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What changed in KRONOS WORLDWIDE INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of KRONOS WORLDWIDE INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+243 added−220 removedSource: 10-K (2024-03-06) vs 10-K (2023-03-08)

Top changes in KRONOS WORLDWIDE INC's 2023 10-K

243 paragraphs added · 220 removed · 187 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

67 edited+8 added−8 removed80 unchanged
Biggest changeContracts may be terminated with a 12-month written notice (generally for multi-year agreement terms) 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 TiO 2 are titanium-containing feedstock, primarily ilmenite or purchased sulfate grade slag and sulfuric acid.
Biggest changeWe expect the raw materials purchased under these contracts, and contracts we may enter into, will meet our 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.
(3) We operate the facility near Lake Charles through a joint venture with Venator Investments LLC (Venator Investments), a wholly-owned subsidiary of Venator Group, of which Venator Materials PLC (Venator) owns 100% and the amount indicated in the table above represents the share of TiO 2 produced by the joint venture to which we are entitled.
(3) We operate the facility near Lake Charles, Louisiana through a joint venture with Venator Investments LLC (Venator Investments), a wholly-owned subsidiary of Venator Group, of which Venator Materials PLC (Venator) owns 100% and the amount indicated in the table above represents the share of TiO 2 produced by the joint venture to which we are entitled.
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, 13 management reviews and evaluates safety performance throughout the year.
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.
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.
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 12 our locations maintains site-specific safety programs and disaster response and business continuity plans.
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 expect 13 our manufacturing facilities to produce our products safely and in compliance with local regulations, policies, standards and practices intended to protect the environment and our people and have established global policies designed to promote compliance. We require our employees to comply with such requirements.
We purchase feedstock for our chloride process TiO 2 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 Eramet SA ​ Chloride process grade slag ​ Renewal terms upon negotiation Sierra Rutile Limited ​ Rutile ore ​ Renewal terms upon negotiation Iluka Resources Limited ​ Rutile ore ​ Renewal terms upon negotiation Saraf Agencies Private Limited ​ Chloride process grade slag ​ Renewal terms upon negotiation In the past we have been, and we expect that we will continue to be, successful in obtaining short-term and long-term extensions to these and other existing supply contracts prior to their expiration.
We purchase feedstock for our chloride process TiO 2 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 Eramet SA ​ Chloride process grade slag ​ Renewal terms upon negotiation Sierra Rutile Limited ​ Rutile ore ​ Renewal terms upon negotiation Iluka Resources Limited ​ Rutile ore ​ Renewal terms upon negotiation Saraf Agencies Private Limited ​ Chloride process grade slag ​ Renewal terms upon negotiation In the past we have been, and we expect that we will continue to be, successful in obtaining short-term and long-term extensions to these and other existing supply contracts.
Our 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. We operated our facilities at reduced capacities in the fourth quarter of 2022 and into 2023.
Our 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. We operated our facilities at reduced capacities in the fourth quarter of 2022 and through 2023.
Although we sell our TiO 2 to all segments of the paper end-use market, our primary focus is on the TiO 2 grades used in paper laminates, where several layers of paper are laminated together using melamine resin under high temperature and pressure.
Although we sell our TiO 2 to all segments of the paper end-use market, our primary focus is on the TiO 2 grades used in coated board and paper laminates, where several layers of paper are laminated together using melamine resin under high temperature and pressure.
As one of the few vertically integrated producers of sulfate process TiO 2 , we operate a rock ilmenite mine in Norway, which provided all of the feedstock for our European sulfate process TiO 2 plants in 2022. We expect ilmenite production from our mine to meet our European sulfate process feedstock requirements for the foreseeable future.
As one of the few vertically integrated producers of sulfate process TiO 2 , we operate a rock ilmenite mine in Norway, which provided all of the feedstock for our European sulfate process TiO 2 plants in 2023. We expect ilmenite production from our mine to meet our European sulfate process feedstock requirements for the foreseeable future.
Ltd. 11% Venator 7% Kronos 7% Other 48% ​ Chemours has approximately one-half of total North American TiO 2 production capacity and is our principal North American competitor. LB Group Co. Ltd. previously announced it plans to add an additional 200,000 tons of chloride capacity which we expect will be added incrementally over the next several years.
Ltd. 12% Kronos 7% Venator 7% Other 48% ​ Chemours has approximately one-half of total North American TiO 2 production capacity and is our principal North American competitor. LB Group Co. Ltd. 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.
We did not experience any work stoppages during 2022, although it is possible that there could be future work stoppages or other labor disruptions that could materially and adversely affect our business, results of operations, financial position, or liquidity.
We did not experience any work stoppages during 2023, although it is possible that there could be future work stoppages or other labor disruptions that could materially and adversely affect our business, results of operations, financial position, or liquidity.
We, along with our distributors and agents, sell and provide technical services for our products to approximately 4,000 customers in 100 countries with the majority of our sales in Europe, North America and the Asia Pacific region.
We, along with our distributors and agents, sell and provide technical services for our products to approximately 3,000 customers in 100 countries with the majority of our sales in Europe, North America and the Asia Pacific region.
Therefore, over the past ten years, we and our competitors increased industry capacity through debottlenecking projects, although this increase only partly compensated for the shut-down of various TiO 2 plants throughout the world. Although overall industry demand is expected to increase in 2023, other than through debottlenecking projects and the LB Group Co.
Therefore, over the past ten years, we and our competitors increased industry capacity through debottlenecking projects; however, this increase only partly compensated for the shut-down of various TiO 2 plants throughout the world. Although overall industry demand is expected to increase in 2024, other than through debottlenecking projects and the LB Group Co.
Patents – We have obtained patents and have numerous patent applications pending that cover our products and the technology used in the manufacture of our products. Our patent strategy is important to us and our continuing business activities.
Patents – We have obtained patents and have numerous patent applications pending that cover certain aspects of our products and the technology used in the manufacture of our products. Our patent strategy is important to us and our continuing business activities.
We own the Leverkusen facility, which represents about one-third of our current TiO 2 production capacity, but we lease the land under the facility from Bayer under a long-term agreement which expires in 2050. Lease payments are periodically negotiated with Bayer for periods of at least two years at a time.
We own our Leverkusen facility, which represents about one-third of our current TiO 2 production capacity, but we lease 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.
Our TiO 2 business is enhanced by the following three complementary businesses, which comprised approximately 8% of our net sales in 2022: ● We own and operate an ilmenite mine in Norway pursuant to a governmental concession with an unlimited term. Ilmenite is a raw material used directly as a feedstock by some sulfate-process TiO 2 plants.
Our TiO 2 business is enhanced by the following three complementary businesses, which comprised approximately 10% of our net sales in 2023: ● We own and operate an ilmenite mine in Norway pursuant to a governmental concession with an unlimited term. Ilmenite is a raw material used directly as a feedstock by some sulfate-process TiO 2 plants.
We strive to maintain good relationships with all our employees, including the unions and workers’ councils representing those employees. In Europe, our union employees are covered by master collective bargaining agreements for the chemical industry that are generally renewed annually. At December 31, 2022, approximately 88% of our worldwide workforce is organized under collective bargaining agreements.
We strive to maintain good relationships with all our employees, including the unions and workers’ councils representing those employees. In Europe, our union employees are covered by master collective bargaining agreements for the chemical industry that are generally renewed annually. At December 31, 2023, approximately 78% of our worldwide workforce is organized under collective bargaining agreements.
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 TiO 2 industry sales represented by chloride process pigments has remained stable relative to sulfate process pigments, and in 2022, chloride process production facilities represented approximately 45% of industry capacity.
The 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 TiO 2 industry sales represented by chloride process pigments has remained stable relative to sulfate process pigments, and in 2023, chloride process production facilities represented approximately 43% of industry capacity.
During 2022, we had an estimated 7% share of worldwide TiO 2 sales volume, and based on sales volume, we believe we are the leading seller of TiO 2 in several countries, including Germany. Our principal competitors are The Chemours Company, Tronox Incorporated, LB Group Co. Ltd. and Venator Materials PLC.
During 2023, we had an estimated 6% share of worldwide TiO 2 sales volume, and based on sales volume, we believe we are the leading seller of TiO 2 in several countries, including Germany. Our principal competitors are The Chemours Company, Tronox Incorporated, LB Group Co. Ltd. and Venator Materials PLC.
The top five TiO 2 producers (i.e. we and our four principal competitors) account for approximately 52% of the world’s production capacity. The following chart shows our estimate of worldwide production capacity in 2022: ​ ​ ​ Worldwide production capacity - 2022 Chemours 15% Tronox ​ 12% LB Group Co.
The top five TiO 2 producers (i.e. we and our four principal competitors) account for approximately 52% of the world’s production capacity. The following chart shows our estimate of worldwide production capacity in 2023: ​ ​ ​ Worldwide production capacity - 2023 Chemours 14% Tronox ​ 12% LB Group Co.
As a result, we normally build inventories during the first and fourth quarters of each year in order to maximize our product availability during the higher demand periods normally experienced in the second and third quarters. Competition The TiO 2 industry is highly competitive.
We normally build inventories during the first and fourth quarters of each year in order to maximize our product availability during the higher demand periods normally experienced in the second and third quarters. 9 Competition The TiO 2 industry is highly competitive.
We sell to a diverse customer base with only one customer representing 10% or more of our net sales in 2022 (Behr Process Corporation – 10%). Our largest ten customers accounted for approximately 33% of net sales in 2022. Neither our business as a whole nor any of our principal product groups is seasonal to any significant extent.
We sell to a diverse customer base with only one customer representing 10% or more of our net sales in 2023 (Behr Process Corporation – 12%). Our largest ten customers accounted for approximately 35% of net sales in 2023. Neither our business as a whole nor any of our principal product groups is seasonal to any significant extent.
These individuals have the responsibility for improving our chloride and sulfate production processes, improving product quality and strengthening our competitive position by developing new products and applications. Our expenditures for these activities were approximately $16 million in 2020, $17 million in 2021 and $15 million in 2022. We expect to spend approximately $17 million on research and development in 2023.
These individuals have the responsibility for improving our chloride and sulfate production processes, improving product quality and strengthening our competitive position by developing new products and applications. Our expenditures for these activities were approximately $17 million in 2021, $15 million in 2022 and $18 million in 2023. We expect to spend approximately $14 million on research and development in 2024.
At December 31, 2022, approximately 50% of our common stock was owned by Valhi, Inc. (NYSE: VHI) and approximately 31% was owned by a wholly-owned subsidiary of NL Industries, Inc. (NYSE: NL). Valhi also owns approximately 83% of NL Industries’ outstanding common stock. A wholly-owned subsidiary of Contran Corporation held approximately 92% of Valhi’s outstanding common stock.
At December 31, 2023, approximately 50% of our common stock was owned by Valhi, Inc. (NYSE: VHI) and approximately 31% was owned by a wholly-owned subsidiary of NL Industries, Inc. (NYSE: NL). Valhi also owns approximately 83% of NL Industries’ outstanding common stock. A wholly-owned subsidiary of Contran Corporation held approximately 91% of Valhi’s outstanding common stock.
The table below shows our estimated market share for our significant markets, Europe and North America, for the last three years. 4 ​ ​ ​ ​ ​ ​ ​ ​ 2020 ​ 2021 ​ 2022 Europe ​ 17% ​ 15% ​ 14% North America ​ 18% ​ 17% ​ 17% We believe we are the leading seller of TiO 2 in several countries, including Germany.
The table below shows our estimated market share for our significant markets, Europe and North America, for the last three years. ​ ​ ​ ​ ​ ​ ​ ​ 2021 ​ 2022 ​ 2023 Europe ​ 15% ​ 14% ​ 12% North America ​ 17% ​ 17% ​ 16% 4 We believe we are the leading seller of TiO 2 in several countries, including Germany.
The joint venture operates on a break-even basis and therefore we do not have any equity in earnings of the joint venture. We are required to purchase one half of the TiO 2 produced by the joint venture.
We account for our interest in the joint venture by the equity method. The joint venture operates on a break-even basis and therefore we do not have any equity in earnings of the joint venture. We are required to purchase one half of the TiO 2 produced by the joint venture.
Products and end-use markets Including our predecessors, we have produced and marketed TiO 2 in North America and Europe, our primary markets, for over 100 years. We believe we are the largest TiO 2 producer in Europe with 45% of our 2022 sales volumes attributable to markets in Europe.
Products and end-use markets Including our predecessors, we have produced and marketed TiO 2 in North America and Europe, our primary markets, for over 100 years. We believe we are the largest chloride process TiO 2 producer in Europe with 44% of our 2023 sales volumes attributable to markets in Europe.
Our 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 our manufacturing facilities, were $17.6 million in 2022 and are currently expected to be approximately $20 million in 2023.
Our 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 our manufacturing facilities, were $11.2 million in 2023 and are currently expected to be approximately $28 million in 2024.
The following table summarizes our raw materials purchased or mined in 2022. ​ ​ ​ ​ Raw materials Production process/raw material procured or mined ​ ​ (In thousands ​ ​ of metric tons) Chloride process plants - ​ Purchased slag or rutile ore 488 Sulfate process plants: Ilmenite ore mined and used internally 220 Purchased slag 20 Sales and marketing Our marketing strategy is aimed at developing and maintaining strong relationships with new and existing customers.
The following table summarizes our raw materials purchased or mined in 2023. ​ ​ ​ ​ Raw materials Production process/raw material procured or mined ​ ​ (In thousands ​ ​ of metric tons) Chloride process plants - ​ Purchased slag or rutile ore 430 Sulfate process plants: ​ Ilmenite ore mined and used internally 156 Purchased slag 15 Purchased ilmenite ore ​ 8 Sales and marketing Our marketing strategy is aimed at developing and maintaining strong relationships with new and existing customers.
The following tables show our approximate TiO 2 sales volume by geographic region and end-use for the year ended December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ Sales volume percentages ​ Sales volume percentages by geographic region ​ by end-use ​ Europe 45 % ​ Coatings ​ 50 % North America ​ 39 % ​ Plastics ​ 29 % Asia Pacific 9 % ​ Paper 8 % Rest of World 7 % ​ Other 13 % ​ Some of the principal applications for our products include the following: TiO 2 for coatings – Our TiO 2 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 following tables show our approximate TiO 2 sales volume by geographic region and end-use for the year ended December 31, 2023: ​ ​ ​ ​ ​ ​ ​ Sales volume percentages ​ Sales volume percentages by geographic region by end-use Europe 44% ​ Coatings ​ 57% North America ​ 41% ​ Plastics ​ 30% Asia Pacific 9% ​ Paper 9% Rest of World 6% ​ Other 4% ​ Some of the principal applications for our products include the following: TiO 2 for coatings – Our TiO 2 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.
As of December 31, 2022, we employed the following number of people: ​ ​ ​ Europe 1,841 Canada ​ 369 United States (1) ​ 56 Total 2,266 (1) Excludes employees of our LPC joint venture. Certain employees at each of our production facilities are organized by labor unions.
As of December 31, 2023, we employed the following number of people: ​ ​ ​ Europe 1,779 Canada ​ 369 United States (1) ​ 48 Total 2,196 (1) Excludes employees of our LPC joint venture. Certain employees at each of our production facilities are organized by labor unions.
Since the beginning of 2017, we have added nine new grades for pigments and other applications. 10 Patents, trademarks, trade secrets and other intellectual property rights We have a comprehensive intellectual property protection strategy that includes obtaining, maintaining and enforcing our patents, primarily in the United States, Canada and Europe.
Since the beginning of 2019, we have added seven new grades for pigments and other applications. 10 Patents, trademarks, trade secrets and other intellectual property rights We have a comprehensive intellectual property protection strategy that includes obtaining, maintaining and enforcing our patents, primarily in the United States, Canada and Europe. We also register, maintain and protect our trademark rights.
The mine has estimated ilmenite reserves that are expected to last at least 50 years. ● We manufacture and sell iron-based chemicals, which are co-products and processed co-products of sulfate and chloride process TiO 2 pigment production.
The mine has estimated ilmenite reserves that we expect, based on internal estimates, to last approximately 50 years. ● We manufacture and sell iron-based chemicals, which are co-products and processed co-products of the sulfate and chloride process TiO 2 pigment production.
A majority-owned subsidiary of Bayer 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.
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.
On November 23, 2022 the Court of Justice of the European Union annulled the classification of TiO 2 as a suspected carcinogen in its entirety.
On November 23, 2022, the Court of Justice of the European Union annulled the classification of TiO 2 as a suspected carcinogen in its entirety. That decision is currently under appeal.
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 conduct our businesses in ways intended to provide all personnel with a safe and healthy work environment and have established safety and environmental programs and goals to achieve these results.
Our manufacturing facilities are strategically located adjacent to sources of water, which we use for process operations and for 11 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.
We also actively manage potential water-related risks, including flooding and water shortages. Our manufacturing facilities are strategically located adjacent to sources of water, which we use 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.
Our global total frequency rate aggregating information about employees and contractors was 1.61 in 2020 (1.54 of the aggregate represents employees only) 1.08 in 2021 (0.90 of the aggregate represents employees only) and 1.01 in 2022 (0.86 of the aggregate represents employees only). Diversity and inclusion – We recognize that everyone deserves respect and equal treatment.
Our global total frequency rate aggregating information about employees and contractors was 1.08 in 2021 (0.90 was the frequency rate for employees only), 1.01 in 2022 (0.86 was the frequency rate for employees only) and 0.95 in 2023 (0.74 was the frequency rate for employees only). Diversity and inclusion – We recognize that everyone deserves respect and equal treatment.
In the fourth quarter of 2022 we adjusted production levels to correspond with reduced customer demand in our European and export markets resulting from challenging economic conditions and geopolitical uncertainties.
Beginning in the fourth quarter of 2022 and continuing throughout 2023, we adjusted production levels to correspond with reduced customer demand resulting from challenging economic conditions and geopolitical uncertainties.
Our production volumes include our share of the output produced by our TiO 2 manufacturing joint venture discussed below. Our average production capacity utilization rates were approximately 92% in 2020, full practical capacity in 2021 and 89% in 2022. Our production rates in 2020 were impacted by the COVID-19 pandemic (primarily in the third quarter).
Our production volumes include our share of the output produced by our TiO 2 manufacturing joint venture discussed below. Our average production capacity utilization rates were approximately full practical capacity in 2021, 89% in 2022 and 72% in 2023.
The following table presents the division of our expected 2023 manufacturing capacity by plant location and type of manufacturing process: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % of capacity by TiO 2 ​ ​ ​ ​ manufacturing process ​ Facility Description Chloride ​ Sulfate Leverkusen, Germany (1) ​ TiO 2 production, chloride process, co-products ​ 32 % - % Nordenham, Germany ​ TiO 2 production, sulfate process, co-products ​ - ​ 11 Langerbrugge, Belgium TiO 2 production, chloride process, co-products, titanium chemicals products 15 - ​ Fredrikstad, Norway (2) TiO 2 production, sulfate process, co-products - 7 ​ Varennes, Canada TiO 2 production, chloride and sulfate process, slurry facility, titanium chemicals products 17 3 ​ Lake Charles, LA, US (3) TiO 2 production, chloride process 15 - ​ Total ​ ​ 79 % 21 % (1) The Leverkusen facility is located within an extensive manufacturing complex owned by Bayer AG.
The following table presents the division of our expected 2024 manufacturing capacity by plant location and type of manufacturing process: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % of capacity by TiO 2 ​ ​ ​ ​ manufacturing process ​ Facility Description Chloride ​ Sulfate Leverkusen, Germany (1) ​ TiO 2 production, chloride process, co-products ​ 32 % - % Nordenham, Germany ​ TiO 2 production, sulfate process, co-products ​ - ​ 11 Langerbrugge, Belgium TiO 2 production, chloride process, co-products, titanium chemicals products 16 - ​ Fredrikstad, Norway (2) TiO 2 production, sulfate process, co-products - 6 ​ Varennes, Canada TiO 2 production, chloride and sulfate process, slurry facility, titanium chemicals products 18 3 ​ Lake Charles, LA, US (3) TiO 2 production, chloride process 14 - ​ Total ​ ​ 80 % 20 % (1) The Leverkusen facility is located within a more extensive manufacturing complex.
We believe that Western Europe and North America currently each account for approximately 16% of global TiO 2 consumption.
We believe Western Europe and North America currently account for approximately 14% and 15% of global TiO 2 consumption, respectively.
Our proprietary chloride production process is an important part of our technology and our business could be harmed if we fail to maintain confidentiality of our trade secrets used in this technology.
We rely upon unpatented proprietary knowledge and continuing technological innovation and other trade secrets to develop and maintain our competitive position. Our proprietary chloride production process is an important part of our technology and our business could be harmed if we fail to maintain confidentiality of our trade secrets used in this technology.
In addition, we operate a rutile slurry manufacturing plant near Lake Charles, Louisiana, which converts dry pigment primarily manufactured for us at the Lake Charles TiO 2 facility into a slurry form that is then shipped to customers. 7 We have corporate and administrative offices located in the U.S., Germany, Norway, Canada, Belgium and France.
In addition, we operate a rutile slurry manufacturing plant near Lake Charles, Louisiana, which converts dry pigment primarily manufactured for us at the Lake Charles TiO 2 facility into a slurry form that is then shipped to customers.
We periodically update our board of directors on our cyber-related risks and cybersecurity programs. In an effort to align our non-employee directors’ financial interests with those of our stockholders, our Board established share ownership guidelines for our non-management directors. We have taken steps to integrate ESG considerations into operating decisions with other critical business factors.
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. We have taken steps to integrate ESG considerations into operating decisions with other critical business factors. We biennially publish an ESG Report, which is available on our public website.
We voluntarily developed these internal metrics and benchmarks, which we use 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 subsidiary and jurisdiction.
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 subsidiary and jurisdiction.
We produce high-purity sulfate process anatase TiO 2 used to provide opacity, whiteness and brightness in a variety of cosmetic and personal care products, such as skin cream, lipstick, eye shadow and toothpaste.
Without the presence of TiO 2 , these materials would be unsuitable for use in many textile applications. 5 We produce high-purity sulfate process anatase TiO 2 used to provide opacity, whiteness and brightness in a variety of cosmetic and personal care products, such as skin cream, lipstick, eye shadow and toothpaste.
In addition to maintaining our patent portfolio, we seek patent protection for our technical developments, principally in the United States, Canada and Europe. U.S. patents are generally in effect for 20 years from the date of filing. Our U.S. patent portfolio includes patents having remaining terms ranging from one year to 20 years.
In addition to maintaining our patent portfolio, we seek patent protection for our 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.
We also protect our trademark and trade secret rights and have entered into license agreements with third parties concerning various intellectual property matters. We have also from time to time been involved in disputes over intellectual property.
We maintain the secrecy of our trade secret rights and protect them by means of security protocols and confidentiality agreements. In some instances, we have entered into license agreements with third parties concerning various intellectual property matters. We have also from time to time been involved in disputes over intellectual property.
After separation from the impurities in the ore (mainly iron), the TiO 2 is precipitated and calcined to form an intermediate base pigment ready for sale or can be upgraded through finishing treatments. 6 We produced 517,000, 545,000 and 492,000 metric tons of TiO 2 in 2020, 2021 and 2022, respectively.
After separation from the impurities in the ore (mainly iron), the TiO 2 is precipitated and calcined to form an intermediate base pigment ready for sale or can be upgraded through finishing treatments.
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.
The primary raw materials used in sulfate process TiO 2 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.
Two general managers manage the operations of the joint venture acting under the direction of the supervisory committee. We appoint one general manager and Venator appoints the other. We do not consolidate LPC because we do not control it. We account for our interest in the joint venture by the equity method.
This committee is composed of four members, two of whom we appoint and two of whom Venator appoints. Two general managers manage the operations of the joint venture acting under the direction of the supervisory committee. We appoint one general manager and Venator appoints the other. We do not consolidate LPC because we do not control it.
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. 12 At a corporate level, we engage in periodic reviews of our cybersecurity programs, including cybersecurity risk and threats.
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.
During 2021, we were notified by government authorities in Norway that the classification of a dam at our mine facilities was changed to the highest level for Norwegian classification of dam structures.
During 2021, we were notified by government authorities in Norway that the classification of a dam at our mine facilities was changed to the highest level for Norwegian classification of dam structures. As a result, our mine operations are subject to a higher degree of oversight and regulation than existed prior to this change in classification.
We biennially publish an ESG Report, which is available on our public website. The primary purpose of our ESG Report is to describe our policies and programs in the area of ESG, including certain internal metrics and benchmarks related to various aspects of ESG.
The primary purpose of our ESG Report is to describe our policies and programs in the area of ESG, including certain internal metrics and benchmarks related to various aspects of ESG. We voluntarily developed these internal metrics and benchmarks, which we use to identify progress and opportunities for improvement.
We offer our customers a broad portfolio of products that include over 40 different TiO 2 pigment grades under the KRONOS ® trademark, which provide a variety of performance properties to meet customers’ specific requirements. Our major customers include domestic and international paint, plastics, decorative laminate and paper manufacturers.
Overall, we are one of the top five producers of TiO 2 in the world. We offer our customers a broad portfolio of products that include over 50 different TiO 2 pigment grades under the KRONOS ® trademark, which provide a variety of performance properties to meet customers’ specific requirements.
We ship TiO 2 to our customers in either a dry or slurry form via rail, truck and/or ocean carrier. Sales of our core TiO 2 pigments represented approximately 92% of our net sales in 2022. We and our agents and distributors primarily sell our products in three major end-use markets: coatings, plastics and paper.
Our major customers include domestic and international paint, plastics, decorative laminate and paper manufacturers. We ship TiO 2 to our customers in either a dry or slurry form via rail, truck and/or ocean carrier. Sales of our core TiO 2 pigments represented approximately 90% of our net sales in 2023.
We supply ilmenite to our sulfate plants in Europe. We also sell ilmenite ore to third parties, some of whom are our competitors. We also sell an ilmenite-based specialty product to the oil and gas industry.
Along with supplying ilmenite ore to our sulfate plants in Europe, we also sell ilmenite ore to third parties, some of whom are our competitors.
Three of our five production facilities maintain certifications to the ISO 50001:2018 Energy Management standard and all locations have local energy teams in place. These teams are responsible for maintaining ISO 50001:2018 certifications (where applicable), performing regular reviews of local energy consumption, making recommendations regarding capital projects that reduce energy consumption and associated Greenhouse Gas (GHG) emissions or enhance efficiency.
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 11 Greenhouse Gas (GHG) emissions or enhance efficiency. When possible, we look for opportunities to partner with local government authorities through grant opportunities to reduce energy consumption and associated GHG emissions.
We and Venator share production from the plant equally pursuant to separate offtake agreements, unless we and Venator otherwise agree. A supervisory committee directs the business and affairs of the joint venture, including production and output decisions. This committee is composed of four members, two of whom we appoint and two of whom Venator appoints.
LPC owns and operates a chloride-process TiO 2 plant located near Lake Charles, Louisiana. We and Venator share production from the plant equally pursuant to separate offtake agreements, unless we and Venator otherwise agree. A supervisory committee directs the business and affairs of the joint venture, including production and output decisions.
In North America, we have a TiO 2 plant in Varennes, Quebec, Canada and, through the manufacturing joint venture described below, a 50% interest in a TiO 2 plant near Lake Charles, Louisiana. As part of our long-term strategy to increase chloride process production, we phased-out sulfate production at our Leverkusen facility during 2020.
In North America, we have a TiO 2 plant in Varennes, Quebec, Canada and, through the manufacturing joint venture described below, a 50% interest in a TiO 2 plant near Lake Charles, Louisiana.
TiO 2 manufacturing joint venture Kronos Louisiana, Inc., one of our subsidiaries, and Venator Investments each own a 50% interest in a manufacturing joint venture, Louisiana Pigment Company, L.P. (LPC). LPC owns and operates a chloride-process TiO 2 plant located near Lake Charles, Louisiana.
We have corporate and administrative offices located in the U.S., Germany, Norway, Canada, Belgium and France. 7 TiO 2 manufacturing joint venture Kronos Louisiana, Inc., one of our subsidiaries, and Venator Investments each own a 50% interest in a manufacturing joint venture, Louisiana Pigment Company, L.P. (LPC).
In man-made fibers such as rayon and polyester, TiO 2 corrects an 5 otherwise undesirable glossy and translucent appearance. Without the presence of TiO 2 , these materials would be unsuitable for use in many textile applications.
In man-made fibers such as rayon and polyester, TiO 2 corrects an otherwise undesirable glossy and translucent appearance.
The chloride process produces an intermediate base pigment with a wide range of properties. ● Sulfate process – The sulfate process is a batch process in which sulfuric acid is used to extract the TiO 2 from ilmenite or titanium slag.
The chloride process produces a product with a blueish undertone and is the preferred form to produce TiO 2 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 TiO 2 from ilmenite or titanium slag.
Trademarks and trade secrets – Our trademarks, including KRONOS ® , are covered by issued and/or pending registrations, including in Canada and the United States. We protect the trademarks we use in connection with the products we manufacture and sell and have developed goodwill in connection with our long-term use of our trademarks.
We protect the trademarks we use in connection with the products we manufacture and sell and have developed goodwill in connection with our long-term use of our trademarks. Trade secrets – We conduct research activities in secret and we protect the confidentiality of our trade secrets through reasonable measures, including confidentiality agreements and security procedures, including data security.
We have a history of identifying new ways to reduce consumption and waste by converting byproducts to co-products through our KRONOS ecochem® products. Annually we update and publish our Safety, Environment, Energy and Quality Policy which is translated into local languages and distributed to all our employees and shared publicly via our website.
Annually we update and publish our Safety, Environment, Energy and Quality Policy which is translated into local languages and distributed to all our employees and shared publicly via our website. We have implemented rigorous procedures for incident reporting and investigation, including root cause analysis of environmental and safety incidents and near misses.
We have implemented rigorous procedures for incident reporting and investigation, including root cause analysis of environmental and safety incidents and near misses. Because TiO 2 production requires significant energy input, we are focused on energy efficiency at all production locations.
Because TiO 2 production requires significant energy input, we are focused on energy efficiency at all production locations. Four of our five production facilities maintain certifications to the ISO 50001:2018 Energy Management standard and all locations have local energy teams in place.
Removed
Overall, we are one of the top five producers of TiO 2 in the world, with an estimated 7% share of worldwide TiO 2 sales volume in 2022.
Added
We and our agents and distributors primarily sell our products in three major end-use markets: coatings, plastics and paper.
Removed
Based on current assumptions about market performance and demand, we expect to operate our TiO 2 plants at 80% to 90% capacity in the first half of 2023 and near full practical capacity levels by the second half of 2023.
Added
The chloride process produces an intermediate base pigment with a wide range of properties.
Removed
We expect the raw materials purchased under these contracts, and contracts that we may enter into, will meet our chloride process feedstock requirements over the next several years.
Added
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. 6 We produced 545,000, 492,000 and 401,000 metric tons of TiO 2 in 2021, 2022 and 2023, respectively.
Removed
With certain exceptions such as during the third quarter of 2020 as a result of the COVID-19 pandemic, and during the fourth quarter of 2022 as a result of reduced customer demand and unprecedentedly high energy costs, we have historically operated our production facilities at near full capacity rates throughout the entire year, which among other things helps to minimize our per-unit 9 production costs.
Added
In addition, several of our 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 sulphate process capacity.
Removed
We conduct research activities in secret and we protect the confidentiality of our trade secrets through reasonable measures, including confidentiality agreements and security procedures, including data security. We rely upon unpatented proprietary knowledge and continuing technological innovation and other trade secrets to develop and maintain our competitive position.
Added
Our U.S. patent portfolio includes patents having remaining terms ranging from one year to 18 years. Trademarks – Our trademarks, including KRONOS ® , are covered by issued and/or pending registrations, including in Canada and the United States.
Removed
As a result, our mine operations are subject to a higher degree of oversight and regulation than existed prior to this change in classification and we have increased our capital expenditures to adapt to the higher classification standards.
Added
In 2023, we completed capital projects for improvements to the dam and related areas necessary to meet the new classification standards. We have a history of identifying new ways to reduce consumption and waste by converting byproducts to co-products through our KRONOS ecochem® products.
Removed
When possible, we look for opportunities to partner with local government authorities through grant opportunities to reduce energy consumption and associated GHG emissions. We also actively manage potential water-related risks, including flooding and water shortages.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe may not always be able to increase our selling prices to offset the impact of any higher costs or reduced production levels, which could reduce earnings and decrease liquidity. We have supply contracts that provide for our TiO 2 feedstock requirements that currently expire in 2023 and one contract that extends through 2026.
Biggest changeFuture variations in the cost of energy, which primarily reflect market prices for oil and natural gas, and for raw materials may significantly affect our operating results and decrease liquidity as we may not always be able to increase our selling prices to offset the impact of any higher costs or reduced production levels.
Increased regulatory scrutiny could affect consumer perception of TiO 2 or limit the marketability and demand for TiO 2 or products containing TiO 2 and increase our manufacturing and regulatory compliance obligations and costs.
Increased regulatory scrutiny could affect consumer perception of TiO 2 or limit the marketability and demand for TiO 2 or products containing TiO 2 or increase our manufacturing and regulatory compliance obligations and costs.
Our patents and other intellectual property rights may be challenged, invalidated, circumvented and 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.
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.
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; 15 ● 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 business and the industry in which we operate; and ● placing us at a competitive disadvantage relative to other less leveraged competitors.
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 business and the industry in which we operate; and ● placing us at a competitive disadvantage relative to other less leveraged competitors.
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 introduced 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.
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.
We also may not be able to readily detect breaches of such agreements. The failure of our patents or confidentiality agreements to protect our proprietary technology, know-how or trade secrets could result in a material loss of our competitive position, which could lead to significantly lower revenues, reduced profit margins or loss of market share.
We also may not be able to readily detect breaches of such agreements. The failure of our confidentiality agreements to protect our proprietary technology, know-how or trade secrets could result in a material loss of our competitive position, which could lead to significantly lower revenues, reduced profit margins or loss of market share.
Some of the lawsuits may seek fines or penalties and damages in large amounts or seek to restrict our business activities. Because of the uncertain nature of litigation and coverage decisions, we cannot predict the outcome of these matters or whether insurance claims may mitigate any damages ultimately determined to be 16 owed by us.
Some of the lawsuits may seek fines or penalties and damages in large amounts or seek to restrict our business activities. Because of the uncertain nature of litigation and coverage decisions, we cannot predict the outcome of these matters or whether insurance claims may mitigate any damages ultimately determined to be owed by us.
TiO 2 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.
TiO 2 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 14 by regional and world events or economic conditions.
Historically, the markets for many of our 14 products have experienced alternating periods of increasing and decreasing demand. Relative changes in the selling prices for our products are one of the main factors that affect the level of our profitability.
Historically, the markets for many of our products have experienced alternating periods of increasing and decreasing demand. Relative changes in the selling prices for our products are one of the main factors that affect the level of our profitability.
Protection of our intellectual property rights, including patents, trade secrets, confidential information, trademarks and tradenames, is important to our business and our competitive position. We endeavor to protect our intellectual property rights in key jurisdictions in which our products are produced or used and in jurisdictions into which our products are imported.
Protection of our intellectual property rights, including patents, copyrights, trade secrets, confidential information, trademarks and tradenames, is important to our business and our competitive position. 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.
We 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 plants, receive, process and ship orders, manage the billing of and collections from customers and manage payments to vendors.
We 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.
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 2022, 45% of our sales volumes were sold into European markets.
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 2022 and 2023, approximately 45% and 44%, respectively, of our sales volumes were sold into European markets.
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 $689 million in 2023.
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 $543 million in 2024.
Operational Risk Factors Demand for, and prices of, certain of our products are influenced by changing market conditions for our products, which may result in reduced earnings or in operating losses. Our sales and profitability are largely dependent on the TiO 2 industry. In 2022, 92% of our sales were attributable to sales of TiO 2 .
Operational Risk Factors Demand for, and prices of, certain of our products are influenced by changing market conditions for our products, which may result in reduced earnings or in operating losses. Our sales and profitability are largely dependent on the TiO 2 industry. In 2023, approximately 90% of our sales were attributable to sales of TiO 2 .
These agreements require us to purchase certain minimum quantities or services with minimum purchase commitments aggregating approximately $84 million at December 31, 2022. Our commitments under these contracts could adversely affect our financial results if we significantly reduce our production and we are unable to modify the contractual commitments.
These agreements require us to purchase certain minimum quantities or services with minimum purchase commitments aggregating approximately $72 million at December 31, 2023. Our commitments under these contracts could 15 adversely affect our financial results if we significantly reduce our production and we are unable to modify the contractual commitments.
Our business 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.
Our business 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 have significant international operations which, along with our customers and suppliers, could be substantially affected by a number of risks arising from operating a multi-national business, including trade barriers, tariffs, economic sanctions, exchange controls, global and regional economic downturns, terrorism, armed conflict (such as the current conflict between Russia and Ukraine), natural disasters, health crises (such as COVID-19) and political conditions.
We have significant international operations which, along with our customers and suppliers, could be substantially affected by a number of risks arising from operating a multi-national business, including trade barriers, tariffs, economic sanctions, exchange controls, global and regional economic downturns, terrorism, armed conflict (such as the current conflicts between Russia and Ukraine and Israel and Hamas), natural disasters, pandemics or other health crises and political conditions.
Financial Risk Factors 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 our Senior Notes issued in September 2017. As of December 31, 2022, our total consolidated debt was approximately $425 million.
Financial Risk Factors 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 our Senior Secured Notes issued in September 2017 and February 2024. As of December 31, 2023, our total consolidated debt was approximately $441 million.
Indebtedness outstanding under our global revolving credit facility accrues interest at variable rates. To the extent market interest rates rise, the cost of our debt could increase, adversely affecting our financial condition, results of operations and cash flows.
Indebtedness outstanding under our global revolving credit facility (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 our financial condition, results of operations and cash flows.
In addition, our ability to borrow funds under our revolving credit facility in the future, in some instances, will depend in part on our ability to maintain specified financial ratios and satisfy certain financial covenants contained in the applicable credit agreement.
In addition, our ability to borrow funds under our Global Revolver in the future, in some instances, will depend in part on our ability to maintain specified financial ratios and satisfy certain financial covenants contained in the credit agreement governing the Global Revolver.
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 rely on judicial enforcement of our patents and other proprietary rights.
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.
If our intellectual property were to be declared invalid, or copied by or 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.
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.
Our current agreements (including those entered into through February 2023) require us to purchase certain minimum quantities of feedstock with minimum purchase commitments aggregating approximately $1.0 billion beginning in 2023 and extending through 2026. In addition, we have other long-term supply and service contracts that provide for various raw materials and services.
Our current agreements require us to purchase certain minimum quantities of feedstock with minimum purchase commitments aggregating approximately $583 million beginning in 2024 and extending through 2026. In addition, we have other long-term supply and service contracts that provide for various raw materials and services.
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.
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. 16 Legal, Compliance and Regulatory Risk Factors We may be subject to litigation, the disposition of which could have a material adverse effect on our results of operations.
If we or our worldwide vendors are unable to meet our planned or contractual obligations and we are unable to obtain necessary raw materials, we could incur higher costs for raw materials or we may be required to reduce production levels.
If we or our worldwide vendors are unable to meet our planned or contractual obligations and we are unable to obtain necessary raw materials, we could incur higher costs for raw materials or we may be required to reduce production levels. We experienced increases in feedstock costs in 2022 and 2023, for example, which affected our margins.
While we believe we will be able to renew these contracts, we do not know if we will be successful in renewing them or in obtaining long-term extensions to them prior to expiration.
We have supply contracts that provide for our TiO 2 feedstock requirements. While we believe we will be able to renew these contracts, as necessary, we do not know if we will be successful in renewing them or in obtaining long-term extensions to them prior to expiration.
If we must take legal action to protect, defend or enforce our intellectual property rights, any suits or proceedings could result in significant costs and diversion of resources and management’s attention, and we may not prevail in any such suits or proceedings.
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. 17 Global climate change laws and regulations could negatively impact our financial results or limit our ability to operate our businesses.
Legal, Compliance and Regulatory Risk Factors We may be subject to litigation, the disposition of which could have a material adverse effect on our results of operations. The nature of our operations exposes us to possible litigation claims, including disputes with customers and suppliers and matters relating to, among other things, antitrust, product liability, intellectual property, employment and environmental claims.
The nature of our operations exposes us to possible litigation claims, including disputes with customers and suppliers and matters relating to, among other things, antitrust, product liability, intellectual property, employment and environmental claims.
Political and economic instability or increased regulations in the countries from which we purchase or mine our raw material supplies could adversely affect raw material availability.
Titanium-containing feedstocks suitable for use in our TiO 2 facilities are available from a limited number of suppliers around the world. Political and economic instability or increased regulations in the countries from which we purchase or mine our raw material supplies could adversely affect raw material availability.
Some of our competitors may be able to drive down prices for our products if their costs are lower than our costs. In addition, some of our competitors’ financial, technological and other resources may be greater than our resources and such competitors may be better able to withstand changes in market conditions.
In addition, some of our competitors’ financial, technological and other resources may be greater than our resources and such competitors may be better able to withstand changes in market conditions. Our competitors may be able to respond more quickly than we can to new or emerging technologies and changes in customer requirements.
The occurrence of any of these events could result in reduced earnings or operating losses. 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.
Further, consolidation of our competitors or customers may result in reduced demand for our products or make it more difficult for us to compete with our competitors. The occurrence of any of these events could result in reduced earnings or operating losses. Higher costs or limited availability of our raw materials may reduce our earnings and decrease our liquidity.
Similarly, third parties may assert claims against us and our customers and distributors alleging our products infringe upon third-party intellectual property rights.
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.
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 TiO 2 facilities are available from a limited number of suppliers around the world.
In addition, many of our raw material contracts contain fixed quantities we are required to purchase. The number of sources for and availability of certain raw materials is specific to the particular geographical region in which our facilities are located.
Removed
Our competitors may be able to respond more quickly than we can to new or emerging technologies and changes in customer requirements. Further, consolidation of our competitors or customers may result in reduced demand for our products or make it more difficult for us to compete with our competitors.
Added
We face significant competition from international and regional competitors, including TiO 2 producers in China, who have significant sulfate production process capacity.
Removed
We experienced increases in feedstock costs in 2021 and 2022, and we expect feedstock costs to continue to increase in 2023. We may also experience higher operating costs such as energy costs, which could affect our profitability.
Added
Chinese producers have also continued to develop chloride process technology, and the risk of substitution of our 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.
Removed
A failure to protect, defend or enforce our intellectual property rights could have an adverse effect on our financial condition and results of operations. 17 Global climate change laws and regulations could negatively impact our financial results or limit our ability to operate our businesses.
Added
Some of our competitors may be able to drive down prices for our products if their costs are lower than our costs, including our 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.
Added
We have also experienced higher operating costs such as energy costs.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph shows the value at December 31 of each year, assuming an original investment of $100 at December 31, 2017 and reinvestment of cash dividends and other distributions to stockholders. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2017 2018 2019 2020 2021 2022 Kronos common stock ​ $ 100 ​ $ 46 ​ $ 56 ​ $ 67 ​ $ 70 ​ $ 47 S&P 500 Composite Stock Index ​ ​ 100 ​ ​ 96 ​ ​ 126 ​ ​ 149 ​ ​ 192 ​ ​ 157 Peer Group ​ 100 ​ ​ 48 ​ ​ 39 ​ ​ 53 ​ 77 ​ 61 The information contained in the performance graph shall not be deemed “soliciting material” or “filed” with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act, except to the extent we specifically request that the material be treated as soliciting material or specifically incorporate this performance graph by reference into a document filed under the Securities Act or the Securities Exchange Act.
Biggest changeIn accordance with applicable regulations of the SEC, the performance graph set forth below reflects both our current peer group and our prior peer group (which included Venator through May 14, 2023, the date of its bankruptcy filing). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2018 2019 2020 2021 2022 2023 Kronos common stock ​ $ 100 ​ $ 123 ​ $ 146 ​ $ 154 ​ $ 102 ​ $ 117 S&P 500 Composite Stock Index ​ ​ 100 ​ ​ 131 ​ ​ 156 ​ ​ 200 ​ ​ 164 ​ ​ 207 Current Peer Group ​ 100 ​ ​ 81 ​ ​ 114 ​ 170 ​ 136 ​ 145 Prior Peer Group ​ ​ 100 ​ ​ 82 ​ ​ 112 ​ 162 ​ 127 ​ 135 The information contained in the performance graph shall not be deemed “soliciting material” or “filed” with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act, except to the extent we specifically request that the material be treated as soliciting material or specifically incorporate this performance graph by reference into a document filed under the Securities Act or the Securities Exchange Act. 21 Equity compensation plan information We have an equity compensation plan, which was approved by our stockholders, pursuant to which an aggregate of 200,000 shares of our common stock can be awarded to members of our board of directors.
Purchases of Equity Securities In December 2010, our board of directors authorized the repurchase of up to 2.0 million shares of our common stock in open market transactions, including block purchases, or in privately-negotiated transactions at unspecified prices and over an unspecified period of time.
In December 2010, our board of directors authorized the repurchase of up to 2.0 million shares of our common stock in open market transactions, including block purchases, or in privately-negotiated transactions at unspecified prices and over an unspecified period of time.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed and traded on the New York Stock Exchange (symbol: KRO). As of February 28, 2023, there were approximately 1,700 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed and traded on the New York Stock Exchange (symbol: KRO). As of February 29, 2024, there were approximately 1,600 holders of record of our common stock.
All of these purchases were made under the repurchase program in open market transactions. ​ ​ ​ ​ Period Total number of shares purchased ​ Average price paid per share Total number of shares purchased as part of the publicly announced plan Maximum number of shares that may yet be purchased under the publicly announced plan November 2022 46,931 ​ 9.71 46,931 1,428,298 December 2022 ​ 96,966 ​ 9.46 ​ 96,966 ​ 1,331,332 20 Performance graph Set forth below is a table and line graph comparing the yearly change in our cumulative total stockholder return on our common stock against the cumulative total return of the S&P 500 Composite Stock Index and an index of a self-selected peer group of companies.
See Note 13 to our Consolidated Financial Statements. 20 Performance graph Set forth below is a table and line graph comparing the yearly change in our cumulative total stockholder return on our common stock against the cumulative total return of the S&P 500 Composite Stock Index and an index of a self-selected peer group of companies.
Equity compensation plan information We have an equity compensation plan, which was approved by our stockholders, pursuant to which an aggregate of 200,000 shares of our common stock can be awarded to members of our board of directors. At December 31, 2022, 111,800 shares are available for awards under this plan. See Note 13 to our Consolidated Financial Statements.
At December 31, 2023, 97,100 shares are available for awards under this plan. See Note 13 to our Consolidated Financial Statements.
The peer group index is comprised of The Chemours Company, Venator Materials PLC and Tronox Ltd.
The peer group index is comprised of The Chemours Company and Tronox Ltd. The graph shows the value at December 31 of each year, assuming an original investment of $100 at December 31, 2018 and reinvestment of cash dividends and other distributions to stockholders. We previously included Venator Materials PLC (Venator) in our peer group index.
Removed
In 2022 we repurchased 217,778 shares, and we have 1,331,332 shares available for repurchase under the stock repurchase program at December 31, 2022. See Note 13 to our Consolidated Financial Statements. The following table discloses certain information regarding the shares of our common stock we purchased during the fourth quarter of 2022 (we made no purchases in October 2022).
Added
In 2023 we repurchased 313,814 shares, and we have 1,017,518 shares available for repurchase under the stock repurchase program at December 31, 2023.
Added
Venator’s ordinary shares no longer trade on the New York Stock Exchange as a result of a Chapter 11 bankruptcy filing in May 2023. Therefore, we no longer believe Venator is sufficiently comparable to us.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeComparison of 2020 to 2021 Results of Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ ​ 2020 ​ 2021 ​ ​ (Dollars in millions) Net sales $ 1,638.8 100 % $ 1,939.4 100 % Cost of sales ​ ​ 1,287.6 ​ 79 ​ ​ 1,493.2 ​ 77 Gross margin ​ 351.2 ​ 21 ​ 446.2 23 ​ Selling, general and administrative expense ​ 218.6 ​ 13 ​ 248.9 13 ​ Other operating income (expense): ​ ​ ​ ​ Currency transactions, net ​ (4.0) ​ - ​ 1.6 - ​ Other operating expense, net ​ (12.4) ​ (1) ​ (11.8) - ​ Income from operations $ 116.2 ​ 7 % $ 187.1 10 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % Change ​ TiO 2 operating statistics: ​ ​ ​ ​ Sales volumes* ​ 531 ​ ​ ​ 563 ​ 6 % Production volumes* ​ 517 ​ ​ ​ 545 ​ 5 % Percentage change in net sales: ​ ​ ​ ​ TiO 2 product pricing ​ ​ ​ ​ 8 % TiO 2 sales volumes ​ ​ ​ ​ 6 ​ TiO 2 product mix/other ​ ​ ​ ​ 1 ​ Changes in currency exchange rates ​ ​ ​ ​ 3 ​ Total ​ ​ ​ ​ 18 % * Thousands of metric tons Net sales – Our net sales increased $300.6 million, or 18%, in 2021 compared to 2020, primarily due to an 8% increase in average TiO 2 selling prices (which increased net sales by approximately $131 million) and a 6% increase in sales volumes (which increased net sales by approximately $98 million).
Biggest changeOur net income in 2022 includes the recognition of a pre-tax insurance settlement gain of $2.7 million recognized in the third quarter ($2.2 million, or $.02 per share, net of income tax expense) related to a business interruption insurance claim arising from Hurricane Laura in 2020. 23 Comparison of 2023 to 2022 Results of Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ ​ ​ 2022 ​ 2023 ​ ​ ​ (Dollars in millions) Net sales $ 1,930.2 100 % $ 1,666.5 100 % Cost of sales 1,539.1 80 ​ 1,501.6 90 ​ Gross margin 391.1 20 ​ 164.9 10 ​ Selling, general and administrative expense 231.3 12 ​ 211.2 13 ​ Other operating income (expense): ​ ​ ​ ​ Currency transactions, net 11.5 1 ​ 1.4 - ​ Other operating expense, net (11.7) (1) ​ (11.1) - ​ Income (loss) from operations $ 159.6 8 % $ (56.0) (3) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % Change ​ TiO 2 operating statistics: ​ ​ ​ Sales volumes* ​ ​ 481 ​ ​ ​ ​ 419 ​ (13) % Production volumes* ​ ​ 492 ​ ​ ​ ​ 401 ​ (19) % Percentage change in net sales: ​ ​ ​ ​ TiO 2 sales volumes ​ ​ ​ ​ (13) % TiO 2 product pricing ​ ​ ​ (4) ​ TiO 2 product mix/other ​ ​ ​ 2 ​ Changes in currency exchange rates ​ ​ ​ 1 ​ Total ​ ​ ​ ​ (14) % * Thousands of metric tons ​ Industry conditions and 2023 overview – We and the TiO 2 industry are experiencing an extended period of significantly reduced demand across all major markets, which is reflected in our sales volumes in 2023.
Deferred income tax assets and liabilities for each tax-paying jurisdiction in which we operate 31 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.
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.
As a result of this process, we have in the past and may in the future seek to reduce, refinance, repurchase or restructure indebtedness, raise additional capital, repurchase shares of our common stock, modify 34 our dividend policy, restructure ownership interests, sell interests in our subsidiaries or other assets, or take a combination of these steps or other steps to manage our liquidity and capital resources.
As a result of this process, we have in the past and may in the future seek to reduce, refinance, repurchase or restructure indebtedness, raise additional capital, repurchase shares of our common stock, modify our dividend policy, restructure ownership interests, sell interests in our subsidiaries or other assets, or take a combination of these steps or other steps to manage our liquidity and capital resources.
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 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- 32 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 operations.
Our sales volumes decreased 15% in 2022 as compared to 2021 primarily due to lower demand in our European and export markets which we began experiencing towards the end of the second quarter and which accelerated during the third and fourth quarters of 2022.
Our sales volumes decreased 15% in 2022 as compared to 2021 primarily due to lower demand in our European and export markets which we began experiencing towards the end of the second quarter and which accelerated during the 26 third and fourth quarters of 2022.
Our provision 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.
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.
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 $1.1 million during 2023. ● Income taxes – We operate globally 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 global operations.
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 $1.1 million during 2024. ● Income taxes – We operate globally 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 global operations.
Our Global Revolver is collateralized by, among other things, a first priority lien on the borrower’s trade receivables and inventories. See Note 8 to our Consolidated Financial Statements.
Our Global Revolver is collateralized 35 by, among other things, a first priority lien on the borrower’s trade receivables and inventories. See Note 8 to our Consolidated Financial Statements.
At December 31, 2022, we have concluded that no deferred income tax asset valuation allowance is required to be recognized with respect to such carryforwards, principally because (i) such carryforwards have an indefinite carryforward period, (ii) we have utilized a portion of such carryforwards during the most recent three-year period and (iii) we currently expect to utilize the remainder of such carryforwards over the long term.
At December 31, 2023, we have concluded that no deferred income tax asset valuation allowance is required to be recognized with respect to such carryforwards, principally because (i) such carryforwards have an indefinite carryforward period, (ii) we have utilized a portion of such carryforwards during the most recent three-year period and (iii) we currently expect to utilize the remainder of such carryforwards over the long term.
Capital spending for 2023 is expected to be funded through cash on hand or borrowing under our existing credit facility. It is possible we will delay planned capital projects based on market conditions. Commitments and contingencies See Notes 12 and 15 to our Consolidated Financial Statements for a description of certain income tax contingencies, certain legal proceedings and other commitments.
Capital spending for 2024 is expected to be funded through cash on hand or borrowing under our existing credit facility. It is possible we will delay planned capital projects based on market conditions. Commitments and contingencies See Notes 12 and 15 to our Consolidated Financial Statements for a description of certain income tax contingencies, certain legal proceedings and other commitments.
We used the following discount rates for our defined benefit pension plans: ​ ​ ​ ​ ​ ​ ​ ​ ​ Discount rates used for: ​ ​ Obligations ​ Obligations ​ Obligations ​ ​ at December 31, 2020 ​ at December 31, 2021 ​ at December 31, 2022 ​ ​ ​ and expense in 2021 ​ and expense in 2022 ​ and expense in 2023 ​ Germany ​ .7% ​ 1.2% ​ 3.7% ​ Canada 2.4% ​ 2.9% ​ 5.1% ​ Norway 1.7% ​ 1.9% ​ 3.6% ​ U.S. 2.2% ​ 2.6% ​ 5.3% ​ ​ 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.
We used the following discount rates for our defined benefit pension plans: ​ ​ ​ ​ ​ ​ ​ ​ ​ Discount rates used for: ​ ​ Obligations ​ Obligations ​ Obligations ​ ​ at December 31, 2021 ​ at December 31, 2022 ​ at December 31, 2023 ​ ​ ​ and expense in 2022 ​ and expense in 2023 ​ and expense in 2024 ​ Germany ​ 1.2% ​ 3.7% ​ 3.2% ​ Canada 2.9% ​ 5.1% ​ 4.6% ​ Norway 1.9% ​ 3.6% ​ 3.6% ​ U.S. 2.6% ​ 5.3% ​ 5.0% ​ ​ 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.
See Note 12 to our Consolidated Financial Statements for a tabular reconciliation of our statutory income tax provision to our actual tax provision. 26 Effects of currency exchange rates We have substantial operations and assets located outside the United States (primarily in Germany, Belgium, Norway and Canada).
See Note 12 to our Consolidated Financial Statements for a tabular reconciliation of our statutory income tax provision to our actual tax provision. 27 Effects of currency exchange rates We have substantial operations and assets located outside the United States (primarily in Germany, Belgium, Norway and Canada).
At December 31, 2022, 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.
At December 31, 2023, 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 effective income tax rate in 2023 is expected to be higher than the U.S. federal statutory rate of 21% because the income tax rates applicable to the earnings (losses) of our non-U.S. operations will be higher than the income tax rates applicable to our U.S. operations and due to the expected mix of earnings.
Our consolidated effective income tax rate in 2024 is expected to be higher than the U.S. federal statutory rate of 21% because the income tax rates applicable to the earnings (losses) of our non-U.S. operations will be higher than the income tax rates applicable to our U.S. operations and due to the expected mix of earnings.
Our Senior Secured Notes and our Global Revolver contain a number of covenants and restrictions which, among other things, restrict our 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 Senior Secured Notes, our Global Revolver and the Contran term loan contain a number of covenants and restrictions which, among other things, restrict our 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 assets consist primarily of investments in operating subsidiaries, and our ability to service our obligations, including the Senior Secured Notes, depends in part upon the distribution of earnings of our subsidiaries, whether in the form of dividends, advances or payments on account of intercompany obligations or otherwise.
Our assets consist primarily of investments in operating subsidiaries, and our ability to service our obligations, including the Senior Secured Notes and the Contran term loan, depends in part upon the distribution of earnings of our subsidiaries, whether in the form of dividends, advances or payments on account of intercompany obligations or otherwise.
Executive summary We reported net income of $104.5 million, or $.90 per share, in 2022 compared to $112.9 million, or $.98 per share in 2021.
We reported net income of $104.5 million, or $.90 per share, in 2022 compared to $112.9 million, or $.98 per share in 2021.
Based upon our expectation for the TiO 2 industry and anticipated demands on cash resources, we expect to have sufficient liquidity to meet our short term obligations (defined as the twelve-month period ending December 31, 2023) and our long-term obligations (defined as the five-year period ending December 31, 2027, our time period for long-term budgeting).
Based upon our expectation for the TiO 2 industry and anticipated demands on cash resources, we expect to have sufficient liquidity to meet our short-term obligations (defined as the twelve-month period ending December 31, 2024) and our long-term obligations (defined as the five-year period ending December 31, 2028, our time period for long-term budgeting).
We estimate approximately $20 million of our 2023 capital expenditures will be in environmental compliance, protection and improvement programs which are primarily focused on increasing operating efficiency but also result in improved environmental protection, such as lower emissions from our manufacturing plants.
We estimate approximately $28 million of our 2024 capital expenditures will be in environmental compliance, protection and improvement programs which are primarily focused on increasing operating efficiency but also result in improved environmental protection, such as lower emissions from our manufacturing plants.
As noted above, we have experienced global market disruptions including high energy costs and availability concerns and future impacts on our operations will depend on, among other things, future energy costs and availability and the impact economic conditions and geopolitical events have on our operations or our customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.
We have experienced global market disruptions including high energy costs and future impacts on our operations will depend on, among other things, future energy costs and the impact economic conditions and geopolitical events have on our operations or our customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.
At December 31, 2022, approximately 59%, 21%, 12% and 3% 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.
At December 31, 2023, approximately 62%, 21%, 11% and 3% 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.
Based on the actuarial assumptions described above and our current expectation for what actual average currency exchange rates will be during 2023, we expect our defined benefit pension expense will approximate $9.8 million in 2023. In comparison, we expect to be required to contribute approximately $17 million to such plans during 2023.
Based on the actuarial assumptions described above and our current expectation for what actual average currency exchange rates will be during 2024, we expect our defined benefit pension expense will approximate $7.5 million in 2024. In comparison, we expect to be required to contribute approximately $17 million to such plans during 2024.
However, if we had lowered the assumed discount rate by 25 basis points for all plans as of December 31, 2022, our aggregate projected benefit obligations would have increased by approximately $18 million at that date and our defined benefit pension expense would be expected to increase by approximately $.1 million during 2023.
