About Valhi

Valhi, Inc., through its wholly-owned subsidiaries, produces and markets value-added titanium dioxide pigments (TiO2). The company is a subsidiary of Contran Corporation. The company operates through its wholly-owned and majority-owned subsidiaries, including NL Industries, Inc. (NL); Kronos Worldwide, Inc. (Kronos); CompX International Inc. (CompX); Basic Management, Inc. (BMI); and The LandWell Company (LandWell). Segments The company operates through three segments: Chemicals, Component Products, and Real Estate Management and Development. Chemicals segment This segment is operated through the company’s majority control of Kronos. Kronos is a major producer and marketer of TiO2, a base industrial product used in a wide range of applications. Kronos, along with its distributors and agents, sells and provides technical services for its products to approximately 4,000 customers in 100 countries with the majority of sales in Europe, North America, and the Asia Pacific region. Products and End-Use Markets Kronos offers its customers a portfolio of products that include over 40 different TiO2 pigment grades under the KRONOS trademark, which provide a variety of performance properties to meet customers’ specific requirements. Kronos’ major customers include domestic and international paint, plastics, decorative laminate and paper manufacturers. Kronos ships TiO2 to its customers in either a powder or slurry form via rail, truck and/or ocean carrier. Sales of Kronos’ core TiO2 pigments represented approximately 93% of this segment’s net sales in 2020. Kronos and its agents and distributors primarily sell its products in three major end-use markets, such as coatings, plastics and paper. Some of the principal applications for Kronos’ products include the following: TiO2 for Coatings: Kronos’ TiO2 is used to provide opacity, durability, tinting strength and brightness in industrial coatings, as well as coatings for commercial and residential interiors and exteriors, automobiles, aircraft, machines, appliances, traffic paint and other special purpose coatings. TiO2 for Plastics: Kronos produces TiO2 pigments that improve the optical and physical properties of plastics, including whiteness and opacity. TiO2 is used to provide opacity to items, such as containers and packaging materials; and vinyl products, such as windows, door profiles and siding. TiO2 also generally provides hiding power, neutral undertone, brightness and surface durability for housewares, appliances, toys, computer cases and food packages. TiO2’s high brightness along with its opacity, is used in some engineering plastics to help mask their undesirable natural color. TiO2 is also used in masterbatch, which is a concentrate of TiO2 and other additives and is one of the major uses for TiO2 in the plastics end-use market. In masterbatch, the TiO2 is dispersed at high concentrations into a plastic resin and is then used by manufacturers of plastic containers, bottles, packaging, and agricultural films. TiO2 for Paper: Kronos’ TiO2 is used in the production of several types of paper, including laminate (decorative) paper, filled paper and coated paper to provide whiteness, brightness, opacity, and color stability. Although Kronos sells its TiO2 to all segments of the paper end-use market, its primary focus is on the TiO2 grades used in paper laminates, where several layers of paper are laminated together using melamine resin under high temperature and pressure. TiO2 for Other Applications: Kronos produces TiO2 to improve the opacity and hiding power of printing inks. TiO2 allows inks to achieve very high print quality while not interfering with the technical requirements of printing machinery, including low abrasion, high printing speed and high temperatures. Kronos’ TiO2 is also used in textile applications where TiO2 functions as an opacifying and delustering agent. In man-made fibers, such as rayon and polyester, TiO2 corrects an otherwise undesirable glossy and translucent appearance. Without the presence of TiO2, these materials would be unsuitable for use in many textile applications. Kronos produces high purity sulfate process anatase TiO2 used to provide opacity, whiteness and brightness in a variety of cosmetic and personal care products, such as skin cream, lipstick, eye shadow and toothpaste. Kronos’ TiO2 is also found in food products, such as candy and confectionaries, and in pet foods where it is used to obtain uniformity of color and appearance. In pharmaceuticals, Kronos’ TiO2 is used commonly as a colorant in tablet and capsule coatings, as well as in liquid medicines to provide uniformity of color and appearance. KRONOS purified anatase grades meet the applicable requirements of the Cosmetics, Toiletries and Fragrances Association; the United States Pharmacopoeia and British Pharmacopoeia; and the United States Food and Drug Administration. Kronos’ TiO2 business is enhanced by the following three complementary businesses: Kronos owns and operates two ilmenite mines in Norway pursuant to a governmental concession with an unlimited term. Ilmenite is a raw material used directly as a feedstock by some sulfate-process TiO2 plants. Kronos supplies ilmenite to its sulfate plants in Europe. Kronos also sells ilmenite ore to third parties, some of whom are its competitors; and Kronos sells an ilmenite-based specialty product to the oil and gas industry. Kronos manufactures and sells iron-based chemicals, which are co-products and processed co-products of sulfate and chloride process TiO2 pigment production. These co-product chemicals are marketed through its Ecochem division and are primarily used as treatment and conditioning agents for industrial effluents and municipal wastewater, as well as in the manufacture of iron pigments, cement and agricultural products. Kronos manufactures and sells titanium oxychloride and titanyl sulfate, which are side-stream specialty products from the production of