What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-03-09 compared with 2022-03-10 · 101 added, 98 removed, 547 unchanged (27% of the section changed)

41 unchanged sentences

● 2020 – In December LandWell completed the first bulk sale of land within the Cadence planned community;

● 2022 – In July 2022 Basic Water Company ceased water delivery due to a decline in water levels at Lake Mead in Nevada.

Unless otherwise indicated, references in this report to “we”, “us” or “our” refer to Valhi, Inc.

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● General global economic and political conditions that harm the worldwide economy, disrupt our supply chain, increase material and energy costs, reduce demand or perceived demand for TiO 2, component products and land held for development or impair our ability to operate our facilities (including changes in the level of gross domestic product in various regions of the world, natural disasters, terrorist acts, global conflicts and public health crises such as COVID-19);

● Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions, unscheduled or unplanned downtime such as disruptions in energy supplies, transportation interruptions, cyber-attacks and public health crises such as COVID-19);

● Competitive products and substitute products;

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● The ability of our subsidiaries to pay us dividends;

● The impact of current or future government regulations (including employee healthcare benefit related regulations);

● Uncertainties associated with new product development and the development of new product features;

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dollar and each of the euro, the Norwegian krone and the Canadian dollar and between the euro and the Norwegian krone) or possible disruptions to our business resulting from uncertainties associated with the euro or other currencies;

● Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions, unscheduled or unplanned downtime, transportation interruptions, cyber-attacks and public health crises such as COVID-19);

● Decisions to sell operating assets other than in the ordinary course of business;

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● Our ability to renew, amend, refinance or establish credit facilities;

● Potential increases in interest rates;

● Increases in interest rates;

● Our ability to maintain sufficient liquidity;

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● Our ability to utilize income tax attributes, the benefits of which may or may not have been recognized under the more-likely-than-not recognition criteria;

● Environmental matters (such as those requiring compliance with emission and discharge standards for existing and new facilities, or new developments regarding environmental remediation at sites related to our former operations);

● Government laws and regulations and possible changes therein (such as changes in government regulations which might impose various obligations on former manufacturers of lead pigment and lead-based paint, including NL, with respect to asserted health concerns associated with the use of such products) including new environmental health and safety regulations such as those seeking to limit or classify TiO 2 or its use;

● Government laws and regulations and possible changes therein (such as changes in government regulations which might impose various obligations on former manufacturers of lead pigment and lead-based paint, including NL, with respect to asserted health concerns associated with the use of such products) including new environmental health and safety or other regulations such as those seeking to limit or classify TiO 2 or its use;

● The ultimate resolution of pending litigation (such as NL’s lead pigment and environmental matters);

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● Changes in real estate values and construction costs in Henderson, Nevada;

● Water levels in Lake Mead;

● Possible future litigation.

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TiO 2 is used to impart whiteness, brightness, opacity and durability to a wide variety of products, including paints, plastics, paper, fibers and ceramics.

Additionally, TiO 2 is a critical component of everyday applications, such as coatings, plastics and paper, as well as many specialty products such as inks, foods and cosmetics.

Additionally, TiO 2 is a critical component of everyday applications, such as coatings, plastics and paper, as well as many specialty products such as inks, cosmetics and pharmaceuticals.

Component Products

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We operate in the component products industry through our majority control of CompX.

CompX is a leading manufacturer of security products used in the recreational transportation, postal, office and institutional furniture, cabinetry, tool storage, healthcare and a variety of other industries.

CompX also manufactures stainless steel exhaust systems, gauges, throttle controls, wake enhancement systems, trim tabs and related hardware and accessories for the recreational marine industry.

CompX is a leading manufacturer of security products used in the postal, recreational transportation, office and institutional furniture, cabinetry, tool storage, healthcare and a variety of other industries.

CompX is also a leading manufacturer of wake enhancement systems, stainless steel exhaust systems, gauges, throttle controls, trim tabs and related hardware and accessories for the recreational marine industry.

Real Estate Management and Development

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We operate in real estate management and development through our majority control of BMI and LandWell.

BMI provides utility services to certain industrial and municipal customers and owns real property in Henderson, Nevada.

BMI owns real property in Henderson, Nevada and through its wholly-owned subsidiaries provides utility services to certain industrial and municipal customers.

LandWell is engaged in efforts to develop certain land holdings for commercial, industrial and residential purposes in Henderson, Nevada.

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TiO 2 is a white inorganic pigment used in a wide range of products for its exceptional durability and its ability to impart whiteness, brightness and opacity.

TiO 2 is a critical component of everyday applications, such as coatings, plastics and paper, as well as many specialty products such as inks, food and cosmetics.

TiO 2 is widely considered to be superior to alternative white pigments in large part due to its hiding power (or opacity), which is the ability to cover or mask other materials effectively and efficiently.

TiO 2 is a critical component of everyday applications, such as coatings, plastics and paper, as well as many specialty products such as inks, cosmetics and pharmaceuticals.

TiO 2 is widely considered to

be superior to alternative white pigments in large part due to its hiding power (or opacity), which is the ability to cover or mask other materials effectively and efficiently.

TiO 2 is designed, marketed and sold based on specific end-use applications.

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We believe Western Europe and North America currently each account for approximately 16% of global TiO 2 consumption.

Markets for TiO 2 are generally increasing in China, the Asia Pacific region, South America and Eastern Europe and we believe these are significant markets which will continue to grow as economies in these regions continue to develop and quality-of-life products, including TiO 2 , experience greater demand.

Markets for TiO 2 are generally increasing in China, the Asia Pacific region, South America and Eastern Europe and we believe these are significant markets which will continue to grow as economies in these regions develop and quality-of-life products, including TiO 2 , experience greater demand.

Products and end-use markets

Including its predecessors, Kronos has produced and marketed TiO 2 in North America and Europe, its primary markets, for over 100 years.

We believe Kronos is the largest producer of TiO 2 in Europe with 46% of its 2021 sales volumes attributable to markets in Europe.

We believe Kronos is the largest TiO 2 producer in Europe with 45% of its 2022 sales volumes attributable to markets in Europe.

The table below shows Kronos’ estimated market share for its significant markets, Europe and North America, for the last three years.

North America

We believe Kronos is the leading seller of TiO 2 in several countries, including Germany, with an estimated 8% share of worldwide TiO 2 sales volume in 2021.

Overall, Kronos is one of the top five producers of TiO 2 in the world.

We believe Kronos is the leading seller of TiO 2 in several countries, including Germany.

Overall, Kronos is one of the top five producers of TiO 2 in the world, with an estimated 7% share of worldwide TiO 2 sales volume in 2022.

Kronos offers its customers a broad portfolio of products that include over 40 different TiO 2 pigment grades under the KRONOS ® trademark, which provide a variety of performance properties to meet customers’ specific requirements.

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Kronos produces high purity sulfate process anatase TiO 2 used to provide opacity, whiteness and brightness in a variety of cosmetic and personal care products, such as skin cream, lipstick, eye shadow and toothpaste.

Kronos’ TiO 2 is also found in food products, such as candy and confectionaries, and in pet foods where it is used to obtain uniformity of color and appearance.

In pharmaceuticals, Kronos’ TiO 2 is used commonly as a colorant in tablet and capsule coatings as well as in liquid medicines to provide uniformity of color and appearance.

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Kronos’ TiO 2 business is enhanced by the following three complementary businesses, which comprised approximately 8% of our Chemicals Segment’s net sales in 2022:

● Kronos owns and operates two ilmenite mines in Norway pursuant to a governmental concession with an unlimited term.

● Kronos owns and operates an ilmenite mine in Norway pursuant to a governmental concession with an unlimited term.

Ilmenite is a raw material used directly as a feedstock by some sulfate-process TiO 2 plants.

Kronos supplies ilmenite to its sulfate plants in Europe.

Kronos also sells ilmenite ore to third parties, some of whom are its competitors, and Kronos sells an ilmenite-based specialty product to the oil and gas industry.

The mines have estimated ilmenite reserves that are expected to last at least 50 years.

Kronos also sells ilmenite ore to third parties, some of whom are its competitors.

Kronos also sells an ilmenite-based specialty product to the oil and gas industry.

The mine has estimated ilmenite reserves that are expected to last at least 50 years.

● Kronos manufactures and sells iron-based chemicals, which are co-products and processed co-products of sulfate and chloride process TiO 2 pigment production.

These co-product chemicals are marketed through its Ecochem division and are primarily used as treatment and conditioning agents for industrial effluents and municipal wastewater as well as in the manufacture of iron pigments, cement and agricultural products.

● Kronos manufactures and sells other specialty chemicals, which are side-stream specialty products from the production of TiO 2 .

Such specialty chemicals are used in applications in the formulation of pearlescent pigments, production of electroceramic capacitors for cell phones and other electronic devices and natural gas pipe and other specialty applications.

● Kronos manufactures and sells other specialty chemicals, which are side-stream products from the production of TiO 2 .

These specialty chemicals are used in applications in the formulation of pearlescent pigments, production of electroceramic capacitors for cell phones and other electronic devices and natural gas pipe and other specialty applications.

Manufacturing, operations and properties

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Due to environmental factors and customer considerations, the proportion of TiO 2 industry sales represented by chloride process pigments has remained stable relative to sulfate process pigments, and in 2022, chloride process production facilities represented approximately 45% of industry capacity.

