NL Industries(NL) - 2024 Q1 - Quarterly Results

First Quarter 2024 Financial Highlights This section highlights NL Industries' financial performance in Q1 2024, noting a significant turnaround from a net loss to net income NL Industries Overall Performance NL Industries reported a significant turnaround in Q1 2024, moving from a net loss to net income attributable to stockholders, primarily driven by an unrealized gain on marketable equity securities NL Industries Key Financial Metrics | Metric (in $M, except per share amounts) | Q1 2024 | Q1 2023 | | :-------------------------------------- | :------ | :------ | | Net income (loss) attributable to NL stockholders | $6.8M | -$6.7M | | Net income (loss) per share attributable to NL stockholders | $0.14 | -$0.14 | | Unrealized gain (loss) on marketable equity securities | $2.4M | -$5.5M | Segment Performance Analysis This section analyzes the performance of CompX and Kronos segments, highlighting sales trends, operational income, and key contributing factors CompX Segment Results CompX experienced a decrease in net sales and income from operations in Q1 2024, mainly due to lower Marine Components sales, despite some offset from higher Security Products sales CompX Segment Financials | Metric (in $M) | Q1 2024 | Q1 2023 | Change | | :-------------------------- | :------ | :------ | :----- | | Net Sales | $38.0M | $41.2M | -$3.2M | | Income from Operations | $3.7M | $7.0M | -$3.3M | - Decrease in net sales primarily due to lower Marine Components sales to the towboat market, partially offset by higher Security Products sales to the government security market[3] - Decrease in income from operations predominantly due to lower Marine Components sales and gross margin[3] Kronos Segment Results Kronos segment results show significant improvements in net sales and operational income, driven by increased TiO2 sales volumes and lower production costs Kronos Net Sales Drivers Kronos' net sales increased by 12% in Q1 2024, primarily due to a 28% rise in TiO2 sales volumes driven by strengthening demand, which more than offset an 11% decline in average TiO2 selling prices. Favorable currency exchange rates also contributed Kronos Net Sales Performance | Metric (in $M) | Q1 2024 | Q1 2023 | Change | | :---------------- | :------ | :------ | :----- | | Net Sales | $478.8M | $426.3M | +$52.5M | | Equity in Earnings (Losses) | $2.5M | -$4.6M | +$7.1M | Kronos Net Sales Change Breakdown | Factor | Percentage Change in Net Sales (Q1 2024 vs. Q1 2023) | | :-------------------------- | :------------------------------------------------ | | TiO2 sales volume | 28% | | TiO2 product pricing | (11)% | | Product mix/other TiO2 | (6)% | | Changes in currency exchange rates | 1% | | Total | 12% | - Average TiO2 selling prices were 11% lower in Q1 2024 compared to Q1 2023, and declined 2% during Q1 2024[4] Kronos Operational Performance Kronos' income from operations significantly improved to $19.5 million in Q1 2024 from a loss of $18.3 million in Q1 2023, driven by higher sales and production volumes, lower production costs (energy, raw materials), and increased capacity utilization Kronos Operational Metrics | Metric (in $M) | Q1 2024 | Q1 2023 | Change | | :----------------------- | :------ | :------ | :----- | | Income (Loss) from Operations | $19.5M | -$18.3M | +$37.8M | - TiO2 production volumes were 15% higher in Q1 2024 compared to Q1 2023[5] - Capacity utilization increased from 76% in Q1 2023 to 87% in Q1 2024 due to improved demand and a more favorable production cost environment[5] Other Financial and Operational Details This section details corporate expenses, interest and dividend income, and specific income/loss adjustments impacting NL Industries' financial results Corporate Expenses and Other Income Corporate expenses decreased in Q1 2024 due to lower litigation fees, partially offset by higher environmental remediation costs. Interest and dividend income increased due to higher interest rates and investment balances - Corporate expenses decreased by $0.4 million in Q1 2024, primarily due to lower litigation fees and related costs, somewhat offset by higher environmental remediation and related costs[6] - Interest and dividend income increased by $0.6 million in Q1 2024, primarily due to higher average interest rates and increased investment balances[6] Specific Income/Loss Adjustments NL Industries' Q1 2024 net income included a loss of $0.3 million from Kronos' write-off of deferred financing costs, contrasting with Q1 2023 which included income from Kronos' insurance settlement gain - Q1 2024 net income attributable to NL stockholders includes a loss of $0.3 million (net of tax) due to Kronos' recognition of an aggregate charge related to a write-off of deferred financing costs[7] - Q1 2023 net loss attributable to NL stockholders included income of $0.4 million (net of tax) due to Kronos' recognition of a pre-tax insurance settlement gain related to a business interruption insurance claim from Hurricane Laura in 2020[7][8] Business Overview and Future Outlook This section provides an overview of NL Industries' business segments and outlines forward-looking statements and key risk factors affecting future performance NL Industries Business Description NL Industries, Inc. operates in two main business areas: component products (security products and recreational marine components) and chemicals (TiO2) - NL Industries, Inc. is engaged in component products (security products and recreational marine components) and chemicals (TiO2) businesses[12] Forward-Looking Statements and Risk Factors The report includes forward-looking statements based on management's beliefs, acknowledging substantial risks and uncertainties that could cause actual future results to differ materially. Key risk factors include supply/demand fluctuations, cyclicality, raw material costs, global economic conditions, operating interruptions, technology disruptions, competition, and regulatory changes - Forward-looking statements represent management's beliefs and assumptions, but actual future results could differ materially due to substantial risks and uncertainties[9] - Factors that could cause actual future results to differ materially include future supply and demand for products, business cyclicality (such as Kronos' TiO2 operations), changes in raw material and other operating costs, general global economic and political conditions, operating interruptions, technology related disruptions, competitive products and substitute products, and government laws and regulations[10][13] Condensed Financial Information This section presents condensed consolidated financial statements, detailing operational income components and the breakdown of Kronos' net sales changes Condensed Consolidated Statements of Operations The condensed consolidated statements show NL Industries' shift from a net loss to net income in Q1 2024, with significant improvements in equity in earnings of Kronos and marketable equity securities, despite a decrease in net sales and gross margin Condensed Consolidated Statements of Operations | Metric (In millions, except EPS) | Q1 2024 | Q1 2023 | | :----------------------------------- | :------ | :------ | | Net sales | $38.0 | $41.2 | | Cost of sales | $28.3 | $28.5 | | Gross margin | $9.7 | $12.7 | | Selling, general and administrative expense | $6.0 | $5.7 | | Corporate expense | $2.4 | $2.8 | | Income from operations | $1.3 | $4.2 | | Equity in earnings (losses) of Kronos | $2.5 | ($4.6) | | Interest and dividend income | $2.6 | $2.0 | | Marketable equity securities | $2.4 | ($5.5) | | Income (loss) before income taxes | $8.3 | ($4.5) | | Income tax expense | $1.0 | $1.4 | | Net income (loss) | $7.3 | ($5.9) | | Noncontrolling interest | $0.5 | $0.8 | | Net income (loss) attributable to NL stockholders | $6.8 | ($6.7) | | Net income (loss) per share attributable to NL stockholders | $0.14 | ($0.14) | | Weighted average shares | 48.8 | 48.8 | Components of Income from Operations This table provides a breakdown of NL Industries' income from operations, showing a decrease in CompX's contribution and a reduction in corporate expenses, leading to a lower overall income from operations Income from Operations Components | Metric (In millions) | Q1 2024 | Q1 2023 | | :------------------------- | :------ | :------ | | CompX - component products | $3.7 | $7.0 | | Corporate expense | ($2.4) | ($2.8) | | Income from operations | $1.3 | $4.2 | Change in Kronos' Net Sales Breakdown This table details the specific factors contributing to the 12% increase in Kronos' net sales in Q1 2024, primarily highlighting the positive impact of TiO2 sales volume growth and the negative effect of product pricing Kronos Net Sales Change Breakdown | Factor | Percentage Change in Net Sales (Q1 2024 vs. Q1 2023) | | :-------------------------- | :------------------------------------------------ | | TiO2 sales volume | 28% | | TiO2 product pricing | (11)% | | Product mix/other TiO2 | (6)% | | Changes in currency exchange rates | 1% | | Total | 12% |