Dallas, Texas, May 16, 2024 (GLOBE NEWSWIRE) -- NL Industries, Inc. (NYSE: NL) announced that its board of directors has declared a quarterly dividend of eight cents ($0.08) per share on its common stock, payable on June 25, 2024 to shareholders of record at the close of business on June 10, 2024. NL Industries also announced that at its 2024 annual shareholder meeting held today its shareholders had: elected each of Loretta J. Feehan, John E. Harper, Kevin B. Kramer, Meredith W. Mendes, Cecil H. Moore, Jr. ...

[First Quarter 2024 Financial Highlights](index=1&type=section&id=First%20Quarter%202024%20Financial%20Highlights) This section highlights NL Industries' financial performance in Q1 2024, noting a significant turnaround from a net loss to net income [NL Industries Overall Performance](index=1&type=section&id=NL%20Industries%20Overall%20Performance) NL Industries reported a significant turnaround in Q1 2024, moving from a net loss to net income attributable to stockholders, primarily driven by an unrealized gain on marketable equity securities NL Industries Key Financial Metrics | Metric (in $M, except per share amounts) | Q1 2024 | Q1 2023 | | :-------------------------------------- | :------ | :------ | | Net income (loss) attributable to NL stockholders | $6.8M | -$6.7M | | Net income (loss) per share attributable to NL stockholders | $0.14 | -$0.14 | | Unrealized gain (loss) on marketable equity securities | $2.4M | -$5.5M | [Segment Performance Analysis](index=1&type=section&id=Segment%20Performance%20Analysis) This section analyzes the performance of CompX and Kronos segments, highlighting sales trends, operational income, and key contributing factors [CompX Segment Results](index=1&type=section&id=CompX%20Segment%20Results) CompX experienced a decrease in net sales and income from operations in Q1 2024, mainly due to lower Marine Components sales, despite some offset from higher Security Products sales CompX Segment Financials | Metric (in $M) | Q1 2024 | Q1 2023 | Change | | :-------------------------- | :------ | :------ | :----- | | Net Sales | $38.0M | $41.2M | -$3.2M | | Income from Operations | $3.7M | $7.0M | -$3.3M | - Decrease in net sales primarily due to lower Marine Components sales to the towboat market, partially offset by higher Security Products sales to the government security market[3](index=3&type=chunk) - Decrease in income from operations predominantly due to lower Marine Components sales and gross margin[3](index=3&type=chunk) [Kronos Segment Results](index=1&type=section&id=Kronos%20Segment%20Results) Kronos segment results show significant improvements in net sales and operational income, driven by increased TiO2 sales volumes and lower production costs [Kronos Net Sales Drivers](index=1&type=section&id=Kronos%20Net%20Sales%20Drivers) Kronos' net sales increased by **12%** in Q1 2024, primarily due to a **28%** rise in TiO2 sales volumes driven by strengthening demand, which more than offset an **11%** decline in average TiO2 selling prices. Favorable currency exchange rates also contributed Kronos Net Sales Performance | Metric (in $M) | Q1 2024 | Q1 2023 | Change | | :---------------- | :------ | :------ | :----- | | Net Sales | $478.8M | $426.3M | +$52.5M | | Equity in Earnings (Losses) | $2.5M | -$4.6M | +$7.1M | Kronos Net Sales Change Breakdown | Factor | Percentage Change in Net Sales (Q1 2024 vs. Q1 2023) | | :-------------------------- | :------------------------------------------------ | | TiO2 sales volume | 28% | | TiO2 product pricing | (11)% | | Product mix/other TiO2 | (6)% | | Changes in currency exchange rates | 1% | | **Total** | **12%** | - Average TiO2 selling prices were **11%** lower in Q1 2024 compared to Q1 2023, and declined **2%** during Q1 2024[4](index=4&type=chunk) [Kronos Operational Performance](index=1&type=section&id=Kronos%20Operational%20Performance) Kronos' income from operations significantly improved to **$19.5 million** in Q1 2024 from a loss of **$18.3 million** in Q1 2023, driven by higher sales and production volumes, lower production costs (energy, raw materials), and increased capacity utilization Kronos Operational Metrics | Metric (in $M) | Q1 2024 | Q1 2023 | Change | | :----------------------- | :------ | :------ | :----- | | Income (Loss) from Operations | $19.5M | -$18.3M | +$37.8M | - TiO2 production volumes were **15%** higher in Q1 2024 compared to Q1 2023[5](index=5&type=chunk) - Capacity utilization increased from **76%** in Q1 2023 to **87%** in Q1 2024 due to improved demand and a more favorable production cost environment[5](index=5&type=chunk) [Other Financial and Operational Details](index=1&type=section&id=Other%20Financial%20and%20Operational%20Details) This section details corporate expenses, interest and dividend income, and specific income/loss adjustments impacting NL Industries' financial results [Corporate Expenses and Other Income](index=1&type=section&id=Corporate%20Expenses%20and%20Other%20Income) Corporate expenses decreased in Q1 2024 due to lower litigation fees, partially offset by higher environmental remediation costs. Interest and dividend income increased due to higher interest rates and investment balances - Corporate expenses decreased by **$0.4 million** in Q1 2024, primarily due to lower litigation fees and related costs, somewhat offset by higher environmental remediation and related costs[6](index=6&type=chunk) - Interest and dividend income increased by **$0.6 million** in Q1 2024, primarily due to higher average interest rates and increased investment balances[6](index=6&type=chunk) [Specific Income/Loss Adjustments](index=1&type=section&id=Specific%20Income%2FLoss%20Adjustments) NL Industries' Q1 2024 net income included a loss of **$0.3 million** from Kronos' write-off of deferred financing costs, contrasting with Q1 2023 which included income from Kronos' insurance settlement gain - Q1 2024 net income attributable to NL stockholders includes a loss of **$0.3 million** (net of tax) due to Kronos' recognition of an aggregate charge related to a write-off of deferred financing costs[7](index=7&type=chunk) - Q1 2023 net loss attributable to NL stockholders included income of **$0.4 million** (net of tax) due to Kronos' recognition of a pre-tax insurance settlement gain related to a business interruption insurance claim from Hurricane Laura in 2020[7](index=7&type=chunk)[8](index=8&type=chunk) [Business Overview and Future Outlook](index=2&type=section&id=Business%20Overview%20and%20Future%20Outlook) This section provides an overview of NL Industries' business segments and outlines forward-looking statements and key risk factors affecting future performance [NL Industries Business Description](index=5&type=section&id=NL%20Industries%20Business%20Description) NL Industries, Inc. operates in two main business areas: component products (security products and recreational marine components) and chemicals (TiO2) - NL Industries, Inc. is engaged in component products (security products and recreational marine components) and chemicals (TiO2) businesses[12](index=12&type=chunk) [Forward-Looking Statements and Risk Factors](index=2&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factors) The report includes forward-looking statements based on management's beliefs, acknowledging substantial risks and uncertainties that could cause actual future results to differ materially. Key risk factors include supply/demand fluctuations, cyclicality, raw material costs, global economic conditions, operating interruptions, technology disruptions, competition, and regulatory changes - Forward-looking statements represent management's beliefs and assumptions, but actual future results could differ materially due to substantial risks and uncertainties[9](index=9&type=chunk) - Factors that could cause actual future results to differ materially include future supply and demand for products, business cyclicality (such as Kronos' TiO2 operations), changes in raw material and other operating costs, general global economic and political conditions, operating interruptions, technology related disruptions, competitive products and substitute products, and government laws and regulations[10](index=10&type=chunk)[13](index=13&type=chunk) [Condensed Financial Information](index=6&type=section&id=Condensed%20Financial%20Information) This section presents condensed consolidated financial statements, detailing operational income components and the breakdown of Kronos' net sales changes [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The condensed consolidated statements show NL Industries' shift from a net loss to net income in Q1 2024, with significant improvements in equity in earnings of Kronos and marketable equity securities, despite a decrease in net sales and gross margin Condensed Consolidated Statements of Operations | Metric (In millions, except EPS) | Q1 2024 | Q1 2023 | | :----------------------------------- | :------ | :------ | | Net sales | $38.0 | $41.2 | | Cost of sales | $28.3 | $28.5 | | Gross margin | $9.7 | $12.7 | | Selling, general and administrative expense | $6.0 | $5.7 | | Corporate expense | $2.4 | $2.8 | | Income from operations | $1.3 | $4.2 | | Equity in earnings (losses) of Kronos | $2.5 | ($4.6) | | Interest and dividend income | $2.6 | $2.0 | | Marketable equity securities | $2.4 | ($5.5) | | Income (loss) before income taxes | $8.3 | ($4.5) | | Income tax expense | $1.0 | $1.4 | | Net income (loss) | $7.3 | ($5.9) | | Noncontrolling interest | $0.5 | $0.8 | | Net income (loss) attributable to NL stockholders | $6.8 | ($6.7) | | Net income (loss) per share attributable to NL stockholders | $0.14 | ($0.14) | | Weighted average shares | 48.8 | 48.8 | [Components of Income from Operations](index=7&type=section&id=Components%20of%20Income%20from%20Operations) This table provides a breakdown of NL Industries' income from operations, showing a decrease in CompX's contribution and a reduction in corporate expenses, leading to a lower overall income from operations Income from Operations Components | Metric (In millions) | Q1 2024 | Q1 2023 | | :------------------------- | :------ | :------ | | CompX - component products | $3.7 | $7.0 | | Corporate expense | ($2.4) | ($2.8) | | **Income from operations** | **$1.3** | **$4.2** | [Change in Kronos' Net Sales Breakdown](index=7&type=section&id=Change%20in%20Kronos'%20Net%20Sales%20Breakdown) This table details the specific factors contributing to the **12%** increase in Kronos' net sales in Q1 2024, primarily highlighting the positive impact of TiO2 sales volume growth and the negative effect of product pricing Kronos Net Sales Change Breakdown | Factor | Percentage Change in Net Sales (Q1 2024 vs. Q1 2023) | | :-------------------------- | :------------------------------------------------ | | TiO2 sales volume | 28% | | TiO2 product pricing | (11)% | | Product mix/other TiO2 | (6)% | | Changes in currency exchange rates | 1% | | **Total** | **12%** |

Part I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents NL Industries' unaudited condensed consolidated financial statements, showing a Q1 2024 net income turnaround driven by equity earnings from Kronos and marketable securities, despite slightly decreased assets and sales [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | Dec 31, 2023 (in thousands) | Mar 31, 2024 (in thousands) | Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | | Total Assets | $576,662 | $568,816 | $(7,846) | | Total Liabilities | $184,900 | $178,732 | $(6,168) | | Total Equity | $391,762 | $390,084 | $(1,678) | | Cash and cash equivalents | $111,522 | $138,257 | $26,735 | | Marketable securities (current) | $53,149 | $29,662 | $(23,487) | | Investment in Kronos Worldwide, Inc. | $247,582 | $237,221 | $(10,361) | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric | Q1 2023 (in thousands) | Q1 2024 (in thousands) | Change (YoY) | | :------------------------------------- | :--------------------- | :--------------------- | :----------- | | Net sales | $41,151 | $37,971 | $(3,180) | | Gross margin | $12,704 | $9,667 | $(3,037) | | Income from operations | $4,197 | $1,356 | $(2,841) | | Equity in earnings (losses) of Kronos | $(4,637) | $2,476 | $7,113 | | Marketable equity securities | $(5,498) | $2,383 | $7,881 | | Net income (loss) | $(5,939) | $7,315 | $13,254 | | Net income (loss) attributable to NL stockholders | $(6,716) | $6,839 | $13,555 | | Basic and diluted net income (loss) per share | $(0.14) | $0.14 | $0.28 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) | Metric | Q1 2023 (in thousands) | Q1 2024 (in thousands) | Change (YoY) | | :------------------------------------------------ | :--------------------- | :--------------------- | :----------- | | Net income (loss) | $(5,939) | $7,315 | $13,254 | | Total other comprehensive loss, net | $(1,381) | $(4,620) | $(3,239) | | Comprehensive income (loss) | $(7,320) | $2,695 | $10,015 | | Comprehensive income (loss) attributable to NL stockholders | $(8,093) | $2,220 | $10,313 | [Condensed Consolidated Statements of Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) | Metric | Dec 31, 2023 (in thousands) | Mar 31, 2024 (in thousands) | Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | | Total NL stockholders' equity | $369,812 | $368,126 | $(1,686) | | Noncontrolling interest in subsidiary | $21,950 | $21,958 | $8 | | Total equity | $391,762 | $390,084 | $(1,678) | | Retained earnings (Dec 31, 2023 to Mar 31, 2024) | $284,462 | $287,395 | $2,933 | | Accumulated other comprehensive loss (Dec 31, 2023 to Mar 31, 2024) | $(219,621) | $(224,240) | $(4,619) | | Dividends paid - $.08 per share (Q1 2024) | N/A | $(3,906) | N/A | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric | Q1 2023 (in thousands) | Q1 2024 (in thousands) | Change (YoY) | | :------------------------------------ | :--------------------- | :--------------------- | :----------- | | Net cash provided by operating activities | $7,278 | $6,744 | $(534) | | Net cash provided by (used in) investing activities | $(24,094) | $24,495 | $48,589 | | Net cash used in financing activities | $(3,805) | $(4,373) | $(568) | | Cash and cash equivalents and restricted cash - net change | $(20,621) | $26,866 | $47,487 | | Balance at end of period | $76,881 | $168,248 | $91,367 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - NL Industries, Inc. is primarily a holding company, with **Valhi, Inc.** holding approximately **83%** of its common stock. NL also owns approximately **31%** of **Kronos Worldwide, Inc.** and has a majority-owned subsidiary, **CompX International Inc.**[22](index=22&type=chunk)[23](index=23&type=chunk)[25](index=25&type=chunk) - The company's noncurrent marketable securities include an investment in **Valhi, Inc.** common stock, valued at **$20.577 million** at March 31, 2024, up from **$18.194 million** at December 31, 2023[29](index=29&type=chunk)[30](index=30&type=chunk) - NL owned approximately **35.2 million shares** of **Kronos** common stock, with an aggregate market value of **$415.6 million** at March 31, 2024, an increase from **$350.1 million** at December 31, 2023[32](index=32&type=chunk) | Metric | Q1 2023 (in thousands) | Q1 2024 (in thousands) | Change (YoY) | | :-------------------- | :--------------------- | :--------------------- | :----------- | | Security Products Net Sales | $27,342 | $29,887 | $2,545 | | Marine Components Net Sales | $13,809 | $8,084 | $(5,725) | | Total Net Sales | $41,151 | $37,971 | $(3,180) | - The company is involved in significant lead pigment litigation, with **two annual installment payments** remaining for the Santa Clara global settlement agreement (**$12.0 million** due in September 2024 and **$16.7 million** for the final installment due in September 2025). The company believes it has substantial defenses and has not accrued liability for other pending lead pigment cases[47](index=47&type=chunk)[49](index=49&type=chunk)[51](index=51&type=chunk) - Accrued environmental remediation and related costs totaled **$90.947 million** at March 31, 2024, with a reasonably possible upper range of approximately **$118 million** for estimable sites. There are approximately **five sites** for which costs cannot be reasonably estimated yet[62](index=62&type=chunk)[63](index=63&type=chunk) - The FASB issued **ASU 2023-07 (Segment Reporting)** and **ASU 2023-09 (Income Taxes)**, requiring additional disclosures. **ASU 2023-07** is effective for NL's **2024 Annual Report** and **Q1 2025 interim reporting**, while **ASU 2023-09** is effective for its **2025 Annual Report**[70](index=70&type=chunk)[71](index=71&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) NL Industries' Q1 2024 net income significantly increased, driven by marketable equity securities gains and Kronos' equity earnings, despite lower CompX operating income. The company maintains strong liquidity, supported by affiliate dividends and credit facilities - Net income attributable to NL stockholders increased significantly from a loss of **$6.7 million** in Q1 2023 to a gain of **$6.8 million** in Q1 2024[78](index=78&type=chunk) - This improvement was driven by an unrealized gain on marketable equity securities and a positive swing in equity in earnings from Kronos, partially offset by lower income from CompX operations[83](index=83&type=chunk) | Metric | Q1 2023 (in millions) | Q1 2024 (in millions) | Change (YoY) | | :------------------------------------- | :-------------------- | :-------------------- | :----------- | | Equity in earnings (losses) of Kronos | $(4.6) | $2.5 | $7.1 | | Marketable equity securities unrealized gain (loss) | $(5.5) | $2.4 | $7.9 | | Interest and dividend income | $2.0 | $2.6 | $0.6 | | Metric | Q1 2023 (in millions) | Q1 2024 (in millions) | Change (YoY) | | :-------------------- | :-------------------- | :-------------------- | :----------- | | CompX Income from operations | $7.0 | $3.7 | $(3.3) | | Corporate expense | $(2.8) | $(2.4) | $0.4 | | Total Income from operations | $4.2 | $1.3 | $(2.9) | [Business overview](index=24&type=section&id=Business%20overview) - **NL** is a holding company with a majority-owned subsidiary, **CompX International Inc.**, and a **31%** non-controlling interest in **Kronos Worldwide, Inc.**[72](index=72&type=chunk)[74](index=74&type=chunk) - **CompX** manufactures mechanical and electronic cabinet locks (**Security Products**) and wake enhancement systems, exhaust systems, gauges, and related hardware for recreational marine (**Marine Components**)[73](index=73&type=chunk) - **Kronos** is a leading global producer and marketer of titanium dioxide pigments (**TiO2**) used in paints, plastics, and paper[74](index=74&type=chunk) [Forward-looking information](index=24&type=section&id=Forward-looking%20information) - Forward-looking statements are subject to substantial risks and uncertainties that could significantly impact expected results[75](index=75&type=chunk) - Key risk factors include future supply and demand, business cyclicality (e.g., **Kronos' TiO2** operations), raw material and operating costs, global economic and political conditions, operating interruptions, technology disruptions, competitive pressures, currency fluctuations, and pending litigation (lead pigment and environmental matters)[75](index=75&type=chunk)[77](index=77&type=chunk) [Results of operations](index=27&type=section&id=Results%20of%20operations) | Metric | Q1 2023 (in millions) | Q1 2024 (in millions) | Change (YoY) | | :-------------------- | :-------------------- | :-------------------- | :----------- | | Net sales | $41.2 | $38.0 | $(3.2) | | Cost of sales | $28.5 | $28.3 | $(0.2) | | Gross margin | $12.7 | $9.7 | $(3.0) | | Income from operations | $7.0 | $3.7 | $(3.3) | | Gross margin % | 31% | 25% | -6% | | Income from operations % | 17% | 10% | -7% | - The decrease in income from operations was primarily due to lower **Marine Components** sales and gross margin[84](index=84&type=chunk) - Operating costs and expenses increased by **$0.3 million** due to higher employee salaries and benefits at **Security Products**[87](index=87&type=chunk) [CompX International Inc.](index=28&type=section&id=CompX%20International%20Inc.) [Security Products](index=29&type=section&id=Security%20Products) | Metric | Q1 2023 (in millions) | Q1 2024 (in millions) | Change (YoY) | | :-------------------- | :-------------------- | :-------------------- | :----------- | | Net sales | $27.4 | $29.9 | $2.5 | | Gross margin | $8.5 | $8.8 | $0.3 | | Operating income | $5.4 | $5.5 | $0.1 | | Gross margin % | 31% | 29% | -2% | | Operating income margin % | 20% | 18% | -2% | - Sales increased primarily due to **$1.8 million** higher sales to the government security market[91](index=91&type=chunk) [Marine Components](index=29&type=section&id=Marine%20Components) | Metric | Q1 2023 (in millions) | Q1 2024 (in millions) | Change (YoY) | | :-------------------- | :-------------------- | :-------------------- | :----------- | | Net sales | $13.8 | $8.1 | $(5.7) | | Gross margin | $4.2 | $0.9 | $(3.3) | | Operating income | $3.3 | $0.0 | $(3.3) | | Gross margin % | 31% | 11% | -20% | | Operating income margin % | 24% | 0% | -24% | - Sales decreased by **$4.3 million** to the towboat market, **$0.7 million** to the industrial market, **$0.3 million** to the engine builder market, and **$0.3 million** to distributors[92](index=92&type=chunk) - Gross margin percentage decreased primarily due to higher cost inventory produced in Q4 2023 (due to lower production volumes) and decreased coverage of fixed overhead on lower sales[92](index=92&type=chunk) [Outlook](index=29&type=section&id=Outlook) - **CompX** expects **Security Products** sales in **2024** to be lower than **2023**, with comparable gross margin but declining operating income margin due to limited pricing power and reduced coverage of SG&A costs[95](index=95&type=chunk) - **Marine Components** net sales for **2024** are expected to be lower than **2023** due to anticipated further decline in the towboat market, leading to lower gross and operating income margins[95](index=95&type=chunk) - **CompX** is aligning **Marine Components** inventory balances with current demand, expecting completion by mid-**2024**, after elevated balances at the end of **2023**[95](index=95&type=chunk) [General corporate and other items](index=31&type=section&id=General%20corporate%20and%20other%20items) | Metric | Q1 2023 (in millions) | Q1 2024 (in millions) | Change (YoY) | | :------------------------------------- | :-------------------- | :-------------------- | :----------- | | Corporate expenses | $2.8 | $2.4 | $(0.4) | | Litigation fees and related costs | $1.4 | $0.7 | $(0.7) | | Environmental remediation and related costs | $0.0 | $0.2 | $0.2 | | Interest and dividend income | $2.0 | $2.6 | $0.6 | | Marketable equity securities (unrealized gain/loss) | $(5.5) | $2.4 | $7.9 | | Income tax expense | $1.4 | $1.0 | $(0.4) | - The effective tax rate attributable to equity in earnings of **Kronos** was **negative 10.6%** in Q1 2024 (vs. **negative 28.7%** in Q1 2023) due to nontaxable dividends from **Kronos** and anticipated higher full-year earnings for **Kronos** in **2024**[102](index=102&type=chunk)[103](index=103&type=chunk) [Equity in earnings (losses) of Kronos Worldwide, Inc.](index=33&type=section&id=Equity%20in%20earnings%20(losses)%20of%20Kronos%20Worldwide,%20Inc.) | Metric | Q1 2023 (in millions) | Q1 2024 (in millions) | Change (YoY) | | :------------------------------------- | :-------------------- | :-------------------- | :----------- | | Net sales | $426.3 | $478.8 | $52.5 | | Gross margin | $30.8 | $71.5 | $40.7 | | Income (loss) from operations | $(18.3) | $19.5 | $37.8 | | Net income (loss) | $(15.2) | $8.1 | $23.3 | | Equity in earnings (losses) of Kronos | $(4.6) | $2.5 | $7.1 | | Cost of sales % of net sales | 93% | 85% | -8% | | Income (loss) from operations % of net sales | -4% | 4% | +8% | | Metric | Q1 2023 (in thousands of metric tons) | Q1 2024 (in thousands of metric tons) | Change (YoY) | | :-------------------- | :------------------------------------ | :------------------------------------ | :----------- | | TiO2 Sales volumes | 102 | 130 | 28% | | TiO2 Production volumes | 105 | 121 | 15% | [Current industry conditions](index=35&type=section&id=Current%20industry%20conditions) - **TiO2** demand improved in Q1 2024 across all major markets, though still below historical levels[107](index=107&type=chunk) - **Kronos'** production facility utilization increased to **87%** in Q1 2024 from **76%** in Q1 2023 due to increased demand and more favorable production costs[108](index=108&type=chunk) - Average **TiO2** selling prices in Q1 2024 were **11% lower** than Q1 2023 and declined **2%** during Q1 2024[107](index=107&type=chunk) - Cost of sales per metric ton of **TiO2** sold significantly decreased due to lower feedstock costs and reduced unabsorbed fixed costs[109](index=109&type=chunk) - **Kronos** plans to close its sulfate process line in Varennes, Canada, by Q3 2024, expecting a **$2 million** charge for workforce reductions and approximately **$15 million** in non-cash charges related to the closure[111](index=111&type=chunk) [Net sales](index=35&type=section&id=Net%20sales) - Net sales increased by **$52.5 million (12%)** in Q1 2024 compared to Q1 2023[112](index=112&type=chunk) - This increase was primarily due to a **28% increase** in sales volumes (contributing approximately **$119 million**), partially offset by an **11% decrease** in average **TiO2** selling prices (decreasing net sales by approximately **$47 million**)[112](index=112&type=chunk) - Changes in currency exchange rates (primarily the euro) increased net sales by approximately **$4 million**[112](index=112&type=chunk) [Cost of sales and gross margin](index=35&type=section&id=Cost%20of%20sales%20and%20gross%20margin) - Cost of sales increased by **$11.8 million (3%)** in Q1 2024, driven by higher sales and production volumes[114](index=114&type=chunk) - Production costs decreased by approximately **$64 million**, primarily due to lower energy and raw material costs[114](index=114&type=chunk) - Unabsorbed fixed production costs decreased by **$10 million**, from **$22 million** in Q1 2023 to **$12 million** in Q1 2024[114](index=114&type=chunk) - Cost of sales as a percentage of net sales improved to **85%** (from **93%**), and gross margin as a percentage of net sales increased to **15%** (from **7%**)[115](index=115&type=chunk)[118](index=118&type=chunk) [Selling, general and administrative expense](index=37&type=section&id=Selling,%20general%20and%20administrative%20expense) - SG&A expense increased by **$1.0 million (2%)** in Q1 2024, mainly due to variable costs from higher sales volumes[119](index=119&type=chunk) - SG&A as a percentage of net sales decreased to **11%** in Q1 2024 from **12%** in Q1 2023[119](index=119&type=chunk) [Income (loss) from operations](index=37&type=section&id=Income%20(loss)%20from%20operations) - Income from operations increased by **$37.8 million**, from a loss of **$18.3 million** in Q1 2023 to an income of **$19.5 million** in Q1 2024[120](index=120&type=chunk) - Q1 2023 included a **$1.7 million** gain from a business interruption insurance claim settlement[120](index=120&type=chunk) [Other non-operating income (expense)](index=37&type=section&id=Other%20non-operating%20income%20(expense)) - Unrealized gain on marketable equity securities was **$0.3 million** in Q1 2024, compared to a **$0.7 million loss** in Q1 2023[121](index=121&type=chunk) - Interest expense increased by **$5.0 million** due to a debt exchange in February 2024, involving new **9.50% Senior Secured Notes** and an **11.5% subordinated term loan**[121](index=121&type=chunk) - A **$1.5 million** charge for the write-off of deferred financing costs was included in Q1 2024 interest expense[121](index=121&type=chunk) [Income tax expense (benefit)](index=37&type=section&id=Income%20tax%20expense%20(benefit)) - Income tax expense was **$3.5 million** in Q1 2024, compared to a **$6.9 million benefit** in Q1 2023, driven by higher earnings and jurisdictional mix[122](index=122&type=chunk) - **Kronos'** consolidated effective income tax rate in Q1 2024 was lower than the U.S. federal statutory rate of **21%** due to lower earnings and tax benefits from losses in certain high-tax jurisdictions[122](index=122&type=chunk) - The **OECD's Pillar Two** initiative is not anticipated to have a material impact on **Kronos'** financial statements based on currently enacted legislation[123](index=123&type=chunk) [Effects of currency exchange rates](index=37&type=section&id=Effects%20of%20currency%20exchange%20rates) - Currency exchange rate fluctuations increased **Kronos'** net sales by **$4 million** in Q1 2024, mainly due to a weakening U.S. dollar relative to the euro[127](index=127&type=chunk)[129](index=129&type=chunk) - The impact of currency exchange rates on **Kronos'** income from operations was nominal[130](index=130&type=chunk) - **Kronos'** non-U.S. operations generate currency transaction gains and losses from differences in exchange rates between accrual and settlement of non-local currency transactions and holding non-local currency[125](index=125&type=chunk) [Outlook](index=39&type=section&id=Outlook) - **Kronos** expects sales volumes in **2024** to exceed **2023** levels due to improved customer demand across all major markets[131](index=131&type=chunk) - Production rates are expected to be higher than comparable periods in **2023**, and implemented **TiO2** selling price increases are aimed at achieving historical margin levels[131](index=131&type=chunk) - Gross margins are expected to improve as higher-cost inventory from late **2023** is replaced with lower-cost inventory produced in **2024**, coupled with realized price increases and cost reduction efforts[132](index=132&type=chunk) - Overall, **Kronos** expects higher operating results for the full year **2024** compared to **2023** due to improved demand, higher selling prices, and lower production costs[132](index=132&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) | Metric | Q1 2023 (in millions) | Q1 2024 (in millions) | Change (YoY) | | :------------------------------------ | :-------------------- | :-------------------- | :----------- | | Net cash provided by operating activities | $7.3 | $6.7 | $(0.6) | | Net cash provided by (used in) investing activities | $(24.1) | $24.5 | $48.6 | | Net cash used in financing activities | $(3.8) | $4.4 | $(0.6) | - At March 31, 2024, the company had **$197.9 million** in aggregate restricted and unrestricted cash, cash equivalents, and current marketable securities[148](index=148&type=chunk)[149](index=149&type=chunk) - **NL** also held investments in **Valhi** common stock (**$20.6 million** market value) and **Kronos** common stock (**$415.6 million** market value) at March 31, 2024[150](index=150&type=chunk) - The company expects to have sufficient liquidity for short-term and long-term obligations, supported by a **$50 million** revolving credit facility with **Valhi**, of which **$49.5 million** was available at March 31, 2024[153](index=153&type=chunk) | Affiliate | Shares held (millions) | Quarterly Dividend Rate | Annual Expected Dividend (millions) | | :-------- | :--------------------- | :---------------------- | :---------------------------------- | | Kronos | 35.2 | $0.19 | $26.8 | | CompX | 10.8 | $0.30 | $12.9 | | Valhi | 1.2 | $0.08 | $0.4 | | Total | | | $40.1 | [Consolidated cash flows](index=40&type=section&id=Consolidated%20cash%20flows) - Net cash provided by operating activities decreased by **$0.5 million** to **$6.7 million** in Q1 2024[136](index=136&type=chunk) - Investing activities provided **$24.5 million** in Q1 2024, a significant increase from a **$24.1 million** use in Q1 2023, primarily due to **$24.0 million** in proceeds from U.S. treasury bill maturities[140](index=140&type=chunk) - Financing activities used **$4.4 million** in Q1 2024, up from **$3.8 million** in Q1 2023, mainly due to higher dividends paid (**$0.08 per share** in 2024 vs. **$0.07** in 2023)[143](index=143&type=chunk) [Operating activities](index=40&type=section&id=Operating%20activities) - Net cash provided by operating activities was **$6.7 million** in Q1 2024, down from **$7.3 million** in Q1 2023[136](index=136&type=chunk) - Key factors for the decrease include lower income from **CompX** operations (**$3.3 million**) and higher interest income received (**$0.9 million**)[141](index=141&type=chunk) | Metric | Dec 31, 2023 | Mar 31, 2024 | Change | | :------------------ | :----------- | :----------- | :----- | | Days sales outstanding | 36 days | 42 days | +6 days | | Days in inventory | 95 days | 89 days | -6 days | [Investing activities](index=40&type=section&id=Investing%20activities) - Net cash provided by investing activities was **$24.5 million** in Q1 2024, compared to a net use of **$24.1 million** in Q1 2023[20](index=20&type=chunk) - Proceeds from U.S. treasury bill maturities totaled **$24.0 million** in Q1 2024 (vs. **$8.0 million** in Q1 2023)[140](index=140&type=chunk) - Capital expenditures remained stable at **$0.3 million** in both Q1 2024 and Q1 2023[139](index=139&type=chunk) [Financing activities](index=42&type=section&id=Financing%20activities) - Net cash used in financing activities increased to **$4.373 million** in Q1 2024 from **$3.805 million** in Q1 2023[20](index=20&type=chunk) - Dividends paid to **NL** stockholders increased from **$0.07 per share** in Q1 2023 to **$0.08 per share** in Q1 2024[143](index=143&type=chunk) [Outstanding debt obligations](index=42&type=section&id=Outstanding%20debt%20obligations) - **NLKW** had **$0.5 million** outstanding and **$49.5 million** available under its **$50 million** secured revolving credit facility with **Valhi** at March 31, 2024[145](index=145&type=chunk) - **Kronos** had no outstanding borrowings on its **$225 million** global revolving credit facility, with full availability[146](index=146&type=chunk) - **Kronos** completed a debt exchange in February 2024, issuing **€276.174 million** of **9.50% Senior Secured Notes** due March 2029 and a new **$53.7 million** subordinated term loan from **Contran**[146](index=146&type=chunk) - Both **NL** and **Kronos** are in compliance with all debt covenants[145](index=145&type=chunk)[146](index=146&type=chunk) [Future cash requirements](index=42&type=section&id=Future%20cash%20requirements) - Primary liquidity sources are operating cash flows and credit facilities with affiliates[147](index=147&type=chunk) - At March 31, 2024, **NL** had **$197.9 million** in cash, cash equivalents, and current marketable securities, and expects sufficient liquidity for short-term and long-term obligations[148](index=148&type=chunk)[149](index=149&type=chunk)[153](index=153&type=chunk) - **CompX** expects **$2.8 million** in capital expenditures for **2024**[154](index=154&type=chunk) | Affiliate | Annual Expected Dividend (millions) | | :-------- | :---------------------------------- | | Kronos | $26.8 | | CompX | $12.9 | | Valhi | $0.4 | | Total | $40.1 | [Liquidity](index=42&type=section&id=Liquidity) - Primary liquidity sources are cash flow from operating activities and credit facilities with affiliates[147](index=147&type=chunk) - At March 31, 2024, the company had **$197.9 million** in cash, cash equivalents, and current marketable securities, all held in the U.S.[148](index=148&type=chunk)[149](index=149&type=chunk) - **NL** also owned approximately **1.2 million shares** of **Valhi** common stock (**$20.6 million** market value) and **35.2 million shares** of **Kronos** common stock (**$415.6 million** market value)[150](index=150&type=chunk) - The company expects sufficient liquidity for short-term (**12 months**) and long-term (**5 years**) obligations, supported by a **$50 million** revolving loan from **Valhi** (**$49.5 million** available)[153](index=153&type=chunk) [Capital expenditures](index=44&type=section&id=Capital%20expenditures) - Firm purchase commitments for capital projects totaled **$0.4 million** at March 31, 2024[154](index=154&type=chunk) - **CompX** expects to spend **$2.8 million** on capital investments in **2024**, mainly for customer demand and facility/technology maintenance[154](index=154&type=chunk) [Repurchases of common stock](index=44&type=section&id=Repurchases%20of%20common%20stock) - **CompX** had **523,647 shares** available for repurchase under its stock repurchase program at March 31, 2024[155](index=155&type=chunk) [Dividends](index=44&type=section&id=Dividends) - **NL's** long-term ability to meet parent company obligations depends on dividends from subsidiaries and affiliates[156](index=156&type=chunk) | Affiliate | Annual Expected Dividend (millions) | | :-------- | :---------------------------------- | | Kronos | $26.8 | | CompX | $12.9 | | Valhi | $0.4 | | Total | $40.1 | - The declaration and payment of future dividends are discretionary and depend on financial condition, cash requirements, and other factors[143](index=143&type=chunk) [Investments in our subsidiaries and affiliates and other acquisitions](index=44&type=section&id=Investments%20in%20our%20subsidiaries%20and%20affiliates%20and%20other%20acquisitions) - **NL** periodically evaluates acquisitions of interests in or combinations with companies, including related companies, and may issue additional equity or increase indebtedness for such activities[152](index=152&type=chunk)[158](index=158&type=chunk) - The company also evaluates restructuring ownership interests among its subsidiaries and related companies[152](index=152&type=chunk)[158](index=158&type=chunk) [Commitments and contingencies](index=46&type=section&id=Commitments%20and%20contingencies) - No material changes in contractual obligations since the **2023 Annual Report**[159](index=159&type=chunk) - The company is subject to various commitments and contingencies, including legal proceedings related to lead pigment and environmental matters[160](index=160&type=chunk) - Proposed legislation that could impose civil liability based on market share or revive barred actions for lead pigment litigation could have a material adverse effect, though none has been enacted[160](index=160&type=chunk) [Recent accounting pronouncements](index=46&type=section&id=Recent%20accounting%20pronouncements) - Refer to **Note 15** for details on recent accounting pronouncements, including **ASU 2023-07 (Segment Reporting)** and **ASU 2023-09 (Income Taxes)**[161](index=161&type=chunk) [Critical accounting policies and estimates](index=46&type=section&id=Critical%20accounting%20policies%20and%20estimates) - No changes in critical accounting policies during Q1 2024[162](index=162&type=chunk) - Refer to the **2023 Annual Report** for a discussion of critical accounting policies[162](index=162&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) The company is exposed to market risks related to currency exchange rates, interest rates, and equity security prices. There have been no material changes in these market risks since the 2023 Annual Report - The company is exposed to market risks including currency exchange rates, interest rates, and equity security prices[163](index=163&type=chunk) - No material changes in market risks since the **2023 Annual Report**[163](index=163&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting, excluding equity method investees but including investment recording controls - Disclosure controls and procedures were evaluated as effective as of March 31, 2024, by the principal executive and financial officers[164](index=164&type=chunk) - No material changes to internal control over financial reporting occurred during Q1 2024[168](index=168&type=chunk) - The assessment of internal control over financial reporting excludes equity method investees and financial statement schedules but includes controls over recording investment amounts related to equity method investees[167](index=167&type=chunk) Part II. OTHER INFORMATION [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 13 of the Condensed Consolidated Financial Statements and the 2023 Annual Report for a discussion of legal proceedings - Refer to **Note 13** to the Condensed Consolidated Financial Statements and the **2023 Annual Report** for information on legal proceedings[170](index=170&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) This section refers to Part I, Item 1A, "Risk Factors," in the 2023 Annual Report for a discussion of business-related risk factors - Refer to **Part I, Item 1A, "Risk Factors,"** in the **2023 Annual Report** for a discussion of business-related risk factors[171](index=171&type=chunk) [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications (31.1, 31.2, 32.1) and Inline XBRL documents - The report includes certifications (**31.1, 31.2, 32.1**) and **Inline XBRL** documents as exhibits[174](index=174&type=chunk) SIGNATURES - The report was signed on **May 8, 2024**, by **Amy Allbach Samford (EVP & CFO)** and **Amy E. Ruf (VP & Controller)**[176](index=176&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-640 NL INDUSTRIES, INC. (Exact name of Registrant as specified in its charter) New Jersey 13-5267260 (State or other jurisdiction of incorporation ...

NL REPORTS FOURTH QUARTER 2023 RESULTS DALLAS, TEXAS – March 6, 2024 – NL Industries, Inc. (NYSE: NL) today reported net income attributable to NL stockholders of $7.6 million, or $.16 per share, in the fourth quarter of 2023 compared to a net loss attributable to NL stockholders of $6.1 million, or $.13 per share, in the fourth quarter of 2022. NL's results include an unrealized gain of $2.4 million in the fourth quarter of 2023 related to the change in value of marketable equity securities compared to a $ ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-640 NL INDUSTRIES, INC. (Exact name of Registrant as specified in its charter) New Jersey 13-5267260 (State or other ju ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements of NL Industries, Inc. and its subsidiaries for the periods ended June 30, 2023, including balance sheets, statements of operations, comprehensive income (loss), equity, and cash flows, along with detailed notes explaining significant accounts and transactions [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (In thousands) | ASSETS | Dec 31, 2022 | Jun 30, 2023 (unaudited) | | :--------------------------------- | :----------- | :----------------------- | | Cash and cash equivalents | $68,868 | $58,523 | | Marketable securities (current) | $70,164 | $95,716 | | Total current assets | $193,968 | $208,373 | | Investment in Kronos Worldwide, Inc. | $292,206 | $268,469 | | Total assets | $609,867 | $586,421 | | LIABILITIES AND EQUITY | | | | Total current liabilities | $32,052 | $29,338 | | Total noncurrent liabilities | $175,068 | $168,309 | | Total NL stockholders' equity | $382,150 | $367,657 | | Total liabilities and equity | $609,867 | $586,421 | - Total assets decreased by **$23.4 million** from $609.9 million at December 31, 2022, to $586.4 million at June 30, 2023, primarily due to a decrease in the investment in Kronos Worldwide, Inc. and cash and cash equivalents[9](index=9&type=chunk) - Total NL stockholders' equity decreased by **$14.5 million** from $382.2 million at December 31, 2022, to $367.7 million at June 30, 2023[11](index=11&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (In thousands, except per share data) | Metric | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net sales | $41,675 | $36,616 | $83,725 | $77,767 | | Gross margin | $13,629 | $10,273 | $25,709 | $22,977 | | Income from operations | $4,205 | $1,421 | $8,075 | $5,618 | | Equity in earnings (losses) of Kronos Worldwide, Inc. | $13,991 | $(2,516) | $31,524 | $(7,153) | | Net income (loss) attributable to NL stockholders | $30,252 | $(3,108) | $48,809 | $(9,824) | | Basic and diluted net income (loss) per share | $0.62 | $(0.06) | $1.00 | $(0.20) | - Net sales decreased by **12.1%** for the three months ended June 30, 2023, and by **7.1%** for the six months ended June 30, 2023, compared to the same periods in 2022[13](index=13&type=chunk) - The company reported a **net loss attributable to NL stockholders of $3.1 million ($.06 per share)** for Q2 2023, a significant decline from net income of $30.3 million ($.62 per share) in Q2 2022[13](index=13&type=chunk)[82](index=82&type=chunk) - Equity in earnings from Kronos Worldwide, Inc. shifted from a gain of **$14.0 million** in Q2 2022 to a loss of **$2.5 million** in Q2 2023, significantly impacting overall profitability[13](index=13&type=chunk)[87](index=87&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Condensed Consolidated Statements of Comprehensive Income (Loss) (In thousands) | Metric | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | | :------------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (loss) | $31,057 | $(2,591) | $50,266 | $(8,530) | | Total other comprehensive income (loss), net | $(7,948) | $3,278 | $(5,563) | $1,897 | | Comprehensive income (loss) attributable to NL stockholders | $22,304 | $162 | $43,246 | $(7,931) | - Comprehensive income attributable to NL stockholders decreased significantly from **$22.3 million** in Q2 2022 to **$0.2 million** in Q2 2023, and from **$43.2 million** in H1 2022 to a loss of **$7.9 million** in H1 2023[16](index=16&type=chunk) - Other comprehensive income (loss) improved from a loss of **$7.9 million** in Q2 2022 to a gain of **$3.3 million** in Q2 2023, primarily driven by defined benefit pension plans[16](index=16&type=chunk) [Condensed Consolidated Statements of Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) Changes in NL Stockholders' Equity (In thousands) | Equity Component | Balance at Dec 31, 2022 | Net Income (Loss) H1 2023 | Other Comprehensive Income H1 2023 | Dividends Paid H1 2023 | Balance at Jun 30, 2023 | | :-------------------------- | :---------------------- | :------------------------ | :--------------------------------- | :--------------------- | :---------------------- | | Common stock | $6,101 | — | — | — | $6,103 | | Additional paid-in capital | $298,598 | — | — | — | $298,868 | | Retained earnings | $300,442 | $(9,824) | — | $(6,834) | $283,784 | | Accumulated other comprehensive loss | $(222,991) | — | $1,893 | — | $(221,098) | | Total NL stockholders' equity | $382,150 | $(9,824) | $1,893 | $(6,834) | $367,657 | - NL stockholders' equity decreased by **$14.5 million** from $382.2 million at December 31, 2022, to $367.7 million at June 30, 2023, primarily due to a net loss of $9.8 million and dividends paid of $6.8 million[19](index=19&type=chunk)[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (In thousands) | Cash Flow Activity | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $13,625 | $20,928 | | Net cash provided by (used in) investing activities | $35 | $(23,444) | | Net cash used in financing activities | $(9,405) | $(7,612) | | Net change in cash and cash equivalents and restricted cash | $4,255 | $(10,128) | | Balance at end of period | $179,497 | $87,374 | - Net cash provided by operating activities increased to **$20.9 million** in H1 2023 from $13.6 million in H1 2022, despite a net loss, driven by lower net cash used for changes in receivables, inventories, and payables[22](index=22&type=chunk)[149](index=149&type=chunk) - Net cash used in investing activities significantly increased to **$23.4 million** in H1 2023 from $0.04 million provided in H1 2022, primarily due to **$50.0 million** in purchases of marketable securities, partially offset by proceeds from maturities and note collections[22](index=22&type=chunk)[156](index=156&type=chunk) - Cash and cash equivalents and restricted cash decreased by **$10.1 million** in H1 2023, resulting in an end-of-period balance of **$87.4 million**[22](index=22&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1 – Organization and basis of presentation](index=12&type=section&id=Note%201%20%E2%80%93%20Organization%20and%20basis%20of%20presentation) - NL Industries, Inc. is primarily a holding company, with Valhi, Inc. holding approximately **83%** of its common stock, consolidating its majority-owned subsidiary CompX International Inc., and holding approximately **31%** of Kronos Worldwide, Inc[24](index=24&type=chunk)[25](index=25&type=chunk) [Note 2 – Accounts and other receivables, net](index=12&type=section&id=Note%202%20%E2%80%93%20Accounts%20and%20other%20receivables%2C%20net) Accounts and Other Receivables, Net (In thousands) | Category | Dec 31, 2022 | Jun 30, 2023 | | :-------------------------- | :----------- | :----------- | | Trade receivables - CompX | $17,910 | $15,114 | | Other receivables | $30 | $37 | | Allowance for doubtful accounts | $(70) | $(70) | | Total | $17,870 | $15,081 | - Total accounts and other receivables, net, decreased by **$2.8 million** from $17.9 million at December 31, 2022, to $15.1 million at June 30, 2023, primarily due to a reduction in CompX's trade receivables[28](index=28&type=chunk) [Note 3 – Inventories, net](index=13&type=section&id=Note%203%20%E2%80%93%20Inventories%2C%20net) Inventories, Net (In thousands) | Category | Dec 31, 2022 | Jun 30, 2023 | | :---------------- | :----------- | :----------- | | Raw materials | $6,245 | $6,548 | | Work in process | $19,983 | $22,024 | | Finished products | $5,062 | $5,193 | | Total | $31,290 | $33,765 | - Total inventories, net, increased by **$2.5 million** from $31.3 million at December 31, 2022, to $33.8 million at June 30, 2023, driven by increases in raw materials and work in process[29](index=29&type=chunk) [Note 4 – Marketable securities](index=13&type=section&id=Note%204%20%E2%80%93%20Marketable%20securities) - Current marketable securities are debt securities (U.S. government treasuries) classified as available-for-sale, with fair value determined using Level 2 inputs[30](index=30&type=chunk) - Noncurrent marketable securities are equity securities (Valhi, Inc. common stock) classified as available-for-sale, carried at fair value using Level 1 inputs[31](index=31&type=chunk) Marketable Securities Fair Value (In thousands) | Category | Dec 31, 2022 Market Value | Jun 30, 2023 Market Value | | :---------------------- | :------------------------ | :------------------------ | | Current assets (Fixed income) | $70,164 | $95,716 | | Noncurrent assets (Valhi common stock) | $26,350 | $15,391 | | Total Marketable Securities | $96,514 | $111,107 | - The market price of Valhi common stock held by NL decreased from **$22.00 per share** at December 31, 2022, to **$12.85 per share** at June 30, 2023, resulting in an unrealized loss[32](index=32&type=chunk) [Note 5 – Investment in Kronos Worldwide, Inc.](index=13&type=section&id=Note%205%20%E2%80%93%20Investment%20in%20Kronos%20Worldwide%2C%20Inc.) - NL owned approximately **35.2 million shares** of Kronos common stock at June 30, 2023, with an aggregate market value of **$307.5 million**, down from $331.1 million at December 31, 2022[34](index=34&type=chunk) Change in Carrying Value of Investment in Kronos (In millions) | Item | Amount | | :-------------------------------------- | :----- | | Balance at beginning of period (Jan 1, 2023) | $292.2 | | Equity in loss of Kronos | $(7.1) | | Dividends received from Kronos | $(13.4) | | Equity in Kronos' other comprehensive income (loss) | $(3.2) | | Balance at end of period (Jun 30, 2023) | $268.5 | Kronos Worldwide, Inc. Selected Financial Information (In millions) | Metric | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net sales | $565.3 | $443.2 | $1,128.2 | $869.5 | | Income (loss) from operations | $65.2 | $(6.7) | $148.5 | $(25.0) | | Net income (loss) | $45.9 | $(8.2) | $103.4 | $(23.4) | - Kronos' net sales decreased by **22%** in Q2 2023 and **23%** in H1 2023 compared to the same periods in 2022, primarily due to a significant decrease in sales volumes (**26%** in Q2, **28%** in H1)[37](index=37&type=chunk)[121](index=121&type=chunk)[123](index=123&type=chunk) - Kronos reported an operating loss of **$6.7 million** in Q2 2023 and **$25.0 million** in H1 2023, a substantial decline from operating income in the prior year, mainly due to lower sales volumes and higher production costs[37](index=37&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) [Note 6 – Other assets, net](index=16&type=section&id=Note%206%20%E2%80%93%20Other%20assets%2C%20net) Other Assets, Net (In thousands) | Category | Dec 31, 2022 | Jun 30, 2023 | | :--------------- | :----------- | :----------- | | Pension asset | $1,105 | — | | Other | $1,418 | $1,771 | | Total | $2,523 | $1,771 | - The pension asset of **$1.1 million** at December 31, 2022, was eliminated by June 30, 2023, due to the termination and buy-out of the U.K. pension plan[38](index=38&type=chunk)[46](index=46&type=chunk) [Note 7 – Accrued and other current liabilities](index=16&type=section&id=Note%207%20%E2%80%93%20Accrued%20and%20other%20current%20liabilities) Accrued and Other Current Liabilities (In thousands) | Category | Dec 31, 2022 | Jun 30, 2023 | | :-------------- | :----------- | :----------- | | Employee benefits | $11,023 | $7,792 | | Other | $2,370 | $1,879 | | Total | $13,393 | $9,671 | - Accrued and other current liabilities decreased by **$3.7 million** from $13.4 million at December 31, 2022, to $9.7 million at June 30, 2023, primarily due to a reduction in employee benefits[39](index=39&type=chunk) [Note 8 – Long-term debt](index=16&type=section&id=Note%208%20%E2%80%93%20Long-term%20debt) - NLKW Holding, LLC had **$0.5 million** outstanding under its **$50 million** secured revolving credit facility with Valhi at June 30, 2023, with **$49.5 million** available for future borrowing, and an average interest rate for H1 2023 of **9.80%**[40](index=40&type=chunk) [Note 9 – Other noncurrent liabilities](index=16&type=section&id=Note%209%20%E2%80%93%20Other%20noncurrent%20liabilities) Other Noncurrent Liabilities (In thousands) | Category | Dec 31, 2022 | Jun 30, 2023 | | :-------------------------- | :----------- | :----------- | | Reserve for uncertain tax positions | $2,714 | $2,714 | | OPEB | $637 | $604 | | Insurance claims and expenses | $625 | $553 | | Other | $303 | $305 | | Total | $4,279 | $4,176 | - Total other noncurrent liabilities remained relatively stable, decreasing slightly from **$4.3 million** at December 31, 2022, to **$4.2 million** at June 30, 2023[41](index=41&type=chunk) [Note 10 – Revenue recognition](index=16&type=section&id=Note%2010%20%E2%80%93%20Revenue%20recognition) Net Sales by Reporting Unit (In thousands) | Reporting Unit | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | | :--------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Security Products | $28,837 | $25,672 | $58,418 | $53,014 | | Marine Components | $12,838 | $10,944 | $25,307 | $24,753 | | Total | $41,675 | $36,616 | $83,725 | $77,767 | - Total net sales decreased by **12.1%** in Q2 2023 and **7.1%** in H1 2023, primarily driven by lower sales in both Security Products and Marine Components[43](index=43&type=chunk) [Note 11 – Employee benefit plans](index=17&type=section&id=Note%2011%20%E2%80%93%20Employee%20benefit%20plans) Net Periodic Defined Benefit Pension Cost (In thousands) | Component | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | | :------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Interest cost | $297 | $412 | $594 | $862 | | Expected return on plan assets | $(392) | $(352) | $(784) | $(766) | | Recognized actuarial losses | $373 | $358 | $746 | $716 | | Total | $278 | $418 | $556 | $812 | - A non-cash pension plan termination loss of **$4.9 million** was recognized in Q2 2023 due to the completion of the buy-out of the U.K. pension plan[46](index=46&type=chunk) [Note 12 – Income taxes](index=17&type=section&id=Note%2012%20%E2%80%93%20Income%20taxes) Income Tax Expense (Benefit) (In thousands) | Category | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2023 | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | | :------------------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Expected tax expense (benefit) at U.S. federal statutory income tax rate of 21% | $7,873 | $(2,077) | $12,475 | $(3,026) | | Rate differences on equity in earnings (losses) of Kronos, net of dividends | $(1,449) | $(5,146) | $(3,363) | $(2,841) | | Income tax expense (benefit) | $6,435 | $(7,300) | $9,140 | $(5,879) | - The company recognized an income tax benefit of **$7.3 million** in Q2 2023 and **$5.9 million** in H1 2023, compared to income tax expenses in the prior year periods, primarily due to lower earnings and the impact of equity in losses of Kronos[47](index=47&type=chunk)[112](index=112&type=chunk) - The effective tax rate attributable to equity in earnings of Kronos increased from **10.3%** in H1 2022 to **60.7%** in H1 2023, mainly due to Kronos' anticipated lower full-year earnings in 2023[113](index=113&type=chunk) [Note 13 – Stockholders' equity](index=19&type=section&id=Note%2013%20%E2%80%93%20Stockholders%27%20equity) Changes in Accumulated Other Comprehensive Loss (In thousands) | Component | Balance at Dec 31, 2022 | Other Comprehensive Income (Loss) H1 2023 | Balance at Jun 30, 2023 | | :-------------------------------- | :---------------------- | :---------------------------------------- | :---------------------- | | Currency translation | $(179,857) | $(1,219) | $(181,076) | | Defined benefit pension plans | $(43,464) | $4,676 | $(38,788) | | OPEB plans and other | $(953) | $(58) | $(1,011) | | Marketable debt securities | $(94) | $(129) | $(223) | | Total accumulated other comprehensive loss | $(224,368) | $3,270 | $(221,098) | - Accumulated other comprehensive loss decreased by **$3.3 million** in Q2 2023 and **$1.9 million** in H1 2023, primarily due to income from defined benefit pension plans, partially offset by currency translation losses[49](index=49&type=chunk) - CompX acquired **78,900 shares** of its Class A common stock for approximately **$1.7 million** in Q2 2022 under repurchase authorizations[51](index=51&type=chunk) [Note 14 – Commitments and contingencies](index=21&type=section&id=Note%2014%20%E2%80%93%20Commitments%20and%20contingencies) [General](index=21&type=section&id=General) - The company is involved in various environmental, contractual, product liability, patent, employment, and other claims and disputes incidental to its current and former businesses, with management regularly evaluating their status[52](index=52&type=chunk) [Lead pigment litigation](index=21&type=section&id=Lead%20pigment%20litigation) - NL is a defendant in various lawsuits seeking damages for alleged harm from lead-based paints, but believes these actions are without merit and has not accrued any liability, as no final adverse judgments have been entered against it[53](index=53&type=chunk)[55](index=55&type=chunk)[56](index=56&type=chunk) - The company has three annual installment payments remaining for the Santa Clara lead pigment litigation settlement, with **$12.0 million** for the next two and **$16.7 million** for the final installment[57](index=57&type=chunk) [Environmental matters and litigation](index=23&type=section&id=Environmental%20matters%20and%20litigation) - NL is involved in civil litigation and administrative proceedings under environmental laws (e.g., CERCLA) related to past operations, seeking cleanup costs and damages[61](index=61&type=chunk) - Accrued environmental remediation and related costs totaled **$91.4 million** at June 30, 2023, with an estimated upper range of reasonably possible costs at approximately **$118 million**[67](index=67&type=chunk) - For approximately five sites, the company is unable to reasonably estimate a range of costs due to early investigation stages and lack of information[68](index=68&type=chunk) [Insurance coverage claims](index=26&type=section&id=Insurance%20coverage%20claims) - NL is in legal proceedings with former insurance carriers regarding coverage for lead pigment and asbestos litigation defense costs and indemnity, but cannot assure such coverage will be available[69](index=69&type=chunk)[70](index=70&type=chunk) - Insurance recoveries are recognized only when receipt is probable and the amount can be reasonably estimated[71](index=71&type=chunk) [Other litigation](index=27&type=section&id=Other%20litigation) - The company is involved in various other environmental, contractual, product liability, patent, employment, and other claims, but does not expect them to have a material adverse effect beyond existing accruals[73](index=73&type=chunk) [Note 15 – Financial instruments](index=27&type=section&id=Note%2015%20%E2%80%93%20Financial%20instruments) Financial Instruments Not Carried at Fair Value (In thousands) | Instrument | Dec 31, 2022 Carrying Amount | Dec 31, 2022 Fair Value | Jun 30, 2023 Carrying Amount | Jun 30, 2023 Fair Value | | :-------------------------------------- | :---------------------------- | :---------------------- | :---------------------------- | :---------------------- | | Cash, cash equivalents and restricted cash | $97,502 | $97,502 | $87,374 | $87,374 | - The carrying amounts of accounts receivable and accounts payable are considered equivalent to fair value due to their near-term maturities[74](index=74&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition for the three and six months ended June 30, 2023, discussing key drivers of results, segment performance, and liquidity, highlighting significant declines in net income and operating results primarily due to unrealized losses on marketable securities and equity in losses from Kronos [Business overview](index=28&type=section&id=Business%20overview) - NL Industries, Inc. operates as a holding company, with primary operations through its majority-owned subsidiary CompX International Inc. (component products) and a non-controlling **31%** interest in Kronos Worldwide, Inc. (titanium dioxide pigments)[75](index=75&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk) [Forward-looking information](index=28&type=section&id=Forward-looking%20information) - The report contains forward-looking statements subject to substantial risks and uncertainties, including future supply/demand, market cyclicality, raw material costs, global economic conditions, operating interruptions, competition, and regulatory changes[78](index=78&type=chunk)[81](index=81&type=chunk) [Results of operations](index=31&type=section&id=Results%20of%20operations) [Net income (loss) overview](index=31&type=section&id=Net%20income%20(loss)%20overview) - Net loss attributable to NL stockholders was **$3.1 million ($.06 per share)** in Q2 2023, down from net income of $30.2 million ($.62 per share) in Q2 2022[82](index=82&type=chunk) - The decrease in earnings is primarily due to an unrealized loss on marketable equity securities (**$5.4 million** in 2023 vs. **$19.2 million** gain in 2022), equity in losses of Kronos (**$2.6 million** in 2023 vs. **$14.0 million** gain in 2022), and a **$4.9 million** non-cash loss on U.K. pension plan termination[87](index=87&type=chunk) [Income from operations](index=31&type=section&id=Income%20from%20operations) Income from Operations (In millions) | Segment | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2023 | % Change | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | % Change | | :------------------ | :-------------------------- | :-------------------------- | :--------- | :-------------------------- | :-------------------------- | :--------- | | CompX | $7.7 | $4.4 | (44)% | $14.0 | $11.4 | (19)% | | Corporate expense | $(3.5) | $(3.0) | (17)% | $(5.9) | $(5.8) | (3)% | | Total Income from operations | $4.2 | $1.4 | (66)% | $8.1 | $5.6 | (30)% | - Total income from operations decreased by **66%** in Q2 2023 and **30%** in H1 2023, primarily driven by a **44%** decrease in CompX's operating income in Q2[86](index=86&type=chunk) [CompX International Inc.](index=33&type=section&id=CompX%20International%20Inc.) CompX Financial Performance (In millions) | Metric | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2023 | % Change | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | % Change | | :------------------------ | :-------------------------- | :-------------------------- | :--------- | :-------------------------- | :-------------------------- | :--------- | | Net sales | $41.6 | $36.6 | (12)% | $83.7 | $77.8 | (7)% | | Gross margin | $13.6 | $10.3 | (25)% | $25.7 | $23.0 | (11)% | | Income from operations | $7.7 | $4.4 | (44)% | $14.0 | $11.4 | (19)% | | Gross margin % | 33% | 28% | | 31% | 30% | | | Operating income margin % | 19% | 12% | | 17% | 15% | | - CompX's operating income decreased by **44%** in Q2 2023 and **19%** in H1 2023, primarily due to lower sales and gross margin in both Security Products and Marine Components[91](index=91&type=chunk) [Security Products](index=35&type=section&id=Security%20Products) Security Products Performance (In millions) | Metric | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2023 | % Change | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | % Change | | :------------------------ | :-------------------------- | :-------------------------- | :--------- | :-------------------------- | :-------------------------- | :--------- | | Net sales | $28.8 | $25.6 | (11)% | $58.4 | $53.0 | (9)% | | Operating income | $6.7 | $4.1 | (39)% | $12.7 | $9.5 | (25)% | | Gross margin % | 35% | 29% | | 33% | 30% | | | Operating income margin % | 23% | 16% | | 22% | 18% | | - Security Products net sales decreased **11%** in Q2 2023 and **9%** in H1 2023, mainly due to lower sales to the government security market (including non-recurring sales in 2022) and office furniture market[98](index=98&type=chunk) - Gross margin and operating income as a percentage of net sales decreased due to lower sales and reduced coverage of fixed costs[99](index=99&type=chunk) [Marine Components](index=35&type=section&id=Marine%20Components) Marine Components Performance (In millions) | Metric | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2023 | % Change | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | % Change | | :------------------------ | :-------------------------- | :-------------------------- | :--------- | :-------------------------- | :-------------------------- | :--------- | | Net sales | $12.8 | $11.0 | (15)% | $25.3 | $24.8 | (2)% | | Operating income | $2.7 | $2.0 | (29)% | $4.7 | $5.3 | 11% | | Gross margin % | 29% | 26% | | 26% | 29% | | | Operating income margin % | 21% | 18% | | 19% | 21% | | - Marine Components net sales decreased **15%** in Q2 2023, primarily due to a **$2.0 million** decline in the towboat market, partially offset by higher industrial sales[100](index=100&type=chunk) - Operating income for Marine Components increased by **11%** in H1 2023, driven by favorable product mix, increased selling prices, and production efficiencies in Q1 2023, despite lower Q2 sales[101](index=101&type=chunk) [Outlook (CompX)](index=37&type=section&id=Outlook) - CompX expects lower operating income at both reporting units in 2023 compared to 2022 due to softening demand, particularly in Marine Components, and challenges to gross margins at Security Products from higher cost inventory[103](index=103&type=chunk) - The company is managing inventory levels, with a planned build at Security Products for a large order expected to ship in H2 2023[103](index=103&type=chunk) [General corporate and other items](index=37&type=section&id=General%20corporate%20and%20other%20items) - Corporate expenses decreased by **$0.5 million** in Q2 2023 due to lower environmental remediation costs, but H1 2023 corporate expenses were comparable to H1 2022 due to higher litigation fees[105](index=105&type=chunk)[106](index=106&type=chunk) - Interest and dividend income increased significantly in Q2 and H1 2023 due to higher average interest rates and increased investment balances[110](index=110&type=chunk) - An unrealized loss of **$5.4 million** on marketable equity securities was recognized in Q2 2023, compared to a **$19.2 million** gain in Q2 2022[111](index=111&type=chunk) - The company expects net general corporate expenses in 2023 to be higher than 2022, primarily due to higher expected litigation fees and related costs[109](index=109&type=chunk) [Equity in earnings (losses) of Kronos Worldwide, Inc.](index=39&type=section&id=Equity%20in%20earnings%20(losses)%20of%20Kronos%20Worldwide%2C%20Inc.) Kronos Worldwide, Inc. Financial Performance (In millions, except metric tons) | Metric | 3 Months Ended Jun 30, 2022 | 3 Months Ended Jun 30, 2023 | % Change | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | :-------------------------- | :-------------------------- | :--------- | | Net sales | $565.3 | $443.2 | (22)% | $1,128.2 | $869.5 | (23)% | | Income (loss) from operations | $65.2 | $(6.7) | (110)% | $148.5 | $(25.0) | (117)% | | Net income (loss) | $45.9 | $(8.2) | | $103.4 | $(23.4) | | | Sales volumes (K metric tons) | 142 | 104 | (26)% | 286 | 206 | (28)% | | Production volumes (K metric tons) | 132 | 89 | (33)% | 270 | 194 | (28)% | | Cost of sales % of net sales | 79% | 90% | | 76% | 91% | | | Income (loss) from operations % of net sales | 11% | (1)% | | 13% | (3)% | | [Current industry conditions](index=40&type=section&id=Current%20industry%20conditions) - Kronos' average TiO2 selling prices declined **5%** in H1 2023, and overall sales volumes decreased due to reduced demand across all major markets[116](index=116&type=chunk) - Production facilities operated at **70%** of practical capacity in H1 2023, down from **98%** in H1 2022, to align with customer demand[118](index=118&type=chunk) - Cost of sales per metric ton of TiO2 sold was significantly higher in Q2 and H1 2023 due to increased production costs (energy, feedstock) and unabsorbed fixed costs from reduced operating rates[120](index=120&type=chunk) [Net sales (Kronos)](index=42&type=section&id=Net%20sales) - Kronos' net sales decreased by **22%** in Q2 2023 and **23%** in H1 2023, primarily due to a **26%** and **28%** decrease in sales volumes, respectively, across all major markets[121](index=121&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) - Average TiO2 selling prices decreased by **2%** in Q2 2023, contributing to the sales decline, while product mix positively contributed to net sales[121](index=121&type=chunk) [Cost of sales and gross margin (Kronos)](index=42&type=section&id=Cost%20of%20sales%20and%20gross%20margin) - Kronos' cost of sales decreased by **10%** in Q2 2023 and **7%** in H1 2023, but as a percentage of net sales, it increased to **90%** and **91%** respectively, due to higher production costs and unabsorbed fixed costs[125](index=125&type=chunk)[127](index=127&type=chunk) - Gross margin as a percentage of net sales decreased to **10%** in Q2 2023 (from 21% in Q2 2022) and **9%** in H1 2023 (from 24% in H1 2022), primarily due to higher production costs, lower volumes, and lower selling prices[126](index=126&type=chunk)[128](index=128&type=chunk) [Selling, general and administrative expense (Kronos)](index=44&type=section&id=Selling%2C%20general%20and%20administrative%20expense) - Kronos' SG&A expense decreased by **21%** in Q2 2023 and **17%** in H1 2023, primarily due to lower distribution costs resulting from reduced sales volumes[129](index=129&type=chunk)[130](index=130&type=chunk) [Income (loss) from operations (Kronos)](index=44&type=section&id=Income%20(loss)%20from%20operations) - Kronos reported an operating loss of **$6.7 million** in Q2 2023 and **$25.0 million** in H1 2023, a significant decline from income in the prior year, mainly due to factors impacting gross margin[131](index=131&type=chunk)[132](index=132&type=chunk) - A gain of **$0.5 million** in Q2 2023 and **$2.2 million** in H1 2023 was recognized from a business interruption insurance claim settlement[131](index=131&type=chunk)[132](index=132&type=chunk) [Other non-operating income (expense) (Kronos)](index=44&type=section&id=Other%20non-operating%20income%20(expense)) - Kronos recognized an unrealized loss of **$0.6 million** on marketable equity securities in Q2 2023 (vs. $2.3 million gain in Q2 2022) and **$1.3 million** in H1 2023 (vs. $2.4 million gain in H1 2022)[133](index=133&type=chunk)[134](index=134&type=chunk) - Other components of net periodic pension and OPEB cost decreased in Q2 and H1 2023, partly due to higher discount rates and **$1.3 million** in settlement costs from the U.K. pension plan termination[133](index=133&type=chunk)[134](index=134&type=chunk) [Income tax expense (benefit) (Kronos)](index=44&type=section&id=Income%20tax%20expense%20(benefit)) - Kronos recognized an income tax benefit of **$4.1 million** in Q2 2023 and **$11.0 million** in H1 2023, compared to expenses in prior periods, due to lower earnings and jurisdictional mix[135](index=135&type=chunk) [Effects of currency exchange rates (Kronos)](index=44&type=section&id=Effects%20of%20currency%20exchange%20rates) - Fluctuations in currency exchange rates had a nominal effect on Kronos' net sales in Q2 2023, but decreased net sales by **$12 million** in H1 2023, primarily due to a strengthening U.S. dollar against the euro[121](index=121&type=chunk)[123](index=123&type=chunk)[141](index=141&type=chunk)[143](index=143&type=chunk) - Currency exchange rate fluctuations decreased Kronos' loss from operations by **$2 million** in Q2 2023 and **$21 million** in H1 2023, driven by lower net currency transaction gains and net currency translation gains from a strengthening U.S. dollar[131](index=131&type=chunk)[132](index=132&type=chunk)[142](index=142&type=chunk)[149](index=149&type=chunk) [Outlook (Kronos)](index=47&type=section&id=Outlook) - Kronos expects near-term demand to remain below historical norms, despite some pockets of strengthening demand, and anticipates lower operating results for the full year 2023 due to weaker demand recovery and higher production costs[145](index=145&type=chunk) - Increased pricing pressure is expected due to favorable pigment availability, minimal order lead times, and low-cost imports from China[145](index=145&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) [Consolidated cash flows](index=47&type=section&id=Consolidated%20cash%20flows) [Operating activities](index=47&type=section&id=Operating%20activities) - Net cash provided by operating activities increased to **$20.9 million** in H1 2023 from $13.6 million in H1 2022, primarily due to lower net cash used for relative changes in receivables, inventories, and payables[149](index=149&type=chunk) Net Cash Provided by Operating Activities (In millions) | Entity | 6 Months Ended Jun 30, 2022 | 6 Months Ended Jun 30, 2023 | | :-------------------------------- | :-------------------------- | :-------------------------- | | CompX | $1.5 | $9.8 | | NL Parent and wholly-owned subsidiaries | $17.5 | $16.5 | | Eliminations | $(5.4) | $(5.4) | | Total | $13.6 | $20.9 | Working Capital Metrics | Metric | Dec 31, 2021 | Jun 30, 2022 | Dec 31, 2022 | Jun 30, 2023 | | :------------------ | :----------- | :----------- | :----------- | :----------- | | Days sales outstanding | 42 days | 38 days | 41 days | 37 days | | Days in inventory | 96 days | 108 days | 99 days | 117 days | - Days in inventory increased from **99 days** at December 31, 2022, to **117 days** at June 30, 2023, mainly due to a planned inventory build at Security Products for specific customer orders[153](index=153&type=chunk)[154](index=154&type=chunk) [Investing activities](index=49&type=section&id=Investing%20activities) - Capital expenditures, all related to CompX, were **$0.5 million** in H1 2023, down from $2.2 million in H1 2022[155](index=155&type=chunk) - Net marketable securities activity in H1 2023 included **$50.0 million** in purchases and **$26.0 million** in proceeds from maturities, resulting in a net cash outflow[156](index=156&type=chunk) [Financing activities](index=49&type=section&id=Financing%20activities) - Dividends of **$0.07 per share** were declared quarterly in H1 2022 and H1 2023[157](index=157&type=chunk) - Cash flows from financing activities in H1 2023 included **$6.8 million** in dividends paid and **$0.8 million** in dividends paid to noncontrolling interests[22](index=22&type=chunk) [Outstanding debt obligations](index=49&type=section&id=Outstanding%20debt%20obligations) - At June 30, 2023, NLKW had **$0.5 million** outstanding under its **$50 million** secured revolving credit facility with Valhi, with **$49.5 million** available[159](index=159&type=chunk) - Kronos had no outstanding borrowings on its **$225 million** global revolving credit facility at June 30, 2023, and was in compliance with all debt covenants[160](index=160&type=chunk)[161](index=161&type=chunk) [Future cash requirements](index=51&type=section&id=Future%20cash%20requirements) [Liquidity](index=51&type=section&id=Liquidity) - At June 30, 2023, NL had **$183.1 million** in aggregate restricted and unrestricted cash, cash equivalents, and current marketable securities, all held in the U.S[163](index=163&type=chunk)[164](index=164&type=chunk) - The company expects sufficient liquidity to meet short-term obligations, supported by its operating cash flows and a **$50 million** revolving loan facility with Valhi[167](index=167&type=chunk) [Capital expenditures](index=51&type=section&id=Capital%20expenditures) - Firm purchase commitments for capital projects totaled **$0.1 million** at June 30, 2023, and CompX expects to spend **$2.7 million** on capital investments in 2023[168](index=168&type=chunk) [Repurchases of common stock](index=53&type=section&id=Repurchases%20of%20common%20stock) - At June 30, 2023, CompX had **523,647 shares** available for repurchase under its stock repurchase program[170](index=170&type=chunk) [Dividends](index=53&type=section&id=Dividends) Expected Annual Dividends from Subsidiaries and Affiliates (In millions) | Entity | Shares held (Jun 30, 2023) | Quarterly Dividend Rate | Annual Expected Dividend | | :------- | :------------------------- | :---------------------- | :----------------------- | | Kronos | 35.2 | $0.19 | $26.8 | | CompX | 10.8 | $0.25 | $10.8 | | Valhi | 1.2 | $0.08 | $0.4 | | Total | | | $38.0 | - The company's long-term ability to meet parent company obligations depends on dividends from subsidiaries and affiliates, with **$38.0 million** in total annual expected dividends from Kronos, CompX, and Valhi[171](index=171&type=chunk)[172](index=172&type=chunk) [Investments in our subsidiaries and affiliates and other acquisitions](index=53&type=section&id=Investments%20in%20our%20subsidiaries%20and%20affiliates%20and%20other%20acquisitions) - The company may purchase securities of subsidiaries, affiliates, or third parties, issue equity, or increase indebtedness for acquisitions, and may restructure ownership interests[173](index=173&type=chunk) [Commitments and contingencies](index=53&type=section&id=Commitments%20and%20contingencies) - No material changes in contractual obligations since the 2022 Annual Report, and the company remains subject to various legal proceedings and potential legislation regarding lead pigment and lead-based paint, which could materially affect financial position[174](index=174&type=chunk)[175](index=175&type=chunk) [Recent accounting pronouncements](index=53&type=section&id=Recent%20accounting%20pronouncements) - No recent accounting pronouncements are applicable[176](index=176&type=chunk) [Critical accounting policies and estimates](index=53&type=section&id=Critical%20accounting%20policies%20and%20estimates) - There have been no changes in critical accounting policies during the first six months of 2023[176](index=176&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) This section discusses the company's exposure to market risks, including currency exchange rates, interest rates, and equity security prices, noting no material changes since the 2022 Annual Report - The company is exposed to market risks related to currency exchange rates, interest rates, and equity security prices, with no material changes reported since the 2022 Annual Report[177](index=177&type=chunk) [Item 4. Controls and Procedures](index=55&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, concluding that disclosure controls are effective and noting no material changes to internal control over financial reporting [Evaluation of disclosure controls and procedures](index=55&type=section&id=Evaluation%20of%20disclosure%20controls%20and%20procedures) - The President and CEO, and Executive Vice President and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[178](index=178&type=chunk) [Internal control over financial reporting](index=55&type=section&id=Internal%20control%20over%20financial%20reporting) - Management is responsible for establishing and maintaining adequate internal control over financial reporting to ensure reliable financial reporting in accordance with GAAP[179](index=179&type=chunk) [Other](index=55&type=section&id=Other) - The assessment of internal control over financial reporting excludes equity method investees and financial statement schedules required by Article 12 of Regulation S-X[180](index=180&type=chunk) [Changes in internal control over financial reporting](index=55&type=section&id=Changes%20in%20internal%20control%20over%20financial%20reporting) - No changes to internal control over financial reporting occurred during Q2 2023 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[181](index=181&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) This section provides updates on specific legal proceedings, including a finding of liability in a California environmental case, a favorable decision in Pennsylvania lead paint cases, and a partial dismissal in an Atlantic Richfield Co. lawsuit [California Department of Toxic Substances Control v. NL Industries, Inc., et al.](index=55&type=section&id=California%20Department%20of%20Toxic%20Substances%20Control%20v.%20NL%20Industries%2C%20Inc.%2C%20et%20al.) - In July 2023, a court found NL and other defendants liable in a case brought by the California Department of Toxic Substances Control, with allocation and damages to be determined later[183](index=183&type=chunk)[184](index=184&type=chunk) [Pennsylvania Lead Paint Cases](index=57&type=section&id=Pennsylvania%20Lead%20Paint%20Cases) - In May 2023, the Pennsylvania Commonwealth Court dismissed claims brought by two county governments regarding lead paint, finding them inconsistent with state law, with the decision under review by the Pennsylvania Supreme Court[185](index=185&type=chunk) [Atlantic Richfield, Co. v. NL Industries, Inc.](index=57&type=section&id=Atlantic%20Richfield%2C%20Co.%20v.%20NL%20Industries%2C%20Inc.) - In April 2023, a court dismissed claims by Atlantic Richfield Co. seeking recovery of direct remediation costs, but allowed the lawsuit to continue for claims related to a **$400,000** settlement payment to EPA[186](index=186&type=chunk) [Item 1A. Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the company's 2022 Annual Report for a comprehensive discussion of risk factors related to its businesses - For a discussion of risk factors, refer to Part I, Item 1A, 'Risk Factors,' in the company's 2022 Annual Report[187](index=187&type=chunk) [Item 6. Exhibits](index=57&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including the 2023 Non-Employee Director Stock Plan, certifications, and Inline XBRL documents - Exhibits include the NL Industries, Inc. 2023 Non-Employee Director Stock Plan, various certifications (31.1, 31.2, 32.1), and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[189](index=189&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-640 NL INDUSTRIES, INC. (Exact name of Registrant as specified in its charter) New Jersey 13-5267260 (State or other jurisd ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-640 NL INDUSTRIES, INC. (Exact name of Registrant as specified in its charter) New Jersey 13-5267260 (State or other jurisdiction of incorporation ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to 5430 LBJ Freeway, Suite 1700 Dallas, Texas 75240-2620 (Address of principal executive offices) Registrant's telephone number, including area cod ...