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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.06pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.01pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.11pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+1
adverse+1
negatively+1
conflicts+1
suspend+1
Positive rising
favorable+1
improvements+1
Risk Factors (Item 1A)
6,189 words
ITEM 1A. RISK FACTORS
Listed below are certain risk factors associated with us and our businesses. See also certain risk factors discussed in Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates”. In addition to the potential effect of these risk factors, any risk factor which could result in reduced earnings or increased operating losses, or reduced liquidity, could in turn adversely affect our ability to service our liabilities or pay dividends on our common stock or adversely affect the quoted market prices for our securities.
Operational Risk Factors
Demand for, and prices of, certain of our Chemicals Segment’s products are influenced by changing market conditions for its products, which may result in reduced earnings or operating losses.
Our Chemicals Segment’s sales and profitability are largely dependent on the TiO 2 industry. In 2025, approximately 90% of our Chemicals Segment’s sales were attributable to sales of TiO 2 . TiO 2 is used in many “quality of life” products for which demand historically has been linked to global, regional, and local gross domestic product and discretionary spending, which can be impacted by regional and world events or economic conditions. Such events are likely to cause a decrease in demand for our products and, as a result, may have an effect on our results of operations and financial condition.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
loss+6
closures+5
restructuring+4
weakening+2
curtailments+2
Positive rising
gains+3
favorable+2
greater+2
gain+1
opportunities+1
MD&A (Item 7)
19,865 words
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Business Overview
We are primarily a holding company. We operate through our wholly-owned and majority-owned subsidiaries, including NL Industries, Inc., Kronos Worldwide, Inc., CompX International Inc., Tremont LLC, Basic Management, Inc. (“BMI”) and the LandWell Company (“LandWell”). Kronos (NYSE: KRO), NL (NYSE: NL) and CompX (NYSE American: CIX) each file periodic reports with the SEC.
We have three consolidated reportable operating segments:
Chemicals – Our Chemicals Segment is operated through our majority control of Kronos. Kronos is a leading global producer and marketer of value-added TiO 2 . TiO 2 is used to impart whiteness, brightness, opacity and durability to a wide variety of products, including paints, plastics, paper, fibers and ceramics. Additionally, TiO 2 is a critical component of everyday applications, such as coatings, plastics and paper, as well as many specialty products such as inks, cosmetics and pharmaceuticals.
Component Products – We operate in the component products industry through our majority control of CompX. CompX is a leading manufacturer of security products used in the postal, recreational transportation, office and institutional furniture, cabinetry, tool storage, healthcare applications and a variety of other industries. CompX is also a manufacturer of wake systems, stainless steel exhaust systems, gauges, throttle controls, trim tabs and related hardware and accessories for the recreational marine and other industries.
Pricing within the global TiO 2 industry over the long term is cyclical and changes in economic conditions worldwide can significantly impact our Chemicals Segment’s earnings and operating cash flows. Historically, the markets for many of our Chemicals Segment’s products have experienced alternating periods of increasing and decreasing demand. Relative changes in the selling prices for our Chemicals Segment’s products are one of the main factors that affect the level of our Chemicals Segment’s profitability. In periods of increasing demand, our Chemicals Segment’s selling prices and profit margins generally will tend to increase, while in periods of decreasing demand selling prices and profit margins generally tend to decrease. In addition, pricing may affect customer inventory levels as customers may from time to time accelerate purchases of TiO 2 in advance of anticipated price increases or defer purchases of TiO 2 in advance of anticipated price decreases. Our Chemicals Segment’s ability to further increase capacity without additional investment in greenfield or brownfield capacity may be limited and as a result, our Chemicals Segment’s profitability may become even more dependent upon the selling prices of its products.
The TiO 2 industry is concentrated and highly competitive and our Chemical Segment faces price pressures in the markets in which it operates, which may result in reduced earnings or operating losses.
The global market in which our Chemicals Segment operates is concentrated, with the top four TiO 2 producers accounting for approximately 42% of the world’s production capacity, and is highly competitive. Competition is based on a number of factors, such as price, product quality and service. Our Chemicals Segment faces significant competition from international and regional competitors, including increasing competition from TiO 2 producers in China, who have
significant sulfate production process capacity. Chinese producers have also continued to develop chloride process technology, and the risk of substitution of our Chemicals Segment’s products with products made by Chinese producers could increase if Chinese producers increase the use of chloride process technology and improve the quality of their sulfate and chloride products. Some of our Chemicals Segment’s competitors may be able to drive down prices for our Chemicals Segment’s products if their costs are lower than our Chemicals Segment’s costs, including its competitors with vertically integrated sources of raw materials for the chloride process who may have a competitive advantage during periods of high or rising raw material costs or who operate in regions with less stringent regulatory requirements. For example, Chinese competition generally has lower operating costs due to less stringent regulatory and environmental compliance requirements and less expensive energy prices. China has dumped lower cost sulfate process TiO 2 into markets our Chemicals Segment serves. In some cases, Western TiO 2 producers have been successful in obtaining anti-dumping duties on Chinese imports such as the duties recently enacted in the European Union, Brazil, Saudi Arabia, and other jurisdictions. In addition, some of our Chemicals Segment’s competitors’ financial, technological and other resources may be greater than its resources and such competitors may be betterable to withstand extended periods of reduced demand or other changes in market conditions. Our Chemicals Segment’s competitors may be able to respond more quickly than it can to new or emerging technologies and changes in customer requirements. Further, consolidation of our Chemicals Segment’s competitors or customers may result in reduced demand for its products or make it more difficult for it to compete with its competitors. The occurrence of any of these events could result in reduced earnings or operating losses.
Many of the markets in which our Component Products Segment operates are mature and highly competitive resulting in pricing pressure and the need to continuously reduce costs.
Many of the markets our Component Products Segment serves are highly competitive, with a number of competitors offering similar products. Our Component Products Segment focuses its efforts on the middle and high-end segment of the market where it feels that it can compete due to the importance of product design, quality and durability to the customer. However, our Component Products Segment’s ability to effectively compete is impacted by a number of factors. The occurrence of any of these factors could result in reduced earnings or operating losses.
Competitors may be able to drive down prices for our Component Products Segment’s products beyond its ability to adjust costs because their costs are lower than our Component Products Segment’s, especially products sourced from Asia.
Competitors’ financial, technological and other resources may be greater than our Component Products Segment’s resources, which may enable them to more effectively withstand changes in market conditions.
Competitors may be able to respond more quickly than our Component Products Segment can to new or emerging technologies and changes in customer requirements.
Consolidation of our Component Products Segment’s competitors or its customers in any of the markets in which it competes may result in reduced demand for its products.
New competitors could emerge by modifying their existing production facilities to manufacture products that compete with our Component Products Segment’s products.
Our Component Products Segment may not be able to sustain a cost structure that enables it to be competitive.
Customers may no longer value our Component Products Segment’s product design, quality or durability over the lower cost products of its competitors.
Our development of innovative features for current products is critical to sustaining and growing our Component Product Segment’s sales.
Historically, our Component Products Segment’s ability to provide value-added custom engineered products that address requirements of technology and space utilization has been a key element of its success. Our Component Products Segment spends a significant amount of time and effort to refine, improve and adapt its existing products for new customers and applications. Since expenditures for these types of activities are not considered research and development expense under accounting principles generally accepted in the United States of America (“GAAP”), the amount of our Component Products Segment’s research and development expenditures, which is not significant, is not indicative of the overall effort involved in the development of new product features. The introduction of new product features requires the coordination of the design, manufacturing and marketing of the new product features with current and potential customers. The ability
to coordinate these activities with current and potential customers may be affected by factors beyond our Component Products Segment’s control. While our Component Products Segment will continue to emphasize the introduction of innovative new product features that target customer-specific opportunities, we do not know if any new product features our Component Products Segment introduces will achieve the same degree of success that it has achieved with its existing products. At times our Component Products Segment works with new and existing customers on specific product innovations. Sometimes it has a cost sharing arrangement for development efforts, although our Component Products Segment may also fully bear the development costs. If a customer were to ultimately reject or abandon custom product innovation efforts, our Component Products Segment may not be able to recover its development costs.
Higher costs or limited availability of our raw materials may reduce our earnings and decrease our liquidity. In addition, many of our raw material contracts contain fixed quantities we are required to purchase.
For our Chemicals Segment, the number of sources for and availability of certain raw materials is specific to the particular geographical region in which our facilities are located. Titanium-containing feedstocks suitable for use in our Chemicals Segment’s TiO 2 facilities are available from a limited number of suppliers around the world. Political and economic instability or increased regulations in the countries from which our Chemicals Segment purchases or mines its raw material supplies could adversely affect raw material availability. If our Chemicals Segment or its worldwide vendors are unable to meet their planned or contractual obligations and our Chemicals Segment is unable to obtain necessary raw materials, it could incur higher costs for raw materials or may be required to reduce production levels. For example, our Chemicals Segment experienced increases in feedstock costs in 2023 and 2024, which negatively affected its margins. Our Chemicals Segment has also experienced higher operating costs such as energy costs. Future variations in the cost of energy, which primarily reflect market prices for oil and natural gas, and for raw materials may significantly affect its operating results and decrease liquidity as our Chemicals Segment may not always be able to increase its selling prices to offset the impact of any higher costs or reduced production levels.
Our Chemicals Segment has supply contracts that provide for its TiO 2 feedstock requirements. While our Chemicals Segment believes it will be able to renew these contracts, as necessary, we do not know if our Chemicals Segment will be successful in renewing them or in obtaining long-term extensions to them prior to expiration. Our Chemicals Segment’s feedstock agreements have minimum purchase requirements, targeted purchases, or require it to purchase certain minimum percentage-based quantities of feedstock based upon its annual purchasing requirements. We estimate aggregate purchases under these feedstock agreements will be between approximately $375 million and $450 million in 2026. In addition, our Chemicals Segment has other long-term supply and service contracts that provide for various raw materials and services which may require it to purchase certain minimum quantities. Our Chemicals Segment’s obligations under these contracts could adversely affect our financial results if it significantly reduces its production and is unable to modify the contractual commitments.
Certain raw materials used in our Component Products Segment’s products are commodities that are subject to significant fluctuations in price in response to world-wide supply and demand as well as speculative investor activity. Zinc and brass are the principal raw materials used in the manufacture of security products. Stainless steel and aluminum are the major raw materials used in the manufacture of marine components. These raw materials are purchased from several suppliers and are generally readily available from numerous sources. Our Component Products Segment occasionally enters into short-term raw material supply arrangements to mitigate the impact of future increases in commodity-related raw material costs and ensure supply. Materials purchased outside of these arrangements are sometimes subject to unanticipated and sudden price increases.
Certain components used in our Component Products Segment’s products are manufactured by foreign suppliers located in China and elsewhere. Global economic and political conditions, including natural disasters, terrorist acts, transportation disruptions, global conflicts or trade wars and public health crises such as pandemics, could prevent our Component Products Segment’s vendors from being able to supply these components. Should our Component Products Segment’s vendors not be able to meet their supply obligations or should it be otherwise unable to obtain necessary raw materials or components, it may incur higher supply costs or may be required to reduce or suspend production. In addition, the imposition of new tariffs or increases in existing tariffs by the U.S. government on imports from China, Mexico or other countries from which our Component Products Segment imports raw materials and other components could increase its supply costs. Increases in our Component Products Segment’s supply costs may decrease its liquidity or negatively impact its financial condition or results of operations as our Component Products Segment may be unable to offset the higher costs with increases in its selling prices or reductions in other operating costs.
Dependence on our Component Product Segment’s significant customers could adversely affect their business and results of operations.
For the year ended December 31, 2025, our Component Products Segment’s largest ten customers accounted for approximately 52% of its consolidated net sales, with a single customer accounting for 26% of its consolidated net sales. Because our Component Products Segment’s customers’ purchases are made through purchase orders rather than long-term contracts or minimum purchase commitments, order levels can fluctuate significantly from period to period based on customer needs. In addition, significant customers may negotiate more favorable pricing or terms, which may pressure our Component Products Segment’s operating margins. If any of our Component Products Segment’s significant customers reduces their purchases, loses market share for its end-use products, experiences financial difficulty, changes suppliers, or otherwise alters its relationship with our Component Products Segment, demand for its products could decline. Any such reduction in sales could potentially have a material adverse effect on our Component Products Segment’s revenues and results of operations.
Kronos’ acquisition of the remaining 50% interest in LPC may not generate benefits we anticipate and may otherwise affect our business and prospects.
In July 2024 Kronos completed the LPC acquisition in which it purchased the 50% ownership interest in LPC it did not previously own, and Kronos subsequently merged LPC into Kronos’ wholly-owned subsidiary, Kronos Louisiana. If Kronos experiences unforeseen technological, operational or other difficulties in integrating the Kronos Louisiana facility into its operations, Kronos may not be able to implement the process innovations at the facility that it expects. In addition, Kronos may not be able to achieve the anticipated synergies or improvements in efficiency and product quality that it expects. With or without such difficulties, the integration of the Kronos Louisiana facility into Kronos’ operations may divert significant management time and attention from its other operations. If Kronos fails to successfully integrate the Kronos Louisiana facility into its operations, if the acquisition does not provide expected synergies or sales increases, or if Kronos Louisiana has unexpected legal, regulatory, or financial liabilities, Kronos’ business, financial condition, results of operations and prospects could be adversely affected.
Our Real Estate Management and Development Segment has significant development obligations related to a residential/planned community in Henderson, Nevada. Increases in labor or construction costs related to the completion of such development obligations may reduce our earnings and decrease our liquidity.
A substantial portion of the revenues and assets associated with our Real Estate Management and Development Segment relates to certain land under development in Henderson, Nevada, including approximately 2,100 acres zoned for residential/planned community purposes. All of the remaining land in the residential/planned community was sold in 2025. We generally recognize revenue from these land sales over time using cost-based inputs because we receive substantially all cash payment at the time of sale but significant development obligations still exist for post-closing obligation activities and several community-wide large projects. We currently estimate development obligations are approximately $54 million and will take approximately one to two years to complete. Our estimates of our development obligations include certain assumptions about future labor and construction costs. If actual costs were significantly above our estimates, revenue, profits and liquidity in our Real Estate Management and Development Segment may be significantly and negatively affected.
Financial Risk Factors
Our assets consist primarily of investments in our operating subsidiaries, and we are dependent upon distributions from our subsidiaries to service our liabilities.
