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What changed in NL INDUSTRIES INC's 10-K — 2022 vs 2023

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

+362 added−349 removedSource: 10-K (2024-03-06) vs 10-K (2023-03-08)

Top changes in NL INDUSTRIES INC's 2023 10-K

362 paragraphs added · 349 removed · 288 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

90 edited+14 added−10 removed104 unchanged
Biggest changeThe 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 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 energy, ore, zinc, aluminum, steel and brass costs) and our ability to pass those costs on to our customers or offset them with reductions in other operating costs; ● Changes in the availability of raw material (such as ore); ● General global economic and political conditions that harm the worldwide economy, disrupt our supply chain, increase material and energy costs or reduce demand or perceived demand for Kronos’ TiO 2 and our products or impair our ability to operate our facilities (including changes in the level of gross domestic product in -2- ​ 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, transportation interruptions, cyber-attacks and public health crises such as COVID-19); ● Competitive products and substitute products; ● Price and product competition from low-cost manufacturing sources (such as China); ● Customer and competitor strategies; ● Potential consolidation of Kronos’ competitors; ● Potential consolidation of Kronos’ customers; ● The impact of pricing and production decisions; ● Competitive technology positions; ● Our ability to protect or defend intellectual property rights; ● Potential difficulties in integrating future acquisitions; ● Potential difficulties in upgrading or implementing accounting and manufacturing software systems; ● The introduction of trade barriers or trade disputes; ● Fluctuations in currency exchange rates (such as changes in the exchange rate between the U.S. dollar and each of the euro, the Norwegian krone and the Canadian dollar and between the euro and the Norwegian krone), or possible disruptions to our business resulting from uncertainties associated with the euro or other currencies; ● Decisions to sell operating assets other than in the ordinary course of business; ● Kronos’ ability to renew or refinance credit facilities; ● Increases in interest rates; ● Our ability to maintain sufficient liquidity; ● The timing and amounts of insurance recoveries; ● The ability of our subsidiaries or affiliates to pay us dividends; ● Uncertainties associated with CompX’s development of new products and product features; ● The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters, including future tax reform; ● Our ability to utilize income tax attributes or changes in income tax rates related to such attributes, the benefits of which may or may not have been recognized under the more-likely-than-not recognition criteria; ● Environmental matters (such as those requiring compliance with emission and discharge standards for existing and new facilities or new developments regarding environmental remediation or decommissioning obligations at sites related to our former operations); ● Government laws and regulations and possible changes therein (such as changes in government regulations which might impose various obligations on former manufacturers of lead pigment and lead-based paint, including us, with respect to asserted health concerns associated with the use of such products), including new environmental 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 our lead pigment and environmental matters); and ● Possible future litigation. -3- ​ Should one or more of these risks materialize or if the consequences of such a development worsen, or should the underlying assumptions prove incorrect, actual results could differ materially from those currently forecasted or expected.
Biggest changeThe 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 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 energy, ore, zinc, aluminum, steel and brass costs) and our ability to pass those costs on to our customers or offset them with reductions in other operating costs; ● Changes in the availability of raw material (such as ore); -2- ​ ● General global economic and political conditions that harm the worldwide economy, disrupt our supply chain, increase material and energy costs or reduce demand or perceived demand for Kronos’ TiO 2 and our products or impair our ability to operate our facilities (including changes in the level of gross domestic product in various regions of the world, 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; ● Price and product competition from low-cost manufacturing sources (such as China); ● Customer and competitor strategies; ● Potential consolidation of Kronos’ competitors; ● Potential consolidation of Kronos’ customers; ● The impact of pricing and production decisions; ● Competitive technology positions; ● Our ability to protect or defend intellectual property rights; ● Potential difficulties in integrating future acquisitions; ● Potential difficulties in upgrading or implementing accounting and manufacturing software systems; ● The introduction of trade barriers or trade disputes; ● Fluctuations in currency exchange rates (such as changes in the exchange rate between the U.S. dollar and each of the euro, the Norwegian krone and the Canadian dollar and between the euro and the Norwegian krone), or possible disruptions to our business resulting from uncertainties associated with the euro or other currencies; ● Decisions to sell operating assets other than in the ordinary course of business; ● Kronos’ ability to renew or refinance credit facilities; ● Increases in interest rates; ● Our ability to maintain sufficient liquidity; ● The timing and amounts of insurance recoveries; ● The ability of our subsidiaries or affiliates to pay us dividends; ● Uncertainties associated with CompX’s development of new products and product features; ● The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters, including future tax reform; ● Our ability to utilize income tax attributes or changes in income tax rates related to such attributes, the benefits of which may or may not have been recognized under the more-likely-than-not recognition criteria; -3- ​ ● Environmental matters (such as those requiring compliance with emission and discharge standards for existing and new facilities or new developments regarding environmental remediation or decommissioning obligations at sites related to our former operations); ● Government laws and regulations and possible changes therein (such as changes in government regulations which might impose various obligations on former manufacturers of lead pigment and lead-based paint, including us, with respect to asserted health concerns associated with the use of such products), including new environmental, 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 our lead pigment and environmental matters); and ● Pending or possible future litigation or other actions.
CompX’s major trademarks and brand names in addition to CompX ® include: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Security Products Security Products Marine Components CompX ® Security Products™ ​ Lockview ® ​ CompX Marine ® ​ National Cabinet Lock ® ​ System 64 ® ​ Custom Marine ® ​ Fort Lock ® ​ SlamCAM ® ​ Livorsi ® Marine ​ Timberline ® Lock ® ​ RegulatoR ® ​ Livorsi II ® Marine ​ Chicago Lock ® ​ CompXpress ® ​ CMI Industrial ® ​ STOCK LOCKS ® ​ GEM ® ​ Custom Marine ® Stainless Exhaust ​ KeSet ® ​ Turbine™ ​ The #1 Choice in Performance Boating ® ​ TuBar ® ​ NARC iD ® ​ Mega Rim ® ​ StealthLock ® ​ NARC ® ​ Race Rim ® ​ ACE ® ​ ecoForce ® ​ Vantage View ® ​ ACE ® II ​ Pearl ® ​ GEN-X ® ​ CompX eLock ® ​ ​ ​ ​ ​ ​ Sales, marketing and distribution - A majority of CompX’s component sales are direct to large OEM customers through its factory-based sales and marketing professionals supported by engineers working in concert with field salespeople and independent manufacturer’s representatives.
CompX’s major trademarks and brand names in addition to CompX ® include: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Security Products Security Products Marine Components CompX ® Security Products™ ​ Lockview ® ​ CompX Marine ® ​ National Cabinet Lock ® ​ System 64 ® ​ Custom Marine ® ​ Fort Lock ® ​ SlamCAM ® ​ Livorsi ® Marine ​ Timberline ® Lock ® ​ RegulatoR ® ​ Livorsi II ® Marine ​ Chicago Lock ® ​ CompXpress ® ​ CMI Industrial ® ​ STOCK LOCKS ® ​ GEM ® ​ Custom Marine ® Stainless Exhaust ​ KeSet ® ​ Turbine™ ​ The #1 Choice in Performance Boating ® ​ TuBar ® ​ NARC iD ® ​ Mega Rim ® ​ StealthLock ® ​ NARC ® ​ Race Rim ® ​ ACE ® ​ ecoForce ® ​ Vantage View ® ​ ACE ® II ​ Pearl ® ​ GEN-X ® ​ CompX eLock ® ​ ​ ​ ​ ​ ​ -6- ​ Sales, marketing and distribution - A majority of CompX’s component sales are direct to large OEM customers through its factory-based sales and marketing professionals supported by engineers working in concert with field salespeople and independent manufacturer’s representatives.
CompX 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 served by its products. 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 served by its products. Consequently, overall operating margins can be negatively affected by commodity-related raw material cost pressures.
(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 it 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 it is entitled.
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.
CompX’s Security Products business has one manufacturing facility in Mauldin, South Carolina and one in Grayslake, Illinois which is shared with its Marine Components business. CompX believes it is a North American market leader in the manufacture and sale of cabinet locks and other locking mechanisms.
CompX’s Security Products business has one manufacturing facility in Mauldin, South Carolina and one in Grayslake, Illinois which is shared with its Marine Components business. CompX believes it is a North -4- ​ American market leader in the manufacture and sale of cabinet locks and other locking mechanisms.
TiO 2 is the largest commercially used whitening pigment because it has a high refractive rating, giving it more hiding power than any other commercially produced white pigment. In addition, TiO 2 has excellent resistance to interaction with other chemicals, good thermal stability and resistance to ultraviolet degradation.
TiO 2 is the largest commercially used whitening pigment because it has a high refractive rating, giving it more hiding power than any other commercially produced white pigment. In addition, TiO 2 has excellent resistance to interaction -7- ​ with other chemicals, good thermal stability and resistance to ultraviolet degradation.
These specialty chemicals are used in applications in the formulation of pearlescent pigments, production of electroceramic capacitors for cell phones and other electronic devices and natural gas pipe and other specialty applications. Manufacturing, operations and properties - Kronos produces TiO 2 in two crystalline forms: rutile and anatase.
These specialty chemicals are used in applications in the formulation of pearlescent pigments, production of electroceramic capacitors for cell phones and other electronic devices and natural gas pipe and other specialty applications. -9- ​ Manufacturing, operations and properties - Kronos produces TiO 2 in two crystalline forms: rutile and anatase.
Price and availability are the most significant competitive factors along with quality and customer service for the majority of its product grades. Increasingly, Kronos is focused on providing pigments that are differentiated to meet specific customer requests and specialty grades that are differentiated from its competitors’ products.
Price and availability are the most significant competitive factors along with quality and customer service for the majority of its product grades. Increasingly, Kronos is focused on providing pigments that are differentiated to meet specific customer -13- ​ requests and specialty grades that are differentiated from its competitors’ products.
We and other entities that may be affiliated with Contran routinely evaluate acquisitions of interests in, or combinations with, companies, including related companies that provide strategic opportunities and synergies or that we perceive to be undervalued in the marketplace. These companies may or may not be engaged in businesses related to our current businesses.
We and other entities that may be affiliated with Contran routinely evaluate acquisitions of interests in, or combinations with, companies, including related companies that provide strategic opportunities and synergies or that we perceive to be undervalued in the marketplace. These companies may or may not be engaged in businesses related to our -18- ​ current businesses.
The amount of TiO 2 used in coatings varies widely depending on the opacity, color and quality desired. In general, the higher the opacity requirement of the coating, the greater the TiO 2 content. TiO 2 for plastics – Kronos produces TiO 2 pigments that improve the optical and physical properties of plastics, including whiteness and opacity.
The amount of TiO 2 used in coatings varies widely depending -8- ​ on the opacity, color and quality desired. In general, the higher the opacity requirement of the coating, the greater the TiO 2 content. TiO 2 for plastics – Kronos produces TiO 2 pigments that improve the optical and physical properties of plastics, including whiteness and opacity.
Kronos and CompX expect their manufacturing facilities to produce 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. Kronos and CompX require employees to comply with such requirements.
Kronos and CompX expect their manufacturing facilities to produce products safely and in compliance with local regulations, policies, standards and practices intended to protect the environment and their people -17- ​ and have established global policies designed to promote compliance. Kronos and CompX require their employees to comply with such requirements.
CompX has three production facilities in the United States. ​ Chemicals Kronos Worldwide, Inc. - 31% owned at December 31, 2022 Kronos is a leading global producer and marketer of value-added titanium dioxide pigments, or TiO 2, a base industrial product used in imparting whiteness, brightness, opacity and durability to a diverse range of customer applications and end-use markets, including coatings, plastics, paper, inks, cosmetics, pharmaceuticals and other industrial and consumer “quality-of-life” products.
CompX has three production facilities in the United States. ​ Chemicals Kronos Worldwide, Inc. - 31% owned at December 31, 2023 Kronos is a leading global producer and marketer of value-added titanium dioxide pigments, or TiO 2, a base industrial product used in imparting whiteness, brightness, opacity and durability to a diverse range of customer applications and end-use markets, including coatings, plastics, paper, inks, cosmetics, pharmaceuticals and other industrial and consumer “quality-of-life” products.
Kronos 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 negotiations Sierra Rutile Limited ​ Rutile ore ​ Renewal terms upon negotiations Iluka Resources Limited ​ Rutile ore ​ Renewal terms upon negotiations Saraf Agencies Private Limited ​ Chloride process grade slag ​ Renewal terms upon negotiations In the past Kronos has been, and expects it will continue to be, successful in obtaining short-term and long-term extensions to these and other existing supply contracts 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 negotiations Sierra Rutile Limited ​ Rutile ore ​ Renewal terms upon negotiations Iluka Resources Limited ​ Rutile ore ​ Renewal terms upon negotiations Saraf Agencies Private Limited ​ Chloride process grade slag ​ Renewal terms upon negotiations In the past Kronos has been, and expects it will continue to be, successful in obtaining short-term and long-term extensions to these and other existing supply contracts.
Kronos, 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. Kronos believes it 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. Kronos believes it has developed considerable expertise and efficiency in the manufacture, sale, shipment and service of its products in domestic and international markets.
Component Products CompX International Inc. - 87% owned at December 31, 2022 CompX manufactures engineered components that are sold to a variety of industries including postal, recreational transportation (including boats), office and institutional furniture, cabinetry, tool storage, healthcare, gas stations and vending equipment.
Component Products CompX International Inc. - 87% owned at December 31, 2023 CompX manufactures engineered components that are sold to a variety of industries including postal, recreational transportation (including boats), office and institutional furniture, cabinetry, tool storage, healthcare, gas stations and vending equipment.
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.
Two general managers manage the operations of the joint venture acting under the direction of the supervisory committee. Kronos appoints one general manager and Venator appoints the other. -10- ​ Kronos does not consolidate LPC because Kronos does not control it. Kronos accounts for its interest in the joint venture by the equity method.
Two general managers manage the operations of the joint venture acting under the direction of the supervisory committee. Kronos appoints one general manager and Venator appoints the other. -11- ​ Kronos does not consolidate LPC because Kronos does not control it. Kronos accounts for its interest in the joint venture by the equity method.
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.
CompX also has a standardized product line suitable -4- ​ 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.
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.
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.
Kronos and CompX promote a respectful, diverse and inclusive workplace in which all individuals are treated with respect and dignity. -16- ​ OTHER In addition to our 87% ownership of CompX and our 31% ownership of Kronos at December 31, 2022, we also hold certain marketable securities and other investments. See Note 5 to our Consolidated Financial Statements.
Kronos and CompX promote a respectful, diverse and inclusive workplace in which all individuals are treated with respect and dignity. OTHER In addition to our 87% ownership of CompX and our 31% ownership of Kronos at December 31, 2023, we also hold certain marketable securities and other investments. See Note 5 to our Consolidated Financial Statements.
Kronos and CompX conduct their businesses in ways that provide all personnel with a safe and healthy work environment and have established safety and environmental programs and goals to achieve such results.
Kronos and CompX conduct their businesses in ways that provide all personnel with a safe and healthy work environment and have established safety and environmental programs and goals to achieve these results.
Kronos has also from time to time been involved in disputes over intellectual property. Patents – Kronos has obtained patents and has numerous patent applications pending that cover its products and the technology used in the manufacture of its products. Kronos’ patent strategy is important to it and its continuing business activities.
Kronos has also from time to time been involved in disputes over intellectual property. -14- ​ 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.
CompX operates three low-emission manufacturing facilities and CompX’s production processes requiring waste-water discharge are consolidated at its Mauldin, South Carolina facility. -6- ​ This facility has received a ReWa Gold Award from Renewable Water Resources, an organization which sets regulatory and water policies for the Mauldin facility’s geographic region, for multiple years for its exemplary performance.
