SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 - For the quarter ended June 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 (IRS Employer
incorporation or organization) Identification No.)
3000 North Sam Houston Parkway East, Houston, Texas 77032
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 987-5000
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) had been subject to such filing
requirements for the past 90 days. Yes X No
Number of shares of common stock outstanding on August 3, 1994: 51,039,943
NL INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - December 31, 1993
and June 30, 1994 3-4
Consolidated Statements of Operations - Three and
six months ended June 30, 1993 and 1994 5
Consolidated Statement of Shareholders' Deficit
- Six months ended June 30, 1994 6
Consolidated Statements of Cash Flows - Six months
ended June 30, 1993 and 1994 7-8
Notes to Consolidated Financial Statements 9-14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 15-18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 19-20
Item 4. Submission of Matters to a Vote of Security Holders. 20
Item 6. Exhibits and Reports on Form 8-K. 20
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS December 31, June 30,
1993 1994
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 106,593 $ 135,779
Marketable securities 41,045 25,579
Accounts and notes receivable 116,355 170,367
Inventories 194,167 179,148
Prepaid expenses 5,637 9,307
Deferred income taxes 3,701 4,967
Total current assets 467,498 525,147
Other assets:
Marketable securities 18,428 19,449
Refundable income taxes 91,994 22,030
Investment in joint ventures 190,787 188,534
Prepaid pension cost 16,307 18,430
Other 42,932 41,550
Total other assets 360,448 289,993
Property and equipment:
Land 18,237 19,582
Buildings 129,582 138,140
Machinery and equipment 515,090 556,164
Mining properties 72,711 76,435
Construction in progress 30,050 33,156
765,670 823,477
Less accumulated depreciation and depletion 387,067 423,866
Net property and equipment 378,603 399,611
$1,206,549 $1,214,751
</TABLE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' DEFICIT December 31, June 30,
1993 1994
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 35,716 $ 37,056
Accounts payable and accrued liabilities 177,265 183,997
Payable to affiliates 9,566 10,559
Income taxes 6,353 8,227
Deferred income taxes 3,623 2,516
Total current liabilities 232,523 242,355
Noncurrent liabilities:
Long-term debt 835,169 797,510
Deferred income taxes 138,977 192,992
Accrued pension cost 72,606 76,419
Accrued postretirement benefits cost 68,322 66,774
Other 121,309 129,942
Total noncurrent liabilities 1,236,383 1,263,637
Minority interest 2,438 2,745
Shareholders' deficit:
Common stock 8,355 8,355
Additional paid-in capital 759,281 759,281
Adjustments:
Currency translation (115,803) (125,330)
Pension liabilities (3,442) (3,442)
Marketable securities (2,164) (1,234)
Accumulated deficit (543,059) (564,960)
Treasury stock (367,963) (366,656)
Total shareholders' deficit (264,795) (293,986)
$1,206,549 $1,214,751
</TABLE>
[FN]
Commitments and contingencies (Note 13)
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1993 1994 1993 1994
<S> <C> <C> <C> <C>
Revenues and other income:
Net sales $221,378 $237,113 $419,896 $438,962
Other, net 4,291 5,200 10,377 28,214
225,669 242,313 430,273 467,176
Costs and expenses:
Cost of sales 171,671 178,925 314,177 325,881
Selling, general and
administrative 50,900 54,250 95,639 110,261
Interest 26,615 21,071 52,752 42,136
249,186 254,246 462,568 478,278
Loss before income taxes
and minority interest (23,517) (11,933) (32,295) (11,102)
Income tax expense (4,314) (3,354) (8,855) (10,303)
Loss before minority
interest (27,831) (15,287) (41,150) (21,405)
Minority interest (171) (247) (342) (496)
Net loss $(28,002) $(15,534) $(41,492) $(21,901)
Net loss per share of common
stock $ (.55) $ (.30) $ (.82) $ (.43)
Weighted average common shares
outstanding 50,890 51,040 50,890 51,002
</TABLE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
Six months ended June 30, 1994
(In thousands)
<TABLE>
<CAPTION>
Additional Adjustments
Common paid-in Currency Pension Marketable
stock capital translation liabilities securities
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $8,355 $759,281 $(115,803) $(3,442) $(2,164)
Net loss - - - - -
Adjustments - - (9,527) - 930
Other, net - - - - -
Balance at June 30, 1994 $8,355 $759,281 $(125,330) $(3,442) $(1,234)
</TABLE>
<TABLE>
<CAPTION>
Accumulated Treasury
deficit stock Total
<S> <C> <C> <C>
Balance at December 31, 1993 $(543,059) $(367,963) $(264,795)
Net loss (21,901) - (21,901)
Adjustments - - (8,597)
Other, net - 1,307 1,307
Balance at June 30, 1994 $(564,960) $(366,656) $(293,986)
</TABLE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1993 and 1994
(In thousands)
<TABLE>
<CAPTION>
1993 1994
<S> <C> <C>
Cash flows from operating activities:
Net loss $(41,492) $(21,901)
Adjustments:
Depreciation, depletion and amortization 24,673 17,481
Deferred income taxes 1,566 30,195
Net (gains) losses from:
Securities transactions (1,982) 1,213
Disposition of property and equipment 593 1,279
Marketable trading securities:
Purchases - (870)
Dispositions - 15,124
Other, net 1,244 (3,386)
Change in assets and liabilities:
Accounts and notes receivable (24,730) (46,791)
Inventories 357 22,715
Prepaid expenses (1,737) (2,503)
Accounts payable and accrued liabilities (3,819) 5,829
Income taxes 2,653 75,490
Other, net 8,410 17,703
Total adjustments 7,228 133,479
Net cash provided (used) by operating
activities (34,264) 111,578
Cash flows from investing activities:
Capital expenditures (19,982) (16,564)
Marketable securities:
Purchases (1,615) -
Dispositions 58,006 -
Proceeds from disposition of property
and equipment 220 212
Investment in joint ventures, net - 2,405
Other, net 670 350
Net cash provided (used) by investing
activities 37,299 (13,597)
</TABLE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Six months ended June 30, 1993 and 1994
(In thousands)
<TABLE>
<CAPTION>
1993 1994
<S> <C> <C>
Cash flows from financing activities:
Notes payable and long-term debt:
Additions $ 993 $ 32,622
Principal payments (17,288) (105,472)
Deferred financing costs (646) (685)
Distributions to minority interest (33) (202)
Net cash used by financing activities (16,974) (73,737)
Cash and cash equivalents:
Net change from:
Operating, investing and financing activities (13,939) 24,244
Currency translation (1,831) 4,942
Balance at beginning of period 87,333 106,593
Balance at end of period $ 71,563 $ 135,779
Supplemental disclosures - cash paid (received) for:
Interest, net of amounts capitalized $ 53,494 $ 35,130
Income taxes 4,806 (95,134)
</TABLE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION:
NL Industries, Inc. is primarily a holding company and conducts its
operations through its wholly-owned subsidiaries, Kronos, Inc. (titanium dioxide
pigments, or "TiO2") and Rheox, Inc. (specialty chemicals). At June 30, 1994,
Valhi, Inc. held approximately 49% of NL's outstanding common stock and Tremont
Corporation, a 48%-owned affiliate of Valhi, held an additional 18% of NL's
outstanding common stock. Together, Tremont and Valhi may be deemed to control
NL. Contran Corporation holds, directly or through subsidiaries, approximately
90% of Valhi's outstanding common stock.
The consolidated balance sheet of NL Industries, Inc. and Subsidiaries
(collectively, the "Company") at December 31, 1993 has been condensed from the
Company's audited consolidated financial statements at that date. The
consolidated balance sheet at June 30, 1994 and the consolidated statements of
operations, shareholders' deficit and cash flows for the interim periods ended
June 30, 1993 and 1994, have been prepared by the Company, without audit. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the consolidated financial position,
results of operations and cash flows have been made. The results of operations
for the interim periods are not necessarily indicative of the operating results
for a full year or of future operations.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. Certain prior-year amounts have been
reclassified to conform to the 1994 presentation. The accompanying consolidated
financial statements should be read in conjunction with the consolidated
financial statements included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1993 (the "1993 Annual Report").
