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Item 9A. Controls and Procedures

2024-03-07 compared with 2023-03-09 · 337 added, 299 removed, 1386 unchanged (31% of the section changed)

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Management’s Report on Internal Control over Financial Reporting –

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

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

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

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Based on our evaluation under that framework, we have concluded that our internal control over financial reporting was effective as of December 31, 2023.

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

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

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, 2023.

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.

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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OTHER INFORMATION

Not applicable.

N ot a ppl i cab l e.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

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Exhibit Index

Purchase Agreement by and between JFL-WCS Partners, LLC, as Purchaser, and Andrews County Holdings, Inc., as Seller, dated as of December 19, 2017 – incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K (File No.

1-5467) dated January 26, 2018 and filed on January 26, 2018.

Amendment to Purchase Agreement by and between JFL-WCS Partners, LLC, as Purchaser, and Andrews County Holdings, Inc., as Seller, dated as of January 19, 2018 – incorporated by reference to Exhibit 2.2 to our Current Report on Form 8-K (File No.

1-5467) dated January 26, 2018 and filed on January 26, 2018.

Restated Third Amended and Restated Certificate of Incorporation of Valhi, Inc., as amended by Certificate of Amendment filed on May 29, 2020 (effective June 1, 2020) and by Certificate of Elimination of the 6% Series A Preferred Stock filed on August 10, 2020 – incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q (File No.

1-5467) for the quarter ended September 30, 2020.

Amended and Restated By-Laws of Valhi, Inc.

– incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K (File No.

1-5467) dated March 4, 2021.

Description of Capital Stock – incorporated by reference to Exhibit 99.2 of our Current Report on Form 8-K dated May 6, 2021 (file No.

1-5467) and filed on May 6, 2021.

(effective November 2, 2023) – incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed on November 2, 2023.

Description of Capital Stock – incorporated by reference to Exhibit 99.2 of our Current Report on Form 8-K dated May 6, 2021 and filed on May 6, 2021.

Intercorporate Services Agreement between Valhi, Inc.

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

effective as of January 1, 2004 – incorporated by reference to Exhibit 10.1 to NL’s Quarterly Report on Form 10-Q (File No.

1-640) for the quarter ended March 31, 2004.

effective as of January 1, 2004 – incorporated by reference to Exhibit 10.1 to NL’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.

Intercorporate Services Agreement between Contran Corporation and CompX International Inc.

effective January 1, 2004 – incorporated by reference to Exhibit 10.2 to CompX’s Annual Report on Form 10-K (File No.

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

effective January 1, 2004 – incorporated by reference to Exhibit 10.2 to CompX’s Annual Report on Form 10-K for the year ended December 31, 2003.

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

effective January 1, 2004 – incorporated by reference to Exhibit No.

10.1 to Kronos’ Quarterly Report on Form 10-Q (File No.

1-31763) for the quarter ended March 31, 2004.

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

Tax Agreement between Valhi, Inc.

and Contran Corporation dated January 1, 2020 incorporated by reference to Exhibit 10.5 to our Annual Report on Form 10-K (file No.

1-5467) for the year ended December 31, 2019.

2021 Non-employee Director Stock Plan – incorporated by reference to Exhibit 4.4 of the Registration statement on Form S-8 of the Registrant (File No.

and Contran Corporation dated January 1, 2020 incorporated by reference to Exhibit 10.5 to our Annual Report on Form 10-K for the year ended December 31, 2019.

2021 Non-employee Director Stock Plan – incorporated by reference to Exhibit 4.4 of the Registration statement on Form S-8 of the Registrant.

Filed on May 27, 2021.

Kronos Worldwide, Inc.

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

2012 Director Stock Plan – incorporated by reference to Exhibit 4.4 of the Registration statement on Form S-8 of the Registrant.

Filed on May 31, 2012.

CompX International Inc.

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

2012 Director Stock Plan – incorporated by reference to Exhibit 4.4 of the Registration statement on Form S-8 of the Registrant.

Filed on May 31, 2012.

NL Industries, Inc.

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

Filed on May 31, 2012.

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

Exhibit Index

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and Valhi, Inc.

dated January 25, 2019 – incorporated by reference to Exhibit 10.10 to our Annual Report on Form 10-K for the year ended December 31, 2018 (file No.

1-5467) filed on March 11, 2019.

dated January 25, 2019 – incorporated by reference to Exhibit 10.16 to Kronos’ Annual Report on Form 10-K for the year ended December 31, 2018 filed on March 11, 2019.

Formation Agreement dated as of October 18, 1993 among Tioxide Americas Inc., Kronos Louisiana, Inc.

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Indenture, dated as of September 13, 2017, among Kronos International, Inc.

the guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee, collateral agent, paying agent, transfer agent and registrar – incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No.

001-31763) dated September 13, 2017 and filed by Kronos Worldwide, Inc.

on September 13, 2017.

Supplemental Indenture No.

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

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

Exhibit Index

Pledge Agreement, dated as of September 13, 2017, among Kronos International, Inc.

the guarantors named therein and Deutsche Bank Trust Company Americas, as collateral agent – incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K (File No.

001-31763) dated September 13, 2017 and filed by Kronos Worldwide, Inc.

the guarantors named therein and Deutsche Bank Trust Company Americas, as collateral agent – incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K dated September 13, 2017 and filed by Kronos Worldwide, Inc.

on September 13, 2017.

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

Unsecured Revolving Demand Promissory Note dated December 31, 2023 in the principal amount of $150.0 million executed by Valhi, Inc.

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Collateral Agreement dated March 12, 2013 between Valhi, Inc.

and Contran Corporation – incorporated by reference to Exhibit 10.23 to our Annual Report on Form 10-K for the year ended December 31, 2018 (file No.

1-5467) filed on March 11, 2019.

Exhibit Index

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

1-31763) for the quarter ended March 31, 2021.

and Contran Corporation – incorporated by reference to Exhibit 10.23 to our Annual Report on Form 10-K for the year ended December 31, 2018 filed on March 11, 2019.

First Amendment to Credit Agreement dated May 8, 2023 among Kronos Worldwide, Inc., Kronos Louisiana, Inc., Kronos (US), Inc., Kronos Canada, Inc., Kronos Europe NV, Kronos Titan GmbH, Wells Fargo Bank, National Association, as administrative agent, and the lenders a party thereto – incorporated by reference to Exhibit 10.1 to Kronos Worldwide, Inc.’s Current Report on Form 8-K filed on May 9, 2023.

