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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, 2021

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: (972233-1700

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 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, a 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.

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, $.01 par value per share, outstanding on April 30, 2021: 28,273,093  

 

 

 


 

 

VALHI, INC. AND SUBSIDIARIES

INDEX

 

 

 

 

 

 

 

Page
number

 

 

 

 

 

 

 

 

Part I.

 

FINANCIAL INFORMATION

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 1.

  

Financial Statements

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Condensed Consolidated Balance Sheets – December 31, 2020 and March 31, 2021 (unaudited)

  

 

3

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Condensed Consolidated Statements of Income (unaudited) – Three months ended March 31, 2020 and 2021

  

 

5

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) – Three months ended March 31, 2020 and 2021

  

 

6

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Condensed Consolidated Statements of Stockholders’ Equity (unaudited) – Three months ended March 31, 2020 and 2021

  

 

7

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Condensed Consolidated Statements of Cash Flows (unaudited) –Three months ended March 31, 2020 and 2021

  

 

8

  

 

 

 

 

 

 

 

 

 

 

 

 

  

Notes to Condensed Consolidated Financial Statements (unaudited)

  

 

9

  

 

 

 

 

 

 

 

 

 

 

 

Item 2.

  

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

  

 

22

 

 

 

 

 

 

 

 

 

 

 

 

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

  

 

38

 

 

 

 

 

 

 

 

 

 

 

 

Item 4.

  

Controls and Procedures

  

 

38

 

 

 

 

 

 

 

 

 

 

Part II.

 

OTHER INFORMATION

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 1.

  

Legal Proceedings

  

 

39

 

 

 

 

 

 

 

 

 

 

 

 

Item 1A.

  

Risk Factors

  

 

39

 

 

 

 

 

 

 

 

 

 

 

 

Item 6.

  

Exhibits

  

 

40

 

Items 2, 3, 4 and 5 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,

 

 

2020

 

 

2021

 

 

 

 

 

 

(unaudited)

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

518.6

 

 

$

546.0

 

Restricted cash equivalents

 

13.9

 

 

 

17.2

 

Marketable securities

 

4.4

 

 

 

2.4

 

Accounts and other receivables, net

 

342.3

 

 

 

362.8

 

Inventories, net

 

538.2

 

 

 

491.9

 

Other current assets

 

36.0

 

 

 

47.7

 

Total current assets

 

1,453.4

 

 

 

1,468.0

 

 

 

 

 

 

 

 

 

Other assets:

 

 

 

 

 

 

 

Investment in TiO2 manufacturing joint venture

 

103.3

 

 

 

106.7

 

Goodwill

 

379.7

 

 

 

379.7

 

Deferred income taxes

 

120.2

 

 

 

112.0

 

Other assets

 

242.3

 

 

 

232.5

 

Total other assets

 

845.5

 

 

 

830.9

 

 

 

 

 

 

 

 

 

Property and equipment:

 

 

 

 

 

 

 

Land

 

49.6

 

 

 

48.7

 

Buildings

 

268.7

 

 

 

257.8

 

Equipment

 

1,234.8

 

 

 

1,205.0

 

Mining properties

 

30.2

 

 

 

24.3

 

Construction in progress

 

64.5

 

 

 

67.9

 

 

 

1,647.8

 

 

 

1,603.7

 

Less accumulated depreciation and amortization

 

1,057.4

 

 

 

1,034.8

 

Net property and equipment

 

590.4

 

 

 

568.9

 

Total assets

$

2,889.3

 

 

$

2,867.8

 

 

 

- 3 -


 

VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In millions)

 

 

December 31,

 

 

March 31,

 

 

2020

 

 

2021

 

 

 

 

 

 

(unaudited)

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current maturities of long-term debt

$

2.4

 

 

$

2.4

 

Accounts payable and accrued liabilities

 

300.0

 

 

 

291.9

 

Income taxes

 

15.7

 

 

 

17.2

 

Total current liabilities

 

318.1

 

 

 

311.5

 

 

 

 

 

 

 

 

 

Noncurrent liabilities:

 

 

 

 

 

 

 

Long-term debt

 

786.2

 

 

 

763.1

 

Deferred income taxes

 

29.6

 

 

 

30.2

 

Payable to affiliate - income taxes

 

50.4

 

 

 

50.4

 

Accrued pension costs

 

379.0

 

 

 

361.8

 

Accrued environmental remediation and related costs

 

95.2

 

 

 

94.7

 

Other liabilities

 

223.9

 

 

 

227.5

 

Total noncurrent liabilities

 

1,564.3

 

 

 

1,527.7

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

Valhi stockholders' equity:

 

 

 

 

 

 

 

Common stock

 

.3

 

 

 

.3

 

Additional paid-in capital

 

668.3

 

 

 

669.2

 

Retained earnings

 

282.9

 

 

 

295.5

 

Accumulated other comprehensive loss

 

(219.4

)

 

 

(215.8

)

Treasury stock, at cost

 

(49.6

)

 

 

(49.6

)

Total Valhi stockholders' equity

 

682.5

 

 

 

699.6

 

Noncontrolling interest in subsidiaries

 

324.4

 

 

 

329.0

 

Total equity

 

1,006.9

 

 

 

1,028.6

 

Total liabilities and equity

$

2,889.3

 

 

$

2,867.8

 

 

 

 

Commitments and contingencies (Notes 6, 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,

 

 

2020

 

 

2021

 

 

(unaudited)

 

 

 

 

 

 

 

 

 

Revenues and other income:

 

 

 

 

 

 

 

Net sales

$

459.3

 

 

$

509.0

 

Other, net

 

34.9

 

 

 

7.0

 

Total revenues and other income

 

494.2

 

 

 

516.0

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of sales

 

359.6

 

 

 

399.7

 

Selling, general and administrative

 

70.9

 

 

 

70.9

 

Other components of net periodic pension and OPEB expense

 

4.7

 

 

 

4.3

 

Interest

 

9.7

 

 

 

8.6

 

Total costs and expenses

 

444.9

 

 

 

483.5

 

Income before income taxes

 

49.3

 

 

 

32.5

 

Income tax expense

 

11.4

 

 

 

8.0

 

Net income

 

37.9

 

 

 

24.5

 

Noncontrolling interest in net income of subsidiaries

 

13.5

 

 

 

9.7

 

Net income attributable to Valhi stockholders

$

24.4

 

 

$

14.8

 

 

 

 

 

 

 

 

 

Amounts attributable to Valhi stockholders:

 

 

 

 

 

 

 

Basic and diluted net income per share

$

.86

 

 

$

.52

 

 

 

 

 

 

 

 

 

Basic and diluted weighted average shares outstanding

 

28.5

 

 

 

28.5

 

 

 

 

 

 

 

 

 

 

 

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,

 

 

2020

 

 

2021

 

 

(unaudited)

 

Net income

$

37.9

 

 

$

24.5

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

Currency translation

 

(37.7

)

 

 

1.7

 

Defined benefit pension plans

 

3.0

 

 

 

3.4

 

Other

 

(.1

)

 

 

(.2

)

Total other comprehensive income (loss), net

 

(34.8

)

 

 

4.9

 

Comprehensive income

 

3.1

 

 

 

29.4

 

Comprehensive income attributable to noncontrolling interest

 

4.2

 

 

 

11.0

 

Comprehensive income (loss) attributable to Valhi stockholders

$

(1.1

)

 

$

18.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2020 and 2021  (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

other

 

 

 

 

 

 

Non-

 

 

 

 

 

 

Preferred

 

 

Common

 

 

paid-in

 

 

Retained

 

 

comprehensive

 

 

Treasury

 

 

controlling

 

 

 

 

 

 

stock

 

 

stock

 

 

capital

 

 

earnings

 

 

loss

 

 

stock

 

 

interest

 

 

Total

 

 

 

 

 

 

 

 

Balance at December 31, 2019

$

667.3

 

 

$

.3

 

 

$

3.3

 

 

$

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 - $.24 per share

 

-

 

 

 

-

 

 

 

-

 

 

 

(6.8

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6.8

)

Equity transactions with noncontrolling

interest, net and other

 

-

 

 

 

-

 

 

 

-

 

 

 

(.6

)

 

 

-

 

 

 

-

 

 

 

(.3

)

 

 

(.9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2020

$

667.3

 

 

$

.3

 

 

$

3.3

 

 

$

256.4

 

 

$

(246.2

)

 

$

(49.6

)

 

$

335.4

 

 

$

966.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020

$

-

 

 

$

.3

 

 

$

668.3

 

 

$

282.9

 

 

$

(219.4

)

 

$

(49.6

)

 

$

324.4

 

 

$

1,006.9

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

14.8

 

 

 

-

 

 

 

-

 

 

 

9.7

 

 

 

24.5

 

Other comprehensive income, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3.6

 

 

 

-

 

 

 

1.3

 

 

 

4.9

 

Dividends paid to noncontrolling interest

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4.8

)

 

 

(4.8

)

Cash dividends - $.08 per share

 

-

 

 

 

-

 

 

 

-

 

 

 

(2.2

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(2.2

)

Equity transaction with noncontrolling

interest, net and other

 

-

 

 

 

-

 

 

 

.9

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1.6

)

 

 

(.7

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2021

$

-

 

 

$

.3

 

 

$

669.2

 

 

$

295.5

 

 

$

(215.8

)

 

$

(49.6

)

 

$

329.0

 

 

$

1,028.6

 

 

 

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,

 

 

2020

 

 

2021

 

 

(unaudited)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

$

37.9

 

 

$

24.5

 

Depreciation and amortization

 

17.0

 

 

 

14.7

 

Benefit plan expense greater than cash funding

 

3.1

 

 

 

3.5

 

Deferred income taxes

 

-

 

 

 

1.3

 

Contributions to TiO2 manufacturing joint venture, net

 

(2.2

)

 

 

(3.4

)

Other, net

 

3.1

 

 

 

.9

 

Change in assets and liabilities:

 

 

 

 

 

 

 

Accounts and other receivables, net

 

(39.7

)

 

 

(29.7

)

Inventories, net

 

2.7

 

 

 

35.7

 

Land held for development, net

 

(2.7

)

 

 

(4.9

)

Accounts payable and accrued liabilities

 

(35.0

)

 

 

(2.0

)

Accounts with affiliates

 

(1.5

)

 

 

4.5

 

Income taxes

 

11.8

 

 

 

1.9

 

Other, net

 

(12.7

)

 

 

9.6

 

Net cash provided by (used in) operating activities

 

(18.2

)

 

 

56.6

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Capital expenditures

 

(16.0

)

 

 

(11.5

)

Purchases of marketable securities

 

(.4

)

 

 

(.9

)

Proceeds from disposal of marketable securities

 

.6

 

 

 

3.0

 

Other, net

 

2.7

 

 

 

2.1

 

Net cash used in investing activities

 

(13.1

)

 

 

(7.3

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Principal payments on indebtedness

 

(3.2

)

 

 

(3.9

)

Valhi cash dividends paid

 

(6.8

)

 

 

(2.2

)

Distributions to noncontrolling interest in subsidiaries

 

(8.6

)

 

 

(4.8

)

Subsidiary treasury stock acquired

 

(1.0

)

 

 

(.8

)

Net cash used in financing activities

 

(19.6

)

 

 

(11.7

)

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

 

 

 

 

 

 

 

Operating, investing and financing activities

 

(50.9

)

 

 

37.6

 

Effect of exchange rates on cash

 

(3.9

)

 

 

(7.0

)

Balance at beginning of period

 

583.8

 

 

 

570.3

 

Balance at end of period

$

529.0

 

 

$

600.9

 

Supplemental disclosures:

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

Interest, net of capitalized interest

$

12.7

 

 

$

12.0

 

Income taxes, net

 

(.7

)

 

 

3.9

 

Noncash investing activities:

 

 

 

 

 

 

 

Change in accruals for capital expenditures

 

2.2

 

 

 

2.4

 

 

 

See accompanying Notes to Condensed Consolidated Financial Statements.

 

 

- 8 -


 

 

VALHI, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(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, 2021.  A majority of Contran's outstanding voting stock is held directly by Lisa K. Simmons and various family trusts established for the benefit of Ms. Simmons, Thomas C. Connelly (the husband of Ms. Simmons’ late sister) and their children and for which Ms. Simmons or Mr. Connelly, as applicable, serve as trustee (collectively, the “Other Trusts”). With respect to the Other Trusts for which Mr. Connelly serves as trustee, he is required to vote the shares of Contran voting stock held in such trusts in the same manner as Ms. Simmons.  Such voting rights of Ms. Simmons last through April 22, 2030 and are personal to Ms. Simmons. The remainder of Contran’s outstanding voting stock is held by another trust (the “Family Trust”), which was established for the benefit of Ms. Simmons and her late sister and their children and for which a third-party financial institution serves as trustee. Consequently, at March 31, 2021, 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, 2020 that we filed with the SEC on March 11, 2021 (the “2020 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, 2020 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, 2020) 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, 2021 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 2020 Consolidated Financial Statements contained in our 2020 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, 2021

 

Chemicals

  

Kronos

  

80

Component products

  

CompX

  

87

Real estate management and development

 

BMI and LandWell

 

63% - 77

%

- 9 -


 

 

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

 

 

Three months ended

 

 

March 31,

 

 

2020

 

 

2021

 

 

(In millions)

 

Net sales:

 

 

 

 

 

 

 

Chemicals

$

421.0

 

 

$

465.0

 

Component products

 

32.3

 

 

 

35.9

 

Real estate management and development

 

6.0

 

 

 

8.1

 

Total net sales

$

459.3

 

 

$

509.0