NL Industries, Inc. Contact: Gregory M. Swalwell
Three Lincoln Centre Vice President, Finance and Chief
5430 LBJ Freeway, Suite 1700 Financial Officer
Dallas, TX 75240-2697 (972) 233-1700
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News Release
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FOR IMMEDIATE RELEASE [GRAPHIC OMITTED]
NL REPORTS FIRST QUARTER RESULTS
DALLAS, TEXAS...May 5, 2006...NL Industries, Inc. (NYSE:NL) today reported
income from continuing operations of $6.5 million, or $.13 per diluted share, in
the first quarter of 2006 compared to $14.8 million, or $.31 per diluted share,
in the first quarter of 2005.
Component product sales increased slightly in the first quarter of 2006 as
compared to the same quarter of 2005 as higher volumes of security product sales
was offset by decreases in sales for certain other products resulting from
increased competition. Component products segment profit increased due to the
favorable impact of CompX's continued focus on reducing costs across all
segments and a favorable change in product mix resulting from increases in sales
of certain higher margin security products.
Kronos' net sales of $304.3 million in the first quarter of 2006 were $12.4
million, or 4%, higher than in the first quarter of 2005 due to the net effects
of higher TiO2 selling prices, higher average TiO2 selling volumes, and the
unfavorable effect of fluctuations in foreign currency exchange rates, which
decreased sales by approximately $16 million.
Kronos' average TiO2 selling prices in billing currencies (which excludes the
effects of fluctuations in the value of the U.S. dollar relative to other
currencies) were 2% higher in the first quarter of 2006 as compared to the first
quarter of 2005. Expressed in U.S. dollars computed using actual foreign
currency exchange rates prevailing during the respective periods, the Company's
average TiO2 selling prices in the first quarter of 2006 were 3% lower than the
first quarter of 2005.
Kronos' first quarter 2006 TiO2 sales volumes increased 9% from the first
quarter of 2005, primarily due to significantly higher sales volumes in the US,
and slightly higher sales volumes in Europe and in export markets offsetting the
effects of lower sales volumes in Canada. Kronos' TiO2 production volumes were
4% higher in the first quarter of 2006 as compared to the first quarter of 2005,
with operating rates at near full capacity in both periods. Both production
volume and sales volume in the first quarter of 2006 set a new record for Kronos
for a first quarter.
Kronos' TiO2 segment profit for the first quarter of 2006 was $36.2 million
compared with $48.0 million in the first quarter of 2005. First quarter segment
profit diminished due primarily to higher production costs, particularly raw
material and energy costs, as well as to the negative effects of the fluctuation
in foreign currency rates which resulted in a decrease in Kronos' segment profit
of approximately $5 million.
Securities transactions gains in the first quarter of 2005 relate principally to
a $14.6 million gain ($7.9 million, or $.16 per diluted share, net of income
taxes) related to the Company's sale of shares of Kronos common stock in market
transactions. Insurance recoveries in the first quarter of 2006 of $2.2 million
($1.5 million, or $.03 per diluted share, net of income taxes) relate to amounts
received by NL from certain of its former insurance carriers. Corporate expenses
were lower in the first quarter of 2006 as compared to the first quarter of 2005
due to lower environmental and legal expenses.
Discontinued operations in 2005 relate to CompX's former Thomas Regout
operations in the Netherlands.
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 the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, it 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,
the Company continues to face many risks and uncertainties. The factors that
could cause actual future results to differ materially include, but are not
limited to, the following:
o Future supply and demand for the Company's products,
o The extent of the dependence of certain of the Company's businesses on
certain market sectors,
o The cyclicality of certain of the Company's businesses,
o Customer inventory levels,
o Changes in raw material and other operating costs,
o The possibility of labor disruptions,
o General global economic and political conditions,
o Demand for office furniture,
o Competitive products and substitute products, including increased
competition from low-cost manufacturing sources,
o Customer and competitor strategies,
o The impact of pricing and production decisions,
o Competitive technology positions,
o The introduction of trade barriers,
o Service industry employment levels,
o Fluctuations in currency exchange rates,
o Operating interruptions,
o The timing and amounts of insurance recoveries,
o The ability of the Company to renew or refinance credit facilities,
o The ultimate outcome of income tax audits, tax settlement initiatives or
other tax matters,
o The introduction of trade barriers,
o Potential difficulties in integrating completed or future acquisitions,
o Decisions to sell operating assets other than in the ordinary course of
business,
o Uncertainties associated with new product development,
o The ultimate ability to utilize income tax attributes, the benefit of which
has been recognized under the "more-likely-than-not" recognition criteria,
o Environmental matters,
o Government laws and regulations and possible changes therein,
o The ultimate resolution of pending litigation, and
o 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 forecasted or expected. The
Company disclaims any intention or obligation to update or revise any
forward-looking statement whether as a result of changes in information, future
events or otherwise.
