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, 1997
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: (281) 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 14, 1997: 51,144,014
<PAGE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - December 31, 1996
and March 31, 1997 3-4
Consolidated Statements of Operations - Three
months ended March 31, 1996 and 1997 5
Consolidated Statement of Shareholders' Deficit
- Three months ended March 31, 1997 6
Consolidated Statements of Cash Flows - Three
months ended March 31, 1996 and 1997 7-8
Notes to Consolidated Financial Statements 9-13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17-18
Item 6. Exhibits and Reports on Form 8-K 19
- 2 -
<PAGE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
December 31, March 31,
ASSETS 1996 1997
------------ ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents, including
restricted cash of $10,895 and $9,343 ......... $ 114,115 $ 77,662
Accounts and notes receivable .................. 138,538 162,547
Refundable income taxes ........................ 9,267 3,761
Inventories .................................... 232,510 194,033
Prepaid expenses ............................... 4,219 5,485
Deferred income taxes .......................... 1,597 1,234
---------- ----------
Total current assets ....................... 500,246 444,722
---------- ----------
Other assets:
Marketable securities .......................... 23,718 25,297
Investment in joint ventures ................... 181,479 179,347
Prepaid pension cost ........................... 24,821 24,898
Deferred income taxes .......................... 223 223
Other .......................................... 24,825 25,634
---------- ----------
Total other assets ......................... 255,066 255,399
---------- ----------
Property and equipment:
Land ........................................... 21,963 20,589
Buildings ...................................... 165,479 157,246
Machinery and equipment ........................ 660,333 628,269
Mining properties .............................. 95,891 94,062
Construction in progress ....................... 13,231 13,360
---------- ----------
956,897 913,526
Less accumulated depreciation and depletion .... 490,851 472,279
---------- ----------
Net property and equipment ................. 466,046 441,247
---------- ----------
$1,221,358 $1,141,368
========== ==========
</TABLE>
- 3 -
<PAGE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands)
<TABLE>
<CAPTION>
December 31, March 31,
LIABILITIES AND SHAREHOLDERS' DEFICIT 1996 1997
------------- ------------
<S> <C> <C>
Current liabilities:
Notes payable ................................ $ 25,732 $ 23,776
Current maturities of long-term debt ......... 91,946 31,626
Accounts payable and accrued liabilities ..... 153,904 150,733
Payable to affiliates ........................ 10,204 9,619
Income taxes ................................. 5,664 5,860
Deferred income taxes ........................ 2,895 2,892
----------- -----------
Total current liabilities ................ 290,345 224,506
----------- -----------
Noncurrent liabilities:
Long-term debt ............................... 737,100 746,605
Deferred income taxes ........................ 151,221 143,239
Accrued pension cost ......................... 57,941 54,093
Accrued postretirement benefits cost ......... 55,935 54,822
Other ........................................ 132,048 155,061
----------- -----------
Total noncurrent liabilities ............. 1,134,245 1,153,820
----------- -----------
Minority interest .............................. 249 237
Shareholders' deficit:
Common stock ................................. 8,355 8,355
Additional paid-in capital ................... 759,281 759,281
Adjustments:
Currency translation ....................... (118,629) (117,879)
Pension liabilities ........................ (1,822) (1,822)
Marketable securities ...................... 1,278 2,304
Accumulated deficit .......................... (485,948) (521,669)
Treasury stock ............................... (365,996) (365,765)
----------- -----------
Total shareholders' deficit .............. (203,481) (237,195)
----------- -----------
$ 1,221,358 $ 1,141,368
=========== ===========
</TABLE>
Commitments and contingencies (Note 13)
See accompanying notes to consolidated financial statements.
- 4 -
<PAGE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 1996 and 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Revenues and other income:
Net sales ...................................... $ 240,440 $ 239,476
Other, net ..................................... 10,548 2,242
--------- ---------
250,988 241,718
--------- ---------
Costs and expenses:
Cost of sales .................................. 169,816 185,035
Selling, general and administrative ............ 42,891 71,146
Interest ....................................... 19,139 18,958
--------- ---------
231,846 275,139
--------- ---------
Income (loss) before income taxes and
minority interest ......................... 19,142 (33,421)
Income tax expense ............................... 5,740 2,292
--------- ---------
Income (loss) before minority interest ..... 13,402 (35,713)
Minority interest ................................ (42) 8
--------- ---------
Net income (loss) .......................... $ 13,444 $ (35,721)
========= =========
Net income (loss) per share of common stock ...... $ .26 $ (.70)
========= =========
Weighted average common and common equivalent
shares outstanding .............................. 51,510 51,144
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
- 5 -
<PAGE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT
Three months ended March 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Adjustments
Additional -------------------------------------
Common paid-in Currency Pension Marketable Accumulated Treasury
stock capital translation liabilities securities deficit stock Total
--------- ---------- ----------- ----------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ 8,355 $ 759,281 $(118,629) $ (1,822) $ 1,278 $(485,948) $(365,996) $(203,481)
Net loss ................... - - - - - (35,721) - (35,721)
Adjustments ................ - - 750 - 1,026 - - 1,776
Treasury stock reissued .... - - - - - - 231 231
--------- --------- --------- --------- --------- --------- --------- ---------
Balance at March 31, 1997 .. $ 8,355 $ 759,281 $(117,879) $ (1,822) $ 2,304 $(521,669) $(365,765) $(237,195)
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
- 6 -
<PAGE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 1996 and 1997
(In thousands)
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................ $ 13,444 $(35,721)
Depreciation, depletion and amortization ......... 10,125 9,786
Noncash interest expense ......................... 5,026 5,483
Deferred income taxes ............................ (4,065) (198)
Change in accounting for environmental
remediation liabilities ......................... - 30,000
Other, net ....................................... (4,155) (1,990)
-------- --------
20,375 7,360
Change in assets and liabilities:
Accounts and notes receivable .................. (24,052) (30,706)
Inventories .................................... (10,213) 28,377
Prepaid expenses ............................... (3,433) (1,478)
Accounts payable and accrued liabilities ....... (14,573) 57
Income taxes ................................... 3,153 6,335
Other, net ..................................... (2,514) (2,633)
-------- --------
Net cash provided (used) by operating
activities .................................. (31,257) 7,312
-------- --------
Cash flows from investing activities:
Capital expenditures ............................. (12,250) (8,868)
Purchase of minority interest .................... (5,168) -
Investment in joint ventures, net ................ 1,379 2,379
Other, net ....................................... 82 64
-------- --------
Net cash used by investing activities ........ (15,957) (6,425)
-------- --------
</TABLE>
- 7 -
<PAGE>
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Three months ended March 31, 1996 and 1997
(In thousands)
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Cash flows from financing activities:
Indebtedness:
Borrowings ....................................... $ 35,079 $ 140,000
Principal payments ............................... (10,002) (172,577)
Deferred financing costs ......................... - (3,434)
Dividends .......................................... (5,109) -
Other, net ......................................... (406) 231
--------- ---------
Net cash provided (used) by financing
activities .................................... 19,562 (35,780)
--------- ---------
Cash and cash equivalents:
Net change from:
Operating, investing and financing activities .... (27,652) (34,893)
Currency translation ............................. (623) (1,560)
Balance at beginning of period ..................... 141,333 114,115
--------- ---------
Balance at end of period ........................... $ 113,058 $ 77,662
========= =========
Supplemental disclosures - cash paid (received) for:
Interest, net of amounts capitalized ............... $ 6,557 $ 7,153
Income taxes, net .................................. 6,637 (4,385)
</TABLE>
See accompanying notes to consolidated financial statements.
- 8 -
<PAGE>
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 approximately 56% and 18%, respectively,
of NL's outstanding common stock, and together may be deemed to control NL.
Contran and its subsidiaries and other entities related to Harold C. Simmons
hold approximately 91% of Valhi's and 45% of Tremont's outstanding common stock.
The consolidated balance sheet of NL Industries, Inc. and Subsidiaries
(collectively, the "Company") at December 31, 1996 has been condensed from the
Company's audited consolidated financial statements at that date. The
consolidated balance sheet at March 31, 1997 and the consolidated statements of
operations, shareholders' deficit and cash flows for the interim periods ended
March 31, 1996 and 1997 have been prepared by the Company, without audit. In the
opinion of management, all 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. 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, 1996 (the "1996 Annual Report").
The Company adopted a new method of accounting as required by the AICPA's
Statement of Position ("SOP") No. 96-1, "Environmental Remediation Liabilities,"
in the first quarter of 1997. The SOP, among other things, expands the types of
costs which must be considered in determining environmental remediation
accruals. As a result of adopting the SOP, the Company recognized a noncash
cumulative charge of $30 million in the first quarter of 1997. The charge is not
expected to materially change the Company's 1997 income tax expense because the
Company believes the resulting deferred income tax asset does not currently
satisfy the more-likely-than-not realization criteria and, accordingly, the
Company has established an offsetting valuation allowance. Such charge is
comprised primarily of estimated future undiscounted expenditures associated
with managing and monitoring existing environmental remediation sites. The
expenditures consist principally of legal and professional fees, but do not
include litigation defense costs with respect to situations in which the Company
asserts that no liability exists. Previously, such expenditures were expensed as
incurred.
- 9 -
<PAGE>
Note 2 - Net income (loss) per share of common stock:
Net income (loss) 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. The Company will retroactively
adopt Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share," effective December 31, 1997. Basic earnings per share pursuant to
SFAS No. 128 will not be materially different from earnings per share presented
herein and diluted earnings per share pursuant to SFAS No. 128 is not expected
to be materially different from basic earnings per share.
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,
--------------------------
1996 1997
--------- ---------
(In thousands)
<S> <C> <C>
Net sales:
Kronos ..................................... $ 206,368 $ 204,389
Rheox ...................................... 34,072 35,087
--------- ---------
$ 240,440 $ 239,476
========= =========
Operating income:
Kronos ..................................... $ 29,472 $ 8,689
Rheox ...................................... 12,466 10,136
--------- ---------
41,938 18,825
General corporate income (expense):
Securities earnings, net ................... 1,307 699
Expenses, net .............................. (4,964) (33,987)
Interest expense ........................... (19,139) (18,958)
--------- ---------
$ 19,142 $ (33,421)
========= =========
</TABLE>
Corporate expenses, net increased in the first quarter of 1997 due to the
$30 million noncash charge related to the adoption of a new method of accounting
for certain environmental remediation costs, as described in Note 1.
Note 4 - Inventories:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ ---------
(In thousands)
<S> <C> <C>
Raw materials ............................ $ 43,284 $ 28,529
Work in process .......................... 10,356 10,088
Finished products ........................ 142,091 121,149
Supplies ................................. 36,779 34,267
-------- --------
$232,510 $194,033
======== ========
</TABLE>
- 10 -
<PAGE>
Note 5 - Marketable securities:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ ---------
(In thousands)
<S> <C> <C>
Available-for-sale securities -
noncurrent marketable equity securities:
Unrealized gains $ 3,516 $ 4,933
Unrealized losses (1,550) (1,388)
Cost 21,752 21,752
------- -------
Aggregate market $23,718 $25,297
======= =======
</TABLE>
Note 6 - Investment in joint ventures:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ ---------
(In thousands)
<S> <C> <C>
TiO2 manufacturing joint venture ............... $179,195 $176,816
Other .......................................... 2,284 2,531
-------- --------
$181,479 $179,347
======== ========
</TABLE>
Note 7 - Other noncurrent assets:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ ---------
(In thousands)
<S> <C> <C>
Intangible assets, net ......................... $ 7,939 $ 6,683
Deferred financing costs, net .................. 9,791 12,144
Other .......................................... 7,095 6,807
------- -------
$24,825 $25,634
======= =======
</TABLE>
Note 8 - Accounts payable and accrued liabilities:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ ---------
(In thousands)
<S> <C> <C>
Accounts payable ......................... $ 60,648 $ 52,390
-------- --------
Accrued liabilities:
Employee benefits ...................... 34,618 31,437
Environmental costs .................... 6,000 9,000
Interest ............................... 9,429 14,890
Miscellaneous taxes .................... 4,073 3,736
Other .................................. 39,136 39,280
-------- --------
93,256 98,343
-------- --------
$153,904 $150,733
======== ========
</TABLE>
- 11 -
<PAGE>
Note 9 - Other noncurrent liabilities:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ ---------
(In thousands)
<S> <C> <C>
Environmental costs .......................... $106,849 $130,918
Employee benefits ............................ 11,960 11,087
Insurance claims and expenses ................ 11,673 11,603
Other ........................................ 1,566 1,453
-------- --------
$132,048 $155,061
======== ========
</TABLE>
Note 10 - Notes payable and long-term debt:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ ---------
(In thousands)
<S> <C> <C>
Notes payable - Kronos (DM 40,000) ................. $ 25,732 $ 23,776
======== ========
Long-term debt:
NL Industries:
11.75% Senior Secured Notes .................... $250,000 $250,000
13% Senior Secured Discount Notes .............. 149,756 154,493
-------- --------
399,756 404,493
-------- --------
Kronos:
DM bank credit facility (DM 539,971 and
DM 288,322, respectively) ..................... 347,362 171,379
Joint venture term loan ........................ 57,858 54,000
Other .......................................... 9,125 8,111
-------- --------
414,345 233,490
-------- --------
Rheox:
Bank term loan ................................. 14,659 140,000
Other .......................................... 286 248
-------- --------
14,945 140,248
-------- --------
829,046 778,231
Less current maturities ............................ 91,946 31,626
-------- --------
$737,100 $746,605
======== ========
</TABLE>
- 12 -
<PAGE>
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,
--------------------
1996 1997
-------- --------
(In thousands)
<S> <C> <C>
Expected tax expense (benefit) ......................... $ 6,700 $(11,697)
Non-U.S. tax rates ..................................... (1,462) (207)
Incremental tax on income of companies not included
in NL's consolidated U.S. federal income tax return ... 114 500
Valuation allowance .................................... (709) 12,942
U.S. state income taxes ................................ 364 450
Other, net ............................................. 733 304
-------- --------
Income tax expense ............................... $ 5,740 $ 2,292
======== ========
</TABLE>
Note 12 - Other income, net:
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------
1996 1997
------- -------
(In thousands)
<S> <C> <C>
Interest and dividends ......................... $ 1,307 $ 699
Pension curtailment gain ....................... 4,554 -
Technology fee income .......................... 3,081 -
Currency transaction gains, net ................ 1,046 517
Other, net ..................................... 560 1,026
------- -------
$10,548 $ 2,242
======= =======
</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)
Management's Discussion and Analysis of Financial Condition and Results of
Operations, (ii) Part II, Item 1 -"Legal Proceedings" and (iii) the 1996 Annual
Report.
- 13 -
<PAGE>
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
-------------------- ------
1996 1997
------ ------
(In millions)
<S> <C> <C> <C>
Net sales:
Kronos ............................... $206.3 $204.4 -1%
Rheox ................................ 34.1 35.1 +3%
------ ------
$240.4 $239.5 N/C
====== ======
Operating income:
Kronos ............................... $ 29.5 $ 8.7 -70%
Rheox ................................ 12.4 10.1 -19%
------ ------
$ 41.9 $ 18.8 -55%
====== ======
Percent changes in TiO2:
Sales volume ......................... +22%
Average selling prices
(in billing currencies).............. -16%
</TABLE>
Kronos' TiO2 operating income in the first quarter of 1997 decreased from
the first quarter of 1996 as lower average selling prices were only slightly
offset by higher production and sales volumes. Kronos' record first quarter
sales volumes improved 22% from the first quarter of 1996, reflecting improved
demand for TiO2 in each of Kronos' major markets. Average TiO2 selling prices
for the first quarter of 1997 were 16% lower than the first quarter of 1996, and
average prices for the quarter were 2% lower than the fourth quarter of 1996.
The Company expects TiO2 prices will begin to increase during the second quarter
of 1997 as the impact of previously-announced price increases begin to take
effect. Kronos anticipates its TiO2 sales volume will exceed year-earlier levels
through the second quarter of 1997 and Kronos expects sales volumes for
full-year 1997 to be slightly higher than full-year 1996.
Kronos expects its full-year 1997 operating income will be below that of
1996, primarily because of lower anticipated average TiO2 prices for 1997
compared to 1996. Kronos' selling, general and administrative expenses decreased
in the first quarter of 1997 due to favorable effects of foreign currency
translation, partially offset by higher distribution expenses associated with
higher first-quarter 1997 sales volume. Kronos' cost of sales as a percentage of
net sales increased in the first quarter of 1997 due to lower average prices in
the first quarter of 1997.
Rheox's operating results for the first quarter of 1997 improved slightly
compared to the first quarter of 1996 on slightly higher sales volumes,
excluding
- 14 -
<PAGE>
a first-quarter 1996 $2.7 million gain related to the curtailment of certain
U.S. employee pension benefits. Rheox's cost of sales increased in the first
quarter of 1997 over the prior-year period primarily due to slightly higher
sales volume, and cost of sales as a percentage of net sales was comparable to
the 1996 period. Selling, general and administrative expenses increased in the
first quarter of 1997 compared to the first quarter of 1996 primarily due to
higher variable compensation expense.
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 first quarter of 1997 by
$8 million compared to the first quarter of 1996.
The following table sets forth certain information regarding general
corporate income (expense).
<TABLE>
<CAPTION>
Three months ended
March 31, Difference
--------------------- ----------
1996 1997
------ ------
(In millions)
<S> <C> <C> <C>
Securities earnings .................. $ 1.3 $ .7 $ (.6)
Corporate expenses, net .............. (5.0) (34.0) (29.0)
Interest expense ..................... (19.1) (19.0) .1
------ ------ ------
$(22.8) $(52.3) $(29.5)
====== ====== ======
</TABLE>
Securities earnings declined due to lower average balances available for
investment. Corporate expense, net in the first quarter of 1997 was higher than
the comparable period in 1996 due to the $30 million noncash charge related to
the Company's adoption of SOP No. 96-1, "Environmental Remediation Liabilities."
See Note 1 to the Consolidated Financial Statements. This charge is included in
selling, general and administrative expense in the Company's consolidated
statements of operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated cash flows from operating, investing and
financing activities for the three months ended March 31, 1996 and 1997 are
presented below.
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------
1996 1997
------- -------
(In millions)
<S> <C> <C>
Net cash provided (used) by:
Operating activities ................................. $ (31.3) $ 7.3
Investing activities ................................. (16.0) (6.4)
Financing activities ................................. 19.6 (35.8)
------- -------
Net cash used by operating, investing and
financing activities ............................ $ (27.7) $ (34.9)
======= =======
</TABLE>
- 15 -
<PAGE>
The TiO2 industry is cyclical and changes in economic conditions within
the industry significantly impact the earnings and operating cash flows of the
Company. Cash flows from operations before change in assets and liabilities in
the 1997 period declined from the comparable period in 1996 due to lower
operating income. Changes in the Company's inventories, receivables and payables
(excluding the effect of currency translation) used cash in both the first
quarter of 1996 and 1997; however, the cash used in the first quarter of 1997
was significantly less than the first quarter of 1996 due to cash provided from
reductions in inventory levels in the 1997 period.
Certain of the Company's income tax returns in various U.S. and non-U.S.
jurisdictions are being examined and tax authorities have proposed or may
propose tax deficiencies. The Company has previously reached an agreement with
the German tax authorities, and paid certain tax deficiencies of approximately
DM 44 million ($28 million when paid), including interest, which resolved
significant tax contingencies for years through 1990. Certain other significant
German tax contingencies remain outstanding and will continue to be litigated.
The Company has received certain tax assessments aggregating DM 130 million ($77
million), including interest, for years through 1996 and expects to receive tax
assessments for an additional DM 20 million ($12 million) related to these
remaining tax contingencies. No payments of tax or interest deficiencies related
to these assessments will be required until the litigation is resolved, which
the Company anticipates may take approximately two to five years. Although the
Company believes that it will ultimately prevail, the Company has granted a DM
100 million ($59 million at March 31, 1997) 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 proceedings. 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.
In order to improve its near-term liquidity, the Company refinanced its
Rheox subsidiary during January 1997, obtaining a net $125 million of new
long-term financing. The net proceeds, along with other available funds, were
used to prepay DM 207 million ($127 million when paid) of the Company's DM term
loan and to repay DM 43 million ($26 million when paid) of the Company's DM
revolving credit facility. As a result of the refinancing and prepayment, the
Company's aggregate scheduled debt payments for 1997 and 1998 decreased by $103
million ($64 million in 1997 and $39 million in 1998). In connection with the
prepayment, the Company and its lenders modified certain financial covenants of
the DM credit agreement and NL guaranteed the facility. At March 31, 1997, the
Company was in compliance with all financial covenants governing its debt
agreements.
In addition to the above refinancing and prepayment, the Company repaid
$3.9 million of the joint venture term loan in the first quarter of 1997.
At March 31, 1997, the Company had cash and cash equivalents aggregating
$78 million (51% held by non-U.S. subsidiaries), including restricted cash and
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cash equivalents of $9 million. The Company's subsidiaries had $9 million and
$94 million available for borrowing at March 31, 1997 under existing U.S. and
non-U.S. credit facilities, respectively.
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, mining locations and facilities
currently or previously owned, operated or used by the Company, certain of which
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
($140 million at March 31, 1997) for reasonably estimable costs of such matters,
but the Company's ultimate liability may be affected by a number of factors,
including changes in remedial alternatives and costs and the allocations of such
costs among PRPs. It is not possible to estimate the range of costs for certain
sites. 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 $185
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. There is no assurance that the Company will not
incur future liability in respect of this pending litigation in view of the
inherent uncertainties involved in court and jury rulings in pending and
possible future cases. However, 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 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
in the past has sought, and in the future may seek, to reduce, refinance,
repurchase or restructure indebtedness, raise additional capital, issue
additional securities,
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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 review opportunities for the acquisition, divestiture,
joint venture or other business combinations in the chemicals industry. In the
event of any such transactions, 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 1996 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 1996 Annual Report for descriptions of certain
previously-reported legal proceedings.
In April 1997 the Quebec Court of Appeals dismissed the Canadian
Fisheries Act case (previously reported at page 9 of the 1996 Annual Report)
against one of the individual defendants. In May 1997 the Crown's counsel filed
an order of nolle prosequi effectively terminating the matter as against Kronos
Canada, Inc. and the remaining individual defendant. In May 1998 the matter will
be expunged from the records as if it had never been brought. Kronos Canada and
the individual defendant have agreed not to seek damages for malicious or
improper prosecution.
Ritchie v. NL Industries, et al. (No. 5:96-CV-166). The case was
remanded to state court in April 1997.
In April 1997 the Company was served with a complaint in Parker v. NL
Industries, et al. (Circuit Court, Baltimore City, Maryland, No. 97085060
CC915). Plaintiff, now an adult, and his wife, seek compensatory and punitive
damages from the Company, another former manufacturer of lead paint and a local
paint retailer, based on claims of negligence, strict liability and fraud, for
plaintiff's alleged ingestion of lead paint as a child. In May 1997 the Company
removed the case to federal court.
In March 1997 the Company was served with a complaint filed in the
Fifth Judicial District Court of Cass County, Texas, on behalf of approximately
4,000 plaintiffs and their spouses alleging injury due to exposure to asbestos
and
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seeking compensatory and punitive damages. The Company has filed an answer
denying the material allegations. (Ernest Hughes, et al. v. Owens-Corning
Fiberglass, Corporation, et al., No. 97-C-051).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 - Executive severance agreement effective as of July 24, 1996
by and between the Registrant and J. Landis Martin.
10.2 - Intercorporate Services Agreement by and between Contran
Corporation and the Registrant effective as of January 1, 1997.
10.3 - Intercorporate Services Agreement by and between Valhi, Inc.
and the Registrant effective as of January 1, 1997.
10.4 - Intercorporate Services Agreement by and between Tremont
Corporation and the Registrant effective as of January 1, 1997.
10.5 - Intercorporate Services Agreement by and between Titanium
Metals Corporation and the Registrant effective as of January 1,
1997.
27.1 - Financial Data Schedule for the three-month period ended
March 31, 1997.
(b) Reports on Form 8-K
Reports on Form 8-K for the quarter ended March 31, 1997 and
through the date of this report:
January 30, 1997 - reported Items 5 and 7.
April 22, 1997 - reported Items 5 and 7.
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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 14, 1997 By /s/ Joseph S. Compofelice
- ------------------- ------------------------------
Joseph S. Compofelice
Vice President and
Chief Financial Officer
Date: May 14, 1997 By /s/ Dennis G. Newkirk
- ------------------- ------------------------------
Dennis G. Newkirk
Vice President and Controller
(Principal Accounting Officer)
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EXHIBIT 10.1
AMENDED AND RESTATED
EXECUTIVE SEVERANCE AGREEMENT
This Amended and Restated Executive Severance Agreement is made effective
as of the 24th day of July, 1996, by and between NL INDUSTRIES, INC., a New
Jersey corporation (hereinafter called the "Company"), and J. Landis Martin
(hereinafter called the "Executive") and supersedes the Executive Severance
Agreement dated December 31, 1991, between the Company and Executive.
To assure the Company that it will have the continued services of
Executive and the availability of Executive's advice and counsel and to induce
Executive to remain in the employ of the Company, and for other good and
valuable consideration, the Company and Executive agree as follows:
1. Termination.
a. General. This Agreement is not an employment contract nor does
it in any way alter the status of Executive as an at-will
employee of the Company serving at the pleasure of the
Company's Board of Directors. Executive's employment with the
Company may be terminated without notice (except as required
by Section 2 hereof) at any time, for any reason (i) by
resolution approved by Directors constituting a majority of
all of the Directors then holding office or (ii) by Executive.
b. Termination by the Company. Executive shall be entitled to the
severance benefits set forth in Sections 3 and 4 upon
termination of Executive's employment by the Company unless
such termination is for cause (as defined below). Executive's
termination of employment with the Company by virtue of death,
disability (as defined below), or retirement (as defined
below) shall not be considered as a termination of Executive
by the Company. For purposes of this Agreement, "cause" shall
mean (i) Executive's conviction of any criminal violation
involving dishonesty, fraud or breach of trust or any felony
or (ii) Executive's willful engagement in gross misconduct in
the performance of his duties that materially and adversely
affects the financial condition of the Company. The Executive
shall be deemed to have a "disability" if, by reason of
physical or mental incapacity, Executive becomes unable to
perform his normal duties for more than 180 days in the
aggregate (excluding infrequent and temporary absence due to
ordinary transitory illness) during any 12-month period.
Executive shall be deemed to have "retired" upon Executive
reaching the age of 65; provided that Executive is no longer
employed by the Company.
c. Termination by the Employee. Executive shall not be entitled
to the severance benefits set forth in Sections 3 and 4 of
this Agreement upon termination of Executive's employment with
the Company by Executive unless such termination is for good
reason. For purposes of this Agreement, "good reason" shall
mean the occurrence of any one of the following events without
Executive's consent:
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(i) the assignment of Executive to any duties substantially
inconsistent with his position, duties, responsibilities
or status with the Company immediately prior to such
assignment, or a substantial reduction of the duties or
responsibilities, as compared with the duties or
responsibilities immediately prior to such reduction, it
being expressly understood that a promotion of another
executive to a position senior to Executive shall not in
and of itself be deemed to constitute "good reason"
under this Section 1.c(i);
(ii) a reduction by the Company in the amount of Executive's annual
base salary as in effect as of the date of this agreement or
as the same may be increased from time to time, except for
across-the-board salary reductions similarly affecting all
executives of the Company; or
(iii) the Company repudiates this Agreement or fails to obtain a
satisfactory agreement from any successor to assume and agree
to perform this Agreement, as contemplated by Section 9.a.
hereof.
