VALHI
2024
ANNUAL REPORT
VALHI, INC. CORPORATE AND OTHER INFORMATION
Board of Directors
Loretta J. Feehan
Chair of Board (non-executive)
Financial Consultant
Michael S. Simmons
Vice Chairman, President and
Chief Executive Officer
Thomas E. Barry (a) (b)
Emeritus Professor of Marketing at
Southern Methodist University
Terri L. Herrington (a) (b)
Private Investor
Mary A. Tidlund (a)
Private Investor
Board Committees
(a) Audit Committee
(b) Management Development and
Compensation Committee
Corporate Officers
Michael S. Simmons
Vice Chairman, President and
Chief Executive Officer
Kristin B. McCoy
Executive Vice President, Tax
Andrew B. Nace
Executive Vice President and General
Counsel
Courtney J. Riley
Executive Vice President
Amy A. Samford
Executive Vice President and
Chief Financial Officer
John A. Sunny
Executive Vice President and
Chief Information Officer
Bryan A. Hanley
Senior Vice President and Treasurer
Patty S. Brinda
Vice President and Controller
Jane R. Grimm
Vice President, Secretary and
Associate General Counsel
Bart W. Reichert
Vice President, Internal Audit
Darci B. Scott
Vice President, Tax
Management of Subsidiaries
Kronos Worldwide Inc.
James M. Buch
Director, President and
Chief Executive Officer
NL Industries, Inc.
Courtney J. Riley
Director, President and
Chief Executive Officer
CompX International Inc.
Scott C. James
Director, President and Chief
Executive Officer
Basic Management, Inc. and
The LandWell Company
Lee Farris
President and Chief
Stock Exchanges
Valhiʼs common shares are listed on the
New York Stock Exchange under the
symbol “VHI.”
Kronosʼ common shares are listed on
the New York Stock Exchange under
the symbol “KRO.”
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.”
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 date
and time as set forth in the notice of the
meeting, proxy statement and form of
proxy that will be furnished to stock
holders 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
Valhi, 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
(877) 373-6374
http://www.computershare.com/investor
Visit us on the Web
http://www.valhi.net
Gina A. Norris (a)
Senior Vice President,
Partner Relations
Matthews Southwest
W. Hayden Mcllroy (a) (b)
Private Investor
Executive 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 1-5467
VALHI, INC.
(Exact name of Registrant as specified in its charter)
Delaware
87-0110150
(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
VHI
NYSE
No securities 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 (or for such
shorter period that the Registrant was required to file such reports), 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, smaller reporting company or an emerging growth company. See the definitions
of “large accelerated filer”, “accelerated filer,” smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Act.
Large accelerated filer
☐
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 2.4 million shares of voting common stock held by nonaffiliates of Valhi, Inc. as of June 30, 2024 (the last business day of the Registrant’s
most recently-completed second fiscal quarter) approximated $43.4 million.
Number of shares of the registrant’s common stock, $.01 par value per share, outstanding on March 3, 2025: 28,294,793.
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
Valhi, Inc. (NYSE: VHI) is primarily a holding company. We operate through our wholly-owned and majority-
owned subsidiaries, including NL Industries, Inc., Kronos Worldwide, Inc., CompX International Inc., Basic
Management, Inc. and The LandWell Company. Kronos (NYSE: KRO), NL (NYSE: NL) and CompX (NYSE American:
CIX) each file periodic reports with the U.S. Securities and Exchange Commission (SEC).
Our principal executive offices are located at Three Lincoln Center 5430 LBJ Freeway, Suite 1700, Dallas, Texas
75240-2620. Our telephone number is (972) 233-1700. We maintain a website at www.valhi.net.
Brief History
LLC Corporation, our legal predecessor, was incorporated in Delaware in 1932. We are the successor company
of the 1987 merger of LLC Corporation and another entity controlled by Contran Corporation. One of Contran’s wholly-
owned subsidiaries held approximately 91% of Valhi’s outstanding common stock at December 31, 2024. 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 us.
Key events in our history include:
•
1979 – Contran acquires control of LLC;
•
1981 – Contran acquires control of our other predecessor company;
•
1982 – Contran acquires control of Keystone Consolidated Industries, Inc., a predecessor to CompX;
•
1984 – Keystone spins-off an entity that includes what is to become CompX; this entity subsequently merges
with LLC;
•
1986 – Contran acquires control of NL, which at the time owns 100% of Kronos;
•
1987 – LLC and another Contran controlled company merge to form Valhi, our current corporate structure;
•
2003 – NL completes the spin-off of Kronos through the pro-rata distribution of Kronos shares to its
shareholders including us;
•
2004 through 2005 – NL distributes Kronos shares to its shareholders, including us, through quarterly
dividends;
•
2010 – Kronos completes a secondary offering of its common stock lowering our ownership of Kronos to
80%;
•
2012 – In December CompX completes the sale of its furniture components business;
•
2013 – In December we purchased an additional ownership interest in and became the majority owner of
Basic Management, Inc. (“BMI”) and The LandWell Company (“LandWell”);
•
2015 – The first homes in our Cadence planned community were completed by third-party builders and sold
to the public;
•
2020 – In December LandWell completed the first bulk sale of land within the Cadence planned community;
•
2022 – In July Basic Water Company (BWC) ceased water delivery due to a decline in water levels at Lake
Mead in Nevada and in September BWC filed for bankruptcy protection;
•
2023 – In November, upon the Bankruptcy Court’s approval of BWC’s plan of reorganization, BWC sold
substantially all of its assets. In December BMI sold Basic Power Company; and
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•
2024 – In July, Kronos acquired the remaining 50% joint venture interest in Louisiana Pigment Company,
L.P. previously held by Venator Investments, Ltd.
Unless otherwise indicated, references in this report to “we”, “us” or “our” refer to Valhi, Inc. and its subsidiaries,
taken as a whole.
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;
•
Our ability to realize expected cost savings from strategic and operational initiatives;
•
Our ability to integrate acquisitions, including Louisiana Pigment Company, L.P., into Kronos’ operations
and realize expected synergies and innovations;
•
The extent of the dependence of certain of our businesses on certain market sectors;
•
The cyclicality of certain of our businesses (such as Kronos’ titanium dioxide (“TiO2”) operations);
•
Customer and producer inventory levels;
•
Unexpected or earlier-than-expected industry capacity expansion (such as the TiO2 industry);
•
Changes in raw material and other operating costs (such as ore, zinc, brass, aluminum, steel and energy costs)
or the implementation of tariffs on imported raw materials;
•
Changes in the availability of raw materials (such as ore);
•
General global economic and political conditions that harm the worldwide economy, disrupt our supply
chain, increase material and energy costs, reduce demand or perceived demand for TiO2, component products
and land held for development or impair our ability to operate our facilities (including changes in the level
of gross domestic product in various regions of the world, 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;
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•
Competition from Chinese suppliers with less stringent regulatory and environmental compliance
requirements;
•
Customer and competitor strategies;
•
Potential difficulties in upgrading or implementing accounting and manufacturing software systems;
•
Potential consolidation of our competitors;
•
Potential consolidation of our customers;
•
The impact of pricing and production decisions;
•
Competitive technology positions;
•
Our ability to protect or defend intellectual property rights;
•
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);
•
The ability of our subsidiaries to pay us dividends;
•
Uncertainties associated with new product development and the development of new product features;
•
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;
•
The timing and amounts of insurance recoveries;
•
Our ability to renew or refinance credit facilities or other debt instruments in the future;
•
Changes in interest rates;
•
Our ability to maintain sufficient liquidity;
•
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, 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 NL, 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 NL’s lead pigment and environmental matters);
•
Our ability to comply with covenants contained in our revolving bank credit facilities;
•
Our ability to complete and comply with the conditions of our licenses and permits;
•
Changes in real estate values and construction costs in Henderson, Nevada; and
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•
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.
Segments
We currently have three consolidated reportable operating segments at December 31, 2024:
Chemicals
Kronos Worldwide, Inc.
Our Chemicals Segment is operated through our majority
control of Kronos. Kronos is a leading global producer and
marketer of value-added titanium dioxide pigments. TiO2 is
used to impart whiteness, brightness, opacity and durability
to a wide variety of products, including paints, plastics,
paper, fibers and ceramics. Additionally, 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.
Component Products
CompX International Inc.
We operate in the component products industry through our
majority control of CompX. CompX is a leading
manufacturer of security products used in the postal,
recreational transportation, office and institutional furniture,
cabinetry, tool storage, healthcare applications and a variety
of other industries. CompX is also a leading manufacturer
of wake enhancement systems, stainless steel exhaust
systems, gauges, throttle controls, trim tabs and related
hardware and accessories for the recreational marine
industry.
Real Estate Management and Development
Basic Management, Inc. and The LandWell Company
We operate in real estate management and development
through our majority control of BMI and LandWell. BMI
and LandWell own real property in Henderson, Nevada.
LandWell is engaged in efforts to develop certain land
holdings for commercial, industrial and residential purposes
in Henderson, Nevada. BMI previously, through wholly-
owned subsidiaries, also was responsible for the delivery of
water to the City of Henderson and various other users
through September 2022, and provided utility services to
certain industrial customers prior to December 2023.
For additional information about our segments and equity investments see “Part II – Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and Notes 2, 3 and 12 to our Consolidated
Financial Statements.
CHEMICALS SEGMENT – KRONOS WORLDWIDE, INC.
Business Overview
Our majority-controlled subsidiary, 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
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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. We believe Kronos 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 3 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, we believe 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 we believe 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. We
believe 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 we believe 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
Including its predecessors, Kronos has produced and marketed TiO2 in North America and Europe, its primary
markets, for over 100 years. We believe Kronos 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 %
We believe Kronos 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.
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
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TiO2 pigments represented approximately 90% of our Chemicals Segment’s net sales in 2024. Kronos and its agents and
distributors primarily sell its 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
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), BP (British
Pharmacopoeia) and the FDA (United States Food and Drug Administration).
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Kronos’ TiO2 business is enhanced by the following three complementary businesses, which comprised
approximately 10% of our Chemicals Segment’s 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 Kronos 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
the 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, 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.
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 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
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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 Notes 3 and 17 to our Consolidated Financial Statements.
As a result of the acquisition, for financial reporting purposes, the assets acquired and liabilities assumed of LPC
are included in our Consolidated Balance Sheet as of December 31, 2024, and the results of operations and cash flows of
LPC are included in our Consolidated Statement of Operations and Cash Flows beginning as of the Acquisition Date. See
Note 3 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 its 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.
(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. See Note 20
to our Consolidated Financial Statements.
-9-
(4)
Effective July 16, 2024, Kronos acquired the 50% interest in LPC it did not already own. See Note 3 to our
Consolidated Financial Statements.
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 it 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 negotiation
Iluka Resources Limited
Rutile ore
Renewal terms upon negotiation
In the past Kronos has been, and it expects that it will continue to be, successful in obtaining short-term and long-
term extensions to these and other existing supply contracts. 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.
-10-
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
Kronos’ 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,
evaluates the need for improvements in its product and process technology and identifies opportunities to develop new
product solutions for its customers. Kronos’ marketing staff closely coordinates with its sales force and technical specialists
to ensure the needs of its customers are met, and to help develop and commercialize new grades where appropriate.
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, its 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 its sales are now made through its direct sales force, sales agents and distributors. In
addition to its direct sales force and sales agents, many of Kronos’ sales agents also act as distributors to service its
customers in all regions. Kronos offers customer and technical service to customers who purchase its products through
distributors as well as to its larger customers serviced by its direct sales force.
Kronos sells to a diverse customer base with only one customer representing 10% or more of our Chemicals
Segment’s net sales in 2024 (Behr Process Corporation – 10%). Kronos’ largest ten customers accounted for approximately
39% of our Chemicals Segment’s net sales in 2024.
Neither our Chemicals Segment’s 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.
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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 Kronos’
product grades. Increasingly, Kronos is focused on providing pigments that are differentiated to meet specific customer
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, we believe Kronos 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 our 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 process
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 it 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 its 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 at 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.
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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.
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 its 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 Kronos’ 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 Kronos’ 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 our 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.
-13-
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
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 our consolidated financial
position, results of operations or liquidity. Kronos believes 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 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 Kronos’ 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.
COMPONENT PRODUCTS SEGMENT – COMPX INTERNATIONAL INC.
Business overview
Through our majority-controlled subsidiary, CompX, we are a leading manufacturer of engineered components
utilized in a variety of applications and industries. CompX manufactures security products including mechanical and
electrical cabinet locks and other locking mechanisms used in postal, recreational transportation, office and institutional
furniture, cabinetry, tool storage, healthcare applications and a variety of other industries. 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 various other industries. CompX continuously seeks to diversify into new
-14-
markets and identify new applications and features for its products, which it believes provides a greater potential for higher
rates of earnings growth as well as diversification of risk.
Manufacturing, operations and products
Security Products. CompX’s security products reporting unit manufactures mechanical and electrical cabinet
locks and other locking mechanisms used in a variety of applications including mailboxes, ignition systems, file cabinets,
desk drawers, tool storage cabinets, high security medical cabinetry, integrated inventory and access control secured
narcotics boxes, electronic circuit panels, storage compartments, gas station security, vending and cash containment
machines. CompX’s security products reporting unit has one manufacturing facility in Mauldin, South Carolina and one
in Grayslake, Illinois which is shared with its marine components reporting unit. 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 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.
Marine Components. CompX’s marine components reporting unit manufactures and distributes wake
enhancement systems, stainless steel exhaust components, gauges, throttle controls, trim tabs and related hardware and
accessories primarily for ski/wakeboard boats (towboats) and performance boats. CompX’s marine components reporting
unit has a facility in Neenah, Wisconsin and a facility in Grayslake, Illinois which is shared with its security products
reporting unit. 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:
•
wake enhancement devices, trim tabs, steering wheels, and billet aluminum accessories;
•
original equipment and aftermarket stainless steel exhaust headers, exhaust pipes, mufflers and other exhaust
components;
•
high performance gauges such as GPS speedometers and tachometers;
•
mechanical and electronic controls and throttles;
•
dash panels, LED indicators, and wire harnesses; and
•
grab handles, pin cleats and other accessories.
-15-
CompX operated three principal operating facilities at December 31, 2024 as shown below.
Reporting
Size
Facility Name
Unit
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
MC – Marine Components
(1) ISO-9001 registered facilities
Raw materials
CompX’s primary raw materials 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 Component Products Segment’s total cost of sales for 2024. Total material costs,
including purchased components, represented approximately 46% of our Component Products Segment’s 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
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 marine components
(including marine exhaust headers and pipes, wake enhancement systems, throttles and trim tabs), were relatively stable
in 2024 because CompX 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.
-16-
Patents and trademarks
CompX holds a number of patents relating to its component products, certain of which it believes to be important
to it 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™
National Cabinet Lock®
Fort Lock®
Timberline® Lock
Chicago Lock®
STOCK LOCKS®
KeSet®
TuBar®
StealthLock®
ACE®
ACE® II
CompX eLock®
Lockview®
System 64®
SlamCAM®
RegulatoR®
CompXpress®
GEM®
Turbine®
NARC iD®
NARC®
ecoForce®
Pearl®
CompX Marine®
Custom Marine®
Livorsi® Marine
Livorsi II® Marine
CMI Industrial®
Custom Marine® Stainless Exhaust
The #1 Choice in Performance Boating®
Mega Rim®
Race Rim®
Vantage View®
GEN-X®
Sales, marketing and distribution
A majority of our Component Products Segment’s 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.
Our Component Products Segment sells to a diverse customer base with only one customer representing 10% or
more of our Component Products Segment’s sales in 2024 (United States Postal Service – 21%). Our Component Products
Segment’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 reporting unit competes
against a number of domestic and foreign manufacturers. CompX’s marine components reporting unit 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 multiple years for its exemplary performance from Renewable Water Resources, an organization which
-17-
sets regulatory and water policies for the Mauldin facility’s geographic region. 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
and regulations have not significantly impacted CompX’s results; however, it is possible future laws and regulations may
require it to incur significant additional expenditures.
REAL ESTATE MANAGEMENT AND DEVELOPMENT SEGMENT – BASIC MANAGEMENT, INC. AND
THE LANDWELL COMPANY
Business overview
Our Real Estate Management and Development Segment consists of our majority owned subsidiaries, BMI and
LandWell. BMI and LandWell own real property in Henderson, Nevada. LandWell is actively engaged in efforts to
develop certain real estate in Henderson, Nevada including approximately 2,100 acres zoned for residential/planned
community purposes. BMI also was responsible for the delivery of water to the City of Henderson and various other users
through a water distribution system owned and operated by Basic Water Company (“BWC”), a wholly-owned subsidiary
of BMI, prior to BWC’s bankruptcy filing and deconsolidation on September 10, 2022. BMI also provided certain utility
services to an industrial park located in Henderson, Nevada prior to the sale of Basic Power Company (“BPC”), a wholly-
owned subsidiary of BMI, on December 1, 2023. See Notes 2 and 3 to our Consolidated Financial Statements and also
Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Real Estate
Management and Development”.
Operations and services
Over the years, LandWell and BMI have focused on developing and selling the land transferred to LandWell as
part of its formation in the early 1950’s as well as additional land holdings acquired by LandWell in the surrounding area
subsequent to LandWell’s formation (although BMI and LandWell have not had significant real property acquisitions
since 2004). Since LandWell’s formation, LandWell and BMI have had a history of successfully developing and selling
retail, light industrial, commercial and residential projects in the Henderson, Nevada area. LandWell is focused primarily
on the development of a large tract of land in Henderson zoned for residential/planned community purposes (approximately
2,100 acres). Planning and zoning work on the project began in 2007, but intensive development efforts of the
residential/planned community did not begin until 2013 (with LandWell acting as the master developer for all such
development efforts). LandWell markets and sells its residential/planned community to established home builders in tracts
of land that are pre-zoned for a maximum number of home lots. LandWell supports the builders’ efforts to market and sell
specific residential homes within its residential/planned community through joint marketing campaign and community
wide education efforts.
In addition, BMI, prior to BWC’s bankruptcy filing and deconsolidation on September 10, 2022, delivered water
to the City of Henderson and various other users through a water delivery system owned and operated by BWC, and prior
to the sale of BPC on December 1, 2023, provided certain utility services to an industrial park located in Henderson,
Nevada. Upon approval of the plan of reorganization by the bankruptcy court, substantially all BWC’s assets were sold in
November 2023. Following the sale of the BWC assets and BPC, BMI no longer provides services to the industrial park.
Sales
LandWell began marketing land for sale in the residential/planned community in December 2013 and at
December 31, 2024 approximately 20 saleable acres remain. In addition, LandWell has been actively marketing and selling
land zoned for commercial and light industrial use and at December 31, 2024 approximately 15 saleable acres remain.
Contracts for land sales are negotiated on an individual basis, and sales terms and prices will vary based on such factors
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as location (including location within a planned community), expected development work and individual buyer needs.
Although land may be under contract or land sales may be completed, we do not recognize revenue until we have satisfied
the criteria for revenue recognition. In most instances buyers can cancel an escrow agreement with no financial penalties
until shortly before the closing date. In some instances, LandWell will receive cash proceeds at the time the contract closes
and record deferred revenue for some or all of the cash amount received, with such deferred revenue being recognized in
subsequent periods. Substantially all the land in the residential/planned community has been sold; however, we expect the
development work to take two to three years to complete.
Our Real Estate Management and Development Segment’s sales consist principally of land sales and to a lesser
extent water (through September 2022) and electric delivery fees (prior to December 2023). During 2024 we had sales to
three customers that exceeded 10% of our Real Estate Management and Development Segment’s net sales (Lennar
Homes – 23%, Richmond American Homes – 16% and American Homes for Rent – 14%) related to land sales.
Competition
There are multiple new construction residential communities in the greater Las Vegas, Nevada area. LandWell
competes with these communities on the basis of location, planned community amenities and features, proximity to major
retail and recreational activities, and the perception of quality of life within the new community. We believe LandWell’s
residential/planned community is unique within the greater Las Vegas area due to its location and planned amenities which
include 490 acres of community and neighborhood parks and open space interconnected with major regional trails and
parks. LandWell markets its residential/planned community to builders who target first-time to middle market home buyers
to maximize sales.
Regulatory and environmental matters
LandWell and the subcontractors it uses must comply with many federal, state and local laws and regulations,
including zoning, density and development requirements, building, environmental, advertising, labor and real estate sales
rules and regulations. These regulations and requirements affect substantially all aspects of its land development. Our Real
Estate Management and Development Segment’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. We believe our Real Estate Management
and Development Segment is in substantial compliance with all such laws and regulations. To date, the costs of maintaining
compliance with such laws and regulations have not significantly impacted our results. We currently do not anticipate our
Real Estate Management and Development Segment will incur significant costs or expenses relating to such matters;
however, it is possible future laws and regulations may require it to incur significant additional expenditures.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)
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 our
facilities, we undertake various environmental sustainability programs, and we promote social responsibility and
volunteerism through programs designed to support and give back to the local communities in which we operate. Each of
our locations maintains site-specific safety programs and disaster response and business continuity plans. All
manufacturing facilities have detailed, site-specific emergency response procedures we 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
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operates adopt implementing legislation and Kronos will establish a compliance program to address any applicable
requirements.
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
Our operating results depend in part on our ability to successfully manage our human capital resources, including
attracting, identifying and retaining key talent. Each of our businesses has a well-trained labor force with a substantial
number of long-tenured employees. Our businesses provide competitive compensation and benefits to our employees,
some of which are offered under collective bargaining agreements. In addition to salaries, these programs, which vary by
segment and by country/region, can include annual bonuses, a defined benefit pension plan, 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. As a global company, we embrace diversity
and collaboration in our workforce and our business initiatives. We are an equal opportunity employer, and we 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
we operate. We promote a respectful, diverse and inclusive workplace in which all individuals are treated with respect and
dignity.
As of December 31, 2024, our Chemicals Segment employed the following number of people:
Europe
1,813
Canada
364
United States
347
Total
2,524
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
Kronos’ business, results of operations, financial position or liquidity.
As of December 31, 2024, our Component Products Segment and our Real Estate Management and Development
Segment employed 510 people and 16 people, respectively, all in the United States. We believe CompX’s and BMI’s labor
relations are good.
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Health and safety
Protecting the health and safety of our workforce, our customers, our business partners and the natural
environment is one of our core values. We are committed to maintaining a strong safety culture where all workers meet or
exceed required industry performance standards, and we continuously seek to improve occupational and process safety
performance. We are conducting our 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. We expect our
manufacturing facilities to produce our products safely and in 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. We require our employees to comply with such requirements. We provide our workers with the tools and
training necessary to make the appropriate decisions to prevent accidents and injuries. Each of our 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. We monitor 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
we operate. With this data we calculate incident frequency rates to assess the quality of our safety performance. At the
global level we also track overall safety performance. 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 method 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).
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, one in each of 2023 and 2024.
OTHER
NL Industries, Inc. – At December 31, 2024, NL owned approximately 87% of CompX and approximately 31%
of Kronos. NL also holds certain marketable securities and other investments.
Tremont LLC – Tremont is primarily a holding company through which we hold our 63% ownership interest in
BMI and our 77% ownership interest in LandWell. Our 77% ownership interest in LandWell includes 27% we hold through
our ownership of Tremont and 50% held by a subsidiary of BMI. Tremont also owns 100% of Tall Pines Insurance
Company, an insurance company that also holds certain marketable securities and other investments. See Note 17 to our
Consolidated Financial Statements.
In addition, we also own real property related to certain of our former business units.
Business Strategy – We routinely compare our liquidity requirements and alternative uses of capital against the
estimated future cash flows to be received from our subsidiaries and unconsolidated affiliates, and the estimated sales
value of those businesses. As a result, we have in the past, and may in the future, seek to raise additional capital, refinance
or restructure indebtedness, repurchase indebtedness in the market or otherwise, modify our dividend policy, consider the
sale of an interest in our subsidiaries, business units, marketable securities or other assets, or take a combination of these
or other steps, to increase liquidity, reduce indebtedness and fund future activities, which have in the past and may in the
future involve related companies. From time to time, we and our related entities consider restructuring ownership interests
among our subsidiaries and related companies. We expect to continue this activity in the future.
We and other entities that may be deemed to be controlled by or affiliated with Ms. Simmons and the Family
Trust routinely evaluate acquisitions of interests in, or combinations with, companies, including related companies, that
provide strategic opportunities and synergies or that we perceive to be undervalued in the marketplace. These companies
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may or may not be engaged in businesses related to our current businesses. In some instances we actively manage the
businesses we acquire with a focus on maximizing return-on-investment through cost reductions, capital expenditures,
improved operating efficiencies, selective marketing to address market niches, disposition of marginal operations, use of
leverage and redeployment of capital to more productive assets. In other instances, we have disposed of our interest in a
company prior to gaining control. We intend to consider such activities in the future and may, in connection with such
activities, consider issuing additional equity securities and increasing our indebtedness.
Website and Available Information – Our fiscal year ends December 31. We furnish our stockholders 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. Certain of our consolidated subsidiaries (Kronos, NL and
CompX) also file annual, quarterly and current reports, proxy and information statements and other information with the
SEC. We also make our annual reports 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.valhi.net as soon as reasonably practical after
they have been filed with the SEC. We also provide to anyone, without charge, copies of such documents upon written
request. 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 also be found on our website. Information contained on our website is not part
of this Annual Report.
The SEC maintains an internet website at www.sec.gov that contains reports, proxy and information statements
and other information regarding issuers, such as us, that file electronically with the SEC.
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 increased 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 our Chemicals Segment’s products are influenced by changing market
conditions for its products, which may result in reduced earnings or operating losses.
Our Chemicals Segment’s sales and profitability are largely dependent on the TiO2 industry. In 2024,
approximately 90% of our Chemicals Segment’s 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 our 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 our Chemicals Segment’s earnings and operating cash flows. Historically, the markets
for many of our Chemicals Segment’s products have experienced alternating periods of increasing and decreasing demand.
Relative changes in the selling prices for our Chemicals Segment’s products are one of the main factors that affect the
level of our Chemicals Segment’s profitability. In periods of increasing demand, our Chemicals Segment’s selling prices
and profit margins generally will tend to increase, while in periods of decreasing demand 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. Our Chemicals Segment’s ability to further increase capacity without additional investment in greenfield
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or brownfield capacity may be limited and as a result, our Chemicals Segment’s profitability may become even more
dependent upon the selling prices of its products.
The TiO2 industry is concentrated and highly competitive and our Chemical Segment faces price pressures in the
markets in which it operates, which may result in reduced earnings or operating losses.
The global market in which our Chemicals Segment operates 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
a number of factors, such as price, product quality and service. Our Chemicals Segment 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
our Chemicals Segment’s 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 our
Chemicals Segment’s competitors may be able to drive down prices for our Chemicals Segment’s products if their costs
are lower than our Chemicals Segment’s 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 our Chemicals Segment’s 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. Our Chemicals Segment’s competitors may be able to respond more quickly than
it can to new or emerging technologies and changes in customer requirements. Further, consolidation of our Chemicals
Segment’s competitors or customers may result in reduced demand for its products or make it more difficult for it to
compete with its competitors. The occurrence of any of these events could result in reduced earnings or operating losses.
Many of the markets in which our Component Products Segment operates are mature and highly competitive
resulting in pricing pressure and the need to continuously reduce costs.
Many of the markets our Component Products Segment serves are highly competitive, with a number of
competitors offering similar products. Our Component Products Segment 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, our Component Products Segment’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 our Component Products Segment’s products beyond its
ability to adjust costs because their costs are lower than our Component Products Segment’s, especially
products sourced from Asia.
•
Competitors’ financial, technological and other resources may be greater than our Component Products
Segment’s resources, which may enable them to more effectively withstand changes in market conditions.
•
Competitors may be able to respond more quickly than our Component Products Segment can to new or
emerging technologies and changes in customer requirements.
•
Consolidation of our Component Products Segment’s competitors or its customers in any of the markets in
which it competes may result in reduced demand for its products.
•
A reduction of our Component Products Segment’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 our Component Products Segment’s products.
•
Our Component Products Segment may not be able to sustain a cost structure that enables it to be competitive.
•
Customers may no longer value our Component Products Segment’s product design, quality or durability
over the lower cost products of its competitors.
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Our development of innovative features for current products is critical to sustaining and growing our Component
Product Segment’s sales.
Historically, our Component Products Segment’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. Our Component Products
Segment 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 our Component
Products Segment’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 our Component
Products Segment’s control. While our Component Products Segment will continue to emphasize the introduction of
innovative new product features that target customer-specific opportunities, we do not know if any new product features
our Component Products Segment introduces will achieve the same degree of success that it has achieved with its existing
products. At times our Component Products Segment works with new and existing customers on specific product
innovations. Sometimes it has a cost sharing arrangement for development efforts, although our Component Products
Segment may also fully bear the development costs. If a customer were to ultimately reject or abandon custom product
innovation efforts, our Component Products Segment may not be able to recover its development costs.
Higher costs or limited availability of our raw materials may reduce our earnings and decrease our liquidity. In
addition, many of our raw material contracts contain fixed quantities we are required to purchase.
For our Chemicals Segment, the number of sources for and availability of certain raw materials is specific to the
particular geographical region in which our facilities are located. Titanium-containing feedstocks suitable for use in our
Chemicals Segment’s 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 our Chemicals Segment purchases or mines its
raw material supplies could adversely affect raw material availability. If our Chemicals Segment or its worldwide vendors
are unable to meet their planned or contractual obligations and our Chemicals Segment is unable to obtain necessary raw
materials, it could incur higher costs for raw materials or may be required to reduce production levels. Our Chemicals
Segment experienced increases in feedstock costs in 2023 and 2024, for example, which affected its margins. Our
Chemicals Segment 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 our Chemicals Segment may not always be able to increase its selling prices to
offset the impact of any higher costs or reduced production levels.
Our Chemicals Segment has supply contracts that provide for its TiO2 feedstock requirements. While our
Chemicals Segment believes it will be able to renew these contracts, as necessary, we do not know if our Chemicals
Segment will be successful in renewing them or in obtaining long-term extensions to them prior to expiration. Our
Chemicals Segment’s 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, our Chemicals Segment has other long-term supply and service contracts that provide for various raw materials
and services. These agreements require it to purchase certain minimum quantities or services with minimum purchase
commitments aggregating approximately $67 million at December 31, 2024. Our Chemicals Segment’s commitments
under these contracts could adversely affect our financial results if it significantly reduces its production and is unable to
modify the contractual commitments.
Certain raw materials used in our Component Products Segment’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. Our Component Products Segment occasionally
enters into short-term raw material supply arrangements to mitigate the impact of future increases in commodity-related
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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 our Component Products Segment’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 conflict and public health crises such as pandemics, could prevent our Component
Products Segment’s vendors from being able to supply these components. Should our Component Products Segment’s
vendors not be able to meet their supply obligations or should it be otherwise unable to obtain necessary raw materials or
components, it 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 our Component Products Segment
may be unable to offset the higher costs with increases in its selling prices or reductions in other operating costs.
Kronos’ recent acquisition of the remaining 50% interest in LPC may not generate benefits we anticipate and may
otherwise affect our business and prospects.
Kronos recently completed the LPC acquisition in which it purchased the 50% ownership interest in LPC it did
not previously own. If Kronos experiences unforeseen technological, operational or other difficulties in managing the
integration of LPC as its wholly-owned subsidiary, Kronos 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, regulatory, or financial liabilities, our business, financial condition, results of operations and prospects
could be adversely affected.
Our Real Estate Management and Development Segment has significant development obligations related to a
residential/planned community in Henderson, Nevada. Increases in labor or construction costs related to the
completion of such development obligations may reduce our earnings and decrease our liquidity.
A substantial portion of the revenues and assets associated with our Real Estate Management and Development
Segment relates to certain land under development in Henderson, Nevada, including approximately 2,100 acres zoned for
residential/planned community purposes. A substantial majority of the land in the residential/planned community was sold
prior to 2024. We generally recognize revenue from these land sales over time using cost-based inputs because we receive
substantially all cash payment at the time of sale but significant development obligations still exist. We currently estimate
development obligations are approximately $78 million and will take approximately two to three years to complete. Our
estimates of our development obligations include certain assumptions about future labor and construction costs. If actual
costs were significantly above our estimates, revenue, profits and liquidity in our Real Estate Management and
Development Segment may be significantly and negatively affected.
Financial Risk Factors
Our assets consist primarily of investments in our operating subsidiaries, and we are dependent upon distributions
from our subsidiaries to service our liabilities.
The majority of our operating cash flows are generated by our operating subsidiaries, 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. Our subsidiaries 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 could be subject to restrictions under applicable law, monetary transfer restrictions,
currency exchange regulations in jurisdictions in which our subsidiaries operate or any other restrictions imposed by
current or future agreements to which our subsidiaries 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 to pay dividends or make other distributions to us. If our subsidiaries were to become unable to make sufficient
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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. If we were
required to liquidate our subsidiaries’ 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.