NOTE 2 - LOSS PER SHARE OF COMMON STOCK:
Loss per share of common stock is based on the weighted average number of
common shares outstanding. Common stock equivalents are excluded from the
computation because they are antidilutive.
NOTE 3 - BUSINESS SEGMENT INFORMATION:
The Company's operations are conducted in two business segments - TiO2
conducted by Kronos and specialty chemicals conducted by Rheox.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1993 1994 1993 1994
(In thousands)
<S> <C> <C> <C> <C>
Net sales:
Kronos $193,194 $206,407 $365,277 $380,667
Rheox 28,184 30,706 54,619 58,295
$221,378 $237,113 $419,896 $438,962
Operating income:
Kronos $ 7,530 $ 17,664 $ 24,686 $ 33,023
Rheox 7,636 8,578 13,585 15,532
15,166 26,242 38,271 48,555
General corporate income
(expense):
Securities earnings 1,298 642 4,168 843
Corporate expenses, net (13,366) (17,746) (21,982) (18,364)
Interest expense (26,615) (21,071) (52,752) (42,136)
$(23,517) $(11,933) $(32,295) $(11,102)
</TABLE>
NOTE 4 - INVENTORIES:
<TABLE>
<CAPTION>
December 31, June 30,
1993 1994
(In thousands)
<S> <C> <C>
Raw materials $ 19,785 $ 29,832
Work in process 7,173 6,798
Finished products 135,102 106,920
Supplies 32,107 35,598
$194,167 $179,148
</TABLE>
NOTE 5 - MARKETABLE SECURITIES AND SECURITIES TRANSACTIONS:
<TABLE>
<CAPTION>
December 31, June 30,
1993 1994
(In thousands)
<S> <C> <C>
Current - U.S. Treasury securities:
Unrealized gains (losses) $ 52 $ (723)
Cost 40,993 26,302
Aggregate market $41,045 $25,579
Noncurrent - marketable equity securities:
Unrealized gains $ 33 $ 665
Unrealized losses (2,951) (2,562)
Cost 21,346 21,346
Aggregate market $18,428 $19,449
The Company has classified its U.S. Treasury securities as trading
securities and its marketable equity securities as available-for-sale.
Net gains and losses from securities transactions are composed of:
</TABLE>
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1993 1994 1993 1994
(In thousands)
<S> <C> <C> <C> <C>
Unrealized gains (losses):
Marketable equity securities $ 84 $ - $ 64 $ -
Other securities (270) (387) 286 (775)
Realized gains (losses) - other
securities 518 (25) 1,632 (438)
$ 332 $(412) $1,982 $(1,213)
</TABLE>
NOTE 6 - INVESTMENT IN JOINT VENTURES:
<TABLE>
<CAPTION>
December 31, June 30,
1993 1994
(In thousands)
<S> <C> <C>
TiO2 manufacturing joint venture $188,031 $185,583
Other 2,756 2,951
$190,787 $188,534
</TABLE>
NOTE 7 - OTHER NONCURRENT ASSETS:
<TABLE>
<CAPTION>
December 31, June 30,
1993 1994
(In thousands)
<S> <C> <C>
Intangible assets, net $15,317 $15,183
Deferred financing costs, net 18,954 17,616
Other 8,661 8,751
$42,932 $41,550
</TABLE>
NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
<TABLE>
<CAPTION>
December 31, June 30,
1993 1994
(In thousands)
<S> <C> <C>
Accounts payable $ 89,010 $ 73,543
Accrued liabilities:
Employee benefits 32,350 35,276
Environmental costs 14,517 24,605
Interest 6,933 6,785
Miscellaneous taxes 2,240 3,817
Other 32,215 39,971
88,255 110,454
$177,265 $183,997
</TABLE>
NOTE 9 - OTHER NONCURRENT LIABILITIES:
<TABLE>
<CAPTION>
December 31, June 30,
1993 1994
(In thousands)
<S> <C> <C>
Environmental costs $ 70,789 $ 79,253
Deferred technology fee income 26,881 23,142
Insurance claims and expenses 10,299 15,556
Employee benefits 10,084 10,736
Other 3,256 1,255
$121,309 $129,942
</TABLE>
NOTE 10 - LONG-TERM DEBT:
<TABLE>
<CAPTION>
December 31, June 30,
1993 1994
(In thousands)
<S> <C> <C>
NL Industries:
11.75% Senior Secured Notes $250,000 $250,000
13% Senior Secured Discount Notes 102,627 109,304
352,627 359,304
Kronos:
DM bank credit facility (DM 548,000
and DM 460,448) 316,032 290,589
Joint venture term loan 104,143 96,429
5% to 8% bank loans payable through 2000 12,338 10,393
Other 2,175 1,850
434,688 399,261
Rheox:
Bank term loan 82,500 75,000
Other 1,070 1,001
83,570 76,001
870,885 834,566
Less current maturities 35,716 37,056
$835,169 $797,510
</TABLE>
NOTE 11 - INCOME TAXES:
The difference between the provision for income tax expense attributable to
loss before income taxes and minority interest and the amount that would be
expected using the U.S. federal statutory income tax rate is presented below.
The expected tax benefit in 1993 is computed at the previously-reported U.S.
federal statutory rate of 34% because the retroactive increase to the current
35% rate was not enacted until August 1993.
<TABLE>
<CAPTION>
Six months ended
June 30,
1993 1994
(In thousands)
<S> <C> <C>
Expected tax benefit $ 10,983 $ 3,886
Non-U.S. tax rates 6,203 2,703
Incremental tax on income of companies not included
in NL's consolidated U.S. federal income tax return (1,541) (1,096)
Valuation allowance (24,208) (15,138)
U.S. state income taxes (292) (283)
Other, net - (375)
Income tax expense $ (8,855) $(10,303)
</TABLE>
NOTE 12 - OTHER INCOME, NET:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1993 1994 1993 1994
(In thousands)
<S> <C> <C> <C> <C>
Securities earnings:
Interest and dividends $ 966 $1,054 $ 2,186 $ 2,056
Securities transactions 332 (412) 1,982 (1,213)
1,298 642 4,168 843
Litigation settlement gain - - - 20,040
Technology fee income - 2,453 - 4,862
Royalty income 565 594 1,061 1,020
Currency transaction gains, net 1,054 502 1,676 366
Disposition of property and equipment (374) (292) (593) (1,279)
Other, net 1,748 1,301 4,065 2,362
$4,291 $5,200 $10,377 $28,214
</TABLE>
NOTE 13 - COMMITMENTS AND CONTINGENCIES:
For descriptions of certain legal proceedings, income tax and other
commitments and contingencies related to the Company, reference is made to (i)
Part II, Item 1 -"Legal Proceedings," (ii) the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1994 and (iii) the 1993 Annual Report.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The Company's chemical operations are conducted in two business segments -
TiO2 conducted by Kronos and specialty chemicals conducted by Rheox. The
Company's return to profitability, and the timing thereof, are dependent in
large part upon improved pricing for TiO2. Based on the Company's current near-
term outlook for its TiO2 business, the Company expects to report a net loss for
calendar 1994, although its results for the second half of the year should be
improved compared to 1993.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1993 1994 % Change 1993 1994 % Change
(In millions) (In millions)
<S> <C> <C> <C> <C> <C> <C>
Net sales:
Kronos $193.2 $206.4 +7% $365.3 $380.7 +4%
Rheox 28.2 30.7 +9% 54.6 58.3 +7%
$221.4 $237.1 +7% $419.9 $439.0 +5%
Operating income:
Kronos $ 7.6 $ 17.6 +135% $ 24.7 $ 33.1 +34%
Rheox 7.6 8.6 +12% 13.6 15.5 +14%
$ 15.2 $ 26.2 +73% $ 38.3 $ 48.6 +27%
Percent changes in TiO2:
Sales volume +10% +9%
Average selling prices
(in billing currencies) +1% -1%
</TABLE>
Kronos' TiO2 operating income in the second quarter and first half of 1994
increased from the comparable 1993 periods due to higher sales volumes, slightly
lower per unit operating costs and technology fee income. Primarily as a result
of improved pricing in Europe, Kronos' average TiO2 selling prices in the first
half of 1994 approximated both first-half 1993 and full-year 1993 average
selling prices. A significant amount of sales are denominated in currencies
other than the U.S. dollar, and fluctuations in the value of the U.S. dollar
relative to other currencies decreased the dollar value of sales for the second
quarter and first half of 1994 by $7 million and $15 million, respectively,
compared to the 1993 periods. Kronos expects the impact of previously-announced
price increases will further improve its operating income in the second half of
1994. Rheox's operating results for both the second quarter and first half of
1994 improved compared to the 1993 periods primarily as a result of higher sales
volumes and lower operating costs.
The following table sets forth certain information regarding general
corporate income (expense).
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, Difference June 30, Difference
1993 1994 1993 1994
(In millions) (In millions)
<S> <C> <C> <C> <C> <C> <C>
Securities earnings $ 1.3 $ .7 $ (.6) $ 4.2 $ .9 $(3.3)
Corporate expenses, net (13.4) (17.7) (4.3) (22.0) (18.5) 3.5
Interest expense (26.6) (21.1) 5.5 (52.8) (42.1) 10.7
$(38.7) $(38.1) $ .6 $(70.6) $(59.7) $10.9
</TABLE>
Year-to-date corporate expenses, net were lower as a $20 million gain
related to the first-quarter 1994 settlement of the Company's lawsuit against
Lockheed Corporation was partially offset by increased provisions for
environmental remediation and other costs.
Interest expense declined due to lower debt outstanding and lower interest
rates on Deutsche mark-denominated debt, partially offset by the higher interest
rates on the Company's Senior Notes.
The Company's operations are conducted on a worldwide basis. In both 1993
and 1994, the Company's income tax expense was impacted by losses in certain
countries for which no current refund is available and for which the Company
believes recognition of a deferred tax asset is not currently considered
appropriate.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated cash flows from operating, investing and
financing activities for the six months ended June 30, 1993 and 1994 are
presented below.
<TABLE>
<CAPTION>
Six months ended
June 30,
1993 1994
(In millions)
<S> <C> <C>
Net cash provided (used) by:
Operating activities $(34.3) $111.6
Investing activities 37.3 (13.6)
Financing activities (16.9) (73.8)
Net cash provided (used) by operating,
investing and financing activities $(13.9) $ 24.2
</TABLE>
The TiO2 industry is cyclical, with the previous peak in selling prices in
early 1990. During the recent down cycle of the past few years, the Company's
operations have used significant amounts of cash. Receipt of the German
tentative tax refunds, discussed below, significantly increased the Company's
cash flow from operating activities for the first half of 1994 and was a factor
in the Company's improved liquidity. Excluding the effects of the receipt of
the German tentative tax refunds, the Company's operations continued to use cash
during the first half of 1994 but at a lower rate than the year-earlier period.
The Company has taken and continues to take measures to manage its near-term and
long-term liquidity requirements, including cost reduction efforts, tightening
of controls over working capital and the formation of a TiO2 manufacturing joint
venture and the refinancing of certain debt in 1993. The Company currently
expects to have sufficient liquidity to meet its obligations including
operations, capital expenditures and debt service.
