What changed in this filing

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Item 9A. Controls and Procedures

2023-03-09 compared with 2022-03-10 · 236 added, 233 removed, 1449 unchanged (24% of the section changed)

3 unchanged sentences

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in the reports we file or submit to the SEC under the Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions to be made regarding required disclosure.

Each of Robert D.

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

Each of Michael S.

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

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

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

This annual report does not include an attestation report of our registered public accounting firm regarding the effectiveness of our internal control over financial reporting as of December 31, 2021.

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 on Form 10-K.

PricewaterhouseCoopers LLP, the independent registered public accounting firm that has audited our consolidated financial statements included in this Annual Report, has audited the effectiveness of our internal control over

financial reporting as of December 31, 2022, as stated in their report, which is included in this Annual Report on Form 10-K.

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

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

/s/ Robert D.

Graham, March 10, 2022

/s/ Michael S.

Simmons, March 9, 2023

(Vice Chairman of the Board, President and

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/s/ Loretta J.

/s/ Robert D.

/s/ Michael S.

Feehan, March 9, 2023

(Chair of the Board (non-executive))

Graham, March 10, 2022

Simmons, March 9, 2023

(Vice Chairman of the Board, President and Chief Executive Officer)

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Amy Allbach Samford, March 9, 2023

(Senior Vice President and Chief Financial Officer)

(Executive Vice President and Chief Financial Officer)

Herrington, March 9, 2023

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(Vice President and Controller)

Kramer, March 9, 2023

Hayden McIlroy

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To the Board of Directors and Stockholders of Valhi, Inc.

Opinion on the Financial Statements

Opinions on the Financial Statements and Internal Control over Financial Reporting

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

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

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

Basis for Opinion

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

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

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

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

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

Basis for Opinions

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

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

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

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

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

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

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

Accordingly, we express no such opinion.

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

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

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

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

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

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

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

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

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

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

Definition and Limitations of Internal Control over Financial Reporting

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

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

transactions and dispositions of the assets of the company;

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

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

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

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

Critical Audit Matters

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As disclosed by management, the Company operates globally through its Chemicals Segment.

The calculation of the Company’s provision for income taxes and its deferred tax assets and liabilities involves the interpretation and application of complex tax laws and regulations in a multitude of jurisdictions

across the Chemicals Segment’s global operations.

The Company’s effective tax rate is highly dependent upon the geographic distribution of its earnings or losses and the effects of tax laws and regulations in each tax-paying jurisdiction in which it operates.

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The Company's provision for income taxes and deferred tax assets and liabilities reflect management's best assessment of estimated current and future taxes to be paid, including the recognition and measurement of deferred tax assets and liabilities.

The principal consideration for our determination that performing procedures relating to income taxes for the Chemicals Segment is a critical audit matter is the significant judgment by management when developing the estimate of current and future taxes to be paid, including the recognition and measurement of deferred tax assets and liabilities.

The principal considerations for our determination that performing procedures relating to income taxes for the Chemicals Segment is a critical audit matter are the significant judgment by management when developing the estimate of current and future taxes to be paid, including the recognition and measurement of deferred tax assets and liabilities.

This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating evidence related to the recognition and measurement of deferred tax assets and liabilities and management's assessment of the estimated current and future taxes to be paid, including evaluating management’s interpretation of tax laws and regulations in jurisdictions in which the Chemicals Segment operates.

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(ii) testing the current and deferred income tax provision, including evaluating permanent and temporary differences within certain jurisdictions and management's assessment of the technical merits of the differences;

(iii) performing procedures over the Company’s rate reconciliation;

performing procedures over the Company's rate reconciliation;

and (iv) testing the reconciliation of the provision to the tax returns.

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As disclosed by management, environmental remediation and related costs accruals (and the potential range of the 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 consideration 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.

These procedures included testing the effectiveness of controls relating to management’s evaluation of NL’s environmental remediation and related matters (including costs and estimates associated with damages for property damage and/or damages for injury to natural resources), including controls over determining whether estimated future expenditures are probable and reasonably estimable, as well as the related financial

statement disclosures.

These procedures also included, among others, (i) obtaining the rollforward of NL’s environmental accrual activity for each matter and, for a sample of sites, reviewing and discussing site activity with management, (ii) obtaining and evaluating responses to letters of audit inquiry from NL’s internal and external legal counsel, and (iii) evaluating the sufficiency of the Company’s environmental remediation and related matters disclosures related to NL.

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Selling, general and administrative

Litigation settlement expense, net

Fixed asset impairment

Loss on deconsolidation of Basic Water Company ("BWC")

Other components of net periodic pension and OPEB expense

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Defined benefit pension plans

Total other comprehensive income (loss), net

Total other comprehensive income, net

Comprehensive income

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Dividends paid to noncontrolling interest

Other comprehensive loss, net

Other comprehensive income, net

Contribution of preferred stock

Equity transactions with noncontrolling

interest, net

interest and other, net

Balance at December 31, 2020

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Other comprehensive income, net

Contribution of preferred stock

Equity transactions with noncontrolling

interest, net

interest and other, net

Balance at December 31, 2021

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Equity transactions with noncontrolling

interest, net

interest and other, net

Balance at December 31, 2022

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Sale of business

Fixed asset impairment

Loss on deconsolidation of BWC

Noncash interest expense

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Accounts and other receivables, net

Land held for development, net

Inventories, net

Land held for development, net

Accounts payable and accrued liabilities

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Capital expenditures

Proceeds from sale of business

Cash, cash equivalents and restricted cash and cash equivalents of business

at time of sale

Cash, cash equivalents and restricted cash of BWC

Purchases of marketable securities

Proceeds from land sales

Proceeds from disposal of marketable securities

Proceeds from sale of business

Proceeds from land sales

Net cash used in investing activities

Cash flows from financing activities:

Indebtedness:

Principal payments

Deferred financing fees

Principal payments on indebtedness

Valhi cash dividends paid

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Years ended December 31,

Cash, cash equivalents and restricted cash and cash equivalents - net change

from operating, investing and financing activities

Cash, cash equivalents and restricted cash and cash

equivalents - net change from:

Operating, investing and financing activities

Effect of exchange rates on cash

Net change for the year

Balance at beginning of year

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Noncash investing activities:

Changes in accruals for capital expenditures

Receivable from sale of business

Change in accruals for capital expenditures

See accompanying Notes to Consolidated Financial Statements.

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We recognize currency transaction gains and losses in income.

Derivatives and hedging activities.

We recognize derivatives as either assets or liabilities measured at fair value.

We recognize the effect of changes in the fair value of derivatives either in net income or other comprehensive income (loss), depending on the intended use of the derivative.

