10-Q 1 vhi-10q_20130630.htm FORM 10-Q

      

      

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 quarter ended June 30, 2013

Commission file number 1-5467

      

VALHI, INC.

(Exact name of Registrant as specified in its charter)

      

   

 

Delaware

   

87-0110150

(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

      

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 (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Whether the Registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Act).

   

 

Large accelerated filer

   

¨

      

Accelerated filer

   

x

   

   

   

   

Non-accelerated filer

   

¨  (Do not check if a smaller reporting company)

      

Smaller reporting company

   

¨

Whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨     No  x.

Number of shares of the Registrant’s common stock outstanding on August 2, 2013: 339,120,449

   

      

      

   

   

   

   


   

VALHI, INC. AND SUBSIDIARIES

INDEX

   

 

   

   

   

   

   

   

Page

number

   

   

   

   

   

   

   

   

Part I.

   

FINANCIAL INFORMATION

      

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Item 1.

      

Financial Statements

      

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

      

Condensed Consolidated Balance Sheets – December 31, 2012 and June 30, 2013 (unaudited)  

      

   

 

 3

      

   

   

   

   

   

   

   

   

   

   

   

   

      

Condensed Consolidated Statements of Operations (unaudited) – Three and six months ended June 30, 2012 and 2013  

      

   

 

 5

      

   

   

   

   

   

   

   

   

   

   

   

   

      

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) – Three and six months ended June 30, 2012 and 2013  

      

   

 

 7

      

   

   

   

   

   

   

   

   

   

   

   

   

      

Condensed Consolidated Statements of Cash Flows (unaudited) – Six months ended June 30, 2012 and 2013  

      

   

 

 8

      

   

   

   

   

   

   

   

   

   

   

   

   

      

Condensed Consolidated Statement of Equity (unaudited) – Six months ended June 30, 2013  

      

   

 

 9

      

   

   

   

   

   

   

   

   

   

   

   

   

      

Notes to Condensed Consolidated Financial Statements (unaudited)  

      

   

 

 10

      

   

   

   

   

   

   

   

   

   

   

   

Item 2.

      

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

      

   

 

 28

   

   

   

   

   

   

   

   

   

   

   

   

Item 3.

      

Quantitative and Qualitative Disclosures About Market Risk  

      

   

46

   

   

   

   

   

   

   

   

   

   

   

   

Item 4.

      

Controls and Procedures  

      

   

 

 46

   

   

   

   

   

   

   

   

   

   

Part II.

   

OTHER INFORMATION  

      

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Item 1.

      

Legal Proceedings  

      

   

 

 48

   

   

   

   

   

   

   

   

   

   

   

   

Item 1A.

      

Risk Factors  

      

   

 

 48

   

   

   

   

   

   

   

   

   

   

   

   

Item 6.

      

Exhibits  

      

   

 

 49

   

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

   

   

   

       

 

- 2 -

   


   

VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

   

 

   

December 31,
2012

   

      

June 30,

2013

   

   

   

   

      

(unaudited)

   

ASSETS

   

   

   

      

   

   

   

Current assets:

   

   

   

      

   

   

   

Cash and cash equivalents

$

366.9

      

      

$

179.9 

   

Restricted cash equivalents

   

8.1

      

      

   

6.5 

   

Accounts and other receivables, net

   

302.5

      

      

   

380.4 

   

Inventories, net

   

650.3

      

      

   

462.9 

   

Other current assets

   

26.0

      

      

   

16.7 

   

Deferred income taxes

   

9.6

      

      

         

9.6

   

Total current assets

   

1,363.4

      

      

         

1,056.0

   

   

   

   

   

      

   

   

   

Other assets:

   

   

   

      

   

   

   

Marketable securities

   

256.8

      

      

   

254.1

   

Investment in affiliates

   

126.1

      

      

   

110.7

   

Goodwill

   

379.7

      

      

   

379.7

   

Deferred income taxes

   

120.3

      

      

   

165.1

   

Other noncurrent assets

   

161.1

      

      

   

157.1

   

Total other assets

   

1,044.0

      

      

   

1,066.7

   

Property and equipment:

   

   

   

      

   

   

   

Land

   

48.3

      

      

   

47.7

   

Buildings

   

280.5

      

      

   

272.8

   

Equipment

   

1,127.7

      

      

   

1,105.6

   

Treatment, storage and disposal facility

   

158.7

      

      

   

159.0

   

Mining properties

   

72.3

      

      

   

60.8

   

Construction in progress

   

40.7

      

      

   

53.6

   

   

   

1,728.2

      

      

   

1,699.5

   

Less accumulated depreciation

   

965.1

      

      

   

957.8

   

   

   

   

   

      

   

   

   

Net property and equipment

   

763.1

      

      

   

741.7

   

   

   

   

   

      

   

   

   

Total assets

$

3,170.5

      

      

$

2,864.4

   

   

 

- 3 -

   


   

VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In millions)

   

 

   

December 31,

2012

   

   

June 30,

2013

   

   

   

   

   

(unaudited)

   

LIABILITIES AND EQUITY

   

   

   

   

   

   

   

Current liabilities:

   

   

   

   

   

   

   

Current maturities of long-term debt

$

29.6

      

   

$

30.8

   

Accounts payable and accrued liabilities

   

334.6

      

   

   

303.3

   

Income taxes

   

23.1

      

   

   

4.2

   

Deferred income taxes

   

11.2

      

   

   

10.9

   

Total current liabilities

   

398.5

      

   

   

349.2

   

   

   

   

   

   

   

   

   

Noncurrent liabilities:

   

   

   

   

   

   

   

Long-term debt

   

880.5

      

   

   

790.3

   

Deferred income taxes

   

454.8

      

   

   

439.9

   

Accrued pension costs

   

202.9

      

   

   

192.7

   

Accrued environmental remediation and related costs

   

42.6

      

   

   

55.3

   

Accrued postretirement benefits costs

   

21.2

      

   

   

20.4

   

Other liabilities

   

78.3

      

   

   

79.7

   

Total noncurrent liabilities

   

1,680.3

      

   

   

1,578.3

   

   

   

   

   

   

   

   

   

Equity:

   

   

   

   

   

   

   

Valhi stockholders’ equity:

   

   

   

   

   

   

   

Preferred stock

   

667.3

      

   

   

667.3

   

Common stock

   

3.6

      

   

   

3.6

   

Additional paid-in capital

   

78.9

      

   

   

62.2

   

Retained earnings (deficit)

   

75.4

      

   

   

(21.1

)

Accumulated other comprehensive loss

   

(42.0

   

   

(55.5

)

Treasury stock

   

(49.6

   

   

(49.6

)

Total Valhi stockholders’ equity

   

733.6

      

   

   

606.9

   

   

   

   

   

   

   

   

   

Noncontrolling interest in subsidiaries

   

358.1

      

   

   

330.0

   

Total equity

   

1,091.7

      

   

   

936.9

   

Total liabilities and equity

$

3,170.5

      

   

$

2,864.4

   

Commitments and contingencies (Notes 13 and 16)

   

   

   

   

   

   

See accompanying Notes to Condensed Consolidated Financial Statements.

   

   

   

 

- 4 -

   


   

VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

   

 

   

Three months
ended June 30,

   

   

Six months ended
June 30,

   

2012

   

      

2013

   

   

2012

   

      

2013

   

   

   

   

   

(unaudited)

   

   

   

   

   

Revenues and other income:

   

   

   

      

   

   

   

   

   

   

   

      

   

   

   

Net sales

$

568.3

      

      

$

516.0

      

   

$

1,151.1

      

      

$

1,015.2

   

Other income, net

   

22.2

      

      

   

4.3

      

   

   

31.8

      

      

   

13.1

   

Total revenues and other income

   

590.5

      

      

   

520.3

      

   

   

1,182.9

      

      

   

1,028.3

   

   

   

   

   

      

   

   

   

   

   

   

   

      

   

   

   

Costs and expenses:

   

   

   

      

   

   

   

   

   

   

   

      

   

   

   

Cost of sales

   

406.3

      

      

   

498.8

      

   

   

728.7

      

      

   

985.1

   

Selling, general and administrative

   

68.2

      

      

   

82.7

      

   

   

146.9

      

      

   

152.4

   

Loss on prepayment of debt

   

7.2

      

      

   

—  

      

   

   

7.2

      

      

   

6.6

   

Interest

   

14.3

      

      

   

14.7

      

   

   

27.8

      

      

   

30.1

   

Total costs and expenses

   

496.0

      

      

   

596.2

      

   

   

910.6

      

      

   

1,174.2

   

   

   

   

   

      

   

   

   

   

   

   

   

      

   

   

   

Income (loss) from continuing operations before income taxes

   

94.5

      

      

   

(75.9

   

   

272.3

      

      

   

(145.9

)

   

   

   

   

      

   

   

   

   

   

   

   

      

   

   

   

Income tax expense (benefit)

   

33.7

      

      

   

(27.3

   

   

92.7

      

      

   

(49.1

)

Income (loss) from continuing operations

   

60.8

      

      

   

(48.6

   

   

179.6

      

      

   

(96.8

)

Income from discontinued operations, net of tax

   

.8

      

      

   

—  

      

   

   

1.5

      

      

   

—  

   

Net income (loss)

   

61.6

      

      

   

(48.6

   

   

181.1

      

      

   

(96.8

)

   

   

   

   

      

   

   

   

   

   

   

   

      

   

   

   

Noncontrolling interest in net income (loss) of subsidiaries

   

17.2

      

      

   

(8.9

   

   

47.8

      

      

   

(17.3

)

Net income (loss) attributable to Valhi stockholders

$

44.4

      

      

$

(39.7

   

$

133.3

      

      

$

(79.5

)

   

   

   

   

   

   

   

   

   

   

   

   

   

 

- 5 -

   


   

VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)

(In millions, except per share data)

   

 

   

Three months
ended June 30,

   

   

Six months
ended June 30,

   

   

2012

   

      

2013

   

   

2012

   

      

2013

   

   

(unaudited)

   

Amounts attributable to Valhi stockholders:

   

   

   

      

   

   

   

   

   

   

   

      

   

   

   

Income (loss) from continuing operations

$

43.8

      

      

$

(39.7

   

$

132.2

      

      

$

(79.5

Income from discontinued operations

   

.6

      

      

   

—  

      

   

   

1.1

      

      

   

—  

      

   

   

   

   

      

   

   

   

   

   

   

   

      

   

   

   

Net income (loss) attributable to Valhi stockholders

$

44.4

      

      

$

(39.7

   

$

133.3

      

      

$

(79.5

)  

   

   

   

   

      

   

   

   

   

   

   

   

      

   

   

   

Basic and diluted net income (loss) per share:

   

   

   

      

   

   

   

   

   

   

   

      

   

   

   

Income (loss) from continuing operations

$

.13

      

      

$

(.12

   

$

.39

      

      

$

(.23

)  

Income from discontinued operations

   

—  

      

      

   

—  

      

   

   

—  

      

      

   

—  

   

Net income (loss) per share

$

.13

      

      

$

(.12

   

$

.39

      

      

$

(.23

)  

   

   

   

   

      

   

   

   

   

   

   

   

      

   

   

   

Cash dividends per share

$

.05

      

      

$

.05

      

   

$

.092

      

      

$

.10 

      

   

   

   

   

      

   

   

   

   

   

   

   

      

   

   

   

Basic and diluted weighted average shares outstanding

342.0

      

      

   

342.0

      

   

   

342.0

      

      

   

342.0 

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

See accompanying Notes to Condensed Consolidated Financial Statements.

   

   

   

 

- 6 -

   


   

VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)

   

 

   

Three months
ended June 30,

   

   

Six months
ended June 30,

   

   

2012

   

   

2013

   

   

2012

   

   

2013

   

   

(unaudited)

   

Net income (loss)

$

61.6

      

   

$

(48.6

   

$

181.1

      

   

$

(96.8

)

Other comprehensive income (loss), net of tax:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Currency translation

   

(41.6

   

   

6.0

   

   

   

(23.3

   

   

(22.1

)

Marketable securities

   

(17.8

   

   

(4.4

)  

   

   

(28.9

   

   

2.0

   

Defined benefit pension plans

   

1.9

      

   

   

2.7

      

   

   

3.9

      

   

   

5.4

   

Other postretirement benefit plans

   

(.3

   

   

(.4

   

   

(.6

   

   

(.6

)

Total other comprehensive income (loss), net

   

(57.8

   

   

3.9

   

   

   

(48.9

   

   

(15.3

)

Comprehensive income (loss)

   

3.8

      

   

   

(44.7

   

   

132.2

      

   

   

(112.1

)

Comprehensive income (loss) attributable to noncontrolling interest

   

(3.0

   

   

(11.2

   

   

26.4

      

   

   

(19.1

)

Comprehensive income (loss) attributable to Valhi stockholders

$

6.8

      

   

$

(33.5

   

$

105.8

      

   

$

(93.0

)

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

See accompanying Notes to Condensed Consolidated Financial Statements

   

   

   

 

- 7 -

   


   

VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

 

   

Six months ended

June 30,

   

   

2012

   

   

2013

   

   

(unaudited)

   

Cash flows from operating activities:

   

   

   

   

   

   

   

Net income (loss)

$

181.1

      

   

$

(96.8

)

Depreciation and amortization

   

32.9

      

   

   

37.0

      

Litigation settlement gain

   

(14.7

   

   

—  

      

Loss on prepayment of debt

   

7.2

      

   

   

6.6

      

Call premium and interest paid on Senior Notes redeemed

   

(6.2

   

   

—  

      

Benefit plan expense less than cash funding requirements:

   

   

   

   

   

   

   

Defined benefit pension expense

   

(.5

   

   

—  

      

Other postretirement benefit expense

   

(.7

   

   

(.8

Deferred income taxes

   

32.4

      

   

   

(62.6

Net distributions from (contributions to) Ti02 manufacturing joint venture, net

   

(19.4

   

   

14.7

      

Other, net

   

2.2

      

   

   

7.1

      

Change in assets and liabilities:

   

   

   

   

   

   

   

Accounts and other receivables, net

   

(170.2

   

   

(96.7

Inventories, net

   

(217.9

   

   

175.4

      

Accounts payable and accrued liabilities

   

48.4

      

   

   

(2.4

)  

Accounts with affiliates

   

43.6

      

   

   

(5.3

Income taxes

   

(1.8

   

   

(4.5

)  

Other, net

   

7.2

      

   

   

11.7

      

Net cash used in operating activities

   

(76.4

   

   

(16.6

Cash flows from investing activities:

   

   

   

   

   

   

   

Capital expenditures

   

(49.4

   

   

(36.6

Capitalized permit costs

   

(1.9

   

   

(.5

Purchases of marketable securities

   

(4.0

   

   

(4.5

Proceeds from:

   

   

   

   

   

   

   

Disposal of mutual funds

   

21.1

      

   

   

—  

      

Disposal of other marketable securities

   

5.3

      

   

   

6.5

      

Disposal of assets held for sale

   

—  

      

   

   

1.6

      

Collection of note receivable

   

—  

      

   

   

3.0

      

Real estate-related litigation settlement

   

15.6

      

   

   

—  

      

Change in restricted cash equivalents, net

   

(3.3

   

   

.2

      

Other, net

   

2.5

      

   

   

(.3

Net cash used in investing activities

   

(14.1

   

   

(30.6

Cash flows from financing activities:

   

   

   

   

   

   

   

Indebtedness:

   

   

   

   

   

   

   

Borrowings

$

503.3

   

   

$

258.0

   

Principal payments

   

(359.6

)

   

   

(353.6

)

Deferred financing costs paid

   

(4.5

)

   

   

—  

   

Valhi cash dividends paid

   

(31.1

)

   

   

(33.9

)

Distributions to noncontrolling interest in subsidiaries

   

(9.3

)

   

   

(9.2

)

Other, net

   

(.1

)

   

   

.1

   

Net cash provided by (used in) financing activities

   

98.7

   

   

   

(138.6

)

Cash and cash equivalents – net change from:

   

   

   

   

   

   

   

Operating, investing and financing activities

   

8.2

   

   

   

(185.8

)

Effect of exchange rate on cash

   

(1.4

)

   

   

(1.2

)

Cash and cash equivalents at beginning of period

   

96.4

   

   

   

366.9

   

Cash and cash equivalents at end of period

$

103.2

   

   

$

179.9

   

Supplemental disclosures:

   

   

   

   

   

   

   

Cash paid (received) for:

   

   

   

   

   

   

   

Interest, net of capitalized interest (including call premium paid)

$

36.9

   

   

$

29.2

   

Income taxes, net

   

54.3

   

   

   

16.6

   

Noncash investing activities:

   

   

   

   

   

   

   

Accrual for capital expenditures

   

7.5

   

   

   

1.1

   

Accrual for capitalized permit costs

   

4.2

   

   

   

.1

   

Noncash financing activities:

   

   

   

   

   

   

   

Accrued construction retainage payable converted to note payable

   

—  

   

   

   

2.8

   

See accompanying Notes to Condensed Consolidated Financial Statements

   

   

   

 

- 8 -

   


   

VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

Six months ended June 30, 2013

(In millions)

(unaudited)

   

 

   

Valhi Stockholders’ Equity

   

   

   

   

   

   

   

   

Preferred
stock

   

      

Common
stock

   

      

Additional
paid-in
capital

   

      

Retained
earnings (deficit)

   

   

Accumulated
other
comprehensive
loss

   

   

Treasury
stock

   

   

Non-
controlling
interest

   

   

Total
equity

   

Balance at December 31, 2012

$

667.3

      

      

$

3.6

      

      

$

78.9

      

      

$

75.4

      

   

$

(42.0

   

$

(49.6

   

$

358.1

      

   

$

1,091.7

      

Net loss

   

—  

      

      

   

—  

      

      

   

—  

      

      

   

(79.5

   

   

—  

      

   

   

—  

      

   

   

(17.3

   

   

(96.8

Other comprehensive loss, net

   

—  

      

      

   

—  

      

      

   

—  

      

      

   

—  

      

   

   

(13.5

   

   

—  

      

   

   

(1.8

)  

   

   

(15.3

Cash dividends

   

—  

      

      

   

—  

      

      

   

(16.9

)  

      

   

(17.0

   

   

—  

      

   

   

—  

      

   

   

(9.2

   

   

(43.1

Issuance of common stock and other, net

   

—  

      

      

   

—  

      

      

   

.2

      

      

   

—  

   

   

   

—  

      

   

   

—  

      

   

   

.2

   

   

   

.4

   

Balance at June 30, 2013

$

667.3

      

      

$

3.6

      

      

$

62.2

      

      

$

(21.1

)  

   

$

(55.5

   

$

(49.6

   

$

330.0

      

   

$

936.9

      

   

   

   

   

   

   

   

   

See accompanying Notes to Condensed Consolidated Financial Statements

   

   

   

 

- 9 -

   


   

VALHI, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(unaudited)

Note 1—Organization and basis of presentation:

Organization—We are majority owned by Contran Corporation and one of its subsidiaries, which own approximately 93% of our outstanding common stock at June 30, 2013. Substantially all of Contran’s outstanding voting stock is held by trusts established for the benefit of certain children and grandchildren of Harold C. Simmons (for which Mr. Simmons is the sole trustee) or is held directly by Mr. Simmons or other persons or entities related to Mr. Simmons. Consequently, Mr. Simmons may be deemed to control Contran and us.

Basis of Presentation—Consolidated in this Quarterly Report are the results of our majority-owned and wholly-owned subsidiaries, including NL Industries, Inc., Kronos Worldwide, Inc., CompX International Inc., Tremont LLC and Waste Control Specialists LLC (“WCS”). Kronos (NYSE: KRO), NL (NYSE: NL), and CompX (NYSE MKT: CIX) 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 included in our Annual Report on Form 10-K for the year ended December 31, 2012 that we filed with the SEC on March 15, 2013 (the “2012 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, 2012 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, 2012) 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 periods ended June 30, 2013 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 2012 Consolidated Financial Statements contained in our 2012 Annual Report.

Unless otherwise indicated, references in this report to “we,” “us” or “our” refer to Valhi, Inc and its subsidiaries (NYSE: VHI), taken as a whole.

   

Note 2—Business segment information:

   

   

 

Business segment

      

Entity

      

% controlled at

June 30, 2013

   

Chemicals

      

Kronos

      

   

80

Component products

      

CompX

      

   

87

Waste management

      

WCS

      

   

100

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. At June 30, 2013 we had an aggregate of 12.0 million shares of our Kronos common stock pledged as collateral for certain debt obligations of Contran.  We receive a fee from Contran for pledging these Kronos shares, determined by a formula based on the market value of the shares pledged.

   

   

 

- 10 -

   


   

   

 

 

Three months ended

June 30,

   

   

Six months ended

June 30,

   

   

2012

   

   

2013

   

   

2012

   

   

2013

   

   

(In millions)

   

Net sales:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Chemicals

$

545.3

      

   

$

481.1

      

   

$

1,106.6

      

   

$

944.7

   

Component products

   

22.1

      

   

   

24.0

      

   

   

42.5

      

   

   

45.5

   

Waste management

   

.9

      

   

   

10.9

      

   

   

2.0

      

   

   

25.0

   

Total net sales

$

568.3

      

   

$

516.0

      

   

$

1,151.1

      

   

$

1,015.2

   

Cost of sales:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Chemicals

$

382.6

      

   

$

472.1

      

   

$

683.0

      

   

$

932.4

   

Component products

   

15.6

      

   

   

16.4

      

   

   

30.0

      

   

   

31.9

   

Waste management

   

8.1

      

   

   

10.3

      

   

   

15.7

      

   

   

20.8

   

Total cost of sales

$

406.3

      

   

$

498.8

      

   

$

728.7

      

   

$

985.1

   

Gross margin:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Chemicals

$

162.7

      

   

$

9.0

      

   

$

423.6

      

   

$

12.3

   

Component products

   

6.5

      

   

   

7.6

      

   

   

12.5

      

   

   

13.6

   

Waste management

   

(7.2

   

   

.6

      

   

   

(13.7

   

   

4.2

   

Total gross margin

$

162.0

      

   

$

17.2

      

   

$

422.4

      

   

$

30.1

   

Operating income (loss):

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Chemicals

$

112.4

      

   

$

(45.3

   

$

323.7

      

   

$

(90.4

)

Component products

   

2.1

      

   

   

2.9

      

   

   

3.7

      

   

   

4.4

   

Waste management

   

(11.3

   

   

(4.4

   

   

(20.9

   

   

(6.0

)

Total operating income (loss)

   

103.2

      

   

   

(46.8

   

   

306.5

      

   

   

(92.0

)

Equity in earnings of investees

   

(.1

   

   

(.5

   

   

—  

      

   

   

(.8

)

General corporate items:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Securities earnings

   

7.1

      

   

   

6.7

      

   

   

14.2

      

   

   

13.3

   

Insurance recoveries

   

.3

      

   

   

1.0

      

   

   

1.4

      

   

   

1.6

   

Litigation settlement gain

   

14.7

      

   

   

—  

      

   

   

14.7

      

   

   

—  

   

Loss on prepayment of debt

   

(7.2

   

   

—  

   

   

   

(7.2

   

   

(6.6

)

General expenses, net

   

(9.2

   

   

(21.6

   

   

(29.5

   

   

(31.3

)

Interest expense

   

(14.3

   

   

(14.7

   

   

(27.8

   

         

(30.1

)

Income (loss) from continuing operations before income taxes

$

94.5

      

   

$

(75.9

   

$

272.3

      

   

$

(145.9

)

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 the way we define operating income. Intersegment sales are not material.

   

 

- 11 -

   


   

Note 3—Discontinued operations:

On December 28, 2012, CompX completed the sale of its furniture components operations to a competitor of that business. Please refer to Note 3 to our 2012 Annual Report for a complete description of the transaction.

Selected financial data for the operations of the disposed furniture components business is presented below:

   

 

   

Three months ended
June 30, 2012

   

      

Six months ended
June 30, 2012

   

   

(In millions)

   

Income statement:

   

   

   

      

   

   

   

Net sales

$

15.5

      

      

$

30.6

      

Operating income

$

1.8

      

      

$

3.1

      

Income from discontinued operations:

   

   

   

      

   

   

   

Income before taxes

$

1.7

      

      

$

3.0

      

Income tax expense

   

.9

      

      

   

1.5

      

Income from discontinued operations, net of tax

   

.8

      

      

   

1.5

      

Noncontrolling interest in income from discontinued operations

   

.2

      

      

   

.4

      

Total discontinued operations, net of tax and noncontrolling interest

$

.6

      

      

$

1.1

      

In accordance with generally accepted accounting principles, the assets and liabilities relating to the furniture components reporting unit were eliminated from the 2012 Consolidated Balance Sheet at the date of sale. We have reclassified our Condensed Consolidated Statements of Income for the interim periods ended June 30, 2012 to reflect the disposed operations as discontinued operations. We have not reclassified our June 30, 2012 Condensed Consolidated Statement of Cash Flows to reflect discontinued operations.

In conjunction with the sale of CompX’s furniture components reporting unit, the buyer was not interested in retaining certain undeveloped land located in Taiwan owned by CompX’s Taiwanese Furniture Component subsidiary. We had no additional use for the undeveloped land in Taiwan and therefore expected the land to be sold to a third party with CompX receiving the net proceeds. Based on the legal form of how we completed the disposal transaction, our interest in such land was represented by a $3.0 million promissory note receivable at December 31, 2012, issued to CompX by its former Taiwanese subsidiary which retained legal ownership in the land to facilitate the future sale of the land to a third party. The proceeds from a future sale of the land were required to be used to settle the note receivable. During the first quarter of 2013, an agreement was entered into with a third party to sell the land for $3.0 million, $1.8 million of which was received during the first quarter with the remaining $1.2 million received in the second quarter of 2013. Such note receivable is classified as part of other current assets in our Consolidated Balance Sheet at December 31, 2012.

   

 

- 12 -

   


   

Note 4—Marketable securities:

   

   

 

   

Market

value

   

      

Cost

basis

   

      

Unrealized

gains, net

   

   

(In millions)

   

December 31, 2012:

   

   

   

      

   

   

   

      

   

   

   

Current assets:

$

.9

      

      

$

.9

      

      

$

—  

      

Noncurrent assets:

   

   

   

      

   

   

   

      

   

   

   

The Amalgamated Sugar Company LLC

$

250.0

      

      

$

250.0

      

      

$

—  

      

Other

   

6.8

      

      

   

6.7

      

      

   

.1

      

Total

$

256.8

      

      

$

256.7

      

      

$

.1

      

June 30, 2013:

   

   

   

      

   

   

   

      

   

   

   

Current assets

$

1.6

      

      

$

1.6

      

      

$

—  

      

Noncurrent assets:

   

   

   

      

   

   

   

      

   

   

   

The Amalgamated Sugar Company LLC

$

250.0

      

      

$

250.0

      

      

$

—  

      

Other

   

4.1

      

      

   

4.1

      

      

   

—  

      

Total

$

254.1

      

      

$

254.1

      

      

$

—  

      

All of our marketable securities are accounted for as available-for-sale, which are carried at fair value, with any unrealized gains or losses recognized through accumulated other comprehensive income. Our marketable securities are carried at fair value using quoted market prices, primarily Level 1 inputs as defined by Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, except for our investment in The Amalgamated Sugar Company LLC (“Amalgamated”). Our current marketable securities are included with “other current assets” on our Condensed Consolidated Balance Sheets. Our investment in Amalgamated is measured using significant unobservable inputs, which are Level 3 inputs. Please refer to Note 4 in our 2012 Annual Report for a complete description of the valuation methodology for our investment in Amalgamated. There have been no changes to the carrying value of this investment during the periods presented. See Note 17.

   

Note 5—Accounts and other receivables, net:

   

   

 

   

December 31,
2012

   

   

   

June 30,
2013

   

   

(In millions)

   

Trade accounts receivable:

   

   

   

   

   

   

   

Kronos

$

229.7

      

   

$

317.2

   

CompX

   

8.7

      

   

   

10.9

   

WCS

   

4.8

      

   

   

6.0

   

VAT and other receivables

   

42.2

      

   

   

42.0

   

Refundable income taxes

   

18.3

      

   

   

5.3

   

Receivable from Contran – trade items

   

.3

   

   

   

.3

   

Allowance for doubtful accounts

   

(1.5

   

   

(1.3

)

Total

$

302.5

      

   

$

380.4

   

   

   

 

- 13 -

   


   

Note 6—Inventories, net:

   

 

   

December 31,
2012

   

   

   

June 30,
2013

   

   

(In millions)

   

Raw materials:

   

   

   

      

   

   

   

Chemicals

$

151.5

      

      

$

99.7

   

Component products

   

3.3

      

      

   

3.9

   

Total raw materials

   

154.8

      

      

   

103.6

   

Work in process:

   

   

   

      

   

   

   

Chemicals

   

27.3

      

      

   

19.8

   

Component products

   

5.9

      

      

   

6.3

   

Total in-process products

   

33.2

      

      

   

26.1

   

Finished products:

   

   

   

      

   

   

   

Chemicals

   

395.6

      

      

   

265.5

   

Component products

   

2.1

      

      

   

2.0

   

Total finished products

   

397.7

      

      

   

267.5

   

Supplies (chemicals)

   

64.6

      

      

   

65.7

   

Total

$

650.3

      

      

$

462.9

   

   

Note 7—Other noncurrent assets:

   

   

 

   

December 31,

2012

   

      

June 30,

2013

   

   

(In millions)

   

Investment in affiliates:

   

   

   

      

   

   

   

TiO2 manufacturing joint venture, Louisiana Pigment Company, L.P. (“LPC”)

$

109.9

      

      

$

95.2

      

Other

   

16.2