The sulfate process is preferred for use in selected paper products, ceramics, rubber tires, man-made fibers, food products, pharmaceuticals and cosmetics.

The sulfate process is preferred for use in selected paper products, ceramics, rubber tires, man-made fibers, pharmaceuticals and cosmetics.

Once an intermediate TiO 2 pigment has been produced by either the chloride or sulfate process, it is “finished” into products with specific performance characteristics for particular end-use applications through proprietary processes involving various chemical surface treatments and intensive micronizing (milling).

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Kronos’ production volumes include its share of the output produced by its TiO 2 manufacturing joint venture discussed below.

Kronos’ average production capacity utilization rates were approximately 98% in 2019, 92% in 2020 and at full practical capacity in 2021.

Kronos’ production rates in 2020 were impacted by the COVID-19 pandemic as it decreased production levels early in the third quarter to correspond with a temporary decline in market demand.

Kronos’ average production capacity utilization rates were approximately 92% in 2020, full practical capacity in 2021 and 89% in 2022.

Kronos’ production rates in 2020 were impacted by the COVID-19 pandemic (primarily in the third quarter).

In the fourth quarter of 2022 Kronos adjusted production levels to correspond with reduced customer demand in its European and export markets resulting from challenging economic conditions and geopolitical uncertainties.

Kronos operates facilities throughout North America and Europe, including the only sulfate process plant in North America and four TiO 2 plants in Europe (one in each of Leverkusen, Germany;

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As part of Kronos’ long-term strategy to increase chloride process production, Kronos phased-out sulfate production at its Leverkusen facility during 2020.

Kronos’ chloride process production and remaining sulfate production capacity has increased by approximately 5% over the past ten years due to debottlenecking programs, incurring only moderate capital expenditures.

Kronos expects to operate its TiO 2 plants at near full practical capacity levels in 2022.

Kronos’ chloride process production and remaining sulfate production capacity has increased by approximately 5% over the past ten years due to debottlenecking programs, with only moderate capital expenditures.

Kronos operated its facilities at reduced capacities in the fourth quarter of 2022 and into 2023.

Based on current assumptions about market performance and demand, Kronos expects to operate its TiO 2 plants at 80% to 90% capacity in the first half of 2023 and near full practical capacity levels by the second half of 2023.

The following table presents the division of Kronos’ expected 2023 manufacturing capacity by plant location and type of manufacturing process:

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Langerbrugge, Belgium

TiO 2 production, chloride process, co-products, titanium

chemicals products

TiO 2 production, chloride process, co-products,

titanium chemicals products

Fredrikstad, Norway (2)

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Varennes, Canada

TiO 2 production, chloride and sulfate process, slurry

facility, titanium chemicals products

TiO 2 production, chloride and sulfate process,

slurry facility, titanium chemicals products

Lake Charles, LA, US (3)

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Kronos owns the land underlying all of its principal production facilities unless otherwise indicated in the table above.

Kronos also operates two ilmenite mines in Norway pursuant to a governmental concession with an unlimited term.

Kronos also operates an ilmenite mine in Norway pursuant to a governmental concession with an unlimited term.

In addition, Kronos operates a rutile slurry manufacturing plant near Lake Charles, Louisiana, which converts dry pigment primarily manufactured for it at the Lake Charles TiO 2 facility into a slurry form that is then shipped to customers.

Kronos has corporate and administrative offices located in the U.S., Germany, Norway, Canada, Belgium, France and the United Kingdom and various sales offices located in North America.

Kronos has corporate and administrative offices located in the U.S., Germany, Norway, Canada, Belgium and France.

TiO 2 manufacturing joint venture

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Auto-renews annually

Tizir Titanium & Iron AS

Chloride process grade slag

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Renewal terms upon negotiation

Base Titanium Limited

Iluka Resources Limited

Renewal terms upon negotiation

Saraf Agencies Private Limited

Chloride process grade slag

Renewal terms upon negotiation

In the past Kronos has been, and it expects that it will continue to be, successful in obtaining short-term and long-term extensions to these and other existing supply contracts prior to their expiration.

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Titanium-containing feedstock suitable for use in the sulfate process is available from a limited number of suppliers principally in Norway, Canada, Australia, India and South Africa.

As one of the few vertically-integrated producers of sulfate process TiO 2 , Kronos operates two rock ilmenite mines in Norway, which provided all of the feedstock for its European sulfate process TiO 2 plants in 2021.

Kronos expects ilmenite production from its mines to meet its European sulfate process feedstock requirements for the foreseeable future.

As one of the few vertically-integrated producers of sulfate process TiO 2 , Kronos operates a rock ilmenite mine in Norway, which provided all of the feedstock for its European sulfate process TiO 2 plants in 2022.

Kronos expects ilmenite production from its mine to meet its European sulfate process feedstock requirements for the foreseeable future.

For its Canadian sulfate process plant, Kronos purchases sulfate grade slag primarily from Rio Tinto Fer et Titane Inc.

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Kronos endeavors to extend these commercial and technical relationships to multiple levels within its customers’ organizations using its direct sales force and technical service group to accomplish this objective.

Kronos believes this helps build customer loyalty to Kronos and strengthens its competitive position.

Kronos believes this helps build customer loyalty and strengthens its competitive position.

Close cooperation and strong customer relationships enable Kronos to stay closely attuned to trends in its customers’ businesses.

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This focus includes continuously reviewing and optimizing its customer and product portfolios.

Kronos also works directly with its customers to monitor the success of its products in their end-use applications, evaluate the need for improvements in its product and process technology and identify opportunities to develop new product solutions for its customers.

Kronos also works directly with its customers to monitor the success of its products in their end-use applications, evaluates the need for improvements in its product and process technology and identifies opportunities to develop new product solutions for its customers.

Kronos’ marketing staff closely coordinates with its sales force and technical specialists to ensure the needs of its customers are met, and to help develop and commercialize new grades where appropriate.

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In North America, its sales are made primarily through its direct sales force and supported by a network of distributors.

In export markets, where Kronos increased its marketing efforts over the last several years, its sales are made through its direct sales force, sales agents and distributors.

Kronos has increased its marketing efforts over the last several years in export markets and its sales are now made through its direct sales force, sales agents and distributors.

In addition to its direct sales force and sales agents, many of Kronos’ sales agents also act as distributors to service its customers in all regions.

Kronos offers customer and technical service to customers who purchase its products through distributors as well as to its larger customers serviced by its direct sales force.

Kronos sells to a diverse customer base and no single customer comprised 10% or more of our Chemicals Segment’s net sales in 2021.

Kronos sells to a diverse customer base with only one customer representing 10% or more of our Chemicals Segment’s net sales in 2022 (Behr Process Corporation – 10%).

Kronos’ largest ten customers accounted for approximately 33% of our Chemicals Segment’s net sales in 2022.

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However, TiO 2 sales are generally higher in the second and third quarters of the year, due in part to the increase in coatings production in the spring to meet demand during the spring and summer painting seasons.

With certain exceptions, such as during the third quarter of 2020 as a result of the COVID-19 pandemic, Kronos has historically operated its production facilities at near full capacity rates throughout the entire year, which among other things helps to minimize its per-unit production costs.

As a result, Kronos normally will build inventories during the first and fourth quarters of each year in order to maximize its product availability during the higher demand periods normally experienced in the second and third quarters.

With certain exceptions, such as during the third quarter of 2020 as a result of the COVID-19 pandemic, and during the fourth quarter of 2022 as a result of reduced customer demand and unprecedentedly high energy costs, Kronos has historically operated its production facilities at near full capacity rates throughout the entire year, which among other things helps to minimize its per-unit production costs.

As a result, Kronos normally builds inventories during the first and fourth quarters of each year in order to maximize its product availability during the higher demand periods normally experienced in the second and third quarters.

The TiO 2 industry is highly competitive.

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During 2022, Kronos had an estimated 7% share of worldwide TiO 2 sales volume, and based on sales volume, we believe Kronos is the leading seller of TiO 2 in several countries, including Germany.

Kronos’ principal competitors are The Chemours Company, Tronox Incorporated, Lomon Billions and Venator Materials PLC.

Kronos’ principal competitors are The Chemours Company, Tronox Incorporated, LB Group Co.

and Venator Materials PLC.

The top five TiO 2 producers (i.e.

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Worldwide production capacity - 2022

Lomon Billions

Chemours has approximately one-half of total North American TiO 2 production capacity and is Kronos’ principal North American competitor.

In 2019, Tronox acquired certain of the TiO 2 assets of Cristal Global.

Lomon Billions announced it added approximately 260,000 tons of chloride capacity in 2019 and plans to add an additional 200,000 tons by 2023.

previously announced it plans to add an additional 200,000 tons of chloride capacity which we expect will be added incrementally over the next several years.

The TiO 2 industry is characterized by high barriers to entry consisting of high capital costs, proprietary technology and significant lead times required to construct new facilities or to expand existing capacity.

Over the past ten years, Kronos and its competitors increased industry capacity through debottlenecking projects, which in part compensated for the shut-down of various TiO 2 plants throughout the world.

Although overall industry demand is expected to increase in 2022, other than through debottlenecking projects and the Lomon Billions expansion mentioned above, Kronos does not expect any significant efforts will be undertaken by it or its principal competitors to further increase capacity and Kronos believes it is unlikely any new TiO 2 plants will be constructed in Europe or North America for the foreseeable future.

Therefore, over the past ten years, Kronos and its competitors increased industry capacity through debottlenecking projects, although this increase only partly compensated for the shut-down of various TiO 2 plants throughout the world.

Although overall industry demand is expected to increase in 2023, other than through debottlenecking projects and the LB Group Co.

expansion mentioned above, Kronos does not expect any significant efforts will be undertaken by it or its principal competitors to further increase capacity and Kronos believes it is unlikely any new TiO 2 plants will be constructed in Europe or North America for the foreseeable future.

If actual developments differ from Kronos’ expectations, the TiO 2 industry’s and Kronos’ performance could be unfavorably affected.

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patents are generally in effect for 20 years from the date of filing.

patent portfolio includes patents having remaining terms ranging from two years to 20 years.

patent portfolio includes patents having remaining terms ranging from one year to 20 years.

Trademarks and trade secrets – Kronos’ trademarks, including KRONOS ® , are covered by issued and/or pending registrations, including in Canada and the United States.

Kronos protects the trademarks that it uses in connection with the products it manufactures and sells and has developed goodwill in connection with its long-term use of its trademarks.

Kronos protects the trademarks it uses in connection with the products it manufactures and sells and has developed goodwill in connection with its long-term use of its trademarks.

Kronos conducts research activities in secret and it protects the confidentiality of its trade secrets through reasonable measures, including confidentiality agreements and security procedures, including data security.

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During 2021, Kronos was notified by government authorities in Norway that the classification of a dam at its mine facilities was changed to the highest level for Norwegian classification of dam structures.

As a result, its mine operations are subject to a higher degree of oversight and regulation than existed prior to this change in classification, and we expect Kronos to incur additional capital expenditures to adapt to the higher classification standards.

Kronos has a history of identifying new ways to reduce consumption and waste by converting byproducts to co-products through its ecochem® products.

As a result, Kronos’ mine operations are subject to a higher degree of oversight and regulation than existed prior to this change in classification, and Kronos has increased its capital expenditures to adapt to the higher classification standards.

Kronos has a history of identifying new ways to reduce consumption and waste by converting byproducts to co-products through its KRONOS ecochem® products.

Annually Kronos updates and publishes its Safety, Environment, Energy and Quality Policy which is translated into local languages and distributed to all its employees and shared publicly via its website.

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Three of its five production facilities maintain certifications to the ISO 50001:2018 Energy Management standard and all locations have local energy teams in place.

These teams are responsible for maintaining ISO 50001:2018 certifications (where applicable), performing regular reviews of local energy consumption, making recommendations regarding capital projects that reduce energy consumption or enhance efficiency, and partnering with local government authorities through grant opportunities to reduce energy consumption and associated Greenhouse Gas (“GHG”) emissions.

Kronos also actively manages potential water-related

risks, including flooding and water shortages.

These teams are responsible for maintaining ISO 50001:2018 certifications (where applicable), performing regular reviews of local energy consumption, making recommendations regarding capital projects that reduce energy consumption and associated Greenhouse Gas (“GHG”) emissions or enhance efficiency.

When possible, Kronos looks for opportunities to partner with local government authorities through grant opportunities to reduce energy consumption and associated GHG

Kronos also actively manages potential water-related risks, including flooding and water shortages.

Kronos’ manufacturing facilities are strategically located adjacent to sources of water, which it uses for process operations and for shipping and receiving raw materials and finished products.

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However, increased regulatory scrutiny could affect consumer perception of TiO 2 or limit the marketability and demand for TiO 2 or products containing TiO 2 and increase Kronos’ regulatory and compliance costs.

On February 18, 2020, the EU published the regulation classifying dry TiO 2 and mixtures containing dry TiO 2 as a suspected carcinogen via inhalation under its EU Regulation No.

1272/2008 on classification and labeling substances and mixtures.

The regulation went into force on October 1, 2021 when hazard labels were required on certain dry TiO 2 products and certain mixtures containing dry TiO 2 in the EU.

On October 1, 2021, EU Regulation No.

1272/2008 classifying dry TiO 2 and mixtures containing dry TiO 2 as a suspected carcinogen via inhalation went into force.

Kronos’ dry TiO 2 products do not meet the criteria set forth in the regulation and therefore do not require classification labels.

This classification of TiO 2 is based on scientifically questioned animal test data.

Separate studies of TiO 2 workers conducted by the TiO 2 industry have shown no TiO 2 specific links to cancer.

Kronos intends to comply with the new requirements including working with customers and other stakeholders on compliance matters as appropriate.

On November 23, 2022 the Court of Justice of the European Union annulled the classification of TiO 2 as a suspected carcinogen in its entirety.

Kronos’ capital expenditures related to ongoing environmental compliance, protection and improvement programs, including capital expenditures which are primarily focused on increasing operating efficiency but also result in improved environmental protection such as lower emissions from its manufacturing facilities, were $17.6 million in 2022 and are currently expected to be approximately $20 million in 2023.

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Business overview

Through our majority-controlled subsidiary, CompX, we are a leading manufacturer of security products including mechanical and electrical cabinet locks and other locking mechanisms used in recreational transportation, postal,

office and institutional furniture, cabinetry, tool storage and healthcare applications.

CompX also manufactures stainless steel exhaust systems, gauges, throttle controls, wake enhancement systems, trim tabs and related hardware and accessories for the recreational marine and other industries.

CompX continuously seeks to diversify into new markets and identify new applications and features for its products, which it believes provides a greater potential for higher rates of earnings growth as well as diversification of risk.

CompX also manufactures wake enhancement systems, stainless steel exhaust systems, gauges, throttle controls, trim tabs and related hardware and accessories for the recreational marine and other industries.

CompX continuously seeks to diversify into new markets and

identify new applications and features for its products, which it believes provides a greater potential for higher rates of earnings growth as well as diversification of risk.

Manufacturing, operations and products

Security Products .

CompX’s security products reporting unit manufactures mechanical and electrical cabinet locks and other locking mechanisms used in a variety of applications including ignition systems, mailboxes, file cabinets, desk drawers, tool storage cabinets, high security medical cabinetry, integrated inventory and access control secured narcotics boxes, electronic circuit panels, storage compartments, gas station security, vending and cash containment machines.

CompX’s security products reporting unit manufactures mechanical and electrical cabinet locks and other locking mechanisms used in a variety of applications including mailboxes, ignition systems, file cabinets, desk drawers, tool storage cabinets, high security medical cabinetry, integrated inventory and access control secured narcotics boxes, electronic circuit panels, storage compartments, gas station security, vending and cash containment machines.

CompX’s security products reporting unit has one manufacturing facility in Mauldin, South Carolina and one in Grayslake, Illinois which is shared with its marine components reporting unit.

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Marine Components .

CompX’s marine components reporting unit manufactures and distributes stainless steel exhaust components, gauges, throttle controls, wake enhancement systems, trim tabs and related hardware and accessories primarily for performance and ski/wakeboard boats.

CompX’s marine components reporting unit manufactures and distributes wake enhancement systems, stainless steel exhaust components, gauges, throttle controls, trim tabs and related hardware and accessories primarily for ski/wakeboard boats (tow boats) and performance boats.

CompX’s marine components reporting unit has a facility in Neenah, Wisconsin and a facility in Grayslake, Illinois which is shared with its security products reporting unit.

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These products include:

● wake enhancement devices, trim tabs, steering wheels, and billet aluminum accessories;

● original equipment and aftermarket stainless steel exhaust headers, exhaust pipes, mufflers and other exhaust components;

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● mechanical and electronic controls and throttles;

● wake enhancement devices, trim tabs, steering wheels, and billet aluminum accessories;

● dash panels, LED indicators, and wire harnesses;

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At other times CompX may make spot market buys of larger quantities of raw materials to take advantage of favorable pricing or volume-based discounts.

Prices for the primary commodity-related raw materials used in the manufacture of locking mechanisms, primarily zinc and brass, remained relatively stable during 2020 but generally increased throughout 2021.

The prices for stainless steel, the primary raw material used for the manufacture of marine exhaust headers and pipes and wake enhancement systems, remained relatively stable in 2020 but experienced significant volatility during 2021.

Based on current economic conditions, CompX expects the prices for zinc, brass and stainless steel, and other manufacturing materials to be volatile during 2022.

Prices for the primary commodity-related raw materials used in the manufacture of locking mechanisms, primarily zinc and brass, generally increased throughout 2021 and the first half of 2022.

Prices began to stabilize in the latter half of 2022, although at elevated levels.

The prices for stainless steel, the primary raw material used for the manufacture of marine exhaust headers and pipes and wake enhancement systems, experienced significant volatility during 2021 and 2022.

Based on current economic conditions, CompX expects the prices for zinc, brass, stainless steel and other manufacturing materials in 2023 to be relatively stable, although at the elevated levels it experienced in the second half of 2022.

When purchased on the spot market, each of these raw materials may be subject to sudden and unanticipated price increases.

When possible, CompX seeks to mitigate the impact of fluctuations in these raw material costs on its margins through improvements in production efficiencies or other operating cost reductions.

In the event CompX is unable to offset raw material cost increases with other cost reductions, it may be difficult to recover those cost increases through increased product selling prices or raw material surcharges due to the competitive nature of the markets served by its products.

