0001564590-20-022871.txt : 20200507 0001564590-20-022871.hdr.sgml : 20200507 20200507161655 ACCESSION NUMBER: 0001564590-20-022871 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 87 CONFORMED PERIOD OF REPORT: 20200331 FILED AS OF DATE: 20200507 DATE AS OF CHANGE: 20200507 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VALHI INC /DE/ CENTRAL INDEX KEY: 0000059255 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INORGANIC CHEMICALS [2810] IRS NUMBER: 870110150 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-48391 FILM NUMBER: 20856653 BUSINESS ADDRESS: STREET 1: 5430 LBJ FRWY STREET 2: STE 1700 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 9722331700 MAIL ADDRESS: STREET 1: THREE LINCOLN CENTER STREET 2: 5430 LBJ FREEWAY SUITE 1700 CITY: DALLAS STATE: TX ZIP: 75240-2620 FORMER COMPANY: FORMER CONFORMED NAME: LLC CORP DATE OF NAME CHANGE: 19870329 FORMER COMPANY: FORMER CONFORMED NAME: LIBERTY LOAN CORP DATE OF NAME CHANGE: 19800414 10-Q 1 vhi-10q_20200331.htm 10-Q vhi-10q_20200331.htm

 

 

UNITED STATES

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 quarterly period ended March 31, 2020

OR

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from       to

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 office)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common stock

 

VHI

 

NYSE

 

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      No  

Whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Whether the Registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, smaller reporting company or an emerging growth company.  See the 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

 

  

 

  

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.

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, $.01 par value per share, outstanding on April 30, 2020: 339,235,449

 

 

 


 

VALHI, INC. AND SUBSIDIARIES

INDEX

 

 

 

 

 

 

 

Page
number

 

 

 

 

 

 

 

 

Part I.

 

FINANCIAL INFORMATION

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 1.

  

Financial Statements

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Condensed Consolidated Balance Sheets – December 31, 2019 and March 31, 2020 (unaudited)

  

 

3

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Condensed Consolidated Statements of Income (unaudited) – Three months ended March 31, 2019 and 2020

  

 

5

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) – Three months ended March 31, 2019 and 2020

  

 

6

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Condensed Consolidated Statements of Stockholders’ Equity (unaudited) – Three months ended March 31, 2019 and 2020

  

 

7

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Condensed Consolidated Statements of Cash Flows (unaudited) – Three months ended March 31, 2019 and 2020

  

 

8

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Notes to Condensed Consolidated Financial Statements (unaudited)

  

 

9

  

 

 

 

 

 

 

 

 

 

 

 

Item 2.

  

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

  

 

23

 

 

 

 

 

 

 

 

 

 

 

 

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

  

 

39

 

 

 

 

 

 

 

 

 

 

 

 

Item 4.

  

Controls and Procedures

  

 

39

 

 

 

 

 

 

 

 

 

 

Part II.

 

OTHER INFORMATION

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 1.

  

Legal Proceedings

  

 

40

 

 

 

 

 

 

 

 

 

 

 

 

Item 1A.

  

Risk Factors

  

 

40

 

 

 

 

 

 

 

 

 

 

 

 

Item 5.

  

Other Information

  

 

40

 

 

 

 

 

 

 

 

 

 

 

 

Item 6.

  

Exhibits

  

 

41

 

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

 

 

 


VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

 

 

December 31,

 

 

March 31,

 

 

2019

 

 

2020

 

 

 

 

 

 

(unaudited)

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

523.8

 

 

$

483.1

 

Restricted cash equivalents

 

27.0

 

 

 

12.5

 

Marketable securities

 

2.1

 

 

 

2.1

 

Accounts and other receivables, net

 

329.2

 

 

 

351.0

 

Inventories, net

 

522.1

 

 

 

499.2

 

Other current assets

 

21.2

 

 

 

23.3

 

Total current assets

 

1,425.4

 

 

 

1,371.2

 

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

Investment in TiO2 manufacturing joint venture

 

90.2

 

 

 

92.4

 

Goodwill

 

379.7

 

 

 

379.7

 

Deferred income taxes

 

106.0

 

 

 

104.1

 

Other assets

 

230.1

 

 

 

233.8

 

Total other assets

 

806.0

 

 

 

810.0

 

 

 

 

 

 

 

 

 

Property and equipment:

 

 

 

 

 

 

 

Land

 

46.2

 

 

 

45.5

 

Buildings

 

248.0

 

 

 

239.0

 

Equipment

 

1,166.0

 

 

 

1,133.7

 

Mining properties

 

26.2

 

 

 

8.1

 

Construction in progress

 

62.7

 

 

 

58.9

 

 

 

1,549.1

 

 

 

1,485.2

 

Less accumulated depreciation and amortization

 

986.1

 

 

 

955.8

 

Net property and equipment

 

563.0

 

 

 

529.4

 

Total assets

$

2,794.4

 

 

$

2,710.6

 

 

- 3 -


VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In millions)

 

 

 

December 31,

 

 

March 31,

 

 

2019

 

 

2020

 

 

 

 

 

 

(unaudited)

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current maturities of long-term debt

$

4.9

 

 

$

3.8

 

Accounts payable and accrued liabilities

 

307.4

 

 

 

257.6

 

Income taxes

 

10.2

 

 

 

15.9

 

Total current liabilities

 

322.5

 

 

 

277.3

 

Noncurrent liabilities:

 

 

 

 

 

 

 

Long-term debt

 

789.4

 

 

 

779.7

 

Deferred income taxes

 

38.1

 

 

 

33.0

 

Payable to affiliate - income taxes

 

56.3

 

 

 

56.3

 

Accrued pension costs

 

315.6

 

 

 

309.3

 

Accrued environmental remediation and related costs

 

95.2

 

 

 

94.6

 

Other liabilities

 

197.2

 

 

 

193.5

 

Total noncurrent liabilities

 

1,491.8

 

 

 

1,466.4

 

Equity:

 

 

 

 

 

 

 

Valhi stockholders' equity:

 

 

 

 

 

 

 

Preferred stock

 

667.3

 

 

 

667.3

 

Common stock

 

3.6

 

 

 

3.6

 

Additional paid-in capital

 

-

 

 

 

-

 

Retained earnings

 

239.4

 

 

 

256.4

 

Accumulated other comprehensive loss

 

(220.7

)

 

 

(246.2

)

Treasury stock, at cost

 

(49.6

)

 

 

(49.6

)

Total Valhi stockholders' equity

 

640.0

 

 

 

631.5

 

Noncontrolling interest in subsidiaries

 

340.1

 

 

 

335.4

 

Total equity

 

980.1

 

 

 

966.9

 

Total liabilities and equity

$

2,794.4

 

 

$

2,710.6

 

 

 

Commitments and contingencies (Notes 12 and 15)

 

 

 

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,

 

 

2019

 

 

2020

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

Revenues and other income:

 

 

 

 

 

 

 

Net sales

$

479.6

 

 

$

459.3

 

Other income, net

 

6.6

 

 

 

34.9

 

Total revenues and other income

 

486.2

 

 

 

494.2

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of sales

 

357.8

 

 

 

359.6

 

Selling, general and administrative

 

71.4

 

 

 

70.9

 

Other components of net periodic pension expense

 

4.1

 

 

 

4.7

 

Interest

 

10.3

 

 

 

9.7

 

Total costs and expenses

 

443.6

 

 

 

444.9

 

Income before income taxes

 

42.6

 

 

 

49.3

 

Income tax expense

 

14.2

 

 

 

11.4

 

Net income

 

28.4

 

 

 

37.9

 

Noncontrolling interest in net income of subsidiaries

 

10.2

 

 

 

13.5

 

Net income attributable to Valhi stockholders

$

18.2

 

 

$

24.4

 

 

 

 

 

 

 

 

 

Amounts attributable to Valhi stockholders:

 

 

 

 

 

 

 

Basic and diluted net income per share

$

.05

 

 

$

.07

 

 

 

 

 

 

 

 

 

Basic and diluted weighted average shares outstanding

 

342.0

 

 

 

342.1

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

- 5 -


 

VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)

 

 

 

Three months ended

 

 

March 31,

 

 

2019

 

 

2020

 

 

(unaudited)

 

Net income

$

28.4

 

 

$

37.9

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

Currency translation

 

(.3

)

 

 

(37.7

)

Defined benefit pension plans

 

2.3

 

 

 

3.0

 

Other

 

(.2

)

 

 

(.1

)

Total other comprehensive income (loss), net

 

1.8

 

 

 

(34.8

)

Comprehensive income

 

30.2

 

 

 

3.1

 

Comprehensive income attributable to noncontrolling interest

 

10.7

 

 

 

4.2

 

Comprehensive income (loss) attributable to Valhi stockholders

$

19.5

 

 

$

(1.1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

- 6 -


 

VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions)

 

 

 

 

 

Three months ended March 31, 2019 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Retained

 

 

other

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Preferred

 

 

Common

 

 

paid-in

 

 

earnings

 

 

comprehensive

 

 

Treasury

 

 

controlling

 

 

 

 

 

 

stock

 

 

stock

 

 

capital

 

 

(deficit)

 

 

loss

 

 

stock

 

 

interest

 

 

Total

 

 

 

 

 

 

 

 

Balance at December 31, 2018

$

667.3

 

 

$

3.6

 

 

$

-

 

 

$

220.3

 

 

$

(206.2

)

 

$

(49.6

)

 

$

353.6

 

 

$

989.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

18.2

 

 

 

-

 

 

 

-

 

 

 

10.2

 

 

 

28.4

 

Other comprehensive income, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1.3

 

 

 

-

 

 

 

.5

 

 

 

1.8

 

Dividends paid to noncontrolling interest

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6.3

)

 

 

(6.3

)

Cash dividends - $.02 per share

 

-

 

 

 

-

 

 

 

-

 

 

 

(6.8

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6.8

)

Balance at March 31, 2019

$

667.3

 

 

$

3.6

 

 

$

-

 

 

$

231.7

 

 

$

(204.9

)

 

$

(49.6

)

 

$

358.0

 

 

$

1,006.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended March 31, 2020 (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Retained

 

 

other

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Preferred

 

 

Common

 

 

paid-in

 

 

earnings

 

 

comprehensive

 

 

Treasury

 

 

controlling

 

 

 

 

 

 

stock

 

 

stock

 

 

capital

 

 

(deficit)

 

 

loss

 

 

stock

 

 

interest

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

$

667.3

 

 

$

3.6

 

 

$

-

 

 

$

239.4

 

 

$

(220.7

)

 

$

(49.6

)

 

$

340.1

 

 

$

980.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

24.4

 

 

 

-

 

 

 

-

 

 

 

13.5

 

 

 

37.9

 

Other comprehensive loss, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(25.5

)

 

 

-

 

 

 

(9.3

)

 

 

(34.8

)

Dividends paid to noncontrolling interest

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8.6

)

 

 

(8.6

)

Cash dividends - $.02 per share

 

-

 

 

 

-

 

 

 

-

 

 

 

(6.8

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6.8

)

Equity transaction with noncontrolling

interest, net and other

 

-

 

 

 

-

 

 

 

-

 

 

 

(.6

)

 

 

-

 

 

 

-

 

 

 

(.3

)

 

 

(.9

)

Balance at March 31, 2020

$

667.3

 

 

$

3.6

 

 

$

-

 

 

$

256.4

 

 

$

(246.2

)

 

$

(49.6

)

 

$

335.4

 

 

$

966.9

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

- 7 -


 

 

 

 

VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

 

 

Three months ended

 

 

March 31,

 

 

2019

 

 

2020

 

 

(unaudited)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

$

28.4

 

 

$

37.9

 

Depreciation and amortization

 

12.8

 

 

 

17.0

 

Benefit plan expense greater than cash funding

 

1.1

 

 

 

3.1

 

Deferred income taxes

 

3.6

 

 

 

-

 

Contributions to TiO2 manufacturing joint venture, net

 

(.8

)

 

 

(2.2

)

Other, net

 

1.1

 

 

 

3.1

 

Change in assets and liabilities:

 

 

 

 

 

 

 

Accounts and other receivables, net

 

(46.0

)

 

 

(39.7

)

Inventories, net

 

(3.7

)

 

 

2.7

 

Land held for development, net

 

(1.1

)

 

 

(2.7

)

Accounts payable and accrued liabilities

 

(4.2

)

 

 

(35.0

)

Accounts with affiliates

 

1.8

 

 

 

(1.5

)

Income taxes

 

1.6

 

 

 

11.8

 

Other, net

 

3.2

 

 

 

(12.7

)

Net cash used in operating activities

 

(2.2

)

 

 

(18.2

)

Cash flows from investing activities:

 

 

 

 

 

 

 

Capital expenditures

 

(16.8

)

 

 

(16.0

)

Purchases of marketable securities

 

(1.0

)

 

 

(.4

)

Proceeds from disposal of marketable securities

 

1.7

 

 

 

.6

 

Other, net

 

-

 

 

 

2.7

 

Net cash used in investing activities

 

(16.1

)

 

 

(13.1

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Principal payments on indebtedness

 

(2.1

)

 

 

(3.2

)

Valhi cash dividends paid

 

(6.8

)

 

 

(6.8

)

Distributions to noncontrolling interest in subsidiaries

 

(6.3

)

 

 

(8.6

)

Subsidiary treasury stock acquired

 

-

 

 

 

(1.0

)

Net cash used in financing activities

 

(15.2

)

 

 

(19.6

)

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

 

 

 

 

 

 

 

Operating, investing and financing activities

 

(33.5

)

 

 

(50.9

)

Effect of exchange rates on cash

 

(2.6

)

 

 

(3.9

)

Balance at beginning of period

 

523.7

 

 

 

583.8

 

Balance at end of period

$

487.6

 

 

$

529.0

 

Supplemental disclosures:

 

 

 

 

 

 

 

Cash paid (received) for:

 

 

 

 

 

 

 

Interest, net of capitalized interest

$

13.7

 

 

$

12.7

 

Income taxes, net

 

6.3

 

 

 

(.7

)

Noncash investing activities:

 

 

 

 

 

 

 

Change in accruals for capital expenditures

 

2.0

 

 

 

2.2

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

- 8 -


 

VALHI, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

(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 92% of our outstanding common stock at March 31, 2020.  At March 31, 2020, a majority of Contran’s outstanding voting stock was held directly by Lisa K. Simmons and Serena Simmons Connelly and various family trusts established for the benefit of Ms. Simmons and Ms. Connelly and their children and for which Ms. Simmons or Ms. Connelly, as applicable, served as trustee (collectively, the “Other Trusts”). In addition, each of Ms. Simmons and Ms. Connelly served as co-chair of the Contran board of directors.  The remainder of Contran’s outstanding voting stock was held by another trust (the “Family Trust”), which was established for the benefit of Ms. Simmons and Ms. Connelly and their children and for which a third-party financial institution serves as trustee.  Consequently, at March 31, 2020, Ms. Simmons, Ms. Connelly and the Family Trust may be deemed to control Contran, and us.  

 

Following the death of Ms. Connelly on April 22, 2020, Ms. Simmons and the Family Trust continue to directly hold their shares of Contran voting stock.  Under the terms of the Contran Corporation Amended and Restated Stockholders Agreement dated September 9, 2019 (the “Contran Stockholders Agreement”), and with respect to the shares of Contran voting stock held directly by Ms. Connelly at the time of her death (the “Connelly Direct Shares”), the independent executor of the estate of Ms. Connelly (prior to the completion of the probate of such estate) and the legatee of the Connelly Direct Shares (following completion of the probate of such estate) is required to vote the Connelly Direct Shares in the same manner as Ms. Simmons.  Also under the terms of the Contran Stockholders Agreement, and with respect to the shares of Contran voting stock held by the Other Trusts for which Ms. Connelly previously served as trustee and for which her successor trustee is someone other than Ms. Simmons (the “Connelly Indirect Shares”), such successor trustee is also required to vote the Connelly Indirect Shares in the same manner as Ms. Simmons. Such voting rights of Ms. Simmons with respect to the Connelly Direct Shares and the Connelly Indirect Shares last through April 22, 2030 and are personal to Ms. Simmons. Consequently, as of April 22, 2020, Ms. Simmons and the Family Trust may be deemed to control Contran and us.

Basis of Presentation— Consolidated in this Quarterly Report are the results of our wholly-owned and majority-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 American: 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, 2019 that we filed with the SEC on March 12, 2020 (the “2019 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, 2019 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, 2019) 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, 2020 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 2019 Consolidated Financial Statements contained in our 2019 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, 2020

 

Chemicals

  

Kronos

  

80 

Component products

  

CompX

  

86 

Real estate management and development

 

BMI and LandWell

 

63 – 77

%

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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,

 

 

2019

 

 

2020

 

 

(unaudited)

 

Net sales:

 

 

 

 

 

 

 

Chemicals

$

436.5

 

 

$

421.0

 

Component products

 

31.2

 

 

 

32.3

 

Real estate management and development

 

11.9

 

 

 

6.0

 

Total net sales

$

479.6

 

 

$

459.3

 

Cost of sales:

 

 

 

 

 

 

 

Chemicals

$

327.7

 

 

$

333.3

 

Component products

 

21.5

 

 

 

21.9

 

Real estate management and development

 

8.6

 

 

 

4.4

 

Total cost of sales

$

357.8

 

 

$

359.6

 

Gross margin:

 

 

 

 

 

 

 

Chemicals

$

108.8

 

 

$

87.7

 

Component products

 

9.7

 

 

 

10.4

 

Real estate management and development

 

3.3

 

 

 

1.6

 

Total gross margin

$

121.8

 

 

$

99.7

 

Operating income:

 

 

 

 

 

 

 

Chemicals

$

52.8

 

 

$

46.8

 

Component products

 

4.4

 

 

 

5.0

 

Real estate management and development

 

3.2

 

 

 

19.2

 

Total operating income

 

60.4

 

 

 

71.0

 

General corporate items:

 

 

 

 

 

 

 

Securities earnings

 

3.1

 

 

 

1.6

 

Insurance recoveries

 

.3

 

 

 

1.6

 

Changes in market value of Valhi common stock held by subsidiaries

 

1.1

 

 

 

(2.4

)

Other components of net periodic pension expense

 

(4.1

)

 

 

(4.7

)

General expenses, net

 

(7.9

)

 

 

(8.1

)

Interest expense

 

(10.3

)

 

 

(9.7

)

Income before income taxes

$

42.6

 

 

$

49.3

 

 

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. Infrastructure reimbursement income is included in the determination of Real Estate Management and Development operating income. See Note 11.

 

 

- 10 -


 

Note 3—Accounts and other receivables, net:

 

 

December 31,

 

 

March 31,

 

 

2019

 

 

2020

 

 

(In millions)

 

Trade accounts receivable:

 

 

 

 

 

 

 

Kronos

$

270.5

 

 

$

306.5

 

CompX

 

11.9

 

 

 

15.3

 

BMI and LandWell

 

1.6

 

 

 

1.4

 

VAT and other receivables

 

31.2

 

 

 

23.2

 

Refundable income taxes

 

7.9

 

 

 

3.4

 

Receivable from affiliates:

 

 

 

 

 

 

 

Contran - trade items

 

.4

 

 

 

.4

 

Louisiana Pigment Company, L.P. ("LPC")

 

4.7

 

 

 

-

 

Other - trade items

 

2.2

 

 

 

2.2

 

Allowance for doubtful accounts

 

(1.2

)

 

 

(1.4

)

Total

$

329.2

 

 

$

351.0

 

 

Note 4—Inventories, net:

 

 

December 31,

 

 

March 31,

 

 

2019

 

 

2020

 

 

(In millions)

 

Raw materials:

 

 

 

 

 

 

 

Chemicals

$

124.4

 

 

$

125.5

 

Component products

 

2.9

 

 

 

3.1

 

Total raw materials

 

127.3

 

 

 

128.6

 

Work in process: