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Item 9A. Controls and Procedures

2024-03-06 compared with 2023-03-08 · 187 added, 181 removed, 959 unchanged (28% of the section changed)

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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:

● 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, 2023.

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.

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.

schedules which would be required by Article 12 of Regulation S-X.

However, our assessment of internal control over financial reporting with respect to equity method investees did include controls over the recording of amounts related to our investment that are recorded in the consolidated financial statements, including controls over the selection of accounting methods for our investments, the recognition of equity method earnings and losses and the determination, valuation and recording of our investment account balances.

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OTHER INFORMATION

Not applicable

DISCLOSURE REGARDING FOREIGN JURSIDICTIONS THAT PREVENT INSPECTIONS

N ot a ppl i cab l e

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable

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Exhibit Index

Certificate of Amended and Restated Certificate of Incorporation dated May 22, 2008 - incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K (File No.

001-00640) filed with the U.S.

Certificate of Amended and Restated Certificate of Incorporation dated May 22, 2008 - incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the U.S.

Securities and Exchange Commission on May 23, 2008.

Amended and Restated Bylaws of NL Industries, Inc.

as of May 23, 2008 - incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K (File No.

001-00640) filed with the U.S.

Securities and Exchange Commission on May 23, 2008.

as of October 26, 2023 - incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the U.S.

Securities and Exchange Commission on October 26, 2023.

Description of the Registrant’s Capital Stock.

- incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K (File No.

001-00640) for the year ended December 31, 2019.

- incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2019.

Lease Contract dated June 21, 1952, between Farbenfabriken Bayer Aktiengesellschaft and Titangesellschaft mit beschrankter Haftung (German language version and English translation thereof) - incorporated by reference to Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K (File No.

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- incorporated by reference to Exhibit 10.9 to Kronos International, Inc.’s Registration Statement on Form S-4 (File No.

333-100047) .

Form of Cross License Agreement, effective as of January 1, 1999, between Kronos Inc.

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and payable to the order of Kronos Worldwide, Inc.

– incorporate by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10K for the year ended December 31, 2022.

Cancellation of Unsecured Revolving Demand Promissory Note between Valhi, Inc.

and Kronos Worldwide, Inc.

dated February 21, 2024.

Restated and Amended Agreement by and between Richards Bay Titanium (Proprietary) Limited (acting through its sales agent Rio Tinto Iron & Titanium Limited) and Kronos (US), Inc.

effective January 1, 2016 – incorporated by reference to Exhibit 10.26 to the Kronos Worldwide, Inc.

Annual Report on Form 10-K (File No.

001-31763) for the year ended December 31, 2015.

Annual Report on Form 10-K for the year ended December 31, 2015 .

Kronos Worldwide, Inc.

2012 Director Stock Plan - incorporated by reference to Exhibit 4.4 of Kronos Worldwide, Inc.

Registration statement on Form S-8 (File No.

Registration statement on Form S-8.

CompX International Inc.

2012 Director Stock Plan - incorporated by reference to Exhibit 10.2 of CompX International Inc.’s Annual Report on Form 10-K (File No.

001-00640) for the year ended December 31, 2012.

2012 Director Stock Plan - incorporated by reference to Exhibit 10.2 of CompX International Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012.

NL Industries, Inc.

2012 Director Stock Plan - incorporated by reference to Exhibit 4.4 of Registrant’s statement on Form S-8 (File No.

001-00640) Filed on May 31, 2012.

2023 Non-Employee Director Stock Plan - incorporated by reference to Exhibit 10.1 of Registrant’s Quarterly Report on Form 10Q for the quarter ended June 30, 2023.

Exhibit Index

Second Amended and Restated Agreement Regarding Shared Insurance among CompX International Inc., Contran Corporation, Kronos Worldwide, Inc., NL Industries, Inc.

and Valhi, Inc.

dated January 25, 2019 – incorporated by reference to Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K (File No.

001-00640) for the year ended December 31, 2018.

Exhibit Index

dated January 25, 2019 – incorporated by reference to Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2018.

