NL INDUSTRIES INC (NL)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Business overview

We are primarily a holding company. We operate in the component products industry through our majority-owned subsidiary, CompX International Inc. We also own a noncontrolling interest in Kronos Worldwide, Inc. Both CompX (NYSE American: CIX) and Kronos (NYSE: KRO) file periodic reports with the SEC.

CompX is a leading manufacturer of engineered components utilized in a variety of applications and industries. Through its Security Products operations, CompX manufactures mechanical and electronic cabinet locks and other locking mechanisms used in postal, recreational transportation, office and institutional furniture, cabinetry, tool storage and healthcare applications. CompX also manufactures wake enhancement systems, stainless steel exhaust systems, gauges, throttle controls, trim tabs and related hardware and accessories for the recreational marine and other industries through its Marine Components operations.

We account for our 31% non-controlling interest in Kronos by the equity method. Kronos is a leading global producer and marketer of value-added titanium dioxide pigments. TiO2 is used for a variety of manufacturing applications including coatings, plastics, paper and other industrial products.

Net income overview

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

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

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Our 2024 net income per share attributable to NL includes:

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

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

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

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

Outlook

Excluding any potential effects from changes in the relative value of marketable equity securities, we currently expect our net income attributable to NL stockholders in 2025 to be lower than 2024 primarily due to income related to the settlement of a liability for an environmental remediation site recognized in the fourth quarter of 2024 partially offset by higher expected CompX segment profit. See also Item 3 – “Legal Proceedings – Environmental matters and litigation” and Note 17 to our Consolidated Financial Statements.

Income from operations

The following table shows the components of our income from operations.

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The following table shows the components of our income (loss) before income taxes exclusive of our income from operations.

n.m. not meaningful

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CompX International Inc.

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

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

Cost of sales and gross margin – CompX’s cost of sales decreased in 2024 compared to 2023 primarily due to the effects of lower sales at both Security Products and Marine Components partially offset by higher production costs across both reporting units. As a result, CompX’s cost of sales as a percentage of net sales increased over the same period. CompX’s gross margin as a percentage of sales decreased in 2024 compared to 2023 primarily due to the factors affecting cost of sales and decreased coverage of fixed costs due to lower sales.

CompX’s cost of sales decreased in 2023 compared to 2022 primarily due to the effects of lower production costs at both Security Products and Marine Components as well as lower Marine Components sales. CompX’s gross margin as a percentage of sales increased over the same period primarily due to the factors affecting cost of sales.

Selling, general and administrative expenses – CompX’s selling, general and administrative expenses consist primarily of personnel costs, sales commissions and advertising expenses directly related to product sales and administrative costs relating to CompX’s businesses and its corporate management activities, as well as gains and losses on property and equipment. CompX’s selling, general and administrative expenses increased $.5 million in 2024 compared to 2023 predominantly due to higher employee salary and benefit costs at Security Products. As a percentage of sales, CompX’s selling, general and administrative expenses increased in 2024 compared to 2023 primarily due to increased selling, general and administrative expenses and decreased coverage of selling, general and administrative expenses on lower sales.

CompX’s selling, general and administrative expenses increased in 2023 compared to 2022 predominantly due to higher salary and benefit costs at Security Products which increased by $.6 million. As a percentage of sales, CompX’s selling, general and administrative expenses increased in 2023 compared to 2022 primarily due to the effect of the increased selling, general and administrative expenses on lower sales.

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Segment profit – As a percentage of net sales, CompX’s segment profit decreased in 2024 compared to 2023 and increased in 2023 compared to 2022. CompX’s segment profit margins were primarily impacted by the factors impacting net sales, cost of sales, gross margin and selling, general and administrative expenses discussed above.

General – CompX’s profitability primarily depends on its ability to utilize its production capacity effectively, which is affected by, among other things, the demand for its products and its ability to control its manufacturing costs, primarily comprised of labor costs and materials. The materials used in CompX’s products consist of purchased components and raw materials some of which are subject to fluctuations in the commodity markets such as zinc, brass, aluminum and stainless steel. Total material costs represented approximately 46% of CompX’s cost of sales in 2024, with commodity-related raw materials representing approximately 13% of its cost of sales. CompX’s raw material prices were generally stable through the first half of 2024. Beginning in the latter half of the third quarter CompX began to experience moderate increases in certain raw material costs, particularly brass. The zinc market was volatile in 2024, but CompX was successful in making strategic spot buys to keep its costs consistent with 2023. Prices for aluminum and stainless steel, which are the primary raw materials used for the manufacture of CompX’s marine components (including marine exhaust headers and pipes, wake enhancement systems, throttles and trim tabs), were relatively stable in 2024 because it took advantage of volume purchase opportunities during the year. In most cases, commodity raw materials CompX purchases include processing and conversion costs, such as alloying, extrusion and rolling, which remain elevated due to costs of labor, transportation and energy. Processing and conversion costs are not expected to decrease and may negate the benefit of softening commodity prices on CompX’s purchases. Based on current economic conditions, CompX expects the prices for zinc, brass, aluminum, stainless steel and other manufacturing materials in 2025 to be relatively stable, although governmental actions such as tariffs may impact markets.

CompX occasionally enters into short-term commodity-related raw material supply arrangements to mitigate the impact of future increases in commodity related raw material costs. See Item 1 – “Business- Raw Materials.”

Results by reporting unit

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

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Security Products – Security Products net sales decreased 5% to $115.2 million in 2024 compared to $121.2 million in 2023 primarily due to lower sales to the government security market as a result of sales related to a pilot project for a government security customer that shipped in the third and fourth quarters of 2023 and for which there were no related sales in 2024. Relative to prior year, sales were $8.3 million lower to the government security market, $2.0 million lower to the transportation market and $.9 million lower to distributors, partially offset by $4.1 million higher sales to the healthcare market and $.7 million higher sales to the tool storage market. Gross margin as a percentage of net sales for 2024 decreased as compared to 2023 primarily due to lower sales, a less favorable customer and product mix, higher employee related costs (primarily increased medical costs), higher materials costs (primarily brass and electronics) in the

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

Security Products net sales increased 6% to $121.2 million in 2023 compared to $114.5 million in 2022 primarily due to higher sales related to a pilot project for a government security customer. Relative to prior year, sales were $8.3 million higher to the government security market and $1.5 million higher to distributors, partially offset by $1.7 million lower sales to the office furniture market and $.7 million lower sales to the gas station security market. Gross margin as a percentage of net sales for 2023 increased as compared to 2022 primarily due to lower production costs (including lower material, overtime and shipping costs) and increased coverage of fixed costs on higher sales, primarily in the fourth quarter. Reporting unit profit margin increased for 2023 compared to 2022 primarily due to the factors impacting gross margin, as well as increased coverage of operating costs and expenses from higher sales, partially offset by increased operating costs and expenses, including higher employee salaries and benefit costs of $.6 million.

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Marine Components – Marine Components net sales decreased 23% in 2024 as compared to 2023 primarily due to $8.7 million lower sales to the towboat market through the first three quarters of 2024, partially offset by higher sales in the fourth quarter of 2024, including $1.1 million higher sales to the towboat market and $1.0 million higher sales to the government market. Relative to the full year of 2023, sales were $7.6 million lower to the towboat market (primarily to original equipment boat manufacturers), $1.4 million lower to the industrial market and $.6 million lower to each the engine builder market and distributors, partially offset by $1.4 million higher sales to the government market. Gross margin as a percentage of sales decreased in 2024 compared to 2023 primarily due to higher cost inventory produced during the fourth quarter of 2023 and sold in the first quarter of 2024 and decreased coverage of fixed costs as a result of lower sales, partially offset by a more favorable customer and product mix, lower employee salaries and benefits of approximately $1.8 million primarily related to headcount reductions and decreased labor costs of $1.2 million due to lower production volumes. Reporting unit profit as a percentage of net sales decreased in 2024 compared to 2023 due to the factors impacting gross margin, as well as decreased coverage of operating costs and expenses on lower sales, partially offset by reduced operating costs and expenses, including lower employee related expenses of $.2 million.

Marine Components net sales decreased 23% in 2023 as compared to 2022. Relative to prior year, sales were $12.8 million lower to the towboat market (primarily to original equipment boat manufacturers) and $2.0 million lower to the engine builder market, partially offset by $1.2 million higher industrial sales and $.8 million higher sales to the center console boat market. Gross margin as a percentage of sales increased in 2023 compared to 2022 primarily due to lower raw material costs (primarily stainless steel and aluminum), lower supplies costs driven by lower volume, lower shipping costs and lower labor costs from reduced employee overtime due to lower sales volumes, partially offset by decreased coverage of fixed costs as a result of lower sales. Reporting unit profit as a percentage of net sales decreased slightly in 2023 compared to 2022 primarily due to the factors impacting gross margin, as well as decreased coverage of operating costs and expenses from lower sales.

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

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would have increased in 2024 as compared to 2023 due to increased sales across a variety of markets, particularly increased sales of mechanical locks to the government security market. At CompX’s Marine Components reporting unit, the decline in sales to the towboat market as a result of the contraction in the recreational marine industry that began in the second quarter of 2023 continued through the third quarter of 2024. Marine Components net sales increased in the fourth quarter of 2024 compared to the fourth quarter of 2023 as a result of stabilizing demand in the towboat market as well as increased sales to the government market. Raw material prices remained relatively stable through the first half of the year; however, beginning in the third quarter of 2024 CompX experienced price increases in certain commodity raw materials, primarily brass and electronic components at Security Products.

CompX expects Security Products net sales in 2025 to improve modestly over 2024, and it expects gross margin and reporting unit profit percentages in 2025 to be slightly above 2024 due to pricing improvements on the Security Products product mix. CompX expects Marine Components net sales to increase in 2025 due to higher expected sales to the government and industrial markets. CompX believes the recreational marine market has stabilized, and it expects Marine Components sales to the towboat market in 2025 will be comparable to 2024. Overall CompX expects Marine Components to have improved gross margins and reporting unit profit percentages in 2025 compared to 2024 due to higher expected sales volumes. During 2024 CompX was aggressive in aligning its production capabilities and inventories to demand levels. In 2025, CompX will continue to monitor current and anticipated near-term customer demand levels to ensure its production capabilities and inventories are aligned accordingly.

CompX’s expectations for its operations and the markets it serves are based on a number of factors outside its control. Currently, CompX’s supply chains are stable and transportation and logistical delays are minimal. CompX has in the past experienced global and domestic supply chain challenges, and any future impacts on its operations will depend on, among other things, any future disruption in its operations or its suppliers’ operations, the effect of tariffs, and the impact of economic conditions and geopolitical events on demand for its products or its customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.

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

Insurance recoveries – We have agreements with certain insurance carriers pursuant to which the carriers reimburse us for a portion of our past lead pigment and asbestos litigation defense costs. Insurance recoveries include amounts we received from these insurance carriers.

The agreements with certain of our insurance carriers also include reimbursement for a portion of our future litigation defense costs. We are not able to determine how much we will ultimately recover from these carriers for defense costs incurred by us because of certain issues that arise regarding which defense costs qualify for reimbursement. Accordingly, these insurance recoveries are recognized when receipt is probable and the amount is determinable. In this regard we received $.5 million and $1.4 million in insurance recoveries in 2023 and 2024, respectively. Recoveries in 2022 were nominal. See Note 17 to our Consolidated Financial Statements.

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

Corporate expenses were $11.8 million in each of 2022 and 2023. Included in corporate expenses are:

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Overall, we currently expect that our general corporate expenses in 2025 will be higher than in 2024 primarily due to income recognized in 2024 related to the settlement of a liability for an environmental remediation site in the fourth quarter of 2024. See also Item 3 – “Legal Proceedings – Environmental matters and litigation” and Note 17 to our Consolidated Financial Statements.

The level of our litigation fees and related costs varies from period to period depending upon, among other things, the number of cases in which we are currently involved, the nature of such cases and the current stage of such cases (e.g. discovery, pre-trial motions, trial or appeal, if applicable). See Note 17 to our Consolidated Financial Statements. If our current expectations regarding the number of cases in which we expect to be involved during 2025 or the nature of such cases were to change, our corporate expenses could be higher than we currently estimate.

Obligations for environmental remediation and related costs are difficult to assess and estimate and it is possible that actual costs for environmental remediation will exceed accrued amounts or that costs will be incurred in the future for sites in which we cannot currently estimate our liability. If these events were to occur in 2025, our corporate expenses would be higher than we currently estimate. In addition, we adjust our environmental accruals as further information becomes available to us or as circumstances change. Such further information or changed circumstances could result in an increase in our accrued environmental costs. See Note 17 to our Consolidated Financial Statements.

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

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Marketable equity securities – Unrealized gains or losses on our marketable equity securities are recognized in Marketable equity securities on our Consolidated Statements of Operations. See Note 5 to our Consolidated Financial Statements.

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

In accordance with GAAP, we recognize deferred income taxes on our undistributed equity in earnings of Kronos. Because we and Kronos are part of the same U.S. federal income tax group, any dividends we receive from Kronos are nontaxable to us. Accordingly, we do not recognize and we are not required to pay income taxes on dividends from Kronos. Therefore, our full-year effective income tax rate will generally be lower than the U.S. federal statutory income tax rate in years during which we receive dividends from Kronos and recognize equity in earnings of Kronos. Conversely, our effective income tax rate will generally be higher than the U.S. federal statutory income tax rate in years during which we receive dividends from Kronos and recognize equity in losses of Kronos. During interim periods, our effective income tax rate may not necessarily correspond to the foregoing due to the application of accounting for income taxes in interim periods which requires us to base our effective rate on full year projections. We received aggregate dividends from Kronos of $26.8 million in each of 2022 and 2023 and $16.9 million in 2024. Our effective tax rate attributable to our equity in earnings (losses) of Kronos, including the effect of non-taxable dividends we received from Kronos, was a 3.4% expense in 2022, a 58.5% expense in 2023 and a 7.5% expense in 2024. The increase in our effective rate from 2022 to 2023 is attributable to the effects of Kronos’ loss in 2023 as compared to earnings in 2022. The decrease in our effective rate from 2023 to 2024 is attributable to the combined effects of Kronos’ earnings in 2024 as compared to loss in 2023 and the lower non-taxable dividend income we received from Kronos in 2024 as compared to 2023.

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

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

Related party transactions – We are a party to certain transactions with related parties. See Notes 1 and 16 to our Consolidated Financial Statements. It is our policy to engage in transactions with related parties on terms, in our opinion, no less favorable to us than we could obtain from unrelated parties.

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Equity in earnings of Kronos Worldwide, Inc.

As previously reported, effective the Acquisition Date, of July 16, 2024 Kronos acquired the 50% joint venture interest in LPC previously held by Venator. Prior to the acquisition, Kronos held a 50% joint venture interest in LPC through a wholly-owned subsidiary. LPC was operated as a manufacturing joint venture between Kronos and Venator. Following the acquisition, LPC became a wholly-owned subsidiary of Kronos. Kronos acquired the 50% joint venture interest that it did not already own for consideration of $185 million less a working capital adjustment. An additional earn-out payment of up to $15 million based on Kronos’ aggregate consolidated net income before interest expense, income taxes and depreciation and amortization expense, or EBITDA, during a two-year period comprising calendar years 2025 and 2026 may be required. The acquisition was financed through borrowings of $132.1 million under Kronos’ Global Revolver and the remainder paid with Kronos’ cash on hand. Kronos accounted for the acquisition of the interest in LPC as a business combination. See Note 6 to our Consolidated Financial Statements.

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Industry conditions and 2024 overview – Kronos and the TiO2 industry experienced an extended period of significantly reduced demand reflected in its sales volumes beginning in the second half of 2022 and continuing throughout 2023. While demand improved in 2024 resulting in increased sales volumes across all major markets compared to the prior year, overall demand remained below average historical levels. After improving in the first half of 2024, demand moderated in the second half of the year, which placed downward pressure on Kronos’ TiO2 pricing with 2024 average TiO2 selling prices approximately 5% below the average TiO2 selling prices for 2023.

Kronos operated its production facilities at 72% of practical capacity utilization in 2023 in response to decreased demand and higher production costs. As a result of the increase in demand experienced in the fourth quarter of 2023 and the first quarter of 2024, along with more favorable production costs, Kronos began increasing its production rates during the first quarter of 2024 and it operated at near practical capacity in the second, third and fourth quarters of 2024 resulting in 96% of practical capacity utilization in 2024.

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

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Excluding the effect of changes in currency exchange rates, Kronos’ cost of sales per metric ton of TiO2 sold in 2024 was significantly lower as compared to 2023 primarily due to significant decreases in per metric ton production costs (primarily energy and raw materials).

In response to the extended period of reduced demand in 2023, discussed above, Kronos took measures to reduce its operating costs and improve its long-term cost structure such as the implementation of certain voluntary and involuntary workforce reductions during the second half of 2023 that primarily impacted its European operations. A substantial portion of Kronos’ workforce reductions were accomplished through voluntary programs, for which eligible workforce reduction costs are recognized at the time both the employee and employer are irrevocably committed to the terms of the separation. These workforce reductions impacted approximately 100 employees. Kronos recognized a total of approximately $6 million in charges primarily in the fourth quarter of 2023 related to workforce reductions it implemented during the second half of 2023. In the third quarter of 2024, Kronos closed its sulfate process production line at its plant in Varennes, Canada. As a result of the process line closure, Kronos recognized charges to cost of sales of approximately $2 million during 2024 related to workforce reductions. Kronos also recognized approximately $14 million in non-cash charges primarily related to accelerated depreciation in the second and third quarters of 2024.

Net sales – Kronos’ net sales in 2024 increased 13%, or $220.6 million, compared to 2023 primarily due to the effects of a 20% increase in sales volumes due to improved overall demand across all major markets (which increased net sales by approximately $333 million) partially offset by a 5% decrease in average TiO2 selling prices (which decreased net sales by approximately $83 million). Changes in product mix negatively contributed to net sales, primarily due to changes in product sales mix in export markets in 2024 as compared to 2023. Additionally, Kronos estimates that changes in currency exchange rates (primarily the euro) increased its net sales by approximately $5 million in 2024 as compared to 2023. TiO2 selling prices will increase or decrease generally as a result of competitive market pressures and changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs. Incremental sales volumes resulting from the LPC acquisition did not significantly impact comparisons to the prior year.

Kronos’ net sales in 2023 decreased 14%, or $263.7 million, compared to 2022 primarily due to a 13% decrease in sales volumes (which decreased net sales by approximately $251 million) and a 4% decrease in average TiO2 selling prices (which decreased net sales by approximately $77 million). Changes in product mix positively contributed to net sales, primarily due to higher average selling prices and sales volumes in its complementary businesses which somewhat offset declines in TiO2 sales volumes. In addition to the impact of sales volumes and average TiO2  selling prices, Kronos

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estimates that changes in currency exchange rates (primarily the euro) increased its net sales by approximately $10 million in 2023 as compared to 2022. TiO2 selling prices will increase or decrease generally as a result of competitive market pressures, changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs.

Kronos’ sales volumes decreased 13% in 2023 as compared to 2022 due to lower overall demand across all major markets noted above. The lower overall demand Kronos began experiencing in the second half of 2022 continued throughout most of 2023. However, Kronos’ sales volumes were 29% higher in the fourth quarter of 2023 as compared to the fourth quarter of 2022 due to strengthening demand for TiO2 in its primary markets of Europe and North America.

Cost of sales and gross margin – Kronos’ cost of sales increased $26.2 million, or 2%, in 2024 compared to 2023 due to the net effects of a 20% increase in sales volumes, a 33% increase in production rates resulting in reduced unabsorbed fixed production costs, and lower production costs of approximately $115 million (primarily energy and raw materials). Kronos’ unabsorbed fixed production costs in 2024 were $12 million (incurred in the first quarter) compared to $96 million in 2023 related to curtailments that began in 2022 and continued into the first quarter of 2024, as discussed above. Kronos’ cost of sales in 2024 include a charge of approximately $2 million related to workforce reductions and approximately $14 million in non-cash charges related to the closure of its sulfate process line in Canada discussed above. Sales and production volumes resulting from the LPC acquisition did not materially impact comparisons to the prior year.

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

Kronos’ gross margin as a percentage of net sales increased to 19% in 2024 compared to 10% in 2023. As discussed and quantified above, Kronos’ gross margin as a percentage of net sales increased primarily due to higher sales and production volumes as well as lower production costs, partially offset by lower average TiO2 selling prices.

Kronos’ cost of sales decreased $37.5 million, or 2%, in 2023 compared to 2022 due to the net effects of a 13% decrease in sales volumes, a 19% decrease in production volumes at certain of its manufacturing facilities to align inventory levels to anticipated near-term customer demand (which resulted in $96 million of unabsorbed fixed production costs) and higher production costs of approximately $65 million (primarily raw materials). Kronos’ cost of sales as a percentage of net sales increased to 90% in 2023 compared to 80% in 2022 primarily due to the unfavorable effects of higher production costs (primarily raw materials) and unabsorbed fixed production costs due to lower production volumes.

Kronos’ gross margin as a percentage of net sales decreased to 10% in 2023 compared to 20% in 2022. As discussed and quantified above, Kronos’ gross margin as a percentage of net sales decreased primarily due to lower production and sales volumes, lower average TiO2 selling prices, higher production costs and changes in currency exchange rates.

Other operating income and expense, net – Kronos’ selling, general and administrative expense increased $14.4 million, or 7%, in 2024 compared to 2023. This increase was primarily due to higher distribution costs related to higher overall sales volumes compared to 2023. Kronos’ selling, general and administrative expense in 2024 also includes $2.2 million of transaction costs incurred in connection with the LPC acquisition. Selling, general and administrative expense also decreased due to lower costs related to workforce reductions in 2024 compared to 2023. Kronos’ selling, general and administrative expenses decreased $20.1 million, or 9%, in 2023 compared to 2022 primarily due to lower distribution costs related to lower overall sales volumes during the year. Selling, general and administrative expense as a percentage of net sales increased in 2023 compared to 2022 as a result of lower net sales and $5.8 million in charges related to workforce reductions.

Income (loss) from operations – Kronos had income from operations of $122.9 million in 2024 compared to a loss from operations of $56.0 million in 2023 as a result of the factors impacting gross margin discussed above. Kronos recognized a gain of $2.5 million in 2023 related to cash received from the settlement of a business interruption insurance claim. Kronos estimates that changes in currency exchange rates increased income from operations by approximately $10 million in 2024 as compared to 2023, as further discussed below.

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Kronos had a loss from operations of $56.0 million in 2023 compared to income from operations of $159.6 million in 2022 as a result of the factors impacting gross margin discussed above. Kronos recognized a gain of $2.5 million in 2023 and a gain of $2.7 million in 2022 related to cash received from the settlement of a business interruption insurance claim related to Hurricane Laura. Kronos estimates changes in currency exchange rates decreased its loss from operations by approximately $16 million in 2023 as compared to 2022, as discussed in the Effects of currency exchange rates section below.

Other non-operating income (expense) – Kronos recognized a gain on the remeasurement of its investment in LPC of $64.5 million in 2024 as a result of the acquisition. Kronos’ interest expense in 2024 increased $25.8 million compared to 2023 primarily due to higher interest rates on the debt exchange and the issuance of new notes discussed below and higher average debt balances as a result of the LPC acquisition. As a result of the exchange, Kronos’ interest expense for 2024 also includes a charge of $1.5 million for the write-off of deferred financing costs. Kronos recognized a gain of $1.2 million on the change in value of its marketable equity securities in 2024 compared to a loss of $1.0 million in 2023. Kronos’ other components of net periodic pension and OPEB cost in 2024 decreased $4.1 million compared to 2023 primarily due to a higher expected return on plan assets, lower discount rates impacting interest costs and a non-recurring $1.3 million in settlement costs related to the termination and buy-out of its U.K. pension plan in the second quarter of 2023.

Kronos recognized unrealized losses of $1.0 million in each of 2023 and 2022 on the change in value of its marketable equity securities. Kronos’ other components of net periodic pension and OPEB cost in 2023 decreased $7.2 million compared to 2022 primarily due to the net effects of higher discount rates impacting interest cost, previously unrecognized actuarial losses and $1.3 million in settlement costs related to the termination and buy-out of its pension plan in the United Kingdom during the second quarter of 2023. Kronos’ interest expense in 2023 was comparable to interest expense in 2022.

Income tax expense (benefit) – Kronos recognized income tax expense of $63.4 million in 2024 compared to an income tax benefit of $23.8 million in 2023. The difference is primarily due to higher earnings in 2024 and the jurisdictional mix of such earnings. Kronos’ earnings are subject to income tax in various U.S. and non-U.S. jurisdictions, and the income tax rates applicable to the pre-tax earnings (losses) of its non-U.S. operations are generally higher than the income tax rates applicable to its U.S. operations. Kronos would generally expect its overall effective tax rate, excluding the effect of any increase or decrease in its deferred income tax asset valuation allowance or changes in its reserve for uncertain tax positions, to be higher than the U.S. federal statutory tax rate of 21% primarily because of its sizeable non-U.S. operations.

Kronos’ income tax expense in 2024 includes a non-cash deferred income tax expense of $8.2 million, recognized in the fourth quarter, related to the recognition of a deferred income tax asset valuation allowance related to its Belgian net deferred tax assets. Kronos continues to believe it will ultimately realize the full benefit of its Belgian NOL carryforwards, in part because of their indefinite carryforward period. However, Kronos’ ability to reverse all or a portion of such valuation allowance in the future is dependent on the presence of sufficient positive evidence, such as the existence of cumulative profits in the most recent twelve consecutive quarters, and the ability to demonstrate future profitability for a sustainable period. Until such time as Kronos is able to reverse the valuation allowance in full, to the extent it generates additional losses in Belgium in the intervening periods, Kronos’ effective income tax rate will be negatively impacted, because any further losses will effectively be recognized without the net income tax benefit.

On December 10, 2024, the Department of the Treasury and the Internal Revenue Service released final currency regulations under §987 and related rules (the “2024 Final Regulations”). The 2024 Final Regulations generally apply to tax years beginning after December 31, 2024, and include transition rules that require Kronos to compute a pretransition gain or loss for currency translation related to the operations, assets and liabilities of its non-U.S. qualified business units. Pursuant to the 2024 Final Regulations, Kronos has calculated a pretransition gain of $77.1 million and, accordingly, its income tax expense in 2024 includes a non-cash deferred income tax expense of $16.5 million recognized in the fourth quarter.

Kronos recognized an income tax benefit of $23.8 million in 2023 compared to income tax expense of $29.4 million in 2022. The difference is primarily due to lower earnings in 2023 and the jurisdictional mix of such earnings.

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Kronos’ consolidated effective income tax rate in 2025 is expected to be higher than the U.S. federal statutory rate of 21% because the income tax rates applicable to the earnings (losses) of Kronos’ non-U.S. operations will be higher than the income tax rates applicable to its U.S. operations and due to the expected mix of earnings.

Effects of currency exchange rates

Kronos has substantial operations and assets located outside the United States (primarily in Germany, Belgium, Norway and Canada). The majority of its sales from non-U.S. operations are denominated in currencies other than the U.S. dollar, principally the euro, other major European currencies and the Canadian dollar. A portion of Kronos’ sales generated from its non-U.S. operations is denominated in the U.S. dollar (and consequently its non-U.S. operations will generally hold U.S. dollars from time to time). Certain raw materials used in all Kronos’ production facilities, primarily titanium-containing feedstocks, are purchased primarily in U.S. dollars, while labor and other production and administrative costs are incurred primarily in local currencies. Consequently, the translated U.S. dollar value of Kronos’ non-U.S. sales and operating results are subject to currency exchange rate fluctuations which may favorably or unfavorably impact reported earnings and may affect the comparability of period-to-period operating results. In addition to the impact of the translation of sales and expenses over time, Kronos’ non-U.S. operations also generate currency transaction gains and losses which primarily relate to (i) the difference between the currency exchange rates in effect when non-local currency sales or operating costs (primarily U.S. dollar denominated) are initially accrued and when such amounts are settled with the non-local currency and (ii) changes in currency exchange rates during time periods when its non-U.S. operations are holding non-local currency (primarily U.S. dollars).

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

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The $5 million increase in Kronos’ net sales (translation gains) was caused primarily by a weakening of the U.S. dollar relative to the euro, as Kronos’ euro-denominated sales were translated into more U.S. dollars in 2024 as compared to 2023. The strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2024 did not have a significant effect on Kronos net sales, as a substantial portion of the sales generated by its Canadian and Norwegian operations is denominated in the U.S. dollar.

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

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The $10 million increase in Kronos’ net sales (translation gains) was caused primarily by a weakening of the U.S. dollar relative to the euro, as Kronos’ euro-denominated sales were translated into more U.S. dollars in 2023 as compared to 2022. The strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2023 did not have a significant effect on Kronos net sales, as a substantial portion of the sales generated by its Canadian and Norwegian operations is denominated in the U.S. dollar.

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

Outlook

Overall Kronos’ customer demand improved in 2024 compared to the historical low demand it experienced during 2023, although demand levels remained below historical averages and customer demand moderated in the second half of the year as compared to the first half of the year across all major markets. Kronos expects demand to improve in 2025, particularly in Europe where the European Commission enacted duties on Chinese imports of TiO2 in mid-2024; however, it expects overall demand will remain below historical levels due to continued global economic uncertainty caused, in part, by the potential implementation of tariffs by the U.S. and other countries. Kronos believes customer inventory levels were low at the end of 2024 due to customer hesitancy to build inventory late in the year, and it is receiving customer orders on shorter notice than it experienced early in 2024 indicating that customers have a cautious demand outlook and are carefully managing inventory levels. TiO2 selling prices softened in the second half of 2024 in response to sluggish demand and competitive pressures. Kronos expects these pricing pressures to be somewhat mitigated in 2025, particularly in Europe, as a result of the duties enacted on low-cost imports from China. Kronos is operating its facilities at production rates in line with the current and expected near-term demand and believe its production rates for 2025 will be slightly above 2024 rates.

Kronos is focused on cost reduction initiatives designed to improve its long-term cost structure. In 2023, Kronos implemented targeted workforce reductions and certain ongoing process improvement initiatives. In the third quarter of 2024, Kronos closed its Canadian sulfate process line to improve gross margins through the optimization of production of its purified grades. Raw material, energy and other input costs generally improved during 2024; however, energy costs in Europe have trended up in recent months and remain above historical levels. Kronos expects raw material and other input costs will continue to moderate in 2025. Overall, primarily due to improved demand, Kronos expects to report higher operating results for the full year of 2025 as compared to 2024, although it will need to achieve TiO2 selling price increases in order to recognize margins more in-line with historical levels.

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As noted above, Kronos acquired full control of LPC in July 2024. Kronos believes this acquisition is a unique opportunity to immediately add value to its customers and better serve the North American marketplace by allowing it to expand its product offerings and increase sales to new and existing customers while recognizing significant synergies, including commercial, overhead and supply chain optimization. Kronos is in the process of fully integrating the additional LPC production capacity, and it expects the acquisition will have a positive impact on its earnings in 2025, although the potential positive impact will be limited by competitive pressures and by the additional debt service costs associated with the increase in borrowings to complete the transaction. With the increased borrowing availability under Kronos’ Global Revolver, as well as cash on hand, Kronos was able to finance the required working capital for the improvement needed to fully integrate the acquired LPC production capacity.

Kronos’ expectations for the TiO2 industry and its operations are based on a number of factors outside its control. Kronos’ operations are affected by global and regional economic, political and regulatory factors, and it has experienced global market disruptions. As noted above, energy costs in Europe, which spiked when Russia invaded Ukraine, remain above historical levels. In addition, Kronos operates a TiO2 facility in Canada, and the majority of production from that facility is currently sold into the U.S. The U.S. federal government’s recently enacted 25% tariff on Kronos’ imports from Canada could harm its ability to compete and adversely impact its earnings and profitability if such tariffs are sustained for an extended period of time without exclusion. Kronos has begun to implement strategies to minimize the potential impacts. Future impacts on Kronos’ operations will depend on, among other things, future energy costs, the effect newly enacted tariffs have on jurisdictions in which Kronos or its customers and suppliers operate, Kronos’ success in implementing mitigation strategies, and the impact economic conditions and geopolitical events have on its operations or its customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.

Operations outside the United States

Kronos has substantial operations located outside the United States for which the functional currency is not the U.S. dollar. As a result, the reported amount of our net investment in Kronos will fluctuate based upon changes in currency exchange rates. At December 31, 2024, Kronos had substantial net assets denominated in the euro, Canadian dollar and Norwegian krone.

Critical accounting policies and estimates

Our significant accounting policies are more fully described in Note 1 to our Consolidated Financial Statements. Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or (GAAP). The preparation of these financials statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenue and expense during the reporting period. On an ongoing basis we evaluate our estimates, including those related to the recoverability of long-lived assets, goodwill, pension and other postretirement benefit obligations and the underlying actuarial assumptions related thereto, the realization of deferred income tax assets and accruals for litigation, income tax and other contingencies. We base our estimates on historical experience and on various other assumptions which we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ significantly from previously-estimated amounts under different assumptions or conditions.

We believe the most critical accounting policies and estimates involving significant judgment primarily relate to contingencies, certain long-lived assets, considerations in the recoverability and impairment assessments for goodwill and defined benefit pension plans. We have discussed the development, selection and disclosure of our critical accounting estimates with the audit committee of our board of directors.

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Obligations for environmental remediation costs are difficult to assess and it is possible that actual costs for environmental remediation will exceed accrued amounts or that costs will be incurred in the future for sites in which we cannot currently estimate our liability. If these events were to occur in 2025, our corporate expenses would be higher than we currently estimate. In addition, we adjust our environmental remediation and related costs accruals (and potential range of our liabilities) as further information becomes available to us or as circumstances change which involves our judgment regarding current facts and circumstances for each site and is subject to various assumptions and estimates. Such further information or changed circumstances could result in an increase in our accrued environmental costs. See Note 17 to our Consolidated Financial Statements.

Significant judgment is required in estimating such cash flows. Adverse changes in such estimates of future net cash flows or estimates of fair value could result in an inability to recover the carrying value of the long-lived asset, thereby possibly requiring an impairment charge to be recognized in the future. We do not assess our property and equipment for impairment unless certain impairment indicators are present. We did not evaluate any long-lived assets for impairment during 2024 because no such impairment indicators were present.

