VALHI INC /DE/

Previous wording

We reported net income attributable to Valhi stockholders of $24.3 million, or $.85 per diluted share, in the first six months of 2026 compared to net income attributable to Valhi stockholders of $17.8 million, or $.62 per diluted share, in the first six months of 2025. Our net income attributable to Valhi stockholders increased from 2025 to 2026 primarily due to the effects of:

Current wording

We reported net income attributable to Valhi stockholders of $30.2 million, or $1.06 per diluted share, in the third quarter of 2026 compared to a net loss attributable to Valhi stockholders of $22.2 million, or $.78 per diluted share, in the third quarter of 2025. Our net income attributable to Valhi stockholders increased from 2025 to 2026 primarily due to higher operating income from our Chemicals Segment of $60.5 million in 2026 compared to an operating loss of $15.9 million in 2025 partially offset by lower operating income from our Real Estate Management and Development Segment of $.5 million in 2026 compared to $19.7 million in 2025.

Previous wording

Our diluted net income per share in the second quarter of 2025 includes income of $.31 per share related to tax increment infrastructure reimbursement.

Current wording

Our diluted net income per share in the third quarter of 2026 includes income of $.28 per share related to the Chemicals Segment’s non-cash deferred income tax benefit related to proposed currency regulations under §987 issued in August 2026.

Previous wording

We reported net income attributable to Valhi stockholders of $22.3 million, or $.78 per diluted share, in the second quarter of 2026 compared to net income attributable to Valhi stockholders of $.9 million, or $.03 per diluted share, in the second quarter of 2025. Our net income attributable to Valhi stockholders increased from 2025 to 2026 primarily due to higher operating income from our Chemicals Segment of $40.4 million in 2026 compared to operating income of $10.3 million in 2025.

Current wording

We reported net income attributable to Valhi stockholders of $54.5 million, or $1.91 per diluted share, in the first nine months of 2026 compared to a net loss attributable to Valhi stockholders of $4.4 million, or $.15 per diluted share, in the first nine months of 2025. Our net income attributable to Valhi stockholders increased from 2025 to 2026 primarily due to higher operating income from our Chemicals Segment of $115.4 million in 2026 compared to operating income of $35.6 million in 2025.

Previous wording

Current Industry Conditions– Our Chemicals Segment started 2026 with average TiO 2 selling prices lower than at the beginning of 2025; however, its average TiO 2 selling prices increased 4% during the first six months of 2026. During the second quarter of 2026, our Chemicals Segment announced and implemented various price increases and surcharges in response to higher operating costs. Our Chemicals Segment’s average TiO 2 selling prices in the first six months of 2026 were 4% lower than its average TiO 2 selling prices for the first six months of 2025. Overall, our Chemicals Segment’s sales volumes increased in the first six months of 2026 compared to the same period in 2025 primarily due to market share gains across all markets resulting from changing competitive and supply conditions and the continued effect of anti-dumping duties which remain in effect in certain markets.

Current wording

Current Industry Conditions– Our Chemicals Segment started 2026 with average TiO 2 selling prices lower than at the beginning of 2025; however, its average TiO 2 selling prices increased 11% during the first nine months of 2026. Throughout this period, our Chemicals Segment successfully implemented price increases and surcharges in response to rising operating costs, including energy and distribution costs. As a result, our Chemicals Segment’s average TiO 2 selling prices for the first nine months of 2026 were 1% lower than the corresponding period of 2025, while average TiO 2 selling prices for the third quarter of 2026 were 5% higher than in the third quarter of 2025. Overall, our Chemicals Segment’s sales volumes increased in the first nine months of 2026 compared to the same period in 2025 primarily due to market share gains in its European and North American markets, reflecting the effect of anti-dumping duties that remain in effect in certain markets and changing supply conditions. These conditions allowed us to expand our Chemicals Segment’s customer base and supported implementation of our pricing initiatives. Despite these gains, overall TiO 2 demand remains below historical levels.

Previous wording

Excluding the effect of changes in currency exchange rates, our Chemicals Segment’s cost of sales per metric ton of TiO 2 sold in the first half of 2026 was lower than the comparable period of 2025 due to decreases in per metric ton production costs driven primarily by the cost reduction initiatives discussed above, as well as lower raw material costs (primarily feedstock costs) and lower unabsorbed fixed costs.

Current wording

Excluding the effects of changes in currency exchange rates, our Chemicals Segment’s cost of sales per metric ton of TiO 2 sold in the first nine months of 2026 was lower than the comparable period of 2025 due to decreases in per metric ton production costs, primarily driven by the cost reduction initiatives discussed above, as well as lower raw material costs (primarily feedstock costs) and lower unabsorbed fixed costs, partially offset by higher energy costs.

Previous wording

Net Sales– Our Chemicals Segment’s net sales in the second quarter of 2026 increased 13%, or $63.7 million, compared to the second quarter of 2025 primarily due to the effects of a 16% increase in sales volumes (which increased net sales by approximately $79 million) and the favorable impact of changes in currency exchange rates (primarily the euro) which our Chemicals Segment estimates increased its net sales by approximately $10 million. These increases were partially offset by a 3% decrease in average TiO 2 selling prices (which decreased net sales by approximately $15 million) and by changes in product mix, primarily due to lower average selling prices and lower sales volumes in its complementary businesses. TiO 2 selling prices will increase or decrease generally as a result of competitive market pressures, change in the relative level of supply and demand as well as change in raw material and other manufacturing costs.

Current wording

Net sales– Our Chemicals Segment’s net sales in the third quarter of 2026 increased 18%, or $84.2 million, compared to the third quarter of 2025 primarily due to the effects of a 14% increase in sales volumes (which increased net sales by approximately $64 million) and a 5% increase in average TiO 2 selling prices (which increased net sales by approximately $23 million). TiO 2 selling prices will increase or decrease generally as a result of competitive market pressures, change in the relative level of supply and demand as well as change in raw material and other manufacturing costs.

Previous wording

Our Chemicals Segment’s net sales in the first six months of 2026 increased 9%, or $83.7 million, compared to the first six months of 2025 primarily due to the effects of a 10% increase in sales volumes (which increased net sales by approximately $98 million) and the favorable impact of changes in currency exchange rates (primarily the euro), which our Chemicals Segment estimates increased its net sales by approximately $41 million. These increases were partially offset by a 4% decrease in average TiO 2 selling prices (which decreased net sales by approximately $39 million) and by changes in product mix, primarily due to lower average selling prices and lower sales volumes in its complementary businesses.

Current wording

Our Chemicals Segment’s net sales in the first nine months of 2026 increased 12%, or $167.9 million, compared to the first nine months of 2025 primarily due to an 11% increase in sales volumes (which increased net sales by approximately $159 million) partially offset by a 1% decrease in average TiO 2 selling prices (which decreased net sales by approximately $14 million). Additionally, we estimate that changes in currency exchange rates (primarily the euro) increased our Chemicals Segment’s net sales by approximately $39 million in the first nine months of 2026 as compared to the first nine months of 2025.

Previous wording

Cost of Sales and Gross Margin– Our Chemicals Segment’s cost of sales increased by $23.7 million, or 5%, in thesecond quarter of 2026 compared to thesecond quarter of 2025 due to a 16% increase in sales volumesand the unfavorable impact from changes in currency exchange rates. These increases were partially offset by lower production costs resulting primarily from the cost reduction initiatives implemented in the fourth quarter of 2025, lower raw material costs (primarily feedstock) and lower unabsorbed fixed costs. Unabsorbed fixed costs were not material in thesecond quarter of 2026 compared to approximately $20 million in thesecond quarter of 2025.

Current wording

Cost of Sales and Gross Margin– Our Chemicals Segment’s cost of sales increased by $3.8 million, or 1%, in thethird quarter of 2026 compared to thethird quarter of 2025 due to the net effects of a 14% increase in sales volumes, higher energy costs, higher production rates resulting in reduced unabsorbed fixed production costs, lower raw material costs (primarily feedstock), and lower production costs resulting primarily from the cost reduction initiatives implemented in the fourth quarter of 2025. Our Chemicals Segment’s cost of sales in thethird quarter of 2025 included approximately $27 million of unabsorbed fixed costs as it adjusted its TiO 2 production volumes lower to align inventory levels with lower demand. Unabsorbed fixed costs in thethird quarter of 2026 were not material.

Previous wording

Our Chemicals Segment’s gross margin as a percentage of net sales increased to 18% in the second quarter of 2026 compared to 13% in the second quarter of 2025. Our Chemicals Segment’s gross margin as a percentage of net sales increased primarily due to the net effects of higher sales volumes, lower average TiO 2 selling prices, lower production costs as discussed above, and the unfavorable impact from changes in currency exchange rates.

Current wording

Our Chemicals Segment’s gross margin as a percentage of net sales increased to 23% in the third quarter of 2026 compared to 10% in the third quarter of 2025. Our Chemicals Segment’s gross margin as a percentage of net sales increased based on the factors affecting net sales and cost of sales, discussed above.

Previous wording

Our Chemicals Segment’s cost of sales increased by $67.3 million, or 8%, in the first six months of 2026 compared to the first six months of 2025 due to a 10% increase in sales volumes and the unfavorable impact from changes in currency exchange rates. These increases were partially offset by lower production costs resulting primarily from the cost reduction initiatives implemented in the fourth quarter of 2025, lower raw material costs (primarily feedstock), and lower unabsorbed fixed costs. Unabsorbed fixed costs were not material in the first six months of 2026 compared to $30 million in the first six months of 2025.

Current wording

Our Chemicals Segment’s cost of sales increased $71.1 million, or 6%, in thefirst nine months of 2026 compared to thefirst nine months of 2025 primarily due to an 11% increase in sales volumes and theunfavorable impact from changes in currency exchange rates, partially offset by higher production rates resulting in reduced unabsorbed fixed production costs, lower raw material costs (primarily feedstock) and lower production costs resulting primarily from the cost reduction initiatives implemented in the fourth quarter of 2025. Our Chemicals Segment’s cost of sales for the first nine months of 2025 includes approximately $45 million of unabsorbed fixed costs. Unabsorbed fixed costs for the first nine months of 2026 were not material.

Previous wording

Our Chemicals Segment’s cost of sales as a percentage of net sales improved to 82% in the second quarter of 2026 compared to 87% in the same period of 2025, primarily due to the favorable effects of higher sales volumes and lower production costs, discussed above. These favorable impacts were partially offset by lower average TiO 2 selling prices and the unfavorable impact of lower average selling prices and sales volumes within our Chemicals Segment’s complementary businesses.

Current wording

Our Chemicals Segment’s cost of sales as a percentage of net sales improved to 81% in the first nine months of 2026 compared to 85% in the same period of 2025, primarily due to the favorable effects of lower production costs, partially offset by lower average TiO 2 selling prices and the unfavorable impact of changes in currency exchange rates.

Previous wording

Our Chemicals Segment’s gross margin as a percentage of net sales was comparable at 17% in the first six months of 2026 and 2025 based on the factors affecting net sales and cost of sales, discussed above.

Current wording

Our Chemicals Segment’s gross margin as a percentage of net sales increased to 19% in the first nine months of 2026 compared to 15% in the same period of 2025 based on the factors affecting net sales and cost of sales, discussed above.

Previous wording

Our Chemicals Segment’s operating income increased by $3.4 million to $54.9 million in the first six months of 2026 compared to $51.5 million in the first six months of 2025, primarily as a result of the factors impacting gross margin discussed above. We estimate that changes in currency exchange rates decreased our Chemicals Segment’s operating income by approximately $18 million in the first six months of 2026 compared to the same period in 2025, as discussed in the effects of currency exchange rates section below.

Current wording

Operating Income (Loss)– Our Chemicals Segment’s operating income increased by $76.4 million to $60.5 million in the third quarter of 2026 compared to a $15.9 million loss in the third quarter of 2025, primarily as a result of the factors impacting gross margin discussed above. We estimate that changes in currency exchange rates decreased operating income by approximately $5 million in the third quarter of 2026 compared to the same period in 2025, as discussed in the effects of currency exchange rates section below. Our Chemicals Segment’s operating income increased by $79.8 million to $115.4 million in the first nine months of 2026 compared to $35.6 million in the first nine months of 2025, primarily as a result of the factors impacting gross margin discussed above. We estimate that changes in currency exchange rates decreased operating income by approximately $23 million in the first nine months of 2026 compared to the same period in 2025, as discussed in the effects of currency exchange rates section below.

Previous wording

Our Chemicals Segment’s operating income is net of amortization of purchase accounting adjustments made in conjunction with our acquisitions of interests in NLI and Kronos. As a result, we recognize additional depreciation expense above the amounts Kronos reports separately, substantially all of which is included within cost of sales. We recognized additional depreciation expense of $1.2 million and $1.0 million in the first six months of 2026 and 2025, respectively, which reduced our reported Chemicals Segment’s operating income as compared to amounts reported by Kronos.

Current wording

Our Chemicals Segment’s operating income (loss) is net of amortization of purchase accounting adjustments made in conjunction with our acquisitions of interests in NLI and Kronos. As a result, we recognize additional depreciation expense above the amounts Kronos reports separately, substantially all of which is included within cost of sales. We recognized additional depreciation expense of $1.7 million and $1.6 million in the first nine months of 2026 and 2025, respectively, which reduced our reported Chemicals Segment’s operating income (loss) as compared to amounts reported by Kronos.

Previous wording

Currency Exchange Rates– Our Chemicals Segment has substantial operations and assets located outside the United States (primarily in Germany, Belgium, Norway and Canada). The majority of our Chemicals Segment’s 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 our Chemicals Segment’s sales generated from its non-U.S. operations is denominated in the U.S. dollar (and consequently our Chemicals Segment’s non-U.S. operations will generally hold U.S. dollars from time to time). Certain raw materials used in all our Chemicals Segment’s production facilities, primarily titanium-containing feedstocks, are purchased primarily in U.S. dollars, while labor and other production and administrative costs are incurred primarily in local currencies. Consequently, the translated U.S. dollar value of our Chemicals Segment’s 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, our Chemicals Segment’s 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, (ii) changes in currency exchange rates during time periods when our Chemicals Segment’s non-U.S. operations are holding non-local currency (primarily U.S. dollars), and (iii) relative changes in the aggregate fair value of currency forward contracts held from time to time. We periodically use currency forward contracts to manage a portion of our currency exchange risk, and relative changes in the aggregate fair value of any currency forward contracts we hold from time to time serves in part to mitigate the currency transaction gains or losses we would recognize from the first two items described above.

Current wording

denominated in currencies other than the U.S. dollar, principally the euro, other major European currencies and the Canadian dollar. A portion of our Chemicals Segment’s sales generated from its non-U.S. operations is denominated in the U.S. dollar (and consequently our Chemicals Segment’s non-U.S. operations will generally hold U.S. dollars from time to time). Certain raw materials used in all our Chemicals Segment’s production facilities, primarily titanium-containing feedstocks, are purchased primarily in U.S. dollars, while labor and other production and administrative costs are incurred primarily in local currencies. Consequently, the translated U.S. dollar value of our Chemicals Segment’s 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, our Chemicals Segment’s 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, (ii) changes in currency exchange rates during time periods when our Chemicals Segment’s non-U.S. operations are holding non-local currency (primarily U.S. dollars), and (iii) relative changes in the aggregate fair value of currency forward contracts held from time to time. We periodically use currency forward contracts to manage a portion of our currency exchange risk, and relative changes in the aggregate fair value of any currency forward contracts we hold from time to time serves in part to mitigate the currency transaction gains or losses we would recognize from the first two items described above.

Previous wording

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

Current wording

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

Previous wording

The $10 million increase in our Chemicals Segment net sales (translation gains) was caused primarily by a weakening of the U.S. dollar relative to the euro, as its euro-denominated sales were translated into more U.S. dollars in 2026 as compared to 2025. The weakening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2026 did not have a significant effect on our Chemicals Segment’s net sales, as a substantial portion of the sales generated by its Canadian and Norwegian operations is denominated in the U.S. dollar.

Current wording

The $2 million decrease in our Chemicals Segment net sales (translation losses) was caused primarily by a strengthening of the U.S. dollar relative to the euro, as our euro-denominated sales were translated into less U.S. dollars in 2026 as compared to 2025. The strengthening of the U.S. dollar relative to the Canadian dollar and the weakening of the U.S. dollar relative to the Norwegian krone in 2026 did not have a significant effect on our Chemicals Segment’s net sales, as a substantial portion of the sales generated by its Canadian and Norwegian operations is denominated in the U.S. dollar.

Previous wording

The $12 million decrease in our Chemicals Segment’s operating income was comprised of the following:

Current wording

The $5 million decrease in our Chemicals Segment’s operating income was comprised of the following:

Previous wording

The $41 million increase in our Chemicals Segment’s net sales (translation gains) was caused primarily by a weakening of the U.S. dollar relative to the euro, as its euro-denominated sales were translated into more U.S. dollars in 2026 as compared to 2025. The weakening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2026 did not have a significant effect on our Chemicals Segment’s net sales, as a substantial portion of the sales generated by its Canadian and Norwegian operations is denominated in the U.S. dollar.

Current wording

The $39 million increase in our Chemicals Segment’s net sales (translation gains) was caused primarily by a weakening of the U.S. dollar relative to the euro, as our euro-denominated sales were translated into more U.S. dollars in 2026 as compared to 2025. The weakening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2026 did not have a significant effect on our Chemicals Segment’s net sales, as a substantial portion of the sales generated by its Canadian and Norwegian operations is denominated in the U.S. dollar.

Previous wording

The $18 million decrease in our Chemicals Segment’s operating income was comprised of the following:

Current wording

The $23 million decrease in our Chemicals Segment’s operating income was comprised of the following:

Previous wording

Outlook – During the second quarter of 2026, our Chemicals Segment continued the positive momentum from the first quarter, with sales volumes improving compared to the same period in 2025. Volume growth was driven by higher sales across all major markets as a result of market share gains, particularly in Europe, reflecting changing competitive and supply conditions that created opportunities to expand its customer base. While demand has improved compared to 2025, overall demand remains below historical levels, particularly in North America, where demand continues to be affected by broader economic uncertainty, prolonged elevated interest rates and subdued consumer spending. Our Chemicals Segment believes industry-wide TiO 2 inventories remain constrained and customer order levels have improved in response to geopolitical instability and recent supply and shipping disruptions in certain regions. As a result, customer order lead times have lengthened. Our Chemicals Segment’s order backlog entering the third quarter is favorable compared to prior year, providing greater flexibility in its near- and intermediate-term production planning.

Current wording

Outlook – During the third quarter of 2026, our Chemicals Segment continued the positive momentum from the first half of the year, with sales volumes improving compared to the same period in 2025. Volume growth was driven primarily by market share gains in Europe and North America, reflecting the effect of anti-dumping duties in certain markets and changing supply conditions. While sales volumes have improved compared to 2025, overall demand remains below historical levels, particularly in North America, where demand continues to be affected by broader economic uncertainty, prolonged housing market weakness caused by elevated interest rates and subdued consumer spending. Customer order lead times have recently begun to decline, consistent with the seasonal slowdown typically experienced during the fourth quarter. Our Chemicals Segment’s order backlog entering the fourth quarter remains favorable compared to the prior year, and combined with planned maintenance activities at several of our Chemicals Segment’s facilities, it expects its finished goods inventory levels to remain below normal.

Previous wording

The cost reduction initiatives implemented by our Chemicals Segment during the fourth quarter of 2025, including workforce reductions and other measures, designed to align its cost structure with current demand levels, continue to benefit its operating results in 2026. During the second quarter of 2026, our Chemicals Segment realized improved gross margins, and it expects margins to continue to benefit from lower cost inventory produced during 2026 and more favorable selling prices. Our Chemicals Segment’s operational restructuring allows it to run its facilities more efficiently at lower production rates for extended periods while maintaining flexibility to respond to changing market conditions. Our Chemicals Segment operated its facilities within its normal capacity range during the first

Current wording

The cost reduction initiatives implemented by our Chemicals Segment during the fourth quarter of 2025, including workforce reductions and other measures designed to align its cost structure with current demand levels, continue to benefit its operating results in 2026. Gross margins improved during the third quarter and first nine months of 2026 and are expected to remain above 2025 levels for the full year, benefiting from lower cost inventory produced during 2026, more favorable selling prices and the ongoing effects of its cost-reduction initiatives. Our Chemicals Segment’s operational restructuring allows it to run its facilities more efficiently at lower production rates for extended periods while maintaining flexibility to respond to changing market conditions. Our Chemicals Segment operated its facilities within its normal capacity range during the first nine months of 2026, and our Chemicals Segment currently expects to continue operating within its normal capacity range for the remainder of the year.

Previous wording

Our Chemicals Segment remains focused on improving profitability through pricing actions, disciplined cost management, and continued execution of its operating cost structural realignment initiatives. Our Chemicals Segment also continues to pursue sales growth opportunities in regions affected by changing competitive and supply conditions, logistical challenges and trade measures that have reduced the competitiveness of certain imports.

Current wording

Our Chemicals Segment remains focused on improving profitability through pricing actions, disciplined cost management, and continued execution of its cost reduction initiatives. Our Chemicals Segment also continues to pursue targeted sales growth opportunities in regions affected by logistical challenges and trade measures that have reduced the competitiveness of certain imports.

Previous wording

Liquidity and capital resources remain sufficient to support our Chemicals Segment’s operations and planned capital investments. While our Chemicals Segment typically experiences significant seasonal cash usage in the first half of the year, it expects cash on hand to improve over the remainder of the year. Our Chemicals Segment will continue to actively manage working capital, including inventories and receivables, to bolster operating cash flows and maintain financial flexibility. Our Chemicals Segment believes its revolving credit facility availability, combined with the absence of near-term debt maturities and improved operating cash flows, will provide adequate liquidity for expected working capital needs and capital allocation requirements.

Current wording

Liquidity and capital resources remain sufficient to support our Chemicals Segment’s operations and planned capital investments. While our Chemicals Segment typically experiences significant seasonal cash usage in the first half of the year, it expects liquidity to improve over the remainder of 2026. Our Chemicals Segment will continue to actively manage working capital, including inventories and receivables, to bolster operating cash flows and maintain financial flexibility. Our Chemicals Segment believes availability under its revolving credit facility, combined with the absence of near-term debt maturities and improved operating cash flows, will provide adequate liquidity for expected working capital needs and capital allocation priorities.

Previous wording

Our Component Products Segment’s operating income in the second quarter of 2026 was $8.9 million compared to $6.3 million in the second quarter of 2025. Operating income for the first six months of 2026 was $16.0 million compared to $12.2 million for the comparable prior year period. Our Component Products Segment’s operating income increased in the second quarter and for the first six months of 2026 due to higher sales and gross margins, predominantly at the security products reporting unit, and to a lesser extent, at the marine components reporting unit.

Current wording

Our Component Products Segment’s operating income in the third quarter of 2026 was $6.4 million compared to $4.8 million in the same period of 2025. Operating income for the first nine months of 2026 was $22.4 million compared to $17.0 million for the comparable prior year period. Our Component Products Segment’s operating income increased in the third quarter and for the first nine months of 2026 due to higher sales and gross margin at the security products and marine components reporting units.

Previous wording

$.6 million higher sales to the healthcare market and $.4 million higher sales to distributors. Sales to the government security market in the second quarter and in the first six months of 2026 were comparable to the same periods in 2025. The increase in second quarter marine components sales was primarily due to $1.6 million higher sales to the industrial market, partially offset by $1.0 million lower sales to the government market. The increase in marine components sales for the first six months of 2026 was primarily due to $3.5 million higher sales to the industrial market, partially offset by $1.5 million lower sales to the towboat market and $1.0 million lower sales to the government market. Towboat market sales in the first quarter of 2025 benefited from a one-time customer stocking event that did not repeat in 2026.

Current wording

Net Sales– Our Component Products Segment’s net sales increased $4.0 million in the third quarter of 2026 compared to the same period in 2025 primarily due to higher marine components sales to the towboat and industrial markets, and to a lesser extent, higher security products sales to the healthcare and tool storage markets. Our Component Products Segment’s net sales increased $7.6 million for the first nine months of 2026 compared to the same period in 2025 primarily due to higher marine components sales to the industrial market and higher security products sales to various markets including the healthcare, tool storage, transportation and distribution markets. The increase in third quarter security products sales was primarily due to $1.4 million higher sales to the healthcare market and $.6 million higher sales to the tool storage market, partially offset by $.8 million lower sales to the government security market. The increase in security products sales for the first nine months of 2026 was primarily due to $2.0 million higher sales to the healthcare market, $1.3 million higher sales to the tool storage market, $1.1 million higher sales to the transportation market and $.6 million higher sales to distributors, partially offset by $1.1 million lower sales to the government security market. The increase in third quarter marine components sales was primarily due to $1.1 million higher sales to the towboat market and $.9 million higher sales to the industrial market. The increase in marine components sales for the first nine months of 2026 was primarily due to $4.4 million higher sales to the industrial market and $.5 million higher sales to the engine builder market, partially offset by $.7 million lower sales to the government market and $.5 million lower sales to each of the towboat and the center console markets. Towboat market sales in the first quarter of 2025 benefited from a one-time customer stocking event that did not repeat in 2026.

Previous wording

Cost of Sales and Gross Margin– Our Component Products Segment’s cost of sales as a percentage of net sales improved by 4% and 3% in the second quarter and first six months of 2026, respectively, compared to the same periods in 2025. As a result, gross margin as a percentage of net sales increased over the same periods. The improvement in gross margin percentage for the second quarter and first six months of 2026 was primarily due to a higher gross margin percentage at security products. In addition, improved gross margin performance at marine components contributed favorably to the increase in the second-quarter comparative period. Marine components’ gross margin as a percentage of net sales increased in the second quarter of 2026 compared to the same period in 2025 primarily due to a more favorable customer and product mix, partially offset by higher cost of sales, including increased maintenance and supply costs. Marine components’ gross margin as a percentage of net sales for the first six months of 2026 was comparable to the same period in 2025 as a more favorable customer and product mix and increased coverage of fixed costs on higher sales were largely offset by higher cost of sales, including sales of higher-cost inventory and increased maintenance and supply costs. Security products’ gross margin as a percentage of net sales increased in the second quarter and first six months of 2026 compared to the same periods in 2025 primarily due to a more favorable customer and product mix and lower cost of sales driven by lower employer-related medical expenses and the recovery of one-time prior-period import costs recognized during the second quarter of 2026.

Current wording

Cost of Sales and Gross Margin– Our Component Products Segment’s cost of sales as a percentage of net sales improved by 2% and 3% in the third quarter and first nine months of 2026, respectively, compared to the same periods in 2025. As a result, gross margin as a percentage of net sales increased over the same periods. The improvement in gross margin percentage for the third quarter was due to higher gross margin percentages at both security products and marine components, while the improvement for the first nine months of 2026 was primarily due to the improvement in gross margin percentage at security products. Marine components’ gross margin as a percentage of net sales increased in the third quarter of 2026 compared to the same period in 2025 primarily due to increased coverage of fixed costs on higher sales, partially offset by a less favorable customer and product mix. Marine components’ gross margin as a percentage of net sales for the first nine months of 2026 was comparable to the same period in 2025 as increased coverage of fixed costs on higher sales were largely offset by a less favorable customer and product mix. Security products’ gross margin as a percentage of net sales for the third quarter of 2026 increased compared to the same period in 2025 due to lower cost inventory produced during the second quarter of 2026 and sold in the third quarter of 2026 and increased coverage of fixed costs as a result of higher sales. Security products’ gross margin as a percentage of net sales for the first nine months of 2026 increased compared to the same period in 2025 primarily due to a more favorable customer and product mix and lower cost of sales driven by lower employer-related medical expenses and the one-time recovery of prior-period import costs recognized during the second quarter of 2026.

Previous wording

Operating Income– As a percentage of net sales, our Component Products Segment’s operating income for the second quarter and the first six months of 2026 increased compared to the same periods of 2025 and was primarily impacted by the factors affecting sales, cost of sales and gross margin discussed above.

Current wording

Operating Income– As a percentage of net sales, our Component Products Segment’s operating income for the third quarter and the first nine months of 2026 increased compared to the same periods of 2025 and was primarily impacted by the factors affecting sales, cost of sales and gross margin discussed above.

Previous wording

*Outlook –*Our Component Products Segment’s results for the first six months of 2026 reflected higher sales and favorable customer and product mix for both the security products and marine components reporting units. Our Component Products Segment expects these trends to continue through the remainder of 2026, and it currently expects net sales for the full year of 2026 to exceed 2025 levels. Within the security products reporting unit, it expects demand from several end markets, including healthcare, transportation and tool storage, to remain strong in the second half of 2026. Within the marine components reporting unit, it expects increased demand will continue to be driven by industrial market demand, particularly aeroderivative demand, while recreational marine and towboat-related demand is expected to remain relatively consistent with 2025 levels (excluding the impact of the one-time stocking event noted above). Based on our Component Products Segment’s first-half operating performance, it currently expects full-year gross margin and operating income margins to exceed 2025 levels, although margins during the second half of 2026 may be challenged by the factors discussed below. Future operating results will continue to be influenced by product and customer mix, raw material costs and overall demand levels in the markets it serves.

Current wording

*Outlook –*Our Component Products Segment’s results for the first nine months of 2026 reflected higher sales and improved profitability in both the security products and marine components reporting units. Demand remained strong in several key security products end markets, including healthcare, tool storage, and transportation. Marine components continued to benefit primarily from industrial market demand as well as increased towboat demand in the third quarter. Our Component Products Segment expects these favorable trends to continue throughout the remainder of 2026 and it expects net sales, gross margin and operating income for the full year of 2026 to exceed 2025 levels. At the security products reporting unit, it expects healthcare demand to remain strong, while government security sales are expected to remain slightly below prior year levels. At the marine components reporting unit, it expects demand to remain driven primarily by the industrial market, while towboat market sales are expected to remain relatively consistent with prior year levels.

Previous wording

Our Component Products Segment manufactures substantially all its products in the U.S. and sources a substantial majority of its raw materials from U.S. suppliers. Our Component Products Segment also sources certain components, primarily electronic components, from suppliers in Asia, including China. Beginning in the second quarter of 2025 and continuing through the second quarter of 2026, our Component Products Segment experienced cost increases for certain imported raw materials, primarily electronic components, including increases in tariffs and shipping costs. In addition, inflationary pressures have increased costs for certain domestically-sourced raw materials. Where possible, our Component Products Segment increases selling prices to recover these higher raw material costs, although the extent to which our Component Products Segment can fully recover such costs will depend on a variety of factors including the ultimate tariff rate, duration of tariffs, and our Component Products Segment’s customers’ ability to substitute alternative products. Accordingly, our Component Products Segment will continue to closely monitor raw material costs, including zinc, brass, aluminum, steel and energy, as well as current and anticipated customer demand levels, to ensure its production capacity and inventory levels remain aligned with market conditions.

Current wording

Our Component Products Segment manufactures substantially all of its products in the United States and sources a substantial majority of its raw materials from U.S. suppliers. Our Component Products Segment also sources certain components, primarily electronic components, from suppliers in Asia, including China. Tariff-related costs and inflationary pressures affecting certain raw materials remain elevated relative to historical levels. In addition, our Component Products Segment has recently experienced difficulties or delays in sourcing certain electronic components, in some cases resulting in increased costs (including higher inbound freight costs) to minimize shipping delays. Where appropriate, our Component Products Segment continues to adjust selling prices to offset higher costs, although its ability to fully recover these costs depends on competitive conditions, customer demand, tariff levels and the availability of alternative sources. Our Component Products Segment continues to monitor potential changes in tariff policies and their impact on raw material costs, sourcing decisions and customer demand. Accordingly, our Component Products Segment continues to closely monitor raw material costs, including zinc, brass, aluminum, steel and energy, as well as customer demand levels, to ensure its production capacity and inventory levels remain aligned with market conditions.

Previous wording

LandWell began marketing land for sale in the residential/planned community in December 2013 and sold the last remaining parcel during 2025. In addition, adjacent to the residential/planned community, LandWell has been actively marketing and selling land zoned for commercial and light industrial use and sold the last of those remaining parcels during the first quarter of 2026. Although land sales may be completed, we do not recognize revenue until we have satisfied the criteria for revenue recognition. In some instances, LandWell will receive cash proceeds at the time the contract closes and record deferred revenue for some or all of the cash amount received, with such deferred revenue being recognized in subsequent periods. Although all of the land in the residential/planned community has been sold, we continue to complete our development obligations. We expect the development work to be completed by the end of 2027.

Current wording

LandWell began marketing land for sale in the residential/planned community in December 2013 and sold the last remaining parcel during 2025. In addition, adjacent to the residential/planned community, LandWell has been actively marketing and selling land zoned for commercial and light industrial use and sold the last of those remaining parcels during the first quarter of 2026. Although land sales may be completed, we do not recognize revenue until we have satisfied the criteria for revenue recognition. In some instances, LandWell received cash proceeds at the time the contract closed and recorded deferred revenue for some or all of the cash amount received, with such deferred revenue being recognized in subsequent periods. Although all of the land in the residential/planned community has been sold, we continue to complete our development obligations. We expect the development work to be completed by the end of 2027.

Previous wording

Net Sales and Operating Income – Substantially all of the net sales from our Real Estate Management and Development Segment in the second quarter and the first six months of 2026 and 2025 were from land sales. We recognized $4.4 million in revenues on land sales during the second quarter of 2026 compared to $5.7 million in revenues in the second quarter of 2025 and $14.1 million in the first six months of 2026 compared to $14.2 million in the same prior year period. Net sales decreased $1.3 million in the second quarter of 2026 compared to the same period in 2025 primarily because of a slower pace of development activity for previously sold parcels within the residential/planned community as our Real Estate Management and Development Segment nears completion of its development work. Net sales for the first six months of 2026 slightly decreased compared to the first six months of 2025 due to the effect of a significantly slower pace of development activity for previously sold parcels within the residential/planned community, which was offset by the sale of the final commercial parcel for $7.3 million in the first quarter of 2026, which had no further development obligations and was therefore immediately recognized as revenue. As noted above, we recognize revenue in our residential/planned community over time using cost-based input methods. All of the revenue we recognized in 2025 and 2026 for our residential/planned community was under this method of revenue recognition. The pace of development activities is dictated by a number of factors such as city permit and design approval, approval from the Nevada Department of Environmental Protection, labor and materials availability, and the amount of remaining development obligations. Cost of sales were $2.1 million and $4.9 million in the second quarter and the first six months of 2026, respectively, compared to $2.8 million and $7.4 million in the second quarter and first six months of 2025, respectively. We recognized income of $11.3 million and $16.7 million in the second quarter and first six months of 2026, respectively, related to tax increment infrastructure reimbursement compared to $17.2 million in the second quarter and first six months of 2025. Additionally, in the second quarter of 2026, LandWell sold the office building used in operations and recognized a gain on the sale of approximately $5.8 million.

Current wording

Net Sales and Operating Income – Substantially all of the net sales from our Real Estate Management and Development Segment in the third quarter and the first nine months of 2026 and 2025 were from land sales. We recognized $3.9 million in revenues on land sales during the third quarter of 2026 compared to $6.6 million in revenues in the third quarter of 2025 and $18.0 million in the first nine months of 2026 compared to $20.8 million in the same prior year period. Net sales decreased in the third quarter and first nine months of 2026 compared to the same periods in 2025 due to the significantly slower pace of development activity for previously sold parcels within the residential/planned community as our Real Estate Management and Development Segment nears completion of its development work. Lower land sales revenue for the first nine months of 2026 was partially offset by the sale of the final commercial parcel for $7.3 million in the first quarter of 2026, which had no further development obligations and was therefore immediately recognized as revenue. As noted above, we recognize revenue in our residential/planned community over time using cost-based input methods. All of the revenue we recognized in 2025 and 2026 for our residential/planned community was under this method of revenue recognition. The pace of development activities is dictated by a number of factors such as city permit and design approval, approval from the Nevada Department of Environmental Protection, labor and materials availability, and the amount of remaining development obligations. Cost of sales were $1.7 million and $6.6 million in the third quarter and the first nine months of 2026, respectively, compared to $3.5 million and $10.9 million in the third quarter and first nine months of 2025, respectively. We recognized income of $16.7 million and $34.2 million related to tax increment infrastructure reimbursement in the first nine months of 2026 and 2025, respectively, including $17.0 million recognized in the third quarter of 2025. Additionally, operating income for the first nine months of 2026 includes the gain on sale of an office building of approximately $5.8 million.

Previous wording

*Outlook –*LandWell is focused on completing development of the land it manages for the residential/planned community in Henderson. At June 30, 2026, all of the land in the residential/planned community had been sold as well as all saleable acreage zoned for light industrial and commercial use, including the office building LandWell used for its operations. As a result, we no longer own saleable land in Henderson. At June 30, 2026, we have deferred revenue of $24.0 million related to post-closing obligations on land sales in the residential/planned community closed prior to 2026. Because we recognize revenue over time using cost-based inputs, we will continue to recognize revenue on land previously sold over the development period, even though we have already received all the cash proceeds related to these sales. We currently expect to recognize substantially all remaining deferred revenue during 2026. Any delays or curtailments in infrastructure development related to post-closing obligation activities would delay the timing of revenue recognized on these previously closed land sales.

Current wording

*Outlook –*LandWell is focused on completing development of the land it manages for the residential/planned community in Henderson. At September 30, 2026, all of the land in the residential/planned community had been sold as well as all saleable acreage zoned for light industrial and commercial use, including the office building LandWell used for its operations. As a result, we no longer own saleable land in Henderson. At September 30, 2026, we have deferred revenue of $21.8 million related to post-closing obligations on land sales in the residential/planned community closed prior to 2026. Because we recognize revenue over time using cost-based inputs, we will continue to recognize revenue on land previously sold over the development period, even though we have already received all the cash proceeds related to these sales. We currently expect to recognize substantially all remaining deferred revenue by the end of 2027. Any delays or curtailments in infrastructure development related to post-closing obligation activities would delay the timing of revenue recognized on these previously closed land sales.

Previous wording

Under LandWell’s development agreement with the City of Henderson, the issuance of a specified number of housing permits requires LandWell to complete certain large community-wide infrastructure projects. Construction on several of these large projects began in late 2021 and is expected to be completed in late 2027. We expect 2026 land development costs to be lower than those in 2025 due to the timing of planned infrastructure projects and the availability of certain construction materials. Because these large

Current wording

Under LandWell’s development agreement with the City of Henderson, the issuance of a specified number of housing permits requires LandWell to complete certain large community-wide infrastructure projects. Construction on several of these large projects began in late 2021 and is expected to be completed in late 2027. We expect 2026 land development costs to be lower than those in 2025 primarily due to delays in approvals for planned infrastructure projects and the availability of certain construction materials. Because these large infrastructure projects relate to the entirety of the residential/planned community, the associated costs are not part of the cost-based inputs used to recognize revenue, and therefore, this spending will not correlate to revenue recognition. During the second quarter

Previous wording

infrastructure projects relate to the entirety of the residential/planned community, the associated costs are not part of the cost-based inputs used to recognize revenue, and therefore, this spending will not correlate to revenue recognition. However, this spending is eligible for tax increment reimbursement under our Owner Participation Agreement (“OPA”) with the City of Henderson. During the second quarter of 2026, LandWell received approval for the remaining $11 million of tax increment reimbursement, bringing the total approved reimbursement under the OPA to the maximum amount of $170 million. We expect to receive cash payments on the related notes receivables over the next 5 to 7 years.

Current wording

of 2026, LandWell received approval for the remaining tax increment reimbursement available, bringing the total approved reimbursement to the maximum amount of $170 million. We expect to receive cash payments on the related notes receivable over the next 5 to 7 years.

Previous wording

Changes in the Market Value of Valhi Common Stock held by Subsidiaries– Our subsidiaries, Kronos and NLI, hold shares of our common stock. As discussed in the 2025 Annual Report, we account for our proportional interest in these shares of our common stock as treasury stock at Kronos’ and NLI’s historical cost basis. The remaining portion of these shares of our common stock, which are attributable to the noncontrolling interest of Kronos and NLI, are reflected in our Condensed Consolidated Balance Sheet at fair value. Kronos and NLI recognize unrealized gains or losses on these shares of our common stock in the determination of each of their respective net income or loss. Under the principles of consolidation we eliminate any gains or losses associated with our common stock to the extent of our proportional ownership interest in each subsidiary. We recognized a $.1 million gain in the second quarter of 2026 compared to no gain or loss in the second quarter of 2025 and a gain of $.6 million in the first six months of 2026 compared to a loss of $1.7 million in the first six months of 2025, each of which was recognized in our Condensed Consolidated Statements of Income and represent the unrealized gain (loss) in respect of these shares during such periods attributable to the noncontrolling interest of Kronos and NLI.

Current wording

Changes in the Market Value of Valhi Common Stock held by Subsidiaries– Our subsidiaries, Kronos and NLI, hold shares of our common stock. As discussed in the 2025 Annual Report, we account for our proportional interest in these shares of our common stock as treasury stock at Kronos’ and NLI’s historical cost basis. The remaining portion of these shares of our common stock, which are attributable to the noncontrolling interest of Kronos and NLI, are reflected in our Condensed Consolidated Balance Sheet at fair value. Kronos and NLI recognize unrealized gains or losses on these shares of our common stock in the determination of each of their respective net income or loss. Under the principles of consolidation we eliminate any gains or losses associated with our common stock to the extent of our proportional ownership interest in each subsidiary. We recognized a $.2 million unrealized gain in the third quarter of 2026 compared to a $.1 million unrealized loss in the third quarter of 2025 and an unrealized gain of $.8 million in the first nine months of 2026 compared to an unrealized loss of $1.8 million in the first nine months of 2025, each of which was recognized in our Condensed Consolidated Statements of Operations and represent the unrealized gain (loss) in respect of these shares during such periods attributable to the noncontrolling interest of Kronos and NLI.

Previous wording

Interest Income and Other– Interest income and other increased $.3 million in the second quarter of 2026 primarily due to increased interest income received on the Real Estate Management and Development OPA note receivable offset by decreased average investment balances and lower average interest rates. Interest income and other decreased $.5 million in the first six months of 2026 compared to the same period of 2025 primarily due to decreased average investment balances and lower average interest rates partially offset by increased interest income received on the Real Estate Management and Development OPA note receivable. See Note 12 to our Condensed Consolidated Financial Statements.

Current wording

Interest Income and Other– Interest income and other decreased $.5 million in the third quarter of 2026 compared to the third quarter of 2025 due to decreased interest rates partially offset by increased interest income received on the Real Estate Management and Development tax increment note receivable. Interest income and other decreased $1.0 million in the first nine months of 2026 compared to the first nine months of 2025 due to decreased average investment balances and lower average interest rates, which were slightly offset by increased interest income received on the Real Estate Management and Development tax increment note receivable. See Note 12 to our Condensed Consolidated Financial Statements.

Previous wording

Other General Corporate Items– Corporate expenses were 2% lower in the second quarter of 2026 and 5% lower in the first six months of 2026 compared to the same respective periods in 2025 primarily due to lower environmental remediation and related costs. Included in corporate expense are:

Current wording

Other General Corporate Items– Corporate expenses were 13% lower in the third quarter of 2026 compared to the third quarter of 2025 primarily due to lower general and administrative costs partially offset by higher environmental remediation and related costs. Corporate expenses were 8% lower in the first nine months of 2026 primarily due to lower general and administrative costs and lower environmental remediation and related costs. Included in corporate expense are:

Previous wording

Overall, we currently expect that our net general corporate expenses in 2026 will be higher than in 2025 primarily due to expected increases in litigation fees and related costs, predominantly in the second half of the year. See Note 16 to our Condensed Consolidated Financial Statements.

Current wording

Overall, we currently expect that our net general corporate expenses in 2026 will be higher than in 2025 primarily due to expected increases in litigation fees and related costs, predominantly in the fourth quarter of the year. See Note 16 to our Condensed Consolidated Financial Statements.

Previous wording

Interest Expense– Interest expense increased $.9 million and $2.4 million in the second quarter and first six months of 2026, respectively, compared to the same periods in 2025 primarily due to higher overall debt levels and higher average interest rates. See Note 7 to our Condensed Consolidated Financial Statements.

Current wording

to the first nine months in 2025 primarily due to higher average interest rates. See Note 7 to our Condensed Consolidated Financial Statements.