Dallas, Texas, Aug. 05, 2020 (GLOBE NEWSWIRE) -- NL Industries, Inc. (NYSE: NL) today reported net income attributable to NL stockholders of $4.6 million, or $.09 per share, in the second quarter of 2020 compared to net income attributable to NL stockholders of $5.9 million, or $.12 per share, in the second quarter of 2019. For the first six months of 2020, NL reported net income attributable to NL stockholders of $6.5 million, or $.13 per share, compared to net income of $21.1 million, or $.43 per share for the first six months of 2019. NL results include an unrealized loss of $14.3 million in the first six months of 2020 related to the change in value of marketable equity securities compared to a $14.9 million unrealized gain in the first six months of 2019. NL also recognized a pre-tax litigation settlement expense of $19.6 million ($.32 per share, net of income tax benefit) in the second quarter of 2019.
CompX net sales were $23.8 million for the second quarter of 2020 compared to $33.7 million in the second quarter of 2019 and $56.1 million for the six months ended June 30, 2020 compared to $64.9 million for the same prior year period. Income from operations attributable to CompX was $2.4 million for the second quarter of 2020 compared to $5.6 million for the second quarter of 2019 and $7.4 million for the first six months of 2020 compared to $9.9 million for the same prior year period. The COVID-19 pandemic impacted CompX’s operations during the second quarter of 2020 due to government mandated closures and reduced demand for its products which resulted in a decrease in net sales and operating income in the second quarter and for the first six months of 2020 compared to the same periods in 2019.
NL recognized equity in earnings of Kronos of $5.7 million in the second quarter of 2020 compared to $9.0 million in the same period of 2019 and $13.9 million in the first six months of 2020 compared to $18.2 million in the same period of 2019. Kronos’ net sales of $386.0 million in the second quarter of 2020 were $98.5 million, or 20%, lower than in the second quarter of 2019. Kronos’ net sales of $807.0 million in the first six months of 2020 were $114.0 million, or 12%, lower than in the first six months of 2019. Kronos’ net sales decreased in the 2020 periods primarily due to lower sales volumes and lower average TiO2 selling prices. Kronos’ TiO2 sales volumes were 22% lower in the second quarter of 2020 as compared to the second quarter of 2019 and 14% lower in the first six months of 2020 as compared to the same prior year period due to lower sales volumes in all major markets primarily due to demand contraction related to the COVID-19 pandemic. Kronos’ average TiO2 selling prices were 1% lower in the second quarter and first six months of 2020 as compared to the same periods in 2019. Kronos’ average TiO2 selling prices at the end of the second quarter of 2020 were comparable to the end of the first quarter of 2020. Fluctuations in currency exchange rates (primarily the euro) also affected net sales comparisons, decreasing net sales by approximately $4 million in the second quarter of 2020 and approximately $11 million in the first six months of 2020 as compared to the same periods in 2019.
Kronos’ income from operations in the second quarter of 2020 was $33.0 million as compared to $46.5 million in the second quarter of 2019. For the year-to-date period, Kronos’ income from operations was $76.5 million as compared to $95.5 million in the first six months of 2019. Kronos’ income from operations decreased in the 2020 periods primarily due to the unfavorable effects of lower sales volumes, lower average TiO2 selling prices and higher raw materials and other production costs. Kronos’ TiO2 production volumes were 2% lower in the second quarter and year-to-date periods of 2020 as compared to the same periods in 2019. Kronos operated its production facilities at overall average capacity utilization rates of 95% in the first six months of 2020 (95% and 96% in the first and second quarters of 2020, respectively) compared to 97% in 2019 (97% in the first and second quarters of 2019). Fluctuations in currency exchange rates also affected the year-to-date income from operations comparison, which increased income from operations by approximately $11 million in the year-to-date 2020 period as compared to the same period of 2019. Fluctuations in currency exchange rates had a nominal effect on the second quarter income from operations comparison.
Corporate expenses decreased $1.1 million in the second quarter of 2020 compared to the second quarter of 2019 primarily due to lower litigation fees and related costs. Corporate expenses decreased $.7 million in the first six months of 2020 compared to the same period of 2019 primarily due to lower litigation fees and related costs partially offset by higher environmental remediation and related costs. We recognized an additional $19.6 million pre-tax litigation settlement expense in the second quarter of 2019 for a settlement agreement that was approved by the court in July 2019.
Insurance recoveries represent amounts we receive from certain of our former insurance carriers and generally relate to the recovery of past lead pigment and asbestos litigation defense costs we have incurred. Substantially all of the insurance recoveries we recognized in the second quarter of 2019 relate to a settlement we reached with a single insurance carrier that agreed to reimburse us for a portion of our past and future litigation defense costs. Such insurance recoveries aggregated $5.0 million ($3.9 million, or $.08 per share, net of income tax expense) in the first six months of 2019.
