SECURITIES
AND EXCHANGE COMMISSION
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|
Washington,
D.C. 20549
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|
X
FORM
10-K
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT
OF 1934 - For the fiscal year ended December
31, 2008
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Commission
file number 1-640
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NL
INDUSTRIES, INC.
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(Exact
name of Registrant as specified in its charter)
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New
Jersey
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13-5267260
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(State
or other jurisdiction of
incorporation
or organization)
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(IRS
Employer
Identification
No.)
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5430 LBJ Freeway, Suite 1700, Dallas,
Texas
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75240-2697
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant's
telephone number, including area
code: (972) 233-1700
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Securities
registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name
of each exchange on
which
registered
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Common
stock
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New
York Stock Exchange
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ITEM
1. BUSINESS
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·
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Future
supply and demand for our products,
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·
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The
extent of the dependence of certain of our businesses on certain market
sectors,
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·
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The
cyclicality of our businesses (such as Kronos’ titanium dioxide pigments
(“TiO2”)
operations),
|
·
|
Customer
inventory levels (such as the extent to which Kronos’ customers may, from
time to time, accelerate purchases of TiO2 in
advance of anticipated price increases or defer purchases of TiO2 in
advance of anticipated price
decreases),
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·
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Changes
in raw material and other operating costs (such as energy and steel
costs),
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·
|
General
global economic and political conditions (such as changes in the level of
gross domestic product in various regions of the world and the impact of
such changes on demand for, among other things, TiO2 and
component products),
|
·
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Possible
disruption of our business or increases in the cost of doing business
resulting from terrorist activities or global
conflicts,
|
·
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Competitive
products and substitute products, including increased competition from
low-cost manufacturing sources (such as
China),
|
·
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Customer
and competitor strategies,
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·
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Potential
consolidation or solvency of our
competitors,
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·
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Demand
for office furniture,
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·
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Demand
for high performance marine
components,
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·
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Substitute
products,
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·
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The
impact of pricing and production
decisions,
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·
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Competitive
technology positions,
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·
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The
introduction of trade barriers,
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·
|
Service
industry employment levels,
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·
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Fluctuations
in currency exchange rates (such as changes in the exchange rate between
the U.S. dollar and each of the euro, the Norwegian kroner, the Canadian
dollar and the New Taiwan dollar),
|
·
|
Operating
interruptions (including, but not limited to, labor disputes, leaks,
natural disasters, fires, explosions, unscheduled or unplanned downtime
and transportation interruptions),
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·
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The
timing and amounts of insurance
recoveries,
|
·
|
Our
ability to maintain sufficient
liquidity,
|
·
|
The
extent to which our subsidiaries were to become unable to pay us
dividends,
|
·
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CompX’s
and Kronos’ ability to renew or refinance credit
facilities,
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·
|
The
ultimate outcome of income tax audits, tax settlement initiatives or other
tax matters,
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·
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Potential
difficulties in integrating completed or future
acquisitions,
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·
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Decisions
to sell operating assets other than in the ordinary course of
business,
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·
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Uncertainties
associated with new product
development,
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·
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The
ultimate ability to utilize income tax attributes or changes in income tax
rates related to such attributes, the benefits of which have been
recognized under the more-likely-than-not recognition
criteria,
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·
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Environmental
matters (such as those requiring compliance with emission and discharge
standards for existing and new facilities or new developments regarding
environmental remediation at sites related to our former
operations),
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·
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Government
laws and regulations and possible changes therein (such as changes in
government regulations which might impose various obligations on present
and former manufacturers of lead pigment and lead-based paint, including
us, with respect to asserted health concerns associated with the use of
such products),
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·
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The
ultimate resolution of pending litigation (such as our lead pigment and
environmental matters), and
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·
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Possible
future litigation.
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Component
Products
CompX
International Inc. - 87%
owned
at December 31, 2008
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CompX
is a leading manufacturer of security products, precision ball bearing
slides and ergonomic computer support systems used in the office
furniture, transportation, postal, tool storage, appliance and a variety
of other industries. CompX is also a leading manufacturer of
stainless steel exhaust systems, gauges and throttle controls for the
performance marine industry. CompX has production facilities in
North America and Asia.
|
Chemicals
Kronos
Worldwide, Inc. – 36%
owned
at December 31, 2008
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Kronos
is a leading global producer and marketer of value-added TiO2
pigments, which are used for imparting whiteness, brightness and opacity
to a diverse range of customer applications and end-use markets, including
coatings, plastics, paper and other industrial and consumer
"quality-of-life" products. Kronos has production
facilities in Europe and North America. Sales of TiO2
represented about 90% of Kronos’ total sales in 2008, with sales of
other products that are complementary to Kronos’ TiO2
business comprising the
remainder.
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·
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disc
tumbler locks which provide moderate security and generally represent the
lowest cost lock to produce;
|
·
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pin
tumbler locking mechanisms which are more costly to produce and are used
in applications requiring higher levels of security, including CompX’s
KeSet high
security system, which allows the user to change the keying on a single
lock 64 times without removing the lock from its enclosure;
and
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·
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innovative
eLock electronic locks which provide stand-alone security and audit trail
capability for drug storage and other valuables through the use of a
proximity card, magnetic stripe, or keypad
credentials.
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·
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the
patented Integrated
Slide Lock which allows a file cabinet manufacturer to reduce the
possibility of multiple drawers being opened at the same
time;
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·
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the
patented adjustable Ball
Lock which reduces the risk of heavily-filled drawers, such as auto
mechanic tool boxes, from opening while in
movement;
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·
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the
Self-Closing
Slide, which is designed to assist in closing a drawer and is used
in applications such as bottom-mount
freezers;
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·
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articulating
computer keyboard support arms (designed to attach to desks in the
workplace and home office environments to alleviate possible user strains
and stress and maximize usable workspace), along with the patented LeverLock keyboard arm,
which is designed to make ergonomic adjustments to the keyboard arm
easier;
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·
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CPU
storage devices which minimize adverse effects of dust and moisture;
and
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·
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complementary
accessories, such as ergonomic wrist rest aids, mouse pad supports and
flat screen computer monitor support
arms.
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·
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original
equipment and aftermarket stainless steel exhaust headers, exhaust pipes,
mufflers and other exhaust components;
and
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·
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high
performance gauges such as GPS speedometers and
tachometers;
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·
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controls,
throttles, steering wheels and other billet accessories;
and
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·
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dash
panels, LED lighting, rigging and other
accessories.
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Security Products
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Furniture Components
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Marine Components
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||
Mauldin,
SC
Grayslake,
IL
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Kitchener,
Ontario
Byron
Center, MI
Taipei,
Taiwan
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Neenah,
WI
Grayslake,
IL
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·
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zinc,
copper and brass (used in the Security Products business for the
manufacture of locking mechanisms);
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·
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coiled
steel (used in the Furniture Components business for the manufacture of
precision ball bearing slides and ergonomic computer support
systems);
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·
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stainless
steel (used in the Marine Components business for the manufacture of
exhaust headers, pipes and other components);
and
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·
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plastic
resins (primarily used in the Furniture Components business for injection
molded plastics in the manufacture of ergonomic computer support
systems).
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Furniture
Components
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Security
Products
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Marine
Components
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||
CompX
Precision Slides®
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CompX
Security Products®
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Custom
Marine®
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||
CompX
Waterloo®
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National
Cabinet Lock®
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Livorsi
Marine®
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CompX
ErgonomX®
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Fort
Lock®
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CMI
Industrial Mufflers™
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CompX
DurISLide®
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Timberline®
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Custom
Marine Stainless
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Dynaslide®
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Chicago
Lock®
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Exhaust™
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Waterloo
Furniture
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STOCK
LOCKS®
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The
#1 Choice in
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||
Components
Limited®
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KeSet®
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Performance
Boating®
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TuBar®
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Mega
Rim™
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|||
CompX
eLock®
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Race
Rim™
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|||
Lockview®
Software
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CompX
Marine™
|
·
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shifting
the manufacture of some products to our lower-cost
facilities;
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·
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working
to reduce costs and gain operational efficiencies through workforce
reductions and lean process improvements in all of our facilities;
and
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·
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working
with our customers to be their value-added supplier of choice by offering
customer support services which Asian-based suppliers are generally unable
to provide.
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United
States
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658 | |||
Canada(1)
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237 | |||
Taiwan
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81 | |||
Total
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976 |
(1)
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Approximately
75% of the Canadian employees are represented by a labor union covered by
a collective bargaining agreement. A new collective bargaining
agreement, providing for wage increases from 0% to 1%, was ratified in
January 2009 and expires January
2012.
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·
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Kronos
owns and operates an ilmenite mine in Norway pursuant to a governmental
concession with an unlimited term, and Kronos is currently excavating a
second mine located near the first mine. Ilmenite is a raw
material used directly as a feedstock by some sulfate-process TiO2
plants, including all of Kronos’ European sulfate-process
plants. Kronos also sells ilmenite ore to third-parties, some
of which are its competitors. The mines have estimated
aggregate reserves that are expected to last for at least another 60
years.
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·
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Kronos
manufactures and sells iron-based chemicals that are co-products and
processed co-products of TiO2
pigment production. These co-product chemicals are marketed
through Kronos’ Ecochem division and are used primarily as treatment and
conditioning agents for industrial effluents and municipal wastewater as
well as in the manufacture of iron pigments, cement and agricultural
products.
|
·
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Kronos
manufactures and sells titanium oxychloride and titanyl sulfate which are
side-stream products from the production of TiO2. Titanium
oxychloride is used in specialty applications in the formulation of
pearlescent pigments and in the production of electroceramic capacitors
for cell phones and other electronic devices. Titanyl sulfate
products are used primarily in pearlescent
pigments.
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Production Process/Raw
Material
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Raw Materials Procured or
Mined
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(In
thousands of metric tons)
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Chloride
process plants:
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Purchased
slag or natural rutile ore
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422
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Sulfate
process plants:
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Raw
ilmenite ore mined & used internally
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305
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Purchased
slag
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30
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·
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Competitors
may be able to drive down prices for our products because their costs are
lower than our costs, especially those located in
Asia.
|
·
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Competitors'
financial, technological and other resources may be greater than our
resources, which may enable them to more effectively withstand changes in
market conditions.
|
·
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Competitors
may be able to respond more quickly than we can to new or emerging
technologies and changes in customer
requirements.
|
·
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Consolidation
of our competitors or customers in any of the markets in which we compete
may result in reduced demand for our
products.
|
·
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New
competitors could emerge by modifying their existing production facilities
to manufacture products that compete with our
products.
|
·
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Our
ability to sustain a cost structure that enables us to be
cost-competitive.
|
·
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Our
ability to adjust costs relative to our
pricing.
|
·
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Customers
may no longer value our product design, quality or durability over lower
cost products of our competitors.
|
·
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the
identification of suitable growth
opportunities;
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·
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an
inaccurate assessment of acquired
liabilities;
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·
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the
entry into markets in which we may have limited or no
experience;
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·
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the
diversion of management’s attention from our core
businesses;
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·
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the
potential loss of key employees or customers of the acquired
businesses;
|
·
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difficulties
in realizing projected efficiencies, synergies and cost savings;
and
|
·
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an
increase in our indebtedness and a limitation in our ability to access
additional capital when needed.
|
·
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making
it more difficult for Kronos to satisfy its obligations with respect to
its liabilities;
|
·
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increasing
its vulnerability to adverse general economic and industry
conditions;
|
·
|
requiring
that a portion of Kronos’ cash flows from operations be used for the
payment of interest on its debt, which reduces its ability to use cash
flow to fund working capital, capital expenditures, dividends on our
common stock, acquisitions or general corporate
requirements;
|
·
|
limiting
its ability to obtain additional financing to fund future working capital,
capital expenditures, dividends on its common stock, acquisitions or
general corporate requirements;
|
·
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limiting
its flexibility in planning for, or reacting to, changes in Kronos’
business and the industry in which it operates;
and
|
·
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placing
it at a competitive disadvantage relative to other less leveraged
competitors.
|
·
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complexity
and differing interpretations of governmental
regulations;
|
·
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number
of PRPs and their ability or willingness to fund such allocation of
costs;
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·
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financial
capabilities of the PRPs and the allocation of costs among
them;
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·
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solvency
of other PRPs;
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·
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multiplicity
of possible solutions; and
|
·
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number
of years of investigatory, remedial and monitoring activity
required.
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High
|
Low
|
Cash
dividends
paid
|
||||||||||
Year
ended December 31, 2007
|
||||||||||||
First
Quarter
|
$ | 12.09 | $ | 10.02 | $ | .125 | ||||||
Second
Quarter
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13.52 | 10.02 | .125 | |||||||||
Third
Quarter
|
13.05 | 9.49 | .125 | |||||||||
Fourth
Quarter
|
12.33 | 9.34 | .125 | |||||||||
Year
ended December 31, 2008
|
||||||||||||
First
Quarter
|
$ | 11.63 | $ | 8.65 | $ | .125 | ||||||
Second
Quarter
|
11.89 | 9.53 | .125 | |||||||||
Third
Quarter
|
10.93 | 9.37 | .125 | |||||||||
Fourth
Quarter
|
13.96 | 8.09 | .125 | |||||||||
January
1, 2009 through February 27, 2009
|
$ | 14.35 | $ | 9.21 | $ | .125 |
2003
|
2004
|
2005
|
2006
|
2007
|
2008
|
|||||||||||||||||||
NL
common stock
|
$ | 100 | $ | 213 | $ | 144 | $ | 111 | $ | 128 | $ | 157 | ||||||||||||
S&P
500 Composite Stock Price Index
|
100 | 111 | 116 | 135 | 142 | 90 | ||||||||||||||||||
S&P
500 Industrial Conglomerates Index
|
100 | 119 | 115 | 125 | 130 | 63 | ||||||||||||||||||
|
ITEM
6. SELECTED FINANCIAL
DATA
|
Years ended December 31,
|
||||||||||||||||||||
2004
|
2005
|
2006
|
2007
|
2008
|
||||||||||||||||
(In
millions, except per share data)
|
||||||||||||||||||||
STATEMENTS
OF OPERATIONS DATA:
|
||||||||||||||||||||
Net
sales:
|
||||||||||||||||||||
Component
products
|
$ | 182.6 | $ | 186.4 | $ | 190.1 | $ | 177.7 | $ | 165.5 | ||||||||||
Chemicals
(1)
|
559.1 | - | - | - | - | |||||||||||||||
$ | 741.7 | $ | 186.4 | $ | 190.1 | $ | 177.7 | $ | 165.5 | |||||||||||
Income
from operations:
|
||||||||||||||||||||
Component
products
|
$ | 16.2 | $ | 19.3 | $ | 20.5 | $ | 15.4 | $ | 5.3 | ||||||||||
Chemicals
(1)
|
66.7 | - | - | - | - | |||||||||||||||
$ | 82.9 | $ | 19.3 | $ | 20.5 | $ | 15.4 | $ | 5.3 | |||||||||||
Equity
in earnings(losses) of Kronos (1)
|
$ | 9.1 | $ | 25.7 | $ | 29.3 | $ | (23.9 | ) | $ | 3.2 | |||||||||
Income
(loss) from continuing operations
|
$ | 159.1 | $ | 33.3 | $ | 26.1 | $ | (1.7 | ) | 33.2 | ||||||||||
Discontinued
operations
|
3.5 | (.3 | ) | - | - | - | ||||||||||||||
Net
income (loss)
|
$ | 162.6 | $ | 33.0 | $ | 26.1 | $ | (1.7 | ) | $ | 33.2 | |||||||||
DILUTED
EARNINGS PER SHARE DATA:
|
||||||||||||||||||||
Income
(loss) from continuing operations
|
$ | 3.29 | $ | .68 | $ | .54 | $ | (.04 | ) | $ | .68 | |||||||||
Discontinued
operations
|
.07 | - | - | - | - | |||||||||||||||
Net
income (loss)
|
$ | 3.36 | $ | .68 | $ | .54 | $ | (.04 | ) | $ | .68 | |||||||||
Dividends
per share (2)
|
$ | .80 | $ | 1.00 | $ | .50 | $ | .50 | $ | .50 | ||||||||||
Weighted
average common shares outstanding
|
48,419 | 48,587 | 48,584 | 48,590 | 48,605 | |||||||||||||||
BALANCE
SHEET DATA (at year end):
|
||||||||||||||||||||
Total
assets
|
$ | 552.5 | $ | 485.6 | $ | 529.3 | $ | 524.8 | $ | 419.5 | ||||||||||
Long-term debt, including current maturities (3)
|
.1 | 1.4 | - | 50.0 | 43.0 | |||||||||||||||
Stockholders'
equity
|
234.2 | 220.3 | 248.5 | 246.5 | 188.4 | |||||||||||||||
STATEMENT
OF CASH FLOW DATA:
|
||||||||||||||||||||
Net
cash provided by(used in):
|
||||||||||||||||||||
Operating
activities
|
$ | 92.7 | $ | (5.3 | ) | $ | 29.0 | $ | (2.8 | ) | $ | .8 | ||||||||
Investing
activities
|
34.5 | 18.5 | (25.2 | ) | 17.5 | 7.1 | ||||||||||||||
Financing
activities
|
(28.7 | ) | (35.8 | ) | (27.7 | ) | (27.3 | ) | (32.2 | ) |
(1)
|
We
ceased to consolidate the Kronos chemicals segment effective July 1, 2004,
at which time we commenced to account for our interest in Kronos by the
equity method.
|
(2)
|
Amounts
paid in 2005 (last three quarters), 2006, 2007 and 2008 were cash
dividends, while amounts paid in 2004 and the first quarter of 2005 were
in the form of shares of Kronos common
stock.
|
(3)
|
Long-term
debt in 2007 and 2008 represents a promissory note payable to an
affiliate. See Note 17 to the Consolidated Financial
Statements.
|
·
|
a
litigation settlement pre-tax gain of $48.8 million in
2008;
|
·
|
a
goodwill impairment charge of $10.1 million in
2008;
|
·
|
higher
equity in earnings from Kronos in
2008;
|
·
|
lower
litigation and related expenses in
2008;
|
·
|
higher
environmental costs in 2008; and
|
·
|
higher
insurance recoveries in 2008.
|
·
|
lower
equity in earnings from Kronos in
2007;
|
·
|
lower
insurance recoveries in 2007;
|
·
|
higher
legal defense costs in 2007;
|
·
|
higher
securities transaction gains in 2007;
and
|
·
|
lower
component products income from operations in
2007.
|
·
|
a
litigation settlement gain of $.65 per diluted share related to the
settlement of condemnation proceedings on real property we
owned;
|
·
|
a
goodwill impairment charge of $.21 per diluted share related to the marine
business line of our component products
operations;
|
·
|
interest
income of $.06 per diluted share related to certain escrow
funds;
|
·
|
income
included in our equity in earnings of Kronos of $.03 per diluted share
related to an adjustment of certain income tax attributes of Kronos in
Germany; and
|
·
|
income
of $.13 per diluted share related to certain insurance
recoveries.
|
·
|
a
charge included in our equity in earnings of Kronos of $.43 per diluted
share related to a reduction in Kronos’ net deferred income tax asset
resulting from a change in German income tax rates as discussed
below;
|
·
|
a
charge included in our equity in earnings of Kronos of $.04 per diluted
share related to an adjustment of certain income tax attributes of Kronos
in Germany;
|
·
|
income
of $.30 per diluted share from a gain on sale of TIMET common
stock;
|
·
|
income
of $.08 per diluted share related to certain insurance recoveries we
received; and
|
·
|
income
of $.03 per diluted share due to a net reduction in our reserve for
uncertain tax positions.
|
·
|
a
charge included in our equity in earnings of Kronos of $.07 per diluted
share related to Kronos’ redemption of its 8.875% Senior Secured
Notes;
|
·
|
income
included in our equity in earnings of Kronos of $.16 per diluted share
related to Kronos’ aggregate income tax benefit associated with the net
effects of the withdrawal of certain income tax assessments previously
made by the Belgian and Norwegian tax authorities, the resolution of
certain income tax issues related to German and Belgian operations and the
enactment of a reduction in the Canadian federal income tax rate;
and
|
·
|
income
of $.10 per diluted share related to certain insurance recoveries we
received.
|
·
|
lower
income from operations in 2009 as a result of higher legal defense
costs;
|
·
|
lower
equity in earnings from Kronos in 2009;
and
|
·
|
lower
litigation settlement gains in
2009.
|
·
|
Investments - We own
investments in certain companies that we account for as marketable
securities carried at fair value (Level 1 inputs) or that we account for
under the equity method. For all such investments, we record an
impairment charge when we believe that an investment has experienced a
decline in fair value below its cost basis (for marketable securities) or
below its carrying value (for equity method investees) that is other than
temporary. Future adverse changes in market conditions or poor
operating results of underlying investments could result in losses or an
inability to recover the carrying value of the investments that may not be
reflected in an investment's current carrying value, thereby possibly
requiring an impairment charge in the
future.
|
·
|
Long-lived
assets. We recognize an impairment charge associated
with our long-lived assets, including property and equipment, whenever we
determine that recovery of such long-lived asset is not
probable. Such determination is made in accordance with the
applicable GAAP requirements of SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, and is based upon, among other
things, estimates of the amount of future net cash flows to be generated
by the long-lived asset (Level 3 inputs) and estimates of the current fair
value of the asset. Significant judgment is required in
estimating such cash flows. Assumptions used in our impairment
evaluations, such as forecasted growth rates and our cost of capital, are
consistent with our internal projections and operating
plans. We do not assess our property and equipment for
impairment unless certain impairment indicators specified in SFAS No. 144
are present. We did not evaluate any long-lived assets for impairment
during 2008 because no such impairment indicators were
present.
|
·
|
Goodwill - In
accordance with SFAS No. 142, Goodwill and other Intangible
Assets, we review goodwill for impairment at least on an annual
basis. We are also required to review goodwill for impairment
at other times during each year when impairment indicators, as defined,
are present. The estimated fair values of CompX’s three
reporting units are determined based on discounted cash flow projections
(Level 3 inputs). See Note 8 to the Consolidated Financial
Statements. Considerable management judgment is necessary to
evaluate the impact of operating changes and to estimate future cash
flows. Assumptions used in our impairment evaluations, such as
forecasted growth rates and our cost of capital, are consistent with our
internal projections and operating
plans.
|
·
|
Benefit plans - We
maintain various defined benefit pension plans and postretirement benefits
other than pensions (“OPEB”). The amounts recognized as defined
benefit pension and OPEB expenses, and the reported amounts of prepaid and
accrued pension and OPEB costs, are actuarially determined based on
several assumptions, including discount rates, expected rates of return on
plan assets and expected health care trend rates. Variances
from these actuarially assumed rates will result in increases or
decreases, as applicable, in the recognized pension and OPEB obligations,
pension and OPEB expenses and funding requirements. These
assumptions are more fully described below under “Defined Benefit Pension
Plans” and “OPEB Plans.”
|
·
|
Income taxes - Deferred
taxes are recognized for future tax effects of temporary differences
between financial and income tax reporting in accordance with the
recognition criteria of SFAS No. 109, Accounting for Income
Taxes. We record a reserve for uncertain tax positions in
accordance with Financial Accounting Standards Board Interpretation No.
48, Accounting for
Uncertain Tax Positions for tax positions where we believe that it
is more-likely-than-not our position will not prevail with the applicable
tax authorities. While
we have considered future taxable income and ongoing prudent and feasible
tax planning strategies in assessing the need for a valuation allowance,
it is possible that in the future we may change our estimate of the amount
of the deferred income tax assets that would more-likely-than-not be
realized in the future resulting in an adjustment to the deferred income
tax asset valuation allowance that would either increase or decrease, as
applicable, reported net income in the period such change in estimate was
made.
|
·
|
Accruals - We record
accruals for environmental, legal and other contingencies and commitments
when estimated future expenditures associated with such contingencies
become probable, and the amounts can be reasonably
estimated. However, new information may become available, or
circumstances (such as applicable laws and regulations) may change,
thereby resulting in an increase or decrease in the amount required to be
accrued for such matters (and therefore a decrease or increase in reported
net income in the period of such
change).
|
·
|
Chemicals
– allowance for doubtful accounts, reserves for obsolete or unmarketable
inventories, impairment of equity method investees, long-lived assets,
defined benefit pension and OPEB plans and loss accruals,
and
|
·
|
Component
products – reserves for obsolete or unmarketable inventories, impairment
of goodwill and long-lived assets and loss
accruals.
|
Year ended December 31,
|
% Change
|
|||||||||||||||||||
2006
|
2007
|
2008
|
2006-07 | 2007-08 | ||||||||||||||||
(Dollars
in millions)
|
||||||||||||||||||||
CompX
|
$ | 20.5 | $ | 15.4 | $ | 5.3 | (25 | )% | (66 | )% | ||||||||||
Insurance
recoveries
|
7.7 | 5.6 | 9.6 | (27 | )% | 70 | % | |||||||||||||
Litigation
settlement gain
|
- | - | 48.8 | - | 100 | % | ||||||||||||||
Corporate
expense and other
|
(24.3 | ) | (31.3 | ) | (24.9 | ) | 29 | % | (20 | )% | ||||||||||
Income
(loss) from operations
|
$ | 3.9 | $ | (10.3 | ) | $ | 38.8 | (364 | )% | 477 | % |
Year ended December 31,
|
% Change
|
|||||||||||||||||||
2006
|
2007
|
2008
|
2006-07 | 2007-08 | ||||||||||||||||
(Dollars
in millions)
|
||||||||||||||||||||
Net
sales
|
$ | 190.1 | $ | 177.7 | $ | 165.5 | (7 | )% | (7 | )% | ||||||||||
Cost
of goods sold
|
143.6 | 132.5 | 125.7 | (8 | )% | (5 | )% | |||||||||||||
Gross
margin
|
46.5 | 45.2 | 39.8 | (3 | )% | (12 | )% | |||||||||||||
Operating
costs and expenses
|
26.0 | 29.8 | 34.5 | 15 | % | 16 | % | |||||||||||||
Income
from operations
|
$ | 20.5 | $ | 15.4 | $ | 5.3 | (25 | )% | (66 | )% | ||||||||||
Percentage
of net sales:
|
||||||||||||||||||||
Cost
of goods sold
|
76 | % | 75 | % | 76 | % | ||||||||||||||
Gross
margin
|
24 | % | 25 | % | 24 | % | ||||||||||||||
Operating
costs and expenses
|
14 | % | 16 | % | 21 | % | ||||||||||||||
Income
from operations
|
11 | % | 9 | % | 3 | % |
·
|
a
negative impact of approximately $5.4 million relating to lower order
rates from many of our customers resulting from unfavorable economic
conditions in North America,
|
·
|
increased
raw material costs that we were not able to fully recover through sales
price increases by approximately $1 million due to the competitive nature
of the markets we serve,
|
·
|
the
one-time $2.7 million charge for facility consolidation costs incurred in
2007,
|
·
|
$1.8
million in lower depreciation expense in 2008 due to a reduction in
capital expenditures for shorter lived assets over the last several years
in response to lower sales, and
|
·
|
$1.3
million favorable effect on operating income from changes in foreign
currency exchange rates.
|
·
|
a
higher portion of the sales decline in 2007 occurring among lower margin
products,
|
·
|
an
increased percentage of sales from our higher margin Marine
business,
|
·
|
the
$2.7 million charge for facility consolidation
costs,
|
·
|
a
$2.4 million unfavorable effect of relative changes in foreign currency
exchange rates (including the $1.2 million related to foreign exchange
transaction losses noted above),
|
·
|
lower
sales to the office furniture industry due to competition from lower
priced Asian manufacturers, and
|
·
|
lower
order rates from many of our customers due to unfavorable economic
conditions.
|
Increase
(decrease) –
Year ended December
31,
|
||||||||
2007 vs. 2006
|
2008 vs. 2007
|
|||||||
Impact
on:
|
(In
thousands)
|
|||||||
Net
sales
|
$ | 886 | $ | 406 | ||||
Income
from operations
|
(2,384 | ) | 1,304 |
·
|
Our
Security Products business is the least affected by the softness in
consumer demand, because we sell products to a diverse number of customers
across a wide range of markets, most of which are not directly impacted by
changes in consumer demand. While demand within this business
is not as significantly affected by softness in the overall economy, we do
expect sales to be lower over the next twelve
months.
|
·
|
Our
Furniture Components sales are primarily concentrated in the office
furniture, toolbox, home appliance and a number of other
industries. Several of these industries, primarily toolbox and
home appliance, are more directly affected by consumer demand than those
served by our Security Products business. We expect many of the
markets served by Furniture Components to continue to experience low
demand over the next twelve months.
|
·
|
Our
Marine business has been the most affected by the slowing economy as the
decrease in consumer confidence, the decline in home values, a tighter
credit market and volatile fuel costs have resulted in a significant
reduction in consumer spending in the marine market. We do not
expect the marine market to recover until consumer confidence returns and
home values stabilize.
