Exhibit 99.2
VALHI, INC. AND SUBSIDIARIES
INDEX TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Page
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Pro Forma Condensed Consolidated Balance Sheet - September 30, 1994 F-2/F-3
Notes to Pro Forma Condensed Consolidated Balance Sheet F-4/F-5
Pro Forma Condensed Consolidated Statements of Operations:
Nine months ended September 30, 1994 F-6
Year ended December 31, 1993 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 respective historical consolidated financial statements
of Valhi, Inc. and NL Industries, Inc. The pro forma condensed consolidated
financial statements are not necessarily indicative of Valhi's consolidated
financial position or results of continuing operations as they may be in the
future.
F-1
VALHI, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 1994
(Unaudited)
(In millions)
Pro forma Pro forma
Valhi adjustment NL adjustment
ASSETS Historical (I) Historical (II) Pro forma
---------- ---------- ---------- ---------- ----------
Current assets:
Cash and cash equivalents $21.4 $ - $194.1 ($12.4)(a) $203.1
Marketable securities 23.7 - 25.5 - 49.2
Accounts and notes receivable 97.0 - 160.5 - 257.5
Receivable from affiliates 10.3 - - - 10.3
Inventories 94.5 - 167.8 1.0 (c) 263.3
Other 5.6 - 13.2 - 18.8
---------- ---------- ---------- ---------- ----------
252.5 - 561.1 (11.4) 802.2
---------- ---------- ---------- ---------- ----------
Other assets:
Marketable securities 110.8 - 20.5 (3.9)(c) 127.4
Investment in joint ventures - - 188.4 - 188.4
Natural resource properties 53.1 - - 9.2 (b)
20.3 (c) 82.6
Deferred income taxes 33.8 (6.0) - (27.8)(d) -
Goodwill 5.4 - - 242.7 (c) 248.1
Other assets 31.5 - 58.5 - 90.0
Investment in affiliates:
NL Industries, Inc. 50.4 - - 12.4 (a)
(62.8)(c) -
Tremont Corporation 5.7 (5.7) - - -
---------- ---------- ---------- ---------- ----------
290.7 (11.7) 267.4 190.1 736.5
---------- ---------- ---------- ---------- ----------
Property and equipment, net 242.4 - 409.1 (9.2)(b)
175.6 (c) 817.9
---------- ---------- ---------- ---------- ----------
$785.6 ($11.7) $1,237.6 $345.1 $2,356.6
========== ========== ========== ========== ==========
F-2
VALHI, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
September 30, 1994
(Unaudited)
(In millions)
Pro forma Pro forma
Valhi adjustment NL adjustment
LIABILITIES AND STOCKHOLDERS' EQUITY Historical (I) Historical (II) Pro forma
---------- ---------- ---------- ---------- ----------
Current liabilities:
Notes payable & current long-term debt $66.8 $ - $43.3 $ - $110.1
Accounts payable & accrued liabilities 160.3 - 192.5 - 352.8
Payable to affiliates 0.1 5.0 10.6 - 15.7
Income taxes 3.6 9.6 0.4 (c) 13.6
---------- ---------- ---------- ---------- ----------
230.8 5.0 256.0 0.4 492.2
---------- ---------- ---------- ---------- ----------
Noncurrent liabilities:
Long-term debt 308.5 - 791.0 - 1,099.5
Deferred income taxes 3.0 - 204.6 77.3 (c)
(27.8)(d) 257.1
Accrued pension cost 0.1 - 79.5 - 79.6
Accrued OPEB cost 18.3 - 65.9 - 84.2
Accrued environmental costs - - 83.4 - 83.4
Other 9.0 - 49.5 - 58.5
---------- ---------- ---------- ---------- ----------
338.9 - 1,273.9 49.5 1,662.3
---------- ---------- ---------- ---------- ----------
Minority interest in NL subsidiaries - - 2.9 - 2.9
---------- ---------- ---------- ---------- ----------
Stockholders' equity:
Common stock and paid-in capital 34.5 767.6 (767.6)(c) 34.5
Retained earnings 222.9 (18.6) (569.5) 569.5 (c) 204.3
Treasury stock (71.2) - (366.6) 366.6 (c) (71.2)
Adjustments:
Currency translation (11.6) 1.4 (122.7) 122.7 (c) (10.2)
Marketable securities 42.8 0.1 (0.5) 0.5 (c) 42.9
Pension liabilities (1.5) 0.4 (3.5) 3.5 (c) (1.1)
---------- ---------- ---------- ---------- ----------
215.9 (16.7) (295.2) 295.2 199.2
---------- ---------- ---------- ---------- ----------
$785.6 ($11.7) $1,237.6 $345.1 $2,356.6
========== ========== ========== ========== ==========
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) occurred on September 30, 1994:
I- Valhi distributed its holdings of Tremont common stock (3.5 million
shares) pro rata to Valhi stockholders (the "Distribution"). Prior to
the Distribution, Valhi accounted for Tremont by the equity method and,
accordingly, the Distribution is accounted for as a "spin-off" (recorded
at book value, net of tax). The Distribution is currently taxable to
Valhi for federal income tax purposes based upon the aggregate fair
market value of the Tremont stock distributed.
