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What changed in VALHI INC /DE/'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of VALHI INC /DE/'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.

+484 added−465 removedSource: 10-K (2024-03-07) vs 10-K (2023-03-09)

Top changes in VALHI INC /DE/'s 2023 10-K

484 paragraphs added · 465 removed · 379 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

104 edited+18 added−12 removed113 unchanged
Biggest changeKey events in our history include: ● 1979 – Contran acquires control of LLC; ● 1981 – Contran acquires control of our other predecessor company; ● 1982 – Contran acquires control of Keystone Consolidated Industries, Inc., a predecessor to CompX; ● 1984 – Keystone spins-off an entity that includes what is to become CompX; this entity subsequently merges with LLC; ● 1986 – Contran acquires control of NL, which at the time owns 100% of Kronos; ● 1987 – LLC and another Contran controlled company merge to form Valhi, our current corporate structure; ● 1995 – WCS begins start-up operations; ● 2003 – NL completes the spin-off of Kronos through the pro-rata distribution of Kronos shares to its shareholders including us; ● 2004 through 2005 – NL distributes Kronos shares to its shareholders, including us, through quarterly dividends; ● 2008 – WCS receives a license for the disposal of byproduct material and begins construction of the byproduct facility infrastructure; ● 2009 – WCS receives a license for the disposal of Class A, B and C low-level radioactive waste (“LLRW”) and completes construction of the byproduct facility; ● 2010 – Kronos completes a secondary offering of its common stock lowering our ownership of Kronos to 80%; ● 2011 – WCS begins construction on its Compact and Federal LLRW and mixed LLRW disposal facilities; ● 2012 – WCS completes construction of its Compact and Federal LLRW disposal facilities and commences operations at the Compact facility; ● 2012 – In December CompX completes the sale of its furniture components business; ● 2013 – WCS commences operations at the Federal LLRW facility; - 1 - ​ ● 2013 – In December we purchased an additional ownership interest in and became the majority owner of Basic Management, Inc. and The LandWell Company; both companies are now included in our Consolidated Financial Statements effective December 31, 2013; ● 2015 – The first homes in our Cadence planned community were completed by third-party builders and sold to the public; ● 2018 – In January we completed the sale of WCS; ● 2020 – In December LandWell completed the first bulk sale of land within the Cadence planned community; and ● 2022 – In July 2022 Basic Water Company ceased water delivery due to a decline in water levels at Lake Mead in Nevada.
Biggest changeKey events in our history include: ● 1979 – Contran acquires control of LLC; ● 1981 – Contran acquires control of our other predecessor company; ● 1982 – Contran acquires control of Keystone Consolidated Industries, Inc., a predecessor to CompX; ● 1984 – Keystone spins-off an entity that includes what is to become CompX; this entity subsequently merges with LLC; ● 1986 – Contran acquires control of NL, which at the time owns 100% of Kronos; ● 1987 – LLC and another Contran controlled company merge to form Valhi, our current corporate structure; ● 2003 – NL completes the spin-off of Kronos through the pro-rata distribution of Kronos shares to its shareholders including us; ● 2004 through 2005 – NL distributes Kronos shares to its shareholders, including us, through quarterly dividends; ● 2010 – Kronos completes a secondary offering of its common stock lowering our ownership of Kronos to 80%; ● 2012 – In December CompX completes the sale of its furniture components business; ● 2013 – In December we purchased an additional ownership interest in and became the majority owner of Basic Management, Inc. and The LandWell Company; ● 2015 – The first homes in our Cadence planned community were completed by third-party builders and sold to the public; ● 2020 – In December LandWell completed the first bulk sale of land within the Cadence planned community; ● 2022 – In July Basic Water Company (BWC) ceased water delivery due to a decline in water levels at Lake Mead in Nevada and in September BWC filed for bankruptcy protection; and ● 2023 – In November, upon the Bankruptcy Court’s approval of BWC’s plan of reorganization, BWC sold substantially all of its assets.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, we do not know if these expectations will be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results. Actual future results could differ materially from those predicted.
Although we believe the expectations reflected in such forward-looking statements are reasonable, we do not know if these expectations will be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results. Actual future results could differ materially from those predicted.
TiO 2 is widely considered to - 4 - ​ be superior to alternative white pigments in large part due to its hiding power (or opacity), which is the ability to cover or mask other materials effectively and efficiently. TiO 2 is designed, marketed and sold based on specific end-use applications.
TiO 2 is widely considered to be superior to alternative white pigments in large part due to its hiding power (or opacity), which is the ability to cover or - 4 - ‌ ​ mask other materials effectively and efficiently. TiO 2 is designed, marketed and sold based on specific end-use applications.
Health and safety Protecting the health and safety of our workforce, our customers, our business partners and the natural environment is one of our core values. We are committed to maintaining a strong safety culture where all workers meet or exceed required industry performance standards and continuously seek to improve occupational and process safety performance.
Health and safety Protecting the health and safety of our workforce, our customers, our business partners and the natural environment is one of our core values. We are committed to maintaining a strong safety culture where all workers meet or exceed required industry performance standards, and we continuously seek to improve occupational and process safety performance.
We 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 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.
A substantial portion of Security Products’ sales consist of products with specialized adaptations to an individual customer’s specifications, some of which are listed above. CompX also has a standardized product line suitable for many customers, which is offered through a North American distribution network to locksmith and smaller original equipment manufacturer distributors via its STOCK LOCKS ® distribution program.
A substantial portion of security products’ sales consist of products with specialized adaptations to an individual customer’s specifications, some of which are listed above. CompX also has a standardized product line suitable for many customers, which is offered through a North American distribution network to locksmith and smaller original equipment manufacturer (OEM) distributors via its STOCK LOCKS ® distribution program.
These products include: ● wake enhancement devices, trim tabs, steering wheels, and billet aluminum accessories; ● original equipment and aftermarket stainless steel exhaust headers, exhaust pipes, mufflers and other exhaust components; ● high performance gauges such as GPS speedometers and tachometers; ● mechanical and electronic controls and throttles; ● dash panels, LED indicators, and wire harnesses; and ● grab handles, pin cleats and other accessories. ​ - 14 - ​ CompX operated three principal operating facilities at December 31, 2022 as shown below. ​ ​ ​ ​ ​ ​ ​ ​ ​ Reporting ​ ​ ​ Size Facility Name Unit Location (square feet) Owned Facilities : National (1) SP Mauldin, SC 198,000 Grayslake (1) SP/MC Grayslake, IL 133,000 Custom (1) MC Neenah, WI 95,000 (1) ISO-9001 registered facilities SP- Security Products MC- Marine Components Raw materials CompX’s primary raw materials are: ● Security Products - zinc and brass (for the manufacture of locking mechanisms). ● Marine Components - stainless steel (for the manufacture of exhaust headers and pipes and wake enhancement systems), aluminum (for the manufacture of throttles and trim tabs) and other components.
These products include: ● wake enhancement devices, trim tabs, steering wheels, and billet aluminum accessories; ● original equipment and aftermarket stainless steel exhaust headers, exhaust pipes, mufflers and other exhaust components; ● high performance gauges such as GPS speedometers and tachometers; ● mechanical and electronic controls and throttles; ● dash panels, LED indicators, and wire harnesses; and ● grab handles, pin cleats and other accessories. - 14 - ‌ ​ CompX operated three principal operating facilities at December 31, 2023 as shown below. ​ ​ ​ ​ ​ ​ ​ ​ ​ Reporting ​ ​ ​ Size Facility Name Unit Location (square feet) Owned Facilities : National (1) SP Mauldin, SC 198,000 Grayslake (1) SP/MC Grayslake, IL 133,000 Custom (1) MC Neenah, WI 95,000 (1) ISO-9001 registered facilities SP- Security Products MC- Marine Components Raw materials CompX’s primary raw materials are: ● Security Products - zinc and brass (for the manufacture of locking mechanisms). ● Marine Components - stainless steel (for the manufacture of exhaust headers and pipes and wake enhancement systems), aluminum (for the manufacture of throttles and trim tabs) and other components.
CompX occasionally enters into short-term commodity-related raw material supply arrangements to mitigate the impact of future price increases in commodity-related raw materials, including zinc, brass and stainless steel. These arrangements generally provide for stated unit prices based upon specified purchase volumes, which help CompX to stabilize its commodity-related raw material costs to a certain extent.
CompX occasionally enters into short-term commodity-related raw material supply arrangements to mitigate the impact of future price increases in commodity-related raw materials, including zinc, brass, aluminum and stainless steel. These arrangements generally provide for stated unit prices based upon specified purchase volumes, which help CompX to stabilize its commodity-related raw material costs to a certain extent.
In the event CompX is unable to offset raw material cost increases with other cost reductions, it may be difficult to recover those cost increases through increased product selling prices or raw material surcharges due to the competitive nature of the markets in which it competes. Consequently, overall operating margins can be affected by commodity-related raw material cost pressures.
In the event CompX is unable to offset raw material cost increases with other cost reductions, it may be difficult to recover those cost increases through increased product selling prices or raw material surcharges due to the competitive nature of the markets in which it competes. Consequently, overall operating margins can be negatively affected by commodity-related raw material cost pressures.
For internal global tracking, benchmarking and identification of - 19 - ​ opportunities for improvement, Kronos collects the location specific information and applies a U.S.-based injury rate calculation to arrive at a global total frequency rate, which is expressed as the number of incidents at its operating locations per 200,000 hours.
For internal global tracking, benchmarking and identification of opportunities for improvement, Kronos collects the location specific information and applies a U.S.-based injury rate calculation to arrive at a global total frequency rate, which is expressed as the number of incidents at its operating locations per 200,000 hours.
(3) Kronos operates 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 Kronos is entitled.
(3) Kronos operates 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 Kronos is entitled.
Since LandWell’s formation, LandWell and BMI have a history of successfully developing and selling retail, light industrial, commercial and residential projects in the Henderson, Nevada area. LandWell is focused primarily on the development of a large tract of land in Henderson zoned for residential/planned community purposes (approximately 2,100 acres).
Since LandWell’s formation, LandWell and BMI have had a history of successfully developing and selling retail, light industrial, commercial and residential projects in the Henderson, Nevada area. LandWell is focused primarily on the development of a large tract of land in Henderson zoned for residential/planned community purposes (approximately 2,100 acres).
Kronos voluntarily developed these internal metrics and benchmarks, which Kronos uses to identify progress and opportunities for improvement. These metrics are not intended to be directly - 18 - ​ comparable to similar metrics utilized by other companies to track ESG performance, as the standards, methodologies and assumptions used to determine these metrics vary by company and jurisdiction.
Kronos voluntarily developed these internal metrics and benchmarks, which Kronos uses to identify progress and opportunities for improvement. These metrics are not intended to be directly comparable to similar metrics utilized by other companies to track ESG performance, as the standards, methodologies and assumptions used to determine these metrics vary by company and jurisdiction.
These products include: ● disc tumbler locks which provide moderate security and generally represent the lowest cost lock CompX produces; ● pin tumbler locking mechanisms which are more costly to produce and are used in applications requiring higher levels of security, including KeSet ® and System 64 ® (which each allow the user to change the keying on a single lock 64 times without removing the lock from its enclosure), TuBar ® and Turbine™ ; and ● CompX’s innovative CompX eLock ® and StealthLock ® electronic locks which provide stand-alone or networked security and audit trail capability for drug storage and other valuables through the use of a proximity card, magnetic stripe, radio frequency or other keypad credential.
These products include: ● disc tumbler locks which provide moderate security and generally represent the lowest cost lock CompX produces; ● pin tumbler locks which are more costly to produce and are used in applications requiring higher levels of security, including KeSet ® and System 64 ® (which each allow the user to change the keying on a single lock 64 times without removing the lock from its enclosure), TuBar ® and Turbine™ ; and ● CompX’s innovative CompX eLock ® and StealthLock ® electronic locks which provide stand-alone or networked security and audit trail capability for drug storage and other valuables through the use of a proximity card, magnetic stripe, radio frequency or other keypad credential.
We provide our workers with the tools and training necessary to make the appropriate decisions to prevent accidents and injuries. Each of our operating facilities develops, maintains and implements safety programs encompassing key aspects of their operations. In addition, management reviews and evaluates safety performance throughout the year.
We provide our workers with the tools and - 19 - ‌ ​ 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.
CompX continuously seeks to diversify into new markets and - 13 - ​ identify new applications and features for its products, which it believes provides a greater potential for higher rates of earnings growth as well as diversification of risk. Manufacturing, operations and products Security Products .
CompX continuously seeks to diversify into new markets and identify new applications and features for its products, which it believes provides a greater potential for higher rates of earnings growth as well as diversification of risk. Manufacturing, operations and products Security Products .
In some instances, LandWell will receive cash proceeds at the time the contract closes and record deferred revenue for some or all of the cash amount received, with deferred revenue being recognized in subsequent periods.
In some instances, LandWell will receive cash proceeds at the time the contract closes - 17 - ‌ ​ and record deferred revenue for some or all of the cash amount received, with deferred revenue being recognized in subsequent periods.
Kronos purchases feedstock for its 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 Kronos has been, and it expects that it will continue to be, successful in obtaining short-term and long-term extensions to these and other existing supply contracts prior to their expiration.
Kronos purchases feedstock for its 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 Kronos has been, and it expects that it will continue to be, successful in obtaining short-term and long-term extensions to these and other existing supply contracts.
ITEM 1. BUSINESS Valhi, Inc. (NYSE: VHI) is primarily a holding company. We operate through our wholly-owned and majority-owned subsidiaries, including NL Industries, Inc., Kronos Worldwide, Inc., CompX International Inc., Basic Management, Inc. and The LandWell Company. Kronos (NYSE: KRO), NL (NYSE: NL) and CompX (NYSE American: CIX) each file periodic reports with the U.S. Securities and Exchange Commission (“SEC”).
ITEM 1. BUSINESS Valhi, Inc. (NYSE: VHI) is primarily a holding company. We operate through our wholly-owned and majority-owned subsidiaries, including NL Industries, Inc., Kronos Worldwide, Inc., CompX International Inc., Basic Management, Inc. and The LandWell Company. Kronos (NYSE: KRO), NL (NYSE: NL) and CompX (NYSE American: CIX) each file periodic reports with the U.S. Securities and Exchange Commission (SEC).
Kronos, along with its distributors and agents, sells and provides technical services for its products to approximately 4,000 customers in 100 countries with the majority of sales in Europe, North America and the Asia Pacific region. We believe Kronos has developed considerable expertise and efficiency in the manufacture, sale, shipment and service of its products in domestic and international markets.
Kronos, along with its distributors and agents, sells and provides technical services for its products to approximately 3,000 customers in 100 countries with the majority of sales in Europe, North America and the Asia Pacific region. We believe Kronos has developed considerable expertise and efficiency in the manufacture, sale, shipment and service of its products in domestic and international markets.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) We seek to operate our businesses in line with sound ESG principles that include corporate governance, social responsibility, sustainability, and cybersecurity.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) We seek to operate our businesses in line with sound ESG principles that include corporate governance, social responsibility, sustainability and cybersecurity.
Although Kronos sells its TiO 2 to all segments of the paper end-use market, its 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 Kronos sells its TiO 2 to all segments of the paper end-use market, its 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 , Kronos operates a rock ilmenite mine in Norway, which provided all of the feedstock for its European sulfate process TiO 2 plants in 2022. Kronos expects ilmenite production from its mine to meet its European sulfate process feedstock requirements for the foreseeable future.
As one of the few vertically-integrated producers of sulfate process TiO 2 , Kronos operates a rock ilmenite mine in Norway, which provided all of the feedstock for its European sulfate process TiO 2 plants in 2023. Kronos expects ilmenite production from its mine to meet its European sulfate process feedstock requirements for the foreseeable future.
We promote a respectful, diverse and inclusive workplace in which all individuals are treated with respect and dignity. OTHER NL Industries, Inc. – At December 31, 2022, NL owned approximately 87% of CompX and approximately 31% of Kronos. NL also holds certain marketable securities and other investments.
We promote a respectful, diverse and inclusive workplace in which all individuals are treated with respect and dignity. OTHER NL Industries, Inc. – At December 31, 2023, NL owned approximately 87% of CompX and approximately 31% of Kronos. NL also holds certain marketable securities and other investments.
Kronos 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 Kronos’ business, results of operations, financial position, or liquidity.
Kronos 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 Kronos’ business, results of operations, financial position, or liquidity.
In addition to salaries, these programs, which vary by segment and by country/region, can include annual bonuses, a defined benefit pension plan, a defined contribution plan with employer matching opportunities, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, employee assistance programs, and tuition assistance.
In addition to salaries, these programs, which vary by segment and by country/region, can include annual bonuses, a defined benefit pension plan, a defined contribution plan with employer matching, a profit sharing plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, employee assistance programs, and tuition assistance.
Therefore, over the past ten years, Kronos and its 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, Kronos and its 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 – Kronos has obtained patents and has numerous patent applications pending that cover its products and the technology used in the manufacture of its products. Kronos’ patent strategy is important to it and its continuing business activities.
Patents – Kronos has obtained patents and has numerous patent applications pending that cover certain aspects of its products and the technology used in the manufacture of its products. Kronos’ patent strategy is important to it and its continuing business activities.
Ltd. 11 % Venator 7 % Kronos 7 % Other 48 % ​ Chemours has approximately one-half of total North American TiO 2 production capacity and is Kronos’ principal North American competitor. LB Group Co.
Ltd. 12 % Kronos 7 % Venator 7 % Other 48 % ​ Chemours has approximately one-half of total North American TiO 2 production capacity and is Kronos’ principal North American competitor. LB Group Co.
The factors that could cause actual future results to differ materially from those described herein are the risks and uncertainties discussed in this Annual Report and those described from time to time in our other filings with the SEC and include, but are not limited to, the following: ● Future supply and demand for our products; ● The extent of the dependence of certain of our businesses on certain market sectors; ● The cyclicality of certain of our businesses (such as Kronos’ TiO 2 operations); ● Customer and producer inventory levels; ● Unexpected or earlier-than-expected industry capacity expansion (such as the TiO 2 industry); ● Changes in raw material and other operating costs (such as ore, zinc, brass, aluminum, steel and energy costs); ● Changes in the availability of raw materials (such as ore); ● General global economic and political conditions that harm the worldwide economy, disrupt our supply chain, increase material and energy costs, reduce demand or perceived demand for TiO 2, component products and land held for development or impair our ability to operate our facilities (including changes in the level of gross domestic product in various regions of the world, natural disasters, terrorist acts, global conflicts and public health crises such as COVID-19); ● Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions, unscheduled or unplanned downtime such as disruptions in energy supplies, transportation interruptions, cyber-attacks and public health crises such as COVID-19); ● Competitive products and substitute products; ● Customer and competitor strategies; - 2 - ​ ● Potential difficulties in integrating future acquisitions; ● Potential difficulties in upgrading or implementing accounting and manufacturing software systems; ● Potential consolidation of our competitors; ● Potential consolidation of our customers; ● The impact of pricing and production decisions; ● Competitive technology positions; ● Our ability to protect or defend intellectual property rights; ● The introduction of trade barriers or trade disputes; ● The ability of our subsidiaries to pay us dividends; ● Uncertainties associated with new product development and the development of new product features; ● Fluctuations in currency exchange rates (such as changes in the exchange rate between the U.S. dollar and each of the euro, the Norwegian krone and the Canadian dollar and between the euro and the Norwegian krone) or possible disruptions to our business resulting from uncertainties associated with the euro or other currencies; ● Decisions to sell operating assets other than in the ordinary course of business; ● The timing and amounts of insurance recoveries; ● Our ability to renew, amend, refinance or establish credit facilities; ● Increases in interest rates; ● Our ability to maintain sufficient liquidity; ● The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters, including future tax reform; ● Our ability to utilize income tax attributes, the benefits of which may or may not have been recognized under the more-likely-than-not recognition criteria; ● Environmental matters (such as those requiring compliance with emission and discharge standards for existing and new facilities, or new developments regarding environmental remediation or decommissioning obligations at sites related to our former operations); ● Government laws and regulations and possible changes therein (such as changes in government regulations which might impose various obligations on former manufacturers of lead pigment and lead-based paint, including NL, with respect to asserted health concerns associated with the use of such products) including new environmental health and safety or other regulations such as those seeking to limit or classify TiO 2 or its use; ● The ultimate resolution of pending litigation (such as NL’s lead pigment and environmental matters); ● Our ability to comply with covenants contained in our revolving bank credit facilities; ● Our ability to complete and comply with the conditions of our licenses and permits; ● Changes in real estate values and construction costs in Henderson, Nevada; and ● Possible future litigation.
The factors that could cause actual future results to differ materially from those described herein are the risks and uncertainties discussed in this Annual Report and those described from time to time in our other filings with the SEC and include, but are not limited to, the following: ● Future supply and demand for our products; ● The extent of the dependence of certain of our businesses on certain market sectors; ● The cyclicality of certain of our businesses (such as Kronos’ TiO 2 operations); ● Customer and producer inventory levels; ● Unexpected or earlier-than-expected industry capacity expansion (such as the TiO 2 industry); ● Changes in raw material and other operating costs (such as ore, zinc, brass, aluminum, steel and energy costs); ● Changes in the availability of raw materials (such as ore); ● General global economic and political conditions that harm the worldwide economy, disrupt our supply chain, increase material and energy costs, reduce demand or perceived demand for TiO 2, component products and land held for development or impair our ability to operate our facilities (including changes in the level of gross domestic product in various regions of the world, natural disasters, terrorist acts, global conflicts and public health crises); ● Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions, unscheduled or unplanned downtime, transportation interruptions, certain regional and world events or economic conditions and public health crises); ● Technology related disruptions (including, but not limited to, cyber-attacks; software implementation, upgrades or improvements; technology processing failures; or other events) related to our technology infrastructure that could impact our ability to continue operations, or at key vendors which could impact our supply chain, or at key customers which could impact their operations and cause them to curtail or pause orders; ● Competitive products and substitute products; ● Customer and competitor strategies; ● Potential difficulties in integrating future acquisitions; ● Potential difficulties in upgrading or implementing accounting and manufacturing software systems; ● Potential consolidation of our competitors; ● Potential consolidation of our customers; ● The impact of pricing and production decisions; - 2 - ‌ ​ ● Competitive technology positions; ● Our ability to protect or defend intellectual property rights; ● The introduction of trade barriers or trade disputes; ● The ability of our subsidiaries to pay us dividends; ● Uncertainties associated with new product development and the development of new product features; ● Fluctuations in currency exchange rates (such as changes in the exchange rate between the U.S. dollar and each of the euro, the Norwegian krone and the Canadian dollar and between the euro and the Norwegian krone) or possible disruptions to our business resulting from uncertainties associated with the euro or other currencies; ● Decisions to sell operating assets other than in the ordinary course of business; ● The timing and amounts of insurance recoveries; ● Our ability to renew, amend, refinance or establish credit facilities; ● Increases in interest rates; ● Our ability to maintain sufficient liquidity; ● The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters, including future tax reform; ● Our ability to utilize income tax attributes, the benefits of which may or may not have been recognized under the more-likely-than-not recognition criteria; ● Environmental matters (such as those requiring compliance with emission and discharge standards for existing and new facilities, or new developments regarding environmental remediation or decommissioning obligations at sites related to our former operations); ● Government laws and regulations and possible changes therein (such as changes in government regulations which might impose various obligations on former manufacturers of lead pigment and lead-based paint, including NL, with respect to asserted health concerns associated with the use of such products) including new environmental, health, safety, sustainability or other regulations (such as those seeking to limit or classify TiO 2 or its use); ● The ultimate resolution of pending litigation (such as NL’s lead pigment and environmental matters); ● Our ability to comply with covenants contained in our revolving bank credit facilities; ● Our ability to complete and comply with the conditions of our licenses and permits; ● Changes in real estate values and construction costs in Henderson, Nevada; and ● Pending or possible future litigation or other actions.
Kronos owns the Leverkusen facility, which represents about one-third of its current TiO 2 production capacity, but Kronos leases 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.
Kronos owns its Leverkusen facility, which represents about one-third of its current TiO 2 production capacity, but Kronos leases the land under the facility under a long-term agreement which expires in 2050. Lease payments are periodically negotiated for periods of at least two years at a time.
We are the successor company of the 1987 merger of LLC Corporation and another entity controlled by Contran Corporation. One of Contran’s wholly-owned subsidiaries held approximately 92% of Valhi’s outstanding common stock at December 31, 2022. As discussed in Note 1 to our Consolidated Financial Statements, Lisa K. Simmons and a trust established for the benefit of Ms.
We are the successor company of the 1987 merger of LLC Corporation and another entity controlled by Contran Corporation. One of Contran’s wholly-owned subsidiaries held approximately 91% of Valhi’s outstanding common stock at December 31, 2023. As discussed in Note 1 to our Consolidated Financial Statements, Lisa K. Simmons and a trust established for the benefit of Ms.
Kronos’ TiO 2 business is enhanced by the following three complementary businesses, which comprised approximately 8% of our Chemicals Segment’s net sales in 2022: ● Kronos owns and operates an ilmenite mine in Norway pursuant to a governmental concession with an unlimited term. Ilmenite is a raw material used directly as a feedstock by some sulfate-process TiO 2 plants.
Kronos’ TiO 2 business is enhanced by the following three complementary businesses, which comprised approximately 10% of our Chemicals Segment’s net sales in 2023: ● Kronos owns and operates an ilmenite mine in Norway pursuant to a governmental concession with an unlimited term. Ilmenite is a raw material used directly as a feedstock by some sulfate-process TiO 2 plants.
During 2022, Kronos had an estimated 7% share of worldwide TiO 2 sales volume, and based on sales volume, we believe Kronos is the leading seller of TiO 2 in several countries, including Germany. Kronos’ principal competitors are The Chemours Company, Tronox Incorporated, LB Group Co. Ltd. and Venator Materials PLC. The top five TiO 2 producers (i.e.
During 2023, Kronos had an estimated 6% share of worldwide TiO 2 sales volume, and based on sales volume, we believe Kronos is the leading seller of TiO 2 in several countries, including Germany. Kronos’ principal competitors are The Chemours Company, Tronox Incorporated, LB Group Co. Ltd. and Venator Materials PLC. The top five TiO 2 producers (i.e.
Kronos strives to maintain good relationships with all its employees, including the unions and workers’ councils representing those employees. In Europe, Kronos’ union employees are covered by master collective bargaining agreements for the chemical industry that are generally renewed annually. At December 31, 2022, approximately 88% of Kronos’ worldwide workforce is organized under collective bargaining agreements.
Kronos strives to maintain good relationships with all its employees, including the unions and workers’ councils representing those employees. In Europe, Kronos’ union employees are covered by master collective bargaining agreements for the chemical industry that are generally renewed annually. At December 31, 2023, approximately 78% of Kronos’ worldwide workforce is organized under collective bargaining agreements.
As a result, Kronos normally builds inventories during the first and fourth quarters of each year in order to maximize its product availability during the higher demand periods normally experienced in the second and third quarters. - 10 - ​ Competition The TiO 2 industry is highly competitive.
Kronos normally builds inventories during the first and fourth quarters of each year in order to maximize its product availability during the higher demand periods normally experienced in the second and third quarters. - 10 - ‌ ​ Competition The TiO 2 industry is highly competitive.
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.
COMPONENT PRODUCTS SEGMENT – COMPX INTERNATIONAL INC. Business overview Through our majority-controlled subsidiary, CompX, we are a leading manufacturer of security products including mechanical and electrical cabinet locks and other locking mechanisms used in postal, recreational transportation, office and institutional furniture, cabinetry, tool storage and healthcare applications.
Business overview Through our majority-controlled subsidiary, CompX, we are a leading manufacturer of security products including mechanical and electrical cabinet locks and other locking mechanisms used in postal, recreational transportation, office and institutional furniture, cabinetry, tool storage and healthcare applications.
The table below shows Kronos’ estimated market share for its significant markets, Europe and North America, for the last three years. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2020 2021 2022 Europe 17% ​ 15% ​ 14% ​ North America 18% ​ 17% ​ 17% ​ ​ We believe Kronos is the leading seller of TiO 2 in several countries, including Germany.
The table below shows Kronos’ estimated market share for its significant markets, Europe and North America, for the last three years. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2022 2023 Europe 15% ​ 14% ​ 12% ​ North America 17% ​ 17% ​ 16% ​ ​ We believe Kronos is the leading seller of TiO 2 in several countries, including Germany.
See Note 2 to our Consolidated Financial Statements and also Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Real Estate Management and Development”.
See Notes 2 and 3 to our Consolidated Financial Statements and also Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Real Estate Management and Development”.
Kronos and its 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.
Kronos and its 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.
CompX defines lost time incidents as work-related accidents where a worker sustains an injury that results in time away from work. CompX had lost time incidents of nil in 2020, one in 2021 and three in 2022. Diversity and inclusion We recognize that everyone deserves respect and equal treatment.
CompX defines lost time incidents as work-related accidents where a worker sustains an injury that results in time away from work. CompX had one lost time incident in 2021, three in 2022 and one in 2023. Diversity and inclusion We recognize that everyone deserves respect and equal treatment.
Kronos sells to a diverse customer base with only one customer representing 10% or more of our Chemicals Segment’s net sales in 2022 (Behr Process Corporation – 10%). Kronos’ largest ten customers accounted for approximately 33% of our Chemicals Segment’s net sales in 2022.
Kronos sells to a diverse customer base with only one customer representing 10% or more of our Chemicals Segment’s net sales in 2023 (Behr Process Corporation – 12%). Kronos’ largest ten customers accounted for approximately 35% of our Chemicals Segment’s net sales in 2023.
Sales LandWell began marketing land for sale in the residential/planned community in December 2013 and at December 31, 2022 approximately 90 saleable acres remain. LandWell has been actively marketing and selling the land zoned for commercial and light industrial use and at December 31, 2022 approximately 20 saleable acres remain.
Sales LandWell began marketing land for sale in the residential/planned community in December 2013 and at December 31, 2023 approximately 20 saleable acres remain. In addition, LandWell has been actively marketing and selling land zoned for commercial and light industrial use and at December 31, 2023 approximately 15 saleable acres remain.
Unless otherwise indicated, references in this report to “we”, “us” or “our” refer to Valhi, Inc. and its subsidiaries, taken as a whole. Forward-Looking Statements This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended.
In December BMI sold Basic Power Company. - 1 - ‌ ​ Unless otherwise indicated, references in this report to “we”, “us” or “our” refer to Valhi, Inc. and its subsidiaries, taken as a whole. Forward-Looking Statements This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended.
The pricing under these agreements is generally negotiated quarterly or semi-annually. ​ - 9 - ​ The following table summarizes Kronos’ 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 Kronos’ marketing strategy is aimed at developing and maintaining strong relationships with new and existing customers.
The pricing under these agreements is generally negotiated quarterly or semi-annually. ​ - 9 - ‌ ​ The following table summarizes Kronos’ 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 Kronos’ marketing strategy is aimed at developing and maintaining strong relationships with new and existing customers.
Products and end-use markets Including its predecessors, Kronos has produced and marketed TiO 2 in North America and Europe, its primary markets, for over 100 years. We believe Kronos is the largest TiO 2 producer in Europe with 45% of its 2022 sales volumes attributable to markets in Europe.
Products and end-use markets Including its predecessors, Kronos has produced and marketed TiO 2 in North America and Europe, its primary markets, for over 100 years. We believe Kronos is the largest chloride process TiO 2 producer in Europe with 44% of its 2023 sales volumes attributable to markets in Europe.
Kronos’ dry TiO 2 products do not meet the criteria set forth in the regulation and therefore do not require classification labels. On November 23, 2022 the Court of Justice of the European Union annulled the classification of TiO 2 as a suspected carcinogen in its entirety.
Kronos’ dry TiO 2 products do not meet the criteria set forth in the regulation and therefore do not require classification labels. On November 23, 2022 the Court of Justice of the European Union annulled the classification of TiO 2 as a suspected carcinogen in its entirety. That decision is currently under appeal.
These raw materials are purchased from several suppliers, are readily available from numerous sources and accounted for approximately 17% of our Component Products Segment’s total cost of sales for 2022. Total material costs, including purchased components, represented approximately 47% of our Component Products Segment’s cost of sales in 2022.
These raw materials are purchased from several suppliers, are readily available from numerous sources and accounted for approximately 13% of our Component Products Segment’s total cost of sales for 2023. Total material costs, including purchased components, represented approximately 48% of our Component Products Segment’s cost of sales in 2023.
As of December 31, 2022, our Component Products Segment and our Real Estate Management and Development Segment employed 609 people and 24 people, respectively, all in the United States. We believe CompX’s and BMI’s labor relations are good.
As of December 31, 2023, our Component Products Segment and our Real Estate Management and Development Segment employed 555 people and 21 people, respectively, all in the United States. We believe CompX’s and BMI’s labor relations are good.
As of December 31, 2022, our Chemicals Segment 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 Kronos’ production facilities are organized by labor unions.
As of December 31, 2023, our Chemicals Segment 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 Kronos’ production facilities are organized by labor unions.
The following tables show Kronos’ approximate TiO 2 sales volume by geographic region and end-use for the year ended December 31, 2022: ​ ​ ​ ​ Sales volume percentages by geographic region ​ Sales volume percentages by end-use Europe ​ 45 % ​ Coatings ​ 50 % North America ​ 39 % ​ Plastics ​ 29 % Asia Pacific ​ 9 % ​ Paper ​ 8 % Rest of World ​ 7 % ​ Other ​ 13 % - 5 - ​ ​ Some of the principal applications for Kronos’ products include the following: TiO 2 for coatings – Kronos’ 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 Kronos’ approximate TiO 2 sales volume by geographic region and end-use for the year ended December 31, 2023: ​ ​ ​ ​ Sales volume percentages by geographic region ​ Sales volume percentages by end-use Europe ​ 44 % ​ Coatings ​ 57 % North America ​ 41 % ​ Plastics ​ 30 % Asia Pacific ​ 9 % ​ Paper ​ 9 % Rest of World ​ 6 % ​ Other ​ 4 % ​ - 5 - ‌ ​ Some of the principal applications for Kronos’ products include the following: TiO 2 for coatings – Kronos’ 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.
In addition, BMI provides certain utility services to an industrial park located in Henderson, Nevada and prior to BWC’s bankruptcy filing on September 10, 2022 also delivered water to the City of Henderson and various other users through a water delivery system owned and operated by BWC.
In addition, BMI, prior to BWC’s bankruptcy filing and deconsolidation on September 10, 2022, delivered water to the City of Henderson and various other users through a water delivery system owned and operated by BWC, and prior to the sale of BPC on December 1, 2023, provided certain utility services to an industrial park located in Henderson, Nevada.
Substantially all of the land in the residential/planned community has been sold; however, we expect the development work to take three to five years to complete. Our Real Estate Management and Development Segment’s sales consist principally of land sales and to a lesser extent water (for the first half of 2022) and electric delivery fees.
Substantially all the land in the residential/planned community has been sold; however, we expect the development work to take three to four years to complete. Our Real Estate Management and Development Segment’s sales consist principally of land sales and to a lesser extent water (through September 2022) and electric delivery fees (prior to December 2023).
Kronos’ 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). CompX uses lost time incidents as a key measure of worker safety.
Kronos’ 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). CompX uses lost time incidents as a key measure of worker safety.
The mine has estimated ilmenite reserves that are expected to last at least 50 years. ● Kronos manufactures and sells 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 Kronos expects, based on internal estimates, to last approximately 50 years. ● Kronos manufactures and sells iron-based chemicals, which are co-products and processed co-products of the sulfate and chloride process TiO 2 pigment production.
Since the beginning of 2017, Kronos has added nine new grades for pigments and other applications. - 11 - ​ Patents, trademarks, trade secrets and other intellectual property rights Kronos has a comprehensive intellectual property protection strategy that includes obtaining, maintaining and enforcing its patents, primarily in the United States, Canada and Europe.
Since the beginning of 2019, Kronos has added seven new grades for pigments and other applications. Patents, trademarks, trade secrets and other intellectual property rights Kronos has a comprehensive intellectual property protection strategy that includes obtaining, maintaining and enforcing its patents, primarily in the United States, Canada and Europe. Kronos also registers, maintains and protects its trademark rights.
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.
These individuals have the responsibility for improving Kronos’ chloride and sulfate production processes, improving product quality and strengthening its competitive position by developing new products and applications. Kronos’ expenditures for these activities were approximately $16 million in 2020, $17 million in 2021 and $15 million in 2022. Kronos expects to spend approximately $17 million on research and development in 2023.
These individuals have the responsibility for improving Kronos’ chloride and sulfate production processes, improving product quality and strengthening its competitive position by developing new products and applications. Kronos’ expenditures for these activities were approximately $17 million in 2021, $15 million in 2022 and $18 million in 2023.
Kronos’ manufacturing facilities are strategically located adjacent to sources of water, which it uses for process operations and for shipping and receiving raw materials and finished products. Water-critical processes are identified and ongoing efforts to minimize water use are incorporated into environmental planning.
Kronos also actively manages potential water-related risks, including flooding and water shortages. Kronos’ manufacturing facilities are strategically located adjacent to sources of water, which it uses for process operations and for shipping and receiving raw materials and finished products. Water-critical processes are identified and ongoing efforts to minimize water use are incorporated into environmental planning.
Patents generally have a term of 20 years, and CompX’s patents have remaining - 15 - ​ terms ranging from 1 year to 18 years at December 31, 2022.
Patents generally have a term of 20 years, and CompX’s patents have remaining - 15 - ‌ ​ terms ranging from less than 1 year to 17 years at December 31, 2023.
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.
We believe 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.
We operate in the component products industry through our majority control of CompX. CompX is a leading manufacturer of security products used in the postal, recreational transportation, office and institutional furniture, cabinetry, tool storage, healthcare and a variety of other industries.
CompX is a leading manufacturer of security products used in the postal, recreational transportation, office and institutional furniture, cabinetry, tool storage, healthcare and a variety of other industries.
Based on current economic conditions, CompX expects the prices for zinc, brass, stainless steel and other manufacturing materials in 2023 to be relatively stable, although at the elevated levels it experienced in the second half of 2022. When purchased on the spot market, each of these raw materials may be subject to sudden and unanticipated price increases.
Based on current economic conditions, CompX expects the prices for zinc, brass, aluminum, stainless steel and other manufacturing materials in 2024 to be relatively stable. When purchased on the spot market, each of these raw materials may be subject to sudden and unanticipated price increases.
In the fourth quarter of 2022 Kronos adjusted production levels to correspond with reduced customer demand in its European and export markets resulting from challenging economic conditions and geopolitical uncertainties.
Beginning in the fourth quarter of 2022 and continuing throughout 2023, Kronos adjusted production levels to correspond with reduced customer demand resulting from challenging economic conditions and geopolitical uncertainties.
Kronos’ production volumes include its share of the output produced by its TiO 2 manufacturing joint venture discussed below. Kronos’ average production capacity utilization rates were approximately 92% in 2020, full practical capacity in 2021 and 89% in 2022. Kronos’ production rates in 2020 were impacted by the COVID-19 pandemic (primarily in the third quarter).
Kronos’ production volumes include its share of the output produced by its TiO 2 manufacturing joint venture discussed below. Kronos’ average production capacity utilization rates were approximately full practical capacity in 2021, 89% in 2022 and 72% in 2023.
Kronos’ capital expenditures related to ongoing environmental compliance, protection and improvement programs, including capital expenditures which are primarily focused on increasing operating efficiency but also result in improved environmental protection such as lower emissions from its manufacturing facilities, were $17.6 million in 2022 and are currently expected to be approximately $20 million in 2023.
Kronos’ capital expenditures related to ongoing environmental compliance, protection and improvement programs, including capital expenditures which are primarily focused on increasing operating efficiency but also result in improved environmental protection such as lower emissions from its manufacturing facilities, were $11.2 million in 2023 and are currently expected to be approximately $28 million in 2024. - 13 - ‌ ​ COMPONENT PRODUCTS SEGMENT – COMPX INTERNATIONAL INC.
Kronos biennially publishes an ESG Report, which is available on its public website. The primary purpose of its ESG Report is to describe Kronos’ policies and programs in the area of ESG, including certain internal metrics and benchmarks related to various aspects of ESG.
Kronos has taken steps to integrate ESG considerations into operating decisions with other critical business factors. Kronos biennially publishes an ESG Report, which is available on its public website. The primary purpose of its ESG Report is to describe Kronos’ policies and programs in the area of ESG, including certain internal metrics and benchmarks related to various aspects of ESG.
Kronos continually seeks to improve the quality of its grades and has been successful at developing new grades for existing and new applications to meet the needs of its customers and increase product life cycles.
Kronos expects to spend approximately $14 million on research and development in 2024. - 11 - ‌ ​ Kronos continually seeks to improve the quality of its grades and has been successful at developing new grades for existing and new applications to meet the needs of its customers and increase product life cycles.
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. Kronos 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.
Kronos’ proprietary chloride production process is an important part of its technology and its business could be harmed if it fails to maintain confidentiality of its trade secrets used in this technology.
Kronos relies upon unpatented proprietary knowledge and continuing technological innovation and other trade secrets to develop and maintain its competitive position. Kronos’ proprietary chloride production process is an important part of its technology and its business could be harmed if it fails to maintain confidentiality of its trade secrets used in this technology.
CompX believes it is in substantial compliance with all such laws and regulations. To date, the costs of maintaining compliance with such laws and regulations have not significantly impacted CompX’s results.
CompX’s operations are also subject to federal, state, and local laws and regulations relating to worker health and safety. CompX believes it is in substantial compliance with all such laws and regulations. To date, the costs of maintaining compliance with such laws and regulations have not significantly impacted CompX’s results.
Kronos also protects its trademark and trade secret rights and has entered into license agreements with third parties concerning various intellectual property matters. Kronos has also from time to time been involved in disputes over intellectual property.
Kronos maintains the secrecy of its trade secret rights and protects them by means of security protocols and confidentiality agreements. In some instances, Kronos has entered into license agreements with third parties concerning various intellectual property matters. Kronos has also from time to time been involved in disputes over intellectual property.
LandWell competes with these communities on the basis of location; planned community amenities and features; proximity to major retail and recreational activities; and the perception of quality of life within the new community.
Competition There are multiple new construction residential communities in the greater Las Vegas, Nevada area. LandWell competes with these communities on the basis of location, planned community amenities and features, proximity to major retail and recreational activities, and the perception of quality of life within the new community.
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.
In addition to maintaining its patent portfolio, Kronos seeks patent protection for its technical developments, principally in the United States, Canada and Europe. U.S. patents are generally in effect for 20 years from the date of filing. Kronos’ U.S. patent portfolio includes patents having remaining terms ranging from one year to 20 years.
In addition to maintaining its patent portfolio, Kronos seeks patent protection for its technical developments, principally in the United States, Canada and Europe. U.S. patents are generally in effect from the time that they issue as patents and then extend for 20 years from the date of filing.
BMI provides certain utility services, among other things, to an industrial park located in Henderson, Nevada and prior to the bankruptcy filing on September 10, 2022 of Basic Water Company (“BWC”), a wholly-owned subsidiary of BMI, was responsible for the delivery of water to the City of Henderson and various other users through a water distribution system owned and operated by BWC.
BMI also was responsible for the delivery of water to the City of Henderson and various other users through a water distribution system owned and operated by Basic Water Company (BWC), a wholly-owned subsidiary of BMI, prior to BWC’s bankruptcy filing and deconsolidation on September 10, 2022.
Our Component Products Segment sells to a diverse customer base with only two customers representing 10% or more of our Component Products Segment’s sales in 2022 (United States Postal Service – 14% and Malibu Boats, LLC –12%). Our Component Products Segment’s largest ten customers accounted for approximately 52% of its sales in 2022.
Our Component Products Segment sells to a diverse customer base with only one customer representing 10% or more of our Component Products Segment’s sales in 2023 (United States Postal Service representing 24% of which 11% related to a pilot project). Our Component Products Segment’s largest ten customers accounted for approximately 52% of its sales in 2023.
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. 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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur Chemicals Segment may not always be able to increase its selling prices to offset the impact of any higher costs or reduced production levels, which could reduce earnings and decrease liquidity. Our Chemicals Segment has supply contracts that provide for its 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 its operating results and decrease liquidity as our Chemicals Segment may not always be able to increase its selling prices to offset the impact of any higher costs or reduced production levels.
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; ● 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; - 24 - ​ ● limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or general corporate requirements; ● limiting our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate; and ● placing us at a competitive disadvantage relative to other less leveraged competitors.
Our level of debt could have important consequences to our stockholders and creditors, including: ● making it more difficult for us to satisfy our obligations with respect to our liabilities; ● increasing our vulnerability to adverse general economic and industry conditions; ● requiring that a portion of our cash flows from operations be used for the payment of interest on our debt, which reduces our ability to use our cash flow to fund working capital, capital expenditures, dividends on our common stock, acquisitions or general corporate requirements; ● limiting the ability of our subsidiaries to pay dividends to us; ● limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or general corporate requirements; ● limiting our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate; and ● placing us at a competitive disadvantage relative to other less leveraged competitors.
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.
Should our Component Products Segment’s vendors not be able to meet their - 23 - ​ supply obligations or should it be otherwise unable to obtain necessary raw materials or components, it may incur higher supply costs or may be required to reduce production levels, either of which may decrease our liquidity or negatively impact our financial condition or results of operations as our Component Products Segment may be unable to offset the higher costs with increases in its selling prices or reductions in other operating costs.
Should our Component Products Segment’s vendors not be able to meet their supply obligations or should it be otherwise unable to obtain necessary raw materials or components, it may incur higher supply costs or may be required to reduce production levels, either of which may decrease our liquidity or negatively impact our financial condition or results of operations as our Component Products Segment may be unable to offset the higher costs with increases in its selling prices or reductions in other operating costs.
Our Chemicals Segment also may not be able to readily detect breaches of such agreements. The failure of our Chemicals Segment’s patents or confidentiality agreements to protect its proprietary technology, know-how or trade secrets could result in a material loss of its competitive position, which could lead to significantly lower revenues, reduced profit margins or loss of market share.
Our Chemicals Segment also may not be able to readily detect breaches of such agreements. The failure of our Chemicals Segment’s confidentiality agreements to protect its proprietary technology, know-how or trade secrets could result in a material loss of its competitive position, which could lead to significantly lower revenues, reduced profit margins or loss of market share.
See also Item 3 - “Legal Proceedings - Lead pigment litigation - NL.” - 25 - ​ Certain properties and facilities used in NL’s former operations are the subject of litigation, administrative proceedings or investigations arising under various environmental laws. These proceedings seek cleanup costs, personal injury or property damages and/or damages for injury to natural resources.
See also Item 3 - “Legal Proceedings - Lead pigment litigation - NL.” Certain properties and facilities used in NL’s former operations are the subject of litigation, administrative proceedings or investigations arising under various environmental laws. These proceedings seek cleanup costs, personal injury or property damages and/or damages for injury to natural resources.
Therefore, in certain jurisdictions, we may be unable to protect our technology and designs adequately against unauthorized third-party use, which could adversely affect our competitive position. - 26 - ​ Third parties may claim that we or our customers are infringing upon their intellectual property rights.
Therefore, in certain jurisdictions, we may be unable to protect our technology and designs adequately against unauthorized third-party use, which could adversely affect our competitive position. Third parties may claim that we or our customers are infringing upon their intellectual property rights.
Others may independently discover our trade secrets and proprietary information, and in such cases our Component Products Segment could not assert any trade secret rights against such parties. Further, we do not know if any of our Component Products Segment’s pending trademark or patent applications will be approved.
Third parties may independently discover our trade secrets and proprietary information, and in such cases our Component Products Segment could not assert any trade secret rights against such parties. Further, we do not know if any of our Component Products Segment’s pending trademark or patent applications will be approved.
Protection of our intellectual property rights, including patents, trade secrets, confidential information, trademarks and tradenames, is important to our businesses and our competitive positions. We endeavor to protect our intellectual property rights in key jurisdictions in which our products are produced 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 businesses and our competitive positions. We endeavor to protect our intellectual property rights in key jurisdictions in which our products are produced, sold or used and in jurisdictions into which our products are imported.
Our businesses rely on integrated information technology systems to manage, process and analyze data, including to facilitate the manufacture and distribution of products to and from our plants, receive, process and ship orders, manage the billing of and collections from customers and manage payments to vendors.
Our businesses rely on integrated information technology systems to manage, process and analyze data, including to facilitate the manufacture and distribution of products to and from our facilities, receive, process and ship orders, manage the billing of and collections from customers and manage payments to vendors.
Since expenditures for these types of activities are not considered research and development expense under accounting principles generally accepted in the United States of America (“GAAP”), the amount of our Component - 22 - ​ Products Segment’s research and development expenditures, which is not significant, is not indicative of the overall effort involved in the development of new product features.
Since expenditures for these types of activities are not considered research and development expense under accounting principles generally accepted in the United States of America (GAAP), the amount of our Component Products Segment’s research and development expenditures, which is not significant, is not indicative of the overall effort involved in the development of new product features.
Until the timing, scope and extent of any new or future regulation becomes known, we cannot predict the effect on our business, results of operations or financial condition.
Until the timing, scope and extent of any new or future regulation become known, we cannot predict the effect on our business, results of operations or financial condition.
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.
We generally recognize revenue from these land sales over time using cost-based inputs because we receive substantially all cash payment at the time of sale but significant development obligations still exist. We currently estimate development obligations are $140 million and will take approximately three to five years to complete.
We generally recognize revenue from these land sales over time using cost-based inputs because we receive substantially all cash payment at the time of sale but significant development obligations still exist. We currently estimate development obligations are approximately $107 million and will take approximately three to four years to complete.
These agreements require it to purchase certain minimum quantities or services with minimum purchase commitments aggregating approximately $84 million at December 31, 2022. Our Chemicals Segment’s commitments under these contracts could adversely affect our financial results if it significantly reduces its production and is unable to modify the contractual commitments.
These agreements require it to purchase certain minimum quantities or services with minimum purchase commitments aggregating approximately $72 million at December 31, 2023. Our Chemicals Segment’s commitments under these contracts could adversely affect our financial results if it significantly reduces its production and is unable to modify the contractual commitments.
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 Chemicals Segment’s 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 Chemicals Segment’s sales volumes were sold into European markets.
In 2022, 92% of our Chemicals Segment’s sales were attributable to sales of TiO 2 . 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.
In 2023, approximately 90% of our Chemicals Segment’s sales were attributable to sales of TiO 2 . 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.
The occurrence of any of these factors could result in reduced earnings or operating losses. ● Competitors may be able to drive down prices for our Component Products Segment’s products beyond its ability to adjust costs because their costs are lower than our Component Products Segment’s, especially products sourced from Asia. ● Competitors’ financial, technological, and other resources may be greater than our Component Products Segment’s resources, which may enable them to more effectively withstand changes in market conditions. ● Competitors may be able to respond more quickly than our Component Products Segment can to new or emerging technologies and changes in customer requirements. ● A reduction of our Component Products Segment’s market share with one or more of its key customers, or a reduction in one or more of its key customers’ market share for their end-use products, may reduce demand for its products. ● New competitors could emerge by modifying their existing production facilities to manufacture products that compete with our Component Products Segment’s products. ● Our Component Products Segment may not be able to sustain a cost structure that enables us to be competitive. ● Customers may no longer value our Component Products Segment’s product design, quality, or durability over the lower cost products of its competitors.
The occurrence of any of these factors could result in reduced earnings or operating losses. ● Competitors may be able to drive down prices for our Component Products Segment’s products beyond its ability to adjust costs because their costs are lower than our Component Products Segment’s, especially products sourced from Asia. ● Competitors’ financial, technological and other resources may be greater than our Component Products Segment’s resources, which may enable them to more effectively withstand changes in market conditions. ● Competitors may be able to respond more quickly than our Component Products Segment can to new or emerging technologies and changes in customer requirements. ● A reduction of our Component Products Segment’s market share with one or more of its key customers, or a reduction in one or more of its key customers’ market share for their end-use products, may reduce demand for its products. ● New competitors could emerge by modifying their existing production facilities to manufacture products that compete with our Component Products Segment’s products. ● Our Component Products Segment may not be able to sustain a cost structure that enables it to be competitive. ● Customers may no longer value our Component Products Segment’s product design, quality or durability over the lower cost products of its competitors. - 22 - ‌ ​ Our development of innovative features for current products is critical to sustaining and growing our Component Product Segment’s sales.
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 $790 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 $632 million in 2024.
Our businesses may not generate cash flows from operating activities sufficient to enable us to pay our debts when they become due and to fund our other liquidity needs. As a result, we may need to refinance all or a portion of our debt before maturity.
Our businesses may not generate cash flows from operating activities sufficient to enable us to pay our debts when they become due and to fund our other liquidity needs. As a result, we may need to refinance all or a portion of our debt before maturity, as we have done in the past.
We 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, natural disasters, terrorism, armed conflict (such as the current conflict between Russia and Ukraine), 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.
Indebtedness outstanding under our loan from Contran and Kronos’ 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 financial condition, results of operations and cash flows.
Indebtedness outstanding under our loan from Contran and Kronos’ 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 financial condition, results of operations and cash flows.
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. ​ - 25 - ‌ ​ Legal, Compliance and Regulatory Risk Factors We could incur significant costs related to legal and environmental remediation matters.
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 Chemicals Segment’s current agreements (including those entered into through February 2023) require it 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, our Chemicals Segment has other long-term supply and service contracts that provide for various raw materials and services.
Our Chemicals Segment’s current agreements require it to purchase certain minimum quantities of feedstock with minimum purchase commitments aggregating approximately $583 million beginning in 2024 and extending through 2026. In addition, our Chemicals Segment has other long-term supply and service contracts that provide for various raw materials and services.
Although it is the practice of our Chemicals Segment to enter into confidentiality agreements with its employees and third parties to protect its proprietary expertise and other trade secrets, these agreements may not provide sufficient protection for its trade secrets or proprietary know-how, or adequate remedies for breaches of such agreements may not be available in the event of an unauthorized use or disclosure of such trade secrets and know-how.
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. - 26 - ‌ ​ Although it is the practice of our Chemicals Segment to enter into confidentiality agreements with its employees and third parties to protect its proprietary expertise and other trade secrets, these agreements may not provide sufficient protection for its trade secrets or proprietary know-how, or adequate remedies for breaches of such agreements may not be available in the event of an unauthorized use or disclosure of such trade secrets and know-how.
Legal, Compliance and Regulatory Risk Factors We could incur significant costs related to legal and environmental remediation matters. NL formerly manufactured lead pigments for use in paint. NL and others have been named as defendants in various legal proceedings seeking damages for personal injury, property damage and governmental expenditures allegedly caused by the use of lead-based paints.
NL formerly manufactured lead pigments for use in paint. NL and others have been named as defendants in various legal proceedings seeking damages for personal injury, property damage and governmental expenditures allegedly caused by the use of lead-based paints.
While our Chemicals Segment believes it will be able to renew these contracts, we do not know if our Chemicals Segment will be successful in renewing them or in obtaining long-term extensions to them prior to expiration.
Our Chemicals Segment has supply contracts that provide for its TiO 2 feedstock requirements. While our Chemicals Segment believes it will be able to renew these contracts, as necessary, we do not know if our Chemicals Segment will be successful in renewing them or in obtaining long-term extensions to them prior to expiration.
We have a significant amount of debt, primarily related to Kronos’ Senior Notes, our loan from Contran Corporation, and the LandWell bank note. As of December 31, 2022, our total consolidated debt was approximately $560 million.
We have a significant amount of debt, primarily related to Kronos’ Senior Secured Notes issued in September 2017 and February 2024, Kronos’ and our loans from Contran Corporation and the LandWell bank note. As of December - 24 - ‌ ​ 31, 2023, our total consolidated debt was approximately $547 million.
In addition, any adopted future laws and regulations focused on climate change and/or GHG emissions could negatively impact our ability (or that of our customers and suppliers) to compete with companies situated in areas not subject to such laws and regulations.
In addition, any adopted future laws and regulations focused on climate change and/or GHG emissions could negatively impact our ability (or that of our customers and suppliers) to compete with companies situated in areas not subject to such laws and regulations. ​ - 27 - ‌ ​ General Risk Factors Operating as a global business presents risks associated with global and regional economic, political and regulatory environments.
Global economic and political conditions, including natural disasters, terrorist acts, global conflict, and public health crises such as COVID-19, could prevent our Component Products Segment’s vendors from being able to supply these components.
Certain components used in our Component Products Segment’s products are manufactured by foreign suppliers located in China and elsewhere. Global economic and political conditions, including natural disasters, terrorist acts, transportation disruptions, global conflict and public health crises such as pandemics, could prevent our Component Products Segment’s vendors from being able to supply these components.
Therefore, any of our information technology systems may be susceptible to outages, disruptions or destruction from power outages, telecommunications failures, employee error, cybersecurity breaches or attacks and other similar events.
Although we have systems and procedures in place to protect our information technology systems, there can be no assurance that such systems and procedures will be sufficiently effective. Therefore, any of our information technology systems may be susceptible to outages, disruptions or destruction from power outages, telecommunications failures, employee error, cybersecurity breaches or attacks and other similar events.
Many of the markets our Component Products Segment serves are highly competitive, with a number of competitors offering similar products. Our Component Products Segment focuses its efforts on the middle and high-end segment of the market where it feels that it can compete due to the importance of product design, quality, and durability to the customer.
Our Component Products Segment focuses its efforts on the middle and high-end segment of the market where it feels that it can compete due to the importance of product design, quality and durability to the customer. However, our Component Products Segment’s ability to effectively compete is impacted by a number of factors.
We operate production facilities in several countries and many of our facilities require large amounts of energy, including electricity and natural gas, in order to conduct operations.
Global climate change laws and regulations could negatively impact our financial results or limit our ability to operate our businesses. We operate production facilities in several countries and many of our facilities require large amounts of energy, including electricity and natural gas, in order to conduct operations.
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.
If a customer were to ultimately reject or abandon custom product innovation efforts, our Component Products Segment may not be able to recover its development costs. Higher costs or limited availability of our raw materials may reduce our earnings and decrease our liquidity. In addition, many of our raw material contracts contain fixed quantities we are required to purchase.
The occurrence of any of these events could result in reduced earnings or operating losses. Many of the markets in which our Component Products Segment operates are mature and highly competitive resulting in pricing pressure and the need to continuously reduce costs.
Many of the markets in which our Component Products Segment operates are mature and highly competitive resulting in pricing pressure and the need to continuously reduce costs. Many of the markets our Component Products Segment serves are highly competitive, with a number of competitors offering similar products.
Stainless steel and aluminum are the major raw materials used in the manufacture of marine components. These raw materials are purchased from several suppliers and are generally readily available from numerous sources. Our Component Products Segment occasionally enters into short-term raw material supply arrangements to mitigate the impact of future increases in commodity-related raw material costs and ensure supply.
Our Component Products Segment occasionally enters into short-term raw material supply arrangements to mitigate the impact of future increases in commodity-related - 23 - ‌ ​ raw material costs and ensure supply. Materials purchased outside of these arrangements are sometimes subject to unanticipated and sudden price increases.
Some of our Chemicals Segment’s competitors may be able to drive down prices for its products if their costs are lower than our Chemicals Segment’s costs. In addition, some of our Chemicals Segment’s competitors’ financial, technological, and other resources may be greater than its resources and such competitors may be better able to withstand changes in market conditions.
In addition, some of our Chemicals Segment’s competitors’ financial, technological and other resources may be greater than its resources and such competitors may be better able to withstand changes in market conditions. Our Chemicals Segment’s competitors may be able to respond more quickly than it can to new or emerging technologies and changes in customer requirements.
Our development of innovative features for current products is critical to sustaining and growing our Component Product Segment’s sales. Historically, our Component Products Segment’s ability to provide value-added custom engineered products that address requirements of technology and space utilization has been a key element of its success.
Historically, our Component Products Segment’s ability to provide value-added custom engineered products that address requirements of technology and space utilization has been a key element of its success. Our Component Products Segment spends a significant amount of time and effort to refine, improve and adapt its existing products for new customers and applications.
Our Chemicals Segment experienced increases in feedstock costs in 2021 and 2022, and we expect feedstock costs to continue to increase in 2023. Our Chemicals Segment may also experience higher operating costs such as energy costs, which could affect its profitability.
Our Chemicals Segment experienced increases in feedstock costs in 2022 and 2023, for example, which affected its margins. Our Chemicals Segment has also experienced higher operating costs such as energy costs.
Our Chemicals Segment’s competitors may be able to respond more quickly than it can to new or emerging technologies and changes in customer requirements. Further, consolidation of our Chemicals Segment’s competitors or customers may result in reduced demand for its products or make it more difficult for it to compete with its competitors.
Further, consolidation of our Chemicals Segment’s competitors or customers may result in reduced demand for its products or make it more difficult for it to compete with its competitors. The occurrence of any of these events could result in reduced earnings or operating losses.
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However, our Component Products Segment’s ability to effectively compete is impacted by a number of factors.
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Our Chemicals Segment faces significant competition from international and regional competitors, including TiO 2 producers in China, who have significant sulfate production process capacity.
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Our Component Products Segment spends a significant amount of time and effort to refine, improve and adapt its existing products for new customers and applications.
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Chinese producers have also continued to develop chloride process technology, and the risk of substitution of our Chemicals Segment’s products with products made by Chinese producers could increase if Chinese producers increase the use of chloride process technology and improve the quality of their sulfate and chloride products.
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Introduction of new product features typically requires increases in production volume on a timely basis while maintaining product quality. Manufacturers often encounter difficulties in increasing production volumes, including delays, quality control problems and shortages of qualified personnel or raw materials.
Added
Some of our Chemicals Segment’s competitors may be able to drive down prices for our Chemicals Segment’s products if their costs are lower than our Chemicals Segment’s costs, including its competitors with vertically integrated sources of raw materials for the chloride process who may have a competitive advantage during periods of high or rising raw material costs or who operate in regions with less stringent regulatory requirements.
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As our Component Products Segment attempts to introduce new product features in the future, we do not know if it will be able to increase production volumes without encountering these or other problems, which might negatively impact our financial condition or results of operations.
Added
At times our Component Products Segment works with new and existing customers on specific product innovations. Sometimes it has a cost sharing arrangement for development efforts, although our Component Products Segment may also fully bear the development costs.
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Materials purchased outside of these arrangements are sometimes subject to unanticipated and sudden price increases. Certain components used in our Component Products Segment’s products are manufactured by foreign suppliers located in China and elsewhere.
Added
Stainless steel and aluminum are the major raw materials used in the manufacture of marine components. These raw materials are purchased from several suppliers and are generally readily available from numerous sources.
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A failure to protect, defend or enforce our intellectual property rights could have an adverse effect on our financial condition and results of operations. Global climate change laws and regulations could negatively impact our financial results or limit our ability to operate our businesses.
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General Risk Factors Operating as a global business presents risks associated with global and regional economic, political, and regulatory environments.
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Although we have systems and procedures - 27 - ​ in place to protect our information technology systems, there can be no assurance that such systems and procedures will be sufficiently effective.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThese lawsuits seek recovery under a variety of theories, including public and private nuisance, negligent product design, negligent failure to warn, strict liability, breach of warranty, conspiracy/concert of action, aiding and abetting, enterprise liability, market share or risk contribution liability, intentional tort, fraud and misrepresentation, violations of state consumer protection statutes, supplier negligence and similar claims. - 28 - ​ The plaintiffs in these actions generally seek to impose on the defendants responsibility for lead paint abatement and health concerns associated with the use of lead-based paints, including damages for personal injury, contribution and/or indemnification for medical expenses, medical monitoring expenses and costs for educational programs.
Biggest changeThese lawsuits seek recovery under a variety of theories, including public and private nuisance, negligent product design, negligent failure to warn, strict liability, breach of warranty, conspiracy/concert of action, aiding and abetting, enterprise liability, market share or risk contribution liability, intentional tort, fraud and misrepresentation, violations of state consumer protection statutes, supplier negligence and similar claims.
Obligations associated with environmental remediation and related matters are difficult to assess and estimate for numerous reasons including the: ● complexity and differing interpretations of governmental regulations, ● number of PRPs and their ability or willingness to fund such allocation of costs, ● financial capabilities of the PRPs and the allocation of costs among them, ● solvency of other PRPs, ● multiplicity of possible solutions, ● number of years of investigatory, remedial and monitoring activity required, ● uncertainty over the extent, if any, to which our former operations might have contributed to the conditions allegedly giving rise to such personal injury, property damage, natural resource and related claims, and - 30 - ​ ● number of years between former operations and notice of claims and lack of information and documents about the former operations.
Obligations associated with environmental remediation and related matters are difficult to assess and estimate for numerous reasons including the: ● complexity and differing interpretations of governmental regulations, ● number of PRPs and their ability or willingness to fund such allocation of costs, ● financial capabilities of the PRPs and the allocation of costs among them, ● solvency of other PRPs, ● multiplicity of possible solutions, ● number of years of investigatory, remedial and monitoring activity required, ● uncertainty over the extent, if any, to which our former operations might have contributed to the conditions allegedly giving rise to such personal injury, property damage, natural resource and related claims, and ● number of years between former operations and notice of claims and lack of information and documents about the former operations.
We currently believe that the disposition of all of these various other claims and disputes (including asbestos related claims), individually or in the aggregate, should - 33 - ​ not have a material adverse effect on our consolidated financial position, results of operations or liquidity beyond the accruals already provided.
We currently believe that the disposition of all of these various other claims and disputes (including asbestos related claims), individually or in the aggregate, should not have a material adverse effect on our consolidated financial position, results of operations or liquidity beyond the accruals already provided.
Environmental Matters and Litigation Certain properties and facilities used in our former operations (primarily NL’s former operations), including divested primary and secondary lead smelters and former mining locations, are the subject of civil litigation, administrative proceedings or investigations arising under federal and state environmental laws and common law.
Environmental Matters and Litigation Certain properties and facilities used in our former operations (primarily NL’s former operations), including divested primary and secondary lead smelters and former mining locations, are the subject of civil litigation, administrative - 31 - ‌ ​ proceedings or investigations arising under federal and state environmental laws and common law.
EPA contends that NL is liable as the alleged successor to the Doehler Die Casting Company, and therefore - 32 - ​ responsible for any potential contamination at the site resulting from Doehler’s ownership/operation of a warehouse and a die casting plant it owned 90 years ago.
EPA contends that NL is liable as the alleged successor to the Doehler Die Casting Company, and therefore responsible for any potential contamination at the site resulting from Doehler’s ownership/operation of a warehouse and a die casting plant it owned 90 years ago.
(Supreme Court of the State of New York, County of New York, Index No. 14/650103). The plaintiff, a former insurance carrier of NL, is seeking a declaratory judgment of its obligations to NL under insurance policies issued to NL by the plaintiff with respect to certain lead pigment lawsuits.
(Supreme Court of the State of New York, County of New York, Index No. 14/650103). The plaintiff, a former insurance carrier of NL, is seeking a declaratory judgment of its obligations to NL under insurance policies issued - 35 - ‌ ​ to NL by the plaintiff with respect to certain lead pigment lawsuits.
At each balance sheet date, we estimate the amount of the accrued environmental and related costs which we expect to pay within the next twelve months, and we classify this estimate as a current liability. We classify the remaining accrued environmental costs as a noncurrent liability.
At each balance sheet date, we estimate the amount of the accrued environmental and related costs which we expect to pay within the next - 32 - ‌ ​ twelve months, and we classify this estimate as a current liability. We classify the remaining accrued environmental costs as a noncurrent liability.
At December 31, 2021 and 2022 we had not recognized any material receivables for recoveries. We do not know and cannot estimate the exact time frame over which we will make payments for our accrued environmental and related costs.
At December 31, 2022 and December 31, 2023 we had not recognized any material receivables for recoveries. We do not know and cannot estimate the exact time frame over which we will make payments for our accrued environmental and related costs.
The upper end of the range of reasonably possible costs to NL for remediation and related matters for which NL believes it is possible to estimate costs is approximately $119 million, including the amount currently accrued. NL believes that it is not reasonably possible to estimate the range of costs for certain sites.
The upper end of the range of reasonably possible costs to NL for remediation and related matters for which NL believes it is possible to estimate costs is approximately $118 million, including the amount currently accrued. NL believes that it is not reasonably possible to estimate the range of costs for certain sites.
In addition, we are occasionally named as a party in a number of personal injury lawsuits filed in various jurisdictions alleging claims related to environmental conditions alleged to have resulted from its operations.
In addition, we are occasionally named as a party in a number of personal injury lawsuits filed in various jurisdictions alleging claims related to environmental conditions alleged to have resulted from our operations.
In addition, some plaintiffs allege exposure to asbestos from working in various facilities previously owned and/or operated by NL. There are 109 of these types of cases pending, involving a total of approximately 583 plaintiffs. In addition, the claims of approximately 8,715 plaintiffs have been administratively dismissed or placed on the inactive docket in Ohio state courts.
In addition, some plaintiffs allege exposure to asbestos from working in various facilities previously owned and/or operated by NL. There are 108 of these types of cases pending, involving a total of approximately 582 plaintiffs. In addition, the claims of approximately 8,715 plaintiffs have been administratively dismissed or placed on the inactive docket in Ohio state courts.
At December 31, 2022, there were approximately five sites for which NL is not currently able to reasonably estimate a range of costs.
At December 31, 2023, there were approximately five sites for which NL is not currently able to reasonably estimate a range of costs.
NL is currently in discussions with EPA regarding a de minimis settlement and is otherwise taking actions necessary to respond to the UAO. If these discussions are unsuccessful, NL will continue to deny liability and will defend vigorously against all of the claims. In January 2020, NL was sued in Atlantic Richfield, Co. v.
NL has been in discussions with EPA regarding a de minimis settlement and is otherwise taking actions necessary to respond to the UAO. If these discussions are ultimately unsuccessful, NL will continue to deny liability and will defend vigorously against all of the claims. In January 2020, NL was sued in Atlantic Richfield, Co. v.
NL has denied liability and will continue to defend vigorously against all claims. Other Litigation NL – NL has been named as a defendant in various lawsuits in several jurisdictions, alleging personal injuries as a result of occupational exposure primarily to products manufactured by our former operations containing asbestos, silica and/or mixed dust.
NL intends to deny liability and will defend vigorously against all claims. - 34 - ‌ ​ Other Litigation NL – NL has been named as a defendant in various lawsuits in several jurisdictions, alleging personal injuries as a result of occupational exposure primarily to products manufactured by our former operations containing asbestos, silica and/or mixed dust.
In June 2022, NL received a letter from the NJDEP informing NL that remediation of contaminated sites upriver of the former Sayreville site had progressed to the point that it was now appropriate for NL to resume investigating the sediments adjacent to the Sayreville site. NL informed the NJDEP by letter that it would resume that investigation.
In June 2022, NL received a letter from the NJDEP informing NL that remediation of contaminated sites upriver of the former Sayreville site had progressed to the point that it was now appropriate for NL to resume investigating the sediments adjacent to the Sayreville site.
At December 31, 2022, NL had accrued approximately $92 million related to approximately 33 sites associated with remediation and related matters that NL believes are at the present time and/or in their current phase reasonably estimable.
At December 31, 2023, NL had accrued approximately $91 million related to approximately 33 sites associated with remediation and related matters that NL believes are at the present time and/or in their current phase reasonably estimable.
Although we may be jointly and severally liable for these costs, in most cases they are only one of a number of PRPs who may also be jointly and severally liable, and among whom costs may be shared or allocated.
Although we may be jointly and severally liable for these costs, in most cases NL is only one of a number of PRPs who may also be jointly and severally liable, and among whom costs may be shared or allocated.
NL made the initial $25.0 million payment in September 2019 and the first, second and third annual installment payments of $12.0 million each in September 2020, - 29 - ​ 2021 and 2022. We recognized an aggregate accretion expense of $1.3 million, $1.1 million and $.9 million in 2020, 2021 and 2022, respectively.
NL made the initial $25.0 million payment in September 2019 and the first, second, third and fourth annual installment payments of $12.0 million each in September 2020, 2021, 2022 and 2023. We recognized an aggregate accretion expense of $1.1 million, $.9 million and $.7 million in 2021, 2022 and 2023, respectively.
Some are on appeal following dismissal or summary judgment rulings or a trial verdict in favor of either the defendants or the plaintiffs. NL believes these actions are without merit, and intends to continue to deny all allegations of wrongdoing and liability and to defend against all actions vigorously.
Some are on appeal following dismissal or summary judgment rulings or a trial verdict in favor of either the defendants or the plaintiffs. NL believes it has substantial defenses to these actions and NL intends to continue to deny all allegations of wrongdoing and liability and to defend against all actions vigorously.
In December 2020, the trial court denied the insurers’ motion for summary judgment, finding that the arguments raised by the insurers did not bar NL from coverage under the relevant policies. We continue to believe the insurers’ claims are without merit and NL intends to defend its rights and prosecute its claims in this action vigorously.
In December 2020, the trial court denied the insurers’ motion for summary judgment, finding that the arguments raised by the insurers did not bar NL from coverage under the relevant policies. We intend to defend NL’s rights and prosecute NL’s claims in this action vigorously.
NL Industries, Inc. , (United States District Court for the District of Colorado, Case 1:20-cv-00234). This is a CERCLA cost recovery action brought by a past owner and operator of certain mining properties located in Rico, Colorado. NL has denied liability and will defend vigorously against all claims.
NL Industries, Inc. , (United States District Court for the District of Colorado, Case 1:20-cv-00234). This is a CERCLA cost recovery action brought by a past owner and operator of certain mining properties located in Rico, Colorado.
We do not believe it is probable we have incurred any liability with respect to pending lead pigment litigation cases to which NL is a party, and with respect to all such lead pigment litigation cases to which NL is a party, we believe liability to NL that may result, if any, in this regard cannot be reasonably estimated, because: ● NL has never settled any of the market share, intentional tort, fraud, nuisance, supplier negligence, breach of warranty, conspiracy, misrepresentation, aiding and abetting, enterprise liability, or statutory cases (other than the Santa Clara case discussed below), ● no final, non-appealable adverse judgments have ever been entered against NL, and ● NL has never ultimately been found liable with respect to any such litigation matters, including over 100 cases over a thirty-year period for which NL was previously a party and for which NL has been dismissed without any finding of liability.
We do not believe it is probable we have incurred any liability with respect to pending lead pigment litigation cases to which NL is a party, and with respect to all such lead pigment litigation cases to which NL is a party, we believe liability to NL that may result, if any, in this regard cannot be reasonably estimated, because: ● NL has never settled any of the market share, intentional tort, fraud, nuisance, supplier negligence, breach of warranty, conspiracy, misrepresentation, aiding and abetting, enterprise liability, or statutory cases (other than the Santa Clara case discussed below), ● no final, non-appealable adverse judgments have ever been entered against NL, and ● NL has never ultimately been found liable with respect to any such litigation matters, including over 100 cases over a thirty-year period for which NL was previously a party and for which NL has been dismissed without any finding of liability. - 30 - ‌ ​ Accordingly, we have not accrued any amounts for any of the pending lead pigment and lead-based paint litigation cases filed by or on behalf of states, counties, cities or their public housing authorities and school districts, or those asserted as class actions.
In October 2022, the trial court issued an order finding that NL and the other defendants are not liable under CERCLA for lead contamination in residential neighborhoods surrounding, but at a distance from, the former secondary lead smelter. The case will continue with regard to the former smelter property and an adjacent industrial area.
In October 2022, the trial court issued an order finding that NL and the other defendants are not liable under CERCLA for lead contamination in residential neighborhoods surrounding, but at a distance from, the former secondary lead smelter.
This complaint by a California state agency asserts claims under CERCLA, a state environmental statute, and the common law relating to lead contamination allegedly connected to a secondary lead smelter located in Vernon, California.
NL Industries, Inc. , (United States District Court for the Central District of California, Case 2:20-cv-11293). This complaint by a California state agency asserts claims under CERCLA, a state environmental statute, and the common law relating to lead contamination allegedly connected to a secondary lead smelter located in Vernon, California.
NL Industries, Inc. , (United States District Court for the District of New Jersey, Case 3:12-cv-03842-PGS-TJB). The plaintiff, a landowner of property located across the Raritan River from NL’s former Sayreville, New Jersey operation, claims that contaminants from NL’s former Sayreville operation came to be located on its land.
The plaintiff, a landowner of property located across the Raritan River from NL’s former Sayreville, New Jersey operation, claims that contaminants from NL’s former Sayreville operation came to be located on its land.
The stay will remain in place until defendants’ appeals are resolved. New cases may continue to be filed against NL. We do not know if NL will incur liability in the future in respect of any of the pending or possible litigation in view of the inherent uncertainties involved in court and jury rulings.
We do not know if NL will incur liability in the future in respect of any of the pending or possible litigation in view of the inherent uncertainties involved in court and jury rulings.
Any such adjustment could result in the recognition of an accrual that would have a material effect on our consolidated financial statements, results of operations and liquidity.
Any such adjustment could result in the recognition of an accrual that would have a material effect on our consolidated financial statements, results of operations and liquidity. We have also accrued approximately $6 million at December 31, 2023 for other environmental cleanup matters which represents our best estimate of the liability.
(United States District Court, Eastern District of Missouri, Case No. 4:11-cv-00864). The plaintiff brought this CERCLA contribution action against several defendants to recover a portion of the amount it paid in settlement with the U.S. Government during its Chapter 11 bankruptcy in relation to the Southeast Missouri Mining District.
(United States District Court, Western District of Missouri, Case No. 4:11-cv-00138-DGK) and ASARCO LLC v. NL Industries, Inc., et al. (United States District Court, Eastern District of Missouri, Case No. 4:11-cv-00864). Both cases are CERCLA contribution actions brought against several defendants to recover a portion of the amount the plaintiff paid in settlement with the U.S.
NJDEP alleged that a waste hauler transported waste from one of its former facilities for disposal at the site in the early 1970s.
In June 2008, NL received a Directive and Notice to Insurers from the New Jersey Department of Environmental Protection (NJDEP) regarding the Margaret’s Creek site in Old Bridge Township, New Jersey. NJDEP alleged that a waste hauler transported waste from one of its former facilities for disposal at the site in the early 1970s.
The lawsuit remains pending. NL continues to deny liability and will defend vigorously against all claims. In June 2011, NL was served in ASARCO LLC v. NL Industries, Inc., et al. (United States District Court, Western District of Missouri, Case No. 4:11-cv-00138-DGK).
NL has been diligently conducting that investigation in compliance with - 33 - ‌ ​ NJDEP regulations. The lawsuit remains pending. NL continues to deny liability and will defend vigorously against all claims. In 2011, NL was served in ASARCO LLC v. NL Industries, Inc., et al.
In December 2020, NL and several other defendants were sued in California Department of Toxic Substances v. NL Industries, Inc. , (United States District Court for the Central District of California, Case 2:20-cv-11293).
NL has denied liability and will continue to defend vigorously against all claims. In December 2023, NL and several other defendants were sued in Sunset Commercial, LLC v. Stauffer Management Co., et al. (United States District Court for the District of Nevada, Case 2:23-cv-02081).
Removed
Accordingly, we have not accrued any amounts for any of the pending lead pigment and lead-based paint litigation cases filed by or on behalf of states, counties, cities or their public housing authorities and school districts, or those asserted as class actions.
Added
The plaintiffs in these actions generally seek to impose on the defendants responsibility for lead paint abatement and health concerns associated with the use of lead-based paints, including damages for personal injury, contribution and/or indemnification for medical expenses, medical monitoring expenses and costs for educational programs.
Removed
In November 2018, NL was served with two complaints filed by county governments in Pennsylvania. Each county alleges that NL and several other defendants created a public nuisance by selling and promoting lead-containing paints and pigments in the counties. The plaintiffs seek abatement and declaratory relief.
Added
In January 2024, NL was served with a third-party complaint in a matter titled Arrioena Beal v. Hattie Mitchell, et al. (Circuit Court of Milwaukee County, Wisconsin, Case No. 21-cv-3276). The plaintiff in this case sued her former landlords and several former manufacturers of lead paint for injuries allegedly attributable to lead paint, but did not sue NL.
Removed
NL believes these lawsuits are inconsistent with Pennsylvania law and without merit, and NL intends to defend itself vigorously. In February 2022, the Pennsylvania Commonwealth Court entered orders staying all proceedings in the trial courts, and granting defendants’ request for an interlocutory appeal of earlier trial court rulings allowing the cases to proceed.
Added
Several of the former lead paint manufacturer defendants later filed a third-party complaint against NL, seeking contribution for any damages they may ultimately have to pay to the plaintiff. NL believes it has substantial defenses to these claims under Wisconsin law and intends to defend itself vigorously. New cases may continue to be filed against NL.
Removed
We have also accrued approximately $5 million at December 31, 2022 for other environmental cleanup matters which represents our best estimate of the liability. - 31 - ​ In June 2008, NL received a Directive and Notice to Insurers from the New Jersey Department of Environmental Protection (NJDEP) regarding the Margaret’s Creek site in Old Bridge Township, New Jersey.
Added
Government during its Chapter 11 bankruptcy. The court in each case entered indefinite stays of the litigation in 2013 and 2015, which remain in place. In July 2012, NL was served in EPEC Polymers, Inc., v. NL Industries, Inc. , (United States District Court for the District of New Jersey, Case 3:12-cv-03842-PGS-TJB).
Removed
The plaintiff brought this CERCLA contribution action against several defendants to recover a portion of the amount it paid in settlement with the U.S.
Added
In 2023, the trial court granted partial summary judgment for NL and the plaintiff appealed that decision to the Court of Appeals for the Tenth Circuit. NL continues to deny liability and will defend vigorously against all claims. In December 2020, NL and several other defendants were sued in California Department of Toxic Substances v.
Removed
Government during its Chapter 11 bankruptcy in relation to the Tar Creek site, the Cherokee County Superfund Site in southeast Kansas, the Oronogo-Duenweg Lead Mining Belt Superfund Site in Jasper County, Missouri and the Newton County Mine Tailing Site in Newton County, Missouri. NL has denied liability and will defend vigorously against all of the claims.
Added
In August 2023, the trial court issued orders finding that NL and several other defendants are jointly liable for contamination on areas where operations were previously conducted, but are not liable for contamination outside those former operating areas. Neither the amount of damages owed, nor any party’s allocated share of such damages, has yet been determined.
Removed
In the second quarter of 2012, NL filed a motion to stay the case. In the first quarter of 2013, NL’s motion was granted and the court entered an indefinite stay, which remains in place. In September 2011, NL was served in ASARCO LLC v. NL Industries, Inc., et al.
Added
The complaint asserts claims under CERCLA as well as claims for private nuisance, negligence, trespass, and strict liability. The plaintiff asserts that hazardous substances located on its property are attributable to a large industrial facility in the area.
Removed
NL has denied liability and will defend vigorously against all of the claims. In May 2015, the trial court on its own motion entered an indefinite stay of the litigation, which remains in place. In July 2012, NL was served in EPEC Polymers, Inc., v.
Added
The plaintiff alleges NL is liable for once holding a lease on the industrial property and for its past partial ownership of another company.

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 assumes the reinvestment of our regular quarterly dividends in shares of our stock. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2017 2018 2019 2020 2021 2022 Valhi common stock ​ $ 100 ​ $ 32 ​ $ 32 ​ $ 23 ​ $ 44 ​ $ 34 S&P 500 Index ​ 100 ​ 96 ​ 126 ​ 149 ​ 192 ​ 157 S&P 500 Industrial Conglomerates ​ 100 ​ 73 ​ 91 ​ 101 ​ 106 ​ 97 ​ The information contained in the performance graph shall not be deemed “soliciting material” or “filed” with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act, as amended, except to the extent we specifically request that the material be treated as soliciting material or specifically incorporate this performance graph by reference into a document filed under the Securities Act or the Securities Exchange Act.
Biggest changeThe graph shows the value at December 31 of each year assuming an original investment of $100 at December 31, 2018, and assumes the reinvestment of our regular quarterly dividends in shares of our stock. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2018 2019 2020 2021 2022 2023 Valhi common stock ​ $ 100 ​ $ 100 ​ $ 71 ​ $ 136 ​ $ 105 ​ $ 74 S&P 500 Index ​ 100 ​ 131 ​ 156 ​ 200 ​ 164 ​ 207 S&P 500 Industrial Conglomerates ​ 100 ​ 125 ​ 138 ​ 145 ​ 133 ​ 165 ​ The information contained in the performance graph shall not be deemed “soliciting material” or “filed” with the SEC, or subject to the liabilities of Section 18 of the Securities Exchange Act, as amended, except to the extent we specifically request that the material be treated as soliciting material or specifically incorporate this performance graph by reference into a document filed under the Securities Act or the Securities Exchange Act. - 37 - ‌ ​ Equity Compensation Plan Information – We have an equity compensation plan, which was approved by our stockholders, pursuant to which an aggregate of 100,000 shares of our common stock can be awarded to non-employee members of our board of directors.
The aggregate number of shares authorized for repurchase is 833,333, and we have approximately 334,000 shares available for repurchase at December 31, 2022. We may purchase the stock from time to time as market conditions permit. The stock repurchase program does not include specific price targets or timetables and may be suspended at any time.
The aggregate number of shares authorized for repurchase is 833,333, and we have approximately 334,000 shares available for repurchase at December 31, 2023. We may purchase the stock from time to time as market conditions permit. The stock repurchase program does not include specific price targets or timetables and may be suspended at any time.
Performance Graph – Set forth below is a line graph comparing the yearly change in our cumulative total stockholder return on our common stock against the cumulative total return of the S&P 500 Composite Stock Price Index and the S&P 500 Industrial Conglomerates Index for the period from December 31, 2017 through December 31, 2022.
Performance Graph – Set forth below is a line graph comparing the yearly change in our cumulative total stockholder return on our common stock against the cumulative total return of the S&P 500 Composite Stock Price Index and the S&P 500 Industrial Conglomerates Index for the period from December 31, 2018 through December 31, 2023.
At December 31, 2022, an aggregate of 93,600 shares were available for future award under this plan. See Note 16 to our Consolidated Financial Statements.
At December 31, 2023, an aggregate of 84,600 shares were available for future award under this plan. See Note 16 to our Consolidated Financial Statements.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock and Dividends – Our common stock is listed and traded on the New York Stock Exchange (symbol: VHI). As of March 3, 2023, there were approximately 728 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock and Dividends – Our common stock is listed and traded on the New York Stock Exchange (symbol: VHI). As of March 1, 2024, there were approximately 740 holders of record of our common stock.
Removed
Equity Compensation Plan Information – We have an equity compensation plan, which was approved by our stockholders, pursuant to which an aggregate of 100,000 shares of our common stock can be awarded to non-employee - 35 - ​ members of our board of directors.

Item 7. Management's Discussion & Analysis

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

184 edited+73 added−57 removed97 unchanged
Biggest changeFor comparative purposes, we have also provided comparable prior year numbers below. ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, December 31, ​ ​ 2020 ​ 2021 ​ 2022 Kronos: ​ ​ ​ ​ ​ ​ Days sales outstanding 68 days 65 days 64 days Days sales in inventory 74 days 59 days 79 days CompX: Days sales outstanding 33 days 42 days 41 days Days sales in inventory 75 days 96 days 99 days We do not have complete access to the cash flows of our majority-owned subsidiaries, due in part to limitations contained in certain credit agreements of our subsidiaries and because we do not own 100% of these subsidiaries.
Biggest changeChanges in working capital were affected by accounts receivable and inventory changes, as shown below: ● Kronos’ average days sales outstanding (DSO) increased from December 31, 2022 to December 31, 2023, primarily due to the relative changes in the timing of collections. ● Kronos’ average days sales in inventory (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 production volumes exceeded sales volumes. ● CompX’s average DSO decreased from December 31, 2022 to December 31, 2023 and is primarily impacted by the timing of sales and collections in the last month of the year. ● CompX’s average DSI decreased from December 31, 2022 to December 31, 2023, primarily due to a decrease at its security products reporting unit due to the fulfillment and shipping of a significant order during the fourth quarter of 2023, partially offset by an increase at its marine components reporting unit due to lower sales and increased inventory balances as a result of prior orders of certain raw materials with longer lead times. ​ - 59 - ‌ ​ For comparative purposes, we have also provided comparable prior year numbers below. ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, December 31, ​ ​ 2021 ​ 2022 ​ 2023 Kronos: ​ ​ ​ ​ ​ ​ Days sales outstanding 65 days 64 days 66 days Days sales in inventory 59 days 103 days 65 days CompX: Days sales outstanding 42 days 41 days 36 days Days sales in inventory 96 days 99 days 95 days We do not have complete access to the cash flows of our majority-owned subsidiaries, due in part to limitations contained in certain credit agreements of our subsidiaries and because we do not own 100% of these subsidiaries.
Substantially all of the land sales revenue we recognized in 2022 was under the cost-based inputs method of revenue recognition for acreage sold in prior years and to a lesser extent current year land sales. In 2021 land sales were heavily weighted towards the end of the year.
Substantially all the land sales revenue we recognized in 2022 was under the cost-based inputs method of revenue recognition for acreage sold in prior years and to a lesser extent current year land sales. In 2021 land sales were heavily weighted towards the end of the year.
We considered BWC’s inability to pump water from Lake Mead to be a triggering event under the ASC 360 Property, Plant, and Equipment , which caused us to evaluate the water system fixed assets for impairment.
We considered BWC’s inability to pump water from Lake Mead to be a triggering event under ASC 360 Property, Plant, and Equipment , which caused us to evaluate the water system fixed assets for impairment.
Generally, all of the land sales associated with the residential/planned community have been recognized over time using cost-based inputs of accounting in accordance with ASC 606.
Generally, all the land sales associated with the residential/planned community have been recognized over time using cost-based inputs of accounting in accordance with ASC 606.
In addition to those legal proceedings described in Note 18 to our Consolidated Financial Statements, various legislation and administrative regulations have, from time to time, been proposed that seek to (i) impose various obligations - 62 - ​ on present and former manufacturers of lead pigment and lead-based paint (including NL) with respect to asserted health concerns associated with the use of such products and (ii) effectively overturn court decisions in which NL and other pigment manufacturers have been successful.
In addition to those legal proceedings described in Note 18 to our Consolidated Financial Statements, various legislation and administrative regulations have, from time to time, been proposed that seek to (i) impose various obligations on present and former manufacturers of lead pigment and lead-based paint (including NL) with respect to asserted health concerns associated with the use of such products and (ii) effectively overturn court decisions in which NL and other pigment manufacturers have been successful.
Commitments and Contingencies We are subject to certain commitments and contingencies, as more fully described in the Notes to our Consolidated Financial Statements and in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, including: ● certain income contingencies in various U.S. and non-U.S. jurisdictions; ● certain environmental remediation matters involving NL and BMI; ● certain litigation related to NL’s former involvement in the manufacture of lead pigment and lead-based paint; and ● certain other litigation to which we are a party.
Commitments and Contingencies We are subject to certain commitments and contingencies, as more fully described in the Notes to our Consolidated Financial Statements and in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, including: ● certain income contingencies in various U.S. and non-U.S. jurisdictions; - 65 - ‌ ​ ● certain environmental remediation matters involving NL and BMI; ● certain litigation related to NL’s former involvement in the manufacture of lead pigment and lead-based paint; and ● certain other litigation to which we are a party.
In addition, our Chemicals Segment’s cost of sales in 2022 includes approximately $26 million of unabsorbed fixed production and other manufacturing costs associated with production curtailments at certain of its European facilities throughout the fourth quarter. - 40 - ​ Gross margin as a percentage of net sales decreased to 20% in 2022 compared to 23% in 2021.
In addition, our Chemicals Segment’s cost of sales in 2022 includes approximately $26 million of unabsorbed fixed production and other manufacturing costs associated with production curtailments at certain of its European facilities throughout the fourth quarter. Gross margin as a percentage of net sales decreased to 20% in 2022 compared to 23% in 2021.
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 - 55 - ‌ ​ rating agencies in the applicable country where the defined benefit pension benefits are being paid.
We base our purchase decision on a variety of factors, including an analysis of the optimal use of our capital, taking into account the market value of the securities and the relative value of expected returns on alternative investments. In connection with these activities, we may consider issuing additional equity securities or increasing our indebtedness.
We base our purchase decision on a variety of factors, including an analysis of the optimal use of our capital, taking into account the market value of the securities and the relative value of expected returns on alternative investments. In connection with these activities, we may consider issuing additional equity securities - 64 - ‌ ​ or increasing our indebtedness.
In addition to the impact of the operating, investing and financing cash flows discussed below, changes in the amount of cash, cash equivalents and restricted cash we report from year to year can be impacted by changes in currency exchange rates, since a portion of our cash, cash equivalents and restricted cash is held by our Chemicals Segment’s non-U.S. subsidiaries.
In addition to the impact of the operating, investing and financing cash flows discussed below, changes in the amount of cash, cash equivalents and restricted cash we report from year to year can be impacted by changes in currency exchange rates, since a portion of our - 58 - ‌ ​ cash, cash equivalents and restricted cash is held by our Chemicals Segment’s non-U.S. subsidiaries.
BWC’s water delivery system operated on Lake Mead in Nevada. Due to the Western drought, water levels in Lake Mead have been declining for much of the last twenty years. As a result of water release curtailments upstream of Lake Mead which began late in the second quarter, Lake Mead water levels have dropped precipitously to historically low levels.
BWC’s water delivery system operated on Lake Mead in Nevada. Due to the Western drought, water levels in Lake Mead have been declining for much of the last twenty years. As a result of water release curtailments upstream of Lake Mead which began late in the second quarter of 2022, Lake Mead water levels dropped precipitously to historically low levels.
If any of these factors were to materially change such change may require revaluation of our goodwill. Changes in estimates or the application of alternative assumptions could produce significantly different results. - 51 - ​ A reporting unit can be a segment or an operating division based on the operations of the segment.
If any of these factors were to materially change such change may require revaluation of our goodwill. Changes in estimates or the application of alternative assumptions could produce significantly different results. A reporting unit can be a segment or an operating division based on the operations of the segment.
CompX is also a leading manufacturer of wake enhancements systems, stainless steel exhaust systems, gauges, throttle controls, trim tabs and related hardware and accessories for the recreational marine. ● Real Estate Management and Development – We operate in real estate management and development through our majority control of BMI and LandWell.
CompX is also a leading manufacturer of wake enhancements systems, stainless steel exhaust systems, gauges, throttle controls, trim tabs and related hardware and accessories for the recreational marine industry. ● Real Estate Management and Development – We operate in real estate management and development through our majority control of BMI and LandWell.
Our Chemicals Segment’s cost of sales as a percentage of net sales increased to 80% in 2022 compared to 77% in 2021 due to the impact of higher production costs, including higher raw material and energy costs partially offset by the favorable effects of higher average TiO 2 selling prices.
Our Chemicals Segment’s cost of sales as a percentage of net sales increased to 80% in 2022 compared to 77% in 2021 due to the impact of higher production costs, including higher raw - 43 - ‌ ​ material and energy costs partially offset by the favorable effects of higher average TiO 2 selling prices.
However, in 2022 our consolidated effective income tax rate is lower than the U.S. federal statutory rate of 21% due to the effect of a tax benefit relating to the release of a portion of our valuation allowance associated with the 2022 utilization of a portion of our business interest expense carryforwards.
However, in 2022 our consolidated effective income tax rate is lower than the U.S. federal statutory rate of 21% due to the effect of a tax benefit relating to the partial release of our valuation allowance associated with the 2022 utilization of a portion of our business interest expense carryforwards.
Without the ability to pump and deliver water to its customers, BWC’s operating expenses exceeded its revenues, and on September 10, 2022 BWC and its subsidiaries voluntarily filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Nevada.
Without the ability to pump and deliver water to its customers, BWC’s operating expenses exceeded its revenues, and on September 10, 2022 BWC and its subsidiaries voluntarily filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District - 50 - ‌ ​ of Nevada.
In addition, Kronos’ capital expenditures in the area of environmental compliance, protection and improvement include expenditures which are - 60 - ​ primarily focused on increased operating efficiency but also result in improved environmental protection, such as lower emissions from our manufacturing plants.
In addition, Kronos’ capital expenditures in the area of environmental compliance, protection and improvement include expenditures which are primarily focused on increased operating efficiency but also result in improved environmental protection, such as lower emissions from our manufacturing plants.
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.
Operating costs and expenses consist primarily of sales and administrative-related personnel costs, sales commissions and advertising expenses directly related to product sales and administrative costs relating to business unit and corporate management activities, as well as gains and losses on disposal of property and equipment.
Operating costs and expenses consist primarily of sales and administrative-related personnel costs, sales commissions and advertising expenses directly related to product sales and administrative costs relating to business unit and corporate management activities, as well as gains and losses on sales of property and equipment.
The materials used in our Component Products Segment’s products consist of purchased components and raw materials some of which are subject to fluctuations in the commodity markets such as zinc, brass and stainless steel.
The materials used in our Component Products Segment’s products consist of purchased components and raw materials some of which are subject to fluctuations in the commodity markets such as zinc, brass, aluminum and stainless steel.
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.
Dividends – Because our operations are conducted primarily through subsidiaries and affiliates, our long-term ability to meet parent company level corporate obligations is largely dependent on the receipt of dividends or other distributions from our subsidiaries and affiliates. Kronos paid a regular dividend of $.19 per share in each quarter of 2022 for which we received $44.1 million.
Dividends – Because our operations are conducted primarily through subsidiaries and affiliates, our long-term ability to meet parent company level corporate obligations is largely dependent on the receipt of dividends or other distributions from our subsidiaries and affiliates. Kronos paid a regular dividend of $.19 per share in each quarter of 2023 for which we received $44.1 million.
Our diluted income from continuing operations per share in 2022 includes: ● aggregate charges of $.35 per share related to the bankruptcy filing of BWC, including $.29 per share related to the impairment of the water delivery system fixed assets, primarily recognized in the second quarter, and $.04 per share loss on the deconsolidation of BWC and $.02 per share of bad debt expense related to an intercompany receivable with BWC, both recognized in the third quarter; ● income of $.28 per share related to tax increment infrastructure reimbursements recognized in the third and fourth quarters; ● a gain of $.05 per share related to a business interruption insurance claim arising from Hurricane Laura in 2020 at our Chemicals Segment recognized in the third quarter; and ● income of $.02 per share related to an energy utility infrastructure reimbursement recognized in the second quarter.
Our diluted net income per share in 2022 includes: ● aggregate charges of $.35 per share related to the bankruptcy filing of BWC, including $.29 per share related to the impairment of the water delivery system fixed assets, primarily recognized in the second quarter, and $.04 per share loss on the deconsolidation of BWC and $.02 per share of bad debt expense related to an intercompany receivable with BWC, both recognized in the third quarter; ● income of $.28 per share related to tax increment infrastructure reimbursements recognized in the third and fourth quarters; ● a gain of $.05 per share related to a business interruption insurance claim arising from Hurricane Laura in 2020 at our Chemicals Segment recognized in the third quarter; and ● income of $.02 per share related to an energy utility infrastructure reimbursement recognized in the second quarter.
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 Kronos and NL Plans: ​ ​ ​ ​ ​ ​ ​ 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 Kronos and NL Plans: ​ ​ ​ ​ ​ ​ ​ 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.
If these events occur in 2023, our corporate expense could be higher than we currently estimate. In addition, we adjust our accruals for environmental remediation and related costs as further information becomes available to us or as circumstances change. Such further information or changed circumstances could result in an increase or reduction in our accrued environmental remediation and related costs.
If these events occur in 2024, our corporate expense could be higher than we currently estimate. In addition, we adjust our accruals for environmental remediation and related costs as further information becomes available to us or as circumstances change. Such further information or changed circumstances could result in an increase or reduction in our accrued environmental remediation and related costs.
In 2022, we used the qualitative assessment for our annual impairment test and determined it was not necessary to perform the quantitative goodwill impairment test, as we concluded it is more-likely-than-not that the fair value of the security products reporting unit exceeded its carrying amount.
In 2023, we used the qualitative assessment for our annual impairment test and determined it was not necessary to perform the quantitative goodwill impairment test, as we concluded it is more-likely-than-not that the fair value of the security products reporting unit exceeded its carrying amount.
In comparison, we expect to be required to contribute approximately $18 million to such plans during 2023. As noted above, defined benefit pension expense and the amounts recognized as accrued pension costs are based upon the actuarial assumptions discussed above. We believe all of the actuarial assumptions used are reasonable and appropriate.
In comparison, we expect to be required to contribute approximately $18 million to such plans during 2024. As noted above, defined benefit pension expense and the amounts recognized as accrued pension costs are based upon the actuarial assumptions discussed above. We believe all of the actuarial assumptions used are reasonable and appropriate.
Cost of Sales and Gross Margin – Cost of sales increased $45.7 million, or 3%, in 2022 compared to 2021 primarily due to the net effects of higher production costs of approximately $285 million (including higher costs for raw materials and energy), a 15% decrease in sales volumes and changes in currency exchange rates.
Cost of sales increased $45.7 million, or 3%, in 2022 compared to 2021 primarily due to the net effects of higher production costs of approximately $285 million (including higher costs for raw materials and energy), a 15% decrease in sales volumes and changes in currency exchange rates.
Goodwill – Our net goodwill totaled $379.7 million at December 31, 2022 primarily resulting from our various step acquisitions of Kronos and NL (which occurred before the implementation of the current accounting standards related to noncontrolling interest) and to a lesser extent CompX’s purchase of various businesses.
Goodwill – Our net goodwill totaled $379.7 million at December 31, 2023 primarily resulting from our various step acquisitions of Kronos and NL (which occurred before the implementation of the current accounting standards related to noncontrolling interest) and to a lesser extent CompX’s purchase of various businesses.
If Kronos were to pay its $.19 per share dividend in each quarter of 2023 based on the 58.0 million shares we held of Kronos common stock at December 31, 2022, during 2023 we would receive aggregate regular dividends from Kronos of $44.1 million.
If Kronos were to pay its $.19 per share dividend in each quarter of 2024 based on the 58.0 million shares we held of Kronos common stock at December 31, 2023, during 2024 we would receive aggregate regular dividends from Kronos of $44.1 million.
See Note 18 to our Consolidated Financial Statements. If our current expectations regarding the number of cases in which we expect to be involved during 2023, or the nature of such cases were to change, our corporate expenses could be higher than we currently estimate.
See Note 18 to our Consolidated Financial Statements. If our current expectations regarding the number of cases in which we expect to be involved during 2024, or the nature of such cases were to change, our corporate expenses could be higher than we currently estimate.
The $1.6 million loss in 2022, the $3.3 million gain in 2021 and the $1.7 million loss in 2020 recognized in our Consolidated Financial Statements represent the unrealized gain (loss) in respect of these shares during such periods attributable to the noncontrolling interest of Kronos and NL.
The $1.7 million loss in 2023, the $1.6 million loss in 2022 and the $3.3 million gain in 2021 recognized in our Consolidated Financial Statements represent the unrealized gain (loss) in respect of these shares during such periods attributable to the noncontrolling interest of Kronos and NL.
If actual developments differ from our expectations, our results of operations could be unfavorably affected. ​ - 38 - ​ Segment Operating Results – 2022 Compared to 2021 and 2021 Compared to 2020 Chemicals – We consider TiO 2 to be a “quality of life” product, with demand affected by gross domestic product, or GDP, and overall economic conditions in our markets located in various regions of the world.
If actual developments differ from our expectations, our results of operations could be unfavorably affected. ​ Segment Operating Results – 2023 Compared to 2022 and 2022 Compared to 2021 Chemicals – We consider TiO 2 to be a “quality of life” product, with demand affected by gross domestic product, or GDP, and overall economic conditions in our markets located in various regions of the world.
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 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 due to the expected mix of earnings.
See Note 11 to our Consolidated Financial Statements for additional discussion of actuarial assumptions used in determining defined benefit pension assets, liabilities and expenses. Based on the actuarial assumptions described above and our current expectation for what actual average currency exchange rates will be during 2023, we expect our defined benefit pension expense will approximate $11 million in 2023.
See Note 11 to our Consolidated Financial Statements for additional discussion of actuarial assumptions used in determining defined benefit pension assets, liabilities and expenses. Based on the actuarial assumptions described above and our current expectation for what actual average currency exchange rates will be during 2024, we expect our defined benefit pension expense will approximate $9 million in 2024.
At December 31, 2022, CompX had approximately .5 million shares of its Class A common stock available for repurchase under the authorization described in Note 3 to our Consolidated Financial Statements.
At December 31, 2023, CompX had approximately .5 million shares of its Class A common stock available for repurchase under the authorization described in Note 3 to our Consolidated Financial Statements.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Business Overview We are primarily a holding company. We operate through our wholly-owned and majority-owned subsidiaries, including NL Industries, Inc., Kronos Worldwide, Inc., CompX International, Inc., Tremont LLC, Basic Management, Inc. (“BMI”) and the LandWell Company (“LandWell”).
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Business Overview We are primarily a holding company. We operate through our wholly-owned and majority-owned subsidiaries, including NL Industries, Inc., Kronos Worldwide, Inc., CompX International, Inc., Tremont LLC, Basic Management, Inc. (BMI) and the LandWell Company (LandWell).
Because BWC has filed for bankruptcy protection, we and BMI can no longer affirmatively assert we control BWC and, as such, in accordance with ASC 810, Consolidation, we deconsolidated BWC as of the date of the bankruptcy filing and recognized a loss of $2.0 million in the third quarter of 2022 on the deconsolidation.
Because BWC filed for bankruptcy protection, we and BMI could no longer affirmatively assert we control BWC and, as such, in accordance with ASC 810, Consolidation, we deconsolidated BWC as of the date of the bankruptcy filing and recognized a loss of $2.0 million in the third quarter of 2022 on the deconsolidation.
Kronos’ Senior Secured Notes and its Global Revolver contain a number of covenants and restrictions which, among other things, restrict its ability to incur or guarantee additional debt, incur liens, pay dividends or make other restricted payments, or merge or consolidate with, or sell or transfer substantially all of its assets to, another entity, and contain other provisions and restrictive covenants customary in lending transactions of these types.
Kronos’ Senior Secured Notes, its Global Revolver and the Contran term loan contain a number of covenants and restrictions which, among other things, restrict its ability to incur or guarantee additional debt, incur liens, pay dividends or make other restricted payments, or merge or consolidate with, or sell or transfer substantially all of its assets to, another entity, and contain other provisions and restrictive covenants customary in lending transactions of these types.
Substantially all of the land in the residential/planned community has been sold; however, we expect the development work to take three to five years to complete. Net Sales and Operating Income – Substantially all of the net sales from our Real Estate Management and Development segment in 2022 consisted of revenues from land sales.
Substantially all the land in the residential/planned community has been sold; however, we expect the development work to take three to four years to complete. Net Sales and Operating Income – Substantially all the net sales from our Real Estate Management and Development segment in 2023 and 2022 consisted of revenues from land sales.
Similarly, if we - 54 - ​ lowered the assumed long-term rate of return on plan assets by 25 basis points for all of our plans, our defined benefit pension expense would be expected to increase by approximately $1 million during 2023.
Similarly, if we lowered the assumed long-term rate of return on plan assets by 25 basis points for all of our plans, our defined benefit pension expense would be expected to increase by approximately $1 million during 2024.
In addition, small variations in period-to-period net sales, cost of sales and gross margin can result from changes in the relative mix of our products sold.
In addition, small variations in period-to-period net sales, cost of sales and gross margin can result from changes in the relative mix of our Components Products Segment’s products sold.
Distributions to noncontrolling interest in 2020, 2021 and 2022 are primarily comprised of: CompX dividends paid to shareholders other than NL; Kronos dividends paid to shareholders other than us and NL, and BMI and LandWell dividends paid to shareholders other than us.
Distributions to noncontrolling interest in 2021, 2022 and 2023 are primarily comprised of: CompX dividends paid to shareholders other than NL; Kronos dividends paid to shareholders other than us and NL, and BMI and LandWell dividends paid to shareholders other than us.
The terms of all of our debt instruments are discussed in Note 9 to our Consolidated Financial Statements. We are in compliance with all of our debt covenants at December 31, 2022.
The terms of all of our debt instruments are discussed in Note 9 to our Consolidated Financial Statements. We are in compliance with all of our debt covenants at December 31, 2023.
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. - 53 - ‌ ​ Critical accounting policies and estimates Our significant accounting policies are more fully described in Note 1 to our Consolidated Financial Statements.
The $16.4 million impairment charge primarily recognized in the second quarter of 2022 represents the write down of the book value to the estimated salvage value of the assets.
The $16.4 million impairment charge primarily recognized in the second quarter of 2022 represented the write down of the book value to the estimated salvage value of the assets.
At December 31, 2022, we had approximately .3 million shares of our common stock available for repurchase under the authorizations described in Note 16 to our Consolidated Financial Statements. At December 31, 2022, Kronos had approximately 1.3 million shares of its common stock available for repurchase under the authorization described in Note 3 to our Consolidated Financial Statements.
At December 31, 2023, we had approximately .3 million shares of our common stock available for repurchase under the authorizations described in Note 16 to our Consolidated Financial Statements. At December 31, 2023, Kronos had approximately 1.0 million shares of its common stock available for repurchase under the authorization described in Note 3 to our Consolidated Financial Statements.
Overall, we currently expect that our net general corporate expenses in 2023 will be higher than 2022 primarily due to higher expected litigation fees and related costs and higher environmental remediation and related costs. - 49 - ​ The level of our litigation and related expenses varies from period to period depending upon, among other things, the number of cases in which we are currently involved, the nature of such cases and the current stage of such cases (e.g. discovery, pre-trial motions, trial or appeal, if applicable).
Overall, we currently expect that our net general corporate expenses in 2024 will be higher than 2023 primarily due to higher expected litigation fees and related costs. - 52 - ‌ ​ The level of our litigation and related expenses varies from period to period depending upon, among other things, the number of cases in which we are currently involved, the nature of such cases and the current stage of such cases (e.g. discovery, pre-trial motions, trial or appeal, if applicable).
Based upon our expectations of our operating performance, and the anticipated demands on our cash resources, we expect to have sufficient liquidity to meet our short-term (defined as the twelve-month period ending December 31, 2023) and long-term obligations (defined as the five-year period ending December 31, 2027).
Based upon our expectations of our operating performance, and the anticipated demands on our cash resources, we expect to have sufficient liquidity to meet our short-term (defined as the twelve-month period ending December 31, 2024) and long-term obligations (defined as the five-year period ending December 31, 2028).
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 net sales, as a substantial portion of the sales generated by our Chemicals Segment’s Canadian and Norwegian operations are denominated in the U.S. dollar.
The strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2023 did not have a significant effect on the reported amount of net sales, as a substantial portion of the sales generated by our Chemicals Segment’s Canadian and Norwegian operations are denominated in the U.S. dollar.
As noted above, our Chemicals Segment has experienced global market disruptions including high energy costs and availability concerns and future impacts on its operations will depend on, among other things, future energy costs and availability and the impact economic conditions and geopolitical events have on its operations or its customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.
Our Chemicals Segment has experienced global market disruptions including high energy costs and future impacts on its operations will depend on, among other things, future energy costs and the impact economic conditions and geopolitical events have on its operations or its customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.
Although land may be under contract, we do not recognize revenue until we have satisfied the criteria for revenue recognition set forth in ASC Topic 606.
Although land may be under contract or land sales may be completed, we do not recognize revenue until we have satisfied the criteria for revenue recognition set forth in ASC Topic 606.
In addition, LandWell expects to spend approximately $63 million on land development costs during 2023, including $53 million contractually committed at December 31, 2022. Land development costs are included in the determination of cash provided by operating activities. Capital spending for 2023 is expected to be funded through cash generated from operations or borrowing under our existing credit facilities.
In addition, LandWell expects to spend approximately $55 million on land development costs during 2024, including approximately $40 million contractually committed at December 31, 2023. Land development costs are included in the determination of cash provided by operating activities. Capital spending for 2024 is expected to be funded through cash generated from operations or borrowing under our existing credit facilities.
BMI and LandWell pay cash dividends from time to time, but the timing and amount of such dividends are uncertain. In this regard, we received aggregate dividends from BMI and LandWell of $43.0 million in 2020, $74.8 million in 2021 and $16.6 million in 2022. We do not know if we will receive distributions from BMI and LandWell during 2023.
BMI and LandWell pay cash dividends from time to time, but the timing and amount of such dividends are uncertain. In this regard, we received aggregate dividends from BMI and LandWell of $74.8 million in 2021, $16.6 million in 2022 and $17.6 million in 2023. We do not know if we will receive distributions from BMI and LandWell during 2024.
We believe that we will be able to continue to comply with the financial covenants contained in our credit facilities through their maturity; however, if future operating results differ materially from our expectations we may be unable to maintain compliance.
We believe we will be able to comply with the financial covenants contained in our credit facilities through their maturities; however, if future operating results differ materially from our expectations we may be unable to maintain compliance.
If these events occur in 2023, our corporate expense could be higher than we currently estimate.
If these events occur in 2024, our corporate expense could be higher than we currently estimate.
In February 2023 the Kronos board of directors approved a regular quarterly dividend of $.19 per share.
In February 2024 the Kronos board of directors approved a regular quarterly dividend of $.19 per share.
We also eliminate any such intercompany borrowings in our Consolidated Financial Statements. There is $.5 million outstanding under this facility at December 31, 2022. ​ We have an unsecured revolving demand promissory note with Kronos which, as amended, provides for borrowings from Kronos of up to $25 million. We eliminate any such intercompany borrowings in our Consolidated Financial Statements.
We also eliminate any such intercompany borrowings in our Consolidated Financial Statements. There is $.5 million outstanding under this facility at December 31, 2023. ​ We had an unsecured revolving demand promissory note with Kronos which, as amended, provided for borrowings from Kronos of up to $25 million. We eliminate any such intercompany borrowings in our Consolidated Financial Statements.
Our obligations related to the long-term supply contracts for the purchase of TiO 2 feedstock are more fully described in Note 18 to our Consolidated Financial Statements and above in “Business – Chemicals Segment – Kronos Worldwide, Inc. – Raw Materials.” CompX has purchase obligations of $17.7 million ($16.3 million payable in 2023 and $1.4 million payable in 2024) which consist of open purchase orders and contractual obligations, primarily commitments to purchase raw materials and for capital projects in process at December 31, 2022.
Our obligations related to the long-term supply contracts for the purchase of TiO 2 feedstock are more fully described in Note 18 to our Consolidated Financial Statements and above in “Business – Chemicals Segment – Kronos Worldwide, Inc. – Raw Materials.” CompX has purchase obligations of $18.3 million ($17.5 million payable in 2024 and $.8 million payable in 2025/2026) which consist of open purchase orders and contractual obligations, primarily commitments to purchase raw materials and for capital projects in process at December 31, 2023.
Marine components net sales increased $16.4 million, or 46%, in 2022 as compared to 2021. Relative to prior year, marine component sales were $11.5 million higher to the towboat market (primarily to original equipment boat manufacturers), $2.1 million higher to the engine builder market and $2.0 million higher to the industrial market.
Relative to prior year, marine components sales were $11.5 million higher to the towboat market (primarily to original equipment boat manufacturers), $2.1 million higher to the engine builder market and $2.0 million higher to the industrial market. Security products net sales increased $9.4 million, or 9%, in 2022 as compared to 2021.
LandWell has been actively marketing and selling the land zoned for commercial and light industrial use and at December 31, 2022 approximately 20 saleable acres remain.
LandWell has been actively marketing and selling the land zoned for commercial and light industrial use and at December 31, 2023 approximately 15 saleable acres remain.
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 $19 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 million at that date and our defined benefit pension expense would be expected to increase by a nominal amount during 2024.
See Note 18 to our Consolidated Financial Statements. - 55 - ​ LIQUIDITY AND CAPITAL RESOURCES Consolidated Cash Flows Operating Activities – Trends in cash flows as a result of our operating income (excluding the impact of significant asset dispositions and relative changes in assets and liabilities) are generally similar to trends in our earnings.
LIQUIDITY AND CAPITAL RESOURCES Consolidated Cash Flows Operating Activities – Trends in cash flows as a result of our operating income (excluding the impact of significant asset dispositions and relative changes in assets and liabilities) are generally similar to trends in our earnings.
Other General Corporate Items – Corporate expenses were 5% higher at $36.6 million in 2022 compared to $34.7 million in 2021 due primarily to higher litigation and related costs in 2022.
Corporate expenses were 5% higher at $36.5 million in 2022 compared to $34.6 million in 2021 due primarily to higher litigation and related costs in 2022.
Operating costs and expenses increased $1.2 million in 2022 compared to 2021 predominantly due to higher salary and employment related costs. Our Component Products Segment operating income increased in 2021 compared to 2020. Operating margin increased in 2021 compared to 2020 primarily due to the factors impacting net sales, cost of sales and gross margin discussed above.
Operating margin increased in 2022 compared to 2021 primarily due to the factors impacting net sales, cost of sales and gross margin discussed above. Operating costs and expenses increased $1.2 million in 2022 compared to 2021 predominantly due to higher salary and employment related costs.
See Note 18 to our Consolidated Financial Statements. Interest Expense – Interest expense decreased to $27.9 million in 2022 from $32.5 million in 2021 primarily due to lower average debt levels and the effects of changes in currency exchange rates somewhat offset by higher interest rates on variable-rate indebtedness in 2022.
Interest expense decreased to $27.9 million in 2022 from $32.5 million in 2021 primarily due to lower average debt levels and the effects of changes in currency exchange rates somewhat offset by higher interest rates on variable-rate indebtedness in 2022.
The $23 million increase in operating income 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 Chemicals Segment’s non-U.S. operations, and in Norwegian krone denominated receivables and payables held by our Chemicals Segment’s non-U.S. operations, and ● Approximately $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. ​ - 42 - ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 Operating income ​ (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 euro-denominated sales were translated into more U.S. dollars in 2021 as compared to 2020.
The $23 million increase in operating income 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 - 45 - ‌ ​ decreases, as applicable, in U.S. dollar-denominated receivables and payables and U.S. dollar currency held by our Chemicals Segment’s non-U.S. operations, and in Norwegian krone denominated receivables and payables held by our Chemicals Segment’s non-U.S. operations, and ● Approximately $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.
The - 52 - ​ impact on the amount of revenue recognized resulting from any future change in the estimate of total costs estimated to be incurred would be accounted for prospectively in accordance with GAAP. Defined benefit pension plans – We maintain various defined benefit pension plans in the U.S., Europe and Canada.
The impact on the amount of revenue recognized resulting from any future change in the estimate of total costs estimated to be incurred would be accounted for prospectively in accordance with GAAP. Defined benefit pension plans – We maintain various defined benefit pension plans in the U.S., Europe and Canada. See Note 11 to our Consolidated Financial Statements.
At December 31, 2022, approximately 54%, 20%, 11% and 9% 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 58%, 19%, 10% and 9% 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.
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 flows from operating activities decreased to $34.9 million in 2022 from $459.7 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. Cash flows from operating activities decreased to $3.9 million in 2023 from $34.9 million in 2022.
Long-lived assets – The net book value of our property and equipment totaled $523.8 million at December 31, 2022. We assess property and equipment for impairment only when circumstances indicate an impairment may exist.
Long-lived assets – The net book value of our property and equipment totaled $517.3 million at December 31, 2023. We assess property and equipment for impairment only when circumstances indicate an impairment may exist.
Financing Activities – During 2022: ● we borrowed $.1 million and repaid $51.6 million on Valhi’s credit facility with Contran; ● we repaid $8.4 million on BWC’s loan from Western Alliance Bank (see Note 9 to our Consolidated Financial Statements); ● Kronos acquired 217,778 shares of its common stock for an aggregate purchase price of $2.3 million; and ● CompX acquired 78,900 shares of its Class A common stock for an aggregate purchase price of $ 1.7 million.
During 2022: ● we borrowed $.1 million and repaid $51.6 million on Valhi’s credit facility with Contran; ● we repaid $8.4 million on BWC’s loan from Western Alliance Bank; ● Kronos acquired 217,778 shares of its common stock for an aggregate purchase price of $2.3 million; and ● CompX acquired 78,900 shares of its Class A common stock for an aggregate purchase price of $ 1.7 million.
Intercompany dividends have been eliminated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ 2020 2021 2022 ​ ​ (In millions) Cash provided by (used in) operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Kronos ​ $ 102.5 ​ $ 206.5 ​ $ 81.7 Valhi exclusive of subsidiaries ​ 57.2 ​ 122.1 ​ 68.8 CompX ​ 14.9 ​ 10.5 ​ 16.9 NL exclusive of subsidiaries ​ 7.3 ​ 15.3 ​ 39.2 Tremont exclusive of subsidiaries ​ 36.7 ​ 58.8 ​ 12.7 BMI ​ 39.0 ​ 59.7 ​ 12.1 LandWell ​ 81.9 ​ 302.1 ​ (22.0) Eliminations and other ​ (187.3) ​ (315.3) ​ (174.5) Total ​ $ 152.2 ​ $ 459.7 ​ $ 34.9 Investing Activities – We disclose capital expenditures by our business segments in Note 2 to our Consolidated Financial Statements.
Intercompany dividends have been eliminated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ 2021 2022 2023 ​ ​ (In millions) Cash provided by (used in) operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Kronos ​ $ 206.5 ​ $ 81.7 ​ $ 5.5 Valhi exclusive of subsidiaries ​ 122.1 ​ 68.8 ​ 40.7 CompX ​ 10.5 ​ 16.9 ​ 25.8 NL exclusive of subsidiaries ​ 15.3 ​ 39.2 ​ 21.6 Tremont exclusive of subsidiaries ​ 58.8 ​ 12.7 ​ 11.2 BMI ​ 59.7 ​ 12.1 ​ 13.2 LandWell ​ 302.1 ​ (22.0) ​ 17.5 Eliminations and other ​ (315.3) ​ (174.5) ​ (131.6) Total ​ $ 459.7 ​ $ 34.9 ​ $ 3.9 ​ Investing Activities – We disclose capital expenditures by our business segments in Note 2 to our Consolidated Financial Statements.
Included in corporate expense are: ● litigation and related costs at NL of $1.9 million in each of 2021 and 2020; and ● environmental remediation and related costs of $1.6 million in 2021 compared to $.7 million in 2020.
Included in corporate expense are: ● litigation and related costs at NL of $4.2 million in 2022 and $1.9 million in 2021; and ● environmental remediation and related costs of $1.7 million in 2022 compared to $1.6 million in 2021.
At December 31, 2022, approximately 64%, 15%, 8% and 8% 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 68%, 14%, 7% and 7% 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.
If NL were to pay its $.07 per share dividend in each quarter of 2023 based on the 40.4 million shares we held of NL common stock at December 31, 2022, during 2023 we would receive aggregate quarterly dividends from NL of $11.3 million.
If NL were to pay its $.08 per share dividend in each quarter of 2024 based on the 40.4 million shares we held of NL common stock at December 31, 2023, during 2024 we would receive aggregate quarterly dividends from NL of $12.9 million.
We could borrow an additional $11.8 million under our current intercompany facility with CompX at December 31, 2022. CompX’s obligation to loan us money under this note is at CompX’s discretion.
We could borrow an additional $14.4 million under our current intercompany facility with CompX at December 31, 2023. CompX’s obligation to loan us money under this note is at CompX’s discretion.
As noted above, there continue to be some global and domestic supply chain challenges and any future impacts on operations will depend on, among other things, any future disruption in our Component Products Segment’s operations or its suppliers’ operations, the impact of economic conditions and geopolitical events on demand for its products or its customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted. ​ - 46 - ​ Real Estate Management and Development – ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ 2020 2021 2022 ​ ​ (In millions) Net sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ Land sales ​ $ 87.0 ​ $ 207.8 ​ $ 120.9 Water delivery sales ​ 7.6 ​ 6.8 ​ 3.6 Utility and other ​ 1.8 ​ 1.6 ​ 1.2 Total net sales ​ 96.4 ​ 216.2 ​ 125.7 Cost of sales ​ 64.9 ​ 123.6 ​ 74.1 Gross margin ​ $ 31.5 ​ $ 92.6 ​ $ 51.6 Operating income ​ $ 47.8 ​ $ 97.3 ​ $ 39.4 ​ General – Our Real Estate Management and Development Segment consists of BMI and LandWell.
Our Component Products Segment has experienced global and domestic supply chain challenges, and any future impacts on operations will depend on, among other things, any future disruption in our Component Products Segment’s operations or its suppliers’ operations, the impact of economic conditions and geopolitical events on demand for its products or its customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted. ​ Real Estate Management and Development – ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ 2021 2022 2023 ​ ​ (In millions) Net sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ Land sales ​ $ 207.8 ​ $ 120.9 ​ $ 92.6 Utility and other ​ 1.6 ​ 1.2 ​ 1.3 Water delivery sales ​ 6.8 ​ 3.6 ​ — Total net sales ​ 216.2 ​ 125.7 ​ 93.9 Cost of sales ​ 123.6 ​ 74.1 ​ 61.7 Gross margin ​ $ 92.6 ​ $ 51.6 ​ $ 32.2 Operating income ​ $ 97.3 ​ $ 39.4 ​ $ 49.9 ​ General – Our Real Estate Management and Development Segment consists of BMI and LandWell.
At December 31, 2022, we had credit available under existing facilities of approximately $265 million, which was comprised of: ● $211 million under Kronos’ global revolving credit facility; and ● $54 (1) million under Valhi’s Contran credit facility. (1) Amounts available under this facility are at the sole discretion of Contran.
At December 31, 2023, we had credit available under existing facilities of approximately $282 million, which was comprised of: ● $225 million under Kronos’ global revolving credit facility; and ● $57 (1) million under Valhi’s Contran credit facility. (1) Amounts available under this facility are at the sole discretion of Contran.
The increase is primarily due to higher earnings in 2021 and the jurisdictional mix of such earnings. Our earnings are subject to income tax in various U.S. and non-U.S. jurisdictions.
The decrease is primarily due to lower earnings in 2022 and the jurisdictional mix of such earnings. Our earnings are subject to income tax in various U.S. and non-U.S. jurisdictions.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe following table presents principal amounts and weighted average interest rates for our aggregate outstanding indebtedness at December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Indebtedness Amount Year end ​ ​ ​ Carrying ​ Fair ​ interest ​ Maturity ​ ​ value ​ value ​ rate ​ date ​ ​ (In millions) ​ ​ ​ ​ Fixed-rate indebtedness: ​ ​ ​ ​ ​ ​ Kronos fixed-rate Senior Notes ​ $ 424.1 ​ $ 374.2 ​ 3.75% ​ 2025 LandWell bank note payable ​ 12.9 ​ 12.9 4.76% 2036 Total fixed-rate indebtedness ​ $ 437.0 ​ $ 387.1 3.78% Variable-rate indebtedness: ​ ​ Valhi Contran credit facility ​ $ 121.4 ​ $ 121.4 8.50% ​ 2024 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 changeThe following table presents principal amounts and weighted average interest rates for our aggregate outstanding indebtedness at December 31, 2023. ​ - 66 - ‌ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Indebtedness Amount Year end ​ ​ ​ Carrying ​ Fair ​ interest ​ Maturity ​ ​ value ​ value ​ rate ​ date ​ ​ (In millions) ​ ​ ​ ​ Fixed-rate indebtedness: ​ ​ ​ ​ ​ ​ Kronos fixed-rate 3.75% Senior Secured Notes due 2025 ​ $ 440.9 ​ $ 424.5 ​ 3.75% ​ 2025 LandWell bank note payable ​ 12.2 ​ 12.2 4.76% 2036 Total fixed-rate indebtedness ​ $ 453.1 ​ $ 436.7 3.78% Variable-rate indebtedness: ​ ​ Valhi Contran credit facility ​ $ 93.4 ​ $ 93.4 9.50% ​ 2025 ​ On February 12, 2024 KII 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.
The above discussion and estimated sensitivity analysis amounts include forward-looking statements of market risk which assume hypothetical changes in market prices. Actual future market conditions will likely differ materially from such assumptions. Accordingly, such forward-looking statements should not be considered to be projections by us of future events, gains or losses. - 64 - ​
The above discussion and estimated sensitivity analysis amounts include forward-looking statements of market risk which assume hypothetical changes in market prices. Actual future market conditions will likely differ materially from such assumptions. Accordingly, such forward-looking statements should not be considered to be projections by us of future events, gains or losses.
For certain raw material requirements we do not have long-term supply agreements either because we have assessed the risk of the unavailability of those raw materials and/or the risk of a significant change in the cost of those raw materials to be low, or because long-term supply agreements for those raw materials are generally not available.
For certain raw material requirements we do not have long-term supply agreements either because we have assessed the risk of the unavailability of those raw materials and/or - 67 - ‌ ​ the risk of a significant change in the cost of those raw materials to be low, or because long-term supply agreements for those raw materials are generally not available.
See Notes 1 and 19 to our Consolidated Financial Statements for a discussion of the assumptions we used to estimate the fair value of the financial instruments to which we are a party at December 31, 2021 and 2022. Raw Materials – Our Chemicals Segment is exposed to market risk from changes in commodity prices relating to our raw materials.
See Notes 1 and 19 to our Consolidated Financial Statements for a discussion of the assumptions we used to estimate the fair value of the financial instruments to which we are a party at December 31, 2022 and 2023. Raw Materials – Our Chemicals Segment is exposed to market risk from changes in commodity prices relating to our raw materials.
The fixed-rate debt instruments minimize earnings volatility that would result from changes in interest rates. The Kronos Global Revolver is a variable-rate instrument; however, Kronos had no borrowings under this facility during 2021 or 2022.
The fixed-rate debt instruments minimize earnings volatility that would result from changes in interest rates. The Kronos Global Revolver is a variable-rate instrument; however, Kronos had no borrowings under this facility during 2022 or 2023.
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 Kronos’ Senior 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 Kronos’ Senior Secured Notes, as such indebtedness is denominated in euros.
At December 31, 2022, we had the equivalent of $426.5 million outstanding under Kronos’ euro-denominated Senior Notes (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 such date would be approximately $43 million.
At December 31, 2023, we had the equivalent of $442.5 million outstanding under Kronos’ euro-denominated 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.
At December 31, 2022 we have $74.5 million invested in marketable debt securities at an average interest rate of approximately 3%. At December 31, 2022 our aggregate indebtedness was split between 78% of fixed-rate instruments (December 31, 2021 – 74%) and 22% of variable-rate borrowings (December 31, 2021 – 26%).
At December 31, 2023 we have $58.7 million invested in marketable debt securities at an average interest rate of approximately 4.3%. At December 31, 2023 our aggregate indebtedness was split between 83% of fixed-rate instruments (December 31, 2022 – 78%) and 17% of variable-rate borrowings (December 31, 2022 – 22%).
Earnings are primarily affected by fluctuations in the value of the U.S. dollar relative to the euro, the Canadian dollar, the Norwegian krone and, to a lesser extent, the United Kingdom pound sterling and the value of the euro relative to the Norwegian krone. - 63 - ​ The majority of our sales from non-U.S. operations are denominated in currencies other than the U.S. dollar, principally the euro, other major European currencies and the Canadian dollar.
Earnings are primarily affected by fluctuations in the value of the U.S. dollar relative to the euro, the Canadian dollar, the Norwegian krone and, to a lesser extent, the United Kingdom pound sterling and the value of the euro relative to the Norwegian krone.
Consequently, the translated U.S. dollar value of our non-U.S. sales and operating results are subject to currency exchange rate fluctuations which may favorably or unfavorably impact reported earnings.
Certain raw materials used worldwide, primarily titanium-containing feedstocks, are purchased primarily in U.S. dollars, while labor and other production and administrative costs are purchased primarily in local currencies. Consequently, the translated U.S. dollar value of our non-U.S. sales and operating results are subject to currency exchange rate fluctuations which may favorably or unfavorably impact reported earnings.
A portion of our sales generated from our non-U.S. operations is denominated in the U.S. dollar (and consequently our non-U.S. operations will generally hold U.S. dollars from time to time). Certain raw materials used worldwide, primarily titanium-containing feedstocks, are purchased primarily in U.S. dollars, while labor and other production and administrative costs are purchased primarily in local currencies.
The majority of our sales from non-U.S. operations are denominated in currencies other than the U.S. dollar, principally the euro, other major European currencies and the Canadian dollar. A portion of our sales generated from our non-U.S. operations is denominated in the U.S. dollar (and consequently our non-U.S. operations will generally hold U.S. dollars from time to time).
Added
See Note 9 to our Consolidated Financial Statements. 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.

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