NL INDUSTRIES
2024
ANNUAL REPORT
NL INDUSTRIES, INC. CORPORATE AND OTHER INFORMATION
Board of Directors
Loretta J. Feehan
Chair of the Board (non-executive)
Financial Consultant
Kevin B. Kramer (a)
Senior Advisor
ATI Inc.
Michael S. Simmons
Vice Chairman of the Board
John E. Harper (a)(b)
Private Investor
Meredith W. Mendes
Chief Financial Officer
Pierson Ferdinand LLP
Cecil H. Moore, Jr. (a)(b)
Retired Partner
KPMG LLP
Courtney J. Riley
President and
Chief Executive Officer
Board Committees
(a) Audit Committee
(b) Management Development and
Compensation Committee
Corporate Officers
Michael S. Simmons
Vice Chairman of the Board
Courtney J. Riley
President and Chief Executive Officer
Andrew B. Nace
Executive Vice President
Amy A. Samford
Executive Vice President and
Chief Financial Officer
Bryan A. Hanley
Senior Vice President and Treasurer
John R. Powers, III
Senior Vice President and General
Counsel
Erica A. Austin
Vice President, Employee Benefits
Bart W. Reichert
Vice President, Internal Audit
Amy E. Ruf
Vice President and Controller
Darci B. Scott
Vice President, Tax
Kristin B. McCoy
Executive Vice President, Tax
Management of Subsidiary and
Affiliate
CompX International Inc.
Scott C. James
Director, President and
Chief Executive Officer
Kronos Worldwide, Inc.
James M. Buch
Director, President and
Chief Executive Officer
Annual Meeting
The 2025 Annual Meeting of Stockholders will
be held at the Conference Center at Three
Lincoln Centre, 5430 LBJ Freeway, Suite 350,
Dallas, Texas, 75240-2620, on the day and
time as set forth in the notice of the meeting,
proxy statement and form of proxy that will be
furnished to stockholders in advance of the
meeting.
Form 10-K Report
The Companyʼs Annual Report on Form 10-K
for the year ended December 31, 2024, as
filed with the Securities and Exchange
Commission, is printed as part of this Annual
Report. Additional copies are available without
charge upon written request to:
Bryan A. Hanley
Investor Relations
NL Industries, Inc.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2620
Transfer Agent
Computershare acts as transfer agent,
registrar and dividend paying agent for the
Companyʼs common stock.
Communications regarding stockholder
accounts, dividends and change of address
should be directed to:
Computershare Trust Company, N.A.
P.O. Box 43006
Providence, Rhode Island 02940-3006
Telephone: (877) 373-6374
http://www.computershare.com/investor
Visit us on the Web
http://www.nl-ind.com
Stock and Class A Exchanges
NLʼs common shares are listed on the New York Stock Exchange under
the symbol “NL.”
CompXʼs Class A common shares are listed on the NYSE American
under the symbol “CIX.”
Kronosʼ common shares are listed on the New York Stock Exchange
under the symbol “KRO.”
(a)(b)
John A. Sunny
Executive Vice President and
Chief Information Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-640
NL INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
New Jersey
13-5267260
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2620
(Address of principal executive offices)
Registrant’s telephone number, including area code: (972) 233-1700
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock
NL
NYSE
No securities are registered pursuant to Section 12(g) of the Act.
Indicate by check mark:
If the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
If the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during
the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company or emerging growth
company (as defined in Rule 12b-2 of the Act). See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
☐
Non-accelerated filer
☒ Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262 (b)) by the registered public accounting firm that prepared or issued its audit
report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the 8.5 million shares of voting stock held by nonaffiliates of NL Industries, Inc. as of June 30, 2024 (the last business
day of the Registrant’s most recently-completed second fiscal quarter) approximated $51.0 million.
Number of shares of the registrant’s common stock, $.125 par value per share, outstanding on February 28, 2025: 48,847,734.
Documents incorporated by reference
The information required by Part III is incorporated by reference from the Registrant’s definitive proxy statement to be filed with the
Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this report.
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PART I
ITEM 1.
BUSINESS
The Company
NL Industries, Inc. was organized as a New Jersey corporation in 1891. Our common stock trades on the New
York Stock Exchange, or the NYSE, under the symbol NL. References to “NL Industries,” “NL,” the “Company,” the
“Registrant,” “we,” “our,” “us” and similar terms mean NL Industries, Inc. and its subsidiaries and affiliate, unless the
context otherwise requires.
Our principal executive offices are located at Three Lincoln Center, 5430 LBJ Freeway, Suite 1700, Dallas, TX
75240. Our telephone number is (972) 233-1700. We maintain a website at www.nl-ind.com.
Business summary
We are primarily a holding company. We operate in the component products industry through our majority-
owned subsidiary, CompX International Inc. (NYSE American: CIX). We operate in the chemicals industry through our
noncontrolling interest in Kronos Worldwide, Inc. CompX and Kronos (NYSE: KRO) each file periodic reports with the
Securities and Exchange Commission (“SEC”).
Organization
At December 31, 2024, Valhi, Inc. (NYSE: VHI) held approximately 83% of our outstanding common stock and
a wholly-owned subsidiary of Contran Corporation held approximately 91% of Valhi’s outstanding common stock. As
discussed in Note 1 to our Consolidated Financial Statements, Lisa K. Simmons and a trust established for the benefit of
Ms. Simmons and her late sister and their children (the “Family Trust”) may be deemed to control Contran, and therefore
may be deemed to indirectly control the wholly-owned subsidiary of Contran, Valhi and us.
Forward-looking statements
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, as amended. Statements in this Annual Report that are not historical facts are
forward-looking in nature and represent management’s beliefs and assumptions based on currently available information.
In some cases, you can identify forward-looking statements by the use of words such as “believes,” “intends,” “may,”
“should,” “could,” “anticipates,” “expects” or comparable terminology, or by discussions of strategies or trends. Although
we believe the expectations reflected in such forward-looking statements are reasonable, we do not know if these
expectations will be correct. Such statements by their nature involve substantial risks and uncertainties that could
significantly impact expected results. Actual future results could differ materially from those predicted. The factors that
could cause actual future results to differ materially from those described herein are the risks and uncertainties discussed
in this Annual Report and those described from time to time in our other filings with the SEC and include, but are not
limited to, the following:
•
Future supply and demand for our products;
•
Kronos’ ability to realize expected cost savings from strategic and operational initiatives;
•
Kronos’ ability to integrate acquisitions, including Louisiana Pigment Company, L.P., into its operations and
realize expected synergies and innovations;
•
The extent of the dependence of certain of our businesses on certain market sectors;
•
The cyclicality of our businesses (such as Kronos’ TiO2 operations);
•
Customer and producer inventory levels;
•
Unexpected or earlier-than-expected industry capacity expansion (such as the TiO2 industry);
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•
Changes in raw material and other operating costs (such as energy, ore, zinc, aluminum, steel and brass costs)
or the implementation of tariffs on imported raw materials and our ability to pass those costs on to our
customers or offset them with reductions in other operating costs;
•
Changes in the availability of raw material (such as ore);
•
General global economic and political conditions that harm the worldwide economy, disrupt our supply
chain, increase material and energy costs or reduce demand or perceived demand for TiO2 and our products
or impair our ability to operate our facilities (including changes in the level of gross domestic product in
various regions of the world, tariffs, natural disasters, terrorist acts, global conflicts and public health crises);
•
Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires,
explosions, unscheduled or unplanned downtime, transportation interruptions, certain regional and world
events or economic conditions and public health crises);
•
Technology related disruptions (including, but not limited to, cyber-attacks; software implementation,
upgrades, or improvements; technology processing failures; or other events) related to our technology
infrastructure that could impact our ability to continue operations, or at key vendors which could impact our
supply chain, or at key customers which could impact their operations and cause them to curtail or pause
orders;
•
Competitive products and substitute products;
•
Competition from Chinese suppliers with less stringent regulatory and environmental compliance
requirements;
•
Customer and competitor strategies;
•
Potential consolidation of Kronos’ competitors;
•
Potential consolidation of Kronos’ customers;
•
The impact of pricing and production decisions;
•
Competitive technology positions;
•
Our ability to protect or defend intellectual property rights;
•
Potential difficulties in integrating future acquisitions;
•
Potential difficulties in upgrading or implementing accounting and manufacturing software systems;
•
The introduction of new, or changes in existing, tariffs, trade barriers or trade disputes (including tariffs
imposed by the U.S. federal government on imports from Canada, where Kronos has a manufacturing
facility);
•
Fluctuations in currency exchange rates (such as changes in the exchange rate between the U.S. dollar and
each of the euro, the Norwegian krone and the Canadian dollar and between the euro and the Norwegian
krone), or possible disruptions to our business resulting from uncertainties associated with the euro or other
currencies;
•
Decisions to sell operating assets other than in the ordinary course of business;
•
Kronos’ ability to renew or refinance credit facilities or other debt instruments in the future;
•
Changes in interest rates;
•
Kronos’ ability to comply with covenants contained in its revolving bank credit facility;
•
Our ability to maintain sufficient liquidity;
•
The timing and amounts of insurance recoveries;
•
The ability of our subsidiaries or affiliates to pay us dividends;
-4-
•
Uncertainties associated with CompX’s development of new products and product features;
•
The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters, including future
tax reform;
•
Our ability to utilize income tax attributes or changes in income tax rates related to such attributes, the
benefits of which may or may not have been recognized under the more-likely-than-not recognition criteria;
•
Environmental matters (such as those requiring compliance with emission and discharge standards for
existing and new facilities or new developments regarding environmental remediation or decommissioning
obligations at sites related to our former operations);
•
Government laws and regulations and possible changes therein (such as changes in government regulations
which might impose various obligations on former manufacturers of lead pigment and lead-based paint,
including us, with respect to asserted health concerns associated with the use of such products), including
new environmental, sustainability, health and safety or other regulations (such as those seeking to limit or
classify TiO2 or its use);
•
The ultimate resolution of pending litigation (such as our lead pigment and environmental matters); and
•
Pending or possible future litigation (such as litigation related to CompX’s use of certain permitted chemicals
in its productions process) or other actions.
Should one or more of these risks materialize (or the consequences of such development worsen), or should the
underlying assumptions prove incorrect, actual results could differ materially from those currently forecasted or expected.
We disclaim any intention or obligation to update or revise any forward-looking statement whether as a result of changes
in information, future events or otherwise.
Operations and equity investment
Information regarding our operations and the companies conducting such operations is set forth below.
Geographic financial information is included in Note 2 to our Consolidated Financial Statements, which is incorporated
herein by reference.
Component Products
CompX International Inc. –
87% owned at December 31,
2024
CompX manufactures engineered components that are sold to a variety of industries
including postal, recreational transportation (including boats), office and
institutional furniture, cabinetry, tool storage, healthcare, gas stations and vending
equipment. CompX has three production facilities in the United States.
Chemicals
Kronos Worldwide, Inc. – 31%
owned at December 31, 2024
Kronos is a leading global producer and marketer of value-added titanium dioxide
pigments, or TiO2, a base industrial product used in imparting whiteness, brightness,
opacity and durability to a diverse range of customer applications and end-use
markets, including coatings, plastics, paper, inks, cosmetics, pharmaceuticals and
other industrial and consumer “quality-of-life” products. Kronos has production
facilities in Europe and North America. Sales of its core TiO2 pigments represented
approximately 90% of Kronos’ net sales in 2024, with sales of other products that
are complementary to Kronos’ TiO2 business comprising the remainder.
COMPONENT PRODUCTS – COMPX INTERNATIONAL INC.
Industry overview – Through our majority-owned subsidiary, CompX, we manufacture engineered components
utilized in a variety of applications and industries. CompX manufactures mechanical and electrical cabinet locks and other
locking mechanisms used in postal, recreational transportation, office and institutional furniture, cabinetry, tool storage
and healthcare applications. CompX also manufactures wake enhancement systems, stainless steel exhaust systems,
gauges, throttle controls, trim tabs and related hardware and accessories for the recreational marine and other industries.
-5-
CompX continuously seeks to diversify into new markets and identify new applications and features for its products, which
it believes provide a greater potential for higher rates of earnings growth as well as diversification of risk.
Manufacturing, operations and products – CompX’s Security Products business manufactures mechanical and
electrical cabinet locks and other locking mechanisms used in a variety of applications including mailboxes, ignition
systems, file cabinets, desk drawers, tool storage cabinets, high security medical cabinetry, integrated inventory and access
control secured narcotics boxes, electronic circuit panels, storage compartments, gas station security, vending and cash
containment machines. CompX’s Security Products business has one manufacturing facility in Mauldin, South Carolina
and one in Grayslake, Illinois which is shared with its Marine Components business. CompX believes it is a North
American market leader in the manufacture and sale of cabinet locks and other locking mechanisms. These products
include:
•
disc tumbler locks which provide moderate security and generally represent the lowest cost lock CompX
produces;
•
pin tumbler locks which are more costly to produce and are used in applications requiring higher levels of
security, including KeSet® and System 64® (which each allow the user to change the keying on a single lock
64 times without removing the lock from its enclosure), TuBar® and Turbine®; and
•
CompX’s innovative CompX eLock® and StealthLock® electronic locks which provide stand-alone or
networked security and audit trail capability for drug storage and other valuables through the use of a
proximity card, magnetic stripe, radio frequency or other keypad credential.
A substantial portion of CompX’s Security Products’ sales consist of products with specialized adaptations to an
individual customer’s specifications, some of which are listed above. CompX also has a standardized product line suitable
for many customers, which is offered through a North American distribution network to locksmith and smaller original
equipment manufacturer (“OEM”) distributors via its STOCK LOCKS® distribution program.
CompX’s Marine Components business manufactures and distributes wake enhancement systems, stainless steel
exhaust components, gauges, throttle controls, trim tabs and related hardware and accessories primarily for ski/wakeboard
boats (towboats) and performance boats. CompX’s Marine Components business has a facility in Neenah, Wisconsin and
a facility in Grayslake, Illinois which is shared with Security Products. CompX’s specialty Marine Component products
are high precision components designed to operate within tight tolerances in the highly demanding marine environment.
These products include:
•
original equipment and aftermarket stainless steel exhaust headers, exhaust pipes, mufflers and other exhaust
components;
•
high performance gauges such as GPS speedometers and tachometers;
•
mechanical and electronic controls and throttles;
•
wake enhancement devices, trim tabs, steering wheels and billet aluminum accessories;
•
dash panels, LED indicators and wire harnesses; and
•
grab handles, pin cleats and other accessories.
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The following table sets forth the location, size and business operations for each of CompX’s principal operating
facilities at December 31, 2024:
Business
Size
Facility Name
Operations
Location (square feet)
Owned Facilities:
National (1)
SP
Mauldin, SC
198,000
Grayslake(1)
SP/MC Grayslake, IL
133,000
Custom(1)
MC
Neenah, WI
95,000
SP – Security Products business
MC – Marine Components business
(1) ISO-9001 registered facilities
CompX believes all of its facilities are well maintained and satisfactory for their intended purposes.
Raw materials – The primary raw materials used in CompX’s manufacturing processes are:
•
Security Products – zinc and brass (for the manufacture of locking mechanisms).
•
Marine Components – stainless steel (for the manufacture of exhaust headers and pipes and wake
enhancement systems), aluminum (for the manufacture of throttles and trim tabs) and other components.
These raw materials are purchased from several suppliers, are readily available from numerous sources and
accounted for approximately 13% of our total cost of sales for 2024. Total material costs, including purchased components,
represented approximately 46% of our cost of sales in 2024.
CompX occasionally enters into short-term commodity-related raw material supply arrangements to mitigate the
impact of future price increases in commodity-related raw materials, including zinc, brass, aluminum and stainless steel.
These arrangements generally provide for stated unit prices based upon specified purchase volumes, which help CompX
to stabilize its commodity-related raw material costs to a certain extent. At other times, CompX may make spot market
buys of larger quantities of raw materials to take advantage of favorable pricing or volume-based discounts. CompX’s raw
material prices were generally stable through the first half of 2024, although beginning in the latter half of the third quarter
it began to experience moderate increases in certain raw material costs, particularly brass. The zinc market was volatile in
2024, but CompX was successful in making strategic spot buys to keep its costs consistent with 2023. Prices for aluminum
and stainless steel, which are the primary raw materials used for the manufacture of CompX’s marine components
(including marine exhaust headers and pipes, wake enhancement systems, throttles and trim tabs), were relatively stable
in 2024 because it took advantage of volume purchase opportunities during the year. In most cases, commodity raw
materials CompX purchases include processing and conversion costs, such as alloying, extrusion and rolling, which remain
elevated due to costs of labor, transportation and energy. Processing and conversion costs are not expected to decrease and
may negate the benefit of softening commodity prices on CompX’s purchases. Based on current economic conditions,
CompX expects the prices for zinc, brass, aluminum, stainless steel and other manufacturing materials in 2025 to be
relatively stable, although governmental actions such as tariffs may impact markets. When purchased on the spot market,
each of these raw materials may be subject to sudden and unanticipated price increases. When possible, CompX seeks to
mitigate the impact of fluctuations in these raw material costs on its margins through improvements in production
efficiencies or other operating cost reductions. In the event CompX is unable to offset raw material cost increases with
other cost reductions, it may be difficult to recover those cost increases through increased product selling prices or raw
material surcharges due to the competitive nature of the markets in which CompX competes. Consequently, overall
operating margins can be negatively affected by commodity-related raw material cost pressures. Commodity market prices
are cyclical, reflecting overall economic trends, specific developments in consuming industries and speculative investor
activities.
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Patents and trademarks – CompX holds a number of patents relating to its component products, certain of which
it believes to be important to CompX and its continuing business activity. Patents generally have a term of 20 years and
CompX’s patents have remaining terms ranging from one year to 16 years at December 31, 2024.
CompX’s major trademarks and brand names in addition to CompX® include:
Security Products
Security Products
Marine Components
CompX® Security Products™
Lockview®
CompX Marine®
National Cabinet Lock®
System 64®
Custom Marine®
Fort Lock®
SlamCAM®
Livorsi® Marine
Timberline® Lock®
RegulatoR®
Livorsi II® Marine
Chicago Lock®
CompXpress®
CMI Industrial®
STOCK LOCKS®
GEM®
Custom Marine® Stainless Exhaust
KeSet®
Turbine®
The #1 Choice in Performance Boating®
TuBar®
NARC iD®
Mega Rim®
StealthLock®
NARC®
Race Rim®
ACE®
ecoForce®
Vantage View®
ACE® II
Pearl®
GEN-X®
CompX eLock®
Sales, marketing and distribution – A majority of CompX’s component sales are direct to large OEM customers
through its factory-based sales and marketing professionals supported by engineers working in concert with field
salespeople and independent manufacturer’s representatives. CompX selects manufacturer’s representatives based on
special skills in certain markets or relationships with current or potential customers.
In addition to sales to large OEM customers, a substantial portion of CompX’s Security Products sales are made
through distributors. CompX has a significant North American market share of cabinet lock security product sales as a
result of the locksmith distribution channel. CompX supports its locksmith distributor sales with a line of standardized
products used by the largest segments of the marketplace. These products are packaged and merchandised for easy
availability and handling by distributors and end users.
CompX sells to a diverse customer base with only one customer representing 10% or more of its sales in 2024
(United States Postal Service representing 21%). CompX’s largest ten customers accounted for approximately 47% of its
sales in 2024.
Competition – The markets in which CompX participates are highly competitive. CompX competes primarily on
the basis of product design, including space utilization and aesthetic factors, product quality and durability, price, on-time
delivery, service and technical support. CompX focuses its efforts on the middle and high-end segments of the market,
where product design, quality, durability and service are valued by the customer. CompX’s Security Products business
competes against a number of domestic and foreign manufacturers. CompX’s Marine Components business competes with
small domestic manufacturers and is minimally affected by foreign competitors.
Regulatory and environmental matters – CompX has a history of incorporating environmental management and
compliance in its operations and decision making. CompX operates three manufacturing facilities and CompX’s
production processes requiring waste-water discharge are consolidated at its Mauldin, South Carolina facility. This facility
has received a ReWa Compliance Excellence Award from Renewable Water Resources, an organization which sets
regulatory and water policies for the Mauldin facility’s geographic region, for multiple years for its exemplary
performance. In addition, CompX operates extensive scrap metal recycling programs to reduce landfill waste.
CompX’s operations are subject to federal, state, and local laws and regulations relating to the use, storage,
handling, generation, transportation, treatment, emission, discharge, disposal, remediation of and exposure to hazardous
and non-hazardous substances, materials and wastes, some of which are becoming stricter over time. CompX’s operations
are also subject to federal, state and local laws and regulations relating to worker health and safety. CompX believes it is
in substantial compliance with all such laws and regulations. To date, the costs of maintaining compliance with such laws
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and regulations have not significantly impacted its results; however, it is possible future laws and regulations may require
CompX to incur significant additional expenditures.
CHEMICALS – KRONOS WORLDWIDE, INC.
Business overview – Kronos is a leading global producer and marketer of value-added titanium dioxide pigments,
or TiO2, a base industrial product used in a wide range of applications. Kronos, along with its distributors and agents, sells
and provides technical services for its products to approximately 3,000 customers in 100 countries with the majority of
sales in Europe, North America and the Asia Pacific region. Kronos believes it has developed considerable expertise and
efficiency in the manufacture, sale, shipment and service of its products in domestic and international markets. Effective
July 16, 2024 (“Acquisition Date”), Kronos acquired the 50% joint venture interest in Louisiana Pigment Company, L.P.
(“LPC”) held by Venator Investments, Ltd. (“Venator”) for consideration of $185 million less a working capital
adjustment. Prior to the acquisition, Kronos held a 50% joint venture interest in LPC through a wholly-owned subsidiary.
LPC was operated as a manufacturing joint venture between Kronos and Venator. Following the acquisition, LPC became
a wholly-owned subsidiary of Kronos. See Note 6 to our Consolidated Financial Statements.
TiO2 is a white inorganic pigment used in a wide range of products for its exceptional durability and its ability to
impart whiteness, brightness and opacity. TiO2 is a critical component of everyday applications, such as coatings, plastics
and paper, as well as many specialty products such as inks, cosmetics and pharmaceuticals. TiO2 is widely considered to
be superior to alternative white pigments in large part due to its hiding power (or opacity), which is the ability to cover or
mask other materials effectively and efficiently. TiO2 is designed, marketed and sold based on specific end-use
applications.
TiO2 is the largest commercially used whitening pigment because it has a high refractive rating, giving it more
hiding power than any other commercially produced white pigment. In addition, TiO2 has excellent resistance to interaction
with other chemicals, good thermal stability and resistance to ultraviolet degradation. Although there are other white
pigments on the market, Kronos believes there are no effective substitutes for TiO2 because no other white pigment has
the physical properties for achieving comparable opacity and brightness or can be incorporated in as cost-effective a
manner. Pigment extenders such as kaolin clays, calcium carbonate and polymeric opacifiers are used together with TiO2
in a number of end-use markets. However, these products are not able to duplicate the opacity performance characteristics
of TiO2 and Kronos believes these products are unlikely to have a significant impact on the use of TiO2.
TiO2 is considered a “quality-of-life” product. Demand for TiO2 has generally been driven by worldwide gross
domestic product and has generally increased with rising standards of living in various regions of the world. According to
industry estimates, TiO2 consumption has grown at a compound annual growth rate of approximately 3% since 2000. Per
capita consumption of TiO2 in Western Europe and North America far exceeds that in other areas of the world, and these
regions are expected to continue to be the largest consumers of TiO2 on a per capita basis for the foreseeable future. Kronos
believes Western Europe and North America each account for approximately 15% of global TiO2 consumption,
respectively. Markets for TiO2 are generally increasing in China, the Asia Pacific region, South America and Eastern
Europe and Kronos believes these are significant markets which will continue to grow as economies in these regions
develop and quality-of-life products, including TiO2, experience greater demand.
Products and end-use markets – Kronos, including its predecessors, has produced and marketed TiO2 in North
America and Europe, its primary markets, for over 100 years. Kronos believes it is the largest chloride process TiO2
producer in Europe with 44% of its 2024 sales volumes attributable to markets in Europe. The table below shows Kronos’
estimated market share for its significant markets, Europe and North America, for the last three years.
2022 2023 2024
Europe
14 %
12 %
14 %
North America
17 %
16 %
17 %
Kronos believes it is the leading seller of TiO2 in several countries, including Germany. Overall, Kronos is one
of the top five producers of TiO2 in the world.
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Kronos offers its customers a broad portfolio of products that include over 50 different TiO2 pigment grades under
the KRONOS® trademark, which provide a variety of performance properties to meet customers’ specific requirements.
Kronos’ major customers include domestic and international paint, plastics, decorative laminate and paper manufacturers.
Kronos ships TiO2 to its customers in either a dry or slurry form via rail, truck and/or ocean carrier. Sales of Kronos’ core
TiO2 pigments represented approximately 90% of its net sales in 2024. Kronos and its agents and distributors primarily
sell products in three major end-use markets: coatings, plastics and paper.
The following tables show Kronos’ approximate TiO2 sales volume by geographic region and end-use for the year
ended December 31, 2024:
Sales volume percentages
by geographic region
Sales volume percentages
by end-use
Europe
44 %
Coatings
60 %
North America
40 %
Plastics
27 %
Asia Pacific
9 %
Paper
9 %
Rest of World
7 %
Other
4 %
Some of the principal applications for Kronos’ products include the following:
TiO2 for coatings – Kronos’ TiO2 is used to provide opacity, durability, tinting strength and brightness in industrial
coatings, as well as coatings for commercial and residential interiors and exteriors, automobiles, aircraft, machines,
appliances, traffic paint and other special purpose coatings. The amount of TiO2 used in coatings varies widely depending
on the opacity, color and quality desired. In general, the higher the opacity requirement of the coating, the greater the TiO2
content.
TiO2 for plastics – Kronos produces TiO2 pigments that improve the optical and physical properties of plastics,
including whiteness and opacity. TiO2 is used to provide opacity to items such as containers and packaging materials, and
vinyl products such as windows, door profiles and siding. TiO2 also generally provides hiding power, neutral undertone,
brightness and surface durability for housewares, appliances, toys, computer cases and food packages. TiO2’s high
brightness along with its opacity, is used in some engineering plastics to help mask their undesirable natural color. TiO2 is
also used in masterbatch, which is a concentrate of TiO2 and other additives and is one of the largest uses for TiO2 in the
plastics end-use market. In masterbatch, the TiO2 is dispersed at high concentrations into a plastic resin and is then used
by manufacturers of plastic containers, bottles, packaging and agricultural films.
TiO2 for paper – Kronos’ TiO2 is used in the production of several types of paper, including laminate (decorative)
paper, filled paper and coated paper to provide whiteness, brightness, opacity and color stability. Although Kronos sells
its TiO2 to all segments of the paper end-use market, its primary focus is on the TiO2 grades used in coated board and paper
laminates, where several layers of paper are laminated together using melamine resin under high temperature and pressure.
The top layer of paper contains TiO2 and plastic resin and is the layer that is printed with decorative patterns. Paper
laminates are used to replace materials such as wood and tile for such applications as counter tops, furniture and wallboard.
TiO2 is beneficial in these applications because it assists in preventing the material from fading or changing color after
prolonged exposure to sunlight and other weathering agents.
TiO2 for other applications – Kronos produces TiO2 to improve the opacity and hiding power of printing inks.
TiO2 allows inks to achieve very high print quality while not interfering with the technical requirements of printing
machinery, including low abrasion, high printing speed and high temperatures. Kronos’ TiO2 is also used in textile
applications where TiO2 functions as an opacifying and delustering agent. In man-made fibers such as rayon and polyester,
TiO2 corrects an otherwise undesirable glossy and translucent appearance. Without the presence of TiO2, these materials
would be unsuitable for use in many textile applications.
Kronos produces high-purity sulfate process anatase TiO2 used to provide opacity, whiteness and brightness in a
variety of cosmetic and personal care products, such as skin cream, lipstick, eye shadow and toothpaste. In
pharmaceuticals, Kronos’ TiO2 is used commonly as a colorant in tablet and capsule coatings as well as in liquid medicines
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to provide uniformity of color and appearance. KRONOS® purified anatase grades meet the applicable requirements of the
CTFA (Cosmetics, Toiletries and Fragrances Association), USP (United States Pharmacopoeia) and BP (British
Pharmacopoeia) and the FDA (United States Food and Drug Administration).
Kronos’ TiO2 business is enhanced by the following three complementary businesses, which comprised
approximately 10% of its net sales in 2024:
•
Kronos owns and operates an ilmenite mine in Norway pursuant to a governmental concession with an
unlimited term. Ilmenite is a raw material used directly as a feedstock by some sulfate-process TiO2 plants.
Along with supplying ilmenite ore to its sulfate plants in Europe, Kronos also sells ilmenite ore to third
parties, some of whom are its competitors. The mine has estimated ilmenite reserves that it expects, based
on internal estimates, to last approximately 50 years.
•
Kronos manufactures and sells iron-based chemicals, which are co-products and processed co-products of
sulfate and chloride process TiO2 pigment production. These co-product chemicals are marketed through its
Ecochem division and are primarily used as treatment and conditioning agents for industrial effluents and
municipal wastewater as well as in the manufacture of iron pigments, cement and agricultural products.
•
Kronos manufactures and sells other specialty chemicals, which are side-stream products from the production
of TiO2. These specialty chemicals are used in applications in the formulation of pearlescent pigments,
production of electroceramic capacitors for cell phones and other electronic devices and natural gas pipe and
other specialty applications.
Manufacturing, operations and properties
Manufacturing – Kronos produces TiO2 in two crystalline forms: rutile and anatase. Rutile TiO2 is manufactured
using both a chloride production process and a sulfate production process, whereas anatase TiO2 is only produced using a
sulfate production process. Manufacturers of many end-use applications can use either form, especially during periods of
tight supply for TiO2. The chloride process is the preferred form for use in coatings and plastics, the two largest end-use
markets. Due to environmental factors and customer considerations, the proportion of TiO2 industry sales represented by
chloride process pigments has remained stable relative to sulfate process pigments, and in 2024, chloride process
production facilities represented approximately 41% of industry capacity. The sulfate process is preferred for use in
selected paper products, ceramics, rubber tires, man-made fibers, food products, pharmaceuticals and cosmetics. Once an
intermediate TiO2 pigment has been produced by either the chloride or sulfate process, it is “finished” into products with
specific performance characteristics for particular end-use applications through proprietary processes involving various
chemical surface treatments and intensive micronizing (milling).
•
Chloride process – The chloride process is a continuous process in which chlorine is used to extract rutile
TiO2. The chloride process produces less waste than the sulfate process because much of the chlorine is
recycled and feedstock bearing higher titanium content is used. The chloride process also has lower energy
requirements and is less labor-intensive than the sulfate process, although the chloride process requires a
higher-skilled labor force. The chloride process produces an intermediate base pigment with a wide range of
properties. The chloride process produces a product with a blueish undertone and is the preferred form to
produce TiO2 pigments for use in coatings and plastics, the two largest end-use markets.
•
Sulfate process – The sulfate process is a batch process in which sulfuric acid is used to extract the TiO2 from
ilmenite or titanium slag. After separation from the impurities in the ore (mainly iron), the TiO2 is precipitated
and calcined to form an intermediate base pigment ready for sale or can be upgraded through finishing
treatments. The sulfate process produces a warmer undertone and is preferred for use in selected paper
products, ceramics, rubber tires, man-made fibers, food products, pharmaceuticals and cosmetics, some of
which generate higher profit margins.
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LPC – Prior to July 16, 2024, Kronos Louisiana, Inc., one of Kronos’ subsidiaries, and Venator each owned a
50% interest in LPC, which was operated as a manufacturing joint venture. LPC owns and operates a chloride-process
TiO2 plant located near Lake Charles, Louisiana. On July 16, 2024 Kronos acquired the remaining 50% interest in LPC
held by Venator for consideration of $185 million less a working capital adjustment.
Prior to the acquisition, Kronos accounted for its interest in the joint venture by the equity method. The joint
venture operated on a break-even basis and therefore Kronos did not have any equity in earnings of the joint venture.
Kronos was required to purchase one half of the TiO2 produced by the joint venture. All costs and capital expenditures
were shared equally with Venator, with the exception of feedstock (purchased natural rutile ore or chlorine slag) and
packaging costs for the pigment grades produced. Kronos’ share of net costs was reported as cost of sales as the TiO2 was
sold. See Note 6 to our Consolidated Financial Statements.
Operations – Kronos produced 492,000, 401,000, and 535,000 metric tons of TiO2 in 2022, 2023 and 2024,
respectively. Kronos’ production volumes for 2022, 2023 and 2024 through the Acquisition Date include its share of the
output produced by its TiO2 manufacturing joint venture. Subsequent to the Acquisition Date, Kronos’ 2024 production
volumes include 100% of the production volumes from the LPC facility.
Kronos’ average production capacity utilization rates were approximately 89% in 2022, 72% in 2023 and 96% in
2024. Beginning in the fourth quarter of 2022 and continuing throughout the first quarter of 2024, Kronos adjusted
production levels to correspond with reduced customer demand resulting from challenging economic conditions and
geopolitical uncertainties. Kronos increased production levels to align with higher overall customer demand in 2024.
Properties – Kronos operates facilities throughout North America and Europe. Kronos has four TiO2 plants in
Europe (one in each of Leverkusen, Germany; Nordenham, Germany; Langerbrugge, Belgium; and Fredrikstad, Norway).
In North America, Kronos has a TiO2 plant in Varennes, Quebec, Canada and a TiO2 plant near Lake Charles, Louisiana.
Kronos’ chloride process production and remaining sulfate production capacity has increased by approximately
5% over the past ten years due to debottlenecking programs with only moderate capital expenditures.
The following table presents the division of Kronos’ expected 2025 manufacturing capacity by plant location and
type of manufacturing process:
% of capacity by TiO2
manufacturing process
Facility
Description
Chloride
Sulfate
Leverkusen, Germany (1)
TiO2 production, chloride process, co-products
29 %
— %
Nordenham, Germany
TiO2 production, sulfate process, co-products
—
10
Langerbrugge, Belgium
TiO2 production, chloride process, co-products, titanium
chemicals products
15
—
Fredrikstad, Norway (2)
TiO2 production, sulfate process, co-products
—
5
Varennes, Canada (3)
TiO2 production, chloride process, slurry facility, titanium
chemicals products
15
—
Lake Charles, LA, US (4)
TiO2 production, chloride process
26
—
Total
85 %
15 %
(1) The Leverkusen facility is located within a more extensive manufacturing complex. Kronos owns its Leverkusen
facility, which represents approximately 29% of Kronos’ current TiO2 production capacity, but Kronos leases the land
under the facility under a long-term agreement which expires in 2050. Lease payments are periodically negotiated for
periods of at least two years at a time. A third-party operator of the manufacturing complex provides some raw
materials including chlorine, auxiliary and operating materials, utilities and services necessary to operate the
Leverkusen facility under separate supplies and services agreements.
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(2) The Fredrikstad facility is located on public land and is leased until 2063.
(3) In the third quarter of 2024, Kronos closed its sulfate process line at its plant in Varennes, Canada.
(4) Effective July 16, 2024, Kronos obtained full control of LPC. Kronos now fully operates the facility near Lake Charles,
Louisiana and owns the land and facility.
Kronos owns the land underlying all of its principal production facilities unless otherwise indicated in the table
above.
Kronos also operates an ilmenite mine in Norway pursuant to a governmental concession with an unlimited term.
In addition, Kronos operates a rutile slurry manufacturing plant near its Lake Charles, Louisiana, facility, which converts
dry pigment primarily manufactured for Kronos at the Lake Charles TiO2 facility into a slurry form that is then shipped to
customers.
Kronos has corporate and administrative offices located in the U.S., Germany, Norway, Canada, Belgium, and
France.
Raw materials – The primary raw materials used in chloride process TiO2 are titanium-containing feedstock
(purchased natural rutile ore or chlorine slag), chlorine and petroleum coke. Chlorine is available from a number of
suppliers, while petroleum coke is available from a limited number of suppliers. Titanium-containing feedstock suitable
for use in the chloride process is available from a limited but increasing number of suppliers principally in Australia, South
Africa, Sierra Leone, Canada and India. Kronos purchases feedstock for its chloride process TiO2 from the following
primary suppliers for certain contractually specified volumes for delivery extending, in some cases, through 2026:
Supplier
Product
Renewal Terms
Rio Tinto Iron and Titanium Ltd
Chloride process grade slag
Auto-renews bi-annually
Rio Tinto Iron and Titanium Ltd
Upgraded slag
Auto-renews annually
Sierra Rutile Limited
Rutile ore
Renewal terms upon negotiations
Iluka Resources Limited
Rutile ore
Renewal terms upon negotiations
In the past Kronos has been, and expects it will continue to be, successful in obtaining short-term and long-term
extensions to these and other existing supply contracts. Kronos expects the raw materials purchased under these contracts,
and contracts it may enter into, will meet its chloride process feedstock requirements over the next several years. Multi-
year contracts generally may be terminated with a 12-month written notice or based on certain defaults by either party or
failure to agree on pricing as noted in the agreements.