II- Valhi increased its interest in NL Industries from approximately 48.9% to
approximately 50.9% through the purchase of an additional 1,038,900 shares
of NL common stock (for approximately $12.4 million) and commenced
accounting for NL as a consolidated subsidiary at that date (step
acquisition accounted for by the purchase method).
Note 2 - Pro forma adjustments:
I - Reflect the Distribution of Tremont common stock as a "spin-off",
net of tax.
Amount
------------
(In millions)
Taxable value of Tremont stock distributed, based upon
the September 30, 1994 market price of $10.50 per share $37.1
Valhi's net carrying value of Tremont stock 5.7
------------
$31.4
============
Income tax on above at the U.S. federal statutory rate of 35% $11.0
============
The charge to Valhi's equity to reflect the Distribution consists of:
Net carrying value of Tremont stock $5.7
Related income taxes:
Currently payable 5.0
Deferred - reversal of amounts previously provided 6.0
------------
$16.7
============
F-4
VALHI, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
(Unaudited)
II- (a) Cost of 1,038,900 shares of NL common stock purchased in market
transactions at an average price of $11.93 per share, including fees
and commissions.
(b) Reclassification of certain NL historical amounts to conform to
Valhi's presentation.
(c) Consolidation entries.
Amount
------------
(In millions)
Valhi's investment in NL:
Actual at September 30, 1994 $50.4
Pro forma purchase of additional NL common shares 12.4
------------
62.8
NL's separately-reported stockholders' deficit 295.2
------------
Valhi's net purchase accounting basis differences 358.0
Less previously allocated net basis differences existing at
September 30, 1994. Such purchase accounting differences were
allocated among NL's net assets (principally property and
equipment) at the various dates of acquisition based upon
relative fair values at such dates and include $79.4
million of goodwill 194.7
------------
Additional purchase accounting basis differences created by the
acquisition of additional NL shares and the consolidation of NL
(step acquisition accounted for by the purchase method) - deemed
to be goodwill to be amortized by the straight-line method over
the remaining life (approximately 31 years) of the $79.4 million
of previously-allocated goodwill attributable to NL $163.3
============
No minority interest attributable to NL's separately-reported
stockholders' deficit can be recognized in consolidation, which
results in Valhi recording approximately $145 million of amortizable
goodwill in excess of the $18 million directly attributable to
Valhi's pro-rata increase in ownership of NL.
(d) Reclassification.
F-5
VALHI, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine months ended September 30, 1994
(Unaudited)
(In millions, except per share data)
Pro forma Pro forma
Valhi adjustment NL adjustment
Historical (I) Historical (II) Pro forma
---------- ---------- ---------- ---------- ----------
Revenues and other income:
Net sales $632.3 $ - $664.2 $ - $1,296.5
Other, net 6.7 - 36.5 - 43.2
---------- ---------- ---------- ---------- ----------
639.0 - 700.7 - 1,339.7
---------- ---------- ---------- ---------- ----------
Costs and expenses:
Cost of goods sold 481.4 - 493.9 9.1 (a) 984.4
Selling, general and administrative 91.0 - 157.4 3.2 (a)
3.7 (b) 255.3
Interest 26.0 - 63.1 - 89.1
---------- ---------- ---------- ---------- ----------
598.4 - 714.4 16.0 1,328.8
---------- ---------- ---------- ---------- ----------
Income of consolidated companies
before income taxes 40.6 - (13.7) (16.0) 10.9
Equity in losses of affiliates (30.5) 7.0 - 23.5 (a) -
---------- ---------- ---------- ---------- ----------
Income before income taxes and
minority interest 10.1 7.0 (13.7) 7.5 10.9
Provision for income taxes 3.2 2.4 12.2 (3.9)(a)
(5.3)(c) 8.6
Minority interest in NL subsidiaries - - 0.6 - 0.6
---------- ---------- ---------- ---------- ----------
Income from continuing operations $6.9 $4.6 ($26.5) $16.7 $1.7
========== ========== ========== ========== ==========
Income from continuing operations per share $0.06 $0.01
========== ==========
Weighted average common shares outstanding 114.3 114.3
========== ==========
See accompanying notes to pro forma condensed consolidated statements
of operations.
F-6
VALHI, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year ended December 31, 1993
(Unaudited)
(In millions, except per share data)
Pro forma Pro forma
Valhi adjustment NL adjustment
Historical (I) Historical (II) Pro forma
---------- ---------- ---------- ---------- ----------
Revenues and other income:
Net sales $781.2 $ - $805.3 $ - $1,586.5
Other, net 12.8 - 22.1 - 34.9
---------- ---------- ---------- ---------- ----------
794.0 - 827.4 - 1,621.4
---------- ---------- ---------- ---------- ----------
Costs and expenses:
Cost of goods sold 593.0 - 612.4 12.2 (a) 1,217.6
Selling, general and administrative 113.1 - 185.7 4.9 (a)
4.9 (b) 308.6
Impairment charge - - - 84.0 (d) 84.0
Interest 38.6 - 99.1 - 137.7
---------- ---------- ---------- ---------- ----------
744.7 - 897.2 106.0 1,747.9
---------- ---------- ---------- ---------- ----------
Income of consolidated companies
before income taxes 49.3 - (69.8) (106.0) (126.5)
---------- ---------- ---------- ---------- ----------
Equity in losses of affiliates:
Equity in losses (59.8) 7.4 - 52.4 (a) -
Provision for market value impairment (84.0) - - 84.0 (d) -
---------- ---------- ---------- ---------- ----------
(143.8) 7.4 - 136.4 -
---------- ---------- ---------- ---------- ----------
Loss before income taxes and
minority interest (94.5) 7.4 (69.8) 30.4 (126.5)
Provision for income taxes (benefit) (30.4) 2.6 12.7 (12.4)(a)
(14.1)(c) (41.6)
Minority interest in NL subsidiaries - - 0.7 - 0.7
---------- ---------- ---------- ---------- ----------
Loss from continuing operations ($64.1) $4.8 ($83.2) $56.9 ($85.6)
========== ========== ========== ========== ==========
Loss from continuing operations per share ($0.56) ($0.75)
========== ==========
Weighted average common shares outstanding 114.1 114.1
========== ==========
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 Statements of Operations assume the
Distribution of Tremont common stock and the consolidation of NL occurred at
the beginning of the year ended December 31, 1993:
Note 2 - Pro forma adjustments:
I - Eliminate Valhi's equity in Tremont's titanium metals operations, net of
related deferred income tax benefit. In future filings, such historical
amounts will be reported by Valhi as discontinued operations.
II- (a) Consolidating entry to eliminate the historical equity in losses of
NL and allocate the historical amortization of existing purchase
accounting basis differences (principally depreciation of property
and equipment, related deferred income taxes and amortization of
goodwill) attributable to NL.
(b) Amortization of new goodwill, arising from the step-acquisition
purchase of additional NL shares resulting in the consolidation of
NL, by the straight-line method over 31 years as more fully described
in Note 2 (II)(c) to the Pro Forma Condensed Consolidated Balance
Sheet.
NL separately reported a stockholders' deficit in 1993 and 1994 and,
accordingly, no minority interest attributable to NL's
separately-reported losses can be recognized in consolidation.
(c) NL is not a member of Valhi's consolidated income tax group and,
accordingly, incremental deferred income tax benefits attributable to
increased equity in net losses of NL is provided at the U.S. federal
statutory rate of 35%.
(d) Reclassification.
F-8