8-K 1 tre8k011003.txt TREMONT CORPORATION 8K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 January 10, 2003 ------------------------------------------------------------------------------- (Date of Report, date of earliest event reported) TREMONT CORPORATION ------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 1-10126 76-0262791 -------------------------------------------------------------------------------- (State or other (Commission (IRS Employer jurisdiction of File Number) Identification incorporation) Number) 1999 Broadway, Suite 4300, Denver, CO 80202 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (303) 296-5600 -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not Applicable -------------------------------------------------------------------------------- (Former name or address, if changed since last report) Item 5: Other Events On January 10, 2003 the Registrant issued the press release attached hereto as Exhibit 99.1, which is incorporated herein by reference. The press release relates to an announcement by Registrant regarding the time and place for a special meeting of the stockholders of the corporation for the purpose of considering adoption of the merger agreement among Tremont, Valhi, Inc. and a subsidiary of Valhi. Item 7: Financial Statements, Pro Forma Financial Information and Exhibits (c) Exhibits Item No. Exhibit List -------- -------------------------------------------------------- 99.1 Press release dated January 10, 2003 issued by Registrant. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TREMONT CORPORATION (Registrant) By: /s/ Joan H. Prusse ------------------------------------- Joan H. Prusse Assistant General Counsel and Assistant Secretary Date: January 10, 2003 Exhibit 99.1 PRESS RELEASE FOR IMMEDIATE RELEASE: CONTACT: Tremont Corporation Robert E. Musgraves 1999 Broadway, Suite 4300 Vice President Denver, Colorado 80202 and General Counsel (303) 291-2982 TREMONT ANNOUNCES INFORMATION FOR SPECIAL MEETING OF STOCKHOLDERS DENVER, COLORADO . . . January 10, 2003 . . . Tremont Corporation ("Tremont") (NYSE: TRE) announced today that Tremont's Board of Directors has set the time and place for a special meeting of the stockholders of the corporation for the purpose of considering adoption of the merger agreement among Tremont, Valhi, Inc. and a subsidiary of Valhi.. The meeting has been set for 10:00 a.m. (Mountain Time), Friday, February 7, 2003, at the corporation's office located at 1999 Broadway, Suite 4300, Denver, Colorado. The Board had previously established the close of business on January 10, 2003 as the record date for the special meeting. Tremont, headquartered in Denver, Colorado, is principally a holding company with operations in the titanium metals business, conducted through Titanium Metals Corporation (TIMET), in the titanium dioxide pigments business, conducted through NL Industries, Inc. (NL), and in real estate development, conducted through The Landwell Company. o o o o o

TREMONT CORPORATION ANNUAL REPORT ON FORM 10-K ITEMS 8, 14(a) and 14(d) INDEX OF FINANCIAL STATEMENTS Page Financial Statements Report of Independent Accountants F-1 Consolidated Balance Sheets - December 31, 2001 and 2000 F-2 Consolidated Statements of Income (Loss) - Years ended December 31, 2001, 2000 and 1999 F-4 Consolidated Statements of Comprehensive Income (Loss) - Years ended December 31, 2001, 2000 and 1999 F-5 Consolidated Statements of Cash Flows - Years ended December 31, 2001, 2000 and 1999 F-6 Consolidated Statements of Changes in Stockholders' Equity - Years ended December 31, 2001, 2000 and 1999 F-8 Notes to Consolidated Financial Statements F-9

TREMONT CORPORATION CONSOLIDATED BALANCE SHEETS December 31, 2001 and 2000 (In thousands, except per share data) ASSETS 2001 2000 ----------------- ----------------- Current assets: Cash and cash equivalents $ 1,446 $ 793 Accounts and notes receivable, less allowance of $2,663 3,415 2,744 Receivable from related parties 558 1,906 Prepaid expenses and other 5,004 2,434 ----------------- ----------------- Total current assets 10,423 7,877 Investment in Titanium Metals Corporation ("TIMET") 55,930 72,179 Investment in NL Industries, Inc. ("NL") 130,319 122,717 Investment in other joint ventures 12,415 13,134 Property and equipment, net 1,104 536 Receivable from related parties 218 836 Other 20,911 12,299 ----------------- ----------------- $ 231,320 $ 229,578 ================= =================

TREMONT CORPORATION CONSOLIDATED BALANCE SHEETS (CONTINUED) December 31, 2001 and 2000 (In thousands, except per share data) LIABILITIES AND STOCKHOLDERS' EQUITY 2001 2000 ---------------- ---------------- Current liabilities: Accrued liabilities $ 10,413 $ 5,099 Loan payable to related party - 13,403 Current maturities of note payable to related party 1,000 - Other payables to related parties 286 252 ---------------- ---------------- Total current liabilities 11,699 18,754 Note payable to related party 11,650 - Insurance claims and claim expenses 21,686 13,486 Accrued postretirement benefit cost 19,982 20,899 Deferred income taxes 14,412 12,605 Accrued environmental cost 2,937 5,311 Deferred compensation 800 - ---------------- ---------------- Total liabilities 83,166 71,055 ---------------- ---------------- Stockholders' equity: Preferred stock, $1.00 par value; 1,000 shares authorized; none issued - - Common stock, $1.00 par value; 14,000 shares authorized; 7,817 shares issued 7,817 7,817 Additional paid-in capital 291,173 290,568 Accumulated deficit (56,095) (53,488) Accumulated other comprehensive loss (29,991) (21,624) Treasury stock, at cost (1,392 shares) (64,750) (64,750) ---------------- ---------------- Total stockholders' equity 148,154 158,523 ---------------- ---------------- $ 231,320 $ 229,578 ================ ================

TREMONT CORPORATION CONSOLIDATED STATEMENTS OF INCOME (LOSS) Years ended December 31, 2001, 2000 and 1999 (In thousands, except per share data) 2001 2000 1999 ---------------- ---------------- --------------- Equity in earnings (losses) of: TIMET $ (9,161) $ (8,990) $ (71,992) NL 21,093 28,223 28,126 Other joint ventures 580 1,672 595 ---------------- ---------------- --------------- 12,512 20,905 (43,271) Corporate expense, net 5,872 1,949 2,696 Interest expense 1,258 1,230 917 ---------------- ---------------- --------------- Income (loss) before income taxes and minority interest 5,382 17,726 (46,884) Income tax expense (benefit) 6,190 8,069 (18,871) Minority interest - 455 191 ---------------- ---------------- --------------- Net income (loss) $ (808) $ 9,202 $ (28,204) ================ ================ =============== Net income (loss) per share: Basic $ (.13) $ 1.47 $ (4.41) Diluted $ (.13) $ 1.43 $ (4.41) Weighted average shares outstanding: Common shares 6,214 6,274 6,386 Diluted shares 6,258 6,350 6,454

TREMONT CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Years ended December 31, 2001, 2000 and 1999 (In thousands) 2001 2000 1999 -------------- -------------- -------------- Net income (loss) $ (808) $ 9,202 $ (28,204) -------------- -------------- -------------- Other comprehensive income (loss): Currency translation adjustment, net of tax benefit of $1,978, $4,216 and $3,561 in 2001, 2000 and 1999, respectively (3,674) (7,833) (6,610) Unrealized gains (losses) on marketable securities, net of tax expense (benefit) of $65, $202 and $(163) in 2001, 2000 and 1999, respectively 124 373 (304) Pension liabilities adjustment, net of tax expense (benefit) of $(2,595), $(48) and $167 in 2001, 2000 and 1999, respectively (4,817) (89) 308 -------------- -------------- -------------- Total other comprehensive loss (8,367) (7,549) (6,606) -------------- -------------- -------------- Comprehensive income (loss) $ (9,175) $ 1,653 $ (34,810) ============== ============== ==============

TREMONT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2001, 2000 and 1999 (In thousands) 2001 2000 1999 -------------- -------------- -------------- Cash flows from operating activities: Net income (loss) $ (808) $ 9,202 $(28,204) Losses (earnings) of affiliates: Equity in (earnings) losses (12,512) (20,905) 43,271 Distributions from affiliates 9,472 6,721 2,904 Deferred income taxes 6,192 8,064 (17,066) Minority interest - 455 191 Other, net 477 (46) (1,514) Change in assets and liabilities: Accounts and notes receivable (671) (130) 641 Accounts with related parties 2,000 92 2,162 Prepaid expenses (2,570) (650) (580) Accrued liabilities 5,314 476 802 Income taxes - 4 (686) Other, net (3,058) (1,346) (527) -------------- -------------- -------------- Net cash provided by operating activities 3,836 1,937 1,394 -------------- -------------- -------------- Cash flows from investing activities: Purchases of NL and TIMET common stock - - (15,988) Proceeds from sale of securities 13 100 - Purchase of minority interest - (2,500) - Capital expenditures (644) - - Other, net - - (7) -------------- -------------- -------------- Net cash used by investing activities (631) (2,400) (15,995) -------------- -------------- -------------- Cash flows from financing activities: Letters of credit cash collateralized - - 9,872 Dividends paid (1,799) (1,792) (1,788) Indebtedness with related parties: Borrowings 13,400 3,460 6,275 Repayments (14,153) (3,800) - Issuance of common stock - 386 - Other, net - - 112 -------------- -------------- -------------- Net cash (used) provided by financing activities (2,552) (1,746) 14,471 -------------- -------------- -------------- Net cash provided (used) $ 653 $ (2,209) $ (130) ============== ============== ==============

TREMONT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) Years ended December 31, 2001, 2000 and 1999 (In thousands) 2001 2000 1999 -------------- -------------- ------------- Cash and cash equivalents: Net increase (decrease) $ 653 $ (2,209) $ (130) Cash at beginning of year 793 3,002 3,132 -------------- -------------- ------------- Cash at end of year $ 1,446 $ 793 $ 3,002 ============== ============== ============= Supplemental disclosures - cash paid for: Interest $ 1,258 $ 1,230 $ 400 Income taxes - 2 -

TREMONT CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY Years ended December 31, 2001, 2000 and 1999 (In thousands) Accumulated other Additional comprehensive income Total ------------------------------------ Common Common paid-in Accumulated Currency Marketable Pension Treasury stockholders' shares stock capital deficit translation securities liabilities stock equity ------ ------- ---------- ---------- ----------- ---------- ----------- --------- ------------ Balance at December 31, 1998 6,377 $ 7,769 $ 290,118 $ (30,906) $ (6,742) $ 590 $ (1,317) $ (59,358) $ 200,154 Comprehensive income (loss) - - - (28,204) (6,610) (304) 308 - (34,810) Dividends ($.28 per share) - - - (1,788) - - - - (1,788) Common stock issued 12 12 86 - - - - - 98 Other - - 14 - - - - - 14 ------ ------- ---------- ---------- ----------- ---------- ----------- --------- ------------ Balance at December 31, 1999 6,389 7,781 290,218 (60,898) (13,352) 286 (1,009) (59,358) 163,668 Comprehensive income (loss) - - - 9,202 (7,833) 373 (89) - 1,653 Dividends ($.28 per share) - - - (1,792) - - - - (1,792) Common stock issued 36 36 350 - - - - - 386 Treasury stock - - - - - - - (5,392) (5,392) ------ -------- ---------- --------- ----------- ---------- ----------- --------- ----------- Balance at December 31, 2000 6,425 7,817 290,568 (53,488) (21,185) 659 (1,098) (64,750) 158,523 Comprehensive income (loss) - - - (808) (3,674) 124 (4,817) - (9,175) Dividends ($.28 per share) - - - (1,799) - - - - (1,799) Other - - 605 - - - - - 605 ------ -------- ---------- --------- ----------- ---------- ----------- --------- ----------- Balance at December 31, 2001 6,425 $ 7,817 $ 291,173 $ (56,095) $ (24,859) $ 783 $ (5,915) $ (64,750) $ 148,154 ====== ======== ========== ========= =========== ========== =========== ========= ===========

Year ended December 31 -------------------------------------------------- 2001 2000 1999 -------------- -------------- -------------- (In thousands, except per share data) Net income (loss) as reported $ (808) $ 9,202 $ (28,204) Adjustments: Equity in TIMET's goodwill amortization - - 1,376 Equity method goodwill amortization 1,693 1,541 1,442 Incremental income tax (648) (589) (1,078) -------------- -------------- -------------- Adjusted net income (loss) $ 237 $ 10,154 $ (26,464) ============== ============== ============== Net income (loss) per basic share as reported $ (.13) $ 1.47 $ (4.41) Adjustments: Equity in TIMET's goodwill amortization - - .22 Equity method goodwill amortization .27 .24 .22 Incremental income taxes (.10) (.09) (.17) -------------- -------------- -------------- Adjusted net income (loss) per basic share $ .04 $ 1.62 $ (4.14) ============== ============== ============== Net income (loss) per diluted share as reported $ (.13) $ 1.43 $ (4.41) Adjustments: Equity in TIMET's goodwill amortization - - .22 Equity method goodwill amortization .27 .24 .22 Incremental income taxes (.10) (.09) (.17) -------------- -------------- -------------- Adjusted net income (loss) per diluted share $ .04 $ 1.58 $ (4.14) ============== ============== ==============

December 31, ---------------------------------- 2001 2000 --------------- -------------- (In thousands) Current assets $ 308,687 $ 248,205 Noncurrent assets 390,696 510,941 Current liabilities 122,360 115,842 Noncurrent liabilities 68,941 76,695 Minority interest 209,968 209,094 Common equity 298,114 357,515

Year ended December 31, ------------------------------------------------------- 2001 2000 1999 ---------------- --------------- ---------------- (In thousands) Net sales $ 486,935 $ 426,798 $ 480,029 Gross margin 39,892 3,881 25,523 Net loss (41,766) (38,902) (31,390)

December 31, --------------------------------- 2001 2000 -------------- -------------- (In thousands) Current assets $ 559,086 $ 553,780 Noncurrent assets 592,005 567,008 Current liabilities 299,074 297,956 Noncurrent liabilities 457,866 472,065 Minority interest 7,208 6,279 Common equity 386,943 344,488

Year ended December 31, ----------------------------------------------------- 2001 2000 1999 ---------------- --------------- -------------- (In thousands) Net sales $ 835,099 $ 922,319 $ 908,387 Cost of sales 578,060 610,449 662,315 Net income 121,407 154,609 159,771

December 31, ------------------------------------ 2001 2000 ---------------- ---------------- (In thousands) Land and improvements $ 974 $ 330 Buildings 913 913 Equipment 179 179 ---------------- ---------------- 2,066 1,422 Less accumulated depreciation 962 886 ---------------- ---------------- $ 1,104 $ 536 ================ ================

December 31, ------------------------------------ 2001 2000 ---------------- ---------------- (In thousands) Restricted deposits $ 4,713 $ 5,047 Reinsured claims incurred but not reported 15,915 6,814 Other 283 438 ---------------- ---------------- $ 20,911 $ 12,299 ================ ================

December 31, ------------------------------------ 2001 2000 ---------------- ---------------- (In thousands) Postretirement benefit costs $ 1,432 $ 1,432 Deferred compensation 1,407 - Environmental costs 2,357 725 Reserve for unearned insurance premiums 4,611 2,375 Other 606 567 ---------------- ---------------- $ 10,413 $ 5,099 ================ ================

Year ended December 31, -------------------------------------------------- 2001 2000 1999 -------------- -------------- -------------- (In thousands) Expected income tax expense (benefit) $ 1,884 $ 6,204 $ (16,409) Adjustment of deferred tax asset valuation allowance 7,225 3,161 (1,180) Incremental tax and rate differences on equity in income of companies not included in the consolidated tax group (371) (1,392) (1,647) Rate difference on equity in income of companies included in consolidated tax group (2,508) (135) (67) U.S. state income taxes, net - 3 6 Other, net (40) 228 426 -------------- -------------- -------------- $ 6,190 $ 8,069 $ (18,871) ============== ============== ============== Income tax expense (benefit): Current income taxes: U.S. federal $ - $ - $ (1,812) U.S. state (2) 5 7 Deferred income taxes 6,192 8,064 (17,066) -------------- -------------- -------------- $ 6,190 $ 8,069 $ (18,871) ============== ============== ============== Comprehensive tax expense (benefit) allocable to: Pre-tax income (loss) $ 6,190 $ 8,069 $ (18,871) Stockholders' equity, principally other comprehensive income (4,386) (4,062) (3,557) -------------- -------------- -------------- $ 1,804 $ 4,007 $ (22,428) ============== ============== ==============

The components of deferred taxes are summarized below. December 31, ----------------------------------------------------------- 2001 2000 ---------------------------- ---------------------------- Assets Liabilities Assets Liabilities ------------ ------------ ------------ ------------ (In millions) Temporary differences relating to net assets: Property and equipment $ .1 $ - $ .1 $ - Accrued OPEB cost 7.5 - 7.8 - Accrued liabilities and other deductible differences 3.5 - 2.9 - Other taxable differences - (5.4) - (5.4) Investments in subsidiaries and affiliates including foreign currency translation adjustments: TIMET 11.1 - 5.0 - NL - (12.4) - (9.4) Other - (.7) - (.8) Tax loss and credit carryforwards 6.0 - 4.1 - Valuation allowance (24.1) - (16.9) - ------------ ------------ ------------ ------------ Gross deferred tax assets (liabilities) 4.1 (18.5) 3.0 (15.6) Netting (4.1) 4.1 (3.0) 3.0 ------------ ------------ ------------ ------------ Total deferred taxes - (14.4) - (12.6) Less current deferred taxes - - - - ------------ ------------ ------------ ------------ Net noncurrent deferred taxes $ - $ (14.4) $ - $ (12.6) ============ ============ ============ ============

December 31, ------------------------------------ 2001 2000 ---------------- ---------------- (In thousands) Actuarial present value of accumulated OPEB obligations: Balance at beginning of year $ 16,577 $ 16,821 Interest cost 1,036 1,182 Actuarial gain (1,022) (339) Benefits paid, net of participant contributions (1,362) (1,087) ---------------- ---------------- Balance at end of year 15,229 16,577 Unrecognized prior service credit 3,768 4,209 Unrecognized net actuarial gain 2,417 1,545 ---------------- ---------------- Total accrued OPEB cost 21,414 22,331 Less current portion 1,432 1,432 ---------------- ---------------- Noncurrent accrued OPEB cost $ 19,982 $ 20,899 ================ ================

Year ended December 31, -------------------------------------------------- 2001 2000 1999 -------------- ------------- -------------- (In thousands) OPEB expense: Interest cost $ 1,036 $ 1,182 $ 1,164 Amortization of prior service credit (441) (441) (441) Amortization of gain/loss (150) - - -------------- -------------- -------------- Net OPEB expense $ 445 $ 741 $ 723 ============== ============== ==============

December 31, ------------------------------------ 2001 2000 ---------------- ---------------- Weighted average assumptions: Discount rate 7.00% 7.25% Health care cost trend rate for the following period 11.15% 8.62% Ultimate health care cost trend rate 5.00% 6.00% Fiscal period ultimate health care cost trend rate attained 2010 2016

Weighted Fair average value at Exercise Amount payable exercise grant Shares price per share upon exercise price Date -------- ---------------- ----------------- ------------ ---------- (In thousands, except per share amounts) Outstanding at December 31, 1998 158 $ 8.00-56.50 $ 1,895 $ 11.96 Granted 3 31.00 93 31.00 $ 10.78 Exercised (12) 8.00-8.81 (98) 8.13 Canceled (1) 8.13 (7) 8.13 -------- ---------------- ----------------- ------------ Outstanding at December 31, 1999 148 8.13-56.50 1,883 12.68 Granted 3 14.00 42 14.00 $ 6.54 Exercised (36) 8.13-18.75 (387) 10.76 Canceled (5) 8.13-22.22 (68) 13.24 -------- ---------------- ----------------- ------------ Outstanding at December 31, 2000 110 8.13-56.50 1,470 13.31 Granted 3 35.00 105 35.00 $ 15.43 Canceled (86) 8.13-22.75 (947) 10.96 -------- ---------------- ----------------- ------------ Outstanding at December 31, 2001 27 $ 8.13-56.50 $ 628 $ 23.23 ======== ================ ================= ============

2001 2000 1999 ------------- -------------- -------------- Assumptions at date of grant: Expected life (years) 5.0 5.0 4.7 Risk-free interest rate 3.375% 4.85% 4.81% Volatility 47% 45% 40% Dividend yield 0% 0% 0%

December 31, ------------------------------------- 2001 2000 ---------------- ---------------- (In thousands) Current assets $ 32,098 $ 41,458 Property and equipment, net 18,140 18,258 Other assets 14,223 14,925 Land and development costs 13,091 11,944 Long-term notes and other receivables 9,355 7,511 Investment in undeveloped land and water rights 2,270 2,458 ---------------- ---------------- Total assets $ 89,177 $ 96,554 ================ ================ Current liabilities $ 16,458 $ 16,703 Other liabilities 436 652 Long-term debt 18,545 19,201 Deferred income taxes 4,048 4,570 Equity 49,690 55,428 ---------------- ---------------- Total liabilities and equity $ 89,177 $ 96,554 ================ ================

Year ended December 31, ---------------------------------------------------- 2001 2000 1999 --------------- --------------- -------------- (In thousands) Combined revenues $ 19,292 $ 28,760 $ 10,978 Income before income taxes 575 8,535 364 Net income 761 7,640 551

Amount ------------------- (In thousands) Years ending December 31, 2002 $ 4,253 2003 2,734 2004 1,345 2005 522 2006 445 2007 and thereafter 348 ------------------- $ 9,647 ===================

Real Estate Equipment ----------------- ---------------- (In thousands) Years ending December 31, 2002 $ 1,855 $ 2,190 2003 1,636 1,235 2004 1,440 903 2005 1,062 439 2006 1,026 245 2007 and thereafter 19,437 700 ----------------- ----------------- $ 26,456 $ 5,712 ================= =================

Year ended December 31, ----------------------------------------------------- 2001 2000 1999 --------------- -------------- ---------------- (In thousands) Numerator: Net income (loss) $ (808) $ 9,202 $ (28,204) Effect of dilutive securities of equity investees 24 (129) (17) --------------- -------------- ---------------- Diluted net income (loss) $ (784) $ 9,073 $ (28,221) =============== ============== ================ Denominator: Average common shares outstanding 6,214 6,274 6,386 Average dilutive stock options 44 76 68 --------------- -------------- ---------------- Diluted shares 6,258 6,350 6,454 =============== ============== ================

Note 14 - Quarterly results of operations (unaudited): For the quarter ended ---------------------------------------------------------------- March 31 June 30 Sept. 30 Dec. 31 ------------- -------------- -------------- ------------- (In millions, except per share data) Year ended December 31, 2001: Equity in earnings (losses) of: TIMET $ .1 $ 12.9 $ 3.2 $ (25.4) NL 6.1 4.1 3.3 7.6 Net income (loss) 4.5 11.4 4.9 (21.6) Earnings (loss) per share(1): Basic $ .73 $ 1.84 $ .78 $ (3.48) Diluted .72 1.74 .78 (3.48) Year ended December 31, 2000: Equity in earnings (losses) of(2): TIMET $ (4.3) $ (2.2) $ (1.5) $ (1.0) NL 3.9 11.9 5.3 7.1 Net income (1.9) 5.1 1.9 4.1 Earnings (loss) per share(1): Basic $ (.30) $ .81 $ .31 $ .66 Diluted (.30) .80 .30 .66

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