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

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

1-31763) for the quarter ended March 31, 2021.

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

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

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

Subsidiaries of Valhi, Inc.

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Certification

Policy for the Recovery of Erroneously Awarded Compensation .

Exhibit Index

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

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(Vice President and Controller)

Kramer, March 9, 2023

Hayden McIlroy

Hayden McIlroy, March 7, 2024

Norris, March 7, 2024

/s/ Mary A.Tidlund

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Consolidated Balance Sheets – December 31, 2022 and 2023

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

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

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

Consolidated Statements of Comprehensive Income (Loss) – Years ended December 31, 2021,

2022 and 2023

Consolidated Statements of Stockholders’ Equity – Years ended December 31, 2021, 2022 and 2023

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

Opinions on the Financial Statements and Internal Control over Financial Reporting

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of 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”).

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

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

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

Basis for Opinions

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

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

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

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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

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

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

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

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

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

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

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

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

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

Accordingly, we express no such opinion.

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

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

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

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

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

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

Definition and Limitations of Internal Control over Financial Reporting

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

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

transactions and dispositions of the assets of the company;

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

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

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

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

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

Critical Audit Matters

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Income Taxes - Chemicals Segment

As described in Note 14 to the consolidated financial statements, the Company recorded a provision for income taxes of $33.8 million and recorded noncurrent deferred tax asset and deferred tax liability amounts of $40.5 million and $63.5 million, respectively, for the year ended December 31, 2022.

As described in Note 14 to the consolidated financial statements, the Company recorded a benefit for income taxes of $22.4 million and recorded noncurrent deferred tax asset and deferred tax liability amounts of $67.0 million and $31.8 million, respectively, for the year ended December 31, 2023.

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 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.

Significant judgments and estimates are required by management in determining the Company’s consolidated provision for income taxes due to the global nature of the Chemicals Segment’s operations.

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 Company's provision (benefit) 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 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.

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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;

performing procedures over the Company's rate reconciliation;

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

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

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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 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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Accounts and other receivables, net

Refundable income taxes

Receivables from affiliates

Refundable income taxes

Inventories, net

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Preferred stock, $ .01 par value;

500,000 shares authorized and nil shares issued

500,000 shares authorized, none issued

Common stock, $ .01 par value;

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share data)

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Selling, general and administrative

Fixed asset impairment

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

Other components of net periodic pension and OPEB expense

Loss on sale of Basic Power Company (BPC)

Water system fixed asset impairment

Loss on deconsolidation of Basic Water Company (BWC)

Total costs and expenses

Income from continuing operations before income taxes

Income tax expense

Net income from continuing operations

Income from discontinued operations, net of tax

Income (loss) before income taxes

Income tax expense (benefit)

Noncontrolling interest in net income of subsidiaries

Net income attributable to Valhi stockholders

Net income (loss) attributable to Valhi stockholders

Amounts attributable to Valhi stockholders:

Income from continuing operations

Income from discontinued operations

Net income attributable to Valhi stockholders

Basic and diluted net income per share:

Income from continuing operations

Income from discontinued operations

Net income per basic and diluted share

Basic and diluted net income (loss) per share

Basic and diluted weighted average shares outstanding

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)

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Defined benefit pension plans

Total other comprehensive income, net

Total other comprehensive income (loss), net

Comprehensive income

Comprehensive income attributable to noncontrolling interest

Comprehensive income attributable to Valhi stockholders

Comprehensive income (loss) attributable to Valhi stockholders

See accompanying Notes to Consolidated Financial Statements.

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(In millions)

Valhi Stockholders' Equity

comprehensive

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Other comprehensive income, net

Contribution of preferred stock

Equity transactions with noncontrolling

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Balance at December 31, 2022

Net income (loss)

Cash dividends - $ .32 per share

Dividends paid to noncontrolling interest

Other comprehensive income, net

Other comprehensive loss, net

Equity transactions with noncontrolling

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Depreciation and amortization

Net gain from:

Sale of business

Gain from sale of land

Loss on pension plan termination

Water system fixed asset impairment

Fixed asset impairment

Loss on sale of BPC

Loss on deconsolidation of BWC

Noncash interest expense

Benefit plan expense greater than cash funding

Benefit plan expense greater (less) than cash funding

Deferred income taxes

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Capital expenditures

Cash and cash equivalents of BPC at time of sale

Cash, cash equivalents and restricted cash of BWC

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Proceeds from disposal of marketable securities

Proceeds from sale of business

Proceeds from land sales

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CIX) each file periodic reports with the Securities and Exchange Commission (SEC).

In January 2018, we sold Waste Control Specialists LLC (“WCS”), see Note 3.

Organization.

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

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

Simmons, Thomas C.

Connelly (the husband of Ms.

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

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

Connelly and their children and for which Ms.

Simmons or Mr.

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

Any unrealized gains or losses on our marketable equity 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 Operations.

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

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We perform the impairment test by comparing the estimated future undiscounted cash flows (exclusive of interest expense) associated with the asset or asset group to the asset’s net carrying value to determine if a write-down to fair value is required.

During the fourth quarter of 2023, our Chemicals Segment recorded a fixed asset impairment of $ 3.8 million related to the write-off of certain costs resulting from a capital project termination.

Excluding this project, we did not evaluate any long-lived assets for impairment during 2023 because no such impairment indicators were present.

During the preparation of our second quarter 2023 interim financial statements, we identified a prior period misclassification related to the presentation of the gross value of the classes of property and equipment and accumulated depreciation and amortization.

This misclassification had no impact to net property and equipment;

however, total gross property and equipment increased $ 19.1 million (a decrease of $ 5.3 million and $ 45.8 million in land and equipment, respectively, and an increase of $ 5.1 million and $ 65.1 million in buildings and mining properties, respectively), and accumulated depreciation and amortization increased by the same amount.

Property and equipment presented on the December 31, 2022 Consolidated Balance Sheet has been revised to reflect these changes.

We have evaluated the misclassifications and determined the related changes are not material to any previously issued annual or interim financial statements.

Long-term debt.

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Income taxes.

We and our qualifying subsidiaries are members of Contran’s consolidated U.S federal income tax group (the “Contran Tax Group”).

We and our qualifying subsidiaries are members of Contran’s consolidated U.S.

federal income tax group (the “Contran Tax Group”).

We and certain of our qualifying subsidiaries also file consolidated income tax returns with Contran in various U.S.

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We made cash payments for income taxes to Contran of $ 25.5 million in 2021, $ 17.5 million in 2022 and $ 14.2 million in 2023.

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

in our subsidiaries and affiliates who are not members of the Contran Tax Group and undistributed earnings of our Chemicals Segment’s non-U.S.

subsidiaries which are not deemed to be permanently reinvested.

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In some cases, the purchase order is supported by an underlying master sales agreement, but our purchase order acceptance generally evidences the contract with our customer by specifying the key terms of product and quantity ordered, price and delivery and payment terms.

In accordance with ASC 606, Revenue from Contracts with Customers , we record revenue when we satisfy our performance obligations to our customers by transferring control of our products to them, which generally occurs at point of shipment or upon delivery.

In accordance with ASC 606, Revenue from Contracts with Customers , we record revenue when we satisfy our performance obligations

to our customers by transferring control of our products to them, which generally occurs at point of shipment or upon delivery.

Such transfer of control is also evidenced by transfer of legal title and other risks and rewards of ownership (giving the customer the ability to direct the use of, and obtain substantially all of the benefits of, the product), and our customers becoming obligated to pay us and it is probable we will receive payment.

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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.

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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 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.

Revenue is recorded in an amount that reflects the net consideration we expect to receive in exchange for our services.

Prices for our products are based on contracted rates and do not include financing components, noncash consideration or consideration paid to our customers.

As our standard payment terms are less than one year, we have elected the practical expedient under ASC 606 and we have not assessed whether a contract has a significant financing component.

Our revenues also are related to efforts to develop certain real estate in Henderson, Nevada, including approximately 2,100 acres zoned for residential/planned community purposes and approximately 400 acres zoned for commercial and light industrial use.

Real Estate Management and Development Segment – Prior to the bankruptcy filing and deconsolidation on September 10, 2022 of Basic Water Company (BWC), a wholly-owned subsidiary of BMI, revenues from our Real Estate Management and Development Segment involved delivery of water to the City of Henderson and various other users through a water distribution system owned and operated by BWC.

Prior to the sale of Basic Power Company (BPC), a wholly-owned subsidiary of BMI, on December 1, 2023 the revenues also included providing certain utility services to an industrial park located in Henderson, Nevada.

See Notes 2 and 3.

These sales involved single performance obligations, and we recorded revenue when we satisfied our performance obligations to our customers generally after the service was performed and our customers became obligated to pay us and it was probable we would receive payment.

Revenue was recorded in an amount that reflected the net consideration we expected to receive in exchange for our services.

Prices for our products were based on contracted rates and did not include financing components, noncash consideration or consideration paid to our customers.

As our standard payment terms were less than one year, we elected the practical expedient under ASC 606 and we did not assess whether a contract had a significant financing component.

Our revenues also are related to efforts to develop certain real estate in Henderson, Nevada, including approximately 2,100 acres zoned for residential/planned community purposes.

Contracts for land sales are negotiated on an individual basis, involve single performance obligations, and generally require us to complete property development and improvements after title passes to the buyer and we have received all or a substantial portion of the selling price.

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Land sales associated with the residential/planned community have variable consideration components which are based on a percentage of the builder’s ultimate selling price of a residential housing unit to their customer (ranging from 2.5 % to 3.5 % of such sales price).

The amount we recognize when a parcel is sold to a home builder is 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.

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.

By recognizing revenue over time using cost-based input methods, revenues (including variable consideration) and profits are recognized in the same proportion of our progress towards completion of our contractual obligations, with our progress measured by costs incurred as a percentage of total costs estimated to be incurred relative to the parcels sold.

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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 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 $ 132 million in 2021, $ 122 million in 2022 and $ 101 million in 2023.

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We expense advertising and research and development costs as incurred.

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

Advertising costs were approximately $ 1 million in 2021 and $ 2 million in each of 2022 and 2023.

Research and development costs were approximately $ 17 million in 2021, $ 16 million in 2022 and $ 18 million in 2023.

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● Real Estate Management and Development – We operate in real estate management and development through our majority control of BMI and LandWell.

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

BMI and LandWell own real property in Henderson, Nevada.

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

BMI previously, through wholly-owned subsidiaries, also was responsible for the delivery of water to the City of Henderson and various other users through September 2022, and provided utility services to certain industrial customers prior to December 2023.

We evaluate segment performance based on segment operating income, which we define as income before income taxes and interest expense, exclusive of certain non-recurring items (such as gains or losses on disposition of business units and other long-lived assets outside the ordinary course of business and certain legal settlements) and certain general corporate income and expense items (including securities transactions gains and losses and interest and dividend income), which are not attributable to the operations of the reportable operating segments.

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Intersegment sales are not material.

Interest income included in the calculation of segment operating income is not material in 2020, 2021 or 2022.

Interest income included in the calculation of segment operating income is not significant in 2021, 2022 or 2023.

Capital expenditures include additions to property and equipment.

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Total gross margin

Operating income:

Operating income (loss):

Component products

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Interest income and other

Insurance recoveries

Gain on land sales

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Interest expense

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.

Income (loss) before income taxes

Included in the determination of Chemicals operating income is restructuring costs related to workforce reductions of $ 5.8 million (see Note 20) and a fixed asset impairment related to the write-off of certain costs resulting from a capital project termination of $ 3.8 million, both recognized in the fourth quarter of 2023.

Also included in the determination of Chemicals operating income are business interruption insurance settlement gains of $ 2.7 million recognized in the third quarter of 2022 and an aggregate $ 2.5 million recognized in the first, second and third quarters of 2023.

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.

Prior to BWC’s bankruptcy filing on September 10, 2022, BMI 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.

As a result of water release curtailments upstream of Lake Mead which began late in the second quarter of 2022, Lake Mead water levels 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.

We considered BWC’s inability to pump water from Lake Mead to be a triggering event under 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.

The $ 16.4 million impairment charge primarily recognized in the second quarter of 2022 represented 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 filed for bankruptcy protection, we and BMI could 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.

Operating income comparisons between 2023, 2022 and 2021 are also affected by BWC’s water delivery sales and related cost of sales.

Years ended December 31,

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we attribute property and equipment to their physical location.

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

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

At December 31, 2022 and 2023 the net assets of our non-U.S.

subsidiaries included in consolidated net assets approximated $ 699 million and $ 653 million, respectively.

Years ended December 31,

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North America

Asia and other

(In millions)

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

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 2021, Kronos acquired 14,409 shares of its common stock in market transactions for an aggregate purchase price of $ .2 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.

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

In 2023, Kronos acquired 313,814 shares of its common stock in market transactions for an aggregate purchase price of $ 2.8 million.

At December 31, 2023, 1,017,518 shares are available for repurchase under this stock repurchase program.

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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 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.

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.

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.

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.

CompX did no t make any repurchases under the plan during 2023.

At December 31, 2023, 523,647 shares were available for purchase under these authorizations.

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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

Pursuant to an agreement we entered into in December 2017, on January 26, 2018 we completed the sale of our former Waste Management Segment to JFL-WCS Partners, LLC ("JFL Partners"), an entity sponsored by certain investment affiliates of J.F.

Lehman & Company, for consideration consisting of the assumption of all of WCS’ third-party indebtedness and other liabilities.

We recognized a pre-tax gain of $ 4.9 million ($ 4.3 million, net of tax) in the fourth quarter of 2020 related to proceeds received from JFL Partners in final settlement of an earn-out provision in the sale agreement.

As discussed above, BWC filed for Chapter 11 bankruptcy protection on September 10, 2022.

On November 8, 2023, the Bankruptcy Court for the District of Nevada entered an order approving BWC’s plan of reorganization, which provided for the sale of substantially all BWC’s assets and the transfer of substantially all of its operating and other agreements to one of its industrial customers.

The transaction closed on November 17, 2023 at which time BWC discontinued its water delivery operations.

As part of the transaction, BWC is providing transition services to the purchaser for a limited time.

The proceeds of the sale will be used to repay creditors of BWC and its wholly-owned subsidiary.

BWC’s assets may not be sufficient to fully repay its creditors, and the timing of the resolution of the bankruptcy proceedings remains uncertain.

On December 1, 2023, BMI sold its subsidiary BPC, which provides electricity to four customers located in the industrial park, and its sewer system assets to another of its industrial customers.

The sale was for minimal cash consideration and the assumption of liabilities, and upon the closing of the sale we recognized a loss of $ 2.6 million.

BMI is providing transition services to the purchaser of the businesses for a limited time.

With the sale of BPC, we no longer provide services to the industrial park which allows us to focus on land sales and development activity for the residential/planned community.

Note 4 – Accounts and other receivables, net:

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December 31, 2022:

Current assets - fixed income securities

Noncurrent assets:

Fixed income securities

December 31, 2022:

Current assets:

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Noncurrent assets - fixed income securities

December 31, 2023:

Current assets - fixed income securities

Noncurrent assets:

Fixed income securities

Our marketable securities are primarily invested in U.S.

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Note receivables - OPA

Operating lease right-of-use assets

Land held for development

IBNR receivables

Operating lease right-of-use assets

Investment in TiO 2 manufacturing joint venture.

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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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Also see Note 10.

Our Chemicals Segment’s principal German operating subsidiary leases the land under its Leverkusen TiO 2 production facility pursuant to a lease with Bayer AG that expires in 2050.

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.

Our Chemicals Segment’s principal German operating subsidiary leases the land under its Leverkusen TiO 2 production facility pursuant to a lease that expires in 2050.

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

During 2021, 2022 and 2023, our operating lease expense approximated $ 7.7 million, $ 5.5 million and $ 5.6 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 2021, 2022 and 2023, variable lease expense and short-term lease expense were not material.

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.

During 2021, 2022 and 2023, we entered into new operating leases which

resulted in the recognition of $ 3.8 million, $ 6.6 million and $ 4.6 million, respectively, in right-of-use operating lease assets and corresponding liabilities on our Consolidated Balance Sheets.

At December 31, 2022 and 2023, the weighted average remaining lease term of our operating leases was approximately 15 years and 14 years , respectively, and the weighted average discount rate associated with such leases was approximately 5.0 % in both 2022 and 2023.

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Long term lease obligations

With respect to our land lease associated with our Chemical Segment’s Leverkusen facility, we periodically establish the amount of rent for such land lease by agreement with Bayer for periods of at least two years at a time.

With respect to our land lease associated with our Chemical Segment’s Leverkusen facility, we periodically establish the amount of rent for such land lease for periods of at least two years at a time.

The lease agreement provides for no formula, index or other mechanism to determine changes in the rent of such land lease;

rather, any change in the rent is subject solely to periodic negotiation between Bayer and us.

rather, any change in the rent is subject solely to periodic negotiation.

As such, we will account for any change in the rent associated with such lease as a lease modification.

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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 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.

During 2021, 2022 and 2023, we received approval for additional tax increment reimbursement of $ 15.3 million ($ 6.2 million in the first quarter and $ 9.1 million in the fourth quarter), $ 15.2 million ($ 10.0 million in the third quarter and $ 5.2 million in the fourth quarter), and $ 25.2 million ($ 4.8 million in the third quarter and $ 20.4 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:

Kronos International, Inc.

3.75 % Senior Secured Notes due 2025

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, 2023 was 9.20 %.

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).

The Senior Notes:

During 2023 we had no borrowings and repayments of $ 28.0 million under this facility, and at December 31, 2023 an additional $ 56.6 million was available for borrowings under this facility.

3.75 % Senior Secured Notes due 2025 – 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 “Old Notes”) at par value ($ 477.6 million when issued).

The Old Notes:

● bear interest at 3.75 % per annum, payable semi-annually on March 15 and September 15 of each year, payments began on March 15, 2018 ;

● have a maturity date of September 15, 2025 .

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.

Kronos would also be required to make an offer to purchase a specified portion of the Senior Notes at par value in the event that it generates a certain amount of net proceeds from the sale of assets outside the ordinary course of business, and such net proceeds are not otherwise used for specified purposes within a specified time period ;

Kronos may redeem the Old Notes at 100 %, plus accrued and unpaid interest.

If Kronos experiences certain specified change of control events as outlined in the indenture governing its Old Notes, it would be required to make an offer to purchase the Old Notes at 101 % of the principal amount, plus accrued and unpaid interest.

Kronos would also be required to make an offer to purchase a specified portion of the Old Notes at par value, plus accrued and unpaid interest, in the event that it generates a certain amount of net proceeds from the sale of assets outside the ordinary course of business, and such net proceeds are not otherwise used for specified purposes within a specified time period as described in the indenture governing its Old Notes ;

● are fully and unconditionally guaranteed , jointly and severally, on a senior secured basis by Kronos Worldwide, Inc.

and each of its direct and indirect domestic, wholly-owned subsidiaries;

● 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;

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

● have substantially similar collateral, guarantees and covenants to the New Notes.

The carrying value of the Old Notes at December 31, 2023 is stated net of unamortized debt issuance costs of $ 1.6 million (December 31, 2022 - $ 2.4 million).

9.50 % Senior Secured Notes due 2029 – On February 12, 2024, for certain eligible holders of existing Old Notes, KII executed an exchange of € 325 million principal amount of the outstanding Old Notes for newly issued € 276.174 million aggregate outstanding KII 9.50 % Senior Secured Notes due March 2029 (the “New Notes” and together with the Old Notes, the “Senior Secured Notes”) plus additional cash consideration of € 50 million.

Kronos financed the € 50 million cash consideration with a new unsecured term loan from Contran Corporation (described below).

Holders of the Old Notes received for each € 1,000 principal amount of Old Notes exchanged, € 850 in principal amount of New Notes plus a cash payment in an amount equal to € 150 .

Following the exchange, Old Notes totaling € 75 million principal amount that were not exchanged continue to remain outstanding.

In connection with the exchange, the indenture governing the Old Notes was amended to conform to the restrictive covenants in the indenture governing the New Notes and to make other conforming changes.

KII did not receive any cash proceeds from the issuance and delivery of the New Notes in connection with the exchange.

The New Notes:

● bear interest at 9.50 % per annum , payable semi-annually on March 15 and September 15 of each year, payments begin on September 15, 2024 ;

● have a maturity date of March 15, 2029 .

Prior to March 15, 2026, Kronos may redeem some or all of the New Notes at a price equal to 100 % of the principal amount thereof, plus an applicable premium as of the date of the redemption as described in the indenture governing its New Notes, plus accrued and unpaid interest.

On or after March 15, 2026, Kronos may redeem the New Notes at redemption prices ranging from 104.750 % of the principal amount, declining to 100 % on or after March 15, 2028, plus accrued and unpaid interest.

In addition, on or before March 15, 2026, Kronos may redeem up to 40 % of the New Notes with the net proceeds of certain public or private equity offerings at 109.50 % of the principal amount, plus accrued and unpaid interest, provided that following the redemption at least 50 % of the New Notes remain outstanding .

If Kronos or Kronos’ subsidiaries experience certain change of control events, as outlined in the indenture governing its New Notes, Kronos would be required to make an offer to purchase the New Notes at 101 % of the principal amount thereof, plus accrued and unpaid interest.

Kronos would also be required to make an offer to purchase a specified portion of the New Notes at par value, plus accrued and unpaid interest, in the event that Kronos and its subsidiaries generate a certain amount of net proceeds from the sale of assets outside the ordinary course of business, and such net proceeds are not otherwise used for specified purposes within a specified time period as described in the indenture governing Kronos’ New Notes ;

● are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by Kronos Worldwide, Inc.

and each of its direct and indirect domestic, wholly-owned subsidiaries;

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);

● 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, 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 .

Subordinated, Unsecured Term Loan from Contran – As part of the refinancing of a majority of Kronos’ Old Notes discussed above, Kronos borrowed $ 53.7 million (€ 50.0 million) from Contran through the issuance of an unsecured subordinated term promissory note dated February 12, 2024 (the “ Contran Term Loan ”).

The Contran Term Loan is guaranteed by Kronos’ domestic wholly-owned subsidiaries.

Kronos’ obligations under the Contran Term Loan, and the obligations of the guarantors under the related guaranties, are unsecured and subordinated in right of payment to Kronos’ Senior Secured Notes and its $ 225 million global revolving credit facility (Global Revolver).

Interest on the Contran Term Loan is payable in cash at an interest rate of 11.5 %.

The Contran Term Loan matures on demand (but no earlier than

September 2029), is not subject to any amortization payments and is prepayable at par beginning in March 2026.

The restrictive covenants in the Contran Term Loan are substantially similar to those contained in the indenture governing Kronos’ New Notes.

In accordance with Kronos’ related party transaction policy, the audit committee of its board of directors, comprised of the independent directors, approved the terms and conditions of the new term loan from Contran.

Revolving credit facility – On April 20, 2021, Kronos entered into the $ 225 million Global Revolver which matures in April 2026 .

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

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Borrowings by Kronos’ Canadian, Belgian and German subsidiaries are limited to $ 25 million, € 30 million and € 60 million, respectively.

Any amounts outstanding under the Global Revolver bear interest, at Kronos’ option, at the applicable non-base rate (LIBOR, CDOR or EURIBOR, dependent on the currency of the borrowing) plus a margin ranging from 1.5 % to 2.0 %, or at the applicable base rate, as defined in the agreement, plus a margin ranging from .5 % to 2.0 %.

Any amounts outstanding under the Global Revolver bear interest, at Kronos’ option, at the applicable non-base rate (SOFR, CDOR or EURIBOR, dependent on the currency of the borrowing) plus a margin ranging from 1.5 % to 2.0 %, or at the applicable base rate, as defined in the agreement, plus a margin ranging from .5 % to 2.0 %.

The Global Revolver is collateralized by, among other things, a first priority lien on the borrowers’ trade receivables and inventories.

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.

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.

During 2023, Kronos had no borrowings or repayments under its Global Revolver and at December 31, 2023, the full $ 225 million was available for borrowing under this revolving facility.

Other – In December 2019, LandWell entered into the $ 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.

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, 2023 are presented in the table below.

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Total long-term debt

After considering the effect of the exchange of the Old Notes and issuance of the New Notes and Contran Term Loan discussed above, our aggregate maturities of long-term debt would be:

Years ending December 31,

(In millions)

2029 and thereafter

Gross maturities

Less debt issuance costs

We are in compliance with all of our debt covenants at December 31, 2023.

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Accrued sales discounts and rebates

Accrued development costs

Operating lease liabilities

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Accrued development costs

Operating lease liabilities

Deferred income

Insurance claims and expenses

Operating lease liabilities

Other postretirement benefits

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Changes in the funded status of these plans are recognized either in net income, to the extent they are reflected in periodic benefit cost, or through other comprehensive income (loss).

We previously maintained a defined benefit pension plan in the United Kingdom (U.K.) related to a former disposed U.K.

business unit.

In accordance with applicable U.K.

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

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

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

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

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

At December 31, 2022 the U.K.

plan had a benefit obligation of $ 7.8 million, plan assets of $ 9.3 million and a pension plan asset of $ 1.5 million was recognized in our Consolidated Balance Sheet.

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

The buy-out was completed with existing plan funds.

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

pension plan were removed from our Consolidated Financial Statements and a non-cash pension plan termination loss of $ 6.2 million was recognized in the second quarter of 2023.

We expect to contribute the equivalent of approximately $ 18 million to all of our defined benefit pension plans during 2024.

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Interest cost

Actuarial gains

Actuarial losses (gains)

Benefits paid

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The total net underfunded status of our U.S.

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 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.

defined benefit pension plans decreased from $ 4.3 million at December 31, 2022 to $ 2.4 million at December 31, 2023 due to the change in our plan assets during 2023 exceeding the change in our PBO during 2023.

The increase in our plan assets in 2023 was primarily attributable to improved returns on plan assets.

The decrease in our PBO in 2023 was primarily attributable to lower actuarial gains due to the decrease in discount rates from year end 2022.

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

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Participants’ contributions

Actuarial gains

Actuarial losses (gains)

Change in currency exchange rates

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The total net underfunded status of our non-U.S.

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 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.

defined benefit pension plans increased from $ 118.1 million at December 31, 2022 to $ 141.1 million at December 31, 2023 due to the change in our PBO during 2023 exceeding the change in plan assets during 2023.

The increase in our PBO in 2023 was primarily attributable to higher actuarial losses due to the decrease in discount rates from year end 2022 and unfavorable currency fluctuations, primarily from the weakening of the U.S.

dollar relative to the euro.

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.

The increase in our plan assets in 2023 was primarily attributable to positive plan asset returns in 2023 and favorable currency fluctuations (primarily from the weakening of the U.S.

dollar relative to the euro) and employer contributions.

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The Bayer fund periodic reports are subject to audit by the German pension regulator.

● In Canada, we currently have a plan asset target allocation of 10 - 20 % to equity securities and 80 - 90 % to fixed income securities.

● In Canada, we currently have a plan asset target allocation of up to 10 % to equity securities and 90 – 100 % to fixed income securities.

We expect the long-term rate of return for such investments to approximate the applicable equity or fixed income index.

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● In the U.S.

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

The expected long-term rate of return for such investments is approximately 7 % , 5 % and 4 % , respectively (before plan administrative expenses).

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

The expected long-term rate of return for our equity securities and fixed income securities is approximately 7 % and 5 %, respectively (before plan administrative expenses).

Approximately 98 % of our U.S.

plan assets are invested in funds that are valued at net asset value (NAV) and not subject to classification in the fair value hierarchy.

● We also have plan assets in Belgium and the United Kingdom.

● We also have plan assets in Belgium.

The Belgian plan assets are invested in certain individualized fixed income insurance contracts for the benefit of each plan participant as required by the local regulators and are therefore a Level 3 input.

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

We had plan assets in the United Kingdom invested primarily in insurance contracts

that were a Level 3 input as of December 31, 2022.

During 2023, we completed a termination and buy-out of our pension plan in the United Kingdom resulting in a $ 6.2 million settlement loss.

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

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(In millions)

Local currency equities

Non local currency equities

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Assets purchased

Transfers in (out)

Transfers out

Currency exchange rate fluctuations

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Real Estate Management and Development:

Water delivery

Utility and other

Water delivery

Note 13 – Other income, net:

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Infrastructure reimbursement

Gain on land sales

Currency transactions, net

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).

Gain on land sales

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.

LandWell also has agreements with certain utility providers servicing the Cadence master planned community under which certain costs incurred for the development of power infrastructure may be reimbursed to LandWell.

LandWell received $ .8 million in reimbursement during the second quarter of 2022 and $ .3 million during the third quarter of 2023 for past costs incurred.

Insurance recoveries – 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.

Kronos recognized gains of $ 2.7 million and $ 2.5 million in 2022 and 2023, respectively, related to its business interruption claim.

NL received $ .5 million in insurance recoveries in 2023 and recoveries in each of 2021 and 2022 were nominal.

Land sales – 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 gain of $ 16.0 million (including $ 5.6 million in the second quarter and $ 10.4 million in the third quarter).

In the second quarter of 2023, we sold excess property not used in our operations for net proceeds of approximately $ 1.8 million and recognized a gain of $ 1.5 million.

Note 14 – Income taxes:

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(In millions)

Pre-tax income:

Pre-tax income (loss):

United States

Expected tax expense at U.S.

federal statutory income tax

Expected tax expense (benefit) at U.S.

federal statutory

income tax rate of 21 %

Incremental net tax benefit on earnings and losses of U.S.

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Global intangible low-tax income, net

Tax rate changes

state income taxes, net

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Nondeductible expenses

Income tax expense

Components of income tax expense:

Income tax expense (benefit)

Components of income tax expense (benefit):

Currently payable:

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federal and state

Income tax expense

Comprehensive provision for income taxes allocable to:

Income from continuing operations

Discontinued operations

Income tax expense (benefit)

Comprehensive provision (benefit) for income taxes

allocable to:

Net income (loss)

Other comprehensive income (loss):

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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, 2022 and 2023 are summarized in the following table.

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Net noncurrent deferred tax asset (liability)

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).

At December 31, 2022, we have concluded that no deferred income tax asset valuation allowance is required to be recognized with respect to such carryforwards, principally because (i) such carryforwards have an indefinite carryforward period, (ii) we have utilized a portion of such carryforwards during the most recent three-year period and (iii) we currently expect to utilize the remainder of such carryforwards over the long term.

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

We periodically review our deferred tax assets (DTAs) to determine if a valuation allowance is required.

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

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

We have concluded that no deferred income tax asset valuation allowance is required to be recognized with respect to such carryforwards, principally because (i) such carryforwards have lengthy carryforward periods (the German and Belgian carryforwards may be carried forward indefinitely and the Canadian carryforwards may be carried forward 20 years ), (ii) we have utilized a portion of such carryforwards during the most recent three-year period and (iii) we currently expect to utilize the remainder of such carryforwards over the long term.

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

The 2017 Tax Act limited 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.

At December 31, 2022 and December 31, 2023, we have recorded deferred tax assets of $ 12.5 million and $ 14.7 million, respectively, for the carryforwards associated with the nondeductible portion of our interest expense and have concluded we are required to recognize a valuation allowance for such deferred tax asset under the more-likely-than-not recognition criteria.

During 2023 we recognized a non-cash deferred income tax expense of $ 2.2 million with respect to the valuation allowance recorded on additional interest expense carryforwards.

Prior to the enactment of the 2017 Tax Act the undistributed earnings of our Chemicals Segment’s European subsidiaries were deemed to be permanently reinvested (we had not made a similar determination with respect to the undistributed earnings of our Chemicals Segment’s Canadian subsidiary).

Pursuant to the one time repatriation tax (Transition Tax) provisions of the 2017 Tax Act which imposed a one-time repatriation tax on post-1986 undistributed earnings, 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, 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).

