Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No ¨☐

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x☒ No ¨☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Large accelerated filer ¨☐ Accelerated filer x☒ Non-accelerated filer ¨☐ Smaller reporting company ¨☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨☐ No x☒

Number of shares of the Registrant’s common stock outstanding on October ~~30, 2015: 48,691,884.~~28, 2016: 48,705,884.

Items 2, 3, 4 and 5 of Part II are omitted because there is no information to report.

	December 31,		September 30,		December 31,		September 30,
	2014		2015		2015		2016
			(unaudited)				(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	72,560	$	88,392	$	96,462	$	100,995
Restricted cash and cash equivalents		3,995		3,306		3,246		3,336
Accounts and other receivables, net		9,256		12,735		8,977		13,282
Inventories, net		16,863		15,448		15,098		14,638
Prepaid expenses and other		792		831		981		856
Deferred income taxes		4,567		4,567

Total current assets		108,033		125,279		124,764		133,107

Other assets:
Notes receivable from affiliate						—		10,700
Marketable securities		92,131		27,165		19,260		33,058
Investment in Kronos Worldwide, Inc.		237,719		154,588		140,695		138,550
Goodwill		27,156		27,156		27,156		27,156
Other assets, net		2,143		2,494		3,331		3,658
Deferred income taxes		20		20		11		11

Total other assets		359,169		211,423		190,453		213,133

Property and equipment:
Land		5,138		5,138		5,138		5,146
Buildings		21,176		21,498		21,502		22,812
Equipment		62,264		63,632		64,051		65,443
Construction in progress		909		1,749		1,567		873

		89,487		92,017		92,258		94,274
Less accumulated depreciation		55,931		58,489		58,152		60,657

Net property and equipment		33,556		33,528		34,106		33,617

Total assets	$	500,758	$	370,230	$	349,323	$	379,857

	December 31,			September 30,			December 31,			September 30,
	2014			2015			2015			2016
				(unaudited)						(unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	6,115		$	5,107		$	4,557		$	5,387
Accrued and other current liabilities		11,521			9,902			10,783			10,091
Accrued environmental remediation and related costs		6,984			6,989			8,668			13,361
Income taxes		7			13

Total current liabilities		24,627			22,011			24,008			28,839

Noncurrent liabilities:
Accrued pension cost		12,242			11,237
Accrued pension costs								14,155			13,586
Accrued postretirement benefits (OPEB) costs		3,341			3,081			2,773			2,595
Accrued environmental remediation and related costs		103,031			104,622			104,465			103,450
Deferred income taxes		87,725			36,935			25,035			31,651
Other		18,342			13,667			13,636			13,567

Total noncurrent liabilities		224,681			169,542			160,064			164,849

Equity:
NL stockholders' equity:
Common stock		6,085			6,086			6,086			6,088
Additional paid-in capital		300,388			300,543			300,543			300,674
Retained earnings		112,588			94,306			88,679			94,427
Accumulated other comprehensive loss		(182,039	)		(237,425	)		(245,358	)		(231,080	)

Total NL stockholders' equity		237,022			163,510			149,950			170,109

Noncontrolling interest in subsidiary		14,428			15,167			15,301			16,060

Total equity		251,450			178,677			165,251			186,169

Total liabilities and equity	$	500,758		$	370,230		$	349,323		$	379,857

	Three months ended						Nine months ended
	September 30,						September 30,						Three months ended						Nine months ended
	2014			2015			2014			2015			September 30,						September 30,
	(unaudited)												2015			2016			2015			2016
													(unaudited)
Net sales	$	26,473		$	26,505		$	79,102		$	83,314		$	26,505		$	28,404		$	83,314		$	82,586
Cost of sales		18,331			18,387			54,598			57,471			18,387			19,005			57,471			56,496

Gross margin		8,142			8,118			24,504			25,843			8,118			9,399			25,843			26,090

Selling, general and administrative expense		4,710			4,684			13,872			14,402			4,684			4,926			14,402			14,547
Other operating income (expense):
Insurance recoveries		8,843			113			10,041			3,480			113			76			3,480			399
Other income		9			74			140			91			74			—			91			5
Corporate expense		(4,304	)		(2,659	)		(17,582	)		(12,146	)		(2,659	)		(4,555	)		(12,146	)		(13,538	)

Income from operations		7,980			962			3,231			2,866
Income (loss) from operations														962			(6	)		2,866			(1,591	)

Equity in earnings (losses) of Kronos Worldwide, Inc.		9,689			(3,600	)		24,101			(46,584	)		(3,600	)		6,776			(46,584	)		6,123
Other income - interest and dividend income		311			294			1,333			878		294				430		878				1,160

Income (loss) before income taxes		17,980			(2,344	)		28,665			(42,840	)		(2,344	)		7,200			(42,840	)		5,692

Income tax expense (benefit)		3,800			(3,581	)		4,645			(25,534	)
Income tax benefit														(3,581	)		(560	)		(25,534	)		(1,052	)

Net income (loss)		14,180			1,237			24,020			(17,306	)		1,237			7,760			(17,306	)		6,744
Noncontrolling interest in net income of subsidiary		291			294			904			976			294			388			976			996

Net income (loss) attributable to NL stockholders	$	13,889		$	943		$	23,116		$	(18,282	)	$	943		$	7,372		$	(18,282	)	$	5,748

Amounts attributable to NL stockholders:

Basic and diluted net income (loss) per share	$	.29		$	.02		$	.47		$	(.38	)	$	.02		$	.15		$	(.38	)	$	.12

Weighted average shares used in the calculation of net income (loss) per share		48,683			48,692			48,678			48,687			48,692			48,706			48,687			48,699

	Three months ended						Nine months ended
	September 30,						September 30,						Three months ended						Nine months ended
	2014			2015			2014			2015			September 30,						September 30,
	(unaudited)												2015			2016			2015			2016
													(unaudited)
Net income (loss)	$	14,180		$	1,237		$	24,020		$	(17,306	)	$	1,237		$	7,760		$	(17,306	)	$	6,744

Other comprehensive income (loss), net of tax:
Marketable securities		1,022			(34,513	)		(105,842	)		(41,657	)		(34,513	)		6,983			(41,657	)		9,182
Currency translation		(9,215	)		(3,538	)		(10,589	)		(15,309	)		(3,538	)		1,777			(15,309	)		3,628
Interest rate swap		-			(733	)		-			(733	)		(733	)		145			(733	)		(583	)
Defined benefit pension plans		530			902			1,585			2,723			902			817			2,723			2,447
Other postretirement benefit plans		(156	)		(137	)		(469	)		(410	)		(137	)		(132	)		(410	)		(396	)

Total other comprehensive loss, net		(7,819	)		(38,019	)		(115,315	)		(55,386	)
Total other comprehensive income (loss), net														(38,019	)		9,590			(55,386	)		14,278

Comprehensive income (loss)		6,361			(36,782	)		(91,295	)		(72,692	)		(36,782	)		17,350			(72,692	)		21,022
Comprehensive income attributable to noncontrolling interest		291			294			904			976			294			388			976			996

Comprehensive income (loss) attributable to NL stockholders	$	6,070		$	(37,076	)	$	(92,199	)	$	(73,668	)	$	(37,076	)	$	16,962		$	(73,668	)	$	20,026

Accumulated

Additional

other

Noncontrolling

Common

paid-in

Retained

comprehensive

interest in

Total

stock

capital

earnings

loss

subsidiary

equity

(unaudited)

Balance at December 31, 2014
$
6,085

$
300,388

$
112,588

$
(182,039
)

$
14,428

$
251,450

Net income (loss)

-

-

(18,282
)

-

976

(17,306
)
Other comprehensive loss, net of tax

-

-

-

(55,386
)

-

(55,386
)
Issuance of NL common stock

1

65

-

-

-

66

Dividends

-

-

-

-

(247
)

(247
)
Other, net

-

90

-

-

10

100

Balance at September 30, 2015
$
6,086

$
300,543

$
94,306

$
(237,425
)

$
15,167

$
178,677

							Accumulated
			Additional				other			Noncontrolling
	Common		paid—in		Retained		comprehensive			interest in			Total
	stock		capital		earnings		income (loss)			subsidiary			equity
	(unaudited)
Balance at December 31, 2015	$	6,086	$	300,543	$	88,679	$	(245,358	)	$	15,301		$	165,251

Net income		—		—		5,748		—			996			6,744
Other comprehensive income, net of tax		—		—		—		14,278			—			14,278
Issuance of NL common stock		2		35		—		—			—			37
Dividends		—		—		—		—			(249	)		(249	)
Other, net		—		96		—		—			12			108

Balance at September 30, 2016	$	6,088	$	300,674	$	94,427	$	(231,080	)	$	16,060		$	186,169

	Nine months ended						Nine months ended
	September 30,						September 30,
	2014			2015			2015			2016
	(unaudited)						(unaudited)
Cash flows from operating activities:
Net income (loss)	$	24,020		$	(17,306	)	$	(17,306	)	$	6,744
Depreciation and amortization		2,694			2,699			2,699			2,847
Deferred income taxes		1,132			(20,978	)		(20,978	)		(1,080	)
Equity in losses (earnings) of Kronos Worldwide, Inc.		(24,101	)		46,584
Equity in earnings of Kronos Worldwide, Inc.								46,584			(6,123	)
Dividends received from Kronos Worldwide, Inc.		15,849			15,849			15,849			15,849
Cash funding of benefit plans in excess of net benefit plan expense		(2,145	)		(1,116	)		(1,116	)		(267	)
Other, net		417			348			348			385
Change in assets and liabilities:
Accounts and other receivables, net		(1,839	)		(2,583	)		(2,583	)		(4,303	)
Inventories, net		(2,030	)		1,246			1,246			280
Prepaid expenses and other		15			(40	)		(40	)		125
Accounts payable and accrued liabilities		2,184			(1,805	)		(1,805	)		50
Income taxes		3			-			—			(4	)
Accounts with affiliates		3,380			(1,497	)		(1,497	)		(34	)
Accrued environmental remediation and related costs		3,334			1,596			1,596			3,679
Other noncurrent assets and liabilities, net		(63	)		(4,700	)		(4,700	)		(259	)

Net cash provided by operating activities		22,850			18,297			18,297			17,889

Cash flows from investing activities:
Capital expenditures		(2,199	)		(2,570	)		(2,570	)		(2,354	)
Change in restricted cash equivalents, net		(454	)		348			348			(53	)
Notes receivable from affiliate:
Loans								—			(15,100	)
Proceeds from collection								—			4,400
Proceeds from the sale of marketable securities		-			255			255			—
Purchase of marketable securities		-			(251	)		(251	)		—
Other		(57	)		-

Net cash used in investing activities		(2,710	)		(2,218	)		(2,218	)		(13,107	)

Cash flows from financing activities -
Cash flows from financing activities —
Distributions to noncontrolling interests in subsidiary		(246	)		(247	)		(247	)		(249	)

Cash and cash equivalents - net change from:
Cash and cash equivalents — net change from:
Operating, investing and financing activities		19,894			15,832			15,832			4,533
Cash and cash equivalents at beginning of period		52,609			72,560			72,560			96,462

Cash and cash equivalents at end of period	$	72,503		$	88,392		$	88,392		$	100,995

Supplemental disclosure - cash paid for:
Supplemental disclosure — cash paid for:
Income taxes, net	$	190		$	1,587		$	1,587		$	61

Organization –At September 30, ~~2015,~~2016, Valhi, Inc. (NYSE: VHI) held approximately 83% of our outstanding common stock and a wholly-owned subsidiary of Contran Corporation held approximately 93% of Valhi’s outstanding common stock. ~~Substantially all~~All of Contran’s outstanding voting stock is held by a family trust established for the benefit of Lisa K. Simmons and Serena Simmons Connelly ~~daughters of Harold C. Simmons,~~ and their children ~~(for~~for which Ms. ~~Lisa~~ Simmons and Ms. Connelly are ~~co-trustees)~~co-trustees, or is held directly by Ms. ~~Lisa~~ Simmons and Ms. Connelly or ~~persons or~~ entities related to ~~them, including their step-mother Annette C.~~them. Consequently, Ms. Simmons the widow of Mr. Simmons. Under a voting agreement entered into by all of the voting stockholders of Contran, effective in February 2014 and as amended, the size of the board of directors of Contran was fixed at five members, Ms. Lisa Simmons, Ms. Connelly and Ms. Annette Simmons (and in the event of their death, their heirs) each has the right to designate one of the five members of the Contran board and the remaining two members of the Contran board must consist of members of Contran management. Ms. Lisa Simmons, Ms. Connelly and Ms. Annette Simmons each serve as members of the Contran board. The voting agreement expires in February 2017 (unless Ms. Lisa Simmons, Ms. Connelly and Ms. Annette Simmons otherwise unanimously agree), and the ability of Ms. Lisa Simmons, Ms. Connelly, and Ms. Annette Simmons to each designate one member of the Contran board is dependent upon each of their continued beneficial ownership of at least 5% of the combined voting stock of Contran. Consequently, Ms. Lisa Simmons, Ms. Connelly and Ms. Annette Simmons may be deemed to control Contran, Valhi and us.

Basis of presentation – Consolidated in this Quarterly Report are the results of our majority-owned subsidiary, CompX International Inc. We also own 30% of Kronos Worldwide, Inc. (Kronos). CompX (NYSE MKT: CIX) and Kronos (NYSE: KRO); each file periodic reports with the Securities and Exchange Commission (SEC).

The unaudited Condensed Consolidated Financial Statements contained in this Quarterly Report have been prepared on the same basis as the audited Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015 that we filed with the SEC on March ~~12,~~10, 2016 (the 2015 ~~(the 2014~~ Annual Report). In our opinion, we have made all necessary adjustments (which include only normal recurring adjustments) in order to state fairly, in all material respects, our consolidated financial position, results of operations and cash flows as of the dates and for the periods presented. We have condensed the Consolidated Balance Sheet ~~and Statement of Stockholders’ Equity~~ at December 31, ~~2014~~2015 contained in this Quarterly Report as compared to our audited Consolidated Financial Statements at that date, and we have omitted certain information and footnote disclosures (including those related to the Consolidated Balance Sheet at December 31, ~~2014)~~2015) normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Our results of operations for the interim periods ended September 30, ~~2015~~2016 may not be indicative of our operating results for the full year. The Condensed Consolidated Financial Statements contained in this Quarterly Report should be read in conjunction with our ~~2014~~2015 Consolidated Financial Statements contained in our ~~2014~~2015 Annual Report.

Unless otherwise indicated, references in this report to “NL,” “we,” “us” or “our” refer to NL Industries, Inc. and its subsidiaries and affiliate, Kronos, taken as a whole.

At December 31, ~~2014~~2015 and September 30, ~~2015,~~2016, we held approximately 14.4 million shares of common stock of our immediate parent company, Valhi. See Note 1. We account for our investment in Valhi common stock as available-for-sale marketable equity securities and any unrealized gains or losses on the securities are recognized through other comprehensive income, net of deferred income taxes. Our shares of Valhi common stock are carried at fair value based on quoted market prices, representing a Level 1 input within the fair value hierarchy. At December 31, ~~2014~~2015 and September 30, ~~2015,~~2016, the quoted per share market price of Valhi common stock was ~~$6.41~~$1.34 and ~~$1.89,~~$2.30, respectively.

The Valhi common stock we own is subject to the restrictions on resale pursuant to certain provisions of the SEC Rule 144. In addition, as a majority-owned subsidiary of Valhi, we cannot vote our shares of Valhi common stock under Delaware General Corporation Law, but we do receive dividends from Valhi on these shares, when declared and paid.

At December 31, ~~2014~~2015 and September 30, ~~2015,~~2016, we owned approximately 35.2 million shares of Kronos common stock. At September 30, ~~2015,~~2016, the quoted market price of Kronos’ common stock was ~~$6.21~~$8.29 per share, or an aggregate market value of ~~$218.7~~$292.0 million. At December 31, ~~2014,~~2015, the quoted market price was ~~$13.02~~$5.64 per share, or an aggregate market value of ~~$458.6~~$198.6 million.

The change in the carrying value of our investment in Kronos during the first nine months of ~~2015~~2016 is summarized below.

During the first nine months of ~~2015,~~2016, we had no ~~borrowings~~borrowing under our promissory note with Valhi, and at September 30, ~~2015,~~2016, the full $40 million was available for borrowing under this facility. The amount of any such loan Valhi would make to us is at Valhi’s discretion.

Changes in accumulated other comprehensive ~~loss~~income (loss) attributable to NL stockholders, including amounts resulting from our investment in Kronos Worldwide (see Note 5), are presented in the table below.

	Three months ended						Nine months ended						Three months ended						Nine months ended
	September 30,						September 30,						September 30,						September 30,
	2014			2015			2014			2015			2015			2016			2015			2016
	(In thousands)												(In thousands)
Accumulated other comprehensive loss, net of tax:
Marketable securities:
Balance at beginning of period	$	47,305		$	39,968		$	154,169		$	47,112		$	39,968		$	2,394		$	47,112		$	195
Other comprehensive income (loss) -
unrealized gains (losses) arising during the year		1,022			(34,513	)		(105,842	)		(41,657	)
Other comprehensive income - unrealized gains (losses) arising during the year														(34,513	)		6,983			(41,657	)		9,182

Balance at end of period	$	48,327		$	5,455		$	48,327		$	5,455		$	5,455		$	9,377		$	5,455		$	9,377

Currency translation:
Balance at beginning of period	$	(135,190	)	$	(165,944	)	$	(133,816	)	$	(154,173	)	$	(165,944	)	$	(170,533	)	$	(154,173	)	$	(172,384	)
Other comprehensive loss		(9,215	)		(3,538	)		(10,589	)		(15,309	)
Other comprehensive income (loss)														(3,538	)		1,777			(15,309	)		3,628

Balance at end of period	$	(144,405	)	$	(169,482	)	$	(144,405	)	$	(169,482	)	$	(169,482	)	$	(168,756	)	$	(169,482	)	$	(168,756	)

Interest rate swap:
Balance at beginning of period	$	-		$	-		$	-		$	-		$	—		$	(1,173	)	$	—		$	(445	)
Other comprehensive loss		-			(733	)		-			(733	)
Other comprehensive loss:
Unrealized gains (losses) arising during the year													$	(733	)	$	32		$	(733	)	$	(920	)
Less reclassification adjustment for amounts included in interest expense														—			113			—			337

Balance at end of period	$	-		$	(733	)	$	-		$	(733	)	$	(733	)	$	(1,028	)	$	(733	)	$	(1,028	)

Defined benefit pension plans:
Balance at beginning of period	$	(55,589	)	$	(73,439	)	$	(56,644	)	$	(75,260	)	$	(73,439	)	$	(71,082	)	$	(75,260	)	$	(72,712	)
Other comprehensive income -
amortization of net losses
included in net periodic pension cost		530			902			1,585			2,723
Other comprehensive income - amortization of net losses included in net periodic pension cost														902			817			2,723			2,447

Balance at end of period	$	(55,059	)	$	(72,537	)	$	(55,059	)	$	(72,537	)	$	(72,537	)	$	(70,265	)	$	(72,537	)	$	(70,265	)

OPEB plans:
Balance at beginning of period	$	962		$	9		$	1,275		$	282		$	9		$	(276	)	$	282		$	(12	)
Other comprehensive loss -
amortization of prior service credit and net gains
included in net periodic OPEB cost		(156	)		(137	)		(469	)		(410	)
Other comprehensive loss - amortization of prior service credit and net gains included in net periodic OPEB cost														(137	)		(132	)		(410	)		(396	)

Balance at end of period	$	806		$	(128	)	$	806		$	(128	)	$	(128	)	$	(408	)	$	(128	)	$	(408	)

Total accumulated other comprehensive loss:
Balance at beginning of period	$	(142,512	)	$	(199,406	)	$	(35,016	)	$	(182,039	)	$	(199,406	)	$	(240,670	)	$	(182,039	)	$	(245,358	)
Other comprehensive loss		(7,819	)		(38,019	)		(115,315	)		(55,386	)
Other comprehensive income (loss)														(38,019	)		9,590			(55,386	)		14,278

Balance at end of period	$	(150,331	)	$	(237,425	)	$	(150,331	)	$	(237,425	)	$	(237,425	)	$	(231,080	)	$	(237,425	)	$	(231,080	)

See Note 12 for amounts related to our defined benefit pension plans and OPEB plans.

	Three months ended						Nine months ended						Three months ended						Nine months ended
	September 30,						September 30,						September 30,						September 30,
	2014			2015			2014			2015			2015			2016			2015			2016
	(In millions)												(In millions)
Expected tax expense (benefit), at U.S. federal statutory income tax rate of 35%	$	6.3		$	(.8	)	$	10.0		$	(15.0	)	$	(.8	)	$	2.5		$	(15.0	)	$	2.0
Rate differences on equity in earnings (losses) of Kronos		(2.5	)		(2.7	)		(5.8	)		(7.4	)		(2.7	)		(3.0	)		(7.4	)		(2.8	)
Adjustment to the reserve for uncertain tax positions, net		-			-			-			(3.0	)		—			—			(3.0	)		—
Nontaxable income		.2			(.1	)		(.1	)		(.3	)		(.1	)		(.2	)		(.3	)		(.4	)
U.S. state income taxes and other, net		(.2	)		.1			.5			.2			.1			.1			.2			.1

Income tax expense (benefit)													$	(3.5	)	$	(.6	)	$	(25.5	)	$	(1.1	)

Comprehensive provision for income taxes (benefit) allocable to:
Net income (loss)													$	(3.5	)	$	(.6	)	$	(25.5	)	$	(1.1	)
Other comprehensive income (loss):
Marketable securities														(18.6	)		3.7			(22.4	)		4.9
Currency translation														(2.0	)		1.0			(8.3	)		2.0
Interest rate swap														(.4	)		.1			(.4	)		(.3	)
Pension plans														.5			.4			1.5			1.3
OPEB plans														—			(.1	)		(.2	)		(.2	)

Total	$	3.8		$	(3.5	)	$	4.6		$	(25.5	)	$	(24.0	)	$	4.5		$	(55.3	)	$	6.6

In accordance with GAAP, we recognize deferred income taxes on our undistributed equity in earnings (losses) of Kronos. Because we and Kronos are part of the same U.S. federal income tax group, any dividends we receive from Kronos are nontaxable to us. Accordingly, we do not recognize and we are not required to pay income taxes on dividends from Kronos. We received aggregate dividends from Kronos of $15.8 million in the first nine months of 2015 and 2016. The amounts shown in the above table of our income tax rate reconciliation for rate differences on equity in earnings (losses) of Kronos represents the ~~benefit~~net tax (benefit) associated with such non-taxability of the dividends we receive from Kronos, as it relates to the amount of deferred income taxes we recognize on our undistributed equity in earnings (losses) of Kronos.

Kronos has substantial net operating losses in Germany and Belgium, the benefit of which Kronos had previously recognized under the more-likely-than-not recognition criteria. In the second quarter of 2015, Kronos determined that such losses did not meet the more-likely-than-not recognition criteria, and as a result Kronos recognized a non-cash deferred income tax expense of $150.3 million in the second quarter of 2015 as a valuation allowance against Kronos’ net deferred income tax assets in such jurisdictions. Kronos recognized an additional $2.3 million non-cash deferred income tax asset valuation allowance during the third quarter of 2015 ~~due to~~and recognized an aggregate $2.1 million non-cash deferred income tax asset valuation allowance in the first nine months of 2016 (mostly in the second quarter) as additional valuation allowance against additional losses ~~recognized by its German and Belgian operations during~~in such ~~period.~~jurisdictions. The rate difference related to our equity in losses of Kronos in the third quarter and first nine months of 2015 and 2016 includes our equity in such non-cash deferred income tax ~~expenses~~expense recognized by Kronos.

Tax authorities are examining certain of our U.S. and non-U.S. tax returns, including those of Kronos, and tax authorities have or may propose tax deficiencies, including penalties and interest. ~~We cannot guarantee these tax matters will be resolved in our favor due to~~Because of the inherent uncertainties involved in settlement initiatives and court and tax ~~proceedings.~~proceedings, we cannot guarantee that these matters will be resolved in our favor, and therefore our potential exposure, if any, is also uncertain. As a result of ongoing audits in in certain jurisdictions, in 2008 Kronos filed Advance Pricing Agreement Requests with the tax authorities in the U.S., Canada and Germany. These requests have been under review with the respective tax authorities since 2008 and prior to the third quarter of 2016, it was uncertain whether an agreement would be reached between the tax authorities and whether Kronos would agree to execute and finalize such agreements. During the third quarter of 2016, Contran, as the ultimate parent of our U.S. Consolidated income tax group, executed and finalized an Advance Pricing Agreement with the U.S. Internal Revenue Service and Kronos’ Canadian subsidiary executed and finalized an Advance Pricing Agreement with the Competent Authority for Canada (collectively, the “U.S.-Canada APA”) effective for tax years 2005 - 2015. Pursuant to the terms of the U.S.-Canada APA, the U.S. and Canadian tax authorities agreed to certain prior year changes to taxable income of the U.S. and Canadian subsidiaries. As a result of such agreed-upon changes, Kronos recognized a $5.6 million current U.S. income tax benefit in the third quarter of 2016. In addition, Kronos’ Canadian subsidiary will incur a cash income tax payment of approximately CAD $3 million (USD $2.3 million) as a result of the U.S.-Canada APA, but such payment was fully offset by previously provided accruals. Kronos currently expects the Advance Pricing Agreement between Canada and Germany (collectively, the “Canada-Germany APA”) to be executed and finalized within the next twelve months. Kronos believes it has adequate accruals to cover any cash income tax payment which might result from the finalization of the Canada-Germany APA, and accordingly does not expect the execution of such APA to have a material adverse effect on its consolidated financial position, results of operations or liquidity. We believe we have adequate accruals for additional taxes and related interest expense which could ultimately result from tax examinations. We believe the ultimate disposition of tax examinations should not have a material adverse effect on our consolidated financial position, results of operations or liquidity.The rate difference related to our equity in losses of Kronos in the third quarter and first nine months of 2016 includes our equity in such current tax benefit recognized by Kronos.

In the first ~~quarter~~nine months of 2015, we recognized a first quarter non-cash income tax benefit of $3.0 million related to the release of a portion of our reserve for uncertain tax positions due to the expiration of the applicable statute of limitations. We currently estimate that our unrecognized tax benefits will not change materially during the next twelve months.

Defined benefit plans – The components of net periodic defined benefit pension cost (income) are presented in the table below.

Postretirement benefits – The components of net periodic postretirement benefits other than pension (OPEB) income are presented in the table below.

Contributions – We currently expect our ~~2015~~2016 contributions to our defined benefit pension plans and other postretirement plans to be approximately ~~$1.3~~$1 million.

We are involved in various environmental, contractual, product liability, patent (or intellectual property), employment and other claims and disputes incidental to our current and former businesses. At least quarterly our management discusses and evaluates the status of any pending litigation or claim to which we are a party or which has been asserted against us. The factors considered in such evaluation include, among other things, the nature of such pending cases and ~~claim,~~claims, the status of such pending cases and claims, the advice of legal counsel and our experience in similar cases and claims (if any). Based on such evaluation, we make a determination as to whether we believe (i) it is probable a loss has been incurred, and if so if the amount of such loss (or a range of loss) is reasonably estimable, or (ii) it is reasonably possible but not probable a loss has been incurred, and if so if the amount of such loss (or a range of loss) is reasonably estimable, or (iii) the probability a loss has been incurred is remote.

Our former operations included the manufacture of lead pigments for use in paint and lead-based paint. We, other former manufacturers of lead pigments for use in paint and lead-based paint (together, the “former pigment manufacturers”), and the Lead Industries Association (LIA), which discontinued business operations in 2002, have been named as defendants in various legal proceedings seeking damages for personal injury, property damage and governmental expenditures allegedly caused by the use of lead-based paints. Certain of these actions have been filed by or on behalf of states, counties, cities or their public housing authorities and school districts, and certain others have been asserted as class actions. These lawsuits seek recovery under a variety of theories, including public and private nuisance, negligent product design, negligent failure to warn, strict liability, breach of warranty, conspiracy/concert of action, aiding and abetting, enterprise liability, market share or risk contribution liability, intentional tort, fraud and misrepresentation, violations of state consumer protection statutes, supplier negligence and similar claims.

The plaintiffs in these actions generally seek to impose on the defendants responsibility for lead paint abatement and health concerns associated with the use of lead-based paints, including damages for personal injury, contribution and/or indemnification for medical expenses, medical monitoring expenses and costs for educational programs. To the extent the plaintiffs seek compensatory or punitive damages in these actions, such damages are generally unspecified. In some cases, the damages are unspecified pursuant to the requirements of applicable state law. A number of cases are inactive or have been dismissed or withdrawn. Most of the remaining cases are in various pre-trial stages. Some are on appeal following dismissal or summary judgment rulings or a trial verdict in favor of either the defendants or the plaintiffs.

We believe that these actions are without merit, and we intend to continue to deny all allegations of wrongdoing and liability and to defend against all actions vigorously. We do not believe it is probable that we have incurred any liability with respect to all of the lead pigment litigation cases to which we are a party, and liability to us that may result, if any, in this regard cannot be reasonably estimated, because:

Accordingly, we have not accrued any amounts for any of the pending lead pigment and ~~lead-based~~lead—based paint litigation cases filed by or on behalf of states, counties, cities or their public housing authorities and school districts, or those asserted as class actions. In addition, we have determined that liability to us which may result, if any, cannot be reasonably estimated because there is no prior history of a loss of this nature on which an estimate could be made and there is no substantive information available upon which an estimate could be based.

In one of these lead pigment cases, in April 2000 we were served with a complaint in County of Santa Clara v. Atlantic Richfield Company, et al. (Superior Court of the State of California, County of Santa Clara, Case No. 1-00-CV-788657) brought by a number of California government entities against the former pigment manufacturers, the LIA and certain paint manufacturers. The County of Santa Clara sought to recover compensatory damages for funds the plaintiffs have expended or ~~will~~would in the future expend for medical treatment, educational expenses, abatement or other costs due to exposure to, or potential exposure to, lead paint, disgorgement of profit, and punitive damages. In July 2003, the trial judge granted defendants’ motion to dismiss all remaining claims. Plaintiffs appealed and the intermediate appellate court reinstated public nuisance, negligence, strict liability, and fraud claims in March 2006. A fourth amended complaint was filed in March 2011 on behalf of The People of California by the County Attorneys of Alameda, Ventura, Solano, San Mateo, Los Angeles and Santa Clara, and the City Attorneys of San Francisco, San Diego and Oakland. That complaint alleged that the presence of lead paint created a public nuisance in each of the prosecuting jurisdictions and ~~seeks~~sought its abatement. In July and August 2013, the case was tried. In January 2014, the Judge issued a judgment finding us, The Sherwin Williams Company and ConAgra Grocery Products Company jointly and severally liable for the abatement of lead paint in pre-1980 homes, and ordered the

defendants to pay an aggregate $1.15 billion to the people of the State of California to fund such abatement. In February 2014, we filed a motion for a new trial, and in March 2014 the court denied the motion. Subsequently in March 2014, we filed a notice of appeal with the Sixth District Court of Appeal for the State of California and the appeal is proceeding with the appellate court. NL believes that this judgment is inconsistent with California law and is unsupported by the evidence, and we will defend vigorously against all claims.

The Santa Clara case is unusual in that this is the second time that an adverse verdict in the lead pigment litigation has been entered against NL (the first adverse verdict against NL was ultimately overturned on appeal). We have concluded that the likelihood of a loss in this case has not reached a standard of “probable” as contemplated by ASC 450, given (i) the substantive, substantial and meritorious grounds on which the adverse verdict in the Santa Clara case will be appealed, (ii) the uniqueness of the Santa Clara verdict (i.e. no final, non-appealable verdicts have ever been rendered against us, or any of the other former lead pigment manufacturers, based on the public nuisance theory of liability or otherwise), and (iii) the rejection of the public nuisance theory of liability as it relates to lead pigment matters in many other jurisdictions (no jurisdiction in which a plaintiff has asserted a public nuisance theory of liability has ever successfully been upheld). In addition, liability that may result, if any, cannot be reasonably estimated, as NL continues to have no basis on which an estimate of liability could be made, as discussed above. However, as with any legal proceeding, there is no assurance that any appeal would be successful, and it is reasonably possible, based on the outcome of the appeals process, that NL may in the future incur some liability resulting in the recognition of a loss contingency accrual that could have a material adverse impact on our results of operations, financial position and liquidity.

New cases may continue to be filed against us. We ~~cannot assure you that~~do not know if we will ~~not~~ incur liability in the future in respect of any of the pending or possible litigation in view of the inherent uncertainties involved in court and jury rulings. In the future, if new information regarding such matters becomes available to us (such as a final, non-appealable adverse verdict against us or otherwise ultimately being found liable with respect to such matters), at that time we would consider such information in evaluating any remaining cases then-pending against us as to whether it might then have become probable we have incurred liability with respect to these matters, and whether such liability, if any, could have become reasonably estimable. The resolution of any of these cases could result in the recognition of a loss contingency accrual that could have a material adverse impact on our net income for the interim or annual period during which such liability is recognized and a material adverse impact on our consolidated financial condition and liquidity.

Our operations are governed by various environmental laws and regulations. Certain of our businesses are and have been engaged in the handling, manufacture or use of substances or compounds that may be considered toxic or hazardous within the meaning of applicable environmental laws and regulations. As with other companies engaged in similar businesses, certain of our past and current operations and products have the potential to cause environmental or other damage. We have implemented and continue to implement various policies and programs in an effort to minimize these risks. Our policy is to maintain compliance with applicable environmental laws and regulations at all of our plants and to strive to improve environmental performance. From time to time, we may be subject to environmental regulatory enforcement under U.S. and non-U.S. statutes, the resolution of which typically involves the establishment of compliance programs. It is possible that future developments, such as stricter requirements of environmental laws and enforcement policies, could adversely affect our production, handling, use, storage, transportation, sale or disposal of such substances. We believe that all of our facilities are in substantial compliance with applicable environmental laws.

Certain properties and facilities used in our former operations, including divested primary and secondary lead smelters and former mining locations, are the subject of civil litigation, administrative proceedings or investigations arising under federal and state environmental laws and common law. Additionally, in connection with past operating practices, we are currently involved as a defendant, potentially responsible party (PRP) or both, pursuant to the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act (CERCLA), and similar state laws in various governmental and private actions associated with waste disposal sites, mining locations, and facilities that we or our predecessors, our subsidiaries or their predecessors currently or previously owned, operated or used, certain of which are on the United States Environmental Protection Agency’s (EPA) Superfund National Priorities List or similar state lists.

These proceedings seek cleanup costs, damages for personal injury or property damage and/or damages for injury to natural resources. Certain of these proceedings involve claims for substantial amounts. Although we may be jointly and severally liable for these costs, in most cases we are only one of a number of PRPs who may also be jointly and severally liable, and among whom costs may be shared or allocated. In addition, we are occasionally named as a party in a number of personal injury lawsuits filed in various jurisdictions alleging claims related to environmental conditions alleged to have resulted from our operations.

Obligations associated with environmental remediation and related matters are difficult to assess and estimate for numerous reasons including the:

In addition, the imposition of more stringent standards or requirements under environmental laws or regulations, new developments or changes regarding site cleanup costs or the allocation of costs among PRPs, solvency of other PRPs, the results of future testing and analysis undertaken with respect to certain sites or a determination that we are potentially responsible for the release of hazardous substances at other sites, could cause our expenditures to exceed our current estimates. We ~~cannot assure you that~~do not know if actual costs will ~~not~~ exceed accrued amounts or the upper end of the range for sites for which estimates have been made, and we ~~cannot assure you that~~do not know if costs will ~~not~~ be incurred for sites where no estimates presently can be made. Further, additional environmental and related matters may arise in the future. If we were to incur any future liability, this could have a material adverse effect on our consolidated financial statements, results of operations and liquidity.

We record liabilities related to environmental remediation and related matters (including costs associated with damages for personal injury or property damage and/or damages for injury to natural resources) when estimated future expenditures are probable and reasonably estimable. We adjust such accruals as further information becomes available to us or as circumstances change. Unless the amounts and timing of such estimated future expenditures are fixed and reasonably determinable, we generally do not discount estimated future expenditures to their present value due to the uncertainty of the timing of the payout. We recognize recoveries of costs from other parties, if any, as assets when their receipt is deemed probable. At December 31, ~~2014~~2015 and September 30, ~~2015,~~2016, we have not recognized any receivables for recoveries.

We do not know and cannot estimate the exact time frame over which we will make payments for our accrued environmental and related costs. The timing of payments depends upon a number of factors, including but not limited to the timing of the actual remediation process; which in turn depends on factors outside of our control. At each balance sheet date, we estimate the amount of our accrued environmental and related costs which we expect to pay within the next twelve months, and we classify this estimate as a current liability. We classify the remaining accrued environmental costs as a noncurrent liability.

Changes in the accrued environmental remediation and related costs during the first nine months of ~~2015~~2016 are as follows:

On a quarterly basis, we evaluate the potential range of our liability for environmental remediation and related costs at sites where we have been named as a PRP or defendant, including sites for which our wholly-owned environmental management subsidiary, NL Environmental Management Services, Inc. (EMS), has contractually assumed our obligations. At September 30, ~~2015,~~2016, we had accrued approximately ~~$112~~$117 million related to approximately 4342 sites associated with remediation and related matters that we believe are at the present time and/or in their current phase reasonably estimable. The upper end of the range of reasonably possible costs to us for remediation and related matters for which we believe it is possible to estimate costs is approximately ~~$166~~$160 million, including the amount currently accrued.

We believe that it is not reasonably possible to estimate the range of costs for certain sites. At September 30, ~~2015,~~2016, there were approximately 5 sites for which we are not currently able to reasonably estimate a range of costs. For these sites, generally the investigation is in the early stages, and we are unable to determine whether or not we actually had any association with the site, the nature of our responsibility ~~if any,~~ for the contamination at the site, if any, and the extent of contamination at and cost to remediate the site. The timing and availability of information on these sites is dependent on events outside of our control, such as when the party alleging liability provides information to us. At certain of these previously inactive sites, we have received general and special notices of liability from the EPA and/or state agencies alleging that we, sometimes with other PRPs, are liable for past and future costs of remediating environmental contamination allegedly caused by former operations. These notifications may assert that we, along with any other alleged PRPs, are liable for past and/or future clean-up costs. As further information becomes available to us for any of these sites, which would allow us to estimate a range of costs, we would at that time adjust our accruals. Any such adjustment could result in the recognition of an accrual that would have a material effect on our consolidated financial statements, results of operations and liquidity.

We are involved in certain legal proceedings with a number of our former insurance carriers regarding the nature and extent of the carriers’ obligations to us under insurance policies with respect to certain lead pigment and asbestos lawsuits. The issue of whether insurance coverage for defense costs or indemnity or both will be found to exist for our lead pigment and asbestos litigation depends upon a variety of factors and we cannot assure you that such insurance coverage will be available.

We have agreements with certain of our former insurance carriers pursuant to which the carriers reimburse us for a portion of our future lead pigment litigation defense costs, and one such carrier reimburses us for a portion of our future asbestos litigation defense costs. We are not able to determine how much we will ultimately recover from these carriers for defense costs incurred by us because of certain issues that arise regarding which defense costs qualify for reimbursement. While we continue to seek additional insurance recoveries, we do not know if we will be successful in obtaining reimbursement for either defense costs or indemnity. Accordingly, we recognize insurance recoveries in income only when receipt of the recovery is probable and we are able to reasonably estimate the amount of the recovery.

For a complete discussion of certain litigation involving us and certain of our former insurance carriers, refer to our ~~2014~~2015 Annual Report.

We have been named as a defendant in various lawsuits in several jurisdictions, alleging personal injuries as a result of occupational exposure primarily to products manufactured by our former operations containing asbestos, silica and/or mixed dust. In addition, some plaintiffs allege exposure to asbestos from working in various facilities previously owned and/or operated by us. There are ~~166~~103 of these types of cases pending, involving a total of approximately ~~712~~588 plaintiffs. In addition, the claims of approximately 8,692 plaintiffs have been administratively dismissed or placed on the inactive docket in Ohio state court. We do not expect these claims will be re-opened unless the plaintiffs meet the courts’ medical criteria for asbestos-related claims. We have not accrued any amounts for this litigation because of the uncertainty of liability and inability to reasonably estimate the liability, if any. To date, we have not been adjudicated liable in any of these matters.

we believe that the range of reasonably possible outcomes of these matters will be consistent with our historical costs (which are not material). Furthermore, we do not expect any reasonably possible outcome would involve amounts material to our consolidated financial position, results of operations or liquidity. We have sought and will continue to vigorously seek, dismissal and/or a finding of no liability from each claim. In addition, from time to time, we have received notices regarding asbestos or silica claims purporting to be brought against former subsidiaries, including notices provided to insurers with which we have entered into settlements extinguishing certain insurance policies. These insurers may seek indemnification from us. For a discussion of other legal proceedings to which we are a party, refer to our ~~2014~~2015 Annual Report.

In addition to the litigation described above, we and our ~~affiliate~~affiliates are also involved in various other environmental, contractual, product liability, patent (or intellectual property), employment and other claims and disputes incidental to present and former businesses. In certain cases, we have insurance coverage for these items, although we do not expect additional material insurance coverage for environmental matters.

We currently believe the disposition of all of these various other claims and disputes, individually and in the aggregate, should not have a material adverse effect on our consolidated financial position, results of operations or liquidity beyond the accruals already provided.

From time to time, we may have loans and advances outstanding between us and various related parties pursuant to term and demand notes. We generally enter into these loans and advances for cash management purposes. When we loan funds to related parties, we are generally able to earn a higher rate of return on the loan than we would earn if we invested the funds in other instruments, and when we borrow from related parties, we are generally able to pay a lower rate of interest than we would pay if we had incurred third-party indebtedness. While certain of these loans to affiliates may be of a lesser credit quality than cash equivalent instruments otherwise available to us, we believe we have considered the credit risks in the terms of the applicable loans. In this regard, on August 3, 2016 CompX entered into an unsecured revolving demand promissory note with Valhi whereby CompX has agreed to loan Valhi up to $40 million. CompX’s loan to Valhi bears interest at prime plus 1.00%, payable quarterly, with all principal due on demand, but in any event no earlier than December 31, 2017. The amount of CompX’s outstanding loans to Valhi at any time is at its discretion. At September 30, 2016, the outstanding principal balance receivable from Valhi under the promissory note was $10.7 million.

See Note 4 for information on how we determine fair value of our marketable securities.

The following table presents the financial instruments that are not carried at fair value but which require fair value disclosure at December 31, ~~2014~~2015 and September 30, ~~2015:~~2016:

The fair value of our noncontrolling interest in CompX stockholders’ equity is based upon its quoted market price at each balance sheet date, which represents a Level 1.1 input. The fair value of our variable-rate promissory note receivable from affiliate is deemed to approximate book value using Level 2 inputs. Due to their near-term maturities, the carrying amounts of accounts receivable and accounts payable are considered equivalent to fair value.

Note 1516 – Recent ~~Accounting Pronouncements~~accounting pronouncements not yet adopted:

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606). This standard replaces existing revenue recognition guidance, which in many cases was tailored for specific industries, with a uniform accounting standard applicable to all industries and transactions. The new standard, as amended, is currently effective for us beginning with the first quarter of 2018. Entities may elect to adopt ASU No. 2014-09 retrospectively for all periods for all contracts and transactions which occurred during the period (with a few exceptions for practical expediency) or retrospectively with a cumulative effect recognized as of the date of adoption. ASU No. 2014-09 is a fundamental rewriting of existing GAAP with respect to revenue recognition, and we are still evaluating the effect the ~~standard~~Standard will have on our Consolidated Financial Statements. We currently expect to adopt the standard in the first quarter of 2018. In addition, we have not yet determined the method we will use to adopt the ~~standard.~~Standard.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which addresses certain aspects related to the recognition, measurement, presentation and disclosure of financial instruments. The ASU requires equity investments (except for those accounted for under the equity method of accounting or those that result in the consolidation of the investee) to generally be measured at fair value with changes in fair value recognized in net income. The amendment also requires a number of other changes, including among others: simplifying the impairment assessment for equity instruments without readily determinable fair values; eliminating the requirement for public business entities to disclose method and assumptions used to determine fair value for financial instruments measured at amortized cost; requiring an exit price notion when measuring the fair value of financial instruments for disclosure purposes; and requiring separate presentation of financial assets and liabilities by measurement category and form of asset. The changes indicated above will be effective for us beginning in the first quarter of 2018, with prospective application required, and early adoption is not permitted. The most significant aspect of adopting this ASU will be the requirement to recognize changes in fair value of our available-for-sale marketable equity securities in net income (currently changes in fair value of such securities are recognized in other comprehensive income).

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. This standard provides guidance on eight specific cash flow issues including: debt prepayment or debt extinguishment costs, proceeds from the settlement of insurance claims, distributions from equity method investees and separately identifiable cash flows and application of the predominance principle. The new standard is effective for us beginning with the first quarter of 2018. ASU 2016-15 is to be adopted with retrospective presentation and early adoption is permitted provided all provisions are adopted. We have not yet determined when we will adopt ASU 2016-15. The adoption of the standard will not have a material effect on our Consolidated Financial Statements.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740) Intra-Entity Transfers of Assets Other Than Inventory. Currently an entity would not recognize the income tax consequences of an intra-entity transfer of assets other than inventory until final disposition to a third—party. Under the new guidance an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. No additional disclosures are required under this pronouncement. This standard is effective for us in the first quarter of 2018 and early adoption is permitted. From time to time we engage in intra-entity asset transfers that may fall under the new guidance but we do not expect the adoption of this standard to have a material effect on our Consolidated Financial Statements.

We are primarily a holding company. We operate in the component products industry through our majority-owned subsidiary, CompX International Inc. We also own a non-controlling interest in Kronos Worldwide, Inc. Both CompX (NYSE MKT: CIX) and Kronos (NYSE: KRO) file periodic reports with the Securities and Exchange Commission (SEC).

CompX is a leading manufacturer of engineered components utilized in a variety of applications and industries. Through its Security Products operations, CompX manufactures mechanical and electronic cabinet locks and other locking mechanisms used in recreational transportation, postal, office and institutional furniture, cabinetry, tool storage and healthcare applications. CompX also manufactures stainless steel exhaust systems, gauges, ~~and~~ throttle controls and trim tabs for the recreational marine and other industries through its Marine Components operations.

We account for our 30% non-controlling interest in Kronos by the equity method. Kronos is a leading global producer and marketer of value-added titanium dioxide pigments (TiO₂). TiO₂ is used for a variety of manufacturing applications including ~~coatings,~~paints, plastics, paper and other industrial and specialty products.

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Statements in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking in nature and represent management’s beliefs and assumptions based on currently available information. Statements in this report including, but not limited to, statements found in Item 2 -— “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are forward-looking statements that represent our management’s beliefs and assumptions based on currently available information. In some cases you can identify forward-looking statements by the use of words such as “believes,” “intends,” “may,” “should,” “could,” “anticipates,” “expects” or comparable terminology, or by discussions of strategies or trends. Although we believe the expectations reflected in forward-looking statements are reasonable, we do not know if these expectations will be correct. Such statements by their nature involve substantial risks and uncertainties that could significantly impact expected results. Actual future results could differ materially from those predicted. The factors that could cause our actual future results to differ materially from those described herein are the risks and uncertainties discussed in this Quarterly Report and those described from time to time in our other filings with the SEC including, but are not limited to, the following:

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

Quarter ended September 30, ~~2015~~2016 compared to the quarter ended September 30, ~~2014~~2015

Our net income attributable to NL stockholders was $7.4 million, or $.15 per share, in the third quarter of 2016 compared to $.9 million, or $.02 per share, in the third quarter of ~~2015 compared to net income attributable to NL stockholders of $13.9 million, or $.29 per share, in the third quarter of 2014.~~2015. As more fully described below, the ~~decrease~~increase in our earnings per share from ~~2014~~2015 to ~~2015~~2016 is primarily due ~~to:~~to the net effects of:

Our ~~2014~~2016 net income attributable to NL stockholders ~~includes~~ includes:

Nine months ended September 30, ~~2015~~2016 compared to nine months ended September 30, ~~2014~~2015

Our net income attributable to NL stockholders was $5.7 million, or $.12 per share, in the first nine months of 2016 compared to net loss attributable to NL stockholders ~~was~~of $18.3 million, or $.38 per share, in the first nine months of 2015. As more fully described below, the increase in our earnings per share from 2015 to 2016 is primarily due to the net effects of:

loss of $.01 per share, net of income taxes, included in our equity in earnings of Kronos related to ~~2015 is primarily~~Kronos’ recognition of a deferred income tax asset valuation allowance related ~~to:~~to its German and Belgian operations.

~~equity in losses from Kronos in 2015 compared to equity in earnings from Kronos in 2014,~~

~~higher income from operations attributable to CompX of $.8 million,~~

lower insurance recoveries in 2015 of $6.5 million primarily related to an insurance recovery settlement for certain past lead pigment litigation defense costs we recognized in the third quarter of 2014,

~~lower environmental remediation and related costs of $3.5 million in 2015,~~

~~lower litigation fees and related costs of $2.2 million in 2015, and~~

~~a first quarter non-cash income tax benefit in 2015 related to a net reduction in our reserve for uncertain tax positions of $3.0 million.~~

Our 2015 net loss attributable to NL stockholders includes:

loss of $.62 per share, net of income taxes, included in our equity in losses of Kronos related to Kronos’ recognition of a deferred income tax asset valuation allowance related to its German and Belgian operations,

~~loss of $.07 per share, net of income taxes, included in our equity in losses of Kronos related to certain workforce reduction charges recognized by Kronos,~~

loss of $.07 per share, net of income taxes, included in our equity in losses of Kronos related to certain workforce reduction charges recognized by Kronos,

~~income of $.06 per share related to a net reduction of our reserve for uncertain tax positions,~~

income of $.06 per share related to a net reduction of our reserve for uncertain tax positions,

~~income of $.05 per share, net of income taxes, related to insurance recoveries we recognized, and~~

income of $.05 per share, net of income taxes, related to insurance recoveries we recognized, and

~~loss of $.03 per share, net of income taxes, included in our equity in losses of Kronos related to Kronos’ recognition of an other-than-temporary impairment charge in a marketable equity security.~~

loss of $.03 per share, net of income taxes, included in our equity in losses of Kronos related to Kronos’ recognition of an other-than-temporary impairment charge in a marketable equity security.

~~Our 2014 net income attributable to NL stockholders includes:~~

~~income of $.13 per share, net of income taxes, related to insurance recoveries we recognized, and~~

~~income of $.02 per share, net of income taxes, included in our equity in earnings of Kronos related to a net reduction of Kronos’ reserve for uncertain tax positions.~~

Income (loss) from operations

The following table shows the components of our income (loss) from operations.

	Three months ended September 30,						%				Nine months ended September 30,						%				Three months ended September 30,						%				Nine months ended September 30,						%
	2014			2015			Change				2014			2015			Change				2015			2016			Change				2015			2016			Change
	(In millions)										(In millions)										(In millions)										(In millions)
CompX	$	3.4		$	3.4			-		%	$	10.6		$	11.4			8		%	$	3.4		$	4.5			32		%	$	11.4		$	11.5			1		%
Insurance recoveries		8.8			.1			(99	)			10.0			3.5			(65	)			.1			.1			-				3.5			0.4			(89	)
Other income, net		-			.1		-					.1			.1			-				.1			-			(100	)			.1			—			(100	)
Corporate expense		(4.3	)		(2.6	)		(40	)			(17.5	)		(12.1	)		(31	)			(2.6	)		(4.6	)		77				(12.1	)		(13.5	)		12
Income from operations	$	7.9		$	1.0			(87	)		$	3.2		$	2.9			(9	)
Income (loss) from operations																					$	1.0		$	—			(100	)		$	2.9		$	(1.6	)		(155	)

Amounts attributable to CompX relate primarily to its components products business, while the other amounts generally relate to NL. Each of these items is further discussed below.

The following table shows the components of our income (loss) before income taxes exclusive of our income (loss) from operations.

	Three months ended September 30,						%				Nine months ended September 30,						%			Three months ended September 30,						%			Nine months ended September 30,						%
	2014			2015			Change				2014			2015			Change			2015			2016			Change			2015			2016			Change
	(In thousands)										(In thousands)									(In thousands)									(In thousands)
Net sales	$	26,473		$	26,505			-		%	$	79,102		$	83,314			5	%	$	26,505		$	28,404			7	%	$	83,314		$	82,586			(1	)	%
Cost of sales		18,331			18,387			-				54,598			57,471			5			18,387			19,005			3			57,471			56,496			(2	)
Gross margin		8,142			8,118			-				24,504			25,843			5			8,118			9,399			16			25,843			26,090			1
Operating costs and expenses		4,710			4,684			(1	)			13,872			14,402			4			4,684			4,926			5			14,402			14,547			1
Income from operations	$	3,432		$	3,434			-			$	10,632		$	11,441			8		$	3,434		$	4,473			30		$	11,441		$	11,543			1

Percentage of net sales:
Cost of sales		69	%		69	%						69	%	69		%					69	%		67	%				69		%		68	%
Gross margin		31			31							31		31							31			33					31				32
Operating costs and expenses		18			18							18		17							18			17					17				18
Income from operations		13			13							13		14							13			16					14				14

Net sales – Net sales ~~for~~increased $1.9 million in the third quarter of ~~2015 were comparable~~2016 due to ~~the same period in 2014 as a slight increase in CompX’s Marine Components business~~higher Security Product sales ~~was offset by a slight decrease in CompX’s Security Products business sales over the comparative period.~~to existing government customers. Net sales ~~increased $4.2~~decreased $.7 million in the first nine months of ~~2015~~2016 compared to the ~~same period~~respective periods in ~~2014, as a result of strong demand within~~2015, primarily due to CompX’s Security Products business sales in 2015 for ~~existing~~a government ~~customers primarily~~security end-user that, as expected, did not recur in ~~the first half of 2015.~~2016. CompX’s overall decrease was partially offset by higher third quarter sales in its Security Products and Marine Components ~~business sales also contributed to the increase for the nine-month period primarily as a result of improved demand for products sold to the waterski/wakeboard boat market.~~businesses. Relative changes in selling prices did not have a material impact on ~~overall~~ net sales comparisons.

Cost of sales and gross margin –Cost of sales ~~sold~~as a percentage of sales decreased 2.5% in the third quarter of 2016 compared to the same period in 2015 due to manufacturing efficiencies and fixed cost leverage resulting from increased manufacturing volume. As a result, gross profit as a percentage of net sales ~~for the third quarter of 2015 is comparable to the same period in 2014 as modestly~~ increased ~~variable margins for both CompX’s Security Products business and CompX’s Marine Components business were offset by increased CompX Security Products~~ ~~business fixed costs. As a result, gross margin as a percentage of net sales is comparable~~ over the same period. As a percentage of net sales, cost of ~~sales and resulting gross margin~~goods for the first nine months of 2016 decreased slightly compared to the same period in 2015 due to the operating improvements resulting from the favorable third quarter volumes. As a result, gross profit as a percentage of net sales increased over the same period. Gross profit dollars increased $1.3 million for the third quarter of 2016 due to higher sales in the Security Products segment. Gross profit dollars for the first nine months of 2016 are comparable to the same period in 2014 as improved variable margins and manufacturing efficiencies attributable to CompX’s Marine Components business were substantially offset by slightly lower variable margins and increased fixed costs within CompX’s Security Products business. Gross margin dollars for the third quarter of 2015 are comparable to the same period in 2014 as increased CompX Marine Component business gross margin dollars of $.2 million were offset by decreased CompX Security Products business gross margin dollars of $.2 million. Gross margin dollars increased $1.3 million in the first nine months of 2015 compared to the same period in 2014 due to sales growth in CompX’s Security Products business (primarily in the first half of 2015) and sales growth in CompX’s Marine Components business .2015.

Operating costs and expenses – Operating costs and expenses consist primarily of sales and ~~administrative-related~~administrative related personnel costs, sales commissions and advertising expenses, as well as gains and losses on property, plant and equipment. Operating costs and expenses for the third quarter and first nine months of ~~2015~~2016 were comparable to the same ~~period~~periods in 2014. Operating costs and expenses increased for the first nine months of 2015 compared to the same period of 2014 primarily due to increased administrative personnel (added in the latter half of 2014) to support the growth in volume for CompX’s Security Products business .2015.

Income from operations – As a percentage of net sales, income from operations for the third quarter ~~of 2015 was comparable to the same period in 2014~~ and ~~increased slightly for the~~ first nine months of ~~2015~~2016 increased compared to the same ~~period~~periods in ~~2014~~2015 and was primarily ~~as the result of~~impacted by the factors impacting gross ~~margin~~profit percentage and operating costs ~~and expenses described~~discussed above.

The key performance indicator for CompX’s reporting units is the level of their income from operations (see discussion below).

	Three months ended September 30,								%				Nine months ended September 30,								%			Three months ended September 30,								%				Nine months ended September 30,								%
	2014				2015				Change				2014				2015				Change			2015				2016				Change				2015				2016				Change
	(In thousands)												(In thousands)											(In thousands)												(In thousands)
Net sales:
Security Products	$	23,237			$	23,115				(1	)	%	$	69,246			$	72,831				5	%	$	23,115			$	24,680				7		%	$	72,831			$	71,289				(2	)	%
Marine Components		3,236				3,390				5				9,856				10,483				6			3,390				3,724				10				10,483				11,297				8
Total net sales	$	26,473			$	26,505				-			$	79,102			$	83,314				5		$	26,505			$	28,404				7			$	83,314			$	82,586				(1	)

Gross margin:
Security Products	$	7,396			$	7,182				(3	)		$	22,222			$	23,005				4		$	7,182			$	8,311				16			$	23,005			$	22,980				—
Marine Components		746				936				25				2,282				2,838				24			936				1,088				16				2,838				3,110				10
Total gross margin	$	8,142			$	8,118				-			$	24,504			$	25,843				5		$	8,118			$	9,399				16			$	25,843			$	26,090				1

Income from operations:
Security Products	$	4,694			$	4,455				(5	)		$	14,235			$	14,656				3		$	4,455			$	5,421				22			$	14,656			$	14,676				—
Marine Components		223				422				89				729				1,288				77			422				547				30				1,288				1,436				11
Corporate operating expenses		(1,485	)			(1,443	)			(3	)			(4,332	)			(4,503	)			4			(1,443	)			(1,495	)			(4	)			(4,503	)			(4,569	)			(1	)
Total income from operations	$	3,432			$	3,434				-			$	10,632			$	11,441				8		$	3,434			$	4,473				30			$	11,441			$	11,543				1

Gross margin:
Security Products		32		%		31		%						32		%		32		%					31		%		34		%						32		%		32		%
Marine Components		23				28								23				27							28				29								27				28
Total gross margin		31				31								31				31							31				33								31				32
Income from operations margin:
Security Products		20		%		19		%						21		%		20		%					19		%		22		%						20		%		21		%
Marine Components		7				12								7				12							12				15								12				13
Total income from operations margin		13				13								13				14							13				16								14				14

Security Products –— Security Products net sales ~~decreased less than 1%~~increased $1.6 million, or 7%, in the third quarter of ~~2015~~2016 compared to the same period in ~~2014 as increased sales~~2015, primarily due to ~~an existing government customer of approximately $.2 million was more than offset by decreases~~a net increase in ~~recreational transportation sales and~~ sales to existing ~~office equipment~~government customers of $1.2 million. As previously disclosed, net sales in 2015 included substantial project related sales for a government security end-user that, as expected, did not recur in 2016. During the third quarter of 2016, CompX was awarded a substantial new project for the same customer which began to ship in August and ~~institutional furniture customers.~~is expected to continue through the end of the year. Third quarter sales under the new initiative were slightly greater than the $1.7 million of nonrecurring project related sales realized in the third quarter of 2015. This offset to the prior year nonrecurring revenue, along with higher sales to other existing government customers and improved sales to distribution customers contributed to the third quarter Security Products sales ~~increased 5%~~increase over 2015.

Security Products net sales decreased $1.5 million, or 2%, in the first nine months of ~~2015~~2016 compared to the same period last year ~~principally~~primarily due to ~~increased~~approximately $4.9 million of nonrecurring sales related to the aforementioned government security end-user project. Including the new project for the same customer with initial shipments in the third quarter of 2016 and improved year-to-date sales to other government customers, net sales to existing government customers ~~of $3.4 million, primarily in~~for the first ~~six~~nine months of 2016 decreased $2.0 million from a year ago. Aside from government customers, sales into OEM markets for the ~~year.~~first nine months of 2016 were mixed, but sales to distribution customers have increased approximately $0.9 million over the prior year period.

Gross profit margin and operating income as a ~~percentage~~percent of sales for the third quarter of ~~2015 decreased~~2016 increased compared to the ~~third quarter of 2014~~same period in 2015 primarily due to ~~slightly higher~~manufacturing efficiencies and fixed ~~costs for~~cost leverage resulting from the increased manufacturing volume during the period. Gross profit margin and operating income as a percentage of sales for the first nine months of ~~2015 decreased~~2016 also increased compared to the same period ~~last year due~~in 2015. The year-to-date improvements are attributable to relative changes in customer and product mix resulting in lower variable margins, and increased fixed costs, including manufacturing support staff added during 2014 in response to increased volumes. Operating costs and expenses in the favorable third quarter ~~of 2015 were comparable to the third quarter of 2014. For~~volume as these measures trailed prior year through the first ~~nine~~six months of ~~2015, operating costs~~2016.

Marine Components – Marine Components net sales increased 10% and expenses increased approximately $.4 million primarily due to increased administrative personnel and benefits costs (beginning in the latter half of 2014). Income from operations as a percentage of net sales8% in the third quarter and first nine months of ~~2015 decreased compared to the same periods in 2014 primarily as a result of the factors impacting gross margin described above.~~

~~MarineComponents~~ – ~~Marine Components net sales increased 5% and 6% in the third quarter and first nine months of 2015,~~2016, respectively, as compared to the same periods last year. The increase in sales for the third quarter and first nine months of 2016 is primarily due to improved demand for products sold to the waterski/wakeboard boat ~~market, including the introduction of new product lines to that~~ market. Gross profit margin and operating income ~~from operations~~ as a percentage of sales ~~improved~~increased for the third quarter and first nine months of ~~2015~~2016 compared to the same periods in ~~2014~~2015 due primarily to improved variable margins ~~as a result of~~resulting from changes in customer and product ~~mix, improved manufacturing efficiencies and increased leverage of fixed costs as a result of higher production volumes.~~mix.

Outlook – ~~As anticipated, third quarter~~Security Products sales ~~returned~~for the first nine months of 2016 trail the comparable prior year period by only $1.5 million despite approximately $4.9 million in 2015 sales related to ~~more normalized levels following~~ a ~~strong first half which was led by increased demand for certain~~ government security ~~applications, office equipment~~end-user project which did not recur in 2016. The revenue offset has been achieved primarily through increased sales to existing government customers and ~~marine components. While third quarter sales~~the substantial new project for a government customer that began shipping in ~~these markets continued~~August and is expected to be ~~favorable~~completed by the end of the year. Security Product sales to ~~prior year, we~~distributors have ~~not experienced broad-based demand increases~~been marginally improved in ~~other markets we serve.~~2016, while sales to OEM customers have been relatively flat, reflecting general economic conditions. We continue to benefit from innovation and diversification ofin our product ~~lines and~~offerings, particularly in the ~~ongoing innovation~~recreational boat markets served by our Marine Components segment. In the absence of ~~our products, most recently with respect~~significant change in general economic conditions, full year sales for 2016 are expected to ~~our line of electronic locks for multiple high security applications, security products for gas stations and expanded offerings to the waterski/wakeboard boat markets.~~approach 2015 levels.

~~It is normal for seasonal demand to subside during the fourth quarter and we~~We will continue ~~to remain diligent~~ to monitor general economic conditions and sales order rates and respond to fluctuations in customer demand through continuous evaluation of staffing levels and consistent execution of our lean manufacturing and cost improvement initiatives. Additionally, we continue to seek opportunities to gain market share in existing markets, ~~we currently serve,~~ to expand into new markets and to further develop new ~~product~~and current customers, products, and features in order to mitigate the impact of changes in demand ~~as well as~~and broaden our sales base.

Insurance recoveries – We have agreements with certain insurance carriers pursuant to which the carriers reimburse us for a portion of our past lead pigment and asbestos litigation defense costs. Insurance recoveries include amounts we received from these insurance carriers. Substantially all of the $3.5 million insurance recoveries we recognized in the first nine months of 2015 relate to a first quarter settlement we reached with one of our insurance carriers in which they agreed to reimburse us for a portion of our past litigation defense costs.

The agreements with certain of our insurance carriers also include reimbursement for a portion of our future litigation defense costs. We are not able to determine how much we will ultimately recover from these carriers for defense costs incurred by us because of certain issues that arise regarding which defense costs qualify for reimbursement. Accordingly, these insurance recoveries are recognized when the receipt is probable and the amount is determinable. See Note 13 to our Condensed Consolidated Financial Statements.

Corporate expense – Corporate expenses were ~~$2.6~~$4.6 million in the third quarter of ~~2015, $1.7~~2016, $2.0 million ~~lower~~higher than in the third quarter of ~~2014~~2015 primarily due to higher environmental remediation and related costs in 2016 somewhat offset by lower litigation and related costs in ~~2015.~~2016. Included in corporate expense in the third quarter of ~~2014~~2015 and ~~2015~~2016 are:

Corporate expenses were ~~$12.1~~$13.5 million in the first nine months of ~~2015, $5.4~~2016, $1.4 million ~~lower~~higher than in the first nine months of ~~2014~~2015 primarily due to ~~lower~~higher environmental remediation and related ~~costs; and litigation and related~~ costs in ~~2015.~~2016. Included in corporate expense in the first nine months of ~~2014~~2015 and 2016 are:

environmental remediation and related costs of $5.1 million in 2016 compared to $2.5 million in 2015, ~~are:~~and

~~environmental remediation and related costs of $2.6 million in 2015 compared to $6.1 million in 2014, and~~

~~litigation and related costs of $3.7 million in 2015 compared to $5.9 million in 2014.~~

litigation and related costs of $2.3 million in 2016 compared to $3.7 million in 2015.

The level of our litigation fees and related costs varies from period to period depending upon, among other things, the number of cases in which we are currently involved, the nature of such cases and the current stage of such cases (e.g. discovery, pre-trial motions, trial or appeal, if applicable). See Note 13 to our Condensed Consolidated Financial Statements. If our current expectations regarding the number of cases in which we expect to be involved during ~~2015~~2016 or the nature of such cases were to change, our corporate expenses could be higher than we currently estimate.

Obligations for environmental remediation costs are difficult to assess and estimate and it is possible that actual costs for environmental remediation will exceed accrued amounts or that costs will be incurred in the future for sites in which we cannot currently estimate our liability. If these events were to occur in ~~2015,~~2016, our corporate expenses would be higher than we currently estimate. In addition, we adjust our environmental accruals as further information becomes available to us or as circumstances change. Such further information or changed circumstances could result in an increase in our accrued environmental costs. See Note 13 to our Condensed Consolidated Financial Statements.

Overall, we expect that our general corporate expenses for all of ~~2015~~2016 will be ~~lower than 2014 primarily due~~comparable to ~~lower expected environmental remediation and related costs and lower litigation and related costs.~~2015. If our current expectations regarding the number of cases or sites in which we expect to be involved during ~~2015,~~2016, or if the nature of such cases or sites were to change, our corporate expenses could be higher than we currently estimate and involve amounts that are material.

Income tax expense – We recognized an income tax benefit of $.6 million in the third quarter of 2016 compared to income tax benefit of $3.5 million in the third quarter of 2015 ~~compared to~~and an income tax ~~expense~~benefit of ~~$3.8~~$1.1 million in the ~~third quarter~~first nine months of ~~2014, and~~2016 compared to an income tax benefit of $25.5 million in the first nine months of ~~2015 compared to an income tax expense of $4.6 million in the first nine months of 2014.~~2015. Our income tax benefit in the first nine months of 2015 includes a first quarter non-cash income tax benefit of $3.0 million related to the release of a portion of our reserve for uncertain tax positions due to the expiration of the applicable statute of limitations. In accordance with GAAP, we recognize deferred income taxes on our undistributed equity in earnings (losses) of Kronos. Because we and Kronos are part of the same U.S. federal income tax group, any dividends we receive from Kronos are nontaxable to us. Accordingly, we do not recognize and we are not required to pay income taxes on dividends from Kronos. Therefore, our full-year effective income tax rate will generally be lower than the U.S. federal statutory income tax rate in ~~periods~~years during which we receive dividends from Kronos and recognize equity in earnings of ~~Kronos (such as in 2014).~~Kronos. Conversely, our effective income tax rate will generally be higher than the U.S. federal statutory income tax rate in ~~periods~~years during which we receive dividends from Kronos and recognize equity in losses of Kronos. During interim periods, our effective income tax rate may not necessarily correspond to the foregoing due to the application of accounting for income taxes in interim periods which requires us to base our effective rate on full year projections. We received dividends from Kronos ~~(such as~~of $15.8 million in ~~2015).~~ each of the first nine months of 2015 and 2016.

Our effective tax rate attributable to our equity in earnings of Kronos, including the effect of the non-taxable dividends we received from Kronos was ~~10.7%~~(11.3)% in the first nine months of ~~2014.~~ 2016 and 50.9% in the first nine months of 2015. Kronos has substantial net operating losses in Germany and Belgium, the benefit of which Kronos had previously recognized under the more-likely-than-not recognition criteria. In the second quarter of 2015, Kronos determined that such losses did not meet the more-likely-than-not recognition criteria, and as a result Kronos recognized a non-cash deferred income tax expense of $150.3 million in the second quarter of 2015 ~~and an additional $2.3 million of expense in the third quarter of 2015~~ as a valuation allowance against Kronos’ net deferred income tax assets in such jurisdictions. Kronos recognized an additional $2.3 million non-cash deferred income tax asset valuation allowance during the third quarter of 2015, and recognized an aggregate $2.1 million non-cash deferred income tax asset valuation allowance in the first nine months of 2016 (mostly in the second quarter) as additional valuation allowance against additional losses in such jurisdictions. Our equity in losses of Kronos in the third quarter and first nine months of 2015 and 2016 includes our equity in such non-cash

deferred income tax expense recognized by Kronos and is a significant reason why our effective tax rate attributable to our equity in losses of Kronos ~~including the effect of the non-taxable dividends we received from Kronos,~~ was 50.9% in the first nine months of 2015. See Note 11 to our Condensed Consolidated Financial Statements for more information about our ~~2015~~2016 income tax items, including a tabular reconciliation of our statutory tax expense (benefit) to our actual expense (benefit).

Noncontrolling interest – Noncontrolling interest in net income of CompX is consistent in the third quarter and year-to-date periods of ~~2014~~2015 and ~~2015.~~2016. The noncontrolling interest we recognize in each period is directly related to the level of earnings at CompX for the period.

Equity in earnings (losses) of Kronos Worldwide, Inc.

	Three months ended September 30,								%				Nine months ended September 30,								%				Three months ended September 30,								%				Nine months ended September 30,								%
	2014				2015				Change				2014				2015				Change				2015				2016				Change				2015				2016				Change
	(In millions)												(In millions)												(In millions)												(In millions)
Net sales	$	414.8			$	336.5				(19	)	%	$	1,278.4			$	1,061.8				(17	)	%	$	336.5			$	356.1				6		%	$	1,061.8			$	1,030.6				(3	)	%
Cost of sales		319.1				293.3				(8	)			1,008.4				894.7				(11	)			293.3				280.6				(4	)			894.7				859.2				(4	)
Gross margin	$	95.7			$	43.2							$	270.0			$	167.1							$	43.2			$	75.5							$	167.1			$	171.4

Income (loss) from operations	$	47.9			$	(3.2	)			(107	)		$	118.2			$	18.6				(84	)		$	(3.2	)		$	28.0				975			$	18.6			$	38.2				105
Interest and dividend income		.2				.3								.7				.6
Securities transactions, net		-				(12.0	)							-				(12.0	)							(12.0	)			—								(12.0	)			—
Other, net																										.3				.1								.6				.5
Interest expense		(3.9	)			(4.3	)							(12.6	)			(13.3	)							(4.3	)			(5.2	)							(13.3	)			(15.4	)
Income (loss) before income taxes		44.2				(19.2	)							106.3				(6.1	)							(19.2	)			22.9								(6.1	)			23.3
Income tax expense		12.3				(7.4	)							27.0				147.1
Income tax expense (benefit)																										(7.4	)			0.7								147.1				3.2
Net income (loss)	$	31.9			$	(11.8	)						$	79.3			$	(153.2	)						$	(11.8	)		$	22.2							$	(153.2	)		$	20.1

Percentage of net sales:
Cost of sales		77		%		87		%						79		%		84		%						87		%		79		%						84		%		83		%
Income (loss) from operations		12				(1	)							9				2								(1	)			8								2				4

Equity in earnings (losses) of Kronos Worldwide, Inc.	$	9.7			$	(3.6	)						$	24.1			$	(46.6	)						$	(3.6	)		$	6.8							$	(46.6	)		$	6.1

TiO₂ operating statistics:
Sales volumes*		125				136				8		%		380				406				7		%		136				143				6		%		406				430				6		%
Production volumes*		134				132				(1	)			388				397				2				132				139				5				397				401				1

Change in TiO₂ net sales:
TiO₂ product pricing										(15	)	%										(13	)	%										2		%										(7	)	%
TiO₂ sales volumes										8												7												6												6
TiO₂ product mix										(3	)											(2	)
TiO₂ product mix/other																																		(1	)											(1	)
Changes in currency exchange rates										(9	)											(9	)											(1	)											(1	)
Total										(19	)	%										(17	)	%										6		%										(3	)	%

* Thousands of metric tons

The key performance indicators for Kronos are TiO₂ average selling prices, its level of TiO₂ sales and production volumes and the cost of third-party feedstock ore. TiO₂ selling prices generally follow industry trends and prices will increase or decrease generally as a result of market pressures.

Current industry conditions – Due to competitive pressures, Kronos’ average selling prices decreased throughout ~~2014~~2015 and, to a much lesser extent, into the first ~~nine months~~quarter of 2016. Kronos’ average selling prices at the beginning of 2016 were 17% lower as compared to the beginning of 2015. In the second quarter of 2016, Kronos’ average selling prices began to rise due to the implementation of previously-announced price increases and average selling prices continued to rise through the third quarter. Kronos’ average selling prices at the end of the third quarter of ~~2015~~2016 were ~~3% lower~~6% higher than at the end of the second quarter of ~~2015,~~2016 and ~~13% lower~~8% higher than at the end of ~~2014,~~2015, with ~~lower~~higher prices in all major markets. ~~Kronos’ average selling prices in 2015 were also impacted by a higher percentage of sales to lower-priced export markets in 2015 compared to 2014.~~Kronos experienced higher sales volumes in European, North American and export markets in the ~~third quarter and~~ first nine months of ~~2015 as compared to the third quarter and first nine months of 2014, partially offset by slightly lower volumes in North American markets in 2015~~2016 as compared to the same ~~periods~~period of ~~2014.~~2015, partially offset by lower volumes in the Latin American market.

Kronos operated its production facilities at overall average capacity utilization rates of ~~96%~~97% in the first nine months of ~~2015~~2016 (approximately ~~93%~~97%, ~~100%~~95% and ~~95%~~100% of practical capacity in the first, second and third quarters, respectively) compared to approximately ~~94%~~96% in the first nine months of ~~2014 (90%~~2015 (93%, ~~97%~~100% and ~~96%~~95% in the first, second and third quarters of ~~2014,~~2015, respectively). Kronos’ production capacity utilization rates in the first quarter of 2014 were impacted by a union labor lockout at its Canadian production facility that ended in December 2013, as restart of production at the facility did not begin until February 2014. Kronos’ production rates in the first quarter of 2015 were impacted by the implementation of certain productivity-enhancing improvement projects at certain facilities, as well as necessary improvements to ensure continued compliance with its permit regulations, which resulted in longer-than-normal maintenance shutdowns in some instances.

In the second quarter of 2015, Kronos initiated a restructuring plan designed to improve its long-term cost structure. A portion of such expected cost savings are planned to occur through workforce reductions. During the second and third quarters of 2015, Kronos implemented certain voluntary and involuntary workforce reductions at certain of its facilities impacting approximately 160 individuals. Kronos recognized an aggregate $21.1 million charge in the second quarter of 2015 and an additional $.4 million charge in the third quarter of 2015 for such workforce reductions it had implemented through September 30, 2015, $10.7 million of which is classified as part of cost of sales and $10.8 million of which is classified in selling, general and administrative expense. The charge associated with the workforce reductions implemented in the third quarter of 2015, which impacted approximately 50 individuals, was not material due to the applicable law affecting such individuals, which generally provides for a short notice period (if any) and the payment of a nominal amount of severance (if any).

Net sales – Kronos’ net sales in the third quarter of ~~2015 decreased 19%~~2016 increased 6%, or ~~$78.3~~$19.6 million, compared to the third quarter of ~~2014~~2015 primarily due to the net effect of a ~~15% decrease~~2% increase in average TiO₂ selling prices (which ~~decreased~~increased net sales by approximately ~~$62~~$7 million) and ~~an 8%~~a 6% increase in sales volumes (which increased net sales by approximately ~~$33~~$20 million). TiO₂ selling prices will increase or decrease generally as a result of competitive market pressures, changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs.

Kronos’ sales volumes increased 8%6% in the third quarter of ~~2015 as~~2016 compared to the third quarter of ~~2014~~2015 primarily due to higher sales in ~~certain European~~North American and export markets, partially offset by ~~slightly~~ lower sales in ~~North American markets.~~Latin America. Kronos’ sales volumes in the third quarter of 2016 set a new overall record for a third quarter (sales volume in the second quarter of 2016 also set a new overall record for a second quarter). In addition to the impact of changes in average TiO₂ selling prices and sales volumes, Kronos estimates that changes in currency exchange rates (primarily the euro) decreased its net sales by approximately ~~$36~~$2 million as compared to the third quarter of ~~2014.~~2015.

Kronos’ net sales in the first nine months ~~ended September 30, 2015~~of 2016 decreased ~~17%~~3%, or ~~$216.6~~$31.2 million, compared to the first nine months ~~ended September 30, 2014~~of 2015 primarily due to the net effect of a ~~13%~~7% decrease in average TiO₂ selling prices (which decreased net sales by approximately ~~$166~~$74 million) and a 7%6% increase in sales volumes (which increased net sales by approximately ~~$89~~$64 million). TiO₂ selling prices will increase or decrease generally as a result of competitive market pressures, changes in the relative level of supply and demand as well as changes in raw material and other manufacturing costs.

Kronos’ sales volumes increased 7%6% in the first nine months of ~~2015~~2016 as compared to the first nine months of ~~2014~~2015 primarily due to higher sales in ~~certain~~ European, North American and export markets, partially offset by ~~slightly~~ lower sales in ~~North American markets.~~Latin America. Kronos’ sales volumes in the first nine months of 2016 set a new overall record for a first-nine-months period. In addition to the impact of changes in average TiO₂ selling prices and sales volumes, Kronos estimates that changes in currency exchange rates decreased its net sales by approximately ~~$113~~$8 million as compared to the first nine months of ~~2014.~~2015.

Cost of sales – Kronos’ cost of sales decreased ~~$25.8~~$12.7 million or 8%4% in the third quarter of ~~2015~~2016 compared to ~~2014~~the third quarter of 2015 due to the net impact of lower raw materials and other production costs of approximately $5$20 million (primarily ~~caused by~~ lower third-party feedstock ore costs), ~~an 8%~~a 6% increase in sales ~~volumes,~~volume, a ~~1% decrease~~5% increase in TiO₂ production volumes and currency fluctuations (primarily the euro). Kronos’ cost of sales as a percentage of net sales ~~increased~~decreased to ~~87%~~79% in the third quarter of ~~2015~~2016 compared to ~~77%~~87% in the same period of ~~2014, as the unfavorable impact of lower average selling prices more than offset~~2015 due to the favorable effects of average selling prices, higher production volumes and lower raw ~~material costs, as discussed above.~~materials and other production costs.

Kronos’ cost of sales decreased ~~$113.7~~$35.5 million or ~~11%~~4% in the first nine months ~~ended September 30, 2015~~of 2016 compared to the same period in ~~2014~~2015 primarily due to the net impact of lower raw materials and other production costs of approximately ~~$28~~$43 million (primarily ~~caused by~~ lower third-party feedstock ore costs), approximately $4.5 million in savings resulting from workforce reductions implemented in 2015, a ~~2% increase in TiO~~₂ ~~production volumes, a 7%~~6% increase in sales volumes, and currency fluctuations (primarily the euro). ~~In addition,~~Most of such $4.5 million of savings were recognized in the first six months of 2016, as a substantial portion of the workforce reductions had been implemented by July 1, 2015. Kronos’ cost of sales in 2015 includes approximately $10.7 million of severance costs related to ~~the~~ workforce ~~reduction plan discussed above.~~reductions.

Kronos’ cost of sales as a percentage of net sales ~~increased~~decreased to ~~84%~~83% in the first nine months of ~~2015~~2016 compared to ~~79%~~84% in the same period of ~~2014,~~2015, as the favorable effects of lower raw materials and other production costs and the impact of the $10.7 million second quarter 2015 workforce reduction charge classified in cost of sales and associated cost savings from such workforce reduction realized in the first nine months of 2016 were offset by the unfavorable impact of lower average selling prices, as discussed above.

Other operating income and expense, net – Kronos’ other operating income and expense, net in the third quarter of 2016 was $47.5 million, an increase of $1.1 million compared to the third quarter of 2015.

Kronos’ other operating income and expense, net in the first nine months of 2016 was $133.2 million, a decrease of $15.3 million compared to the first nine months of 2015. Kronos’ other operating expense in the first nine months of 2015 includes $10.8 million of severance costs related to workforce reductions classified in selling, general and administrative expense. In addition, Kronos’ other operating expense decreased in the first nine months of 2016 due to approximately $5.5 million in cost savings realized in 2016 from workforce reductions implemented in 2015 along with an increase in other operating income due to the recognition of an insurance settlement gain of $3.4 million related to a 2014 business interruption claim. Most of such $5.5 million of savings were recognized in the first six months of 2016, as a substantial portion of the workforce ~~reduction charge more than offset the favorable effects of lower raw material costs and efficiencies related to higher production volumes, as discussed above.~~ reductions had been implemented by July 1, 2015.

Gross margin and income (loss) from operations – Kronos’ income from operations ~~decreased~~increased by ~~$51.1~~$31.2 million ~~from income of $47.9 million in the third quarter of 2014~~compared to ~~a loss from operations of $3.2 million in~~ the third quarter of 2015. Income (loss) from operations as a percentage of net sales ~~decreased~~increased to ~~(1)%~~8% in the third quarter of ~~2015~~2016 from ~~12%~~(1)% in the same period of ~~2014.~~2015. This ~~decrease~~increase was driven by the ~~decline~~increase in gross margin percentage, which ~~decreased~~increased to 21% for the third quarter of 2016 compared to 13% for the third quarter of ~~2015 compared to 23% for the third quarter of 2014.~~2015. As discussed and quantified above, Kronos’ gross margin percentage ~~decreased~~increased primarily due to the net effect of ~~lower~~higher selling prices, lower ~~manufacturing~~raw material and other production costs, ~~(primarily raw materials),~~ higher sales volumes and ~~lower~~higher production volumes. Kronos estimates that changes in currency exchange rates increased income from operations by approximately $5$2 million in the third quarter of ~~2015~~2016 as compared to the same period in ~~2014,~~2015, as discussed below.

Kronos’ income from operations ~~decreased~~increased by ~~$99.6~~$19.6 million ~~from $118.2 million in the first nine months of 2014~~compared to ~~$18.6 million in~~ the first nine months of 2015. Income from operations as a percentage of net sales ~~decreased~~increased to 2%4% in the first nine months of ~~2015~~2016 from 9%2% in the same period of ~~2014.~~2015. This ~~decrease~~increase was driven by the ~~decline~~increase in gross margin, which ~~decreased~~increased to 17% for the first nine months of 2016 compared to 16% for the first nine months of 2015, ~~compared to 21% for~~partially offset by the impact of the $10.8 million second quarter 2015 workforce reduction charge classified in selling, general and administrative expense and the associated cost savings from such workforce reductions realized in the first nine months of ~~2014, as well as the negative impact~~2016 of ~~the workforce reduction charge classified as part of other operating expense ($10.8 million).~~$5.5 million. As discussed and quantified above, Kronos’ gross margin ~~decreased~~increased primarily due to the net effect of lower selling prices, lower raw material and other production costs (including 2015 workforce reduction ~~costs~~charges of $10.7 million classified as ~~part of~~ cost of sales ~~($10.7 million)~~and the associated $4.5 million of cost savings from such workforce reduction realized in 2016), ~~lower manufacturing costs (primarily raw materials), higher production volumes,~~ and higher sales volumes. Kronos estimates that changes in currency exchange rates increased income from operations by approximately ~~$30~~$13 million in the first nine months of ~~2015~~2016 as compared to the same period in ~~2014.~~2015.

Other non-operating income (expense) – Kronos recognized a $12.0 million pre-tax impairment charge in the third quarter of 2015 due to other-than-temporary impairment on ~~its~~Kronos’ investment in ~~Valhi common stock~~a marketable security held for sale.

Kronos’ interest expense increased $.9 million, or 21%, in the third quarter of ~~2014~~2016 compared to the third quarter of 2015 primarily due to its interest rate swap contract which was ~~comparable~~effective September 30, 2015 and higher average debt levels in the third quarter of 2016 compared to the third quarter of 2015. ~~Kronos currently expects its interest expense for all of 2015 will be comparable to 2014.~~

Kronos’ interest expense increased ~~$.7~~$2.1 million, ~~from $12.6 million~~or 16%, in the first nine months ~~ended September 30, 2014~~of 2016 compared to ~~$13.3 million in the nine months ended September 30,~~ 2015 primarily due to its interest rate swap and higher average debt levels ~~mostly offset by lower average interest rates~~ in ~~2015~~.2016.

Income tax expense – Kronos recognized anincome tax expense of $.7 million in the third quarter of 2016 compared to income tax benefit of $7.4 million in the third quarter of ~~2015 compared to~~2015. As discussed below, Kronos’ income tax expense ~~of $12.3 million~~ in the ~~same period last year. This difference is primarily due to Kronos’ decreased earnings in 2015. Kronos’ earnings are subject to~~third quarter of 2016 includes a $5.6 million current income tax ~~in various~~benefit related to the execution and finalization of an Advance Pricing Agreement between the U.S. and non-U.S. jurisdictions, and the income tax rates applicable to its pre-tax earnings (losses) of its non-U.S. operations is generally lower than the income tax rates applicable to Kronos’ U.S. operations.Canada.

~~As previously disclosed,~~ Kronos has substantial net operating loss (NOL) carryforwards in Germany (the equivalent of ~~$738 million and $94~~$683 million for German corporate purposes and $96 million for German trade tax purposes, respectively, at December 31, ~~2014)~~2015) and in Belgium (the equivalent of ~~$87~~$86 million for Belgian corporate tax purposes at December 31, ~~2014)~~2015), all of which have an indefinite carryforward period. As a result, Kronos has net deferred income tax assets with respect to these two jurisdictions, primarily related to these NOL carryforwards. The German corporate tax is similar to the U.S. federal income tax, and the German trade tax is similar to the U.S. state income tax. Prior to June 30, 2015, and using all available evidence, Kronos had concluded no deferred income tax asset valuation allowance was required to be recognized with respect to these net deferred income tax assets under the more-likely-than-not recognition criteria, primarily because (i) the carryforwards have an indefinite carryforward period, (ii) Kronos utilized a portion of such carryforwards during the most recent three-year period, and (iii) Kronos ~~expects~~expected to utilize the remainder of the carryforwards over the long term. Kronos had also previously indicated that facts and circumstances could change, which might in the future result in the recognition of a valuation allowance against some or all of such deferred income tax assets. However, as of June 30, 2015, and given Kronos’ operating results during the second quarter of 2015 and Kronos’ expectations at that time for its operating results for the remainder of 2015, which ~~as discussed above have~~had been driven in large part by the trend in Kronos’ average TiO₂ selling prices over such periods as well as the $21.1 million pre-tax charge recognized in the second quarter of 2015 in connection with the implementation of certain workforce reductions, Kronos did not have sufficient positive evidence to overcome the significant negative evidence of having cumulative losses in the most recent twelve consecutive quarters in both its German and Belgian jurisdictions at June 30, 2015 (even considering that the carryforward period of its German and Belgian NOL carryforwards is indefinite, one piece of positive evidence). Accordingly, at June 30, 2015, Kronos concluded that it was required to recognize a non-cash deferred income tax asset valuation allowance under the more-likely-than-not recognition criteria with respect to its German and Belgian net deferred income tax ~~assets. Such valuation allowance aggregated $150.3 million~~assets at ~~June 30, 2015.~~ such date. Kronos recognized an additional ~~$2.3 million~~ non-cash deferred income tax asset valuation allowance ~~under the more-likely-than-not recognition criteria~~ during the ~~third quarter~~second half of 2015 due to losses recognized by its German and Belgian operations during such period.~~And consistent with Kronos’ expectation regarding its consolidated results of operations in the fourth quarter of this year (as discussed below under the “Outlook” subsection),~~ Such valuation allowance aggregated $168.9 million at December 31, 2015. Kronos ~~believes it is likely its German and Belgian operations will report~~recognized an additional ~~losses in the fourth quarter of this year, which would result in a further increase in the~~non-cash deferred income tax asset valuation ~~allowance.~~allowance during the first nine months of 2016 of $2.1 million, most of which was recognized in the second quarter. Kronos continues to believe it will ultimately realize the full benefit of these German and Belgian NOL carryforwards, in part because of their indefinite carryforward period. However, Kronos’ 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 Kronos is able to reverse the valuation allowance in full, to the extent itKronos generates additional losses in Germany or Belgium in the intervening periods, Kronos’ effective income tax rate would be impacted by the existence of such valuation allowance, because such losses would effectively be recognized without any associated net income tax benefit, as such losses would result in a further increase in the deferred income tax asset valuation allowance. Alternatively, until such time as Kronos is able to reverse the valuation allowance in full, to the extent Kronos generates income in Germany or Belgium in the intervening periods, its effective income tax rate would also be impacted by the existence of such valuation allowance, because such income ~~would effectively~~may be recognized without any associated net income tax expense, subject to certain NOL usage limitations, as Kronos would reverse a portion of the valuation allowance to offset the income tax expense attributable to such income. In addition, any change in tax law related to the indefinite carryforward period of these NOLs could adversely impact Kronos’ ability to reverse the valuation allowance in full. Consistent

with Kronos’ expectation regarding its consolidated results of operations in the remainder of 2016 (as discussed below under the “Outlook” subsection), Kronos currently believes it is likely its German and Belgian operations will report improved operating results in 2016 as compared to 2015. However Kronos currently does not expect that its German and Belgian operating results would improve to such an extent in 2016 that reversal of the valuation allowance in full would be supported by the presence of sufficient positive evidence.

Kronos recognized income tax expense of ~~$147.1~~$3.2 million in the first nine months of ~~2015~~2016 compared to income tax expense of ~~$27.0~~$147.1 million in the same period last year. As discussed above, Kronos’ income tax expense in the first nine months of 2016 and 2015 includes a $5.6 million current income tax benefit related to the execution and finalization of an ~~aggregate~~Advance Pricing Agreement between the U.S. and Canada. Kronos’ income tax expense in the first nine months of 2016 and 2015 includes a non-cash deferred income tax expense of $2.1 million and $152.6 million, respectively, related to the recognition of a deferred income tax asset valuation allowance for ~~Kronos’~~its German and Belgian operations (mostly recognized in the second ~~quarter). In the first nine months~~quarter of 2014, Kronos’ income tax expense was favorably impacted by an aggregate non-cash income tax benefit of $5.1 million related to a net reduction in its reserve for uncertain tax positions (mostly recognized in the second quarter)each respective year). Kronos’ earnings are subject to income tax in various U.S. and non-U.S. jurisdictions, and the income tax rates applicable to its pre-tax earnings (losses) of its non-U.S. operations are generally lower than the income tax rates applicable to Kronos’ U.S. operations. Excluding the ~~impact~~effect of ~~the net reduction~~any increase or decrease in Kronos’ ~~reserve for uncertain~~deferred income tax ~~positions in the first nine months of 2014,~~asset valuation allowance, Kronos would generally expect its overall effective tax rate ~~in such period was~~to be lower than the U.S. federal statutory ~~tax~~ rate of 35%

primarily ~~due to~~because of its non-U.S. ~~earnings.~~operations. Kronos’ effective income tax rate in the first nine months of 2015, excluding the impact of the deferred income tax asset valuation ~~allowance,~~allowances Kronos recognized, was higher than the U.S. federal statutory tax rate of 35%, primarily due to a current U.S. income tax benefit attributable to current year losses of one of its non-U.S. subsidiaries.Kronos’ effective income tax rate in the first nine months of 2016, excluding the impact of the deferred income tax asset valuation allowances Kronos recognized, was lower than the U.S. federal statutory rate of 35%. Excluding the impact of the deferred income tax asset valuation allowance Kronos recognized and the U.S.-Canada APA changes to prior year tax, Kronos expects its effective income tax rate to be lower than the U.S. federal statutory rate of 35% primarily because of non-U.S. operations.

Kronos has substantial operations and assets located outside the United States (primarily in Germany, Belgium, Norway and Canada). The majority of its 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 Kronos’ sales generated from its non-U.S. operations is denominated in the U.S. dollar (and consequently its non-U.S. operations will generally hold U.S. dollars from time to time). Certain raw materials used ~~worldwide,~~in all Kronos’ production facilities, primarily titanium-containing feedstocks, are purchased 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 Kronos’ 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, Kronos’ non-U.S. operations also generate currency transaction gains and losses which primarily relate to (i) the difference between the currency exchange rates in effect when non-local currency sales or operating costs (primarily U.S. dollar denominated) are initially accrued and when such amounts are settled with the non-local currency, (ii) changes in currency exchange rates during time periods when its 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. Kronos periodically uses 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 Kronos holds from time to time serves in part to mitigate the currency transaction gains or losses it would otherwise recognize from the first two items described above. Overall, Kronos estimates that fluctuations in currency exchange rates had the following effects on its sales and income from operations for the periods indicated.

The ~~$36~~$2 million ~~reduction~~decrease in Kronos’ net sales (translation loss) was caused primarily by a strengthening of the U.S. dollar relative to the euro, as ~~its~~Kronos’ euro-denominated sales were translated into ~~fewer~~less U.S. dollars in ~~2015~~2016 as compared to ~~2014.~~2015. The strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in ~~2015~~2016 did not have a significant effect on the reported amount of Kronos’ net sales, as a substantial portion of the sales generated by ~~its~~Kronos’ Canadian and Norwegian operations are denominated in the U.S. dollar.

The $5$2 million net increase in Kronos’ income from operations is comprised primarily of approximately $2 million from net currency translation gains caused primarily by a strengthening of the ~~following net effects:~~U.S. dollar relative to the Canadian dollar and the Norwegian krone, as their local currency denominated operating costs were translated into fewer U.S. dollars in 2016 as compared to 2015, (and such translation, as it related to the U.S. dollar relative to the euro, had a negative effect on Kronos’ income from operations in 2016 as compared to 2015, as the negative impact of the stronger U.S. dollar on euro-denominated sales more than offset the favorable effect of euro-denominated operating costs being translated into less U.S. dollars in 2016 as compared to 2015).

The ~~$113~~$8 million reduction in Kronos’ net sales (translation loss) was caused primarily by a strengthening of the U.S. dollar relative to the euro, as Kronos’ euro-denominated sales were translated into fewer U.S. dollars in ~~2015~~2016 as compared to ~~2014.~~2015. The strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in ~~2015~~2016 did not have a significant effect on the reported amount of Kronos’ net sales, as a substantial portion of the sales generated by its Canadian and Norwegian operations are denominated in the U.S. dollar.

The ~~$30~~$13 million net increase in Kronos’ income from operations comprised the ~~following~~following:

approximately $2 million from net ~~effects:~~currency transaction gains caused primarily by a strengthening of the U.S. dollar relative to the euro, the Norwegian krone and the Canadian dollar, as U.S. dollar-denominated receivables and U.S. dollar currency held by its non-U.S. operations became equivalent to a greater amount of local currency in the 2016 period as compared to the 2015 period, and

A reduction in the amount of net currency transaction gains (losses) during the two periods of approximately $2 million. Such net currency transaction gains (losses) result primarily from U.S. dollar-denominated receivables and U.S. dollar currency held by Kronos’ non-U.S. operations, which are translated into the applicable local currency at each balance sheet date. During the first nine months of 2014, a relative strengthening of the U.S. dollar relative to the euro and the Norwegian krone gave rise to a net $3 million currency transaction gain, whereas Kronos recognized a $1 million currency transaction gain during the first nine months of 2015, and

Approximately $32 million from net currency translation gains caused primarily by a strengthening of the U.S. dollar relative to the Canadian dollar, the Norwegian krone and the euro, as Kronos’ local currency-denominated operating costs were translated into fewer U.S. dollars in 2015 as compared to 2014 (and such translation, as it related to Kronos’ euro-denominated operating costs, more than offset the negative impact on Kronos’ income from operations from the reduction in net sales caused by the strengthening of the U.S. dollar as it related to its euro denominated sales).

approximately $11 million from net currency translation gains caused primarily by a strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone, as their local currency denominated operating costs were translated into fewer U.S. dollars in 2016 as compared to 2015, (and such translation, as it related to the U.S. dollar relative to the euro, had a negative effect on income from operations in 2016 as compared to 2015, as the negative impact of the stronger U.S. dollar on euro-denominated sales more than offset the favorable effect of euro-denominated operating costs being translated into fewer U.S. dollars in 2016 as compared to 2015).

Outlook

During the first nine months of ~~2015~~2016 Kronos operated its production facilities at ~~96%~~97% of practical ~~capacity~~capacity. Kronos expects its production volumes to be higher in 2016 as compared to ~~approximately 94%~~2015, as its production rates in 2015 were impacted by the implementation of ~~practical capacity~~certain productivity-enhancing improvement projects at certain facilities, as well as necessary improvements to ensure continued compliance with its permit regulations, which resulted in ~~2014.~~longer-than-normal maintenance shutdowns in some instances. Assuming global economic conditions do not deteriorate, ~~in the various regions of the world,~~ Kronos expects ~~its~~ sales volumes to be higher in ~~2015~~2016 as compared to ~~2014.~~2015. Kronos will continue to monitor current and anticipated near-term customer demand levels and align its production and inventories accordingly.

Kronos ~~continued to experience~~experienced moderation in the cost of TiO₂ feedstock ore procured from third parties in ~~2014 and~~2015 which continued into the first nine months of ~~2015.~~2016. Given the time lag between when third-party feedstock ore is ~~procured~~purchased and when the TiO₂ product produced with such ore is ~~sold and recognized~~reflected in Kronos’ cost of sales, ~~its~~Kronos’ cost of sales per metric ton of TiO₂ sold in the first nine months of ~~2015~~2016 was ~~slightly~~ lower than its cost of sales per metric ton of TiO₂ sold in ~~2014~~the first nine months of 2015 (excluding the effect of changes in currency exchange rates). ~~While~~ Kronos expects its cost of sales per metric ton of TiO₂ sold for the ~~remainder~~full year of ~~2015~~2016 will be ~~comparable to such~~lower than its per-metric ton cost in the ~~first nine months~~comparable periods of 2015, ~~such per-metric ton~~due in part to the favorable effect of the workforce reductions and other cost ~~for~~reduction initiatives it implemented beginning in the ~~remainder~~second quarter of 2015 isas well as some expected ~~to continue to be slightly lower as compared to~~additional modest improvement in the ~~same period in 2014 (excluding the effect~~cost of ~~changes in currency exchange rates).~~ feedstock ore.

Kronos started ~~2015~~2016 with selling prices 9%17% lower than the beginning of ~~2014,~~2015, and prices declined by an additional ~~13%~~1% in the first ~~nine months~~quarter of 2016. In the second quarter of 2016, Kronos’ average selling prices began to rise due to the implementation of previously-announced price increases and average selling prices continued to rise in the third quarter. Kronos’ average selling prices at the end of the third quarter of 2016 were 6% higher than at the end of the second quarter of 2016, and 8% higher than at the end of 2015 but still lower than the beginning of 2015. Industry data indicates that overall TiO₂ inventory held by producers ~~has been~~declined significantly ~~decreased.~~during 2015. In addition, Kronos believes most customers hold very low inventories of TiO₂ with many operating on a just-in-time basis. With the ~~improvement in~~strong sales volumes experienced in the first nine months of ~~2015,~~2016, Kronos continues to see evidence of strengthening demand for its TiO₂ products in certain of its primary markets. Kronos and its major competitors have announced price increases, which Kronos began implementing in the second quarter of 2016, as contracts have allowed. The extent to which Kronos will be able to achieve any additional price increases in the near term will depend on market conditions.

~~In the second quarter of 2015,~~ Kronos initiated a restructuring plan in 2015 designed to improve its long-term cost structure. ~~A portion~~As part of such ~~expected cost savings is planned to occur through workforce reductions. During the second and third quarters of 2015,~~plan, Kronos implemented certain voluntary and involuntary workforce reductions during 2015 at certain of its facilities impacting approximately 160 individuals. ~~As of September 30, 2015 Kronos has recognized an aggregate $21.5 million charge for such~~Such workforce reductions ~~it had implemented through that date, $10.7~~are expected to result in approximately $19 million of ~~which is classified as part~~annual cost savings. Since the majority of ~~cost of sales and $10.8 million of which is classified in selling, general and administrative expense. The~~ workforce reductions ~~Kronos has~~had been implemented ~~through September 30,~~by July 1, 2015, the full year 2016 will not reflect this annual cost savings, as a portion of such annual cost savings were achieved in the second half of 2015 affecting year over year comparisons. These workforce reductions are not expected to negatively impact ~~its~~Kronos’ ability to operate its production facilities at their practical capacity rates.

In addition to the workforce reductions implemented ~~through September 30,~~in 2015, Kronos is also in the process of implementing other cost reduction initiatives throughout the organization, including the implementation of continued process productivity improvements. The workforce reductions Kronos has implemented through September 30, 2015, combined with certain open positions that are not expected to be filled and cost savings expected to be realized from its other cost reduction initiatives it is undertaking, are expected to result in a payback of the aggregate workforce reduction charge accrued at September 30, 2015 within approximately one year, the benefit of which Kronos began to recognize in the third quarter of 2015.

Overall, Kronos expects income from operations in ~~2015~~2016 will be ~~significantly lower~~higher as compared to ~~2014, primarily~~2015 as a result of:

the favorable effects of anticipated higher sales and production volumes ~~and moderating raw material costs will be more than offset by~~ in 2016,

the ~~negative effects~~favorable effect of lower anticipated average selling prices. In addition, benefits expected to be realized in the remainder of 2015 from the workforce reductions implemented through September 30, 2015 would be more than offset by the workforce reduction charge recognized in the second andlower-cost third ~~quarters of 2015, as Kronos will not realize a full year of~~ party feedstock ore,

the expected cost savings from ~~such~~ workforce reductions, absence of restructuring fees paid in 2015, and other cost reduction ~~until 2016. Given, among other things,~~initiatives throughout the ~~level~~organization, and

the expected implementation of ~~Kronos’ average selling prices at the beginning of the fourth quarter of 2015, Kronos believes it is likely it will report a loss from operations in the fourth quarter of this year.~~price increases.

Due to the constraints of high capital costs and extended lead time associated with adding significant new TiO₂ production capacity, especially for premium grades of TiO₂ products produced from the chloride process, Kronos believes increased and sustained profit margins will be necessary to financially justify major expansions of TiO₂ production capacity required to meet expected future growth in demand. As a result of ~~supply and demand trends over~~relative customer inventory levels during the ~~last year~~recent past and the resulting adverse effect on global TiO₂ pricing, some industry projects to increase TiO₂ production capacity have been cancelled or deferred indefinitely, and announcements have been made regarding the closure of certain facilities. Given the lead time required for ~~such~~ production capacity expansions, a shortage of TiO₂ ~~products~~ could occur if economic conditions improve and global demand levels for TiO₂ increase sufficiently.

Kronos’ expectations for its future operating results are based upon a number of factors beyond its control, including worldwide growth of ~~GDP,~~gross domestic product, competition in the marketplace, continued operation of competitors, unexpected or earlier-than-expected capacity additions or reductions and technological advances. If actual developments differ from ~~Kronos’~~its expectations, ~~its~~Kronos’ results of operations could be unfavorably affected.

LIQUIDITY AND CAPITAL RESOURCES

Consolidated cash flows

Operating activities

Trends in cash flows from operating activities, excluding the impact of deferred taxes and relative changes in assets and liabilities, are generally similar to trends in our income from operations. Changes in working capital are primarily related to changes in receivables and inventories (as discussed below) and payables and accrued liabilities.

Net cash provided by operating activities was $17.9 million in the first nine months of 2016 compared to $18.3 million in the first nine months of ~~2015 compared to $22.9 million in the first nine months of 2014.~~2015. The ~~$4.6~~$.4 million net decrease in cash provided by operating activities includes the net effects of:

~~higher income from operations attributable to CompX of $.8 million,~~

higher amount of net cash used for relative changes in receivables (excluding insurance recoveries), inventories, payables and accrued liabilities in 2016 of $.6 million,

~~higher amount of net cash used for relative changes in receivables (excluding insurance recoveries), inventories, payables and accrued liabilities in 2015 of $.3 million, and~~

lower cash paid for income taxes in 2016 of $1.5 million, due to timing of tax payments, and

~~lower cash received for insurance recoveries in 2015 of $7.7 million.~~

higher income from operations of CompX in 2016 of $.1 million.

We do not have complete access to CompX’s cash flows in part because we do not own 100% of CompX. A detail of our consolidated cash flows from operating activities is presented in the table below. Intercompany dividends have been eliminated. The reference to NL Parent in the table below is a reference to NL Industries, Inc., as the parent company of CompX and our wholly-owned subsidiaries.

	Nine months ended September 30,						Nine months ended September 30,
	2014			2015			2015			2016
	(In millions)						(In millions)
Net cash provided by operating activities:
CompX	$	7.2		$	6.7		$	6.7		$	7.9
NL Parent and wholly-owned subsidiaries		17.3			13.2			13.2			11.6
Eliminations		(1.6	)		(1.6	)		(1.6	)		(1.6	)
Total	$	22.9		$	18.3		$	18.3		$	17.9

~~Relative changes~~Changes in working capital can have a significant effect on cash flows from operating activities. Generally, we expect our average days sales outstanding to increase from December to September as the result of a seasonal increase in sales during the third quarter as compared to the fourth quarter. Overall, our September 30, ~~2015~~2016 days sales outstanding compared to December 31, ~~2014~~2015 is in line with our expectations. As shown below, our total average number of days in inventory ~~relative to sales~~ decreased from December 31, ~~2014~~2015 to September 30, ~~2015 primarily~~2016 as a result of ~~CompX’s intentional 2014~~the seasonal increase in sales during the third quarter of 2016 as compared to the fourth quarter ~~inventory build up to prepare for first quarter~~ 2015 ~~sales.~~and the temporary reduction in stocking levels at CompX’s Marine Components business. For comparative purposes, we have provided information for December 31, ~~2013~~2014 and September 30, ~~2014~~2015 below.

InNet cash used in investing activities totaled $13.1 million in the first nine months of ~~2015, we~~2016 and $2.2 million in the first nine months of 2015. On August 3, 2016 CompX entered into an unsecured revolving demand promissory note with Valhi whereby CompX agreed to loan Valhi up to $40 million. CompX’s loan to Valhi bears interest at prime plus 1.00%, payable quarterly, with all principal due on demand, but in any event no earlier than December 31, 2017. The amount of outstanding loans to Valhi at any time is at CompX’s discretion. During the third quarter of 2016, Valhi had borrowed a net $10.7 million under the promissory note ($15.1 million of gross borrowings and $4.4 million of gross repayments). See Note 14 to the Condensed Consolidated Financial Statements.

We spent ~~$2.6~~$2.4 million in capital expenditures during the first nine months of 2016, substantially all of which related to CompX.

Cash flows from financing activities in the first nine months of ~~2015~~2016 consist of CompX dividends paid to its stockholders other than us.

At September 30, ~~2015,~~2016, NL and CompX did not have any outstanding debt obligations.

Kronos’ North American and European revolvers and its term loan contain a number of covenants and restrictions which, among other things, restrict its ability to incur additional debt, incur liens, pay dividends or merge or consolidate with, or sell or transfer substantially all of ~~our~~its assets to, another entity, and contains other provisions and restrictive covenants customary in lending transactions of this type. Certain of Kronos’ 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, certain 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, certain 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. Kronos’ European revolving credit facility also requires the maintenance of certain financial ratios, and one of such requirements is based on the ratio of net debt to the last twelve months EBITDA of the borrowers. Kronos is in compliance with all of its debt covenants at September 30, ~~2015.~~2016. Kronos believes that it will be able to continue to comply with the financial covenants contained in its credit facilities through their maturity.

Our primary source of liquidity on an ongoing basis is our cash flow from operating activities and credit facilities with affiliates and banks as further discussed below. We generally use these amounts to fund capital expenditures (substantially all of which relate to CompX), pay ongoing environmental remediation and litigation costs and provide for the payment of dividends (if declared).

At September 30, ~~2015,~~2016, we had aggregate cash, cash equivalents and restricted cash of ~~$93.1~~$105.6 million, substantially all of which was held in the U.S. A detail by entity is presented in the table below.

In addition, at September 30, ~~2015~~2016 we owned 14.4 million shares of Valhi common stock with an aggregate market value of ~~$27.2~~$33.1 million. See Note 4 to our Condensed Consolidated Financial Statements. We also owned 35.2 million shares of Kronos common stock at September 30, ~~2015~~2016 with an aggregate market value of ~~$218.7~~$292.0 million. See Note 5 to our Condensed Consolidated Financial Statements.

We routinely compare our liquidity requirements and alternative uses of capital against the estimated future cash flows we expect to receive from our subsidiaries and affiliates. As a result of this process, we have in the past and may in the future seek to raise additional capital, incur debt, repurchase indebtedness in the market or otherwise, modify our dividend policies, consider the sale of our interests in our subsidiaries, affiliates, business, marketable securities or other assets, or take a combination of these and other steps, to increase liquidity, reduce indebtedness and fund future activities. Such activities have in the past and may in the future involve related companies.

We periodically evaluate acquisitions of interests in or combinations with companies (including related companies) perceived by management to be undervalued in the marketplace. These companies may or may not be engaged in businesses related to our current businesses. We intend to consider such acquisition activities in the future and, in connection with this activity, may consider issuing additional equity securities and increasing indebtedness. From time to time, we also evaluate the restructuring of ownership interests among our respective subsidiaries and related companies.

Based upon our expectations of our operating performance, and the anticipated demands on our cash resources we expect to have sufficient liquidity to meet our short-term obligations (defined as the twelve-month period ending September 30, ~~2016)~~2017) including any amounts CompX might loan from time to time under the terms of its new revolving loan to Valhi discussed in Note 14 to our Condensed Consolidated Financial Statements (which loans would be solely at CompX’s discretion). If actual developments differ materially from our expectations, our liquidity could be adversely affected. In this regard, Valhi has agreed to loan us up to $40 million on a revolving basis. At September 30, ~~2015,~~2016, we had no outstanding borrowings under this facility, and the full $40 million was available for future borrowing. The amount of any such outstanding loan Valhi would make to us is at Valhi’s discretion. We currently do not expect to be required to borrow any amounts from Valhi during the remainder of ~~2015~~2016 under this facility.

Firm purchase commitments for capital projects in process at September 30, ~~2015~~2016 approximated ~~$.9~~$.4 million. CompX’s ~~2015~~2016 capital investments are limited to those expenditures required to meet expected customer demand and those required to properly maintain our facilities and technology infrastructure.

Because our operations are conducted primarily through subsidiaries and affiliates, our long-term ability to meet parent company-level corporate obligations is largely dependent on the receipt of dividends or other distributions from our subsidiaries and affiliates. A detail of annual dividends we expect to receive from our subsidiaries and affiliates in ~~2015,~~2016, based on the number of shares of common stock of these affiliates we own as of September 30, ~~2015~~2016 and their current regular quarterly dividend rate, is presented in the table below.

We have in the past and may in the future, purchase the securities of our subsidiaries and affiliates or third-parties in market or privately-negotiated transactions. We base our purchase decisions on a variety of factors, including an analysis of the optimal use of our capital, taking into account the market value of the securities and the relative value of expected returns on alternative investments. In connection with these activities, we may consider issuing additional equity securities or increasing our indebtedness. We may also evaluate the restructuring of ownership interests of our businesses among our subsidiaries and related companies.

Other than operating lease commitments discussed in our ~~2014~~2015 Annual Report, we are not party to any material off-balance sheet financing arrangements.

There have been no material changes in our contractual obligations since we filed our ~~2014~~2015 Annual Report and we refer you to that report for a complete description of these commitments.

We are subject to certain commitments and contingencies, as more fully described toin our ~~2014~~2015 Annual Report, or in Note 13 to our Condensed Consolidated Financial Statements or in Part II, Item 1 of this report, including certain legal proceedings. In addition to such legal proceedings, various legislation and administrative regulations have, from time to time, been proposed that seek to (i) impose various obligations on present and former manufacturers of lead pigment and lead-based paint (including us) with respect to asserted health concerns associated with the use of such products and (ii) effectively overturn court decisions in which we and other pigment manufacturers have been successful. Examples of such proposed legislation include bills which would permit civil liability for damages on the basis of market share, rather than requiring plaintiffs to prove that the defendant’s product caused the alleged damage and bills which would revive actions barred by the statute of limitations. While no legislation or regulations have been enacted to date that are expected to have a material adverse effect on our consolidated financial position, results of operations or liquidity, enactment of such legislation could have such an effect.

For a discussion of our critical accounting policies, refer to Part I, -— “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2014~~2015 Annual Report. There have been no changes in our critical accounting policies during the first nine months of ~~2015.~~2016.

We are exposed to market risk, including currency exchange rates, interest rates and security prices. There have been no material changes in these market risks since we filed our ~~2014~~2015 Annual Report, and we refer you to Part I, Item 7A. –“Quantitative and Qualitative Disclosure about Market Risk” in our ~~2014~~2015 Annual Report. See also Note 1415 to our Condensed Consolidated Financial Statements.

Evaluation of disclosure controls and procedures – We maintain disclosure controls and procedures which, as defined in Exchange Act Rule 13a-15(e), means controls and other procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit to the SEC under the Securities Exchange Act of 1934, as amended (the Act), is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information we are required to disclose in the reports we file or submit to the SEC under the Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions to be made regarding required disclosure. Each of Robert D. Graham, our ~~Vice~~ Chairman of the Board, President and Chief Executive Officer and Gregory M. Swalwell, our Executive Vice President and Chief Financial Officer, have evaluated the design and effectiveness of our disclosure controls and procedures as of September 30, ~~2015.~~2016. Based upon their evaluation, these executive officers have concluded that our disclosure controls and procedures are effective as of the date of this evaluation.

Internal control over financial reporting – Our management is responsible for establishing and maintaining adequate internal control over financial reporting which, as defined by Exchange Act Rule 13a-15(f) means a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

As permitted by the SEC, our assessment of internal control over financial reporting excludes (i) internal control over financial reporting of equity method investees and (ii) internal control over the preparation of any financial statement schedules which would be required by Article 12 of Regulation S-X. However, our assessment of internal control over financial reporting with respect to equity method investees did include controls over the recording of amounts related to our investment that are recorded in the consolidated financial statements, including controls over the selection of accounting methods for our investments, the recognition of equity method earnings and losses and the determination, valuation and recording of our investment account balances.

Changes in internal control over financial reporting – There have been no changes to our internal control over financial reporting during the quarter ended September 30, ~~2015~~2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the matters discussed below, refer to Note 13 to our Condensed Consolidated Financial Statements, our ~~2014~~2015 Annual Report and our Quarterly Report on Form 10-Q for the quarters ended March 31, ~~2015~~2016 and June 30, ~~2015~~2016 for descriptions of certain legal proceedings.

~~ASARCO LLC v. NL Industries, Inc., et al.~~ ~~(United States District Court, Eastern District of Missouri, Case No. 4:11-cv-00864). In October 2015, the 8~~^th ~~Circuit Court of Appeals granted NL’s motion to dismiss Asarco’s appeal. The trial court’s indefinite stay therefore remains in place.~~

~~Consolidation Coal Company v. 3M Company, et al.~~ ~~(United States District Court, Eastern District of North Carolina, Civil Action No. 5:09-CV-00191-FL). In October 2015, the plaintiffs’ claims against NL were dismissed with prejudice.~~

For a discussion of the risk factors related to our businesses, refer to Part I, Item 1A., “Risk Factors,” in our ~~2014~~2015 Annual Report.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Page number
Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets - December 31, ~~2014;~~2015; September 30, ~~2015~~2016 (unaudited)	3

	Condensed Consolidated Statements of Operations (unaudited) -– Three and nine months ended September 30, ~~2014~~2015 and ~~2015~~2016	5

	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) -– Three and nine months ended September 30, ~~2014~~2015 and ~~2015~~2016	6

	Condensed Consolidated Statement of Equity (unaudited) -– Nine months ended September 30, ~~2015~~2016	7

	Condensed Consolidated Statements of Cash Flows (unaudited) - Nine months ended September 30, ~~2014~~2015 and ~~2015~~2016	8

	Notes to Condensed Consolidated Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2223
��
Item 3.	Quantitative and Qualitative Disclosure About Market Risk	4142

Item 4.	Controls and Procedures	4142


Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	4243

Item 1A.	Risk Factors	4243

Item 6.	Exhibits	4243

								Fair value measurement level	Market value		Cost basis		Unrealized gain (loss)
	Fair value measurement level	Market value		Cost basis		Unrealized gain			(In thousands)
		(In thousands)
December 31, 2014
December 31, 2015
Valhi common stock	1	$	92,131	$	24,347	$	67,784	1	$	19,260	$	24,347	$	(5,087	)

September 30, 2015
September 30, 2016
Valhi common stock	1	$	27,165	$	24,347	$	2,818	1	$	33,058	$	24,347	$	8,711

	December 31,		September 30,		December 31,		September 30,
	2014		2015		2015		2016
	(In millions)				(In millions)
Current assets	$	886.2	$	781.2	$	710.8	$	690.5
Property and equipment, net		479.7		431.3		429.5		446.6
Investment in TiO₂ joint venture		89.0		81.4		82.9		79.8
Other noncurrent assets		187.6		18.8		19.5		24.6

Total assets	$	1,642.5	$	1,312.7	$	1,242.7	$	1,241.5

Current liabilities	$	237.9	$	204.7	$	201.7	$	206.5
Long-term debt		344.7		342.9		337.2		336.0
Accrued pension and postretirement benefits		245.2		219.1		209.4		210.3
Other noncurrent liabilities		33.6		38.3		32.5		33.8
Stockholders' equity		781.1		507.7		461.9		454.9

Total liabilities and stockholders' equity	$	1,642.5	$	1,312.7	$	1,242.7	$	1,241.5

	Amount			Amount
	(In thousands)			(In thousands)
Balance at the beginning of the period	$	110,015		$	113,133
Additions charged to expense, net		2,530			5,090
Payments, net		(934	)		(1,412	)

Balance at the end of the period	$	111,611		$	116,811

Amounts recognized in the Condensed Consolidated
Balance Sheet at the end of the period:
Current liability	$	6,989		$	13,361
Noncurrent liability		104,622			103,450

Balance at the end of the period	$	111,611		$	116,811

	December 31, 2014				September 30, 2015				December 31, 2015				September 30, 2016
	Carrying		Fair		Carrying		Fair		Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value		amount		value		amount		value
	(In thousands)								(In thousands)
Cash, cash equivalents and restricted cash	$	77,975	$	77,975	$	93,118	$	93,118	$	100,981	$	100,981	$	105,611	$	105,611
Note receivable from affiliate										—		—		10,700		10,700
Noncontrolling interest in CompX common stock		14,428		19,936		15,167		18,199		15,301		18,878		16,060		19,269

	Transaction gains/(losses) recognized								Translation gain/loss- impact of rate changes			Total currency impact 2015 vs. 2014
	2014		2015			Change			Translation gain/loss- impact of rate changes			Total currency impact 2015 vs. 2014
	(In millions)
Impact on:
Net sales	$	-	$	-		$	-		$	(36	)	$	(36	)
Income from operations		3		(1	)		(4	)		9			5

	Transaction gains/(losses) recognized						Translation gain/loss— impact of rate changes		Total currency impact 2016 vs. 2015
	2015		2016		Change		Translation gain/loss— impact of rate changes		Total currency impact 2016 vs. 2015
	(In millions)
Impact on:
Net sales	$	—	$	—	$	—	$	(8)	$	(8)
Income from operations		1		3		2		11		13

	Shares held at September 30, 2015		Current Quarterly Dividend Rate		Annual Expected Dividend		Shares held at September 30, 2016		Current Quarterly Dividend Rate		Annual Expected Dividend
	(In millions)				(In millions)		(In millions)				(In millions)
Kronos		35.2	$	.15	$	21.1		35.2	$	.15	$	21.1
CompX		10.8		.05		2.2		10.8		.05		2.2
Valhi		14.4		.02		1.1		14.4		.02		1.1
Total expected annual dividends					$	24.4					$	24.4

31.1	Certification

31.2	Certification

32.1	Certification

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema

101.CAL	XBRL Taxonomy Extension Calculation Linkbase

101.DEF	XBRL Taxonomy Extension Definition Linkbase

101.LAB	XBRL Taxonomy Extension Label Linkbase

101.PRE	XBRL Taxonomy Extension Presentation Linkbase

Date: November ~~6, 2015~~7, 2016	/s/ Gregory M. Swalwell
	Gregory M. Swalwell
	(Executive Vice President and Chief Financial Officer, Principal Financial Officer)
Date: November ~~6, 2015~~7, 2016	~~/s/ Tim C. Hafer~~/s/ Amy Allbach Samford
	~~Tim C. Hafer~~Amy Allbach Samford
	(Vice President and Controller, Principal Accounting Officer)