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 March 31, 2021 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 (IRS Employer Identification No.) 5430 LBJ Freeway, Suite 1700 Dallas, Texas 75240-2620 (Address of principal executive offices) Regist ...

Part I [Business Overview](index=4&type=section&id=ITEM%201.%20BUSINESS) Kronos Worldwide is a leading global producer and marketer of titanium dioxide (TiO2) pigments for various industries - Kronos is a leading global producer and marketer of value-added titanium dioxide pigments (TiO2), selling to approximately **4,000 customers in 100 countries**[11](index=11&type=chunk) - At December 31, 2020, approximately **50% of the company's common stock was owned by Valhi, Inc.**, and **30% by a subsidiary of NL Industries, Inc.**, indicating a concentrated ownership structure[15](index=15&type=chunk) 2020 Sales Volume Breakdown | By Geographic Region | Percentage | By End-Use | Percentage | | :--- | :--- | :--- | :--- | | Europe | 46% | Coatings | 58% | | North America | 36% | Plastics | 30% | | Asia Pacific | 11% | Paper | 6% | | Rest of World | 7% | Other | 6% | Market Share in Key Regions | Region | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | Europe | 13% | 18% | 17% | | North America | 17% | 19% | 18% | - The company's business is enhanced by three complementary businesses which comprised approximately **7% of net sales in 2020**: operating ilmenite mines, manufacturing iron-based chemicals, and producing titanium specialty chemicals[27](index=27&type=chunk) TiO2 Production Volumes and Capacity Utilization | Year | Production (Metric Tons) | Capacity Utilization | | :--- | :--- | :--- | | 2018 | 536,000 | 95% | | 2019 | 546,000 | 98% | | 2020 | 517,000 | 92% | - As of December 31, 2020, the company employed **2,242 people**, with approximately **86% of the worldwide workforce** organized under collective bargaining agreements[60](index=60&type=chunk)[62](index=62&type=chunk) - On February 18, 2020, the European Union published a regulation classifying TiO2 powder as a **suspected carcinogen via inhalation**, requiring new hazard labels on certain products[73](index=73&type=chunk) [Risk Factors](index=14&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces operational, financial, legal, and general risks, including industry cyclicality, competition, leverage, and regulatory changes - **Operational Risks**: Profitability is highly dependent on the cyclical TiO2 industry, where the top five producers account for about **52% of global capacity**, and faces risks from raw material costs and availability[79](index=79&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - **Financial Risks**: As of December 31, 2020, total consolidated debt was approximately **$487 million**, and the company is exposed to currency exchange rate risks with **46% of 2020 sales volumes** in European markets[87](index=87&type=chunk)[91](index=91&type=chunk) - **Legal and Regulatory Risks**: The company is exposed to potential litigation and increased compliance costs from new regulations, such as the EU's classification of TiO2 powder as a suspected carcinogen[92](index=92&type=chunk)[93](index=93&type=chunk)[97](index=97&type=chunk) - **COVID-19 Impact**: The pandemic significantly impacted 2020 operations, primarily through **reduced demand**, with the future extent of the impact remaining uncertain[85](index=85&type=chunk) Part II [Market for Common Equity and Related Stockholder Matters](index=19&type=section&id=ITEM%205.%20MARKET%20FOR%20COMMON%20EQUITY%20AND%20RELATED%20STOCKHOLDER%20MATTERS) The company's common stock (NYSE: KRO) has an active repurchase program, and its five-year total return has underperformed its peer group - The company's common stock is listed on the NYSE under the symbol **KRO**[106](index=106&type=chunk) - In 2020, the company repurchased **122,489 shares** of its common stock, with **1,563,519 shares** remaining available for repurchase under the authorized program[107](index=107&type=chunk) Cumulative Total Stockholder Return (2015-2020) | Year | Kronos Common Stock | S&P 500 Composite Stock Index | Peer Group | | :--- | :--- | :--- | :--- | | 2015 | $100 | $100 | $100 | | 2016 | $230 | $112 | $374 | | 2017 | $512 | $136 | $828 | | 2018 | $238 | $130 | $395 | | 2019 | $292 | $171 | $323 | | 2020 | $346 | $203 | $441 | [Selected Financial Data](index=20&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) The five-year financial summary from 2016 to 2020 shows significant fluctuations in performance, with peak net income in 2017 followed by a decline Selected Financial Data (2016-2020) | Metric | 2016 | 2017 | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | :--- | :--- | | **Net sales ($M)** | 1,364.3 | 1,729.0 | 1,661.9 | 1,731.1 | 1,638.8 | | **Income from operations ($M)** | 92.9 | 347.8 | 330.1 | 145.8 | 116.2 | | **Net income ($M)** | 43.3 | 354.5 | 205.0 | 87.1 | 63.9 | | **Net income per share ($)** | 0.37 | 3.06 | 1.77 | 0.75 | 0.55 | | **Total assets ($M)** | 1,179.6 | 1,824.4 | 1,898.1 | 1,965.8 | 2,036.7 | | **Long-term debt ($M)** | 339.0 | 474.5 | 456.6 | 445.5 | 487.4 | | **Operating cash flow ($M)** | 89.6 | 276.1 | 188.5 | 160.3 | 102.5 | | **Sales volumes (k metric tons)** | 559 | 586 | 491 | 566 | 531 | | **Production volumes (k metric tons)** | 546 | 576 | 536 | 546 | 517 | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=21&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management analyzes financial performance, attributing the 2020 income decline to pandemic impacts while confirming sufficient liquidity and outlining critical accounting policies [Results of Operations](index=21&type=section&id=Results%20of%20Operations) The company's 2020 net income declined due to lower sales volumes and prices from the COVID-19 pandemic, though a recovery is expected in 2021 Comparison of Results of Operations (2020 vs. 2019) | Metric | 2019 ($M) | 2020 ($M) | % Change | | :--- | :--- | :--- | :--- | | Net sales | 1,731.1 | 1,638.8 | (5)% | | Gross margin | 386.2 | 351.2 | (9)% | | Income from operations | 145.8 | 116.2 | (20)% | | TiO2 Sales volumes (k tons) | 566 | 531 | (6)% | - The **5% decrease in 2020 net sales** was primarily due to a **6% decrease in sales volumes** and a **2% decrease in average TiO2 selling prices**[124](index=124&type=chunk) Comparison of Results of Operations (2019 vs. 2018) | Metric | 2018 ($M) | 2019 ($M) | % Change | | :--- | :--- | :--- | :--- | | Net sales | 1,661.9 | 1,731.1 | 4% | | Gross margin | 562.2 | 386.2 | (31)% | | Income from operations | 330.1 | 145.8 | (56)% | | TiO2 Sales volumes (k tons) | 491 | 566 | 15% | - The **4% increase in 2019 net sales** was driven by a **15% increase in sales volumes**, which was partially offset by a **6% decrease in average TiO2 selling prices**[137](index=137&type=chunk) - **Outlook for 2021**: Management expects sales and income from operations to be **higher than in 2020**, driven by anticipated higher average TiO2 selling prices and sales volumes[157](index=157&type=chunk) [Critical Accounting Policies and Estimates](index=28&type=section&id=Critical%20accounting%20policies%20and%20estimates) Key accounting judgments involve impairment of long-lived assets, pension plan assumptions, and the realizability of deferred tax assets - The most critical accounting policies involve significant judgment regarding **long-lived assets, defined benefit pension plans, and income taxes**[164](index=164&type=chunk) Pension Plan Discount Rate Assumptions (for Obligations) | Region | at Dec 31, 2018 | at Dec 31, 2019 | at Dec 31, 2020 | | :--- | :--- | :--- | :--- | | Germany | 1.8% | 1.0% | 0.7% | | Canada | 3.5% | 3.0% | 2.4% | | Norway | 2.5% | 2.3% | 1.7% | | U.S. | 4.1% | 3.1% | 2.2% | - The company has substantial net operating loss carryforwards in Germany (**$531 million**) and Belgium (**$20 million**) as of December 31, 2020[179](index=179&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintains sufficient liquidity through cash from operations and credit facilities despite a decrease in operating cash flow in 2020 Consolidated Cash Flow Summary | Cash Flow Activity ($M) | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | Operating activities | 188.5 | 160.3 | 102.5 | | Investing activities | (42.7) | (52.5) | (61.3) | | Financing activities | (80.4) | (87.9) | (85.3) | - At December 31, 2020, the company had consolidated debt of **$487.4 million**, primarily comprising **€400 million of 3.75% Senior Secured Notes due 2025**[188](index=188&type=chunk)[190](index=190&type=chunk) - At December 31, 2020, the company had **$107.6 million** available under its North American revolving credit facility and the full **€90 million** ($110.3 million) available under its European facility[192](index=192&type=chunk) - The company intends to spend approximately **$85 million on capital expenditures in 2021**, including **$23 million for environmental programs**[201](index=201&type=chunk) Contractual Commitments as of December 31, 2020 | Contractual Commitment ($M) | 2021 | 2022/2023 | 2024/2025 | 2026 and after | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Indebtedness (Principal & Interest) | 19.1 | 37.8 | 521.9 | - | 578.8 | | Operating leases | 7.4 | 6.8 | 3.1 | 20.1 | 37.4 | | Long-term supply contracts (TiO2 feedstock) | 483.5 | 690.1 | - | - | 1,173.6 | | Other supply contracts & obligations | 79.8 | 53.8 | 46.0 | 3.3 | 182.9 | | **Total** | **$590.8** | **$788.5** | **$571.0** | **$23.4** | **$1,973.7** | [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risks stem from currency exchange rates, interest rates, and raw material prices, with significant exposure from non-U.S. operations - The company's primary market risks are from changes in **currency exchange rates, interest rates, and raw material prices**[210](index=210&type=chunk) - The majority of the company's debt is **fixed-rate**, which minimizes earnings volatility from interest rate changes, but the euro-denominated Senior Secured Notes expose the company to currency exchange rate risk[211](index=211&type=chunk)[216](index=216&type=chunk) - A hypothetical **10% adverse change in the euro exchange rate** at December 31, 2020, would increase the U.S. dollar equivalent of the Senior Secured Notes by approximately **$49 million**[216](index=216&type=chunk) Financial Statements and Supplementary Data [Consolidated Financial Statements](index=49&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show a decrease in 2020 net income and operating cash flow, alongside an increase in total assets and long-term debt Consolidated Balance Sheet Highlights (in millions) | Account | Dec 31, 2019 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $390.8 | $355.3 | | Total current assets | $1,219.7 | $1,218.3 | | Net property and equipment | $490.6 | $524.6 | | **Total assets** | **$1,965.8** | **$2,036.7** | | Total current liabilities | $270.6 | $260.2 | | Long-term debt | $444.0 | $486.7 | | **Total liabilities** | **$1,149.7** | **$1,240.2** | | **Total stockholders' equity** | **$816.1** | **$796.5** | Consolidated Statement of Income Highlights (in millions) | Account | 2018 | 2019 | 2020 | | :--- | :--- | :--- | :--- | | Net sales | $1,661.9 | $1,731.1 | $1,638.8 | | Gross margin | $562.2 | $386.2 | $351.2 | | Income from operations | $330.1 | $145.8 | $116.2 | | **Net income** | **$205.0** | **$87.1** | **$63.9** | | **Net income per share** | **$1.77** | **$0.75** | **$0.55** | [Notes to Consolidated Financial Statements](index=56&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail key accounting policies, debt instruments, pension plans, income taxes, and significant related party transactions - The company accounts for its **50% interest** in the Louisiana Pigment Company, L.P. (LPC) joint venture using the equity method[328](index=328&type=chunk)[329](index=329&type=chunk) - Long-term debt primarily consists of **€400 million in 3.75% Senior Secured Notes** issued by subsidiary KII, due in 2025[340](index=340&type=chunk) - At year-end 2020, the non-U.S. pension plans had a total underfunded status of **$364.9 million**, while the U.S. plan had an underfunded status of **$3.3 million**[353](index=353&type=chunk)[361](index=361&type=chunk) - The company has significant net operating loss (NOL) carryforwards in Germany (**$531 million**) and Belgium (**$20 million**) with indefinite carryforward periods[381](index=381&type=chunk) - **Significant related party transactions** exist with parent and affiliated companies, including intercorporate service agreements, shared insurance programs, and tax sharing agreements[397](index=397&type=chunk)[400](index=400&type=chunk)[405](index=405&type=chunk) - The company has long-term supply contracts with minimum purchase commitments for TiO2 feedstock aggregating approximately **$1.2 billion** subsequent to December 31, 2020[414](index=414&type=chunk)

[Part I. FINANCIAL INFORMATION](index=3&type=section&id=Part%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Kronos Worldwide, Inc.'s unaudited condensed consolidated financial statements for Q3 and nine months ended September 30, 2020, reflecting the COVID-19 pandemic's impact [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2020, total assets decreased slightly to **$1.947 billion**, primarily due to reduced cash, while total liabilities increased and equity decreased Condensed Consolidated Balance Sheet Highlights (in millions) | Balance Sheet Item | Dec 31, 2019 | Sep 30, 2020 (unaudited) | | :--- | :--- | :--- | | **Total Current Assets** | $1,219.7 | $1,188.7 | | **Total Assets** | $1,965.8 | $1,946.9 | | **Total Current Liabilities** | $270.6 | $235.5 | | **Total Liabilities** | $1,149.7 | $1,145.2 | | **Total Stockholders' Equity** | $816.1 | $801.7 | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Net income significantly decreased in Q3 2020 to **$8.1 million** and for the nine months to **$53.7 million**, driven by lower net sales and gross margin Income Statement Summary (in millions, except per share data) | Metric | Q3 2019 | Q3 2020 | Nine Months 2019 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $437.4 | $416.9 | $1,358.4 | $1,223.9 | | Gross Margin | $87.7 | $80.6 | $306.5 | $264.5 | | Income from Operations | $33.1 | $19.3 | $128.6 | $95.8 | | Net Income | $17.9 | $8.1 | $77.7 | $53.7 | | Net Income per Share | $0.16 | $0.07 | $0.67 | $0.46 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities sharply decreased to **$56.1 million** for the first nine months of 2020, primarily due to lower net income and working capital changes Cash Flow Summary (Nine months ended Sep 30, in millions) | Cash Flow Activity | 2019 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $123.8 | $56.1 | | Net cash used in investing activities | $(39.2) | $(36.8) | | Net cash used in financing activities | $(66.1) | $(63.6) | | **Net change in cash** | $18.5 | $(44.3) | - The financial statements have been prepared on the same basis as the audited statements in the 2019 Annual Report on Form 10-K, with all necessary normal recurring adjustments made for fair presentation[25](index=25&type=chunk) - Operating results for the first nine months of 2020 were significantly impacted by the **COVID-19 pandemic**, primarily through reduced product demand due to the global economic contraction[26](index=26&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's performance, attributing lower net income in Q3 and the first nine months of 2020 to reduced sales volumes and lower TiO2 selling prices due to the COVID-19 pandemic [Results of Operations](index=17&type=section&id=Results%20of%20Operations) Net sales decreased **5%** in Q3 and **10%** year-to-date 2020, driven by lower sales volumes and average TiO2 selling prices, leading to reduced production capacity utilization Q3 2020 vs Q3 2019 Performance | Metric | Q3 2019 | Q3 2020 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $437.4M | $416.9M | (5)% | | Income from Operations | $33.1M | $19.3M | (42)% | | Sales Volumes (k metric tons) | 144 | 136 | (6)% | | Production Volumes (k metric tons) | 136 | 122 | (11)% | Nine Months 2020 vs 2019 Performance | Metric | Nine Months 2019 | Nine Months 2020 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,358.4M | $1,223.9M | (10)% | | Income from Operations | $128.6M | $95.8M | (26)% | | Sales Volumes (k metric tons) | 445 | 396 | (11)% | | Production Volumes (k metric tons) | 406 | 387 | (5)% | - The decrease in Q3 2020 net sales was primarily due to a **6% decrease in sales volumes** and a **4% decrease in average TiO2 selling prices**[67](index=67&type=chunk) - Production capacity utilization rates decreased significantly in the third quarter of 2020 to **86%**, compared to **97%** in the same period of 2019, as the company aligned production with lower demand[63](index=63&type=chunk)[64](index=64&type=chunk) [Effects of Currency Exchange Rates](index=22&type=section&id=Effects%20of%20Currency%20Exchange%20Rates) Currency fluctuations had a mixed impact, increasing Q3 2020 net sales by **$7 million** but decreasing income from operations by **$5 million**, with varied effects year-to-date Impact of Currency Exchange Rates (in millions) | Period | Impact on Net Sales | Impact on Income from Operations | | :--- | :--- | :--- | | Q3 2020 vs Q3 2019 | +$7 | -$5 | | 9M 2020 vs 9M 2019 | -$4 | +$6 | [Outlook](index=23&type=section&id=Outlook) The company anticipates continued negative impact from COVID-19 on sales and earnings for the remainder of 2020, while managing hurricane-related disruptions at its LPC joint venture - The company expects sales volumes and earnings for the rest of 2020 to remain lower than 2019 due to the ongoing impact of COVID-19 on the global economy[94](index=94&type=chunk) - The company believes it has sufficient liquidity, with **$348 million in cash** and **$231 million in available credit**, to navigate the uncertainty and is prepared to implement cash-saving strategies if needed[95](index=95&type=chunk) - The Louisiana Pigment Company (LPC) facility, a 50%-owned joint venture, experienced temporary production halts due to Hurricanes Laura and Delta, with most losses expected to be covered by insurance[96](index=96&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) Cash from operations decreased to **$56.1 million** for the first nine months of 2020, but the company maintains sufficient liquidity with **$353.9 million** in cash and **$231 million** in available credit - Cash from operating activities decreased by **$67.7 million** in the first nine months of 2020 compared to 2019, primarily due to lower income from operations and higher cash used for working capital[98](index=98&type=chunk) - Capital expenditures for the first nine months of 2020 were **$38.3 million**, with projected total 2020 capital expenditures of approximately **$60 million**[101](index=101&type=chunk)[112](index=112&type=chunk) - At September 30, 2020, total available liquidity included **$353.9 million in cash** and approximately **$231 million in borrowing capacity** under its North American and European credit facilities[111](index=111&type=chunk) - During the first nine months of 2020, the company paid **$62.4 million in dividends** and repurchased **$1.0 million of its common stock**[103](index=103&type=chunk)[104](index=104&type=chunk) - The company identifies TiO2 selling prices, sales and production volumes, manufacturing costs (especially feedstock and energy), and currency exchange rates as the key factors impacting operating results[56](index=56&type=chunk)[58](index=58&type=chunk) - Net income for Q3 2020 was **$8.1 million**, down from **$17.9 million** in Q3 2019, and for the first nine months of 2020, it was **$53.7 million**, compared to **$77.7 million** in the prior-year period, attributed to lower sales volumes and prices due to the COVID-19 pandemic[57](index=57&type=chunk) [Quantitative and Qualitative Disclosure About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) No material changes in market risk exposure, including currency, interest rates, equity, and raw material prices, have occurred since the 2019 Annual Report filing - There have been no material changes in market risks (currency, interest rates, equity, raw materials) since the 2019 Annual Report[118](index=118&type=chunk) [Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2020[119](index=119&type=chunk) - No changes to internal control over financial reporting occurred during the third quarter of 2020 that have materially affected, or are reasonably likely to materially affect, the company's internal controls[123](index=123&type=chunk) [Part II. OTHER INFORMATION](index=29&type=section&id=Part%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 13 of the financial statements and the 2019 Annual Report for details on legal proceedings - For information on legal proceedings, the report refers to Note 13 of the financial statements and the 2019 Annual Report[126](index=126&type=chunk) [Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors have occurred during the nine months ended September 30, 2020, since the 2019 Annual Report - There have been no material changes to the company's risk factors during the first nine months of 2020[127](index=127&type=chunk) [Exhibits](index=29&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - The exhibits filed with the report include officer certifications and Inline XBRL data files[128](index=128&type=chunk)

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 Commission file number 1-31763 KRONOS WORLDWIDE, INC. (Exact name of registrant as specified in its charter) For the quarterly period ended June 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 DELAWARE 76-0294959 (State or other jurisdiction of incorp ...

[Part I. FINANCIAL INFORMATION](index=3&type=section&id=Part%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Kronos Worldwide reported decreased Q1 2020 net income and total assets, a shift to negative operating cash flow, and anticipates future COVID-19 impacts [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and liabilities decreased, leading to a decline in total stockholders' equity from year-end 2019 to Q1 2020 Condensed Consolidated Balance Sheet Highlights (In millions) | Account | Dec 31, 2019 | Mar 31, 2020 (unaudited) | | :--- | :--- | :--- | | **Total Current Assets** | $1,219.7 | $1,163.4 | | **Total Assets** | **$1,965.8** | **$1,874.8** | | **Total Current Liabilities** | $270.6 | $231.2 | | **Total Liabilities** | $1,149.7 | $1,092.5 | | **Total Stockholders' Equity** | $816.1 | $782.3 | | **Total Liabilities and Stockholders' Equity** | **$1,965.8** | **$1,874.8** | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Net income decreased in Q1 2020 due to lower net sales and gross margin, despite a positive currency transaction gain Condensed Consolidated Statements of Income (In millions, except per share data) | Metric | Q1 2019 | Q1 2020 | | :--- | :--- | :--- | | Net sales | $436.5 | $421.0 | | Gross margin | $109.3 | $88.1 | | Income from operations | $49.0 | $43.5 | | **Net income** | **$30.3** | **$27.0** | | Net income per share | $0.26 | $0.23 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) The company reported a comprehensive loss in Q1 2020, a significant reversal from prior year's income, primarily driven by a net loss from currency translation Comprehensive Income (Loss) (In millions) | Metric | Q1 2019 | Q1 2020 | | :--- | :--- | :--- | | Net income | $30.3 | $27.0 | | Other comprehensive income (loss), net | $2.1 | $(39.0) | | **Comprehensive income (loss)** | **$32.4** | **$(12.0)** | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity decreased in Q1 2020 due to a comprehensive loss and dividend payments, partially offset by net income - Dividends of **$0.18 per share** were paid in Q1 2020, totaling **$20.8 million**[18](index=18&type=chunk) - The company acquired **$1.0 million** of its common stock as treasury stock during Q1 2020[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow shifted to a net use in Q1 2020 due to working capital changes, while investing and financing cash flows remained relatively stable Net Cash Flow Summary (In millions) | Activity | Q1 2019 | Q1 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $7.0 | $(9.8) | | Net cash used in investing activities | $(17.5) | $(13.8) | | Net cash used in financing activities | $(21.0) | $(21.9) | | **Net change in Cash** | **$(31.5)** | **$(45.5)** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail ownership, presentation, and disaggregated net sales, noting the adoption of ASU 2019-12 and the expected negative impact of the COVID-19 pandemic - At March 31, 2020, **Valhi, Inc. held approximately 50%** and an **NL Industries, Inc. subsidiary held 30%** of the company's outstanding common stock[25](index=25&type=chunk) Net Sales by Point of Destination (In millions) | Region | Q1 2019 | Q1 2020 | | :--- | :--- | :--- | | Europe | $215.2 | $214.5 | | North America | $146.8 | $132.3 | | Other | $74.5 | $74.2 | | **Total** | **$436.5** | **$421.0** | - The CARES Act provided a **$0.5 million cash tax benefit** in Q1 2020 from the reversal of a valuation allowance on disallowed interest expense[47](index=47&type=chunk) - The **COVID-19 pandemic** is expected to result in **lower sales and earnings** for the remainder of 2020, with the full extent of impact uncertain[56](index=56&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q1 2020 net income decline to lower sales volumes and higher costs, anticipates negative COVID-19 impacts, but maintains strong liquidity [Results of Operations](index=17&type=section&id=Results%20of%20Operations) Income from operations decreased in Q1 2020 due to lower TiO2 sales volumes and gross margin, partially offset by favorable currency exchange rates TiO2 Operating Statistics (Thousands of metric tons) | Metric | Q1 2019 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | Sales volumes | 143 | 136 | (5)% | | Production volumes | 134 | 132 | (1)% | - Net sales decreased by **4% ($15.5 million)**, primarily due to a **5% decrease in sales volumes**, with comparable average TiO2 selling prices year-over-year[69](index=69&type=chunk) - Currency exchange rate changes decreased net sales by approximately **$7 million** but increased income from operations by approximately **$11 million** in Q1 2020[71](index=71&type=chunk)[74](index=74&type=chunk)[79](index=79&type=chunk) [Outlook](index=21&type=section&id=Outlook) Management anticipates lower sales and earnings for the remainder of 2020 due to COVID-19, despite essential operations, with the full impact remaining uncertain - The company's manufacturing facilities are designated as essential businesses and remain open, operating at near planned capacities[82](index=82&type=chunk) - Due to COVID-19's global economic impact, the company expects **lower sales and earnings** than originally planned for 2020[84](index=84&type=chunk) - The company maintains sufficient liquidity with over **$341 million in cash** and over **$200 million in available credit**, prepared for cash-saving strategies if needed[81](index=81&type=chunk)[86](index=86&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with substantial cash and credit, despite negative operating cash flow in Q1 2020, and plans approximately $60 million in capital expenditures - Cash used in operating activities was **$9.8 million** in Q1 2020, a **$16.8 million decrease** from cash provided of $7.0 million in Q1 2019[88](index=88&type=chunk) Key Working Capital Metrics | Metric | Dec 31, 2019 | Mar 31, 2020 | | :--- | :--- | :--- | | DSO (Days Sales Outstanding) | 71 days | 69 days | | DSI (Days Sales in Inventory) | 83 days | 66 days | - At March 31, 2020, the company had **$342.9 million in cash** and access to approximately **$216.2 million in available credit**[98](index=98&type=chunk) - The company plans to invest approximately **$60 million** in capital expenditures during 2020[99](index=99&type=chunk) [Quantitative and Qualitative Disclosure About Market Risk](index=24&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) No material changes in the company's exposure to market risks, including currency, interest rates, equity, and commodity prices, have occurred since the 2019 Annual Report - There have been **no material changes** to the company's market risk exposures, including currency, interest rates, and commodity prices, since the 2019 Annual Report[105](index=105&type=chunk) [Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal control over financial reporting during Q1 - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of March 31, 2020[106](index=106&type=chunk) - No material changes to internal control over financial reporting occurred during Q1 2020[109](index=109&type=chunk) [Part II. OTHER INFORMATION](index=26&type=section&id=Part%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company has not accrued for litigation matters, believing a material loss is not reasonably possible, as detailed in Note 13 and the 2019 Annual Report - The company has **not accrued amounts for litigation matters**, as a material loss is not reasonably possible[52](index=52&type=chunk)[112](index=112&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors have occurred during the first quarter of 2020 since the 2019 Annual Report - There have been **no material changes** to the company's risk factors during the first quarter of 2020[113](index=113&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 122,489 shares of common stock for approximately $1.0 million in Q1 2020, with 1,563,519 shares remaining available for repurchase Common Stock Purchases - Q1 2020 | Period | Total Shares Purchased | Average Price Paid | Shares Remaining for Repurchase | | :--- | :--- | :--- | :--- | | March 2020 | 122,489 | $8.00 | 1,563,519 | [Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL interactive data files - Filed exhibits include **CEO and CFO certifications** under Sarbanes-Oxley and **XBRL data files**[116](index=116&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 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 incorporat ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 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) Was ...

[Part I. FINANCIAL INFORMATION](index=3&type=section&id=Part%20I.%20Item%201.%20FINANCIAL%20INFORMATION%20Financial%20Statements) [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets and stockholders' equity slightly increased, while liabilities also rose, driven by higher receivables and new lease accounting standards | Metric | Dec 31, 2018 (Millions) | Jun 30, 2019 (Unaudited, Millions) | Change (Millions) | % Change | | :-------------------------- | :---------------------- | :--------------------------------- | :---------------- | :------- | | Total Assets | $1,898.1 | $1,958.6 | $60.5 | 3.19% | | Total Liabilities | $1,058.3 | $1,090.6 | $32.3 | 3.05% | | Total Stockholders' Equity | $839.8 | $868.0 | $28.2 | 3.36% | | Cash and cash equivalents | $373.3 | $328.6 | $(44.7) | -11.97% | | Accounts and other receivables | $312.5 | $400.6 | $88.1 | 28.19% | | Inventories, net | $497.9 | $488.6 | $(9.3) | -1.87% | | Operating lease right-of-use assets | $- | $32.0 | $32.0 | N/A | | Total current liabilities | $233.4 | $249.1 | $15.7 | 6.73% | | Long-term debt | $455.1 | $452.2 | $(2.9) | -0.64% | | Operating lease liabilities | $- | $24.6 | $24.6 | N/A | - The adoption of ASU 2016-02, Leases (Topic 842), on January 1, 2019, led to the recognition of operating lease right-of-use assets of **$32.0 million** and corresponding operating lease liabilities of **$24.6 million** (noncurrent) and **$6.7 million** (current) on the balance sheet[8](index=8&type=chunk)[10](index=10&type=chunk)[35](index=35&type=chunk) [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Net income and income from operations significantly declined due to lower gross margins from decreased selling prices and higher raw material costs Three Months Ended June 30 (Unaudited) | Metric (Millions) | 2018 | 2019 | Change | % Change | | :---------------- | :------ | :------ | :------ | :------- | | Net sales | $471.8 | $484.5 | $12.7 | 2.69% | | Cost of sales | $300.0 | $375.0 | $75.0 | 25.00% | | Gross margin | $171.8 | $109.5 | $(62.3) | -36.26% | | Income from operations | $119.9 | $46.5 | $(73.4) | -61.22% | | Net income | $77.7 | $29.5 | $(48.2) | -62.03% | | Net income per basic and diluted share | $0.67 | $0.25 | $(0.42) | -62.69% | Six Months Ended June 30 (Unaudited) | Metric (Millions) | 2018 | 2019 | Change | % Change | | :---------------- | :------ | :------ | :------- | :------- | | Net sales | $902.2 | $921.0 | $18.8 | 2.08% | | Cost of sales | $555.6 | $702.2 | $146.6 | 26.39% | | Gross margin | $346.6 | $218.8 | $(127.8)| -36.88% | | Income from operations | $227.4 | $95.5 | $(131.9)| -58.00% | | Net income | $148.4 | $59.8 | $(88.6) | -59.70% | | Net income per basic and diluted share | $1.28 | $0.52 | $(0.76) | -59.38% | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income decreased due to lower net income, despite a positive shift in other comprehensive income from currency translation gains Comprehensive Income (Millions) | Metric | Three months ended June 30, 2018 | Three months ended June 30, 2019 | Six months ended June 30, 2018 | Six months ended June 30, 2019 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $77.7 | $29.5 | $148.4 | $59.8 | | Other comprehensive income (loss), net of tax | $(22.8) | $9.3 | $(9.8) | $11.4 | | Comprehensive income | $54.9 | $38.8 | $138.6 | $71.2 | - Currency translation shifted from a loss of **$(25.2) million** in Q2 2018 to a gain of **$7.1 million** in Q2 2019, and from a loss of **$(14.5) million** in H1 2018 to a gain of **$7.0 million** in H1 2019, positively impacting other comprehensive income[16](index=16&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity increased due to net income and other comprehensive income, partially offset by dividends and treasury stock acquisitions Stockholders' Equity (Millions) | Metric | Dec 31, 2018 | Jun 30, 2019 | | :-------------------------- | :----------- | :----------- | | Total Stockholders' Equity | $839.8 | $868.0 | | Retained deficit | $(136.2) | $(118.1) | | Accumulated other comprehensive loss | $(424.3) | $(412.9) | | Treasury stock | $- | $(1.4) | - The company paid quarterly dividends of **$0.18 per share** in the first six months of 2019, totaling **$41.7 million**, compared to **$0.17 per share** (**$39.4 million**) in the same period of 2018[19](index=19&type=chunk)[119](index=119&type=chunk) - During the second quarter of 2019, the company acquired **110,303 shares** of its common stock for **$1.4 million** under its repurchase program[19](index=19&type=chunk)[64](index=64&type=chunk)[142](index=142&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow significantly decreased due to lower net income and working capital changes, while investing and financing cash outflows rose Cash Flows (Millions) | Metric | Six months ended June 30, 2018 | Six months ended June 30, 2019 | Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :----- | | Net cash provided by operating activities | $169.7 | $26.0 | $(143.7) | | Net cash used in investing activities | $(11.2) | $(27.2) | $(16.0) | | Net cash used in financing activities | $(39.7) | $(43.4) | $(3.7) | | Balance at end of period (Cash, cash equivalents and restricted cash) | $433.2 | $329.5 | $(103.7) | - The **$143.7 million** decrease in cash from operating activities was primarily due to **$131.9 million** lower income from operations, **$4.4 million** contributions to (vs. **$4.8 million** distributions from) the TiO2 manufacturing joint venture, and **$18.0 million** higher cash paid for taxes[116](index=116&type=chunk) - Investing activities included capital expenditures of **$25.5 million** in H1 2019 (vs. **$24.8 million** in H1 2018) and net loans to Valhi of **$1.7 million** in H1 2019 (vs. net collections of **$13.6 million** in H1 2018)[21](index=21&type=chunk)[118](index=118&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail organization, accounting policies, ownership, lease standard adoption, marketable securities, debt, revenue, and income tax reconciliation - Valhi, Inc. held approximately **50%** of Kronos Worldwide's outstanding common stock at June 30, 2019, indicating significant control by related parties[25](index=25&type=chunk) - Effective January 1, 2019, the company adopted ASU 2016-02, Leases (Topic 842), recognizing right-of-use assets and lease liabilities for operating leases on the balance sheet. This resulted in the recognition of **$35.1 million** in right-of-use assets and **$34.5 million** in lease liabilities at adoption[35](index=35&type=chunk)[70](index=70&type=chunk) Net Sales by Point of Origin and Destination (Millions) | Category | Three months ended June 30, 2019 | Six months ended June 30, 2019 | | :-------------------- | :------------------------------- | :----------------------------- | | **Point of Origin:** | | | | Germany | $248.5 | $467.7 | | United States | $289.3 | $534.6 | | Canada | $95.9 | $174.4 | | Belgium | $77.7 | $147.4 | | Norway | $47.7 | $99.2 | | Eliminations | $(274.6) | $(502.3) | | **Total Net Sales** | **$484.5** | **$921.0** | | **Point of Destination:** | | | | Europe | $229.4 | $444.6 | | North America | $161.5 | $308.3 | | Other | $93.6 | $168.1 | | **Total Net Sales** | **$484.5** | **$921.0** | [Note 1 - Organization and basis of presentation](index=10&type=section&id=Note%201%20-%20Organization%20and%20basis%20of%20presentation) Details the company's ownership structure and the basis for preparing the unaudited financial statements - At June 30, 2019, Valhi, Inc. held approximately **50%** of Kronos Worldwide's outstanding common stock, and a wholly-owned subsidiary of NL Industries, Inc. held approximately **30%**. This indicates a complex ownership structure with ultimate control by the Family Trust of Lisa K. Simmons and Serena Simmons Connelly[25](index=25&type=chunk)[26](index=26&type=chunk) - The unaudited Condensed Consolidated Financial Statements are prepared on the same basis as the audited 2018 Annual Report on Form 10-K, with only normal recurring adjustments and certain information/footnote disclosures omitted[27](index=27&type=chunk) [Note 2 - Accounts and other receivables](index=10&type=section&id=Note%202%20-%20Accounts%20and%20other%20receivables) Provides a breakdown of accounts and other receivables, highlighting changes in trade receivables Accounts and Other Receivables (Millions) | Category | Dec 31, 2018 | Jun 30, 2019 | | :-------------------------- | :----------- | :----------- | | Trade receivables | $273.3 | $372.5 | | Recoverable VAT and other receivables | $23.8 | $15.7 | | Receivables from affiliates | $13.0 | $12.2 | | Refundable income taxes | $3.6 | $2.2 | | Allowance for doubtful accounts | $(1.2) | $(2.0) | | **Total** | **$312.5** | **$400.6** | - Trade receivables increased significantly by **$99.2 million** from December 31, 2018, to June 30, 2019, reflecting higher sales volumes[29](index=29&type=chunk)[94](index=94&type=chunk) [Note 3 - Inventories, net](index=11&type=section&id=Note%203%20-%20Inventories%2C%20net) Details the composition of inventories, showing changes in raw materials and finished products Inventories, Net (Millions) | Category | Dec 31, 2018 | Jun 30, 2019 | | :---------------- | :----------- | :----------- | | Raw materials | $93.1 | $137.0 | | Work in process | $23.5 | $27.3 | | Finished products | $316.8 | $256.6 | | Supplies | $64.5 | $67.7 | | **Total** | **$497.9** | **$488.6** | - Raw materials inventory increased by **$43.9 million**, while finished products inventory decreased by **$60.2 million**, contributing to a slight overall decrease in net inventories[30](index=30&type=chunk) [Note 4 - Marketable securities](index=11&type=section&id=Note%204%20-%20Marketable%20securities) Describes marketable securities, primarily related party investments, and their fair value changes - Marketable securities consist of investments in publicly-traded shares of related parties (Valhi, NL, and CompX International Inc.), accounted for as available-for-sale securities at fair value[31](index=31&type=chunk) Marketable Securities Fair Value (Millions) | Marketable security | Dec 31, 2018 (Fair Value) | Jun 30, 2019 (Fair Value) | Unrealized Gain (Jun 30, 2019) | | :------------------ | :------------------------ | :------------------------ | :----------------------------- | | Valhi common stock | $3.3 | $5.1 | $1.9 | | NL and CompX common stocks | $0.1 | $0.1 | $- | | **Total** | **$3.4** | **$5.2** | **$1.9** | - The fair value of Valhi common stock increased from **$3.3 million** to **$5.1 million**, resulting in an unrealized gain of **$1.9 million** at June 30, 2019[32](index=32&type=chunk) [Note 5 - Leases](index=11&type=section&id=Note%205%20-%20Leases) Explains the adoption of new lease accounting standards, lease terms, and maturity of lease liabilities - The company adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019, classifying all leases as operating leases under the new standard. This led to the recognition of right-of-use assets and lease liabilities on the balance sheet[35](index=35&type=chunk) - At June 30, 2019, the weighted average remaining lease term for operating leases was approximately **13 years**, with a weighted average discount rate of approximately **4.5%**[41](index=41&type=chunk) Maturities of Operating Lease Liabilities at June 30, 2019 (Millions) | Years ending December 31, | Amount | | :------------------------ | :----- | | 2019 (remainder of year) | $3.9 | | 2020 | $6.9 | | 2021 | $6.1 | | 2022 | $3.5 | | 2023 | $2.3 | | 2024 and thereafter | $21.5 | | **Total remaining lease payments** | **$44.2** | | Less imputed interest | $12.9 | | **Total lease obligations** | **$31.3** | | Less current obligations | $6.7 | | **Long term lease obligations** | **$24.6** | [Note 6 - Other noncurrent assets](index=13&type=section&id=Note%206%20-%20Other%20noncurrent%20assets) Presents a breakdown of other noncurrent assets, including pension assets and deferred financing costs Other Noncurrent Assets (Millions) | Category | Dec 31, 2018 | Jun 30, 2019 | | :-------------------------- | :----------- | :----------- | | Pension asset | $0.8 | $1.3 | | Deferred financing costs, net | $0.9 | $0.8 | | Other | $1.9 | $1.5 | | **Total** | **$3.6** | **$3.6** | [Note 7 - Long-term debt](index=13&type=section&id=Note%207%20-%20Long-term%20debt) Details the company's long-term debt obligations and compliance with debt covenants Long-Term Debt (Millions) | Category | Dec 31, 2018 | Jun 30, 2019 | | :---------------------------------- | :----------- | :----------- | | Kronos International, Inc. 3.75% Senior Secured Notes | $452.4 | $449.7 | | Other | $4.2 | $4.0 | | **Total debt** | **$456.6** | **$453.7** | | Less current maturities | $1.5 | $1.5 | | **Total long-term debt** | **$455.1** | **$452.2** | - The company had no borrowings or repayments under its North American and European revolving credit facilities during the first six months of 2019, with approximately **$122.3 million** and **€90.0 million** (**$102.5 million**) available for borrowing, respectively, at June 30, 2019[48](index=48&type=chunk) - The company was in compliance with all debt covenants at June 30, 2019[49](index=49&type=chunk) [Note 8 - Accounts payable and accrued liabilities](index=14&type=section&id=Note%208%20-%20Accounts%20payable%20and%20accrued%20liabilities) Provides a breakdown of current liabilities, including accounts payable and new lease liabilities Accounts Payable and Accrued Liabilities (Millions) | Category | Dec 31, 2018 | Jun 30, 2019 | | :-------------------------- | :----------- | :----------- | | Accounts payable | $103.2 | $139.4 | | Employee benefits | $27.9 | $21.1 | | Accrued sales discounts and rebates | $29.7 | $19.1 | | Operating lease liabilities | $- | $6.7 | | Payables to affiliates | $62.1 | $60.0 | | **Total** | **$222.9** | **$247.3** | - Accounts payable increased by **$36.2 million**, and operating lease liabilities of **$6.7 million** were recognized due to the adoption of ASU 2016-02[50](index=50&type=chunk) [Note 9 - Other noncurrent liabilities](index=14&type=section&id=Note%209%20-%20Other%20noncurrent%20liabilities) Details the composition of other noncurrent liabilities, including postretirement and employee benefits Other Noncurrent Liabilities (Millions) | Category | Dec 31, 2018 | Jun 30, 2019 | | :-------------------------- | :----------- | :----------- | | Accrued postretirement benefits | $7.4 | $7.7 | | Employee benefits | $7.3 | $6.9 | | Other | $14.1 | $11.2 | | **Total** | **$28.8** | **$25.8** | [Note 10 - Revenue recognition](index=14&type=section&id=Note%2010%20-%20Revenue%20recognition) Disaggregates net sales by point of origin and destination for the reporting periods Net Sales by Point of Origin and Destination (Millions) | Category | Three months ended June 30, 2019 | Six months ended June 30, 2019 | | :-------------------- | :------------------------------- | :----------------------------- | | **Point of Origin:** | | | | Germany | $248.5 | $467.7 | | United States | $289.3 | $534.6 | | Canada | $95.9 | $174.4 | | Belgium | $77.7 | $147.4 | | Norway | $47.7 | $99.2 | | Eliminations | $(274.6) | $(502.3) | | **Total Net Sales** | **$484.5** | **$921.0** | | **Point of Destination:** | | | | Europe | $229.4 | $444.6 | | North America | $161.5 | $308.3 | | Other | $93.6 | $168.1 | | **Total Net Sales** | **$484.5** | **$921.0** | - For the six months ended June 30, 2019, the United States was the largest point of origin for net sales (**$534.6 million**), while Europe remained the largest point of destination (**$444.6 million**)[53](index=53&type=chunk) [Note 11 - Employee benefit plans](index=15&type=section&id=Note%2011%20-%20Employee%20benefit%20plans) Details net periodic defined benefit pension costs and expected contributions for employee benefit plans Net Periodic Defined Benefit Pension Cost (Millions) | Component | Three months ended June 30, 2018 | Three months ended June 30, 2019 | Six months ended June 30, 2018 | Six months ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service cost | $2.9 | $2.8 | $5.9 | $5.6 | | Interest cost | $3.6 | $3.5 | $7.2 | $7.0 | | Expected return on plan assets | $(3.2) | $(3.0) | $(6.6) | $(6.2) | | Recognized actuarial losses | $3.5 | $3.3 | $7.0 | $6.7 | | **Total** | **$6.8** | **$6.6** | **$13.6** | **$13.2** | - The company expects 2019 contributions for its pension plans to be approximately **$17 million**[55](index=55&type=chunk) [Note 12 - Income taxes](index=15&type=section&id=Note%2012%20-%20Income%20taxes) Presents income tax expense, effective tax rates, and the impact of non-U.S. operations and GILTI Income Tax Expense (Millions) | Metric | Three months ended June 30, 2018 | Three months ended June 30, 2019 | Six months ended June 30, 2018 | Six months ended June 30, 2019 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax expense | $32.4 | $11.4 | $61.4 | $24.2 | | Expected tax expense (21% U.S. federal statutory rate) | $23.2 | $8.5 | $44.1 | $17.6 | | Non-U.S. tax rates | $7.9 | $2.3 | $15.0 | $4.7 | | Global intangible low-tax income, net | $- | $0.7 | $- | $1.5 | - The decrease in income tax expense for both periods is primarily due to lower earnings in 2019. The overall effective tax rate is generally higher than the U.S. federal statutory rate of **21%** due to sizeable non-U.S. operations[56](index=56&type=chunk)[91](index=91&type=chunk)[101](index=101&type=chunk) - The company records global intangible low-tax income (GILTI) tax as a current-period expense and does not expect unrecognized tax benefits to materially change in the next twelve months[57](index=57&type=chunk)[60](index=60&type=chunk) [Note 13 – Stockholders' equity](index=16&type=section&id=Note%2013%20%E2%80%93%20Stockholders%27%20equity) Details changes in stockholders' equity, including accumulated other comprehensive loss and stock repurchases Accumulated Other Comprehensive Loss, Net of Tax (Millions) | Category | Dec 31, 2018 | Jun 30, 2019 | | :-------------------------- | :----------- | :----------- | | Currency translation | $(245.1) | $(238.0) | | Defined benefit pension plans | $(177.7) | $(175.5) | | OPEB plans | $0.6 | $0.6 | | Marketable securities | $- | $- | | **Total accumulated other comprehensive loss** | **$(424.3)** | **$(412.9)** | - The company has an authorized stock repurchase program for up to **2.0 million shares**. As of June 30, 2019, **1,840,697 shares** remained available for repurchase, after acquiring **110,303 shares** for **$1.4 million** in Q2 2019[63](index=63&type=chunk)[64](index=64&type=chunk)[142](index=142&type=chunk) [Note 14 - Commitments and contingencies](index=17&type=section&id=Note%2014%20-%20Commitments%20and%20contingencies) Outlines various environmental, legal, and contractual commitments and contingencies - The company is involved in various environmental, contractual, product liability, patent, employment, and other claims and disputes incidental to its business. No amounts have been accrued for litigation matters as it is not reasonably possible that a material loss has been incurred[65](index=65&type=chunk) [Note 15 - Financial instruments](index=17&type=section&id=Note%2015%20-%20Financial%20instruments) Details fair value measurements of financial instruments and the use of derivatives for risk management Fair Value Measurements of Financial Instruments (Millions) | Asset | Dec 31, 2018 (Total Fair Value) | Jun 30, 2019 (Total Fair Value) | | :-------------------------- | :------------------------------ | :------------------------------ | | Noncurrent marketable securities | $3.4 | $5.2 | Financial Instruments Not Carried at Fair Value (Millions) | Instrument | Dec 31, 2018 (Carrying Amount) | Dec 31, 2018 (Fair Value) | Jun 30, 2019 (Carrying Amount) | Jun 30, 2019 (Fair Value) | | :---------------------------------- | :----------------------------- | :------------------------ | :----------------------------- | :------------------------ | | Cash, cash equivalents and restricted cash | $374.7 | $374.7 | $329.5 | $329.5 | | Long-term debt - Fixed rate Senior Secured Notes | $452.4 | $412.9 | $449.7 | $454.6 | | Common stockholders' equity | $839.8 | $1,335.3 | $868.0 | $1,774.2 | - The company uses derivative financial instruments, primarily currency forward contracts and interest rate swaps, to manage exposure to currency exchange rates and interest rates, not for trading or speculative purposes[67](index=67&type=chunk) [Note 16 - Recent accounting pronouncement](index=18&type=section&id=Note%2016%20-%20Recent%20accounting%20pronouncement) Discusses the adoption of ASU 2016-02, Leases, and its impact on the financial statements - On January 1, 2019, the company adopted ASU 2016-02, Leases (Topic 842), prospectively without restatement of prior periods. This resulted in the recognition of **$35.1 million** in right-of-use operating lease assets and **$34.5 million** in corresponding operating lease liabilities[70](index=70&type=chunk) - The company elected practical expedients upon adoption, including those related to lease classification, nonlease components, and short-term leases[70](index=70&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion and analysis of the company's financial performance, liquidity, and capital resources [Business overview](index=19&type=section&id=Business%20overview) Kronos Worldwide is a leading global TiO2 producer, with demand linked to GDP, and performance driven by selling prices, volumes, and raw material costs - Kronos Worldwide is a leading global producer and marketer of value-added titanium dioxide (TiO2) pigments, with production facilities in Europe and North America[72](index=72&type=chunk) - Approximately half of the company's sales volumes for the first six months of 2019 were in European markets[72](index=72&type=chunk) - Key performance indicators are TiO2 average selling prices, sales and production volumes, and the cost of third-party feedstock ore[74](index=74&type=chunk) [Executive summary](index=19&type=section&id=Executive%20summary) Net income significantly declined in Q2 and H1 2019 due to lower income from operations, driven by decreased selling prices and higher raw material costs Net Income Summary (Millions, except per share) | Period | Net Income (2018) | Net Income (2019) | Change | EPS (2018) | EPS (2019) | Change | | :-------------------- | :---------------- | :---------------- | :----- | :--------- | :--------- | :----- | | Second Quarter | $77.7 | $29.5 | $(48.2) | $0.67 | $0.25 | $(0.42) | | First Six Months | $148.4 | $59.8 | $(88.6) | $1.28 | $0.52 | $(0.76) | - The lower net income in 2019 periods was primarily due to lower income from operations, driven by lower average selling prices and higher raw materials and other production costs, partially offset by higher sales volumes[75](index=75&type=chunk) [Forward-looking information](index=20&type=section&id=Forward-looking%20information) Forward-looking statements involve substantial risks and uncertainties, with actual results potentially differing due to market, cost, economic, and competitive factors - Forward-looking statements are subject to substantial risks and uncertainties that could significantly impact expected results, and actual future results could differ materially from predictions[77](index=77&type=chunk) - Key factors that could cause actual results to differ include future supply and demand for products, cyclicality of the business, changes in raw material and operating costs, global economic and political conditions, competitive pressures, currency exchange rate fluctuations, and operating interruptions[78](index=78&type=chunk) [Results of operations](index=21&type=section&id=Results%20of%20operations) Operating results show significant declines in gross margin and income from operations, driven by lower TiO2 selling prices and higher raw material costs [Current industry conditions](index=21&type=section&id=Current%20industry%20conditions) Analyzes current TiO2 industry conditions, including selling price trends, sales volumes, and production capacity utilization - Average TiO2 selling prices declined in late 2018 and Q1 2019, but began to rise in Q2 2019, with prices **2% higher** than Q1 2019, but still **2% lower** than at the end of 2018[80](index=80&type=chunk) - Sales volumes increased in all major markets in the first six months of 2019 compared to the same period in 2018[80](index=80&type=chunk) Production Capacity Utilization Rates | Quarter | 2018 | 2019 | | :------------ | :--- | :--- | | First quarter | 95% | 97% | | Second quarter| 97% | 97% | - Cost of sales per metric ton of TiO2 sold in the first six months of 2019 was higher than in 2018, primarily due to a rise in the cost of third-party feedstock ore[83](index=83&type=chunk) [Quarter ended June 30, 2019 compared to the quarter ended June 30, 2018](index=21&type=section&id=Quarter%20ended%20June%2030%2C%202019%20compared%20to%20the%20quarter%20ended%20June%2030%2C%202018) Compares financial performance for Q2 2019 versus Q2 2018, detailing changes in net sales, costs, and income Q2 2019 vs Q2 2018 Financial Highlights (Millions, except percentages) | Metric | 2018 | 2019 | % Change | | :-------------------------- | :------ | :------ | :------- | | Net sales | $471.8 | $484.5 | 3% | | Cost of sales | $300.0 | $375.0 | 25% | | Gross margin | $171.8 | $109.5 | -36% | | Income from operations | $119.9 | $46.5 | -61% | | Net sales change breakdown: | | | | | TiO2 product pricing | | | (8)% | | TiO2 sales volumes | | | 15% | | Changes in currency exchange rates | | | (4)% | - Net sales increased by **$12.7 million** (**3%**) due to a **15%** increase in sales volumes (**+$71 million**), largely offset by an **8%** decrease in average TiO2 selling prices (**-$38 million**) and negative currency exchange rate impacts (**-$17 million**)[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) - Cost of sales increased by **$75.0 million** (**25%**) due to higher sales volumes and approximately **$31 million** in higher raw materials and other production costs (primarily feedstock ore costs). Gross margin as a percentage of net sales decreased from **36%** to **23%**[87](index=87&type=chunk)[88](index=88&type=chunk) - Income from operations decreased by **$73.4 million** (**61%**), primarily due to the lower gross margin. Currency exchange rate changes decreased income from operations by approximately **$9 million**[89](index=89&type=chunk) [Six months ended June 30, 2019 compared to the six months ended June 30, 2018](index=23&type=section&id=Six%20months%20ended%20June%2030%2C%202019%20compared%20to%20the%20six%20months%20ended%20June%2030%2C%202018) Compares financial performance for H1 2019 versus H1 2018, detailing changes in net sales, costs, and income H1 2019 vs H1 2018 Financial Highlights (Millions, except percentages) | Metric | 2018 | 2019 | % Change | | :-------------------------- | :------ | :------ | :------- | | Net sales | $902.2 | $921.0 | 2% | | Cost of sales | $555.6 | $702.2 | 26% | | Gross margin | $346.6 | $218.8 | -37% | | Income from operations | $227.4 | $95.5 | -58% | | Net sales change breakdown: | | | | | TiO2 product pricing | | | (8)% | | TiO2 sales volumes | | | 15% | | Changes in currency exchange rates | | | (4)% | - Net sales increased by **$18.8 million** (**2%**) due to a **15%** increase in sales volumes (**+$135 million**), largely offset by an **8%** decrease in average TiO2 selling prices (**-$72 million**) and negative currency exchange rate impacts (**-$32 million**)[94](index=94&type=chunk)[95](index=95&type=chunk) - Cost of sales increased by **$146.6 million** (**26%**) due to higher sales volumes and approximately **$77 million** in higher raw materials and other production costs (primarily feedstock ore costs). Gross margin as a percentage of net sales decreased from **38%** to **24%**[96](index=96&type=chunk)[97](index=97&type=chunk) - Income from operations decreased by **$131.9 million** (**58%**), primarily due to the lower gross margin. Currency exchange rate changes decreased income from operations by approximately **$1 million**[99](index=99&type=chunk) [Effects of Currency Exchange Rates](index=24&type=section&id=Effects%20of%20Currency%20Exchange%20Rates) Currency fluctuations, especially a stronger U.S. dollar, negatively impacted net sales and income from operations in Q2 and H1 2019 Impact of Currency Exchange Rates (Millions) | Impact on | Q2 2019 vs Q2 2018 | H1 2019 vs H1 2018 | | :-------------------- | :----------------- | :----------------- | | Net sales | $(17) | $(32) | | Income from operations | $(9) | $(1) | - The **$17 million** decrease in Q2 net sales and **$32 million** decrease in H1 net sales were primarily due to the strengthening of the U.S. dollar relative to the euro, translating euro-denominated sales into fewer U.S. dollars[104](index=104&type=chunk)[106](index=106&type=chunk) - The **$9 million** decrease in Q2 income from operations was due to **$11 million** in net currency transaction losses, partially offset by **$2 million** in net currency translation gains. The **$1 million** decrease in H1 income from operations was due to **$5 million** in net currency transaction losses, partially offset by **$4 million** in net currency translation gains[109](index=109&type=chunk)[110](index=110&type=chunk) [Outlook](index=25&type=section&id=Outlook) Higher production and sales volumes are expected in 2019, but lower income from operations is projected due to reduced selling prices and increased raw material costs - The company expects 2019 production and sales volumes to be slightly higher than 2018, assuming stable global economic conditions[107](index=107&type=chunk) - Cost of sales per metric ton of TiO2 sold in 2019 is expected to be higher than in 2018, primarily due to increased feedstock ore costs[108](index=108&type=chunk) - Despite average selling prices being lower at the start of 2019, they began to rise in Q2 2019, and the company expects the market to support additional selling price increases for the remainder of 2019 due to rising raw material costs and global demand[109](index=109&type=chunk)[111](index=111&type=chunk) - Overall, 2019 sales are expected to be higher than 2018, but income from operations is expected to be lower, as higher sales volumes will be more than offset by lower average selling prices and higher raw material costs[112](index=112&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=26&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Liquidity, primarily from operating cash flows, decreased in H1 2019, but the company maintains sufficient resources and credit facilities for obligations [Consolidated cash flows](index=26&type=section&id=Consolidated%20cash%20flows) Analyzes changes in cash flows from operating, investing, and financing activities for the period - Cash provided by operating activities decreased significantly to **$26.0 million** in H1 2019 from **$169.7 million** in H1 2018, primarily due to lower income from operations and higher cash paid for taxes[116](index=116&type=chunk) - Working capital changes were influenced by a decrease in average days sales outstanding (DSO) from **76 days** (Dec 31, 2018) to **72 days** (Jun 30, 2019) and a decrease in average days sales in inventory (DSI) from **113 days** to **62 days** over the same period[117](index=117&type=chunk) [Investing activities](index=27&type=section&id=Investing%20activities) Details cash flows related to capital expenditures and loans to affiliates - Capital expenditures were **$25.5 million** in H1 2019, slightly up from **$24.8 million** in H1 2018, primarily for maintaining and improving manufacturing facilities[118](index=118&type=chunk) - The company loaned **$7.1 million** to Valhi and collected **$5.4 million** under a promissory note in H1 2019[118](index=118&type=chunk) [Financing activities](index=27&type=section&id=Financing%20activities) Outlines cash flows from dividend payments and treasury stock acquisitions - Dividends paid increased to **$41.7 million** (**$.18 per share**) in H1 2019 from **$39.4 million** (**$.17 per share**) in H1 2018[119](index=119&type=chunk) - Treasury stock acquisitions amounted to **$1.4 million** in H1 2019[21](index=21&type=chunk)[119](index=119&type=chunk) [Outstanding debt obligations](index=27&type=section&id=Outstanding%20debt%20obligations) Describes the company's long-term debt structure and compliance with covenants - At June 30, 2019, consolidated debt included **€400 million** (carrying amount **$449.7 million**) of KII 3.75% Senior Secured Notes due September 2025, and approximately **$4.0 million** of other indebtedness[120](index=120&type=chunk) - The company was in compliance with all debt covenants at June 30, 2019, and expects to continue to comply through maturity[120](index=120&type=chunk) [Future cash requirements (Liquidity)](index=27&type=section&id=Future%20cash%20requirements%20%28Liquidity%29) Assesses future liquidity needs, sources of cash, and ability to meet short-term and long-term obligations - Primary liquidity source is cash flows from operating activities, used for capital expenditures, debt repayment, and dividends[122](index=122&type=chunk) - At June 30, 2019, the company had **$329.5 million** in cash, cash equivalents, and restricted cash, with **$135.4 million** held by non-U.S. subsidiaries, which can be repatriated without material income tax liability[125](index=125&type=chunk) - Available borrowing capacity included **$122.3 million** under the North American revolving credit facility and **€90.0 million** (**$102.5 million**) under the European revolving credit facility[125](index=125&type=chunk) - The company expects to have sufficient liquidity to meet short-term (through June 30, 2020) and long-term (through June 30, 2024) obligations[125](index=125&type=chunk) [Capital expenditures](index=28&type=section&id=Capital%20expenditures) Provides estimated capital expenditures for 2019 and details on spending priorities - Estimated capital expenditures for 2019 are approximately **$78 million**, with **$25.5 million** already spent through June 30, 2019, primarily for facility maintenance and improvements[126](index=126&type=chunk) [Stock repurchase program](index=28&type=section&id=Stock%20repurchase%20program) Details the remaining shares available under the board-authorized stock repurchase program - At June 30, 2019, **1,840,697 shares** were available for repurchase under the board-authorized stock repurchase program[127](index=127&type=chunk) [Off-balance sheet financing](index=28&type=section&id=Off-balance%20sheet%20financing) Confirms the absence of off-balance sheet financing arrangements following new lease accounting adoption - Following the January 1, 2019 adoption of ASU 2016-02, Leases (Topic 842), the company no longer has any off-balance sheet financing arrangements[128](index=128&type=chunk) [Commitments and contingencies](index=28&type=section&id=Commitments%20and%20contingencies) Refers to notes for details on income tax contingencies and legal proceedings - Refer to Notes 12 and 14 of the Condensed Consolidated Financial Statements for details on income tax contingencies and legal proceedings[129](index=129&type=chunk) [Recent accounting pronouncements](index=28&type=section&id=Recent%20accounting%20pronouncements) Refers to notes for details on the adoption of ASU 2016-02, Leases - Refer to Note 16 of the Condensed Consolidated Financial Statements for details on recent accounting pronouncements, specifically the adoption of ASU 2016-02[130](index=130&type=chunk) [Critical accounting policies](index=28&type=section&id=Critical%20accounting%20policies) States that there have been no changes in critical accounting policies during the period - There have been no changes in critical accounting policies during the first six months of 2019[131](index=131&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) The company faces market risks from currency, interest rates, equity, and raw material prices, with no material changes since the 2018 Annual Report - The company is exposed to market risks related to currency exchange rates, interest rates, equity security, and raw material prices[132](index=132&type=chunk) - No material changes in these market risks have occurred since the filing of the 2018 Annual Report[132](index=132&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2019, with no material changes to internal control over financial reporting - The company's disclosure controls and procedures were evaluated by management and concluded to be effective as of June 30, 2019[133](index=133&type=chunk) - There has been no material change to internal control over financial reporting during the quarter ended June 30, 2019[136](index=136&type=chunk) [Part II. OTHER INFORMATION](index=30&type=section&id=Part%20II.%20OTHER%20INFORMATION) Contains additional information including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) Refers to Note 14 and the 2018 Annual Report for legal proceedings, with no new material information in this report - Information regarding legal proceedings is referenced to Note 14 of the Condensed Consolidated Financial Statements and the 2018 Annual Report[139](index=139&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors discussed in the 2018 Annual Report for the six months ended June 30, 2019 - No material changes to the risk factors discussed in Part I, Item 1A of the 2018 Annual Report have occurred during the six months ended June 30, 2019[140](index=140&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 110,303 common shares for $1.4 million in Q2 2019 under its authorized program Common Stock Purchases (Q2 2019) | Period | Total number of shares purchased | Average price paid per share | Maximum number of shares that may yet be purchased | | :-------- | :------------------------------- | :--------------------------- | :----------------------------------------------- | | May 2019 | 106,137 | $12.83 | 1,844,863 | | June 2019 | 4,166 | $12.71 | 1,840,697 | - All purchases were made under the stock repurchase program authorized by the board of directors in December 2010 for up to **2.0 million shares**[142](index=142&type=chunk) [Item 6. Exhibits](index=30&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Form 10-Q, including certifications and XBRL taxonomy documents - Exhibits include Certification documents (31.1, 31.2, 32.1) and various XBRL Taxonomy Extension documents (Instance, Schema, Calculation, Definition, Label, Presentation)[143](index=143&type=chunk) [SIGNATURES](index=31&type=section&id=SIGNATURES) The report was signed by the Senior Vice President and Chief Financial Officer and Senior Vice President and Controller on August 7, 2019 - The report was signed by James W. Brown, Senior Vice President and Chief Financial Officer, and Tim C. Hafer, Senior Vice President and Controller, on August 7, 2019[146](index=146&type=chunk)

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 quarter ended March 31, 2019 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 exe ...

Part I [Business](index=4&type=section&id=ITEM%201.%20BUSINESS) The company is a leading global producer of TiO2 pigments, serving diverse markets with complementary mining and chemical operations - Kronos is a leading global producer and marketer of TiO2, selling to approximately 4,000 customers in 100 countries[11](index=11&type=chunk) - At December 31, 2018, a concentrated ownership structure exists, with approximately **50% of common stock owned by Valhi, Inc.**, and 30% by a subsidiary of NL Industries, Inc[15](index=15&type=chunk) [Products and End-Use Markets](index=5&type=section&id=Products%20and%20end-use%20markets) The company's sales are dominated by over 40 grades of TiO2 pigments, with complementary businesses contributing a smaller portion 2018 Sales Volume Percentages | By Geographic Region | % | By End-Use | % | | :--- | :--- | :--- | :--- | | Europe | 44% | Coatings | 56% | | North America | 37% | Plastics | 27% | | Asia Pacific | 10% | Paper | 7% | | Rest of World | 9% | Other | 10% | - Sales of core TiO2 pigments represented approximately **94% of net sales in 2018**, with the company offering over 40 different pigment grades under the KRONOS® trademark[19](index=19&type=chunk) - The company's TiO2 business is supported by three complementary businesses which comprised about **6% of net sales in 2018**: ilmenite mining, iron-based chemicals, and specialty titanium chemicals[26](index=26&type=chunk)[27](index=27&type=chunk) [Manufacturing, Operations, and Properties](index=6&type=section&id=Manufacturing%2C%20operations%20and%20properties) The company operates TiO2 plants globally using both chloride and sulfate processes, supported by its own ilmenite mining operations - The company produces TiO2 using both chloride (74% of capacity) and sulfate (26% of capacity) processes, with 2018 production at **536,000 metric tons** and an average capacity utilization rate of approximately **95%**[29](index=29&type=chunk)[31](index=31&type=chunk) - Kronos operates TiO2 plants in Germany, Belgium, Norway, and Canada, and has a **50% interest in a joint venture plant** in Lake Charles, Louisiana[30](index=30&type=chunk) - The company owns and operates two ilmenite mines in Norway under an unlimited governmental concession, securing feedstock for its European plants[27](index=27&type=chunk)[42](index=42&type=chunk) [Raw Materials](index=8&type=section&id=Raw%20materials) The company relies on titanium-containing feedstock, chlorine, coke, and sulfuric acid sourced from a limited number of suppliers - Primary raw materials are titanium-containing feedstock (rutile ore, slag, ilmenite), chlorine, coke, and sulfuric acid, sourced from a limited number of suppliers under long-term contracts[40](index=40&type=chunk)[42](index=42&type=chunk) Raw Materials Procured or Mined in 2018 (in thousands of metric tons) | Production Process/Raw Material | Amount | | :--- | :--- | | **Chloride process plants:** | | | Purchased slag or rutile ore | 430 | | **Sulfate process plants:** | | | Ilmenite ore mined and used internally | 328 | | Purchased slag | 24 | [Competition](index=10&type=section&id=Competition) The TiO2 industry is highly concentrated and competitive, with significant barriers to entry due to high capital costs and technology - The TiO2 industry is highly competitive, with the top six producers accounting for approximately **58% of world production capacity**[53](index=53&type=chunk)[80](index=80&type=chunk) Estimated Worldwide Production Capacity - 2018 | Company | Capacity Share | | :--- | :--- | | Chemours | 16% | | Cristal | 11% | | Venator | 9% | | Lomon Billions | 9% | | Kronos | 7% | | Tronox | 6% | | Other | 42% | - Competition is based on price, product quality, technical service, and availability, with high barriers to entry due to capital costs and proprietary technology[52](index=52&type=chunk)[58](index=58&type=chunk) [Employees](index=11&type=section&id=Employees) The company's workforce is primarily based in Europe, with a high percentage of employees covered by collective bargaining agreements - As of December 31, 2018, the company employed **2,195 people**, with the majority (1,805) in Europe[64](index=64&type=chunk) - Approximately **86% of the worldwide workforce** is organized under collective bargaining agreements[66](index=66&type=chunk) [Risk Factors](index=13&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces significant risks from industry cyclicality, competition, raw material costs, high leverage, and global operations - The company's profitability is highly dependent on the cyclical TiO2 industry, which accounted for **94% of 2018 sales**[78](index=78&type=chunk)[79](index=79&type=chunk) - The company has significant leverage, with total consolidated debt of approximately **$456.6 million** as of December 31, 2018, which could limit operational flexibility[84](index=84&type=chunk) - Higher costs or limited availability of raw materials pose a risk, with minimum purchase commitments of approximately **$594 million for feedstock** subsequent to December 31, 2018[82](index=82&type=chunk)[83](index=83&type=chunk) - As a global business with **44% of 2018 sales volumes in Europe**, the company is subject to risks from currency fluctuations and trade barriers[88](index=88&type=chunk)[89](index=89&type=chunk) [Unresolved Staff Comments](index=17&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved staff comments from the SEC - None[99](index=99&type=chunk) [Properties](index=17&type=section&id=ITEM%202.%20PROPERTIES) Information regarding the company's properties is incorporated by reference from the Business section of this report - Information on properties is incorporated by reference to Item 1: Manufacturing, Operations and Properties[99](index=99&type=chunk) [Legal Proceedings](index=17&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) Details concerning legal proceedings are incorporated by reference from the notes to the Consolidated Financial Statements - Information is incorporated by reference to Note 16 to the Consolidated Financial Statements[100](index=100&type=chunk) [Mine Safety Disclosures](index=17&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section is not applicable to the company - Not applicable[101](index=101&type=chunk) Part II [Market for Common Equity and Related Stockholder Matters](index=18&type=section&id=ITEM%205.%20MARKET%20FOR%20COMMON%20EQUITY%20AND%20RELATED%20STOCKHOLDER%20MATTERS) The company's stock (NYSE: KRO) has an active repurchase plan and has underperformed the S&P 500 over the last five years - The company's common stock is listed on the New York Stock Exchange (symbol: KRO)[102](index=102&type=chunk) - A stock repurchase plan was authorized in December 2010, with **1,951,000 shares remaining available** for repurchase as of December 31, 2018[103](index=103&type=chunk) Comparison of 5-Year Cumulative Total Return | | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Kronos common stock | $100 | $71 | $33 | $77 | $170 | $79 | | S&P 500 Composite Stock Index | $100 | $114 | $115 | $129 | $157 | $150 | | Peer Group | $100 | $108 | $19 | $76 | $141 | $68 | [Selected Financial Data](index=19&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) A five-year summary shows peak net sales and income in 2017, with a decline in 2018 Selected Financial Data (2014-2018, in millions, except per share data) | | 2014 | 2015 | 2016 | 2017 | 2018 | | :--- | :--- | :--- | :--- | :--- | :--- | | **STATEMENTS OF OPERATIONS DATA:** | | | | | | | Net sales | $1,651.9 | $1,348.8 | $1,364.3 | $1,729.0 | $1,661.9 | | Income from operations | $161.4 | $11.0 | $92.9 | $347.8 | $330.1 | | Net income (loss) | $99.2 | $(173.6) | $43.3 | $354.5 | $205.0 | | Net income (loss) per share | $0.86 | $(1.50) | $0.37 | $3.06 | $1.77 | | **BALANCE SHEET DATA (at year end):** | | | | | | | Total assets | $1,633.1 | $1,242.7 | $1,179.6 | $1,824.4 | $1,898.1 | | Notes payable and long-term debt | $343.6 | $341.0 | $339.0 | $474.5 | $456.6 | | **OPERATING STATISTICS: TiO2 (k metric tons)** | | | | | | | Sales volumes | 496 | 525 | 559 | 586 | 491 | | Production volumes | 511 | 528 | 546 | 576 | 536 | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=20&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses financial results, highlighting impacts from TiO2 pricing and volumes, and provides an outlook for 2019 [Results of Operations](index=20&type=section&id=Results%20of%20Operations) Operating results declined in 2018 after a strong 2017, driven by changes in TiO2 sales volumes and selling prices Comparison of 2018 to 2017 Results (in millions) | | 2017 | 2018 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $1,729.0 | $1,661.9 | (4)% | | Gross margin | $569.7 | $562.2 | (1)% | | Income from operations | $347.8 | $330.1 | (5)% | | TiO2 Sales volumes (k tons) | 586 | 491 | (16)% | | TiO2 Production volumes (k tons) | 576 | 536 | (7)% | - The **4% decrease in net sales in 2018** was due to a 16% decrease in sales volumes, partially offset by a 13% increase in average TiO2 selling prices[130](index=130&type=chunk)[131](index=131&type=chunk) Comparison of 2017 to 2016 Results (in millions) | | 2016 | 2017 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $1,364.3 | $1,729.0 | 27% | | Gross margin | $264.7 | $569.7 | 115% | | Income from operations | $92.9 | $347.8 | 274% | | TiO2 Sales volumes (k tons) | 559 | 586 | 5% | | TiO2 Production volumes (k tons) | 546 | 576 | 5% | - The **27% increase in net sales in 2017** was driven by a 22% increase in average TiO2 selling prices and a 5% increase in sales volumes[152](index=152&type=chunk) - **Outlook for 2019**: The company expects sales to be higher than 2018 due to higher sales volumes, but income from operations to be lower due to lower expected selling prices and higher raw material costs[171](index=171&type=chunk) [Critical Accounting Policies and Estimates](index=22&type=section&id=Critical%20accounting%20policies%20and%20estimates) Key accounting estimates relate to asset recoverability, pension obligations, and the realization of deferred income tax assets - Key estimates involve the recoverability of long-lived assets, defined benefit pension plan obligations, and the realization of deferred income tax assets[119](index=119&type=chunk)[121](index=121&type=chunk) - The company **reversed its deferred income tax asset valuation allowance** for German and Belgian operations in 2017, concluding that realization was more-likely-than-not[122](index=122&type=chunk) - Following the 2017 Tax Act, the company determined that undistributed earnings of its European subsidiaries are no longer permanently reinvested[123](index=123&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains liquidity through operations and has significant debt, with planned capital expenditures of $85 million for 2019 Consolidated Cash Flows (in millions) | | 2016 | 2017 | 2018 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $89.6 | $276.1 | $188.5 | | Net cash used in investing activities | $(53.0) | $(77.9) | $(42.7) | | Net cash provided by (used in) financing activities | $(73.3) | $58.8 | $(80.4) | - Cash from operations **decreased by $87.6 million in 2018** compared to 2017, primarily due to lower income from operations and higher cash taxes paid[195](index=195&type=chunk) - At Dec 31, 2018, the company had total debt of **$456.6 million**, primarily consisting of €400 million in 3.75% Senior Secured Notes due 2025[206](index=206&type=chunk)[209](index=209&type=chunk) - The company had **$373.3 million in cash and cash equivalents** at Dec 31, 2018, with $118.5 million held by non-U.S. entities[213](index=213&type=chunk) - Capital expenditures for 2019 are planned to be approximately **$85 million**, including $25 million for environmental compliance programs[215](index=215&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company is exposed to market risks from currency exchange rates, commodity prices, and the value of its equity securities - The company's primary market risks are from changes in interest rates, currency exchange rates, and prices of equity securities and raw materials[224](index=224&type=chunk) - Currency exchange rate risk is significant; a hypothetical **10% adverse change in exchange rates** would increase the U.S. dollar equivalent of its euro-denominated debt by approximately **$46 million** as of Dec 31, 2018[228](index=228&type=chunk)[231](index=231&type=chunk) - The company is exposed to market risk from its marketable securities portfolio, which had a fair value of **$3.4 million** at Dec 31, 2018[232](index=232&type=chunk) [Controls and Procedures](index=44&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and internal control over financial reporting were effective as of year-end 2018 - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2018[238](index=238&type=chunk) - Management concluded that the company's internal control over financial reporting was **effective** as of December 31, 2018, based on the 2013 COSO framework[240](index=240&type=chunk) - PricewaterhouseCoopers LLP audited and issued an **unqualified opinion** on the effectiveness of the company's internal control over financial reporting as of December 31, 2018[241](index=241&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=46&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information concerning directors, executive officers, and corporate governance is incorporated by reference from the 2019 proxy statement - Information is incorporated by reference from the Registrant's definitive proxy statement to be filed within 120 days after the fiscal year end[248](index=248&type=chunk) [Executive Compensation](index=46&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Information regarding executive compensation is incorporated by reference from the company's 2019 proxy statement - Information is incorporated by reference from the 2019 proxy statement[249](index=249&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=46&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Details on security ownership are incorporated by reference from the company's 2019 proxy statement - Information is incorporated by reference from the 2019 proxy statement[250](index=250&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=46&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information on related party transactions and director independence is incorporated by reference from the 2019 proxy statement - Information is incorporated by reference from the 2019 proxy statement and Note 15 to the Consolidated Financial Statements[251](index=251&type=chunk) [Principal Accounting Fees and Services](index=46&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) Information regarding principal accounting fees and services is incorporated by reference from the 2019 proxy statement - Information is incorporated by reference from the 2019 proxy statement[252](index=252&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=46&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the financial statements and exhibits filed as part of the Annual Report - The consolidated financial statements of the Registrant are filed as part of the Annual Report[254](index=254&type=chunk) - An index of exhibits is provided, including key agreements such as the Indenture for the Senior Secured Notes and intercompany service agreements[258](index=258&type=chunk)[259](index=259&type=chunk) Financial Statements [Report of Independent Registered Public Accounting Firm](index=52&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers LLP issued unqualified opinions on the company's financial statements and internal controls over financial reporting - PricewaterhouseCoopers LLP expressed an **unqualified opinion** that the financial statements are fairly presented in accordance with U.S. GAAP[269](index=269&type=chunk) - The firm also opined that the Company maintained **effective internal control** over financial reporting as of December 31, 2018[269](index=269&type=chunk) [Consolidated Financial Statements](index=54&type=section&id=Consolidated%20Financial%20Statements) The statements show a financial position with $1.90 billion in assets and 2018 net income of $205.0 million Consolidated Balance Sheet Highlights (in millions) | | Dec 31, 2017 | Dec 31, 2018 | | :--- | :--- | :--- | | Total current assets | $1,062.5 | $1,201.4 | | Total assets | $1,824.4 | $1,898.1 | | Total current liabilities | $231.5 | $233.4 | | Long-term debt | $473.8 | $455.1 | | Total stockholders' equity | $754.3 | $839.8 | Consolidated Statement of Income Highlights (in millions) | | 2016 | 2017 | 2018 | | :--- | :--- | :--- | :--- | | Net sales | $1,364.3 | $1,729.0 | $1,661.9 | | Gross margin | $264.7 | $569.7 | $562.2 | | Income from operations | $92.9 | $347.8 | $330.1 | | Net income | $43.3 | $354.5 | $205.0 | [Note 13 – Income Taxes](index=80&type=section&id=Note%2013%20%E2%80%93%20Income%20taxes) Income tax expense in 2018 contrasts with a 2017 benefit, which was driven by valuation allowance reversals and the U.S. Tax Act Income Tax Expense (Benefit) Reconciliation (in millions) | | 2016 | 2017 | 2018 | | :--- | :--- | :--- | :--- | | Pre-tax income | $61.2 | $305.7 | $293.8 | | Expected tax expense at U.S. rate | $21.4 | $107.0 | $61.7 | | Valuation allowance | $(2.2) | $(205.4) | - | | Transition Tax | - | $76.2 | $(1.7) | | **Income tax expense (benefit)** | **$17.9** | **$(48.8)** | **$88.8** | - In 2017, the company recognized a net income tax benefit of **$136.5 million**, primarily from the reversal of valuation allowances offset by the provisional Transition Tax expense[137](index=137&type=chunk)[139](index=139&type=chunk) - As of Dec 31, 2018, the company has substantial net operating loss (NOL) carryforwards in Germany (**$541 million**) and Belgium (**$16 million**), all with indefinite carryforward periods[386](index=386&type=chunk) [Note 15 – Related Party Transactions](index=87&type=section&id=Note%2015%20%E2%80%93%20Related%20party%20transactions) The company engages in significant transactions with affiliated entities for services, supplies, and financing - Purchases of TiO2 from the 50%-owned joint venture, LPC, were **$165.9 million in 2018**, while sales of feedstock to LPC were $66.9 million[407](index=407&type=chunk) - The company is charged for management and administrative services by related parties, with net fees amounting to **$21.1 million in 2018**[411](index=411&type=chunk) - The company participates in a group insurance program with other Contran affiliates, with premiums and fees paid to related entities totaling **$10.4 million in 2018**[412](index=412&type=chunk) [Note 16 – Commitments and Contingencies](index=89&type=section&id=Note%2016%20%E2%80%93%20Commitments%20and%20contingencies) The company has substantial future commitments for raw material purchases and operating leases - The company has long-term supply contracts for TiO2 feedstock with minimum purchase commitments of approximately **$594 million** for years subsequent to December 31, 2018[420](index=420&type=chunk) - Future minimum payments under non-cancellable operating leases total **$42.5 million** at December 31, 2018[423](index=423&type=chunk) - The company's largest customer concentration risk was one customer accounting for approximately **10% of net sales in 2016**, with no single customer reaching that threshold in 2017 or 2018[418](index=418&type=chunk)