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Related Party Transactions | 12 Months Ended
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Dec. 31, 2011
Related Party Transactions [Abstract] |
Related Party Transactions | Note 16—Related party transactions: We may be deemed to be controlled by Mr. Harold C. Simmons. See Note 1. We and other entities that may be deemed to be controlled by or affiliated with Mr. Simmons sometimes engage in (a) intercorporate transactions such as guarantees, management and expense sharing arrangements, shared fee arrangements, joint ventures, partnerships, loans, options, advances of funds on open account, and sales, leases and exchanges of assets, including securities issued by both related and unrelated parties, and (b) common investment and acquisition strategies, business combinations, reorganizations, recapitalizations, securities repurchases, and purchases and sales (and other acquisitions and dispositions) of subsidiaries, divisions or other business units. These transactions have involved both related and unrelated parties and have included transactions which resulted in the acquisition by one related party of a publicly-held noncontrolling equity interest in another related party. We periodically consider, review and evaluate, and understand that Contran and related entities consider, review and evaluate such transactions. Depending upon the business, tax and other objectives then relevant, it is possible we might be a party to one or more such transactions in the future. From time to time, we will have loans and advances outstanding between us and various related parties, including Contran, pursuant to term and demand notes. We generally enter into these loans and advances for cash management purposes. When we loan funds to related parties, we are generally able to earn a higher rate of return on the loan than we would earn if we invested the funds in other instruments. While certain of these loans may be of a lesser credit quality than cash equivalent instruments otherwise available to us, we believe we have evaluated the credit risks involved and appropriately reflect those credit risks in the terms of the applicable loans. When we borrow from related parties, we are generally able to pay a lower rate of interest than we would pay if we borrowed from unrelated parties. In December 2011, we entered into an unsecured revolving demand promissory note with Contran whereby we agreed to loan Contran up to $30 million. Our loan to Contran bears interest at prime plus 3.0% (6.25% at December 31, 2011), payable quarterly, with all principal due on demand, but in any event no earlier than December 31, 2013. The amount of our outstanding loans to Contran at any time is at our discretion. As of December 31, 2011, we had loans outstanding to Contran of $11.2 million. Interest income on our loan to Contran was $36,000 in 2011. We also engaged in related party loans, as discussed in Note 9. Interest expense related to our borrowings from Contran was $.7 million in 2009, $3.9 million in 2010 and $.5 million in 2011. Interest expense related to CompX's note payable to TFMC (a subsidiary of TIMET) was $.8 million in 2009, $.6 million in 2010 and $.5 million in 2011. Under the terms of various intercorporate services agreements ("ISAs") we enter into with Contran, employees of Contran provide us certain management, tax planning, financial and administrative services on a fee basis. Such charges are based upon estimates of the time devoted by the Contran employees to our affairs, and the compensation and other expenses associated with those persons. Because of the large number of companies affiliated with Contran, we believe we benefit from cost savings and economies of scale gained by not having certain management, financial and administrative staffs duplicated at all of our subsidiaries, thus allowing certain Contran employees to provide services to multiple companies but only be compensated by Contran. The net ISA fees charged to us by Contran and approved by the independent members of the applicable board of directors aggregated $23.7 million in 2009, $25.1 million in 2010 and $27.1 million in 2011. These agreements are renewed annually, and we expect to pay a net amount of $32.0 million under the ISA during 2012. Tall Pines Insurance Company and EWI RE, Inc. provide for or broker certain insurance or reinsurance policies for Contran and certain of its subsidiaries and affiliates, including us. Tall Pines and EWI are our subsidiaries. Consistent with insurance industry practices, Tall Pines and EWI receive commissions from the insurance and reinsurance underwriters and/or assess fees for the policies that they provide or broker to us. Tall Pines purchases reinsurance for substantially all of the risks it underwrites from third party insurance carriers with an A.M. Best Company rating of generally at least A- (Excellent). We expect these relationships with Tall Pines and EWI will continue in 2012. Contran and certain of its subsidiaries and affiliates, including us, purchase certain of their insurance policies as a group, with the costs of the jointly-owned policies being apportioned among the participating companies. With respect to some of these policies, it is possible that unusually large losses incurred by one or more insureds during a given policy period could leave the other participating companies without adequate coverage under that policy for the balance of the policy period. As a result, we and Contran have entered into a loss sharing agreement under which any uninsured loss is shared by those entities who have submitted claims under the relevant policy. We believe the benefits in the form of reduced premiums and broader coverage associated with the group coverage for such policies justifies the risk associated with the potential of any uninsured loss. BMI, among other things, provides utility services (primarily water distribution, maintenance of a common electrical facility and sewage disposal monitoring) to TIMET and other manufacturers within an industrial complex located in Nevada. The other owners of BMI are generally the other manufacturers located within the complex. BMI provides power transmission and sewer services on a cost reimbursement basis, similar to a cooperative, while water delivery is currently provided at the same rates as are charged by BMI to an unrelated third party. Amounts paid by TIMET to BMI for these utility services were $2.2 million in 2009, $1.4 million in 2010 and $1.6 million in 2011. TIMET also paid BMI an electrical facilities upgrade fee of $.8 million in 2009. Additionally, BMI maintains insurance coverage for common area environmental remediation activities within the industrial complex located in Henderson, Nevada with participation from numerous manufacturers within the industrial complex, including TIMET. In December 2011, after approval by TIMET's independent members of its board of directors, TIMET sold a portion of its excess insurance reserve limit under such insurance policy to BMI for $2.8 million. As consideration for the sale, BMI paid TIMET $1.4 million in cash and issued a $1.4 million promissory note to TIMET that bears interest at 3% per annum with the balance due no later than December 2012. The terms of the sale were comparable with then-recent negotiations for a similar transaction between BMI and other unrelated third party manufacturers within the same industrial complex, and BMI completed such transaction with the other unrelated third party in January 2012 on those comparable terms. Additionally, if at any time through December 2013 BMI were to purchase excess insurance limits from any of the other manufacturers within the industrial complex at a price per dollar of coverage in excess of the price per dollar of coverage inherent in TIMET's sale to BMI, BMI is obligated to pay TIMET such excess price per dollar of coverage as additional consideration for our sale. TIMET would recognize any such additional consideration only upon realization. WCS is required to provide certain financial assurances to the Texas government agencies with respect to certain decommissioning obligations related to the WCS' facility in West Texas. See Note 17. Such financial assurances may be provided by various means. We and certain of our affiliates have provided or assisted WCS with providing such financial assurance, as specified below:
| • |  | During 2009, 2010 and 2011, a subsidiary of Contran guaranteed certain of WCS' specified decommissioning obligations as it relates to its RCRA and TSCA licenses and permits, currently estimated at $5.5 million. Such Contran subsidiary was eligible to provide this guarantee because it met certain specified financial tests. The obligations would arise only upon a closure of our West Texas facility and WCS' failure to perform the required decommissioning activities. We do not currently expect that such subsidiary will be required to perform under such guarantee for the foreseeable future.
| • |  | During 2009, 2010 and 2011, Contran issued a letter of credit ("LOC") under its bank credit facility to the State of Texas related to specified decommissioning obligations associated with WCS' byproduct facility. At December 31, 2011, the amount of such LOC was $5.7 million. The LOC would only be drawn down upon the closure of the byproduct facility and WCS' failure to perform the required decommissioning activities. We do not currently expect that the LOC will have to be drawn down for the foreseeable future. We agreed to reimburse Contran for the costs of providing the LOC and incurred costs of $.2 million in 2009 and $.1 million in each of 2010 and 2011.
| • |  | During 2011, a subsidiary of Contran pledged certain of its marketable securities as collateral for the benefit of the state of Texas related to specified decommissioning obligations associated with WCS' LLRW disposal facilities, currently estimated at $45.5 million. The marketable securities would only be liquidated upon a closure of our West Texas facility and WCS' failure to perform the required decommissioning activities. We do not currently expect that such marketable securities will be required to be liquidated for the foreseeable future. Such marketable securities would be released in November 2016 upon WCS' payment of approximately $119.5 million into a collateral trust, as discussed in Note 7. We have agreed to pay a collateral fee to such Contran subsidiary for its pledge of collateral, and such fee was $.1 million in 2011.
| • |  | During 2011, Contran, Valhi and certain other subsidiaries of Contran guaranteed WCS' obligations under the $20.0 million surety bond discussed in Note 17. The obligations would arise upon WCS' failure to make the required quarterly payments into the surety bond trust. We do not currently expect that Contran, Valhi and such other Contran subsidiaries will be required to perform under such guarantee for the foreseeable future.
Receivables from and payables to affiliates are summarized in the table below.
|  | December 31, |
|  | 2010 |  |  | 2011 |
|  | (In millions) |
Current receivables from affiliates: |  |  |  |  |  |  |  |
Louisiana Pigment Company, L.P., net |  | $ | — |  |  | $ | 29.6 |
Other |  |  | .1 |  |  |  | — |
Total |  | $ | .1 |  |  | $ | 29.6 |
Current payables to affiliates: |  |  |  |  |  |  |  |
Louisiana Pigment Company, L.P. |  | $ | 7.4 |  |  | $ | — |
Contran: |  |  |  |  |  |  |  |
Income taxes, net |  |  | 4.3 |  |  |  | .1 |
Trade items |  |  | 17.4 |  |  |  | 21.1 |
TIMET |  |  | 1.0 |  |  |  | — |
Other |  |  | .1 |  |  |  | .2 |
Total |  | $ | 30.2 |  |  | $ | 21.4 |
Noncurrent note receivable from affiliate |  |  |  |  |  |  |  |
Valhi—Contran note receivable |  | $ | — |  |  | $ | 11.2 |
Note payable to affiliate included in long-term debt |  |  |  |  |  |  |  |
CompX TIMET note payable |  | $ | 42.2 |  |  | $ | 22.2 |
Amounts payable to LPC are generally for the purchase of Ti0 2, while amounts receivable from LPC are generally from the sale of feedstock ore, see Note 7. Purchases of TiO 2 from LPC were $121.1 million in 2009, $133.7 million in 2010 and $145.0 million in 2011. Sales of feedstock ore to LPC were nil in 2009, $5.2 million in 2010 and $93.0 million in 2011. Substantially all of the Contran trade payables relates to the ISA fees charged to WCS by Contran, which WCS has not paid Contran since 2001. See Note 9 for more information on the CompX note payable to TIMET, on the Valhi credit facility with Contran and the promissory notes payable to Contran.

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- Definition The entire disclosure for related party transactions, including the nature of the relationship(s), a description of the transactions, the amount of the transactions, the effects of any change in the method of establishing the terms of the transaction from the previous period, stated interest rate, expiration date, terms and manner of settlement per the agreement with the related party, and amounts due to or from related parties. If the entity and one or more other entities are under common ownership or management control and this control affects the operating results or financial position, disclosure includes the nature of the control relationship even if there are no transactions between the entities. Disclosure may also include the aggregate amount of current and deferred tax expense for each statement of earnings presented where the entity is a member of a group that files a consolidated tax return, the amount of any tax related balances due to or from affiliates as of the date of each statement of financial position presented, the principal provisions of the method by which the consolidated amount of current and deferred tax expense is allocated to the members of the group and the nature and effect of any changes in that method. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(k)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Article 3A -Section 04 -Paragraph b Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 57 -Paragraph 1-4 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39678-107864 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Article 4 -Section 08 -Paragraph k Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39691-107864 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39549-107864 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39622-107864 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6457730&loc=d3e39603-107864 + Details
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