# Kronos Worldwide Inc: Form 10-Q for the period ended Sep 30, 2024

- Company: [Kronos Worldwide Inc](/companies/kro.md) (CIK 1257640)
- Form: 10-Q
- Filed: 2024-11-06
- Accepted by EDGAR: Nov 6, 2024, 16:16 ET
- Period: 2024-09-30
- Accession: 0001558370-24-014630
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1257640/000155837024014630/kro-20240930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1257640/000155837024014630/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $484.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $1.46bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $383.5m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $1.19bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | $101.2m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | $272.9m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $62.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $174.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $38.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $94.3m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $11.8m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $30.8m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $22.7m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $34.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $71.8m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $99.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.62 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $0.86 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.62 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $0.86 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 115,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 115,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $23.2m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $17.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2024-01-01 to 2024-09-30 | $49.5m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2024-09-30 | $94.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $1.07bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $1.92bn | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $398.3m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2024-09-30 | $470.4m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $83.9m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-09-30 | $847.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 57,516 characters.

### 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 months ended September 30, 2024, approximately 40% 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 TiO2 selling prices as well as their expectation for future availability of product. Although certain of our TiO2 grades 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,
- TiO2 sales and production volumes,
- Manufacturing costs, particularly raw materials such as third-party feedstock, maintenance and energy-related expenses, and
- Currency exchange rates (particularly the exchange rate for the U.S. dollar relative to the euro, the Norwegian krone and the Canadian dollar and the euro relative to the Norwegian krone).

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

### Executive summary

As previously reported, effective July 16, 2024 (“Acquisition Date”), we acquired the 50% joint venture interest in Louisiana Pigment Company, L.P. (“LPC”) previously held by Venator Investments, Ltd. (“Venator”). Prior to the acquisition, LPC was operated as a manufacturing joint venture between us and Venator, and through a wholly-owned subsidiary, we held a 50% joint venture interest in LPC. Following the acquisition, LPC became a wholly-owned subsidiary of ours. We acquired the 50% joint venture interest that we did not already own for consideration of $185 million less a working capital adjustment of $11.0 million. An additional earn-out payment of up to $15 million based on our aggregate consolidated net income before interest expense, income taxes and depreciation and amortization expense, or EBITDA, during a two-year period comprising calendar years 2025 and 2026 may be required. The acquisition was financed through borrowings of $132.1 million under our global revolving credit facility (the “Global Revolver”) and the remainder paid with cash on hand. We accounted for the acquisition of LPC’s interest as a business combination. For financial reporting purposes, the assets acquired and liabilities assumed of LPC are included in our Condensed Consolidated Balance Sheet as of September 30, 2024, and the results of operations and cash flows of LPC are included in our Condensed Consolidated Statement of Operations and Cash Flows beginning as of the Acquisition Date. See Note 17 to our Condensed Consolidated Financial Statements.

We reported net income of $71.8 million, or $.62 per share, in the third quarter of 2024 compared to a net loss of $20.4 million, or $.18 per share, in the third quarter of 2023. For the first nine months of 2024, we reported net income of $99.4 million, or $.86 per share, compared to a net loss of $43.8 million, or $.38 per share, in the first nine months of 2023. Net income increased in the third quarter and first nine months of 2024 compared to the same periods in 2023 primarily due to higher income from operations as a result of the effects of higher sales and production volumes and lower production costs (primarily energy and raw materials), partially offset by lower average TiO2 selling prices. Our results of operations in the first nine months of 2023 were significantly impacted by reduced demand for certain of our products occurring in all major markets and unabsorbed fixed production and other costs due to reduced production volumes. Demand has improved in all of our major markets in the first nine months of 2024 and production volumes have increased, contributing to our improved profitability. Comparability of our results was also impacted by the effects of changes in currency exchange rates.

Our net income in the first nine months of 2024 includes a non-cash, pre-tax gain of $64.5 million ($50.9 million, or $.44 per share, net of income tax expense) resulting from the measurement of our investment in LPC and an aggregate charge of $1.5 million ($1.1 million, or $.01 per share, net of income tax benefit) related to a write-off of deferred financing costs.

Our net loss in the first nine months of 2023 includes the recognition of a pre-tax insurance settlement gain of $2.5 million ($2.0 million, or $.02 per share, net of income tax expense) related to a business interruption insurance claim arising from Hurricane Laura in 2020 and a $1.3 million settlement loss related to the termination and buy-out of our UK pension plan ($.9 million, or $.01 per share, net of income tax expense).