CompX operates three low-emission manufacturing facilities and CompX’s production processes requiring waste-water discharge are consolidated at its Mauldin, South Carolina facility. This facility has received a ReWa Compliance Excellence Award from Renewable Water Resources, an organization which sets regulatory and water policies for the Mauldin facility’s geographic region, for multiple years for its exemplary performance.
During 2022, Kronos had an estimated 7% share of worldwide TiO 2 sales volume, and based on sales volume Kronos believes it 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 Kronos believes it 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.
In addition to salaries, these programs, which vary by country/region, can include annual bonuses, a defined benefit pension plan (for Kronos), a defined contribution plan -15- ​ 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 country/region, can include annual bonuses, a defined benefit pension plan (for Kronos), a defined contribution plan with employer matching, a profit sharing plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, employee assistance programs, and tuition assistance.
At December 31, 2022, approximately 88% of Kronos’ worldwide workforce is organized under collective bargaining agreements. 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 its business, results of operations, financial position or liquidity.
At December 31, 2023, approximately 78% of Kronos’ worldwide workforce is organized under collective bargaining agreements. 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 its business, results of operations, financial position or liquidity.
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. 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. Competition - The TiO 2 industry is highly competitive.
Organization At December 31, 2022, Valhi, Inc. (NYSE: VHI) held approximately 83% of our outstanding common stock and a wholly-owned subsidiary of Contran Corporation held approximately 92% of Valhi’s outstanding common stock. As discussed in Note 1 to our Consolidated Financial Statements, Lisa K. Simmons and a trust established for the benefit of Ms.
Organization At December 31, 2023, Valhi, Inc. (NYSE: VHI) held approximately 83% of our outstanding common stock and a wholly-owned subsidiary of Contran Corporation held approximately 91% of Valhi’s outstanding common stock. As discussed in Note 1 to our Consolidated Financial Statements, Lisa K. Simmons and a trust established for the benefit of Ms.
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.
Kronos owns the Leverkusen facility, which represents about one-third of Kronos’ 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 Kronos’ 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.
Kronos’ major customers include domestic and international paint, plastics, decorative laminate and paper manufacturers. Kronos ships TiO 2 to its customers in either a dry or slurry form via rail, truck and/or ocean carrier. Sales of Kronos’ core TiO 2 pigments represented approximately 92% of its net sales in 2022.
Kronos’ major customers include domestic and international paint, plastics, decorative laminate and paper manufacturers. Kronos ships TiO 2 to its customers in either a dry or slurry form via rail, truck and/or ocean carrier. Sales of Kronos’ core TiO 2 pigments represented approximately 90% of its net sales in 2023.
Kronos sells to a diverse customer base with only one customer representing 10% or more of its net sales in 2022 (Behr Process Corporation – 10%). Kronos’ largest ten customers accounted for approximately 33% of net sales in 2022. Neither Kronos’ business as a whole nor any of its principal product groups is seasonal to any significant extent.
Kronos sells to a diverse customer base with only one customer representing 10% or more of its net sales in 2023 (Behr Process Corporation – 12%). Kronos’ largest ten customers accounted for approximately 35% of net sales in 2023. Neither Kronos’ business as a whole nor any of its principal product groups is seasonal to any significant extent.
These individuals have the responsibility for improving Kronos’ chloride and sulfate production processes, improving product quality and strengthening Kronos’ competitive position by developing new products and applications. Kronos’ expenditures for these activities were approximately $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 Kronos’ 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 expects to spend approximately $14 million on research and development in 2024.
Kronos continually seeks to improve the quality of its grades and has been successful in developing new grades for existing and new applications to meet the needs of its customers and increase product life cycles. Since the beginning of 2017, Kronos has added nine new grades for pigments and other applications.
Kronos continually seeks to improve the quality of its grades and has been successful in developing new grades for existing and new applications to meet the needs of its customers and increase product life cycles. Since the beginning of 2019, Kronos has added seven new grades for pigments and other applications.
CompX uses lost time incidents as a key measure of worker safety. CompX defines lost time incidents as work-related accidents where a worker sustains an injury that results in time away from work. CompX had lost time incidents of nil in 2020, one in 2021, and three in 2022.
CompX uses lost time incidents as a key measure of worker safety. CompX defines lost time incidents as work-related accidents where a worker sustains an injury that results in time away from work. CompX had one lost time incident in 2021, three in 2022 and one in 2023.
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 % ​ Kronos believes it 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 % ​ Kronos believes it is the leading seller of TiO 2 in several countries, including Germany.
Kronos believes that all of its facilities are in substantial compliance with applicable environmental laws. -14- ​ From time to time, new environmental, health and safety regulations are passed or proposed in the countries in which Kronos operates or sells its products, seeking to regulate its operations or to restrict, limit or classify TiO 2 .
From time to time, new environmental, health and safety regulations are passed or proposed in the countries in which Kronos operates or sells its products, seeking to regulate its operations or to restrict, limit or classify TiO 2 . Kronos believes that it is in substantial compliance with laws applicable to the regulation of TiO 2 .
Products and end-use markets - Kronos, including its predecessors, has produced and marketed TiO 2 in North America and Europe, its primary markets, for over 100 years. Kronos believes it 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 - Kronos, including its predecessors, has produced and marketed TiO 2 in North America and Europe, its primary markets, for over 100 years. Kronos believes it is the largest chloride process TiO 2 producer in Europe with 44% of its 2023 sales volumes attributable to markets in Europe.
Kronos has production facilities in Europe and North America. Sales of its core TiO 2 pigments represented about 92% of Kronos’ net sales in 2022, with sales of other products that are complementary to Kronos’ TiO 2 business comprising the remainder. ​ COMPONENT PRODUCTS - COMPX INTERNATIONAL INC.
Kronos has production facilities in Europe and North America. Sales of its core TiO 2 pigments represented approximately 90% of Kronos’ net sales in 2023, with sales of other products that are complementary to Kronos’ TiO 2 business comprising the remainder. ​ COMPONENT PRODUCTS - COMPX INTERNATIONAL INC.
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.
Patents generally have a term of 20 years and CompX’s patents have remaining terms ranging from one year to 18 years at December 31, 2022.
Patents generally have a term of 20 years and CompX’s patents have remaining terms ranging from one year to 17 years at December 31, 2023.
These raw materials are purchased from several suppliers, are readily available from numerous sources and accounted for approximately 17% of our total cost of sales for 2022. Total material costs, including purchased components, represented approximately 47% of our 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 total cost of sales for 2023. Total material costs, including purchased components, represented approximately 48% of our cost of sales in 2023.
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 % ​ 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 % ​ 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.
This internal safety metric may not be directly comparable to a recordable incident rate calculated under U.S. law. Kronos’ global total frequency rate 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).
This internal safety metric may not be directly comparable to a recordable incident rate calculated under U.S. law. Kronos’ global total frequency rate 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).
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.
As of December 31, 2022, CompX employed 609 people, all in the United States. As of December 31, 2022, Kronos employed the following number of people: ​ ​ ​ Europe 1,841 Canada 369 United States (1) 56 Total 2,266 (1) Excludes employees of Kronos’ LPC joint venture. CompX believes its labor relations are good at all of its facilities.
As of December 31, 2023, CompX employed 555 people, all in the United States. As of December 31, 2023, Kronos employed the following number of people: ​ ​ ​ Europe 1,779 Canada 369 United States (1) 48 Total 2,196 (1) Excludes employees of Kronos’ LPC joint venture. CompX believes its labor relations are good at all of its facilities.
Overall, Kronos is one of the top five producers of TiO 2 in the world, with an estimated 7% share of worldwide TiO 2 sales volume in 2022. -7- ​ Kronos offers its customers a broad portfolio of products that include over 40 different TiO 2 pigment grades under the KRONOS ® trademark, which provide a variety of performance properties to meet customers’ specific requirements.
Overall, Kronos is one of the top five producers of TiO 2 in the world. Kronos offers its customers a broad portfolio of products that include over 50 different TiO 2 pigment grades under the KRONOS ® trademark, which provide a variety of performance properties to meet customers’ specific requirements.
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 it expects, based on internal estimates, to last approximately 50 years. ● Kronos manufactures and sells iron-based chemicals, which are co-products and processed co-products of sulfate and chloride process TiO 2 pigment production.
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 and its four principal competitors) account for approximately 52% of the world’s production capacity. -12- ​ The following chart shows Kronos’ estimate of worldwide production capacity in 2022: ​ ​ ​ ​ ​ Worldwide production capacity – 2022 Chemours 15 % Tronox 12 % LB Group Co.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.
The following chart shows Kronos’ estimate of worldwide production capacity in 2023: ​ ​ ​ ​ ​ Worldwide production capacity – 2023 Chemours 14 % Tronox 12 % 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.
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 believes that Western Europe and North America currently each account for approximately 16% of global TiO 2 consumption.
Kronos believes Western Europe and North America currently account for approximately 14% and 15% of global TiO 2 consumption, respectively.
CompX sells to a diverse customer base with only two customers representing 10% or more of its sales in 2022 (United States Postal Service representing 14% and Malibu Boats, LLC representing 12%). CompX’s largest ten customers accounted for approximately 52% of its sales in 2022. Competition - The markets in which CompX participates are highly competitive.
CompX sells to a diverse customer base with only one customer representing 10% or more of its sales in 2023 (United States Postal Service representing 24% of which 11% related to a pilot project). CompX’s largest ten customers accounted for approximately 52% of its sales in 2023. Competition - The markets in which CompX participates are highly competitive.
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.
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 protects its trademark and trade secret rights and has entered into license agreements with third parties concerning various intellectual property matters.
Patents, trademarks, trade secrets and other intellectual property rights - Kronos has a comprehensive intellectual property protection strategy that includes obtaining, maintaining and enforcing its patents, primarily in the United States, Canada and Europe. Kronos also registers, maintains, and protects its trademark rights.
Kronos 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 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.
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.
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 ​ -11- ​ 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. ​ -12- ​ 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.
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.
We periodically update our board of directors on cyber-related risks and cybersecurity programs. In an effort to align our non-employee directors’ financial interests with those of our stockholders, our Board established share ownership guidelines for our non-management directors. Kronos has taken steps to integrate ESG considerations into operating decisions with other critical business factors.
In an effort to align our non-employee directors’ financial interests with those of our stockholders, our board of directors established share ownership guidelines for our non-management directors. 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.
Occasionally, Kronos may pay penalties. To date, such penalties have not involved amounts having a material adverse effect on Kronos’ consolidated financial position, results of operations or liquidity.
Occasionally, Kronos may pay penalties. To date, such penalties have not involved amounts having a material adverse effect on Kronos’ consolidated financial position, results of operations or liquidity. Kronos believes that all of its facilities are in substantial compliance with applicable environmental laws.
The following table sets forth the location, size and business operations for each of CompX’s principal operating facilities at December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ Business ​ ​ ​ Size Facility Name Operations Location (square feet) Owned Facilities : National (1) SP Mauldin, SC 198,000 Grayslake (1) SP/MC Grayslake, IL 133,000 Custom (1) MC Neenah, WI 95,000 ​ SP – Security Products business MC – Marine Components business (1) ISO-9001 registered facilities CompX believes all of its facilities are well maintained and satisfactory for their intended purposes.
The following table sets forth the location, size and business operations for each of CompX’s principal operating facilities at December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ Business ​ ​ ​ Size Facility Name Operations Location (square feet) Owned Facilities : National (1) SP Mauldin, SC 198,000 Grayslake (1) SP/MC Grayslake, IL 133,000 Custom (1) MC Neenah, WI 95,000 ​ SP – Security Products business MC – Marine Components business (1) ISO-9001 registered facilities CompX believes all of its facilities are well maintained and satisfactory for their intended purposes. -5- ​ Raw materials - The primary raw materials used in CompX’s manufacturing processes are: ● Security Products - zinc and brass (for the manufacture of locking mechanisms). ● Marine Components - stainless steel (for the manufacture of exhaust headers and pipes and wake enhancement systems), aluminum (for the manufacture of throttles and trim tabs) and other components.
All manufacturing facilities have detailed, site-specific emergency response procedures Kronos and CompX believe adequately address regulatory compliance, vulnerability to potential hazards, emergency response and action plans, employee training, alarms and warning systems and crisis communication. At a corporate level, Kronos and CompX engage in periodic reviews of their cybersecurity programs, including cybersecurity risk and threats.
All manufacturing facilities have detailed, site-specific emergency response procedures Kronos and CompX believe adequately address regulatory compliance, vulnerability to potential hazards, emergency response and action plans, employee training, alarms and warning systems and crisis communication.
Kronos’ chloride process production and remaining sulfate production capacity has increased by approximately 5% over the past ten years due to debottlenecking programs with only moderate -9- ​ capital expenditures. Kronos operated its facilities at reduced capacities in the fourth quarter of 2022 and into 2023.
Kronos’ chloride process production and remaining sulfate production capacity has increased by approximately 5% over the past ten years due to debottlenecking programs with only moderate capital expenditures.
During 2021, Kronos was notified by government authorities in Norway that the classification of a dam at its mine facilities was changed to the highest level for Norwegian classification of dam structures.
During 2021, Kronos was notified by government authorities in Norway that the classification of a dam at its mine facilities was changed to the highest level for Norwegian classification of dam structures. As a result, its mine operations are subject to a higher degree of oversight and regulation than existed prior to this change in classification.
Prices began to stabilize in the latter half of 2022, although at elevated levels. The prices for stainless steel, the primary raw material used for the manufacture of marine -5- ​ exhaust headers and pipes and wake enhancement systems, experienced significant volatility during 2021 and 2022.
The prices for stainless steel, the primary raw material used for the manufacture of marine exhaust headers and pipes and wake enhancement systems, experienced significant volatility during 2021 and 2022, but were more stable in 2023.
The following table presents the division of Kronos’ expected 2023 manufacturing capacity by plant location and type of manufacturing process: ​ ​ ​ ​ ​ ​ ​ ​ ​ % of capacity by TiO 2 manufacturing process Facility ​ Description ​ Chloride Sulfate Leverkusen, Germany (1) ​ TiO 2 production, chloride process, co-products ​ ​ 32 % ​ ​ — % Nordenham, Germany ​ TiO 2 production, sulfate process, co-products ​ ​ — ​ ​ ​ 11 ​ Langerbrugge, Belgium ​ TiO 2 production, chloride process, co-products, titanium chemicals products ​ ​ 15 ​ ​ ​ — ​ Fredrikstad, Norway (2) ​ TiO 2 production, sulfate process, co-products ​ ​ — ​ ​ ​ 7 ​ Varennes, Canada ​ TiO 2 production, chloride and sulfate process, slurry facility, titanium chemicals products ​ ​ 17 ​ ​ ​ 3 ​ Lake Charles, LA, US (3) ​ TiO 2 production, chloride process ​ ​ 15 ​ ​ ​ — ​ Total ​ ​ ​ ​ 79 % ​ ​ 21 % ​ (1) The Leverkusen facility is located within an extensive manufacturing complex owned by Bayer AG.
Kronos operated its facilities at reduced capacities in the fourth quarter of 2022 and through 2023. ​ -10- ​ The following table presents the division of Kronos’ expected 2024 manufacturing capacity by plant location and type of manufacturing process: ​ ​ ​ ​ ​ ​ ​ ​ ​ % of capacity by TiO 2 manufacturing process Facility ​ Description ​ Chloride Sulfate Leverkusen, Germany (1) ​ TiO 2 production, chloride process, co-products ​ ​ 32 % ​ ​ — % Nordenham, Germany ​ TiO 2 production, sulfate process, co-products ​ ​ — ​ ​ ​ 11 ​ Langerbrugge, Belgium ​ TiO 2 production, chloride process, co-products, titanium chemicals products ​ ​ 16 ​ ​ ​ — ​ Fredrikstad, Norway (2) ​ TiO 2 production, sulfate process, co-products ​ ​ — ​ ​ ​ 6 ​ Varennes, Canada ​ TiO 2 production, chloride and sulfate process, slurry facility, titanium chemicals products ​ ​ 18 ​ ​ ​ 3 ​ Lake Charles, LA, US (3) ​ TiO 2 production, chloride process ​ ​ 14 ​ ​ ​ — ​ Total ​ ​ ​ ​ 80 % ​ ​ 20 % ​ (1) The Leverkusen facility is located within a more extensive manufacturing complex.
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.
The primary purpose of its ESG Report is to describe Kronos’ policies and programs in the area of ESG, including certain internal metrics and benchmarks related to various aspects of ESG. Kronos voluntarily developed these internal metrics and benchmarks, which Kronos uses to identify progress and opportunities for improvement.
Three of its five production facilities maintain certifications to the ISO 50001:2018 Energy Management standard and all locations have local energy teams in place. These teams are responsible for maintaining ISO 50001:2018 certifications (where applicable), performing regular reviews of local energy consumption, making recommendations regarding capital projects that reduce energy consumption and associated Greenhouse Gas (GHG) emissions or enhance efficiency.
These teams are responsible for maintaining ISO 50001:2018 certifications (where applicable), performing regular reviews of local energy consumption, making recommendations regarding capital projects that reduce energy consumption and associated Greenhouse Gas (GHG) emissions or enhance efficiency. When possible, Kronos looks for opportunities to partner with local government authorities through grant opportunities to reduce energy consumption and associated GHG emissions.
Geographic financial information is included in Note 2 to our Consolidated Financial Statements, which is incorporated herein by reference.
Operations and equity investment Information regarding our operations and the companies conducting such operations is set forth below. Geographic financial information is included in Note 2 to our Consolidated Financial Statements, which is incorporated herein by reference.
Kronos’ U.S. manufacturing operations are governed by federal, state and local environmental and worker health and safety laws and regulations.
Water-critical processes are identified and ongoing efforts to minimize water use are incorporated into environmental planning. -15- ​ Kronos’ U.S. manufacturing operations are governed by federal, state and local environmental and worker health and safety laws and regulations.
In North America, Kronos has a TiO 2 plant in Varennes, Quebec, Canada and, through the manufacturing joint venture described below, a 50% interest in a TiO 2 plant near Lake Charles, Louisiana. As part of Kronos’ long-term strategy to increase chloride process production, Kronos phased-out sulfate production at its Leverkusen facility during 2020.
In North America, Kronos has a TiO 2 plant in Varennes, Quebec, Canada and, through the manufacturing joint venture described below, a 50% interest in a TiO 2 plant near Lake Charles, Louisiana.
LB Group. Ltd. previously announced it plans to add an additional 200,000 tons of chloride capacity which we expect will be added incrementally over the next several years. The TiO 2 industry is characterized by high barriers to entry consisting of high capital costs, proprietary technology and significant lead times required to construct new facilities or to expand existing capacity.
LB Group. Ltd. previously announced it plans to add an additional 200,000 tons of chloride capacity which we expect will be added incrementally over the next several years.
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.
Contracts may be terminated with a 12-month written notice (generally for multi-year agreement terms) or based on certain defaults by either party or failure to agree on pricing as noted in the agreements. The primary raw materials used in sulfate process TiO 2 are titanium-containing feedstock, primarily ilmenite or purchased sulfate grade slag, and sulfuric acid.
Kronos expects the raw materials purchased under these contracts, and contracts it may enter into, will meet its chloride process feedstock requirements over the next several years. Multi-year contracts generally may be terminated with a 12-month written notice or based on certain defaults by either party or failure to agree on pricing as noted in the agreements.
Trademarks and trade secrets – Kronos trademarks, including KRONOS ® , are covered by issued and/or pending registrations, including in Canada and the United States. Kronos protects the trademarks it uses in connection with the products it manufactures and sells and has developed goodwill in connection with its long-term use of its trademarks.
Kronos protects the trademarks it uses in connection with the products it manufactures and sells and has developed goodwill in connection with its long-term use of its trademarks. Trade secrets - Kronos conducts research activities in secret and it protects the confidentiality of its trade secrets through reasonable measures, including confidentiality agreements and security procedures, including data security.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeKronos 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 its earnings and decrease its liquidity. -19- ​ Kronos 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 Kronos may not always be able to increase its selling prices to offset the impact of any higher costs or reduced production levels.
Kronos’ and CompX’s patents and other intellectual property rights may be challenged, invalidated, circumvented and rendered unenforceable or otherwise compromised. A failure to protect, defend or enforce intellectual property could have an adverse effect on our financial condition and results of operations.
Kronos’ and CompX’s patents and other intellectual property rights may be challenged, invalidated, circumvented, rendered unenforceable or otherwise compromised. A failure to protect, defend or enforce intellectual property could have an adverse effect on our financial condition and results of operations.
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 Kronos’ 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 Kronos’ manufacturing and regulatory compliance obligations and costs.
The occurrence of any of these factors could result in reduced earnings or operating losses. ● Competitors may be able to drive down prices for CompX’s products beyond its ability to adjust costs because their costs are lower than CompX, especially products sourced from Asia. ● Competitors’ financial, technological and other resources may be greater than CompX’s resources, which may enable them to more effectively withstand changes in market conditions. ● Competitors may be able to respond more quickly than CompX can to new or emerging technologies and changes in customer requirements. ● Consolidation of CompX’s competitors or customers in any of the markets in which it competes may result in reduced demand for its products. ● A reduction of CompX’s market share with one or more of its key customers, or a reduction in one or more of its key customers’ market share for their end-use products, may reduce demand for its products. -18- ​ ● New competitors could emerge by modifying their existing production facilities to manufacture products that compete with CompX’s products. ● CompX may not be able to sustain a cost structure that enables it to be competitive. ● Customers may no longer value CompX’s product design, quality or durability over the lower cost products of its competitors.
The occurrence of any of these factors could result in reduced earnings or operating losses. ● Competitors may be able to drive down prices for CompX’s products beyond its ability to adjust costs because their costs are lower than CompX, especially products sourced from Asia. ● Competitors’ financial, technological and other resources may be greater than CompX’s resources, which may enable them to more effectively withstand changes in market conditions. ● Competitors may be able to respond more quickly than CompX can to new or emerging technologies and changes in customer requirements. ● Consolidation of CompX’s competitors or customers in any of the markets in which it competes may result in reduced demand for its products. ● A reduction of CompX’s market share with one or more of its key customers, or a reduction in one or more of its key customers’ market share for their end-use products, may reduce demand for its products. ● New competitors could emerge by modifying their existing production facilities to manufacture products that compete with CompX’s products. ● CompX may not be able to sustain a cost structure that enables it to be competitive. ● Customers may no longer value CompX’s product design, quality or durability over the lower cost products of its competitors.
The U.S. government and various non-U.S. governmental agencies of countries in which Kronos and CompX operate have determined the consumption of energy derived from fossil fuels is a major contributor to climate change and have 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 Kronos and CompX operate have determined the consumption of energy derived from fossil fuels is a major contributor to climate change and have adopted or are contemplating regulatory changes in response to the potential impact of climate change, including laws and regulations requiring enhanced reporting (such as the Corporate Social Responsibility Directive adopted by the European Union on November 28, 2022) as well as legislation regarding carbon emission costs, GHG emissions and renewable energy targets.
Although it is the practice of Kronos to enter into confidentiality agreements with its employees and third parties to protect its proprietary expertise and other trade secrets, these agreements may not provide sufficient protection for its -21- ​ 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.
Although it is the practice of Kronos to enter into confidentiality agreements with its employees and third parties to protect its proprietary expertise and other trade secrets, these agreements may not provide sufficient protection for its trade secrets or proprietary know-how, or adequate remedies for breaches of such agreements may not be available in the event of an unauthorized use or disclosure of such trade secrets and know-how.
International treaties or agreements may also result in increasing regulation of GHG emissions, including emissions permits and/or energy taxes or the introduction of carbon emissions trading mechanisms. To date, the existing GHG laws and regulations in effect in the various countries in which -22- ​ Kronos or CompX operates have not had a material adverse effect on financial results.
International treaties or agreements may also result in increasing regulation of GHG emissions, including emissions permits and/or energy taxes or the introduction of carbon emissions trading mechanisms. To date, the existing GHG laws and regulations in effect in the various countries in which Kronos or CompX operates have not had a material adverse effect on financial results.
Since expenditures for these types of activities are not considered research and development expense under accounting principles generally accepted in the United States of America (“GAAP”), the amount of CompX’s research and development expenditures, which is not significant, is not indicative of the overall effort involved in the development of new product features.
Since expenditures for these types of activities are not considered research and development expense under accounting principles generally accepted in -20- ​ the United States of America (“GAAP”), the amount of CompX’s research and development expenditures, which is not significant, is not indicative of the overall effort involved in the development of new product features.
Until the timing, scope and extent of any new or future regulation becomes known, we cannot predict the effect on Kronos’ or CompX’s business, results of operations or financial condition.
Until the timing, scope and extent -24- ​ of any new or future regulation becomes known, we cannot predict the effect on Kronos’ or CompX’s business, results of operations or financial condition.
Others may independently discover CompX’s trade secrets and proprietary information, and in such cases CompX could not assert any trade secret rights against such parties. Further, CompX does not know if any of its pending trademark or patent applications will be approved. Costly and time-consuming litigation could be necessary to enforce and determine the scope of intellectual property rights.
Third parties may independently discover CompX’s trade secrets and proprietary information, and in such cases CompX could not assert any trade secret rights against such parties. Further, CompX does not know if any of its pending trademark or patent applications will be approved. Costly and time-consuming litigation could be necessary to enforce and determine the scope of intellectual property rights.
Kronos also may not be able to readily detect breaches of such agreements. The failure of Kronos’ 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.
Kronos also may not be able to readily detect breaches of such agreements. The failure of Kronos’ confidentiality agreements to protect its proprietary technology, -23- ​ 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.
Protection of intellectual property rights, including patents, trade secrets, confidential information, trademarks and tradenames, is important to Kronos’ and CompX’s businesses and their competitive positions. Kronos and CompX endeavor to protect their intellectual property rights in key jurisdictions in which their products are produced or used and in jurisdictions into which their products are imported.
Protection of intellectual property rights, including patents, copyrights, trade secrets, confidential information, trademarks and tradenames, is important to Kronos’ and CompX’s businesses and their competitive positions. Kronos and CompX endeavor to protect their intellectual property rights in key jurisdictions in which their products are produced, sold or used and in jurisdictions into which their products are imported.
Furthermore, periods of extended inclement weather or associated droughts or flooding may inhibit Kronos’ or CompX’s facility operations and delay or hinder shipments of products to customers. Any such events could have a material adverse effect on Kronos’ or CompX’s costs or results of operations. ​ -23- ​
Furthermore, periods of extended inclement weather or associated droughts or flooding may inhibit Kronos’ or CompX’s facility operations and delay or hinder shipments of products to customers. Any such events could have a material adverse effect on Kronos’ or CompX’s costs or results of operations. -25- ​ ​
Kronos and CompX rely on integrated information technology systems to manage, process and analyze data, including to facilitate the manufacture and distribution of their products to and from their plants, receive, process and ship orders, manage the billing of and collections from their customers and manage payments to vendors.
Kronos and CompX rely on integrated information technology systems to manage, process and analyze data, including to facilitate the manufacture and distribution of their products to and from their facilities, receive, process and ship orders, manage the billing of and collections from their customers and manage payments to vendors.
Global economic and political conditions, including natural disasters, terrorist acts, global conflicts and public health crises such as pandemics, could prevent CompX’s vendors from being able to supply these components.
Global economic and political conditions, including natural disasters, terrorist acts, transportation disruptions, global conflicts and public health crises such as pandemics, could prevent CompX’s vendors from being able to supply these components.
If Kronos or CompX must take legal action to protect, defend or enforce intellectual property rights, any suits or proceedings could result in significant costs and diversion of resources and management’s attention, and Kronos or CompX may not prevail in any such suits or proceedings.
If Kronos or CompX must take legal action to protect, defend or enforce intellectual property rights, any suits or proceedings could result in significant costs, including attorney’s fees and diversion of resources and management’s attention, and Kronos or CompX may not prevail in any such suits or proceedings.
Kronos has significant international operations which, along with its customers and suppliers, could be substantially affected by a number of risks arising from operating a multi-national business, including 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.
Kronos has significant international operations which, along with its customers and suppliers, could be substantially affected by a number of risks arising from operating a multi-national business, including 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.
See also Item 3 - “Legal Proceedings - Environmental matters and litigation.” If Kronos’ or CompX’s intellectual property were to be declared invalid, or copied by or become known to competitors, or if Kronos’ or CompX’s competitors were to develop similar or superior intellectual property or technology, their ability to compete could be adversely impacted.
See also Item 3 - “Legal Proceedings - Environmental matters and litigation.” If some or all of Kronos’ or CompX’s intellectual property were to be declared invalid, held to be unenforceable or copied by competitors, or some or all of Kronos’ or CompX’s confidential information become known to competitors, or if Kronos’ or CompX’s competitors were to develop similar or superior intellectual property or technology, their ability to compete could be adversely impacted.
See also certain risk factors discussed in Item 7 – “ Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates.” In addition to the potential effect of these risk factors, any risk factor which could result in reduced earnings or operating losses, or reduced liquidity, could in turn adversely affect our ability to service our liabilities or pay dividends on our common stock or adversely affect the quoted market prices for our securities. -17- ​ Operational Risk Factors Demand for, and prices of, certain of Kronos’ products are influenced by changing market conditions for its products, which may result in reduced earnings or in operating losses.
See also certain risk factors discussed in Item 7 – “ Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates.” In addition to the potential effect of these risk factors, any risk factor which could result in reduced earnings or operating losses, or reduced liquidity, could in turn adversely affect our ability to service our liabilities or pay dividends on our common stock or adversely affect the quoted market prices for our securities.
However, Kronos and CompX may be unable to obtain protection for their intellectual property in key jurisdictions. Although Kronos and CompX have applied for numerous patents and trademarks throughout the world, they may have to rely on judicial enforcement of their patents and other proprietary rights.
However, Kronos and CompX may be unable to obtain protection for their intellectual property in key jurisdictions. Although Kronos and CompX have applied for numerous patents and trademarks throughout the world, they may have to engage in judicial enforcement in order to protect their patent rights and other proprietary rights.
While CompX will continue to emphasize the introduction of innovative new product features that target customer-specific opportunities, we do not know if any new product features it introduces will achieve the same degree of success that it has achieved with its existing products.
While CompX will continue to emphasize the introduction of innovative new product features that target customer-specific opportunities, it does not know if any new product features it introduces will achieve the same degree of success that it has achieved with its existing products. At times CompX works with new and existing customers on specific product innovations.
Kronos has a significant amount of debt, primarily related to its Senior Notes issued in September 2017. As of December 31, 2022, Kronos’ total consolidated debt was approximately $425 million.
Kronos has a significant amount of debt, primarily related to its Senior Secured Notes issued in September 2017 and February 2024. As of December 31, 2023, Kronos’ total consolidated debt was approximately $441 million.
Kronos’ 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, Kronos has other long-term supply and service contracts that provide for various raw materials and services.
Kronos’ 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, Kronos has other long-term supply and service contracts that provide for various raw materials and services.
If Kronos or Kronos’ worldwide vendors are unable to meet their planned or contractual obligations and Kronos was unable to obtain necessary raw materials, Kronos could incur higher costs for raw materials or may be required to reduce production levels.
If Kronos or Kronos’ worldwide vendors are unable to meet their planned or contractual obligations and Kronos was unable to obtain necessary raw materials, Kronos could incur higher costs for raw materials or may be required to reduce production levels. Kronos experienced increases in feedstock costs in 2022 and 2023, for example, which affected its margins.
The occurrence of any of these events could result in reduced earnings or operating losses. CompX operates in mature and highly competitive markets, resulting in pricing pressure and the need to continuously reduce costs. Many of the markets CompX serves are highly competitive, with a number of competitors offering similar products.
CompX operates in mature and highly competitive markets, resulting in pricing pressure and the need to continuously reduce costs. Many of the markets CompX serves are highly competitive, with a number of competitors offering similar products.
Kronos may not be able to refinance any of its debt in a timely manner on favorable terms, if at all, in the current credit markets.
As a result, Kronos may need to refinance all or a portion of its debt before maturity, as we have done in the past. Kronos may not be able to refinance any of its debt in a timely manner on favorable terms, if at all, in the current credit markets.
While Kronos believes it will be able to renew these contracts, Kronos does not know if it will be successful in renewing them or in obtaining long-term extensions to them prior to expiration.
Kronos has supply contracts that provide for its TiO 2 feedstock requirements. While Kronos believes it will be able to renew these contracts, as necessary, Kronos does not know if it will be successful in renewing them or in obtaining long-term extensions to them prior to expiration.
Kronos’ ability to further increase capacity without additional investment in greenfield or brownfield capacity may be limited and as a result, Kronos’ profitability may become even more dependent upon the selling prices of its products.
Kronos’ ability to further increase capacity without additional investment in greenfield or brownfield capacity may be limited and as a result, Kronos’ profitability may become even more dependent upon the selling prices of its products. -19- ​ The TiO 2 industry is concentrated and highly competitive and Kronos faces price pressures in the markets in which it operates, which may result in reduced earnings or operating losses.
To the extent market interest rates rise, the cost of Kronos’ debt could increase, adversely affecting its financial condition, results of operations and cash flows. -20- ​ In addition to Kronos’ indebtedness, Kronos is party to various lease and other agreements (including feedstock purchase contracts and other long-term supply and service contracts, as discussed above) pursuant to which, along with its indebtedness, Kronos is committed to pay approximately $689 million in 2023.
In addition to Kronos’ indebtedness, Kronos is party to various lease and other agreements (including feedstock purchase contracts and other long-term supply and service contracts, as discussed above) pursuant to which, along with its indebtedness, Kronos is committed to pay approximately $543 million in 2024.
Some of Kronos’ competitors may be able to drive down prices for Kronos’ products if their costs are lower than Kronos’ costs. In addition, some of Kronos’ competitors’ financial, technological and other resources may be greater than its resources and such competitors may be better able to withstand changes in market conditions.
In addition, some of Kronos’ competitors’ financial, technological and other resources may be greater than its resources and such competitors may be better able to withstand changes in market conditions. Kronos’ competitors may be able to respond more quickly than it can to new or emerging technologies and changes in customer requirements.
Kronos’ competitors may be able to respond more quickly than it can to new or emerging technologies and changes in customer requirements. Further, consolidation of Kronos’ competitors or customers may result in reduced demand for its products or make it more difficult for Kronos to compete with its competitors.
Further, consolidation of Kronos’ competitors or customers may result in reduced demand for its products or make it more difficult for Kronos to compete with its competitors. The occurrence of any of these events could result in reduced earnings or operating losses.
Similarly, third parties may assert claims against Kronos and Compx and their customers and distributors alleging their products infringe upon third-party intellectual property rights.
Similarly, third parties may assert claims against Kronos and Compx and their customers and distributors alleging their products infringe upon third-party intellectual property rights. In the event that any such third party prevails against Kronos or CompX on such claims, there could be an adverse effect on our financial condition and results of operations.
In addition, Kronos’ ability to borrow funds under its revolving credit facility in the future, in some instances, will depend in part on its ability to maintain specified financial ratios and satisfy certain financial covenants contained in the applicable credit agreement.
In addition, Kronos’ ability to borrow funds under its Global Revolver in the future, in some instances, will depend in part on its ability to maintain specified financial ratios and satisfy certain financial covenants contained in the credit agreement governing the Global Revolver. -22- ​ Kronos’ business may not generate cash flows from operating activities sufficient to enable it to pay its debts when they become due and to fund its other liquidity needs.
These agreements require Kronos to purchase certain minimum quantities or services with minimum purchase commitments aggregating approximately $84 million at December 31, 2022. Kronos’ commitments under these contracts could adversely affect our financial results if Kronos significantly reduces its production and was unable to modify the contractual commitments.
These agreements require Kronos to purchase certain minimum quantities or services with minimum purchase commitments aggregating approximately $72 million at December 31, 2023.
Our assets consist primarily of investments in our operating subsidiaries and affiliate, and we are dependent upon distributions from our subsidiaries and affiliate.
Kronos’ commitments under these contracts could adversely affect our financial results if Kronos significantly reduces its production and was unable to modify the contractual commitments. -21- ​ Our assets consist primarily of investments in our operating subsidiaries and affiliate, and we are dependent upon distributions from our subsidiaries and affiliate.
Kronos’ sales and profitability are largely dependent on the TiO 2 industry. In 2022, 92% of Kronos’ sales were attributable to sales of TiO 2 .
Operational Risk Factors Demand for, and prices of, certain of Kronos’ products are influenced by changing market conditions for its products, which may result in reduced earnings or in operating losses. Kronos’ sales and profitability are largely dependent on the TiO 2 industry. In 2023, approximately 90% of Kronos’ sales were attributable to sales of TiO 2 .
Removed
The TiO 2 industry is concentrated and highly competitive and Kronos faces price pressures in the markets in which it operates, which may result in reduced earnings or operating losses.
Added
Kronos faces significant competition from international and regional competitors, including TiO 2 producers in China, who have significant sulfate production process capacity.
Removed
Introduction of new product features typically requires CompX to increase 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
Chinese producers have also continued to develop chloride process technology, and the risk of substitution of Kronos’ products with products made by Chinese producers could increase if Chinese producers increase the use of chloride process technology and improve the quality of their sulfate and chloride products.
Removed
As CompX 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. Higher costs or unavailability of CompX’s raw materials could negatively impact our financial results.
Added
Some of Kronos’ competitors may be able to drive down prices for Kronos’ products if their costs are lower than Kronos’ costs, including its competitors with vertically integrated sources of raw materials for the chloride process who may have a competitive advantage during periods of high or rising raw material costs or who operate in regions with less stringent regulatory requirements.
Removed
Kronos experienced increases in feedstock costs in 2021 and 2022, and Kronos expects feedstock costs to continue to increase in 2023. Kronos may also experience higher operating costs such as energy costs, which could affect its profitability.
Added
Sometimes CompX has a cost sharing arrangement for development efforts although it may also fully bear the development costs. If a customer were to ultimately reject or abandon custom product innovation efforts, CompX may not be able to recover its development costs. Higher costs or unavailability of CompX’s raw materials could negatively impact our financial results.
Removed
Indebtedness outstanding under Kronos’ global revolving credit facility accrues interest at variable rates.
Added
Kronos has also experienced higher operating costs such as energy costs.
Removed
Kronos’ business may not generate cash flows from operating activities sufficient to enable it to pay its debts when they become due and to fund its other liquidity needs. As a result, Kronos may need to refinance all or a portion of its debt before maturity.
Added
Indebtedness outstanding under Kronos’ global revolving credit facility (Global Revolver) accrues interest at variable rates. To the extent market interest rates rise, the cost of Kronos’ debt could increase, even if the amount borrowed remains the same, adversely affecting its financial condition, results of operations and cash flows.
Removed
A failure to protect, defend or enforce intellectual property rights could have an adverse effect on our financial condition and results of operations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

31 edited+9 added−7 removed52 unchanged
Biggest changeIn 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 we intend to defend NL’s rights and prosecute NL’s claims in this action vigorously.
Biggest changeNL has filed a counterclaim seeking a declaratory judgment that all of the insurers are obligated to provide NL with certain coverage and seeking damages for breach of contract. In December 2020, the trial court denied the insurers’ motion for summary judgment, finding that the arguments raised by the insurers did not bar NL from coverage under the relevant policies.
We do not believe it is probable we have incurred any liability with respect to pending lead pigment litigation cases to which we are a party, and with respect to all such lead pigment litigation cases to which we are a party, we believe liability to us that may result, if any, in this regard cannot be reasonably estimated, because: ● we have 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 us, and ● we have never ultimately been found liable with respect to any such litigation matters, including over 100 cases over a thirty-year period for which we were previously a party and for which we have 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 we are a party, and with respect to all such lead -27- ​ pigment litigation cases to which we are a party, we believe liability to us that may result, if any, in this regard cannot be reasonably estimated, because: ● we have 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 us, and ● we have never ultimately been found liable with respect to any such litigation matters, including over 100 cases over a thirty-year period for which we were previously a party and for which we have been dismissed without any finding of liability.
In the future, if new information regarding such matters becomes available to us (such as a final, non-appealable adverse verdict against us or otherwise ultimately being found liable with respect to such matters), at that time we would consider such information in evaluating any remaining cases then-pending against us as to whether it might then have become probable we have incurred liability with respect to these matters, and whether such liability, if any, could have become reasonably estimable.
In the future, if new information regarding such matters becomes available to us (such as a final, non-appealable adverse verdict -28- ​ against us or otherwise ultimately being found liable with respect to such matters), at that time we would consider such information in evaluating any remaining cases then-pending against us as to whether it might then have become probable we have incurred liability with respect to these matters, and whether such liability, if any, could have become reasonably estimable.
The lawsuit remains pending. NL continues to deny liability and will defend vigorously against all claims. In June 2011, we were served in ASARCO LLC v. NL Industries, Inc., et al. (United States District Court, Western District of Missouri, Case No. 4:11-cv-00138-DGK).
The lawsuit remains pending. NL continues to deny liability and will defend vigorously against all claims. In 2011, we were served in ASARCO LLC v. NL Industries, Inc., et al. (United States District Court, Western District of Missouri, Case No. 4:11-cv-00138-DGK) and ASARCO LLC v. NL Industries, Inc., et al.
We record liabilities related to environmental remediation and related matters (including costs associated with damages for personal injury or property damage and/or damages for injury to natural resources) when estimated future expenditures are probable and reasonably estimable. We adjust such accruals as further information becomes available to us or as circumstances change.
We record liabilities related to environmental remediation and related matters (including costs associated with damages for personal injury or property damage and/or damages for injury to natural resources) when estimated future expenditures are probable and reasonably estimable. We adjust such accruals as further information becomes available to -29- ​ us or as circumstances change.
In addition, from time to time, we have received notices -28- ​ regarding asbestos or silica claims purporting to be brought against former subsidiaries, including notices provided to insurers with which we have entered into settlements extinguishing certain insurance policies. These insurers may seek indemnification from us.
In addition, from time to time, we have received notices regarding asbestos or silica claims purporting to be brought against former subsidiaries, including notices provided to insurers with which we have entered into settlements extinguishing certain insurance policies. These insurers may seek indemnification from us.
This is a citizen’s suit filed by two local environmental groups pursuant to the Resource Conservation and Recovery Act and the Clean Water Act against NL, current owners, developers and state and local government entities.
This is a citizen’s suit filed by two local environmental groups pursuant to the Resource Conservation and Recovery Act and the Clean Water -30- ​ Act against NL, current owners, developers and state and local government entities.
These proceedings seek cleanup costs, damages for personal injury or property damage and/or damages for injury to natural resources. Certain of these proceedings involve claims for -25- ​ substantial amounts.
These proceedings seek cleanup costs, damages for personal injury or property damage and/or damages for injury to natural resources. Certain of these proceedings involve claims for substantial amounts.
At December 31, 2021 and December 31, 2022, we had not recognized any 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 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.
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, we were 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, we were sued in Atlantic Richfield, Co. v.
We made the initial $25.0 million payment in September 2019 and the first, second and third annual installment payments of $12.0 million each in September 2020, 2021 and 2022. We recognized an aggregate of $1.3 million, $1.1 million and $.9 million of accretion expense in 2020, 2021, and 2022 respectively.
We 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.
At December 31, 2022, we had accrued approximately $92 million related to approximately 33 sites associated with remediation and related matters we believe are at the present time and/or in their current phase reasonably estimable.
At December 31, 2023, we had accrued approximately $91 million related to approximately 33 sites associated with remediation and related matters we believe are at the present time and/or in their current phase reasonably estimable.
Some are on appeal following dismissal or summary judgment rulings or a trial verdict in favor of either the defendants or the plaintiffs. We believe these actions are without merit, and we intend 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. We believe we have substantial defenses to these actions and we intend to continue to deny all allegations of wrongdoing and liability and to defend against all actions vigorously.
In addition, we have determined that liability to us which may result, if any, cannot be reasonably estimated at this time because there is no prior history of a loss of this nature on which an estimate could be made and there is no substantive information available upon which an estimate could be based. -24- ​ In the matter titled County of Santa Clara v.
In addition, we have determined that liability to us which may result, if any, cannot be reasonably estimated at this time because there is no prior history of a loss of this nature on which an estimate could be made and there is no substantive information available upon which an estimate could be based.
(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, Eastern District of Missouri, Case No. 4:11-cv-00864). Both cases are CERCLA contribution actions brought against several defendants to recover a portion of the amount the plaintiff paid in settlement with the U.S. Government during its Chapter 11 bankruptcy.
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 have 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.
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. NL has been diligently conducting that investigation in compliance with NJDEP regulations.
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.
These accruals have not been discounted to present value. -26- ​ We believe it is not reasonably possible to estimate the range of costs for certain sites. At December 31, 2022, there were approximately five sites for which we are not currently able to reasonably estimate a range of costs.
We believe it is not reasonably possible to estimate the range of costs for certain sites. At December 31, 2023, there were approximately five sites for which we are not currently able to reasonably estimate a range of costs.
The upper end of the range of reasonably possible costs to us for remediation and related matters for which we believe it is possible to estimate costs is approximately $119 million, including the amount currently accrued.
The upper end of the range of reasonably possible costs to us for remediation and related matters for which we believe it is possible to estimate costs is approximately $118 million, including the amount currently accrued. These accruals have not been discounted to present value.
We have settled insurance coverage claims concerning environmental claims with certain of our principal former insurance carriers. We do not expect further material settlements relating to environmental remediation coverage. ​
We intend to defend NL’s rights and prosecute NL’s claims in this action vigorously. We have settled insurance coverage claims concerning environmental claims with certain of our principal former insurance carriers. We do not expect further material settlements relating to environmental remediation coverage. ​
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 our 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 our former Sayreville, New Jersey operation, claims that contaminants from NL’s former Sayreville operation came to be located on its land.
We have denied liability and will continue to defend vigorously against all claims. Other litigation We have been named as a defendant in various lawsuits in several jurisdictions, alleging personal injuries as a result of occupational exposure primarily to products manufactured by our former operations containing asbestos, silica and/or mixed dust.
Other litigation We have been named as a defendant in various lawsuits in several jurisdictions, alleging personal injuries as a result of occupational exposure primarily to products manufactured by our former operations containing asbestos, silica and/or mixed dust. In addition, some plaintiffs allege exposure to asbestos from working in various facilities previously owned and/or operated by us.
We do not expect these claims will be re-opened unless the plaintiffs meet the courts’ medical criteria for asbestos-related claims. We have not accrued any amounts for this litigation because of the uncertainty of liability and inability to reasonably estimate the liability, if any. To date, we have not been adjudicated liable in any of these matters.
We have not accrued any amounts for this litigation because of the uncertainty of liability and inability to reasonably estimate the liability, if any. To date, we have not been adjudicated liable in any of these matters.
We are not able to determine how much we will ultimately recover from these carriers for defense costs incurred by us because of certain issues that arise regarding which defense costs qualify for reimbursement. While we continue to seek additional insurance recoveries, we do not know if we will be successful in obtaining reimbursement for either defense costs or indemnity.
We are not able to determine how much we will ultimately recover from these carriers for defense costs incurred by us because of certain issues that arise regarding which defense costs qualify for -32- ​ reimbursement.
The stay will remain in place until defendants’ appeals are resolved. New cases may continue to be filed against us. We do not know if NL will incur liability in the future in respect of any of the pending or possible litigation in view of the inherent uncertainties involved in court and jury rulings.
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.
(Supreme Court of the State of New York, County of New York, Index No. 14/650103). The plaintiff, a former insurance carrier of ours, is seeking a declaratory judgment of its obligations to us under insurance policies issued to us by the plaintiff with respect to certain lead pigment lawsuits.
The plaintiff, a former insurance carrier of ours, is seeking a declaratory judgment of its obligations to us under insurance policies issued to us by the plaintiff with respect to certain lead pigment lawsuits. Other insurers have been added as parties to the case and have also sought a declaratory judgment regarding their obligations under certain insurance policies.
In addition, some plaintiffs allege exposure to asbestos from working in various facilities previously owned and/or operated by us. 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.
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. We do not expect these claims will be re-opened unless the plaintiffs meet the courts’ medical criteria for asbestos-related claims.
Accordingly, we recognize insurance recoveries in income only when receipt of the recovery is probable and we are able to reasonably estimate the amount of the recovery. In January 2014, we were served with a complaint in Certain Underwriters at Lloyds, London, et al v. NL Industries, Inc.
In January 2014, we were served with a complaint in Certain Underwriters at Lloyds, London, et al v. NL Industries, Inc. (Supreme Court of the State of New York, County of New York, Index No. 14/650103).
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).
We have 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
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 the matter titled County of Santa Clara v. Atlantic Richfield Company, et al .
Removed
We believe these lawsuits are inconsistent with Pennsylvania law and without merit, and we intend to defend ourselves 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
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
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
Several of the former lead paint manufacturer defendants later filed a third-party complaint against NL, seeking contribution for any damages they may ultimately have to pay to the plaintiff. We believe we have substantial defenses to these claims under Wisconsin law and intend to defend ourselves vigorously. New cases may continue to be filed against us.
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. We have denied liability and will defend vigorously against all of the claims.
Added
The court in each case entered indefinite stays of the litigation in 2013 and 2015, which remain in place. In July 2012, we were served in EPEC Polymers, Inc., v. NL Industries, Inc. , (United States District Court for the District of New Jersey, Case 3:12-cv-03842-PGS-TJB).
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, we were served in ASARCO LLC v. NL Industries, Inc., et al.
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. We continue to deny liability and will defend vigorously against all claims. In December 2020, NL and several other defendants were sued in California Department of Toxic Substances v.
Removed
We have 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. -27- ​ In July 2012, we were served in EPEC Polymers, Inc., v.
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
Other insurers have been added as parties to the case and have also sought a declaratory judgment regarding their obligations under certain insurance policies. NL has filed a counterclaim seeking a declaratory judgment that all of the insurers are obligated to provide NL with certain coverage and seeking damages for breach of contract.
Added
The complaint -31- ​ 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.
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. NL intends to deny liability and will defend vigorously against all claims.
Added
While we continue to seek additional insurance recoveries, we do not know if we will be successful in obtaining reimbursement for either defense costs or indemnity. Accordingly, we recognize insurance recoveries in income only when receipt of the recovery is probable and we are able to reasonably estimate the amount of the recovery.

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 the reinvestment of dividends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2017 2018 2019 2020 2021 2022 NL common stock ​ $ 100 ​ $ 25 ​ $ 27 ​ $ 35 ​ $ 56 ​ $ 56 S&P 500 Composite Stock Index ​ 100 ​ 96 ​ 126 ​ 149 ​ 192 ​ 157 S&P 500 Industrial Conglomerates Index ​ 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, 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. -30- ​ Equity compensation plan information We have an equity compensation plan, which was approved by our shareholders, pursuant to which an aggregate of 200,000 shares of our common stock can be awarded to members of our board of directors.
Biggest changeThe graph shows the value at December 31 of each year assuming an original investment of $100 at December 31, 2018 and the reinvestment of dividends. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2018 2019 2020 2021 2022 2023 NL common stock ​ $ 100 ​ $ 111 ​ $ 142 ​ $ 228 ​ $ 227 ​ $ 197 S&P 500 Composite Stock Index ​ 100 ​ 131 ​ 156 ​ 200 ​ 164 ​ 207 S&P 500 Industrial Conglomerates Index ​ 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, 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. -34- ​ Equity compensation plan information We have an equity compensation plan, which was approved by our shareholders, pursuant to which an aggregate of 200,000 shares of our common stock can be awarded to non-employee members of our board of directors.
Performance graph Set forth below is a table and line graph comparing the yearly change in our cumulative total stockholder return on our common stock against the cumulative total return of the S&P 500 Composite Stock Price Index and the S&P 500 Industrial Conglomerates Index for the period from December 31, 2017 through December 31, 2022.
Performance graph Set forth below is a table and line graph comparing the yearly change in our cumulative total stockholder return on our common stock against the cumulative total return of the S&P 500 Composite Stock Price Index and the S&P 500 Industrial Conglomerates Index for the period from December 31, 2018 through December 31, 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock is listed and traded on the New York Stock Exchange (NYSE: NL). As of February 28, 2023, there were approximately 1,574 holders of record of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock is listed and traded on the New York Stock Exchange (NYSE: NL). As of February 29, 2024, there were approximately 1,500 holders of record of our common stock.
At December 31, 2022, 51,150 shares are available for award under this plan. See Note 14 to our Consolidated Financial Statements. ​
At December 31, 2023, 200,000 shares are available for award under this plan. See Note 14 to our Consolidated Financial Statements. ​

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe $23 million increase in income from operations was comprised of the following: ● Higher net currency transaction gains of approximately $10 million primarily caused by relative changes in currency exchange rates at each applicable balance sheet date between the U.S. dollar and the euro, Canadian -40- ​ dollar and the Norwegian krone, and between the euro and the Norwegian krone, which causes increases or decreases, as applicable, in U.S. dollar-denominated receivables and payables and U.S. dollar currency held by Kronos’ non-U.S. operations, and in Norwegian krone denominated receivables and payables held by its non-U.S. operations, and ● Approximately $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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impact of changes in currency exchange rates - 2021 vs 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Translation ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ gains (losses)- Total currency ​ ​ Transaction gains/(losses) recognized ​ impact of ​ impact ​ 2020 2021 Change rate changes 2021 vs 2020 ​ ​ ​ ​ ​ ​ ​ ​ (In millions) ​ ​ ​ ​ ​ ​ Impact on: ​ ​ ​ ​ ​ Net sales ​ $ — ​ $ — ​ $ — ​ $ 43 ​ $ 43 Income from operations ​ (4) ​ 2 ​ 6 ​ (19) ​ (13) ​ The $43 million increase in Kronos’ net sales (translation gain) was caused primarily by a weakening of the U.S. dollar relative to the euro, as Kronos’ euro-denominated sales were translated into more U.S. dollars in 2021 as compared to 2020.
Biggest changeThe $23 million increase in income from operations was comprised of the following: ● Higher net currency transaction gains of approximately $10 million primarily caused by relative changes in currency exchange rates at each applicable balance sheet date between the U.S. dollar and the euro, Canadian dollar and the Norwegian krone, and between the euro and the Norwegian krone, which causes increases or decreases, as applicable, in U.S. dollar-denominated receivables and payables and U.S. dollar currency held by Kronos’ non-U.S. operations, and in Norwegian krone denominated receivables and payables held by its 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.
Operating costs and expenses - 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 CompX’s businesses and its corporate management activities, as well as gains and losses on property and equipment.
Operating costs and expenses – CompX’s 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 CompX’s businesses and its corporate management activities, as well as gains and losses on property and equipment.
General - CompX’s profitability primarily depends on its ability to utilize production capacity effectively, which is affected by, among other things, the demand for its products and its ability to control manufacturing costs, primarily comprised of labor costs and materials.
General - CompX’s profitability primarily depends on its ability to utilize its production capacity effectively, which is affected by, among other things, the demand for its products and its ability to control its manufacturing costs, primarily comprised of labor costs and materials.
In addition, cost of sales in 2022 includes approximately $26 million of unabsorbed fixed production and other manufacturing costs associated with production curtailments at certain of Kronos’ European facilities throughout the fourth quarter. Gross margin as a percentage of net sales decreased to 20% in 2022 compared to 23% in 2021.
In addition, cost -43- ​ of sales in 2022 includes approximately $26 million of unabsorbed fixed production and other manufacturing costs associated with production curtailments at certain of Kronos’ European facilities throughout the fourth quarter. Gross margin as a percentage of net sales decreased to 20% in 2022 compared to 23% in 2021.
We intend to consider such acquisition activities in the future and, in connection with this activity, may consider issuing additional equity securities and increasing indebtedness. From time to time, we also evaluate the restructuring of ownership interests among our respective subsidiaries and related companies.
We intend to consider such acquisition activities in the future and, in -53- ​ connection with this activity, may consider issuing additional equity securities and increasing indebtedness. From time to time, we also evaluate the restructuring of ownership interests among our respective subsidiaries and related companies.
Gross margin as a percentage of sales increased slightly in 2022 compared to 2021 with increased sales due to price increases and -34- ​ surcharges more than offsetting higher production costs, as well as increased coverage of cost of sales from higher sales.
Gross margin as a percentage of sales increased slightly in 2022 compared to 2021 with increased sales due to price increases and surcharges more than offsetting higher production costs, as well as increased coverage of cost of sales from higher sales.
While no legislation or regulations have been enacted to date that are expected to have a material adverse effect on our consolidated financial position, results of operations or liquidity, enactment of such legislation could have such an effect.
While no legislation or regulations have been enacted to date that are expected to have a material -54- ​ adverse effect on our consolidated financial position, results of operations or liquidity, enactment of such legislation could have such an effect.
Operating costs and expenses increased in 2022 compared to 2021 predominantly due to higher salary and employment related costs which increased by $.7 million. As a percentage of sales, operating costs and expenses decreased in 2022 compared to 2021 primarily due to the effect of higher sales.
CompX’s operating costs and expenses increased in 2022 compared to 2021 predominantly due to higher salary and employment related costs which increased by $.7 million. As a percentage of sales, CompX’s operating costs and expenses decreased in 2022 compared to 2021 primarily due to the effect of higher sales .
The decrease in our effective rate from -36- ​ 2021 to 2022 is attributable to the combined effects of Kronos’ lower earnings and the higher non-taxable dividend income we received from Kronos in 2022 as compared to 2021.
The decrease in our effective rate from 2021 to 2022 is attributable to the combined effects of Kronos’ lower earnings and the higher non-taxable dividend income we received from Kronos in 2022 as compared to 2021.
The difference is primarily due to lower earnings in 2022, the jurisdictional mix of Kronos’ earnings and the release of a portion of its valuation allowance associated with the 2022 utilization of a portion of its business interest expense carryforwards .
The difference is primarily due to lower earnings in 2022, the jurisdictional mix of Kronos’ earnings and the -44- ​ release of a portion of its valuation allowance associated with the 2022 utilization of a portion of its business interest expense carryforwards .
During interim periods, our effective income tax rate may not necessarily correspond to the foregoing due to the application of accounting for income taxes in interim periods which requires us to base our effective rate on full year projections. We received aggregate dividends from Kronos of $25.4 million in each of 2020 and 2021 and $26.8 million in 2022.
During interim periods, our effective income tax rate may not necessarily correspond to the foregoing due to the application of accounting for income taxes in interim periods which requires us to base our effective rate on full year projections. We received aggregate dividends from Kronos of $25.4 million in 2021, and $26.8 million in each of 2022 and 2023.
If these events were to occur in 2023, our corporate expenses would be higher than we currently estimate. In addition, we adjust our environmental accruals as further information becomes available to us or as circumstances change. Such further information or changed circumstances could result in an increase in our accrued environmental costs. See Note 16 to our Consolidated Financial Statements.
If these events were to occur in 2024, our corporate expenses would be higher than we currently estimate. In addition, we adjust our environmental accruals as further information becomes available to us or as circumstances change. Such further information or changed circumstances could result in an increase in our accrued environmental costs. See Note 16 to our Consolidated Financial Statements.
We do not assess our property and equipment for impairment unless certain impairment indicators are present. We did not evaluate any long-lived assets for impairment during 2022 because no such impairment indicators were present. ● Goodwill - Our net goodwill totaled $27.2 million at December 31, 2022, all related to CompX’s Security Products reporting unit.
We do not assess our property and equipment for impairment unless certain impairment indicators are present. We did not evaluate any long-lived assets for impairment during 2023 because no such impairment indicators were present. ● Goodwill - Our net goodwill totaled $27.2 million at December 31, 2023, all related to CompX’s Security Products reporting unit.
Based upon our expectations of operating performance, and the anticipated demands on our cash resources we expect to have sufficient liquidity to meet our short-term obligations (defined as the twelve-month period ending December 31, 2023). If actual developments differ materially from our expectations, our liquidity could be adversely affected.
Based upon our expectations of operating performance, and the anticipated demands on our cash resources we expect to have sufficient liquidity to meet our short-term obligations (defined as the twelve-month period ending December 31, 2024). If actual developments differ materially from our expectations, our liquidity could be adversely affected.
In this regard, Valhi has agreed to loan us up to $50 million on a revolving basis. At December 31, 2022, we had $.5 million in outstanding borrowings under this facility, and we had $49.5 million available for future borrowing under the facility. See Note 10 to our Consolidated Financial Statements.
In this regard, Valhi has agreed to loan us up to $50 million on a revolving basis. At December 31, 2023, we had $.5 million in outstanding borrowings under this facility, and we had $49.5 million available for future borrowing under the facility. See Note 10 to our Consolidated Financial Statements.
At December 31, 2022, Kronos had substantial net assets denominated in the euro, Canadian dollar and Norwegian krone. Critical accounting policies and estimates Our significant accounting policies are more fully described in Note 1 to our Consolidated Financial Statements.
At December 31, 2023, Kronos had substantial net assets denominated in the euro, Canadian dollar and Norwegian krone. Critical accounting policies and estimates Our significant accounting policies are more fully described in Note 1 to our Consolidated Financial Statements.
Capital expenditures Capital expenditures for 2023 are estimated at approximately $3.0 million, substantially all of which relate to CompX. CompX’s 2023 capital investments are primarily to meet its expected customer demand and those required to properly maintain its facilities and technology infrastructure.
Capital expenditures Capital expenditures for 2024 are estimated at approximately $3.0 million, substantially all of which relate to CompX. CompX’s 2024 capital investments are primarily to meet its expected customer demand and those required to properly maintain its facilities and technology infrastructure.
Kronos’ 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 Kronos’ non-U.S. operations will be higher than the income tax rates applicable to its U.S. operations and due to the expected mix of earnings.
Kronos’ 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 Kronos’ non-U.S. operations will be higher than the income tax rates applicable to its U.S. operations and due to the expected mix of earnings.
As noted above, there continue to be some global and domestic supply chain challenges and any future impacts on CompX’s operations will depend on, among other things, any future disruption in its operations or its suppliers’ operations, the impact of economic conditions and geo-political events on demand for its products or its customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.
As noted above, there continue to be some global and domestic supply chain challenges, and any future impacts on CompX’s operations will depend on, among other things, any future disruption in its 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.
Cost of sales and gross margin – Cost of sales increased $45.9 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.
Kronos’ cost of sales increased $45.9 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.
Beginning in the latter half of 2022, CompX limited investments primarily to those expenditures required to meet its existing demand and to properly maintain its facilities and technology infrastructure.
Beginning in the latter half of 2022 through 2023, CompX limited investments primarily to those expenditures required to meet its existing demand and to properly maintain its facilities and technology infrastructure.
Outstanding debt obligations At December 31, 2022, NL had outstanding debt obligations of $.5 million under its secured revolving credit facility with Valhi, and CompX did not have any outstanding debt obligations. We are in compliance with all of the covenants contained in our revolving credit facility with Valhi at December 31, 2022.
Outstanding debt obligations At December 31, 2023, NL had outstanding debt obligations of $.5 million under its secured revolving credit facility with Valhi, and CompX did not have any outstanding debt obligations. We are in compliance with all of the -52- ​ covenants contained in our revolving credit facility with Valhi at December 31, 2023.
Income from operations - As a percentage of net sales, operating income increased in 2022 compared to 2021 and increased in 2021 compared to 2020. Operating margins were primarily impacted by the factors impacting net sales, cost of sales, gross margin and operating costs discussed above.
Income from operations - As a percentage of net sales, CompX’s operating income increased in 2023 compared to 2022 and increased in 2022 compared to 2021. CompX’s operating margins were primarily impacted by the factors impacting net sales, cost of sales, gross margin and operating costs discussed above.
Kronos is in compliance with all of its debt covenants at December 31, 2022. Kronos believes that it will be able to continue to comply with the financial covenants contained in its credit facility through their maturity.
Kronos is in compliance with all of its debt covenants at December 31, 2023. Kronos believes that it will be able to continue to comply with the financial covenants contained in its credit facility through its maturity.
As more fully described below, the decrease in our earnings per share attributable to NL stockholders from 2021 to 2022 is primarily due to the net effects of: ● an unrealized loss in the relative value of marketable equity securities of $8.1 million in 2022 compared to a gain of $16.2 million in 2021, ● higher income from operations attributable to CompX of $4.9 million in 2022, and ● equity in earnings from Kronos in 2022 of $31.9 million compared to $34.3 million in 2021.
As more fully described below, the increase in our earnings attributable to NL stockholders from 2021 to 2022 is primarily due to the effects of: ● an unrealized loss in the relative value of marketable equity securities of $8.1 million in 2022 compared to a gain of $16.2 million in 2021, ● higher income from operations attributable to CompX of $4.9 million in 2022, and ● equity in earnings from Kronos in 2022 of $31.9 million compared to $34.3 million in 2021.
For comparative purposes, we have provided 2020 numbers below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2020 2021 2022 Days sales outstanding 33 days 42 days 41 days Days in inventory 75 days 96 days 99 days ​ Investing activities Capital expenditures, substantially all of which relate to CompX, have primarily emphasized improving manufacturing facilities and investing in manufacturing equipment, utilizing new technologies and increased automation of the manufacturing process, to provide for increased productivity and efficiency in order to meet expected customer demand and properly maintain facilities and technology infrastructure.
For comparative purposes, we have provided 2021 numbers below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2022 2023 Days sales outstanding 42 days 41 days 36 days Days in inventory 96 days 99 days 95 days ​ Investing activities Capital expenditures, substantially all of which relate to CompX, have primarily emphasized improving manufacturing facilities and investing in manufacturing equipment, utilizing new technologies and increased automation of the manufacturing process, to provide for increased productivity and efficiency in order to meet expected customer demand and properly maintain facilities and technology infrastructure.
Kronos’ Global Revolver and its Senior Secured Notes contain a number of covenants and restrictions which, among other things, restrict its ability to incur additional debt, incur liens, pay dividends or merge or consolidate with, or sell or transfer substantially all of its assets to, another entity, and contains other provisions and restrictive covenants customary in lending transactions of this type.
Kronos’ Senior Secured Notes, Global Revolver and the Contran term loan contain a number of covenants and restrictions which, among other things, restrict its ability to incur additional debt, incur liens, pay dividends or merge or consolidate with, or sell or transfer substantially all of its assets to, another entity, and contain other provisions and restrictive covenants customary in lending transactions of this type.
As noted above, Kronos 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.
Kronos 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.
The reference to NL Parent in the tables below is a reference to NL Industries, Inc., as the parent company of CompX and our other wholly-owned subsidiaries. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ 2020 2021 2022 ​ ​ (In millions) Net cash provided by operating activities: ​ ​ ​ CompX ​ $ 15.5 ​ $ 10.5 ​ $ 16.9 NL Parent and wholly-owned subsidiaries ​ 7.8 ​ 15.7 ​ 39.6 Eliminations ​ (4.3) ​ (8.6) ​ (29.6) Total ​ $ 19.0 ​ $ 17.6 ​ $ 26.9 ​ Relative changes in working capital can have a significant effect on cash flows from operating activities.
The reference to NL Parent in the tables below is a reference to NL Industries, Inc., as the parent company of CompX and our other wholly-owned subsidiaries. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ 2021 2022 2023 ​ ​ (In millions) Net cash provided by operating activities: ​ ​ ​ CompX ​ $ 10.5 ​ $ 16.9 ​ $ 25.8 NL Parent and wholly-owned subsidiaries ​ 15.7 ​ 39.6 ​ 21.9 Eliminations ​ (8.6) ​ (29.6) ​ (10.7) Total ​ $ 17.6 ​ $ 26.9 ​ $ 37.0 ​ Relative changes in working capital can have a significant effect on cash flows from operating activities.
The $9.3 million net increase in cash provided by operating activities includes the net effects of: ● higher income from operations from CompX in 2022 of $4.9 million; ● lower net cash used for relative changes in receivables, inventories, prepaid expenses, payables and accrued liabilities in 2022 of $4.0 million; ● a $1.8 million increase in interest received in 2022 due to higher interest rates and increased investment balances, offset by lower average balances on CompX’s revolving promissory note receivable from affiliate; and ● a $1.1 million increase in cash paid for taxes in 2022 due to the relative timing of payments. -45- ​ Net cash provided by operating activities was $17.6 million in 2021 compared to $19.0 million in 2020.
The $9.3 million net increase in cash provided by operating activities includes the net effects of: ● higher income from operations from CompX in 2022 of $4.9 million; ● lower net cash used for relative changes in receivables, inventories, prepaid expenses, payables and accrued liabilities in 2022 of $4.0 million; ● a $1.8 million increase in interest received in 2022 due to higher interest rates and increased investment balances, offset by lower average balances on CompX’s revolving promissory note receivable from affiliate; and ● a $1.1 million increase in cash paid for taxes in 2022 due to the relative timing of payments.
See Note 5 to our Consolidated Financial Statements. We also owned 35.2 million shares of Kronos common stock at December 31, 2022 with an aggregate market value of $331.1 million. See Note 6 to our Consolidated Financial Statements.
See Note 5 to our Consolidated Financial Statements. We also owned 35.2 million shares of Kronos common stock at December 31, 2023 with an aggregate market value of $350.1 million. See Note 6 to our Consolidated Financial Statements.
There are currently no contractual restrictions on the amount of dividends which we may pay. Cash flows from financing activities include CompX dividends paid to its stockholders other than us aggregating $.7 million in 2020, $1.3 million in 2021 and $4.3 million in 2022 which includes $2.7 million related to a special dividend.
There are currently no contractual restrictions on the amount of dividends which we may pay. Cash flows from financing activities include CompX dividends paid to its stockholders other than us aggregating $1.3 million in 2021, $4.3 million in 2022 ($2.7 million of which relates to a special dividend) and $1.6 million in 2023.
Other operating income and expense, net - Kronos’ selling, general and administrative expenses decreased $17.6 million, or 7%, in 2022 compared to 2021 primarily due to changes in currency exchange rates (primarily the euro) and lower variable costs (primarily distribution costs) related to lower overall sales volumes.
Kronos’ selling, general and administrative expenses decreased $17.6 million, or 7%, in 2022 compared to 2021 primarily due to changes in currency exchange rates (primarily the euro) and lower variable costs (primarily distribution costs) related to lower overall sales volumes.
Overall, we currently expect that our general corporate expenses in 2023 will be higher than in 2022 primarily due to higher expected litigation fees and related costs and higher environmental remediation and related costs.
Overall, we currently expect that our general corporate expenses in 2024 will be higher than in 2023 primarily due to higher expected litigation fees and related costs.
Our effective tax rate attributable to our equity in earnings (losses) of Kronos, including the effect of non-taxable dividends we received from Kronos, was a 6.4% benefit in 2020, 5.5% expense in 2021 and 3.4% expense in 2022.
Our effective tax rate attributable to our equity in earnings (losses) of Kronos, including the effect of non-taxable dividends we received from Kronos, was a 5.5% expense in 2021, a 3.4% expense in 2022 and a 58.5% expense in 2023.
Such further information or changed circumstances could result in an increase in our accrued environmental costs. See Note 16 to our Consolidated Financial Statements. -42- ​ ● Long-lived assets - The net book value of our property and equipment totaled $28.7 million at December 31, 2022, all of which relates to CompX.
Such further information or changed circumstances could result in an increase in our accrued environmental costs. See Note 16 to our Consolidated Financial Statements. ● Long-lived assets - The net book value of our property and equipment totaled $25.9 million at December 31, 2023, all of which relates to CompX.
However, if we had lowered the assumed discount rate by 25 basis points for each of our plans as of December 31, 2022, our aggregate projected benefit obligations would have increased by approximately $.6 million at that date. Such a change would not materially impact our defined benefit pension expense for 2023.
However, if we had lowered the assumed discount rate by 25 basis points for our plan as of December 31, 2023, our aggregate projected benefit obligation would have increased by approximately $.6 million at that date. Such a change would not materially impact our defined benefit pension expense for 2024.
Interest and dividend income - Interest income increased $2.2 million in 2022 compared to 2021 primarily due to higher interest rates and increased investment balances, somewhat offset by lower average balances on CompX’s revolving promissory note receivable from Valhi.
Interest and dividend income - Interest income increased $5.8 million in 2023 compared to 2022 primarily due to higher interest rates and increased investment balances, somewhat offset by lower average balances on CompX’s revolving promissory note receivable from Valhi.
As shown below, our total average days sales outstanding was generally consistent from December 31, 2021 to December 31, 2022 and is primarily impacted by the timing of sales and collections in the last month of the year.
As shown below, our total average days sales outstanding 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.
Cost of sales and gross margin - Cost of sales increased in 2022 compared to 2021 primarily due to the effects of higher sales, as well as increased production costs at both of CompX’s business units. Gross margin as a percentage of sales decreased over the same period primarily due to the decrease in CompX’s Security Products gross margin percentage.
Gross margin as a percentage of sales increased over the same period primarily due to the factors affecting cost of sales. CompX’s cost of sales increased in 2022 compared to 2021 primarily due to the effects of higher sales, as well as increased production costs at both of CompX’s business units.
Our assumed long-term rates of return on plan assets for 2020, 2021 and 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ 2020 2021 2022 United States 4.5 % 4.0 % 4.0 % United Kingdom 3.3 % 1.3 % 1.3 % ​ Our long-term rate of return on plan asset assumptions in 2023 used for purposes of determining our 2023 defined benefit pension plan expense is 5.0% for the U.S. plan and 4.3% for the U.K. plan.
Our assumed long-term rates of return on plan assets for 2021, 2022 and 2023 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ 2021 2022 2023 United States 4.0 % 4.0 % 5.0 % United Kingdom (through date of plan termination) 1.3 % 1.3 % 4.3 % ​ Our long-term rate of return on plan asset assumptions in 2024 used for purposes of determining our 2024 defined benefit pension plan expense is 5.0%.
Net income overview Our net income attributable to NL stockholders was $33.8 million, or $.69 per share, in 2022 compared to net income of $51.2 million, or $1.05 per share, in 2021 and net income of $14.7 million, or $.30 per share, in 2020.
Net income overview Our net loss attributable to NL stockholders was $2.3 million, or $.05 per share, in 2023 compared to net income of $33.8 million, or $.69 per share, in 2022 and net income of $51.2 million, or $1.05 per share, in 2021.
In addition, our board of directors declared a special dividend which totaled $17.1 million ($.35 per share) paid on August 31, 2022. In March 2023 our board of directors declared a first quarter 2023 dividend of $.07 per share, to be paid on March 23, 2023 to NL stockholders of record as of March 7, 2023.
In addition, our board of directors declared a special dividend which totaled $17.1 million ($.35 per share) paid on August 31, 2022. In February 2024 our board of directors declared a first quarter 2024 dividend of $.08 per share, to be paid on March 21, 2024 to NL stockholders of record as of March 11, 2024.
Overall, Kronos estimates that fluctuations in currency exchange rates had the following effects on its sales and income from operations for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impact of changes in currency exchange rates - 2022 vs 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ Translation ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ gains (losses)- ​ Total currency ​ ​ Transaction gains recognized ​ impact of ​ impact ​ 2021 2022 Change rate changes 2022 vs 2021 ​ ​ (In millions) Impact on: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ — ​ $ — ​ $ — ​ $ (106) ​ $ (106) Income from operations ​ 2 ​ 12 ​ 10 ​ 13 ​ 23 ​ The $106 million decrease in Kronos’ net sales (translation losses) was caused primarily by a strengthening of the U.S. dollar relative to the euro, as Kronos’ euro-denominated sales were translated into fewer U.S. dollars in 2022 as compared to 2021.
Overall, Kronos estimates that fluctuations in currency exchange rates had the following effects on its sales and income from operations for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impact of changes in currency exchange rates - 2023 vs 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Translation ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ gains - ​ Total currency ​ ​ Transaction gains recognized ​ impact of ​ impact ​ 2022 2023 Change rate changes 2023 vs 2022 ​ ​ (In millions) Impact on: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales ​ $ — ​ $ — ​ $ — ​ $ 10 ​ $ 10 Income (loss) from operations ​ 12 ​ 1 ​ (11) ​ 27 ​ 16 ​ The $10 million increase in Kronos’ net sales (translation gains) was caused primarily by a weakening of the U.S. dollar relative to the euro, as Kronos’ euro-denominated sales were translated into more U.S. dollars in 2023 as compared to 2022.
The materials used in its 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. Total material costs represented approximately 47% of CompX’s cost of sales in 2022, with commodity-related raw materials accounting for approximately 17% of cost of sales.
The materials used in CompX’s products consist of purchased components and raw materials some of which are subject to fluctuations in the commodity markets such as zinc, brass, -37- ​ aluminum and stainless steel. Total material costs represented approximately 48% of CompX’s cost of sales in 2023, with commodity-related raw materials representing approximately 13% of its cost of sales.
Income tax expense (benefit) - We recognized an income tax benefit of $2.5 million in 2020 and income tax expense of $7.5 million in 2021 and $2.8 million in 2022. In accordance with GAAP, we recognize deferred income taxes on our undistributed equity in earnings of Kronos.
See Note 5 to our Consolidated Financial Statements. Income tax expense (benefit) - We recognized income tax expense of $7.5 million in 2021 and $2.8 million in 2022 and an income tax benefit of $7.0 million in 2023. In accordance with GAAP, we recognize deferred income taxes on our undistributed equity in earnings of Kronos.
See Note 16 to our Consolidated Financial Statements. -35- ​ Corporate expense - Corporate expenses were $11.7 million in 2022, $1.7 million or 17% higher than in 2021 primarily due to higher litigation fees and related costs partially offset by lower environmental remediation and related costs.
Corporate expenses were $11.7 million in 2022, $1.7 million or 17% higher than in 2021 primarily due to higher litigation fees and related costs partially offset by lower environmental remediation and related costs.
Investing activities also include net borrowings of $1.4 million ($34.8 million of gross borrowings and $33.4 million of gross repayments) in 2020, net collections of $10.8 million ($29.8 million of gross borrowings and $40.6 million of gross repayments) in 2021 and net collections of $5.5 million ($24.3 million of gross borrowings and $29.8 million of gross repayments) in 2022 under a promissory note receivable from an affiliate.
Investing activities also include net collections of $10.8 million ($29.8 million of gross borrowings and $40.6 million of gross repayments) in 2021, net collections of $5.5 million ($24.3 million of gross borrowings and $29.8 million of gross repayments) in 2022 and net collections of $2.6 million ($27.9 million of gross borrowings and $30.5 million of gross repayments) in 2023 under a promissory note receivable from an affiliate.
Additionally, CompX has purchase obligations of $17.7 million ($16.3 million payable in 2023 and $1.4 million payable in 2024) which consists of open purchase orders and contractual obligations, primarily commitments to purchase raw materials and for capital projects in process at December 31, 2022.
Additionally, CompX has purchase obligations of $18.3 million ($17.5 million payable in 2024 and $.8 million payable in 2025/2026) which consists of open purchase orders and contractual obligations, primarily commitments to purchase raw materials and for capital projects in process at December 31, 2023.
A detail (in millions) by entity is presented in the table below. ​ ​ ​ ​ ​ ​ Amount ​ ​ (In millions) CompX $ 59.9 NL Parent and wholly-owned subsidiaries ​ 107.8 Total ​ $ 167.7 ​ In addition, at December 31, 2022 we owned 1.2 million shares of Valhi common stock with an aggregate market value of $26.4 million.
A detail (in millions) by entity is presented in the table below. ​ ​ ​ ​ ​ ​ Amount ​ ​ (In millions) CompX $ 76.7 NL Parent and wholly-owned subsidiaries ​ 117.8 Total ​ $ 194.5 ​ In addition, at December 31, 2023 we owned 1.2 million shares of Valhi common stock with an aggregate market value of $18.2 million.
Other non-operating income (expense) - Kronos recognized a loss of $1.0 million in 2022 compared to a gain of $2.0 million in 2021 on the change in value of its marketable equity securities.
Interest expense in 2023 was comparable to interest expense in 2022. Kronos recognized a loss of $1.0 million in 2022 compared to a gain of $2.0 million in 2021 on the change in value of its marketable equity securities.
We use these discount rates to determine the actuarial present value of the pension obligations as of December 31 of that year. We also use these discount rates to determine the interest component of defined benefit pension expense for the following year.
We use these discount rates to determine the actuarial present value of the pension obligations as of December 31 of that year. We also use these discount rates to determine the interest component of defined benefit pension expense for the following year. As noted above, we terminated our UK pension plan in May 2023.
We recognized consolidated defined benefit pension plan expense of $1.0 million in 2020, $.9 million in 2021 and $1.4 million in 2022. The funding requirements for these defined benefit pension plans are generally based upon applicable regulations (such as ERISA in the U.S.) and will generally differ from pension expense recognized under GAAP for financial reporting purposes.
The funding requirements for these defined benefit pension plans are generally based upon applicable regulations (such as ERISA in the U.S.) and will generally differ from pension expense recognized under GAAP for financial reporting purposes. We made contributions to our plans of approximately $1.2 million in each of 2021 and 2022.
In addition to the impact of higher sales volumes and higher average selling prices, Kronos estimates that changes in currency exchange rates (primarily the euro) increased its net sales by approximately $43 million, or 3%, as compared to 2020.
In addition to the impact of sales volumes and average TiO 2 selling prices, Kronos estimates that changes in currency exchange rates (primarily the euro) increased its net sales by approximately $10 million in 2023 as compared to 2022.
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 Kronos’ net sales, as a substantial portion of the sales generated by its 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 Kronos net sales, as a substantial portion of the sales generated by its Canadian and Norwegian operations is denominated in the U.S. dollar.
See Notes 1 and 7 to our Consolidated Financial Statements. ● Defined benefit pension plans - We maintain a defined benefit pension plan in the U.S. and a plan in the United Kingdom (U.K.) See Note 11 to our Consolidated Financial Statements.
See Notes 1 and 7 to our Consolidated Financial Statements. ● Defined benefit pension plans - We maintain a defined benefit pension plan in the U.S. and we previously maintained a plan in the United Kingdom (U.K.) related to a former disposed U.K. business unit.
See Item 1 - “Business- Raw Materials.” ​ -33- ​ Results by reporting unit The key performance indicator for CompX’s reporting units is the level of their income from operations (see discussion below). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ % Change ​ ​ 2020 2021 2022 2020-21 2021-22 ​ (Dollars in millions) ​ ​ ​ ​ ​ Security Products: ​ ​ ​ Net sales $ 87.9 ​ $ 105.1 ​ $ 114.5 20 % 9 % Cost of sales 62.1 ​ 71.5 ​ 79.1 15 11 Gross margin 25.8 ​ 33.6 ​ 35.4 30 5 Operating costs and expenses 10.9 ​ 12.0 ​ 12.7 11 5 Operating income $ 14.9 ​ $ 21.6 ​ $ 22.7 45 5 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross margin 29.4 % 32.0 % 31.0 % ​ ​ Operating income margin 17.0 ​ 20.6 ​ 19.9 ​ Security Products - Security Products net sales increased 9% to $114.5 million in 2022 compared to $105.1 million in 2021 due to increased sales across a variety of markets.
See Item 1 - “Business- Raw Materials.” Results by reporting unit The key performance indicator for CompX’s reporting units is the level of their income from operations (see discussion below). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ % Change ​ ​ 2021 2022 2023 2021-22 2022-23 ​ (Dollars in millions) ​ ​ ​ ​ ​ Security Products: ​ ​ ​ Net sales $ 105.1 ​ $ 114.5 ​ $ 121.2 9 % 6 % Cost of sales 71.5 ​ 79.1 ​ 82.8 11 5 Gross margin 33.6 ​ 35.4 ​ 38.4 5 8 Operating costs and expenses 12.0 ​ 12.7 ​ 13.5 5 6 Operating income $ 21.6 ​ $ 22.7 ​ $ 24.9 5 10 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross margin 32.0 % 31.0 % 31.7 % ​ ​ Operating income margin 20.6 ​ 19.9 ​ 20.6 ​ Security Products - Security Products net sales increased 6% to $121.2 million in 2023 compared to $114.5 million in 2022 primarily due to higher sales related to a pilot project for a government security customer.
In 2022, CompX used the qualitative assessment for its annual impairment test and determined it was not necessary to perform the quantitative goodwill impairment test, as it concluded it is more-likely-than-not the fair value of the Security Products reporting unit exceeded its carrying amount.
Changes in estimates or the application of alternative assumptions could produce significantly different results. -48- ​ In 2023, CompX used the qualitative assessment for its annual impairment test and determined it was not necessary to perform the quantitative goodwill impairment test, as it concluded it is more-likely-than-not the fair value of the Security Products reporting unit exceeded its carrying amount.
We used the following discount rates for our defined benefit pension plans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Discount rates used for: ​ Obligations at Obligations at Obligations at ​ ​ December 31, ​ December 31, ​ December 31, ​ ​ 2020 and ​ 2021 and ​ 2022 and ​ ​ expense in 2021 ​ expense in 2022 ​ expense in 2023 ​ United States 2.2 % 2.6 % 5.3 % United Kingdom 1.4 % 1.3 % 4.3 % ​ 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 from the plans’ assets provided to fund the benefit payments inherent in the projected benefit obligations.
We use different discount rate assumptions in determining our defined benefit pension plan obligations and expense for the plan we maintain in the United States and previously in the U.K. as the interest rate environment differs from country to country. -49- ​ We used the following discount rates for our defined benefit pension plans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Discount rates used for: ​ Obligations at Obligations at Obligations at ​ ​ December 31, ​ December 31, ​ December 31, ​ ​ 2021 and ​ 2022 and ​ 2023 and ​ ​ expense in 2022 ​ expense in 2023 ​ expense in 2024 ​ United States 2.6 % 5.3 % 5.0 % United Kingdom (through date of plan termination) 1.3 % 4.3 % N/A ​ ​ The assumed long-term rate of return on plan assets represents the estimated average rate of earnings expected to be earned on the funds invested or to be invested from the plans’ assets provided to fund the benefit payments inherent in the projected benefit obligations.
Operating income margin increased for 2021 compared to 2020 primarily due to increased coverage of operating costs and expenses on higher sales, partially offset by the higher production costs impacting gross margin and increased sales and administrative-related salary and benefit costs of $.7 million. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, % Change ​ ​ 2020 2021 2022 2020-21 2021-22 ​ (Dollars in millions) ​ ​ Marine Components: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales $ 26.6 ​ $ 35.7 ​ $ 52.1 ​ 34 % 46 % Cost of sales 19.6 ​ 26.6 ​ 38.7 36 45 Gross margin 7.0 ​ 9.1 ​ 13.4 29 47 Operating costs and expenses 2.9 ​ 3.5 ​ 3.8 18 9 Operating income $ 4.1 ​ $ 5.6 ​ $ 9.6 37 71 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross margin 26.4 % 25.4 % 25.6 % ​ ​ Operating income margin 15.3 ​ 15.7 ​ 18.4 ​ Marine Components - Marine Components net sales increased 46% in 2022 as compared to 2021.
Operating income margin decreased for 2022 compared to 2021 primarily due to the factors impacting gross margin, as -38- ​ well as increased operating costs and expenses, resulting from higher salaries and employment related costs, partially offset by increased coverage of operating costs and expenses from higher sales. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, % Change ​ ​ 2021 2022 2023 2021-22 2022-23 ​ (Dollars in millions) ​ ​ Marine Components: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net sales $ 35.7 ​ $ 52.1 ​ $ 40.1 ​ 46 % (23) % Cost of sales 26.6 ​ 38.7 ​ 29.3 45 (24) Gross margin 9.1 ​ 13.4 ​ 10.8 47 (19) Operating costs and expenses 3.5 ​ 3.8 ​ 3.6 9 (5) Operating income $ 5.6 ​ $ 9.6 ​ $ 7.2 71 (25) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross margin 25.4 % 25.6 % 27.0 % ​ ​ Operating income margin 15.7 ​ 18.4 ​ 18.0 ​ Marine Components - Marine Components net sales decreased 23% in 2023 as compared to 2022.
Kronos would generally expect its overall effective tax rate, excluding the impact of the reversal of a portion of its deferred income tax asset valuation allowance, to be higher than the U.S. federal statutory rate of 21% primarily because of Kronos’ sizeable non-U.S. operations.
Kronos would generally expect its overall effective tax rate to be higher than the U.S. federal statutory rate of 21% primarily because of Kronos’ sizeable non-U.S. operations.
Income from operations The following table shows the components of our income from operations. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, % Change ​ 2020 2021 2022 2020-21 2021-22 ​ ​ (Dollars in millions) ​ ​ ​ ​ ​ CompX $ 11.8 ​ $ 20.5 ​ $ 25.4 74 % 24 % Corporate expense (9.4) ​ (10.0) ​ (11.7) 6 17 ​ Income from operations $ 2.4 ​ $ 10.5 ​ $ 13.7 345 31 ​ ​ The following table shows the components of our income before income taxes exclusive of our income from operations. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, % Change ​ 2020 2021 2022 2020-21 2021-22 ​ (Dollars in millions) ​ ​ ​ ​ Equity in earnings of Kronos $ 19.4 ​ $ 34.3 ​ $ 31.9 77 % (7) % Marketable equity securities unrealized gain (loss) (8.7) ​ 16.2 ​ (8.1) 287 (150) ​ Other components of net periodic pension and OPEB cost (.8) ​ (.6) ​ (1.1) (15) 71 ​ Interest and dividend income 2.6 ​ 1.6 ​ 3.8 (38) 137 ​ Interest expense (1.3) ​ (1.1) ​ (1.0) (15) (18) ​ ​ CompX International Inc. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, % Change ​ ​ 2020 2021 2022 2020-21 2021-22 ​ ​ (Dollars in millions) ​ ​ ​ ​ Net sales $ 114.5 ​ $ 140.8 ​ $ 166.6 23 % 18 % Cost of sales 81.7 ​ 98.1 ​ 117.8 20 20 ​ Gross margin 32.8 ​ 42.7 ​ 48.8 30 14 ​ Operating costs and expenses 21.0 ​ 22.2 ​ 23.4 6 5 Income from operations $ 11.8 ​ $ 20.5 ​ $ 25.4 74 24 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of net sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales 71.3 % 69.7 % 70.7 % ​ Gross margin 28.7 ​ 30.3 ​ 29.3 Operating costs and expenses 18.4 ​ 15.8 ​ 14.0 Income from operations ​ 10.3 ​ 14.6 ​ 15.3 ​ ​ ​ ​ Net sales – CompX’s net sales increased approximately $25.8 million in 2022 compared to 2021 primarily due to higher Marine Component sales primarily to the towboat market and, to a lesser extent, higher Security Products sales across a variety of markets.
Income from operations The following table shows the components of our income from operations. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, % Change ​ 2021 2022 2023 2021-22 2022-23 ​ ​ (Dollars in millions) ​ ​ ​ ​ ​ CompX $ 20.5 ​ $ 25.4 ​ $ 25.4 24 % — % Corporate expense (10.0) ​ (11.7) ​ (11.3) 17 (3) ​ Income from operations $ 10.5 ​ $ 13.7 ​ $ 14.1 31 3 ​ ​ The following table shows the components of our income (loss) before income taxes exclusive of our income from operations. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, % Change ​ 2021 2022 2023 2021-22 2022-23 ​ (Dollars in millions) ​ ​ ​ ​ Equity in earnings (losses) of Kronos $ 34.3 ​ $ 31.9 ​ $ (15.0) (7) % (147) % Marketable equity securities unrealized gain (loss) 16.2 ​ (8.1) ​ (8.1) (150) 1 ​ Loss on pension plan termination ​ — ​ ​ — ​ ​ (4.9) ​ — ​ n.m. ​ Other components of net periodic pension and OPEB cost (.6) ​ (1.1) ​ (1.4) 71 21 ​ Interest and dividend income 1.6 ​ 3.8 ​ 9.6 137 154 ​ Interest expense (1.1) ​ (1.0) ​ (.7) (18) (21) ​ -36- ​ CompX International Inc. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, % Change ​ ​ 2021 2022 2023 2021-22 2022-23 ​ ​ (Dollars in millions) ​ ​ ​ ​ Net sales $ 140.8 ​ $ 166.6 ​ $ 161.3 18 % (3) % Cost of sales 98.1 ​ 117.8 ​ 112.1 20 (5) ​ Gross margin 42.7 ​ 48.8 ​ 49.2 14 1 ​ Operating costs and expenses 22.2 ​ 23.4 ​ 23.8 5 2 Income from operations $ 20.5 ​ $ 25.4 ​ $ 25.4 24 — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of net sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales 69.7 % 70.7 % 69.5 % ​ Gross margin 30.3 ​ 29.3 ​ 30.5 Operating costs and expenses 15.8 ​ 14.0 ​ 14.7 Income from operations ​ 14.6 ​ 15.3 ​ 15.8 ​ ​ ​ ​ Net sales – CompX’s net sales decreased approximately $5.3 million in 2023 compared to 2022 due to lower Marine Components sales primarily to the towboat market, partially offset by higher Security Products sales largely in the fourth quarter of 2023 .
Operating income margin decreased for 2022 compared to 2021 primarily due to the factors impacting gross margin, as well as increased operating costs and expenses, resulting from higher salaries and employment related costs, partially offset by increased coverage of operating costs and expenses from higher sales.
Operating income margin increased for 2023 compared to 2022 primarily due to the factors impacting gross margin, as well as increased coverage of operating costs and expenses from higher sales, partially offset by increased operating costs and expenses, including higher employee salaries and benefit costs of $.6 million.
The prices for stainless steel, the primary raw material used for the manufacture of marine exhaust headers and pipes and wake enhancement systems, experienced significant volatility during 2021 and 2022.
Prices for aluminum and stainless steel, the primary raw material used for the manufacture of marine exhaust headers and pipes, wake enhancement systems, throttles and trim tabs experienced significant volatility during 2021 and 2022 but were more stable in 2023.
Prices for the primary commodity-related raw materials used in the manufacture of its locking mechanisms, primarily zinc and brass, generally increased throughout 2021 and the first half of 2022. Prices began to stabilize in the latter half of 2022, although at elevated levels.
After increasing in 2021 and the first half of 2022, prices for the primary commodity-related raw materials used in the manufacture of CompX’s locking mechanisms, primarily zinc and brass, generally began to stabilize in the latter half of 2022 and into 2023 and generally began to soften in the latter half of 2023.
It is our policy to engage in transactions with related parties on terms, in our opinion, no less favorable to us than we could obtain from unrelated parties. ​ Equity in earnings of Kronos Worldwide, Inc. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ % Change ​ ​ 2020 2021 2022 2020-21 2021-22 ​ (Dollars in millions) ​ ​ ​ Net sales $ 1,638.8 ​ $ 1,939.4 ​ $ 1,930.2 18 % — % Cost of sales 1,287.6 ​ 1,493.2 ​ 1,539.1 16 ​ 3 ​ Gross margin $ 351.2 ​ $ 446.2 ​ $ 391.1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income from operations $ 116.2 ​ $ 187.1 ​ $ 159.6 61 ​ (15) ​ Other loss, net ​ (17.2) ​ ​ (14.1) ​ ​ (8.8) ​ (18) ​ (38) ​ Interest expense (19.0) ​ (19.6) ​ (16.9) 3 ​ (14) ​ Income before income taxes 80.0 ​ 153.4 ​ 133.9 Income tax expense 16.1 ​ 40.5 ​ 29.4 Net income $ 63.9 ​ $ 112.9 ​ $ 104.5 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of net sales: ​ ​ Cost of sales 79 % 77 % 80 % ​ ​ ​ Income from operations 7 ​ 10 ​ 8 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity in earnings of Kronos Worldwide, Inc. $ 19.4 ​ $ 34.3 ​ $ 31.9 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ TiO 2 operating statistics: ​ ​ Sales volumes* 531 ​ 563 ​ 481 6 % (15) % Production volumes* 517 ​ 545 ​ 492 5 % (10) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in TiO 2 net sales: ​ ​ TiO 2 product pricing ​ ​ ​ ​ ​ ​ ​ ​ ​ 8 % 21 % TiO 2 sales volumes ​ ​ ​ ​ ​ 6 ​ (15) ​ TiO 2 product mix/other ​ ​ ​ ​ ​ 1 ​ (1) ​ Changes in currency exchange rates ​ ​ ​ ​ ​ 3 ​ (5) ​ Total ​ ​ ​ ​ ​ ​ ​ 18 % — % * Thousands of metric tons Industry conditions and 2022 overview - Kronos started 2022 with average TiO 2 selling prices 16% higher than at the beginning of 2021 and Kronos’ average TiO 2 selling prices increased 16% throughout 2022 in response to its rising production costs.
It is our policy to engage in transactions with related parties on terms, in our opinion, no less favorable to us than we could obtain from unrelated parties. ​ -41- ​ Equity in earnings of Kronos Worldwide, Inc. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years ended December 31, ​ % Change ​ ​ 2021 2022 2023 2021-22 2022-23 ​ (Dollars in millions) ​ ​ ​ Net sales $ 1,939.4 ​ $ 1,930.2 ​ $ 1,666.5 — % (14) % Cost of sales 1,493.2 ​ 1,539.1 ​ 1,501.6 3 ​ (2) ​ Gross margin $ 446.2 ​ $ 391.1 ​ $ 164.9 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations $ 187.1 ​ $ 159.6 ​ $ (56.0) (15) ​ (135) ​ Other gain (loss), net ​ (14.1) ​ ​ (8.8) ​ ​ .2 ​ (38) ​ (102) ​ Interest expense (19.6) ​ (16.9) ​ (17.1) (14) ​ 1 ​ Income (loss) before income taxes 153.4 ​ 133.9 ​ (72.9) Income tax expense (benefit) 40.5 ​ 29.4 ​ (23.8) Net income (loss) $ 112.9 ​ $ 104.5 ​ $ (49.1) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Percentage of net sales: ​ ​ Cost of sales 77 % 80 % 90 % ​ ​ ​ Income (loss) from operations 10 ​ 8 ​ (3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity in earnings (losses) of Kronos Worldwide, Inc. $ 34.3 ​ $ 31.9 ​ $ (15.0) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ TiO 2 operating statistics: ​ ​ Sales volumes* 563 ​ 481 ​ 419 (15) % (13) % Production volumes* 545 ​ 492 ​ 401 (10) % (19) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in TiO 2 net sales: ​ ​ TiO 2 product pricing ​ ​ ​ ​ ​ ​ ​ ​ ​ 21 % (4) % TiO 2 sales volumes ​ ​ ​ ​ ​ (15) ​ (13) ​ TiO 2 product mix/other ​ ​ ​ ​ ​ (1) ​ 2 ​ Changes in currency exchange rates ​ ​ ​ ​ ​ (5) ​ 1 ​ Total ​ ​ ​ ​ ​ ​ ​ — % (14) % * Thousands of metric tons Industry conditions and 2023 overview - Kronos and the TiO 2 industry are experiencing an extended period of significantly reduced demand across all major markets, which is reflected in its sales volumes in 2023.
Gross margin as a percentage of sales increased over the same period due to the increase in CompX’s Security Products gross margin percentage partially offset by the decrease in CompX’s Marine Components gross margin percentage .
Gross margin as a percentage of sales decreased over the same period primarily due to the decrease in CompX’s Security Products gross margin percentage .
Obligations for environmental remediation costs are difficult to assess and it is possible that actual costs for environmental remediation will exceed accrued amounts or that costs will be incurred in the future for sites in which we cannot currently estimate our liability. If these events were to occur in 2023, our corporate expenses would be higher than we currently estimate.
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. -40- ​ Obligations for environmental remediation and related costs are difficult to assess and estimate and it is possible that actual costs for environmental remediation will exceed accrued amounts or that costs will be incurred in the future for sites in which we cannot currently estimate our liability.
Operating costs and expenses increased in 2021 compared to 2020 predominantly due to higher salary and benefit costs which increased by $.9 million. As a percentage of sales, operating costs and expenses decreased in 2021 compared to 2020 primarily due to the effect of higher sales .
CompX’s operating costs and expenses increased in 2023 compared to 2022 predominantly due to higher salary and benefit costs at Security Products which increased by $.6 million. As a percentage of sales, CompX’s operating costs and expenses increased in 2023 compared to 2022 primarily due to the effect of the increased operating costs and expenses on lower sales.
See Note 15 to our Consolidated Financial Statements. -46- ​ During 2022 we purchased marketable debt securities totaling $70.0 million, of which $33.0 million relates to CompX. See Note 5 to our Consolidated Financial Statements.
See Note 15 to our Consolidated Financial Statements. During 2022, we purchased marketable debt securities totaling $70.0 million, of which $33.0 million relates to CompX. During 2023, we purchased marketable debt securities totaling $61.4 million, of which $36.3 million relates to CompX, and received gross proceeds totaling $82.0 million, of which $36.0 million relate to CompX.
Interest decreased $1.0 million in 2021 compared to 2020 primarily due to lower average balances on CompX’s revolving promissory note receivable from Valhi. ​ Marketable equity securities - Unrealized gains or losses on our marketable equity securities are recognized in Marketable equity securities on our Consolidated Statements of Income. See Note 5 to our Consolidated Financial Statements.
Interest income increased $2.2 million in 2022 compared to 2021 primarily due to higher interest rates and increased investment balances, somewhat offset by lower average balances on CompX’s revolving promissory note receivable from Valhi. ​ Marketable equity securities - Unrealized gains or losses on our marketable equity securities are recognized in Marketable equity securities on our Consolidated Statements of Operations.
As noted above, defined benefit pension expense and the amounts recognized as accrued pension costs are based upon the actuarial assumptions discussed above. We believe that all of the actuarial assumptions used are reasonable and appropriate.
In comparison, we expect to be required to contribute approximately $1.0 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 that all of the actuarial assumptions used are reasonable and appropriate.
Operating income as a percentage of net sales increased slightly in 2021 compared to 2020 due to increased coverage of operating costs and expenses from higher sales, partially offset by the factors impacting gross margin.
Operating income as a percentage of net sales decreased slightly in 2023 compared to 2022 primarily due to the factors impacting gross margin, as well as decreased coverage of operating costs and expenses from lower sales. Marine Components net sales increased 46% in 2022 as compared to 2021.
This decrease was driven by the net effects of lower gross margin and lower selling, general and administrative expenses for the comparable periods discussed above. Kronos experienced a loss from operations of $19.7 million in the fourth quarter of 2022 compared to income from operations of $52.0 million in the fourth quarter of 2021.
Income from operations as a percentage of net sales decreased to 8% in 2022 from 10% in 2021. This decrease was driven by the net effects of lower gross margin and lower selling, general and administrative expenses for the comparable periods discussed above.
Differences between the expected return on plan assets for a given year and the actual return are deferred and amortized over future periods based on the average remaining life expectancy of the inactive participants. At December 31, 2022, approximately 80% of the plan assets were related to our plan in the U.S., with the remainder related to the U.K. plan.
Differences between the expected return on plan assets for a given year and the actual return are deferred and amortized over future periods based on the average remaining life expectancy of the inactive participants.
The $1.4 million net decrease in cash provided by operating activities includes the net effects of: ● higher net cash used for relative changes in receivables, inventories, prepaid expenses, payables and accrued liabilities in 2021 of $8.2 million; ● higher income from operations from CompX in 2021 of $8.7 million; and ● a $1.3 million decrease in interest received in 2021 due to lower average affiliate receivable balance and the relative timing of interest received.
The $10.1 million net increase in cash provided by operating activities includes the effects of: ● lower net cash used for relative changes in receivables, inventories, prepaid expenses, payables and accrued liabilities in 2023 of $6.7 million; ● a $2.6 million increase in interest received in 2023 due to higher interest rates and increased investment balances, offset by lower average balances on CompX’s revolving promissory note receivable from affiliate; and ● a $1.4 million decrease in cash paid for taxes in 2023 due to the relative timing of payments.
Kronos also recognized a gain of $2.7 million in 2022 related to cash received from the settlement of a business interruption insurance claim related to Hurricane Laura. Kronos estimates that changes in currency exchange rates increased income from operations by approximately $23 million in 2022 as compared to 2021, as discussed in the Effects of currency exchange rates section below.
Kronos estimates that changes in currency exchange rates increased income from operations by approximately $23 million in 2022 as compared to 2021, as discussed in the Effects of currency exchange rates section below.
See Note 13 to our Consolidated Financial Statements for more information about our 2022 income tax items, including a tabular reconciliation of our statutory tax expense to our actual tax expense (benefit).
The increase in our effective rate from 2022 to 2023 is attributable to the effects of Kronos’ loss in 2023 as compared to earnings in 2022. See Note 13 to our Consolidated Financial Statements for more information about our 2023 income tax items, including a tabular reconciliation of our statutory tax expense to our actual tax expense (benefit).
TiO 2 selling prices will increase or decrease generally as a result of competitive market pressures, changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs.
TiO 2 selling prices will increase or decrease generally as a result of competitive market pressures, changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs. Kronos’ sales volumes decreased 13% in 2023 as compared to 2022 due to lower overall demand across all major markets noted above.
Kronos’ gross margin as a percentage of net sales in 2021 increased primarily due to the net effects of higher average TiO 2 selling prices, higher production and sales volumes, higher production costs and fluctuations in currency exchange rates.
Gross margin as a percentage of net sales decreased to 10% in 2023 compared to 20% in 2022. As discussed and quantified above, Kronos’ gross margin as a percentage of net sales decreased primarily due to lower production and sales volumes, lower average TiO 2 selling prices, higher production costs and changes in currency exchange rates.

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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 fair value of our equity securities at December 31, 2021 and 2022 was $34.4 million and $26.4 million, respectively. The potential change in the aggregate fair value of these investments, assuming a 10% change in prices, would be $3.4 million and $2.6 million at December 31, 2021 and 2022, respectively.
Biggest changeThe fair value of our equity securities at December 31, 2022 and 2023 was $26.4 million and $18.2 million, respectively. The potential change in the aggregate fair value of these investments, assuming a 10% change in prices, would be $2.6 million and $1.8 million at December 31, 2022 and 2023, respectively.
Interest rates - We are exposed to market risk from changes in interest rates, primarily related to our indebtedness, CompX’s note receiveable from affiliate and our investment in marketable debt securities.
Interest rates - We are exposed to market risk from changes in interest rates, primarily related to our indebtedness, CompX’s note receivable from affiliate and our investment in marketable debt securities.
We have an outstanding principal amount of indebtedness of $.5 million at December 31, 2022 bearing interest at prime plus 1.875% (9.4% at December 31, 2022) with a maturity date of December 31, 2030. The carrying value of such outstanding indebtedness approximates its fair value.
We have an outstanding principal amount of indebtedness of $.5 million at December 31, 2023 bearing interest at prime plus 1.875% (10.4% at December 31, 2023) with a maturity date of December 31, 2030. The carrying value of such outstanding indebtedness approximates its fair value.
At December 31, 2022 we have $70.2 million invested in marketable debt securities, $33.1 held by CompX, at an average interest rate of approximately 3%. Marketable equity security prices - We are exposed to market risk due to changes in prices of the marketable equity securities which we own.
At December 31, 2023 we have $53.1 million invested in marketable debt securities, $35.4 held by CompX, at an average interest rate of approximately 4.6%. Marketable equity security prices - We are exposed to market risk due to changes in prices of the marketable equity securities which we own.
The outstanding principal amount of the note receivable from affiliate of $13.2 million at December 31, 2022 bears interest at prime plus 1.0% (8.5% at December 31, 2022). We received interest income of $1.0 million from the note -49- ​ during 2022.
The outstanding principal amount of the note receivable from affiliate of $10.6 million at December 31, 2023 bears interest at prime plus 1.0% (9.5% at December 31, 2023). We received interest income of $1.2 million from the note during 2023.

Other NL 10-K year-over-year comparisons