In an effort to provide investors with additional information regarding the
Company's results of operations as determined by GAAP, the Company has disclosed
certain non-GAAP information the Company believes provides useful information to
investors:
o The Company discloses percentage changes in Kronos' average TiO2 selling
prices in billing currencies, which excludes the effects of foreign
currency translation. The Company believes disclosure of such percentage
changes allows investors to analyze such changes without the impact of
changes in foreign currency exchange rates, thereby facilitating
period-to-period comparisons of relative changes in average TiO2 selling
prices in the actual various billing currencies. Generally, when the U.S.
dollar either strengthens or weakens against other currencies, the
percentage change in average TiO2 selling prices in billing currencies will
be higher or lower, respectively, than such percentage changes would be
using actual exchange rates prevailing during the respective periods.
o The Company discloses segment profit, which is used by the Company's
management to assess the performance of its component products operations.
The Company believes disclosure of segment profit provides useful
information to investors because it allows investors to analyze the
performance of the Company's operations in the same way that the Company's
management assesses performance. The Company defines segment profit as
income before income taxes, interest expense and certain general corporate
items. Corporate items excluded from the determination of segment profit
include corporate expense and interest income not attributable to the
Company's operations.
NL Industries, Inc. is engaged in the component products (precision ball bearing
slides, security products and ergonomic computer support systems), chemicals
(titanium dioxide pigments) and other businesses.
NL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended March 31, 2005 and 2006
(In millions, except earnings per share)
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2005 2006
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Net sales $ 46.8 $ 47.0
Cost of sales 36.6 35.4
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Gross margin 10.2 11.6
Selling, general and administrative expense 6.1 6.7
Other operating income (expense):
General corporate expenses, net (5.8) (4.1)
Insurance recoveries - 2.2
Other income .2 -
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Income from operations (1.5) 3.0
General corporate items:
Interest and dividend income from affiliates .6 .5
Other interest income .9 .9
Securities transactions gains, net 14.6 .1
Interest expense (.1) (.1)
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14.5 4.4
Equity in earnings of Kronos Worldwide, Inc. 7.8 5.3
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Income from continuing operations before
income taxes and minority interest 22.3 9.7
Provision for income taxes 6.8 2.5
Minority interest in after-tax earnings .7 .7
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Income from continuing operations 14.8 6.5
Discontinued operations (.3) -
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Net income $ 14.5 $ 6.5
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Basic and diluted earnings per share:
Continuing operations $ .31 $ .13
Discontinued operations (.01) -
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Net income $ .30 $ .13
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Weighted-average shares used in the
calculation of earnings per share:
Basic shares 48.5 48.6
Dilutive impact of stock options .1 -
Diluted shares 48.6 48.6
NL INDUSTRIES, INC.
RECONCILIATION OF SEGMENT PROFIT TO
INCOME FROM OPERATIONS
(Unaudited)
Three months ended March 31, 2005 and 2006
(In millions)
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2005 2006
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Segment profit - component products $ 4.1 $ 4.8
Insurance recoveries - 2.2
Corporate expense (5.8) (4.1)
Other, net .2 .1
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Income from operations $ (1.5) $ 3.0
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NL INDUSTRIES, INC.
RECONCILIATION OF PERCENTAGE CHANGE IN
KRONOS' AVERAGE TiO2 SELLING PRICES
(Unaudited)
Three months ended
March 31,
2006 vs. 2005
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Percentage change in average selling prices:
Using actual foreign currency exchange rates -3%
Impact of changes in foreign currency exchange rates +5%
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In billing currencies +2%
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