SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
January 30, 1998
(Date of Report, date of earliest event reported)
VALHI, INC.
(Exact name of Registrant as specified in its charter)
Delaware 1-5467 87-0110150
(State or other (Commission (IRS Employer
jurisdiction or File Number) Identification
incorporation) No.)
5430 LBJ Freeway, Suite 1700, Dallas, TX 75240-2697
(Address of principal executive offices) (Zip Code)
(972) 233-1700
(Registrant's telephone number, including area code)
Not applicable
(Former name or address, if changed since last report)
Item 2: Acquisition or Disposition of Assets
On January 30, 1998, the Company's 57%-owned subsidiary, NL Industries, Inc.,
completed the disposition of substantially all of the net assets of its
rheological products specialty chemicals business unit conducted by Rheox, Inc.
to Elementis plc, a U.K.-based corporation, for $465 million cash consideration,
including $20 million attributable to a five-year covenant not to compete. NL
used a portion of the net proceeds to repay and terminate Rheox's U.S bank
indebtedness.
Item 7: Financial Statements, Pro Forma Financial Information
and Exhibits
(b) Pro forma financial information
Pro forma condensed consolidated financial statements of the
Registrant, which present the pro forma effects of the transactions
described in Item 2 above, assuming such transactions had occurred
as of the dates set forth in the accompanying notes, are included
herein as Exhibit 99.1.
(c) Exhibit
Item No. Exhibit Index
99.1 Pro forma financial information of the Registrant.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VALHI, INC.
(Registrant)
By: /s/ Bobby D. O'Brien
Bobby D. O'Brien
Vice President
Date: February 13, 1997
Exhibit 99.1
VALHI, INC. AND SUBSIDIARIES
INDEX TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page
--------
Pro Forma Condensed Consolidated Balance Sheet - September 30, 1997 F-2/F-3
Notes to Pro Forma Condensed Consolidated Balance Sheet F-4/F-5
Pro Forma Condensed Consolidated Statements of Operations:
Year ended December 31, 1996 F-6
Nine months ended September 30, 1997 F-7
Notes to Pro Forma Condensed Consolidated Statements of Operations F-8
These pro forma condensed consolidated financial statements should be read in
conjunction with the historical consolidated financial statements of Valhi,
Inc. These pro forma condensed consolidated financial statements are not
necessarily indicative of Valhi's consolidated financial position or results
of operations as they may be in the future.
F-1
VALHI, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1997
(Unaudited)
(In millions)
<TABLE>
<CAPTION>
Pro forma adjustments
Valhi ---------------------------------------
ASSETS Historical I II III Pro forma
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $350.9 $318.1 $20.0 ($125.3) $563.7
Accounts and notes receivable 201.4 (23.8) - - 177.6
Inventories 183.5 (18.6) - - 164.9
Prepaid expenses 7.1 (0.7) - - 6.4
Deferred income taxes 5.6 (0.5) - - 5.1
----------- ----------- ----------- ----------- ----------
748.5 274.5 20.0 (125.3) 917.7
----------- ----------- ----------- ----------- ----------
Other assets:
Marketable securities 343.0 - - - 343.0
Investment in joint ventures 194.7 (2.1) - - 192.6
Loans and notes receivable 90.4 - - - 90.4
Mining properties 31.4 (12.8) - - 18.6
Goodwill 249.0 (24.9) - - 224.1
Deferred income taxes 0.2 - - - 0.2
Other assets 54.2 (0.8) - - 53.4
----------- ----------- ----------- ----------- ----------
962.9 (40.6) - - 922.3
----------- ----------- ----------- ----------- ----------
Property and equipment, net 559.1 (34.0) - - 525.1
----------- ----------- ----------- ----------- ----------
$2,270.5 $199.9 $20.0 ($125.3) $2,365.1
=========== =========== =========== =========== ==========
</TABLE>
F-2
VALHI, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
September 30, 1997
(Unaudited)
(In millions)
<TABLE>
<CAPTION>
Pro forma adjustments
Valhi ---------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY Historical I II III Pro forma
----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Current liabilities:
Notes payable & current long-term debt $78.8 $ - $ - ($15.1) $63.7
Accounts payable & accrued liabilities 204.4 (12.8) 4.0 - 195.6
Income taxes 9.2 - - - 9.2
Deferred income taxes 2.7 0.3 - - 3.0
----------- ----------- ----------- ----------- ----------
295.1 (12.5) 4.0 (15.1) 271.5
----------- ----------- ----------- ----------- ----------
Noncurrent liabilities:
Long-term debt 1,096.8 - - (110.2) 986.6
Deferred income taxes 230.9 64.1 - - 295.0
Other 262.4 (0.7) 16.0 - 277.7
----------- ----------- ----------- ----------- ----------
1,590.1 63.4 16.0 (110.2) 1,559.3
----------- ----------- ----------- ----------- ----------
Minority interest 0.3 12.8 - - 13.1
----------- ----------- ----------- ----------- ----------
Stockholders' equity:
Common stock and paid-in capital 39.4 - - - 39.4
Retained earnings 283.5 136.2 - - 419.7
Adjustments: -
Marketable securities 153.2 - - - 153.2
Currency translation (16.8) - - - (16.8)
Pension liabilities (3.2) - - - (3.2)
Treasury stock (71.1) - - - (71.1)
----------- ----------- ----------- ----------- ----------
385.0 136.2 - - 521.2
----------- ----------- ----------- ----------- ----------
$2,270.5 $199.9 $20.0 ($125.3) $2,365.1
=========== =========== =========== =========== ==========
</TABLE>
See accompanying notes to pro forma condensed consolidated balance sheet.
F-3
VALHI, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
Note 1 - Basis of presentation:
The Pro Forma Condensed Consolidated Balance Sheet assumes the following
transactions, more fully described in Item 2 of this Current Report on Form
8-K dated February 13, 1998, occurred on September 30, 1997:
I - NL sells sells substantially all of the net assets of its rheological
products specialty chemicals business unit conducted by Rheox for
$445 million cash consideration.
II - NL agrees not to compete with the purchaser in the rheological products
business for five years for $20 million consideration.
III - Rheox repays and terminates its U.S. bank indebtedness.
Note 2 - Pro forma adjustments:
I - Reflect the sale of substantially all of Rheox's net assets as follows:
<TABLE>
<CAPTION>
Amount
-------------
(In millions)
<S> <C>
Aggregate cash consideration, net of estimated fees and expenses $435.0
-------------
Carrying value of assets sold and liabilities assumed:
Cash and equivalents 6.9
Receivables 23.8
Inventories 18.6
Prepaid expenses 0.7
Investment in joint ventures 2.1
Mining properties 12.8
Goodwill 24.9
Other assets 0.8
Net property, plant and equipment 34.0
Accounts payable & accrued liabilities (12.8)
Other noncurrent liabilities (0.7)
-------------
111.1
-------------
Pre-tax gain 323.9
-------------
Income tax expense:
Current income taxes 110.0
Deferred income taxes 64.9
-------------
174.9
-------------
Minority interest in NL's earnings 12.8
-------------
Net-of-tax gain $136.2
=============
</TABLE>
F-4
VALHI, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
(Unaudited)
The Company's actual net-of-tax gain on disposal of business unit will
differ from the amount shown above due to, among other things, (i)
differences in the carrying value of assets sold and liabilities
assumed and (b) differences in the provision for income taxes
applicable to the gain resulting from differences in tax law
limitations in the period the gain actually occurs.
The net-of-tax gain on the disposal of business unit differs from the
amount separately reported by NL due to amortization of purchase
accounting basis differences made in conjunction with the Company's
acquisitions of its interest in NL. In addition, at September 30,
1997, NL's separate financial statements reflect a stockholders'
deficit of approximately $229 million. Until such time as NL
separately reports positive stockholders' equity, all undistributed
income or loss of NL accrues to the Company for financial reporting
purposes. If the disposal of business unit had occurred at
September 30, 1997, NL's net-of-tax gain would have resulted in NL
reporting positive stockholders' equity. Accordingly, a portion of
NL's net-of-tax gain on disposal would not accrue to the Company for
financial reporting purposes but instead would be reported as
minority interest in NL's earnings.
NL is not a member of the consolidated U.S. federal income tax group of
which Valhi is a member, and consequently the Company provides
incremental income taxes related to NL's earnings. Accordingly,
the provision for income taxes shown above includes a provision for
the Company's incremental income taxes related to NL's gain.
II - Reflect NL's agreement not to compete with the purchaser. The $20
million consideration will be deferred and amortized over the
five-year non-compete period.
III- Reflect Rheox's repayment of its U.S. bank indebtedness.
F-5
VALHI, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year ended December 31, 1996
(Unaudited)
(In millions, except per share data)
<TABLE>
<CAPTION>
Pro forma adjustments
Valhi -------------------------
Historical I II Pro forma
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues and other income:
Net sales $1,074.8 ($134.9)(a) $ - $939.9
Other, net 41.9 - (a) 4.0 45.9
----------- ----------- ----------- -----------
1,116.7 (134.9) 4.0 985.8
----------- ----------- ----------- -----------
Costs and expenses:
Cost of goods sold 808.2 (70.6)(a) - 737.6
Selling, general and administrative 205.5 (27.2)(a) - 178.3
Interest 98.5 (3.0)(a) - 95.5
----------- ----------- ----------- -----------
1,112.2 (100.8) - 1,011.4
----------- ----------- ----------- -----------
Income (loss) of consolidated companies
before income taxes 4.5 (34.1) 4.0 (25.6)
Equity in Amalgamated Sugar Company 10.0 - - 10.0
Equity in Waste Control Specialists (6.4) - - (6.4)
----------- ----------- ----------- -----------
Income (loss) before income taxes and
minority interest 8.1 (34.1) 4.0 (22.0)
Provision for income taxes (benefit) 1.1 (13.0)(a)
(7.4)(b)
5.3 (d) 0.8 (13.2)
Minority interest in income (loss) 6.9 (15.2)(c) 1.8 (6.5)
----------- ----------- ----------- -----------
Income (loss) from continuing operations $0.1 ($3.8) $1.4 ($2.3)
=========== =========== =========== ===========
Basic earnings (loss) from continuing
operations per share $ - ($0.02)
=========== ===========
Weighted average common shares outstanding 114.6 114.6
=========== ===========
</TABLE>
See accompanying notes to pro forma condensed consolidated statements of
operations.
F-6
VALHI, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine months ended September 30, 1997
(Unaudited)
(In millions, except per share data)
<TABLE>
<CAPTION>
Pro forma adjustments
Valhi -------------------------
Historical I II Pro forma
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues and other income:
Net sales $820.7 ($111.3)(a) $ - $709.4
Other, net 60.0 - 3.0 63.0
----------- ----------- ----------- -----------
880.7 (111.3) 3.0 772.4
----------- ----------- ----------- -----------
Costs and expenses:
Cost of goods sold 618.1 (55.7)(a) - 562.4
Selling, general and administrative 175.4 (22.8)(a) - 152.6
Interest 91.4 (8.7)(a) - 82.7
----------- ----------- ----------- -----------
884.9 (87.2) - 797.7
----------- ----------- ----------- -----------
Loss of consolidated companies
before income taxes (4.2) (24.1) 3.0 (25.3)
Equity in Waste Control Specialists (8.9) - - (8.9)
----------- ----------- ----------- -----------
Loss before income taxes and
minority interest (13.1) (24.1) 3.0 (34.2)
Provision for income taxes (benefit) (1.1) (9.3)(a)
(5.2)(b)
7.9 (d) 0.6 (7.1)
Minority interest in losses - (22.5)(c) 1.3 (21.2)
----------- ----------- ----------- -----------
Income (loss) from continuing operations ($12.0) $5.0 $1.1 ($5.9)
=========== =========== =========== ===========
Basic loss from continuing operations
per share ($0.10) ($0.05)
=========== ===========
Weighted average common shares outstanding 115.0 115.0
=========== ===========
</TABLE>
See accompanying notes to pro forma condensed consolidated statements of
operations.
F-7
VALHI, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Note 1 - Basis of presentation:
The Pro Forma Condensed Consolidated Statement of Operations assumes the
disposition of NL's rheological products specialty chemicals business unit,
more fully described in Item 2 of this Current Report on Form 8-K dated
February 13, 1998, occurred as of the beginning of 1996.
Note 2 - Pro forma adjustments:
I - Pro forma adjustments to eliminate the results of NL's rheological
products specialty chemicals business unit from the Company's
consolidated historical results:
(a) Eliminate the results of operations of NL's rheological products
specialty chemicals business unit conducted by Rheox included in
Valhi's consolidated statement of operations.
Such results of operations differ from the amounts separately
reported by NL due to amortization of purchase accounting basis
differences made in conjunction with the Company's acquisitions
of its interest in NL.
(b) Adjust the Company's incremental income taxes for pro forma
adjustment (a).
NL is not a member of the consolidated U.S. federal income tax group of
which Valhi is a member, and consequently the Company provides
incremental income taxes related to NL's earnings.
(c) Recognize minority interest in the remaining NL results of operations.
During 1996 and the first nine months of 1997, NL's separate financial
statements reflected a stockholders' deficit, and all of NL's
undistributed income or loss accrued to the Company for financial
reporting purposes. If the disposal of business unit had occurred at
the beginning of 1996, NL's net-of-tax gain on disposal would have
resulted in NL reporting positive stockholders' equity throughout
1996 and the first nine months of 1997, on a pro forma basis,
and consequently the Company would have reported minority interest
in NL's remaining losses.
(d) Adjust the Company's incremental income taxes for pro forma
adjustment (c).
Valhi will account for the disposition of NL's rheological products
specialty chemicals business unit as the disposal of a business unit.
Valhi will report a gain on disposal of such business unit in the first
quarter of 1998. The accompanying unaudited pro forma condensed
consolidated statements of operations presented herein do not reflect
any pro forma adjustment for such gain in accordance with the
requirements of Article 11 of Regulation S-X.
II - Record amortization of the deferred revenue related to NL's covenant
not to compete, the related minority interest in such earnings and the
Company's provision for incremental income taxes related to such
earnings.
F-8
