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

The global market in which our Chemicals Segment operates 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. Our Chemicals Segment faces 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 Chemicals Segment’s products with products made by Chinese producers could increase if Chinese producers increase the use of chloride process technology and improve the quality of their sulfate and chloride products. Some of our Chemicals Segment’s competitors may be able to drive down prices for our Chemicals Segment’s products if their costs are lower than our Chemicals Segment’s costs, including its competitors with vertically integrated sources of raw materials for the chloride process who may have a competitive advantage during periods of high or rising raw material costs or who operate in regions with less stringent regulatory requirements. For example, Chinese competition generally has lower operating costs due to less stringent regulatory and environmental compliance requirements and less expensive energy prices. China has dumped lower cost sulfate process TiO2 into markets our Chemicals Segment serves. 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 Chemicals Segment’s competitors’ financial, technological and other resources may be greater than its resources and such competitors may be better able to withstand extended periods of reduced demand or other changes in market conditions. Our Chemicals Segment’s competitors may be able to respond more quickly than it can to new or emerging technologies and changes in customer requirements. Further, consolidation of our Chemicals Segment’s competitors or customers may result in reduced demand for its products or make it more difficult for it to compete with its competitors. The occurrence of any of these events could result in reduced earnings or operating losses.

For our Chemicals Segment, the number of sources for and availability of certain raw materials is specific to the particular geographical region in which our facilities are located. Titanium-containing feedstocks suitable for use in our Chemicals Segment’s 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 our Chemicals Segment purchases or mines its raw material supplies could adversely affect raw material availability. If our Chemicals Segment or its worldwide vendors are unable to meet their planned or contractual obligations and our Chemicals Segment is unable to obtain necessary raw materials, it could incur higher costs for raw materials or may be required to reduce production levels. OurFor example, our Chemicals Segment experienced increases in feedstock costs in 2023 and 2024, forwhich example, whichnegatively affected its margins. Our Chemicals Segment has also experienced higher operating costs such as energy costs. Future variations in the cost of energy, which primarily reflect market prices for oil and natural gas, and for raw materials may significantly affect its operating results and decrease liquidity as our Chemicals Segment may not always be able to increase its selling prices to offset the impact of any higher costs or reduced production levels.

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

Certain components used in our Component Products Segment’s products are manufactured by foreign suppliers located in China and elsewhere. Global economic and political conditions, including natural disasters, terrorist acts, transportation disruptions, global conflictconflicts or trade wars and public health crises such as pandemics, could prevent our Component Products Segment’s vendors from being able to supply these components. Should our Component Products Segment’s vendors not be able to meet their supply obligations or should it be otherwise unable to obtain necessary raw materials or components, it may incur higher supply costs or may be required to reduce productionor levels,suspend eitherproduction. In addition, the imposition of new tariffs or increases in existing tariffs by the U.S. government on imports from China, Mexico or other countries from which our Component Products Segment imports raw materials and other components could increase its supply costs. Increases in our Component Products Segment’s supply costs may decrease ourits liquidity or negatively impact ourits financial condition or results of operations as our Component Products Segment may be unable to offset the higher costs with increases in its selling prices or reductions in other operating costs.

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

In July 2024 Kronos recently completed the LPC acquisition in which it purchased the 50% ownership interest in LPC it did not previously own.own, and Kronos subsequently merged LPC into Kronos’ wholly-owned subsidiary, Kronos Louisiana. If Kronos experiences unforeseen technological, operational or other difficulties in managingintegrating the integrationKronos ofLouisiana LPCfacility asinto its wholly-owned subsidiary,operations, Kronos may not be able to implement the process innovations at the facility that it expects. In addition, Kronos may not be able to achieve the anticipated synergies or improveimprovements in efficiency and product quality that it expects. With or without such difficulties, the integration of the LPCKronos Louisiana facility into Kronos’ operations may divert significant management time and attention from its other operations. If Kronos fails to successfully integrate LPCthe Kronos Louisiana facility into its 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, ourKronos’ business, financial condition, results of operations and prospects could be adversely affected.

A substantial portion of the revenues and assets associated with our Real Estate Management and Development Segment relates to certain land under development in Henderson, Nevada, including approximately 2,100 acres zoned for residential/planned community purposes. A substantial majorityAll of the remaining land in the residential/planned community was sold priorin to 2024.2025. We generally recognize revenue from these land sales over time using cost-based inputs because we receive substantially all cash payment at the time of sale but significant development obligations still exist.exist for post-closing obligation activities and several community-wide large projects. We currently estimate development obligations are approximately $78$54 million and will take approximately twoone to threetwo years to complete. Our estimates of our development obligations include certain assumptions about future labor and construction costs. If actual costs were significantly above our estimates, revenue, profits and liquidity in our Real Estate Management and Development Segment may be significantly and negatively affected.

We have a significant amount of debt, primarily related to Kronos’ 9.50% Senior Secured Notes due 2029, Kronos’ 3.75% Senior Secured Notes due 2025, Kronos’ term loan from Contran, Kronos’ borrowings on its global revolving credit facility (the “Global Revolver”), our loan from Contran Corporation and the LandWell bank note. As of December 31, 2024,2025, our total consolidated debt was approximately $563$592 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 $794$213 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 certain of our revolving credit facilities in the future, in some instances, will depend in part on these subsidiaries’ ability to maintain specified financial ratios and satisfy certain financial covenants contained in the applicable credit agreement.

We operate our businesses in several different countries and sell our products worldwide. For example, during 20232024 and 20242025 approximately 44% and 45% of our Chemicals Segment’s sales volumesvolumes, respectively, were sold into European markets. The majority (but not all) of our sales from our Chemicals Segment’s operations outside the United States are denominated in currencies other than the United States dollar, primarily the euro, other major European currencies and the Canadian dollar. Therefore, we are exposed to risks related to the need to convert currencies we receive from the sale of our products into the currencies required to pay for certain of our operating costs and expenses and other liabilities (including indebtedness), all of which could result in future losses depending on fluctuations in currency exchange rates and affect the comparability of our results of operations between periods.

Protection of our intellectual property rights, including patents, copyrights, trade secrets, confidential information, trademarks and tradenames, is important to our businesses and our competitive positions. We endeavor to protect our intellectual property rights in key jurisdictions in which our products are produced, sold or used and in jurisdictions into which our products are imported. However, we may be unable to obtain protection for our intellectual property in key jurisdictions. Although we own and have applied for numerous patents and trademarks throughout the world, we may have to engage in judicial enforcement in order to protect our patent rights and other proprietary rights. Our patents and other intellectual property rights may be challenged, invalidated, circumvented, rendered unenforceable or otherwise compromised. A failure to protect, defend or enforce our intellectual property could have an adverse effect on our financial condition and results of operations. Similarly, third parties may assert claims against us and our customers and distributors alleging our products infringe upon third-party intellectual property rights. In the event that any such third-party prevails against us on such claims, there could be an adverse effect on our financial condition and results of operations.

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 become known, we cannot predict the effect on our business, results of operations or financial condition. However, if further GHG laws and regulations were to be enacted in one or more countries, it could negatively impact our future results of operations through increased costs of production, particularly as it relates to our energy requirements or our need to obtain emissions permits. If such increased costs of production were to materialize, we may be unable to pass price increases on to our customers to compensate for increased production costs, which may decrease our liquidity, operating income and results of operations. In addition, any adopted future laws and regulations focused on climate change and/or GHG emissions could negatively impact our ability (or that of our customers and suppliers) to compete with companies situated in areas not subject to such laws and regulations.

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 our Chemicals Segment currently manufactures a significant portion of its North American TiO2 in Canada, if sustained for an extended period of time, the 25%a tariff on our Chemicals Segment’s imports into the U.S. from Canada,Canada without exclusion, willwould make its products manufactured in Canada and sold into the U.S. more expensive. As a result, demand for these products could be reduced, or our Chemicals Segment could be required to absorb the increased costs or increase prices of such products. Tariff mitigation strategies, such as those our Chemicals Segment undertook in the first quarter of 2025 which included building and positioning inventory from its Canadian facility into the U.S., may result in increased shipping and warehousing costs. Future mitigation strategies may offer only temporary relief from the effect of these tariffs. Such tariffs and, if enacted, any further legislation or actions taken by the U.S. government that restrict trade, such as additional tariffs, trade barriers and other protectionist or retaliatory measures taken in response, could adversely impact our Chemicals Segment’s ability to sell its products in the U.S. or reduce its revenues and gross margins. These measures may also increase our Chemicals Segment’s costs of Canadian feedstock imported into the U.S. and could adversely impact its gross margins or require our Chemicals Segment to raise prices thereby making its products less competitive. Additional tariffs imposed by the U.S or any retaliatory or reciprocal tariffs imposed by other countries could also increase the cost of feedstock and other raw materials that go into making 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.

OurIn addition to the 2024 items noted above, our diluted net loss per share in 2023 includes:

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 Segments’ 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 Chemicals Segment’s TiO2 grades are considered specialty pigments, the majority of its grades and substantially all of its production are considered differentiated commodity pigment products with price and availability being the most significant competitive factors along with product quality and customer and technical support services.

As previously reported, effective the Acquisition Date of July 16, 2024,2024 (the “Acquisition Date”), Kronos acquired the 50% joint venture interest in LPC previously held by Venator.Venator Investments, Ltd. (“Venator”). Prior to the acquisition, Kronos held a 50% joint venture interest in LPC through a wholly-owned subsidiary. LPC was operated as a manufacturing joint venture between Kronos and Venator. Following the acquisition, LPC became a wholly-owned subsidiary of Kronos. In 2025, Kronos acquiredmerged LPC into its wholly-owned subsidiary Kronos Louisiana, Inc. (the 50%combined jointcompany ventureis interest that it did not already own for consideration of $185 million less a working capital adjustment. An additional earn-out payment of upreferred to $15as million“Kronos based on Kronos’ aggregate consolidated net income before interest expense, income taxes and depreciation and amortization expense, or EBITDA, during a two-year period comprising calendar years 2025 and 2026 may be required. The acquisition was financed through borrowings of $132.1 million under Kronos’ Global Revolver and the remainder paid with cash on hand.Louisiana”). Kronos 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 3 to our Consolidated Financial Statements.

Excluding the effect of changes in currency exchange rates,rates and unabsorbed fixed costs, our ChemicalsChemical Segment’s cost of sales per metric ton of TiO2 sold in 20242025 was significantly lower as compared to 20232024 primarily due to significant decreases in per metric ton production costs (primarily energy and raw materials).

Net Sales – Our Chemicals Segment’s net sales in 20242025 increaseddecreased 13%,1%, or $220.6$27.7 million, compared to 20232024 primarily due to the effects of a 20% increase in sales volumes due to improved overall demand across all major markets (which increased net sales by approximately $333 million) partially offset by a 5%4% decrease in average TiO2 selling prices (which decreased net sales by approximately $83$75 million) somewhat offset by a 2% increase in sales volumes (which increased net sales by approximately $38 million). Changes in product mix negatively contributed to net sales, primarily due to changes in product sales mix in export markets in 2024 as compared to 2023. Additionally, we estimate that changes in currency exchange rates (primarily the euro) increased our ChemicalsChemical Segment’s net sales by approximately $5$24 million in 20242025 as compared to 2023.2024. TiO2 selling prices will increase or decrease generally as a result of competitive market pressures and changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs. Incremental sales volumes resulting from the LPC acquisition did not significantly impact comparisons to the prior year.

Our Chemicals Segment’s sales volumes decreasedincreased 13% in 20232% as compared to 20222024 primarily due to lowermarket overallshare demandgains acrossin allEuropean, majorNorth American and Latin American markets notedrelated above. The lower overall demand our Chemicals Segment began experiencing into the second2024 halfacquisition of 2022LPC. continuedOur throughout most of 2023. However, our ChemicalsChemical Segment’s sales volumes were 29%7% higher in the fourth quarter of 20232025 as compared to the fourth quarter of 20222024 primarily due to strengtheningincremental demandmarket forshare TiO2increases in itsthe primaryEuropean marketsmarket as a result of Europecompetitor andplant Northclosures America.in Europe.

Cost of Sales and Gross Margin – Cost of sales increased $27.4$118.3 million, or 2%,8%, in 20242025 compared to 20232024 due to the net effects of aapproximately 20%$111 increasemillion in sales volumes, a 33% increase in production rates resulting in reduced unabsorbed fixed production costs,costs and(including $54 million in the fourth quarter) recognized as a result of reduced operating rates at our Chemicals Segment’s production facilities, lower production costs of approximately $115$14 million (primarily energyraw materials) and rawfavorable materialscurrency fluctuations (primarily the euro). Our Chemicals Segment’s unabsorbed fixed production costs in 2024 were $12 millionmillion. (incurredOur Chemical Segment’s cost of sales in 2025 includes a charge in the firstfourth quarter) comparedof to2025 $96of approximately $4 million in 2023 related to curtailmentsworkforce thatreductions began in 2022 and continued into the first quarter of 2024, as discussednoted above. Our ChemicalsChemical Segment’s cost of sales in 2024 include a charge of approximately $2 million related to workforce reductions and approximately $14 million in non-cash charges related to the closure of its sulfate process line in Canada discussed above. Sales and production volumes resulting from the LPC acquisition did not materially impact comparisons to the prior year.Canada.

Operating Income (Loss) – Our Chemicals Segment had an operating loss of $24.5 million in 2025 compared to operating income of $138.5 million in 2024 compared to an operating loss of $41.1 million in 2023 as a result of the factors impacting gross margin discussed above. Our Chemicals Segment recognized a gain of $2.5 million in 2023 related to cash received from the settlement of a business interruption insurance claim. We estimate that changes in currency exchange rates increaseddecreased our Chemicals Segment’s operating incomeloss by approximately $10$8 million in 20242025 as compared to 2023,2024, as further discussed below.

Our Chemicals Segment had operating income of $138.5 million in 2024 compared to an operating loss of $41.1 million in 2023 compared to operating income of $174.6 million in 2022 as a result of the factors impacting gross margin discussed above. Our Chemicals Segment recognized a gain of $2.5 million in 2023 and a gain of $2.7 million in 2022 related to cash received from the settlement of a business interruption insurance claim related to Hurricane Laura.claim. We estimate that changes in currency exchange rates decreasedincreased our Chemicals Segment’s operating lossincome by approximately $16$10 million in 20232024 as compared to 2022,2023, as further discussed in the Currency Exchange Rates section below.

Our Chemicals Segment’s operating income (loss) is net of amortization of purchase accounting adjustments made in conjunction with our acquisitions of interests in NL and Kronos. As a result, we recognize additional depreciation expense above the amounts Kronos reports separately, substantially all of which is included within cost of sales. We recognized additional depreciation expense of $1.3 million in each of 2022 and 2023 and2023, $2.5 million in 2024,2024 and $2.2 million in 2025, which reducedincreased our reported Chemicals Segment’s operating incomeloss as compared to amounts reported by Kronos.

Currency Exchange Rates – Our Chemicals Segment has substantial operations and assets located outside the United States (primarily in Germany, Belgium, Norway and Canada). The majority of our Chemicals Segment’s sales from non-U.S. operations are denominated in currencies other than the U.S. dollar, principally the euro, other major European currencies and the Canadian dollar. A portion of our Chemicals Segment’s sales generated from its non-U.S. operations is denominated in the U.S. dollar (and consequently our Chemicals Segment’s non-U.S. operations will generally hold U.S. dollars from time to time). Certain raw materials used in all our Chemicals Segment’s production facilities, primarily titanium-containing feedstocks, are purchased primarily in U.S. dollars, while labor and other production and administrative costs are incurred primarily in local currencies. Consequently, the translated U.S. dollar value of our Chemicals Segment’s non-U.S. sales and operating results are subject to currency exchange rate fluctuations which may favorably or unfavorably impact reported earnings and may affect the comparability of period-to-period operating results. In addition to the impact of the translation of sales and expenses over time, our non-U.S. operations also generate currency transaction gains and losses which primarily relate to (i) the difference between the currency exchange rates in effect when non-local currency sales or operating costs (primarily U.S. dollar denominated) are initially accrued and when such amounts are settled with the non-local currency and (ii) changes in currency exchange rates during time periods when our Chemicals Segment’s non-U.S. operations are holding non-local currency (primarily U.S. dollars). and (iii) relative changes in the aggregate fair value of currency forward contracts held from time to time. Our Chemicals Segment periodically use currency forward contracts to manage a portion of its currency exchange risk, and relative changes in the aggregate fair value of any currency forward contracts our Chemicals Segment holds from time to time serve in part to mitigate the currency transaction gains or losses we would recognize from the first two items described above.

Our expectations for the TiO2 industry and our Chemicals Segment’s operations are based on a number of factors outside ourits control. Our Chemicals Segment’sSegment operations are affected by global and regional economic, political and regulatory factorsfactors, and it has experienced global market disruptions. As noted above, energy costs in Europe, which spiked when Russia invaded Ukraine, remain above historical levels. In addition, our Chemicals Segment operates 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 Chemicals Segment’s imports from Canada could harm its ability to compete and adversely impact its earnings and profitability if such tariffs are sustained for an extended period of time without exclusion. Our Chemicals Segment has begun to implement strategies to minimize the potential impacts. Future impacts on our Chemicals Segment’s operations will depend on, among other things, future energy costs, the effect newly enacted tariffs have onin jurisdictions inwhere which our Chemicals Segmentit or its customers and suppliers operate, its success in implementing mitigation strategies, and the impact economic conditionsconditions, consumer confidence, and geopolitical events have on its operations or its customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.

Our Component Products Segment reported operating income of $22.6 million in 2025, $17.0 million in 2024 and $25.4 million in 2023. The increase in operating income in 2025 compared to 2024 was driven by higher sales and improved gross margin at each of 2023the security products and 2022.marine Thecomponents decreasereporting units. In contrast, the decline in operating income in 2024 compared to 2023 isresulted due tofrom lower sales and reduced gross margin atacross both security products and marine components reporting units. Operating income in 2023 was comparable to 2022 as lower marine components sales were offset by higher security products sales and higher gross margin percentages across both reporting units.

Net Sales – Our Component Products Segment’s net sales decreased $15.4 million in 2024 compared to 2023 primarily due to lower marine components sales to the towboat market and lower security products sales to the government security market. Marine components net sales decreased $9.4 million, or 23%, in 2024 as compared to 2023 primarily due to $8.7 million lower sales to the towboat market through the first three quarters of 2024, partially offset by higher sales in the fourth quarter of 2024, including $1.1 million higher sales to the towboat market and $1.0 million higher sales to the government market. Relative to the full year of 2023, marine component sales were $7.6 million lower to the towboat market (primarily to original equipment boat manufacturers), $1.4 million lower to the industrial market and $.6 million lower to each the engine builder market and distributors, partially offset by $1.4 million higher sales to the government market. Security products net sales decreased $6.0 million, or 5%, in 2024 as compared to 2023 primarily due to lower sales to the government security market as a result of sales related to a pilot project for a government security customer that shipped in the third and fourth quarters of 2023 and for which there were no related sales in 2024. Relative to prior year, sales were $8.3 million lower to the government security market, $2.0 million lower to the transportation market and $.9 million lower to distributors, partially offset by $4.1 million higher sales to the healthcare market and $.7 million higher sales to the tool storage market.

Cost of Sales and Gross Margin – Our Component Products Segment’s cost of sales decreasedincreased in 20242025 compared to 20232024 primarily due to the effects of lowerhigher sales at both security products and marine components partiallyas offsetwell byas higherincreased production costs across both reporting units. As a result, our Component Products Segment’sHowever, cost of sales as a percentage of net sales increaseddeclined over the same period.period Ourdriven by a more favorable customer and product mix, particularly within security products, and increased coverage of fixed costs due to higher sales across both segments. As a result, our Component Products Segment’s gross margin as a percentage of net sales decreasedincreased in 20242025 compared to 2023 primarily due to the factors affecting cost of sales and decreased coverage of fixed costs due to lower sales.2024. Security products gross margin as a percentage of net sales forincreased 2024in decreased2025 as compared to 20232024 primarily due to lower sales, a less favorable customer and product mix, higher employee related costs (primarily increased medical costs), higher materials costs (primarily brass and electronics) in the latter half of the year and decreased coverage of fixed costs due to lowerhigher sales.sales and a more favorable customer and product mix. These factors were partially offset by higher costs associated with inventory sold during the second half of the year and increased employee-related expenses including salaries, benefits and medical costs, of $2.6 million. Marine components gross margin as a percentage of net sales decreasedincreased in 20242025 compared to 20232024 primarily due to higher cost inventory produced during the fourth quarter of 2023 and sold in the first quarter of 2024 and decreasedincreased coverage of fixed costs as a result of lowerhigher sales,sales partially offset by ahigher moreemployee-related favorableexpenses customerincluding salaries, benefits and product mix, lower employee salaries and benefits of approximately $1.8 million primarily related to headcount reductions and decreased labormedical costs of $1.2$1.7 million due to lower production volumes.million.

Our Component Products Segment’s cost of sales decreased in 20232024 compared to 20222023 primarily due to the effects of lower production costssales at both security products and marine components partially offset by higher production costs across both reporting unitsunits. As a result, our Component Products Segment’s cost of sales as wella aspercentage lowerof marinenet componentssales sales.increased over the same period. Our Component Products Segment’s gross margin as a percentage of net sales increaseddecreased overin the2024 samecompared periodto 2023 primarily due to the factors affecting cost of sales and decreased coverage of fixed costs due to lower sales. Security products gross margin as a percentage of net sales for 20232024 increaseddecreased as compared to 20222023 primarily due to lower productionsales, a less favorable customer and product mix, higher employee related costs (includingprimarily lowerincreased material,medical overtimecosts), higher materials costs (primarily brass and shippingelectronics) costs)in the latter half of the year and increaseddecreased coverage of fixed costs ondue higherto sales,lower primarily in the fourth quarter.sales. Marine components gross margin as a percentage of net sales increaseddecreased in 20232024 compared to 20222023 primarily due to lowerhigher rawcost materialinventory costsproduced (primarilyduring stainlessthe steelfourth quarter of 2023 and aluminum),sold lowerin suppliesthe costsfirst drivenquarter byof lower volume, lower shipping costs2024 and lower labor costs from reduced employee overtime due to lower sales volumes, partially offset by decreased coverage of fixed costs as a result of lower sales.sales, partially offset by a more favorable customer and product mix, lower employee salaries and benefits of approximately $1.8 million primarily related to headcount reductions and decreased labor costs of $1.2 million due to lower production volumes.

Operating Income – As a percentage of net sales, our Component Products Segment’s operating income increased in 2025 compared to 2024 and decreased in 2024 compared to 2023 and increased in 2023 compared to 2022.2023. Operating income margins were primarily impacted by the factors affecting net sales, cost of sales and gross margin, discussed above. Operating costs and expenses consist primarily of sales and administrative-related personnel costs, sales commissions and advertising expenses directly related to product sales and administrative costs relating to business unit and corporate management activities, as well as gains and losses on sales of property and equipment. Operating costs and expenses increased $.5$1.3 million in 20242025 compared to 20232024 predominantly due to higher employeeemployee-related salarycosts including salaries, benefits, and benefitmedical costsexpenses at securityboth products.reporting units.

As a percentage of net sales, our Component Products Segment’s operating income increaseddecreased in 20232024 compared to 2022.2023. TheOperating operatingincome marginmargins percentage increased in 2023 compared to 2022were primarily dueimpacted toby the factors impactingaffecting net sales, cost of sales and gross marginmargin, discussed above. Operating costs and expenses increasedconsist inprimarily 2023of comparedsales and administrative-related personnel costs, sales commissions and advertising expenses directly related to 2022product predominantlysales dueand administrative costs relating to higherbusiness salaryunit and benefitcorporate costsmanagement atactivities, theas securitywell productsas reportinggains unitand whichlosses increasedon bysales $.6of million.property and equipment.

General – Our Component Products Segment’s profitability primarily depends on its ability to utilize its production capacity effectively, which is affected by, among other things, the demand for its products and its ability to control its manufacturing costs, primarily comprised of labor costs and materials. The materials used in our Component Products Segment’s products consist of purchased components and raw materials some of which are subject to fluctuations in the commodity markets such as zinc, brass, aluminum and stainless steel. Total material costs represented approximately 46%43% of our Component Products Segment’s cost of sales in 2024,2025, with commodity-related raw materials representing approximately 13%14% of its cost of sales. OurDuring 2025, our Component Products Segment’sSegment experienced increases in the cost of certain raw materialmaterials. Throughout the year, market prices for brass and aluminum experienced a general upward trend. Stainless steel prices were generallyrelatively stable throughin the first halfpart of 2024.2025 Beginningbut inbegan increasing during the latter half of the thirdyear. quarterZinc ourpricing Componentwas Productsrelatively Segment began to experience moderate increasesstable in certain2025, raw material costs, particularly brass. The zinc market was volatile in 2024, butand our Component Products Segment was successfulable into makingmitigate increases through strategic spot buysbuy to keep its costs consistent with 2023. Prices for aluminum and stainless steel, which are the primary raw materials used for the manufacture of marine components (including marine exhaust headers and pipes, wake enhancement systems, throttles and trim tabs), were relatively stable in 2024 because our Component Products Segment took advantage of volume purchase opportunities during the year.purchases. In most cases, commodity raw materials our Component Products Segment purchases include processing and conversion costs, such as alloying, extrusion and rolling, which remain elevated due to costs of labor, transportation and energy. Processing and conversion costs are not expected to decrease and may negate the benefit of softening commodity prices on our Component Products Segment’s purchases.decrease. Based on current economic conditions, our Component Products Segment expects the prices for zinc, brass, aluminum, stainless steel and other manufacturing materials in 20252026 to be relativelymore stable,volatile althoughcompared to 2025. In addition to supply and demand, governmental actions such as tariffs may impact markets.

We are primarily a holding company. We operate through our wholly-owned and majority-owned subsidiaries, including NLI Holdings, Inc. (formerly NL Industries, Inc.,Inc.), Kronos Worldwide, Inc., CompX International Inc., Tremont LLC, Basic Management, Inc. (“BMI”) and theThe LandWell Company (“LandWell”). Kronos (NYSE: KRO), NLNLI (NYSE: NL) and CompX (NYSE American: CIX) each file periodic reports with the SEC.

Quarter Ended MarchJune 31,30, 2026 Compared to the Quarter Ended MarchJune 31,30, 2025 –

We reported net income attributable to Valhi stockholders of $2.0$22.3 million, or $.07$.78 per diluted share, in the firstsecond quarter of 2026 compared to net income attributable to Valhi stockholders of $16.9$.9 million, or $.59$.03 per diluted share, in the firstsecond quarter of 2025. As discussed more fully below, ourOur net income attributable to Valhi stockholders decreasedincreased from 2025 to 2026 primarily due to lowerhigher operating income from our Chemicals Segment partiallyof offset$40.4 bymillion higherin 2026 compared to operating income fromof our$10.3 Componentmillion Productsin and our Real Estate Management and Development Segments.2025.

Our diluted net income per share in the firstsecond quarter of 2026 includes:

Current Industry Conditions – Our Chemicals Segment started 2026 with average TiO2 selling prices lower than at the beginning of 2025; however, its average TiO2 selling prices increased 2%4% during the first six months of 2026. During the second quarter of 2026.2026, our Chemicals Segment announced and implemented various price increases and surcharges in response to higher operating costs. Our Chemicals Segment’s average TiO2 selling prices in the first quartersix months of 2026 were 6%4% lower than its average TiO2 selling prices duringfor the first quartersix months of 2025. Overall, our Chemicals Segment’s 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 thecertain European market.markets.

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

Excluding the effect of changes in currency exchange rates, our Chemicals Segment’s 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.

Net Sales – Our Chemicals Segment’s 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 Chemicals Segment’sSegment estimates increased its 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 its 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 – Our Chemicals Segment’s cost of sales increased by $43.6$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 Chemicals Segment’s 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 effectsChemicals ofSegment’s lowercomplementary production costs.businesses.

Gross margin as a percentage of net sales decreased to 16% in the first quarter of 2026 compared to 22% in the first quarter of 2025. As discussed and quantified above, ourOur Chemicals Segment’s gross margin as a percentage of net sales decreasedincreased to 18% in the second quarter of 2026 compared to 13% in the second quarter of 2025. Our Chemicals Segment’s gross margin as a percentage of net sales increased 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.

Operating Income– Our Chemicals Segment’s operating income decreasedincreased $26.7by $30.1 million to $14.5$40.4 million in the firstsecond quarter of 2026 compared to $41.2$10.3 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 our Chemicals Segment’s operating income 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.

Our Chemicals Segment’s operating income is net of amortization of purchase accounting adjustments made in conjunction with our acquisitions of interests in NLNLI 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 $.6$1.2 million and $.5$1.0 million in the first threesix months of 2026 and 2025, respectively, which reduced our reported Chemicals Segment’s operating income as compared to amounts reported by Kronos.

The $30$10 million increase in our Chemicals Segment net sales (translation gains) was caused primarily by a weakening of the U.S. dollar relative to the euro, as ourits euro-denominated sales were translated into more U.S. dollars in 2026 as compared to 2025. The weakening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2026 did not have a significant effect on our Chemicals Segment’s net sales, as a substantial portion of the sales generated by ourits Canadian and Norwegian operations is denominated in the U.S. dollar.

Our Chemicals Segment isremains focused on improving operating marginsprofitability through pricing actions, disciplined cost management, and continued execution of its operating cost structural realignment initiatives. Our Chemicals Segment is also continuingcontinues to pursue targetedsales market 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 Chemicals Segment’s operations and planned capital investments. While our Chemicals Segment typically experiences a significant seasonal cash usage in the first quarter,half ourof Chemicalsthe Segmentyear, it expects cash on hand to improve over the remainder of the year. Our Chemicals Segment will continue to actively manage working capital, including inventories and receivables, to bolster operating cash flows and maintain financial flexibility. Our Chemicals Segment believes its 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.

Our expectations for the TiO2 industry and our Chemicals Segment’s operations are based on a number of factors outside itsour 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 effect of newly enacted tariffs in jurisdictions where it 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 its customers’ and suppliers’ operations, all of which remain uncertain and cannot be predicted.

Our Component Products Segment’s operating income in the firstsecond quarter of 2026 was $7.1$8.9 million compared to $5.9$6.3 million in the firstsecond quarter of 2025. TheOperating increaseincome infor the first six months of 2026 was $16.0 million compared to $12.2 million for the comparable prior year period. Our Component Products Segment’s operating income increased in the second quarter and for the first quartersix months of 2026 compared to 2025 is primarily due to higher sales and gross marginmargins, predominantly at the security products reporting unitunit, and,and to a lesser extent, the impact of higher sales at the marine components reporting unit.

Net Sales – Our Component Products Segment’s net sales increased $.3$3.3 million and $3.6 million in the firstsecond quarter and for the first six months of 20262026, respectively, compared to the same periodperiods in 2025 primarily due to higher security products sales across a variety of markets and higher marine components sales to the industrial marketmarket. partiallyThe offsetincrease byin lowersecond quarter security products sales. Security products net sales decreased 1% in the first quarter of 2026 compared to the same period last yearwas primarily due to lower sales across a variety of markets. The decrease was driven by $.3$.9 million lowerhigher sales to the healthcare marketmarket, and $.2$.7 million lowerhigher sales to each of the generaltransportation cabinetry,market, electric$.5 controlmillion panel,higher sales to distributors and gas station security markets. These decreases were partially offset by $.3$.4 million higher sales to the tool storage marketmarket. andThe $.2increase in security products sales for the first six months of 2026 was primarily due to $.8 million higher sales to the institutionaltransportation furnituremarket, market.$.7 Marinemillion components nethigher sales increasedto 6%the tool storage market, $.6 million higher sales to the healthcare market and $.4 million higher sales to distributors. Sales to the government security market in the second quarter and in the first quartersix months of 2026 comparedwere comparable to the same periodperiods lastin year2025. The increase in second quarter marine components sales was primarily due to $1.9$1.6 million higher sales to the industrial marketmarket, partially offset by $1.4$1.0 million lower sales to the government market. The increase in marine components sales for the first six months of 2026 was primarily due to $3.5 million higher sales to the industrial market, partially offset by $1.5 million lower sales to the towboat market and $1.0 million lower sales to the government market. Towboat market sales in the first quarter of 2025 benefittedbenefited from a one-time customer stocking event that did not repeat in 2026.

Operating Income – As a percentage of net sales, our Component Products Segment’s operating income for the second quarter and the first quartersix months of 2026 increased compared to the same periodperiods of 2025 and was primarily impacted by the factors affecting sales, cost of sales and gross margin discussed above.

Our Component Products Segment manufactures substantially all its products in the U.S. and sourcesources a substantial majority of its raw materials from U.S. suppliers. Our Component Products Segment also sources certain components, primarily electronic components, from suppliers in Asia, including China. Beginning in the second quarter of 2025 and continuing through the firstsecond quarter of 2026, our Component Products Segment incurredexperienced tariff-relatedcost surchargesincreases onfor certain imported raw materials, primarily electronic components.components, including increases in tariffs and shipping costs. In addition, someinflationary ofpressures ourhave Componentincreased Productscosts Segment’s U.S.-based suppliers are applying tariff-related surcharges onfor certain domesticallydomestically-sourced sourcedraw materials. Where possible, our Component Products Segment increases selling prices to recover these higher raw material costs, although the extent to which our Component Products Segment can fully recover such costs will depend on a variety of factors including the ultimate tariff rate, duration of tariffs, and our Component Products Segment’s customers’ ability to substitute alternative products. OurAccordingly, our Component Products Segment will continue to closely monitor raw material costs, including zinc, brass, aluminum, steel and energy, as well as current and anticipated near-term customer demand levelslevels, to ensure its production capabilitiescapacity and inventoriesinventory arelevels remain aligned accordingly.with market conditions.

General – Our Real Estate Management and Development Segment consists of BMI and LandWell. BMI and LandWell ownowned and developed real property in Henderson, Nevada. LandWell is actively engaged in developing certain real estate in Henderson, Nevada including approximately 2,100 acres zoned fora residential/planned community purposes.in Henderson.

Net Sales and Operating Income – Substantially all of the net sales from our Real Estate Management and Development Segment in the second quarter and the first quartersix months of 2026 and 2025 were from land sales. NetWe recognized $4.4 million in revenues on land sales increasedduring $1.2the second quarter of 2026 compared to $5.7 million in revenues in the second quarter of 2025 and $14.1 million in the first six months of 2026 compared to $14.2 million in the same prior year period. Net sales decreased $1.3 million in the second quarter of 2026 compared to the same period in 2025 primarily due to the sale of the final commercial parcel for $7.3 million, which had no further development obligations and was therefore recognized immediately as revenue. This increase was partially offset by the effectsbecause of a slower pace of development activity for previously sold parcels within the residential/planned community as our Real Estate Management and Development Segment nears completion of its development work. Net sales for the first six months of 2026 slightly decreased compared to the first six months of 2025 due to the effect of a significantly slower pace of development activity for previously sold parcels within the residential/planned community, which was offset by the sale of the final commercial parcel for $7.3 million in the first quarter of 2026, which had no further development obligations and was therefore immediately recognized as revenue. As noted above, we recognize revenue in our residential/planned community over time using cost-based input methods. All of the revenue we recognized in the first quarters of 2025 and 2026 for our residential/planned community was under this method of revenue recognition. 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 waswere $2.8$2.1 million and $4.9 million in the firstsecond quarter and the first six months of 20262026, respectively, compared to $4.6$2.8 million and $7.4 million in the firstsecond quarter and first six months of 2025.2025, Includedrespectively. We recognized income of $11.3 million and $16.7 million in operatingthe incomesecond forquarter theand first quartersix months of 20262026, was incomerespectively, related to tax increment infrastructure reimbursement compared to $17.2 million in the second quarter and first six months of $5.42025. Additionally, in the second quarter of 2026, LandWell sold the office building used in operations and recognized a gain on the sale of approximately $5.8 million.

Outlook – LandWell is focused on completing development of the land it manages for the residential/planned community in Henderson. At MarchJune 31,30, 2026, all of the land in the residential/planned community had been sold andas well as all saleable acreage zoned for light industrial and commercial useuse, adjacent toincluding the 2,100office acrebuilding residential/plannedLandWell communityused hasfor alsoits beenoperations. sold,As witha theresult, finalwe parcelno closinglonger own saleable land in the first quarter of 2026.Henderson. At MarchJune 31,30, 20262026, we have deferred revenue of $24.8$24.0 million related to post-closing obligations on land sales in the residential/planned community closed prior to 2026. Because we recognize revenue over time using cost-based inputs, we will continue to recognize revenue on land previously sold over the development period, even though we have already received all the cash proceeds related to these sales. We currently expect to recognize substantially all remaining deferred revenue during 2026. Any delays or curtailments in infrastructure development related to post-closing obligation activities would delay the timing of revenue recognized on these previously closed land sales.

Under LandWell’s development agreement with the City of Henderson, the issuance of a specified number of housing permits requires LandWell to complete certain large community-wide infrastructure projects. Construction on several of these large projects began in late 2021 and is expected to be completed in late 2027. We expect 2026 land development costs to be comparablelower tothan those in 2025 due to the timing of planned infrastructure projects and the availability of certain construction materials. Because these large infrastructure projects relate to the entirety of the residential/planned community, the associated costs are not part of the cost-based inputs used to recognize revenue, and therefore, this spending will not correlate to revenue recognition. However, this spending is expected to be eligible for tax increment reimbursement under our Owner Participation Agreement (“OPA”) with the City of Henderson,Henderson. and delays or curtailments in eligible infrastructure development activities will also delay LandWell’s ability to submit completed costs toDuring the Citysecond for approvalquarter of additional2026, OPALandWell note receivables. We currently expect to receivereceived approval for the remaining $11 million infrastructureof tax increment reimbursement, bringing the total approved reimbursement noteunder receivablesthe – upOPA to the maximum amount of $170 millionmillion. cap – in 2026, and weWe expect to receive cash payments on the related notes forreceivables over the next 5 to 7 years.

Changes in the Market Value of Valhi Common Stock held by Subsidiaries – Our subsidiaries, Kronos and NL,NLI, hold shares of our common stock. As discussed in the 2025 Annual Report, we account for our proportional interest in these shares of our common stock as treasury stock at Kronos’ and NL’sNLI’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,NLI, are reflected in our Condensed Consolidated Balance Sheet at fair value. Kronos and NLNLI 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 $.1 million gain in the second quarter of 2026 compared to no gain or loss in the second quarter of 2025 and a gain of $.5$.6 million in the first quartersix months of 2026 compared to a loss of $1.7 million in the first quartersix months of 20252025, each of which was recognized in our Condensed Consolidated Statements of Income,Income whichand representsrepresent the unrealized gain (loss) in respect of these shares during such periods attributable to the noncontrolling interest of Kronos and NL.NLI.

Interest Income and Other – Interest income and other increased $.3 million in the second quarter of 2026 primarily due to increased interest income received on the Real Estate Management and Development OPA note receivable offset by decreased $.8average investment balances and lower average interest rates. Interest income and other decreased $.5 million in the first quartersix months of 2026 compared to the same period of 2025 primarily due to decreased average investment balances and lower average interest rates.rates partially offset by increased interest income received on the Real Estate Management and Development OPA note receivable. See Note 12 to our Condensed Consolidated Financial Statements.

Other General Corporate Items – Corporate expenses were 2% lower in the firstsecond quarter of 2026 declinedand slightly5% aslower in the first six months of 2026 compared to the same periodrespective periods in 2025 primarily due to lower administrative and environmental remediation and related costs. Included in corporate expense are:

Overall, we currently expect that our net general corporate expenses in 2026 will be higher than in 2025 primarily due to expected increases in litigation fees and related costs.costs, predominantly in the second half of the year. See Note 16 to our Condensed Consolidated Financial Statements.

Interest Expense – Interest expense increased $1.5$.9 million and $2.4 million in the firstsecond quarter and first six months of 20262026, respectively, compared to the respectivesame periodperiods in 2025 primarily due to higher overall debt levels and higher average interest rates. See Note 7 to our Condensed Consolidated Financial Statements.

We expect interest expense will be higher in 2026 as compared to 2025 primarily due to higher average debt balances and higher interest rates on Kronos’ debt issued in the third quarter of 2025.

Income Tax Expense – We recognized income tax expense of $6.3$11.8 million in the firstsecond quarter of 2026 compared to income tax expense of $8.0 million in the second quarter of 2025 and income tax expense of $18.1 million in the first quartersix months of 2026 compared to $16.0 million in the first six months of 2025. The decreaseincrease in the second quarter and first quartersix months of 2026 is primarily due to lowerhigher earnings in 2026 and2026, the jurisdictional mix of such earningsearnings, somewhat offset byand a net uncertain tax position of $2.0 million recognized in the first quarter of 2026. 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).