KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

INDEX


		Page number
Part I.	FINANCIAL INFORMATION	Page number
~~Part I.~~	~~FINANCIAL INFORMATION~~
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets - December 31, ~~2020; September 30, 2021~~2021; March 31, 2022 (unaudited)	3
	Condensed Consolidated Statements of Income (unaudited) - Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022	5
	Condensed Consolidated Statements of Comprehensive Income (unaudited) - Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022	6
	Condensed Consolidated Statements of Stockholders’ Equity (unaudited) - Three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022	7
	Condensed Consolidated Statements of Cash Flows (unaudited) - ~~Nine~~Three months ended ~~September 30, 2020~~March 31, 2021 and ~~2021~~2022	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3.	Quantitative and Qualitative Disclosure About Market Risk		2524
Item 4.	Controls and Procedures		2524
Part II.	OTHER INFORMATION
Item 1A.
~~Item 1.~~	~~Legal Proceedings~~		27
~~Item 1A.~~	Risk Factors		2725
Item 5.2.	~~Other Information~~Unregistered Sales of Equity Securities and Use of Proceeds		2725
Item 6.	Exhibits	2726
Items 2, 3 and 4 of Part II are omitted because there is no information to report.

~~- 2 -~~Table of Contents

KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)


ASSETS	December 31,		March 31,
	2021		2022
				(unaudited)
Current assets:
Cash and cash equivalents	$	406.0	$	350.0
Restricted cash		2.1		1.8
Accounts and other receivables, net		379.1		416.4
Inventories, net		432.3		464.2
Prepaid expenses and other		38.5		47.1

Total current assets		1,258.0		1,279.5

Other assets:
Investment in TiO₂ manufacturing joint venture		101.9		105.7
Restricted cash		4.5		4.4
Marketable securities		4.2		4.3
Operating lease right-of-use assets		19.9		21.5
Deferred income taxes		106.8		101.4
Other		14.1		14.7

Total other assets		251.4		252.0

Property and equipment:
Land		43.9		43.8
Buildings		222.2		221.8
Equipment		1,122.1		1,119.8
Mining properties		129.6		133.5
Construction in progress		72.7		80.4
		1,590.5		1,599.3
Less accumulated depreciation and amortization		1,087.1		1,095.5

Net property and equipment		503.4		503.8

Total assets	$	2,012.8	$	2,035.3

December 31,

September 30,

2020

2021

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents
$
355.3

$
373.5

Restricted cash

2.0

1.7

Accounts and other receivables, net

323.0

384.0

Inventories, net

519.0

423.6

Prepaid expenses and other

19.0

36.3

Total current assets

1,218.3

1,219.1

Other assets:

Investment in TiO₂ manufacturing joint venture

103.3

105.5

Restricted cash

4.7

4.5

Marketable securities

2.2

3.4

Operating lease right-of-use assets

26.1

21.8

Deferred income taxes

151.0

136.1

Other

6.5

11.1

Total other assets

293.8

282.4

Property and equipment:

Land

44.1

44.1

Buildings

233.9

225.5

Equipment

1,173.7

1,137.2

Mining properties

127.8

125.3

Construction in progress

56.1

71.8

1,635.6

1,603.9

Less accumulated depreciation and amortization

1,111.0

1,100.9

Net property and equipment

524.6

503.0

Total assets
$
2,036.7

$
2,004.5

~~- 3 -~~

Table of Contents

KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In millions)

December 31,

September 30,

2020

2021

(unaudited)

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current maturities of long-term debt
$
.7

$
.7

Accounts payable and accrued liabilities

243.8

246.9

Income taxes

15.7

12.1

Total current liabilities

260.2

259.7

Noncurrent liabilities:

Long-term debt

486.7

461.1

Accrued pension costs

372.6

349.3

Payable to affiliate - income taxes

50.6

44.7

Operating lease liabilities

18.8

16.6

Deferred income taxes

24.6

23.3

Other

26.7

27.8

Total noncurrent liabilities

980.0

922.8

Stockholders' equity:

Common stock

1.2

1.2

Additional paid-in capital

1,395.3

1,395.4

Retained deficit

(151.8
)

(132.9
)
Accumulated other comprehensive loss

(448.2
)

(441.7
)

Total stockholders' equity

796.5

822.0

Total liabilities and stockholders' equity
$
2,036.7

$
2,004.5


LIABILITIES AND STOCKHOLDERS’ EQUITY	December 31,		March 31,
	2021		2022
				(unaudited)
Current liabilities:
Current maturities of long-term debt	$	1.4	$	1.4
Accounts payable and accrued liabilities		275.1		261.0
Income taxes		12.3		18.7

Total current liabilities		288.8		281.1

Noncurrent liabilities:
Long-term debt		449.8		443.8
Accrued pension costs		287.4		282.3
Payable to affiliate - income taxes		44.7		44.7
Operating lease liabilities		15.8		17.2
Deferred income taxes		28.1		26.3
Other		28.0		26.3

Total noncurrent liabilities		853.8		840.6

Stockholders’ equity:
Common stock		1.2		1.2
Additional paid-in capital		1,395.4		1,395.2
Retained deficit		(122.1)		(86.5)
Accumulated other comprehensive loss		(404.1)		(395.2)
Treasury stock, at cost		(.2)		(1.1)

Total stockholders’ equity		870.2		913.6

Total liabilities and stockholders’ equity	$	2,012.8	$	2,035.3

Commitments and contingencies (Notes 10 and 12)

~~See accompanying notes to Condensed Consolidated Financial Statements.~~

~~- 4 -~~

~~KRONOS WORLDWIDE, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF INCOME~~

~~(In millions, except per share data)~~

Three months ended

Nine months ended

September 30,

September 30,

2020

2021

2020

2021

(unaudited)

Net sales
$
416.9

$
499.8

$
1,223.9

$
1,443.4

Cost of sales

336.3

376.8

959.4

1,115.7

Gross margin

80.6

123.0

264.5

327.7

Selling, general and administrative expense

55.6

64.2

161.8

185.1

Other operating income (expense):

Currency transactions, net

(2.9
)

1.2

3.2

1.2

Other operating expense, net

(2.8
)

(2.7
)

(10.1
)

(8.7
)

Income from operations

19.3

57.3

95.8

135.1

Other income (expense):

Interest and dividend income

.1

-

1.5

.2

Insurance settlement gain

-

-

1.5

-

Marketable equity securities

.4

(.1
)

(1.3
)

1.2

Other components of net periodic pension and OPEB cost

(5.0
)

(4.3
)

(14.4
)

(12.9
)
Interest expense

(4.9
)

(4.8
)

(14.1
)

(15.0
)

Income before income taxes

9.9

48.1

69.0

108.6

Income tax expense

1.8

12.1

15.3

27.3

Net income
$
8.1

$
36.0

$
53.7

$
81.3

Net income per basic and diluted share
$
.07

$
.31

$
.46

$
.70

Weighted average shares used in the calculation
of net income per share

115.5

115.5

115.6

115.5

~~See accompanying notes to Condensed Consolidated Financial Statements.~~

~~- 5 -~~

~~KRONOS WORLDWIDE, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~(In millions)~~

Three months ended

Nine months ended

September 30,

September 30,

2020

2021

2020

2021

(unaudited)

Net income
$
8.1

$
36.0

$
53.7

$
81.3

Other comprehensive income (loss), net of tax:

Currency translation

10.1

(7.8
)

(13.8
)

(3.8
)
Defined benefit pension plans

3.1

3.5

9.2

10.5

Other postretirement benefit plans

(.1
)

(.1
)

(.2
)

(.2
)

Total other comprehensive income (loss), net

13.1

(4.4
)

(4.8
)

6.5

Comprehensive income
$
21.2

$
31.6

$
48.9

$
87.8

See accompanying notes to Condensed Consolidated Financial Statements.

~~- 6 -~~

Table of Contents

KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS’ EQUITY~~INCOME

(In ~~millions)~~millions, except per share data)

Three months ended September 30, 2020 and 2021 (unaudited)

Accumulated

Additional

other

Common

paid-in

Retained

comprehensive

Treasury

stock

capital

deficit

loss

stock

Total

Balance at June 30, 2020
$
1.2

$
1,395.3

$
(128.5
)

$
(466.7
)

$
-

$
801.3

Net income

-

-

8.1

-

-

8.1

Other comprehensive income, net of tax

-

-

-

13.1

-

13.1

Dividends paid - $.18 per share

-

-

(20.8
)

-

-

(20.8
)

Balance at September 30, 2020
$
1.2

$
1,395.3

$
(141.2
)

$
(453.6
)

$
-

$
801.7

Balance at June 30, 2021
$
1.2

$
1,395.4

$
(148.1
)

$
(437.3
)

$
-

$
811.2

Net income

-

-

36.0

-

-

36.0

Other comprehensive loss, net of tax

-

-

-

(4.4
)

-

(4.4
)
Dividends paid - $.18 per share

-

-

(20.8
)

-

-

(20.8
)

Balance at September 30, 2021
$
1.2

$
1,395.4

$
(132.9
)

$
(441.7
)

$
-

$
822.0


	Three months ended
	March 31,
	2021		2022

	(unaudited)
Net sales	$	465.0	$	562.9
Cost of sales		369.3		413.6

Gross margin		95.7		149.3

Selling, general and administrative expense		58.0		61.4
Other operating income:
Currency transactions, net		(.5)		(1.5)
Other operating expense, net		(3.2)		(3.1)

Income from operations		34.0		83.3

Other income (expense):
Interest and dividend income		.1		.1
Marketable equity securities		.8		.1
Other components of net periodic pension and OPEB cost		(4.3)		(3.2)
Interest expense		(5.0)		(4.5)

Income before income taxes		25.6		75.8

Income tax expense		6.0		18.3

Net income	$	19.6	$	57.5

Net income per basic and diluted share	$	.17	$	.50

Weighted average shares used in the calculation of net income per share		115.5		115.5

Nine months ended September 30, 2020 and 2021 (unaudited)

Accumulated

Additional

other

Common

paid-in

Retained

comprehensive

Treasury

stock

capital

deficit

loss

stock

Total

Balance at December 31, 2019
$
1.2

$
1,396.2

$
(132.5
)

$
(448.8
)

$
-

$
816.1

Net income

-

-

53.7

-

-

53.7

Other comprehensive loss, net of tax

-

-

-

(4.8
)