Our leverage may impair our financial condition or limit our ability to operate our businesses.
We have a significant amount of debt, primarily related to Kronos’ 9.50% Senior Secured Notes due 2029,
Kronos’ 3.75% Senior Secured Notes due 2025, Kronos’ term loan from Contran, Kronos’ borrowings on its global
revolving credit facility (the “Global Revolver”), our loan from Contran Corporation and the LandWell bank note. As of
December 31, 2024, our total consolidated debt was approximately $563 million. Our level of debt could have important
consequences to our stockholders and creditors, including:
•
making it more difficult for us to satisfy our obligations with respect to our liabilities;
•
increasing our vulnerability to adverse general economic and industry conditions;
•
requiring that a portion of our cash flows from operations be used for the payment of interest on our debt,
which reduces our ability to use our cash flow to fund working capital, capital expenditures, dividends on
our common stock, acquisitions or general corporate requirements;
•
limiting the ability of our subsidiaries to pay dividends to us;
•
limiting our ability to obtain additional financing to fund future working capital, capital expenditures,
acquisitions or general corporate requirements;
•
limiting our flexibility in planning for, or reacting to, changes in our businesses and the industries in which
we operate; and
•
placing us at a competitive disadvantage relative to other less leveraged competitors.
Indebtedness outstanding under our loan from Contran and Kronos’ Global Revolver accrues interest at variable
rates. To the extent market interest rates rise, the cost of our debt could increase, even if the amount borrowed remains the
same, adversely affecting financial condition, results of operations and cash flows.
In addition to our indebtedness, we are 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 our
indebtedness, we are committed to pay approximately $794 million in 2025. Our ability to make payments on and refinance
our debt and to fund planned capital expenditures depends on our 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
our control. In addition, our ability to borrow funds under certain of our revolving credit facilities in the future, in some
instances, will depend in part on these subsidiaries’ ability to maintain specified financial ratios and satisfy certain financial
covenants contained in the applicable credit agreement.
Our businesses may not generate cash flows from operating activities sufficient to enable us to pay our debts
when they become due and to fund our other liquidity needs. As a result, we may need to refinance all or a portion of our
debt before maturity, as we have done in the past. We may not be able to refinance any of our 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 our
debt on favorable terms could have a material adverse effect on our financial condition.
Changes in currency exchange rates and interest rates can adversely affect our net sales, profits, and cash flows.
We operate our businesses in several different countries and sell our products worldwide. For example, during
2023 and 2024 approximately 44% of our Chemicals Segment’s sales volumes were sold into European markets. The
majority (but not all) of our sales from our Chemicals Segment’s operations outside the United States are denominated in
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currencies other than the United States dollar, primarily the euro, other major European currencies and the Canadian dollar.
Therefore, we are exposed to risks related to the need to convert currencies we receive from the sale of our products into
the currencies required to pay for certain of our 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 our results of operations between periods.
Legal, Compliance and Regulatory Risk Factors
We could incur significant costs related to legal and environmental remediation matters.
NL formerly manufactured lead pigments for use in paint. NL 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. NL entered into a legal settlement
in one public-nuisance lead pigment case and has recognized a material liability related to the settlement. Any additional
liability NL might incur in the future for these matters could be material. See also Item 3 - “Legal Proceedings - Lead
pigment litigation - NL.”
Certain properties and facilities used in NL’s 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.”
Environmental, health and safety laws and regulations may result in increased regulatory scrutiny which could
decrease demand for our products, increase our manufacturing and compliance costs or obligations and result in
unanticipated losses which could negatively impact our financial results or limit our ability to operate our
Chemicals Segment’s business.
From time to time, new environmental, health and safety regulations are passed or proposed in the countries in
which we operate or sell our products, seeking to regulate our 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 our 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 our future financial results through increased costs of production, or reduced sales which may decrease our
liquidity, operating income and results of operations.
If some or all of our intellectual property were to be declared invalid, held to be unenforceable or copied by
competitors or some or all of our confidential information become known to competitors, or if our competitors were
to develop similar or superior intellectual property or technology, our ability to compete could be adversely
impacted.
Protection of our intellectual property rights, including patents, copyrights, trade secrets, confidential
information, trademarks and tradenames, is important to our businesses and our competitive positions. We endeavor to
protect our intellectual property rights in key jurisdictions in which our products are produced, sold or used and in
jurisdictions into which our products are imported. However, we may be unable to obtain protection for our intellectual
property in key jurisdictions. Although we own and have applied for numerous patents and trademarks throughout the
world, we may have to engage in judicial enforcement in order to protect our patent rights and other proprietary rights.
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Our patents and other intellectual property rights may be challenged, invalidated, circumvented, rendered unenforceable
or otherwise compromised. A failure to protect, defend or enforce our intellectual property could have an adverse effect
on our financial condition and results of operations. Similarly, third parties may assert claims against us and our customers
and distributors alleging our products infringe upon third-party intellectual property rights. In the event that any such third-
party prevails against us on such claims, there could be an adverse effect on our financial condition and results of
operations.
Although it is the practice of our Chemicals Segment 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. Our Chemicals Segment
also may not be able to readily detect breaches of such agreements. The failure of our Chemicals Segment’s 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.
Our Component Products Segment relies on patent, trademark and trade secret laws in the United States and
similar laws in other countries to establish and maintain our intellectual property rights in our technology and designs.
Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented or
misappropriated. Third parties may independently discover our trade secrets and proprietary information, and in such cases
our Component Products Segment could not assert any trade secret rights against such parties. Further, we do not know if
any of our Component Products Segment’s pending trademark or patent applications will be approved. Costly and time-
consuming litigation could be necessary to enforce and determine the scope of our 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, we may be unable to protect our technology and designs adequately against
unauthorized third-party use, which could adversely affect our competitive position.
Third parties may claim that we or our customers are infringing upon their intellectual property rights. Even if
we believe that such claims are without merit, they can be time-consuming and costly to defend and distract our
management’s and technical staff’s attention and resources. Claims of intellectual property infringement also might require
us to redesign affected technology, enter into costly settlement or license agreements or pay costly damage awards, or face
a temporary or permanent injunction prohibiting us from marketing or selling certain of our technology. If we cannot or
do 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 we must take legal action to protect, defend or enforce our 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 we
may not prevail in any such suits or proceedings.
Global climate change laws and regulations could negatively impact our financial results or limit our ability to
operate our businesses.
We operate production facilities in several countries and many of our 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 we 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
we operate have not had a material adverse effect on our financial results. Until the timing, scope and extent of any new
or future regulation become known, we cannot predict the effect on our 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 our future results of operations through increased costs of production, particularly as it relates to our energy
requirements or our need to obtain emissions permits. If such increased costs of production were to materialize, we may
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be unable to pass price increases on to our customers to compensate for increased production costs, which may decrease
our 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 our ability (or that of our customers and suppliers) to
compete with companies situated in areas not subject to such laws and regulations.
General Risk Factors
Operating as a global business presents risks associated with global and regional economic, political and regulatory
environments.
Our Chemicals Segment manufactures and distributes its products globally. Our Chemicals Segment’s revenue
from non-U.S. markets accounted for approximately 68%, 66%, and 66% of its revenue for the years ended December 31,
2022, 2023 and 2024, respectively. Our Chemicals Segment 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 it manufactures a significant portion of the TiO2 it sells in North America. Tariffs could make
its products more expensive which would reduce demand or require our Chemicals Segment to absorb the
increased costs reducing its operating margins;
•
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 our Chemicals Segment 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 our control;
•
difficulties enforcing agreements or other legal rights; and
•
our Chemicals Segment’s 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 our results of operations and financial condition.
Our Chemicals Segment 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 our Chemicals Segment 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 our Chemicals Segment currently manufactures a significant portion of
its North American TiO2 in Canada, if sustained for an extended period of time, the 25% tariff on our Chemicals Segment’s
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 our Chemicals Segment 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 our Chemicals Segment’s ability to sell its products in the
U.S. or reduce its revenues and gross margins. These measures may also increase our Chemicals Segment’s costs of Canadian
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feedstock imported into the U.S. and could adversely impact its gross margins or require our Chemicals Segment 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.
Our businesses rely on integrated information technology systems to manage, process and analyze data, including
to facilitate the manufacture and distribution of products to and from our facilities, receive, process and ship orders, manage
the billing of and collections from customers and manage payments to vendors. Although we have systems and procedures
in place to protect our information technology systems, there can be no assurance that such systems and procedures will
be sufficiently effective. Therefore, any of our 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 our business operations, injury to people, harm to the environment
or our assets, and/or the inability to access our information technology systems and could adversely affect our results of
operations and financial condition. We have in the past experienced, and we expect to continue to experience, cyber-
attacks, including phishing and other attempts to breach or gain unauthorized access to, our systems, and vulnerabilities
introduced into our systems by trusted third-party vendors who have experienced cyber-attacks. To date we have not
suffered breaches in our 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 we are
experiencing such difficulties in obtaining insurance coverage.
Physical impacts of climate change could have a material adverse effect on our 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 our 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 our facilities are located near coastal areas or
waterways where rising sea levels or flooding could disrupt our operations or adversely impact our facilities. Furthermore,
periods of extended inclement weather or associated droughts or flooding may inhibit our facility operations and delay or
hinder shipments of our products to customers. Any such events could have a material adverse effect on our costs or results
of operations.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 1C.
CYBERSECURITY
We operate through our subsidiaries and receive services through our intercorporate services agreement (“ISA”)
with Contran (see Note 17 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
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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 reporting units. Both our CIO and the CompX 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
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
We along with our subsidiaries, Kronos, CompX and NL lease office space through Contran for our principal
executive offices in Dallas, Texas. Our BMI and LandWell subsidiaries’ principal offices are in an owned building in
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Henderson, Nevada. A list of principal operating facilities for each of our subsidiaries is described in the applicable
business sections of Item 1 – “Business.” We believe our facilities are generally adequate and suitable for their respective
uses.
ITEM 3.
LEGAL PROCEEDINGS
We are involved in various legal proceedings. In addition to information included below, certain information
called for by this Item is included in Note 18 to our Consolidated Financial Statements, which is incorporated herein by
reference.
Lead Pigment Litigation – NL
NL’s former operations included the manufacture of lead pigments for use in paint and lead-based paint. NL,
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. NL currently has 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 NL) 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 NL and its
co-defendants in respect to the case. In the agreement, NL expressly denies any and all liability and the dismissal of the
case with prejudice was entered by the court without a final judgment of liability entered against NL. 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). NL’s 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 NL (and any amounts on deposit in excess of the final payment would be returned
to NL). Pursuant to the settlement agreement, NL 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 NL’s 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. NL 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
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contribution for any damages they may ultimately have to pay to the plaintiff. NL believes it has substantial defenses to
these claims under Wisconsin law and intends to defend itself vigorously.
New cases may continue to be filed against NL. 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 NL 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 NL as to whether it might then have become probable
NL has 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 (primarily NL’s 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 and NL or its
predecessors, 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 NL is only one of a number of PRPs who may also be jointly and severally liable, and
among whom costs may be shared or allocated. In addition, we are occasionally named as a party in a number of personal
injury lawsuits filed in various jurisdictions alleging claims related to environmental conditions alleged to have resulted
from our operations.
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
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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 the 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 NL’s wholly-owned
environmental management subsidiary, NL Environmental Management Services, Inc., (“EMS”), has contractually
assumed NL’s obligations. At December 31, 2024, NL had accrued approximately $69 million related to approximately
30 sites associated with remediation and related matters that NL believes 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 NL for remediation and
related matters for which NL believes it is possible to estimate costs is approximately $38 million, including amounts
currently accrued.
NL believes that 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 NL is not currently able to reasonably estimate a range of costs. For
these sites, generally the investigation is in the early stages, and NL is unable to determine whether or not it actually had
any association with the site, the nature of its responsibility, if any, for the contamination at the site, if any, and the extent
of contamination at and cost to remediate the site. The timing and availability of information on these sites is dependent
on events outside of NL’s control, such as when the party alleging liability provides information to NL. At certain of these
previously inactive sites, NL has received general and special notices of liability from the EPA and/or state agencies
alleging that NL, 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 NL, 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.
We have also accrued approximately $6 million at December 31, 2024 for other environmental cleanup matters
which represents our best estimate of the liability.
In June 2008, NL 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 its 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.
-34-
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 NL 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 NL’s
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.
In August 2009, NL was 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 its 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.
In 2011, NL was 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, NL was 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 NL’s 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. NL has
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, NL was 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
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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, NL was 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. NL continues 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. NL has denied liability and will continue to defend vigorously against all claims.
In May 2024, NL was 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.
Other Litigation
NL – NL has 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 NL. 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, NL has 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 NL has been dismissed, and
•
its prior experience in the defense of these matters,
We believe the range of reasonably possible outcomes of these matters will be consistent with NL’s 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. NL has sought and will continue to
vigorously seek, dismissal and/or a finding of no liability from each claim. In addition, from time to time, NL has received
notices regarding asbestos or silica claims purporting to be brought against former subsidiaries, including notices provided
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to insurers with which it has entered into settlements extinguishing certain insurance policies. These insurers may seek
indemnification from NL.
Other – 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 – NL
NL is involved in certain legal proceedings with a number of its former insurance carriers regarding the nature
and extent of the carriers’ obligations to NL 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 NL’s
lead pigment and asbestos litigation depends upon a variety of factors and we cannot assure you that such insurance
coverage will be available.
NL has agreements with certain of its former insurance carriers pursuant to which the carriers reimburse it for a
portion of its future lead pigment litigation defense costs, and one such carrier reimburses NL for a portion of its future
asbestos litigation defense costs. We are not able to determine how much NL will ultimately recover from these carriers
for defense costs incurred by NL because of certain issues that arise regarding which defense costs qualify for
reimbursement. While NL continues to seek additional insurance recoveries, we do not know if it 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 January 2014, NL was 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 NL, is seeking a declaratory judgment of its obligations to NL under insurance policies issued
to NL 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.
NL has settled insurance coverage claims concerning environmental claims with certain of its 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.
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ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
-38-
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Common Stock and Dividends – Our common stock is listed and traded on the New York Stock Exchange
(symbol: VHI). As of March 3, 2025, there were approximately 715 holders of record of our common stock.
Performance Graph – Set forth below is a 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 assumes the reinvestment of our regular quarterly dividends in shares of our stock.
December 31,
2019
2020
2021
2022
2023
2024
Valhi common stock
$
100 $
70 $
135 $
104 $
74 $
115
S&P 500 Index
100
118
152
125
158
197
S&P 500 Industrial Conglomerates
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, as amended, 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.
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Equity Compensation Plan Information – We have an equity compensation plan, which was approved by our
stockholders, pursuant to which an aggregate of 100,000 shares of our common stock can be awarded to non-employee
members of our board of directors. At December 31, 2024, an aggregate of 78,300 shares were available for future award
under this plan. See Note 16 to our Consolidated Financial Statements.
Treasury Stock Purchases – In March 2005 and November 2006, our board of directors authorized the repurchase
of shares of our common stock in open market transactions, including block purchases, or in privately negotiated
transactions, which may include transactions with our affiliates. The aggregate number of shares authorized for repurchase
is 833,333, and we have approximately 334,000 shares available for repurchase at December 31, 2024. We may purchase
the stock from time to time as market conditions permit. The stock repurchase program does not include specific price
targets or timetables and may be suspended at any time. Depending on market conditions, we could terminate the program
prior to completion. We will use our cash on hand to acquire the shares. Repurchased shares will be retired and cancelled
or may be added to our treasury stock and used for employee benefit plans, future acquisitions or other corporate purposes.
See Note 16 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 through our wholly-owned and majority-owned subsidiaries,
including NL Industries, Inc., Kronos Worldwide, Inc., CompX International Inc., Tremont LLC, Basic Management, Inc.
(“BMI”) and the LandWell Company (“LandWell”). Kronos (NYSE: KRO), NL (NYSE: NL) and CompX (NYSE
American: CIX) each file periodic reports with the SEC.
We have three consolidated reportable operating segments:
•
Chemicals – Our Chemicals Segment is operated through our majority control of Kronos. Kronos is a leading
global producer and marketer of value-added TiO2. TiO2 is used to impart whiteness, brightness, opacity and
durability to a wide variety of products, including paints, plastics, paper, fibers and ceramics. Additionally,
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.
•
Component Products – We operate in the component products industry through our majority control of
CompX. CompX is a leading manufacturer of security products used in the postal, recreational transportation,
office and institutional furniture, cabinetry, tool storage, healthcare applications and a variety of other
industries. CompX is also a leading manufacturer of wake enhancements systems, stainless steel exhaust
systems, gauges, throttle controls, trim tabs and related hardware and accessories for the recreational marine
industry.
•
Real Estate Management and Development – We operate in real estate management and development
through our majority control of BMI and LandWell. BMI and LandWell own real property in Henderson,
Nevada. LandWell is engaged in efforts to develop certain land holdings for commercial, industrial and
residential purposes in Henderson, Nevada. BMI previously, through wholly-owned subsidiaries, also was
responsible for the delivery of water to the City of Henderson and various other users through
September 2022, and provided utility services to certain industrial customers prior to December 2023.
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Operations Overview
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 –
We reported net income attributable to Valhi stockholders of $108.0 million or $3.79 per diluted share in 2024
compared to a net loss of $9.9 million or $.35 per diluted share in 2023.
Our net income attributable to Valhi stockholders increased from 2023 to 2024 primarily due to the net effects
of:
•
operating income from our Chemicals Segment of $138.5 million in 2024 compared to an operating loss of
$41.1 million in 2023;
•
a non-cash gain of $64.5 million in 2024 resulting from the remeasurement of the Chemicals Segment’s
investment in the TiO2 manufacturing joint venture;
•
aggregate income of $31.4 million in 2024 related to the settlement of a liability for an environmental
remediation site;
•
income from tax increment infrastructure reimbursement of $30.3 million in 2024 compared to $25.2 million
in 2023;
•
a non-cash deferred income tax expense of $16.5 million in 2024 related to final tax regulations on the
treatment of certain currency translation gains and losses related to our Chemicals Segment;
•
a non-cash deferred income tax expense of $8.2 million in 2024 related to the recognition of a deferred
income tax asset valuation allowance related to our Chemicals Segment’s Belgian net deferred tax assets;
•
a non-cash loss on the termination of our U.K. pension plan of $6.2 million in 2023; and
•
higher interest expense in 2024 as a result of refinancing of the Chemicals Segment’s Senior Secured Notes
in the first quarter and debt incurred to finance the LPC acquisition in the third quarter.
Our diluted net income per share in 2024 includes:
•
income of $1.18 per share due to the recognition of a non-cash gain resulting from the remeasurement of the
Chemicals Segment’s investment in the TiO2 manufacturing joint venture recognized in the third quarter;
•
aggregate income of $.72 per share related to the settlement of a liability for an environmental remediation
site recognized in the fourth quarter;
•
income of $.55 per share related to tax increment infrastructure reimbursements recognized in the third and
fourth quarters;
•
a loss of $.38 per share due to the recognition of a non-cash deferred income tax expense related to final tax
regulations on the treatment of certain currency translation gains and losses related to our Chemicals Segment
in the fourth quarter; and
•
a loss of $.19 per share due to the recognition of a non-cash deferred income tax expense related to the
recognition of a deferred income tax asset valuation allowance related to our Chemicals Segment’s Belgian
net deferred tax assets in the fourth quarter.
Our diluted net loss per share in 2023 includes:
income of $.46 per share related to tax increment infrastructure reimbursements recognized in the third and
fourth quarters;
•
a loss of $.13 per share due to the termination of our U.K. pension plan recognized in the second quarter;
-41-
•
a loss of $.10 per share related to workforce reductions by our Chemicals Segment recognized in the fourth
quarter;
•
a loss of $.06 per share related to the write-off of certain costs resulting from a capital project termination
recognized in the fourth quarter; and
a gain of $.05 per share related to a business interruption insurance claim arising from Hurricane Laura in
2020 at our Chemicals Segment recognized in the first, second and third quarters.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 –
We reported a net loss attributable to Valhi stockholders of $9.9 million or $.35 per diluted share in 2023
compared to net income of $87.2 million or $3.06 per diluted share in 2022.
Our net income attributable to Valhi stockholders decreased from 2022 to 2023 primarily due to the net effects
of:
•
lower operating income from our Chemicals Segment in 2023 compared to 2022 including 2023 charges of
$5.8 million related to workforce reductions and $3.8 million related to the write-off of certain costs resulting
from a capital project termination;
aggregate charges of $19.7 million in our Real Estate Management and Development Segment in 2022
related to the impairment of certain fixed assets and the bankruptcy filing of BWC;
•
income from tax increment infrastructure reimbursement of $25.2 million in 2023 compared to $15.2 million
in 2022; and
•
a non-cash loss on the termination of our U.K. pension plan of $6.2 million in 2023.
Our diluted net loss per share in 2023 includes:
income of $.46 per share related to tax increment infrastructure reimbursements recognized in the third and
fourth quarters;
•
a loss of $.13 per share due to the termination of our U.K. pension plan recognized in the second quarter;
•
a loss of $.10 per share related to workforce reductions by our Chemicals Segment recognized in the fourth
quarter;
•
a loss of $.06 per share related to the write-off of certain costs resulting from a capital project termination
recognized in the fourth quarter; and
a gain of $.05 per share related to a business interruption insurance claim arising from Hurricane Laura in
2020 at our Chemicals Segment recognized in the first, second and third quarters.
Our diluted net income per share in 2022 includes:
aggregate charges of $.35 per share related to the bankruptcy filing of BWC, including $.29 per share related
to the impairment of the water delivery system fixed assets, primarily recognized in the second quarter, and
$.04 per share loss on the deconsolidation of BWC and $.02 per share of bad debt expense related to an
intercompany receivable with BWC, both recognized in the third quarter;
•
income of $.28 per share related to tax increment infrastructure reimbursements recognized in the third and
fourth quarters; and
a gain of $.05 per share related to a business interruption insurance claim arising from Hurricane Laura in
2020 at our Chemicals Segment recognized in the third quarter.
We discuss these amounts more fully below.
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Current Forecast for 2025 –
We currently expect consolidated operating income for 2025 to be higher as compared to 2024 primarily due to
the net effects of:
•
higher operating income from our Chemicals Segment in 2025 primarily due to the positive impact of
improved demand;
•
higher operating income from our Real Estate Management and Development Segment in 2025 due to higher
expected infrastructure reimbursements; and
•
higher operating income from our Component Products Segment in 2025 as marine sales are expected to
improve in 2025.
Our expectations for our future operating results are based upon a number of factors beyond our control, including
worldwide growth of gross domestic product, competition in the marketplace, continued operation of competitors,
technological advances, worldwide production capacity, public health crises, the effect of tariffs, and the impact of
economic conditions and geopolitical events on demand for our products or our customers’ and suppliers’ operations, all
of which remain uncertain and cannot be predicted. If actual developments differ from our expectations, our results of
operations could be unfavorably affected.
Segment Operating Results – 2024 Compared to 2023 and 2023 Compared to 2022
Chemicals –
We consider TiO2 to be a “quality of life” product, with demand affected by gross domestic product, or GDP, and
overall economic conditions in our markets located in various regions of the world. Over the long-term, we expect demand
for TiO2 will grow by 2% to 3% per year, consistent with our expectations for the long-term growth in GDP. However,
even if our Chemicals Segment and its competitors maintain consistent shares of the worldwide market, demand for TiO2
in any interim or annual period may not change in the same proportion as the change in GDP, in part due to relative changes
in the TiO2 inventory levels of our Chemicals Segment’s customers. We believe our Chemicals Segments’ customers’
inventory levels are influenced in part by their expectation for future changes in TiO2 selling prices as well as their
expectation for future availability of product. Although certain of our Chemicals Segment’s TiO2 grades are considered
specialty pigments, the majority of its grades and substantially all of its production are considered commodity pigment
products with price and availability being the most significant competitive factors along with product quality and customer
and technical support services.
The factors having the most impact on our Chemicals Segment’s reported operating results are:
•
TiO2 selling prices,
•
TiO2 sales and production volumes,
•
Manufacturing costs, particularly raw materials such as third-party feedstock, maintenance and energy-
related expenses, and
•
Currency exchange rates (particularly the exchange rate for the U.S. dollar relative to the euro, the Norwegian
krone and the Canadian dollar and the euro relative to the Norwegian krone).
Our Chemicals Segment’s key performance indicators are its TiO2 average selling prices, its TiO2 sales and
production volumes and the cost of titanium-containing feedstock purchased from third parties. TiO2 selling prices
generally follow industry trends and selling prices will increase or decrease generally as a result of competitive market
pressures.
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
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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 cash on hand. Kronos accounted for the acquisition of the interest in LPC as a
business combination. For financial reporting purposes, the assets acquired and liabilities assumed of LPC are included in
our Consolidated Balance Sheet as of December 31, 2024, and the results of operations and cash flows of LPC are included
in our Consolidated Statement of Operations and Cash Flows beginning as of the Acquisition Date. See Note 3 to our
Consolidated Financial Statements.
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
1,540.2
1,502.7
1,530.1
(2)
2
Gross margin
$
390.0
$
163.8
$
357.0
(58)
118
Operating income (loss)
$
174.6
$
(41.1)
$
138.5
(124)
437
Percent of net sales:
Cost of sales
80 %
90 %
81 %
Gross margin
20
10
19
Operating income (loss)
9
(2)
7
TiO2 operating statistics:
Sales volumes*
481
419
504
(13)%
20 %
Production volumes*
492
401
535
(19)%
33 %
Percent change in TiO2 net sales:
TiO2 sales volumes
(13)%
20 %
TiO2 product pricing
(4)
(5)
TiO2 product mix/other
2
(2)
Changes in currency exchange rates
1
—
Total
(14)%
13 %
*
Thousands of metric tons
Industry Conditions and 2024 Overview – Our Chemicals Segment and the TiO2 industry experienced an
extended period of significantly reduced demand reflected in our Chemicals Segment’s 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
our Chemicals Segment’s TiO2 pricing with 2024 average TiO2 selling prices approximately 5% below the average TiO2
selling prices for 2023.
Our Chemicals Segment 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, our Chemicals Segment 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.
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The following table shows our Chemicals Segment’s 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, our Chemicals Segment’s 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, our Chemicals Segment 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 our Chemicals Segment’s 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. Our Chemicals Segment 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,
our Chemicals Segment closed its sulfate process production line at its plant in Varennes, Canada. As a result of the process
line closure, our Chemicals Segment recognized charges to cost of sales of approximately $2 million during 2024 related
to workforce reductions. Our Chemicals Segment also recognized approximately $14 million in non-cash charges primarily
related to accelerated depreciation in the second and third quarters of 2024.
Net Sales – Our Chemicals Segment’s 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, we estimate
that changes in currency exchange rates (primarily the euro) increased our Chemicals Segment’s 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.
Our Chemicals Segment’s 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 our Chemicals Segment’s
complementary businesses which somewhat offset declines in TiO2 sales volumes. In addition to the impact of sales
volumes and average TiO2 selling prices, we estimate that changes in currency exchange rates (primarily the euro) increased
our Chemicals Segment’s net sales by approximately $10 million in 2023 as compared to 2022.
Our Chemicals Segment’s 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 our Chemicals Segment began experiencing in
the second half of 2022 continued throughout most of 2023. However, our Chemicals Segment’s 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 – Cost of sales increased $27.4 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
-45-
fixed production costs, and lower production costs of approximately $115 million (primarily energy and raw materials).
Our Chemicals Segment’s 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. Our Chemicals Segment’s 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.
Our Chemicals Segment’s 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.
Gross margin as a percentage of net sales increased to 19% in 2024 compared to 10% in 2023. As discussed and
quantified above, our Chemicals Segment’s 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.
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 our Chemicals Segment’s 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). Our Chemicals
Segment’s 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.
Gross margin as a percentage of net sales decreased to 10% in 2023 compared to 20% in 2022. As discussed and
quantified above, our Chemicals Segment’s 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.
Operating Income (Loss) – Our Chemicals Segment had operating income of $138.5 million in 2024 compared
to an operating loss of $41.1 million in 2023 as a result of the factors impacting gross margin discussed above. Our
Chemicals Segment recognized a gain of $2.5 million in 2023 related to cash received from the settlement of a business
interruption insurance claim. We estimate that changes in currency exchange rates increased our Chemicals Segment’s
operating income by approximately $10 million in 2024 as compared to 2023, as further discussed below.
Our Chemicals Segment had an operating loss of $41.1 million in 2023 compared to operating income of $174.6
million in 2022 as a result of the factors impacting gross margin discussed above. Our Chemicals Segment 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. We estimate changes in currency exchange rates decreased our
Chemicals Segment’s operating loss by approximately $16 million in 2023 as compared to 2022, as discussed in the
Currency Exchange Rates section below.
Our Chemicals Segment’s operating income (loss) is net of amortization of purchase accounting adjustments
made in conjunction with our acquisitions of interests in NL and Kronos. As a result, we recognize additional depreciation
expense above the amounts Kronos reports separately, substantially all of which is included within cost of sales. We
recognized additional depreciation expense of $1.3 million in each of 2022 and 2023 and $2.5 million in 2024, which
reduced our reported Chemicals Segment’s operating income as compared to amounts reported by Kronos.
Currency Exchange Rates – Our Chemicals Segment has substantial operations and assets located outside the
United States (primarily in Germany, Belgium, Norway and Canada). The majority of our Chemicals Segment’s 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 our Chemicals Segment’s sales generated from its non-U.S.
operations is denominated in the U.S. dollar (and consequently our Chemicals Segment’s non-U.S. operations will
generally hold U.S. dollars from time to time). Certain raw materials used in all our Chemicals Segment’s production
-46-
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 our Chemicals Segment’s 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, our 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 our Chemicals Segment’s non-U.S. operations are holding non-local currency (primarily U.S. dollars).
Fluctuations in currency exchange rates had the following effects on our Chemicals Segment’s sales and operating
income (loss) 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
Operating income (loss)
1
2
1
9
10
The $5 million increase in net sales (translation gains) was caused primarily by a weakening of the U.S. dollar
relative to the euro, as 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 the reported amount of net sales, as a substantial portion of the sales generated by our Chemicals Segment’s
Canadian and Norwegian operations is denominated in the U.S. dollar.
The $10 million increase in operating income 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 our Chemicals Segment’s non-U.S. operations, and in Norwegian krone denominated receivables and
payables held by our Chemicals Segment’s 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.
-47-
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
Operating income (loss)
12
1
(11)
27
16
The $10 million increase in net sales (translation gains) was caused primarily by a weakening of the U.S. dollar
relative to the euro, as 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 the reported amount of net sales, as a substantial portion of the sales generated by our Chemicals Segment’s
Canadian and Norwegian operations are denominated in the U.S. dollar.
The $16 million decrease in operating loss 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 our Chemicals Segment’s non-U.S. operations, and in Norwegian krone denominated receivables and
payables held by our Chemicals Segment’s 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 – Our Chemicals Segment’s overall 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. Our Chemicals
Segment expects demand to improve in 2025, particularly in Europe where the European Commission enacted duties on
Chinese imports of TiO2 in mid-2024; however, our Chemicals Segment 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. Our Chemicals Segment believes customer inventory levels were low at the end of 2024
due to customer hesitancy to build inventory late in the year and our Chemicals Segment 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. Our Chemicals Segment 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. Our Chemicals Segment is
operating its facilities at production rates in line with the current and expected near-term demand and believes its
production rates for 2025 will be slightly above 2024 rates.
Our Chemicals Segment is focused on cost reduction initiatives designed to improve its long-term cost structure.
In 2023, our Chemicals Segment implemented targeted workforce reductions and certain ongoing process improvement
initiatives. In the third quarter of 2024, our Chemicals Segment 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. Our Chemicals Segment expects raw material and other input costs will continue to moderate in 2025. Overall,
primarily due to improved demand, our Chemicals Segment 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.
-48-
As noted above, our Chemicals Segment acquired full control of LPC in July 2024. Our Chemicals Segment
believes this acquisition is a unique opportunity to immediately add value to its customers and better serve the North
American marketplace by allowing our Chemicals Segment to expand its product offerings and increase sales to new and
existing customers while recognizing significant synergies, including commercial, overhead and supply chain
optimization. Our Chemicals Segment 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 our Chemicals Segment’s Global Revolver, as
well as cash on hand, it was able to finance the required working capital for the improvements needed to fully integrate
the acquired LPC production capacity.
Our expectations for the TiO2 industry and our Chemicals Segment’s operations are based on a number of factors
outside our control. Our Chemicals Segment’s 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, our Chemicals Segment 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 our Chemicals Segment’s 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.
Our Chemicals Segment has begun to implement strategies to minimize the potential impacts. Future impacts on our
Chemicals Segment’s operations will depend on, among other things, future energy costs, the effect newly enacted tariffs
have on jurisdictions in which our Chemicals Segment or its customers and suppliers operate, its 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.
Component Products –
Our Component Products Segment reported operating income of $17.0 million in 2024 and $25.4 million in each
of 2023 and 2022. The decrease in operating income in 2024 compared to 2023 is due to lower sales and gross margin at
both security products and marine components reporting units. Operating income in 2023 was comparable to 2022 as lower
marine components sales were offset by higher security products sales and higher gross margin percentages across both
reporting units.
Our Component Products Segment’s product offerings consist of a large number of products that have a wide
variation in selling price and manufacturing cost, which results in certain practical limitations on its ability to quantify the
impact of changes in individual product sales quantities and selling prices on our Component Products Segment’s net
sales, cost of sales and gross margin. In addition, small variations in period-to-period net sales, cost of sales and gross
margin can result from changes in the relative mix of our Components Products Segment’s products sold. The key
performance indicator for our Component Products Segment is operating income margins.
Years ended December 31,
% Change
2022
2023
2024
2022-23
2023-24
(Dollars in millions)
Net sales:
Security products
$
114.5
$
121.2
$
115.2
6 %
(5) %
Marine components
52.1
40.1
30.7
(23)
(23)
Total 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)
Operating income
$
25.4
$
25.4
$
17.0
—
(33)
Percent of net sales:
Cost of sales
71 %
70 %
72 %
Gross margin
29
31
28
Operating income
15
16
12
-49-
Net Sales – Our Component Products Segment’s net sales decreased $15.4 million in 2024 compared to 2023
primarily due to lower marine components sales to the towboat market and lower security products sales to the government
security market. Marine components net sales decreased $9.4 million, or 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, marine component 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. Security products net sales decreased $6.0 million, or 5%, in 2024 as compared to 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.
Our Component Products Segment’s net sales decreased $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. Marine components net sales decreased $12.0 million, or 23%, in 2023 as compared to 2022.
Relative to prior year, marine components 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. Security products net sales increased $6.7
million, or 6%, in 2023 as compared to 2022 primarily due to higher sales related to a pilot project for a government
security customer. Relative to prior year, security products 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.
Cost of Sales and Gross Margin – Our Component Products Segment’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, our Component Products Segment’s cost of sales as a
percentage of net sales increased over the same period. Our Component Products Segment’s gross margin as a percentage
of net 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. Security products 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 latter half of the year
and decreased coverage of fixed costs due to lower sales. Marine components gross margin as a percentage of net 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.
Our Component Products Segment’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 reporting units as well as lower marine
components sales. Our Component Products Segment’s gross margin as a percentage of net sales increased over the same
period primarily due to the factors affecting cost of sales. Security products 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. Marine components
gross margin as a percentage of net 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.
Operating Income – As a percentage of net sales, our Component Products Segment’s operating income
decreased in 2024 compared to 2023 and increased in 2023 compared to 2022. Operating income margins were primarily
impacted by the factors affecting net sales, cost of sales and gross margin, discussed above. Operating costs and expenses
-50-
consist primarily of sales and administrative-related personnel costs, sales commissions and advertising expenses directly
related to product sales and administrative costs relating to business unit and corporate management activities, as well as
gains and losses on sales of property and equipment. Operating costs and 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 net sales, our Component Products Segment’s operating income increased in 2023 compared
to 2022. The operating margin percentage increased in 2023 compared to 2022 primarily due to the factors impacting net
sales, cost of sales and gross margin discussed above. Operating costs and expenses increased in 2023 compared to 2022
predominantly due to higher salary and benefit costs at the security products reporting unit which increased by $.6 million.
General – Our Component Products Segment’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 our Component
Products Segment’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 our Component Products Segment’s cost of sales in 2024, with commodity-related raw materials representing
approximately 13% of its cost of sales. Our Component Products Segment’s raw material prices were generally stable
through the first half of 2024. Beginning in the latter half of the third quarter our Component Products Segment began to
experience moderate increases in certain raw material costs, particularly brass. The zinc market was volatile in 2024, but
our Component Products Segment 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 marine
components (including marine exhaust headers and pipes, wake enhancement systems, throttles and trim tabs), were
relatively stable in 2024 because our Component Products Segment took advantage of volume purchase opportunities
during the year. In most cases, commodity raw materials our Component Products Segment 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 our Component Products Segment’s purchases. Based on current economic conditions, our
Component Products Segment 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.
Our Component Products Segment 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 –
Component Products Segment – CompX International Inc. – Raw Materials.”
Outlook – As noted above, in the second half of 2023 our Component Products Segment’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 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 the 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 our Component Products Segment
experienced price increases in certain commodity raw materials, primarily brass and electronic components at the security
products reporting unit.
Our Component Products Segment expects security products net sales in 2025 to improve modestly over 2024,
and our Component Products Segment expects gross margin and operating income percentages in 2025 to be slightly above
2024 due to pricing improvements on the security products product mix. Our Component Products Segment expects marine
components net sales to increase in 2025 due to higher expected sales to the government and industrial markets. Our
Component Products Segment 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 our Component Products Segment expects marine
components to have improved gross margins and operating income percentages in 2025 compared to 2024 due to higher
expected sales volumes. During 2024 our Component Products Segment was aggressive in aligning its production
-51-
capabilities and inventories to demand levels. In 2025, our Component Products Segment will continue to monitor current
and anticipated near-term customer demand levels to ensure its production capabilities and inventories are aligned
accordingly.
Our Component Products Segment’s expectations for its operations and the markets it serves are based on a
number of factors outside its control. Currently, our Component Products Segment’s supply chains are stable and
transportation and logistical delays are minimal. Our Component Products Segment 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.
Real Estate Management and Development –
Years ended December 31,
2022
2023
2024
(In millions)
Net sales:
Land sales
$
120.9
$
92.6
$
71.5
Utility and other
1.2
1.3
.3
Water delivery
3.6
—
—
Total net sales
125.7
93.9
71.8
Cost of sales
74.1
61.7
45.6
Gross margin
$
51.6
$
32.2
$
26.2
Operating income
$
39.4
$
49.9
$
55.2
General – Our Real Estate Management and Development Segment consists of BMI and LandWell. BMI and
LandWell own real property in Henderson, Nevada. LandWell is actively engaged in efforts to develop certain real estate
in Henderson, Nevada including approximately 2,100 acres zoned for residential/planned community purposes. BMI also
was responsible for the delivery of water to the City of Henderson and various other users through a water distribution
system owned and operated by BWC prior to BWC’s bankruptcy filing and deconsolidation on September 10, 2022. BMI
also provided certain utility services to an industrial park located in Henderson, Nevada prior to the sale of BPC on
December 1, 2023. With the approval of BWC’s plan of reorganization by the bankruptcy court, substantially all of BWC’s
assets were sold in November 2023. Following the sale of the BWC assets and BPC, BMI no longer provides services to
the industrial park which allows us to focus on land sales and development activity for the residential/planned community.
LandWell began marketing land for sale in the residential/planned community in December 2013 and at
December 31, 2024 approximately 20 saleable acres remain. LandWell has been actively marketing and selling the land
zoned for commercial and light industrial use and at December 31, 2024 approximately 15 saleable acres remain. Contracts
for land sales are negotiated on an individual basis, and sales terms and prices will vary based on such factors as location
(including location within a planned community), expected development work, and individual buyer needs. Although land
may be under contract or land sales may be completed, we do not recognize revenue until we have satisfied the criteria for
revenue recognition set forth in ASC Topic 606. In most instances buyers can cancel an escrow agreement with no financial
penalties until shortly before the closing date. In some instances, we will receive cash proceeds at the time the contract
closes and record deferred revenue for some or all of the cash amount received, with such deferred revenue being
recognized in subsequent periods. Substantially all the land in the residential/planned community has been sold; however,
we expect the development work to take two to three years to complete.
Net Sales and Operating Income – Substantially all the net sales from our Real Estate Management and
Development segment in 2024 and 2023 consisted of revenues from land sales. We recognized $71.5 million in revenues
on land sales during 2024 compared to $92.6 million in 2023. All of the land sales revenues recognized in 2024 are related
to land sold in prior years. As noted above, we recognize revenue in our residential/planned community over time using
cost-based input methods, and substantially all the land sales revenue we recognized in 2024 and 2023 was under this
method of revenue recognition. Land sales revenue in 2024 decreased compared to 2023 due to the decreased pace of
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development activity for previously sold parcels within the residential/planned community, primarily due to delays in
receiving city permits and delays in environmental related approvals. The pace of development activities is dictated by a
number of factors such as city permit and design approval, approval from the Nevada Department of Environmental
Protection and labor and materials availability. Cost of sales related to land sales revenues was $45.1 million in 2024
compared to $60.8 million in 2023. Included in operating income was income related to the tax increment reimbursement
note receivables of $30.3 million and $25.2 million in 2024 and 2023, respectively. See Note 7 to our Consolidated
Financial Statements.
Substantially all the net sales from our Real Estate Management and Development segment in 2023 and 2022
consisted of revenues from land sales. We recognized $92.6 million in revenues on land sales during 2023 compared to
$120.9 million in 2022. As noted above, we recognize revenue in our residential/planned community over time using cost-
based input methods, and substantially all the land sales revenue we recognized in 2023 and 2022 was under this method
of revenue recognition. Land sales revenue in 2023 decreased compared to 2022 due to the decreased pace of development
activity dictated by the factors noted above within the residential/planned community. Cost of sales related to land sales
revenues was $60.8 million in 2023 compared to $69.7 million in 2022. Included in operating income was income related
to the tax increment reimbursement note receivables of $25.2 million and $15.2 million in 2023 and 2022, respectively.
See Note 7 to our Consolidated Financial Statements.
The remainder of net sales and cost of sales related to this segment primarily relates to water delivery fees and
expenses. Prior to BWC’s bankruptcy filing on September 10, 2022, BMI was responsible for the delivery of water to the
City of Henderson and various other users under long-term contracts through a water delivery system owned and operated
by BWC. BWC’s water delivery system operated on Lake Mead in Nevada. Late in the second quarter of 2022, Lake Mead
water levels dropped precipitously to historically low levels. On June 30, 2022 BWC was no longer able to pump water
and consequently ceased operations at its water intake facility. We considered BWC’s inability to pump water from Lake
Mead to be a triggering event under ASC 360 Property, Plant, and Equipment, which caused us to evaluate the water
system fixed assets for impairment. Because BWC was unable to deliver water under its current contracts and therefore
unable to generate revenue, we determined the water system’s assets were fully impaired except to the extent certain
equipment had alternative use outside of BWC’s operations, in which case those assets were written down to estimated
salvage value. The $16.4 million impairment charge primarily recognized in the second quarter of 2022 represented the
write down of the book value to the estimated salvage value of the assets. Without the ability to pump and deliver water
to its customers, BWC’s operating expenses exceeded its revenues, and on September 10, 2022 BWC and its wholly-
owned subsidiary (collectively, “Debtors”) voluntarily filed for Chapter 11 bankruptcy protection in the United States
Bankruptcy Court for the District of Nevada. Because BWC filed for bankruptcy protection, we and BMI could no longer
affirmatively assert we control BWC and, as such, in accordance with ASC 810, Consolidation, we deconsolidated BWC
as of the date of the bankruptcy filing and recognized a loss of $2.0 million in the third quarter of 2022 on the
deconsolidation. In addition, BMI had an outstanding intercompany accounts receivable balance with BWC on the date of
the bankruptcy filing, and we recognized $1.3 million of bad debt expense to fully reserve this balance during the third
quarter of 2022.
On November 8, 2023, the Bankruptcy Court for the District of Nevada (“Court”) entered an order approving
Debtors’ plan of reorganization, which provided for the sale of substantially all Debtors’ assets and the transfer of
substantially all of their operating and other agreements to one of their industrial customers. The transaction closed on
November 17, 2023 at which time Debtors discontinued their water delivery operations. The proceeds of the sale were
used to repay creditors of the Debtors. On July 10, 2024, the Court approved the closure of the Debtors’ bankruptcy case.
BWC and its wholly-owned subsidiary BWC SPE I, LLC were subsequently dissolved with the remaining cash at BWC
of $2.6 million distributed to BMI. See Note 3 to our Consolidated Financial Statements.
On December 1, 2023, BMI sold its subsidiary BPC, which provided electricity to four customers located in the
industrial park, and its sewer system assets to another of its industrial customers. The sale was for minimal cash
consideration and the assumption of liabilities, and upon the closing of the sale we recognized a loss of $2.6 million. BMI
provided transition services to the purchaser of the businesses for a limited time. With the sale of BPC and the completion
of the bankruptcy, we no longer provide services to the industrial park which allows us to focus on land sales and
development activity for the residential/planned community.
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Outlook – LandWell is focused on developing the land it manages, primarily to residential builders, for the
residential/planned community in Henderson. At December 31, 2024, substantially all of the land in the residential/planned
community had been sold with approximately 20 saleable acres remaining. A contract for the remaining 20 acres is
currently in escrow with a home builder, and the sale is scheduled to close by mid-2025. There are also 15 saleable acres
zoned for light industrial and commercial use outside of the 2,100 acre residential/planned community available for sale.
Demand for retail and commercial use in the Las Vegas area is not as strong as residential demand, and we expect it will
take more time to sell these remaining acres. At December 31, 2024 we have deferred revenue of $32.1 million related to
post-closing obligations on land sales closed prior to 2024. Because we recognize revenue over time using cost-based
inputs, we will continue to recognize revenue on land previously sold over the development period, although we have
already received substantially all the cash proceeds related to these sales. We currently expect to take two to three years
to complete our post-closing obligations. Any delays or curtailments in infrastructure development related to post-closing
obligation activities will delay the amount of revenue we recognize on previously closed land sales. Under LandWell’s
development agreement with the City of Henderson, the issuance of a specified number of housing permits requires
LandWell to complete certain large infrastructure projects. LandWell began construction on several of these community-
wide large projects in late 2021 with the construction expected to continue for the next two to three years. We expect these
land development costs in 2025 to be comparable to 2024 due to the timing of planned infrastructure projects and the
availability of certain construction materials. Because these large projects relate to the entirety of the residential/planned
community, the costs associated with these large projects are not part of the cost-based inputs used to recognize revenue,
and therefore, this spending will not correlate to revenue recognition. However, this spending is expected to be eligible for
tax increment reimbursement under our Owner Participation Agreement (“OPA”) with the City of Henderson, and delays
or curtailments in eligible infrastructure development activities will also delay LandWell’s ability to submit completed
costs to the City for approval of additional OPA note receivables. The maximum reimbursement under the OPA is $209
million. We have collected $32.7 million to date and expect to reach the maximum in the next 7 to 10 years.
General Corporate Items, Interest Expense, Income Taxes, Noncontrolling Interest and Related Party Transactions
Insurance Recoveries – NL has agreements with certain insurance carriers pursuant to which the carriers
reimburse NL for a portion of its past lead pigment and asbestos litigation defense costs. Insurance recoveries include
amounts NL received from these insurance carriers. NL received $1.4 million and $.5 million in insurance recoveries
during 2024 and 2023, respectively. Insurance recoveries in 2022 were nominal. See Note 13 to our Consolidated Financial
Statements.
The agreements with certain of NL’s insurance carriers also include reimbursement for a portion of its future
litigation defense costs. We are not able to determine how much we will ultimately recover from these carriers for defense
costs incurred by NL because of certain issues that arise regarding which defense costs qualify for reimbursement.
Accordingly, these insurance recoveries are recognized when the receipt is probable and the amount is determinable. See
Note 18 to our Consolidated Financial Statements.
Gain on Remeasurement of Investment in TiO2 Manufacturing Joint Venture – We recognized a gain on the
remeasurement of Kronos’ investment in LPC of $64.5 million in the third quarter of 2024 as a result of the acquisition.
See Note 3 to our Consolidated Financial Statements.
Other Components of Net Periodic Pension and OPEB Expense – We recognized other components of net
periodic pension and OPEB expense of $2.6 million in 2024, $11.8 million in 2023 and $13.9 million in 2022. The decrease
in 2024 compared to 2023 is primarily due to a higher expected return on plan assets, lower discount rates impacting
interest costs and a non-recurring $6.2 million in settlement costs related to the termination and buy-out of our U.K.
pension plan in the second quarter of 2023. The decrease in 2023 compared to 2022 is primarily due to the net effects of
higher discount rates impacting interest cost, previously unrecognized actuarial losses and $6.2 million in settlement costs
related to the termination and buy-out of our U.K. pension plan during the second quarter of 2023. See Note 11 to our
Consolidated Financial Statements.
Changes in the Market Value of Valhi Common Stock held by Subsidiaries – Our subsidiaries Kronos and NL
hold shares of our common stock. As discussed in Note 16 to our Consolidated Financial Statements, we account for our
proportional interest in these shares of our common stock as treasury stock, at Kronos’ and NL’s historical cost basis. The
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remaining portion of these shares of our common stock, which are attributable to the noncontrolling interest of Kronos
and NL, are reflected in our Consolidated Balance Sheets at fair value. Any unrealized gains or losses on the shares of our
common stock attributable to the noncontrolling interest of Kronos and NL are recognized in the determination of each of
Kronos and NL’s respective net income or loss. Under the principles of consolidation, we eliminate any gains or losses
associated with our common stock to the extent of our proportional ownership interest in each subsidiary. The $1.9 million
gain in 2024, the $1.7 million loss in 2023 and the $1.6 million loss in 2022 recognized in our Consolidated Financial
Statements represent the unrealized gain (loss) in respect of these shares during such periods attributable to the
noncontrolling interest of Kronos and NL.
Interest Income and Other – Interest income and other of $22.0 million in 2024 was comparable to 2023. Interest
income and other increased $10.9 million in 2023 compared to 2022 primarily due to higher average interest rates and
increased investment balances. See Note 13 to our Consolidated Financial Statements.
Other General Corporate Items – Corporate expenses of $4.3 million in 2024 decreased compared to corporate
expenses of $35.2 million in 2023 primarily 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 expense are:
•
litigation and related costs at NL of $3.0 million in 2024 and $4.4 million in 2023; and
•
income from environmental remediation of $19.2 million in 2024 compared to costs of $2.5 million in 2023.
Corporate expenses were 4% lower at $35.2 million in 2023 compared to corporate expenses of $36.6 million in
2022 due primarily to lower administrative expenses. Included in corporate expense are:
•
litigation and related costs at NL of $4.4 million in 2023 and $4.2 million in 2022; and
•
environmental remediation and related costs of $2.5 million in 2023 compared to $1.7 million in 2022.
Overall, we currently expect that our net general corporate expenses in 2025 will be higher than 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.
The level of our litigation and related expenses 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 18 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 and related costs will exceed accrued amounts or that costs will be incurred
in the future for sites in which we cannot currently estimate the liability. If these events occur in 2025, our corporate
expense could be higher than we currently estimate. In addition, we adjust our accruals for environmental remediation and
related costs as further information becomes available to us or as circumstances change. Such further information or
changed circumstances could result in an increase or reduction in our accrued environmental remediation and related costs.
See Note 18 to our Consolidated Financial Statements.
Interest Expense – Interest expense increased $21.6 million in 2024 compared to 2023 primarily due to higher
interest rates on Kronos’ new debt issued in February and July of 2024 and higher average debt balances as a result of the
LPC acquisition. As a result of the exchange, interest expense in 2024 also includes a charge of $1.5 million for the write-
off of deferred financing costs. Interest expense of $28.3 million in 2023 was comparable to $27.9 million in 2022.
We expect interest expense will be higher in 2025 as compared to 2024 primarily due to the higher debt balances
as a result of the third quarter acquisition of LPC and higher interest rates on Kronos’ new debt issued in February and
July of 2024. See Note 9 to our Consolidated Financial Statements.
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Income Tax Expense (Benefit) – We recognized income tax expense of $82.9 million in 2024 compared to an
income tax benefit of $24.6 million in 2023. The increase is primarily due to higher earnings in 2024 and the jurisdictional
mix of such earnings. We recognized an income tax benefit of $24.6 million in 2023 compared to income tax expense of
$36.8 million in 2022. The decrease is primarily due to lower earnings in 2023 and the jurisdictional mix of such earnings.
Our income tax expense in 2024 includes a non-cash deferred income tax expense of $8.2 million in the fourth
quarter, related to the recognition of a deferred income tax asset valuation allowance for our Chemicals Segment’s Belgian
net deferred tax assets. We continue to believe we will ultimately realize the full benefit of our Belgian NOL carryforwards,
in part because of their indefinite carryforward period. However, our 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 we are able to reverse the valuation allowance in full, to the extent we generate additional losses
in Belgium in the intervening periods, our 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 us to compute a pretransition gain
or loss for currency translation related to the operations, assets and liabilities of our Chemicals Segment’s non-U.S.
qualified business units. Pursuant to the 2024 Final Regulations, we have calculated a pretransition gain of $77.1 million
and, accordingly, our income tax expense in 2024 includes a non-cash deferred income tax expense of $16.5 million
recognized in the fourth quarter.
Our earnings are subject to income tax in various U.S. and non-U.S. jurisdictions. Generally, our consolidated
effective income tax rate is higher than the U.S. federal statutory tax rate of 21% primarily because the income tax rates
applicable to the pre-tax earnings (losses) of our non-U.S. operations are generally higher than the income tax rates
applicable to our U.S. operations. However, in 2022 our consolidated effective income tax rate was lower than the U.S.
federal statutory rate of 21% due to the effect of a tax benefit relating to the partial release of our valuation allowance
associated with the 2022 utilization of a portion of our business interest expense carryforwards.
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.
Noncontrolling Interest in Net Income of Subsidiaries – Noncontrolling interest in operations of subsidiaries
increased in 2024 compared to 2023 primarily due to increased operating income at Kronos. Noncontrolling interest in
operations of subsidiaries decreased from 2022 to 2023 primarily due to lower operating income at Kronos. See Note 15
to our Consolidated Financial Statements.
Related Party Transactions – We are a party to certain transactions with related parties. See Note 17 to our
Consolidated Financial Statements.
Foreign Operations
We have substantial operations located outside the United States, principally our Chemicals Segment’s operations
in Europe and Canada. The functional currency of these operations is the local currency. As a result, the reported amount
of our assets and liabilities related to these foreign operations will fluctuate based upon changes in currency exchange
rates. At December 31, 2024, we 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 financial statements requires us to make estimates
and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities
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at the date of the financial statements and the reported amount of revenues and expenses during the reported period. On
an ongoing basis we evaluate our estimates, including those related to the recoverability of long-lived assets, 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
goodwill, long-lived assets, revenue recognized over time using cost-based inputs, defined benefit pension plans, income
taxes, acquisition of joint venture, and litigation and environmental liabilities. We have discussed the development,
selection and disclosure of our critical accounting estimates with the audit committee of our board of directors.
Goodwill – Our net goodwill totaled $382.3 million at December 31, 2024 primarily resulting from our various
step acquisitions of Kronos and NL (which occurred before the implementation of the current accounting standards related
to noncontrolling interest) and to a lesser extent CompX’s purchase of various businesses and Kronos’ purchase of the
remaining 50% interest in LPC in 2024. In accordance with the applicable accounting standards for goodwill, we do not
amortize goodwill.
We perform a goodwill impairment test annually in the third quarter of each year. Goodwill is also evaluated for
impairment 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. An entity may first assess qualitative factors to determine whether
it is necessary to complete the 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 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 us 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 our 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 of strategic decisions. If any of these factors were to materially change such change may
require revaluation of our goodwill. Changes in estimates or the application of alternative assumptions could produce
significantly different results.
A reporting unit can be a segment or an operating division based on the operations of the segment. For example,
our Chemicals Segment produces a globally coordinated homogeneous product whereas our Component Products Segment
operates as two distinct reporting units. If the fair value of the reporting unit is less than its book value, the goodwill is
written down to estimated fair value.
For our Chemicals Segment, we use Level 1 inputs of publicly traded market prices to compare the book value
to assess impairment. We also consider control premiums when assessing fair value. When we performed our annual
goodwill impairment test in the third quarter of 2024 for our Chemicals Segment goodwill, we concluded there was no
impairment of such goodwill. However, future events and circumstances could change (i.e. a significant decline in quoted
market prices) and result in a materially different finding which could result in the recognition of a material impairment
with respect to such goodwill.
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Substantially all of the goodwill for our Component Products Segment relates to its security products reporting
unit. In 2024, we used the qualitative assessment for our annual impairment test and determined it was not necessary to
perform the quantitative goodwill impairment test, as we concluded it is more-likely-than-not that the fair value of the
security products reporting unit exceeded its carrying amount.
Long-lived assets – The net book value of our property and equipment totaled $723.4 million at December 31,
2024. 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.
Revenue recognized over time using cost-based inputs – Certain real estate land sales by our Real Estate
Management and Development Segment (generally land sales associated with our residential/planned community) require
us to complete property development and improvements after title passes to the buyer and we have received all or a
substantial portion of the selling price. Generally, all the land sales associated with the residential/planned community
have been recognized over time using cost-based inputs of accounting in accordance with ASC 606. Under such method,
revenues and profits are recognized in the same proportion of our progress towards completion of our contractual
obligations, with our progress measured by costs incurred as a percentage of total costs estimated to be incurred. Such
costs incurred and total estimated costs include amounts specifically identifiable with the parcels sold as well as certain
development costs for the entire residential/planned community which are allocated to the parcels sold under applicable
GAAP. Estimates of total costs expected to be incurred require significant management judgment, and the amount of
revenue and profits that have been recognized to date are subject to revisions throughout the development period. The
impact on the amount of revenue recognized resulting from any future change in the estimate of total costs estimated to be
incurred would be accounted for prospectively in accordance with GAAP.
Defined benefit pension plans – We maintain various defined benefit pension plans in the U.S., Europe and
Canada. See Note 11 to our Consolidated Financial Statements. We recognized consolidated defined benefit pension plan
expense of $25.4 million in 2022, $18.4 million in 2023 and $9.4 million in 2024. The amount of funding requirements
for these defined benefit pension plans is generally based upon applicable regulations (such as ERISA in the U.S.) and
will generally differ from pension expense for financial reporting purposes. We made contributions to all of our defined
benefit pension plans of $16.6 million in 2022, $16.3 million in 2023 and $16.4 million in 2024.
Under defined benefit pension plan accounting, defined benefit pension plan expense, pension assets and accrued
pension costs are each recognized based on certain actuarial assumptions. These assumptions are principally the discount
rate, the assumed long-term rate of return on plan assets, the fair value of plan assets and the assumed increase in future
compensation levels. We recognize the 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.
At December 31, 2024, approximately 65%, 14%, 7% and 11% of the projected benefit obligations related to our
plans in Germany, Canada, Norway and the U.S., respectively. We use several different discount rate assumptions in
determining our consolidated defined benefit pension plan obligation and expense. This is because we maintain defined
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benefit pension plans in several different countries in Europe and North America and 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
Obligations
Obligations
at December 31, 2022 at December 31, 2023 at December 31, 2024
and expense in 2023
and expense in 2024
and expense in 2025
Kronos and NL Plans:
Germany
3.7%
3.2%
3.4%
Canada
5.1%
4.6%
4.6%
Norway
3.6%
3.6%
4.3%
U.S.
5.3%
5.0%
5.5%
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 in 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 either upon the expected average remaining service life of the active plan participants (for plans for which
benefits are still being earned by active employees) or the average remaining life expectancy of the inactive participants
(for plans for which benefits are not still being earned by active employees).
At December 31, 2024, the fair value of plan assets for all defined benefit plans comprised $75.7 million related
to U.S. plans and $404.9 million related to non-U.S. plans. All of plan assets attributable to non-U.S. plans related to plans
maintained by Kronos, and approximately 35% and 65% of the plan assets attributable to U.S. plans related to plans
maintained by NL and Kronos, respectively. At December 31, 2024, approximately 55%, 17%, 9% and 16% of the plan
assets related to our plans in Germany, Canada, Norway and the U.S, respectively. We use several different long-term
rates of return on plan asset assumptions in determining our consolidated defined benefit pension plan expense. This is
because the plan assets in different countries are 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. We regularly
review our actual asset allocation for each of our U.S. and non-U.S. plans and will periodically rebalance the investments
in each plan to more accurately reflect the targeted allocation when considered appropriate.
The assumed long-term rates of return on plan assets used for purposes of determining net period pension cost
for 2022, 2023 and 2024 were as follows:
2022
2023
2024
Kronos and NL plans:
Germany
2.0%
4.8%
5.0%
Canada
3.8%
4.4%
4.9%
Norway
3.0%
4.8%
4.8%
U.S.
4.0%
5.0%
5.0%
Our long-term rate of return on plan asset assumptions in 2025 used for purposes of determining our 2025 defined
benefit pension plan expense for Germany, Canada, Norway and the U.S. are 4.8%, 3.7%, 5.3% and 5.0%, respectively.
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We follow ASC Topic 820, Fair Value Measurements and Disclosures, in determining the fair value of plan
assets within our defined benefit pension plans. While we believe the valuation methods used to determine the fair value
of plan assets are appropriate, the use of different methodologies or assumptions to determine the fair value of certain
financial instruments could result in a different estimate of fair value at the reporting date.
To the extent that a plan’s particular pension benefit formula calculates the pension benefit in whole or in part
based upon future compensation levels, the projected benefit obligations and the pension expense will be based in part
upon expected increases in future compensation levels. For all of our plans for which the benefit formula is so calculated,
we generally base the assumed expected increase in future compensation levels upon average long-term inflation rates for
the applicable country.
In addition to the actuarial assumptions discussed above, the amount of recognized defined benefit pension
expense and the amount of net pension asset and net pension liability will vary based upon relative changes in currency
exchange rates. See Note 11 to our Consolidated Financial Statements for additional discussion of actuarial assumptions
used in determining defined benefit pension assets, liabilities and expenses.
Based on the actuarial assumptions described above and our current expectation for what actual average currency
exchange rates will be during 2025, we expect our defined benefit pension expense will approximate $9 million in 2025.
In comparison, we expect to be required to contribute approximately $16 million to such plans 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 all of the actuarial assumptions used are reasonable and
appropriate. However, if we had lowered the assumed discount rate by 25 basis points for all plans as of December 31,
2024, our aggregate projected benefit obligations would have increased by approximately $19 million at that date and our
defined benefit pension expense would be expected to increase by a nominal amount during 2025. Similarly, if we lowered
the assumed long-term rate of return on plan assets by 25 basis points for all of our plans, our defined benefit pension
expense would be expected to increase by approximately $1 million during 2025.
Income taxes – We operate globally through our Chemicals Segment and the calculation of our provision for
income taxes and our deferred tax assets and liabilities involves the interpretation and application of complex tax laws and
regulations in a multitude of jurisdictions across our Chemicals Segment’s global operations. Our effective tax rate is
highly dependent upon the geographic distribution of our earnings or losses and the effects of tax laws and regulations in
each tax-paying jurisdiction in which we operate. Significant judgments and estimates are required in determining our
consolidated provision for income taxes due to the global nature of our Chemicals Segment’s operations. Our provision
(benefit) for income taxes and deferred tax assets and liabilities reflect our best assessment of estimated current and future
taxes to be paid, including the recognition and measurement of deferred tax assets and liabilities.
We recognize deferred taxes for future tax effects of temporary differences between financial and income tax
reporting. 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 record a valuation allowance to
reduce our deferred income tax assets to the amount that is believed to be realized under the more-likely-than-not
recognition criteria. While we have considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for a valuation allowance, it is possible that we may change our estimate of the amount of
the deferred income tax assets that would more-likely-than-not be realized in the future, resulting in an adjustment to the
deferred income tax asset valuation allowance that would either increase or decrease, as applicable, reported net income
in the period such change in estimate was made.
We periodically review our deferred tax assets (“DTA”) to determine if a valuation allowance is required. For
example, at December 31, 2024, our Chemicals Segment has significant 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;
and Belgian corporate NOL carryforwards of $72.0 million (DTA of $18.0 million). Prior to December 31, 2024, and
using all available evidence, we had concluded that no deferred income tax asset valuation allowance was 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), (ii) we have utilized a portion of
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such carryforwards during the most recent three-year period and (iii) we currently expect to utilize the remainder of such
carryforwards over the long term. With respect to our Belgium carryforwards, at December 31, 2024, given our operating
results during the fourth quarter of 2024 and our current expectations for 2025, we do not have sufficient positive evidence
to overcome the significant negative evidence of having cumulative losses in the most recent twelve consecutive quarters
in Belgium (even considering that the carryforward period of our Belgian NOL carryforwards is indefinite, one piece of
positive evidence). Accordingly, at December 31, 2024, we concluded that we were 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 our Belgian net deferred tax assets. At December 31, 2024, we continue to conclude no valuation allowance is
required to be recognized for our German DTAs although prior to the complete utilization of such carryforwards, if we
were to generate additional losses in our German operations for an extended period of time, or if applicable laws were to
change such that the carryforward periods were more limited, it is possible that we might conclude the benefit of such
carryforwards would no longer meet the more-likely-than-not recognition criteria, at which point we would be required to
recognize a valuation allowance against some or all of the then-remaining tax benefit associated with the carryforwards.
The Organization for Economic Cooperation and Development (the “OECD”), the European Union and other
countries have committed to enacting the OECD’s Pillar Two initiative that would provide a global minimum level of
taxation for multinational companies to be applied on a country-by-country basis. Currently, many countries have enacted
legislation to implement the Pillar Two rules effective for years beginning on or after December 31, 2023. Based on
legislation currently enacted, we do not anticipate any material impact to our Consolidated Financial Statements; however,
until all the jurisdictions we operate in enact legislation, the full impact of Pillar Two to us is unknown.
Acquisition of joint venture – During the third quarter of 2024, Kronos acquired the 50% joint venture interest in
LPC previously held by Venator. Prior to the acquisition we accounted for Kronos’s interest in LPC under the equity
method. The application of the purchase method of accounting for business combinations requires Kronos to use significant
estimates and assumptions in the determination of the estimated fair value of assets acquired and liabilities assumed.
Kronos’ estimates of the fair values of assets acquired and liabilities assumed are based upon assumptions we believe are
reasonable, and when appropriate, include assistance from independent third-party valuation advisors. See Note 3 to our
Consolidated Financial Statements.
Contingencies – We record accruals for environmental, legal and other contingencies and commitments when
estimated future expenditures associated with such contingencies become probable, and amounts can be reasonably
estimated. However, new information may become available to us, or circumstances (such as applicable laws and
regulations) may change, thereby resulting in an increase or decrease in the amount required to be accrued for such matters
(and therefore a decrease or increase in reported net income in the period of such change). At December 31, 2024 we have
recorded total accrued environmental liabilities of $74.6 million.
Obligations for environmental remediation and related costs are difficult to assess, and it is possible that actual
costs for environmental remediation and related costs will exceed accrued amounts or that costs will be incurred in the
future for sites in which we cannot currently estimate the liability. If these events occur in 2025, our corporate expense
could be higher than we currently estimate. In addition, we adjust our accruals for environmental remediation and related
costs (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
remediation and related costs. See Note 18 to our Consolidated Financial Statements.
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LIQUIDITY AND CAPITAL RESOURCES
Consolidated Cash Flows
Operating Activities –
Trends in cash flows as a result of our operating income (excluding the impact of significant asset dispositions
and relative changes in assets and liabilities) are generally similar to trends in our earnings. In addition to the impact of
the operating, investing and financing cash flows discussed below, changes in the amount of cash, cash equivalents and
restricted cash we report from year to year can be impacted by changes in currency exchange rates, since a portion of our
cash, cash equivalents and restricted cash is held by our Chemicals Segment’s non-U.S. subsidiaries. For example, during
2024, relative changes in currency exchange rates resulted in a $.1 million decrease in the reported amount of our cash,
cash equivalents and restricted cash compared to a $1.0 million increase in 2023 and a $5.1 million decrease in 2022.
Cash flows from operating activities increased to $44.0 million in 2024 from $3.9 million in 2023. This
$40.1 million increase in cash provided by operations in 2024 includes:
•
consolidated operating income of $210.7 million in 2024, an increase of $176.5 million compared to
operating income of $34.2 million in 2023;
•
higher amount of net cash used of $92.5 million associated with relative changes in our receivables,
inventories, land held for development, payables and accrued liabilities in 2024;
•
higher net cash paid for income taxes in 2024 of $14.4 million primarily due to higher earnings and the
relative timing of payments;
•
higher cash paid for interest in 2024 of $18.5 million;
•
cash premium of $6.0 million on the issuance of Kronos’ senior notes; and
•
higher net contributions of $5.8 million to our TiO2 manufacturing joint venture in 2024 prior to the LPC
acquisition.
Cash flows from operating activities decreased to $3.9 million in 2023 from $34.9 million in 2022. This
$31.0 million decrease in cash provided by operations in 2023 includes:
•
consolidated operating income of $34.2 million in 2023, a decrease of $205.2 million compared to operating
income of $239.4 million in 2022;
•
lower amount of net cash used of $84.6 million associated with relative changes in our receivables,
inventories, land held for development, payables and accrued liabilities in 2023;
•
lower net cash paid for income taxes in 2023 of $16.3 million primarily due to decreased earnings; and
•
lower net contributions to our TiO2 manufacturing joint venture in 2023 of $13.6 million.
As noted in our discussion of our Real Estate Management and Development segment above, we have sold the
majority of the land in our residential/planned community, and in accordance with our development agreement with the
City of Henderson and our contractual obligations with builders, we expect to complete our land development obligations
over the next two to three years. Because we have largely received cash proceeds from land sales, we expect LandWell to
generate negative operating cash flows as it completes its required land development work.
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Changes in working capital were affected by accounts receivable and inventory changes, as shown below:
•
Kronos’ average days sales outstanding (“DSO”) decreased from December 31, 2023 to December 31, 2024,
primarily due to the relative changes in the timing of collections.
•
Kronos’ average days sales in inventory (“DSI”) increased from December 31, 2023 to December 31, 2024
primarily due to production volumes exceeding sales volumes in 2024 compared to 2023 when Kronos’ sales
volumes exceeded its production volumes.
•
CompX’s average DSO 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.
•
CompX’s average DSI at December 31, 2024 was comparable to December 31, 2023 as the increase at the
security products reporting unit due to the fulfillment and shipping of a significant order during the fourth
quarter of 2023 was offset by the decline at the marine components reporting unit due to elevated inventory
balances at December 31, 2023.
For comparative purposes, we have also provided comparable prior year numbers below.
December 31, December 31, December 31,
2022
2023
2024
Kronos:
Days sales outstanding
64 days
66 days
62 days
Days sales in inventory
103 days
65 days
82 days
CompX:
Days sales outstanding
41 days
36 days
33 days
Days sales in inventory
99 days
95 days
94 days
We do not have complete access to the cash flows of our majority-owned subsidiaries, due in part to limitations
contained in certain credit agreements of our subsidiaries and because we do not own 100% of these subsidiaries. A detail
of our consolidated cash flows from operating activities is presented in the table below. Intercompany dividends have been
eliminated.
Years ended December 31,
2022
2023
2024
(In millions)
Cash provided by (used in) operating activities:
Kronos
$
81.7
$
5.5
$
72.5
Valhi exclusive of subsidiaries
68.8
40.7
60.6
CompX
16.9
25.8
22.9
NL exclusive of subsidiaries
39.2
21.6
36.7
Tremont exclusive of subsidiaries
12.7
11.2
(.4)
BMI
12.1
13.2
2.6
LandWell
(22.0)
17.5
(16.1)
Eliminations and other
(174.5)
(131.6)
(134.8)
Total
$
34.9
$
3.9
$
44.0
Investing Activities –
We disclose capital expenditures by our business segments in Note 2 to our Consolidated Financial Statements.
During 2024:
•
Kronos paid $156.8 million, net of cash acquired, for the remaining TiO2 manufacturing joint venture interest
in LPC; see Note 3 to our Consolidated Financial Statements;
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•
we had net proceeds of $54.3 million related to marketable securities; and
•
we had net proceeds from the sale of land not used in our operations of $5.6 million.
During 2023:
•
we had net proceeds of $19.3 million of marketable securities; and
•
we had net proceeds from the sale of land not used in our operations of $1.8 million.
During 2022:
•
we had net purchases of $70.7 million of marketable securities; and
•
$8.6 million of BWC’s cash, cash equivalents and restricted cash was removed as part of its deconsolidation
in the third quarter (see Note 3 to our Consolidated Financial Statements).
Financing Activities –
During 2024:
•
we repaid $48.8 million on Valhi’s credit facility with Contran; and
•
Kronos exchanged €325 million of its Kronos International, Inc. (“KII”) 3.75% Senior Secured Notes due
September 2025 (the “Old Notes”) for KII’s newly issued €276.174 million 9.50% Senior Secured Notes due
March 2029 (the “New Notes”) plus additional cash consideration of $52.6 million to certain eligible holders
of the Old Notes and borrowed $53.7 million from Contran. In the third quarter 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”).
During 2023:
•
we repaid $28.0 million on Valhi’s credit facility with Contran; and
•
Kronos acquired 313,814 shares of its common stock for an aggregate purchase price of $2.8 million.
During 2022:
•
we borrowed $.1 million and repaid $51.6 million on Valhi’s credit facility with Contran;
•
we repaid $8.4 million on BWC’s loan from Western Alliance Bank;
•
Kronos acquired 217,778 shares of its common stock for an aggregate purchase price of $2.3 million; and
•
CompX acquired 78,900 shares of its Class A common stock for an aggregate purchase price of $ 1.7 million.
We paid aggregate cash dividends on our common stock of $9.0 million in 2022 and $9.1 million in each of 2023
and 2024. Distributions to noncontrolling interest in 2022, 2023 and 2024 are primarily comprised of: CompX dividends
paid to shareholders other than NL; Kronos dividends paid to shareholders other than us and NL, and BMI and LandWell
dividends paid to shareholders other than us.
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Outstanding Debt Obligations
At December 31, 2024, our consolidated indebtedness was comprised of:
•
Valhi’s $44.6 million outstanding on its $150 million amended credit facility with Contran which is due no
earlier than December 31, 2026;
•
€351.174 million aggregate outstanding on KII’s 9.5% Senior Secured Notes due 2029 plus €5.1 million of
unamortized premium ($365.4 million carrying amount, net of unamortized debt issuance costs);
•
€75 million aggregate outstanding on KII’s 3.75% Senior Secured Notes due 2025 ($78.3 million carrying
amount);
•
$53.7 million outstanding on Kronos’ subordinated, unsecured term loan from Contran due September 2029
(the “Contran Term Loan”);
•
$10.0 million outstanding on Kronos’ Global Revolver; and
•
$11.4 million outstanding on LandWell’s bank loan due April 2036.
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. On July 30, 2024, Kronos’ wholly-owned subsidiary, KII, issued an additional €75 million
principal amount of 9.50% Senior Secured Notes due 2029 (the “Additional New 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 the 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. See Note 9 to our
Consolidated Financial Statements.
The Contran Term Loan is subordinated in right of payment to Kronos’ Senior Secured Notes and its 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 or guarantee additional debt, incur liens,
pay dividends or make other restricted payments, or merge or consolidate with, or sell or transfer substantially all of our
assets to, another entity, and contain other provisions and restrictive covenants customary in lending transactions of these
types. Our 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. The terms of all of our debt instruments
are discussed in Note 9 to our Consolidated Financial Statements. We are in compliance with all of our debt covenants at
December 31, 2024. We believe we will be able to continue to comply with the financial covenants contained in our credit
facilities through their maturity; however, if future operating results differ materially from our expectations we may be
unable to maintain compliance.
Our assets consist primarily of investments in operating subsidiaries, and our ability to service our obligations,
including the Kronos’ Senior Secured Notes and the Contran Term Loan, depends in part upon the distribution of earnings
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of our subsidiaries, whether in the form of dividends, advances or payments on account of intercompany obligations or
otherwise. Kronos’ Senior Secured Notes are collateralized by, among other things, a first priority lien on (i) 100% of the
common stock or other ownership interests of each existing and future direct domestic subsidiary of KII and the guarantors,
and (ii) 65% of the voting common stock or other ownership interests and 100% of the non-voting common stock or other
ownership interests of each non-U.S. subsidiary that is directly owned by KII or any guarantor. Kronos’ Global Revolver
is collateralized by, among other things, a first priority lien on the borrower’s trade receivables and inventories.
Future Cash Requirements
Liquidity –
Our primary source of liquidity on an ongoing basis is our cash flows from operating activities and borrowings
under various lines of credit and notes. We generally use these amounts to (i) fund capital expenditures, (ii) repay short-
term indebtedness incurred primarily for working capital purposes and (iii) provide for the payment of dividends (including
dividends paid to us by our subsidiaries) or treasury stock purchases. From time-to-time we will incur indebtedness,
generally to (i) fund short-term working capital needs, (ii) refinance existing indebtedness, (iii) make investments in
marketable and other securities (including the acquisition of securities issued by our subsidiaries and affiliates) or (iv) fund
major capital expenditures or the acquisition of other assets outside the ordinary course of business. Occasionally we sell
assets outside the ordinary course of business, and we generally use the proceeds to (i) repay existing indebtedness
(including indebtedness which may have been collateralized by the assets sold), (ii) make investments in marketable and
other securities, (iii) fund major capital expenditures or the acquisition of other assets outside the ordinary course of
business or (iv) pay dividends.
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 the estimated sales value of those units. As a result of this process,
we have in the past sought, and may in the future seek, to raise additional capital, refinance or restructure indebtedness,
repurchase indebtedness in the market or otherwise, modify our dividend policies, consider the sale of our interests in our
subsidiaries, affiliates, business units, 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 and our subsidiaries may enter into intercompany loans as a cash
management tool. Such notes are structured as revolving demand notes and pay and receive interest on terms we believe
are more favorable than current debt and investment market rates. The companies that borrow under these notes have
sufficient borrowing capacity to repay the notes at any time upon demand. All of these notes and related interest expense
and income are eliminated in our Consolidated Financial Statements. We may also from time to time engage in preliminary
discussions with existing or potential investors regarding the timing or terms of any such refinancing or other potential
transactions.
We periodically evaluate acquisitions of interests in or combinations with companies (including our affiliates)
that 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 our operating performance, and the anticipated demands on our cash resources,
we expect to have sufficient liquidity to meet our short-term (defined as the twelve-month period ending December 31,
2025) and long-term obligations (defined as the five-year period ending December 31, 2029). In this regard, see the
discussion above in “Outstanding Debt Obligations.” With respect to the €75 million KII 3.75% Senior Secured Notes
due 2025, we intend to satisfy this obligation through cash generated from operations or to the extent that is not sufficient,
a combination of cash generated from operations and borrowings on the Global Revolver. If actual developments differ
from our expectations, our liquidity could be adversely affected.
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At December 31, 2024, we had credit available under existing facilities of approximately $373 million, which
was comprised of:
•
$268 million under Kronos’ global revolving credit facility; and
•
$105(1) million under Valhi’s Contran credit facility.
(1) Amounts available under this facility are at the sole discretion of Contran.
At December 31, 2024, we had an aggregate of $386.2 million of restricted and unrestricted cash, cash equivalents
and marketable securities attributable to operations. A detail by entity is presented in the table below.
Total
Held outside
amount
U.S.
(In millions)
Kronos
$
114.7 $
84.5
CompX
60.8
—
NL exclusive of its subsidiaries
123.4
—
BMI
14.7
—
Tremont exclusive of its subsidiaries
11.8
—
LandWell
60.6
—
Valhi exclusive of its subsidiaries
.2
—
Total cash and cash equivalents, restricted cash and marketable securities
$
386.2 $
84.5
Following the implementation of a territorial tax system under the 2017 Tax Act, repatriation of any cash and
cash equivalents held by our non-U.S. subsidiaries would not be expected to result in any material income tax liability as
a result of such repatriation.
Capital Expenditures and Other Investments –
We currently expect our aggregate capital expenditures for 2025 will be approximately $58 million (including
approximately $9 million contractually committed at December 31, 2024) as follows:
•
$55 million by our Chemicals Segment, including approximately $24 million in the area of environmental
compliance, protection and improvement; and
•
$3 million by our Component Products Segment.
In addition, LandWell expects to spend approximately $53 million on land development costs during 2025,
including approximately $51 million contractually committed at December 31, 2024. Land development costs are included
in the determination of cash provided by operating activities.
Capital spending for 2025 is expected to be funded through cash generated from operations or borrowing under
our existing credit facilities. Planned capital expenditures in 2025 at Kronos and CompX will primarily be to maintain and
improve existing facilities and, as it relates to CompX, to meet expected customer demand and maintain technology
infrastructure. In addition, Kronos’ capital expenditures in the area of environmental compliance, protection and
improvement include expenditures which are primarily focused on increased operating efficiency but also result in
improved environmental protection, such as lower emissions from our manufacturing plants.
Repurchases of our Common Stock and Common Stock of our Subsidiaries –
We have in the past, and may in the future, make repurchases of our common stock in market or privately-
negotiated transactions. At December 31, 2024, we had approximately .3 million shares of our common stock available
for repurchase under the authorizations described in Note 16 to our Consolidated Financial Statements.
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At December 31, 2024, Kronos had approximately 1.0 million shares of its common stock available for
repurchase under the authorization described in Note 3 to our Consolidated Financial Statements.
At December 31, 2024, CompX had approximately .5 million shares of its Class A common stock available for
repurchase under the authorization described in Note 3 to our Consolidated Financial Statements.
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. Kronos paid a regular dividend of $.19 per share in the first and second quarters of 2024 for
which we received $22.0 million. In July 2024, Kronos announced a decrease in its regular quarterly dividend from $.19
per share to $.05 per share beginning in the third quarter of 2024. Kronos paid a regular dividend of $.05 per share in the
third and fourth quarters of 2024 for which we received $5.8 million. In February 2025 the Kronos board of directors
approved a quarterly dividend of $.05 per share. If Kronos were to pay its $.05 per share dividend in each quarter of 2025
based on the 58.0 million shares we held of Kronos common stock at December 31, 2024, during 2025 we would receive
aggregate regular dividends from Kronos of $11.6 million. NL paid a quarterly dividend of $.08 per share in 2024 for
which we received $12.9 million. In August 2024, NL’s board of directors declared a special dividend of $.43 per share
on its common stock. We received $17.4 million from this special dividend, which is not expected to be recurring. In
February 2025 the NL board of directors approved a quarterly dividend of $.09 per share. If NL were to pay its $.09 per
share dividend in each quarter of 2025 based on the 40.4 million shares we held of NL common stock at December 31,
2024, during 2025 we would receive aggregate quarterly dividends from NL of $14.5 million. BMI and LandWell pay
cash dividends from time to time, but the timing and amount of such dividends are uncertain. In this regard, we received
aggregate dividends from BMI and LandWell of $16.6 million in 2022, $17.6 million in 2023 and $4.0 million in 2024.
In addition, we received aggregate dividends from BMI and LandWell of $4.5 million in January 2025. All of our
ownership interest in CompX is held through our ownership in NL, as such we do not receive any dividends from CompX.
Instead any dividend paid by CompX is paid to NL.
Our subsidiaries have various credit agreements with unrelated third-party lenders which contain customary
limitations on the payment of dividends, typically a percentage of net income or cash flow; however, these restrictions in
the past have not significantly impacted their ability to pay dividends.
Investment 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 decision 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.
We generally do not guarantee any indebtedness or other obligations of our subsidiaries or affiliates. See Note 17
to our Consolidated Financial Statements. Our subsidiaries are not required to pay us dividends. If one or more of our
subsidiaries were unable to maintain its current level of dividends, either due to restrictions contained in a credit agreement
or to satisfy its liabilities or otherwise, our ability to service our liabilities or to pay dividends on our common stock could
be adversely impacted. If this were to occur, we might consider reducing or eliminating our dividends or selling interests
in subsidiaries or other assets. If we were required to liquidate assets to generate funds to satisfy our liabilities, we may be
required to sell our subsidiaries’ securities for less than what we believe is the long-term value of such assets.
We have a $50 million revolving credit facility with a subsidiary of NL secured with approximately 35.2 million
shares of the common stock of Kronos Worldwide, Inc. held by NL’s subsidiary as collateral. Outstanding borrowings
under the credit facility, as amended, bear interest at the prime rate plus 1.875% per annum, payable quarterly, with all
amounts due on December 31, 2030. The maximum principal amount which may be outstanding from time-to-time under
the credit facility is limited to 50% of the amount of the most recent closing price of the Kronos stock. The credit facility
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contains a number of covenants and restrictions which, among other things, restrict NL’s subsidiary’s ability to incur
additional debt, incur liens, and merge or consolidate with, or sell or transfer substantially all of NL’s subsidiary’s assets
to, another entity, and require NL’s subsidiary to maintain a minimum specified level of consolidated net worth. Upon an
event of default (as defined in the credit facility), Valhi will be entitled to terminate its commitment to make further loans
to NL’s subsidiary, declare the outstanding loans (with interest) immediately due and payable, and exercise its rights with
respect to the collateral under the loan documents. Such collateral rights include, upon certain insolvency events with
respect to NL’s subsidiary or NL, the right to purchase all of the Kronos common stock at a purchase price equal to the
aggregate market value, less amounts owing to Valhi under the loan documents, and up to 50% of such purchase price
may be paid 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, with the remainder of such
purchase price payable in cash at the date of purchase. We also eliminate any such intercompany borrowings in our
Consolidated Financial Statements. There is $.5 million outstanding under this facility at December 31, 2024.
We had an unsecured revolving demand promissory note with Kronos which, as amended, provided for
borrowings from Kronos of up to $25 million. We had no borrowings with Kronos in 2022, 2023 and 2024. Kronos’
obligation to loan us money under this note was at Kronos’ discretion. In February 2024, this note was cancelled by mutual
agreement between us and Kronos.
We have an unsecured revolving demand promissory note with CompX which, as amended, provides for
borrowings from CompX of up to $25 million. We eliminate these intercompany borrowings in our Consolidated Financial
Statements. The facility, as amended, is due on demand, but in any event no earlier than December 31, 2026. We had gross
borrowings of $24.3 million and gross repayments of $29.8 million with CompX for a total outstanding balance of $13.2
million at December 31, 2022. We had gross borrowings of $27.9 million and gross repayments of $30.5 million with
CompX for a total outstanding balance of $10.6 million at December 31, 2023. We had gross borrowings of $25.0 million
and gross repayments of $26.3 million with CompX for a total outstanding balance of $9.3 million at December 31, 2024.
We could borrow an additional $15.7 million under our current intercompany facility with CompX at December 31, 2024.
CompX’s obligation to loan us money under this note is at CompX’s discretion.
Commitments and Contingencies
We are subject to certain commitments and contingencies, as more fully described in the Notes to our
Consolidated Financial Statements and in this Management’s Discussion and Analysis of Financial Condition and Results
of Operations, including:
•
certain income contingencies in various U.S. and non-U.S. jurisdictions;
•
certain environmental remediation matters involving NL and BMI;
•
certain litigation related to NL’s former involvement in the manufacture of lead pigment and lead-based
paint; and
•
certain other litigation to which we are a party.
In addition to those legal proceedings described in Note 18 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 NL) with respect to asserted health
concerns associated with the use of such products and (ii) effectively overturn court decisions in which NL 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 described in the Notes 7, 9 and 18 to our Consolidated Financial Statements, we are a party to various debt,
lease and other agreements which contractually and unconditionally commit us to pay certain amounts in the future. Our
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obligations related to the long-term supply contracts for the purchase of TiO2 feedstock are more fully described in Note 18
to our Consolidated Financial Statements and above in “Business – Chemicals Segment – Kronos Worldwide, Inc. – Raw
Materials.” CompX has purchase obligations of $19.8 million ($19.3 million payable in 2025 and $.5 million payable in
2026/2027) which consist 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 are
based on the contractual payment amount and the contractual payment date for those commitments.
Recent Accounting Pronouncements
See Note 21 to our Consolidated Financial Statements.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
General – We are exposed to market risk from changes in interest rates, currency exchange 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
and or investment in marketable debt securities.
At December 31, 2024, our aggregate indebtedness was comprised primarily of Kronos’ fixed-rate, euro-
denominated KII 9.50% Senior Secured Notes due 2029 and KII 3.75% Senior Secured Notes due 2025. The fixed-rate
debt instruments minimize earnings volatility that would result from changes in interest rates. The Kronos Global Revolver
is a variable-rate instrument. The following table presents principal amounts and weighted average interest rates for our
aggregate outstanding indebtedness at December 31, 2024. Information shown below for Kronos’ euro-denominated
9.50% and 3.75% Senior Secured Notes due 2029 and 2025, respectively, is presented in its U.S. dollar equivalent at
December 31, 2024 (net of unamortized debt issuance costs of $6.3 million, in addition to an unamortized bond premium
of $5.3 million) using an exchange rate of U.S. $1.043 per euro. In addition, at December 31, 2024, Kronos has a $53.7
million subordinated, unsecured term loan payable to a related party, Contran, due September 2029, and Valhi has $44.6
million outstanding on an unsecured revolving credit facility with Contran. See Note 9 to our Consolidated Financial
Statements.
Indebtedness Amount Year end
Carrying
Fair
interest Maturity
value
value
rate
date
(In millions)
Fixed-rate indebtedness:
Kronos fixed-rate 9.50% Senior Secured Notes due 2029
$
365.4 $
403.4
9.50%
2029
Kronos fixed-rate 3.75% Senior Secured Notes due 2025
78.3
77.9
3.75%
2025
LandWell bank note payable
11.4
11.4
4.76%
2036
Total fixed-rate indebtedness
$
455.1 $
492.7
8.39%
Variable-rate indebtedness - Kronos revolving credit facility
$
10.0 $
10.0
6.25%
2029
Currency Exchange Rates – We are exposed to market risk arising from changes in currency exchange rates as a
result of manufacturing and selling our products worldwide. Earnings are primarily affected by fluctuations in the value
of the U.S. dollar relative to the euro, the Canadian dollar, the Norwegian krone and, to a lesser extent, the United Kingdom
pound sterling and the value of the euro relative to the Norwegian krone.
The majority of our 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 our sales generated from our
non-U.S. operations is denominated in the U.S. dollar (and consequently our non-U.S. operations will generally hold U.S.
dollars from time to time). Certain raw materials used worldwide, primarily titanium-containing feedstocks, are purchased
primarily in U.S. dollars, while labor and other production and administrative costs are purchased primarily in local
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currencies. Consequently, the translated U.S. dollar value of our non-U.S. sales and operating results are subject to
currency exchange rate fluctuations which may favorably or unfavorably impact reported earnings. In addition to the
impact of the translation of sales and expenses over time, our 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 our non-U.S.
operations are holding non-local currency (primarily U.S. dollars).
We periodically use currency forward contracts to manage a very nominal portion of currency exchange rate risk
associated with trade receivables denominated in a currency other than the holder’s functional currency or similar exchange
rate risk associated with future sales. We have not entered into these contracts for trading or speculative purposes in the
past. However, we may enter into such contracts in the future to manage our currency exchange rate risk. We are not party
to any currency forward contracts at December 31, 2024.
Also, we are subject to currency exchange rate risk associated with Kronos’ Senior Secured Notes due 2025 and
2029, as such indebtedness is denominated in euros. At December 31, 2024, we had the equivalent of $365.4 million
outstanding under Kronos’ euro-denominated KII 9.5% Senior Secured Notes due 2029 (exclusive of unamortized bond
premium and debt issuance costs) and $78.3 million outstanding under Kronos’ euro-dominated KII 3.75% Senior Secured
Notes due 2025 (exclusive of unamortized debt issuance costs). The potential increase in the U.S. dollar equivalent of such
indebtedness resulting from a hypothetical 10% adverse change in exchange rates at December 31, 2024 would be
approximately $45 million.
See Notes 1 and 19 to our Consolidated Financial Statements for a discussion of the assumptions we used to
estimate the fair value of the financial instruments to which we are a party at December 31, 2023 and 2024.
Raw Materials – Our Chemicals Segment is exposed to market risk from changes in commodity prices relating
to our raw materials. As discussed in Item 1, we generally enter into long-term supply agreements for certain of our raw
material requirements. Many of our raw material contracts contain fixed quantities we are required to purchase, or specify
a range of quantities within which we are required to purchase. Raw material pricing under these agreements is generally
negotiated quarterly or semi-annually depending upon the suppliers. For certain raw material requirements we do not have
long-term supply agreements either because we have assessed the risk of the unavailability of those raw materials and/or
the risk of a significant change in the cost of those raw materials to be low, or because long-term supply agreements for
those raw materials are generally not available.
Our Component Products Segment 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. We do not have long-
term supply agreements for our raw material requirements because either we believe the risk of unavailability of those raw
materials is low and we believe the downside risk of price volatility to be too great or because long-term supply agreements
for those materials are generally not available. We do not engage in commodity raw material hedging programs.
Other – We believe there may be a certain amount of incompleteness in the sensitivity analyses presented above.
For example, the hypothetical effect of changes in interest rates discussed above ignores the potential effect on other
variables that affect our results of operations and cash flows, such as demand for our products, sales volumes and selling
prices and operating expenses. Contrary to the above assumptions, changes in interest rates rarely result in simultaneous
comparable shifts along the yield curve. Accordingly, the amounts we present above are not necessarily an accurate
reflection of the potential losses we would incur assuming the hypothetical changes in market prices were actually to occur.
The above discussion and estimated sensitivity analysis amounts 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 by us of future
events, gains or losses.
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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 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 Michael S. Simmons, our Vice Chairman of the Board,
President and Chief Executive Officer, and Amy Allbach Samford, our Executive Vice President and Chief Financial
Officer, have evaluated the design and effectiveness of our disclosure controls and procedures as of December 31, 2024.
Based upon their evaluation, these executive officers have concluded that our disclosure controls and procedures were
effective as of the date of such evaluation.
Management’s Report on Internal Control over Financial Reporting –
Our management is responsible for establishing and maintaining adequate internal control over financial reporting
which, as defined by Exchange Act Rule 13a-15(f) means a process designed by, or under the supervision of, our principal
executive and principal financial officers, or persons performing similar functions, and effected by the board of directors,
management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and
includes those policies and procedures that:
•
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 criteria
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 the
effectiveness of our internal control over financial reporting as of December 31, 2024. Management’s report was not
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subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only
management’s report in this Annual Report on Form 10-K.
Other –
As permitted by the SEC, our assessment of internal control over financial reporting excludes (i) internal control
over the preparation of any financial statement schedules which would be required by Article 12 of Regulation S-X and
(ii) internal control over financial reporting as it relates to our newly-consolidated subsidiary LPC (as discussed in Note 3
to our Consolidated Financial Statements, which represents approximately 13% of our total assets at December 31, 2024.)
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, or
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, file quarterly
certifications with the SEC regarding the quality of our public disclosures, as required by Section 302 of the Sarbanes-
Oxley Act of 2002. The certifications for the quarter ended December 31, 2024 have been filed as Exhibits 31.1 and 31.2
to this Annual Report on Form 10-K.
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 we will
file with the SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this report (the
“Valhi Proxy Statement”).
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.
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ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTORS
INDEPENDENCE
The information required by this Item is incorporated by reference to our 2025 proxy statement. See also Note 17
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.
PART IV
ITEM 15.
EXHIBITS
(a) and (c) Financial Statements
The Registrant
Our Consolidated Financial Statements listed on the accompanying Index of Financial Statements
(see page F-1) are filed as part of this Annual Report.
50%-or-less owned persons
We are not required to provide any consolidated financial statements pursuant to Rule 3-09 of
Regulation S-X.
(b) Exhibits
Included as exhibits are the items listed in the Exhibit Index. We have retained a signed original of
any of these exhibits that contain signatures, and we will provide such exhibit to the Commission
or its staff upon request. We will furnish a copy of any of the exhibits listed below upon request and
payment of $4.00 per exhibit to cover our costs of furnishing the exhibits. Such requests should be
directed to the attention of our Corporate Secretary at our corporate offices located at 5430 LBJ
Freeway, Suite 1700, Dallas, Texas 75240. Pursuant to Item 601(b)(4)(iii) of Regulation S-K, we
will furnish to the Commission upon request any instrument defining the rights of holders of long-
term debt issues and other agreements related to indebtedness which do not exceed 10% of our
consolidated total assets as of December 31, 2024.
Item No.
Exhibit Index
3.1
Restated Third Amended and Restated Certificate of Incorporation of Valhi, Inc., as amended by Certificate
of Amendment filed on May 29, 2020 (effective June 1, 2020) and by Certificate of Elimination of the 6%
Series A Preferred Stock filed on August 10, 2020 – incorporated by reference to Exhibit 3.1 to our
Quarterly Report on Form 10-Q for the quarter ended September 30, 2020.
3.2
Amended and Restated By-Laws of Valhi, Inc. (effective November 2, 2023) – incorporated by reference
to Exhibit 3.1 of our Current Report on Form 8-K filed on November 2, 2023.
4.1
Description of Capital Stock – incorporated by reference to Exhibit 99.2 of our Current Report on Form 8-K
dated May 6, 2021 and filed on May 6, 2021.
10.1
Intercorporate Services Agreement between Valhi, Inc. and Contran Corporation effective as of January 1,
2004 – incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2004.
