NL REPORTS FIRST QUARTER 2018 RESULTS
DALLAS, TEXAS - May 8, 2018 - NL Industries, Inc. (NYSE: NL) today reported net income attributable to NL stockholders of $14.3 million, or $.29 per share, in the first quarter of 2018 compared to net income attributable to NL stockholders of $8.4 million, or $.17 per share, in the first quarter of 2017.
Net sales decreased to $28.4 million in the first quarter of 2018 from $29.9 million in the first quarter of 2017 primarily due to lower security products sales volumes to existing government security customers and to a lesser extent lower sales to an original equipment manufacturer of recreational transportation products, partially offset by higher marine components sales for the quarter. Income from operations attributable to CompX decreased slightly to $4.4 million in the first quarter of 2018 from $4.5 million in the first quarter of 2017 due to lower Security Products sales.
Kronos' net sales of $430.4 million in the first quarter of 2018 were $60.6 million, or 16%, higher than in the first quarter of 2017. Kronos' net sales increased in the first quarter of 2018 as compared to the same period in 2017 due to higher average TiO2 selling prices partially offset by lower sales volumes. Kronos' average TiO2 selling prices were 26% higher in the first quarter of 2018 as compared to the first quarter of 2017 with higher prices in all major markets. Kronos' average TiO2 selling prices at the end of the first quarter of 2018 were 4% higher than at the end of 2017 with higher prices in the European, North American and export markets, partially offset by lower prices in Latin America. TiO2 sales volumes in the first quarter of 2018 were 13% lower as compared to the record first quarter sales volumes of 2017 due to lower sales in all major markets. Fluctuations in currency exchange rates (primarily the euro) also affected net sales comparisons, increasing net sales by approximately $31 million in the first quarter of 2018 as compared to the first quarter of 2017. The table at the end of this press release shows how each of these items impacted the overall increase in sales.
Kronos' TiO2 income from operations in the first quarter of 2018 was $107.5 million as compared to $56.4 million in the first quarter of 2017. Kronos' income from operations increased in the first quarter of 2018 primarily due to higher average TiO2 selling prices partially offset by lower sales and production volumes and higher costs for certain raw materials and other production costs. Kronos' TiO2 production volumes were 8% lower in the first quarter as compared to the same period in 2017. Kronos' production facilities operated at 95% of practical capacity in 2018 compared to full practical capacity utilization rates in 2017. Fluctuations in currency exchange rates also affected segment profit comparisons, which increased income from operations by approximately $1 million in the first quarter of 2018 as compared to the first quarter of 2017.
Kronos' income tax expense in 2017 includes a $5.0 million (NL's equity interest was $1.0 million, or $0.2 per share) non-cash deferred income tax benefit as a result of a net decrease in its deferred income tax asset valuation allowance related to its German and Belgian operations.
Corporate expenses increased $2.7 million in the first quarter of 2018 as compared to the first quarter of 2017 primarily due to higher litigation fees and related costs and higher environmental remediation and related costs in 2018. Interest and dividend income increased $.4 million in the first quarter of 2018 as compared to the first quarter of 2017 primarily due to interest earned on CompX's loan to an affiliate which was entered into in August 2016.
The statements in this release relating to matters that are not historical facts are forward-looking statements that represent management's beliefs and assumptions based on currently available information. Although NL believes that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results, and actual future results could differ materially from those described in such forward-looking statements. While it is not possible to identify all factors, we continue to face many risks and uncertainties. Among the factors that could cause actual future results to differ materially include, but are not limited to:
- Future supply and demand for our products
- The extent of the dependence of certain of our businesses on certain market sectors
- The cyclicality of our businesses (such as Kronos' TiO2 operations)
- Customer and producer inventory levels
- Unexpected or earlier-than-expected industry capacity expansion (such as the TiO2 industry)
- Changes in raw material and other operating costs (such as ore, zinc, brass, aluminum, steel and energy costs) and our ability to pass those costs on to our customers or offset them with reductions in other operating costs
- Changes in the availability of raw material (such as ore)
- 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)
- Competitive products and substitute products
- Price and product competition from low-cost manufacturing sources (such as China)
- Customer and competitor strategies
- Potential consolidation of Kronos' competitors
- Potential consolidation of Kronos' customers
- The impact of pricing and production decisions
- Competitive technology positions
- Potential difficulties in integrating future acquisitions
- Potential difficulties in upgrading or implementing new accounting and manufacturing software systems (such as Kronos' new enterprise resource planning system)
- The introduction of trade barriers
- Possible disruption of Kronos' or CompX's business, or increases in our cost of doing business resulting from terrorist activities or global conflicts
- The impact of current or future government regulations (including employee healthcare benefit related regulations)
- Fluctuations in currency exchange rates (such as changes in the exchange rate between the U.S. dollar and each of the euro, the Norwegian krone and the Canadian dollar), or possible disruptions to our business resulting from potential instability resulting from uncertainties associated with the euro or other currencies
- Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions, unscheduled or unplanned downtime, transportation interruptions and cyber attacks)
- Decisions to sell operating assets other than in the ordinary course of business
- Kronos' ability to renew or refinance credit facilities
- Our ability to maintain sufficient liquidity
- The timing and amounts of insurance recoveries
- The extent to which our subsidiaries or affiliates were to become unable to pay us dividends
- The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters, including future tax reform
- Uncertainties associated with CompX's development of new product features
- Our ability to utilize income tax attributes or changes in income tax rates related to such attributes, the benefits of which may or may not have been recognized under the more-likely-than-not recognition criteria
- 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)
- Government laws and regulations and possible changes therein (such as changes in government regulations which might impose various obligations on former manufacturers of lead pigment and lead-based paint, including us, with respect to asserted health concerns associated with the use of such products)
- The ultimate resolution of pending litigation (such as our lead pigment and environmental matters)
- Possible future litigation.
Should one or more of these risks materialize (or the consequences of such a development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those currently forecasted or expected. We disclaim any intention or obligation to update or revise any forward-looking statement whether as a result of changes in information, future events or otherwise.
NL Industries, Inc. is engaged in the component products (security products and performance marine components), chemicals (TiO2) and other businesses.
|NL INDUSTRIES, INC.|
|CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS|
|(In millions, except earnings per share)|
|Three months ended|
|Net sales||$ 29.9||$ 28.4|
|Cost of sales||20.2||18.9|
|Selling, general and administrative expense||5.2||5.1|
|Other operating income (expense):|
|Other income, net||-||.6|
|Loss from operations||(.7)||(2.8)|
|Equity in earnings of Kronos Worldwide, Inc.||11.2||21.5|
|General corporate items:|
|Other components of net periodic pension and OPEB||(.2)||(0.1)|
|Interest and dividend income||.7||1.1|
|Income before income taxes||11.0||18.1|
|Income tax expense||2.2||3.3|
|Noncontrolling interest in net income of subsidiary||.4||.5|
|Net income attributable to NL stockholders||$ 8.4||$ 14.3|
|Net income per share attributable to NL stockholders||$ 0.17||$ 0.29|
|Weighted average shares used in the|
|calculation of net income per share||48.7||48.7|
NL INDUSTRIES, INC.
COMPONENTS OF INCOME (LOSS) FROM OPERATIONS
|ended March 31,|
|CompX - component products||$ 4.5||$ 4.4|
|Other income, net||-||.6|
|Loss from operations||$ (.7)||$ (2.8)|
CHANGE IN KRONOS' TiO2 SALES
|ended March 31,|
|2018 vs. 2017|
|Percentage change in sales:|
|TiO2 product pricing||26||%|
|TiO2 sales volume||(13)|
|TiO2 product mix/other||(5)|
|Changes in currency exchange rates||8|
SOURCE: NL Industries, Inc.
CONTACT: Janet G. Keckeisen, Vice President - Corporate Strategy and Investor Relations, 972.233.1700