Investment in Kronos Worldwide, Inc.

6 Months Ended

Jun. 30, 2024

Investment in Kronos Worldwide, Inc.

Investment in Kronos Worldwide, Inc.

Note 5 – Investment in Kronos Worldwide, Inc.:

At December 31, 2023 and June 30, 2024, we owned approximately 35.2 million shares of Kronos common stock. At June 30, 2024, the quoted market price of Kronos’ common stock was $12.55 per share, or an aggregate market value of $442.0 million. At December 31, 2023, the quoted market price was $9.94 per share, or an aggregate market value of $350.1 million.

The change in the carrying value of our investment in Kronos during the first six months of 2024 is summarized below.

	Amount
	(In millions)
Balance at the beginning of the period	$	247.6
Equity in earnings of Kronos		8.4
Dividends received from Kronos		(13.4)
Equity in Kronos' other comprehensive income (loss):
Currency translation		(5.6)
Defined benefit pension plans		.3
Balance at the end of the period	$	237.3

Selected financial information of Kronos is summarized below:

	December 31,		June 30,
	2023		2024
	(In millions)
Current assets	$	1,117.4	$	987.2
Property and equipment, net		482.9		444.3
Investment in TiO2 joint venture		111.0		101.2
Other noncurrent assets		126.7		124.2
Total assets	$	1,838.0	$	1,656.9
Current liabilities	$	370.8	$	273.1
Long-term debt		440.9		423.7
Accrued pension costs		150.0		140.1
Other noncurrent liabilities		68.0		45.4
Stockholders’ equity		808.3		774.6
Total liabilities and stockholders’ equity	$	1,838.0	$	1,656.9

	Three months ended				Six months ended
	June 30,				June 30,
	2023		2024		2023		2024
	(In millions)
Net sales	$	443.2	$	500.5	$	869.5	$	979.3
Cost of sales		399.1		400.3		794.6		807.6
Income (loss) from operations		(6.7)		35.9		(25.0)		55.4
Income tax expense (benefit)		(4.1)		8.5		(11.0)		12.0
Net income (loss)		(8.2)		19.5		(23.4)		27.6

Effective July 16, 2024, Kronos acquired the 50% joint venture interest in  Lousiana Pigment Company (LPC) previously held by Venator Investments, Ltd (“Venator”). Prior to the acquisition, LPC was operated as a joint venture between Kronos and Venator, and through a wholly-owned subsidiary, Kronos held a 50% joint venture interest in LPC. Following the acquisition, LPC is an indirect, wholly-owned subsidiary of Kronos. Kronos completed the acquisition in order to obtain full control of LPC and its TiO₂ production to better serve the North American TiO₂ marketplace. Kronos acquired the 50% joint venture interest that it did not already own for an upfront cash payment of $185 million (subject to working capital adjustments) and a potential earn-out payment of up to $15 million based on Kronos’ 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. The aggregate EBITDA tiers for the two-year earn-out period are $650 million and $730 million, with $5 million of the earnout payable if Kronos achieves $650 million in aggregate consolidated EBITDA, and a maximum of $15 million payable if aggregate EBITDA is $730 million or greater for the period. If Kronos achieves aggregate consolidated EBITDA between $650 million and $730 million, the payment of the additional $10 million is pro-rated between the two targets. The earn-out is payable at the earliest in April 2027. The acquisition was financed through a borrowing of $132 million under Kronos’ Global Revolver with the remainder paid with cash on hand.