VALHI INC /DE/

Previous wording

We reported net income attributable to Valhi stockholders of $16.9 million or $.59 per diluted share in the first quarter of 2025 compared to net income attributable to Valhi stockholders of $7.8 million or $.27 per diluted share in the first quarter of 2024. As discussed more fully below, our net income attributable to Valhi stockholders increased from 2024 to 2025 primarily due to higher operating income from our Chemicals Segment of $41.2 million in 2025 compared to operating income of $22.8 million in 2024.

Current wording

We reported net income attributable to Valhi stockholders of $.9 million or $.03 per diluted share in the second quarter of 2025 compared to net income attributable to Valhi stockholders of $19.9 million or $.70 per diluted share in the second quarter of 2024. As discussed more fully below, our net income attributable to Valhi stockholders decreased from 2024 to 2025 primarily due to the net effects of:

Previous wording

We currently expect consolidated operating income for 2025 to be higher as compared to 2024 primarily due to the net effects of:

Current wording

We currently expect consolidated operating income for 2025 to be lower as compared to 2024 primarily due to the net effects of:

Previous wording

Current Industry Conditions– Our Chemicals Segment started 2025 with average TiO 2 selling prices 2% higher than at the beginning of 2024 but average TiO 2 selling prices declined 3% during the first quarter of 2025 due to market pressure in certain regions and a less favorable product sales mix. Our Chemicals Segment’s average TiO 2 selling prices in the first three months of 2025 were 2% higher than the average prices during the first three months of 2024. Our Chemicals Segment had higher overall sales volumes in its North American and European markets somewhat offset by lower sales volumes in export markets in the first three months of 2025 as compared to the same period of 2024.

Current wording

Current Industry Conditions– The first six months of 2025 have seen unprecedented global uncertainty related to U.S. trade policies and geopolitical tensions. Our Chemicals Segment’s customers have been hesitant to build inventories, given these uncertainties, which has prolonged the market downturn and which has impacted our Chemicals Segment’s sales volumes and pricing momentum. Our Chemicals Segment started 2025 with average TiO 2 selling prices 2% higher than at the beginning of 2024 but its average TiO 2 selling prices declined 4% during the first six months of 2025. Our Chemicals Segment’s average TiO 2 selling prices in the first six months of 2025 were comparable to the average selling prices during the first six months of 2024. Our Chemicals Segment had higher overall sales volumes in its European and North American markets somewhat offset by lower sales volumes in its export markets in the first six months of 2025 compared to the first six months of 2024.

Previous wording

Our Chemicals Segment operated its production facilities at 93% of practical capacity utilization in the first quarter of 2025 compared to 87% in the first quarter of 2024 in response to increased customer demand.

Current wording

Our Chemicals Segment operated its production facilities at 93% of practical capacity utilization in the first half of 2024. In the first half of 2025, our Chemicals Segment’s practical capacity utilization was 87% as it reduced operating rates at certain of its manufacturing facilities.

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 three months of 2025 was lower as compared to the comparable period in 2024 due to decreases in per metric ton production costs (primarily raw materials, utilities and unabsorbed fixed costs due to improved operating rates in 2025).

Current 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 second quarter and the first half of 2025 was higher as compared to the same periods in 2024 due to increases in per metric ton production costs (primarily unabsorbed fixed costs due to reduced operating rates in 2025).

Previous wording

Net Sales– Our Chemicals Segment’s net sales in the first quarter of 2025 increased 2%, or $11.0 million, compared to the first quarter of 2024 primarily due to the net effects of a 5% increase in sales volumes (which increased net sales by approximately $24 million), a 2% increase in average TiO 2 selling prices (which increased net sales by approximately $10 million) and changes in product mix (which decreased net sales by approximately $10 million). In addition, our Chemicals Segment estimates that changes in currency exchange rates (primarily the euro) decreased its net sales by approximately $11 million in the first quarter of 2025 as compared to the first quarter of 2024. 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– Our Chemicals Segment’s net sales in the second quarter of 2025 decreased 1%, or $6.1 million, compared to the second quarter of 2024 primarily due to the effects of a 1% decrease in average TiO 2 selling prices (which decreased net sales by approximately $7 million), changes in product mix (which decreased net sales by approximately $4 million) and a 1% decrease in sales volumes (which decreased net sales by approximately $3 million). In addition, our Chemicals Segment estimates that changes in currency exchange rates (primarily the euro) increased its net sales by approximately $8 million in the second quarter of 2025 as compared to the second quarter of 2024. 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

Our Chemicals Segment’s sales volumes increased 5% in the first quarter of 2025 as compared to the first quarter of 2024 due to higher overall sales volumes in its North American and European markets somewhat offset by lower sales volumes in export markets.

Current wording

Our Chemicals Segment’s sales volumes increased 2% in the first six months of 2025 as compared to the same period in 2024 due to higher overall sales volumes in its North American and European markets somewhat offset by lower sales volumes in its export markets.