When performing a qualitative assessment considerable management judgment is necessary to evaluate the qualitative impact of events and circumstances on the fair value of a reporting unit. Events and circumstances considered in our impairment evaluations, such as CompX’s historical profits and stability of the markets served, are consistent with factors utilized with our internal projections and operating plan. However, future events and circumstances could result in materially different findings which could result in the recognition of a material goodwill impairment.

Evaluations of possible impairment utilizing the quantitative impairment test require CompX to estimate, among other factors: forecasts of future operating results, revenue growth, operating margin, tax rates, capital expenditures, depreciation, working capital, weighted average cost of capital, long-term growth rates, risk premiums, terminal values, and fair values of reporting units and assets. The goodwill impairment test is subject to uncertainties arising from such events as changes in competitive conditions, the current general economic environment, material changes in growth rate assumptions that could positively or negatively impact anticipated future operating conditions and cash flows, changes in the discount rate, and the impact

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of strategic decisions. If any of these factors were to materially change such change may require revaluation of the reported goodwill. Changes in estimates or the application of alternative assumptions could produce significantly different results.

In 2024, CompX used the qualitative assessment for its annual impairment test and determined it was not necessary to perform the quantitative goodwill impairment test, as it concluded it is more-likely-than-not the fair value of the Security Products reporting unit exceeded its carrying amount. See Notes 1 and 7 to our Consolidated Financial Statements.

Defined benefit pension plans – We maintain a defined benefit pension plan in the U.S. As a result of the spin-off of Kronos in 2003, Kronos participates in our pension plan. Using participant data, we account for our portion of the combined pension plan as if it were a separate pension plan from the portion in which Kronos participates. As a result of the LPC acquisition in July 2024 (see Note 6 to our Consolidated Financial Statements), Kronos acquired the LPC defined benefit pension plan, which was overfunded on the Acquisition Date. Effective December 31, 2024, the LPC defined benefit pension plan was merged into our combined U.S. pension plan. Because we account for our portion of the combined pension plan separately, the plan merger did not impact our Consolidated Financial Statements. See Note 11 to our Consolidated Financial Statements.

We previously maintained a plan in the United Kingdom (U.K.) related to a former disposed U.K. business unit. In accordance with applicable U.K. pension regulations, we entered into an agreement in March 2021 for the bulk annuity purchase, or “buy-in”, with a specialist insurer of defined benefit pension plans. Following the buy-in, individual policies replaced the bulk annuity policy in a “buy-out” which was completed as of May 1, 2023. The buy-out was completed with existing plan funds. At the completion of the buy-out, the assets and liabilities of the U.K. pension plan were removed from our Consolidated Financial Statements and a non-cash pension plan termination loss of $4.9 million was recognized in the second quarter of 2023. See Note 11 to our Consolidated Financial Statements.

We recognized consolidated defined benefit pension plan expense of $1.4 million in 2022, $6.5 million in 2023, including the loss on the termination of the U.K. pension plan of $4.9 million discussed above and $1.4 million in 2024. The funding requirements for these defined benefit pension plans are generally based upon applicable regulations (such as ERISA in the U.S.) and will generally differ from pension expense recognized under GAAP for financial reporting purposes. We made contributions to our plans of approximately $1.2 million in 2022. In 2023, we made a net contribution of $.2 million to our plans (a contribution of approximately $1.1 million to our U.S. plan and a refund of approximately $.9 million as a result of the termination of the U.K. plan). In 2024, we made a contribution of $1.0 to our U.S. plan.

Under defined benefit pension plan accounting, defined benefit pension plan expense and prepaid and accrued pension costs are each recognized based on certain actuarial assumptions, principally the assumed discount rate and the assumed long-term rate of return on plan assets. We recognize the full funded status of our defined benefit pension plans as either an asset (for overfunded plans) or a liability (for underfunded plans) in our Consolidated Balance Sheets.

The discount rates we use for determining defined benefit pension expense and the related pension obligations are based on current interest rates earned on long-term bonds that receive one of the two highest ratings given by recognized rating agencies in the applicable country where the defined benefit pension benefits are being paid. In addition, we receive third-party advice about appropriate discount rates, and these advisors may in some cases use their own market indices. We adjust these discount rates as of each December 31 valuation date to reflect then-current interest rates on such long-term bonds. We use these discount rates to determine the actuarial present value of the pension obligations as of December 31 of that year. We also use these discount rates to determine the interest component of defined benefit pension expense for the following year.

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At December 31, 2024, our projected benefit obligations for our U.S. defined benefit plan is $26.6 million. As noted above, we terminated our U.K. pension plan in May 2023. We use different discount rate assumptions in determining our defined benefit pension plan obligations and expense for the plan we maintain in the United States and previously in the U.K. as the interest rate environment differs from country to country.

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

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The assumed long-term rate of return on plan assets represents the estimated average rate of earnings expected to be earned on the funds invested or to be invested from the plans’ assets provided to fund the benefit payments inherent in the projected benefit obligations. Unlike the discount rate, which is adjusted each year based on changes in current long-term interest rates, the assumed long-term rate of return on plan assets will not necessarily change based upon the actual short-term performance of the plan assets in any given year. Defined benefit pension expense each year is based upon the assumed long-term rate of return on plan assets for each plan, the actual fair value of the plan assets as of the beginning of the year and an estimate of the amount of contributions to and distributions from the plan during the year. Differences between the expected return on plan assets for a given year and the actual return are deferred and amortized over future periods based on the average remaining life expectancy of the inactive participants.

We used different long-term rates of return on plan asset assumptions for our U.S. and previously maintained U.K. defined benefit pension plan expense because the respective plan assets were invested in a different mix of investments and the long-term rates of return for different investments differ from country to country.

In determining the expected long-term rate of return on plan asset assumptions, we consider the long-term asset mix (e.g., equity vs. fixed income) for the assets for each of our plans and the expected long-term rates of return for such asset components. In addition, we receive third-party advice about appropriate long-term rates of return. See Note 11 to our Consolidated Financial Statements.

Our assumed long-term rates of return on plan assets for 2022, 2023 and 2024 were as follows:

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Our long-term rate of return on plan asset assumptions in 2025 used for purposes of determining our 2025 defined benefit pension plan expense is 5.0%. As noted above, during 2022 and through the approximate plan termination date in 2023, all of the assets of the U.K. plan were invested primarily in insurance contracts.

Based on the actuarial assumptions described above, we expect to recognize defined benefit pension expense of approximately $1.3 million in 2025. In comparison, we do not expect to be required to make any contributions to such plan during 2025.

As noted above, defined benefit pension expense and the amounts recognized as accrued pension costs are based upon the actuarial assumptions discussed above. We believe that all of the actuarial assumptions used are reasonable and appropriate. However, if we had lowered the assumed discount rate by 25 basis points for

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our plan as of December 31, 2024, our aggregate projected benefit obligation would have increased by approximately $.6 million at that date. Such a change would not materially impact our defined benefit pension expense for 2025. Similarly, if we lowered the assumed long-term rate of return on plan assets by 25 basis points for our plan, such a change would not materially impact our defined benefit pension expense for 2025.

LIQUIDITY AND CAPITAL RESOURCES

Consolidated cash flows

Operating activities

Trends in cash flows from operating activities, excluding the impact of deferred taxes and relative changes in assets and liabilities, are generally similar to trends in our income from operations. Changes in working capital are primarily related to changes in receivables and inventories (as discussed below) and payables and accrued liabilities. Net cash provided by operating activities was $25.6 million in 2024 compared to $37.0 million in 2023. The $11.4 million decrease in cash provided by operating activities includes the net effects of:

Net cash provided by operating activities was $37.0 million in 2023 compared to $26.9 million in 2022. The $10.1 million increase in cash provided by operating activities includes the net effects of:

We do not have complete access to CompX’s cash flows in part because we do not own 100% of CompX. A detail of our consolidated cash flows from operating activities is presented in the table below. Intercompany dividends have been eliminated. The reference to NL Parent in the tables below is a reference to NL Industries, Inc., as the parent company of CompX and our other wholly-owned subsidiaries.

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Relative changes in working capital can have a significant effect on cash flows from operating activities. As shown below, our total average days sales outstanding decreased from December 31, 2023 to December 31, 2024 and is primarily impacted by the timing of sales and collections in the last month of the year. As shown below, our average number of days in inventory at December 31, 2024 was comparable to December 31, 2023 primarily due to an increase at CompX’s Security Products reporting unit due to the fulfillment and shipping of a significant order during the fourth quarter of 2023, partially offset by a decrease at CompX’s Marine Components reporting unit due to elevated inventory balances at December 31, 2023 as a result of prior orders of certain raw materials with longer lead times delivered in the fourth quarter of 2023. For comparative purposes, we have provided 2022 numbers below.

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Investing activities

Capital expenditures, substantially all of which relate to CompX, have primarily emphasized improving manufacturing facilities and investing in manufacturing equipment, utilizing new technologies and increased automation of the manufacturing process, to provide for increased productivity and efficiency in order to meet expected customer demand and properly maintain facilities and technology infrastructure. Capital expenditures were $3.7 million in 2022, $1.1 million in 2023 and $1.4 million in 2024. Capital expenditures in 2022 were higher as CompX accelerated the timeline for certain projects designed to increase its capacity and improve its capabilities in response to strong customer demand. Beginning in the latter half of 2022 and continuing through 2024, CompX limited investments primarily to those expenditures required to meet its existing demand and to properly maintain its facilities and technology infrastructure.

Investing activities also include net collections of $5.5 million ($24.3 million of gross borrowings and $29.8 million of gross repayments) in 2022, net collections of $2.6 million ($27 9 million of gross borrowings and $30.5 million of gross repayments) in 2023 and net collections of $1.3 million ($25.0 million of gross borrowings and $26.3 million of gross repayments) in 2024 under a promissory note receivable from an affiliate. See Note 16 to our Consolidated Financial Statements.

During 2022, we purchased U.S. treasury marketable securities totaling $70.0 million. During 2023, we purchased U.S. treasury marketable securities totaling $61.4 million, and received gross proceeds totaling $82.0 million related to U.S. treasury bill maturities. During 2024, we received gross proceeds of $54.0 million related to U.S. treasury bill maturities. See Note 5 to our Consolidated Financial Statements.

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

Financing activities

Quarterly dividends paid totaled $13.7 million ($.28 per share, or $.07 per share per quarter) in each of 2022 and 2023 and $15.6 million ($.32 per share, or $.08 per share per quarter in 2024). In addition, our board of directors declared special dividends which totaled $17.1 million ($.35 per share) paid in August 2022 and $21.0 million ($.43 per share) paid in August 2024. In February 2025 our board of directors declared a first quarter 2025 dividend of $.09 per share, to be paid on March 27, 2025 to NL stockholders of record as of March 11, 2025. The declaration and payment of future dividends, and the amount thereof, is discretionary and is dependent upon our financial condition, cash requirements, contractual obligations and restrictions and other factors deemed relevant by our board of directors. The amount and timing of past dividends is not necessarily indicative of the amount or timing of any future dividends which might be paid. There are currently no contractual restrictions on the amount of dividends which we may pay.

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

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

Outstanding debt obligations

At December 31, 2024, NLKW had outstanding debt obligations of $.5 million under its secured revolving credit facility with Valhi, and CompX did not have any outstanding debt obligations. We are in compliance with all of the covenants contained in our secured revolving credit facility with Valhi at December 31, 2024. See Note 10 to our Consolidated Financial Statements

At December 31, 2024, Kronos had $10 million outstanding on its Global Revolver. Availability under the Global Revolver is subject to a borrowing base calculation, as defined in the agreement. The borrowing base calculated as of December 31, 2024 was approximately $278 million. Effective July 17, 2024, Kronos completed an amendment to its Global Revolver (the “Second Amendment”). Among other things, the Second Amendment increased the maximum borrowing amount from $225 million to $300 million, extended the maturity date to July 2029 and expanded the facility to include LPC and LPC’s receivables and certain of its inventories in the borrowing base. The LPC acquisition was financed through borrowings of $132.1 million under Kronos’ Global Revolver with the remainder paid with cash on hand.  In February 2024, Kronos exchanged €325 million principal amount of its outstanding 3.75% Senior Secured Notes due in September 2025 (the “Old Notes”) for newly issued €276.174 million 9.50% Senior Secured Notes due March 2029 (the “New Notes”) plus additional cash consideration of €48.75 million ($52.6 million) paid to the holders of the Old Notes and entered into a $53.7 million unsecured term loan from Contran Corporation due in September 2029 (the “Contran Term Loan”). On July 30, 2024, Kronos issued an additional €75 million principal amount of 9.50% Senior Secured Notes due 2029 (the “Additional New Notes” and, together with the Old Notes and the New Notes, the “Senior Secured Notes”). The Additional New Notes were issued at a premium of 107.50% of their principal amount, plus accrued interest from February 12, 2024, resulting in net proceeds of approximately $90 million, after fees and expenses. The Additional New Notes are fungible with the New Notes, are treated as a single series with the New Notes and have the same terms as the New Notes, other than their date of issuance and issue price. The proceeds from the Additional New Notes were used to pay down borrowings incurred under Kronos’ Global Revolver. Subsequent to the issuance of the Additional New Notes, the Contran Term Loan was amended in August 2024 to change the interest rate from 11.5% (which had been determined by adding an additional spread of 2% to the final interest rate on the New Notes issued in February 2024) to 9.54% (determined by adding a spread of 2% to the effective interest rate of the Additional New Notes issued in July 2024). In each case, the spread used to determine the rate was based upon comparable debt transactions at the time of the issuance of the applicable notes.

The Contran Term Loan is subordinated in right of payment to Kronos’ Senior Secured Notes and Kronos’ Global Revolver. Kronos’ Senior Secured Notes, the Contran Term Loan and Kronos’ Global Revolver contain a number of covenants and restrictions which, among other things, restrict its ability to incur additional debt, incur liens, pay dividends or merge or consolidate with, or sell or transfer substantially all of its assets to, another entity, and contain other provisions and restrictive covenants customary in lending transactions of these types. Certain of Kronos’ credit agreements contain provisions which could result in the acceleration of indebtedness prior to their stated maturity for reasons other than defaults for failure to comply with typical financial or payment covenants. For example, the credit agreements allow the lender to accelerate the maturity of the indebtedness upon a change of control (as defined in the agreement) of the borrower. In addition, the credit agreements could result in the acceleration of all or a portion of the indebtedness following a sale of assets outside the ordinary course of business. Kronos is in compliance with all of its debt covenants at December 31, 2024. Kronos believes that it will be able to continue to comply with the financial covenants contained in its credit facility through its maturity; however, if its future operating results differ materially from its expectations it may be unable to maintain compliance.

Future cash requirements

Liquidity

Our primary source of liquidity on an ongoing basis is our cash flow from operating activities and credit facilities with affiliates and banks as further discussed below. We generally use these amounts to fund capital expenditures

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

At December 31, 2024, we had aggregate restricted and unrestricted cash, cash equivalents and current marketable securities of $184.2 million, substantially all of which was held in the U.S. A detail (in millions) by entity is presented in the table below.

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In addition, at December 31, 2024 we owned 1.2 million shares of Valhi common stock with an aggregate market value of $28.0 million. See Note 5 to our Consolidated Financial Statements. We also owned 35.2 million shares of Kronos common stock at December 31, 2024 with an aggregate market value of $343.4 million. See Note 6 to our Consolidated Financial Statements.

We routinely compare our liquidity requirements and alternative uses of capital against the estimated future cash flows we expect to receive from our subsidiaries and affiliates. As a result of this process, we have in the past and may in the future seek to raise additional capital, incur debt, repurchase indebtedness in the market or otherwise, modify our dividend policies, consider the sale of our interests in our subsidiaries, affiliates, business, marketable securities or other assets, or take a combination of these and other steps, to increase liquidity, reduce indebtedness and fund future activities. Such activities have in the past and may in the future involve related companies.

We periodically evaluate acquisitions of interests in or combinations with companies (including related companies) perceived by management to be undervalued in the marketplace. These companies may or may not be engaged in businesses related to our current businesses. We intend to consider such acquisition activities in the future and, in connection with this activity, may consider issuing additional equity securities and increasing indebtedness. From time to time, we also evaluate the restructuring of ownership interests among our respective subsidiaries and related companies.

Based upon our expectations of operating performance, and the anticipated demands on our cash resources we expect to have sufficient liquidity to meet our short-term obligations (defined as the twelve-month period ending December 31, 2025). If actual developments differ materially from our expectations, our liquidity could be adversely affected. In this regard, Valhi has agreed to loan us up to $50 million on a revolving basis. At December 31, 2024, we had $.5 million in outstanding borrowings under this facility, and we had $49.5 million available for future borrowing under the facility. See Note 10 to our Consolidated Financial Statements.

Capital expenditures

Capital expenditures for 2025 are estimated at approximately $3.2 million, substantially all of which relate to CompX. CompX’s 2025 capital investments are primarily to meet its expected customer demand and those required to properly maintain its facilities and technology infrastructure.

Dividends

Because our operations are conducted primarily through subsidiaries and affiliates, our long-term ability to meet parent company-level corporate obligations is largely dependent on the receipt of dividends or other distributions from our subsidiaries and affiliates. A detail of annual dividends we expect to receive from our subsidiaries and affiliates in 2025, based on the number of shares of common stock of these affiliates we own as of December 31, 2024 and their current regular quarterly dividend rate, is presented in the table below.

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Investments in our subsidiaries and affiliates and other acquisitions

We have in the past and may in the future, purchase the securities of our subsidiaries and affiliates or third-parties in market or privately-negotiated transactions. We base our purchase decisions on a variety of factors, including an analysis of the optimal use of our capital, taking into account the market value of the securities and the relative value of expected returns on alternative investments. In connection with these activities, we may consider issuing additional equity securities or increasing our indebtedness. We may also evaluate the restructuring of ownership interests of our businesses among our subsidiaries and related companies.

Commitments and contingencies

We are subject to certain commitments and contingencies, as more fully described in Note 17 to our Consolidated Financial Statements or in Part I, Item 3 of this report. In addition to those legal proceedings described in Note 17 to our Consolidated Financial Statements, various legislation and administrative regulations have, from time to time, been proposed that seek to (i) impose various obligations on present and former manufacturers of lead pigment and lead-based paint (including us) with respect to asserted health concerns associated with the use of such products and (ii) effectively overturn court decisions in which we and other pigment manufacturers have been successful. Examples of such proposed legislation include bills which would permit civil liability for damages on the basis of market share, rather than requiring plaintiffs to prove that the defendant’s product caused the alleged damage and bills which would revive actions barred by the statute of limitations. While no legislation or regulations have been enacted to date that are expected to have a material adverse effect on our consolidated financial position, results of operations or liquidity, enactment of such legislation could have such an effect.

As more fully described in the Notes to our Consolidated Financial Statements, we are party to various debt, leases and other agreements which contractually and unconditionally commit us to pay certain amounts in the future. See Note 10 to our Consolidated Financial Statements. See Notes 1 and 14 to our Consolidated Financial Statements for a description of certain income tax contingencies.  Additionally, CompX has purchase obligations of $19.8 million ($19.3 million payable in 2025 and $.5 million payable in 2026/2027) which consists of open purchase orders and contractual obligations, primarily commitments to purchase raw materials and for capital projects in process at December 31, 2024. The timing and amount for purchase obligations is based on the contractual payment amount and the contractual payment date for those commitments.

Recent accounting pronouncements

See Note 19 to our Consolidated Financial Statements.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Business overview

We are primarily a holding company. We operate in the component products industry through our majority-owned subsidiary, CompX International Inc. We also own a noncontrolling interest in Kronos Worldwide, Inc. Both CompX (NYSE American: CIX) and Kronos (NYSE: KRO) file periodic reports with the SEC.

CompX is a leading manufacturer of engineered components utilized in a variety of applications and industries. Through its Security Products operations, CompX manufactures mechanical and electronic cabinet locks and other locking mechanisms used in postal, recreational transportation, office and institutional furniture, cabinetry, tool storage and healthcare applications. CompX also manufactures wake enhancement systems, stainless steel exhaust systems, gauges, throttle controls, trim tabs and related hardware and accessories for the recreational marine and other industries through its Marine Components operations.

We account for our 31% non-controlling interest in Kronos by the equity method. Kronos is a leading global producer and marketer of value-added titanium dioxide pigments. TiO2 is used for a variety of manufacturing applications including coatings, plastics, paper and other industrial products.

Net income overview

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

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

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

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

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

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

Outlook

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

Income from operations

The following table shows the components of our income from operations.