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Item No.
Exhibit Index
10.2
Intercorporate Services Agreement between Contran Corporation and NL Industries, Inc. effective as of
January 1, 2004 – incorporated by reference to Exhibit 10.1 to NL’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2004.
10.3
Intercorporate Services Agreement between Contran Corporation and CompX International Inc. effective
January 1, 2004 – incorporated by reference to Exhibit 10.2 to CompX’s Annual Report on Form 10-K for
the year ended December 31, 2003.
10.4
Intercorporate Services Agreement between Contran Corporation and Kronos Worldwide, Inc. effective
January 1, 2004 – incorporated by reference to Exhibit No. 10.1 to Kronos’ Quarterly Report on Form 10-Q
for the quarter ended March 31, 2004.
10.5
Tax Agreement between Valhi, Inc. and Contran Corporation dated January 1, 2020 incorporated by
reference to Exhibit 10.5 to our Annual Report on Form 10-K for the year ended December 31, 2019.
10.6*
Valhi, Inc. 2021 Non-employee Director Stock Plan – incorporated by reference to Exhibit 4.4 of the
Registration statement on Form S-8 of the Registrant. Filed on May 27, 2021.
10.7*
Kronos Worldwide, Inc. 2012 Director Stock Plan – incorporated by reference to Exhibit 4.4 of the
Registration statement on Form S-8 of the Registrant. Filed on May 31, 2012.
10.8*
CompX International Inc. 2012 Director Stock Plan – incorporated by reference to Exhibit 4.4 of the
Registration statement on Form S-8 of the Registrant. Filed on May 31, 2012.
10.9*
NL Industries, Inc. 2023 Non-Employee Director Stock Plan – incorporated by reference to Exhibit 10.1 to
NL’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.
10.10
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 10.16 to Kronos’ Annual Report on Form 10-K for the year
ended December 31, 2018 filed on March 11, 2019.
10.11
Lease Contract dated June 21, 1952, between Farbenfabrieken Bayer Aktiengesellschaft and
Titangesellschaft mit beschrankter Haftung (German language version and English translation thereof) –
incorporated by reference to Exhibit 10.14 of NL’s Annual Report on Form 10-K (File No. 1-640) for
the year ended December 31, 1985. (P)
10.12
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 Annual Report on Form 10-K of Kronos
Worldwide, Inc. for the year ended December 31, 2015.
10.13
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 dated September 13,
2017 and filed by Kronos Worldwide, Inc. on September 13, 2017.
10.13.1
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 February 12, 2024.
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Item No.
Exhibit Index
10.13.2
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 of Kronos Worldwide, Inc.’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2024.
10.14
Indenture, dated as of February 12, 2024, among Kronos International, Inc., the guarantors named therein,
and Deutsche Bank Trust Company Americas, as trustee, collateral agent, paying agent, transfer agent and
registrar – incorporated by reference to Exhibit 4.2 to Kronos Worldwide, Inc.’s Current Report on
Form 8-K filed February 12, 2024.
10.14.1
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 July 30, 2024.
10.14.2
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 of Kronos Worldwide, Inc.’s
Quarterly Report on Form 10-Q for the quarter ended September 30, 2024.
10.15
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 dated September 13, 2017 and filed by Kronos
Worldwide, Inc. on September 13, 2017.
10.15.1
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
February 12, 2024.
10.15.2
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.
10.15.3
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 of Kronos Worldwide, Inc.’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2024.
10.15.4
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 of Kronos Worldwide, Inc.’s Quarterly Report on Form 10-Q for
the quarter ended September 30, 2024.
10.16
Credit Agreement dated as of April 20, 2021 by and among Kronos Worldwide, Inc., Kronos Louisiana,
Inc., Kronos (US), Inc., Kronos Canada, Inc., Kronos Europe NV, Kronos Titan GmbH and Wells Fargo
Bank, National Association as administrative agent and lender – incorporated by reference to Exhibit 10.1
of Kronos Worldwide, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.
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Item No.
Exhibit Index
10.16.1
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 GmbH, Wells
Fargo Bank, National Association, as administrative agent, and the lenders a party thereto – incorporated
by reference to Exhibit 10.1 to Kronos Worldwide, Inc.’s Current Report on Form 8-K filed on May 9,
2023.
10.16.2
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.
10.16.3
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 the Current Report on Form 8-K dated December 19, 2024 and filed by Kronos
Worldwide, Inc. on December 19, 2024.
10.17
Guaranty and Security Agreement dated as of April 20, 2021, by and among Kronos Worldwide, Inc.,
Kronos Louisiana, Inc., Kronos (US), Inc., Kronos Canada, Inc., Kronos International, Inc. and Wells Fargo
Bank, National Association as administrative agent and lender – incorporated by reference to Exhibit 10.2
of Kronos Worldwide, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.
10.17.1
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 of Kronos Worldwide,
Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024.
10.17.2
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 of Kronos Worldwide, Inc.’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2024.
10.18
Unsecured Subordinated Term Promissory Note dated February 12, 2024 in the principal amount of
$53,705,000 executed by Kronos Worldwide, Inc. and the guarantors named therein and payable to the
order of Contran Corporation – incorporated by reference to Exhibit 4.5 to Kronos Worldwide, Inc.’s
Current Report on Form 8-K filed February 12, 2024.
10.18.1
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 10.6 of Kronos Worldwide, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30,
2024.
10.19
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.
10.19.1
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 of Kronos Worldwide, Inc.’s Quarterly Report on Form 10-Q for the quarter ended
September 30, 2024.
-77-
Item No.
Exhibit Index
10.20**
Unsecured Revolving Demand Promissory Note dated December 31, 2024 in the principal amount of
$150.0 million executed by Valhi, Inc. and payable to the order of Contran Corporation.
10.21
Collateral Agreement dated March 12, 2013 between Valhi, Inc. and Contran Corporation – incorporated
by reference to Exhibit 10.23 to our Annual Report on Form 10-K for the year ended December 31, 2018
filed on March 11, 2019.
10.22**
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**
Valhi, Inc. Insider Trading Policy
21.1**
Subsidiaries of Valhi, Inc.
23.1**
Consent of PricewaterhouseCoopers LLP with respect to Valhi’s 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 our Annual
Report on Form 10-K for the year ended December 31, 2023.
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 agreement.
** Filed herewith.
(P) Paper exhibits.
-78-
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.
VALHI, INC.
(Registrant)
By: /s/ Michael S. Simmons
Michael S. Simmons, March 6, 2025
(Vice Chairman of the Board, 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/ Michael S. Simmons
Loretta J. Feehan, March 6, 2025
(Chair of the Board (non-executive))
Michael S. Simmons, March 6, 2025
(Vice Chairman of the Board, President and Chief
Executive Officer)
/s/ Thomas E. Barry
/s/ Amy Allbach Samford
Thomas E. Barry, March 6, 2025
(Director)
Amy Allbach Samford, March 6, 2025
(Executive Vice President and Chief Financial Officer)
/s/ Terri L. Herrington
/s/ Patty S. Brinda
Terri L. Herrington, March 6, 2025
(Director)
Patty S. Brinda, March 6, 2025
(Vice President and Controller)
/s/ W. Hayden McIlroy
W. Hayden McIlroy, March 6, 2025
(Director)
/s/ Gina A. Norris
Gina A. Norris, March 6, 2025
(Director)
/s/ Mary A. Tidlund
Mary A. Tidlund, March 6, 2025
(Director)
(This page has been left blank intentionally.)
F-1
VALHI, INC.
Annual Report on Form 10-K
Items 8, 15(a) and 15(c)
Index of Financial Statements
Page
Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
F-2
Consolidated Balance Sheets – December 31, 2023 and 2024
F-5
Consolidated Statements of Operations –
Years ended December 31, 2022, 2023 and 2024
F-7
Consolidated Statements of Comprehensive Income (Loss) –
Years ended December 31, 2022, 2023 and 2024
F-8
Consolidated Statements of Stockholders’ Equity –
Years ended December 31, 2022, 2023 and 2024
F-9
Consolidated Statements of Cash Flows –
Years ended December 31, 2022, 2023 and 2024
F-10
Notes to Consolidated Financial Statements
F-12
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 Valhi, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Valhi, Inc. and its subsidiaries
(the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of
operations, of comprehensive income (loss), of stockholders’ equity and of cash flows for each of
the three years in the period ended December 31, 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 matters communicated below are matters arising from the current period audit
of the consolidated financial statements that were communicated or required to be communicated
to the audit committee and that (i) relate 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 matters below, providing separate opinions on the critical audit
matters or on the accounts or disclosures to which they relate.
F-2
Income Taxes - Chemicals Segment
As described in Note 14 to the consolidated financial statements, the Company recorded a
provision for income taxes of $82.9 million and recorded noncurrent deferred tax asset and
deferred tax liability amounts of $53.8 million and $57.7 million, respectively, for the year ended
December 31, 2024. As disclosed by management, the Company operates globally through its
Chemicals Segment. The calculation of the Company’s provision for income taxes and its deferred
tax assets and liabilities involves the interpretation and application of complex tax laws and
regulations in a multitude of jurisdictions across the Chemicals Segment’s global operations. The
Company’s effective tax rate is highly dependent upon the geographic distribution of its earnings
or losses and the effects of tax laws and regulations in each tax-paying jurisdiction in which it
operates. Significant judgments and estimates are required by management in determining the
Company’s consolidated provision for income taxes due to the global nature of the Chemicals
Segment’s operations. The Company's provision for income taxes and deferred tax assets and
liabilities reflect management's best assessment of estimated current and future taxes to be paid,
including the recognition and measurement of deferred tax assets and liabilities.
The principal considerations for our determination that performing procedures relating to income
taxes for the Chemicals Segment is a critical audit matter are the significant judgment by
management when developing the estimate of current and future taxes to be paid, including the
recognition and measurement of deferred tax assets and liabilities. This in turn led to a high
degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating
evidence related to the recognition and measurement of deferred tax assets and liabilities and
management's assessment of the estimated current and future taxes to be paid, including
evaluating management’s interpretation of tax laws and regulations in jurisdictions in which the
Chemicals Segment operates.
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 accounting for income taxes,
including controls over the identification, completeness, and recognition of permanent and
temporary differences within jurisdictions in which the Chemicals Segment operates, the
recognition and measurement of deferred tax assets and liabilities, the application of tax laws and
regulations in the various jurisdictions in which the Chemicals Segment operates, the rate
reconciliation and the provision to tax return reconciliation. These procedures also included,
among others, (i) evaluating the provision for income taxes, including the accuracy of the
underlying information used in the calculation by jurisdiction, as well as the reasonableness of
management's judgments and estimates in the application of tax laws and regulations in certain
jurisdictions in which the Chemicals Segment operates; (ii) testing the current and deferred
income tax provision, including evaluating permanent and temporary differences within certain
jurisdictions and management's assessment of the technical merits of the differences; (iii)
performing procedures over the Company's rate reconciliation; and (iv) testing the reconciliation
of the provision to the tax returns.
Environmental Remediation and Related Matters - NL Industries, Inc.
As described in Note 18 to the consolidated financial statements, management evaluates the
potential range of the Company’s liability for environmental remediation and related costs at sites
where NL Industries, Inc. (“NL”), a majority-owned subsidiary of 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 of NL’s 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
F-3
expenditures are probable and reasonably estimable. As disclosed by management,
environmental remediation and related costs accruals (and the potential range of the liabilities)
are adjusted as further information becomes available or as circumstances change which involves
management’s judgment regarding current facts and circumstances for each site and is subject to
various assumptions and estimates.
The principal considerations for our determination that performing procedures relating to
environmental remediation and related matters is a critical audit matter are the significant
judgment by management when assessing the accruals and the potential range of the Company’s
liabilities and when determining whether estimated future expenditures are probable and
reasonably estimable, which in turn led to a high degree of auditor judgment, subjectivity and
effort in performing procedures and evaluating evidence related to management’s assessment of
the accruals and the potential range of the liabilities.
Addressing the matter involved performing procedures and evaluating audit evidence in
connection with forming our overall opinion on the consolidated financial statements. These
procedures included testing the effectiveness of controls relating to management’s evaluation of
NL’s environmental remediation and related matters, including controls over determining
whether estimated future expenditures are probable and reasonably estimable, as well as the
related financial statement disclosures. These procedures also included, among others, (i)
obtaining the rollforward of NL’s environmental accrual activity for each matter and, for a sample
of sites, reviewing and discussing site activity with management, (ii) obtaining and evaluating
responses to letters of audit inquiry from NL’s internal and external legal counsel, and (iii)
evaluating the sufficiency of the Company’s environmental remediation and related matters
disclosures related to NL.
Dallas, Texas
March 6, 2025
We have served as the Company’s auditor since 1987.
F-4
F-5
VALHI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions)
ASSETS
December 31,
2023
2024
Current assets:
Cash and cash equivalents
$
407.0
$
348.3
Restricted cash equivalents
22.6
24.8
Marketable securities
56.1
1.9
Accounts and other receivables, net
321.1
325.7
Receivables from affiliates
17.5
.8
Refundable income taxes
1.8
1.3
Inventories, net
596.1
685.8
Prepaid expenses and other
53.2
65.1
Total current assets
1,475.4
1,453.7
Other assets:
Marketable securities
4.8
5.7
Investment in TiO2 manufacturing joint venture
111.0
—
Goodwill
379.7
382.3
Deferred income taxes
67.0
53.8
Pension asset
8.1
19.8
Other assets
173.7
161.5
Total other assets
744.3
623.1
Property and equipment:
Land
45.1
74.7
Buildings
271.2
282.6
Equipment
1,179.4
1,312.0
Mining properties
89.2
76.0
Construction in progress
23.6
41.7
1,608.5
1,787.0
Less accumulated depreciation and amortization
1,091.2
1,063.6
Net property and equipment
517.3
723.4
Total assets
$
2,737.0
$
2,800.2
F-6
VALHI, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In millions, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31,
2023
2024
Current liabilities:
Current maturities of long-term debt
$
.7
$
79.0
Accounts payable
228.5
250.0
Accrued liabilities
216.6
199.1
Accrued environmental remediation and related costs
3.7
59.7
Accrued litigation settlement
11.8
16.4
Payables to affiliates
30.1
17.1
Income taxes
15.7
22.5
Total current liabilities
507.1
643.8
Noncurrent liabilities:
Long-term debt
545.8
484.4
Accrued pension costs
151.6
117.6
Accrued environmental remediation and related costs
93.2
14.9
Deferred income taxes
17.1
57.7
Payable to affiliate - income taxes
18.5
—
Long-term litigation settlement
16.1
—
Other liabilities
111.4
102.7
Total noncurrent liabilities
953.7
777.3
Equity:
Preferred stock, $.01 par value; 500,000 shares authorized, none issued
—
—
Common stock, $.01 par value; 50.0 million shares authorized;
29.6 million shares issued and outstanding
.3
.3
Additional paid-in capital
669.5
669.9
Retained earnings
475.8
574.7
Accumulated other comprehensive loss
(145.5)
(159.2)
Treasury stock, at cost - 1.1 million shares
(49.6)
(49.6)
Total Valhi stockholders' equity
950.5
1,036.1
Noncontrolling interest in subsidiaries
325.7
343.0
Total equity
1,276.2
1,379.1
Total liabilities and equity
$
2,737.0
$
2,800.2
Commitments and contingencies (Notes 3, 14, 17 and 18)
See accompanying Notes to Consolidated Financial Statements.
F-7
VALHI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
Years ended December 31,
2022
2023
2024
Revenues and other income:
Net sales
$
2,222.5 $
1,921.7 $
2,104.8
Other income, net
43.7
55.4
61.8
Total revenues and other income
2,266.2 1,977.1 2,166.6
Cost and other expense (income):
Cost of sales
1,732.1 1,676.5 1,680.3
Selling, general and administrative
304.0
277.4
256.2
Gain on remeasurement of investment in TiO2 manufacturing joint
venture
—
—
(64.5)
Other components of net periodic pension and OPEB
expense
13.9
11.8
2.6
Water system fixed asset impairment
16.4
—
—
Interest
27.9
28.3
49.9
Other
2.0
2.6
(2.1)
Total costs and other expense
2,096.3 1,996.6 1,922.4
Income (loss) before income taxes
169.9
(19.5)
244.2
Income tax expense (benefit)
36.8
(24.6)
82.9
Net income
133.1
5.1
161.3
Noncontrolling interest in net income of subsidiaries
45.9
15.0
53.3
Net income (loss) attributable to Valhi stockholders
$
87.2 $
(9.9) $
108.0
Amounts attributable to Valhi stockholders:
Basic and diluted net income (loss) per share
$
3.06 $
(.35) $
3.79
Basic and diluted weighted average shares outstanding
28.5
28.5
28.5
See accompanying Notes to Consolidated Financial Statements.
F-8
VALHI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In millions)
Years ended December 31,
2022
2023
2024
Net income
$
133.1
$
5.1
$
161.3
Other comprehensive income (loss), net of tax:
Currency translation
(26.1)
3.6
(30.8)
Defined benefit pension plans
89.4
(5.9)
12.6
Other
1.0
(.6)
(.3)
Total other comprehensive income (loss), net
64.3
(2.9)
(18.5)
Comprehensive income
197.4
2.2
142.8
Comprehensive income attributable to noncontrolling interest
62.8
13.7
48.5
Comprehensive income (loss) attributable to Valhi stockholders
$
134.6
$
(11.5)
$
94.3
See accompanying Notes to Consolidated Financial Statements.
F-9
VALHI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years ended December 31, 2022, 2023 and 2024
(In millions)
Accumulated
Additional
other
Non-
Common
paid-in
Retained comprehensive Treasury controlling
Total
stock
capital
earnings
loss
stock
interest
equity
Balance at December 31, 2021
$
.3 $ 669.0 $ 416.6 $
(191.3) $ (49.6) $ 328.9 $ 1,173.9
Net income
—
— 87.2
—
—
45.9 133.1
Cash dividends - $.32 per share
—
— (9.0)
—
—
—
(9.0)
Dividends paid to noncontrolling
interest
—
—
—
—
— (38.9)
(38.9)
Other comprehensive income, net
—
—
—
47.4
—
16.9
64.3
Equity transactions with noncontrolling
interest and other, net
—
.5
—
—
—
(4.6)
(4.1)
Balance at December 31, 2022
.3 669.5 494.8
(143.9) (49.6) 348.2 1,319.3
Net income (loss)
—
— (9.9)
—
—
15.0
5.1
Cash dividends - $.32 per share
—
— (9.1)
—
—
—
(9.1)
Dividends paid to noncontrolling
interest
—
—
—
—
— (34.0)
(34.0)
Other comprehensive loss, net
—
—
—
(1.6)
—
(1.3)
(2.9)
Equity transactions with noncontrolling
interest and other, net
—
—
—
—
—
(2.2)
(2.2)
Balance at December 31, 2023
.3 669.5 475.8
(145.5) (49.6) 325.7 1,276.2
Net income
—
— 108.0
—
—
53.3 161.3
Cash dividends - $.32 per share
—
— (9.1)
—
—
—
(9.1)
Dividends paid to noncontrolling
interest
—
—
—
—
— (31.2)
(31.2)
Other comprehensive loss, net
—
—
—
(13.7)
—
(4.8)
(18.5)
Equity transactions with noncontrolling
interest and other, net
—
.4
—
—
—
—
.4
Balance at December 31, 2024
$
.3 $ 669.9 $ 574.7 $
(159.2) $ (49.6) $ 343.0 $ 1,379.1
See accompanying Notes to Consolidated Financial Statements.
F-10
VALHI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Years ended December 31,
2022
2023
2024
Cash flows from operating activities:
Net income
$
133.1 $
5.1 $
161.3
Depreciation and amortization
58.5
54.1
66.7
Gain on remeasurement of investment in TiO2 manufacturing
joint venture
—
—
(64.5)
Premium on issuance of senior secured notes
—
—
6.0
Deferred income taxes
3.6
(50.3)
43.5
Benefit plan expense greater (less) than cash funding
8.6
(6.2)
(8.1)
Loss on pension plan termination
—
6.2
—
Water system fixed asset impairment
16.4
—
—
Fixed asset impairment
—
3.8
—
Noncash interest expense
2.2
2.0
3.1
Distributions from (contributions to) TiO2 manufacturing
joint venture, net
(10.5)
3.1
(2.7)
Gain from sale of land
—
(1.5)
(.5)
Other, net
12.1
5.2
(.2)
Change in assets and liabilities:
Accounts and other receivables, net
81.1
(44.6)
(16.7)
Inventories, net
(204.2)
56.7
(41.0)
Land held for development, net
21.4
.8
5.3
Accounts payable and accrued liabilities
3.9
11.2
(60.2)
Income taxes
(.5)
9.3
9.2
Accounts with affiliates
9.4
(27.8)
(6.6)
Other noncurrent assets
(3.4)
(9.5)
(29.5)
Other noncurrent liabilities
(83.9)
(19.3)
(15.1)
Other, net
(12.9)
5.6
(6.0)
Net cash provided by operating activities
34.9
3.9
44.0
Cash flows from investing activities:
Capital expenditures
(67.6)
(48.5)
(30.9)
Acquisition of remaining TiO2 manufacturing joint venture
interest, net of cash acquired
—
—
(156.8)
Cash, cash equivalents and restricted cash of BWC
(8.6)
—
2.6
Purchases of marketable securities
(73.6)
(66.4)
(2.7)
Proceeds from disposal of marketable securities
2.9
85.7
57.0
Proceeds from land sales
—
1.8
5.6
Other, net
.2
(1.6)
.2
Net cash used in investing activities
(146.7)
(29.0)
(125.0)
F-11
VALHI, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(In millions)
Years ended December 31,
2022
2023
2024
Cash flows from financing activities:
Kronos revolving credit facility:
Borrowings
$
— $
— $
158.6
Payments
—
—
(148.9)
Payments on long-term debt
(62.0)
(29.8)
(102.2)
Kronos term loan from Contran
—
—
53.7
Proceeds from issuance of Kronos senior secured notes
—
—
80.2
Deferred financing fees
—
—
(9.3)
Valhi cash dividends paid
(9.0)
(9.1)
(9.1)
Distributions to noncontrolling interest in subsidiaries
(38.9)
(34.0)
(25.3)
Subsidiary treasury stock acquired
(4.0)
(2.9)
—
Other, net
(.1)
(.1)
—
Net cash used in financing activities
(114.0)
(75.9)
(2.3)
Cash, cash equivalents and restricted cash and cash
equivalents - net change from:
Operating, investing and financing activities
(225.8)
(101.0)
(83.3)
Effect of exchange rates on cash
(5.1)
1.0
(.1)
Balance at beginning of year
792.9
562.0
462.0
Balance at end of year
$
562.0 $
462.0 $
378.6
Supplemental disclosures:
Cash paid for:
Interest, net of amounts capitalized
$
25.8 $
26.6 $
45.1
Income taxes, net
43.7
27.4
41.8
Noncash investing activities:
Change in accruals for capital expenditures
6.6
1.1
7.0
See accompanying Notes to Consolidated Financial Statements.
F-12
VALHI, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024
Note 1 – Summary of significant accounting policies:
Nature of our business. Valhi, Inc. (NYSE: VHI) is primarily a holding company. We operate through our
wholly-owned and majority-owned subsidiaries, including NL Industries, Inc., Kronos Worldwide, Inc., CompX
International Inc., Tremont LLC, Basic Management, Inc. (“BMI”) and The LandWell Company (“LandWell”). Kronos
(NYSE: KRO), NL (NYSE: NL) and CompX (NYSE American: CIX) each file periodic reports with the Securities and
Exchange Commission (“SEC”).
Organization. We are majority owned by a wholly-owned subsidiary of Contran Corporation (“Contran”), which
owns approximately 91% of our outstanding common stock at December 31, 2024. 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 us.
Unless otherwise indicated, references in this report to “we,” “us” or “our” refer to Valhi, Inc. and its subsidiaries,
taken as a whole.
Management’s estimates. The preparation of our Consolidated Financial Statements in conformity with
accounting principles generally accepted in the United States of America (“GAAP”), requires us 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 Valhi and our majority-owned and wholly-owned subsidiaries. We eliminate all material
intercompany accounts and balances. Changes in ownership are accounted for as equity transactions with no gain or loss
recognized on the transaction unless there is a change in control.
Revision of previously issued financial statements. Prior to June 30, 2024, we had concluded a valuation
allowance for the deferred tax asset for the carryforwards related to the nondeductible portion of our interest expense was
required; however, during the second quarter of 2024 we determined there were additional sources of income that should
have been considered with regards to the realization of such deferred tax asset, specifically the reversals of indefinite-lived
deferred tax liabilities that require an action by management which are not expected to reverse in the foreseeable future.
As a result, the quarterly and annual periods beginning in 2018 through the period ended December 31, 2023, have been
revised. During the second quarter of 2024, we evaluated the impact of the correction on our previously issued financial
statements and determined the impact is not material to any previously issued annual or interim financial statements;
however, if the aggregate amount of the adjustment was recorded in the three-month period ended June 30, 2024, when
the issue was identified the impact to the results would have been material. Accordingly, we revised our previously issued
financial statements. The impact of the adjustment to periods not presented herein has been reflected as an adjustment to
opening retained earnings for the respective period.
As a result of the revision, our deferred income tax liabilities decreased by $12.5 million and $14.7 million with
a corresponding increase in retained earnings as of December 31, 2022 and 2023, respectively. Additionally, retained
F-13
earnings increased by $15.5 million as of December 31, 2021. In addition, our income tax expense increased by $3.0
million in 2022 and our net income and comprehensive income decreased correspondingly in 2022. Our income tax benefit
increased by $2.2 million in 2023, and net income and comprehensive income increased correspondingly in 2023. Basic
and diluted net income per share were decreased by $.10 in 2022 and basic and diluted loss per share were decreased by
$.07 in 2023. There were no change to cash flows used in operating, investing, or financing activities for the years ended
December 31, 2022 and 2023.
Foreign currency translation. The financial statements of our foreign subsidiaries are translated to U.S. dollars.
The functional currency of our foreign subsidiaries is generally the local currency of the country. Accordingly, we translate
the assets and liabilities at year-end exchange rates, while we translate their 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 and noncontrolling interest. We
recognize currency transaction gains and losses in income.
Derivatives and hedging activities. We recognize derivatives as either assets or liabilities measured at fair value.
We recognize the effect of changes in the fair value of derivatives either in net income (loss) or other comprehensive
income (loss), depending on the intended use of the derivative.
Cash and cash equivalents. We classify bank time deposits and highly-liquid investments, 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 and cash equivalents that have been segregated or are
otherwise limited in use as restricted. Such restrictions principally include amounts pledged as collateral with respect to
performance obligations or letters of credit required by regulatory agencies for various environmental remediation sites,
cash held in escrow under various hold-back agreements with third-party homebuilders associated with our Real Estate
Management and Development Segment, cash pledged under debt agreement covenants or legal settlements and certain
employee benefit obligations. To the extent the restricted amount relates to a recognized liability, we classify the restricted
amount as current or noncurrent according to the corresponding liability. To the extent the restricted amount does not
relate to a recognized liability, we classify restricted cash as a current asset. Restricted cash and cash equivalents classified
as a current asset are presented separately on our Consolidated Balance Sheets, and restricted cash and cash equivalents
classified as a noncurrent asset are presented as a component of other assets on our Consolidated Balance Sheets, as
disclosed in Note 7.
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. Any unrealized gains or losses on our marketable
equity securities are recognized in other income, net on our Consolidated Statements of Operations. We accumulate
unrealized gains and losses on marketable debt securities as part of accumulated other comprehensive income (loss), net
of related deferred income taxes. See Notes 3, 6, 11 and 19. We base realized gains and losses upon the specific
identification of the securities sold.
F-14
Accounts receivable. We provide an allowance for doubtful accounts for known and estimated potential losses
arising from our sales to customers based on a periodic review of these accounts.
Inventories and cost of sales. We state inventories at the lower of cost or net realizable value. We generally base
inventory costs for all inventory categories on 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, 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 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.
Land held for development. Land held for development relates to BMI and LandWell. The primary asset of
LandWell is certain real property in Henderson, Nevada some of which we are developing for residential lots in a master
planned community. Land held for development was recorded at the estimated acquisition date fair value based on a value
per developable acre at the time of purchase. Development costs, including infrastructure improvements, real estate taxes,
capitalized interest and other costs, some of which may be allocated, are capitalized during the period incurred. We allocate
costs to each parcel sold on a pro-rata basis associated with the relevant development activity, and the land basis of parcels
expected to be sold within one year are presented in prepaid expenses and other on our Consolidated Balance Sheets. As
land parcels are sold, costs of land sales, including land and development costs, are allocated based on specific
identification, relative sales value, square footage or a combination of these methods. All sales and marketing activities
and general overhead are charged to selling, general and administrative expense as incurred.
Investment in TiO2 manufacturing joint venture. We accounted for our investment in Louisiana Pigment
Company, L.P. (“LPC”), which was operated as a 50%-owned manufacturing joint venture, by the equity method before
Kronos’ acquisition of the remaining 50% joint venture interest in July 2024. Distributions received from LPC are
classified for statement of cash flow purposes using the “nature of distribution” approach under ASC Topic 230.
See Note 3.
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 manufacturing facilities, land 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 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. Operating leases are included in operating lease right-of-use assets,
current operating lease liabilities and noncurrent operating lease liabilities in our Consolidated Balance Sheets. See Notes 7
and 10. As permitted by ASC Topic 842, Leases, we elected the practical expedients related to nonlease components (in
which nonlease components associated with a lease and paid by us to the lessor, such as property taxes, insurance and
maintenance, are treated as a lease component and considered part of minimum lease rental payments), and short-term
leases (in which leases with an original maturity of 12 months or less are excluded from the recognition requirements of
ASC 842).
Right-of-use assets represent our right to use an underlying asset for the lease term and operating lease liabilities
represent our obligation to make lease payments arising from the lease. The right-of-use operating lease assets and
liabilities are recognized based on the estimated present value of lease payments over the lease term as of the respective
lease commencement dates. We use an estimated incremental borrowing rate to determine the present value of lease
payments (unless we can determine the rate implicit in the lease, which is generally not the case). Our incremental
borrowing rate for each of our leases is derived from available information, including our current debt and credit facilities
and U.S. and European yield curves as well as publicly available data for instruments with similar characteristics, adjusted
for factors such as collateralization and term.
F-15
Our leases generally do not include termination or purchase options. Certain of our leases include an option to
renew the lease after expiration of the initial lease term, but we have not included such renewal periods in our lease term
because it is not reasonably certain that we would exercise the renewal option. Our leases generally have fixed lease
payments, with no contingent or incentive payments. Certain of our leases include variable lease payments that depend on
a specified index or rate. Our lease agreements do not contain any residual value guarantees.
Goodwill and other intangible assets; amortization expense. 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
amortize other intangible assets by the straight-line method over their estimated lives and state them net of accumulated
amortization. We evaluate goodwill for impairment, annually or when events or changes in circumstances indicate the
carrying value may not be recoverable. We evaluate other intangible assets for impairment when events or changes in
circumstances indicate the carrying value may not be recoverable. See Note 8.
Property and equipment; depreciation expense. We state property and equipment at acquisition cost, including
capitalized interest on borrowings during the actual construction period of major capital projects. In 2022, 2023 and 2024
we capitalized $1.7 million, $1.9 million and $1.0 million, respectively, of interest costs. We compute depreciation of
property and equipment for financial reporting purposes (including mining equipment) principally by the straight-line
method over the estimated useful lives of the assets as follows:
Asset
Useful lives
Buildings and improvements
10 to 40 years
Machinery and equipment
3 to 20 years
Mine development costs
Units-of-production
We use the Alternative Depreciation System (“ADS”) for income tax purposes. Upon the sale or retirement of an
asset, we remove the related cost and accumulated depreciation from the accounts and recognize any gain or loss in income
currently.
We expense expenditures for maintenance, repairs and minor renewals as incurred that do not improve or extend
the life of the assets, including planned major maintenance.
We have a governmental concession with an unlimited term to operate our ilmenite mine in Norway. Mining
properties consist of buildings and equipment used in our Norwegian ilmenite mining operations. While we own the land
and ilmenite reserves associated with the mining operations, such land and reserves were acquired for nominal value and
we have no material asset recognized for the land and reserves related to our mining operations.
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 the impairment test by comparing the estimated future
undiscounted cash flows (exclusive of interest expense) associated with the asset or asset group to the asset’s net carrying
value to determine if a write-down to fair value is required. During the fourth quarter of 2023, our Chemicals Segment
recorded a fixed asset impairment of $3.8 million related to the write-off of certain costs resulting from a capital project
termination. Excluding this project, we did not evaluate any long-lived assets for impairment during 2023 or 2024 because
no such impairment indicators were present.
Long-term debt. We state long-term debt net of any unamortized original issue premium, discount or deferred
financing costs (other than deferred financing costs associated with revolving credit facilities, which are recognized as an
asset). We classify amortization of deferred financing costs and any premium or discount associated with the issuance of
indebtedness as interest expense, and compute amortization by either the interest method or the straight-line method over
the term of the applicable issue. See Note 9.
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. and Canadian retired employees, which are
not material. See Note 10.
F-16
Income taxes. We and our qualifying subsidiaries are members of Contran’s consolidated U.S. federal income
tax group (the “Contran Tax Group”). We and certain of our qualifying subsidiaries also file consolidated income tax
returns with Contran in various U.S. state 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 17. As a member of the Contran Tax Group,
we are a party to a tax sharing agreement which provides that we compute our tax provision for U.S. income taxes on a
separate-company basis using the tax elections made by Contran. Pursuant to the tax sharing agreement, we make
payments to or receive payments from Contran in amounts we would have paid to or received from the U.S. Internal
Revenue Service (“IRS”) or the applicable state tax authority had we not been a member of the Contran Tax Group. We
made cash payments for income taxes to Contran of $17.5 million in 2022, $14.2 million in 2023 and $19.1 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 our
Chemicals Segment’s non-U.S. subsidiaries which are not deemed to be permanently reinvested. At December 31, 2024,
we continue to assert indefinite reinvestment as it relates to our outside basis difference attributable to our Chemicals
Segment’s investments in non-U.S. subsidiaries, other than post-1986 undistributed earnings of our Chemicals Segment’s
European subsidiaries and all undistributed earnings of our Chemicals Segment’s Canadian subsidiary, which are not
subject to permanent reinvestment plans. It is not practical for us to determine the amount of the unrecognized deferred
income tax liability related to our investments in our Chemicals Segment’s non-U.S. subsidiaries which are permanently
reinvested due to the complexities associated with our organizational structure, changes in the Tax Cuts and Jobs Act
(“2017 Tax Act”) and the U.S. taxation of such investments in the states in which we operate. 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.
The 2017 Tax Act imposed a tax on global intangible low-taxed income (“GILTI”). We record GILTI tax as a
current period expense when incurred under the period cost method. While our future global operations depend on a
number of different factors, we do expect to have future U.S. inclusions in taxable income related to GILTI.
We account for the tax effects of a change in tax law as a component of the income tax provision related to
continuing operations in the period of enactment, including the tax effects of any deferred income taxes originally
established through a financial statement component other than continuing operations (i.e., other comprehensive income
(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
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 Chemicals Segment’s 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.
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.
F-17
Environmental remediation and related costs. We record liabilities related to environmental remediation and
related costs 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 their present value due to the uncertainty of the timing of the ultimate payout. We recognize any recoveries
of remediation costs from other parties when we deem their receipt to be probable. We expense any environmental
remediation related legal costs as incurred. See Note 18.
Revenue recognition. Chemicals and Component Products Segments – 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 acceptance generally evidences the contract with our
customer by specifying the key terms of product and quantity ordered, price and delivery and payment terms. In accordance
with ASC 606, Revenue from Contracts with Customers, we record revenue when we satisfy our performance obligations
to our customers by transferring control of our products to them, which generally occurs at point of shipment or upon
delivery. 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 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).
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.
Real Estate Management and Development Segment – Our revenues are primarily related to efforts to develop
certain real estate in Henderson, Nevada, including approximately 2,100 acres zoned for residential/planned community
purposes. Contracts for land sales are negotiated on an individual basis, involve single performance obligations, and
generally require us to complete property development and improvements after title passes to the buyer and we have
received all or a substantial portion of the selling price. We recognize land sales revenue associated with the
residential/planned community over time using cost-based input methods. Land sales associated with the
residential/planned community have variable consideration components which are based on a percentage of the builder’s
ultimate selling price of a residential housing unit to their customer (ranging from 2.5% to 3.5% of such sales price). The
amount we recognize when a parcel is sold to a home builder is the amount to which we are most-likely to be entitled,
using all information (historical, current and forecasted) that is reasonably available to us, and only to the extent that a
F-18
significant reversal in the amount of the cumulative revenue recognized is not probable of occurring in a future period. By
recognizing revenue over time using cost-based input methods, revenues (including variable consideration) and profits are
recognized in the same proportion of our progress towards completion of our contractual obligations, with our progress
measured by costs incurred as a percentage of total costs estimated to be incurred relative to the parcels sold. Estimates of
total costs expected to be incurred require significant management judgment, and the amount of revenue and profits that
have been recognized to date are subject to revisions throughout the development period. The impact on the amount of
revenue recognized resulting from any future change in the estimate of total costs estimated to be incurred would be
accounted for prospectively in accordance with GAAP. 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 the housing units are sold.
Prior to the bankruptcy filing and deconsolidation on September 10, 2022 of Basic Water Company (“BWC”),
which at that time was a wholly-owned subsidiary of BMI, revenues from our Real Estate Management and Development
Segment involved delivery of water to the City of Henderson and various other users through a water distribution system
owned and operated by BWC. Prior to the sale of Basic Power Company (“BPC”), a wholly-owned subsidiary of BMI, on
December 1, 2023, the revenues also included providing certain utility services to an industrial park located in Henderson,
Nevada. See Notes 2 and 3. These sales involved single performance obligations, and we recorded revenue when we
satisfied our performance obligations to our customers generally after the service was performed and our customers
became obligated to pay us and it was probable we would receive payment. Revenue was recorded in an amount that
reflected the net consideration we expected to receive in exchange for our services. Prices for our products were based on
contracted rates and did not include financing components, noncash consideration or consideration paid to our customers.
As our standard payment terms were less than one year, we elected the practical expedient under ASC 606 and we did not
assess whether a contract had a significant financing component.
Selling, general and administrative expenses; shipping and handling costs; advertising costs; research and
development costs. Selling, general and administrative expenses include costs related to marketing, sales, distribution,
shipping and handling, research and development, legal, environmental remediation and administrative functions such as
accounting, treasury and finance, and include costs for salaries and benefits not associated with our manufacturing process,
travel and entertainment, promotional materials and professional fees. Shipping and handling costs of our Chemicals
Segment were approximately $122 million in 2022, $101 million in 2023 and $115 million in 2024. Shipping and handling
costs of our Component Products Segment are not material. We expense advertising and research and development costs
as incurred. Advertising costs were approximately $2 million in each of 2022, 2023 and 2024. Research and development
costs were approximately $16 million in 2022, $18 million in 2023 and $14 million in 2024.
Note 2 – Business and geographic segments:
% controlled at
Business segment
Entity
December 31, 2024
Chemicals
Kronos
81%
Component products
CompX
87%
Real estate management and development
BMI and LandWell
63% - 77%
Our control of Kronos includes 50% we hold directly and 31% held directly by NL. We own 83% of NL. Our
control of CompX is through NL. We own 63% of BMI. Our control of LandWell includes the 27% we hold directly and
50% held by BMI.
We are organized based upon our operating subsidiaries. Each operating segment is separately managed, and each
operating segment represents a strategic business unit offering different products. Our chief operating decision maker
(“CODM”) is our President and CEO. Our CODM is responsible for determining how to allocate resources and assessing
performance. The CODM evaluates segment performance based on each segment’s operating income, which is defined as
income before income taxes and interest expense, exclusive of certain non-recurring items (such as gains or losses on
disposition of business units and other long-lived assets outside the ordinary course of business and certain legal
settlements) and certain general corporate income and expense items (including securities transactions gains and losses
and interest and dividend income), which are not attributable to the operations of the reportable operating segments. The
CODM considers current-period operating income compared to plan and prior-period on a monthly and/or quarterly basis
F-19
for evaluating performance of each segment and making decisions about allocating capital and other resources. The
accounting policies of the reportable operating segments are the same as those described in Note 1. Capital expenditures
include additions to property and equipment but exclude amounts attributable to business combinations. Segment results
we report may differ from amounts separately reported by our various subsidiaries and affiliates due to purchase accounting
adjustments and related amortization or differences in how we define operating income. Intersegment sales are not
material.
We have the following three consolidated reportable operating segments.
•
Chemicals – Our Chemicals Segment is operated through our majority control of Kronos. Kronos is a leading
global producer and marketer of value-added titanium dioxide pigments (“TiO2”). TiO2 is used to impart
whiteness, brightness, opacity and durability to a wide variety of products, including paints, plastics, paper,
fibers and ceramics. Additionally, 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.
•
Component Products – We operate in the component products industry through our majority control of
CompX. CompX is a leading manufacturer of security products used in the postal, recreational transportation,
office and institutional furniture, cabinetry, tool storage, healthcare applications and a variety of other
industries. CompX is also a leading manufacturer of wake enhancement systems, stainless steel exhaust
systems, gauges, throttle controls, trim tabs and related hardware and accessories for the recreational marine
industry. All CompX production facilities are in the United States.
•
Real Estate Management and Development – We operate in real estate management and development
through our majority control of BMI and LandWell. BMI and LandWell own real property in Henderson,
Nevada. LandWell is engaged in efforts to develop certain land holdings for commercial, industrial and
residential purposes in Henderson, Nevada. BMI previously, through wholly-owned subsidiaries, also was
responsible for the delivery of water to the City of Henderson and various other users through
September 2022, and provided utility services to certain industrial customers prior to December 2023.
Interest income included in the calculation of segment operating income is not significant in 2022, 2023 or 2024.
Depreciation and amortization related to each reportable operating segment includes amortization of any intangible assets
attributable to the segment. Amortization of deferred financing costs and any premium or discount associated with the
issuance of indebtedness is included in interest expense.
Segment assets are comprised of all assets attributable to each reportable operating segment, including goodwill
and other intangible assets. Corporate assets are not attributable to any operating segment and consist principally of cash
and cash equivalents, restricted cash and restricted cash equivalents and marketable securities.
F-20
Years ended December 31,
2022
2023
2024
(In millions)
Net sales:
Chemicals
$ 1,930.2 $ 1,666.5 $ 1,887.1
Component products
166.6
161.3
145.9
Real estate management and development
125.7
93.9
71.8
Total net sales
$ 2,222.5 $ 1,921.7 $ 2,104.8
Cost of sales:
Chemicals
$ 1,540.2 $ 1,502.7 $ 1,530.1
Component products
117.8
112.1
104.6
Real estate management and development
74.1
61.7
45.6
Total cost of sales
$ 1,732.1 $ 1,676.5 $ 1,680.3
Gross margin:
Chemicals
$
390.0 $
163.8 $
357.0
Component products
48.8
49.2
41.3
Real estate management and development
51.6
32.2
26.2
Total gross margin
$
490.4 $
245.2 $
424.5
Operating income (loss):
Chemicals
$
174.6 $
(41.1) $
138.5
Component products
25.4
25.4
17.0
Real estate management and development
39.4
49.9
55.2
Total operating income
239.4
34.2
210.7
General corporate items:
Interest income and other
10.4
21.3
22.0
Gain on remeasurement of investment in TiO2 manufacturing
joint venture
—
—
64.5
Insurance recoveries
.1
.5
1.4
Gain on land sales
—
1.5
.5
Other components of net periodic pension and OPEB expense
(13.9)
(11.8)
(2.6)
Changes in market value of Valhi common stock held by subsidiaries
(1.6)
(1.7)
1.9
General expenses, net
(36.6)
(35.2)
(4.3)
Interest expense
(27.9)
(28.3)
(49.9)
Income (loss) before income taxes
$
169.9 $
(19.5) $
244.2
Included in the determination of Chemicals operating income is restructuring costs related to workforce
reductions of $5.8 million and $2.0 million recognized in 2023 and 2024, respectively, (see Note 20) and a fixed asset
impairment related to the write-off of certain costs resulting from a capital project termination of $3.8 million recognized
in 2023. Also included in the determination of Chemicals operating income are business interruption insurance settlement
aggregate gains of $2.7 million recognized in 2022 and $2.5 million recognized in 2023. See Note 13.
Included in the determination of the Real Estate Management and Development Segment’s operating income in
2022 and 2024 are charges resulting from the cessation of BWC’s water delivery and subsequent bankruptcy filing. See
Note 3. Operating income comparisons between 2024, 2023 and 2022 are also affected by BWC’s water delivery sales
and related cost of sales, see Note 3. Also included in the determination of Real Estate Management and Development
operating income are infrastructure reimbursements and land related income. See Notes 7 and 13.
F-21
Years ended December 31,
2022
2023
2024
(In millions)
Depreciation and amortization:
Chemicals
$
53.1
$
49.9
$
62.9
Component products
4.0
4.0
3.7
Real estate management and development
1.4
.2
.1
Total
$
58.5
$
54.1
$
66.7
Capital expenditures:
Chemicals
$
63.2
$
47.4
$
29.5
Component products
3.7
1.1
1.4
Real estate management and development
.7
—
—
Total
$
67.6
$
48.5
$
30.9
December 31,
2022
2023
2024
(In millions)
Total assets:
Operating segments:
Chemicals
$
2,293.5
$
2,196.8
$
2,268.5
Component products
131.3
141.5
117.0
Real estate management and development
219.2
200.9
216.7
Corporate and eliminations
191.7
197.8
198.0
Total
$
2,835.7
$
2,737.0
$
2,800.2
Geographic information. We attribute net sales to the place of manufacture (point-of-origin) and the location of
the customer (point-of-destination); we attribute property and equipment to their physical location. At December 31, 2023
and 2024 the net assets of our non-U.S. subsidiaries included in consolidated net assets approximated $653 million and
$532 million, respectively.
Years ended December 31,
2022
2023
2024
(In millions)
Net sales - point of origin:
United States
$
1,518.9
$
1,284.4
$
1,396.1
Germany
895.4
726.4
826.6
Canada
389.4
351.0
351.5
Norway
273.5
252.1
278.6
Belgium
306.5
217.1
237.8
Eliminations
(1,161.2)
(909.3)
(985.8)
Total
$
2,222.5
$
1,921.7
$
2,104.8
Net sales - point of destination:
North America
$
985.4
$
871.0
$
914.0
Europe
879.0
738.5
842.2
Other
358.1
312.2
348.6
Total
$
2,222.5
$
1,921.7
$
2,104.8
F-22
December 31,
2022
2023
2024
(In millions)
Net property and equipment:
United States
$
45.8
$
40.0
$
302.1
Germany
204.7
213.0
190.9
Belgium
101.4
98.5
88.6
Norway
83.6
83.5
73.6
Canada
88.3
82.3
68.2
Total
$
523.8
$
517.3
$
723.4
At December 31, 2024, the United States net property and equipment includes the acquired assets of LPC.
Note 3 – Business combinations, dispositions and related transactions:
Kronos Worldwide, Inc.
Acquisition of Remaining Joint Venture Interest in LPC –
Effective July 16, 2024 (“Acquisition Date”), Kronos acquired the 50% joint venture interest in 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 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 cash on hand.
For financial reporting purposes, the assets acquired and liabilities assumed of LPC have been included in our
Consolidated Balance Sheet as of December 31, 2024, and the results of operations and cash flows of LPC have been
included in our Consolidated Statement of Operations and Cash flows beginning as of the Acquisition Date. Kronos
incurred $2.2 million of transaction costs in connection with the acquisition. These costs were primarily associated with
legal and professional services and were expensed in accordance with ASC 805 and are included in selling, general and
administrative expense in our Consolidated Statement of Operations.
The potential earn-out payment of up to $15 million is based on aggregate Kronos 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. The earn-out liability is included in other noncurrent liabilities on the Consolidated Balance Sheet
and is part of the line item captioned earn-out liability in Note 10. The fair value measurement is based on significant
inputs not observable in the market and therefore represents a Level 3 measurement as defined in ASC 820. The earn-out
liability will be re-measured at fair value on a recurring basis and the change to the liability, if any, would be recorded as
a component of cost and other expense (income) in our Consolidated Statements of Operations. See Note 19 to our
Consolidated Financial Statements.
Kronos remeasured its existing ownership interest in LPC to its estimated fair value at the Acquisition Date in
accordance with ASC 805-10-25, for a business combination achieved in stages (because Kronos previously had an
F-23
ownership interest in LPC). As a result of such remeasurement, we 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 the
existing ownership interest in LPC at the Acquisition Date and its aggregate $113.7 million carrying value at the
Acquisition Date. Such pre-tax gain is disclosed as gain on remeasurement of investment in TiO2 manufacturing joint
venture and is included in cost and other expense (income) in our Consolidated Statement of Operations.
The following table summarizes the aggregate fair value of the consideration transferred to gain control of LPC,
the current estimate for the fair value of Kronos’ existing ownership interest in LPC and the amounts assigned to the
identifiable assets acquired and liabilities assumed at the Acquisition Date. The estimated purchase price allocation is
based upon management’s estimate of the fair value of the acquired assets and assumed liabilities using independent third-
party appraiser valuation techniques including income, cost, and market approaches. The total consideration was allocated
to the assets acquired and liabilities assumed, with the excess of the consideration over the estimated fair value of the net
assets acquired recorded as goodwill. Subject to final determination, which is expected to occur within 12 months of the
Acquisition Date, the provisional fair values of the assets acquired and liabilities assumed in the acquisition are as follows:
Amount
(In millions)
Consideration:
Cash consideration
$
185.0
Working capital adjustment
(11.0)
Earn-out liability
4.2
Total fair value of consideration
178.2
Fair value of investment in TiO2 manufacturing joint venture
178.2
Total
$
356.4
Allocation of purchase price to identifiable assets acquired and liabilities assumed:
Cash and cash equivalents
$
21.3
Restricted cash
1.3
Accounts and other receivables, net
.2
Inventories, net
82.0
Prepaid expenses and other
.6
Other assets
10.7
Property and equipment
268.5
Accounts payable and accrued liabilities
(21.7)
Other noncurrent liabilities
(6.4)
Deferred tax liability
(2.7)
Total net identifiable assets acquired
353.8
Goodwill
2.6
Total
$
356.4
Property and equipment will be depreciated over useful lives of 5 years to 20 years. Goodwill is related to the
benefits expected as a result of the acquisition, and of the $2.6 million recorded as goodwill, $.1 million is expected to be
deductible for tax purposes.
Prior to the Acquisition Date, Kronos and Venator were both required to purchase one-half of the TiO2 produced
by LPC, unless Kronos and Venator agreed otherwise. Because Kronos operated LPC on a break-even basis, it reported
no equity in earnings of LPC. Each owner’s acquisition transfer price for its share of the TiO2 produced was equal to its
share of the joint venture’s production costs and interest expense, if any. Kronos’ share of net cost was reported as cost of
sales as the related TiO2 acquired from LPC was sold. Kronos reported distributions it received from LPC, which generally
related to excess cash generated by LPC from its non-cash production costs, and contributions Kronos made to LPC, which
generally related to cash required by LPC when it built working capital, as part of its cash flows from operating activities
in our Consolidated Statements of Cash Flows. The components of our net cash distributions from (contributions to) LPC
are shown in the table below.
F-24
Years ended December 31,
2022
2023
2024 (1)
(In millions)
Distributions from LPC
$
58.3
$
52.8
$
31.2
Contributions to LPC
(68.8)
(49.7)
(33.9)
Net distributions (contributions)
$
(10.5)
$
3.1
$
(2.7)
(1) Reflects distributions and contributions from/to LPC prior to the Acquisition Date.
The summary balance sheet for LPC for the annual period prior to the Acquisition Date is shown below:
December 31, 2023
(In millions)
ASSETS
Current assets
$
118.5
Property and equipment, net
148.4
Total assets
$
266.9
LIABILITIES AND PARTNERS' EQUITY
Other liabilities, primarily current
$
42.1
Partners' equity
224.8
Total liabilities and partners' equity
$
266.9
Summary income statements for LPC for the annual periods prior to the Acquisition Date are shown below:
Years ended December 31,
2022
2023
(In millions)
Revenues and other income:
Kronos
$
225.6
$
231.7
Venator
225.9
231.7
Total
451.5
463.4
Cost and expenses:
Cost of sales
451.1
463.0
General and administrative
.4
.4
Total
451.5
463.4
Net income
$
—
$
—
Prior to the acquisition, Kronos had certain related party transactions with LPC, as more fully described in
Note 17.
The pro forma impact of combining LPC’s results of operations assuming the LPC transaction had occurred as
of January 1, 2023 would result in no net increase to earnings. The additional interest expense and depreciation expense
that would have occurred during the comparable period is not material. The pro forma impact is not necessarily indicative
of either future results of operations or results of operations that might have been achieved had the acquisition occurred as
of January 1, 2023. The incremental finished goods offtake produced resulting from Kronos’ additional 50% interest
acquired in LPC has not materially impacted revenue and earnings from Acquisition Date through the end of the year.
F-25
Other –
Kronos
Kronos’ board of directors has previously authorized the repurchase of up to 2.0 million shares of its common
stock in open market transactions, including block purchases, or in privately-negotiated transactions at unspecified prices
and over an unspecified period of time. Kronos may repurchase its common stock from time to time as market conditions
permit. The stock repurchase program does not include specific price targets or timetables and may be suspended at any
time. Depending on market conditions, Kronos may terminate the program prior to its completion. Kronos uses cash on
hand or other sources of liquidity to acquire the shares. Repurchased shares are added to Kronos’ treasury shares and
subsequently cancelled upon approval of the Kronos board of directors. In 2022, Kronos acquired 217,778 shares of its
common stock in market transactions for an aggregate purchase price of $2.5 million. In 2023, Kronos acquired 313,814
shares of its common stock in market transactions for an aggregate purchase price of $2.8 million. Kronos made no treasury
purchases in 2024. At December 31, 2024, 1,017,518 shares are available for repurchase under this stock repurchase
program.
CompX
CompX’s board of directors has previously authorized various repurchases of its Class A common stock in open
market transactions, including block purchases, or in privately-negotiated transactions at unspecified prices and over an
unspecified period of time. CompX may repurchase its common stock from time to time as market conditions permit. The
stock repurchase program does not include specific price targets or timetables and may be suspended at any time.
Depending on market conditions, CompX may terminate the program prior to its completion. CompX would generally use
cash on hand to acquire the shares. Repurchased shares will be added to CompX’s treasury and cancelled. During 2022,
CompX acquired 78,900 shares of its Class A common stock for an aggregate amount of $1.7 million under prior
repurchase authorizations. Of the shares repurchased, 70,000 shares were purchased in a market transaction, and 8,900
shares were purchased from two affiliates in two separate private transactions that were also approved in advance by
CompX’s independent directors. CompX made no treasury purchases during 2023 and 2024. At December 31, 2024,
523,647 shares were available for purchase under these authorizations.
NL
During 2022, NL purchased 2,000 shares of its common stock from Kronos for a nominal amount in a private
transaction that was approved in advance by NL’s independent directors and subsequently cancelled all such shares.
BMI
Prior to BWC’s bankruptcy filing on September 10, 2022, BMI was responsible for the delivery of water to the
City of Henderson and various other users under long-term contracts through a water delivery system owned and operated
by BWC. BWC’s water delivery system operated on Lake Mead in Nevada. Late in the second quarter of 2022, Lake
Mead water levels dropped precipitously to historically low levels. On June 30, 2022, BWC was no longer able to pump
water and consequently ceased operations at its water intake facility. We considered BWC’s inability to pump water from
Lake Mead to be a triggering event under ASC 360 Property, Plant, and Equipment, which caused us to evaluate the water
system fixed assets for impairment. Because BWC was unable to deliver water under its current contracts and therefore
unable to generate revenue, we determined the water system’s assets were fully impaired except to the extent certain
equipment had alternative use outside of BWC’s operations, in which case those assets were written down to estimated
salvage value. The $16.4 million impairment charge primarily recognized in the second quarter of 2022 represented the
write down of the book value to the estimated salvage value of the assets. Without the ability to pump and deliver water
to its customers, BWC’s operating expenses exceeded its revenues, and on September 10, 2022, BWC and its wholly-
owned subsidiary (collectively, “Debtors”) voluntarily filed for Chapter 11 bankruptcy protection in the United States
Bankruptcy Court for the District of Nevada. Because BWC filed for bankruptcy protection, we and BMI could no longer
affirmatively assert we control BWC and, as such, in accordance with ASC 810, Consolidation, we deconsolidated BWC
as of the date of the bankruptcy filing and recognized a loss of $2.0 million in the third quarter of 2022 on the
deconsolidation. In addition, BMI had an outstanding intercompany accounts receivable balance with BWC on the date of
F-26
the bankruptcy filing, and we recognized $1.3 million of bad debt expense to fully reserve this balance during the third
quarter of 2022.
On November 8, 2023, the Bankruptcy Court for the District of Nevada (“Court”) entered an order approving
Debtors’ plan of reorganization, which provided for the sale of substantially all Debtors’ assets and the transfer of
substantially all of their operating and other agreements to one of their industrial customers. The transaction closed on
November 17, 2023 at which time Debtors discontinued their water delivery operations. The proceeds of the sale were
used to repay creditors of the Debtors. On July 10, 2024, the Court approved the closure of the Debtors’ bankruptcy case.
BWC and its wholly-owned subsidiary BWC SPE I, LLC were subsequently dissolved, with the remaining cash at BWC
of $2.6 million distributed to BMI.
On December 1, 2023, BMI sold its subsidiary BPC, which provided electricity to four customers located in the
industrial park, and its sewer system assets to another of its industrial customers. The sale was for minimal cash
consideration and the assumption of liabilities, and upon the closing of the sale we recognized a loss of $2.6 million. BMI
provided transition services to the purchaser of the businesses for a limited time. With the sale of BPC and the completion
of the bankruptcy, we no longer provide services to the industrial park which allows us to focus on land sales and
development activity for the residential/planned community.
Note 4 – Accounts and other receivables, net:
December 31,
2023
2024
(In millions)
Trade accounts receivable:
Kronos
$
273.6
$
269.2
CompX
17.1
14.2
BMI/LandWell
1.2
.3
VAT and other receivables
33.4
45.9
Allowance for doubtful accounts
(4.2)
(3.9)
Total
$
321.1
$
325.7
Note 5 – Inventories, net:
December 31,
2023
2024
(In millions)
Raw materials:
Chemicals
$
188.3
$
176.9
Component products
5.7
5.6
Total raw materials
194.0
182.5
Work in process:
Chemicals
30.8
52.5
Component products
19.1
17.6
Total in-process products
49.9
70.1
Finished products:
Chemicals
250.4
308.3
Component products
5.9
5.1
Total finished products
256.3
313.4
Supplies (chemicals)
95.9
119.8
Total
$
596.1
$
685.8
F-27
Note 6 – Marketable securities:
Cost or
amortized
Unrealized
Market value
cost
loss, net
(In millions)
December 31, 2023:
Current assets
$
56.1
$
56.1
$
—
Noncurrent assets
$
4.8
$
5.0
$
(.2)
December 31, 2024:
Current assets
$
1.9
$
1.9
$
—
Noncurrent assets
$
5.7
$
5.7
$
—
Fair Value Measurements
Quoted
Significant
Prices in
Other
Active
Observable
Markets
Inputs
Total
(Level 1)
(Level 2)
(In millions)
December 31, 2023:
Current assets - fixed income securities
$
56.1
$
—
$
56.1
Noncurrent assets:
Fixed income securities
$
2.6
$
—
$
2.6
Mutual funds
2.2
2.2
—
Total
$
4.8
$
2.2
$
2.6
December 31, 2024:
Current assets - fixed income securities
$
1.9
$
—
$
1.9
Noncurrent assets:
Fixed income securities
$
3.1
$
—
$
3.1
Mutual funds
2.6
2.6
—
Total
$
5.7
$
2.6
$
3.1
Our marketable securities consist of investments in marketable equity and debt securities. At December 31, 2023
and 2024 our current marketable securities were primarily debt securities invested in U.S. government treasuries. The fair
values of our marketable debt securities are either determined using Level 1 inputs (because securities are actively traded)
or determined using Level 2 inputs (because although these securities are traded, in many cases, the market is not active
and the year-end valuation is generally based on the last trade of the year, which may be several days prior to
December 31).
F-28
Note 7 – Other assets:
December 31,
2023
2024
(In millions)
Other assets:
Note receivables - OPA
$
69.1
$
91.6
Operating lease right-of-use assets
22.7
20.6
IBNR receivables
13.4
15.0
Land held for development
19.4
7.4
Restricted cash and cash equivalents
32.4
5.5
Other
16.7
21.4
Total
$
173.7
$
161.5
Leases. We enter into various operating leases for manufacturing facilities, land and equipment. Our operating
leases are included in operating lease right-of-use assets, current operating lease liabilities and noncurrent operating lease
liabilities on our Consolidated Balance Sheets. Also see Note 10. Our Chemicals Segment’s principal German operating
subsidiary leases the land under its Leverkusen TiO2 production facility pursuant to a lease that expires in 2050. The
Leverkusen facility itself, which Kronos owns and which represents approximately 29% of its current TiO2 production
capacity, is located within an extensive manufacturing complex.
During 2022, 2023 and 2024, our operating lease expense approximated $5.5 million, $5.6 million and $5.2
million, respectively, (which approximates the amount of cash paid during the period for our operating leases included in
the determination of our cash flows from operating activities). During 2022, 2023 and 2024, variable lease expense and
short-term lease expense were not material. During 2022, 2023 and 2024, we entered into new operating leases which
resulted in the recognition of $6.6 million, $4.6 million and $2.8 million, respectively, in right-of-use operating lease assets
and corresponding liabilities on our Consolidated Balance Sheets. At December 31, 2023 and 2024, the weighted average
remaining lease term of our operating leases was approximately 14 years and the weighted average discount rate associated
with such leases was approximately 5.0% in 2023 and approximately 6.0% in 2024. Such average remaining lease term is
weighted based on each arrangement’s lease obligation, and such average discount rate is weighted based on each
arrangement’s total remaining lease payments.
At December 31, 2024, maturities of our operating lease liabilities were as follows:
Years ending December 31,
Amount
(In millions)
2025
$
4.4
2026
4.0
2027
2.8
2028
2.3
2029
2.0
2030 and thereafter
14.6
Total remaining lease payments
30.1
Less imputed interest
9.5
Total lease obligations
20.6
Less current obligations
3.5
Long term lease obligations
$
17.1
With respect to our land lease associated with our Chemical Segment’s Leverkusen facility, we periodically
establish the amount of rent for such land lease for periods of at least two years at a time. The lease agreement provides
for no formula, index or other mechanism to determine changes in the rent of such land lease; rather, any change in the
rent is subject solely to periodic negotiation. As such, we will account for any change in the rent associated with such lease
as a lease modification. Of the $20.6 million total lease obligations at December 31, 2024, approximately $6.8 million
F-29
relates to our Leverkusen facility land lease.
At December 31, 2024, we have no significant lease commitments that have not yet commenced.
Note receivables – OPA. Under an Owner Participation Agreement (“OPA”) entered into by LandWell with the
Redevelopment Agency of the City of Henderson, Nevada, if LandWell develops certain real property for commercial and
residential purposes in a master planned community in Henderson, Nevada, the cost of certain public infrastructure may
be reimbursed to us through tax increment. The maximum reimbursement under the OPA is $209 million, and is subject
to, among other things, completing construction of approved qualifying public infrastructure, transferring title of such
infrastructure to the City of Henderson, receiving approval from the Redevelopment Agency of the funds expended to be
eligible for tax increment reimbursement and the existence of a sufficient property tax valuation base and property tax
rates in order to generate tax increment reimbursement funds. We are entitled to receive 75% of the tax increment generated
by the master planned community through the expiration of the Redevelopment Plan, subject to the qualifications and
limitations indicated above. The OPA note receivables represent public infrastructure costs previously incurred for which
the Redevelopment Agency has provided its approval for tax increment reimbursement but we have not yet received such
reimbursement through tax increment receipts, and are evidenced by a promissory note issued to LandWell by the City of
Henderson.
During 2022, 2023 and 2024, we received approval for additional tax increment reimbursement of $15.2 million
($10.0 million in the third quarter and $5.2 million in the fourth quarter), $25.2 million ($4.8 million in the third quarter
and $20.4 million in the fourth quarter), and $30.3 million ($14.2 million in the third quarter and $16.1 million in the
fourth quarter), respectively, which were recognized as other income and are evidenced by a promissory note issued to
LandWell by the City of Henderson. The note receivables bear interest at 6% annually and in 2021, the City of Henderson
extended the Redevelopment Plan for an additional 15 years which allows us to collect any remaining amounts due under
the OPA through 2051. Any unpaid balances at the end of the agreement are forfeited. See Note 13.
Land held for development. The land held for development relates to BMI and LandWell and is discussed in
Note 1.
