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 quarterly period ended September 30, 2019

OR

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to          

  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 75240-2620

(Address of principal executive offices)

Registrant’s telephone number, including area code: (972) 233-1700

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common stock

 

NL

 

NYSE

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer          

Accelerated filer

Non-accelerated filer

Smaller reporting company  

Emerging growth company  

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  

Number of shares of the registrant’s common stock, $.125 par value per share, outstanding on November 1, 2019:  48,755,734.

 

 


NL INDUSTRIES, INC. AND SUBSIDIARIES

INDEX

 

 

 

Page
number

Part I.

FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements

 

 

 

Condensed Consolidated Balance Sheets - December 31, 2018;  September 30, 2019 (unaudited)

3

 

 

Condensed Consolidated Statements of Operations (unaudited) – Three and nine months ended September 30, 2018 and 2019

5

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) – Three and nine months ended September 30, 2018 and 2019

6

 

 

Condensed Consolidated Statements of Equity (unaudited) – Three and nine months ended September 30, 2018 and 2019

7

 

 

Condensed Consolidated Statements of Cash Flows (unaudited) -  Nine months ended September 30, 2018 and 2019

9

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

10

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

 

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

39

 

Item 4.

Controls and Procedures

39

 

 

 

 

 

 

Part II.

OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

40

 

Item 1A.

Risk Factors

40

 

Item 6.

Exhibits

40

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,

 

 

 

2018

 

 

 

2019

 

 

 

 

 

 

 

 

(unaudited)

 

 

ASSETS

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

116,259

 

 

 

$

109,419

 

 

Restricted cash and cash equivalents

 

3,727

 

 

 

 

2,913

 

 

Accrued insurance recovery related to litigation settlement

 

15,000

 

 

 

 

-

 

 

Accounts and other receivables, net

 

12,440

 

 

 

 

13,797

 

 

Inventories, net

 

17,102

 

 

 

 

18,826

 

 

Receivable from affiliates

 

792

 

 

 

 

648

 

 

Prepaid expenses and other

 

1,324

 

 

 

 

1,149

 

 

 

 

 

 

 

 

 

 

 

 

Total current assets

 

166,644

 

 

 

 

146,752

 

 

 

 

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

 

 

Restricted cash and cash equivalents

 

1,003

 

 

 

 

25,310

 

 

Notes receivable from affiliate

 

34,000

 

 

 

 

36,700

 

 

Marketable securities

 

27,740

 

 

 

 

27,309

 

 

Investment in Kronos Worldwide, Inc.

 

255,565

 

 

 

 

257,717

 

 

Goodwill

 

27,156

 

 

 

 

27,156

 

 

Other assets, net

 

3,108

 

 

 

 

3,187

 

 

 

 

 

 

 

 

 

 

 

 

Total other assets

 

348,572

 

 

 

 

377,379

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment:

 

 

 

 

 

 

 

 

 

Land

 

5,151

 

 

 

 

4,940

 

 

Buildings

 

22,842

 

 

 

 

22,856

 

 

Equipment

 

67,446

 

 

 

 

67,595

 

 

Construction in progress

 

603

 

 

 

 

963

 

 

 

 

96,042

 

 

 

 

96,354

 

 

Less accumulated depreciation

 

64,016

 

 

 

 

65,137

 

 

 

 

 

 

 

 

 

 

 

 

Net property and equipment

 

32,026

 

 

 

 

31,217

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

547,242

 

 

 

$

555,348

 

 

 

3

 


 

NL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In thousands)

 

 

December 31,

 

 

 

September 30,

 

 

 

2018

 

 

 

2019

 

 

 

 

 

 

 

 

(unaudited)

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

$

4,831

 

 

 

$

4,987

 

 

Accrued litigation settlement

 

60,000

 

 

 

 

11,774

 

 

Accrued and other current liabilities

 

10,854

 

 

 

 

9,797

 

 

Accrued environmental remediation and related costs

 

5,027

 

 

 

 

3,168

 

 

Payable to affiliates

 

567

 

 

 

 

567

 

 

Income taxes

 

44

 

 

 

 

64

 

 

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

81,323

 

 

 

 

30,357

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent liabilities:

 

 

 

 

 

 

 

 

 

Long-term debt from affiliate

 

500

 

 

 

 

500

 

 

Accrued pension costs

 

10,389

 

 

 

 

7,689

 

 

