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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, 2020

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 October 30, 2020:  48,788,984.

 

 


NL INDUSTRIES, INC. AND SUBSIDIARIES

INDEX

 

 

 

Page
number

Part I.

FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements

 

 

 

Condensed Consolidated Balance Sheets -
December 31, 2019; September 30, 2020 (unaudited)

3

 

 

Condensed Consolidated Statements of Operations (unaudited) -
Three and nine months ended September 30, 2019 and 2020

5

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) -
Three and
nine months ended September 30, 2019 and 2020

6

 

 

Condensed Consolidated Statements of Equity (unaudited) -
Three and nine months ended September 30, 2019 and 2020

7

 

 

Condensed Consolidated Statements of Cash Flows (unaudited) -
Nine months ended September 30, 2019 and 2020

8

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

10

 

Item 2.

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

21

 

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

39

 

Item 4.

Controls and Procedures

39

 

 

 

 

 

 

Part II.

OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

41

 

Item 1A.

Risk Factors

41

 

Item 6.

Exhibits

41

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,

 

 

 

2019

 

 

2020

 

 

 

 

 

 

 

(unaudited)

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

129,730

 

 

$

128,792

 

 

Restricted cash and cash equivalents

 

2,695

 

 

 

2,718

 

 

Accounts and other receivables, net

 

11,929

 

 

 

12,699

 

 

Inventories, net

 

18,348

 

 

 

19,166

 

 

Receivables from affiliates

 

581

 

 

 

49

 

 

Prepaid expenses and other

 

1,401

 

 

 

1,330

 

 

 

 

 

 

 

 

 

 

 

Total current assets

 

164,684

 

 

 

164,754

 

 

 

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

 

Restricted cash and cash equivalents

 

25,445

 

 

 

25,463

 

 

Note receivable from affiliate

 

28,100

 

 

 

30,500

 

 

Marketable securities

 

26,877

 

 

 

15,762

 

 

Investment in Kronos Worldwide, Inc.

 

248,355

 

 

 

243,966

 

 

Goodwill

 

27,156

 

 

 

27,156

 

 

Other assets, net

 

5,860

 

 

 

5,634

 

 

 

 

 

 

 

 

 

 

 

Total other assets

 

361,793

 

 

 

348,481

 

 

 

 

 

 

 

 

 

 

 

Property and equipment:

 

 

 

 

 

 

 

 

Land

 

4,940

 

 

 

4,940

 

 

Buildings

 

23,047

 

 

 

23,057

 

 

Equipment

 

67,718

 

 

 

68,047

 

 

Construction in progress

 

1,002

 

 

 

763

 

 

 

 

96,707

 

 

 

96,807

 

 

Less accumulated depreciation

 

65,692

 

 

 

67,445

 

 

 

 

 

 

 

 

 

 

 

Net property and equipment

 

31,015

 

 

 

29,362

 

 

 

 

 

 

 

 

 

 

 

Total assets

$

557,492

 

 

$

542,597

 

 

 

3

 


 

NL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In thousands)

 

 

December 31,

 

 

September 30,

 

 

 

2019

 

 

2020

 

 

 

 

 

 

 

(unaudited)

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

$

3,438

 

 

$

2,714

 

 

Accrued litigation settlement

 

11,830

 

 

 

11,774

 

 

Accrued and other current liabilities

 

10,601

 

 

 

9,085

 

 

Accrued environmental remediation and related costs

 

3,065

 

 

 

3,053

 

 

Payables to affiliates

 

801

 

 

 

757

 

 

Income taxes

 

73

 

 

 

19

 

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

29,808

 

 

 

27,402

 

 

 

 

 

 

 

 

 

 

 

Noncurrent liabilities:

 

 

 

 

 

 

 

 

Long-term debt from affiliate

 

500

 

 

 

500

 

 

Accrued environmental remediation and related costs

 

91,443

 

 

 

90,517

 

 

Long-term litigation settlement

 

60,081

 

 

 

49,169

 

 

Deferred income taxes

 

33,957

 

 

 

33,446

 

 

Accrued pension costs

 

8,230

 

 

 

6,659

 

 

Other

 

6,260

 

 

 

2,940

 

 

 

 

 

 

 

 

 

 

 

Total noncurrent liabilities

 

200,471

 

 

 

183,231

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

NL stockholders' equity:

 

 

 

 

 

 

 

 

Common stock

 

6,094

 

 

 

6,098

 

 

Additional paid-in capital

 

299,102

 

 

 

299,093

 

 

Retained earnings

 

251,000

 

 

 

255,518

 

 

Accumulated other comprehensive loss

 

(251,690

)

 

 

(252,090

)

 

 

 

 

 

 

 

 

 

 

Total NL stockholders' equity

 

304,506

 

 

 

308,619

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interest in subsidiary

 

22,707

 

 

 

23,345

 

 

 

 

 

 

 

 

 

 

 

Total equity

 

327,213

 

 

 

331,964

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and equity

$

557,492

 

 

$

542,597

 

 

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,

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

 

(unaudited)

 

Net sales

$

29,703

 

 

$

28,426

 

 

$

94,610

 

 

$

84,537

 

Cost of sales

 

20,227

 

 

 

21,098

 

 

 

64,571

 

 

 

59,412

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

9,476

 

 

 

7,328

 

 

 

30,039

 

 

 

25,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

5,210

 

 

 

5,246

 

 

 

15,860

 

 

 

15,654

 

Other operating income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Insurance recoveries

 

243

 

 

 

-

 

 

 

5,240

 

 

 

108

 

Other income, net

 

4,424

 

 

 

-

 

 

 

4,433

 

 

 

10

 

Litigation settlement expense, net

 

305

 

 

 

-

 

 

 

(19,266

)

 

 

-

 

Corporate expense

 

(3,429

)

 

 

(2,390

)

 

 

(9,148

)

 

 

(7,349

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

5,809

 

 

 

(308

)

 

 

(4,562

)

 

 

2,240

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity in earnings of Kronos Worldwide, Inc.

 

5,463

 

 

 

2,475

 

 

 

23,632

 

 

 

16,333

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and dividend income

 

1,571

 

 

 

470

 

 

 

5,213

 

 

 

2,102

 

Marketable equity securities

 

(15,379

)

 

 

3,210

 

 

 

(431

)

 

 

(11,115

)

Other components of net periodic pension and OPEB cost

 

(434

)

 

 

(208

)

 

 

(1,290

)

 

 

(624

)

Interest expense

 

(314

)

 

 

(352

)

 

 

(332

)

 

 

(1,054

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

(3,284

)

 

 

5,287

 

 

 

22,230

 

 

 

7,882

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

(2,286

)

 

 

1,163

 

 

 

942

 

 

 

(3,616

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

(998

)

 

 

4,124

 

 

 

21,288

 

 

 

11,498

 

Noncontrolling interest in net income of subsidiary

 

540

 

 

 

252

 

 

 

1,744

 

 

 

1,127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to NL stockholders

$

(1,538

)

 

$

3,872

 

 

$

19,544

 

 

$

10,371

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amounts attributable to NL stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net income (loss) per share

$

(.03

)

 

$

.08

 

 

$

.40

 

 

$

.21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used in the calculation

   of net income (loss) per share

 

48,756

 

 

 

48,789

 

 

 

48,741

 

 

 

48,772

 

 

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,

 

 

 

2019

 

 

2020

 

 

2019

 

 

2020

 

 

 

(unaudited)

 

Net income (loss)

 

$

(998

)

 

$

4,124

 

 

$

21,288

 

 

$

11,498

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation

 

 

(4,500

)

 

 

2,426

 

 

 

(2,805

)

 

 

(3,328

)

Defined benefit pension plans

 

 

818

 

 

 

1,075

 

 

 

2,463

 

 

 

3,149

 

Other postretirement benefit plans

 

 

(65

)

 

 

(70

)

 

 

(200

)

 

 

(221

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss), net

 

 

(3,747

)

 

 

3,431

 

 

 

(542

)

 

 

(400

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

 

(4,745

)

 

 

7,555

 

 

 

20,746

 

 

 

11,098

 

Comprehensive income attributable to noncontrolling interest

 

 

540

 

 

 

252

 

 

 

1,744

 

 

 

1,127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss) attributable to NL stockholders

 

$

(5,285

)

 

$

7,303

 

 

$

19,002

 

 

$

9,971

 

 

See accompanying notes to Condensed Consolidated Financial Statements.

 

6

 


 

NL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

 

Three months ended September 30, 2019 and 2020 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

other

 

 

Noncontrolling

 

 

 

 

 

 

Common

 

 

paid-in

 

 

Retained

 

 

comprehensive

 

 

interest in

 

 

Total

 

 

stock

 

 

capital

 

 

earnings

 

 

loss

 

 

subsidiary

 

 

equity

 

 

(unaudited)

 

Balance at June 30, 2019

$

6,094

 

 

$

299,404

 

 

$

246,238

 

 

$

(245,065

)

 

$

21,955

 

 

$

328,626

 

Net income (loss)

 

-

 

 

 

-

 

 

 

(1,538

)

 

 

-

 

 

 

540

 

 

 

(998

)

Other comprehensive loss, net of tax

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,747

)

 

 

-

 

 

 

(3,747

)

Dividends paid to noncontrolling interest

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(118

)

 

 

(118

)

Other, net

 

-

 

 

 

(302

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(302

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2019

$

6,094

 

 

$

299,102

 

 

$

244,700

 

 

$

(248,812

)

 

$

22,377

 

 

$

323,461

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2020

$

6,098

 

 

$

299,093

 

 

$

253,597

 

 

$

(255,521

)

 

$

23,262

 

 

$

326,529

 

Net income

 

-

 

 

 

-

 

 

 

3,872

 

 

 

-

 

 

 

252

 

 

 

4,124

 

Other comprehensive income, net of tax

 

-

 

 

 

-

 

 

 

-

 

 

 

3,431

 

 

 

-

 

 

 

3,431

 

Dividends paid - $.04 per share

 

-

 

 

 

-

 

 

 

(1,951

)

 

 

-

 

 

 

-

 

 

 

(1,951

)

Dividends paid to noncontrolling interest

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(169

)

 

 

(169

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2020

$

6,098

 

 

$

299,093

 

 

$

255,518

 

 

$

(252,090

)

 

$

23,345

 

 

$

331,964

 

 

 

 

Nine months ended September 30, 2019 and 2020 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

other

 

 

Noncontrolling

 

 

 

 

 

 

Common

 

 

paid-in

 

 

Retained

 

 

comprehensive

 

 

interest in

 

 

Total

 

 

stock

 

 

capital

 

 

earnings

 

 

loss

 

 

subsidiary

 

 

equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

$

6,090

 

 

$

301,139

 

 

$

225,156

 

 

$

(248,270

)

 

$

19,443

 

 

$

303,558

 

Net income

 

-

 

 

 

-

 

 

 

19,544

 

 

 

-

 

 

 

1,744

 

 

 

21,288

 

Other comprehensive loss, net of tax

 

-

 

 

 

-

 

 

 

-

 

 

 

(542

)

 

 

-

 

 

 

(542

)

Issuance of NL common stock

 

4

 

 

 

96