Cash and cash equivalents.

We classify bank time deposits and highly-liquid investments with original maturities of three months or less as cash equivalents.

We classify bank time deposits and highly-liquid investments, including government and commercial notes and bills, with original maturities of three months or less as cash equivalents.

Restricted cash and cash equivalents.

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Such restrictions principally include amounts pledged as collateral with respect to performance obligations or letters of credit required by regulatory agencies for various environmental remediation sites, cash held in escrow under various hold-back agreements with third-party homebuilders associated with our Real Estate Management and Development Segment and cash pledged under debt agreement covenants or legal settlements.

extent the restricted amount relates to a recognized liability, we classify the restricted amount as current or noncurrent according to the corresponding liability.

To the extent the restricted amount relates to a recognized liability, we classify the restricted amount as current or noncurrent according to the corresponding liability.

To the extent the restricted amount does not relate to a recognized liability, we classify restricted cash as a current asset.

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We classify all of our marketable securities as available-for-sale.

Any unrealized gains or losses on our marketable securities are recognized in other income, net on our Consolidated Statements of Income.

Any unrealized gains or losses on our marketable equity securities are recognized in other income, net on our Consolidated Statements of Income.

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

See Notes 6, 11 and 13.

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We allocate costs to each parcel sold on a pro-rata basis associated with the relevant development activity, and the land basis of parcels expected to be sold within one year are presented in prepaid expenses and other on our Consolidated Balance Sheets.

As land parcels are sold, costs of land sales, including land and development costs, are allocated based on specific identification, relative sales value, square footage or a combination of these methods.

As land parcels are sold, costs of land sales, including land and development costs, are allocated based on specific

identification, relative sales value, square footage or a combination of these methods.

All sales and marketing activities and general overhead are charged to selling, general and administrative expense as incurred.

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All of our leases are classified as operating leases.

Operating leases are included in operating lease right-of-use assets, current operating lease liabilities and noncurrent operating lease liabilities in our Consolidated Balance Sheet.

Operating leases are included in operating lease right-of-use assets, current operating lease liabilities and noncurrent operating lease liabilities in our Consolidated Balance Sheets.

See Notes 7 and 10.

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We expense expenditures for maintenance, repairs and minor renewals as incurred that do not improve or extend the life of the assets, including planned major maintenance.

We have a governmental concession with an unlimited term to operate our ilmenite mines in Norway.

We have a governmental concession with an unlimited term to operate our ilmenite mine in Norway.

Mining properties consist of buildings and equipment used in our Norwegian ilmenite mining operations.

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inclusions in taxable income related to GILTI.

We account for the tax effects of a change in tax law as a component of the income tax provision related to continuing operations in the period of enactment, including the tax effects of any deferred income taxes originally

established through a financial statement component other than continuing operations (i.e.

other comprehensive income).

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We state sales net of price, early payment and distributor discounts as well as volume rebates (collectively, variable consideration).

Variable consideration, to the extent present, is recognized as the amount to which we are most-likely to be entitled, using all information (historical, current and forecasted) that is reasonably available to us, and only to the extent that a significant reversal in the amount of the cumulative revenue recognized is not probable of occurring in a future period.

Variable consideration, to the extent present, is

recognized as the amount to which we are most-likely to be entitled, using all information (historical, current and forecasted) that is reasonably available to us, and only to the extent that a significant reversal in the amount of the cumulative revenue recognized is not probable of occurring in a future period.

Differences, if any, between estimates of the amount of variable consideration to which we will be entitled and the actual amount of such variable consideration have 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 occasionally receive partial or full consideration from our customers prior to the completion of our performance obligation (shipment of product).

We record estimated deferred revenue on the amount to which we are most-likely to be entitled and deferred revenue is recognized into revenue as our performance obligation has been satisfied.

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).

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

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As scheduled delivery dates for these orders are within a one year period, under the optional exemption provided by ASC 606, we do not disclose sales allocated to future shipments of partially completed contracts.

Real Estate Management and Development Segment – Revenues from our Real Estate Management and Development Segment involve providing utility services, among other things, to an industrial park located in Henderson, Nevada and we are responsible for the delivery of water to the City of Henderson and various other users through a water distribution system we own.

Real Estate Management and Development Segment – Revenues from our Real Estate Management and Development Segment involve providing 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, we were 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.

These sales involve single performance obligations and we record revenue when we satisfy our performance obligations to our customers generally after the service is performed and our customers become obligated to pay us and it is probable we will receive payment.

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research and development costs.

Selling, general and administrative expenses include costs related to marketing, sales, distribution, shipping and handling, research and development, legal, environmental remediation and administrative functions such as accounting, treasury and finance, and includes costs for salaries and benefits not associated with our manufacturing process, travel and entertainment, promotional materials and professional fees.

Selling, general and administrative expenses include costs related to marketing, sales, distribution, shipping and handling, research and development, legal, environmental remediation and administrative functions such as accounting, treasury and finance, and include costs for salaries and benefits not associated with our manufacturing process,

travel and entertainment, promotional materials and professional fees.

Shipping and handling costs of our Chemicals Segment were approximately $ 112 million in 2020, $ 132 million in 2021 and $ 122 million in 2022.

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We expense advertising and research and development costs as incurred.

Advertising costs were approximately $ 2 million in 2019 and $ 1 million in each of 2020 and 2021.

Research, development and certain sales technical support costs were approximately $ 17 million in 2019, $ 16 million in 2020 and $ 17 million in 2021.

Advertising costs were approximately $ 1 million in each of 2020 and 2021 and $ 2 million in 2022.

Research and development costs were approximately $ 16 million in 2020, $ 17 million in 2021 and $ 16 million in 2022.

Note 2 – Business and geographic segments:

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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 – 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, tool storage, healthcare and a variety of other industries.

CompX is also a leading manufacturer of 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.

All CompX production facilities are in the United States.

● Real Estate Management and Development – 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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Segment assets are comprised of all assets attributable to each reportable operating segment, including goodwill and other intangible assets.

Our investment in the TiO 2 manufacturing joint venture (see Note 7) is included in the

Chemicals Segment’s assets.

Our investment in the TiO 2 manufacturing joint venture (see Note 7) is included in the Chemicals Segment’s assets.

Corporate assets are not attributable to any operating segment and consist principally of cash and cash equivalents, restricted cash and restricted cash equivalents and marketable securities.

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General corporate items:

Securities earnings

Interest income and other

Insurance recoveries

Gain on land sales

Gain on sale of business

Other components of net periodic pension and

Litigation settlement expense, net

Changes in market value of Valhi common stock held by

Other components of net periodic pension and OPEB expense

Changes in market value of Valhi common stock held by subsidiaries

General expenses, net

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Income from continuing operations before income taxes

Included in the determination of Chemicals operating income is a business interruption insurance settlement gain of $ 2.7 million recognized in the third quarter of 2022.

Infrastructure reimbursements and land related income is included in the determination of Real Estate Management and Development operating income.

See Notes 7 and 13.

BMI provides certain utility services, among other things, to an industrial park located in Henderson, Nevada and prior to BWC’s bankruptcy filing on September 10, 2022 was responsible for the delivery of water to the City of Henderson and various other users under long-term contracts through a water delivery system owned and operated by BWC.

BWC’s water delivery system operated on Lake Mead in Nevada.

Due to the Western drought, water levels in Lake Mead have been declining for much of the last twenty years.

As a result of water release curtailments upstream of Lake Mead which

began late in the second quarter, Lake Mead water levels have dropped precipitously to historically low levels.

On June 30, 2022 BWC was no longer able to pump water without the risk of damaging the system and consequently ceased operations at its water intake facility to best preserve the system.

Current estimates of Lake Mead water levels do not indicate lake levels will be sufficient to enable BWC to resume pumping water for the foreseeable future.

We considered BWC’s inability to pump water from Lake Mead to be a triggering event under the ASC 360 Property, Plant, and Equipment , which caused us to evaluate the water system fixed assets for impairment.

Because BWC was unable to deliver water under its current contracts and therefore unable to generate revenue, we determined the water system’s assets were fully impaired except to the extent certain equipment had alternative use outside of BWC’s operations, in which case those assets were written down to estimated salvage value.

The $ 16.4 million impairment charge primarily recognized in the second quarter of 2022 represents the write down of the book value to the estimated salvage value of the assets.

Without the ability to pump and deliver water to its customers, BWC’s operating expenses exceeded its revenues, and on September 10, 2022 BWC and its subsidiaries voluntarily filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Nevada.

Because BWC has filed for bankruptcy protection, we and BMI can no longer affirmatively assert we control BWC and, as such, in accordance with ASC 810, Consolidation, we deconsolidated BWC as of the date of the bankruptcy filing and recognized a loss of $ 2.0 million in the third quarter of 2022 on the deconsolidation.

In addition, BMI had an outstanding intercompany accounts receivable balance with BWC on the date of the bankruptcy filing, and we recognized $ 1.3 million of bad debt expense to fully reserve this balance during the third quarter of 2022.

All of these charges are included in the determination of the Real Estate Management and Development’s operating income in 2022.

Years ended December 31,

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At December 31, 2022 the net assets of our non-U.S.

subsidiaries included in consolidated net assets approximated $ 575 million (in 2020 the total was $ 565 million).

subsidiaries included in consolidated net assets approximated $ 699 million (in 2021 the total approximated $ 575 million).

Years ended December 31,

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Repurchased shares are added to Kronos’ treasury shares and subsequently cancelled upon approval of the Kronos board of directors.

In 2019 and 2020 Kronos acquired 264,992 and 122,489 shares, respectively, of its common stock in market transactions for an aggregate purchase price of $ 3.0 million and $ 1.0 million respectively, and subsequently cancelled all such shares.

In 2021, Kronos acquired 14,409 shares of its common stock in market transactions for an aggregate purchase price of $ .2 million which are accounted for as Kronos’ treasury stock at December 31, 2021.

At December 31, 2021 1,549,110 shares are available for repurchase under these authorizations.

In 2020, Kronos acquired 122,489 shares of its common stock in market transactions for an aggregate purchase price of $ 1.0 million and subsequently cancelled all such shares.

In 2021, Kronos acquired 14,409 shares of its common stock in market transactions for an aggregate purchase price of $ .2 million and subsequently cancelled all such shares.

In 2022, Kronos acquired 217,778 shares of its common stock in market transactions for an aggregate purchase price of $ 2.5 million.

Of these shares, 73,881 shares were purchased in the first quarter and subsequently cancelled, and 143,897 shares were purchased in the fourth quarter and are accounted for as Kronos’ treasury stock at December 31, 2022.

At December 31, 2022, 1,331,332 shares are available for repurchase under this stock repurchase program.

CompX International Inc.

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Repurchased shares will be added to CompX’s treasury and cancelled.

CompX did no t make any repurchases under the plan during 2019 and 2020.

In 2021, CompX acquired 75,000 shares of its Class A common stock in market transactions for an aggregate purchase price of approximately $ 1.3 million and subsequently cancelled all such shares.

CompX did no t make any repurchases under the plan during 2020.

In 2021 CompX acquired 75,000 shares of its Class A common stock in market transactions for an aggregate purchase price of $ 1.3 million and subsequently cancelled all such shares.

During the second quarter of 2022, CompX acquired 78,900 shares of its Class A common stock for an aggregate amount of $ 1.7 million and subsequently cancelled all such shares.

Of the shares repurchased in 2022, 70,000 shares were purchased in a market transaction, and 8,900 shares were purchased from two affiliates in two separate private transactions that were also approved in advance by CompX’s independent directors.

At December 31, 2022, 523,647 shares were available for purchase under these authorizations.

NL Industries, Inc.

During the second quarter of 2022, NL purchased 2,000 shares of its common stock from Kronos for a nominal amount in a private transaction that was approved in advance by NL’s independent directors and subsequently cancelled all such shares.

Discontinued Operations – Waste Control Specialists LLC

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December 31, 2021:

Current assets

Current assets - fixed income securities

Noncurrent assets:

Fixed income securities

Common stocks

December 31, 2022:

Current assets:

Noncurrent assets:

Fixed income securities

Noncurrent assets - fixed income securities

Our marketable securities are primarily invested in U.S.

government treasuries.

The fair value of our marketable securities are either determined using Level 1 inputs (because the securities are actively traded) or determined using Level 2 inputs (because although these securities are traded, in many cases the market is not active and the year-end valuation is generally based on the last trade of the year, which may be several days prior to December 31).

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Kronos’ share of net cost is reported as cost of sales as the related TiO 2 acquired from LPC is sold.

We report distributions Kronos receives from LPC, which generally relate to excess cash generated by LPC from its non-cash production costs, and contributions Kronos makes to LPC, which generally relate to cash required by LPC when it builds working capital, as part of our cash flows from operating activities

in our Consolidated Statements of Cash Flows.

We report distributions Kronos receives from LPC, which generally relate to excess cash generated by LPC from its non-cash production costs, and contributions Kronos makes to LPC, which

generally relate to cash required by LPC when it builds working capital, as part of our cash flows from operating activities in our Consolidated Statements of Cash Flows.

The components of our net cash distributions from (contributions to) LPC are shown in the table below.

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We enter into various operating leases for manufacturing facilities, land and equipment.

Our operating leases are included in operating lease right-of-use assets, current operating lease liabilities and noncurrent operating lease liabilities in our Consolidated Balance Sheet.

Our operating leases are included in operating lease right-of-use assets, current operating lease liabilities and noncurrent operating lease liabilities on our Consolidated Balance Sheets.

Also see Note 10.

1 unchanged sentence

The Leverkusen facility itself, which Kronos owns and which represents approximately one-third of its current TiO 2 production capacity, is located within Bayer’s extensive manufacturing complex.

During 2020 and 2021, our operating lease expense approximated $ 7.6 million and $ 7.7 million, respectively, (which approximates the amount of cash paid during the period for our operating leases included in the determination of our cash flows from operating activities).

During 2020, 2021 and 2022, our operating lease expense approximated $ 7.6 million, $ 7.7 million and $ 5.5 million, respectively, (which approximates the amount of cash paid during the period for our operating leases included in the determination of our cash flows from operating activities).

During 2020, 2021 and 2022, variable lease expense and short-term lease expense were not material.

During 2020 and 2021, we entered into new operating leases which resulted in the recognition of $ 2.5 million and $ 3.8 million, respectively, in right-of-use operating lease assets and corresponding liabilities on our Consolidated Balance Sheet.

At December 31, 2020 and 2021, the weighted average remaining lease term of our operating leases was approximately 15 years and 17 years , respectively, and the weighted average discount rate associated with such leases was

approximately 4.8 % and 5.0 %, respectively.

During 2020, 2021 and 2022, we entered into new operating leases which resulted in the recognition of $ 2.5 million, $ 3.8 million and $ 6.6 million, respectively, in right-of-use operating lease assets

and corresponding liabilities on our Consolidated Balance Sheets.

At December 31, 2021 and 2022, the weighted average remaining lease term of our operating leases was approximately 17 years and 15 years , respectively, and the weighted average discount rate associated with such leases was approximately 5.0 % in both 2021 and 2022.

Such average remaining lease term is weighted based on each arrangement’s lease obligation, and such average discount rate is weighted based on each arrangement’s total remaining lease payments.

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The OPA note receivables represent public infrastructure costs previously incurred for which the Redevelopment Agency has provided its approval for tax increment reimbursement but we have not yet received such reimbursement through tax increment receipts, and are evidenced by a promissory note issued to LandWell by the City of Henderson.

During 2019, 2020 and 2021, we received approval for additional tax increment reimbursement of $ 8.8 million (primarily in the second quarter), $ 19.1 million (all in the first quarter) and $ 15.3 million ($ 6.2 million in the first quarter and $ 9.1 million in the fourth quarter), respectively, which were recognized as other income and are evidenced by a promissory note issued to LandWell by the City of Henderson.

The note receivables bear interest at 6 % annually and in 2021, the City of Henderson extended the Redevelopment Plan for an additional 15 years which allows us to collect any remaining amounts due under the OPA through 2051.

During 2020, 2021 and 2022, we received approval for additional tax increment reimbursement of $ 19.1 million (all in the first quarter), $ 15.3 million ($ 6.2 million in the first quarter and $ 9.1 million in the fourth quarter), and $ 15.2 million ($ 10.0 million in the third quarter and $ 5.2 million in the fourth quarter), respectively, which were recognized as other income and are evidenced by a promissory note issued to LandWell by the City of Henderson.

The note receivables bear interest at 6 % annually and in 2021, the City of Henderson extended the Redevelopment Plan for an additional 15

years which allows us to collect any remaining amounts due under the OPA through 2051.

Any unpaid balances at the end of the agreement are forfeited.

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Subsidiary debt:

Senior Secured Notes

Bank loan Western Alliance Bank

Note payable to Western Alliance Business Trust

BWC Bank loan from Western Alliance Bank

Total subsidiary debt

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The average interest rate on the credit facility for the year ended December 31, 2022 was 5.86 %.

During 2021 we made no borrowings and we repaid $ 97.8 million under this facility, and at December 31, 2021 an additional $ 52.1 million was available for borrowings under this facility.

Kronos – Senior Notes – On September 13, 2017, Kronos International, Inc.

During 2022 we had borrowings of $ .1 million and repayments of $ 51.6 million under this facility, and at December 31, 2022 an additional $ 53.6 million was available for borrowings under this facility.

Kronos – Senior Secured Notes – On September 13, 2017, Kronos International, Inc.

(“KII”), Kronos’ wholly-owned subsidiary, issued € 400 million aggregate principal amount of its 3.75 % Senior Secured Notes due September 15, 2025 (the “Senior Notes”), at par value ($ 477.6 million when issued).

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● have a maturity date of September 15, 2025 .

Kronos may redeem the Senior Notes at redemption prices ranging from 102.813 % of the principal amount, declining to 100 % on or after September 15, 2023.

Kronos may redeem the Senior Notes at 100.938 % of the principal amount, declining to 100 % on or after September 15, 2023.

If Kronos experiences certain specified change of control events, it would be required to make an offer to purchase the Senior Notes at 101 % of the principal amount.

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● are collateralized by a first priority lien on (i) 100 % of the common stock or other ownership interests of each existing and future direct domestic subsidiary of KII and the guarantors, and (ii) 65 % of the voting common stock or other ownership interests and 100 % of the non-voting common stock or other ownership interests of each foreign subsidiary that is directly owned by KII or any guarantor;

● contain a number of covenants and restrictions which, among other things, restrict Kronos’ ability to incur or guarantee additional debt, incur liens, pay dividends or make other restricted payments, or merge or consolidate with, or sell or transfer substantially all of its assets to, another entity, and contain other provisions and restrictive covenants customary in lending transactions of this type (however, there are no ongoing financial maintenance covenants);

provisions and restrictive covenants customary in lending transactions of this type (however, there are no ongoing financial maintenance covenants);

● contain customary default provisions, including a default under any of Kronos’ other indebtedness in excess of $ 50.0 million.

The carrying value of the Senior Notes at December 31, 2021 is stated net of unamortized debt issuance costs of $ 3.5 million (at December 31, 2020 the balance was $ 4.7 million).

Revolving credit facility – On April 20, 2021, Kronos entered into a new global $ 225 million revolving credit facility (“Global Revolver”) which matures in April 2026 .

The Global Revolver replaces Kronos’ previously existing North American and European revolving credit facilities and there were no borrowings on either facility in 2020 and 2021 through their termination concurrent with entering into the Global Revolver.

The carrying value of the Senior Notes at December 31, 2022 is stated net of unamortized debt issuance costs of $ 2.4 million (December 31, 2021 - $ 3.5 million).

Revolving credit facility – On April 20, 2021, Kronos entered into a $ 225 million global revolving credit facility (“Global Revolver”) which matures in April 2026 .

Borrowings under the Global Revolver are available for Kronos’ general corporate purposes.

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The facility contains a number of covenants and restrictions customary in lending transactions of this type which, among other things, restrict the borrowers’ ability to incur additional debt, incur liens, pay additional dividends or merge or consolidate with, or sell or transfer all or substantially all of their assets to another entity and, under certain conditions, requires the maintenance of a fixed charge coverage ratio, as defined in the agreement, of at least 1.0 to 1.0.

Since inception, Kronos has had no borrowings or repayments under the Global Revolver and at December 31, 2021, approximately $ 213 million was available for borrowing under this revolving facility.

Other – In February 2017, a wholly-owned subsidiary of BMI entered into a $ 20.5 million loan agreement with Western Alliance Bank.

The agreement requires semi-annual payments of principal and interest on June 1 and December 1 aggregating $ 1.9 million annually beginning on June 1, 2017 through the maturity date in June 2032 .

The agreement bears interest at 5.34 % and is collateralized by certain real property, including the water delivery system, and revenue streams under the City of Henderson water contract.

The carrying value of the loan is stated net of debt issuance costs of $ .5 million at December 31, 2021.

In December 2019, LandWell entered into a $ 15.0 million loan agreement with Western Alliance Business Trust.

During 2022, Kronos had no borrowings or repayments under its Global Revolver and at December 31, 2022, approximately $ 211 million was available for borrowing under this revolving facility.

Other – In December 2019, LandWell entered into a $ 15.0 million loan agreement with Western Alliance Business Trust.

The agreement requires semi-annual payments of principal and interest on April 15 and October 15 aggregating $ 1.3 million annually beginning on April 15, 2020 through the maturity date in April 2036 and is payable from the tax increment reimbursement funds received under the OPA.

The agreement bears interest at a fixed 4.76 % rate and is collateralized by all tax increment reimbursement funds LandWell receives under the OPA.

Aggregate maturities of long-term debt

Aggregate maturities of debt at December 31, 2021 are presented in the table below.

In February 2017, BWC entered into a $ 20.5 million loan agreement with Western Alliance Bank.

In 2022, BWC repaid $ 8.4 million on this loan prior to September 10, 2022.

As a result of BWC’s bankruptcy filing, BWC is no longer consolidated in our Consolidated Financial Statements, including the loan from Western Alliance Bank (see Note 2).

Aggregate maturities of long-term debt – Aggregate maturities of debt at December 31, 2022 are presented in the table below.

Years ending December 31,

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Accounts payable:

BMI and LandWell

Current accrued liabilities:

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Noncurrent accrued liabilities:

Deferred income

Accrued development costs

Deferred income

Insurance claims and expenses

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Reserve for uncertain tax positions

Deferred payment obligation

The risks associated with certain of our accrued insurance claims and expenses have been reinsured, and the related IBNR receivables are recognized as noncurrent assets to the extent the related liability is classified as a noncurrent liability.

Our reserve for uncertain tax positions is discussed in Note 14.

In 2013 and in conjunction with the acquisition of a controlling interest of our Real Estate Management and Development Segment, we issued a face value $ 11.1 million deferred payment obligation owed to NERT that would not bear interest until December 2023, and was collateralized by the BMI and LandWell interests acquired.

The deferred payment obligation had no specified maturity date.

We were required to make repayments on the deferred payment obligation, in specified amounts, whenever we received distributions from BMI and LandWell, and we were permitted to make voluntary repayments on the deferred payment obligation at any time, in each case without any penalty.

For financial reporting purposes, the obligation was recorded at its acquisition date present value using a 3 % discount rate from December 2023 (when it would become interest bearing at 3 %).

We made repayments of $ 9.6 million during 2020 under the terms of the obligation and recognized an accretion loss of $ .8 million on the early repayment.

In the first quarter of 2021 we voluntarily fully repaid the remaining $ 1.5 million face value outstanding under the obligation and recognized an accretion loss of $ .2 million on the early payment.

Note 11 – Defined contribution and defined benefit retirement:

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

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

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

At December 31, 2022 the U.K.

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Interest cost

Actuarial losses (gains)

Actuarial gains

Benefits paid

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Accrued pension costs:

Accumulated other comprehensive loss - actuarial loss

Accumulated other comprehensive loss - actuarial losses

Accumulated benefit obligations (“ABO”)

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defined benefit pension plans decreased from $ 5.6 million at December 31, 2021 to $ 4.3 million at December 31, 2022 due to the change in our PBO during 2022 exceeding the change in our plan assets during 2022.

The decrease in our PBO in 2021 was primarily attributable to actuarial gains due to the increase in discount rates from year end 2020.

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

The decrease in our PBO in 2022 was primarily attributable to higher 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 components of our net periodic defined benefit pension cost for U.S.

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(In millions)

Net periodic pension benefit cost for U.S.

Interest cost on PBO

Net periodic pension cost for U.S.

Interest cost

Expected return on plan assets

Recognized actuarial losses

Settlement gain

Recognized net actuarial losses

Information concerning our U.S.

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Participants’ contributions

Actuarial losses (gains)

Actuarial gains

Change in currency exchange rates

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defined benefit pension plans decreased from $ 276.6 million at December 31, 2021 to $ 118.1 million at December 31, 2022 due to the change in our PBO during 2022 exceeding the change in plan assets during 2022.

The decrease in our PBO in 2021 was primarily attributable to actuarial gains due to the increase in discount rates from year end 2020 and favorable foreign currency fluctuations, primarily from the strengthening of the U.S.

The decrease in our PBO in 2022 was primarily attributable to higher actuarial gains due to the increase in discount rates from year end 2021 and favorable foreign currency fluctuations, primarily from the strengthening of the U.S.

dollar relative to the euro.

The decrease in our plan assets in 2021 was primarily attributable to unfavorable foreign currency fluctuations, primarily from the strengthening of the U.S.

dollar relative to the euro in addition to the net effects of plan asset returns, employer and participant contributions and benefits paid in 2021.

The decrease in our plan assets in 2022 was primarily attributable to the net effects of negative plan asset returns in 2022, unfavorable currency fluctuations, primarily from the strengthening of the U.S.

dollar relative to the euro, and employer contributions.

The components of our net periodic pension benefit cost for our non-U.S.

plans are presented in the table below.

The amounts shown below for the amortization of prior service cost and recognized net actuarial losses for 2019, 2020

and 2021 were recognized as components of our accumulated other comprehensive income (loss) at December 31, 2018, 2019 and 2020, respectively, net of deferred income taxes and noncontrolling interest.

The amounts shown below for the amortization of prior service cost and recognized net actuarial losses for 2020, 2021 and 2022 were recognized as components of our accumulated other comprehensive income (loss) at December 31, 2019, 2020 and 2021, respectively, net of deferred income taxes and noncontrolling interest.

Years ended December 31,

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These amounts, net of deferred income taxes and noncontrolling interest, are recognized in our accumulated other comprehensive income (loss) at December 31, 2021 and 2022.

We expect approximately $ 16.1 million and $ .1 million of the unrecognized actuarial losses and prior service cost, respectively, will be recognized as components of our periodic defined benefit

pension cost in 2022.

We expect approximately $ 3.8 million and $ .1 million of the unrecognized

actuarial losses and prior service cost, respectively, will be recognized as components of our periodic defined benefit pension cost in 2023.

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

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Fair value at beginning of year

Gain on assets held at end of year

Gain on assets sold during the year

Gain (loss) on assets held at end of year

Gain (loss) on assets sold during the year

Assets purchased

Transfers in (out)

Currency exchange rate fluctuations

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(In millions)

Securities earnings:

Dividends and interest

Interest income and other:

Interest and dividends

Securities transactions, net

Infrastructure reimbursement

Gain on land sales

Infrastructure reimbursements

Insurance recoveries

Currency transactions, net

Disposal of property and equipment, net

Gain on sale of business

Infrastructure reimbursements related to the OPA are discussed in Note 7.

Insurance recoveries relate primarily to amounts NL received from certain of its former insurance carriers, and relate principally to the recovery of prior lead pigment and asbestos litigation defense costs.

NL has agreements with certain of its former insurance carriers pursuant to which the carriers reimburse it for a portion of its future lead pigment litigation defense costs, and one such carrier reimburses NL for a portion of its future asbestos litigation defense costs.

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

While NL continues to seek additional insurance recoveries for lead pigment and asbestos litigation matters, we do not know the extent to which it will be successful in obtaining additional reimbursement for either defense costs or indemnity.

In 2019, NL recognized $ 5.1 million in insurance recoveries which represented recovery of past and future litigation defense costs primarily related to a single insurance recovery settlement.

In the fourth quarter of 2019 and the first quarter of 2020, Kronos recognized gains of $ 2.6 million and $ 1.5 million, respectively, related to an insurance settlement for a property damage claim.

In the third quarter of 2019, NL sold excess property for net proceeds of $ 4.6 million and recognized a pre-tax gain of $ 4.4 million.

In the fourth quarter of 2019, NL sold its insurance and risk management business for proceeds of $ 3.25 million and recognized a pre-tax gain of $ 3.0 million on the sale.

Insurance recoveries

In the third quarter of 2020, BMI recognized a pre-tax gain of $ 4.0 million related to proceeds received associated with a prior land sale.

In 2021 we sold excess property not used in our operations for net proceeds of approximately $ 23.4 million (including $ 8.4 million in the second quarter and $ 15.0 million in the third quarter) and recognized a pre-tax gain of $ 16.0 million (including $ 5.6 million in the second quarter and $ 10.4 million in the third quarter).

Infrastructure reimbursement – Infrastructure reimbursements related to the OPA are discussed in Note 7.

LandWell also has an agreement with the energy utility providing electric power to the Cadence master planned community under which certain costs incurred for the development of power infrastructure may be reimbursed to LandWell.

During 2022, LandWell received $ .8 million (all in the second quarter) in reimbursement for past costs incurred.

Insurance recoveries – In the first quarter of 2020, Kronos recognized a gain of $ 1.5 million related to an insurance settlement for a property damage claim.

On August 24, 2020, LPC temporarily halted production due to Hurricane Laura.

Although storm damage to core processing facilities was not extensive, a variety of factors, including loss of utilities and limited access and availability of employees and raw materials, prevented the resumption of operations until September 25, 2020.

The majority of Kronos’ losses from property damage and its share of LPC’s lost production and other costs resulting from the disruption of operations were covered by insurance.

Kronos recognized a gain of $ 2.7 million related to its business interruption claim in the third quarter of 2022.

Note 14 – Income taxes:

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Nondeductible expenses

Assessment (refund) of prior tax payments, net

Income tax expense

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Income tax expense

Comprehensive provision for income taxes

allocable to:

Comprehensive provision for income taxes allocable to:

Income from continuing operations

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income taxes (or current income tax benefit), including U.S.

personal holding company tax, as applicable, attributable to current-year income (losses) of one of Kronos’ non-U.S.

personal holding company tax, as applicable, attributable to current-year income (losses) of one of our Chemicals Segment’s non-U.S.

subsidiaries, which subsidiary is treated as a dual resident for U.S.

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income tax under the U.S.

dual-resident provisions of the Internal Revenue Code, (iii) deferred income taxes associated with our direct investment in

Kronos and (iv) current and deferred income taxes associated with distributions and earnings from our investment in LandWell and BMI.

dual-resident provisions of the Internal Revenue Code, (iii) deferred income taxes associated with our direct investment in Kronos and (iv) current and deferred income taxes associated with distributions and earnings from our investment in LandWell and BMI.

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

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Net noncurrent deferred tax asset (liability)

Tax authorities are examining certain of our U.S.

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

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

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

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

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

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Pursuant to the one time repatriation tax (Transition Tax) provisions of the 2017 Tax Act which imposed a one-time repatriation tax on post-1986 undistributed earnings, we recognized current income tax expense of $ 74.1 million and elected to pay such tax over an eight year period beginning in 2018.

At December 31, 2021, the balance of our unpaid Transition Tax is $ 50.4 million, which will be paid in annual installments over the remainder of the eight-year period.

Of such $ 50.4 million, $ 44.5 million is recorded as a

noncurrent payable to affiliate (income taxes payable to Contran) classified as a noncurrent liability in our Consolidated Balance Sheet, and $ 5.9 million is included with our current payable to affiliate (income taxes payable to Contran) classified as a current liability (a portion of our noncurrent income tax payable to affiliate was reclassified to our current payable to affiliate for the portion of our 2021 Transition Tax installment due within the next twelve months).

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

In addition, we recognized a non-cash deferred income tax expense of $ 4.7 million primarily related to the revaluation of our net deferred income tax asset in Germany resulting from a decrease in the German trade tax rate.

At December 31, 2022, the balance of our unpaid Transition Tax is $ 44.5 million, which will be paid in annual installments over the remainder of the eight-year period, which ends in 2025.

Of such $ 44.5 million, $ 33.4 million is recorded as a noncurrent payable to affiliate (income taxes payable to Contran) classified as a noncurrent liability in our Consolidated Balance Sheet, and $ 11.1 million is included with our current payable to affiliate (income taxes payable to Contran) classified as a current liability (a portion of our noncurrent income tax payable to affiliate was reclassified to our current payable to affiliate for the portion of our 2022 Transition Tax installment due within the next twelve months).

We recognize deferred income taxes with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock because the exemption under GAAP to avoid such recognition of deferred income taxes is not available to us.

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During 2022, we recognized a non-cash deferred income tax expense with respect to our direct investment in Kronos of $ 1.2 million for the increase in the deferred income taxes required to be recognized with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock, to the extent such increase related to our equity in Kronos’ net income during such period.

We recognized a similar non-cash deferred income tax benefit of $ 2.4 million in 2020 and a non-cash deferred income tax expense of $ .1 million in 2019.

We recognized a similar non-cash deferred income tax expense of $ 5.0 million in 2021 and a non-cash deferred income tax benefit of $ 2.4 million in 2020.

A portion of the net change with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock during such periods related to our equity in Kronos’ other comprehensive income (loss) items, and the amounts shown in the table above for income tax expense (benefit) allocated to other comprehensive income (loss) items includes amounts related to our equity in Kronos’ other comprehensive income (loss) items.

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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.

The 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 our allowable interest expense deduction for 2019 and 2020.

The 2017 Tax Act limited our business interest expense to the sum of our business interest income and 30 % of our 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.

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

We also concluded we were 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 our allowable interest expense deduction for 2019 and 2020.

Consequently, in the first quarter of 2020 we recognized a cash tax benefit of $ 1.0 million related to the reversal of the valuation allowance recognized in 2019 for the portion of the disallowed interest expense we did not expect to fully utilize at December 31, 2019 and we considered such modifications in our 2020 provision for income taxes.

Other provisions of the CARES Act did not have a material impact on our provision for income taxes in 2020.

Although these CARES Act provisions expired at the end of 2020, in 2021 we recognized less disallowed interest expense than in recent years and a lower valuation allowance for the portion of the carryforward we believe does not meet the more-likely-than-not measurement criteria primarily due to the increase in our adjusted taxable income.

During 2022, we determined we were able to utilize a portion of the business interest expense carryforward and accordingly we recognized an aggregate non-cash income tax benefit of $ 2.9 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.

We have evaluated the relevant provisions of the Act and do not expect them to have a material impact on our tax provision.

Tax authorities are examining certain of our U.S.

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

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

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

The following table shows the changes in the amount of our uncertain tax positions (exclusive of the effect of interest and penalties) during 2020, 2021 and 2022:

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Lapse due to applicable statute of limitations

Settlement with taxing authorities

Changes in currency exchange rates

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Under the principles of consolidation we eliminate any gains or losses associated with our common stock to the extent of our proportional ownership interest in each subsidiary.

We recognized losses of $ .2 million in 2019 and $ 1.7 million in 2020 and a gain of $ 3.3 million in 2021 in our Consolidated Statements of Income which represents the unrealized gain (loss) in respect of these shares attributable to the noncontrolling interest of Kronos and NL.

We recognized a loss of $ 1.7 million in 2020, a gain of $ 3.3 million in 2021 and a loss of $ 1.6 million in 2022 in our Consolidated Statements of Income which represents the unrealized gain (loss) in respect of these shares attributable to the noncontrolling interest of Kronos and NL.

Preferred stock.

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Prior to 2020, 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.

Under the plan, we awarded 50,000 shares in each of 2019 and 2020.

Under the plan, we awarded 50,000 shares in 2020.

(The share numbers under the then-existing plan have not been adjusted for the 1-for- 12 reverse stock split in 2020.) In March 2021, 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 100,000 shares could be awarded.

The new plan was approved at our May 2021 shareholder meeting, at which time the prior director stock plan terminated.

We awarded 4,000 shares under this new plan in 2021, and at December 31, 2021, 96,000 shares are available for future award under this new plan.

We awarded 4,000 shares and 2,400 shares under this plan in 2021 and 2022, respectively, and at December 31, 2022, 93,600 shares are available for future award under this new plan.

Stock plans of subsidiaries.

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Balance at beginning of year

Other comprehensive loss:

Amortization of prior service cost and net losses included

in net periodic pension cost

Other comprehensive income:

Amortization of prior service cost and net losses

included in net periodic pension cost

Net actuarial gain (loss) arising during the year

Plan settlement

Balance at end of year

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Balance at beginning of year

Other comprehensive income (loss)

Other comprehensive income

Balance at end of year

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We received $ 1.4 million in 2020, $ 1.5 million in 2021 and $ 1.2 million in 2022 from Contran for this pledge.

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

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

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

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

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

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

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

We received cash payments under the group insurance program from Contran and certain other affiliates not members of our consolidated financial reporting group of $ .7 million in 2019.

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

These amounts also include payments to insurers or reinsurers through EWI for the reimbursement of claims within our applicable deductible or retention ranges that such insurers and reinsurers paid to third parties on our behalf, as

well as amounts for claims and risk management services and various other third-party fees and expenses incurred by the program.

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

The aggregate amount paid under the group insurance program by us, our subsidiaries and our joint venture in 2020 and 2021 was $ 23.1 million and $ 27.1 million, respectively.

The aggregate amounts paid under the program in 2020 and 2021 principally represent premiums for insurance, but also includes payments to insurers or reinsurers for the reimbursement of claims within our applicable deductible or retention ranges that such insurers or reinsurers paid to third parties on our behalf, and amounts for claims and risk management services and various other third-party fees and expenses incurred by the program.

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

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

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

The aggregate amount paid under the group insurance program by us, our subsidiaries and our joint venture in 2020, 2021 and 2022 was $ 23.1 million, $ 27.1 million and $ 25.2 million, respectively, which amounts principally represent insurance premiums.

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

We expect these relationships will continue in 2023.

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We believe the benefits in the form of reduced premiums and broader coverage associated with the group coverage for such policies justify the risk associated with the potential for any uninsured loss.

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

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

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

The program apportions its costs among the participating companies.

We paid Contran $ .2 million in 2019 and $ .3 million in each of 2020 and 2021 for such services.

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

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

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

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

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

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

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

enterprise liability, market share or risk contribution liability, intentional tort, fraud and misrepresentation, violations of state consumer protection statutes, supplier negligence and similar claims.

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

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NL believes these actions are without merit, and intends to continue to deny all allegations of wrongdoing and liability and to defend against all actions vigorously.

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

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

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

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

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

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

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

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The global settlement agreement provides that an aggregate $ 305 million will be paid collectively by the three co-defendants in full satisfaction of all claims resulting in a dismissal of the case with prejudice and the resolution of (i) all pending and future claims by the plaintiffs in the case, and (ii) all potential claims for contribution or indemnity between NL and its co-defendants in respect to the case.

In the agreement, NL expressly denies any and all liability and the dismissal of the

case with prejudice was entered by the court without a final judgment of liability entered against NL.

In the agreement, NL expressly denies any and all liability and the dismissal of the case with prejudice was entered by the court without a final judgment of liability entered against NL.

The settlement agreement fully concludes this matter.

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NL’s sixth installment will be made with funds already on deposit at the court, which is included in noncurrent restricted cash on our Consolidated Balance Sheets, that are committed to the settlement, including all accrued interest at the date of payment, with any remaining balance to be paid by NL (and any amounts on deposit in excess of the final payment would be returned to NL).

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

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

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

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

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

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

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

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

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

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

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

New cases may continue to be filed against us.

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

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

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

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statutes, the resolution of which typically involves the establishment of compliance programs.

It is possible that future developments, such as stricter requirements of environmental laws and enforcement policies, could adversely affect our production, handling, use, storage, transportation,

sale or disposal of such substances.

It is possible that future developments, such as stricter requirements of environmental laws and enforcement policies, could adversely affect our production, handling, use, storage, transportation, sale or disposal of such substances.

We believe all of our facilities are in substantial compliance with applicable environmental laws.

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

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

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

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

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Balance at the end of the year

Amounts recognized in our Consolidated Balance Sheet

at the end of the year:

Amounts recognized in the Consolidated Balance Sheet at the

end of the year:

Current liabilities

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We are involved in certain legal proceedings with a number of our former insurance carriers regarding the nature and extent of the carriers’ obligations to us under insurance policies with respect to certain lead pigment and asbestos lawsuits.

The issue of whether insurance coverage for defense costs or indemnity or both will be found to exist for our

lead pigment and asbestos litigation depends upon a variety of factors and we cannot assure you that such insurance coverage will be available.

The issue of whether insurance coverage for defense costs or indemnity or both will be found to exist for our lead pigment and asbestos litigation depends upon a variety of factors and we cannot assure you that such insurance coverage will be available.

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

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Other matters

Concentrations of credit risk – Sales of TiO 2 accounted for approximately 94 % of our Chemicals Segment’s sales in 2019, 93 % in 2020 and 92 % in 2021.

The remaining sales result from the mining and sale of ilmenite ore (a raw material used in the sulfate pigment production process), and the manufacture and sale of iron-based water treatment chemicals and certain titanium chemical products (derived from co-products of the TiO 2 production processes).

Concentrations of credit risk – Sales of TiO 2 accounted for approximately 93 % of our Chemicals Segment’s sales in 2020 and 92 % in each of 2021 and 2022.

The remaining sales result from the mining and sale of ilmenite ore (a raw

material used in the sulfate pigment production process), and the manufacture and sale of iron-based water treatment chemicals and certain titanium chemical products (derived from co-products of the TiO 2 production processes).

TiO 2 is generally sold to the paint, plastics and paper industries.

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Our Chemicals Segment sells TiO 2 to approximately 4,000 customers, with the top ten customers approximating 34 % of our Chemicals Segment’s net sales in 2020, 32 % in 2021 and 33 % in 2022.

In 2019 and 2020 one customer accounted for approximately 10 % of our Chemicals Segment’s net sales.

One customer accounted for approximately 10 % of our Chemicals Segment’s net sales in both 2020 and 2022.

Our Chemicals Segment did not have sales to a single customer comprising 10% or more of its net sales in 2021.

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One customer of the security products reporting unit accounted for approximately 17 % of the Component Products Segment’s total sales in 2020, 16 % in 2021 and 14 % in 2022.

One customer of the marine components reporting unit accounted for 12 % of the Component Products Segment’s total sales in 2022.

Our Real Estate Management and Development Segment’s revenues are land sales income and water and electric delivery fees.

During 2019 we had sales to three customers that each exceeded 10 % of our Real Estate Management and Development Segment’s net sales related to land sales and one customer related to water delivery sales.

During 2020 we had sales to one customer that exceeded 10 % of our Real Estate Management and Development Segment’s net sales all related to land sales.

During 2020, we had sales to one customer that exceeded 10 % of our Real Estate Management and Development Segment’s net sales related to land sales.

During 2021, we had sales to three customers that each exceeded 10 % of our Real Estate Management and Development Segment’s net sales all related to land sales.

During 2022, we had sales to two customers that each exceeded 10% of our Real Estate Management and Development Segment’s net sales both related to land sales.

Long-term contracts – Our Chemicals Segment has long-term supply contracts that provide for certain of its TiO 2 feedstock requirements through 2026.

The agreements require Kronos to purchase certain minimum quantities of feedstock

with minimum purchase commitments aggregating approximately $ 800 million over the life of the contracts in years subsequent to December 31, 2021 (including approximately $ 500 million committed to be purchased in 2022).

The agreements require Kronos to purchase certain minimum quantities of feedstock with minimum purchase commitments aggregating approximately $ 1.0 billion over the life of the contracts in years subsequent to December 31, 2022 (including approximately $ 600 million committed to be purchased in 2023).

In addition, our Chemicals Segment has other long-term supply and service contracts that provide for various raw materials and services.

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Under applicable law, we, as well as every other member of the Contran Tax Group, are each jointly and severally liable for the aggregate federal income tax liability of Contran and the other companies included in the Contran Tax Group for all periods in which we are included in the Contran Tax Group.

Contran has agreed, however, to indemnify us for any liability for income taxes of the Contran Tax Group in excess of our tax liability computed in accordance with the tax sharing agreement.

Contran has agreed, however,

to indemnify us for any liability for income taxes of the Contran Tax Group in excess of our tax liability computed in accordance with the tax sharing agreement.

Note 19 – Financial instruments:

The following table summarizes the valuation of our short-term investments and financial instruments by the ASC Topic 820 categories as of December 31, 2020 and 2021:

Fair Value Measurements

(In millions)

December 31, 2020:

Marketable securities:

December 31, 2021:

Marketable securities:

See Note 6 for information on how we determine the fair value of our marketable securities.

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Cash, cash equivalents and restricted cash equivalents

Deferred payment obligation

Long-term debt (excluding capitalized leases):

Long-term debt:

Kronos Senior Notes

Valhi credit facility with Contran

BMI bank note payable

LandWell bank note payable

BWC bank note payable

At December 31, 2022, the estimated market price of Kronos’ Senior Notes was € 877 per € 1,000 principal amount.

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See Notes 4 and 10.

BWC is no longer consolidated in our Consolidated Financial Statements at December 31, 2022 (see Notes 2 and 9).

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