Consequently, overall operating margins can be affected by commodity-related raw material cost pressures.

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These products are packaged and merchandised for easy availability and handling by distributors and end users.

Our Component Products Segment sells to a diverse customer base with only one customer representing 10% or more of our Component Products Segment’s sales in 2021 (United States Postal Service representing 16%).

Our Component Products Segment sells to a diverse customer base with only two customers representing 10% or more of our Component Products Segment’s sales in 2022 (United States Postal Service – 14% and Malibu Boats, LLC –12%).

Our Component Products Segment’s largest ten customers accounted for approximately 52% of its sales in 2022.

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Our Real Estate Management and Development Segment consists of our majority owned subsidiaries, BMI and LandWell.

BMI provides utility services, among other things, to an industrial park located in Henderson, Nevada and is responsible for the delivery of water to the City of Henderson and various other users through a water distribution system owned by BMI.

BMI provides certain utility services, among other things, to an industrial park located in Henderson, Nevada and prior to the bankruptcy filing on September 10, 2022 of Basic Water Company (“BWC”), a wholly-owned subsidiary of BMI, was responsible for the delivery of water to the City of Henderson and various other users through a water distribution system owned and operated by BWC.

See Note 2 to our Consolidated Financial Statements and also Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Real Estate Management and Development”.

LandWell is actively engaged in efforts to develop certain real estate in Henderson, Nevada including approximately 2,100 acres zoned for residential/planned community purposes and approximately 400 acres zoned for commercial and light industrial use.

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LandWell supports the builders’ efforts to market and sell specific residential homes within its residential/planned community through joint marketing campaign and community wide education efforts.

In addition, BMI delivers utility services to an industrial park located in Henderson, Nevada and also delivers water to the City of Henderson and various other users through a water delivery system owned by BMI.

Through December 31, 2021, LandWell has closed or entered into escrow on approximately 1,700 acres of the residential/planned community and approximately 70 acres zoned for commercial and light industrial use.

In addition, BMI provides certain utility services to an industrial park located in Henderson, Nevada and prior to BWC’s bankruptcy filing on September 10, 2022 also delivered water to the City of Henderson and various other users through a water delivery system owned and operated by BWC.

LandWell began marketing land for sale in the residential/planned community in December 2013 and at December 31, 2022 approximately 90 saleable acres remain.

LandWell has been actively marketing and selling the land zoned for commercial and light industrial use and at December 31, 2022 approximately 20 saleable acres remain.

Contracts for land sales are negotiated on an individual basis and sales terms and prices will vary based on such factors as location (including location within a planned community), expected development work and individual buyer needs.

Although land may be under contract, we do not recognize revenue until we have satisfied the criteria for revenue recognition.

In some instances, LandWell will receive cash proceeds at the time the contract closes and record deferred revenue for some or all of the cash amount received, with such deferred revenue being recognized in subsequent periods.

We expect substantially all of the land in the residential/planned community will be sold by the end of 2022;

In some instances, LandWell will receive cash proceeds at the time the contract closes and record deferred revenue for some or all of the cash amount received, with deferred revenue being recognized in subsequent periods.

Substantially all of the land in the residential/planned community has been sold;

however, we expect the development work to take three to five years to complete.

Our Real Estate Management and Development Segment’s sales consist principally of land sales and water and electric delivery fees.

During 2021 we had sales to three customers that exceeded 10% of our Real Estate Management and Development Segment’s net sales (Century Communities – 26%, CCR 270 – 17% and Richmond American Homes – 13%) related to land sales.

Our Real Estate Management and Development Segment’s sales consist principally of land sales and to a lesser extent water (for the first half of 2022) and electric delivery fees.

During 2022 we had sales to two customers that exceeded

10% of our Real Estate Management and Development Segment’s net sales (CCR 270 – 30% and Richmond American Homes – 19%) related to land sales.

There are multiple new construction residential communities in the greater Las Vegas, Nevada area.

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We seek to operate our businesses in line with sound ESG principles that include corporate governance, social responsibility, sustainability, and cybersecurity.

We believe ESG means conducting operations with high standards of environmental and social responsibility, practicing exemplary ethical standards, focusing on safety as a top priority, respecting and supporting our local communities, and continuously developing our employees.

We believe ESG means conducting operations with high standards of environmental and social responsibility, practicing exemplary ethical standards, focusing on safety as a top priority, respecting human rights and supporting our local communities, and continuously developing our employees.

At our facilities, we undertake various environmental sustainability programs, and we promote social responsibility and volunteerism through programs designed to support and give back to the local communities in which we operate.

Each of our locations maintains site-specific safety programs and disaster response and business continuity plans.

All manufacturing facilities have detailed, site-specific emergency response procedures that we believe adequately address regulatory compliance, vulnerability to potential hazards, emergency response and action plans, employee training, alarms and warning systems and crisis communication.

All manufacturing facilities have detailed, site-specific emergency response procedures we believe adequately address regulatory compliance, vulnerability to potential hazards, emergency response and action plans, employee training, alarms and warning systems and crisis communication.

At a corporate level, we engage in periodic reviews of our cybersecurity programs, including cybersecurity risk and threats.

8 unchanged sentences

Kronos voluntarily developed these internal metrics and benchmarks, which Kronos uses to identify progress and opportunities for improvement.

These metrics are not intended to be directly comparable to similar metrics utilized by other companies to track ESG performance.

These metrics are not intended to be directly

comparable to similar metrics utilized by other companies to track ESG performance, as the standards, methodologies and assumptions used to determine these metrics vary by company and jurisdiction.

HUMAN CAPITAL RESOURCES

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As of December 31, 2022, our Component Products Segment and our Real Estate Management and Development Segment employed 609 people and 24 people, respectively, all in the United States.

We believe CompX’s and BMI and LandWell’s labor relations are good.

We believe CompX’s and BMI’s labor relations are good.

Health and safety

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Each Kronos operating location is subject to local laws and regulations that dictate what injuries are required to be recorded and reported, which may differ from location to location and result in different methods of injury rate calculation.

For internal global tracking, benchmarking and identification of opportunities for improvement, Kronos collects the location specific information and applies a U.S.-based injury rate calculation to arrive at a global total frequency rate, which is expressed as the number of incidents at our operating locations

per 200,000 hours.

For internal global tracking, benchmarking and identification of

opportunities for improvement, Kronos collects the location specific information and applies a U.S.-based injury rate calculation to arrive at a global total frequency rate, which is expressed as the number of incidents at its operating locations per 200,000 hours.

This internal safety metric may not be directly comparable to a recordable incident rate calculated under U.S.

Kronos’ global total frequency rate was 1.59 in 2019, 1.61 in 2020 and 1.08 in 2021.

CompX uses a Lost Time Incident Rate as a key measure of worker safety.

The Lost Time Incident Rate is a standard Occupational Safety and Health Administration metric that calculates the number of incidents that result in time away from work.

CompX had a Lost Time Incident Rate of three in 2019, nil in 2020, and one in 2021.

Kronos’ global total frequency rate aggregating information about employees and contractors was 1.61 in 2020 (1.54 of the aggregate represents employees only), 1.08 in 2021 (0.90 of the aggregate represents employees only) and 1.01 in 2022 (0.86 of the aggregate represents employees only).

CompX uses lost time incidents as a key measure of worker safety.

CompX defines lost time incidents as work-related accidents where a worker sustains an injury that results in time away from work.

CompX had lost time incidents of nil in 2020, one in 2021 and three in 2022.

Diversity and inclusion

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– At December 31, 2022, NL owned approximately 87% of CompX and approximately 31% of Kronos.

NL also owns 100% of EWI RE, Inc., an inactive subsidiary that was formerly an insurance brokerage and risk management services company.

In the fourth quarter of 2019, NL sold the insurance and risk management business of EWI for proceeds of $3.25 million and recognized a gain of $3.0 million.

NL also holds certain marketable securities and other investments.

See Note 17 to our Consolidated Financial Statements for additional information.

Tremont LLC – Tremont is primarily a holding company through which we hold our 63% ownership interest in BMI and our 77% ownership interest in LandWell.

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Tremont also owns certain real property in Henderson, Nevada.

See Notes 13 and 17 to our Consolidated Financial Statements.

See Note 17 to our Consolidated Financial Statements.

In addition, we also own real property related to certain of our former business units.

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We and other entities that may be deemed to be controlled by or affiliated with Ms.

Simmons and the Family Trust routinely evaluate acquisitions of interests in, or combinations with, companies, including related companies, we perceive to be undervalued in the marketplace.

Simmons and the Family Trust routinely evaluate acquisitions of interests in, or combinations with, companies, including related companies, that provide strategic opportunities and synergies or that we perceive to be undervalued in the marketplace.

These companies may or may not be engaged in businesses related to our current businesses.

In some instances we actively manage the businesses we acquire with a focus on maximizing return-on-investment through cost reductions, capital expenditures, improved operating efficiencies, selective marketing to

address market niches, disposition of marginal operations, use of leverage and redeployment of capital to more productive assets.

In some instances we actively manage the

businesses we acquire with a focus on maximizing return-on-investment through cost reductions, capital expenditures, improved operating efficiencies, selective marketing to address market niches, disposition of marginal operations, use of leverage and redeployment of capital to more productive assets.

In other instances, we have disposed of our interest in a company prior to gaining control.

11 unchanged sentences

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 1. Business