VALHI INC /DE/ - FORM 8-K - EX-99.2 - VALHI, INC. AND SUBSIDIARIES - January 26, 2018

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EX-99.1 - VALHI PRESS RELEASE DATED JANUARY 26, 2018 - VALHI, INC. COMPLETES SALE OF WASTE - VALHI INC /DE/exh991.htm
EX-2.2 - AMENDMENT TO PURCHASE AGREEMENT - VALHI INC /DE/exh22.htm
EX-2.1 - PURCHASE AGREEMENT BY AND BETWEEN JFL-WCS PARTNERS, LLC AND ANDREWS COUNTY HOLDI - VALHI INC /DE/exh21180126.htm
8-K - VALHI INC /DE/vhiwcs8k180126.htm
   Valhi, Inc. and Subsidiaries   
Index to Pro Forma Condensed Consolidated Financial Statements 
               
               
             
Page
               
Pro Forma Condensed Consolidated Balance Sheet -
      
  September 30, 2017
          
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, 2014
        
F-6
  Year ended December 31, 2015
        
F-7
  Year ended December 31, 2016
        
F-8
  Nine months ended September 30, 2017
      
F-9
               
Notes to Pro Forma Condensed Consolidated Statements
    
 of Operations
          
F-10
               
               
               
               
               
               
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
  
have been prepared based upon currently available information and
  
assumptions that are deemed appropriate by the Company's management.
  
These Pro Forma Condensed Consolidated Financial Statements are for
  
informational purposes only, are not intended to be indicative of what
  
Valhi's consolidated financial position or results of operations would have
  
been, nor do they purport to represent and be 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, 2017      
    (Unaudited)      
             
   (In $ millions)      
             
       
Total
    
       
pro forma
    
ASSETS
  
Historical
  
adjustments
Pro forma
             
Current assets:
            
  Cash and cash equivalents
  
$424.4
  
($0.1)
  
$424.3
  Restricted cash equivalents
  
13.9
  
                        -
  
13.9
  Marketable and other securities
  
0.8
  
                        -
  
0.8
  Accounts and notes receivables:
  
367.1
  
(11.0)
  
356.1
  Receivables from affiliates:
            
    Income taxes, net
  
1.5
  
43.3
  
44.8
    Trade items
  
12.8
  
                        -
  
12.8
  Refundable income taxes
  
2.3
  
                        -
  
2.3
  Inventories
  
352.7
  
(1.2)
  
351.5
  Land held for development
  
21.6
  
                        -
  
21.6
  Prepaid expense
  
20.4
  
(1.2)
  
19.2
             
    Total current assets
  
1,217.5
  
29.8
  
1,247.3
             
Other assets:
            
  Marketable and other securities
  
256.7
  
                        -
  
256.7
  Investment in affiliates
  
75.1
  
                        -
  
75.1
  Goodwill
  
379.7
  
                        -
  
379.7
  Deferred income taxes
  
120.3
  
(1.2)
  
119.1
  Other noncurrent assets
  
194.3
  
(32.1)
  
162.2
  Property, plant and equipment, net
  
574.8
  
(5.6)
  
569.2
             
   
$2,818.4
  
($9.1)
  
$2,809.3
             
             
     
F-2
      
 
 
 
 
   Valhi, Inc. and Subsidiaries 
                                                                    Pro Forma Condensed Consolidated Balance Sheet (continued)
   
 September 30, 2017  
   
    (Unaudited)
      
             
   
   (In $ millions)
    
             
       
Total
    
       
pro forma
    
LIABILITIES AND EQUITY
  
Historical
  
adjustments
Pro forma
             
Current liabilities:
            
  Current maturities of long-term debt
  
$3.9
  
($2.9)
  
$1.0
  Accounts payable and accrued liabilities
277.3
  
(9.5)
  
267.8
  Payable to affiliates
  
50.0
  
(34.7)
  
15.3
  Income taxes
  
22.9
  
                        -
  
22.9
             
    Total current liabilities
  
354.1
  
(47.1)
  
307.0
             
Other liabilities:
            
  Long-term debt
  
1,102.8
  
(65.9)
    
       
34.7
  
1,071.6
  Deferred income taxes
  
259.9
  
65.0
  
324.9
  Accrued pension cost
  
265.8
  
                        -
  
265.8
  Accrued environmental remedication
          
    and related costs
  
107.9
  
                        -
  
107.9
  Accrued postretirement benefit costs
11.3
  
                        -
  
11.3
  Other liabilities
  
110.4
  
(31.1)
  
79.3
             
    Total liabilities
  
2,212.2
  
(44.4)
  
2,167.8
             
Equity:
            
  Valhi stockholders' equity:
            
     Common stock and additional
            
      paid-in capital
  
3.6
  
                        -
  
3.6
    Preferred stock
  
667.3
  
                        -
  
667.3
    Retained deficit
  
(151.4)
  
35.3
  
(116.1)
    Accumulated other comprehensive loss
(182.9)
  
                        -
  
(182.9)
    Treasury stock
  
(49.6)
  
                        -
  
(49.6)
             
      Total Valhi stockholders' equity
  
287.0
  
35.3
  
322.3
             
  Noncontrolling interest in subsidiaries
319.2
  
                        -
  
319.2
             
      Total equity
  
606.2
  
35.3
  
641.5
             
   
$2,818.4
  
($9.1)
  
$2,809.3
             
                   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 sale of Waste Control
 
Specialists LLC ("WCS") to JFL-WCS Partners, LLC  ("Purchaser"), more fully described in Item
 
2.01 to this Current Report on Form 8-K  dated January  26, 2018, occurred on
 
September 30, 2017
            
                   
                   
Note 2 - Pro forma adjustments:
            
                   
 
Reflect the sale of WCS as follows:
          
                 
Amount
                 
(In $ millions)
                   
                   
                   
 
Carrying value of assets sold and liabilities assumed:
      
 
  Cash and cash equivalents
          
$0.1
 
  Accounts and notes receivables
        
11.0
 
  Inventories
            
1.2
 
  Prepaid expense
            
1.2
 
  Noncurrent deferred income tax asset
      
1.2
 
  Other noncurrent assets
          
32.1
 
  Property, plant and equipment, net
        
5.6
 
  Current maturities of long-term debt
      
(2.9)
 
  Accounts payable and accrued liabilities
      
(9.5)
 
  Long-term debt
            
(65.9)
 
  Other liabilities
            
(31.1)
                   
                 
(57.0)
                   
 
      Pre-tax gain
            
57.0
                   
 
Income tax expense (benefit), at combined U.S. statutory federal and state
  
 
  effective income tax rate of approximately 38%
      
 
    Current income taxes refundable
        
(43.3)
 
    Deferred income taxes
          
65.0
                   
 
      Total income tax expense
        
21.7
                   
 
          Net-of-tax gain
          
$35.3
                   
                   
         
F-4
        
                   
 
 
 
 
Valhi, Inc. and Subsidiaries     
Notes to Pro Forma Condensed Consolidated Balance Sheet (continued)
    (Unaudited)       
                 
                 
The  actual net-of-tax gain on the sale of WCS reported by Valhi, Inc. ("Valhi) will differ from
the amounts shown in the table above due to , among other things, differences in the
carrying value of the assets sold and liabilities assumed as of the actual date the sale of WCS
is completed, and differences in the provision for income taxes attributable to such pre-tax
gain from the sale.
              
                 
As part of the sale of WCS, certain liabilites of WCS are not being assumed by the Purchaser.
These liabilites consist of, and associated amounts as of September 30, 2017, are as follows:
                 
               
Amount
               
(In $ millions)
                 
    Loan payable to Andrews County Holding, Inc.
    
$38.8
     (including accrued and unpaid interest)
        
    Trade payable to affiliates (Contran Corporation)
    
34.7
                 
               
$73.5
                 
These liabilities of WCS were contributed to WCS' equity prior to closing
the sale of WCS, as more fully described below.
      
                 
Immediately prior to closing the sale of WCS, Andrews County Holdings, Inc. ("ACH")
contributed its loan receivable (including accrued and unpaid interest) from WCS
to WCS' equity, and the outstanding balance of such loan was  deemed
paid in full.  WCS' loan payable to ACH (and related accrued and unpaid interest)
is eliminated in the preparation of Valhi's consolidated financial statements.
Accordingly, no pro forma adjustment is required to reflect the elimination of these
liabilities of WCS.
              
                 
As part of the contribution of WCS' trade payables owed to Contran Corporation ("Contran"),
Contran transfered its associated receivable from WCS to Valhi, in return for a deemed
borrowing by Valhi unders its revolving loan facility with Contran.  Valhi subsequently
contributed such receivable from WCS to ACH, and ACH in turn contributed
such receivable to WCS' equity, and the outstanding balance of such trade payable was
deemed paid in full.  Accordingly, included as part of the pro forma adjustments
reflected in the Pro Forma Condensed Consolidated Balance Sheet is a $34.7 million
increase in the outstanding balance of Valhi's loan from Contran, equal to the amount of
such WCS trade payable owed to Contran which has been extinguished.
                 
                 
                 
                 
                 
       
F-5
        
 
 
 
Valhi, Inc. and Subsidiaries      
Pro Forma Condensed Consolidated Statement of Operations    
Year ended December 31, 2014      
    (Unaudited)      
             
   (In $ millions)      
             
       
Total
    
       
pro forma
    
   
Historical
  
adjustments
  
Pro forma
             
Revenues and other income:
            
  Net sales
  
$1,862.6
  
($66.5)
(a)
$1,796.1
  Other income, net
  
42.0
  
(0.1)
(a)
41.9
             
   
1,904.6
  
(66.6)
  
1,838.0
             
Costs and expenses:
            
  Cost of sales
  
1,459.8
  
(49.7)
(a)
1,410.1
  Selling, general and administrative
  
276.1
  
(19.0)
(a)
257.1
  Interest
  
56.7
  
(5.5)
(a)
51.2
             
   
1,792.6
  
(74.2)
  
1,718.4
             
   Income from continuing operations before
            
      income taxes
  
112.0
  
7.6
  
119.6
             
Income tax expense
  
32.5
  
1.5
(c)
34.0
             
    Net income (loss) from continuing operations
79.5
  
6.1
  
85.6
             
Noncontrolling interest in net income from
            
 continuing operations of subsidiaries
  
25.7
  
                        -
  
25.7
             
    Net income (loss) from continuing operations
          
     attributable to Valhi stockholders
  
$53.8
  
$6.1
  
$59.9
             
             
Amounts attributable to Valhi stockholders:
            
             
    Net income (loss) from continuing operations
          
     per share
  
$0.16
      
$0.18
             
  Basic and diluted weighted average shares
            
   outstanding
  
342.0
      
342.0
             
             
             
     
F-6
    
             
 
 
 
Valhi, Inc. and Subsidiaries      
Pro Forma Condensed Consolidated Statement of Operations    
Year ended December 31, 2015      
    (Unaudited)      
             
   (In $ millions)      
             
       
Total
    
       
pro forma
    
   
Historical
  
adjustments
  
Pro forma
             
Revenues and other income:
            
  Net sales
  
$1,532.9
  
($45.0)
(a)
$1,487.9
  Other income, net
  
32.0
  
(0.1)
(a)
31.9
             
   
1,564.9
  
(45.1)
  
1,519.8
             
Costs and expenses:
            
  Cost of sales
  
1,310.0
  
(50.5)
(a)
1,259.5
  Selling, general and administrative
  
269.7
  
(21.1)
(a)
248.6
  Interest
  
59.0
  
(5.4)
(a)
53.6
             
   
1,638.7
  
(77.0)
  
1,561.7
             
   Income from continuing operations before
            
      income taxes
  
(73.8)
  
31.9
  
(41.9)
             
Income tax expense
  
97.3
  
10.2
(c)
107.5
             
    Net income (loss) from continuing operations
(171.1)
  
21.7
  
(149.4)
             
Noncontrolling interest in net income from
            
 continuing operations of subsidiaries
  
(37.5)
  
                        -
  
(37.5)
             
    Net income (loss) from continuing operations
          
     attributable to Valhi stockholders
  
($133.6)
  
$21.7
  
($111.9)
             
             
Amounts attributable to Valhi stockholders:
            
             
    Net income (loss) from continuing operations
          
     per share
  
($0.39)
      
($0.33)
             
  Basic and diluted weighted average shares
            
   outstanding
  
342.0
      
342.0
             
             
             
     
F-7
    
             
Valhi, Inc. and Subsidiaries      
Pro Forma Condensed Consolidated Statement of Operations   
Year ended December 31, 2016      
    (Unaudited)      
             
   (In $ millions)      
             
       
Total
    
       
pro forma
    
   
Historical
  
adjustments
  
Pro forma
             
Revenues and other income:
            
  Net sales
  
$1,566.8
  
($47.4)
(a)
$1,519.4
  Other income, net
  
39.4
  
(0.4)
(a)
39.0
             
   
1,606.2
  
(47.8)
  
1,558.4
             
Costs and expenses:
            
  Cost of sales
  
1,274.7
  
(55.5)
(a)
1,219.2
  Selling, general and administrative
  
260.2
  
(18.0)
(a)
  
       
(5.8)
(b)
236.4
  Contract related intangible asset impairment
5.1
  
                      -
  
5.1
  Interest
  
63.2
  
(5.1)
(a)
58.1
             
   
1,603.2
  
(84.4)
  
1,518.8
             
   Income from continuing operations before
            
      income taxes
  
3.0
  
36.6
  
39.6
             
Income tax expense
  
6.0
  
12.6
(c)
18.6
             
    Net income (loss) from continuing operations
(3.0)
  
24.0
  
21.0
             
Noncontrolling interest in net income from
            
 continuing operations of subsidiaries
  
12.9
  
                        -
  
12.9
             
    Net income (loss) from continuing operations
        
     attributable to Valhi stockholders
  
($15.9)
  
$24.0
  
$8.1
             
             
Amounts attributable to Valhi stockholders:
            
             
    Net income (loss) from continuing operations
        
     per share
  
($0.05)
      
$0.02
             
  Basic and diluted weighted average shares
            
   outstanding
  
342.0
      
342.0
             
             
             
     
F-8
    
 
 
 
 
Valhi, Inc. and Subsidiaries      
Pro Forma Condensed Consolidated Statement of Operations (continued)  
Nine months ended September 30, 2017      
    (Unaudited)      
             
   (In $ millions)      
             
       
Total
    
       
pro forma
    
   
Historical
  
adjustments
  
Pro forma
             
Revenues and other income:
            
  Net sales
  
$1,444.0
  
($60.4)
(a)
$1,383.6
  Other income, net
  
19.8
  
(0.2)
(a)
19.6
             
   
1,463.8
  
(60.6)
  
1,403.2
             
Costs and expenses:
            
  Cost of sales
  
1,012.7
  
(45.9)
(a)
966.8
  Selling, general and administrative
  
218.9
  
(11.1)
(a)
  
       
(8.2)
(b)
199.6
  Long-lived asset impairment
  
170.6
  
(170.6)
(a)
0.0
  Loss on prepaymnet of debt
  
7.1
  
                        -
  
7.1
  Interest
  
47.9
  
(3.7)
(a)
44.2
             
   
1,457.2
  
(239.5)
  
1,217.7
             
    Income from continuing operations before
            
      income taxes
  
6.6
  
178.9
  
185.5
             
Income tax expense (benefit)
  
(134.2)
  
68.2
(c)
(66.0)
             
    Net income from continuing operations
  
140.8
  
110.7
  
251.5
             
Noncontrolling interest in net income from
            
 continuing operations of subsidiaries
  
73.4
  
                        -
  
73.4
             
    Net income from continuing operations
            
     attributable to Valhi stockholders
  
$67.4
  
$110.7
  
$178.1
             
             
Amounts attributable to Valhi stockholders:
            
             
    Net income from continuing operations
            
     per share
  
$0.20
      
$0.52
             
  Basic and diluted weighted average shares
            
   outstanding
  
342.0
      
342.0
             
             
                                             See accompanying notes to Pro Forma Condensed
    
                                                Consolidated Statements of Operations
    
             
     
F-9
    
             
 
 
 
 
       
Valhi, Inc. and Subsidiaries
    
   
Notes to Pro Forma Condensed Consolidated Statements of Operations
       
    (Unaudited)
        
                   
                   
                   
Note 1 - Basis of presentation:
            
                   
   
The Pro Forma Condensed Consolidated Statements of Operations  assume the sale of
   
Waste Control Specialists LLC, more fully described in Item 2.01 to this Current Report
   
on Form 8-K dated January  26, 2018, occurred as of the beginning of 2014.
                   
                   
                   
Note 2 - Pro forma adjustments:
          
                   
 
 (a)
Eliminate Waste Control Specialists' historical results of operations included in Valhi's
   
consolidated statements of operations.
      
                   
 
 (b)
Eliminate expenses incurred by Valhi related to efforts to sell Waste Control
   
Specialists LLC, included in Valhi's historical consolidated
  
   
statements of operations.  Such expenses were charged to expense as incurred.
                   
 
 (c)
Aggregate current and deferred income tax impact of all pro forma adjustments,
   
at the combined U.S. statutory federal and state effective income tax rate
   
of approximately 20% for the year ended December 31, 2014,
  
   
approximately 32% for the year ended December 31, 2015,
  
   
approximately 34% for the year ended December 31, 2016 and
  
   
approximately 38% for the nine months ended September 30, 2017.
                   
                   
                   
                   
                   
                   
         
F-10
        
 
 

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