NL INDUSTRIES INC

Previous wording

Our net income attributable to NL stockholders was $7.9 million, or $.16 per share, in the second quarter of 2024 compared to a net loss attributable to NL stockholders of $3.1 million, or $.06 per share, in the second quarter of 2023. 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:

Current wording

Our net income attributable to NL stockholders was $36.0 million, or $.74 per share, in the third quarter of 2024 compared to a net loss attributable to NL stockholders of $.1 million, or nil per share, in the third quarter of 2023. As more fully described below, the increase in our net income attributable to NL stockholders from 2023 to 2024 is primarily due to the net effects of:

Previous wording

Our 2024 net income per share attributable to NL includes a loss of $.01 per share due to Kronos’recognition of an aggregate charge related to a write-off of deferred financing costs.

Current wording

Our 2024 net income per share attributable to NL stockholders includes:

Previous wording

Six months ended June 30, 2024 compared to six months ended June 30, 2023

Current wording

Nine months ended September 30, 2024 compared to nine months ended September 30, 2023

Previous wording

Our net income attributable to NL stockholders was $14.7 million, or $.30 per share, in the first six months of 2024 compared to a net loss attributable to NL stockholders of $9.8 million, or $.20 per share, in the first six months of 2023. As more fully described below, the increase in our earnings attributable to NL stockholders from 2023 to 2024 is primarily due to:

Current wording

Our net income attributable to NL stockholders was $50.7 million, or $1.04 per share, in the first nine months of 2024 compared to a net loss attributable to NL stockholders of $9.9 million, or $.20 per share, in the first nine months of 2023. As more fully described below, the increase in our earnings attributable to NL stockholders from 2023 to 2024 is primarily due to:

Previous wording

CompX’s income from operations in the second quarter of 2024 was $5.1 million compared to $4.4 million in the second quarter of 2023. The increase in income from operations in the second quarter of 2024 compared to 2023 is due to higher Security Products sales and gross margin which more than offset lower Marine Components sales and gross margin. CompX’s income from operations for the first six months of 2024 was $8.8 million compared to $11.4 million in the first six months of 2023. The decrease in income from operations in the first six months of 2024 compared to 2023 is primarily due to lower Marine Components sales and gross margin partially offset by higher Security Products sales and higher Security Products gross margin in the second quarter of 2024 compared to the second quarter of 2023.

Current wording

CompX’s income from operations in the third quarter of 2024 was $3.3 million compared to $6.6 million in the third quarter of 2023. The decrease in income from operations in the third quarter of 2024 compared to 2023 is due to lower sales and gross margin at both Security Products and Marine Components reporting units. Income from operations for the first nine months of 2024 was $12.1 million compared to $18.0 million in the first nine months of 2023. The decrease in income from operations in the first nine months of 2024 compared to 2023 is primarily due to lower Marine Components sales and gross margin.

Previous wording

Net sales– Net sales decreased $.7 million and $3.9 million in the second quarter and for the first six months of 2024, respectively, compared to the same periods in 2023 due to lower Marine Components sales primarily to the towboat market, partially offset by higher Security Products sales to the government security market. See discussion of reporting units below.

Current wording

Net sales– Net sales decreased $6.7 million in the third quarter of 2024 compared to the same period in 2023 primarily due to lower Security Products sales to a government security customer and to a lesser extent lower Marine Components sales primarily to the towboat market. Net sales decreased $10.6 million for the first nine months of 2024 compared to the same period in 2023 primarily due to lower Marine Components sales to the towboat market. See discussion of reporting units below.

Previous wording

Cost of sales and gross margin– Cost of sales as a percentage of sales improved 3% in the second quarter of 2024 compared to the same period in 2023. As a result, gross margin as a percentage of sales increased over the same period. Gross margin percentage increased in the second quarter of 2024 compared to the same period in 2023 primarily due to higher Security Products gross margin percentage and, to a lesser extent, higher gross margin percentage at Marine Components. Cost of sales as a percentage of sales increased 2% for the first six months of 2024 compared to the same period in 2023. As a result, gross margin as a percentage of sales declined over the same period. The decline in gross margin percentage for the six-month comparative period is primarily due to lower gross margin percentage at Marine Components, particularly in the first quarter of 2024, partially offset by higher gross margin percentage at Security Products in the second quarter of 2024. See discussion of reporting units below.

Current wording

Cost of sales and gross margin– Cost of sales as a percentage of sales increased 3% in the third quarter of 2024 compared to the same period in 2023. As a result, gross margin as a percentage of sales decreased over the same period. Gross margin percentage decreased in the third quarter of 2024 compared to the same period in 2023 primarily due to lower gross margin percentages at both Security Products and Marine Components reporting units. Cost of sales as a percentage of sales increased 2% for the first nine months of 2024 compared to the same period in 2023. As a result, gross margin as a percentage of sales declined over the same period. The decline in gross margin percentage for the nine-month comparative period is primarily due to lower gross margin percentage at Marine Components. See discussion of reporting units below.

Previous wording

Operating costs and expenses– Operating costs and expenses consist primarily of sales and administrative-related personnel costs, sales commissions and advertising expenses directly related to product sales and administrative costs relating to business unit and corporate management activities, as well as any gains and losses on property and equipment. Operating costs and expenses for the second quarter and for the first six months of 2024 increased $.1 million and $.4 million, respectively, compared to the same periods in 2023 primarily due to higher employee salaries and benefits at Security Products. Operating costs and expenses as a percentage of net sales increased for the second quarter and for the first six months of 2024 due to the increased operating costs and expenses mentioned above and decreased coverage of operating costs and expenses as a result of lower sales.

Current wording

Operating costs and expenses– Operating costs expenses consist primarily of sales and administrative-related personnel costs, sales commissions and advertising expenses directly related to product sales and administrative costs relating to business unit and corporate management activities, as well as any gains and losses on property and equipment. Operating costs and expenses for the third quarter of 2024 were comparable to the same period in 2023. For the first nine months of 2024, operating costs and expenses increased $.6 million compared to the same period in 2023 primarily due to higher employee salaries and benefits at Security Products during the first half of the year. Operating costs and expenses as a percentage of net sales increased for the third quarter of 2024 compared to the same period in 2023 due to decreased coverage of operating costs and expenses as a result of lower sales. Operating costs and expenses as a percentage of net sales increased for the first nine months of 2024 compared to the same period in 2023 due to decreased coverage of operating costs and expenses as a result of lower sales and higher operating costs as noted above.

Previous wording

Income from operations– As a percentage of net sales, income from operations for the second quarter and the first six months of 2024 compared to the same periods of 2023 was primarily impacted by the factors affecting sales, cost of sales, gross margin and operating costs and expenses. See discussion of reporting units below.

Current wording

Income from operations– As a percentage of net sales, income from operations for the third quarter and the first nine months of 2024 compared to the same periods of 2023 was primarily impacted by the factors affecting sales, cost of sales, gross margin and operating costs and expenses. See discussion of reporting units below.

Previous wording

The key performance indicator for CompX’s reporting units is the level of their income from operations (see discussion below). Reporting unit results exclude CompX corporate expenses.

Current wording

The key performance indicators for CompX’s reporting units is the level of their gross margin and income from operations (see discussion below). Reporting unit results exclude CompX corporate expenses.

Previous wording

Marine Components– Marine Components net sales decreased 30% in the second quarter of 2024 compared to the same period in 2023. Relative to prior year, the decrease in second quarter sales was primarily due to $3.1 million lower sales to the towboat market. Marine Components net sales decreased 36% in the first six months of 2024 compared to the same period in 2023. Relative to prior year, the decrease in sales for the first six months was primarily due to $7.4 million lower sales to the towboat market, $.6 million lower sales to each the engine builder and industrial markets and $.5 million lower sales to distributors.

Current wording

Marine Components– Marine Components net sales decreased 21% in the third quarter of 2024 compared to the same period in 2023. Relative to prior year, the decrease in third quarter sales was primarily due to $1.3 million lower sales to the towboat market and $.5 million lower sales to the industrial market. Marine Components net sales decreased 32% in the first nine months of 2024 compared to the same period in 2023. Relative to prior year, the decrease in sales for the first nine months was primarily due to $8.7 million lower sales to the towboat market, $1.1 million lower sales to the industrial market and $.6 million lower sales to each the engine builder market and distributors.

Previous wording

Gross margin as a percentage of net sales improved in the second quarter of 2024 compared to the same period in 2023 primarily due to a favorable customer and product mix, partially offset by decreased coverage of fixed costs as a result of lower sales. Operating income as a percentage of net sales increased slightly in the second quarter of 2024 compared to the same period in 2023 due to the factors impacting gross margin as well as slightly reduced operating costs and expenses, including lower employee salaries and benefits of approximately $.1 million, partially offset by decreased coverage of operating costs and expenses on lower sales. For the first six months of 2024, gross margin as a percentage of net sales declined compared to the same period in 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 in the second quarter of 2024. Operating income as a percentage of net sales decreased in the first six months of 2024 compared to the same period in 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 salaries and benefits of $.1 million.

Current wording

Gross margin as a percentage of sales decreased in the third quarter of 2024 compared to the same period in 2023 primarily due to lower sales and decreased coverage of fixed costs as a result of lower sales, partially offset by a more favorable customer and product mix as well as lower employee salaries and benefits of approximately $.5 million related to headcount reductions. Operating income as a percentage of net sales decreased in the third quarter of 2024 compared to the same period in 2023 due to the factors impacting gross margin as well as decreased coverage of operating costs and expenses on lower sales, partially offset by slightly reduced operating costs and expenses, including lower employee salaries and benefits of approximately $.1 million. For the first nine months of 2024, gross margin as a percentage of net sales declined compared to the same period in 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 as well as lower employee salaries and benefits of approximately $1.7 million related to headcount reductions. Operating income as a percentage of net sales decreased in the first nine months of 2024 compared to the same period in 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 salaries and benefits of $.2 million.

Previous wording

Outlook**–In **the first six months of 2024, CompX’s Security Products reporting unit benefitted from a general increase in sales across many markets and particularly increased sales of mechanical locks to the government security market; however, some of the overall demand improvement was offset by lower demand from distributors as noted above. 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 late in the first quarter of 2023 has continued. CompX is focused on aligning its resources with current demand levels, and particularly at Marine Components, CompX is adjusting inventory levels, operating expenses and labor resources to align with current demand while also preserving its ability to respond quickly when demand increases. Generally, raw material prices have stabilized, CompX’s supply chains are stable and transportation and logistical delays are minimal. CompX has adjusted its order patterns in response to the stability of its raw material supplies.

Current wording

Outlook**–As **previously noted, beginning in the third quarter of 2023 CompX’s Security Products reporting unit had significant sales from a pilot project to a government security customer. Excluding these sales in 2023, Security Products sales would have increased in the first nine months of 2024 as compared to the first nine months of 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 late in the first quarter of 2023 has continued. CompX is focused on aligning its resources with current demand levels, and particularly at Marine Components, CompX is adjusting inventory levels, operating expenses and labor resources to align with current orders while also preserving its ability to respond quickly when demand increases. Raw material prices have been relatively stable during the first nine months of 2024; however, CompX is beginning to experience price increases in certain raw materials. CompX’s supply chains are stable and transportation and logistical delays are minimal. CompX has adjusted its order patterns in response to its customer demand levels and the stability of its raw materials supplies.

Previous wording

CompX expects Security Products net sales in 2024 to be lower than 2023 as the increase in demand experienced in the first half of 2024 is expected to be more than offset by lower comparative government security sales in the second half of the year as sales from the 2023 pilot project will not repeat. Additionally, CompX is unsure if current demand levels across the variety of the markets Security Products serves are sustainable as its customers continue to express uncertainty regarding consumer demand levels. Overall, CompX expects Security Products gross margin will be comparable to 2023, although it expects operating income as a percentage of sales to decline due to its limited pricing power along with reduced coverage of selling, general and administrative costs as a result of lower expected sales. CompX expects Marine Components net sales for the full year of 2024 will be lower as compared to 2023 because it believes demand in the towboat market will further decline. The recreational marine industry faces strong headwinds due to higher interest rates and broader market weakness. Several original equipment boat manufacturers, including certain of CompX’s customers, have publicly announced further reductions to their 2024 production schedules. Overall, CompX expects Marine Components gross margin as a percentage of net sales for 2024 to be lower than 2023 due to lower coverage of fixed overhead as a result of lower expected sales, and operating income as a percentage of net sales to be similarly lower as a result of reduced coverage of selling, general and administrative expenses due to lower expected sales. CompX ended 2023 with elevated inventory balances at its Marine Components reporting unit as a result of increased orders of certain raw materials due to previously long lead times coupled with the rapidly changing towboat demand which created a misalignment of its raw materials with near term demand. CompX made significant progress in aligning

Current wording

to 2023 due to decreased demand in the towboat market. The recreational marine industry faces strong headwinds due to higher interest rates and broader market weakness. Overall, CompX expects Marine Components gross margin as a percentage of net sales for 2024 to be lower than 2023 due to lower coverage of fixed overhead as a result of lower expected sales, and operating income as a percentage of net sales to be similarly lower as a result of reduced coverage of selling, general and administrative expenses due to lower expected sales. CompX ended 2023 with elevated inventory balances at its Marine Components segment as a result of increased orders of certain raw materials due to previously long lead times coupled with the rapidly changing towboat demand which created a misalignment of its raw materials with near term demand. CompX made significant progress in aligning its Marine Components inventory balances with current demand in the first nine months of 2024; however, we expect further reduction of inventory quantities will be offset by higher raw materials costs for certain projects in the industrial and other marine components markets, outside of the towboat market, which in many instances are more expensive than the stainless steel inventory used in towboat products.

Previous wording

Corporate expense– Corporate expenses were $4.3 million in the second quarter of 2024, $1.3 million higher than in the second quarter of 2023, primarily due to higher environmental remediation and related costs. Included in corporate expense in the second quarter of 2023 and 2024 are:

Current wording

Corporate expense– Corporate expenses were $2.3 million in the third quarter of 2024, $.9 million lower than in the third quarter of 2023, primarily due to lower litigation fees and related costs and lower environmental remediation and related costs. Included in corporate expense in the third quarter of 2023 and 2024 are:

Previous wording

Corporate expenses were $6.7 million in the first six months of 2024, $.9 million higher than in the first six months of 2023, primarily due to higher environmental remediation and related costs, somewhat offset by lower litigation and related costs. Included in corporate expense in the first six months of 2023 and 2024 are:

Current wording

Corporate expenses were $9.2 million in the first nine months of 2024, $.1 million higher than in the first nine months of 2023 as lower litigation fees and related costs were offset by higher environmental remediation and related costs. Included in corporate expense in the first nine months of 2023 and 2024 are:

Previous wording

Overall, we currently expect that our net general corporate expenses in 2024 will be comparable to 2023.

Current wording

Overall, we currently expect that our net general corporate expenses in 2024 will be higher than in 2023 primarily due to higher expected environmental remediation and related costs.

Previous wording

Interest and dividend income– Interest and dividend income increased in the second quarter and for the first six months of 2024 compared to the same periods of 2023 primarily due to higher average interest rates and higher average investment balances, somewhat offset by lower average balances on CompX’s revolving promissory note receivable from Valhi. See Note 4 to our Condensed Consolidated Financial Statements.

Current wording

Interest and dividend income– Interest and dividend income increased in the third quarter and for the first nine months of 2024 compared to the same periods of 2023 primarily due to higher average interest rates and increased investment balances, somewhat offset by lower average balances on CompX’s revolving promissory notes receivable from Valhi. See Note 4 to our Condensed Consolidated Financial Statements.

Previous wording

Marketable equity securities– We recognized an unrealized gain of $.8 million on the change in value of our marketable equity securities in the second quarter of 2024 compared to an unrealized loss of $5.4 million in the second quarter of 2023. We recognized an unrealized gain of $3.2 million on the change in value of our marketable equity securities in the first six months of 2024 compared to an unrealized loss of $10.9 million in the first six months of 2023. See Note 4 to our Condensed Consolidated Financial Statements.

Current wording

Marketable equity securities– We recognized an unrealized gain of $18.6 million on the change in value of our marketable equity securities in the third quarter of 2024 compared to $.4 million in the third quarter of 2023. We recognized an unrealized gain of $21.8 million on the change in value of our marketable equity securities in the first nine months of 2024 compared to an unrealized loss of $10.5 million in the first nine months of 2023. See Note 4 to our Condensed Consolidated Financial Statements.

Previous wording

Income tax expense– We recognized income tax expense of $1.3 million in the second quarter of 2024 compared to an income tax benefit of $7.3 million in the second quarter of 2023 and income tax expense of $2.3 million in the first half of 2024 compared to an income tax benefit of $5.9 million in the first half of 2023. 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

Current wording

Income tax expense– We recognized income tax expense of $8.5 million in the third quarter of 2024 compared to an income tax benefit of $.9 million in the third quarter of 2023 and income tax expense of $10.8 million in the first nine months of 2024 compared to an income tax benefit of $6.8 million in the first nine months of 2023. 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 dividends from Kronos of $20.1 million and $15.1 million in the first nine month periods of 2023 and 2024, respectively.

Previous wording

Our effective tax rate attributable to our equity in earnings of Kronos, including the effect of the nontaxable dividends we received from Kronos, was an effective tax rate of 2.6% in the first six months of 2024 compared to an effective rate of 60.7% in the first six months of 2023. The decrease in our effective rate from 2023 to 2024 is primarily attributable to Kronos’ anticipated higher full year earnings offset by the effect of lower anticipated full year dividends in 2024 as compared to 2023. See Note 11 to our Condensed Consolidated Financial Statements for more information about our 2024 income tax items, including a tabular reconciliation of our statutory tax expense to our actual expense.

Current wording

Our effective tax rate attributable to our equity in earnings of Kronos, including the effect of the nontaxable dividends we received from Kronos, was an effective tax rate of 12.7% in the first nine months of 2024 compared to an effective rate of 50% in the first nine months of 2023. The decrease in our effective rate from 2023 to 2024 is primarily attributable to Kronos’ anticipated higher full year earnings offset by the effect of lower anticipated full year dividends in 2024 as compared to 2023. See Note 11 to our Condensed Consolidated Financial Statements for more information about our 2024 income tax items, including a tabular reconciliation of our statutory tax expense to our actual expense.

Previous wording

Noncontrolling interest– Noncontrolling interest in net income of CompX increased during the second quarter of 2024, but decreased for the first six months of 2024 compared to the same prior year periods. The noncontrolling interest we recognize in each period is directly related to the level of earnings at CompX for the period.

Current wording

Noncontrolling interest– Noncontrolling interest in net income of CompX decreased during the third quarter of 2024 and for the first nine months of 2024 compared to the same prior year periods. The noncontrolling interest we recognize in each period is directly related to the level of earnings at CompX for the period.

Previous wording

Effective July 16, 2024, Kronos acquired the 50% joint venture interest in Louisiana Pigment Company, L.P. (“LPC”) previously held by Venator Investments, Ltd. (“Venator”). Prior to the acquisition, LPC was operated as a joint venture between Kronos and Venator, and through a wholly-owned subsidiary, Kronos held a 50% joint venture interest in LPC. Following the acquisition, LPC is Kronos’ indirect, wholly-owned subsidiary. Kronos acquired the 50% joint venture interest that it did not already own for an upfront cash payment of $185 million (subject to working capital adjustments) and a potential earn-out payment of up to $15 million based on its 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. The acquisition was financed through borrowings of $132 million under Kronos’ Global Revolver and the remainder paid with cash on hand. See Note 5 to our Condensed Consolidated Financial Statements.

Current wording

As previously reported, effective July 16, 2024, Kronos acquired the 50% joint venture interest in Louisiana Pigment Company, L.P. (“LPC”) previously held by Venator Investments, Ltd. (“Venator”). Prior to the acquisition, LPC was operated as a manufacturing joint venture between Kronos and Venator, and through a wholly-owned subsidiary, Kronos held a 50% joint venture interest in LPC. 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 of $11.0 million. 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’ revolving credit facility and the remainder paid with cash on hand. Kronos accounted for the acquisition of LPC’s interest as a business combination. See Note 5 to our Condensed Consolidated Financial Statements.

Previous wording

Kronos’ key performance indicators are its TiO 2 average selling prices, its level of TiO 2 sales and production volumes and the cost of its third-party feedstock. TiO 2 selling prices generally follow industry trends and prices will increase or decrease generally as a result of competitive market pressures.

Current wording

Kronos’ key performance indicators are its TiO 2 average selling prices, its level of TiO 2 sales and production volumes and the cost of titanium-containing feedstock purchased from third parties. TiO 2 selling prices generally follow industry trends and prices will increase or decrease generally as a result of competitive market pressures.

Previous wording

Kronos and the TiO 2 industry experienced an extended period of significantly reduced demand across all major markets which was reflected in its sales volumes throughout 2023. Although overall demand remains below average historical levels, demand has improved in the first six months of 2024 in all major markets. Kronos started 2024 with average TiO 2 selling prices 13% lower than at the beginning of 2023 and its average TiO 2 selling prices have remained stable during the first six months of 2024. Kronos’ average TiO 2 selling prices in the first six months of 2024 were 9% lower than average prices during the first six months of 2023.

Current wording

Kronos and the TiO 2 industry experienced an extended period of significantly reduced demand across all major markets which was reflected in its sales volumes throughout 2023. While demand has improved in 2024 resulting in increased sales volumes across all major markets compared to the prior year, overall demand remains below average historical levels and during the third quarter of 2024, demand moderated as compared to the first half of the year. Kronos started 2024 with average TiO 2 selling prices 13% lower than at the beginning of 2023 and its average TiO 2 selling prices increased 4% during the first nine months of 2024. Kronos’ average TiO 2 selling prices in the first nine months of 2024 were 7% lower than average prices during the first nine months of 2023.

Previous wording

Kronos operated its production facilities at 70% of practical capacity utilization in the first six months of 2023 in response to decreased demand and higher production costs. As a result of increased demand experienced in the fourth quarter of 2023 and first half 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 quarter of 2024 resulting in 93% of practical capacity utilization in the first six months of 2024.

Current wording

Kronos operated its production facilities at 71% of practical capacity utilization in the first nine months of 2023 in response to decreased demand and higher production costs. As a result of increased demand experienced in the fourth quarter of 2023 and first nine months 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 and third quarters of 2024 resulting in 93% of practical capacity utilization in the first nine months of 2024.

Previous wording

Excluding the effect of changes in currency exchange rates, Kronos’ cost of sales per metric ton of TiO 2 sold in the first six months of 2024 was significantly lower as compared to the comparable period in 2023 primarily due to significant decreases in per metric ton production costs (primarily feedstock, energy and unabsorbed fixed costs resulting from reduced operating rates in 2023).

Current wording

Excluding the effect of changes in currency exchange rates, Kronos’ cost of sales per metric ton of TiO 2 sold in the first nine months of 2024 was significantly lower as compared to the comparable period in 2023 primarily due to significant decreases in per metric ton production costs (primarily feedstock and energy).

Previous wording

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 third quarter 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 timeboth the employee and employer are irrevocably committed to the terms of the sepa ration. These work force reductions impacted approximately 100 employees. Kronos recognized a total of approximately $6 million in chargesprimarily in the fourth quarter of 2023 related to workforce reductions it implemented during thesecond half of the year. The majo rityof related cash payments will be paid in 2024.

Current wording

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 third quarter 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 timeboth the employee and employer are irrevocably committed to the terms of the sepa ration. These work force reductions impacted approximately 100 employees. Kronos recognized a total of approximately $6 million in chargesprimarily in the fourth quarter of 2023 related to workforce reductions it implemented during thesecond half of the year. Kronos has paid approximately $4 million through the end of the third quarter. The majority of the remaining related cash payments will be paid by the end of 2024.

Previous wording

In April 2024, Kronos announced plans to close its sulfate process line at its plant in Varennes, Canada by the end of the third quarter of 2024. As a result of the sulfate process line closure, Kronos recognized a charge of approximately $2 million to cost of sales in the second quarter of 2024 related to workforce reductions for employees impacted. In addition, approximately $10 million in non-

Current wording

Inthe third quarter of 2024, Kronos closed its sulfate process line at its plant in Varennes, Canada. As a result of the sulfate process line closure, Kronos recognized charges to cost of sales in the first nine months of 2024 of approximately $2 million related to workforce reductions for employees impacted of which approximately $.6 million was paid through the end of the third quarter. Kronos also recognized a total of approximately $14 million in non-cash charges primarily related to accelerated depreciation in the second and third quarters of 2024.

Previous wording

Net sales– Kronos’sales in the second quarter of 2024 increased 13%, or $57.3 million, compared to the second quarter of 2023 primarily due to the net effects of a 29% increase in sales volumes (which increased net sales by approximately $129 million) and an 8% decrease in average TiO 2 selling prices (which decreased net sales by approximately $35 million). In addition to the impact of sales volumes and average TiO 2 selling prices, Kronos estimates that changes in currency exchange rates (primarily the euro) increased its net sales by approximately $2 million in the second quarter of 2024 as compared to the second quarter of 2023. TiO 2 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.

Current wording

Net sales– Kronos’ netsales in the third quarter of 2024 increased 22%, or $87.8 million, compared to the third quarter of 2023 primarily due to the effects of a 21% increase in sales volumes (which increased net sales by approximately $83 million) partially offset by a 1% decrease in average TiO 2 selling prices (which decreased net sales by approximately $4 million). The effects of changes in currency exchange rates in the third quarter of 2024 were comparable to the third quarter of 2023. TiO 2 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.

Previous wording

Kronos’ sales volumes increased 29% in the second quarter of 2024 as compared to the second quarter of 2023 due to higher overall demand across all major markets.

Current wording

Kronos’ sales volumes increased 21% in the third quarter of 2024 as compared to the third quarter of 2023 due to higher overall demand across all major markets. Incremental sales volumes generated from the LPC acquisition did not materially impact quarter to quarter comparisons.

Previous wording

Kronos’ net sales in the first six months of 2024 increased 13%, or $109.8 million, compared to the first six months of 2023 primarily due to a 28% increase in sales volumes due to improved overall demand across all major markets (which increased net sales by approximately $243 million) partially offset by a 9% decrease in average TiO 2 selling prices (which decreased net sales by approximately $78 million). Changes in product mix negatively contributed to net sales, primarily due to changes in product sales mix in export markets in the first six months of 2024 as compared to the same period in 2023. Additionally, Kronos estimates that changes in currency exchange rates (primarily the euro) increased its net sales by approximately $6 million in the first six months of 2024 as compared to the first six months of 2023. TiO 2 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.

Current wording

Kronos’ net sales in the first nine months of 2024 increased 16%, or $197.6 million, compared to the first nine months of 2023 primarily due to the effects of a 26% increase in sales volumes due to improved overall demand across all major markets (which increased net sales by approximately $329 million) partially offset by a 7% decrease in average TiO 2 selling prices (which decreased net sales by approximately $89 million). Changes in product mix negatively contributed to net sales, primarily due to changes in product sales mix in export markets in the first nine months of 2024 as compared to the same period in 2023. Additionally, Kronos estimates that changes in currency exchange rates (primarily the euro) increased its net sales by approximately $5 million in the first nine months of 2024 as

Previous wording

Cost of sales and gross margin– Kronos’ costof sales increased by $1.2 million in the second quarter of 2024 compared to the second quarter of 2023 due to the net effects of a 29% increase in sales volumes, higher plant utilization rates (99% in the second quarter of 2024 compared to 64% in the second quarter of 2023), and lower production costs of approximately $20 million (primarily energy and raw materials). Kronos’ cost of sales in the second quarter of 2024 includes a charge of approximately $2 million related to workforce reductions and approximately $10 million in non-cash charges primarily related to accelerated depreciation in connection with the closure of Kronos’ sulfate process line in Canada. Kronos’cost of sales in the second quarter of 2023 includes $32 million of unabsorbed fixed production and other manufacturing costs associated with production curtailments at its facilities during the second quarter of 2023 as it adjusted its TiO 2 production volumes to align inventory levels with lower demand.

Current wording

Cost of sales and gross margin– Kronos’ costof sales increased by $21.0 million, or 6%, in the third quarter of 2024 compared to the third quarter of 2023 due to the net effects of a 21% increase in sales volumes, higher production rates and lower production costs of approximately $24 million (primarily energy and raw materials). Kronos’ cost of sales in the third quarter of 2024 also includes approximately $4 million in non-cash charges related to accelerated depreciation in connection with the closure of its sulfate process line in Canada. Kronos’cost of sales in the third quarter of 2023 includes $20 million of unabsorbed fixed production and other manufacturing costs associated with production curtailments at its facilities during the third quarter of 2023 as it adjusted its TiO 2 production volumes to align inventory levels with lower demand. Kronos’ third quarter production volumes include approximately 13,000 metric tons of incremental production resulting from the LPC acquisition.

Previous wording

Kronos’ cost of sales as a percentage of net sales improved to 80% in the second quarter of 2024 compared to 90% in the same period of 2023 primarily due to the favorable effects of lower production costs and higher production volumes resulting in increased coverage of fixed production costs.

Current wording

Kronos’ cost of sales as a percentage of net sales improved to 79% in the third quarter of 2024 compared to 91% in the same period of 2023 primarily due to the favorable effects of lower production costs and higher production volumes resulting in increased coverage of fixed production costs.

Previous wording

Gross margin as a percentage of net sales increased to 20% in the second quarter of 2024 compared to 10% in the second quarter of 2023. As discussed and quantified above, Kronos’ gross margin as a percentage of net sales increased primarily due to higher sales and production volumes and lower production costs, which were partially offset by lower average TiO 2 selling prices.

Current wording

Kronos’ gross margin as a percentage of net sales increased to 21% in the third quarter of 2024 compared to 9% in the third quarter of 2023. As discussed and quantified above, Kronos’ gross margin as a percentage of net sales increased primarily due to higher sales and production volumes and lower production costs, which were partially offset by lower average TiO 2 selling prices.

Previous wording

Kronos’ cost of sales increased $13.0 million, or 2%, in the first six months of 2024 compared to the first six months of 2023 due to the net effects of a 28% increase in sales volumes, a 33% increase in production volumes in responseto improved customer demandand lower production costs of approximately $84 million (primarily raw materials and energy). Kronos’ unabsorbed fixed production costs in the first six months of 2024 were $12 million (incurred in the first quarter) compared to $54 million in the first six months of 2023 related to curtailments in 2023 and continuing into the first quarter of 2024, as discussed above. Kronos’ cost of sales in the first six months of 2024 includes a charge of approximately $2 million related to workforce reductions and approximately $10 million in non-cash charges primarily related to accelerated depreciation in connection with the closure of its sulfate process line in Canada.

Current wording

Kronos’ cost of sales increased $34.0 million, or 3%, in the first nine months of 2024 compared to the first nine months of 2023 due to the net effects of a 26% increase in sales volumes, higher production rates resulting in reduced unabsorbed fixed production costs, and lower production costs of approximately $108 million (primarily raw materials and energy). Kronos’ unabsorbed fixed production costs in the first nine months of 2024 were $12 million (incurred in the first quarter) compared to $74 million in the first nine months of 2023 related to curtailments in 2023 and continuing into the first quarter of 2024, as discussed above. Kronos’ cost of sales in the first nine months of 2024 includes a charge of approximately $2 million related to workforce reductions and approximately $14 million in non-cash charges primarily related to accelerated depreciation in connection with the closure of its sulfate process line in Canada. Sales and production volumes resulting from the LPC acquisition did not materially impact comparisons to the prior year.

Previous wording

Kronos’ cost of sales as a percentage of net sales decreased to 82% in the first six months of 2024 compared to 91% in the same period of 2023 primarily due to the favorable effects of lower production costs and higher production volumes resulting in increased coverage of fixed production costs.

Current wording

Kronos’ cost of sales as a percentage of net sales decreased to 81% in the first nine months of 2024 compared to 91% in the same period of 2023 primarily due to the favorable effects of lower production costs and higher production volumes resulting in increased coverage of fixed production costs.

Previous wording

Kronos’ gross margin as a percentage of net sales increased to 18% in the first six months of 2024 compared to 9% in the first six months of 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, which were partially offset by lower average TiO 2 selling prices.

Current wording

Kronos’ gross margin as a percentage of net sales increased to 19% in the first nine months of 2024 compared to 9% in the first nine months of 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 TiO 2 selling prices.

Previous wording

Selling, general and administrative expense– Kronos’ selling, administrative expense increased $7.8 million, or 16%, in the second quarter of 2024 compared to the second quarter of 2023 primarily due to higher distribution costs related to higher sales volumes during the quarter. As a result of higher distribution costs, selling, general and administrative expense as a percentage of net sales increased to 12% in the second quarter of 2024 compared to 11% of net sales in the second quarter of 2023.

Current wording

Selling, general and administrative expense– Kronos’ selling, administrative expense increased $8.7 million, or 16%, in the third quarter of 2024 compared to the third quarter of 2023 primarily due to higher distribution costs related to higher sales volumes during the quarter. Kronos’ selling, general, and administrative expense in the third quarter of 2024 also includes $2.2 million of transaction costs incurred in connection with the LPC acquisition. Kronos’ selling, general and administrative expense as a percentage of net sales remained consistent at 13% in the third quarter of 2024 compared to the third quarter of 2023.

Previous wording

Kronos’ selling, general and administrative expense increased $8.8 million, or 9%, in the first six months of 2024 compared to the same period in 2023 primarily due to higher distribution costs related to higher sales volumes. Selling, general and administrative expense as a percentage of net sales decreased slightly in the first six months of 2024 compared to the first six months of 2023 due to the significant increase in sales volumes for the comparable periods offset somewhat by lower selling prices.

Current wording

Kronos’ selling, general and administrative expense increased $17.5 million, or 11%, in the first nine months of 2024 compared to the same period in 2023 primarily due to higher distribution costs related to higher sales volumes. Kronos’ selling, general and administrative expense in the first nine months of 2024 also includes $2.2 million of transaction costs incurred in connection with the LPC acquisition. Kronos’selling, general and administrative expense as a percentage of net sales remained consistent in the first nine months of 2024 compared to the first nine months of 2023.