VALHI INC /DE/ [VHI] Filings

10-Q 1 vhl-20240930x10q.htm 10-Q

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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 September 30, 2024

☐ 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 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 November 1, 2024: 28,294,793

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VALHI, INC. AND SUBSIDIARIES

INDEX

				Page number


Part I.	FINANCIAL INFORMATION

	Item 1.		Financial Statements

			Condensed Consolidated Balance Sheets – December 31, 2023 and September 30, 2024 (unaudited)	3

			Condensed Consolidated Statements of Operations (unaudited) – Three and nine months ended September 30, 2023 and 2024	5

			Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) – Three and nine months ended September 30, 2023 and 2024	6

			Condensed Consolidated Statements of Stockholders’ Equity (unaudited) – Three and nine months ended September 30, 2023 and 2024	7

			Condensed Consolidated Statements of Cash Flows (unaudited) – Nine months ended September 30, 2023 and 2024	8

			Notes to Condensed Consolidated Financial Statements (unaudited)	10

	Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

	Item 3.		Quantitative and Qualitative Disclosures About Market Risk	50

	Item 4.		Controls and Procedures	50

Part II.		OTHER INFORMATION

		Item 1.	Legal Proceedings	51

		Item 1A.	Risk Factors	51

		Item 6.	Exhibits	52

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

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VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)


ASSETS	December 31,		September 30,
	2023		2024
			(unaudited)
Current assets:
Cash and cash equivalents	$	407.0	$	314.6
Restricted cash equivalents		22.6		44.7
Marketable securities		56.1		2.1
Accounts and other receivables, net		340.4		394.7
Inventories, net		596.1		577.4
Prepaid expenses and other		53.2		72.5
Total current assets		1,475.4		1,406.0

Other assets:
Marketable securities		4.8		5.3
Investment in TiO₂ manufacturing joint venture		111.0		—
Goodwill		379.7		382.3
Deferred income taxes		67.0		68.8
Other assets		181.8		173.5
Total other assets		744.3		629.9

Property and equipment:
Land		45.1		77.2
Buildings		271.2		297.9
Equipment		1,179.4		1,382.3
Mining properties		89.2		85.3
Construction in progress		23.6		33.6
		1,608.5		1,876.3
Less accumulated depreciation and amortization		1,091.2		1,125.0
Net property and equipment		517.3		751.3
Total assets	$	2,737.0	$	2,787.2

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VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In millions)


LIABILITIES AND STOCKHOLDERS' EQUITY	December 31,		September 30,
	2023		2024
			(unaudited)
Current liabilities:
Current maturities of long-term debt	$	.7	$	84.7
Accounts payable and accrued liabilities		490.7		401.3
Income taxes		15.7		17.7
Total current liabilities		507.1		503.7

Noncurrent liabilities:
Long-term debt		545.8		526.6
Accrued pension costs		151.6		144.8
Accrued environmental remediation and related costs		93.2		92.8
Deferred income taxes		17.1		40.4
Payable to affiliate - income taxes		18.5		—
Other liabilities		127.5		112.3
Total noncurrent liabilities		953.7		916.9

Equity:
Preferred stock		—		—
Common stock		.3		.3
Additional paid-in capital		669.5		669.9
Retained earnings		475.8		554.2
Accumulated other comprehensive loss		(145.5)		(152.3)
Treasury stock, at cost		(49.6)		(49.6)
Total Valhi stockholders' equity		950.5		1,022.5
Noncontrolling interest in subsidiaries		325.7		344.1
Total equity		1,276.2		1,366.6
Total liabilities and equity	$	2,737.0	$	2,787.2

Commitments and contingencies (Notes 13, 16 and 19)

See accompanying Notes to Condensed Consolidated Financial Statements.

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VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)


	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2024		2023		2024

	(unaudited)
Revenues and other income:
Net sales	$	468.9	$	533.6	$	1,468.7	$	1,623.9
Other income, net		7.5		25.2		31.1		41.1
Total revenues and other income		476.4		558.8		1,499.8		1,665.0

Cost and other expense (income):
Cost of sales		408.3		417.3		1,288.5		1,300.0
Selling, general and administrative		69.1		74.2		206.3		217.7
Gain on remeasurement of investment in TiO₂ manufacturing joint venture		—		(64.5)		—		(64.5)
Other components of net periodic pension and OPEB expense		1.3		.6		10.0		1.8
Interest		7.2		13.4		21.4		36.6
Other		—		(2.1)		—		(2.1)
Total costs and other expense (income)		485.9		438.9		1,526.2		1,489.5

Income (loss) before income taxes		(9.5)		119.9		(26.4)		175.5
Income tax expense (benefit)		(7.8)		34.3		(19.8)		46.6
Net income (loss)		(1.7)		85.6		(6.6)		128.9
Noncontrolling interest in net income of subsidiaries		4.1		28.1		8.2		43.7
Net income (loss) attributable to Valhi stockholders	$	(5.8)	$	57.5	$	(14.8)	$	85.2

Amounts attributable to Valhi stockholders:
Basic and diluted net income (loss) per share	$	(.21)	$	2.01	$	(.52)	$	2.99

Basic and diluted weighted average shares outstanding		28.5		28.5		28.5		28.5

See accompanying Notes to Condensed Consolidated Financial Statements.

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VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)


	Three months ended				Nine months ended
	September 30,				September 30,
	2023		2024		2023		2024

	(unaudited)
Net income (loss)	$	(1.7)	$	85.6	$	(6.6)	$	128.9
Other comprehensive income (loss), net of tax:
Currency translation		(1.4)		5.8		(12.4)		(10.9)
Defined benefit pension plans		.7		.7		7.0		2.1
Other		—		—		(.4)		(.2)
Total other comprehensive income (loss), net		(.7)		6.5		(5.8)		(9.0)
Comprehensive income (loss)		(2.4)		92.1		(12.4)		119.9
Comprehensive income attributable to noncontrolling interest		4.0		29.9		6.3		41.5
Comprehensive income (loss) attributable to Valhi stockholders	$	(6.4)	$	62.2	$	(18.7)	$	78.4

See accompanying Notes to Condensed Consolidated Financial Statements.

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VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions)


	Three months ended September 30, 2023 and 2024 (unaudited)
							Accumulated
			Additional				other				Non-
	Common		paid-in		Retained		comprehensive		Treasury		controlling
	stock		capital		earnings		loss		stock		interest		Total
Balance at June 30, 2023	$	.3	$	669.5	$	481.3	$	(147.2)	$	(49.6)	$	335.6	$	1,289.9
Net income (loss)		—		—		(5.8)		—		—		4.1		(1.7)
Other comprehensive loss, net		—		—		—		(.6)		—		(.1)		(.7)
Dividends paid to noncontrolling interest		—		—		—		—		—		(6.3)		(6.3)
Cash dividends - $.08 per share		—		—		(2.3)		—		—		—		(2.3)

Balance at September 30, 2023	$	.3	$	669.5	$	473.2	$	(147.8)	$	(49.6)	$	333.3	$	1,278.9

Balance at June 30, 2024	$	.3	$	669.9	$	499.0	$	(157.0)	$	(49.6)	$	324.4	$	1,287.0
Net income		—		—		57.5		—		—		28.1		85.6
Other comprehensive income, net		—		—		—		4.7		—		1.8		6.5
Dividends paid to noncontrolling interest		—		—		—		—		—		(10.2)		(10.2)
Cash dividends - $.08 per share		—		—		(2.3)		—		—		—		(2.3)

Balance at September 30, 2024	$	.3	$	669.9	$	554.2	$	(152.3)	$	(49.6)	$	344.1	$	1,366.6


	Nine months ended September 30, 2023 and 2024 (unaudited)
							Accumulated
			Additional				other				Non-
	Common		paid-in		Retained		comprehensive		Treasury		controlling
	stock		capital		earnings		loss		stock		interest		Total
Balance at December 31, 2022	$	.3	$	669.5	$	494.8	$	(143.9)	$	(49.6)	$	348.2	$	1,319.3
Net income (loss)		—		—		(14.8)		—		—		8.2		(6.6)
Other comprehensive loss, net		—		—		—		(3.9)		—		(1.9)		(5.8)
Dividends paid to noncontrolling interest		—		—		—		—		—		(19.0)		(19.0)
Cash dividends - $.24 per share		—		—		(6.8)		—		—		—		(6.8)
Equity transactions with noncontrolling interest, net and other		—		—		—		—		—		(2.2)		(2.2)

Balance at September 30, 2023	$	.3	$	669.5	$	473.2	$	(147.8)	$	(49.6)	$	333.3	$	1,278.9

Balance at December 31, 2023	$	.3	$	669.5	$	475.8	$	(145.5)	$	(49.6)	$	325.7	$	1,276.2
Net income		—		—		85.2		—		—		43.7		128.9
Other comprehensive loss, net		—		—		—		(6.8)		—		(2.2)		(9.0)
Dividends paid to noncontrolling interest		—		—		—		—		—		(23.1)		(23.1)
Cash dividends - $.24 per share		—		—		(6.8)		—		—		—		(6.8)
Equity transactions with noncontrolling interest, net and other		—		.4		—		—		—		—		.4

Balance at September 30, 2024	$	.3	$	669.9	$	554.2	$	(152.3)	$	(49.6)	$	344.1	$	1,366.6

See accompanying Notes to Condensed Consolidated Financial Statements.

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VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)


	Nine months ended
	September 30,
	2023		2024

	(unaudited)
Cash flows from operating activities:
Net income (loss)	$	(6.6)	$	128.9
Depreciation and amortization		40.7		51.2
Gain on remeasurement of investment in TiO₂ manufacturing joint venture		—		(64.5)
Premium on issuance of senior secured notes		—		6.0
Loss on pension plan termination		6.2		—
Benefit plan expense less than cash funding		(5.7)		(6.9)
Deferred income taxes		(38.6)		20.0
Contributions to TiO₂ manufacturing joint venture, net		(2.8)		(2.7)
Gain from sale of land		(1.5)		—
Other, net		4.6		(.8)
Change in assets and liabilities:
Accounts and other receivables, net		(60.9)		(67.8)
Inventories, net		103.3		96.4
Land held for development, net		.2		2.0
Accounts payable and accrued liabilities		(78.4)		(110.4)
Income taxes		1.6		1.8
Accounts with affiliates		(5.8)		(20.2)
Other, net		(17.5)		(34.8)
Net cash used in operating activities		(61.2)		(1.8)

Cash flows from investing activities:
Capital expenditures		(42.7)		(18.4)
Acquisition of remaining TiO₂ manufacturing joint venture interest, net of cash acquired		—		(156.8)
Purchases of marketable securities		(63.7)		(1.0)
Proceeds from disposal of marketable securities		56.5		55.8
Proceeds from land sales		1.8		—
Other, net		—		2.8
Net cash used in investing activities		(48.1)		(117.6)

Cash flows from financing activities:
Kronos revolving credit facility:
Borrowings		—		148.6
Payments		—		(123.9)
Payments on long-term debt		(24.5)		(101.3)
Kronos term loan from Contran		—		53.7
Proceeds from issuance of senior secured notes		—		80.2
Deferred financing fees		—		(9.3)
Valhi cash dividends paid		(6.8)		(6.8)
Distributions to noncontrolling interest in subsidiaries		(19.0)		(23.1)
Subsidiary treasury stock acquired		(2.9)		—
Net cash provided by (used in) financing activities		(53.2)		18.1

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VALHI, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(In millions)


	Nine months ended
	September 30,
	2023		2024

	(unaudited)

Cash, cash equivalents and restricted cash and cash equivalents - net change from:
Operating, investing and financing activities	$	(162.5)	$	(101.3)
Effect of exchange rates on cash		(2.8)		4.4
Balance at beginning of period		562.0		462.0
Balance at end of period	$	396.7	$	365.1

Supplemental disclosures:
Cash paid for:
Interest, net of amounts capitalized	$	24.0	$	37.2
Income taxes, net		24.5		41.1
Noncash investing activities:
Change in accruals for capital expenditures		.7		1.4

See accompanying Notes to Condensed Consolidated Financial Statements.

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VALHI, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

(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 91% of our outstanding common stock at September 30, 2024. A majority of Contran’s outstanding voting stock is held directly by Lisa K. Simmons and by family stockholders (Thomas C. Connelly (the husband of Ms. Simmons’ late sister), a family-owned entity and various family trusts established for the benefit of Ms. Simmons, Mr. Connelly and their children) who are required to vote their shares of Contran voting stock in the same manner as Ms. Simmons. Such voting rights are personal to Ms. Simmons and last through April 22, 2030. 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 September 30, 2024, 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, 2023 that we filed with the SEC on March 7, 2024 (the “2023 Annual Report”). In our opinion, we have made all necessary adjustments (which include only normal recurring adjustments, except as noted below), 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, 2023 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, 2023) normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Our results of operations for the interim periods ended September 30, 2024 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 2023 Consolidated Financial Statements contained in our 2023 Annual Report.

Effective July 16, 2024 (“Acquisition Date”), Kronos acquired the 50% joint venture interest in Louisiana Pigment Company, L.P. (“LPC”) previously held by Venator Investments, Ltd. (“Venator”). Prior to the acquisition, Kronos held a 50% joint venture interest in LPC and LPC was operated as a manufacturing joint venture between Kronos and Venator. Following the acquisition, LPC became a wholly-owned subsidiary of Kronos. For financial reporting purposes, the assets acquired and liabilities assumed of LPC have been included in our Condensed Consolidated Balance Sheet as of September 30, 2024, and the results of operations and cash flows of LPC have been included in our Condensed Consolidated Statement of Operations and Cash Flows beginning as of the Acquisition Date. See Note 19 to our Condensed Consolidated Financial Statements.

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.

Revision of Previously Issued Financial Statements – Prior to June 30, 2024, we had concluded a valuation allowance for the deferred tax asset for the carryforwards related to the nondeductible portion of our interest expense was required; however, during the second quarter of 2024 we determined there were additional sources of income that should have been considered with regards to the realization of such deferred tax asset, specifically the reversals of indefinite-lived deferred tax liabilities that require an action by management which are not expected to reverse in the foreseeable future. As a result, the quarterly and annual periods beginning in 2018 through the period ended December 31, 2023, have been revised. During the second quarter of 2024, we evaluated the impact of the correction on our previously issued financial statements and determined the impact is not material to any previously issued annual or interim financial statements; however, if the aggregate amount of the adjustment was recorded in the three-month period ended June 30, 2024, when the issue was identified the impact to the results would have been material. Accordingly, we revised our previously issued

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financial statements. The impact of the adjustment to periods not presented herein has been reflected as an adjustment to opening retained earnings for the respective period.

As a result of the revision, our deferred income tax liabilities decreased by $14.7 million with a corresponding increase in retained earnings as of December 31, 2023. Additionally, retained earnings increased by $12.5 million, $