Business and geographic segments

12 Months Ended

Dec. 31, 2024

Business and geographic segments

Business and geographic segments

Note 2 – Business and geographic segments:

		% controlled at
Business segment	Entity	December 31, 2024
Chemicals	Kronos	81%
Component products	CompX	87%
Real estate management and development	BMI and LandWell	63% - 77%

Our control of Kronos includes 50% we hold directly and 31% held directly by NL. We own 83% of NL. Our control of CompX is through NL. We own 63% of BMI. Our control of LandWell includes the 27% we hold directly and 50% held by BMI.

We are organized based upon our operating subsidiaries. Each operating segment is separately managed, and each operating segment represents a strategic business unit offering different products. Our chief operating decision maker (“CODM”) is our President and CEO. Our CODM is responsible for determining how to allocate resources and assessing performance. The CODM evaluates segment performance based on each segment’s operating income, which is defined as income before income taxes and interest expense, exclusive of certain non-recurring items (such as gains or losses on disposition of business units and other long-lived assets outside the ordinary course of business and certain legal settlements) and certain general corporate income and expense items (including securities transactions gains and losses and interest and dividend income), which are not attributable to the operations of the reportable operating segments. The CODM considers current-period operating income compared to plan and prior-period on a monthly and/or quarterly basis

for evaluating performance of each segment and making decisions about allocating capital and other resources. The accounting policies of the reportable operating segments are the same as those described in Note 1. Capital expenditures include additions to property and equipment but exclude amounts attributable to business combinations. Segment results we report may differ from amounts separately reported by our various subsidiaries and affiliates due to purchase accounting adjustments and related amortization or differences in how we define operating income. Intersegment sales are not material.

We have the following three consolidated reportable operating segments.

● Chemicals – Our Chemicals Segment is operated through our majority control of Kronos. Kronos is a leading global producer and marketer of value-added titanium dioxide pigments (“TiO₂”). TiO₂ is used to impart whiteness, brightness, opacity and durability to a wide variety of products, including paints, plastics, paper, fibers and ceramics. Additionally, TiO₂ is a critical component of everyday applications, such as coatings, plastics and paper, as well as many specialty products such as inks, cosmetics and pharmaceuticals.

● Component Products – We operate in the component products industry through our majority control of CompX. CompX is a leading manufacturer of security products used in the postal, recreational transportation,  office and institutional furniture, cabinetry, tool storage, healthcare applications and a variety of other industries. CompX is also a leading manufacturer of wake enhancement systems, stainless steel exhaust systems, gauges, throttle controls, trim tabs and related hardware and accessories for the recreational marine industry. All CompX production facilities are in the United States.

● Real Estate Management and Development – We operate in real estate management and development through our majority control of BMI and LandWell. BMI and LandWell own real property in Henderson, Nevada. LandWell is engaged in efforts to develop certain land holdings for commercial, industrial and residential purposes in Henderson, Nevada. BMI previously, through wholly-owned subsidiaries, also was responsible for the delivery of water to the City of Henderson and various other users through September 2022, and provided utility services to certain industrial customers prior to December 2023.

Interest income included in the calculation of segment operating income is not significant in 2022, 2023 or 2024. Depreciation and amortization related to each reportable operating segment includes amortization of any intangible assets attributable to the segment. Amortization of deferred financing costs and any premium or discount associated with the issuance of indebtedness is included in interest expense.

Segment assets are comprised of all assets attributable to each reportable operating segment, including goodwill and other intangible assets. Corporate assets are not attributable to any operating segment and consist principally of cash and cash equivalents, restricted cash and restricted cash equivalents and marketable securities.

	Years ended December 31,
	2022		2023		2024
	(In millions)
Net sales:
Chemicals	$	1,930.2	$	1,666.5	$	1,887.1
Component products		166.6		161.3		145.9
Real estate management and development		125.7		93.9		71.8
Total net sales	$	2,222.5	$	1,921.7	$	2,104.8
Cost of sales:
Chemicals	$	1,540.2	$	1,502.7	$	1,530.1
Component products		117.8		112.1		104.6
Real estate management and development		74.1		61.7		45.6
Total cost of sales	$	1,732.1	$	1,676.5	$	1,680.3
Gross margin:
Chemicals	$	390.0	$	163.8	$	357.0
Component products		48.8		49.2		41.3
Real estate management and development		51.6		32.2		26.2
Total gross margin	$	490.4	$	245.2	$	424.5
Operating income (loss):
Chemicals	$	174.6	$	(41.1)	$	138.5
Component products		25.4		25.4		17.0
Real estate management and development		39.4		49.9		55.2
Total operating income		239.4		34.2		210.7
General corporate items:
Interest income and other		10.4		21.3		22.0
Gain on remeasurement of investment in TiO2 manufacturing joint venture		—		—		64.5
Insurance recoveries		.1		.5		1.4
Gain on land sales		—		1.5		.5
Other components of net periodic pension and OPEB expense		(13.9)		(11.8)		(2.6)
Changes in market value of Valhi common stock held by subsidiaries		(1.6)		(1.7)		1.9
General expenses, net		(36.6)		(35.2)		(4.3)
Interest expense		(27.9)		(28.3)		(49.9)
Income (loss) before income taxes	$	169.9	$	(19.5)	$	244.2

Included in the determination of Chemicals operating income is restructuring costs related to workforce reductions of $5.8 million and $2.0 million recognized in 2023 and 2024, respectively, (see Note 20) and a fixed asset impairment related to the write-off of certain costs resulting from a capital project termination of $3.8 million recognized in 2023. Also included in the determination of Chemicals operating income are business interruption insurance settlement aggregate gains of $2.7 million recognized in 2022 and $2.5 million recognized in 2023. See Note 13.

Included in the determination of the Real Estate Management and Development Segment’s operating income in 2022 and 2024 are charges resulting from the cessation of BWC’s water delivery and subsequent bankruptcy filing. See Note 3. Operating income comparisons between 2024, 2023 and 2022 are also affected by BWC’s water delivery sales and related cost of sales, see Note 3. Also included in the determination of Real Estate Management and Development operating income are infrastructure reimbursements and land related income. See Notes 7 and 13.

	Years ended December 31,
	2022		2023		2024
	(In millions)
Depreciation and amortization:
Chemicals	$	53.1	$	49.9	$	62.9
Component products		4.0		4.0		3.7
Real estate management and development		1.4		.2		.1
Total	$	58.5	$	54.1	$	66.7
Capital expenditures:
Chemicals	$	63.2	$	47.4	$	29.5
Component products		3.7		1.1		1.4
Real estate management and development		.7		—		—
Total	$	67.6	$	48.5	$	30.9

	December 31,
	2022		2023		2024
	(In millions)
Total assets:
Operating segments:
Chemicals	$	2,293.5	$	2,196.8	$	2,268.5
Component products		131.3		141.5		117.0
Real estate management and development		219.2		200.9		216.7
Corporate and eliminations		191.7		197.8		198.0
Total	$	2,835.7	$	2,737.0	$	2,800.2

Geographic information. We attribute net sales to the place of manufacture (point-of-origin) and the location of the customer (point-of-destination); we attribute property and equipment to their physical location. At December 31, 2023 and 2024 the net assets of our non-U.S. subsidiaries included in consolidated net assets approximated $653 million and $532 million, respectively.

	Years ended December 31,
	2022		2023		2024
	(In millions)
Net sales - point of origin:
United States	$	1,518.9	$	1,284.4	$	1,396.1
Germany		895.4		726.4		826.6
Canada		389.4		351.0		351.5
Norway		273.5		252.1		278.6
Belgium		306.5		217.1		237.8
Eliminations		(1,161.2)		(909.3)		(985.8)
Total	$	2,222.5	$	1,921.7	$	2,104.8
Net sales - point of destination:
North America	$	985.4	$	871.0	$	914.0
Europe		879.0		738.5		842.2
Other		358.1		312.2		348.6
Total	$	2,222.5	$	1,921.7	$	2,104.8

	December 31,
	2022		2023		2024
	(In millions)
Net property and equipment:
United States	$	45.8	$	40.0	$	302.1
Germany		204.7		213.0		190.9
Belgium		101.4		98.5		88.6
Norway		83.6		83.5		73.6
Canada		88.3		82.3		68.2
Total	$	523.8	$	517.3	$	723.4

At December 31, 2024, the United States net property and equipment includes the acquired assets of LPC.