What changed in this filing

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Item 9A. Controls and Procedures

2023-03-08 compared with 2022-03-09 · 164 added, 151 removed, 976 unchanged (24% of the section changed)

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Each of Courtney J.

Riley, our President and Chief Executive Officer and Amy Allbach Samford, our Senior Vice President and Chief Financial Officer, have evaluated the design and effectiveness of our disclosure controls and procedures as of December 31, 2021.

Riley, our President and Chief Executive Officer and Amy Allbach Samford, our Executive Vice President and Chief Financial Officer, have evaluated the design and effectiveness of our disclosure controls and procedures as of December 31, 2022.

Based upon their evaluation, these executive officers have concluded that our disclosure controls and procedures are effective as of the date of this evaluation.

Management’s report on internal control over financial reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting which, as defined by Exchange Act Rule 13a-15(f) means a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”), and includes those policies and procedures that:

preparation of financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”), and includes those policies and procedures that:

● pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets,

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Based on our evaluation under that framework, we have concluded that our internal control over financial reporting was effective as of December 31, 2022.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.

Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this annual report.

PricewaterhouseCoopers LLP, the independent registered public accounting firm that has audited our consolidated financial statements included in this Annual Report, has audited the effectiveness of our internal control over financial reporting as of December 31, 2022, as stated in their report, which is included in this Annual Report on Form 10-K.

As permitted by the SEC, our assessment of internal control over financial reporting excludes (i) internal control over financial reporting of equity method investees and (ii) internal control over the preparation of any financial statement schedules which would be required by Article 12 of Regulation S-X.

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001-00640) for the quarter ended March 31, 2021.

First Amendment to Loan Agreement between NLKW Holding, LLC, as Borrower, and Valhi, Inc.

as Lender, dated as of November 9, 2022 incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No.

001-00640) of the Registration dated November 9, 2022 .

First Amendment to Back-to-Back Loan Agreement between NL Industries, Inc., as Borrower, and NLKW Holding, LLC, as Lender, dated as of November 9, 2022 incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No.

001-00640) of the Registrant dated November 9, 2022 .

Subsidiaries of the Registrant

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(Chair of the Board (non-executive))

/s/ Robert D.

/s/ Michael S.

/s/ Meredith W.

Graham, March 9, 2022

Simmons, March 8, 2023

Mendes, March 8, 2023

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Moore, Jr., March 8, 2023

(Vice President and Chief Financial Officer,

(Executive Vice President and Chief Financial Officer,

Principal Financial Officer)

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To the Board of Directors and Stockholders of NL Industries, Inc.

Opinion on the Financial Statements

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of NL Industries, Inc.

and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of income, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's report on internal control over financial reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

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As of December 31, 2022, management accrued approximately $92 million related to approximately 33 sites associated with remediation and related matters.

Liabilities related to environmental remediation and related matters (including costs associated with damages for property damage and/or

damages for injury to natural resources) are recorded when management determines that estimated future expenditures are probable and reasonably estimable.

Liabilities related to environmental remediation and related matters (including costs associated with damages for property damage and/or damages for injury to natural resources) are recorded when management determines that estimated future expenditures are probable and reasonably estimable.

As disclosed by management, environmental remediation and related costs accruals (and the potential range of the Company’s liabilities) are adjusted as further information becomes available or as circumstances change which involves management’s judgment regarding current facts and circumstances for each site and is subject to various assumptions and estimates.

The principal considerations for our determination that performing procedures relating to environmental remediation and related matters is a critical audit matter are the significant judgments by management when assessing the accruals and the potential range of the Company’s liabilities and when determining whether estimated future expenditures are probable and reasonably estimable, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating evidence related to management’s assessment of the accruals and the potential range of the liabilities.

The principal considerations for our determination that performing procedures relating to environmental remediation and related matters is a critical audit matter is the significant judgment by management when assessing the accruals and the potential range of the Company’s liabilities and when determining whether estimated future expenditures are probable and reasonably estimable, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating evidence related to management’s assessment of the accruals and the potential range of the liabilities.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

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Restricted cash and cash equivalents

Marketable securities

Accounts and other receivables, net

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5,000 shares authorized;

Common stock, $ .125 par value;

Common stock;

$ .125 par value;

150,000 shares authorized;

48,803 shares issued and outstanding

48,803 and 48,816 shares issued and outstanding

Additional paid-in capital

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Selling, general and administrative expense

Other operating income (expense):

Insurance recoveries

Other income, net

Litigation settlement expense, net

Corporate expense

Income (loss) from operations

Income from operations

Equity in earnings of Kronos Worldwide, Inc.

