Core Viewpoint - NL Industries, Inc. shares have decreased approximately 18% since the last analysis in July 2025, when they were trading at around $6.70 [1] Company Analysis - The company is categorized as an industrial holding company [1] - The investment strategy focuses on acquiring undervalued profitable stocks with strong balance sheets and minimal debt [1] Investment Strategy - The approach includes writing calls against positions to generate additional income when opportunities arise [1] - Risk management is emphasized through position sizing and the use of trailing stop losses over time [1]

Financial Performance - NL Industries reported a net loss attributable to stockholders of $7.8 million, or $0.16 per share, in Q3 2025, compared to a net income of $36.0 million, or $0.74 per share, in Q3 2024[2]. - For the first nine months of 2025, NL Industries reported a net loss of $6.8 million, or $0.14 per share, compared to a net income of $50.7 million, or $1.04 per share, for the same period in 2024[2]. - Kronos' net sales decreased by $27.8 million, or 6%, to $456.9 million in Q3 2025 compared to Q3 2024, and by $22.9 million, or 2%, to $1.4 billion for the first nine months of 2025 compared to the same period in 2024[5]. - Kronos' loss from operations in Q3 2025 was $19.2 million, down from an income of $38.9 million in Q3 2024, and for the first nine months of 2025, income from operations was $26.6 million compared to $94.3 million in the same period of 2024[6]. - Net sales for the three months ended September 30, 2024, were $33.6 million, a decrease of 16% compared to $40.0 million in 2025[19]. - Total net sales decreased by 6% for the three months ended September 30, 2025, compared to the same period in 2024[23]. - Income from operations for the nine months ended September 30, 2024, was $4.2 million, compared to $7.8 million in 2025[21]. - Income (loss) before income taxes for the three months ended September 30, 2024, was $44.8 million, compared to a loss of $8.2 million in 2025[19]. Operational Challenges - Kronos experienced a decline in average TiO2 selling prices, which were 7% lower in Q3 2025 compared to Q3 2024 and 2% lower in the first nine months of 2025 compared to the same period in 2024[5]. - Unabsorbed fixed production costs for Kronos in Q3 2025 were approximately $27 million, contributing to the decrease in income from operations[8]. - Corporate expenses increased by $0.7 million in Q3 2025 compared to Q3 2024, primarily due to higher litigation fees[9]. - Kronos' average capacity utilization was 85% in the first nine months of 2025, down from 93% in the same period of 2024[8]. - The percentage change in net sales for TiO2 sales volume was down 3% for the three months ended September 30, 2025, compared to 2024[23]. Equity and Investments - NL recognized equity in losses of Kronos amounting to $11.3 million in Q3 2025, compared to equity in earnings of $21.9 million in Q3 2024[4]. - Interest and dividend income for the three months ended September 30, 2024, was $2.7 million, compared to $2.1 million in 2025[19]. - The weighted average shares used in the calculation of net income per share were 48.8 million for both the three and nine months ended September 30, 2024, and 2025[19]. Risks and Uncertainties - The company faces substantial risks and uncertainties that could impact future results, including supply and demand fluctuations, geopolitical tensions, and changes in raw material costs[12].

Financial Performance - Net loss attributable to NL stockholders was $7.8 million, or $0.16 per share, in Q3 2025, compared to net income of $36.0 million, or $0.74 per share, in Q3 2024, indicating a significant decline in earnings [88]. - For the first nine months of 2025, net loss attributable to NL stockholders was $6.8 million, or $0.14 per share, compared to net income of $50.7 million, or $1.04 per share, in the same period of 2024 [89]. - Interest and dividend income decreased to $2.1 million in Q3 2025 from $2.7 million in Q3 2024, a decline of 24% [94]. - Corporate expenses increased to $3.0 million in Q3 2025, a 21% rise from $2.3 million in Q3 2024 [92]. - Selling, general and administrative expenses for Q3 2025 were $6.2 million, unchanged from Q3 2024, but increased by $0.9 million (5%) for the first nine months due to higher employee-related costs [100]. - Income from operations decreased by $67.7 million to $26.6 million in the first nine months of 2025 compared to $94.3 million in the same period of 2024, influenced by factors impacting gross margin [144]. Segment Performance - CompX segment profit increased to $4.8 million in Q3 2025, a 42% increase from $3.3 million in Q3 2024, driven by higher sales and gross margin [96]. - CompX segment profit for the first nine months of 2025 was $17.0 million, up 40% from $12.1 million in the same period of 2024 [96]. - CompX's net sales increased by $6.4 million (19%) in Q3 2025 and $13.1 million (12%) for the first nine months compared to the same periods in 2024, driven by higher sales in Security Products and Marine Components [98]. - Security Products net sales rose by 14% in Q3 2025 and 8% for the first nine months, primarily due to increased sales to the government security market [104]. - Marine Components net sales surged by 36% in Q3 2025 and 29% for the first nine months, driven by higher sales to the industrial and government markets [107]. Market Conditions - The company faces substantial risks and uncertainties that could materially impact future results, including supply and demand fluctuations and changes in raw material costs [83]. - Kronos expects fourth quarter operating results to be lower than the third quarter due to weaker demand and pricing pressure, projecting lower full-year results for 2025 compared to 2024 [163]. - Kronos anticipates that pricing pressures will continue through 2025, with expectations for pricing upside in 2026 due to capacity reductions and anti-dumping duties [163]. - The TiO2 market has seen significant capacity reductions, which Kronos believes may provide opportunities for market share gains, particularly in Europe [161]. Costs and Expenses - Cost of sales increased by $26.4 million, or 7%, in Q3 2025 compared to Q3 2024, primarily due to unfavorable fixed cost absorption and higher inventory costs [135]. - Gross margin as a percentage of net sales decreased to 10% in Q3 2025 from 21% in Q3 2024, primarily due to lower average TiO2 selling prices [137]. - Kronos' cost of sales increased by $33.4 million, or 3%, in the first nine months of 2025 compared to the same period in 2024, primarily due to approximately $45 million in additional unabsorbed fixed production costs [138]. - The cost of sales as a percentage of net sales rose to 85% in the first nine months of 2025 from 81% in the same period of 2024, mainly due to unfavorable fixed cost absorption [139]. - Gross margin as a percentage of net sales decreased to 15% in the first nine months of 2025 from 19% in the first nine months of 2024, attributed to lower fixed cost absorption and lower average selling prices [140]. Cash Flow and Liquidity - Net cash used in operating activities was $32.3 million in the first nine months of 2025, compared to net cash provided of $16.6 million in the same period of 2024 [169]. - The company increased its maximum borrowings under its credit facility from $300 million to $350 million to enhance liquidity [165]. - Kronos' total cash and cash equivalents stood at $123.6 million as of September 30, 2025, with $70.2 million outstanding on its revolving credit facility [184]. - The company expects sufficient liquidity to meet short-term obligations of $50 million and long-term obligations through 2030, with $49.5 million available for future borrowing as of September 30, 2025 [188]. Strategic Initiatives - The company is implementing targeted workforce reductions to improve its long-term cost structure, expecting a more significant financial impact than previous reductions [162]. - Kronos acquired full control of LPC in July 2024, aiming to enhance its product offerings and realize significant synergies, although short-term impacts are limited by soft demand [164]. - The company plans to evaluate acquisitions of undervalued companies and may consider issuing additional equity securities and increasing indebtedness in the future [187]. Risks and Legal Matters - The company is subject to various legal proceedings and proposed legislation that could affect its financial position, although no material adverse effects are expected at this time [196]. - The company remains exposed to market risks, including currency exchange rates and interest rates, with no material changes since the 2024 Annual Report [200].

