NL INDUSTRIES INC - Annual Report: 2010 (Form 10-K)

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 - For the fiscal year ended December 31, 2010
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	75240-2697
(Address of principal executive offices)	(Zip Code)
Registrant's telephone number, including area code:          (972) 233-1700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Name of each exchange on     which registered
Common stock	New York Stock Exchange

·	The registrant has not yet been phased into the interactive data requirements.

 

ITEM 1.  BUSINESS

The Company

·	Future supply and demand for our products;

·	The extent of the dependence of certain of our businesses on certain market sectors;

·	The cyclicality of our businesses (such as Kronos’ TiO2 operations);

·	Changes in raw material and other operating costs (such as energy, ore and steel costs)and our ability to pass those costs on to our customers or offset them with reductions in other operating costs;

·	Changes in the availability of raw material (such as ore)

·	General global economic and political conditions (such as changes in the level of gross domestic product in various regions of the world and the impact of such changes on demand for, among other things, TiO2 and component products);

·	Possible disruption of our business or increases in the cost of doing business resulting from terrorist activities or global conflicts;

·	Competitive products and prices, including increased competition from low-cost manufacturing sources (such as China);

·	Customer and competitor strategies;

·	Potential consolidation of Kronos’ competitors;

·	Demand for office furniture;

·	Substitute products;

·	The impact of pricing and production decisions;

·	Competitive technology positions;

·	Our ability to protect our intellectual property rights in our technology;

·	The introduction of trade barriers;

·	Service industry employment levels;

·	Fluctuations in currency exchange rates (such as changes in the exchange rate between the U.S. dollar and each of the euro, the Norwegian krone, the Canadian dollar and the New Taiwan dollar);

·	Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions, unscheduled or unplanned downtime and transportation interruptions);

·	The timing and amounts of insurance recoveries,

·	Our ability to maintain sufficient liquidity;

·	The extent to which our subsidiaries were to become unable to pay us dividends;

·	CompX’s and Kronos’ ability to renew or refinance debt;

·	CompX’s ability to comply with covenants contained in its revolving bank credit facility;

·	The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters;

·	Potential difficulties in integrating completed or future acquisitions,

·	Decisions to sell operating assets other than in the ordinary course of business;

·	Uncertainties associated with the development of new product features;

·	Our ability to utilize income tax attributes or changes in income tax rates related to such attributes, the benefits of which have been recognized under the more-likely-than-not recognition criteria;

·	Environmental matters (such as those requiring compliance with emission and discharge standards for existing and new facilities or new developments regarding environmental remediation at sites related to our former operations);

·

Government laws and regulations and possible changes therein (such as changes in government regulations which might impose various obligations on present and former manufacturers of lead pigment and lead-based paint, including us, with respect to asserted health concerns associated with the use of such products);

·	The ultimate resolution of pending litigation (such as our lead pigment and environmental matters); and

·	Possible future litigation.

Information regarding our operations and the companies conducting such operations is set forth below.  Geographic financial information is included in Note 2 to the Consolidated Financial Statements, which is incorporated herein by reference.

COMPONENT PRODUCTS - COMPX INTERNATIONAL INC.

 
 

·	disc tumbler locks which provide moderate security and generally represent the lowest cost lock to produce;

·

pin tumbler locking mechanisms which are more costly to produce and are used in applications requiring higher levels of security, including our TuBar® and our KeSet® and System 64 high security systems, which allow the user to change the keying on a single lock 64 times without removing the lock from its enclosure; and

·	innovative eLock electronic locks which provide stand-alone or networked security and audit trail capability for drug storage and other valuables through the use of a proximity card, magnetic stripe or keypad credentials.

·	the patented Integrated Slide Lock which allows a file cabinet manufacturer to reduce the possibility of multiple drawers being opened at the same time;

·	the patented adjustable Ball Lock which reduces the risk of heavily-filled drawers, such as auto mechanic tool boxes, from opening while in movement;

·	the Self-Closing Slide, which is designed to assist in closing a drawer and is used in applications such as bottom-mount freezers;

·

articulating computer keyboard support arms (designed to attach to desks in the workplace and home office environments to alleviate possible user strains and stress and maximize usable workspace), along with the patented LeverLock keyboard arm, which is designed to make ergonomic adjustments to the keyboard arm easier;

·	CPU storage devices which minimize adverse effects of dust and moisture;

·	flat panel computer monitor support systems designed to support one to eight screens which can be adjusted for tilt, swing and rotation to enable achievement of the correct ergonomic position; and

·	complementary ergonomic accessories, such as ergonomic wrist rest aids and mouse pad supports.

·	original equipment and aftermarket stainless steel exhaust headers, exhaust pipes, mufflers and other exhaust components;

·	high performance gauges such as GPS speedometers and tachometers;

·	controls, throttles, steering wheels and other billet accessories; and

·	dash panels, LED lighting, rigging and other accessories.

Security Products		Furniture Components		Marine Components
Mauldin, SC Grayslake, IL		Kitchener, Ontario Byron Center, MI Taipei, Taiwan		Neenah, WI Grayslake, IL

·	coiled steel (used in the Furniture Components business for the manufacture of precision ball bearing slides and ergonomic computer support systems);

·	zinc and brass (used in the Security Products business for the manufacture of locking mechanisms);

·	stainless steel (used in the Marine Components business for the manufacture of exhaust headers, pipes and other components); and

·	plastic resins (primarily used in the Furniture Components business for injection molded plastics in the manufacture of ergonomic computer support systems).

Furniture Components		Security Products		Marine Components
CompX Precision Slides®		CompX Security Products®		Custom Marine®
CompX Waterloo®		National Cabinet Lock®		Livorsi Marine®
CompX ErgonomX®		Fort Lock®		CMI Industrial Mufflers™
CompX DurISLide®		Timberline®		Custom Marine Stainless
Dynaslide®		Chicago Lock®		Exhaust™
Waterloo Furniture		STOCK LOCKS®		The #1 Choice in
Components Limited®		KeSet®		Performance Boating®
		TuBar®		Mega Rim™
		ACE II®		Race Rim™
		CompX eLock®		CompX Marine™
		Lockview® Software

United States			546
Canada(1)			208
Taiwan			74
Total			828

(1)	Approximately 75% of the Canadian employees are represented by a labor union covered by a collective bargaining agreement that expires in January 2012, which provides for wage increases from 0% to 1% over the term of the contract.

 
 

	2008	2009	2010
Europe	19%	19%	22%
North America	16%	16%	19%

 

 

·

Kronos owns and operates two ilmenite mines in Norway pursuant to a governmental concession with an unlimited term.  Kronos commenced production from its second mine in 2009.  Ilmenite is a raw material used directly as a feedstock by some sulfate-process TiO2 plants.  We believe that Kronos has a significant competitive advantage because its mines supply the feedstock requirements for all of its European sulfate-process plants.  Kronos also sells ilmenite ore to third-parties, some of which are competitors.  The mines have estimated ilmenite reserves that are expected to last at least 60 years.

 

·

Kronos manufactures and sells iron-based chemicals, which are co-products and processed co-products of the sulfate and chloride process TiO2 pigment production.  These co-product chemicals are marketed through Kronos’ Ecochem division and are primarily used as treatment and conditioning agents for industrial effluents and municipal wastewater as well as for the manufacture of iron pigments, cement and agricultural products.

 

·

Kronos manufactures and sells titanium oxychloride and titanyl sulfate, which are side-stream specialty products from the production of TiO2.  Titanium oxychloride is used in specialty applications in the formulation of pearlescent pigments, production of electroceramic capacitors for cell phones and other electronic devices.  Titanyl sulfate productions are used in pearlescent pigments, natural gas pipe and other specialty applications.

 

·

Chloride Process.  The chloride process is a continuous process in which chlorine is used to extract rutile TiO2.  The chloride process typically has lower manufacturing costs than the sulfate process due to higher yield, less waste, lower energy requirements and lower labor costs.  This process has also gained market share over the sulfate process because of the relatively lower upfront capital investment in plant and equipment required.  The chloride process produces less waste than the sulfate process because much of the chlorine is recycled and feedstock bearing higher titanium content is used.  The chloride process produces an intermediate base pigment with a wide range of properties.

·

Sulfate Process. The sulfate process is a batch process in which sulfuric acid is used to extract the TiO2 from ilmenite or titanium slag.  After separation from the impurities in the ore (mainly iron) the TiO2 is precipitated and calcined to form an intermediate base pigment ready for sale or can be upgraded through finishing treatment.

 
 

 

 

(1)

The Leverkusen facility is located within an extensive manufacturing complex owned by Bayer AG.  Kronos owns the Leverkusen facility, which represents about one-third of its current TiO2 production capacity, but it leases the land under the facility from Bayer under a long-term agreement which expires in 2050.  Lease payments are periodically negotiated with Bayer for periods of at least two years at a time.  Bayer or its affiliates provides some raw materials, including chlorine, auxiliary and operating materials, utilities and services necessary to operate the Leverkusen facility under separate supplies and services agreements.

 

(2)

The Fredrikstad plant is located on public land and is leased until April 2013 with an option to extend the lease for an additional 50 years.

 

(3)

Kronos operates this facility in a 50/50 joint venture with Tioxide Americas Inc., a subsidiary of Huntsman Corporation.

 

 

Production Process/Raw Material	Raw Materials Procured or Mined
	(In thousands of metric tons)
Chloride process plants:
Purchased slag or natural rutile ore	439
Sulfate process plants:
Ilmenite ore mined and used internally	328
Purchased slag	31

 

 
 

Worldwide Production Capacity - 2010
DuPont			23	%
Cristal			14	%
Kronos			10	%
Huntsman			9	%
Tronox			7	%
Other			37	%

 

 
 

 

Europe			2,000
Canada			400
United States (1)			40
Total			2,440

(1)	Excludes employees of Kronos’ Louisiana joint venture.

 

 

 

 

·	Competitors may be able to drive down prices for our products because their costs are lower than our costs, especially products sourced from Asia.

·	Competitors' financial, technological and other resources may be greater than our resources, which may enable them to more effectively withstand changes in market conditions.

·	Competitors may be able to respond more quickly than we can to new or emerging technologies and changes in customer requirements.

·	Consolidation of our competitors or customers in any of the markets in which we compete may result in reduced demand for our products.

·	New competitors could emerge by modifying their existing production facilities to manufacture products that compete with our products.

·	We may not be able to sustain a cost structure that enables us to be competitive.

·	Customers may no longer value our product design, quality or durability over the lower cost products of our competitors.

 
 

·	the identification of suitable growth opportunities;

·	an inaccurate assessment of acquired liabilities;

·	the entry into markets in which we may have limited or no experience;

·	the diversion of management’s attention from our core businesses;

·	the potential loss of key employees or customers of the acquired businesses;

·	difficulties in realizing projected efficiencies, synergies and cost savings and

·	an increase in our indebtedness and a limitation in our ability to access additional capital when needed.

 

·	making it more difficult for Kronos to satisfy its obligations with respect to its liabilities;

·	increasing its vulnerability to adverse general economic and industry conditions;

·	requiring that a portion of Kronos’ cash flows from operations be used for the payment of interest on its debt, which reduces its ability to use cash flow to fund working capital, capital expenditures, dividends on our common stock, acquisitions or general corporate requirements;

·	limiting its ability to obtain additional financing to fund future working capital, capital expenditures, dividends on its common stock, acquisitions or general corporate requirements;

·	limiting its flexibility in planning for, or reacting to, changes in Kronos’ business and the industry in which it operates and

·	placing it at a competitive disadvantage relative to other less leveraged competitors.

 
 

ITEM 3.

LEGAL PROCEEDINGS

 

·	complexity and differing interpretations of governmental regulations;

·	number of PRPs and their ability or willingness to fund such allocation of costs;

·	financial capabilities of the PRPs and the allocation of costs among them;

·	solvency of other PRPs;

·	multiplicity of possible solutions;

·	number of years of investigatory, remedial and monitoring activity required; and

·	number of years between former operations and notice of claims and lack of information and documents about the former operations.

 

 
 

		High				Low				Cash dividends  paid
Year ended December 31, 2009
First Quarter		$	14.35			$	7.14			$	.125
Second Quarter			12.85				6.74				.125
Third Quarter			7.65				6.46				.125
Fourth Quarter			7.27				6.12				.125
Year ended December 31, 2010
First Quarter			8.85				6.59				.125
Second Quarter			8.92				6.07				.125
Third Quarter			10.28				6.20				.125
Fourth Quarter			12.14				8.54				.125
January 1, 2011 through February 28, 2011		$	14.52			$	11.01			$	-

		2005				2006				2007				2008				2009				2010
NL common stock		$	100			$	77			$	89			$	109			$	60			$	103
S&P 500 Composite Stock Price Index			100				116				122				77				97				112
S&P 500 Industrial Conglomerates Index			100				109				113				55				61				72

 

		Years ended December 31,
		2006				2007				2008				2009				2010
		(In millions, except per share data)
STATEMENTS OF OPERATIONS DATA:
Net sales		$	190.1			$	177.7			$	165.5			$	116.1			$	135.3
Income (loss) from component products operations		$	20.5			$	15.4			$	5.3	(1)		$	(4.0	)		$	9.4
Equity in earnings (losses) of Kronos		$	29.3			$	(23.9	)		$	3.2			$	(12.5	)		$	45.6
Net income (loss)		$	29.6			$	.9			$	32.8			$	(12.0	)		$	70.8
Net income (loss) attributable to NL stockholders		$	26.1			$	(1.7	)		$	33.2			$	(11.8	)		$	70.4
DILUTED EARNINGS PER SHARE DATA:
Net income (loss) attributable    to NL stockholders		$	.54			$	(.04	)		$	.68			$	(.24	)		$	1.40
Cash dividends per share		$	.50			$	.50			$	.50			$	.50			$	.50
Weighted average common shares outstanding			48,584				48,590				48,605				48,609				48,627
BALANCE SHEET DATA (at year end):
Total assets (3)		$	529.3			$	524.8			$	419.5			$	403.0			$	553.7
Long-term debt, including current maturities (2)			-				50.0				43.0				42.2				74.5
NL stockholders' equity (3)(4)			248.5				246.5				188.4				174.6				252.9
Total equity			293.9				260.8				200.2				185.7				263.9
STATEMENT OF CASH FLOW DATA:
Net cash provided by (used in):
Operating activities		$	29.0			$	(2.8	)		$	.8			$	1.4			$	5.4
Investing activities			(25.2	)			17.5				7.1				32.4				2.8
Financing activities			(27.7	)			(27.3	)			(32.2	)			(25.9	)			(17.8	)

(1)Includes a $10.1 million goodwill impairment charge related to our Marine Components reporting unit.  See Note 7 to our Consolidated Financial Statements.

(2)Long-term debt includes promissory notes payable to affiliates.  See Note 17 to our Consolidated Financial Statements.

(3)We adopted the asset and liability recognition provisions of Accounting Standard Codification (“ASC”) Topic 715 as of December 31, 2006 and the measurement date provisions of the Topic as of December 31, 2007.  See Notes 16 to our Consolidated Financial Statements.

(4)We adopted the uncertain tax position provisions of ASC Topic 740 as of January 1, 2007.  See Note 15 to our Consolidated Financial Statements.

·	equity in net income from Kronos in 2010 as compared to equity in losses in 2009,

·	a pre-tax gain of $78.9 million ($51.0 million, net of taxes) on our reduction in ownership interest in Kronos in 2010,

·	lower pre-tax litigation settlement gains of $6 million in 2010,

·	income from operations from component products in 2010 as compared to a loss in 2009,

·	a litigation settlement expense in 2010 as discussed below,

·	lower environmental remediation expense in 2010,

·	lower litigation and related expenses in 2010, and

·	higher insurance recoveries in 2010 primarily related to the litigation settlement expense.

·	equity in net losses of Kronos in 2009 as opposed to earnings in 2008,

·	lower litigation settlement gains of $37.5 million in 2009,

·	lower component products income from operations in 2009, including consideration of the impact of the $10.1 million goodwill impairment charge related to the marine components business line recognized in 2008,

·	higher defined benefit pension expense in 2009,

·	lower litigation and related expenses in 2009,

·	lower environmental remediation expense in 2009 and

·	lower insurance recoveries in 2009.

·	income of $1.05 per share related to the decrease in our ownership interest in Kronos from 36% to 30% in 2010,

·	income included in our equity in earnings of Kronos of $.17 per share related to an income tax benefit recognized by Kronos in the first quarter related to a European Court ruling that resulted in the favorable resolution of certain German income tax issues,

·	income of $.25 per share related to certain insurance recoveries we recognized,

·	income of $.07 per share related to a settlement agreement we entered into with another PRP for certain environmental matters,

·	a charge of $.43 per share related to a litigation settlement expense,

·	a charge of $.03 per share, net of noncontrolling interest, related to the recognition of a deferred income tax liability associated with a determination that certain undistributed earnings of CompX’s Taiwanese subsidiary can no longer be considered to be permanently reinvested, and

·	a write-down of assets held for sale of $.01 per share.

·	a litigation settlement gain of $.15 per share related to the settlement of condemnation proceedings on real property we owned,

·	income of $.06 per share related to certain insurance recoveries, and

·	a write-down of assets held for sale of $.01 per share.

·	a litigation settlement gain of $.65 per diluted share related to the settlement of condemnation proceedings on real property we owned,

·	a goodwill impairment charge of $.21 per diluted share related to the marine business line of our component products operations,

·	interest income of $.06 per diluted share related to certain escrow funds,

·	income included in our equity in earnings of Kronos of $.03 per diluted share related to an adjustment of certain income tax attributes of Kronos in Germany, and

·	income of $.13 per diluted share related to certain insurance recoveries.

·	the gain recorded on our reduction in ownership interest in Kronos in 2010,

·	higher equity in earnings from Kronos in 2011,

·	the litigation settlement charge recorded in 2010,

·	lower insurance recoveries in 2011, and

·	higher component products income from operations in 2011.

·

Investments - We own investments in certain companies that we account for as marketable securities carried at fair value or that we account for under the equity method.  For these investments, we evaluate the fair value at each balance sheet date.  We use quoted market prices, Level 1 inputs as defined in Accounting Standards Codification (“ASC”) 820-10-35, Fair Value Measurements and Disclosures, to determine fair value for certain of our marketable debt securities and publicly traded investees.  We record an impairment charge when we believe an investment has experienced an other than temporary decline in fair value below its cost basis (for marketable securities) or below its carrying value (for equity method investees). Further adverse changes in market conditions or poor operating results of underlying investments could result in losses or our inability to recover the carrying value of the investments that may not be reflected in an investment’s current carrying value, thereby possibly requiring us to recognize an impairment charge in the future.

·

Long-lived assets - We assess property and equipment for impairment only when circumstances (as specified in ASC 360-10-35, Property, Plant, and Equipment) indicate an impairment may exist.  Our determination is based upon, among other things, our estimates of the amount of future net cash flows to be generated by the long-lived asset (Level 3 inputs) and our estimates of the current fair value of the asset.  Considerable management judgment is necessary to evaluate the impact of operating changes and to estimate future cash flows.  Assumptions used in our impairment evaluations, such as forecasted growth rates and our cost of capital, are consistent with our internal projections and operating plans.

 
 

·

Goodwill - We perform a goodwill impairment test annually in the third quarter of each year.  Goodwill is also evaluated for impairment at other times whenever an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.  The estimated fair values of CompX’s three reporting units are determined using Level 3 inputs of a discounted cash flow technique since Level 1 inputs of market prices are not available at the reporting unit level.  If the fair value is less than the book value, the asset is written down to the estimated fair value.

·

Benefit plans - We maintain various defined benefit pension plans and postretirement benefits other than pensions (“OPEB”).  The amounts recognized as defined benefit pension and OPEB expenses and the reported amounts of pension asset and accrued pension and OPEB costs are actuarially determined based on several assumptions, including discount rates, expected rates of returns on plan assets and expected health care trend rates.  Variances from these actuarially assumed rates will result in increases or decreases, as applicable, in the recognized pension and OPEB obligations, pension and OPEB expenses and funding requirements. These assumptions are more fully described below “Assumptions on defined benefit pension plans and OPEB plans.”

·

Income taxes - We recognize deferred taxes for future tax effects of temporary differences between financial and income tax reporting.  While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance, it is possible that in the future we may change our estimate of the amount of the deferred income tax assets that would more-likely-than-not be realized in the future resulting in an adjustment to the deferred income tax asset valuation allowance that would either increase or decrease, as applicable, reported net income in the period the change in estimate was made.

·

Accruals - We record accruals for environmental, legal and other contingencies and commitments when estimated future expenditures associated with such contingencies become probable, and the amounts can be reasonably estimated.  However, new information may become available, or circumstances (such as applicable laws and regulations) may change, thereby resulting in an increase or decrease in the amount required to be accrued for such matters (and therefore a decrease or increase in reported net income in the period of such change).

·

Assets Held for Sale - Our assets held for sale at December 31, 2010, consist of a facility in River Grove, Illinois and land in Neenah, Wisconsin.  These two properties (primarily land, buildings and building improvements) were formerly used in CompX’s operations.  During the third quarter of 2010, and as weak economic conditions continued longer than expected, we obtained an independent appraisal for the River Grove facility (the most significant of these two properties).  Based on this appraisal, we recorded a write-down of $.5 million during the third quarter of 2010 to reduce the carrying value of the asset to its estimated fair value less cost to sell.  During the fourth quarter of 2010, we obtained an independent appraisal for the Neenah land.  Based on this appraisal, we determined the carrying value of the asset approximates the fair value less cost to sell and therefore no adjustment to the carrying value was deemed necessary.  The combined carrying value of these two properties is $2.4 million at December 31, 2010.  The appraisals represent a Level 2 input.  Both properties are being actively marketed.  However, due to the current state of the commercial real estate market, we cannot be certain of the timing of the disposition of the assets.  If we continue to experience difficulty in disposing of the assets at or above their carrying value, we may have to record additional write-downs of the assets in the future.

·	Chemicals – allowance for doubtful accounts, impairment of equity method investments, long-lived assets, defined benefit pension and OPEB plans, loss accruals and income taxes, and

·	Component products – impairment of goodwill and long-lived assets, loss accruals and income taxes.

 

		Year ended December 31,												% Change
		2008				2009				2010					2008-09				2009-10
		(Dollars in millions)
CompX		$	5.3			$	(4.0	)		$	9.4				(175	)%			335	%
Insurance recoveries			9.6				4.6				18.8				(52	)%			306	%
Litigation settlement gain			48.8				11.3				5.3				(77	)%			(53	)%
Litigation settlement expense			-				-				(32.2	)			-				100	%
Corporate expense and other			(24.9	)			(23.5	)			(15.5	)			(6	)%			(34	)%
Income (loss) from operations		$	38.8			$	(11.6	)		$	(14.2	)			(130	)%			23	%

		Year ended December 31,												% Change
		2008				2009				2010					2008-09				2009-10
		(Dollars in millions)
Equity in earnings (loss) of Kronos		$	3.2			$	(12.5	)		$	45.6				(486	)%		n.m.
Gain on reduction in ownership in Kronos Worldwide, Inc.			-				-				78.9				-			n.m.
Interest and dividend income			8.0				2.7				2.4				(66	)%			(11	)%
Interest expense			(2.4	)			(1.1	)			(1.5	)			(55	)%			42	%

________________________________

		Year ended December 31,												% Change
		2008				2009				2010					2008-09				2009-10
		(Dollars in millions)
Net sales		$	165.5			$	116.1			$	135.3				(30	)%			17	%
Cost of sales			125.7				92.3				99.3				(27	)%			8	%
Gross margin			39.8				23.8				36.0				(40	)%			51	%
Goodwill impairment			10.1				-				-				(100	)%			-
Operating costs and expenses			24.4				27.1				26.1				11	%			(4	)%
Assets held for sale write-down			-				.7				.5				100	%			(29	)%
Income(loss)from operations		$	5.3			$	(4.0	)		$	9.4				(175	)%			335	%
Percentage of net sales:
Cost of sales			76	%			80	%			73	%
Gross margin			24	%			20	%			27	%
Operating costs and expenses			21	%			23	%			19	%
Income (loss) from operations			3	%			(3	)%			7	%