Intercorporate Services Agreement by and between Contran Corporation and Kronos Worldwide, Inc.

- incorporated by reference to Exhibit 10.1 to the Kronos Worldwide, Inc.

Quarterly Report on Form 10-Q (File No.

001-31763) for the quarter ended March 31, 2004.

Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.

Intercorporate Services Agreement between CompX International Inc.

and Contran Corporation effective as of January 1, 2004 - incorporated by reference to Exhibit 10.2 to the CompX International Inc.

Annual Report on Form 10-K (File No.

1-13905) for the year ended December 31, 2003.

Annual Report on Form 10-K for the year ended December 31, 2003.

Intercorporate Services Agreement by and between Contran Corporation and NL Industries, Inc.

effective as of January 1, 2004 - incorporated by reference to Exhibit 10.1 to the NL Industries, Inc.

Quarterly Report on Form 10-Q (File No.

001-00640) for the quarter ended March 31, 2004.

Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.

Tax Agreement between Valhi, Inc.

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dated as of January 1, 2020 - incorporated by reference to Exhibit 10.1 to the Kronos Worldwide, Inc.

Annual Report on Form 10-K (File No.

001-31763) for the year ended December 31, 2019.

Annual Report on Form 10-K for the year ended December 31, 2019.

Tax Agreement among NL Industries, Inc., Valhi, Inc.

and Contran Corporation dated as of January 1, 2020 - incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K (File No.

001-00640) for the year ended December 31, 2019.

and Contran Corporation dated as of January 1, 2020 - incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K (for the year ended December 31, 2019.

Unsecured Revolving Demand Promissory Note dated December 31, 2023 in the principal amount of $25 .0 million executed by Valhi, Inc.

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for the year ended December 31, 2023.

Loan Agreement between NLKW Holding, LLC, as Borrower, and Valhi, Inc., as Lender, dated as of November 14, 2016 incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K (File No.

001-00640) of the Registrant dated November 14, 2016 and filed on November 15, 2016.

Pledge and Security Agreement made by and between NLKW Holding, LLC in favor of Valhi, Inc., dated as of November 14, 2016 incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K (File No.

001-00640) of the Registrant dated November 14, 2016 and filed on November 15, 2016.

Back-to-Back Loan Agreement between the registrant, as Borrower, and NLKW Holding, LLC, as Lender, dated as of November 14, 2016 incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K (File No.

001-00640) of the Registrant dated November 14, 2016 and filed on November 15, 2016.

Back-to-Back Pledge and Security Agreement made by and between the registrant in favor of Valhi, Inc., dated as of November 14, 2016 incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K (File No.

001-00640) of the Registrant dated November 14, 2016 and filed on November 15, 2016.

Indenture, dated as of September 13, 2017, among Kronos International, Inc., the guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee, collateral agent, paying agent, transfer agent and registrar – incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No.

001-31763) of Kronos Worldwide, Inc.

Loan Agreement between NLKW Holding, LLC, as Borrower, and Valhi, Inc., as Lender, dated as of November 14, 2016 incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Registrant dated November 14, 2016 and filed on November 15, 2016.

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 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 of the Registrant dated November 9, 2022 .

Exhibit Index

dated September 13, 2017 and filed on September 13, 2017.

Pledge Agreement, dated as of September 13, 2017, among Kronos International, Inc., the guarantors named therein and Deutsche Bank Trust Company Americas, as collateral agent – incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K (File No.

001-31763) of Kronos Worldwide, Inc.

Supplemental Indenture No.

1, dated as of February 12, 2024, among Kronos International, Inc., the guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee, collateral agent, paying agent, transfer agent and registrar – incorporated by reference to Exhibit 4.1 to Kronos Worldwide Inc.’s Current Report on Form 8-K filed on February 12, 2024.

Indenture, dated as of February 12, 2024, among Kronos International, Inc., the guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee, collateral agent, paying agent, transfer agent and registrar – incorporated by reference to Exhibit 4.2 to Kronos Worldwide Inc.’s Current Report on Form 8-K filed on February 12, 2024.

dated September 13, 2017 and filed on September 13, 2017.

Exhibit Index

Credit Agreement dated as of April 20, 2021 by and among Kronos Worldwide, Inc., Kronos Louisiana, Inc., Kronos (US), Inc., Kronos Canada, Inc., Kronos Europe NV, Kronos Titan GmbH and Wells Fargo Bank, National Association as administrative agent and lender – incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q (File No.

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

Additional Notes Priority Joinder Agreement dated February 12, 2024, executed by Deutsche Bank Trust Company Americas, as trustee and collateral agent for the holders of Kronos International, Inc.’s 9.50% Senior Secured Notes due 2029 and as existing agent under the Pledge Agreement dated September 13, 2017 entered into in connection with Kronos International Inc.’s 3.75% Senior Secured Notes due 2025 – incorporated by reference to Exhibit 4.4 to Kronos Worldwide Inc.’s Current Report on Form 8-K filed on February 12, 2024.

First Amendment to Credit Agreement dated May 8, 2023, among Kronos Worldwide, Inc., Kronos Louisiana, Inc., Kronos (US), Inc., Kronos Canada, Inc., Kronos Europe NV, Kronos Titan GmgH, Wells Fargo Bank, National Association, as administrative agent, and the lenders a party thereto – incorporated by reference to Exhibit 10.1 of Kronos Worldwide, Inc.’s Current Report on Form 8-K filed with the U.S.

Securities and Exchange Commission on May 9, 2023.

Guaranty and Security Agreement dated as of April 20, 2021, by and among Kronos Worldwide, Inc., Kronos Louisiana, Inc., Kronos (US), Inc., Kronos Canada, Inc., Kronos International, Inc.

and Wells Fargo Bank, National Association as administrative agent and lender – incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q (File No.

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 .

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

and Wells Fargo Bank, National Association as administrative agent and lender – incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.

Unsecured Subordinated Term Promissory Note dated February 12, 2024 in the principal amount of $53,705,000 executed by Kronos Worldwide, Inc.

and the guarantors named therein and payable to the order of Contran Corporation – incorporated by reference to Exhibit 4.5 to Kronos Worldwide Inc.’s Current Report on Form 8-K filed on February 12, 2024.

Subsidiaries of the Registrant

Consent of PricewaterhouseCoopers LLP with respect to NL’s consolidated financial statements .

Exhibit Index

Consent of PricewaterhouseCoopers LLP with respect to Kronos’ consolidated financial statements.

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Certification

Policy for the Recovery of Erroneously Awarded Compensation.

Consolidated financial statements of Kronos Worldwide, Inc.

- incorporated by reference to Kronos’ Annual Report on Form 10-K (File No.

1-31763) for the year ended December 31, 2022.

- incorporated by reference to Kronos’ Annual Report on Form 10-K for the year ended December 31, 2023.

Inline XBRL Instance – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

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Amy Allbach Samford, March 6, 2024

Moore, Jr., March 8, 2023

Kramer, March 6 2024

(Executive Vice President and Chief Financial Officer,

Principal Financial Officer)

/s/ Thomas P.

Ruf, March 6, 2024

Stafford, March 8, 2023

Moore, Jr., March 6, 2024

(Vice President and Controller,

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Consolidated Balance Sheets - December 31, 2022 and 2023

Consolidated Statements of Income - Years ended December 31, 2020, 2021 and 2022

Consolidated Statements of Operations - Years ended December 31, 2021, 2022 and 2023

Consolidated Statements of Comprehensive Income - Years ended December 31, 2021, 2022 and 2023

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

Opinions on the Financial Statements and Internal Control over Financial Reporting

Opinion on the Financial Statements

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”).

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.

and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 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 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 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.

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.

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.

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.

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

Critical Audit Matters

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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 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.

The principal considerations for our determination that performing procedures relating to environmental remediation and related matters is a critical audit matter are 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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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

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Income from operations

Equity in earnings of Kronos Worldwide, Inc.

Equity in earnings (losses) of Kronos Worldwide, Inc.

Other income (expense):

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Marketable equity securities

Loss on pension plan termination

Other components of net periodic pension and OPEB cost

Interest expense

Income before income taxes

Income (loss) before income taxes

Income tax expense (benefit)

Noncontrolling interest in net income of subsidiary

Net income attributable to NL stockholders

Net income (loss) attributable to NL stockholders

Amounts attributable to NL stockholders:

Basic and diluted net income per share

Basic and diluted net income (loss) per share

Weighted average shares used in the calculation of

net income per share

net income (loss) per share

See accompanying Notes to Consolidated Financial Statements.

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Defined benefit pension plans

Marketable debt securities

Other postretirement benefit plans

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Balance at December 31, 2022

Net income (loss)

Other comprehensive income,

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Deferred income taxes

Equity in earnings of Kronos Worldwide, Inc.

Equity in (earnings) losses of Kronos Worldwide, Inc.

Dividends received from Kronos Worldwide, Inc.

Marketable equity securities

Loss on pension plan termination

Benefit plan expense greater (less) than cash funding

Noncash interest income

Noncash interest expense

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Capital expenditures

Marketable securities:

Proceeds from maturities

Note receivable from affiliate:

Purchases of marketable securities

Net cash provided by (used in) investing activities

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Balance at end of year

Supplemental disclosures - cash paid for:

Supplemental disclosures - cash paid (received) for:

Income taxes, net

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A majority of Contran’s outstanding voting stock is held directly by Lisa K.

Simmons and various family trusts established for the benefit of Ms.

Simmons, Thomas C.

Connelly (the husband of Ms.

Simmons’ late sister) and their children and for which Ms.

Simmons’ late sister) and various family trusts established for the benefit of Ms.

Connelly and their children and for which Ms.

Simmons or Mr.

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We accumulate unrealized gains and losses on marketable debt securities as part of accumulated other comprehensive income (loss), net of related deferred income taxes.

We recognize unrealized gains or losses on the marketable equity securities in Marketable equity securities on our Consolidated Statements of Income.

We recognize unrealized gains or losses on the marketable equity securities in Marketable equity securities on our Consolidated Statements of Operations.

We base realized gains and losses upon the specific identification of the securities sold.

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Internal Revenue Service or the applicable state tax authority had we not been a member of the Contran Tax Group.

We made net payments to Valhi for income taxes of nil in each of 2020 and 2021 and $ 1.1 million in 2022.

We made net payments to Valhi for income taxes of nil in 2021, $ 1.1 million in 2022 and received net refunds from Valhi of $ .3 million in 2023.

We recognize deferred income tax assets and liabilities for the expected future tax consequences of temporary differences between the income tax and financial reporting carrying amounts of assets and liabilities, including investments in our subsidiaries and affiliates who are not members of the Contran Tax Group and undistributed earnings of non-U.S.

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other comprehensive income).

Changes in applicable income tax rates over time as a result of changes in tax law, or times in which a deferred income tax asset valuation allowance is initially recognized in one year and subsequently reversed in a later year, can give rise to “stranded” tax effects in accumulated other comprehensive income in which the net accumulated income tax (benefit) remaining in accumulated other comprehensive income does not correspond to the then-applicable income tax rate applied

to the pre-tax amount which resides in accumulated other comprehensive income.

remaining in accumulated other comprehensive income does not correspond to the then-applicable income tax rate applied to the pre-tax amount which resides in accumulated other comprehensive income.

As permitted by GAAP, our accounting policy is to remove any such stranded tax effect remaining in accumulated other comprehensive income, by recognizing an offset to our provision for income taxes related to continuing operations, only at the time when there is no remaining pre-tax amount in accumulated other comprehensive income.

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subsidiaries.

For defined pension benefit plans and OPEB plans, this would occur whenever one of our subsidiaries which previously sponsored a defined benefit pension or OPEB plan had terminated such a plan and had no future obligation or plan asset associated with such a plan.

pension plan).

We record a reserve for uncertain tax positions for tax positions where we believe it is more-likely-than-not our position will not prevail with the applicable tax authorities.

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Deferred revenue has not been material in the past.

We report any tax assessed by a governmental authority that we collect from our customers that is both imposed on and concurrent with our revenue-producing activities (such as sales, use, value added and excise taxes) on a net basis (meaning we do not recognize these taxes either in our revenues or in our costs and expenses).

We report any tax assessed by a governmental authority that we collect from our customers that is both imposed on and concurrent with our revenue-producing activities (such as

sales, use, value added and excise taxes) on a net basis (meaning we do not recognize these taxes either in our revenues or in our costs and expenses).

Frequently, we receive orders for products to be delivered over dates that may extend across reporting periods.

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We expense advertising costs and research and development costs as incurred.

Advertising and research and development costs were no t significant in any year presented.

Advertising and research and development costs were not significant in any year presented.

Corporate expenses - Corporate expenses include environmental, legal and other costs attributable to formerly-owned business units.

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Trade receivables - CompX

Accrued insurance recoveries

Other receivables

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December 31, 2022

Current assets - fixed income securities

Noncurrent assets

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Balance at the beginning of the period

Equity in earnings of Kronos

Equity in earnings (loss) of Kronos

Dividends received from Kronos

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Cost of sales

Income from operations

Income tax expense

Income (loss) from operations

Income tax expense (benefit)

Net income (loss)

Note 7 - Goodwill:

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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 the maturity date.

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.

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Company contributions are based on matching or other formulas.

Defined contribution plan expense approximated $ 3.0 million in 2020, $ 3.7 million in 2021 and $ 3.9 million in 2022.

Defined contribution plan expense approximated $ 3.7 million in 2021 and $ 3.9 million in each of 2022 and 2023.

Defined benefit pension plans - We maintain a defined benefit pension plan in the U.S.

We also maintain a plan in the United Kingdom (U.K.) related to a former disposed business unit in the U.K.

The benefits under our defined benefit plans are based upon years of service and employee compensation.

The plans are closed to new participants and no additional benefits accrue to existing plan participants.

The benefits under our defined benefit plan is based upon years of service and employee compensation.

The plan is closed to new participants and no additional benefits accrue to existing plan participants.

Our funding policy is to contribute annually the minimum amount required under ERISA (or equivalent non-U.S.) regulations plus additional amounts as we deem appropriate.

We previously maintained a defined benefit pension plan in the U.K.

related to a former disposed U.K.

business unit.

In accordance with applicable U.K.

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 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 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.

plan had a benefit obligation of $ 5.8 million, plan assets of $ 6.9 million and a pension plan asset of $ 1.1 million was recognized in our Consolidated Balance Sheet.

We expect to contribute approximately $ 1.2 million to our defined benefit pension plans during 2023.

Following the buy-in, individual policies replaced the bulk annuity policy in a “buy-out” which was completed as of May 1, 2023.

The buy-out was completed with existing plan funds.

At the completion of the buy-out, the assets and liabilities of the U.K.

pension plan were removed from our Consolidated Financial Statements and a non-cash pension plan termination loss of $ 4.9 million was recognized in the second quarter of 2023.

We expect to contribute approximately $ 1.0 million to our defined benefit pension plan during 2024.

Benefit payments to all plan participants out of plan assets are expected to be the equivalent of:

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Employer contributions

Plan settlement

Change in currency exchange rates

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Accrued pension costs:

Accumulated other comprehensive loss -

actuarial losses, net

Accumulated other comprehensive loss - actuarial losses, net

Accumulated benefit obligations (ABO)

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These amounts, net of deferred income taxes, are recognized in our accumulated other comprehensive income (loss) at December 31, 2022 and 2023.

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 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 total net underfunded status of our defined benefit pension plans decreased from $ 2.0 million at December 31, 2022 to $ 1.6 million at December 31, 2023 due to the change in our plan assets exceeding the change in our PBO during 2023.

Plan assets increased relative to our PBO primarily due to improved returns on plan assets during 2023.

The table below details the changes in other comprehensive income (loss) during 2021, 2022 and 2023.

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Certain information concerning our defined benefit pension plans (including information concerning certain plans for which ABO exceeds the fair value of plan assets as of the indicated date) is presented in the table below.

As discussed above, our U.K.

plan was terminated in the second quarter of 2023.

(In thousands)

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In determining the expected long-term rate of return on our U.S.

and our previously maintained non-U.S.

plan asset assumptions, we consider the long-term asset mix (e.g.

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In addition, we receive third-party advice about appropriate long-term rates of return.

we currently have a plan asset target allocation of 34 % to equity securities, 59 % to fixed income securities, and the remainder is allocated to multi-asset strategies.

we currently have a plan asset target allocation of 33 % to equity securities, 59 % to fixed income securities, and the remainder is allocated to multi-asset and other strategies.

The expected long-term rate of return for such investments is approximately 7 % and 5 %, respectively (before plan administrative expenses).

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plan assets are invested in funds that are valued at net asset value (NAV) and, in accordance with ASC 820-10, not subject to classification in the fair value hierarchy.

plan assets are invested primarily in insurance contracts and are a Level 3 input.

During 2022 and through plan termination in 2023, the non-U.S.

plan assets were invested primarily in insurance contracts and were a Level 3 input.

We regularly review our actual asset allocation for each plan, and will periodically rebalance the investments in each plan to more accurately reflect the targeted allocation and/or maximize the overall long-term return when considered appropriate.

The composition of our pension plan assets by fair value level at December 31, 2021 and 2022 is shown in the table below.

The composition of our pension plan assets by fair value level at December 31, 2022 and 2023 is shown in the tables below.

Fair Value Measurements

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Cash and other

As noted above, in March 2021 we purchased a bulk annuity for our U.K.

pension plan and such annuity is considered a Level 3 asset included with “U.K.

– Other” in the table above.

Fair Value Measurements

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Cash and other

As noted above, in March 2021 we purchased a bulk annuity for our U.K.

pension plan and such annuity is considered a Level 3 asset included with “U.K.

– Other” in the table above.

Note 12 - Other noncurrent liabilities:

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Note 13 - Income taxes:

The provision for income taxes and the difference between such provision for income taxes and the amount that would be expected using the U.S.

The provision for income taxes and the difference between the provision for income taxes and the amount that would be expected using the U.S.

federal statutory income tax rate are presented below.

Years ended December 31,

(In millions)

Expected tax expense, at U.S.

(In thousands)

Expected tax expense (benefit), at U.S.

federal statutory

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Comprehensive provision (benefit) for income taxes allocable to:

Additional paid-in capital

Other comprehensive income:

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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 2020 and 2021 and $ 26.8 million in 2022.

We received aggregate dividends from Kronos of $ 25.4 million in 2021, and $ 26.8 million in each of 2022 and 2023.

The components of the net deferred tax liability at December 31, 2022 and 2023 are summarized in the following table.

(In millions)

(In thousands)

Tax effect of temporary differences related to:

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Net noncurrent deferred tax liability

At December 31, 2022, we had NOL carryforwards for federal income tax purposes of approximately $ 21.9 million all of which have an indefinite carryforward period subject to an 80 % annual usage limitation .

At December 31, 2023, we have a deferred tax asset relating to our NOL carryforwards for federal income tax purposes of $ 3.6 million all of which have an indefinite carryforward period subject to an 80% annual usage limitation.

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

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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.

At December 31, 2020, 2021, and 2022, the gross amount of our uncertain tax positions (exclusive of the effect of interest and penalties) was $ 7.3 million, and there was no change in such amount during the past three years.

At December 31, 2021, 2022, and 2023, the gross amount of our uncertain tax positions (exclusive of the effect of interest and penalties) was $ 7.3 million, and this amount has not changed during the past three years.

Previously, we made certain pro-rata distributions to our stockholders in the form of Kronos common stock and we recognized a taxable gain related to such distributions.

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Income tax matters related to Kronos

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, 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.

Prior to the enactment of the 2017 Tax Act, the undistributed earnings of Kronos’ European subsidiaries were deemed to be permanently reinvested (Kronos had not made a similar determination with respect to the undistributed earnings of its Canadian subsidiary).

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, 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).

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.

Kronos periodically reviews its deferred tax assets (“DTA”) to determine if a valuation allowance is required.

At December 31, 2023, Kronos has German corporate and trade net operating loss (“NOL”) carryforwards of $ 478.7 million (DTA of $ 75.8 million) and $ 54.5 million (DTA of $ 5.9 million), respectively;

Belgian corporate NOL carryforwards of $ 47.0 million (DTA of $ 11.8 million) and Canadian corporate and provincial NOL carryforwards of $ 31.5 million (DTA of $ 4.7 million) and $ 34.9 million (DTA of $ 4.0 million), respectively.

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 lengthy carryforward periods (the German and Belgian carryforwards may be carried forward indefinitely and the Canadian carryforwards may be carried forward 20 years ), (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, Belgian or Canadian operations for an extended period of time, or if applicable laws were to change such that the carryforward periods were more limited, it is possible that it 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.

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.

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.

At December 31, 2022 and December 31, 2023, Kronos has recorded deferred tax assets of $ .9 million and $ 3.5 million, respectively, for the carryforwards associated with the nondeductible portion of its interest expense and has concluded it is required to recognize a valuation allowance for such deferred tax asset under the more-likely-than-not recognition criteria.

During 2023, Kronos recognized a non-cash deferred income tax expense of $ 2.6 million with respect to the valuation allowance recorded on additional interest expense carryforwards .

At December 31, 2023 the balance of its unpaid Transition Tax is $ 33.5 million, with two remaining payments of $ 14.9 million due in 2024 and $ 18.6 million due in 2025.

The payments are recorded as a current and noncurrent payable to affiliate (income taxes payable to Valhi) on Kronos’ Consolidated Balance Sheet at December 31, 2023.

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

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

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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.

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:

Long-term incentive compensation plan - We have a long-term incentive plan that provides for the award of stock to our board of directors, up to a maximum of 200,000 shares.

Long-term incentive compensation plan – Prior to 2021, our board of directors adopted a plan that provided for the award of stock to our board of directors, and up to a maximum of 200,000 shares could be awarded.

We awarded 13,750 shares in 2021, 15,000 shares in 2022 and 17,750 shares in 2023 under this plan.

At December 31, 2022, 51,150 shares were available for future grants.

In February 2023, our board of directors voted to replace the existing director stock plan with a new plan that would provide for the award of stock to non-employee members of our board of directors, and up to a maximum of 200,000 shares could be awarded.

plan was approved at our May 2023 shareholder meeting, and the prior director stock plan terminated effective June 30, 2023.

At December 31, 2023, 200,000 shares were available for future award under this new plan.

Long-term incentive compensation plans of subsidiaries and affiliates - CompX and Kronos each have a share-based incentive compensation plan pursuant to which an aggregate of up to 200,000 shares of their common stock can be awarded to members of their board of directors.

At December 31, 2023, Kronos had 97,100 shares available for award and CompX had 124,450 shares available for award.

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.

Dividends - Our board of directors approved and we paid quarterly dividends per share to stockholders of $ .06 in 2021 aggregating $ 11.7 million and $ .07 in each of 2022 and 2023 aggregating $ 13.7 million in each year.

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.

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Balance at end of period

OPEB plans and other:

Balance at beginning of period

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Net actuarial gain arising during the year

Change in value of debt securities

Balance at end of period

Marketable debt securities:

Balance at beginning of period

Other comprehensive income (loss) - unrealized gain (loss)

arising the period.

Balance at end of period

Total accumulated other comprehensive loss:

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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.

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, 2023, 523,647 shares were available for purchase under CompX’s prior repurchase authorizations.

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Current receivables from affiliates:

Other receivables from affiliates

Income taxes receivable from Valhi

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Other - trade items

Income taxes payable to Valhi

From time to time, we may have loans and advances outstanding between us and various related parties, pursuant to term and demand notes.

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Interest income (including unused commitment fees) on CompX’s loan to Valhi was $ 1.2 million in 2021, $ 1.0 million in 2022 and $ 1.2 million in 2023.

In February 2024, Kronos entered into a $ 53.7 million subordinated, unsecured term loan with Contran.

Under the terms of various intercorporate services agreements (ISAs) we enter into with Contran, employees of Contran will provide certain management, tax planning, financial and administrative services to the Company on a fee basis.

Such fees are based on the compensation of individual Contran employees providing services for us and/or estimates of time devoted to our affairs by such persons.

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

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.

The net ISA fees charged to us by Contran, (including amounts attributable to Kronos for all periods) aggregated approximately $ 33.2 million in 2021, $ 33.5 million in 2022 and $ 30.8 million in 2023.

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The program apportions its costs among the participating companies.

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

The aggregate amount Kronos paid to Contran for such services was $ .3 million in each of 2021 and 2022 and $ .4 million in 2023.

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

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

Kronos paid Contran $ .4 million in 2021, $ .5 million in 2022 and $ .6 million in 2023 for such rent and related ancillary services.

We expect that these relationships with Contran will continue in 2024.

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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.

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

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.

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

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Some are on appeal following dismissal or summary judgment rulings or a trial verdict in favor of either the defendants or the plaintiffs.

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.

We believe we have substantial defenses to these actions, and we intend to continue to deny all allegations of wrongdoing and liability and to defend against all actions vigorously.

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:

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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 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 made the initial $ 25.0 million payment in September 2019 and the first, second, third and fourth annual installment payments of $ 12.0 million each in

September 2020, 2021, 2022 and 2023.

We recognized an aggregate accretion expense of $ 1.1 million, $ .9 million, and $ .7 million in 2021, 2022, and 2023 respectively.

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The table below presents a summary of the activity in our accrued environmental costs during the past three years.

The amount charged to expense is included in corporate expense on our Consolidated Statements of Income.

The amount charged to expense is included in corporate expense on our Consolidated Statements of Operations.

Years ended December 31,

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(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.

At December 31, 2023, we had accrued approximately $ 91 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 $ 118 million, including the amount currently accrued.

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Accordingly, we recognize insurance recoveries in income only when receipt of the recovery is probable and we are able to reasonably estimate the amount of the recovery.

In this regard we received $ .5 million in insurance recoveries in 2023 and recoveries in each of 2021 and 2022 were nominal.

Other litigation

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Component products are sold primarily in North America to original equipment manufacturers.

The ten largest customers related to our Component Products operations accounted for approximately 48 % of total sales in 2020, 51 % in 2021 and 52 % in 2022.

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

The ten largest customers related to our Component Products operations accounted for approximately 51 % of total sales in 2021 and 52 % in each of 2022 and 2023.

One customer of CompX’s Security Products business accounted for 16 % of total sales in 2021, 14 % in 2022 and 24 % in 2023 (of which 11 % relates to a pilot project).

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

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Due to their near-term maturities, the carrying amounts of accounts receivable and accounts payable are considered equivalent to fair value.

Note 18 - Recent Accounting Pronouncements:

In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

The ASU requires public companies to disclose significant segment expenses and other segment items on an annual and interim basis.

The ASU also mandates public companies to provide all annual segment disclosures currently required annually in interim periods.

Public companies will also be required to disclose the title and position of the chief operating decision maker (CODM) and explain how the CODM uses the reported measure of segment profit or loss in assessing segment performance and allocation resources.

The ASU is effective for us beginning with our 2024 Annual Report, and for interim reporting, in the first quarter of 2025, with retrospective application required.

We are in the process of evaluating the additional disclosure requirements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The ASU requires additional annual disclosure and disaggregation for the rate reconciliation, income taxes paid and income tax expense by federal, state and foreign tax jurisdictions.

In addition, the standard increases the disclosure requirements for items included in the rate reconciliation that meet a quantitative threshold.

The ASU is effective for us beginning with our 2025 Annual Report.

The ASU may be applied prospectively;

however, entities have the option to apply it retrospectively.

We are in the process of evaluating the additional disclosure requirements.

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