Previous wording

Our Chemicals Segment’s gross margin as a percentage of net sales increased to 22% in the first quarter of 2025 compared to 15% in the first quarter of 2024. As discussed and quantified above, our Chemicals Segment’s gross margin as a percentage of net sales increased primarily due to higher sales and production volumes, higher average TiO 2 selling prices, lower overall production costs (primarily raw materials and utilities) and improved fixed cost absorption.

Current wording

Our Chemicals Segment’s gross margin as a percentage of net sales decreased to 13% in the second quarter of 2025 compared to 20% in the second quarter of 2024. As discussed and quantified above, our Chemicals Segment’s gross margin as a percentage of net sales decreased primarily due to lower production volumes resulting in unfavorable fixed cost absorption.

Previous wording

Operating Income– Our Chemicals Segment had operating income of $41.2 million in the first quarter of 2025 compared to operating income of $22.8 million in the first quarter of 2024 as a result of the factors impacting gross margin discussed above. We estimate changes in currency exchange rates decreased our Chemicals Segment’s operating income by approximately $5 million in the first quarter of 2025 as compared to the same period in 2024, as discussed in the effects of currency exchange rates section below.

Current wording

Operating Income– Our Chemicals Segment’s operating income decreased by $30.2 million to $10.3 million in the second quarter of 2025 compared to operating income of $40.5 million in the second quarter of 2024 as a result of the factors impacting gross margin discussed above. We estimate that changes in currency exchange rates increased our Chemicals Segment’s operating income by approximately $14 million in the second quarter of 2025 as compared to the same period in 2024, 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 NL 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 $.5 million and $.6 million in the first three months of 2025 and 2024, 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 is net of amortization of purchase accounting adjustments made in conjunction with our acquisitions of interests in NL 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 $1.0

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 gain or losses we would recognize from the first two items described above.

Current 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.

Previous wording

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

Current wording

The $14 million increase in our Chemicals Segment’s operating income was comprised of the following:

Previous wording

The $11 million decrease in our Chemicals Segment’s net sales (translation losses) was caused primarily by a strengthening of the U.S. dollar relative to the euro, as its euro-denominated sales were translated into fewer U.S. dollars in 2025 as compared to 2024. The strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2025 did not have a significant effect on our Chemicals Segment’s net sales, as a substantial portion of the sales generated by our Chemicals Segment’s Canadian and Norwegian operations is denominated in the U.S. dollar.

Current wording

The $3 million decrease in our Chemicals Segment’s net sales (translation losses) was caused primarily by a strengthening of the U.S. dollar relative to the euro, as its euro-denominated sales were translated into fewer U.S. dollars in 2025 as compared to 2024. The strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2025 did not have a significant effect on the reported amount of our Chemicals Segment’s net sales, as a substantial portion of the sales generated by our Chemicals Segment’s Canadian and Norwegian operations is denominated in the U.S. dollar.

Previous wording

Outlook – Overall our Chemicals Segment’s customer demand improved in the first quarter of 2025 as compared to the same period in 2024, led by stronger demand in Europe. The momentum our Chemicals Segment saw at the beginning of the year began to slow in the second half of the first quarter as uncertainty regarding the outcome of the U.S. federal government’s announced tariffs and responses to such tariffs from various affected countries tempered customer demand. Our Chemicals Segment expects demand, particularly in North America, to remain challenging until the uncertainty around tariffs is resolved; however, demand in Europe has improved in part due to the European Commission’s duties on Chinese imports of TiO 2, enacted in mid-2024. Overall, it is unclear how much impact the economic uncertainty caused by potential tariffs implemented by the U.S. and other countries will have on demand in 2025. Our Chemicals Segment believes customer inventory levels remain low, although in the face of this uncertainty customers are demonstrating hesitancy to build inventory, and our Chemicals Segment is receiving orders on shorter notice than previously experienced, indicating a cautious demand outlook and careful inventory management. TiO 2 selling prices have remained relatively stable in North America and in export markets and have increased slightly in Europe partly as a result of continued elevated costs for utilities and other raw materials. Our Chemicals Segment is evaluating production rates at its operating facilities based on current customer demand and expects its 2025 production rates to be near 2024 levels.

Current wording

Outlook – Overall our Chemicals Segment’s customer demand decreased in the second quarter of 2025 in all major markets. The momentum our Chemicals Segment saw at the beginning of the year began to slow toward the second half of the first quarter of 2025 and persisted through the second quarter 2025 as customers continue to be cautious as a result of high interest rates and continued inflation concerns largely driven by ongoing global tariff and trade tensions. Our Chemicals Segment expects demand to remain challenging until the uncertainty around tariffs is resolved and it remains unclear how much impact the economic uncertainty caused by global tariff and trade tensions will have on demand for the remainder of 2025. Our Chemicals Segment believes customer inventory levels remain low; however, customers continue to be hesitant to build inventory and our Chemicals Segment continues to receive orders on shorter notice than previously experienced. As previously disclosed, in the first quarter of 2025 our Chemicals Segment implemented tariff mitigation strategies, including building and prepositioning inventory from its Canadian facility in the U.S. which resulted in increased shipping and warehousing costs and increased finished goods inventory in the U.S. As a result of weaker than expected demand in the second quarter of 2025, U.S. inventory balances remain elevated. Our Chemicals Segment reduced its facility operating rates in the second quarter in response to the lower demand levels and our Chemicals Segment plans to operate its facilities in line with the current demand environment over the remainder of the year as it sells down elevated inventory balances.

Previous wording

As noted above, our Chemicals Segment acquired full control of LPC in July 2024. Our Chemicals Segment believes this acquisition presents a unique opportunity to add immediate value for its customers and better serve the North American marketplace by expanding its product offerings and increasing sales to new and existing customers while realizing significant synergies, including commercial, overhead, and supply chain optimization. Our Chemicals Segment is in the process of fully integrating the additional LPC production capacity and it expects the acquisition to positively impact its earnings in 2025, although soft demand, competitive pressures and additional debt service costs associated with increased borrowings to complete the transaction may limit this impact.

Current wording

As noted above, our Chemicals Segment acquired full control of LPC in July 2024. Our Chemicals Segment believes this acquisition adds value to its customers and enables our Chemicals Segment to better serve the North American marketplace by expanding its product offerings and increasing sales to new and existing customers while realizing significant synergies, including commercial, overhead, and supply chain optimization. Our Chemicals Segment is in the process of fully integrating the additional LPC production capacity and expects the acquisition to positively impact its earnings. However, soft demand, competitive pressures and additional debt service costs from increased borrowings will limit this impact in the near term. Our Chemicals Segment is investing in technological and manufacturing improvements to the LPC facility which are expected to improve the flexibility, quality and cost effectiveness of the facility over the long term.

Previous wording

As noted above, our Chemicals Segment’s tariff mitigation efforts in the first quarter required working capital to build and position inventory within the U.S. Our Chemicals Segment expects its cash on hand to improve as it reduces inventory levels over the next several quarters. With increased borrowing availability under its revolving credit facility and cash on hand, our Chemicals Segment believes it is well-positioned to finance its working capital needs, to repay in September the €75 million 3.75% Senior Secured Notes due 2025, and to fully integrate the acquired LPC production capacity.

Current wording

In July 2025, our Chemicals Segment increased the maximum borrowings under its credit facility from $300 million to $350 million to provide additional liquidity for general corporate purposes and to support near-term debt maturities, including the €75 million 3.75% Senior Secured Notes due in September 2025. Our Chemicals Segment expects its cash on hand to improve as it reduces inventory levels over the next several quarters. With increased borrowing availability under our Chemicals Segment’s revolving credit facility and cash on hand, our Chemicals Segment believes it is well-positioned to finance its working capital needs and to fully integrate the acquired LPC production capacity.

Previous wording

Cost of Sales and Gross Margin– Our Component Products Segment’s cost of sales as a percentage of net sales decreased 5% in the first quarter of 2025 compared to the same period in 2024. As a result, gross margin as a percentage of sales increased over the same period. Gross margin percentage increased in the first quarter of 2025 compared to the same period in 2024 primarily due to higher gross margin percentage at the marine components reporting unit as a result of lower cost inventory produced during the fourth quarter of 2024 and sold in the first quarter of 2025 as well as increased coverage of fixed costs on higher sales. Gross margin as a percentage of net sales at the security products reporting unit in the first quarter of 2025 was comparable to the same period in 2024.

Current wording

Cost of Sales and Gross Margin– Our Component Products Segment’s cost of sales as a percentage of net sales improved 1% in the second quarter of 2025 compared to the same period in 2024. As a result, gross margin as a percentage of sales increased over the same period. Gross margin percentage increased in the second quarter of 2025 compared to the same period in 2024 primarily due to higher marine components gross margin percentage partially offset by lower security products gross margin percentage. Marine components’ gross margin percentage increased in the second quarter of 2025 compared to the same period in 2024 primarily due to increased coverage of fixed costs as a result of higher sales and to a lesser extent a more favorable customer and product mix. Security products’ gross margin as a percentage of net sales for the second quarter of 2025 decreased slightly as compared to the same period in 2024 primarily due to higher employee related costs including salaries, benefits and medical expense partially offset by increased coverage of fixed costs and operating costs and expenses as a result of higher sales.

Previous wording

Operating Income– As a percentage of net sales, our Component Products Segment’s operating income for the first quarter of 2025 increased compared to the same period of 2024 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 second quarter and the first six months of 2025 increased compared to the same periods of 2024 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 first quarter sales and operating income exceeded prior year on the strength of improved demand at the marine components reporting unit, primarily in the towboat and government markets. Security products sales improved slightly from prior year, as increased sales to the government security market were mostly offset by softness across a variety of markets. The raw material price increases our Component Products Segment began experiencing in the third quarter of 2024 have continued through the first quarter of 2025, and our Component Products Segment is starting to see some surcharges related to tariffs on certain commodity raw materials.

Current wording

Outlook* –*Our Component Products Segment’s sales for the first half of 2025 reflect continued robust demand across both of its reporting units, surpassing the first half of 2024 sales. Marine components sales and operating income for the first six months of 2025 exceeded prior year on the strength of improved demand to the government market as well as increased sales to the towboat market primarily in the first quarter of 2025 related to a one-time stocking event for a towboat OEM customer. Security products sales improved from prior year predominantly due to increased sales to the government security market and to a lesser extent increased sales to the healthcare market. The raw material price increases our Component Products Segment began experiencing in the third quarter of 2024 have continued through the first half of 2025, and it is starting to see some surcharges related to tariffs on certain components, primarily electronic components from Asia.

Previous wording

Our Component Products Segment expects security products net sales in 2025 to improve modestly over 2024, and it expects gross margin and operating income percentages in 2025 to be slightly above 2024 due to price increases implemented in the first quarter and an improved security products product mix. Our Component Products Segment expects marine components net sales to increase in 2025 predominantly due to higher expected sales to the government and industrial markets. In the first quarter marine components benefited from an increase in sales related to a one-time stocking event at a towboat OEM customer. For the remainder of the year, our Component Products Segment expects demand from the towboat market to be consistent with 2024. Overall, our Component Products Segment expects its marine components reporting unit to have improved gross margins and operating income percentages in 2025 compared to 2024 due to increased coverage of fixed costs on higher expected sales volumes.

Current wording

Our Component Products Segment expects security products net sales in 2025 to improve over 2024 primarily due to continued higher sales to the government security and healthcare markets; however, our Component Products Segment expects these increases will be offset somewhat by certain other markets that continue to be challenging including transportation and distribution. Security products gross margin and operating income percentages will be challenged during the last half of 2025 primarily due to higher cost inventory it began producing late in the second quarter due to higher raw material costs and tariff related surcharges on certain raw materials, primarily electronic components, which our Component Products Segment expects to continue in the second half of 2025. As a result, our Component Products Segment expects gross margin and operating income margin at the security products reporting unit to be in-line with prior year. Our Component Products Segment expects marine components net sales to increase in 2025 predominantly due to higher expected sales to the government market as well as higher expected sales to the industrial market in the second half of the year. Overall, our Component Products Segment expects the marine components reporting unit to have improved gross margin and operating income percentages in 2025 compared to 2024 due to increased coverage of fixed costs on higher expected sales volumes.

Previous wording

Our Component Products Segment manufactures substantially all of 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 Asia, including China. In anticipation of the U.S. federal government tariffs announcements, our Component Products Segment increased purchases of certain electronic components and other components to mitigate the potential near-term impact of tariffs. As noted above, our Component Products Segment has recently experienced some raw material and component price increases related to tariffs. Our Component Products Segment believes it can increase selling prices to its customers to recoup its increased 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, the length of time tariffs are in effect, and the ability of its customers to substitute alternative products. Our Component Products Segment will continue to monitor current and anticipated near-term customer demand levels to ensure its production capabilities and inventories are aligned accordingly.

Current wording

Our Component Products Segment manufactures substantially all of 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 Asia, including China. Early in the first quarter of 2025, in anticipation of the U.S. federal government tariffs announcements, our Component Products Segment increased purchases of certain electronic components and other components to mitigate the potential near-term impact of tariffs. As noted above, late in the second quarter our Component Products Segment began incurring tariff related surcharges on certain raw materials, primarily electronic components. Our Component Products Segment is

Previous wording

Net Sales and Operating Income – Substantially all of the net sales from our Real Estate Management and Development Segment in the first quarter of 2025 and 2024 were from land sales. We recognized $8.5 million in revenues on land sales during the first quarter of 2025 compared to $13.7 million in the first quarter of 2024. All of the land sales revenues recognized in 2025 and 2024 are related to land sold in prior years. As noted above, we recognize revenue in our residential/planned community over time using cost-based input methods, and all of the land sales revenue we recognized in 2025 and 2024 was under this method of revenue recognition. Land sales revenue in the first quarter of 2025 decreased compared to the same prior year period due to the decreased pace of development activity for previously sold parcels within the residential/planned community, primarily due to delays in receiving city permits and delays in environmental related approvals. 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, and labor and materials availability. Cost of sales related to land sales revenues was $4.6 million in the first quarter of 2025 compared to $8.0 million in the first quarter of 2024.

Current 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 2025 and 2024 were from land sales. We recognized $5.7 million in revenues on land sales during the second quarter of 2025 compared to $23.2 million in the second quarter of 2024 and $14.2 million in the first six months of 2025 compared to $36.9 million in the same prior year period. All of the land sales revenues recognized in 2025 and 2024 are related to land sold in prior years. As noted above, we recognize revenue in our residential/planned community over time using cost-based input methods, and all of the land sales revenue we recognized in 2025 and 2024 was under this method of revenue recognition. Land sales revenue in the second quarter and the first six months of 2025 decreased compared to the same prior year periods due to the decreased pace of development activity for previously sold parcels within the residential/planned community, primarily due to delays in receiving city permits and delays in environmental related approvals. 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, and labor and materials availability. Cost of sales related to land sales revenues was $2.7 million and $7.3 million in the second quarter and the first six months of 2025, respectively, compared to $12.8 million and $20.8 million in the second quarter and the first six months of 2024, respectively. In addition we recognized income of $17.2 million related to tax increment infrastructure reimbursement in the second quarter of 2025.

Previous wording

*Outlook –*LandWell is focused on developing the land it manages for the residential/planned community in Henderson with sales primarily to residential builders. At March 31, 2025, substantially all of the land in the residential/planned community had been sold with approximately 20 saleable acres remaining. A contract for the remaining 20 acres is currently in escrow with a home builder, and the sale is scheduled to close by mid-2025. There are also 15 saleable acres zoned for light industrial and commercial use adjacent to the 2,100 acre residential/planned community which are also currently in escrow and scheduled to close in the third and fourth quarters of 2025. At March 31, 2025 we have deferred revenue of $27.6 million related to post-closing obligations on land sales closed prior to 2024. Because we recognize revenue over time using cost-based inputs, we will continue to recognize revenue on land previously sold over the development period, although we have already received substantially all the cash proceeds related to these sales. We currently expect to take one to two years to complete our post-closing obligations. Any delays or curtailments in infrastructure development related to post-closing obligation activities will delay the amount of revenue we recognize on previously closed land sales. 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 infrastructure projects. LandWell began construction on several of these community-wide large projects in late 2021 with the construction expected to continue for the next two to three years. We expect these land development costs in 2025 to be comparable to 2024 due to the timing of planned infrastructure projects and the availability of certain construction materials. Because these large projects relate to the entirety of the residential/planned community, the costs associated with these large projects are not part of the cost-based inputs used to recognize revenue, and therefore, this spending will not correlate to revenue

Current wording

*Outlook –*LandWell is focused on developing the land it manages for the residential/planned community in Henderson with sales primarily to residential builders. At June 30, 2025, substantially all of the land in the residential/planned community had been sold with approximately 20 saleable acres remaining. A contract for the remaining 20 acres is currently in escrow with a home builder, and the sale is scheduled to close by the end of 2025. There are also 15 saleable acres zoned for light industrial and commercial use adjacent to the 2,100 acre residential/planned community which are also currently in escrow as two separate transactions and are scheduled to close in the third and fourth quarters of 2025, respectively. At June 30, 2025 we have deferred revenue of $30.4 million related to post-closing obligations on land sales closed prior to 2024. Because we recognize revenue over time using cost-based inputs, we will continue to recognize revenue on land previously sold over the development period, although we have already received substantially all the cash proceeds related to these sales. We currently expect to take one to two years to complete our post-closing obligations. Any delays or curtailments in infrastructure development related to post-closing obligation activities will delay the amount of revenue we recognize on previously closed land sales. 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 infrastructure projects. LandWell began construction on several of these community-wide large projects in late 2021 with the construction expected to continue for the next two to three years. We expect these land development costs in 2025 to be comparable to 2024 due to the timing of planned infrastructure projects and the availability of certain construction materials. Because these large projects relate to the entirety of the residential/planned community, the costs associated with these large projects 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 expected to be eligible for tax increment reimbursement under our Owner Participation Agreement (“OPA”) with the City of Henderson, and delays or curtailments in eligible infrastructure development activities will also delay LandWell’s ability to submit completed costs to the City for approval of additional OPA note receivables. The maximum reimbursement under the OPA is $209 million. We have collected $39.3 million to date and expect to reach the maximum over the next 7 to 10 years.

Previous wording

Changes in the Market Value of Valhi Common Stock held by Subsidiaries– Our subsidiaries, Kronos and NL, hold shares of our common stock. As discussed in the 2024 Annual Report, we account for our proportional interest in these shares of our common stock as treasury stock at Kronos’ and NL’s historical cost basis. The remaining portion of these shares of our common stock, which are attributable to the noncontrolling interest of Kronos and NL, are reflected in our Condensed Consolidated Balance Sheet at fair value. Kronos and NL recognize unrealized gains or losses on these shares of our common stock in the determination of each of their respective net income or losses. 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 loss of $1.7 million in the first quarter of 2025 compared to a gain of $.5 million in the first quarter of 2024 in our Condensed Consolidated Statements of Income, which represents the unrealized gain (loss) in respect of these shares during such periods attributable to the noncontrolling interest of Kronos and NL.

Current wording

Changes in the Market Value of Valhi Common Stock held by Subsidiaries– Our subsidiaries, Kronos and NL, hold shares of our common stock. As discussed in the 2024 Annual Report, we account for our proportional interest in these shares of our common stock as treasury stock at Kronos’ and NL’s historical cost basis. The remaining portion of these shares of our common stock, which are attributable to the noncontrolling interest of Kronos and NL, are reflected in our Condensed Consolidated Balance Sheet at fair value. Kronos and NL recognize unrealized gains or losses on these shares of our common stock in the determination of each of their respective net income or losses. 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 no gain in the second quarter of 2025 compared to a gain of $.1 million in the second quarter of 2024 and a loss of $1.7 million in the first six months of 2025 compared to a gain of $.6 million in the first six months of 2024 in our Condensed Consolidated Statements of Income, which represents the unrealized gain (loss) in respect of these shares during such periods attributable to the noncontrolling interest of Kronos and NL.

Previous wording

Interest Income and Other– Interest income and other decreased $1.4 million in the first quarter of 2025 compared to the same period of 2024 primarily due to lower average interest rates and decreased cash balances. See Note 12 to our Condensed Consolidated Financial Statements.

Current wording

Interest Income and Other– Interest income and other decreased $1.8 million in the second quarter and $3.2 million in the first six months of 2025 compared to the same periods of 2024 primarily due to lower average interest rates and decreased cash balances. See Note 12 to our Condensed Consolidated Financial Statements.

Previous wording

Other General Corporate Items– Corporate expenses in the first quarter of 2025 were comparable to the same period in 2024. Included in corporate expense are:

Current wording

Other General Corporate Items– Corporate expenses were 11% lower in the second quarter of 2025 compared to the same period in 2024 primarily due to lower litigation fees and related costs and lower environmental remediation and related costs. Corporate expenses were 5% lower in the first six months of 2025 compared to the same period in 2024 primarily due to lower litigation fees and related costs. Included in corporate expense are:

Previous wording

The level of our litigation fees and related expenses varies from period to period depending upon, among other things, the number of cases in which we are currently involved, the nature of such cases and the current stage of such cases (e.g. discovery, pre-trial motions, trial or appeal, if applicable). See Note 16 to our Condensed Consolidated Financial Statements. If our current expectations regarding the number of cases in which we expect to be involved during 2025, or the nature of such cases were to change, our corporate expenses could be higher than we currently estimate.

Current wording

The level of our litigation fees and related expenses varies from period to period depending upon, among other things, the number of cases in which we are currently involved, the nature of such cases and the current stage of such cases (e.g. discovery, pre-trial motions, trial or appeal, if applicable). See Note 16 to our Condensed Consolidated Financial Statements. If our current expectations

Previous wording

Interest Expense– Interest expense increased $1.9 million in the first quarter of 2025 compared to the respective period in 2024 primarily due to higher overall debt levels as a result of Kronos debt transactions entered into in 2024. Interest expense in the first three months of 2024 includes a charge of $1.5 million for the write-off of deferred financing costs. The details of the debt transactions are discussed in Note 9 to our Consolidated Financial Statements in our 2024 Annual Report. See Note 7 to our Condensed Consolidated Financial Statements.

Current wording

Interest Expense– Interest expense increased $1.9 million in the second quarter of 2025 compared to the same period in 2024 primarily due to higher overall debt levels. Interest expense increased $3.8 million in the first six months of 2025 compared to the same period in 2024 primarily due to higher overall debt levels and higher average interest rates as a result of Kronos debt transactions entered into in 2024. Interest expense in the first six months of 2024 includes a charge of $1.5 million for the write-off of deferred financing costs. The details of the debt transactions are discussed in Note 9 to our Consolidated Financial Statements in our 2024 Annual Report. See Note 7 to our Condensed Consolidated Financial Statements.

Previous wording

Income Tax Expense* *– We recognized income tax expense of $8.0 million in the first quarter of 2025 compared to income tax expense of $4.4 million in the first quarter of 2024. The increase in the first quarter of 2025 is primarily due to higher earnings in 2025 and the jurisdictional mix of such earnings. During interim periods, our effective tax rate may not necessarily correspond to the current period income (loss) before taxes due to the application of accounting for income taxes in interim periods which requires us to base our effective rate on full year projections of pre-tax income (loss).

Current wording

Income Tax Expense* *– We recognized income tax expense of $8.0 million in the second quarter of 2025 compared to $7.9 million in the second quarter of 2024 and income tax expense of $16.0 million in the first six months of 2025 compared to $12.3 million in the first six months of 2024. The increase in the second quarter and first six months of 2025 is primarily due to the jurisdictional mix of such earnings, partially offset by the year-to-date increase to the valuation allowance against our Belgian net deferred tax asset. During interim periods, our effective tax rate may not necessarily correspond to the current period income (loss) before taxes due to the application of accounting for income taxes in interim periods which requires us to base our effective rate on full year projections of pre-tax income (loss).

Previous wording

We recognize deferred income taxes with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock because the exemption under GAAP to avoid such recognition of deferred income taxes is not available to us. At December 31, 2024, we recognized a deferred income tax liability with respect to our direct investment in Kronos of $49.6 million. There is a maximum amount (or cap) of such deferred income taxes we are required to recognize with respect to our direct investment in Kronos. The maximum amount of the cap is $153.6 million. During the first three months of 2025, we recognized a non-cash deferred income tax benefit with respect to our direct investment in Kronos of $.5 million for the decrease in the deferred income taxes required to be recognized with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock, this decrease related to our equity in Kronos’ net income during the period. We recognized a similar deferred income tax expense of $.1 million in the first three months of 2024. A portion of the net change with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock during such periods related to our equity in Kronos’ other comprehensive income (loss) items, and the amounts allocated to other comprehensive income (loss) items includes amounts related to our equity in Kronos’ other comprehensive income (loss) items.

Current wording

We recognize deferred income taxes with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock because the exemption under GAAP to avoid such recognition of deferred income taxes is not available to us. At December 31, 2024, we recognized a deferred income tax liability with respect to our direct investment in Kronos of $49.6 million. There is a maximum amount (or cap) of such deferred income taxes we are required to recognize with respect to our direct investment in Kronos. The maximum amount of the cap is $153.6 million. During the first six months of 2025, we recognized a non-cash deferred income tax benefit with respect to our direct investment in Kronos of $2.2 million for the decrease in the deferred income taxes required to be recognized with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock, this decrease related to our equity in Kronos’ net income during the period. We recognized a similar deferred income tax benefit of $.6 million in the first six months of 2024. A portion of the net change with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock during such periods related to our equity in Kronos’ other comprehensive income (loss) items, and the amounts allocated to other comprehensive income (loss) items includes amounts related to our equity in Kronos’ other comprehensive income (loss) items.

Previous wording

Noncontrolling Interest in Net Income of Subsidiaries– Noncontrolling interest in operations of subsidiaries in the first quarter of 2025 was comparable to the same period in 2024. See Note 14 to our Condensed Consolidated Financial Statements.

Current wording

Noncontrolling Interest in Net Income of Subsidiaries– Noncontrolling interest in operations of subsidiaries decreased in the first six months of 2025 compared to the same period in 2024 primarily due to decreased operating income at Kronos. See Note 14 to our Condensed Consolidated Financial Statements.

Previous wording

Trends in cash flows from operating activities (excluding the impact of significant asset dispositions and relative changes in assets and liabilities) are generally similar to trends in our operating income. In addition to the impact of the operating, investing and financing cash flows discussed below, changes in the amount of cash, cash equivalents and restricted cash we report from period to period can be impacted by changes in currency exchange rates, since a portion of our cash, cash equivalents and restricted cash is held by our non-U.S. subsidiaries.

Current wording

Trends in cash flows from operating activities (excluding the impact of significant asset dispositions and relative changes in assets and liabilities) are generally similar to trends in our operating income. In addition to the impact of the operating, investing and financing cash flows discussed below, changes in the amount of cash, cash equivalents and restricted cash we report from period to

Previous wording

Cash used in operating activities was $155.9 million in the first three months of 2025 compared to cash used in operating activities of $48.8 million in the first three months of 2024. This $107.1 million increase in cash used in operating activities in the first three months of 2025 includes:

Current wording

Cash used in operating activities was $134.2 million in the first six months of 2025 compared to cash used in operating activities of $15.3 million in the first six months of 2024. This $118.9 million increase in cash used in operating activities in the first six months of 2025 includes:

Previous wording

During the three months ended March 31, 2025, we spent $12.8 million in capital expenditures including $12.0 million in our Chemicals Segment and $.8 million in our Component Products Segment.

Current wording

During the six months ended June 30, 2025, we spent $25.4 million in capital expenditures including $23.2 million in our Chemicals Segment and $2.2 million in our Component Products Segment.

Previous wording

The declaration and payment of future dividends, and the amount thereof, is discretionary and is dependent upon a number of factors including our current and future expected results of operations, financial condition, cash requirements for our businesses, contractual and other requirements and restrictions and other factors deemed relevant by our board of directors. The amount and timing of past dividends is not necessarily indicative of the amount or timing of any future dividends which might be paid. There are currently no contractual restrictions on the amount of dividends which we may pay. Distributions to noncontrolling interest in subsidiaries in the first three months of 2025 are comprised of CompX dividends paid to shareholders other than NL, Kronos dividends paid to shareholders other than us and NL, and LandWell dividends paid to partners other than us and BMI.

Current wording

The declaration and payment of future dividends, and the amount thereof, is discretionary and is dependent upon a number of factors including our current and future expected results of operations, financial condition, cash requirements for our businesses, contractual and other requirements and restrictions and other factors deemed relevant by our board of directors. The amount and timing of past dividends is not necessarily indicative of the amount or timing of any future dividends which might be paid. There are currently no contractual restrictions on the amount of dividends which we may pay. Distributions to noncontrolling interest in subsidiaries in the first six months of 2025 are comprised of CompX dividends paid to shareholders other than NL, Kronos dividends paid to shareholders other than us and NL, and LandWell dividends paid to partners other than us and BMI.

Previous wording

Our assets consist primarily of investments in operating subsidiaries, and our ability to service our obligations, including Kronos’ Senior Secured Notes and the Contran Term Loan, depends in part upon the distribution of earnings of our subsidiaries, whether in the form of dividends, advances or payments on account of intercompany obligations or otherwise. Kronos’ Senior Secured Notes are collateralized by, among other things, a first priority lien on (i) 100% of the common stock or other ownership interests of each existing and future direct domestic subsidiary of Kronos International, Inc. (“KII”) and the guarantors, and (ii) 65% of the voting common stock or other ownership interests and 100% of the non-voting common stock or other ownership interests of each non-U.S. subsidiary that is

Current wording

Our assets consist primarily of investments in operating subsidiaries, and our ability to service our obligations, including Kronos’ Senior Secured Notes and the Contran Term Loan, depends in part upon the distribution of earnings of our subsidiaries, whether in the form of dividends, advances or payments on account of intercompany obligations or otherwise. Kronos’ Senior Secured Notes are collateralized by, among other things, a first priority lien on (i) 100% of the common stock or other ownership interests of each existing and future direct domestic subsidiary of Kronos International, Inc. (“KII”) and the guarantors, and (ii) 65% of the voting common stock or other ownership interests and 100% of the non-voting common stock or other ownership interests of each non-U.S. subsidiary that is directly owned by KII or any guarantor. Kronos’ Global Revolver is collateralized by, among other things, a first priority lien on the borrower’s trade receivables and inventories. See Note 7 to our Condensed Consolidated Financial Statements.

Previous wording

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

Current wording

We periodically evaluate acquisitions of interests in or combinations with companies (including our affiliates) that may or may not be engaged in businesses related to our current businesses. We intend to consider such acquisition activities in the future and, in

Previous wording

Based upon our expectations of our operating performance, and the anticipated demands on our cash resources, we expect to have sufficient liquidity to meet our short-term (defined as the twelve-month period ending March 31, 2026) and long-term obligations (defined as the five-year period ending March 31, 2030). With respect to the repayment of Kronos’ €75 million due in September 2025, we intend to satisfy this obligation through cash generated from operations or to the extent that is not sufficient, a combination of cash generated from operations and borrowings on the Global Revolver. If actual developments differ from our expectations, our liquidity could be adversely affected.

Current wording

Based upon our expectations of our operating performance, and the anticipated demands on our cash resources, we expect to have sufficient liquidity to meet our short-term (defined as the twelve-month period ending June 30, 2026) and long-term obligations (defined as the five-year period ending June 30, 2030). Kronos’ Global Revolver matures in July 2029, and at June 30, 2025 Kronos had total availability for borrowing of approximately $300 million less any amounts outstanding. The borrowing base is calculated at least quarterly, and the amount available for borrowing may change based on applicable period end balances. See Note 7 to our Condensed Consolidated Financial Statements. Effective July 17, 2025, Kronos increased the maximum borrowings under the Global Revolver from $300 million to $350 million to provide additional liquidity for general corporate purposes and to support near-term debt maturities, including Kronos’ €75 million 3.75% Senior Secured Notes due September 2025. If actual developments differ from our expectations, our liquidity could be adversely affected.

Previous wording

At March 31, 2025, we had an aggregate of $238.6 million of restricted and unrestricted cash, cash equivalents and marketable securities, including $26.6 million held by our non-U.S. subsidiaries. A detail by entity is presented in the table below.

Current wording

At June 30, 2025, we had an aggregate of $230.1 million of restricted and unrestricted cash, cash equivalents and marketable securities, including $23.4 million held by our non-U.S. subsidiaries. A detail by entity is presented in the table below.

Previous wording

We currently expect our aggregate capital expenditures for 2025 will be approximately $58 million as follows:

Current wording

We currently expect our aggregate capital expenditures for 2025 will be approximately $48 million as follows: