What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-03-06 compared with 2024-03-06 · 292 added, 205 removed, 384 unchanged (56% of the section changed)

15 unchanged sentences

Net income overview

Our net loss attributable to NL stockholders was $2.3 million, or $.05 per share, in 2023 compared to net income of $33.8 million, or $.69 per share, in 2022 and net income of $51.2 million, or $1.05 per share, in 2021.

Our net income attributable to NL stockholders was $67.2 million, or $1.38 per share, in 2024 compared to a net loss of $2.3 million, or $.05 per share, in 2023 and net income of $33.8 million, or $.69 per share, in 2022.

As more fully described below, the increase in our earnings attributable to NL stockholders from 2023 to 2024 is primarily due to the net effects of:

● equity in earnings from Kronos in 2024 of $26.4 million compared to equity in losses of $15.0 million in 2023;

● aggregate income of $31.4 million in 2024 related to the settlement of a liability for an environmental remediation site ;

● an unrealized gain in the relative value of marketable equity securities of $9.8 million in 2024 compared to an unrealized loss of $8.1 million in 2023;

● lower CompX segment profit of $17.0 million in 2024 compared to $25.4 million in 2023;

● a non-cash loss on the termination of our U.K.

pension plan of $4.9 million in 2023;

● higher interest and dividend income of $11.0 million in 2024 compared to $9.6 million in 2023;

● higher insurance recoveries of $1.4 million in 2024 compared to $.5 million in 2023.

Our 2024 net income per share attributable to NL includes:

● aggregate income of $.51 per share, net of tax in the fourth quarter of 2024 related to the settlement of a liability for an environmental remediation site;

● income of $.25 per share, net of tax, due to Kronos’ recognition of a non-cash gain resulting from the remeasurement of its investment in the TiO 2 manufacturing joint venture;

● a loss of $.08 per share, net of tax, due to Kronos’ recognition of a non-cash deferred income tax expense related to final tax regulations on the treatment of certain currency translation gains and losses recognized in the fourth quarter;

● a loss of $.04 per share, net of tax, due to Kronos’ recognition of a non-cash deferred income tax expense related to the recognition of a deferred income tax asset valuation allowance related to its Belgian net deferred tax assets recognized in the fourth quarter, and

● income of $.02 per share, net of tax, related to insurance recoveries;

● a loss of $.01 per share due to Kronos’ recognition of an aggregate charge related to a write-off of deferred financing costs.

Our 2023 net loss per share attributable to NL stockholders includes:

● a loss of $.08 per share, net of tax, due to the termination of our U.K.

pension plan recognized in the second quarter,

● a loss of $.02 per share, net of tax, due to Kronos’ recognition, primarily in the fourth quarter, of restructuring costs related to workforce reductions,

● income of $.01 per share, net of tax, due to Kronos’ recognition in the first, second and third quarters of a pre-tax insurance settlement gain related to a business interruption insurance claim arising from Hurricane Laura in 2020, and

● a loss of $.01 per share, net of tax, due to Kronos’ recognition in the fourth quarter of a fixed asset impairment related to the write-off of certain costs resulting from a capital project termination.

As more fully described below, the decrease in our earnings attributable to NL stockholders from 2022 to 2023 is primarily due to the net effects of:

● equity in losses from Kronos in 2023 of $15.0 million compared to equity in earnings of $31.9 million in 2022,

● higher interest and dividend income of $5.8 million in 2023, and

● higher interest and dividend income of $9.6 million in 2023 compared to $3.8 million in 2022, and

● a non-cash loss on the termination of our U.K.

7 unchanged sentences

Our 2022 net income per share attributable to NL stockholders includes income of $.01 per share, recognized in the third quarter, related to Kronos’ business interruption insurance claim arising from Hurricane Laura in 2020.

As more fully described below, the increase in our earnings attributable to NL stockholders from 2021 to 2022 is primarily due to the effects of:

● an unrealized loss in the relative value of marketable equity securities of $8.1 million in 2022 compared to a gain of $16.2 million in 2021,

● higher income from operations attributable to CompX of $4.9 million in 2022, and

● equity in earnings from Kronos in 2022 of $31.9 million compared to $34.3 million in 2021.

Excluding any potential effects from changes in the relative value of marketable equity securities, we currently expect our net income attributable to NL stockholders in 2024 to be higher than 2023 primarily due to higher equity in earnings from Kronos, partially offset by lower expected income from operations attributable to CompX and higher litigation fees and related costs.

Excluding any potential effects from changes in the relative value of marketable equity securities, we currently expect our net income attributable to NL stockholders in 2025 to be lower than 2024 primarily due to income related to the settlement of a liability for an environmental remediation site recognized in the fourth quarter of 2024 partially offset by higher expected CompX segment profit.

See also Item 3 – “Legal Proceedings – Environmental matters and litigation” and Note 17 to our Consolidated Financial Statements.

Income from operations

2 unchanged sentences

(Dollars in millions)

Corporate expense

CompX segment profit

Insurance recoveries

Corporate income (expense), net

Income from operations

10 unchanged sentences

Interest expense

not meaningful

CompX International Inc.

2 unchanged sentences

Cost of sales

Operating costs and expenses

Income from operations

Selling, general and administrative expenses

Segment profit (1)

Percentage of net sales:

Cost of sales

Operating costs and expenses

Income from operations

Net sales – CompX’s net sales decreased approximately $5.3 million in 2023 compared to 2022 due to lower Marine Components sales primarily to the towboat market, partially offset by higher Security Products sales largely in the fourth quarter of 2023 .

CompX’s net sales increased approximately $25.8 million in 2022 compared to 2021 primarily due to higher Marine Component sales primarily to the towboat market and, to a lesser extent, higher Security Products sales across a variety of markets.

Cost of sales and gross margin – CompX’s cost of sales decreased in 2023 compared to 2022 primarily due to the effects of lower production costs at both Security Products and Marine Components as well as lower Marine Components sales.

Gross margin as a percentage of sales increased over the same period primarily due to the factors affecting cost of sales.

CompX’s cost of sales increased in 2022 compared to 2021 primarily due to the effects of higher sales, as well as increased production costs at both of CompX’s business units.

Gross margin as a percentage of sales decreased over the same period primarily due to the decrease in CompX’s Security Products gross margin percentage .

Operating costs and expenses – CompX’s operating costs and expenses consist primarily of sales and administrative-related personnel costs, sales commissions and advertising expenses directly related to product sales and administrative costs relating to CompX’s businesses and its corporate management activities, as well as gains and losses on property and equipment.

CompX’s operating costs and expenses increased in 2023 compared to 2022 predominantly due to higher salary and benefit costs at Security Products which increased by $.6 million.

As a percentage of sales, CompX’s operating costs and expenses increased in 2023 compared to 2022 primarily due to the effect of the increased operating costs and expenses on lower sales.

CompX’s operating costs and expenses increased in 2022 compared to 2021 predominantly due to higher salary and employment related costs which increased by $.7 million.

As a percentage of sales, CompX’s operating costs and expenses decreased in 2022 compared to 2021 primarily due to the effect of higher sales .

Income from operations - As a percentage of net sales, CompX’s operating income increased in 2023 compared to 2022 and increased in 2022 compared to 2021.

CompX’s operating margins were primarily impacted by the factors impacting net sales, cost of sales, gross margin and operating costs discussed above.

Selling, general and administrative expenses

Segment profit

(1) We use segment profit to assess the performance of CompX.

Segment profit is defined as gross margin less selling, general and administrative expenses directly attributable to CompX’s operations.

Net sales – CompX’s net sales decreased $15.4 million in 2024 compared to 2023 due to lower Marine Components sales to the towboat market and lower Security Products sales to the government security market as a result of sales related to a pilot project that shipped in the third and fourth quarters of 2023 and for which there were no related sales in 2024 .

CompX’s net sales decreased approximately $5.3 million in 2023 compared to 2022 due to lower Marine Components sales primarily to the towboat market, partially offset by higher Security Products sales largely in the fourth quarter of 2023 .

Cost of sales and gross margin – CompX’s cost of sales decreased in 2024 compared to 2023 primarily due to the effects of lower sales at both Security Products and Marine Components partially offset by higher production costs across both reporting units.

As a result, CompX’s cost of sales as a percentage of net sales increased over the same period.

CompX’s gross margin as a percentage of sales decreased in 2024 compared to 2023 primarily due to the factors affecting cost of sales and decreased coverage of fixed costs due to lower sales.

CompX’s cost of sales decreased in 2023 compared to 2022 primarily due to the effects of lower production costs at both Security Products and Marine Components as well as lower Marine Components sales.

CompX’s gross margin as a percentage of sales increased over the same period primarily due to the factors affecting cost of sales .

Selling, general and administrative expenses – CompX’s selling, general and administrative expenses consist primarily of personnel costs, sales commissions and advertising expenses directly related to product sales and administrative costs relating to CompX’s businesses and its corporate management activities, as well as gains and losses on property and equipment.

CompX’s selling, general and administrative expenses increased $.5 million in 2024 compared to 2023 predominantly due to higher employee salary and benefit costs at Security Products.

As a percentage of sales, CompX’s selling, general and administrative expenses increased in 2024 compared to 2023 primarily due to increased selling, general and administrative expenses and decreased coverage of selling, general and administrative expenses on lower sales.

CompX’s selling, general and administrative expenses increased in 2023 compared to 2022 predominantly due to higher salary and benefit costs at Security Products which increased by $.6 million.

As a percentage of sales, CompX’s selling, general and administrative expenses increased in 2023 compared to 2022 primarily due to the effect of the increased selling, general and administrative expenses on lower sales .

Segment profit – As a percentage of net sales, CompX’s segment profit decreased in 2024 compared to 2023 and increased in 2023 compared to 2022.

CompX’s segment profit margins were primarily impacted by the factors impacting net sales, cost of sales, gross margin and selling, general and administrative expenses discussed above.