The majority of our operating cash flows are generated by our operating subsidiaries, and our ability to service liabilities and pay dividends on our common stock depends to a large extent upon the cash dividends or other distributions we receive from our subsidiaries. Our subsidiaries are separate and distinct legal entities and they have no obligation, contingent or otherwise, to pay cash dividends or other distributions to us. In addition, the payment of dividends or other distributions from our subsidiaries could be subject to restrictions under applicable law, monetary transfer restrictions, currency exchange regulations in jurisdictions in which our subsidiaries operate or any other restrictions imposed by current or future agreements to which our subsidiaries may be a party, including debt instruments. Events beyond our control, including changes in general business and economic conditions, could adversely impact the ability of our subsidiaries to pay dividends or make other distributions to us. If our subsidiaries were to become unable to make sufficient cash dividends or other distributions to us, our ability to service our liabilities and to pay dividends on our common stock could be adversely affected.
In addition, a significant portion of our assets consist of ownership interests in our subsidiaries. If we were required to liquidate our subsidiaries’ securities in order to generate funds to satisfy our liabilities, we may be required to sell such securities at a time or times for less than what we believe to be the long-term value of such assets.
Our leverage may impair our financial condition or limit our ability to operate our businesses.
We have a significant amount of debt, primarily related to Kronos’ 9.50% Senior Secured Notes due 2029, Kronos’ term loan from Contran, Kronos’ borrowings on its global revolving credit facility (the “Global Revolver”), our loan from Contran Corporation and the LandWell bank note. As of December 31, 2025, our total consolidated debt was approximately $592 million. Our level of debt could have important consequences to our stockholders and creditors, including:
making it more difficult for us to satisfy our obligations with respect to our liabilities;
increasing our vulnerability to adverse general economic and industry conditions;
requiring that a portion of our cash flows from operations be used for the payment of interest on our debt, which reduces our ability to use our cash flow to fund working capital, capital expenditures, dividends on our common stock, acquisitions or general corporate requirements;
limiting the ability of our subsidiaries to pay dividends to us;
limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or general corporate requirements;
limiting our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate; and
placing us at a competitive disadvantage relative to other less leveraged competitors.
Indebtedness outstanding under our loan from Contran and Kronos’ Global Revolver accrues interest at variable rates. To the extent market interest rates rise, the cost of our debt could increase, even if the amount borrowed remains the same, adversely affecting financial condition, results of operations and cash flows.
In addition to our indebtedness, we are party to various lease and other agreements (including feedstock purchase contracts with minimum commitments and other long-term supply and service contracts as discussed above) pursuant to which, along with our indebtedness, we are committed to pay approximately $213 million in 2026. Our ability to make payments on and refinance our debt and to fund planned capital expenditures depends on our ability to generate cash flow in the future. To some extent, this is subject to general economic, financial, competitive, legislative, regulatory, and other factors that are beyond our control. In addition, our ability to borrow funds under certain of our revolving credit facilities in the future, in some instances, will depend in part on these subsidiaries’ ability to maintain specified financial ratios and satisfy certain financial covenants contained in the applicable credit agreement.
Our businesses may not generate cash flows from operating activities sufficient to enable us to pay our debts when they become due and to fund our other liquidity needs. As a result, we may need to refinance all or a portion of our debt before maturity, as we have done in the past. We may not be able to refinance any of our debt in a timely manner on favorable terms, if at all, in the current credit markets. Any inability to generate sufficient cash flows or to refinance our debt on favorable terms could have a material adverse effect on our financial condition.
Changes in currency exchange rates and interest rates can adversely affect our net sales, profits, and cash flows.
We operate our businesses in several different countries and sell our products worldwide. For example, during 2024 and 2025 approximately 44% and 45% of our Chemicals Segment’s sales volumes, respectively, were sold into European markets. The majority (but not all) of our sales from our Chemicals Segment’s operations outside the United States are denominated in currencies other than the United States dollar, primarily the euro, other major European currencies and the Canadian dollar. Therefore, we are exposed to risks related to the need to convert currencies we receive from the sale of our products into the currencies required to pay for certain of our operating costs and expenses and other liabilities (including indebtedness), all of which could result in future losses depending on fluctuations in currency exchange rates and affect the comparability of our results of operations between periods.
Legal, Compliance and Regulatory Risk Factors
We could incur significant costs related to legal and environmental remediation matters.
NL formerly manufactured lead pigments for use in paint. NL and others have been named as defendants in various legal proceedings seeking damages for personal injury, property damage and governmental expenditures allegedly caused by the use of lead-based paints. These lawsuits seek recovery under a variety of theories, including public and private nuisance, negligent product design, negligentfailure to warn, strict liability, breach of warranty, conspiracy/concert of action, aiding and abetting, enterprise liability, market share or risk contribution liability, intentional tort, fraud and misrepresentation, violations of state consumer protection statutes, supplier negligence and similar claims. The plaintiffs in these actions generally seek to impose on the defendants responsibility for lead paint abatement and health concerns associated with the use of lead-based paints, including damages for personal injury, contribution and/or indemnification for medical expenses, medical monitoring expenses and costs for educational programs. NL entered into a legal settlement in one public-nuisance lead pigment case and has recognized a material liability related to the settlement. Any additional liability NL might incur in the future for these matters could be material. See also Item 3 - “Legal Proceedings - Lead pigment litigation - NL.”
Certain properties and facilities used in NL’s former operations are the subject of litigation, administrative proceedings or investigations arising under various environmental laws. These proceedings seek cleanup costs, personal injury or property damages and/or damages for injury to natural resources. Some of these proceedings involve claims for substantial amounts. Environmental obligations are difficult to assess and estimate for numerous reasons, and we may incur costs for environmental remediation in the future in excess of amounts currently estimated. Any liability we might incur in the future could be material. See also Item 3 - “Legal Proceedings - Environmental matters and litigation.”
Environmental, health and safety laws and regulations may result in increased regulatory scrutiny which could decrease demand for our products, increase our manufacturing and compliance costs or obligations and result in unanticipatedlosses which could negatively impact our financial results or limit our ability to operate our Chemicals Segment’s business.
From time to time, new environmental, health and safety regulations are passed or proposed in the countries in which we operate or sell our products, seeking to regulate our operations or to restrict, limit or classify TiO 2 , or its use. Increased regulatory scrutiny could affect consumer perception of TiO 2 or limit the marketability and demand for TiO 2 or products containing TiO 2 or increase our manufacturing and regulatory compliance obligations and costs. Increased compliance obligations and costs or restrictions on operations, raw materials and certain TiO 2 applications could negatively impact our future financial results through increased costs of production, or reduced sales which may decrease our liquidity, operating income and results of operations.
If some or all of our intellectual property were to be declared invalid, held to be unenforceable or copied by competitors or some or all of our confidential information become known to competitors, or if our competitors were to develop similar or superior intellectual property or technology, our ability to compete could be adversely impacted.
Protection of our intellectual property rights, including patents, copyrights, trade secrets, confidential information, trademarks and tradenames, is important to our businesses and our competitive positions. We endeavor to protect our intellectual property rights in key jurisdictions in which our products are produced, sold or used and in jurisdictions into which our products are imported. However, we may be unable to obtain protection for our intellectual property in key jurisdictions. Although we own and have applied for numerous patents and trademarks throughout the world, we may have to engage in judicial enforcement in order to protect our patent rights and other proprietary rights. Our patents and other intellectual property rights may be challenged, invalidated, circumvented, rendered unenforceable or otherwise compromised. A failure to protect, defend or enforce our intellectual property could have an adverse effect on our financial condition and results of operations. Similarly, third parties may assert claimsagainst us and our customers and distributors alleging our products infringe upon third-party intellectual property rights. In the event that any such third-party prevails against us on such claims, there could be an adverse effect on our financial condition and results of operations.
Although it is the practice of our Chemicals Segment to enter into confidentiality agreements with its employees and third parties to protect its proprietary expertise and other trade secrets, these agreements may not provide sufficient protection for its trade secrets or proprietary know-how, or adequate remedies for breaches of such agreements may not be available in the event of an unauthorized use or disclosure of such trade secrets and know-how. Our Chemicals Segment also may not be able to readily detect breaches of such agreements. The failure of our Chemicals Segment’s confidentiality agreements to protect its proprietary technology, know-how or trade secrets could result in a material loss of its competitive position, which could lead to significantly lower revenues, reduced profit margins or loss of market share.
Our Component Products Segment relies on patent, trademark and trade secret laws in the United States and similar laws in other countries to establish and maintain our intellectual property rights in our technology and designs. Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated. Third parties may independently discover our trade secrets and proprietary information, and in such cases our Component Products Segment could not assert any trade secret rights against such parties. Further, we do not know if any of our Component Products Segment’s pending trademark or patent applications will be approved. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our intellectual property rights. In addition, the laws of certain countries do not protect intellectual property rights to the same extent as the laws of the United States. Therefore, in certain jurisdictions, we may be unable to protect our technology and designs adequatelyagainstunauthorized third-party use, which could adversely affect our competitive position.
Third parties may claim that we or our customers are infringing upon their intellectual property rights. Even if we believe that such claims are without merit, they can be time-consuming and costly to defend and distract our management’s and technical staff’s attention and resources. Claims of intellectual property infringement also might require us to redesign affected technology, enter into costly settlement or license agreements or pay costlydamage awards, or face a temporary or permanent injunction prohibiting us from marketing or selling certain of our technology. If we cannot or do not license the infringed technology on reasonable pricing terms or at all, or substitute similar technology from another source, our business could be adversely impacted.
If we must take legal action to protect, defend or enforce our intellectual property rights, any suits or proceedings could result in significant costs, including attorney’s fees and diversion of resources and management’s attention, and we may not prevail in any such suits or proceedings.
Global climate change laws and regulations could negatively impact our financial results or limit our ability to operate our businesses.
We operate production facilities in several countries and many of our facilities require large amounts of energy, including electricity and natural gas, in order to conduct operations. Governmental agencies of countries in which we operate have determined, or may determine in the future, the consumption of energy derived from fossil fuels is a major contributor to climate change and have adopted or are contemplating regulatory changes in response to the potential impact
of climate change, including laws and regulations requiring enhanced reporting (such as the Corporate Social Responsibility Directive adopted by the European Union on November 28, 2022) as well as legislation regulating carbon and other GHG emissions and the use of renewable energy. International treaties or agreements may also result in increasing regulation of GHG emissions, including emissions permits and/or energy taxes or the introduction of carbon emissions trading mechanisms. To date, the existing GHG laws and regulations in effect in the various countries in which we operate have not had a material adverse effect on our financial results. Until the timing, scope and extent of any new or future regulation become known, we cannot predict the effect on our business, results of operations or financial condition. However, if further GHG laws and regulations were to be enacted in one or more countries, it could negatively impact our future results of operations through increased costs of production, particularly as it relates to our energy requirements or our need to obtain emissions permits. If such increased costs of production were to materialize, we may be unable to pass price increases on to our customers to compensate for increased production costs, which may decrease our liquidity, operating income and results of operations. In addition, any adopted future laws and regulations focused on climate change and/or GHG emissions could negatively impact our ability (or that of our customers and suppliers) to compete with companies situated in areas not subject to such laws and regulations.
General Risk Factors
Operating as a global business presents risks associated with global and regional economic, political and regulatory environments.
Our Chemicals Segment manufactures and distributes its products globally. Our Chemicals Segment’s revenue from non-U.S. markets accounted for approximately 66%, 66% and 64% of its revenue for the years ended December 31, 2023, 2024 and 2025, respectively. Our Chemicals Segment has significant international operations which, along with its customers and suppliers, could be substantially affected by a number of risks arising from operating a multi-national business, including:
global or regional economic downturn;
changes in tariffs, trade barriers, and regulatory requirements, such as the enactment of tariffs on goods imported into the U.S. including, but not limited to, tariffs enacted on goods imported from Canada where it manufactures a significant portion of the TiO 2 it sells in North America. Tariffs could make its products more expensive which would reduce demand or require our Chemicals Segment to absorb the increased costs reducing its operating margins;
protectionist laws, policies, and business practices and nationalistic campaigns such as economic sanctions and exchange controls;
U.S. relations with the governments of the other countries in which our Chemicals Segment operates;
t errorism, armed conflict (such as the current conflicts between Russia and Ukraine);
natural disasters, pandemics or other health crises, climate change, and other events beyond our control;
difficulties enforcing agreements or other legal rights; and
our Chemicals Segment’s effective tax rate may fluctuate based on the variability of geographic earnings and statutory rates.
TiO 2 production requires significant energy input, and economic sanctions or supply disruptions resulting from armed conflict could lead to additional volatility in global energy prices and energy supply disruptions. These risks, individually or in the aggregate, could have an adverse effect on our results of operations and financial condition.
The U.S. federal government has recently implemented tariffs on certain foreign goods and may implement additional tariffs on foreign goods. As our Chemicals Segment currently manufactures a significant portion of its North American TiO 2 in Canada, if sustained for an extended period of time, a tariff on our Chemicals Segment’s imports into the U.S. from Canada would make its products manufactured in Canada and sold into the U.S. more expensive. As a result, demand for these products could be reduced, or our Chemicals Segment could be required to absorb the increased costs or increase prices of such products. Tariff mitigation strategies, such as those our Chemicals Segment undertook in the first quarter of 2025 which included building and positioning inventory from its Canadian facility into the U.S., may result in increased shipping and warehousing costs. Future mitigation strategies may offer only temporary relief from the effect of
these tariffs. Such tariffs and, if enacted, any further legislation or actions taken by the U.S. government that restrict trade, such as additional tariffs, trade barriers and other protectionist or retaliatory measures taken in response, could adversely impact our Chemicals Segment’s ability to sell its products in the U.S. or reduce its revenues and gross margins. These measures may also increase our Chemicals Segment’s costs of Canadian feedstock imported into the U.S. and could adversely impact its gross margins or require our Chemicals Segment to raise prices thereby making its products less competitive. Additional tariffs imposed by the U.S or any retaliatory or reciprocal tariffs imposed by other countries could also increase the cost of feedstock and other raw materials that go into making TiO 2 , the extent of which is unknown. The ultimate impact of any tariffs will depend on various factors, including the length of time tariffs are ultimately implemented and the amount, scope and nature of the tariffs.
Technology failures or cybersecurity breaches could have a material adverse effect on our operations.
Our businesses rely on integrated information technology systems to manage, process and analyze data, including to facilitate the manufacture and distribution of products to and from our facilities, receive, process and ship orders, manage the billing of and collections from customers and manage payments to vendors. Although we have systems and procedures in place to protect our information technology systems, there can be no assurance that such systems and procedures will be sufficiently effective. Therefore, any of our information technology systems may be susceptible to outages, disruptions or destruction from power outages, telecommunications failures, employee error, cybersecurity breaches or attacks and other similar events. This could result in a disruption of our business operations, injury to people, harm to the environment or our assets, and/or the inability to access our information technology systems and could adversely affect our results of operations and financial condition. We have in the past experienced, and we expect to continue to experience, cyber-attacks, including phishing and other attempts to breach or gainunauthorized access to, our systems, and vulnerabilities introduced into our systems by trusted third-party vendors who have experienced cyber-attacks. To date we have not sufferedbreaches in our systems, either directly or through a trusted third-party vendor, which have led to material losses. Due to the increase in global cybersecurity incidents it has become increasingly difficult to obtain insurance coverage on reasonable pricing terms to mitigate some risks associated with technology failures or cybersecurity breaches, and we are experiencing such difficulties in obtaining insurance coverage.
Physical impacts of climate change could have a material adverse effect on our costs and operations.
Climate change may increase both the frequency and severity of extreme weather conditions and natural disasters, such as hurricanes, thunderstorms, tornadoes, drought and snow or ice storms. Extreme weather conditions may increase our costs or cause damage to our facilities, and any damage resulting from extreme weather may not be fully insured. Climate change has also been associated with rising sea levels and many of our facilities are located near coastal areas or waterways where rising sea levels or flooding could disrupt our operations or adversely impact our facilities. Furthermore, periods of extended inclement weather or associated droughts or flooding may inhibit our facility operations and delay or hinder shipments of our products to customers. Any such events could have a material adverse effect on our costs or results of operations.
leading
enhancements
Real Estate Management and Development – We operate in real estate management and development through our majority control of BMI and LandWell. BMI and LandWell own real property in Henderson, Nevada. LandWell is engaged in efforts to develop certain land holdings for commercial, industrial and residential purposes in Henderson, Nevada. Prior to 2023, BMI was responsible for the delivery of water to the City of Henderson and various other users and provided utility services to certain industrial customers.
Operations Overview
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024 –
We reported a net loss attributable to Valhi stockholders of $57.6 million or $2.02 per diluted share in 2025 compared to net income of $108.0 million or $3.79 per diluted share in 2024.
Our net income attributable to Valhi stockholders decreased from 2024 to 2025 primarily due to the net effects of:
an operating loss from our Chemicals Segment of $24.5 million in 2025 compared to operating income of $138.5 million in 2024;
a non-cash gain of $64.5 million resulting from the remeasurement of the Chemicals Segment’s investment in the TiO 2 manufacturing joint venture in 2024;
aggregate income of $31.4 million in 2024 related to the settlement of a liability for an environmental remediation site;
a non-cash settlement loss of $28.7 million on the termination and buy-out of our pension plan in the United States in 2025;
a non-cash deferred income tax expense of $19.3 million to reduce the Chemicals Segment’s net German deferred tax asset as a result of the German tax rate reduction in 2025;
aggregate charges of $10.3 million related to restructuring costs associated with workforce reductions in our Chemicals Segment in 2025;
a non-cash deferred income tax expense of $8.5 million related to the recognition of a valuation allowance on our Chemicals Segment’s German interest deduction limitation deferred tax asset recognized in the fourth quarter;
a non-cash gain of $4.6 million resulting from the remeasurement of the Chemicals Segment’s acquisition earn-out liability in 2025; and
income from tax increment infrastructure reimbursement of $34.2 million in 2025 compared to $30.3 million in 2024.
Our diluted net loss per share in 2025 includes:
income of $.62 per share related to tax increment infrastructure reimbursements recognized in the second and third quarters;
a loss of $.62 per share due to the termination and buy-out of our pension plan in the United States in the fourth quarter;
a loss of $.45 per share related to the recognition of a non-cash deferred income tax expense to reduce the Chemicals Segment’s net German deferred tax asset as a result of the German tax rate reduction in the third quarter;
a loss $.18 per share related to restructuring costs related to our Chemicals Segment’s workforce reductions in the fourth quarter;
a loss of $.20 per share related to the recognition of a non-cash deferred income tax expense related to the recognition of a valuation allowance on our Chemicals Segment’s German net deferred tax asset in the fourth quarter; and
income of $.08 per share due to the recognition of a non-cash gain resulting from the remeasurement of the Chemicals Segment’s acquisition earn-out liability in the third quarter.
Our diluted net income per share in 2024 includes:
income of $1.18 per share due to the recognition of a non-cash gain resulting from the remeasurement of the Chemicals Segment’s investment in the TiO 2 manufacturing joint venture recognized in the third quarter;
aggregate income of $.72 per share related to the settlement of a liability for an environmental remediation site recognized in the fourth quarter;
income of $.55 per share related to tax increment infrastructure reimbursements recognized in the third and fourth quarters;
a loss of $.38 per share due to the recognition of a non-cash deferred income tax expense related to final tax regulations on the treatment of certain currency translation gains and losses related to our Chemicals Segment in the fourth quarter; and
a loss of $.19 per share due to the recognition of a non-cash deferred income tax expense related to the recognition of a valuation allowance on our Chemicals Segment’s Belgian net deferred tax assets in the fourth quarter.
Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 –
We reported net income attributable to Valhi stockholders of $108.0 million or $3.79 per diluted share in 2024 compared to a net loss of $9.9 million or $.35 per diluted share in 2023.
Our net income attributable to Valhi stockholders increased from 2023 to 2024 primarily due to the net effects of:
operating income from our Chemicals Segment of $138.5 million in 2024 compared to an operating loss of $41.1 million in 2023;
a non-cash gain of $64.5 million in 2024 resulting from the remeasurement of the Chemicals Segment’s investment in the TiO 2 manufacturing joint venture;
aggregate income of $31.4 million in 2024 related to the settlement of a liability for an environmental remediation site;
income from tax increment infrastructure reimbursement of $30.3 million in 2024 compared to $25.2 million in 2023;
a non-cash deferred income tax expense of $16.5 million in 2024 related to final tax regulations on the treatment of certain currency translation gains and losses related to our Chemicals Segment;
a non-cash deferred income tax expense of $8.2 million in 2024 related to the recognition of a deferred income tax asset valuation allowance related to our Chemicals Segment’s Belgian net deferred tax assets;
a non-cash loss on the termination of our U.K. pension plan of $6.2 million in 2023; and
higher interest expense in 2024 as a result of refinancing of the Chemicals Segment’s Senior Secured Notes in the first quarter and debt incurred to finance the LPC acquisition in the third quarter.
In addition to the 2024 items noted above, our diluted net loss per share in 2023 includes:
income of $.46 per share related to tax increment infrastructure reimbursements recognized in the third and fourth quarters;
a loss of $.13 per share due to the termination of our U.K. pension plan recognized in the second quarter;
a loss of $.10 per share related to workforce reductions by our Chemicals Segment recognized in the fourth quarter;
a loss of $.06 per share related to the write-off of certain costs resulting from a capital project termination recognized in the fourth quarter; and
a gain of $.05 per share related to a business interruption insurance claim arising from Hurricane Laura in 2020 at our Chemicals Segment recognized in the first, second and third quarters.
We discuss these amounts more fully below.
Current Forecast for 2026 –
We currently expect consolidated operating income for 2026 to be higher as compared to 2025 primarily due to the net effects of:
higher operating income from our Chemicals Segment in 2026 primarily due to the positive impacts of increased operating rates, higher sales volumes and selling prices, and lower operating costs;
lower operating income from our Real Estate Management and Development Segment in 2026 due to the wind down of development activities; and
a non-cash settlement loss of $28.7 million related to the termination of the U.S. pension plan in 2025.
Our expectations for our future operating results are based upon a number of factors beyond our control, including worldwide growth of gross domestic product, competition in the marketplace, continued operation of competitors, technological advances, worldwide production capacity, public health crises, the effect of tariffs, and the impact of economic conditions and geopolitical events on demand for our products or our customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted. If actual developments differ from our expectations, our results of operations could be unfavorably affected.
Segment Operating Results – 2025 Compared to 2024 and 2024 Compared to 2023
Chemicals –
We consider TiO 2 to be a “quality of life” product, with demand affected by gross domestic product, or GDP, and overall economic conditions in our markets located in various regions of the world. Over the long-term, we expect demand for TiO 2 will grow by 2% to 3% per year, consistent with our expectations for the long-term growth in GDP. However, even if our Chemicals Segment and its competitors maintain consistent shares of the worldwide market, demand for TiO 2 in any interim or annual period may not change in the same proportion as the change in GDP, in part due to relative changes in the TiO 2 inventory levels of our Chemicals Segment’s customers. We believe our Chemicals Segments’ customers’ inventory levels are influenced in part by their expectation for future changes in TiO 2 selling prices as well as their expectation for future availability of product. Although certain of our Chemicals Segment’s TiO 2 grades are considered specialty pigments, the majority of its grades and substantially all of its production are considered differentiated commodity pigment products with price and availability being the most significant competitive factors along with product quality and customer and technical support services.
The factors having the most impact on our Chemicals Segment’s reported operating results are:
TiO 2 selling prices,
TiO 2 sales and production volumes,
Manufacturing costs, particularly raw materials such as third-party feedstock, maintenance and energy-related expenses, and
Currency exchange rates (particularly the exchange rate for the U.S. dollar relative to the euro, the Norwegian krone and the Canadian dollar and the euro relative to the Norwegian krone).
Our Chemicals Segment’s key performance indicators are its TiO 2 average selling prices, its 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 selling prices will increase or decrease generally as a result of competitive market pressures.
As previously reported, effective July 16, 2024 (the “Acquisition Date”), Kronos acquired the 50% joint venture interest in LPC previously held by Venator Investments, Ltd. (“Venator”). Prior to the acquisition, Kronos held a 50% joint venture interest in LPC through a wholly-owned subsidiary. LPC was operated as a manufacturing joint venture between Kronos and Venator. Following the acquisition, LPC became a wholly-owned subsidiary of Kronos. In 2025, Kronos merged LPC into its wholly-owned subsidiary Kronos Louisiana, Inc. (the combined company is referred to as “Kronos Louisiana”). Kronos accounted for the acquisition as a business combination. The results of operations of LPC are included in our Consolidated Statements of Operations beginning as of the Acquisition Date. See Note 3 to our Consolidated Financial Statements.
Years ended December 31,
% Change
(Dollars in millions)
Net sales
Cost of sales
Gross margin
Operating income (loss)
Percent of net sales:
Cost of sales
Gross margin
Operating income (loss)
TiO 2 operating statistics:
Sales volumes*
Production volumes*
Percent change in TiO 2 net sales:
TiO 2 sales volumes
TiO 2 product pricing
TiO 2 product mix/other
Changes in currency exchange rates
Total
Thousands of metric tons
Industry Conditions and 2025 Overview – Throughout 2025, the market faced significant global uncertainty driven by evolving U.S. trade policies and sustained geopolitical tensions. These factors, combined with continued market weakness compared to historical periods, contributed to additional global capacity reductions by TiO 2 producers in 2025, including both announced plant closures and lower operating rates. While our Chemicals Segment has seen some incremental benefit as a result of certain plant closures, primarily in Europe and particularly in the fourth quarter of 2025, the prolonged market downturn has negatively impacted its sales volume and led to pricing degradation as the year progressed. Our Chemicals Segment started 2025 with average TiO 2 selling prices 2% higher than at the beginning of 2024 but ended 2025 with average TiO 2 selling prices 10% lower. Overall, our Chemicals Segment’s sales volumes have increased slightly in 2025 as compared to 2024 with higher overall sales volumes in both the European and North American markets offset by lower sales volumes to the export market.
Our Chemicals Segment operated its production facilities at 96% of practical capacity utilization in 2024 and continued operating at similar rates in early 2025. When the demand outlook began to soften, our Chemicals Segment adjusted its production operating rates downward in the second and third quarters of 2025, and our Chemicals Segment implemented a more significant production curtailment in the fourth quarter of 2025 to reduce finished goods inventory levels and preserve liquidity.
The following table shows our Chemicals Segment’s capacity utilization rates during 2024 and 2025.
Production Capacity Utilization Rates
First quarter
Second quarter
Third quarter
Fourth quarter
Overall
Excluding the effect of changes in currency exchange rates and unabsorbed fixed costs, our Chemical Segment’s cost of sales per metric ton of TiO 2 sold in 2025 was lower as compared to 2024 primarily due to decreases in per metric ton production costs (primarily raw materials).
In response to the extended period of reduced demand in 2025, discussed above, our Chemicals Segment has taken measures to further reduce its operating costs and improve its long-term cost structure. In the fourth quarter of 2025, our Chemicals Segment implemented certain voluntary and involuntary workforce reductions across its operating locations impacting both manufacturing and selling, general and administrative costs. Our Chemicals Segment recognized a total of approximately $10 million in restructuring charges in the fourth quarter of 2025 related to workforce reductions impacting approximately 226 positions. See Note 20 to our Consolidated Financial Statements.
Net Sales – Our Chemicals Segment’s net sales in 2025 decreased 1%, or $27.7 million, compared to 2024 primarily due to a 4% decrease in average TiO 2 selling prices (which decreased net sales by approximately $75 million) somewhat offset by a 2% increase in sales volumes (which increased net sales by approximately $38 million). Additionally, we estimate that changes in currency exchange rates (primarily the euro) increased our Chemical Segment’s net sales by approximately $24 million in 2025 as compared to 2024. 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.
Our Chemicals Segment’s sales volumes increased 2% as compared to 2024 primarily due to market share gains in European, North American and Latin American markets related to the 2024 acquisition of LPC. Our Chemical Segment’s sales volumes were 7% higher in the fourth quarter of 2025 as compared to the fourth quarter of 2024 primarily due to incremental market share increases in the European market as a result of competitor plant closures in Europe.
Our Chemicals Segment’s net sales in 2024 increased 13%, or $220.6 million, compared to 2023 primarily due to the effects of a 20% increase in sales volumes resulting from improved overall demand across all major markets (which increased net sales by approximately $333 million) partially offset by a 5% decrease in average TiO 2 selling prices (which decreased net sales by approximately $83 million). Changes in product mix negatively contributed to net sales, primarily due to changes in product sales mix in export markets in 2024 as compared to 2023. Additionally, we estimate that changes in currency exchange rates (primarily the euro) increased our Chemicals Segment’s net sales by approximately $5 million in 2024 as compared to 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. Incremental sales volumes resulting from the LPC acquisition did not significantly impact comparisons to the prior year.
Cost of Sales and Gross Margin – Cost of sales increased $118.3 million, or 8%, in 2025 compared to 2024 due to the net effects of approximately $111 million in unabsorbed fixed production costs (including $54 million in the fourth quarter) recognized as a result of reduced operating rates at our Chemicals Segment’s production facilities, lower production costs of approximately $14 million (primarily raw materials) and favorable currency fluctuations (primarily the euro). Our Chemicals Segment’s unabsorbed fixed production costs in 2024 were $12 million. Our Chemical Segment’s cost of sales in 2025 includes a charge in the fourth quarter of 2025 of approximately $4 million related to workforce reductions noted above. Our Chemical Segment’s cost of sales in 2024 include a charge of approximately $2 million related to workforce reductions and approximately $14 million in non-cash charges related to the closure of its sulfate process line in Canada.
Our Chemicals Segment’s cost of sales as a percentage of net sales increased to 89% in 2025 compared to 81% in 2024 primarily due to the unfavorable fixed cost absorption and currency fluctuations, as discussed above.
Gross margin as a percentage of net sales decreased to 11% in 2025 compared to 19% in 2024. As discussed and quantified above, our Chemicals Segment’s gross margin as a percentage of net sales decreased primarily due to lower average TiO 2 selling prices and lower production volumes resulting in unfavorable fixed cost absorption.
Cost of sales increased $27.4 million, or 2%, in 2024 compared to 2023 due to the net effects of a 20% increase in sales volumes, a 33% increase in production rates resulting in reduced unabsorbed fixed production costs, and lower production costs of approximately $115 million (primarily energy and raw materials). Our Chemicals Segment’s unabsorbed fixed production costs in 2024 were $12 million (incurred in the first quarter) compared to $96 million in 2023 related to curtailments that began in 2022 and continued into the first quarter of 2024, as discussed above. Our Chemicals Segment’s cost of sales in 2024 include a charge of approximately $2 million related to workforce reductions and approximately $14 million in non-cash charges related to the closure of its sulfate process line in Canada. Sales and production volumes resulting from the LPC acquisition did not materially impact comparisons to the prior year.
Our Chemicals Segment’s cost of sales as a percentage of net sales decreased to 81% in 2024 compared to 90% in 2023 primarily due to the favorable effects of increased sales, lower production costs and higher production volumes resulting in increased coverage of fixed production costs.
Gross margin as a percentage of net sales increased to 19% in 2024 compared to 10% in 2023. 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 as well as lower production costs, partially offset by lower average TiO 2 selling prices.
Operating Income (Loss) – Our Chemicals Segment had an operating loss of $24.5 million in 2025 compared to operating income of $138.5 million in 2024 as a result of the factors impacting gross margin discussed above. We estimate that changes in currency exchange rates decreased our Chemicals Segment’s operating loss by approximately $8 million in 2025 as compared to 2024, as further discussed below.
Our Chemicals Segment had operating income of $138.5 million in 2024 compared to an operating loss of $41.1 million in 2023 as a result of the factors impacting gross margin discussed above. Our Chemicals Segment recognized a gain of $2.5 million in 2023 related to cash received from the settlement of a business interruption insurance claim. We estimate that changes in currency exchange rates increased our Chemicals Segment’s operating income by approximately $10 million in 2024 as compared to 2023, as further discussed below.
Our Chemicals Segment’s operating income (loss) 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 $1.3 million in 2023, $2.5 million in 2024 and $2.2 million in 2025, which increased our reported Chemicals Segment’s operating loss as compared to amounts reported by Kronos.
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 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. Our Chemicals Segment periodically use currency forward contracts to manage a portion of its currency exchange risk, and relative changes in the aggregate fair
value of any currency forward contracts our Chemicals Segment holds from time to time serve in part to mitigate the currency transaction gains or losses we would recognize from the first two items described above.
Fluctuations in currency exchange rates had the following effects on our Chemicals Segment’s sales and operating income (loss) for the periods indicated.
Impact of changes in currency exchange rates - 2025 vs 2024
Translation
gains
Total currency
Transaction gains recognized
impact of
impact
Change
rate changes
(In millions)
Impact on:
Net sales
Operating income (loss)
The $24 million increase in net sales (translation gains) was caused primarily by a weakening of the U.S. dollar relative to the euro, as euro-denominated sales were translated into more U.S. dollars in 2025 as compared to 2024. The strengthening of the U.S. dollar relative to the Canadian dollar and the weakening of the U.S. dollar relative to the Norwegian krone in 2025 did not have a significant effect on the reported amount of 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.
The $8 million decrease in loss from operations was comprised of the following:
Higher net currency transaction gains of approximately $3 million primarily caused by relative changes in currency exchange rates at each applicable balance sheet date between the U.S. dollar and the euro, Canadian dollar and the Norwegian krone, and between the euro and the Norwegian krone, which causes increases or decreases, as applicable, in U.S. dollar-denominated receivables and payables and U.S. dollar currency held by our non-U.S. operations, and in Norwegian krone denominated receivables and payables held by our Chemicals Segment’s non-U.S. operations. As discussed in Note 19 to our Consolidated Financial Statements, in order to manage currency exchange rate risk associated with the maturity in September 2025 of Kronos’ €75 million 3.75% Senior Secured Notes due 2025, in the first quarter of 2025 — our Chemicals Segment entered into a currency forward contract to purchase €25 million at an exchange rate of €1.05 per U.S. dollar. The contract was settled in August 2025, resulting in an overall transaction gain of $2.8 million included in our Consolidated Statement of Operations for the year ended 2025; and
Approximately $5 million from net currency translation gains primarily caused by a strengthening of the U.S. dollar relative to the Canadian dollar, as local currency-denominated operating costs were translated into fewer U.S. dollars in 2025 as compared to 2024. The effect of the weakening of the U.S. dollar relative to the Norwegian krone caused net translation losses as local currency-denominated costs were translated into more U.S. dollars in 2025 as compared to 2024. Additionally, combined with the effect of the weakening of the U.S. dollar relative to the euro caused further net translation losses, as the positive effects of the weaker U.S. dollar on euro-denominated sales was more than offset by the unfavorable effects on euro-denominated operating costs being translated into more U.S. dollars in 2025 as compared to 2024.
Impact of changes in currency exchange rates - 2024 vs. 2023
Translation
gains
Total currency
Transaction gains recognized
impact of
impact
Change
rate changes
(In millions)
Impact on:
Net sales
Operating income (loss)
The $5 million increase in net sales (translation gains) was caused primarily by a weakening of the U.S. dollar relative to the euro, as euro-denominated sales were translated into more U.S. dollars in 2024 as compared to 2023. The strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2024 did not have a significant effect on the reported amount of 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.
The $10 million increase in operating income was comprised of the following:
Higher net currency transaction gains of approximately $1 million primarily caused by relative changes in currency exchange rates at each applicable balance sheet date between the U.S. dollar and the euro, Canadian dollar and the Norwegian krone, and between the euro and the Norwegian krone, which causes increases or decreases, as applicable, in U.S. dollar-denominated receivables and payables and U.S. dollar currency held by our Chemicals Segment’s non-U.S. operations, and in Norwegian krone denominated receivables and payables held by our Chemicals Segment’s non-U.S. operations; and
Approximately $9 million from net currency translation gains primarily caused by a strengthening of the U.S. dollar relative to the Canadian dollar and Norwegian krone, as local currency-denominated operating costs were translated into fewer U.S. dollars in 2024 as compared to 2023. The effect of the weakening of the U.S. dollar relative to the euro caused additional net translation gains as the positive effects of the weaker U.S. dollar on euro-denominated sales more than offset the unfavorable effects on euro-denominated operating costs being translated into more U.S. dollars in 2024 as compared to 2023.
Outlook – Our Chemicals Segment’s overall customer demand remained weaker than expected throughout 2025, driven by ongoing economic uncertainty related to tariffs and global trade tensions, as well as persistently high interest rates and elevated home prices which are impacting housing mobility. Our Chemicals Segment’s customers were reluctant to build inventories, resulting in shorter order lead times and greater demand forecasting challenges. In the fourth quarter of 2025, our Chemicals Segment further reduced operating rates to align production with demand and to reduce its inventory levels to support cash generation. In 2025, the TiO 2 industry experienced significant capacity reductions including curtailments and previously announced plant closures by multiple producers, primarily in China and Europe. In combination with ongoing tariff and anti-dumping measures, these factors created targeted opportunities for improved sales volumes and mix in select markets, most notably in Europe during the fourth quarter of 2025.
Entering 2026, our Chemicals Segment expects demand improvement from 2025 levels, supported by low customer inventories and seasonal restocking, particularly in North America. The pace and sustainability of recovery remain uncertain and will be influenced by macroeconomic factors, including interest rates, inflation, and consumer confidence. Demand in Europe continues to lag historical levels; however, our Chemicals Segment expects its European volumes to increase from 2025 levels, supported by industry capacity reductions, including the Venator bankruptcy and associated plant closures. To improve operating margins, our Chemicals Segment will need to realize price increases and execute on its operating cost structural realignment.
Our Chemicals Segment remains focused on permanently realigning its operating costs, improving capital efficiency, and preserving liquidity. Following the workforce reductions implemented in late 2025, our Chemicals Segment is pursuing additional cost savings through restructuring supplier agreements, improving asset utilization and enhancing processes to support a leaner organization capable of operating efficiently during extended periods of lower production rates.
Liquidity and capital resources remain sufficient to support our Chemicals Segment’s operations and planned investments. In 2025, our Chemicals Segment increased the maximum availability under its revolving credit facility from $300 million to $350 million and refinanced its €75 million 3.75% Senior Secured Notes due September 2025 with €75 million of additional 9.50% Senior Secured Notes due 2029 (effective rate 7.8% at issuance), resulting in no near-term debt maturities. Our Chemicals Segment expects cash on hand to improve over the next several quarters, and we will continue to actively manage working capital, including inventories and receivables, to bolster operating cash flows and maintain financial flexibility. Our Chemicals Segment believes its revolver availability, combined with having no near-term debt maturities and improved operating cash flows, will provide adequate liquidity for expected working capital needs and capital allocation requirements.
Our Chemicals Segment is pursuing targeted market share opportunities in regions where competitors have
announced permanent or temporary shutdowns or curtailments and in markets where tariffs or duties have reduced the impact of low-cost imports. Overall, while our Chemicals Segment expects operating results in 2026 to improve relative to 2025, our results will remain sensitive to demand variability, pricing competition, and the successful execution of our cost, capital and liquidity initiatives.
Our expectations for the TiO 2 industry and our Chemicals Segment’s operations are based on a number of factors outside its control. Our Chemicals Segment operations are affected by global and regional economic, political and regulatory factors, and it has experienced global market disruptions. Future impacts on our Chemicals Segment’s operations will depend on, among other things, future energy costs, the effect newly enacted tariffs in jurisdictions where it or its customers and suppliers operate, its success in implementing mitigation strategies, and the impact economic conditions, consumer confidence, and geopolitical events on its operations or its customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.
Component Products –
Our Component Products Segment reported operating income of $22.6 million in 2025, $17.0 million in 2024 and $25.4 million in 2023. The increase in operating income in 2025 compared to 2024 was driven by higher sales and improved gross margin at each of the security products and marine components reporting units. In contrast, the decline in operating income in 2024 compared to 2023 resulted from lower sales and reduced gross margin across both security products and marine components reporting units.
Our Component Products Segment’s product offerings consist of a large number of products that have a wide variation in selling price and manufacturing cost, which results in certain practical limitations on its ability to quantify the impact of changes in individual product sales quantities and selling prices on our Component Products Segment’s net sales, cost of sales and gross margin. In addition, small variations in period-to-period net sales, cost of sales and gross margin can result from changes in the relative mix of our Components Products Segment’s products sold. The key performance indicator for our Component Products Segment is operating income margins.
Years ended December 31,
% Change
(Dollars in millions)
Net sales:
Security products
Marine components
Total net sales
Cost of sales
Gross margin
Operating income
Percent of net sales:
Cost of sales
Gross margin
Operating income
Net Sales – Our Component Products Segment’s net sales increased $12.4 million in 2025 compared to 2024 primarily due to higher security products components sales to the government security market and higher marine components sales to various markets including the towboat, government and industrial market. Security products net sales increased 5% to $120.7 million in 2025 compared to $115.2 million in 2024. Relative to prior year, the increase in sales was primarily due to $9.9 million higher sales to the government security market and $.6 million higher sales to the gas station security market, partially offset by lower sales to a variety of other markets including $2.3 million lower sales to the healthcare market, $1.3 million lower sales to the transportation market and $.5 million lower sales to the tool storage market. Marine components net sales increased 22% in 2025 as compared to 2024 primarily due to $2.7 million higher sales to the towboat market (including a one-time stocking event for a towboat OEM customer), $2.5 million higher sales to the government market and $2.2 million higher sales to the industrial market, partially offset by $1.1 million lower sales to the center console market.
Our Component Products Segment’s net sales decreased $15.4 million in 2024 compared to 2023 primarily due to lower marine components sales to the towboat market and lower security products sales to the government security market. Marine components net sales decreased $9.4 million, or 23%, in 2024 as compared to 2023 primarily due to $8.7 million lower sales to the towboat market through the first three quarters of 2024, partially offset by higher sales in the fourth quarter of 2024, including $1.1 million higher sales to the towboat market and $1.0 million higher sales to the government market. Relative to the full year of 2023, marine component sales were $7.6 million lower to the towboat market (primarily to original equipment boat manufacturers), $1.4 million lower to the industrial market and $.6 million lower to each the engine builder market and distributors, partially offset by $1.4 million higher sales to the government market. Security products net sales decreased $6.0 million, or 5%, in 2024 as compared to 2023 primarily due to lower sales to the government security market as a result of sales related to a pilot project for a government security customer that shipped in the third and fourth quarters of 2023 and for which there were no related sales in 2024. Relative to prior year, sales were $8.3 million lower to the government security market, $2.0 million lower to the transportation market and $.9 million lower to distributors, partially offset by $4.1 million higher sales to the healthcare market and $.7 million higher sales to the tool storage market.
Cost of Sales and Gross Margin – Our Component Products Segment’s cost of sales increased in 2025 compared to 2024 primarily due to the effects of higher sales at both security products and marine components as well as increased production costs across both reporting units. However, cost of sales as a percentage of net sales declined over the same period driven by a more favorable customer and product mix, particularly within security products, and increased coverage of fixed costs due to higher sales across both segments. As a result, our Component Products Segment’s gross margin as a percentage of net sales increased in 2025 compared to 2024. Security products gross margin as a percentage of net sales increased in 2025 as compared to 2024 primarily due to increased coverage of fixed costs due to higher sales and a more favorable customer and product mix. These factors were partially offset by higher costs associated with inventory sold during the second half of the year and increased employee-related expenses including salaries, benefits and medical costs, of $2.6 million. Marine components gross margin as a percentage of sales increased in 2025 compared to 2024 primarily due to increased coverage of fixed costs as a result of higher sales partially offset by higher employee-related expenses including salaries, benefits and medical costs of $1.7 million.
Our Component Products Segment’s cost of sales decreased in 2024 compared to 2023 primarily due to the effects of lower sales at both security products and marine components partially offset by higher production costs across both reporting units. As a result, our Component Products Segment’s cost of sales as a percentage of net sales increased over the same period. Our Component Products Segment’s gross margin as a percentage of net sales decreased in 2024 compared to 2023 primarily due to the factors affecting cost of sales and decreased coverage of fixed costs due to lower sales. Security products gross margin as a percentage of net sales for 2024 decreased as compared to 2023 primarily due to lower sales, a less favorable customer and product mix, higher employee related costs (primarily increased medical costs), higher materials costs (primarily brass and electronics) in the latter half of the year and decreased coverage of fixed costs due to lower sales. Marine components gross margin as a percentage of net sales decreased in 2024 compared to 2023 primarily due to higher cost inventory produced during the fourth quarter of 2023 and sold in the first quarter of 2024 and decreased coverage of fixed costs as a result of lower sales, partially offset by a more favorable customer and product mix, lower employee salaries and benefits of approximately $1.8 million primarily related to headcount reductions and decreased labor costs of $1.2 million due to lower production volumes.
Operating Income – As a percentage of net sales, our Component Products Segment’s operating income increased in 2025 compared to 2024 and decreased in 2024 compared to 2023. Operating income margins were primarily impacted by the factors affecting net sales, cost of sales and gross margin, discussed above. 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 gains and losses on sales of property and equipment. Operating costs and expenses increased $1.3 million in 2025 compared to 2024 predominantly due to higher employee-related costs including salaries, benefits, and medical expenses at both reporting units.
As a percentage of net sales, our Component Products Segment’s operating income decreased in 2024 compared to 2023. Operating income margins were primarily impacted by the factors affecting net sales, cost of sales and gross margin, discussed above. 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 gains and losses on sales of property and equipment.
Operating costs and expenses increased $.5 million in 2024 compared to 2023 predominantly due to higher employee salary and benefit costs at security products.
General – Our Component Products Segment’s profitability primarily depends on its ability to utilize its production capacity effectively, which is affected by, among other things, the demand for its products and its ability to control its manufacturing costs, primarily comprised of labor costs and materials. The materials used in our Component Products Segment’s products consist of purchased components and raw materials some of which are subject to fluctuations in the commodity markets such as zinc, brass, aluminum and stainless steel. Total material costs represented approximately 43% of our Component Products Segment’s cost of sales in 2025, with commodity-related raw materials representing approximately 14% of its cost of sales. During 2025, our Component Products Segment experienced increases in the cost of certain raw materials. Throughout the year, market prices for brass and aluminum experienced a general upward trend. Stainless steel prices were relatively stable in the first part of 2025 but began increasing during the latter half of the year. Zinc pricing was relatively stable in 2025, and our Component Products Segment was able to mitigate increases through strategic spot buy purchases. In most cases, commodity raw materials our Component Products Segment purchases include processing and conversion costs, such as alloying, extrusion and rolling, which remain elevated due to costs of labor, transportation and energy. Processing and conversion costs are not expected to decrease. Based on current economic conditions, our Component Products Segment expects the prices for zinc, brass, aluminum, stainless steel and other manufacturing materials in 2026 to be more volatile compared to 2025. In addition to supply and demand, governmental actions such as tariffs may impact markets.
Our Component Products Segment occasionally enters into short-term commodity-related raw material supply arrangements to mitigate the impact of future increases in commodity related raw material costs. See Item 1 – “Business – Component Products Segment – CompX International Inc. – Raw Materials.”
Outlook – Sales for 2025 were strong across both our Component Products Segment’s reporting units, exceeding 2024 levels. At the marine components reporting unit, improved demand in the government and industrial markets — combined with the one-time stocking event noted above — drove sales and operating income significantly above prior-year levels. At the security products reporting unit, sales increased compared to 2024 primarily due to higher demand from the government security market, partially offset by continued softness across a variety of markets including transportation, healthcare, and tool storage.
Our Component Products Segment expects modest growth in both the security products and marine components reporting units net sales in 2026 as our Component Products Segment aligns pricing, product features, and service levels with market conditions and customer requirements . At security products, it anticipates sales increases in most markets, partially offset by ongoing softness in the transportation market. At the marine components reporting unit, net sales growth in 2026 is expected to come primarily from the industrial market. Recreational marine sales appear to have largely stabilized, and (excluding the one-time restocking event noted above) sales to the towboat market in 2026 are expected to be comparable to 2025.
Our Component Products Segment expects gross margin and operating income percentages across both the security products and marine components reporting units in 2026 to remain generally comparable to 2025, as planned price increases are expected to offset higher raw material costs and tariff-related surcharges on certain raw materials, as discussed below. During 2025, inventory levels increased across both the security products and marine components reporting units, driven by higher raw material and production costs as well as actions taken to support anticipated customer demand. These actions included an insourcing initiative at security products and a shift in customer mix at marine components. As a result, our Component Products Segment expects inventory levels in 2026 to remain approximately at current levels, consistent with ongoing operating requirements.
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 suppliers located in 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 and other components to mitigate the potential near-term tariff impacts. Late in the second quarter our Component Products Segment began incurring tariff-related surcharges on certain raw materials, primarily electronic components. In addition, some of our Component Products Segment’s U.S.-based suppliers have recently started applying tariff-related surcharges on certain U.S.-based purchases. Where possible, our Component Products Segment is
increasing selling prices to its customers to recover these higher raw material costs, although the extent to which our Component Products Segment can fully recover such costs will depend on a variety of factors including the ultimate tariff rate, 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.
Our Component Products Segment’s expectations for its operations and the markets it serves are based on a number of factors outside its control. Currently, our Component Products Segment’s supply chains are stable and transportation and logistical delays are minimal. Our Component Products Segment has experienced global and domestic supply chain challenges in the past, and any future impacts on its operations will depend on, among other things, any future disruption in its operations or its suppliers’ operations, the effect of tariffs, and the impact of economic conditions, consumer confidence and geopolitical events on demand for its products or its customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.
Real Estate Management and Development –
Years ended December 31,
(In millions)
Net sales:
Land sales
Utility and other
Total net sales
Cost of sales
Gross margin
Operating income
General – Our Real Estate Management and Development Segment consists of BMI and LandWell. BMI and LandWell own real property in Henderson, Nevada. LandWell is actively engaged in developing certain real estate in Henderson, Nevada including approximately 2,100 acres zoned for residential/planned community purposes. Prior to 2023, BMI also was responsible for the delivery of water to the City of Henderson and various other users through a water distribution system owned and operated by Basic Water Company (“BWC”), a wholly-owned subsidiary of BMI. BWC filed for bankruptcy in 2022 and following approval of its plan of reorganization by the bankruptcy court, substantially all of BWC’s assets were sold in November 2023. BMI also provided certain utility services to an industrial park located in Henderson, Nevada prior to the sale of BPC on December 1, 2023. Following the sale of the BWC assets and BPC, BMI no longer provides services to the industrial park which allows us to focus on land sales and development activity for the residential/planned community.
LandWell began marketing land for sale in the residential/planned community in December 2013 and sold the last remaining parcel during 2025. LandWell has been actively marketing and selling the land zoned for commercial and light industrial use and at December 31, 2025 approximately 8 saleable acres remain adjacent to the residential/planned community. Contracts for land sales are negotiated on an individual basis, and sales terms and prices will vary based on such factors as location (including location within a planned community), expected development work, and individual buyer needs. Although land may be under contract or land sales may be completed, we do not recognize revenue until we have satisfied the criteria for revenue recognition set forth in ASC Topic 606. In most instances buyers can cancel an escrow agreement with no financial penalties until shortly before the closing date. In some instances, we will receive cash proceeds at the time the contract closes and record deferred revenue for some or all of the cash amount received, with such deferred revenue being recognized in subsequent periods. Although all the land in the residential/planned community has been sold, we continue to complete our development obligations. We expect the development work be completed by the end of 2027.
Net Sales and Operating Income – All of the net sales from our Real Estate Management and Development segment in 2025 consisted of revenues from land sales, and substantially all of the net sales in 2024 were also from land sales. We recognized $59.3 million in revenues on land sales during 2025 compared to $71.5 million in 2024. Land sale revenue decreased in 2025 as compared to 2024 primarily due to the net effects of a slower pace of development activity for previously sold parcels within the residential/planned community as our Real Estate Management and Development
segment nears completion of its development work, partially offset by additional land sale revenue in the fourth quarter of 2025 related to the sale of three parcels (including approximately $6.3 million related to parcels with no further development obligations, which was recognized immediately as revenue in the fourth quarter). As noted above, we recognize revenue in our residential/planned community over time using cost-based input methods. All land sale revenue recognized in 2024 was recorded under this method, and the significant majority of land sale revenue recognized in 2025 was also recorded under this method. Cost of sales related to land sales revenues was $23.1 million in 2025 compared to $45.1 million in 2024. The decrease in cost of sales in 2025 compared to 2024 was primarily due to a decrease in infrastructure development spending. Operating income also included income related to tax increment reimbursement note receivables of $34.2 million in 2025 and $30.3 million in 2024. See Note 7 to our Consolidated Financial Statements.
Substantially all the net sales from our Real Estate Management and Development segment in 2024 and 2023 consisted of revenues from land sales. We recognized $71.5 million in revenues on land sales during 2024 compared to $92.6 million in 2023. All of the land sales revenues recognized in 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 substantially all the land sales revenue we recognized in 2024 and 2023 was under this method of revenue recognition. Land sales revenue in 2024 decreased compared to 2023 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 $45.1 million in 2024 compared to $60.8 million in 2023. Included in operating income was income related to the tax increment reimbursement note receivables of $30.3 million and $25.2 million in 2024 and 2023, respectively. See Note 7 to our Consolidated Financial Statements.
As noted above, BMI sold its subsidiary BPC in 2023. The sale was for minimal cash consideration and the assumption of liabilities, and upon the closing of the sale we recognized a loss of $2.6 million in 2023. BWC filed for bankruptcy in 2022 and following approval of its plan of reorganization by the bankruptcy court, substantially all of BWC’s assets were sold in November 2023. On July 10, 2024, the bankruptcy court for the District of Nevada approved the closure of the bankruptcy case of BWC and its wholly-owned subsidiary, BWC SPE I, LLC. Both entities were subsequently dissolved, and the remaining cash of $2.6 million was distributed to BMI. See Note 3 to our Consolidated Financial Statements.
Outlook – LandWell is focused on developing the land it manages, primarily to residential builders, for the residential/planned community in Henderson. At December 31, 2025, all of the land in the residential/planned community has been sold. There are also approximately 8 saleable acres zoned for light industrial and commercial use adjacent to the 2,100 acre residential/planned community available for sale. The remaining 8 acres are currently in escrow and the sale is scheduled to close by the end of the first quarter of 2026. At December 31, 2025, we had deferred revenue of $23.5 million related to post-closing obligations on land sales closed prior to 2025. Because we recognize revenue over time using cost-based inputs, we will continue to recognize revenue on land previously sold over the development period, even though we have already received all the cash proceeds related to these sales. We currently expect to recognize all remaining deferred revenue during 2026. Any delays or curtailments in infrastructure development related to post-closing obligation activities would delay the timing of revenue recognized on these previously closed land sales. Under LandWell’s development agreement with the City of Henderson, the issuance of a specified number of housing permits requires LandWell to complete certain large community-wide infrastructure projects. Construction on several of these large projects began in late 2021 and is expected to be completed in 2027. We expect 2026 land development costs to be comparable to those in 2025 due to the timing of planned infrastructure projects and the availability of certain construction materials. Because these large infrastructure projects relate to the entirety of the residential/planned community, the associated costs are not part of the cost-based inputs used to recognize revenue, and therefore, this spending will not correlate to revenue recognition. 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. We currently expect to receive approval for the remaining infrastructure reimbursement notes receivable – up to the $170 million cap – in 2026, and we expect to receive cash payments on the notes for the next 5 to 7 years.
General Corporate Items, Interest Expense, Income Taxes, Noncontrolling Interest and Related Party Transactions
Insurance Recoveries – NL has agreements with certain insurance carriers pursuant to which the carriers reimburse NL for a portion of its past lead pigment and asbestos litigation defense costs. Insurance recoveries include amounts NL received from these insurance carriers. NL did not receive any insurance recoveries during 2025. NL received $1.4 million and $.5 million in insurance recoveries during 2024 and 2023, respectively. See Note 13 to our Consolidated Financial Statements.
The agreements with certain of NL’s insurance carriers also include reimbursement for a portion of its future litigation defense costs. We are not able to determine how much we will ultimately recover from these carriers for defense costs incurred by NL because of certain issues that arise regarding which defense costs qualify for reimbursement. Accordingly, these insurance recoveries are recognized when the receipt is probable and the amount is determinable. See Note 18 to our Consolidated Financial Statements.
Gain on Remeasurement of Investment in TiO 2 Manufacturing Joint Venture – We recognized a gain on the remeasurement of Kronos’ investment in LPC of $64.5 million in the third quarter of 2024 as a result of the acquisition. See Note 3 to our Consolidated Financial Statements.
Gain on Remeasurement of Earn-out Liability – We recognized a gain on the remeasurement of Kronos’ earn-out liability of $4.6 million in the third quarter of 2025. See Note 3 to our Consolidated Financial Statements.
Other Components of Net Periodic Pension and OPEB Expense – We recognized other components of net periodic pension and OPEB expense of $32.7 million in 2025, $2.6 million in 2024 and $11.8 million in 2023. The increase in 2025 compared to 2024 is primarily due to a $28.7 million settlement loss incurred in the fourth quarter of 2025 related to the termination and buy-out of our U.S. pension plan. The decrease in 2024 compared to 2023 is primarily due to a higher expected return on plan assets, lower discount rates impacting interest costs and a $6.2 million settlement loss related to the termination and buy-out of our U.K. pension plan in the second quarter of 2023. See Note 11 to our Consolidated Financial Statements.
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 Note 16 to our Consolidated Financial Statements, 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 Consolidated Balance Sheets at fair value. Any unrealized gains or losses on the shares of our common stock attributable to the noncontrolling interest of Kronos and NL are recognized in the determination of each of Kronos and NL’s respective net income or loss. Under the principles of consolidation, we eliminate any gains or losses associated with our common stock to the extent of our proportional ownership interest in each subsidiary. The $2.7 million loss in 2025, $1.9 million gain in 2024 and the $1.7 million loss in 2023 recognized in our Consolidated Financial Statements represent the unrealized gain (loss) in respect of these shares during such periods attributable to the noncontrolling interest of Kronos and NL.
Interest Income and Other – Interest income and other of $16.6 million in 2025 decreased $5.4 million compared to 2024 primarily due to lower interest rates and decreased average investment balances. Interest income and other of $22.0 million in 2024 was comparable to 2023. See Note 13 to our Consolidated Financial Statements.
Other General Corporate Items – Corporate expenses of $35.0 million in 2025 increased compared to corporate expenses of $4.3 million in 2024 primarily due to income of $31.4 million recognized in the fourth quarter of 2024 as a result of the settlement of a liability for an environmental remediation site, including income of $9.6 million received from private companies participating in the settlement. Included in corporate expense are:
litigation and related costs at NL of $2.9 million in 2025 and $3.0 million in 2024; and
environmental remediation costs of $2.7 million in 2025 compared to income of $19.2 million in 2024.
Corporate expenses of $4.3 million in 2024 decreased compared to corporate expenses of $35.2 million in 2023 primarily due to income of $31.4 million recognized in the fourth quarter of 2024 as a result of the settlement of a liability
for an environmental remediation site, including income of $9.6 million received from private companies participating in the settlement. Included in corporate expense are:
litigation and related costs at NL of $3.0 million in 2024 and $4.4 million in 2023; and
income from environmental remediation of $19.2 million in 2024 compared to costs of $2.5 million in 2023.
Overall, we currently expect that our net general corporate expenses in 2026 will be higher than in 2025 primarily due to expected increases in litigation fees and related costs.
The level of our litigation 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 18 to our Consolidated Financial Statements. If our current expectations regarding the number of cases in which we expect to be involved during 2026, or the nature of such cases were to change, our corporate expenses could be higher than we currently estimate.
Obligations for environmental remediation and related costs are difficult to assess and estimate, and it is possible that actual costs for environmental remediation and related costs will exceed accrued amounts or that costs will be incurred in the future for sites in which we cannot currently estimate the liability. If these events occur in 2026, our corporate expense could be higher than we currently estimate. In addition, we adjust our accruals for environmental remediation and related costs as further information becomes available to us or as circumstances change. Such further information or changed circumstances could result in an increase or reduction in our accrued environmental remediation and related costs. See Note 18 to our Consolidated Financial Statements.
Interest Expense – Interest expense in 2025 increased $7.2 million compared to 2024 primarily due to higher average debt balances and higher interest rates. Interest expense increased $21.6 million in 2024 compared to 2023 primarily due to higher interest rates on Kronos’ debt issued in February and July of 2024 and higher average debt balances as a result of the LPC acquisition. As a result of the exchange, interest expense in 2024 also includes a charge of $1.5 million for the write-off of deferred financing costs.
We expect interest expense will be higher in 2026 as compared to 2025 primarily due to higher debt balances and higher interest rates on Kronos’ new debt issued in 2025. See Note 9 to our Consolidated Financial Statements.
Income Tax Expense (Benefit) – We recognized income tax expense of $11.9 million and $82.9 million, in 2025 and 2024, respectively, and we recognized an income tax benefit of $24.6 million in 2023. The decrease from 2024 to 2025 and the increase from 2023 to 2024 is primarily due to the change in our earnings from year to year and the jurisdictional mix of such earnings, partially offset by the following:
a non-cash deferred income tax expense of $19.3 million in the third quarter of 2025 to reduce our Chemicals Segment’s net German deferred tax asset as a result of the reduction of the German corporate tax rate,
a non-cash deferred income tax expense of $8.5 million in 2025 ($2.5 million in 2024) related to the valuation allowance recorded against the portion of our U.S. federal carryforwards of the nondeductible portion of our interest expense,
a non-cash deferred income tax expense of $8.5 million in 2025 with respect to the valuation allowance recorded against our Chemicals Segment’s German corporate and trade tax carryforwards of the nondeductible portion of the German interest expense,
a non-cash deferred income tax expense of $8.6 million in 2025 ($8.2 million in 2024) related to the recognition of a deferred income tax asset valuation allowance related to our Chemicals Segment’s Belgian net deferred tax assets, and
a non-cash deferred income tax expense of $16.5 million recognized in the fourth quarter of 2024 related to the pretransition gain computed on currency translation related to the operations, assets and liabilities of our Chemicals Segment’s non-U.S. qualified business units.
Our earnings are subject to income tax in various U.S. and non-U.S. jurisdictions. We would generally expect our overall effective tax rate, excluding the effect of any increase or decrease in our deferred income tax asset valuation allowance or tax rate changes to be higher than the U.S. federal statutory tax rate of 21% primarily because of our sizeable non-U.S. operations.
See Note 14 to our Consolidated Financial Statements for more information about our 2025 income tax items, including a tabular reconciliation of our statutory tax expense to our actual tax expense.
Noncontrolling Interest in Net Income of Subsidiaries – Noncontrolling interest in operations of subsidiaries decreased in 2025 compared to 2024 primarily due to decreased operating income at Kronos. Noncontrolling interest in operations of subsidiaries increased in 2024 compared to 2023 primarily due to increased operating income at Kronos. See Note 15 to our Consolidated Financial Statements.
Related Party Transactions – We are a party to certain transactions with related parties. See Note 17 to our Consolidated Financial Statements.
Foreign Operations
As discussed above, we have substantial operations located outside the United States, principally our Chemicals Segment’s operations in Europe and Canada. The functional currency of these operations is the local currency. As a result, the reported amount of our assets and liabilities related to these foreign operations will fluctuate based upon changes in currency exchange rates. At December 31, 2025, we had substantial net assets denominated in the euro, Canadian dollar and Norwegian krone.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in Note 1 to our Consolidated Financial Statements. Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. On an ongoing basis we evaluate our estimates, including those related to the recoverability of long-lived assets, pension and other postretirement benefit obligations and the underlying actuarial assumptions related thereto, the realization of deferred income tax assets and accruals for litigation, income tax and other contingencies. We base our estimates on historical experience and on various other assumptions which we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ significantly from previously-estimated amounts under different assumptions or conditions.
We believe the most critical accounting policies and estimates involving significant judgment primarily relate to goodwill, long-lived assets, revenue recognized over time using cost-based inputs, defined benefit pension plans, income taxes, acquisition of joint venture, and litigation and environmental liabilities. We have discussed the development, selection and disclosure of our critical accounting estimates with the audit committee of our board of directors.
Goodwill – Our net goodwill related to our Chemicals Segment totaled $355.2 million at December 31, 2025 primarily resulting from our various step acquisitions of Kronos and NL (which occurred before the implementation of the current accounting standards related to noncontrolling interest) and Kronos’ purchase of the remaining 50% interest in LPC in 2024. In accordance with the applicable accounting standards for goodwill, we do not amortize goodwill.
We perform a goodwill impairment test annually in the third quarter of each year by reporting unit. Goodwill is also evaluated for impairment at other times whenever an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. An entity may first assess qualitative factors to determine whether it is necessary to complete the quantitative impairment test using a more-likely-than-not criteria. If an
entity believes it is more-likely-than-not the fair value of a reporting unit is greater than its carrying value, including goodwill, the quantitative impairment test can be bypassed. Alternatively, an entity has an unconditional option to bypass the qualitative assessment and proceed directly to performing the quantitative impairment test. If we choose not to complete a qualitative assessment for a reporting unit or if the initial assessment indicates that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, additional quantitative testing is required.
If additional quantitative testing is performed, an impairmentloss is recognized when the amount by which the carrying value of the reporting unit exceeds its fair value. A reporting unit can be a segment or an operating division based on the operations of the segment. Our Chemicals Segment is one reporting unit.
In performing a quantitative test for impairment of goodwill, we use the income approach method of valuation that includes the discounted cash flow method and the market approach that includes the guideline public company method to determine the fair value of the reporting unit. When performing an income approach method considerable management judgment is necessary to derive the primary assumptions used in estimating fair value under the discounted cash flow model including forecasted revenue, gross margin, operating expenses, capital expenditures, discount rate and the tax rate. Additionally, management judgment is necessary for the assumptions used to determine fair value under the guideline public company method including the selection of guideline companies and the valuation multiples applied. We performed our annual goodwill impairment test in the third quarter of 2025 for our Chemicals Segment goodwill and concluded there was no impairment of such goodwill.
Estimating the fair value of a reporting unit requires the use of estimates and significant judgments that are based on a number of factors including actual operating results and future expectations such as global demand, product pricing, input costs and general economic trends. The judgments and estimates described above could change in future periods or the actual results may differ from the forecast and could result in the recognition of a material goodwill impairment.
Long-lived assets – The net book value of our property and equipment totaled $751.6 million at December 31, 2025. We assess property and equipment for impairment only when circumstances indicate an impairment may exist. Our determination is based upon, among other things, our estimates of the amount of future net cash flows to be generated by the long-lived asset (Level 3 inputs) and our estimates of the current fair value of the asset. Significant judgment is required in estimating such cash flows. Adverse changes in such estimates of future net cash flows or estimates of fair value could result in an inability to recover the carrying value of the long-lived asset, thereby possibly requiring an impairment charge to be recognized in the future. We do not assess our property and equipment for impairment unless certain impairment indicators are present. We did not evaluate any long-lived assets for impairment during 2025 because no such impairment indicators were present.
Revenue recognized over time using cost-based inputs – Certain real estate land sales by our Real Estate Management and Development Segment (generally land sales associated with our residential/planned community) require us to complete property development and improvements after title passes to the buyer and we have received all or a substantial portion of the selling price. Generally, all the land sales associated with the residential/planned community have been recognized over time using cost-based inputs of accounting in accordance with ASC 606. Under such method, revenues and profits are recognized in the same proportion of our progress towards completion of our contractual obligations, with our progress measured by costs incurred as a percentage of total costs estimated to be incurred. Such costs incurred and total estimated costs include amounts specifically identifiable with the parcels sold as well as certain development costs for the entire residential/planned community which are allocated to the parcels sold under applicable GAAP. Estimates of total costs expected to be incurred require significant management judgment, and the amount of revenue and profits that have been recognized to date are subject to revisions throughout the development period. The impact on the amount of revenue recognized resulting from any future change in the estimate of total costs estimated to be incurred would be accounted for prospectively in accordance with GAAP.
Defined benefit pension plans – We maintain various defined benefit pension plans in the U.S., Europe and Canada. See Note 11 to our Consolidated Financial Statements. We recognized consolidated defined benefit pension plan expense of $18.4 million in 2023, $9.4 million in 2024 and $38.7 million in 2025. The amount of funding requirements for these defined benefit pension plans is generally based upon applicable regulations (such as ERISA in the U.S.) and will generally differ from pension expense for financial reporting purposes. We made contributions to all of our defined benefit pension plans of $16.3 million in 2023, $16.4 million in 2024 and $15.9 million in 2025. In accordance with applicable U.S. pension regulations, effective June 30, 2025, NL began the process of terminating the U.S. pension plan, which includes the purchase of annuity contracts from third-party insurance companies for the purpose of paying benefits
to plan participants. The annuity contracts were purchased on December 16, 2025 from “A” rated third-party insurance companies in settlement of all remaining obligations to the pension plan participants. The annuity purchase was funded with existing plan assets. In connection with the settlement, we recognized a non-cash settlement loss on the U.S. pension plan termination and buy-out of approximately $28.7 million, which is included in our other components of net periodic pension and OPEB cost on our Consolidated Statements of Operations for the year ended December 31, 2025. This charge represents the previously unrecognized actuarial losses and prior service costs that were accumulated in other comprehensive loss. Following the settlement, surplus U.S. pension assets will be used, as permitted by the applicable regulations, to fund obligations associated with our Chemicals Segment’s U.S. defined contribution profit sharing plan. Such surplus assets are included in pension assets on our Consolidated Balance Sheet.
Under defined benefit pension plan accounting, defined benefit pension plan expense, pension assets and accrued pension costs are each recognized based on certain actuarial assumptions. These assumptions are principally the discount rate, the assumed long-term rate of return on plan assets, the fair value of plan assets and the assumed increase in future compensation levels. We recognize the funded status of our defined benefit pension plans as either an asset (for overfunded plans) or a liability (for underfunded plans) in our Consolidated Balance Sheets.
The discount rates we use for determining defined benefit pension expense and the related pension obligations are based on current interest rates earned on long-term bonds that receive one of the two highest ratings given by recognized rating agencies in the applicable country where the defined benefit pension benefits are being paid. In addition, we receive third-party advice about appropriate discount rates and these advisors may in some cases use their own market indices. We adjust these discount rates as of each December 31 valuation date to reflect then-current interest rates on such long-term bonds. We use these discount rates to determine the actuarial present value of the pension obligations as of December 31 of that year. We also use these discount rates to determine the interest component of defined benefit pension expense for the following year.
At December 31, 2025, approximately 72%, 15% and 8% of the projected benefit obligations related to our plans in Germany, Canada, Norway, respectively. We use several different discount rate assumptions in determining our consolidated defined benefit pension plan obligation and expense. This is because we maintain defined benefit pension plans in several different countries in Europe and North America and the interest rate environment differs from country to country.
We used the following discount rates for our defined benefit pension plans:
Discount rates used for:
Obligations
Obligations
Obligations
at December 31, 2023
at December 31, 2024
at December 31, 2025
and expense in 2024
and expense in 2025
and expense in 2026
Kronos and NL Plans:
Germany
Canada
Norway
The assumed long-term rate of return on plan assets represents the estimated average rate of earnings expected to be earned on the funds invested or to be invested in the plans’ assets provided to fund the benefit payments inherent in the projected benefit obligations. Unlike the discount rate, which is adjusted each year based on changes in current long-term interest rates, the assumed long-term rate of return on plan assets will not necessarily change based upon the actual short-term performance of the plan assets in any given year. Defined benefit pension expense each year is based upon the assumed long-term rate of return on plan assets for each plan, the actual fair value of the plan assets as of the beginning of the year and an estimate of the amount of contributions to and distributions from the plan during the year. Differences between the expected return on plan assets for a given year and the actual return are deferred and amortized over future periods based either upon the expected average remaining service life of the active plan participants (for plans for which benefits are still being earned by active employees) or the average remaining life expectancy of the inactive participants (for plans for which benefits are not still being earned by active employees).
All of plan assets attributable to non-U.S. and U.S. plans related to plans maintained by Kronos. At December 31, 2025, approximately 65%, 18% and 11% of the plan assets related to our Kronos plans in Germany, Canada and
Norway, respectively. We use several different long-term rates of return on plan asset assumptions in determining our consolidated defined benefit pension plan expense. This is because the plan assets in different countries are invested in a different mix of investments and the long-term rates of return for different investments differ from country to country.
In determining the expected long-term rate of return on plan asset assumptions, we consider the long-term asset mix (e.g., equity vs. fixed income) for the assets for each of our plans and the expected long-term rates of return for such asset components. In addition, we receive third-party advice about appropriate long-term rates of return. We regularly review our actual asset allocation for each of our U.S. and non-U.S. plans and will periodically rebalance the investments in each plan to more accurately reflect the targeted allocation when considered appropriate.
The assumed long-term rates of return on plan assets used for purposes of determining net period pension cost for 2023, 2024 and 2025 were as follows:
Kronos and NL plans:
Germany
Canada
Norway
Our long-term rate of return on plan asset assumptions in 2026 used for purposes of determining our 2026 defined benefit pension plan expense for Germany, Canada and Norway are 4.8%, 3.7% and 5.6%, respectively.
We follow ASC Topic 820, Fair Value Measurements and Disclosures , in determining the fair value of plan assets within our defined benefit pension plans. While we believe the valuation methods used to determine the fair value of plan assets are appropriate, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.
To the extent that a plan’s particular pension benefit formula calculates the pension benefit in whole or in part based upon future compensation levels, the projected benefit obligations and the pension expense will be based in part upon expected increases in future compensation levels. For all of our plans for which the benefit formula is so calculated, we generally base the assumed expected increase in future compensation levels upon average long-term inflation rates for the applicable country.
In addition to the actuarial assumptions discussed above, the amount of recognized defined benefit pension expense and the amount of net pension asset and net pension liability will vary based upon relative changes in currency exchange rates. See Note 11 to our Consolidated Financial Statements for additional discussion of actuarial assumptions used in determining defined benefit pension assets, liabilities and expenses.
Based on the actuarial assumptions described above and our current expectation for what actual average currency exchange rates will be during 2026, we expect our defined benefit pension expense will approximate $8 million in 2026. In comparison, we expect to be required to contribute approximately $17 million to such plans during 2026.
As noted above, defined benefit pension expense and the amounts recognized as accrued pension costs are based upon the actuarial assumptions discussed above. We believe all of the actuarial assumptions used are reasonable and appropriate. However, if we had lowered the assumed discount rate by 25 basis points for all plans as of December 31, 2025, our aggregate projected benefit obligations would have increased by approximately $17 million at that date and our defined benefit pension expense would be expected to increase by a nominal amount during 2026. Similarly, if we lowered the assumed long-term rate of return on plan assets by 25 basis points for all of our plans, our defined benefit pension expense would be expected to increase by approximately $1 million during 2026.
Income taxes – We operate globally through our Chemicals Segment and the calculation of our provision for income taxes and our deferred tax assets and liabilities involves the interpretation and application of complex tax laws and regulations in a multitude of jurisdictions across our Chemicals Segment’s global operations. Our effective tax rate is highly dependent upon the geographic distribution of our earnings or losses and the effects of tax laws and regulations in each tax-paying jurisdiction in which we operate. Significant judgments and estimates are required in determining our
consolidated provision for income taxes due to the global nature of our Chemicals Segment’s operations. Our provision (benefit) for income taxes and deferred tax assets and liabilities reflect our best assessment of estimated current and future taxes to be paid, including the recognition and measurement of deferred tax assets and liabilities.
We recognize deferred taxes for future tax effects of temporary differences between financial and income tax reporting. Deferred income tax assets and liabilities for each tax-paying jurisdiction in which we operate are netted and presented as either a noncurrent deferred income tax asset or liability, as applicable. We record a valuation allowance to reduce our deferred income tax assets to the amount that is believed to be realized under the more-likely-than-not recognition criteria. While we have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance, it is possible that we may change our estimate of the amount of the deferred income tax assets that would more-likely-than-not be realized in the future, resulting in an adjustment to the deferred income tax asset valuation allowance that would either increase or decrease, as applicable, reported net income in the period such change in estimate was made.
We periodically review our deferred tax assets (“DTA”) to determine if a valuation allowance is required. For example, at December 31, 2025, our Chemicals Segment has significant German corporate and trade net operating loss (“NOL”) carryforwards of $510.8 million (DTA of $57.2 million) and $46.3 million (DTA of $5.0 million), respectively. We also have U.S. federal NOL carryforwards of $58.1 million (DTA of $12.2 million). At December 31, 2025, we have concluded no valuation allowance is required to be recognized for our German and U.S. DTAs principally because such carryforwards have an indefinite carryforward period and we currently expect to utilize the remainder of such carryforwards over the long term. Although prior to the complete utilization of such carryforwards, if we were to generate additional losses in our German or U.S. operations for an extended period of time, or if applicable laws were to change such that the carryforward periods were more limited, it is possible that we might conclude the benefit of such carryforwards would no longer meet the more-likely-than-not recognition criteria, at which point we would be required to recognize a valuation allowance against some or all of the then-remaining tax benefit associated with the carryforwards.
Acquisition of joint venture – During the third quarter of 2024, Kronos acquired the 50% joint venture interest in LPC previously held by Venator. Prior to the acquisition we accounted for Kronos’s interest in LPC under the equity method. The application of the purchase method of accounting for business combinations requires Kronos to use significant estimates and assumptions in the determination of the estimated fair value of assets acquired and liabilities assumed. Kronos’ estimates of the fair values of assets acquired and liabilities assumed are based upon assumptions we believe are reasonable, and when appropriate, include assistance from independent third-party valuation advisors. See Note 3 to our Consolidated Financial Statements.
Contingencies – We record accruals for environmental, legal and other contingencies and commitments when estimated future expenditures associated with such contingencies become probable, and amounts can be reasonably estimated. However, new information may become available to us, or circumstances (such as applicable laws and regulations) may change, thereby resulting in an increase or decrease in the amount required to be accrued for such matters (and therefore a decrease or increase in reported net income in the period of such change). At December 31, 2025 we have recorded total accrued environmental liabilities of $17.5 million.
Obligations for environmental remediation and related costs are difficult to assess, and it is possible that actual costs for environmental remediation and related costs will exceed accrued amounts or that costs will be incurred in the future for sites in which we cannot currently estimate the liability. If these events occur in 2026, our corporate expense could be higher than we currently estimate. In addition, we adjust our accruals for environmental remediation and related costs (and potential range of our liabilities) as further information becomes available to us or as circumstances change which involves our judgment regarding current facts and circumstances for each site and is subject to various assumptions and estimates. Such further information or changed circumstances could result in an increase in our accrued environmental remediation and related costs. See Note 18 to our Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated Cash Flows
Operating Activities –
Trends in cash flows as a result of our operating activities (excluding the impact of significant asset dispositions and relative changes in assets and liabilities) are generally similar to trends in our earnings. 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 year to year can be impacted by changes in currency exchange rates, since a portion of our cash, cash equivalents and restricted cash is held by our Chemicals Segment’s non-U.S. subsidiaries. For example, during 2025, relative changes in currency exchange rates resulted in a $4.5 million increase in the reported amount of our cash, cash equivalents and restricted cash compared to a $.1 million decrease in 2024 and a $1.0 million increase in 2023.
Cash flows from operating activities decreased to a use of $35.5 million in 2025 from cash provided of $44.0 million in 2024. This $79.5 million decrease in operating cash flows in 2025 includes:
a consolidated operating income of $63.3 million in 2025, a decrease of $147.4 million compared to operating income of $210.7 million in 2024;
lower amount of net cash used of $155.7 million associated with relative changes in our receivables, inventories, land held for development, payables and accrued liabilities in 2025;
higher cash paid for environmental remediation and related costs in 2025 of $56.7 million primarily due to the payment of a settlement for an environmental remediation site (see Note 18 to our Consolidated Financial Statements);
higher net cash paid for income taxes in 2025 of $10.3 million primarily due to the timing of tax payments;
higher cash paid for interest in 2025 of $6.7 million; and
lower net contributions to our TiO 2 manufacturing joint venture in 2025 of $2.7 million as the result of obtaining control of LPC in July 2024 .
Cash flows from operating activities increased to $44.0 million in 2024 from $3.9 million in 2023. This $40.1 million increase in cash provided by operations in 2024 includes:
consolidated operating income of $210.7 million in 2024, an increase of $176.5 million compared to operating income of $34.2 million in 2023;
higher amount of net cash used of $92.5 million associated with relative changes in our receivables, inventories, land held for development, payables and accrued liabilities in 2024;
higher net cash paid for income taxes in 2024 of $14.4 million primarily due to higher earnings and the relative timing of payments;
higher cash paid for interest in 2024 of $18.5 million;
cash premium of $6.0 million on the issuance of Kronos’ senior notes; and
higher net contributions of $5.8 million to our TiO 2 manufacturing joint venture in 2024 prior to the LPC acquisition.
As noted in our discussion of our Real Estate Management and Development segment above, we have sold all of the land in our residential/planned community, and in accordance with our development agreement with the City of Henderson and our contractual obligations with builders, we expect to complete our land development obligations over the next two years. Because we have largely received cash proceeds from land sales, we expect LandWell to generate negative operating cash flows as it completes its required land development work.
Changes in working capital were affected by accounts receivable and inventory changes, as shown below:
Kronos’ average days sales outstanding (“DSO”) at December 31, 2025 was comparable to December 31, 2024.
Kronos’ average days sales in inventory (“DSI”) decreased from December 31, 2024 to December 31, 2025 primarily due to lower inventory volumes attributable to sales volumes exceeding production volumes in the fourth quarter of 2025 compared to the fourth quarter of 2024 when Kronos’ production volumes exceeded its sales volumes.
CompX’s average DSO at December 31, 2025 was comparable to December 31, 2024.
CompX’s average DSI increased from December 31, 2024 to December 31, 2025 primarily due to increased inventory at both the security products and marine components reporting units as a result of higher raw material and production costs and to meet expected customer demand.
For comparative purposes, we have also provided comparable prior year numbers below.
December 31,
December 31,
December 31,
Kronos:
Days sales outstanding
66 days
62 days
61 days
Days sales in inventory
65 days
82 days
57 days
CompX:
Days sales outstanding
36 days
33 days
33 days
Days sales in inventory
95 days
94 days
108 days
We do not have complete access to the cash flows of our majority-owned subsidiaries, due in part to limitations contained in certain credit agreements of our subsidiaries and because we do not own 100% of these subsidiaries. A detail of our consolidated cash flows from operating activities is presented in the table below. Intercompany dividends have been eliminated.
Years ended December 31,
(In millions)
Cash provided by (used in) operating activities:
Kronos
Valhi exclusive of subsidiaries
CompX
NL exclusive of subsidiaries
Tremont exclusive of subsidiaries
BMI
LandWell
Eliminations and other
Total
Investing Activities –
During 2025:
we had net purchases of $1.2 million related to marketable securities.
During 2024:
Kronos paid $156.8 million, net of cash acquired, for the remaining TiO 2 manufacturing joint venture interest in LPC; see Note 3 to our Consolidated Financial Statements;
we had net proceeds of $54.3 million related to marketable securities; and
we had net proceeds from the sale of land not used in our operations of $5.6 million.
During 2023:
we had net proceeds of $19.3 million of marketable securities; and
we had net proceeds from the sale of land not used in our operations of $1.8 million.
Financing Activities –
During 2025:
Kronos had net repayments of $11.3 million on its revolving credit facility;
Kronos International, Inc. (“KII”) issued an additional €75 million principal amount of 9.50% Senior Secured Notes due 2029 (the “Additional Notes”), the proceeds of which were used to refinance the 3.75% Senior Secured Notes that matured in September 2025;
we repaid $21.0 million under the Contran credit facility; and
During 2024:
we repaid $48.8 million on Valhi’s credit facility with Contran; and
Kronos exchanged €325 million of its Kronos International, Inc. (“KII”) 3.75% Senior Secured Notes due September 2025 (the “Old Notes”) for KII’s newly issued €276.174 million 9.50% Senior Secured Notes due March 2029 (the “New Notes”) plus additional cash consideration of $52.6 million to certain eligible holders of the Old Notes and borrowed $53.7 million from Contran. In the third quarter Kronos issued an additional €75 million principal amount of 9.50% Senior Secured Notes due 2029.
During 2023:
we repaid $28.0 million on Valhi’s credit facility with Contran; and
Kronos acquired 313,814 shares of its common stock for an aggregate purchase price of $2.8 million.
We paid aggregate cash dividends on our common stock of $9.1 million in 2023, 2024 and 2025, respectively. Distributions to noncontrolling interest in 2023, 2024 and 2025 are primarily comprised of: CompX dividends paid to shareholders other than NL; Kronos dividends paid to shareholders other than us and NL, and BMI and LandWell dividends paid to shareholders other than us.
Outstanding Debt Obligations
At December 31, 2025, our consolidated indebtedness was comprised of:
Valhi’s $23.6 million outstanding on its $125 million amended credit facility with Contran which is due no earlier than December 31, 2027;
€426.174 million aggregate outstanding on Kronos’ 9.50% Senior Secured Notes due 2029 ($503.7 million carrying amount, net of unamortized premium and unamortized debt issuance costs) ;
$53.7 million outstanding on Kronos’ subordinated, unsecured term loan from Contran due September 2029 (the “Contran Term Loan”); and
$10.7 million outstanding on LandWell’s bank loan due April 2036.
Availability under Kronos’ Global Revolver is subject to a borrowing base calculation, as defined in the agreement. The borrowing base calculated as of December 31, 2025 was approximately $251 million. Effective July 17, 2025, Kronos completed an amendment to its Global Revolver (the “Fourth Amendment”). Among other things, the Fourth Amendment increased the maximum borrowing amount from $300 million to $350 million and increased the Belgian and German sub-limits from €30 million and €60 million to €55 million and €85 million, respectively, allowing greater access
to Euro denominated borrowings. The maturity date of the Global Revolver remains July 2029. On September 15, 2025, KII issued the Additional Notes, the proceeds of which were used to refinance the 3.75% Senior Secured Notes (€75 million aggregate principal amount) that matured in September 2025. The Additional Notes were issued as additional notes to the existing €351.174 million aggregate principal amount of 9.50% Senior Secured Notes due 2029 issued on February 12, 2024 and July 30, 2024 (the “Existing Notes”). The Additional Notes were issued at a premium of 105.0% of their principal amount, resulting in net proceeds of approximately $90 million after fees and estimated expenses. The Additional Notes are fungible with the Existing Notes, are treated as a single series and have the same terms as the Existing Notes, other than their date of issuance and issue price. See Note 9 to our Consolidated Financial Statements.
The Contran Term Loan is subordinated in right of payment to Kronos’ Senior Secured Notes and its Global Revolver. Kronos’ Senior Secured Notes, the Contran Term Loan and Kronos’ Global Revolver contain a number of covenants and restrictions which, among other things, restrict its ability to incur or guarantee additional debt, incur liens, pay dividends or make other restricted payments, or merge or consolidate with, or sell or transfer substantially all of our assets to, another entity, and contain other provisions and restrictive covenants customary in lending transactions of these types. Our credit agreements contain provisions which could result in the acceleration of indebtedness prior to their stated maturity for reasons other than defaults for failure to comply with typical financial or payment covenants. For example, the credit agreements allow the lender to accelerate the maturity of the indebtedness upon a change of control (as defined in the agreement) of the borrower. In addition, the credit agreements could result in the acceleration of all or a portion of the indebtedness following a sale of assets outside the ordinary course of business. The terms of all of our debt instruments are discussed in Note 9 to our Consolidated Financial Statements. We are in compliance with all of our debt covenants at December 31, 2025. We believe we will be able to continue to comply with the financial covenants contained in our credit facilities through their maturity; however, if future operating results differ materially from our expectations we may be unable to maintain compliance.
Our assets consist primarily of investments in operating subsidiaries, and our ability to service our obligations, including the 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 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.
Future Cash Requirements
Liquidity –
Our primary source of liquidity on an ongoing basis is our cash flows from operating activities and borrowings under various lines of credit and notes. We generally use these amounts to (i) fund capital expenditures, (ii) repay short-term indebtedness incurred primarily for working capital purposes and (iii) provide for the payment of dividends (including dividends paid to us by our subsidiaries) or treasury stock purchases. From time-to-time we will incur indebtedness, generally to (i) fund short-term working capital needs, (ii) refinance existing indebtedness, (iii) make investments in marketable and other securities (including the acquisition of securities issued by our subsidiaries and affiliates) or (iv) fund major capital expenditures or the acquisition of other assets outside the ordinary course of business. Occasionally we sell assets outside the ordinary course of business, and we generally use the proceeds to (i) repay existing indebtedness (including indebtedness which may have been collateralized by the assets sold), (ii) make investments in marketable and other securities, (iii) fund major capital expenditures or the acquisition of other assets outside the ordinary course of business or (iv) pay dividends.
We routinely compare our liquidity requirements and alternative uses of capital against the estimated future cash flows we expect to receive from our subsidiaries, and the estimated sales value of those units. As a result of this process, we have in the past sought, and may in the future seek, to raise additional capital, refinance or restructure indebtedness, repurchase indebtedness in the market or otherwise, modify our dividend policies, consider the sale of our interests in our subsidiaries, affiliates, business units, marketable securities or other assets, or take a combination of these and other steps, to increase liquidity, reduce indebtedness and fund future activities. Such activities have in the past and may in the future involve related companies. From time to time we and our subsidiaries may enter into intercompany loans as a cash
management tool. Such notes are structured as revolving demand notes and pay and receive interest on terms we believe are more favorable than current debt and investment market rates. The companies that borrow under these notes have sufficient borrowing capacity to repay the notes at any time upon demand. All of these notes and related interest expense and income are eliminated in our Consolidated Financial Statements. We may also from time to time engage in preliminary discussions with existing or potential investors regarding the timing or terms of any such refinancing or other potential transactions.
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.
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 December 31, 2026) and long-term obligations (defined as the five-year period ending December 31, 2030). In this regard, see the discussion above in “Outstanding Debt Obligations.” Kronos’ Global Revolver matures in July 2029, and at December 31, 2025 Kronos had total availability for borrowing of approximately $251 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 9 to our Consolidated Financial Statements. If actual developments differ from our expectations, our liquidity could be adversely affected.
At December 31, 2025, we had credit available under existing facilities of approximately $352 million, which was comprised of:
$251 million under Kronos’ global revolving credit facility; and
$101 (1) million under Valhi’s Contran credit facility.
Amounts available under this facility are at the sole discretion of Contran.
At December 31, 2025, we had an aggregate of $237.7 million of restricted and unrestricted cash, cash equivalents and marketable securities attributable to operations. A detail by entity is presented in the table below.
Total
Held outside
amount
(In millions)
Kronos
CompX
NL exclusive of its subsidiaries
BMI
Tremont exclusive of its subsidiaries
LandWell
Valhi exclusive of its subsidiaries
Total cash and cash equivalents, restricted cash and marketable securities
Following the implementation of a territorial tax system under the 2017 Tax Act, repatriation of any cash and cash equivalents held by our non-U.S. subsidiaries would not be expected to result in any material income tax liability as a result of such repatriation.
Capital Expenditures and Other Investments –
We currently expect our aggregate capital expenditures for 2026 will be approximately $64 million (including approximately $11 million contractually committed at December 31, 2025) as follows:
$60 million by our Chemicals Segment, including approximately $30 million in the area of environmental compliance, protection and improvement; and
$4 million by our Component Products Segment.
In addition, LandWell expects to spend approximately $39 million on land development costs during 2026, including approximately $3 million contractually committed at December 31, 2025. Land development costs are included in the determination of cash provided by operating activities.
Capital spending for 2026 is expected to be funded through cash generated from operations or borrowing under our existing credit facilities. Planned capital expenditures in 2026 at Kronos and CompX will primarily be to maintain and improve existing facilities and, as it relates to CompX, to meet expected customer demand and maintain technology infrastructure. In addition, Kronos’ capital expenditures in the area of environmental compliance, protection and improvement include expenditures which are primarily focused on increased operating efficiency but also result in improved environmental protection, such as lower emissions from our manufacturing plants.
Repurchases of our Common Stock and Common Stock of our Subsidiaries –
We have in the past, and may in the future, make repurchases of our common stock in market or privately-negotiated transactions. At December 31, 2025, we had approximately .3 million shares of our common stock available for repurchase under the authorizations described in Note 16 to our Consolidated Financial Statements.
At December 31, 2025, Kronos had approximately 1.0 million shares of its common stock available for repurchase under the authorization described in Note 3 to our Consolidated Financial Statements.
At December 31, 2025, CompX had approximately .5 million shares of its Class A common stock available for repurchase under the authorization described in Note 3 to our Consolidated Financial Statements.
Dividends –
Because our operations are conducted primarily through subsidiaries and affiliates, our long-term ability to meet parent company level corporate obligations is largely dependent on the receipt of dividends or other distributions from our subsidiaries and affiliates. Kronos paid a regular dividend of $.05 per share in each quarter of 2025 for which we received $11.6 million. In February 2026 the Kronos board of directors approved a quarterly dividend of $.05 per share. If Kronos were to pay its $.05 per share dividend in each quarter of 2026 based on the 58.0 million shares we held of Kronos common stock at December 31, 2025, during 2026 we would receive aggregate regular dividends from Kronos of $11.6 million. NL paid a quarterly dividend of $.09 per share in 2025 for which we received $14.5 million. In August 2025 the NL board of directors declared a special dividend of $.21 per share on its common stock. We received $8.5 million from this dividend, which is not expected to be recurring. In February 2026 the NL board of directors approved a quarterly dividend of $.10 per share. If NL were to pay its $.10 per share dividend in each quarter of 2026 based on the 40.4 million shares we held of NL common stock at December 31, 2025, during 2026 we would receive aggregate quarterly dividends from NL of $16.2 million. BMI and LandWell pay cash dividends from time to time, but the timing and amount of such dividends are uncertain. In this regard, we received aggregate dividends from BMI and LandWell of $17.6 million in 2023, $4.0 million in 2024 and $19.5 million in 2025. All of our ownership interest in CompX is held through our ownership in NL; as such we do not receive any dividends from CompX. Instead any dividend paid by CompX is paid to NL.
Our subsidiaries have various credit agreements with unrelated third-party lenders which contain customary limitations on the payment of dividends, typically a percentage of net income or cash flow; however, these restrictions in the past have not significantly impacted their ability to pay dividends.
Investment in our Subsidiaries and Affiliates and Other Acquisitions –
We have in the past, and may in the future, purchase the securities of our subsidiaries and affiliates or third parties in market or privately-negotiated transactions. We base our purchase decision on a variety of factors, including an analysis of the optimal use of our capital, taking into account the market value of the securities and the relative value of expected returns on alternative investments. In connection with these activities, we may consider issuing additional equity securities or increasing our indebtedness. We may also evaluate the restructuring of ownership interests of our businesses among our subsidiaries and related companies.
We generally do not guarantee any indebtedness or other obligations of our subsidiaries or affiliates. See Note 17 to our Consolidated Financial Statements. Our subsidiaries are not required to pay us dividends. If one or more of our subsidiaries were unable to maintain its current level of dividends, either due to restrictions contained in a credit agreement or to satisfy its liabilities or otherwise, our ability to service our liabilities or to pay dividends on our common stock could be adversely impacted. If this were to occur, we might consider reducing or eliminating our dividends or selling interests in subsidiaries or other assets. If we were required to liquidate assets to generate funds to satisfy our liabilities, we may be required to sell our subsidiaries’ securities for less than what we believe is the long-term value of such assets.
We have a $50 million revolving credit facility with a subsidiary of NL secured with approximately 35.2 million shares of the common stock of Kronos Worldwide, Inc. held by NL’s subsidiary as collateral. Outstanding borrowings under the credit facility, as amended, bear interest at the prime rate plus 1.875% per annum, payable quarterly, with all amounts due on December 31, 2030. The maximum principal amount which may be outstanding from time-to-time under the credit facility is limited to 50% of the amount of the most recent closing price of the Kronos stock. The credit facility contains a number of covenants and restrictions which, among other things, restrict NL’s subsidiary’s ability to incur additional debt, incur liens, and merge or consolidate with, or sell or transfer substantially all of NL’s subsidiary’s assets to, another entity, and require NL’s subsidiary to maintain a minimum specified level of consolidated net worth. Upon an event of default (as defined in the credit facility), Valhi will be entitled to terminate its commitment to make further loans to NL’s subsidiary, declare the outstanding loans (with interest) immediately due and payable, and exercise its rights with respect to the collateral under the loan documents. Such collateral rights include, upon certain insolvency events with respect to NL’s subsidiary or NL, the right to purchase all of the Kronos common stock at a purchase price equal to the aggregate market value, less amounts owing to Valhi under the loan documents, and up to 50% of such purchase price may be paid by Valhi in the form of an unsecured promissory note bearing interest at the prime rate plus 2.75% per annum, payable quarterly, with all amounts due no later than five years from the date of purchase, with the remainder of such purchase price payable in cash at the date of purchase. We also eliminate any such intercompany borrowings in our Consolidated Financial Statements. There is $.5 million outstanding under this facility at December 31, 2025.
We have an unsecured revolving demand promissory note with CompX which, as amended, provides for borrowings from CompX of up to $25 million. We eliminate these intercompany borrowings in our Consolidated Financial Statements. The facility, as amended, is due on demand, but in any event no earlier than December 31, 2027. We had gross borrowings of $27.9 million and gross repayments of $30.5 million with CompX for a total outstanding balance of $10.6 million at December 31, 2023. We had gross borrowings of $25.0 million and gross repayments of $26.3 million with CompX for a total outstanding balance of $9.3 million at December 31, 2024. We had gross borrowings of $15.7 million and gross repayments of $17.0 million with CompX for a total outstanding balance of $8.0 million at December 31, 2025.We could borrow an additional $17.0 million under our current intercompany facility with CompX at December 31, 2025. CompX’s obligation to loan us money under this note is at CompX’s discretion.
Commitments and Contingencies
We are subject to certain commitments and contingencies, as more fully described in the Notes to our Consolidated Financial Statements and in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, including:
certain income contingencies in various U.S. and non-U.S. jurisdictions;
certain environmental remediation matters involving NL and BMI;
certain litigation related to NL’s former involvement in the manufacture of lead pigment and lead-based paint; and
certain other litigation to which we are a party.
In addition to those legal proceedings described in Note 18 to our Consolidated Financial Statements, various legislation and administrative regulations have, from time to time, been proposed that seek to (i) impose various obligations on present and former manufacturers of lead pigment and lead-based paint (including NL) with respect to asserted health concerns associated with the use of such products and (ii) effectively overturn court decisions in which NL and other pigment manufacturers have been successful. Examples of such proposed legislation include bills which would permit civil liability for damages on the basis of market share, rather than requiring plaintiffs to prove that the defendant’s product caused the allegeddamage, and bills which would revive actions barred by the statute of limitations. While no legislation or regulations have been enacted to date that are expected to have a material adverse effect on our consolidated financial position, results of operations or liquidity, enactment of such legislation could have such an effect.
As described in the Notes 7, 9 and 18 to our Consolidated Financial Statements, we are a party to various debt, lease and other agreements which contractually and unconditionally commit us to pay certain amounts in the future. Our obligations related to the long-term supply contracts for the purchase of TiO 2 feedstock are more fully described in Note 18 to our Consolidated Financial Statements and above in “Business – Chemicals Segment – Kronos Worldwide, Inc. – Raw Materials.” CompX has purchase obligations of $13.9 million ($13.4 million payable in 2026 and $.5 million payable in 2027/2028) which consist of open purchase orders and contractual obligations, primarily commitments to purchase raw materials and for capital projects in process at December 31, 2025. The timing and amount for purchase obligations are based on the contractual payment amount and the contractual payment date for those commitments.
Recent Accounting Pronouncements
See Note 21 to our Consolidated Financial Statements.