2. Notice of Certain Terminations. In the event that either (i) the
Company shall terminate Executive for cause or (ii) Executive shall
resign for good reason, then any such termination shall be
communicated by written notice to the other party hereto. Any such
notice shall specify (a) the effective date of termination, which
shall not be more than 30 days after the date the notice is
delivered (the "Termination Date"); and (b) in reasonable detail the
facts and circumstances underlying a determination that the
termination is for cause or for good reason, as the case may be. If
within 15 days after any notice is given, the party receiving such
notice notifies the other party that a good faith dispute exists
concerning the characterization of the termination, the Termination
Date shall be the date on which such dispute is finally resolved
either by written agreement of the parties or by a final judicial
determination. Notwithstanding the pendency of any such dispute, the
Company shall continue Executive and his dependents as participants
in all medical, dental and any other health insurance and similar
benefit plans of the Company in which he and they were participating
when the notice giving rise to the dispute was given, until the
dispute is finally resolved. Benefits provided under this Section 2
are in addition to all other amounts due under this Agreement and
shall not be offset against, or reduce any other amounts due under,
this Agreement.
3. Termination Benefits. Subject to the conditions set forth in Section
1 and Section 6.b. hereof, the Company shall make the following
payments (subject to any applicable payroll or other taxes required
to be withheld) to Executive within 15 days of the Termination Date:
a. Base Salary and Bonus. Two times Executive's effective annual
base salary at the Termination Date plus two times Executive's
level "B" target bonus under the Company's Employee Incentive
Bonus Plan as in effect at the Termination Date, it being
understood that such level shall in any event be a minimum of
100% of Executive's effective annual base salary.
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b. Accrued Amounts. (i) Accrued but unpaid salary and bonus
through the Termination Date and (ii) unpaid salary with
respect to any vacation days accrued but not taken as of the
Termination Date.
4. Other Benefits. Subject to the conditions set forth in Sections 1
and 6.b. hereof, the following benefits (subject to any applicable
payroll or other taxes required to be withheld) shall be paid or
provided to Executive within 15 days of the Termination Date:
a. Insurance Benefits. Medical, dental and any other health
insurance, life insurance, accidental death and dismemberment
insurance and disability protection no less favorable to
Executive and his dependents covered thereby (including with
respect to any costs borne by Executive) than the greater of
the coverage provided on the date of execution of this
Agreement or the coverage provided by Company immediately
prior to the Termination Date for the period beginning on the
Termination Date and ending on the first to occur of (i) the
date of Executive's re-employment or (ii) the second
anniversary of the Termination Date.
5. Retirement Plan. Following retirement and attainment of ages
specified in the Retirement Plan of NL Industries, Inc. (the "NL
Pension Plan"), Executive shall be entitled to all pension benefits
which are available to him under the NL Pension Plan in effect on
the Termination Date.
6. Benefits Valuation and Limitation.
a. Promptly following any Termination Date, and as of that date,
the Company will notify Executive of the itemized and
aggregate cash value of the payments and benefits, as
determined under Section 280G of the Code, received or to be
received by Executive in connection with the termination of
his employment (whether payable pursuant to the terms of this
Agreement or otherwise). At the same time, the Company shall
advise Executive of the portion of such payments or benefits
which constitute parachute payments within the meaning of the
Code and which may subject Executive to the payment of excise
taxes pursuant to Section 4999 and the expected amount of such
taxes (such payments or benefits being hereinafter referred to
as "Parachute Payments").
b. Notwithstanding the provisions of Sections 3 and 4 hereof, if
all or any portion of the payments or benefits provided under
Sections 3 or 4 either alone or together with other payments
or benefits which Executive has received or is then entitled
to receive from the Company and any of its subsidiaries would
constitute Parachute Payments, such payments or benefits
provided to Executive under Sections 3 and 4 shall be reduced
to the extent necessary so that no portion thereof shall be
subject to the excise tax imposed by Section 4999 of the Code;
but only if, by reason of such reduction, Executive's net
after tax benefit shall exceed the net after tax benefit if
such reduction were not made.
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<PAGE>
"Net after tax benefit" for purposes of this Section 6.b.
shall mean the sum of (i) the total amount payable to
Executive under Sections 3 and 4 hereof, plus (ii) all other
payments and benefits which Executive has received or is then
entitled to receive from the Company and any of its
subsidiaries that would constitute a Parachute Payment, less
(iii) the amount of federal income taxes payable with respect
to the payment and benefits described in (i) and (ii) above
calculated at the maximum marginal income tax rate for each
year in which such payments and benefits shall be paid to
Executive (based upon the rate in effect for such year as set
forth in the Code at the Termination Date), less (iv) the
amount of excise taxes imposed with respect to the payments
and benefits described in (i) and (ii) above by Section 4999
of the Code.
For purposes of this Section 6.b., Executive's base amount,
the present value of the Parachute Payments, the amount of the
excise tax and all other appropriate matters shall be
determined by the Company's independent auditors in accordance
with the principles of Section 280G of the Code and based upon
the advice of tax counsel selected by the Company, which tax
counsel shall be reasonably satisfactory to Executive.
7. Mitigation. Executive is not required to seek other employment or
otherwise mitigate the amount of any payments to be made by the
Company pursuant to this Agreement. Except as otherwise provided in
Section 4.a. of this Agreement, the amount of any payments or other
benefits provided for in this Agreement shall not be reduced by any
compensation earned by Executive as the result of employment by
another employer after the Termination Date, or otherwise.
8. Continuing Obligations. Executive hereby agrees that all documents,
records, techniques, business secrets and other information which
have come and will come into his possession from time to time during
his employment by the Company shall be deemed to be confidential and
proprietary to the Company, and Executive further agrees to retain
in confidence any confidential information known to him concerning
the Company and its subsidiaries and their respective businesses so
long as such information is not publicly disclosed.
9. Successors.
a. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the
Company, by Agreement in form and substance reasonably
satisfactory to Executive to expressly assume and agree to
perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no
such succession had taken place. For purposes of this
Agreement, any determination as to whether the Company has
engaged in a transaction involving all or substantially all of
the business and/or assets of the Company shall be made by the
Board of Directors in its sole discretion, which determination
shall be final and binding on the parties. For purposes of
this Agreement, "Company" shall mean NL Industries, Inc. and
any successor to its business and/or assets as aforesaid which
assumes and agrees
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to perform this Agreement or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of
law or otherwise.
b. This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any
amounts are payable to him hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to Executive's devisee, legatee or
other designee or, if there be no such designee, to
Executive's estate.
10. Notices. For the purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be
deemed to have been duly given when actually delivered or mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Executive:
Mr. J. Landis Martin
150 Vine Street
Denver, Colorado 80206
If to the Company:
NL Industries, Inc.
16825 Northchase Drive, Suite 1200
Houston, Texas 77060
ATTENTION: General Counsel
or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
11. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the internal
laws, and not the conflicts laws, of the State of Texas.
12. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge
is agreed to in writing signed by Executive and a duly authorized
officer of the Company. No waiver by either party hereto at any time
of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or any prior or subsequent
time. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made
by either party which are not set forth expressly in this Agreement.
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<PAGE>
13. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full
force and effect.
14. Non-assignability. This Agreement is personal in nature and neither
of the parties hereto shall, without the written consent of the
other, assign or transfer this Agreement or any rights or
obligations hereunder, except as provided in Section 9. Without
limiting the foregoing, Executive's right to receive payments
hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than a
transfer by his will or trust or by the laws of descent or
distribution, and in the event of any attempted assignment or
transfer contrary to this paragraph the Company shall have no
liability to pay any amount so attempted to be assigned or
transferred.
15. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect through December 31 of 2000.
16. Enforcement Costs. In the event that either party files an action
against the other in any court to collect, enforce, protect or
preserve its rights under this Agreement, the prevailing party in
such action shall be entitled to receive reimbursement from such
other party of all reasonable costs and expenses, including
attorneys' fees, which such prevailing party incurred in prosecuting
or defending such action, as the case may be.
17. Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed to be an original but all of which
taken together will constitute one and the same instrument.
18. Unsecured Obligation. All rights of Executive and Executive's spouse
or other beneficiary under this Agreement shall at all times be
entirely unfunded and no provision shall at any time be made with
respect to segregating assets of the Company or payment of any
amounts due hereunder. Neither Executive nor his spouse or other
beneficiary shall have any interest in or rights against any
specific assets of the Company, and Executive and his spouse or
other beneficiary shall have only the rights of a general unsecured
creditor of the Company.
* * * *
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IN WITNESS WHEREOF, the parties have caused this Amended and
Restated Executive Severance Agreement to be executed and delivered effective as
of the date first written above.
The Company:
NL INDUSTRIES, INC.
By_________________________________
Harold C. Simmons,
Chairman of the Board
Executive:
____________________________________
J. Landis Martin
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EXHIBIT 10.2
INTERCORPORATE SERVICES AGREEMENT
This INTERCORPORATE SERVICES AGREEMENT (the "Agreement"), effective as of
January 1, 1997, amends and supersedes that certain Intercorporate Services
Agreement effective as of January 1, 1996 by and between CONTRAN CORPORATION, a
Delaware corporation ("Contran"), and NL INDUSTRIES, INC., a New Jersey
corporation. ("Recipient"),
Recitals
A. 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.
B. Recipient does not separately maintain the full internal capability to
perform all necessary advisory functions that Recipient requires.
C. The costs of engaging the advisory services of someone possessing Mr.
Simmons' expertise and the costs 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.
D. 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.
Agreement
For and in consideration of the mutual premises, representations and
covenants herein contained, the parties hereto mutually agree as follows:
Section 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; and
(b) Such other services as may be requested by Recipient from time
to time.
This Agreement does not apply to and the Services provided for herein do not
include any services that 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.
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Section 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 effective 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.
Section 3. Fee for Services. Recipient agrees to pay to Contran $125,000
quarterly, commencing as of January 1, 1997, pursuant to this Agreement.
Section 4. Original Term. Subject to the provisions of Section 5 hereof,
the original term of this Agreement shall be from January 1, 1997 to December
31, 1997.
Section 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.
Section 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.
Section 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 arising out
of the Services provided by Contran to Recipient hereunder, provided that such
indemnity shall not protect any person against any liability to which such
person would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence on the part of such person.
2
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Section 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.
Section 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.
Section 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.
Section 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.
Section 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
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EXHIBIT 10.3
INTERCORPORATE SERVICES AGREEMENT
This INTERCORPORATE SERVICES AGREEMENT (the "Agreement"), effective as of
January 1, 1997, amends and supersedes that certain Intercorporate Services
Agreement effective as of January 1, 1996 by and between VALHI, INC., a Delaware
corporation ("Valhi"), and NL INDUSTRIES, INC., a New Jersey corporation ("NL").
Recitals
A. NL desires to have the services of certain Valhi personnel and Valhi is
willing to provide such services under the terms of this Agreement.
B. Valhi desires to have the services of certain NL personnel and NL is
willing to provide such services under the terms of this Agreement.
C. The costs of maintaining the additional personnel necessary to perform
the functions provided for by this Agreement would exceed the amount charged to
such party that is contained in the net fee set forth in Section 4 of this
Agreement and that the terms of this Agreement are no less favorable to each
party than could otherwise be obtained from a third party for comparable
services.
D. Each party desires to continue receiving the services presently
provided by the other party and its affiliates and each party is willing to
continue to provide such services under the terms of this Agreement.
Agreement
For and in consideration of the mutual premises, representations and
covenants contained in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto mutually agree as follows:
Section 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 charter and
bylaws 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;
1
<PAGE>
(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, without limitation, preparation and filing of
tax returns, tax reporting, examinations by government authorities and tax
planning; and
(f) Such other services as may be requested by NL from time to time.
Section 2. NL Services to be Provided. NL agrees to make available to
Valhi, upon request, the following services (the "NL Services," and collectively
with the Valhi Services, the "Services") to be rendered by the internal staff of
NL:
(a) The services of Joseph S. Compofelice to act as Executive Vice
President of Valhi, which Valhi and NL agree shall involve substantially
such time as has been allocated in the past and is currently being
devoted;
(b) The services of NL's internal audit personnel in providing
consultation and assistance in performing internal audit projects as
requested from time to time; and
(c) certain administration and management services with respect to
Valhi's insurance and risk management needs, including, without
limitations, administration of Valhi's:
(i) property and casualty insurance program,
(ii) claims management program,
(iii) property loss control program, and
(d) Such other services as may be requested by Valhi from time to
time.
Section 3. Miscellaneous Services. It is the intent of the parties hereto
that each party to this Agreement provide (a "Providing Party") only such
Services as are requested by the other party (a "Receiving Party") in connection
with routine management, financial and administrative functions related to the
ongoing operations of the Receiving Party and not with respect to special
projects, including corporate investments, acquisitions and divestitures. The
parties hereto contemplate that the Services rendered by a Providing Party in
connection with the conduct of each Receiving Party's business will be on a
scale compared to that existing on the effective 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. Each Receiving Party 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 each Providing Party assumes
no liability for any expenses or services other than those stated in this
Agreement to be provided by such party. In addition to the amounts charged to a
Receiving Party for Services provided pursuant to this Agreement, such Receiving
Party will pay the Providing Party the amount of out-of-pocket costs incurred by
the Providing Party in rendering such Services.
2
<PAGE>
Section 4. Net Fee for Services. Valhi agrees to pay to NL a net annual
fee of $138,000 payable in quarterly installments of $34,500 each, commencing as
of January 1, 1997, pursuant to this Agreement, which net annual fee includes
reimbursements of $20,000 for certain insurance and risk management services
provided by NL to Valhi in 1996. In addition to the net annual fee:
(a) Valhi shall pay to NL an additional amount equal to the sum of:
(i) the product of (x) $600, (y) the number of days devoted by
NL's internal auditors to providing NL Services described in
Subsection 2(b) and (z) the number of internal auditors providing
such NL Services; and
(ii) all related out-of-pocket expenses;
(b) Valhi shall pay to NL additional amounts plus all related
out-of-pocket costs, all as agreed to by the parties, for all NL Services
provided under Subsection 2(d); and
(c) NL shall credit or pay to Valhi additional amounts plus all
related out-of-pocket costs, all as agreed to by the parties, for all
Valhi Services provided under Subsection 1(f).
Section 5. Original Term. Subject to the provisions of Section 6 hereof,
the original term of this Agreement shall be from January 1, 1997 to December
31, 1997.
Section 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.
Section 7. Limitation of Liability. In providing Services hereunder, each
Providing Party shall have a duty to act, and to cause its agents to act, in a
reasonably prudent manner, but no Providing Party nor any officer, director,
employee or agent of such party nor or its affiliates shall be liable to a
Receiving Party for any error of judgment or mistake of law or for any loss
incurred by the Receiving 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 the Providing Party.
Section 8. Indemnification. Each Receiving Party shall indemnify and hold
harmless the Providing 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 Providing Party may become subject arising
out of the Services provided by such Providing Party to the Receiving Party
hereunder, provided that such indemnity shall not protect any person against any
liability to which such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on the part of such person.
3
<PAGE>
Section 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.
Section 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.
Section 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.
Section 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.
Section 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
4
<PAGE>
EXHIBIT 10.4
INTERCORPORATE SERVICES AGREEMENT
INTERCORPORATE SERVICES AGREEMENT effective as of January 1, 1997, by and
between Tremont Corporation ("Tremont"), a Delaware corporation, and NL
Industries, Inc. ("NL"), a New Jersey corporation.
WHEREAS, Tremont desires that NL provide certain services to Tremont, and
NL is willing to provide such services to Tremont pursuant to the terms of this
Agreement.
NOW, THEREFORE, in consideration of the premises and promises set forth
herein, the parties to this Agreement agree as follows:
1. Services Provided. NL will make available to Tremont the following
services (the "Services"):
a. certain administration and management services with respect to
Tremont's insurance and risk management needs, including:
(i) management of claims (including insured and
self-insured workers compensation and
liability claims);
(ii) budgeting and related activities;
(iii)administration of Tremont's captive
insurance company;
(iv) coordination of property loss control
program; and
(v) administration of Tremont's insurance program, excluding
all employee benefit and welfare related programs.
b. certain administration and management services with respect to
Tremont's real properties and interests.
c. consultation and assistance in performing internal audit
projects, as requested.
d. certain executive secretarial and administrative services.
e. consultation and assistance in tax management and
administration, including, without limitation, preparation and
filing of tax returns, tax reporting, examinations by
government authorities and tax planning.
1
<PAGE>
2. Fees for Services and Reimbursement of Expenses. During the Term of
this Agreement, Tremont shall pay to NL an annual fee of $183,900 (the "Annual
Fee") for the Services described in paragraphs 1.a, 1.b, 1.d and 1.e above
payable in quarterly installments as described below, plus all out-of-pocket
expenses incurred in connection with the performance of such Services. The first
quarterly installment of the Annual Fee shall be $120,975 which includes
reimbursements of $100,000 for tax services provided by NL to Tremont and its
subsidiaries in 1996. Thereafter, each quarterly installment due hereunder shall
be $20,975. In addition, Tremont will, within thirty (30) days after receipt of
an invoice (such invoices to occur no more frequently than once per month), (A)
pay to NL an amount equal to the product of $600 multiplied by the number of
days devoted by NL's internal auditors to providing Services described in
paragraph 1.c above times the number of internal auditors providing such
Services, and (B) reimburse NL for all out-of-pocket expenses incurred by NL in
the performance of Services under this Agreement. Notwithstanding the foregoing,
in the event that Tremont determines, in its sole discretion, that it no longer
desires certain of the Services or NL determines, in its sole discretion, that
it no longer desires to provide certain of the Services, then Tremont or NL, as
appropriate, shall provide the other party with a ninety (90) day prior written
notice of cancellation describing the Services to be terminated or discontinued
and Tremont and NL during such ninety-day period shall agree to a pro-rata
reduction of the fees due hereunder for such terminated or discontinued
Services.
3. Limitation of Liability. In providing Services hereunder, NL shall have
a duty to act, and to cause its agents to act, in a reasonably prudent manner,
but neither NL nor any officer, director, employee or agent of NL shall be
liable to Tremont or its subsidiaries for any error of judgment or mistake of
law or for any loss incurred by Tremont or its subsidiaries in connection with
the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of NL or from
NL's reckless disregard of obligations and duties under this Agreement.
4. Indemnification of NL by Tremont. Tremont shall indemnify and hold
harmless NL, its subsidiaries and their respective officers, directors and
employees from and against any and all losses, liabilities, claims, damages,
costs and expenses (including reasonable attorneys' fees and other expenses of
litigation) to which such party may become subject arising out of the provision
by NL to Tremont and its subsidiaries of any of the Services, provided that such
indemnity shall not protect any such party against any liability to which such
person would otherwise by subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations and duties hereunder.
5. Further Assurance. 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 by
required in order to effectuate the purposes of this Agreement and to carry out
the terms hereof.
6. Notices. All communications hereunder shall be in writing and shall be
addressed to:
If to NL: NL Industries, Inc.
16825 Northchase Drive, Suite 1200
Houston, Texas 77060
Attention: General Counsel
If to Tremont: Tremont Corporation
1999 Broadway, Suite 4300
Denver, Colorado 80202
Attention: General Counsel
or such other address as the parties shall have specified in writing.
2
<PAGE>
7. Amendment and Modification. Neither this Agreement nor any item hereof
may be changed, waived, discharged or terminated other than by agreement in
writing signed by the parties hereto.
8. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties hereto,
provided that this Agreement may not be assigned by either of the parties hereto
without the prior written consent of the other party.
9. Miscellaneous. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
instrument. This Agreement shall be governed in all respects, including
validity, interpretation and affect, by the laws of the State of Texas.
10. Term of Agreement. This Agreement shall be effective as of January 1,
1997, and shall remain in effect for a term of one year until December 31, 1997
(the "Term"); provided, however, the Agreement shall be extended on a
quarter-to-quarter basis after the expiration of the Term unless written
notification is given by either party thirty (30) days in advance of the first
day of each successive quarter or unless it is terminated or succeeded by a
subsequent written agreement of the parties hereto. Upon such termination or
upon the expiration of this Agreement, the parties' rights and obligations
hereunder shall cease and terminate except with respect to rights and
obligations arising on or prior to the date of expiration or termination and the
rights and obligations arising under paragraph 4 above.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the ____ day of ____________, 1997, which Agreement will be deemed to be
effective as of January 1, 1997.
NL INDUSTRIES, INC.
By:________________________________
Dennis G. Newkirk
Vice President
TREMONT CORPORATION
By:________________________________
J. Thomas Montgomery
Vice President and Controller
3
<PAGE>
EXHIBIT 10.5
INTERCORPORATE SERVICES AGREEMENT
This INTERCORPORATE SERVICES AGREEMENT (the "Agreement") is made effective
as of January 1, 1997, by and between Titanium Metals Corporation ("TIMET"), a
Delaware corporation, and NL Industries, Inc. ("NL"), a New Jersey corporation.
WHEREAS, TIMET desires that NL provide certain insurance, risk management,
loss control, internal audit, tax, and executive secretarial and administrative
services to TIMET, as set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and promises set forth
herein and for other good and valuable consideration the receipt and sufficiency
of which is hereby acknowledged, the parties to this Agreement agree as follows:
1. Services Provided. NL will make available to TIMET and its subsidiaries
the following services (the "Services"):
(a) certain administration and management services with respect to
TIMET's insurance and risk management needs, including:
(i) management of claims (including insured and self-insured
workers compensation and liability claims);
(ii) budgeting and related activities;
(iii) coordination of property loss control program; and
(iv) administration of TIMET's insurance program, excluding
all employee benefit and welfare related programs.
(b) consultation and assistance in performing internal audit
projects, as requested.
(c) consultation and assistance in tax management and
administration, including, without limitation, preparation and
filing of tax returns, tax reporting, examinations by
government authorities and tax planning.
(d) certain executive secretarial and administrative services.
2. Fees for Services and Reimbursement of Expenses. During the Term (as
defined below) of the Agreement, TIMET shall pay to NL an annual fee of $305,100
for the Services described in paragraphs 1(a), 1(c), and 1(d) above payable in
quarterly installments of $76,275 plus all out-of-pocket expenses incurred in
connection with the performance of such Services. In addition, during the
Initial Term and each Subsequent Term, TIMET will pay to NL within thirty (30)
days after receipt of an invoice (such invoices to occur no more frequently than
once per month) an amount equal to the product of $600 multiplied by the number
of days devoted by NL's internal auditors to providing Services described in
paragraph 1(b) above times the number of internal auditors providing such
Services plus all out-of-pocket expenses incurred in the performance of such
Services; provided, however, in the event that TIMET determines, in its sole
discretion, that it no longer desires certain of the Services or NL determines,
in its sole discretion, that it no longer desires to provide certain of the
1
<PAGE>
Services, then TIMET or NL, as appropriate, shall provide the other party with a
ninety (90) day prior written notice of cancellation describing the Services to
be terminated or discontinued and TIMET and NL during such ninety-day period
shall agree to a pro-rata reduction of the fees due hereunder for such
terminated or discontinued Services.
3. Limitation of Liability. In providing Services hereunder, NL shall have
a duty to act, and to cause its agents to act, in a reasonably prudent manner,
but neither NL nor any officer, director, employee or agent of NL shall be
liable to TIMET or its subsidiaries for any error of judgment or mistake of law
or for any loss incurred by TIMET or its subsidiaries in connection with the
matters to which this Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of NL or from NL's
reckless disregard of obligations and duties under this Agreement.
4. Indemnification of NL by TIMET. TIMET shall indemnify and hold harmless
NL, its subsidiaries and their respective officers, directors and employees from
and against any and all losses, liabilities, claims, damages, costs and expenses
(including reasonable attorneys' fees and other expenses of litigation) to which
such party may become subject arising out of the provision by NL to TIMET and
its subsidiaries of any of the Services, provided that such indemnity shall not
protect any such party against any liability to which such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations and duties hereunder.
5. Further Assurance. 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 by
required in order to effectuate the purposes of this Agreement and to carry out
the terms hereof.
6. Notices. All communications hereunder shall be in writing and shall be
addressed to:
If to NL: NL Industries, Inc.
16825 Northchase Drive, Suite 1200
Houston, Texas 77060
Attention: General Counsel
If to TIMET: Titanium Metals Corporation
1999 Broadway, Suite 4300
Denver, Colorado 80202
Attention: General Counsel
or such other address as the parties shall have specified in writing.
7. Amendment and Modification. Neither this Agreement nor any item hereof
may be changed, waived, discharged or terminated other than by agreement in
writing signed by the parties hereto.
8. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties hereto,
provided that this Agreement may not be assigned by either of the parties hereto
without the prior written consent of the other party.
9. Miscellaneous. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
instrument. This
2
<PAGE>
Agreement shall be governed in all respects, including validity, interpretation
and affect, by the laws of the State of Texas.
10. Term of Agreement. This Agreement shall be effective as of January 1,
1997, and shall remain in effect for one year until December 31, 1997 (the
"Term"); provided, however, the Agreement shall be extended on a
quarter-to-quarter basis after the expiration of the Term unless written
notification is given by either party thirty (30) days in advance of the first
day of each successive quarter or unless it is terminated or superseded by a
subsequent written agreement of the parties hereto. Upon such termination or
upon the expiration of this Agreement, the parties' rights and obligations
hereunder shall cease and terminate except with respect to rights and
obligations arising on or prior to the date of expiration or termination and the
rights and obligations arising under paragraph 4 above.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
effective as of the _____ day of ____________, 1997, which Agreement will be
deemed to be effective as of January 1, 1997.
NL INDUSTRIES, INC.
By:____________________________________
Dennis G. Newkirk
Vice President
TITANIUM METALS CORPORATION
By:____________________________________
J. Thomas Montgomery
Vice President - Finance and Treasurer
3
<PAGE>
<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, 1997, 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 77,662
<SECURITIES> 0
<RECEIVABLES> 151,844
<ALLOWANCES> 2,699
<INVENTORY> 194,033
<CURRENT-ASSETS> 444,722
<PP&E> 913,526
<DEPRECIATION> 472,279
<TOTAL-ASSETS> 1,141,368
<CURRENT-LIABILITIES> 224,506
<BONDS> 746,605
0
0
<COMMON> 8,355
<OTHER-SE> (245,550)
<TOTAL-LIABILITY-AND-EQUITY> 1,141,368
<SALES> 239,476
<TOTAL-REVENUES> 241,718
<CGS> 185,035
<TOTAL-COSTS> 185,035
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,958
<INCOME-PRETAX> (33,421)
<INCOME-TAX> 2,292
<INCOME-CONTINUING> (35,721)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (35,721)
<EPS-PRIMARY> (0.70)
<EPS-DILUTED> (0.70)
</TABLE>