|
Years ended December 31,
|
% Change
|
|||||||||||||||||||
2006
|
2007
|
2008
|
2006-07 | 2007-08 | ||||||||||||||||
(Dollars
in millions)
|
||||||||||||||||||||
Net
sales
|
$ | 1,279.4 | $ | 1,310.3 | $ | 1,316.9 | 2 | % | 1 | % | ||||||||||
Cost
of sales
|
968.9 | 1,058.9 | 1,096.3 | 9 | % | 4 | % | |||||||||||||
Gross
margin
|
$ | 310.5 | $ | 251.4 | $ | 220.6 | ||||||||||||||
Income
from operations
|
$ | 143.2 | $ | 84.9 | $ | 47.2 | (41 | )% | (44 | )% | ||||||||||
Other
general corporate, net
|
3.6 | 2.5 | 1.0 | |||||||||||||||||
Loss
on prepayment of debt
|
(22.3 | ) | - | - | ||||||||||||||||
Interest
expense
|
(43.2 | ) | (39.4 | ) | (42.2 | ) | ||||||||||||||
Income
before income taxes
|
81.3 | 48.0 | 6.0 | |||||||||||||||||
Provision
for income taxes (benefit)
|
(.7 | ) | 114.7 | (3.0 | ) | |||||||||||||||
Net
income (loss)
|
$ | 82.0 | $ | (66.7 | ) | $ | 9.0 | |||||||||||||
Percentage
of net sales:
|
||||||||||||||||||||
Cost
of sales
|
76 | % | 81 | % | 83 | % | ||||||||||||||
Income
from operations
|
11 | % | 6 | % | 4 | % | ||||||||||||||
Equity
in earnings (losses) of Kronos Worldwide, Inc.
|
$ | 29.3 | $ | (23.9 | ) | $ | 3.2 | |||||||||||||
TiO2
operating statistics:
|
||||||||||||||||||||
Sales
volumes*
|
511 | 519 | 478 | 1 | % | (8 | )% | |||||||||||||
Production
volumes*
|
516 | 512 | 514 | (1 | )% | - | % | |||||||||||||
Change
in Ti02
net sales:
|
||||||||||||||||||||
Ti02
product pricing
|
(4 | )% | 2 | % | ||||||||||||||||
Ti02
sales volume
|
1 | (8 | ) | |||||||||||||||||
Ti02
product mix
|
- | 2 | ||||||||||||||||||
Changes
in currency exchange rates
|
5 | 5 | ||||||||||||||||||
Total
|
2 | % | 1 | % |
Year
ended
December
31, 2007
vs. 2006
|
Year
ended
December
31, 2008
vs. 2007
|
|||||||
Increase (decrease), in
millions
|
||||||||
Impact
on:
|
||||||||
Net
sales
|
$ | 65 | $ | 61 | ||||
Income
from operations
|
(4 | ) | (4 | ) |
·
|
A
non-cash benefit of $7.2 million relating to a European Court ruling that
resulted in the favorable resolution of certain income tax issues in
Germany and an increase in the amount of Kronos’ German corporate and
trade tax net operating loss carryforwards.
|
·
|
a
non-cash charge of $90.8 million relating to a decrease in Kronos’ net
deferred income tax asset in Germany resulting from the reduction in
income tax rates;
|
·
|
a
non-cash charge of $8.7 million relating to the adjustment of certain
German income tax attributes; and
|
·
|
a
non-cash income tax benefit of $2.0 million resulting from a net reduction
in Kronos’ reserve for uncertain tax
positions.
|
·
|
an
income tax benefit of $21.7 million resulting from a favorable resolution
of certain income tax audits in Germany that resulted in an increase in
the amount of Kronos’ German trade tax net operating loss
carryforward;
|
·
|
an
income tax benefit of $10.7 million resulting from the reduction in
Kronos’ income tax contingency reserves related to favorable developments
with income tax audits in Belgium, Norway and
Germany;
|
·
|
an
income tax benefit of $1.4 million relating to the favorable resolution of
certain income tax audit issues in Germany and Belgium;
and
|
·
|
a
$1.1 million benefit resulting from the enactment of a reduction in
Canadian income tax rates.
|
·
|
Litigation
and related costs of $14.6 million in 2008 compared to $22.1 in 2007;
and
|
·
|
Environmental
expenses of $6.8 million in 2008, compared to $4.4 million in
2007.
|
·
|
Litigation
and related costs of $22.1 million in 2007 compared to $15.3 million in
2006; and
|
·
|
Environmental
expense of $4.4 million in 2007, compared to $4.3 million in
2006.
|
Discount
rates used for:
|
||||||||||||
Obligations
at
December
31, 2006
and
expense in 2007
|
Obligations
at
December
31, 2007 and expense in 2008
|
Obligations
at
December
31, 2008 and expense in 2009
|
||||||||||
U.S.
|
5.8 | % | 6.1 | % | 6.1 | % | ||||||
United
Kingdom
|
5.0 | % | 5.8 | % | 6.0 | % |
December 31,
|
||||||||
2007
|
2008
|
|||||||
Equity
securities
|
98 | % | 53 | % | ||||
Debt
securities
|
- | 43 | ||||||
Cash
and other
|
2 | 4 | ||||||
Total
|
100 | % | 100 | % |
2006
|
2007
|
2008
|
||||||||||
U.S.
|
10.0 | % | 10.0 | % | 10.0 | % | ||||||
United
Kingdom
|
6.5 | % | 6.5 | % | 7.0 | % |
·
|
higher
income from operations in 2008 of $10.4 million (excluding both the $10.1
million non-cash goodwill impairment charge and the litigation settlement
pre-tax gain of $48.8 million), due primarily to lower litigation expense
of $7.5 million and lower depreciation and amortization in 2008 of $2.0
million;
|
·
|
higher
interest income of $3.2 million in 2008 primarily due to $4.3 million of
interest received from certain escrow
funds;
|
·
|
higher
cash paid for environmental liabilities in 2008 of $2.3
million;
|
·
|
lower
net cash provided by relative changes in our inventories and receivables
of $3.0 million; and
|
·
|
higher
cash paid for interest in 2008 of $2.2 million due to CompX’s issuance of
its note payable to an affiliate in the fourth quarter of
2007.
|
·
|
higher
cash paid for income taxes in 2007 of $23.3 million due in part to income
tax payments we made related to the capital gain generated from Valhi’s
distribution of TIMET common stock in March 2007 (as discussed in Note 4
to the Consolidated Financial Statements) and the U.S. income taxes
related to a higher amount of dividends CompX received from its non-U.S.
subsidiaries in 2007;
|
·
|
higher
cash paid for legal expenses in 2007 of $8.5
million;
|
·
|
lower
cash received for insurance recoveries in 2007 of $2.0 million;
and
|
·
|
lower
cash paid for environmental liabilities in 2007 of $3.4
million.
|
Years ended December 31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
(In
millions)
|
||||||||||||
Cash
provided by (used in) operating
activities:
|
||||||||||||
CompX
|
$ | 27.4 | $ | 11.9 | $ | 15.7 | ||||||
NL
Parent and wholly-owned subsidiaries
|
6.9 | (9.3 | ) | (9.5 | ) | |||||||
Eliminations
|
(5.3 | ) | (5.4 | ) | (5.4 | ) | ||||||
Total
|
$ | 29.0 | $ | (2.8 | ) | $ | .8 |
·
|
We
received $39.6 million from the initial closing contained in a settlement
agreement related to condemnation proceedings on certain real property we
owned in New Jersey;
|
·
|
We
provided loans to affiliates in the amount of $19.2 million to Kronos and
$3.0 million to Valhi;
|
·
|
CompX
purchased approximately 126,000 shares of its common stock in market
transactions for $1.0 million;
|
·
|
We
purchased approximately 79,500 shares of Kronos common stock for $.8
million and approximately 79,000 shares of Valhi for $1.1 million in
market transactions; and
|
·
|
We
used a net $2.6 million of cash to fund two new escrow accounts related to
environmental matters (such escrow funds are classified as restricted
cash.)
|
·
|
We
sold 800,000 shares of TIMET common stock to Valhi at a cash price of
$33.50 per share, or an aggregate of $26.8
million;
|
·
|
We
had additional net proceeds from sales of other marketable securities of
$4.2 million; and
|
·
|
CompX
purchased approximately 179,100 shares of its common stock in market
transactions for $3.3 million.
|
·
|
CompX
acquired a marine component products company for $9.8 million, net of cash
acquired; and
|
·
|
We
purchased 147,500 shares of CompX common stock in market transactions for
$2.3 million.
|
·
|
CompX
paid cash dividends to minority interests in the amount of $.8 million in
2008, $1.9 million in 2007 and $2.3 million in
2006;
|
·
|
CompX
prepaid $7.0 million in 2008 and $2.6 million in 2007 on its note payable
to TIMET and in 2006 prepaid $1.6 million of indebtedness assumed in its
August 2005 business acquisition;
|
·
|
We
received proceeds from the exercise of options to purchase CompX common
stock of $1.4 million in 2007 and $.3 million in
2006.
|
CompX
|
$ | 14.4 | ||
NL
Parent and wholly-owned subsidiaries
|
15.0 | |||
Total
|
$ | 29.4 |
Payment due date
|
||||||||||||||||||||
Contractual commitment
|
2009
|
2010/2011 | 2012/2013 |
2014
and
After
|
Total
|
|||||||||||||||
(In
millions)
|
||||||||||||||||||||
Note
and interest payable to affiliate
|
$ | 3.1 | $ | 6.1 | $ | 5.9 | $ | 39.4 | $ | 54.5 | ||||||||||
Estimated
tax obligations
|
1.9 | - | - | - | 1.9 | |||||||||||||||
Operating
leases
|
.6 | .7 | .2 | - | 1.5 | |||||||||||||||
Purchase
obligations
|
16.5 | - | - | - | 16.5 | |||||||||||||||
Fixed
asset acquisitions
|
.6 | - | - | - | .6 | |||||||||||||||
$ | 22.7 | $ | 6.8 | $ | 6.1 | $ | 39.4 | $ | 75.0 | |||||||||||
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
·
|
pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of our
assets,
|
·
|
provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP, and that
receipts and expenditures are being made only in accordance with
authorizations of management and directors,
and
|
·
|
provide
reasonable assurance regarding prevention or timely detection of an
unauthorized acquisition, use or disposition of assets that could have a
material effect on our Condensed Consolidated Financial
Statements.
|
(a)
and (c)
|
Financial
Statements and Schedules
|
|
The
consolidated financial statements of Kronos (36%-owned at December 31,
2008) are incorporated by reference in Exhibit 99.1 of this Annual Report
pursuant to Rule 3-09 of Regulation S-X. Management’s Report on
Internal Control Over Financial Reporting of Kronos is not included as
part of Exhibit 99.1. The Registrant is not required to provide
any other consolidated financial statements pursuant to Rule 3-09 of
Regulation S-X.
|
|
(b)
|
Exhibits
|
2.1
|
Form
of Distribution Agreement between NL Industries, Inc. and Kronos
Worldwide, Inc. – incorporated by reference to Exhibit 2.1 to the Kronos
Worldwide, Inc. Registration Statement on Form 10 (File No.
001-31763).
|
3.1
|
Certificate
of Amended and Restated Certificate of Incorporation dated May 22,
2008 - incorporated by reference to Exhibit 1 to the Registrant’s
Proxy Statement on Schedule 14A for the annual meeting held on May 21,
2008.
|
3.2
|
Amended
and Restated Bylaws of NL Industries, Inc. as of May 23, 2008 –
incorporated by reference to Exhibit 3.1 of the Registrant’s Current
Report on Form 8-K filed with the U.S. Securities and Exchange Commission
on May 23, 2008.
|
4.1
|
Indenture
governing the 6.5% Senior Secured Notes due 2013,
dated
|
as
of April 11, 2006, between Kronos International, Inc. and
The
|
|
Bank
of New York, as trustee (incorporated by reference to Exhibit 4.1 to the
Current Report on Form 8-K of Kronos International, Inc. (File No.
333-100047) that was filed with the U.S. Securities and Exchange
Commission on April 11, 2006).
|
10.1
|
Lease
Contract dated June 21, 1952, between Farbenfabriken Bayer
Aktiengesellschaft and Titangesellschaft mit beschrankter Haftung (German
language version and English translation thereof) - incorporated by
reference to Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K
for the year ended December 31,
1985.
|
10.2
|
Formation
Agreement dated as of October 18, 1993 among Tioxide Americas Inc., Kronos
Louisiana, Inc. and Louisiana Pigment Company, L.P. - incorporated by
reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form
10-Q for the quarter ended September 30,
1993.
|
10.3
|
Joint
Venture Agreement dated as of October 18, 1993 between Tioxide Americas
Inc. and Kronos Louisiana, Inc. - incorporated by reference to Exhibit
10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter
ended September 30, 1993.
|
10.4
|
Kronos
Offtake Agreement dated as of October 18, 1993 between Kronos Louisiana,
Inc. and Louisiana Pigment Company, L.P. - incorporated by reference to
Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993.
|
10.5
|
Amendment
No. 1 to Kronos Offtake Agreement dated as of December 20, 1995 between
Kronos Louisiana, Inc. and Louisiana Pigment Company, L.P. - incorporated
by reference to Exhibit 10.22 to the Registrant’s Annual Report on Form
10-K for the year ended December 31,
1995.
|
10.6
|
Tioxide
Americas Offtake Agreement dated as of October 18, 1993 between Tioxide
Americas Inc. and Louisiana Pigment Company, L.P. - incorporated by
reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form
10-Q for the quarter ended September 30,
1993.
|
10.7
|
Amendment
No. 1 to Tioxide Americas Offtake Agreement dated as of December 20, 1995
between Tioxide Americas Inc. and Louisiana Pigment Company, L.P. -
incorporated by reference to Exhibit 10.24 to the Registrant’s Annual
Report on Form 10-K for the year ended December 31,
1995.
|
10.8
|
TCI/KCI
Output Purchase Agreement dated as of October 18, 1993 between Tioxide
Canada Inc. and Kronos Canada, Inc. - incorporated by reference to Exhibit
10.6 to the Registrant’s Quarterly Report on Form 10-Q for the quarter
ended September 30, 1993.
|
10.9
|
TAI/KLA
Output Purchase Agreement dated as of October 18, 1993 between Tioxide
Americas Inc. and Kronos Louisiana, Inc. - incorporated by reference to
Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993.
|
10.10
|
Parents’
Undertaking dated as of October 18, 1993 between ICI American Holdings
Inc. and Kronos, Inc. - incorporated by reference to Exhibit 10.9 to the
Registrant’s Quarterly Report on Form 10-Q for the quarter ended September
30, 1993.
|
10.11
|
Allocation
Agreement dated as of October 18, 1993 between Tioxide Americas Inc., ICI
American Holdings, Inc., Kronos, Inc. and Kronos Louisiana, Inc. -
incorporated by reference to Exhibit 10.10 to the Registrant’s Quarterly
Report on Form 10-Q for the quarter ended September 30,
1993.
|
10.12
|
Form
of Director’s Indemnity Agreement between NL Industries, Inc. and the
independent members of the Board of Directors of NL Industries, Inc. -
incorporated by reference to Exhibit 10.20 to the Registrant’s Annual
Report on Form 10-K for the year ended December 31,
1987.
|
10.13*
|
NL
Industries, Inc. 1998 Long-Term Incentive Plan - incorporated by reference
to Appendix A to the NL Industries, Inc. Proxy Statement on Schedule 14A
for the annual meeting of shareholders held on May 6,
1998.
|
10.14*
|
Form
of Kronos Worldwide, Inc. 2003 Long-Term Incentive Plan – incorporated by
reference to Exhibit 10.4 to the Kronos Worldwide, Inc. Registration
Statement on Form 10 (File No.
001-31763).
|
10.15
|
Insurance
Sharing Agreement, effective January 1, 1990, by and between the
Registrant, NL Insurance, Ltd. (an indirect subsidiary of Tremont
Corporation) and Baroid Corporation - incorporated by reference to Exhibit
10.20 to the NL Industries, Inc. Annual Report on Form 10-K for the year
ended December 31, 1991.
|
10.16
|
Amended
Tax Agreement among NL Industries, Inc., Valhi, Inc. and Contran
Corporation effective November 30, 2004 – incorporated by reference to
Exhibit 10.1 to the Registrant’s Current Report on Form 8-K as of November
30, 2004.
|
10.17
|
Intercorporate
Services Agreement by and between Contran Corporation and NL Industries,
Inc. effective as of January 1, 2004 – incorporated by reference to
Exhibit 10.1 to the NL Industries, Inc. Quarterly Report on Form 10-Q for
the quarter ended March 31, 2004.
|
10.18
|
Intercorporate
Services Agreement by and between Contran Corporation and Kronos
Worldwide, Inc. – incorporated by reference to Exhibit 10.1 to the Kronos
Worldwide, Inc. Quarterly Report on Form 10-Q for the quarter ended March
31, 2004.
|
10.19
|
Intercorporate
Services Agreement between CompX International Inc. and Contran
Corporation effective as of January 1, 2004 – incorporated by reference to
Exhibit 10.2 to the CompX International Inc. Annual Report on Form 10-K
for the year ended December 31,
2004.
|
10.20
|
Form
of Tax Agreement between Valhi, Inc. and Kronos Worldwide, Inc –
incorporated by reference to Exhibit 10.1 to the Kronos Worldwide, Inc.
Registration Statement on Form 10 (File No.
001-31763).
|
10.21
|
Insurance
sharing agreement dated October 30, 2003 by and among CompX International
Inc., Contran Corporation, Keystone Consolidated Industries, Inc., Kronos
Worldwide, Inc., Titanium Metals Corp., Valhi, Inc. and NL Industries,
Inc. – incorporated by reference to Exhibit 10.48 to the NL Industries,
Inc. Annual Report on Form 10-K for the year ended December 31,
2003.
|
10.22
|
First
Amendment Agreement, dated September 3, 2004, Relating to a Facility
Agreement dated June 25, 2002 among Kronos Titan GmbH, Kronos Europe
S.A./N.V., Kronos Titan AS and Titania A/S, as borrowers, Kronos Titan
GmbH, Kronos Europe S.A./N.V. and Kronos Norge AS, as guarantors, Kronos
Denmark ApS, as security provider, with Deutsche Bank Luxembourg S.A.,
acting as agent – incorporated by reference to Exhibit 10.8 to the
Registration Statement on Form S-1 of Kronos Worldwide, Inc. (File No.
333-119639).
|
10.23*
|
CompX
International Inc. 1997 Long-Term Incentive Plan – incorporated by
reference to Exhibit 10.2 to the CompX International Inc. Registration
Statement on Form S-1 (File No.
1-13905).
|
10.24
|
Second
Amendment Agreement Relating to a Facility Agreement dated June 25, 2002
executed as of June 14, 2005 by and among Deutsche Bank AG, as mandated
lead arranger, Deutsche Bank Luxembourg S.A. as agent, the participating
lenders, Kronos Titan GmbH, Kronos Europe S.A./N.V, Kronos Titan AS,
Kronos Norge AS, Titania AS and Kronos Denmark ApS – incorporated by
reference to Exhibit 10.1 of the Kronos International, Inc. Form 8-K dated
June 14, 2005. Certain schedules, exhibits, annexes and similar
attachments to this Exhibit have not been filed; upon request, the
Reporting Persons will furnish supplementally to the Commission a copy of
any omitted exhibit, annex or
attachment.
|
10.25
|
$50,000,000
Credit Agreement between CompX International Inc. and Wachovia Bank,
National Association, as Agent and various lending institutions dated
December 23, 2005 – incorporated by reference to Exhibit 10.12 of CompX
International Inc.’s Form 10-K for the year ended December 31, 2006 (File
No. 1-13905). Certain exhibits, annexes and similar attachments
to this Exhibit have not been filed; upon request, CompX International
Inc. will furnish supplementally to the SEC a copy of any omitted exhibit,
annex, or attachment.
|
10.26
|
Stock
Purchase Agreement dated October 11, 2007 between NL Industries, Inc. and
Valhi, Inc., - incorporated by reference to Exhibit 10.6 of CompX
International Inc.’s Form 10-K for the year ended December 31, 2007 (File
No. 1-13905).
|
10.27
|
First
Amendment to Credit Agreement dated as of October 16, 2007 among CompX
International Inc., CompX Security Products, Inc., CompX Precision Slides
Inc., CompX Marine Inc., Custom Marine Inc., Livorsi Marine Inc., Wachovia
Bank, National Association for itself and as administrative agent for
Compass Bank and Comerica Bank - incorporated by reference to Exhibit
10.12 of CompX International Inc.’s Form 10-K for the year ended December
31, 2007 (File No. 1-13905).
|
10.28
|
Stock
Purchase Agreement dated October 16, 2007 between CompX International,
Inc. and TIMET Finance Management Company – incorporated by reference to
Exhibit 10.6 of CompX International Inc.’s Form 10-K for the year ended
December 31, 2007 (File No.
1-13905).
|
10.29
|
Form
of Subordination Agreement among CompX International Inc., TIMET Finance
Management Company, CompX Security Products, Inc., CompX Precision Sildes
Inc., CompX Marine Inc., Custom Marine Inc., Livorsi Marine Inc., Wachovia
Bank, National Association as administrative agent for itself, Compass
Bank and Comerica Bank – incorporated by reference to Exhibit 10.8 of
CompX International Inc.’s Form 10-K for the year ended December 31, 2007
(File No. 1-13905).
|
10.30
|
Subordinated
Term Loan Promissory Note dated October 26, 2007 executed by CompX
International Inc. and payable to the order of TIMET Finance Management
Company – incorporated by reference to Exhibit 10.9 of CompX International
Inc.’s Form 10-K for the year ended December 31, 2007 (File No.
1-13905).
|
10.31
|
Third
Amendment Agreement Relating to a Facility Agreement dated June 25, 2002
executed as of May 26, 2008 by and among Deutsche Bank AG, as mandated
lead arranger, Deutsche Bank Luxembourg S.A., as agent, the participating
lenders, Kronos Titan GmbH, Kronos Europe S.A,/N.V, Kronos Titan AS,
Kronos Norge AS, Titania AS and Kronos Denmark ApS - incorporated by
reference to Exhibit 10.1 to the Current Report on Form 8-K of Kronos
International, Inc. (File No. 333-100047) dated May 26,
2008. Certain schedules, exhibits, annexes and similar
attachments to this Exhibit 10.1 have not been filed; upon request, the
registrant will furnish supplementally to the Commission a copy of any
omitted exhibit, annex or
attachment.
|
10.32
|
Reinstated
and Amended Settlement Agreement and Release, dated June 26, 2008, by and
among NL Industries, Inc., NL Environmental Management Services, Inc., the
Sayreville Economic and Redevelopment Agency, Sayreville Seaport
Associates, L.P., and the County of Middlesex. Certain
schedules, exhibits, annexes and similar attachments to this Exhibit 10.1
have not been filed; upon request, the registrant will furnish
supplementally to the Commission a copy of any omitted exhibit, annex or
attachment -incorporated by reference to Exhibit 10.1 to the NL
Industries, Inc. Current Report on Form 8-K that was filed with the U.S.
Securities and Exchange Commission on October 16,
2008.
|
10.33
|
Amendment
to Restated and Amended Settlement Agreement and Release, dated September
25, 2008 by and among NL Industries, Inc., NL Environmental
Management Services, Inc., the Sayreville Economic and Redevelopment
Agency, Sayreville Seaport Associates, L.P., and the County of Middlesex -
incorporated by reference to Exhibit 10.2 to the NL Industries, Inc.
Current Report on Form 8-K that was filed with the U.S. Securities and
Exchange Commission on October 16,
2008.
|
10.34
|
Mortgage
Note, dated October 15, 2008 by Sayreville Seaport Associates, L.P. in
favor of NL Industries, Inc. and NL Environmental Management Services, Inc
- incorporated by reference to Exhibit 10.3 to the NL Industries, Inc.
Current Report on Form 8-K that was filed with the U.S. Securities and
Exchange Commission on October 16,
2008.
|
10.35
|
Leasehold
Mortgage, Assignment, Security Agreement and Fixture Filing, dated October
15, 2008, by Sayreville Seaport Associates, L.P. in favor of NL
Industries, Inc. and NL Environmental Management Services,
Inc. Certain schedules, exhibits, annexes and similar
attachments to this Exhibit 10.4 have not been filed; upon request, the
registrant will furnish supplementally to the Commission a copy of any
omitted exhibit, annex or attachment -incorporated by reference to Exhibit
10.4 to the NL Industries, Inc. Current Report on Form 8-K that was filed
with the U.S. Securities and Exchange Commission on October 16,
2008.
|
10.36
|
Intercreditor,
Subordination and Standstill Agreement, dated October 15, 2008, by NL
Industries, Inc., NL Environmental Management Services, Inc., Bank of
America, N.A. on behalf of itself and the other financial institutions,
and acknowledged and consented to by Sayreville Seaport Associates, L.P.
and J. Brian O'Neill. Certain schedules, exhibits, annexes and
similar attachments to this Exhibit 10.5 have not been filed; upon
request, the registrant will furnish supplementally to the Commission a
copy of any omitted exhibit, annex or attachment -incorporated by
reference to Exhibit 10.5 to the NL Industries, Inc. Current Report on
Form 8-K that was filed with the U.S. Securities and Exchange Commission
on October 16, 2008.
|
10.37
|
Multi
Party Agreement, dated October 15, 2008 by and among Sayreville Seaport
Associates, L.P., Sayreville Seaport Associates Acquisition Company, LLC,
OPG Participation, LLC, J. Brian O'Neill, NL Industries, Inc., NL
Environmental Management Services, Inc., The Prudential Insurance Company
of America, Sayreville PRISA II LLC. Certain schedules,
exhibits, annexes and similar attachments to this Exhibit 10.6 have not
been filed; upon request, the registrant will furnish supplementally to
the Commission a copy of any omitted exhibit, annex or attachment -incorporated
by reference to Exhibit 10.6 to the NL Industries, Inc. Current Report on
Form 8-K that was filed with the U.S. Securities and Exchange Commission
on October 16, 2008.
|
10.38
|
Guaranty
Agreement, dated October 15, 2008, by J. Brian O’Neill in favor of NL
Industries, Inc. and NL Environmental Management Services, Inc -
incorporated by reference to Exhibit 10.7 to the NL Industries, Inc.
Current Report on Form 8-K that was filed with the U.S. Securities and
Exchange Commission on October 16,
2008.
|
10.39
|
Unsecured
Revolving Demand Promissory Note dated October 29, 2008 in the original
principal amount of $40.0 million executed by Kronos Worldwide, Inc. and
payable to the order of NL Industries, Inc. - incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K that Kronos Worldwide, Inc.
(Commission File No. 1-31763) filed with the U.S. Securities and Exchange
Commission on October 29, 2008.
|
10.40
|
Unsecured
Revolving Demand Promissory Note dated November 5, 2008 in the original
principal amount of $40.0 million executed by Valhi, Inc. and payable to
the order of NL Industries, Inc. -incorporated by reference to Exhibit
10.1 to the NL Industries, Inc. Current Report on Form 8-K, Commission
File No. 1-640, that was filed with the U.S. Securities and
Exchange Commission on November 5,
2008.
|
10.41
|
Third
Amendment Agreement Relating to a Facility Agreement dated June 25, 2002
executed as of May 26, 2008 by and among Deutsche Bank AG, as mandated
lead arranger, Deutsche Bank Luxembourg S.A., as agent, the participating
lenders, Kronos Titan GmbH, Kronos Europe S.A.,/N.V, Kronos Titan AS,
Kronos Norge AS, Titania AS and Kronos Denmark ApS – incorporated by
reference to Exhibit 10.1 to the Current Report on Form 8-K of Kronos
International, Inc. (File No. 333-100047) dated May 26,
2008. Certain schedules, exhibits, annexes and similar
attachments to this Exhibit 10.1 have not been files; upon request, the
registrant will furnish supplementally to the Commission a copy of any
omitted exhibit, annex or
attachment.
|
10.42
|
Second
Amendment to Credit Agreement dated as of January 15, 2009 among CompX
International Inc., CompX Security Products Inc., CompX Precision Slides
Inc., CompX Marine Inc., Custom Marine Inc., Livorsi Marine Inc., Wachovia
Bank, National Association for itself and as administrative agent for
Compass Bank and Comerica Bank - incorporated by reference to Exhibit
10.12 of CompX International Inc.’s Form 10-K for the year ended December
31, 2008.
|
21.1
|
Subsidiaries
of the Registrant.
|
23.1
|
Consent
of PricewaterhouseCoopers LLP with respect to NL’s consolidated financial
statements.
|
23.2
|
Consent
of PricewaterhouseCoopers LLP with respect to Kronos’ consolidated
financial statements.
|
32.1
|
Certification
|
99.1
|
Consolidated
financial statements of Kronos Worldwide, Inc. – incorporated by reference
to Kronos’ Annual Report on Form 10-K (File No. 1-31763) for the year
ended December 31, 2008.
|
*
|
Management
contract, compensatory plan or
arrangement.
|
By:/s/ Harold C.
Simmons
|
Harold
C. Simmons
|
March
11, 2009
|
(Chairman
of the Board and
Chief
Executive Officer)
|
/s/ Steven L.
Watson
|
|
Harold
C. Simmons, March 11, 2009
|
Steven
L. Watson, March 11, 2009
|
(Chairman
of the Board and Chief
|
(Director)
|
Executive
Officer)
|
|
/s/ Thomas P.
Stafford
|
/s/ Glenn R.
Simmons
|
Thomas
P. Stafford, March 11, 2009
|
Glenn
R. Simmons, March 11, 2009
|
(Director)
|
(Director)
|
/s/ C. H. Moore, Jr.
|
/s/ Gregory M.
Swalwell
|
C.
H. Moore, Jr., March 11, 2009
|
Gregory
M. Swalwell, March 11, 2009
|
(Director)
|
(Vice
President, Finance and Chief Financial Officer, Principal Financial
Officer)
|
/s/ Terry N.
Worrell
|
/s/ Tim C.
Hafer
|
Terry
N. Worrell, March 11, 2009
|
Tim
C. Hafer, March 11, 2009
|
(Director)
|
(Vice
President and Controller, Principal Accounting
Officer)
|
Financial
Statements
|
Page
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
Consolidated
Balance Sheets - December 31, 2007 and 2008
|
F-4
|
Consolidated Statements of Operations -
Years ended December 31, 2006,
2007 and 2008
|
F-6
|
Consolidated Statements of Comprehensive Income -
Years ended December 31, 2006,
2007 and 2008
|
F-7
|
Consolidated Statements of Stockholders' Equity -
Years ended December 31, 2006,
2007 and 2008
|
F-8
|
Consolidated Statements of Cash Flows -
Years ended December 31, 2006,
2007 and 2008
|
F-9
|
Notes to Consolidated Financial Statements
|
F-11
|
Financial Statement Schedule
|
|
Schedule I – Condensed Financial Information of Registrant
|
S-1
|
Schedules II,
III and IV are omitted because they are not applicable
or the required amounts are either not material or are presented in the
Notes to the Consolidated Financial Statements.
|
ASSETS
|
December 31,
|
|||||||
2007
|
2008
|
|||||||
Current
assets:
|
||||||||
Cash and cash equivalents
|
$ | 41,112 | $ | 16,450 | ||||
Restricted cash and cash equivalents
|
4,970 | 7,457 | ||||||
Marketable securities
|
5,860 | 5,534 | ||||||
Accounts and other receivables,
net
|
22,221 | 25,513 | ||||||
Receivable from affiliates
|
1,271 | 3,150 | ||||||
Inventories,
net
|
24,277 | 22,661 | ||||||
Prepaid expenses
and other
|
1,516 | 1,435 | ||||||
Deferred income taxes
|
6,474 | 5,766 | ||||||
Total current assets
|
107,701 | 87,966 | ||||||
Other assets:
|
||||||||
Marketable equity securities
|
113,393 | 64,000 | ||||||
Investment in and
advances to
Kronos Worldwide, Inc.
|
147,119 | 133,745 | ||||||
Pension
asset
|
17,623 | - | ||||||
Goodwill
|
54,719 | 44,194 | ||||||
Assets
held for sale
|
3,117 | 3,517 | ||||||
Other,
net
|
7,856 | 17,832 | ||||||
Total other assets
|
343,827 | 263,288 | ||||||
Property and equipment:
|
||||||||
Land
|
12,346 | 12,232 | ||||||
Buildings
|
35,963 | 32,723 | ||||||
Equipment
|
127,801 | 115,546 | ||||||
Construction in progress
|
2,659 | 4,406 | ||||||
178,769 | 164,907 | |||||||
Less accumulated depreciation
|
105,536 | 96,625 | ||||||
Net property and equipment
|
73,233 | 68,282 | ||||||
Total
assets
|
$ | 524,761 | $ | 419,536 |
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
December 31,
|
|||||||
2007
|
2008
|
|||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 8,769 | $ | 6,802 | ||||
Accrued liabilities
|
26,039 | 24,475 | ||||||
Accrued environmental costs
|
11,863 | 9,834 | ||||||
Payable to affiliates
|
1,149 | 3,139 | ||||||
Income taxes
|
136 | 1,167 | ||||||
Total current liabilities
|
47,956 | 45,417 | ||||||
Noncurrent liabilities:
|
||||||||
Note
payable to affiliate
|
49,730 | 41,980 | ||||||
Accrued pension costs
|
1,665 | 11,768 | ||||||
Accrued postretirement benefits (OPEB)
cost
|
9,865 | 8,883 | ||||||
Accrued environmental costs
|
38,467 | 40,220 | ||||||
Deferred income taxes
|
91,124 | 49,215 | ||||||
Other
|
25,126 | 21,823 | ||||||
Total noncurrent liabilities
|
215,977 | 173,889 | ||||||
Minority interest
|
14,366 | 11,866 | ||||||
Stockholders' equity:
|
||||||||
Preferred stock, no par value; 5,000 shares
authorized; none issued
|
- | - | ||||||
Common stock, $.125 par value; 150,000 shares
authorized; 48,592
and 48,599 shares issued and outstanding
|
6,073 | 6,074 | ||||||
Additional paid-in capital
|
345,338 | 330,879 | ||||||
Retained earnings
(deficit)
|
(6,525 | ) | 16,909 | |||||
Accumulated other comprehensive income:
|
||||||||
Marketable securities
|
57,603 | 24,970 | ||||||
Currency translation
|
(123,829 | ) | (135,922 | ) | ||||
Defined
benefit pension plans
|
(31,373 | ) | (54,333 | ) | ||||
Postretirement
benefit (OPEB) plans
|
(825 | ) | (213 | ) | ||||
Total stockholders' equity
|
246,462 | 188,364 | ||||||
Total
liabilities and stockholders' equity
|
$ | 524,761 | $ | 419,536 | ||||
Years ended December 31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
Net
sales
|
$ | 190,123 | $ | 177,683 | $ | 165,502 | ||||||
Cost
of goods sold
|
143,648 | 132,455 | 125,749 | |||||||||
Gross margin
|
46,475 | 45,228 | 39,753 | |||||||||
Selling, general and administrative expense
|
26,060 | 25,846 | 24,818 | |||||||||
Other operating income (expense):
|
||||||||||||
Insurance
recoveries
|
7,656 | 5,659 | 9,610 | |||||||||
Facility
consolidation expense
|
- | (2,665 | ) | - | ||||||||
Goodwill
impairment
|
- | - | (10,111 | ) | ||||||||
Litigation
settlement gain
|
- | - | 48,806 | |||||||||
Currency
transaction gains (losses), net
|
145 | (1,086 | ) | 679 | ||||||||
Other expense,
net
|
(94 | ) | (256 | ) | (131 | ) | ||||||
Corporate expense
|
(24,247 | ) | (31,318 | ) | (25,012 | ) | ||||||
Income (loss)
from operations
|
3,875 | (10,284 | ) | 38,776 | ||||||||
Equity in earnings (losses)
of Kronos Worldwide, Inc.
|
29,345 | (23,901 | ) | 3,229 | ||||||||
Other income (expense):
|
||||||||||||
Interest and dividends
|
5,140 | 4,778 | 8,010 | |||||||||
Securities transactions, net
|
297 | 22,749 | (1 | ) | ||||||||
Interest expense
|
(219 | ) | (760 | ) | (2,362 | ) | ||||||
Income (loss)
before income taxes and minority interest
|
38,438 | (7,418 | ) | 47,652 | ||||||||
Provision for income taxes (benefit)
|
8,860 | (8,311 | ) | 14,850 | ||||||||
Minority interest
in after-tax earnings (loss)
|
3,468 | 2,624 | (382 | ) | ||||||||
Net income
(loss)
|
$ | 26,110 | $ | (1,731 | ) | $ | 33,184 | |||||
Basic
and diluted net income (loss) per share
|
$ | .54 | $ | (.04 | ) | $ | .68 | |||||
Weighted-average
shares outstanding:
|
||||||||||||
Basic
|
48,568 | 48,590 | 48,596 | |||||||||
Dilutive
impact of stock options
|
16 | - | 9 | |||||||||
Diluted
|
48,584 | 48,590 | 48,605 |
Years ended December 31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
Net
income (loss)
|
$ | 26,110 | $ | (1,731 | ) | $ | 33,184 | |||||
Other
comprehensive income (loss), net of tax:
|
||||||||||||
Marketable
securities:
|
||||||||||||
Unrealized
net gains (losses) arising during the year
|
22,712 | 15,475 | (32,633 | ) | ||||||||
Realized
gains included in net income
|
- | (14,668 | ) | - | ||||||||
22,712 | 807 | (32,633 | ) | |||||||||
Currency
translation adjustment
|
6,499 | 10,152 | (12,093 | ) | ||||||||
Defined
benefit pension plans :
|
||||||||||||
Net
actuarial gain (loss) arising during the year
|
- | 10,618 | (23,151 | ) | ||||||||
Amortization
of prior service cost included in net periodic pension
cost
|
- | 1,623 | 191 | |||||||||
Minimum pension liability chan |
2,388
|
- | - | |||||||||
2,388 | 12,241 | (22,960 | ) | |||||||||
Postretirement
benefit plan adjustment:
|
||||||||||||
Net
actuarial gain arising during the year
|
- | 861 | 746 | |||||||||
Amortization
of prior service credit included in net periodic pension
cost
|
- | (75 | ) | (134 | ) | |||||||
- | 786 | 612 | ||||||||||
Total
other comprehensive income (loss)
|
31,599 | 23,986 | (67,074 | ) | ||||||||
Comprehensive
income (loss)
|
$ | 57,709 | $ | 22,255 | $ | (33,890 | ) |
Accumulated
other
|
||||||||||||||||||||||||||||||||
Additional
|
Retained
|
comprehensive
income (loss)
|
||||||||||||||||||||||||||||||
Common
|
paid-in
|
earnings
|
Marketable
|
Currency
|
Pension
|
OPEB
|
||||||||||||||||||||||||||
stock
|
capital
|
(deficit)
|
securities
|
translation
|
plans
|
plans
|
Total
|
|||||||||||||||||||||||||
Balance at December 31, 2005
|
$ | 6,070 | $ | 363,286 | $ | - | $ | 34,084 | $ | (140,480 | ) | $ | (42,687 | ) | $ | - | $ | 220,273 | ||||||||||||||
Net income
|
- | - | 26,110 | - | - | - | - | 26,110 | ||||||||||||||||||||||||
Other comprehensive income (loss), net of tax
|
- | - | - | 22,712 | 6,499 | 2,388 | - | 31,599 | ||||||||||||||||||||||||
Issuance of common stock
|
3 | 196 | - | - | - | - | - | 199 | ||||||||||||||||||||||||
Cash dividends - $.50 per share
|
- | - | (24,284 | ) | - | - | - | - | (24,284 | ) | ||||||||||||||||||||||
Change in accounting
-
asset and liability recognition provisions of
SFAS No. 158
|
- | - | - | - | - | (3,764 | ) | (1,611 | ) | (5,375 | ) | |||||||||||||||||||||
Other
|
- | (10 | ) | - | - | - | - | - | (10 | ) | ||||||||||||||||||||||
Balance at December 31, 2006
|
6,073 | 363,472 | 1,826 | 56,796 | (133,981 | ) | (44,063 | ) | (1,611 | ) | 248,512 | |||||||||||||||||||||
Net loss
|
- | - | (1,731 | ) | - | - | - | - | (1,731 | ) | ||||||||||||||||||||||
Other comprehensive income (loss), net of tax
|
- | - | - | 807 | 10,152 | 12,241 | 786 | 23,986 | ||||||||||||||||||||||||
Issuance of common stock
|
- | 63 | - | - | - | - | - | 63 | ||||||||||||||||||||||||
Cash dividends - $.50 per share
|
- | (18,222 | ) | (6,073 | ) | - | - | - | - | (24,295 | ) | |||||||||||||||||||||
Change in accounting:
|
||||||||||||||||||||||||||||||||
FIN 48
|
- | - | (97 | ) | - | - | - | - | (97 | ) | ||||||||||||||||||||||
SFAS No. 158 – measurement date provisions
|
- | - | (450 | ) | - | - | 449 | (1 | ) | |||||||||||||||||||||||
Other
|
- | 25 | - | - | - | - | - | 25 | ||||||||||||||||||||||||
Balance at December 31, 2007
|
6,073 | 345,338 | (6,525 | ) | 57,603 | (123,829 | ) | (31,373 | ) | (825 | ) | 246,462 | ||||||||||||||||||||
Net income
|
- | - | 33,184 | - | - | - | - | 33,184 | ||||||||||||||||||||||||
Other comprehensive income (loss), net of tax
|
- | - | - | (32,633 | ) | (12,093 | ) | (22,960 | ) | 612 | (67,074 | ) | ||||||||||||||||||||
Issuance of common stock
|
1 | 71 | - | - | - | - | - | 72 | ||||||||||||||||||||||||
Cash dividends - $.50 per share
|
- | (14,549 | ) | (9,750 | ) | - | - | - | - | (24,299 | ) | |||||||||||||||||||||
Other
|
- | 19 | - | - | - | - | - | 19 | ||||||||||||||||||||||||
Balance at December 31, 2008
|
$ | 6,074 | $ | 330,879 | $ | 16,909 | $ | 24,970 | $ | (135,922 | ) | $ | (54,333 | ) | $ | (213 | ) | $ | 188,364 | |||||||||||||
Years ended December 31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income (loss)
|
$ | 26,110 | $ | (1,731 | ) | $ | 33,184 | |||||
Depreciation
and amortization
|
12,220 | 11,375 | 9,420 | |||||||||
Deferred
income taxes
|
8,407 | (12,604 | ) | (4,352 | ) | |||||||
Minority
interest
|
3,468 | 2,624 | (382 | ) | ||||||||
Securities
transaction gains
|
(298 | ) | (22,749 | ) | - | |||||||
Benefit
plan expense greater (less)
than
cash funding:
|
||||||||||||
Defined
benefit pension plans
|
(2,161 | ) | (2,464 | ) | (2,976 | ) | ||||||
Other
postretirement benefit plans
|
(1,009 | ) | 629 | 476 | ||||||||
Equity
in Kronos Worldwide, Inc.
|
(29,345 | ) | 23,901 | (3,229 | ) | |||||||
Distributions
from Kronos Worldwide, Inc.
|
17,516 | 17,516 | 17,532 | |||||||||
Goodwill
impairment
|
- | - | 10,111 | |||||||||
Litigation
settlement gain
|
- | - | (48,806 | ) | ||||||||
Other,
net
|
1,469 | 1,413 | 601 | |||||||||
Change
in assets and liabilities:
|
||||||||||||
Accounts
and other receivable
|
541 | 1,032 | (4,703 | ) | ||||||||
Inventories
|
2,258 | (1,813 | ) | 889 | ||||||||
Prepaid
expenses
|
352 | (160 | ) | 92 | ||||||||
Accounts
payable and accrued liabilities
|
(7,107 | ) | (918 | ) | (2,830 | ) | ||||||
Income
taxes
|
509 | (1,127 | ) | 976 | ||||||||
Accounts
with affiliates
|
3,618 | (12,779 | ) | 2,277 | ||||||||
Accrued
environmental costs
|
(4,234 | ) | (383 | ) | (275 | ) | ||||||
Other noncurrent assets and liabilities, net
|
(3,313 | ) | (4,533 | ) | (7,245 | ) | ||||||
Net
cash provided by (used in) operating activities
|
29,001 | (2,771 | ) | 760 | ||||||||
Cash
flows from investing activities:
|
||||||||||||
Capital
expenditures
|
(12,148 | ) | (13,998 | ) | (6,897 | ) | ||||||
Proceeds
from real estate-related litigation settlement
|
- | - | 39,550 | |||||||||
Business
acquisitions, net of cash acquired
|
(9,832 | ) | - | - | ||||||||
Loans
to affiliates, net
|
- | - | (22,210 | ) | ||||||||
Collection
of note receivable
|
1,306 | 1,306 | 1,306 | |||||||||
Change
in restricted cash equivalents and marketable debt securities,
net
|
(2,903 | ) | 2,386 | (2,558 | ) | |||||||
Proceeds
from disposal of:
|
||||||||||||
Marketable
securities
|
16,849 | 36,894 | 554 | |||||||||
Property
and equipment
|
1,316 | 73 | 377 | |||||||||
Purchase
of:
|
||||||||||||
CompX
common stock
|
(2,318 | ) | (3,309 | ) | (1,007 | ) | ||||||
Kronos
common stock
|
- | - | (793 | ) | ||||||||
Valhi
common stock
|
- | - | (1,081 | ) | ||||||||
Other
marketable securities
|
(17,501 | ) | (5,861 | ) | (156 | ) | ||||||
Net
cash provided by (used in) investing activities
|
(25,231 | ) | 17,491 | 7,085 |
Years ended December 31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
Cash
flows from financing activities:
|
||||||||||||
Indebtedness:
|
||||||||||||
Principal
payments
|
$ | (1,563 | ) | $ | - | $ | - | |||||
Deferred
financing costs paid
|
(110 | ) | - | (56 | ) | |||||||
Repayment
note payable to affiliate
|
- | (2,600 | ) | (7,000 | ) | |||||||
Cash
dividends paid
|
(24,284 | ) | (24,295 | ) | (24,299 | ) | ||||||
Proceeds
from issuance of stock:
|
||||||||||||
NL
common stock
|
88 | - | 6 | |||||||||
CompX
common stock
|
347 | 1,395 | - | |||||||||
Tax
benefit from exercise of stock options
|
111 | 73 | - | |||||||||
Distributions
to minority interests
|
(2,272 | ) | (1,918 | ) | (804 | ) | ||||||
Net
cash used in financing activities
|
(27,683 | ) | (27,345 | ) | (32,153 | ) | ||||||
Net
decrease
|
$ | (23,913 | ) | $ | (12,625 | ) | $ | (24,308 | ) | |||
Cash
and cash equivalents - net change from:
|
||||||||||||
Operating, investing and financing activities
|
$ | (23,913 | ) | $ | (12,625 | ) | $ | (24,308 | ) | |||
Currency translation
|
(257 | ) | 995 | (354 | ) | |||||||
Cash
and cash
equivalents at beginning of year
|
76,912 | 52,742 | 41,112 | |||||||||
Cash
and cash equivalents at end of year
|
$ | 52,742 | $ | 41,112 | $ | 16,450 | ||||||
Supplemental disclosures:
|
||||||||||||
Cash
paid (received) for:
|
||||||||||||
Interest
|
$ | 139 | $ | 109 | $ | 2,278 | ||||||
Income taxes,
net
|
(3,627 | ) | 19,680 | 19,398 | ||||||||
Non-cash investing and
financing activities:
|
||||||||||||
Note
payable to affiliate issued for repurchase of CompX common
stock
|
$ | - | $ | 52,580 | $ | - | ||||||
Receipt
of TIMET shares from Valhi
|
- | 11,410 | - | |||||||||
Accrual
for capital expenditures
|
- | 665 | 511 | |||||||||
Note
receivable from litigation settlement
|
- | - | 15,000 |
|
·
|
Level 1 – Unadjusted
quoted prices in active markets that are accessible at the measurement
date for identical, unrestricted assets or
liabilities;
|
|
·
|
Level 2 – Quoted prices
in markets that are not active, or inputs which are observable, either
directly or indirectly, for substantially the full term of the assets or
liability; and
|
|
·
|
Level 3 – Prices or
valuation techniques that require inputs that are both significant to the
fair value measurement and
unobservable.
|
Years ended December 31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
(In
millions)
|
||||||||||||
Net
sales - point of origin:
|
||||||||||||
United States
|
$ | 127.6 | $ | 118.5 | $ | 115.5 | ||||||
Canada
|
52.4 | 52.7 | 46.5 | |||||||||
Taiwan
|
15.9 | 11.7 | 8.3 | |||||||||
Eliminations
|
(5.8 | ) | (5.2 | ) | (4.8 | ) | ||||||
Total
|
$ | 190.1 | $ | 177.7 | $ | 165.5 | ||||||
Net sales - point of destination:
|
||||||||||||
United States
|
$ | 153.9 | $ | 147.8 | $ | 134.2 | ||||||
Canada
|
20.0 | 19.3 | 16.9 | |||||||||
Other
|
16.2 | 10.6 | 14.4 | |||||||||
Total
|
$ | 190.1 | $ | 177.7 | $ | 165.5 |
December 31,
|
||||||||
2007
|
2008
|
|||||||
(In
millions)
|
||||||||
Identifiable
assets -
|
||||||||
Net property and equipment:
|
||||||||
United States
|
$ | 51.9 | $ | 52.2 | ||||
Canada
|
13.9 | 9.0 | ||||||
Taiwan
|
7.4 | 7.1 | ||||||
Total
|
$ | 73.2 | $ | 68.3 |
December
31,
|
||||||||
2007
|
2008
|
|||||||
(In
thousands)
|
||||||||
Current
assets (available-for-sale):
|
||||||||
Restricted
debt securities
|
$ | 5,301 | $ | 5,372 | ||||
Other
marketable securities
|
559 | 162 | ||||||
Total
|
$ | 5,860 | $ | 5,534 | ||||
Noncurrent
assets (available-for-sale):
|
||||||||
Valhi
common stock
|
$ | 75,064 | $ | 51,234 | ||||
TIMET
common stock
|
38,329 | 12,766 | ||||||
Total
|
$ | 113,393 | $ | 64,000 |
Fair
Value Measurements at December
31, 2008
|
||||||||||||
Total
|
Quoted
Prices in Active Markets (Level
1)
|
Significant
Other Observable Inputs (Level
2)
|
||||||||||
(in
thousands)
|
||||||||||||
Current assets (available-for-sale):
|
||||||||||||
Restricted debt securities
|
$ | 5,372 | $ |
-
|
$ | 5,372 | ||||||
Other marketable securities
|
162 |
-
|
162 | |||||||||
Total
|
$ | 5,534 | $ |
-
|
$ | 5,534 | ||||||
Noncurrent assets (available-for-sale):
|
||||||||||||
Valhi common stock
|
$ | 51,234 | $ | 51,234 | $ |
-
|
||||||
TIMET common stock
|
12,766 | 12,766 |
-
|
|||||||||
Total
|
$ | 64,000 | $ | 64,000 | $ |
-
|
December 31,
|
||||||||
2007
|
2008
|
|||||||
(In
thousands)
|
||||||||
Trade
receivables
|
$ | 21,129 | $ | 17,598 | ||||
Accrued
insurance recoveries
|
- | 7,219 | ||||||
Other
receivables
|
1,535 | 1,069 | ||||||
Refundable
income taxes
|
217 | 338 | ||||||
Allowance
for doubtful accounts
|
(660 | ) | (711 | ) | ||||
Total
|
$ | 22,221 | $ | 25,513 |
December 31,
|
||||||||
2007
|
2008
|
|||||||
(In
thousands)
|
||||||||
Raw
materials
|
$ | 6,341 | $ | 7,552 | ||||
In
process products
|
9,783 | 8,225 | ||||||
Finished
products
|
8,153 | 6,884 | ||||||
Total
|
$ | 24,277 | $ | 22,661 |
December 31,
|
||||||||
2007
|
2008
|
|||||||
(In
millions)
|
||||||||
Investment
in Kronos
|
$ | 147.1 | $ | 114.5 | ||||
Loan
to Kronos
|
- | 19.2 | ||||||
Total
assets
|
$ | 147.1 | $ | 133.7 | ||||
Year ended December 31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
(In
millions)
|
||||||||||||
Balance
at the beginning of the period
|
$ | 147.7 | $ | 160.5 | $ | 147.1 | ||||||
Equity
in earnings (losses) of Kronos
|
29.3 | (23.9 | ) | 3.2 | ||||||||
Dividends
received from Kronos
|
(17.5 | ) | (17.5 | ) | (17.5 | ) | ||||||
Purchases
of Kronos stock
|
- | - | .8 | |||||||||
Equity
in Kronos’ changes in accounting
|
(13.4 | ) | (2.1 | ) | - | |||||||
Other,
principally equity in other comprehensive income
|
14.4 | 30.1 | (19.1 | ) | ||||||||
Balance
at the end of the period
|
$ | 160.5 | $ | 147.1 | $ | 114.5 |
December 31,
|
||||||||
2007
|
2008
|
|||||||
(In
millions)
|
||||||||
Current
assets
|
$ | 621.7 | $ | 589.5 | ||||
Property
and equipment, net
|
526.5 | 485.5 | ||||||
Investment
in TiO2
joint venture
|
118.5 | 105.6 | ||||||
Other
noncurrent assets
|
188.3 | 178.1 | ||||||
Total
assets
|
$ | 1,455.0 | $ | 1,358.7 | ||||
Current
liabilities
|
$ | 224.5 | $ | 204.4 | ||||
Long-term
debt
|
590.0 | 618.5 | ||||||
Note
payable to NL
|
- | 19.2 | ||||||
Accrued
pension and post retirement benefits
|
149.9 | 134.2 | ||||||
Other
noncurrent liabilities
|
79.6 | 64.5 | ||||||
Stockholders’
equity
|
411.0 | 317.9 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 1,455.0 | $ | 1,358.7 |
Year ended December 31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
Net
sales
|
$ | 1,279.4 | $ | 1,310.3 | $ | 1,316.9 | ||||||
Cost
of sales
|
968.9 | 1,058.9 | 1,096.3 | |||||||||
Income
from operations
|
143.2 | 84.9 | 47.2 | |||||||||
Net
income (loss)
|
82.0 | (66.7 | ) | 9.0 |
Component
products operations
(In
millions)
|
||||
Balance
at December 31, 2005
|
$ | 20.8 | ||
Goodwill
acquired during the year
|
5.6 | |||
Changes
in foreign exchange rates
|
.2 | |||
Balance
at December 31, 2006
|
26.6 | |||
Goodwill
acquired during the year
|
21.7 | |||
Balance
at December 31, 2007
|
48.3 | |||
Goodwill
impairment during the year
|
(10.1 | ) | ||
Changes
in foreign exchange rates
|
(.4 | ) | ||
Balance
at December 31, 2008
|
$ | 37.8 |
December 31,
|
||||||||
2007
|
2008
|
|||||||
(In
thousands)
|
||||||||
Promissory
note receivable
|
$ | - | $ | 15,000 | ||||
Patents
and other intangible assets, net
|
2,569 | 1,991 | ||||||
Other
|
5,287 | 841 | ||||||
Total
|
$ | 7,856 | $ | 17,832 |
December 31,
|
||||||||
2007
|
2008
|
|||||||
(In
thousands)
|
||||||||
Employee
benefits
|
$ | 8,896 | $ | 8,158 | ||||
Professional
fees
|
4,322 | 3,624 | ||||||
Reserve
for uncertain tax positions
|
289 | 212 | ||||||
Other
|
12,532 | 12,481 | ||||||
Total
|
$ | 26,039 | $ | 24,475 |
December 31,
|
||||||||
2007
|
2008
|
|||||||
(In
thousands)
|
||||||||
Insurance
claims and expenses
|
$ | 1,381 | $ | 1,197 | ||||
Reserve
for uncertain tax positions
|
22,128 | 19,121 | ||||||
Other
|
1,617 | 1,505 | ||||||
Total
|
$ | 25,126 | $ | 21,823 |
Shares
of common stock issued and
outstanding
|
||||
(In
thousands)
|
||||
Balance
at December 31, 2005
|
48,562 | |||
Common
stock issued
|
24 | |||
Balance
at December 31, 2006
|
48,586 | |||
Common
stock issued
|
6 | |||
Balance
at December 31, 2007
|
48,592 | |||
Common
stock issued
|
7 | |||
Balance
at December 31, 2008
|
48,599 |
Shares
|
Exercise
price
per
share
|
Amount
payable
upon
exercise
|
Weighted-
average exercise price
|
|||||||||||||
(In
thousands, except per share amounts)
|
||||||||||||||||
Outstanding
at December 31, 2005
|
128 | $ | 2.66-11.89 | $ | 1,165 | $ | 9.11 | |||||||||
Exercised
|
(17 | ) | 2.66- 9.34 | (88 | ) | 5.08 | ||||||||||
Cancelled
|
(5 | ) | 11.49-11.89 | (50 | ) | 10.48 | ||||||||||
Outstanding
at December 31, 2006
|
106 | 2.66-11.49 | 1,027 | 9.71 | ||||||||||||
Cancelled
|
(9 | ) | 5.19-11.49 | (67 | ) | 7.51 | ||||||||||
Outstanding
at December 31, 2007
|
97 | 2.66-11.49 | 960 | 9.91 | ||||||||||||
Exercised
|
(1 | ) | 5.63 | (3 | ) | 5.63 | ||||||||||
Cancelled
|
(1 | ) |
11.49
|
(14 | ) | 11.49 | ||||||||||
Outstanding
at December 31, 2008
|
95 | $ | 2.66-$11.49 | $ | 943 | $ | 9.92 |
Years ended December 31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
(In
millions)
|
||||||||||||
Pre-tax
income (loss):
|
||||||||||||
U.S.
|
$ | 31.1 | $ | (14.9 | ) | $ | 53.0 | |||||
Non-U.S.
|
7.3 | 7.5 |
(5.3
|
) | ||||||||
Total
|
$ | 38.4 | $ | (7.4 | ) | $ | 47.7 | |||||
Expected tax expense, at U.S.
federal
statutory income tax rate of 35%
|
$ | 13.5 | $ | (2.6 | ) | $ | 16.7 | |||||
Non-U.S. tax rates
|
(.3 | ) | (.2 | ) | (.3 | ) | ||||||
Incremental U.S. tax and rate differences
on equity in earnings
|
(4.0 | ) | (5.0 | ) | (3.4 | ) | ||||||
Nondeductible expenses
|
.3 | .5 | .3 | |||||||||
U.S. state income taxes, net
|
.5 | .5 | .9 | |||||||||
Goodwill
impairment
|
- | - | 3.5 | |||||||||
Tax contingency reserve adjustment, net
|
.1 | (1.3 | ) | (2.1 | ) | |||||||
Other, net
|
(1.2 | ) | (.2 | ) | (.7 | ) | ||||||
Provision
for income taxes (benefit)
|
$ | 8.9 | $ | (8.3 | ) | $ | 14.9 |
Years ended December 31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
(In
millions)
|
||||||||||||
Components
of income tax expense (benefit):
|
||||||||||||
Currently payable (refundable):
|
||||||||||||
U.S. federal and state
|
$ | (1.9 | ) | $ | .1 | $ | 18.6 | |||||
Non-U.S.
|
2.4 | 3.6 | 3.7 | |||||||||
.5 | 3.7 | 22.3 | ||||||||||
Deferred income taxes (benefit):
|
||||||||||||
U.S. federal and state
|
8.9 | (12.0 | ) | (7.1 | ) | |||||||
Non-U.S.
|
(.5 | ) | - | (.3 | ) | |||||||
8.4 | (12.0 | ) | (7.4 | ) | ||||||||
Total
|
$ | 8.9 | $ | (8.3 | ) | $ | 14.9 |
Years ended December 31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
(In
millions)
|
||||||||||||
Comprehensive
provision for
income
taxes (benefit) allocable to:
|
||||||||||||
Net
income (loss)
|
$ | 8.9 | $ | (8.3 | ) | $ | 14.9 | |||||
Other
comprehensive income:
|
||||||||||||
Marketable
securities
|
12.4 | (5.6 | ) | (17.8 | ) | |||||||
Pension
liabilities
|
1.4 | 6.8 | (12.6 | ) | ||||||||
OPEB
Plans
|
- | .4 | .3 | |||||||||
Currency
translation
|
5.2 | 6.0 | (7.0 | ) | ||||||||
Adoption
of SFAS 158:
|
||||||||||||
Pension
plans
|
(2.1 | ) | - | - | ||||||||
OPEB
plans
|
(.9 | ) | - | - | ||||||||
Total
|
$ | 24.9 | $ | (.7 | ) | $ | (22.2 | ) |
December 31,
|
||||||||||||||||
2007
|
2008
|
|||||||||||||||
Assets
|
Liabilities
|
Assets
|
Liabilities
|
|||||||||||||
(In
millions)
|
||||||||||||||||
Tax effect of temporary differences
related to:
|
||||||||||||||||
Inventories
|
$ | 1.0 | $ | - | $ | .9 | $ | - | ||||||||
Marketable securities
|
- | (20.0 | ) | - | (2.4 | ) | ||||||||||
Property and equipment
|
- | (4.7 | ) | - | (5.5 | ) | ||||||||||
Accrued OPEB costs
|
3.9 | - | 3.5 | - | ||||||||||||
Pension
asset
|
- | (6.2 | ) | - | - | |||||||||||
Accrued pension cost
|
.7 | - | 4.2 | - | ||||||||||||
Accrued environmental liabilities
|
16.4 | - | 17.7 | - | ||||||||||||
Other accrued liabilities and deductible
differences
|
2.5 | - | 2.6 | - | ||||||||||||
Other taxable differences
|
- | (10.7 | ) | - | (11.3 | ) | ||||||||||
Investments in subsidiaries and
affiliates
|
- | (67.8 | ) | - | (53.3 | ) | ||||||||||
Tax loss and tax credit carryforwards
|
.3 | - | .2 | - | ||||||||||||
Adjusted gross deferred tax assets
(liabilities)
|
24.8 | (109.4 | ) | 29.1 | (72.5 | ) | ||||||||||
Netting of items by tax jurisdiction
|
(18.3 | ) | 18.3 | (23.3 | ) | 23.3 | ||||||||||
6.5 | (91.1 | ) | 5.8 | (49.2 | ) | |||||||||||
Less net current deferred tax asset
|
6.5 | - | 5.8 | - | ||||||||||||
Net noncurrent deferred tax liability
|
$ | - | $ | (91.1 | ) | $ | - | $ | (49.2 | ) |
2009
|
$ 2.9
|
|
2010
|
2.8
|
|
2011
|
2.9
|
|
2012
|
2.9
|
|
2013
|
3.0
|
|
Next 5 years
|
15.8
|
Years ended December 31,
|
||||||||
2007
|
2008
|
|||||||
(In
thousands)
|
||||||||
Change
in projected benefit obligations ("PBO"):
|
||||||||
Balance
at beginning of the year
|
$ | 53,351 | $ | 50,922 | ||||
Elimination
of early measurement date
|
732 | - | ||||||
Interest cost
|
2,925 | 2,931 | ||||||
Participant contributions
|
18 | 10 | ||||||
Plan
amendment
|
- | 27 | ||||||
Actuarial losses
(gains), net
|
(2,224 | ) | 125 | |||||
Change in foreign currency exchange rates
|
180 | (2,535 | ) | |||||
Benefits paid
|
(4,060 | ) | (3,516 | ) | ||||
Benefit
obligation at end of the year
|
50,922 | 47,964 | ||||||
Change in plan assets:
|
||||||||
Fair value
at beginning of the year
|
63,199 | 66,706 | ||||||
Elimination
of early measurement date
|
1,451 | - | ||||||
Actual return on plan assets
|
5,327 | (25,593 | ) | |||||
Employer contributions
|
869 | 560 | ||||||
Participant contributions
|
18 | 10 | ||||||
Change in foreign currency exchange rates
|
(98 | ) | (2,145 | ) | ||||
Benefits paid
|
(4,060 | ) | (3,516 | ) | ||||
Fair value of
plan assets at end of year
|
66,706 | 36,022 | ||||||
Funded status
|
$ | 15,784 | $ | (11,942 | ) | |||
Amounts recognized in the
Consolidated Balance Sheets:
|
||||||||
Pension
asset
|
$ | 17,623 | $ | - | ||||
Accrued pension costs:
|
||||||||
Current
|
(174 | ) | (174 | ) | ||||
Noncurrent
|
(1,665 | ) | (11,768 | ) | ||||
$ | 15,784 | $ | (11,942 | ) | ||||
Accumulated other comprehensive income
-
|
||||||||
actuarial
losses (gains), net
|
$ | (5,103 | ) | $ | 26,393 | |||
Accumulated
benefit obligation (“ABO”)
|
$ | 50,922 | $ | 47,964 |
Years
Ended December 31,
(In
thousands)
|
|||||||||
2007
|
2008
|
||||||||
Changes
in plan assets and benefit obligations recognized in other comprehensive
income:
|
|||||||||
Net
actuarial gains (loss) arising during the year
|
$ | 1,735 | $ | (31,640 | ) | ||||
Amortization
of unrecognized net actuarial gains
|
295 | 144 | |||||||
Change
in measurement date
|
76 | - | |||||||
Total
|
$ | 2,106 | $ | (31,496 | ) | ||||
Years ended December 31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
(In
thousands)
|
||||||||||||
Net
periodic pension cost (income):
|
||||||||||||
Interest cost on PBO
|
$ | 2,889 | $ | 2,925 | $ | 2,931 | ||||||
Expected return on plan assets
|
(5,396 | ) | (5,800 | ) | (6,209 | ) | ||||||
Plan
amendment
|
- | - | 27 | |||||||||
Amortization
of unrecognized:
|
||||||||||||
Net actuarial losses
|
414 | 295 | 144 | |||||||||
Net transition obligations
|
(67 | ) | - | - | ||||||||
Total
|
$ | (2,160 | ) | $ | (2,580 | ) | $ | (3,107 | ) |
December 31,
|
||||||||
2007
|
2008
|
|||||||
(In
thousands)
|
||||||||
PBO
at end of the year:
|
||||||||
U.S. plan
|
$ | 41,725 | $ | 41,440 | ||||
U.K. plan
|
9,197 | 6,524 | ||||||
Total
|
$ | 50,922 | $ | 47,964 | ||||
Fair value of plan assets at end of the year:
|
||||||||
U.S. plan
|
$ | 58,239 | $ | 30,623 | ||||
U.K. plan
|
8,467 | 5,399 | ||||||
Total
|
$ | 66,706 | $ | 36,022 | ||||
Plans
for which the accumulated benefit obligationexceeds plan
assets:
|
||||||||
PBO
|
9,197 | 47,964 | ||||||
ABO
|
9,197 | 47,964 | ||||||
Fair
value of plan assets
|
8,467 | 36,022 |
Years ended December 31,
|
||||||||||||
Rate
|
2006
|
2007
|
2008
|
|||||||||
Discount
rate
|
5.4 | % | 5.7 | % | 6.0 | % | ||||||
Long-term
return on plan assets
|
9.6 | % | 9.6 | % | 9.6 | % |
December 31,
|
||||||||
2007
|
2008
|
|||||||
Equity
securities
|
98 | % | 53 | % | ||||
Debt securities
|
- | 43 | ||||||
Cash
and other
|
2 | 4 | ||||||
Total
|
100 | % | 100 | % |
2009
|
$1.2
million
|
|
2010
|
1.2
million
|
|
2011
|
1.2
million
|
|
2012
|
1.1
million
|
|
2013
|
1.0
million
|
|
Next 5 years
|
4.3
million
|
Years ended December 31,
|
||||||||
2007
|
2008
|
|||||||
(In
thousands)
|
||||||||
Actuarial
present value of accumulated OPEB obligations:
|
||||||||
Balance at beginning of the year
|
$ | 13,257 | $ | 11,242 | ||||
Interest cost
|
726 | 655 | ||||||
Actuarial gain
|
(837 | ) | (665 | ) | ||||
Plan
amendment
|
(425 | ) | - | |||||
Net
benefits paid
|
(1,479 | ) | (1,118 | ) | ||||
Obligations at end of the year
|
11,242 | 10,114 | ||||||
Fair
value of plan assets at end of year
|
- | - | ||||||
Funded status
|
$ | (11,242 | ) | $ | (10,114 | ) | ||
Accrued
OPEB costs recognized in the
Consolidated Balance Sheets:
|
||||||||
Current
|
$ | (1,377 | ) | $ | (1,231 | ) | ||
Noncurrent
|
(9,865 | ) | (8,883 | ) | ||||
Total
|
$ | (11,242 | ) | $ | (10,114 | ) | ||
Accumulated other comprehensive loss:
|
||||||||
Unrecognized net actuarial losses
|
$ | 1,953 | $ | 1,288 | ||||
Unrecognized prior service credit
|
(883 | ) | (704 | ) | ||||
Total
|
$ | 1,070 | $ | 584 |
Years ended December 31,
|
||||||||
2007
|
2008
|
|||||||
(In
thousands)
|
||||||||
Changes
in benefit obligations recognized in
other
comprehensive income:
|
||||||||
Net
actuarial gain arising during the year
|
$ | (836 | ) | $ | (665 | ) | ||
Current
year plan amendments
|
(425 | ) | - | |||||
Amortization
of unrecognized:
|
||||||||
Prior service credit
|
112 | 179 | ||||||
Net actuarial losses
|
(15 | ) | - | |||||
Total
|
$ | (1,164 | ) | $ | (486 | ) |
Years ended December 31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
(In
thousands)
|
||||||||||||
Net
periodic OPEB cost:
|
||||||||||||
Interest cost
|
$ | 734 | $ | 726 | $ | 655 | ||||||
Amortization of prior service credit
|
(112 | ) | (112 | ) | (179 | ) | ||||||
Recognized actuarial losses
|
- | 15 | - | |||||||||
Total
|
$ | 622 | $ | 629 | $ | 476 |
2007
|
2008
|
|||||||
Health
care inflation:
|
||||||||
Initial
rate
|
8.5 | % | 8.0 | % | ||||
Ultimate
rate
|
5.5 | % | 5.5 | % | ||||
Year
of ultimate rate achievement
|
2014
|
2014
|
||||||
Discount
rate
|
6.2 | % | 5.8 | % |
1% Increase
|
1% Decrease
|
|||||||
(In
thousands)
|
||||||||
Effect
on net OPEB cost during 2008
|
$ | 40 | $ | (35 | ) | |||
Effect
at December 31, 2008 on
postretirement
obligation
|
500 | (450 | ) |
December 31,
|
||||||||
2007
|
2008
|
|||||||
(In
thousands)
|
||||||||
Current
receivables from affiliates:
|
||||||||
Income
taxes refundable from Valhi
|
$ | 1,271 | $ | 150 | ||||
Note
receivable from Valhi
|
- |
3,000
|
||||||
Total
|
$ | 1,271 | $ | 3,150 | ||||
Current
payables to affiliates:
|
||||||||
Income
taxes payable to Valhi
|
$ | - | $ | 919 | ||||
Note
payable TIMET
|
250 | 1,000 | ||||||
Accrued
interest payable to TIMET
|
559 | 528 | ||||||
Kronos
|
20 | 256 | ||||||
Tremont
|
320 |
436
|
||||||
Total
|
$ | 1,149 | $ | 3,139 |
December 31,
|
||||||||
2007
|
2008
|
|||||||
(In
thousands)
|
||||||||
Noncurrent
payable to affiliate:
|
||||||||
Note
payable to TIMET
|
$ | 49,980 | $ | 42,980 | ||||
Less
current maturities
|
250 | 1,000 | ||||||
Total
note payable to TIMET
|
$ | 49,730 | $ | 41,980 |
Years ending December 31,
|
Amount
|
|||
(In
thousands)
|
||||
2009
|
$ | 1,000 | ||
2010
|
1,000 | |||
2011
|
1,000 | |||
2012
|
1,000 | |||
2013
|
1,000 | |||
2014
|
37,980 | |||
Total
|
$ | 42,980 |
·
|
we
have never settled any of these
cases,
|
·
|
no
final, non-appealable adverse verdicts have ever been entered against us,
and
|
·
|
we
have never ultimately been found liable with respect to any such
litigation matters.
|
·
|
complexity
and differing interpretations of governmental
regulations,
|
·
|
number
of PRPs and their ability or willingness to fund such allocation of
costs,
|
·
|
financial
capabilities of the PRPs and the allocation of costs among
them,
|
·
|
solvency
of other PRPs,
|
·
|
multiplicity
of possible solutions, and
|
·
|
number
of years of investigatory, remedial and monitoring activity
required.
|
Years ended December 31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
(In
thousands)
|
||||||||||||
Balance
at the beginning of the year
|
$ | 54,947 | $ | 50,713 | $ | 50,330 | ||||||
Additions
charged to expense, net
|
3,958 | 4,368 | 6,779 | |||||||||
Payments,
net
|
(8,192 | ) | (4,751 | ) | (7,055 | ) | ||||||
Balance
at the end of the year
|
$ | 50,713 | $ | 50,330 | $ | 50,054 | ||||||
Amounts
recognized in the balance sheet:
|
||||||||||||
Current liability
|
$ | 9,778 | $ | 11,863 | $ | 9,834 | ||||||
Noncurrent liability
|
40,935 | 38,467 | 40,220 | |||||||||
Total
|
$ | 50,713 | $ | 50,330 | $ | 50,054 |
·
|
facts
concerning historical operations,
|
·
|
the
rate of new claims,
|
·
|
the
number of claims from which we have been dismissed,
and
|
·
|
our
prior experience in the defense of these
matters
|
Years ending December 31,
|
Amount
|
|||
(In
thousands)
|
||||
2009
|
$ | 587 | ||
2010
|
341 | |||
2011
|
330 | |||
2012
|
201 | |||
Total
|
$ | 1,459 |
Fair
Value Measurements
at
December 31, 2008
|
||||||||||||||
Total
|
Quoted
Prices in Active Markets (Level
1)
|
Significant
Other Observable Inputs (Level
2)
|
||||||||||||
(in
millions)
|
||||||||||||||
Marketable
securities:
|
||||||||||||||
Current
|
$ | 5.5 | $ | - | $ | 5.5 | ||||||||
Noncurrent
|
64.0 | 64.0 | - |
December 31, 2007
|
December 31, 2008
|
|||||||||||||||
Carrying
Amount
|
Fair
Value
|
Carrying
Amount
|
Fair
Value
|
|||||||||||||
(in
millions)
|
||||||||||||||||
Cash
and cash equivalents, current restricted cash equivalents and current
marketable securities
|
$ | 51.9 | $ | 51.9 | $ | 29.4 | $ | 29.4 | ||||||||
Promissory
note receivable
|
- | - | $ | 15.0 | $ | 15.0 | ||||||||||
Note
payable to affiliate
|
$ | 50.0 | $ | 50.0 | $ | 43.0 | $ | 43.0 | ||||||||
Minority
interest in CompX common stock
|
$ | 14.4 | $ | 25.2 | $ | 11.9 | $ | 8.5 | ||||||||
Common
stockholders’ equity
|
$ | 246.8 | $ | 555.4 | $ | 188.9 | $ | 651.2 |
December 31,
|
||||||||
2007
|
2008
|
|||||||
(In
millions)
|
||||||||
Unrecognized
liabilities:
|
||||||||
Balance at the beginning of the period
|
$ | 23.1 | $ | 21.1 | ||||
Tax positions taken in prior periods:
|
||||||||
Gross
increases
|
- | - | ||||||
Gross decreases
|
- | (.3 | ) | |||||
Settlements with taxing authorities-cash paid
|
(.3 | ) | - | |||||
Lapse of applicable statute of limitations
|
(1.7 | ) | (2.0 | ) | ||||
Balance at the end of the period
|
$ | 21.1 | $ | 18.8 | ||||
Quarter ended
|
||||||||||||||||
March 31
|
June 30
|
Sept. 30
|
Dec. 31
|
|||||||||||||
(In
millions, except per share data)
|
||||||||||||||||
Year ended December 31, 2007
|
||||||||||||||||
Net sales
|
$ | 43.6 | $ | 45.2 | $ | 46.4 | $ | 42.5 | ||||||||
Gross margin
(a)
|
12.1 | 11.9 | 11.9 | 9.3 | ||||||||||||
Net income
(loss)(b)
|
5.8 | (1.5 | ) | (16.0 | ) | 10.0 | ||||||||||
Diluted earnings
(loss) per common share
|
$ | .12 | $ | (.03 | ) | $ | (.33 | ) | $ | .21 | ||||||
Year ended December 31, 2008
|
||||||||||||||||
Net sales
|
$ | 40.5 | $ | 43.7 | $ | 43.9 | $ | 37.4 | ||||||||
Gross margin
|
9.4 | 11.0 | 11.2 | 8.2 | ||||||||||||
Net income
(loss) (c)
|
(.3 | ) | 4.0 | (6.8 | ) | 36.3 | ||||||||||
Diluted earnings
(loss) per common share
|
$ | (.01 | ) | $ | .08 | $ | (.14 | ) | $ | .75 |
·
|
$14.7
million gain from our sale of 800,000 shares of TIMET common stock to
Valhi. See Note 4.
|
·
|
$2.7
million expense related to the consolidation of three of CompX’s northern
Illinois facilities into one new facility including a $600,000 charge to
write-down a vacated facility to its estimated net realizable value, see
Note 14; and
|
|
·
|
$32.5
million charge included in our equity in earnings of Kronos in the third
quarter for a change in the German tax
rates.
|
|
·
|
$10.1
million goodwill impairment charge in the third quarter of 2008, see Note
8; and
|
|
·
|
$48.8
million pre-tax gain in the fourth quarter for a litigation settlement,
see Note 19.
|
December 31,
|
||||||||
2007
|
2008
|
|||||||
Current
assets:
|
||||||||
Cash and cash equivalents
|
$ | 4,542 | $ | 1,075 | ||||
Restricted cash equivalents
|
143 | 2,452 | ||||||
Restricted marketable debt securities
|
5,301 | 5,371 | ||||||
Accounts and notes receivable
|
208 | 7,343 | ||||||
Receivable from subsidiaries and affiliates
|
1,758 | 6,308 | ||||||
Prepaid expenses
|
39 | 35 | ||||||
Deferred income taxes
|
4,009 | 3,611 | ||||||
Total current assets
|
16,000 | 26,195 | ||||||
Other assets:
|
||||||||
Marketable securities
|
79,500 | 46,317 | ||||||
Investment in subsidiaries
|
122,524 | 97,419 | ||||||
Investment in Kronos Worldwide, Inc.
|
147,119 | 133,745 | ||||||
Pension
asset
|
17,623 | - | ||||||
Other
|
1,560 | 15,490 | ||||||
Property and equipment, net
|
875 | 647 | ||||||
Total other assets
|
369,201 | 293,618 | ||||||
Total
assets
|
$ | 385,201 | $ | 319,813 | ||||
Current liabilities:
|
||||||||
Accounts payable and accrued liabilities
|
$ | 6,152 | $ | 6,755 | ||||
Payable to subsidiaries and affiliates
|
2,607 | 22,185 | ||||||
Accrued environmental costs
|
8,521 | 7,253 | ||||||
Total current liabilities
|
17,280 | 36,193 | ||||||
Noncurrent liabilities:
|
||||||||
Deferred income tax
|
73,754 | 39,240 | ||||||
Accrued environmental costs
|
11,049 | 13,542 | ||||||
Accrued pension cost
|
1,665 | 11,767 | ||||||
Accrued postretirement benefits cost
|
9,865 | 8,883 | ||||||
Other
|
25,126 | 21,824 | ||||||
Total noncurrent liabilities
|
121,459 | 95,256 | ||||||
Stockholders' equity
|
246,462 | 188,364 | ||||||
Total
liabilities and stockholders' equity
|
$ | 385,201 | $ | 319,813 | ||||
Years ended December
31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
Revenues
and other income (expense):
|
||||||||||||
Equity in income (losses) of subsidiaries and affiliates
|
$ | 37,972 | $ | (18,401 | ) | $ | (3,706 | ) | ||||
Litigation
settlement gain
|
- | - | 52,266 | |||||||||
Interest and dividends
|
1,976 | 1,482 | 6,266 | |||||||||
Securities transactions, net
|
- | 22,741 | - | |||||||||
Insurance
recoveries
|
7,656 | 5,659 | 9,610 | |||||||||
Other income
(expense), net
|
85 | (215 | ) | 65 | ||||||||
Total
revenues and other income
|
47,689 | 11,266 | 64,501 | |||||||||
Costs and expenses:
|
||||||||||||
Corporate
expense
|
22,797 | 28,842 | 23,516 | |||||||||
Interest
|
7 | 1 | - | |||||||||
Total
costs and expenses
|
22,804 | 28,843 | 23,516 | |||||||||
Income
(loss) before income taxes
|
24,885 | (17,577 | ) | 40,985 | ||||||||
Income
tax expense (benefit)
|
(1,225 | ) | (15,846 | ) | 7,801 | |||||||
Net
income (loss)
|
$ | 26,110 | $ | (1,731 | ) | $ | 33,184 | |||||
Years ended December 31,
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income (loss)
|
$ | 26,110 | $ | (1,731 | ) | $ | 33,184 | |||||
Distributions
from Kronos
|
17,516 | 17,516 | 17,532 | |||||||||
Distributions
from CompX
|
5,351 | 8,376 | 5,378 | |||||||||
Deferred
income taxes
|
7,009 | (5,871 | ) | (4,250 | ) | |||||||
Equity
in earnings of subsidiaries and investments
|
(37,972 | ) | 18,401 | 3,706 | ||||||||
Securities
transactions
|
- | (22,741 | ) | - | ||||||||
Litigation
settlement gain
|
- | - | (52,266 | ) | ||||||||
Other,
net
|
(3,097 | ) | (1,578 | ) | (2,429 | ) | ||||||
Net
change in assets and liabilities
|
(4,843 | ) | (15,795 | ) | (9,700 | ) | ||||||
Net
cash provided by (used in) operating activities
|
10,074 | (3,423 | ) | (8,845 | ) | |||||||
Cash
flows from investing activities:
|
||||||||||||
Capital
expenditures
|
- | (175 | ) | (45 | ) | |||||||
Loans
to affiliates, net
|
- | - | (22,210 | ) | ||||||||
Proceeds
from real estate-related litigation settlement
|
- | - | 39,550 | |||||||||
Change
in restricted cash equivalents and marketable debt securities,
net
|
(10 | ) | (7 | ) | (2,379 | ) | ||||||
Purchase
of CompX common stock
|
(2,318 | ) | - | (1,081 | ) | |||||||
Proceeds
from disposal of marketable securities
|
- | 26,800 | - | |||||||||
Other
|
(57 | ) | - | (794 | ) | |||||||
Net
cash provided by (used in) investing activities
|
(2,385 | ) | 26,618 | 13,041 | ||||||||
Cash
flows from financing activities:
|
||||||||||||
Loans from affiliates, net
|
7,380 | (5,380 | ) | 16,630 | ||||||||
Dividends paid
|
(24,284 | ) | (24,295 | ) | (24,299 | ) | ||||||
Common stock issued
|
88 | - | 6 | |||||||||
Net
cash used in financing activities
|
(16,816 | ) | (29,675 | ) | (7,663 | ) | ||||||
Net
change during the year from operating investing and financing
activities
|
(9,127 | ) | (6,480 | ) | (3,467 | ) | ||||||
Balance
at beginning of year
|
20,149 | 11,022 | 4,542 | |||||||||
Balance
at end of year
|
$ | 11,022 | $ | 4,542 | $ | 1,075 |
December 31,
|
||||||||
2007
|
2008
|
|||||||
(In
thousands)
|
||||||||
Current:
|
||||||||
Receivable
from:
|
||||||||
Valhi
– income taxes
|
$ | 1,271 | $ | 150 | ||||
CompX
– income taxes
|
282 | - | ||||||
EMS
– income taxes
|
71 | - | ||||||
Valhi
|
- | 3,000 | ||||||
EMS
|
- | 3,158 | ||||||
Other
|
134 | - | ||||||
Total
|
$ | 1,758 | $ | 6,308 | ||||
Payable
to:
|
||||||||
EWI
- promissory note
|
$ | 2,000 | $ | 2,000 | ||||
EMS
- promissory note
|
- | 16,630 | ||||||
CompX
– income taxes
|
223 | 1,472 | ||||||
Valhi
– income taxes
|
- | 919 | ||||||
EWI
– income taxes
|
44 | 16 | ||||||
EMS
– income taxes
|
- | 456 | ||||||
Tremont
|
320 | 436 | ||||||
Kronos
|
20 | 256 | ||||||
Total
|
$ | 2,607 | $ | 22,185 |
December 31,
|
||||||||
2007
|
2008
|
|||||||
(In
thousands)
|
||||||||
Investment
in:
|
||||||||
CompX
|
$ | 97,266 | $ | 86,372 | ||||
Other
subsidiaries
|
25,258 | 11,047 | ||||||
Total
|
$ | 122,524 | $ | 97,419 |
_Years ended December 31,_
|
||||||||||||
2006
|
2007
|
2008
|
||||||||||
(In
thousands)
|
||||||||||||
Equity
in earnings (losses) of subsidiaries and affiliates:
|
||||||||||||
Kronos
|
$ | 29,345 | $ | (23,901 | ) | $ | 3,229 | |||||
CompX
|
8,188 | 6,356 | (3,257 | ) | ||||||||
Other
subsidiaries
|
439 | (856 | ) | (3,678 | ) | |||||||
Total
|
$ | 37,972 | $ | (18,401 | ) | $ | (3,706 | ) |
SUBSIDIARIES
OF THE REGISTRANT
|
||
NAME OF CORPORATION
|
Jurisdiction
of
incorporation
or organization
|
%
of Voting
Securities
Held at December 31,
2008
(1)
|
CompX
International Inc. (2)
|
Delaware
|
87
|
Kronos
Worldwide, Inc. (3)
|
Delaware
|
36
|
EWI
RE, Inc.
|
New
York
|
100
|
NLO,
Inc.
|
Ohio
|
100
|
NL
Environmental Management Services, Inc.
|
New
Jersey
|
100
|
EMS
Financial, Inc.
|
Delaware
|
100
|
United
Lead Company
|
New
Jersey
|
100
|
|
||
(1)
|
Held
by the Registrant or the indicated subsidiary of the
Registrant
|
(2)
|
Subsidiaries
of CompX International Inc. are incorporated by reference to Exhibit 21.1
of CompX’s Annual Report on Form 10-K for the year ended December 31, 2008
(File No. 1-13905)
|
(3)
|
Subsidiaries
of Kronos Worldwide, Inc. are incorporated by reference to Exhibit 21.1 of
Kronos’ Annual Report on Form 10-K for the year ended December 31, 2008
(File No.
1-31763)
|
1)
|
I
have reviewed this annual report on Form 10-K of NL Industries,
Inc.;
|
2)
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3)
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4)
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and we
have:
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
c)
|
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5)
|
The
registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent
function):
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
|
b)
|
Any
fraud, whether or not material, that involves management or
other
|
|
employees
who have a significant role in the registrant's internal control over
financial reporting.
|
1)
|
I
have reviewed this annual report on Form 10-K of NL Industries,
Inc.;
|
2)
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3)
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4)
|
The
registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and we
have:
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
b)
|
Designed
such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
c)
|
Evaluated
the effectiveness of the registrant's disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5)
|
The
registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent
function):
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
|
b)
|
Any
fraud, whether or not material, that involves management or
other
|
|
employees
who have a significant role in the registrant's internal control over
financial reporting.
|
(1)
|
The
Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934;
and
|
(2)
|
The
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|