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 in annual installments over an eight-year period beginning in 2018.

At December 31, 2023, the balance of our unpaid Transition Tax is $ 33.3 million with two remaining payments of $ 14.8 million due in 2024 and $ 18.5 million due in 2025.

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

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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The maximum amount of such deferred income tax liability we would be required to have recognized (the cap) is $ 153.6 million.

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

During 2023, we recognized a non-cash deferred income tax benefit with respect to our direct investment in Kronos of $ 6.4 million for the decrease 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 decrease related to our equity in Kronos’ net income during such period.

We recognized a similar non-cash deferred income tax expense of $ 1.2 million in 2022 and $ 5.0 million in 2021.

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.

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

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

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.

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.

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

Because of the inherent uncertainties involved in settlement initiatives and court and tax proceedings, 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.

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Amount at beginning of year

Net increase (decrease):

Tax positions taken in prior periods

Tax positions taken in current period

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Amount at end of year

If our uncertain tax positions were recognized, a benefit of $ 3.5 million at December 31, 2022, would affect our effective income tax rate.

We currently estimate that our unrecognized tax benefits will decrease by approximately $ 1.2 million, excluding interest, during the next twelve months related to the expiration of certain statutes of limitations.

At December 31, 2023, all of our uncertain tax benefits are classified as a component of our noncurrent deferred tax asset.

If our uncertain tax position at December 31, 2023 was recognized, a benefit of $ 2.8 million would affect our effective income tax rate.

We currently estimate that our unrecognized tax benefits will not change materially during the next twelve months.

We and Contran file income tax returns in U.S.

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We accrue interest and penalties on our uncertain tax positions as a component of our provision for income taxes.

We accrued interest and penalties of $ .8 million during 2020, $ .7 million during 2021 and $ .2 million during 2022, and at December 31, 2021 and 2022 we had $ .9 million and $ .1 million, respectively, accrued for interest and an immaterial amount accrued for penalties for our uncertain tax positions.

We accrued interest and penalties of $ .7 million during 2021, $ .2 million during 2022 and nil during 2023, and at December 31, 2022 and 2023 we had $ .1 million and nil , respectively, accrued for interest and penalties for our uncertain tax positions.

Note 15 – Noncontrolling interest in subsidiaries:

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(In millions)

Noncontrolling interest in net income of subsidiaries:

Noncontrolling interest in net income (loss) of subsidiaries:

Kronos Worldwide

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Balance at December 31, 2021, 2022 and 2023

Valhi common stock .

We issued a nominal number of shares of Valhi common stock during 2020, 2021 and 2022, associated with annual stock awards to members of our board of directors.

Valhi share repurchases and cancellations.

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Under Delaware Corporation Law, 100 % (and not the proportionate interest) of a parent company’s shares held by a majority-owned subsidiary of the parent is considered to be treasury stock for voting purposes.

As a result, our common shares outstanding for financial reporting purposes differ from those outstanding for legal purposes.

As a result, our common shares outstanding for financial reporting purposes differ from those outstanding for legal

Any unrealized gains or losses on the shares of our common stock attributable to the noncontrolling interest of Kronos and NL are recognized in the determination of each of Kronos and NL’s respective net income or loss.

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 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.

At December 31, 2019, our outstanding preferred stock consisted of 5,000 shares of our Series A Preferred Stock having a liquidation preference of $ 133,466.75 per share, or an aggregate liquidation preference of $ 667.3 million.

The outstanding shares of Series A Preferred Stock were held by Contran and represented all of the shares of Series A Preferred Stock we were authorized to issue.

The preferred stock had a par value of $ .01 per share and paid a non-cumulative cash dividend at an annual rate of 6 % of the aggregate liquidation preference only when authorized and declared by our board of directors.

The shares of Series A Preferred Stock were non-convertible, and the shares did not carry any redemption or call features (either at our option or the option of the holder).

A holder of the Series A shares did not have any voting rights, except in limited circumstances, and was not entitled to a preferential dividend right that is senior to our shares of common stock.

We had not declared any dividends on the Series A Preferred Stock since its issuance.

Effective August 10, 2020, we, Contran and a wholly owned subsidiary of Contran entered into a contribution agreement pursuant to which, on August 10, 2020, the 6 % Series A Preferred Stock was voluntarily contributed to our capital for no consideration and without the issuance of additional securities by us.

Our independent directors approved acceptance of such contribution and entering into the contribution agreement.

The contribution had no impact on our consolidated financial position, results of operations or liquidity and the contribution did not have any tax consequences to us.

On August 10, 2020, following the contribution of the 6 % Series A Preferred Stock to us, we filed a Certificate of Elimination with the Secretary of State of Delaware and, as a result, the 5,000 shares that were designated as 6 % Series A Preferred Stock have been returned to the status of authorized but unissued shares of the preferred stock, $.01 par value per share, without designation as to series.

We recognized a gain of $ 3.3 million in 2021 , a loss of $ 1.6 million in 2022 and a loss of $ 1.7 million in 2023 in our Consolidated Statements of Operations which represents the unrealized gain (loss) in respect of these shares attributable to the noncontrolling interest of Kronos and NL.

Valhi director stock plan.

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

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.

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.

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At December 31, 2023, Kronos, NL and CompX had 97,100 , 200,000 and 124,450 shares of their respective common stock available for future award under respective plans.

Accumulated other comprehensive income (loss).

Accumulated other comprehensive loss.

Accumulated other comprehensive income (loss) attributable to Valhi stockholders comprises changes in equity as presented in the table below.

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Balance at beginning of year

Other comprehensive gain (loss) arising during the year

Other comprehensive income (loss) arising during the year

Balance at end of year

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Balance at beginning of year

Other comprehensive income

Other comprehensive income (loss)

Balance at end of year

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Corporations that may be deemed to be controlled by or affiliated with such individuals sometimes engage in (a) intercorporate transactions such as guarantees, management and expense sharing arrangements, shared fee arrangements, joint ventures, partnerships, loans, options, advances of funds on open account, and sales, leases and exchanges of assets, including securities issued by both related and unrelated parties and (b) common investment and acquisition strategies, business combinations, reorganizations, recapitalizations, securities repurchases, and purchases and sales (and other acquisitions and dispositions) of subsidiaries, divisions or other business units, which transactions have involved both related and unrelated parties and have included transactions which resulted in the acquisition by one related party of a publicly-held noncontrolling interest in another related party.

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

and related entities consider, review and evaluate such transactions.

Depending upon the business, tax and other objectives then relevant, it is possible that we might be a party to one or more such transactions in the future.

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When we borrow from related parties, we are generally able to pay a lower rate of interest than we would pay if we borrowed from unrelated parties.

See Note 9 for more information on the Valhi credit facility with Contran.

We paid Contran $ 14.2 million, $ 10.4 million and $ 9.2 million in interest on borrowings and unused commitment fees under credit facilities in 2020, 2021 and 2022, respectively.

We paid Contran $ 10.4 million, $ 9.2 million and $ 10.3 million in interest on borrowings and unused commitment fees under Valhi’s Contran credit facility in 2021, 2022 and 2023, respectively.

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

See Note 9 for more information on the Kronos term loan with Contran and the Valhi credit facility with Contran.

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

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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.

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

The program apportions its costs among the participating

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

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

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

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

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

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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.

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

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

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

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

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.

NL believes it has substantial defenses to these actions and NL intends to continue to deny all allegations of wrongdoing and liability and to defend against all actions vigorously.

We do not believe it is probable we have incurred any liability with respect to pending lead pigment litigation cases to which 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:

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

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.

NL made the initial $ 25.0 million payment in September 2019 and the first, second, third and fourth annual installment payments of $ 12.0 million each in September 2020, 2021, 2022 and 2023.

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

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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.

The resolution of any of these cases could result in the recognition of a loss contingency accrual that could have a material adverse impact on our net income for the interim or annual period during which such liability is recognized and a material adverse impact on our consolidated financial condition and liquidity.

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Certain of these proceedings involve claims for substantial amounts.

Although we may be jointly and severally liable for these costs, in most cases we are only one of a number of PRPs who may also be jointly and severally liable, and among whom costs may be shared or allocated.

Although we may be jointly and severally liable for these costs, in most cases NL is only one of a number of PRPs who may also be jointly and severally liable, and among whom costs may be shared or allocated.

In addition, we are occasionally named as a party in a number of personal injury lawsuits filed in various jurisdictions alleging claims related to environmental conditions alleged to have resulted from our operations.

16 unchanged sentences

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

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

At December 31, 2022 and December 31, 2023, 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.

20 unchanged sentences

At December 31, 2023, there were approximately five sites for which NL is not currently able to reasonably estimate a range of costs.

For these sites, generally the investigation is in the early stages, and NL is unable to determine whether or not NL actually had any association with the site, the nature of its responsibility, if any, for the contamination at the site, if any, and the extent of contamination at and cost to remediate the site.

of contamination at and cost to remediate the site.

The timing and availability of information on these sites is dependent on events outside of NL’s control, such as when the party alleging liability provides information to NL.

16 unchanged sentences

Other matters

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).

Concentrations of credit risk – Sales of TiO 2 accounted for approximately 92 % of our Chemicals Segment’s sales in each of 2021 and 2022 and 90 % in 2023.

The remaining sales result from the 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.

1 unchanged sentence

Our Chemicals Segment sells TiO 2 to approximately 3,000 customers, with the top ten customers approximating 32 % of our Chemicals Segment’s net sales in 2021, 33 % in 2022 and 35 % in 2023.

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

One customer accounted for approximately 10 % of our Chemicals Segment’s net sales in 2022 and 12 % in 2023.

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

2 unchanged sentences

Our Component Products Segment’s products are sold primarily in North America to original equipment manufacturers.

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

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.

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

One customer of the security products reporting unit accounted for approximately 16 % of the Component Products Segment’s total sales in 2021, 14 % in 2022 and 24 % in 2023 (of which 11 % relates to a pilot project).

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 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.

Our Real Estate Management and Development Segment’s revenues are land sales income and water (through September 2022) and electric delivery fees (prior to December 2023).

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.

During 2023, we had sales to five customers that each exceeded 10 % of our Real Estate Management and Development Segment’s net sales all 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 $ 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).

The agreements require Kronos to purchase certain minimum quantities of feedstock with minimum purchase commitments aggregating approximately $ 583 million over the life of the contracts in years subsequent to December 31, 2023 (including approximately $ 465 million committed to be purchased in 2024).

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

8 unchanged sentences

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:

6 unchanged sentences

Long-term debt:

Kronos Senior Notes

Kronos 3.75 % Senior Secured Notes due 2025

Valhi credit facility with Contran

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.

The fair value of Kronos’ Senior Notes was based on quoted market prices;

however, these quoted market prices represent Level 2 inputs because the markets in which the Senior Notes trade were not active.

At December 31, 2023, the estimated market price of Kronos’ 3.75 % Senior Secured Notes due 2025 was € 959 per € 1,000 principal amount.

The fair value of Kronos’ 3.75 % Senior Secured Notes due 2025 was based on quoted market prices;

however, these quoted market prices represent Level 2 inputs because the markets in which the 3.75 % Senior Secured Notes due 2025 trade were not active.

Fair values of variable interest rate debt and other fixed-rate debt are deemed to approximate book value.

1 unchanged sentence

See Notes 4 and 10.

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

Note 20 – Restructuring costs:

As part of overall cost saving measures to improve Kronos’ long-term cost structure, during the third quarter of 2023 Kronos began implementing certain voluntary and involuntary workforce reductions.

A substantial portion of Kronos’ workforce reductions were accomplished through voluntary programs for which eligible workforce reduction costs are recognized at the time both the employee and employer are irrevocably committed to the terms of the separation.

These workforce reductions impacted approximately 100 individuals and are substantially completed.

Kronos recognized a total of approximately $ 6 million in selling, general and administrative expense related to these workforce reductions in 2023.

Kronos does not expect to accrue any further material amounts associated with the affected individuals who are providing service to Kronos past December 31, 2023.

Accrued severance costs at December 31, 2023 are expected to be paid by the first quarter of 2024 and are included in accrued liabilities – other on our Consolidated Balance Sheet.

A summary of the activity in Kronos’ accrued workforce reduction costs for 2023 is shown in the table below (in millions):

Accrued workforce reduction costs as of January 1, 2023

Workforce reduction costs accrued

Workforce reduction costs paid

Currency translation adjustments, net

Accrued workforce reduction costs at December 31, 2023

Amounts recognized in the balance sheet:

Current liability

Noncurrent liability

Note 21 – Recent Accounting Pronouncements:

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

Improvements to Reportable Segment Disclosures .

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

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

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

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

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

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

Improvements to Income Tax Disclosures .

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

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

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

The ASU may be applied prospectively;

however, entities have the option to apply it retrospectively.

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

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

What changed 10-K

Item 9A. Controls and Procedures