Interest and dividend income decreased $1.6 million in the second quarter and $2.0 million in the first six months of 2020 compared to the prior year periods primarily due to lower average outstanding balances under CompX’s revolving promissory note receivable from Valhi and lower average interest rates partially offset by higher cash and cash equivalents and restricted cash and cash equivalents balances available for investment. Marketable equity securities represent unrealized gains (losses) on our portfolio of marketable equity securities during the periods.
Our results of operations for the second quarter of 2020 were significantly impacted by the COVID-19 pandemic, specifically through reduced demand for many of CompX and Kronos’ products resulting from the rapid contraction of vast areas of the global economy. The extent of the COVID-19 impact on our future operations will depend on the time period and degree to which the COVID-19 pandemic persists in the global economy thereby reducing customer demand for certain of CompX and Kronos’ products, including the timing and extent to which CompX and Kronos’ customers’ operations continue to be impacted, their customers’ perception as to when consumer demand for their products will return to pre-pandemic levels and on any future disruptions in their operations or their suppliers’ operations, all of which are difficult to predict.
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 we believe 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. Factors that could cause actual future results to differ materially include, but are not limited to:
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 recreational marine components), chemicals (TiO2) and other businesses.
NL INDUSTRIES, INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME(In millions, except earnings per share)(unaudited)
Three months ended | Six months ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2020 | 2019 | 2020 | ||||||||||||
Net sales | $ | 33.7 | $ | 23.8 | $ | 64.9 | $ | 56.1 | |||||||
Cost of sales | 22.7 | 16.4 | 44.3 | 38.3 | |||||||||||
Gross margin | 11.0 | 7.4 | 20.6 | 17.8 | |||||||||||
Selling, general and administrative expense | 5.4 | 5.0 | 10.7 | 10.4 | |||||||||||
Other operating income (expense): | |||||||||||||||
Insurance recoveries | 4.7 | .1 | 5.0 | .1 | |||||||||||
Litigation settlement expense, net | (19.6 | ) | - | (19.6 | ) | - | |||||||||
Corporate expense | (3.6 | ) | (2.5 | ) | (5.7 | ) | (5.0 | ) | |||||||
Income (loss) from operations | (12.9 | ) | - | (10.4 | ) | 2.5 | |||||||||
Equity in earnings of Kronos Worldwide, Inc. | 9.0 | 5.7 | 18.2 | 13.9 | |||||||||||
General corporate items: | |||||||||||||||
Interest and dividend income | 2.1 | .5 | 3.6 | 1.6 | |||||||||||
Marketable equity securities | 9.4 | (2.2 | ) | 14.9 | (14.3 | ) | |||||||||
Other components of net periodic pension and OPEB cost | (.4 | ) | (.2 | ) | (.8 | ) | (.4 | ) | |||||||
Interest expense | - | (.4 | ) | - | (.7 | ) | |||||||||
Income before income taxes | 7.2 | 3.4 | 25.5 | 2.6 | |||||||||||
Income tax expense (benefit) | .6 | (1.5 | ) | 3.2 | (4.8 | ) | |||||||||
Net income | 6.6 | 4.9 | 22.3 | 7.4 | |||||||||||
Noncontrolling interest in net income of subsidiary | .7 | .3 | 1.2 | .9 | |||||||||||
Net income attributable to NL stockholders | $ | 5.9 | $ | 4.6 | $ | 21.1 | $ | 6.5 | |||||||
Net income per share attributable to NL stockholders | $ | .12 | $ | .09 | $ | .43 | $ | .13 | |||||||
Weighted average shares used in the | |||||||||||||||
calculation of net income per share | 48.7 | 48.8 | 48.7 | 48.8 |
NL INDUSTRIES, INC.COMPONENTS OF INCOME FROM OPERATIONS(In millions) (unaudited)
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June 30, | June 30, | ||||||||||||||
2019 | 2020 | 2019 | 2020 | ||||||||||||
CompX - component products | $ | 5.6 | $ | 2.4 | $ | 9.9 | $ | 7.4 | |||||||
Insurance recoveries | 4.7 | .1 | 5.0 | .1 | |||||||||||
Litigation settlement expense, net | (19.6 | ) | - | (19.6 | ) | - | |||||||||
Corporate expense | (3.6 | ) | (2.5 | ) | (5.7 | ) | (5.0 | ) | |||||||
Income (loss) from operations | $ | (12.9 | ) | $ | - | $ | (10.4 | ) | $ | 2.5 |
CHANGE IN KRONOS’ TiO2 SALES(unaudited)
Three months ended | Six months ended | ||||||||||
June 30, | June 30, | ||||||||||
2020 vs. 2019 | 2020 vs. 2019 | ||||||||||
Percentage change in net sales: | |||||||||||
TiO2 sales volume | (22 | ) | % | (14 | ) | % | |||||
TiO2 product pricing | (1 | ) | (1 | ) | |||||||
TiO2 product mix/other | 4 | 4 | |||||||||
Changes in currency exchange rates | (1 | ) | (1 | ) | |||||||
Total | (20 | ) | % | (12 | ) | % |