Other. IBNR receivables relate to certain insurance liabilities, the risk of which we have reinsured with certain
third-party insurance carriers. We report the insurance liabilities related to these IBNR receivables which have been
reinsured as part of noncurrent accrued insurance claims and expenses. Certain of our insurance liabilities are classified as
current liabilities and the related IBNR receivables are classified with prepaid expenses and other on our Consolidated
Balance Sheets. See Notes 10 and 17.
Note 8 – Goodwill:
We have assigned goodwill to each of our reporting units (as that term is defined in ASC Topic 350-20-20,
Goodwill) which corresponds to our operating segments. Substantially all of our goodwill related to our Chemicals
Segment is from our various step acquisitions of NL and Kronos which occurred prior to 2022, as goodwill was determined
prior to the adoption of the equity transaction framework provisions of ASC Topic 810. In the third quarter of 2024, we
recognized $2.6 million of goodwill related to Kronos’ acquisition of the remaining 50% joint venture interest in LPC. See
Note 3. Substantially all of the net goodwill related to the Component Products Segment was generated from CompX’s
acquisitions of certain business units and the step acquisitions of CompX. The Component Products Segment goodwill is
assigned to the security products reporting unit within that operating segment.
Operating segment
Component
Chemicals
Products
Total
(In millions)
Balance at December 31, 2022 and 2023
$
352.6
$
27.1
$
379.7
LPC Acquisition
2.6
—
2.6
Balance at December 31, 2024
$
355.2
$
27.1
$
382.3
F-30
We test for goodwill impairment at the reporting unit level. In determining the estimated fair value of the reporting
units, we use appropriate valuation techniques, such as discounted cash flows and, with respect to our Chemicals Segment,
we consider quoted market prices, a Level 1 input, while discounted cash flows are a Level 3 input. We also consider
control premiums when assessing fair value using quoted market prices. If the carrying amount of the reporting unit’s net
assets exceeds its fair value, an impairment charge is recorded for the amount by which such carrying amount exceeds the
reporting unit’s fair value (not to exceed the amount of goodwill recognized). As permitted by GAAP, during 2022, 2023
and 2024 we used the qualitative assessment of ASC 350-20-35 for the Component Products security products reporting
unit’s annual impairment test and determined it was not necessary to perform a quantitative goodwill impairment test.
We review goodwill for each of our reporting units for impairment during the third quarter of each year. Goodwill
is also evaluated for impairment 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. If the fair value of an evaluated asset is less than
its book value, the asset is written down to fair value. In 2022, 2023 and 2024, no goodwill impairment was indicated as
part of our annual impairment review of goodwill.
Prior to 2022, we recorded an aggregate $16.5 million goodwill impairment, mostly with respect to our
Component Products Segment. Our consolidated gross goodwill at December 31, 2024 is $398.8 million.
Note 9 – Long-term debt:
December 31,
2023
2024
(In millions)
Valhi:
Contran credit facility
$
93.4
$
44.6
Subsidiary debt:
Kronos:
Kronos International, Inc. 9.50% Senior Secured Notes due 2029
—
365.4
Kronos International, Inc. 3.75% Senior Secured Notes due 2025
440.9
78.3
Subordinated, Unsecured Term Loan from Contran
—
53.7
Revolving credit facility
—
10.0
LandWell:
Note payable to Western Alliance Business Trust
12.2
11.4
Total subsidiary debt
453.1
518.8
Total debt
546.5
563.4
Less current maturities
.7
79.0
Total long-term debt
$
545.8
$
484.4
Valhi – Contran credit facility – We have an unsecured revolving credit facility with Contran which, as amended,
provides for borrowings from Contran of up to $150 million. The facility, as amended, bears interest at prime plus 1%
(8.50% at December 31, 2024), and is due on demand, but in any event no earlier than December 31, 2026. The facility
contains no financial covenants or other financial restrictions. Valhi pays an unused commitment fee quarterly to Contran
on the available balance (except during periods during which Contran would be a net borrower from Valhi). The average
interest rate on the credit facility for the year ended December 31, 2024 was 9.27%. During 2024 we had no borrowings
and repayments of $48.8 million under this facility, and at December 31, 2024 an additional $105.4 million was available
for borrowings under this facility.
Kronos – 9.50% Senior Secured Notes due 2029 – On February 12, 2024, for certain eligible holders of existing
3.75% Senior Secured Notes due September 2025 (the “Old Notes”), Kronos International, Inc. (“KII”) executed an
exchange of €325 million principal amount of the outstanding Old Notes for newly issued €276.174 million aggregate
outstanding KII 9.50% Senior Secured Notes due March 2029 (the “New Notes” and, together with the Old Notes and the
Additional New Notes (as defined below), the “Senior Secured Notes”) plus additional cash consideration of €48.75
million ($52.6 million). Holders of the Old Notes received for each €1,000 principal amount of Old Notes exchanged,
€850 in principal amount of New Notes, plus a cash payment in an amount equal to €150. Following the exchange, Old
F-31
Notes totaling €75 million principal amount that were not exchanged continue to remain outstanding. In connection with
the exchange, the indenture governing the Old Notes was amended to conform to the restrictive covenants in the indenture
governing the New Notes and to make other conforming changes. KII did not receive any cash proceeds from the issuance
and delivery of the New Notes in connection with the exchange. Kronos also entered into a $53.7 million unsecured term
loan from Contran Corporation (described below) in connection with the exchange.
On July 30, 2024, KII issued an additional €75 million principal amount of 9.50% Senior Secured Notes due 2029
(the “Additional New Notes” and together with the New Notes the “9.50% Senior Secured Notes due 2029”). The
Additional New Notes are additional notes to the existing €276.174 million aggregate principal amount of New Notes
issued on February 12, 2024. 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
estimated 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 under the $300 million global revolving credit facility
(the “Global Revolver”).
The 9.50% Senior Secured Notes due 2029:
•
bear interest at 9.50% per annum, payable semi-annually on March 15 and September 15 of each year,
payments began on September 15, 2024;
•
have a maturity date of March 15, 2029. Prior to March 15, 2026, Kronos may redeem some or all of the
9.50% Senior Secured Notes due 2029 at a price equal to 100% of the principal amount thereof, plus an
applicable premium as of the date of the redemption as described in the indenture governing its 9.50% Senior
Secured Notes due 2029, plus accrued and unpaid interest. On or after March 15, 2026, Kronos may redeem
the 9.50% Senior Secured Notes due 2029 at redemption prices ranging from 104.75% of the principal
amount, declining to 100% on or after March 15, 2028, plus accrued and unpaid interest. In addition, on or
before March 15, 2026, Kronos may redeem up to 40% of the 9.50% Senior Secured Notes due 2029 with
the net proceeds of certain public or private equity offerings at 109.50% of the principal amount, plus accrued
and unpaid interest, provided that following the redemption at least 50% of the 9.50% Senior Secured Notes
due 2029 remain outstanding. If Kronos or Kronos’ subsidiaries experience certain change of control events,
as outlined in the indenture governing its 9.50% Senior Secured Notes due 2029, Kronos would be required
to make an offer to purchase the 9.50% Senior Secured Notes due 2029 at 101% of the principal amount
thereof, plus accrued and unpaid interest. Kronos would also be required to make an offer to purchase a
specified portion of the 9.50% Senior Secured Notes due 2029 at par value, plus accrued and unpaid interest,
in the event that Kronos and its subsidiaries generate a certain amount of net proceeds from the sale of assets
outside the ordinary course of business, and such net proceeds are not otherwise used for specified purposes
within a specified time period as described in the indenture governing Kronos’ 9.50% Senior Secured Notes
due 2029;
•
are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by Kronos
Worldwide, Inc. and each of its direct and indirect domestic, wholly-owned subsidiaries;
•
are collateralized by a first priority lien on (i) 100% of the common stock or other ownership interests of
each existing and future direct domestic subsidiary of KII and the guarantors, and (ii) 65% of the voting
common stock or other ownership interests and 100% of the non-voting common stock or other ownership
interests of each non-U.S. subsidiary that is directly owned by KII or any guarantor;
•
contain a number of covenants and restrictions which, among other things, restrict Kronos’ ability to incur
or guarantee additional debt, incur liens, pay dividends or make other restricted payments, or merge or
consolidate with, or sell or transfer substantially all of its assets to, another entity, and contain other
provisions and restrictive covenants customary in lending transactions of this type (however, there are no
ongoing financial maintenance covenants); and
•
contain customary default provisions, including a default under any of Kronos’ other indebtedness in excess
of $50.0 million.
F-32
At December 31, 2024, the carrying value of the 9.50% Senior Secured Notes due 2029 (€351.174 million
aggregate principal amount outstanding plus €5.1 million of unamortized premium) is stated net of unamortized debt
issuance costs of $6.3 million. As a result of the note exchange, in the first quarter of 2024 Kronos recognized a non-cash
pre-tax interest charge of $1.5 million included in interest expense related to the write-off of the deferred financing costs
associated with the Old Notes. As of December 31, 2024, Kronos has capitalized $7.4 million in debt issuance costs
associated with the 9.50% Senior Secured Notes due 2029.
3.75% Senior Secured Notes due 2025 – At December 31, 2024, the carrying value of Kronos’ remaining Old
Notes (€75 million aggregate principal amount outstanding) is $78.3 million. In connection with the issuance of the New
Notes in February 2024, the indenture governing the Old Notes was amended to conform to the restrictive covenants in
the indenture governing the New Notes and to make other conforming changes.
Subordinated, Unsecured Term Loan from Contran – As part of the refinancing of a majority of Kronos’ Old
Notes discussed above, Kronos borrowed $53.7 million (€50.0 million) from Contran through the issuance of an unsecured
subordinated term promissory note dated February 12, 2024 (the “Contran Term Loan”). The Contran Term Loan is
guaranteed by certain of Kronos’ domestic wholly-owned subsidiaries. Kronos’ obligations under the Contran Term Loan,
and the obligations of the guarantors under the related guaranties, are unsecured and subordinated in right of payment to
Kronos’ Senior Secured Notes and its Global Revolver. Interest on the Contran Term Loan is payable in cash. 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 matures on demand (but no
earlier than September 2029), is not subject to any amortization payments and is prepayable at par beginning in
March 2026. The restrictive covenants in the Contran Term Loan are substantially similar to those contained in the
indenture governing Kronos’ 9.50% Senior Secured Notes due 2029. In accordance with Kronos’ related party transaction
policy, the audit committee of its board of directors, comprised of the independent directors, approved the terms and
conditions of the original Contran Term Loan and its amendment in August 2024.
Revolving credit facility – 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 agreement to include LPC and
LPC’s receivables and certain of its inventories in the borrowing base. See Note 3. Available borrowings are based on
formula-determined amounts of eligible trade receivables and inventories, as defined in the agreement, less any borrowings
outstanding and outstanding letters of credit issued under the Global Revolver. Borrowings by Kronos’ Canadian, Belgian
and German subsidiaries are limited to U.S. $35 million, €30 million and €60 million, respectively. Any amounts
outstanding under the Global Revolver bear interest, at Kronos’ option, at the applicable non-base rate (SOFR, adjusted
CORRA or EURIBOR, depending on the currency of the borrowing) plus a margin ranging from 1.5% to 2.0%, or at the
applicable base rate, as defined in the agreement, plus a margin ranging from .5% to 2.0%. U.S. Dollar or Canadian Dollar
non-base rate loans, as well as euro non-base rate and euro base rate loans are subject to a 0.25% floor, plus the applicable
margin. The Global Revolver is collateralized by, among other things, a first priority lien on the borrowers’ trade
receivables and inventories. The facility contains a number of covenants and restrictions customary in lending transactions
of this type which, among other things, restrict the borrowers’ ability to incur additional debt, incur liens, pay additional
dividends or merge or consolidate with, or sell or transfer all or substantially all of their assets to another entity and, under
certain conditions, requires the maintenance of a fixed charge coverage ratio, as defined in the agreement, of at least 1.0
to 1.0. During 2024, Kronos borrowed $157.8 million and repaid $147.8 million under its Global Revolver. The average
interest rate on outstanding borrowings for 2024 was 7.21%, and at December 31, 2024, the interest rate on the outstanding
borrowings was 6.25%. The borrowing base calculated as of December 31, 2024, was approximately $278 million.
During 2023, Kronos had no borrowings or repayments under its Global Revolver.
Other – In December 2019, LandWell entered into the $15.0 million loan agreement with Western Alliance
Business Trust. The agreement requires semi-annual payments of principal and interest on April 15 and October 15
aggregating $1.3 million annually beginning on April 15, 2020 through the maturity date in April 2036 and is payable
F-33
from the tax increment reimbursement funds received under the OPA. The agreement bears interest at a fixed 4.76% rate
and is collateralized by all tax increment reimbursement funds LandWell receives under the OPA. See Note 7.
Aggregate maturities of long-term debt – Aggregate maturities of debt at December 31, 2024 are presented in
the table below.
Years ending December 31,
Amount
(In millions)
Gross amounts due each year:
2025
$
79.0
2026
45.4
2027
.8
2028
.9
2029
431.1
2030 and thereafter
7.2
Subtotal
564.4
Less amounts representing original issue discount and debt issuance costs
1.0
Total long-term debt
$
563.4
We are in compliance with all of our debt covenants at December 31, 2024.
F-34
Note 10 – Accounts payable and accrued liabilities:
December 31,
2023
2024
(In millions)
Accounts payable:
Kronos
$
218.7 $
232.4
CompX
3.1
3.7
BMI/LandWell
6.7
8.0
Distributions payable to noncontrolling interest
—
5.9
Total
$
228.5
$
250.0
Current accrued liabilities:
Employee benefits
$
36.2
$
38.7
Accrued development costs
15.1
30.0
Deferred income
88.8
28.2
Accrued sales discounts and rebates
22.5
27.6
Interest
5.1
11.4
Operating lease liabilities
3.9
3.5
Other
45.0
59.7
Total
$
216.6
$
199.1
Noncurrent accrued liabilities:
Accrued development costs
$
42.3
$
26.8
Operating lease liabilities
18.6
17.1
Insurance claims and expenses
14.9
16.6
Deferred income
15.5
11.8
Asset retirement obligations
7.2
14.3
Other postretirement benefits
7.4
6.7
Employee benefits
4.9
4.5
Earn-out liability
—
4.3
Other
.6
.6
Total
$
111.4
$
102.7
The risks associated with certain of our accrued insurance claims and expenses have been reinsured, and the
related IBNR receivables are recognized as noncurrent assets to the extent the related liability is classified as a noncurrent
liability. See Note 7. See Note 3 for additional details related to the acquisition earn-out liability.
Note 11 – Defined contribution and defined benefit retirement plans:
Defined contribution plans. Certain of our subsidiaries maintain various defined contribution pension plans for
our employees worldwide. Defined contribution plan expense approximated $8.0 million in 2022, $8.2 million in 2023
and $7.7 million in 2024.
Defined benefit plans. Kronos and NL sponsor various defined benefit pension plans worldwide. The benefits
under our defined benefit plans are based upon years of service and employee compensation. Our funding policy is to
contribute annually the minimum amount required under ERISA (or equivalent foreign) regulations plus additional
amounts as we deem appropriate. We recognize an asset or liability for the over or under funded status of each of our
individual defined benefit pension plans on our Consolidated Balance Sheets. Changes in the funded status of these plans
are recognized either in net income, to the extent they are reflected in periodic benefit cost, or through other comprehensive
income (loss).
F-35
As a result of the LPC acquisition in July 2024 (see Note 3), Kronos acquired the LPC defined benefit pension
plan, which had a net pension asset of $10.6 million on the Acquisition Date. Prior to the LPC acquisition, LPC’s defined
benefit pension plan had been frozen for all employees with benefits based on years of service and employee compensation.
Effective December 31, 2024, the LPC defined benefit pension plan was merged into NL’s U.S. defined benefit pension
plan.
We previously maintained a defined benefit pension plan in the United Kingdom (U.K.) related to a former
disposed U.K. business unit. In accordance with applicable U.K. pension regulations, we entered into an agreement in
March 2021 for the bulk annuity purchase, or “buy-in”, with a specialist insurer of defined benefit pension plans. Following
the buy-in, individual policies replaced the bulk annuity policy in a “buy-out” which was completed as of May 1, 2023.
The buy-out was completed with existing plan funds. At the completion of the buy-out, the assets and liabilities of the
U.K. pension plan were removed from our Consolidated Financial Statements and a non-cash pension plan termination
loss of $6.2 million was recognized in the second quarter of 2023.
We expect to contribute the equivalent of approximately $16 million to all of our defined benefit pension plans
during 2025. Benefit payments to plan participants out of plan assets are expected to be the equivalent of:
Years ending December 31,
Amount
(In millions)
2025
$
29.9
2026
30.5
2027
32.5
2028
37.4
2029
36.0
Next 5 years
175.9
F-36
The funded status of our U.S. defined benefit pension plans, including the acquired LPC plan, is presented in the
table below.
Years ended December 31,
2023
2024
(In millions)
Change in projected benefit obligations ("PBO"):
Balance at beginning of the year
$
43.4
$
42.7
Interest cost
2.2
2.7
Actuarial (gains) losses
1.2
(3.1)
Benefits paid
(4.1)
(4.6)
Acquisition
—
27.5
Balance at end of the year
$
42.7
$
65.2
Change in plan assets:
Fair value at beginning of the year
$
39.1
$
40.3
Actual return on plan assets
3.7
.4
Employer contributions
1.6
1.5
Benefits paid
(4.1)
(4.6)
Acquisition
—
38.1
Fair value at end of the year
$
40.3
$
75.7
Funded status
$
(2.4)
$
10.5
Amounts recognized in the Consolidated Balance Sheets:
Noncurrent pension asset
$
—
$
10.7
Accrued pension costs:
Current
—
(.1)
Noncurrent
(2.4)
(.1)
Total
(2.4)
10.5
Accumulated other comprehensive loss - actuarial losses
30.3
28.5
Total
$
27.9
$
39.0
Accumulated benefit obligations ("ABO")
$
42.7
$
65.2
The total net overfunded status of our U.S. defined benefit pension plans increased from a total net underfunded
balance of $2.4 million at December 31, 2023 to a total net overfunded balance of $10.5 million at December 31, 2024
due to the consolidation of the LPC pension plan which, as noted above, is an overfunded plan. Absent the LPC plan, the
decrease in our PBO exceeded the decrease 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.
The components of our net periodic defined benefit pension cost for U.S. plans are presented in the table below.
The amounts shown below for the amortization of recognized actuarial losses for 2022, 2023 and 2024 were recognized
as components of our accumulated other comprehensive income (loss) at December 31, 2021, 2022 and 2023, respectively,
net of deferred income taxes and noncontrolling interest.
Years ended December 31,
2022
2023
2024
(In millions)
Net periodic pension cost for U.S. plans:
Interest cost
$
1.4
$
2.2
$
2.7
Expected return on plan assets
(2.0)
(1.9)
(3.2)
Recognized net actuarial losses
1.9
2.0
1.9
Total
$
1.3
$
2.3
$
1.4
F-37
Information concerning our U.S. defined benefit pension plans (for which the ABO of all of the plans exceeds
the fair value of plan assets as of the indicated date) is presented in the table below.
December 31,
2023
2024
(In millions)
Plans for which the ABO exceeds plan assets:
Projected benefit obligations
$
42.7
$
.1
Accumulated benefit obligations
42.7
.1
Fair value of plan assets
40.3
—
The discount rate assumptions used in determining the actuarial present value of the benefit obligation for our
U.S. defined benefit pension plans as of December 31, 2023 and 2024 are 5.0% and 5.5%, respectively. The impact of
assumed increases in future compensation levels does not have an effect on the benefit obligation as the plans are frozen
with regards to compensation.
The weighted-average rate assumptions used in determining the net periodic pension cost for our U.S. defined
benefit pension plans for 2022, 2023 and 2024 are presented in the table below. The impact of assumed increases in future
compensation levels does not have an effect on the periodic pension cost as the plans are frozen with regards to
compensation.
Years ended December 31,
2022
2023
2024
Discount rate
2.6%
5.3%
5.0%
Long-term return on plan assets
4.0%
5.0%
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.
F-38
The funded status of our non-U.S. defined benefit pension plans is presented in the table below.
Years ended December 31,
2023
2024
(In millions)
Change in PBO:
Balance at beginning of the year
$
508.6
$
563.7
Service cost
6.3
6.6
Interest cost
19.8
18.9
Participants’ contributions
1.8
1.8
Actuarial (gains) losses
44.3
(16.2)
Settlements
(8.6)
(1.9)
Change in currency exchange rates
14.1
(36.8)
Benefits paid
(22.6)
(22.8)
Balance at end of the year
$
563.7
$
513.3
Change in plan assets:
Fair value at beginning of the year
$
390.5
$
422.6
Actual return on plan assets
37.4
20.0
Employer contributions
14.7
14.9
Participants' contributions
1.8
1.8
Settlements
(8.6)
(1.9)
Change in currency exchange rates
9.4
(29.7)
Benefits paid
(22.6)
(22.8)
Fair value at end of the year
$
422.6
$
404.9
Funded status
$
(141.1)
$
(108.4)
Amounts recognized in the Consolidated Balance Sheets:
Noncurrent pension asset
$
8.1
$
9.1
Noncurrent accrued pension costs
(149.2)
(117.5)
Total
(141.1)
(108.4)
Accumulated other comprehensive loss:
Actuarial losses
106.8
88.8
Prior service cost
.3
.3
Total
107.1
89.1
Total
$
(34.0)
$
(19.3)
ABO
$
549.8
$
499.7
The total net underfunded status of our non-U.S. defined benefit pension plans decreased from $141.1 million at
December 31, 2023 to $108.4 million at December 31, 2024 due to the change in our PBO during 2024 exceeding the
change in plan assets during 2024. The decrease in our PBO in 2024 was primarily attributable to higher actuarial gains
due primarily to the increase in discount rates in Germany from year end 2023 and favorable currency fluctuations,
primarily from the strengthening of the U.S. dollar relative to the euro. The decrease in our plan assets in 2024 was
primarily attributable to unfavorable currency fluctuations (primarily from the strengthening of the U.S. dollar relative to
the euro) offsetting positive plan asset returns and employer contributions in 2024.
The components of our net periodic pension benefit cost for our non-U.S. plans are presented in the table below.
The amounts shown below for the amortization of prior service cost and recognized net actuarial losses for 2022, 2023
and 2024 were recognized as components of our accumulated other comprehensive income (loss) at December 31, 2021,
2022 and 2023, respectively, net of deferred income taxes and noncontrolling interest.
F-39
Years ended December 31,
2022
2023
2024
(In millions)
Net periodic pension cost for non-U.S. plans:
Service cost
$
11.3
$
6.3
$
6.6
Interest cost
10.6
19.8
18.9
Expected return on plan assets
(11.1)
(18.3)
(19.9)
Recognized net actuarial losses
12.8
1.8
1.9
Amortization of prior service cost
.1
—
.1
Settlements
.4
6.5
.4
Total
$
24.1
$
16.1
$
8.0
Information concerning certain of our non-U.S. defined benefit pension plans (for which the ABO exceeds the
fair value of plan assets as of the indicated date) is presented in the table below.
December 31,
2023
2024
(In millions)
Plans for which the ABO exceeds plan assets:
Projected benefit obligations
$
463.1
$
397.1
Accumulated benefit obligations
452.9
387.1
Fair value of plan assets
313.8
279.5
The key actuarial assumptions used to determine our non-U.S. benefit obligations as of December 31, 2023 and
2024 are as follows:
December 31,
2023
2024
Discount rate
3.4%
3.6%
Increase in future compensation levels
2.7%
2.8%
A summary of our key actuarial assumptions used to determine non-U.S. net periodic benefit cost for 2022, 2023
and 2024 are as follows:
Years ended December 31,
2022
2023
2024
Discount rate
1.5%
3.9%
3.4%
Increase in future compensation levels
2.6%
2.7%
2.7%
Long-term return on plan assets
2.5%
4.6%
4.9%
Variances from actuarially assumed rates will result in increases or decreases in accumulated pension obligations,
pension expense and funding requirements in future periods.
The amounts shown for all of our periodic defined benefit plans for actuarial losses and prior service cost 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 and noncontrolling interest, are recognized in our accumulated other comprehensive
income (loss) at December 31, 2023 and 2024. We expect approximately $3.2 million and $.1 million of the unrecognized
actuarial losses and prior service cost, respectively, will be recognized as components of our periodic defined benefit
pension cost in 2025. The table below details the changes in other comprehensive income (loss) during 2022, 2023 and
2024.
F-40
Years ended December 31,
2022
2023
2024
(In millions)
Changes in plan assets and benefit obligations recognized in
other comprehensive income (loss):
Net actuarial gains (losses)
$
134.1
$
(25.5)
$
16.0
Amortization of unrecognized:
Net actuarial losses
14.7
3.8
3.7
Prior service cost
.1
—
.1
Settlements
.4
6.5
.4
Total
$
149.3
$
(15.2)
$
20.2
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. Such assumed
asset mixes are summarized below:
•
In Germany, the composition of our plan assets is established to satisfy the requirements of the German
insurance commissioner. Our German pension plan assets represent an investment in a large collective
investment fund established and maintained by Bayer AG in which several pension plans, including our
German pension plans and Bayer’s pension plans, have invested. Our plan assets represent a very nominal
portion of the total collective investment fund maintained by Bayer. These plan assets are a Level 3 in the
fair value hierarchy because there is not an active market that approximates the value of our investment in
the Bayer investment fund. We estimate the fair value of the Bayer plan assets based on periodic reports we
receive from the managers of the Bayer fund and using a model we developed with assistance from our third-
party actuary that uses estimated asset allocations and correlates such allocation to similar asset mixes in
fund indexes quoted on an active market. We periodically evaluate the results of our valuation model against
actual returns in the Bayer fund and adjust the model as needed. The Bayer fund periodic reports are subject
to audit by the German pension regulator.
•
In Canada, we currently have a plan asset target allocation of up to 10% to equity securities and 90 –100%
to fixed income securities. We expect the long-term rate of return for such investments to approximate the
applicable equity or fixed income index. The Canadian assets are Level 1 inputs because they are traded in
active markets.
•
In Norway, we currently have a plan asset target allocation of 18% to equity securities, 63% to fixed income
securities, 14% to real estate and the remainder primarily to other investments and liquid investments such
as money markets. The expected long-term rate of return for such investments is approximately 7%, 5%, 7%
and 8%, respectively. The majority of Norwegian plan assets are Level 1 inputs because they are traded in
active markets; however, approximately 15% of our Norwegian plan assets are invested in real estate and
other investments not actively traded and are therefore a Level 3 input.
•
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 our
equity securities and fixed income securities is approximately 7% and 5%, respectively (before plan
administrative expenses). Approximately 51% of our U.S. plan assets are invested in funds that are valued at
net asset value (“NAV”) and not subject to classification in the fair value hierarchy. As noted above, the LPC
defined benefit pension plan was merged into the existing NL U.S. defined benefit pension plan effective
December 31, 2024. In preparation for merging the U.S. pension plans, pension assets held by the LPC
defined benefit pension plan were converted to cash resulting in an overall higher allocation to cash at
December 31, 2024. In January 2025, our plan assets were rebalanced to align with the asset target allocation
noted above.
F-41
•
We also have plan assets in Belgium. The Belgian plan assets are invested in certain individualized fixed
income insurance contracts for the benefit of each plan participant as required by the local regulators and are
therefore a Level 3 input.
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 asset category and fair value level at December 31, 2023 and 2024
is shown in the tables below.
Fair Value Measurements at December 31, 2023
Quoted Significant
Prices in
Other
Significant
Active
Observable Unobservable
Assets
Markets
Inputs
Inputs
measured
Total
(Level 1)
(Level 2)
(Level 3)
at NAV
(In millions)
Germany
$ 269.4 $
— $
— $
269.4 $
—
Canada:
Non local currency equities
2.7
2.7
—
—
—
Local currency fixed income
86.2
86.2
—
—
—
Cash and other
1.1
1.1
—
—
—
Norway:
Local currency equities
2.4
2.4
—
—
—
Non local currency equities
7.2
7.2
—
—
—
Local currency fixed income
23.9
4.4
19.5
—
—
Non local currency fixed income
4.2
4.2
—
—
—
Real estate
6.6
—
—
6.6
—
Cash and other
3.0
2.8
—
.2
—
U.S.:
Equities
11.3
—
—
—
11.3
Fixed income
27.1
—
—
—
27.1
Cash and other
1.9
.7
—
—
1.2
Other
15.9
—
—
15.9
—
Total
$ 462.9 $ 111.7 $
19.5 $
292.1 $
39.6
F-42
Fair Value Measurements at December 31, 2024
Quoted Significant
Prices in
Other
Significant
Active Observable Unobservable
Assets
Markets
Inputs
Inputs
measured
Total
(Level 1)
(Level 2)
(Level 3)
at NAV
(In millions)
Germany
$ 264.6 $
— $
— $
264.6 $
—
Canada:
Local currency equities
2.8
2.8
—
—
—
Local currency fixed income
78.1
78.1
—
—
—
Cash and other
.5
.5
—
—
—
Norway:
Local currency equities
2.0
2.0
—
—
—
Non local currency equities
6.9
6.9
—
—
—
Local currency fixed income
21.1
3.7
17.4
—
—
Non local currency fixed income
4.2
4.2
—
—
—
Real estate
6.2
—
—
6.2
—
Cash and other
3.6
3.4
—
.2
—
U.S.:
Equities
6.7
—
—
.1
6.6
Fixed income
30.8
—
—
—
30.8
Cash and other
38.2
37.0
—
—
1.2
Other
14.9
—
—
14.9
—
Total
$ 480.6 $ 138.6 $
17.4 $
286.0 $
38.6
A rollforward of the change in fair value of Level 3 assets follows.
Years ended December 31,
2023
2024
(In millions)
Fair value at beginning of year
$
264.8
$
292.1
Gain on assets held at end of year
11.1
12.8
Gain (loss) on assets sold during the year
14.4
(.7)
Assets purchased
1.7
1.5
Assets sold
(9.3)
(2.3)
Currency exchange rate fluctuations
9.4
(17.4)
Fair value at end of year
$
292.1
$
286.0
F-43
Note 12 – Disaggregation of sales:
The following table disaggregates the net sales of our Chemicals Segment by place of manufacture (point of
origin) and the location of the customer (point of destination), which are the categories that depict how the nature, amount,
timing and uncertainty of revenue and cash flows are affected by economic factors.
Years ended December 31,
2022
2023
2024
(In millions)
Net sales - point of origin:
United States
$
1,226.6
$
1,029.2
$
1,178.4
Germany
895.4
726.4
826.6
Canada
389.4
351.0
351.5
Norway
273.5
252.1
278.6
Belgium
306.5
217.1
237.8
Eliminations
(1,161.2)
(909.3)
(985.8)
Total
$
1,930.2
$
1,666.5
$
1,887.1
Net sales - point of destination:
Europe
$
878.3
$
737.8
$
841.5
North America
695.7
618.1
698.3
Other
356.2
310.6
347.3
Total
$
1,930.2
$
1,666.5
$
1,887.1
The following table disaggregates the net sales of our Component Products and Real Estate Management and
Development Segments by major product line, which are the categories that depict how the nature, amount, timing and
uncertainty of revenue and cash flows for these segments are affected by economic factors.
Years ended December 31,
2022
2023
2024
(In millions)
Component Products:
Net sales:
Security products
$
114.5
$
121.2
$
115.2
Marine components
52.1
40.1
30.7
Total
$
166.6
$
161.3
$
145.9
Real Estate Management and Development:
Net sales:
Land sales
$
120.9
$
92.6
$
71.5
Utility and other
1.2
1.3
.3
Water delivery
3.6
—
—
Total
$
125.7
$
93.9
$
71.8
F-44
Note 13 – Other income, net:
Years ended December 31,
2022
2023
2024
(In millions)
Interest income and other:
Interest and dividends
$
10.9
$
21.0
$
21.8
Securities transactions, net
(.5)
.3
.2
Total
10.4
21.3
22.0
Infrastructure reimbursement
16.0
25.5
31.7
Currency transactions, net
11.5
1.4
1.6
Insurance recoveries
2.8
3.0
1.4
Gain on land sales
—
1.5
.5
Other, net
3.0
2.7
4.6
Total
$
43.7
$
55.4
$
61.8
Infrastructure reimbursement – Infrastructure reimbursements related to the OPA are discussed in Note 7.
LandWell also has agreements with certain utility providers servicing the Cadence master planned community under which
certain costs incurred for the development of utility infrastructure may be reimbursed to LandWell. LandWell received $.8
million, $.3 million and $1.4 million in 2022, 2023 and 2024, respectively, for past costs incurred.
Insurance recoveries – Kronos recognized aggregate gains of $2.7 million and $2.5 million in 2022 and 2023,
respectively, related to its Hurricane Laura business interruption claim.
NL received $.5 million and $1.4 million in insurance recoveries in 2023 and 2024, respectively. NL insurance
recoveries in 2022 were nominal.
F-45
Note 14 – Income taxes:
Years ended December 31,
2022
2023
2024
(In millions)
Pre-tax income (loss):
United States
$
81.4 $
53.2 $
169.8
Non-U.S. subsidiaries
88.5
(72.7)
74.4
Total
$
169.9 $
(19.5) $
244.2
Expected tax expense (benefit) at U.S. federal statutory
income tax rate of 21%
$
35.7 $
(4.1) $
51.3
Non-U.S. tax rates
2.0
(6.3)
.1
Incremental net tax expense (benefit) on earnings and losses of U.S. and non-
U.S. tax group companies
(1.7)
(13.9)
11.3
Valuation allowance
—
—
10.7
Global intangible low-tax income, net
1.8
(.4)
3.4
U.S. state income taxes, net
1.5
.6
2.6
Adjustment to the reserve for uncertain tax positions, net
(2.9)
(.7)
.5
Nondeductible expenses
1.0
1.2
3.2
Other, net
(.6)
(1.0)
(.2)
Income tax expense (benefit)
$
36.8 $
(24.6) $
82.9
Components of income tax expense (benefit):
Currently payable:
U.S. federal and state
$
16.3 $
12.6 $
14.2
Non-U.S.
20.1
13.5
25.3
Total
36.4
26.1
39.5
Deferred income taxes (benefit):
U.S. federal and state
(.9)
(14.8)
41.3
Non-U.S.
1.3
(35.9)
2.1
Total
.4
(50.7)
43.4
Income tax expense (benefit)
$
36.8 $
(24.6) $
82.9
Comprehensive provision (benefit) for income taxes
allocable to:
Net income (loss)
$
36.8 $
(24.6) $
82.9
Other comprehensive income (loss):
Currency translation
(3.3)
.4
(3.9)
Pension plans
60.7
(7.6)
7.5
Other
.9
(.3)
—
Total
$
95.1 $
(32.1) $
86.5
The amount shown in the preceding table of our income tax rate reconciliation for non-U.S. tax rates represents
the result determined by multiplying the pre-tax earnings or losses of each of our non-U.S. subsidiaries by the difference
between the applicable statutory income tax rate for each non-U.S. jurisdiction and the U.S. federal statutory tax rate. The
amount shown on such table for incremental net tax benefit on earnings and losses on non-U.S. and non-tax group
companies includes, as applicable, (i) deferred income taxes (or deferred income tax benefits) associated with the
current year earnings of all our Chemicals Segment’s non-U.S. subsidiaries, (ii) current U.S. income taxes (or current
income tax benefit), including U.S. personal holding company tax, as applicable, attributable to current-year income
(losses) of one of our Chemicals Segment’s non-U.S. subsidiaries, which subsidiary is treated as a dual resident for U.S.
income tax purposes, to the extent the current-year income (losses) of such subsidiary is subject to U.S. income tax under
the U.S. dual-resident provisions of the Internal Revenue Code, (iii) deferred income taxes associated with our direct
F-46
investment in Kronos and (iv) current and deferred income taxes associated with distributions and earnings from our
investment in LandWell and BMI.
The components of the net deferred income taxes at December 31, 2023 and 2024 are summarized in the
following table.
December 31,
2023
2024
Assets
Liabilities
Assets
Liabilities
(In millions)
Tax effect of temporary differences related to:
Property and equipment
$
— $
(62.9) $
— $
(69.1)
Lease assets (liabilities)
5.7
(5.7)
5.2
(5.3)
Accrued OPEB costs
2.1
—
1.9
—
Accrued pension costs
26.9
—
14.3
—
Accrued environmental liabilities
22.6
—
15.2
—
Capitalized research and development costs
4.8
—
6.3
—
Other deductible differences
10.7
—
10.1
—
Other taxable differences
—
(15.3)
—
(22.6)
Investments in subsidiaries and affiliates
10.5
(54.7)
10.1
(56.9)
Unrecognized currency gain
—
—
—
(16.8)
Tax on unremitted earnings of non-U.S. subsidiaries
—
(10.9)
—
(8.8)
Tax loss and tax credit carryforwards
119.6
—
126.6
—
Valuation allowance
(3.5)
—
(14.1)
—
Adjusted gross deferred tax assets (liabilities)
199.4
(149.5)
175.6
(179.5)
Netting of items by tax jurisdiction
(132.4)
132.4
(121.8)
121.8
Net noncurrent deferred tax asset (liability)
$
67.0 $
(17.1) $
53.8 $
(57.7)
We periodically review our deferred tax assets (“DTA”) to determine if a valuation allowance is required. At
December 31, 2024, our Chemicals Segment 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, we had concluded that no deferred income tax asset valuation allowance was required to
be recognized with respect to such carryforwards, principally because (i) such carryforwards have lengthy carryforward
periods (the German and Belgian carryforwards may be carried forward indefinitely and the Canadian carryforwards may
be carried forward 20 years), (ii) we have utilized a portion of such carryforwards during the most recent three-year period
and (iii) we currently expect to utilize the remainder of such carryforwards over the long term. With regards to our Belgian
DTA, given our Belgium unit’s operating results during the fourth quarter of 2024 and our current expectations for 2025
in that jurisdiction, we do not have sufficient positive evidence to overcome the significant negative evidence of having
twelve quarters of cumulative losses. Accordingly, at December 31, 2024, we concluded that we were 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 our Belgian DTA. At December 31, 2024, we continue to conclude no valuation allowance is
required to be recognized for our German and Canadian DTAs although prior to the complete utilization of such
carryforwards, if we were to generate additional losses in our 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 we
might conclude the benefit of such carryforwards would no longer meet the more-likely-than-not recognition criteria, at
which point we would be required to recognize a valuation allowance against some or all of the then-remaining tax benefit
associated with the carryforwards.
The 2017 Tax Act limited our business interest expense to the sum of our business interest income and 30% of
our adjusted taxable income as defined in the Tax Act. Any business interest expense disallowed as a deduction as a result
of the limitation may be carried forward indefinitely. At December 31, 2023 and December 31, 2024, we have recorded
deferred tax assets of $14.7 million and $23.1 million, respectively, for the carryforwards associated with the
F-47
nondeductible portion of our interest expense and have concluded we are required to recognize a valuation allowance for
such deferred tax asset under the more-likely-than-not recognition criteria. During 2024 we recognized a non-cash deferred
income tax expense of $2.5 million with respect to the valuation allowance recorded on the portion of our additional
interest expense carryforwards not benefitted by future reversals of existing deferred tax liabilities. See Note 1 for
additional information related to the revision impacting income taxes.
Prior to the enactment of the 2017 Tax Act the undistributed earnings of our Chemicals Segment’s European
subsidiaries were deemed to be permanently reinvested (we had not made a similar determination with respect to the
undistributed earnings of our Chemicals Segment’s Canadian subsidiary). Pursuant to the one-time repatriation tax
(Transition Tax) provisions of the 2017 Tax Act which imposed a one-time repatriation tax on post-1986 undistributed
earnings, we recognized current income tax expense of $74.1 million and elected to pay such tax in annual installments
over an eight-year period beginning in 2018. At December 31, 2024, the balance of our unpaid Transition Tax is $18.5
million, with the remaining payment due in 2025. The payment is recorded as a current payable to affiliate (income taxes
payable to Contran) on our Consolidated Balance Sheet at December 31, 2024. See Note 17.
We recognize deferred income taxes with respect to the excess of the financial reporting carrying amount over
the income tax basis of our direct investment in Kronos common stock because the exemption under GAAP to avoid such
recognition of deferred income taxes is not available to us. At December 31, 2024, we have recognized a deferred income
tax liability with respect to our direct investment in Kronos of $49.6 million. There is a maximum amount (or cap) of such
deferred income taxes we are required to recognize with respect to our direct investment in Kronos. The maximum amount
of such deferred income tax liability we would be required to have recognized (the cap) is $153.6 million. During 2024,
we recognized a non-cash deferred income tax expense with respect to our direct investment in Kronos of $4.6 million for
the increase in the deferred income taxes required to be recognized with respect to the excess of the financial reporting
carrying amount over the income tax basis of our direct investment in Kronos common stock, to the extent such increase
related to our equity in Kronos’ net income during such period. We recognized a similar non-cash deferred income tax
benefit of $6.4 million in 2023 and a non-cash deferred income tax expense of $1.2 million in 2022. A portion of the net
change with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct
investment in Kronos common stock during such periods related to our equity in Kronos’ other comprehensive income
(loss) items, and the amounts shown in the table above for income tax expense (benefit) allocated to other comprehensive
income (loss) items includes amounts related to our equity in Kronos’ other comprehensive income (loss) items.
On 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 us to compute a pretransition gain
or loss for currency translation related to the operations, assets and liabilities of our non-U.S. qualified business units.
Pursuant to the 2024 Final Regulations, we have calculated a pretransition gain of $77.1 million and, accordingly, our
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 our 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, we cannot guarantee that these tax matters, if any, will be resolved in our favor, and therefore our potential
exposure, if any, is also uncertain. We believe we have adequate accruals for additional taxes and related interest expense
which could ultimately result from tax examinations. We believe the ultimate disposition of tax examinations should not
have a material adverse effect on our consolidated financial position, results of operations or liquidity.
F-48
The following table shows the changes in the amount of our uncertain tax positions (exclusive of the effect of
interest and penalties) during 2022, 2023 and 2024:
Years ended December 31,
2022
2023
2024
(In millions)
Unrecognized tax benefits:
Amount at beginning of year
$
6.4
$
3.5
$
2.8
Tax positions taken in current period
.7
.5
.5
Lapse due to applicable statute of limitations
(3.4)
(1.2)
—
Changes in currency exchange rates
(.2)
—
(.1)
Amount at end of year
$
3.5
$
2.8
$
3.2
At December 31, 2024, all of our uncertain tax benefits are classified as a component of our noncurrent deferred
tax asset. If our uncertain tax position at December 31, 2024 was recognized, a benefit of $3.2 million would affect our
effective income tax rate. Excluding any potential adjustments resulting from on-going examinations by tax authorities,
we currently estimate that our unrecognized tax benefits will not change materially during the next twelve months.
We and Contran file income tax returns in U.S. federal and various state and local jurisdictions. We also file
income tax returns in various non-U.S. jurisdictions, principally in Germany, Canada, Belgium and Norway. Our U.S.
income tax returns prior to 2021 are generally considered closed to examination by applicable tax authorities. Our non-
U.S. income tax returns are generally considered closed to examination for years prior to: 2020 for Germany; 2021 for
Belgium; and 2019 for Canada and Norway although certain periods may be extended if currently under examination or
for the review of cross-border transactions.
We accrue interest and penalties on our uncertain tax positions as a component of our provision for income
taxes. The amount of interest and penalties we accrued during 2022, 2023 and 2024 was not material.
Note 15 – Noncontrolling interest in subsidiaries:
December 31,
2023
2024
(In millions)
Noncontrolling interest in net assets:
Kronos Worldwide
$
209.0
$
210.3
NL Industries
76.9
81.5
CompX International
22.0
19.0
BMI
11.0
18.7
LandWell
6.8
13.5
Total
$
325.7
$
343.0
Years ended December 31,
2022
2023
2024
(In millions)
Noncontrolling interest in net income (loss) of subsidiaries:
Kronos Worldwide
$
20.0
$
(9.5)
$
16.1
NL Industries
5.8
(.4)
11.4
CompX International
2.6
2.9
2.0
BMI
2.8
8.2
9.6
LandWell
14.7
13.8
14.2
Total
$
45.9
$
15.0
$
53.3
F-49
Note 16 – Valhi stockholders’ equity:
Shares of common stock
Issued
Treasury
Outstanding
(In millions)
Balance at December 31, 2022, 2023 and 2024
29.6
(1.1)
28.5
Valhi share repurchases and cancellations. Our board of directors previously authorized the repurchase of shares
of our common stock in open market transactions, including block purchases, or in privately negotiated transactions, which
may include transactions with our affiliates or subsidiaries. The aggregate number of shares authorized for repurchase is
833,333, and we have approximately 334,000 shares available for repurchase at December 31, 2024. We may purchase
the stock from time to time as market conditions permit. The stock repurchase program does not include specific price
targets or timetables and may be suspended at any time. Depending on market conditions, we may terminate the program
prior to completion. We will use cash on hand to acquire the shares. Repurchased shares could be retired and cancelled or
may be added to our treasury stock and used for employee benefit plans, future acquisitions or other corporate purposes.
We did not make any such purchases under the plan in 2022, 2023 or 2024.
Treasury stock. At December 31, 2023 and 2024, NL and Kronos held approximately 1.2 million and .1 million
shares of our common stock, respectively. The treasury stock we reported for financial reporting purposes at December 31,
2023 and 2024 represents our proportional interest in these shares of our common stock held by NL and Kronos, at NL’s
and Kronos’ historical cost basis. The remaining portion of these shares of our common stock, which are attributable to
the noncontrolling interest of NL and Kronos, are reflected in our Consolidated Balance Sheets at fair value and are
classified as part of other noncurrent assets. Under Delaware Corporation Law, 100% (and not the proportionate interest)
of a parent company’s shares held by a majority-owned subsidiary of the parent is considered to be treasury stock for
voting purposes. As a result, our common shares outstanding for financial reporting purposes differ from those outstanding
for legal purposes. Any unrealized gains or losses on the shares of our common stock attributable to the noncontrolling
interest of Kronos and NL are recognized in the determination of each of Kronos and NL’s respective net income or loss.
Under the principles of consolidation we eliminate any gains or losses associated with our common stock to the extent of
our proportional ownership interest in each subsidiary. We recognized a loss of $1.6 million in 2022, a loss of $1.7 million
in 2023 and a gain of $1.9 million in 2024 in our Consolidated Statements of Operations which represents the unrealized
gain (loss) in respect of these shares attributable to the noncontrolling interest of Kronos and NL. See Note 2.
Valhi director stock 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. In March 2021, our board of directors
voted to replace the existing director stock plan with a new plan that would provide for the award of stock to non-employee
members of our board of directors, and up to a maximum of 100,000 shares could be awarded. The new plan was approved
at our May 2021 shareholder meeting, at which time the prior director stock plan terminated. We awarded 9,000 shares
and 6,300 shares under this plan in 2023 and 2024, respectively, and at December 31, 2024, 78,300 shares are available
for future award under this new plan.
Stock plans of subsidiaries. Kronos, NL and CompX each maintain plans which provide for the award of their
common stock to their board of directors. At December 31, 2024, Kronos, NL and CompX had 87,800, 185,750 and
119,650 shares of their respective common stock available for future award under respective plans.
F-50
Accumulated other comprehensive loss. Accumulated other comprehensive income (loss) attributable to Valhi
stockholders comprises changes in equity as presented in the table below.
Years ended December 31,
2022
2023
2024
(In millions)
Accumulated other comprehensive income (loss) (net of tax and
noncontrolling interest):
Marketable securities:
Balance at beginning of year
$
1.7 $
1.6 $
1.7
Other comprehensive income:
Unrealized gain (loss) arising during the year
(.1)
.1
—
Balance at end of year
$
1.6 $
1.7 $
1.7
Currency translation:
Balance at beginning of year
$
(72.2)
$
(91.5)
$
(88.8)
Other comprehensive income (loss) arising during the year
(19.3)
2.7
(22.9)
Balance at end of year
$
(91.5)
$
(88.8)
$ (111.7)
Defined benefit pension plans:
Balance at beginning of year
$ (120.9)
$
(55.0)
$
(58.8)
Other comprehensive income:
Amortization of prior service cost and net losses
included in net periodic pension cost
7.3
1.9
2.1
Net actuarial gain (loss) arising during the year
58.4
(10.0)
7.1
Plan settlement
.2
4.3
.2
Balance at end of year
$
(55.0)
$
(58.8)
$
(49.4)
OPEB plans:
Balance at beginning of year
$
.1
$
1.0
$
.4
Other comprehensive income:
Amortization of prior service credit and net losses
included in net periodic OPEB cost
(.5)
(.7)
(.3)
Net actuarial gain arising during the year
1.4
.1
.1
Balance at end of year
$
1.0
$
.4
$
.2
Total accumulated other comprehensive loss:
Balance at beginning of year
$ (191.3)
$ (143.9)
$ (145.5)
Other comprehensive income (loss)
47.4
(1.6)
(13.7)
Balance at end of year
$ (143.9)
$ (145.5)
$ (159.2)
See Note 11 for amounts related to our defined benefit pension plans and Note 10 for amounts related to our
OPEB plans.
Note 17 – 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
F-51
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.
From time to time, we may have loans and advances outstanding between us and various related parties, including
Contran, 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 we
would earn if we invested the funds in other instruments. While certain of these loans may be of a lesser credit quality than
cash equivalent instruments otherwise available to us, we believe we have evaluated the credit risks involved and
appropriately reflect those credit risks in the terms of the applicable loans. 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. We paid Contran
$9.2 million, $10.3 million and $6.3 million in interest on borrowings and unused commitment fees under Valhi’s Contran
credit facility in 2022, 2023 and 2024, respectively. In February 2024, Kronos entered into a $53.7 million subordinated,
unsecured term loan with Contran. Interest expense on Kronos’ loan from Contran was $5.1 million in 2024. See Note 9
for more information on the Kronos term loan with Contran and the Valhi credit facility with Contran.
Under the terms of various intercorporate services agreements (“ISA”) we enter into with Contran, employees of
Contran provide us certain management, tax planning, financial and administrative services on a fee basis. Such fees are
based on the compensation of individual Contran employees providing services for us and/or estimates of the 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 all of our subsidiaries, thus allowing certain Contran employees to provide services to multiple companies
but only be compensated by Contran. We negotiate fees annually, and agreements renew quarterly. The net ISA fees
charged to us by Contran aggregated $41.2 million in 2022, $37.8 million in 2023 and $39.5 million in 2024.
At December 31, 2024, we had an aggregate 16.7 million shares of our Kronos common stock pledged as
collateral for certain debt obligations of Contran. We receive a fee from Contran for pledging these Kronos shares,
determined by a formula based on the market value of the shares pledged. We received $1.2 million in 2022, $.8 million
in 2023 and $.9 million in 2024 from Contran for this pledge.
Contran and certain of its subsidiaries and affiliates, including us, purchase certain of their insurance policies and
risk management services as a group, with the costs of the jointly-owned policies and services being apportioned among
the participating companies. Tall Pines Insurance Company, our subsidiary, underwrites certain insurance policies for
Contran and certain of its subsidiaries and affiliates, including us. Tall Pines purchases reinsurance from highly rated (as
determined by A.M. Best or other internationally recognized ratings agency) third-party insurance carriers for substantially
all of the risks it underwrites. Consistent with insurance industry practices, Tall Pines receives commissions from the
reinsurance underwriters and/or assesses fees for certain of the policies that it underwrites. The aggregate amount paid
under the group insurance program by us, our subsidiaries and LPC in 2022, 2023 and 2024 was $25.2 million, $29.3
million and $29.7 million, respectively, which amounts principally represent insurance premiums. The aggregate amounts
paid under the group insurance program also include payments to insurers or reinsurers for the reimbursement of claims
within our applicable deductible or retention ranges that such insurers and reinsurers paid to third parties on our behalf, as
well as amounts for claims and risk management services and various other third-party fees and expenses incurred by the
program. We expect these relationships will continue in 2025.
With respect to certain of such jointly-owned policies, it is possible that unusually large losses incurred by one
or more insureds 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 amongst 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 justify the risk associated with the potential for any uninsured loss.
Contran and certain of its subsidiaries participate in a combined information technology data services program
that Contran provides for primary data processing and failover. The program apportions its costs among the participating
F-52
companies. The aggregate amount Kronos paid 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 these relationships with Contran will continue in 2025.
Prior to 2022, NL made certain pro-rata distributions to its stockholders in the form of shares of Kronos common
stock. All of NL’s distributions of Kronos common stock were taxable to NL and NL recognized a taxable gain equal to
the difference between the fair market value of the Kronos shares distributed on the various dates of distribution and NL’s
adjusted tax basis in the shares at the dates of distribution. NL transferred shares of Kronos common stock to us in
satisfaction of the tax liability related to NL’s gain on the transfer or distribution of these shares of Kronos common stock
and the tax liability generated from the use of Kronos shares to settle the tax liability. To date, we have not paid the liability
to Contran because Contran has not paid the liability to the applicable tax authority. The income tax liability will become
payable to Contran, and by Contran to the applicable tax authority, when the shares of Kronos transferred or distributed
by NL to us are sold or otherwise transferred outside the Contran Tax Group or in the event of certain restructuring
transactions involving us. We have recognized deferred income taxes for our investment in Kronos common stock.
We are a party to a tax sharing agreement with Contran 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. Contran has agreed, however,
to indemnify us for any liability for income taxes of the Contran Tax Group in excess of our tax liability computed in
accordance with the tax sharing agreement.
Receivables from and payables to affiliates are summarized in the table below.
December 31,
2023
2024
(In millions)
Current receivables from affiliates:
LPC
$
16.9
$
—
Contran - trade items
.2
.2
Other
.4
.6
Total
$
17.5
$
.8
Current payables to affiliates:
LPC
$
19.9
$
—
Contran - income taxes
10.2
16.9
Contran - trade items
—
.2
Total
$
30.1
$
17.1
Noncurrent payable to affiliates:
Contran - income taxes
$
18.5
$
—
Payables to affiliate included in long-term debt:
Valhi - Contran credit facility
$
93.4
$
44.6
Kronos - Contran Term Loan
—
53.7
Total
$
93.4
$
98.3
Amounts payable to LPC were generally for the purchase of TiO2, while amounts receivable from LPC were
generally from the sale of TiO2 feedstock. Purchases of TiO2 from LPC totaled $225.6 million in 2022 and $231.7 million
in 2023. Sales of feedstock to LPC totaled $106.9 million in 2022 and $135.1 million in 2023. See Note 3 for the details
on the LPC acquisition.
F-53
Note 18 – Commitments and contingencies:
Lead pigment litigation
NL’s former operations included the manufacture of lead pigments for use in paint and lead-based paint. NL,
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. NL currently has 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 NL) 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 NL and its
co-defendants in respect to the case. In the agreement, NL expressly denies any and all liability and the dismissal of the
case with prejudice was entered by the court without a final judgment of liability entered against NL. 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). NL’s 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 NL (and any amounts on deposit in excess of the final payment would be returned
to NL). Pursuant to the settlement agreement, NL 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 NL’s 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. NL 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
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.
F-54
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. Our businesses 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 and overall sustainability. Periodically we produce our
Kronos Environmental Social Governance Report, which highlights Kronos’ focus on sustainability of its manufacturing
operations, as well as its environmental, social and governance strategy. From time to time, our businesses may be subject
to environmental regulatory enforcement under U.S. and non-U.S. statutes, the resolution of which typically involves the
establishment or enhancement 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 (primarily NL’s 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 and NL or its
predecessors, 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 NL is only one of a number of PRPs who may also be jointly and severally liable, and
among whom costs may be shared or allocated. In addition, we are occasionally named as a party in a number of personal
injury lawsuits filed in various jurisdictions alleging claims related to environmental conditions alleged to have resulted
from our operations.
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
F-55
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 the 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 2022, 2023 and
2024.
Years ended December 31,
2022
2023
2024
(In millions)
Balance at the beginning of the year
$
97.6
$
97.3
$
96.9
Additions (deductions), net
1.7
2.5
(19.2)
Payments, net
(2.0)
(2.9)
(3.1)
Balance at the end of the year
$
97.3
$
96.9
$
74.6
Amounts recognized in the Consolidated Balance Sheet at the
end of the year:
Current liabilities
$
3.8
$
3.7
$
59.7
Noncurrent liabilities
93.5
93.2
14.9
Total
$
97.3
$
96.9
$
74.6
NL. On a quarterly basis, NL evaluates the potential range of its liability for environmental remediation and
related costs at sites where it has been named as a PRP or defendant. At December 31, 2024, NL had accrued approximately
$69 million related to approximately 30 sites associated with remediation and related matters it believes 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
NL for remediation and related matters for which NL believes it is possible to estimate costs is approximately $38 million,
including amounts currently accrued.
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-
F-56
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 NL 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 NL’s
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.
NL believes that 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 NL is not currently able to reasonably estimate a range of costs. For
these sites, generally the investigation is in the early stages, and NL is unable to determine whether or not NL actually had
any association with the site, the nature of its responsibility, if any, for the contamination at the site, if any, and the extent
of contamination at and cost to remediate the site. The timing and availability of information on these sites is dependent
on events outside of NL’s control, such as when the party alleging liability provides information to NL. At certain of these
previously inactive sites, NL has received general and special notices of liability from the EPA and/or state agencies
alleging that NL, 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 NL, 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.
Other. We have also accrued approximately $6 million at December 31, 2024 for other environmental cleanup
matters which represents our best estimate of the liability.
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, NL received $.5 million and $1.4 million in insurance recoveries in 2023 and 2024, respectively. Recoveries in
2022 were nominal.
Other litigation
In addition to the litigation described above, we and our affiliates are involved in various other environmental,
contractual, product liability, patent (or intellectual property), employment and other claims and disputes incidental to our
present and former businesses. In certain cases, we have insurance coverage for these items, although we do not expect
additional material insurance coverage for our 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.
F-57
Other matters
Concentrations of credit risk – Sales of TiO2 accounted for approximately 92% of our Chemicals Segment’s sales
in 2022 and 90% in both 2023 and 2024. The remaining sales result from the sale of ilmenite ore (a raw material used in
the sulfate pigment production process), and the manufacture and sale of iron-based water treatment chemicals and certain
titanium chemical products (derived from co-products of the TiO2 production processes). TiO2 is generally sold to the
paint, plastics and paper industries. Such markets are generally considered “quality-of-life” markets whose demand for
TiO2 is influenced by the relative economic well-being of the various geographic regions. Our Chemicals Segment sells
TiO2 to approximately 3,000 customers, with the top ten customers approximating 33% of our Chemicals Segment’s net
sales in 2022, 35% in 2023 and 39% in 2024. One customer accounted for approximately 10% of our Chemicals Segment’s
net sales in 2022, 12% in 2023 and 10% in 2024. The table below shows the approximate percentage of our Chemicals
Segment’s TiO2 sales by volume for its significant markets, Europe and North America, for the last three years.
2022
2023
2024
Europe
45%
44%
44%
North America
39%
41%
40%
Our Component Products Segment’s products are sold primarily in North America to original equipment
manufacturers. The ten largest customers related to our Component Product’s Segment accounted for approximately 52%
of our Component Products Segment’s sales in each of 2022 and 2023 and 47% in 2024. One customer of the security
products reporting unit accounted for approximately 14% of the Component Products Segment’s total sales in 2022, 24%
in 2023 (of which 11% related to a non-recurring pilot project) and 21% in 2024. One customer of the marine components
reporting unit accounted for 12% of the Component Products Segment’s total sales in 2022.
Our Real Estate Management and Development Segment’s revenues are land sales income and water (through
September 2022) and electric delivery fees (prior to December 2023). During 2022, we had sales to two customers that
each exceeded 10% of our Real Estate Management and Development Segment’s net sales, both related to land sales.
During 2023, we had sales to five customers that each exceeded 10% of our Real Estate Management and Development
Segment’s net sales all related to land sales. During 2024, we had sales to three customers that each exceeded 10% of our
Real Estate Management and Development Segment’s net sales all related to land sales.
Long-term contracts – Our Chemicals Segment has long-term supply contracts that provide for certain of its TiO2
feedstock requirements through 2026. The agreements require Kronos to purchase certain minimum quantities of feedstock
with minimum purchase commitments aggregating approximately $542 million over the life of the contracts in years
subsequent to December 31, 2024 (including approximately $484 million committed to be purchased in 2025). In addition,
our Chemicals Segment 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 (including $40 million committed to be
purchased in 2025).
Note 19 – Financial instruments:
See Note 6 for information on how we determine the fair value of our marketable securities.
See Note 3 for information on how we determine fair value of our earn-out liability related to the LPC acquisition.
The fair value measurement is based on significant inputs not observable in the market and therefore represents a Level 3
measurement as defined in ASC 820. Accretion of the earn-out liability was not material in 2024. There has been no other
activity subsequent to Acquisition Date impacting the fair value of the acquisition earn-out liability. The fair value of the
acquisition earn-out liability is included in other noncurrent liabilities on the Consolidated Balance Sheet.
F-58
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 millions)
Cash, cash equivalents and restricted cash equivalents
$
462.0
$
462.0
$
378.6
$
378.6
Long-term debt:
Kronos 9.50% Senior Secured Notes due 2029
—
—
365.4
403.4
Kronos 3.75% Senior Secured Notes due 2025
440.9
424.5
78.3
77.9
Kronos revolving credit facility
—
—
10.0
10.0
LandWell bank note payable
12.2
12.2
11.4
11.4
At December 31, 2024, the estimated market price of Kronos’ 3.75% Senior Secured Notes due 2025 was €996
per €1,000 principal amount, and the estimated market price of Kronos’ 9.50% Senior Secured Notes due 2029 was €1,101
per €1,000 principal amount. The fair values of Kronos’ 3.75% Senior Secured Notes due 2025 and Kronos’ 9.50% Senior
Secured Notes due 2029 were based on quoted market prices; however, these quoted market prices represented Level 2
inputs because the markets in which the 3.75% Senior Secured Notes due 2025 and the 9.50% Senior Secured Notes due
2029 trade were not active. Due to the variable interest rate, the carrying amount of Kronos’ revolving credit facility is
deemed to approximate fair value. The fair value of other fixed-rate debt, which represents Level 2 inputs, is deemed to
approximate carrying value. In addition, at December 31, 2024, Kronos has a $53.7 million subordinated, unsecured term
loan payable to a related party, Contran, due September 2029, and Valhi has $44.6 million outstanding on an unsecured
revolving credit facility with Contran. See Note 9. Due to their near-term maturities, the carrying amounts of accounts
receivable and accounts payable are considered equivalent to fair value. See Notes 4 and 10.
Note 20 – Restructuring costs:
In response to the extended period of reduced demand in 2023, 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 third quarter 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 line at its facility in Varennes, Canada. As a result
of the sulfate process line closure, Kronos recognized charges to cost of sales in 2024 of approximately $2 million related
to workforce reductions for employees impacted and approximately $14 million in non-cash charges primarily related to
accelerated depreciation.
F-59
A summary of the activity in Kronos’ accrued restructuring costs for 2023 and 2024 is shown in the table below:
Years ended December 31,
2023
2024
(in millions)
Changes in accrued workforce reduction costs:
Balances at beginning of the year
$
— $
5.0
Workforce reduction costs accrued
5.8
2.0
Workforce reduction costs paid
(.9)
(6.0)
Currency translation adjustments, net
.1
(.1)
Balance at the end of the year
$
5.0 $
.9
Amounts recognized in the balance sheet:
Current liability
$
5.0 $
.9
Noncurrent liability
—
—
$
5.0 $
.9
Note 21 – 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 annual segment disclosures currently required annually in interim periods. Public
companies are required to disclose the title and position of the 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
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
Name of Corporation
Jurisdiction of
Incorporation
or Organization
% of Voting
Securities
Held at
December 31,
2024 (1)
ASC Holdings, Inc.
Utah
100%
Kronos Worldwide, Inc. (2)
Delaware
50%
NL Industries, Inc. (2), (3), (4)
New Jersey
83%
CompX International Inc. (4)
Delaware
87%
Tremont LLC
Delaware
100%
TRECO LLC
Nevada
100%
Basic Management, Inc.
Nevada
63%
Basic Environmental Company LLC
Nevada
100%
Basic Remediation Company LLC
Nevada
100%
Basic Land Company
Nevada
100%
The LandWell Company LP (5)
Delaware
50%
Henderson Interchange Sign LLC
Nevada
100%
TRE Management Company
Delaware
100%
Tall Pines Insurance Company
Vermont
100%
Medite Corporation
Delaware
100%
(1)
Held by the Registrant or the indicated subsidiary of the Registrant.
(2)
Subsidiaries of Kronos are incorporated by reference to Exhibit 21.1 of Kronos’ Annual Report on Form 10-
K for the year ended December 31, 2024 (File No. 333-100047). NL owns an additional 31% of Kronos
directly.
(3)
Subsidiaries of NL are incorporated by reference to Exhibit 21.1 of NL’s Annual Report on Form 10-K for
the year ended December 31, 2024 (File No. 1-640).
(4)
Subsidiaries of CompX are incorporated by reference to Exhibit 21.1 of CompX’s Annual Report on Form
10-K for the year ended December 31, 2024 (File No. 1-13905).
(5)
TRECO LLC owns an additional 27% of The LandWell Company LP directly.
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Valhi, Inc.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, TX 75240-2620
(972) 233-1700