For
the quarter ended March 31,
2009
|
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)
|
|
*
|
The
registrant has not yet been phased into the interactive data
requirements
|
Page
number
|
|
Part
I. FINANCIAL
INFORMATION
|
|
Item
1. Financial
Statements.
|
|
Condensed Consolidated Balance
Sheets –
December 31, 2008; and
March 31, 2009 (unaudited)
|
3
|
Condensed Consolidated
Statements of Operations (unaudited) – Three months ended March 31,
2008 and 2009
|
5
|
Condensed Consolidated
Statements of Cash Flows (unaudited)
– Three months ended
March 31, 2008 and 2009
|
6
|
Condensed Consolidated
Statement of Stockholders’ Equity
and Comprehensive
Loss – Three months ended
March 31, 2009
(unaudited)
|
8
|
Notes to Condensed Consolidated
Financial Statements
(unaudited)
|
9
|
Item
2. Management’s
Discussion and Analysis of Financial
Condition and Results of
Operations.
|
29
|
Item
3. Quantitative
and Qualitative Disclosures About Market Risk
|
47
|
Item
4. Controls and
Procedures
|
48
|
Part
II. OTHER
INFORMATION
|
|
Item
1. Legal
Proceedings.
|
49
|
Item
1A. Risk Factors.
|
50
|
Item
2. Unregistered
Sales of Equity Securities and
Use of Proceeds; Share
Repurchases
|
50
|
Item
6. Exhibits.
|
50
|
ASSETS
|
December
31,
2008
|
March
31,
2009
|
||||||
(unaudited)
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 37.0 | $ | 48.0 | ||||
Restricted cash equivalents
|
9.4 | 8.8 | ||||||
Marketable securities
|
8.8 | 7.2 | ||||||
Accounts and other receivables, net
|
205.2 | 210.2 | ||||||
Inventories, net
|
408.5 | 316.2 | ||||||
Prepaid expenses and
other
|
15.4 | 16.9 | ||||||
Deferred income taxes
|
12.1 | 12.0 | ||||||
Total current assets
|
696.4 | 619.3 | ||||||
Other assets:
|
||||||||
Marketable
securities
|
275.5 | 270.3 | ||||||
Investment in affiliates
|
124.0 | 125.2 | ||||||
Goodwill
|
396.8 | 396.6 | ||||||
Other intangible assets
|
2.0 | 1.9 | ||||||
Deferred income taxes
|
166.4 | 178.5 | ||||||
Other assets
|
87.3 | 87.4 | ||||||
Total other assets
|
1,052.0 | 1,059.9 | ||||||
Property and equipment:
|
||||||||
Land
|
46.4 | 46.1 | ||||||
Buildings
|
268.5 | 270.3 | ||||||
Equipment
|
1,025.3 | 1,032.7 | ||||||
Mining properties
|
30.3 | 34.4 | ||||||
Construction in progress
|
58.2 | 79.5 | ||||||
1,428.7 | 1,463.0 | |||||||
Less accumulated depreciation
|
787.7 | 821.8 | ||||||
Net property and equipment
|
641.0 | 641.2 | ||||||
Total assets
|
$ | 2,389.4 | $ | 2,320.4 |
LIABILITIES AND STOCKHOLDERS'
EQUITY
|
December
31,
2008
|
March
31,
2009
|
||||||
(unaudited)
|
||||||||
Current liabilities:
|
||||||||
Current maturities of long-term debt
|
$ | 9.4 | $ | 89.3 | ||||
Accounts payable
and accrued liabilities
|
275.2 | 223.2 | ||||||
Income taxes
|
4.9 | 5.5 | ||||||
Deferred income taxes
|
4.7 | 4.4 | ||||||
Total current liabilities
|
294.2 | 322.4 | ||||||
Noncurrent liabilities:
|
||||||||
Long-term debt
|
911.0 | 862.9 | ||||||
Deferred income taxes
|
346.6 | 346.4 | ||||||
Accrued pension costs
|
146.1 | 138.9 | ||||||
Accrued postretirement
benefits costs
|
29.3 | 29.2 | ||||||
Accrued environmental costs
|
41.3 | 40.0 | ||||||
Other liabilities
|
78.8 | 78.5 | ||||||
Total noncurrent liabilities
|
1,553.1 | 1,495.9 | ||||||
Stockholders' equity:
|
||||||||
Preferred stock
|
667.3 | 667.3 | ||||||
Common stock
|
1.2 | 1.2 | ||||||
Additional paid-in capital
|
- | - | ||||||
Accumulated
deficit
|
(109.8 | ) | (141.0 | ) | ||||
Accumulated other comprehensive loss
|
(51.0 | ) | (53.9 | ) | ||||
Treasury stock
|
(38.9 | ) | (38.9 | ) | ||||
Total Valhi
stockholders' equity
|
468.8 | 434.7 | ||||||
Noncontrolling interest
in subsidiaries
|
73.3 | 67.4 | ||||||
Total equity
|
542.1 | 502.1 | ||||||
Total liabilities
and equity
|
$ | 2,389.4 | $ | 2,320.4 | ||||
Three
months ended
|
||||||||
March 31,
