10-Q 1 vhi-10q_20180331.htm 10-Q vhi-10q_20180331.htm

 

 

 

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 March 31, 2018

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

 

75240-2620

(Address of principal executive offices)

 

(Zip Code)

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

 

Indicate by check mark:

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 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      No  

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

 

Large accelerated filer

 

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer (don’t check if smaller reporting company)

 

  

 

  

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.

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 outstanding on April 30, 2018: 339,170,949

 

 

 

 

 


 

VALHI, INC. AND SUBSIDIARIES

INDEX

 

 

 

 

 

 

 

Page
number

 

 

 

 

 

 

 

 

Part I.

 

FINANCIAL INFORMATION

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 1.

  

Financial Statements

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Condensed Consolidated Balance Sheets – December 31, 2017 and March 31, 2018 (unaudited)

  

 

3

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Condensed Consolidated Statements of Income (unaudited) – Three months ended March 31, 2017 and 2018

  

 

5

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Condensed Consolidated Statements of Comprehensive Income (unaudited) – Three months ended March 31, 2017 and 2018

  

 

6

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Condensed Consolidated Statements of Cash Flows (unaudited) – Three months ended March 31, 2017 and 2018

  

 

7

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Condensed Consolidated Statement of Equity (unaudited) – Three months ended March 31, 2018

  

 

8

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Notes to Condensed Consolidated Financial Statements (unaudited)

  

 

9

  

 

 

 

 

 

 

 

 

 

 

 

Item 2.

  

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

  

 

32

 

 

 

 

 

 

 

 

 

 

 

 

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

  

 

50

 

 

 

 

 

 

 

 

 

 

 

 

Item 4.

  

Controls and Procedures

  

 

50

 

 

 

 

 

 

 

 

 

 

Part II.

 

OTHER INFORMATION

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 1.

  

Legal Proceedings

  

 

52

 

 

 

 

 

 

 

 

 

 

 

 

Item 1A.

  

Risk Factors

  

 

52

 

 

 

 

 

 

 

 

 

 

 

 

Item 6.

  

Exhibits

  

 

53

 

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,
2017

 

 

March 31,
2018

 

 

 

 

 

(unaudited)

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

435.7

 

 

$

478.8

 

Restricted cash equivalents

 

16.1

 

 

 

15.4

 

Marketable securities

 

3.0

 

 

 

.6

 

Accounts and other receivables, net

 

365.8

 

 

 

416.5

 

Land held for development

 

16.5

 

 

 

8.4

 

Inventories, net

 

398.4

 

 

 

447.3

 

Other current assets

 

15.5

 

 

 

15.2

 

Current assets of discontinued operations

 

11.2

 

 

 

 

Total current assets

 

1,262.2

 

 

 

1,382.2

 

Other assets:

 

 

 

 

 

 

 

Marketable securities

 

255.7

 

 

 

258.1

 

Investment in TiO2 manufacturing joint venture

 

86.5

 

 

 

79.6

 

Goodwill

 

379.7

 

 

 

379.7

 

Deferred income taxes

 

119.8

 

 

 

112.9

 

Other assets

 

174.1

 

 

 

189.6

 

Noncurrent assets of discontinued operations

 

40.8

 

 

 

 

Total other assets

 

1,056.6

 

 

 

1,019.9

 

Property and equipment:

 

 

 

 

 

 

 

Land

 

47.0

 

 

 

48.2

 

Buildings

 

261.6

 

 

 

264.0

 

Equipment

 

1,150.8

 

 

 

1,200.0

 

Mining properties

 

35.0

 

 

 

35.3

 

Construction in progress

 

58.3

 

 

 

33.3

 

 

 

1,552.7

 

 

 

1,580.8

 

Less accumulated depreciation

 

964.0

 

 

 

985.2

 

Net property and equipment

 

588.7

 

 

 

595.6

 

Total assets

$

2,907.5

 

 

$

2,997.7

 

 

 

 

- 3 -


 

VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In millions)

 

 

December 31,
2017

 

 

March 31,
2018

 

 

 

 

 

(unaudited)

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current maturities of long-term debt

$

1.6

 

 

$

1.6

 

Accounts payable and accrual liabilities

 

257.1

 

 

 

290.0

 

Income taxes

 

25.1

 

 

 

32.9

 

Current liabilities of discontinued operations

 

47.3

 

 

 

 

Total current liabilities

 

331.1

 

 

 

324.5

 

Noncurrent liabilities:

 

 

 

 

 

 

 

Long-term debt

 

1,041.5

 

 

 

1,089.4

 

Deferred income taxes

 

183.2

 

 

 

169.1

 

Payable to affiliates

 

70.1

 

 

 

70.1

 

Accrued pension costs

 

266.4

 

 

 

272.0

 

Accrued environmental remediation and related costs

 

110.7

 

 

 

101.6

 

Accrued postretirement benefits costs

 

11.3

 

 

 

10.9

 

Other liabilities

 

73.6

 

 

 

79.3

 

Noncurrent liabilities of discontinued operations

 

52.9

 

 

 

 

Total noncurrent liabilities

 

1,809.7

 

 

 

1,792.4

 

Equity:

 

 

 

 

 

 

 

Valhi stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock

 

667.3

 

 

 

667.3

 

Common stock

 

3.6

 

 

 

3.6

 

Additional paid-in capital

 

 

 

 

 

Retained earnings (deficit)

 

(17.9

)

 

 

67.3

 

Accumulated other comprehensive loss

 

(179.0

)

 

 

(170.2

)

Treasury stock, at cost

 

(49.6

)

 

 

(49.6

)

Total Valhi stockholders’ equity

 

424.4

 

 

 

