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 March 31, 1995
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.)
Two Greenspoint Plaza, 16825 Northchase Dr., Suite 1200, Houston, TX 77060-2544
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 423-3300
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 May 3, 1995: 51,053,783
NL INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - December 31, 1994
and March 31, 1995 3-4
Consolidated Statements of Operations - Three
months ended March 31, 1994 and 1995 5
Consolidated Statement of Shareholders' Deficit
- Three months ended March 31, 1995 6
Consolidated Statements of Cash Flows - Three
months ended March 31, 1994 and 1995 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
Item 6. Exhibits and Reports on Form 8-K 19
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS December 31, March 31,
1994 1995
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 131,124 $ 107,486
Marketable securities 25,165 26,516
Accounts and notes receivable 137,753 180,285
Refundable income taxes 1,162 3,478
Inventories 185,173 199,533
Prepaid expenses 3,878 8,160
Deferred income taxes 2,177 2,098
Total current assets 486,432 527,556
Other assets:
Marketable securities 21,329 21,875
Investment in joint ventures 187,480 189,718
Prepaid pension cost 19,329 21,191
Deferred income taxes 2,746 1,262
Other 37,267 37,536
Total other assets 268,151 271,582
Property and equipment:
Land 20,665 22,624
Buildings 147,370 159,534
Machinery and equipment 582,138 626,658
Mining properties 87,035 92,951
Construction in progress 9,579 19,579
846,787 921,346
Less accumulated depreciation and depletion 438,960 477,191
Net property and equipment 407,827 444,155
$1,162,410 $1,243,293
</TABLE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' DEFICIT December 31, March 31,
1994 1995
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 42,887 $ 40,550
Accounts payable and accrued liabilities 168,327 185,885
Payable to affiliates 11,348 10,727
Income taxes 20,762 25,442
Deferred income taxes 1,590 1,678
Total current liabilities 244,914 264,282
Noncurrent liabilities:
Long-term debt 746,762 774,153
Deferred income taxes 178,332 195,102
Accrued pension cost 76,242 82,740
Accrued postretirement benefits cost 65,299 64,454
Other 141,518 147,801
Total noncurrent liabilities 1,208,153 1,264,250
Minority interest 2,425 2,724
Shareholders' deficit:
Common stock 8,355 8,355
Additional paid-in capital 759,281 759,281
Adjustments:
Currency translation (125,494) (133,534)
Pension liabilities (1,635) (1,635)
Marketable securities (12) 80
Accumulated deficit (567,041) (553,979)
Treasury stock (366,536) (366,531)
Total shareholders' deficit (293,082) (287,963)
$1,162,410 $1,243,293
</TABLE>
Commitments and contingencies (Note 13)
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 1994 and 1995
(In thousands, except per share data)
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Revenues and other income:
Net sales $201,849 $250,875
Other, net 23,014 2,894
224,863 253,769
Costs and expenses:
Cost of sales 146,956 169,768
Selling, general and administrative 56,011 44,172
Interest 21,065 20,676
224,032 234,616
Income before income taxes and minority 831 19,153
interest
Income tax expense 6,949 5,746
Income (loss) before minority interest (6,118) 13,407
Minority interest 249 345
Net income (loss) $ (6,367) $ 13,062
Net income (loss) per share of common stock $ (.12) $ .26
Weighted average common and common equivalent
shares outstanding 50,965 51,176
</TABLE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
Three months ended March 31, 1995
(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, 1994 $8,355 $759,281 $(125,494) $(1,635) $ (12)
Net income - - - - -
Adjustments - - (8,040) - 92
Treasury stock reissued - - - - -
Balance at March 31, 1995 $8,355 $759,281 $(133,534) $(1,635) $ 80
</TABLE>
<TABLE>
<CAPTION>
Accumulated Treasury
deficit stock Total
<S> <C> <C> <C>
Balance at December 31, 1994 $(567,041) $(366,536) $(293,082)
Net income 13,062 - 13,062
Adjustments - - (7,948)
Treasury stock reissued - 5 5
Balance at March 31, 1995 $(553,979) $(366,531) $(287,963)
</TABLE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 1994 and 1995
(In thousands)
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (6,367) $ 13,062
Depreciation, depletion and amortization 8,464 9,326
Noncash interest expense 4,465 4,646
Deferred income taxes 4,935 3,286
Other, net (162) (603)
11,335 29,717
Change in assets and liabilities:
Accounts and notes receivable (29,639) (31,375)
Inventories 869 (2,115)
Prepaid expenses (3,993) (3,491)
Accounts payable and accrued liabilities (9,385) 5,587
Income taxes (1,164) 129
Other, net 10,072 (29)
Marketable trading securities, net (870) (762)
Net cash used by operating activities (22,775) (2,339)
Cash flows from investing activities:
Capital expenditures (7,248) (12,382)
Investment in joint ventures, net 2,027 (2,371)
Other, net 283 12
Net cash used by investing activities (4,938) (14,741)
</TABLE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Three months ended March 31, 1994 and 1995
(In thousands)
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Cash flows from financing activities:
Indebtedness:
Borrowings $ 14,049 $ 2,095
Principal payments (7,900) (12,543)
Other, net (190) 5
Net cash provided (used) by financing
activities 5,959 (10,443)
Cash and cash equivalents:
Net change from:
Operating, investing and financing activities (21,754) (27,523)
Currency translation 861 3,885
Balance at beginning of period 106,593 131,124
Balance at end of period $ 85,700 $107,486
Supplemental disclosures - cash paid for:
Interest, net of amounts capitalized $ 10,603 $ 4,958
Income taxes 3,277 2,188
</TABLE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION:
NL Industries, Inc. conducts its operations primarily through its wholly-
owned subsidiaries, Kronos, Inc. (titanium dioxide pigments, or "TiO2") and
Rheox, Inc. (specialty chemicals). Valhi, Inc. and Tremont Corporation, each
affiliates of Contran Corporation, hold 53% and 18%, respectively, of NL's
outstanding common stock. Contran holds, directly or indirectly, approximately
90% of Valhi's and 44% of Tremont's outstanding common stock. Together, Tremont
and Valhi may be deemed to control NL.
The consolidated balance sheet of NL Industries, Inc. and Subsidiaries
(collectively, the "Company") at December 31, 1994 has been condensed from the
Company's audited consolidated financial statements at that date. The
consolidated balance sheet at March 31, 1995 and the consolidated statements of
operations, shareholders' deficit and cash flows for the interim periods ended
March 31, 1994 and 1995, 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 1995 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, 1994 (the "1994 Annual Report").
NOTE 2 - INCOME (LOSS) PER SHARE OF COMMON STOCK:
Income (loss) per share of common stock is based on the weighted average
number of common shares outstanding. Outstanding common stock options are
excluded from the computation when the effect of their assumed exercise is
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
March 31,
1994 1995
(In thousands)
<S> <C> <C>
Net sales:
Kronos $174,260 $217,328
Rheox 27,589 33,547
$201,849 $250,875
Operating income:
Kronos $ 15,359 $ 32,453
Rheox 6,954 9,515
22,313 41,968
General corporate income (expense):
Securities earnings, net 201 2,469
Expenses, net (618) (4,608)
Interest expense (21,065) (20,676)
$ 831 $ 19,153
</TABLE>
NOTE 4 - INVENTORIES:
<TABLE>
<CAPTION>
December 31, March 31,
1994 1995
(In thousands)
<S> <C> <C>
Raw materials $ 30,118 $ 38,399
Work in process 7,655 9,483
Finished products 112,410 114,230
Supplies 34,990 37,421
$185,173 $199,533
</TABLE>
NOTE 5 - MARKETABLE SECURITIES AND SECURITIES TRANSACTIONS:
<TABLE>
<CAPTION>
December 31, March 31,
1994 1995
(In thousands)
<S> <C> <C>
Current - U.S. Treasury securities:
Unrealized losses $(1,124) $ (433)
Cost 26,289 26,949
Aggregate market $25,165 $26,516
Noncurrent - marketable equity securities:
Unrealized gains $ 3,357 $ 3,997
Unrealized losses (3,374) (3,874)
Cost 21,346 21,752
Aggregate market $21,329 $21,875
</TABLE>
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>
<CAPTION>
Three months ended
March 31,
1994 1995
(In thousands)
<S> <C> <C>
Unrealized gains (losses) $(388) $ 692
Realized losses (413) (103)
$(801) $ 589
</TABLE>
NOTE 6 - INVESTMENT IN JOINT VENTURES:
<TABLE>
<CAPTION>
December 31, March 31,
1994 1995
(In thousands)
<S> <C> <C>
TiO2 manufacturing joint venture $185,122 $187,493
Other 2,358 2,225
$187,480 $189,718
</TABLE>
NOTE 7 - OTHER NONCURRENT ASSETS:
<TABLE>
<CAPTION>
December 31, March 31,
1994 1995
(In thousands)
<S> <C> <C>
Intangible assets, net $13,957 $14,677
Deferred financing costs, net 16,079 15,961
Other 7,231 6,898
$37,267 $37,536
</TABLE>
NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
<TABLE>
<CAPTION>
December 31, March 31,
1994 1995
(In thousands)
<S> <C> <C>
Accounts payable $ 74,903 $ 78,713
Accrued liabilities:
Employee benefits 34,209 33,657
Environmental costs 10,433 10,433
Interest 6,485 17,539
Miscellaneous taxes 7,336 3,558
Other 34,961 41,985
93,424 107,172
$168,327 $185,885
</TABLE>
NOTE 9 - OTHER NONCURRENT LIABILITIES:
<TABLE>
<CAPTION>
December 31, March 31,
1994 1995
(In thousands)
<S> <C> <C>
Environmental costs $ 93,655 $100,542
Deferred technology fee income 18,305 16,765
Insurance claims and expenses 14,716 14,554
Employee benefits 12,322 13,535
Other 2,520 2,405
$141,518 $147,801
</TABLE>
NOTE 10 - LONG-TERM DEBT:
<TABLE>
<CAPTION>
December 31, March 31,
1994 1995
(In thousands)
<S> <C> <C>
NL Industries:
11.75% Senior Secured Notes $250,000 $250,000
13% Senior Secured Discount Notes 116,409 120,091
366,409 370,091
Kronos:
DM bank credit facility (DM 397,610
and DM 397,610) 255,703 286,239
Joint venture term loan 88,715 84,858
Other 10,507 13,473
354,925 384,570
Rheox:
Bank term loan 67,500 59,263
Other 815 779
68,315 60,042
789,649 814,703
Less current maturities 42,887 40,550
$746,762 $774,153
</TABLE>
NOTE 11 - INCOME TAXES:
The difference between the provision for income tax expense attributable to
income before income taxes and minority interest and the amount that would be
expected using the U.S. federal statutory income tax rate of 35% is presented
below.
<TABLE>
<CAPTION>
Three months ended
March 31,
1994 1995
(In thousands)
<S> <C> <C>
Expected tax expense $ 291 $ 6,704
Non-U.S. tax rates (1,824) (1,045)
Incremental tax on income of companies not included
in NL's consolidated U.S. federal income tax return 606 1,320
Valuation allowance 7,722 (1,276)
U.S. state income taxes 128 216
Other, net 26 (173)
Income tax expense $ 6,949 $ 5,746
</TABLE>
NOTE 12 - OTHER INCOME, NET:
<TABLE>
<CAPTION>
Three months ended
March 31,
1994 1995
(In thousands)
<S> <C> <C>
Securities earnings:
Interest and dividends $ 1,002 $ 1,880
Securities transactions (801) 589
201 2,469
Litigation settlement gain 20,040 -
Technology fee income 2,409 2,586
Currency transaction losses, net (136) (2,633)
Disposition of property and equipment (987) (794)
Royalty income 426 -
Other, net 1,061 1,266
$23,014 $ 2,894
</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" and (ii) the 1994 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 results improved significantly during the first three months of 1995,
as discussed below, and the Company expects to remain profitable for the year as
a result of improved TiO2 prices and demand.
<TABLE>
<CAPTION>
Three months ended %
March 31, Change
1994 1995
(In millions)
<S> <C> <C> <C>
Net sales:
Kronos $174.2 $217.3 +25%
Rheox 27.6 33.6 +22%
$201.8 $250.9 +24%
Operating income:
Kronos $ 15.3 $ 32.5 +111%
Rheox 7.0 9.5 +37%
$ 22.3 $ 42.0 +88%
Percent changes in TiO2:
Sales volume +9%
Average selling prices +11%
(in billing currencies)
</TABLE>
Kronos' TiO2 operating income in the first quarter of 1995 increased from
the first quarter of 1994 due to higher average selling prices and higher sales
and production volumes. As a result of increased pricing in all major markets,
Kronos' average TiO2 selling prices in the first quarter of 1995 were 11% higher
than the first quarter of 1994 and were 5% higher than year-end 1994. TiO2
sales volumes increased in both Europe and North America. Rheox's operating
results for the first quarter of 1995 improved compared to the first quarter of
1994 primarily as a result of higher sales volumes. 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 increased the
dollar value of sales for the first quarter of 1995 by $13 million compared to
the first quarter of 1994.
The following table sets forth certain information regarding general
corporate income (expense).
<TABLE>
<CAPTION>
Three months ended
March 31, Difference
1994 1995
(In millions)
<S> <C> <C> <C>
Securities earnings $ .2 $ 2.5 $ 2.3
Corporate expenses, net (.6) (4.6) (4.0)
Interest expense (21.1) (20.7) .4
$(21.5) $(22.8) $(1.3)
</TABLE>
Corporate expenses, net were higher as lower provisions for environmental
remediation and other costs in the first quarter of 1995 were more than offset
by the effect of the $20 million gain related to the first-quarter 1994
settlement of the Company's lawsuit against Lockheed Corporation. Interest
expense was slightly lower due to the lower level of debt partly offset by
higher variable U.S. interest rates and the impact of changes in currency
exchange rates.
The Company's operations are conducted on a worldwide basis. In 1994, the
Company's income tax expense was impacted by losses in certain countries for
which no current benefit was available and for which the Company believes
recognition of a deferred tax asset was not currently appropriate.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated cash flows from operating, investing and
financing activities for the three months ended March 31, 1994 and 1995 are
presented below.
<TABLE>
<CAPTION>
Three months ended
March 31,
1994 1995
(In millions)
<S> <C> <C>
Net cash provided (used) by:
Operating activities $(22.8) $ (2.3)
Investing activities (4.9) (14.7)
Financing activities 5.9 (10.5)
Net cash used by operating, investing and
financing activities $(21.8) $(27.5)
</TABLE>
The TiO2 industry is cyclical, with the previous peak in selling prices in
early 1990 and the latest trough in the third quarter of 1993. The Company's
cash flows from operations improved during the first quarter of 1995, primarily
due to increased TiO2 selling prices and demand. Changes in the Company's
inventories, receivables and payables (excluding the effect of currency
translation) used cash in both periods.
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 tax deficiencies. Additional substantial German proposed tax
deficiency assessments are expected. Although the Company believes that it will
ultimately prevail, the Company has granted a DM 100 million ($72 million at
March 31, 1995) lien on its Nordenham, Germany TiO2 plant and may be required to
provide additional security in favor of the German tax authorities until the
assessments proposing tax deficiencies are resolved. 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 and
believes that the ultimate disposition of such examinations should not have a
material adverse effect on the Company's consolidated financial position,
results of operations or liquidity.
Repayments of indebtedness in the first three months of 1995 include
payments of $8.3 million on the Rheox bank term loan and $3.9 million on the
joint venture term loan. The Company reduced its "net debt" (notes payable and
long-term debt less cash, cash equivalents and securities) by $87 million during
the last twelve months.
At March 31, 1995, the Company had cash, cash equivalents and current
marketable securities aggregating $134 million (36% held by non-U.S.
subsidiaries) including restricted cash, cash equivalents and current marketable
securities of $16 million. The Company's subsidiaries had $232 million
available for borrowing under existing credit facilities, of which $90 million
is available only for (i) permanently reducing the DM term loan or (ii) paying
future German income tax assessments, as described above. In April 1995, the
Company borrowed $11 million under existing credit facilities.
The Company has been named as a defendant, potentially responsible party
("PRP"), or both, in a number of legal proceedings associated with environmental
matters, including waste disposal sites or facilities 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 (the "U.S. EPA")
Superfund National Priorities List or similar state lists. The Company believes
it has adequate accruals ($92 million at March 31, 1995) 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 $166 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 from 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 and 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 to 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 1994 Annual Report for descriptions of certain
previously-reported legal proceedings.
Wright (Alvin) and Wright (Allen) v. Lead Industries, et al. In April
1995, the Company answered the complaint in this case denying liability.
Wagner, et al. v. Anzon, Inc. and NL Industries, Inc. In April 1995,
plaintiffs' post-trial motions in this case were denied. The time for
plaintiffs' to appeal has not yet expired.
The Company has been named as a defendant in various lawsuits alleging
personal injuries as a result of exposure to asbestos in connection with
formerly-owned operations. To date, the Company has always been dismissed from
such actions prior to trial without payment of any money in judgment or
settlement. Various of these actions remain pending. One such case,
In re: Asbestos III, 92-C-8888 (Circuit Court of Kanawha County, West Virginia),
involving approximately 4,500 plaintiffs, is scheduled to begin trial in July
1995. The Company intends to defend the case vigorously.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)EXHIBITS
10.1 - Intercorporate Service Agreement by and between Valhi, Inc.
and the Registrant effective as of January 1, 1995.
10.2 - Intercorporate Service Agreement by and between Contran
Corporation and the Registrant effective as of January 1, 1995.
10.3 - Description of terms of an executive severance agreement
between the Registrant and Lawrence A. Wigdor - incorporated by
reference to the last paragraph on page 16 entitled "Employment
Agreements" of the Registrant's definitive proxy statement dated
March 29, 1995.
27.1 - Financial Data Schedule for the three-month period ended
March 31, 1995.
(b)REPORTS ON FORM 8-K
Reports on Form 8-K for the quarter ended March 31, 1995 and for the
month of April 1995:
January 30, 1995 - reported Items 5 and 7.
April 25, 1995 - 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: May 3, 1995 By /s/ Joseph S. Compofelice
Joseph S. Compofelice
Vice President and
Chief Financial Officer
Date: May 3, 1995 By /s/ Dennis G. Newkirk
Dennis G. Newkirk
Vice President and Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from NL
Industries Inc.'s consolidated financial statements for the three months
ended March 31, 1995, and is qualified in its entirety by reference to
such consolidated financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 107,486
<SECURITIES> 26,516
<RECEIVABLES> 164,486
<ALLOWANCES> 4,013
<INVENTORY> 199,533
<CURRENT-ASSETS> 531,919
<PP&E> 921,346
<DEPRECIATION> 477,191
<TOTAL-ASSETS> 1,250,368
<CURRENT-LIABILITIES> 271,356
<BONDS> 774,153
<COMMON> 8,355
0
0
<OTHER-SE> (296,318)
<TOTAL-LIABILITY-AND-EQUITY> 1,250,368
<SALES> 250,875
<TOTAL-REVENUES> 250,875
<CGS> 169,768
<TOTAL-COSTS> 169,768
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (59)
<INTEREST-EXPENSE> 20,676
<INCOME-PRETAX> 19,153
<INCOME-TAX> 5,746
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EXHIBIT 10.1
INTERCORPORATE SERVICES AGREEMENT
This INTERCORPORATE SERVICES AGREEMENT (the "Agreement"), effective as of
January 1, 1995, amends and supersedes that certain Intercorporate Services
Agreement dated as of January 1, 1994 by and between VALHI, INC. ("Valhi"), a
Delaware corporation, and NL INDUSTRIES, INC. ("NL"), a New Jersey corporation.
W I T N E S S E T H:
WHEREAS, employees and agents of Valhi and affiliates of Valhi perform
management, financial and administrative functions for NL without direct
compensation from NL; and
WHEREAS, NL does not separately maintain the full internal capability to
perform all necessary management, financial and administrative functions which
NL requires; and
WHEREAS, the cost of maintaining the additional personnel necessary to
perform the functions provided for by this Agreement would exceed the fee set
forth in Section 3 of this Agreement and that the terms of this Agreement are no
less favorable to NL then could otherwise be obtained from a third party for
comparable services; and
WHEREAS, NL desires to continue receiving the management, financial and
administrative services presently provided by Valhi and affiliates of Valhi and
Valhi is willing to continue to provide such services under the terms of this
Agreement; and
WHEREAS, Valhi desires to have the services of certain personnel of NL and
NL is willing to provide such services under the terms of this Agreement.
NOW, THEREFORE, for and in consideration of the mutual premises,
representations and covenants herein contained, the parties hereto mutually
agree as follows:
1. Valhi Services to be Provided. Valhi agrees to make available to NL, upon
request, the following services (the "Valhi Services") to be rendered by
the internal staff of Valhi and affiliates of Valhi:
(a) Consultation and assistance in the development and implementation of
NL's corporate business strategies, plans and objectives.
(b) Consultation and assistance in management and conduct of corporate
affairs and corporate governance consistent with the Articles of
Incorporation and By-Laws of NL.
(c) Consultation and assistance in maintenance of financial records and
controls, including preparation and review of periodic financial
statements and reports to be filed with public and regulatory entities
and those required to be prepared for financial institutions or
pursuant to indentures and credit agreements.
(d) Consultation and assistance in cash management and in arranging
financing necessary to implement the business plans of NL.
(e) Consultation and assistance in tax management and administration
including; preparation and filing of tax returns, tax reporting,
examinations by government authorities and tax planning.
(f) Such other services as may be requested by NL or deemed necessary and
proper from time to time.
2. Miscellaneous Services. It is the intent of the parties hereto that Valhi
provide only the Valhi Services requested by NL in connection with routine
management, financial and administrative functions related to the ongoing
operations of NL and not with respect to special projects, including
corporate investments, acquisitions and divestitures. The parties hereto
contemplate that the Valhi Services rendered in connection with the conduct
of NL's business will be on a scale compared to that existing on the date
of this Agreement, adjusted for internal corporate growth or contraction,
but not for major corporate acquisitions or divestitures, and that
adjustments may be required to the terms of this Agreement in the event of
such major corporate acquisitions, divestitures or special projects. NL
will continue to bear all other costs required for outside services
including, but not limited to, the outside services of attorneys, auditors,
trustees, consultants, transfer agents and registrars, and it is expressly
understood that Valhi assumes no liability for any expenses or services
other than those stated in Section 1. In addition to the fee paid to Valhi
by NL for the Valhi Services provided pursuant to this Agreement, NL will
pay to Valhi the amount of out-of-pocket costs incurred by Valhi in
rendering such Valhi Services.
3. NL Services to be provided. NL agrees to make available the services of
Joseph S. Compofelice to act as Executive Vice President of Valhi and to
continue to devote such time to matters related to Valhi and affiliates of
Valhi as has been allocated in the past and is currently being devoted to
such matters (the "NL Services").
4. Net Fee for Services. NL agrees to pay to Valhi a net fee of $20,000.00
quarterly, commencing as of January 1, 1995, pursuant to this Agreement,
which net fee includes reimbursements of $25,000.00 for NL Services
performed in 1994.
5. Original Term. Subject to the provisions of Section 6 hereof, the original
term of this Agreement shall be from January 1, 1995 to December 31, 1995.
6. Extensions. This Agreement shall be extended on a quarter- to-quarter
basis after the expiration of its original term unless written notification
is given by Valhi or NL thirty (30) days in advance of the first day of
each successive quarter or unless it is superseded by a subsequent written
agreement of the parties hereto.
7. Limitation of Liability. In providing Valhi Services or NL Services
hereunder, Valhi and NL shall each have a duty to act, and to cause its
respective agents to act, in a reasonably prudent manner, but neither Valhi
nor NL nor any officer, director, employee or agent of Valhi or NL or their
respective affiliates shall be liable to the other party hereunder for any
error of judgment or mistake of law or for any loss incurred by such party
in connection with the matter to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on
the part of Valhi or NL, respectively.
8. Indemnification. Each party hereunder shall indemnify and hold harmless
the other party, its affiliates and their respective officers, directors
and employees from and against any and all losses, liabilities, claims,
damages, costs and expenses (including attorneys' fees and other expenses
of litigation) to which such party may become subject to arising out of the
corresponding Valhi Services or NL Services provided by Valhi or by NL
hereunder, provided that such indemnity shall not protect any such party
against any liability to which such person would otherwise be subject to by
reason of willful misfeasance, bad faith or gross negligence on the part of
Valhi or NL, respectively.
9. Further Assurances. Each of the parties will make, execute, acknowledge
and deliver such other instruments and documents, and take all such other
actions, as the other party may reasonably request and as may reasonably be
required in order to effectuate the purposes of this Agreement and to carry
out the terms hereof.
10. Notices. All communications hereunder shall be in writing and shall be
addressed, if intended for Valhi, to Three Lincoln Centre, 5430 LBJ
Freeway, Suite 1700, Dallas, Texas 75240, Attention: President, or such
other address as it shall have furnished to NL in writing, and if intended
for NL, to Two Greenspoint Plaza, 16825 Northchase Drive, Suite 1200,
Houston, Texas 77060, Attention: President, or such other address as it
shall have furnished to Valhi in writing.
11. Amendment and Modification. Neither this Agreement nor any term hereof may
be changed, waived, discharged or terminated other than by agreement in
writing signed by the parties hereto.
12. Successor and Assigns. This Agreement shall be binding upon and inure to
the benefit of Valhi and NL and their respective successors and assigns,
except that neither party may assign its rights under this Agreement
without the prior written consent of the other party.
13. Governing Law. This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
VALHI, INC.
By:_____________________________
Steven L. Watson
Vice President
NL INDUSTRIES, INC.
By:_____________________________
J. Landis Martin
President and Chief
Executive Officer
EXHIBIT 10.2
INTERCORPORATE SERVICES AGREEMENT
This INTERCORPORATE SERVICES AGREEMENT (the "Agreement"), effective as of
January 1, 1995, amends and supersedes that certain Intercorporate Services
Agreement dated as of January 1, 1994 by and between CONTRAN CORPORATION
("Contran"), a Delaware corporation, and NL INDUSTRIES, INC. ("Recipient"), a
New Jersey corporation.
W I T N E S S E T H:
WHEREAS, Harold C. Simmons, an employee of Contran and a director and the
Chairman of the Board of Recipient, performs certain advisory functions for
Recipient, which functions are unrelated to his function as a director and the
Chairman of the Board of Recipient, without direct compensation from Recipient;
and
WHEREAS, Recipient does not separately maintain the full internal
capability to perform all necessary advisory functions which Recipient requires;
and
WHEREAS, the cost of engaging the advisory services of someone possessing
Mr. Simmons expertise and the cost of maintaining the personnel necessary to
perform the functions provided for by this Agreement would exceed the fee set
forth in Section 3 of this Agreement and the terms of this Agreement are no less
favorable to Recipient than could otherwise be obtained from a third party for
comparable services; and
WHEREAS, Recipient desires to continue receiving the advisory services of
Harold C. Simmons and Contran is willing to continue to provide such services
under the terms of this Agreement.
NOW, THEREFORE, for and in consideration of the mutual premises,
representations and covenants herein contained, the parties hereto mutually
agree as follows:
1. Services to be Provided: Contran agrees to make available to Recipient,
upon request, the following services (the "Services") to be rendered by
Harold C. Simmons:
(a) Consultation and assistance in the development and implementation of
Recipient's corporate business strategies, plans and objectives.
(b) Such other services as may be requested by Recipient or deemed
necessary and proper from time to time.
(c) This Agreement does not apply to and the Services provided for
herein do not include any services which Harold C. Simmons may
provide to Recipient in his role as a director on Recipient's Board
of Directors, as Chairman of such Board of Directors or any other
activity related to such Board of Directors.
2. Miscellaneous Services: It is the intent of the parties hereto that
Contran provide only the Services requested by Recipient in connection
with routine functions related to the ongoing operations of Recipient and
not with respect to special projects, including corporate investments,
acquisitions and divestitures. The parties hereto contemplate that the
Services rendered in connection with the conduct of Recipient's business
will be on a scale compared to that existing on the date of this
Agreement, adjusted for internal corporate growth or contraction, but not
for major corporate acquisitions or divestitures, and that adjustments may
be required to the terms of this Agreement in the event of such major
corporate acquisitions, divestitures or special projects. Recipient will
continue to bear all other costs required for outside services including,
but not limited to, the outside services of attorneys, auditors, trustees,
consultants, transfer agents and registrars, and it is expressly
understood that Contran assumes no liability for any expenses or services
other than those stated in Section 1. In addition to the fee paid to
Contran by Recipient for the Services provided pursuant to this Agreement,
Recipient will pay to Contran the amount of out-of-pocket costs incurred
by Contran in rendering such Services.
3. Fee for Services: Recipient agrees to pay to Contran $100,000.00
quarterly, commencing as of January 1, 1995, pursuant to this Agreement.
4. Original Term: Subject to the provisions of Section 5 hereof, the
original term of this Agreement shall be from January 1, 1995 to December
31, 1995.
5. Extensions. This Agreement shall be extended on a quarter- to-quarter
basis after the expiration of its original term unless written
notification is given by Contran or Recipient thirty (30) days in advance
of the first day of each successive quarter or unless it is superseded by
a subsequent written agreement of the parties hereto.
6. Limitation of Liability. In providing its Services hereunder, Contran
shall have a duty to act, and to cause its agents to act, in a reasonably
prudent manner, but neither Contran nor any officer, director, employee or
agent of Contran or its affiliates shall be liable to Recipient for any
error of judgment or mistake of law or for any loss incurred by Recipient
in connection with the matter to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on
the part of Contran.
7. Indemnification of Contran by Recipient. Recipient shall indemnify and
hold harmless Contran, its affiliates and their respective officers,
directors and employees from and against any and all losses, liabilities,
claims, damages, costs and expenses (including attorneys' fees and other
expenses of litigation) to which such party may become subject to arising
out of the Services provided by Contran to Recipient hereunder, provided
that such indemnity shall not protect any such party against any liability
to which such person would otherwise be subject to by reason of willful
misfeasance, bad faith or gross negligence.
8. Further Assurances. Each of the parties will make, execute, acknowledge
and deliver such other instruments and documents, and take all such other
actions, as the other party may reasonably request and as may reasonably
be required in order to effectuate the purposes of this Agreement and to
carry out the terms hereof.
9. Notices. All communications hereunder shall be in writing and shall be
addressed, if intended for Contran, to Three Lincoln Centre, 5430 LBJ
Freeway, Suite 1700, Dallas, Texas 75240, Attention: President, or such
other address as it shall have furnished to Recipient in writing, and if
intended for Recipient, to Two Greenspoint Plaza, 16825 Northchase Drive,
Suite 1200, Houston, Texas 77060, Attention: President or such other
address as it shall have furnished to Contran in writing.
10. Amendment and Modification. Neither this Agreement nor any term hereof
may be changed, waived, discharged or terminated other than by agreement
in writing signed by the parties hereto.
11. Successor and Assigns: This Agreement shall be binding upon and inure to
the benefit of Contran and Recipient and their respective successors and
assigns, except that neither party may assign its rights under this
Agreement without the prior written consent of the other party.
12. Governing Law: This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
CONTRAN CORPORATION
By:_____________________________
Steven L. Watson
Vice President
NL INDUSTRIES, INC.
By:_____________________________
J. Landis Martin
President and
Chief Executive Officer