NL Industries, Inc. Financial Performance - NL Industries reported a net loss of $7.8 million, or $0.16 per share, in Q3 2025, a significant decline from a net income of $36.0 million, or $0.74 per share, in Q3 2024 [1] - For the first nine months of 2025, NL Industries experienced a net loss of $6.8 million, or $0.14 per share, compared to a net income of $50.7 million, or $1.04 per share, in the same period of 2024 [1] - The results included an unrealized loss of $0.5 million in Q3 2025 related to marketable equity securities, contrasting with an unrealized gain of $18.6 million in Q3 2024 [1] Kronos Worldwide, Inc. Performance - Kronos reported net sales of $456.9 million in Q3 2025, a decrease of $27.8 million, or 6%, compared to Q3 2024 [4] - For the first nine months of 2025, Kronos' net sales totaled $1.4 billion, down $22.9 million, or 2%, from the same period in 2024 [4] - The decline in sales was primarily due to lower average TiO2 selling prices and reduced sales volumes in European and export markets, partially offset by higher sales volumes in North America [4] Kronos' Income from Operations - Kronos reported a loss from operations of $19.2 million in Q3 2025, compared to income of $38.9 million in Q3 2024 [5] - For the first nine months of 2025, Kronos' income from operations was $26.6 million, down from $94.3 million in the same period of 2024 [5] - The decrease in income from operations was attributed to unfavorable fixed cost absorption due to reduced operating rates and higher inventory costs [5][6] CompX Financial Performance - CompX's net sales increased to $40.0 million in Q3 2025 from $33.6 million in Q3 2024, and for the first nine months of 2025, sales rose to $120.6 million from $107.5 million in the same period of 2024 [2] - The increase in sales was driven by higher Security Products sales to the government security market and increased Marine Components sales [2] - CompX's segment profit rose to $4.8 million in Q3 2025 from $3.3 million in Q3 2024, and for the first nine months, it increased to $17.0 million from $12.1 million [2] Market Conditions Impacting Kronos - Kronos faced unprecedented global uncertainty affecting the TiO2 industry, including U.S. trade policies and geopolitical tensions, which prolonged market downturns [4] - Average TiO2 selling prices started 2025 at 2% higher than the beginning of 2024 but declined by 6% during the first nine months of 2025 [4] - Currency fluctuations, particularly with the euro, impacted Kronos' net sales, increasing them by approximately $14 million in Q3 2025 [4]

Core Points - NL Industries, Inc. has declared a quarterly dividend of nine cents ($0.09) per share on its common stock [1] - The dividend is payable on December 16, 2025, to shareholders of record at the close of business on November 21, 2025 [1] - NL Industries operates in the component products sector, specifically in security products and recreational marine components, as well as in the chemicals sector focusing on TiO2 [1]

Core Viewpoint - NL Industries, Inc. is set to announce its third quarter 2025 earnings on November 6, 2025, after market close, pending the completion of quarter-end closing procedures [1] Company Overview - NL Industries, Inc. operates in two primary business segments: component products, which include security products and recreational marine components, and chemicals, specifically titanium dioxide (TiO2) [1]

Core Insights - NL Industries reported a significant decline in GAAP net profit for Q2 2025, primarily due to challenges in the Kronos Worldwide chemical segment, despite growth in the CompX components business [1][2][3] Financial Performance - GAAP earnings per share (EPS) for Q2 2025 were $0.01, missing analyst estimates of $0.19 and down from $0.16 in Q2 2024, representing a 93.8% year-over-year decline [2][1] - Net income attributable to NL stockholders fell to $0.3 million from $7.9 million in Q2 2024, marking a 96.2% decrease [2][1] - Income from operations increased to $2.8 million from $0.8 million in Q2 2024, reflecting a 250% improvement [2] - Kronos' net sales decreased by 1% year-over-year, totaling $494.4 million in Q2 2025, driven by lower TiO2 selling prices and reduced export sales volumes [5][2] Segment Analysis - Kronos Worldwide, the primary value driver for NL Industries, experienced a significant operational downturn, with an equity loss of $2.8 million compared to a profit of $6.0 million in Q2 2024 [7][1] - CompX reported a strong performance with net sales rising 12.3% to $40.3 million, and segment profit increasing from $5.1 million to $6.3 million, driven by higher sales in government security and marine markets [9][1] Market Conditions - Demand for titanium dioxide (TiO2) has softened due to global uncertainties, including U.S. trade policies and geopolitical tensions, leading to cautious inventory management by customers [4][11] - Average TiO2 selling prices declined by 4% in the first half of 2025, with a 1% decrease noted in Q2 2025 compared to Q2 2024 [10][11] Operational Factors - Kronos operated at 81% capacity in Q2 2025, down from 99% in Q2 2024, resulting in $20 million of unabsorbed fixed costs due to reduced utilization rates [6][11] - CompX's growth was supported by strong demand in security products and marine hardware, with improved gross margins across product lines [9][11] Strategic Outlook - NL Industries did not provide forward guidance for upcoming quarters, citing ongoing risks related to market conditions and raw material costs [13][14] - Investors are advised to monitor trends in TiO2 demand, pricing, and capacity utilization, as well as the integration of the Louisiana Pigment Company [14][13]

[Executive Summary](index=1&type=section&id=Executive%20Summary) [NL Industries Consolidated Financial Performance](index=1&type=section&id=NL%20Industries%20Consolidated%20Financial%20Performance) NL Industries reported a significant decrease in net income attributable to stockholders for both the second quarter and first six months of 2025 compared to 2024, primarily driven by an unrealized loss on marketable equity securities and a shift from equity in Kronos earnings to losses NL Industries Consolidated Financial Highlights | Metric | Q2 2024 ($M) | Q2 2025 ($M) | H1 2024 ($M) | H1 2025 ($M) | | :-------------------------------------- | :----------- | :----------- | :----------- | :----------- | | Net Income Attributable to NL Stockholders | 7.9 | 0.3 | 14.7 | 1.0 | | Net Income per Share (EPS) | 0.16 | 0.01 | 0.30 | 0.02 | | Marketable Equity Securities (Unrealized Gain/Loss) | 0.8 | (0.1) | 3.2 | (8.6) | | Equity in Kronos Earnings (Losses) | 6.0 | (2.8) | 8.5 | 2.7 | [Segment Performance Overview](index=1&type=section&id=Segment%20Performance%20Overview) CompX demonstrated strong growth in both net sales and segment profit for Q2 and H1 2025, while Kronos experienced a slight decrease in Q2 net sales but a slight increase for H1, with its income from operations significantly declining in both periods - CompX's net sales increased to **$40.3 million** in Q2 2025 (from $35.9M in Q2 2024) and **$80.6 million** in H1 2025 (from $73.9M in H1 2024), driven by higher Security Products and Marine Components sales[3](index=3&type=chunk) - Kronos's net sales were **$494.4 million** in Q2 2025 (1% lower YoY) and **$984.2 million** in H1 2025 (1% higher YoY)[5](index=5&type=chunk) - Kronos's income from operations significantly decreased to **$7.4 million** in Q2 2025 (from $35.9M in Q2 2024) and **$45.8 million** in H1 2025 (from $55.4M in H1 2024)[6](index=6&type=chunk) [Detailed Segment Performance](index=1&type=section&id=Detailed%20Segment%20Performance) [CompX Segment Performance](index=1&type=section&id=CompX%20Segment%20Performance) CompX achieved robust growth in both net sales and segment profit for the second quarter and first six months of 2025, primarily attributed to increased sales in Security Products and Marine Components, coupled with improved gross margins across both segments CompX Segment Financials | Metric | Q2 2024 ($M) | Q2 2025 ($M) | H1 2024 ($M) | H1 2025 ($M) | | :--------------- | :----------- | :----------- | :----------- | :----------- | | Net Sales | 35.9 | 40.3 | 73.9 | 80.6 | | Segment Profit | 5.1 | 6.3 | 8.8 | 12.2 | - The increase in sales for both periods is due to higher Security Products sales primarily to the government security market and higher Marine Components sales primarily to the government and towboat markets[3](index=3&type=chunk) - CompX's segment profit increased due to higher sales and gross margin at each of the Security Products and Marine Components segments[3](index=3&type=chunk) [Kronos Worldwide, Inc. Performance](index=1&type=section&id=Kronos%20Worldwide%2C%20Inc.%20Performance) Kronos's financial performance was mixed, with a slight decrease in Q2 2025 net sales but a slight increase for H1 2025, while income from operations significantly declined in both periods, impacted by lower TiO2 selling prices, unfavorable fixed cost absorption, and higher production costs, with the acquisition of the remaining 50% interest in Louisiana Pigment Company, L.P. in July 2024 also noted Kronos Key Financials | Metric | Q2 2024 ($M) | Q2 2025 ($M) | H1 2024 ($M) | H1 2025 ($M) | | :----------------------- | :----------- | :----------- | :----------- | :----------- | | Net Sales | 500.5 | 494.4 | 979.3 | 984.2 | | Income from Operations | 35.9 | 7.4 | 55.4 | 45.8 | - Effective July 16, 2024, Kronos acquired the remaining 50% joint venture interest in Louisiana Pigment Company, L.P. (LPC), making LPC a wholly-owned subsidiary[4](index=4&type=chunk) [Kronos Net Sales Analysis](index=1&type=section&id=Kronos%20Net%20Sales%20Analysis) Kronos's Q2 2025 net sales decreased by 1% year-over-year, primarily due to lower average TiO2 selling prices, changes in product mix, and reduced sales volumes in export markets, partially offset by higher North American sales volumes, while H1 2025 net sales increased by 1% year-over-year, driven by higher sales volumes in North American and European markets, despite lower export volumes and product mix changes, with currency exchange rates also influencing comparisons Change in Kronos' Net Sales (YoY Percentage) | Factor | Q2 2025 vs. 2024 | H1 2025 vs. 2024 | | :-------------------------- | :--------------- | :--------------- | | TiO2 sales volume | (1)% | 2% | | TiO2 product pricing | (1)% | — | | Product mix/other TiO2 | (1)% | (1)% | | Changes in currency exchange rates | 2% | — | | **Total** | **(1)%** | **1%** | - Kronos's average TiO2 selling prices declined **4%** during the first six months of 2025, with Q2 2025 prices **1%** lower YoY[5](index=5&type=chunk) - The TiO2 market in H1 2025 was impacted by global uncertainty related to U.S. trade policies, geopolitical tensions, and customer hesitancy to build inventories, deferring anticipated market recovery[5](index=5&type=chunk) [Kronos Income from Operations Analysis](index=1&type=section&id=Kronos%20Income%20from%20Operations%20Analysis) Kronos's income from operations significantly decreased in both Q2 and H1 2025, with the Q2 decline primarily due to unfavorable fixed cost absorption from reduced operating rates, higher cost inventory, and currency fluctuations, and the H1 decline also attributed to additional unabsorbed fixed production costs and higher raw material costs, despite a 2% increase in TiO2 sales volumes Kronos Income from Operations | Metric | Q2 2024 ($M) | Q2 2025 ($M) | H1 2024 ($M) | H1 2025 ($M) | | :----------------------- | :----------- | :----------- | :----------- | :----------- | | Income from Operations | 35.9 | 7.4 | 55.4 | 45.8 | - Q2 2025 decrease primarily due to unfavorable fixed cost absorption from reduced operating rates, higher cost inventory produced in Q1, and currency fluctuations (primarily the euro)[7](index=7&type=chunk)[8](index=8&type=chunk) - H1 2025 decrease primarily due to approximately **$18 million** in additional unabsorbed fixed production costs and higher production costs (primarily raw materials)[8](index=8&type=chunk) - Currency exchange rates (primarily the euro) increased Kronos's income from operations by approximately **$14 million** in Q2 2025 and **$9 million** in H1 2025[8](index=8&type=chunk) [Kronos Operational Factors](index=2&type=section&id=Kronos%20Operational%20Factors) Kronos incurred approximately $20 million in unabsorbed fixed production costs in Q2 2025 and $18 million in H1 2025 due to operating its production facilities at reduced rates, with overall average capacity utilization for H1 2025 at 87%, a decrease from 93% in H1 2024, and prior year periods included charges related to workforce reductions and accelerated depreciation from the closure of a sulfate process line Kronos Unabsorbed Fixed Production Costs | Period | Unabsorbed Fixed Production Costs ($M) | | :----- | :------------------------------------- | | Q2 2025 | ~20 | | H1 2025 | ~18 | Kronos Capacity Utilization Rates | Period | Average Capacity Utilization | | :----- | :--------------------------- | | H1 2025 | 87% | | Q1 2025 | 93% | | Q2 2025 | 81% | | H1 2024 | 93% | | Q1 2024 | 87% | | Q2 2024 | 99% | - Kronos's income from operations in both Q2 and H1 2024 included a charge of approximately **$2 million** related to workforce reductions and approximately **$10 million** in non-cash charges primarily related to accelerated depreciation from the closure of its sulfate process line in Canada[8](index=8&type=chunk) [Other Financial Items & Corporate](index=3&type=section&id=Other%20Financial%20Items%20%26%20Corporate) [Corporate Expenses and Other Income/Expense](index=3&type=section&id=Corporate%20Expenses%20and%20Other%20Income%2FExpense) Corporate expenses decreased in both Q2 and H1 2025, primarily due to lower litigation fees and environmental remediation costs, while interest and dividend income also declined due to lower average interest rates and decreased cash balances, and the company recorded an unrealized loss on marketable equity securities in 2025, contrasting with gains in 2024 Corporate Expenses and Other Income/Expense | Metric | Q2 2024 ($M) | Q2 2025 ($M) | H1 2024 ($M) | H1 2025 ($M) | | :------------------------------ | :----------- | :----------- | :----------- | :----------- | | Corporate Expense | 4.3 | 3.5 | 6.7 | 6.2 | | Interest and Dividend Income | 2.6 | 1.5 | 5.2 | 3.5 | | Marketable Equity Securities (Unrealized Gain/Loss) | 0.8 | (0.1) | 3.2 | (8.6) | - Corporate expenses decreased primarily due to lower litigation fees and related costs and lower environmental remediation and related costs[9](index=9&type=chunk) - Net income attributable to NL stockholders for H1 2024 included a loss of **$0.3 million** due to Kronos's recognition of an aggregate charge related to a write-off of deferred financing costs[10](index=10&type=chunk) [Business Overview & Forward-Looking Statements](index=3&type=section&id=Business%20Overview%20%26%20Forward-Looking%20Statements) [Business Description](index=6&type=section&id=Business%20Description) NL Industries, Inc. operates in two primary business segments: component products, which include security products and recreational marine components, and chemicals, specifically Titanium Dioxide (TiO2) - NL Industries, Inc. is engaged in component products (security products and recreational marine components) and chemicals (TiO2) businesses[14](index=14&type=chunk) [Forward-Looking Statements and Risk Factors](index=3&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factors) The report contains forward-looking statements that are subject to substantial risks and uncertainties, which could cause actual future results to differ materially from expectations, with key risk factors including market supply and demand, Kronos's ability to achieve cost savings and integrate acquisitions, business cyclicality, raw material costs, global economic and political conditions, operating interruptions, technology disruptions, competition, currency fluctuations, and various legal, environmental, and regulatory matters - Statements in this release that are not historical facts are forward-looking and involve substantial risks and uncertainties that could significantly impact expected results[11](index=11&type=chunk) - Key risk factors include future supply and demand for products, Kronos's ability to realize cost savings and integrate acquisitions (like LPC), cyclicality of businesses (e.g., Kronos's TiO2 operations), changes in raw material and operating costs, global economic and political conditions, operating interruptions, technology-related disruptions, competitive pressures, currency exchange rate fluctuations, and various legal and environmental matters[11](index=11&type=chunk)[12](index=12&type=chunk)[15](index=15&type=chunk) - The company disclaims any intention or obligation to update or revise any forward-looking statement[13](index=13&type=chunk) [Financial Statements](index=7&type=section&id=Financial%20Statements) [Condensed Consolidated Statements of Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section presents the unaudited condensed consolidated statements of income for NL Industries, Inc. for the three and six months ended June 30, 2025, and 2024, detailing net sales, cost of sales, gross margin, various expenses, income from operations, equity in Kronos, other income/expense items, net income, and earnings per share NL INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME | Metric | Q2 2024 ($M) | Q2 2025 ($M) | H1 2024 ($M) | H1 2025 ($M) | | :-------------------------------------- | :----------- | :----------- | :----------- | :----------- | | Net sales | 35.9 | 40.3 | 73.9 | 80.6 | | Cost of sales | 24.8 | 27.4 | 53.1 | 55.5 | | Gross margin | 11.1 | 12.9 | 20.8 | 25.1 | | Selling, general and administrative expense | 6.0 | 6.6 | 12.0 | 12.9 | | Corporate expense | 4.3 | 3.5 | 6.7 | 6.2 | | Income from operations | 0.8 | 2.8 | 2.1 | 6.0 | | Equity in earnings (losses) of Kronos Worldwide, Inc. | 6.0 | (2.8) | 8.5 | 2.7 | | Interest and dividend income | 2.6 | 1.5 | 5.2 | 3.5 | | Marketable equity securities | 0.8 | (0.1) | 3.2 | (8.6) | | Income before income taxes | 9.8 | 1.0 | 18.1 | 2.3 | | Income tax expense | 1.3 | — | 2.3 | — | | Net income | 8.5 | 1.0 | 15.8 | 2.3 | | Net income attributable to NL stockholders | 7.9 | 0.3 | 14.7 | 1.0 | | Net income per share attributable to NL stockholders | 0.16 | 0.01 | 0.30 | 0.02 | [Components of Income from Operations](index=8&type=section&id=Components%20of%20Income%20from%20Operations) This table details the breakdown of NL Industries' consolidated income from operations, showing the contributions from CompX segment profit and the impact of Corporate expense for the three and six months ended June 30, 2025, and 2024 NL INDUSTRIES, INC. COMPONENTS OF INCOME FROM OPERATIONS | Metric | Q2 2024 ($M) | Q2 2025 ($M) | H1 2024 ($M) | H1 2025 ($M) | | :---------------------- | :----------- | :----------- | :----------- | :----------- | | CompX segment profit | 5.1 | 6.3 | 8.8 | 12.2 | | Corporate expense | (4.3) | (3.5) | (6.7) | (6.2) | | Income from operations | 0.8 | 2.8 | 2.1 | 6.0 | [Change in Kronos' Net Sales](index=8&type=section&id=Change%20in%20Kronos'%20Net%20Sales) This table provides a detailed analysis of the percentage change in Kronos's net sales for the three and six months ended June 30, 2025, compared to the prior year, attributing changes to specific factors such as TiO2 sales volume, product pricing, product mix, and currency exchange rates CHANGE IN KRONOS' NET SALES (YoY Percentage) | Factor | Q2 2025 vs. 2024 | H1 2025 vs. 2024 | | :-------------------------- | :--------------- | :--------------- | | TiO2 sales volume | (1)% | 2% | | TiO2 product pricing | (1)% | — | | Product mix/other TiO2 | (1)% | (1)% | | Changes in currency exchange rates | 2% | — | | **Total** | **(1)%** | **1%** |

Core Points - NL Industries, Inc. has declared a special cash dividend of $0.21 per share and a quarterly dividend of $0.09 per share [1] - The special dividend will be funded from excess cash flows and is payable on August 28, 2025, to shareholders of record as of August 18, 2025 [1] - The quarterly dividend is payable on September 23, 2025, to shareholders of record as of September 5, 2025 [1] Company Overview - NL Industries, Inc. operates in the component products sector, specifically in security products and recreational marine components, as well as in the chemicals sector, focusing on TiO2 [2]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=Part%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and detailed notes for NL Industries, Inc. [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements and detailed notes for NL Industries, Inc. [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section details the company's financial position, including assets, liabilities, and equity, at specific dates | (In thousands) | December 31, 2024 | June 30, 2025 | | :--------------------------------- | :------------------ | :-------------- | | **ASSETS** | | | | Cash and cash equivalents | $163,154 | $111,469 | | Total current assets | $237,958 | $183,688 | | Investment in Kronos Worldwide, Inc. | $250,278 | $259,405 | | Total assets | $578,258 | $523,704 | | **LIABILITIES AND EQUITY** | | | | Total current liabilities | $91,062 | $33,981 | | Total noncurrent liabilities | $71,293 | $72,712 | | Total equity | $415,903 | $417,011 | | Total liabilities and equity | $578,258 | $523,704 | - Total assets **decreased by $54.55 million** from December 31, 2024, to June 30, 2025, primarily driven by a reduction in cash and cash equivalents and total current assets[9](index=9&type=chunk) - Total current liabilities significantly **decreased from $91.06 million to $33.98 million**, mainly due to a substantial reduction in accrued environmental remediation and related costs[11](index=11&type=chunk) [Condensed Consolidated Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section reports the company's financial performance, detailing revenues, expenses, and net income | (In thousands, except per share data) | Three months ended June 30, 2024 | Three months ended June 30, 2025 | Six months ended June 30, 2024 | Six months ended June 30, 2025 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $35,887 | $40,366 | $73,858 | $80,638 | | Gross margin | $11,165 | $12,890 | $20,832 | $25,053 | | Income from operations | $791 | $2,801 | $2,147 | $5,949 | | Equity in earnings (losses) of Kronos Worldwide, Inc. | $5,973 | $(2,811) | $8,449 | $2,714 | | Net income attributable to NL stockholders | $7,835 | $355 | $14,674 | $1,022 | | Basic and diluted net income per share | $.16 | $.01 | $.30 | $.02 | - Net income attributable to NL stockholders significantly **decreased** for both the three-month period (from **$7.835 million to $0.355 million**) and the six-month period (from **$14.674 million to $1.022 million**) ended June 30, 2025, compared to the prior year[13](index=13&type=chunk) - Basic and diluted net income per share **dropped from $0.16 to $0.01** for the three months and from **$0.30 to $0.02** for the six months ended June 30, 2025[13](index=13&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents total equity changes from non-owner sources, including net income and other comprehensive income items | (In thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2025 | Six months ended June 30, 2024 | Six months ended June 30, 2025 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $8,453 | $1,054 | $15,768 | $2,376 | | Total other comprehensive income (loss), net | $807 | $3,729 | $(3,813) | $8,198 | | Comprehensive income attributable to NL stockholders | $8,641 | $4,084 | $10,861 | $9,220 | - Comprehensive income attributable to NL stockholders **decreased from $8.641 million to $4.084 million** for the three months ended June 30, 2025, but **increased from $10.861 million to $9.220 million** for the six months ended June 30, 2025, primarily due to significant positive currency translation adjustments in 2025[15](index=15&type=chunk) [Condensed Consolidated Statements of Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) This section details changes in the company's equity accounts over specific periods, including common stock, retained earnings, and accumulated other comprehensive loss | (In thousands) | Balance at December 31, 2024 | Balance at June 30, 2025 | | :------------------------------------ | :--------------------------- | :----------------------- | | Common stock | $6,105 | $6,107 | | Additional paid-in capital | $299,099 | $299,349 | | Retained earnings | $315,056 | $307,284 | | Accumulated other comprehensive loss | $(223,356) | $(215,158) | | Total NL stockholders' equity | $396,904 | $397,582 | | Noncontrolling interest in subsidiary | $18,999 | $19,429 | | Total equity | $415,903 | $417,011 | - Total NL stockholders' equity increased slightly from **$396.904 million to $397.582 million** from December 31, 2024, to June 30, 2025, despite a decrease in retained earnings, primarily due to a reduction in accumulated other comprehensive loss[18](index=18&type=chunk)[19](index=19&type=chunk) - Dividends paid to NL stockholders for the six months ended June 30, 2025, totaled **$8.794 million**, an increase from **$7.814 million** in the same period of 2024[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes cash inflows and outflows from operating, investing, and financing activities | (In thousands) | Six months ended June 30, 2024 | Six months ended June 30, 2025 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $22,278 | $(40,188) | | Net cash provided by (used in) investing activities | $42,670 | $(1,755) | | Net cash used in financing activities | $(8,750) | $(9,733) | | Balance at beginning of year | $141,382 | $184,190 | | Balance at end of period | $197,580 | $132,514 | - The company experienced a significant shift in operating cash flow, moving from **$22.278 million provided** in the first six months of 2024 to **$40.188 million used** in the same period of 2025, largely due to higher cash paid for environmental remediation and lower dividends from Kronos[20](index=20&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk) - Cash and cash equivalents at the end of the period **decreased by $65.066 million**, from **$197.580 million** in June 2024 to **$132.514 million** in June 2025[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information for various accounts and transactions [Note 1 – Organization and basis of presentation](index=12&type=section&id=Note%201%20%E2%80%93%20Organization%20and%20basis%20of%20presentation) This note describes the company's corporate structure and the accounting principles used in financial statements - NL Industries, Inc. is controlled by Valhi, Inc. (**83% ownership**), which in turn is controlled by Contran Corporation, ultimately controlled by Lisa K. Simmons and family trusts[22](index=22&type=chunk) - The company consolidates its majority-owned subsidiary, CompX International Inc., and accounts for its approximately **31% interest** in Kronos Worldwide, Inc. using the equity method[23](index=23&type=chunk) [Note 2 – Segment information](index=13&type=section&id=Note%202%20%E2%80%93%20Segment%20information) This note provides financial data for the company's operating segments, detailing their revenues and profits | (In thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2025 | Six months ended June 30, 2024 | Six months ended June 30, 2025 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $35,887 | $40,366 | $73,858 | $80,638 | | Segment profit | $5,081 | $6,320 | $8,796 | $12,189 | | Equity in earnings (losses) of Kronos Worldwide, Inc. | $5,973 | $(2,811) | $8,449 | $2,714 | | Net income | $8,453 | $1,054 | $15,768 | $2,376 | - Segment profit for CompX **increased by 24%** for the three months and **39%** for the six months ended June 30, 2025, compared to the prior year, reaching **$6.320 million** and **$12.189 million**, respectively[28](index=28&type=chunk) [Note 3 – Accounts and other receivables, net](index=13&type=section&id=Note%203%20%E2%80%93%20Accounts%20and%20other%20receivables%2C%20net) This note details the composition and changes in the company's accounts and other receivables | (In thousands) | December 31, 2024 | June 30, 2025 | | :--------------- | :------------------ | :-------------- | | Trade receivables - CompX | $14,183 | $16,984 | | Other receivables | $9,626 | $60 | | Total | $23,739 | $16,974 | - Total accounts and other receivables, net, **decreased from $23.739 million to $16.974 million** from December 31, 2024, to June 30, 2025, primarily due to a significant reduction in other receivables[29](index=29&type=chunk) [Note 4 – Inventories, net](index=13&type=section&id=Note%204%20%E2%80%93%20Inventories%2C%20net) This note provides a breakdown of the company's inventory components and their valuation | (In thousands) | December 31, 2024 | June 30, 2025 | | :--------------- | :------------------ | :-------------- | | Raw materials | $5,652 | $5,773 | | Work in process | $17,638 | $22,213 | | Finished products | $5,076 | $4,915 | | Total | $28,366 | $32,901 | - Total inventories, net, **increased from $28.366 million to $32.901 million** from December 31, 2024, to June 30, 2025, mainly driven by an increase in work in process inventory[30](index=30&type=chunk) [Note 5 – Marketable securities](index=14&type=section&id=Note%205%20%E2%80%93%20Marketable%20securities) This note describes the company's marketable securities, including market value and unrealized gains or losses | (In thousands) | December 31, 2024 | June 30, 2025 | | :--------------- | :------------------ | :-------------- | | Market value | $28,015 | $19,356 | | Cost or amortized cost | $24,347 | $24,347 | | Unrealized gain (loss), net | $3,668 | $(4,991) | - The company holds approximately **1.2 million shares** of Valhi, Inc. common stock, which are accounted for as available-for-sale securities[31](index=31&type=chunk) - The market value **decreased from $28.015 million to $19.356 million**, resulting in an unrealized loss of **$4.991 million** at June 30, 2025, compared to an unrealized gain of **$3.668 million** at December 31, 2024[31](index=31&type=chunk)[32](index=32&type=chunk) [Note 6 – Investment in Kronos Worldwide, Inc.](index=14&type=section&id=Note%206%20%E2%80%93%20Investment%20in%20Kronos%20Worldwide%2C%20Inc.) This note details the company's equity method investment in Kronos Worldwide, Inc., including its carrying value and transactions - NL Industries owned approximately **35.2 million shares** of Kronos common stock at June 30, 2025, with an aggregate market value of **$218.4 million**, down from **$343.4 million** at December 31, 2024[34](index=34&type=chunk) | (In millions) | Amount | | :------------------------------------ | :----- | | Balance at the beginning of the period | $250.3 | | Equity in earnings of Kronos | $2.7 | | Dividends received from Kronos | $(3.5) | | Equity in Kronos' other comprehensive income: | | | Currency translation | $9.6 | | Defined benefit pension plans | $.3 | | Balance at the end of the period | $259.4 | - Kronos acquired the remaining **50% joint venture interest** in Louisiana Pigment Company, L.P. (LPC) on July 16, 2024, for **$185 million**, gaining full control and recognizing a pre-tax gain of approximately **$64.5 million**[37](index=37&type=chunk) [Note 7 – Other assets, net](index=15&type=section&id=Note%207%20%E2%80%93%20Other%20assets%2C%20net) This note provides information on other non-current assets held by the company | (In thousands) | December 31, 2024 | June 30, 2025 | | :--------------- | :------------------ | :-------------- | | Pension asset | $354 | $300 | | Other | $680 | $631 | | Total | $1,034 | $931 | [Note 8 – Accrued and other current liabilities](index=16&type=section&id=Note%208%20%E2%80%93%20Accrued%20and%20other%20current%20liabilities) This note details the composition of the company's accrued and other current liabilities | (In thousands) | December 31, 2024 | June 30, 2025 | | :--------------- | :------------------ | :-------------- | | Employee benefits | $10,302 | $8,254 | | Other | $1,730 | $1,683 | | Total | $12,032 | $9,937 | [Note 9 – Long-term debt](index=16&type=section&id=Note%209%20%E2%80%93%20Long-term%20debt) This note describes the company's long-term debt obligations, including credit facilities and balances - NLKW Holding, LLC had **$0.5 million** outstanding under its **$50 million** secured revolving credit facility with Valhi at June 30, 2025, with **$49.5 million** available for future borrowing[40](index=40&type=chunk) - The average interest rate for the six months ended June 30, 2025, was **9.38%**[40](index=40&type=chunk) [Note 10 – Other noncurrent liabilities](index=16&type=section&id=Note%2010%20%E2%80%93%20Other%20noncurrent%20liabilities) This note provides details on other noncurrent liabilities, such as tax position reserves and OPEB | (In thousands) | December 31, 2024 | June 30, 2025 | | :--------------- | :------------------ | :-------------- | | Reserve for uncertain tax positions | $4,778 | $— | | OPEB | $451 | $427 | | Insurance claims and expenses | $685 | $649 | | Other | $269 | $193 | | Total | $6,183 | $1,269 | - Total other noncurrent liabilities **decreased significantly from $6.183 million to $1.269 million**, primarily due to the elimination of the reserve for uncertain tax positions[41](index=41&type=chunk) [Note 11 – Revenue recognition](index=16&type=section&id=Note%2011%20%E2%80%93%20Revenue%20recognition) This note explains the company's policies and disaggregation of revenue from customer contracts | (In thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2025 | Six months ended June 30, 2024 | Six months ended June 30, 2025 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Security Products | $28,213 | $30,683 | $58,100 | $60,913 | | Marine Components | $7,674 | $9,683 | $15,758 | $19,725 | | Total | $35,887 | $40,366 | $73,858 | $80,638 | - Net sales increased across both reporting units, with Security Products growing **9% (QoQ)** and **5% (YoY)**, and Marine Components growing **26% (QoQ)** and **25% (YoY)** for the periods ended June 30, 2025[43](index=43&type=chunk) [Note 12 – Employee benefit plans](index=16&type=section&id=Note%2012%20%E2%80%93%20Employee%20benefit%20plans) This note provides information on the company's pension and other post-employment benefit plans - NL Industries began the process of terminating its U.S. pension plan, closed to new participants since 1996, effective June 30, 2025[44](index=44&type=chunk) - The termination is expected to take **six to twelve months** and will involve purchasing annuity contracts for participants, with a plan settlement gain or loss to be recognized[44](index=44&type=chunk) | (In thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2025 | Six months ended June 30, 2024 | Six months ended June 30, 2025 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest cost | $365 | $356 | $730 | $712 | | Expected return on plan assets | $(335) | $(317) | $(670) | $(634) | | Recognized actuarial losses | $333 | $284 | $666 | $568 | | Total | $363 | $323 | $726 | $646 | [Note 13 – Income taxes](index=17&type=section&id=Note%2013%20%E2%80%93%20Income%20taxes) This note details the company's income tax expense or benefit and related deferred tax assets and liabilities | (In thousands) | Three months ended June 30, 2024 | Three months ended June 30, 2025 | Six months ended June 30, 2024 | Six months ended June 30, 2025 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax expense (benefit) | $1,302 | $(43) | $2,290 | $(66) | - The company recognized an income tax benefit of **$0.043 million** for the three months and **$0.066 million** for the six months ended June 30, 2025, a significant change from income tax expenses of **$1.302 million** and **$2.290 million**, respectively, in the prior year periods[47](index=47&type=chunk) - Kronos expects to record deferred income tax expense of **$20 million to $23 million** in Q3 2025 due to a reduction in the German corporate tax rate, effective starting in 2028[49](index=49&type=chunk)[50](index=50&type=chunk) [Note 14 – Stockholders' equity](index=19&type=section&id=Note%2014%20%E2%80%93%20Stockholders%27%20equity) This note provides a breakdown of the components of stockholders' equity and changes therein | (In thousands) | Six months ended June 30, 2024 | Six months ended June 30, 2025 | | :--------------- | :----------------------------- | :----------------------------- | | Balance at beginning of period (Accumulated other comprehensive loss) | $(219,621) | $(223,356) | | Other comprehensive income (loss) | $(3,813) | $8,198 | | Balance at end of period (Accumulated other comprehensive loss) | $(223,434) | $(215,158) | - Accumulated other comprehensive loss attributable to NL stockholders **decreased from $(223.356) million to $(215.158) million** at June 30, 2025, primarily due to **$8.198 million** in other comprehensive income, net of tax[52](index=52&type=chunk) [Note 15 – Commitments and contingencies](index=19&type=section&id=Note%2015%20%E2%80%93%20Commitments%20and%20contingencies) This note describes the company's legal and environmental commitments and potential liabilities - NL Industries has one remaining installment payment of **$16.7 million** due in September 2025 for the County of Santa Clara v. Atlantic Richfield Company, et al. global settlement agreement, which will be paid from funds already on deposit[56](index=56&type=chunk) - Accrued environmental remediation and related costs **decreased significantly from $69.278 million to $13.301 million** at June 30, 2025, primarily due to **$57.456 million** in payments, including a **$56.1 million** payment for the Raritan Bay Slag Superfund Site settlement[64](index=64&type=chunk)[69](index=69&type=chunk) - The estimated upper end of the range of reasonably possible costs for environmental remediation and related matters is approximately **$38 million**, including currently accrued amounts[65](index=65&type=chunk)[67](index=67&type=chunk)[70](index=70&type=chunk) - For about five sites, costs cannot be reasonably estimated due to early investigation stages[65](index=65&type=chunk)[67](index=67&type=chunk)[70](index=70&type=chunk) [Note 16 – Financial instruments](index=25&type=section&id=Note%2016%20%E2%80%93%20Financial%20instruments) This note provides information on the fair value of the company's financial instruments | (In thousands) | December 31, 2024 (Carrying amount) | December 31, 2024 (Fair value) | June 30, 2025 (Carrying amount) | June 30, 2025 (Fair value) | | :--------------- | :---------------------------------- | :----------------------------- | :------------------------------ | :------------------------- | | Cash, cash equivalents and restricted cash | $184,190 | $184,190 | $132,514 | $132,514 | - The carrying amounts of cash, cash equivalents, and restricted cash are considered equivalent to their fair values due to their near-term maturities[77](index=77&type=chunk) [Note 17 – Recent Accounting Pronouncements](index=27&type=section&id=Note%2017%20%E2%80%93%20Recent%20Accounting%20Pronouncements) This note discusses recently issued accounting standards and their potential impact on financial statements - ASU 2023-09 (Income Taxes) is effective for the company's 2025 Annual Report, requiring additional annual disclosure and disaggregation for rate reconciliation and income taxes paid[78](index=78&type=chunk) - ASU No. 2024-03 (Reporting Comprehensive Income - Expense Disaggregation Disclosures) is effective for the company's 2027 Annual Report, requiring additional information about specific expense categories[79](index=79&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operating results, segment performance, and liquidity [Business overview](index=28&type=section&id=Business%20overview) This section provides an overview of NL Industries' primary operations, including CompX and its investment in Kronos - NL Industries is primarily a holding company, operating in the component products industry through its majority-owned subsidiary, CompX International Inc., and holding a non-controlling interest (approx. **31%**) in Kronos Worldwide, Inc.[81](index=81&type=chunk) - CompX manufactures engineered components, including mechanical and electronic cabinet locks (Security Products) and wake enhancement systems, exhaust systems, and related marine hardware (Marine Components)[82](index=82&type=chunk) - Kronos is a leading global producer and marketer of titanium dioxide pigments (TiO2) used in paints, plastics, and paper[83](index=83&type=chunk) [Forward-looking information](index=28&type=section&id=Forward-looking%20information) This section highlights statements about future events and financial performance, emphasizing inherent risks - The report contains forward-looking statements subject to substantial risks and uncertainties, including future supply and demand, Kronos' ability to realize cost savings and integrate acquisitions, cyclicality of businesses, raw material costs, global economic conditions, operating interruptions, technology disruptions, and competitive pressures[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) - Other risks include fluctuations in currency exchange rates, interest rates, ability to maintain liquidity, ultimate outcome of litigation (lead pigment and environmental matters), and changes in government laws and regulations[86](index=86&type=chunk) [Results of operations](index=32&type=section&id=Results%20of%20operations) This section analyzes the company's financial performance, detailing changes in net income, segment profits, and key metrics [Net income overview](index=32&type=section&id=Net%20income%20overview) This section summarizes key factors influencing the company's net income and earnings per share - Net income attributable to NL stockholders **decreased significantly to $0.3 million ($.01 per share)** in Q2 2025 from **$7.9 million ($.16 per share)** in Q2 2024, and to **$1.0 million ($.02 per share)** in H1 2025 from **$14.7 million ($.30 per share)** in H1 2024[89](index=89&type=chunk) - The decrease is primarily due to equity in losses of Kronos (**$2.8 million** in Q2 2025 vs. **$6.0 million** earnings in Q2 2024), an unrealized loss on marketable equity securities (**$8.6 million** in H1 2025 vs. **$3.2 million** gain in H1 2024), and lower interest and dividend income, partially offset by higher CompX segment profit[92](index=92&type=chunk) [Income from operations](index=32&type=section&id=Income%20from%20operations) This section analyzes the company's operating income, highlighting segment contributions and corporate expenses | (In millions) | Three months ended June 30, 2024 | Three months ended June 30, 2025 | % Change | Six months ended June 30, 2024 | Six months ended June 30, 2025 | % Change | | :-------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | CompX segment profit | $5.1 | $6.3 | 24 % | $8.8 | $12.2 | 39 % | | Corporate expense | $(4.3) | $(3.5) | (18) | $(6.7) | $(6.2) | (6) | | Income from operations | $0.8 | $2.8 | 254 | $2.1 | $6.0 | 177 | - Income from operations **increased significantly by 254% to $2.8 million** in Q2 2025 and by **177% to $6.0 million** in H1 2025, driven by higher CompX segment profit and lower corporate expenses[91](index=91&type=chunk) [CompX International Inc.](index=33&type=section&id=CompX%20International%20Inc.) This section provides a detailed analysis of CompX's financial performance, including net sales, gross margin, and profit | (In millions) | Three months ended June 30, 2024 | Three months ended June 30, 2025 | % Change | Six months ended June 30, 2024 | Six months ended June 30, 2025 | % Change | | :-------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Net sales | $35.9 | $40.3 | 12 % | $73.9 | $80.6 | 9 % | | Gross margin | $11.1 | $12.9 | 15 | $20.8 | $25.1 | 20 | | Segment profit | $5.1 | $6.3 | 24 | $8.8 | $12.2 | 39 | - CompX's net sales **increased by $4.4 million (12%)** in Q2 2025 and **$6.7 million (9%)** in H1 2025, primarily due to higher sales in both Security Products and Marine Components[96](index=96&type=chunk) - CompX's gross margin as a percentage of sales **improved by 1%** in Q2 2025 and **3%** in H1 2025, mainly driven by higher Marine Components gross margin percentage[97](index=97&type=chunk) [Results by reporting unit](index=35&type=section&id=Results%20by%20reporting%20unit) This section breaks down CompX's performance by its Security Products and Marine Components units | (In millions) | Three months ended June 30, 2024 | Three months ended June 30, 2025 | % Change | Six months ended June 30, 2024 | Six months ended June 30, 2025 | % Change | | :-------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | **Security Products:** | | | | | | |\ | Net sales | $28.2 | $30.7 | 9 % | $58.1 | $60.9 | 5 % | | Reporting unit profit | $5.4 | $5.8 | 6 | $10.9 | $11.3 | 4 | | **Marine Components:** | | | | | | |\ | Net sales | $7.7 | $9.6 | 26 % | $15.8 | $19.7 | 25 % | | Reporting unit profit | $1.4 | $2.3 | 73 | $1.4 | $4.6 | 226 | - Security Products sales increased due to higher demand from government security and healthcare markets, while Marine Components sales saw significant growth from government and towboat markets[103](index=103&type=chunk)[106](index=106&type=chunk) - Marine Components' gross margin and reporting unit profit margin percentages increased significantly due to higher sales volumes and a more favorable customer/product mix[107](index=107&type=chunk) [Outlook – CompX](index=36&type=section&id=Outlook%20%E2%80%93%20CompX) This section discusses CompX's future expectations regarding sales, margins, and operational strategies - CompX expects Security Products net sales to improve in 2025, driven by government security and healthcare markets, but gross margin and profit margin percentages will be challenged by higher raw material costs and tariff-related surcharges on electronic components[109](index=109&type=chunk) - Marine Components net sales are expected to increase in 2025, primarily from the government and industrial markets, leading to improved gross margin and profit margin percentages due to increased fixed cost coverage[109](index=109&type=chunk) - CompX is working to increase selling prices to offset rising raw material costs and tariffs, particularly on electronic components from Asia, and is monitoring customer demand to align production and inventory[110](index=110&type=chunk)[111](index=111&type=chunk) [General corporate and other items](index=38&type=section&id=General%20corporate%20and%20other%20items) This section covers corporate expenses, investment income, and other non-segment specific financial items - Corporate expenses **decreased in Q2 2025 by $0.8 million** due to lower litigation fees and environmental remediation costs, but H1 2025 saw a slight **decrease of $0.5 million** due to higher environmental remediation costs partially offsetting lower litigation costs[113](index=113&type=chunk) - The company recognized an unrealized loss of **$0.1 million** on marketable equity securities in Q2 2025 (vs. **$0.8 million** gain in Q2 2024) and an **$8.6 million loss** in H1 2025 (vs. **$3.2 million** gain in H1 2024)[117](index=117&type=chunk) - Income tax shifted from an expense of **$1.3 million** in Q2 2024 to a benefit of **less than $0.1 million** in Q2 2025, and from an expense of **$2.3 million** in H1 2024 to a benefit of **$0.1 million** in H1 2025, influenced by nontaxable dividends from Kronos and equity in Kronos' earnings/losses[118](index=118&type=chunk)[122](index=122&type=chunk) [Equity in earnings of Kronos Worldwide, Inc.](index=40&type=section&id=Equity%20in%20earnings%20of%20Kronos%20Worldwide%2C%20Inc.) This section details the company's share of Kronos's earnings or losses and its impact on financial results | (In millions) | Three months ended June 30, 2024 | Three months ended June 30, 2025 | % Change | Six months ended June 30, 2024 | Six months ended June 30, 2025 | % Change | | :-------------- | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Net sales | $500.5 | $494.4 | (1)% | $979.3 | $984.2 | 1 % | | Gross margin | $100.2 | $62.8 | (37) | $171.7 | $169.7 | (1) | | Income from operations | $35.9 | $7.4 | (79)% | $55.4 | $45.8 | (17)% | | Net income (loss) | $19.5 | $(9.2) | | $27.6 | $8.9 | | | Equity in earnings (losses) of Kronos Worldwide, Inc. | $6.0 | $(2.8) | | $8.5 | $2.7 | | - Kronos' net income shifted from a **$19.5 million gain** in Q2 2024 to a **$9.2 million loss** in Q2 2025, and **decreased from $27.6 million to $8.9 million** in H1 2025, primarily due to lower average TiO2 selling prices, reduced operating rates, and higher production costs[124](index=124&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[135](index=135&type=chunk) - Currency exchange rate fluctuations had a **positive impact** on Kronos' income from operations, increasing it by approximately **$14 million** in Q2 2025 and **$9 million** in H1 2025[144](index=144&type=chunk)[145](index=145&type=chunk)[154](index=154&type=chunk)[157](index=157&type=chunk) [Current industry conditions](index=42&type=section&id=Current%20industry%20conditions) This section describes the prevailing market environment affecting Kronos, particularly the titanium dioxide pigment industry - Kronos experienced unprecedented global uncertainty in H1 2025 due to U.S. trade policies and geopolitical tensions, leading to customer hesitation in building inventories and a prolonged market downturn[128](index=128&type=chunk) - Average TiO2 selling prices **declined 4%** in H1 2025, and production facility utilization **decreased to 87% from 93%** in H1 2024 due to reduced operating rates[128](index=128&type=chunk)[129](index=129&type=chunk) [Outlook – Kronos](index=49&type=section&id=Outlook%20%E2%80%93%20Kronos) This section outlines Kronos's future expectations regarding demand, pricing, costs, and strategic initiatives - Kronos expects demand to remain challenging due to tariff uncertainty and economic conditions, leading to lower operating results for the full year 2025 compared to 2024, despite anticipated lower raw material and energy costs in H2 2025[163](index=163&type=chunk)[164](index=164&type=chunk) - The acquisition of full control of LPC in July 2024 is expected to positively impact earnings long-term through synergies and technological improvements, but near-term impact will be limited by soft demand and increased debt service costs[165](index=165&type=chunk) - Kronos increased its credit facility to **$350 million** in July 2025 to provide additional liquidity and support near-term debt maturities, including **€75 million** Senior Secured Notes due September 2025[166](index=166&type=chunk) [Liquidity and Capital Resources](index=50&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to generate and manage cash, covering cash flows, debt, and funding needs [Consolidated cash flows](index=50&type=section&id=Consolidated%20cash%20flows) This section analyzes the company's cash inflows and outflows from operating, investing, and financing activities - Net cash used in operating activities was **$40.2 million** in H1 2025, a significant decrease from **$22.3 million provided** in H1 2024, primarily due to higher cash paid for environmental remediation (**$56.8 million**) and lower dividends from Kronos (**$9.9 million**)[169](index=169&type=chunk)[170](index=170&type=chunk) - Net cash used in investing activities was **$1.8 million** in H1 2025, compared to **$42.7 million provided** in H1 2024, mainly due to increased capital expenditures and no proceeds from marketable securities maturities[20](index=20&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) - Net cash used in financing activities **increased to $9.7 million** in H1 2025 from **$8.8 million** in H1 2024, driven by higher dividends paid[20](index=20&type=chunk)[176](index=176&type=chunk) [Outstanding debt obligations](index=54&type=section&id=Outstanding%20debt%20obligations) This section details the company's current debt levels, credit facilities, and related terms - At June 30, 2025, NLKW had **$0.5 million** in outstanding debt under its secured revolving credit facility with Valhi, with **$49.5 million** available[180](index=180&type=chunk) - Kronos had **$37.0 million** outstanding on its Global Revolver at June 30, 2025, and subsequently increased the maximum borrowing amount to **$350 million** in July 2025[181](index=181&type=chunk) [Future cash requirements](index=54&type=section&id=Future%20cash%20requirements) This section outlines the company's anticipated cash needs for operations, investments, and debt servicing - At June 30, 2025, the company had **$132.5 million** in aggregate restricted and unrestricted cash and cash equivalents, with **$56.2 million** held by CompX and **$76.3 million** by NL Parent and wholly-owned subsidiaries[183](index=183&type=chunk)[184](index=184&type=chunk) - Expected annual dividends from Kronos, CompX, and Valhi total **$20.3 million**, with an additional **$10.8 million** special dividend expected from CompX in August 2025[191](index=191&type=chunk)[192](index=192&type=chunk) - CompX expects to spend **$3.4 million** on capital investments in 2025, primarily for existing customer demand and facility maintenance[189](index=189&type=chunk) [Recent accounting pronouncements](index=58&type=section&id=Recent%20accounting%20pronouncements) This section discusses new accounting standards and their potential impact on financial reporting - The company is evaluating ASU 2023-09 (Income Taxes) effective for its 2025 Annual Report and ASU No. 2024-03 (Reporting Comprehensive Income - Expense Disaggregation Disclosures) effective for its 2027 Annual Report[198](index=198&type=chunk) [Critical accounting policies and estimates](index=58&type=section&id=Critical%20accounting%20policies%20and%20estimates) This section highlights accounting policies requiring significant judgment and estimation by management - There have been no changes in the company's critical accounting policies during the first six months of 2025[199](index=199&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) This section states that there have been no material changes in the company's exposure to market risks, including currency exchange rates, interest rates, and equity security prices, since the filing of its 2024 Annual Report - No material changes in market risks (currency exchange rates, interest rates, equity security prices) since the 2024 Annual Report[200](index=200&type=chunk) [Item 4. Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures and internal control over financial reporting. Management concluded that disclosure controls and procedures were effective as of June 30, 2025, and there were no material changes to internal control over financial reporting during the quarter [Evaluation of disclosure controls and procedures](index=58&type=section&id=Evaluation%20of%20disclosure%20controls%20and%20procedures) This section describes the assessment of the effectiveness of the company's disclosure controls and procedures - The President and CEO, and Executive Vice President and CFO, evaluated the disclosure controls and procedures as of June 30, 2025, and concluded they are effective[201](index=201&type=chunk) [Internal control over financial reporting](index=58&type=section&id=Internal%20control%20over%20financial%20reporting) This section outlines management's responsibility for establishing and maintaining effective internal control over financial reporting - Management is responsible for establishing and maintaining adequate internal control over financial reporting to ensure reliability of financial reporting and preparation of financial statements in accordance with GAAP[202](index=202&type=chunk) [Other](index=58&type=section&id=Other) This section clarifies the scope of the assessment of internal control over financial reporting, including exclusions and inclusions - The assessment of internal control over financial reporting excludes equity method investees and financial statement schedules required by Article 12 of Regulation S-X, but includes controls over recording investment amounts and equity method earnings/losses[203](index=203&type=chunk) [Changes in internal control over financial reporting](index=60&type=section&id=Changes%20in%20internal%20control%20over%20financial%20reporting) This section reports on any material changes to the company's internal control over financial reporting during the period - No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2025[205](index=205&type=chunk) [PART II. OTHER INFORMATION](index=60&type=section&id=Part%20II.%20OTHER%20INFORMATION) This section contains additional information not covered in Part I, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=60&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 15 of the financial statements and the 2024 Annual Report for descriptions of legal proceedings. It specifically notes the dismissal of the Philip Palmeri v. NL Industries, Inc. case in May 2025 - The case Philip Palmeri v. NL Industries, Inc. was dismissed in May 2025[208](index=208&type=chunk) [Item 1A. Risk Factors](index=60&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to Part I, Item 1A, 'Risk Factors,' in the company's 2024 Annual Report for a discussion of business-related risk factors - For a discussion of risk factors related to the businesses, refer to Part I, Item 1A, 'Risk Factors,' in the 2024 Annual Report[209](index=209&type=chunk) [Item 6. Exhibits](index=61&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the Fourth Amendment to Credit Agreement for Kronos Worldwide, Inc., certifications, and Inline XBRL documents - Exhibits include the Fourth Amendment to Credit Agreement for Kronos Worldwide, Inc. (dated July 17, 2025), certifications (31.1, 31.2, 32.1), and various Inline XBRL documents[213](index=213&type=chunk)