518.4

 

Noncontrolling interest in subsidiaries

 

342.3

 

 

 

362.4

 

Total equity

 

766.7

 

 

 

880.8

 

Total liabilities and equity

$

2,907.5

 

 

$

2,997.7

 

 

Commitments and contingencies (Notes 14 and 17)

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

- 4 -


 

VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share data)

 

 

Three months ended

March 31,

 

 

2017

 

 

2018

 

 

(unaudited)

 

Revenues and other income:

 

 

 

 

 

 

 

Net sales

$

405.3

 

 

$

466.0

 

Other income, net

 

7.6

 

 

 

20.4

 

Total revenues and other income

 

412.9

 

 

 

486.4

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of sales

 

288.7

 

 

 

280.7

 

Selling, general and administrative

 

63.5

 

 

 

80.2

 

Other components of net periodic pension and OPEB expense

 

4.1

 

 

 

3.7

 

Interest

 

14.5

 

 

 

15.4

 

Total costs and expenses

 

370.8

 

 

 

380.0

 

Income from continuing operations before income taxes

 

42.1

 

 

 

106.4

 

Income tax expense

 

18.6

 

 

 

36.2

 

Net income from continuing operations

 

23.5

 

 

 

70.2

 

Income (loss) from discontinued operations, net of tax

 

(1.7

)

 

 

37.6

 

Net income

 

21.8

 

 

 

107.8

 

Noncontrolling interest in net income of subsidiaries

 

9.1

 

 

 

18.5

 

Net income attributable to Valhi stockholders

$

12.7

 

 

$

89.3

 

 

 

 

 

 

 

 

 

Amounts attributable to Valhi stockholders:

 

 

 

 

 

 

 

Income from continuing operations

$

14.4

 

 

$

51.7

 

Income (loss) from discontinued operations

 

(1.7

)

 

 

37.6

 

Net income attributable to Valhi stockholders

$

12.7

 

 

$

89.3

 

 

 

 

 

 

 

 

 

Basic and diluted net income per share:

 

 

 

 

 

 

 

Income from continuing operations

$

.04

 

 

$

.15

 

Income from discontinued operations

 

 

 

 

.11

 

Net income attributable to Valhi stockholders

$

.04

 

 

$

.26

 

 

 

 

 

 

 

 

 

Cash dividends per share

$

.02

 

 

$

.02

 

 

 

 

 

 

 

 

 

Basic and diluted weighted average shares outstanding

 

342.0

 

 

 

342.0

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

- 5 -


 

VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

 

 

 

Three months
ended March 31,

 

 

 

2017

 

 

2018

 

 

 

(unaudited)

 

Net income

 

$

21.8

 

 

$

107.8

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

Currency translation

 

 

7.5

 

 

 

9.8

 

Marketable securities

 

 

(.3

)

 

 

(.1

)

Interest rate swap

 

 

.5

 

 

 

 

Defined benefit pension plans

 

 

2.8

 

 

 

2.6

 

Other postretirement benefit plans

 

 

(.2

)

 

 

(.3

)

Total other comprehensive income, net

 

 

10.3

 

 

 

12.0

 

Comprehensive income

 

 

32.1

 

 

 

119.8

 

Comprehensive income attributable to noncontrolling interest

 

 

11.8

 

 

 

21.7

 

Comprehensive income attributable to Valhi stockholders

 

$

20.3

 

 

$

98.1

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

- 6 -


 

VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

 

Three months ended
March 31,

 

 

2017

 

 

2018

 

 

(unaudited)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

$

21.8

 

 

$

107.8

 

Depreciation and amortization

 

16.6

 

 

 

14.5

 

Benefit plan expense greater than cash funding

 

3.4

 

 

 

.5

 

Deferred income taxes

 

2.5

 

 

 

37.2

 

Gain on sale of WCS

 

 

 

 

(58.4

)

Gain on land sales

 

 

 

 

(12.5

)

Distributions from (contributions to) Ti02 manufacturing joint venture, net

 

(3.1

)

 

 

5.5

 

Other, net

 

.8

 

 

 

1.6

 

Change in assets and liabilities:

 

 

 

 

 

 

 

Accounts and other receivables, net

 

(27.7

)

 

 

(40.9

)

Inventories, net

 

(12.4

)

 

 

(41.8

)

Land held for development, net

 

(1.1

)

 

 

(1.4

)

Accounts payable and accrued liabilities

 

16.1

 

 

 

23.0

 

Accounts with affiliates

 

4.7

 

 

 

3.4

 

Income taxes

 

4.7

 

 

 

7.5

 

Other, net

 

10.2

 

 

 

1.7

 

Net cash provided by operating activities

 

36.5

 

 

 

47.7

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Capital expenditures

 

(13.7

)

 

 

(16.9

)

Cash, cash equivalents and restricted cash and cash equivalents of discontinued operations

  at time of sale

 

 

 

 

(28.9

)

Capitalized permit costs

 

(.3

)

 

 

 

Proceeds from sale of land

 

 

 

 

19.5

 

Purchases of marketable securities

 

(2.8

)

 

 

(3.5

)

Disposals of marketable securities

 

4.6

 

 

 

3.4

 

Other, net

 

.1

 

 

 

.6

 

Net cash used in investing activities

 

(12.1

)

 

 

(25.8

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Indebtedness:

 

 

 

 

 

 

 

Borrowings

 

53.3

 

 

 

 

Principal payments

 

(18.1

)

 

 

(2.5

)

Deferred financing costs paid

 

(.2

)

 

 

 

Valhi cash dividends paid

 

(6.8

)

 

 

(6.8

)

Distributions to noncontrolling interest in subsidiaries

 

(3.5

)

 

 

(3.9

)

Other

 

.1

 

 

 

 

Net cash provided by (used in) financing activities

 

24.8

 

 

 

(13.2

)

Cash, cash equivalents and restricted cash and cash equivalents - net change from:

 

 

 

 

 

 

 

Operating, investing and financing activities

 

49.2

 

 

 

8.7

 

Effect of exchange rates on cash

 

1.2

 

 

 

5.4

 

Balance at beginning of period

 

196.5

 

 

 

489.4

 

Balance at end of period

$

246.9

 

 

$

503.5

 

Supplemental disclosures:

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

Interest, net of capitalized interest

$

14.7

 

 

$

19.4

 

Income taxes, net

 

4.5

 

 

 

13.7

 

Noncash investing activities:

 

 

 

 

 

 

 

Change in accruals for capital expenditures

 

4.2

 

 

 

1.8

 

Noncash financing activities:

 

 

 

 

 

 

 

Trade payable to affiliate converted to indebtedness

 

 

 

 

36.3

 

Indebtedness borrowings paid directly to lender to settle refinanced indebtedness

 

9.3

 

 

 

 

Indebtedness principal payments paid directly by lender

 

(8.4

)

 

 

 

Indebtedness borrowings paid directly to lender for debt issuance costs

 

(.9

)

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

- 7 -


 

VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

Three months ended March 31, 2018

(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, 2017

$

667.3

  

  

$

3.6

  

  

$

  

  

$

(17.9

)  

 

$

(179.0

 

$

(49.6

 

$

342.3

  

 

$

766.7

  

Change in accounting principle – ASU 2014-09

 

  

  

 

  

  

 

  

  

 

2.7

 

 

 

  

 

 

  

 

 

2.3

 

 

 

5.0

 

Balance at January 1, 2018, as adjusted

 

667.3

  

  

 

3.6

  

  

 

  

  

 

(15.2

)  

 

 

(179.0

 

 

(49.6

 

 

344.6

  

 

 

771.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

  

  

 

  

  

 

  

  

 

89.3

 

 

 

  

 

 

  

 

 

18.5

 

 

 

107.8

 

Other comprehensive income, net

 

  

  

 

  

  

 

  

  

 

  

 

 

8.8

 

 

 

 

 

 

3.2

  

 

 

12.0

 

Cash dividends

 

  

  

 

  

  

 

 

  

 

(6.8

)

 

 

  

 

 

  

 

 

(3.9

)

 

 

(10.7

)

Balance at March 31, 2018

$

667.3

  

  

$

3.6

  

  

$

  

  

$

67.3

 

 

$

(170.2

)

 

$

(49.6

)

 

$

362.4

  

 

$

880.8

  

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

 

- 8 -


 

VALHI, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(unaudited)

 

Note 1—Organization and basis of presentation:

Organization— We are majority owned by a wholly-owned subsidiary of Contran Corporation (“Contran”), which owns approximately 93% of our outstanding common stock at March 31, 2018.  All of Contran's outstanding voting stock is held by a family trust established for the benefit of Lisa K. Simmons and Serena Simmons Connelly and their children, for which Ms. Simmons and Ms. Connelly are co-trustees, or is held directly by Ms. Simmons and Ms. Connelly or entities related to them.  Consequently, Ms. Simmons and Ms. Connelly 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, Basic Management, Inc. (“BMI”) and The LandWell Company (“LandWell”).  Kronos (NYSE: KRO), NL (NYSE: NL), and CompX (NYSE MKT: CIX) each file periodic reports with the Securities and Exchange Commission (“SEC”).  In January 2018, we sold Waste Control Specialists LLC (“WCS”).  See Note 3.

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, 2017 that we filed with the SEC on March 15, 2018 (the “2017 Annual Report”). In our opinion, we have made all necessary adjustments (which include only normal recurring adjustments, other than the gain on the sale of WCS recognized in the first quarter of 2018 as discussed in Note 3), 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, 2017 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, 2017) 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, 2018 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 2017 Consolidated Financial Statements contained in our 2017 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
March 31, 2018

 

Chemicals

  

Kronos

  

 80

Component products

  

CompX

  

 87

Real estate management and development

 

BMI and LandWell

 

63% - 77

%

- 9 -


 

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.  

 

 

 

Three months ended
March 31,

 

 

 

2017

 

 

2018

 

 

 

(unaudited)

 

Net sales:

 

 

 

 

 

 

 

Chemicals

$

369.8

 

 

$

430.4

 

Component products

 

29.9

 

 

 

28.4

 

Real estate management and development

 

5.6

 

 

 

7.2

 

Total net sales

$

405.3

 

 

$

466.0

 

Cost of sales:

 

 

 

 

 

 

 

Chemicals

$

264.2

 

 

$

256.1

 

Component products

 

20.3

 

 

 

18.9

 

Real estate management and development

 

4.2

 

 

 

5.7

 

Total cost of sales

$

288.7

 

 

$

280.7

 

Gross margin:

 

 

 

 

 

 

 

Chemicals

$

105.6

 

 

$

174.3

 

Component products

 

9.6

 

 

 

9.5

 

Real estate management and development

 

1.4

 

 

 

1.5

 

Total gross margin

$

116.6

 

 

$

185.3

 

Operating income:

 

 

 

 

 

 

 

Chemicals

$

59.1

 

 

$

110.6

 

Component products

 

4.5

 

 

 

4.4

 

Real estate management and development

 

.5

 

 

 

3.8

 

Total operating income

 

64.1

 

 

 

118.8

 

General corporate items:

 

 

 

 

 

 

 

Securities earnings

 

7.0

 

 

 

8.3

 

Insurance recoveries

 

.1

 

 

 

.2

 

Gain on land sales

 

 

 

 

12.5

 

Other components of net periodic pension and OPEB expense

 

(4.1

)

 

 

(3.7

)

General expenses, net

 

(10.5

)

 

 

(14.3

)

Interest expense

 

(14.5

)

 

 

(15.4

)

Income from continuing operations before income taxes

$

42.1

 

 

$

106.4

 

Segment results we report may differ from amounts separately reported by our various subsidiaries due to purchase accounting adjustments and related amortization or differences in the way we define operating income.  Intersegment sales are not material.

 

Note 3—Business disposition —  Waste Control Specialists LLC:

Pursuant to an agreement we entered into in December 2017, on January 26, 2018 we completed the sale of our Waste Management Segment to JFL-WCS Partners, LLC ("JFL Partners"), an entity sponsored by certain investment affiliates of J.F. Lehman & Company, for consideration consisting of the assumption of all of WCS' third-party indebtedness and other liabilities.   Our Waste Management Segment, which operated in the low-level radioactive, hazardous, toxic and other waste disposal industry historically struggled to generate sufficient recurring disposal volumes to generate positive operating results or cash flows.  We believe the sale will enable us to focus more effort on continuing to develop our remaining segments which we believe have greater opportunity for higher returns than our Waste Management segment.

In accordance with GAAP, the Waste Management Segment has been classified as discontinued operations in our Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Income for all periods presented.  Also in accordance with GAAP, we have not reclassified our Condensed Consolidated Statement of Cash Flows to reflect the Waste Management Segment as discontinued operations. We recognized a pre-tax gain of approximately $58 million in the first quarter of 2018 on the transaction ($38.2 million, or $.11 per diluted share, net of tax) because the carrying value of the liabilities of the business assumed by the purchaser exceeded the carrying value of the assets sold at the time of the sale in large part due to the previously-reported long-lived asset impairment of $170.6 million recognized in the second quarter of 2017, as discussed in the 2017 Annual Report.  The net assets of the disposed Waste Management Segment at the time we completed the sale on January 26, 2018 were not materially different as compared to December 31, 2017.  Selected financial data for the operations of the disposed Waste Management Segment for periods prior to completing the sale is presented below.  Current assets at December 31, 2017 consist principally of trade accounts receivable.  

- 10 -


 

 

 

 

December 31,

2017

 

 

 

(In millions)

 

ASSETS

  

 

 

 

Current assets

  

$

11.2

  

Restricted cash

 

 

27.2

 

Property and equipment, net

 

 

6.0

 

Other noncurrent assets

 

 

7.6

 

Total noncurrent assets

 

 

40.8

 

Total assets

 

$

52.0

 

 

 

 

 

 

LIABILITIES

  

 

 

 

Current portion of long-term debt

  

$

3.0

  

Payable to Contran

 

 

36.1

 

Other current liabilities

 

 

8.2

 

Total current liabilities

 

 

47.3

 

 

 

 

 

 

Long-term debt

 

 

65.0

 

Deferred income taxes

 

 

(43.8

)

Accrued noncurrent closure and post closure costs

 

 

31.7

 

Total noncurrent liabilities

 

 

52.9

 

Total liabilities

 

$

100.2

 

 

 

 

 

Three months ended March 31,

 

 

 

 

2017

 

 

 

2018(1)

 

 

 

(In millions)

 

Net sales

  

$

21.5

  

  

$

4.6

  

 

  

 

 

 

  

 

 

 

Operating income (loss)

  

$

.6

 

  

$

(.4

)  

Other expense, net

  

 

(1.9

)

  

 

  

Interest expense, net

 

 

(1.2

)

 

 

(.3

)

Loss before taxes

  

 

(2.5

)

  

 

(.7

)  

Income tax expense (benefit)

 

 

(.8

)

 

 

.1

 

Net loss

  

 

(1.7

  

 

(.6

 

 

 

 

 

 

 

 

 

Pre-tax gain on disposal

 

 

 

 

 

58.4

 

Income tax expense

 

 

 

 

 

20.2

 

After-tax gain on disposal

 

 

 

 

 

38.2

 

 

 

 

 

 

 

 

 

 

Total

 

$

(1.7

)

 

$

37.6

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

7.2

 

 

$

2.3

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) investing activities

 

$

(.5

)

 

$

(.1

)

 

(1)  Includes results of the Waste Management Segment though January 26, 2018, the date of the sale.

In connection with the January 2018 sale, JFL Partners did not assume WCS’ trade payable owed to Contran, which consisted primarily of intercorporate service fees charged to WCS by Contran which WCS did not pay to Contran for several years.  Immediately prior to the closing of the sale of WCS, Contran transferred its associated receivable of $36.3 million from WCS to Valhi, in return for a deemed $36.3 million borrowing by Valhi under its revolving credit facility with Contran, see Note 8.  Valhi subsequently contributed such receivable from WCS to WCS’s equity, and the trade payable obligation of WCS was deemed paid in full.

 

- 11 -


 

Note 4—Accounts and other receivables, net:

 

 

December 31,
2017

 

 

March 31,
2018

 

 

(In millions)

 

Trade accounts receivable:

 

 

 

 

 

 

 

Kronos

$

301.4

 

 

$

347.3

 

CompX

 

10.5

 

 

 

12.7

 

BMI and LandWell

 

1.6

 

 

 

1.0

 

VAT and other receivables

 

20.7

 

 

 

23.4

 

Refundable income taxes

 

.5

 

 

 

.2

 

Receivable from affiliates:  

 

 

 

 

 

 

 

Contran – trade items

 

1.0

 

 

 

.9

 

Contran – income taxes

 

19.4

 

 

 

19.7

 

LPC – trade items

 

8.9

 

 

 

9.3

 

Other – trade items

 

3.3

 

 

 

3.5

 

Allowance for doubtful accounts

 

(1.5

)

 

 

(1.5

)

Total

$

365.8

 

 

$

416.5

 

 

Note 5—Inventories, net:

 

 

December 31,
2017

 

 

March 31,
2018

 

 

(In millions)

 

Raw materials:

 

 

 

 

 

 

 

Chemicals

$

106.9

 

 

$

105.4

 

Component products

 

2.7

 

 

 

2.8

 

Total raw materials

 

109.6

 

 

 

108.2

 

Work in process:

 

 

 

 

 

 

 

Chemicals

 

20.8

 

 

 

37.1

 

Component products

 

9.8

 

 

 

10.7

 

Total in-process products  

 

30.6

 

 

 

47.8

 

Finished products:

 

 

 

 

 

 

 

Chemicals

 

192.2

 

 

 

220.6

 

Component products

 

2.8

 

 

 

2.9

 

Total finished products

 

195.0

 

 

 

223.5

 

Supplies (chemicals)

 

63.2

 

 

 

67.8

 

Total

$

398.4

 

 

$

447.3

 

 

Note 6—Marketable securities:

Our marketable securities consist of marketable equity and debt securities.  Prior to 2018, any unrealized gains or losses on equity securities were recognized through other comprehensive income, net of deferred income taxes.  Beginning on January 1, 2018 with the adoption of Accounting Standards Update (“ASU”) 2016-01, our marketable equity securities will continue to be carried at fair value as noted above, but any unrealized gains or losses on the securities are now recognized as a component of other income included in the securities transactions, net on our Condensed Consolidated Statements of Income.    See Note 19.

- 12 -


 

 

 

 

Market
value

 

 

Cost
basis

 

 

Unrealized
losses, net

 

 

(In millions)

 

December 31, 2017:

 

 

 

 

 

 

 

 

 

 

 

Current assets

$

3.0

 

 

 

3.0

 

 

 

 

Noncurrent assets:

 

 

 

 

 

 

 

 

 

 

 

The Amalgamated Sugar Company LLC

$

250.0

 

 

 

250.0

 

 

 

 

Other

 

5.7

 

 

 

5.9

 

 

 

(.2

)

Total

$

255.7

 

 

 

255.9

 

 

 

(.2

)

March 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

Current assets

$

.6

 

 

 

.6

 

 

 

 

Noncurrent assets:

 

 

 

 

 

 

 

 

 

 

 

The Amalgamated Sugar Company LLC

$

250.0

 

 

 

250.0

 

 

 

 

Other

 

8.1

 

 

 

8.3

 

 

 

(.2

)

Total

$

258.1

 

 

 

258.3

 

 

 

(.2

)

 

All of our marketable securities are accounted for as available-for-sale, which are carried at fair value using quoted market prices, primarily Level 1 inputs as defined by ASC Topic 820, Fair Value Measurements and Disclosures, except for our investment in The Amalgamated Sugar Company LLC (“Amalgamated”). Our investment in Amalgamated is measured using significant unobservable inputs, which are Level 3 inputs. Please refer to Note 6 in our 2017 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 18.  Our other marketable securities, which consist of marketable equity and debt securities, are not material.

 

Note 7—Other noncurrent assets:

 

 

December 31,
2017

 

 

March 31,
2018

 

 

(In millions)

 

Other noncurrent assets:

 

 

 

 

 

 

 

Land held for development

$

126.6

 

 

$

128.9

 

Restricted cash

 

9.9

 

 

 

9.3

 

Land contract receivables

 

 

 

 

9.9

 

IBNR receivables

 

6.8

 

 

 

6.8

 

Pension asset

 

4.2

 

 

 

6.2

 

Notes receivable - OPA

 

 

 

 

3.1

 

Other

 

26.6

 

 

 

25.4

 

Total

$

174.1

 

 

$

189.6

 

Land contract receivables classified as a noncurrent asset relate to our Real Estate Management and Development Segment.  Such receivables relate to certain fees we collect from builders when the builder sells a home to a customer, as discussed in Note 19.  

As disclosed in Note 18 to our 2017 Annual Report under an Owner Participation Agreement (“OPA”) entered into by LandWell with the Redevelopment Agency of the City of Henderson, Nevada, if LandWell develops certain real property for commercial and residential purposes in a master planned community in Henderson, Nevada, the cost of certain public infrastructure may be reimbursed to us through tax increment.  The maximum reimbursement under the OPA is $209 million, and is subject to, among other things, completing construction of approved qualifying public infrastructure, transferring title of such infrastructure to the City of Henderson, receiving approval from the Redevelopment Agency of the funds expended to be eligible for tax increment reimbursement and the existence of a sufficient property tax valuation base and property tax rates in order to generate tax increment reimbursement funds.   We are entitled to receive 75% of the tax increment generated by the master planned community through 2036, subject to the qualifications and limitations indicated above.  Public infrastructure costs previously incurred for which the Redevelopment Agency had provided its approval for tax increment reimbursement but we had not yet received such reimbursement through tax increment receipts aggregated $3.1 million at December 31, 2017.  Such amount is evidenced by a promissory note issued to LandWell by the City of Henderson.  

- 13 -


 

Prior to 2018, due to the significant uncertainty of the timing and amount of any of such potential tax increment reimbursements, we recognized any such tax increment reimbursements only when received.  However, due to growth in the master planned community and the increase in tax increment funds to which we are entitled, we determined in the first quarter of 2018 we expected the tax increment reimbursements to be collected in the future would at least be sufficient to support recognizing the $3.1 million note payable issued by the City of Henderson to us.  The note payable bears interest at 6% annually and the note expires in 2036.  Any unpaid balances in 2036 are forfeit.  See Note 13.

 

 

 

Note 8—Long-term debt:

 

 

December 31,
2017

 

 

March 31,
2018

 

 

(In millions)

 

Valhi:

 

 

 

 

 

 

 

Snake River Sugar Company

$

250.0

 

 

$

250.0

 

Contran credit facility

 

284.3

 

 

 

320.6

 

Total Valhi debt

 

534.3

 

 

 

570.6

 

Subsidiary debt:

 

 

 

 

 

 

 

Kronos:

 

 

 

 

 

 

 

Senior Secured Notes

 

471.1

 

 

 

485.0

 

Tremont:

 

 

 

 

 

 

 

Promissory note payable

 

13.1

 

 

 

10.9

 

BMI:

 

 

 

 

 

 

 

Bank loan – Western Alliance Bank

 

18.8

 

 

 

18.8

 

LandWell:

 

 

 

 

 

 

 

Note payable to the City of Henderson

 

2.5

 

 

 

2.5

 

Other

 

3.3

 

 

 

3.2

 

Total subsidiary debt

 

508.8

 

 

 

520.4

 

Total debt

 

1,043.1

 

 

 

1,091.0

 

Less current maturities

 

1.6

 

 

 

1.6

 

Total long-term debt

$

1,041.5

 

 

$

1,089.4

 

Valhi Contran credit facility – In connection with the sale of WCS discussed in Note 3, immediately prior to the closing of the sale, Contran transferred its associated receivable of $36.3 million from WCS to Valhi, in return for a deemed $36.3 million borrowing by Valhi under its revolving credit facility with Contran.  The average interest rate on the existing balance as of and for the three months ended March 31, 2018 was 5.75% and 5.53%, respectively. At March 31, 2018, the equivalent of $39.4 million was available for borrowing under this facility.

Kronos – Senior Secured Notes -  At March 31, 2018, the carrying value of Kronos’ 3.75% Senior Secured Notes due September 15, 2025 (€400 million aggregate principal amount outstanding) is stated net of unamortized debt issuance costs of $7.5 million.

North American and European revolving credit facilities– During the first three months of 2018, Kronos had no borrowings or repayments under its North American revolving credit facility and its European revolving credit facility.  At March 31, 2018, approximately $115.2 million was available for additional borrowing under the North American Revolving credit facility.  Kronos’ European revolving credit facility requires the maintenance of certain financial ratios, and one of such requirements is based on the ratio of net debt to last twelve months earnings before income tax, interest, depreciation and amortization expense (EBITDA) of the borrowers.  Based upon the borrowers’ last twelve months EBITDA as of March 31, 2018 and the net debt to EBITDA financial test, the full €90.0 million of the credit facility ($110.8 million) is available for borrowing availability at such date.    

Tremont – Promissory note payable – In January 2018, and following Tremont’s sale of certain land held for investment, discussed in Note 13, Tremont prepaid (without penalty) $2.2 million principal amount on the note as required under the terms of the note agreement.

- 14 -


 

Restrictions and other Certain of the credit facilities with unrelated, third-party lenders described above require the respective borrowers to maintain minimum levels of equity, require the maintenance of certain financial ratios, limit dividends and additional indebtedness and contain other provisions and restrictive covenants customary in lending transactions of this type. We are in compliance with all of our debt covenants at March 31, 2018.

 

 

Note 9—Accounts payable and accrued liabilities:

 

 

December 31,
2017

 

 

March 31,
2018

 

 

(In millions)

 

Accounts payable:

 

 

 

 

 

 

 

Kronos

$

107.9

 

 

$

117.3

 

CompX

 

2.3

 

 

 

2.8

 

BMI and LandWell

 

3.7

 

 

 

3.5

 

NL

 

1.8

 

 

 

1.2

 

Other

 

.4

 

 

 

.4

 

Payable to affiliates:

 

 

 

 

 

 

 

Contran – trade items

 

 

 

 

.1

 

LPC – trade items

 

16.2

 

 

 

13.8

 

Employee benefits

 

36.3

 

 

 

36.8

 

Deferred income

 

28.3

 

 

 

24.7

 

Accrued sales discounts and rebates

 

14.3

 

 

 

28.8

 

Environmental remediation and related costs

 

6.8

 

 

 

19.7

 

Interest

 

5.5

 

 

 

1.3

 

Other

 

33.6

 

 

 

39.6

 

Total

$

257.1

 

 

$

290.0

 

 

Note 10—Other noncurrent liabilities:

 

 

December 31,
2017

 

 

March 31,
2018

 

 

(In millions)

 

Reserve for uncertain tax positions

$

16.5

 

 

$

16.9

 

Deferred income

 

15.7

 

 

 

18.4

 

Employee benefits

 

8.4

 

 

 

8.7

 

Insurance claims and expenses

 

9.1

 

 

 

9.4

 

Deferred payment obligation

 

9.3

 

 

 

9.4

 

Accrued development costs

 

6.1

 

 

 

7.5

 

Other

 

8.5

 

 

 

9.0

 

Total

$

73.6

 

 

$

79.3

 

 

 

Note 11 – Revenue Recognition

 

Chemicals and Component Products Segments - Our sales involve single performance obligations to ship our products pursuant to customer purchase orders.  In some cases, the purchase order is supported by an underlying master sales agreement, but our purchase order acceptance generally evidences the contract with our customer by specifying the key terms of product and quantity ordered, price and delivery and payment terms.  Effective January 1, 2018 with the adoption of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), see Note 19, we record revenue when we satisfy our performance obligations to our customers by transferring control of our products to them, which generally occurs at point of shipment or upon delivery.  Such transfer of control is also evidenced by transfer of legal title and other risks and rewards of ownership (giving the customer the ability to direct the use of, and obtain substantially all of the benefits of, the product), and our customers becoming obligated to pay us and such payment being probable of occurring.  In certain arrangements we provide shipping and handling activities after the transfer of control to our customer (e.g. when control transfers prior to delivery). In such arrangements shipping and handling are considered fulfillment activities, and accordingly, such costs are accrued when the related revenue is recognized.

 

- 15 -


 

Revenue is recorded in an amount that reflects the net consideration we expect to receive in exchange for our products.  Prices for our products are based on terms specified in published list prices and purchase orders, which generally do not include financing components, noncash consideration or consideration paid to our customers.  As our standard payment terms are less than one year, we have elected the practical expedient under ASC 606 and we have not assessed whether a contract has a significant financing component.  We state sales net of price, early payment and distributor discounts as well as volume rebates (collectively, variable consideration).   Variable consideration, to the extent present, is recognized as the amount to which we are most-likely to be entitled, using all information (historical, current and forecasted) that is reasonably available to us, and only to the extent that a significant reversal in the amount of the cumulative revenue recognized is not probable of occurring in a future period.   Differences, if any, between estimates of the amount of variable consideration to which we will be entitled and the actual amount of such variable consideration have not been material in the past. We report any tax assessed by a governmental authority that we collect from our customers that is both imposed on and concurrent with our revenue-producing activities (such as sales, use, value added and excise taxes) on a net basis (meaning we do not recognize these taxes either in our revenues or in our costs and expenses).

 

Frequently, we receive orders for products to be delivered over dates that may extend across reporting periods. We invoice for each delivery upon shipment and recognize revenue for each distinct shipment when all sales recognition criteria for that shipment have been satisfied. As scheduled delivery dates for these orders are within a one year period, under the optional exemption provided by ASC 606, we do not disclose sales allocated to future shipments of partially completed contracts.

 

Real Estate Management and Development Segment – Our sales involve providing utility services, among other things, to an industrial park located in Henderson, Nevada and we are responsible for the delivery of water to the city of Henderson and various other users through a water distribution system we own.  These sales involve single performance obligations and  we record revenue when we satisfy our performance obligations to our customers generally after the service is performed and our customers become obligated to pay us and such payment being probable of occurring.  Revenue is recorded in an amount that reflects the net consideration we expect to receive in exchange for our services.  Prices for our products are based on contracted rates and do not include financing components, noncash consideration or consideration paid to our customers.  As our standard payment terms are less than one year, we have elected the practical expedient under ASC 606 and we have not assessed whether a contract has a significant financing component.  

 

Our revenues also are related to efforts to develop certain real estate in Henderson, Nevada, including approximately 2,100 acres zoned for residential/planned community purposes and approximately 400 acres zoned for commercial and light industrial use. Contracts for land sales are negotiated on an individual basis, involve single performance obligations, and generally require us to complete property development and improvements after title passes to the buyer and we have received all or a substantial portion of the selling price.  We recognize land sales revenue associated with the residential/planned community over time using cost based input methods.  Land sales associated with the residential/planned community have variable consideration components which are based on a percentage of the builder’s ultimate selling price of residential housing unit to their customer (generally 3.5% of such sales price).  The amount we recognize when a parcel is sold to a home builder is the amount to which we are most-likely to be entitled, using all information (historical, current and forecasted) that is reasonably available to us, and only to the extent that a significant reversal in the amount of the cumulative revenue recognized is not probable of occurring in a future period.   By recognizing revenue over time using cost based input methods, revenues (including variable consideration) and profits are recognized in the same proportion of our progress towards completion of our contractual obligations, with our progress measured by costs incurred as a percentage of total costs estimated to be incurred relative to the parcels sold.  Estimates of total costs expected to be incurred require significant management judgment, and the amount of revenue and profits that have been recognized to date are subject to revisions throughout the development period.  The impact on the amount of revenue recognized resulting from any future change in the estimate of total costs estimated to be incurred would be accounted for prospectively in accordance with GAAP.   We also receive variable consideration of 1% tied to the builders ultimate selling price to their customers which is intended to recover our expenses for marketing the entire residential/planned community.  Because we control and direct the marketing campaign we recognize both the revenues and expenses on a gross basis.   We record estimated deferred revenue on the amount to which we are most-likely to be entitled and deferred revenue is recognized into revenue as the housing units are sold.  

 

Disaggregation of sales–The following table disaggregates the net sales of our Chemicals Segment the categories that depict how the nature, amount timing and uncertainty of revenue and cash flows are affected by economic factors (as required by ASC 606).

 

- 16 -


 

 

 

Three months ended March 31,

 

 

 

 

2017

 

 

 

2018

 

 

 

(In millions)

 

Net sales – point of origin:

  

 

 

  

  

 

 

  

Germany

  

$

 183.6

 

  

$

234.5

 

United States

  

 

205.7

 

  

 

196.8

 

Canada

  

 

77.9

 

  

 

71.6

  

Belgium

 

 

58.1

 

 

 

69.7

 

Norway

  

 

47.3

 

  

 

53.1

 

Eliminations

  

 

(202.8

)

  

 

(195.3

)

Total

 

$

369.8

 

 

$

430.4

 

 

  

 

 

 

  

 

 

 

Net sales – point of destination:

 

 

 

 

 

 

 

 

Europe

 

$

179.7

 

 

$

233.9

 

North America

 

 

124.0

 

 

 

127.0

 

Other

 

 

66.1

 

 

 

69.5

 

 

 

$

369.8

 

 

$

430.4

 

 

 

The following table disaggregates the net sales of our Component Products and Real Estate Management and Development Segments by major product line.

 

 

 

Three months ended March 31,

 

 

 

 

2017

 

 

 

2018

 

 

 

(In millions)

 

Component Products:

 

 

 

 

 

 

 

 

Net sales:

  

 

 

  

  

 

 

  

Security products

  

$

26.0

 

  

$

24.1

 

Marine components

  

 

3.9

 

  

 

4.3

 

 

  

$

29.9

 

  

$

28.4

  

 

 

 

 

Real Estate Management and Development:

 

 

 

 

 

 

 

 

Net sales:

  

 

 

  

  

 

 

  

Land sales

  

$

3.7

 

  

$

5.8

 

Water delivery

 

 

1.3

 

 

 

.9

 

Utility and other

  

 

.6

 

  

 

.5

 

 

  

$

5.6

 

  

$

7.2

  

 

Note 12—Employee benefit plans:

The components of our net periodic defined benefit pension cost are presented in the table below.

 

 

 

Three months ended
March 31,

 

 

 

2017

 

 

2018

 

 

 

(In millions)

 

Service cost

 

$

2.7

 

 

$

3.0

 

Interest cost

 

 

3.8

 

 

 

4.0

 

Expected return on plan assets

 

 

(3.2

)

 

 

(4.0

)

Amortization of unrecognized prior service cost

 

 

.1

 

 

 

.1

 

Recognized actuarial losses

 

 

3.6

 

 

 

3.8

 

Total

 

$

7.0

 

 

$

6.9

 

 

- 17 -


 

The components of our net periodic other postretirement benefit cost are presented in the table below.

 

 

 

Three months ended
March 31,

 

 

 

2017

 

 

2018

 

 

(In millions)

 

Interest cost

$

.1

 

 

$

.1

 

Amortization of prior service credit

 

(.2

)

 

 

(.3

)

Recognized actuarial gains

 

(.1

)

 

 

 

Total

$

(.2

)

 

$

(.2

)

 

Upon the adoption of ASU ASU 2017-07, Compensation— Retirement Benefits (Topic 715) Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, our net periodic defined benefit pension cost and other postretirement benefit cost, other than the service cost component, is presented as a separate line item (“Other components of net periodic pension and OPEB expense”) in our Condensed Consolidated Statements of Income for all periods presented.  See Note 19. We expect to contribute the equivalent of approximately $18.9 million and $1.0 million, respectively, to all of our defined benefit pension plans and other postretirement benefit plans during 2018.

 

 

Note 13—Other income, net:

 

 

Three months ended
March 31,

 

 

2017

 

 

2018

 

 

(In millions)

 

Securities earnings:

 

 

 

 

 

 

 

Dividends and interest

$

7.0

 

 

$

8.3

 

Currency transactions, net

 

(.2

)

 

 

(5.0

)

Insurance recoveries

 

.1

 

 

 

.2

 

Infrastructure reimbursement

 

.2

 

 

 

3.8

 

Gain on land sales

 

 

 

 

12.5

 

Other, net

 

.7

 

 

 

.6

 

Total

$

7.6

 

 

$

20.4

 

 

Insurance recoveries reflect, in part, amounts NL received from certain of its former insurance carriers and relate to the recovery of prior lead pigment and asbestos litigation defense costs incurred by NL.  See Note 17.

 

Infrastructure reimbursement costs relate principally to tax increment reimbursements of our Real Estate Management and Development Segment discussed in Note 7.

 

In the first quarter of 2018 we sold two parcels of land not used in our operating activities.  We sold the first parcel for net proceeds of $18.9 million, and recognized a pre-tax gain on the sale of $11.9 million. We were required under our debt agreement with NERT to use a portion of the net proceeds received for the property to pay down our note balance and accordingly we made $2.2 million in principal payments on our debt, see Note 8.  In addition NL sold excess property with a nominal book value for proceeds of $.6 million.

 

- 18 -


 

Note 14—Income taxes:

 

 

 

Three months ended
March 31,

 

 

 

2017

 

 

2018

 

 

(In millions)

 

Expected tax expense, at U.S. federal statutory income

   tax rate of 35% in 2017 and 21% in 2018

$

14.7

 

 

$

22.4

 

Incremental net tax on earnings and losses of non-U.S. and

   non-tax group companies

 

11.2

 

 

 

4.1

 

Non-U.S. tax rates

 

(2.4

)

 

 

7.0

 

Valuation allowance

 

(5.0

)

 

 

.3

 

Adjustment to the reserve for uncertain tax positions, net

 

.5

 

 

 

1.6

 

Canada – Germany APA

 

 

 

 

(1.4

)

Nondeductible expenses

 

.4

 

 

 

.4

 

Domestic production activities deduction

 

(.6

)

 

 

 

U.S. state income taxes and other, net

 

(.2

)

 

 

1.8

 

Income tax expense

$

18.6

 

 

$

36.2

 

Comprehensive provision for income taxes (benefit) allocable to:

 

 

 

 

 

 

 

Income from continuing operations

$

18.6

 

 

$

36.2

 

Discontinued operations

 

(.8

)

 

 

20.1

 

Retained earnings – change in accounting principle

 

 

 

 

1.1

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

Currency translation

 

1.8

 

 

 

1.4

 

Pension plans

 

.9

 

 

 

1.5

 

OPEB plans

 

(.1

)

 

 

(.1

)

Interest rate swap

 

.4

 

 

 

 

Marketable securities

 

(.1

)