-

(4.8
)
Issuance of common stock

-

.1

-

-

-

.1

Dividends paid - $.54 per share

-

-

(62.4
)

-

-

(62.4
)
Treasury stock acquired

-

-

-

-

(1.0
)

(1.0
)
Treasury stock retired

-

(1.0
)

-

-

1.0

-

Balance at September 30, 2020
$
1.2

$
1,395.3

$
(141.2
)

$
(453.6
)

$
-

$
801.7

Balance at December 31, 2020
$
1.2

$
1,395.3

$
(151.8
)

$
(448.2
)

$
-

$
796.5

Net income

-

-

81.3

-

-

81.3

Other comprehensive income, net of tax

-

-

-

6.5

-

6.5

Issuance of common stock

-

.1

-

-

-

.1

Dividends paid - $.54 per share

-

-

(62.4
)

-

-

(62.4
)

Balance at September 30, 2021
$
1.2

$
1,395.4

$
(132.9
)

$
(441.7
)

$
-

$
822.0

~~See accompanying notes to Condensed Consolidated Financial Statements.~~

~~- 7 -~~

~~KRONOS WORLDWIDE, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(In millions)~~

Nine months ended

September 30,

2020

2021

(unaudited)

Cash flows from operating activities:

Net income
$
53.7

$
81.3

Depreciation

43.3

38.1

Amortization of operating lease right-of-use assets

4.8

5.0

Deferred income taxes

(12.3
)

3.2

Benefit plan expense greater than cash funding

12.5

9.2

Marketable equity securities

1.3

(1.2
)
Contributions to TiO₂ manufacturing joint venture, net

(6.5
)

(2.2
)
Other, net

.3

.4

Change in assets and liabilities:

Accounts and other receivables, net

(10.4
)

(61.0
)
Inventories, net

7.7

81.0

Prepaid expenses

(1.7
)

(18.3
)
Accounts payable and accrued liabilities

(37.3
)

11.4

Income taxes

18.3

(1.5
)
Accounts with affiliates

(19.2
)

(19.4
)
Other, net

1.6

-

Net cash provided by operating activities

56.1

126.0

Cash flows from investing activities:

Capital expenditures

(38.3
)

(35.9
)
Proceeds from insurance settlement

1.5

-

Net cash used in investing activities

(36.8
)

(35.9
)

Cash flows from financing activities:

Payments on long-term debt

(.2
)

(.5
)
Deferred financing fees

-

(1.8
)
Dividends paid

(62.4
)

(62.4
)
Treasury stock acquired

(1.0
)

-

Net cash used in financing activities

(63.6
)

(64.7
)

Cash, cash equivalents and restricted cash - net change from:

Operating, investing and financing activities

(44.3
)

25.4

Currency translation

5.9

(7.7
)
Balance at beginning of period

392.3

362.0

Balance at end of period
$
353.9

$
379.7

Supplemental disclosures:

Cash paid for:

Interest, net of amount capitalized
$
17.9

$
18.0

Income taxes

13.5

33.9

Accrual for capital expenditures

1.8

4.1

See accompanying notes to Condensed Consolidated Financial Statements.

~~- 8 -~~

Table of Contents

KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)


	Three months ended
	March 31,
	2021		2022

	(unaudited)
Net income	$	19.6	$	57.5

Other comprehensive income (loss), net of tax:
Currency translation		2.2		6.6
Defined benefit pension plans		3.5		2.4
Other postretirement benefit plans		(.1)		(.1)

Total other comprehensive income, net		5.6		8.9

Comprehensive income	$	25.2	$	66.4

See accompanying notes to Condensed Consolidated Financial Statements.

Table of Contents

KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions)


	Three months ended March 31, 2021 and 2022 (unaudited)
							Accumulated
			Additional				other
	Common		paid-in		Retained		comprehensive		Treasury
	stock		capital		deficit		loss		stock		Total
Balance at December 31, 2020	$	1.2	$	1,395.3	$	(151.8)	$	(448.2)	$	-	$	796.5
Net income		-		-		19.6		-		-		19.6
Other comprehensive income, net of tax		-		-		-		5.6		-		5.6
Dividends paid - $.18 per share		-		-		(20.8)		-		-		(20.8)

Balance at March 31, 2021	$	1.2	$	1,395.3	$	(153.0)	$	(442.6)	$	-	$	800.9


Balance at December 31, 2021	$	1.2	$	1,395.4	$	(122.1)	$	(404.1)	$	(.2)	$	870.2
Net income		-		-		57.5		-		-		57.5
Other comprehensive income, net of tax		-		-		-		8.9		-		8.9
Dividends paid - $.19 per share		-		-		(21.9)		-		-		(21.9)
Treasury stock acquired		-		-		-		-		(1.1)		(1.1)
Treasury stock retired		-		(.2)		-		-		.2		-

Balance at March 31, 2022	$	1.2	$	1,395.2	$	(86.5)	$	(395.2)	$	(1.1)	$	913.6

See accompanying notes to Condensed Consolidated Financial Statements.

Table of Contents

KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)


		Three months ended
		March 31,
		2021		2022

		(unaudited)
Cash flows from operating activities:
Net income		$	19.6	$	57.5
Depreciation			12.7		12.9
Amortization of operating lease right-of-use assets			1.7		1.4
Deferred income taxes			.2		1.7
Benefit plan expense greater than cash funding			3.7		1.6
Marketable equity securities			(.8)		(.1)
Contributions to TiO₂ manufacturing joint venture, net			(3.4)		(3.8)
Other, net			.1		1.6
Change in assets and liabilities:
Accounts and other receivables, net			(23.5)		(41.2)
Inventories, net			35.6		(32.8)
Prepaid expenses			5.0		(8.9)
Accounts payable and accrued liabilities			.5		(25.2)
Income taxes			.9		6.4
Accounts with affiliates			4.2		9.8
Other, net			.2		.5

Net cash provided by (used in) operating activities			56.7		(18.6)

Cash flows from investing activities - capital expenditures			(10.8)		(14.2)

Cash flows from financing activities:
Payments on long-term debt			(.2)		(.2)
Dividends paid			(20.8)		(21.9)
Treasury stock acquired			-		(1.1)

Net cash used in financing activities			(21.0)		(23.2)

Cash, cash equivalents and restricted cash - net change from:
Operating, investing and financing activities			24.9		(56.0)
Effect of currency exchange rate changes on cash			(7.0)		(.4)
Balance at beginning of period			362.0		412.6

Balance at end of period		$	379.9	$	356.2

Supplemental disclosures:
Cash paid for:
Interest, net of amount capitalized		$	9.2	$	8.3
Income taxes			3.9		5.5
Accrual for capital expenditures	��		2.5		3.8

See accompanying notes to Condensed Consolidated Financial Statements

Table of Contents

KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2021~~March 31, 2022

(unaudited)

Note 1 - Organization and basis of presentation:

Organization - At ~~September 30, 2021,~~March 31, 2022, Valhi, Inc. (NYSE: VHI) held approximately 50% of our outstanding common stock and a wholly-owned subsidiary of NL Industries, Inc. (NYSE: NL) held approximately ~~30%~~31% of our common stock. Valhi owned approximately 83% of NL’s outstanding common stock and a wholly-owned subsidiary of Contran Corporation held approximately 92% of Valhi’s outstanding common stock. A majority of ~~Contran's~~Contran’s outstanding voting stock is held directly by Lisa K. Simmons and various family trusts established for the benefit of Ms. Simmons, Thomas C. Connelly (the husband of Ms. Simmons’ late sister) and their children and for which Ms. Simmons or Mr. Connelly, as applicable, serve as trustee (collectively, the “Other Trusts”). With respect to the Other Trusts for which Mr. Connelly serves as trustee, he is required to vote the shares of Contran voting stock held in such trusts in the same manner as Ms. Simmons. Such voting rights of Ms. Simmons last through April 22, 2030 and are personal to Ms. Simmons. The remainder of Contran’s outstanding voting stock is held by another trust (the “Family Trust”), which was established for the benefit of Ms. Simmons and her late sister and their children and for which a third-party financial institution serves as trustee. Consequently, at ~~September 30, 2021~~March 31, 2022, Ms. Simmons and the Family Trust may be deemed to control Contran, and therefore may be deemed to indirectly control the wholly-owned subsidiary of Contran, Valhi, NL and us.

Basis of presentation - The unaudited Condensed Consolidated Financial Statements contained in this Quarterly Report have been prepared on the same basis as the audited Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 that we filed with the Securities and Exchange Commission (SEC) on March ~~10, 2021 (2020~~9, 2022 (2021 Annual Report). In our opinion, we have made all necessary adjustments (which include only normal recurring adjustments), in order to state fairly, in all material respects, our consolidated financial position, results of operations and cash flows as of the dates and for the periods presented. We have condensed the Consolidated Balance Sheet at December 31, ~~2020~~2021 contained in this Quarterly Report as compared to our audited Consolidated Financial Statements at that date, and we have omitted certain information and footnote disclosures (including those related to the Consolidated Balance Sheet at December 31, ~~2020)~~2021) normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Our results of operations for the interim ~~periods~~period ended ~~September 30, 2021~~March 31, 2022 may not be indicative of our operating results for the full year. The Condensed Consolidated Financial Statements contained in this Quarterly Report should be read in conjunction with our ~~2020~~2021 Consolidated Financial Statements contained in our ~~2020~~2021 Annual Report.

Unless otherwise indicated, references in this report to “we,” “us” or “our” refer to Kronos Worldwide, Inc. and its subsidiaries (NYSE: KRO) taken as a whole.

Note 2 - Accounts and other receivables, net:


	December 31,		March 31,
	2021		2022

	(In millions)
Trade receivables	$	326.3	$	374.1
Recoverable VAT and other receivables		32.4		23.4
Receivables from affiliates:
Louisiana Pigment Company, L.P. (LPC)		15.8		15.2
Other		2.6		2.8
Refundable income taxes		4.0		4.0
Allowance for doubtful accounts		(2.0)		(3.1)
Total	$	379.1	$	416.4

December 31,

September 30,

2020

2021

(In millions)

Trade receivables
$
294.8

$
346.6

Recoverable VAT and other receivables

21.3

19.9

Receivables from affiliates:

Louisiana Pigment Company, L.P. (LPC)

-

13.4

Other

3.5

2.4

Refundable income taxes

5.3

3.7

Allowance for doubtful accounts

(1.9
)

(2.0
)
Total
$
323.0

$
384.0

~~- 9 -~~Table of Contents

Note 3 - Inventories, net:


					December 31,		March 31,
					2021		2022
	December 31,		September 30,
	2020		2021
	(In millions)
					(In millions)
Raw materials	$	133.2	$	100.7	$	76.3	$	97.1
Work in process		36.8		29.8		30.4		35.6
Finished products		269.2		213.9		245.6		249.0
Supplies		79.8		79.2		80.0		82.5
Total	$	519.0	$	423.6	$	432.3	$	464.2

Note 4 - Marketable securities:

Our marketable securities consist of investments in the publicly-traded shares of related parties: Valhi, NL and CompX International Inc. NL owns the majority of CompX’s outstanding common stock. All of our marketable securities are accounted for as available-for-sale securities, which are carried at fair value using quoted market prices in active markets for each marketable security and represent a Level 1 input within the fair value hierarchy. Any unrealized gains or losses on the securities are recognized in Other income (expense) - Marketable equity securities on our Condensed Consolidated Statements of Income.

	Fair value
	measurement	Market		Cost		Unrealized

									Fair value
									measurement	Market		Cost		Unrealized
Marketable security	level	value		basis		gain (loss)			level	value		basis		gain
		(In millions)
December 31, 2020:
										(In millions)
December 31, 2021:
Valhi common stock	1	$	2.1	$	3.2	$	(1.1	)	1	$	4.1	$	3.2	$	.9
NL and CompX common stocks	1		.1		.1		-		1		.1		.1		-
Total		$	2.2	$	3.3	$	(1.1	)		$	4.2	$	3.3	$	.9

September 30, 2021:

March 31, 2022:
Valhi common stock	1	$	3.3	$	3.2	$	.1		1	$	4.2	$	3.2	$	1.0
NL and CompX common stocks	1		.1		.1		-		1		.1		.1		-
Total		$	3.4	$	3.3	$	.1			$	4.3	$	3.3	$	1.0

At December 31, ~~2020~~2021 and ~~September 30, 2021,~~March 31, 2022, we held approximately 144,000 shares of Valhi’s common stock. We also held a nominal number of shares of NL and CompX common stocks. At December 31, ~~2020~~2021 and ~~September 30, 2021,~~March 31, 2022, the per share quoted market price of Valhi’s common stock was ~~$15.20~~$28.75 and ~~$23.33,~~$29.31, respectively.

The Valhi, CompX and NL common stocks we own are subject to restrictions on resale pursuant to certain provisions of SEC Rule 144. In addition, as a majority-owned subsidiary of Valhi we cannot vote our shares of Valhi common stock under Delaware General Corporation law, but we receive dividends from Valhi on these shares when declared and paid.

Note 5 - Long-term debt:


	December 31,		March 31,
	2021		2022

	(In millions)
Kronos International, Inc. 3.75% Senior Notes	$	448.8	$	442.9
Other		2.4		2.3
Total debt		451.2		445.2
Less current maturities		1.4		1.4
Total long-term debt	$	449.8	$	443.8

December 31,

September 30,

2020

2021

(In millions)

Kronos International, Inc. 3.75% Senior Notes
$
485.7

$
460.4

Other

1.7

1.4

Total debt

487.4

461.8

Less current maturities

.7

.7

Total long-term debt
$
486.7

$
461.1

Table of Contents

Senior Notes - At ~~September 30, 2021,~~March 31, 2022, the carrying value of our 3.75% Senior Secured Notes due September 15, 2025 (€400 million aggregate principal amount outstanding) is stated net of unamortized debt issuance costs of ~~$3.8~~$3.2 million.

~~- 10 -~~

Revolving credit ~~facilities~~ facility - ~~On April 20, 2021,~~During the first three months of 2022, we ~~entered into a new global~~had 0 borrowings or repayments under our $225 million global revolving credit facility (Global Revolver) which matures in April 2026. The Global Revolver replaces our previously existing North American and European revolving credit facilities and there were 0 borrowings on either facility in 2021 through their termination concurrent with entering into the Global Revolver. Since inception, we had 0 borrowings or repayments under the Global Revolver and at ~~September 30, 2021,~~March 31, 2022, the full $225 million was available for borrowing. Borrowings under the Global Revolver are available for our general corporate purposes. Available borrowings are based on formula-determined amounts of eligible trade receivables and inventories, as defined in the agreement, less any outstanding letters of credit issued under the Global Revolver. Borrowings by our Canadian, Belgian and German subsidiaries are limited to $25 million, ~~€30 million and €60 million, respectively.~~ Any amounts outstanding under the Global Revolver bear interest, at our option, at the applicable non-base rate (LIBOR, CDOR or EURIBOR, dependent on the currency of the borrowing) plus a margin ranging from 1.5% to 2.0%, or at the applicable base rate, as defined in the agreement, plus a margin ranging from .5% to 2.0%. The Global Revolver is collateralized by, among other things, a first priority lien on the borrowers’ trade receivables and inventories. The facility contains a number of covenants and restrictions customary in lending transactions of this type which, among other things, restrict the borrowers’ ability to incur additional debt, incur liens, pay additional dividends or merge or consolidate with, or sell or transfer all or substantially all of their assets to another entity and, under certain conditions, requires the maintenance of a fixed charge coverage ratio, as defined in the agreement, of at least 1.0 to 1.0.

Other- We are in compliance with all of our debt covenants at ~~September 30, 2021.~~March 31, 2022.

Note 6 - Accounts payable and accrued liabilities:

December 31,

September 30,

2020

2021

(In millions)

Accounts payable
$
111.0

$
123.4

Employee benefits

27.8

29.8

Accrued sales discounts and rebates

29.1

22.7

Payables to affiliates:

LPC

19.3

17.6

Income taxes payable to Valhi

8.6

6.3

Operating lease liabilities

6.7

4.6

Other

41.3

42.5

Total
$
243.8

$
246.9


	December 31,		March 31,
	2021		2022

	(In millions)
Accounts payable	$	143.6	$	132.5
Accrued sales discounts and rebates		28.7		11.1
Employee benefits		28.9		31.0
Payables to affiliates:
LPC		17.3		20.8
Income taxes payable to Valhi		.9		5.2
Operating lease liabilities		3.7		3.9
Other		52.0		56.5
Total	$	275.1	$	261.0

Note 7 - Other noncurrent liabilities:

December 31,

September 30,

2020

2021

(In millions)

Accrued postretirement benefits
$
8.7

$
8.8

Employee benefits

6.2

5.4

Other

11.8

13.6

Total
$
26.7

$
27.8


	December 31,		March 31,
	2021		2022

	(In millions)
Accrued postretirement benefits	$	8.4	$	8.6
Employee benefits		6.1		5.9
Other		13.5		11.8
Total	$	28.0	$	26.3

~~- 11 -~~

Table of Contents

Note 8 - Revenue recognition:

The following table disaggregates our net sales by place of manufacture (point of origin) and to the location of the customer (point of destination), which are the categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.


													Three months ended
													March 31,
													2021		2022
	Three months ended						Nine months ended
	September 30,						September 30,
	2020			2021			2020			2021
	(In millions)
													(In millions)
Net sales - point of origin:
United States	$	272.9		$	297.6		$	736.5		$	787.5		$	253.9	$	326.4
Germany		208.1			254.2			620.3			724.2			231.2		276.5
Canada		93.8			88.6			247.1			288.8			97.2		96.4
Belgium		64.9			69.6			181.9			212.0			66.5		92.8
Norway		46.6			63.4			163.5			198.5			71.0		78.4
Eliminations		(269.4	)		(273.6	)		(725.4	)		(767.6	)		(254.8)		(307.6)
Total	$	416.9		$	499.8		$	1,223.9		$	1,443.4		$	465.0	$	562.9


Net sales - point of destination:
Europe	$	194.3		$	248.0		$	578.6		$	712.1		$	227.3	$	269.5
North America		153.2			174.3			434.4			476.9			145.3		179.9
Other		69.4			77.5			210.9			254.4			92.4		113.5
Total	$	416.9		$	499.8		$	1,223.9		$	1,443.4		$	465.0	$	562.9

Note 9 - Employee benefit plans:

The components of net periodic defined benefit pension cost are presented in the table below.

Three months ended

Nine months ended

September 30,

September 30,

2020

2021

2020

2021

(In millions)

Service cost
$
3.5

$
3.7

$
9.9

$
11.1

Interest cost

2.7

2.2

7.9

6.6

Expected return on plan assets

(2.4
)

(2.9
)

(7.0
)

(8.9
)
Amortization of prior service cost

.1

-

.2

.1

Recognized actuarial losses

4.6

5.0

13.3

15.2

Total
$
8.5

$
8.0

$
24.3

$
24.1


	Three months ended
	March 31,
	2021		2022

	(In millions)
Net periodic pension cost (income):
Service cost	$	3.8	$	3.0
Interest cost		2.2		2.9
Expected return on plan assets		(3.0)		(3.1)
Recognized actuarial losses		5.1		3.4
Total	$	8.1	$	6.2

We expect our ~~2021~~2022 contributions for our pension plans to be approximately ~~$17~~$19 million.

12 -

Table of Contents

Note 10 - Income taxes:

Three months ended

Nine months ended

September 30,

September 30,

2020

2021

2020

2021

(In millions)

Expected tax expense, at U.S. federal statutory
income tax rate of 21%
$
2.1

$
10.1

$
14.5

$
22.8

Non-U.S. tax rates

.1

1.3

.7

3.0

Incremental net tax expense (benefit) on earnings
and losses of U.S. and non-U.S. companies

.1

(1.2
)

(4.5
)

(2.7
)
Global intangible low-tax income, net

(.9
)

.6

3.3

1.6

Valuation allowance, net

.5

.6

.5

1.7

Adjustment to the reserve for uncertain tax positions, net

(.5
)

.1

-

(.3
)
Nondeductible expenses

-

.2

1.0

.6

Other, net

.4

.4

(.2
)

.6

Income tax expense
$
1.8

$
12.1

$
15.3

$
27.3

Comprehensive provision for income taxes allocable to:

Net income
$
1.8

$
12.1

$
15.3

$
27.3

Other comprehensive income (loss):

Pension plans

1.4

1.6

4.2

4.8

OPEB plans

-

(.1
)

(.1
)

(.1
)
Total
$
3.2

$
13.6

$
19.4

$
32.0


	Three months ended
	March 31,
	2021		2022

	(In millions)
Expected tax expense, at U.S. federal statutory income tax rate of 21%	$	5.4	$	15.9
Non-U.S. tax rates		.7		2.0
Incremental net tax benefit on earnings and losses of U.S. and non-U.S. companies		(.7)		(.4)
Valuation allowance, net		.5		(.1)
Global intangible low-tax income, net		.5		.9
Adjustment to the reserve for uncertain tax positions, net		(.5)		(.8)
Other, net		.1		.8
Income tax expense	$	6.0	$	18.3

Comprehensive provision for income taxes allocable to:
Net income	$	6.0	$	18.3
Other comprehensive income - pension plans		1.6		1.1
Total	$	7.6	$	19.4

The amount shown in the preceding table of our income tax rate reconciliation for non-U.S. tax rates represents the result determined by multiplying the pre-tax earnings or losses of each of our non-U.S. subsidiaries by the difference between the applicable statutory income tax rate for each non-U.S. jurisdiction and the U.S. federal statutory tax rate. The amount shown on such table for incremental net tax expense (benefit) on earnings and losses of U.S. and non-U.S. companies includes, as applicable, (i) deferred income taxes (or deferred income tax benefits) associated with the current-year earnings of all of our non-U.S. subsidiaries and (ii) current U.S. income taxes (or current income tax benefit) including U.S. personal holding company tax, as applicable, attributable to current-year income (losses) of one of our non-U.S. subsidiaries, which subsidiary is treated as a dual resident for U.S. income tax purposes, to the extent the current-year income (losses) of such subsidiaries is subject to U.S. income tax under the U.S. dual-resident provisions of the Internal Revenue Code.

On March 27, 2020, the “Coronavirus Aid, Relief and Economic Security (CARES) Act” was signed into law in response to the COVID-19 pandemic. The CARES Act, among other things, includes modifications to the limitation of business interest for tax years beginning in 2019 and 2020 increasing the business interest limitation from 30% of adjusted taxable income to 50% of adjusted taxable income which increased our allowable interest expense deduction for 2019 and 2020. Consequently, in the first quarter of 2020 we recognized a cash tax benefit of $.5 million related to the reversal of the valuation allowance recognized in 2019 for the portion of the disallowed interest expense we did not expect to fully utilize at December 31, 2019.

Tax authorities are examining certain of our U.S. and non-U.S. tax returns and may propose tax deficiencies, including penalties and interest. We believe we have adequate accruals for additional taxes and related interest expense which could ultimately result from tax examinations. We believe the ultimate disposition of tax examinations should not have a material adverse effect on our consolidated financial position, results of operations or liquidity. We currently estimate that our unrecognized tax benefits will decrease by approximately ~~$1.1~~$1.3 million during the next twelve months primarily due to the expiration of certain statutes of limitations.

13 -

Table of Contents

Note 11 – ~~Accumulated other comprehensive loss:~~Stockholders’ equity:

Changes in accumulated other comprehensive loss are presented in the table below. See Note ~~4 for further discussion of our marketable securities and Note~~ 9 for discussion of our defined benefit pension plans.


	Three months ended
	March 31,
	2021		2022

	(In millions)
Accumulated other comprehensive loss, net of tax:
Currency translation:
Balance at beginning of period	$	(233.4)	$	(240.4)
Other comprehensive income		2.2		6.6
Balance at end of period	$	(231.2)	$	(233.8)

Defined benefit pension plans:
Balance at beginning of period	$	(214.5)	$	(163.3)
Other comprehensive income - amortization of prior service cost and net losses included in net periodic pension cost		3.5		2.4
Balance at end of period	$	(211.0)	$	(160.9)

OPEB plans:
Balance at beginning of period	$	(.3)	$	(.4)
Other comprehensive loss - amortization of prior service credit and net losses included in net periodic OPEB cost		(.1)		(.1)
Balance at end of period	$	(.4)	$	(.5)

Total accumulated other comprehensive loss:
Balance at beginning of period	$	(448.2)	$	(404.1)
Other comprehensive income		5.6		8.9
Balance at end of period	$	(442.6)	$	(395.2)

Our board of directors has previously authorized the repurchase of up to 2.0 million shares of our common stock in open market transactions, including block purchases, or in privately-negotiated transactions at unspecified prices and over an unspecified period of time. We may repurchase our common stock from time to time as market conditions permit. The stock repurchase program does not include specific price targets or timetables and may be suspended at any time. Depending on market conditions, we may terminate the program prior to its completion. We use cash on hand or other sources of liquidity to acquire the shares. Repurchased shares are added to our treasury and subsequently cancelled upon approval of the board of directors.

During the fourth quarter of 2021, we acquired 14,409 shares of common stock in market transactions for an aggregate purchase price of $.2 million which were accounted for as treasury stock at December 31, 2021. We subsequently cancelled all such shares in February 2022. During the first three months of 2022, we acquired an additional 73,881 shares of our common stock in market transactions for an aggregate purchase price of $1.1 million which are accounted for as treasury stock at March 31, 2022. At March 31, 2022, 1,475,229 shares are available for repurchase under this stock repurchase program.

Three months ended

Nine months ended

September 30,

September 30,

2020

2021

2020

2021

(In millions)

Accumulated other comprehensive loss, net of tax:

Currency translation:

Balance at beginning of period
$
(270.7
)

$
(229.4
)

$
(246.8
)

$
(233.4
)
Other comprehensive income (loss)

10.1

(7.8
)

(13.8
)

(3.8
)
Balance at end of period
$
(260.6
)

$
(237.2
)

$
(260.6
)

$
(237.2
)

Defined benefit pension plans:

Balance at beginning of period
$
(196.1
)

$
(207.5
)

$
(202.2
)

$
(214.5
)
Other comprehensive income - amortization
   of prior service cost and net losses included in
   net periodic pension cost

3.1

3.5

9.2

10.5

Balance at end of period
$
(193.0
)

$
(204.0
)

$
(193.0
)

$
(204.0
)

OPEB plans:

Balance at beginning of period
$
.1

$
(.4
)

$
.2

$
(.3
)
Other comprehensive loss - amortization
   of prior service credit and net losses
   included in net periodic OPEB cost

(.1
)

(.1
)

(.2
)

(.2
)
Balance at end of period
$
-

$
(.5
)

$
-

$
(.5
)

Total accumulated other comprehensive loss:

Balance at beginning of period
$
(466.7
)

$
(437.3
)

$
(448.8
)

$
(448.2
)
Other comprehensive income (loss)

13.1

(4.4
)

(4.8
)

6.5

Balance at end of period
$
(453.6
)

$
(441.7
)

$
(453.6
)

$
(441.7
)

Table of Contents

Note 12 - Commitments and contingencies:

We are involved in various environmental, contractual, product liability, patent (or intellectual property), employment and other claims and disputes incidental to our business. At least quarterly our management discusses and evaluates the status of any pending litigation to which we are a party. The factors considered in such evaluation include, among other things, the nature of such pending cases, the status of such pending cases, the advice of legal counsel and our experience in similar cases (if any). Based on such evaluation, we make a determination as to whether we believe (i) it is probable a loss has been incurred, and if so if the amount of such loss (or a range of loss) is reasonably estimable, or (ii) it is reasonably possible but not probable a loss has been incurred, and if so if the amount of such loss (or a range of loss) is reasonably estimable, or (iii) the probability a loss has been incurred is remote. We have not accrued any amounts for litigation matters because it is not reasonably possible we have incurred a loss that would be material to our consolidated financial statements, results of operations or liquidity.

~~- 14 -~~

Note 13 - Financial instruments:

See Note 4 for information on how we determine fair value of our marketable securities.

The following table presents the financial instruments that are not carried at fair value but which require fair value disclosure:

December 31, 2020

September 30, 2021

Carrying amount

Fair
value

Carrying
amount

Fair
value

(In millions)

Cash, cash equivalents and restricted cash

$
362.0

$
362.0

$
379.7

$
379.7

Long-term debt - Fixed rate Senior Notes

485.7

499.9

460.4

472.4

December 31, 2021

March 31, 2022

Carrying

Fair

Carrying

Fair

amount

value

amount

value

(In millions)

Cash, cash equivalents and restricted cash

412.6

356.2

Long-term debt - Fixed rate Senior Notes

448.8

460.2

442.9

435.7

At ~~September 30, 2021,~~March 31, 2022, the estimated market price of our Senior Notes was ~~€1,017~~€977 per €1,000 principal amount. The fair value of our Senior Notes was based on quoted market prices; however, these quoted market prices represented Level 2 inputs because the markets in which the Senior Notes trade were not active. Due to their near-term maturities, the carrying amounts of accounts receivable and accounts payable are considered equivalent to fair value. See Notes 2 and 6.

Table of Contents

~~- 15 -~~

~~ITEM 2.~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Business overview

We are a leading global producer and marketer of value-added titanium dioxide pigments (TiO₂). TiO₂ is used for a variety of manufacturing applications, including paints, plastics, paper and other industrial and specialty products. For the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, approximately one-half of our sales volumes were sold into European markets. Our production facilities are located in Europe and North America.

We consider TiO₂ to be a “quality of life” product, with demand affected by gross domestic product, or GDP, and overall economic conditions in our markets located in various regions of the world. Over the long-term, we expect demand for TiO₂ will grow by 2% to 3% per year, consistent with our expectations for the long-term growth in GDP. However, even if we and our competitors maintain consistent shares of the worldwide market, demand for TiO₂ in any interim or annual period may not change in the same proportion as the change in GDP, in part due to relative changes in the TiO₂ inventory levels of our customers. We believe our customers’ inventory levels are influenced in part by their expectation for future changes in TiO₂selling prices as well as their expectation for future availability of product. Although certain of our TiO₂grades are considered specialty pigments, the majority of our grades and substantially all of our production are considered commodity pigment products with price and availability being the most significant competitive factors along with product quality and customer and technical support services.

The factors having the most impact on our reported operating results are:

•

●

TiO₂ selling prices,

•

●

~~Our~~ TiO₂ sales and production volumes,

•

●

Manufacturing costs, particularly raw materials such as third-party feedstock, maintenance and energy-related expenses, and

•

●

Currency exchange rates (particularly the exchange ~~rates~~rate for the U.S. dollar relative to the euro, the Norwegian krone and the Canadian dollar and the euro relative to the Norwegian krone).

Our key performance indicators are our TiO₂ average selling prices, our level of TiO₂ sales and production volumes and the cost of ~~our third-party feedstock.~~titanium-containing feedstock purchased from third parties. TiO₂selling prices generally follow industry trends and selling prices will increase or decrease generally as a result of competitive market pressures.

Executive summary

We reported net income of ~~$36.0~~$57.5 million, or $.31 per share, in the third quarter of 2021 compared to $8.1 million, or $.07 per share, in the third quarter of 2020. For the first nine months of 2021, we reported net income of $81.3 million, or $.70 per share, compared to $53.7 million, or $.46$.50 per share, in the first ~~nine months~~quarter of ~~2020. We reported higher net~~2022 compared to $19.6 million, or $.17 per share, in the first quarter of 2021. Net income in the ~~third~~first quarter ~~and~~of 2022 was higher than in the first ~~nine months~~quarter of 2021 ~~as compared to the same periods in 2020~~ primarily due to higher income from operations resulting from the net effects of higher ~~sales volumes and higher~~ average TiO₂ selling prices, ~~partially offset by~~higher sales volumes, higher production costs ~~including raw material~~ and energy costs. Our results of operations for the first nine months of 2020 were significantly impacted by the COVID-19 pandemic, specifically through reduced demand for certain of our products occurring primarily in the second quarter, with demand improving throughout the third quarter of 2020, though not to pre-pandemic levels in all regions of the world. Comparability of our results was also impacted by the effects of changes in currency exchange rates.

Table of Contents

Forward-looking information

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Statements in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking in nature and represent management’s beliefs and assumptions based on currently available information. Statements in this report including, but not limited to, statements found in Item 2 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are forward-looking statements that represent our management’s beliefs and assumptions based on currently available information. In some cases you can identify forward-looking statements by the use of words such as “believes,” “intends,” “may,” “should,” “could,” “anticipates,” “expects” or comparable terminology, or by discussions of strategies or trends. Although we believe the expectations reflected in forward-looking statements are reasonable, we do not know if these expectations will be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results. Actual future results could differ materially from those predicted. The factors that could cause our actual future results to differ materially from those described herein

~~- 16 -~~

are the risks and uncertainties discussed in this Quarterly 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 business

•

●

Customer and producer inventory levels

•

●

Unexpected or earlier-than-expected industry capacity expansion

•

●

Changes in raw material and other operating costs (such as energy and ore costs)

•

●

Changes in the availability of raw materials (such as ore)

•

●

General global economic and political conditions that harm the worldwide economy, disrupt our supply chain, increase material and energy costs or reduce demand or perceived demand for our TiO₂ 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 such as COVID-19)

•

●

Competitive products and substitute products

•

●

Customer and competitor strategies

•

●

Potential consolidation of our competitors

•

●

Potential consolidation of our customers

•

●

The impact of pricing and production decisions

•

●

Competitive technology positions

•

●

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

•

●

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)

•

●

Our ability to renew or refinance credit facilities

•

●

Potential increases in interest rates

●

Our ability to maintain sufficient liquidity

Table of Contents

•

●

The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters, including future tax reform

•

●

Our ability to utilize income tax attributes, the benefits of which may or may not have been recognized under the more-likely-than-not recognition criteria

•

●

Environmental matters (such as those requiring compliance with emission and discharge standards for existing and new facilities)

•

●

Government laws and regulations and possible changes therein including new environmental, health and safety regulations (such as those seeking to limit or classify TiO₂ or its use)

•

●

Possible future litigation.

Should one or more of these risks materialize (or the consequences of such a development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those forecasted or expected. We disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of changes in information, future events or otherwise.

~~- 17 -~~

Results of operations

Current industry conditions

We started ~~2021~~2022 with average TiO₂selling prices ~~3% lower~~16% higher than at the beginning of ~~2020. Average~~2021 and our average TiO₂selling prices ~~were 11% higher in the third quarter of 2021 as compared to the third quarter of 2020 and 4% higher~~increased 7% in the first ~~nine months of 2021 as compared to the first nine months of 2020. Our average TiO~~₂~~selling prices at the end of the third~~ quarter of ~~2021 were 10% higher than the end of 2020.~~2022 in response to customer demand and our rising production costs. We experienced higher sales volumes in ~~all major~~our North American, European and Latin American markets in the first ~~nine~~three months of ~~2021~~2022 as compared to the same period of ~~2020 primarily due to the COVID-19 related demand contraction in 2020 which impacted the second and third quarters and was most acute in the second quarter of 2020.~~2021.

We operated our production facilities at ~~overall average~~full practical capacity ~~utilization rates of 99%~~ in the first ~~nine months~~quarter of ~~2021~~2022 compared to ~~92%~~an average capacity rate of 97% in the first ~~nine months~~quarter of ~~2020. TiO~~₂ ~~production volumes were higher in the first nine months~~2021.

Table of 2021 as compared to the first nine months of 2020 due to higher customer demand in 2021. We decreased production levels in 2020 (primarily in the third quarter) to correspond to the temporary decline in demand resulting from the COVID-19 pandemic. The table below lists our comparative quarterly production capacity utilization rates.Contents

Production Capacity Utilization Rates

2020

2021

First quarter
95%

97%

Second quarter
96%

100%

Third quarter
86%

100%

Quarter ended ~~September 30, 2021~~March 31, 2022 compared to the quarter ended ~~September 30, 2020~~March 31, 2021


		Three months ended March 31,
		2021			2022

		(Dollars in millions)
Net sales	$	465.0	100	%	$	562.9	100	%
Cost of sales		369.3	79			413.6	73
Gross margin		95.7	21			149.3	27
Selling, general and administrative expense		58.0	13			61.4	11
Other operating income (expense):
Currency transactions, net		(.5)	-			(1.5)	-
Other operating expense, net		(3.2)	(1)			(3.1)	(1)
Income from operations	$	34.0	7	%	$	83.3	15	%

							% Change
TiO₂ operating statistics:
Sales volumes*		141				144	2	%
Production volumes*		130				138	6	%
Percentage change in net sales:
TiO₂ product pricing							24	%
TiO₂ sales volumes							2
TiO₂ product mix/other							-
Changes in currency exchange rates							(5)
Total							21	%

Three months ended September 30,

2020

2021

(Dollars in millions)

Net sales
$
416.9

100
%

$
499.8

100
%
Cost of sales

336.3

81

376.8

75

Gross margin

80.6

19

123.0

25

Selling, general and administrative expense

55.6

13

64.2

13

Other operating income (expense):

Currency transactions, net

(2.9
)

(1
)

1.2

-

Other operating expense, net

(2.8
)

-

(2.7
)

(1
)
Income from operations
$
19.3

5
%

$
57.3

11
%

% Change

TiO₂ operating statistics:

Sales volumes*

136

142

6
%
Production volumes*

122

137

13
%
Percentage change in net sales:

TiO₂ sales volumes

6
%
TiO₂ product pricing

11

TiO₂ product mix/other

2

Changes in currency exchange rates

1

Total

20
%

Thousands of metric tons

~~- 18 -~~

Net sales -Net sales in the ~~third~~first quarter of ~~2021~~2022 increased ~~20%~~21%, or ~~$82.9~~$97.9 million, compared to the ~~third~~first quarter of ~~2020~~2021 primarily due to ~~an 11%~~a 24% increase in average TiO₂selling prices (which increased net sales by approximately ~~$46~~$112 million) and a 6%2% increase in sales volumes (which increased net sales by approximately ~~$25~~$9 million). ~~In addition to the impact of higher sales volumes and higher average selling prices, we~~We estimate that changes in currency exchange rates (primarily the euro) ~~increased~~decreased our net sales by approximately $5$22 million in the ~~third~~first quarter of ~~2021~~2022 as compared to the ~~third~~first quarter of ~~2020.~~2021. TiO₂ selling prices will increase or decrease generally as a result of competitive market pressures, changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs.

Our sales volumes increased 6%2% in the ~~third~~first quarter of ~~2021~~2022 as compared to the ~~third quarter of 2020 due to higher demand primarily in our European and North American markets from continuing improvements in global economic activity in the third~~first quarter of 2021 ~~compared~~due to the ~~same period~~effects of continuing high demand and improvements in ~~2020, which was negatively impacted by the COVID-19 pandemic.~~our delivery and distribution network in 2022.

Cost of sales and gross margin - Cost of sales increased ~~$40.5~~$44.3 million, or 12%, in the ~~third~~first quarter of 2022 compared to the first quarter of 2021 ~~compared~~due to the ~~third quarter~~net effects of ~~2020 due to a 6% increase in sales volumes and~~ higher production costs of approximately ~~$16~~$64 million (including higher costs for raw materials and energy)., a 2% increase in sales volumes and more favorable absorption of fixed costs due to a 6% increase in production volumes. Our cost of sales as a percentage of net sales ~~decreased~~improved to ~~75%~~73% in the ~~third~~first quarter of ~~2021~~2022 compared to ~~81%~~79% in the same period of ~~2020 primarily due to~~2021 as the favorable effects of higher average TiO₂ selling prices and increased coverage of fixed costs from higher production ~~partially~~more than offset bythe unfavorable impact of higher production costs including higher raw material and energy costs, as discussed above.

Gross margin as a percentage of net sales increased to ~~25%~~27% in the ~~third~~first quarter of ~~2021~~2022 compared to ~~19%~~21% in the ~~third~~first quarter of ~~2020.~~2021. As discussed and quantified above, our gross margin as a percentage of net sales increased primarily due to the net effects of higher average TiO₂ selling prices, higher production and sales volumes, ~~and higher average TiO~~₂~~selling prices, partially offset by~~ higher production costs ~~including higher raw material~~ and ~~energy costs.~~ changes in currency exchange rates.

Selling, general and administrative expense - Selling, general and administrative expense ~~was comparable in the third quarters of 2021 and 2020 at approximately 13% of net sales. Distribution costs were slightly higher~~ as a percentage of net sales ~~but were offset by lower~~decreased to 11% in the first quarter of 2022 compared to 13% in the first quarter of 2021. Increases in distribution and other general and administrative costs ~~as a percentage~~were more than offset by the effects of higher net sales during the comparative periods.

Table of Contents

Income from operations - Income from operations increased by ~~$38.0~~$49.3 million ~~or 197%,~~to $83.3 million in the ~~third~~first quarter of ~~2021~~2022 compared to $34.0 million in the ~~third~~first quarter of ~~2020.~~2021. Income from operations as a percentage of net sales increased to ~~11%~~15% in the ~~third~~first quarter of ~~2021~~2022 from 5%7% in the same period of ~~2020~~2021 as a result of the factors impacting gross margin discussed above. We estimate changes in currency exchange rates ~~increased~~decreased income from operations by approximately $2$5 million in the ~~third~~first quarter of ~~2021~~2022 as compared to the same period in ~~2020,~~2021, as discussed in the Effects of ~~Currency Exchange Rates~~currency exchange rates section below.

Other non-operating income (expense)- We recognized a ~~loss~~gain of $.1 million on the change in value of our marketable equity securities in the ~~third~~first quarter of ~~2021~~2022 compared to a gain of ~~$.4~~$.8 million in the ~~third~~first quarter of ~~2020.~~2021. See Note 4 to our Condensed Consolidated Financial Statements. Other components of net periodic pension and OPEB cost in the ~~third~~first quarter of ~~2021~~2022 decreased ~~$.7~~$1.1 million compared to the ~~third~~first quarter of ~~2020~~2021 primarily due to ~~higher expected returns on plan assets offset by~~ the net effects of ~~lower~~higher discount rates impacting interest cost and previously unrecognized actuarial losses. See Note 9 to our Condensed Consolidated Financial Statements. Interest expense in the ~~third~~first quarter of 2022 decreased $.5 million compared to the first quarter of 2021 ~~was comparable~~primarily due to the ~~third quarter~~strengthening of ~~2020.~~the U.S. dollar relative to the euro (see discussion in the Effects of currency exchange rates section below). See Note 5 to our Condensed Consolidated Financial Statements.

Income tax expense - We recognized income tax expense of ~~$12.1~~$18.3 million in the ~~third~~first quarter of ~~2021~~2022 compared to income tax expense of ~~$1.8~~$6.0 million in the ~~third~~first quarter of ~~2020.~~2021. The difference is primarily due to higher earnings in ~~2021~~the first quarter of 2022 and the jurisdictional mix of such earnings. Our earnings are subject to income tax in various U.S. and non-U.S. jurisdictions, and the income tax rates applicable to the pre-tax earnings (losses) of our non-U.S. operations are generally higher than the income tax rates applicable to our U.S. operations. We would generally expect our overall effective tax rate to be higher than the U.S. federal statutory tax rate of 21% primarily because of our sizeable non-U.S. operations. See Note 10 to our Condensed Consolidated Financial Statements.

~~- 19 -~~

~~Nine months ended September 30, 2021 compared to the nine months ended September 30, 2020~~

Nine months ended September 30,

2020

2021

(Dollars in millions)

Net sales
$
1,223.9

100
%

$
1,443.4

100
%
Cost of sales

959.4

78

1,115.7

77

Gross margin

264.5

22

327.7

23

Selling, general and administrative expense

161.8

13

185.1

13

Other operating income (expense):

Currency transactions, net

3.2

-

1.2

-

Other operating expense, net

(10.1
)

(1
)

(8.7
)

(1
)
Income from operations
$
95.8

8
%

$
135.1

9
%

% Change

TiO₂ operating statistics:

Sales volumes*

396

427

8
%
Production volumes*

387

404

4
%
Percentage change in net sales:

TiO₂ sales volumes

8
%
TiO₂ product pricing

4

TiO₂ product mix/other

2

Changes in currency exchange rates

4

Total

18
%

*	~~Thousands of metric tons~~

~~Net sales~~ -Net sales in the first nine months of 2021 increased 18%, or $219.5 million, compared to the first nine months of 2020 primarily due to an 8% increase in sales volumes (which increased net sales by approximately $98 million) and a 4% increase in average TiO₂selling prices (which increased net sales by approximately $49 million). In addition to the impact of higher sales volumes and higher average selling prices, we estimate that changes in currency exchange rates (primarily the euro) increased our net sales by approximately $47 million in the first nine months of 2021 as compared to the first nine months of 2020. TiO₂ selling prices will increase or decrease generally as a result of competitive market pressures, changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs.

Our sales volumes increased 8% in the first nine months of 2021 as compared to the first nine months of 2020 primarily due to higher sales volumes in all major markets, with a significant portion of the increase occurring in the second and third quarters as a result of the impact of COVID-19 on the comparable periods in 2020, as discussed above.

~~Cost of sales and gross margin~~ - Cost of sales increased $156.3 million, or 16%, in the first nine months of 2021 compared to the first nine months of 2020 due to an 8% increase in sales volumes and higher production costs of approximately $17 million (including higher costs for raw materials and energy) and the effects of currency fluctuations (primarily the Canadian dollar). Our cost of sales as a percentage of net sales decreased slightly to 77% in the first nine months of 2021 compared to 78% in the same period of 2020 primarily due to the favorable effects of higher average TiO₂ selling prices and increased coverage of fixed costs from higher production, partially offset by higher production costs as well as the effects of fluctuations in currency exchange rates, as discussed below.

Gross margin as a percentage of net sales increased to 23% in the first nine months of 2021 compared to 22% in the first nine months of 2020. As discussed and quantified above, our gross margin as a percentage of net sales increased primarily due to the net effects of higher average TiO₂ ~~selling prices, higher production and sales volumes, higher raw material and other production costs and fluctuations in currency exchange rates.~~

~~Selling, general and administrative expense~~ ~~- Selling, general and administrative expense was comparable in the first nine months of 2021 and 2020 at approximately 13% of net sales.~~

~~- 20 -~~

~~Income from operations~~ -Income from operations increased by $39.3 million, or 41%, in the first nine months of 2021 compared to the first nine months of 2020. Income from operations as a percentage of net sales increased to 9% in the first nine months of 2021 from 8% in the same period of 2020. This increase was driven by the higher gross margin discussed above. We estimate that changes in currency exchange rates decreased income from operations by approximately $15 million in the first nine months of 2021 as compared to the same period in 2020, as further discussed below.

~~Other non-operating income (expense)~~ - We recognized a gain of $1.2 million on the change in value of our marketable equity securities in the first nine months of 2021 and a loss of $1.3 million in the first nine months of 2020. See Note 4 to our Condensed Consolidated Financial Statements. Other components of net periodic pension and OPEB cost in the first nine months of 2021 decreased $1.5 million compared to the first nine months of 2020 primarily due to higher expected returns on plan assets offset by the net effects of lower discount rates impacting interest cost and previously unrecognized actuarial losses. See Note 9 to our Condensed Consolidated Financial Statements. We recognized an insurance settlement gain of $1.5 million in the first nine months of 2020 related to a property damage claim. Interest expense in the first nine months of 2021 increased $.9 million compared to the first nine months of 2020 due to the refinancing of our revolving credit facility in the second quarter of 2021 (see Note 5 to our Condensed Consolidated Financial Statements) and the effects of changes in currency exchange rates.

~~Income tax expense~~ - We recognized income tax expense of $27.3 million in the first nine months of 2021 compared to income tax expense of $15.3 million in the first nine months of 2020. The difference is primarily due to higher earnings in 2021 and the jurisdictional mix of our earnings. Our earnings are subject to income tax in various U.S. and non-U.S. jurisdictions, and the income tax rates applicable to the pre-tax earnings (losses) of our non-U.S. operations are generally higher than the income tax rates applicable to our U.S. operations. We would generally expect our overall effective tax rate to be higher than the U.S. federal statutory tax rate of 21% primarily because of our sizeable non-U.S. operations. See Note 10 to our Condensed Consolidated Financial Statements.

Effects of currency exchange rates

We have substantial operations and assets located outside the United States (primarily in Germany, Belgium, Norway and Canada). The majority of our sales from non-U.S. operations are denominated in currencies other than the U.S. dollar, principally the euro, other major European currencies and the Canadian dollar. A portion of our sales generated from our non-U.S. operations is denominated in the U.S. dollar (and consequently our non-U.S. operations will generally hold U.S. dollars from time to time). Certain raw materials used in all our production facilities, primarily titanium-containing feedstocks, are purchased primarily in U.S. dollars, while labor and other production and administrative costs are incurred primarily in local currencies. Consequently, the translated U.S. dollar value of our non-U.S. sales and operating results are subject to currency exchange rate fluctuations which may favorably or unfavorably impact reported earnings and may affect the comparability of period-to-period operating results. In addition to the impact of the translation of sales and expenses over time, our non-U.S. operations also generate currency transaction gains and losses which primarily relate to (i) the difference between the currency exchange rates in effect when non-local currency sales or operating costs (primarily U.S. dollar denominated) are initially accrued and when such amounts are settled with the non-local currency, and (ii) changes in currency exchange rates during time periods when our non-U.S. operations are holding non-local currency (primarily U.S. dollars).

Overall, we estimate that fluctuations in currency exchange rates had the following effects on our sales and income from operations for the periods indicated.


Impact of changes in currency exchange rates
Three months ended March 31, 2022 vs March 31, 2021
							Translation		Total
							losses -		currency
	Transaction losses recognized						impact of		impact
	2021		2022		Change		rate changes		2022 vs 2021

		(In millions)
Impact on:
Net sales	$	-	$	-	$	-	$	(22)	$	(22)
Income from operations		(1)		(2)		(1)		(4)		(5)

Impact of changes in currency exchange rates
Three months ended September 30, 2021 vs September 30, 2020

Translation
gains (losses) -
impact of
rate changes

Total
currency
impact
2021 vs 2020

Transaction gains (losses) recognized

2020

2021

Change

(In millions)

Impact on:

Net sales
$
-

$
-

$
-

$
5

$
5

Income from operations

(3
)

1

4

(2
)

2

Table of Contents

The $5$22 million ~~increase~~decrease in net sales (translation ~~gain)~~losses) was caused primarily by a ~~weakening~~strengthening of the U.S. dollar relative to the euro, as our euro-denominated sales were translated into ~~more~~fewer U.S. dollars in ~~2021~~2022 as compared to ~~2020.~~2021. The ~~weakening~~strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in ~~2021~~2022 did not have a significant effect on our net sales, as a substantial portion of the sales generated by our Canadian and Norwegian operations is denominated in the U.S. dollar.

~~- 21 -~~

The $2$5 million ~~increase~~decrease in income from operations was comprised of the following:

•

●

Higher net currency transaction ~~gains~~losses of approximately $4$1 million primarily caused by relative changes in currency exchange rates at each applicable balance sheet date between the U.S. dollar and the euro, Canadian dollar and the Norwegian krone, and between the euro and the Norwegian krone, which causes increases or decreases, as applicable, in U.S. dollar-denominated receivables and payables and U.S. dollar currency held by our non-U.S. operations, and in Norwegian krone denominated receivables and payables held by our non-U.S. operations, and

•

●

Approximately $2$4 million from net currency translation losses primarily caused by a weakening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone, as local currency-denominated operating costs were translated into more U.S. dollars in 2021 as compared to 2020, partially offset by net currency translation gains primarily caused by a weakeningstrengthening of the U.S. dollar relative to the euro as the ~~positive~~negative effects of the ~~weaker~~stronger U.S. dollar on euro-denominated sales more than offset the ~~unfavorable~~favorable effects of euro-denominated operating costs being translated into ~~more~~fewer U.S. dollars in ~~2021~~2022 as compared to ~~2020.~~2021.

Impact of changes in currency exchange rates
Nine months ended September 30, 2021 vs September 30, 2020

Translation
gains (losses) -
impact of
rate changes

Total
currency
impact
2021 vs 2020

Transaction gains recognized

2020

2021

Change

(In millions)

Impact on:

Net sales
$
-

$
-

$
-

$
47

$
47

Income from operations

3

1

(2
)

(13
)

(15
)

The $47 million increase in net sales (translation gain) was caused primarily by a weakening of the U.S. dollar relative to the euro, as our euro-denominated sales were translated into more U.S. dollars in 2021 as compared to 2020. The weakening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2021 did not have a significant effect on the reported amount of our net sales, as a substantial portion of the sales generated by our Canadian and Norwegian operations is denominated in the U.S. dollar.

~~The $15 million decrease in income from operations was comprised of the following:~~

•

Lower net currency transaction gains of approximately $2 million primarily caused by relative changes in currency exchange rates at each applicable balance sheet date between the U.S. dollar and the euro, Canadian dollar and the Norwegian krone, and between the euro and the Norwegian krone, which causes increases or decreases, as applicable, in U.S. dollar-denominated receivables and payables and U.S. dollar currency held by our non-U.S. operations, and in Norwegian krone denominated receivables and payables held by our non-U.S. operations, and

•

Approximately $13 million from net currency translation losses primarily caused by a weakening of the U.S. dollar relative to the Canadian dollar and Norwegian krone, as local currency-denominated operating costs were translated into more U.S. dollars in 2021 as compared to 2020, partially offset by net currency translation gains primarily caused by a weakening of the U.S. dollar relative to the euro as the positive effects of the weaker U.S. dollar on euro-denominated sales more than offset the unfavorable effects of euro-denominated operating costs being translated into more U.S. dollars in 2021 as compared to 2020.

Outlook

Based on current market conditions, we expect global demand for consumer products, including those of our customers, to remain strong throughout the remainder of ~~2021 and therefore~~2022. Therefore, we expect ~~our~~to continue to produce at full practical capacity and to match sales ~~and~~volumes with production volumes ~~will be higher~~which would result in ~~2021~~lower sales volumes in 2022 as compared to ~~2020. As global economic activity continues~~2021 based on current inventory levels. We continue to ~~recover, we are experiencing certain~~experience disruptions in global supply chains including availability of certain third-party feedstock and other raw materials along with certain transportation and logistics delays. Thus far ~~our operations team has been able to manage~~we have managed through these disruptions with minimal impact on our operations; however, we expect these challenges to continue for the foreseeable future. We experienced increases in our feedstock costs in the first quarter of 2022 as compared to the same period in 2021, and we expect our feedstock costs to continue to increase for the remainder of 2022 as compared to our average 2021 costs. In addition to feedstock cost increases, we continue to experience increasing production costs, including higher raw material and related shipping costs and significantly higher energy and utility costs, especially in Europe, all of which are likely to continue ~~through~~throughout 2022. At the ~~end~~beginning of 2022, our average TiO₂ selling prices were 16% higher than at the ~~year. As a result~~beginning of ~~rising costs~~2021 and ~~continued~~average TiO₂ selling prices increased 7% in the first quarter of 2022. We expect strong ~~customer~~ demand ~~we expect~~will support increasing selling prices for TiO₂ ~~will continue~~throughout 2022, sufficient to ~~rise through~~mitigate the ~~remainder~~effects of ~~2021, mitigating~~ increases in distribution, raw material, energy and other production costs. ~~As such, we~~We expect our ~~2021~~2022 sales and income from operations will be higher than in ~~2020;~~2021; however, ~~we expect~~ increasing costs towill continue to challenge margins. We continue to monitor current and anticipated near-term customer demand levels and will align our production and inventories accordingly.

~~- 22 -~~

Our expectations for the TiO₂ industry and our operations are based on a number of factors outside our ~~control, including the ongoing economic effects of the COVID-19 pandemic.~~control. As noted above, we have experienced global supply chain ~~disruptions, including disruptions related to COVID-19,~~disruptions; and future impacts ~~of COVID-19~~ on our operations will depend on, among other things, any future disruption in our operations or our suppliers’ operations, or related possible shipping delays, and the timing and effectiveness of the global measures deployed to fight COVID-19 and its variants, all of which remain uncertain and cannot be predicted.

~~Liquidity and Capital Resources~~LIQUIDITY AND CAPITAL RESOURCES

Consolidated cash flows

Operating activities

Trends in cash flows as a result of our operating activities (excluding the impact of significant asset dispositions and relative changes in assets and liabilities) are generally similar to trends in our earnings. In addition to the impact of the operating, investing and financing cash flows discussed below, changes in the amount of cash, cash equivalents and restricted cash we report from period to period can be impacted by changes in currency exchange rates, since a portion of our cash, cash equivalents and restricted cash is held by our non-U.S. subsidiaries.

Table of Contents

Cash ~~provided by~~used in operating activities was ~~$126.0~~$18.6 million in the first ~~nine~~three months of ~~2021~~2022 compared to cash provided by operating activities of ~~$56.1~~$56.7 million in the first ~~nine~~three months of ~~2020.~~2021. This ~~$69.9~~$75.3 million ~~increase~~decrease in the amount of cash provided was primarily due to the net effect of the following:

•

●

~~lower~~higher amount of net cash used associated with relative changes in our inventories, receivables, payables and accruals in ~~2021~~2022 of ~~$59.4~~$123.6 million as compared to ~~2020,~~2021, and

•

●

higher income from operations in ~~2021~~2022 of ~~$39.3 million,~~$49.3 million.

•

~~higher cash paid for taxes in 2021 of $20.4 million due to increased profits in 2021 and the timing of tax payments, and~~

•

~~lower net contributions to our TiO~~₂ ~~manufacturing joint venture in 2021 of $4.3 million.~~

Changes in working capital were affected by accounts receivable and inventory changes. As shown below:

•

●

Our average days sales outstanding, or DSO, decreased from December 31, ~~2020~~2021 to ~~September 30, 2021~~March 31, 2022 primarily due to relative changes in the timing of collections, and

•

●

Our average days sales in inventory, or DSI, decreased from December 31, ~~2020~~2021 to ~~September 30, 2021~~March 31, 2022 primarily due to lower inventory volumes attributable to sales volumes exceeding production volumes in the first ~~nine~~three months of ~~2021~~2022 compared to ~~2020.~~ 2021 and due to supply disruptions and other transportation delays impacting the timing of raw material shipments.

For comparative purposes, we have also provided comparable prior year numbers below.

~~December 31,~~

~~2019~~

December 31, 2020

~~September 30,~~

~~2020~~March 31, 2021

December 31, 2021

~~December 31,~~

~~2020~~

~~September 30,~~

~~2021~~March 31, 2022

DSO

~~71 days~~

~~67 days~~

68 days

64 days

65 days

63 days

DSI

~~83 days~~

~~66 days~~

74 days

56 days

59 days

54 days

Investing activities

Our capital expenditures of ~~$35.9~~$14.2 million and ~~$38.3~~$10.8 million in the first ~~nine~~three months of ~~2021~~2022 and ~~2020,~~2021, respectively, were primarily to maintain and improve the cost effectiveness of our manufacturing facilities.

~~In addition, during the first nine months of 2020, we received $1.5 million from an insurance settlement related to a property damage claim.~~

Financing activities

During the first ~~nine~~three months of ~~2021~~2022, we paid quarterly dividends of $.19 per share to stockholders aggregating $21.9 million and ~~2020,~~in the first three months of 2021, we paid quarterly dividends of $.18 per share to stockholders aggregating ~~$62.4~~$20.8 million.

In addition, during the first ~~nine~~three months of ~~2020,~~2022, we acquired ~~122,489~~73,881 shares of our common stock in market transactions for an aggregate purchase price of ~~$1.0~~$1.1 million.

~~- 23 -~~

Outstanding debt obligations

At ~~September 30, 2021,~~March 31, 2022, our consolidated debt comprised:

•

●

€400 million aggregate outstanding on our Kronos International, Inc. (KII) 3.75% Senior Secured Notes ($~~460.4~~442.9 million carrying amount, net of unamortized debt issuance costs) due in September 2025 (Senior Secured Notes), and

•

●

approximately ~~$1.4~~$2.3 million of other indebtedness.

~~On April 20, 2021, we entered into a new~~We had no outstanding borrowings at March 31, 2022 on our $225 million global revolving credit facility (Global Revolver) ~~which matures in April 2026. We had no outstanding borrowings on the new Global Revolver at September 30, 2021~~ and the full $225 million was available for borrowings thereunder. Our Senior Secured Notes and our ~~new~~ Global Revolver contain a number of covenants and restrictions which, among other things, restrict our ability to incur or guarantee additional debt, incur liens, pay dividends or make other restricted payments, or merge or consolidate with, or sell or transfer substantially all of our assets to, another entity, and contain other provisions and restrictive covenants customary in lending transactions of these ~~types~~.types. Our credit agreements contain provisions which could result in the acceleration of indebtedness prior to their stated maturity for reasons other than defaults for failure to comply with typical financial or payment covenants. For example, the credit agreements allow the lender to accelerate the maturity of the indebtedness upon a change of control (as defined in the agreement) of the borrower. In addition, the credit agreements could result in the acceleration of all or a portion of the indebtedness following a sale of assets outside the ordinary course of business.The terms of all of our debt instruments ~~outstanding at September 30, 2021~~ are discussed in Note 8 to our Consolidated Financial Statements included in our ~~2020~~2021 Annual

Table of Contents

Report. ~~See Note 5 to our Condensed Consolidated Financial Statements for discussion of the terms of our new Global Revolver.~~ We ~~were~~are in compliance with all of our debt covenants at ~~September~~ 30~~, 2021.~~March 31, 2022. We believe we will be able to ~~maintain compliance~~continue to comply with the financial covenants contained in our credit facility through its maturity.

Our assets consist primarily of investments in operating subsidiaries, and our ability to service our obligations, including the Senior Secured Notes, depends in part upon the distribution of earnings of our subsidiaries, whether in the form of dividends, advances or payments on account of intercompany obligations or otherwise. Our Senior Secured Notes are collateralized by, among other things, a first priority lien on (i) 100% of the common stock or other ownership interests of each existing and future direct domestic subsidiary of KII and the guarantors, and (ii) 65% of the voting common stock or other ownership interests and 100% of the non-voting common stock or other ownership interests of each non-U.S. subsidiary that is directly owned by KII or any guarantor. Our ~~new~~ Global Revolver is collateralized by, among other things, a first priority lien on the borrower’s trade receivables and inventories. See Note 5 to our Condensed Consolidated Financial Statements.

Future cash requirements

Liquidity

Our primary source of liquidity on an ongoing basis is cash flows from operating activities which is generally used to (i) fund capital expenditures, (ii) repay any short-term indebtedness incurred for working capital purposes, ~~and~~ (iii) provide for the payment of ~~dividends.~~dividends and (iv) fund purchases of shares of our common stock under our stock repurchase program. From time-to-time we will incur indebtedness, generally to (i) fund short-term working capital needs, (ii) refinance existing indebtedness or (iii) fund major capital expenditures or the acquisition of other assets outside the ordinary course of business. We will also from time-to-time sell assets outside the ordinary course of business and use the proceeds to (i) repay existing indebtedness, (ii) make investments in marketable and other securities, (iii) fund major capital expenditures or the acquisition of other assets outside the ordinary course of business or (iv) pay dividends.

The TiO₂ industry is cyclical, and changes in industry economic conditions significantly impact earnings and operating cash flows. Changes in TiO₂ pricing, production volumes and customer demand, among other things, could significantly affect our liquidity.

We routinely evaluate our liquidity requirements, alternative uses of capital, capital needs and availability of resources in view of, among other things, our dividend policy, our debt service, our capital expenditure requirements and estimated future operating cash flows. As a result of this process, we have in the past and may in the future seek to reduce, refinance, repurchase or restructure indebtedness, raise additional capital, repurchase shares of our common stock, modify our dividend policy, restructure ownership interests, sell interests in our subsidiaries or other assets, or take a combination of these steps or other steps to manage our liquidity and capital resources. Such activities have in the past and may in the future involve related companies. In the normal course of our business, we may investigate, evaluate, discuss and engage in acquisition, joint venture, strategic relationship and other business combination opportunities in the TiO₂industry. In the event of any future acquisition or joint venture opportunity, we may consider using then-available liquidity, issuing our equity securities or incurring additional indebtedness.

At ~~September 30, 2021~~March 31, 2022 we had aggregate cash, cash equivalents and restricted cash on hand of ~~$379.7~~$356.2 million, of which ~~$111.2~~$76.2 million was held by non-U.S. subsidiaries. Following implementation of a territorial tax system under the 2017 Tax Act,

~~- 24 -~~

repatriation of any cash and cash equivalents held by our non-U.S. subsidiaries would not be expected to result in any material income tax liability as a result of such repatriation. Our ~~new~~ $225 million Global Revolver we entered into in April 2021, which replaced our North American and European facilities, matures in April 2026 and currently the full $225 million is available for borrowing under this facility and we could borrow all available amounts without violating our existing debt covenants. See Note 5 to our Condensed Consolidated Financial Statements. Based upon our expectation for the TiO₂ industry and anticipated demands on cash resources, we expect to have sufficient liquidity to meet our short-term obligations (defined as the twelve-month period ending ~~September 30, 2022)~~March 31, 2023) and our long-term obligations (defined as the five-year period ending ~~September 30, 2026,~~March 31, 2027, our time period for long-term budgeting). If actual developments differ from our expectations, our liquidity could be adversely affected.

Capital expenditures

We intend to invest approximately ~~$70~~$95 million in capital expenditures primarily to maintain and improve our existing facilities during ~~2021,~~2022, including ~~the $35.9~~$14.2 million ~~we have spent~~in expenditures through ~~September 30, 2021.~~March 31, 2022. It is possible we will delay planned capital projects based

Table of Contents

on market ~~conditions.~~conditions including but not limited to the general availability of materials, equipment and supplies necessary to complete such projects.

Stock repurchase program

At ~~September 30, 2021,~~March 31, 2022, we have ~~1,563,519~~1,475,229 shares available for repurchase under a stock repurchase program authorized by our board of directors.

~~Off-balance sheet financing~~

~~Neither we nor any of our subsidiaries or affiliates are parties to any off-balance sheet financing arrangements.~~

Commitments and contingencies

See Notes 10 and 12 to our Condensed Consolidated Financial Statements for a description of certain income tax contingencies, certain legal proceedings and other commitments.

Recent accounting pronouncements

Not applicable

Critical accounting policies

For a discussion of our critical accounting policies, refer to Part I, Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2020~~2021 Annual Report. There have been no changes in our critical accounting policies during the first ~~nine~~three months of ~~2021.~~2022.

~~ITEM 3.~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

General

We are exposed to market risk, including currency exchange rates, interest rates, equity security and raw material prices. There have been no material changes in these market risks since we filed our ~~2020~~2021 Annual Report. See also Part I, Item 7A. - “Quantitative and Qualitative Disclosure About Market Risk” in our ~~2020~~2021 Annual Report and Note 13 to our Condensed Consolidated Financial Statements.

~~ITEM 4.~~

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures which, as defined in Exchange Act Rule 13a-15(e), means controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit to the SEC under the Securities Exchange Act of 1934, as amended (the “Act”), is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in the reports we file or submit to the SEC under the Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions to be made regarding required disclosure. Each of Robert D. Graham, our Vice Chairman of the Board and Chief Executive Officer and Tim C. Hafer, our Senior Vice President and Chief Financial Officer, has evaluated the design and effectiveness of our disclosure controls and procedures as of ~~September 30,~~

~~- 25 -~~

~~2021.~~March 31, 2022. Based upon their evaluation, these executive officers have concluded that our disclosure controls and procedures are effective as of the date of such evaluation.

Internal control over financial reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting which, as defined by Exchange Act Rule 13a-15(f) means a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

•

●

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets,

Table of Contents

•

●

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and

•

●

Provide reasonable assurance regarding prevention or timely detection of an unauthorized acquisition, use or disposition of our assets that could have a material effect on our Condensed Consolidated Financial Statements.

Other

As permitted by the SEC, our assessment of internal control over financial reporting excludes (i) internal control over financial reporting of our equity method investees and (ii) internal control over the preparation of any financial statement schedules which would be required by Article 12 of Regulation S-X. However, our assessment of internal control over financial reporting with respect to our equity method investees did include our controls over the recording of amounts related to our investment that are recorded in our Condensed Consolidated Financial Statements, including controls over the selection of accounting methods for our investments, the recognition of equity method earnings and losses and the determination, valuation and recording of our investment account balances.

Changes in internal control over financial reporting

There has been no change to our internal control over financial reporting during the quarter ended ~~September 30, 2021~~March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~- 26 -~~

Part II. OTHER INFORMATION

~~Item 1.~~

~~Legal Proceedings~~

~~Refer to Note 12 to our Condensed Consolidated Financial Statements and our 2020 Annual Report for descriptions of certain legal proceedings.~~

~~Item 1A.~~

Item 1A. Risk Factors

For a discussion of the risk factors related to our businesses, refer to Part I, Item 1A, “Risk Factors,” in our ~~2020~~2021 Annual Report.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

The following table discloses certain information regarding the shares of our common stock we purchased during the first quarter of 2022. All of these purchases were made under our stock repurchase program in open market transactions. See Note 11 to our Condensed Consolidated Financial Statements.


Period	Total number of shares purchased (1)	Average price paid per share		Total number of shares purchased as part of the publicly announced plan	Maximum number of shares that may yet be purchased under the publicly announced plan
January 2022	8,000		$14.43	8,000	1,541,110
February 2022	44,052		$14.25	44,052	1,497,058
March 2022	21,829		$13.93	21,829	1,475,229

~~Item 5.~~

(1)

~~Other Information~~

In December 2010, our board of directors authorized the repurchase of up to 2.0 million shares of our common stock in open market transactions, including block purchases, or in privately-negotiated transactions at unspecified prices and over an unspecified period of time.

~~In the third quarter 2021, we were notified that the classification~~25

Table of a dam at our mine facilities in Norway was changed to the highest level for Norwegian classification of dam structures. As a result of this change in classification, our operations are subject to a higher degree of oversight and regulation. The impact of further regulations and any potential to affect our operations at the mines, and as a result at our sulfate pigment plants, is not known.Contents

Item 6.Exhibits

~~Item 6.~~

~~Exhibits~~


31.1		Certification

31.2		Certification

32.1		Certification

101.INS		Inline XBRL Instance - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase

104		Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

~~- 27 -~~

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Kronos Worldwide, Inc.
		(Registrant)



Date: ~~November~~May 4, ~~2021~~	2022	/s/ Tim C. Hafer
		Tim C. Hafer
		Senior Vice President and Chief Financial Officer (duly authorized officer)

~~- 28 -~~


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock	KRO	NYSE