What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-06 compared with 2024-03-07 · 319 added, 275 removed, 525 unchanged (53% of the section changed)

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● Component Products – We operate in the component products industry through our majority control of CompX.

CompX is a leading manufacturer of security products used in the postal, recreational transportation, office and institutional furniture, cabinetry, tool storage, healthcare and a variety of other industries.

CompX is also a leading manufacturer of wake enhancements systems, stainless steel exhaust systems, gauges, throttle controls, trim tabs and related hardware and accessories for the recreational marine industry.

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Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 –

We reported net income attributable to Valhi stockholders of $108.0 million or $3.79 per diluted share in 2024 compared to a net loss of $9.9 million or $.35 per diluted share in 2023.

Our net income attributable to Valhi stockholders increased from 2023 to 2024 primarily due to the net effects of:

● operating income from our Chemicals Segment of $138.5 million in 2024 compared to an operating loss of $41.1 million in 2023;

● a non-cash gain of $64.5 million in 2024 resulting from the remeasurement of the Chemicals Segment’s investment in the TiO 2 manufacturing joint venture;

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

● income from tax increment infrastructure reimbursement of $30.3 million in 2024 compared to $25.2 million in 2023;

● a non-cash deferred income tax expense of $16.5 million in 2024 related to final tax regulations on the treatment of certain currency translation gains and losses related to our Chemicals Segment;

● a non-cash deferred income tax expense of $8.2 million in 2024 related to the recognition of a deferred income tax asset valuation allowance related to our Chemicals Segment’s Belgian net deferred tax assets;

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

pension plan of $6.2 million in 2023;

● higher interest expense in 2024 as a result of refinancing of the Chemicals Segment’s Senior Secured Notes in the first quarter and debt incurred to finance the LPC acquisition in the third quarter.

Our diluted net income per share in 2024 includes:

● income of $1.18 per share due to the recognition of a non-cash gain resulting from the remeasurement of the Chemicals Segment’s investment in the TiO 2 manufacturing joint venture recognized in the third quarter;

● aggregate income of $.72 per share related to the settlement of a liability for an environmental remediation site recognized in the fourth quarter;

● income of $.55 per share related to tax increment infrastructure reimbursements recognized in the third and fourth quarters;

● a loss of $.38 per share due to the recognition of a non-cash deferred income tax expense related to final tax regulations on the treatment of certain currency translation gains and losses related to our Chemicals Segment in the fourth quarter;

● a loss of $.19 per share due to the recognition of a non-cash deferred income tax expense related to the recognition of a deferred income tax asset valuation allowance related to our Chemicals Segment’s Belgian net deferred tax assets in the fourth quarter.

Our diluted net loss per share in 2023 includes:

● income of $.46 per share related to tax increment infrastructure reimbursements recognized in the third and fourth quarters;

● a loss of $.13 per share due to the termination of our U.K.

pension plan recognized in the second quarter;

● a loss of $.10 per share related to workforce reductions by our Chemicals Segment recognized in the fourth quarter;

● a loss of $.06 per share related to the write-off of certain costs resulting from a capital project termination recognized in the fourth quarter;

● a gain of $.05 per share related to a business interruption insurance claim arising from Hurricane Laura in 2020 at our Chemicals Segment recognized in the first, second and third quarters.

Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 –

We reported a net loss attributable to Valhi stockholders of $9.9 million or $.35 per diluted share in 2023 compared to net income of $87.2 million or $3.06 per diluted share in 2022.

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pension plan of $6.2 million in 2023.

● a loss of $2.6 million related to the sale of BPC in 2023;

● the recognition of a gain on the sale of land not used in our operations of $1.5 million in 2023.

Our diluted net loss per share in 2023 includes:

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● a gain of $.05 per share related to a business interruption insurance claim arising from Hurricane Laura in 2020 at our Chemicals Segment recognized in the first, second and third quarters.

● a loss of $.04 per share due to the sale of BPC recognized in the fourth quarter;

● a gain of $.04 per share related to the sale of land not used in our operations recognized in the second quarter.

Our diluted net income per share in 2022 includes:

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● a gain of $.05 per share related to a business interruption insurance claim arising from Hurricane Laura in 2020 at our Chemicals Segment recognized in the third quarter.

● income of $.02 per share related to an energy utility infrastructure reimbursement recognized in the second quarter.

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 –

We reported net income attributable to Valhi stockholders of $90.2 million or $3.16 per diluted share in 2022 compared to $127.2 million or $4.46 per diluted share in 2021.

Our net income attributable to Valhi stockholders decreased from 2021 to 2022 primarily due to the net effects of:

● lower operating income from our Chemicals Segment in 2022 compared to 2021;

● lower operating income from our Real Estate Management and Development Segment in 2022 compared to 2021 including aggregate charges of $19.7 million in our Real Estate Management and Development Segment in 2022 related to the impairment of certain fixed assets and the bankruptcy filing of BWC in 2022;

● recognition of a gain on sales of land not used in our operations of $16.0 million in 2021.

Our diluted net income per share in 2022 includes:

● aggregate charges of $.35 per share related to the bankruptcy filing of BWC, including $.29 per share related to the impairment of the water delivery system fixed assets, primarily recognized in the second quarter, and $.04 per share loss on the deconsolidation of BWC and $.02 per share of bad debt expense related to an intercompany receivable with BWC, both recognized in the third quarter;

● income of $.28 per share related to tax increment infrastructure reimbursements recognized in the third and fourth quarters;

● a gain of $.05 per share related to a business interruption insurance claim arising from Hurricane Laura in 2020 at our Chemicals Segment recognized in the third quarter;

● income of $.02 per share related to an energy utility infrastructure reimbursement recognized in the second quarter.

Our diluted net income per share in 2021 includes:

● a gain of $.43 per share related to sales of land not used in our operations recognized in the second and third quarters;

● income of $.28 per share related to tax increment infrastructure reimbursements recognized in the first and fourth quarters.

We discuss these amounts more fully below.

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We currently expect consolidated operating income for 2025 to be higher as compared to 2024 primarily due to the net effects of:

● higher operating income from our Chemicals Segment in 2024 primarily due to the positive impacts of improved demand and lower manufacturing costs;

● higher operating income from our Chemicals Segment in 2025 primarily due to the positive impact of improved demand;

● higher operating income from our Real Estate Management and Development Segment in 2025 due to higher expected infrastructure reimbursements;

● lower operating income from our Component Products Segment in 2024 as security products and marine sales are expected to decline further in 2024.

technological advances, worldwide production capacity and public health crises.

● higher operating income from our Component Products Segment in 2025 as marine sales are expected to improve in 2025.

Our expectations for our future operating results are based upon a number of factors beyond our control, including worldwide growth of gross domestic product, competition in the marketplace, continued operation of competitors, technological advances, worldwide production capacity, public health crises, the effect of tariffs, and the impact of economic conditions and geopolitical events on demand for our products or our customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.

If actual developments differ from our expectations, our results of operations could be unfavorably affected.

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TiO 2 selling prices generally follow industry trends and selling prices will increase or decrease generally as a result of competitive market pressures.

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 cash on hand.

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

For financial reporting purposes, the assets acquired and liabilities assumed of LPC are included in our Consolidated Balance Sheet as of December 31, 2024, and the results of operations and cash flows of LPC are included in our Consolidated Statement of Operations and Cash Flows beginning as of the Acquisition Date.

See Note 3 to our Consolidated Financial Statements.

Years ended December 31,

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Thousands of metric tons

Industry Conditions and 2023 Overview – Our Chemicals Segment and the TiO 2 industry are experiencing an extended period of significantly reduced demand across all major markets, which is reflected in o ur Chemicals Segment’s 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 o ur Chemicals Segment 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 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 major markets.

Our Chemicals Segment 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, our Chemicals Segment continued operating its production facilities at reduced rates to align production with expected customer demand.

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

Industry Conditions and 2024 Overview – Our Chemicals Segment and the TiO 2 industry experienced an extended period of significantly reduced demand reflected in our Chemicals Segment’s 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 our Chemicals Segment’s TiO 2 pricing with 2024 average TiO 2 selling prices approximately 5% below the average TiO 2 selling prices for 2023.

Our Chemicals Segment 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, our Chemicals Segment 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 our Chemicals Segment’s capacity utilization rates during 2023 and 2024.

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Fourth quarter

Due to significant increases in per metric ton production costs (primarily feedstock and unabsorbed fixed costs due to reduced operating rates), our Chemicals Segment’s cost of sales per metric ton of TiO 2 sold in 2023 was significantly higher than in 2022 (excluding the effect of changes in currency exchange rates).

In response to the extended period of reduced demand, our Chemicals Segment has taken measures to reduce its operating costs and improve its long-term cost structure.

