Kronos Worldwide, Inc. (KRO, NYSE)
Industry: Specialty Chemicals
Annual report, fiscal year 2011


## KRONOS



# KRONOS WORLDWIDE, INC. CORPORATE AND OTHER INFORMATION

## Board of Directors

Kieth R. Coogan (a) (b)
Private Investor

C. H. Moore, Jr. (a)
Retired Partner
KPMG LLP

George E. Poston(a)(b)
President
Poston Real Estate Co. and
Poston Capital Co.

Glenn R. Simmons
Vice Chairman
Valhi, Inc.

Harold C. Simmons
Chairman

Dr. R. Gerald Turner(a)(b)
President
Southern Methodist University

Steven L. Watson
Vice Chairman
and Chief Executive Officer

## Board Committees

(a) Audit Committee

(b) Management Development and Compensation Committee

## Corporate and Operating Management

Harold C. Simmons
Chairman

Steven L. Watson
Vice Chairman
and Chief Executive Officer

Robert D. Graham
Executive Vice President
and General Counsel

Gregory M. Swalwell
Executive Vice President
and Chief Financial Officer

Douglas C. Weaver
Chairman, Executive Management Committee

Dr Ulfert Fland
Vice Chairman, Executive Management Committee
and Chief Technology Officer

Klemens T. Schlueter
President, Manufacturing

H. Joseph Maas
President, Sales and Marketing

Brian W. Christian
Vice President, Strategic Business Development

Robert V. Cottone
Senior Vice President, Information Technology

Keith S. D'Souza
Vice President, Human Resources

Tim C. Hafer
Vice President and Controller

Janet G. Keckeisen
Vice President, Investor Relations

A. Andrew R. Louis
Vice President, Secretary and
Associate General Counsel

Kelly D. Lutmer
Vice President and Global Tax Director

John A. St. Wrba
Vice President and Treasurer

## Product Information

Information about our products and services is available online or by contacting:

Kronos Worldwide, Inc.
5 Cedar Brook, Drive
Cranbury, NJ. 08512
Phone: (609) 860-6200
Customer Service: 1-800-866-5600.
Email: kronos.marketing@kronosww.com

## Transfer Agent

Computershare acts as transfer agent, registrar and dividend paying agent for the Company's common stock.

Communications regarding stockholder accounts, dividends and change of address should be directed to:

Computershare Trust Company, N. A.
250 Royal Street
Canton, Massachusetts 02021
Telephone: (877) 373-6374
Internet address:
http://www.computershare.com/investor

Visit us on the Web
http://www.kronosww.com

## Annual Meeting

The 2012 Annual Meeting of Stockholders will be held at the office of the Company, Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas, Texas 75240-2697, on the date and time as set forth in the notice of the meeting, proxy statement and form of proxy that will be mailed to stockholders in advance of the meeting.

## Stock and Bond Exchanges

Kronos' common shares are listed on the New York Stock Exchange under the symbol "KRO."

## Form 10-K Report

The Company’s Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the Securities and Exchange Commission is printed as part of this Annual Report. Additional copies are available without charge upon written request to:

Janet G. Keckeisen
Vice President, Investor Relations
Kronos Worldwide, Inc.
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697

Kronos International, Inc.'s 6.5% Senior Secured Notes Due 2013 are listed on the Luxembourg Stock Exchange and are quoted in the over-the-counter market in the U.S.



# 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 and Exchange Act of 1934: For the fiscal year ended December 31, 2011 Commission file number 1-31763

KRONOS WORLDWIDE, INC.
(Exact name of Registrant as specified in its charter)

DELAWARE
(State or other Jurisdiction of
incorporation or organization)
(IRS Employer Identification No.)

5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240-2697
(Address of principal executive offices)

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

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



## Forward-Looking Information

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Statements in this Annual Report that are not historical facts are forward-looking in nature and represent management's beliefs and assumptions based on currently available information. In some cases, you can identify



- The ultimate resolution of pending litigation (such as the matter described in Note 15 to our Consolidated Financial Statements)

• Possible future litigation.

Should one or more of these risks materialize (or the consequences of such a development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those forecasted or expected. We disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of changes in information, future events or otherwise.

The following table represents the data from the provided image. The text is not clear, and the image is too blurry to be recognized.

The provided image is a graphic design and does not contain any chart, graph, or data. Therefore, it is not possible to extract numerical data points to create a table.

The provided image is a graphic design and does not contain any chart, graph, or data. It is a 2D image with a grid and no data points.



respectively. Markets for TiO \( _{2} \)  are increasing in South America, Eastern Europe, the Far East and China and we believe these are significant markets that will continue to grow as economies in these regions continue to develop



The following tables show our approximate sales volume by geographic region and end use for the year ended December 31, 2011:

<table><tr><td colspan="2">Sales Volumes Percentages by Geographic Region</td><td colspan="2">Sales Volumes Percentages by End-use</td></tr><tr><td>Europe</td><td>53%</td><td>Coatings</td><td>53%</td></tr><tr><td>North America</td><td>32%</td><td>Plastics</td><td>35%</td></tr><tr><td>Asia Pacific</td><td>10%</td><td>Other</td><td>8%</td></tr><tr><td>Rest of World</td><td>5%</td><td>Paper</td><td>4%</td></tr></table>

Some of the principal applications for our products include the following:

TiO₂ for Coatings - Our TiO₂ is used to provide positive durability. The tinting strength and brightness in industrial coatings, as well as coatings for home interiors and accessories, automobiles, aircraft, machines, and furniture paint and other special purpose coatings. The amount of TiO₂ used in coatings varies widely depending on the opacity, color and quality desired. In general, the higher the opacity requirement of the coating, the greater its TiO₂ content.

TiO₂ for Plastics - We produce TiO₂ pigments that improve the optical and physical properties in plastics, including whiteness and opacity. TiO₂ is used to provide opacity in items such as containers and packaging materials, and vinyl products such as windows, door profiles and siding. TiO₂ also generally provides hiding power, neutral undertone, brightness and surface durability for housewares, appliances, toys, computer cases and food packages. TiO₂'s high brightness along with its opacity, is used in some engineering plastics to help mask their undesirable natural color. TiO₂ is also used in masterbatch, which is a concentrate of TiO₂ and other additives and is one of the largest uses for TiO₂ in the plastics end-use market. In masterbatch, the TiO₂ is dispersed at high concentrations into a plastic resin and is then used



We produce high purity sulfate process anatase  \( TiO_{2} \)  used to provide opacity, whiteness and brightness in a variety of cosmetic and personal care products, such as skin cream, lipstick, eye shadow and toothpaste. Our  \( TiO_{2} \)  is also found in food products, such as candy and confectionaries, and in pet foods where it is used to obtain uniformity of color and appearance. In pharmaceuticals, our  \( TiO_{2} \)  is used commonly as a colorant in pill and capsule coatings as well as in liquid medicines to provide uniformity of color and appearance. Kronos \( ^{\circledR} \)  purified anatase grades meet the applicable requirements of the CTFA (Cosmetics, Toiletries and Fragrances Association), USP and BP (United States Pharmacopoeia and British Pharmacopoeia) and the FDA (United States Food and Drug Administration).

Our  \( TiO_{2} \)  business is enhanced by the following three complementary businesses, which comprised approximately 8% of our net sales in 2011:

- We own and operate two limestone mines in Norway pursuant to a governmental concession with an unlimited term. We commenced production from our second mine in 2009. Ilmenite is a raw material used directly as a feedstock by some sulfate-process  \( TiO_{2} \)  plants. We believe that we have a significant competitive advantage because our mines supply our feedstock requirements for all of our European sulfate-process plants. We also sell ilmenite ore to third-parties, some of whom are our competitors. The mines have estimated ilmenite reserves that are expected to last at least 50 years.

- We manufacture and sell iron-based chemicals, which are co-products and processed co-products of the sulfate and chloride process  \( TiO_{2} \)  pigment production. These co-product chemicals are marketed through our Ecochem division and are primarily used as treatment and conditioning agents for industrial effluents and municipal wastewater as well as in the manufacture of iron pigments, cement and agricultural products.

- We manufacture and sell titanium oxychloride and titanyl sulfate, which are side-stream specialty products from the production of  \( TiO_{2} \) . Titanium oxychloride is used in specialty applications in the formulation of pearlescent pigments, production of electroceramic capacitors for cell phones and other electronic devices. Titanyl sulfate productions are used in pearlescent pigments, natural gas pipe and other specialty applications.

## Manufacturing, Operations and Properties

We produce  \( TiO_{2} \)  in two crystalline forms: rutile and anatase. Rutile  \( TiO_{2} \)  is manufactured using both a chloride production process and a sulfate

use of the
chloride
, the two
customer
chloride
ants and in
only 55% of
acted paper
ics. Once
chloride or
performance
orprietary
production process. Manufacturers of the
form, especially during periods of  \( TiO_{2} \)  supply tightness. The
process is the preferred form for use in coatings and plastics
largest end-use markets. Due to environmental factors and
considerations, the proportion of  \( TiO_{2} \)  industry sales represented by
process pigments has increased relative to sulfate process pigment
2011, chloride process production facilities represented approximately
industry capacity. The sulfate process is preferred for use in select
products, ceramics, rubber tires, man-made fibers, food and cosmetic
an intermediate  \( TiO_{2} \)  pigment has been produced by either the
sulfate process, it is "finished" into products with specific
characteristics for particular end-use applications through



processes involving various chemical surface treatments and intensive micronizing (milling).

- Chloride Process - The chloride process is a continuous process in which chlorine is used to extract rutile  \( TiO_{2} \) . This process has also gained market share over the sulfate process because of the relatively lower upfront capital investment in plant and equipment required. The chloride process produces less waste than the sulfate process because much of the chlorine is recycled and feedstock bearing higher titanium content is used. The chloride process also has lower energy requirements and is less labor-intensive than the sulfate process. The chloride process produces an intermediate base pigment with a wide range of properties.

- Sulfate Process - The Sulfate process is a batch process in which sulfuric acid is used to extract the  \( TiO_{2} \)  from ilmenite or titanium slag. After separation from the impurities in the ore (mainly iron), the ore is then subjected to further processing to produce the final product. The process involves the use of a series of chemical reactions to convert the ore into a more refined product. The final product is then subjected to further processing to produce the final product.

We produced 550,000 metric tons of  \( TiO_{2} \)  in 2011, up from the 524,000 metric tons we produced in 2010. Our  \( TiO_{2} \)  production in 2011 was a new record for us. Such production amounts include our 50% interest in the  \( TiO_{2} \)  manufacturing joint venture discussed below in "TiO \( _{2} \)  Manufacturing Joint Venture." Our average production capacity utilization rates were approximately 76% in 2009, near full capacity in 2010 and at full capacity in 2011. In late 2008, and as a result of the sharp decline in global demand, we experienced a build up in our inventory levels. In order to decrease our inventory levels and improve our liquidity, we implemented production curtailments during the first half of 2009. Consequently, our average production capacity utilization rates were approximately 58% during the first half of 2009 as compared to 94% during the second half of 2009.

We operate four  \( TiO_{2} \)  plants in Europe (one in each of Leverkusen, Germany; Nordenham, Germany; Langerbrugge, Belgium; and Fredrikstad, Norway). In North America, we have a  \( TiO_{2} \)  plant in Varennes, Quebec, Canada and, through the manufacturing joint venture described below in "TiO \( _{2} \)  Manufacturing Joint Venture," a 50% interest in a  \( TiO_{2} \)  plant in Lake Charles, Louisiana.

Our production capacity in 2011 was 550,000 metric tons, approximately three-fourths of which was from the chloride production process.



The following table presents the division of our expected 2012 manufacturing capacity by plant location and type of manufacturing process:

<table><tr><td rowspan="2">Facility</td><td rowspan="2">Description</td><td colspan="2">% of Capacity by TiO2 Manufacturing Process</td></tr><tr><td>Chloride</td><td>Sulfate</td></tr><tr><td>Leverkusen, Germany (1)</td><td>TiO2 production, chloride and sulfate process, co-products</td><td>39%</td><td>26%</td></tr><tr><td>Nordenham, Germany</td><td>TiO2 production, sulfate process, co-products</td><td>-</td><td>40</td></tr><tr><td>Langerbrugg, Belgium</td><td>TiO2 production, chloride process, co-products, titanium chemicals products</td><td>21</td><td>-</td></tr><tr><td>Fredrikstad, Norway (2)</td><td>TiO2 production, sulfate process, co-products</td><td>-</td><td>21</td></tr><tr><td>Varennes, Canada</td><td>TiO2 production, chloride and sulfate process, slurry facility, titanium chemicals products</td><td>21</td><td>13</td></tr><tr><td>Lake Charles, LA, US (3)</td><td>TiO2 production, chloride process</td><td>19</td><td>-</td></tr><tr><td>Total</td><td></td><td>100%</td><td>100%</td></tr></table>

(1) The Leverkusen facility is located within an extensive manufacturing complex owned by Bayer AG. We own the Leverkusen facility, which represents about one-third of our current  \( TiO_{2} \)  production capacity, but we lease the land under the facility from Bayer under a long-term agreement which expires in 2050. Lease payments are periodically negotiated with Bayer for periods of at least two years at a time. A majority-owned subsidiary of Bayer provides some raw materials including chlorine, auxiliary and operating materials, utilities and services necessary to operate the Leverkusen facility under separate supplies and services agreements.

(2) The Fredrikstad plant is located on public land and is leased until April 2013 with an option to extend the lease for an additional 50 years.

(3) We operate this facility in a 50/50 joint venture with Tioxide Americas Inc., a subsidiary of Huntsman Corporation and the amount indicated in the table above represents our share of the  \( TiO_{2} \)  produced by the joint venture. See Note 5 to our Consolidated Financial Statements and "TiO \( _{2} \)  Manufacturing Joint Venture."

We own the land underlying all of our principle production facilities unless otherwise indicated in the table above.

Our production capacity has increased by approximately 20% over the past ten years due to debottlenecking programs, with only moderate capital



expenditures. We believe that our annual attainable production capacity for 2012 is approximately 550,000 metric tons and we currently expect we will operate at near full production capacity for the year.

We also operate two ilmenite mines in Norway pursuant to a governmental concession with an unlimited term. In addition, we operate a rutile slurry manufacturing plant in Lake Charles, Louisiana, which converts dry pigment manufactured at the Lake Charles  \( TiO_{2} \)  facility for us into a slurry form that is then shipped to customers.

We have various corporate and administrative offices located in the U.S., Germany, Norway, Canada and Belgium and various sales offices located in the U.S., Canada, Belgium, France, the Netherlands and the United Kingdom.

TiO \( _{2} \) -Manufacturing Joint Venture.....solaries; and a subsidiary of an a manufacturing joint venture, owns and operates a chloride-uisiana. We and Huntsman share separate offtake agreements.

Business and affairs of the joint
decisions. This committee is
point and two of whom Huntsman
operations of the joint venture
orry committee. We appoint one
or.

The TiO \( _{2} \)  produced by the joint end in our financial statements, for our interest in the joint venture operates on a break-even utility in earnings of the joint enditures equally with Huntsman costs for the pigment grades as cost of sales as the TiO \( _{2} \)  is Financial Statements.

The process TiO \( _{2} \)  are titanium-purchased slag), chlorine and suppliers, while petroleum coke suppliers. Titanium-containing cess is available from a limited supply in Australia, South Africa, base chloride process grade slag long-term supply contract that Sands (PTY) LTD under a supply contract that expires in December 2012. We put the raw materials used in chlo containing feedstock (natural rutile ore or coke. Chlorine is available from a number of is available from a limited number of s feedstock suitable for use in the chloride pro but increasing number of suppliers principal Canada, India and the United States. We purc from Rio Tinto Iron and Titanium under a expires at the end of 2016 and from Exxaro TS1 contract that expires in December 2012. We pu



purchased under these contracts to meet our chloride process feedstock requirements over the next several years.

The primary raw materials used in sulfate process  \( TiO_{2} \)  are titanium-containing feedstock, primarily ilmenite or purchased sulfate grade slag and sulfuric acid. Sulfuric acid is available from a number of suppliers. Titanium-containing feedstock suitable for use in the sulfate process is available from a limited number of suppliers principally in Norway, Canada,

Australia. India. and South Africa. As one of the few vertically-integrated

ers of sulfate process  \( TiO_{2} \) , we operate two rock ilmenite mines in which provided all of the feedstock for our European sulfate process in 2011. We expect ilmenite production from our mines to meet our sulfate process feedstock requirements for the foreseeable future. Canadian sulfate process plant, we also purchase sulfate grade slag from Q.I.T. Fer et Titane Inc. (a subsidiary of Rio Tinto Iron and m), under a long-term supply contract that expires at the end of 2014. The raw materials purchased under these contracts to meet our process feedstock requirements over the next several years.

any of our raw material contracts contain fixed quantities we are to purchase, or specify a range of quantities within which we are to purchase. The pricing under these agreements is generally fixed, quarterly or semi-annually, depending upon the summners.

e summarizes our raw materials purchased or mined in

Raw Materials

produce
Norway,
TiO₂ pl.
Europea
For ou
primari
Titaniu
We exp
sulfate

M
require
require

Meyvabara quere.egotia

The following table 2011.



Our marketing strategy is also aimed at working directly with customers to monitor the success of our products in their end-use applications, evaluate the need for improvements in product and process technology and identify



The following chart shows our estimate of worldwide production capacity in 2011:

<table><tr><td colspan="2">Worldwide Production Capacity - 2011</td></tr><tr><td>DuPont</td><td>20%</td></tr><tr><td>Cristal</td><td>12%</td></tr><tr><td>Kronos</td><td>10%</td></tr><tr><td>Huntsman</td><td>9%</td></tr><tr><td>Tronox</td><td>8%</td></tr><tr><td>Other</td><td>41%</td></tr></table>

DuPont has over one-half of total North American  \( TiO_{2} \)  production capacity and is our principal North American competitor. Tronox filed for Chapter 11 bankruptcy protection in January 2009 and continued to operate as a debtor-in-possession until February 2011, at which time it emerged from Chapter 11. During 2011, Tronox agreed to participate in certain transactions that, if approved, would give Exxaro Mineral Sands, a major producer of titanium ore feedstock, an ownership interest in Tronox. There can be no assurance that such transactions involving Tronox would be approved and completed.

Over the past ten years, we and our competitors have increased industry capacity through debottlenecking projects, which in part compensated for the shut down of  \( TiO_{2} \)  plants in France, the United States, the United Kingdom and China. In addition, in May 2011, Dupont announced a comprehensive plan to add approximately 350,000 metric tons of global capacity in the next three years. Although overall industry demand is expected to be higher in 2012 as compared to 2011 as a result of improving worldwide economic conditions, we do not expect any other significant efforts will be undertaken by us or our competitors to further increase capacity for the foreseeable future, other than through debottlenecking projects. If actual developments differ from our expectations, the  \( TiO_{2} \)  industry's performance and that of our own could be unfavorably affected.

The  \( TiO_{2} \)  industry is characterized by high barriers to entry consisting of high capital costs, proprietary technology and significant lead times (typically three to five years in our experience) required to construct new facilities or expand existing capacity. In addition, we believe the suppliers of titanium-containing feedstock do not currently have the ability to supply the raw materials that would be required to operate any such new  \( TiO_{2} \)  production capacity until they have invested in additional infrastructure required to expand their own production capacity, which we believe will take a few years to complete. We believe it is unlikely any new  \( TiO_{2} \)  plants will be constructed in Europe or North America in the foreseeable future.

## Research and Development

We employ scientists, chemists, process engineers and technicians who are engaged in research and development, process technology and quality assurance activities in Leverkusen, Germany. These individuals have the responsibility for improving chloride and sulfate production processes, improving product quality and strengthening our competitive position by developing new applications. Our expenditures for these activities were approximately $12 million in 2009, $13 million in 2010 and $20 million in 2011. We expect to spend approximately $22 million on research and development in 2012.

We continually seek to improve the quality of our grades and have been successful at developing new grades for existing and new applications to meet



the needs of our customers and increase product life cycles. Since 2006, we have added five new grades for plastics and coatings.

## Patents, Trademarks, Trade Secrets and Other Intellectual Property Rights

We have a comprehensive intellectual property protection strategy that includes obtaining, maintaining and enforcing our patents, primarily in the United States, Canada and Europe. We also protect our trademark and trade secret rights and have entered into license agreements with third parties concerning various intellectual property matters. We have also from time to time been involved in disputes over intellectual property.

Patents - We have obtained patents and have numerous patent applications pending that cover our products and the technology used in the manufacture of our products. Our patent strategy is important to us and our continuing business activities. In addition to maintaining our patent portfolio, we seek patent protection for our technical developments, principally in the United States, Canada and Europe. U.S. Patents are generally in effect for 20 years from the date of filing. Our U.S. patent portfolio includes patents having remaining terms ranging from one year to 20 years.

Trademarks and Trade Secrets - Our trademarks, including Kronos \( ^{®} \) , are covered by issued and/or pending registrations, including in Canada and the United States. We protect the trademarks that we use in connection with the products we manufacture and sell and have developed goodwill in connection with our long-term use of our trademarks. We conduct research activities in secret and we protect the confidentiality of our trade secrets through reasonable measures, including confidentiality agreements and security procedures. We rely upon unpatented proprietary knowledge and continuing technological innovation and other trade secrets to develop and maintain our competitive position. Our proprietary chloride production process is an important part of our technology and our business could be harmed if we fail to maintain confidentiality of our trade secrets used in this technology.

## Employees

we employed the following number of people:

1,985
440
AL

As of December 31, 2011,

Europe
Canada



The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.



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changes in economic conditions, especially in Western industrialized nations, can significantly impact our earnings and operating cash flows. Historically, the markets for many of our products have experienced alternating periods of increasing and decreasing demand. Relative changes in the selling prices for our products are one of the main factors that affect the level of our



reduced production levels, which could reduce our earnings and decrease our liquidity.

We have long-term supply contracts that provide for our TiO₂ feedstock requirements that currently expire through 2016, most of which we may be able to renew. We may not be successful in renewing these contracts or in obtaining long-term extensions to these contracts prior to expiration. The agreements require us to purchase certain minimum quantities of feedstock with

agreement with the other long-term supply and service December 31, 2011. In addition



of our debt before maturity. We may not be able to refinance any of our debt in a timely manner on favorable terms if at all, in the current credit markets. Any inability to generate sufficient cash flows or to refinance our debt on favorable terms could have a material adverse effect on our financial condition.

Global climate change legislation could negatively impact our financial results or limit our ability to operate our businesses.

We operate production facilities in several countries. In many of the countries in which we operate, legislation has been passed, or proposed legislation is being considered, to limit greenhouse gases through various means, including emissions permits and/or energy taxes. In several of our production facilities, we consume large amounts of energy, primarily electricity and natural gas. To date, the permit system in effect in the various countries in which we operate has not had a material adverse effect on our financial results. However, if further greenhouse gas legislation were to

be enacted in one or more countries, it could negatively impact results from operations through increased costs of production. It relates to our energy requirements or our need to obtain emission permits. If such increased costs of production were to materialize, we may be in pass price increases onto our customers to compensate for increased costs, which may decrease our liquidity, operating income and operations.

## ITEM 1B. UNRESOLVED STAFF COMMENTS

None

## ITEM 2. PROPERTIES

Information on our properties is incorporated by reference Manufacturing, Operations and Properties above. Our corporate head located in Dallas, Texas. See Note 15 to our Consolidated Statements for information on our leases.

## ITEM 3. LEGAL PROCEEDINGS

We are involved in various environmental, contractual, or property, product liability and other claims and disputes incident to our operations. We are involved in various environmental, contractual, or property, product liability and other claims and disputes incident



## PART II

## ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock is listed and traded on the New York Stock Exchange (symbol: KRO). As of February 29, 2012, there were approximately 2,800 holders of record of our common stock. The following table sets forth the high and low closing per share sales price for our common stock for the periods indicated according to Bloomberg and dividends paid during such periods. On February 29, 2012 the closing price of our common stock was $23.37.

<table><tr><td></td><td>High</td><td>Low</td><td>Cash Dividends Paid</td></tr><tr><td>Year ended December 31, 2010</td><td></td><td></td><td></td></tr><tr><td>First Quarter</td><td>$ 8.60</td><td>$ 6.78</td><td>$ -</td></tr><tr><td>Second Quarter</td><td>10.13</td><td>7.33</td><td>-</td></tr><tr><td>Third Quarter</td><td>19.92</td><td>9.08</td><td>-</td></tr><tr><td>Fourth Quarter</td><td>22.39</td><td>18.08</td><td>.125</td></tr></table>

Year ended December 31, 2011



In November 2010, we completed a secondary public offering of 8.97 million shares of our common stock in an underwritten offering for net proceeds of $337.6 million. See Note 13 to our Consolidated Financial Statements.

The quick brown fox jumps over the lazy dog.



(2) In May 2011, we implemented a 2-for-1 stock split of our common stock effected in the form of a stock dividend. All per share disclosures above reflect this stock split. Cash dividends in 2011 include a $5.50 per share special dividend paid to stockholders in the first quarter of 2011. See Note 13 to our Consolidated Financial Statements.

(3) Metric tons in thousands

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Business overview

We are a leading global producer and marketer of value-added TiO \( _{2} \) . TiO \( _{2} \)  is used for a variety of manufacturing applications, including plastics, paints, paper, and other industrial products. During 2011, approximately 100,000



In addition, our effective income tax rate in each of 2009, 2010 and 2011 was 21.4%, 21.4% and 21.4% respectively.






long term. However, prior to the complete utilization of such carryforwards, if we were to generate losses in our German operations for an extended period of time, it is possible that we might conclude the benefit of such carryforwards would no longer meet the more-likely-than-not recognition criteria, at which point we would be required to recognize a valuation allowance against some or all of the then-remaining tax benefit associated with the carryforwards.

We record a reserve for uncertain tax positions where we believe it is more-likely-than-not our tax positions will not prevail with the applicable tax authorities. It is possible that in the future we may change our assessment regarding the probability that our tax positions will prevail that would require an adjustment to the amount of our reserve for uncertain tax positions that could either increase or decrease, as applicable, reported net income in the period the change in assessment was made.

In addition, we evaluate at the end of each reporting period as to whether or not some or all of the undistributed earnings of our non-U.S. subsidiaries are permanently reinvested (as that term is defined in GAAP). While we may have concluded in the past that some of such undistributed earnings are permanently reinvested, facts and circumstances can change in the future and it is possible that a change in facts and circumstances, such as a change in the expectation regarding the capital needs of our non-U.S. subsidiaries, could result in a conclusion that some or all of such undistributed earnings are no longer permanently reinvested. In such an event, we would be required to recognize a deferred income tax liability in an amount equal to the estimated incremental U.S. income tax and withholding tax liability that



<table><tr><td rowspan="3"></td><td colspan="4">Year ended December 31,</td></tr><tr><td colspan="2">2010</td><td colspan="2">2011</td></tr><tr><td colspan="4">(Dollars in millions)</td></tr><tr><td>Net sales</td><td>$ 1,449.7</td><td>100 %</td><td>$ 1,943.3</td><td>100 %</td></tr><tr><td>Cost of sales</td><td>1,104.4</td><td>76</td><td>1,194.9</td><td>61</td></tr><tr><td>Gross margin</td><td>345.3</td><td>24</td><td>748.4</td><td>39</td></tr><tr><td>Other operating income and expenses, net</td><td>166.9</td><td>12</td><td>201.9</td><td>11</td></tr><tr><td>Income from operations</td><td>$ 178.4</td><td>12 %</td><td>$ 546.5</td><td>28 %</td></tr><tr><td></td><td></td><td></td><td></td><td>%</td></tr><tr><td></td><td></td><td></td><td></td><td>Change</td></tr><tr><td>TiO2 operating statistics:</td><td></td><td></td><td></td><td></td></tr><tr><td>Sales volumes*</td><td>528</td><td></td><td>503</td><td>(5) %</td></tr><tr><td>Production volumes*</td><td>524</td><td></td><td>550</td><td>5 %</td></tr><tr><td>Percentage change in net sales:</td><td></td><td></td><td></td><td></td></tr><tr><td>TiO2 product pricing</td><td></td><td></td><td></td><td>40 %</td></tr><tr><td>TiO2 sales volumes</td><td></td><td></td><td></td><td>(5)</td></tr><tr><td>TiO2 product mix</td><td></td><td></td><td></td><td>(6)</td></tr><tr><td>Changes in currency exchange rates</td><td></td><td></td><td></td><td>5</td></tr><tr><td>Total</td><td></td><td></td><td></td><td>34 %</td></tr></table>

## * Thousands of metric tons

Industry conditions and 2011 overview - In 2011 our production facilities operated at full capacity rates and we increased  \( TiO_{2} \)  selling prices throughout 2010 and 2011, resulting in increased profitability and cash flows. Global customer demand for our  \( TiO_{2} \)  products also remained strong in 2011. Nevertheless, we experienced a softening of demand in the fourth quarter as a result of customer destocking, and our sales volumes in 2011 were lower as compared to 2010, with most of the lower volumes occurring in the fourth quarter. We anticipate that customer demand will rebound from the softness experienced in the fourth quarter, and that we will be able to implement further  \( TiO_{2} \)  selling price increases.

We experienced increased costs for our raw materials such as ore and petroleum coke in 2011. We expect further increases in raw material costs in 2012.

Overall, based on positive market dynamics in the  \( TiO_{2} \)  industry, we expect our profitability and cash flows to increase in 2012 and the foreseeable future.

Net sales - Net sales increased 34% or $493.6 million in 2011 compared to 2010, primarily due to a 40% increase in average  \( TiO_{2} \)  selling prices.  \( TiO_{2} \)  selling prices will increase or decrease generally as a result of competitive market pressures, changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs. Based on current conditions in the  \( TiO_{2} \)  industry, as well as the expectation for increases in our manufacturing costs discussed below, we currently expect average selling prices in 2012 to be higher than in 2011.

While the amount of inventory available for shipment in 2011 increased due to higher production volumes during the year, our sales volumes were 5%



lower than in 2010 as a result of soft demand in the fourth quarter of 2011 due to customer destocking.

In addition to the factors discussed above, we estimate the favorable effect of changes in currency exchange rates increased our net sales by approximately $70 million, or 5%, as compared to 2010, while relative changes in mix of the various grades of our products sold decreased our net sales by approximately $87 million, or 6%.

Cost of sales - Cost of sales increased $90.5 million or 8% in 2011 compared to 2010 due to the net impact of a 5% increase in TiO₂ production volumes, higher raw material costs of $75.1 million (primarily feedstock ore and petroleum coke), an increase in maintenance costs of $15.0 million (consistent with the increase in production volumes) and currency fluctuations (primarily the euro). Overall, our per metric ton cost of TiO₂ we produced increased approximately 10% as compared to 2010. Cost of sales as a percentage of net sales decreased to 51% in 2011 compared to 76% in 2010 primarily due to the effects of higher selling prices and the benefit of higher production volumes in 2011. Our TiO₂ production volumes in 2011 established a new record for us for an annual production period. We currently expect our feedstock ore and our other raw material costs to increase in 2012, including significant increases in our feedstock ore costs.

Income from operations - Income from operations increased by $368.1 million from $178.4 million in 2010 to $546.5 million in 2011. Income from operations as a percentage of net sales increased to 28% in 2011 from 12% in 2010. This increase is driven by the improvement in gross margin, which increased to 3% in civil companies' primary because of the effect of offset the impact of higher maintenance). Changes in current income from operations in 2011 are

sales, selling, general and administrative
ent at approximately 10% and 12% for 2011 and

(expense) - In March 2011, we redeemed €80 6.5% Senior Secured Notes. In the third and repurchased in open market transactions an amount of our 6.5% Notes. We recognized a net charge related to the redemption and open, consisting of the call premium, the write-inancing costs and original issue discount purchased Notes.

$6.1 million from $38.8 million in 2010 to net effects of the prepayment and open market $5.5% Senior Secured Notes as discussed above, rates. The interest expense we recognize are euro exchange rate.

Income tax provision was $196.1 million in 2010. This increase is primarily due to our increase in the net effect of the repurchase of our 6.5% Senior Secured Notes. The interest expense we recognize are euro exchange rate.
As a percentage of net expenses were relatively consistent 2010 respectively.

Other non-operating income million principal amount of our fourth quarters of 2011, we aggregate €40.8 million principal net $3.1 million pre-tax interest market purchases of the 6.5% Not-off of unamortized deferred financial associated with the redeemed and

Interest expense decreased $32.7 million in 2011 due to the purchases of a portion of the 6 and changes in currency exchange will vary with fluctuations in t

Income tax provision - Our 2011 compared to $9.7 million in increased earnings, See Note 10 a tabular reconciliation of our results in the following table:



- Our income tax provision in 2011 includes $17.2 million for U.S. incremental income taxes on current earnings repatriated from our German subsidiary, which earnings were used to fund a portion of the redemption and repurchases of our Senior Secured Notes.

- Our income tax provision in 2010 includes a $35.2 million non-cash income tax benefit related to a European Court ruling that resulted in the favorable resolution of certain income tax issues in Germany and an increase in the amount of our German corporate and trade tax net operating loss carryforwards.

Comparison of 2010 to 2009 Results of Operations

<table><tr><td rowspan="3"></td><td colspan="3">Year ended December 31,</td></tr><tr><td>2009</td><td>2010</td><td></td></tr><tr><td colspan="3">(Dollars in millions)</td></tr><tr><td>Net sales</td><td>$1,142.0</td><td>100 %</td><td>$1,449.7</td></tr></table>



decreased to 76% in 2010 compared to 89% in 2009 primarily due to higher selling prices in 2010 and the significantly higher production volumes in 2010, as we implemented temporary plant curtailments during the first half of 2009 in order to reduce our finished goods inventories to an appropriate level. Such temporary plant curtailments resulted in approximately $80 million of unabsorbed fixed production costs which were charged directly to cost of sales in the first six months of 2009.

Income (loss) from operations - Income (loss) from operations increased by $194.1 million from an operating loss of $15.7 million in 2009 to operating income of $178.4 million in 2010. Income (loss) from operations as a percentage of net sales increased to 12% in 2010 from (2)% in 2009. This increase is driven by the improvement in gross margin, which increased to 24% for 2010 compared to 11% for 2009. Our gross margin increased primarily because of higher sales volumes, higher selling prices and lower manufacturing costs per ton resulting from higher production volumes. However, changes in currency exchange rates negatively affected our gross margin and income (loss) from operations. We estimate that changes in currency exchange rates decreased income (loss) from operations by approximately $27 million in 2010 as compared to 2009.

As a percentage of net sales, selling, general and administrative expenses were relatively consistent at approximately 12% and 13% for 2010 and 2009 respectively.

Interest expense - Interest expense decreased $2.6 million from $41.4 million in 2009 to $38.8 million in 2010 due to decreased average borrowings under our revolving credit facilities. The interest expense we recognize will vary with fluctuations in the euro exchange rate.

Income tax provision (benefit) - Our income tax provision was $9.7 million in 2010 compared to an income tax benefit of $22.2 million in 2009. See Note 10 to our Consolidated Financial Statements for a tabular reconciliation of our statutory income tax provision to our actual tax provision. Some of the more significant items impacting this reconciliation are summarized below.

- Our income tax provision in 2010 includes a $35.2 million non-cash income tax benefit related to a European Court ruling that resulted in the favorable resolution of certain income tax issues in Germany and an

operating loss carryforwards.

- Our income tax benefit for 2009 includes a non-cash benefit of $4.7 million related to a net decrease in our reserve for uncertain tax positions, primarily as a result of the resolution of tax audits in Belgium and Germany in the third and fourth quarters.

## Effects of Currency Exchange Rates

We have substantial operations and assets located outside the United States (primarily in Germany, Belgium, Norway and Canada). The majority of our sales from non-U.S. operations are denominated in currencies other than the U.S. dollar, principally the euro, other major European currencies and the Canadian dollar. A portion of our sales generated from our non-U.S. operations is denominated in the U.S. dollar. Certain raw materials used worldwide, primarily titanium-containing feedstocks, are purchased in U.S. dollars, while labor, and other production costs are purchased primarily in local currencies.



inventory on hand at the end of 2011. Consequently, we expect our sales volumes to increase in 2012 as compared to 2011.

We implemented significant increases in  \( TiO_{2} \)  selling prices throughout 2011. Our average  \( TiO_{2} \)  selling prices were 40% higher in 2011 as compared to 2010, and our average prices at the end of 2011 were 11% higher than at the end of the third quarter of 2011 and 47% higher than at the end of 2010. Based on the expected continuation of strong demand levels and increases in our manufacturing costs, we anticipate that 2012 will continue to increase throughout 2012, including increases to offset the impact of our expected higher manufacturing costs.

Throughout 2011 we have seen significantly higher feedstock ore costs driven by tight ore supplies and higher-than-historical increases in petroleum coke and energy costs. We currently expect this trend to continue in 2012, with continued higher-than-historical increases in feedstock ore, petroleum coke, energy and freight costs. Overall, we currently expect the per metric ton cost of  \( TiO_{2} \)  we produce will increase approximately 50% to 60% in 2012 as compared to 2011 primarily due to higher feedstock ore costs. Our cost of sales per metric ton of  \( TiO_{2} \)  sold in 2012 is consequently expected to be significantly higher as compared to 2011, but only after we have sold the  \( TiO_{2} \)  products on hand at the end of 2011, the cost of which is significantly lower than the cost of  \( TiO_{2} \)  products sold on hand at the end of 2011.

industry, if our costs of production exceed our current expectations in 2012, we will continue to increase our production capacity, which will result in higher costs through additional selling price increases.

Overall, we expect income from operations will be higher in 2012 as compared to 2011, as the favorable effect of higher selling prices and sales volumes will more than offset the impact of higher production costs.

Our expectations as to the future of the  \( TiO_{2} \)  industry are based upon a number of factors beyond our control, including worldwide growth of gross domestic product, competition in the marketplace, continued operation of competitors, unexpected or earlier-than-expected capacity additions or reductions and technological advances. If actual developments differ from our expectations, our results of operations could be unfavorably affected.

## LIQUIDITY AND CAPITAL RESOURCES

Consolidated cash flows



- higher net distributions from our TiO \( _{2} \)  joint venture in 2011 of $1.4 million due to related changes in their cash requirements and

The quick brown fox jumps over the lazy dog.



- purchased $43.2 million in marketable equity securities of related parties, including $3.6 million of purchases in late 2010 which settled in early 2011.

During 2010, we:

• loaned a net $61.9 million under our revolving demand promissory note with Valhi, and

- purchased an aggregate of $46.0 million in marketable equity securities of related parties, including $3.6 million of purchases in late 2010 which settled in early 2011.

Our marketable securities are discussed in Note 6 to our Consolidated financial statements. All principal on our loan to Valhi, as amended, is Financial Statements.






maximum amount of dividends and other restricted payments that KII could make (the "Restricted Payment Basket") was approximately $256.6 million.

## Liquidity

Our primary source of liquidity on an ongoing basis is cash flows from operating activities which is generally used to (i) fund working capital expenditures, (ii) repay any short-term indebtedness incurred for working capital purposes and (iii) provide for the payment of dividends. From time-to-time, we will incur indebtedness, generally to (i) fund short-term working



including block purchases, or in privately-negotiated transactions at unspecified prices and over an unspecified period of time. To date, we have not made any repurchases under the plan and all 2.0 million shares are available for repurchase. See Note 13 to our Consolidated Financial Statements.

## Capital expenditures

We intend to spend approximately $74 million to maintain and improve our existing facilities during 2012, including approximately $26 million in the

effectiveness of our manufacturing facilities. Our capital expenditures in the area of environmental compliance, protection and improvement include expenditures which are primarily focused on increased operating efficiency but also result in improved environmental protection, such as lower emissions from our manufacturing plants. Capital spending for 2012 is expected to be funded through cash on hand or borrowing under existing credit facilities.

## Off-balance sheet financing

Other than operating lease commitments disclosed in Note 15 to our Consolidated Financial Statements, we are not party to any material off-balance sheet financing arrangements.

Cash, cash equivalents, restricted cash and marketable securities

At December 31, 2011 we had:

<table><tr><td rowspan="3"></td><td colspan="4">Held by</td></tr><tr><td colspan="2">U.S.</td><td colspan="2">Non-U.S.</td></tr><tr><td colspan="4">Entities.....Entities.....Total</td></tr><tr><td>82.5</td><td>Cash and cash equivalents</td><td>$ 58.5</td><td>$ 24.0</td><td>$</td></tr><tr><td>7.3</td><td>Restricted cash</td><td>-</td><td>7.3</td><td></td></tr><tr><td>20.9</td><td>Mutual funds</td><td>20.9</td><td>-</td><td></td></tr><tr><td>98.4</td><td>Noncurrent marketable securities</td><td>98.4</td><td>-</td><td></td></tr></table>

We are party to certain transactions with us our Consolidated Financial Statements. In our opinion, no less favorable

ed Financial Statements for a
ns currently underway, certain

Recent accounting

Staements.

Reference party transactions

We are party to certain transactions with to our Consolidated Financial Statements. transactions with related parties on terms, in to us than could be obtained from unrelated pa

## Commitments and contingencies

See Notes 10 and 15 to our Consolidated description of certain income tax examination legal proceedings and other commitments.

## Recent accounting pronouncements

See Note 17 to our Consolidated Financial



As more fully described in the Notes to the Consolidated Financial

Statements and Notes to the Notes to the Consolidated Financial Statements and Notes to the Notes to the Consolidated Financial Statements and Notes to the Notes to the Consolidated Financial

By contract to pay certain amounts in the contractually agreed amount for a period of time.



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At December 31, 2011, approximately 54%, 24%, 16% and 4% of the plan assets related to our plans in the Germany, Canada, Norway and the U.S., respectively. We use several different long-term rates of return on plan asset assumptions in determining our consolidated defined benefit pension plan expense. This is because the plan assets in different countries are invested in a different mix of investments and the long-term rates of return for different investments differ from country to country.

In determining the expected long-term rate of return on plan asset assumptions, we consider the long-term asset mix (e.g. equity vs. fixed income) for the assets for each of our plans and the expected long-term rates of return for such asset components. In addition, we receive third-party advice about appropriate long-term rates of return. Such assumed asset mixes are summarized below:

• In Germany, the composition of our plan assets is established to satisfy the requirements of the German insurance commissioner.

The combined investment trust, the investment by certain plans sponsored by C. Simmons is the sole trustee of the investment objective is to provide a rate of return of 7% and 3%, respectively.

In the U.S. substantially all of the assets are in Master Retirement Trust ("CMRT"), a collected sponsored by Contran to permit the collective master trusts which fund certain employee benefit Contran and certain of its affiliates. Harold C. Simmons is the sole trustee of the CMRT and is a member of the CMRT investment common portfolio; however through December 31, 2009 we invested in a the CMRT which does not include the TIMET holdings. Beginning we began to invest in the portion of the CMRT that holds such During the history of the CMRT from its inception in 198 December 31, 2011, the average annual rate of return (in CMRT's investment in TIMET common stock) has been 14%, while return excluding the CMRT's investment in TIMET common stock has been 11.4%.



Our main aim weighted average asset allocation by asset category

December 31, 2011



In addition to the actuarial assumptions discussed above, the amount of recognized defined benefit pension expense and the amount of net pension asset and net pension liability will vary based upon relative changes in currency exchange rates.

A reduction in the assumed discount rate generally results in an actuarial loss, as the actuarially-determined present value of estimated future benefit payments will increase. Conversely, an increase in the assumed discount rate generally results in an actuarial gain. In addition, an actual return on plan assets for a given year that is greater than the assumed return on plan assets results in an actuarial gain, while an actual return on plan assets that is less than the assumed return results in an actuarial loss.



We recognized consolidated OPEB cost of approximately $6 million in 2009, $1.2 million in 2010 and $3.3 million in 2011. Similar to defined benefit pension benefits, the amount of funding will differ from the expense coverage. The OPEB and the OPEB and the OPEB and the OPEB and the OPEB and



## General

We are exposed to market risk from changes in interest rates, currency exchange rates and raw materials prices.

## Interest rates

We are exposed to market risk from changes in interest rates, primarily related to indebtedness. At December 31, 2010 and 2011, the majority of our aggregate indebtedness was comprised of fixed-rate instruments. The large percentage of fixed-rate debt instruments minimizes earnings volatility that would result from changes in interest rates. The following table presents principal amounts and weighted average interest rates for our aggregate outstanding indebtedness at December 31, 2011. Information shown below for such non-U.S. dollar denominated indebtedness is presented in its U.S. dollar

-ae- pecement of 31, 2% at 31, 2% at 31, 2% at 31, 2%

Note 9 to our Consolidated Financial Statements.

equivalence

euro. See

Amount



purposes in the past, nor do we currently anticipate entering into such contracts for trading or speculative purposes in the future.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.



materially from such assumptions. Accordingly, such forward-looking statements should not be considered to be projections by us of future events, gains or losses.

## ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information called for by this Item is contained in a separate section of this Annual Report. See "Index of Financial Statements and Schedules" (page F-1).

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures. The term



- Provide reasonable assurance regarding prevention or timely detection of an unauthorized acquisition, use or disposition of assets that could have a material effect on our Consolidated Financial Statements.

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to report on internal control over financial reporting in this Annual Report on Form 10-K for the year ended December 31, 2011. Our independent registered public accounting firm is also required to annually attest to our internal control over financial reporting.

essment of internal control over
- - - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - -
(li) internal control over the preparation of our
- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - -
es required by Article 12 of Regulation S-X.
- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - -
internal control over financial reporting with
- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - -
vestment that are recorded in the consolidated
- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - -
ing controls over the selection of accounting
- - - - - - - - - - - - - - - - - - - - -
, the recognition of equity method earnings and
- - - - - - - - - - - - - - - - - - -
on, valuation and recording of our investment

Over Financial Reporting

change to our internal control over financial

and are increasingly likely to materialize, affect our internal control over financial reporting.



Our chief executive officer and chief financial officer are also required to, among other things, file quarterly certifications with the SEC regarding the quality of our public disclosures, as required by Section 302 of the Sarbanes-Oxley Act of 2002. The certifications for the quarter ended

Report on Form 10-K.

ITEM 9B. OTHER INFORMATION

Not applicable



## PART III

## ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is incorporated by reference to our 2012 definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this report.

## ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to our 2012 proxy statement.

## ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated by reference to our 2012 proxy statement.

## ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by the Item is incorporated by reference to our 2012 proxy statement.

JULY 14. BRINCETAN ACCOUNTING SERVICES AND SERVICES

The information required by the Item is incorporated by reference to our 2012 proxy statement.



## PART IV

## ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) and (c) Financial Statements and Schedule

## The Registrant

The consolidated financial statements and schedule of the Registrant listed on the accompanying Index of Financial Statements and Schedules (see page F-1) are filed as part of this Annual Report.

## (b)

## Exhibits

Included as exhibits are the items listed in the Exhibit Index. We will furnish a copy of any of the exhibits listed below upon payment of $4.00 per exhibit to cover our costs to furnish the exhibits. Pursuant to Item 601(b)(4)(iii) of Regulation S-K, any

and other agreements related to indebtedness which do not exceed 1% of annualized net assets. See the Memorandum of 2010, 2011, ha furnished to the Commission upon request.

We will also furnish, without charge, a copy of our amended and restated Code of Business Conduct and Ethics, as adopted by the board of directors on February 9, 2012, upon request. Such requests should be directed to the attention of the Corporate Secretary at our corporate offices located at 5430 LBJ Freeway, Suite 1700, Dallas, TX 75240.

## Exhibit Index

First Amended and Restated Certificate of Incorporation of Kronos Worldwide, Inc. - incorporated by reference to Exhibit 3.1 of the Registration statement on Form 10 of the Registrant (File No. 001-31763).

Amended and Restated Bylaws of Kronos Worldwide, Inc. as of October 25, 2007 - incorporated by reference to Exhibit 3.1 of the

Registrant's Current Report on Form 8-K Filed (File No. 001-31763)

the U.S. Securities and Exchange Commission on October 31,

7.



Registration statement on Form 10 of the Registrant (File No. 001-31763).

Intercorporate Services Agreement by and between Contran Corporation and Kronos Worldwide, Inc., effective as of January 1, 2004 - incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of the Registrant (File No. 001-31763) for the quarter ended March 31, 2004.

Form of Kronos Worldwide, Inc. 2003 Long-Term Incentive Plan - incorporated by reference to Exhibit 10.4 of the Registration statement on Form 10 of the Registrant (File No. 001-31763).

€80,000,000 Facility Agreement, dated June 25, 2002, among Kronos Titan GmbH & Co. OHG, Kronos Europe S.A./N.V., Kronos Titan A/S and Titania A/S, as borrowers, Kronos Titan GmbH & Co. OHG, Kronos Europe S.A./N.V. and Kronos Norge AS, as guarantors, Kronos Denmark ApS, as security provider, Deutsche Bank AG, as mandated lead arranger, Deutsche Bank Luxembourg S.A., as agent and security agent, and KBC Bank NV, as fronting bank, and the financial institutions listed in Schedule 1 thereto, as lenders - incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of NL Industries, Inc. (File No. 001-00640) for the quarter ended June 30, 2002.

First Amendment Agreement, dated September 3, 2004, Relating to a Facility Agreement dated June 25, 2002 among Kronos Titan GmbH, Kronos Europe S.A./N.V., Kronos Titan AS and Titania A/S, as borrowers, Kronos Titan GmbH, Kronos Europe S.A./N.V. and Kronos Norge AS, as guarantors, Kronos Denmark ApS, as security provider, with Deutsche Bank Luxembourg S.A., acting as agent - incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K of the Registrant dated November 17, 2004 (File No. 333-119639).

Second Amendment Agreement Relating to a Facility Agreement dated June 25, 2002 executed as of June 14, 2005 by and among Deutsche Bank AG, as mandated lead arranger, Deutsche Bank Luxembourg S.A. as agent, the participating lenders, Kronos Titan GmbH, Kronos Europe S.A./N.V, Kronos Titan AS, Kronos Norge AS, Titania AS and Kronos Denmark ApS - incorporated by reference to Exhibit 10.3 to the Annual Report on Form 10-K of Kronos International, Inc. (File No. 333-100047) for the year ended December 31, 2009.

Third Amendment Agreement Relating to a Facility Agreement dated June 25, 2002 executed as of May 26, 2008 by and among Deutsche Bank AG, as mandated lead arranger, Deutsche Bank Luxembourg S.A., as agent, the participating lenders, Kronos Titan GmbH, Kronos Europe S.A./N.V, Kronos Titan AS, Kronos Norge AS, Titania AS and Kronos Denmark ApS - incorporated by reference to Exhibit 10.4 to the Annual Report on Form 10-K of Kronos International, Inc. (File No. 333-100047) for the year ended December 31, 2009.

Fourth Amendment Agreement Relating to a Facility Agreement dated June 25, 2002 executed as of September 15, 2009 by and among Deutsche Bank AG, as mandated lead arranger, Deutsche Bank Luxembourg S.A., as agent, the participating lenders, Kronos Titan GmbH, Kronos Europe S.A./N.V., Kronos Titan AS, Kronos Norge AS, Titania AS and Kronos Denmark ApS - incorporated by reference to



Exhibit 10.5 to the Annual Report on Form 10-K of Kronos International, Inc. (File No. 333-1000947) for the year ended December 31, 2009.

Fifth Amendment Agreement Relating to a Facility Agreement dated June 25, 2002 executed as of October 28, 2010 by and among Deutsche Bank AG, as mandated lead arranger, Deutsche Bank Luxembourg S.A., as agent, the participating lenders, Kronos Titan GmbH, Kronos Europe S.A./N.V., Kronos Titan AS, Kronos Norge AS, Titania AS and Kronos Denmark ApS - incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Kronos International, Inc. dated October 28, 2010 (File No. 333-100047).

10.1. Lease Contract, dated June 21, 1952, between Farbenfabriken, Bayer AG, and the other parties, dated June 21, 1952, between Farbenfabriken, Bayer AG and the other parties, dated June 21, 1952, between Farbenfabri

Form of Cross License Agreement, effective as of January 1, 1999,
(1) 10.13
Form of Cross License Agreement, effective as of January 1, 1999,
(2) 10.13
Form of Cross License Agreement, effective as of January 1,



10.17 Amendment No. 1 to Kronos Offtake Agreement dated as of December 20, 1995 between Kronos Louisiana, Inc. and Louisiana Pigment Company, L.P. - incorporated by reference to Exhibit 10.22 to NL Industries, Inc.'s Annual Report on Form 10-K (File No. 001-00640) for the year ended December 31, 1995.

10.18 Toxicide Americas Offtake Agreement dated as of October 18, 1993 between Toxicide Americas Inc. and Louisiana Pigment Company, L.P. - incorporated by reference to Exhibit 10.5 to NL Industries, Inc.'s Quarterly Report on Form 10-Q (File No. 001-00640) for the quarter ended September 30, 1993.

10.19 Amendment No. 1 to Toxicide Americas Offtake Agreement dated as of December 20, 1995 between Toxicide Americas, Inc. and Louisiana Pigment Company, L.P.



101. INS** XBRL Instance Document

101. SCH** XBRL Taxonomy Extension Schema

101. CAL** XBRL Taxonomy Extension Calculation Linkbase

101. DEF** XBRL Taxonomy Extension Definition Linkbase

101. LAB** XBRL Taxonomy Extension Label Linkbase

101. PRE** XBRL Taxonomy Extension Presentation Linkbase



## SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Kronos Worldwide, Inc.

(Registrant)

By:/s/ Steven L. Watson

Steven L. Watson

March 5, 2012

(Vice Chairman and Chief Executive

Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

/s/ Harold C. Simmons

/s/ Steven L. Watson

Harold C. Simmons, March 5, 2012

(Chairman of the Board)

Steven L. Watson, March 5, 2012

(Vice Chairman and Chief Executive

Officer)

/s/ George E. Poston

/s/ Glenn R. Simmons



# KRONOS WORLDWIDE, INC.

# Annual Report on Form 10-K

# Items 8, 15(a) and 15(c)

# Index of Financial Statements and Schedules

Financial Statements Page

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets - December 31, 2010 and 2011 F-4

Consolidated Statements of Operations -

Year, ended December 31, 2009 and 2011, 2010 and 2011

8) - Consolidated Statements of Comprehensive Income (Loss)

F-7 Years ended December 31, 2009, 2010 and 2011

F-8 Consolidated Statements of Stockholders' Equity - Years ended December 31, 2009, 2010 and 2011

F-9 Consolidated Statements of Cash Flows - Years ended December 31, 2009, 2010 and 2011

F-11 Notes to Consolidated Financial Statements

Financial Statement Schedule

rant S-1 Schedule I - Condensed Financial Information of Regist

are not applicable
are presented in
Schedules II, III and IV are omitted because they a-
or the required amounts are either not material or
the Notes to the Consolidated Financial Statements.



# REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Kronos Worldwide, Inc.:

In our opinion, the accompanying consolidated balance sheets and the

In our opinion, the accompanying consolidated balance sheets and the

of stockholders' equity and of cash flows present fairly, in all material respects, the financial position of Kronos Worldwide, Inc. and its

and their cash flows for each of the three years in the period
December 31, 2011 in conformity with accounting principles generally
in the United States of America. In addition, in our opinion, the
statement schedule listed in the accompanying index presents
all material respects, the information set forth therein when read
with the related consolidated financial statements. Also in
accordance with the requirements of the applicable accounting
standard, the Company maintained, in all material respects, effective
control over financial reporting as of December 31, 2011, based on
established in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). The

Company's management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company's internal control over financial reporting based on our audits (which were integrated audits in 2011 and 2009). We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and

over financial reporting was maintained in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting is maintained in all material respects. Our audits also included evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such procedures as we considered necessary in the circumstances. We believe that our audit of the financial statements provides a reasonable basis for our opinions.



A company's internal control over financial reporting is a process.



## KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

## CONSOLIDATED BALANCE SHEETS

## (In millions, except per share data)

<table><tr><td rowspan="2">ASSETS</td><td colspan="2">December 31,</td></tr><tr><td>2010</td><td>2011</td></tr><tr><td>Current assets:</td><td></td><td></td></tr><tr><td>Cash and cash equivalents</td><td>$ 304.7</td><td>$ 82.5</td></tr><tr><td>Restricted cash</td><td>1.9</td><td>1.9</td></tr><tr><td>Marketable securities</td><td>-</td><td>20.9</td></tr><tr><td>Accounts and other receivables</td><td>231.2</td><td>270.3</td></tr><tr><td>Receivable from affiliate</td><td>-</td><td>29.6</td></tr></table>



## KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

## CONSOLIDATED BALANCE SHEETS (CONTINUED)

## (In millions, except per share data)

<table><tr><td colspan="3">LIABILITIES AND STOCKHOLDERS&#x27; EQUITY</td></tr></table>



## KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

## CONSOLIDATED STATEMENTS OF OPERATIONS

## (In millions, except per share data)

<table><tr><td rowspan="2"></td><td colspan="3">Years ended December 31,</td></tr><tr><td>2009</td><td>2010</td><td>2011</td></tr><tr><td>Net sales</td><td>$ 1,142.0</td><td>$ 1,449.7</td><td>$ 1,943.3</td></tr><tr><td>Cost of sales</td><td>1,011.7</td><td>1,104.4</td><td>1,194.9</td></tr><tr><td>Gross margin</td><td>130.3</td><td>345.3</td><td>748.4</td></tr><tr><td>Selling, general and administrative expense</td><td>148.2</td><td>166.7</td><td>195.0</td></tr><tr><td>Other operating income (expense):</td><td></td><td></td><td></td></tr><tr><td>Currency transaction gains, net</td><td>9.9</td><td>7.8</td><td>3.0</td></tr><tr><td>Disposition of property and equipment</td><td>(.9)</td><td>(1.8)</td><td>(1.0)</td></tr><tr><td>Other income, net</td><td>.6</td><td>1.0</td><td>.1</td></tr><tr><td>Corporate expense</td><td>(7.4)</td><td>(7.2)</td><td>(9.0)</td></tr><tr><td>Income (loss) from operations</td><td>(15.7)</td><td>178.4</td><td>546.5</td></tr><tr><td>Other income (expense):</td><td></td><td></td><td></td></tr><tr><td>Interest and dividend income</td><td>.2</td><td>.7</td><td>7.0</td></tr><tr><td>Marketable securities transaction losses, net</td><td>-</td><td>-</td><td>(.6)</td></tr><tr><td>Loss on prepayment of debt, net</td><td>-</td><td>-</td><td>(3.1)</td></tr></table>



## KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

## CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

## (In millions)

<table><tr><td rowspan="2"></td><td colspan="3">Years ended December 31,</td></tr><tr><td>2009</td><td>2010</td><td>2011</td></tr><tr><td>Net income (loss)</td><td>$ (34.7)</td><td>$ 130.6</td><td>$ 321.0</td></tr><tr><td>Other comprehensive income (loss), net of tax:</td><td></td><td></td><td></td></tr><tr><td>Marketable securities</td><td>-</td><td>-</td><td>5.1</td></tr><tr><td>Currency translation</td><td>24.1</td><td>.1</td><td>(26.7)</td></tr></table>

Pension plans:

Amortization of prior service cost, net

transition obligation and net losses



<table><tr><td>1</td><td>2</td><td>3</td><td>4</td><td>5</td><td>6</td><td>7</td><td>8</td><td>9</td><td>10</td><td>11</td><td>12</td><td>13</td><td>14</td><td>15</td><td>16</td><td>17</td><td>18</td><td>19</td><td>20</td><td>21</td><td>22</td><td>23</td><td>24</td><td>25</td><td>26</td><td>27</td><td>28</td><td>29</td><td>30</td><td>31</td><td>32</td><td>33</td><td>34</td><td>35</td><td>36</td><td>37</td><td>38</td><td>39</td><td>40</td><td>41</td><td>42</td><td>43</td><td>44</td><td>45</td><td>46</td><td>47</td><td>48</td><td>49</td><td>50</td><td>51</td><td>52</td><td>53</td><td>54</td><td>55</td><td>56</td><td>57</td><td>58</td><td>59</td><td>60</td><td>61</td><td>62</td><td>63</td><td>64</td><td>65</td><td>66</td><td>67</td><td>68</td><td>69</td><td>70</td><td>71</td><td>72</td><td>73</td><td>74</td><td>75</td><td>76</td><td>77</td><td>78</td><td>79</td><td>80</td><td>81</td><td>82</td><td>83</td><td>84</td><td>85</td><td>86</td><td>87</td><td>88</td><td>89</td><td>90</td><td>91</td><td>92</td><td>93</td><td>94</td><td>95</td><td>96</td><td>97</td><td>98</td><td>99</td><td>100</td><td>101</td><td>102</td><td>103</td><td>104</td><td>105</td><td>106</td><td>107</td><td>108</td><td>109</td><td>110</td><td>111</td><td>112</td><td>113</td><td>114</td><td>115</td><td>116</td><td>117</td><td>118</td><td>119</td><td>120</td><td>121</td><td>122</td><td>123</td><td>124</td><td>125</td><td>126</td><td>127</td><td>128</td><td>129</td><td>130</td><td>131</td><td>132</td><td>133</td><td>134</td><td>135</td><td>136</td><td>137</td><td>138</td><td>139</td><td>140</td><td>141</td><td>142</td><td>143</td><td>144</td><td>145</td><td>146</td><td>147</td><td>148</td><td>149</td><td>150</td><td>151</td><td>152</td><td>153</td><td>154</td><td>155</td><td>156</td><td>157</td><td>158</td><td>159</td><td>160</td><td>161</td><td>162</td><td>163</td><td>164</td><td>165</td><td>166</td><td>167</td><td>168</td><td>169</td><td>170</td><td>171</td><td>172</td><td>173</td><td>174</td><td>175</td><td>176</td><td>177</td><td>178</td><td>179</td><td>180</td><td>181</td><td>182</td><td>183</td><td>184</td><td>185</td><td>186</td><td>187</td><td>188</td><td>189</td><td>190</td><td>191</td><td>192</td><td>193</td><td>194</td><td>195</td><td>196</td><td>197</td><td>198</td><td>199</td><td>200</td><td>201</td><td>202</td><td>203</td><td>204</td><td>205</td><td>206</td><td>207</td><td>208</td><td>209</td><td>210</td><td>211</td><td>212</td><td>213</td><td>214</td><td>215</td><td>216</td><td>217</td><td>218</td><td>219</td><td>220</td><td>221</td><td>222</td><td>223</td><td>224</td><td>225</td><td>226</td><td>227</td><td>228</td><td>229</td><td>230</td><td>231</td><td>232</td><td>233</td><td>234</td><td>235</td><td>236</td><td>237</td><td>238</td><td>239</td><td>240</td><td>241</td><td>242</td><td>243</td><td>244</td><td>245</td><td>246</td><td>247</td><td>248</td><td>249</td><td>250</td><td>251</td><td>252</td><td>253</td><td>254</td><td>255</td><td>256</td><td>257</td><td>258</td><td>259</td><td>260</td><td>261</td><td>262</td><td>263</td><td>264</td><td>265</td><td>266</td><td>267</td><td>268</td><td>269</td><td>270</td><td>271</td><td>272</td><td>273</td><td>274</td><td>275</td><td>276</td><td>277</td><td>278</td><td>279</td><td>280</td><td>281</td><td>282</td><td>283</td><td>284</td><td>285</td><td>286</td><td>287</td><td>288</td><td>289</td><td>290</td><td>291</td><td>292</td><td>293</td><td>294</td><td>295</td><td>296</td><td>297</td><td>298</td><td>299</td><td>300</td><td>301</td><td>302</td><td>303</td><td>304</td><td>305</td><td>306</td><td>307</td><td>308</td><td>309</td><td>310</td><td>311</td><td>312</td><td>313</td><td>314</td><td>315</td><td>316</td><td>317</td><td>318</td><td>319</td><td>320</td><td>321</td><td>322</td><td>323</td><td>324</td><td>325</td><td>326</td><td>327</td><td>328</td><td>329</td><td>330</td><td>331</td><td>332</td><td>333</td><td>334</td><td>335</td><td>336</td><td>337</td><td>338</td><td>339</td><td>340</td><td>341</td><td>342</td><td>343</td><td>344</td><td>345</td><td>346</td><td>347</td><td>348</td><td>349</td><td>350</td><td>351</td><td>352</td><td>353</td><td>354</td><td>355</td><td>356</td><td>357</td><td>358</td><td>359</td><td>360</td><td>361</td><td>362</td><td>363</td><td>364</td><td>365</td><td>366</td><td>367</td><td>368</td><td>369</td><td>370</td><td>371</td><td>372</td><td>373</td><td>374</td><td>375</td><td>376</td><td>377</td><td>378</td><td>379</td><td>380</td><td>381</td><td>382</td><td>383</td><td>384</td><td>385</td><td>386</td><td>387</td><td>388</td><td>389</td><td>390</td><td>391</td><td>392</td><td>393</td><td>394</td><td>395</td><td>396</td><td>397</td><td>398</td><td>399</td><td>400</td><td>401</td><td>402</td><td>403</td><td>404</td><td>405</td><td>406</td><td>407</td><td>408</td><td>409</td><td>410</td><td>411</td><td>412</td><td>413</td><td>414</td><td>415</td><td>416</td><td>417</td><td>418</td><td>419</td><td>420</td><td>421</td><td>422</td><td>423</td><td>424</td><td>425</td><td>426</td><td>427</td><td>428</td><td>429</td><td>430</td><td>431</td><td>432</td><td>433</td><td>434</td><td>435</td><td>436</td><td>437</td><td>438</td><td>439</td><td>440</td><td>441</td><td>442</td><td>443</td><td>444</td><td>445</td><td>446</td><td>447</td><td>448</td><td>449</td><td>450</td><td>451</td><td>452</td><td>453</td><td>454</td><td>455</td><td>456</td><td>457</td><td>458</td><td>459</td><td>460</td><td>461</td><td>462</td><td>463</td><td>464</td><td>465</td><td>466</td><td>467</td><td>468</td><td>469</td><td>470</td><td>471</td><td>472</td><td>473</td><td>474</td><td>475</td><td>476</td><td>477</td><td>478</td><td>479</td><td>480</td><td>481</td><td>482</td><td>483</td><td>484</td><td>485</td><td>486</td><td>487</td><td>488</td><td>489</td><td>490</td><td>491</td><td>492</td><td>493</td><td>494</td><td>495</td><td>496</td><td>497</td><td>498</td><td>499</td><td>500</td><td>501</td><td>502</td><td>503</td><td>504</td><td>505</td><td>506</td><td>507</td><td>508</td><td>509</td><td>510</td><td>511</td><td>512</td><td>513</td><td>514</td><td>515</td><td>516</td><td>517</td><td>518</td><td>519</td><td>520</td><td>521</td><td>522</td><td>523</td><td>524</td><td>525</td><td>526</td><td>527</td><td>528</td><td>529</td><td>530</td><td>531</td><td>532</td><td>533</td><td>534</td><td>535</td><td>536</td><td>537</td><td>538</td><td>539</td><td>540</td><td>541</td><td>542</td><td>543</td><td>544</td><td>545</td><td>546</td><td>547</td><td>548</td><td>549</td><td>550</td><td>551</td><td>552</td><td>553</td><td>554</td><td>555</td><td>556</td><td>557</td><td>558</td><td>559</td><td>560</td><td>561</td><td>562</td><td>563</td><td>564</td><td>565</td><td>566</td><td>567</td><td>568</td><td>569</td><td>570</td><td>571</td><td>572</td><td>573</td><td>574</td><td>575</td><td>576</td><td>577</td><td>578</td><td>579</td><td>580</td><td>581</td><td>582</td><td>583</td><td>584</td><td>585</td><td>586</td><td>587</td><td>588</td><td>589</td><td>590</td><td>591</td><td>592</td><td>593</td><td>594</td><td>595</td><td>596</td><td>597</td><td>598</td><td>599</td><td>600</td><td>601</td><td>602</td><td>603</td><td>604</td><td>605</td><td>606</td><td>607</td><td>608</td><td>609</td><td>610</td><td>611</td><td>612</td><td>613</td><td>614</td><td>615</td><td>616</td><td>617</td><td>618</td><td>619</td><td>620</td><td>621</td><td>622</td><td>623</td><td>624</td><td>625</td><td>626</td><td>627</td><td>628</td><td>629</td><td>630</td><td>631</td><td>632</td><td>633</td><td>634</td><td>635</td><td>636</td><td>637</td><td>638</td><td>639</td><td>640</td><td>641</td><td>642</td><td>643</td><td>644</td><td>645</td><td>646</td><td>647</td><td>648</td><td>649</td><td>650</td><td>651</td><td>652</td><td>653</td><td>654</td><td>655</td><td>656</td><td>657</td><td>658</td><td>659</td><td>660</td><td>661</td><td>662</td><td>663</td><td>664</td><td>665</td><td>666</td><td>667</td><td>668</td><td>669</td><td>670</td><td>671</td><td>672</td><td>673</td><td>674</td><td>675</td><td>676</td><td>677</td><td>678</td><td>679</td><td>680</td><td>681</td><td>682</td><td>683</td><td>684</td><td>685</td><td>686</td><td>687</td><td>688</td><td>689</td><td>690</td><td>691</td><td>692</td><td>693</td><td>694</td><td>695</td><td>696</td><td>697</td><td>698</td><td>699</td><td>700</td><td>701</td><td>702</td><td>703</td><td>704</td><td>705</td><td>706</td><td>707</td><td>708</td><td>709</td><td>710</td><td>711</td><td>712</td><td>713</td><td>714</td><td>715</td><td>716</td><td>717</td><td>718</td><td>719</td><td>720</td><td>721</td><td>722</td><td>723</td><td>724</td><td>725</td><td>726</td><td>727</td><td>728</td><td>729</td><td>730</td><td>731</td><td>732</td><td>733</td><td>734</td><td>735</td><td>736</td><td>737</td><td>738</td><td>739</td><td>740</td><td>741</td><td>742</td><td>743</td><td>744</td><td>745</td><td>746</td><td>747</td><td>748</td><td>749</td><td>750</td><td>751</td><td>752</td><td>753</td><td>754</td><td>755</td><td>756</td><td>757</td><td>758</td><td>759</td><td>760</td><td>761</td><td>762</td><td>763</td><td>764</td><td>765</td><td>766</td><td>767</td><td>768</td><td>769</td><td>770</td><td>771</td><td>772</td><td>773</td><td>774</td><td>775</td><td>776</td><td>777</td><td>778</td><td>779</td><td>780</td><td>781</td><td>782</td><td>783</td><td>784</td><td>785</td><td>786</td><td>787</td><td>788</td><td>789</td><td>790</td><td>791</td><td>792</td><td>793</td><td>794</td><td>795</td><td>796</td><td>797</td><td>798</td><td>799</td><td>800</td><td>801</td><td>802</td><td>803</td><td>804</td><td>805</td><td>806</td><td>807</td><td>808</td><td>809</td><td>810</td><td>811</td><td>812</td><td>813</td><td>814</td><td>815</td><td>816</td><td>817</td><td>818</td><td>819</td><td>820</td><td>821</td><td>822</td><td>823</td><td>824</td><td>825</td><td>826</td><td>827</td><td>828</td><td>829</td><td>830</td><td>831</td><td>832</td><td>833</td><td>834</td><td>835</td><td>836</td><td>837</td><td>838</td><td>839</td><td>840</td><td>841</td><td>842</td><td>843</td><td>844</td><td>845</td><td>846</td><td>847</td><td>848</td><td>849</td><td>850</td><td>851</td><td>852</td><td>853</td><td>854</td><td>855</td><td>856</td><td>857</td><td>858</td><td>859</td><td>860</td><td>861</td><td>862</td><td>863</td><td>864</td><td>865</td><td>866</td><td>867</td><td>868</td><td>869</td><td>870</td><td>871</td><td>872</td><td>873</td><td>874</td><td>875</td><td>876</td><td>877</td><td>878</td><td>879</td><td>880</td><td>881</td><td>882</td><td>883</td><td>884</td><td>885</td><td>886</td><td>887</td><td>888</td><td>889</td><td>890</td><td>891</td><td>892</td><td>893</td><td>894</td><td>895</td><td>896</td><td>897</td><td>898</td><td>899</td><td>900</td><td>901</td><td>902</td><td>903</td><td>904</td><td>905</td><td>906</td><td>907</td><td>908</td><td>909</td><td>910</td><td>911</td><td>912</td><td>913</td><td>914</td><td>915</td><td>916</td><td>917</td><td>918</td><td>919</td><td>920</td><td>921</td><td>922</td><td>923</td><td>924</td><td>925</td><td>926</td><td>927</td><td>928</td><td>929</td><td>930</td><td>931</td><td>932</td><td>933</td><td>934</td><td>935</td><td>936</td><td>937</td><td>938</td><td>939</td><td>940</td><td>941</td><td>942</td><td>943</td><td>944</td><td>945</td><td>946</td><td>947</td><td>948</td><td>949</td><td>950</td><td>951</td><td>952</td><td>953</td><td>954</td><td>955</td><td>956</td><td>957</td><td>958</td><td>959</td><td>960</td><td>961</td><td>962</td><td>963</td><td>964</td><td>965</td><td>966</td><td>967</td><td>968</td><td>969</td><td>970</td><td>971</td><td>972</td><td>973</td><td>974</td><td>975</td><td>976</td><td>977</td><td>978</td><td>979</td><td>980</td><td>981</td><td>982</td><td>983</td><td>984</td><td>985</td><td>986</td><td>987</td><td>988</td><td>989</td><td>990</td><td>991</td><td>992</td><td>993</td><td>994</td><td>995</td><td>996</td><td>997</td><td>998</td><td>999</td><td>100</td><td>101</td><td>102</td><td>103</td><td>104</td><td>105</td><td>106</td><td>107</td><td>108</td><td>109</td><td>110</td><td>111</td><td>112</td><td>113</td><td>114</td><td>115</td><td>116</td><td>117</td><td>118</td><td>119</td><td>120</td><td>121</td><td>122</td><td>123</td><td>124</td><td>125</td><td>126</td><td>127</td><td>128</td><td>129</td><td>130</td><td>131</td><td>132</td><td>133</td><td>134</td><td>135</td><td>136</td><td>137</td><td>138</td><td>139</td><td>140</td><td>141</td><td>142</td><td>143</td><td>144</td><td>145</td><td>146</td><td>147</td><td>148</td><td>149</td><td>150</td><td>151</td></tr></table>



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# KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

## NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

## Note 1 - Summary of significant accounting policies:

Organization and basis of presentation - At December 31, 2011, (i) Valhi, Inc. (NYSE:VHI) held approximately 50% of our outstanding common stock (ii) NL Industries, Inc. (NYSE:NL) held approximately 30% of our common stock, (iii) Valhi owned approximately 83% of NL's outstanding common stock and (iv) Contran Corporation and its subsidiaries held approximately 95% of Valhi's outstanding common stock. Substantially all of Contran's outstanding voting stock is held by trusts established for the benefit of certain children and grandchildren of Harold C. Simmons (for which Mr. Simmons is the sole trustee of the child who was born to his mother, Monogen, Inc.



the extent the restricted amount does not relate to a recognized liability, we classify restricted cash as a current asset. See Note 7.

Marketable securities and securities transactions - We carry marketable debt and equity securities at fair value. Accounting Standard Codification ("ASC") Topic 820, Fair Value Measurements and Disclosures, establishes a consistent framework for measuring fair value and (with certain exceptions) this framework is generally applied to all financial statement items required to be measured at fair value. The standard requires fair value measurements to be classified and disclosed in one of the following three categories:

- Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

- Level 2 - Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the assets or liability; and

- Level 3 - Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable.

We classify all of our marketable securities as available-for-sale and unrealized gains or losses on these securities are recognized through other comprehensive income, except for any decline in value we conclude is other than temporary, which is accounted for as a realized loss. We base realized gains and losses upon the specific identification of the specific loss.

We evaluate our investments whenever events or conditions occur to indicate that the fair value of such investments has declined below their carrying amounts. If the carrying amount for an investment declines below its historical cost basis, we evaluate all available positive and negative evidence including, but not limited to, the extent and duration of the impairment, business prospects for the investee and our intent and ability to hold the investment for a reasonable period of time sufficient for the recovery of fair value. If we determine the decline in fair value is other than temporary, the carrying amount of the investment is written down to fair value.

See Notes 6, 11 and 16.

Accounts receivable - We provide an allowance for doubtful accounts for known and estimated potential losses arising from sales to customers based on a periodic review of these accounts.

- - - - - - - - - - - - - - - - - - - - - -

estimated obsolescence or instances when inventory is no longer marketable for



Investment in TiO \( _{2} \)  manufacturing joint venture - We account for our investment in a 50%-owned manufacturing joint venture by the equity method. See Note 5.

Property and equipment and depreciation - We state property and equipment at cost, including capitalized interest on borrowings during the actual construction period of major capital projects. Capitalized interest costs were $1.1 million in 2009, $9 million in 2010 and $1.0 million in 2011. We compute depreciation of property and equipment for financial reporting purposes (including mining equipment) principally by the straight-line method over the estimated useful lives of the assets.



the Contran Tax Group for all periods in which we are included in the Contran Tax Group. See Note 15. As a member of the Contran Tax Group, we are a party to a tax sharing agreement which provides that we compute our provision for U.S. income taxes on a separate-company basis using the tax elections made by Contran. Pursuant to the tax sharing agreement, we make payments to

The Contran Tax Group is a member of the Contran Tax Group, which is a member of the Contran Tax Group. See Note 15. As a member of the Contran Tax Group, we are a party to a tax sharing agreement which provides that we compute our provision for U.S. income taxes on a separate-company basis using the tax elections made by Contran. Pursuant to the tax sharing agreement, we make payments to

assets and liabilities for the expected differences between the income tax and of assets and liabilities, including affiliates who are not members of the ring of non-U.S. subsidiaries which are invested. The earnings of non-U.S. investment plans aggregated $767 million on at December 31, 2011. It is not out of the unrecognized deferred income tax liability related to such
$43.5 in 2011.

We recognize deferred income tax future tax consequences of temporary financial reporting carrying amounts investments in our subsidiaries and Contran Tax Group and undistributed earnings not deemed to be permanently reinvested. The subsidiaries subject to permanent reinvestment are at December 31, 2010 and $946 million. We recognize a tax benefit for the



in 2011. We expense advertising costs as incurred and these costs were $1 million in each of 2009, 2010 and 2011. We expense research, development and certain sales technical support costs as incurred and these costs approximated $12 million in 2009, $13 million in 2010 and $20 million in 2011.

Note 2 - Geographic information:

"osera tions - as osera tions - wnten espo aces tions - as tions - wnten espo aces tions - as tions - wnt



Note 3 - Accounts and other receivables:

<table><tr><td rowspan="2"></td><td colspan="2">December 31,</td></tr><tr><td>2010</td><td>2011</td></tr><tr><td></td><td>(In millions)</td><td></td></tr><tr><td>Trade receivables</td><td>$ 202.2</td><td>$ 247.2</td></tr><tr><td>Recoverable VAT and other receivables</td><td>29.9</td><td>22.3</td></tr><tr><td>Refundable income taxes</td><td>1.3</td><td>2.0</td></tr><tr><td>Allowance for doubtful accounts</td><td>(2.2)</td><td>(1.2)</td></tr><tr><td>Total</td><td>$ 231.2</td><td>$ 270.3</td></tr></table>

Note 4 - Inventories:

<table><tr><td rowspan="2"></td><td colspan="2">December 31,</td></tr><tr><td>2010</td><td>2011</td></tr><tr><td></td><td>(In millions)</td><td></td></tr><tr><td>Raw materials</td><td>$ 52.1</td><td>$ 89.6</td></tr><tr><td>Work in process</td><td>13.6</td><td>17.3</td></tr><tr><td>Finished products</td><td>154.6</td><td>280.7</td></tr><tr><td>Supplies</td><td>55.5</td><td>56.6</td></tr><tr><td>Total</td><td>$ 275.8</td><td>$ 444.2</td></tr></table>



Summary balance sheets of LPC are shown below:

<table><tr><td rowspan="2"></td><td colspan="2">December 31,</td></tr><tr><td>2010</td><td>2011</td></tr><tr><td></td><td colspan="2">(In millions)</td></tr><tr><td>ASSETS</td><td></td><td></td></tr><tr><td>Current assets</td><td>$ 68.6</td><td>$ 108.5</td></tr><tr><td>Property and equipment, net</td><td>154.4</td><td>140.7</td></tr></table>

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<table><tr><td>Marketable security</td><td>Fair value measurement level</td><td>Market value</td><td>Cost basis</td><td>Unrealized gains (losses)</td></tr><tr><td>December 31, 2010:</td><td></td><td></td><td></td><td></td></tr><tr><td>Noncurrent assets:</td><td></td><td></td><td></td><td></td></tr><tr><td>TIMET common stock</td><td>1</td><td>$ 46.9</td><td>$ 46.9</td><td>$ -</td></tr><tr><td>Valhi common stock</td><td>1</td><td>2.7</td><td>2.7</td><td>-</td></tr><tr><td>NL and CompX common stocks</td><td>1</td><td>.1</td><td>.1</td><td>-</td></tr><tr><td>Total</td><td></td><td>$ 49.7</td><td>$ 49.7</td><td>$ -</td></tr><tr><td>December 31, 2011:</td><td></td><td></td><td></td><td></td></tr><tr><td>Current assets:</td><td></td><td></td><td></td><td></td></tr><tr><td>Mutual funds</td><td>1</td><td>$ 20.9</td><td>$ 21.1</td><td>$ (.2)</td></tr><tr><td>Noncurrent assets:</td><td></td><td></td><td></td><td></td></tr><tr><td>TIMET common stock</td><td>1</td><td>63.6</td><td>73.9</td><td>(10.3)</td></tr></table>

For more information on shares in common shares, see the "Securities and Exchange Act" and "Majority-owned" securities.

The following table shows the number of shares of each security owned by each of the following companies:

The following table shows the number of shares of each security owned by each of the following companies:

Delaware Corporation Law, but we do receive dividends from Valhi on these shares, when declared and paid.

Because we have classified all of our marketable securities as available-for-sale, any unrealized gains or losses on the securities are recognized through other comprehensive income. With respect to our investment in TIMET, our cost basis has continuously exceeded its market value since October 2011, but we consider such decline in market price to be temporary at December 31, 2011. We considered all available evidence in reaching this conclusion, including our ability and intent to hold this investment for a reasonable period of time sufficient for the recovery of fair value, as evidenced by the amount of liquidity we currently have with

cash on hand and our borrowing availability. We will continue to monitor the



recognized unrealized losses to the extent they were previously recognized in accumulated other comprehensive income.

At December 31, 2011, we held investments in various mutual funds which have a primary investment objective of holding corporate and government debt securities from U.S. and other markets. These funds have, daily liquidity and are held for the temporary investment of cash available for our current.



Senior Secured Notes - In April 2006, Kronos International, Inc. ("KII"), one of our wholly-owned subsidiaries, issued €400 million principal amount of 6.5% Senior Secured Notes ("6.5% Notes") due 2013 at 99.306% of the principal amount ($498.5 million when issued). We collateralized the 6.5% Notes with a pledge of 65% of the common stock or other ownership interests of certain of our first-tier European operating subsidiaries: Kronos Titan GmbH, Kronos Denmark ApS, Kronos Limited and Société Industrielle du Titane, S.A. We issued the 6.5% Notes pursuant to an indenture which contains a number of covenants and restrictions which, among other things, restricts our ability to incur additional debt, incur liens, pay dividends or merge or consolidate with or sell or transfer all or substantially all of the assets



During 2011, we borrowed €80 million ($113.3 million when borrowed) under our European credit facility, and subsequently repaid €80 million ($115.0 million when repaid). As of December 31, 2011, there were no outstanding borrowings under our European credit facility and the equivalent of $103.5 million was available for borrowing under this facility.

Canada - In December 2011, our Canadian subsidiary entered into a Cdn. $10.0 million loan agreement with the Bank of Montreal for the limited purpose of issuing letters of credit. The facility renews annually. Letters

... of credit are collateralized by restricted deposits at the Bank of Montreal (55.1 million Canadian dollars) and other things related to the same
(55.1 million Canadian dollars) and other things related to the same
incurring additional indebtedness in excess of Cdn. $20 million. An
31, 2011, an aggregate of Cdn. $5.2 million letters of credit
outstanding under this facility. In February 2012, an additional
credit was issued under this facility for Cdn. $2.1 million.

agreement
c, Canada
ch agency.
Canadian
capital
payments
In December 2011, our Canadian subsidiary entered into an
with an economic development agency of the Province of Quebec
pursuant to which we may borrow up to Cdn. $7.1 million from su
Borrowings may only be used to fund capital improvements at ou
plant, and are limited to a specified percentage of suc
improvements. Borrowings are non-interest bearing, with monthly
commencing in 2017. More aggressive capital increases, particularly



Under the cross-default provisions of the 6.5% Notes, the 6.5% Notes may be accelerated prior to their stated maturity if KII or any of KII's subsidiaries default under any other indebtedness in excess of $20 million due to a failure to pay the other indebtedness at its due date (including any due date that arises prior to the stated maturity as a result of a default under the other indebtedness). Under the cross-default provisions of the European revolving credit facility, any outstanding borrowings under the facility may be accelerated prior to their stated maturity if the borrowers or KII default under any other indebtedness in excess of €5 million due to a failure to pay the other indebtedness at its due date (including any due date that arises prior to the stated maturity as a result of a default under the other indebtedness). The European revolving credit facility contains provisions that allow the lender to accelerate the maturity of the applicable facility in the event of a change of control, as defined in the respective agreement, of the applicable borrower. In the event any of these cross-



<table><tr><td rowspan="2"></td><td colspan="4">Years ended December 31,</td></tr><tr><td>2009</td><td>2010</td><td>2011</td><td></td></tr><tr><td></td><td colspan="4">(In millions)</td></tr><tr><td>Components of income tax expense (benefit):</td><td></td><td></td><td></td><td></td></tr><tr><td>Currently payable (refundable):</td><td></td><td></td><td></td><td></td></tr><tr><td>U.S. federal and state</td><td>$ 1.9</td><td>$ 16.7</td><td>$ 52.0</td><td></td></tr><tr><td>Non-U.S.</td><td>2.5</td><td>16.2</td><td>78.7</td><td></td></tr><tr><td></td><td>4.4</td><td>32.9</td><td>130.7</td><td></td></tr><tr><td>Deferred income taxes (benefit):</td><td></td><td></td><td></td><td></td></tr><tr><td>U.S. federal and state</td><td>2.5</td><td>(3.4)</td><td>3.9</td><td></td></tr><tr><td>Non-U.S.</td><td>(29.1)</td><td>(19.8)</td><td>61.5</td><td></td></tr><tr><td></td><td>(26.6)</td><td>(23.2)</td><td>65.4</td><td></td></tr><tr><td>Provision for income taxes (benefit)</td><td>$ (22.2)</td><td>$ 9.7</td><td>$ 196.1</td><td></td></tr><tr><td></td><td colspan="4">Years ended December 31,</td></tr><tr><td></td><td>2009</td><td>2010</td><td>2011</td><td></td></tr><tr><td></td><td colspan="4">(In millions)</td></tr><tr><td>Comprehensive provision for income taxes (benefit) allocable to:</td><td></td><td></td><td></td><td></td></tr><tr><td>Net income (loss)</td><td>$ (22.2)</td><td>$ 9.7</td><td>$ 196.1</td><td></td></tr><tr><td>Other comprehensive income (loss):</td><td></td><td></td><td></td><td></td></tr><tr><td>Pension plans</td><td>3.1</td><td>(2.8)</td><td>(3.3)</td><td></td></tr><tr><td>OPEB plans</td><td>(.9)</td><td>1.3</td><td>(.7)</td><td></td></tr><tr><td>Marketable securities</td><td>-</td><td>-</td><td>3.1</td><td></td></tr><tr><td>Total</td><td>$ (20.0)</td><td>$ 8.2</td><td>$ 195.2</td><td></td></tr></table>

The components of our net deferred income taxes at December 31, 2010 and 2011 are summarized in the following table.



<table><tr><td rowspan="3"></td><td colspan="5">December 31,</td></tr><tr><td colspan="2">2010</td><td colspan="2">2011</td><td rowspan="2">Liabilities</td></tr><tr><td>Assets</td><td>Liabilities</td><td>Assets</td><td>Liabilities</td></tr><tr><td>Tax effect of temporary differences related to:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Inventories</td><td>$ 2.0</td><td>$ (3.8)</td><td>$ 7.5</td><td>$ (6.4)</td><td></td></tr><tr><td>Property and equipment</td><td>-</td><td>(62.4)</td><td>-</td><td>(67.3)</td><td></td></tr><tr><td>Accrued postretirement benefits other than pension (&quot;OPEB&quot;) costs</td><td>3.1</td><td>-</td><td>3.7</td><td>-</td><td></td></tr><tr><td>Accrued pension cost</td><td>7.4</td><td>-</td><td>10.9</td><td>-</td><td></td></tr><tr><td>Other accrued liabilities and deductible differences</td><td>16.0</td><td>-</td><td>12.5</td><td>-</td><td></td></tr><tr><td>Other taxable differences</td><td>-</td><td>(5.5)</td><td>-</td><td>(6.7)</td><td></td></tr><tr><td>Tax on unremitted earnings of non-U.S. subsidiaries</td><td>-</td><td>(3.2)</td><td>-</td><td>(14.4)</td><td></td></tr><tr><td>Tax loss and tax credit carryforwards</td><td>205.6</td><td>-</td><td>156.1</td><td>-</td><td></td></tr><tr><td>Valuation allowance</td><td>(0.5)</td><td>-</td><td>(0.2)</td><td>-</td><td></td></tr><tr><td>Adjusted gross deferred tax assets (liabilities)</td><td>233.6</td><td>(74.9)</td><td>190.5</td><td>(94.8)</td><td></td></tr><tr><td>Netting of items by tax jurisdiction</td><td>(37.0)</td><td>37.0</td><td>(47.6)</td><td>47.6</td><td></td></tr><tr><td></td><td>196.6</td><td>(37.9)</td><td>142.9</td><td>(47.2)</td><td></td></tr><tr><td>Less net current deferred tax (liability)</td><td>4.6</td><td>(4.7)</td><td>9.9</td><td>(6.2)</td><td></td></tr><tr><td>Net noncurrent deferred tax asset (liability)</td><td>$ 192.0</td><td>$ (33.2)</td><td>$ 133.0</td><td>$ (41.0)</td><td></td></tr></table>

Our provision for income taxes in the third and fourth quarters of 2011 includes an aggregate of $17.2 million for U.S. incremental income taxes on current earnings repatriated from our German subsidiary, which earnings were used to fund a portion of the repurchases of our Senior Secured Notes discussed in Note 9. In addition, we accrue U.S. incremental income taxes on the earnings of our Canadian subsidiary, which earnings we previously determined are not permanently reinvested.

As a consequence of a European Court ruling that resulted in a favorable resolution of certain income tax issues in Germany, during the first quarter of 2010 the German tax authorities agreed to an increase in our German net operating loss carryforwards. Accordingly, we recognized a non-cash income tax benefit of $35.2 million in the first quarter of 2010.

Following the resolution of tax audits in Belgium and Germany in the third and fourth quarters of 2009, we de-recognized $4.7 million of our reserve for uncertain tax positions primarily related to the audit resolution.

Tax authorities are examining certain of our non-U.S. tax returns and have or may propose tax deficiencies, including penalties and interest. Because of the inherent uncertainties involved in settlement initiatives and court and tax proceedings, we cannot guarantee that these tax matters will be resolved in our favor, and therefore our potential exposure, if any, is also uncertain. In 2011 we received notices of re-assessment from the Canadian federal and provincial tax authorities related to the years 2002 through



2004. We object to the re-assessments and believe the position is without merit. Accordingly, we are appealing the re-assessments and in connection with such appeal we were required to post letters of credit aggregating Cdn. $5.2 million (see Note 9). In February 2012, and in conjunction with the re-assessment notices received in 2011, we posted an additional letter of credit of Cdn. $2.1 million. If the full amount of the proposed adjustment were ultimately to be assessed against us the cash tax liability would be approximately $11.6 million. We believe we have adequate accruals for additional taxes and related interest expense which could ultimately result from tax examinations. We believe the ultimate disposition of tax examinations should not have a material adverse effect on our consolidated financial position, results of operations or liquidity.

We accrue interest and penalties on our uncertain tax positions as a component of our provision for income taxes. The amount of interest and penalties we accrued during 2009, 2010 and 2011 was not material, and at December 31, 2009, 2010, and 2011, we had $2.5 million, $2.7 million and $3.1 million, respectively, accrued for interest and penalties for our uncertain tax positions.

The following table shows the changes in the amount of our uncertain tax positions (exclusive of the effect of interest and penalties) during 2009, 2010 and 2011:

<table><tr><td rowspan="2"></td><td colspan="3">Year Ended December 31,</td></tr><tr><td>2009</td><td>2010 (In millions)</td><td>2011</td></tr><tr><td>Changes in unrecognized tax benefits:</td><td></td><td></td><td></td></tr><tr><td>Unrecognized tax benefits at beginning of year</td><td>$ 10.4</td><td>$ 7.0</td><td>$ 7.9</td></tr><tr><td>Net increase (decrease):</td><td></td><td></td><td></td></tr><tr><td>Tax positions taken in prior periods</td><td>(5.0)</td><td>(.1)</td><td>.3</td></tr><tr><td>Tax positions taken in current period</td><td>.9</td><td>.6</td><td>1.0</td></tr><tr><td>Change in currency exchange rates</td><td>.7</td><td>.4</td><td>(.4)</td></tr><tr><td>Unrecognized tax benefits at end of year</td><td>$ 7.0</td><td>$ 7.9</td><td>$ 8.8</td></tr></table>

If our uncertain tax positions were recognized, a benefit of $9.5 million, $10.6 million and $11.9 million would affect our effective income tax rates for 2009, 2010 and 2011 respectively. We currently estimate that our unrecognized tax benefits will not change materially during the next twelve months.

We file income tax returns in various U.S. federal, state and local jurisdictions. We also file income tax returns in various non-U.S. jurisdictions, principally in Germany, Canada, Belgium and Norway. Our U.S. income tax returns prior to 2008 are generally considered closed to examination by applicable tax authorities. Our non-U.S. income tax returns are generally considered closed to examination for years prior to 2007 for Germany, 2008 for Belgium, 2006 for Canada and 2002 for Norway.

At December 31, 2011, we had the equivalent of $799 million and $188 million of net operating loss carryforwards for German corporate and trade tax purposes, respectively. At December 31, 2011, we have concluded that no deferred income tax asset valuation allowance is required to be recognized with respect to such carryforwards, principally because (i) such carryforwards have an indefinite carryforward period, (ii) we have utilized a portion of such carryforwards during the most recent three-year period and (iii) we currently expect to utilize the remainder of such carryforwards over the long term. However, prior to the complete utilization of these



carryforwards, particularly if the economic recovery were to be short-lived or we generate operating losses in our German operations for an extended period of time, it is possible we might conclude the benefit of the carryforwards would no longer meet the more-likely-than-not recognition criteria, at which point we would be required to recognize a valuation allowance against some or all of the then-remaining tax benefit associated with the carryforwards.

## Note 11 - Employee benefit plans:

Defined contribution plans - We maintain various defined contribution pension plans with our contributions based on matching or other formulas. Defined contribution plan expense approximated $1.0 million in 2009, $1.2 million in 2010 and $1.5 million in 2011.

Accounting for defined benefit and postretirement benefits other than pensions ("OPEB") plans - We recognize an asset or liability for the over or under funded status of each of our individual defined benefit pension plans on our Consolidated Balance Sheets. Changes in the funded status of these plans are recognized either in net income (loss), to the extent they are reflected in periodic benefit cost, or through other comprehensive income (loss).

Defined benefit plans - We sponsor various defined benefit pension plans. Non-U.S. employees are covered by plans in their respective countries and a majority of U.S. employees are eligible to participate in a contributory savings plan. The benefits under our plans are based upon years of service and employee compensation. Our funding policy is to contribute annually the minimum amount required under ERISA (or equivalent non-U.S.) regulations plus additional amounts as we deem appropriate.

We expect to contribute the equivalent of approximately $26.4 million to all of our defined benefit pension plans during 2012. Benefit payments to plan participants out of plan assets are expected to be the equivalent of:

<table><tr><td>Years ending December 31,</td><td>Amount (In millions)</td></tr><tr><td>2012</td><td>$ 24.5</td></tr><tr><td>2013</td><td>25.4</td></tr><tr><td>2014</td><td>25.4</td></tr><tr><td>2015</td><td>25.1</td></tr><tr><td>2016</td><td>24.8</td></tr><tr><td>Next 5 years</td><td>136.9</td></tr></table>



The funded status of our non-U.S. defined benefit pension plans is presented in the table below.

<table><tr><td rowspan="3"></td><td colspan="2">Years ended December 31,</td></tr><tr><td>2010</td><td>2011</td></tr><tr><td colspan="2">(In millions)</td></tr><tr><td>Change in projected benefit obligations (“PBO”):</td><td></td><td></td></tr><tr><td>Benefit obligations at beginning of the year</td><td>$ 423.7</td><td>$ 446.0</td></tr><tr><td>Service cost</td><td>10.4</td><td>11.2</td></tr><tr><td>Interest cost</td><td>21.9</td><td>23.6</td></tr><tr><td>Participant contributions</td><td>1.7</td><td>1.9</td></tr><tr><td>Actuarial losses</td><td>24.9</td><td>18.0</td></tr><tr><td>Plan amendments</td><td>3.8</td><td>-</td></tr><tr><td>Change in currency exchange rates</td><td>(18.0)</td><td>(13.4)</td></tr><tr><td>Benefits paid</td><td>(22.4)</td><td>(27.0)</td></tr><tr><td>Benefit obligations at end of the year</td><td>446.0</td><td>460.3</td></tr><tr><td>Change in plan assets:</td><td></td><td></td></tr><tr><td>Fair value of plan assets at beginning of the year</td><td>306.9</td><td>327.3</td></tr><tr><td>Actual return on plan assets</td><td>26.7</td><td>18.3</td></tr><tr><td>Employer contributions</td><td>24.5</td><td>25.2</td></tr><tr><td>Participant contributions</td><td>1.7</td><td>1.9</td></tr><tr><td>Change in currency exchange rates</td><td>(10.1)</td><td>(9.5)</td></tr><tr><td>Benefits paid</td><td>(22.4)</td><td>(27.0)</td></tr><tr><td>Fair value of plan assets at end of year</td><td>327.3</td><td>336.2</td></tr><tr><td>Funded status</td><td>$ (118.7)</td><td>$ (124.1)</td></tr><tr><td>Amounts recognized in the balance sheet:</td><td></td><td></td></tr><tr><td>Noncurrent pension asset</td><td>$ .3</td><td>$ -</td></tr><tr><td>Accrued pension costs:</td><td></td><td></td></tr><tr><td>Current</td><td>(1.3)</td><td>(1.3)</td></tr><tr><td>Noncurrent</td><td>(117.7)</td><td>(122.8)</td></tr><tr><td>Total</td><td>$ (118.7)</td><td>$ (124.1)</td></tr><tr><td>Accumulated other comprehensive loss:</td><td></td><td></td></tr><tr><td>Actuarial losses</td><td>$ 119.7</td><td>$ 128.8</td></tr><tr><td>Prior service cost</td><td>7.7</td><td>6.5</td></tr><tr><td>Net transition obligations</td><td>2.2</td><td>1.7</td></tr><tr><td>Total</td><td>$ 129.6</td><td>$ 137.0</td></tr><tr><td>Accumulated benefit obligations (“ABO”)</td><td>$ 414.7</td><td>$ 428.1</td></tr></table>

In the fourth quarter of 2010, we amended our benefit formula for most participants of our Canadian and Belgium plans effective January 1, 2011, resulting in a prior service cost of approximately $3.8 million as of December 31, 2010. Key assumptions as of December 31, 2010 and thereafter now reflect these plan revisions to the benefit formula.

The components of our net periodic defined benefit pension cost for our non-U.S. defined benefit pension plans are presented in the table below. During 2011, certain eligible participants elected to take lump sum distributions upon their retirement, resulting in a nominal settlement charge.



in 2011. The amounts shown below for the amortization of prior service cost, net transition obligations and recognized actuarial losses for 2009, 2010 and 2011 were recognized as components of our accumulated other comprehensive income (loss) at December 31, 2008, 2009 and 2010, respectively, net of deferred income taxes.

<table><tr><td rowspan="3"></td><td colspan="3">Years ended December 31,</td></tr><tr><td>2009</td><td>2010</td><td>2011</td></tr><tr><td colspan="3">(In millions)</td></tr><tr><td>Net periodic pension cost:</td><td></td><td></td><td></td></tr><tr><td>Service cost benefits</td><td>$ 8.6</td><td>$ 10.4</td><td>$ 11.2</td></tr><tr><td>Interest cost on PBO</td><td>22.1</td><td>21.9</td><td>23.6</td></tr><tr><td>Expected return on plan assets</td><td>(15.4)</td><td>(16.5)</td><td>(17.6)</td></tr><tr><td>Settlement losses</td><td>-</td><td>-</td><td>.5</td></tr><tr><td>Recognized actuarial losses</td><td>5.5</td><td>5.5</td><td>6.6</td></tr><tr><td>Amortization of prior service cost</td><td>.9</td><td>.9</td><td>1.2</td></tr><tr><td>Amortization of net transition obligations</td><td>.5</td><td>.5</td><td>.5</td></tr><tr><td>Total</td><td>$ 22.2</td><td>$ 22.7</td><td>$ 26.0</td></tr></table>

Certain information concerning our non-U.S. defined benefit pension plans is presented in the table below.

<table><tr><td rowspan="3"></td><td colspan="2">December 31,</td></tr><tr><td>2010</td><td>2011</td></tr><tr><td colspan="2">(In millions)</td></tr><tr><td>Plans for which the ABO exceeds plan assets:</td><td></td><td></td></tr><tr><td>PBO</td><td>$ 386.2</td><td>$ 460.3</td></tr><tr><td>ABO</td><td>362.2</td><td>428.1</td></tr><tr><td>Fair value of plan assets</td><td>268.5</td><td>336.2</td></tr></table>

The weighted-average rate assumptions used in determining the actuarial present value of benefit obligations for our non-U.S. defined benefit pension plans as of December 31, 2010 and 2011 are presented in the table below.

<table><tr><td rowspan="2">Rate</td><td colspan="2">December 31,</td></tr><tr><td>2010</td><td>2011</td></tr><tr><td>Discount rate</td><td>5.1%</td><td>4.9%</td></tr><tr><td>Increase in future compensation levels</td><td>3.1%</td><td>3.2%</td></tr></table>

The weighted-average rate assumptions used in determining the net periodic pension cost for our non-U.S. defined benefit pension plans for 2009, 2010 and 2011 are presented in the table below.

<table><tr><td rowspan="2">Rate</td><td colspan="3">Years ended December 31,</td></tr><tr><td>2009</td><td>2010</td><td>2011</td></tr><tr><td>Discount rate</td><td>5.9%</td><td>5.5%</td><td>5.1%</td></tr><tr><td>Increase in future compensation levels</td><td>3.2%</td><td>3.1%</td><td>3.1%</td></tr><tr><td>Long-term return on plan assets</td><td>5.9%</td><td>5.5%</td><td>5.5%</td></tr></table>

Variances from actuarially assumed rates will result in increases or decreases in accumulated pension obligations, pension expense and funding requirements in future periods.



The funded status of our U.S. defined benefit pension plan is presented in the table below.

<table><tr><td rowspan="3"></td><td colspan="3">Years ended December 31,</td></tr><tr><td>2010</td><td>2011</td><td></td></tr><tr><td colspan="3">(In millions)</td></tr><tr><td>Change in PBO:</td><td></td><td></td><td></td></tr><tr><td>Benefit obligations at beginning of the year</td><td>$ 14.6</td><td>$ 15.9</td><td></td></tr><tr><td>Interest cost</td><td>.9</td><td>.9</td><td></td></tr><tr><td>Actuarial losses</td><td>1.2</td><td>1.8</td><td></td></tr><tr><td>Benefits paid</td><td>(.8)</td><td>(.8)</td><td></td></tr><tr><td>Benefit obligations at end of the year</td><td>15.9</td><td>17.8</td><td></td></tr><tr><td>Change in plan assets:</td><td></td><td></td><td></td></tr><tr><td>Fair value of plan assets at beginning of the year</td><td>11.8</td><td>14.0</td><td></td></tr><tr><td>Actual return on plan assets</td><td>2.9</td><td>(.4)</td><td></td></tr><tr><td>Employer contributions</td><td>.1</td><td>.1</td><td></td></tr><tr><td>Benefits paid</td><td>(.8)</td><td>(.8)</td><td></td></tr><tr><td>Fair value of plan assets at end of year</td><td>14.0</td><td>12.9</td><td></td></tr><tr><td>Funded status</td><td>$ (1.9)</td><td>$ (4.9)</td><td></td></tr><tr><td>Amounts recognized in the balance sheet:</td><td></td><td></td><td></td></tr><tr><td>Accrued pension costs:</td><td></td><td></td><td></td></tr><tr><td>Current</td><td>$ (.1)</td><td>$ (.1)</td><td></td></tr><tr><td>Noncurrent</td><td>(1.8)</td><td>(4.8)</td><td></td></tr><tr><td>Total</td><td>$ (1.9)</td><td>$ (4.9)</td><td></td></tr><tr><td>Accumulated other comprehensive loss-</td><td></td><td></td><td></td></tr><tr><td>actuarial losses</td><td>$ 7.1</td><td>$ 10.4</td><td></td></tr><tr><td>ABO</td><td>$ 15.9</td><td>$ 17.8</td><td></td></tr></table>

The components of our net periodic defined benefit pension cost for our U.S. defined benefit pension plan is presented in the table below. The amounts shown below for recognized actuarial losses for 2009, 2010 and 2011 were recognized as components of our accumulated other comprehensive income (loss) at December 31, 2008, 2009 and 2010 respectively, net of deferred income taxes.

<table><tr><td rowspan="3"></td><td colspan="3">Years ended December 31,</td></tr><tr><td>2009</td><td>2010</td><td>2011</td></tr><tr><td colspan="3">(In millions)</td></tr><tr><td>Net periodic pension cost (income):</td><td></td><td></td><td></td></tr><tr><td>Interest cost on PBO</td><td>$ .9</td><td>$ .9</td><td>$ .9</td></tr><tr><td>Expected return on plan assets</td><td>(1.1)</td><td>(1.0)</td><td>(1.4)</td></tr><tr><td>Recognized actuarial losses</td><td>.3</td><td>.2</td><td>.3</td></tr><tr><td>Total</td><td>$ .1</td><td>$ .1</td><td>$ (.2)</td></tr></table>

The discount rate assumptions used in determining the actuarial present value of the benefit obligation for our U.S. defined benefit pension plan as of December 31, 2010 and 2011 are 5.1% and 4.2%, respectively. The impact of assumed increases in future compensation levels does not have an effect on the benefit obligation as the plan is frozen with regards to compensation.



The weighted-average rate assumptions used in determining the net periodic pension cost for our U.S. defined benefit pension plan for 2009, 2010 and 2011 are presented in the table below. The impact of assumed increases in future compensation levels does not have an effect on the periodic pension cost as the plan is frozen with regards to compensation.

<table><tr><td rowspan="2">Rate</td><td colspan="3">Years ended December 31,</td></tr><tr><td>2009</td><td>2010</td><td>2011</td></tr><tr><td>Discount rate</td><td>6.1%</td><td>5.7%</td><td>5.1%</td></tr><tr><td>Long-term return on plan assets</td><td>10.0%</td><td>10.0%</td><td>10.0%</td></tr></table>

Variances from actuarially assumed rates will result in increases or decreases in accumulated pension obligations, pension expense and funding requirements in future periods.

The amounts shown in the above tables for actuarial losses, prior service cost and net transition obligations at December 31, 2010 and 2011 have not yet been recognized as components of our periodic defined benefit pension cost as of those dates. These amounts will be recognized as components of our periodic defined benefit cost in future years and are recognized, net of deferred income taxes, in our accumulated other comprehensive income (loss) at December 2010 and 2011. We expect approximately $8.5 million, $1.1 million and $4 million of the unrecognized actuarial losses, prior service costs and net transition obligations, respectively, will be recognized as components of our consolidated net periodic defined benefit pension cost in 2012.

The table below details the changes in our consolidated other comprehensive income (loss) during 2009, 2010 and 2011.

<table><tr><td rowspan="3"></td><td colspan="4">Years Ended December 31,</td></tr><tr><td>2009</td><td>2010</td><td>2011</td><td></td></tr><tr><td colspan="4">(In millions)</td></tr><tr><td>Changes in plan assets and benefit obligations recognized in other comprehensive income (loss):</td><td></td><td></td><td></td><td></td></tr><tr><td>Current year:</td><td></td><td></td><td></td><td></td></tr><tr><td>Net actuarial gain (loss)</td><td>$ 2.8</td><td>$ (13.9)</td><td>$ (19.8)</td><td></td></tr><tr><td>Plan amendments</td><td>-</td><td>(3.8)</td><td>-</td><td></td></tr><tr><td>Settlements</td><td>-</td><td>-</td><td>.5</td><td></td></tr><tr><td>Amortization of unrecognized:</td><td></td><td></td><td></td><td></td></tr><tr><td>Net actuarial losses</td><td>5.5</td><td>5.7</td><td>6.9</td><td></td></tr><tr><td>Prior service cost</td><td>.8</td><td>.9</td><td>1.2</td><td></td></tr><tr><td>Net transition obligations</td><td>.5</td><td>.5</td><td>.5</td><td></td></tr><tr><td>Total</td><td>$ 9.6</td><td>$ (10.6)</td><td>$ (10.7)</td><td></td></tr></table>

In determining the expected long-term rate of return on plan asset assumptions, we consider the long-term asset mix (e.g. equity vs. fixed income) for the assets for each of our plans and the expected long-term rates of return for such asset components. In addition, we receive third-party advice about appropriate long-term rates of return. Such assumed asset mixes are summarized below:

- In Germany, the composition of our plan assets is established to satisfy the requirements of the German insurance commissioner. Our German pension plan assets represent an investment in a large collective investment fund established and maintained by Bayer AG in which several pension plans, including our German pension plan and Bayer's pension plans, have invested. Our plan assets represent a very



nominal portion of the total collective investment fund maintained by Bayer. These plan assets are a Level 3 input because there is not an active market that approximates the value of our investment in the Bayer investment fund. We determine the fair value of the Bayer plan assets based on periodic reports we receive from the managers of the Bayer plan. These periodic reports are subject to audit by the German pension regulator.

- In Canada, we currently have a plan asset target allocation of 55% to equity securities and 45% to fixed income securities. We expect the long-term rate of return for such investments to average approximately 125 basis points above the applicable equity or fixed income index. The Canadian assets are Level 1 input because they are traded in active markets.

- In Norway, we currently have a plan asset target allocation of 12% to equity securities, 72% to fixed income securities, 7% to real estate and the remainder primarily to liquid investments such as money markets. The expected long-term rate of return for such investments is approximately 8%, 4%, 7% and 3%, respectively. The majority of Norwegian plan assets are Level 1 inputs because they are traded in active markets; however, approximately 10% of our Norwegian plan assets are invested in real estate and other investments not actively traded and are therefore a Level 3 input.

- In the U.S., substantially all of the assets were invested in The Combined Master Retirement Trust ("CMRT"), a collective investment trust sponsored by Contran to permit the collective investment by certain master trusts which fund certain employee benefit plans sponsored by Contran and certain of its affiliates.

The CMRT's long-term investment objective is to provide a rate of return exceeding a composite of broad market equity and fixed income indices (including the S&P 500 and certain Russell indices) while utilizing both third-party investment managers as well as investments directed by Mr. Simmons. Mr. Simmons is the sole trustee of the CMRT. The trustee of the CMRT, along with the CMRT's investment committee, of which Mr. Simmons is a member, actively manage the investments of the CMRT.

The CMRT trustee and investment committee do not maintain a specific target asset allocation in order to achieve their objectives, but instead they periodically change the asset mix of the CMRT based upon, among other things, advice they receive from third-party advisors and their expectations regarding potential returns for various investment alternatives and what asset mix will generate the greatest overall return. The CMRT holds TIMET common stock in its investment portfolio; however through December 31, 2009 we invested in a portion of the CMRT which does not include the TIMET holdings. Beginning in 2010, we began to invest in the portion of the CMRT that holds such stock. During the history of the CMRT from its inception in 1988 through December 31, 2011, the average annual rate of return (including the CMRT's investment in TIMET common stock) has been 14%, while such annual return excluding the CMRT's investment in TIMET common stock has been 11.4%. For the years ended December 31, 2009, 2010 and 2011, the assumed long-term rate of return for plan assets invested in the CMRT was 10%. In determining the appropriateness of the long-term rate of return assumption, we primarily rely on the historical rates of return achieved by the CMRT, although we consider other factors as well including, among other things, the investment objectives of the CMRT's managers and their expectation that such historical returns will in the future continue to be achieved over the long-term.



The CMRT unit value is determined semi-monthly, and the plans have the ability to redeem all or any portion of their investment in the CMRT at any time based on the most recent semi-monthly valuation. However, the plans do not have the right to individual assets held by the CMRT and the CMRT has the sole discretion in determining how to meet any redemption request. For purposes of our plan asset disclosure, we consider the investment in the CMRT as a Level 2 input because (i) the CMRT value is established semi-monthly and the plans have the right to redeem their investment in the CMRT, in part or in whole, at anytime based on the most recent value and (ii) observable inputs from Level 1 or Level 2 were used to value approximately 84% of the assets of the CMRT at December 31, 2010 and 2011, as noted below. The aggregate fair value of all of the CMRT assets, including funds of Contran and its other affiliates that also invest in the CMRT, and supplemental asset mix details of the CMRT as of December 31, 2010 and 2011, are as follows:

<table><tr><td></td><td>2010 (In millions)</td><td>2011</td></tr><tr><td>CMRT asset value</td><td>$ 714.9</td><td>$ 659.5</td></tr><tr><td>CMRT fair value input:</td><td></td><td></td></tr><tr><td>Level 1</td><td>83 %</td><td>82 %</td></tr><tr><td>Level 2</td><td>1</td><td>1</td></tr><tr><td>Level 3</td><td>16</td><td>17</td></tr><tr><td></td><td>100 %</td><td>100 %</td></tr><tr><td>CMRT asset mix:</td><td></td><td></td></tr><tr><td>Domestic equities, principally publicly traded</td><td>73 %</td><td>75 %</td></tr><tr><td>International equities, publicly traded</td><td>2</td><td>2</td></tr><tr><td>Fixed income securities, publicly traded</td><td>16</td><td>14</td></tr><tr><td>Privately managed limited partnerships</td><td>8</td><td>8</td></tr><tr><td>Other</td><td>1</td><td>1</td></tr><tr><td></td><td>100 %</td><td>100 %</td></tr></table>

We also have plan assets in Belgium and the United Kingdom. The Belgian plan assets are invested in certain individualized fixed income insurance contracts for the benefit of each plan participant as required by the local regulators and are therefore a Level 3 input. The United Kingdom plan assets consist of marketable securities which are Level 1 inputs because they trade in active markets.

We regularly review our actual asset allocation for each plan, and will periodically rebalance the investments in each plan to more accurately reflect the targeted allocation and/or maximize the overall long-term return when considered appropriate.

The composition of our December 31, 2010 and 2011 pension plan assets by fair value level is shown in the table below. The amounts shown for plan assets invested in the CMRT include a nominal amount of cash held by our U.S. pension plan which is not part of the plan's investment in the CMRT.



<table><tr><td rowspan="2"></td><td colspan="5">Fair Value Measurements at December 31, 2010</td></tr><tr><td>Total</td><td>Quoted Prices in Active Markets (Level 1)</td><td>Significant Other Observable Inputs (Level 2)</td><td>Significant Unobservable Inputs (Level 3)</td><td></td></tr><tr><td>Germany</td><td>$ 176.2</td><td>$ -</td><td>$ -</td><td>$ 176.2</td><td></td></tr><tr><td>Canada:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Local currency equities</td><td>19.6</td><td>19.6</td><td>-</td><td>-</td><td></td></tr><tr><td>Non local currency equities</td><td>28.3</td><td>28.3</td><td>-</td><td>-</td><td></td></tr><tr><td>Local currency fixed income</td><td>30.7</td><td>30.7</td><td>-</td><td>-</td><td></td></tr><tr><td>Non local currency fixed income</td><td>.2</td><td>.2</td><td>-</td><td>-</td><td></td></tr><tr><td>Cash and other</td><td>2.4</td><td>2.4</td><td>-</td><td>-</td><td></td></tr><tr><td>Norway:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Local currency equities</td><td>11.5</td><td>11.5</td><td>-</td><td>-</td><td></td></tr><tr><td>Non local currency equities</td><td>.2</td><td>.2</td><td>-</td><td>-</td><td></td></tr><tr><td>Local currency fixed income</td><td>42.3</td><td>15.9</td><td>-</td><td>26.4</td><td></td></tr><tr><td>Non local currency fixed income</td><td>3.5</td><td>.5</td><td>-</td><td>3.0</td><td></td></tr><tr><td>Cash and other</td><td>1.2</td><td>.6</td><td>-</td><td>.6</td><td></td></tr><tr><td>U.S.</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>CMRT</td><td>14.0</td><td>.3</td><td>13.7</td><td>-</td><td></td></tr><tr><td>Other</td><td>11.2</td><td>2.5</td><td>-</td><td>8.7</td><td></td></tr><tr><td>Total</td><td>$ 341.3</td><td>$ 112.7</td><td>$ 13.7</td><td>$ 214.9</td><td></td></tr></table>

<table><tr><td rowspan="2"></td><td colspan="5">Fair Value Measurements at December 31, 2011</td></tr><tr><td>Total</td><td>Quoted Prices in Active Markets (Level 1)</td><td>Significant Other Observable Inputs (Level 2)</td><td>Significant Unobservable Inputs (Level 3)</td><td></td></tr><tr><td>Germany</td><td>$ 187.2</td><td>$ -</td><td>$ -</td><td>$ 187.2</td><td></td></tr><tr><td>Canada:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Local currency equities</td><td>18.1</td><td>18.1</td><td>-</td><td>-</td><td></td></tr><tr><td>Non local currency equities</td><td>28.0</td><td>28.0</td><td>-</td><td>-</td><td></td></tr><tr><td>Local currency fixed income</td><td>33.8</td><td>33.8</td><td>-</td><td>-</td><td></td></tr><tr><td>Cash and other</td><td>2.4</td><td>2.4</td><td>-</td><td>-</td><td></td></tr><tr><td>Norway:</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Local currency equities</td><td>2.0</td><td>2.0</td><td>-</td><td>-</td><td></td></tr><tr><td>Non local currency equities</td><td>3.7</td><td>3.7</td><td>-</td><td>-</td><td></td></tr><tr><td>Local currency fixed income</td><td>35.9</td><td>35.9</td><td>-</td><td>-</td><td></td></tr><tr><td>Non local currency fixed income</td><td>4.3</td><td>4.3</td><td>-</td><td>-</td><td></td></tr><tr><td>Real estate</td><td>5.1</td><td>-</td><td>-</td><td>5.1</td><td></td></tr><tr><td>Cash and other</td><td>6.3</td><td>4.9</td><td>-</td><td>1.4</td><td></td></tr><tr><td>U.S.</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>CMRT</td><td>12.8</td><td>.1</td><td>12.7</td><td>-</td><td></td></tr><tr><td>Other</td><td>9.4</td><td>2.5</td><td>-</td><td>6.9</td><td></td></tr><tr><td>Total</td><td>$ 349.0</td><td>$ 135.7</td><td>$ 12.7</td><td>$ 200.6</td><td></td></tr></table>



A rollforward of the change in fair value of Level 3 assets follows.

<table><tr><td></td><td>2010 (In millions)</td><td>2011</td></tr><tr><td>Fair value at beginning of year</td><td>$ 207.1</td><td>$ 214.9</td></tr><tr><td>Gain on assets held at end of year</td><td>15.9</td><td>18.8</td></tr><tr><td>Gain on assets sold during the year</td><td>1.5</td><td>1.8</td></tr><tr><td>Assets purchased</td><td>20.0</td><td>18.6</td></tr><tr><td>Assets sold</td><td>(15.9)</td><td>(18.1)</td></tr><tr><td>Transfers out</td><td>-</td><td>(29.2)</td></tr><tr><td>Currency exchange rate fluctuations</td><td>(13.7)</td><td>(6.2)</td></tr><tr><td>Fair value at end of year</td><td>$ 214.9</td><td>$ 200.6</td></tr></table>

Postretirement benefits other than pensions ("OPEB") - We provide certain health care and life insurance benefits for eligible retired employees. Certain of our Canadian employees may become eligible for such postretirement health care and life insurance benefits if they reach retirement age while working for us. In the U.S., employees who retired after 1998 are not entitled to any such benefits. The majority of all retirees are required to contribute a portion of the cost of their benefits and certain current and future retirees are eligible for reduced health care benefits at age 65. We have no OPEB plan assets, rather, we fund medical claims as they are paid. Benefit payments to OPEB plans are expected to be the equivalent of:

<table><tr><td>Years ending December 31,</td><td>Amount (In millions)</td></tr><tr><td>2012</td><td>$ .5</td></tr><tr><td>2013</td><td>.5</td></tr><tr><td>2014</td><td>.5</td></tr><tr><td>2015</td><td>.5</td></tr><tr><td>2016</td><td>.5</td></tr><tr><td>Next 5 years</td><td>2.6</td></tr></table>



The funded status of our OPEB plans is presented in the table below:

<table><tr><td rowspan="3"></td><td colspan="2">Years ended December 31,</td></tr><tr><td>2010</td><td>2011</td></tr><tr><td colspan="2">(In millions)</td></tr><tr><td>Change in accumulated OPEB obligations:</td><td></td><td></td></tr><tr><td>Obligations at beginning of the year</td><td>$ 14.2</td><td>$ 11.2</td></tr><tr><td>Service cost</td><td>.4</td><td>.2</td></tr><tr><td>Interest cost</td><td>.8</td><td>.6</td></tr><tr><td>Actuarial losses</td><td>1.6</td><td>1.9</td></tr><tr><td>Plan amendments</td><td>(5.8)</td><td>-</td></tr><tr><td>Change in currency exchange rates</td><td>.5</td><td>(.3)</td></tr><tr><td>Benefits paid from employer contributions</td><td>(.5)</td><td>(.4)</td></tr><tr><td>Obligations at end of the year</td><td>11.2</td><td>13.2</td></tr><tr><td>Fair value of plan assets</td><td>-</td><td>-</td></tr><tr><td>Funded status</td><td>$ (11.2)</td><td>$ (13.2)</td></tr><tr><td>Amounts recognized in the balance sheet:</td><td></td><td></td></tr><tr><td>Current accrued pension costs</td><td>$ (.6)</td><td>$ (.5)</td></tr><tr><td>Noncurrent accrued pension costs</td><td>(10.6)</td><td>(12.7)</td></tr><tr><td>Total</td><td>$ (11.2)</td><td>$ (13.2)</td></tr><tr><td>Accumulated other comprehensive income:</td><td></td><td></td></tr><tr><td>Net actuarial losses</td><td>$ 3.2</td><td>$ 4.9</td></tr><tr><td>Prior service credit</td><td>(6.1)</td><td>(5.3)</td></tr><tr><td>Total</td><td>$ (2.9)</td><td>$ (4)</td></tr></table>

The amounts shown in the table above for net actuarial losses and prior service credit at December 31, 2010 and 2011 have not yet been recognized as components of our periodic OPEB cost as of those dates. These amounts will be recognized as components of our periodic OPEB cost in future years and are recognized, net of deferred income taxes, in our accumulated other comprehensive income (loss). We expect to recognize approximately $.3 million of unrecognized actuarial losses and $.6 million of prior service credit as components of our periodic OPEB cost in 2012.

At December 31, 2011, the accumulated OPEB obligations for all OPEB plans was comprised of $1.2 million related to U.S. plans and $12.0 million related to our Canadian plan (2010 - $1.4 million and $9.7 million, respectively).

In the fourth quarter of 2010, we amended our benefit formula for most participants of our plans effective January 1, 2011, resulting in a prior service credit of approximately $5.8 million as of December 31, 2010. Key assumptions including the health care cost trend rate as of December 31, 2010 now reflect these plan revisions to the benefit formula.

The components of our periodic OPEB costs are presented in the table below. The amounts shown below for amortization of prior service credit and recognized actuarial losses for 2009, 2010 and 2011 were recognized as components of our accumulated other comprehensive income (loss) at December 31, 2008, 2009 and 2010, respectively, net of deferred income taxes.



<table><tr><td rowspan="2"></td><td colspan="4">Years ended December 31,</td></tr><tr><td>2010</td><td>2010</td><td>2011</td><td></td></tr><tr><td>Service cost</td><td>$ .2</td><td>$ .4</td><td>$ .2</td><td></td></tr><tr><td>Interest cost</td><td>.6</td><td>.8</td><td>.6</td><td></td></tr><tr><td>Amortization of prior service credit</td><td>(.2)</td><td>(.2)</td><td>(.8)</td><td></td></tr><tr><td>Recognized actuarial losses</td><td>—</td><td>.2</td><td>.3</td><td></td></tr><tr><td>Total</td><td>$ .6</td><td>$ 1.2</td><td>$ .3</td><td></td></tr><tr><td colspan="5">The table below details the changes in benefit obligations recognized accumulated other comprehensive income (loss) during 2009, 2010 and 2011.</td></tr><tr><td rowspan="2"></td><td colspan="4">Years Ended December 31,</td></tr><tr><td>2009</td><td>2010</td><td>2011</td><td></td></tr><tr><td>Changes in benefit obligations recognized in other comprehensive income (loss):</td><td></td><td></td><td></td><td></td></tr><tr><td>Current year:</td><td></td><td></td><td></td><td></td></tr><tr><td>Net actuarial loss</td><td>$ (3.2)</td><td>$ (1.6)</td><td>$ (2.0)</td><td></td></tr><tr><td>Plan amendments</td><td>-</td><td>5.8</td><td>-</td><td></td></tr><tr><td>Amortization of unrecognized:</td><td></td><td></td><td></td><td></td></tr><tr><td>Prior service credit</td><td>(.2)</td><td>(.2)</td><td>(.8)</td><td></td></tr><tr><td>Net actuarial loss</td><td>—</td><td>.2</td><td>.3</td><td></td></tr><tr><td>Total</td><td>$ (3.4)</td><td>$ 4.2</td><td>$ (2.5)</td><td></td></tr></table>

A summary of our key actuarial assumptions used to determine the net benefit obligation as of December 31, 2010 and 2011 are presented in the table below. The weighted average discount rate was determined using the projected benefit obligation as of such dates. The impact of assumed increases in future compensation levels does not have a material effect on the actuarial asset value of the benefit obligation as substantially all of such benefits relate solely to eligible retirees, for which compensation is not applicable.

<table><tr><td></td><td>2010</td><td>2011</td></tr><tr><td>Healthcare inflation:</td><td></td><td></td></tr><tr><td>Initial rate</td><td>7.5%</td><td>8.0%</td></tr><tr><td>Ultimate rate</td><td>5.5%</td><td>5.0%</td></tr><tr><td>Year of ultimate rate achievement</td><td>2016</td><td>2018</td></tr><tr><td>Weighted average discount rate</td><td>5.1%</td><td>4.1%</td></tr></table>

Assumed health care cost trend rates affect the amounts we report for health care plans. A one percent change in assumed health care trend rates would have a material effect on the net periodic OPEB-OPEB cost for 2011. The accumulated OPEB obligation at December 31, 2011.



Variances from actuarially-assumed rates will result in additional increases or decreases in accumulated OPEB obligations, net periodic OPEB cost and funding requirements in future periods.

Note 12 - Other noncurrent liabilities:

<table><tr><td rowspan="3"></td><td colspan="2">December 31,</td></tr><tr><td>2010</td><td>2011</td></tr><tr><td colspan="2">(In millions)</td></tr><tr><td>Reserve for uncertain tax positions</td><td>$ 10.6</td><td>$ 11.9</td></tr><tr><td>Employee benefits</td><td>9.7</td><td>10.2</td></tr><tr><td>Insurance claims and expenses</td><td>.3</td><td>.3</td></tr><tr><td>Other</td><td>5.0</td><td>5.0</td></tr><tr><td>Total</td><td>$ 25.6</td><td>$ 27.4</td></tr></table>

Note 13 - Common stock compensation and other stock transactions:

Secondary public offering of common stock - In November 2010, we completed a secondary public offering of 17.94 million shares of our common stock in an underwritten offering for net proceeds of $337.6 million. The price to the public was $20.00 per share, and the underwriting discount was 5.75% (or $1.15 per share). Costs of the offering (exclusive of the underwriting discount) were approximately $7 million. The offering took place in two parts, and the first closing occurred on November 2, 2010 of 15.6 million shares of common stock that generated net proceeds of $293.5 million. The second closing (upon exercise of the underwriters' overall-totment option) occurred on November 9, 2010 for an additional 2.34 million shares of common stock that generated additional net proceeds of $44.1 million. The shares of common stock issued in the secondary offering are identical to the previously issued outstanding shares in all respects, including par value, liquidation and dividend preference. All shares were sold to third-party investors; none of our affiliated companies purchased any shares in the offering. Upon completion of the offering, the Valhi consolidated aggregate ownership of Kronos was reduced from 95.2% (59.2% held by Valhi directly and 36.0% held by NL directly) to 80.4% (50.0% is held by Valhi directly and 30.4% is held by NL directly).

NL common stock options held by our employees - Certain of our employees were granted nonqualified options to purchase NL common stock under the terms of certain option plans sponsored by NL. Generally, the stock options were granted at a price equal to or greater than 100% of the market price of NL's common stock at the date of grant, vested over a five-year period and expired ten years from the date of grant. At December 31, 2011, no options were outstanding as all outstanding options expired or were exercised in 2011. During 2009, 2010 and 2011, 6,950, 10,350 and 25,950 options were exercised, respectively.

Long-term incentive compensation plan - We have a long-term incentive compensation plan that provides for the discretionary grant of, among other things, qualified incentive stock options, nonqualified stock options, restricted common stock, stock awards and stock appreciation rights. Up to 150,000 shares of our common stock may be issued pursuant to this plan. As of December 31, 2011, no options had been granted pursuant to this plan, and 115,500 shares were available for future grants. During 2009, 2010 and 2011 we awarded an aggregate of 10,500, 7,000, and 3,500 shares of our common stock pursuant to this plan to members of our board of directors. In



Current receivables from and payables to affiliates are summarized in the table below.

<table><tr><td rowspan="2"></td><td colspan="2">December 31,</td></tr><tr><td>2010</td><td>2011</td></tr><tr><td></td><td colspan="2">(In millions)</td></tr><tr><td>Current receivable from affiliate - LPC</td><td>$ -</td><td>$ 29.6</td></tr><tr><td>Noncurrent note receivable from Valhi</td><td>$ 61.9</td><td>$ 136.1</td></tr><tr><td>Current payables to affiliates:</td><td></td><td></td></tr><tr><td>LPC</td><td>$ 7.4</td><td>$ -</td></tr><tr><td>Income taxes payable to Valhi</td><td>2.1</td><td>8.6</td></tr><tr><td>Other</td><td>.1</td><td>-</td></tr><tr><td>Total</td><td>$ 9.6</td><td>$ 8.6</td></tr></table>

From time to time, we will have loans and advances outstanding between us and various related parties pursuant to term and demand notes. We generally enter into these loans and advances for cash management purposes. When we loan funds to related parties, we are generally able to earn a higher rate of return on the loan than we would earn if we invested the funds in other instruments, and when we borrow from related parties, we are generally able to pay a lower rate of interest than we would pay if we had incurred third-party indebtedness. While certain of these loans to affiliates may be of a lesser credit quality than cash equivalent instruments otherwise available to us, we believe we have considered the credit risks in the terms of the applicable loans. In this regard:

- In November 2010, we entered into an unsecured revolving demand promissory note with Valhi whereby, as amended, we agreed to loan Valhi up to $225 million. Our loan to Valhi bears interest at prime plus 1.00%, payable quarterly, with all principal due on demand, but in any event no earlier than December 31, 2013. The amount of our outstanding loans to Valhi at any time is at our discretion. As of December 31, 2011, we had loans outstanding to Valhi of $136.1 million;

- In April 2010, we entered into an unsecured revolving credit note with Contran pursuant to which we could borrow up to $40 million of Liq.  \( \text{Liq.} \)  Liq.  \( \text{Liq.} \)  Liq.  \(  \)  Liq.  \(  \)  Liq.  \(  \)  Li

- In October 2008, we entered into an unsecured revolving credit with NL pursuant to which we could borrow up to $40 million through December 31, 2009. Such revolving credit note term upon its maturity in December 2009.

Interest income on our loan to Valhi was $.5 million in 2010 and million in 2011. Interest expense on our loans from Contran and NL was million in 2009, $.2 million in 2010 and nil in 2011.

Amounts payable to LPC are generally for the purchase of  \( TiO_{2} \) , amounts receivable from LPC are generally from the sale of feedstock See Note 5. Purchases of  \( TiO_{2} $  from LPC were 121.1 million in 2009, 5 million in 2010 and 145.0 million in 2011. Sales of feedstock ore were nil in 2009, 5.2 million in 2010 and 93.0 million in 2011.



including Contran, tax planning, of the range of the most recent, saving and economic and administrative expenses and other expenses and expenses and expenses and expenses and expenses and expenses and expenses and expenses and expenses and expenses and expenses

§8.3 million in 2010 and $9.6 million in 2011. This agreement



strive to improve our environmental performance. From time to time, we may be subject to environmental regulatory enforcement under U.S. and non-U.S. statutes, resolution of which typically involves the establishment of compliance programs. It is possible that future developments, such as stricter requirements of environmental laws and enforcement policies thereunder, could adversely affect our production, handling, use, storage, transportation, sale or disposal of such substances. We believe all of our plants are in substantial compliance with applicable environmental laws.

Litigation matters - We are involved in various environmental, contractual, product liability, patent (or intellectual property), employment and other claims and disputes incidental to our business. We currently believe the disposition of all claims and disputes, individually or in the aggregate, should not have a material adverse effect on our consolidated financial condition, results of operations or liquidity.

In March 2010, we were served with two complaints which were subsequently consolidated as Haley Paint et al. v. E.I. Du Pont de Nemours and Company, et al. (United States District Court, for the District of Maryland, Case No. 1:10-cv-00318-RDB). A third plaintiff intervened into the

firm-query. zyil.com; Intelevenants-Infusions-Tis; E.I. Du Pont de Nemours Company, Huntsman International LLC, Millennium Inorganic, and the National Titanium Dioxide Company Limited (d/b/a Intififs seek to represent a class consisting of all persons and purchased titanium dioxide in the United States directly from the defendants on or after March 1, 2002. The complaint the defendants conspired and combined to fix, raise, maintain, the price at which titanium dioxide was sold in the United States and in other anticompetitive conduct. In May 2010, defendants to dismiss, which plaintiffs opposed. In March 2011, the motion to dismiss. The case is proceeding in the trial of the action is without merit, have denied all allegations and liability and intend to defend against the action

ations of credit risk - Sales of  \( TiO_{2} \)  accounted for 90% of our sales during each of the years 2009 and 2010 and 92% remaining sales result from the mining and sale of ilmenite ore all used in the sulfate pigment production process), and the
Concentrate of wongdoing vigorously.

titanium chemical products (derived from co-products of the  \( TiO_{2} \)  production processes).  \( TiO_{2} \)  is generally sold to the paint, plastics and paper industries. Such markets are generally considered "quality-of-life" markets whose demand for  \( TiO_{2} \)  is influenced by the relative economic well-being of the various geographic regions. We sell  \( TiO_{2} \)  to over 4,000 customers, with the top ten customers approximating 28% of net sales in 2009, 27% in 2010 and 30% in 2011. We did not have sales to a single customer comprising over 10% of our net sales in any of the previous three years. The table below shows the approximate percentage of our  \( TiO_{2} \)  sales by volume for our significant markets, Europe and North America, for the last three years.

<table><tr><td></td><td>2009</td><td>2010</td><td>2011</td></tr><tr><td>Europe</td><td>53%</td><td>53%</td><td>53%</td></tr><tr><td>North America</td><td>32%</td><td>33%</td><td>32%</td></tr></table>



Income taxes - We and Valhi have agreed to a policy providing for the allocation of tax liabilities and tax payments as described in Note 1. Under applicable law, we, along with every other member of the Contran Tax Group, are each jointly and severally liable for the aggregate federal income tax liability of Contran and the other companies included in the Contran Tax Group. For all periods in which we are included in the Contran Tax Group, however, to indemnify us for any liability for income taxes paid, we have entered into a contract with our tax liability previously computed by us in accordance with the tax allocation policy.

## - Financial instruments:

e following table summarizes the valuation of our financial
nts recorded on a fair value basis as of December 31, 2010 and 2011:

<table><tr><td rowspan="2"></td><td colspan="4">Fair Value Measurements</td></tr><tr><td>Quoted Prices in Active Markets (Level 1)</td><td>Significant Other Observable Inputs (Level 2)</td><td>Significant Unobservable Inputs (Level 3)</td><td></td></tr><tr><td>(1)</td><td>Total</td><td>(2)</td><td>(3)</td><td>(4)</td></tr><tr><td>(1)</td><td>(2)</td><td>(3)</td><td>(4)</td><td>(5)</td></tr><tr><td>(1)</td><td>(2)</td><td>(3)</td><td></td><td></td></tr></table>

Valhi ha of the C and paid

Note 16

Th
instrume

Asset (1. December
Curren
Noncur
secu

December
Curren
Curren
secu
Noncur
secu



January 2012 through December 2012 at a rate of $4.0 million per month, subject to early redemption provisions at our option.

The estimated fair value of such currency forward contracts at December

The estimated fair value of such currency forward contracts at December 2012 is $4.0 million.



which we present our comprehensive income in these Consolidated Financial Statements. Additionally, ASU 2011-05 would have required us to present on the face of our financial statements the effect of reclassifications out of accumulative other comprehensive income on the components of net income and other comprehensive income. However, in December 2011 the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05. ASU 2011-12 defers the effectiveness for the requirement to present on the face of our financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income.

not have a material effect on our Consolidated Financial Statements.

ures about to disclose
uments and
uments and
rangement.
ining with
s standard

In December 2011 the FASB issued ASU 2011-11 Disclosures Offsetting Assets and Liabilities. ASU 2011-11 requires entities both gross information and net information about both transactions eligible for offset in the balance sheet and institutions subject to an agreement similar to a master netting as this standard will be effective for annual and interim periods beginning in the first quarter 2013 report. We do not believe the adoption of this will have a material effect on our Consolidated Financial Statements.

Note 18 - Quarterly results of operations (unaudited):

<table><tr><td rowspan="2">December 31 data)</td><td colspan="5">Quarter ended</td></tr><tr><td>March 31</td><td>June 30</td><td>September 30</td><td></td><td></td></tr><tr><td>Year ended December 31, 2010</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Net sales</td><td>$ 319.7</td><td>$ 380.1</td><td>$ 376.6</td><td></td><td></td></tr><tr><td>Gross margin</td><td>60</td><td>86</td><td>86</td><td></td><td></td></tr><tr><td>Net income</td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>Basic and diluted earnings per common share</td><td></td><td></td><td></td><td></td><td></td></tr></table>

The following table represents the data for the years ended December 31, 2010, 2011, and 2012. The following table represents the data for the years ended December 31, 2010, 2012, and 2013. The following table represents the data for the years ended December 31, 2010, and 2013. The following table represents the data for the years ended December 31



Our provision for income taxes in the third and fourth quarters of 2011
Our provision for income taxes in the third and fourth quarters of 2011
Our provision



## KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

## SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT

## Condensed Balance Sheets

## (In millions)

<table><tr><td rowspan="2"></td><td colspan="2">December 31,</td></tr><tr><td>2010</td><td>2011</td></tr><tr><td>Current assets:</td><td></td><td></td></tr><tr><td>Cash and equivalents</td><td>$ 209.9</td><td>$ 7.8</td></tr><tr><td>Receivables from subsidiary</td><td>51.9</td><td>37.8</td></tr><tr><td>Marketable securities</td><td>-</td><td>20.9</td></tr><tr><td>Prepaid expenses</td><td>.3</td><td>.5</td></tr><tr><td>Deferred income taxes</td><td>-</td><td>.3</td></tr><tr><td>Total current assets</td><td>262.1</td><td>67.3</td></tr><tr><td>Other assets:</td><td></td><td></td></tr><tr><td>Investment in subsidiaries</td><td>733.5</td><td>945.7</td></tr><tr><td>Note receivable from Valhi</td><td>61.9</td><td>136.1</td></tr></table>



SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

Condensed Statements of Operations

(In millions)

<table><tr><td colspan="3">Years ended December 31,</td></tr><tr><td>2009</td><td>2010</td><td>2011</td></tr></table>

Revenues and other income:

The following table represents the financial data for the years ended December 31, 2009, 2010, and 2011. The data is presented in a tabular format, with the following columns: 2009, 2010, and 2011. The data is presented in a table format, with the following columns: 2009, 2010, and 2011.

The table is divided into two sections, with the first section containing the financial data for the years ended December 31, 2009, 2010, and 2011. The second section contains the financial data for the years ended December 31, 2009, 2010,



## KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

## SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

## Condensed Statements of Cash Flows

## (In millions)

<table><tr><td rowspan="2"></td><td colspan="3">Years ended December 31,</td></tr><tr><td>2009</td><td>2010</td><td>2011</td></tr></table>

Cash flows from operating activities:

Net income (loss)

$ (34.7) $ 130.6 $ 321.0

The quick brown fox jumps over the lazy dog.



# KRONOS WORLDWIDE, INC. AND SUBSIDIARIES

## SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)

## Notes to Condensed Financial Information

## Note 1 - Basis of presentation:

The accompanying financial statements of Kronos Worldwide, Inc. reflect our investment in majority-owned subsidiaries on the equity method. The Consolidated Financial Statements of Kronos and its majority-owned subsidiaries (the "Company") and the related Notes to Consolidated Financial Statements are incorporated herein by reference.

Note 2 - Receivable from (payable to) subsidiaries and affiliates:

<table><tr><td rowspan="3"></td><td colspan="3">December 31,</td></tr><tr><td>2010</td><td>2011</td><td></td></tr><tr><td colspan="3">(In millions)</td></tr><tr><td>Current:</td><td></td><td></td><td></td></tr><tr><td>Receivable from:</td><td></td><td></td><td></td></tr><tr><td>ana, Inc. (“KLA”)</td><td>$ 44.4</td><td>$ 23.5</td><td></td></tr><tr><td>taxes</td><td>7.5</td><td>7.2</td><td></td></tr><tr><td>taxes</td><td>-</td><td>7.1</td><td></td></tr><tr><td></td><td>$ 51.9</td><td>$ 37.8</td><td></td></tr><tr><td>Tnr</td><td>.</td><td>.</td><td></td></tr><tr><td>taxes</td><td>2.1</td><td>8.6</td><td></td></tr><tr><td></td><td>$ 76.9</td><td>$ 32.1</td><td></td></tr><tr><td>Tnr Valhi</td><td>$ 61.9</td><td>$ 136.1</td><td></td></tr><tr><td></td><td>$ 263.1</td><td>$ 274.4</td><td></td></tr></table>

II loaned us an aggregate € 163.1 million ($209.5 million instead of paying us cash dividends. The original notes 31, 2010 maturity date and required interest to be paid rate of 9.25%. Prior to 2009, the terms of these notes the requirements for quarterly interest payments and to the December 31, 2013, and at December 31, 2010 and of $45.4 million and $63.5 million, respectively, of interest on these loans. The notes are unsecured, contain and provide for default only upon our failure to pay any amount due to a short grace period). Due to the long-term these notes, settlement of the principal and accrued the notes is not contemplated within the foreseeable expected that settlement of the principal and interest will occur through a capital transaction. We recognize such notes as incurred. Until such time as the notes are interest expense on the promissory notes.
Prior to 2009, K. at the borrowing date) provided for a December quarterly at an annual interest rate of 2.5% were modified to remove the maturity date of 2011 we had an aggregate accrued and unpaid interest on financial covenants amount when due (subject to the interest balance of future. We currently amount of the notes was interest expense on such interest expense on such interest expense on such interest expense on such interest expense on such interest expense on



## Note 3 - Investment in subsidiaries:

<table><tr><td rowspan="3"></td><td colspan="3">December 31,</td></tr><tr><td>2010</td><td>2011</td><td></td></tr><tr><td colspan="3">(In millions)</td></tr><tr><td>Investment in:</td><td></td><td></td><td></td></tr><tr><td>KLA</td><td>$ 214.3</td><td>$ 194.5</td><td></td></tr><tr><td>KC</td><td>76.9</td><td>100.0</td><td></td></tr><tr><td>KII</td><td>442.3</td><td>651.2</td><td></td></tr><tr><td>Total</td><td>$ 733.5</td><td>$ 945.7</td><td></td></tr><tr><td></td><td>2009</td><td>2010</td><td>2011</td></tr><tr><td></td><td colspan="3">(In millions)</td></tr><tr><td>Equity in earnings (loss) from continuing operations of subsidiaries:</td><td></td><td></td><td></td></tr><tr><td>KLA</td><td>$ 14.4</td><td>$ 39.8</td><td>$ 68.4</td></tr><tr><td>KC</td><td>(.5)</td><td>5.8</td><td>40.4</td></tr><tr><td>KII</td><td>(32.1)</td><td>99.8</td><td>243.4</td></tr><tr><td>Total</td><td>$ (18.2)</td><td>$ 145.4</td><td>$ 352.2</td></tr></table>



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• General global economic and political conditions (such as changes in the level of gross domestic product in various regions of the world and the impact of such changes on demand for TiO₂);

Competitive products and substitute products;

• Customer and competitor strategies;
• Potential consolidation of our competitors;

• The impact of pricing and production decisions;

• Competitive technology positions;

business resulting from terrorist

• Possible disruption of our business or increases in the cost of doing activities or global conflicts;

ange rate between the U.S. dollar
 \( ^{1} \) , or possible disruptions to our
s associated with the euro;
, leaks, natural disasters, fires,
 \( ^{1} \)  interruptions);

• The introduction of trade barriers;

• Fluctuations in currency exchange rates (such as changes in the exchange rate) and the introduction of new currencies, such as the Euro, have been recognized under the more recent circumstances.

• Operating interruptions (including, but not limited to, labor disputes, explosions, unscheduled or unplanned downtime and transportation)

• Our ability to renew or refinance credit facilities;

• Our ability to maintain sufficient liquidity;

Our ability to maintain sufficient liquidity, and our ability to maintain sufficient liquidity, and our ability to maintain sufficient liquidity, and our ability to maintain

are requiring compliance with emission and discharge standards for

and possible changes therein;

tigation; and

(ize (or the consequences of such a development worsen), or correct, actual results could differ materially from those forecasted / intention or obligation to update or revise any forward-looking information, future events or otherwise.

In an effort to provide investors with additional information regarding the Company's results of operations as described in the Limited Statement of Affairs ("CAMP"), the
Environmental matters (such as those existing and new facilities);

• Government laws and regulations;

• The ultimate resolution of pending litigation;

• Possible future litigation

Should one or more of these risks materialize, the Company should consider the following measures to mitigate the impact of such risks:

Should one or more of these risks materialize, the Company should consider the following measures to mitigate

In an effort to provide investors with additional information regarding the Company's results of operations as described in the Limited Statement of Affairs ("CAMP"), the



The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.

The quick brown fox jumps over the lazy dog.



## KRONOS WORLDWIDE, INC.
RECONCILIATION OF SEGMENT PROFIT TO
INCOME FROM OPERATIONS
(In millions)
(Unaudited)

<table><tr><td rowspan="2"></td><td colspan="2">Three months ended December 31,</td><td colspan="2">Year ended December 31,</td></tr><tr><td>2010</td><td>2011</td><td>2010</td><td>2011</td></tr><tr><td>Segment profit</td><td>$ 62.5</td><td>$ 145.9</td><td>$ 185.8</td><td>$ 555.8</td></tr><tr><td>Adjustments:</td><td></td><td></td><td></td><td></td></tr><tr><td>Trade interest income</td><td>(.1)</td><td>(.1)</td><td>(.2)</td><td>(.3)</td></tr><tr><td>Corporate expense</td><td>(1.5)</td><td>(2.5)</td><td>(7.2)</td><td>(9.0)</td></tr><tr><td>Income from operations</td><td>$ 60.9</td><td>$ 143.3</td><td>$ 178.4</td><td>$ 546.5</td></tr></table>



## SUBSIDIARIES OF THE REGISTRANT

<table><tr><td>NAME OF CORPORATION</td><td>Jurisdiction of incorporation or organization</td><td>% of Voting Securities Held at December 31, 2011(a)</td></tr><tr><td>Kronos Canada, Inc.</td><td>Canada</td><td>100</td></tr><tr><td>Kronos International, Inc.</td><td>Delaware</td><td>100</td></tr><tr><td>Kronos Titan GmbH</td><td>Germany</td><td>100</td></tr><tr><td>Société Industrielle du Titane, S.A.</td><td>France</td><td>99</td></tr><tr><td>Kronos Limited</td><td>United Kingdom</td><td>100</td></tr><tr><td>Kronos Denmark ApS</td><td>Denmark</td><td>100</td></tr><tr><td>Kronos Europe S.A./N.V.</td><td>Belgium</td><td>100</td></tr><tr><td>Kronos B.V.</td><td>Netherlands</td><td>100</td></tr><tr><td>Kronos Norge A/S</td><td>Norway</td><td>100</td></tr><tr><td>Kronos Titan A/S</td><td>Norway</td><td>100</td></tr><tr><td>Titania A/S</td><td>Norway</td><td>100</td></tr><tr><td colspan="3">The Technical Management</td></tr></table>

The Technical Management

Delaware 100

Delaware 100

Delaware 50

ed subsidiary of the Registrant

(a) Held by the Registrant or the indicate



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Kronos Worldwide, Inc.

Three Lincoln Centre

5430 LBJ Freeway, Suite 1700

Dallas, TX 75240-2697

(972) 233-1700

(972) 448-1445 (Fax)