Valhi(VHI) - 2025 Q2 - Quarterly Report

Part I. FINANCIAL INFORMATION Item 1. Financial Statements The company's unaudited financial statements show a significant decrease in net income and a substantial increase in cash used for operations Condensed Consolidated Balance Sheets Total assets slightly decreased to $2.76 billion, driven by a reduction in cash, while total equity increased to $1.43 billion Condensed Consolidated Balance Sheet Highlights (In millions) | Balance Sheet Item | Dec 31, 2024 | June 30, 2025 | | :--- | :--- | :--- | | Total Current Assets | $1,453.7 | $1,367.4 | | Total Assets | $2,800.2 | $2,762.8 | | Total Current Liabilities | $643.8 | $483.1 | | Total Liabilities | $1,421.1 | $1,332.8 | | Total Equity | $1,379.1 | $1,430.0 | Condensed Consolidated Statements of Income Net income attributable to stockholders plummeted to $0.9 million in Q2 2025 from $19.9 million in Q2 2024 due to higher costs Statement of Income Summary (In millions, except per share data) | Metric | Q2 2024 | Q2 2025 | H1 2024 | H1 2025 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $559.7 | $540.4 | $1,090.3 | $1,079.0 | | Income Before Income Taxes | $37.6 | $15.5 | $55.6 | $46.3 | | Net Income | $29.7 | $7.5 | $43.3 | $30.3 | | Net Income Attributable to Valhi | $19.9 | $0.9 | $27.7 | $17.8 | | Basic and Diluted EPS | $0.70 | $0.03 | $0.97 | $0.62 | Condensed Consolidated Statements of Comprehensive Income Comprehensive income attributable to stockholders decreased in Q2 2025 but increased for the six-month period due to favorable currency effects Comprehensive Income Attributable to Valhi Stockholders (In millions) | Period | 2024 | 2025 | | :--- | :--- | :--- | | Three months ended June 30 | $21.5 | $10.8 | | Six months ended June 30 | $16.2 | $39.5 | Condensed Consolidated Statements of Stockholders' Equity Total equity grew to $1.43 billion, driven by net income and other comprehensive income, despite cash dividend payments - For the six months ended June 30, 2025, the company paid cash dividends of $0.16 per share, totaling $4.5 million[21] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased substantially to $134.2 million, primarily due to an environmental settlement payment Cash Flow Summary - Six Months Ended June 30 (In millions) | Cash Flow Activity | 2024 | 2025 | | :--- | :--- | :--- | | Net cash used in operating activities | $(15.3) | $(134.2) | | Net cash provided by (used in) investing activities | $34.0 | $(24.7) | | Net cash used in financing activities | $(53.2) | $(0.7) | Notes to Condensed Consolidated Financial Statements The notes detail segment performance, a significant environmental settlement payment, and the acquisition of the remaining interest in LPC - The company operates through three main business segments: Chemicals (81% control of Kronos), Component Products (87% control of CompX), and Real Estate Management and Development (63%-77% control of BMI and LandWell)[29] Segment Operating Income (In millions) | Segment | Q2 2024 | Q2 2025 | H1 2024 | H1 2025 | | :--- | :--- | :--- | :--- | :--- | | Chemicals | $40.5 | $10.3 | $63.3 | $51.5 | | Component Products | $5.1 | $6.3 | $8.8 | $12.2 | | Real Estate Management | $9.2 | $18.9 | $14.2 | $21.9 | - In Q1 2025, subsidiary NL Industries paid $56.1 million plus interest to settle all federal and state law claims related to the Raritan Bay Slag Superfund Site[77][78] - Effective July 16, 2024, Kronos acquired the remaining 50% joint venture interest in Louisiana Pigment Company, L.P. (LPC), making it a wholly-owned subsidiary[90] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Net income declined due to weakness in the Chemicals segment, though liquidity remains sufficient despite a large settlement payment Results of Operations The Chemicals segment's income dropped significantly, while the Component Products and Real Estate segments showed strong growth - The decrease in net income for Q2 2025 was primarily driven by lower operating income from the Chemicals Segment ($10.3M in 2025 vs $40.5M in 2024) and partially offset by higher operating income from the Real Estate Segment ($18.9M in 2025 vs $9.2M in 2024)[110] - The Chemicals Segment's production capacity utilization rate fell to 81% in Q2 2025 from 99% in Q2 2024, leading to approximately $20 million in unabsorbed fixed production costs[120][126] - The Real Estate segment recognized $17.2 million in income from tax increment infrastructure reimbursement in Q2 2025, significantly boosting its operating income[165] Liquidity and Capital Resources Operating cash flow was negative due to a settlement payment, but liquidity was enhanced by an upsized credit facility - Cash used in operating activities increased by $118.9 million in H1 2025 compared to H1 2024, primarily due to a $56.6 million payment for an environmental remediation settlement[181][184] - In July 2025, Kronos amended its Global Revolver, increasing the maximum borrowing amount from $300 million to $350 million to provide additional liquidity and support near-term debt maturities[192][199] - The company projects aggregate capital expenditures for 2025 to be approximately $48 million, with $45 million allocated to the Chemicals Segment[202][206] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes in its exposure to market risks since its 2024 Annual Report - There have been no material changes in market risks since the company filed its 2024 Annual Report[219] Item 4. Controls and Procedures The company's disclosure controls and internal controls over financial reporting were deemed effective with no material changes - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[222][223] - No changes occurred in the company's internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal controls[226] Part II. OTHER INFORMATION Item 1. Legal Proceedings The company notes the dismissal of the Philip Palmeri v. NL Industries, Inc. case in May 2025 - The case of Philip Palmeri v. NL Industries, Inc. was dismissed in May 2025[229] Item 1A. Risk Factors The company states there have been no material changes to the risk factors disclosed in its 2024 Annual Report - The company refers to its 2024 Annual Report for a discussion of risk factors, indicating no material changes[230] Item 6. Exhibits This section lists filed exhibits, including an amendment to a credit agreement and officer certifications - A key exhibit filed is the Fourth Amendment to the Credit Agreement for Kronos Worldwide, Inc., dated July 17, 2025[235]