Certain of the Company's income tax returns in various U.S. and non-U.S.
jurisdictions, including Germany, are being examined and tax authorities have
proposed or may propose tax deficiencies. During the second quarter of 1994,
the German tax authorities withdrew certain tax assessment reports and remitted
tax refunds aggregating DM 185 million ($112 million), including interest, on a
tentative basis. The Company applied DM 143 million ($87 million) of the German
tentative tax refunds to reduce outstanding borrowings under its DM revolving
credit facility. The examination of the Company's German income tax returns
continues. The Company understands the German tax authorities intend to remit
additional tentative refunds aggregating DM 35 million and issue new assessment
reports proposing tax deficiencies. The Company expects to apply the additional
tentative refunds to reduce the outstanding borrowings under its DM bank credit
facility. The Company has granted a DM 100 million ($63 million at June 30,
1994) lien on its Nordenham, Germany TiO2 plant in favor of the German tax
authorities until any future assessments proposing tax deficiencies are
resolved. The timing of receipt of any additional tentative tax refunds and the
timing and amount of new assessments proposing tax deficiencies remains
uncertain. The Company believes that it has adequately provided accruals for
additional income taxes and related interest expense which may ultimately result
from all such examinations.
Net repayments of indebtedness in the first half of 1994 include payments
of DM 143 million of the DM credit facility ($87 million), $8 million on the
Rheox bank term loan and $8 million on the joint venture term loan, and
borrowings under the DM bank credit facility of DM 55 million ($33 million).
At June 30, 1994, the Company had cash, cash equivalents and current
marketable securities aggregating $161 million (34% held by non-U.S.
subsidiaries) including restricted cash and cash equivalents of $15 million.
The Company's subsidiaries had $178 million available for borrowing under
existing non-U.S. credit facilities at June 30, 1994, of which $90 million is
available only for (i) permanently reducing the DM term loan or (ii) paying
future German tax assessments, as described above.
The Company has been named as a defendant, potentially responsible party,
or both, in a number of legal proceedings associated with environmental matters,
including waste disposal sites currently or formerly owned, operated or used by
the Company, many of which disposal sites or facilities are on the U.S.
Environmental Protection Agency's Superfund National Priorities List or similar
state lists. The Company believes it has adequate reserves ($87 million at June
30, 1994) for reasonably estimable costs of such matters. It is not possible to
estimate the range of costs for certain sites. The Company has estimated that
the upper end of the range of reasonably possible costs to the Company for sites
for which it is possible to estimate costs is approximately $136 million. No
assurance can be given that actual costs will not exceed accrued amounts or the
upper end of the range for sites for which estimates have been made, and no
assurance can be given that costs will not be incurred with respect to sites as
to which no estimate presently can be made. Further, there can be no assurance
that additional environmental matters will not arise in the future. The Company
is also a defendant in a number of legal proceedings seeking damages for
personal injury and property damage arising out of the sale of lead pigments and
lead-based paints. Based on, among other things, the results of such litigation
to date, the Company believes that the pending lead pigment litigation is
without merit and has not accrued any amounts for such pending lead pigment
litigation. The Company currently believes the disposition of all claims and
disputes, individually or in the aggregate, should not have a material adverse
effect on the Company's consolidated financial position, results of operations
or liquidity. There can be no assurance that additional matters of these types
will not arise in the future. In addition, various legislation and
administrative regulations have, from time to time, been enacted or proposed at
the state, local and federal levels that seek to impose various obligations on
present and former manufacturers of lead pigment and lead-based paint with
respect to asserted health concerns associated with the use of such products and
effectively overturn court decisions in which the Company and other pigment
manufacturers have been successful.
The Company periodically evaluates its liquidity requirements, capital
needs and availability of resources in view of, among other things, its debt
service requirements, capital expenditure requirements and estimated future
operating cash flows. As a result of this process, the Company has in the past
and may in the future seek to refinance or restructure indebtedness, raise
additional capital, restructure ownership interests, sell interests in
subsidiaries, marketable securities or other assets, or take a combination of
such steps or other steps to increase its liquidity and capital resources.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the 1993 Annual Report and the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1994 for descriptions of
certain previously-reported legal proceedings.
Coren, et al. v. Cardozo v. Sherwin-Williams, et al. and Pacheco, et al. v.
Ortiz v. The Sherwin-Williams Company, et al. In May 1994, joint stipulations
of dismissal without prejudice were filed by the third-party plaintiff and the
third-party defendants (including the Company) in each of these previously-
reported cases.
Barros v. Pires v. Sherwin-Williams Co., et al. In May 1994, the third-
party plaintiffs withdrew their motion for reconsideration or reversal of the
court's previous decision dismissing the third-party defendants, including the
Company.
The City of New York, the New York City Housing Authority and the New York
City Health and Hospitals Corp. v. Lead Industries Association, Inc., et al. In
May 1994, the trial court granted the defendants' motion to dismiss the
plaintiffs' restitution and indemnification claims. The plaintiffs filed a
notice of appeal.
Skipworth v. Sherwin-Williams Co., et al. In June 1994, the plaintiffs
appealed the trial court's decision dismissing the plaintiffs' case with
prejudice.
NL Industries, Inc. v. Commercial Union Insurance Cos., et al. In July
1994, the court entered judgment on the previously-reported order requiring
Commercial Union to pay previously-incurred Company costs in defending two lead
pigment cases. The defendant's time to appeal has not yet expired.
Wagner, et al. v. Anzon and NL Industries, Inc. Defendants' motion for
summary judgment was denied; trial remains set for September 1994.
United States of America v. Peter Gull and NL Industries, Inc. In June
1994, both the Company and the U.S. Environmental Protection Agency (the "U.S.
EPA") appealed the previously-reported judgment.
Pedricktown. In July 1994, the U.S. EPA selected a remediation plan for
the remaining clean-up of operable unit one which the U.S. EPA estimates will
cost $18.7 million to complete. No agreement regarding the allocation of such
costs among the potential responsible parties has been reached.
Dallas Smelter. The Texas Natural Resources Commission has filed a report
and petition against the Company and Mainland Land and Equipment ("Mainland")
seeking approximately $.2 million in penalties and implementation of a site
investigation plan in connection with the Company's former smelter in Dallas,
Texas. The report and petition alleges that the Company and Mainland are
responsible for the discharge of pollutants and for the failure to undertake
actions to abate and remove the discharge of pollutants. The Company has filed
an answer denying the allegations and has requested a hearing.
Day, et al. v. NLO, Inc., et al. In July 1994, the parties reached a
settlement agreement pursuant to which the Department of Energy would pay all
costs of the settlement, the plaintiffs' case would be dismissed, and the
Company and NLO would be released and dismissed. The settlement is subject to
final court approval.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on May 4, 1994. The
only matter voted upon was the election of directors. All of the Company's
directors stood for election. The vote with respect to each was as follows:
<TABLE>
<CAPTION>
Vote Vote
Director For Withheld
<S> <C> <C>
J. Landis Martin 47,254,675 277,704
Kenneth R. Peak 47,266,695 265,684
Glenn R. Simmons 47,241,495 290,884
Harold C. Simmons 47,249,605 282,774
Michael A. Snetzer 47,265,057 267,322
Lawrence A. Wigdor 47,266,793 265,586
Admiral Elmo R. Zumwalt, Jr. 47,260,756 271,623
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None.
(b) REPORTS ON FORM 8-K
Reports on Form 8-K for the quarter ended June 30, 1994 and for the
month of July 1994:
April 25, 1994 - reported Items 5 and 7.
May 5, 1994 - reported Items 5.
May 31, 1994 - reported Items 5 and 7.
July 25, 1994 - reported Items 5 and 7.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NL INDUSTRIES, INC.
(Registrant)
Date: August 4, 1994 By /s/ Joseph S. Compofelice
Joseph S. Compofelice
Vice President and
Chief Financial Officer
Date: August 4, 1994 By /s/ Dennis G. Newkirk
Dennis G. Newkirk
Vice President and Controller
(Principal Accounting Officer)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NL INDUSTRIES, INC.
(Registrant)
Date: August __, 1994 By
Joseph S. Compofelice
Vice President and
Chief Financial Officer
Date: August __, 1994 By
Dennis G. Newkirk
Vice President and Controller
(Principal Accounting Officer)