As part of overall cost saving measures, in the third quarter of

2023 our Chemicals Segment began implementing certain voluntary and involuntary workforce reductions.

A substantial portion of its 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 individuals and are substantially completed.

Our Chemicals Segment 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 the year, which is classified in selling, general and administrative expense.

The majority of cash payments are expected to be completed by the first quarter of 2024.

Net Sales – Our Chemicals Segment’s 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, our Chemicals Segment’s 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, our Chemicals Segment 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 our Chemicals Segment’s 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.

Our Chemicals Segment 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, our Chemicals Segment closed its sulfate process production line at its plant in Varennes, Canada.

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

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

Net Sales – Our Chemicals Segment’s 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, we estimate that changes in currency exchange rates (primarily the euro) increased our Chemicals Segment’s 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.

Our Chemicals Segment’s 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 our Chemicals Segment’s 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, w e estimate that changes in currency exchange rates (primarily the euro) increased our Chemicals Segment’s 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.

Our Chemicals Segment’s sales volumes decreased 13% in 2023 as compared to 2022 due to lower overall demand across all major markets noted above.

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However, o ur Chemicals Segment’s 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.

Our Chemicals Segment’s 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).

We estimate that changes in currency exchange rates (primarily the euro) decreased our Chemicals Segment’s net sales by approximately $106 million, or 5% in 2022 as compared to 2021.

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

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

Our Chemicals Segment 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 – 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 our Chemicals Segment’s 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 – Cost of sales increased $27.4 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).

Our Chemicals Segment’s 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.

Our Chemicals Segment’s 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.

Our Chemicals Segment’s 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.

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

As discussed and quantified above, our Chemicals Segment’s 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.

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 our Chemicals Segment’s 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).

Our Chemicals Segment’s 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.

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As discussed and quantified above, our Chemicals Segment’s 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.

Cost of sales increased $45.7 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.

Our Chemicals Segment’s 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, our Chemicals Segment’s cost of sales in 2022 includes approximately $26 million of unabsorbed fixed production and other manufacturing costs associated with production curtailments at certain of its European facilities throughout the fourth quarter.

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

Our Chemicals Segment’s gross margin as a percentage of net sales in 2022 decreased primarily due to the net effect of higher average TiO 2 selling prices, lower production and sales volumes, higher production costs and fluctuations in currency exchange rates.

Operating Income (Loss) – Our Chemicals Segment had an operating loss of $41.1 million in 2023 compared to operating income of $174.6 million in 2022 as a result of the factors impacting gross margin discussed above .

Operating Income (Loss) – Our Chemicals Segment had operating income of $138.5 million in 2024 compared to an operating loss of $41.1 million in 2023 as a result of the factors impacting gross margin discussed above.

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

We estimate that changes in currency exchange rates increased our Chemicals Segment’s operating income by approximately $10 million in 2024 as compared to 2023, as further discussed below.

Our Chemicals Segment had an operating loss of $41.1 million in 2023 compared to operating income of $174.6 million in 2022 as a result of the factors impacting gross margin discussed above .

Our Chemicals Segment 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.

We estimate changes in currency exchange rates decreased our Chemicals Segment’s operating loss by approximately $16 million in 2023 as compared to 2022, as discussed in the Currency Exchange Rates section below.

Our Chemicals Segment’s operating income decreased by $26.2 million, from $200.8 million in 2021 to $174.6 million in 2022.

Operating income as a percentage of net sales was 9% in 2022 compared to 10% in 2021.

This decrease was driven by the lower gross margin discussed above for the comparable periods.

Our Chemicals Segment experienced an operating loss of $15.3 million in the fourth quarter of 2022 compared to operating income of $55.4 million in the fourth quarter of 2021.

Our Chemicals Segment 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.

We estimate that changes in currency exchange rates increased our Chemicals Segment’s operating income by approximately $23 million in 2022 as compared to 2021 as discussed in the Currency Exchange Rates section below.

Our Chemicals Segment’s operating income (loss) is net of amortization of purchase accounting adjustments made in conjunction with our acquisitions of interests in NL and Kronos.

As a result, we recognize additional depreciation expense above the amounts Kronos reports separately, substantially all of which is included within cost of sales.

We recognized additional depreciation expense of $1.5 million in 2021 and $1.3 million in each of 2022 and 2023, which reduced our reported Chemicals Segment’s operating income as compared to amounts reported by Kronos.

We recognized additional depreciation expense of $1.3 million in each of 2022 and 2023 and $2.5 million in 2024, which reduced our reported Chemicals Segment’s operating income as compared to amounts reported by Kronos.

Currency Exchange Rates – Our Chemicals Segment has substantial operations and assets located outside the United States (primarily in Germany, Belgium, Norway and Canada).

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dollars from time to time).

Certain raw materials used in all our Chemicals Segment’s production facilities, primarily titanium-containing feedstocks, are purchased primarily in U.S.

Certain raw materials used in all our Chemicals Segment’s production facilities, primarily

titanium-containing feedstocks, are purchased primarily in U.S.

dollars, while labor and other production and administrative costs are incurred primarily in local currencies.

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

Overall, we estimate that fluctuations in currency exchange rates had the following effects on our Chemicals Segment’s sales and operating income (loss) for the periods indicated.

Fluctuations in currency exchange rates had the following effects on our Chemicals Segment’s sales and operating income (loss) for the periods indicated.

Impact of changes in currency exchange rates - 2024 vs 2023

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The strengthening of the U.S.

dollar relative to the Canadian dollar and the Norwegian krone in 2023 did not have a significant effect on the reported amount of net sales, as a substantial portion of the sales generated by our Chemicals Segment’s Canadian and Norwegian operations are denominated in the U.S.

The $16 million decrease in operating loss 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 relative to the Canadian dollar and the Norwegian krone in 2024 did not have a significant effect on the reported amount of net sales, as a substantial portion of the sales generated by our Chemicals Segment’s Canadian and Norwegian operations is denominated in the U.S.

The $10 million increase in operating income 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.

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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.

gains/(losses)

Total currency

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(In millions)

Operating income

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

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

Operating income (loss)

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

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

dollars in 2023 as compared to 2022.

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The $23 million increase in operating income 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 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.

The $16 million decrease in operating loss 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.

dollar-denominated receivables and payables and U.S.

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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.

Outlook – Our Chemicals Segment’s 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.

Our Chemicals Segment 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, our Chemicals Segment expects sales volumes in 2024 to exceed 2023 sales volumes.

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

Our Chemicals Segment 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, our Chemicals Segment’s selling prices came under increasing pressure, primarily due to low-cost imports from China impacting European and export pricing.

Our Chemicals Segment 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 our Chemicals Segment 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, our Chemicals Segment 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, our Chemicals Segment expects its energy costs will be further reduced in 2024.

Our Chemicals Segment 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, our Chemicals Segment expects to report higher operating results for the full year of 2024 as compared to 2023.

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

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

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

Our expectations for the TiO 2 industry and our Chemicals Segment operations are based on a number of factors outside our control.

Our Chemicals Segment 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.

The effect of the weakening of the U.S.

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

Outlook – Our Chemicals Segment’s overall 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.

Our Chemicals Segment 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, our Chemicals Segment 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.

Our Chemicals Segment believes customer inventory levels were low at the end of 2024 due to customer hesitancy to build inventory late in the year and our Chemicals Segment 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.

Our Chemicals Segment 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.

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

Our Chemicals Segment is focused on cost reduction initiatives designed to improve its long-term cost structure.

In 2023, our Chemicals Segment implemented targeted workforce reductions and certain ongoing process improvement initiatives.

In the third quarter of 2024, our Chemicals Segment 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.

Our Chemicals Segment expects raw material and other input costs will continue to moderate in 2025.

Overall, primarily due to improved demand, our Chemicals Segment 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, our Chemicals Segment acquired full control of LPC in July 2024.

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

Our Chemicals Segment 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 our Chemicals Segment’s Global Revolver, as well as cash on hand, it was able to finance the required working capital for the improvements needed to fully integrate the acquired LPC production capacity.

Our expectations for the TiO 2 industry and our Chemicals Segment’s operations are based on a number of factors outside our control.

Our Chemicals Segment’s 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, our Chemicals Segment 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 our Chemicals Segment’s 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.

Our Chemicals Segment has begun to implement strategies to minimize the potential impacts.

Future impacts on our Chemicals Segment’s operations will depend on, among other things, future energy costs, the effect newly enacted tariffs have on jurisdictions in which our Chemicals Segment or its customers and suppliers operate, its 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.

Component Products –

Our Component Products Segment reported operating income of $25.4 million in each of 2023 and 2022 and $20.5 million in 2021.

Our Component Products Segment reported operating income of $17.0 million in 2024 and $25.4 million in each of 2023 and 2022.

The decrease in operating income in 2024 compared to 2023 is due to lower sales and gross margin at both security products and marine components reporting units.

Operating income in 2023 was comparable to 2022 as lower marine components sales were offset by higher security products sales and higher gross margin percentages across both reporting units.

The increase in operating income in 2022 over 2021 is primarily due to higher marine components sales and to a lesser extent higher security products sales.

Our Component Products Segment’s product offerings consist of a large number of products that have a wide variation in selling price and manufacturing cost, which results in certain practical limitations on its ability to quantify the impact of changes in individual product sales quantities and selling prices on our Component Products Segment’s net sales, cost of sales and gross margin.

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Operating income

Net Sales – Our Component Products Segment’s net sales decreased $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.

Net Sales – Our Component Products Segment’s net sales decreased $15.4 million in 2024 compared to 2023 primarily due to lower marine components sales to the towboat market and lower security products sales to the government security market.

Marine components net sales decreased $9.4 million, or 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, marine component 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.

Security products net sales decreased $6.0 million, or 5%, in 2024 as compared to 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.

Our Component Products Segment’s net sales decreased $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.

Marine components net sales decreased $12.0 million, or 23%, in 2023 as compared to 2022.

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Relative to prior year, security products 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.

Our Component Products Segment’s net sales increased $25.8 million in 2022 compared to 2021 due to higher marine components sales primarily to the towboat market and, to a lesser extent, higher security products sales across a variety of markets.

Marine components net sales increased $16.4 million, or 46%, in 2022 as compared to 2021.

Relative to prior year, marine components 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.

Security products net sales increased $9.4 million, or 9%, in 2022 as compared to 2021.

Relative to prior year, security products 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.

Cost of Sales and Gross Margin – Our Component Products Segment’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 reporting units as well as lower marine components sales.

Cost of Sales and Gross Margin – Our Component Products Segment’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, our Component Products Segment’s cost of sales as a percentage of net sales increased over the same period.

Our Component Products Segment’s gross margin as a percentage of net 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.

Security products 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.

Marine components gross margin as a percentage of net 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.

Our Component Products Segment’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 reporting units as well as lower marine components sales.

Our Component Products Segment’s gross margin as a percentage of net sales increased over the same period primarily due to the factors affecting cost of sales.

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Marine components gross margin as a percentage of net 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.

Our Component Products Segment’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 security products and marine components.

Our Component Products Segment’s gross margin as a percentage of net sales decreased over the same period primarily due to the decrease in the security products gross margin percentage.

Security products 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.

Marine components gross margin as a percentage of net 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, our Component Products Segment’s operating income increased in 2023 compared to 2022.

Operating Income – As a percentage of net sales, our Component Products Segment’s operating income decreased in 2024 compared to 2023 and increased in 2023 compared to 2022.

Operating income margins were primarily impacted by the factors affecting net sales, cost of sales and gross margin, discussed above.

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 business unit and corporate management activities, as well as gains and losses on sales of property and equipment.

Operating costs and 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 net sales, our Component Products Segment’s operating income increased in 2023 compared to 2022.

The operating margin percentage increased in 2023 compared to 2022 primarily due to the factors impacting net sales, cost of sales and gross margin discussed above.

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 business unit and corporate management activities, as well as gains and losses on sales of property and equipment.

Operating costs and expenses increased in 2023 compared to 2022 predominantly due to higher salary and benefit costs at the security products reporting unit which increased by $.6 million.

Our Component Products Segment operating income increased in 2022 compared to 2021.

Operating margin increased in 2022 compared to 2021 primarily due to the factors impacting net sales, cost of sales and gross margin discussed above.

Operating costs and expenses increased $1.2 million in 2022 compared to 2021 predominantly due to higher salary and employment related costs.

General – Our Component Products Segment’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 manufacturing costs, primarily comprised of labor costs and materials.

General – Our Component Products Segment’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 our Component Products Segment’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 48% of our Component Products Segment’s cost of sales in 2023, with commodity-related raw materials representing approximately 13% of our Component Products Segment’s 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 our Component Products Segment’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 our Component Products Segment 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, our Component Products Segment expects the prices for zinc, brass, aluminum, stainless steel and other manufacturing materials in 2024 to be relatively stable.

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

Our Component Products Segment’s raw material prices were generally stable through the first half of 2024.

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

The zinc market was volatile in 2024, but our Component Products Segment 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 marine components (including marine exhaust headers and pipes, wake enhancement systems, throttles and trim tabs), were relatively stable in 2024 because our Component Products Segment took advantage of volume purchase opportunities during the year.

In most cases, commodity raw materials our Component Products Segment 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 our Component Products Segment’s purchases.

Based on current economic conditions, our Component Products Segment 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.

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

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– Raw Materials.”

Outlook – In 2023, the 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 it serves.

At the 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 our Component Products Segment operates, and material prices have either stabilized or, in the case of certain commodity raw materials, started to decline slightly.

Our Component Products Segment’s supply chains are stable and transportation and logistical delays are minimal.

Our Component Products

Segment 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.

Our Component Products Segment 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.

Our Component Products Segment 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, our Component Products Segment believes its customers will accept only modest price increases in the current environment.

Overall, our Component Products Segment expects the security products reporting unit’s 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.

Our Component Products Segment 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 our Component Products Segment’s customers, have publicly announced reductions to production schedules for 2024.

Overall, our Component Products Segment expects the marine components reporting unit’s 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.

Our Component Products Segment 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.

Our Component Products Segment expects inventory balances to be in alignment with current demand by mid-year 2024.

Outlook – As noted above, in the second half of 2023 our Component Products Segment’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 the 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 our Component Products Segment experienced price increases in certain commodity raw materials, primarily brass and electronic components at the security products reporting unit.

Our Component Products Segment expects security products net sales in 2025 to improve modestly over 2024, and our Component Products Segment expects gross margin and operating income percentages in 2025 to be slightly above 2024 due to pricing improvements on the security products product mix.

Our Component Products Segment expects marine components net sales to increase in 2025 due to higher expected sales to the government and industrial markets.

Our Component Products Segment 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 our Component Products Segment expects marine components to have improved gross margins and operating income percentages in 2025 compared to 2024 due to higher expected sales volumes.

During 2024 our Component Products Segment was aggressive in aligning its production

capabilities and inventories to demand levels.

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

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

Our Component Products Segment has experienced global and domestic supply chain challenges, and any future impacts on operations will depend on, among other things, any future disruption in our Component Products Segment’s 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, our Component Products Segment’s supply chains are stable and transportation and logistical delays are minimal.

Our Component Products Segment 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.

Real Estate Management and Development –

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Utility and other

Water delivery sales

Water delivery

Total net sales

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BMI also provided certain utility services to an industrial park located in Henderson, Nevada prior to the sale of BPC on December 1, 2023.

With the approval of BWC’s plan of reorganization by the bankruptcy court, substantially all of BWC’s

assets were sold in November 2023.

With the approval of BWC’s plan of reorganization by the bankruptcy court, substantially all of BWC’s assets were sold in November 2023.

Following the sale of the BWC assets and BPC, BMI no longer provides services to the industrial park which allows us to focus on land sales and development activity for the residential/planned community.

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Although land may be under contract or land sales may be completed, we do not recognize revenue until we have satisfied the criteria for revenue recognition set forth in ASC Topic 606.

In most instances buyers can cancel an escrow agreement with no financial penalties until shortly before the closing date.

In some instances, we will receive cash proceeds at the time the contract closes and record deferred revenue for some or all of the cash amount received, with such deferred revenue being recognized in subsequent periods.

Substantially all the land in the residential/planned community has been sold;

however, we expect the development work to take three to four years to complete.

however, we expect the development work to take two to three years to complete.

Net Sales and Operating Income – Substantially all the net sales from our Real Estate Management and Development segment in 2024 and 2023 consisted of revenues from land sales.

We recognized $71.5 million in revenues on land sales during 2024 compared to $92.6 million in 2023.

All of the land sales revenues recognized in 2024 are related to land sold in prior years.

As noted above, we recognize revenue in our residential/planned community over time using cost-based input methods, and substantially all the land sales revenue we recognized in 2024 and 2023 was under this method of revenue recognition.

Land sales revenue in 2023 decreased compared to 2022 due to the decreased pace of development activity within the residential/planned community.

The pace of development activities is dictated by a number of factors such as city permit and design approval and labor and materials availability.

Land sales revenue in 2024 decreased compared to 2023 due to the decreased pace of

development activity for previously sold parcels within the residential/planned community, primarily due to delays in receiving city permits and delays in environmental related approvals.

The pace of development activities is dictated by a number of factors such as city permit and design approval, approval from the Nevada Department of Environmental Protection and labor and materials availability.

Cost of sales related to land sales revenues was $45.1 million in 2024 compared to $60.8 million in 2023.

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We recognized $92.6 million in revenues on land sales during 2023 compared to $120.9 million in 2022.

As noted above, we recognize revenue in our residential/planned community over time using cost-based input methods, and substantially all the land sales revenue we recognized in 2023 and 2022 was under this method of revenue recognition.

Land sales revenue in 2023 decreased compared to 2022 due to the decreased pace of development activity dictated by the factors noted above within the residential/planned community.

Cost of sales related to land sales revenues was $60.8 million in 2023 compared to $69.7 million in 2022.

Land sales revenue decreased substantially in 2022 primarily due to two land parcels with no post-closing obligations that closed during the fourth quarter of 2021 for $70 million, which were immediately recognized as revenue.

Excluding these two parcels that closed in 2021, land sales declined 12% in 2022 primarily due to a decrease in acreage sold and the relative timing of development spending.

Substantially all the land sales revenue we recognized in 2022 was under the cost-based inputs method of revenue recognition for acreage sold in prior years and to a lesser extent current year land sales.

In 2021 land sales were heavily weighted towards the end of the year.

Land sales revenue in the fourth quarter of 2022 was $20.0 million compared to $150.8 million in the fourth quarter of 2021, including approximately $70 million noted above.

Included in operating income was income related to the tax increment reimbursement note receivables of $25.2 million and $15.2 million in 2023 and 2022, respectively.

See Note 7 to our Consolidated Financial Statements.

The remainder of net sales and cost of sales related to this segment primarily relates to water delivery fees and expenses.

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BWC’s water delivery system operated on Lake Mead in Nevada.

Due to the Western drought, water levels in Lake Mead have been declining for much of the last twenty years.

As a result of water release curtailments upstream of Lake Mead which began late in the second quarter of 2022, Lake Mead water levels dropped precipitously to historically low levels.

On June 30, 2022 BWC was no longer able to pump water without the risk of damaging the system and consequently ceased operations at its water intake facility to best preserve the system.

Late in the second quarter of 2022, Lake Mead water levels dropped precipitously to historically low levels.

On June 30, 2022 BWC was no longer able to pump water and consequently ceased operations at its water intake facility.

We considered BWC’s inability to pump water from Lake Mead to be a triggering event under ASC 360 Property, Plant, and Equipment , which caused us to evaluate the water system fixed assets for impairment.

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The $16.4 million impairment charge primarily recognized in the second quarter of 2022 represented the write down of the book value to the estimated salvage value of the assets.

Without the ability to pump and deliver water to its customers, BWC’s operating expenses exceeded its revenues, and on September 10, 2022 BWC and its subsidiaries voluntarily filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District

Without the ability to pump and deliver water to its customers, BWC’s operating expenses exceeded its revenues, and on September 10, 2022 BWC and its wholly-owned subsidiary (collectively, “Debtors”) voluntarily filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Nevada.

Because BWC filed for bankruptcy protection, we and BMI could no longer affirmatively assert we control BWC and, as such, in accordance with ASC 810, Consolidation, we deconsolidated BWC as of the date of the bankruptcy filing and recognized a loss of $2.0 million in the third quarter of 2022 on the deconsolidation.

In addition, BMI had an outstanding intercompany accounts receivable balance with BWC on the date of the bankruptcy filing, and we recognized $1.3 million of bad debt expense to fully reserve this balance during the third quarter of 2022.

All of these charges are included in the determination of the Real Estate Management and Development’s operating income in 2022.

Operating income comparisons between 2023, 2022 and 2021 are also affected by BWC’s water delivery sales and related cost of sales.

On November 8, 2023, the Bankruptcy Court for the District of Nevada (“Court”) entered an order approving Debtors’ plan of reorganization, which provided for the sale of substantially all Debtors’ assets and the transfer of substantially all of their operating and other agreements to one of their industrial customers.

The transaction closed on November 17, 2023 at which time Debtors discontinued their water delivery operations.

The proceeds of the sale were used to repay creditors of the Debtors.

On July 10, 2024, the Court approved the closure of the Debtors’ bankruptcy case.

BWC and its wholly-owned subsidiary BWC SPE I, LLC were subsequently dissolved with the remaining cash at BWC of $2.6 million distributed to BMI.

See Note 3 to our Consolidated Financial Statements.

As noted above, BWC filed for Chapter 11 bankruptcy protection on September 10, 2022.

We recognized an aggregate $19.7 million of charges in 2022, discussed above, related to BWC which will not recur.

On November 8, 2023, the Bankruptcy Court for the District of Nevada entered an order approving BWC’s plan of reorganization, which provided for the sale of substantially all BWC’s assets and the transfer of substantially all of its operating and other agreements to one of its industrial customers.

The transaction closed on November 17, 2023, at which time BWC discontinued its water delivery operations.

As part of the transaction, BWC is providing transition services to the purchaser for a limited time.

The proceeds of the sale will be used to repay creditors of BWC and its wholly-owned subsidiary.

BWC’s assets may not be sufficient to fully repay its creditors, and the timing of the resolution of the bankruptcy proceedings remains uncertain.

On December 1, 2023, BMI sold its subsidiary BPC, which provides electricity to four customers located in the industrial park, and its sewer system assets to another of its industrial customers.

On December 1, 2023, BMI sold its subsidiary BPC, which provided electricity to four customers located in the industrial park, and its sewer system assets to another of its industrial customers.

The sale was for minimal cash consideration and the assumption of liabilities, and upon the closing of the sale we recognized a loss of $2.6 million.

BMI is providing transition services to the purchaser of the businesses for a limited time.

With the sale of BPC, we no longer provide services to the industrial park which allows us to focus on land sales and development activity for the residential/planned community.

BMI provided transition services to the purchaser of the businesses for a limited time.

With the sale of BPC and the completion of the bankruptcy, we no longer provide services to the industrial park which allows us to focus on land sales and development activity for the residential/planned community.

Outlook – LandWell is focused on developing the land it manages, primarily to residential builders, for the residential/planned community in Henderson.

At December 31, 2024, substantially all of the land in the residential/planned community had been sold with approximately 20 saleable acres remaining.

With the strong new home market in the Las Vegas area, we expect to sell our remaining residential zoned land within the next year.

Demand for the 15 saleable acres zoned for light industrial and commercial use is more modest and we expect it will take more time to sell these remaining acres.

At December 31, 2023 we have deferred revenue of $88.0 million related to post-closing obligations on land sales closed in 2023 and prior years.

A contract for the remaining 20 acres is currently in escrow with a home builder, and the sale is scheduled to close by mid-2025.

There are also 15 saleable acres zoned for light industrial and commercial use outside of the 2,100 acre residential/planned community available for sale.

Demand for retail and commercial use in the Las Vegas area is not as strong as residential demand, and we expect it will take more time to sell these remaining acres.

At December 31, 2024 we have deferred revenue of $32.1 million related to post-closing obligations on land sales closed prior to 2024.

Because we recognize revenue over time using cost-based inputs, we will continue to recognize revenue on land previously sold over the development period, although we have already received substantially all the cash proceeds related to these sales.

We currently expect to take three to four years to complete our post-closing obligations.

We currently expect to take two to three years to complete our post-closing obligations.

Any delays or curtailments in infrastructure development related to post-closing obligation activities will delay the amount of revenue we recognize on previously closed land sales.

Under LandWell’s development agreement with the City of Henderson, the issuance of a specified number of housing permits requires LandWell to complete certain large infrastructure projects.

LandWell began construction on several of these community-wide large projects in late 2021 with the construction expected to continue for the next three to four years.

We expect these land development costs in 2024 to be comparable to 2023 due to the timing of certain infrastructure projects.

LandWell began construction on several of these community-wide large projects in late 2021 with the construction expected to continue for the next two to three years.

We expect these land development costs in 2025 to be comparable to 2024 due to the timing of planned infrastructure projects and the availability of certain construction materials.

Because these large projects relate to the entirety of the residential/planned community, the costs associated with these large projects are not part of the cost-based inputs used to recognize revenue, and therefore, this spending will not correlate to revenue recognition.

However, this spending is expected to be eligible for tax increment reimbursement and delays or curtailments in eligible infrastructure development activities will also delay LandWell’s ability to submit completed costs to the City of Henderson for approval of additional tax increment reimbursement note receivables.

However, this spending is expected to be eligible for tax increment reimbursement under our Owner Participation Agreement (“OPA”) with the City of Henderson, and delays or curtailments in eligible infrastructure development activities will also delay LandWell’s ability to submit completed costs to the City for approval of additional OPA note receivables.

The maximum reimbursement under the OPA is $209 million.

We have collected $32.7 million to date and expect to reach the maximum in the next 7 to 10 years.

General Corporate Items, Interest Expense, Income Taxes, Noncontrolling Interest and Related Party Transactions

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Insurance recoveries include amounts NL received from these insurance carriers.

NL received $.5 million in insurance recoveries during 2023.

NL received $1.4 million and $.5 million in insurance recoveries during 2024 and 2023, respectively.

Insurance recoveries in 2022 were nominal.

See Note 13 to our Consolidated Financial Statements.

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See Note 18 to our Consolidated Financial Statements.

Gain on Land Sales – In 2021, we sold two parcels of land (including one parcel in the second quarter and one parcel in the third quarter) not used in our operating activities for net proceeds of approximately $23.4 million and recognized an aggregate pre-tax gain of $16.0 million.

In the second quarter of 2023 we sold excess property not used in our operations for net proceeds of approximately $1.8 million and recognized a pre-tax gain of $1.5 million.

Gain on Remeasurement of Investment in TiO 2 Manufacturing Joint Venture – We recognized a gain on the remeasurement of Kronos’ investment in LPC of $64.5 million in the third quarter of 2024 as a result of the acquisition.

See Note 3 to our Consolidated Financial Statements.

Other Components of Net Periodic Pension and OPEB Expense – We recognized other components of net periodic pension and OPEB expense of $2.6 million in 2024, $11.8 million in 2023 and $13.9 million in 2022.

The decrease in 2023 compared to 2022 is primarily due to the net effects of higher discount rates impacting interest cost, previously unrecognized actuarial losses and $6.2 million in settlement costs related to the termination and buy-out of our pension plan in the United Kingdom during the second quarter of 2023.

The decrease in expense in 2022 compared to 2021 is primarily due to pension costs as a result of actuarial amortizations and expected returns on plan assets.

The decrease in 2024 compared to 2023 is primarily due to a higher expected return on plan assets, lower discount rates impacting interest costs and a non-recurring $6.2 million in settlement costs related to the termination and buy-out of our U.K.

pension plan in the second quarter of 2023.

pension plan during the second quarter of 2023.

See Note 11 to our Consolidated Financial Statements.

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As discussed in Note 16 to our Consolidated Financial Statements, we account for our proportional interest in these shares of our common stock as treasury stock, at Kronos’ and NL’s historical cost basis.

The remaining portion of these shares of our common stock, which are attributable to the noncontrolling interest of Kronos and NL, are reflected in our Consolidated Balance Sheets at fair value.

remaining portion of these shares of our common stock, which are attributable to the noncontrolling interest of Kronos and NL, are reflected in our Consolidated Balance Sheets at fair value.

Any unrealized gains or losses on the shares of our common stock attributable to the noncontrolling interest of Kronos and NL are recognized in the determination of each of Kronos and NL’s respective net income or loss.

Under the principles of consolidation, we eliminate any gains or losses associated with our common stock to the extent of our proportional ownership interest in each subsidiary.

The $1.7 million loss in 2023, the $1.6 million loss in 2022 and the $3.3 million gain in 2021 recognized in our Consolidated Financial Statements represent the unrealized gain (loss) in respect of these shares during such periods attributable to the noncontrolling interest of Kronos and NL.

Interest Income and Other – Interest income and other increased $10.9 million in 2023 compared to 2022 primarily due to higher average interest rates and increased investment balances.

The $1.9 million gain in 2024, the $1.7 million loss in 2023 and the $1.6 million loss in 2022 recognized in our Consolidated Financial Statements represent the unrealized gain (loss) in respect of these shares during such periods attributable to the noncontrolling interest of Kronos and NL.

Interest Income and Other – Interest income and other of $22.0 million in 2024 was comparable to 2023.

Interest income and other increased $10.9 million in 2023 compared to 2022 primarily due to higher average interest rates and increased investment balances.

See Note 13 to our Consolidated Financial Statements.

Other General Corporate Items – Corporate expenses were 5% lower at $34.7 million in 2023 compared to $36.5 million in 2022 due primarily to lower administrative expenses.

Other General Corporate Items – Corporate expenses of $4.3 million in 2024 decreased compared to corporate expenses of $35.2 million in 2023 primarily 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 expense are:

● litigation and related costs at NL of $3.0 million in 2024 and $4.4 million in 2023;

● environmental remediation and related costs of $2.5 million in 2023 compared to $1.7 million in 2022.

Corporate expenses were 5% higher at $36.5 million in 2022 compared to $34.6 million in 2021 due primarily to higher litigation and related costs in 2022.

● income from environmental remediation of $19.2 million in 2024 compared to costs of $2.5 million in 2023.

Corporate expenses were 4% lower at $35.2 million in 2023 compared to corporate expenses of $36.6 million in 2022 due primarily to lower administrative expenses.

Included in corporate expense are:

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● environmental remediation and related costs of $2.5 million in 2023 compared to $1.7 million in 2022.

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

Overall, we currently expect that our net general corporate expenses in 2025 will be higher than 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.

The level of our litigation and related expenses 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.

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See Note 18 to our Consolidated Financial Statements.

Interest Expense – Interest expense of $28.3 million in 2023 was comparable to $27.9 million in 2022 .

Interest expense decreased to $27.9 million in 2022 from $32.5 million in 2021 primarily due to lower average debt levels and the effects of changes in currency exchange rates somewhat offset by higher interest rates on variable-rate indebtedness in 2022.

We expect interest expense will be higher in 2024 as compared to 2023 primarily due to the higher interest rate on the new KII 9.50% Senior Secured Notes due 2029.

Interest Expense – Interest expense increased $21.6 million in 2024 compared to 2023 primarily due to higher interest rates on Kronos’ new debt issued in February and July of 2024 and higher average debt balances as a result of the LPC acquisition.

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

Interest expense of $28.3 million in 2023 was comparable to $27.9 million in 2022 .

We expect interest expense will be higher in 2025 as compared to 2024 primarily due to the higher debt balances as a result of the third quarter acquisition of LPC and higher interest rates on Kronos’ new debt issued in February and July of 2024.

See Note 9 to our Consolidated Financial Statements.

Income Tax Expense (Benefit) – We recognized an income tax benefit of $22.4 million in 2023 compared to income tax expense of $33.8 million in 2022.

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

We recognized income tax expense of $33.8 million in 2022 compared to $60.1 million in 2021.

Income Tax Expense (Benefit) – We recognized income tax expense of $82.9 million in 2024 compared to an income tax benefit of $24.6 million in 2023.

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

We recognized an income tax benefit of $24.6 million in 2023 compared to income tax expense of $36.8 million in 2022.

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

Our income tax expense in 2024 includes a non-cash deferred income tax expense of $8.2 million in the fourth quarter, related to the recognition of a deferred income tax asset valuation allowance for our Chemicals Segment’s Belgian net deferred tax assets.

We continue to believe we will ultimately realize the full benefit of our Belgian NOL carryforwards, in part because of their indefinite carryforward period.

However, our 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 we are able to reverse the valuation allowance in full, to the extent we generate additional losses in Belgium in the intervening periods, our 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 us to compute a pretransition gain or loss for currency translation related to the operations, assets and liabilities of our Chemicals Segment’s non-U.S.

qualified business units.

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

Our earnings are subject to income tax in various U.S.

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

However, in 2022 our consolidated effective income tax rate is lower than the U.S.

However, in 2022 our consolidated effective income tax rate was lower than the U.S.

federal statutory rate of 21% due to the effect of a tax benefit relating to the partial release of our valuation allowance associated with the 2022 utilization of a portion of our business interest expense carryforwards.

Our consolidated effective income tax rate in 2024 is expected to be higher than the U.S.

federal statutory rate of 21% because the income tax rates applicable to the earnings (losses) of our non-U.S.

operations will be higher than the income tax rates applicable to our U.S.

operations due to the expected mix of earnings.

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.

Noncontrolling Interest in Net Income of Subsidiaries – Noncontrolling interest in operations of subsidiaries decreased from 2022 to 2023 primarily due to lower operating income at Kronos.

Noncontrolling interest in operations of subsidiaries decreased from 2021 to 2022 primarily due to lower operating income at BMI and LandWell.

Noncontrolling Interest in Net Income of Subsidiaries – Noncontrolling interest in operations of subsidiaries increased in 2024 compared to 2023 primarily due to increased operating income at Kronos.

Noncontrolling interest in operations of subsidiaries decreased from 2022 to 2023 primarily due to lower operating income at Kronos.

See Note 15 to our Consolidated Financial Statements.

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

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Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period.

the date of the financial statements and the reported amount of revenues and expenses during the reported period.

On an ongoing basis we evaluate our estimates, including those related to the recoverability of long-lived assets, pension and other postretirement benefit obligations and the underlying actuarial assumptions related thereto, the realization of deferred income tax assets and accruals for litigation, income tax and other contingencies.

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Actual results may differ significantly from previously-estimated amounts under different assumptions or conditions.

We believe the most critical accounting policies and estimates involving significant judgment primarily relate to goodwill, long-lived assets, revenue recognized over time using cost-based inputs, defined benefit pension plans, income taxes and litigation and environmental liabilities.

We have discussed the development, selection and disclosure of our critical accounting estimates with the audit committee of our board of directors.

Goodwill – Our net goodwill totaled $379.7 million at December 31, 2023 primarily resulting from our various step acquisitions of Kronos and NL (which occurred before the implementation of the current accounting standards related to noncontrolling interest) and to a lesser extent CompX’s purchase of various businesses.

Goodwill – Our net goodwill totaled $382.3 million at December 31, 2024 primarily resulting from our various step acquisitions of Kronos and NL (which occurred before the implementation of the current accounting standards related to noncontrolling interest) and to a lesser extent CompX’s purchase of various businesses and Kronos’ purchase of the remaining 50% interest in LPC in 2024.

In accordance with the applicable accounting standards for goodwill, we do not amortize goodwill.

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We do not assess our property and equipment for impairment unless certain impairment indicators are present.

During the fourth quarter of 2023, our Chemicals Segment recorded a fixed asset impairment of $3.8 million related to the write-off of certain costs resulting from a capital project termination.

Excluding this project, we did not evaluate any other long-lived assets for impairment during 2023 because no such impairment indicators were present.

We did not evaluate any long-lived assets for impairment during 2024 because no such impairment indicators were present.

Revenue recognized over time using cost-based inputs – Certain real estate land sales by our Real Estate Management and Development Segment (generally land sales associated with our residential/planned community) require us to complete property development and improvements after title passes to the buyer and we have received all or a substantial portion of the selling price.

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We recognize the funded status of our defined benefit pension plans as either an asset (for overfunded plans) or a liability (for underfunded plans) in our Consolidated Balance Sheets.

rating agencies in the applicable country where the defined benefit pension benefits are being paid.

The discount rates we use for determining defined benefit pension expense and the related pension obligations are based on current interest rates earned on long-term bonds that receive one of the two highest ratings given by recognized rating agencies in the applicable country where the defined benefit pension benefits are being paid.

In addition, we receive third-party advice about appropriate discount rates and these advisors may in some cases use their own market indices.

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We use several different discount rate assumptions in determining our consolidated defined benefit pension plan obligation and expense.

This is because we maintain defined benefit pension plans in several different countries in Europe and North America and the interest rate environment differs from country to country.

This is because we maintain defined

benefit pension plans in several different countries in Europe and North America and the interest rate environment differs from country to country.

We used the following discount rates for our defined benefit pension plans:

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plans and $404.9 million related to non-U.S.

Substantially all of plan assets attributable to non-U.S.

All of plan assets attributable to non-U.S.

plans related to plans maintained by Kronos, and approximately 35% and 65% of the plan assets attributable to U.S.

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This is because the plan assets in different countries are invested in a different mix of investments and the long-term rates of return for different investments differ from country to country.

In determining the expected long-term rate of return on plan asset assumptions, we consider the long-term asset mix (e.g.

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.

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Deferred income tax assets and liabilities for each tax-paying jurisdiction in which we operate are netted and presented as either a noncurrent deferred income tax asset or liability, as applicable.

We record a valuation allowance to reduce our deferred income tax assets to the amount that is believed to be realized under the more-likely-than-not

recognition criteria.

We record a valuation allowance to reduce our deferred income tax assets to the amount that is believed to be realized under the more-likely-than-not recognition criteria.

While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance, it is possible that we may change our estimate of the amount of the deferred income tax assets that would more-likely-than-not be realized in the future, resulting in an adjustment to the deferred income tax asset valuation allowance that would either increase or decrease, as applicable, reported net income in the period such change in estimate was made.

We periodically review our deferred tax assets (DTAs) to determine if a valuation allowance is required.

We periodically review our deferred tax assets (“DTA”) to determine if a valuation allowance is required.

For example, at December 31, 2024, our Chemicals Segment has significant German corporate and trade net operating loss (“NOL”) carryforwards of $447.3 million (DTA of $70.8 million) and $40.1 million (DTA of $4.4 million), respectively;

and Belgian corporate NOL carryforwards of $72.0 million (DTA of $18.0 million).

At December 31, 2023, we have concluded that no deferred income tax asset valuation allowance is required to be recognized with respect to such carryforwards, principally because (i) such carryforwards have an indefinite carryforward period, (ii) we have utilized a portion of such carryforwards during the most recent three-year period and (iii) we currently expect to utilize the remainder of such carryforwards over the long term.

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

Prior to December 31, 2024, and using all available evidence, we had concluded that no deferred income tax asset valuation allowance was required to be recognized with respect to such carryforwards, principally because (i) such carryforwards have lengthy carryforward periods (the German and Belgian carryforwards may be carried forward indefinitely), (ii) we have utilized a portion of

such carryforwards during the most recent three-year period and (iii) we currently expect to utilize the remainder of such carryforwards over the long term.

With respect to our Belgium carryforwards, at December 31, 2024, given our operating results during the fourth quarter of 2024 and our current expectations for 2025, we do not have sufficient positive evidence to overcome the significant negative evidence of having cumulative losses in the most recent twelve consecutive quarters in Belgium (even considering that the carryforward period of our Belgian NOL carryforwards is indefinite, one piece of positive evidence).

Accordingly, at December 31, 2024, we concluded that we were required to recognize a non-cash deferred income tax asset valuation allowance of $8.2 million under the more-likely-than-not recognition criteria with respect to our Belgian net deferred tax assets.

At December 31, 2024, we continue to conclude no valuation allowance is required to be recognized for our German DTAs although prior to the complete utilization of such carryforwards, if we were to generate additional losses in our German operations for an extended period of time, or if applicable laws were to change such that the carryforward periods were more limited, it is possible that we might conclude the benefit of such carryforwards would no longer meet the more-likely-than-not recognition criteria, at which point we would be required to recognize a valuation allowance against some or all of the then-remaining tax benefit associated with the carryforwards.

The Organization for Economic Cooperation and Development (the “OECD”), the European Union and other countries have committed to enacting the OECD’s Pillar Two initiative that would provide a global minimum level of taxation for multinational companies to be applied on a country-by-country basis.

Currently, many countries are drafting or have enacted legislation to implement the Pillar Two rules effective for years beginning on or after December 31, 2023.

We are continuing to follow the Pillar Two legislative developments in order to evaluate the potential future impact it could have on our results of operations.

Contingencies – We are involved in numerous legal and environmental actions in part due to NL’s former involvement in the manufacture of lead-based products.

We record accruals for these environmental, legal and other contingencies and commitments when such contingencies become probable, and amounts can be reasonably estimated.

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

Currently, many countries have enacted legislation to implement the Pillar Two rules effective for years beginning on or after December 31, 2023.

Based on legislation currently enacted, we do not anticipate any material impact to our Consolidated Financial Statements;

however, until all the jurisdictions we operate in enact legislation, the full impact of Pillar Two to us is unknown.

Acquisition of joint venture – During the third quarter of 2024, Kronos acquired the 50% joint venture interest in LPC previously held by Venator.

Prior to the acquisition we accounted for Kronos’s interest in LPC under the equity method.

The application of the purchase method of accounting for business combinations requires Kronos to use significant estimates and assumptions in the determination of the estimated fair value of assets acquired and liabilities assumed.

Kronos’ estimates of the fair values of assets acquired and liabilities assumed are based upon assumptions we believe are reasonable, and when appropriate, include assistance from independent third-party valuation advisors.

See Note 3 to our Consolidated Financial Statements.

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

However, new information may become available to us, 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).

At December 31, 2024 we have recorded total accrued environmental liabilities of $74.6 million.

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Trends in cash flows as a result of our operating income (excluding the impact of significant asset dispositions and relative changes in assets and liabilities) are generally similar to trends in our earnings.

In addition to the impact of the operating, investing and financing cash flows discussed below, changes in the amount of cash, cash equivalents and restricted cash we report from year to year can be impacted by changes in currency exchange rates, since a portion of our

cash, cash equivalents and restricted cash is held by our Chemicals Segment’s non-U.S.

subsidiaries.

For example, during 2023, relative changes in currency exchange rates resulted in a $1.0 million increase in the reported amount of our cash, cash equivalents and restricted cash compared to a $5.1 million decrease in 2022 and a $10.6 million decrease in 2021.

For example, during 2024, relative changes in currency exchange rates resulted in a $.1 million decrease in the reported amount of our cash, cash equivalents and restricted cash compared to a $1.0 million increase in 2023 and a $5.1 million decrease in 2022.

Cash flows from operating activities increased to $44.0 million in 2024 from $3.9 million in 2023.

This $40.1 million increase in cash provided by operations in 2024 includes:

● consolidated operating income of $210.7 million in 2024, an increase of $176.5 million compared to operating income of $34.2 million in 2023;

● higher amount of net cash used of $92.5 million associated with relative changes in our receivables, inventories, land held for development, payables and accrued liabilities in 2024;

● higher net cash paid for income taxes in 2024 of $14.4 million primarily due to higher earnings and the relative timing of payments;

● higher cash paid for interest in 2024 of $18.5 million;

● cash premium of $6.0 million on the issuance of Kronos’ senior notes;

● higher net contributions of $5.8 million to our TiO 2 manufacturing joint venture in 2024 prior to the LPC acquisition.

Cash flows from operating activities decreased to $3.9 million in 2023 from $34.9 million in 2022.

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● consolidated operating income of $34.2 million in 2023, a decrease of $205.2 million compared to operating income of $239.4 million in 2022;

● lower amount of net cash used of $84.6 million associated with relative changes in our receivables, inventories, land held for development, payables and accruals in 2023;

● lower amount of net cash used of $84.6 million associated with relative changes in our receivables, inventories, land held for development, payables and accrued liabilities in 2023;

● lower net cash paid for income taxes in 2023 of $16.3 million primarily due to decreased earnings;

● lower net contributions to our TiO 2 manufacturing joint venture in 2023 of $13.6 million.

Cash flows from operating activities decreased to $34.9 million in 2022 from $459.7 million in 2021.

This $424.8 million decrease in cash provided by operations in 2022 includes:

● consolidated operating income of $239.4 million in 2022, a decrease of $79.2 million compared to operating income of $318.6 million in 2021;

● higher amount of net cash used of $273.1 million associated with the relative changes in our receivables, inventories, land held for development, payables and accruals in 2022;

● lower net cash paid for income taxes in 2022 of $22.2 million primarily due to decreased earnings;

● higher net distributions from our TiO 2 manufacturing joint venture in 2022 of $14.3 million.

As noted in our discussion of our Real Estate Management and Development segment above, we have sold the majority of the land in our residential/planned community, and in accordance with our development agreement with the City of Henderson and our contractual obligations with builders, we expect to complete our land development obligations over the next three to four years.

Because we have largely received cash proceeds from land sales, we expect LandWell to generate negative operating cash flows as it completes its required land development work.

Changes in working capital were affected by accounts receivable and inventory changes, as shown below:

● Kronos’ average days sales outstanding (DSO) increased from December 31, 2022 to December 31, 2023, primarily due to the relative changes in the timing of collections.

● Kronos’ average days sales in inventory (DSI) decreased from December 31, 2022 to December 31, 2023 primarily due to lower inventory volumes attributable to sales volumes exceeding production volumes in 2023 compared to 2022 where production volumes exceeded sales volumes.

● Kronos’ average days sales outstanding (“DSO”) decreased from December 31, 2023 to December 31, 2024, primarily due to the relative changes in the timing of collections.

● Kronos’ average days sales in inventory (“DSI”) increased from December 31, 2023 to December 31, 2024 primarily due to production volumes exceeding sales volumes in 2024 compared to 2023 when Kronos’ sales volumes exceeded its production volumes.

● CompX’s average DSO 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.

● CompX’s average DSI decreased from December 31, 2022 to December 31, 2023, primarily due to a decrease at its 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 its 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.

● CompX’s average DSI at December 31, 2024 was comparable to December 31, 2023 as the increase at the security products reporting unit due to the fulfillment and shipping of a significant order during the fourth quarter of 2023 was offset by the decline at the marine components reporting unit due to elevated inventory balances at December 31, 2023.

For comparative purposes, we have also provided comparable prior year numbers below.

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We disclose capital expenditures by our business segments in Note 2 to our Consolidated Financial Statements.

● Kronos paid $156.8 million, net of cash acquired, for the remaining TiO 2 manufacturing joint venture interest in LPC;

see Note 3 to our Consolidated Financial Statements;

● we had net proceeds of $54.3 million related to marketable securities;

● we had net proceeds from the sale of land not used in our operations of $5.6 million.

● we had net proceeds of $19.3 million of marketable securities;

● we had net proceeds from the sale of land not used in our operations of $1.8 million.

● $1.7 million of BPC’s cash and cash equivalents was removed as part of its sale in the fourth quarter (see Note 3 to our Consolidated Financial Statements).

● we had net purchases of $70.7 million of marketable securities;

● $8.6 million of BWC’s cash, cash equivalents and restricted cash was removed as part of its deconsolidation in the third quarter (see Note 3 to our Consolidated Financial Statements).

During 2021 we:

● had net proceeds from the sale of land not used in our operations of $23.4 million (including $8.4 million in the second quarter and $15.0 million in the third quarter);

● had net proceeds of $1.2 million of marketable securities.

Financing Activities –

● we repaid $48.8 million on Valhi’s credit facility with Contran;

● Kronos exchanged €325 million of its Kronos International, Inc.

(“KII”) 3.75% Senior Secured Notes due September 2025 (the “Old Notes”) for KII’s newly issued €276.174 million 9.50% Senior Secured Notes due March 2029 (the “New Notes”) plus additional cash consideration of $52.6 million to certain eligible holders of the Old Notes and borrowed $53.7 million from Contran.

In the third quarter 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”).

● we repaid $28.0 million on Valhi’s credit facility with Contran;

● Kronos acquired 313,814 shares of its common stock for an aggregate purchase price of $2.8 million.

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● CompX acquired 78,900 shares of its Class A common stock for an aggregate purchase price of $ 1.7 million.

● we repaid $97.8 million on Valhi’s credit facility with Contran and repaid $1.5 million under Tremont’s deferred payment obligation;

● CompX acquired 75,000 shares of its Class A common stock in market transactions for an aggregate purchase price of $1.3 million;

● Kronos acquired 14,409 shares of its common stock in market transactions for an aggregate purchase price of $.2 million.

We paid aggregate cash dividends on our common stock of $9.0 million in each of 2021 and 2022 and $9.1 million in 2023.

We paid aggregate cash dividends on our common stock of $9.0 million in 2022 and $9.1 million in each of 2023 and 2024.

Distributions to noncontrolling interest in 2022, 2023 and 2024 are primarily comprised of:

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● Valhi’s $44.6 million outstanding on its $150 million amended credit facility with Contran which is due no earlier than December 31, 2026;

● €400 million aggregate outstanding on Kronos’ wholly-owned subsidiary Kronos International, Inc.

(KII) 3.75% Senior Secured Notes due in September 2025 (the “Old Notes”), which had a $440.9 million carrying amount, net of unamortized debt issuance costs;

● $12.2 million on LandWell’s bank loan due April 2036.

On February 12, 2024, for certain eligible holders of the Old Notes, KII executed an exchange of €325 million principal amount of the Old Notes for newly issued €276.174 million aggregate outstanding KII 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 Notes and Kronos’ $225 million global revolving credit facility (Global Revolver).

In accordance with Kronos’ related party transaction policy, the audit committee of Kronos’ board of directors, comprised of the independent directors, approved the terms and conditions of the new term loan from Contran.

Holders of the Old Notes received for each €1,000 principal amount of Old Notes exchanged, €850 in principal amount of New Notes plus a cash payment in an amount equal to €150.

Following the exchange, Old Notes totaling €75 million principal amount that were not exchanged continue to remain outstanding.

In connection with the exchange, the indenture governing the Old Notes was amended to conform to the restrictive covenants in the indenture governing the New Notes and to make other conforming changes.

KII did not receive any cash proceeds from the issuance and delivery of the New Notes in connection with the exchange.

Kronos expects to recognize a non-cash pre-tax interest charge of approximately $1.6 million in the first quarter of 2024 related to the write-off the deferred financing costs associated with the Old Notes.

We expect interest expense in 2024 to increase by approximately $16 million as a result of the refinancing.

Certain of our credit facilities require the respective borrowers to maintain a number of covenants and restrictions which, among other things, restrict our ability to incur additional debt, incur liens, pay dividends or merge or consolidate with, or sell or transfer substantially all of our assets to, another entity, and contain other provisions and restrictive covenants customary in lending transactions of this type.

Certain of our 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.

For example, certain credit agreements allow the lender to accelerate the maturity of the indebtedness upon a change of control (as defined in the agreement) of the borrower.

In addition, certain credit agreements could result in the acceleration of all or a portion of the indebtedness following a sale of assets outside the ordinary course of business.

Kronos had no outstanding borrowings at December 31, 2023 on its Global Revolver.

Availability under the Global Revolver is subject to a borrowing base calculation, as defined in the agreement, and at December 31, 2023 the full $225 million was available for borrowings.

Kronos’ Senior Secured Notes, its Global Revolver and the Contran term loan contain a number of covenants and restrictions which, among other things, restrict its ability to incur or guarantee additional debt, incur liens, pay dividends or make other restricted payments, 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.

● €351.174 million aggregate outstanding on KII’s 9.5% Senior Secured Notes due 2029 plus €5.1 million of unamortized premium ($365.4 million carrying amount, net of unamortized debt issuance costs);

● €75 million aggregate outstanding on KII’s 3.75% Senior Secured Notes due 2025 ($78.3 million carrying amount);

● $53.7 million outstanding on Kronos’ subordinated, unsecured term loan from Contran due September 2029 (the “Contran Term Loan”);

● $10.0 million outstanding on Kronos’ Global Revolver;

● $11.4 million outstanding on LandWell’s bank loan due April 2036.

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.

On July 30, 2024, Kronos’ wholly-owned subsidiary, KII, issued an additional €75 million principal amount of 9.50% Senior Secured Notes due 2029 (the “Additional New 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 the 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.

See Note 9 to our Consolidated Financial Statements.

The Contran Term Loan is subordinated in right of payment to Kronos’ Senior Secured Notes and its 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 or guarantee additional debt, incur liens, pay dividends or make other restricted payments, or merge or consolidate with, or sell or transfer substantially all of our assets to, another entity, and contain other provisions and restrictive covenants customary in lending transactions of these types.

Our 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.

For example, the credit agreements allow the lender to accelerate the maturity of the indebtedness upon a change of control (as defined in the agreement) of the borrower.

In addition, the credit agreements could result in the acceleration of all or a portion of the indebtedness following a sale of assets outside the ordinary course of business.

The terms of all of our debt instruments are discussed in Note 9 to our Consolidated Financial Statements.

We are in compliance with all of our debt covenants at December 31, 2024.

We believe that we will be able to continue to comply with the financial covenants contained in our credit facilities through their maturity;

We believe we will be able to continue to comply with the financial covenants contained in our credit facilities through their maturity;

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

Our assets consist primarily of investments in operating subsidiaries, and our ability to service our obligations, including the Kronos’ Senior Secured Notes and the Contran Term Loan, depends in part upon the distribution of earnings

of our subsidiaries, whether in the form of dividends, advances or payments on account of intercompany obligations or otherwise.

Kronos’ Senior Secured Notes are collateralized by, among other things, a first priority lien on (i) 100% of the common stock or other ownership interests of each existing and future direct domestic subsidiary of KII and the guarantors, and (ii) 65% of the voting common stock or other ownership interests and 100% of the non-voting common stock or other ownership interests of each non-U.S.

subsidiary that is directly owned by KII or any guarantor.

Kronos’ Global Revolver is collateralized by, among other things, a first priority lien on the borrower’s trade receivables and inventories.

Future Cash Requirements

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From time to time we and our subsidiaries may enter into intercompany loans as a cash management tool.

Such notes are structured as revolving demand notes and pay and receive interest on terms we believe

are more favorable than current debt and investment market rates.

Such notes are structured as revolving demand notes and pay and receive interest on terms we believe are more favorable than current debt and investment market rates.

The companies that borrow under these notes have sufficient borrowing capacity to repay the notes at any time upon demand.

All of these notes and related interest expense and income are eliminated in our Consolidated Financial Statements.

We may also from time to time engage in preliminary discussions with existing or potential investors regarding the timing or terms of any such refinancing or other potential transactions.

We periodically evaluate acquisitions of interests in or combinations with companies (including our affiliates) that may or may not be engaged in businesses related to our current businesses.

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

We believe we will be able to comply with the financial covenants contained in our credit facilities through their maturities;

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

Based upon our expectations of our operating performance, and the anticipated demands on our cash resources, we expect to have sufficient liquidity to meet our short-term (defined as the twelve-month period ending December 31, 2025) and long-term obligations (defined as the five-year period ending December 31, 2029).

In this regard, see the discussion above in “Outstanding Debt Obligations.” If actual developments differ from our expectations, our liquidity could be adversely affected.

In this regard, see the discussion above in “Outstanding Debt Obligations.” With respect to the €75 million KII 3.75% Senior Secured Notes due 2025, we intend to satisfy this obligation through cash generated from operations or to the extent that is not sufficient, a combination of cash generated from operations and borrowings on the Global Revolver.

If actual developments differ from our expectations, our liquidity could be adversely affected.

At December 31, 2024, we had credit available under existing facilities of approximately $373 million, which was comprised of:

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Because our operations are conducted primarily through subsidiaries and affiliates, our long-term ability to meet parent company level corporate obligations is largely dependent on the receipt of dividends or other distributions from our subsidiaries and affiliates.

Kronos paid a regular dividend of $.19 per share in each quarter of 2023 for which we received $44.1 million.

In February 2024 the Kronos board of directors approved a regular quarterly dividend of $.19 per share.

Kronos paid a regular dividend of $.19 per share in the first and second quarters of 2024 for which we received $22.0 million.

In July 2024, Kronos announced a decrease in its regular quarterly dividend from $.19 per share to $.05 per share beginning in the third quarter of 2024.

Kronos paid a regular dividend of $.05 per share in the third and fourth quarters of 2024 for which we received $5.8 million.

In February 2025 the Kronos board of directors approved a quarterly dividend of $.05 per share.

If Kronos were to pay its $.05 per share dividend in each quarter of 2025 based on the 58.0 million shares we held of Kronos common stock at December 31, 2024, during 2025 we would receive aggregate regular dividends from Kronos of $11.6 million.

NL paid a quarterly dividend of $.08 per share in 2024 for which we received $12.9 million.

In August 2024, NL’s board of directors declared a special dividend of $.43 per share on its common stock.

We received $17.4 million from this special dividend, which is not expected to be recurring.

In February 2025 the NL board of directors approved a quarterly dividend of $.09 per share.

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In this regard, we received aggregate dividends from BMI and LandWell of $16.6 million in 2022, $17.6 million in 2023 and $4.0 million in 2024.

We do not know if we will receive distributions from BMI and LandWell during 2024.

In addition, we received aggregate dividends from BMI and LandWell of $4.5 million in January 2025.

All of our ownership interest in CompX is held through our ownership in NL, as such we do not receive any dividends from CompX.

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We base our purchase decision on a variety of factors, including an analysis of the optimal use of our capital, taking into account the market value of the securities and the relative value of expected returns on alternative investments.

In connection with these activities, we may consider issuing additional equity securities

or increasing our indebtedness.

In connection with these activities, we may consider issuing additional equity securities or increasing our indebtedness.

We may also evaluate the restructuring of ownership interests of our businesses among our subsidiaries and related companies.

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The maximum principal amount which may be outstanding from time-to-time under the credit facility is limited to 50% of the amount of the most recent closing price of the Kronos stock.

The credit facility contains a number of covenants and restrictions which, among other things, restrict NL’s subsidiary’s ability to incur additional debt, incur liens, and merge or consolidate with, or sell or transfer substantially all of NL’s subsidiary’s assets to, another entity, and require NL’s subsidiary to maintain a minimum specified level of consolidated net worth.

The credit facility

contains a number of covenants and restrictions which, among other things, restrict NL’s subsidiary’s ability to incur additional debt, incur liens, and merge or consolidate with, or sell or transfer substantially all of NL’s subsidiary’s assets to, another entity, and require NL’s subsidiary to maintain a minimum specified level of consolidated net worth.

Upon an event of default (as defined in the credit facility), Valhi will be entitled to terminate its commitment to make further loans to NL’s subsidiary, declare the outstanding loans (with interest) immediately due and payable, and exercise its rights with respect to the collateral under the loan documents.

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We had an unsecured revolving demand promissory note with Kronos which, as amended, provided for borrowings from Kronos of up to $25 million.

We eliminate any such intercompany borrowings in our Consolidated Financial Statements.

The facility, as amended, was due on demand, but in any event no earlier than December 31, 2024.

There was no outstanding balance at December 31, 2023.

We had no borrowings with Kronos in 2022, 2023 and 2024.

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As described in the Notes 7, 9 and 18 to our Consolidated Financial Statements, we are a party to various debt, lease and other agreements which contractually and unconditionally commit us to pay certain amounts in the future.

Our obligations related to the long-term supply contracts for the purchase of TiO 2 feedstock are more fully described in Note 18 to our Consolidated Financial Statements and above in “Business – Chemicals Segment – Kronos Worldwide, Inc.

obligations related to the long-term supply contracts for the purchase of TiO 2 feedstock are more fully described in Note 18 to our Consolidated Financial Statements and above in “Business – Chemicals Segment – Kronos Worldwide, Inc.

– Raw Materials.” CompX has purchase obligations of $19.8 million ($19.3 million payable in 2025 and $.5 million payable in 2026/2027) which consist of open purchase orders and contractual obligations, primarily commitments to purchase raw materials and for capital projects in process at December 31, 2024.

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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