Financial Instruments

12 Months Ended

Dec. 31, 2014

Note 18—Financial instruments:

The following table summarizes the valuation of our short-term investments and financial instruments by the ASC Topic 820 categories as of December 31, 2013 and 2014:

	Fair Value Measurements
	Total			Quoted Prices in Active Markets (Level 1)			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(In millions)
Asset (liability)
December 31, 2013:
Marketable securities:
Current	$	3.8		$	2.4		$	1.4	$	—
Noncurrent		253.3			1.4			1.9		250.0
Currency forward contracts		(1.0	)		(1.0	)		—		—
December 31, 2014:
Marketable securities:
Current	$	2.7		$	1.7		$	1.0	$	—
Noncurrent		255.6			2.5			3.1		250.0
Currency forward contracts		(4.2	)		(4.2	)		—		—

See Note 4 for information on how we determine the fair value of our marketable securities.

Certain of our sales generated by Chemicals Segment’s non-U.S. operations are denominated in U.S. dollars. Our Chemicals Segment periodically uses currency forward contracts to manage a very nominal portion of currency exchange rate risk associated with trade receivables denominated in a currency other than the holder’s functional currency or similar exchange rate risk associated with future sales. We have not entered into these contracts for trading or speculative purposes in the past, nor do we currently anticipate entering into such contracts for trading or speculative purposes in the future. Derivatives used to hedge forecasted transactions and specific cash flows associated with financial assets and liabilities denominated in currencies other than the U.S. dollar and which meet the criteria for hedge accounting are designated as cash flow hedges. Consequently, the effective portion of gains and losses is deferred as a component of accumulated other comprehensive income (loss) and is recognized in earnings at the time the hedged item affects earnings. Contracts that do not meet the criteria for hedge accounting are marked-to-market at each balance sheet date with any resulting gain or loss recognized in income currently as part of net currency transactions. The fair value of the currency forward contracts is determined using Level 1 inputs based on the currency spot forward rates quoted by banks or currency dealers.

At December 31, 2014, Kronos had currency forward contracts to exchange:

—

an aggregate of $37 million for an equivalent value of Norwegian kroner at an exchange rates ranging from kroner 6.75 to kroner 7.11 per U.S. dollar. These contracts with DnB Nor Bank ASA mature at a rate of $2.7 million to $5.0 million per month in certain months from January 2015 through December 2015; and

—	an aggregate €31.7 million for an equivalent value of Norwegian kroner at exchange rates ranging from kroner 8.52 to kroner 8.81 per euro. These contracts with DnB Nor Bank ASA mature at a rate of €1.1 million to €5.0 million in certain months from February 2015 through December 2015.

The estimated fair value of such currency forward contracts at December 31, 2014 was a $4.2 million net liability of which $4.2 million is recognized as part of accounts payable and accrued liabilities in our Consolidated Balance Sheet with a corresponding $4.2 million currency transaction loss in our Consolidated Statement of Operations, (2013—$1.0 million net liability, , of which $.2 million was recognized as part of accounts and other receivables and $1.2 million recognized as part of accounts payable and accrued liabilities with a corresponding $1.0 million currency transaction loss in our Consolidated Statement of Operations). We did not use hedge accounting for any of our contracts to the extent we held such contracts during 2012, 2013 and 2014.

The following table presents the financial instruments that are not carried at fair value but which require fair value disclosure as of December 31, 2013 and 2014:

	December 31, 2013				December 31, 2014
	Carrying amount		Fair value		Carrying amount		Fair value
	(In millions)
Cash, cash equivalents and restricted cash equivalents	$	186.8	$	186.8	$	280.3	$	280.3
Deferred payment obligation		8.2		8.2		8.5		8.5
Long-term debt (excluding capitalized leases):
Kronos term loan	$	—	$	—	$	345.9	$	341.5
Kronos note payable to Contran		170.0		170.0		—		—
Snake River Sugar Company fixed rate loans		250.0		250.0		250.0		250.0
WCS fixed rate debt		72.4		72.4		67.1		67.1
Valhi credit facility with Contran		206.5		206.5		223.7		223.7
Kronos variable rate bank credit facilities		11.1		11.1		—		—
Tremont promissory note payable		19.1		19.1		17.4		17.4
BMI bank note payable		11.2		11.2		10.3		10.3
LandWell note payable to the City of Henderson		3.1		3.1		3.1		3.1
Noncontrolling interest in:
Kronos common stock	$	241.9	$	431.6	$	211.0	$	295.1
NL common stock		74.5		92.6		54.4		71.3
CompX common stock		13.6		23.1		14.4		19.9
Valhi stockholders’ equity	$	601.3	$	5,916.7	$	477.6	$	2,173.8

The fair value of our publicly-traded marketable securities, noncontrolling interest in NL, Kronos and CompX and our common stockholders’ equity are all based upon quoted market prices, Level 1 inputs at each balance sheet date. At December 31, 2014, the estimated market price of Kronos’ term loan was $983.1 per $1,000 principal amount. The fair value of Kronos’ term loan was based on quoted market prices; however, these quoted market prices represent Level 2 inputs because the markets in which the term loan trades were not active. The fair value of our fixed-rate nonrecourse loans from Snake River Sugar Company is based upon the $250 million redemption price of our investment in the Amalgamated Sugar Company LLC, which collateralizes the nonrecourse loans, (this is a Level 3 input). Fair values of variable interest rate notes receivable and debt and other fixed-rate debt are deemed to approximate book value. Due to their near-term maturities, the carrying amounts of accounts receivable and accounts payable are considered equivalent to fair value. See Notes 4 and 9.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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