However, if we had lowered the assumed discount rate by 25 basis points for all plans as of December 31, 2023, our aggregate projected benefit obligations would have increased by approximately $21.0 million at that date and our defined benefit pension expense would be expected to decrease by approximately $.1 million during 2024.
For example, during 2022, relative changes in currency exchange rates resulted in a $5.1 million decrease in the reported amount of our cash, cash equivalents and restricted cash compared to a $10.6 million decrease in 2021 and a $13.8 million increase in 2020. Cash provided by operating activities was $81.7 million in 2022 compared to $206.5 million in 2021.
For example, during 2023, relative changes in currency exchange rates resulted in a $1.0 million increase in the reported amount of our cash, cash equivalents and restricted cash compared to a $5.1 million decrease in 2022 and a $10.6 million decrease in 2021. 33 Cash provided by operating activities was $5.5 million in 2023 compared to $81.7 million in 2022.
The $23 million increase in income from operations was comprised of the following: ● Higher net currency transaction gains of approximately $10 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 non-U.S. operations, and in Norwegian krone denominated receivables and payables held by our non-U.S. operations, and ● Approximately $13 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 2022 as compared to 2021, partially offset by net currency translation losses primarily caused by a strengthening of the U.S. dollar relative to the euro as the negative effects of the stronger U.S. dollar on euro-denominated sales more than offset the favorable effects of euro-denominated operating costs being translated into fewer U.S. dollars in 2022 as compared to 2021. ​ 27 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impact of changes in currency exchange rates - 2021 vs. 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Translation ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ gains/(losses) ​ Total currency ​ Transaction gains/(losses) recognized ​ impact of ​ impact ​ 2020 2021 Change rate changes 2021 vs. 2020 ​ (In millions) Impact on: ​ ​ ​ ​ ​ Net sales ​ $ - ​ $ - ​ $ - ​ $ 43 ​ $ 43 Income from operations ​ (4) ​ 2 ​ 6 ​ (19) ​ (13) ​ The $43 million increase in net sales (translation gain) was caused primarily by a weakening of the U.S. dollar relative to the euro, as our euro-denominated sales were translated into more U.S. dollars in 2021 as compared to 2020.
The $23 million increase in income from operations was comprised of the following: ● Higher net currency transaction gains of approximately $10 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 non-U.S. operations, and in Norwegian krone denominated receivables and payables held by our non-U.S. operations, and ● Approximately $13 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 2022 as compared to 2021, partially offset by net currency translation losses primarily caused by a strengthening of the U.S. dollar relative to the euro as the negative effects of the stronger U.S. dollar on euro-denominated sales more than offset the favorable effects of euro-denominated operating costs being translated into fewer U.S. dollars in 2022 as compared to 2021 .
At December 31, 2022, approximately 69%, 16%, 8% and 3% 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.
At December 31, 2023, approximately 71%, 15%, 8% and 2% 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.
Financing activities During 2022, we: ● paid quarterly dividends of $.19 per share to stockholders aggregating $87.8 million, and ● acquired 217,778 shares of our common stock in market transactions for an aggregate purchase price of $2.3 million.
During 2022, we: ● paid quarterly dividends of $.19 per share to stockholders aggregating $87.8 million, and ● acquired 217,778 shares of our common stock in market transactions for an aggregate purchase price of $2.3 million. 34 During 2021, we: ● paid quarterly dividends of $.18 per share to stockholders aggregating $83.2 million, and ● acquired 14,409 shares of our common stock in market transactions for an aggregate purchase price of $.2 million.
In February 2023, our board of directors declared a first quarter 2023 regular quarterly dividend of $.19 per share, payable March 16, 2023 to stockholders of record as of March 7, 2023. 33 Outstanding debt obligations and borrowing availability At December 31, 2022, our consolidated debt comprised: ● €400 million aggregate outstanding on our Kronos International, Inc.
In February 2024, our board of directors declared a first quarter 2024 regular quarterly dividend of $.19 per share, payable March 14, 2024 to stockholders of record as of March 5, 2024. Outstanding debt obligations and borrowing availability At December 31, 2023, our consolidated debt comprised €400 million aggregate outstanding on our wholly-owned subsidiary Kronos International, Inc.
The weakening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2021 did not have a significant effect on the reported amount of our net sales, as a substantial portion of the sales generated by our Canadian and Norwegian operations are denominated in the U.S. dollar.
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 our net sales, as a substantial portion of the sales generated by our Canadian and Norwegian operations is denominated in the U.S. dollar.
Capital expenditures are primarily incurred to maintain and improve the cost effectiveness of our manufacturing facilities. Our capital expenditures during the past three years include an aggregate of $53.6 million (including $17.6 million in 2022) for our ongoing environmental protection and compliance programs.
Capital expenditures are primarily incurred to maintain and improve the cost effectiveness of our manufacturing facilities. Our capital expenditures during the past three years include an aggregate of $43.0 million (including $11.2 million in 2023) for our ongoing environmental protection and compliance programs.
Overall, we estimate that fluctuations in currency exchange rates had the following effects on our sales and income from operations for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impact of changes in currency exchange rates - 2022 vs. 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Translation ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ gains/(losses) ​ Total currency ​ Transaction gains recognized ​ impact of ​ impact ​ 2021 2022 Change rate changes 2022 vs. 2021 ​ ​ (In millions) Impact on: ​ ​ ​ ​ ​ Net sales ​ $ - ​ $ - ​ $ - ​ $ (106) ​ $ (106) Income from operations ​ 2 ​ 12 ​ 10 ​ 13 ​ 23 ​ The $106 million decrease in net sales (translation losses) was caused primarily by a strengthening of the U.S. dollar relative to the euro, as our euro-denominated sales were translated into fewer U.S. dollars in 2022 as compared to 2021.
The effect of the weakening of the U.S. dollar relative to the euro was nominal in 2023 as compared to 2022. ​ 28 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impact of changes in currency exchange rates - 2022 vs. 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Translation ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ gains/(losses) ​ Total currency ​ Transaction gains recognized ​ impact of ​ impact ​ 2021 2022 Change rate changes 2022 vs. 2021 ​ (In millions) Impact on: ​ ​ ​ ​ ​ Net sales ​ $ - ​ $ - ​ $ - ​ $ (106) ​ $ (106) Income from operations ​ 2 ​ 12 ​ 10 ​ 13 ​ 23 ​ The $106 million decrease in net sales (translation losses) was caused primarily by a strengthening of the U.S. dollar relative to the euro, as our euro-denominated sales were translated into fewer U.S. dollars in 2022 as compared to 2021.
During 2022, 45% of our sales volumes were sold into European markets. We believe we are the largest producer of TiO 2 in Europe with an estimated 14% share of European TiO 2 sales volumes in 2022. In addition, we estimate we have a 17% share of North American TiO 2 sales volumes in 2022.
During 2023, 44% of our sales volumes were sold into European markets. We believe we are the largest chloride process producer of TiO 2 in Europe with an estimated 12% share of European TiO 2 sales volumes in 2023. In addition, we estimate we have a 16% share of North American TiO 2 sales volumes in 2023.
Comparison of 2022 to 2021 Results of Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ ​ ​ 2021 ​ 2022 ​ ​ ​ (Dollars in millions) Net sales $ 1,939.4 100 % $ 1,930.2 100 % Cost of sales ​ 1,493.2 77 ​ 1,539.1 80 ​ Gross margin ​ 446.2 23 ​ 391.1 20 ​ Selling, general and administrative expense ​ 248.9 13 ​ 231.3 12 ​ Other operating income (expense): ​ ​ ​ ​ ​ Currency transactions, net ​ 1.6 - ​ 11.5 1 ​ Other operating expense, net ​ (11.8) - ​ (11.7) (1) ​ Income from operations $ 187.1 10 % $ 159.6 8 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % Change ​ TiO 2 operating statistics: ​ ​ ​ Sales volumes* ​ ​ 563 ​ ​ ​ ​ 481 ​ (15) % Production volumes* ​ ​ 545 ​ ​ ​ ​ 492 ​ (10) % Percentage change in net sales: ​ ​ ​ ​ TiO 2 product pricing ​ ​ ​ 21 % TiO 2 sales volumes ​ ​ ​ ​ (15) ​ TiO 2 product mix/other ​ ​ ​ (1) ​ Changes in currency exchange rates ​ ​ ​ (5) ​ Total ​ ​ ​ ​ - % * Thousands of metric tons ​ Industry conditions and 2022 overview – We started 2022 with average TiO 2 selling prices 16% higher than at the beginning of 2021 and our average TiO 2 selling prices increased 16% throughout 2022 in response to our rising production costs.
Comparison of 2022 to 2021 Results of Operations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ ​ 2021 ​ 2022 ​ ​ (Dollars in millions) Net sales $ 1,939.4 100 % $ 1,930.2 100 % Cost of sales ​ ​ 1,493.2 ​ 77 1,539.1 80 ​ Gross margin ​ 446.2 23 ​ 391.1 20 ​ Selling, general and administrative expense ​ 248.9 13 ​ 231.3 12 ​ Other operating income (expense): ​ ​ ​ ​ Currency transactions, net ​ 1.6 - ​ 11.5 1 ​ Other operating expense, net ​ (11.8) - ​ (11.7) (1) ​ Income from operations $ 187.1 10 % $ 159.6 8 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ % Change ​ TiO 2 operating statistics: ​ ​ ​ ​ Sales volumes* ​ 563 ​ ​ ​ 481 ​ (15) % Production volumes* ​ 545 ​ ​ ​ 492 ​ (10) % Percentage change in net sales: ​ ​ ​ ​ TiO 2 product pricing ​ ​ ​ ​ 21 % TiO 2 sales volumes ​ ​ ​ ​ (15) ​ TiO 2 product mix/other ​ ​ ​ ​ (1) ​ Changes in currency exchange rates ​ ​ ​ ​ (5) ​ Total ​ ​ ​ ​ - % * Thousands of metric tons Net sales – Our net sales in 2022 were consistent with net sales in 2021 primarily due to the net effects of a 21% increase in average TiO 2 selling prices (which increased net sales by approximately $407 million) and a 15% decrease in sales volumes (which decreased net sales by approximately $291 million).
For comparative purposes, we have provided prior year numbers below. ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 December 31, 2021 December 31, 2022 DSO ​ 68 days ​ 65 days ​ 64 days DSI ​ 74 days ​ 59 days ​ 79 days ​ Investing activities Our capital expenditures were $63.2 million in 2022 compared to $58.6 million in 2021 and $62.8 million in 2020.
For comparative purposes, we have provided current and prior year numbers below. ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 December 31, 2022 December 31, 2023 DSO ​ 65 days ​ 64 days ​ 66 days DSI ​ 59 days ​ 103 days ​ 65 days ​ Investing activities Our capital expenditures were $47.4 million in 2023 compared to $63.2 million in 2022 and $58.6 million in 2021.
In addition to the impact of higher sales volumes and higher average selling prices, we estimate that changes in currency exchange rates (primarily the euro) increased our net sales by approximately $43 million, or 3%, as compared to 2020.
In addition to the impact of sales volumes and average TiO 2 selling prices, we estimate that changes in currency exchange rates (primarily the euro) increased our net sales by approximately $10 million in 2023 as compared to 2022.
Cash provided by operating activities was $206.5 million in 2021 compared to $102.5 million in 2020.
Cash provided by operating activities was $81.7 million in 2022 compared to $206.5 million in 2021.
As described in the Notes to the Consolidated Financial Statements, we are a party to various debt, lease, raw material supply and other agreements which contractually and unconditionally commit us to pay certain amounts in the future. See Notes 7, 8, 14 and 15 to our Consolidated Financial Statements. ​ Recent accounting pronouncements Not applicable 35
As described in the Notes to the Consolidated Financial Statements, we are a party to various debt, lease, raw material supply and other agreements which contractually and unconditionally commit us to pay certain amounts in the future.
Other non-operating income (expense) – We recognized a gain of $2.0 million in 2021 and a loss of $1.1 million in 2020 on the change in value of our marketable equity securities. See Note 6 to our Consolidated Financial Statements.
Other non-operating income (expense) – We recognized unrealized losses of $1.0 million in each of 2023 and 2022 on the change in value of our marketable equity securities. See Note 6 to our Consolidated Financial Statements.
We recognize the full funded status of our defined benefit pension plans as either an asset (for overfunded plans) or a liability (for underfunded plans) on our Consolidated Balance Sheets. 29 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.
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.
We estimate that changes in currency exchange rates decreased income from operations by approximately $13 million in 2021 as compared to 2020 as discussed in the Effects of currency exchange rates section below.
We estimate changes in currency exchange rates decreased our loss from operations by approximately $16 million in 2023 as compared to 2022, as discussed in the Effects of currency exchange rates section below.
The $13 million decrease in income from operations was comprised of the following: ● Higher net currency transaction gains of approximately $6 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 non-U.S. operations, and in Norwegian krone denominated receivables and payables held by our non-U.S. operations, and ● Approximately $19 million from net currency translation losses primarily caused by a weakening of the U.S. dollar relative to the Canadian dollar and Norwegian krone, as local currency-denominated operating costs were translated into more U.S. dollars in 2021 as compared to 2020, partially offset by net currency translation gains primarily caused by a weakening of the U.S. dollar relative to the euro as the positive effects of the weaker U.S. dollar on euro-denominated sales more than offset the unfavorable effects of euro-denominated operating costs being translated into more U.S. dollars in 2021 as compared to 2020.
The $16 million decrease in loss from operations was comprised of the following: ● Lower net currency transaction gains of approximately $11 million primarily caused by relative changes in currency exchange rates at each applicable balance sheet date between the U.S. dollar and the euro, Canadian dollar and the Norwegian krone, and between the euro and the Norwegian krone, which causes increases or decreases, as applicable, in U.S. dollar-denominated receivables and payables and U.S. dollar currency held by our non-U.S. operations, and in Norwegian krone denominated receivables and payables held by our 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.
Gross margin as a percentage of net sales increased to 23% in 2021 compared to 21% in 2020. As discussed and quantified above, our gross margin as a percentage of net sales increased primarily due to the net effects of higher average TiO 2 selling prices, higher production and sales volumes, higher production costs and fluctuations in currency exchange rates.
Gross margin as a percentage of net sales decreased to 10% in 2023 compared to 20% in 2022. As discussed and quantified above, our gross margin as a percentage of net sales decreased primarily due to lower production and sales volumes, lower average TiO 2 selling prices, higher production costs and changes in currency exchange rates.
As shown below: ● Our average days sales outstanding, or DSO, decreased from December 31, 2021 to December 31, 2022, primarily due to relative changes in the timing of collections, and ● Our average days sales in inventory, or DSI, increased from December 31, 2021 to December 31, 2022, primarily due to higher inventory volumes attributable to production volumes exceeding sales volumes in 2022 compared to 2021 and due to supply disruptions and other transportation delays impacting the timing of raw material shipments at the end of 2021.
As shown below: ● Our average days sales outstanding, or DSO, increased from December 31, 2022 to December 31, 2023, primarily due to relative changes in the timing of collections, and ● Our average days sales in inventory, or DSI, decreased from December 31, 2022 to December 31, 2023, primarily due to lower inventory volumes attributable to sales volumes exceeding production volumes in 2023 compared to 2022 where our production volumes exceeded our sales volumes.
(KII) 3.75% Senior Secured Notes due in September 2025 (Senior Secured Notes), which had a $424.1 million carrying amount, net of unamortized debt issuance costs, and ● approximately $1.1 million of other indebtedness.
(KII) 3.75% Senior Secured Notes due in September 2025 (the “Old Notes”), which had a $440.9 million carrying amount, net of unamortized debt issuance costs.
The difference is primarily due to lower earnings in 2022, the jurisdictional mix of our earnings and the release of a portion of our valuation allowance associated with the 2022 utilization of a portion of our business interest expense carryforwards . 24 Our earnings are subject to income tax in various U.S. and non-U.S. jurisdictions, and the income tax rates applicable to the pre-tax earnings (losses) of our non-U.S. operations are generally higher than the income tax rates applicable to our U.S. operations.
The difference is primarily due to lower earnings in 2023 and the jurisdictional mix of such earnings. Our earnings are subject to income tax in various U.S. and non-U.S. jurisdictions, and the income tax rates applicable to the pre-tax earnings (losses) of our non-U.S. operations are generally higher than the income tax rates applicable to our U.S. operations.
We would generally expect our overall effective tax rate to be higher than the U.S. federal statutory rate of 21% primarily because of our sizeable non-U.S. operations.
We would generally expect our overall effective tax rate to be higher than the U.S. federal statutory rate of 21% primarily because of our sizeable non-U.S. operations. See Note 12 to our Consolidated Financial Statements for a tabular reconciliation of our statutory income tax provision to our actual tax provision.
Cash, cash equivalents, restricted cash and marketable securities At December 31, 2022 we had: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held by ​ ​ ​ U.S. ​ Non-U.S. ​ ​ ​ ​ ​ entities ​ entities ​ Total ​ ​ (In millions) Cash and cash equivalents $ 185.8 ​ $ 142.0 ​ $ 327.8 Current restricted cash - ​ 2.0 ​ 2.0 Noncurrent restricted cash - ​ 4.8 ​ 4.8 Noncurrent marketable securities 3.2 ​ - ​ 3.2 ​ Following 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.
Cash, cash equivalents, restricted cash and marketable securities At December 31, 2023 we had: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Held by ​ ​ ​ U.S. ​ Non-U.S. ​ ​ ​ ​ ​ entities ​ entities ​ Total ​ ​ (In millions) Cash and cash equivalents $ 87.0 ​ $ 107.7 ​ $ 194.7 Current restricted cash - ​ 2.2 ​ 2.2 Noncurrent restricted cash - ​ 5.2 ​ 5.2 Noncurrent marketable securities 2.2 ​ - ​ 2.2 ​ Following 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. 36 Stock repurchase program At December 31, 2023, we have 1,017,518 shares available for repurchase under a stock repurchase program authorized by our board of directors.
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. 30 Our assumed long-term rates of return on plan assets for 2020, 2021 and 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ 2020 2021 ​ 2022 Germany ​ 1.0% ​ 2.0% ​ 2.0% Canada ​ 3.5% ​ 3.1% ​ 3.8% Norway 4.0% ​ 2.8% ​ 3.0% U.S. 4.5% ​ 4.0% ​ 4.0% ​ Our long-term rate of return on plan asset assumptions in 2023 used for purposes of determining our 2023 defined benefit pension plan expense for Germany, Canada, Norway and the U.S. are 4.8%, 4.4%, 4.8% and 5.0%, respectively.
Our assumed long-term rates of return on plan assets for 2021, 2022 and 2023 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ 2021 2022 ​ 2023 Germany ​ 2.0% ​ 2.0% ​ 4.8% Canada ​ 3.1% ​ 3.8% ​ 4.4% Norway 2.8% ​ 3.0% ​ 4.8% U.S. 4.0% ​ 4.0% ​ 5.0% ​ Our long-term rate of return on plan asset assumptions in 2024 used for purposes of determining our 2024 defined benefit pension plan expense for Germany, Canada, Norway and the U.S. are 5.0%, 4.9%, 4.8% and 5.0%, respectively.
The funding requirements for these defined benefit pension plans are generally based upon applicable regulations (such as ERISA in the U.S.) and will generally differ from pension expense for financial reporting purposes. We made contributions to all of our plans which aggregated $16.6 million in 2020, $19.1 million in 2021 and $15.3 million in 2022.
We recognized consolidated defined benefit pension plan expense of $31.3 million in 2021, $24.1 million in 2022 and $12.0 million in 2023. The funding requirements for these defined benefit pension plans are generally based upon applicable regulations (such as ERISA in the U.S.) and will generally differ from pension expense for financial reporting purposes.
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 assumed 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.
These assumptions are principally the assumed 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.
Capital expenditures We intend to spend approximately $46 million on capital expenditures during 2023 (including approximately $17.6 million contractually committed at December 31, 2022), primarily to maintain and improve our existing facilities.
See Note 13 to our Consolidated Financial Statements. Capital expenditures We intend to spend approximately $55 million on capital expenditures during 2024 (including approximately $3.2 million contractually committed at December 31, 2023), primarily to maintain and improve our existing facilities.
TiO 2 selling prices will increase or decrease generally as a result of competitive market pressures, changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs.
TiO 2 selling prices will increase or decrease generally as a result of competitive market pressures, changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs. Our sales volumes decreased 13% in 2023 as compared to 2022 due to lower overall demand across all major markets noted above.
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 2022 because no such impairment indicators were present. ● Defined benefit pension plans – We maintain various defined benefit pension plans in the U.S., Europe and Canada.
Excluding this project, we did not evaluate any long-lived assets for impairment during 2023 because no such impairment indicators were present. ● Defined benefit pension plans – We maintain various defined benefit pension plans in the U.S., Europe and Canada. See Note 10 to our Consolidated Financial Statements.
We believe the most critical accounting policies and estimates involving significant judgment primarily relate to long-lived assets, defined benefit pension plans and income taxes. ● Long-lived assets – The net book value of our property and equipment totaled $484.5 million at December 31, 2022.
We believe the most critical accounting policies and estimates involving significant judgment primarily relate to long-lived assets, defined benefit pension plans and income taxes.
This $104.0 million increase in the amount of cash provided was primarily due to the net effect of the following: ● higher income from operations in 2021 of $70.9 million, ● lower amount of net cash used associated with relative changes in our inventories, receivables, payables and accruals in 2021 of $51.8 million as compared to 2020, ● higher cash paid for income taxes in 2021 of $26.3 million due to increased earnings, and 32 ● higher net distributions from our TiO 2 manufacturing joint venture in 2021 of $16.6 million.
This $76.2 million decrease in the amount of cash provided was primarily due to the net effect of the following: ● lower income from operations in 2023 of $215.6 million, ● lower amount of net cash used associated with relative changes in our inventories, receivables, payables and accruals in 2023 of $109.5 million, ● lower cash paid for income taxes of $20.0 million primarily due to decreased earnings in 2023, and ● lower net contributions to our TiO 2 manufacturing joint venture in 2023 of $13.6 million.
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.
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. 31 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.
The terms of all of our debt instruments (including our revolving line of credit for which we have no outstanding borrowings at December 31, 2022) are discussed in Note 8 to our Consolidated Financial Statements. We are in compliance with all of our debt covenants at December 31, 2022.
The terms of all of our debt instruments are discussed in Note 8 to our Consolidated Financial Statements. We are in compliance with all of our debt covenants at December 31, 2023. We believe we will be able to continue to comply with the financial covenants contained in our credit facility through its maturity.
During 2021, we: ● paid quarterly dividends of $.18 per share to stockholders aggregating $83.2 million, and ● acquired 14,409 shares of our common stock in market transactions for an aggregate purchase price of $.2 million.
During 2023, 2022 and 2021, we had no loans or collections under our unsecured revolving demand promissory note with Valhi. Financing activities During 2023, we: ● paid quarterly dividends of $.19 per share to stockholders aggregating $87.5 million, and ● acquired 313,814 shares of our common stock in market transactions for an aggregate purchase price of $2.8 million.
Other components of net periodic pension and OPEB cost in 2021 decreased $2.9 million compared to 2020 primarily due to higher expected returns on plan assets offset by the net effects of lower discount rates impacting interest cost and previously unrecognized actuarial losses. See Note 10 to our Consolidated Financial Statements.
Other components of net periodic pension and OPEB cost in 2023 decreased $7.2 million compared to 2022 primarily due to the net effects of higher discount rates impacting interest cost, previously unrecognized actuarial losses and $1.3 million 25 in settlement costs related to the termination and buy-out of our pension plan in the United Kingdom during the second quarter of 2023.
We will continue to monitor current and anticipated near-term customer demand levels and will align our production and inventories accordingly. The long-term outlook for our industry remains very positive, and the steps we 28 are taking in the near term are intended to preserve our global market share and position our business to profitably grow in the future.
As demand improves, we will continue to monitor current and anticipated near-term customer demand levels and will align our production and inventories accordingly. We believe the steps we took during 2023 to preserve our liquidity while maintaining global market share have positioned our business to capitalize on our expectations for improved demand in 2024.
Comparability of our results was also impacted by the effects of changes in currency exchange rates. We reported net income of $112.9 million, or $.98 per share, in 2021 compared to $63.9 million, or $.55 per share in 2020.
Comparability of our results was also impacted by the effects of changes in currency exchange rates.
We had no outstanding borrowings on our $225 million global revolving credit facility (Global Revolver) at December 31, 2022 and approximately $211 million was available for borrowings thereunder.
We had no outstanding borrowings at December 31, 2023 on our Global Revolver. Availability under the Global Revolver is subject to a borrowing base calculation, as defined in the agreement, and at December 31, 2023 the full $225 million was available for borrowings.
Selling, general and administrative expense – Selling, general and administrative expenses increased $30.3 million, or 14%, in 2021 compared to 2020 primarily due to higher variable costs (primarily distribution costs) related to higher overall sales volumes. Selling, general and administrative expenses were approximately 13% of net sales in each of 2021 and 2020.
Selling, general and administrative expense – Selling, general and administrative expense decreased $20.1 million, or 9%, in 2023 compared to 2022 primarily due to lower distribution costs related to lower overall sales volumes during the year.
Our estimates affect the reported amounts of assets and liabilities and related disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results may differ significantly from those initial estimates.
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 at the date of the financial statements and the reported amount of revenues and expenses during the reported period.
Overall sales volumes declined in 2022 compared to 2021 primarily due to demand contraction in our European and export markets, particularly in the third and fourth quarters. The following table shows our capacity utilization rates during 2022 and 2021. Throughout most of 2021 and continuing into the first quarter of 2022, our production facilities operated at full practical capacity.
Overall sales volumes declined in 2023 compared to 2022 primarily due to lower demand in all of our major markets. We began curtailing production in the fourth quarter of 2022 at certain of our European facilities due to decreased demand and increased production costs.
Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP which requires management to make estimates, judgments and assumptions that we believe are reasonable based on our historical experience, observance of known trends in our Company and industry as a whole and information available from outside sources.
Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP.
See Note 10 to our Consolidated Financial Statements. We recognized consolidated defined benefit pension plan expense of $32.7 million in 2020, $31.3 million in 2021 and $24.1 million in 2022.
See Note 10 to our Consolidated Financial Statements. Interest expense in 2023 was comparable to interest expense in 2022. See Note 8 to our Consolidated Financial Statements. Income tax expense (benefit) – We recognized an income tax benefit of $23.8 million in 2023 compared to income tax expense of $29.4 million in 2022.
Our net income in 2020 includes the first quarter recognition of a pre-tax insurance settlement gain of $1.5 million ($1.2 million, or $.01 per share, net of income tax expense) related to a property damage claim.
Our net loss in 2023 includes: ● an aggregate $2.5 million ($2.0 million, or $.02 per share, net of income tax expense) pre-tax insurance settlement gain related to a business interruption insurance claim arising from Hurricane Laura in 2020, recognized in the first, second and third quarters, ● recognition in the second quarter of a $1.3 million settlement loss related to the termination and buy-out of our pension plan in the United Kingdom ($.9 million, or $.01 per share, net of income tax expense), ● recognition in the fourth quarter of a $3.8 million ($2.8 million, or $.02 per share, net of income tax expense) fixed asset impairment related to the write-off of certain costs resulting from a capital project termination , and ● recognition, primarily in the fourth quarter, of $5.8 million ($4.3 million, or $.04 per share, net of income tax expense) of restructuring costs related to workforce reductions.
For example, at December 31, 2022 we have substantial net operating loss carryforwards in Germany (the equivalent of $414 million for German corporate tax purposes) and Belgium (the equivalent of $13 million for Belgian corporate tax purposes).
For example, at December 31, 2023, we have significant German corporate and trade net operating loss (NOL) carryforwards of $478.7 million (DTA of $75.8 million) and $54.5 million (DTA of $5.9 million), respectively; and Belgian corporate NOL carryforwards of $47.0 million (DTA of $11.8 million).
Cost of sales and gross margin – Cost of sales increased $205.6 million, or 16%, in 2021 compared to 2020 due to a 6% increase in sales volumes and higher production costs of approximately $69 million (including higher costs for raw materials and energy) and the effects of currency fluctuations (primarily the Canadian dollar).
Our 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.
Due to the decreased demand in our European and export markets along with increased production costs, particularly energy costs in Europe, we curtailed production in the third and fourth quarters of 2022 at certain of our European facilities to align our production and inventory levels to anticipated near-term customer demand. ​ ​ ​ ​ ​ ​ Production Capacity Utilization Rates ​ 2021 2022 First Quarter ​ 97% ​ 100% Second Quarter 100% ​ 95% Third Quarter 100% ​ 93% Fourth Quarter 100% ​ 65% Overall 100% ​ 89% ​ 23 Net sales – Our net sales in 2022 were consistent with net sales in 2021 primarily due to the net effects of a 21% increase in average TiO 2 selling prices (which increased net sales by approximately $407 million) and a 15% decrease in sales volumes (which decreased net sales by approximately $291 million).
Cost of sales and gross margin – 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 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).
We recognized an insurance settlement gain of $1.5 million during 2020 related to a property damage claim. Interest expense in 2021 increased $.6 million compared to 2020 due to the refinancing of our revolving credit facility in the second quarter of 2021 (see Note 8 to our Consolidated Financial Statements) and the effects of changes in currency exchange rates.
We 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. See Note 17 to our Consolidated Financial Statements.
We are experiencing continued weak demand in North America in the first quarter of 2023. We expect customer demand to gradually return during the first half of the year particularly in Europe and export markets.
Outlook Customer demand stabilized during the fourth quarter of 2023, particularly in the North American and export markets, while demand in Europe improved but remained below historical levels. We expect consumer demand to improve in 2024, and we believe customer destocking of TiO 2 is largely complete and customer inventories are historically low.
Income tax expense – We recognized income tax expense of $40.5 million in 2021 compared to income tax expense of $16.1 million in 2020. The difference is primarily due to higher earnings in 2021 and the jurisdictional mix of our earnings.
The difference is primarily due to lower earnings in 2022, the jurisdictional mix of our earnings and the release of a portion of our valuation allowance associated with the 2022 utilization of a portion of our business interest expense carryforwards .
Removed
Our results of operations for the year ended December 31, 2020 were significantly impacted by the COVID-19 pandemic, specifically through reduced demand for certain of our products occurring primarily in the second quarter, with demand improving throughout the second half of 2020 and through 2021. 22 Our net income in 2022 includes the recognition of a pre-tax insurance settlement gain of $2.7 million recognized in the third quarter ($2.2 million, or $.02 per share, net of income tax expense) related to a business interruption insurance claim arising from Hurricane Laura in 2020.
Added
Executive summary We reported a net loss of $49.1 million, or $.43 per share, in 2023 compared to net income of $104.5 million, or $.90 per share, in 2022.
Removed
See Note 12 to our Consolidated Financial Statements for a tabular reconciliation of our statutory income tax provision to our actual tax provision.
Added
Net income decreased in 2023 as compared to 2022 primarily due to lower income from operations as a result of lower sales volumes, lower average TiO 2 selling prices and reduced production volumes.
Removed
Our sales volumes increased 6% in 2021 as compared to 2020 primarily due to higher demand in our European, North American and Latin American markets, with a significant portion of the increase occurring in the second and third quarters as a result of the impact of COVID-19 on the comparable periods in 2020, as discussed above.
Added
Beginning in the fourth quarter of 2022 and continuing through 2023, we implemented production curtailments in response to a sharp decline in demand for TiO 2 products occurring in all major markets. In addition, throughout 2023 we implemented cost reduction initiatives and other strategies designed to improve our long-term cost structure and preserve liquidity.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+1 added−0 removed10 unchanged
Biggest changeSee Note 8 to our Consolidated Financial Statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Indebtedness amount Year-end ​ ​ Carrying ​ Fair ​ interest ​ Maturity ​ ​ amount ​ value ​ rate ​ date ​ ​ (In millions) ​ ​ ​ ​ December 31, 2022 ​ ​ ​ ​ ​ ​ Fixed-rate Senior Secured Notes ​ $ 424.1 ​ $ 374.2 3.75 % 2025 December 31, 2021 ​ ​ ​ Fixed-rate Senior Secured Notes ​ $ 448.8 ​ $ 460.2 3.75 % 2025 ​ 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.
Biggest changeSee Note 8 to our Consolidated Financial Statements. ​ 37 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.
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.
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. 38
The fixed-rate debt instrument minimizes earnings volatility that would result from changes in interest rates. Our Global Revolver is a variable-rate instrument; however, we had no borrowings under this facility during 2021 or 2022. The following table presents principal amounts and weighted average interest rates for our aggregate outstanding indebtedness at December 31, 2021 and 2022.
The fixed-rate debt instrument minimizes earnings volatility that would result from changes in interest rates. Our Global Revolver is a variable-rate instrument; however, we had no borrowings under this facility during 2023 or 2022. The following table presents principal amounts and weighted average interest rates for our aggregate outstanding indebtedness at December 31, 2023 and 2022.
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, 2022. Also, we are subject to currency exchange rate risk associated with our Senior Secured Notes, as such indebtedness is denominated in euros.
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, 2023. Also, we are subject to currency exchange rate risk associated with our Senior Secured Notes, as such indebtedness is denominated in euros.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK General We are exposed to market risk from changes in interest rates, currency exchange rates, equity security and raw material prices. Interest rates At December 31, 2021 and 2022, our fixed-rate, euro-denominated Senior Secured Notes comprised the majority of our aggregate indebtedness.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK General We are exposed to market risk from changes in interest rates, currency exchange rates, equity security and raw material prices. Interest rates At December 31, 2023 and 2022, our fixed-rate, euro-denominated KII 3.75% Senior Secured Notes due 2025 comprised the majority of our aggregate indebtedness.
Information shown below for our euro-denominated Senior Secured Notes is presented in its U.S. dollar equivalent at December 31, 2021 and 2022 (net of unamortized debt issuance costs of $3.5 million and $2.4 million, respectively) using an exchange rate of U.S. $1.131 per euro and $1.066 per euro, respectively.
Information shown below for our euro-denominated 3.75% Senior Secured Notes due 2025 is presented in its U.S. dollar equivalent at December 31, 2023 and 2022 (net of unamortized debt issuance costs of $1.6 million and $2.4 million, respectively) using an exchange rate of U.S. $1.106 per euro and $1.066 per euro, respectively.
At December 31, 2022, we had the equivalent of $426.5 million outstanding under our euro-denominated Senior Secured Notes (exclusive of unamortized debt issuance costs.) The potential increase in the 36 U.S. dollar equivalent of such indebtedness resulting from a hypothetical 10% adverse change in exchange rates at December 31, 2022 would be approximately $43 million.
At December 31, 2023, we had the equivalent of $442.5 million outstanding under our euro-denominated 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, 2023 would be approximately $44 million.
Added
See Note 8 to our Consolidated Financial Statements. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Indebtedness amount Year-end ​ ​ Carrying ​ Fair ​ interest ​ Maturity ​ ​ amount ​ value ​ rate ​ date ​ ​ (In millions) ​ ​ ​ ​ December 31, 2023 ​ ​ ​ ​ ​ ​ Fixed-rate 3.75% Senior Secured Notes due 2025 ​ $ 440.9 ​ $ 424.5 3.75 % 2025 December 31, 2022 ​ ​ ​ Fixed-rate 3.75% Senior Secured Notes due 2025 ​ $ 424.1 ​ $ 374.2 3.75 % 2025 ​ On February 12, 2024, we exchanged €325 million principal amount of the outstanding 3.75% Senior Secured Notes due 2025 for newly issued €276.174 million aggregate outstanding KII 9.50% Senior Secured Notes due March 2029.

Other KRO 10-K year-over-year comparisons