UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020 

OR

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to          

Commission file number 1-31763

KRONOS WORLDWIDE, INC.

(Exact name of registrant as specified in its charter)

Delaware	76-0294959
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

5430 LBJ Freeway, Suite 1700

Dallas, Texas 75240-2620

(Address of principal executive offices)

Registrant’s telephone number, including area code: (972) 233-1700

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ☐    No  ☒

Number of shares of the registrant’s common stock, $.01 par value per share, outstanding on October 30, 2020:  115,542,717.

KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

INDEX

		Page number
Part I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets -    December 31, 2019; September 30, 2020 (unaudited)	3
	Condensed Consolidated Statements of Income (unaudited) -    Three and nine months ended September 30, 2019 and 2020	5
	Condensed Consolidated Statements of Comprehensive Income (unaudited) -    Three and nine months ended September 30, 2019 and 2020	6
	Condensed Consolidated Statements of Stockholders’ Equity (unaudited) -    Three and nine months ended September 30, 2019 and 2020	7
	Condensed Consolidated Statements of Cash Flows (unaudited) -    Nine months ended September 30, 2019 and 2020	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3.	Quantitative and Qualitative Disclosure About Market Risk		27
Item 4.	Controls and Procedures		27
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings		29
Item 1A.	Risk Factors		29
Item 6.	Exhibits	29
Items 2, 3, 4 and 5 of Part II are omitted because there is no information to report.

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KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions)

	December 31,		September 30,
	2019		2020
			(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	390.8	$	348.4
Restricted cash		1.5		4.7
Accounts and other receivables, net		309.4		314.5
Inventories, net		503.0		504.2
Prepaid expenses and other		15.0		16.9
Total current assets		1,219.7		1,188.7
Other assets:
Investment in TiO2 manufacturing joint venture		90.2		96.7
Marketable securities		3.3		2.0
Operating lease right-of-use assets		29.0		26.8
Deferred income taxes		127.7		141.1
Other		5.3		6.4
Total other assets		255.5		273.0
Property and equipment:
Land		40.4		41.8
Buildings		211.4		217.1
Equipment		1,113.1		1,152.0
Mining properties		116.2		110.3
Construction in progress		54.9		66.6
		1,536.0		1,587.8
Less accumulated depreciation and amortization		1,045.4		1,102.6
Net property and equipment		490.6		485.2
Total assets	$	1,965.8	$	1,946.9

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KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In millions)

	December 31,			September 30,
	2019			2020
				(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt	$	1.5		$	1.5
Accounts payable and accrued liabilities		259.0			211.6
Income taxes		10.1			22.4
Total current liabilities		270.6			235.5
Noncurrent liabilities:
Long-term debt		444.0			465.9
Accrued pension costs		307.4			321.9
Payable to affiliate - income taxes		56.6			50.6
Operating lease liabilities		22.2			19.6
Deferred income taxes		20.7			23.0
Other		28.2			28.7
Total noncurrent liabilities		879.1			909.7
Stockholders' equity:
Common stock		1.2			1.2
Additional paid-in capital		1,396.2			1,395.3
Retained deficit		(132.5	)		(141.2	)
Accumulated other comprehensive loss		(448.8	)		(453.6	)
Total stockholders' equity		816.1			801.7
Total liabilities and stockholders' equity	$	1,965.8		$	1,946.9

Commitments and contingencies (Notes 11 and 13)

See accompanying notes to Condensed Consolidated Financial Statements.  

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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,
	2019			2020			2019			2020
	(unaudited)
Net sales	$	437.4		$	416.9		$	1,358.4		$	1,223.9
Cost of sales		349.7			336.3			1,051.9			959.4
Gross margin		87.7			80.6			306.5			264.5
Selling, general and administrative expense		56.9			55.6			172.5			161.8
Other operating income (expense):
Currency transactions, net		5.8			(2.9	)		5.6			3.2
Other operating expense, net		(3.5	)		(2.8	)		(11.0	)		(10.1	)
Income from operations		33.1			19.3			128.6			95.8
Other income (expense):
Interest and dividend income		1.4			.1			5.2			1.5
Insurance settlement gain		-			-			-			1.5
Marketable equity securities		(1.9	)		.4			(.1	)		(1.3	)
Other components of net periodic pension and OPEB cost		(3.8	)		(5.0	)		(11.4	)		(14.4	)
Interest expense		(4.6	)		(4.9	)		(14.1	)		(14.1	)
Income before income taxes		24.2			9.9			108.2			69.0
Income tax expense		6.3			1.8			30.5			15.3
Net income	$	17.9		$	8.1		$	77.7		$	53.7
Net income per basic and diluted share	$	.16		$	.07		$	.67		$	.46
Weighted average shares used in the calculation   of net income per share		115.7			115.5			115.8			115.6

See accompanying notes to Condensed Consolidated Financial Statements.  

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KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

	Three months ended						Nine months ended
	September 30,						September 30,
	2019			2020			2019			2020
	(unaudited)
Net income	$	17.9		$	8.1		$	77.7		$	53.7
Other comprehensive income (loss), net of tax:
Currency translation		(18.7	)		10.1			(11.7	)		(13.8	)
Defined benefit pension plans		2.2			3.1			6.7			9.2
Other postretirement benefit plans		(.1	)		(.1	)		(.2	)		(.2	)
Total other comprehensive income (loss), net		(16.6	)		13.1			(5.2	)		(4.8	)
Comprehensive income	$	1.3		$	21.2		$	72.5		$	48.9

See accompanying notes to Condensed Consolidated Financial Statements.

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KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In millions)

	Three months ended September 30, 2019 and 2020 (unaudited)
									Accumulated
			Additional						other
	Common		paid-in			Retained			comprehensive			Treasury
	stock		capital			deficit			loss			stock			Total
Balance at June 30, 2019	$	1.2	$	1,399.2		$	(118.1	)	$	(412.9	)	$	(1.4	)	$	868.0
Net income		-		-			17.9			-			-			17.9
Other comprehensive loss, net of tax		-		-			-			(16.6	)		-			(16.6	)
Dividends paid - $.18 per share		-		-			(20.8	)		-			-			(20.8	)
Treasury stock acquired		-		-			-			-			(1.6	)		(1.6	)
Treasury stock retired		-		(1.4	)		-			-			1.4			-
Balance at September 30, 2019	$	1.2	$	1,397.8		$	(121.0	)	$	(429.5	)	$	(1.6	)	$	846.9
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

	Nine months ended September 30, 2019 and 2020 (unaudited)
									Accumulated
			Additional						other
	Common		paid-in			Retained			comprehensive			Treasury
	stock		capital			deficit			loss			stock			Total
Balance at December 31, 2018	$	1.2	$	1,399.1		$	(136.2	)	$	(424.3	)	$	-		$	839.8
Net income		-		-			77.7			-			-			77.7
Other comprehensive loss, net of tax		-		-			-			(5.2	)		-			(5.2	)
Issuance of common stock		-		.1			-			-			-			.1
Dividends paid - $.54 per share		-		-			(62.5	)		-			-			(62.5	)
Treasury stock acquired		-		-			-			-			(3.0	)		(3.0	)
Treasury stock retired		-		(1.4	)		-			-			1.4			-
Balance at September 30, 2019	$	1.2	$	1,397.8		$	(121.0	)	$	(429.5	)	$	(1.6	)	$	846.9
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		-