KRO 10-K & 10-Q changes, risk factors and insider trading

The global market in which we operate our business is concentrated, with the top fivefour TiO2 producers accounting for approximately 51%42% of the world’s production capacitycapacity, and is highly competitive. Competition is based on a number of factors, such as price, product quality and service. We face significant competition from international and regional competitors, including increasing competition from TiO2 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 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 competitors may be able to drive down prices for our products if their costs are lower than our costs, including our 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 TiO2 into markets we serve. In some cases, Western TiO2 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 competitors’ financial, technological and other resources may be greater than our resources and such competitors may be better able to withstand extended periods of reduced demand or other changes in market conditions. Our competitors may be able to respond more quickly than we can to new or emerging technologies and changes in customer requirements. Further, consolidation of our competitors or customers may result in reduced demand for our products or make it more difficult for us to compete with our competitors. The occurrence of any of these events could result in reduced earnings or operating losses.

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 TiO2 facilities are available from a limited number of suppliers around the world. Political and economic instability or increased regulations in the countries from which we purchase or mine our raw material supplies could adversely affect raw material availability. If we or our worldwide vendors are unable to meet our planned or contractual obligations and we are unable to obtain necessary raw materials, we could incur higher costs for raw materials or we may be required to reduce production levels. WeFor example, we experienced increases in feedstock costs in 2023 and 2024, forwhich example, whichnegatively affected our margins. We have 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 our operating results and decrease liquidity as we may not always be able to increase our selling prices to offset the impact of any higher costs or reduced production levels.

We have supply contracts that provide for our TiO2 feedstock requirements. While we believe we will be able to renew these contracts, as necessary, we do not know if we will be successful in renewing them or in obtaining long-term extensions to them prior to expiration. Our current agreements have minimum purchase requirements, targeted purchases or require us to purchase certain minimum percentage-based quantities of feedstock withbased minimumupon purchaseour commitmentsannual aggregatingpurchasing requirements. We estimate aggregate purchases under these feedstock agreements will be between approximately $542$375 and $450 million beginning in 2025 and extending through 2026. In addition, we have other long-term supply and service contracts that provide for various raw materials and services.services, Thesewhich agreementsmay require us to purchase certain minimum quantities or services with minimum purchase commitments aggregating approximately $67 million at December 31, 2024.quantities. Our commitmentsobligations under these contracts could adversely affect our financial results if we significantly reduce our production and we are unable to modify the contractual commitments.

Our recent acquisition of the remaining 50% interest in LPC may not generate benefits we anticipate and may otherwise affect our business and prospects.

WeIn recentlyJuly 2024 we completed the LPC acquisition in which we purchased the 50% ownership interest in LPC we did not previously own.own and we subsequently merged LPC into our wholly-owned subsidiary, Kronos Louisiana. If we experience unforeseen technological, operational or other difficulties in managingintegrating the integrationKronos ofLouisiana LPCfacility into our operations as our wholly-owned subsidiary, we may not be able to implement the process innovations at the facility that we expect. In addition, we may not be able to achieve the anticipated synergies or improveimprovements in efficiency and product quality that we expect. With or without such difficulties, the integration of the LPCKronos Louisiana facility into our operations may divert significant management time and attention from our other operations. If we fail to successfully integrate LPCthe Kronos Louisiana facility into our operations, or if the LPC acquisition does not provide expected synergies or sales increases, or if LPCKronos Louisiana has unexpected legal, regulatory, or financial liabilities, our business, financial condition, results of operations and prospects could be adversely affected.

We have a significant amount of debt, primarily related to our 9.50% Senior Secured Notes due 2029 and our 3.75% Senior Secured Notes due 2025,2029, our term loan from Contran, and borrowings on our global revolving credit facility (the “Global Revolver”). As of December 31, 2024,2025, our total consolidated debt was approximately $507.4$557.4 million. Our level of debt could have important consequences to our stockholders and creditors, including:

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 $701$193 million in 2025.2026. 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 our Global Revolver in the future, in some instances, will depend in part on our ability to maintain specified financial ratios and satisfy certain financial covenants contained in the credit agreement governing the Global Revolver.

We operate our businesses in several different countries and sell our products worldwide. For example, during both 20232024 and 2024,2025, approximately 44% and 45% of our sales volumesvolumes, respectively, were sold into European markets. The majority (but not all) of our sales from our 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.

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. The U.S. government and various non-U.S. governmentalGovernmental agencies of countries in which we operate have determineddetermined, 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 regardingregulating carbon emissionand costs,other GHG emissions and the use of renewable energy targets.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 becomes 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.

The U.S. federal government has recently implemented tariffs on certain foreign goods and may implement additional tariffs on foreign goods. For example, on March 4, 2025, the U.S. government implemented a 25% tariff on all imports from Mexico and Canada into the U.S. As we currently manufacture a significant portion of our North American TiO2 in Canada, if sustained for an extended period of time, the 25%a tariff on our imports into the U.S. from Canada,Canada without exclusion, willwould make our products manufactured in Canada and sold into the U.S. more expensive. As a result, demand for these products could be reduced, or we could be required to absorb the increased costs or increase prices of such products. Tariff mitigation strategies, such as those we undertook in the first quarter of 2025 which included building and positioning inventory from our 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 ability to sell our products in the U.S. or reduce our revenues and gross margins. These measures may also increase our costs of Canadian feedstock imported into the U.S. and could adversely impact our gross margins or require us to raise prices thereby making our 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 TiO2, 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.

We are a leading global producer and marketer of value-added TiO2. TiO2 is used for a variety of manufacturing applications, including paints, plastics, paper and other industrial and specialty products. During 2024,2025, 44%45% of our sales volumes were sold into European markets. We believe we are the largest chloride process producer of TiO2 in Europe with an estimated 14%15% share of European TiO2 sales volumes in 2024.2025. In addition, we estimate we have a 17%19% share of North American TiO2 sales volumes in 2024.2025. Our production facilities are located in Europe and North America.

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 we and our 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 customers. We believe our customers’ inventory levels are influenced in part by their expectation for future changes in TiO2 selling prices as well as their expectation for future availability of product. Although certain of our TiO2 grades are considered specialty pigments, the majority of our grades and substantially all of our 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.

As previously reported, effective the Acquisition Date of July 16, 2024,2024 (the “Acquisition Date”), we acquired the 50% joint venture interest in LPC previously held by Venator.Venator Investments, Ltd. (“Venator”). Prior to the acquisition, we held a 50% joint venture interest in LPC through a wholly-owned subsidiary. LPC was operated as a manufacturing joint venture between us and Venator. Following the acquisition, LPC became a wholly-owned subsidiary of ours. WeIn acquired the 50% joint venture interest that2025, we didmerged notLPC alreadyinto ownour forwholly-owned considerationsubsidiary ofKronos $185Louisiana, millionInc. less(the acombined workingcompany capitalis adjustment. An additional earn-out payment of upreferred to $15as million“Kronos based on our aggregate consolidated net income before interest expense, income taxes and depreciation and amortization expense, or EBITDA, during a two-year period comprising calendar years 2025 and 2026 may be required. The acquisition was financed through borrowings of $132.1 million under our Global Revolver and the remainder paid with cash on hand.Louisiana”). We accounted for the acquisition of the interest in LPC as a business combination. ForThe financialresults reportingof purposes, the assets acquired and liabilities assumedoperations of LPC are included in our Consolidated Balance Sheet as of December 31, 2024, and the results of operations and cash flows of LPC are included in our Consolidated StatementStatements of Operations and Cash Flows beginning as of the Acquisition Date. See Note 5 to our Consolidated Financial Statements.

* Thousands of metric tons (1) TheWe Company usesuse segment profit (loss) to assess the performance of the company’sour TiO2 operations. Segment profit (loss) is defined as net income (loss) before income tax expense and certain general corporate items. TheseThe general corporate items include corporate expense and the components of other income (expense) except for trade interest income.

Cost of sales and gross margin – Cost of sales increased $26.2 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 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 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 our sulfate process line in Canada discussed above.Canada. Sales and production volumes resulting from the LPC acquisition did not materially impact comparisons to the prior year.

Income tax expense (benefit) – We recognized income tax expense of $63.4 million in 2024 compared to an income tax benefit of $23.8 million in 2023. The difference is primarily due to higher earnings in 2024 and the jurisdictional mix of such earnings. Our earnings are subject to income tax in various U.S. and non-U.S. jurisdictions, and the income tax rates applicable to the pre-tax earnings (losses) of our non-U.S. operations are generally higher than the income tax rates applicable to our U.S. operations. 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 changes in our reserve for uncertain tax positions, to be higher than the U.S. federal statutory tax rate of 21% primarily because of our sizeable non-U.S. operations.

Our income tax expense in 2024 includes a non-cash deferred income tax expense of $8.2 million, recognized in the fourth quarter, related to the recognition of a deferred income tax asset valuation allowance related to our Belgian net deferred tax assets. We continue to believe we will ultimately realize the full benefit of our Belgian NOL carryforwards, in part because of their indefinite carryforward period. However, our ability to reverse all or a portion of such valuation allowance in the future is dependent on the presence of sufficient positive evidence, such as the existence of cumulative profits in the most recent twelve consecutive quarters, and the ability to demonstrate future profitability for a sustainable period. Until such time as we are able to reverse the valuation allowance in full, to the extent we generate additional losses in Belgium in the intervening periods, our effective income tax rate will be negatively impacted because any further losses will effectively be recognized without the net income tax benefit. See Note 12 to our Consolidated Financial Statements.Statements for a tabular reconciliation of our statutory income tax provision to our actual tax provision.

We have substantial operations and assets located outside the United States (primarily in Germany, Belgium, Norway and Canada). The majority of our 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 sales generated from our non-U.S. operations is denominated in the U.S. dollar (and consequently our non-U.S. operations will generally hold U.S. dollars from time to time). Certain raw materials used in all our 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 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 and (ii) changes in currency exchange rates during time periods when our 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.

Our expectations for the TiO2 industry and our operations are based on a number of factors outside our control. Our operations are affected by global and regional economic, political and regulatory factors, and we have experienced global market disruptions. As noted above, energy costs in Europe, which spiked when Russia invaded Ukraine, remain above historical levels. In addition, we operate a TiO2 facility in Canada, and the majority of production from that facility is currently sold into the U.S. The U.S. federal government’s recently enacted 25% tariff on our imports from Canada could harm our ability to compete and adversely impact our earnings and profitability if such tariffs are sustained for an extended period of time without exclusion. We have begun to implement strategies to minimize the potential impacts. Future impacts on our operations will depend on, among other things, future energy costs, the effect newly enacted tariffs have onin jurisdictions in whichwhere we or our customers and suppliers operate, our success in implementing mitigation strategies, and the impact economic conditionsconditions, consumer confidence, and geopolitical events have on our operations or our customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.

At December 31, 2024,2025, approximately 68%,72%, 14%, 7%15% and 7%8% of the projected benefit obligations related to our plans in Germany, Canada, NorwayCanada and the U.S.,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 or participate in defined benefit pension plans in several different countries in Europe and North America and the interest rate environment differs from country to country.

At December 31, 2024,2025, approximately 58%,65%, 18%, 10%18% and 11% of the plan assets related to our plans in Germany, Canada, NorwayCanada and the U.S.,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.

We are a leading global producer and marketer of value-added titanium dioxide pigments (“TiO2”). TiO2 is used for a variety of manufacturing applications, including paints, plastics, paper and other industrial and specialty products. For the threesix months ended MarchJune 31,30, 2026, approximately 40%45% of our sales volumes were sold into European markets. Our production facilities are located in Europe and North America.

We reported net income of $15.2 million, or $.13 per share, in the second quarter of 2026 compared to a net loss of $4.8$9.2 million, or $.04$.08 per share, in the second quarter of 2025. For the first six months of 2026, we reported net income of $10.4 million or $.09 per share, compared to net income of $8.9 million or $.08 per share, in the first quartersix of 2026 compared to net income of $18.1 million, or $.16 per share, in the first quartermonths of 2025. Net income decreasedincreased in the second quarter and first quartersix months of 2026 compared to the prior year periodperiods primarily due to lower income from operations as a result of lower average TiO2 selling prices and lower production volumes, partially offset by higher sales volumes and lower production costs drivenresulting primarily byfrom cost reduction initiatives implemented in the fourth quarter of 2025 to structurally realign our operations,2025, as well as lower raw material costs (primarily feedstock costs) and energylower unabsorbed fixed costs. These favorable factors were partially offset by lower average TiO2 selling prices. Comparability of our results was also impacted by the effects of changes in currency exchange rates.

Our net lossincome for the threesix months ended MarchJune 31,30, 2026 includes an income tax expense of $2.0 million ($.02 per share) to recognize an uncertain tax position related to a German tax audit.

We started 2026 with average TiO2 selling prices lower than at the beginning of 2025; however, our average TiO2 selling prices increased 2%4% during the first six months of 2026. During the second quarter of 2026.2026, we announced and implemented various price increases and surcharges in response to higher operating costs. Our average TiO2 selling prices infor the first quartersix months of 2026 were 6%4% lower than our average TiO2 selling prices duringfor the first quartersix months of 2025. Overall, our sales volumes increased in the first quartersix months of 2026 compared to the same period in 2025 primarily due to highermarket overallshare salesgains volumesacross all markets resulting from changing competitive and supply conditions and the continued effect of anti-dumping duties which remain in the North American, Latin American and export markets partially offset by lower sales volumeseffect in ourcertain European market.markets.

During the fourth quarter of 2025, we implemented cost reduction initiatives, including workforce reductions and other measures, to permanently improve our cost structure and enable more efficient operation of our facilities at lower production rates for extended periods. As a result, beginningwe in the first quarter of 2026,adjusted our normal production capacity range hasin been adjusted2026 to reflect our production capabilities under this new cost structure.

Excluding the effect of changes in currency exchange rates, our cost of sales per metric ton of TiO2 sold in the first quarterhalf of 2026 was lower as compared tothan the firstcomparable quarterperiod of 2025 due to decreases in per metric ton production costs driven primarily by the cost reduction initiatives discussed above, as well as lower raw material costs (primarily feedstock costs) and energylower unabsorbed fixed costs.

Quarter ended MarchJune 31,30, 2026 compared to the quarter ended MarchJune 31,30, 2025

(1) We use segment profit to assess the performance of our TiO2 operations. Segment profit is defined as net income (loss) before income tax expense and certain general corporate items. The general corporate items include corporate expense and the components of other income (expense) except for trade interest income.income, see Note 2 to our Condensed Consolidated Financial Statements.

Net sales - Net sales in the firstsecond quarter of 2026 increased 4%,13%, or $20.0$63.7 million, compared to the firstsecond quarter of 2025 primarily due to the effects of a 4%16% increase in sales volumes (which increased net sales by approximately $20$79 million) and the favorable impact of changes in currency exchange rates (primarily the euro) which we estimate increased our net sales by approximately $30$10 million. These increases were partially offset by a 6%3% decrease in average TiO2 selling prices (which decreased net sales by approximately $30$15 million). and by changes in product mix, primarily due to lower average selling prices and lower sales volumes in our complementary businesses. TiO2 selling prices will increase or decrease generally as a result of competitive market pressures, changeschange in the relative level of supply and demand as well as changeschange in raw material and other manufacturing costs.

Cost of sales and gross margin - Cost of sales increased by $43.5$23.7 million, or 11%,5%, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 due to the effects of a 4%16% increase in sales volumes and the unfavorable impact from changes in currency exchange rates,rates. These increases were partially offset by lower production costs drivenresulting primarily byfrom the cost reduction initiatives asimplemented wellin asthe fourth quarter of 2025, lower raw material costs (primarily feedstock), and energylower unabsorbed fixed costs. In addition, unabsorbedUnabsorbed fixed costs were not material in the firstsecond quarter of 2026 compared to $10approximately $20 million of unabsorbed fixed costs in the firstsecond quarter of 2025.

Our cost of sales as a percentage of net sales increasedimproved to 84%82% in the firstsecond quarter of 2026 compared to 78%87% in the same period of 2025, asprimarily due to the favorable effects of higher sales volumes and lower production costs, discussed above. These favorable impacts were partially offset by lower average TiO2 selling prices and the unfavorable impact of lower average TiO2 selling prices moreand thansales offsetvolumes thewithin favorableour effectscomplementary of lower production costs.businesses.

Gross margin as a percentage of net sales decreasedincreased to 16%18% in the firstsecond quarter of 2026 compared to 22%13% in the firstsecond quarter of 2025. As discussed and quantified above, ourOur gross margin as a percentage of net sales decreasedincreased primarily due to the net effects of higher sales volumes, lower average TiO2 selling prices, lower production costs as discussed above, and the unfavorable impact from changes in currency exchange rates.

Selling, general and administrative expense - Selling, general and administrative expense increased $2.0$2.4 million, or 3%,4%, in the firstsecond quarter of 2026 compared to the firstsecond quarter of 20252025, as the negativeunfavorable impact of changes in currency exchange rates exceededand thehigher benefits of lowerdistribution costs duringmore thethan quarter. Excluding the effects of currency exchange rates, we realized lower selling, general and administrative expenses as a result of (i) realization ofoffset cost savings asrealized a result offrom the fourth quarter of 2025 restructuring,restructuring. (ii)Excluding lowerthe warehousingeffects of changes in currency exchange rates, distribution costs increased primarily due to lowerhigher average finished products inventorysales volumes and (iii)elevated non-recurringU.S. distributionfreight costsrates incurredbeginning early in the firstsecond quarter of 2025 associated with tariff mitigation strategies.2026. Selling, general and administrative expense as a percentage of net sales decreased to 12% in the firstsecond quarter of 2026 compared to 13% in the firstsecond quarter of 20252025, primarily due to the effects of higher sales.

Segment profit - Segment profit decreasedincreased by $26.5$30.1 million to $15.1$41.0 million in the firstsecond quarter of 2026 compared to $41.6$10.9 million in the firstsecond quarter of 2025, primarily as a result of the factors impacting gross margin discussed above. We estimate that changes in currency exchange rates decreased segment profit by approximately $6$12 million in the firstsecond quarter of 2026 compared to the same period in 2025, as discussed in the effects of currency exchange rates section below.

Other non-operating income (expense) - Interest expense in the firstsecond quarter of 2026 increased by $2.7$1.4 million compared to the firstsecond quarter of 2025 primarily due to higher average debt balances and higher interest rates. See Note 6 to our Condensed Consolidated Financial Statements. WeOther recognized an unrealized gaincomponents of $.3net millionperiodic pension and OPEB cost in the firstsecond quarter of 2026 relatedincreased $.2 million compared to the changesecond inquarter marketableof equity2025 securitiesprimarily compareddue to anlower unrealizedexpected lossreturn ofon $1.0plan million in the same period of 2025.assets.

Income tax expense - We recognized income tax expense of $2.8$7.7 million in the firstsecond quarter of 2026 compared to income tax expense of $7.6$3.5 million in the firstsecond quarter of 2025. The decreaseincrease is primarily due to lowerhigher earnings in the firstsecond quarter of 2026 and the jurisdictional mix of such earnings somewhat offset by a net uncertain tax position of $2.0 million recognized in the first quarter of 2026.earnings. Our earnings and losses are subject to income tax in various U.S. and non-U.S. jurisdictions, and the income tax rates applicable to the pre-tax earnings (losses) of our non-U.S. operations are generally higher than the income tax rates applicable to our U.S. operations. 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,allowances, changes in our reserve for uncertain tax positions, 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 11 to our Condensed Consolidated Financial Statements.

Fluctuations in currency exchange rates had the following effects on our sales and incomesegment from operationsprofit for the periods indicated.

The $6$12 million decrease in incomesegment from operationsprofit was comprised of the following:

We areremain focused on improving operating marginsprofitability through pricing actions, disciplined cost management, and continued execution of our operating cost structural realignment initiatives. We are also continuingcontinue to pursue targeted marketsales sharegrowth opportunities in regions and markets impactedaffected by competitorchanging curtailments,competitive closures,and supply conditions, logistical disruptions,challenges orand trade measures such as tariffs or duties that have reduced the competitiveness of low-costcertain imports. These actions are intended to support improved operating performance while maintaining flexibility in the event of continued demand volatility.

Liquidity and capital resources remain sufficient to support our operations and planned capital investments. While we typically experience significant seasonal cash usage in the first quarter,half of the year, we expect cash on hand to improve over the remainder of the year. We will continue to actively manage working capital, including inventories and receivables, to bolster operating cash flows and maintain financial flexibility. We believe our revolverrevolving credit facility availability, combined with the absence of near-term debt maturities and improved operating cash flows, will provide adequate liquidity for expected working capital needs and capital allocation requirements.

Cash usedprovided inby operating activities was $51.3$2.0 million in the first threesix months of 2026 compared to cash used of $102.4$81.7 million in the first threesix months of 2025. This $51.1$83.7 million decreaseincrease in the amount of cash usedprovided inby operating activities was primarily due to the net effect of the following:

Our capital expenditures of $10.2$26.3 million and $12.0$23.2 million in the first threesix months of 2026 and 2025, respectively, were primarily to maintain and improve the cost effectiveness of our manufacturing facilities.

During the first threesix months of 2026 and 2025, we paid quarterly dividends of $.05 per share to stockholders aggregating $5.8$11.5 million each period.

During the first threesix months of 2026 and 2025, we had net borrowings of $58.9$28.4 million and $32.9$25.4 million, respectively, on our revolving credit facility.

At MarchJune 31,30, 2026, our consolidated debt comprised:

Availability under the Global Revolver is subject to a borrowing base calculation, as defined in the agreement. The borrowing base calculated for the period ended MarchJune 31,30, 2026 was approximately $287$261 million.

Our Senior Secured Notes, the Contran Term Loan and our Global Revolver contain a number of covenants and restrictions which, among other things, restrict our 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 8 to our Consolidated Financial Statements included in our 2025 Annual Report. We are in compliance with all of our debt covenants at MarchJune 31,30, 2026. We believe we will be able to continue to comply with the financial covenants contained in our credit facility through its maturity; however, if future operating results differ materially from our expectations we may be unable to maintain compliance.

At MarchJune 31,30, 2026, we had aggregate cash, cash equivalents and restricted cash on hand of $33.6$34.5 million, of which $23.7$27.8 million was held by our non-U.S. subsidiaries. Following 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. 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 obligations (defined as the twelve-month period ending MarchJune 31,30, 2027) and our long-term obligations (defined as the five-year period ending MarchJune 31,30, 2031, our time period for long-term budgeting). Our Global Revolver matures in July 2029, and at MarchJune 31,30, 2026, we had total availability for borrowing of approximately $287$261 million less any amounts outstanding under this facility. The borrowing base is calculated at least quarterly, and the amount available for borrowing may change based on applicable period end balances. See Note 6 to our Condensed Consolidated Financial Statements.

We intend to invest approximately $60 million in capital expenditures primarily to maintain and improve our existing facilities during 2026, including $10.2$26.3 million in expenditures through MarchJune 31,30, 2026. 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.

At MarchJune 31,30, 2026, we have 1,017,518 shares available for repurchase under a stock repurchase program authorized by our board of directors.

For a discussion of our critical accounting policies, refer to Part I, Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2025 Annual Report. There have been no changes in our critical accounting policies during the first threesix months of 2026.