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Business Segment Information
9 Months Ended
Sep. 30, 2011
Business Segment Information 
Business Segment Information

Note 2 – Business segment information:

Business segment

   

Entity

   

% controlled at

September 30, 2011

Chemicals

    Kronos    80%

Component products

    CompX    87%

Waste management

    WCS    100%

Our control of Kronos includes 50% we hold directly and 30% held directly by NL. We own 83% of NL. Our control of CompX is through NL.

 

     Three months  ended
September 30,		     Nine months  ended
September 30,		  
     2010     2011     2010     2011  
     (In millions)  

Net sales:

         

Chemicals

    $ 376.6      $ 547.9      $ 1,076.4      $ 1,505.9   

Component products

      35.7        35.8        102.9        105.8   

Waste management

      .9        .4        6.4        1.2   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total net sales

    $ 413.2      $ 584.1      $ 1,185.7      $ 1,612.9   
  

 

 

    

 

 

    

 

 

    

 

 

  

Cost of sales:

         

Chemicals

    $ 281.0      $ 337.7      $ 836.3      $ 953.5   

Component products

      26.1        27.2        75.3        78.7   

Waste management

      6.0        6.5        18.5        18.4   
  

 

 

    

 

 

    

 

 

    

 

 

  

Total cost of sales

    $ 313.1      $ 371.4      $ 930.1      $ 1,050.6   
  

 

 

    

 

 

    

 

 

    

 

 

  

Gross margin:

         

Chemicals

    $ 95.6      $ 210.2      $ 240.1      $ 552.4   

Component products

      9.6        8.6        27.6        27.1   

Waste management

      (5.1 )      (6.1 )      (12.1 )      (17.2 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total gross margin

    $ 100.1      $ 212.7      $ 255.6      $ 562.3   
  

 

 

    

 

 

    

 

 

    

 

 

  

Operating income (loss):

         

Chemicals

    $ 58.3      $ 158.4      $ 121.3      $ 407.8   

Component products

      3.1        1.5        7.8        13.4   

Waste management

      (8.1 )      (9.7 )      (22.8 )      (27.9 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Total operating income

      53.3        150.2        106.3        393.3   

Equity in earnings of investee

      (.1 )      (.1 )      (.2 )      (.3 ) 

General corporate items:

         

Securities earnings

      6.6        6.6        19.7        21.4   

Insurance recoveries

      .3        16.1        18.6        16.6   

Litigation settlement gain

      6.3        —          6.3        —     

Litigation settlement expense

      —          —          (32.2 )      —     

General expenses, net

      (7.6 )      (9.2 )      (22.0 )      (32.6 ) 

Gain (loss) on prepayment of debt

      —          .1        —          (3.2 ) 

Interest expense

      (16.7 )      (15.2 )      (51.1 )      (48.3 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income before income taxes

    $ 42.1      $ 148.5      $ 45.4      $ 346.9   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

Segment results we report may differ from amounts separately reported by our various subsidiaries and affiliates due to purchase accounting adjustments and related amortization or differences in the way we define operating income. Intersegment sales are not material. We received approximately $7.5 million for a patent litigation settlement in the first quarter of 2011 and incurred a $1.1 million impairment charge for assets held for sale related to CompX in the third quarter of 2011, both of which are included in the determination of its operating income. See Notes 6, 11 and 14. Of the $33.3 million aggregate litigation settlement and contract termination expense we recognized in the first quarter of 2010, $1.1 million relates to WCS and is included in the determination of its operating loss, and the remaining $32.2 million relates to NL. Please refer to Notes 9 and 17 in our 2010 Annual Report. Component Products operating income in the third quarter of 2010 includes the effect of a $.5 million write-down of an asset held for sale, see Note 7 in our 2010 Annual Report.

On July 29, 2011, CompX completed the acquisition of 100% of the stock of a Canadian ergonomic component products company for initial cash consideration of the equivalent of approximately $4.9 million, net of approximately $3,000 of cash acquired, with potential additional cash consideration ranging from nil to approximately $1.5 million payable in the first quarter of 2013, contingent upon the acquired business achieving certain acquired product line sales targets during 2012. The estimated fair value of contingent consideration recognized at the date of acquisition was $.8 million. The acquisition is intended to expand our Component Products Segment's furniture components ergonomics product line. We have included the results of operations and cash flows of the acquired business in our Condensed Consolidated Financial Statements subsequent to the acquisition date. The purchase price has been preliminarily allocated among net assets acquired (pending completion of the final valuation), consisting of (i) net working capital (receivable, inventory and payables) of $1.0 million (ii) identifiable intangibles other than goodwill of $2.0 million, (iii) goodwill of $3.0 million and (iv) noncurrent deferred income tax liabilities of $.4 million. The tangible and intangible net assets acquired (other than goodwill) were valued based upon a preliminary estimate of the fair value of such net assets, with the remainder of the purchase price allocated to goodwill. The business had net sales of $4.2 million during 2010 and the pro-forma effect to us, assuming this acquisition had been completed as of January 1, 2011, is not material.