Accrued environmental remediation and related costs

 

93,184

 

 

 

 

91,808

 

 

Long-term litigation settlement

 

17,000

 

 

 

 

59,797

 

 

Deferred income taxes

 

31,373

 

 

 

 

31,956

 

 

Other

 

9,915

 

 

 

 

9,780

 

 

 

 

 

 

 

 

 

 

 

 

Total noncurrent liabilities

 

162,361

 

 

 

 

201,530

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

 

NL stockholders' equity:

 

 

 

 

 

 

 

 

 

Common stock

 

6,090

 

 

 

 

6,094

 

 

Additional paid-in capital

 

301,139

 

 

 

 

299,102

 

 

Retained earnings

 

225,156

 

 

 

 

244,700

 

 

Accumulated other comprehensive loss

 

(248,270

)

 

 

 

(248,812

)

 

 

 

 

 

 

 

 

 

 

 

Total NL stockholders' equity

 

284,115

 

 

 

 

301,084

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interest in subsidiary

 

19,443

 

 

 

 

22,377

 

 

 

 

 

 

 

 

 

 

 

 

Total equity

 

303,558

 

 

 

 

323,461

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and equity

$

547,242

 

 

 

$

555,348

 

 

Commitments and contingencies (Note 14)

 

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,

 

 

 

 

2018

 

 

2019

 

 

2018

 

 

2019

 

 

 

 

(unaudited)

 

 

 

Net sales

$

30,029

 

 

$

29,703

 

 

$

90,827

 

 

$

94,610

 

 

 

Cost of sales

 

20,433

 

 

 

20,227

 

 

 

60,494

 

 

 

64,571

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

9,596

 

 

 

9,476

 

 

 

30,333

 

 

 

30,039

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

5,075

 

 

 

5,210

 

 

 

15,455

 

 

 

15,860

 

 

 

Other operating income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance recoveries

 

526

 

 

 

243

 

 

 

889

 

 

 

5,240

 

 

 

Other income, net

 

18

 

 

 

4,424

 

 

 

645

 

 

 

4,433

 

 

 

Litigation settlement expense, net

 

-

 

 

 

305

 

 

 

(62,000

)

 

 

(19,266

)

 

 

Corporate expense

 

(1,583

)

 

 

(3,429

)

 

 

(14,352

)

 

 

(9,148

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

3,482

 

 

 

5,809

 

 

 

(59,940

)

 

 

(4,562

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of Kronos Worldwide, Inc.

 

9,905

 

 

 

5,463

 

 

 

55,029

 

 

 

23,632

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable equity securities

 

(35,645

)

 

 

(15,379

)

 

 

(55,911

)

 

 

(431

)

 

 

Other components of net periodic pension and

  OPEB cost

 

(99

)

 

 

(434

)

 

 

(297

)

 

 

(1,290

)

 

 

Interest and dividend income

 

1,336

 

 

 

1,571

 

 

 

3,630

 

 

 

5,213

 

 

 

Interest expense

 

(9

)

 

 

(314

)

 

 

(25

)

 

 

(332

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

(21,030

)

 

 

(3,284

)

 

 

(57,514

)

 

 

22,230

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

(6,158

)

 

 

(2,286

)

 

 

(15,416

)

 

 

942

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

(14,872

)

 

 

(998

)

 

 

(42,098

)

 

 

21,288

 

 

 

Noncontrolling interest in net income of subsidiary

 

514

 

 

 

540

 

 

 

1,654

 

 

 

1,744

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to NL stockholders

$

(15,386

)

 

$

(1,538

)

 

$

(43,752

)

 

$

19,544

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts attributable to NL stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net income (loss) per share

$

(.32

)

 

$

(.03

)

 

$

(.90

)

 

$

.40

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used in the calculation

   of net income (loss) per share

 

48,727

 

 

 

48,756

 

 

 

48,721

 

 

 

48,741

 

 

 

 

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,

 

 

 

2018

 

 

2019

 

 

2018

 

 

2019

 

 

 

(unaudited)

 

Net income (loss)

 

$

(14,872

)

 

$

(998

)

 

$

(42,098

)

 

$

21,288

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation

 

 

1,103

 

 

 

(4,500

)

 

 

(2,414

)

 

 

(2,805

)

Defined benefit pension plans

 

 

959

 

 

 

818

 

 

 

2,916

 

 

 

2,463

 

Other postretirement benefit plans

 

 

(65

)

 

 

(65

)

 

 

(203

)

 

 

(200

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss), net

 

 

1,997

 

 

 

(3,747

)

 

 

299

 

 

 

(542

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

 

(12,875

)

 

 

(4,745

)

 

 

(41,799

)

 

 

20,746

 

Comprehensive income attributable to noncontrolling interest

 

 

514

 

 

 

540

 

 

 

1,654

 

 

 

1,744

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss) attributable to NL stockholders

 

$

(13,389

)

 

$

(5,285

)

 

$

(43,453

)

 

$

19,002

 

 

See accompanying notes to Condensed Consolidated Financial Statements.

 

6

 


 

NL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three and nine months ended September 30, 2018 and 2019

(In thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

other

 

 

Noncontrolling

 

 

 

 

 

 

Common

 

 

paid-in

 

 

Retained

 

 

comprehensive

 

 

interest in

 

 

Total

 

 

stock

 

 

capital

 

 

earnings

 

 

income (loss)

 

 

subsidiary

 

 

equity

 

Balance at December 31, 2017

$

6,089

 

 

$

300,866

 

 

$

220,104

 

 

$

(191,737

)

 

$

17,756

 

 

$

353,078

 

Change in accounting principle - ASU 2016-01

 

-

 

 

 

-

 

 

 

46,069

 

 

 

(46,069

)

 

 

-

 

 

 

-

 

Balance at January 1, 2018, as adjusted

 

6,089

 

 

 

300,866

 

 

 

266,173

 

 

 

(237,806

)

 

 

17,756

 

 

 

353,078

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

-

 

 

 

-

 

 

 

14,249

 

 

 

-

 

 

 

487

 

 

 

14,736

 

Other comprehensive income, net of tax

 

-

 

 

 

-

 

 

 

-

 

 

 

3,501

 

 

 

-

 

 

 

3,501

 

Dividends paid to noncontrolling interest

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(83

)

 

 

(83

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2018

 

6,089

 

 

 

300,866

 

 

 

280,422

 

 

 

(234,305

)

 

 

18,160

 

 

 

371,232

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

-

 

 

 

-

 

 

 

(42,615

)

 

 

-

 

 

 

653

 

 

 

(41,962

)

Other comprehensive loss, net of tax

 

-

 

 

 

-

 

 

 

-

 

 

 

(5,199

)

 

 

-

 

 

 

(5,199

)

Issuance of NL common stock

 

1

 

 

 

119

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

120

 

Dividends paid to noncontrolling interest

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(84

)

 

 

(84

)

Other, net

 

-

 

 

 

154

 

 

 

-

 

 

 

-

 

 

 

18

 

 

 

172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2018

 

6,090

 

 

 

301,139

 

 

 

237,807

 

 

 

(239,504

)

 

 

18,747

 

 

 

324,279

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

-

 

 

 

-

 

 

 

(15,386

)

 

 

-

 

 

 

514

 

 

 

(14,872

)

Other comprehensive income, net of tax

 

-

 

 

 

-

 

 

 

-

 

 

 

1,997

 

 

 

-

 

 

 

1,997

 

Dividends paid to noncontrolling interest

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(84

)

 

 

(84

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2018

$

6,090

 

 

$

301,139

 

 

$

222,421

 

 

$

(237,507

)

 

$

19,177

 

 

$

311,320

 

 

 

 

 

 

 

 


7

 


 

NL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED)

Three and nine months ended September 30, 2018 and 2019

(In thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

other

 

 

Noncontrolling

 

 

 

 

 

 

Common

 

 

paid-in

 

 

Retained

 

 

comprehensive

 

 

interest in

 

 

Total

 

 

stock

 

 

capital

 

 

earnings

 

 

income (loss)

 

 

subsidiary

 

 

equity

 

Balance at December 31, 2018

$

6,090

 

 

$

301,139

 

 

$

225,156

 

 

$

(248,270

)

 

$

19,443

 

 

$

303,558

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

-

 

 

 

-

 

 

 

15,204

 

 

 

-

 

 

 

522

 

 

 

15,726

 

Other comprehensive income, net of tax

 

-

 

 

 

-

 

 

 

-

 

 

 

733

 

 

 

-

 

 

 

733

 

Dividends paid to noncontrolling interest

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(117

)

 

 

(117

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2019

 

6,090

 

 

 

301,139