### 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. In some cases you can identify forward-looking statements by the use of words such as “believes,” “intends,” “may,” “should,” “could,” “anticipates,” “expects” or comparable terminology, or by discussions of strategies or trends. Although we believe the expectations reflected in such forward-looking statements are reasonable, we do not know if these expectations will be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results. Actual future results could differ materially from those predicted. The factors that could cause our actual future results to differ materially from those described herein 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;
- Our ability to realize expected cost savings from strategic and operational initiatives;
- Our ability to integrate acquisitions, including LPC into our operations and realize expected synergies and innovations;
- 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);
- Operating interruptions (including, but not limited to, labor disputes, leaks, natural disasters, fires, explosions, unscheduled or unplanned downtime, transportation interruptions, certain regional and world events or economic conditions and public health crises);
- Technology related disruptions (including, but not limited to, cyber-attacks, software implementation, upgrades or improvements, technology processing failures, or other events) related to our technology infrastructure that could impact

our ability to continue operations, or at key vendors which could impact our supply chain, or at key customers which could impact their operations and cause them to curtail or pause orders;

- Competitive products and substitute products;
- Customer and competitor strategies;
- Potential 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;
- Our ability to renew or refinance credit facilities or other debt instruments in the future;
- Changes in interest rates;
- Our ability to maintain sufficient liquidity;
- The ultimate outcome of income tax audits, tax settlement initiatives or other tax matters, including future tax reform;
- Our ability to utilize income tax attributes, the benefits of which may or may not have been recognized under the more-likely-than-not recognition criteria;
- Environmental matters (such as those requiring compliance with emission and discharge standards for existing and new facilities);
- Government laws and regulations and possible changes therein including new environmental, health and safety, sustainability, or other regulations (such as those seeking to limit or classify TiO2 or its use); and
- Pending or possible future litigation or other actions.

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.

### Results of operations

### Current industry conditions

We and the TiO2 industry experienced an extended period of significantly reduced demand across all major markets which was reflected in our sales volumes throughout 2023. While demand has improved in 2024 resulting in increased sales volumes across all major markets compared to the prior year, overall demand remains below average historical levels and during the third quarter of 2024, demand moderated as compared to the first half of the year. We started 2024 with average TiO2 selling prices 13% lower than at the beginning of 2023 and our average TiO2 selling prices increased 4% during the first nine months of 2024. Our average TiO2 selling prices in the first nine months of 2024 were 7% lower than average prices during the first nine months of 2023.

We operated our production facilities at 71% of practical capacity utilization in the first nine months of 2023 in response to decreased demand and higher production costs. As a result of increased demand experienced in the fourth quarter of 2023 and first nine months of 2024, along with more favorable production costs, we began increasing our production rates during the first quarter of 2024 and we operated at near practical capacity in the second and third quarters of 2024 resulting in 93% of practical capacity utilization in the first nine months of 2024.

The following table shows our capacity utilization rates during 2023 and 2024.

| ​ ​ ​ | ​ | ​ Production Capacity Utilization Rates 2023 | ​ | ​ 2024 |
| --- | --- | ---: | --- | ---: |
| First Quarter | ​ | 76% | ​ | **87%** |
| Second Quarter |  | 64% | ​ | **99%** |
| Third Quarter |  | 73% | ​ | **92%** |

Excluding the effect of changes in currency exchange rates, our cost of sales per metric ton of TiO2 sold in the first nine months of 2024 was significantly lower as compared to the comparable period in 2023 primarily due to significant decreases in per metric ton production costs (primarily feedstock and energy).

In response to the extended period of reduced demand in 2023, discussed above, we took measures to reduce our operating costs and improve our long-term cost structure such as the implementation of certain voluntary and involuntary workforce reductions during the third quarter of 2023 that primarily impacted our European operations. A substantial portion of our workforce reductions were accomplished through voluntary programs, for which eligible workforce reduction costs are recognized at the time both the employee and employer are irrevocably committed to the terms of the separation. These workforce reductions impacted approximately 100 employees. We recognized a total of approximately $6 million in charges primarily in the fourth quarter of 2023 related to workforce reductions we implemented during the second half of the year. We have paid approximately $4 million through the end of the third quarter. The majority of the remaining related cash payments will be paid by the end of 2024.

In the third quarter of 2024, we closed our sulfate process line at our plant in Varennes, Canada. As a result of the sulfate process line closure, we recognized charges to cost of sales in the first nine months of 2024 of approximately $2 million related to workforce reductions for employees impacted of which approximately $.6 million was paid through the end of the third quarter. We also recognized a total of approximately $14 million in non-cash charges primarily related to accelerated depreciation in the second and third quarters of 2024.