TiO2. Titanium oxychloride is used in specialty applications in the formulation of pearlescent pigments, production of electroceramic capacitors for cell phones and other electronic devices. Titanyl sulfate products are used in pearlescent pigments, natural gas pipe and other specialty applications. TiO2 Manufacturing Joint Venture Kronos Louisiana, Inc., one of Kronos’ subsidiaries, and Venator Investments LLC (Venator Investments) each own a 50% interest in a manufacturing joint venture, Louisiana Pigment Company, L.P., which owns and operates a chloride-process TiO2 plant located near Lake Charles, Louisiana. Kronos and Venator Investments share production from the plant equally pursuant to separate offtake agreements, unless Kronos and Venator Investments otherwise agree. Suppliers Kronos purchases chloride process grade slag from Rio Tinto Iron and Titanium Limited under a long-term supply contract, which automatically renewed at the end of 2020 and extends through December 31, 2023. Kronos also purchases upgraded slag from Rio Tinto Iron and Titanium Limited under a long-term supply contract that automatically renewed at the end of 2020 and extends through December 31, 2022. Kronos purchases rutile ore primarily from Sierra Rutile Limited under a contract that expires in 2022 and Base Titanium Limited under a contract that expires at the end of 2022. For its Canadian sulfate process plant, Kronos purchases sulfate grade slag primarily from Rio Tinto Fer et Titane Inc. under a supply contract that renews annually, subject to termination upon twelve months written notice. Sales and Marketing Kronos sells a majority of its products through its direct sales force operating in Europe and North America. Kronos also utilizes sales agents and distributors who are authorized to sell its products in specific geographic areas. In Europe, Kronos’ sales efforts are conducted primarily through its direct sales force and its sales agents. Kronos’ agents do not sell any TiO2 products other than KRONOS brand products. In North America, its sales are made primarily through its direct sales force and supported by a network of distributors. In export markets, its sales are made through its direct sales force, sales agents, and distributors. In addition to its direct sales force and sales agents, many of Kronos’ sales agents also act as distributors to service its customers in all regions. Kronos offers customer and technical service to customers who purchase its products through distributors, as well as to its larger customers serviced by its direct sales force. Customers Kronos had sales to a diverse customer base with only one customer represented 10% or more of the company’s Chemicals segment’s net sales in 2020 (Behr Process Corporation – 10%). Research and Development Kronos’ expenditures for the research and development activities were approximately $16 million in 2020. Patents, Trademarks, Trade Secrets and Other Intellectual Property Rights Patents: Kronos has obtained patents and has numerous patent applications pending that cover its products and the technology used in the manufacture of its products. In addition to maintaining its patent portfolio, Kronos seeks patent protection for its technical developments, principally in the United States, Canada, and Europe. Kronos’ U.S. patent portfolio includes patents having remaining terms ranging from three years to 20 years. Trademarks and Trade Secrets: Kronos’ trademarks, including KRONOS, are covered by issued and/or pending registrations, including in Canada and the United States. Regulatory and Environmental Matters Kronos’ U.S. manufacturing operations are governed by federal, state and local environmental and worker health and safety laws and regulations. These include the Resource Conservation and Recovery Act, the Occupational Safety and Health Act, the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, the Toxic Substances Control Act and the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act, as well as the state counterparts of these statutes. Competition Kronos’ principal competitors are The Chemours Company, Tronox Incorporated, Lomon Billions and Venator Materials PLC. Component Products segment This segment operates in the component products industry through the company’s majority control of CompX. CompX is a major manufacturer of security products used in the recreational transportation, postal, office and institutional furniture, cabinetry, tool storage, healthcare, and a variety of other industries. CompX also manufactures stainless steel exhaust systems, gauges, throttle controls, wake enhancement systems, trim tabs and related hardware and accessories for the recreational marine industry. Products Security Products: CompX’s security products reporting unit manufactures mechanical and electrical cabinet locks and other locking mechanisms used in a variety of applications, including ignition systems, mailboxes, file cabinets, desk drawers, tool storage cabinets, high security medical cabinetry, integrated inventory and access control secured narcotics boxes, electronic circuit panels, storage compartments, gas station security, and vending and cash containment machines. CompX manufactures and sells cabinet locks and other locking mechanisms. These products include disc tumbler locks, which provide moderate security; pin tumbler locking mechanisms, including KeSet and System 64 (which each allow the user to change the keying on a single lock 64 times without removing the lock from its enclosure), TuBar and Turbine; and CompX innovative CompX eLock and StealthLock electronic locks, which provide stand-alone or networked security and audit trail capability for drug storage and other valuables through the use of a proximity card, magnetic stripe, radio frequency or other keypad credential. A substantial portion of Security Products’ sales consist of products with specialized adaptations to an individual customer’s specifications. CompX also has a standardized product line suitable for many customers, which is offered through a North American distribution network to locksmith and smaller original equipment manufacturer distributors via its STOCK LOCKS distribution program. Marine Components: CompX’s marine components reporting unit manufactures and distributes stainless steel exhaust components, gauges, throttle controls, wake enhancement systems, trim tabs and related hardware and accessories primarily for performance and ski/wakeboard boats. CompX’s marine components reporting unit has a facility in Neenah, Wisconsin and a facility in Grayslake, Illinois, which is shared with its security products reporting unit. CompX’s specialty marine component products are high precision components designed to operate within tight tolerances in the highly demanding marine environment. These products include original equipment and aftermarket stainless steel exhaust headers, exhaust pipes, mufflers and other exhaust components; high performance gauges, such as GPS speedometers and tachometers; mechanical and electronic controls and throttles; wake enhancement devices, trim tabs, steering wheels, and billet aluminum accessories; dash panels, LED indicators, and wire harnesses; and grab handles, pin cleats and other accessories. Patents and Trademarks CompX holds a number of patents relating to its component products. Patents generally have a term of 20 years, and CompX’s patents had remaining terms ranging from less than 1 year to 19 years as of December 31, 2020. CompX’s major trademarks and brand names in addition to CompX include: Security Products: Includes CompX Security Products, National Cabinet Lock, Fort Lock, Timberline Lock, Chicago Lock, STOCK LOCKS, KeSet, TuBar, StealthLock, ACE, ACE II, CompX eLock, Lockview, System 64, SlamCAM, RegulatoR, CompXpress, GEM, Turbine, NARC iD, NARC, and ecoForce. Marine Components: Includes CompX Marine, Custom Marine, Livorsi Marine, Livorsi II Marine, CMI Industrial, Custom Marine Stainless Exhaust, The #1 Choice in Performance Boating, Mega Rim, Race Rim, Vantage View, and GEN-X. Sales, Marketing and Distribution A majority of this segment’s sales are direct to large OEM customers through its factory-based sales and marketing professionals supported by engineers working in concert with field salespeople and independent manufacturer’s representatives. In addition to sales to large OEM customers, a substantial portion of CompX’s security products sales are made through distributors. CompX has a significant North American market share of cabinet lock security products sales as a result of the locksmith distribution channel. CompX supports its locksmith distributor sales with a line of standardized products used by the major segments of the marketplace. These products are packaged and merchandised for easy availability and handling by distributors and end users. The company had sales to a diverse customer base with only one customer represented 10% or more of the company’s Component Products segment’s sales in 2020 (the United States Postal Service representing 17%). Real Estate Management and Development segment This segment consists of BMI and LandWell. BMI provides utility services, among other things, to an industrial park located in Henderson, Nevada and is responsible for the delivery of water to the city of Henderson and various other users through a water distribution system owned by BMI. LandWell is actively engaged in efforts to develop certain real estate in Henderson, Nevada, including approximately 2,100 acres zoned for residential/planned community purposes and approximately 400 acres zoned for commercial and light industrial use. Operations and Services LandWell and BMI focus on developing and selling the land transferred to LandWell as part of its formation, as well as additional land holdings acquired by LandWell in the surrounding area subsequent to LandWell’s formation. LandWell focuses primarily on the development of a large tract of land in Henderson zoned for residential/planned community purposes (approximately 2,100 acres). LandWell markets and sells its residential/planned community to established home builders in tracts of land that are pre-zoned for a maximum number of home lots. LandWell supports the builders’ efforts to market and sell specific residential homes within its residential/planned community through joint marketing campaign and community wide education efforts. In addition, BMI delivers utility services to an industrial park located in Henderson, Nevada; and also delivers water to the city of Henderson and various other users through a water delivery system owned by BMI. Sales As of December 31, 2020, LandWell had closed or entered into escrow on approximately 1,000 acres of the residential/planned community and approximately 70 acres zoned for commercial and light industrial use. Customers During 2020, the company had sales to one customer that exceeded 10% of this segment’s net sales (D.R. Horton – 58%) related to land sales. Other NL: As of December 31, 2020, NL owned approximately 86% of CompX and approximately 30% of Kronos. NL also owns 100% of EWI RE, Inc. (EWI), an inactive subsidiary that was formerly an insurance brokerage and risk management services company. In 2019, NL sold the insurance and risk management business of EWI. NL also holds certain marketable securities and other investments. Tremont LLC (Tremont): Tremont is primarily a holding company through which the company holds its 63% ownership interest in BMI and its 77% ownership interest in LandWell. Such 77% ownership interest in LandWell includes 27% the company holds through its ownership of Tremont and 50% held by a subsidiary of BMI. Tremont also owns 100% of Tall Pines Insurance Company, an insurance company that also holds certain marketable securities and other investments. Tremont also owns certain real property in Henderson, Nevada.