[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)

NL Industries, Inc. Summary - NL Industries reported a net income attributable to stockholders of $0.3 million, or $0.01 per share, in Q2 2025, a significant decrease from $7.9 million, or $0.16 per share, in Q2 2024 [1] - For the first half of 2025, net income was $1.0 million, or $0.02 per share, compared to $14.7 million, or $0.30 per share, in the same period of 2024 [1] - The results included an unrealized loss of $0.1 million in Q2 2025 related to marketable equity securities, contrasting with an unrealized gain of $0.8 million in Q2 2024 [1] CompX Summary - CompX's net sales increased to $40.3 million in Q2 2025 from $35.9 million in Q2 2024, and for the first six months, sales rose to $80.6 million from $73.9 million [2] - The increase in sales was attributed to higher Security Products sales to the government security market and increased Marine Components sales to government and towboat markets [2] - Segment profit for CompX was $6.3 million in Q2 2025, up from $5.1 million in Q2 2024, and $12.2 million for the first six months of 2025, compared to $8.8 million in the same prior year period [2] Kronos Worldwide Summary - Kronos reported net sales of $494.4 million in Q2 2025, a decrease of $6.1 million, or 1%, compared to Q2 2024, while net sales for the first half of 2025 were $984.2 million, an increase of $4.9 million, or 1%, from the same period in 2024 [4] - The decline in Q2 sales was primarily due to lower average TiO2 selling prices, changes in product mix, and lower sales volumes in export markets, partially offset by higher sales volumes in North America [4] - Kronos' income from operations fell to $7.4 million in Q2 2025 from $35.9 million in Q2 2024, and for the first six months, it decreased to $45.8 million from $55.4 million in the same period of 2024 [5][6] Market Conditions and Currency Impact - The TiO2 industry faced challenges due to global uncertainties related to U.S. trade policies and geopolitical tensions, affecting sales volumes and pricing momentum [4] - Kronos experienced a 4% decline in average TiO2 selling prices during the first half of 2025, despite starting the year with prices 2% higher than at the beginning of 2024 [4] - Currency fluctuations, particularly with the euro, impacted net sales, increasing them by approximately $8 million in Q2 2025 but decreasing them by about $3 million in the first half of 2025 compared to the same prior year periods [4]

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Core Viewpoint - NL Industries, Inc. is set to announce its second quarter 2025 earnings on August 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]

Part I. FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The financial statements for the quarter ended March 31, 2025, show a decrease in total assets to $520.0 million from $578.3 million at year-end 2024, primarily due to a significant reduction in cash and cash equivalents, with net income attributable to NL stockholders falling sharply to $0.7 million from $6.8 million in the prior-year quarter, driven by an $8.5 million unrealized loss on marketable equity securities, and cash flow from operations turning negative, showing a use of $47.5 million, largely due to a $56.1 million payment for an environmental settlement [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased from $578.3 million at December 31, 2024, to $520.0 million at March 31, 2025, mainly driven by a decrease in cash and cash equivalents from $163.2 million to $110.0 million and a significant reduction in current accrued environmental remediation costs, while total equity remained relatively stable at $416.8 million Condensed Consolidated Balance Sheet Summary (In thousands) | Account | Dec 31, 2024 | Mar 31, 2025 | Change | | :--- | :--- | :--- | :--- | | **Total Current Assets** | $237,958 | $179,619 | ($58,339) | | Cash and cash equivalents | $163,154 | $109,999 | ($53,155) | | **Total Assets** | **$578,258** | **$520,025** | **($58,233)** | | **Total Current Liabilities** | $91,062 | $30,937 | ($60,125) | | Accrued environmental remediation costs (Current) | $58,135 | $1,773 | ($56,362) | | **Total Liabilities** | $162,355 | $103,195 | ($59,160) | | **Total Equity** | **$415,903** | **$416,830** | **$927** | [Condensed Consolidated Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For the three months ended March 31, 2025, net income attributable to NL stockholders was $0.7 million ($0.01 per share), a significant decrease from $6.8 million ($0.14 per share) in the same period of 2024, primarily due to an $8.5 million unrealized loss on marketable equity securities, which contrasted with a $2.4 million gain in the prior year, partially offset by higher income from operations, which more than doubled to $3.1 million, and increased equity in earnings from Kronos Worldwide, Inc Condensed Consolidated Statements of Income (In thousands, except per share data) | Metric | Q1 2024 | Q1 2025 | Change | | :--- | :--- | :--- | :--- | | Net sales | $37,971 | $40,272 | +6.1% | | Gross margin | $9,667 | $12,163 | +25.8% | | Income from operations | $1,356 | $3,148 | +132.1% | | Equity in earnings of Kronos | $2,476 | $5,525 | +123.1% | | Marketable equity securities | $2,383 | ($8,552) | -458.9% | | **Net income attributable to NL stockholders** | **$6,839** | **$667** | **-90.2%** | | **Basic and diluted net income per share** | **$0.14** | **$0.01** | **-92.9%** | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was $47.5 million in Q1 2025, a stark reversal from the $6.7 million provided by operating activities in Q1 2024, primarily driven by a $56.5 million cash outflow for accrued environmental remediation costs related to a settlement, while net cash used in financing activities increased slightly due to higher dividend payments Summary of Cash Flows (In thousands) | Cash Flow Activity | Q1 2024 | Q1 2025 | Change | | :--- | :--- | :--- | :--- | | **Net cash provided by (used in) operating activities** | **$6,744** | **($47,475)** | **($54,219)** | | Net cash provided by (used in) investing activities | $24,495 | ($812) | ($25,307) | | Net cash used in financing activities | ($4,373) | ($4,864) | ($491) | | **Net change in cash** | **$26,866** | **($53,151)** | **($80,017)** | - The significant shift in operating cash flow was mainly due to a payment for accrued environmental remediation and related costs, which amounted to a **$56.5 million** use of cash in Q1 2025[22](index=22&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide details on the company's structure, investments, and contingencies, highlighting Valhi, Inc.'s 83% stake, the increase in Kronos Worldwide, Inc.'s carrying value to $259.5 million, and a significant $56.1 million payment plus interest in Q1 2025 to settle claims related to the Raritan Bay Slag Superfund Site, which substantially reduced accrued environmental liabilities - At March 31, 2025, Valhi, Inc. held approximately **83%** of NL Industries' outstanding common stock, with Valhi itself controlled by Contran Corporation[24](index=24&type=chunk) - The carrying value of the investment in Kronos increased from **$250.3 million** at year-end 2024 to **$259.5 million** at March 31, 2025, primarily due to **$5.5 million** in equity earnings and **$5.3 million** from currency translation[38](index=38&type=chunk)[39](index=39&type=chunk) - In Q1 2025, the company paid **$56.1 million** plus interest to settle all claims related to the Raritan Bay Slag Superfund Site, resolving a lawsuit and representing a major use of cash during the quarter[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk) Change in Accrued Environmental Remediation Costs (In thousands) | Description | Amount | | :--- | :--- | | Balance at beginning of period | $69,278 | | Additions charged to expense, net | $578 | | Payments, net | ($57,089) | | **Balance at end of period** | **$12,767** | [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 attributes the sharp decline in net income to a significant unrealized loss on marketable equity securities ($8.5 million loss vs. $2.4 million gain in Q1 2024), partially offset by strong operational performance from its subsidiary CompX, whose segment profit grew 58%, and higher equity earnings from its affiliate Kronos, which increased 123%, noting that while the company's liquidity was impacted by a large environmental settlement payment, management believes it has sufficient resources for its short- and long-term obligations, supported by cash flows, affiliate dividends, and a credit facility with its parent company, Valhi [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Overall operating income increased to $3.2 million from $1.3 million in the prior-year quarter, driven by a 58% increase in CompX's segment profit, though a significant unrealized loss on marketable equity securities and lower dividend income led to a decrease in income before taxes from $8.3 million to $1.3 million - The decrease in net income attributable to NL stockholders from Q1 2024 to Q1 2025 was primarily due to the net effects of: - An **$8.5 million** unrealized loss on marketable equity securities in 2025 versus a **$2.4 million** gain in 2024 - Higher equity in earnings of Kronos (**$5.5 million** in 2025 vs. **$2.5 million** in 2024) - Higher CompX segment profit (**$5.9 million** in 2025 vs. **$3.7 million** in 2024)[95](index=95&type=chunk) Income from Operations and Other Income (Expense) (In millions) | Component | Q1 2024 | Q1 2025 | % Change | | :--- | :--- | :--- | :--- | | **Income from operations** | **$1.3** | **$3.2** | **+132%** | | CompX segment profit | $3.7 | $5.9 | +58% | | Corporate expense | ($2.4) | ($2.7) | +15% | | **Other Income (Expense)** | | | | | Equity in earnings of Kronos | $2.5 | $5.5 | +123% | | Marketable equity securities | $2.4 | ($8.5) | -459% | | Interest and dividend income | $2.6 | $2.0 | -20% | [CompX International Inc.](index=33&type=section&id=CompX%20International%20Inc.) CompX's segment profit increased by 58% to $5.9 million in Q1 2025, driven by a 24% sales increase in its Marine Components unit, which saw higher sales to the towboat and government markets and expanded its gross margin significantly from 11% to 32%, while the Security Products unit had comparable profit to the prior year, with higher sales to the government security market offset by softness in other OEM markets CompX Performance Summary (In millions) | Metric | Q1 2024 | Q1 2025 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $38.0 | $40.3 | +6% | | Gross Margin | $9.7 | $12.2 | +26% | | **Segment Profit** | **$3.7** | **$5.9** | **+58%** | | Segment Profit % | 10% | 15% | | - Marine Components net sales increased **24%** due to higher sales to the towboat market (**$1.7 million**) and government market (**$1.2 million**), with its gross margin percentage increasing from **11%** to **32%** due to lower cost inventory and better fixed cost absorption[105](index=105&type=chunk) - CompX expects modest sales improvement in 2025 for Security Products and increased sales for Marine Components, driven by government and industrial markets, but faces continued raw material price increases and potential tariff impacts[108](index=108&type=chunk)[109](index=109&type=chunk) [Equity in earnings of Kronos Worldwide, Inc.](index=39&type=section&id=Equity%20in%20earnings%20of%20Kronos%20Worldwide%2C%20Inc.) NL's equity in earnings from Kronos more than doubled, rising to $5.5 million in Q1 2025 from $2.5 million in Q1 2024, as Kronos's income from operations nearly doubled to $38.4 million, driven by a 5% increase in TiO2 sales volumes and a 2% increase in average selling prices, with production volumes rising 18% as facilities operated at 93% capacity, up from 87%, leading to lower per-unit costs and improved gross margins from 15% to 22% Kronos Performance Summary (In millions, except volumes) | Metric | Q1 2024 | Q1 2025 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $478.8 | $489.8 | +2% | | Income from Operations | $19.5 | $38.4 | +97% | | Net Income | $8.1 | $18.1 | +123% | | **NL's Equity in Earnings** | **$2.5** | **$5.5** | **+120%** | | TiO2 Sales Volumes (k tons) | 130 | 136 | +5% | | TiO2 Production Volumes (k tons) | 121 | 143 | +18% | - Kronos operated its production facilities at **93%** of practical capacity in Q1 2025, up from **87%** in Q1 2024, in response to increased customer demand[125](index=125&type=chunk) - Kronos's outlook suggests demand may be challenging in North America due to tariff uncertainty, but has improved in Europe, with the company focused on cost reduction and integrating the LPC acquisition, which is expected to positively impact 2025 earnings[143](index=143&type=chunk)[145](index=145&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity decreased, with cash and cash equivalents falling to $131.0 million from $184.2 million at year-end, primarily due to a $57.1 million payment for an environmental settlement, while primary sources of liquidity are operating cash flow, expected annual dividends of $20.3 million from affiliates, and a $50 million revolving credit facility from parent company Valhi, of which $49.5 million was available at quarter-end, leading management to believe liquidity is sufficient for short- and long-term needs - Net cash used in operating activities was **$47.5 million**, primarily due to a **$57.1 million** payment for an environmental remediation settlement[149](index=149&type=chunk)[155](index=155&type=chunk) Cash and Cash Equivalents by Entity (In millions) | Entity | Amount at Mar 31, 2025 | | :--- | :--- | | CompX | $56.1 | | NL Parent and wholly-owned subsidiaries | $74.9 | | **Total** | **$131.0** | Expected Annual Dividends from Affiliates (In millions) | Affiliate | Expected Annual Dividend | | :--- | :--- | | Kronos | $7.0 | | CompX | $12.9 | | Valhi | $0.4 | | **Total** | **$20.3** | - The company has access to a **$50 million** revolving credit facility from its parent, Valhi, with **$0.5 million** outstanding and **$49.5 million** available as of March 31, 2025[165](index=165&type=chunk) [Quantitative and Qualitative Disclosure About Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) The company states that there have been no material changes in its exposure to market risks, which include currency exchange rates, interest rates, and equity security prices, since the filing of its 2024 Annual Report - There have been no material changes in market risks (currency exchange rates, interest rates, equity security prices) since the 2024 Annual Report[176](index=176&type=chunk) [Controls and Procedures](index=53&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025, with no material changes to the company's internal control over financial reporting during the quarter - The President and CEO, and the Executive VP and CFO, evaluated disclosure controls and procedures and concluded they are effective as of March 31, 2025[177](index=177&type=chunk) - No changes to internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[180](index=180&type=chunk) Part II. OTHER INFORMATION [Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) The report refers to Note 15 of the Condensed Consolidated Financial Statements and the company's 2024 Annual Report for descriptions of its legal proceedings - For information on legal proceedings, the report directs readers to Note 15 of the financial statements and the 2024 Annual Report[183](index=183&type=chunk) [Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) For a discussion of risk factors related to the business, the report refers to Item 1A, "Risk Factors," in the company's 2024 Annual Report - The report references the 2024 Annual Report for a full discussion of business-related risk factors[184](index=184&type=chunk) [Exhibits](index=55&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including officer certifications (31.1, 31.2, 32.1) and Inline XBRL data files - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act sections 302 and 906, as well as Inline XBRL documents[187](index=187&type=chunk)

[Q1 2025 Financial Highlights](index=1&type=section&id=NL%20REPORTS%20FIRST%20QUARTER%202025%20RESULTS) NL Industries reported a significant decrease in Q1 2025 net income, primarily due to an unrealized loss on marketable equity securities, despite improved segment profitability [Overall Performance](index=1&type=section&id=Overall%20Performance) NL Industries reported a significant decrease in net income for the first quarter of 2025, falling to $0.7 million from $6.8 million in the prior-year period. This decline was primarily driven by an $8.5 million unrealized loss on marketable equity securities, contrasting with a $2.4 million gain in Q1 2024 Q1 2025 vs Q1 2024 Key Financial Metrics (In millions, except EPS) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Income Attributable to NL Stockholders | $0.7 million | $6.8 million | | Earnings Per Share (EPS) | $0.01 | $0.14 | | Unrealized Gain/(Loss) on Marketable Equity Securities | ($8.5 million) | $2.4 million | [Segment Performance](index=1&type=section&id=Segment%20Performance) Both CompX and Kronos segments demonstrated strong operational improvements in Q1 2025, driven by increased sales and improved margins [CompX Segment](index=1&type=section&id=CompX%20Segment) CompX reported strong growth in the first quarter of 2025, with net sales increasing to $40.3 million from $38.0 million in Q1 2024. The segment's profit saw a substantial rise to $5.9 million, up from $3.7 million, driven by higher sales and gross margins in its Marine Components division CompX Q1 Performance (In millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Sales | $40.3 million | $38.0 million | | Segment Profit | $5.9 million | $3.7 million | - The sales increase was primarily due to higher Marine Components sales to the towboat and government markets, along with increased Security Products sales to the government security market[3](index=3&type=chunk) [Kronos Worldwide, Inc. Segment](index=1&type=section&id=Kronos%20Worldwide%2C%20Inc.%20Segment) NL's equity in earnings from Kronos increased to $5.5 million. Kronos' net sales rose 2% to $489.8 million, driven by higher sales volumes in North America and Europe and a 2% increase in average TiO2 selling prices year-over-year. Operating income more than doubled to $38.4 million, benefiting from higher sales, increased production volumes, and lower per-ton production costs. Production facility operating rates increased to 93% from 87% in the prior year - Effective July 16, 2024, Kronos acquired the remaining 50% interest in Louisiana Pigment Company, L.P. (LPC), making it a wholly-owned subsidiary. LPC's results are included in Kronos' operations from the acquisition date[4](index=4&type=chunk) Kronos Q1 Performance (In millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Sales | $489.8 million | $478.8 million* | | Income from Operations | $38.4 million | $19.5 million | | Equity in Earnings for NL | $5.5 million | $2.5 million | *Calculated from Q1 2025 sales of $489.8M, which was $11.0M higher than Q1 2024. - Key drivers for Kronos' improved performance include: - **Sales:** Higher volumes in North America and Europe and a **2% YoY increase** in average TiO2 selling prices, partially offset by lower export volumes and negative currency effects of **$11 million** - **Operating Income:** Higher sales and production volumes, better selling prices, and lower per-metric-ton production costs - **Production:** TiO2 production volumes were **18% higher YoY**, with plant capacity utilization rising to **93% from 87%**[5](index=5&type=chunk)[6](index=6&type=chunk) [Corporate Expenses and Other Income](index=1&type=section&id=Corporate%20Expenses%20and%20Other%20Income) Corporate expenses increased slightly in Q1 2025, while interest and dividend income decreased, and a significant unrealized loss was recorded on marketable equity securities [Changes in Corporate and Other Items](index=1&type=section&id=Changes%20in%20Corporate%20and%20Other%20Items) In Q1 2025, corporate expenses saw a slight increase of $0.3 million due to higher environmental and administrative costs. Interest and dividend income decreased by $0.6 million, attributed to lower interest rates and cash balances. The most significant change was the $8.5 million unrealized loss from marketable equity securities - **Corporate Expenses:** Increased by **$0.3 million** due to higher environmental remediation and administrative costs, partially offset by lower litigation fees[7](index=7&type=chunk) - **Interest and Dividend Income:** Decreased by **$0.6 million** primarily due to lower average interest rates and reduced cash balances[7](index=7&type=chunk) - **Marketable Equity Securities:** Recorded an unrealized loss of **$8.5 million**, a significant negative swing from the **$2.4 million gain** in Q1 2024[2](index=2&type=chunk)[7](index=7&type=chunk) [Forward-Looking Statements and Risk Factors](index=3&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factors) The company's forward-looking statements are subject to significant risks, including market dynamics, operational costs, economic conditions, competition, and regulatory changes [Summary of Risks](index=3&type=section&id=Summary%20of%20Risks) The company highlights that forward-looking statements are subject to substantial risks and uncertainties. Key factors that could materially affect future results include supply and demand for products, the cyclicality of the TiO2 business, raw material costs, global economic conditions, competition from Chinese suppliers, currency fluctuations, and regulatory changes - The company faces numerous risks that could cause actual results to differ from expectations, including but not limited to[10](index=10&type=chunk) - **Market & Operations:** Future supply/demand, business cyclicality, customer inventory levels, and industry capacity expansion - **Costs & Supply Chain:** Changes in raw material and energy costs, availability of raw materials, and supply chain disruptions from global events - **Economic & Political:** General global economic conditions, tariffs, trade disputes, and currency exchange rate fluctuations - **Competition:** Competitive products, strategies from competitors (including Chinese suppliers), and potential consolidation of customers or competitors - **Regulatory & Legal:** Environmental regulations, changes in laws (e.g., regarding lead pigment), and the outcome of pending litigation[10](index=10&type=chunk)[13](index=13&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) The financial statements detail the company's Q1 2025 performance, including consolidated income, operational components, and Kronos' sales changes [Condensed Consolidated Statements of Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The condensed consolidated statement of income shows net sales of $40.3 million and income from operations of $3.2 million for Q1 2025. After accounting for equity earnings from Kronos, a significant loss on marketable securities, and other items, net income attributable to NL stockholders was $0.7 million, or $0.01 per share, down from $6.8 million, or $0.14 per share, in Q1 2024 Condensed Consolidated Statements of Income (In millions, except EPS) | | Three months ended March 31, | | :--- | :---: | :---: | | | **2024** | **2025** | | **Net sales** | **$38.0** | **$40.3** | | Cost of sales | 28.3 | 28.1 | | **Gross margin** | **9.7** | **12.2** | | Selling, general and administrative expense | 6.0 | 6.3 | | Corporate expense | 2.4 | 2.7 | | **Income from operations** | **1.3** | **3.2** | | Equity in earnings of Kronos Worldwide, Inc. | 2.5 | 5.5 | | Interest and dividend income | 2.6 | 2.0 | | Marketable equity securities | 2.4 | (8.5) | | Other components of net periodic pension and OPEB cost | (0.3) | (0.3) | | Interest expense | (0.2) | (0.6) | | **Income before income taxes** | **8.3** | **1.3** | | Income tax expense | 1.0 | — | | **Net income** | **7.3** | **1.3** | | Noncontrolling interest in net income of subsidiary | 0.5 | 0.6 | | **Net income attributable to NL stockholders** | **$6.8** | **$0.7** | | **Net income per share attributable to NL stockholders** | **$0.14** | **$0.01** | [Components of Income from Operations](index=7&type=section&id=Components%20of%20Income%20from%20Operations) The company's income from operations increased to $3.2 million in Q1 2025 from $1.3 million in Q1 2024. This improvement was entirely driven by a $2.2 million increase in CompX's segment profit, which was partially offset by a $0.3 million increase in corporate expenses Components of Income from Operations (In millions) | | Three months ended March 31, | | :--- | :---: | :---: | | | **2024** | **2025** | | CompX segment profit | $3.7 | $5.9 | | Corporate expense | (2.4) | (2.7) | | **Income from operations** | **$1.3** | **$3.2** | [Change in Kronos' Net Sales](index=7&type=section&id=Change%20in%20Kronos%27%20Net%20Sales) Kronos' net sales increased by a net 2% in Q1 2025 compared to Q1 2024. This was composed of a 5% increase from TiO2 sales volume and a 2% increase from pricing, which were partially offset by a 2% decrease from product mix/other and a 3% decrease from currency exchange rates Percentage Change in Kronos' Net Sales (Q1 2025 vs. Q1 2024) | Component | Percentage Change | | :--- | :---: | | TiO2 Sales Volume | 5% | | TiO2 Product Pricing | 2% | | TiO2 Product Mix/Other | (2%) | | Changes in Currency Exchange Rates | (3%) | | **Total** | **2%** |

Core Insights - NL Industries, Inc. reported a significant decline in net income for Q1 2025, with net income attributable to NL stockholders at $0.7 million ($0.01 per share), down from $6.8 million ($0.14 per share) in Q1 2024, primarily due to an unrealized loss in marketable equity securities [1][6][16] - CompX experienced an increase in net sales to $40.3 million in Q1 2025, up from $38.0 million in Q1 2024, driven by higher sales in Marine Components and Security Products [2][18] - Kronos' net sales rose to $489.8 million in Q1 2025, a 2% increase from the previous year, attributed to higher sales volumes in North America and Europe, despite lower export volumes [4][20] NL Industries Financial Performance - The company recognized an unrealized loss of $8.5 million in Q1 2025 compared to a gain of $2.4 million in Q1 2024 related to marketable equity securities [1][6] - Corporate expenses increased by $0.3 million in Q1 2025, mainly due to higher environmental remediation costs [6][16] - Interest and dividend income decreased by $0.6 million in Q1 2025, attributed to lower average interest rates and decreased cash balances [6][16] CompX Performance - CompX's segment profit increased to $5.9 million in Q1 2025 from $3.7 million in Q1 2024, primarily due to higher Marine Components sales and improved gross margins [2][18] - The increase in net sales was primarily driven by higher demand in the towboat and government markets [2][18] Kronos Performance - Kronos' income from operations surged to $38.4 million in Q1 2025, up from $19.5 million in Q1 2024, driven by increased sales and production volumes, as well as reduced production costs [5][20] - TiO2 production volumes increased by 18% in Q1 2025 compared to the same period in 2024, with production facilities operating at average capacities of 93% [5][20] - Average TiO2 selling prices were 2% higher at the start of 2025 compared to the beginning of 2024, although they declined by 3% during Q1 2025 due to market pressures [4][5]

Core Viewpoint - NL Industries, Inc. is set to announce its first quarter 2025 earnings on May 7, 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]

Sales and Market Conditions - Approximately 90% of Kronos' sales in 2024 were attributable to TiO2 products, which are linked to global economic conditions and discretionary spending [115]. - Approximately 44% of Kronos' sales volumes in 2023 and 2024 were sold into European markets, exposing the company to currency exchange risks [138]. - Kronos' revenue from non-U.S. markets accounted for approximately 68%, 66%, and 66% for the years ended December 31, 2022, 2023, and 2024, respectively [147]. - The top five TiO2 producers account for approximately 51% of the global production capacity, indicating a highly concentrated and competitive market [117]. Financial Obligations and Debt - Kronos' total consolidated debt as of December 31, 2024, was approximately $507.4 million, which may impact its ability to satisfy obligations and fund operations [133]. - Kronos has minimum purchase commitments of approximately $542 million for TiO2 feedstock starting in 2025, which could adversely affect financial results if production is reduced [127]. - Kronos has an outstanding principal amount of indebtedness of $0.5 million at December 31, 2024, bearing interest at prime plus 1.875% [339]. - The outstanding principal amount of the note receivable from an affiliate is $9.3 million at December 31, 2024, bearing interest at prime plus 1.0% [340]. Cost and Pricing Pressures - Kronos experienced increases in feedstock costs in 2023 and 2024, which affected its profit margins and overall financial condition [126]. - Pricing pressures from competitors, particularly those with lower costs, may affect Kronos' profitability and market position [118]. - Future variations in energy costs, primarily linked to oil and natural gas prices, may significantly impact Kronos' operating results and liquidity [126]. Competition and Market Risks - Kronos is experiencing increasing competition from China, which has lower operating costs due to less stringent regulatory requirements [150]. - The integration of the LPC acquisition may divert significant management attention and could fail to achieve expected synergies or sales increases [130]. - Actual future market conditions may differ materially from the assumptions made in forward-looking statements [343]. Legal and Environmental Liabilities - Environmental obligations related to former operations may incur costs exceeding current estimates, potentially leading to material liabilities [145]. - Legal proceedings related to lead pigment litigation have resulted in recognized material liabilities for Kronos [145]. - Global climate change laws and regulations could negatively impact Kronos' financial results and operational capabilities [146]. Cash Flow and Financial Performance - Kronos' ability to generate cash flow is subject to various external factors, which may impact its capacity to refinance debt and fund capital expenditures [136]. - A 10% change in the prices of marketable equity securities would result in a potential change in fair value of $1.8 million and $2.8 million at December 31, 2023, and 2024, respectively [341]. - The fair value of Kronos' equity securities was $18.2 million and $28.0 million at December 31, 2023, and 2024, respectively [341]. Supply Chain Management - CompX occasionally enters into short-term commodity-related raw material supply arrangements to mitigate future cost increases [342]. - CompX does not have long-term supply agreements for raw materials due to low risk of unavailability and high price volatility [342]. - CompX does not engage in commodity raw material hedging programs [342].

Financial Performance - NL Industries reported a net income of $16.5 million, or $0.34 per share, in Q4 2024, compared to $7.6 million, or $0.16 per share, in Q4 2023[2] - For the full year 2024, NL Industries achieved a net income of $67.2 million, or $1.38 per share, compared to a net loss of $2.3 million, or $0.05 per share, in 2023[2] - Kronos' net sales for Q4 2024 were $423.1 million, a 6% increase from $400.1 million in Q4 2023[6] - Kronos' full year net sales reached $1.9 billion, up 13% from $1.68 billion in 2023[6] - Kronos' income from operations in Q4 2024 was $28.6 million, compared to a loss of $5.7 million in Q4 2023[9] - For the full year 2024, Kronos reported an income from operations of $122.9 million, reversing a loss of $56.0 million in 2023[9] Sales and Production - Kronos' TiO2 sales volumes increased by 4% in Q4 2024 and 20% for the full year compared to 2023[6] - Kronos' production rates increased to 96% of practical capacity utilization in 2024, compared to 72% in 2023[9] - Kronos completed the acquisition of the 50% joint venture interest in Louisiana Pigment Company, making it a wholly-owned subsidiary, which contributed to its financial results starting July 16, 2024[5] Comparative Analysis - Net sales for the three months ended December 31, 2023, increased to $43.2 million, up 12.5% from $38.4 million in the same period of 2024[22] - Gross margin improved to $13.6 million for the three months ended December 31, 2023, compared to $11.0 million in 2024, reflecting a gross margin percentage increase[22] - Income from operations for the year ended December 31, 2023, was $14.1 million, a significant increase from $37.9 million in 2024[22] - Net income attributable to NL stockholders for the three months ended December 31, 2023, was $7.6 million, compared to $16.5 million in 2024, indicating a decrease[22] - The CompX segment reported a profit of $7.4 million for the three months ended December 31, 2023, compared to $4.9 million in 2024[24] - Kronos' net sales for the year ended December 31, 2024, increased by 13%, driven by a 20% increase in sales volume of TiO2[26] - The company experienced a 6% increase in net sales for the three months ended December 31, 2024, compared to the same period in 2023[26] Insurance and Equity - Insurance recoveries for the year ended December 31, 2023, amounted to $1.4 million, up from $0.5 million in 2024[22] - The company reported a loss of $1.6 million from equity in earnings of Kronos Worldwide, Inc. for the three months ended December 31, 2023[22] - The weighted average shares used in the calculation of net income per share remained constant at 48.8 million for both periods[22] Environmental Settlement - NL recognized an aggregate income of $31.4 million related to an environmental remediation settlement in 2024[2]