### Quarter ended September 30, 2024 compared to the quarter ended September 30, 2023

*(Dollars in millions)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Three months ended September 30, ​ 2023 ​ | ​ | ​ ​ ​ | ​ ​ 2024 | ​ | ​ ​ ​ |
| --- | --- | --- | --- | --- | ---: | --- | ---: |
| Net sales |  | $396.9 |  | 100% | **$484.7** |  | **100%** |
| Cost of sales |  | ​ 362.5 |  | 91 **​** | **383.5** |  | **79** **​** |
| Gross margin |  | ​ 34.4 |  | 9 **​** | **101.2** |  | **21** **​** |
| Selling, general and administrative expense |  | ​ 53.6 |  | 13 **​** | **62.3** |  | **13** **​** |
| Other operating income (expense): |  | ​ |  | ​ | ​ |  | ​ |
| Currency transactions, net |  | ​ (3.9) |  | (1) **​** | **2.9** |  | **-** **​** |
| Other operating expense, net |  | ​ (2.2) |  | (1) **​** | **(2.9)** |  | **-** **​** |
| Income (loss) from operations |  | $(25.3) |  | (6)% | **$38.9** |  | **8%** |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| **​** |  | **​** **​** | **​** | **​** **​** | **​** **​** | **​** | **% Change** **​** |
| TiO2 operating statistics: |  | ​ |  | ​ |  |  | ​ |
| Sales volumes\* |  | ​ 107 |  | ​ **​** | **130** | ​ | **21%** |
| Production volumes\* |  | ​ 102 |  | ​ **​** | **141** | ​ | **37%** |
| Percentage change in net sales: |  | ​ |  | ​ |  |  | ​ ​ |
| TiO2 sales volumes |  | **​** ​ | **​** | ​ |  |  | **21%** |
| TiO2 product pricing |  | **​** ​ |  | ​ |  |  | **(1)** **​** |
| TiO2 product mix/other |  | **​** ​ |  | ​ |  |  | **2** ​ |
| Changes in currency exchange rates |  | **​** ​ |  | ​ |  |  | **-** ​ |
| Total |  | **​** ​ | **​** | ​ |  |  | **22%** |

\* Thousands of metric tons

*Net sales* - Net sales in the third quarter of 2024 increased 22%, or $87.8 million, compared to the third quarter of 2023 primarily due to the effects of a 21% increase in sales volumes (which increased net sales by approximately $83 million) partially offset by a 1% decrease in average TiO2 selling prices (which decreased net sales by approximately $4 million). The effects of changes in currency exchange rates in the third quarter of 2024 were comparable to the third quarter of 2023. 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 21% in the third quarter of 2024 as compared to the third quarter of 2023 due to higher overall demand across all major markets. Incremental sales volumes generated from the LPC acquisition did not materially impact quarter to quarter comparisons.

*Cost of sales and gross margin -* Cost of sales increased by $21.0 million, or 6%, in the third quarter of 2024 compared to the third quarter of 2023 due to the net effects of a 21% increase in sales volumes, higher production rates and lower production costs of approximately $24 million (primarily energy and raw materials). Cost of sales in the third quarter of 2024 also includes approximately $4 million in non-cash charges related to accelerated depreciation in connection with the closure of our sulfate process line in Canada. Our cost of sales in the third quarter of 2023 includes $20 million of unabsorbed fixed production and other manufacturing costs associated with production curtailments at our facilities during the third quarter of 2023 as we adjusted our TiO2 production volumes to align inventory levels with lower demand. Our third quarter production volumes include approximately 13,000 metric tons of incremental production resulting from the LPC acquisition.

Our cost of sales as a percentage of net sales improved to 79% in the third quarter of 2024 compared to 91% in the same period of 2023 primarily due to the favorable effects of lower production costs and higher production volumes resulting in increased coverage of fixed production costs.

Gross margin as a percentage of net sales increased to 21% in the third quarter of 2024 compared to 9% in the third quarter of 2023. As discussed and quantified above, our gross margin as a percentage of net sales increased primarily due to higher sales and production volumes and lower production costs, which were partially offset by lower average TiO2 selling prices.

*Selling, general and administrative expense* - Selling, general and administrative expense increased $8.7 million, or 16%, in the third quarter of 2024 compared to the third quarter of 2023 primarily due to higher distribution costs related to higher sales volumes during the quarter. Our selling, general, and administrative expense in the third quarter of 2024 also includes $2.2 million of transaction costs incurred in connection with the LPC acquisition. Selling, general and administrative expense as a percentage of net sales remained consistent at 13% in the third quarter of 2024 compared to the third quarter of 2023.

*Income (loss) from operations –* We had income from operations of $38.9 million in the third quarter of 2024 compared to a loss from operations of $25.3 million in the third quarter of 2023 as a result of the factors impacting gross margin discussed above. We estimate that changes in currency exchange rates increased our income from operations by approximately $13 million in the third quarter of 2024 as compared to the same period in 2023, as discussed in the effects of currency exchange rates section below.

*Other non-operating income (expense)* - We recognized a gain on the remeasurement of our investment in LPC of $64.5 million in the third quarter of 2024 as a result of the acquisition. See Note 17 to our Condensed Consolidated Financial Statements. Interest expense in the third quarter of 2024 increased $7.5 million compared to interest expense in the third quarter of 2023 as a result of the February 2024 exchange of €325 million of our 3.75% Senior Secured Notes due 2025 for newly issued €276.174 million of 9.50% Senior Secured Notes due March 2029 plus additional cash consideration, the July 30, 2024 issuance of an additional €75 million of 9.50% Senior Secured Notes due 2029, and as a result of the $53.7 million subordinated, unsecured term loan from Contran due September 2029 at an interest rate of 11.5% which we entered into in February 2024 in connection with the exchange and which interest rate was amended to 9.54% in August 2024 in conjunction with the issuance of the additional €75 million of 9.50% Senior Secured Notes due 2029. See Note 5 to our Condensed Consolidated Financial Statements. We recognized an unrealized gain of $2.2 million in the third quarter of 2024 related to the change in market price of our marketable equity securities. There was no change in the relative market value of our marketable equity securities in the third quarter of 2023. See Note 4 to our Condensed Consolidated Financial Statements. Other components of net periodic pension and OPEB cost in the third quarter of 2024 decreased $.6 million compared to the third quarter of 2023 primarily due a higher expected return on plan assets. See Note 9 to our Condensed Consolidated Financial Statements.

*Income tax expense (benefit)* - We recognized income tax expense of $22.7 million in the third quarter of 2024 compared to an income tax benefit of $8.7 million in the third quarter of 2023. The difference is primarily due to higher earnings in the third quarter of 2024 and the jurisdictional mix of such earnings. Our earnings and losses 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, excluding the effect of any increase or decrease in our deferred income tax asset valuation allowance or changes in our reserve for uncertain tax positions, 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.

The Organization for Economic Cooperation and Development (the “OECD”), the European Union and other countries have committed to enacting the OECD’s Pillar Two initiative that would provide a global minimum level of taxation for multinational companies to be applied on a country-by-country basis. Currently, many countries are drafting or have enacted legislation to implement the Pillar Two rules effective for years beginning on or after December 31, 2023. Based on legislation currently enacted, we do not anticipate any material impact to our Consolidated Financial Statements; however, until all the jurisdictions we operate in enact legislation, the full impact of Pillar Two to us is unknown.

### Nine months ended September 30, 2024 compared to the nine months ended September 30, 2023

*(Dollars in millions)*

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Nine months ended September 30, ​ 2023 ​ | ​ | ​ ​ ​ | ​ ​ 2024 | ​ | ​ ​ |
| --- | --- | --- | --- | --- | ---: | --- | ---: |
| Net sales |  | $1,266.4 |  | 100% | **$1,464.0** |  | **100%** |
| Cost of sales |  | ​ 1,157.1 |  | 91 **​** | **1,191.1** |  | **81** **​** |
| Gross margin |  | ​ 109.3 |  | 9 **​** | **272.9** |  | **19** **​** |
| Selling, general and administrative expense |  | ​ 156.9 |  | 12 **​** | **174.4** |  | **12** **​** |
| Other operating income (expense): |  | ​ ​ |  | ​ | ​ |  | ​ |
| Currency transactions, net |  | ​ 4.6 |  | **-** **​** | **4.9** |  | **-** **​** |
| Other operating expense, net |  | ​ (7.3) |  | (1) **​** | **(9.1)** |  | **(1)** **​** |
| Income (loss) from operations |  | $(50.3) |  | (4)% | **$94.3** |  | **6%** |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| **​** |  | **​** **​** | **​** | **​** **​** | **​** **​** | **​** | **% Change** **​** |
| TiO2 operating statistics: |  | ​ |  | ​ |  |  | ​ |
| Sales volumes\* | ​ | ​ 313 | **​** | ​ **​** | **​** **394** | ​ | **26%** |
| Production volumes\* | ​ | ​ 296 | **​** | ​ **​** | **​** **399** | ​ | **35%** |
| Percentage change in net sales: |  | ​ |  | ​ |  |  | ​ ​ |
| TiO2 sales volumes |  | **​** ​ |  | ​ |  |  | **26%** |
| TiO2 product pricing |  | **​** ​ | **​** | ​ |  |  | **(7)** **​** |
| TiO2 product mix/other |  | **​** ​ |  | ​ |  |  | **(3)** ​ |
| Changes in currency exchange rates |  | **​** ​ |  | ​ |  |  | **-** ​ |
| Total |  | **​** ​ | **​** | ​ |  |  | **16%** |

*Net sales* - Net sales in the first nine months of 2024 increased 16%, or $197.6 million, compared to the first nine months of 2023 primarily due to the effects of a 26% increase in sales volumes due to improved overall demand across all major markets (which increased net sales by approximately $329 million) partially offset by a 7% decrease in average TiO2 selling prices (which decreased net sales by approximately $89 million). Changes in product mix negatively contributed to net sales, primarily due to changes in product sales mix in export markets in the first nine months of 2024 as compared to the same period in 2023. Additionally, we estimate that changes in currency exchange rates (primarily the euro) increased our net sales by approximately $5 million in the first nine months of 2024 as compared to the first nine months of 2023. TiO2 selling prices will increase or decrease generally as a result of competitive market pressures and changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs. Incremental sales volumes resulting from the LPC acquisition did not significantly impact period to period comparisons in the respective nine-month periods.

*Cost of sales and gross margin -* Cost of sales increased $34.0 million, or 3%, in the first nine months of 2024 compared to the first nine months of 2023 due to the net effects of a 26% increase in sales volumes, higher production rates resulting in reduced unabsorbed fixed production costs, and lower production costs of approximately $108 million (primarily raw materials and energy). Our unabsorbed fixed production costs in the first nine months of 2024 were $12 million (incurred in the first quarter) compared to $74 million in the first nine months of 2023 related to curtailments in 2023 and continuing into the first quarter of 2024, as discussed above. Our cost of sales in the first nine months of 2024 includes a charge of approximately $2 million related to workforce reductions and approximately $14 million in non-cash charges primarily related to accelerated depreciation in connection with the closure of our sulfate process line in Canada. Sales and production volumes resulting from the LPC acquisition did not materially impact comparisons to the prior year.

Our cost of sales as a percentage of net sales decreased to 81% in the first nine months of 2024 compared to 91% in the same period of 2023 primarily due to the favorable effects of lower production costs and higher production volumes resulting in increased coverage of fixed production costs.

Gross margin as a percentage of net sales increased to 19% in the first nine months of 2024 compared to 9% in the first nine months of 2023. As discussed and quantified above, our gross margin as a percentage of net sales increased primarily due to higher sales and production volumes as well as lower production costs, partially offset by lower average TiO2 selling prices.

*Selling, general and administrative expense -* Selling, general and administrative expense increased $17.5 million, or 11%, in the first nine months of 2024 compared to the same period in 2023 primarily due to higher distribution costs related to higher sales volumes. Our selling, general and administrative expense in the first nine months of 2024 also includes $2.2 million of transaction costs incurred in connection with the LPC acquisition. Selling, general and administrative expense as a percentage of net sales remained consistent in the first nine months of 2024 compared to the first nine months of 2023.

*Income (loss) from operations –* We had income from operations of $94.3 million in the first nine months of 2024 compared to a loss from operations of $50.3 million in the first nine months of 2023 as a result of the factors impacting gross margin discussed above. We recognized a gain of $2.5 million in the first nine months of 2023 related to cash received from the settlement of a business interruption insurance claim. See Note 14 to our Condensed Consolidated Financial Statements. We estimate that changes in currency exchange rates increased our income from operations by approximately $10 million in the first nine months of 2024 as compared to the same period in 2023, as further discussed below.

*Other non-operating income (expense)* - We recognized a gain on the remeasurement of our investment in LPC of $64.5 million in the third quarter of 2024 as a result of the acquisition. See Note 17 to our Condensed Consolidated Financial Statements. Interest expense in the first nine months of 2024 increased $18.0 million compared to the first nine months of 2023 primarily due to higher interest rates on the debt exchange and the issuance of new notes noted above. As a result of the exchange, interest expense for the first nine months of 2024 includes a charge of $1.5 million for the write-off of deferred financing costs. See Note 5 to our Condensed Consolidated Financial Statements. We recognized a gain of $2.6 million on the change in value of our marketable equity securities in the first nine months of 2024 compared to a loss of $1.3 million in the first nine months of 2023. See Note 4 to our Condensed Consolidated Financial Statements. Other components of net periodic pension and OPEB cost in the first nine months of 2024 decreased $3.1 million compared to the first nine months of 2023 primarily due to a higher expected return on plan assets and a non-recurring $1.3 million in settlement costs related to the termination and buy-out of our UK pension plan in the second quarter of 2023. See Note 9 to our Condensed Consolidated Financial Statements.

*Income tax expense (benefit)* - We recognized income tax expense of $34.7 million in the first nine months of 2024 compared to an income tax benefit of $19.7 million in the first nine months of 2023. The difference is primarily due to higher earnings in 2024 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, excluding the effect of any increase or decrease in our deferred income tax asset valuation allowance or changes in our reserve for uncertain tax positions, to be higher than the U.S. federal statutory tax rate of 21% primarily because of our sizeable non-U.S. operations. However, in the first nine months of 2024, our consolidated effective income tax rate, excluding the effect of the valuation allowance and change in reserve for uncertain tax positions, is lower than the U.S. federal statutory rate of 21% due to the effect of lower earnings and tax benefits associated with losses incurred in certain high tax jurisdictions. See Note 10 to our Condensed Consolidated Financial Statements.

The Organization for Economic Cooperation and Development (the “OECD”), the European Union and other countries have committed to enacting the OECD’s Pillar Two initiative that would provide a global minimum level of taxation for multinational companies to be applied on a country-by-country basis. Currently, many countries are drafting or have enacted legislation to implement the Pillar Two rules effective for years beginning on or after December 31, 2023. Based on legislation currently enacted, we do not anticipate any material impact to our Consolidated Financial Statements; however, until all the jurisdictions we operate in enact legislation, the full impact of Pillar Two to us is unknown.

### 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).

Fluctuations in currency exchange rates had the following effects on our sales and income (loss) from operations for the periods indicated.

*Impact of changes in currency exchange rates*

*Three months ended September 30, 2024 vs September 30, 2023*

*(In millions)*

| ​ ​ ​ ​ ​ ​ Impact on: | ​ ​ ​ | ​ ​ ​ ​ ​ ​ Transaction gains (losses) recognized 2023 ​ ​ | ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2024 ​ | ​ ​ ​ | ​ ​ ​ ​ ​ ​ Change ​ | ​ ​ ​ ​ | ​ ​ Translation gains/(losses) - impact of rate changes ​ | ​ ​ ​ ​ | ​ ​ Total currency impact 2024 vs 2023 ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Net sales | ​ | $- | ​ | $- | ​ | $- | ​ | $(1) | ​ | $(1) |
| Income (loss) from operations | ​ | (4) | ​ | 3 | ​ | 7 | ​ | 6 | ​ | 13 |

The $1 million decrease in net sales (translation losses) was caused primarily by a strengthening of the U.S. dollar relative to the euro, as our euro-denominated sales were translated into fewer U.S. dollars in 2024 as compared to 2023. The strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2024 did not have a significant effect on 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 $13 million increase in income from operations was comprised of the following:

- Lower net currency transaction losses of approximately $7 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 $6 million from net currency translation gains primarily caused by a strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone, as local currency-denominated operating costs were translated into fewer U.S. dollars in 2024 as compared to 2023. The effect of the weakening of the U.S. dollar relative to the euro was nominal in 2024 as compared to 2023.

*Impact of changes in currency exchange rates*

*Nine months ended September 30, 2024 vs September 30, 2023*

*(In millions)*

| ​ ​ ​ ​ ​ ​ Impact on: | ​ ​ ​ | ​ ​ ​ ​ ​ ​ Transaction gains recognized 2023 ​ ​ | ​ ​ ​ | ​ ​ ​ ​ ​ ​ 2024 ​ | ​ ​ ​ | ​ ​ ​ ​ ​ ​ Change ​ | ​ ​ ​ ​ | ​ ​ Translation gains - impact of rate changes ​ | ​ ​ ​ ​ | ​ ​ Total currency impact 2024 vs 2023 ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Net sales | ​ | $- | ​ | $- | ​ | $- | ​ | $5 | ​ | $5 |
| Income (loss) from operations | ​ | 4 | ​ | 5 | ​ | 1 | ​ | 9 | ​ | 10 |

The $5 million increase in net sales (translation gains) was caused primarily by a weakening of the U.S. dollar relative to the euro, as our euro-denominated sales were translated into more U.S. dollars in 2024 as compared to 2023. The strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2024 did not have a significant effect on 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 $10 million increase in income from operations was comprised of the following:

- Higher net currency transaction gains of approximately $1 million primarily caused by relative changes in currency exchange rates at each applicable balance sheet date between the U.S. dollar and the euro, Canadian dollar and the Norwegian krone, and between the euro and the Norwegian krone, which causes increases or decreases, as applicable, in U.S. dollar-denominated receivables and payables and U.S. dollar currency held by our non-U.S. operations, and in Norwegian krone denominated receivables and payables held by our non-U.S. operations, and
- Approximately $9 million from net currency translation gains primarily caused by a strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone, as local currency-denominated operating costs were translated into fewer U.S. dollars in 2024 as compared to 2023. The effect of the weakening of the U.S. dollar relative to the euro was nominal in 2024 as compared to 2023.

### Outlook

Overall customer demand has improved in 2024 compared to the historical low demand we experienced during 2023, although overall demand levels remain below historical averages and, during the third quarter of 2024, customer demand moderated as compared to the first half of the year across all major markets. We expect demand to further soften in the fourth quarter; however, based on the improved demand experienced through the first nine months, along with the severe demand contraction we experienced during most of 2023, we continue to expect sales volumes in 2024 will exceed 2023 sales volumes. We are operating our facilities at production rates in line with the current and expected near-term demand and believe our production rates for the remainder of 2024 will continue to be higher than comparable periods in 2023. We have had limited success implementing TiO2 selling price increases, which need to continue to be realized to achieve margins more in-line with historical levels.

Throughout 2023, we implemented cost reduction initiatives designed to improve our long-term cost structure, including targeted workforce reductions. In the third quarter of 2024, to further improve gross margins through the optimization of production of our purified grades, we closed our sulfate process line at our facility in Canada. Raw material, energy and other input costs have generally improved compared to 2023. While the full positive impact of input cost improvements and cost reduction efforts are not yet fully reflected in our gross margin, during the second quarter gross margin began to improve and has continued to improve as we replace higher cost inventory with lower cost inventory produced in 2024. Overall, due to improved demand, modest increases in selling prices and lower production costs, including lower unabsorbed fixed costs, we expect to report higher operating results for the full year of 2024 as compared to 2023.

As noted above, we acquired full control of LPC in July 2024. We believe this acquisition is a unique opportunity to immediately add value to our customers and better serve the North American marketplace by allowing us to expand our product offerings and increase sales to new and existing customers while recognizing significant synergies, including commercial, overhead and supply chain optimization. We are in the process of fully integrating the additional LPC production capacity and we expect the acquisition will have a positive impact on our earnings, although the potential positive impact in 2024 will be limited by competitive pressures, demand moderation in North America and by the additional debt service costs associated with the increase in borrowings to complete the transaction. With the increased borrowing availability under our revolving credit facility, as well as cash on hand, we are well positioned to finance the required working capital build needed to fully integrate the acquired LPC production capacity, which we expect to be complete by the end of the year. Beginning in the third quarter, we reduced our quarterly dividend rate from $.19 per share to $.05 per share to provide the flexibility to absorb increased debt service costs, working capital needs and capital improvements from the LPC acquisition.

Our expectations for the TiO2 industry and our operations are based on a number of factors outside our control. We have experienced global market disruptions, including high energy costs, and future impacts on our operations will depend on, among other things, future energy costs and the impact economic conditions and geopolitical events have on our operations or our customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.

### 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.

Cash provided by operating activities was $23.2 million in the first nine months of 2024 compared to cash used of $58.9 million in the first nine months of 2023. This $82.1 million increase in the amount of cash from operating activities was primarily due to the net effect of the following:

- higher income from operations in 2024 of $144.6 million,
- cash premium of $6.0 million on the issuance of senior notes,
- higher amount of net cash used associated with relative changes in our inventories, receivables, payables and accruals in 2024 of $37.1 million,
- higher cash paid for taxes in 2024 of $21.2 million primarily due to higher earnings and the relative timing of payments, and
- higher cash paid for interest in 2024 of $16.0 million.

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

- Our average days sales outstanding, or DSO, increased from December 31, 2023 to September 30, 2024 primarily due to the relative changes in the timing of collections, and
- Our average days sales in inventory, or DSI, decreased from December 31, 2023 to September 30, 2024 primarily due to lower relative cost of sales (as a result of lower production costs, as discussed above) compared to the fourth quarter of 2023.

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

|  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ |
| **​** |  | **December 31, 2022** |  | **September 30, 2023** |  | **December 31, 2023** |  | **September 30, 2024** |
| DSO | ​ | 64 days | ​ | 68 days | ​ | 66 days | ​ | 68 days |
| DSI | ​ | 103 days | ​ | 61 days | ​ | 65 days | ​ | 60 days |

### Investing activities

We paid $156.8 million, net of cash acquired, for the remaining TiO2 manufacturing joint venture interest in LPC. See Note 17 to our Condensed Consolidated Financial Statements.

Our capital expenditures of $17.2 million and $42.1 million in the first nine months of 2024 and 2023, respectively, were primarily to maintain and improve the cost effectiveness of our manufacturing facilities.

### Financing activities

During the first nine months of 2024, we paid dividends of $.43 per share to stockholders aggregating $49.5 million ($.19, $.19 and $.05 per share in the first, second and third quarters of 2024, respectively) and $.57 per share aggregating $65.6 million ($.19 per share in each of the first, second and third quarters of 2023). On October 30, 2024, our board of directors declared a quarterly dividend of $.05 per share, payable December 12, 2024, to stockholders of record as of November 29, 2024.

In addition, during the first three months of 2024, we exchanged €325 million of our Kronos International, Inc. (KII) 3.75% Senior Secured Notes due September 2025 (the “Old Notes”) for our newly issued €276.174 million 9.50% Senior Secured Notes due March 2029 (the “New Notes”) plus additional cash consideration of $52.6 million to certain eligible holders of the Old Notes and borrowed $53.7 million from Contran. In the third quarter we issued an additional €75 million principal amount of 9.50% Senior Secured Notes due 2029 (the Additional New Notes (as defined below) together with the Old Notes and the New Notes, the “Senior Secured Notes”). See Note 5 to our Condensed Consolidated Financial Statements.

### Outstanding debt obligations

At September 30, 2024, our consolidated debt comprised:

- €351.174 million aggregate outstanding on our 9.50% Senior Secured Notes due March 2029 plus €5.4 million of unamortized premium ($391.7 million carrying amount, net of unamortized debt issuance costs),
- €75 million aggregate outstanding on our 3.75% Senior Secured Notes due September 2025 ($83.9 million carrying amount),
- $53.7 million outstanding on our subordinated, unsecured term loan from Contran due September 2029 (the “Contran Term Loan”), and
- $25.0 million outstanding on our Global Revolver.

Availability under the Global Revolver is subject to a borrowing base calculation, as defined in the agreement, and at September 30, 2024, approximately $268 million was available for borrowings. Effective July 17, 2024, we completed an amendment to our Global Revolver (the “Second Amendment”). Among other things, the Second Amendment increased the maximum borrowing amount from $225 million to $300 million, extended the maturity date to July 2029 and expanded the facility to include LPC and LPC’s receivables and certain of its inventories in the borrowing base. The LPC acquisition was financed through borrowings of $132.1 million under our Global Revolver with the remainder paid with cash on hand. On July 30, 2024, our wholly-owned subsidiary, KII, issued an additional €75 million principal amount of 9.50% Senior Secured Notes due 2029 (the “Additional New Notes”). The Additional New Notes were issued at a premium of 107.50% of their principal amount, plus accrued interest from February 12, 2024, resulting in net proceeds of approximately $90 million, after fees and estimated expenses. The Additional New Notes are fungible with the New Notes, are treated as a single series with the New Notes, and have the same terms as the New Notes, other than their date of issuance and issue price. The proceeds from the Additional New Notes were used to pay down borrowings under the Global Revolver. Subsequent to the issuance of the Additional New Notes, in August 2024, the Contran Term Loan was amended to change the interest rate from 11.5% to 9.54%. The amended rate reflects the effective interest rate of the Additional New Notes plus an additional interest rate spread of 2% which is based upon comparable debt transactions at the time of issuance of the Additional New Notes. See Note 5 to our Condensed Consolidated Financial Statements.

The Contran Term Loan is subordinated in right of payment to our Senior Secured Notes and our Global Revolver. Our Senior Secured Notes, the Contran Term Loan and our Global Revolver contain a number of covenants and restrictions which, among other things, restrict our ability to incur or guarantee additional debt, incur liens, pay dividends or make other restricted payments, or merge or consolidate with, or sell or transfer substantially all of our assets to, another entity, and contain other provisions and restrictive covenants customary in lending transactions of these types. Our credit agreements contain provisions which could result in the acceleration of indebtedness prior to their stated maturity for reasons other than defaults for failure to comply with typical financial or payment covenants. For example, the credit agreements allow the lender to accelerate the maturity of the indebtedness upon a change of control (as defined in the agreement) of the borrower. In addition, the credit agreements could result in the acceleration of all or a portion of the indebtedness following a sale of assets outside the ordinary course of business. The terms of all of our debt instruments are discussed in Note 8 to our Consolidated Financial Statements included in our 2023 Annual Report. We are in compliance with all of our debt covenants at September 30, 2024. We believe we will be able to 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 and the Contran Term Loan, depends in part upon the distribution of earnings of our subsidiaries, whether in the form of dividends, advances or payments on account of intercompany obligations or otherwise. 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 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, (iii) provide for the payment of 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. We may also from time to time engage in preliminary discussions with existing or potential investors regarding the timing or terms of any such refinancing or other potential transaction. 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 TiO2 industry. 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, 2024, we had aggregate cash, cash equivalents and restricted cash on hand of $102.9 million, of which $65.3 million was held by non-U.S. subsidiaries. Following implementation of a territorial tax system under the 2017 Tax Act, repatriation of any cash and cash equivalents held by our non-U.S. subsidiaries would not be expected to result in any material income tax liability as a result of such repatriation. As amended, our Global Revolver matures in July 2029, and at September 30, 2024 approximately $268 million is available for borrowing under this facility. The borrowing base is calculated quarterly and the amount available for borrowing may change based on applicable quarter end balances. 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, 2025) and our long-term obligations (defined as the five-year period ending September 30, 2029, 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 $42 million in capital expenditures primarily to maintain and improve our existing facilities during 2024, including $17.2 million in expenditures through September 30, 2024. It is possible we will delay planned capital projects based on market conditions including but not limited to expected demand, the general availability of materials, equipment and supplies necessary to complete such projects.

### Stock repurchase program

At September 30, 2024, we have 1,017,518 shares available for repurchase under a stock repurchase program authorized by our board of directors.

### Commitments and contingencies

See Notes 10, 12 and 17 to our Condensed Consolidated Financial Statements for a description of certain income tax contingencies, certain legal proceedings and other commitments.

### Recent accounting pronouncements

See Note 15 to our Condensed Consolidated Financial Statements.

### 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 2023 Annual Report. There have been no changes in our critical accounting policies during the first nine months of 2024 except as described below:

*Business combinations* - During the third quarter of 2024, we acquired the 50% joint venture interest in LPC previously held by Venator. Prior to the acquisition we accounted for our interest in LPC under the equity method. The application of the purchase method of accounting for business combinations requires us to use significant estimates and assumptions in the determination of the estimated fair value of assets acquired and liabilities assumed. Our estimates of the fair values of assets acquired and liabilities assumed are based upon assumptions we believe are reasonable, and when appropriate, include assistance from independent third-party valuation advisors. See Note 17 to our Condensed Consolidated Financial Statements.

## Market risk

As filed, 408 characters.

### 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 2023 Annual Report. See also Part I, Item 7A. - “Quantitative and Qualitative Disclosure About Market Risk” in our 2023 Annual Report and Note 13 to our Condensed Consolidated Financial Statements.

## Controls and procedures

As filed, 3,802 characters.

### 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 James M. Buch, our President and Chief Executive Officer and Tim C. Hafer, our Executive Vice President and Chief Financial Officer, has evaluated the design and effectiveness of our disclosure controls and procedures as of September 30, 2024. 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,
- 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, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 1,293 characters.

In addition to the risk factor discussed below, refer to Part I, Item 1A, “Risk Factors,” in our 2023 Annual Report for a discussion of the risk factors related to our businesses.

***Our recent acquisition of the remaining 50% interest in LPC may not generate benefits we anticipate and may otherwise affect our business and prospects.***

We recently completed the LPC Acquisition in which we purchased the 50% ownership interest in LPC we did not previously own. If we experience unforeseen technological, operational or other difficulties in managing the integration of LPC as our wholly-owned subsidiary, we may not be able to implement the process innovations at the facility as we expect. In addition, we may not be able to achieve the synergies or improve efficiency and product quality as we expect. With or without such difficulties, the integration of the LPC facility into our operations may divert significant management time and attention from our other operations. If we fail to successfully integrate LPC into our operations, or if the LPC Acquisition does not return expected synergies or a level of sales as we expect, or if LPC has unexpected legal or financial liabilities, our business, financial condition, results of operations and prospects could be adversely affected.

Filed Nov 6, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-014630. Last ingested by Listed: Oct 24, 2026, 15:11 ET. No prices; not investment advice.