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, 1996
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.)
16825 Northchase Drive, Suite 1200, Houston, Texas 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 6, 1996: 51,105,344
NL INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - December 31, 1995
and March 31, 1996 3-4
Consolidated Statements of Operations - Three
months ended March 31, 1995 and 1996 5
Consolidated Statement of Shareholders' Deficit
- Three months ended March 31, 1996 6
Consolidated Statements of Cash Flows - Three
months ended March 31, 1995 and 1996 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 6. Exhibits and Reports on Form 8-K 20
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS December 31, March 31,
1995 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 141,333 $ 113,058
Accounts and notes receivable 147,428 168,990
Refundable income taxes 4,941 1,801
Inventories 251,630 257,497
Prepaid expenses 3,217 6,184
Deferred income taxes 2,522 2,477
Total current assets 551,071 550,007
Other assets:
Marketable securities 20,944 24,176
Investment in joint ventures 185,893 184,612
Prepaid pension cost 22,576 23,591
Deferred income taxes 788 910
Other 31,165 28,679
Total other assets 261,366 261,968
Property and equipment:
Land 22,902 22,453
Buildings 166,349 164,445
Machinery and equipment 648,458 646,708
Mining properties 97,190 96,527
Construction in progress 11,187 11,967
946,086 942,100
Less accumulated depreciation and depletion 486,870 485,993
Net property and equipment 459,216 456,107
$1,271,653 $1,268,082
</TABLE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' DEFICIT December 31, March 31,
1995 1996
<S> <C> <C>
Current liabilities:
Notes payable $ 39,247 $ 37,968
Current maturities of long-term debt 43,369 43,986
Accounts payable and accrued liabilities 165,985 152,429
Payable to affiliates 10,181 10,031
Income taxes 40,088 39,494
Deferred income taxes 3,555 3,569
Total current liabilities 302,425 287,477
Noncurrent liabilities:
Long-term debt 740,334 760,624
Deferred income taxes 157,192 151,188
Accrued pension cost 69,311 62,742
Accrued postretirement benefits cost 60,235 59,687
Other 148,511 143,133
Total noncurrent liabilities 1,175,583 1,177,374
Minority interest 3,066 268
Shareholders' deficit:
Common stock 8,355 8,355
Additional paid-in capital 759,281 759,281
Adjustments:
Currency translation (126,934) (125,030)
Pension liabilities (1,908) (1,908)
Marketable securities (525) 1,575
Accumulated deficit (481,432) (473,097)
Treasury stock (366,258) (366,213)
Total shareholders' deficit (209,421) (197,037)
$1,271,653 $1,268,082
</TABLE>
Commitments and contingencies (Note 13)
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 1995 and 1996
(In thousands, except per share data)
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Revenues and other income:
Net sales $250,875 $240,440
Other, net 2,894 10,548
253,769 250,988
Costs and expenses:
Cost of sales 169,768 169,816
Selling, general and administrative 44,172 42,891
Interest 20,676 19,139
234,616 231,846
Income before income taxes and
minority interest 19,153 19,142
Income tax expense 5,746 5,740
Income before minority interest 13,407 13,402
Minority interest 345 (42)
Net income $ 13,062 $ 13,444
Net income per share of common stock $ .26 $ .26
Weighted average common and common equivalent
shares outstanding 51,176 51,510
</TABLE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
Three months ended March 31, 1996
(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, 1995 $8,355 $759,281 $(126,934) $(1,908) $ (525)
Net income - - - - -
Dividends - - - - -
Adjustments - - 1,904 - 2,100
Treasury stock reissued - - - - -
Balance at March 31, 1996 $8,355 $759,281 $(125,030) $(1,908) $1,575
</TABLE>
<TABLE>
<CAPTION>
Accumulated Treasury
deficit stock Total
<S> <C> <C> <C>
Balance at December 31, 1995 $(481,432) $(366,258) $(209,421)
Net income 13,444 - 13,444
Dividends (5,109) - (5,109)
Adjustments - - 4,004
Treasury stock reissued - 45 45
Balance at March 31, 1996 $(473,097) $(366,213) $(197,037)
</TABLE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 1995 and 1996
(In thousands)
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 13,062 $ 13,444
Depreciation, depletion and amortization 9,326 10,125
Noncash interest expense 4,646 5,026
Deferred income taxes 3,286 (4,065)
Other, net (603) (4,155)
29,717 20,375
Change in assets and liabilities:
Accounts and notes receivable (31,375) (24,052)
Inventories (2,115) (10,213)
Prepaid expenses (3,491) (3,433)
Accounts payable and accrued liabilities 5,587 (14,573)
Income taxes 129 3,153
Other, net (29) (2,514)
Marketable trading securities, net (762) -
Net cash used by operating activities (2,339) (31,257)
Cash flows from investing activities:
Capital expenditures (12,382) (12,250)
Purchase of minority interest - (5,168)
Investment in joint ventures, net (2,371) 1,379
Other, net 12 82
Net cash used by investing activities (14,741) (15,957)
</TABLE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Three months ended March 31, 1995 and 1996
(In thousands)
<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Cash flows from financing activities:
Indebtedness:
Borrowings $ 2,095 $ 35,079
Principal payments (12,543) (10,002)
Dividends - (5,109)
Other, net 5 (406)
Net cash provided (used) by financing
activities (10,443) 19,562
Cash and cash equivalents:
Net change from:
Operating, investing and financing activities (27,523) (27,652)
Currency translation 3,885 (623)
Balance at beginning of period 131,124 141,333
Balance at end of period $107,486 $113,058
Supplemental disclosures - cash paid for:
Interest, net of amounts capitalized $ 4,958 $6,557
Income taxes 2,188 6,637
</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 54% and 18%, respectively, of NL's
outstanding common stock. Contran holds, directly or through subsidiaries,
approximately 91% of Valhi's and 44% of Tremont's outstanding common stock.
The consolidated balance sheet of NL Industries, Inc. and Subsidiaries
(collectively, the "Company") at December 31, 1995 has been condensed from the
Company's audited consolidated financial statements at that date. The
consolidated balance sheet at March 31, 1996 and the consolidated statements of
operations, shareholders' deficit and cash flows for the interim periods ended
March 31, 1995 and 1996, 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 1996 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, 1995 (the "1995 Annual Report").
NOTE 2 - NET INCOME PER SHARE OF COMMON STOCK:
Net income per share of common stock is based on the weighted average
number of common shares and equivalents outstanding. Common stock equivalents,
consisting of nonqualified stock options, are excluded from the computation when
their effect 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,
1995 1996
(In thousands)
<S> <C> <C>
Net sales:
Kronos $217,328 $206,368
Rheox 33,547 34,072
$250,875 $240,440
Operating income:
Kronos $ 32,453 $ 29,472
Rheox 9,515 12,466
41,968 41,938
General corporate income (expense):
Securities earnings, net 2,469 1,307
Expenses, net (4,608) (4,964)
Interest expense (20,676) (19,139)
$ 19,153 $ 19,142
</TABLE>
NOTE 4 - INVENTORIES:
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
(In thousands)
<S> <C> <C>
Raw materials $ 35,075 $ 37,726
Work in process 9,132 9,899
Finished products 172,330 173,482
Supplies 35,093 36,390
$251,630 $257,497
</TABLE>
NOTE 5 - MARKETABLE SECURITIES AND SECURITIES TRANSACTIONS:
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
(In thousands)
<S> <C> <C>
Available-for-sale securities - noncurrent
marketable equity securities:
Unrealized gains $ 1,962 $ 3,403
Unrealized losses (2,770) (979)
Cost 21,752 21,752
Aggregate market $20,944 $24,176
</TABLE>
Net gains and losses from trading securities transactions are composed of:
<TABLE>
<CAPTION>
Three months ended
March 31,
1995 1996
(In thousands)
<S> <C> <C>
Unrealized gains $ 692 $ -
Realized losses (103) -
$ 589 $ -
</TABLE>
NOTE 6 - INVESTMENT IN JOINT VENTURES:
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
(In thousands)
<S> <C> <C>
TiO2 manufacturing joint venture $183,129 $181,900
Other 2,764 2,712
$185,893 $184,612
</TABLE>
NOTE 7 - OTHER NONCURRENT ASSETS:
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
(In thousands)
<S> <C> <C>
Intangible assets, net $11,803 $ 10,715
Deferred financing costs, net 13,199 12,128
Other 6,163 5,836
$31,165 $ 28,679
</TABLE>
NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
(In thousands)
<S> <C> <C>
Accounts payable $ 68,734 $ 53,805
Accrued liabilities:
Employee benefits 49,884 40,875
Environmental costs 6,000 6,000
Interest 6,633 14,234
Miscellaneous taxes 2,557 2,080
Other 32,177 35,435
97,251 98,624
$165,985 $152,429
</TABLE>
NOTE 9 - OTHER NONCURRENT LIABILITIES:
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
(In thousands)
<S> <C> <C>
Environmental costs $112,827 $111,630
Insurance claims and expenses 12,088 11,506
Employee benefits 13,148 12,390
Deferred technology fee income 8,456 5,720
Other 1,992 1,887
$148,511 $143,133
</TABLE>
NOTE 10 - NOTES PAYABLE AND LONG-TERM DEBT:
<TABLE>
<CAPTION>
December 31, March 31,
1995 1996
(In thousands)
<S> <C> <C>
Notes payable - Kronos (DM 56,000) $ 39,247 $ 37,968
Long-term debt:
NL Industries:
11.75% Senior Secured Notes $250,000 $250,000
13% Senior Secured Discount Notes 132,034 136,210
382,034 386,210
Kronos:
DM bank credit facility (DM 397,610 and
DM 447,610, respectively) 276,895 303,479
Joint venture term loan 73,286 69,429
Other 13,672 13,442
363,853 386,350
Rheox:
Bank term loan 37,263 31,534
Other 553 516
37,816 32,050
783,703 804,610
Less current maturities 43,369 43,986
$740,334 $760,624
</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,
1995 1996
(In thousands)
<S> <C> <C>
Expected tax expense $ 6,704 $ 6,700
Non-U.S. tax rates (1,045) (1,462)
Incremental tax on income of companies not included
in NL's consolidated U.S. federal income tax return 125 114
Valuation allowance (1,276) (709)
U.S. state income taxes 332 364
Other, net 906 733
Income tax expense $ 5,746 $ 5,740
</TABLE>
NOTE 12 - OTHER INCOME, NET:
<TABLE>
<CAPTION>
Three months ended
March 31,
1995 1996
(In thousands)
<S> <C> <C>
Securities earnings:
Interest and dividends $ 1,880 $1,307
Securities transactions 589 -
2,469 1,307
Pension curtailment gain - 4,791
Technology fee income 2,586 3,081
Currency transaction gains (losses), net (2,633) 1,046
Other, net 472 323
$ 2,894 $10,548
</TABLE>
The Company recognized a pension curtailment gain of $4.8 million in
the first quarter of 1996 resulting from the reduction of certain U.S. employee
pension benefits.
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 1995 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.
<TABLE>
<CAPTION>
Three months ended %
March 31, Change
1995 1996
(In millions)
<S> <C> <C> <C>
Net sales:
Kronos $217.4 $206.3 -5%
Rheox 33.5 34.1 +2%
$250.9 $240.4 -4%
Operating income:
Kronos $ 32.5 $ 29.5 -9%
Rheox 9.5 12.4 +31%
$ 42.0 $ 41.9 N/C
Percent changes in TiO2:
Sales volume -11%
Average selling prices +5%
(in billing currencies)
</TABLE>
Kronos' TiO2 operating income in the first quarter of 1996 decreased from
the first quarter of 1995 as higher average selling prices were more than offset
by lower production and sales volumes. Kronos' first quarter sales volumes
declined 11% from the record sales volumes of the first quarter of 1995. Slow
economic activity in markets in which Kronos sells TiO2 contributed to continued
soft demand during the first quarter of 1996. While average TiO2 selling prices
for the first quarter of 1996 were 5% higher than the first quarter of 1995,
average prices for the quarter were 3% lower than the fourth quarter of 1995.
Kronos anticipates TiO2 demand will remain soft through at least the first half
of 1996.
Rheox's operating results for the first quarter of 1996 improved compared
to the first quarter of 1995 on higher sales volumes and selling prices and
included a $2.7 million gain related to the curtailment of certain U.S. employee
pension benefits.
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 1996 by
$5 million compared to the first quarter of 1995.
The following table sets forth certain information regarding general
corporate income (expense).
<TABLE>
<CAPTION>
Three months ended
March 31, Difference
1995 1996
(In millions)
<S> <C> <C> <C>
Securities earnings $ 2.5 $ 1.3 $(1.2)
Corporate expenses, net (4.6) (5.0) (.4)
Interest expense (20.7) (19.1) 1.6
$(22.8) $(22.8) $ -
</TABLE>
Securities earnings were lower due to lower average balances available for
investment. Interest expense was lower primarily due to lower variable interest
rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated cash flows from operating, investing and
financing activities for the three months ended March 31, 1995 and 1996 are
presented below.
<TABLE>
<CAPTION>
Three months ended
March 31,
1995 1996
(In millions)
<S> <C> <C>
Net cash provided (used) by:
Operating activities $ (2.3) $(31.3)
Investing activities (14.7) (16.0)
Financing activities (10.5) 19.6
Net cash used by operating, investing and
financing activities $(27.5) $(27.7)
</TABLE>
The TiO2 industry is cyclical, with a peak in selling prices in early 1990
and a trough in the third quarter of 1993. Although selling prices increased
significantly since the 1993 trough, prices began declining during the last half
of 1995. The Company's cash flows from operations declined during the first
quarter of 1996 primarily due to changes in the Company's inventories,
receivables and payables (excluding the effect of currency translation).
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. The Company has reached an agreement
in principle with the German tax authorities regarding such examinations which
will resolve certain significant tax contingencies for years through 1990. The
Company expects to finalize assessments and pay tax deficiencies of
approximately DM 50 million ($34 million at March 31, 1996), including interest,
in settlement of these issues during 1996. Certain other German tax
contingencies remain outstanding and will continue to be litigated. Although
the Company believes that it will ultimately prevail, the Company has granted a
DM 100 million ($68 million at March 31, 1996) lien on its Nordenham, Germany
TiO2 plant in favor of the German tax authorities until the litigation is
resolved. No assurance can be given that this litigation will be resolved in
the Company's favor in view of the inherent uncertainties involved in court
rulings. 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.
Rheox acquired the minority interests of its non-U.S. subsidiaries for $5.2
million in the first quarter of 1996.
The Company borrowed DM 50 million ($35 million when borrowed) under its DM
credit facility during the first quarter of 1996. Repayments of indebtedness in
the same period included payments of $5.8 million on the Rheox bank term loan
and $3.9 million on the joint venture term loan.
In the first quarter of 1996, the Company resumed its quarterly dividend by
paying a $.10 per share dividend to shareholders aggregating $5.1 million. The
Company's ability to continue paying dividends in the near term is contingent
upon, among other things, meeting certain covenants of its Senior Notes.
At March 31, 1996, the Company had cash and cash equivalents aggregating
$113 million (27% held by non-U.S. subsidiaries) including restricted cash and
cash equivalents of $11 million. The Company's subsidiaries had $15 million and
$152 million available for borrowing at March 31, 1996 under existing U.S. and
non-U.S. credit facilities, respectively, of which $85 million of the non-U.S.
amount is available only for (i) permanently reducing the DM term loan or (ii)
paying future German income tax assessments, as described above.
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. On a quarterly
basis, the Company evaluates the potential range of its liability at sites where
it has been named as a PRP or defendant. The Company believes it has adequate
accruals ($100 million at March 31, 1996 with respect to domestic sites) 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 $165 million. The Company's
estimates of such liabilities have not been discounted to present value, and the
Company has not recognized any potential insurance recoveries. 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. Although, no assurance can be given that the
Company will not incur future liability in respect of this litigation, based on,
among other things, the results of such litigation to date, the Company believes
that the pending lead pigment and paint litigation is without merit. The
Company has not accrued any amounts for such pending litigation. Liability that
may result, if any, cannot be reasonably estimated. 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 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.
The Company periodically evaluates its liquidity requirements, alternative
uses of capital, capital needs and availability of resources in view of, among
other things, its debt service and 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 reduce, refinance, repurchase or
restructure indebtedness, raise additional capital, modify its dividend policy,
restructure ownership interests, sell interests in subsidiaries or other assets,
or take a combination of such steps or other steps to manage its liquidity and
capital resources. In the normal course of its business, the Company may also
review opportunities for the acquisition of businesses and assets in the
chemicals industry. In the event of any future acquisition, the Company may
consider using available cash, issuing equity securities or increasing its
indebtedness to the extent permitted by the agreements governing the Company's
existing debt.
The statements contained in this Report on Form 10-Q ("Quarterly Report")
which are not historical facts, including, but not limited to, statements found
under the captions "Results of Operations" and "Liquidity and Capital Resources"
above, are forward-looking statements that involve a number of risks and
uncertainties. The actual results of the future events described in such
forward-looking statements in this Quarterly Report could differ materially from
those stated in such forward-looking statements. Among the factors that could
cause actual results to differ materially are the risks and uncertainties
discussed in this Quarterly Report and in the 1995 Annual Report, including,
without limitation, the portions of such reports under the captions referenced
above, and the uncertainties set forth from time to time in the Company's other
public reports and filings and public statements.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the 1995 Annual Report for descriptions of certain
previously-reported legal proceedings.
Gates v. American Cyanamid Co., et al. (I1996-2114). In April 1996,
the Company was served with a complaint filed in New York state court which
seeks compensatory and punitive damages for personal injury purportedly caused
by lead paint and alleges causes of action against the Company and other former
lead pigment manufacturers and the Lead Industries Association for negligence,
strict products liability, fraud, concert of action, civil conspiracy,
enterprise liability, market share liability and alternative liability. The
complaint also asserts causes of action against the landlords of the apartments
in which plaintiff has lived since 1977. The Company intends to file an answer
denying plaintiff's allegations.
Hines v. Gates, et al. (96-616161). In May 1996, the Company was served
with a complaint filed in Michigan state court seeking recovery for personal
injury purportedly caused by lead paint and alleging causes of action on behalf
of plaintiff against the Company, other former lead pigment manufacturers and
others for negligence, negligent failure to warn, breach of warranty,
alternative liability and concert of action. The complaint also asserts causes
of action against plaintiff's landlord. The Company intends to file an answer
denying plaintiff's allegations.
Skipworth v. Sherwin-Williams Co., et al. In April 1996, the
Pennsylvania Supreme Court granted a petition to hear plaintiffs' appeal from
the appellate court decision in defendants' favor.
City of New York, et al. v. Lead Industries Association, et al. In
February 1996, defendants' motion for summary judgment on the basis that the
fraud claim is time-barred was denied. Defendants have appealed.
NL Industries, Inc. v. Commercial Union Insurance Cos., et al. On
remand from the Court of Appeals, the trial court in April 1996 granted the
Company's motion for summary judgment, finding that Commercial Union had a duty
to defend the Company in the four lead paint cases which were the subject of the
Company's second amended complaint. The court also issued a partial ruling on
Commercial Union's motion for summary judgment in which it sought allocation of
defense costs and contribution from the Company and two other insurance carriers
in connection with the three lead paint actions on which the court had granted
the Company summary judgment in 1991. The court ruled that Commercial Union is
entitled to receive such contribution from the Company and the two carriers, but
reserved ruling with respect to the relative contributions to be made by each of
the parties, including contributions by the Company that may be required with
respect to periods in which it was self-insured and contributions from one
carrier which were reinsured by a former subsidiary of the Company, the
reinsurance costs of which the Company may ultimately be required to bear.
Portland, Oregon smelter site. The U.S. EPA has issued a proposed
Record of Decision Amendment changing portions of the cleanup remedy selected
for the site. The U.S. EPA estimates the cost of the proposed remedy to be from
$10 million to $13 million.
People of the State of Illinois v. NL Industries, Inc., et al. The
Appeals Court has granted the State's motion to reconsider the Court's
affirmance of the dismissal of this case. In addition, the U.S. EPA has issued
an order to the Company to perform a removal action at the Company's former
facility involved in the State of Illinois case. The Company has notified the
U.S. EPA that it intends to comply with the order.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)EXHIBITS
27.1 - Financial Data Schedule for the three-month period ended
March 31, 1996.
(b)REPORTS ON FORM 8-K
Reports on Form 8-K for the quarter ended March 31, 1996 and through
the date of this report:
January 25, 1996 - reported Items 5 and 7.
February 15, 1996 - reported Items 5 and 7.
April 19, 1996 - 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 7, 1996 By /s/ Joseph S. Compofelice
Joseph S. Compofelice
Vice President and
Chief Financial Officer
Date: May 7, 1996 By /s/ Dennis G. Newkirk
Dennis G. Newkirk
Vice President and Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NL
INDUSTRIES INC.'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 31, 1996, 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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 113,058
<SECURITIES> 0
<RECEIVABLES> 155,311
<ALLOWANCES> 3,979
<INVENTORY> 257,497
<CURRENT-ASSETS> 550,007
<PP&E> 942,100
<DEPRECIATION> 485,993
<TOTAL-ASSETS> 1,268,082
<CURRENT-LIABILITIES> 287,477
<BONDS> 760,624
8,355
0
<COMMON> 0
<OTHER-SE> (205,392)
<TOTAL-LIABILITY-AND-EQUITY> 1,268,082
<SALES> 240,440
<TOTAL-REVENUES> 240,440
<CGS> 169,816
<TOTAL-COSTS> 169,816
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 89
<INTEREST-EXPENSE> 19,139
<INCOME-PRETAX> 19,142
<INCOME-TAX> (5,740)
<INCOME-CONTINUING> 13,444
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,444
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
