Company Quick10K Filing
NL Industries
Price4.08 EPS1
Shares49 P/E8
MCap199 P/FCF11
Net Debt-138 EBIT26
TEV61 TEV/EBIT2
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-06
10-K 2019-12-31 Filed 2020-03-11
10-Q 2019-09-30 Filed 2019-11-07
10-Q 2019-06-30 Filed 2019-08-07
10-Q 2019-03-31 Filed 2019-05-09
10-K 2018-12-31 Filed 2019-03-11
10-Q 2018-09-30 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-07
10-Q 2018-03-31 Filed 2018-05-08
10-K 2017-12-31 Filed 2018-03-12
10-Q 2017-09-30 Filed 2017-11-08
10-Q 2017-06-30 Filed 2017-08-08
10-Q 2017-03-31 Filed 2017-05-08
10-K 2016-12-31 Filed 2017-03-10
10-Q 2016-09-30 Filed 2016-11-07
10-Q 2016-06-30 Filed 2016-08-05
10-Q 2016-03-31 Filed 2016-05-06
10-K 2015-12-31 Filed 2016-03-10
10-Q 2015-09-30 Filed 2015-11-06
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-08
10-K 2014-12-31 Filed 2015-03-12
10-Q 2014-09-30 Filed 2014-11-07
10-Q 2014-06-30 Filed 2014-08-07
10-Q 2014-03-31 Filed 2014-05-08
10-K 2013-12-31 Filed 2014-03-12
10-Q 2013-09-30 Filed 2013-11-06
10-Q 2013-06-30 Filed 2013-08-07
10-Q 2013-03-31 Filed 2013-05-08
10-K 2012-12-31 Filed 2013-03-12
10-Q 2012-09-30 Filed 2012-11-06
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-09
10-K 2011-12-31 Filed 2012-03-06
10-Q 2011-09-30 Filed 2011-11-03
10-Q 2011-06-30 Filed 2011-08-03
10-Q 2011-03-31 Filed 2011-05-04
10-K 2010-12-31 Filed 2011-03-07
10-Q 2010-09-30 Filed 2010-11-01
10-Q 2010-06-30 Filed 2010-08-03
10-Q 2010-03-31 Filed 2010-05-04
10-K 2009-12-31 Filed 2010-03-10
8-K 2020-05-21 Shareholder Vote, Regulation FD, Exhibits
8-K 2020-05-06 Earnings, Regulation FD, Exhibits
8-K 2020-04-22 Control
8-K 2020-03-13 Officers
8-K 2020-03-11 Earnings, Regulation FD, Exhibits
8-K 2020-02-19 Regulation FD, Exhibits
8-K 2019-11-07 Earnings, Regulation FD, Exhibits
8-K 2019-09-03 Control
8-K 2019-08-07 Earnings, Regulation FD, Exhibits
8-K 2019-07-24 Enter Agreement
8-K 2019-07-16 Control
8-K 2019-05-16 Shareholder Vote, Regulation FD, Exhibits
8-K 2019-05-16 Code of Ethics, Exhibits
8-K 2019-05-09 Earnings, Regulation FD, Exhibits
8-K 2019-03-18 Officers
8-K 2019-03-08 Earnings, Regulation FD, Exhibits
8-K 2018-11-07 Earnings, Regulation FD, Exhibits
8-K 2018-08-07 Earnings, Regulation FD, Exhibits
8-K 2018-05-17 Shareholder Vote, Regulation FD, Exhibits
8-K 2018-05-08 Earnings, Regulation FD, Exhibits
8-K 2018-03-15 Officers
8-K 2018-03-12 Earnings, Regulation FD, Exhibits

NL 10Q Quarterly Report

Note 1 - Organization and Basis of Presentation:
Note 2 - Accounts and Other Receivables, Net:
Note 3 - Inventories, Net:
Note 4 - Marketable Securities:
Note 5 - Investment in Kronos Worldwide, Inc.:
Note 6 - Other Noncurrent Assets, Net:
Note 7 - Accrued and Other Current Liabilities:
Note 8 - Long - Term Debt:
Note 9 - Other Noncurrent Liabilities:
Note 10 - Revenue Recognition:
Note 11 - Employee Benefit Plans:
Note 12 - Income Taxes:
Note 13 - Accumulated Other Comprehensive Loss:
Note 14 - Commitments and Contingencies:
Note 15 - Financial Instruments and Fair Value Measurements:
Note 16 - Recent Accounting Pronouncements:
Note 17 - Subsequent Event:
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 nl-ex311_13.htm
EX-31.2 nl-ex312_14.htm
EX-32.1 nl-ex321_15.htm

NL Industries Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
2.11.71.30.80.40.02012201420172020
Assets, Equity
1.00.80.60.30.1-0.12012201420172020
Rev, G Profit, Net Income
0.10.10.0-0.0-0.1-0.12012201420172020
Ops, Inv, Fin

10-Q 1 nl-10q_20200331.htm 10-Q nl-10q_20200331.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

OR

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to          

  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

incorporation or organization)

 

(IRS Employer Identification No.)

5430 LBJ Freeway, Suite 1700

Dallas, Texas 75240-2620

(Address of principal executive offices)

Registrant’s telephone number, including area code: (972) 233-1700

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common stock

 

NL

 

NYSE

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) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer          

Accelerated filer

Non-accelerated filer

Smaller reporting company  

Emerging growth company  

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  

Number of shares of the registrant’s common stock, $.125 par value per share, outstanding on May 1, 2020:  48,755,734.

 

 


NL INDUSTRIES, INC. AND SUBSIDIARIES

INDEX

 

 

 

Page
number

Part I.

FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements

 

 

 

Condensed Consolidated Balance Sheets - December 31, 2019;  March 31, 2020 (unaudited)

3

 

 

Condensed Consolidated Statements of Income (unaudited) – Three months ended March 31, 2019 and 2020

5

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) – Three months ended March 31, 2019 and 2020

6

 

 

Condensed Consolidated Statements of Equity (unaudited) – Three months ended March 31, 2019 and 2020

7

 

 

Condensed Consolidated Statements of Cash Flows (unaudited) -  Three months ended March 31, 2019 and 2020

8

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

9

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

 

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

34

 

Item 4.

Controls and Procedures

34

 

 

 

 

 

 

Part II.

OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

35

 

Item 1A.

Risk Factors

35

 

Item 6.

Exhibits

35

Items 2, 3, 4 and 5 of Part II are omitted because there is no information to report.

 

 

 

2

 


 

NL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

December 31,

 

 

March 31,

 

 

2019

 

 

2020

 

 

 

 

 

 

(unaudited)

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

129,730

 

 

$

133,406

 

Restricted cash and cash equivalents

 

2,695

 

 

 

2,697

 

Accounts and other receivables, net

 

11,929

 

 

 

15,294

 

Inventories, net

 

18,348

 

 

 

18,962

 

Receivables from affiliates

 

581

 

 

 

438

 

Prepaid expenses and other

 

1,401

 

 

 

1,272

 

 

 

 

 

 

 

 

 

Total current assets

 

164,684

 

 

 

172,069

 

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

Restricted cash and cash equivalents

 

25,445

 

 

 

25,475

 

Note receivable from affiliate

 

28,100

 

 

 

25,500

 

Marketable securities

 

26,877

 

 

 

14,804

 

Investment in Kronos Worldwide, Inc.

 

248,355

 

 

 

238,067

 

Goodwill

 

27,156

 

 

 

27,156

 

Other assets, net

 

5,860

 

 

 

5,672

 

 

 

 

 

 

 

 

 

Total other assets

 

361,793

 

 

 

336,674

 

 

 

 

 

 

 

 

 

Property and equipment:

 

 

 

 

 

 

 

Land

 

4,940

 

 

 

4,940

 

Buildings

 

23,047

 

 

 

23,047

 

Equipment

 

67,718

 

 

 

68,443

 

Construction in progress

 

1,002

 

 

 

463

 

 

 

96,707

 

 

 

96,893

 

Less accumulated depreciation

 

65,692

 

 

 

66,531

 

 

 

 

 

 

 

 

 

Net property and equipment

 

31,015

 

 

 

30,362

 

 

 

 

 

 

 

 

 

Total assets

$

557,492

 

 

$

539,105

 

 

3

 


 

NL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In thousands)

 

 

December 31,

 

 

March 31,

 

 

2019

 

 

2020

 

 

 

 

 

 

(unaudited)

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

3,438

 

 

$

3,300

 

Accrued litigation settlement

 

11,830

 

 

 

11,887

 

Accrued and other current liabilities

 

10,601

 

 

 

7,483

 

Accrued environmental remediation and related costs

 

3,065

 

 

 

3,357

 

Payables to affiliates

 

801

 

 

 

757

 

Income taxes

 

73

 

 

 

84

 

 

 

 

 

 

 

 

 

Total current liabilities

 

29,808

 

 

 

26,868

 

 

 

 

 

 

 

 

 

Noncurrent liabilities:

 

 

 

 

 

 

 

Long-term debt from affiliate

 

500

 

 

 

500

 

Accrued environmental remediation and related costs

 

91,443

 

 

 

90,882

 

Long-term litigation settlement

 

60,081

 

 

 

60,367

 

Deferred income taxes

 

33,957

 

 

 

28,196

 

Accrued pension costs

 

8,230

 

 

 

7,894

 

Other

 

6,260

 

 

 

6,193

 

 

 

 

 

 

 

 

 

Total noncurrent liabilities

 

200,471

 

 

 

194,032

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

NL stockholders' equity:

 

 

 

 

 

 

 

Common stock

 

6,094

 

 

 

6,094

 

Additional paid-in capital

 

299,102

 

 

 

298,865

 

Retained earnings

 

251,000

 

 

 

250,960

 

Accumulated other comprehensive loss

 

(251,690

)

 

 

(260,845

)

 

 

 

 

 

 

 

 

Total NL stockholders' equity

 

304,506

 

 

 

295,074

 

 

 

 

 

 

 

 

 

Noncontrolling interest in subsidiary

 

22,707

 

 

 

23,131

 

 

 

 

 

 

 

 

 

Total equity

 

327,213

 

 

 

318,205

 

 

 

 

 

 

 

 

 

Total liabilities and equity

$

557,492

 

 

$

539,105

 

Commitments and contingencies (Note 14)

 

See accompanying notes to Condensed Consolidated Financial Statements.

 

 

 

4

 


 

NL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

 

 

Three months ended

 

 

March 31,

 

 

2019

 

 

2020

 

 

(unaudited)

 

Net sales

$

31,176

 

 

$

32,311

 

Cost of sales

 

21,552

 

 

 

21,880

 

 

 

 

 

 

 

 

 

Gross margin

 

9,624

 

 

 

10,431

 

 

 

 

 

 

 

 

 

Selling, general and administrative expense

 

5,334

 

 

 

5,411

 

Other operating income (expense):

 

 

 

 

 

 

 

Insurance recoveries

 

283

 

 

 

22

 

Corporate expense

 

(2,055

)

 

 

(2,508

)

 

 

 

 

 

 

 

 

Income from operations

 

2,518

 

 

 

2,534

 

 

 

 

 

 

 

 

 

Equity in earnings of Kronos Worldwide, Inc.

 

9,225

 

 

 

8,207

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

Interest and dividend income

 

1,519

 

 

 

1,131

 

Marketable equity securities

 

5,462

 

 

 

(12,073

)

Other components of net periodic pension and OPEB cost

 

(428

)

 

 

(208

)

Interest expense

 

(9

)

 

 

(352

)

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

18,287

 

 

 

(761

)

 

 

 

 

 

 

 

 

Income tax expense (benefit)

 

2,561

 

 

 

(3,263

)

 

 

 

 

 

 

 

 

Net income

 

15,726

 

 

 

2,502

 

Noncontrolling interest in net income of subsidiary

 

522

 

 

 

592

 

 

 

 

 

 

 

 

 

Net income attributable to NL stockholders

$

15,204

 

 

$

1,910

 

 

 

 

 

 

 

 

 

Amounts attributable to NL stockholders:

 

 

 

 

 

 

 

Basic and diluted net income per share

$

.31

 

 

$

.04

 

 

 

 

 

 

 

 

 

Weighted average shares used in the calculation

   of net income per share

 

48,727

 

 

 

48,756

 

 

See accompanying notes to Condensed Consolidated Financial Statements.

 

 

 

5

 


 

NL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

 

 

Three months ended

 

 

March 31,

 

 

2019

 

 

2020

 

 

(unaudited)

 

Net income

$

15,726

 

 

$

2,502

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

Currency translation

 

(25

)

 

 

(10,118

)

Defined benefit pension plans

 

828

 

 

 

1,043

 

Other postretirement benefit plans

 

(70

)

 

 

(80

)

 

 

 

 

 

 

 

 

Total other comprehensive income (loss), net

 

733

 

 

 

(9,155

)

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

16,459

 

 

 

(6,653

)

Comprehensive income attributable to noncontrolling interest

 

522

 

 

 

592

 

 

 

 

 

 

 

 

 

Comprehensive income (loss) attributable to NL stockholders

$

15,937

 

 

$

(7,245

)

 

See accompanying notes to Condensed Consolidated Financial Statements.

 

6

 


 

NL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

 

 

 

 

 

Three months ended March 31, 2019 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

other

 

 

Noncontrolling

 

 

 

 

 

 

Common

 

 

paid-in

 

 

Retained

 

 

comprehensive

 

 

interest in

 

 

Total

 

 

stock

 

 

capital

 

 

earnings

 

 

income (loss)

 

 

subsidiary

 

 

equity

 

Balance at December 31, 2018

$

6,090

 

 

$

301,139

 

 

$

225,156

 

 

$

(248,270

)

 

$

19,443

 

 

$

303,558

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

-

 

 

 

-

 

 

 

15,204

 

 

 

-

 

 

 

522

 

 

 

15,726

 

Other comprehensive income, net of tax

 

-

 

 

 

-

 

 

 

-

 

 

 

733

 

 

 

-

 

 

 

733

 

Dividends paid to noncontrolling interest

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(117

)

 

 

(117

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2019

$

6,090

 

 

$

301,139

 

 

$

240,360

 

 

$

(247,537

)

 

$

19,848

 

 

$

319,900

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2020 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

other

 

 

Noncontrolling

 

 

 

 

 

 

Common

 

 

paid-in

 

 

Retained

 

 

comprehensive

 

 

interest in

 

 

Total

 

 

stock

 

 

capital

 

 

earnings

 

 

loss

 

 

subsidiary

 

 

equity

 

Balance at December 31, 2019

$

6,094

 

 

$

299,102

 

 

$

251,000

 

 

$

(251,690

)

 

$

22,707

 

 

$

327,213

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

-

 

 

 

-

 

 

 

1,910

 

 

 

-

 

 

 

592

 

 

 

2,502

 

Other comprehensive loss, net of tax

 

-

 

 

 

-

 

 

 

-

 

 

 

(9,155

)

 

 

-

 

 

 

(9,155

)

Dividends paid - $.04 per share

 

-

 

 

 

-

 

 

 

(1,950

)

 

 

-

 

 

 

-

 

 

 

(1,950

)

Dividends paid to noncontrolling interest

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(168

)

 

 

(168

)

Other, net

 

-

 

 

 

(237

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(237

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2020

$

6,094

 

 

$

298,865

 

 

$

250,960

 

 

$

(260,845

)

 

$

23,131

 

 

$

318,205

 

 

 

 

 

 

 

See accompanying notes to Condensed Consolidated Financial Statements.

 

 

7

 


 

NL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)  

 

Three months ended

 

 

March 31,

 

 

2019

 

 

2020

 

 

(unaudited)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

$

15,726

 

 

$

2,502

 

Depreciation and amortization

 

901

 

 

 

950

 

Deferred income taxes

 

2,552

 

 

 

(3,278

)

Equity in earnings of Kronos Worldwide, Inc.

 

(9,225

)

 

 

(8,207

)

Dividends received from Kronos Worldwide, Inc.

 

6,339

 

 

 

6,339

 

Marketable equity securities

 

(5,462

)

 

 

12,073

 

Cash funding of benefit plans in excess of net benefit plan expense

 

9

 

 

 

244

 

Other, net

 

39

 

 

 

225

 

Change in assets and liabilities:

 

 

 

 

 

 

 

Accounts and other receivables, net

 

(3,244

)

 

 

(3,364

)

Inventories, net

 

(1,475

)

 

 

(673

)

Prepaid expenses and other

 

181

 

 

 

129

 

Accounts payable and accrued liabilities

 

(3,949

)

 

 

(3,196

)

Income taxes

 

9

 

 

 

15

 

Accounts with affiliates

 

559

 

 

 

99

 

Accrued environmental remediation and related costs

 

(1,194

)

 

 

(269

)

Other noncurrent assets and liabilities, net

 

(16

)

 

 

(3

)

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

1,750

 

 

 

3,586

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Capital expenditures

 

(439

)

 

 

(360

)

Note receivable from affiliate:

 

 

 

 

 

 

 

Collections

 

11,400

 

 

 

18,228

 

Loans

 

(17,400

)

 

 

(15,628

)

 

 

 

 

 

 

 

 

Net cash provided by (used in) investing activities

 

(6,439

)

 

 

2,240

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Dividends paid

 

-

 

 

 

(1,950

)

Distributions to noncontrolling interests in subsidiary

 

(117

)

 

 

(168

)

 

 

 

 

 

 

 

 

Net cash used in financing activities

 

(117

)

 

 

(2,118

)

 

 

 

 

 

 

 

 

Cash and cash equivalents and restricted cash and cash equivalents - net

   change from:

 

 

 

 

 

 

 

Operating, investing and financing activities

 

(4,806

)

 

 

3,708

 

Balance at beginning of period

 

120,989

 

 

 

157,870

 

 

 

 

 

 

 

 

 

Balance at end of period

$

116,183

 

 

$

161,578

 

 

 

 

 

 

 

 

 

Supplemental disclosures - cash paid (received) for:

 

 

 

 

 

 

 

Interest

$

9

 

 

$

8

 

Income taxes, net

 

(16

)

 

 

(9

)

 

See accompanying notes to Condensed Consolidated Financial Statements.


8

 


 

NL INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

(unaudited)

 

Note 1 – Organization and basis of presentation:

 

Organization – At March 31, 2020, Valhi, Inc. (NYSE: VHI) held approximately 83% of our outstanding common stock and a wholly-owned subsidiary of Contran Corporation held approximately 92% of Valhi’s outstanding common stock. At March 31, 2020, a majority of Contran’s outstanding voting stock was held directly by Lisa K. Simmons and Serena Simmons Connelly and various family trusts established for the benefit of Ms. Simmons and Ms. Connelly and their children and for which Ms. Simmons or Ms. Connelly, as applicable, served as trustee (collectively, the “Other Trusts”). In addition, each of Ms. Simmons and Ms. Connelly served as co-chair of the Contran board of directors.  The remainder of Contran’s outstanding voting stock was held by another trust (the “Family Trust”), which was established for the benefit of Ms. Simmons and Ms. Connelly and their children and for which a third-party financial institution serves as trustee.  Consequently, at March 31, 2020, Ms. Simmons, Ms. Connelly and the Family Trust may be deemed to control Contran, and therefore may be deemed to indirectly control the wholly-owned subsidiary of Contran, Valhi and us.

 

Following the death of Ms. Connelly on April 22, 2020, Ms. Simmons and the Family Trust continue to directly hold their shares of Contran voting stock.  Under the terms of the Contran Corporation Amended and Restated Stockholders Agreement dated September 9, 2019 (the “Contran Stockholders Agreement”), and with respect to the shares of Contran voting stock held directly by Ms. Connelly at the time of her death (the “Connelly Direct Shares”), the independent executor of the estate of Ms. Connelly (prior to the completion of the probate of such estate) and the legatee of the Connelly Direct Shares (following completion of the probate of such estate) is required to vote the Connelly Direct Shares in the same manner as Ms. Simmons.  Also under the terms of the Contran Stockholders Agreement, and with respect to the shares of Contran voting stock held by the Other Trusts for which Ms. Connelly previously served as trustee and for which her successor trustee is someone other than Ms. Simmons (the “Connelly Indirect Shares”), such successor trustee is also required to vote the Connelly Indirect Shares in the same manner as Ms. Simmons. Such voting rights of Ms. Simmons with respect to the Connelly Direct Shares and the Connelly Indirect Shares last through April 22, 2030 and are personal to Ms. Simmons. Consequently, at April 22, 2020, Ms. Simmons and the Family Trust may be deemed to control Contran, and therefore may be deemed to indirectly control the wholly-owned subsidiary of Contran, Valhi and us.

Basis of presentation Consolidated in this Quarterly Report are the results of our majority-owned subsidiary, CompX International Inc.  We also own 30% of Kronos Worldwide, Inc. (Kronos).  CompX (NYSE American: CIX) and Kronos (NYSE: KRO) each file periodic reports with the Securities and Exchange Commission (SEC).

The unaudited Condensed Consolidated Financial Statements contained in this Quarterly Report have been prepared on the same basis as the audited Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2019 that we filed with the SEC on March 11, 2020 (the 2019 Annual Report).  In our opinion, we have made all necessary adjustments (which include only normal recurring adjustments) in order to state fairly, in all material respects, our consolidated financial position, results of operations and cash flows as of the dates and for the periods presented.  We have condensed the Consolidated Balance Sheet at December 31, 2019 contained in this Quarterly Report as compared to our audited Consolidated Financial Statements at that date, and we have omitted certain information and footnote disclosures (including those related to the Consolidated Balance Sheet at December 31, 2019) normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).  Our results of operations for the interim period ended March 31, 2020 may not be indicative of our operating results for the full year.  The Condensed Consolidated Financial Statements contained in this Quarterly Report should be read in conjunction with our 2019 Consolidated Financial Statements contained in our 2019 Annual Report.

Unless otherwise indicated, references in this report to “NL,” “we,” “us” or “our” refer to NL Industries, Inc. and its subsidiaries and affiliate, Kronos, taken as a whole.

 

9

 


 

Note 2 Accounts and other receivables, net:

 

 

December 31,

 

 

March 31,

 

 

2019

 

 

2020

 

 

(In thousands)

 

Trade receivables - CompX

$

11,940

 

 

$

15,302

 

Other receivables

 

59

 

 

 

62

 

Allowance for doubtful accounts

 

(70

)

 

 

(70

)

Total

$

11,929

 

 

$

15,294

 

 

Note 3 – Inventories, net:

 

 

December 31,

 

 

March 31,

 

 

2019

 

 

2020

 

 

(In thousands)

 

Raw materials

$

2,941

 

 

$

3,104

 

Work in process

 

11,771

 

 

 

12,237

 

Finished products

 

3,636

 

 

 

3,621

 

Total

$

18,348

 

 

$

18,962

 

 

Note 4 Marketable securities:

Our marketable securities consist of investments in the publicly-traded shares of our immediate parent company Valhi, Inc.  Our shares of Valhi common stock are accounted for as available-for-sale securities, which are carried at fair value using quoted market prices in active markets and represent a Level 1 input within the fair value hierarchy.  Any unrealized gains or losses on the securities are recognized in Marketable equity securities on our Condensed Consolidated Statements of Income.  

 

 

Fair value

measurement

level

 

Market

value

 

 

Cost basis

 

 

Unrealized

gain (loss)

 

 

 

 

(In thousands)

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

Valhi common stock

1

 

$

26,877

 

 

$

24,347

 

 

$

2,530