Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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Should one or more of these risks materialize (or the consequences of such development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those currently forecasted or expected. We disclaim any intention or obligation to update or revise any forward-looking statement whether as a result of changes in information, future events or otherwise.

Operations Overview

Quarter Ended September 30, 2025 Compared to the Quarter Ended September 30, 2024 -

We reported a net loss attributable to Valhi stockholders of $22.2 million or $.78 per diluted share in the third quarter of 2025 compared to net income attributable to Valhi stockholders of $57.5 million or $2.01 per diluted share in the third quarter of 2024. As discussed more fully below, our net income attributable to Valhi stockholders decreased from 2024 to 2025 primarily due to the net effects of:

Our diluted net loss per share in the third quarter of 2025 includes:

Our diluted net income per share in the third quarter of 2024 includes:

Nine Months Ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024 -

We reported a net loss attributable to Valhi stockholders of $4.4 million or $.15 per diluted share in the first nine months of 2025 compared to net income attributable to Valhi stockholders of $85.2 million or $2.99 per diluted share in the first nine months of 2024. Our net income attributable to Valhi stockholders decreased from 2024 to 2025 primarily due to the net effects of:

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Our diluted net loss per share in the first nine months of 2025 includes:

Our diluted net income per share in the first nine months of 2024 includes:

Current Forecast for 2025 -

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

Segment Operating Results - 2025 Compared to 2024 -

Chemicals -

We consider TiO₂ 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 TiO₂ 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 TiO₂ 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 TiO₂ inventory levels of our Chemicals Segment's customers. We believe our Chemicals Segment's customers' inventory levels are influenced in part by their expectations for future changes in TiO₂ selling prices as well as their expectations for future availability of product. Although certain of our Chemicals Segment's TiO₂ grades are considered specialty pigments, the majority of its grades and substantially all of its production are considered commodity pigment products with price and availability being the most significant competitive factors along with product quality and customer and technical support services.

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The factors having the most impact on our Chemicals Segment's reported operating results are:

Key performance indicators are our Chemicals Segment's TiO₂ average selling prices, the level of TiO₂ sales and production volumes, and the cost of our Chemicals Segment's titanium-containing feedstock purchased from third parties. TiO₂ 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 ("Acquisition Date"), Kronos acquired the 50% joint venture interest in Louisiana Pigment Company, L.P. ("LPC") previously held by Venator Investments, Ltd. ("Venator"). Prior to the acquisition, Kronos held a 50% joint venture interest in LPC. Following the acquisition, LPC became a wholly-owned subsidiary of Kronos. Kronos accounted for the acquisition as a business combination. The results of operations of LPC have been included in our results of operations beginning as of the Acquisition Date. See Note 18 to our Condensed Consolidated Financial Statements.

* Thousands of metric tons

Current Industry Conditions - The first nine months of 2025 have seen unprecedented global uncertainty related to U.S. trade policies and geopolitical tensions. Our Chemicals Segment's customers have been hesitant to build inventories, given these uncertainties, which has prolonged the market downturn and impacted our Chemicals Segment's sales volumes and pricing momentum. Our Chemicals Segment started 2025 with average TiO₂ selling prices 2% higher than at the beginning of 2024 but its average TiO₂ selling prices declined 6% during the first nine months of 2025. Our Chemicals Segment's average TiO₂ selling prices in the first nine months of 2025 were 2% lower than average selling prices during the first nine months of 2024. Overall, our Chemicals Segment's sales volumes have been comparable in the first nine months of 2025 and 2024 with higher overall sales volumes in both the European and North American markets offset by lower sales volumes in our export market.

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Our Chemicals Segment operated its production facilities at 93% of practical capacity utilization in the first nine months of 2024. In the first nine months of 2025, our Chemicals Segment's practical capacity utilization was 85% as it reduced operating rates at certain of its manufacturing facilitiesin response to lower demand.

The following table shows our Chemicals Segment's capacity utilization rates during 2024 and 2025.

Excluding the effect of changes in currency exchange rates and unabsorbed fixed costs, our Chemicals Segment's cost of sales per metric ton of TiO₂ sold in the third quarter and the first nine months of 2025 was lower as compared to the same periods in 2024 due to decreases in per metric ton production costs.

Net Sales - Our Chemicals Segment's net sales in the third quarter of 2025 decreased 6%, or $27.8 million, compared to the third quarter of 2024 primarily due to the net effects of a 7% decrease in average TiO₂ selling prices (which decreased net sales by approximately $33 million), a 3% decrease in sales volumes (which decreased net sales by approximately $13 million) and changes in product mix (which increased net sales by approximately $4 million). In addition, our Chemicals Segment estimates that changes in currency exchange rates (primarily the euro) increased its net sales by approximately $14 million in the third quarter of 2025 as compared to the third quarter of 2024. TiO₂ selling prices will increase or decrease generally as a result of competitive market pressures, changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs.

Our Chemicals Segment's sales volumes decreased 3% in the third quarter of 2025 as compared to the third quarter of 2024 primarily due to lower sales volumes in its European and export markets somewhat offset by higher sales volumes in its North American market.

Our Chemicals Segment's net sales in the first nine months of 2025 decreased 2%, or $22.9 million, compared to the first nine months of 2024 primarily due to the effects of a 2% decrease in average TiO₂ selling prices (which decreased net sales by approximately $32 million) and changes in product mix (which decreased net sales by approximately $2 million). In addition, our Chemicals Segment estimates that changes in currency exchange rates (primarily the euro) increased its net sales by approximately $11 million in the first nine months of 2025 as compared to the first nine months of 2024.

Our Chemicals Segment's sales volumes in the first nine months of 2025 were comparable to the same period in 2024 with higher overall sales volumes in its North American and European markets offset by lower sales volumes in its export market.

Cost of Sales and Gross Margin - Our Chemicals Segment's cost of sales increased by $26.0 million, or 7%, in the third quarter of 2025 compared to the third quarter of 2024 due to the net effects of unfavorable fixed cost absorption due to reduced operating rates at certain of our Chemicals Segment's manufacturing facilities, higher cost inventory produced in the second quarter relative to the same quarter of 2024 and included in cost of sales in the third quarter and currency fluctuations (primarily the euro). Our Chemicals Segment's unabsorbed fixed production costs related to decreased production volumes in the third quarter of 2025 were approximately $27 million. Cost of sales in the third quarter of 2024includes a charge of approximately $4 million in non-cash charges related to accelerated depreciation in connection with the closure of its sulfate process line in Canada.

Our Chemicals Segment's cost of sales as a percentage of net sales increased to 90% in the third quarter of 2025 compared to 79% in the same period of 2024 primarily due to the unfavorable fixed cost absorptionand currency fluctuations, as discussed above.

Our Chemicals Segment's gross margin as a percentage of net sales decreased to 10% in the third quarter of 2025 compared to 21% in the third quarter of 2024. As discussed and quantified above, our Chemicals Segment's gross margin as a percentage of net sales decreased primarily due to lower average TiO₂ selling prices and lower production volumes resulting in unfavorable fixed cost absorption.

Our Chemicals Segment's cost of sales increased by $32.9 million, or 3%, in the first nine months of 2025 compared to the first nine months of 2024 due to the effects of approximately $45 million in additional unabsorbed fixed production costs recognized as a result of reduced operating rates at our Chemicals Segment's production facilities somewhat offset by lower production costs of approximately $11 million (primarily raw materials) and favorable currency fluctuations (primarily the euro).Cost of sales in the first

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nine months of 2024 includes a charge of approximately $2 million related to workforce reductions and approximately $14 million in non-cash charges primarily related to accelerated depreciation in connection with the closure of our Chemicals Segment's sulfate process line in Canada.

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Our Chemicals Segment's cost of sales as a percentage of net sales increased to 85% in the first nine months of 2025 compared to 81% in the same period of 2024 primarily due to unfavorable fixed cost absorption somewhat offset by lower production costs and currency fluctuations noted above.

Our Chemicals Segment's gross margin as a percentage of net sales decreased to 15% in the first nine months of 2025 compared to 19% in the first nine months of 2024. As discussed and quantified above, our Chemicals Segment's gross margin as a percentage of net sales decreased primarily due to the unfavorable effects of lower fixed cost absorption and lower average selling prices.

Operating Income (Loss) - Our Chemicals Segment's operating income decreased by $58.5 million to an operating loss of $15.9 million in the third quarter of 2025 compared to operating income of $42.6 million in the third quarter of 2024 as a result of the factors impacting gross margin discussed above. We estimate that changes in currency exchange rates increased our Chemicals Segment's operating loss by approximately $4 million in the third quarter of 2025 as compared to the same period in 2024, as discussed in the effects of currency exchange rates section below.

Our Chemicals Segment's operating income decreased by $70.3 million to $35.6 million in the first nine months of 2025 compared to operating income of $105.9 million in the first nine months of 2024 as a result of the factors impacting gross margin discussed above. We estimate that changes in currency exchange rates increased our Chemicals Segment's operating income by approximately $5 million in the first nine months of 2025 as compared to the same period in 2024, 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 $1.6 million and $2.0 million in the first nine months of 2025 and 2024, respectively, which reduced our reported Chemicals Segment's operating income 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 Chemicals Segment's non-U.S. operations also generate currency transaction gains and losses which primarily relate to (i) the difference between the currency exchange rates in effect when non-local currency sales or operating costs (primarily U.S. dollar denominated) are initially accrued and when such amounts are settled with the non-local currency, (ii) changes in currency exchange rates during time periods when our Chemicals Segment's non-U.S. operations are holding non-local currency (primarily U.S. dollars), and (iii) relative changes in the aggregate fair value of currency forward contracts held from time to time. We periodically use currency forward contracts to manage a portion of our currency exchange risk, and relative changes in the aggregate fair value of any currency forward contracts we hold from time to time serves in part to mitigate the currency transaction gains or losses we would recognize from the first two items described above.

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

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The $14 million increase in our Chemicals Segment's net sales (translation gains) was caused primarily by a weakening of the U.S. dollar relative to the euro, as its euro-denominated sales were translated into more U.S. dollars in 2025 as compared to 2024. The strengthening of the U.S. dollar relative to the Canadian dollar and weakening of the U.S. dollar relative to the Norwegian krone in 2025 did not have a significant effect on our Chemicals Segment's net sales, as a substantial portion of the sales generated by our Chemicals Segment's Canadian and Norwegian operations is denominated in the U.S. dollar.

The $4 million increase in our Chemicals Segment's operating loss was comprised of the following:

The $11 million increase in our Chemicals Segment's net sales (translation gains) was caused primarily by a weakening of the U.S. dollar relative to the euro, as its euro-denominated sales were translated into more U.S. dollars in 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 our Chemicals Segment's net sales, as a substantial portion of the sales generated by our Chemicals Segment's Canadian and Norwegian operations is denominated in the U.S. dollar.

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

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Outlook - Overall, our Chemicals Segment's customer demand remained weak in the third quarter of 2025, continuing the softening trend that began earlier in the year. High interest rates and sustained economic uncertainty, driven by global tariff and trade tensions, continue to contribute to cautious customer spending. Our Chemicals Segment does not expect sales volumes to improve meaningfully in the near-term and, although it believes customer inventory levels remain low, our Chemicals Segment is taking additional actions in the fourth quarter of 2025 to reduce its inventory levels by further lowering its operating rates to better align with current demand levels. Given the current depressed demand environment and margins, our Chemicals Segment believes it is prudent to reduce its operating rates in the fourth quarter to reduce inventory and position its plants to improve operating costs at lower utilization rates. These measures are expected to improve operating cash flows as our Chemicals Segment focuses on maximizing liquidity to manage through the current challenging demand market and to be positioned to respond when market dynamics improve.

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In 2025, the TiO₂ market has experienced significant capacity reductions, including previously announced shutdowns or curtailments by multiple producers, such as recently announced facility closures in China and certain European jurisdictions in the third quarter of 2025. Our Chemicals Segment believes it may gain market share from these developments both from current and potential customers primarily in Europe. Although Our Chemicals Segment believes customer inventories are low, its customers' near-term outlook remains uncertain. Certain customers have notified our Chemicals Segment that they intend to curtail production in the fourth quarter due to expected low downstream demand. In North America, downstream demand remains below historical norms across all end-use customers driven by low consumer confidence and lack of housing market mobility driven by high mortgage rates and home prices, which continue to delay the housing market recovery.

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Given the challenging market environment discussed above, our Chemicals Segment remains committed to implementing additional cost reduction initiatives to improve its long-term cost structure, to ensure it remains competitive, and to capitalize on potential market share opportunities. Our Chemicals Segment is currently implementing targeted workforce reductions across its operating locations impacting both manufacturing and selling, general and administrative costs. These reductions include union supported employees, which take longer to negotiate, and our Chemicals Segment cannot yet quantify the impact of such initiatives. However, our Chemicals Segment expects these workforce reductions will have a more significant financial impact than its 2023 and 2024 reductions. Beyond headcount cost savings, our Chemicals Segment is reviewing costs with all its partners, suppliers and vendors which its expects to result in cost reductions that will contribute to its cost savings.

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Pressure from lower demand and favorable TiO₂ availability has caused our Chemicals Segment's selling prices to decrease since the beginning of 2025. Raw material, energy, and other input costs continue to trend lower, and our Chemicals Segment expects this moderation to continue through the remainder of 2025 as lower cost inventory works its way through cost of sales. However, our Chemicals Segment expects fourth quarter operating results to be lower than the third quarter and to report lower operating results for the full year of 2025 as compared to 2024 due to weaker than expected demand, continued pricing pressure, and lower fixed cost absorption as a result of reduced operating rates. The capacity reductions noted above and the implementation of anti-dumping duties in various jurisdictions, among other factors, should lead to pricing upside in 2026. Current profit margins are unsustainable, and our Chemicals Segment will need to achieve price increases, targeted market share gain opportunities, and successfully execute on its cost reduction efforts noted above to achieve reasonable profit margins.

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

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In July 2025, our Chemicals Segment increased the maximum borrowings under its credit facility from $300 million to $350 million to provide additional liquidity for general corporate purposes. In September 2025, our Chemicals Segment successfully refinanced its €75 million 3.75% Senior Secured Notes due in September 2025 by issuing €75 million in additional 9.50% Senior Secured Notes due 2029 at an effective rate of 7.8%. Our Chemicals Segment expects its cash on hand to improve as it reduces inventory levels over the next several quarters. With no near-term debt maturities, significant borrowing availability under our Chemicals Segment's revolving credit facility and cash on hand, our Chemicals Segment believes it is well-positioned to finance its working capital and capital expenditure needs.

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Our expectations for the TiO₂ industry and our Chemicals Segment's operations are based on certain factors beyond our control. Our Chemicals Segment's 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 effects of newly enacted tariffs in jurisdictions where our Chemicals Segment or its customers and suppliers operate, its success in implementing mitigation strategies, and the impact of economic conditions, consumer confidence, and geopolitical events on its operations or those of its customers and suppliers, all of which remain uncertain and cannot be predicted.

Component Products -

Our Component Products Segment's product offerings consist of a significantly 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 the 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 Component Products Segment's products sold. The key performance indicator for our Component Products Segment is operating income.

Our Component Products Segment's operating income in the third quarter of 2025 was $4.8 million compared to $3.3 million in the third quarter of 2024. Operating income for the first nine months of 2025 was $17.0 million compared to $12.1 million for the comparable prior year period. Our Component Products Segment's operating income increased in the third quarter and for the first nine months of 2025 due to higher sales and gross margin at each of the security products and marine components reporting units.

Net Sales - Our Component Products Segment's net sales increased $6.4 million and $13.1 million in the third quarter and for the first nine months of 2025, respectively, compared to the same periods in 2024 due to higher security products sales to the government security market and higher marine component sales to various markets including the towboat, government and industrial markets. Relative to prior year, the increase in third quarter security products sales was primarily due to $4.0 million higher sales to the government security market and $.3 million higher sales to the gas station security market, partially offset by $.7 million lower sales to the healthcare market and $.3 million lower sales to the tool storage market. Relative to 2024, the increase in security products sales for the first nine months of 2025 was primarily due to $8.9 million higher sales to the government security market and $.5 million higher sales to the gas station security market, partially offset by lower sales to a variety of other markets including $1.3 million lower sales to the transportation market, $.9 million lower sales to the tool storage market and $.4 million lower contract plating sales. Relative to prior year, the increase in third quarter marine component sales was primarily due to $1.2 million higher sales to the industrial market, $.9 million higher sales to the towboat market and $.5 million higher sales to the government market. Relative to 2024, the increase in marine component sales for the first nine months of 2025 was primarily due to $3.2 million higher sales to the towboat market, $3.1 million higher sales to the government market and $1.0 million higher sales to the industrial market, partially offset by $.9 million lower sales to the center console market.

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Cost of Sales and Gross Margin - Our Component Products Segment's cost of sales as a percentage of net sales in the third quarter of 2025 is consistent with the same period in 2024. As a result, gross margin as a percentage of net sales in the third quarter of 2025 was comparable to the same period in 2024 primarily due to lower security products gross margin percentage offset by higher marine components gross margin percentage. Security products gross margin as a percentage of net sales for the third of 2025 decreased compared to the same period in 2024 primarily due to higher cost inventory produced during the second quarter of 2025 and sold in the third quarter of 2025 and higher employee-related costs including salaries, benefits and medical expense partially offset by increased coverage of fixed costs as a result of higher sales. Marine components gross margin as a percentage of net sales increased in the third quarter of 2025 compared to the same period last year primarily due to increased coverage of fixed costs as a result of higher sales and to a lesser extent a more favorable customer and product mix.

Our Component Products Segment's cost of sales as a percentage of net sales improved 2% for the first nine months of 2025 compared to the same period in 2024. As a result, gross margin as a percentage of net sales increased over the same period. The increase in the gross margin percentage for the nine-month comparative period is primarily due to a higher gross margin percentage at the marine components reporting unit, partially offset by a lower gross margin percentage at the security products reporting unit. Marine components' gross margin as a percentage of net sales increased for the first nine months of 2025 compared to the same period last year primarily due to increased coverage of fixed costs as a result of higher sales and to a lesser extent a more favorable customer and product mix. Security products' gross margin as a percentage of net sales for the first nine months of 2025 decreased compared to the same period in 2024 primarily due to higher employee-related costs including salaries, benefits and medical expense partially offset by increased coverage of fixed costs as result of higher sales.

Operating Income - As a percentage of net sales, our Component Products Segment's operating income for the third quarter and the first nine months of 2025 increased compared to the same periods of 2024 and was primarily impacted by the factors affecting sales, cost of sales and gross margin discussed above.

Outlook - Our Component Products Segment's sales for the first nine months of 2025 reflect sustained demand across both of its segments, with year-to-date results exceeding those for the same period in 2024. Marine components sales and operating income for the first nine months of 2025 exceeded prior year levels, driven by improved demand in the government and industrial markets as well as increased sales to the towboat market primarily in the first quarter of 2025 related to a one-time stocking event for a towboat OEM customer. Security products sales improved from prior year primarily due to increased sales to the government security market. Raw material price increases that began in the third quarter of 2024 have persisted through the first nine months of 2025. Additionally, our Component Products Segment began incurring tariff-related surcharges on certain components, primarily electronic components from Asia, beginning late in the second quarter of 2025. Our Component Products Segment expects these cost pressures to continue through the remainder of the year.

Our Component Products Segment expects security products net sales in 2025 to improve over 2024 primarily due to continued higher sales to the government security market. However, our Component Products Segment expects softness in various other markets to partially offset these gains, primarily the transportation and tool storage markets. The security products reporting unit's gross margin and operating income percentages are expected to be slightly below prior year levels due to the impact of higher-cost inventory and tariff-related surcharges. Our Component Products Segment expects marine components net sales to increase in 2025 predominantly due to higher expected sales to the government and industrial markets as well as the one-time stocking event for a towboat OEM customer in the first quarter of 2025. Overall, our Component Products Segment expects the marine components reporting unit to have improved gross margin and operating income percentages in 2025 compared to 2024 due to increased coverage of fixed costs on higher expected sales volumes.

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. It also sources certain components, primarily electronic components from Asia, including China. Early in the first quarter of 2025, in anticipation of the U.S. federal government tariffs announcements, our Component Products Segment increased purchases of certain electronic components and other components to mitigate the potential near-term impact of tariffs. As noted above, late in the second quarter our Component Products Segment began incurring tariff-related surcharges on certain raw materials, primarily electronic components. In addition to tariffs on imported raw materials and components, some of its U.S. based suppliers have recently begun to implement tariff-related surcharges on certain U.S. based purchases. Where possible, our Component Products Segment is increasing selling prices to its customers to recoup these increased raw material costs, although the extent to which it 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

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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 our Component Products Segment's products or its customers' and suppliers' operations, all of which remain uncertain and cannot be predicted.

Real Estate Management and Development -

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.

LandWell began marketing land for sale in the residential/planned community in December 2013 and at September 30, 2025 approximately 20 saleable acres remain. In addition, outside of the community LandWell has been actively marketing and selling land zoned for commercial and light industrial use and at September 30, 2025 approximately 15 saleable acres remain. 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. In most instances buyers can cancel an escrow agreement with no financial penalties until shortly before the closing date. In some instances, LandWell will receive cash proceeds at the time the contract closes and record deferred revenue for some or all of the cash amount received, with such deferred revenue being recognized in subsequent periods. Substantially all of the land in the residential/planned community has been sold; however, we expect the development work to take two to three years to complete.

Net Sales and Operating Income - Substantially all of the net sales from our Real Estate Management and Development Segment in the third quarter and the first nine months of 2025 and 2024 were from land sales. We recognized $6.6 million in revenues on land sales during the third quarter of 2025 compared to $15.3 million in the third quarter of 2024 and $20.8 million in the first nine months of 2025 compared to $52.2 million in the same prior year period. All of the land sales revenues recognized in 2025 and 2024 are related to land sold in prior years. As noted above, we recognize revenue in our residential/planned community over time using cost-based input methods, and all of the land sales revenue we recognized in 2025 and 2024 was under this method of revenue recognition. Land sales revenue in the third quarter and the first nine months of 2025 decreased compared to the same prior year periods due to the decreased pace of development activity for previously sold parcels within the residential/planned community. The pace of development activities is dictated by a number of factors such as city permit and design approval, approval from the Nevada Department of Environmental Protection, labor and materials availability, and the amount of remaining development obligations. Cost of sales related to land sales revenues was $3.5 million and $10.9 million in the third quarter and the first nine months of 2025, respectively, compared to $8.8 million and $29.6 million in the third quarter and the first nine months of 2024, respectively. In addition we recognized income of $14.2 million and $34.2 million related to tax increment infrastructure reimbursement in the first nine months of 2024 and 2025, respectively.

Outlook - LandWell is focused on developing the land it manages for the residential/planned community in Henderson with sales primarily to residential builders. At September 30, 2025, substantially all of the land in the residential/planned community had been sold with approximately 20 saleable acres remaining. The sale of the remaining 20 acres closed in October 2025. At September 30, 2025 we have deferred revenue of $28.6 million related to post-closing obligations on land sales closed prior to 2024. Because we recognize revenue over time using cost-based inputs, we will continue to recognize revenue on land previously sold over the development period, although we have already received substantially all the cash proceeds related to these sales. We currently expect to take one to two years to complete our post-closing obligations. Any delays or curtailments in infrastructure development related to post-closing obligation activities will delay the amount of revenue we recognize on previously closed land sales. There are also 15 saleable acres zoned for light industrial and commercial use adjacent to the 2,100 acre residential/planned community. Approximately one-half

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of these acres is currently in escrow and is currently scheduled to close in the fourth quarter of 2025. Because this land is not in the residential/planned community we will recognize all the proceeds as land revenue when the sale closes. Under LandWell's development agreement with the City of Henderson, the issuance of a specified number of housing permits requires LandWell to complete certain large infrastructure projects. LandWell began construction on several of these community-wide large projects in late 2021 with the construction expected to continue for the next two to three years. We expect these land development costs in 2025 to be comparable to 2024 due to the timing of planned infrastructure projects and the availability of certain construction materials. Because these large projects relate to the entirety of the residential/planned community, the costs associated with these large projects are not part of the cost-based inputs used to recognize revenue, and therefore, this spending will not correlate to revenue recognition. However, this spending is expected to be eligible for tax increment reimbursement under our Owner Participation Agreement ("OPA") with the City of Henderson, and delays or curtailments in eligible infrastructure development activities will also delay LandWell's ability to submit completed costs to the City for approval of additional OPA note receivables. The maximum reimbursement under the OPA is $209 million. We have collected $46.2 million to date and expect to reach the maximum over the next 7 to 10 years.

General Corporate and Other Items - 2025 Compared to 2024

Changes in the Market Value of Valhi Common Stock held by Subsidiaries - Our subsidiaries, Kronos and NL, hold shares of our common stock. As discussed in the 2024 Annual Report, we account for our proportional interest in these shares of our common stock as treasury stock at Kronos' and NL's historical cost basis. The remaining portion of these shares of our common stock, which are attributable to the noncontrolling interest of Kronos and NL, are reflected in our Condensed Consolidated Balance Sheet at fair value. Kronos and NL recognize unrealized gains or losses on these shares of our common stock in the determination of each of their respective net income or loss. Under the principles of consolidation we eliminate any gains or losses associated with our common stock to the extent of our proportional ownership interest in each subsidiary. We recognized a loss of $.1 million in the third quarter of 2025 compared to a gain of $3.7 million in the third quarter of 2024 and a loss of $1.8 million in the first nine months of 2025 compared to a gain of $4.3 million in the first nine months of 2024 in our Condensed Consolidated Statements of Operations, which represents the unrealized gain (loss) in respect of these shares during such periods attributable to the noncontrolling interest of Kronos and NL.

Gain on Remeasurement of Investment in TiO₂ 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 18 to our Condensed 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 18 to our Condensed Consolidated Financial Statements.

Interest Income and Other - Interest income and other decreased $.8 million in the third quarter and $4.0 million in the first nine months of 2025 compared to the same periods of 2024 primarily due to lower average interest rates and decreased cash balances. See Note 12 to our Condensed Consolidated Financial Statements.

Other General Corporate Items - Corporate expenses were 11% higher in the third quarter of 2025 compared to the same period in 2024 primarily due to higher litigation fees and related costs. Corporate expenses in the first nine months of 2025 were comparable to the same period in 2024.

Overall, we currently expect that our net general corporate expenses in 2025 will be higher than in 2024 primarily due to income recognized in 2024 related to the settlement of a liability for an environmental remediation site in the fourth quarter of 2024. See Note 16 to our Condensed Consolidated Financial Statements.

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

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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 2025, 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 16 to our Condensed Consolidated Financial Statements.

Interest Expense - Interest expense increased $1.5 million in the third quarter of 2025 and $5.3 million in the first nine months of 2025 compared to the same periods in 2024 primarily due to higher overall debt levels and higher average interest rates as a result of Kronos debt transactions entered into in 2024. Interest expense in the first nine months of 2024 includes a charge of $1.5 million for the write-off of deferred financing costs. See Note 7 to our Condensed Consolidated Financial Statements.

We expect interest expense will be higher in 2025 as compared to 2024 primarily due to the higher debt balances as a result of the third quarter acquisition of LPC and higher interest rates on Kronos' new debt issued in 2024 and 2025.

Income Tax Expense - We recognized income tax expense of $14.3 million in the third quarter of 2025 compared to $34.3 million in the third quarter of 2024 and income tax expense of $30.3 million in the first nine months of 2025 compared to $46.6 million in the first nine months of 2024. The decrease in the third quarter and first nine months of 2025 is primarily due to lower earnings in 2025 and the jurisdictional mix of such earnings, partially offset by the increase to the valuation allowance against our business interest expense carryforwards and the impact of the German tax rate change on our German net deferred tax asset. During interim periods, our effective tax rate may not necessarily correspond to the current period income (loss) before taxes due to the application of accounting for income taxes in interim periods which requires us to base our effective rate on full year projections of pre-tax income (loss).

We recognize deferred income taxes with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock because the exemption under GAAP to avoid such recognition of deferred income taxes is not available to us. At December 31, 2024, we recognized a deferred income tax liability with respect to our direct investment in Kronos of $49.6 million. There is a maximum amount (or cap) of such deferred income taxes we are required to recognize with respect to our direct investment in Kronos. The maximum amount of the cap is $153.6 million. During the first nine months of 2025, we recognized a non-cash deferred income tax benefit with respect to our direct investment in Kronos of $4.9 million for the decrease in the deferred income taxes required to be recognized with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock, this decrease related to our equity in Kronos' net income during the period. We recognized a similar deferred income tax expense of $5.4 million in the first nine months of 2024. A portion of the net change with respect to the excess of the financial reporting carrying amount over the income tax basis of our direct investment in Kronos common stock during such periods related to our equity in Kronos' other comprehensive income (loss) items, and the amounts allocated to other comprehensive income (loss) items includes amounts related to our equity in Kronos' other comprehensive income (loss) items.

At December 31, 2024, we had significant German corporate and trade net operating loss ("NOL") carryforwards of $449.3 million (deferred tax asset "DTA" of $71.1 million) and $41.8 million (DTA of $4.5 million), respectively. Prior to December 31, 2024, and using all available evidence, we had concluded that no deferred income tax asset valuation allowance was required to be recognized with respect to such carryforwards, principally because (i) such carryforwards have an indefinite carryforward period, (ii) we have utilized a portion of such carryforwards during the most recent three-year period and (iii) we currently expect to utilize the remainder of such carryforwards over the long term. At September 30, 2025, we continue to conclude no valuation allowance is required to be recognized for our German DTAs although prior to the complete utilization of such carryforwards, if we were to generate additional losses in our German 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.

See Note 13 to our Condensed Consolidated Financial Statements for a tabular reconciliation of our statutory income tax provision to our actual tax provision.

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

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LIQUIDITY AND CAPITAL RESOURCES

Consolidated Cash Flows

Operating Activities -

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

Cash used in operating activities was $136.1 million in the first nine months of 2025 compared to cash used in operating activities of $1.8 million in the first nine months of 2024. This $134.3 million increase in cash used in operating activities in the first nine months of 2025 includes:

As noted in our discussion of our Real Estate Management and Development segment above, we have sold the majority 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 to three 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:

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For comparative purposes, we have also provided comparable prior period numbers below.

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.

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Investing Activities -

During the nine months ended September 30, 2025, we spent $35.8 million in capital expenditures including $32.7 million in our Chemicals Segment and $3.1 million in our Component Products Segment.

Financing Activities -

During the nine months ended September 30, 2025:

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

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Outstanding Debt Obligations

At September 30, 2025, our consolidated indebtedness was comprised of:

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 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 7 to our Condensed 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 its 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 included in our 2024 Annual Report. We are in compliance with all of our debt covenants at September 30, 2025. We believe we will be able to continue to comply with the financial covenants contained in our debt obligations 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 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. See Note 7 to our Condensed Consolidated Financial Statements.

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)

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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. 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 transaction. 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 generally more favorable than current debt and investment market rates. The companies that borrow under these notes have sufficient liquidity to repay the notes. All of these notes and related interest expense and income are eliminated in our Condensed Consolidated Financial Statements.

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 September 30, 2026) and long-term obligations (defined as the five-year period ending September 30, 2030). Kronos' Global Revolver matures in July 2029, and at September 30, 2025 Kronos had total availability for borrowing of approximately $342 million less any amounts outstanding. The borrowing base is calculated at least quarterly, and the amount available for borrowing may change based on applicable period end balances. See Note 7 to our Condensed Consolidated Financial Statements. If actual developments differ from our expectations, our liquidity could be adversely affected.

At September 30, 2025, we had an aggregate of $232.8 million of restricted and unrestricted cash, cash equivalents and marketable securities, including $34.6 million held by our non-U.S. subsidiaries. A detail by entity is presented in the table below.

Capital Expenditures and Other -

We currently expect our aggregate capital expenditures for 2025 will be approximately $49 million as follows:

In addition, LandWell expects to spend approximately $30 million on land development costs during 2025.

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Capital spending for 2025 is expected to be funded through cash generated from operations or borrowing under our existing credit facilities. Planned capital expenditures for the remainder of 2025 at Kronos and CompX will primarily be to maintain and improve our existing facilities. It is possible we will delay planned capital projects based on market conditions including but not limited to expected demand and the general availability of materials, equipment and supplies necessary to complete such projects.

Repurchases of Common Stock -

We, Kronos and CompX have programs to repurchase common stock from time to time as market conditions permit. These stock repurchase programs do not include specific price targets or timetables and may be suspended at any time. Depending on market conditions, these programs may be terminated prior to completion. Cash on hand will be used to acquire the shares, and repurchased shares will be added to treasury shares and cancelled.

At September 30, 2025, Valhi had approximately .3 million shares available to repurchase under authorizations made by our board of directors.

Kronos' board of directors previously authorized the repurchase of up to 2.0 million shares of its common stock in open market transactions, including block purchases, or in privately-negotiated transactions at unspecified prices and over an unspecified period of time. Kronos may repurchase its common stock from time to time as market conditions permit. At September 30, 2025, approximately 1.0 million shares were available for repurchase under these authorizations.

CompX's board of directors previously authorized the repurchase of its Class A common stock in open market transactions, including block purchases, or in privately-negotiated transactions at unspecified prices and over an unspecified period of time. At September 30, 2025, approximately .5 million shares were available for repurchase under these authorizations.

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. In February 2025 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 2025 based on the 58.0 million shares we held of Kronos common stock at September 30, 2025, during 2025 we would receive aggregate regular dividends from Kronos of $11.6 million. In February 2025 the NL board of directors approved a quarterly dividend of $.09 per share. If NL were to pay its $.09 per share dividend in each quarter of 2025 based on the 40.4 million shares we held of NL common stock at September 30, 2025, during 2025 we would receive aggregate quarterly dividends from NL of $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. 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 $7.8 million in 2025. We do not know if we will receive additional dividends from BMI and LandWell during 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; 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 decisions on a variety of factors, including an analysis of the optimal use of our capital, taking into account the market value of the securities and the relative value of expected returns on alternative investments. In connection with these activities, we may consider issuing additional equity securities or increasing our indebtedness. We may also evaluate the restructuring of ownership interests of our businesses among our subsidiaries and related companies.

We generally do not guarantee any indebtedness or other obligations of our subsidiaries or affiliates. 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 might be required to sell at less than what we believe is the long-term value of such assets.

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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 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 value of the Kronos stock using the most recent closing price. 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 Condensed Consolidated Financial Statements. There is $.5 million outstanding under this facility at September 30, 2025.

We also 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 Condensed Consolidated Financial Statements. The facility, as amended, is due on demand, but in any event no earlier than December 31, 2026. We had gross borrowings of $10.7 million and gross repayments of $11.9 million during the first nine months of 2025, and $8.1 million was outstanding at September 30, 2025. We could borrow $16.9 million under our current intercompany facility with CompX at September 30, 2025. CompX's obligation to loan us money under this note is at CompX's discretion.

Commitments and Contingencies

There have been no material changes in our contractual obligations since we filed our 2024 Annual Report and we refer you to that report for a complete description of these commitments.

We are subject to certain commitments and contingencies, as more fully described in our 2024 Annual Report, or in Notes 13, 16 and 18 to our Condensed Consolidated Financial Statements and in Part II, Item 1 of this Quarterly Report, including:

In addition to such legal proceedings, 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 alleged damage, and bills which would revive actions barred by the statute of limitations. While no legislation or regulations have been enacted to date that are expected to have a material adverse effect on our consolidated financial position, results of operations or liquidity, enactment of such legislation could have such an effect.

Recent Accounting Pronouncements

See Note 19 to our Condensed Consolidated Financial Statements.

Critical Accounting Policies and Estimates

For a discussion of our critical accounting policies and estimates, refer to Part I, Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2024 Annual Report. There have been no changes in our critical accounting policies or estimates during the first nine months of 2025 except as described below:

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Goodwill - Our net goodwill related to our Chemicals Segment totaled $355.2 million at September 30, 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 the Company chooses 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 impairment loss 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 judgement 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 judgement 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 judgements 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.