General – CompX’s profitability primarily depends on its ability to utilize its production capacity effectively, which is affected by, among other things, the demand for its products and its ability to control its manufacturing costs, primarily comprised of labor costs and materials.

The materials used in CompX’s products consist of purchased components and raw materials some of which are subject to fluctuations in the commodity markets such as zinc, brass,

aluminum and stainless steel.

The materials used in CompX’s products consist of purchased components and raw materials some of which are subject to fluctuations in the commodity markets such as zinc, brass, aluminum and stainless steel.

Total material costs represented approximately 46% of CompX’s cost of sales in 2024, with commodity-related raw materials representing approximately 13% of its cost of sales.

After increasing in 2021 and the first half of 2022, prices for the primary commodity-related raw materials used in the manufacture of CompX’s locking mechanisms, primarily zinc and brass, generally began to stabilize in the latter half of 2022 and into 2023 and generally began to soften in the latter half of 2023.

Prices for aluminum and stainless steel, the primary raw material used for the manufacture of marine exhaust headers and pipes, wake enhancement systems, throttles and trim tabs experienced significant volatility during 2021 and 2022 but were more stable in 2023.

Although raw commodity costs declined during 2023 from elevated levels experienced in 2021 and 2022, in most cases materials CompX purchases also include processing and conversion costs such as alloying, extrusion and rolling which continue to be elevated due to costs of labor, transportation and energy.

Based on current economic conditions, CompX expects the prices for zinc, brass, aluminum, stainless steel and other manufacturing materials in 2024 to be relatively stable.

CompX’s raw material prices were generally stable through the first half of 2024.

Beginning in the latter half of the third quarter CompX began to experience moderate increases in certain raw material costs, particularly brass.

The zinc market was volatile in 2024, but CompX was successful in making strategic spot buys to keep its costs consistent with 2023.

Prices for aluminum and stainless steel, which are the primary raw materials used for the manufacture of CompX’s marine components (including marine exhaust headers and pipes, wake enhancement systems, throttles and trim tabs), were relatively stable in 2024 because it took advantage of volume purchase opportunities during the year.

In most cases, commodity raw materials CompX purchases include processing and conversion costs, such as alloying, extrusion and rolling, which remain elevated due to costs of labor, transportation and energy.

Processing and conversion costs are not expected to decrease and may negate the benefit of softening commodity prices on CompX’s purchases.

Based on current economic conditions, CompX expects the prices for zinc, brass, aluminum, stainless steel and other manufacturing materials in 2025 to be relatively stable, although governmental actions such as tariffs may impact markets.

CompX occasionally enters into short-term commodity-related raw material supply arrangements to mitigate the impact of future increases in commodity related raw material costs.

1 unchanged sentence

Results by reporting unit

The key performance indicator for CompX’s reporting units is the level of their income from operations (see discussion below).

The key performance indicator for CompX’s reporting units is the level of their reporting unit profit (see discussion below).

Years ended December 31,

3 unchanged sentences

Operating costs and expenses

Operating income

Operating income margin

Security Products - Security Products net sales increased 6% to $121.2 million in 2023 compared to $114.5 million in 2022 primarily due to higher sales related to a pilot project for a government security customer.

Reporting unit profit (2)

Reporting unit profit margin

(2) Reporting unit profit includes reporting unit sales less cost of sales and operating costs and expenses directly attributable to the reporting unit.

Interunit sales are not material.

Security Products – Security Products net sales decreased 5% to $115.2 million in 2024 compared to $121.2 million in 2023 primarily due to lower sales to the government security market as a result of sales related to a pilot project for a government security customer that shipped in the third and fourth quarters of 2023 and for which there were no related sales in 2024.

Relative to prior year, sales were $8.3 million lower to the government security market, $2.0 million lower to the transportation market and $.9 million lower to distributors, partially offset by $4.1 million higher sales to the healthcare market and $.7 million higher sales to the tool storage market.

Gross margin as a percentage of net sales for 2024 decreased as compared to 2023 primarily due to lower sales, a less favorable customer and product mix, higher employee related costs (primarily increased medical costs), higher materials costs (primarily brass and electronics) in the

latter half of the year and decreased coverage of fixed costs due to lower sales.

Security Products reporting unit profit margin decreased for 2024 compared to 2023 primarily due to the factors impacting gross margin, as well as decreased coverage of operating costs and expenses from lower sales and increased operating costs and expenses, including higher employee salaries and benefit costs of $.5 million, primarily in the first half of the year.

Security Products net sales increased 6% to $121.2 million in 2023 compared to $114.5 million in 2022 primarily due to higher sales related to a pilot project for a government security customer.

Relative to prior year, sales were $8.3 million higher to the government security market and $1.5 million higher to distributors, partially offset by $1.7 million lower sales to the office furniture market and $.7 million lower sales to the gas station security market.

Gross margin as a percentage of net sales for 2023 increased as compared to 2022 primarily due to lower production costs (including lower material, overtime and shipping costs) and increased coverage of fixed costs on higher sales, primarily in the fourth quarter.

Operating income margin increased for 2023 compared to 2022 primarily due to the factors impacting gross margin, as well as increased coverage of operating costs and expenses from higher sales, partially offset by increased operating costs and expenses, including higher employee salaries and benefit costs of $.6 million.

Security Products net sales increased 9% to $114.5 million in 2022 compared to $105.1 million in 2021 due to increased sales across a variety of markets.

Relative to prior year, sales were $3.8 million higher to the government security market, $1.8 million higher to the office furniture market, $1.5 million higher to distributors, $1.0 million higher to the tool storage market, and $.9 million higher to the gas station security market.

Gross margin as a percentage of net sales for 2022 decreased as compared to 2021 primarily due to higher cost of sales, most significantly in the third and fourth quarters of 2022, as price increases and surcharges did not fully offset higher cost inventory sold in the latter half of the year.

Operating income margin decreased for 2022 compared to 2021 primarily due to the factors impacting gross margin, as

well as increased operating costs and expenses, resulting from higher salaries and employment related costs, partially offset by increased coverage of operating costs and expenses from higher sales.

Reporting unit profit margin increased for 2023 compared to 2022 primarily due to the factors impacting gross margin, as well as increased coverage of operating costs and expenses from higher sales, partially offset by increased operating costs and expenses, including higher employee salaries and benefit costs of $.6 million.

Years ended December 31,

3 unchanged sentences

Operating costs and expenses

Operating income

Operating income margin

Marine Components - Marine Components net sales decreased 23% in 2023 as compared to 2022.

Reporting unit profit (2)

Reporting unit profit margin

Marine Components – Marine Components net sales decreased 23% in 2024 as compared to 2023 primarily due to $8.7 million lower sales to the towboat market through the first three quarters of 2024, partially offset by higher sales in the fourth quarter of 2024, including $1.1 million higher sales to the towboat market and $1.0 million higher sales to the government market.

Relative to the full year of 2023, sales were $7.6 million lower to the towboat market (primarily to original equipment boat manufacturers), $1.4 million lower to the industrial market and $.6 million lower to each the engine builder market and distributors, partially offset by $1.4 million higher sales to the government market.

Gross margin as a percentage of sales decreased in 2024 compared to 2023 primarily due to higher cost inventory produced during the fourth quarter of 2023 and sold in the first quarter of 2024 and decreased coverage of fixed costs as a result of lower sales, partially offset by a more favorable customer and product mix, lower employee salaries and benefits of approximately $1.8 million primarily related to headcount reductions and decreased labor costs of $1.2 million due to lower production volumes.

Reporting unit profit as a percentage of net sales decreased in 2024 compared to 2023 due to the factors impacting gross margin, as well as decreased coverage of operating costs and expenses on lower sales, partially offset by reduced operating costs and expenses, including lower employee related expenses of $.2 million.

Marine Components net sales decreased 23% in 2023 as compared to 2022.

Relative to prior year, sales were $12.8 million lower to the towboat market (primarily to original equipment boat manufacturers) and $2.0 million lower to the engine builder market, partially offset by $1.2 million higher industrial sales and $.8 million higher sales to the center console boat market.

Gross margin as a percentage of sales increased in 2023 compared to 2022 primarily due to lower raw material costs (primarily stainless steel and aluminum), lower supplies costs driven by lower volume, lower shipping costs and lower labor costs from reduced employee overtime due to lower sales volumes, partially offset by decreased coverage of fixed costs as a result of lower sales.

Operating income as a percentage of net sales decreased slightly in 2023 compared to 2022 primarily due to the factors impacting gross margin, as well as decreased coverage of operating costs and expenses from lower sales.

Marine Components net sales increased 46% in 2022 as compared to 2021.

Relative to prior year, sales were $11.5 million higher to the towboat market (primarily to original equipment boat manufacturers), $2.1 million higher to the engine builder market, and $2.0 million higher to the industrial market.

Gross margin as a percentage of sales increased slightly in 2022 compared to 2021 with increased sales due to price increases and surcharges more than offsetting higher production costs, as well as increased coverage of cost of sales from higher sales.

Operating income as a percentage of net sales increased in 2022 compared to 2021 primarily due to the factors impacting gross margin, as well as increased coverage of operating costs and expenses from higher sales.

Outlook – In 2023, CompX’s Security Products reporting unit achieved record sales as a result of increased sales to the government security market including a pilot project to a government security customer.

Absent this project, Security Products sales would have declined compared to the prior year due to sluggish demand in many of the other markets Security Products serves.

At CompX’s Marine Components reporting unit, the strong demand experienced in 2021 and 2022 carried into the first quarter of 2023 when the towboat market began experiencing softening demand that accelerated as the year progressed.

Labor markets have become favorable in each of the regions CompX operates, and material prices have either stabilized or, in the case of certain commodity raw materials, started to decline slightly.

CompX’s supply chains are stable and transportation and logistical delays are minimal.

CompX has adjusted its labor force and production rates at its facilities to reflect the stability of its raw material supplies and near-term demand levels.

CompX expects Security Products sales in 2024 will be lower than 2023 as the sluggishness it observed across a variety of the markets Security Products served during 2023 will continue with customers expressing uncertainty regarding sustained consumer demand.

CompX does not currently have additional orders with regard to the 2023 pilot project, and it has no knowledge of any future orders.

After implementing aggressive price increases over the last several years to maintain operating margins, CompX believes its customers will accept only modest price increases in the current environment.

Overall, CompX expects Security Products gross margin will be comparable in 2024, although it expects operating income as a percentage of sales to decline due to its limited pricing power along with reduced coverage of selling, general and administrative costs as a result of lower expected sales.

CompX expects Marine Components net sales in 2024 to also be lower as compared to 2023 because it believes demand in the towboat market will further decline, and expected increases in sales to the industrial and center console boat markets will not fully offset reduced towboat demand.

The recreational marine industry faces strong headwinds due to higher interest rates and broader market weakness.

Several original equipment boat manufacturers, including certain of CompX’s customers, have publicly announced reductions to production schedules for 2024.

Overall, CompX expects Marine Components gross margin as a percentage of net sales for 2024 to be lower than 2023 due to lower coverage of fixed overhead as a result of lower expected sales, and operating income as a percentage of net sales will similarly be lower as a result of reduced coverage of selling, general and administrative expenses due to lower expected sales.

CompX ended the year with elevated inventory balances at its Marine Components reporting unit as a result of increased orders of certain raw materials due to previously long lead times coupled with the rapidly changing towboat demand which created a misalignment of its raw materials with near term demand.

CompX expects inventory balances to be in alignment with current demand by mid-year 2024.

Reporting unit profit as a percentage of net sales decreased slightly in 2023 compared to 2022 primarily due to the factors impacting gross margin, as well as decreased coverage of operating costs and expenses from lower sales.

Outlook – As noted above, in the second half of 2023 CompX’s Security Products reporting unit had significant sales related to a pilot project for a government security customer.

Excluding these sales in 2023, Security Products sales

would have increased in 2024 as compared to 2023 due to increased sales across a variety of markets, particularly increased sales of mechanical locks to the government security market.

At CompX’s Marine Components reporting unit, the decline in sales to the towboat market as a result of the contraction in the recreational marine industry that began in the second quarter of 2023 continued through the third quarter of 2024.

Marine Components net sales increased in the fourth quarter of 2024 compared to the fourth quarter of 2023 as a result of stabilizing demand in the towboat market as well as increased sales to the government market.

Raw material prices remained relatively stable through the first half of the year;

however, beginning in the third quarter of 2024 CompX experienced price increases in certain commodity raw materials, primarily brass and electronic components at Security Products.

CompX expects Security Products net sales in 2025 to improve modestly over 2024, and it expects gross margin and reporting unit profit percentages in 2025 to be slightly above 2024 due to pricing improvements on the Security Products product mix.

CompX expects Marine Components net sales to increase in 2025 due to higher expected sales to the government and industrial markets.

CompX believes the recreational marine market has stabilized, and it expects Marine Components sales to the towboat market in 2025 will be comparable to 2024.

Overall CompX expects Marine Components to have improved gross margins and reporting unit profit percentages in 2025 compared to 2024 due to higher expected sales volumes.

During 2024 CompX was aggressive in aligning its production capabilities and inventories to demand levels.

In 2025, CompX will continue to monitor current and anticipated near-term customer demand levels to ensure its production capabilities and inventories are aligned accordingly.

CompX’s expectations for its operations and the markets it serves are based on a number of factors outside its control.

As noted above, there continue to be some global and domestic supply chain challenges, and any future impacts on CompX’s operations will depend on, among other things, any future disruption in its operations or its suppliers’ operations, the impact of economic conditions and geopolitical events on demand for its products or its customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.

Currently, CompX’s supply chains are stable and transportation and logistical delays are minimal.

CompX has in the past experienced global and domestic supply chain challenges, and any future impacts on its operations will depend on, among other things, any future disruption in its operations or its suppliers’ operations, the effect of tariffs, and the impact of economic conditions and geopolitical events on demand for its products or its customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.

General corporate items, interest and dividend income, interest expense, provision for income taxes, noncontrolling interest and related party transactions

4 unchanged sentences

Accordingly, these insurance recoveries are recognized when receipt is probable and the amount is determinable.

We received $.5 million in insurance recoveries during 2023 which are included in corporate expenses on our Consolidated Statement of Operations.

In this regard we received $.5 million and $1.4 million in insurance recoveries in 2023 and 2024, respectively.

Recoveries in 2022 were nominal.

See Note 17 to our Consolidated Financial Statements.

Corporate expense - Corporate expenses were $11.3 million in 2023, $.4 million or 3% lower than in 2022 primarily due to lower administrative expenses and insurance recoveries noted above.

Included in corporate expenses are:

Corporate income (expense), net – Corporate income was $19.5 million in 2024 compared to corporate expense of $11.8 million in 2023 due to income of $31.4 million recognized in the fourth quarter of 2024 as a result of the settlement of a liability for an environmental remediation site, including income of $9.6 million received from private companies participating in the settlement.

Included in corporate (income) expenses are:

● litigation fees and related costs of $3.0 million in 2024 compared to $4.4 million in 2023, and

● environmental remediation and related costs of $.6 million in 2023 compared to $.5 million in 2022.

Corporate expenses were $11.7 million in 2022, $1.7 million or 17% higher than in 2021 primarily due to higher litigation fees and related costs partially offset by lower environmental remediation and related costs.

● income from environmental remediation and related cost of $20.3 million in 2024 compared to expenses of $.6 million in 2023.

Corporate expenses were $11.8 million in each of 2022 and 2023.

Included in corporate expenses are:

1 unchanged sentence

● environmental remediation and related costs of $.6 million in 2023 compared to $.5 million in 2022.

Overall, we currently expect that our general corporate expenses in 2024 will be higher than in 2023 primarily due to higher expected litigation fees and related costs.

Overall, we currently expect that our general corporate expenses in 2025 will be higher than in 2024 primarily due to income recognized in 2024 related to the settlement of a liability for an environmental remediation site in the fourth quarter of 2024.

See also Item 3 – “Legal Proceedings – Environmental matters and litigation” and Note 17 to our Consolidated Financial Statements.

The level of our litigation fees and related costs varies from period to period depending upon, among other things, the number of cases in which we are currently involved, the nature of such cases and the current stage of such cases (e.g.

7 unchanged sentences

See Note 17 to our Consolidated Financial Statements.

Interest and dividend income - Interest income increased $5.8 million in 2023 compared to 2022 primarily due to higher interest rates and increased investment balances, somewhat offset by lower average balances on CompX’s revolving promissory note receivable from Valhi.

Interest income increased $2.2 million in 2022 compared to 2021 primarily due to higher interest rates and increased investment balances, somewhat offset by lower average balances on CompX’s revolving promissory note receivable from Valhi.

Interest and dividend income – Interest income increased $1.4 million in 2024 compared to 2023 and increased $5.8 million in 2023 compared to 2022 primarily due to higher interest rates and increased investment balances, somewhat offset by lower average balances on CompX’s revolving promissory note receivable from Valhi.

Marketable equity securities – Unrealized gains or losses on our marketable equity securities are recognized in Marketable equity securities on our Consolidated Statements of Operations.

See Note 5 to our Consolidated Financial Statements.

Income tax expense (benefit) - We recognized income tax expense of $7.5 million in 2021 and $2.8 million in 2022 and an income tax benefit of $7.0 million in 2023.

Income tax expense (benefit) – We recognized income tax expense of $2.8 million in 2022, an income tax benefit of $7.0 million in 2023 and income tax expense of $14.1 million in 2024.

In accordance with GAAP, we recognize deferred income taxes on our undistributed equity in earnings of Kronos.

7 unchanged sentences

During interim periods, our effective income tax rate may not necessarily correspond to the foregoing due to the application of accounting for income taxes in interim periods which requires us to base our effective rate on full year projections.

We received aggregate dividends from Kronos of $25.4 million in 2021, and $26.8 million in each of 2022 and 2023.

We received aggregate dividends from Kronos of $26.8 million in each of 2022 and 2023 and $16.9 million in 2024.

Our effective tax rate attributable to our equity in earnings (losses) of Kronos, including the effect of non-taxable dividends we received from Kronos, was a 3.4% expense in 2022, a 58.5% expense in 2023 and a 7.5% expense in 2024.

The decrease in our effective rate from 2021 to 2022 is attributable to the combined effects of Kronos’ lower earnings and the higher non-taxable dividend income we received from Kronos in 2022 as compared to 2021.

The increase in our effective rate from 2022 to 2023 is attributable to the effects of Kronos’ loss in 2023 as compared to earnings in 2022.

The decrease in our effective rate from 2023 to 2024 is attributable to the combined effects of Kronos’ earnings in 2024 as compared to loss in 2023 and the lower non-taxable dividend income we received from Kronos in 2024 as compared to 2023.

See Note 14 to our Consolidated Financial Statements for more information about our 2024 income tax items, including a tabular reconciliation of our statutory tax expense to our actual tax expense (benefit).

Noncontrolling interest - Noncontrolling interest in net income is directly attributable to CompX’s net income.

The increase in noncontrolling interest is the result of CompX’s increase in net income in 2021, 2022 and 2023.

Noncontrolling interest – Noncontrolling interest in net income is directly attributable to CompX’s net income and reflects CompX’s earnings in 2022, 2023 and 2024.

Related party transactions – We are a party to certain transactions with related parties.

6 unchanged sentences

Income (loss) from operations

Gain on remeasurement of investment in TiO 2 manufacturing joint venture

Other gain (loss), net

11 unchanged sentences

Production volumes*

Change in TiO 2 net sales:

TiO 2 product pricing

Percentage change in TiO 2 net sales:

TiO 2 sales volumes

TiO 2 product pricing

TiO 2 product mix/other

1 unchanged sentence

* Thousands of metric tons

Industry conditions and 2023 overview - Kronos and the TiO 2 industry are experiencing an extended period of significantly reduced demand across all major markets, which is reflected in its sales volumes in 2023.

Demand first began to decrease in the third quarter of 2022, and although there has been some stabilization at this reduced level, overall demand remained below average historical levels during 2023.

While Kronos started 2023 with average TiO 2 selling prices 16% higher than at the beginning of 2022, this extended period of reduced demand has put downward pressure on its average TiO 2 selling prices and, as a result, prices declined 13% in 2023.

Overall sales volumes declined in 2023 compared to 2022 primarily due to lower demand in all of its major markets.

Kronos began curtailing production in the fourth quarter of 2022 at certain of its European facilities due to decreased demand and increased production costs.

During 2023, Kronos continued operating its production facilities at reduced rates to align production with expected customer demand.

As a result, Kronos operated its production facilities at 72% of practical capacity utilization in 2023 compared to 89% of practical capacity utilization in 2022.

The following table shows our capacity utilization rates during 2022 and 2023.

As previously reported, effective the Acquisition Date, of July 16, 2024 Kronos acquired the 50% joint venture interest in LPC previously held by Venator.

Prior to the acquisition, Kronos held a 50% joint venture interest in LPC through a wholly-owned subsidiary.

LPC was operated as a manufacturing joint venture between Kronos and Venator.

Following the acquisition, LPC became a wholly-owned subsidiary of Kronos.

Kronos acquired the 50% joint venture interest that it did not already own for consideration of $185 million less a working capital adjustment.

An additional earn-out payment of up to $15 million based on Kronos’ aggregate consolidated net income before interest expense, income taxes and depreciation and amortization expense, or EBITDA, during a two-year period comprising calendar years 2025 and 2026 may be required.

The acquisition was financed through borrowings of $132.1 million under Kronos’ Global Revolver and the remainder paid with Kronos’ cash on hand.

Kronos accounted for the acquisition of the interest in LPC as a business combination.

See Note 6 to our Consolidated Financial Statements.

Industry conditions and 2024 overview – Kronos and the TiO 2 industry experienced an extended period of significantly reduced demand reflected in its sales volumes beginning in the second half of 2022 and continuing throughout 2023.

While demand improved in 2024 resulting in increased sales volumes across all major markets compared to the prior year, overall demand remained below average historical levels.

After improving in the first half of 2024, demand moderated in the second half of the year, which placed downward pressure on Kronos’ TiO 2 pricing with 2024 average TiO 2 selling prices approximately 5% below the average TiO 2 selling prices for 2023.

Kronos operated its production facilities at 72% of practical capacity utilization in 2023 in response to decreased demand and higher production costs.

As a result of the increase in demand experienced in the fourth quarter of 2023 and the first quarter of 2024, along with more favorable production costs, Kronos began increasing its production rates during the first quarter of 2024 and it operated at near practical capacity in the second, third and fourth quarters of 2024 resulting in 96% of practical capacity utilization in 2024.

The following table shows Kronos’ capacity utilization rates during 2023 and 2024.

Production Capacity Utilization Rates

3 unchanged sentences

Fourth Quarter

Net sales - Kronos’ net sales in 2023 decreased 14%, or $263.7 million, compared to 2022 primarily due to a 13% decrease in sales volumes (which decreased net sales by approximately $251 million) and a 4% decrease in average TiO 2 selling prices (which decreased net sales by approximately $77 million).

Excluding the effect of changes in currency exchange rates, Kronos’ cost of sales per metric ton of TiO 2 sold in 2024 was significantly lower as compared to 2023 primarily due to significant decreases in per metric ton production costs (primarily energy and raw materials).

In response to the extended period of reduced demand in 2023, discussed above, Kronos took measures to reduce its operating costs and improve its long-term cost structure such as the implementation of certain voluntary and involuntary workforce reductions during the second half of 2023 that primarily impacted its European operations.

A substantial portion of Kronos’ workforce reductions were accomplished through voluntary programs, for which eligible workforce reduction costs are recognized at the time both the employee and employer are irrevocably committed to the terms of the separation.

These workforce reductions impacted approximately 100 employees.

Kronos recognized a total of approximately $6 million in charges primarily in the fourth quarter of 2023 related to workforce reductions it implemented during the second half of 2023.

In the third quarter of 2024, Kronos closed its sulfate process production line at its plant in Varennes, Canada.

As a result of the process line closure, Kronos recognized charges to cost of sales of approximately $2 million during 2024 related to workforce reductions.

Kronos also recognized approximately $14 million in non-cash charges primarily related to accelerated depreciation in the second and third quarters of 2024.

Net sales – Kronos’ net sales in 2024 increased 13%, or $220.6 million, compared to 2023 primarily due to the effects of a 20% increase in sales volumes due to improved overall demand across all major markets (which increased net sales by approximately $333 million) partially offset by a 5% decrease in average TiO 2 selling prices (which decreased net sales by approximately $83 million).

Changes in product mix negatively contributed to net sales, primarily due to changes in product sales mix in export markets in 2024 as compared to 2023.

Additionally, Kronos estimates that changes in currency exchange rates (primarily the euro) increased its net sales by approximately $5 million in 2024 as compared to 2023.

TiO 2 selling prices will increase or decrease generally as a result of competitive market pressures and changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs.

Incremental sales volumes resulting from the LPC acquisition did not significantly impact comparisons to the prior year .

Kronos’ net sales in 2023 decreased 14%, or $263.7 million, compared to 2022 primarily due to a 13% decrease in sales volumes (which decreased net sales by approximately $251 million) and a 4% decrease in average TiO 2 selling prices (which decreased net sales by approximately $77 million).

Changes in product mix positively contributed to net sales, primarily due to higher average selling prices and sales volumes in its complementary businesses which somewhat offset declines in TiO 2 sales volumes.

In addition to the impact of sales volumes and average TiO 2 selling prices, Kronos estimates that changes in currency exchange rates (primarily the euro) increased its net sales by approximately $10 million in 2023 as compared to 2022.

In addition to the impact of sales volumes and average TiO 2 selling prices, Kronos

estimates that changes in currency exchange rates (primarily the euro) increased its net sales by approximately $10 million in 2023 as compared to 2022.

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 .

2 unchanged sentences

However, Kronos’ sales volumes were 29% higher in the fourth quarter of 2023 as compared to the fourth quarter of 2022 due to strengthening demand for TiO 2 in its primary markets of Europe and North America.

Kronos’ net sales in 2022 were consistent with net sales in 2021 primarily due to the net effects of a 21% increase in average TiO 2 selling prices (which increased net sales by approximately $407 million) and a 15% decrease in sales volumes (which decreased net sales by approximately $291 million).

Kronos estimates that changes in currency exchange rates (primarily the euro) decreased net sales by approximately $106 million, or 5% in 2022 as compared to 2021.

Kronos’ sales volumes decreased 15% in 2022 as compared to 2021 primarily due to lower demand in its European and export markets which Kronos began experiencing towards the end of the second quarter and which accelerated during the third and fourth quarters of 2022.

Kronos’ sales volumes were 40% lower in the fourth quarter of 2022 as compared to the fourth quarter of 2021.

Kronos also experienced lower sales volumes in its North American market in the second half of 2022, although to a lesser extent than the declines in its European and export markets.

Cost of sales and gross margin – Kronos’ cost of sales decreased $37.5 million, or 2%, in 2023 compared to 2022 due to the net effects of a 13% decrease in sales volumes, a 19% decrease in production volumes at certain of its manufacturing facilities to align inventory levels to anticipated near-term customer demand (which resulted in $96 million of unabsorbed fixed production costs) and higher production costs of approximately $65 million (primarily raw materials).

Cost of sales and gross margin – Kronos’ cost of sales increased $26.2 million, or 2%, in 2024 compared to 2023 due to the net effects of a 20% increase in sales volumes, a 33% increase in production rates resulting in reduced unabsorbed fixed production costs, and lower production costs of approximately $115 million (primarily energy and raw materials).

Kronos’ unabsorbed fixed production costs in 2024 were $12 million (incurred in the first quarter) compared to $96 million in 2023 related to curtailments that began in 2022 and continued into the first quarter of 2024, as discussed above.

Kronos’ cost of sales in 2024 include a charge of approximately $2 million related to workforce reductions and approximately $14 million in non-cash charges related to the closure of its sulfate process line in Canada discussed above.

Sales and production volumes resulting from the LPC acquisition did not materially impact comparisons to the prior year.

Kronos’ cost of sales as a percentage of net sales decreased to 81% in 2024 compared to 90% in 2023 primarily due to the favorable effects of increased sales, lower production costs and higher production volumes resulting in increased coverage of fixed production costs.

Kronos’ gross margin as a percentage of net sales increased to 19% in 2024 compared to 10% in 2023.

As discussed and quantified above, Kronos’ gross margin as a percentage of net sales increased primarily due to higher sales and production volumes as well as lower production costs, partially offset by lower average TiO 2 selling prices.

Kronos’ cost of sales decreased $37.5 million, or 2%, in 2023 compared to 2022 due to the net effects of a 13% decrease in sales volumes, a 19% decrease in production volumes at certain of its manufacturing facilities to align inventory levels to anticipated near-term customer demand (which resulted in $96 million of unabsorbed fixed production costs) and higher production costs of approximately $65 million (primarily raw materials).

Kronos’ cost of sales as a percentage of net sales increased to 90% in 2023 compared to 80% in 2022 primarily due to the unfavorable effects of higher production costs (primarily raw materials) and unabsorbed fixed production costs due to lower production volumes.

Gross margin as a percentage of net sales decreased to 10% in 2023 compared to 20% in 2022.

Kronos’ gross margin as a percentage of net sales decreased to 10% in 2023 compared to 20% in 2022.

As discussed and quantified above, Kronos’ gross margin as a percentage of net sales decreased primarily due to lower production and sales volumes, lower average TiO 2 selling prices, higher production costs and changes in currency exchange rates .

Kronos’ cost of sales increased $45.9 million, or 3%, in 2022 compared to 2021 primarily due to the net effects of higher production costs of approximately $285 million (including higher costs for raw materials and energy), a 15% decrease in sales volumes and changes in currency exchange rates.

Kronos’ cost of sales as a percentage of net sales increased to 80% in 2022 compared to 77% in 2021 due to the impact of higher production costs, including higher raw material and energy costs partially offset by the favorable effects of higher average TiO 2 selling prices.

In addition, cost

of sales in 2022 includes approximately $26 million of unabsorbed fixed production and other manufacturing costs associated with production curtailments at certain of Kronos’ European facilities throughout the fourth quarter.

Gross margin as a percentage of net sales decreased to 20% in 2022 compared to 23% in 2021.

As discussed and quantified above, Kronos’ gross margin as a percentage of net sales decreased primarily due to the net effects of higher average TiO 2 selling prices, lower production and sales volumes, higher production costs and fluctuations in currency exchange rates.

Other operating income and expense, net - Kronos’ selling, general and administrative expenses decreased $20.1 million, or 9%, in 2023 compared to 2022 primarily due to lower distribution costs related to lower overall sales volumes during the year.

Other operating income and expense, net – Kronos’ selling, general and administrative expense increased $14.4 million, or 7%, in 2024 compared to 2023.

This increase was primarily due to higher distribution costs related to higher overall sales volumes compared to 2023.

Kronos’ selling, general and administrative expense in 2024 also includes $2.2 million of transaction costs incurred in connection with the LPC acquisition.

Selling, general and administrative expense also decreased due to lower costs related to workforce reductions in 2024 compared to 2023.

Kronos’ selling, general and administrative expenses decreased $20.1 million, or 9%, in 2023 compared to 2022 primarily due to lower distribution costs related to lower overall sales volumes during the year.

Selling, general and administrative expense as a percentage of net sales increased in 2023 compared to 2022 as a result of lower net sales and $5.8 million in charges related to workforce reductions.

Kronos’ selling, general and administrative expenses decreased $17.6 million, or 7%, in 2022 compared to 2021 primarily due to changes in currency exchange rates (primarily the euro) and lower variable costs (primarily distribution costs) related to lower overall sales volumes.

Selling, general and administrative expense as a percentage of net sales decreased to 12% of net sales in 2022 compared to 13% in 2021.

Income from operations – Kronos had a loss from operations of $56.0 million in 2023 compared to income from operations of $159.6 million in 2022 as a result of the factors impacting gross margin discussed above.

Income (loss) from operations – Kronos had income from operations of $122.9 million in 2024 compared to a loss from operations of $56.0 million in 2023 as a result of the factors impacting gross margin discussed above.

Kronos recognized a gain of $2.5 million in 2023 related to cash received from the settlement of a business interruption insurance claim.

Kronos estimates that changes in currency exchange rates increased income from operations by approximately $10 million in 2024 as compared to 2023, as further discussed below.

Kronos had a loss from operations of $56.0 million in 2023 compared to income from operations of $159.6 million in 2022 as a result of the factors impacting gross margin discussed above.

Kronos recognized a gain of $2.5 million in 2023 and a gain of $2.7 million in 2022 related to cash received from the settlement of a business interruption insurance claim related to Hurricane Laura.

Kronos estimates changes in currency exchange rates decreased its loss from operations by approximately $16 million in 2023 as compared to 2022, as discussed in the Effects of currency exchange rates section below.

Kronos’ income from operations decreased by $27.5 million or 15%, from $187.1 million in 2021 to $159.6 million in 2022.

Income from operations as a percentage of net sales decreased to 8% in 2022 from 10% in 2021.

This decrease was driven by the net effects of lower gross margin and lower selling, general and administrative expenses for the comparable periods discussed above.

Kronos experienced a loss from operations of $19.7 million in the fourth quarter of 2022 compared to income from operations of $52.0 million in the fourth quarter of 2021.

Kronos also recognized a gain of $2.7 million in 2022 related to cash received from the settlement of a business interruption insurance claim related to Hurricane Laura.

Kronos estimates that changes in currency exchange rates increased income from operations by approximately $23 million in 2022 as compared to 2021, as discussed in the Effects of currency exchange rates section below.

Other non-operating income (expense) - Kronos recognized unrealized losses of $1.0 million in each of 2023 and 2022 on the change in value of its marketable equity securities.

Other components of net periodic pension and OPEB cost in 2023 decreased $7.2 million compared to 2022 primarily due to the net effects of higher discount rates impacting interest cost, previously unrecognized actuarial losses and $1.3 million in settlement costs related to the termination and buy-out of its pension plan in the United Kingdom during the second quarter of 2023.

Interest expense in 2023 was comparable to interest expense in 2022.

Kronos recognized a loss of $1.0 million in 2022 compared to a gain of $2.0 million in 2021 on the change in value of its marketable equity securities.

Other components of net periodic pension and OPEB cost in 2022 decreased $3.6 million compared to 2021 primarily due to the net effects of higher discount rates impacting interest cost and previously unrecognized actuarial losses.

Interest expense in 2022 decreased $2.7 million compared to 2021 due to fees associated with the refinancing of Kronos’ revolving credit facility in the second quarter of 2021 and the effects of changes in currency exchange rates.

Income tax expense (benefit) - Kronos recognized an income tax benefit of $23.8 million in 2023 compared to income tax expense of $29.4 million in 2022.

The difference is primarily due to lower earnings in 2023 and the jurisdictional mix of such earnings.

Kronos recognized income tax expense of $29.4 million in 2022 compared to income tax expense of $40.5 million in 2021.

The difference is primarily due to lower earnings in 2022, the jurisdictional mix of Kronos’ earnings and the

release of a portion of its valuation allowance associated with the 2022 utilization of a portion of its business interest expense carryforwards .

Other non-operating income (expense) – Kronos recognized a gain on the remeasurement of its investment in LPC of $64.5 million in 2024 as a result of the acquisition.

Kronos’ interest expense in 2024 increased $25.8 million compared to 2023 primarily due to higher interest rates on the debt exchange and the issuance of new notes discussed below and higher average debt balances as a result of the LPC acquisition.

As a result of the exchange, Kronos’ interest expense for 2024 also includes a charge of $1.5 million for the write-off of deferred financing costs.

Kronos recognized a gain of $1.2 million on the change in value of its marketable equity securities in 2024 compared to a loss of $1.0 million in 2023.

Kronos’ other components of net periodic pension and OPEB cost in 2024 decreased $4.1 million compared to 2023 primarily due to a higher expected return on plan assets, lower discount rates impacting interest costs and a non-recurring $1.3 million in settlement costs related to the termination and buy-out of its U.K.

pension plan in the second quarter of 2023.

Kronos recognized unrealized losses of $1.0 million in each of 2023 and 2022 on the change in value of its marketable equity securities.

Kronos’ other components of net periodic pension and OPEB cost in 2023 decreased $7.2 million compared to 2022 primarily due to the net effects of higher discount rates impacting interest cost, previously unrecognized actuarial losses and $1.3 million in settlement costs related to the termination and buy-out of its pension plan in the United Kingdom during the second quarter of 2023.

Kronos’ interest expense in 2023 was comparable to interest expense in 2022.

Income tax expense (benefit) – Kronos recognized income tax expense of $63.4 million in 2024 compared to an income tax benefit of $23.8 million in 2023.

The difference is primarily due to higher earnings in 2024 and the jurisdictional mix of such earnings.

Kronos’ earnings are subject to income tax in various U.S.

jurisdictions, and the income tax rates applicable to the pre-tax earnings (losses) of Kronos’ non-U.S.

jurisdictions, and the income tax rates applicable to the pre-tax earnings (losses) of its non-U.S.

operations are generally higher than the income tax rates applicable to its U.S.

Kronos would generally expect its overall effective tax rate to be higher than the U.S.

federal statutory rate of 21% primarily because of Kronos’ sizeable non-U.S.

Kronos would generally expect its overall effective tax rate, excluding the effect of any increase or decrease in its deferred income tax asset valuation allowance or changes in its reserve for uncertain tax positions, to be higher than the U.S.

federal statutory tax rate of 21% primarily because of its sizeable non-U.S.

Kronos’ income tax expense in 2024 includes a non-cash deferred income tax expense of $8.2 million, recognized in the fourth quarter, related to the recognition of a deferred income tax asset valuation allowance related to its Belgian net deferred tax assets.

Kronos continues to believe it will ultimately realize the full benefit of its Belgian NOL carryforwards, in part because of their indefinite carryforward period.

However, Kronos’ ability to reverse all or a portion of such valuation allowance in the future is dependent on the presence of sufficient positive evidence, such as the existence of cumulative profits in the most recent twelve consecutive quarters, and the ability to demonstrate future profitability for a sustainable period.

Until such time as Kronos is able to reverse the valuation allowance in full, to the extent it generates additional losses in Belgium in the intervening periods, Kronos’ effective income tax rate will be negatively impacted, because any further losses will effectively be recognized without the net income tax benefit.

On December 10, 2024, the Department of the Treasury and the Internal Revenue Service released final currency regulations under §987 and related rules (the “2024 Final Regulations”).

The 2024 Final Regulations generally apply to tax years beginning after December 31, 2024, and include transition rules that require Kronos to compute a pretransition gain or loss for currency translation related to the operations, assets and liabilities of its non-U.S.

qualified business units.

Pursuant to the 2024 Final Regulations, Kronos has calculated a pretransition gain of $77.1 million and, accordingly, its income tax expense in 2024 includes a non-cash deferred income tax expense of $16.5 million recognized in the fourth quarter.

Kronos recognized an income tax benefit of $23.8 million in 2023 compared to income tax expense of $29.4 million in 2022.

The difference is primarily due to lower earnings in 2023 and the jurisdictional mix of such earnings.

Kronos’ consolidated effective income tax rate in 2025 is expected to be higher than the U.S.

21 unchanged sentences

operations are holding non-local currency (primarily U.S.

Overall, Kronos estimates that fluctuations in currency exchange rates had the following effects on its sales and income from operations for the periods indicated.

Kronos fluctuations in currency exchange rates had the following effects on its sales and income from operations for the periods indicated.

Impact of changes in currency exchange rates - 2024 vs 2023

8 unchanged sentences

dollar relative to the Canadian dollar and the Norwegian krone in 2024 did not have a significant effect on Kronos net sales, as a substantial portion of the sales generated by its Canadian and Norwegian operations is denominated in the U.S.

The $16 million decrease in loss from operations was comprised of the following:

● Lower net currency transaction gains of approximately $11 million primarily caused by relative changes in currency exchange rates at each applicable balance sheet date between the U.S.

The $10 million increase in Kronos’ income from operations was comprised of the following:

● Higher net currency transaction gains of approximately $1 million primarily caused by relative changes in currency exchange rates at each applicable balance sheet date between the U.S.

dollar and the euro, Canadian dollar and the Norwegian krone, and between the euro and the Norwegian krone, which causes increases or decreases, as applicable, in U.S.

dollar-denominated receivables and payables and U.S.

dollar currency held

by Kronos’ non-U.S.

operations, and in Norwegian krone denominated receivables and payables held by Kronos’ non-U.S.

dollar currency held by Kronos’ non-U.S.

operations, and in Norwegian krone denominated receivables and payables held by its non-U.S.

operations, and

3 unchanged sentences

The effect of the weakening of the U.S.

dollar relative to the euro was nominal in 2023 as compared to 2022.

dollar relative to the euro caused additional net translation gains as the positive effects of the weaker U.S.

dollar on euro-denominated sales more than offset the unfavorable effects on euro-denominated operating costs being translated into more U.S.

dollars in 2024 as compared to 2023.

Impact of changes in currency exchange rates - 2023 vs 2022

gains (losses)-

Total currency

2 unchanged sentences

Income from operations

The $106 million decrease in Kronos’ net sales (translation losses) was caused primarily by a strengthening of the U.S.

dollar relative to the euro, as Kronos’ euro-denominated sales were translated into fewer U.S.

The $10 million increase in Kronos’ net sales (translation gains) was caused primarily by a weakening of the U.S.

dollar relative to the euro, as Kronos’ euro-denominated sales were translated into more U.S.

dollars in 2023 as compared to 2022.

The strengthening of the U.S.

dollar relative to the Canadian dollar and the Norwegian krone in 2022 did not have a significant effect on the reported amount of Kronos’ net sales, as a substantial portion of the sales generated by its Canadian and Norwegian operations are denominated in the U.S.

The $23 million increase in income from operations was comprised of the following:

● Higher net currency transaction gains of approximately $10 million primarily caused by relative changes in currency exchange rates at each applicable balance sheet date between the U.S.

dollar relative to the Canadian dollar and the Norwegian krone in 2023 did not have a significant effect on Kronos net sales, as a substantial portion of the sales generated by its Canadian and Norwegian operations is denominated in the U.S.

The $16 million decrease in loss from operations was comprised of the following:

● Lower net currency transaction gains of approximately $11 million primarily caused by relative changes in currency exchange rates at each applicable balance sheet date between the U.S.

dollar and the euro, Canadian dollar and the Norwegian krone, and between the euro and the Norwegian krone, which causes increases or decreases, as applicable, in U.S.

1 unchanged sentence

dollar currency held by Kronos’ non-U.S.

operations, and in Norwegian krone denominated receivables and payables held by its non-U.S.

operations, and in Norwegian krone denominated receivables and payables held by Kronos’ non-U.S.

operations, and

1 unchanged sentence

dollar relative to the Canadian dollar and Norwegian krone, as local currency-denominated operating costs were translated into fewer U.S.

dollars in 2022 as compared to 2021, partially offset by net currency translation losses primarily caused by a strengthening of the U.S.

dollar relative to the euro as the negative effects of the stronger U.S.

dollar on euro-denominated sales more than offset the favorable effects of euro-denominated operating costs being translated into fewer U.S.

dollars in 2023 as compared to 2022.

Kronos’ customer demand stabilized during the fourth quarter of 2023, particularly in the North American and export markets, while demand in Europe improved but remained below historical levels.

Kronos expects consumer demand to improve in 2024, and it believes customer destocking of TiO 2 is largely complete and customer inventories are historically low.

As a result, Kronos expects sales volumes in 2024 to exceed 2023 sales volumes.

In this regard, Kronos is experiencing improved demand thus far in the first quarter of 2024 in all major markets.

Kronos has increased production rates in line with current and expected near-term improved demand and believes its production volumes in 2024 will be higher than 2023, although below estimated full practical capacity.

During 2023, Kronos’ selling prices came under increasing pressure, primarily due to low-cost imports from China impacting European and export pricing.

Kronos expects these pricing pressures to be somewhat mitigated in 2024 and believes there is potential industry pricing upside in 2024 as a result of improved demand.

Throughout 2023 Kronos implemented cost reduction initiatives designed to improve its long-term cost structure, including targeted workforce reductions and the implementation of certain ongoing technology innovations and process improvement initiatives.

Energy costs in Europe have generally stabilized after a period of market disruptions, although

in early 2023, in order to provide cost certainty, Kronos entered into forward contracts for a portion of its energy needs in 2023 which in many cases were priced above subsequent market rates.

As a result of contracts expiring in late 2023, Kronos expects its energy costs will be further reduced in 2024.

Kronos expects raw material and other input costs, which began to decline in 2023, will continue to moderate in 2024.

This, along with lower expected energy costs and the cost reduction initiatives discussed above, will result in improved margins in 2024 as compared to 2023.

Overall, due to the expected improved demand and lower production costs, including lower unabsorbed fixed costs, Kronos expects to report higher operating results for the full year of 2024 as compared to 2023.

Throughout 2023 Kronos took necessary actions to align its production and inventories to then current demand levels including production curtailments.

As demand improves, Kronos will continue to monitor current and anticipated near-term customer demand levels and will align its production and inventories accordingly.

Kronos believes the steps it took during 2023 to preserve its liquidity while maintaining global market share has positioned its business to capitalize on its expectations for improved demand in 2024.

The effect of the weakening of the U.S.

dollar relative to the euro was nominal in 2023 as compared to 2022 .

Overall Kronos’ customer demand improved in 2024 compared to the historical low demand it experienced during 2023, although demand levels remained below historical averages and customer demand moderated in the second half of the year as compared to the first half of the year across all major markets.

Kronos expects demand to improve in 2025, particularly in Europe where the European Commission enacted duties on Chinese imports of TiO 2 in mid-2024;

however, it expects overall demand will remain below historical levels due to continued global economic uncertainty caused, in part, by the potential implementation of tariffs by the U.S.

and other countries.

Kronos believes customer inventory levels were low at the end of 2024 due to customer hesitancy to build inventory late in the year, and it is receiving customer orders on shorter notice than it experienced early in 2024 indicating that customers have a cautious demand outlook and are carefully managing inventory levels.

TiO 2 selling prices softened in the second half of 2024 in response to sluggish demand and competitive pressures.

Kronos expects these pricing pressures to be somewhat mitigated in 2025, particularly in Europe, as a result of the duties enacted on low-cost imports from China.

Kronos is operating its facilities at production rates in line with the current and expected near-term demand and believe its production rates for 2025 will be slightly above 2024 rates.

Kronos is focused on cost reduction initiatives designed to improve its long-term cost structure.

In 2023, Kronos implemented targeted workforce reductions and certain ongoing process improvement initiatives.

In the third quarter of 2024, Kronos closed its Canadian sulfate process line to improve gross margins through the optimization of production of its purified grades.

Raw material, energy and other input costs generally improved during 2024;

however, energy costs in Europe have trended up in recent months and remain above historical levels.

Kronos expects raw material and other input costs will continue to moderate in 2025.

Overall, primarily due to improved demand, Kronos expects to report higher operating results for the full year of 2025 as compared to 2024, although it will need to achieve TiO 2 selling price increases in order to recognize margins more in-line with historical levels.

As noted above, Kronos acquired full control of LPC in July 2024.

Kronos believes this acquisition is a unique opportunity to immediately add value to its customers and better serve the North American marketplace by allowing it to expand its product offerings and increase sales to new and existing customers while recognizing significant synergies, including commercial, overhead and supply chain optimization.

Kronos is in the process of fully integrating the additional LPC production capacity, and it expects the acquisition will have a positive impact on its earnings in 2025, although the potential positive impact will be limited by competitive pressures and by the additional debt service costs associated with the increase in borrowings to complete the transaction.

With the increased borrowing availability under Kronos’ Global Revolver, as well as cash on hand, Kronos was able to finance the required working capital for the improvement needed to fully integrate the acquired LPC production capacity.

Kronos’ expectations for the TiO 2 industry and its operations are based on a number of factors outside its control.

Kronos has experienced global market disruptions including high energy costs and future impacts on its operations will depend on, among other things, future energy costs and the impact economic conditions and geopolitical events have on its operations or its customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.

Kronos’ operations are affected by global and regional economic, political and regulatory factors, and it has experienced global market disruptions.

As noted above, energy costs in Europe, which spiked when Russia invaded Ukraine, remain above historical levels.

In addition, Kronos operates a TiO 2 facility in Canada, and the majority of production from that facility is currently sold into the U.S.

federal government’s recently enacted 25% tariff on Kronos’ imports from Canada could harm its ability to compete and adversely impact its earnings and profitability if such tariffs are sustained for an extended period of time without exclusion.

Kronos has begun to implement strategies to minimize the potential impacts.

Future impacts on Kronos’ operations will depend on, among other things, future energy costs, the effect newly enacted tariffs have on jurisdictions in which Kronos or its customers and suppliers operate, Kronos’ success in implementing mitigation strategies, and the impact economic conditions and geopolitical events have on its operations or its customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.

Operations outside the United States

Kronos - Kronos has substantial operations located outside the United States for which the functional currency is not the U.S.

Kronos has substantial operations located outside the United States for which the functional currency is not the U.S.

As a result, the reported amount of our net investment in Kronos will fluctuate based upon changes in currency exchange rates.

10 unchanged sentences

● Contingencies – We record accruals for environmental, legal and other contingencies and commitments when estimated future expenditures associated with such contingencies become probable, and the amounts can be reasonably estimated.

However, new information may become available, or circumstances (such as applicable laws and regulations) may change, thereby resulting in an increase or decrease in the amount required to be accrued for such matters (and therefore a decrease or increase in reported net income in the period of such change).

However, new information may become available, or circumstances (such as applicable laws and regulations) may change, thereby resulting in an increase or decrease in the amount

required to be accrued for such matters (and therefore a decrease or increase in reported net income in the period of such change).

Obligations for environmental remediation costs are difficult to assess and it is possible that actual costs for environmental remediation will exceed accrued amounts or that costs will be incurred in the future for sites in which we cannot currently estimate our liability.

24 unchanged sentences

forecasts of future operating results, revenue growth, operating margin, tax rates, capital expenditures, depreciation, working capital, weighted average cost of capital, long-term growth rates, risk premiums, terminal values, and fair values of reporting units and assets.

The goodwill impairment test is subject to uncertainties arising from such events as changes in competitive conditions, the current general economic environment, material changes in growth rate assumptions that could positively or negatively impact anticipated future operating conditions and cash flows, changes in the discount rate, and the impact of strategic decisions.

of strategic decisions.

If any of these factors were to materially change such change may require revaluation of the reported goodwill.

3 unchanged sentences

Defined benefit pension plans – We maintain a defined benefit pension plan in the U.S.

and we previously maintained a plan in the United Kingdom (U.K.) related to a former disposed U.K.

As a result of the spin-off of Kronos in 2003, Kronos participates in our pension plan.

Using participant data, we account for our portion of the combined pension plan as if it were a separate pension plan from the portion in which Kronos participates.

As a result of the LPC acquisition in July 2024 (see Note 6 to our Consolidated Financial Statements), Kronos acquired the LPC defined benefit pension plan, which was overfunded on the Acquisition Date.

Effective December 31, 2024, the LPC defined benefit pension plan was merged into our combined U.S.

pension plan.

Because we account for our portion of the combined pension plan separately, the plan merger did not impact our Consolidated Financial Statements.

See Note 11 to our Consolidated Financial Statements.

We previously maintained a plan in the United Kingdom (U.K.) related to a former disposed U.K.

business unit.

6 unchanged sentences

See Note 11 to our Consolidated Financial Statements.

We recognized consolidated defined benefit pension plan expense of $.9 million in 2021, $1.4 million in 2022 and $6.5 million in 2023, including the loss on the termination of the U.K.

pension plan of $4.9 million discuss above.

We recognized consolidated defined benefit pension plan expense of $1.4 million in 2022, $6.5 million in 2023, including the loss on the termination of the U.K.

pension plan of $4.9 million discussed above and $1.4 million in 2024.

The funding requirements for these defined benefit pension plans are generally based upon applicable regulations (such as ERISA in the U.S.) and will generally differ from pension expense recognized under GAAP for financial reporting purposes.

We made contributions to our plans of approximately $1.2 million in each of 2021 and 2022.

We made contributions to our plans of approximately $1.2 million in 2022.

In 2023, we made a net contribution of $.2 million to our plans (a contribution of approximately $1.1 million to our U.S.

plan and a refund of approximately $.9 million as a result of the termination of the U.K.

In 2024, we made a contribution of $1.0 to our U.S.

Under defined benefit pension plan accounting, defined benefit pension plan expense and prepaid and accrued pension costs are each recognized based on certain actuarial assumptions, principally the assumed discount rate and the assumed long-term rate of return on plan assets.

5 unchanged sentences

We also use these discount rates to determine the interest component of defined benefit pension expense for the following year.

As noted above, we terminated our UK pension plan in May 2023.

At December 31, 2024, our projected benefit obligations for our U.S.

defined benefit plan is $26.6 million.

As noted above, we terminated our U.K.

pension plan in May 2023.

We use different discount rate assumptions in determining our defined benefit pension plan obligations and expense for the plan we maintain in the United States and previously in the U.K.

17 unchanged sentences

defined benefit pension plan expense because the respective plan assets were 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.

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.

5 unchanged sentences

Our long-term rate of return on plan asset assumptions in 2025 used for purposes of determining our 2025 defined benefit pension plan expense is 5.0%.

As noted above, during 2021 and 2022 and through the approximate plan termination date in 2023, all of the assets of the U.K.

As noted above, during 2022 and through the approximate plan termination date in 2023, all of the assets of the U.K.

plan were invested primarily in insurance contracts.

Based on the actuarial assumptions described above, we expect to recognize defined benefit pension expense of approximately $1.3 million in 2025.

In comparison, we expect to be required to contribute approximately $1.0 million to such plans during 2024.

In comparison, we do not expect to be required to make any contributions to such plan during 2025.

As noted above, defined benefit pension expense and the amounts recognized as accrued pension costs are based upon the actuarial assumptions discussed above.

We believe that all of the actuarial assumptions used are reasonable and appropriate.

However, if we had lowered the assumed discount rate by 25 basis points for our plan as of December 31, 2023, our aggregate projected benefit obligation would have increased by approximately $.6 million at that date.

However, if we had lowered the assumed discount rate by 25 basis points for

our plan as of December 31, 2024, our aggregate projected benefit obligation would have increased by approximately $.6 million at that date.

Such a change would not materially impact our defined benefit pension expense for 2025.

6 unchanged sentences

Net cash provided by operating activities was $25.6 million in 2024 compared to $37.0 million in 2023.

The $10.1 million net increase in cash provided by operating activities includes the effects of:

● lower net cash used for relative changes in receivables, inventories, prepaid expenses, payables and accrued liabilities in 2023 of $6.7 million;

The $11.4 million decrease in cash provided by operating activities includes the net effects of:

● lower dividends received from Kronos in 2024 of $9.9 million;

● lower segment profit from CompX in 2024 of $8.4 million;

● a $4.1 million increase in interest received in 2024 due to higher interest rates and increased investment balances, offset by lower average balances on CompX’s revolving promissory note receivable from affiliate;

● a $1.4 million decrease in cash paid for taxes in 2023 due to the relative timing of payments.

● lower net cash used for relative changes in receivables, inventories, prepaid expenses, payables and accrued liabilities in 2024 of $3.2 million;

● a $.4 million increase in cash paid for taxes in 2024 due to the relative timing of payments.

Net cash provided by operating activities was $37.0 million in 2023 compared to $26.9 million in 2022.

The $9.3 million net increase in cash provided by operating activities includes the net effects of:

● higher income from operations from CompX in 2022 of $4.9 million;

The $10.1 million increase in cash provided by operating activities includes the net effects of:

● lower net cash used for relative changes in receivables, inventories, prepaid expenses, payables and accrued liabilities in 2023 of $6.7 million;

● a $2.6 million increase in interest received in 2023 due to higher interest rates and increased investment balances, offset by lower average balances on CompX’s revolving promissory note receivable from affiliate;

● a $1.1 million increase in cash paid for taxes in 2022 due to the relative timing of payments.

● a $1.4 million decrease in cash paid for taxes in 2023 due to the relative timing of payments.

We do not have complete access to CompX’s cash flows in part because we do not own 100% of CompX.

8 unchanged sentences

As shown below, our total average days sales outstanding decreased from December 31, 2023 to December 31, 2024 and is primarily impacted by the timing of sales and collections in the last month of the year.

As shown below, our average number of days in inventory decreased from December 31, 2022 to December 31, 2023 primarily due to a decrease at CompX’s Security Products reporting unit due to the fulfillment and shipping of a significant order during the fourth quarter of 2023, partially offset by an increase at CompX’s Marine Components reporting unit due to lower sales and

increased inventory balances as a result of prior orders of certain raw materials with longer lead times discussed in CompX’s Outlook above.

As shown below, our average number of days in inventory at December 31, 2024 was comparable to December 31, 2023 primarily due to an increase at CompX’s Security Products reporting unit due to the fulfillment and shipping of a significant order during the fourth quarter of 2023, partially offset by a decrease at CompX’s Marine Components reporting unit due to elevated inventory balances at December 31, 2023 as a result of prior orders of certain raw materials with longer lead times delivered in the fourth quarter of 2023.

For comparative purposes, we have provided 2022 numbers below.

4 unchanged sentences

Capital expenditures were $3.7 million in 2022, $1.1 million in 2023 and $1.4 million in 2024.

Capital expenditures in 2021 and 2022 were higher as CompX accelerated the timeline for certain projects designed to increase its capacity and improve its capabilities in response to strong customer demand.

Beginning in the latter half of 2022 through 2023, CompX limited investments primarily to those expenditures required to meet its existing demand and to properly maintain its facilities and technology infrastructure.

Capital expenditures in 2022 were higher as CompX accelerated the timeline for certain projects designed to increase its capacity and improve its capabilities in response to strong customer demand.

Beginning in the latter half of 2022 and continuing through 2024, CompX limited investments primarily to those expenditures required to meet its existing demand and to properly maintain its facilities and technology infrastructure.

Investing activities also include net collections of $5.5 million ($24.3 million of gross borrowings and $29.8 million of gross repayments) in 2022, net collections of $2.6 million ($27 9 million of gross borrowings and $30.5 million of gross repayments) in 2023 and net collections of $1.3 million ($25.0 million of gross borrowings and $26.3 million of gross repayments) in 2024 under a promissory note receivable from an affiliate.

See Note 16 to our Consolidated Financial Statements.

During 2022, we purchased marketable debt securities totaling $70.0 million, of which $33.0 million relates to CompX.

During 2023, we purchased marketable debt securities totaling $61.4 million, of which $36.3 million relates to CompX, and received gross proceeds totaling $82.0 million, of which $36.0 million relate to CompX.

During 2022, we purchased U.S.

treasury marketable securities totaling $70.0 million.

During 2023, we purchased U.S.

treasury marketable securities totaling $61.4 million, and received gross proceeds totaling $82.0 million related to U.S.

treasury bill maturities.

During 2024, we received gross proceeds of $54.0 million related to U.S.

treasury bill maturities.

See Note 5 to our Consolidated Financial Statements.

During 2024, we had proceeds from the sale of land not used in our operations of $5.0 million.

Financing activities

Quarterly dividends paid totaled $11.7 million ($.24 per share, or $.06 per share per quarter) in 2021 and $13.7 million ($.28 per share, or $.07 per share per quarter) in each of 2022 and 2023.

In addition, our board of directors declared a special dividend which totaled $17.1 million ($.35 per share) paid on August 31, 2022.

Quarterly dividends paid totaled $13.7 million ($.28 per share, or $.07 per share per quarter) in each of 2022 and 2023 and $15.6 million ($.32 per share, or $.08 per share per quarter in 2024).

In addition, our board of directors declared special dividends which totaled $17.1 million ($.35 per share) paid in August 2022 and $21.0 million ($.43 per share) paid in August 2024.

In February 2025 our board of directors declared a first quarter 2025 dividend of $.09 per share, to be paid on March 27, 2025 to NL stockholders of record as of March 11, 2025.

2 unchanged sentences

There are currently no contractual restrictions on the amount of dividends which we may pay.

Cash flows from financing activities include CompX dividends paid to its stockholders other than us aggregating $1.3 million in 2021, $4.3 million in 2022 ($2.7 million of which relates to a special dividend) and $1.6 million in 2023.

In addition, during 2021, CompX acquired 75,000 shares of its Class A common stock in market transactions for an aggregate purchase price of $1.3 million.

Cash flows from financing activities include CompX dividends paid to its stockholders other than us aggregating $4.3 million in 2022 ($2.7 million of which relates to a special dividend), $1.6 million in 2023 and $5.0 million in 2024 ($3.1 million of which relates to a special dividend).

During 2022, CompX acquired 78,900 shares of its Class A common stock (8,900 shares from affiliates in two private transactions, and 70,000 shares in a single market transaction) for an aggregate purchase price of $1.7 million.

Outstanding debt obligations

At December 31, 2023, NL had outstanding debt obligations of $.5 million under its secured revolving credit facility with Valhi, and CompX did not have any outstanding debt obligations.

We are in compliance with all of the

covenants contained in our revolving credit facility with Valhi at December 31, 2023.

At December 31, 2024, NLKW had outstanding debt obligations of $.5 million under its secured revolving credit facility with Valhi, and CompX did not have any outstanding debt obligations.

We are in compliance with all of the covenants contained in our secured revolving credit facility with Valhi at December 31, 2024.

See Note 10 to our Consolidated Financial Statements

In February 2024 Kronos exchanged of €325 million principal amount of its outstanding 3.75% Senior Secured Notes due in September 2025 (the “Old Notes”) for newly issued €276.174 million aggregate outstanding 9.50% Senior Secured Notes due March 2029 (the “New Notes” and together with the Old Notes, the “Senior Secured Notes”) plus additional cash consideration of €50 million ($53.7 million).

Kronos financed the €50 million cash consideration with a new unsecured term loan from Contran Corporation due in September 2029.

The Contran term loan is subordinated in right of payment to Kronos’ Senior Secured and its $225 million global revolving credit facility (Global Revolver).

Kronos’ Senior Secured Notes, Global Revolver and the Contran term loan contain a number of covenants and restrictions which, among other things, restrict its ability to incur additional debt, incur liens, pay dividends or merge or consolidate with, or sell or transfer substantially all of its assets to, another entity, and contain other provisions and restrictive covenants customary in lending transactions of this type.

At December 31, 2024, Kronos had $10 million outstanding on its Global Revolver.

Availability under the Global Revolver is subject to a borrowing base calculation, as defined in the agreement.

The borrowing base calculated as of December 31, 2024 was approximately $278 million.

Effective July 17, 2024, Kronos completed an amendment to its Global Revolver (the “Second Amendment”).

Among other things, the Second Amendment increased the maximum borrowing amount from $225 million to $300 million, extended the maturity date to July 2029 and expanded the facility to include LPC and LPC’s receivables and certain of its inventories in the borrowing base.

The LPC acquisition was financed through borrowings of $132.1 million under Kronos’ Global Revolver with the remainder paid with cash on hand.

In February 2024, Kronos exchanged €325 million principal amount of its outstanding 3.75% Senior Secured Notes due in September 2025 (the “Old Notes”) for newly issued €276.174 million 9.50% Senior Secured Notes due March 2029 (the “New Notes”) plus additional cash consideration of €48.75 million ($52.6 million) paid to the holders of the Old Notes and entered into a $53.7 million unsecured term loan from Contran Corporation due in September 2029 (the “Contran Term Loan”).

On July 30, 2024, Kronos issued an additional €75 million principal amount of 9.50% Senior Secured Notes due 2029 (the “Additional New Notes” and, together with the Old Notes and the New Notes, the “Senior Secured Notes”).

The Additional New Notes were issued at a premium of 107.50% of their principal amount, plus accrued interest from February 12, 2024, resulting in net proceeds of approximately $90 million, after fees and expenses.

The Additional New Notes are fungible with the New Notes, are treated as a single series with the New Notes and have the same terms as the New Notes, other than their date of issuance and issue price.

The proceeds from the Additional New Notes were used to pay down borrowings incurred under Kronos’ Global Revolver.

Subsequent to the issuance of the Additional New Notes, the Contran Term Loan was amended in August 2024 to change the interest rate from 11.5% (which had been determined by adding an additional spread of 2% to the final interest rate on the New Notes issued in February 2024) to 9.54% (determined by adding a spread of 2% to the effective interest rate of the Additional New Notes issued in July 2024).

In each case, the spread used to determine the rate was based upon comparable debt transactions at the time of the issuance of the applicable notes.

The Contran Term Loan is subordinated in right of payment to Kronos’ Senior Secured Notes and Kronos’ Global Revolver.

Kronos’ Senior Secured Notes, the Contran Term Loan and Kronos’ Global Revolver contain a number of covenants and restrictions which, among other things, restrict its ability to incur additional debt, incur liens, pay dividends or merge or consolidate with, or sell or transfer substantially all of its assets to, another entity, and contain other provisions and restrictive covenants customary in lending transactions of these types.

Certain of Kronos’ credit agreements contain provisions which could result in the acceleration of indebtedness prior to their stated maturity for reasons other than defaults for failure to comply with typical financial or payment covenants.

3 unchanged sentences

Kronos believes that it will be able to continue to comply with the financial covenants contained in its credit facility through its maturity;

however, if its future operating results differ materially from its expectations it may be unable to maintain compliance.

Future cash requirements

Our primary source of liquidity on an ongoing basis is our cash flow from operating activities and credit facilities with affiliates and banks as further discussed below.

We generally use these amounts to fund capital expenditures (substantially all of which relate to CompX), pay ongoing environmental remediation and litigation costs, and provide for the payment of dividends (if declared).

We generally use these amounts to fund capital expenditures

(substantially all of which relate to CompX), pay ongoing environmental remediation and litigation costs, and provide for the payment of dividends (if declared).

At December 31, 2024, we had aggregate restricted and unrestricted cash, cash equivalents and current marketable securities of $184.2 million, substantially all of which was held in the U.S.

11 unchanged sentences

These companies may or may not be engaged in businesses related to our current businesses.

We intend to consider such acquisition activities in the future and, in

connection with this activity, may consider issuing additional equity securities and increasing indebtedness.

We intend to consider such acquisition activities in the future and, in connection with this activity, may consider issuing additional equity securities and increasing indebtedness.

From time to time, we also evaluate the restructuring of ownership interests among our respective subsidiaries and related companies.

9 unchanged sentences

A detail of annual dividends we expect to receive from our subsidiaries and affiliates in 2025, based on the number of shares of common stock of these affiliates we own as of December 31, 2024 and their current regular quarterly dividend rate, is presented in the table below.

In this regard, in February 2024 CompX increased its regular quarterly dividend from $.25 to $.30 per share beginning with the dividends payable in March 2024.

Annual expected

13 unchanged sentences

Examples of such proposed legislation include bills which would permit civil liability for damages on the basis of market share, rather than requiring plaintiffs to prove that the defendant’s product caused the alleged damage and bills which would revive actions barred by the statute of limitations.

While no legislation or regulations have been enacted to date that are expected to have a material

adverse effect on our consolidated financial position, results of operations or liquidity, enactment of such legislation could have such an effect.

While no legislation or regulations have been enacted to date that are expected to have a material adverse effect on our consolidated financial position, results of operations or liquidity, enactment of such legislation could have such an effect.

As more fully described in the Notes to our Consolidated Financial Statements, we are party to various debt, leases and other agreements which contractually and unconditionally commit us to pay certain amounts in the future.

3 unchanged sentences

The timing and amount for purchase obligations is based on the contractual payment amount and the contractual payment date for those commitments.

Recent accounting pronouncements

See Note 19 to our Consolidated Financial Statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis