Investment in Kronos Worldwide, Inc.

3 Months Ended

Mar. 31, 2025

Investment in Kronos Worldwide, Inc.

Investment in Kronos Worldwide, Inc.

Note 6 – Investment in Kronos Worldwide, Inc.:

At December 31, 2024 and March 31, 2025, we owned approximately 35.2 million shares of Kronos common stock. At March 31, 2025, the quoted market price of Kronos’ common stock was $7.48 per share, or an aggregate market value of $263.4 million. At December 31, 2024, the quoted market price was $9.75 per share, or an aggregate market value of $343.4 million.

The change in the carrying value of our investment in Kronos during the first three months of 2025 is summarized below.

	Amount
	(In millions)
Balance at the beginning of the period	$	250.3
Equity in earnings of Kronos		5.5
Dividends received from Kronos		(1.8)
Equity in Kronos' other comprehensive income:
Currency translation		5.3
Defined benefit pension plans		.2
Balance at the end of the period	$	259.5

Selected financial information of Kronos is summarized below:

	December 31,		March 31,
	2024		2025
	(In millions)
Current assets	$	1,105.3	$	1,126.0
Property and equipment, net		694.1		705.4
Other noncurrent assets		114.1		114.6
Total assets	$	1,913.5	$	1,946.0
Current liabilities	$	476.6	$	430.3
Long-term debt		429.1		476.0
Accrued pension costs		117.5		119.3
Other noncurrent liabilities		73.3		73.4
Stockholders’ equity		817.0		847.0
Total liabilities and stockholders’ equity	$	1,913.5	$	1,946.0

	Three months ended
	March 31,
	2024		2025
	(In millions)
Net sales	$	478.8	$	489.8
Cost of sales		407.3		383.0
Income from operations		19.5		38.4
Income tax expense		3.5		7.6
Net income		8.1		18.1

Effective July 16, 2024 (“Acquisition Date”), Kronos acquired the 50% joint venture interest in Louisiana Pigment Company, L.P. (“LPC”) previously held by Venator Investments, Ltd. (“Venator”). Prior to the acquisition, Kronos held a 50% joint venture interest in LPC and LPC was operated as a manufacturing joint venture between Kronos and Venator. Kronos acquired the 50% joint venture interest in LPC for consideration of $185 million less a working capital adjustment. An additional earn-out payment of up to $15 million may be required if 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 exceed certain thresholds as described below. Kronos accounted for the acquisition of the interest in LPC as a business combination and, as a result of obtaining full control, LPC became a wholly-owned subsidiary of Kronos. The acquisition was financed through a borrowing of $132.1 million under Kronos’ revolving credit facility and the remainder paid with Kronos’ cash on hand. The potential earn-out payment of up to $15 million is based on Kronos’ aggregate consolidated EBITDA tiers for 2025 and 2026 of $650 million and $730 million, with $5 million of the earn-out 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 aggregated consolidated EBITDA between $650 million and $730 million, the payment of the additional $10 million is prorated between the two targets. The earn-out is payable at the earliest in April 2027. The estimated fair value of the earn-out at the Acquisition Date was $4.2 million and was determined using a weighted probability of potential outcomes based on estimated future EBITDA and volatility factors, among other variables and estimates.  Kronos recognized a pre-tax gain of approximately $64.5 million in the third quarter of 2024, representing the difference between the $178.2 million estimated fair value of its existing ownership interest in LPC at the Acquisition Date and its aggregate $113.7 million carrying value at the Acquisition Date.