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Other postretirement benefit plans

Balance at the end of the year

Balance at the end of the period

Selected financial information of Kronos is summarized below:

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As permitted by GAAP, during 2020, 2021 and 2022 we used the qualitative assessment of ASC 350-20-35 for our annual impairment test and determined it was not necessary to perform the quantitative goodwill impairment test.

Such discounted cash flows are a Level 3 input as defined by ASC 820-10-35.

Prior to 2019, all of the goodwill related to CompX’s marine components operations (which aggregated $ 10.1 million) was impaired, and all of the goodwill related to our wholly-owned subsidiary EWI Re, Inc., (EWI) an insurance brokerage and risk management services company (which aggregated $ 6.4 million), was impaired.

Prior to 2020, all of the goodwill related to CompX’s marine components operations (which aggregated $ 10.1 million) was impaired, and all of the goodwill related to our wholly-owned subsidiary EWI Re, Inc., (EWI) which was formerly an insurance brokerage and risk management services company (which aggregated $ 6.4 million), was impaired.

Our gross goodwill at December 31, 2022 was $ 43.7 million.

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a Back-to-Back Credit Facility, as described below.

Outstanding borrowings under the Valhi Credit Facility bear interest at the prime rate plus 1.875 % per annum, payable quarterly , with all amounts due on December 31, 2023 .

The maximum principal amount which may be outstanding from time-to-time under the Valhi Credit Facility is limited to 50 % of the amount determined by multiplying the number of shares of Kronos

common stock pledged by the most recent closing price of such security on the New York Stock Exchange.

Outstanding borrowings under the Valhi Credit Facility bear interest at the prime rate plus 1.875 % per annum, payable quarterly , with

all amounts due on the maturity date.

The maximum principal amount which may be outstanding from time-to-time under the Valhi Credit Facility is limited to 50 % of the amount determined by multiplying the number of shares of Kronos common stock pledged by the most recent closing price of such security on the New York Stock Exchange.

Borrowings under the Valhi Credit Facility are collateralized by the assets of NLKW (consisting primarily of the shares of Kronos common stock pledged) and 100 % of the membership interest in NLKW held by us .

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Any outstanding borrowings and interest on such borrowings under the Back-to-Back Credit Facility are eliminated in the preparation of the consolidated financial statements.

In November 2022, NLKW and Valhi entered into a first amendment to the Valhi Credit Facility to extend the latest maturity date (and consequently the latest borrowing date) under the Valhi Credit Facility from December 31, 2023 to December 31, 2030;

and NLKW and NL entered into a first amendment to the Back-to-Back Credit Facility to extend the latest maturity date (and consequently the latest borrowing date) under the Back-to-Back Credit Facility from December 31, 2023 to December 31, 2030.

The related collateral arrangements remained unchanged by these amendments.

We had outstanding borrowings under the Valhi Credit Facility of $ .5 million as of December 31, 2021 and 2022 .

The interest rate as of December 31, 2021 and the average interest rate for the year then ended was 5.13 %.

The interest rate as of December 31, 2022 was 9.4 % and the average interest rate for the year then ended was 6.7 %.

NLKW is in compliance with all of the covenants contained in the Valhi Credit Facility at December 31, 2022.

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pension regulations, we entered into an agreement in March 2021 for the bulk annuity purchase, or “buy-in” with a specialist insurer of defined benefit pension plans.

Following the buy-in, individual policies will replace the bulk annuity policy in a “buy-out” which is expected to be completed in 2022.

Following the buy-in, individual

policies will replace the bulk annuity policy in a “buy-out” which is expected to be completed in 2023.

The buy-out is expected to be completed with existing plan funds.

At the completion of the buy-out we will remove the assets and liabilities of the U.K.

pension plan from our Consolidated Financial Statements and a plan settlement gain or loss (which we are currently unable to estimate) will be included in net periodic pension cost.

pension plan from our Consolidated Financial Statements and a final plan settlement gain or loss (which we are currently unable to estimate) will be included in net periodic pension cost.

At December 31, 2022, the U.K.

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Interest cost

Actuarial losses

Plan settlement

Actuarial (gains) losses

Change in currency exchange rates

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Accumulated benefit obligations (ABO)

The amounts shown in the table above for actuarial losses at December 31, 2020 and 2021 have not been recognized as components of our periodic defined benefit pension cost as of those dates.

The amounts shown in the table above for actuarial (gains) losses at December 31, 2021 and 2022 have not been recognized as components of our periodic defined benefit pension cost as of those dates.

These amounts will be recognized as components of our periodic defined benefit cost in future years.

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The total net underfunded status of our defined benefit pension plans decreased from $ 2.4 million at December 31, 2021 to $ 2.0 million at December 31, 2022 due to the change in our PBO exceeding the change in plan assets during 2022.

The decrease in our plan assets in 2021 was primarily attributable to lower net plan asset returns in 2021.

The decrease in our PBO in 2022 was primarily attributable to actuarial gains due to the increase in discount rates from year end 2021.

The decrease in our plan assets in 2022 was primarily attributable to negative plan asset returns in 2022.

The table below details the changes in other comprehensive income (loss) during 2020, 2021 and 2022.

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Net actuarial gain (loss) arising during the year

Plan settlement

Amortization of unrecognized net actuarial gain (loss)

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Net periodic pension cost:

Interest cost on PBO

Interest cost

Expected return on plan assets

Plan settlement

Recognized actuarial losses

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Such weighted-average rates were determined using the projected benefit obligations at each date.

Since our plans are closed to new participants and no new

additional benefits accrue to existing plan participants, assumptions regarding future compensation levels are not applicable.

Since our plans are closed to new participants and no new additional benefits accrue to existing plan participants, assumptions regarding future compensation levels are not

Consequently, the accumulated benefit obligations for all of our defined benefit pension plans were equal to the projected benefit obligations at December 31, 2021 and 2022.

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Our reserve for uncertain tax positions is discussed in Note 13.

Note 13 - Other operating income (expense):

We have agreements with certain insurance carriers pursuant to which the carriers reimburse us for a portion of our past lead pigment and asbestos litigation defense costs.

Insurance recoveries include amounts we received from these insurance carriers.

The agreements with certain of our insurance carriers also include reimbursement for a portion of our future litigation defense costs.

We are not able to determine how much we will ultimately recover from these carriers for defense costs incurred by us because of certain issues that arise regarding which defense costs qualify for reimbursement.

Accordingly, these insurance recoveries are recognized when the receipt is probable and the amount is determinable.

Insurance recoveries in 2019 primarily related to a single settlement we reached with one of our insurance carriers in which they agreed to reimburse us for a portion of our past and future litigation defense costs.

Other income, net in 2019 includes a gain of $ 4.4 million related to a sale of excess property in the third quarter.

In the fourth quarter of 2019 we sold our insurance and risk management business for proceeds of $ 3.25 million and recognized a gain of $ 3.0 million on the sale.

Note 13 - Income taxes:

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Expected tax expense, at U.S.

federal statutory income tax rate of 21 %

Non-taxable dividends received from Kronos

federal statutory

income tax rate of 21 %

Nontaxable dividends received from Kronos

state income taxes and other, net

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Comprehensive provision (benefit) for income taxes allocable to:

Net income (loss)

Additional paid-in capital

Other comprehensive income (loss):

Other comprehensive income:

Currency translation

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Accordingly, we do not recognize and we are not required to pay income taxes on dividends from Kronos.

We received aggregate dividends from Kronos of $ 25.4 million in each of 2019, 2020 and 2021.

We received aggregate dividends from Kronos of $ 25.4 million in each of 2020 and 2021 and $ 26.8 million in 2022.

The components of the net deferred tax liability at December 31, 2021 and 2022 are summarized in the following table.

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Our deferred tax asset for such NOL carryforward is net of a portion of our uncertain tax positions as discussed below.

We believe that we have adequate accruals for additional taxes and related interest expense which could ultimately result from tax examinations.

We believe we have adequate accruals for additional taxes and related interest expense which could ultimately result from tax examinations.

We believe the ultimate disposition of tax examinations should not have a material adverse effect on our consolidated financial position, results of operations or liquidity.

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Kronos has substantial net operating loss (NOL) carryforwards in Germany (the equivalent of $ 414 million for German corporate tax purposes at December 31, 2022) and in Belgium (the equivalent of $ 13 million for Belgian corporate tax purposes at December 31, 2022).

At December 31, 2021, Kronos has concluded that no deferred income tax asset valuation allowance is required to be recognized with respect to such carryforwards, principally because (i) such carryforwards have an indefinite carryforward period, (ii) Kronos has utilized a portion of such carryforwards during the

most recent three-year period and (iii) Kronos currently expects to utilize the remainder of such carryforwards over the long term.

At December 31, 2022, Kronos has concluded that no deferred income tax asset valuation allowance is required to be recognized with respect to such carryforwards, principally because (i) such

carryforwards have an indefinite carryforward period, (ii) Kronos has utilized a portion of such carryforwards during the most recent three-year period and (iii) Kronos currently expects to utilize the remainder of such carryforwards over the long term.

However, prior to the complete utilization of such carryforwards, if Kronos were to generate additional losses in its German or Belgian operations for an extended period of time, or if applicable law were to change such that the carryforward period was no longer indefinite, it is possible that Kronos might conclude the benefit of such carryforwards would no longer meet the more-likely-than-not recognition criteria, at which point Kronos would be required to recognize a valuation allowance against some or all of the then-remaining tax benefit associated with the carryforwards.

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Pursuant to the one-time repatriation tax (Transition Tax) provisions of the 2017 Tax Act which imposed a one-time repatriation tax on post-1986 undistributed earnings, Kronos recognized current income tax expense of $ 74.5 million and elected to pay such tax over an eight year period beginning in 2018.

At December 31, 2021 the balance of its unpaid Transition Tax is $ 50.6 million, which will be paid in annual installments over the remainder of the eight year period.

At December 31, 2022 the balance of its unpaid Transition Tax is $ 44.7 million, which will be paid in annual installments over the remainder of the eight-year period, which ends in 2025.

Of such $ 44.7 million, $ 33.5 million is recorded as a noncurrent payable to affiliate (income taxes payable to Valhi) classified as a noncurrent liability in its Consolidated Balance Sheet at December 31, 2022, and $ 11.2 million is included with its current payable to affiliate (income taxes payable to Valhi) classified as a current liability (a portion of its noncurrent income tax payable to affiliate was reclassified to its current payable to affiliate for the portion of its 2022 Transition Tax installment due within the next twelve months).

In the fourth quarter of 2019, Kronos recognized an income tax benefit of $ 3.0 million primarily related to the favorable settlement of a prior year tax matter in Germany, with $ 1.5 million recognized as a current cash tax benefit and $ 1.5 million recognized as a non-cash deferred income tax benefit related to an increase to its German net operating loss carryforward.

In addition, Kronos recognized a non-cash deferred income tax expense of $ 5.5 million primarily related to the revaluation of its net deferred income tax asset in Germany resulting from a decrease in the German trade tax rate.

Tax authorities are examining certain of Kronos’ U.S.

tax returns and may propose tax deficiencies, including penalties and interest.

Because of the inherent uncertainties involved in settlement initiatives and court and tax proceedings, Kronos cannot guarantee that these tax matters, if any, will be resolved in Kronos’ favor, and therefore its potential exposure, if any, is also uncertain.

Kronos believes it has adequate accruals for additional taxes and related interest expense which could ultimately result from tax examinations.

Kronos believes the ultimate disposition of tax examinations should not have a material adverse effect on its consolidated financial position, results of operations or liquidity.

On March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” was signed into law in response to the COVID-19 pandemic.

The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, modifications to the limitation of business interest for tax years beginning in 2019 and 2020 and technical corrections to tax depreciation methods for qualified improvement property.

Under the CARES Act, the modification to the business interest provisions increases the business interest limitation from 30 % of adjusted taxable income to 50 % of adjusted taxable income which increases Kronos’ allowable interest expense deduction for 2019 and 2020.

The 2017 Tax Act limited Kronos’ business interest expense to the sum of its business interest income and 30% of its adjusted taxable income as defined in the Tax Act.

Any business interest expense disallowed as a deduction as a result of the limitation may be carried forward indefinitely.

Kronos determined its interest expense was limited under these provisions and recorded deferred tax assets for the carryforwards associated with the nondeductible portion of its interest expense.

Kronos also concluded that it is required to recognize a valuation allowance for such deferred tax asset under the more-likely-than-not recognition criteria.

The CARES Act modification to the business interest provisions increased the business interest limitation from 30 % of adjusted taxable income to 50 % of adjusted taxable income which increased Kronos’ allowable interest expense deduction for 2019 and 2020.

Consequently, in the first quarter of 2020 Kronos recognized a cash tax benefit of $ .5 million related to the reversal of the valuation allowance recognized in 2019 for the portion of the disallowed interest expense Kronos did not expect to fully utilize at December 31, 2019 and Kronos has considered such modifications in its 2020 provision for income taxes.

With the expiration of these CARES Act provisions at the end of 2020, Kronos recognized an increase in disallowed interest expense and an increase in the valuation allowance of $ 2.8 million for the portion of the carryforward Kronos believes does not meet the more-likely-than-not measurement criteria in 2021.

The CARES Act provisions expired at the end of 2020, and in 2021 Kronos recognized additional disallowed interest expense and increased the valuation allowance by $ 2.8 million for the portion of the carryforward Kronos believed did not meet the more-likely-than-not measurement criteria.

During 2022, Kronos determined it was able to utilize a portion of the business interest expense carryforward and accordingly it recognized an aggregate non-cash income tax benefit of $ 3.5 million as a reduction of the valuation allowance.

On August 16, 2022, the Inflation Reduction Act was signed into law.

Among other things, this legislation provides for a 15% corporate alternative minimum tax on certain large corporations, imposes a 1% excise tax on qualifying stock buybacks occurring after December 31, 2022, and provides for certain energy-related tax credits.

Kronos has evaluated the relevant provisions of the Act and does not expect them to have a material impact on its tax provision.

Tax authorities may in the future examine certain of Kronos’ U.S.

tax returns and may propose tax deficiencies, including penalties and interest.

Kronos believes it has adequate accruals for additional taxes and related interest expense which could ultimately result from tax examinations.

Kronos believes the ultimate disposition of

tax examinations should not have a material adverse effect on its consolidated financial position, results of operations or liquidity.

Note 14 - Stockholders’ equity:

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At December 31, 2022, Kronos had 111,800 shares available for award and CompX had 131,050 shares available for award.

Dividends - We did no t pay dividends during 2019.

During 2020 and 2021, our board of directors approved and we paid quarterly dividends of $ .04 and $ .06 , respectively, per share to stockholders aggregating $ 7.8 million and $ 11.7 million, respectively.

Dividends - During 2020, 2021 and 2022 our board of directors approved and we paid quarterly dividends of $ .04 , $ .06 and $ .07 , respectively, per share to stockholders aggregating $ 7.8 million, $ 11.7 million and $ 13.7 million, respectively.

In addition, our board of directors declared a special dividend on our common stock which totaled $ 17.1 million ($ .35 per share) that we paid on August 31, 2022.

The declaration and payment of future dividends, and the amount thereof, is discretionary and is dependent upon our financial condition, cash requirements, contractual obligations and restrictions and other factors deemed relevant by our board of directors.

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Other comprehensive income (loss):

Amortization of prior service cost and net losses included in net

periodic pension cost

Amortization of prior service cost and net losses included in

net periodic pension cost

Net actuarial gain (loss) arising during the year

Plan settlement

Balance at end of period

OPEB plans and other:

Balance at beginning of period

Other comprehensive loss - amortization of net

gains included in net periodic OPEB cost

Other comprehensive income (loss):

Amortization of net gain included in net periodic

Net actuarial gain arising during the year

Change in value of debt securities

Balance at end of period

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Balance at beginning of period

Other comprehensive income (loss)

Other comprehensive income

Balance at end of period

See Note 5 for further discussion on our marketable securities and see Note 11 for amounts related to our defined benefit pension plans.

See Note 5 for further discussion on our marketable securities and Note 11 for amounts related to our defined benefit pension plans.

Other – During 2022, we purchased 2,000 shares of our common stock from Kronos for a nominal amount in a private transaction that was approved in advance by our independent directors.

We cancelled these treasury shares and allocated their cost to common stock at par value and additional paid-in capital.

During 2022, CompX acquired 78,900 shares of its Class A common stock for an aggregate amount of approximately $ 1.7 million under prior repurchase authorizations.

Of these shares, 70,000 shares were purchased in a market transaction, and 8,900 shares were purchased from two of its affiliates in two separate private transactions that were also approved in advance by CompX’s independent directors.

During 2021, CompX purchased 75,000 shares of its Class A common stock in a market transaction for approximately $ 1.3 million.

At December 31, 2022, 523,647 shares were available for purchase under CompX’s prior repurchase authorizations.

Note 15 - Related party transactions:

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Simmons and the Family Trust.

Corporations that may be deemed to be controlled by or affiliated with such individuals 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, which 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 interest in another related party.

Corporations that may be deemed to be controlled by or affiliated with such individuals 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, which 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 interest in another related party.

While no transactions of the type described above are planned or proposed with respect to us other than as set forth in these financial statements, we continuously consider, review and evaluate, and understand that Contran and related entities consider, review and evaluate such transactions.

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Current receivables from affiliates:

Other - trade items

Income taxes receivable from Valhi

Current payables to affiliates:

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While certain of such loans may be of a lesser credit quality than cash equivalent instruments otherwise available to us, we believe that we have evaluated the credit risks involved and reflected those credit risks in the terms of the applicable loans.

On November 14, 2016, NLKW entered into the Valhi Credit Facility whereby we could borrow up to $ 50 million.

NLKW had borrowings outstanding of $ .5 million as of December 31, 2021 and 2022 under the Valhi Credit Facility, and we incurred a nominal amount of interest expense under such credit facility for the years ended December 31, 2020, 2021 and 2022.

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Because of the 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 each entity, thus allowing certain Contran employees to provide services to multiple companies but only be compensated by Contran.

We, CompX and Kronos negotiate fees annually and agreements renew quarterly.

