UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2014
Commission file number 1-640
NL INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
|
New Jersey |
|
13-5267260 |
|
(State or other jurisdiction of incorporation or organization) |
|
(IRS Employer Identification No.) |
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
(Address of principal executive offices)
Registrant’s telephone number, including area code: (972) 233-1700
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ¨
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
Number of shares of the Registrant’s common stock outstanding on October 31, 2014: 48,682,884.
NL INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
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Page |
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Part I. |
FINANCIAL INFORMATION |
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Item 1. |
Financial Statements |
|
|
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||
|
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Condensed Consolidated Balance Sheets - December 31, 2013; September 30, 2014 (unaudited) |
3 |
|
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||
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5 |
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6 |
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7 |
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||
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8 |
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||
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Notes to Condensed Consolidated Financial Statements (unaudited) |
10 |
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||
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
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||
|
Item 3. |
36 |
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||
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Item 4. |
36 |
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Part II. |
|
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||
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Item 1. |
37 |
|
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||
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Item 1A. |
37 |
|
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Item 6. |
37 |
|
Items 2, 3, 4 and 5 of Part II are omitted because there is no information to report.
2
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
December 31, |
|
|
September 30, |
|
||
|
|
2013 |
|
|
2014 |
|
||
|
|
|
|
|
|
(unaudited) |
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
52,609 |
|
|
$ |
72,503 |
|
|
Restricted cash and cash equivalents |
|
3,343 |
|
|
|
3,880 |
|
|
Accounts and other receivables, net |
|
10,632 |
|
|
|
12,310 |
|
|
Inventories, net |
|
13,235 |
|
|
|
15,082 |
|
|
Prepaid expenses and other |
|
809 |
|
|
|
794 |
|
|
Deferred income taxes |
|
3,786 |
|
|
|
3,786 |
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
84,414 |
|
|
|
108,355 |
|
|
|
|
|
|
|
|
|
|
|
Other assets: |
|
|
|
|
|
|
|
|
Marketable securities |
|
252,677 |
|
|
|
93,855 |
|
|
Investment in Kronos Worldwide, Inc. |
|
284,523 |
|
|
|
274,132 |
|
|
Goodwill |
|
27,156 |
|
|
|
27,156 |
|
|
Other assets, net |
|
2,707 |
|
|
|
3,137 |
|
|
Deferred income taxes |
|
19 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
Total other assets |
|
567,082 |
|
|
|
398,299 |
|
|
|
|
|
|
|
|
|
|
|
Property and equipment: |
|
|
|
|
|
|
|
|
Land |
|
5,138 |
|
|
|
5,138 |
|
|
Buildings |
|
20,793 |
|
|
|
21,176 |
|
|
Equipment |
|
58,195 |
|
|
|
61,834 |
|
|
Construction in progress |
|
2,588 |
|
|
|
594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
86,714 |
|
|
|
88,742 |
|
|
Less accumulated depreciation |
|
52,385 |
|
|
|
55,049 |
|
|
|
|
|
|
|
|
|
|
|
Net property and equipment |
|
34,329 |
|
|
|
33,693 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
685,825 |
|
|
$ |
540,347 |
|
3
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands)
|
|
December 31, |
|
|
September 30, |
|
||
|
|
2013 |
|
|
2014 |
|
||
|
|
|
|
|
|
(unaudited) |
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
$ |
3,006 |
|
|
$ |
5,978 |
|
|
Accrued and other current liabilities |
|
11,199 |
|
|
|
13,535 |
|
|
Accrued environmental remediation and related costs |
|
4,859 |
|
|
|
12,681 |
|
|
Income taxes |
|
6 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
19,070 |
|
|
|
32,209 |
|
|
|
|
|
|
|
|
|
|
|
Noncurrent liabilities: |
|
|
|
|
|
|
|
|
Accrued pension cost |
|
5,453 |
|
|
|
3,954 |
|
|
Accrued postretirement benefits (OPEB) costs |
|
3,268 |
|
|
|
2,986 |
|
|
Accrued environmental remediation and related costs |
|
108,777 |
|
|
|
104,289 |
|
|
Deferred income taxes |
|
161,933 |
|
|
|
100,984 |
|
|
Other |
|
18,329 |
|
|
|
18,295 |
|
|
|
|
|
|
|
|
|
|
|
Total noncurrent liabilities |
|
297,760 |
|
|
|
230,508 |
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
NL stockholders' equity: |
|
|
|
|
|
|
|
|
Common stock |
|
6,084 |
|
|
|
6,085 |
|
|
Additional paid-in capital |
|
300,223 |
|
|
|
300,388 |
|
|
Retained earnings |
|
84,089 |
|
|
|
107,205 |
|
|
Accumulated other comprehensive loss |
|
(35,016 |
) |
|
|
(150,331 |
) |
|
|
|
|
|
|
|
|
|
|
Total NL stockholders' equity |
|
355,380 |
|
|
|
263,347 |
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest in subsidiary |
|
13,615 |
|
|
|
14,283 |
|
|
|
|
|
|
|
|
|
|
|
Total equity |
|
368,995 |
|
|
|
277,630 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity |
$ |
685,825 |
|
|
$ |
540,347 |
|
Commitments and contingencies (Notes 12 and 13)
See accompanying notes to Condensed Consolidated Financial Statements.
4
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
|
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
||||
|
|
|
(unaudited) |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
24,209 |
|
|
$ |
26,473 |
|
|
$ |
69,701 |
|
|
$ |
79,102 |
|
|
Cost of sales |
|
|
16,695 |
|
|
|
18,331 |
|
|
|
48,557 |
|
|
|
54,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
|
7,514 |
|
|
|
8,142 |
|
|
|
21,144 |
|
|
|
24,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expense |
|
|
4,537 |
|
|
|
4,710 |
|
|
|
13,790 |
|
|
|
13,872 |
|
|
Other operating income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance recoveries |
|
|
2,198 |
|
|
|
8,843 |
|
|
|
3,774 |
|
|
|
10,041 |
|
|
Other income |
|
|
9 |
|
|
|
9 |
|
|
|
23 |
|
|
|
140 |
|
|
Corporate expense and other, net |
|
|
(5,627 |
) |
|
|
(4,304 |
) |
|
|
(26,869 |
) |
|
|
(17,582 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
(443 |
) |
|
|
7,980 |
|
|
|
(15,718 |
) |
|
|
3,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings (loss) of Kronos Worldwide, Inc. |
|
|
(9,101 |
) |
|
|
9,689 |
|
|
|
(31,891 |
) |
|
|
24,101 |
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income |
|
|
725 |
|
|
|
311 |
|
|
|
2,209 |
|
|
|
1,333 |
|
|
Interest expense |
|
|
(10 |
) |
|
|
- |
|
|
|
(127 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(8,829 |
) |
|
|
17,980 |
|
|
|
(45,527 |
) |
|
|
28,665 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
|
(3,145 |
) |
|
|
3,800 |
|
|
|
(23,827 |
) |
|
|
4,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(5,684 |
) |
|
|
14,180 |
|
|
|
(21,700 |
) |
|
|
24,020 |
|
|
Noncontrolling interest in net income of subsidiary |
|
|
256 |
|
|
|
291 |
|
|
|
613 |
|
|
|
904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to NL stockholders |
|
$ |
(5,940 |
) |
|
$ |
13,889 |
|
|
$ |
(22,313 |
) |
|
$ |
23,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts attributable to NL stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per share |
|
$ |
(.12 |
) |
|
$ |
.29 |
|
|
$ |
(.46 |
) |
|
$ |
.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividend per share |
|
$ |
.125 |
|
|
$ |
- |
|
|
$ |
.375 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in the calculation of net income (loss) per share |
|
|
48,674 |
|
|
|
48,683 |
|
|
|
48,671 |
|
|
|
48,678 |
|
See accompanying notes to Condensed Consolidated Financial Statements.
5
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
||||
|
|
(unaudited) |
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
(5,684 |
) |
|
$ |
14,180 |
|
|
$ |
(21,700 |
) |
|
$ |
24,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities |
|
59,716 |
|
|
|
1,022 |
|
|
|
71,542 |
|
|
|
(105,842 |
) |
|
Currency translation |
|
4,155 |
|
|
|
(9,215 |
) |
|
|
(119 |
) |
|
|
(10,589 |
) |
|
Defined benefit pension plans |
|
692 |
|
|
|
530 |
|
|
|
2,078 |
|
|
|
1,585 |
|
|
Other postretirement benefit plans |
|
(144 |
) |
|
|
(156 |
) |
|
|
(432 |
) |
|
|
(469 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss), net |
|
64,419 |
|
|
|
(7,819 |
) |
|
|
73,069 |
|
|
|
(115,315 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
58,735 |
|
|
|
6,361 |
|
|
|
51,369 |
|
|
|
(91,295 |
) |
|
Comprehensive income attributable to noncontrolling interest |
|
256 |
|
|
|
291 |
|
|
|
613 |
|
|
|
904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) attributable to NL stockholders |
$ |
58,479 |
|
|
$ |
6,070 |
|
|
$ |
50,756 |
|
|
$ |
(92,199 |
) |
See accompanying notes to Condensed Consolidated Financial Statements.
6
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Nine months ended September 30, 2014
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
other |
|
|
Noncontrolling |
|
|
|
|
|
|||
|
|
Common |
|
|
paid-in |
|
|
Retained |
|
|
comprehensive |
|
|
interest in |
|
|
Total |
|
||||||
|
|
stock |
|
|
capital |
|
|
earnings |
|
|
loss |
|
|
subsidiary |
|
|
equity |
|
||||||
|
|
(unaudited) |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2013 |
$ |
6,084 |
|
|
$ |
300,223 |
|
|
$ |
84,089 |
|
|
$ |
(35,016 |
) |
|
$ |
13,615 |
|
|
$ |
368,995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
- |
|
|
|
- |
|
|
|
23,116 |
|
|
|
- |
|
|
|
904 |
|
|
|
24,020 |
|
|
Other comprehensive loss, net of tax |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(115,315 |
) |
|
|
- |
|
|
|
(115,315 |
) |
|
Issuance of NL common stock |
|
1 |
|
|
|
76 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
77 |
|
|
Dividends |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(246 |
) |
|
|
(246 |
) |
|
Other, net |
|
- |
|
|
|
89 |
|
|
|
- |
|
|
|
- |
|
|
|
10 |
|
|
|
99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2014 |
$ |
6,085 |
|
|
$ |
300,388 |
|
|
$ |
107,205 |
|
|
$ |
(150,331 |
) |
|
$ |
14,283 |
|
|
$ |
277,630 |
|
See accompanying notes to Condensed Consolidated Financial Statements.
7
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
|
|
Nine months ended |
|
|||||
|
|
September 30, |
|
|||||
|
|
2013 |
|
|
2014 |
|
||
|
|
(unaudited) |
|
|||||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
(21,700 |
) |
|
$ |
24,020 |
|
|
Depreciation and amortization |
|
2,513 |
|
|
|
2,694 |
|
|
Deferred income taxes |
|
(21,651 |
) |
|
|
1,132 |
|
|
Equity in (earnings) loss of Kronos Worldwide, Inc. |
|
31,891 |
|
|
|
(24,101 |
) |
|
Distributions from Kronos Worldwide, Inc. |
|
15,849 |
|
|
|
15,849 |
|
|
Cash funding of benefit plans in excess of net benefit plan expense |
|
(895 |
) |
|
|
(2,145 |
) |
|
Other, net |
|
263 |
|
|
|
417 |
|
|
Change in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts and other receivables, net |
|
(3,661 |
) |
|
|
(1,839 |
) |
|
Inventories, net |
|
(1,884 |
) |
|
|
(2,030 |
) |
|
Prepaid expenses and other |
|
171 |
|
|
|
15 |
|
|
Accounts payable and accrued liabilities |
|
100 |
|
|
|
2,184 |
|
|
Income taxes |
|
(6 |
) |
|
|
3 |
|
|
Accounts with affiliates |
|
(2,467 |
) |
|
|
3,380 |
|
|
Accrued environmental remediation and related costs |
|
10,007 |
|
|
|
3,334 |
|
|
Other noncurrent assets and liabilities, net |
|
(1,169 |
) |
|
|
(63 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
7,361 |
|
|
|
22,850 |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
(2,589 |
) |
|
|
(2,199 |
) |
|
Change in restricted cash equivalents, net |
|
2,007 |
|
|
|
(454 |
) |
|
Collection of note receivable |
|
3,034 |
|
|
|
- |
|
|
Proceeds from the disposal of: |
|
|
|
|
|
|
|
|
Assets held for sale |
|
1,559 |
|
|
|
- |
|
|
Marketable securities |
|
272 |
|
|
|
- |
|
|
Purchase of marketable securities |
|
(261 |
) |
|
|
- |
|
|
Other |
|
(94 |
) |
|
|
(57 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
3,928 |
|
|
|
(2,710 |
) |
|
|
|
|
|
|
|
|
|
8
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands)
|
|
Nine months ended |
|
|||||
|
|
September 30, |
|
|||||
|
|
2013 |
|
|
2014 |
|
||
|
|
(unaudited) |
|
|||||
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Cash dividends paid |
$ |
(18,252 |
) |
|
$ |
- |
|
|
Distributions to noncontrolling interests in subsidiary |
|
(369 |
) |
|
|
(246 |
) |
|
Repayments of indebtedness |
|
(18,480 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
(37,101 |
) |
|
|
(246 |
) |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - net change from: |
|
|
|
|
|
|
|
|
Operating, investing and financing activities |
|
(25,812 |
) |
|
|
19,894 |
|
|
Cash and cash equivalents at beginning of period |
|
77,987 |
|
|
|
52,609 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
$ |
52,175 |
|
|
$ |
72,503 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures: |
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
|
Interest |
$ |
222 |
|
|
$ |
- |
|
|
Income taxes, net |
|
296 |
|
|
|
190 |
|
See accompanying notes to Condensed Consolidated Financial Statements.
9
NL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2014
(unaudited)
Note 1 - Organization and basis of presentation:
Organization - At September 30, 2014, (i) Valhi, Inc. (NYSE: VHI) held approximately 83% of our outstanding common stock and (ii) a wholly-owned subsidiary of Contran Corporation held approximately 94% of Valhi’s outstanding common stock. Substantially all of Contran’s outstanding voting stock is held by family trusts established for the benefit of Lisa K. Simmons and Serena Simmons Connelly, daughters of Harold C. Simmons, and their children (for which Ms. Lisa Simmons and Ms. Connelly are co-trustees) or is held directly by Ms. Lisa Simmons and Ms. Connelly or persons or entities related to them, including their step-mother Annette C. Simmons, the widow of Mr. Simmons. Prior to his death in December 2013, Mr. Simmons served as sole trustee of the family trusts. Under a voting agreement entered into by all of the voting stockholders of Contran, effective in February 2014 and as amended, the size of the board of directors of Contran was fixed at five members, Ms. Lisa Simmons, Ms. Connelly and Ms. Annette Simmons (and in the event of their death, their heirs) each has the right to designate one of the five members of the Contran board and the remaining two members of the Contran board must consist of members of Contran management. Ms. Lisa Simmons, Ms. Connelly, and Ms. Annette Simmons each serve as members of the Contran board. The voting agreement expires in February 2017 (unless Ms. Lisa Simmons, Ms. Connelly and Ms. Annette Simmons otherwise unanimously agree), and the ability of Ms. Lisa Simmons, Ms. Connelly, and Ms. Annette Simmons to each designate one member of the Contran board is dependent upon each of their continued beneficial ownership of at least 5% of the combined voting stock of Contran. Consequently, Ms. Lisa Simmons, Ms. Connelly and Ms. Annette Simmons may be deemed to control Contran, Valhi and us.
Basis of presentation - Consolidated in this Quarterly Report are the results of our majority-owned subsidiary, CompX International Inc. We also own 30% of Kronos Worldwide, Inc. (Kronos). CompX (NYSE MKT: CIX) and Kronos (NYSE: KRO); each file periodic reports with the Securities and Exchange Commission (SEC).
The unaudited Condensed Consolidated Financial Statements contained in this Quarterly Report have been prepared on the same basis as the audited Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2013 that we filed with the SEC on March 12, 2014 (the 2013 Annual Report). In our opinion, we have made all necessary adjustments (which include only normal recurring adjustments) in order to state fairly, in all material respects, our consolidated financial position, results of operations and cash flows as of the dates and for the periods presented. We have condensed the Consolidated Balance Sheet and Statement of Stockholders’ Equity at December 31, 2013 contained in this Quarterly Report as compared to our audited Consolidated Financial Statements at that date, and we have omitted certain information and footnote disclosures (including those related to the Consolidated Balance Sheet at December 31, 2013) normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Our results of operations for the interim periods ended September 30, 2014 may not be indicative of our operating results for the full year. The Condensed Consolidated Financial Statements contained in this Quarterly Report should be read in conjunction with our 2013 Consolidated Financial Statements contained in our 2013 Annual Report.
In February 2014, our Board of Directors deferred consideration of a first quarter 2014 cash dividend, and no dividend was paid in the first quarter. In May 2014, after considering our results of operations, financial conditions and cash requirements for our businesses, our Board of Directors suspended our regular quarterly dividend. The declaration and payment of future dividends, and the amount thereof, is discretionary and is dependent upon these and other factors deemed relevant by our Board of Directors.
Unless otherwise indicated, references in this report to “NL,” “we,” “us” or “our” refer to NL Industries, Inc. and its subsidiaries and affiliate, Kronos, taken as a whole.
10
Note 2 - Accounts and other receivables, net:
|
|
December 31, |
|
|
September 30, |
|
||
|
|
2013 |
|
|
2014 |
|
||
|
|
(In thousands) |
|
|||||
|
Trade receivables - CompX |
$ |
8,662 |
|
|
$ |
11,769 |
|
|
Accrued insurance recoveries |
|
1,877 |
|
|
|
505 |
|
|
Income taxes receivable from Valhi |
|
54 |
|
|
|
- |
|
|
Other receivables |
|
159 |
|
|
|
152 |
|
|
Refundable income taxes |
|
8 |
|
|
|
14 |
|
|
Allowance for doubtful accounts |
|
(128 |
) |
|
|
(130 |
) |
|
|
|
|
|
|
|
|
|
|
Total |
$ |
10,632 |
|
|
$ |
12,310 |
|
Accrued insurance recoveries are discussed in Note 13.
Note 3 - Inventories, net:
|
|
December 31, |
|
|
September 30, |
|
||
|
|
2013 |
|
|
2014 |
|
||
|
|
(In thousands) |
|
|||||
|
Raw materials |
$ |
3,565 |
|
|
$ |
3,142 |
|
|
Work in process |
|
6,696 |
|
|
|
9,671 |
|
|
Finished products |
|
2,974 |
|
|
|
2,269 |
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
13,235 |
|
|
$ |
15,082 |
|
Note 4 - Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value measurement level |
|
Market value |
|
|
Cost basis |
|
|
Unrealized gain |
|
|||
|
|
|
|
|
(In thousands) |
|
|||||||||
|
December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valhi common stock |
|
1 |
|
$ |
252,677 |
|
|
$ |
24,347 |
|
|
$ |
228,330 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valhi common stock |
|
1 |
|
$ |
93,855 |
|
|
$ |
24,347 |
|
|
$ |
69,508 |
|
At December 31, 2013 and September 30, 2014, we held approximately 14.4 million shares of common stock of our immediate parent company, Valhi. We account for our investment in Valhi common stock as available-for-sale marketable equity securities and any unrealized gains or losses on the securities are recognized through other comprehensive income, net of deferred income taxes. Our shares of Valhi common stock are carried at fair value based on quoted market prices, representing a Level 1 input within the fair value hierarchy. At December 31, 2013 and September 30, 2014, the quoted per share market price of Valhi common stock was $17.58 and $6.53, respectively.
The Valhi common stock we own is subject to the restrictions on resale pursuant to certain provisions of the SEC Rule 144. In addition, as a majority-owned subsidiary of Valhi, we cannot vote our shares of Valhi common stock under Delaware Corporation Law, but we do receive dividends from Valhi on these shares, when declared and paid.
Note 5 - Investment in Kronos Worldwide, Inc.:
At December 31, 2013 and September 30, 2014, we owned approximately 35.2 million shares of Kronos common stock. At September 30, 2014, the quoted market price of Kronos’ common stock was $13.78 per share, or an aggregate market value of $485.3 million. At December 31, 2013, the quoted market price was $19.05 per share, or an aggregate market value of $670.9 million.
11
The change in the carrying value of our investment in Kronos during the first nine months of 2014 is summarized below. See also Note 12.
|
|
|
|
|
|
|
Amount |
|
|
|
|
(In millions) |
|
|
|
Balance at the beginning of the period |
$ |
284.5 |
|
|
Equity in earnings of Kronos |
|
24.1 |
|
|
Dividends received from Kronos |
|
(15.8 |
) |
|
Other, principally equity in Kronos' other comprehensive loss |
|
(18.7 |
) |
|
|
|
|
|
|
Balance at the end of the period |
$ |
274.1 |
|
Selected financial information of Kronos is summarized below:
|
|
December 31, |
|
|
September 30, |
|
||
|
|
2013 |
|
|
2014 |
|
||
|
|
(In millions) |
|
|||||
|
Current assets |
$ |
781.2 |
|
|
$ |
897.6 |
|
|
Property and equipment, net |
|
536.3 |
|
|
|
500.8 |
|
|
Investment in TiO2 joint venture |
|
102.3 |
|
|
|
89.1 |
|
|
Other noncurrent assets |
|
199.3 |
|
|
|
163.9 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
1,619.1 |
|
|
$ |
1,651.4 |
|
|
|
|
||||||