually would have been had NL completed the acquisition at the
dates indicated. In addition, the Unaudited Pro Forma Condensed Consolidated
Financial Statements do not purport to project NL's future financial position or
results of operations following completion of such acquisition.
F-1
NL Industries, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 2004
(In millions)
NL CompX Pro forma NL
Historical Historical adjustments pro forma
---------- ---------- ----------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 115.8 $ 11.6 $ - $ 127.4
Restricted cash equivalents
and debt securities 20.1 - - 20.1
Receivables 204.4 28.7 - 233.1
Inventories 209.8 24.8 - 234.6
Prepaid expenses 4.4 1.1 - 5.5
Deferred income taxes 11.0 2.0 - 13.0
-------- ------ ------ --------
Total current assets 565.5 68.2 - 633.7
Marketable securities 53.6 - - 53.6
Restricted debt securities 9.4 - - 9.4
Receivable from affiliate 12.0 - - 12.0
Property and equipment, net 413.9 74.9 - 488.8
Investment in Ti02 joint venture 120.7 - - 120.7
Goodwill 6.4 43.0 3.0 52.4
Other intangible assets 1.7 1.8 - 3.5
Deferred income taxes 179.6 .5 - 180.1
Other assets 27.3 .4 - 27.7
-------- ------ ------ --------
Total assets $1,390.1 $188.8 $ 3.0 $1,581.9
======== ====== ====== ========
F-2
NL Industries, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Balance Sheet (Continued)
June 30, 2004
(In millions)
NL CompX Pro forma NL
Historical Historical adjustments pro forma
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current long-term debt $ .1 $ - $ - $ .1
Payables and accruals 191.6 23.3 - 214.9
Income taxes payable 7.2 1.0 - 8.2
Deferred income taxes 23.8 .5 - 24.3
-------- ------ ------- --------
Total current liabilities 222.7 24.8 - 247.5
-------- ------ ------- --------
Noncurrent liabilities:
Long-term debt 346.7 2.1 - 348.8
Notes payable to affiliate - - 168.6 168.6
Accrued pension costs 79.1 - - 79.1
Accrued OPEB costs 22.0 - - 22.0
Accrued environmental costs 57.2 - - 57.2
Deferred income taxes 55.9 4.2 26.4 86.5
Other noncurrent liabilities 19.3 - - 19.3
-------- ------ ------- --------
Total noncurrent liabilities 580.2 6.3 195.0 781.5
-------- ------ ------- --------
Minority interest 210.8 - 49.8 260.6
-------- ------ ------- --------
Total stockholders' equity 376.4 157.7 (241.8) 292.3
-------- ------ ------- --------
$1,390.1 $188.8 $ 3.0 $1,581.9
======== ====== ======= ========
See accompanying Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements
F-3
NL Industries, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 2003
(In millions, except per share amounts)
NL CompX NL
Historical Historical Pro forma adjustments pro forma
---------- ---------- --------------------- ---------
Net sales $1,008.2 $207.5 $ - $ - $1,215.7
Cost of sales 739.2 172.8 - - 912.0
-------- ------ ------ ------ --------
Gross margin 269.0 34.7 - - 303.7
Selling, general, and
administrative expenses 124.4 27.3 - - 151.7
Other expenses, net 53.8 4.0 - - 57.8
-------- ------ ------ ------ --------
Income from operations 90.8 3.4 - - 94.2
Interest expense 33.0 1.3 - 15.2 49.5
Other nonoperating income, net 6.4 .2 - - 6.6
-------- ------ ------ ------ --------
Income before income taxes
and minority interest 64.2 2.3 - (15.2) 51.3
Provision for income taxes (benefit) (1.5) 1.0 .1 (6.1) (6.5)
Minority interest in net earnings 2.0 - .4 - 2.4
-------- ------ ------ ------ --------
Net income $ 63.7 $ 1.3 $ (.5) $(9.1) $ 55.4
======== ====== ====== ===== ========
Diluted net income per share $ 1.33 $ 1.16
======== ========
Common shares used in calculation
of per share amounts 47.8 47.8
======== ========
See accompanying Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements
F-4
NL Industries, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Consolidated Statement of Income
Six months ended June 30, 2004
(In millions, except per share amounts)
NL CompX NL
Historical Historical Pro forma adjustments pro forma
---------- ---------- --------------------- ---------
Net sales $ 559.1 $109.8 $ - $ - $ 668.9
Cost of sales 429.8 86.5 - - 516.3
------- ------ ------ ----- -------
Gross margin 129.3 23.3 - - 152.6
Selling, general and
administrative expenses 70.2 15.0 - - 85.2
Other income (expense), net (3.9) .4 - - (3.5)
------- ------ ------ ----- -------
Income from operations 55.2 8.7 - - 63.9
Interest expense 17.8 .3 - 7.6 25.7
Other nonoperating income, net 1.9 .1 - - 2.0
------- ------ ------ ----- -------
Income before income taxes and
minority interest 39.3 8.5 - (7.6) 40.2
Provision for income taxes (benefit) (281.6) 3.7 .2 (3.0) (280.7)
Minority interest in net earnings 137.8 - 1.5 - 139.3
------- ------ ------ ----- -------
Net income $ 183.1 $ 4.8 $ (1.7) $(4.6) $ 181.6
======= ====== ====== ===== =======
Diluted net income per share $ 3.79 $ 3.75
======= =======
Common shares used in calculation of
per share amounts 48.4 48.4
======= =======
See accompanying Notes to Unaudited Pro Forma Condensed
Consolidated Financial Statements
F-5
NL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Note 1 - Basis of presentation:
On September 24, 2004, NL Industries, Inc. completed the acquisition of an
aggregate of 10,374,000 shares of the common stock of CompX International Inc.
from Valhi, Inc. and Valcor, Inc. (a wholly-owned subsidiary of Valhi). Such
shares of CompX common stock represent approximately 68% of the total number of
shares of CompX common stock outstanding. Valhi owns, directly or through
another wholly-owned subsidiary of Valhi, approximately 84% of the outstanding
common shares of NL. Contran Corporation owns, directly or through subsidiaries,
approximately 90% of the outstanding common stock of Valhi. The purchase price
for such NL shares was $16.25 per share, or an aggregate of approximately $168.6
million. The consideration for such CompX shares acquired by NL consisted of
NL's transfer to Valhi and Valcor of a portion of NL's $200 million long-term
note receivable from Kronos Worldwide, Inc. equal to the aggregate $168.6
million purchase price.
Valhi, Valcor, NL and CompX are all entities under the common control of
Contran. Accordingly, under accounting principles generally accepted in the
United States of America, NL's acquisition of the CompX shares results in a
change in reporting entity for NL, and NL will account for the acquisition of
the shares of CompX common stock in a manner similar to a pooling-of-interests.
NL will record the CompX shares acquired from Valhi and Valcor at their
carry-over basis, including any incremental deferred income taxes Valhi and
Valcor have recognized with respect to their investment in CompX. Any excess of
the aggregate $168.6 million principal amount of NL's note receivable from
Kronos transferred to Valhi and Valcor over the net carrying value of Valhi's
and Valcor's investment in CompX is accounted for as a reduction of NL's
consolidated stockholders' equity. NL will consolidate the financial position,
result of operations and cash flows of CompX as of the beginning of the period
in which the acquisition is completed, and NL will retroactively restate all
prior periods for comparability to also reflect the consolidation of CompX.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30,
2004 gives effect to NL's acquisition of the shares of CompX common stock from
Valhi and Valcor as if such acquisition had occurred on June 30, 2004. The
Unaudited Pro Forma Condensed Consolidated Statements of Income for the year
ended December 31, 2003 and the six months ended June 30, 2004 gives effect to
such transaction as it had occurred as of January 1, 2003. The pro forma
adjustments are explained in more detail below.
F-6
Note 2 - Pro forma adjustments - Unaudited Condensed Consolidated Balance Sheet:
Valhi's and Valcor's aggregate net investment in CompX, the minority
interest in CompX's net assets and the excess of NL's purchase price for the
shares of CompX common stock acquired over the net carrying value of Valhi's and
Valcor's net investment in CompX, in each case as of June 30, 2004, is presented
in the table below.
Amount
(In millions)
-------------
Valhi's and Valcor's net investment in CompX
CompX historical net assets $157.7
======
Valhi/Valcor pro-rata share of CompX's historical
net assets $107.9
Valhi/Valcor purchase accounting adjustments - 3.0
------
goodwill
110.9
Less Valhi/Valcor incremental deferred income taxes
related to their investment in CompX 26.4
------
Net investment in CompX $ 84.5
======
Minority interest in CompX's net assets
CompX historical net assets $157.7
Less Valhi/Valcor pro-rata share of CompX's
historical net assets 107.9
------
Minority interest in CompX's net assets $ 49.8
======
Excess of NL's purchase price for the CompX shares
acquired over the net carrying value of Valhi's and
Valcor's net investment in CompX
Consideration paid aggregate principal amount of note receivable from Kronos
transferred to Valhi
and Valcor $168.6
Valhi's and Valcor's net investment of CompX 84.5
------
Excess charged to NL's stockholders' equity $ 84.1
======
As noted above, NL will record the CompX shares acquired from Valhi and
Valcor at their carry-over basis, including any incremental deferred income
taxes Valhi and Valcor have recognized with respect to their investment in
CompX. The pro forma adjustment related to goodwill recognizes the goodwill
F-8
attributable to Valhi's and Valcor's aggregate net investment in CompX. The pro
forma adjustment related to noncurrent deferred income taxes recognizes the
incremental deferred incomes related to Valhi's and Valcor's investment in
CompX. The pro forma adjustment related to minority interest recognizes the
minority interest in CompX's net assets that are attributable to CompX
shareholders other than Valhi and Valcor.
As noted above, the consideration for the CompX shares acquired by NL
consisted of NL's transfer to Valhi and Valcor of a portion of NL's $200 million
long-term note receivable from Kronos equal to the aggregate $168.6 million
purchase price. At June 30, 2004, NL consolidated Kronos' financial position,
and accordingly NL's $200 million note receivable from Kronos and Kronos' $200
million note payable to NL are both eliminated in the preparation of NL's
historical consolidated balance sheet at such date. The pro forma adjustment
related to noncurrent notes payable to affiliates represents that portion of
Kronos' $200 million long-term note payable to NL that would no longer be
eliminated in the preparation of NL's consolidated balance sheet because $168.6
million of such note payable would now be payable to Valhi and Valcor. Also as
noted above, any excess of the aggregate $168.6 million principal amount of NL's
note receivable from Kronos transferred to Valhi and Valcor over the net
carrying value of Valhi's and Valcor's investment in CompX is accounted for as a
reduction of NL's consolidated stockholders' equity. NL's pro forma consolidated
stockholders' equity at June 30, 2004 is comprised of (i) $376.4 million (NL's
historical consolidated stockholders' equity at such date) less (ii) the $84.1
million excess of the aggregate principal amount of NL's note receivable from
Kronos transferred to Valhi and Valcor over the net carrying value of Valhi's
and Valcor's investment in CompX at such date.
Note 3- Pro forma adjustments - Unaudited Condensed Consolidated Statement of
Operations:
The aggregate amount of CompX's net income that accrued to Valhi and Valcor
for financial reporting purposes for the year ended December 31, 2003 and the
six months ended June 30, 2004, net of related incremental deferred income
taxes, and the minority interest in CompX's net earnings for such periods, are
presented in the table below.
Year ended Six months
December 31, ended
2003 June 30, 2004
------------ -------------
(In millions)
CompX historical net income $1.3 $4.8
==== ====
Valhi/Valcor pro-rata share of CompX's
historical net income $ .9 $3.3
Valhi/Valcor incremental deferred income
taxes related to their equity in CompX's
historical net income .1 .2
---- ----
Net $ .8 $3.1
==== ====
CompX historical net income $1.3 $4.8
Valhi/Valcor pro rata shares of CompX's
net income .9 3.3
---- ----
Minority interest in CompX's net earnings $ .4 $1.5
==== ====
As noted above, NL will record the CompX shares acquired from Valhi and
Valcor at their carry-over basis including any incremental deferred income taxes
Valhi and Valcor have recognized with respect to their investment in CompX. The
F-8
pro forma adjustment related to the provision for income taxes recognizes the
incremental deferred incomes related to Valhi's and Valcor's aggregate net
equity in CompX's historical net income. The pro forma adjustment related to
minority interest recognizes the minority interest in CompX's net income that is
attributable to CompX shareholders other than Valhi and Valcor.
As noted above, the consideration for the CompX shares acquired by NL
consisted of NL's transfer to Valhi and Valcor of a portion of NL's $200
million, 9% note receivable from Kronos equal to the aggregate $168.6 million
purchase price. During the year ended December 31, 2003 and the six months ended
June 30, 2004, NL consolidated Kronos' results of operations, and accordingly
the interest income related to NL's $200 million note receivable from Kronos,
and the interest expense related to Kronos' note payable to NL, have both been
eliminated in the preparation of NL's historical consolidated income statements
for such periods. The pro forma adjustment related to interest expense
represents the interest expense on that portion of Kronos' $200 million
long-term note payable to NL that would no longer be eliminated in the
preparation of NL's consolidated income statement since $168.6 million of such
note payable would now be payable to Valhi and Valcor. Kronos distributed such
$200 million note payable to NL in December 2003. However, for purposes of these
unaudited pro forma condensed consolidated financial statements, we have assumed
such note payable was distributed to NL on January 1, 2003. The pro forma
adjustment to interest expense for the year ended December 31, 2003 is $15.2
million ($168.6 million at 9% per annum), and the pro forma adjustment to
interest expense for the six months ended June 30, 2004 is $7.6 million
(one-half of the annual amount). An income tax benefit has been recognized with
respect to the pro forma adjustment to interest expense using the estimated
combined U.S. federal and state effective income tax rate of 40%.
F-9