|
||||||||
2008
|
2009
|
|||||||
(unaudited)
|
||||||||
Revenues
and other income:
|
||||||||
Net
sales
|
$ | 373.9 | $ | 277.3 | ||||
Other
income, net
|
5.1 | 30.2 | ||||||
Total
revenues and other income
|
379.0 | 307.5 | ||||||
Costs
and expenses:
|
||||||||
Cost
of sales
|
310.4 | 272.7 | ||||||
Selling,
general and administrative
|
58.3 | 51.4 | ||||||
Interest
|
17.4 | 16.0 | ||||||
Total
costs and expenses
|
386.1 | 340.1 | ||||||
Loss
before income taxes
|
(7.1 | ) | (32.6 | ) | ||||
Income
tax benefit
|
(1.3 | ) | (9.2 | ) | ||||
Net
loss
|
(5.8 | ) | (23.4 | ) | ||||
Noncontrolling
interest in net income (loss)
of
subsidiaries
|
.1 | (3.4 | ) | |||||
Net
loss attributable to Valhi stockholders
|
$ | (5.9 | ) | $ | (20.0 | ) | ||
Amounts
attributable to Valhi stockholders:
|
||||||||
Basic
and diluted net loss per share
|
$ | (.05 | ) | $ | (.18 | ) | ||
Cash
dividends per share
|
$ | .10 | $ | .10 | ||||
Basic
and diluted weighted average shares outstanding
|
114.4 | 114.3 |
Three
months ended
March 31,
|
||||||||
2008
|
2009
|
|||||||
(unaudited)
|
||||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$ | (5.8 | ) | $ | (23.4 | ) | ||
Depreciation and amortization
|
16.7 | 14.4 | ||||||
Gain
on sale of business
|
- | (6.4 | ) | |||||
Defined
benefit plan expense less than cash funding
requirements
|
(3.8 | ) | (.9 | ) | ||||
Deferred income taxes
|
(3.5 | ) | (16.4 | ) | ||||
Net distributions from (contributions
to) Ti02
manufacturing
joint venture
|
1.4 | (1.8 | ) | |||||
Other, net
|
2.0 | 1.2 | ||||||
Change in assets and liabilities:
|
||||||||
Accounts and other receivables, net
|
(36.5 | ) | (10.6 | ) | ||||
Inventories, net
|
(4.2 | ) | 81.3 | |||||
Accounts payable and accrued liabilities
|
(3.2 | ) | (54.2 | ) | ||||
Accounts with affiliates
|
6.2 | (9.5 | ) | |||||
Income taxes
|
(3.9 | ) | 2.2 | |||||
Other, net
|
1.0 | 5.3 | ||||||
Net cash used
in operating activities
|
(33.6 | ) | (18.8 | ) | ||||
Cash flows from investing activities:
|
||||||||
Capital expenditures
|
(18.9 | ) | (19.3 | ) | ||||
Capitalized
permit costs
|
(4.4 | ) | .1 | |||||
Purchases of
CompX common stock
|
(.5 | ) | - | |||||
Marketable securities
|
(1.6 | ) | (3.1 | ) | ||||
Proceeds from disposal of marketable
securities
|
2.6 | 2.2 | ||||||
Proceeds
from sale of business
|
- | 6.8 | ||||||
Change in restricted cash equivalents, net
|
.2 | .8 | ||||||
Other, net
|
.3 | (.1 | ) | |||||
Net cash used in investing activities
|
(22.3 | ) | (12.6 | ) | ||||
Three
months ended
March 31,
|
||||||||
2008
|
2009
|
|||||||
(unaudited)
|
||||||||
Cash
flows from financing activities:
|
||||||||
Indebtedness:
|
||||||||
Borrowings
|
$ | 103.8 | $ | 117.3 | ||||
Principal payments
|
(93.6 | ) | (61.6 | ) | ||||
Deferred
financing costs paid
|
- | (.1 | ) | |||||
Purchases
of Kronos common stock
|
- | (.1 | ) | |||||
Valhi
cash dividends paid
|
(11.4 | ) | (11.4 | ) | ||||
Distributions to noncontrolling
interest in subsidiaries
|
(1.9 | ) | (1.2 | ) | ||||
Issuance
of common stock and other
|
- | .2 | ||||||
Net cash provided
by (used in) financing activities
|
(3.1 | ) | 43.1 | |||||
Cash and cash equivalents – net change from:
|
||||||||
Operating, investing and financing activities
|
(59.0 | ) | 11.7 | |||||
Currency translation
|
1.6 | (.7 | ) | |||||
Cash and cash
equivalents at beginning of period
|
138.3 | 37.0 | ||||||
Cash and cash
equivalents at end of period
|
$ | 80.9 | $ | 48.0 | ||||
Supplemental disclosures:
|
||||||||
Cash paid for:
|
||||||||
Interest, net of amounts capitalized
|
$ | 7.9 | $ | 7.2 | ||||
Income taxes, net
|
- | 3.5 | ||||||
Accrual
for capital expenditures
|
4.1 | 11.4 | ||||||
Accrual
for capitalized permit costs
|
2.0 | 1.7 | ||||||
Noncash
investing activities -
|
||||||||
Note