The primary raw materials used in sulfate process TiO2 are titanium-containing feedstock, primarily ilmenite or
purchased sulfate grade slag, and sulfuric acid. Sulfuric acid is available from a number of suppliers. Titanium-containing
feedstock suitable for use in the sulfate process is available from a limited number of suppliers principally in Norway,
Canada, Australia, India and South Africa. As one of the few vertically-integrated producers of sulfate process TiO2,
Kronos operates a rock ilmenite mine in Norway, which provided all of the feedstock for its European sulfate process TiO2
plants in 2024. Kronos expects ilmenite production from its mine to meet its sulfate process feedstock requirements for
the foreseeable future. Kronos expects the raw materials purchased under this contract, and contracts that it may enter into,
to meet its sulfate process feedstock requirements over the next several years.
Many of Kronos’ raw material contracts contain fixed quantities it is required to purchase or specify a range of
quantities within which it is required to purchase. The pricing under these agreements is generally negotiated quarterly or
semi-annually.
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The following table summarizes Kronos’ raw materials purchased or mined in 2024.
Raw materials
Production process/raw material
procured or mined
(In thousands of
metric tons)
Chloride process plants -
Purchased slag or rutile ore
464
Sulfate process plants:
Ilmenite ore mined and used internally
233
Purchased ilmenite ore (1)
11
(1) Relates to Kronos’ Canadian sulfate production line, which was closed in the third quarter of 2024.
Sales and marketing – Kronos’ marketing strategy is aimed at developing and maintaining strong relationships
with new and existing customers. Because TiO2 represents a significant input cost for its customers, the purchasing
decisions are often made by its customers’ senior management. Kronos works to maintain close relationships with the key
decision makers through in-depth and frequent contact. Kronos endeavors to extend these commercial and technical
relationships to multiple levels within its customers’ organizations using its direct sales force and technical service group
to accomplish this objective. Kronos believes this helps build customer loyalty and strengthens its competitive position.
Close cooperation and strong customer relationships enable Kronos to stay closely attuned to trends in its customers’
businesses. Where appropriate, Kronos works in conjunction with its customers to solve formulation or application
problems by modifying specific product properties or developing new pigment grades. Kronos also focuses its sales and
marketing efforts on those geographic and end-use market segments where it believes it can realize higher selling prices.
This focus includes continuously reviewing and optimizing its customer and product portfolios.
Kronos also works directly with its customers to monitor the success of its products in their end-use applications,
evaluate the need for improvements in its product and process technology and identify opportunities to develop new
product solutions for its customers. Kronos’ marketing staff closely coordinates with its sales force and technical specialists
to ensure the needs of its customers are met, and to help develop and commercialize new grades where appropriate.
Kronos sells a majority of its products through its direct sales force operating in Europe and North America.
Kronos also utilizes sales agents and distributors who are authorized to sell its products in specific geographic areas. In
Europe, Kronos’ sales efforts are conducted primarily through its direct sales force and its sales agents. Kronos’ agents do
not sell any TiO2 products other than KRONOS® branded products. In North America, Kronos’ sales are made primarily
through its direct sales force and supported by a network of distributors. Kronos has increased its marketing efforts over
the last several years in export markets and Kronos’ sales are now made through its direct sales force, sales agents and
distributors. In addition to Kronos’ direct sales force and sales agents, many of its sales agents also act as distributors to
service its customers in all regions. Kronos offers customer and technical service to customers who purchase its products
through distributors as well as to its larger customers serviced by its direct sales force.
Kronos sells to a diverse customer base with only one customer representing 10% or more of its net sales in 2024
(Behr Process Corporation – 10%). Kronos’ largest ten customers accounted for approximately 39% of net sales in 2024.
Neither Kronos’ business as a whole nor any of its principal product groups is seasonal to any significant extent.
However, TiO2 sales are generally higher in the second and third quarters of the year, due in part to the increase in coatings
production in the spring to meet demand during the spring and summer painting seasons. Kronos normally builds
inventories during the first and fourth quarters of each year in order to maximize its product availability during the higher
demand periods normally experienced in the second and third quarters.
Competition – The TiO2 industry is highly competitive. Kronos competes primarily on the basis of price, product
quality, technical service and the availability of high performance pigment grades. Since TiO2 is not traded through a
commodity market, its pricing is largely a product of negotiation between suppliers and their respective customers. Price
and availability are the most significant competitive factors along with quality and customer service for the majority of its
product grades. Increasingly, Kronos is focused on providing pigments that are differentiated to meet specific customer
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requests and specialty grades that are differentiated from its competitors’ products. During 2024, Kronos had an estimated
7% share of worldwide TiO2 sales volume, and based on sales volume Kronos believes it is the leading seller of TiO2 in
several countries, including Germany.
Kronos’ principal competitors are LB Group Co. Ltd, The Chemours Company, Tronox Holdings PLC and
Venator Materials PLC. The top five TiO2 producers (i.e. Kronos and its four principal competitors) account for
approximately 51% of the world’s production capacity.
The following chart shows Kronos’ estimate of worldwide production capacity in 2024:
Worldwide production capacity – 2024
LB Group
13 %
Chemours
13 %
Tronox
12 %
Kronos
7 %
Venator
6 %
Other
49 %
Chemours has approximately one-half of total North American TiO2 production capacity and is Kronos’ principal
North American competitor. LB Group previously announced it plans to add an additional 200,000 tons of chloride
capacity which we expect will be added incrementally over the next several years. However, several of Kronos’
competitors have recently closed or announced plans to close facilities or otherwise reduce capacity, including Chemours
which closed its Taiwan facility with an estimated 160,000 tons of chloride process capacity in 2023 and Venator which
announced plans in 2024 to close its Duisburg, Germany facility with an estimated 50,000 tons of sulfate process capacity.
In addition, in 2024 Kronos closed its sulfate production line in Varennes, Canada.
The TiO2 industry is characterized by high barriers to entry consisting of high capital costs, proprietary
technology and significant lead times required to construct new facilities or to expand existing capacity. Therefore, over
the past ten years, Kronos and its competitors increased industry capacity through debottlenecking projects; however, this
increase only partly compensated for the shut-down of various TiO2 plants throughout the world. Other than through
debottlenecking projects and the LB Group expansion mentioned above, Kronos does not expect any significant efforts
will be undertaken by Kronos or its principal competitors to further increase capacity and Kronos believes it is unlikely
any new TiO2 plants will be constructed in Europe or North America for the foreseeable future. If actual developments
differ from Kronos’ expectations, the TiO2 industry and Kronos’ performance could be unfavorably affected.
Research and development – Kronos employs scientists, chemists, process engineers and technicians who are
engaged in research and development, process technology and quality assurance activities in Leverkusen, Germany. These
individuals have the responsibility for improving Kronos’ chloride and sulfate production processes, improving product
quality and strengthening Kronos’ competitive position by developing new products and applications. Kronos’
expenditures for these activities were approximately $15 million in 2022, $18 million in 2023 and $14 million in 2024.
Kronos expects to spend approximately $15 million on research and development in 2025.
Kronos continually seeks to improve the quality of its grades and has been successful in developing new grades
for existing and new applications to meet the needs of its customers and increase product life cycles. Since the beginning
of 2020, Kronos has added six new grades for pigments and other applications.
Patents, trademarks, trade secrets and other intellectual property rights – Kronos has a comprehensive
intellectual property protection strategy that includes obtaining, maintaining and enforcing its patents, primarily in the
United States, Canada and Europe. Kronos also registers, maintains, and protects its trademark rights. Kronos maintains
the secrecy of its trade secret rights and protects them by means of security protocols and confidentiality agreements. In
some instances, Kronos has entered into license agreements with third parties concerning various intellectual property
matters. Kronos has also from time to time been involved in disputes over intellectual property.
-15-
Patents – Kronos has obtained patents and has numerous patent applications pending that cover certain aspects
of its products and the technology used in the manufacture of its products. Kronos’ patent strategy is important to it and
its continuing business activities. In addition to maintaining its patent portfolio, Kronos seeks patent protection for its
technical developments, principally in the United States, Canada and Europe. U.S. patents are generally in effect from the
time that they issue as patents and then extend for 20 years from the date of filing. Kronos’ U.S. patent portfolio includes
patents having remaining terms ranging from one year to 19 years.
Trademarks – Kronos trademarks, including KRONOS®, are covered by issued and/or pending registrations,
including in Canada and the United States. Kronos protects the trademarks it uses in connection with the products it
manufactures and sells and has developed goodwill in connection with its long-term use of its trademarks.
Trade secrets – Kronos conducts research activities in secret and it protects the confidentiality of its trade secrets
through reasonable measures, including confidentiality agreements and security procedures, including data security.
Kronos relies upon unpatented proprietary knowledge and continuing technological innovation and other trade secrets to
develop and maintain its competitive position. Kronos’ proprietary chloride production process is an important part of its
technology and Kronos’ business could be harmed if it fails to maintain confidentiality of its trade secrets used in this
technology.
Regulatory and environmental matters – Kronos’ operations and properties are governed by various
environmental laws and regulations which are complex, change frequently and have tended to become stricter over time.
These environmental laws govern, among other things, the generation, storage, handling, use and transportation of
hazardous materials; the emission and discharge of hazardous materials into the ground, air or water; and the health and
safety of its employees. Certain of Kronos’ operations are, or have been, engaged in the generation, storage, handling,
manufacture or use of substances or compounds that may be considered toxic or hazardous within the meaning of
applicable environmental laws and regulations. As with other companies engaged in similar businesses, certain of Kronos’
past and current operations and products have the potential to cause environmental or other damage. Kronos has
implemented and continues to implement various policies and programs in an effort to minimize these risks. Kronos’
policy is to comply with applicable environmental laws and regulations at all its facilities and to strive to improve its
environmental performance and overall sustainability. It is possible that future developments, such as stricter requirements
in environmental laws and enforcement policies, could adversely affect its operations, including production, handling, use,
storage, transportation, sale or disposal of hazardous or toxic substances or require Kronos to make capital and other
expenditures to comply, and could adversely affect its consolidated financial position and results of operations or liquidity.
Kronos has a history of identifying new ways to reduce consumption and waste by converting byproducts to co-
products through its KRONOS ecochem® products. Kronos has a published Safety, Environment, Energy and Quality
Policy which is translated into local languages and distributed to all its employees and shared publicly via its website.
Kronos has implemented rigorous procedures for incident reporting and investigation, including root cause analysis of
environmental and safety incidents and near misses. Because TiO2 production requires significant energy input, Kronos is
focused on energy efficiency at all production locations. Four of its six production facilities maintain certifications to the
ISO 50001:2018 Energy Management standard and all locations have local energy teams in place. These teams are
responsible for maintaining ISO 50001:2018 certifications (where applicable), performing regular reviews of local energy
consumption, making recommendations regarding capital projects that reduce energy consumption and associated
Greenhouse Gas (GHG) emissions or enhance efficiency. When possible, Kronos looks for opportunities to partner with
local government authorities through grant opportunities to reduce energy consumption and associated GHG emissions.
Kronos also actively manages potential water-related risks, including flooding and water shortages. Kronos’
manufacturing facilities are strategically located adjacent to sources of water, which it uses for process operations and for
shipping and receiving raw materials and finished products. Water-critical processes are identified and ongoing efforts to
minimize water use are incorporated into environmental planning.
Kronos’ U.S. manufacturing operations are governed by federal, state and local environmental and worker health
and safety laws and regulations. These include the Resource Conservation and Recovery Act, or RCRA, the Occupational
Safety and Health Act, the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, the Toxic Substances Control
Act and the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund
Amendments and Reauthorization Act, or CERCLA, as well as the state counterparts of these statutes. Some of these laws
-16-
hold current or previous owners or operators of real property liable for the costs of cleaning up contamination, even if
these owners or operators did not know of, and were not responsible for, such contamination. These laws also assess
liability on any person who arranges for the disposal or treatment of hazardous substances, regardless of whether the
affected site is owned or operated by such person. Although Kronos has not incurred and does not currently anticipate any
material liabilities in connection with such environmental laws, Kronos may be required to make expenditures for
environmental remediation in the future.
While the laws regulating operations of industrial facilities in Europe vary from country to country, a common
regulatory framework is provided by the European Union, or the EU. Germany and Belgium are members of the EU and
follow its initiatives. Norway is not a member but generally patterns its environmental regulatory actions after those of the
EU.
From time to time, Kronos’ facilities may be subject to environmental regulatory enforcement under local or
national laws. Typically, Kronos updates its compliance programs to resolve these matters. Occasionally, Kronos may pay
penalties. To date, such penalties have not involved amounts having a material adverse effect on Kronos’ consolidated
financial position, results of operations or liquidity. Kronos believes that all of its facilities are in substantial compliance
with applicable environmental laws.
From time to time, new environmental, sustainability, health and safety regulations are passed or proposed in the
countries in which Kronos operates or sells its products, seeking to regulate its operations or to restrict, limit or classify
TiO2. Kronos believes that it is in substantial compliance with laws applicable to the regulation of TiO2. However,
increased regulatory scrutiny could affect consumer perception of TiO2 or limit the marketability and demand for TiO2 or
products containing TiO2 and increase its regulatory and compliance costs.
On October 1, 2021, EU Regulation No. 1272/2008 classifying dry TiO2 and mixtures containing dry TiO2 as a
suspected carcinogen via inhalation went into force. Kronos’ dry TiO2 products do not meet the criteria set forth in the
regulation and therefore do not require classification labels. On November 23, 2022 the Court of Justice of the European
Union annulled the classification of TiO2 as a suspected carcinogen in its entirety, which decision is currently under appeal.
Kronos’ capital expenditures related to ongoing environmental compliance, protection and improvement
programs, including capital expenditures which are primarily focused on increasing operating efficiency but also result in
improved environmental protection such as lower emissions from its manufacturing facilities, were $17 million in 2024
and are currently expected to be approximately $24 million in 2025.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG)
Through our subsidiaries and affiliates, we seek to operate our businesses in line with sound ESG principles that
include corporate governance, social responsibility, sustainability and cybersecurity. We believe ESG means conducting
operations with high standards of environmental and social responsibility, practicing exemplary ethical standards, focusing
on safety as a top priority, respecting human rights and supporting our local communities, and continuously developing
our employees. At their facilities, Kronos and CompX undertake various environmental sustainability programs, and
promote social responsibility and volunteerism through programs designed to support and give back to the local
communities in which each operates. Each of Kronos’ and CompX’s locations maintain site-specific safety programs and
disaster response and business continuity plans. All manufacturing facilities have detailed, site-specific emergency
response procedures Kronos and CompX believe adequately address regulatory compliance, vulnerability to potential
hazards, emergency response and action plans, employee training, alarms and warning systems and crisis communication.
The U.S. government and various non-U.S. governmental agencies of countries in which Kronos operates have
adopted or are contemplating regulatory changes relating to certain ESG topics, such as the Corporate Social Responsibility
Directive adopted by the European Union on November 28, 2022 (EU CSRD). Kronos is evaluating and will continue to
evaluate the applicability of the EU CSRD as regulatory guidance is issued and as the European countries in which it
operates adopt implementing legislation and it will establish a compliance program to address any applicable requirements.
-17-
In an effort to align our non-employee directors’ financial interests with those of our stockholders, our board of
directors established share ownership guidelines for our non-management directors. In addition, we have adopted an
insider trading policy that applies to both employees and non-employee directors.
Kronos has taken steps to integrate ESG considerations into operating decisions with other critical business
factors. Kronos periodically publishes an ESG Report, which is available on its public website. The primary purpose of
its ESG Report is to describe Kronos’ policies and programs in the area of ESG, including certain internal metrics and
benchmarks related to various aspects of ESG. Kronos voluntarily developed these internal metrics and benchmarks, which
Kronos uses to identify progress and opportunities for improvement. These metrics are not intended to be directly
comparable to similar metrics utilized by other companies to track ESG performance, as the standards, methodologies and
assumptions used to determine these metrics vary by company and jurisdiction.
HUMAN CAPITAL RESOURCES
Employees – We operate through our subsidiaries and affiliate and through our intercorporate services agreement
with Contran (see Note 16 to our Consolidated Financial Statements). We have no direct employees. Our operating results
depend in part on Kronos’ and CompX’s ability to successfully manage their human capital resources, including attracting,
identifying and retaining key talent. Kronos and CompX each have a well-trained labor force with a substantial number of
long-tenured employees. Kronos and CompX provide competitive compensation and benefits to their employees, some of
which for Kronos are offered under collective bargaining agreements. In addition to salaries, these programs, which vary
by country/region, can include annual bonuses, a defined benefit pension plan (for Kronos), a defined contribution plan
with employer matching, a profit sharing plan, healthcare and insurance benefits, health savings and flexible spending
accounts, paid time off, family leave, family care resources, employee assistance programs and tuition assistance.
We recognize that everyone deserves respect and equal treatment. Kronos and CompX embrace diversity and
collaboration in their workforces and business initiatives. Kronos and CompX are equal opportunity employers, and base
employment decisions on merit, competence and qualifications, without regard to race, color, national origin, gender, age,
religion, disability, sex, sexual orientation or other characteristics protected by applicable law in the jurisdictions in which
they operate. Kronos and CompX promote a respectful, diverse and inclusive workplace in which all individuals are treated
with respect and dignity.
As of December 31, 2024, CompX employed 510 people, all in the United States.
As of December 31, 2024, Kronos employed the following number of people:
Europe
1,813
Canada
364
United States
347
Total
2,524
CompX believes its labor relations are good at all of its facilities. Certain employees at each of Kronos’ production
facilities are organized by labor unions. Kronos strives to maintain good relationships with all its employees, including the
unions and workers’ councils representing those employees. In Europe, Kronos’ union employees are covered by master
collective bargaining agreements for the chemical industry that are generally renewed annually. At December 31, 2024,
approximately 75% of Kronos’ worldwide workforce is organized under collective bargaining agreements. Kronos did not
experience any work stoppages during 2024, although it is possible that there could be future work stoppages or other
labor disruptions that could materially and adversely affect its business, results of operations, financial position or liquidity.
Health and safety – Kronos and CompX believe protecting the health and safety of their workforce, customers,
business partners and the natural environment are core values. Kronos and CompX are committed to maintaining a strong
safety culture where all workers meet or exceed required industry performance standards and continuously seek to improve
occupational and process safety performance. Kronos and CompX are conducting their businesses in ways that provide all
personnel with a safe and healthy work environment and have established safety and environmental programs and goals
to achieve such results. Kronos and CompX expect their manufacturing facilities to produce products safely and in
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compliance with local regulations, policies, standards and practices intended to protect the environment and people and
have established global policies designed to promote such compliance. Kronos and CompX require their employees to
comply with such requirements. Kronos and CompX provide their workers with the tools and training necessary to make
the appropriate decisions to prevent accidents and injuries. Each of Kronos’ and CompX’s operating facilities develops,
maintains and implements safety programs encompassing key aspects of their operations. In addition, management reviews
and evaluates safety performance throughout the year.
CompX uses lost time incidents as a key measure of worker safety. CompX defines lost time incidents as work-
related accidents where a worker sustains an injury that results in time away from work. CompX had three lost time
incidents in 2022 and one in each of 2023 and 2024.
Kronos monitors conditions that could lead to a safety incident and keep track of injuries through reporting
systems in accordance with laws in the jurisdictions in which it operates. With this data Kronos calculates incident
frequency rates to assess the quality of its safety performance. Kronos also tracks overall safety performance at the global
level. Each Kronos operating location is subject to local laws and regulations that dictate what injuries are required to be
recorded and reported, which may differ from location to location and result in different methods of injury rate calculation.
For internal global tracking, benchmarking and identification of opportunities for improvement, Kronos collects the
location specific information and applies a U.S.-based injury rate calculation to arrive at a global total frequency rate,
which is expressed as the number of incidents at its operating locations per 200,000 hours. This internal safety metric may
not be directly comparable to a recordable incident rate calculated under U.S. law. Kronos’ global total frequency rate
aggregating information about employees and contractors was 1.01 in 2022 (0.86 of the aggregate represents employees
only), 0.95 in 2023 (0.74 of the aggregate represents employees only) and 0.70 in 2024 (0.80 of the aggregate represents
employees only).
OTHER
In addition to our 87% ownership of CompX and our 31% ownership of Kronos at December 31, 2024, we also
hold certain marketable securities and other investments. See Note 5 to our Consolidated Financial Statements.
Regulatory and environmental matters – We discuss regulatory and environmental matters in the respective
business sections contained elsewhere herein and in Item 3 – “Legal Proceedings.” In addition, the information included
in Note 17 to our Consolidated Financial Statements under the captions “Lead pigment litigation” and “Environmental
matters and litigation” is incorporated herein by reference.
Insurance – We maintain insurance for our businesses and operations, with customary levels of coverage,
deductibles and limits. See also Item 3 – “Legal Proceedings – Insurance coverage claims” and Note 17 to our
Consolidated Financial Statements.
Business strategy – We routinely compare our liquidity requirements and alternative uses of capital against the
estimated future cash flows we expect to receive from our subsidiaries and affiliates. As a result of this process, we have
in the past and may in the future seek to raise additional capital, incur debt, repurchase indebtedness in the market, modify
our dividend policies, consider the sale of our interests in our subsidiaries, affiliates, business, marketable securities or
other assets, or take a combination of these and other steps, to increase liquidity, reduce indebtedness and fund future
activities. Such activities have in the past and may in the future involve related companies. From time to time, we also
evaluate the restructuring of ownership interests among our respective subsidiaries and related companies.
We and other entities that may be affiliated with Contran routinely evaluate acquisitions of interests in, or
combinations with, companies, including related companies that provide strategic opportunities and synergies or that we
perceive to be undervalued in the marketplace. These companies may or may not be engaged in businesses related to our
current businesses. In some instances, we have actively managed the businesses acquired with a focus on maximizing
return-on-investment through cost reductions, capital expenditures, improved operating efficiencies, selective marketing
to address market niches, disposition of marginal operations, use of leverage and redeployment of capital to more
productive assets. In other instances, we have disposed of the acquired interest in a company prior to gaining control. We
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intend to consider such activities in the future and may, in connection with such activities, consider issuing additional
equity securities and increasing our indebtedness.
Available information – Our fiscal year ends December 31. We furnish our shareholders with annual reports
containing audited financial statements. In addition, we file annual, quarterly and current reports, proxy and information
statements and other information with the SEC. Our consolidated subsidiary (CompX) and our significant equity method
investee (Kronos) also file annual, quarterly, and current reports, proxy and information statements and other information
with the SEC. We also make our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and amendments thereto available free of charge through our website at www.nl-ind.com as soon as reasonably practicable
after they have been filed with the SEC. We also provide to anyone, without charge, copies of such documents upon written
request. Such requests should be directed to the attention of the Corporate Secretary at our address on the cover page of
this Form 10-K. Additional information, including our Audit Committee Charter, our Code of Business Conduct and Ethics
and our Corporate Governance Guidelines can be found on our website. Information contained on our website is not part
of this Annual Report.
We are an electronic filer and the SEC maintains an internet website that contains reports, proxy and information
statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.
ITEM 1A.
RISK FACTORS
Listed below are certain risk factors associated with us and our businesses. See also certain risk factors discussed
in Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical
Accounting Policies and Estimates.” In addition to the potential effect of these risk factors, any risk factor which could
result in reduced earnings or operating losses, or reduced liquidity, could in turn adversely affect our ability to service our
liabilities or pay dividends on our common stock or adversely affect the quoted market prices for our securities.
Operational Risk Factors
Demand for, and prices of, certain of Kronos’ products are influenced by changing market conditions for its products,
which may result in reduced earnings or in operating losses.
Kronos’ sales and profitability are largely dependent on the TiO2 industry. In 2024, approximately 90% of
Kronos’ sales were attributable to sales of TiO2. TiO2 is used in many “quality of life” products for which demand
historically has been linked to global, regional and local gross domestic product and discretionary spending, which can be
negatively impacted by regional and world events or economic conditions. Such events are likely to cause a decrease in
demand for Kronos’ products and, as a result, may have an adverse effect on our results of operations and financial
condition.
Pricing within the global TiO2 industry over the long term is cyclical and changes in economic conditions
worldwide can significantly impact Kronos’ earnings and operating cash flows. Historically, the markets for many of
Kronos’ products have experienced alternating periods of increasing and decreasing demand. Relative changes in the
selling prices for Kronos’ products are one of the main factors that affect the level of its profitability. In periods of
increasing demand, Kronos’ selling prices and profit margins generally will tend to increase, while in periods of decreasing
demand Kronos’ selling prices and profit margins generally tend to decrease. In addition, pricing may affect customer
inventory levels as customers may from time to time accelerate purchases of TiO2 in advance of anticipated price increases
or defer purchases of TiO2 in advance of anticipated price decreases. Kronos’ ability to further increase capacity without
additional investment in greenfield or brownfield capacity may be limited and as a result, Kronos’ profitability may
become even more dependent upon the selling prices of its products.
The TiO2 industry is concentrated and highly competitive and Kronos faces price pressures in the markets in which it
operates, which may result in reduced earnings or operating losses.
The global market in which Kronos operates its business is concentrated, with the top five TiO2 producers
accounting for approximately 51% of the world’s production capacity and is highly competitive. Competition is based on
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a number of factors, such as price, product quality and service. Kronos faces significant competition from international
and regional competitors, including TiO2 producers in China, who have significant sulfate production process capacity.
Chinese producers have also continued to develop chloride process technology, and the risk of substitution of Kronos’
products with products made by Chinese producers could increase if Chinese producers increase the use of chloride process
technology and improve the quality of their sulfate and chloride products. Some of Kronos’ competitors may be able to
drive down prices for Kronos’ products if their costs are lower than Kronos’ costs, including its competitors with vertically
integrated sources of raw materials for the chloride process who may have a competitive advantage during periods of high
or rising raw material costs or who operate in regions with less stringent regulatory requirements. In addition, some of
Kronos’ competitors’ financial, technological and other resources may be greater than its resources and such competitors
may be better able to withstand changes in market conditions. Kronos’ competitors may be able to respond more quickly
than it can to new or emerging technologies and changes in customer requirements. Further, consolidation of Kronos’
competitors or customers may result in reduced demand for its products or make it more difficult for Kronos to compete
with its competitors. The occurrence of any of these events could result in reduced earnings or operating losses.
CompX operates in mature and highly competitive markets, resulting in pricing pressure and the need to continuously
reduce costs.
Many of the markets CompX serves are highly competitive, with a number of competitors offering similar
products. CompX focuses its efforts on the middle and high-end segment of the market where it feels that it can compete
due to the importance of product design, quality and durability to the customer. However, CompX’s ability to effectively
compete is impacted by a number of factors. The occurrence of any of these factors could result in reduced earnings or
operating losses.
•
Competitors may be able to drive down prices for CompX’s products beyond its ability to adjust costs
because their costs are lower than CompX, especially products sourced from Asia.
•
Competitors’ financial, technological and other resources may be greater than CompX’s resources, which
may enable them to more effectively withstand changes in market conditions.
•
Competitors may be able to respond more quickly than CompX can to new or emerging technologies and
changes in customer requirements.
•
Consolidation of CompX’s competitors or customers in any of the markets in which it competes may result
in reduced demand for its products.
•
A reduction of CompX’s market share with one or more of its key customers, or a reduction in one or more
of its key customers’ market share for their end-use products, may reduce demand for its products.
•
New competitors could emerge by modifying their existing production facilities to manufacture products that
compete with CompX’s products.
•
CompX may not be able to sustain a cost structure that enables it to be competitive.
•
Customers may no longer value CompX’s product design, quality or durability over the lower cost products
of its competitors.
CompX’s development of innovative features for current products is critical to sustaining and growing its sales.
Historically, CompX’s ability to provide value-added custom engineered products that address requirements of
technology and space utilization has been a key element of its success. CompX spends a significant amount of time and
effort to refine, improve and adapt its existing products for new customers and applications. Since expenditures for these
types of activities are not considered research and development expense under accounting principles generally accepted
in the United States of America (“GAAP”), the amount of CompX’s research and development expenditures, which is not
significant, is not indicative of the overall effort involved in the development of new product features. The introduction of
new product features requires the coordination of the design, manufacturing and marketing of the new product features
with current and potential customers. The ability to coordinate these activities with current and potential customers may
be affected by factors beyond CompX’s control. While CompX will continue to emphasize the introduction of innovative
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new product features that target customer-specific opportunities, it does not know if any new product features it introduces
will achieve the same degree of success that it has achieved with its existing products. At times CompX works with new
and existing customers on specific product innovations. Sometimes CompX has a cost sharing arrangement for
development efforts although it may also fully bear the development costs. If a customer were to ultimately reject or
abandon custom product innovation efforts, CompX may not be able to recover its development costs.
Higher costs or unavailability of CompX’s raw materials could negatively impact our financial results.
Certain raw materials used in CompX’s products are commodities that are subject to significant fluctuations in
price in response to world-wide supply and demand as well as speculative investor activity. Zinc and brass are the principal
raw materials used in the manufacture of security products. Stainless steel and aluminum are the major raw materials used
in the manufacture of marine components. These raw materials are purchased from several suppliers and are generally
readily available from numerous sources. CompX occasionally enters into short-term raw material supply arrangements
to mitigate the impact of future increases in commodity-related raw material costs and ensure supply. Materials purchased
outside of these arrangements are sometimes subject to unanticipated and sudden price increases.
Certain components used in CompX’s products are manufactured by foreign suppliers located in China and
elsewhere. Global economic and political conditions, including natural disasters, terrorist acts, transportation disruptions,
global conflicts and public health crises such as pandemics, could prevent CompX’s vendors from being able to supply
these components. Should CompX’s vendors not be able to meet their supply obligations or should CompX be otherwise
unable to obtain necessary raw materials or components, CompX may incur higher supply costs or may be required to
reduce production levels, either of which may decrease our liquidity or negatively impact our financial condition or results
of operations as CompX may be unable to offset the higher costs with increases in its selling prices or reductions in other
operating costs.
Higher costs or limited availability of Kronos’ raw materials may reduce its earnings and decrease its liquidity. In
addition, many of Kronos’ raw material contracts contain fixed quantities it is required to purchase.
For Kronos, the number of sources for and availability of certain raw materials is specific to the particular
geographical region in which its facilities are located. Titanium-containing feedstocks suitable for use in Kronos’ TiO2
facilities are available from a limited number of suppliers around the world. Political and economic instability or increased
regulations in the countries from which Kronos purchases or mines its raw material supplies could adversely affect raw
material availability. If Kronos or Kronos’ worldwide vendors are unable to meet their planned or contractual obligations
and Kronos was unable to obtain necessary raw materials, Kronos could incur higher costs for raw materials or may be
required to reduce production levels. Kronos experienced increases in feedstock costs in 2023 and 2024, for example,
which affected its margins. Kronos has also experienced higher operating costs such as energy costs. Future variations in
the cost of energy, which primarily reflect market prices for oil and natural gas, and for raw materials may significantly
affect its operating results and decrease liquidity as Kronos may not always be able to increase its selling prices to offset
the impact of any higher costs or reduced production levels.
Kronos has supply contracts that provide for its TiO2 feedstock requirements. While Kronos believes it will be
able to renew these contracts, as necessary, Kronos does not know if it will be successful in renewing them or in obtaining
long-term extensions to them prior to expiration. Kronos’ current agreements require it to purchase certain minimum
quantities of feedstock with minimum purchase commitments aggregating approximately $542 million beginning in 2025
and extending through 2026. In addition, Kronos has other long-term supply and service contracts that provide for various
raw materials and services. These agreements require Kronos to purchase certain minimum quantities or services with
minimum purchase commitments aggregating approximately $67 million at December 31, 2024. Kronos’ commitments
under these contracts could adversely affect our financial results if Kronos significantly reduces its production and was
unable to modify the contractual commitments.
Kronos’ recent acquisition of the remaining 50% interest in LPC may not generate benefits it anticipates and may
otherwise affect its business and prospects.
Kronos recently completed the LPC acquisition in which it purchased the 50% ownership interest in LPC it did
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not previously own. If Kronos experiences unforeseen technological, operation or other difficulties in managing the
integration of LPC as its wholly-owned subsidiary, it may not be able to implement the process innovations at the facility
that it expects. In addition, Kronos may not be able to achieve the synergies or improve efficiency and product quality that
it expects. With or without such difficulties, the integration of the LPC facility into Kronos’ operations may divert
significant management time and attention from its other operations. If Kronos fails to successfully integrate LPC into its
operations, or if the LPC acquisition does not provide expected synergies or sales increases, or if LPC has unexpected
legal or financials liabilities, its business, financial condition, result of operations and prospects could be adversely
affected.
Our assets consist primarily of investments in our operating subsidiaries and affiliate, and we are dependent upon
distributions from our subsidiaries and affiliate.
The majority of our operating cash flows are generated by our operating subsidiaries and affiliate, and our ability
to service liabilities and pay dividends on our common stock depends to a large extent upon the cash dividends or other
distributions we receive from our subsidiaries and affiliate. Our subsidiaries and affiliate are separate and distinct legal
entities and they have no obligation, contingent or otherwise, to pay cash dividends or other distributions to us. In addition,
the payment of dividends or other distributions from our subsidiaries and affiliate could be subject to restrictions under
applicable law, monetary transfer restrictions, currency exchange regulations in jurisdictions in which our subsidiaries and
affiliate operate or any other restrictions imposed by current or future agreements to which our subsidiaries and affiliate
may be a party, including debt instruments. Events beyond our control, including changes in general business and
economic conditions, could adversely impact the ability of our subsidiaries and affiliate to pay dividends or make other
distributions to us. If our subsidiaries and affiliate were to become unable to make sufficient cash dividends or other
distributions to us, our ability to service our liabilities and to pay dividends on our common stock could be adversely
affected.
In addition, a significant portion of our assets consist of ownership interests in our subsidiaries and affiliate. If
we were required to liquidate our subsidiaries’ and affiliate’s securities in order to generate funds to satisfy our liabilities,
we may be required to sell such securities at a time or times for less than what we believe to be the long-term value of such
assets.
Financial Risk Factors
Kronos’ leverage may impair our financial condition.
Kronos has a significant amount of debt, primarily related to its 9.50% Senior Secured Notes due 2029 and its
3.75% Senior Secured Notes due 2025, its term loan from Contran, and borrowings on its global revolving credit facility
(“Global Revolver”). As of December 31, 2024, Kronos’ total consolidated debt was approximately $507.4 million.
Kronos’ level of debt could have important consequences to our stockholders and creditors, including:
•
making it more difficult for Kronos to satisfy its obligations with respect to its liabilities;
•
increasing its vulnerability to adverse general economic and industry conditions;
•
requiring that a portion of its cash flows from operations be used for the payment of interest on its debt,
which reduces its ability to use its cash flow to fund working capital, capital expenditures, dividends on its
common stock, acquisitions or general corporate requirements;
•
limiting the ability of Kronos’ subsidiaries to pay dividends to it;
•
limiting Kronos’ ability to obtain additional financing to fund future working capital, capital expenditures,
acquisitions or general corporate requirements;
•
limiting Kronos’ flexibility in planning for, or reacting to, changes in its business and the industry in which
it operates; and
•
placing Kronos at a competitive disadvantage relative to other less leveraged competitors.
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Indebtedness outstanding under Kronos’ Global Revolver accrues interest at variable rates. To the extent market
interest rates rise, the cost of Kronos’ debt could increase, even if the amount borrowed remains the same, adversely
affecting its financial condition, results of operations and cash flows.
In addition to Kronos’ indebtedness, Kronos is party to various lease and other agreements (including feedstock
purchase contracts and other long-term supply and service contracts, as discussed above) pursuant to which, along with its
indebtedness, Kronos is committed to pay approximately $701 million in 2025. Kronos’ ability to make payments on and
refinance its debt and to fund planned capital expenditures depends on its ability to generate cash flow in the future. To
some extent, this is subject to general economic, financial, competitive, legislative, regulatory and other factors that are
beyond its control. In addition, Kronos’ ability to borrow funds under its Global Revolver in the future, in some instances,
will depend in part on its ability to maintain specified financial ratios and satisfy certain financial covenants contained in
the credit agreement governing the Global Revolver.
Kronos’ business may not generate cash flows from operating activities sufficient to enable it to pay its debts
when they become due and to fund its other liquidity needs. As a result, Kronos may need to refinance all or a portion of
its debt before maturity, as it has done in the past. Kronos may not be able to refinance any of its debt in a timely manner
on favorable terms, if at all, in the current credit markets. Any inability to generate sufficient cash flows or to refinance its
debt on favorable terms could have a material adverse effect on its financial condition and impact its ability to pay a
dividend to us.
Changes in currency exchange rates and interest rates can adversely affect Kronos’ net sales, profits and cash flows.
Kronos operates its businesses in several different countries and sells its products worldwide. For example, during
both 2023 and 2024, approximately 44% of Kronos’ sales volumes were sold into European markets. The majority (but
not all) of Kronos’ sales from its operations outside the United States are denominated in currencies other than the United
States dollar, primarily the euro, other major European currencies and the Canadian dollar. Therefore, Kronos is exposed
to risks related to the need to convert currencies we receive from the sale of its products into the currencies required to pay
for certain of its operating costs and expenses and other liabilities (including indebtedness), all of which could result in
future losses depending on fluctuations in currency exchange rates and affect the comparability of Kronos’ results of
operations between periods.
Legal, Compliance and Regulatory Risk Factors
We could incur significant costs related to legal and environmental matters.
We formerly manufactured lead pigments for use in paint. We and others have been named as defendants in
various legal proceedings seeking damages for personal injury, property damage and governmental expenditures allegedly
caused by the use of lead-based paints. 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. We entered into a legal settlement
in one public-nuisance lead pigment case and have recognized a material liability related to the settlement. Any additional
liability we might incur in the future for these matters could be material. See also Item 3 – “Legal Proceedings – Lead
pigment litigation.”
Certain properties and facilities used in our former operations are the subject of litigation, administrative
proceedings or investigations arising under various environmental laws. These proceedings seek cleanup costs, personal
injury or property damages and/or damages for injury to natural resources. Some of these proceedings involve claims for
substantial amounts. Environmental obligations are difficult to assess and estimate for numerous reasons, and we may
incur costs for environmental remediation in the future in excess of amounts currently estimated. Any liability we might
incur in the future could be material. See also Item 3 – “Legal Proceedings – Environmental matters and litigation.”
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If some or all of Kronos’ or CompX’s intellectual property were to be declared invalid, held to be unenforceable or
copied by competitors, or some or all of Kronos’ or CompX’s confidential information become known to competitors,
or if Kronos’ or CompX’s competitors were to develop similar or superior intellectual property or technology, their
ability to compete could be adversely impacted.
Protection of intellectual property rights, including patents, copyrights, trade secrets, confidential information,
trademarks and tradenames, is important to Kronos’ and CompX’s businesses and their competitive positions. Kronos and
CompX endeavor to protect their intellectual property rights in key jurisdictions in which their products are produced, sold
or used and in jurisdictions into which their products are imported. However, Kronos and CompX may be unable to obtain
protection for their intellectual property in key jurisdictions. Although Kronos and CompX have applied for numerous
patents and trademarks throughout the world, they may have to engage in judicial enforcement in order to protect their
patent rights and other proprietary rights. Kronos’ and CompX’s patents and other intellectual property rights may be
challenged, invalidated, circumvented, rendered unenforceable or otherwise compromised. A failure to protect, defend or
enforce intellectual property could have an adverse effect on our financial condition and results of operations. Similarly,
third parties may assert claims against Kronos and Compx and their customers and distributors alleging their products
infringe upon third-party intellectual property rights. In the event that any such third party prevails against Kronos or
CompX on such claims, there could be an adverse effect on our financial condition and results of operations.
Although it is the practice of Kronos to enter into confidentiality agreements with its employees and third parties
to protect its proprietary expertise and other trade secrets, these agreements may not provide sufficient protection for its
trade secrets or proprietary know-how, or adequate remedies for breaches of such agreements may not be available in the
event of an unauthorized use or disclosure of such trade secrets and know-how. Kronos also may not be able to readily
detect breaches of such agreements. The failure of Kronos’ confidentiality agreements to protect its proprietary technology,
know-how or trade secrets could result in a material loss of its competitive position, which could lead to significantly
lower revenues, reduced profit margins or loss of market share.
CompX relies on patent, trademark and trade secret laws in the United States and similar laws in other countries
to establish and maintain intellectual property rights in its technology and designs. Despite these measures, any of
CompX’s intellectual property rights could be challenged, invalidated, circumvented or misappropriated. Third parties
may independently discover CompX’s trade secrets and proprietary information, and in such cases CompX could not assert
any trade secret rights against such parties. Further, CompX does not know if any of its pending trademark or patent
applications will be approved. Costly and time-consuming litigation could be necessary to enforce and determine the scope
of intellectual property rights. In addition, the laws of certain countries do not protect intellectual property rights to the
same extent as the laws of the United States. Therefore, in certain jurisdictions, CompX may be unable to protect its
technology and designs adequately against unauthorized third-party use, which could adversely affect its competitive
position.
Third parties may claim that CompX or its customers are infringing upon their intellectual property rights. Even
if CompX believes such claims are without merit, they can be time-consuming and costly to defend and distract
management’s and technical staff’s attention and resources. Claims of intellectual property infringement also might require
CompX to redesign affected technology, enter into costly settlement or license agreements or pay costly damage awards,
or face a temporary or permanent injunction prohibiting CompX from marketing or selling certain technology. If CompX
cannot or does not license the infringed technology on reasonable pricing terms or at all, or substitute similar technology
from another source, our business could be adversely impacted.
If Kronos or CompX must take legal action to protect, defend or enforce intellectual property rights, any suits or
proceedings could result in significant costs, including attorney’s fees and diversion of resources and management’s
attention, and Kronos or CompX may not prevail in any such suits or proceedings.
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Environmental, health and safety laws and regulations, particularly as they relate to Kronos, may result in increased
regulatory scrutiny which could decrease demand for Kronos’ products, increase Kronos’ manufacturing and
compliance costs or obligations and result in unanticipated losses which could negatively impact its financial results
or limit its ability to operate its business.
From time to time, new environmental, health and safety regulations are passed or proposed in the countries in
which Kronos operates or sells its products, seeking to regulate its operations or to restrict, limit or classify TiO2, or its
use. Increased regulatory scrutiny could affect consumer perception of TiO2 or limit the marketability and demand for
TiO2 or products containing TiO2 or increase Kronos’ manufacturing and regulatory compliance obligations and costs.
Increased compliance obligations and costs or restrictions on operations, raw materials and certain TiO2 applications could
negatively impact Kronos’ future financial results through increased costs of production, or reduced sales which may
decrease its liquidity, operating income and results of operations, which could in turn negatively impact our investment in
Kronos.
Global climate change laws and regulations could negatively impact our financial results or limit Kronos’ and CompX’s
ability to operate their businesses.
CompX operates production facilities in the United States and Kronos operates production facilities in North
America and Europe. Many of Kronos’ and CompX’s facilities require large amounts of energy, including electricity and
natural gas, in order to conduct operations. The U.S. government and various non-U.S. governmental agencies of countries
in which Kronos and CompX operate have determined the consumption of energy derived from fossil fuels is a major
contributor to climate change and have adopted or are contemplating regulatory changes in response to the potential impact
of climate change, including laws and regulations requiring enhanced reporting (such as the Corporate Social
Responsibility Directive adopted by the European Union on November 28, 2022) as well as legislation regarding carbon
emission costs, GHG emissions and renewable energy targets. International treaties or agreements may also result in
increasing regulation of GHG emissions, including emissions permits and/or energy taxes or the introduction of carbon
emissions trading mechanisms. To date, the existing GHG laws and regulations in effect in the various countries in which
Kronos or CompX operates have not had a material adverse effect on financial results. Until the timing, scope and extent
of any new or future regulation becomes known, we cannot predict the effect on Kronos’ or CompX’s business, results of
operations or financial condition. However, if further GHG laws and regulations were to be enacted in one or more
countries, it could negatively impact Kronos or CompX future results of operations through increased costs of production,
particularly as it relates to their energy requirements or their need to obtain emissions permits. If such increased costs of
production were to materialize, Kronos or CompX may be unable to pass price increases on to their customers to
compensate for increased production costs, which may decrease their liquidity, operating income and results of operations.
In addition, any adopted future laws and regulations focused on climate change and/or GHG emissions could negatively
impact Kronos’ or CompX’s ability (or that of its customers and suppliers) to compete with companies situated in areas
not subject to such laws and regulations.
General Risk Factors
Kronos’ operating as a global business presents risks associated with global and regional economic, political, and
regulatory environments.
Kronos manufactures and distributes its products globally. Revenue from non-U.S. markets accounted for
approximately 68%, 66%, and 66% of Kronos’ revenue for the years ended December 31, 2022, 2023 and 2024,
respectively. Kronos has significant international operations which, along with its customers and suppliers, could be
substantially affected by a number of risks arising from operating a multi-national business, including:
•
global or regional economic downturns;
•
changes in tariffs, trade barriers, and regulatory requirements, such as the enactment of tariffs on goods
imported into the U.S. including, but not limited to, the recently enacted tariff on goods imported from
Canada where Kronos manufactures a significant portion of the TiO2 it sells in North America. Tariffs could
make Kronos’ products more expensive which would reduce demand or require it to absorb the increased
costs reducing its operating margins;
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•
protectionist laws, policies, and business practices and nationalistic campaigns such as economic sanctions
and exchange controls;
•
U.S. relations with the governments of the other countries in which Kronos operates;
•
terrorism, armed conflict (such as the current conflicts between Russia and Ukraine and Israel and Hamas);
•
natural disasters, pandemics or other health crises, climate change, and other events beyond Kronos’ control;
•
difficulties enforcing agreements or other legal rights; and
•
Kronos’ effective tax rate may fluctuate based on the variability of geographic earnings and statutory rates.
TiO2 production requires significant energy input, and economic sanctions or supply disruptions resulting from
armed conflict could lead to additional volatility in global energy prices and energy supply disruptions. These risks,
individually or in the aggregate, could have an adverse effect on Kronos’ results of operations and financial condition.
Kronos is experiencing increasing competition from China. Chinese competition generally has lower operating
costs due to less stringent regulatory and environmental compliance requirements and less expensive energy prices. China
has dumped lower cost sulfate process TiO2 into the markets Kronos serves. In some cases, the TiO2 industry has been
successful in getting anti-competitive duties enacted on Chinese imports such as the European duties enacted in 2024.
The U.S. federal government has recently implemented tariffs on certain foreign goods and may implement
additional tariffs on foreign goods. For example, on March 4, 2025, the U.S. government implemented a 25% tariff on all
imports from Mexico and Canada into the U.S. As Kronos currently manufactures a significant portion of its North
American TiO2 in Canada, if sustained for an extended period of time, the 25% tariff on Kronos’ imports into the U.S.
from Canada, without exclusion, will make its products manufactured in Canada and sold into the U.S. more expensive.
As a result, demand for these products could be reduced, or Kronos could be required to absorb the increased costs or
increase prices of such products. Such tariffs and, if enacted, any further legislation or actions taken by the U.S. government
that restrict trade, such as additional tariffs, trade barriers and other protectionist or retaliatory measures taken in response,
could adversely impact Kronos’ ability to sell its products in the U.S. or reduce its revenues and gross margins. These
measures may also increase Kronos’ costs of Canadian feedstock imported into the U.S. and could adversely impact its
gross margins or require Kronos to raise prices thereby making its products less competitive. Additional tariffs imposed
by the U.S or any retaliatory or reciprocal tariffs imposed by other countries could also increase the cost of feedstock and
other raw materials that go into making TiO2, the extent of which is unknown. The ultimate impact of any tariffs will
depend on various factors, including the length of time tariffs are ultimately implemented and the amount, scope and nature
of the tariffs.
Technology failures or cybersecurity breaches could have a material adverse effect on our operations.
Kronos and CompX rely on integrated information technology systems to manage, process and analyze data,
including to facilitate the manufacture and distribution of their products to and from their facilities, receive, process and
ship orders, manage the billing of and collections from their customers and manage payments to vendors. Although Kronos
and CompX have systems and procedures in place to protect information technology systems, there can be no assurance
that such systems and procedures would be sufficiently effective. Therefore, any of Kronos’ and CompX’s information
technology systems may be susceptible to outages, disruptions or destruction from power outages, telecommunications
failures, employee error, cybersecurity breaches or attacks and other similar events. This could result in a disruption of
Kronos’ or CompX’s business operations, injury to people, harm to the environment or their assets, and/or the inability to
access their information technology systems and could adversely affect our results of operations and financial condition.
Kronos and CompX have in the past experienced, and expect to continue to experience, cyber-attacks, including phishing
and other attempts to breach or gain unauthorized access to, their systems, and vulnerabilities introduced into their systems
by trusted third-party vendors who have experienced cyber-attacks. To date Kronos and CompX have not suffered breaches
in their systems, either directly or through a trusted third-party vendor, which have led to material losses. Due to the
increase in global cybersecurity incidents it has become increasingly difficult to obtain insurance coverage on reasonable
pricing terms to mitigate some risks associated with technology failures or cybersecurity breaches, and Kronos and CompX
are experiencing such difficulties in obtaining insurance coverage.
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Physical impacts of climate change could have a material adverse effect on Kronos’ or CompX’s costs and operations.
Climate change may increase both the frequency and severity of extreme weather conditions and natural disasters,
such as hurricanes, thunderstorms, tornadoes, drought and snow or ice storms. Extreme weather conditions may increase
our costs or cause damage to Kronos’ or CompX’s facilities, and any damage resulting from extreme weather may not be
fully insured. Climate change has also been associated with rising sea levels and many of Kronos’ facilities are located
near coastal areas or waterways where rising sea levels or flooding could disrupt its operations or adversely impact its
facilities. Furthermore, periods of extended inclement weather or associated droughts or flooding may inhibit Kronos’ or
CompX’s facility operations and delay or hinder shipments of products to customers. Any such events could have a
material adverse effect on Kronos’ or CompX’s costs or results of operations.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None
ITEM 1C.
CYBERSECURITY
We operate through our subsidiaries and affiliate and receive services through our intercorporate services
agreement (ISA) with Contran (see Note 16 to our Consolidated Financial Statements). We recognize the importance of
proactively assessing, identifying and managing material risks associated with cybersecurity threats. These risks include,
among other things: operational disruptions, intellectual property theft, fraud, extortion, harm to employees or customers
and violation of data privacy or security laws. Our cybersecurity programs are built on both operational and compliance
foundations. The operational component focuses on continuous detection, prevention, measurement, analysis and response
to cybersecurity alerts and incidents, and on emerging threats. The compliance component establishes oversight of our
cybersecurity programs by creating risk-based controls to protect the integrity, confidentiality, accessibility and
availability of company data stored, processed or transferred. Our cybersecurity program is fully integrated into our
enterprise-wide risk management framework.
Kronos and CompX each have their own cybersecurity programs. Our corporate cybersecurity program is led by
our chief information officer (CIO), who is responsible for developing and executing our overall information security
strategy, policy, security engineering, operations and cyber threat detection and response. Our corporate information
systems are owned and operated by Contran and provided to us through the ISA. Our CIO, who also serves as the Kronos
CIO, reports to our and Kronos’ chief executive officers, respectively. CompX’s cybersecurity program is led by the
director of information technology (IT). The director of IT reports to CompX’s vice president in charge of coordinating
operational activities within CompX’s two operating business segments. Both our CIO and the director of IT have
extensive information technology and program management experience and lead teams that have many years of experience
with each organization. Cybersecurity risks at each company are also reviewed and tested annually through third-party
assessments and internal and external information technology audits. Our, Kronos’ and CompX’s information technology
teams review cybersecurity risks at least annually, integrating findings into strategic risk assessments.
We, Kronos and CompX continually enhance our cyber defense strategy with the ultimate goal of preventing
cybersecurity incidents to the extent feasible, while simultaneously bolstering our system resilience in an effort to minimize
the business impact should an incident occur. Third parties also play a role in our cybersecurity. We, Kronos and CompX
engage reputable third-party security firms for consultation on industry best practices and regulatory standards and to
conduct routine evaluations of our cybersecurity, such as through penetration testing and security audits; these evaluations
include testing both the design and operational effectiveness of security controls. All employees are required to complete
cybersecurity training at least once a year and have access to more frequent cybersecurity training through periodic updates.
Employees in certain roles also receive additional role-based, specialized cybersecurity training.
We, Kronos and CompX each have a Cybersecurity Incident Disclosure and Controls Committee (CIDAC) which
is central to the response and evaluation of cybersecurity incidents. Our CIDAC is comprised of our CIO and other senior
executives including our chief executive officer, chief financial officer and general counsel. Security events and data
incidents are evaluated, ranked by severity and prioritized for response and remediation. The IT teams are responsible for
categorizing cybersecurity incidents, and those deemed high-risk or critical are escalated to the CIDAC for review and
response coordination. Incidents are evaluated to determine materiality and for operational, financial and reputational
impact. Our CIDAC, as well as the Kronos and CompX CIDAC, performs simulations and tabletop exercises at a
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management level to evaluate our readiness and response to cybersecurity incidents. As needed, we collaborate with
external cybersecurity experts and legal advisors to help ensure a robust response strategy.
Our board of directors oversees management’s processes for identifying and mitigating risks, including
cybersecurity risks, to help align our risk exposure with our strategic objectives. Senior leadership, including our chief
financial officer and CIO, provides regular updates to the board of directors on our cybersecurity posture, emerging threats
and our risk mitigation efforts. Our board of directors is apprised of cybersecurity incidents deemed to have significant
business impact, even if they are not material to us. The board has delegated some of its primary risk oversight to board
committees, including that our audit committee facilitates the board’s process of oversight of our overall risk management
approach. Our full board retains oversight of cybersecurity because of its importance to us and visibility with our
customers.
In the event of an incident, we follow a structured incident response playbook, which outlines clear and defined
steps to be followed from incident detection to mitigation, recovery and notification, including notifying functional areas
(such as legal and human resources), senior leadership, and the board, as appropriate. We also conduct post-incident
reviews to identify lessons learned and implement continuous improvements.
We, Kronos and CompX face a number of cybersecurity risks. To date, such risks have not materially affected
us, including our business strategy, results of operations or financial condition. While we have not experienced any major
breaches, we actively monitor and mitigate cyber threats, including phishing attempts, malware and targeted attacks. Thus
far all such incidents have been minor, isolated and promptly contained. For more information about the cybersecurity
risks we face, see the risk factor entitled “Technology failures or cybersecurity breaches could have a material adverse
effect on our operations.” in Item 1A- “Risk Factors.”
ITEM 2.
PROPERTIES
Our principal executive offices are located in an office building located at 5430 LBJ Freeway, Dallas, Texas,
75240-2620. The principal properties used in the operations of our subsidiaries and affiliates, including certain risks and
uncertainties related thereto, are described in the applicable business sections of Item 1 – “Business.” We believe that our
facilities are generally adequate and suitable for our respective uses.
ITEM 3.
LEGAL PROCEEDINGS
We are involved in various legal proceedings. In addition to information that is included below, we have included
certain of the information required for this Item in Note 17 to our Consolidated Financial Statements, and we are
incorporating that information here by reference.
Lead pigment litigation
Our former operations included the manufacture of lead pigments for use in paint and lead-based paint. We, other
former manufacturers of lead pigments for use in paint and lead-based paint (together, the “former pigment
manufacturers”), and the Lead Industries Association (LIA), which discontinued business operations in 2002, have
previously been named as defendants in various legal proceedings seeking damages for personal injury, property damage
and governmental expenditures allegedly caused by the use of lead-based paints. Certain of these actions were filed by or
on behalf of states, counties, cities or their public housing authorities and school districts, and certain others were asserted
as class actions. We currently have no pending lead paint class action cases or pending lead paint cases brought by housing
authorities, school districts or other government entities.
In the matter titled County of Santa Clara v. Atlantic Richfield Company, et al. (Superior Court of the State of
California, County of Santa Clara, Case No. 1-00-CV-788657) on July 24, 2019, an order approving a global settlement
agreement entered into among all of the plaintiffs and the three defendants remaining in the case (the Sherwin Williams
Company, ConAgra Grocery Products and us) was entered by the court and the case was dismissed with prejudice. The
global settlement agreement provides that an aggregate $305 million will be paid collectively by the three co-defendants
in full satisfaction of all claims resulting in a dismissal of the case with prejudice and the resolution of (i) all pending and
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future claims by the plaintiffs in the case, and (ii) all potential claims for contribution or indemnity between us and our co-
defendants in respect to the case. In the agreement, we expressly deny any and all liability and the dismissal of the case
with prejudice was entered by the court without a final judgment of liability entered against us. The settlement agreement
fully concludes this matter.
Under the terms of the global settlement agreement, each defendant must pay an aggregate $101.7 million to the
plaintiffs as follows: $25.0 million within sixty days of the court’s approval of the settlement and dismissal of the case,
and the remaining $76.7 million in six annual installments beginning on the first anniversary of the initial payment ($12.0
million for the first five installments and $16.7 million for the sixth installment). Our sixth installment due in September
2025 will be made with funds already on deposit at the court, which is included in current restricted cash on our
Consolidated Balance Sheets, that are committed to the settlement, including all accrued interest at the date of payment,
with any remaining balance to be paid by us (and any amounts on deposit in excess of the final payment would be returned
to us). Pursuant to the settlement agreement, we placed an additional $9.0 million into an escrow account which was
previously included in noncurrent restricted cash on our Consolidated Balance Sheets. Following our fifth $12.0 million
installment made in September 2024, these funds became available for use and were reclassified as cash equivalents on
our Consolidated Balance Sheet.
For financial reporting purposes, using a discount rate of 1.9% per annum, we discounted the aggregate $101.7
million settlement to the estimated net present value of $96.3 million. We made the initial $25.0 million payment in
September 2019 and five annual installment payments of $12.0 million beginning in September 2020 and each September
thereafter through 2024. We recognized an aggregate accretion expense of $.9 million, $.7 million and $.5 million in 2022,
2023 and 2024, respectively.
In January 2024, NL was served with a third-party complaint in a matter titled Arrioena Beal v. Hattie Mitchell,
et al. (Circuit Court of Milwaukee County, Wisconsin, Case No. 21-cv-3276). The plaintiff in this case sued her former
landlords and several former manufacturers of lead paint for injuries allegedly attributable to lead paint, but did not sue
NL. Several of the former lead paint manufacturer defendants later filed a third-party complaint against NL, seeking
contribution for any damages they may ultimately have to pay to the plaintiff. We believe we have substantial defenses
to these claims under Wisconsin law and intend to defend ourselves vigorously.
New cases may continue to be filed against us. We do not know if NL 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.
Environmental matters and litigation
Certain properties and facilities used in our former operations, including divested primary and secondary lead
smelters and former mining locations, are the subject of civil litigation, administrative proceedings or investigations arising
under federal and state environmental laws and common law. Additionally, in connection with past operating practices,
we are currently involved as a defendant, potentially responsible party (“PRP”) or both, pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act (“CERCLA”), and similar state laws in various governmental and private actions associated with
waste disposal sites, mining locations, and facilities that we or our predecessors, our subsidiaries or their predecessors
currently or previously owned, operated or used, certain of which are on the United States Environmental Protection
Agency’s (“EPA”) Superfund National Priorities List or similar state lists. These proceedings seek cleanup costs, damages
for personal injury or property damage and/or damages for injury to natural resources. 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.
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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.
Obligations associated with environmental remediation and related matters are difficult to assess and estimate for
numerous reasons including the:
•
complexity and differing interpretations of governmental regulations,
•
number of PRPs and their ability or willingness to fund such allocation of costs,
•
financial capabilities of the PRPs and the allocation of costs among them,
•
solvency of other PRPs,
•
multiplicity of possible solutions,
•
number of years of investigatory, remedial and monitoring activity required,
•
uncertainty over the extent, if any, to which our former operations might have contributed to the conditions
allegedly giving rise to such personal injury, property damage, natural resource and related claims, and
•
number of years between former operations and notice of claims and lack of information and documents
about the former operations.
In addition, the imposition of more stringent standards or requirements under environmental laws or regulations,
new developments or changes regarding site cleanup costs or the allocation of costs among PRPs, solvency of other PRPs,
the results of future testing and analysis undertaken with respect to certain sites or a determination that we are potentially
responsible for the release of hazardous substances at other sites, could cause our expenditures to exceed our current
estimates. Actual costs could exceed accrued amounts or the upper end of the range for sites for which estimates have been
made, and costs may be incurred for sites where no estimates presently can be made. Further, additional environmental
and related matters may arise in the future. If we were to incur any future liability, this could have a material adverse effect
on our Consolidated Financial Statements, results of operations and liquidity.
We record liabilities related to environmental remediation and related matters (including costs associated with
damages for personal injury or property damage and/or damages for injury to natural resources) when estimated future
expenditures are probable and reasonably estimable. We adjust such accruals as further information becomes available to
us or as circumstances change. Unless the amounts and timing of such estimated future expenditures are fixed and
reasonably determinable, we generally do not discount estimated future expenditures to their present value due to the
uncertainty of the timing of the payout. We recognize recoveries of costs from other parties, if any, as assets when their
receipt is deemed probable.
We do not know and cannot estimate the exact time frame over which we will make payments for our accrued
environmental and related costs. The timing of payments depends upon a number of factors, including but not limited to
the timing of the actual remediation process; which in turn depends on factors outside of our control. At each balance sheet
date, we estimate the amount of our accrued environmental and related costs which we expect to pay within the next
twelve months, and we classify this estimate as a current liability. We classify the remaining accrued environmental costs
as a noncurrent liability.
On a quarterly basis, we evaluate the potential range of our liability for environmental remediation and related
costs at sites where we have been named as a PRP or defendant, including sites for which our wholly-owned environmental
management subsidiary, NL Environmental Management Services, Inc., (“EMS”), has contractually assumed our
obligations. At December 31, 2024, we had accrued approximately $69 million related to approximately 30 sites associated
with remediation and related matters we believe are at the present time and/or in their current phase reasonably estimable.
Excluding the $56.1 million environmental remediation settlement payment made in the first quarter of 2025 (as discussed
below), the upper end of the range of reasonably possible costs to us for remediation and related matters for which we
believe it is possible to estimate costs is approximately $38 million, including amounts currently accrued. These accruals
have not been discounted to present value.
-31-
We believe it is not reasonably possible to estimate the range of costs for certain sites. At December 31, 2024,
there were approximately five sites for which we are not currently able to reasonably estimate a range of costs. For these
sites, generally the investigation is in the early stages, and we are unable to determine whether or not we actually had any
association with the site, the nature of our responsibility, if any, for the contamination at the site, if any, and the extent of
contamination at and cost to remediate the site. The timing and availability of information on these sites is dependent on
events outside of our control, such as when the party alleging liability provides information to us. At certain of these
previously inactive sites, we have received general and special notices of liability from the EPA and/or state agencies
alleging that we, sometimes with other PRPs, are liable for past and future costs of remediating environmental
contamination allegedly caused by former operations. These notifications may assert that we, along with any other alleged
PRPs, are liable for past and/or future clean-up costs. As further information becomes available to us for any of these sites,
which would allow us to estimate a range of costs, we would at that time adjust our accruals. Any such adjustment could
result in the recognition of an accrual that would have a material effect on our Consolidated Financial Statements, results
of operations and liquidity.
In June 2008, we received a Directive and Notice to Insurers from the New Jersey Department of Environmental
Protection (“NJDEP”) regarding the Margaret’s Creek site in Old Bridge Township, New Jersey. NJDEP alleged that a
waste hauler transported waste from one of our former facilities for disposal at the site in the early 1970s. NJDEP referred
the site to the EPA, and in November 2009, the EPA added the site to the National Priorities List under the name Raritan
Bay Slag Site (“RBS Site”). In 2012, EPA notified NL of its potential liability at this site. In June 2013, NL filed a
contribution suit under CERCLA and the New Jersey Spill Act titled NL Industries, Inc. v. Old Bridge Township, et al.
(United States District Court for the District of New Jersey, Civil Action No. 3:13-cv-03493-MAS-TJB) against the current
owner, Old Bridge Township, several federal and state entities, and a number of private companies.
On February 10, 2025, the United States District Court for the District of New Jersey entered an order approving
a consent decree relating to the RBS Site in Middlesex County, New Jersey. The consent decree requires the United States
Army Corps of Engineers (and other federal agencies), the State of New Jersey, the Township of Old Bridge, NL, and
twenty-two other private companies to pay a total of $151.1 million, plus interest, to resolve all federal and state law claims
for past and future response costs under CERCLA and the New Jersey Spill Act, including natural resource damages,
contribution, and indemnification, relating to the RBS Site. The consent decree is a global settlement of all such claims
relating to the RBS Site and resolves a lawsuit captioned United States of America, et al. v. NL Industries, Inc., et al.
(United States District Court for the District of New Jersey, Civil Action No. 3:24-cv-08946) as well as all claims asserted
by NL and the other settling parties in NL’s previously filed contribution lawsuit, NL Industries, Inc. v. Old Bridge
Township, et al., discussed above.
Under the terms of the consent decree, in the first quarter of 2025 we paid $56.1 million, plus $.5 million interest,
toward the global settlement and received approximately $9.6 million from the other private companies participating in
the settlement. We recognized aggregate income of approximately $31.4 million in 2024 related to the adjustment of our
environmental accrual related to this matter and the recording of a $9.6 million receivable for the funds received in the
first quarter of 2025 from the other private companies participating in the settlement. See Note 3 to the Consolidated
Financial Statements.
In August 2009, we were served with a complaint in Raritan Baykeeper, Inc. d/b/a NY/NJ Baykeeper et al. v. NL
Industries, Inc. et al. (United States District Court, District of New Jersey, Case No. 3:09-cv-04117). This is a citizen’s
suit filed by two local environmental groups pursuant to the Resource Conservation and Recovery Act and the Clean Water
Act against NL, current owners, developers and state and local government entities. The complaint alleges that hazardous
substances were and continue to be discharged from our former Sayreville, New Jersey property into the sediments of the
adjacent Raritan River. The former Sayreville site is currently being remediated by owner/developer parties under the
oversight of the NJDEP. The plaintiffs seek a declaratory judgment, injunctive relief, imposition of civil penalties and an
award of costs. In June 2022, NL received a letter from the NJDEP informing NL that remediation of contaminated sites
upriver of the former Sayreville site had progressed to the point that it was now appropriate for NL to resume investigating
the sediments adjacent to the Sayreville site. NL has been diligently conducting that investigation in compliance with
NJDEP regulations. The lawsuit remains pending. NL continues to deny liability and will defend vigorously against all
claims.
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In 2011, we were served in ASARCO LLC v. NL Industries, Inc., et al. (United States District Court, Western
District of Missouri, Case No. 4:11-cv-00138-DGK) and ASARCO LLC v. NL Industries, Inc., et al. (United States District
Court, Eastern District of Missouri, Case No. 4:11-cv-00864). Both cases are CERCLA contribution actions brought
against several defendants to recover a portion of the amount the plaintiff paid in settlement with the U.S. Government
during its Chapter 11 bankruptcy. The court in each case entered indefinite stays of the litigation in 2013 and 2015, which
remain in place.
In July 2012, we were served in EPEC Polymers, Inc., v. NL Industries, Inc., (United States District Court for the
District of New Jersey, Case 3:12-cv-03842-PGS-TJB). The plaintiff, a landowner of property located across the Raritan
River from our former Sayreville, New Jersey operation, claims that contaminants from NL’s former Sayreville operation
came to be located on its land. The complaint seeks compensatory and punitive damages and alleges, among other things,
trespass, private nuisance, negligence, strict liability, and claims under CERCLA and the New Jersey Spill Act. We have
denied liability and will defend vigorously against all claims.
In September 2013, EPA issued to NL and 34 other PRPs general notice of potential liability and a demand for
payment of past costs and performance of a Remedial Design for the Gowanus Canal Superfund Site in Brooklyn, New
York. In March 2014, EPA issued a unilateral administrative order (“UAO”) to NL and approximately 27 other PRPs for
performance of the Remedial Design at the site. EPA contends that NL is liable as the alleged successor to the Doehler
Die Casting Company, and therefore responsible for any potential contamination at the site resulting from Doehler’s
ownership/operation of a warehouse and a die casting plant it owned 90 years ago. In April 2019, the EPA issued a second
UAO to NL and approximately 27 other PRPs for performance of certain work related to the Remedial Design at the site.
In October 2024, we were served in Brooklyn Union Gas Co. v. Consolidated Edison Co. of New York, et al. (United States
District Court for the Eastern District of New York, Case No. 1:24-cv-06993). This complaint asserts claims under
CERCLA and New York law against NL and a number of other private parties, federal and state agencies, and agencies
of the City of New York. The plaintiff, a former gas manufacturer, seeks to recover a portion of investigation and
remediation costs it allegedly incurred to address contamination at the Gowanus Canal Superfund Site. NL has denied
liability and will defend vigorously against all claims.
In January 2020, we were sued in Atlantic Richfield, Co. v. NL Industries, Inc., (United States District Court for
the District of Colorado, Case 1:20-cv-00234). This is a CERCLA cost recovery action brought by a past owner and
operator of certain mining properties located in Rico, Colorado. In 2023, the trial court granted partial summary judgment
for NL based on the statute of limitations and the plaintiff appealed that decision to the Court of Appeals for the Tenth
Circuit. In January 2025, the Court of Appeals reversed the trial court’s grant of partial summary judgment and returned
the matter to the trial court. We continue to deny liability and will defend vigorously against all claims.
In December 2020, NL and several other defendants were sued in California Department of Toxic Substances v.
NL Industries, Inc., (United States District Court for the Central District of California, Case 2:20-cv-11293). This
complaint by a California state agency asserts claims under CERCLA, a state environmental statute, and the common law
relating to lead contamination allegedly connected to a secondary lead smelter located in Vernon, California. In October
2022, the trial court issued an order finding that NL and the other defendants are not liable under CERCLA for lead
contamination in residential neighborhoods surrounding, but at a distance from, the former secondary lead smelter. In
August 2023, the trial court issued orders finding that NL and several other defendants are jointly liable for contamination
on areas where operations were previously conducted, but are not liable for contamination outside those former operating
areas. Neither the amount of damages owed, nor any party’s allocated share of such damages, has yet been determined.
We have denied liability and will continue to defend vigorously against all claims.
In May 2024, we were served in Philip Palmeri v. NL Industries, Inc. (Supreme Court of Niagara County, New
York, Case No. E183238). In this lawsuit, the plaintiff asserts that radioactive material allegedly originating at a former
NL facility in Niagara Falls, New York, caused the wrongful death of plaintiff’s spouse and diminished the value of
plaintiff’s residential property located in Lewiston, New York. The complaint alleges that NL is liable under theories of
strict liability, negligence, private nuisance, and trespass. NL has denied liability and will defend vigorously against all
claims.
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Other litigation
We have been named as a defendant in various lawsuits in several jurisdictions, alleging personal injuries as a
result of occupational exposure primarily to products manufactured by our former operations containing asbestos, silica
and/or mixed dust. In addition, some plaintiffs allege exposure to asbestos from working in various facilities previously
owned and/or operated by us. There are 115 of these types of cases pending, involving a total of approximately 589
plaintiffs. In addition, the claims of approximately 8,715 plaintiffs have been administratively dismissed or placed on the
inactive docket in Ohio state courts. We do not expect these claims will be re-opened unless the plaintiffs meet the courts’
medical criteria for asbestos-related claims. We have not accrued any amounts for this litigation because of the uncertainty
of liability and inability to reasonably estimate the liability, if any. To date, we have not been adjudicated liable in any of
these matters.
Based on information available to us, including:
•
facts concerning historical operations,
•
the rate of new claims,
•
the number of claims from which we have been dismissed, and
•
our prior experience in the defense of these matters,
we believe the range of reasonably possible outcomes of these matters will be consistent with our historical costs (which
are not material). Furthermore, we do not expect any reasonably possible outcome would involve amounts material to our
consolidated financial position, results of operations or liquidity. We have sought and will continue to vigorously seek,
dismissal and/or a finding of no liability from each claim. In addition, from time to time, we have received notices
regarding asbestos or silica claims purporting to be brought against former subsidiaries, including notices provided to
insurers with which we have entered into settlements extinguishing certain insurance policies. These insurers may seek
indemnification from us.
In addition to the matters described above, we and our affiliates are also involved in various other environmental,
contractual, product liability, patent (or intellectual property), employment and other claims and disputes incidental to
present and former businesses. In certain cases, we have insurance coverage for these items, although we do not expect
additional material insurance coverage for environmental matters. We currently believe that the disposition of all of these
various other claims and disputes (including asbestos-related claims), individually or in the aggregate, should not have a
material adverse effect on our consolidated financial position, results of operations or liquidity beyond the accruals already
provided.
Insurance coverage claims
We are involved in certain legal proceedings with a number of our former insurance carriers regarding the nature
and extent of the carriers’ obligations to us under insurance policies with respect to certain lead pigment and asbestos
lawsuits. The issue of whether insurance coverage for defense costs or indemnity or both will be found to exist for our
lead pigment and asbestos litigation depends upon a variety of factors and we cannot assure you that such insurance
coverage will be available.
We have agreements with certain of our former insurance carriers pursuant to which the carriers reimburse us for
a portion of our future lead pigment litigation defense costs, and one such carrier reimburses us for a portion of our future
asbestos litigation defense costs. We are not able to determine how much we will ultimately recover from these carriers
for defense costs incurred by us because of certain issues that arise regarding which defense costs qualify for
reimbursement. While we continue to seek additional insurance recoveries, we do not know if we will be successful in
obtaining reimbursement for either defense costs or indemnity. Accordingly, we recognize insurance recoveries in income
only when receipt of the recovery is probable and we are able to reasonably estimate the amount of the recovery.
-34-
In January 2014, we were served with a complaint in Certain Underwriters at Lloyds, London, et al v. NL
Industries, Inc. (Supreme Court of the State of New York, County of New York, Index No. 14/650103). The plaintiff, a
former insurance carrier of ours, is seeking a declaratory judgment of its obligations to us under insurance policies issued
to us by the plaintiff with respect to certain lead pigment lawsuits. Other insurers have been added as parties to the case
and have also sought a declaratory judgment regarding their obligations under certain insurance policies. NL has filed a
counterclaim seeking a declaratory judgment that all of the insurers are obligated to provide NL with certain coverage and
seeking damages for breach of contract. In December 2020, the trial court denied the insurers’ motion for summary
judgment, finding that the arguments raised by the insurers did not bar NL from coverage under the relevant policies. We
intend to defend NL’s rights and prosecute NL’s claims in this action vigorously.
We have settled insurance coverage claims concerning environmental claims with certain of our principal former
insurance carriers. We do not expect further material settlements relating to environmental remediation coverage.
Litigation – CompX
In 2024, CompX was served with four lawsuits by public water companies in South Carolina that seek recovery
of future costs to remove perfluoroalkyl and polyfluoroalkyl substances (known as “PFAS”) from their water supplies.
The lawsuits have been consolidated with other PFAS cases before a single judge in Spartanburg, South Carolina and were
subsequently removed to federal court. The defendants in the lawsuits include the manufacturers of PFAS products, as
well as companies that allegedly used PFAS-containing products in their manufacturing operations. The four lawsuits
naming CompX allege that CompX was one of many companies that used products containing PFAS in its manufacturing
operations, and that such operations have collectively impacted drinking water supplies used by the water companies. The
plaintiffs do not allege that CompX has failed to comply with, or has violated, any environmental regulation, permit or
statute. The plaintiffs instead assert claims under common law theories of negligence, nuisance, trespass, failure to warn,
and unfair trade practices. CompX intends to deny liability and will defend vigorously against all claims.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable
-35-
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our common stock is listed and traded on the New York Stock Exchange (NYSE: NL). As of February 28, 2025,
there were approximately 1,423 holders of record of our common stock.
Performance graph
Set forth below is a table and line graph comparing the yearly change in our cumulative total stockholder return
on our common stock against the cumulative total return of the S&P 500 Composite Stock Price Index and the S&P 500
Industrial Conglomerates Index for the period from December 31, 2019 through December 31, 2024. The graph shows the
value at December 31 of each year assuming an original investment of $100 at December 31, 2019 and the reinvestment
of dividends.
December 31,
2019
2020
2021
2022
2023
2024
NL common stock
$
100 $
128 $
205 $
204 $
177 $
271
S&P 500 Composite Stock Index
100
118
152
125
158
197
S&P 500 Industrial Conglomerates Index
100
110
116
106
132
182
The information contained in the performance graph shall not be deemed “soliciting material” or “filed” with the
SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act, except to the extent we specifically request
that the material be treated as soliciting material or specifically incorporate this performance graph by reference into a
document filed under the Securities Act or the Securities Exchange Act.
-36-
Equity compensation plan information
We have an equity compensation plan, which was approved by our shareholders, pursuant to which an aggregate
of 200,000 shares of our common stock can be awarded to non-employee members of our board of directors. At
December 31, 2024, 185,750 shares are available for award under this plan. See Note 15 to our Consolidated Financial
Statements.
ITEM 6.
RESERVED
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Business overview
We are primarily a holding company. We operate in the component products industry through our majority-
owned subsidiary, CompX International Inc. We also own a noncontrolling interest in Kronos Worldwide, Inc. Both
CompX (NYSE American: CIX) and Kronos (NYSE: KRO) file periodic reports with the SEC.
CompX is a leading manufacturer of engineered components utilized in a variety of applications and industries.
Through its Security Products operations, CompX manufactures mechanical and electronic cabinet locks and other locking
mechanisms used in postal, recreational transportation, office and institutional furniture, cabinetry, tool storage and
healthcare applications. CompX also manufactures wake enhancement systems, stainless steel exhaust systems, gauges,
throttle controls, trim tabs and related hardware and accessories for the recreational marine and other industries through
its Marine Components operations.
We account for our 31% non-controlling interest in Kronos by the equity method. Kronos is a leading global
producer and marketer of value-added titanium dioxide pigments. TiO2 is used for a variety of manufacturing applications
including coatings, plastics, paper and other industrial products.
Net income overview
Our net income attributable to NL stockholders was $67.2 million, or $1.38 per share, in 2024 compared to a net
loss of $2.3 million, or $.05 per share, in 2023 and net income of $33.8 million, or $.69 per share, in 2022.
As more fully described below, the increase in our earnings attributable to NL stockholders from 2023 to 2024 is
primarily due to the net effects of:
•
equity in earnings from Kronos in 2024 of $26.4 million compared to equity in losses of $15.0 million in
2023;
•
aggregate income of $31.4 million in 2024 related to the settlement of a liability for an environmental
remediation site;
•
an unrealized gain in the relative value of marketable equity securities of $9.8 million in 2024 compared to
an unrealized loss of $8.1 million in 2023;
•
lower CompX segment profit of $17.0 million in 2024 compared to $25.4 million in 2023;
•
a non-cash loss on the termination of our U.K. pension plan of $4.9 million in 2023;
•
higher interest and dividend income of $11.0 million in 2024 compared to $9.6 million in 2023; and
•
higher insurance recoveries of $1.4 million in 2024 compared to $.5 million in 2023.
-37-
Our 2024 net income per share attributable to NL includes:
•
aggregate income of $.51 per share, net of tax in the fourth quarter of 2024 related to the settlement of a
liability for an environmental remediation site;
•
income of $.25 per share, net of tax, due to Kronos’ recognition of a non-cash gain resulting from the
remeasurement of its investment in the TiO2 manufacturing joint venture;
•
a loss of $.08 per share, net of tax, due to Kronos’ recognition of a non-cash deferred income tax expense
related to final tax regulations on the treatment of certain currency translation gains and losses recognized in
the fourth quarter;
•
a loss of $.04 per share, net of tax, due to Kronos’ recognition of a non-cash deferred income tax expense
related to the recognition of a deferred income tax asset valuation allowance related to its Belgian net deferred
tax assets recognized in the fourth quarter, and
•
income of $.02 per share, net of tax, related to insurance recoveries; and
•
a loss of $.01 per share due to Kronos’ recognition of an aggregate charge related to a write-off of deferred
financing costs.
Our 2023 net loss per share attributable to NL stockholders includes:
•
a loss of $.08 per share, net of tax, due to the termination of our U.K. pension plan recognized in the second
quarter,
•
a loss of $.02 per share, net of tax, due to Kronos’ recognition, primarily in the fourth quarter, of restructuring
costs related to workforce reductions,
•
income of $.01 per share, net of tax, due to Kronos’ recognition in the first, second and third quarters of a
pre-tax insurance settlement gain related to a business interruption insurance claim arising from Hurricane
Laura in 2020, and
•
a loss of $.01 per share, net of tax, due to Kronos’ recognition in the fourth quarter of a fixed asset impairment
related to the write-off of certain costs resulting from a capital project termination.
As more fully described below, the decrease in our earnings attributable to NL stockholders from 2022 to 2023
is primarily due to the net effects of:
•
equity in losses from Kronos in 2023 of $15.0 million compared to equity in earnings of $31.9 million in
2022,
•
higher interest and dividend income of $9.6 million in 2023 compared to $3.8 million in 2022, and
•
a non-cash loss on the termination of our U.K. pension plan of $4.9 million in 2023.
Our 2023 net loss per share attributable to NL stockholders includes:
•
a loss of $.08 per share, net of tax, due to the termination of our U.K. pension plan recognized in the second
quarter,
•
a loss of $.02 per share, net of tax, due to Kronos’ recognition, primarily in the fourth quarter, of restructuring
costs related to workforce reductions,
•
income of $.01 per share, net of tax, due to Kronos’ recognition in the first, second and third quarters of a
pre-tax insurance settlement gain related to a business interruption insurance claim arising from Hurricane
Laura in 2020, and
•
a loss of $.01 per share, net of tax, due to Kronos’ recognition in the fourth quarter of a fixed asset impairment
related to the write-off of certain costs resulting from a capital project termination.
-38-
Our 2022 net income per share attributable to NL stockholders includes income of $.01 per share, recognized in
the third quarter, related to Kronos’ business interruption insurance claim arising from Hurricane Laura in 2020.
Outlook
Excluding any potential effects from changes in the relative value of marketable equity securities, we currently
expect our net income attributable to NL stockholders in 2025 to be lower than 2024 primarily due to income related to
the settlement of a liability for an environmental remediation site recognized in the fourth quarter of 2024 partially offset
by higher expected CompX segment profit. See also Item 3 – “Legal Proceedings – Environmental matters and litigation”
and Note 17 to our Consolidated Financial Statements.
Income from operations
The following table shows the components of our income from operations.
Years ended December 31,
% Change
2022
2023
2024
2022-23 2023-24
(Dollars in millions)
CompX segment profit
$
25.4 $
25.4 $
17.0
— %
(33)%
Insurance recoveries
.1
.5
1.4
399
195
Corporate income (expense), net
(11.8)
(11.8)
19.5
—
(266)
Income from operations
$
13.7 $
14.1 $
37.9
3
168
The following table shows the components of our income (loss) before income taxes exclusive of our income
from operations.
Years ended December 31,
% Change
2022
2023
2024
2022-23 2023-24
(Dollars in millions)
Equity in earnings (losses) of Kronos
$
31.9 $
(15.0) $
26.4
(147)%
276 %
Marketable equity securities
unrealized gain (loss)
(8.1)
(8.1)
9.8
1
220
Loss on pension plan termination
—
(4.9)
—
n.m.
n.m.
Other components of net periodic pension
and OPEB cost
(1.1)
(1.4)
(1.2)
21
(12)
Interest and dividend income
3.8
9.6
11.0
154
14
Interest expense
(1.0)
(.7)
(.6)
(21)
(29)
n.m. not meaningful
-39-
CompX International Inc.
Years ended December 31,
% Change
2022
2023
2024
2022-23 2023-24
(Dollars in millions)
Net sales
$
166.6
$
161.3
$
145.9
(3)%
(10)%
Cost of sales
117.8
112.1
104.6
(5)
(7)
Gross margin
48.8
49.2
41.3
1
(16)
Selling, general and administrative expenses
23.4
23.8
24.3
2
2
Segment profit (1)
$
25.4
$
25.4
$
17.0
—
(33)
Percentage of net sales:
Cost of sales
70.7 %
69.5 %
71.7 %
Gross margin
29.3
30.5
28.3
Selling, general and administrative expenses
14.0
14.7
16.7
Segment profit
15.3
15.8
11.7
(1) We use segment profit to assess the performance of CompX. Segment profit is defined as gross margin less
selling, general and administrative expenses directly attributable to CompX’s operations.
Net sales – CompX’s net sales decreased $15.4 million in 2024 compared to 2023 due to lower Marine
Components sales to the towboat market and lower Security Products sales to the government security market as a result
of sales related to a pilot project that shipped in the third and fourth quarters of 2023 and for which there were no related
sales in 2024.
CompX’s net sales decreased approximately $5.3 million in 2023 compared to 2022 due to lower Marine
Components sales primarily to the towboat market, partially offset by higher Security Products sales largely in the fourth
quarter of 2023.
Cost of sales and gross margin – CompX’s cost of sales decreased in 2024 compared to 2023 primarily due to
the effects of lower sales at both Security Products and Marine Components partially offset by higher production costs
across both reporting units. As a result, CompX’s cost of sales as a percentage of net sales increased over the same period.
CompX’s gross margin as a percentage of sales decreased in 2024 compared to 2023 primarily due to the factors affecting
cost of sales and decreased coverage of fixed costs due to lower sales.
CompX’s cost of sales decreased in 2023 compared to 2022 primarily due to the effects of lower production costs
at both Security Products and Marine Components as well as lower Marine Components sales. CompX’s gross margin as
a percentage of sales increased over the same period primarily due to the factors affecting cost of sales.
Selling, general and administrative expenses – CompX’s selling, general and administrative expenses consist
primarily of personnel costs, sales commissions and advertising expenses directly related to product sales and
administrative costs relating to CompX’s businesses and its corporate management activities, as well as gains and losses
on property and equipment. CompX’s selling, general and administrative expenses increased $.5 million in 2024 compared
to 2023 predominantly due to higher employee salary and benefit costs at Security Products. As a percentage of sales,
CompX’s selling, general and administrative expenses increased in 2024 compared to 2023 primarily due to increased
selling, general and administrative expenses and decreased coverage of selling, general and administrative expenses on
lower sales.
CompX’s selling, general and administrative expenses increased in 2023 compared to 2022 predominantly due
to higher salary and benefit costs at Security Products which increased by $.6 million. As a percentage of sales, CompX’s
selling, general and administrative expenses increased in 2023 compared to 2022 primarily due to the effect of the
increased selling, general and administrative expenses on lower sales.
-40-
Segment profit – As a percentage of net sales, CompX’s segment profit decreased in 2024 compared to 2023 and
increased in 2023 compared to 2022. CompX’s segment profit margins were primarily impacted by the factors impacting
net sales, cost of sales, gross margin and selling, general and administrative expenses discussed above.
General – CompX’s profitability primarily depends on its ability to utilize its production capacity effectively,
which is affected by, among other things, the demand for its products and its ability to control its manufacturing costs,
primarily comprised of labor costs and materials. The materials used in CompX’s products consist of purchased
components and raw materials some of which are subject to fluctuations in the commodity markets such as zinc, brass,
aluminum and stainless steel. Total material costs represented approximately 46% of CompX’s cost of sales in 2024, with
commodity-related raw materials representing approximately 13% of its cost of sales. CompX’s raw material prices were
generally stable through the first half of 2024. Beginning in the latter half of the third quarter CompX began to experience
moderate increases in certain raw material costs, particularly brass. The zinc market was volatile in 2024, but CompX was
successful in making strategic spot buys to keep its costs consistent with 2023. Prices for aluminum and stainless steel,
which are the primary raw materials used for the manufacture of CompX’s marine components (including marine exhaust
headers and pipes, wake enhancement systems, throttles and trim tabs), were relatively stable in 2024 because it took
advantage of volume purchase opportunities during the year. In most cases, commodity raw materials CompX purchases
include processing and conversion costs, such as alloying, extrusion and rolling, which remain elevated due to costs of
labor, transportation and energy. Processing and conversion costs are not expected to decrease and may negate the benefit
of softening commodity prices on CompX’s purchases. Based on current economic conditions, CompX expects the prices
for zinc, brass, aluminum, stainless steel and other manufacturing materials in 2025 to be relatively stable, although
governmental actions such as tariffs may impact markets.
CompX occasionally enters into short-term commodity-related raw material supply arrangements to mitigate the
impact of future increases in commodity related raw material costs. See Item 1 – “Business- Raw Materials.”
Results by reporting unit
The key performance indicator for CompX’s reporting units is the level of their reporting unit profit (see
discussion below).
Years ended December 31,
% Change
2022
2023
2024
2022-23 2023-24
(Dollars in millions)
Security Products:
Net sales
$
114.5
$
121.2
$
115.2
6 %
(5)%
Cost of sales
79.1
82.8
80.5
5
(3)
Gross margin
35.4
38.4
34.7
8
(10)
Operating costs and expenses
12.7
13.5
13.9
6
3
Reporting unit profit (2)
$
22.7
$
24.9
$
20.8
10
(16)
Gross margin
31.0 %
31.7 %
30.1 %
Reporting unit profit margin
19.9
20.6
18.1
(2) Reporting unit profit includes reporting unit sales less cost of sales and operating costs and expenses directly
attributable to the reporting unit. Interunit sales are not material.
Security Products – Security Products net sales decreased 5% to $115.2 million in 2024 compared to $121.2
million in 2023 primarily due to lower sales to the government security market as a result of sales related to a pilot project
for a government security customer that shipped in the third and fourth quarters of 2023 and for which there were no
related sales in 2024. Relative to prior year, sales were $8.3 million lower to the government security market, $2.0 million
lower to the transportation market and $.9 million lower to distributors, partially offset by $4.1 million higher sales to the
healthcare market and $.7 million higher sales to the tool storage market. Gross margin as a percentage of net sales for
2024 decreased as compared to 2023 primarily due to lower sales, a less favorable customer and product mix, higher
employee related costs (primarily increased medical costs), higher materials costs (primarily brass and electronics) in the
-41-
latter half of the year and decreased coverage of fixed costs due to lower sales. Security Products reporting unit profit
margin decreased for 2024 compared to 2023 primarily due to the factors impacting gross margin, as well as decreased
coverage of operating costs and expenses from lower sales and increased operating costs and expenses, including higher
employee salaries and benefit costs of $.5 million, primarily in the first half of the year.
Security Products net sales increased 6% to $121.2 million in 2023 compared to $114.5 million in 2022 primarily
due to higher sales related to a pilot project for a government security customer. Relative to prior year, sales were $8.3
million higher to the government security market and $1.5 million higher to distributors, partially offset by $1.7 million
lower sales to the office furniture market and $.7 million lower sales to the gas station security market. Gross margin as a
percentage of net sales for 2023 increased as compared to 2022 primarily due to lower production costs (including lower
material, overtime and shipping costs) and increased coverage of fixed costs on higher sales, primarily in the fourth quarter.
Reporting unit profit margin increased for 2023 compared to 2022 primarily due to the factors impacting gross margin, as
well as increased coverage of operating costs and expenses from higher sales, partially offset by increased operating costs
and expenses, including higher employee salaries and benefit costs of $.6 million.
Years ended December 31,
% Change
2022
2023
2024
2022-23 2023-24
(Dollars in millions)
Marine Components:
Net sales
$
52.1
$
40.1
$
30.7
(23) %
(23) %
Cost of sales
38.7
29.3
24.1
(24)
(18)
Gross margin
13.4
10.8
6.6
(19)
(39)
Operating costs and expenses
3.8
3.6
3.3
(5)
(8)
Reporting unit profit (2)
$
9.6
$
7.2
$
3.3
(25)
(54)
Gross margin
25.6 %
27.0 %
21.6 %
Reporting unit profit margin
18.4
18.0
10.8
Marine Components – Marine Components net sales decreased 23% in 2024 as compared to 2023 primarily due
to $8.7 million lower sales to the towboat market through the first three quarters of 2024, partially offset by higher sales
in the fourth quarter of 2024, including $1.1 million higher sales to the towboat market and $1.0 million higher sales to
the government market. Relative to the full year of 2023, sales were $7.6 million lower to the towboat market (primarily
to original equipment boat manufacturers), $1.4 million lower to the industrial market and $.6 million lower to each the
engine builder market and distributors, partially offset by $1.4 million higher sales to the government market. Gross margin
as a percentage of sales decreased in 2024 compared to 2023 primarily due to higher cost inventory produced during the
fourth quarter of 2023 and sold in the first quarter of 2024 and decreased coverage of fixed costs as a result of lower sales,
partially offset by a more favorable customer and product mix, lower employee salaries and benefits of approximately
$1.8 million primarily related to headcount reductions and decreased labor costs of $1.2 million due to lower production
volumes. Reporting unit profit as a percentage of net sales decreased in 2024 compared to 2023 due to the factors impacting
gross margin, as well as decreased coverage of operating costs and expenses on lower sales, partially offset by reduced
operating costs and expenses, including lower employee related expenses of $.2 million.
Marine Components net sales decreased 23% in 2023 as compared to 2022. Relative to prior year, sales were
$12.8 million lower to the towboat market (primarily to original equipment boat manufacturers) and $2.0 million lower to
the engine builder market, partially offset by $1.2 million higher industrial sales and $.8 million higher sales to the center
console boat market. Gross margin as a percentage of sales increased in 2023 compared to 2022 primarily due to lower
raw material costs (primarily stainless steel and aluminum), lower supplies costs driven by lower volume, lower shipping
costs and lower labor costs from reduced employee overtime due to lower sales volumes, partially offset by decreased
coverage of fixed costs as a result of lower sales. Reporting unit profit as a percentage of net sales decreased slightly in
2023 compared to 2022 primarily due to the factors impacting gross margin, as well as decreased coverage of operating
costs and expenses from lower sales.
Outlook – As noted above, in the second half of 2023 CompX’s Security Products reporting unit had significant
sales related to a pilot project for a government security customer. Excluding these sales in 2023, Security Products sales
-42-
would have increased in 2024 as compared to 2023 due to increased sales across a variety of markets, particularly increased
sales of mechanical locks to the government security market. At CompX’s Marine Components reporting unit, the decline
in sales to the towboat market as a result of the contraction in the recreational marine industry that began in the second
quarter of 2023 continued through the third quarter of 2024. Marine Components net sales increased in the fourth quarter
of 2024 compared to the fourth quarter of 2023 as a result of stabilizing demand in the towboat market as well as increased
sales to the government market. Raw material prices remained relatively stable through the first half of the year; however,
beginning in the third quarter of 2024 CompX experienced price increases in certain commodity raw materials, primarily
brass and electronic components at Security Products.
CompX expects Security Products net sales in 2025 to improve modestly over 2024, and it expects gross margin
and reporting unit profit percentages in 2025 to be slightly above 2024 due to pricing improvements on the Security
Products product mix. CompX expects Marine Components net sales to increase in 2025 due to higher expected sales to
the government and industrial markets. CompX believes the recreational marine market has stabilized, and it expects
Marine Components sales to the towboat market in 2025 will be comparable to 2024. Overall CompX expects Marine
Components to have improved gross margins and reporting unit profit percentages in 2025 compared to 2024 due to higher
expected sales volumes. During 2024 CompX was aggressive in aligning its production capabilities and inventories to
demand levels. In 2025, CompX will continue to monitor current and anticipated near-term customer demand levels to
ensure its production capabilities and inventories are aligned accordingly.
CompX’s expectations for its operations and the markets it serves are based on a number of factors outside its
control. Currently, CompX’s supply chains are stable and transportation and logistical delays are minimal. CompX has in
the past experienced global and domestic supply chain challenges, and any future impacts on its operations will depend
on, among other things, any future disruption in its operations or its suppliers’ operations, the effect of tariffs, and the
impact of economic conditions and geopolitical events on demand for its products or its customers’ and suppliers’
operations, all of which remain uncertain and cannot be predicted.
General corporate items, interest and dividend income, interest expense, provision for income taxes,
noncontrolling interest and related party transactions
Insurance recoveries – We have agreements with certain insurance carriers pursuant to which the carriers
reimburse us for a portion of our past lead pigment and asbestos litigation defense costs. Insurance recoveries include
amounts we received from these insurance carriers.
The agreements with certain of our insurance carriers also include reimbursement for a portion of our future
litigation defense costs. We are not able to determine how much we will ultimately recover from these carriers for defense
costs incurred by us because of certain issues that arise regarding which defense costs qualify for reimbursement.
Accordingly, these insurance recoveries are recognized when receipt is probable and the amount is determinable. In this
regard we received $.5 million and $1.4 million in insurance recoveries in 2023 and 2024, respectively. Recoveries in
2022 were nominal. See Note 17 to our Consolidated Financial Statements.
Corporate income (expense), net – Corporate income was $19.5 million in 2024 compared to corporate expense
of $11.8 million in 2023 due to income of $31.4 million recognized in the fourth quarter of 2024 as a result of the settlement
of a liability for an environmental remediation site, including income of $9.6 million received from private companies
participating in the settlement. Included in corporate (income) expenses are:
•
litigation fees and related costs of $3.0 million in 2024 compared to $4.4 million in 2023, and
•
income from environmental remediation and related cost of $20.3 million in 2024 compared to expenses of
$.6 million in 2023.
Corporate expenses were $11.8 million in each of 2022 and 2023. Included in corporate expenses are:
•
litigation fees and related costs of $4.4 million in 2023 compared to $4.2 million in 2022, and
•
environmental remediation and related costs of $.6 million in 2023 compared to $.5 million in 2022.
-43-
Overall, we currently expect that our general corporate expenses in 2025 will be higher than in 2024 primarily
due to income recognized in 2024 related to the settlement of a liability for an environmental remediation site in the fourth
quarter of 2024. See also Item 3 – “Legal Proceedings – Environmental matters and litigation” and Note 17 to our
Consolidated Financial Statements.
The level of our litigation fees and related costs varies from period to period depending upon, among other things,
the number of cases in which we are currently involved, the nature of such cases and the current stage of such cases (e.g.
discovery, pre-trial motions, trial or appeal, if applicable). See Note 17 to our Consolidated Financial Statements. If our
current expectations regarding the number of cases in which we expect to be involved during 2025 or the nature of such
cases were to change, our corporate expenses could be higher than we currently estimate.
Obligations for environmental remediation and related costs are difficult to assess and estimate and it is possible
that actual costs for environmental remediation will exceed accrued amounts or that costs will be incurred in the future for
sites in which we cannot currently estimate our liability. If these events were to occur in 2025, our corporate expenses
would be higher than we currently estimate. In addition, we adjust our environmental accruals as further information
becomes available to us or as circumstances change. Such further information or changed circumstances could result in an
increase in our accrued environmental costs. See Note 17 to our Consolidated Financial Statements.
Interest and dividend income – Interest income increased $1.4 million in 2024 compared to 2023 and increased
$5.8 million in 2023 compared to 2022 primarily due to higher interest rates and increased investment balances, somewhat
offset by lower average balances on CompX’s revolving promissory note receivable from Valhi.
Marketable equity securities – Unrealized gains or losses on our marketable equity securities are recognized in
Marketable equity securities on our Consolidated Statements of Operations. See Note 5 to our Consolidated Financial
Statements.
Income tax expense (benefit) – We recognized income tax expense of $2.8 million in 2022, an income tax benefit
of $7.0 million in 2023 and income tax expense of $14.1 million in 2024.
In accordance with GAAP, we recognize deferred income taxes on our undistributed equity in earnings of Kronos.
Because we and Kronos are part of the same U.S. federal income tax group, any dividends we receive from Kronos are
nontaxable to us. Accordingly, we do not recognize and we are not required to pay income taxes on dividends from Kronos.
Therefore, our full-year effective income tax rate will generally be lower than the U.S. federal statutory income tax rate
in years during which we receive dividends from Kronos and recognize equity in earnings of Kronos. Conversely, our
effective income tax rate will generally be higher than the U.S. federal statutory income tax rate in years during which we
receive dividends from Kronos and recognize equity in losses of Kronos. During interim periods, our effective income tax
rate may not necessarily correspond to the foregoing due to the application of accounting for income taxes in interim
periods which requires us to base our effective rate on full year projections. We received aggregate dividends from Kronos
of $26.8 million in each of 2022 and 2023 and $16.9 million in 2024. Our effective tax rate attributable to our equity in
earnings (losses) of Kronos, including the effect of non-taxable dividends we received from Kronos, was a 3.4% expense
in 2022, a 58.5% expense in 2023 and a 7.5% expense in 2024. The increase in our effective rate from 2022 to 2023 is
attributable to the effects of Kronos’ loss in 2023 as compared to earnings in 2022. The decrease in our effective rate from
2023 to 2024 is attributable to the combined effects of Kronos’ earnings in 2024 as compared to loss in 2023 and the lower
non-taxable dividend income we received from Kronos in 2024 as compared to 2023.
See Note 14 to our Consolidated Financial Statements for more information about our 2024 income tax items,
including a tabular reconciliation of our statutory tax expense to our actual tax expense (benefit).
Noncontrolling interest – Noncontrolling interest in net income is directly attributable to CompX’s net income
and reflects CompX’s earnings in 2022, 2023 and 2024.
Related party transactions – We are a party to certain transactions with related parties. See Notes 1 and 16 to our
Consolidated Financial Statements. It is our policy to engage in transactions with related parties on terms, in our opinion,
no less favorable to us than we could obtain from unrelated parties.
-44-
Equity in earnings of Kronos Worldwide, Inc.
Years ended December 31,
% Change
2022
2023
2024
2022-23 2023-24
(Dollars in millions)
Net sales
$ 1,930.2
$ 1,666.5
$ 1,887.1
(14)%
13 %
Cost of sales
1,539.1
1,501.6
1,527.8
(2)
2
Gross margin
$
391.1
$
164.9
$
359.3
Income (loss) from operations
$
159.6
$
(56.0)
$
122.9
(135)
319
Gain on remeasurement of investment in TiO2
manufacturing joint venture
—
—
64.5
Other gain (loss), net
(8.8)
.2
5.1
Interest expense
(16.9)
(17.1)
(42.9)
Income (loss) before income taxes
133.9
(72.9)
149.6
Income tax expense (benefit)
29.4
(23.8)
63.4
Net income (loss)
$
104.5
$
(49.1)
$
86.2
Percentage of net sales:
Cost of sales
80 %
90 %
81 %
Income (loss) from operations
8
(3)
7
Equity in earnings (losses) of
Kronos Worldwide, Inc.
$
31.9
$
(15.0)
$
26.4
TiO2 operating statistics:
Sales volumes*
481
419
504
(13)%
20 %
Production volumes*
492
401
535
(19)
33
Percentage change in TiO2 net sales:
TiO2 sales volumes
(4)%
20 %
TiO2 product pricing
(13)
(5)
TiO2 product mix/other
2
(2)
Changes in currency exchange rates
1
—
Total
(14)%
13 %
∗
Thousands of metric tons
As previously reported, effective the Acquisition Date, of July 16, 2024 Kronos acquired the 50% joint venture
interest in LPC previously held by Venator. Prior to the acquisition, Kronos held a 50% joint venture interest in LPC
through a wholly-owned subsidiary. LPC was operated as a manufacturing joint venture between Kronos and Venator.
Following the acquisition, LPC became a wholly-owned subsidiary of Kronos. Kronos acquired the 50% joint venture
interest that it did not already own for consideration of $185 million less a working capital adjustment. An additional earn-
out payment of up to $15 million based on Kronos’ aggregate consolidated net income before interest expense, income
taxes and depreciation and amortization expense, or EBITDA, during a two-year period comprising calendar years 2025
and 2026 may be required. The acquisition was financed through borrowings of $132.1 million under Kronos’ Global
Revolver and the remainder paid with Kronos’ cash on hand. Kronos accounted for the acquisition of the interest in LPC
as a business combination. See Note 6 to our Consolidated Financial Statements.
-45-
Industry conditions and 2024 overview – Kronos and the TiO2 industry experienced an extended period of
significantly reduced demand reflected in its sales volumes beginning in the second half of 2022 and continuing throughout
2023. While demand improved in 2024 resulting in increased sales volumes across all major markets compared to the prior
year, overall demand remained below average historical levels. After improving in the first half of 2024, demand
moderated in the second half of the year, which placed downward pressure on Kronos’ TiO2 pricing with 2024 average
TiO2 selling prices approximately 5% below the average TiO2 selling prices for 2023.
Kronos operated its production facilities at 72% of practical capacity utilization in 2023 in response to decreased
demand and higher production costs. As a result of the increase in demand experienced in the fourth quarter of 2023 and
the first quarter of 2024, along with more favorable production costs, Kronos began increasing its production rates during
the first quarter of 2024 and it operated at near practical capacity in the second, third and fourth quarters of 2024 resulting
in 96% of practical capacity utilization in 2024.
The following table shows Kronos’ capacity utilization rates during 2023 and 2024.
Production Capacity Utilization Rates
2023
2024
First Quarter
76 %
87 %
Second Quarter
64 %
99 %
Third Quarter
73 %
92 %
Fourth Quarter
75 %
97 %
Overall
72 %
96 %
Excluding the effect of changes in currency exchange rates, Kronos’ cost of sales per metric ton of TiO2 sold in
2024 was significantly lower as compared to 2023 primarily due to significant decreases in per metric ton production costs
(primarily energy and raw materials).
In response to the extended period of reduced demand in 2023, discussed above, Kronos took measures to reduce
its operating costs and improve its long-term cost structure such as the implementation of certain voluntary and involuntary
workforce reductions during the second half of 2023 that primarily impacted its European operations. 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 employees. Kronos recognized a total of approximately $6
million in charges primarily in the fourth quarter of 2023 related to workforce reductions it implemented during the second
half of 2023. In the third quarter of 2024, Kronos closed its sulfate process production line at its plant in Varennes, Canada.
As a result of the process line closure, Kronos recognized charges to cost of sales of approximately $2 million during 2024
related to workforce reductions. Kronos also recognized approximately $14 million in non-cash charges primarily related
to accelerated depreciation in the second and third quarters of 2024.
Net sales – Kronos’ net sales in 2024 increased 13%, or $220.6 million, compared to 2023 primarily due to the
effects of a 20% increase in sales volumes due to improved overall demand across all major markets (which increased net
sales by approximately $333 million) partially offset by a 5% decrease in average TiO2 selling prices (which decreased
net sales by approximately $83 million). Changes in product mix negatively contributed to net sales, primarily due to
changes in product sales mix in export markets in 2024 as compared to 2023. Additionally, Kronos estimates that changes
in currency exchange rates (primarily the euro) increased its net sales by approximately $5 million in 2024 as compared
to 2023. TiO2 selling prices will increase or decrease generally as a result of competitive market pressures and changes in
the relative level of supply and demand as well as changes in raw material and other manufacturing costs. Incremental
sales volumes resulting from the LPC acquisition did not significantly impact comparisons to the prior year.
Kronos’ net sales in 2023 decreased 14%, or $263.7 million, compared to 2022 primarily due to a 13% decrease
in sales volumes (which decreased net sales by approximately $251 million) and a 4% decrease in average TiO2 selling
prices (which decreased net sales by approximately $77 million). Changes in product mix positively contributed to net
sales, primarily due to higher average selling prices and sales volumes in its complementary businesses which somewhat
offset declines in TiO2 sales volumes. In addition to the impact of sales volumes and average TiO2 selling prices, Kronos
-46-
estimates that changes in currency exchange rates (primarily the euro) increased its net sales by approximately $10 million
in 2023 as compared to 2022. TiO2 selling prices will increase or decrease generally as a result of competitive market
pressures, changes in the relative level of supply and demand as well as changes in raw material and other manufacturing
costs.
Kronos’ sales volumes decreased 13% in 2023 as compared to 2022 due to lower overall demand across all major
markets noted above. The lower overall demand Kronos began experiencing in the second half of 2022 continued
throughout most of 2023. However, Kronos’ sales volumes were 29% higher in the fourth quarter of 2023 as compared to
the fourth quarter of 2022 due to strengthening demand for TiO2 in its primary markets of Europe and North America.
Cost of sales and gross margin – Kronos’ cost of sales increased $26.2 million, or 2%, in 2024 compared to 2023
due to the net effects of a 20% increase in sales volumes, a 33% increase in production rates resulting in reduced
unabsorbed fixed production costs, and lower production costs of approximately $115 million (primarily energy and raw
materials). Kronos’ unabsorbed fixed production costs in 2024 were $12 million (incurred in the first quarter) compared
to $96 million in 2023 related to curtailments that began in 2022 and continued into the first quarter of 2024, as discussed
above. Kronos’ cost of sales in 2024 include a charge of approximately $2 million related to workforce reductions and
approximately $14 million in non-cash charges related to the closure of its sulfate process line in Canada discussed above.
Sales and production volumes resulting from the LPC acquisition did not materially impact comparisons to the prior year.
Kronos’ cost of sales as a percentage of net sales decreased to 81% in 2024 compared to 90% in 2023 primarily
due to the favorable effects of increased sales, lower production costs and higher production volumes resulting in increased
coverage of fixed production costs.
Kronos’ gross margin as a percentage of net sales increased to 19% in 2024 compared to 10% in 2023. As
discussed and quantified above, Kronos’ gross margin as a percentage of net sales increased primarily due to higher sales
and production volumes as well as lower production costs, partially offset by lower average TiO2 selling prices.
Kronos’ cost of sales decreased $37.5 million, or 2%, in 2023 compared to 2022 due to the net effects of a 13%
decrease in sales volumes, a 19% decrease in production volumes at certain of its manufacturing facilities to align inventory
levels to anticipated near-term customer demand (which resulted in $96 million of unabsorbed fixed production costs) and
higher production costs of approximately $65 million (primarily raw materials). Kronos’ cost of sales as a percentage of
net sales increased to 90% in 2023 compared to 80% in 2022 primarily due to the unfavorable effects of higher production
costs (primarily raw materials) and unabsorbed fixed production costs due to lower production volumes.
Kronos’ gross margin as a percentage of net sales decreased to 10% in 2023 compared to 20% in 2022. As
discussed and quantified above, Kronos’ gross margin as a percentage of net sales decreased primarily due to lower
production and sales volumes, lower average TiO2 selling prices, higher production costs and changes in currency
exchange rates.
Other operating income and expense, net – Kronos’ selling, general and administrative expense increased $14.4
million, or 7%, in 2024 compared to 2023. This increase was primarily due to higher distribution costs related to higher
overall sales volumes compared to 2023. Kronos’ selling, general and administrative expense in 2024 also includes $2.2
million of transaction costs incurred in connection with the LPC acquisition. Selling, general and administrative expense
also decreased due to lower costs related to workforce reductions in 2024 compared to 2023. Kronos’ selling, general and
administrative expenses decreased $20.1 million, or 9%, in 2023 compared to 2022 primarily due to lower distribution
costs related to lower overall sales volumes during the year. Selling, general and administrative expense as a percentage
of net sales increased in 2023 compared to 2022 as a result of lower net sales and $5.8 million in charges related to
workforce reductions.
Income (loss) from operations – Kronos had income from operations of $122.9 million in 2024 compared to a
loss from operations of $56.0 million in 2023 as a result of the factors impacting gross margin discussed above. Kronos
recognized a gain of $2.5 million in 2023 related to cash received from the settlement of a business interruption insurance
claim. Kronos estimates that changes in currency exchange rates increased income from operations by approximately $10
million in 2024 as compared to 2023, as further discussed below.
-47-
Kronos had a loss from operations of $56.0 million in 2023 compared to income from operations of $159.6 million
in 2022 as a result of the factors impacting gross margin discussed above. Kronos recognized a gain of $2.5 million in
2023 and a gain of $2.7 million in 2022 related to cash received from the settlement of a business interruption insurance
claim related to Hurricane Laura. Kronos estimates changes in currency exchange rates decreased its loss from operations
by approximately $16 million in 2023 as compared to 2022, as discussed in the Effects of currency exchange rates section
below.
Other non-operating income (expense) – Kronos recognized a gain on the remeasurement of its investment in
LPC of $64.5 million in 2024 as a result of the acquisition. Kronos’ interest expense in 2024 increased $25.8 million
compared to 2023 primarily due to higher interest rates on the debt exchange and the issuance of new notes discussed
below and higher average debt balances as a result of the LPC acquisition. As a result of the exchange, Kronos’ interest
expense for 2024 also includes a charge of $1.5 million for the write-off of deferred financing costs. Kronos recognized a
gain of $1.2 million on the change in value of its marketable equity securities in 2024 compared to a loss of $1.0 million
in 2023. Kronos’ other components of net periodic pension and OPEB cost in 2024 decreased $4.1 million compared to
2023 primarily due to a higher expected return on plan assets, lower discount rates impacting interest costs and a non-
recurring $1.3 million in settlement costs related to the termination and buy-out of its U.K. pension plan in the second
quarter of 2023.
Kronos recognized unrealized losses of $1.0 million in each of 2023 and 2022 on the change in value of its
marketable equity securities. Kronos’ other components of net periodic pension and OPEB cost in 2023 decreased $7.2
million compared to 2022 primarily due to the net effects of higher discount rates impacting interest cost, previously
unrecognized actuarial losses and $1.3 million in settlement costs related to the termination and buy-out of its pension plan
in the United Kingdom during the second quarter of 2023. Kronos’ interest expense in 2023 was comparable to interest
expense in 2022.
Income tax expense (benefit) – Kronos recognized income tax expense of $63.4 million in 2024 compared to an
income tax benefit of $23.8 million in 2023. The difference is primarily due to higher earnings in 2024 and the
jurisdictional mix of such earnings. Kronos’ earnings are subject to income tax in various U.S. and non-U.S. jurisdictions,
and the income tax rates applicable to the pre-tax earnings (losses) of its non-U.S. operations are generally higher than the
income tax rates applicable to its U.S. operations. Kronos would generally expect its overall effective tax rate, excluding
the effect of any increase or decrease in its deferred income tax asset valuation allowance or changes in its reserve for
uncertain tax positions, to be higher than the U.S. federal statutory tax rate of 21% primarily because of its sizeable non-
U.S. operations.
Kronos’ income tax expense in 2024 includes a non-cash deferred income tax expense of $8.2 million, recognized
in the fourth quarter, related to the recognition of a deferred income tax asset valuation allowance related to its Belgian
net deferred tax assets. Kronos continues to believe it will ultimately realize the full benefit of its Belgian NOL
carryforwards, in part because of their indefinite carryforward period. However, Kronos’ ability to reverse all or a portion
of such valuation allowance in the future is dependent on the presence of sufficient positive evidence, such as the existence
of cumulative profits in the most recent twelve consecutive quarters, and the ability to demonstrate future profitability for
a sustainable period. Until such time as Kronos is able to reverse the valuation allowance in full, to the extent it generates
additional losses in Belgium in the intervening periods, Kronos’ effective income tax rate will be negatively impacted,
because any further losses will effectively be recognized without the net income tax benefit.
On December 10, 2024, the Department of the Treasury and the Internal Revenue Service released final currency
regulations under §987 and related rules (the “2024 Final Regulations”). The 2024 Final Regulations generally apply to
tax years beginning after December 31, 2024, and include transition rules that require Kronos to compute a pretransition
gain or loss for currency translation related to the operations, assets and liabilities of its non-U.S. qualified business units.
Pursuant to the 2024 Final Regulations, Kronos has calculated a pretransition gain of $77.1 million and, accordingly, its
income tax expense in 2024 includes a non-cash deferred income tax expense of $16.5 million recognized in the fourth
quarter.
Kronos recognized an income tax benefit of $23.8 million in 2023 compared to income tax expense of $29.4
million in 2022. The difference is primarily due to lower earnings in 2023 and the jurisdictional mix of such earnings.
-48-
Kronos’ consolidated effective income tax rate in 2025 is expected to be higher than the U.S. federal statutory
rate of 21% because the income tax rates applicable to the earnings (losses) of Kronos’ non-U.S. operations will be higher
than the income tax rates applicable to its U.S. operations and due to the expected mix of earnings.
Effects of currency exchange rates
Kronos has substantial operations and assets located outside the United States (primarily in Germany, Belgium,
Norway and Canada). The majority of its sales from non-U.S. operations are denominated in currencies other than the U.S.
dollar, principally the euro, other major European currencies and the Canadian dollar. A portion of Kronos’ sales generated
from its non-U.S. operations is denominated in the U.S. dollar (and consequently its non-U.S. operations will generally
hold U.S. dollars from time to time). Certain raw materials used in all Kronos’ production facilities, primarily titanium-
containing feedstocks, are purchased primarily in U.S. dollars, while labor and other production and administrative costs
are incurred primarily in local currencies. Consequently, the translated U.S. dollar value of Kronos’ non-U.S. sales and
operating results are subject to currency exchange rate fluctuations which may favorably or unfavorably impact reported
earnings and may affect the comparability of period-to-period operating results. In addition to the impact of the translation
of sales and expenses over time, Kronos’ non-U.S. operations also generate currency transaction gains and losses which
primarily relate to (i) the difference between the currency exchange rates in effect when non-local currency sales or
operating costs (primarily U.S. dollar denominated) are initially accrued and when such amounts are settled with the non-
local currency and (ii) changes in currency exchange rates during time periods when its non-U.S. operations are holding
non-local currency (primarily U.S. dollars).
Kronos fluctuations in currency exchange rates had the following effects on its sales and income from operations
for the periods indicated.
Impact of changes in currency exchange rates - 2024 vs 2023
Translation
gains -
Total currency
Transaction gains recognized
impact of
impact
2023
2024
Change rate changes 2024 vs 2023
(In millions)
Impact on:
Net sales
$
— $
— $
— $
5 $
5
Income (loss) from operations
1
2
1
9
10
The $5 million increase in Kronos’ net sales (translation gains) was caused primarily by a weakening of the U.S.
dollar relative to the euro, as Kronos’ euro-denominated sales were translated into more U.S. dollars in 2024 as compared
to 2023. The strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2024 did not have
a significant effect on Kronos net sales, as a substantial portion of the sales generated by its Canadian and Norwegian
operations is denominated in the U.S. dollar.
The $10 million increase in Kronos’ income from operations was comprised of the following:
•
Higher net currency transaction gains of approximately $1 million primarily caused by relative changes in
currency exchange rates at each applicable balance sheet date between the U.S. dollar and the euro, Canadian
dollar and the Norwegian krone, and between the euro and the Norwegian krone, which causes increases or
decreases, as applicable, in U.S. dollar-denominated receivables and payables and U.S. dollar currency held
by Kronos’ non-U.S. operations, and in Norwegian krone denominated receivables and payables held by its
non-U.S. operations, and
•
Approximately $9 million from net currency translation gains primarily caused by a strengthening of the
U.S. dollar relative to the Canadian dollar and Norwegian krone, as local currency-denominated operating
costs were translated into fewer U.S. dollars in 2024 as compared to 2023. The effect of the weakening of
the U.S. dollar relative to the euro caused additional net translation gains as the positive effects of the weaker
U.S. dollar on euro-denominated sales more than offset the unfavorable effects on euro-denominated
operating costs being translated into more U.S. dollars in 2024 as compared to 2023.
-49-
Impact of changes in currency exchange rates - 2023 vs 2022
Translation
gains -
Total currency
Transaction gains recognized
impact of
impact
2022
2023
Change rate changes 2023 vs 2022
(In millions)
Impact on:
Net sales
$
— $
— $
— $
10 $
10
Income from operations
12
1
(11)
27
16
The $10 million increase in Kronos’ net sales (translation gains) was caused primarily by a weakening of the U.S.
dollar relative to the euro, as Kronos’ euro-denominated sales were translated into more U.S. dollars in 2023 as compared
to 2022. The strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2023 did not have
a significant effect on Kronos net sales, as a substantial portion of the sales generated by its Canadian and Norwegian
operations is denominated in the U.S. dollar.
The $16 million decrease in loss from operations was comprised of the following:
•
Lower net currency transaction gains of approximately $11 million primarily caused by relative changes in
currency exchange rates at each applicable balance sheet date between the U.S. dollar and the euro, Canadian
dollar and the Norwegian krone, and between the euro and the Norwegian krone, which causes increases or
decreases, as applicable, in U.S. dollar-denominated receivables and payables and U.S. dollar currency held
by Kronos’ non-U.S. operations, and in Norwegian krone denominated receivables and payables held by
Kronos’ non-U.S. operations, and
•
Approximately $27 million from net currency translation gains primarily caused by a strengthening of the
U.S. dollar relative to the Canadian dollar and Norwegian krone, as local currency-denominated operating
costs were translated into fewer U.S. dollars in 2023 as compared to 2022. The effect of the weakening of
the U.S. dollar relative to the euro was nominal in 2023 as compared to 2022.
Outlook
Overall Kronos’ customer demand improved in 2024 compared to the historical low demand it experienced during
2023, although demand levels remained below historical averages and customer demand moderated in the second half of
the year as compared to the first half of the year across all major markets. Kronos expects demand to improve in 2025,
particularly in Europe where the European Commission enacted duties on Chinese imports of TiO2 in mid-2024; however,
it expects overall demand will remain below historical levels due to continued global economic uncertainty caused, in part,
by the potential implementation of tariffs by the U.S. and other countries. Kronos believes customer inventory levels were
low at the end of 2024 due to customer hesitancy to build inventory late in the year, and it is receiving customer orders on
shorter notice than it experienced early in 2024 indicating that customers have a cautious demand outlook and are carefully
managing inventory levels. TiO2 selling prices softened in the second half of 2024 in response to sluggish demand and
competitive pressures. Kronos expects these pricing pressures to be somewhat mitigated in 2025, particularly in Europe,
as a result of the duties enacted on low-cost imports from China. Kronos is operating its facilities at production rates in
line with the current and expected near-term demand and believe its production rates for 2025 will be slightly above 2024
rates.
Kronos is focused on cost reduction initiatives designed to improve its long-term cost structure. In 2023, Kronos
implemented targeted workforce reductions and certain ongoing process improvement initiatives. In the third quarter of
2024, Kronos closed its Canadian sulfate process line to improve gross margins through the optimization of production of
its purified grades. Raw material, energy and other input costs generally improved during 2024; however, energy costs in
Europe have trended up in recent months and remain above historical levels. Kronos expects raw material and other input
costs will continue to moderate in 2025. Overall, primarily due to improved demand, Kronos expects to report higher
operating results for the full year of 2025 as compared to 2024, although it will need to achieve TiO2 selling price increases
in order to recognize margins more in-line with historical levels.
-50-
As noted above, Kronos acquired full control of LPC in July 2024. Kronos believes this acquisition is a unique
opportunity to immediately add value to its customers and better serve the North American marketplace by allowing it to
expand its product offerings and increase sales to new and existing customers while recognizing significant synergies,
including commercial, overhead and supply chain optimization. Kronos is in the process of fully integrating the additional
LPC production capacity, and it expects the acquisition will have a positive impact on its earnings in 2025, although the
potential positive impact will be limited by competitive pressures and by the additional debt service costs associated with
the increase in borrowings to complete the transaction. With the increased borrowing availability under Kronos’ Global
Revolver, as well as cash on hand, Kronos was able to finance the required working capital for the improvement needed
to fully integrate the acquired LPC production capacity.
Kronos’ expectations for the TiO2 industry and its operations are based on a number of factors outside its control.
Kronos’ operations are affected by global and regional economic, political and regulatory factors, and it has experienced
global market disruptions. As noted above, energy costs in Europe, which spiked when Russia invaded Ukraine, remain
above historical levels. In addition, Kronos operates a TiO2 facility in Canada, and the majority of production from that
facility is currently sold into the U.S. The U.S. federal government’s recently enacted 25% tariff on Kronos’ imports from
Canada could harm its ability to compete and adversely impact its earnings and profitability if such tariffs are sustained
for an extended period of time without exclusion. Kronos has begun to implement strategies to minimize the potential
impacts. Future impacts on Kronos’ operations will depend on, among other things, future energy costs, the effect newly
enacted tariffs have on jurisdictions in which Kronos or its customers and suppliers operate, Kronos’ success in
implementing mitigation strategies, and the impact economic conditions and geopolitical events have on its operations or
its customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.
Operations outside the United States
Kronos has substantial operations located outside the United States for which the functional currency is not the
U.S. dollar. As a result, the reported amount of our net investment in Kronos will fluctuate based upon changes in currency
exchange rates. At December 31, 2024, Kronos had substantial net assets denominated in the euro, Canadian dollar and
Norwegian krone.
Critical accounting policies and estimates
Our significant accounting policies are more fully described in Note 1 to our Consolidated Financial Statements.
Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted
in the United States of America, or (GAAP). The preparation of these financials statements requires us to make estimates
and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amount of revenue and expense during the reporting period. On an
ongoing basis we evaluate our estimates, including those related to the recoverability of long-lived assets, goodwill,
pension and other postretirement benefit obligations and the underlying actuarial assumptions related thereto, the
realization of deferred income tax assets and accruals for litigation, income tax and other contingencies. We base our
estimates on historical experience and on various other assumptions which we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about the reported amounts of assets, liabilities,
revenues and expenses. Actual results may differ significantly from previously-estimated amounts under different
assumptions or conditions.
We believe the most critical accounting policies and estimates involving significant judgment primarily relate to
contingencies, certain long-lived assets, considerations in the recoverability and impairment assessments for goodwill and
defined benefit pension plans. We have discussed the development, selection and disclosure of our critical accounting
estimates with the audit committee of our board of directors.
•
Contingencies – We record accruals for environmental, legal and other contingencies and commitments when
estimated future expenditures associated with such contingencies become probable, and the amounts can be
reasonably estimated. However, new information may become available, or circumstances (such as
applicable laws and regulations) may change, thereby resulting in an increase or decrease in the amount
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required to be accrued for such matters (and therefore a decrease or increase in reported net income in the
period of such change).
Obligations for environmental remediation costs are difficult to assess and it is possible that actual costs for
environmental remediation will exceed accrued amounts or that costs will be incurred in the future for sites
in which we cannot currently estimate our liability. If these events were to occur in 2025, our corporate
expenses would be higher than we currently estimate. In addition, we adjust our environmental remediation
and related costs accruals (and potential range of our liabilities) as further information becomes available to
us or as circumstances change which involves our judgment regarding current facts and circumstances for
each site and is subject to various assumptions and estimates. Such further information or changed
circumstances could result in an increase in our accrued environmental costs. See Note 17 to our
Consolidated Financial Statements.
•
Long-lived assets – The net book value of our property and equipment totaled $24.0 million at December 31,
2024, all of which relates to CompX. We assess property and equipment for impairment only when
circumstances indicate an impairment may exist. Our determination is based upon, among other things, our
estimates of the amount of future net cash flows to be generated by the long-lived asset (Level 3 inputs) and
our estimates of the current fair value of the asset.
Significant judgment is required in estimating such cash flows. Adverse changes in such estimates of future
net cash flows or estimates of fair value could result in an inability to recover the carrying value of the long-
lived asset, thereby possibly requiring an impairment charge to be recognized in the future. We do not assess
our property and equipment for impairment unless certain impairment indicators are present. We did not
evaluate any long-lived assets for impairment during 2024 because no such impairment indicators were
present.
•
Goodwill – Our net goodwill totaled $27.2 million at December 31, 2024, all related to CompX’s Security
Products reporting unit. Goodwill is required to be tested annually or at other times whenever an event occurs
or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its
carrying value. CompX performs its annual goodwill impairment test in the third quarter of each year or at
other times whenever an event occurs or circumstances change that would more-likely-than-not reduce the
fair value of a reporting unit below its carrying value. Such events or circumstances may include: adverse
industry or economic trends, lower projections of profitability, or a sustained decline in CompX’s market
capitalization. These events or circumstances, among other items, may be indications of potential impairment
issues which are triggering events requiring the testing of an asset’s carrying value for recoverability. An
entity may first assess qualitative factors to determine whether it is necessary to complete a quantitative
impairment test using a more-likely-than-not criteria. If an entity believes it is more-likely-than-not the fair
value of a reporting unit is greater than its carrying value, including goodwill, the quantitative impairment
test can be bypassed. Alternatively, an entity has an unconditional option to bypass the qualitative assessment
and proceed directly to performing the quantitative impairment test.
When performing a qualitative assessment considerable management judgment is necessary to evaluate the
qualitative impact of events and circumstances on the fair value of a reporting unit. Events and circumstances
considered in our impairment evaluations, such as CompX’s historical profits and stability of the markets
served, are consistent with factors utilized with our internal projections and operating plan. However, future
events and circumstances could result in materially different findings which could result in the recognition
of a material goodwill impairment.
Evaluations of possible impairment utilizing the quantitative impairment test require CompX to estimate,
among other factors: forecasts of future operating results, revenue growth, operating margin, tax rates, capital
expenditures, depreciation, working capital, weighted average cost of capital, long-term growth rates, risk
premiums, terminal values, and fair values of reporting units and assets. The goodwill impairment test is
subject to uncertainties arising from such events as changes in competitive conditions, the current general
economic environment, material changes in growth rate assumptions that could positively or negatively
impact anticipated future operating conditions and cash flows, changes in the discount rate, and the impact
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of strategic decisions. If any of these factors were to materially change such change may require revaluation
of the reported goodwill. Changes in estimates or the application of alternative assumptions could produce
significantly different results.
In 2024, CompX used the qualitative assessment for its annual impairment test and determined it was not
necessary to perform the quantitative goodwill impairment test, as it concluded it is more-likely-than-not the
fair value of the Security Products reporting unit exceeded its carrying amount. See Notes 1 and 7 to our
Consolidated Financial Statements.
Defined benefit pension plans – We maintain a defined benefit pension plan in the U.S. As a result of the
spin-off of Kronos in 2003, Kronos participates in our pension plan. Using participant data, we account for
our portion of the combined pension plan as if it were a separate pension plan from the portion in which
Kronos participates. As a result of the LPC acquisition in July 2024 (see Note 6 to our Consolidated Financial
Statements), Kronos acquired the LPC defined benefit pension plan, which was overfunded on the
Acquisition Date. Effective December 31, 2024, the LPC defined benefit pension plan was merged into our
combined U.S. pension plan. Because we account for our portion of the combined pension plan separately,
the plan merger did not impact our Consolidated Financial Statements. See Note 11 to our Consolidated
Financial Statements.
We previously maintained a 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 replaced the bulk annuity policy in a “buy-out” which was
completed as of May 1, 2023. The buy-out was completed with existing plan funds. At the completion of the
buy-out, the assets and liabilities of the U.K. pension plan were removed from our Consolidated Financial
Statements and a non-cash pension plan termination loss of $4.9 million was recognized in the second quarter
of 2023. See Note 11 to our Consolidated Financial Statements.
We recognized consolidated defined benefit pension plan expense of $1.4 million in 2022, $6.5 million in
2023, including the loss on the termination of the U.K. pension plan of $4.9 million discussed above and
$1.4 million in 2024. The funding requirements for these defined benefit pension plans are generally based
upon applicable regulations (such as ERISA in the U.S.) and will generally differ from pension expense
recognized under GAAP for financial reporting purposes. We made contributions to our plans of
approximately $1.2 million in 2022. In 2023, we made a net contribution of $.2 million to our plans (a
contribution of approximately $1.1 million to our U.S. plan and a refund of approximately $.9 million as a
result of the termination of the U.K. plan). In 2024, we made a contribution of $1.0 to our U.S. plan.
Under defined benefit pension plan accounting, defined benefit pension plan expense and prepaid and
accrued pension costs are each recognized based on certain actuarial assumptions, principally the assumed
discount rate and the assumed long-term rate of return on plan assets. We recognize the full funded status of
our defined benefit pension plans as either an asset (for overfunded plans) or a liability (for underfunded
plans) in our Consolidated Balance Sheets.
The discount rates we use for determining defined benefit pension expense and the related pension
obligations are based on current interest rates earned on long-term bonds that receive one of the two highest
ratings given by recognized rating agencies in the applicable country where the defined benefit pension
benefits are being paid. In addition, we receive third-party advice about appropriate discount rates, and these
advisors may in some cases use their own market indices. We adjust these discount rates as of each
December 31 valuation date to reflect then-current interest rates on such long-term bonds. We use these
discount rates to determine the actuarial present value of the pension obligations as of December 31 of
that year. We also use these discount rates to determine the interest component of defined benefit pension
expense for the following year.
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At December 31, 2024, our projected benefit obligations for our U.S. defined benefit plan is $26.6 million.
As noted above, we terminated our U.K. pension plan in May 2023. We use different discount rate
assumptions in determining our defined benefit pension plan obligations and expense for the plan we
maintain in the United States and previously in the U.K. as the interest rate environment differs from country
to country.
We used the following discount rates for our defined benefit pension plans:
Discount rates used for:
Obligations at Obligations at Obligations at
December 31, December 31, December 31,
2022 and
2023 and
2024 and
expense in 2023 expense in 2024 expense in 2025
United States
5.3 %
5.0 %
5.5 %
United Kingdom (through date of plan
termination)
4.3 %
N/A
N/A
The assumed long-term rate of return on plan assets represents the estimated average rate of earnings
expected to be earned on the funds invested or to be invested from the plans’ assets provided to fund the
benefit payments inherent in the projected benefit obligations. Unlike the discount rate, which is adjusted
each year based on changes in current long-term interest rates, the assumed long-term rate of return on plan
assets will not necessarily change based upon the actual short-term performance of the plan assets in any
given year. Defined benefit pension expense each year is based upon the assumed long-term rate of return
on plan assets for each plan, the actual fair value of the plan assets as of the beginning of the year and an
estimate of the amount of contributions to and distributions from the plan during the year. Differences
between the expected return on plan assets for a given year and the actual return are deferred and amortized
over future periods based on the average remaining life expectancy of the inactive participants.
We used different long-term rates of return on plan asset assumptions for our U.S. and previously maintained
U.K. defined benefit pension plan expense because the respective plan assets were invested in a different
mix of investments and the long-term rates of return for different investments differ from country to country.
In determining the expected long-term rate of return on plan asset assumptions, we consider the long-term
asset mix (e.g., equity vs. fixed income) for the assets for each of our plans and the expected long-term rates
of return for such asset components. In addition, we receive third-party advice about appropriate long-term
rates of return. See Note 11 to our Consolidated Financial Statements.
Our assumed long-term rates of return on plan assets for 2022, 2023 and 2024 were as follows:
2022
2023
2024
United States
4.0 %
5.0 %
5.0 %
United Kingdom (through date of plan termination)
1.3 %
4.3 %
N/A
Our long-term rate of return on plan asset assumptions in 2025 used for purposes of determining our 2025
defined benefit pension plan expense is 5.0%. As noted above, during 2022 and through the approximate
plan termination date in 2023, all of the assets of the U.K. plan were invested primarily in insurance contracts.
Based on the actuarial assumptions described above, we expect to recognize defined benefit pension expense
of approximately $1.3 million in 2025. In comparison, we do not expect to be required to make any
contributions to such plan during 2025.
As noted above, defined benefit pension expense and the amounts recognized as accrued pension costs are
based upon the actuarial assumptions discussed above. We believe that all of the actuarial assumptions used
are reasonable and appropriate. However, if we had lowered the assumed discount rate by 25 basis points for
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our plan as of December 31, 2024, our aggregate projected benefit obligation would have increased by
approximately $.6 million at that date. Such a change would not materially impact our defined benefit pension
expense for 2025. Similarly, if we lowered the assumed long-term rate of return on plan assets by 25 basis
points for our plan, such a change would not materially impact our defined benefit pension expense for 2025.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated cash flows
Operating activities
Trends in cash flows from operating activities, excluding the impact of deferred taxes and relative changes in
assets and liabilities, are generally similar to trends in our income from operations. Changes in working capital are
primarily related to changes in receivables and inventories (as discussed below) and payables and accrued liabilities. Net
cash provided by operating activities was $25.6 million in 2024 compared to $37.0 million in 2023. The $11.4 million
decrease in cash provided by operating activities includes the net effects of:
•
lower dividends received from Kronos in 2024 of $9.9 million;
•
lower segment profit from CompX in 2024 of $8.4 million;
•
a $4.1 million increase in interest received in 2024 due to higher interest rates and increased investment
balances, offset by lower average balances on CompX’s revolving promissory note receivable from affiliate;
•
lower net cash used for relative changes in receivables, inventories, prepaid expenses, payables and accrued
liabilities in 2024 of $3.2 million; and
•
a $.4 million increase in cash paid for taxes in 2024 due to the relative timing of payments.
Net cash provided by operating activities was $37.0 million in 2023 compared to $26.9 million in 2022. The
$10.1 million increase in cash provided by operating activities includes the net effects of:
•
lower net cash used for relative changes in receivables, inventories, prepaid expenses, payables and accrued
liabilities in 2023 of $6.7 million;
•
a $2.6 million increase in interest received in 2023 due to higher interest rates and increased investment
balances, offset by lower average balances on CompX’s revolving promissory note receivable from affiliate;
and
•
a $1.4 million decrease in cash paid for taxes in 2023 due to the relative timing of payments.
We do not have complete access to CompX’s cash flows in part because we do not own 100% of CompX. A
detail of our consolidated cash flows from operating activities is presented in the table below. Intercompany dividends
have been eliminated. The reference to NL Parent in the tables below is a reference to NL Industries, Inc., as the parent
company of CompX and our other wholly-owned subsidiaries.
Years ended December 31,
2022
2023
2024
(In millions)
Net cash provided by operating activities:
CompX
$
16.9
$
25.8
$
22.9
NL Parent and wholly-owned subsidiaries
39.6
21.9
37.1
Eliminations
(29.6)
(10.7)
(34.4)
Total
$
26.9
$
37.0
$
25.6
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Relative changes in working capital can have a significant effect on cash flows from operating activities. As
shown below, our total average days sales outstanding decreased from December 31, 2023 to December 31, 2024 and is
primarily impacted by the timing of sales and collections in the last month of the year. As shown below, our average
number of days in inventory at December 31, 2024 was comparable to December 31, 2023 primarily due to an increase at
CompX’s Security Products reporting unit due to the fulfillment and shipping of a significant order during the fourth
quarter of 2023, partially offset by a decrease at CompX’s Marine Components reporting unit due to elevated inventory
balances at December 31, 2023 as a result of prior orders of certain raw materials with longer lead times delivered in the
fourth quarter of 2023. For comparative purposes, we have provided 2022 numbers below.
2022
2023
2024
Days sales outstanding
41 days
36 days
33 days
Days in inventory
99 days
95 days
94 days
Investing activities
Capital expenditures, substantially all of which relate to CompX, have primarily emphasized improving
manufacturing facilities and investing in manufacturing equipment, utilizing new technologies and increased automation
of the manufacturing process, to provide for increased productivity and efficiency in order to meet expected customer
demand and properly maintain facilities and technology infrastructure. Capital expenditures were $3.7 million in 2022,
$1.1 million in 2023 and $1.4 million in 2024. Capital expenditures in 2022 were higher as CompX accelerated the timeline
for certain projects designed to increase its capacity and improve its capabilities in response to strong customer demand.
Beginning in the latter half of 2022 and continuing through 2024, CompX limited investments primarily to those
expenditures required to meet its existing demand and to properly maintain its facilities and technology infrastructure.
Investing activities also include net collections of $5.5 million ($24.3 million of gross borrowings and $29.8
million of gross repayments) in 2022, net collections of $2.6 million ($27 9 million of gross borrowings and $30.5 million
of gross repayments) in 2023 and net collections of $1.3 million ($25.0 million of gross borrowings and $26.3 million of
gross repayments) in 2024 under a promissory note receivable from an affiliate. See Note 16 to our Consolidated Financial
Statements.
During 2022, we purchased U.S. treasury marketable securities totaling $70.0 million. During 2023, we purchased
U.S. treasury marketable securities totaling $61.4 million, and received gross proceeds totaling $82.0 million related to
U.S. treasury bill maturities. During 2024, we received gross proceeds of $54.0 million related to U.S. treasury bill
maturities. See Note 5 to our Consolidated Financial Statements.
During 2024, we had proceeds from the sale of land not used in our operations of $5.0 million.
Financing activities
Quarterly dividends paid totaled $13.7 million ($.28 per share, or $.07 per share per quarter) in each of 2022 and
2023 and $15.6 million ($.32 per share, or $.08 per share per quarter in 2024). In addition, our board of directors declared
special dividends which totaled $17.1 million ($.35 per share) paid in August 2022 and $21.0 million ($.43 per share) paid
in August 2024. In February 2025 our board of directors declared a first quarter 2025 dividend of $.09 per share, to be
paid on March 27, 2025 to NL stockholders of record as of March 11, 2025. The declaration and payment of future
dividends, and the amount thereof, is discretionary and is dependent upon our financial condition, cash requirements,
contractual obligations and restrictions and other factors deemed relevant by our board of directors. The amount and timing
of past dividends is not necessarily indicative of the amount or timing of any future dividends which might be paid. There
are currently no contractual restrictions on the amount of dividends which we may pay.
Cash flows from financing activities include CompX dividends paid to its stockholders other than us aggregating
$4.3 million in 2022 ($2.7 million of which relates to a special dividend), $1.6 million in 2023 and $5.0 million in 2024
($3.1 million of which relates to a special dividend).
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During 2022, CompX acquired 78,900 shares of its Class A common stock (8,900 shares from affiliates in two
private transactions, and 70,000 shares in a single market transaction) for an aggregate purchase price of $1.7 million.
Outstanding debt obligations
At December 31, 2024, NLKW had outstanding debt obligations of $.5 million under its secured revolving credit
facility with Valhi, and CompX did not have any outstanding debt obligations. We are in compliance with all of the
covenants contained in our secured revolving credit facility with Valhi at December 31, 2024. See Note 10 to our
Consolidated Financial Statements
At December 31, 2024, Kronos had $10 million outstanding on its Global Revolver. Availability under the Global
Revolver is subject to a borrowing base calculation, as defined in the agreement. The borrowing base calculated as of
December 31, 2024 was approximately $278 million. Effective July 17, 2024, Kronos completed an amendment to its
Global Revolver (the “Second Amendment”). Among other things, the Second Amendment increased the maximum
borrowing amount from $225 million to $300 million, extended the maturity date to July 2029 and expanded the facility
to include LPC and LPC’s receivables and certain of its inventories in the borrowing base. The LPC acquisition was
financed through borrowings of $132.1 million under Kronos’ Global Revolver with the remainder paid with cash on hand.
In February 2024, Kronos exchanged €325 million principal amount of its outstanding 3.75% Senior Secured Notes due
in September 2025 (the “Old Notes”) for newly issued €276.174 million 9.50% Senior Secured Notes due March 2029
(the “New Notes”) plus additional cash consideration of €48.75 million ($52.6 million) paid to the holders of the Old Notes
and entered into a $53.7 million unsecured term loan from Contran Corporation due in September 2029 (the “Contran
Term Loan”). On July 30, 2024, Kronos issued an additional €75 million principal amount of 9.50% Senior Secured Notes
due 2029 (the “Additional New Notes” and, together with the Old Notes and the New Notes, the “Senior Secured Notes”).
The Additional New Notes were issued at a premium of 107.50% of their principal amount, plus accrued interest from
February 12, 2024, resulting in net proceeds of approximately $90 million, after fees and expenses. The Additional New
Notes are fungible with the New Notes, are treated as a single series with the New Notes and have the same terms as the
New Notes, other than their date of issuance and issue price. The proceeds from the Additional New Notes were used to
pay down borrowings incurred under Kronos’ Global Revolver. Subsequent to the issuance of the Additional New Notes,
the Contran Term Loan was amended in August 2024 to change the interest rate from 11.5% (which had been determined
by adding an additional spread of 2% to the final interest rate on the New Notes issued in February 2024) to 9.54%
(determined by adding a spread of 2% to the effective interest rate of the Additional New Notes issued in July 2024). In
each case, the spread used to determine the rate was based upon comparable debt transactions at the time of the issuance
of the applicable notes.
The Contran Term Loan is subordinated in right of payment to Kronos’ Senior Secured Notes and Kronos’ Global
Revolver. Kronos’ Senior Secured Notes, the Contran Term Loan and Kronos’ Global Revolver contain a number of
covenants and restrictions which, among other things, restrict its ability to incur additional debt, incur liens, pay dividends
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 these types. Certain of Kronos’ credit agreements contain
provisions which could result in the acceleration of indebtedness prior to their stated maturity for reasons other than
defaults for failure to comply with typical financial or payment covenants. For example, the credit agreements allow the
lender to accelerate the maturity of the indebtedness upon a change of control (as defined in the agreement) of the borrower.
In addition, the credit agreements could result in the acceleration of all or a portion of the indebtedness following a sale of
assets outside the ordinary course of business. Kronos is in compliance with all of its debt covenants at December 31,
2024. Kronos believes that it will be able to continue to comply with the financial covenants contained in its credit facility
through its maturity; however, if its future operating results differ materially from its expectations it may be unable to
maintain compliance.
Future cash requirements
Liquidity
Our primary source of liquidity on an ongoing basis is our cash flow from operating activities and credit facilities
with affiliates and banks as further discussed below. We generally use these amounts to fund capital expenditures
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(substantially all of which relate to CompX), pay ongoing environmental remediation and litigation costs, and provide for
the payment of dividends (if declared).
At December 31, 2024, we had aggregate restricted and unrestricted cash, cash equivalents and current marketable
securities of $184.2 million, substantially all of which was held in the U.S. A detail (in millions) by entity is presented in
the table below.
Amount
(In millions)
CompX
$
60.8
NL Parent and wholly-owned subsidiaries
123.4
Total
$
184.2
In addition, at December 31, 2024 we owned 1.2 million shares of Valhi common stock with an aggregate market
value of $28.0 million. See Note 5 to our Consolidated Financial Statements. We also owned 35.2 million shares of Kronos
common stock at December 31, 2024 with an aggregate market value of $343.4 million. See Note 6 to our Consolidated
Financial Statements.
We routinely compare our liquidity requirements and alternative uses of capital against the estimated future cash
flows we expect to receive from our subsidiaries and affiliates. As a result of this process, we have in the past and may in
the future seek to raise additional capital, incur debt, repurchase indebtedness in the market or otherwise, modify our
dividend policies, consider the sale of our interests in our subsidiaries, affiliates, business, marketable securities or other
assets, or take a combination of these and other steps, to increase liquidity, reduce indebtedness and fund future activities.
Such activities have in the past and may in the future involve related companies.
We periodically evaluate acquisitions of interests in or combinations with companies (including related
companies) perceived by management to be undervalued in the marketplace. These companies may or may not be engaged
in businesses related to our current businesses. We intend to consider such acquisition activities in the future and, in
connection with this activity, may consider issuing additional equity securities and increasing indebtedness. From time to
time, we also evaluate the restructuring of ownership interests among our respective subsidiaries and related companies.
Based upon our expectations of operating performance, and the anticipated demands on our cash resources we
expect to have sufficient liquidity to meet our short-term obligations (defined as the twelve-month period ending
December 31, 2025). If actual developments differ materially from our expectations, our liquidity could be adversely
affected. In this regard, Valhi has agreed to loan us up to $50 million on a revolving basis. At December 31, 2024, we had
$.5 million in outstanding borrowings under this facility, and we had $49.5 million available for future borrowing under
the facility. See Note 10 to our Consolidated Financial Statements.
Capital expenditures
Capital expenditures for 2025 are estimated at approximately $3.2 million, substantially all of which relate to
CompX. CompX’s 2025 capital investments are primarily to meet its expected customer demand and those required to
properly maintain its facilities and technology infrastructure.
Dividends
Because our operations are conducted primarily through subsidiaries and affiliates, our long-term ability to meet
parent company-level corporate obligations is largely dependent on the receipt of dividends or other distributions from our
subsidiaries and affiliates. A detail of annual dividends we expect to receive from our subsidiaries and affiliates in 2025,
based on the number of shares of common stock of these affiliates we own as of December 31, 2024 and their current
regular quarterly dividend rate, is presented in the table below.
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Shares held
Quarterly
Annual expected
December 31, 2024
dividend rate
dividend
(In millions)
(In millions)
Kronos
35.2 $
.05 $
7.0
CompX
10.8
.30
12.9
Valhi
1.2
.08
.4
Total expected annual dividends
$
20.3
Investments in our subsidiaries and affiliates and other acquisitions
We have in the past and may in the future, purchase the securities of our subsidiaries and affiliates or third-parties
in market or privately-negotiated transactions. We base our purchase decisions on a variety of factors, including an analysis
of the optimal use of our capital, taking into account the market value of the securities and the relative value of expected
returns on alternative investments. In connection with these activities, we may consider issuing additional equity securities
or increasing our indebtedness. We may also evaluate the restructuring of ownership interests of our businesses among
our subsidiaries and related companies.
Commitments and contingencies
We are subject to certain commitments and contingencies, as more fully described in Note 17 to our Consolidated
Financial Statements or in Part I, Item 3 of this report. In addition to those legal proceedings described in Note 17 to our
Consolidated Financial Statements, various legislation and administrative regulations have, from time to time, been
proposed that seek to (i) impose various obligations on present and former manufacturers of lead pigment and lead-based
paint (including us) with respect to asserted health concerns associated with the use of such products and (ii) effectively
overturn court decisions in which we and other pigment manufacturers have been successful. Examples of such proposed
legislation include bills which would permit civil liability for damages on the basis of market share, rather than requiring
plaintiffs to prove that the defendant’s product caused the alleged damage and bills which would revive actions barred by
the statute of limitations. While no legislation or regulations have been enacted to date that are expected to have a material
adverse effect on our consolidated financial position, results of operations or liquidity, enactment of such legislation could
have such an effect.
As more fully described in the Notes to our Consolidated Financial Statements, we are party to various debt,
leases and other agreements which contractually and unconditionally commit us to pay certain amounts in the future. See
Note 10 to our Consolidated Financial Statements. See Notes 1 and 14 to our Consolidated Financial Statements for a
description of certain income tax contingencies. Additionally, CompX has purchase obligations of $19.8 million ($19.3
million payable in 2025 and $.5 million payable in 2026/2027) which consists of open purchase orders and contractual
obligations, primarily commitments to purchase raw materials and for capital projects in process at December 31, 2024.
The timing and amount for purchase obligations is based on the contractual payment amount and the contractual payment
date for those commitments.
Recent accounting pronouncements
See Note 19 to our Consolidated Financial Statements.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
General – We are exposed to market risk from changes in currency exchange rates, interest rates, raw materials
and equity security prices.
Interest rates – We are exposed to market risk from changes in interest rates, primarily related to our
indebtedness, CompX’s note receivable from affiliate and our investment in marketable debt securities. We have an
outstanding principal amount of indebtedness of $.5 million at December 31, 2024 bearing interest at prime plus 1.875%
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(9.4% at December 31, 2024) with a maturity date of December 31, 2030. The carrying value of such outstanding
indebtedness approximates its fair value.
The outstanding principal amount of the note receivable from affiliate of $9.3 million at December 31, 2024 bears
interest at prime plus 1.0% (8.5% at December 31, 2024). We received interest income of $1.0 million from the note during
2024.
Marketable equity security prices – We are exposed to market risk due to changes in prices of the marketable
equity securities which we own. The fair value of our equity securities at December 31, 2023 and 2024 was $18.2 million
and $28.0 million, respectively. The potential change in the aggregate fair value of these investments, assuming a 10%
change in prices, would be $1.8 million and $2.8 million at December 31, 2023 and 2024, respectively.
Raw materials – CompX will occasionally enter into short-term commodity-related raw material supply
arrangements to mitigate the impact of future increases in commodity-related raw material costs. CompX does not have
long-term supply agreements for its raw material requirements because either it believes the risk of unavailability of those
raw materials is low and it believes the downside risk of price volatility to be too great or because long-term supply
agreements for those materials are generally not available. CompX does not engage in commodity raw material hedging
programs.
Other – The discussion and sensitivity analysis presented above include forward-looking statements of market
risk which assume hypothetical changes in market prices. Actual future market conditions will likely differ materially from
such assumptions. Accordingly, such forward-looking statements should not be considered to be projections of future
events, gains or losses. Such forward-looking statements are subject to certain risks and uncertainties, some of which are
listed in “Business."
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this Item is contained in a separate section of this Annual Report. See “Index of
Financial Statements” (page F-1).
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
We maintain disclosure controls and procedures which, as defined in Exchange Act Rule 13a-15(e), means
controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we
file or submit to the SEC under the Securities Exchange Act of 1934, as amended (the Act), is recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information we are required to
disclose in the reports we file or submit to the SEC under the Act is accumulated and communicated to our management,
including our principal executive officer and our principal financial officer, or persons performing similar functions, as
appropriate to allow timely decisions to be made regarding required disclosure. Each of Courtney J. Riley, our President
and Chief Executive Officer and Amy Allbach Samford, our Executive Vice President and Chief Financial Officer, have
evaluated the design and effectiveness of our disclosure controls and procedures as of December 31, 2024. Based upon
their evaluation, these executive officers have concluded that our disclosure controls and procedures are effective as of the
date of this evaluation.
-60-
Management’s report on internal control over financial reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting
which, as defined by Exchange Act Rule 13a-15(f) means a process designed by, or under the supervision of, our principal
executive and principal financial officers, or persons performing similar functions, and effected by the board of directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles
(“GAAP”), and includes those policies and procedures that:
•
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions
and dispositions of our assets,
•
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance
with authorizations of management and directors, and
•
provide reasonable assurance regarding prevention or timely detection of an unauthorized acquisition, use or
disposition of assets that could have a material effect on our Consolidated Financial Statements.
Our evaluation of the effectiveness of internal control over financial reporting is based upon the framework
established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission in 2013 (commonly referred to as the “2013 COSO” framework). Based on our evaluation under
that framework, we have concluded that our internal control over financial reporting was effective as of December 31,
2024.
This annual report does not include an attestation report of our registered public accounting firm regarding internal
control over financial reporting. Management’s report was not subject to attestation by our registered public accounting
firm pursuant to rules of the SEC that permit us to provide only management’s report in this annual report.
Other
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. However, our assessment of internal control over
financial reporting with respect to equity method investees did include controls over the recording of amounts related to
our investment that are recorded in the Consolidated Financial Statements, including controls over the selection of
accounting methods for our investments, the recognition of equity method earnings and losses and the determination,
valuation and recording of our investment account balances.
Changes in internal control over financial reporting
There has been no change to our internal control over financial reporting during the quarter ended December 31,
2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Certifications
Our chief executive officer is required to annually file a certification with the New York Stock Exchange (NYSE),
certifying our compliance with the corporate governance listing standards of the NYSE. During 2024, our chief executive
officer filed such annual certification with the NYSE. The 2024 certification was unqualified.
Our chief executive officer and chief financial officer are also required to, among other things, quarterly file
certifications with the SEC regarding the quality of our public disclosures, as required by Section 302 of the Sarbanes-
Oxley Act of 2002. We have filed the certifications for the quarter ended December 31, 2024 as Exhibits 31.1 and 31.2 to
this Annual Report on Form 10-K.
-61-
ITEM 9B.
OTHER INFORMATION
Not applicable
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item is incorporated by reference to our 2025 definitive proxy statement to be
filed with the SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this report.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to our 2025 proxy statement.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference to our 2025 proxy statement.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information required by this Item is incorporated by reference to our 2025 proxy statement. See also Note 16
to our Consolidated Financial Statements.
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The Information required by this Item is incorporated by reference to our 2025 proxy statement.
-62-
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) and (c)
Financial Statements
The Registrant
The Consolidated Financial Statements of the Registrant listed on the accompanying Index of Financial
Statements (see page F-1) are filed as part of this Annual Report.
50%-or-less persons
The Consolidated Financial Statements of Kronos (31%-owned at December 31, 2024) are incorporated by
reference in Exhibit 99.1 of this Annual Report pursuant to Rule 3-09 of Regulation S-X. Management’s Report
on Internal Control Over Financial Reporting of Kronos is not included as part of Exhibit 99.1. The Registrant is
not required to provide any other Consolidated Financial Statements pursuant to Rule 3-09 of Regulation S-X.
(b)
Exhibits
We have included as exhibits the items listed in the Exhibit Index. We will furnish a copy of any of the exhibits
listed below upon payment of $4.00 per exhibit to cover our cost to furnish the exhibits. Pursuant to
Item 601(b)(4)(iii) of Regulation S-K, any instrument defining the rights of holders of long-term debt issues and
other agreements related to indebtedness which do not exceed 10% of consolidated total assets as of December
31, 2024 will be furnished to the Commission upon request.
Item No.
Exhibit Index
3.1
Certificate of Amended and Restated Certificate of Incorporation dated May 22, 2008 – incorporated by
reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the U.S. Securities and
Exchange Commission on May 23, 2008.
3.2
Amended and Restated Bylaws of NL Industries, Inc. as of October 26, 2023 – incorporated by reference
to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed with the U.S. Securities and Exchange
Commission on October 26, 2023.
4.1
Description of the Registrant’s Capital Stock –.incorporated by reference to Exhibit 4.1 to the Registrant’s
Annual Report on Form 10-K for the year ended December 31, 2019.
10.1
Lease Contract dated June 21, 1952, between Farbenfabriken Bayer Aktiengesellschaft and
Titangesellschaft mit beschrankter Haftung (German language version and English translation thereof)
– incorporated by reference to Exhibit 10.14 to the Registrant’s Annual Report on Form 10-K (File
No. 001-00640) for the year ended December 31, 1985. (P)
10.2
Form of Assignment and Assumption Agreement, dated as of January 1, 1999, between Kronos Inc.
(formerly known as Kronos (USA), Inc.) and Kronos International, Inc. – incorporated by reference to
Exhibit 10.9 to Kronos International, Inc.’s Registration Statement on Form S-4 (File No. 333-100047).
(P)
10.3
Form of Cross License Agreement, effective as of January 1, 1999, between Kronos Inc. (formerly known
as Kronos (USA), Inc.) and Kronos International, Inc. – incorporated by reference to Exhibit 10.10 to
Kronos International, Inc.’s Registration Statement on Form S-4 (File No. 333-100047).
-63-
Item No.
Exhibit Index
10.4
Restated and Amended Agreement by and between Richards Bay Titanium (Proprietary) Limited (acting
through its sales agent Rio Tinto Iron & Titanium Limited) and Kronos (US), Inc. effective January 1,
2016 – incorporated by reference to Exhibit 10.26 to the Kronos Worldwide, Inc. Annual Report on
Form 10-K for the year ended December 31, 2015.
10.5 *
Kronos Worldwide, Inc. 2012 Director Stock Plan – incorporated by reference to Exhibit 4.4 of Kronos
Worldwide, Inc. Registration statement on Form S-8.
10.6 *
CompX International Inc. 2012 Director Stock Plan – incorporated by reference to Exhibit 10.2 of CompX
International Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012.
10.7 *
NL Industries, Inc. 2023 Non-Employee Director Stock Plan – incorporated by reference to Exhibit 10.1
of Registrant’s Quarterly Report on Form 10Q for the quarter ended June 30, 2023.
10.8
Second Amended and Restated Agreement Regarding Shared Insurance among CompX International Inc.,
Contran Corporation, Kronos Worldwide, Inc., NL Industries, Inc. and Valhi, Inc. dated January 25,
2019 – incorporated by reference to Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K for
the year ended December 31, 2018.
10.9
Intercorporate Services Agreement by and between Contran Corporation and Kronos Worldwide, Inc. –
incorporated by reference to Exhibit 10.1 to the Kronos Worldwide, Inc. Quarterly Report on Form 10-Q
for the quarter ended March 31, 2004.
10.10
Intercorporate Services Agreement between CompX International Inc. and Contran Corporation effective
as of January 1, 2004 – incorporated by reference to Exhibit 10.2 to the CompX International Inc. Annual
Report on Form 10-K for the year ended December 31, 2003.
10.11
Intercorporate Services Agreement by and between Contran Corporation and NL Industries, Inc. effective
as of January 1, 2004 – incorporated by reference to Exhibit 10.1 to the NL Industries, Inc. Quarterly
Report on Form 10-Q for the quarter ended March 31, 2004.
10.12
Tax Agreement between Valhi, Inc. and Kronos Worldwide, Inc. dated as of January 1, 2020
– incorporated by reference to Exhibit 10.1 to the Kronos Worldwide, Inc. Annual Report on Form 10-K
for the year ended December 31, 2019.
10.13
Tax Agreement among NL Industries, Inc., Valhi, Inc. and Contran Corporation dated as of January 1,
2020 – incorporated by reference to Exhibit 10.25 to the Registrant’s Annual Report on Form 10-K (for
the year ended December 31, 2019.
10.14
Unsecured Revolving Demand Promissory Note dated December 31, 2024 in the principal amount of $25.0
million executed by Valhi, Inc. and payable to the order of CompX International Inc. – incorporated by
reference to Exhibit 10.5 to the Annual Report on Form 10-K of CompX International Inc. for the year
ended December 31, 2024.
10.15
Loan Agreement between NLKW Holding, LLC, as Borrower, and Valhi, Inc., as Lender, dated as of
November 14, 2016 – incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of the
Registrant dated November 14, 2016 and filed on November 15, 2016.
10.15.1
First Amendment to Loan Agreement between NLKW Holding, LLC, as Borrower, and Valhi, Inc. as
Lender, dated as of November 9, 2022 –incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K of the Registration dated November 9, 2022.
-64-
Item No.
Exhibit Index
10.16
Pledge and Security Agreement made by and between NLKW Holding, LLC in favor of Valhi, Inc., dated
as of November 14, 2016 – incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K
of the Registrant dated November 14, 2016 and filed on November 15, 2016.
10.17
Back-to-Back Loan Agreement between the registrant, as Borrower, and NLKW Holding, LLC, as Lender,
dated as of November 14, 2016 – incorporated by reference to Exhibit 10.3 to the Current Report on
Form 8-K of the Registrant dated November 14, 2016 and filed on November 15, 2016.
10.17.1
First Amendment to Back-to-Back Loan Agreement between NL Industries, Inc., as Borrower, and NLKW
Holding, LLC, as Lender, dated as of November 9, 2022 – incorporated by reference to Exhibit 10.2 to the
Current Report on Form 8-K of the Registrant dated November 9, 2022.
10.18
Back-to-Back Pledge and Security Agreement made by and between the registrant in favor of Valhi, Inc.,
dated as of November 14, 2016 – incorporated by reference to Exhibit 10.4 to the Current Report on
Form 8-K of the Registrant dated November 14, 2016 and filed on November 15, 2016.
10.19
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 of Kronos
Worldwide, Inc. dated September 13, 2017 and filed on September 13, 2017.
10.19.1
Supplemental Indenture No. 1, dated as of February 12, 2024, among Kronos International, Inc., the
guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee, collateral agent,
paying agent, transfer agent and registrar – incorporated by reference to Exhibit 4.1 to Kronos Worldwide
Inc.’s Current Report on Form 8-K filed on February 12, 2024.
10.19.2
Supplemental Indenture No. 2, dated as of August 8, 2024, among Louisiana Pigment Company, L.P. and
Kronos LPC, LLC (as new guarantors under the Indenture dated as of September 13, 2017, as amended),
Kronos International, Inc., and Deutsche Bank Trust Company Americas, as trustee, collateral agent,
paying agent, transfer agent and registrar – incorporated by reference to Exhibit 10.1 to the Registrant’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2024.
10.20
Indenture, dated as of February 12, 2024, among Kronos International, Inc., the guarantors named therein,
and Deutsche Bank Trust Company Americas, as trustee, collateral agent, paying agent, transfer agent and
registrar – incorporated by reference to Exhibit 4.2 to Kronos Worldwide Inc.’s Current Report on Form
8-K filed on February 12, 2024.
10.20.1
First Supplemental Indenture dated as of July 30, 2024, by and 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 10.1 to Kronos Worldwide,
Inc.’s Current Report on Form 8-K filed on July 30, 2024.
10.20.2
Second Supplemental Indenture dated as of August 8, 2024, among Louisiana Pigment Company, L.P. and
Kronos LPC, LLC (as new guarantors under the Indenture dated as of February 12, 2024, as amended),
Kronos International, Inc., and Deutsche Bank Trust Company Americas, as trustee, collateral agent,
paying agent, transfer agent and registrar – incorporated by reference to Exhibit 10.2 to the Registrant’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2024.
10.21
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 of Kronos Worldwide, Inc. dated
September 13, 2017 and filed on September 13, 2017.
-65-
Item No.
Exhibit Index
10.21.1
Additional Notes Priority Joinder Agreement dated February 12, 2024, executed by Deutsche Bank Trust
Company Americas, as trustee and collateral agent for the holders of Kronos International, Inc.’s 9.50%
Senior Secured Notes due 2029 and as existing agent under the Pledge Agreement dated September 13,
2017 entered into in connection with Kronos International Inc.’s 3.75% Senior Secured Notes due 2025 –
incorporated by reference to Exhibit 4.4 to Kronos Worldwide Inc.’s Current Report on Form 8-K filed on
February 12, 2024.
10.21.2
Additional Notes Priority Joinder Agreement dated July 30, 2024, executed by Deutsche Bank Trust
Company Americas, as trustee and collateral agent. – incorporated by reference to Exhibit 10.2 to Kronos
Worldwide, Inc.’s Current Report on Form 8-K filed July 30, 2024.
10.21.3
Joinder No. 1 dated as of August 8, 2024, to the Pledge Agreement dated as of September 13, 2017, joining
Louisiana Pigment Company, L.P. and Kronos LPC, LLC to the Pledge Agreement – incorporated by
reference to Exhibit 10.3 to the Registrant’s Quarterly Report on form 10-Q for the quarter ended
September 30, 2024.
10.21.4
Pledge Amendment dated as of August 8, 2024, to the Pledge Agreement dated as of September 13, 2017,
executed by Kronos Louisiana, Inc. and Kronos LPC, LLC regarding additional pledged securities –
incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on form 10-Q for the quarter
ended September 30, 2024.
10.22
Credit Agreement dated as of April 20, 2021 by and among Kronos Worldwide, Inc., Kronos Louisiana,
Inc., Kronos (US), Inc., Kronos Canada, Inc., Kronos Europe NV, Kronos Titan GmbH and Wells Fargo
Bank, National Association as administrative agent and lender – incorporated by reference to Exhibit 10.1
to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.
10.22.1
First Amendment to Credit Agreement dated May 8, 2023, among Kronos Worldwide, Inc., Kronos
Louisiana, Inc., Kronos (US), Inc., Kronos Canada, Inc., Kronos Europe NV, Kronos Titan GmgH, Wells
Fargo Bank, National Association, as administrative agent, and the lenders a party thereto – incorporated
by reference to Exhibit 10.1 of Kronos Worldwide, Inc.’s Current Report on Form 8-K filed with the U.S.
Securities and Exchange Commission on May 9, 2023.
10.22.2
Second Amendment to Credit Agreement dated July 17, 2024 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 10.2 to Kronos Worldwide, Inc.’s Current Report on Form 8-K filed July 17, 2024.
10.22.3
Third Amendment to Credit Agreement dated December 19, 2024 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’s Current Report on Form 8-K filed on December 19,
2024.
10.23
Guaranty and Security Agreement dated as of April 20, 2021, by and among Kronos Worldwide, Inc.,
Kronos Louisiana, Inc., Kronos (US), Inc., Kronos Canada, Inc., Kronos International, Inc. and Wells
Fargo Bank, National Association as administrative agent and lender – incorporated by reference to Exhibit
10.2 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.
-66-
Item No.
Exhibit Index
10.23.1
First Amendment to Guaranty and Security Agreement, entered into as of July 17, 2024, by and among
Kronos Worldwide, Inc., Kronos Louisiana, Inc., Kronos (US), Inc., Kronos International, Inc. and Wells
Fargo Bank, National Association as administrative agent and lender, amending Guaranty and Security
Agreement dated as of April 20, 2021 – incorporated by reference to Exhibit 10.5 to the Registrant’s
Quarterly Report on form 10-Q for the quarter ended September 30, 2024.
10.23.2
Joinder No. 1 dated as of August 7, 2024, joining Louisiana Pigment Company, L.P. and Kronos LPC,
LLC to the Guaranty and Security Agreement dated as of April 20, 2021, as amended – incorporated by
reference to Exhibit 10.6 to the Registrant’s Quarterly Report on form 10-Q for the quarter ended
September 30, 2024.
10.24
Unsecured Subordinated Term Promissory Note dated February 12, 2024 in the principal amount of
$53,705,000 executed by Kronos Worldwide, Inc. and the guarantors named therein and payable to the
order of Contran Corporation – incorporated by reference to Exhibit 4.5 to Kronos Worldwide Inc.’s
Current Report on Form 8-K filed on February 12, 2024.
10.24.1
First Amendment to Unsecured Subordinated Term Promissory Note dated February 12, 2024, executed
by Kronos Worldwide, Inc. and Contran Corporation as of August 7, 2024 – incorporated by reference to
Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024.
10.25
Purchase and Sale Agreement dated July 16, 2024 by and between Kronos Louisiana, Inc., Kronos
Worldwide, Inc., Venator Investments, Ltd. and Venator Materials PLC – incorporated by reference to
Exhibit 10.1 to Kronos Worldwide, Inc.’s Current Report on Form 8-K filed July 17, 2024.
10.25.1
Amendment to Purchase and Sale Agreement dated August 13, 2024, by and between Kronos Louisiana,
Inc., Kronos Worldwide, Inc., Venator Investments, Ltd., Venator Materials PLC. and Louisiana Pigment
Company, L.P, amending Purchase Agreement dated as of July 16, 2024 – incorporated by reference to
Exhibit 10.7 to the Registrant’s Quarterly Report on form 10-Q for the quarter ended September 30, 2024.
10.26 **
Consent Decree effective February 10, 2025, among NL Industries, Inc., the United States of America (on
behalf of several agencies) and certain other plaintiff parties and defendant parties, relating to the Raritan
Bay Slag Superfund Site.
19.1 **
NL Industries, Inc. Insider Trading Policy.
21.1 **
Subsidiaries of the Registrant
23.1 **
Consent of PricewaterhouseCoopers LLP with respect to NL’s consolidated financial statements.
23.2 **
Consent of PricewaterhouseCoopers LLP with respect to Kronos’ consolidated financial statements.
31.1 **
Certification
31.2 **
Certification
32.1 **
Certification
97*
Policy for the Recovery of Erroneously Awarded Compensation – incorporated by reference to the
Registrant’s Annual Report on Form 10-K for the year ended December 31, 2023.
99.1
Consolidated Financial Statements of Kronos Worldwide, Inc. – incorporated by reference to Kronos’
Annual Report on Form 10-K for the year ended December 31, 2024.
-67-
Item No.
Exhibit Index
101.INS**
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
101.SCH**
Inline XBRL Taxonomy Extension Schema
101.CAL**
Inline XBRL Taxonomy Extension Calculation Linkbase
101.DEF**
Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB**
Inline XBRL Taxonomy Extension Label Linkbase
101.PRE**
Inline XBRL Taxonomy Extension Presentation Linkbase
104
Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
*
Management contract, compensatory plan or arrangement.
** Filed herewith
(P) Paper exhibits
-68-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NL Industries, Inc.
(Registrant)
By: /s/Courtney J. Riley
Courtney J. Riley, March 6, 2025
(President and Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated:
/s/ Loretta J. Feehan
/s/ John E. Harper
Loretta J. Feehan, March 6, 2025
John E. Harper, March 6, 2025
(Chair of the Board (non-executive))
(Director)
/s/ Michael S. Simmons
/s/ Meredith W. Mendes
Michael S. Simmons, March 6, 2025
Meredith W. Mendes, March 6, 2025
(Vice Chairman and Director)
(Director)
/s/ Amy Allbach Samford
/s/ Kevin B. Kramer
Amy Allbach Samford, March 6, 2025
Kevin B. Kramer, March 6, 2025
(Executive Vice President and Chief Financial Officer,
Principal Financial Officer)
(Director)
/s/ Amy E. Ruf
/s/ Cecil H. Moore, Jr.
Amy E. Ruf, March 6, 2025
Cecil H. Moore, Jr., March 6, 2025
(Vice President and Controller,
Principal Accounting Officer)
(Director)
F-1
NL INDUSTRIES, INC.
Annual Report on Form 10-K
Items 8, 15(a) and 15(c)
Index of Financial Statements
Financial Statements
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
F-2
Consolidated Balance Sheets – December 31, 2023 and 2024
F-4
Consolidated Statements of Operations – Years ended December 31, 2022, 2023 and 2024
F-6
Consolidated Statements of Comprehensive Income – Years ended December 31, 2022, 2023 and 2024
F-7
Consolidated Statements of Stockholders’ Equity – Years ended December 31, 2022, 2023 and 2024
F-8
Consolidated Statements of Cash Flows – Years ended December 31, 2022, 2023 and 2024
F-9
Notes to Consolidated Financial Statements
F-11
All financial statement schedules have been omitted either because they are not applicable or required, or the
information that would be required to be included is disclosed in the Notes to the Consolidated Financial Statements.
PricewaterhouseCoopers LLP, 2121 North Pearl Street, Suite 2000, Dallas, Texas 75201
T: (214) 999 1400, www.pwc.com/us
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of NL Industries, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of NL Industries, Inc. and its
subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated
statements of operations, of comprehensive income, of stockholders’ equity and of cash flows for
each of the three years in the period ended December 31, 2024, 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, 2024 and 2023, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2024 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 of these consolidated financial statements 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. 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. We believe that
our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of
the consolidated financial statements that was communicated or required to be communicated to
the audit committee and that (i) relates to accounts or disclosures that are material to the
consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosures to which it relates.
F-2
Environmental Remediation and Related Matters
As described in Note 17 to the consolidated financial statements, management evaluates the
potential range of the Company’s liability for environmental remediation and related costs at sites
where the Company has been named as a potentially responsible party (PRP) or defendant. As of
December 31, 2024, management accrued approximately $69 million related to approximately 30
sites associated with remediation and related matters. Liabilities related to environmental
remediation and related matters (including costs associated with damages for property damage
and/or damages for injury to natural resources) are recorded when management determines that
estimated future expenditures are probable and reasonably estimable. As disclosed by
management, environmental remediation and related costs accruals (and the potential range of
the Company’s liabilities) are adjusted as further information becomes available or as
circumstances change which involves management’s judgment regarding current facts and
circumstances for each site and is subject to various assumptions and estimates.
The principal considerations for our determination that performing procedures relating to
environmental remediation and related matters is a critical audit matter are the significant
judgment by management when assessing the accruals and the potential range of the Company’s
liabilities and when determining whether estimated future expenditures are probable and
reasonably estimable, which in turn led to a high degree of auditor judgment, subjectivity and
effort in performing procedures and evaluating evidence related to management’s assessment of
the accruals and the potential range of the liabilities.
Addressing the matter involved performing procedures and evaluating audit evidence in
connection with forming our overall opinion on the consolidated financial statements. These
procedures included testing the effectiveness of controls relating to management’s evaluation of
environmental remediation and related matters, 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 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 internal and external legal counsel, and (iii) evaluating the sufficiency of the
Company’s environmental remediation and related matters disclosures.
Dallas, Texas
March 6, 2025
We have served as the Company’s auditor since 1924.
F-3
F-4
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31,
2023
2024
ASSETS
Current assets:
Cash and cash equivalents
$
111,522
$
163,154
Restricted cash and cash equivalents
2,917
20,545
Marketable securities
53,149
—
Accounts and other receivables, net
17,101
23,739
Receivables from affiliates
628
—
Inventories, net
30,712
28,366
Prepaid expenses and other
2,235
2,154
Total current assets
218,264
237,958
Other assets:
Restricted cash and cash equivalents
26,943
491
Note receivable from affiliate
10,600
9,300
Marketable securities
18,194
28,015
Investment in Kronos Worldwide, Inc.
247,582
250,278
Goodwill
27,156
27,156
Other assets, net
2,060
1,034
Total other assets
332,535
316,274
Property and equipment:
Land
5,390
5,390
Buildings
23,239
23,262
Equipment
74,315
75,605
Construction in progress
676
589
103,620
104,846
Less accumulated depreciation
77,757
80,820
Net property and equipment
25,863
24,026
Total assets
$
576,662
$
578,258
F-5
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands, except per share data)
December 31,
2023
2024
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
$
3,148
$
3,758
Accrued litigation settlement
11,830
16,431
Accrued and other current liabilities
13,182
12,032
Accrued environmental remediation and related costs
1,655
58,135
Payables to affiliates
634
706
Total current liabilities
30,449
91,062
Noncurrent liabilities:
Long-term debt from affiliate
500
500
Accrued environmental remediation and related costs
89,451
11,143
Long-term litigation settlement
16,122
—
Deferred income taxes
41,733
53,391
Accrued pension costs
1,571
76
Other
5,074
6,183
Total noncurrent liabilities
154,451
71,293
Equity:
NL stockholders' equity:
Preferred stock, no par value; 5,000 shares authorized;
none issued
—
—
Common stock; $.125 par value; 150,000 shares authorized;
48,833 and 48,848 shares issued and outstanding
6,103
6,105
Additional paid-in capital
298,868
299,099
Retained earnings
284,462
315,056
Accumulated other comprehensive loss
(219,621)
(223,356)
Total NL stockholders' equity
369,812
396,904
Noncontrolling interest in subsidiary
21,950
18,999
Total equity
391,762
415,903
Total liabilities and equity
$
576,662
$
578,258
Commitments and contingencies (Notes 14 and 17)
See accompanying Notes to Consolidated Financial Statements.
F-6
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Years ended December 31,
2022
2023
2024
Net sales
$
166,562
$
161,287
$
145,941
Cost of sales
117,763
112,068
104,578
Gross margin
48,799
49,219
41,363
Selling, general and administrative expense
23,363
23,784
24,340
Other operating income (expense):
Insurance recoveries
93
464
1,369
Corporate income (expense), net
(11,798)
(11,770)
19,484
Income from operations
13,731
14,129
37,876
Equity in earnings (losses) of Kronos Worldwide, Inc.
31,873
(15,003)
26,381
Other income (expense):
Interest and dividend income
3,797
9,636
10,980
Marketable equity securities
(8,085)
(8,156)
9,821
Loss on pension plan termination
—
(4,911)
—
Other components of net periodic pension and OPEB cost
(1,134)
(1,368)
(1,210)
Interest expense
(941)
(746)
(530)
Income (loss) before income taxes
39,241
(6,419)
83,318
Income tax expense (benefit)
2,785
(7,001)
14,057
Net income
36,456
582
69,261
Noncontrolling interest in net income of subsidiary
2,612
2,890
2,033
Net income (loss) attributable to NL stockholders
$
33,844
$
(2,308)
$
67,228
Amounts attributable to NL stockholders:
Basic and diluted net income (loss) per share
$
.69
$
(.05)
$
1.38
Weighted average shares used in the calculation of
net income (loss) per share
48,811
48,827
48,842
See accompanying Notes to Consolidated Financial Statements.
F-7
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Years ended December 31,
2022
2023
2024
Net income
$
36,456
$
582
$
69,261
Other comprehensive income (loss), net of tax:
Currency translation
(6,956)
1,072
(8,304)
Defined benefit pension plans
24,611
2,484
4,707
Marketable debt securities
(50)
53
15
Other postretirement benefit plans
160
(221)
(153)
Total other comprehensive income (loss), net
17,765
3,388
(3,735)
Comprehensive income
54,221
3,970
65,526
Comprehensive income attributable to noncontrolling interest
2,612
2,908
2,033
Comprehensive income attributable to NL stockholders
$
51,609
$
1,062
$
63,493
See accompanying Notes to Consolidated Financial Statements.
F-8
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years ended December 31, 2022, 2023 and 2024
(In thousands)
Accumulated
Additional
other
Noncontrolling
Common
paid-in
Retained comprehensive
interest in
Total
stock
capital earnings
loss
subsidiary
equity
Balance at December 31, 2021
$ 6,100 $ 299,775 $ 297,351 $
(240,756) $
22,501 $ 384,971
Net income
—
—
33,844
—
2,612
36,456
Other comprehensive income,
net of tax
—
—
—
17,765
—
17,765
Issuance of NL common stock
1
119
—
—
—
120
Dividends paid - $.63 per share
—
— (30,753)
—
— (30,753)
Dividends paid to noncontrolling
interest
—
—
—
—
(4,304)
(4,304)
Other, net
—
(1,296)
—
—
(212)
(1,508)
Balance at December 31, 2022
6,101 298,598 300,442
(222,991)
20,597 402,747
Net income (loss)
—
—
(2,308)
—
2,890
582
Other comprehensive income,
net of tax
—
—
—
3,370
18
3,388
Issuance of NL common stock
2
98
—
—
—
100
Dividends paid - $.28 per share
—
— (13,672)
—
— (13,672)
Dividends paid to noncontrolling
interest
—
—
—
—
(1,555)
(1,555)
Other, net
—
172
—
—
—
172
Balance at December 31, 2023
6,103 298,868 284,462
(219,621)
21,950 391,762
Net income
—
—
67,228
—
2,033
69,261
Other comprehensive loss,
net of tax
—
—
—
(3,735)
—
(3,735)
Issuance of NL common stock
2
98
—
—
—
100
Dividends paid - $.75 per share
—
— (36,634)
—
— (36,634)
Dividends paid to noncontrolling
interest
—
—
—
—
(5,000)
(5,000)
Other, net
—
133
—
—
16
149
Balance at December 31, 2024
$ 6,105 $ 299,099 $ 315,056 $
(223,356) $
18,999 $ 415,903
See accompanying Notes to Consolidated Financial Statements.
F-9
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years ended December 31,
2022
2023
2024
Cash flows from operating activities:
Net income
$
36,456
$
582
$
69,261
Depreciation and amortization
3,977
3,973
3,691
Deferred income taxes
2,291
(7,308)
13,718
Equity in (earnings) losses of Kronos Worldwide, Inc.
(31,873)
15,003
(26,381)
Dividends received from Kronos Worldwide, Inc.
26,766
26,766
16,905
Marketable equity securities (gain) loss
8,085
8,156
(9,821)
Loss on pension plan termination
—
4,911
—
Benefit plan expense greater than cash funding
130
461
397
Noncash interest income
(267)
(3,591)
(817)
Noncash interest expense
908
695
479
Other, net
(21)
247
217
Change in assets and liabilities:
Accounts and other receivables, net
(2,275)
754
(6,679)
Inventories, net
(5,832)
333
2,126
Prepaid expenses and other
353
42
82
Accounts payable and accrued liabilities
(10,398)
(12,624)
(13,256)
Accounts with affiliates
(662)
578
700
Accrued environmental remediation and related costs
(582)
(1,252)
(21,828)
Other noncurrent assets and liabilities, net
(125)
(723)
(3,220)
Net cash provided by operating activities
26,931
37,003
25,574
Cash flows from investing activities:
Capital expenditures
(3,695)
(1,130)
(1,432)
Marketable securities:
Purchases
(69,959)
(61,366)
—
Proceeds from maturities
—
82,000
54,000
Note receivable from affiliate:
Collections
29,800
30,500
26,300
Loans
(24,300)
(27,900)
(25,000)
Proceeds from land sale
—
—
5,000
Other, net
284
—
—
Net cash provided by (used in) investing activities
(67,870)
22,104
58,868
Cash flows from financing activities:
Dividends paid
(30,753)
(13,672)
(36,634)
Subsidiary treasury stock acquired
(1,744)
—
—
Dividends paid to noncontrolling interests in subsidiary
(4,304)
(1,555)
(5,000)
Net cash used in financing activities
(36,801)
(15,227)
(41,634)
F-10
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In thousands)
Years ended December 31,
2022
2023
2024
Cash and cash equivalents and restricted cash and cash
equivalents - net change from:
Operating, investing and financing activities
$
(77,740)
$
43,880
$
42,808
Balance at beginning of year
175,242
97,502
141,382
Balance at end of year
$
97,502
$
141,382
$
184,190
Supplemental disclosures:
Cash paid (received) for:
Interest
$
34
$
50
$
51
Income taxes, net
1,140
(300)
127
Noncash investing activities -
Change in accruals for capital expenditures
(49)
23
423
See accompanying Notes to Consolidated Financial Statements.
F-11
NL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024
Note 1 – Summary of significant accounting policies:
Nature of our business – NL Industries, Inc. (NYSE: NL) is primarily a holding company. We operate in the
component products industry through our majority-owned subsidiary, CompX International Inc. (NYSE American: CIX).
We operate in the chemicals industry through our noncontrolling interest in Kronos Worldwide, Inc. (NYSE: KRO).
Organization – At December 31, 2024, Valhi, Inc. (NYSE: VHI) held approximately 83% of our outstanding
common stock and a wholly-owned subsidiary of Contran Corporation held approximately 91% of Valhi’s outstanding
common stock. A majority of Contran’s outstanding voting stock is held directly by Lisa K. Simmons and by family
stockholders (Thomas C. Connelly (the husband of Ms. Simmons’ late sister), a family-owned entity and various family
trusts established for the benefit of Ms. Simmons, Mr. Connelly and their children) who are required to vote their shares
of Contran voting stock in the same manner as Ms. Simmons. Such voting rights are personal to Ms. Simmons and last
through April 22, 2030. The remainder of Contran’s outstanding voting stock is held by another trust (the “Family Trust”),
which was established for the benefit of Ms. Simmons and her late sister and their children and for which a third-party
financial institution serves as trustee. Consequently, at December 31, 2024 Ms. Simmons and the Family Trust may be
deemed to control Contran, and therefore may be deemed to indirectly control the wholly-owned subsidiary of Contran,
Valhi and us.
Unless otherwise indicated, references in this report to “we,” “us” or “our” refer to NL Industries, Inc. and its
subsidiaries and affiliate, Kronos, taken as a whole.
Management’s estimates – In preparing our financial statements in conformity with accounting principles
generally accepted in the United States of America (GAAP), we are required to make estimates and assumptions that affect
the reported amounts of our assets and liabilities and disclosures of contingent assets and liabilities at each balance sheet
date and the reported amounts of our revenues and expenses during each reporting period. Actual results may differ
significantly from previously-estimated amounts under different assumptions or conditions.
Principles of consolidation – Our Consolidated Financial Statements include the financial position, results of
operations and cash flows of NL and our wholly-owned and majority-owned subsidiaries, including CompX. We account
for the 13% of CompX stock we do not own as a noncontrolling interest. We eliminate all material intercompany accounts
and balances. Changes in ownership of our wholly-owned and majority-owned subsidiaries are accounted for as equity
transactions with no gain or loss recognized on the transaction unless there is a change in control.
Currency translation – The financial statements of Kronos’ non-U.S. subsidiaries are translated to U.S. dollars.
The functional currency of Kronos’ non-U.S. subsidiaries is generally the local currency of their country. Accordingly,
Kronos translates the assets and liabilities at year-end rates of exchange, while it translates its revenues and expenses at
average exchange rates prevailing during the year. We accumulate the resulting translation adjustments in stockholders’
equity as part of accumulated other comprehensive income (loss), net of related deferred income taxes. Kronos recognizes
currency transaction gains and losses in income which is reflected as part of our equity in earnings (losses) of Kronos.
Cash and cash equivalents – We classify bank time deposits and highly liquid investments, including
government and commercial notes and bills, with original maturities of three months or less as cash equivalents.
Restricted cash and cash equivalents – We classify cash equivalents that have been segregated or are otherwise
limited in use as restricted. Such restrictions include cash pledged as collateral with respect to performance obligations or
letters of credit required by regulatory agencies for certain environmental remediation sites and cash pledged as collateral
with respect to certain workers compensation liabilities or legal settlements. To the extent the restricted amount relates to
F-12
a recognized liability, we classify such restricted amount as either a current or noncurrent asset to correspond with the
classification of the liability. To the extent the restricted amount does not relate to a recognized liability, we classify
restricted cash as a current asset. Restricted cash equivalents classified as a current asset or a noncurrent asset are presented
separately on our Consolidated Balance Sheets.
Marketable securities and securities transactions – We carry marketable debt and equity securities at fair value.
Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, establishes a
consistent framework for measuring fair value and (with certain exceptions) this framework is generally applied to all
financial statement items required to be measured at fair value. The standard requires fair value measurements to be
classified and disclosed in one of the following three categories:
•
Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical,
unrestricted assets or liabilities;
•
Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or
indirectly, for substantially the full term of the assets or liability; and
•
Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value
measurement and unobservable.
We classify all of our marketable securities as available-for-sale. We accumulate unrealized gains and losses on
marketable debt securities as part of accumulated other comprehensive income (loss), net of related deferred income taxes.
We recognize unrealized gains or losses on the marketable equity securities in Marketable equity securities on our
Consolidated Statements of Operations. We base realized gains and losses upon the specific identification of the securities
sold. See Notes 5 and 11.
Accounts receivable – We provide an allowance for doubtful accounts for known and estimated potential losses
arising from sales to customers based on a periodic review of these accounts. See Note 3.
Inventories and cost of sales – We state inventories at the lower of cost or net realizable value. We record a
provision for obsolete and slow-moving inventories. We generally base inventory costs for all inventory categories on an
average cost that approximates the first-in, first-out method. Inventories include the costs for raw materials, the cost to
manufacture the raw materials into finished goods and overhead. Depending on the inventory’s stage of completion, our
manufacturing costs can include the costs of packing and finishing, utilities, maintenance and depreciation, shipping and
handling, and salaries and benefits associated with our manufacturing process. We allocate fixed manufacturing overhead
costs based on normal production capacity. Unallocated overhead costs resulting from periods with abnormally low
production levels are charged to expense as incurred. As inventory is sold to third parties, we recognize the cost of sales
in the same period that the sale occurs. We periodically review our inventory for estimated obsolescence or instances when
inventory is no longer marketable for its intended use and we record any write-down equal to the difference between the
cost of inventory and its estimated net realizable value based on assumptions about alternative uses, market conditions and
other factors. See Note 4.
Investment in Kronos Worldwide, Inc. – We account for our 31% non-controlling interest in Kronos by the
equity method. Distributions received from Kronos are classified for statement of cash flow purposes using the “nature of
distribution” approach under ASC Topic 230. See Note 6.
Goodwill – Goodwill represents the excess of cost over fair value of individual net assets acquired in business
combinations. Goodwill is not subject to periodic amortization. We evaluate goodwill for impairment annually, or when
circumstances indicate the carrying value may not be recoverable. See Note 7.
Leases – We enter into various arrangements (or leases) that convey the rights to use and control identified
underlying assets for a period of time in exchange for consideration. We lease various facilities and equipment. From time
to time, we may also enter into an arrangement in which the right to use and control an identified underlying asset is
F-13
embedded in another type of contract. We determine if an arrangement is a lease (including leases embedded in another
type of contract) at inception. All of our leases are classified as operating leases under ASC Topic 842 Leases. Operating
leases are not material.
Property and equipment; depreciation expense – We state property and equipment, including purchased
computer software for internal use, at cost. We compute depreciation of property and equipment for financial reporting
purposes principally by the straight-line method over the estimated useful lives of 15 to 40 years for buildings and 3 to 20
years for equipment and software. We use the Alternative Depreciation System (“ADS”) for income tax purposes. Upon
sale or retirement of an asset, the related cost and accumulated depreciation are removed from the accounts and any gain
or loss is recognized in income currently. Expenditures for maintenance, repairs and minor renewals are expensed;
expenditures for major improvements are capitalized.
We perform impairment tests when events or changes in circumstances indicate the carrying value may not be
recoverable. We consider all relevant factors. We perform impairment tests by comparing the estimated future
undiscounted cash flows associated with the asset to the asset’s net carrying value to determine whether impairment exists.
Employee benefit plans – Accounting and funding policies for our defined benefit pension and defined
contribution retirement plans are described in Note 11. We also provide certain postretirement benefits other than pensions
(OPEB), consisting of health care and life insurance benefits, to certain U.S. retired employees, which are not material.
See Note 12.
Income taxes – We, Valhi and our qualifying subsidiaries are members of Contran’s consolidated U.S. federal
income tax group (the Contran Tax Group) and we and certain of our qualifying subsidiaries also file consolidated unitary
state income tax returns with Contran in qualifying U.S. jurisdictions. As a member of the Contran Tax Group, we are
jointly and severally liable for the 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. See Note 16. As a member of the Contran
Tax Group, we are party to a tax sharing agreement with Valhi and Contran which provides that we compute our provision
for income taxes on a separate-company basis using the tax elections made by Contran. Pursuant to our tax sharing
agreement, we make payments to or receive payments from Valhi in amounts that we would have paid to or received from
the U.S. Internal Revenue Service or the applicable state tax authority had we not been a member of the Contran Tax
Group. We made net payments to Valhi for income taxes of $1.1 in 2022, received net refunds from Valhi of $.3 million
in 2023 and made net payments to Valhi of $.1 million in 2024.
We recognize deferred income tax assets and liabilities for the expected future tax consequences of temporary
differences between the income tax and financial reporting carrying amounts of assets and liabilities, including investments
in our subsidiaries and affiliates who are not members of the Contran Tax Group and undistributed earnings of non-U.S.
subsidiaries which are not deemed to be permanently reinvested. In addition, 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 recognition of such deferred income taxes is not
available to us. Deferred income tax assets and liabilities for each tax-paying jurisdiction in which we operate are netted
and presented as either a noncurrent deferred income tax asset or liability, as applicable. We periodically evaluate our
deferred tax assets in the various taxing jurisdictions in which we operate and adjust any related valuation allowance based
on the estimate of the amount of such deferred tax assets that we believe does not meet the more-likely-than-not recognition
criteria.
We account for the tax effects of a change in tax law as a component of the income tax provision related to
continuing operations in the period of enactment, including the tax effects of any deferred income taxes originally
established through a financial statement component other than continuing operations (i.e. other comprehensive
income(loss)). Changes in applicable income tax rates over time as a result of changes in tax law, or times in which a
deferred income tax asset valuation allowance is initially recognized in one year and subsequently reversed in a later year,
can give rise to “stranded” tax effects in accumulated other comprehensive income in which the net accumulated income
tax expense (benefit) remaining in accumulated other comprehensive income does not correspond to the then-applicable
F-14
income tax rate applied to the pre-tax amount which resides in accumulated other comprehensive income (loss). As
permitted by GAAP, our accounting policy is to remove any such stranded tax effect remaining in accumulated other
comprehensive income, by recognizing an offset to our provision for income taxes related to continuing operations, only
at the time when there is no remaining pre-tax amount in accumulated other comprehensive income. For accumulated other
comprehensive income related to currency translation, this would occur only upon the sale or complete liquidation of one
of our non-U.S. subsidiaries. For defined pension benefit plans and OPEB plans, this would occur whenever one of our
subsidiaries which previously sponsored a defined benefit pension or OPEB plan had terminated such a plan and had no
future obligation or plan asset associated with such a plan (such as in 2023 when we terminated our U.K. pension plan).
We record a reserve for uncertain tax positions for tax positions where we believe it is more-likely-than-not our
position will not prevail with the applicable tax authorities. The amount of the benefit associated with our uncertain tax
positions that we recognize is limited to the largest amount for which we believe the likelihood of realization is greater
than 50%. We accrue penalties and interest on the difference between tax positions taken on our tax returns and the amount
of benefit recognized for financial reporting purposes. We classify our reserves for uncertain tax positions in a separate
current or noncurrent liability, depending on the nature of the tax position. See Note 14.
Environmental remediation costs – We record liabilities related to environmental remediation obligations when
estimated future expenditures are probable and reasonably estimable. We adjust these accruals as further information
becomes available to us or as circumstances change. We generally do not discount estimated future expenditures to present
value. We recognize any recoveries of remediation costs from other parties when we deem their receipt probable. We
expense any environmental remediation related legal costs as incurred. See Note 17.
Net sales – Our sales involve single performance obligations to ship our products pursuant to customer purchase
orders. In some cases, the purchase order is supported by an underlying master sales agreement, but our purchase order
verification notice 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 Topic 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. In certain arrangements we provide shipping and handling activities after the transfer
of control to our customer (e.g., when control transfers prior to delivery). In such arrangements shipping and handling are
considered fulfillment activities, and accordingly, such costs are accrued when the related revenue is recognized.
Revenue is recorded in an amount that reflects the net consideration we expect to receive in exchange for our
products. Prices for our products are based on terms specified in published list prices and purchase orders, which generally
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. 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
not material and is recognized as the amount to which we are most-likely to be entitled, using all information (historical,
current and forecasted) that is reasonably available to us, and only to the extent that a significant reversal in the amount of
the cumulative revenue recognized is not probable of occurring in a future period. Differences, if any, between estimates
of the amount of variable consideration to which we will be entitled and the actual amount of such variable consideration
have not been material in the past. We occasionally receive partial or full consideration from our customers prior to the
completion of our performance obligation (shipment of product). We record estimated deferred revenue on the amount to
which we are most likely to be entitled and deferred revenue is recognized into revenue as our performance obligation has
been satisfied. Deferred revenue has not been material in the past. We report any tax assessed by a governmental authority
that we collect from our customers that is both imposed on and concurrent with our revenue-producing activities (such as
sales, use, value added and excise taxes) on a net basis (meaning we do not recognize these taxes either in our revenues or
in our costs and expenses).
F-15
Frequently, we receive orders for products to be delivered over dates that may extend across reporting periods.
We invoice for each delivery upon shipment and recognize revenue for each distinct shipment when all sales recognition
criteria for that shipment have been satisfied. 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.
Selling, general and administrative expenses; advertising costs; research and development costs – Selling,
general and administrative expenses include costs related to marketing, sales, distribution, research and development, and
administrative functions such as accounting, treasury and finance, as well as costs for salaries and benefits, travel and
entertainment, promotional materials and professional fees. We expense advertising costs and research and development
costs as incurred. Advertising costs were approximately $.4 million in 2022 and $.5 million in each of 2023 and 2024.
Research and development costs were not significant in any year presented.
Corporate expenses – Corporate expenses include environmental, legal and other costs attributable to formerly-
owned business units.
Note 2 – Business, segment and geographic information:
We have one operating segment. At December 31, 2024 we owned 87% of CompX. CompX manufactures and
sells security products including locking mechanisms and other security products for sale to the postal, transportation,
office and institutional furniture, cabinetry, tool storage, healthcare and other industries. CompX also manufactures and
distributes wake enhancement systems, stainless steel exhaust systems, gauges, throttle controls, trim tabs and related
hardware and accessories primarily for ski/wakeboard boats and performance boats.
Our chief operating decision maker (“CODM”) is our Vice Chairman of the Board. Our CODM is responsible
for determining how to allocate resources and assessing performance. The CODM evaluates segment performance based
on net income and segment profit (a non-GAAP measure), which we define as gross margin less selling, general and
administrative expenses directly attributable to CompX. The CODM considers current-period segment profit compared to
plan and prior-period on a monthly and/or quarterly basis for evaluating segment performance and making decisions about
allocating capital and other resources. The accounting policies of the reportable operating segment are the same as those
described in Note 1.
Differences between segment profit and the amounts included in net income are included in the table below. Asset
information is not regularly provided to the CODM and therefore is not considered to be used by the CODM in making
key operating decisions, allocating resources or assessing segment performance. Depreciation and amortization amounts
included in the calculation of segment profit all relate to CompX and were $4.0 million in each of 2022 and 2023 and $3.7
million in 2024.
F-16
Years ended December 31,
2022
2023
2024
(In thousands)
Net sales
$
166,562
$
161,287
$
145,941
Segment profit
$
25,436
$
25,435
$
17,023
Insurance recoveries
93
464
1,369
Corporate income (expenses), net
(11,798)
(11,770)
19,484
Equity in earnings (losses) of Kronos Worldwide, Inc.
31,873
(15,003)
26,381
Interest and dividend income
3,797
9,636
10,980
Marketable equity securities gain (loss)
(8,085)
(8,156)
9,821
Loss on pension plan termination
—
(4,911)
—
Other components of net periodic pension and OPEB cost
(1,134)
(1,368)
(1,210)
Interest expense
(941)
(746)
(530)
Income tax (expense) benefit
(2,785)
7,001
(14,057)
Net income
$
36,456
$
582
$
69,261
See the Consolidated Financial Statements for other financial information regarding the Company’s operating
segment.
For geographic information, the point of origin (place of manufacture) for all net sales is the U.S., the point of
destination for net sales is based on the location of the customer.
Years ended December 31,
2022
2023
2024
(In thousands)
Net sales - point of destination:
United States
$
153,982
$
155,092
$
141,328
Canada
9,227
3,153
1,860
Mexico
722
829
774
Other
2,631
2,213
1,979
Total
$
166,562
$
161,287
$
145,941
Note 3 – Accounts and other receivables, net:
December 31,
2023
2024
(In thousands)
Trade receivables - CompX
$
17,131
$
14,183
Other receivables
40
9,626
Allowance for doubtful accounts
(70)
(70)
Total
$
17,101
$
23,739
Other receivables are discussed in Note 17.
F-17
Note 4 – Inventories, net:
December 31,
2023
2024
(In thousands)
Raw materials
$
5,738
$
5,652
Work in process
19,042
17,638
Finished products
5,932
5,076
Total
$
30,712
$
28,366
Note 5 – Marketable securities:
The current marketable securities we held at December 31, 2023 consisted of investments in debt securities. The
fair value of these current marketable securities was generally determined using Level 2 inputs because although these
securities are generally traded, in many cases the market is not active and the year-end valuation is generally based on the
last trade of the year, which may be several days prior to December 31.
Our noncurrent marketable securities consist of investments in the publicly-traded shares of our immediate parent
company Valhi, Inc. Our shares of Valhi common stock are accounted for as available-for-sale securities, which are carried
at fair value using quoted market prices in active markets and represent a Level 1 input within the fair value hierarchy.
Fair value
Cost or
measurement
Market
amortized
Unrealized
level
value
cost
gain (loss)
(In thousands)
December 31, 2023
Current assets - fixed income securities
2
$
53,149
$
53,181
$
(32)
Noncurrent assets
Valhi common stock
1
$
18,194
$
24,347
$
(6,153)
December 31, 2024
Noncurrent assets
Valhi common stock
1
$
28,015
$
24,347
$
3,668
At December 31, 2023 and 2024, we held approximately 1.2 million shares of our immediate parent company,
Valhi. See Note 1. The per share quoted market price of Valhi common stock at December 31, 2023 and 2024 was
$15.19 and $23.39, respectively.
The Valhi common stock we own is subject to the restrictions on resale pursuant to certain provisions of the SEC
Rule 144. In addition, as a majority-owned subsidiary of Valhi we cannot vote our shares of Valhi common stock under
Delaware General Corporation Law, but we do receive dividends from Valhi on these shares, when declared and paid.
F-18
Note 6 – Investment in Kronos Worldwide, Inc.:
At December 31, 2023 and 2024, we owned approximately 35.2 million shares of Kronos common stock. The
per share quoted market price of Kronos common stock at December 31, 2023 and 2024 was $9.94 and $9.75 per share,
respectively, or an aggregate market value of $350.1 million and $343.4 million, respectively. The change in the carrying
value of our investment in Kronos during the past three years is summarized below:
Years ended December 31,
2022
2023
2024
(In millions)
Balance at the beginning of the period
$
264.8
$
292.2
$
247.6
Equity in earnings (loss) of Kronos
31.9
(15.0)
26.4
Dividends received from Kronos
(26.8)
(26.8)
(16.9)
Equity in Kronos' other comprehensive income (loss):
Currency translation
(8.8)
1.1
(10.5)
Defined benefit pension plans
30.9
(3.9)
3.7
Other postretirement benefit plans
—
(.1)
—
Other
.2
.1
—
Balance at the end of the period
$
292.2
$
247.6
$
250.3
Selected financial information of Kronos is summarized below:
December 31,
2023
2024
(In millions)
Current assets
$
1,117.4
$
1,105.3
Property and equipment, net
482.9
694.1
Investment in TiO2 joint venture
111.0
—
Other noncurrent assets
126.7
114.1
Total assets
$
1,838.0
$
1,913.5
Current liabilities
$
370.8
$
476.6
Long-term debt
440.9
429.1
Accrued pension costs
150.0
117.5
Other noncurrent liabilities
68.0
73.3
Stockholders’ equity
808.3
817.0
Total liabilities and stockholders’ equity
$
1,838.0
$
1,913.5
Years ended December 31,
2022
2023
2024
(In millions)
Net sales
$
1,930.2
$
1,666.5
$
1,887.1
Cost of sales
1,539.1
1,501.6
1,527.8
Income (loss) from operations
159.6
(56.0)
122.9
Income tax expense (benefit)
29.4
(23.8)
63.4
Net income (loss)
104.5
(49.1)
86.2
Effective July 16, 2024 (“Acquisition Date”), Kronos acquired the 50% joint venture interest in Louisiana
Pigment Company, L.P. (“LPC”) previously held by Venator Investments, Ltd. (“Venator”). Prior to the acquisition,
Kronos held a 50% joint venture interest in LPC and LPC was operated as a manufacturing joint venture between Kronos
and Venator. Kronos acquired the 50% joint venture interest in LPC for consideration of $185 million less a working
F-19
capital adjustment. An additional earn-out payment of up to $15 million may be required if Kronos’ aggregate consolidated
net income before interest expense, income taxes and depreciation and amortization expense, or EBITDA, during a two-
year period comprising calendar years 2025 and 2026 exceed certain thresholds as described below. Kronos accounted for
the acquisition of the interest in LPC as a business combination and, as a result of obtaining full control, LPC became a
wholly-owned subsidiary of Kronos. Obtaining control of LPC and its estimated additional 78,000 metric tons annually of
TiO2 production volume allows Kronos to better serve the North American TiO2 marketplace. The acquisition was financed
through a borrowing of $132.1 million under Kronos’ Global Revolver and the remainder paid with Kronos’ cash on hand.
The potential earn-out payment of up to $15 million is based on Kronos’ aggregate consolidated EBITDA tiers for 2025
and 2026 of $650 million and $730 million, with $5 million of the earn-out payable if Kronos achieves $650 million in
aggregate consolidated EBITDA, and a maximum of $15 million payable if aggregate EBITDA is $730 million or greater
for the period. If Kronos achieves aggregated consolidated EBITDA between $650 million and $730 million, the payment
of the additional $10 million is prorated between the two targets. The earn-out is payable at the earliest in April 2027. The
estimated fair value of the earn-out at the Acquisition Date was $4.2 million and was determined using a weighted
probability of potential outcomes based on estimated future EBITDA and volatility factors, among other variables and
estimates. Kronos recognized a pre-tax gain of approximately $64.5 million in the third quarter of 2024, representing the
difference between the $178.2 million estimated fair value of its existing ownership interest in LPC at the Acquisition
Date and its aggregate $113.7 million carrying value at the Acquisition Date.
Note 7 – Goodwill:
All of our goodwill is related to our component products operations and was generated from CompX’s
acquisitions of certain business units. There have been no changes in the carrying amount of our goodwill during the past
three years.
We assign goodwill based on the reporting unit (as that term is defined in ASC Topic 350-20-20 Goodwill) which
corresponds to CompX’s security products operations. We test for goodwill impairment at the reporting unit level. In
accordance with ASC 350-20-35, we test for goodwill impairment during the third quarter of each year or when
circumstances arise that indicate an impairment might be present.
In 2022, 2023 and 2024, our goodwill was tested for impairment only in the third quarter of each year in
connection with our annual testing. No impairment was indicated as part of such annual review of goodwill. As permitted
by GAAP, during 2022, 2023 and 2024 we used the qualitative assessment of ASC 350-20-35 for our annual impairment
test and determined it was not necessary to perform the quantitative goodwill impairment test. Prior to 2022, all of the
goodwill related to CompX’s marine components operations (which aggregated $10.1 million) was impaired, and all of
the goodwill related to our wholly-owned subsidiary EWI Re, Inc., (“EWI”) which was formerly an insurance brokerage
and risk management services company (which aggregated $6.4 million), was impaired. Our gross goodwill at
December 31, 2024 was $43.7 million.
Note 8 – Other assets, net:
December 31,
2023
2024
(In thousands)
Pension asset
$
—
$
354
Other
2,060
680
Total
$
2,060
$
1,034
F-20
Note 9 – Accrued and other current liabilities:
December 31,
2023
2024
(In thousands)
Employee benefits
$
11,290
$
10,302
Other
1,892
1,730
Total
$
13,182
$
12,032
Note 10 – Long-term debt:
In November 2016, we entered into a financing transaction with Valhi. Previously, and in contemplation of the
financing transaction described herein, we formed NLKW Holding, LLC (“NLKW”) and capitalized it with 35.2 million
shares of the common stock of Kronos held by us.
The financing transaction consisted of two steps. Under the first step, NLKW entered into a $50 million revolving
credit facility (the “Valhi Credit Facility”) pursuant to which NLKW can borrow up to $50 million from Valhi (with such
commitment amount subject to increase from time to time at Valhi’s sole discretion). Proceeds from any borrowings by
NLKW under the Valhi Credit Facility would be available for one or more loans from NLKW to us in accordance with
the terms of the second step of the financing transaction: a Back-to-Back Credit Facility, as described below. Outstanding
borrowings under the Valhi Credit Facility bear interest at the prime rate plus 1.875% per annum, payable quarterly, with
all amounts due on the maturity date. The maximum principal amount which may be outstanding from time-to-time under
the Valhi Credit Facility is limited to 50% of the amount determined by multiplying the number of shares of Kronos
common stock pledged by the most recent closing price of such security on the New York Stock Exchange. Borrowings
under the Valhi Credit Facility are collateralized by the assets of NLKW (consisting primarily of the shares of Kronos
common stock pledged) and 100% of the membership interest in NLKW held by us. The Valhi Credit Facility contains a
number of covenants and restrictions which, among other things, restrict NLKW’s ability to incur additional debt, incur
liens, and merge or consolidate with, or sell or transfer substantially all of NLKW’s assets to, another entity, and require
NLKW to maintain a minimum specified level of consolidated net worth. Upon an event of default, Valhi will be entitled
to terminate its commitment to make further loans to NLKW, to declare the outstanding loans (with interest) immediately
due and payable, and, in the case of certain insolvency events with respect to NLKW or us, to exercise its rights with
respect to the collateral. Such collateral rights include the right to purchase all of the shares of Kronos common stock
pledged at a purchase price equal to the aggregate market value of such stock (with such market value determined by an
independent third-party valuation provider), less amounts owing to Valhi under the Valhi Credit Facility, with up to 50%
of such purchase price being payable by Valhi in the form of an unsecured promissory note bearing interest at the prime
rate plus 2.75% per annum, payable quarterly, with all amounts due no later than five years from the date of purchase, and
with the remainder of such purchase price payable in cash at the date of purchase.
Contemporaneously with the entering into the Valhi Credit Facility, NLKW entered into a $50 million revolving
credit facility (the “Back-to-Back Credit Facility”) with us, pursuant to which we can borrow up to $50 million from
NLKW (with such commitment amount subject to increase from time to time at NLKW’s sole discretion). Proceeds from
any borrowings under the Back-to-Back Credit Facility would be available for our general corporate purposes, including
providing resources to assist us in the resolution of certain claims and contingent liabilities which may be asserted against
us. Outstanding borrowings under the Back-to-Back Credit Facility bear interest at the same rate and are payable on the
same maturity date as are borrowings by NLKW under the Valhi Credit Facility. Borrowings under the Back-to-Back
Credit Facility are on an unsecured basis; however, as a condition thereto, we pledged to Valhi as collateral for the Valhi
Credit Facility our 100% membership interest in NLKW. Any outstanding borrowings and interest on such borrowings
under the Back-to-Back Credit Facility are eliminated in the preparation of the Consolidated Financial Statements.
In November 2022, NLKW and Valhi entered into a first amendment to the Valhi Credit Facility to extend the latest
maturity date (and consequently the latest borrowing date) under the Valhi Credit Facility from December 31, 2023 to
December 31, 2030; and NLKW and NL entered into a first amendment to the Back-to-Back Credit Facility to extend the latest
F-21
maturity date (and consequently the latest borrowing date) under the Back-to-Back Credit Facility from December 31, 2023 to
December 31, 2030. The related collateral arrangements remained unchanged by these amendments.
We had outstanding borrowings under the Valhi Credit Facility of $.5 million as of December 31, 2023 and 2024.
The interest rate as of December 31, 2024 was 9.4% and the average interest rate for the year then ended was 10.2%. See
Note 16. NLKW is in compliance with all of the covenants contained in the Valhi Credit Facility at December 31, 2024.
Note 11 – Employee benefit plans:
Defined contribution plans – We maintain various defined contribution pension plans. Company contributions
are based on matching or other formulas. Defined contribution plan expense approximated $3.9 million in each of 2022
and 2023 and $3.5 million in 2024.
Defined benefit pension plans – We maintain a defined benefit pension plan in the U.S. As a result of the spin-
off of Kronos in 2003, Kronos participates in our pension plan. Using participant data, we account for our portion of the
combined pension plan as if it were a separate pension plan from the portion in which Kronos participates. As a result of
the LPC acquisition in July 2024 (see Note 6), Kronos acquired the LPC defined benefit pension plan, which was
overfunded on the Acquisition Date. Effective December 31, 2024, the LPC defined benefit pension plan was merged into
our combined U.S. pension plan. See Note 16. Because we account for our portion of the combined pension plan separately,
the plan merger did not impact our Consolidated Financial Statements. The benefits under our defined benefit pension plan
are based upon years of service and employee compensation. The plan is closed to new participants, and no additional
benefits accrue to existing plan participants. Our funding policy is to contribute annually the minimum amount required
under ERISA regulations plus additional amounts as we deem appropriate.
We previously maintained a defined benefit pension plan in the U.K. related to a former disposed U.K. business
unit. In accordance with applicable U.K. pension regulations, we entered into an agreement in March 2021 for the bulk
annuity purchase, or “buy-in”, with a specialist insurer of defined benefit pension plans. Following the buy-in, individual
policies replaced the bulk annuity policy in a “buy-out” which was completed as of May 1, 2023. The buy-out was
completed with existing plan funds. At the completion of the buy-out, the assets and liabilities of the U.K. pension plan
were removed from our Consolidated Financial Statements and a non-cash pension plan termination loss of $4.9 million
was recognized in the second quarter of 2023.
We do not expect to make any contributions to our defined benefit pension plan during 2025. Benefit payments
to all plan participants out of plan assets are expected to be the equivalent of:
Years ending December 31,
Amount
(In thousands)
2025
$
2,886
2026
2,902
2027
2,886
2028
2,863
2029
2,859
Next 5 years
13,584
F-22
The funded status of our defined benefit pension plans is presented in the table below.
December 31,
2023
2024
(In thousands)
Change in projected benefit obligations ("PBO"):
Benefit obligations at beginning of the year
$
36,090
$
29,438
Interest cost
1,619
1,385
Plan settlement
(5,537)
—
Actuarial (gains) losses
265
(1,345)
Change in currency exchange rates
116
—
Benefits paid
(3,115)
(2,912)
Benefit obligations at end of the year
29,438
26,566
Change in plan assets:
Fair value of plan assets at beginning of the year
34,126
27,810
Actual return on plan assets
2,009
899
Employer contributions
196
1,005
Plan settlement
(5,537)
—
Change in currency exchange rates
131
—
Benefits paid
(3,115)
(2,912)
Fair value of plan assets at end of year
27,810
26,802
Funded status
$
(1,628)
$
236
Amounts recognized in the balance sheet:
Noncurrent pension asset
$
—
$
354
Accrued pension costs:
Current
(57)
(42)
Noncurrent
(1,571)
(76)
Total
(1,628)
236
Accumulated other comprehensive loss - actuarial losses, net
21,802
19,877
Total
$
20,174
$
20,113
Accumulated benefit obligations ("ABO")
$
29,438
$
26,566
The amounts shown in the table above for actuarial (gains) losses at December 31, 2023 and 2024 have not been
recognized as components of our periodic defined benefit pension cost as of those dates. These amounts will be recognized
as components of our periodic defined benefit cost in future years. These amounts, net of deferred income taxes, are
recognized in our accumulated other comprehensive loss at December 31, 2023 and 2024.
Our defined benefit pension plans increased from a total net underfunded status of $1.6 million at December 31,
2023 to a total net overfunded status of $.2 million at December 31, 2024 due to the change in our PBO exceeding the
change in our plan assets during 2024. The decrease in our PBO in 2024 was primarily attributable to higher actuarial
gains due primarily to the increase in the discount rate.
F-23
The table below details the changes in other comprehensive income (loss) during 2022, 2023 and 2024.
Years ended December 31,
2022
2023
2024
(In thousands)
Changes in plan assets and benefit obligations recognized in
other comprehensive income:
Net actuarial gain (loss) arising during the year
$
(1,034)
$
(574)
$
904
Plan settlement
104
4,911
—
Amortization of unrecognized net actuarial gain
1,664
1,391
1,330
Total
$
734
$
5,728
$
2,234
The components of our net periodic defined benefit pension cost are presented in the table below. The amounts
shown below for recognized actuarial losses in 2022, 2023 and 2024, net of deferred income taxes, were recognized as a
component of our accumulated other comprehensive loss at December 31, 2021, 2022 and 2023, respectively.
Years ended December 31,
2022
2023
2024
(In thousands)
Net periodic pension cost:
Interest cost
$
1,138
$
1,619
$
1,385
Expected return on plan assets
(1,552)
(1,452)
(1,340)
Plan settlement
104
4,911
—
Recognized actuarial losses
1,664
1,391
1,330
Total
$
1,354
$
6,469
$
1,375
Certain information concerning our defined benefit pension plans (including information concerning certain plans
for which ABO exceeds the fair value of plan assets as of the indicated date) is presented in the table below. As discussed
above, our U.K. plan was terminated in the second quarter of 2023.
December 31,
2023
2024
(In thousands)
Plans for which the ABO exceeds plan assets:
PBO
$
29,438
$
118
ABO
29,438
118
Fair value of plan assets
27,810
—
The weighted-average discount rate assumptions used in determining the actuarial present value of our benefit
obligations as of December 31, 2023 and 2024 are 5.0% and 5.5%, respectively. Such weighted-average rates were
determined using the projected benefit obligations at each date. Since our plans are closed to new participants and no new
additional benefits accrue to existing plan participants, assumptions regarding future compensation levels are not
applicable. Consequently, the accumulated benefit obligations for all of our defined benefit pension plans were equal to
the projected benefit obligations at December 31, 2023 and 2024.
F-24
The weighted-average rate assumptions used in determining the net periodic pension cost for 2022, 2023 and
2024 are presented in the table below. Such weighted-average discount rates were determined using the projected benefit
obligations as of the beginning of each year and the weighted-average long-term return on plan assets was determined
using the fair value of plan assets as of the beginning of each year.
Years ended December 31,
Rate
2022
2023
2024
Discount rate
2.3 %
5.1 %
5.0 %
Long-term rate of return on plan assets
3.3 %
4.9 %
5.0 %
Variances from actuarially assumed rates will result in increases or decreases in accumulated pension obligations,
pension expense and funding requirements in future periods.
In determining the expected long-term rate of return on our U.S. and our previously maintained non-U.S. plan
asset assumptions, we consider the long-term asset mix (e.g., equity vs. fixed income) for the assets for each of our plans
and the expected long-term rates of return for such asset components. In addition, we receive third-party advice about
appropriate long-term rates of return. In the U.S. we currently have a plan asset target allocation of 17% to equity securities,
80% to fixed income securities, and the remainder is allocated to other strategies. The expected long-term rate of return
for such investments is approximately 7% and 5%, respectively (before plan administrative expenses). Approximately
99% of our U.S. plan assets are invested in funds that are valued at net asset value (“NAV”) and, in accordance with ASC
820-10, not subject to classification in the fair value hierarchy.
We regularly review our actual asset allocation for each plan and will periodically rebalance the investments in
each plan to more accurately reflect the targeted allocation and/or maximize the overall long-term return when considered
appropriate.
The composition of our pension plan assets by fair value level at December 31, 2023 and 2024 is shown in the
tables below.
Fair Value Measurements
Quoted prices
Significant other
Significant
in active
observable
unobservable Assets measured
Total markets (Level 1) inputs (Level 2) inputs (Level 3)
at NAV
(In thousands)
December 31, 2023:
U.S.:
Equities
$ 7,786 $
— $
— $
— $
7,786
Fixed income
18,733
—
—
—
18,733
Cash and other
1,291
489
—
41
761
Total
$ 27,810 $
489 $
— $
41 $
27,280
F-25
Fair Value Measurements
Quoted prices
Significant other
Significant
in active
observable
unobservable Assets measured
Total markets (Level 1) inputs (Level 2) inputs (Level 3)
at NAV
(In thousands)
December 31, 2024:
U.S.:
Equities
$ 4,503 $
— $
— $
— $
4,503
Fixed income
21,141
—
—
—
21,141
Cash and other
1,158
290
—
48
820
Total
$ 26,802 $
290 $
— $
48 $
26,464
Note 12 – Other noncurrent liabilities:
December 31,
2023
2024
(In thousands)
Reserve for uncertain tax positions
$
3,707
$
4,778
OPEB
524
451
Insurance claims and expenses
579
685
Other
264
269
Total
$
5,074
$
6,183
Our reserve for uncertain tax positions is discussed in Note 14.
Note 13 – Revenue recognition:
The following table disaggregates our net sales by reporting unit, which are the categories that depict how the
nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors (as required by ASC
606).
Years ended December 31,
2022
2023
2024
(In thousands)
Net sales:
Security Products
$
114,519
$
121,182
$
115,243
Marine Components
52,043
40,105
30,698
Total
$
166,562
$
161,287
$
145,941
F-26
Note 14 – Income taxes:
The provision for income taxes and the difference between the provision for income taxes and the amount that
would be expected using the U.S. federal statutory income tax rate are presented below.
Years ended December 31,
2022
2023
2024
(In thousands)
Expected tax expense (benefit), at U.S. federal statutory
income tax rate of 21%
$
8,241
$
(1,348)
$
17,497
Nontaxable dividends received from Kronos
(5,621)
(5,621)
(3,550)
U.S. state income taxes and other, net
165
(32)
110
Income tax expense (benefit)
$
2,785
$
(7,001)
$
14,057
Components of income tax expense (benefit):
Currently payable
$
495
$
307
$
340
Deferred income tax expense (benefit)
2,290
(7,308)
13,717
Income tax expense (benefit)
$
2,785
$
(7,001)
$
14,057
Comprehensive provision (benefit) for income taxes allocable to:
Net income (loss)
$
2,785
$
(7,001)
$
14,057
Other comprehensive income (loss):
Currency translation
(1,849)
241
(2,207)
Pension plans
6,542
(291)
1,251
Other
69
(35)
(28)
Total
$
7,547
$
(7,086)
$
13,073
In accordance with GAAP, we recognize deferred income taxes on our undistributed equity in earnings (losses)
of Kronos. Because we and Kronos are part of the same U.S. federal income tax group, any dividends we receive from
Kronos are nontaxable to us. Accordingly, we do not recognize and we are not required to pay income taxes on dividends
from Kronos. We received aggregate dividends from Kronos of $26.8 million in each of 2022 and 2023, and $16.9 million
2024. See Note 6.
The components of the net deferred tax liability at December 31, 2023 and 2024 are summarized in the following
table.
December 31,
2023
2024
Assets
Liabilities
Assets
Liabilities
(In thousands)
Tax effect of temporary differences related to:
Marketable securities
$
— $
(3,586) $
— $
(5,652)
Goodwill
—
(1,693)
—
(1,693)
Accrued environmental liabilities
21,332
—
14,406
—
Other accrued liabilities and deductible differences
2,206
—
1,981
—
Other taxable differences
—
(3,859)
—
(5,733)
Investment in Kronos Worldwide, Inc.
— (56,133)
— (56,700)
Adjusted gross deferred tax assets (liabilities)
23,538 (65,271)
16,387 (69,778)
Netting of items by tax jurisdiction
(23,538)
23,538 (16,387)
16,387
Net noncurrent deferred tax liability
$
— $ (41,733) $
— $ (53,391)
F-27
At December 31, 2024, we have a deferred tax asset relating to our NOL carryforwards for federal income tax
purposes of $2.5 million all of which have an indefinite carryforward period subject to an 80% annual usage limitation.
Our deferred tax asset for such NOL carryforward is shown net of a portion of our uncertain tax positions as discussed
below.
At December 31, 2022, 2023, and 2024, the gross amount of our uncertain tax positions (exclusive of the effect
of interest and penalties) was $7.3 million, and this amount has not changed during the past three years. Previously, we
made certain pro-rata distributions to our stockholders in the form of Kronos common stock and we recognized a taxable
gain related to such distributions. Our uncertain tax positions are attributable to such prior period distribution of Kronos
common stock. As discussed in Note 1, we are part of the Contran Tax Group and we have not paid this liability because
Contran has not paid the liability to the applicable tax authority. This liability would be payable by Contran to the
applicable tax authority only if the previously distributed shares of Kronos common stock were to be sold or otherwise
disposed outside of the Contran Tax Group. At December 31, 2024, $2.5 million of our uncertain tax position is classified
as a component of our noncurrent deferred tax liability. If our uncertain tax position at December 31, 2024 was recognized,
a benefit of $7.3 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 believe we have adequate accruals for additional taxes and related interest expense which could ultimately
result from tax examinations. We believe the ultimate disposition of tax examinations should not have a material adverse
effect on our consolidated financial position, results of operations or liquidity.
We and Contran file income tax returns in U.S. federal and various state and local jurisdictions. Our U.S. income
tax returns prior to 2021 are generally considered closed to examination by applicable tax authorities.
Income tax matters related to Kronos
Kronos periodically reviews its deferred tax assets (“DTA”) to determine if a valuation allowance is required. At
December 31, 2024, Kronos has German corporate and trade net operating loss (“NOL”) carryforwards of $447.3 million
(DTA of $70.8 million) and $40.1 million (DTA of $4.4 million), respectively; Belgian corporate NOL carryforwards of
$72.0 million (DTA of $18.0 million) and Canadian corporate and provincial NOL carryforwards of $28.9 million (DTA
of $4.3 million) and $31.1 million (DTA of $3.6 million), respectively.
Prior to December 31, 2024, and using all available evidence, Kronos had concluded that no deferred income tax
asset valuation allowance is required to be recognized with respect to such carryforwards, principally because (i) such
carryforwards have lengthy carryforward periods (the German and Belgian carryforwards may be carried forward
indefinitely and the Canadian carryforwards may be carried forward 20 years), (ii) Kronos has utilized a portion of such
carryforwards during the most recent three-year period and (iii) Kronos currently expects to utilize the remainder of such
carryforwards over the long term. With regards to Kronos’ Belgian DTA, given its operating results during the fourth
quarter of 2024 and its current expectations for 2025 in that jurisdiction, Kronos does not have sufficient positive evidence
to overcome the significant negative evidence of having twelve quarters of cumulative losses. Accordingly, at
December 31, 2024, Kronos concluded that it was required to recognize a non-cash deferred income tax asset valuation
allowance of $8.2 million under the more-likely-than-not recognition criteria with respect to its Belgian DTA. At
December 31, 2024, Kronos continues to conclude no valuation allowance is required to be recognized for its German and
Canadian DTAs although prior to the complete utilization of such carryforwards, if Kronos were to generate additional
losses in its German or Canadian operations for an extended period of time, or if applicable laws were to change such that
the carryforward periods were more limited, it is possible that it might conclude the benefit of such carryforwards would
no longer meet the more-likely-than-not recognition criteria, at which point Kronos would be required to recognize a
valuation allowance against some or all of the then-remaining tax benefit associated with the carryforwards.
The 2017 Tax Act limited Kronos’ business interest expense to the sum of its business interest income and 30%
of its adjusted taxable income as defined in the Tax Act. Any business interest expense disallowed as a deduction as a
result of the limitation may be carried forward indefinitely. At December 31, 2023 and December 31, 2024, Kronos has
F-28
recorded deferred tax assets of $3.5 million and $13.3 million, respectively, for the carryforwards associated with the
nondeductible portion of its interest expense and has concluded it is required to recognize a valuation allowance for such
deferred tax asset under the more-likely-than-not recognition criteria. During 2024, Kronos recognized a non-cash deferred
income tax expense of $5.7 million with respect to the valuation allowance recorded on a portion of its additional interest
expense carryforwards not benefitted by future reversals of existing deferred tax liabilities.
Prior to the enactment of the 2017 Tax Act, the undistributed earnings of Kronos’ European subsidiaries were
deemed to be permanently reinvested (Kronos had not made a similar determination with respect to the undistributed
earnings of its Canadian subsidiary). Pursuant to the one-time repatriation tax (Transition Tax) provisions of the 2017 Tax
Act which imposed a one-time repatriation tax on post-1986 undistributed earnings, Kronos recognized current income
tax expense of $74.5 million and elected to pay such tax in annual installments over an eight-year period beginning in
2018. At December 31, 2024 the balance of its unpaid Transition Tax is $18.6 million, with the remaining payment due in
2025.
On December 10, 2024, the Department of the Treasury and the Internal Revenue Service released final currency
regulations under §987 and related rules (the “2024 Final Regulations”). The 2024 Final Regulations generally apply to
tax years beginning after December 31, 2024, and include transition rules that require Kronos to compute a pretransition
gain or loss for currency translation related to the operations, assets and liabilities of its non-U.S. qualified business units.
Pursuant to the 2024 Final Regulations, Kronos has calculated a pretransition gain of $77.1 million and, accordingly, its
income tax expense in 2024 includes a non-cash deferred income tax expense of $16.5 million recognized in the fourth
quarter.
Tax authorities are examining certain of Kronos’ U.S. and non-U.S. tax returns and may propose tax deficiencies,
including penalties and interest. Because of the inherent uncertainties involved in settlement initiatives and court and tax
proceedings, Kronos cannot guarantee that these tax matters, if any, will be resolved in Kronos’ favor, and therefore its
potential exposure, if any, is also uncertain. Kronos believes it has adequate accruals for additional taxes and related
interest expense which could ultimately result from tax examinations. Kronos believes the ultimate disposition of tax
examinations should not have a material adverse effect on its consolidated financial position, results of operations or
liquidity.
Note 15- Stockholders’ equity:
Long-term incentive compensation plan – Prior to 2022, our board of directors adopted a plan that provided for
the award of stock to our board of directors, and up to a maximum of 200,000 shares could be awarded. We awarded
15,000 shares in 2022 and 17,750 shares in 2023 under this plan. In February 2023, our board of directors voted to replace
the existing director stock plan with a new plan that would provide for the award of stock to non-employee members of
our board of directors, and up to a maximum of 200,000 shares could be awarded. The new plan was approved at our May
2023 shareholder meeting, and the prior director stock plan terminated effective June 30, 2023. We awarded 14,250 shares
in 2024 under the new plan. At December 31, 2024, 185,750 shares were available for future award under this new plan.
Long-term incentive compensation plans of subsidiaries and affiliates – CompX and Kronos each have a share-
based incentive compensation plan pursuant to which an aggregate of up to 200,000 shares of their common stock can be
awarded to members of their board of directors. At December 31, 2024, Kronos had 87,800 shares available for award and
CompX had 119,650 shares available for award.
Dividends – Our board of directors approved and we paid quarterly dividends per share to stockholders of $.07
in each of 2022 and 2023 aggregating $13.7 million in each year and $.08 in 2024 aggregating $15.6 million. In addition,
our board of directors declared special dividends on our common stock which totaled $17.1 million ($.35 per share) that
was paid on August 31, 2022 and $21.0 million ($.43 per share) that was paid on August 29, 2024. The declaration and
payment of future dividends, and the amount thereof, is discretionary and is dependent upon our financial condition, cash
requirements, contractual obligations and restrictions and other factors deemed relevant by our board of directors. The
amount and timing of past dividends is not necessarily indicative of the amount or timing of any future dividends which
might be paid. There are currently no contractual restrictions on the amount of dividends which we may pay.
F-29
Accumulated other comprehensive loss – Changes in accumulated other comprehensive loss attributable to NL
stockholders, including amounts resulting from our investment in Kronos Worldwide (see Note 6), are presented in the
table below.
Years ended December 31,
2022
2023
2024
(In thousands)
Accumulated other comprehensive loss, net of tax:
Currency translation:
Balance at beginning of period
$ (171,235)
$ (178,191)
$ (177,119)
Other comprehensive income (loss)
(6,956)
1,072
(8,304)
Balance at end of period
$ (178,191)
$ (177,119)
$ (185,423)
Defined benefit pension plans:
Balance at beginning of period
$
(68,468)
$
(43,857)
$
(41,373)
Other comprehensive income (loss):
Amortization of prior service cost and net losses included in
net periodic pension cost
3,592
1,436
1,504
Net actuarial gain (loss) arising during the year
20,881
(3,094)
3,134
Plan settlement
138
4,142
69
Balance at end of period
$
(43,857)
$
(41,373)
$
(36,666)
OPEB plans:
Balance at beginning of period
$
(1,053)
$
(893)
$
(1,114)
Other comprehensive income (loss):
Amortization of net gain included in net periodic
OPEB cost
(369)
(357)
(195)
Net actuarial gain arising during the year
529
136
42
Balance at end of period
$
(893)
$
(1,114)
$
(1,267)
Marketable debt securities:
Balance at beginning of period
$
—
$
(50)
$
(15)
Other comprehensive income (loss) - unrealized gain (loss)
arising during the period
(50)
35
15
Balance at end of period
$
(50)
$
(15)
$
—
Total accumulated other comprehensive loss:
Balance at beginning of period
$ (240,756)
$ (222,991)
$ (219,621)
Other comprehensive income (loss)
17,765
3,370
(3,735)
Balance at end of period
$ (222,991)
$ (219,621)
$ (223,356)
See Note 5 for further discussion on our marketable securities and Note 11 for amounts related to our defined
benefit pension plans.
Other – During 2022, we purchased 2,000 shares of our common stock from Kronos for a nominal amount in a
private transaction that was approved in advance by our independent directors. We cancelled these treasury shares and
allocated their cost to common stock at par value and additional paid-in capital.
During 2022, CompX acquired 78,900 shares of its Class A common stock for an aggregate amount of
approximately $1.7 million under prior repurchase authorizations. Of these shares, 70,000 shares were purchased in a
market transaction, and 8,900 shares were purchased from two of its affiliates in two separate private transactions that
F-30
were also approved in advance by CompX’s independent directors. At December 31, 2024, 523,647 shares were available
for purchase under CompX’s prior repurchase authorizations.
Note 16 – Related party transactions:
We may be deemed to be controlled by Ms. Simmons and the Family Trust. See Note 1. 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. 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.
Current receivables and payables to affiliates are summarized in the table below:
December 31,
2023
2024
(In thousands)
Current receivables from affiliates:
Other receivables from affiliates
$
601
$
—
Income taxes receivable from Valhi
27
—
$
628
$
—
Current payables to affiliates:
Other payables to affiliates
$
634
$
513
Income taxes payable to Valhi
—
193
$
634
$
706
From time to time, we may have loans and advances outstanding between us and various related parties, pursuant
to term and demand notes. We generally enter into these loans and advances for cash management purposes. When we
loan funds to related parties, we are generally able to earn a higher rate of return on the loan than the lender would earn if
the funds were invested in other instruments and 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. While certain of such loans may be of a
lesser credit quality than cash equivalent instruments otherwise available to us, we believe that we have evaluated the
credit risks involved and reflected those credit risks in the terms of the applicable loans. NLKW had borrowings
outstanding of $.5 million as of December 31, 2023 and 2024 under the Valhi Credit Facility, and we incurred a nominal
amount of interest expense under such credit facility for the years ended December 31, 2022, 2023 and 2024. See Note 10.
In addition, prior to 2022, CompX entered into an unsecured revolving demand promissory note with Valhi under which,
as amended, CompX has agreed to loan Valhi up to $25 million. CompX’s loan to Valhi, as amended, bears interest at
prime plus 1.00%, payable quarterly, with all principal due on demand, but in any event no earlier than December 31,
2026. Loans made to Valhi at any time are at CompX’s discretion. At December 31, 2023 and 2024, the outstanding
principal balance receivable from Valhi under the promissory note was $10.6 million and $9.3 million, respectively.
Interest income (including unused commitment fees) on CompX’s loan to Valhi was $1.0 million in 2022, $1.2 million in
2023 and $1.0 million in 2024. In February 2024, Kronos entered into a $53.7 million subordinated, unsecured term loan
with Contran.
Under the terms of various intercorporate services agreements (ISAs) we enter into with Contran, employees of
Contran will provide certain management, tax planning, financial and administrative services to the Company on a fee
F-31
basis. Such fees are based on the compensation of individual Contran employees providing services for us and/or estimates
of time devoted to our affairs by such persons. Because of the number of companies affiliated with Contran, we believe
we benefit from cost savings and economies of scale gained by not having certain management, financial and
administrative staffs duplicated at each entity, thus allowing certain Contran employees to provide services to multiple
companies but only be compensated by Contran. We, CompX and Kronos negotiate fees annually and agreements renew
quarterly. The net ISA fees charged to us by Contran, (including amounts attributable to Kronos for all periods) aggregated
approximately $33.5 million in 2022, $30.8 million in 2023 and $32.2 million in 2024.
Contran and certain of its subsidiaries and affiliates, including us, purchase certain of their insurance policies and
risk management services as a group, with the costs of the jointly-owned policies and services being apportioned among
the participating companies. Tall Pines Insurance Company, a subsidiary of Valhi, underwrites certain insurance policies
for Contran and certain of its subsidiaries and affiliates, including us. Tall Pines purchases reinsurance from highly rated
(as determined by A.M. Best or other internationally recognized ratings agency) third-party insurance carriers for
substantially all of the risks it underwrites. Consistent with insurance industry practices, Tall Pines receives commissions
from the reinsurance underwriters and/or assesses fees for certain of the policies that it underwrites. During 2022, 2023
and 2024 we paid $24.3 million, $28.4 million and $29.1 million, respectively, under the group insurance program
(including amounts attributable to Kronos and LPC for all periods) which amounts principally represent insurance
premiums, including $18.2 million, $20.7 million and $21.4 million in 2022, 2023 and 2024, respectively, for policies
written by Tall Pines. Amounts paid under the group insurance program also include payments to insurers or reinsurers
for the reimbursement of claims within our applicable deductible or retention ranges that such insurers and reinsurers paid
to third parties on our behalf, as well as amounts for claims and risk management services and various other third-party
fees and expenses incurred by the program. We expect these relationships will continue in 2025.
With respect to certain of such jointly-owned policies, it is possible that unusually large losses incurred by one
or more insured party during a given policy period could leave the other participating companies without adequate
coverage under that policy for the balance of the policy period. As a result, and in the event that the available coverage
under a particular policy would become exhausted by one or more claims, Contran and certain of its subsidiaries and
affiliates, including us, have entered into a loss sharing agreement under which any uninsured loss arising because the
available coverage had been exhausted by one or more claims will be shared ratably by those entities that had submitted
claims under the relevant policy. We believe the benefits in the form of reduced premiums and broader coverage associated
with the group coverage for such policies justifies the risk associated with the potential for any uninsured loss.
Contran and certain of its subsidiaries, including us, participate in a combined information technology data
services program that Contran provides for primary data processing and failover. The program apportions its costs among
the participating companies. The aggregate amount Kronos paid to Contran for such services was $.3 million in 2022 and
$.4 million in each of 2023 and 2024. Under the terms of a sublease agreement between Contran and Kronos, Kronos
leases certain office space from Contran. Kronos paid Contran $.5 million in 2022, $.6 million in 2023 and $.7 million in
2024 for such rent and related ancillary services. We expect that these relationships with Contran will continue in 2025.
We are a party to a tax sharing agreement with Contran and Valhi providing for the allocation of tax liabilities
and tax payments as described in Note 1. 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. Valhi
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.
Effective December 31, 2024, the LPC defined benefit pension plan was merged into our U.S. combined defined
benefit pension plan. Under the terms of the merger, each of us and Kronos are contractually obligated to bear our
respective share of the merged plan costs, including any funding obligations, and we and Kronos each continue to account
for our respective portions of the merged plan as if it were a separate employee benefit plan. If the merged plan were to be
terminated in the future, Kronos would be entitled to all funding surplus attributable to its participants in the plan. In
February 2025, our board of directors approved the termination of the merged plan, with an effective date of June 30,
F-32
2025. We anticipate that the completion of the merged plan termination will occur in the second half of 2026, following
the receipt of all necessary regulatory approvals. Termination of the merged plan would permanently remove all plan
assets, liabilities and accumulated other comprehensive income (loss) from our financial statements.
Note 17 – Commitments and contingencies:
Lead pigment litigation
Our former operations included the manufacture of lead pigments for use in paint and lead-based paint. We, other
former manufacturers of lead pigments for use in paint and lead-based paint (together, the “former pigment
manufacturers”), and the Lead Industries Association (LIA), which discontinued business operations in 2002, have
previously been named as defendants in various legal proceedings seeking damages for personal injury, property damage
and governmental expenditures allegedly caused by the use of lead-based paints. Certain of these actions were filed by or
on behalf of states, counties, cities or their public housing authorities and school districts, and certain others were asserted
as class actions. We currently have no pending lead paint class action cases or pending lead paint cases brought by housing
authorities, school districts or other government entities.
In the matter titled County of Santa Clara v. Atlantic Richfield Company, et al. (Superior Court of the State of
California, County of Santa Clara, Case No. 1-00-CV-788657) on July 24, 2019, an order approving a global settlement
agreement entered into among all of the plaintiffs and the three defendants remaining in the case (the Sherwin Williams
Company, ConAgra Grocery Products and us) was entered by the court and the case was dismissed with prejudice. The
global settlement agreement provides that an aggregate $305 million will be paid collectively by the three co-defendants
in full satisfaction of all claims resulting in a dismissal of the case with prejudice and the resolution of (i) all pending and
future claims by the plaintiffs in the case, and (ii) all potential claims for contribution or indemnity between us and our co-
defendants in respect to the case. In the agreement, we expressly deny any and all liability and the dismissal of the case
with prejudice was entered by the court without a final judgment of liability entered against us. The settlement agreement
fully concludes this matter.
Under the terms of the global settlement agreement, each defendant must pay an aggregate $101.7 million to the
plaintiffs as follows: $25.0 million within sixty days of the court’s approval of the settlement and dismissal of the case,
and the remaining $76.7 million in six annual installments beginning on the first anniversary of the initial payment ($12.0
million for the first five installments and $16.7 million for the sixth installment). Our sixth installment due in September
2025 will be made with funds already on deposit at the court, which is included in current restricted cash on our
Consolidated Balance Sheets, that are committed to the settlement, including all accrued interest at the date of payment,
with any remaining balance to be paid by us (and any amounts on deposit in excess of the final payment would be returned
to us). Pursuant to the settlement agreement, we had placed an additional $9.0 million into an escrow account which was
previously included in noncurrent restricted cash on our Consolidated Balance Sheets. Following our fifth $12.0 million
installment made in September 2024, these funds became available for use and were reclassified as cash equivalents on
our Consolidated Balance Sheet.
For financial reporting purposes, using a discount rate of 1.9% per annum, we discounted the aggregate $101.7
million settlement to the estimated net present value of $96.3 million. We made the initial $25.0 million payment in
September 2019 and five annual installment payments of $12.0 million beginning in September 2020 and each September
thereafter through 2024. We recognized an aggregate accretion expense of $.9 million, $.7 million, and $.5 million in
2022, 2023, and 2024 respectively.
New cases may continue to be filed against us. 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
F-33
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.
Environmental matters and litigation
Our operations are governed by various environmental laws and regulations. Certain of our businesses are and
have been engaged in the handling, manufacture or use of substances or compounds that may be considered toxic or
hazardous within the meaning of applicable environmental laws and regulations. As with other companies engaged in
similar businesses, certain of our past and current operations and products have the potential to cause environmental or
other damage. We have implemented and continue to implement various policies and programs in an effort to minimize
these risks. Our policy is to maintain compliance with applicable environmental laws and regulations at all of our plants
and to strive to improve environmental performance. From time to time, we may be subject to environmental regulatory
enforcement under U.S. statutes, the resolution of which typically involves the establishment of compliance programs. It
is possible that future developments, such as stricter requirements of environmental laws and enforcement policies, could
adversely affect our production, handling, use, storage, transportation, sale or disposal of such substances. We believe all
of our facilities are in substantial compliance with applicable environmental laws.
Certain properties and facilities used in our former operations, including divested primary and secondary lead
smelters and former mining locations, are the subject of civil litigation, administrative proceedings or investigations arising
under federal and state environmental laws and common law. Additionally, in connection with past operating practices,
we are currently involved as a defendant, potentially responsible party (PRP) or both, pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act (CERCLA), and similar state laws in various governmental and private actions associated with waste
disposal sites, mining locations, and facilities that we or our predecessors, our subsidiaries or their predecessors currently
or previously owned, operated or used, certain of which are on the United States Environmental Protection Agency’s
(EPA) Superfund National Priorities List or similar state lists. These proceedings seek cleanup costs, damages for personal
injury or property damage and/or damages for injury to natural resources. 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. 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.
Obligations associated with environmental remediation and related matters are difficult to assess and estimate for
numerous reasons including the:
•
complexity and differing interpretations of governmental regulations,
•
number of PRPs and their ability or willingness to fund such allocation of costs,
•
financial capabilities of the PRPs and the allocation of costs among them,
•
solvency of other PRPs,
•
multiplicity of possible solutions,
•
number of years of investigatory, remedial and monitoring activity required,
•
uncertainty over the extent, if any, to which our former operations might have contributed to the conditions
allegedly giving rise to such personal injury, property damage, natural resource and related claims, and
•
number of years between former operations and notice of claims and lack of information and documents
about the former operations.
F-34
In addition, the imposition of more stringent standards or requirements under environmental laws or regulations,
new developments or changes regarding site cleanup costs or the allocation of costs among PRPs, solvency of other PRPs,
the results of future testing and analysis undertaken with respect to certain sites or a determination that we are potentially
responsible for the release of hazardous substances at other sites, could cause our expenditures to exceed our current
estimates. Actual costs could exceed accrued amounts or the upper end of the range for sites for which estimates have been
made, and costs may be incurred for sites where no estimates presently can be made. Further, additional environmental
and related matters may arise in the future. If we were to incur any future liability, this could have a material adverse effect
on our Consolidated Financial Statements, results of operations and liquidity.
We record liabilities related to environmental remediation and related matters (including costs associated with
damages for personal injury or property damage and/or damages for injury to natural resources) when estimated future
expenditures are probable and reasonably estimable. We adjust such accruals as further information becomes available to
us or as circumstances change. Unless the amounts and timing of such estimated future expenditures are fixed and
reasonably determinable, we generally do not discount estimated future expenditures to their present value due to the
uncertainty of the timing of the payout. We recognize recoveries of costs from other parties, if any, as assets when their
receipt is deemed probable.
We do not know and cannot estimate the exact time frame over which we will make payments for our accrued
environmental and related costs. The timing of payments depends upon a number of factors, including but not limited to
the timing of the actual remediation process; which in turn depends on factors outside of our control. At each balance sheet
date, we estimate the amount of our accrued environmental and related costs which we expect to pay within the next
twelve months, and we classify this estimate as a current liability. We classify the remaining accrued environmental costs
as a noncurrent liability.
The table below presents a summary of the activity in our accrued environmental costs during the past three years.
The amount charged to expense is included in corporate expense on our Consolidated Statements of Operations.
Years ended December 31,
2022
2023
2024
(In thousands)
Balance at the beginning of the period
$
92,940
$
92,358
$
91,106
Additions (deductions), net
486
558
(20,286)
Payments, net
(1,068)
(1,810)
(1,542)
Balance at the end of the period
$
92,358
$
91,106
$
69,278
Amounts recognized in the balance sheet:
Current liability
$
2,627
$
1,655
$
58,135
Noncurrent liability
89,731
89,451
11,143
Balance at the end of the period
$
92,358
$
91,106
$
69,278
On a quarterly basis, we evaluate the potential range of our liability for environmental remediation and related
costs at sites where we have been named as a PRP or defendant, including sites for which our wholly-owned environmental
management subsidiary, NL Environmental Management Services, Inc. (EMS), has contractually assumed our obligations.
At December 31, 2024, we had accrued approximately $69 million related to approximately 30 sites associated with
remediation and related matters we believe are at the present time and/or in their current phase reasonably estimable.
Excluding the $56.1 million environmental remediation settlement payment made in the first quarter of 2025 (as discussed
below), the upper end of the range of reasonably possible costs to us for remediation and related matters for which we
believe it is possible to estimate costs is approximately $38 million, including amounts currently accrued. These accruals
have not been discounted to present value.
F-35
On February 10, 2025, the United States District Court for the District of New Jersey entered an order approving
a consent decree relating to the Raritan Bay Slag Superfund Site (“RBS Site”) in Middlesex County, New Jersey. The
consent decree requires the United States Army Corps of Engineers (and other federal agencies), the State of New Jersey,
the Township of Old Bridge, NL, and twenty-two other private companies to pay a total of $151.1 million, plus interest,
to resolve all federal and state law claims for past and future response costs under CERCLA and the New Jersey Spill Act,
including natural resource damages, contribution, and indemnification, relating to the RBS Site. The consent decree is a
global settlement of all such claims relating to the RBS Site and resolves a lawsuit captioned United States of America, et
al. v. NL Industries, Inc., et al. (United States District Court for the District of New Jersey, Civil Action No. 3:24-cv-
08946) as well as all claims asserted by NL and the other settling parties in NL’s previously filed contribution lawsuit, NL
Industries, Inc. v. Old Bridge Township, et al., discussed above.
Under the terms of the consent decree, in the first quarter of 2025 we paid $56.1 million, plus $.5 million interest,
toward the global settlement and received approximately $9.6 million from the other private companies participating in
the settlement. We recognized aggregate income of approximately $31.4 million in 2024 related to the adjustment of our
environmental accrual related to this matter and the recording of a $9.6 million receivable for the funds received in the
first quarter of 2025 from the other private companies participating in the settlement. See Note 3.
We believe it is not reasonably possible to estimate the range of costs for certain sites. At December 31, 2024,
there were approximately five sites for which we are not currently able to reasonably estimate a range of costs. For these
sites, generally the investigation is in the early stages, and we are unable to determine whether or not we actually had any
association with the site, the nature of our responsibility, if any, for the contamination at the site, if any, and the extent of
contamination at and cost to remediate the site. The timing and availability of information on these sites is dependent on
events outside of our control, such as when the party alleging liability provides information to us. At certain of these
previously inactive sites, we have received general and special notices of liability from the EPA and/or state agencies
alleging that we, sometimes with other PRPs, are liable for past and future costs of remediating environmental
contamination allegedly caused by former operations. These notifications may assert that we, along with any other alleged
PRPs, are liable for past and/or future clean-up costs. As further information becomes available to us for any of these sites
which would allow us to estimate a range of costs, we would at that time adjust our accruals. Any such adjustment could
result in the recognition of an accrual that would have a material effect on our Consolidated Financial Statements, results
of operations and liquidity.
Insurance coverage claims
We are involved in certain legal proceedings with a number of our former insurance carriers regarding the nature
and extent of the carriers’ obligations to us under insurance policies with respect to certain lead pigment and asbestos
lawsuits. The issue of whether insurance coverage for defense costs or indemnity or both will be found to exist for our
lead pigment and asbestos litigation depends upon a variety of factors and we cannot assure you that such insurance
coverage will be available.
We have agreements with certain of our former insurance carriers pursuant to which the carriers reimburse us for
a portion of our future lead pigment litigation defense costs, and one such carrier reimburses us for a portion of our future
asbestos litigation defense costs. We are not able to determine how much we will ultimately recover from these carriers
for defense costs incurred by us because of certain issues that arise regarding which defense costs qualify for
reimbursement. While we continue to seek additional insurance recoveries, we do not know if we will be successful in
obtaining reimbursement for either defense costs or indemnity. Accordingly, we recognize insurance recoveries in income
only when receipt of the recovery is probable and we are able to reasonably estimate the amount of the recovery. In this
regard we received $.5 million and $1.4 million in insurance recoveries in 2023 and 2024, respectively. Recoveries in
2022 were nominal.
F-36
Other litigation
In addition to the litigation described above, we and our affiliates are also involved in various other
environmental, contractual, product liability, patent (or intellectual property), employment and other claims and disputes
incidental to present and former businesses. In certain cases, we have insurance coverage for these items, although we do
not expect additional material insurance coverage for environmental matters. We currently believe the disposition of all of
these various other claims and disputes (including asbestos-related claims), individually and in the aggregate, should not
have a material adverse effect on our consolidated financial position, results of operations or liquidity beyond the accruals
already provided.
Concentrations of credit risk
Component products are sold primarily in North America to original equipment manufacturers. The ten largest
customers related to our Component Products operations accounted for approximately 52% of total sales in each of 2022
and 2023 and 47% in 2024. One customer of CompX’s Security Products business accounted for 14% of total sales in
2022, 24% in 2023 (of which 11% related to a pilot project) and 21% in 2024. One customer of CompX’s Marine
Components business accounted for 12% of consolidated sales in 2022.
Note 18 – Financial instruments:
See Note 5 for information on how we determine fair value of our marketable securities.
The following table presents the financial instruments that are not carried at fair value but which require fair value
disclosure as of December 31, 2023 and 2024:
December 31, 2023
December 31, 2024
Carrying
Fair
Carrying
Fair
amount
value
amount
value
(In thousands)
Cash, cash equivalents and restricted cash
$ 141,382 $ 141,382 $ 184,190 $ 184,190
Due to their near-term maturities, the carrying amounts of accounts receivable and accounts payable are
considered equivalent to fair value.
Note 19 – Recent accounting pronouncements:
Adopted
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 segment disclosures currently required annually in interim periods. Public companies are also
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. See Note 2.
Pending Adoption
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 non-U.S. 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
F-37
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.
In November 2024, the FASB issued ASU No. 2024-03, Reporting Comprehensive Income – Expense
Disaggregation Disclosures. The ASU requires additional information about specific expense categories in the notes to
financial statements for both interim and annual reporting periods. The ASU is effective for us beginning with our 2027
Annual Report, and for interim reporting, in the first quarter of 2028, with early adoption permitted. We are in the process
of evaluating the additional disclosure requirements.
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction of
% of voting
incorporation
securities held at
NAME OF CORPORATION
or organization
December 31, 2024 (1)
CompX International Inc. (2)
Delaware
87
Kronos Worldwide, Inc. (3)
Delaware
31
EWI RE, Inc.
New York
100
NL Environmental Management Services, Inc.
New Jersey
100
NLKW Holding, LLC
New Jersey
100
(1) Held by the Registrant or the indicated subsidiary of the Registrant
(2) Subsidiaries of CompX International Inc. are incorporated by reference to Exhibit 21.1 of CompX’s Annual Report
on Form 10-K for the year ended December 31, 2024
(3) Subsidiaries of Kronos Worldwide, Inc. are incorporated by reference to Exhibit 21.1 of Kronos’ Annual Report on
Form 10-K for the year ended December 31, 2024
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NL Industries, Inc.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, TX 75240-2620
(972) 233-1700