Business and Geographic Segments

12 Months Ended

Dec. 31, 2021

Segment Reporting [Abstract]

Business and Geographic Segments

Note 2 – Business and geographic segments:

		% controlled at
Business segment	Entity	December 31, 2021
Chemicals	Kronos	80%
Component products	CompX	87%
Real estate management and development	BMI and LandWell	63% - 77%

Our control of Kronos includes 50% we hold directly and 30% held directly by NL. We own 83% of NL. Our control of CompX is through NL. We own 63% of BMI. Our control of LandWell includes the 27% we hold directly and 50% held by BMI. See Note 3.

We are organized based upon our operating subsidiaries. Our operating segments are defined as components of our consolidated operations about which separate financial information is available that is regularly evaluated by our chief operating decision maker in determining how to allocate resources and in assessing performance. Each operating segment is separately managed and each operating segment represents a strategic business unit offering different products.

We have the following three consolidated reportable operating segments.

● Chemicals – Our Chemicals Segment is operated through our majority control of Kronos. Kronos is a leading global producer and marketer of value-added titanium dioxide pigments (“TiO₂”). TiO₂ is used to impart whiteness, brightness, opacity and durability to a wide variety of products, including paints, plastics, paper, fibers and ceramics. Additionally, TiO₂ is a critical component of everyday applications, such as coatings, plastics and paper, as well as many specialty products such as inks, foods and cosmetics. See Note 7.

● Component Products – We operate in the component products industry through our majority control of CompX. CompX is a leading manufacturer of security products used in the recreational transportation, postal, office and institutional furniture, tool storage, healthcare and a variety of other industries. CompX is also a leading manufacturer of stainless steel exhaust systems, gauges, throttle controls, wake enhancement systems, trim tabs and related hardware and accessories for the recreational marine industry.  All CompX production facilities are in the United States.

● Real Estate Management and Development – We operate in real estate management and development through our majority control of BMI and LandWell. BMI provides utility services to certain industrial and municipal customers and owns real property in Henderson, Nevada. LandWell is engaged in efforts to develop certain land holdings for commercial, industrial and residential purposes in Henderson, Nevada.

We evaluate segment performance based on segment operating income, which we define as income before income taxes and interest expense, exclusive of certain non-recurring items (such as gains or losses on disposition of business units and other long-lived assets outside the ordinary course of business and certain legal settlements) and certain general corporate income and expense items (including securities transactions gains and losses and interest and dividend income), which are not attributable to the operations of the reportable operating segments. The accounting policies of our reportable operating segments are the same as those described in Note 1. Segment results we report may differ from amounts separately reported by our various subsidiaries and affiliates due to purchase accounting adjustments and related amortization or differences in how we define operating income. Intersegment sales are not material.

Interest income included in the calculation of segment operating income is not material in 2019, 2020 or 2021. Capital expenditures include additions to property and equipment. Depreciation and amortization related to each reportable operating segment includes amortization of any intangible assets attributable to the segment. Amortization of deferred financing costs and any premium or discount associated with the issuance of indebtedness is included in interest expense.

Segment assets are comprised of all assets attributable to each reportable operating segment, including goodwill and other intangible assets. Our investment in the TiO₂ manufacturing joint venture (see Note 7) is included in the

Chemicals Segment’s assets. Corporate assets are not attributable to any operating segment and consist principally of cash and cash equivalents, restricted cash and restricted cash equivalents and marketable securities.

	Years ended December 31,
	2019		2020		2021
	(In millions)
Net sales:
Chemicals	$	1,731.2	$	1,638.8	$	1,939.4
Component products		124.2		114.5		140.8
Real estate management and development		42.1		96.4		216.2
Total net sales	$	1,897.5	$	1,849.7	$	2,296.4
Cost of sales:
Chemicals	$	1,346.8	$	1,291.0	$	1,494.5
Component products		85.3		81.7		98.1
Real estate management and development		30.8		64.9		123.6
Total cost of sales	$	1,462.9	$	1,437.6	$	1,716.2
Gross margin:
Chemicals	$	384.4	$	347.8	$	444.9
Component products		38.9		32.8		42.7
Real estate management and development		11.3		31.5		92.6
Total gross margin	$	434.6	$	412.1	$	580.2
Operating income:
Chemicals	$	160.1	$	126.5	$	200.8
Component products		17.8		11.8		20.5
Real estate management and development		14.8		47.8		97.3
Total operating income		192.7		186.1		318.6
General corporate items:
Securities earnings		11.2		4.7		4.0
Insurance recoveries		7.7		1.6		.1
Gain on land sales		4.4		.5		16.0
Gain on sale of business		3.0		—		—
Other components of net periodic pension and   OPEB expense		(16.5)		(20.1)		(17.0)
Litigation settlement expense, net		(19.3)		—		—
Changes in market value of Valhi common stock held by   subsidiaries		(.2)		(1.7)		3.3
General expenses, net		(37.5)		(34.3)		(34.7)
Interest expense		(40.8)		(36.2)		(32.5)
Income from continuing operations before income taxes	$	104.7	$	100.6	$	257.8

Infrastructure reimbursements and land related income is included in the determination of Real Estate Management and Development operating income. See Notes 7 and 13.

	Years ended December 31,
	2019		2020		2021
	(In millions)
Depreciation and amortization:
Chemicals	$	50.2	$	61.9	$	52.8
Component products		3.7		3.8		3.8
Real estate management and development		2.9		2.8		2.7
Total	$	56.8	$	68.5	$	59.3
Capital expenditures:
Chemicals	$	55.1	$	62.8	$	58.6
Component products		3.2		1.7		4.1
Real estate management and development		1.6		1.0		1.4
Total	$	59.9	$	65.5	$	64.1

	December 31,
	2019		2020		2021
	(In millions)
Total assets:
Operating segments:
Chemicals	$	2,331.8	$	2,400.7	$	2,373.1
Component products		132.5		138.0		146.4
Real estate management and development		191.6		171.3		259.3
Corporate and eliminations		138.5		179.3		226.4
Total	$	2,794.4	$	2,889.3	$	3,005.2

Geographic information. We attribute net sales to the place of manufacture (point-of-origin) and the location of the customer (point-of-destination); we attribute property and equipment to their physical location. At December 31, 2021 the net assets of our non-U.S. subsidiaries included in consolidated net assets approximated $575 million (in 2020 the total was $565 million).

	Years ended December 31,
	2019		2020		2021
	(In millions)
Net sales - point of origin:
United States	$	1,164.8	$	1,189.8	$	1,409.1
Germany		883.6		836.0		971.7
Canada		328.7		319.5		371.9
Belgium		270.7		249.5		295.7
Norway		192.2		211.8		257.2
Eliminations		(942.5)		(956.9)		(1,009.2)
Total	$	1,897.5	$	1,849.7	$	2,296.4
Net sales - point of destination:
North America	$	740.1	$	778.2	$	999.7
Europe		824.2		783.8		945.7
Asia and other		333.2		287.7		351.0
Total	$	1,897.5	$	1,849.7	$	2,296.4

	December 31,
	2019		2020		2021
	(In millions)
Net property and equipment:
United States	$	72.0	$	67.8	$	63.6
Germany		233.6		237.5		214.8
Canada		73.1		88.6		91.1
Belgium		96.4		108.4		107.7
Norway		87.9		88.1		86.4
Total	$	563.0	$	590.4	$	563.6