receivable from sale of business
|
- | .8 |
Valhi
Stockholders’ Equity
|
||||||||||||||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||||||||||||||
Additional
|
other
|
Non-
|
||||||||||||||||||||||||||||||||||
Preferred
|
Common
|
paid-in
|
Accumulated
|
comprehensive
|
Treasury
|
controlling
|
Total
|
Comprehensive
|
||||||||||||||||||||||||||||
stock
|
stock
|
capital
|
deficit
|
loss
|
stock
|
interest
|
equity
|
loss
|
||||||||||||||||||||||||||||
Balance
at December 31, 2008
|
$ | 667.3 | $ | 1.2 | $ | - | $ | (109.8 | ) | $ | (51.0 | ) | $ | (38.9 | ) | $ | 73.3 | $ | 542.1 | |||||||||||||||||
Net
loss
|
- | - | - | (20.0 | ) | - | - | (3.4 | ) | (23.4 | ) | $ | (23.4 | ) | ||||||||||||||||||||||
Other
comprehensive loss, net
|
- | - | - | - | (2.9 | ) | - | (1.1 | ) | (4.0 | ) | (4.0 | ) | |||||||||||||||||||||||
Equity
transactions with
noncontrolling
interest, net
|
- | - | .2 | - | - | - | (.2 | ) | - | - | ||||||||||||||||||||||||||
Cash
dividends
|
- | - | (.2 | ) | (11.2 | ) | - | - | (1.2 | ) | (12.6 | ) | - | |||||||||||||||||||||||
Balance
at March 31, 2009
|
$ | 667.3 | $ | 1.2 | $ | - | $ | (141.0 | ) | $ | (53.9 | ) | $ | (38.9 | ) | $ | 67.4 | $ | 502.1 | |||||||||||||||||
Comprehensive
loss
|
$ | (27.4 | ) | |||||||||||||||||||||||||||||||||
Business
segment
|
Entity
|
%
owned at
March 31,
2009
|
||
Chemicals
|
Kronos
|
95%
|
||
Component
products
|
CompX
|
87%
|
||
Waste
management
|
WCS
|
100%
|
Three
months ended
March 31,
|
||||||||
2008
|
2009
|
|||||||
Net sales:
|
||||||||
Chemicals
|
$ | 332.5 | $ | 248.0 | ||||
Component products
|
40.5 | 28.5 | ||||||
Waste management
|
.9 | .8 | ||||||
Total net sales
|
$ | 373.9 | $ | 277.3 | ||||
Cost of sales:
|
||||||||
Chemicals
|
$ | 276.0 | $ | 244.4 | ||||
Component products
|
31.1 | 23.7 | ||||||
Waste management
|
3.3 | 4.6 | ||||||
Total cost of sales
|
$ | 310.4 | $ | 272.7 | ||||
Gross margin:
|
||||||||
Chemicals
|
$ | 56.5 | $ | 3.6 | ||||
Component products
|
9.4 | 4.8 | ||||||
Waste management
|
(2.4 | ) | (3.8 | ) | ||||
Total gross margin
|
$ | 63.5 | $ | 4.6 | ||||
Operating income (loss):
|
||||||||
Chemicals
|
$ | 11.0 | $ | (25.5 | ) | |||
Component products
|
3.0 | (1.0 | ) | |||||
Waste management
|
(4.4 | ) | (6.5 | ) | ||||
Total operating income
(loss)
|
9.6 | (33.0 | ) | |||||
Equity
in losses of investee
|
(.4 | ) | (.7 | ) | ||||
General corporate items:
|
||||||||
Securities
earnings
|
6.6 | 6.4 | ||||||
Insurance recoveries
|
.1 | .7 | ||||||
Gain
on litigation settlement
|
- | 11.9 | ||||||
Gain
on sale of business
|
- | 6.4 | ||||||
General expenses, net
|
(5.6 | ) | (8.3 | ) | ||||
Interest expense
|
(17.4 | ) | (16.0 | ) | ||||
Loss
before income taxes
|
$ | (7.1 | ) | $ | (32.6 | ) | ||
December
31,
2008
|
March
31,
2009
|
|||||||
(In
millions)
|
||||||||
Accounts
receivable
|
$ | 194.9 | $ | 208.5 | ||||
Refundable
income taxes
|
1.6 | .2 | ||||||
Receivable
from affiliates
|
.1 | - | ||||||
Other
receivables
|
11.3 | 4.5 | ||||||
Allowance
for doubtful accounts
|
(2.7 | ) | (3.0 | ) | ||||
Total
|
$ | 205.2 | $ | 210.2 |
December
31,
2008
|
March
31,
2009
|
|||||||
(In
millions)
|
||||||||
Raw materials:
|
||||||||
Chemicals
|
$ | 67.1 | $ | 48.1 | ||||
Component products
|
7.5 | 7.3 | ||||||
Total raw materials
|
74.6 | 55.4 | ||||||
Work
in process:
|
||||||||
Chemicals
|
19.8 | 18.2 | ||||||
Component products
|
8.2 | 7.2 | ||||||
Total in-process products
|
28.0 | 25.4 | ||||||
Finished products:
|
||||||||
Chemicals
|
243.8 | 173.0 | ||||||
Component products
|
6.9 | 6.3 | ||||||
Total finished products
|
250.7 | 179.3 | ||||||
Supplies (primarily chemicals)
|
55.2 | 56.1 | ||||||
Total
|
$ | 408.5 | $ | 316.2 |
December
31,
2008
|
March
31,
2009
|
|||||||
(In
millions)
|
||||||||
Marketable
securities:
|
||||||||
The
Amalgamated Sugar Company LLC
|
$ | 250.0 | $ | 250.0 | ||||
Titanium
Metals Corporation (“TIMET”)
|
20.1 | 12.5 | ||||||
Other
|
5.4 | 7.8 | ||||||
Total
|
$ | 275.5 | $ | 270.3 | ||||
Investment
in affiliates:
|
||||||||
TiO2 manufacturing joint venture
|
$ | 105.6 | $ | 107.4 | ||||
Other
|
18.4 | 17.8 | ||||||
Total
|
$ | 124.0 | $ | 125.2 | ||||
Other assets:
|
||||||||
Waste disposal site operating permits, net
|
$ | 43.7 | $ | 45.1 | ||||
Deferred financing costs
|
7.1 | 6.4 | ||||||
IBNR
receivables
|
7.5 | 7.7 | ||||||
NL
note receivable
|
15.0 | 15.0 | ||||||
Other
|
14.0 | 13.2 | ||||||
Total
|
$ | 87.3 | $ | 87.4 |
December
31,
2008
|
March
31,
2009
|
|||||||
(In
millions)
|
||||||||
Current:
|
||||||||
Accounts
payable
|
$ | 121.0 | $ | 65.7 | ||||
Employee benefits
|
33.6 | 29.8 | ||||||
Payable
to affiliates:
|
||||||||
Louisiana
Pigment Company
|
14.3 | 7.8 | ||||||
Contran
– trade items
|
9.7 | 10.4 | ||||||
Contran
– income taxes, net
|
1.3 | 2.4 | ||||||
TIMET
|
.5 | .4 | ||||||
Accrued
sales discounts and rebates
|
14.9 | 10.0 | ||||||
Environmental costs
|
11.6 | 11.8 | ||||||
Interest
|
7.9 | 16.9 | ||||||
Deferred income
|
8.4 | 13.5 | ||||||
Reserve
for uncertain tax positions
|
.2 | .5 | ||||||
Other
|
51.8 | 54.0 | ||||||
Total
|
$ | 275.2 | $ | 223.2 | ||||
Noncurrent:
|
||||||||
Reserve
for uncertain tax positions
|
$ | 50.4 | $ | 50.2 | ||||
Insurance claims and expenses
|
13.5 | 13.8 | ||||||
Employee benefits
|
9.1 | 8.7 | ||||||
Other
|
5.8 | 5.8 | ||||||
Total
|
$ | 78.8 | $ | 78.5 |
December
31,
2008
|
March
31,
2009
|
|||||||
(In
millions)
|
||||||||
Valhi:
|
||||||||
Snake
River Sugar Company
|
$ | 250.0 | $ | 250.0 | ||||
Revolving
bank credit facility
|
7.3 | 18.0 | ||||||
Total
Valhi debt
|
257.3 | 268.0 | ||||||
Subsidiary
debt:
|
||||||||
Kronos International:
6.5% Senior Secured Notes
|
560.0 | 538.2 | ||||||
European
bank credit facility
|
42.2 | 68.9 | ||||||
CompX
promissory note payable to TIMET
|
43.0 | 42.7 | ||||||
Kronos U.S. bank credit facility
|
13.7 | 30.2 | ||||||
Other
|
4.2 | 4.2 | ||||||
Total subsidiary debt
|
663.1 | 684.2 | ||||||
Total debt
|
920.4 | 952.2 | ||||||
Less current maturities
|
9.4 | 89.3 | ||||||
Total long-term debt
|
$ | 911.0 | $ | 862.9 |
Three
months ended
March 31,
|
||||||||
2008
|
2009
|
|||||||
(In
millions)
|
||||||||
Service cost
|
$ | 1.7 | $ | 1.8 | ||||
Interest cost
|
7.4 | 6.6 | ||||||
Expected return on plan assets
|
(8.0 | ) | (5.2 | ) | ||||
Amortization of prior service cost
|
.2 | .3 | ||||||
Amortization of net transition
obligations
|
.1 | .1 | ||||||
Recognized actuarial losses
|
1.1 | 1.8 | ||||||
Total
|
$ | 2.5 | $ | 5.4 |
Three
months ended
March 31,
|
||||||||
2008
|
2009
|
|||||||
(In
millions)
|
||||||||
Service
cost
|
$ | .1 | $ | .1 | ||||
Interest
cost
|
.5 | .4 | ||||||
Amortization
of prior service credit
|
(.1 | ) | (.1 | ) | ||||
Total
|
$ | .5 | $ | .4 |
Three
months ended
March 31,
|
||||||||
2008
|
2009
|
|||||||
(In
millions)
|
||||||||
Securities
earnings:
|
||||||||
Dividends and interest
|
$ | 7.0 | $ | 6.6 | ||||
Securities transactions, net
|
(.4 | ) | (.2 | ) | ||||
Total securities earnings
|
6.6 | 6.4 | ||||||
Equity
in losses of investee
|
(.4 | ) | (.7 | ) | ||||
Currency transactions, net
|
(2.5 | ) | 5.3 | |||||
Insurance recoveries
|
.1 | .7 | ||||||
Gain
on litigation settlement
|
- | 11.9 | ||||||
Gain
on sale of business
|
- | 6.4 | ||||||
Other, net
|
1.3 | .2 | ||||||
Total
|
$ | 5.1 | $ | 30.2 |
Three
months ended
March 31,
|
||||||||
2008
|
2009
|
|||||||
(In
millions)
|
||||||||
Expected
tax benefit, at U.S. federal
statutory income
tax rate of 35%
|
$ | (2.4 | ) | $ | (11.4 | ) | ||
Incremental
U.S. tax and rate differences on
equity
in earnings
|
.6 | (1.6 | ) | |||||
Non-U.S.
tax rates
|
- | 1.4 | ||||||
Nondeductible
expenses
|
- | 2.2 | ||||||
Nontaxable
income
|
- | (1.0 | ) | |||||
Change
in reserve for uncertain tax positions
|
.2 | - | ||||||
U.S.
state income taxes, net
|
.1 | .9 | ||||||
Other,
net
|
.2 | .3 | ||||||
Income
tax benefit
|
$ | (1.3 | ) | $ | (9.2 | ) |
December
31,
2008
|
March
31,
2009
|
|||||||
(In
millions)
|
||||||||
Noncontrolling
interest in subsidiaries:
|
||||||||
NL Industries
|
$ | 45.8 | $ | 41.7 | ||||
Kronos Worldwide
|
15.6 | 14.2 | ||||||
CompX International
|
11.9 | 11.5 | ||||||
Total
|
$ | 73.3 | $ | 67.4 |
Three
months ended
March 31,
|
||||||||
2008
|
2009
|
|||||||
(In
millions)
|
||||||||
Noncontrolling
interest in net income (loss) of
subsidiaries:
|
||||||||
NL Industries
|
$ | (.1 | ) | $ | (2.0 | ) | ||
CompX International
|
.2 | (.1 | ) | |||||
Kronos Worldwide
|
- | (1.3 | ) | |||||
Total
|
$ | .1 | $ | (3.4 | ) |
Three
months ended
March
31,
2009
|
||||
(In
millions)
|
||||
Net
loss attributable to Valhi stockholders
|
$ | (20.0 | ) | |
Transfers
(to) from noncontrolling interest:
|
||||
Increase
in additional paid-in capital for purchase of 14,000 shares of Kronos
common stock
|
.2 | |||
Net
transfers (to) from noncontrolling interest
|
.2 | |||
Net
loss attributable to Valhi stockholders and change from noncontrolling
interest in subsidiaries
|
$ | (19.8 | ) |
|
·
|
we
have never settled any of these
cases;
|
|
·
|
no
final, non-appealable adverse verdicts have ever been entered against us;
and
|
|
·
|
we
have never ultimately been found liable with respect to any such
litigation matters.
|
|
·
|
complexity
and differing interpretations of governmental
regulations;
|
|
·
|
number
of PRPs and their ability or willingness to fund such allocation of
costs;
|
|
·
|
financial
capabilities of the PRPs and the allocation of costs among
them;
|
|
·
|
solvency
of other PRPs;
|
|
·
|
multiplicity
of possible solutions; and
|
|
·
|
number
of years of investigatory, remedial and monitoring activity
required.
|
Amount
|
||||
(In
millions)
|
||||
Balance
at the beginning of the period
|
$ | 52.9 | ||
Additions
charged to expense, net
|
.9 | |||
Payments,
net
|
(2.0 | ) | ||
Balance
at the end of the period
|
$ | 51.8 | ||
Amounts recognized in the Consolidated Balance Sheet at the
end of the period:
|
||||
Current liability
|
$ | 11.8 | ||
Noncurrent liability
|
40.0 | |||
Total
|
$ | 51.8 |
|
·
|
to
recover response and remediation costs incurred at the
site;
|
|
·
|
a
declaration of the parties’ liability for response and remediation costs
incurred at the site;
|
|
·
|
a
declaration of the parties’ liability for response and remediation costs
to be incurred in the future at the site;
and
|
|
·
|
a
declaration regarding the obligation of Tremont to indemnify Halliburton
and DII for costs and expenses attributable to the
site.
|
·
|
facts
concerning historical operations,
|
·
|
the
rate of new claims,
|
·
|
the
number of claims from which we have been dismissed
and
|
·
|
our
prior experience in the defense of these
matters,
|
Fair Value Measurements at March 31,
2009
|
||||||||||||||||
Total
|
Quoted
Prices in Active Markets (Level
1)
|
Significant
Other Observable Inputs (Level
2)
|
Significant
Unobservable Inputs (Level
3)
|
|||||||||||||
(In
millions)
|
||||||||||||||||
Marketable
securities:
|
||||||||||||||||
Current
|
$ | 8.8 | $ | - | $ | 8.8 | $ | - | ||||||||
Noncurrent
|
270.3 | 20.3 | - | 250.0 | ||||||||||||
Currency
forward contracts
|
2.1 | 2.1 | - | - | ||||||||||||
|
·
|
Our
Component Products Segment entered into a series of short-term forward
exchange contracts maturing through June 2009 to exchange an aggregate of
$3.9 million for an equivalent value of Canadian dollars at an exchange
rate of Cdn. $1.25 per U.S. dollar. At March 31, 2009, the
actual exchange rate was Cdn. $1.25 per U.S.
dollar.
|
·
|
Our
Chemicals Segment has an aggregate of $22.5 million for an equivalent
value of Canadian dollars at exchange rates ranging from Cdn. $1.25 to
Cdn. $1.26 per U.S. dollar. These contracts with U.S. Bank mature
from April 2009 through December 2009 at a rate of $2.5 million per
month. At March 31, 2009, the actual exchange rate was Cdn. $1.25
per U.S. dollar.
|
·
|
Our
Chemicals Segment has an aggregate $56.5 million for an equivalent value
of Norwegian kroner at exchange rates ranging from kroner 6.51 to
kroner 7.18 per U.S. dollar. These contracts with DnB Nor Bank ASA
mature from April 2009 through March 2010 at a rate of $.5 million to
$4.75 million per month. At March 31, 2009, the actual exchange
rate was kroner 6.51 per U.S.
dollar.
|
·
|
Our
Chemicals Segment also has an aggregate euro 16.4 million for an
equivalent value of Norwegian kroner at exchange rates ranging from kroner
8.68 to kroner 9.23 per euro. These contracts with DnB Nor Bank ASA
mature from April 2009 through March 2010 at a rate of euro .5 million to
euro 1.7 million per month. At March 31, 2009, the actual
exchange rate was kroner 8.89 per
euro.
|
|
•
|
Chemicals – Our
chemicals segment is operated through our majority ownership of
Kronos. Kronos is a leading global producer and marketer of
value-added titanium dioxide pigments (“TiO2”). TiO2 is
used for a variety of manufacturing applications, including plastics,
paints, paper and other industrial
products.
|
|
•
|
Component Products – We
operate in the component products industry through our majority ownership
of CompX. CompX is a leading global manufacturer of security
products, precision ball bearing slides and ergonomic computer support
systems used in the office furniture, transportation, postal, tool
storage, appliance and a variety of other industries. CompX is
also a leading manufacturer of stainless steel exhaust systems, gauges and
throttle controls for the performance marine
industry.
|
|
•
|
Waste Management – WCS
is our wholly-owned subsidiary which owns and operates a West Texas
facility for the processing, treatment, storage and disposal of hazardous,
toxic and certain types of low-level radioactive waste. WCS
obtained a byproduct disposal license in 2008 and is in the process
constructing the byproduct disposal facility, which is expected to be
operational in the second half of 2009. In January 2009 WCS
received a low-level radioactive waste disposal permit, and construction
of the low-level radioactive waste facility is currently expected to begin
in the third quarter of 2009, following the completion of some
pre-construction licensing and administrative matters, and is expected to
be operational in the third quarter of
2010.
|
|
·
|
Future
supply and demand for our products;
|
|
·
|
The
cyclicality of certain of our businesses (such as Kronos’ TiO2
operations;
|
|
·
|
Customer
inventory levels (such as the extent to which Kronos’ customers may, from
time to time, accelerate purchases of TiO2 in
advance of anticipated price increases or defer purchases of TiO2in
advance of anticipated price
decreases;
|
|
·
|
Changes
in our raw material and other operating costs (such as energy
costs);
|
|
·
|
General
global economic and political conditions (such as changes in the level of
gross domestic product in various regions of the world and the impact of
such changes on demand for, among other things, TiO2);
|
|
·
|
Competitive
products and substitute products;
|
|
·
|
Possible
disruption of our business or increases in the cost of doing business
resulting from terrorist activities or global
conflicts;
|
|
·
|
Customer
and competitor strategies;
|
|
·
|
The
impact of pricing and production
decisions;
|
|
·
|
Competitive
technology positions;
|
|
·
|
The
introduction of trade barriers;
|
|
·
|
Restructuring
transactions involving us and our
affiliates;
|
|
·
|
Potential
consolidation or solvency of our
competitors;
|
|
·
|
Demand
for high performance marine
components;
|
|
·
|
The
ability of our subsidiaries to pay us
dividends;
|
|
·
|
Uncertainties
associated with new product
development;
|
|
·
|
Fluctuations
in currency exchange rates (such as changes in the exchange rate between
the U.S. dollar and each of the euro, the Norwegian krone, the Canadian
dollar and the New Taiwan dollar);
|
|
·
|
Operating
interruptions (including, but not limited to, labor disputes, leaks,
natural disasters, fires, explosions, unscheduled or unplanned downtime
and transportation interruptions);
|
|
·
|
The
timing and amounts of insurance
recoveries;
|
|
·
|
Our
ability to renew, refinance or establish credit
facilities;
|
|
·
|
Our
ability to maintain sufficient
liquidity;
|
|
·
|
The
ultimate outcome of income tax audits, tax settlement initiatives or other
tax matters;
|
|
·
|
The
ultimate ability to utilize income tax attributes or changes in income tax
rates related to such attributes, the benefit of which has been recognized
under the more likely than not recognition criteria (such as Kronos’
ability to utilize its German net operating loss
carryforwards);
|
|
·
|
Environmental
matters (such as those requiring compliance with emission and discharge
standards for existing and new facilities, or new developments regarding
environmental remediation at sites related to our former
operations);
|
|
·
|
Government
laws and regulations and possible changes therein (such as changes in
government regulations which might impose various obligations on present
and former manufacturers of lead pigment and lead-based paint, including
NL, with respect to asserted health concerns associated with the use of
such products);
|
|
·
|
The
ultimate resolution of pending litigation (such as NL's lead pigment
litigation and litigation surrounding environmental matters of NL and
Tremont and CompX’s patent
litigation);
|
|
·
|
Our
ability to comply with covenants contained in our revolving bank credit
facilities; and
|
|
·
|
Possible
future litigation.
|
|
·
|
lower
operating income from each of our Chemicals, Component Products and Waste
Management Segments in 2009;
|
|
·
|
a
gain from a litigation settlement in 2009;
and
|
|
·
|
a
gain from a sale of a business in
2009.
|
|
·
|
lower
expected operating income from our Chemicals Segment due to anticipated
higher production costs;
|
|
·
|
recording
a lower gain from litigation settlements;
and
|
|
·
|
lower
operating losses at WCS as we expect more revenues with the completion of
the byproduct disposal facility in the second half of
2009.
|
|
·
|
TiO2
average selling prices;
|
|
·
|
Currency
exchange rates (particularly the exchange rate for the U.S. dollar
relative to the euro, Norwegian krone and the Canadian
dollar);
|
|
·
|
TiO2
sales and production volumes; and
|
|
·
|
Manufacturing
costs, particularly maintenance and energy-related
expenses.
|
Three months ended March
31,
|
||||||||||||
2008
|
2009
|
% Change
|
||||||||||
(Dollars
in millions)
|
||||||||||||
Net
sales
|
$ | 332.5 | $ | 248.0 | (25 | )% | ||||||
Cost
of sales
|
276.0 | 244.4 | (11 | ) | ||||||||
Gross
margin
|
$ | 56.5 | $ | 3.6 | (94 | ) | ||||||
Operating
income (loss)
|
$ | 11.0 | $ | (25.5 | ) | |||||||
Percent
of net sales:
|
||||||||||||
Cost
of sales
|
83 | % | 99 | % | ||||||||
Gross
margin
|
17 | 1 | ||||||||||
Operating
income
|
3 | (10 | ) | |||||||||
Ti02
operating statistics:
|
||||||||||||
Sales
volumes*
|
127 | 97 | (24 | )% | ||||||||
Production
volumes*
|
132 | 64 | (52 | ) | ||||||||
Percent
change in net sales:
|
||||||||||||
Ti02
product pricing
|
5 | % | ||||||||||
Ti02
sales volumes
|
(24 | ) | ||||||||||
Ti02
product mix
|
(2 | ) | ||||||||||
Changes
in currency exchange rates
|
(4 | ) | ||||||||||
Total
|
(25 | )% |
Three
months ended
March 31, 2009 vs.
2008
|
|
Increase
(decrease) in millions
|
|
Impact
on:
|
|
Net
sales
|
$(13)
|
Operating
income
|
28
|
Three months ended March
31,
|
||||||||||||
2008
|
2009
|
% Change
|
||||||||||
Net
sales
|
$ | 40.5 | $ | 28.5 | (30 | )% | ||||||
Cost
of sales
|
31.1 | 23.7 | (24 | ) | ||||||||
Gross
margin
|
$ | 9.4 | $ | 4.8 | (49 | )% | ||||||
Operating
income (loss)
|
$ | 3.0 | $ | (1.0 | ) | |||||||
Percent
of net sales:
|
||||||||||||
Cost
of sales
|
77 | % | 83 | % | ||||||||
Gross
margin
|
23 | 17 | ||||||||||
Operating
income
|
7 | (3 | ) |
Three
months ended
March 31, 2009
vs. 2008
|
|
Increase
(decrease) in millions
|
|
Impact
on:
|
|
Net
sales
|
$ (.6)
|
Operating
income (loss)
|
.7
|
Three
months ended
|
||||||||
March 31,
|
||||||||
2008
|
2009
|
|||||||
(In
millions)
|
||||||||
Net
sales
|
$ | .9 | $ | .8 | ||||
Cost
of sales
|
3.3 | 4.6 | ||||||
Gross
margin
|
$ | (2.4 | ) | $ | (3.8 | ) | ||
Operating
loss
|
$ | (4.4 | ) | $ | (6.5 | ) |
·
|
litigation
and related costs at NL of $2.5 million in 2009 compared to $3.1 million
in 2008 and
|
·
|
environmental
expenses of $.9 million in 2009, compared to a credit of $.1 million in
2008.
|
|
·
|
lower
consolidated operating income in 2009 of $42.6 million, due to the
operating losses at all of our segments in
2009;
|
|
·
|
higher
cash paid for income taxes in 2009 of $3.5 million due in part to the cash
income taxes generated from the first quarter 2009 litigation settlement
gain and sale of a business, both as discussed
above;
|
|
·
|
proceeds
from a litigation settlement of $11.8 million received in January
2009;
|
|
·
|
net
contributions to our TiO2
joint venture in 2009 of $1.8 million compared to distributions of $1.4
million in 2008 due to relative changes in its cash requirements;
and
|
|
·
|
lower
net cash used by changes in receivables, inventories, payables and accrued
liabilities in 2009 of $50.7 million, primarily due to decreases in
Kronos’ inventory levels.
|
|
·
|
Kronos’
average days sales outstanding (“DSO”) increased from December 31,
2008 to March 31, 2009 due to the timing of collection on higher
accounts receivable balances at the end of
March;
|
|
·
|
Kronos’
average days sales in inventory (“DSI”) decreased from December 31, 2008
to March 31, 2009 as our TiO2
sales volumes exceeded our TiO2
production volumes during the
quarter;
|
|
·
|
CompX’s
average DSO increased from December 31, 2008 to March 31, 2009 due to the
timing of collection of lower accounts receivables balance at the end of
March; and
|
|
·
|
CompX’s
average DSI increased from December 31, 2008 to March 31, 2009 primarily
due lower sales volumes in the first quarter which impacted the DII
calculation though CompX’s overall inventory declined in the first
quarter.
|
December
31,
|
March
31,
|
December
31,
|
March
31,
|
|
2007
|
2008
|
2008
|
2009
|
|
Kronos:
|
||||
DSO
|
63
days
|
72
days
|
64
days
|
68
days
|
DII
|
59
days
|
64
days
|
113
days
|
64
days
|
CompX:
|
||||
DSO
|
44
days
|
43
days
|
41
days
|
44
days
|
DII
|
63
days
|
75
days
|
70
days
|
80
days
|
Three
months ended
March 31,
|
||||||||
2008
|
2009
|
|||||||
(In
millions)
|
||||||||
Cash
provided by (used in) operating activities:
|
||||||||
Kronos
|
$ | (28.9 | ) | $ | (17.4 | ) | ||
CompX
|
2.4 | (.3 | ) | |||||
Waste Control Specialists
|
(2.1 | ) | (8.5 | ) | ||||
NL Parent
|
1.4 | .6 | ||||||
Tremont
|
.1 | 10.9 | ||||||
Valhi
exclusive of subsidiaries
|
11.6 | 12.2 | ||||||
Other
|
(.1 | ) | 1.2 | |||||
Eliminations
|
(18.0 | ) | (17.5 | ) | ||||
Total
|
$ | (33.6 | ) | $ | (18.8 | ) |
|
·
|
$11.4
million in our Chemicals Segment;
|
|
·
|
$7.6
million in our Waste Management
Segment.
|
|
·
|
$.3
million in our Component Products Segment;
and
|
|
·
|
purchased
Kronos common stock for $.1
million;
|
|
·
|
purchased
other marketable securities of $3.1 million;
and
|
|
·
|
sold
other marketable securities for proceeds of $2.2
million.
|
|
·
|
KII’s
euro 400 million aggregate principal amount of its 6.5% Senior Secured
Notes ($538.2 million) due in 2013;
|
|
·
|
our
$250 million loan from Snake River Sugar Company due in
2027;
|
|
·
|
KII's
European revolving credit facility ($68.9 million outstanding) due in
2011;
|
|
·
|
CompX’s
promissory note payable to TIMET ($42.7 million outstanding) which has
quarterly principal repayments of $250,000 and is due in
2014;
|
|
·
|
Kronos’
U.S. revolving credit facility ($30.2 million outstanding) due in
2011;
|
|
·
|
Valhi’s
revolving credit facility ($18.0 million outstanding) due in 2009;
and
|
|
·
|
approximately
$4.2 million of other indebtedness.
|
|
·
|
$72.6(1)
million under Kronos’ various U.S. and non-U.S. credit
facilities;
|
|
·
|
$55.3
million under Valhi’s revolving bank credit facility;
and
|
|
·
|
$37.5
million under CompX’s revolving credit
facility.
|
(1)
|
Includes
$39.2 million under the European Credit facility which cannot currently be
drawn upon because we are not in compliance with a debt ratio as noted
above.
|
Amount
|
||||
(In
millions)
|
||||
Kronos
|
$ | 32.4 | ||
NL Parent
|
23.4 | |||
CompX
|
11.8 | |||
Tremont
|
7.7 | |||
Valhi
exclusive of its subsidiaries
|
6.1 | |||
Waste Control Specialists
|
2.7 | |||
Total cash, cash equivalents and marketable securities
|
$ | 84.1 |
|
·
|
certain
income tax examinations which are underway in various U.S. and non-U.S.
jurisdictions;
|
|
·
|
certain
environmental remediation matters involving NL, Tremont and
Valhi;
|
|
·
|
certain
litigation related to NL’s former involvement in the manufacture of lead
pigment and lead-based paint; and
|
|
·
|
certain
other litigation to which we are a
party.
|
|
·
|
pertain
to the maintenance of records that in reasonable detail accurately and
fairly reflect our transactions and dispositions of our
assets,
|
|
·
|
provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP, and that our
receipts and expenditures are made only in accordance with authorizations
of our management and directors,
and
|
|
·
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have
a material effect on our Condensed Consolidated Financial
Statements.
|
Period
|
Total
number of shares purchased
|
Average
price
paid
per
share, including
commissions
|
Total
number of shares purchased as part of a publicly-announced plan
|
Maximum
number of shares that may yet be purchased under the publicly-announced
plan at end of
period
|
||||||||||||
January 1, 2009
to January 31,
2009
|
2,806 | $ | 11.76 | - 0 - | 4,006,600 |
Item
No.
|
Exhibit
Index
|
||
31.1
|
Certification
|
||
31.2
|
Certification
|
||
32.1
|
Certification
|
VALHI,
INC.
(Registrant)
|
||
Date
May 6,
2009
|
/s/ Bobby D.
O’Brien
|
|
Bobby
D. O’Brien
(Vice
President and Chief
Financial
Officer)
|
||
Date
May 6, 2009
|
/s/ Gregory M.
Swalwell
|
|
Gregory
M. Swalwell
(Vice
President and Controller,
Principal
Accounting Officer)
|
||