We, CompX and Kronos negotiate fees annually and agreements renew

The net ISA fees charged to us by Contran, (including amounts attributable to Kronos for all periods) aggregated approximately $ 33.4 million in 2020, $ 33.2 million in 2021 and $ 33.5 million in 2022.

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.

Contran and certain of its subsidiaries and affiliates, including us, purchase certain of their insurance policies and risk management services as a group, with the costs of the jointly-owned policies and services being apportioned among the participating companies.

Tall Pines Insurance Company, a subsidiary of Valhi, underwrites certain insurance policies for Contran and certain of its subsidiaries and affiliates, including us.

Tall Pines purchases reinsurance from third-party insurance carriers with an A.M.

Best Company rating of generally at least A- (excellent) for substantially all of the risks it underwrites.

EWI RE, Inc., a subsidiary of ours and Valhi, brokered certain of our insurance policies, provided claims and risk management services and, where appropriate, engaged certain third-party risk management consultants prior to our sale of EWI’s insurance and risk management business to a third party in November 2019.

Consistent with insurance industry practices, Tall Pines receives commissions from reinsurance underwriters and/or assesses fees for certain of the policies that it underwrites, and prior to November 2019 EWI received commissions from the insurance and reinsurance underwriters for the policies that it brokered.

The aggregate amount we paid under the group insurance program (including amounts attributable to Kronos for all periods, including its Louisiana Pigment Company joint venture) was $ 14.9 million through the date of the sale in 2019.

This amount principally represents insurance premiums paid to Tall Pines or EWI, including amounts paid to EWI that EWI then remitted, net of brokerage commissions, to insurers.

Following the sale of EWI’s insurance and risk management business, Contran engaged the third-party insurance broker that purchased the business to provide many of the services previously provided by EWI, and we continue to utilize Tall Pines to underwrite certain insurance risks.

During 2020 and 2021, we paid $ 22.2 million and $ 26.3 million, respectively, under the group insurance program (including amounts attributable to Kronos for all periods, including its Louisiana Pigment Company joint venture) which amounts principally represent insurance premiums, including $ 15.6 million and $ 19.5 million in 2020 and 2021, respectively, for policies written by Tall Pines.

Amounts paid under the group insurance program also include payments to insurers or reinsurers (which prior to the sale were made through EWI) for the reimbursement of claims within our applicable deductible or retention ranges that such insurers and reinsurers paid to third parties on our behalf, as well as amounts for claims and risk management services and various other third-party fees and expenses incurred by the program.

Tall Pines purchases reinsurance from highly rated (as determined by A.M.

Best or other internationally recognized ratings agency) third-party insurance carriers for substantially all of the risks it underwrites.

Consistent with insurance industry practices, Tall Pines receives commissions from the reinsurance underwriters and/or assesses fees for certain of the policies that it underwrites.

During 2020, 2021 and 2022 we paid $ 22.2 million, $ 26.3 million and $ 24.3 million, respectively, under the group insurance program (including amounts attributable to Kronos for all periods, including its Louisiana Pigment Company joint venture) which amounts principally represent insurance premiums, including $ 15.6 million, $ 19.5 million and $ 18.2 million in 2020, 2021 and 2022, respectively, for policies written by Tall Pines.

Amounts paid under the group insurance program also include payments to insurers or reinsurers for the reimbursement of claims within our applicable deductible or retention ranges that such insurers and reinsurers paid to third parties on our behalf, as well as amounts for claims and risk management services and various other third-party fees and expenses incurred by the program.

We expect these relationships will continue in 2023.

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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 for any uninsured loss.

Contran and certain of its subsidiaries, including us, participate in a combined information technology data recovery program that Contran provides from a data recovery center that it established.

Pursuant to the program, Contran and certain of its subsidiaries, including us, as a group share information technology data recovery services.

Contran and certain of its subsidiaries, including us, participate in a combined information technology data services program that Contran provides for primary data processing and failover.

The program apportions its costs among the participating companies.

The aggregate amount Kronos paid to Contran for such services was $ .2 million in 2019 and $ .3 million in both 2020 and 2021.

The aggregate amount Kronos paid to Contran for such services was $ .3 million in each of 2020, 2021 and 2022.

Under the terms of a sublease agreement between Contran and Kronos, Kronos leases certain office space from Contran.

Kronos paid Contran $ .1 million in 2019 and $ .4 million in both 2020 and 2021 for such rent and related ancillary services.

Kronos paid Contran $ .4 million in both 2020 and 2021 and $ .5 million in 2022 for such rent and related ancillary services.

We expect that these relationships with Contran will continue in 2023.

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We, other former manufacturers of lead pigments for use in paint and lead-based paint (together, the “former pigment manufacturers”), and the Lead Industries Association (LIA), which discontinued business operations in 2002, have been named as defendants in various legal proceedings seeking damages for personal injury, property damage and governmental expenditures allegedly caused by the use of lead-based paints.

Certain of these actions have been filed by or on behalf of states, counties, cities or their public housing authorities and school districts, and certain others have been asserted as class

Certain of these actions have been filed by or on behalf of states, counties, cities or their public housing authorities and school districts, and certain others have been asserted as class actions.

These lawsuits seek recovery under a variety of theories, including public and private nuisance, negligent product design, negligent failure to warn, strict liability, breach of warranty, conspiracy/concert of action, aiding and abetting, enterprise liability, market share or risk contribution liability, intentional tort, fraud and misrepresentation, violations of state consumer protection statutes, supplier negligence and similar claims.

The plaintiffs in these actions generally seek to impose on the defendants responsibility for lead paint abatement and health concerns associated with the use of lead-based paints, including damages for personal injury, contribution and/or indemnification for medical expenses, medical monitoring expenses and costs for educational programs.

and/or indemnification for medical expenses, medical monitoring expenses and costs for educational programs.

To the extent the plaintiffs seek compensatory or punitive damages in these actions, such damages are generally unspecified.

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We believe these actions are without merit, and we intend to continue to deny all allegations of wrongdoing and liability and to defend against all actions vigorously.

Other than with respect to the Santa Clara, California public nuisance case discussed below, we do not believe it is probable we have incurred any liability with respect to all of the lead pigment litigation cases to which we are a party, and with respect to all such lead pigment litigation cases to which we are a party, other than with respect to the Santa Clara case discussed below, we believe liability to us that may result, if any, in this regard cannot be reasonably estimated, because:

We do not believe it is probable we have incurred any liability with respect to pending lead pigment litigation cases to which we are a party, and with respect to all such lead pigment litigation cases to which we are a party, we believe liability to us that may result, if any, in this regard cannot be reasonably estimated, because:

● we have never settled any of the market share, intentional tort, fraud, nuisance, supplier negligence, breach of warranty, conspiracy, misrepresentation, aiding and abetting, enterprise liability, or statutory cases (other than the Santa Clara case discussed below) ,

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● we have never ultimately been found liable with respect to any such litigation matters, including over 100 cases over a thirty-year period for which we were previously a party and for which we have been dismissed without any finding of liability.

Accordingly, other than with respect to the Santa Clara case discussed below, we have not accrued any amounts for any of the pending lead pigment and lead-based paint litigation cases filed by or on behalf of states, counties, cities or their public housing authorities and school districts, or those asserted as class actions.

Accordingly we have not accrued any amounts for any of the pending lead pigment and lead-based paint litigation cases filed by or on behalf of states, counties, cities or their public housing authorities and school districts, or those asserted as class actions.

In addition, we have determined that liability to us which may result, if any, cannot be reasonably estimated at this time because there is no prior history of a loss of this nature on which an estimate could be made and there is no substantive information available upon which an estimate could be based.

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$ 25.0 million within sixty days of the court’s approval of the settlement and dismissal of the case, and the remaining $ 76.7 million in six annual installments beginning on the first anniversary of the initial payment ($ 12.0 million for the first five installments and $ 16.7 million for the sixth installment).

Our sixth installment will be made with funds already on deposit at the court, which is included in noncurrent restricted cash on our Consolidated Balance Sheets, that are committed to the settlement, including all accrued interest at the date of payment, with any remaining balance to

be paid by us (and any amounts on deposit in excess of the final payment would be returned to us).

Pursuant to the settlement agreement, also during the third quarter of 2019 we placed an additional $ 9.0 million into an escrow account which is included in noncurrent restricted cash on our Consolidated Balance Sheets.

As previously disclosed during the second quarter of 2018 and based on the terms of a May 2018 settlement agreement between us and the plaintiffs which had an aggregate cost of $ 80 million to us, we determined that the loss to us could be reasonably estimated and recognized a net $ 62 million pre-tax charge with respect to this matter ($ 45 million for the amount to be paid by us upon approval of the terms of the settlement and $ 17 million for the net present value of the five payments aggregating $ 20 million to be paid by us in installments beginning four years from such approval).

The May 2018 settlement was never approved by the court and was superseded in July 2019 by the global settlement agreement discussed above.

At June 30, 2019, based on the terms of the global settlement agreement approved by the court in July 2019 we increased the amount accrued for the litigation settlement and a final immaterial adjustment was made to the litigation settlement accrual in the third quarter of 2019.

Pursuant to the settlement agreement, we placed an additional $ 9.0 million into an escrow account which is included in noncurrent restricted cash on our Consolidated Balance Sheets.

For financial reporting purposes, using a discount rate of 1.9 % per annum, we discounted the aggregate $ 101.7 million settlement to the estimated net present value of $ 96.3 million.

We recognized litigation settlement expense of $ 19.3 million ($ 19.6 million expense in the second quarter of 2019 and $ .3 million credit in the third quarter of 2019).

We made the initial $ 25.0 million payment in September 2019 and the first and second annual installment payments of $ 12.0 million each in September 2020 and 2021.

We recognized an aggregate of $ .6 million in accretion expense in the second half of 2019 and an aggregate of $ 1.3 million and $ 1.1 million in 2020 and 2021, respectively.

We made the initial $ 25.0 million payment in September 2019 and the first, second and third annual installment payments of $ 12.0 million each in September 2020, 2021, and 2022.

We recognized an aggregate accretion expense of $ 1.3 million, $ 1.1 million, and $ .9 million in 2020, 2021, and 2022 respectively.

New cases may continue to be filed against us.

We cannot assure you that we will not incur liability in the future in respect of any of the pending or possible litigation in view of the inherent uncertainties involved in court and jury rulings.

We do not know if we will incur liability in the future in respect of any of the pending or possible litigation in view of the inherent uncertainties involved in court and jury rulings.

In the future, if new information regarding such matters becomes available to us (such as a final, non-appealable adverse verdict against us or otherwise ultimately being found liable with respect to such matters), at that time we would consider such information in evaluating any remaining cases then-pending against us as to whether it might then have become probable we have incurred liability with respect to these matters, and whether such liability, if any, could have become reasonably estimable.

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Certain properties and facilities used in our former operations, including divested primary and secondary lead smelters and former mining locations, are the subject of civil litigation, administrative proceedings or investigations arising under federal and state environmental laws and common law.

Additionally, in connection with past operating practices, we are currently involved as a defendant, potentially responsible party (PRP) or both, pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act (CERCLA), and similar state laws in various governmental and private actions associated with waste disposal sites, mining locations, and facilities that we or our predecessors, our subsidiaries or their predecessors currently

or previously owned, operated or used, certain of which are on the United States Environmental Protection Agency’s (EPA) Superfund National Priorities List or similar state lists.

These proceedings seek cleanup costs, damages for personal injury or property damage and/or damages for injury to natural resources.

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We recognize recoveries of costs from other parties, if any, as assets when their receipt is deemed probable.

At December 31, 2020 and December 31, 2021, we had no t recognized any receivables for recoveries.

At December 31, 2021 and 2022, we had no t recognized any receivables for recoveries.

We do not know and cannot estimate the exact time frame over which we will make payments for our accrued environmental and related costs.

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Balance at the beginning of the period

Additions charged (credited) to expense, net

Additions charged to expense, net

Payments, net

Balance at the end of the year

Balance at the end of the period

Amounts recognized in the balance sheet:

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Balance at the end of the period

On a quarterly basis, we evaluate the potential range of our liability for environmental remediation and related costs at sites where we have been named as a PRP or defendant, including sites for which our wholly-owned environmental management subsidiary, NL Environmental Management Services, Inc., (EMS), has contractually assumed our obligations.

At December 31, 2021, we had accrued approximately $ 93 million related to approximately 32 sites associated with remediation and related matters we believe are at the present time and/or in their current phase reasonably estimable.

(EMS), has contractually assumed our obligations.

At December 31, 2022, we had accrued approximately $ 92 million related to approximately 33 sites associated with

remediation and related matters we believe are at the present time and/or in their current phase reasonably estimable.

The upper end of the range of reasonably possible costs to us for remediation and related matters for which we believe it is possible to estimate costs is approximately $ 119 million, including the amount currently accrued.

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We have agreements with certain of our former insurance carriers pursuant to which the carriers reimburse us for a portion of our future lead pigment litigation defense costs, and one such carrier reimburses us for a portion of our future asbestos litigation defense costs.

We are not able to determine how much we will ultimately recover from these carriers

for defense costs incurred by us because of certain issues that arise regarding which defense costs qualify for reimbursement.

While we continue to seek additional insurance recoveries, we do not know if we will be successful in obtaining reimbursement for either defense costs or indemnity.

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One customer of CompX’s Security Products business accounted for 17 % of total sales in 2020, 16 % in 2021 and 14 % in 2022.

One customer of CompX’s Marine Components business accounted for 12 % of consolidated sales in 2022.

We are a party to a tax sharing agreement with Contran and Valhi providing for the allocation of tax liabilities and tax payments as described in Note 1.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures