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 ☒ 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 ☒ No ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Number of shares of the Registrant’s common stock outstanding on ~~July 31, 2017:~~April 30, 2018: 115,902,098.

	December 31,		June 30,		December 31,		March 31,
	2016		2017		2017		2018
			(unaudited)				(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	50.7	$	114.1	$	322.0	$	364.6
Restricted cash		1.6		1.3		1.7		1.3
Accounts and other receivables		244.6		334.8		346.5		390.2
Inventories, net		343.5		341.8		382.3		430.2
Prepaid expenses and other		10.0		8.0		10.0		9.2

Total current assets		650.4		800.0		1,062.5		1,195.5

Other assets:
Investment in TiO₂ manufacturing joint venture		78.9		70.5		86.5		79.6
Marketable securities		6.0		5.2		10.7		10.5
Note receivable from Valhi						13.6		-
Deferred income taxes		8.1		127.8		139.2		132.3
Other		2.2		3.0		5.5		6.6

Total other assets		95.2		206.5		255.5		229.0

Property and equipment:
Land		37.3		40.0		42.0		43.2
Buildings		195.8		210.3		221.6		225.3
Equipment		947.4		1,031.5		1,103.2		1,158.1
Mining properties		108.1		112.5		115.7		123.7
Construction in progress		38.7		47.5		52.6		27.0
		1,327.3		1,441.8		1,535.1		1,577.3
Less accumulated depreciation and amortization		893.3		975.4		1,028.7		1,063.2

Net property and equipment		434.0		466.4		506.4		514.1

Total assets	$	1,179.6	$	1,472.9	$	1,824.4	$	1,938.6

	December 31,			June 30,			December 31,			March 31,
	2016			2017			2017			2018
				(unaudited)						(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt	$	3.6		$	3.6		$	.7		$	.7
Accounts payable and accrued liabilities		173.5			195.9			205.8			227.9
Income taxes		5.0			11.4			25.0			32.5

Total current liabilities		182.1			210.9			231.5			261.1

Noncurrent liabilities:
Long-term debt		335.4			350.8			473.8			487.4
Accrued pension cost		227.3			246.0
Accrued postretirement benefits cost		6.9			7.1
Accrued pension costs								254.2			260.1
Accrued postretirement benefits costs								7.7			7.5
Payable to affiliate								70.1			70.1
Deferred income taxes		10.5			8.6			11.3			11.5
Other		22.4			28.7			21.5			22.6

Total noncurrent liabilities		602.5			641.2			838.6			859.2

Stockholders' equity:
Common stock		1.2			1.2			1.2			1.2
Additional paid-in capital		1,398.8			1,399.0			1,399.0			1,399.0
Retained deficit		(552.2	)		(353.7	)		(267.2	)		(211.4	)
Accumulated other comprehensive loss		(452.8	)		(425.7	)		(378.7	)		(370.5	)

Total stockholders' equity		395.0			620.8			754.3			818.3

Total liabilities and stockholders' equity	$	1,179.6		$	1,472.9		$	1,824.4		$	1,938.6

	Three months ended						Six months ended						Three months ended
	June 30,						June 30,						March 31,
	2016			2017			2016			2017			2017			2018
	(unaudited)												(unaudited)
Net sales	$	356.1		$	441.4		$	674.5		$	811.2		$	369.8		$	430.4
Cost of sales		300.6			311.6			578.6			578.0			263.8			255.6

Gross margin		55.5			129.8			95.9			233.2			106.0			174.8

Selling, general and administrative expense		45.0			52.6			86.1			99.4			45.3			58.4
Other operating income (expense):
Currency transaction gains (losses), net		1.9			(3.5	)		4.2			(3.7	)
Currency transaction losses, net														(.2	)		(5.0	)
Other operating expense, net		(1.9	)		(3.6	)		(3.8	)		(7.7	)		(4.1	)		(3.9	)

Income from operations		10.5			70.1			10.2			122.4			56.4			107.5

Other income (expense):
Interest and dividend income		.2			.1			.4			.3			.2			1.0
Securities transactions, net														-			(.2	)
Other components of net periodic pension and OPEB cost														(4.1	)		(3.8	)
Interest expense		(5.1	)		(4.8	)		(10.2	)		(9.5	)		(4.7	)		(4.8	)

Income before income taxes		5.6			65.4			.4			113.2			47.8			99.7

Income tax expense (benefit)		3.9			(131.1	)		2.5			(120.1	)
Income tax expense														11.0			29.0

Net income (loss)	$	1.7		$	196.5		$	(2.1	)	$	233.3
Net income													$	36.8		$	70.7

Net income (loss) per basic and diluted share	$	.01		$	1.70		$	(.02	)	$	2.01
Net income per basic and diluted share													$	.32		$	.61

Cash dividends per share	$	.15		$	.15		$	.30		$	.30		$	.15		$	.17

Weighted average shares used in the calculation of net income (loss) per share		115.9			115.9			115.9			115.9
Weighted average shares used in the calculation of net income per share														115.9			115.9

	Three months ended						Six months ended						Three months ended
	June 30,						June 30,						March 31,
	2016			2017			2016			2017			2017			2018
	(unaudited)												(unaudited)
Net income (loss)	$	1.7		$	196.5		$	(2.1	)	$	233.3
Net income													$	36.8		$	70.7

Other comprehensive income (loss), net of tax:
Currency translation		(5.0	)		14.8			9.4			23.8			9.0			10.7
Marketable securities		.4			(.4	)		.2			(.6	)		(.2	)		-
Defined benefit pension plans		3.0			.8			5.8			3.9			3.1			2.4
Other postretirement benefit plans		(.1	)		(.1	)		(.2	)		(.2	)		(.1	)		(.1	)
Interest rate swap		(.9	)		(.4	)		(3.7	)		.2			.6			-

Total other comprehensive income (loss), net		(2.6	)		14.7			11.5			27.1
Total other comprehensive income, net														12.4			13.0

Comprehensive income (loss)	$	(.9	)	$	211.2		$	9.4		$	260.4
Comprehensive income													$	49.2		$	83.7

								Accumulated													Accumulated
			Additional		Retained			other								Additional		Retained			other
	Common		paid-in		earnings			comprehensive						Common		paid-in		earnings			comprehensive
	stock		capital		(deficit)			loss			Total			stock		capital		(deficit)			loss			Total
	(unaudited)													(unaudited)
Balance at December 31, 2016	$	1.2	$	1,398.8	$	(552.2	)	$	(452.8	)	$	395.0
Balance at December 31, 2017														$	1.2	$	1,399.0	$	(267.2	)	$	(378.7	)	$	754.3
Change in accounting principle - ASU 2016-01															-		-		4.8			(4.8	)		-
Balance at January 1, 2018, as adjusted															1.2		1,399.0		(262.4	)		(383.5	)		754.3

Net income		-		-		233.3			-			233.3			-		-		70.7			-			70.7
Other comprehensive income, net of tax		-		-		-			27.1			27.1			-		-		-			13.0			13.0
Issuance of common stock		-		.2		-			-			.2
Dividends paid		-		-		(34.8	)		-			(34.8	)		-		-		(19.7	)		-			(19.7	)

Balance at June 30, 2017	$	1.2	$	1,399.0	$	(353.7	)	$	(425.7	)	$	620.8
Balance at March 31, 2018														$	1.2	$	1,399.0	$	(211.4	)	$	(370.5	)	$	818.3

	Six months ended						Three months ended
	June 30,						March 31,
	2016			2017			2017			2018
	(unaudited)						(unaudited)
Cash flows from operating activities:
Net income (loss)	$	(2.1	)	$	233.3
Net income							$	36.8		$	70.7
Depreciation and amortization		20.8			20.2			10.1			12.3
Deferred income taxes		.5			(144.4	)		3.0			9.4
Benefit plan expense greater than cash funding		1.8			5.1			3.7			.9
Distributions from TiO₂ manufacturing joint venture, net		6.6			8.4
Distributions from (contributions to) TiO₂ manufacturing joint venture, net								(3.1	)		5.5
Other, net		(.9	)		.9			.5			1.1
Change in assets and liabilities:
Accounts and other receivables		(47.9	)		(75.1	)		(26.8	)		(38.7	)
Inventories		57.6			22.9			(12.1	)		(40.9	)
Prepaid expenses		2.4			2.5			1.4			1.0
Accounts payable and accrued liabilities		(9.5	)		15.2			21.5			28.6
Income taxes		(4.4	)		6.5			4.7			6.7
Accounts with affiliates		(8.7	)		2.6			(.8	)		.4
Other, net		.4			3.5			2.7			1.2

Net cash provided by operating activities		16.6			101.6			41.6			58.2

Cash flows from investing activities -
Cash flows from investing activities:
Capital expenditures		(23.7	)		(26.6	)		(11.9	)		(15.2	)
Loan to Valhi:
Loans								-			(.8	)
Collections								-			14.4

Net cash used in investing activities		(23.7	)		(26.6	)		(11.9	)		(1.6	)

Cash flows from financing activities:
Indebtedness:
Borrowings		108.2			160.8			42.2			-
Principal payments		(80.1	)		(146.3	)		(17.1	)		(.1	)
Deferred financing fees		-			(.1	)		(.1	)		-
Dividends paid		(34.8	)		(34.8	)		(17.4	)		(19.7	)

Net cash used in financing activities		(6.7	)		(20.4	)
Net cash provided by (used in) financing activities								7.6			(19.8	)

Cash, cash equivalents and restricted cash - net change from:
Operating, investing and financing activities		(13.8	)		54.6		$	37.3		$	36.8
Currency translation		.1			8.5			1.3			5.4
Balance at beginning of period		94.3			52.3			52.3			323.7

Balance at end of period	$	80.6		$	115.4		$	90.9		$	365.9

Supplemental disclosures:
Cash paid for:
Interest, net of amount capitalized	$	9.2		$	8.5		$	4.2		$	9.1
Income taxes		6.9			12.2			2.1			14.0
Accrual for capital expenditures		4.6			4.1			4.2			2.5

Organization - At ~~June 30, 2017,~~March 31, 2018, Valhi, Inc. (NYSE: VHI) held approximately 50% of our outstanding common stock and a wholly-owned subsidiary of NL Industries, Inc. (NYSE: NL) held approximately 30% of our common stock, Valhi owned approximately 83% of NL’s outstanding common stock and a wholly-owned subsidiary of Contran Corporation held approximately 93% of Valhi’s outstanding common stock. 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 and their children, for which Ms. Simmons and Ms. Connelly are co-trustees, or is held directly by Ms. Simmons and Ms. Connelly or entities related to them. Consequently, Ms. Simmons and Ms. Connelly may be deemed to control Contran, Valhi, NL and us.

Basis of presentation - 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, ~~2016~~2017 that we filed with the Securities and Exchange Commission ~~(SEC)~~(“SEC”) on March ~~10,~~ 12, 2018 (“2017 ~~(2016~~ Annual ~~Report)~~Report”). In our opinion, we have made all necessary adjustments (which include only normal recurring ~~adjustments, other than the reversal of the deferred income tax asset valuation allowance recognized in the second quarter of 2017, as discussed in Note 11)~~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 at December 31, ~~2016~~2017 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, ~~2016)~~2017) normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ~~(GAAP)~~(“GAAP”). Our results of operations for the interim ~~periods~~period ended ~~June 30, 2017~~March 31, 2018 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 ~~2016~~2017 Consolidated Financial Statements contained in our ~~2016~~2017 Annual Report.

Unless otherwise indicated, references in this report to “we,” “us” or “our” refer to Kronos Worldwide, Inc. and its subsidiaries (NYSE: KRO) taken as a whole.

	December 31,			June 30,			December 31,			March 31,
	2016			2017			2017			2018
	(In millions)						(In millions)
Trade receivables	$	224.8		$	314.7		$	301.4		$	347.3
Recoverable VAT and other receivables		16.7			17.6			19.0			17.1
Receivable from affiliates:
Income taxes, net - Valhi		.7			-			15.3			14.3
Louisiana Pigment Company, L.P. ("LPC")								8.9			9.4
Other		2.8			3.2			3.2			3.4
Refundable income taxes		.3			-			.1			.2
Allowance for doubtful accounts		(.7	)		(.7	)		(1.4	)		(1.5	)
Total	$	244.6		$	334.8		$	346.5		$	390.2

	December 31,		June 30,		December 31,		March 31,
	2016		2017		2017		2018
	(In millions)				(In millions)
Raw materials	$	68.7	$	80.6	$	106.9	$	105.4
Work in process		22.3		18.9		20.8		37.1
Finished products		195.7		180.2		191.5		219.8
Supplies		56.8		62.1		63.1		67.9
Total	$	343.5	$	341.8	$	382.3	$	430.2

Our marketable securities consist of investments in the publicly-traded shares of related parties: Valhi, NL and CompX International Inc. NL owns the majority of CompX’s outstanding common stock. All of our marketable securities are accounted for as available-for-sale securities, which are carried at fair value using quoted market prices in active markets for each marketable ~~security, and~~security. Prior to 2018, any unrealized gains or losses on the securities were recognized through other comprehensive income, net of deferred income taxes. Beginning on January 1, 2018 with the adoption of Accounting Standards Update (“ASU”) 2016-01, all of our marketable equity securities will continue to be carried at fair value as noted above, but any unrealized gains or losses on the securities are now recognized as a component of other income included in the Securities transactions, net on our Condensed Consolidated Statements of Income. The fair value of our equity securities represent a Level 1 input within the fair value hierarchy. See Note 14. Because we have classified all of our marketable securities as available-for-sale, any unrealized gains or losses on the securities are recognized through other comprehensive income, net of deferred income taxes.

	Fair value							Fair value
	measurement	Market		Cost				measurement	Market		Cost
Marketable security	level	value		basis		Unrealized gain		level	value		basis		Unrealized gain
		(In millions)							(In millions)
December 31, 2016:
December 31, 2017:
Valhi common stock	1	$	5.9	$	3.2	$	2.7	1	$	10.6	$	3.2	$	7.4
NL and CompX common stocks	1		.1		.1		-	1		.1		.1		-
Total		$	6.0	$	3.3	$	2.7		$	10.7	$	3.3	$	7.4

June 30, 2017:
March 31, 2018:
Valhi common stock	1	$	5.1	$	3.2	$	1.9	1	$	10.4	$	3.2	$	7.2
NL and CompX common stocks	1		.1		.1		-	1		.1		.1		-
Total		$	5.2	$	3.3	$	1.9		$	10.5	$	3.3	$	7.2

At December 31, ~~2016~~2017 and ~~June 30, 2017,~~March 31, 2018, we held approximately 1.7 million shares of Valhi’s common stock. We also held a nominal number of shares of CompX and NL common stocks. At December 31, ~~2016~~2017 and ~~June 30, 2017,~~March 31, 2018, the quoted per share market price of Valhi’s common stock was ~~$3.46~~$6.17 and ~~$2.98,~~$6.06, respectively. During the first three months of 2018 we recognized a securities transactions loss of $.2 million related to the aggregate net change in market value of our marketable equity securities during such period.

The Valhi, CompX and NL common stocks we own are subject to the restrictions on resale pursuant to certain provisions of 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.

	December 31,		June 30,		December 31,		March 31,
	2016		2017		2017		2018
	(In millions)				(In millions)
Pension asset	$	.6	$	.9	$	1.6	$	3.4
Deferred financing costs, net		.4		.3		1.1		1.1
Other		1.2		1.8		2.8		2.1
Total	$	2.2	$	3.0	$	5.5	$	6.6

	December 31,		June 30,		December 31,		March 31,
	2016		2017		2017		2018
	(In millions)				(In millions)
Term loan	$	335.9	$	334.9
North American revolving credit facility		-		16.3
Kronos International, Inc. 3.75% Senior Secured Notes					$	471.1	$	484.9
Other		3.1		3.2		3.4		3.2
Total debt		339.0		354.4		474.5		488.1
Less current maturities		3.6		3.6		.7		.7
Total long-term debt	$	335.4	$	350.8	$	473.8	$	487.4

Senior Secured Notes - At March 31, 2018, the carrying value of our 3.75% Senior Secured Notes due September 15, 2025 (€400 million aggregate principal amount outstanding) is stated net of unamortized debt issuance costs of $7.5 million.

~~Term loan~~Revolving credit facilities – - During the first ~~six~~three months of ~~2017,~~2018, we ~~made our required quarterly term loan principal payments aggregating $1.8 million. The average interest rate on the term loan~~had no borrowings as of and for the six months ended June 30, 2017 was 4.3% and 4.1%, respectively. The carrying value of the term loan at June 30, 2017 is stated net of unamortized original issue discount of $.7 million and debt issuance costs of $3.0 million.

~~See Note 14 for a discussion of the interest rate swap we entered into in 2015 pursuant to our interest rate risk management strategy.~~

~~North American revolving credit facility~~ ~~- In January 2017, we extended the maturity date of~~or repayments under our North American revolving credit facility ~~to the earlier of (i) January 30, 2022 or (ii) 90 days prior to the maturity date of~~and our existing term loan indebtedness (or 90 days prior to the maturity date of any indebtedness incurred in a permitted refinancing of such existing term loan indebtedness). Based on the February 2020 maturity date of our existing term loan, the maturity date ofEuropean revolving credit facility. At March 31, 2018, approximately $115.2 million was available for additional borrowing under the North American revolving credit ~~facility is currently November 2019.~~

~~During the first six months of 2017, we borrowed a net $16.3 million under our North American revolving credit~~ facility. The average interest rate on outstanding borrowings as of and for the six months ended June 30, 2017 was 5.0% and 4.8%, respectively. At June 30, 2017, we had approximately $91.4 million available for additional borrowing under this revolving credit facility.

~~European revolving credit facility~~ - Our European revolving credit facility requires the maintenance of certain financial ratios, and one of such requirements is based on the ratio of net debt to last twelve months earnings before income tax, interest, depreciation and amortization expense ~~(EBITDA)~~(“EBITDA”) of the borrowers. Based upon the borrowers’ last twelve months EBITDA as of ~~June 30, 2017~~March 31, 2018 and the net debt to EBITDA financial test, the full ~~€120.0~~€90 million amount of the credit facility ($~~137.1~~110.8 million) is available for borrowing at ~~June 30, 2017.~~March 31, 2018. ~~We expect to extend the maturity date of this facility on or prior to its maturity date in September 2017.~~

Other - - We are in compliance with all of our debt covenants at ~~June 30, 2017.~~March 31, 2018.

December 31,

June 30,

2016

2017

(In millions)

Accounts payable
$
84.9

$
95.8

Accrued sales discounts and rebates

20.9

21.0

Employee benefits

17.7

19.2

Reserve for uncertain tax positions

3.3

3.3

Interest rate swap contract

2.9

2.0

Accrued workforce reduction costs

1.2

.2

Payable to affiliates:

Louisiana Pigment Company, L.P.

14.7

14.7

Income taxes, net - Valhi

-

4.5

Other

27.9

35.2

Total
$
173.5

$
195.9

	December 31,		March 31,
	2017		2018
	(In millions)
Accounts payable	$	107.9	$	117.4
Employee benefits		27.0		31.1
Accrued sales discounts and rebates		11.7		27.5
Payable to affiliate - LPC		16.2		13.7
Other		43.0		38.2
Total	$	205.8	$	227.9

	December 31,		June 30,		December 31,		March 31,
	2016		2017		2017		2018
	(In millions)				(In millions)
Reserve for uncertain tax positions	$	7.3	$	8.2
Employee benefits		7.8		8.3	$	8.5	$	8.9
Interest rate swap contract		.2		.8
Other		7.1		11.4		13.0		13.7
Total	$	22.4	$	28.7	$	21.5	$	22.6

Our sales involve single performance obligations to ship our products pursuant to customer purchase orders. In some cases, the purchase order is supported by an underlying master sales agreement, but our purchase order acceptance generally evidences the contract with our customer by specifying the key terms of product and quantity ordered, price and delivery and payment terms. Effective January 1, 2018 with the adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), see Note 15, we record revenue when we satisfy our performance obligation to our customers by transferring control of our products to them, which generally occurs at point of shipment or upon delivery. Such transfer of control is also evidenced by transfer of legal title and other risks and rewards of ownership (giving the customer the ability to direct the use of, and obtain substantially all of the benefits of, the product), and our customers becoming obligated to pay us and such payment is probable of occurring. In certain arrangements we provide shipping and handling activities after the transfer of control to our customer (e.g. when control transfers prior to delivery) that are considered fulfillment activities, and accordingly, such costs are accrued when the related revenue is recognized. Sales arrangements with consignment customers occur when our product is shipped to a consignment customer location but we maintain control until the product is used in the customer’s manufacturing process. In these instances, we recognize sales when the consignment customer uses our product, as control of our product has not passed to the customer until that time and all other revenue recognition criteria have been satisfied.

Revenue is recorded in an amount that reflects the net consideration we expect to receive in exchange for our products. Prices for our products are based on terms specified in published list prices and purchase orders, which generally do not include financing components, noncash consideration or consideration paid to our customers. As our standard payment terms are less than one year, we have elected the practical expedient under ASC 606 and have not assessed whether a contract has a significant financing component. We state sales net of price, early payment, and distributor discounts and volume rebates (collectively, variable consideration). Variable consideration, to the extent present, is recognized as the amount to which we are most-likely to be entitled, using all information (historical, current and forecasted) that is reasonably available to us, and only to the extent that a significant reversal in the amount of the cumulative revenue recognized is not probable of occurring in a future period. Differences, if any, between estimates of the amount of variable consideration to which we will be entitled and the actual amount of such variable consideration have not been material in the past. Amounts received or receivable from our customers with respect to variable consideration we expect to refund to our customers is recognized as a current liability and classified as accrued sales discounts and rebates (see Note 7). We report any tax assessed by a governmental authority that we collect from our customers that is both imposed on and concurrent

with our revenue-producing activities (such as sales, use, value added and excise taxes) on a net basis (meaning we do not recognize these taxes either in our revenues or in our costs and expenses).

Frequently, we receive orders for products to be delivered over dates that may extend across reporting periods. We invoice for each delivery upon shipment and recognize revenue for each distinct shipment when all sales recognition criteria for that shipment have been satisfied. As scheduled delivery dates for these orders are within a one year period, under the optional exemption provided by ASC 606, we do not disclose sales allocated to future shipments of partially completed contracts.

The following table disaggregates our net sales by place of manufacture (point of origin) and to the location of the customer (point of destination), which are the categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors (as required by ASC 606).

~~Defined benefit plans -~~ The components of net periodic defined benefit pension cost are presented in the table below.

	Three months ended						Six months ended						Three months ended
	June 30,						June 30,						March 31,
	2016			2017			2016			2017			2017			2018
	(In millions)												(In millions)
Service cost	$	2.5		$	2.8		$	5.0		$	5.5		$	2.7		$	3.0
Interest cost		3.9			3.4			7.7			6.7			3.3			3.6
Expected return on plan assets		(3.9	)		(2.5	)		(7.7	)		(5.0	)		(2.5	)		(3.4	)
Amortization of prior service cost		.2			.1			.4			.2			.1			.1
Recognized actuarial losses		2.9			3.3			5.7			6.5			3.2			3.5
Total	$	5.6		$	7.1		$	11.1		$	13.9		$	6.8		$	6.8

~~Postretirement benefits -~~ The components of net periodic postretirement benefits other than pension ~~(OPEB)~~(“OPEB”) cost are presented in the table below.

	Three months ended						Six months ended						Three months ended
	June 30,						June 30,						March 31,
	2016			2017			2016			2017			2017			2018
	(In millions)												(In millions)
Service cost	$	.1		$	.1		$	.1		$	.1
Interest cost		-			-			.1			.1		$	.1		$	.1
Amortization of prior service credit		(.2	)		(.2	)		(.4	)		(.3	)		(.1	)		(.2	)
Recognized actuarial losses		.1			.1			.1			.1			-			.1
Total	$	-		$	-		$	(.1	)	$	-		$	-		$	-

Upon the adoption of ASU 2017-07, Compensation - Retirement Benefits (Topic 715) Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, our net periodic defined benefit pension cost and other postretirement benefit cost, other than the service cost component, is presented as a separate line item (“Other components of net periodic pension and OPEB cost”) in our Condensed Consolidated Statements of Income for all periods presented. See Note 15.

We expect our ~~2017~~2018 contributions for our pension and other postretirement plans to be approximately ~~$15~~$17 million.

Other operating income (expense), net in the first six months of 2016 includes income of $3.4 million, including $1.4 million recognized in the second quarter, related to cash received from settlement of a business interruption insurance claim arising in 2014. No additional material amounts are expected to be received with respect to such insurance claim.

	Three months ended						Six months ended						Three months ended
	June 30,						June 30,						March 31,
	2016			2017			2016			2017			2017			2018
	(In millions)												(In millions)
Expected tax expense, at U.S. federal statutory income tax rate of 35%	$	1.9		$	22.9		$	.1		$	39.6
Expected tax expense, at U.S. federal statutory income tax rate of 35% in 2017 and 21% in 2018													$	16.7		$	20.9
Non-U.S. tax rates		(.6	)		(2.4	)		(.4	)		(4.8	)		(2.4	)		7.1
Incremental net tax expense (benefit) on earnings and losses of non-U.S. companies		(1.0	)		5.4			(.8	)		6.6
Incremental net tax expense (benefit) on earnings and losses of U.S. and non-U.S. companies														1.2			.4
Valuation allowance		2.9			(157.6	)		2.9			(162.6	)		(5.0	)		-
Adjustment to reserve for uncertain tax positions, net		.2			.3			.2			.5			-			1.4
Canada-Germany APA														-			(1.4	)
Nondeductible expenses		.5			.3			.4			.6			-			.3
U.S. state income tax and other, net		-			-			.1			-			.5			.3
Income tax expense (benefit)	$	3.9		$	(131.1	)	$	2.5		$	(120.1	)
Income tax expense													$	11.0		$	29.0

Comprehensive provision for income taxes allocable to:
Net income (loss)	$	3.9		$	(131.1	)	$	2.5		$	(120.1	)
Net income													$	11.0		$	29.0
Other comprehensive income (loss):
Currency translation		-			13.3			-			13.3
Pension plans														.2			1.1
Marketable securities		.2			(.2	)		.1			(.3	)		(.1	)		-
Pension plans		.2			1.9			.3			2.1
OPEB plans		(.1	)		(.1	)		(.1	)		(.1	)
Interest rate swap		(.4	)		(.2	)		(2.0	)		.1			.3			-
Total	$	3.8		$	(116.4	)	$	.8		$	(105.0	)	$	11.4		$	30.1

The amount shown in the above table of our income tax rate reconciliation for non-U.S. tax rates represents the result determined by multiplying the pre-tax earnings or losses of each of our non-U.S. subsidiaries by the difference between the applicable statutory income tax rate for each non-U.S. jurisdiction and the U.S. federal statutory tax rate of 35%. in 2017 and 21% in 2018. The amount shown on such table for incremental net tax expense (benefit) on earnings and losses onof U.S. and non-U.S. companies includes, as applicable, (i) current income taxes (including withholding taxes, if applicable), if any, associated with any current-year earnings of our non-U.S. subsidiaries to the extent such current-year earnings were distributed to us in the current year, (ii) deferred income taxes (or deferred income tax ~~benefit)~~benefits) associated with the current-year change in the aggregate amount of undistributed earnings of our Canadian subsidiary ~~which~~and, beginning in 2018, the post-1986 undistributed earnings ~~are not~~of our European subsidiaries (such post-1986 undistributed earnings were subject to a permanent reinvestment plan in an amount representing the current-year change in the aggregate current income tax that would be generated (including withholding taxes, if applicable) when such aggregate undistributed earnings are distributed to us,until December 31, 2017) and ~~(iii)~~(ii) current U.S. income taxes (or current income tax benefit), including U.S. personal holding company tax, as applicable, attributable to current-year income (losses) of one of our non-U.S. subsidiaries, which subsidiary is treated as a dual resident for U.S. income tax purposes, to the extent the current-year income (losses) of such subsidiary is subject to U.S. income tax under the U.S. dual-resident provisions of the Internal Revenue Code.

We have substantial net operating loss ~~(NOL)~~(“NOL”) carryforwards in Germany (the equivalent of ~~$638~~$652 million for German corporate purposes and ~~$71~~$.5 million for German trade tax purposes at December 31, ~~2016)~~2017) and in Belgium (the equivalent of ~~$93~~$50 million for Belgian corporate tax purposes at December 31, ~~2016)~~2017), all of which have an indefinite carryforward period. As a result, we have 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, we 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) we utilized a portion of such carryforwards during the most recent three-year period, and (iii) we expected to utilize the remainder of the carryforwards over the long term. We had also previously indicated that facts and circumstances could change, which mightAs discussed 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 our operating results during the second quarter of 2015 and our expectations at that time for our operating results for the remainder of 2015, we 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 our German and Belgian jurisdictions at June 30, 2015 (even considering that the carryforward period of our German and Belgian NOL carryforwards is indefinite, one piece of positive evidence). Accordingly, at2017 Annual Report, commencing June 30, 2015, we concluded that we were required to recognize a non-cash deferred income tax asset valuation allowance under the more-likely-than-not recognition criteria with respect to our German and Belgian net deferred income tax assets at such date. We ~~recognized an additional non-cash~~

~~deferred income tax asset valuation allowance~~continued to conclude such losses did not meet the more-likely-than-not recognition criteria through March 31, 2017, and during the second half of 2015 due to losses recognized by our German and Belgian operations during such period. During 2016, we recognized an aggregate $2.2 million non-cash tax benefit as the result of a net decrease in such deferred income tax valuation allowance, as the impact of utilizing a portion of our German NOLs during such period more than offset the impact of additional losses recognized by our Belgian operations during such period. Such valuation allowance aggregated approximately $173 million at December 31, 2016 ($153 million with respect to Germany and $20 million with respect to Belgium). During the first ~~six months~~quarter of 2017 we recognized an aggregate non-cash deferred income tax benefit of ~~$12.7~~$5.0 million as a result of a net decrease in such deferred income tax asset valuation allowance, due to utilizing a portion of both the German and Belgian ~~NOLs~~NOL during ~~such period, including $7.7 million~~the period. As also discussed in the ~~second quarter of 2017. At~~2017 Annual Report, at June 30, 2017, we

concluded we ~~now have~~had sufficient positive evidence under the more-likely-than-not recognition criteria to support reversal of the entire valuation allowance related to our German and Belgian operations.

As discussed ~~below,~~in the 2017 Annual Report, on December 22, 2017, the 2017 Tax Act was enacted into law. This new tax legislation, among other changes, (i) reduced the U.S. Federal corporate income tax rate from 35% to 21% effective January 1, 2018; (ii) implemented a ~~large portion~~territorial tax system and imposed a one-time repatriation tax (“Transition Tax”) on the deemed repatriation of the ~~remaining valuation allowance is reversed as~~post-1986 undistributed earnings of ~~June 30,~~non-U.S. subsidiaries accumulated up through December 31, 2017, ~~but a portion~~regardless of whether such earnings are repatriated; (iii) eliminated U.S. tax on future non-U.S. earnings (subject to certain exceptions); (iv) eliminated the ~~remaining valuation allowance will be reversed during~~domestic production activities deduction beginning in 2018; (v) eliminated the second half of 2017. Such sufficient positive evidence at June 30, 2017 includes, among other things, the existence of cumulative profits in the most recent twelve consecutive quarters (Germany) or profitability in recent quarters during which such profitability was trending upward throughout such period (Belgium), the ability to demonstrate future profitability in Germanynet operating loss carryback and ~~Belgium~~provides for ~~a sustainable period, and the~~an indefinite carryforward period subject to an 80% annual usage limitation; (vi) allows for the ~~German~~expensing of certain capital expenditures; (vii) imposed a tax on global intangible low-tax income (“GILTI”) beginning in 2018; (viii) imposed a base erosion anti-abuse tax (“BEAT”) beginning in 2018; and ~~Belgian NOLs. Accordingly,~~(vi) amended the rules limiting the deduction for business interest expense beginning in 2018. Following the enactment of the 2017 Tax Act, the Securities and Exchange Commission issued Staff Accounting Bulletin (“SAB”) 118 to provide guidance on the accounting and reporting impacts of the 2017 Tax Act. SAB 118 states that companies should account for changes related to the 2017 Tax Act in the period of enactment if all information is available and the accounting can be completed. In situations where companies do not have enough information to complete the accounting in the period of enactment, a company must either 1) record an estimated provisional amount if the impact of the change can be reasonably estimated; or 2) continue to apply the accounting guidance that was in effect immediately prior to the 2017 Tax Act if the impact of the change cannot be reasonably estimated. If estimated provisional amounts are recorded, SAB 118 provides a measurement period of no longer than one year during which companies should adjust those amounts as additional information becomes available in the reporting period within the measurement period in which such adjustment is determined.

Under GAAP, we are required to revalue our net deferred tax asset associated with our U.S. net deductible temporary differences in the period in which the new tax legislation is enacted based on deferred tax balances as of the enactment date, to reflect the effect of such reduction in the corporate income tax ~~benefit~~rate. Our temporary differences as of December 31, 2017 were not materially different from our temporary differences as of the enactment date, accordingly revaluation of our net deductible temporary differences was based on our net deferred tax asset as of December 31, 2017. Such revaluation was recognized in continuing operations and was not material to us.

Prior to the enactment of the 2017 Tax Act, the undistributed earnings of our European subsidiaries were deemed to be permanently reinvested (we had not made a similar determination with respect to the undistributed earnings of our Canadian subsidiary). Pursuant to the Transition Tax provisions imposing a one-time repatriation tax on post-1986 undistributed earnings, we recognized a provisional current income tax expense of $76.2 million in the ~~second~~fourth quarter of ~~2017 includes an aggregate non-cash income tax benefit~~2017. The amounts recorded as of $149.9 million related to such reversal at June 30, 2017 ($141.9 million related to Germany, and $8.0 million related to Belgium). Such second quarter 2017 income tax benefit associated with reversal of the German and Belgian valuation allowance excludes the non-cash income tax benefit of $7.7 million, also recognized in the second quarter, as discussed above. In addition to the above amounts, our deferred income tax asset valuation allowance increased by $9.5 million during the first six months ofDecember 31, 2017 as a result of ~~changes~~the 2017 Tax Act represent estimates based on information currently available. We elected to pay such tax over an eight year period beginning in ~~currency exchange rates,~~2018, including approximately $6.1 million which was ~~recognized~~paid in April 2018 and is netted with our current receivables from affiliates (income taxes receivable from Valhi) classified as ~~part~~a current asset in our Condensed Consolidated Balance Sheet, and the remaining $70.1 million is recorded as a noncurrent payable to affiliate (income taxes payable to Valhi) classified as a noncurrent liability in our Condensed Consolidated Balance Sheet and will be paid in increments over the remainder of ~~other comprehensive income (loss).~~

~~In accordance with~~ the ~~ASC 740-270~~eight year period. We have not made any measurement-period adjustments to the provisional amounts recorded for this item during the first quarter of 2018 because no new information became available during the period that required an adjustment. We are continuing to gather information and await further guidance, ~~regarding accounting for income taxes at interim dates,~~primarily from the state jurisdictions in which we operate and, given the complexities of these new rules and the long time period over which information about our subsidiaries is needed, further guidance is necessary in order to determine the amount of the ~~valuation allowance reversed~~Transition Tax, which may impact the Transition Tax recognized in the fourth quarter of 2017. We will complete our accounting for this item within the prescribed measurement period ending December 22, 2018, pursuant to the guidance under SAB 118, and if we determine an adjustment to the provisional amount recognized at ~~June 30,~~December 31, 2017 ~~($149.9 million) relates~~is required, we will recognize such adjustment in the reporting period within the SAB 118 measurement period in which such adjustment is determined.

Prior to ~~our change in judgment regarding~~ the ~~realizability~~enactment of the ~~related~~2017 Tax Act the undistributed earnings of our European subsidiaries were deemed to be permanently reinvested (we had not made a similar determination with respect to the undistributed earnings of our Canadian subsidiary). As a result of the implementation of a territorial tax system under the 2017 Tax Act, effective January 1, 2018, and the Transition Tax which in effect taxes the post-1986 undistributed earnings of our non-U.S. subsidiaries accumulated up through December 31, 2017, we determined effective December 31, 2017 that all of the post-1986 undistributed earnings of our European subsidiaries are not permanently reinvested. Accordingly, in the fourth quarter of 2017 we recognized an aggregate provisional non-cash deferred income tax ~~asset~~expense of $4.5 million based on our reasonable estimates of the U.S. state and non-U.S. income tax and withholding tax liability attributable to all of such previously-considered permanently reinvested undistributed earnings through December 31, 2017. The amounts recorded as ~~it relates~~of December 31, 2017 as a result of the 2017 Tax Act represent estimates based on information currently available. We have not made any measurement-period adjustments to ~~future years (i.e.~~the provisional amounts recorded at December 31, 2017 for this item during the first quarter of 2018. However, we recorded a provisional non-cash deferred income tax

expense of $.4 million for the estimated U.S. state and non-U.S. income tax and withholding tax liability attributable to the 2018 undistributed earnings of our non-U.S. subsidiaries in the first quarter of 2018. We are continuing our review of certain other provisions under the 2017 Tax Act and ~~after). A change~~waiting on further guidance primarily from the state jurisdictions in ~~judgment regarding~~which we operate that may impact our determination of the ~~realizability of deferred tax assets~~aggregate temporary differences attributable to our investments in our non-U.S. subsidiaries. We will complete our accounting for this item within the prescribed measurement period ending December 22, 2018, pursuant to the guidance under SAB 118, and if we determine an adjustment to the provisional amount recognized at December 31, 2017 and March 31, 2018 are required, we will recognize such adjustment in the reporting period within the SAB 118 measurement period in which such adjustment is determined.

Under U.S. GAAP, as it relates to the ~~current year is considered~~new GILTI tax rules, we are allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in ~~determining~~taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into the ~~estimated annual effective tax rate for the year. Accordingly,~~measurement of ~~the aggregate $173 million~~our deferred ~~income tax asset valuation allowance recognized at December 31, 2016, approximately $163 million has been reversed through June 30, 2017, and the remaining $20 million (which relates~~taxes (the “deferred method”). Our selection of an accounting policy related to the GILTI tax provisions will depend, in part, on analyzing our global income to determine whether we expect to have future U.S. inclusions in taxable income related to GILTI and, if so, what the impact is expected ~~level~~to be. While our future global operations depend on a number of ~~profitability~~different factors, we do expect to have future U.S. inclusions in taxable income related to GILTI. As such, we performed an analysis of GILTI’s impact on our ~~German~~provision and ~~Belgian operations in calendar 2017) will be reversed during~~determined the ~~third and fourth quarters of 2017 (such aggregate reversal amount includes~~impact is not material. Because the ~~$9.5 million increase~~impact is not material to our tax provision, we have not recorded any adjustments related to potential GILTI tax in our financial statements in the first quarter of 2018. Further, we have not made a policy decision regarding whether to record deferred ~~income~~taxes on GILTI or record GILTI tax ~~asset valuation allowance~~ as a ~~result~~current-period expense when incurred. We will complete our policy election for this item within the prescribed measurement period ending December 22, 2018, pursuant to the guidance under SAB 118 and if we determine such policy election impacts our provision, we will recognize an adjustment in the reporting period within the SAB 118 measurement period in which such adjustment is determined. Similarly, we have evaluated the tax impact of ~~changes~~BEAT on our tax provision in ~~currency exchange rates recognized~~the first quarter of 2018 and determined that the tax law has no material impact on our tax provision as ~~part~~we have historically not entered into international payments between related parties that are unrelated to cost of ~~other comprehensive income (loss)).~~ goods sold.

~~Tax authorities are examining certain~~None of our U.S. and non-U.S. tax returns and have or may propose tax deficiencies, including penalties and interest. Because of the inherent uncertainties involved in settlement initiatives and court and tax proceedings, we cannot guarantee that these matters will be resolved in our favor, and therefore our potential exposure, if any, is also uncertain.are currently under examination. As a result of ~~ongoing~~prior audits in certain jurisdictions, which are now settled, in 2008 we 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 2016, it was uncertain whether an agreement would be reached between the tax authorities and whether we would agree to execute and finalize such agreements. During ~~2016, Contran, as~~ the ~~ultimate parent~~third quarter of ~~our U.S. Consolidated income tax group, executed and finalized an Advance Pricing Agreement with the U.S. Internal Revenue Service and~~2017, our Canadian subsidiary executed and finalized an Advance Pricing Agreement with the Competent Authority for Canada ~~(collectively, the “U.S.-Canada~~(the “Canada-Germany APA”) effective for tax years 2005 - ~~2015. Pursuant to~~2017. During the ~~terms~~first quarter of 2018, our German subsidiary executed and finalized the U.S.-Canada APA, the U.S. and Canadian tax authorities agreed to certain prior year changes to taxable income of our U.S. and Canadian subsidiaries. As a result of such agreed-upon changes, our Canadian subsidiary incurred a cash income tax payment of approximately CAD $3 million (USD $2.3 million) related ~~to the U.S.-Canada APA, but such payment was fully offset by previously provided accruals. We currently expect the~~ Advance Pricing Agreement ~~between~~with the Competent Authority for Germany (the “Germany- Canada ~~and Germany (collectively, the “Canada-Germany~~ APA”) ~~to be executed and finalized within the next twelve months.~~effective for tax years 2005 - 2017. We ~~believe we have adequate accruals to cover any cash~~recognized a net $1.4 million non-cash income tax benefit related to an APA tax settlement payment ~~which might result from the finalization of the Canada-Germany APA,~~between our German and ~~accordingly we do not expect the execution of such APA to have a material adverse effect on our consolidated financial position, results of operations or liquidity.~~Canadian subsidiaries.

We believe we have adequate accruals for additional taxes and related interest expense which could ultimately result from tax examinations. During the first quarter of 2018, we recognized a $1.4 million increase to our reserve for uncertain tax positions. We believe the ultimate disposition of any future tax examinations should not have a material adverse effect on our consolidated financial position, results of operations or liquidity. We ~~currently estimate that~~do not expect our unrecognized tax benefits ~~may decrease by approximately $7.0 millionexcluding accrued interest~~to materially change during the next twelve ~~months related to certain adjustments to our prior year returns.~~months.

Changes in accumulated other comprehensive loss are presented in the table below. See Note 4 for further discussion of our marketable securities, Note 910 for discussion of our defined benefit pension plans and OPEB plans, and Note 14 for discussion of our interest rate swap contract.

	Three months ended						Six months ended						Three months ended
	June 30,						June 30,						March 31,
	2016			2017			2016			2017			2017			2018
	(In millions)												(In millions)
Accumulated other comprehensive loss, net of tax:
Currency translation:
Balance at beginning of period	$	(237.6	)	$	(260.6	)	$	(252.0	)	$	(269.6	)	$	(269.6	)	$	(211.9	)
Other comprehensive income (loss)		(5.0	)		14.8			9.4			23.8
Other comprehensive income														9.0			10.7
Balance at end of period	$	(242.6	)	$	(245.8	)	$	(242.6	)	$	(245.8	)	$	(260.6	)	$	(201.2	)

Marketable securities:
Balance at beginning of period	$	(.8	)	$	1.6		$	(.6	)	$	1.8		$	1.8		$	4.8
Other comprehensive income (loss) - unrealized gains (losses) arising during the period		.4			(.4	)		.2			(.6	)
Change in accounting principle														-			(4.8	)
Balance at beginning of period, as adjusted														1.8			-
Other comprehensive loss - unrealized losses arising during the period														(.2	)		-
Balance at end of period	$	(.4	)	$	1.2		$	(.4	)	$	1.2		$	1.6		$	-

Defined benefit pension plans:
Balance at beginning of period	$	(156.4	)	$	(181.7	)	$	(159.2	)	$	(184.8	)	$	(184.8	)	$	(172.8	)
Other comprehensive income - amortization of prior service cost and net losses included in net periodic pension cost		3.0			.8			5.8			3.9			3.1			2.4
Balance at end of period	$	(153.4	)	$	(180.9	)	$	(153.4	)	$	(180.9	)	$	(181.7	)	$	(170.4	)

OPEB plans:
Balance at beginning of period	$	2.0		$	1.7		$	2.1		$	1.8		$	1.8		$	1.2
Other comprehensive loss - amortization of prior service credit and net losses included in net periodic OPEB cost		(.1	)		(.1	)		(.2	)		(.2	)		(.1	)		(.1	)
Balance at end of period	$	1.9		$	1.6		$	1.9		$	1.6		$	1.7		$	1.1

Interest rate swap:
Balance at beginning of period	$	(5.1	)	$	(1.4	)	$	(2.3	)	$	(2.0	)	$	(2.0	)	$	-
Other comprehensive income (loss):
Unrealized losses arising during the period		(1.4	)		(.8	)		(4.8	)		(.8	)
Less reclassification adjustment for amounts included in interest expense		.5			.4			1.1			1.0
Other comprehensive income - reclassification adjustment for amounts included in earnings														.6			-
Balance at end of period	$	(6.0	)	$	(1.8	)	$	(6.0	)	$	(1.8	)	$	(1.4	)	$	-

Total accumulated other comprehensive loss:
Balance at beginning of period	$	(397.9	)	$	(440.4	)	$	(412.0	)	$	(452.8	)	$	(452.8	)	$	(378.7	)
Other comprehensive income (loss)		(2.6	)		14.7			11.5			27.1
Change in accounting principle														-			(4.8	)
Balance at beginning of period, as adjusted														(452.8	)		(383.5	)
Other comprehensive income														12.4			13.0
Balance at end of period	$	(400.5	)	$	(425.7	)	$	(400.5	)	$	(425.7	)	$	(440.4	)	$	(370.5	)

We are involved in various environmental, contractual, product liability, patent (or intellectual property), employment and other claims and disputes incidental to our business. At least quarterly our management discusses and evaluates the status of any pending litigation to which we are a party. The factors considered in such evaluation include, among other things, the nature of such pending cases, the status of such pending cases, the advice of legal counsel and our experience in similar cases (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. We have not accrued any material ~~amounts~~amount for ~~either of~~ the ~~two~~ pending matters discussed below asbecause it is not reasonably possible we have incurred a loss that would be material to our consolidated financial condition, results of operations or liquidity.

In March 2013, we were served with the complaint, Los Gatos Mercantile, Inc. d/b/a Los Gatos Ace Hardware, et al v. E.I. Du Pont de Nemours and Company, et al. (United States District Court, for the Northern District of California, Case No. 3:13-cv-01180-SI). The defendants include us, E.I. Du Pont de Nemours & Company, Huntsman International LLC and Millennium Inorganic Chemicals, Inc. As amended by plaintiffs’ third amended complaint (Harrison, Jan, et al v. E.I. Du Pont de Nemours and Company, et al), plaintiffs seek to represent a class consisting of indirect purchasers of titanium dioxide in the states of Arizona, Arkansas, California, the District of Columbia, Florida, Iowa, Kansas, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, New Mexico, New York, North Carolina, Oregon and Tennessee that indirectly purchased titanium dioxide from one or more of the defendants on or after March 1, 2002. The complaint alleges that the defendants conspired and combined to fix, raise, maintain, and stabilize the price at which titanium dioxide was sold in the United States and engaged in other anticompetitive conduct. ~~The case is now proceeding~~In December 2017, the Court preliminarily approved a settlement agreement with the class plaintiffs. Without admitting any fault or wrongdoing, we agreed to pay an immaterial amount in the trial court. We believe the action is without merit, will deny all allegations of wrongdoing and liability and intend to defend against the action vigorously. Based on our quarterly status evaluationfull settlement of this ~~case, we have determined that it is not reasonably possible that a loss that is material has been incurred~~matter. We expect final approval of the settlement in ~~this case.~~2018.

In September 2016, we were served with the complaint, Home Depot U.S.A., Inc. v. E.I. Dupont Nemours and Company, et al. (United States District Court, for the Northern District of California, Case No. 3:16-cv-04865). The defendants include us, E.I. Du Pont de Nemours & Company, Huntsman International LLC and Millennium Inorganic Chemicals, Inc. The plaintiff alleges that it indirectly purchased titanium dioxide from one or more of the defendants on or after March 1, 2002. The complaint alleges that the defendants conspired and combined to fix, raise, maintain, and stabilize the price at which titanium dioxide was sold in the United States and engaged in other anticompetitive conduct. The case is now proceeding in the trial court. We believe the action is without merit, will deny all allegations of wrongdoing and liability and intend to defend against the action vigorously. Based on our quarterly status evaluation of this case, we have determined that it is not reasonably possible that a loss has been incurred in this case.

The following table summarizes the valuation of our financial instruments recorded on a fair value basis as of December 31, ~~2016~~2017 and ~~June 30, 2017:~~March 31, 2018:

Fair Value Measurements

Quoted

Significant

prices in

other

Significant

active

observable

unobservable

markets

inputs

inputs

Total

(Level 1)

(Level 2)

(Level 3)

(In millions)

Asset (liability)

December 31, 2016:

Interest rate swap contract

$
(3.1
)

$
-

$
(3.1
)

$
-

Noncurrent marketable securities (See Note 4)

6.0

6.0

-

-

June 30, 2017:

Interest rate swap contract

$
(2.8
)

$
-

$
(2.8
)

$
-

Noncurrent marketable securities (See Note 4)

5.2

5.2

-

-

	Fair Value Measurements
			Quoted		Significant
			prices in		other		Significant
			active		observable		unobservable
			markets		inputs		inputs
	Total		(Level 1)		(Level 2)		(Level 3)
	(In millions)
Asset:
December 31, 2017 -
Noncurrent marketable securities (See Note 4)	$	10.7	$	10.7	$	-	$	-

March 31, 2018 -
Noncurrent marketable securities (See Note 4)	$	10.5	$	10.5	$	-	$	-

Our earnings and cash flows are subject to fluctuations due to changes in currency exchange rates and interest rates. Our risk management policy allows for the use of derivative financial instruments to prudently manage exposure to currency exchange rates and interest rates. Derivatives that we use are primarily currency forward contracts and interest rate swaps. We have not entered into these contracts for trading or speculative purposes in the past, nor do we currently anticipate entering into such contracts for trading or speculative purposes in the future.

Currency forward contracts - Certain of our sales generated by our non-U.S. operations are denominated in U.S. dollars. We periodically use currency forward contracts to manage a very nominal portion of currency exchange rate risk associated with trade receivables denominated in a currency other than the holder’s functional currency or similar exchange rate risk associated with future sales. Derivatives used to hedge forecasted transactions and specific cash flows associated with financial assets and liabilities denominated in currencies other than the U.S. dollar and which meet the criteria for hedge accounting are designated as cash flow hedges. Consequently, the effective portion of gains and losses is deferred as a component of accumulated other comprehensive income and is recognized in earnings at the time the hedged item affects earnings. Contracts that do not meet the criteria for hedge accounting are marked-to-market at each balance sheet date with any resulting gain or loss recognized in income currently as part of net currency transaction gains and losses. The fair value of the currency forward contracts is determined using Level 1 inputs based on the currency spot forward rates quoted by banks or currency dealers.

~~At December 31, 2016~~During 2017 and ~~June 30, 2017,~~the first quarter of 2018, we had no currency forward contracts outstanding. ~~We did not use hedge accounting for any of our contracts to the extent we held such contracts in 2016.~~

Interest rate swap contract ~~- As part of our interest rate risk management strategy, in August 2015 we entered into~~– See the 2017 Annual Report for a pay- fixed/receive-variable interest rate swap contract with Wells Fargo Bank, N.A. to minimize our exposure to volatility in LIBOR as it relates to our forecasted outstanding variable-rate indebtedness. Under this interest rate swap, we will pay a fixed rate of 2.016% per annum, payable quarterly, and receive a variable rate of three-month LIBOR (subject to a 1.00% floor), also payable quarterly, in each case based on the notional amount of the swap then outstanding. The effective date of the swap contract was September 30, 2015. The notional amount of the swap started at $344.8 million and declines by $875,000 each quarter beginning December 31, 2015, with a final maturity of the swap contract in February 2020. The notional amount of the swap as of June 30, 2017 was $338.6 million. This swap contract has been designated as a cash flow hedge and qualified as an effective hedge at inception under ASC Topic 815. The effective portion of changes in fair value on this interest rate swap is recorded as a component of other comprehensive income, net of deferred income taxes. Commencing in the fourth quarter of 2015, as interest expense accrues on LIBOR-based variable rate debt, we classify the amount we pay under the pay-fixed leg of the swap and the amount we receive under the receive-variable leg of the swap as part of interest expense, with the net effect that the amount of interest expense we recognize on our LIBOR-based variable rate debt each quarter, as it relates to the notional amount of the swap outstanding each quarter, to be based on a fixed rate of 2.016% per annum in lieu of the level of LIBOR prevailing during the quarter. The amount of hedge ineffectiveness, if any, related to the swap will be recorded in earnings (also as part of interest expense). Since the inception of the swap through June 30, 2017, there have been no gains or losses recognized in earnings representing hedge ineffectiveness with respect to the interest rate swap.

During the first six months of June 30, 2017, the pretax unrealized loss arising during the period and recognized in other comprehensive income (loss) related to the interest rate swap contract was $1.4 million. During the same period, $1.6 million was reclassified from accumulated other comprehensive loss into earnings (interest expense). During the next twelve months, the amount of the June 30, 2017 accumulated other comprehensive loss balance that is expected to be reclassified to interest expense is $2.4 million pre-tax.

~~The fair value~~discussion of the interest rate swap ~~contract at June 30, 2017~~we had entered into in August 2015, and which was ~~a $2.8 million liability including $2.0 million recognized as part of accounts payable and accrued liabilities and $.8 million recognized as part of other noncurrent liabilities~~voluntarily terminated in our Condensed Consolidated Balance Sheet. See Notes 7 and 8. The fair value of the interest rate swap was estimated by a third party using inputs that are observable or that can be corroborated by observable market data such as interest rate yield curves, and therefore, is classified within Level 2 of the valuation hierarchy.September 2017.

The following table presents the financial instruments that are not carried at fair value but which require fair value disclosure as of December 31, ~~2016~~2017 and ~~June 30, 2017.~~March 31, 2018.

December 31, 2016

June 30, 2017

Carrying amount

Fair
value

Carrying amount

Fair
value

(In millions)

Cash, cash equivalents and restricted cash

$
52.3

$
52.3

$
115.4

$
115.4

Long-term debt:

Variable rate:

Term loan

335.9

334.6

334.9

340.3

North American revolving credit facility

-

-

16.3

16.3

Common stockholders' equity

395.0

1,383.8

620.8

2,111.7

	December 31, 2017				March 31, 2018
	Carrying amount		Fair value		Carrying amount		Fair value
	(In millions)
Cash, cash equivalents and restricted cash	$	323.7	$	323.7	$	365.9	$	365.9
Long-term debt -
Fixed rate Senior Notes		471.1		495.1		484.9		506.6
Common stockholders' equity		754.3		2,986.8		818.3		2,619.4

At ~~June 30, 2017,~~March 31, 2018, the estimated market price of our ~~term loan~~Senior Notes was ~~$1,005~~€1,029 per ~~$1,000~~€1,000 principal amount. The fair value of our ~~term loan~~Senior Notes is based on quoted market prices; however, these quoted market prices represented Level 2 inputs because the markets in which the ~~term loan trades were~~Senior Notes trade are not active. The fair value of our common stockholders’ equity is based upon quoted market prices at each balance sheet date, which represent Level 1 inputs. ~~Due to their near-term maturities, the carrying amounts of accounts receivable, accounts payable and the revolving credit facility are considered equivalent to fair value. See Notes 2, 6 and 7.~~

~~In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)~~Adopted

On January 1, 2018, we adopted 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~~were not completed 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 will have on our Consolidated Financial Statements. We currently expect to adopt the standard in the first quarter ofJanuary 1, 2018 using the modified retrospective ~~approach~~method. Prior to ~~adoption. Our~~adoption of this standard, we recorded sales when our products were shipped and title and other risks and rewards of ownership had passed to our customer, which was generally ~~involve single~~at the time of shipment (although in some instances shipping terms were FOB destination point, for which we did not recognize revenue until the product was received by our customer). Following adoption of this standard, we record sales when we satisfy our performance ~~obligations~~obligation to ~~ship goods pursuant~~our customers by transferring control of our products to ~~customer purchase orders without further underlying contracts,~~them, which we have determined is at the same point in time as when we would have recognized revenue prior to adoption of this new standard. Accordingly, the adoption of Topic 606 as of January 1, 2018 did not have a material impact on our consolidated financial statements, and ~~as such~~ we ~~expect~~believe adoption of this standard will have a minimal effect on our ~~revenues. We are in the process of evaluating the additional disclosure requirements.~~revenues on an ongoing basis. See Note 9.

On January ~~2016, the FASB issued~~1, 2018, we adopted 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.~~income (previously, changes in fair value of such securities were recognized in other comprehensive 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 methods 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~~We adopted the ~~first quarter of 2018, with prospective application required, and early adoption is not permitted.~~new standard prospectively. The most significant aspect of adopting this ASU ~~will be~~is the requirement to recognize changes in fair value of our available-for-sale marketable equity securities in net income. At December 31, 2017, our entire portfolio of marketable securities consisted of marketable equity securities. Upon adoption of the ASU on January 1, 2018, the entire balance of our accumulated other comprehensive income ~~(currently changes~~related to marketable securities of $4.8 million was reclassified to our beginning retained earnings pursuant to the transition requirements of the ASU.

In March 2017, the FASB issued ASU 2017-07, Compensation— Retirement Benefits (Topic 715) Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires that the service cost component of net periodic defined benefit pension and OPEB cost be reported in ~~fair value~~the same line item as other compensation costs for applicable employees incurred during the period. Other components of such ~~securities~~net benefit cost are ~~recognized~~required to be presented in the income statement separately from the service cost component, and below income from operations (if such a subtotal is presented). These other ~~comprehensive income)~~net benefit cost components must be disclosed either on the face of the financial statements or in the notes to the financial statements. In addition only the service cost component is eligible for capitalization in assets where applicable (inventory or internally constructed fixed assets for example). We adopted the amendments in ASU 2017-07 beginning in the first quarter of 2018, with retrospective presentation in our Condensed Consolidated Statements of Income. We began applying ASU 2017-07 prospectively beginning on January 1, 2018 as it relates to the capitalization of the service cost component of net benefit cost into assets (primarily inventory). We are availing ourselves of the practical expedient that permits us to use amounts we previously disclosed as components of our net periodic defined benefit pension and OPEB cost for periods prior to the adoption of this ASU as the estimation basis for applying the retrospective presentation requirements. As a result we have reclassified $2.6 million and $1.5 million previously classified as part of cost of sales and selling, general and administrative expenses, respectively, for the three months ended March 31, 2017 to Other components of net periodic pension and OPEB cost in our Condensed Consolidated Statement of Income.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is a comprehensive rewriting of the lease accounting guidance which aims to increase comparability and transparency with regard to lease transactions. The primary change will be the recognition of lease assets for the right-of-use of the underlying asset and lease liabilities for the obligation to make payments by lessees on the balance sheet for leases currently classified as operating leases. The ASU also requires increased qualitative disclosure about leases in addition to quantitative disclosures currently required. Companies are required to use a modified retrospective approach to adoption with a practical expedient which will allow companies to continue to account for existing leases under the prior guidance unless a lease is modified, other than the requirement to recognize the right-of-use asset and lease liability for all operating leases. The changes indicated above will be effective for us beginning in the first quarter of 2019, with early adoption permitted. We are in the process of assessing all of our current leases. We have not yet evaluated the effect this ASU will have on our Consolidated Financial Statements, but given the material amount of our future minimum payments under non-cancellable operating

leases at December 31, ~~2016~~2017 discussed in Note 17 to our ~~2016~~2017 Annual Report, we expect to recognize a material right-of-use lease asset and lease liability upon adoption of the ASU.

~~In March 2017, the FASB issued ASU 2017-07,~~ ~~Compensation - Retirement Benefits (Topic 715) Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~, which requires that the service cost component of net periodic defined benefit pension and OPEB cost be reported in the same line item as other compensation costs for applicable employees incurred during the period. Other components of such net benefit cost are required to be presented in the income statement separately from the service cost component, and below income from operations (if such a subtotal is presented). These other net benefit cost components must be disclosed either on the face of the financial statements or in the notes to the financial statements. In addition only the service cost component is eligible for capitalization in assets where applicable (inventory or internally constructed fixed assets for example). The amendments in ASU 2017-06 are effective for us beginning in the first quarter of 2018, early adoption as of the beginning of an annual period is permitted, retrospective presentation is required for the income statement presentation of the service cost component and other components of net benefit cost, and prospective application is required for the capitalization in assets of the service cost component of net benefit cost. We expect to adopt this ASU in the first quarter of 2018.

We currently include all of our net benefit cost for defined benefit pension plans as part of compensation expense which is capitalized into inventory, we present a subtotal for income from operations and our net periodic defined benefit pension cost is currently included in the determination of income from operations. Accordingly, adoption of this standard will change the amount of our aggregate compensation cost capitalized in inventory, and change the determination of the amount we report as income from operations. As disclosed in Note 10 to our 2016 Annual Report, the service cost component represented approximately $9.9 million of our total net periodic defined benefit pension costs of $22.0 million in 2016. None of the components of our net OPEB cost, or our total OPEB cost, were material in 2016.

We are a leading global producer and marketer of value-added titanium dioxide pigments ~~(TiO~~(“TiO₂”). TiO₂ is used for a variety of manufacturing applications, including paints, plastics, paper and other industrial ~~and specialty~~ products. For the ~~six~~three months ended ~~June 30, 2017,~~March 31, 2018, approximately one-half of our sales volumes were sold into European markets. Our production facilities are located ~~throughout~~in Europe and North America.

We consider TiO₂ to be a “quality of life” product, with demand affected by gross domestic product, or GDP, and overall economic conditions in our markets located in various regions of the world. Over the long-term, we expect demand for TiO₂ will grow by 2% to 3% per year, consistent with our expectations for the long-term growth in GDP. However, even if we and our competitors maintain consistent shares of the worldwide market, demand for TiO₂ in any interim or annual period may not change in the same proportion as the change in global GDP, in part due to relative changes in the TiO₂ inventory levels of our customers. We believe that our customers’ inventory levels are influenced in part by their expectations for future changes in TiO₂market selling prices as well as their expectations for future availability of product. Although certain of our TiO₂grades are considered specialty pigments, the majority of our grades and substantially all of our production are considered commodity pigment products, with price and availability being the most significant competitive factors along with quality and customer service.

Our key performance indicators are our TiO₂ average selling prices, our level of TiO₂ sales and production volumes and the cost of our third-party feedstock ore. TiO₂selling prices generally follow industry trends and prices will increase or decrease generally as a result of competitive market pressures.

We reported net income of ~~$196.5~~$70.7 million, or ~~$1.70~~$.61 per share, in the ~~second~~first quarter of ~~2017~~2018 as compared to net income of ~~$1.7~~$36.8 million, or ~~$.01 per share, in the second quarter of 2016. For the first six months of 2017, we reported net income of $233.3 million, or $2.01 per share, compared to a net loss of $2.1 million, or $.02~~$.32 per share, in the first ~~six months~~quarter of ~~2016.~~2017. We reported higher net income in the ~~2017 periods~~first quarter of 2018 as compared to the ~~2016 periods in part~~first quarter of 2017 primarily due to higher income from operations ~~in 2017~~ resulting from the ~~favorable effects~~net effect of higher average selling prices, ~~higher~~lower sales and production volumes and ~~lower~~higher raw materials and other production costs. ~~In addition, our~~

Our results in the first quarter of 2017 ~~periods~~ include ~~the recognition of~~ a non-cash deferred income tax benefit of $5.0 million ($.04 per share) as a result of a net decrease in our deferred income tax asset valuation allowance ~~related to~~associated with our German and Belgian ~~operations ($157.6 million, or $1.36 per share, in the second quarter and $162.6 million, or $1.40 per share, in the year-to-date period).~~operations.

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 the consequences of such a development worsen), or should the underlying assumptions prove incorrect, actual results could differ materially from those 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.

Due to the successful implementation of previously-announced price increases, average selling prices ~~began to rise in~~rose throughout 2017 and into the ~~second~~first quarter of ~~2016 and have continued to rise through the first half of 2017.~~2018. Our average TiO₂ selling prices inat the ~~second quarter~~end of 2017 were ~~20%~~27% higher ~~as compared to~~than at the ~~second quarter~~end of ~~2016, and our~~2016. Our average selling prices at the end of the ~~second~~first quarter of ~~2017~~2018 were 8%4% higher than at the end of ~~the first quarter of~~ 2017, ~~and were 12% higher than at the end of 2016,~~ with higher prices in ~~all major markets. We experienced higher sales volumes in~~ the European, North American and export markets, partially offset by lower prices in Latin America. We experienced lower sales volumes in all major markets in the first ~~half~~quarter of ~~2017~~2018 as compared to the record sales volumes achieved in the same period of ~~2016, partially offset by lower volumes in the Latin American market.~~2017.

We operated our production facilities at ~~overall average~~approximately 95% of practical capacity in the first quarter of 2018 compared to full practical capacity utilization rates ~~of 100%~~ in the first ~~six months~~quarter of ~~2017 compared~~2017.

Due to ~~approximately 96% in the first six months of 2016. The table below lists our comparative quarterly capacity utilization rates.~~

~~Throughout 2016, we experienced moderation~~a moderate rise in the cost of ~~TiO~~₂third-party feedstock ore we procured ~~from third parties. Our cost of sales per metric ton of TiO~~₂ ~~sold declined throughout 2016 and into the first six months of~~in 2017, ~~primarily due to the moderation in the cost of TiO~~₂~~feedstock ore in 2016. Consequently,~~ our cost of sales per metric ton of TiO₂ sold in the first ~~six~~three months of ~~2017~~2018 was ~~lower than our cost of sales per metric ton of TiO~~₂ ~~sold in~~higher as compared to the first ~~six~~three months of ~~2016~~2017 (excluding the effect of changes in currency exchange rates).

Quarter ended ~~June 30, 2017~~March 31, 2018 compared to the quarter ended ~~June 30, 2016~~March 31, 2017

	Three months ended June 30,									Three months ended March 31,
	2016				2017					2017				2018
		(Dollars in millions)									(Dollars in millions)
Net sales	$	356.1	100	%	$	441.4		100	%	$	369.8	100	%	$	430.4		100	%
Cost of sales		300.6	84			311.6		71			263.8	71			255.6		59
Gross margin		55.5	16			129.8		29			106.0	29			174.8		41
Other operating income and expense, net		45.0	13			59.7		13			49.6	14			67.3		16
Income from operations	$	10.5	3	%	$	70.1		16	%	$	56.4	15	%	$	107.5		25	%

							% Change									% Change
TiO₂ operating statistics:
Sales volumes*		149				157		6	%		143				125		(13	)%
Production volumes*		131				141		8	%		145				133		(8	)%
Percentage change in net sales:
TiO₂ product pricing								20	%								26	%
TiO₂ sales volumes								6									(13	)
TiO₂ product mix/other																	(5	)
Changes in currency exchange rates								(2	)								8
Total								24	%								16	%

Net sales - Net sales in the ~~second~~first quarter of ~~2017~~2018 increased ~~24%~~16%, or ~~$85.3~~$60.6 million, compared to the ~~second~~first quarter of ~~2016~~2017 primarily due to the ~~favorable effects~~net effect of a ~~20%~~26% increase in average TiO₂ selling prices (which increased net sales by approximately ~~$71~~$96 million) and a ~~6% increase~~13% decrease in sales volumes (which ~~increased~~decreased net sales by approximately ~~$21~~$48 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.

Our sales volumes ~~increased 6%~~decreased 13% in the ~~second~~first quarter of ~~2017~~2018 as compared to the ~~second~~record first quarter sales volumes of ~~2016~~2017 primarily due to ~~higher sales in the North American and European markets, partially offset by~~ lower sales in all major markets resulting from a controlled ramp-up in January 2018 as we brought the ~~Latin American market. Our sales~~second phase of our new global enterprise resource planning system online, and as inventory levels remained tight (in part due to lower production volumes in the ~~second~~first quarter of ~~2017 set a new overall record for a second quarter.~~2018, as discussed below) we undertook efforts to assure adequate supply during the spring and summer months. In addition to the impact of changes in average TiO₂ selling prices and sales volumes, we estimate that changes in currency exchange rates (primarily the euro) ~~decreased~~increased our net sales by approximately $8$31 million as compared to the ~~second~~first quarter of ~~2016.~~2017.

Cost of sales and gross margin - Cost of sales ~~increased $11.0~~decreased $8.2 million or 4%3% in the ~~second~~first quarter of ~~2017~~2018 compared to the ~~second~~first quarter of ~~2016~~2017 due to the net ~~impact~~effect of a ~~6% increase~~13% decrease in sales volumes, ~~efficiencies related to~~ an 8% ~~increase~~decrease in TiO₂ production volumes, ~~lower~~higher raw materials and other production costs of approximately $1$12 million (primarily caused by higher third-party feedstock ore costs) and currency fluctuations (primarily the euro). The decrease in TiO₂ production volumes in the first quarter of 2018 compared to the record production volumes in the first quarter of 2017 was primarily due to the timing of scheduled maintenance at certain facilities in 2018 as well as the implementation of a productivity-enhancing improvement project at our Belgian facility. Our cost of sales as a percentage of net sales decreased to ~~71%~~59% in the ~~second~~first quarter of ~~2017~~2018 compared to ~~84%~~71% in the same period of ~~2016 primarily due to~~2017 as the favorable impact of higher average selling prices more than offset the unfavorable effects related to lower production volumes and ~~to a lesser extent lower~~higher raw materials and other production costs, as discussed above.

Gross margin as a percentage of net sales increased to 41% in the first quarter of 2018 compared to 29% in the first quarter of 2017. As discussed and ~~efficiencies related~~quantified above, our gross margin increased primarily due to the net effect of higher average selling prices, lower sales and production ~~volumes.~~ volumes and higher raw materials and other production costs.

Other operating income and expense, net - Other operating income and expense, net in the ~~second~~first quarter of ~~2016 includes~~2018 was $67.3 million, an ~~insurance settlement gain~~increase of ~~$1.4~~$17.7 million compared to the first quarter of 2017. Other operating income and expense, net increased in 2018 in part due to higher general and administrative costs related to the implementation of a ~~2014 business interruption claim.~~new accounting and manufacturing software system, higher sales support costs and currency fluctuations (primarily the euro).

~~Gross margin and income~~Income from operations - Income from operations increased by ~~$59.6~~$51.1 million in the first quarter of 2018 compared to the ~~second~~first quarter of ~~2016.~~2017. Income from operations as a percentage of net sales increased to ~~16%~~25% in the ~~second~~first quarter of ~~2017~~2018 from 3%15% in the same period of ~~2016.~~2017. This increase was driven by the increase in gross margin, ~~percentage, which increased to 29% for the second quarter of 2017 compared to 16% for the second quarter of 2016. As~~ discussed and quantified above, our gross margin percentage increased primarily due to the effects of higher average selling prices, higher sales and production volumes and lower raw materials and other production costs.above. We estimate that changes in currency exchange rates ~~decreased~~increased income from operations by approximately $5$1 million in the ~~second~~first quarter of ~~2017~~2018 as compared to the same period in ~~2016,~~2017, as discussed below.

Other non-operating income (expense) - Other components of net periodic pension and OPEB cost in the first quarter of 2018 was comparable to the first quarter of 2017. See Notes 10 and 15 to our Condensed Consolidated Financial Statements. Interest expense ~~decreased $.3 million, or 6%,~~ in the ~~second~~first quarter of ~~2017 compared~~2018 was comparable to the ~~second~~first quarter of ~~2016.~~2017. We currently expect our interest expense for all of ~~2017~~2018 will be comparable to ~~2016. See Note 6 to~~2017, as higher average debt levels in 2018 resulting from the September 2017 issuance of our ~~Condensed Consolidated Financial Statements.~~Senior Secured Notes would be offset by lower average interest rates on outstanding indebtedness.

Income tax expense ~~(benefit)~~ - We recognized income tax ~~benefit~~expense of ~~$131.1~~$29.0 million in the ~~second~~first quarter of ~~2017~~2018 compared to ~~an income tax expense of $3.9~~$11.0 million in the ~~second~~first quarter of ~~2016.~~2017. The difference is primarily due to the ~~effect~~net effects of higher income from operations in the ~~reversal~~first quarter of ~~our deferred~~2018 which is partially offset by the decrease in U.S. Federal income tax ~~asset valuation allowance associated with our German and Belgian operations in 2017,~~rate as discussed below. Our earnings are subject to income tax in various U.S. and non-U.S. jurisdictions, and effective in 2018 the income tax rates applicable to our pre-tax earnings (losses) of our non-U.S. operations isare generally ~~lower~~higher than the income tax rates applicable to our U.S. operations. Excluding the effect of any increase or decrease in our deferred income tax asset valuation allowance or changes in our reserve for uncertain tax positions, we would generally expect our overall effective tax rate to be higher than the U.S. federal statutory tax rate of 21% primarily because of our non-U.S. operations. Prior to 2018, the income tax rates applicable to our pre-tax earnings (losses) of our non-U.S. operations were generally lower than the U.S. federal statutory tax rate of 35% ~~primarily because of our non-U.S. operations.~~. See Note 11 to our Condensed Consolidated Financial Statements for a tabular reconciliation of our statutory income tax provision to our actual tax provision.

We have substantial net operating loss ~~(NOL)~~(“NOL”) carryforwards in Germany (the equivalent of ~~$638~~$652 million for German corporate purposes and ~~$71~~$.5 million for German trade tax purposes at December 31, ~~2016)~~2017) and in Belgium (the equivalent of ~~$93~~$50 million for Belgian corporate tax purposes at December 31, ~~2016)~~2017), all of which have an indefinite carryforward period. As a result, we have 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, we 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) we utilized a portion of such carryforwards during the most recent three-year period, and (iii) we expected to utilize the remainder of the carryforwards over the long term. We had also previously indicated that facts and circumstances could change, which mightAs discussed 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 our operating results during the second quarter of 2015 and our expectations at that time for our operating results for the remainder of 2015, which had been driven in large part by the trend in our 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, we 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 our German and Belgian jurisdictions at June 30, 2015 (even considering that the carryforward period of our German and Belgian NOL carryforwards is indefinite, one piece of positive evidence). Accordingly, at2017 Annual Report, commencing June 30, 2015, we concluded that we were required to recognize a non-cash deferred income tax asset valuation allowance under the more-likely-than-not recognition criteria with respect to our German and Belgian net deferred income tax assets at such date. We ~~recognized an additional non-cash deferred income tax asset valuation allowance~~continued to conclude such losses did not meet the more-likely-than-not recognition criteria through March 31, 2017, and during the second half of 2015 due to losses recognized by our German and Belgian operations during such period. During 2016, we recognized an aggregate $2.2 million non-cash tax benefit as the result of a net decrease in such deferred income tax valuation allowance, as the impact of utilizing a portion of our German NOLs during such period more than offset the impact of additional losses recognized by our Belgian operations during such period. Such valuation allowance aggregated approximately $173 million at December 31, 2016 ($153 million with respect to Germany and $20 million with respect to Belgium). During the first ~~six months~~quarter of 2017 we recognized an aggregate non-cash deferred income tax benefit of ~~$12.7~~$5.0 million as a result of a net decrease in such deferred income tax asset valuation allowance, due to utilizing a

portion of both the German and Belgian ~~NOLs~~NOL during ~~such period, including $7.7 million~~the period. As also discussed in the second quarter of 2017. We continue to believe we will ultimately realize the full benefit of these German and Belgian NOL carryforwards, in part because of their indefinite carryforward period. As previously disclosed, our ability to reverse all or a portion of either the German or Belgian valuation allowance is dependent on the presence of sufficient positive evidence, such as the existence of cumulative profits in the most recent twelve consecutive quarters or profitability in recent quarters during which such profitability was trending upward throughout such period, and the ability to demonstrate future profitability for a sustainable period. As noted below, we determined such conditions were satisfied at June 30, 2017.

~~Although our Belgian operations were profitable in the first quarter of~~ 2017 and we utilized a portion of the Belgian NOLs during such period, our Belgian operations continued to have cumulative losses in the most recent twelve quarters at March 31, 2017. Although the results of our German operations had improved during 2016 and the first quarter of 2017, indicating a change in the negative trend in earnings that existed at December 31, 2015, and we utilized a portion of our German NOLs during 2016 and the first quarter of 2017, and we had cumulative income with respect to our German operations for the most recent twelve consecutive quarters at March 31, 2017, the sustainability of such positive trend in earnings had not yet been demonstrated at such date. As previously disclosed, while neither our business as a whole nor any of our principal product groups is seasonal to any significant extent, TiO₂ sales are generally higher in the second and third quarters of the year, due in part to the increase in paint production in the spring to meet demand during the spring and summer painting seasons. While we have some insight into the overall demand expected to be generated by a particular year’s paint season and TiO₂~~pricing at the end of the first quarter (the start of the paint season), we have much greater insight and certainty regarding overall demand and TiO~~₂pricing for a particular year’s paint season by the end of the second quarter of the year, in part because some factors, such as weather, can have an impact on both overall demand and pricing each year. Accordingly, at March 31, 2017 we did not have sufficient positive evidence to support a sustainable profit trend and consequently, we did not have sufficient positive evidence under the more-likely-than-not recognition criteria to support reversal of the entire valuation allowance related to our German or Belgian operations at such date. During the second quarter of 2017, our German and Belgian operations continued to be profitable, and both reported levels of profitability higher as compared to the first quarter of 2017. As discussed above, our consolidated results of operations in general, and our German and Belgian operations in particular, were favorably impacted during the quarter by, among other things, continued higher average TiO₂ selling prices and higher sales volumes. Our German operations had cumulative income for the most recent twelve consecutive quarters at June 30, 2017. While our Belgian operations had cumulative losses in the most recent twelve consecutive quarters at June 30, 2017, such operations generated income in both the first and second quarters of 2017, with higher income in the second quarter as compared to the first quarter, the amount of cumulative losses of our Belgian operations for the most recent twelve consecutive quarters was lower as of June 30, 2017 as compared to both March 31, 2017 and December 31, 2016 and we expect to have cumulative profits in the third and fourth quarters. Our production facilities have been operating at near practical capacity utilization rates in the first six months of 2017. In addition, consistent with our expectation regarding our consolidated results of operations for the remainder of 2017 (as discussed below under the “Outlook” subsection), we currently believe it is likely our German and Belgian operations will continue to report improved operating results in 2017 as compared to 2016. Accordingly,Annual Report, at June 30, 2017, we concluded we ~~now have~~had sufficient positive evidence under the more-likely-than-not recognition criteria to support reversal of the entire valuation allowance related to our German and Belgian operations.

As discussed ~~below,~~in the 2017 Annual Report, on December 22, 2017, the 2017 Tax Act was enacted into law. This new tax legislation, among other changes, (i) reduced the U.S. Federal corporate income tax rate from 35% to 21% effective January 1, 2018; (ii) implemented a ~~large portion~~territorial tax system and imposed a one-time repatriation tax (“Transition Tax”) on the deemed repatriation of the ~~remaining valuation allowance is reversed as~~post-1986 undistributed earnings of ~~June 30,~~non-U.S. subsidiaries accumulated up through December 31, 2017, ~~but a portion~~regardless of whether such earnings are repatriated; (iii) eliminated U.S. tax on future non-U.S. earnings (subject to certain exceptions); (iv) eliminated the ~~remaining valuation allowance will be reversed during~~domestic production activities deduction beginning in 2018; (v) eliminated the second half of 2017. Such sufficient positive evidence includes, among other things, the existence of cumulative profits in the most recent twelve consecutive quarters (Germany) or profitability in recent quarters during which such profitability was trending upward throughout such period (Belgium), the ability to demonstrate future profitability in Germanynet operating loss carryback and ~~Belgium~~provides for ~~a sustainable period (as supported by, among other things, recent trends in profitability, driven in large part by increases in TiO~~₂ ~~selling prices, and continued strong demand indicating that such profitability trends will continue in the future), and the~~an indefinite carryforward period subject to an 80% annual usage limitation; (vi) allows for the ~~German~~expensing of certain capital expenditures; (vii) imposed a tax on global intangible low-tax income (“GILTI”) beginning in 2018; (viii) imposed a base erosion anti-abuse tax (“BEAT”) beginning in 2018; and ~~Belgian NOLs. Accordingly,~~(vi) amended the rules limiting the deduction for business interest expense beginning in 2018. Following the enactment of the 2017 Tax Act, the Securities and Exchange Commission issued Staff Accounting Bulletin (“SAB”) 118 to provide guidance on the accounting and reporting impacts of the 2017 Tax Act. SAB 118 states that companies should account for changes related to the 2017 Tax Act in the period of enactment if all information is available and the accounting can be completed. In situations where companies do not have enough information to complete the accounting in the period of enactment, a company must either 1) record an estimated provisional amount if the impact of the change can be reasonably estimated; or 2) continue to apply the accounting guidance that was in effect immediately prior to the 2017 Tax Act if the impact of the change cannot be reasonably estimated. If estimated provisional amounts are recorded, SAB 118 provides a measurement period of no longer than one year during which companies should adjust those amounts as additional information becomes available in the reporting period within the measurement period in which such adjustment is determined.

Prior to the enactment of the 2017 Tax Act, the undistributed earnings of our European subsidiaries were deemed to be permanently reinvested (we had not made a similar determination with respect to the undistributed earnings of our Canadian subsidiary). Pursuant to the Transition Tax provisions imposing a one-time repatriation tax on post-1986 undistributed earnings, we recognized a provisional current income tax expense of $76.2 million in the ~~second~~fourth quarter of 2017. The amounts recorded as of December 31, 2017 as a result of the 2017 Tax Act represent estimates based on information currently available. We elected to pay such tax over an eight year period beginning in 2018, including approximately $6.1 million which was paid in April 2018 and is netted with our current receivables from affiliates (income taxes receivable from Valhi) classified as a current asset in our Condensed Consolidated Balance Sheet, and the remaining $70.1 million is recorded as a noncurrent payable to affiliate (income taxes payable to Valhi) classified as a noncurrent liability in our Condensed Consolidated Balance Sheet and will be paid in increments over the remainder of the eight year period. We have not made any measurement-period adjustments to the provisional amounts recorded for this item during the first quarter of 2018 because no new information became available during the period that required an adjustment. We are continuing to gather information and await further guidance, primarily from the state jurisdictions in which we operate and, given the complexities of these new rules and the long time period over which information about our subsidiaries is needed, further guidance is necessary in order to determine the amount of the Transition Tax, which may impact the Transition Tax recognized in the fourth quarter of 2017. We will complete our accounting for this item within the prescribed measurement period ending December 22, 2018, pursuant to the guidance under SAB 118, and if we determine an adjustment to the provisional amount recognized at December 31, 2017 is required, we will recognize such adjustment in the reporting period within the SAB 118 measurement period in which such adjustment is determined.

Prior to the enactment of the 2017 Tax Act the undistributed earnings of our European subsidiaries were deemed to be permanently reinvested (we had not made a similar determination with respect to the undistributed earnings of our Canadian subsidiary). As a result of the implementation of a territorial tax system under the 2017 Tax Act, effective January 1, 2018, and the Transition Tax which in effect taxes the post-1986 undistributed earnings of our non-U.S. subsidiaries accumulated up through December 31, 2017, we determined effective December 31, 2017 that all of the post-1986 undistributed earnings of our European subsidiaries are not permanently reinvested. Accordingly, in the fourth quarter of 2017 ~~includes~~we recognized an aggregate provisional non-cash income tax benefit of $149.9 million related to such reversal at June 30, 2017 ($141.9 million related to Germany, and $8.0 million related to Belgium). Such second quarter 2017 income tax benefit associated with reversal of the German and Belgian valuation allowance excludes the non-cash income tax benefit of $7.7 million, also recognized in the second quarter, as discussed above. In addition to the above amounts, our deferred income tax ~~asset~~expense of $4.5 million based on our reasonable estimates of the U.S. state and non-U.S. income tax and withholding tax liability attributable to all of such previously-considered permanently reinvested undistributed earnings through December 31, 2017. The amounts recorded as of December 31, 2017 as a result of the 2017 Tax Act represent estimates based on information currently available. We have not made any measurement-period adjustments to the provisional amounts recorded at

~~valuation allowance increased by $9.5 million~~December 31, 2017 for this item during the first ~~six months~~quarter of ~~2017 as~~2018. However, we recorded a ~~result of changes in currency exchange rates, which was recognized as part of other comprehensive income (loss).~~

In accordance with the ASC 740-270 guidance regarding accounting for income taxes at interim dates, the amount of the valuation allowance reversed at June 30, 2017 ($149.9 million) relates to our change in judgment regarding the realizability of the relatedprovisional non-cash deferred income tax ~~asset as it relates~~expense of $.4 million for the estimated U.S. state and non-U.S. income tax and withholding tax liability attributable to ~~future years (i.e.~~the 2018 undistributed earnings of our non-U.S. subsidiaries in the first quarter of 2018. We are continuing our review of certain other provisions under the 2017 Tax Act and ~~after). A change~~waiting on further guidance primarily from the state jurisdictions in ~~judgment regarding~~which we operate that may impact our determination of the ~~realizability of deferred tax assets~~aggregate temporary differences attributable to our investments in our non-U.S. subsidiaries. We will complete our accounting for this item within the prescribed measurement period ending December 22, 2018, pursuant to the guidance under SAB 118, and if we determine an adjustment to the provisional amount recognized at December 31, 2017 and March 31, 2018 are required, we will recognize such adjustment in the reporting period within the SAB 118 measurement period in which such adjustment is determined.

~~Six months ended June 30, 2017 compared to the six months ended June 30, 2016~~

Six months ended June 30,

2016

2017

(Dollars in millions)

Net sales
$
674.5

100
%

$
811.2

100
%
Cost of sales

578.6

86

578.0

71

Gross margin

95.9

14

233.2

29

Other operating income and expense, net

85.7

12

110.8

14

Income from operations
$
10.2

2
%

$
122.4

15
%

% Change

TiO₂ operating statistics:

Sales volumes*

287

300

5
%
Production volumes*

262

286

9
%
Percentage change in net sales:

TiO₂ product pricing

19
%
TiO₂ sales volumes

5

TiO₂ product mix/other

(2
)
Changes in currency exchange rates

(2
)
Total

20
%

~~Net sales~~ ~~- Net sales~~our financial statements in the first ~~six months~~quarter of ~~2017 increased 20%,~~2018. Further, we have not made a policy decision regarding whether to record deferred taxes on GILTI or ~~$136.7 million, compared~~record GILTI tax as a current-period expense when incurred. We will complete our policy election for this item within the prescribed measurement period ending December 22, 2018, pursuant to the ~~first six months of 2016 primarily due to the favorable effects of a 19% increase in average TiO~~₂ ~~selling prices (which increased net sales by approximately $128 million)~~guidance under SAB 118 and ~~a 5% increase in sales volumes (which increased net sales by approximately $34 million). TiO~~₂ ~~selling prices~~if we determine such policy election impacts our provision, we will ~~increase or decrease generally as a result of competitive market pressures, changes~~recognize an adjustment in the ~~relative level~~reporting period within the SAB 118 measurement period in which such adjustment is determined. Similarly, we have evaluated the tax impact of ~~supply and demand as well as changes in raw material and other manufacturing costs.~~

~~Our sales volumes increased 5%~~BEAT on our tax provision in the first ~~six months~~quarter of ~~2017~~2018 and determined that the tax law has no material impact on our tax provision as ~~compared~~we have historically not entered into international payments between related parties that are unrelated to the first six months of 2016 primarily due to higher sales in the North American and export markets, partially offset by lower sales in the Latin American market. Our sales volumes in the first half of 2017 set a new overall record for a first-six-month period. In addition to the impact of changes in average TiO₂ ~~selling prices and sales volumes, we estimate that changes in currency exchange rates decreased our net sales by approximately $15 million as compared to the first six months of 2016.~~

~~Cost of sales~~ - Cost of sales decreased $.6 million in the first six months of 2017 compared to the same period in 2016 primarily due to the net impact of a 5% increase in sales volumes, efficiencies related to a 9% increase in TiO₂~~production volumes, lower raw materials and other production costs of approximately $14 million and currency fluctuations (primarily the euro). Our~~ cost of sales as a percentage of net sales decreased to 71% in the first six months of 2017 compared to 86% in the same period of 2016 due to the favorable impact of higher average selling prices, lower raw materials and other production costs and efficiencies related to higher production volumes.

~~Other operating income and expense, net –~~ ~~Other operating income and expense in the first six months of 2016 includes an insurance settlement gain of $3.4 million related to a 2014 business interruption claim.~~

~~Gross margin and income from operations~~ -Income from operations increased by $112.2 million in the first six months of 2017 compared to the first six months of 2016. Income from operations as a percentage of net sales increased to 15% in the first six months of 2017 from 2% in the same period of 2016. This increase was driven by the increase in gross margin, which increased to 29% for the first six months of 2017 compared to 14% for the first six months of 2016. As discussed and quantified above, our gross margin increased primarily due to the effects of higher average selling prices, higher sales and production volumes and lower raw materials and other production costs. We estimate that changes in currency exchange rates decreased income from operations by approximately $13 million in the first six months of 2017 as compared to the same period in 2016.

~~Other non-operating income (expense)~~ ~~- Interest expense decreased $.7 million, or 7%, in the first six months of 2017 compared to 2016. We currently expect our interest expense for all of 2017 will be comparable to 2016.~~

~~Income tax expense (benefit)~~ - We recognized income tax benefit of $120.1 million in the first six months of 2017 compared to an income tax expense of $2.5 million in the first six months of 2016. The difference is primarily due to the effect of the reversal of our deferred income tax asset valuation allowance associated with our German and Belgian operations in 2017, as discussed above. Our earnings are subject to income tax in various U.S. and non-U.S. jurisdictions, and the income tax rates applicable to our pre-tax earnings (losses) of our non-U.S. operations is generally lower than the income tax rates applicable to our U.S. operations. Excluding the effect of any increase or decrease in our deferred income tax asset valuation allowance, we would generally expect our overall effective tax rate to be lower than the U.S. federal statutory tax rate of 35% primarily because of our non-U.S. operations. Our effective income tax rate in the first six months of 2017, excluding the impact of the reversal of the deferred income tax asset valuation allowances we recognized, was higher than the U.S. federal statutory rate of 35%, primarily due to the income tax effect associated with the expected repatriation in 2017 of certain of our current-year earnings generated by our European subsidiaries. Our effective income tax rate in the first six months of 2016, excluding the impact of the deferred income tax asset valuation allowances we recognized, was also higher than the U.S. federal statutory rate of 35%. Although we reported positive pre-tax earnings in the first six months of 2016, we recognized a net income tax benefit in the first six months of 2016, excluding the impact of the deferred income tax asset valuation we recognized, primarily because we are required under ASC 740-270 to compute the interim tax provision by calculating an estimated annual effective tax rate. Because the estimate is based on full year income, the tax rate differences may not have a meaningful relationship to quarterly or year-to-date interim pre-tax income and may produce unusual and unexpected relationships to other tax rate reconciling items. Excluding the impact of the deferred income tax asset valuation allowance we recognized, our effective income tax rate and the net income tax benefit recognized in the first six months of 2016 was not indicative of the effective income tax rate or income tax expense (benefit) we expected for the full year of 2016, in part given the near break-even pre-tax results we recognized in the first six months of 2016. See Note 11 to our Condensed Consolidated Financial Statements for a tabular reconciliation of our statutory income tax provision to our actual tax provision.goods sold.

We have substantial operations and assets located outside the United States (primarily in Germany, Belgium, Norway and Canada). The majority of our sales from non-U.S. operations are denominated in currencies other than the U.S. dollar, principally the euro, other major European currencies and the Canadian dollar. A portion of our sales generated from our non-U.S. operations is denominated in the U.S. dollar (and consequently our non-U.S. operations will generally hold U.S. dollars from time to time). Certain raw materials used in all our production facilities, primarily titanium-containing feedstocks, are purchased in U.S. dollars, while labor and other production and administrative costs are incurred primarily in local currencies. Consequently, the translated U.S. dollar value of our non-U.S. sales and operating results are subject to currency exchange rate fluctuations which may favorably or unfavorably impact reported earnings and may affect the comparability of period-to-period operating results. In addition to the impact of the translation of sales and expenses over time, our non-U.S. operations also generate currency transaction gains and losses which primarily relate to (i) the difference between the currency exchange rates in effect when non-local currency sales or operating costs (primarily U.S. dollar denominated) are initially accrued and when such amounts are settled with the non-local currency, (ii) changes in currency exchange rates during time periods when our non-U.S. operations are holding non-local currency (primarily U.S. dollars), and (iii) relative changes in the aggregate fair value of currency forward contracts held from time to time. As discussed in Note 14 to our Condensed Consolidated Financial Statements, we periodically use currency forward contracts to manage a portion of our currency exchange risk, and relative changes in the aggregate fair value of any currency forward contracts we hold from time to time serves in part to mitigate the currency transaction gains or losses we would otherwise recognize from the first two items described above.

Overall, we estimate that fluctuations in currency exchange rates had the following effects on the reported amounts of our sales and income from operations for the periods indicated.

Impact of changes in currency exchange rates three months ended June 30, 2017 vs June 30, 2016

Impact of changes in currency exchange rates three months ended March 31, 2018 vs March 31, 2017																Impact of changes in currency exchange rates three months ended March 31, 2018 vs March 31, 2017

	Transaction gains/losses recognized								Translation gain/loss – impact of rate changes				Total currency impact 2017 vs 2016			Transaction losses recognized						Translation gains – impact of rate changes		Total currency impact 2018 vs 2017
	2016		2017			Change						2017					2018		Change			Translation gains – impact of rate changes		Total currency impact 2018 vs 2017
	(In millions)															(In millions)
Impact on:									Translation gain/loss – impact of rate changes				Total currency impact 2017 vs 2016
Net sales	$	-	$	-		$	-		$	(8	)		$	(8	)	$	-	$	-	$	-	$	31	$	31
Income from operations		2		(4	)		(6	)		1				(5	)		-		(5)		(5)		6		1

The $8$31 million ~~reduction~~increase in net sales (translation ~~loss)~~gain) was caused primarily by a ~~strengthening~~weakening of the U.S. dollar relative to the euro, as our euro-denominated sales were translated into ~~fewer~~more U.S. dollars in ~~2017~~2018 as compared to ~~2016.~~2017. The ~~strengthening~~weakening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in ~~2017~~2018 did not have a significant effect on the reported amount of our net sales, as a substantial portion of the sales generated by our Canadian and Norwegian operations are denominated in the U.S. dollar.

The $5$1 million ~~decrease~~increase in income from operations was comprised of the following:

The $15 million reduction in net sales (translation loss) was caused primarily by a strengthening of the U.S. dollar relative to the euro, as our euro-denominated sales were translated into fewer U.S. dollars in 2017 as compared to 2016. The strengthening of the U.S. dollar relative to the Canadian dollar and the Norwegian krone in 2017 did not have a significant effect on the reported amount of our net sales, as a substantial portion of the sales generated by our Canadian and Norwegian operations are denominated in the U.S. dollar.

~~The $13 million net decrease in income from operations comprised the following:~~

~~During the first half of 2017 we operated our production facilities at 100% of practical capacity.~~ We expect our production volumes in 2018 to be slightly ~~higher in 2017~~lower as compared to ~~2016, as our~~the record 2017 production ~~rates in 2017 will be positively impacted by the implementation of certain productivity-enhancing improvement projects at certain facilities.~~volumes. Assuming current global economic conditions ~~do not deteriorate,~~continue and based on anticipated production levels, we expect our ~~2017~~2018 sales volumes to be ~~comparable~~slightly lower as compared to ~~2016~~record 2017 sales volumes. We will continue to monitor current and anticipated near-term customer demand levels and align our production and inventories accordingly. ~~We believe it is reasonably likely we will set a new record for production volumes in 2017 (our prior record was 550,000 metric tons in 2011).~~

~~We experienced moderation in the cost of TiO~~₂ ~~feedstock ore procured from third parties in 2016. However, the~~The cost of third-party feedstock ore we ~~procured~~purchased in the first ~~half~~quarter of ~~2017~~2018 was ~~comparable to slightly~~ higher as compared to the ~~first half~~fourth quarter of ~~2016,~~2017, and such higher cost feedstock ore ~~is expected to~~will be reflected in our results of operations beginning in the ~~third~~second quarter of ~~2017.~~2018. We expect our cost of sales per metric ton of TiO₂ sold ~~for the full year of 2017~~in 2018 will be ~~slightly~~moderately higher than our per-metric ton cost in ~~2016.~~2017 primarily due to higher third-party feedstock ore costs.

We started ~~2017~~2018 with average selling prices ~~11%~~27% higher than the beginning of ~~2016,~~2017, and average selling prices increased by an additional ~~12%~~4% in the first ~~six~~three months of ~~2017.~~2018. Industry data indicates that overall TiO₂ inventory held by producers ~~declined significantly during 2016. In addition, we believe most customers hold very~~remained at low ~~inventories of TiO~~₂ ~~with many operating on a just-in-time basis. With the strong sales volumes experienced in~~levels throughout 2017 and into the first ~~half~~quarter of ~~2017, we~~2018. We continue to see evidence of ~~strengthening~~strong demand for our TiO₂ products ~~in certain of our primary markets. We and our major competitors have announced~~across nearly all segments, which could lead to additional selling price increases ~~which we began implementing in~~during the ~~second quarter~~remainder of ~~2016, as contracts have allowed. The extent to which we will be able to achieve any additional~~2018 (although the magnitude of selling price increases inwe would achieve for all of 2018 would not be expected to be comparable to the ~~near term will depend on market conditions.~~ magnitude of selling price increases we achieved during 2017).

Overall, we expect ~~income from operations~~our sales in ~~2017~~2018 will be higher as compared to ~~2016,~~2017, principally as a result of expected higher average selling prices, and we expect our income from operations in 2018 will be higher as compared to 2017, principally as a result of expected higher average selling prices in ~~2017~~2018 as compared to ~~2016 and~~2017, partially offset by higher raw material costs (principally feedstock ore). However, we expect our net income in 2018 will be lower as compared to ~~a lesser extent from~~2017, as the favorable ~~effects~~impact of ~~anticipated~~ higher ~~production volumes~~expected income from operations in ~~2017. In addition, and as discussed above, we recognized a non-cash~~2018 would be more than offset by the favorable impact of the aggregate net income tax benefit of ~~$162.6~~$136.5 million in the first six months of 2017 (including $157.6 million in the second quarter of 2017) related to our deferred income tax asset valuation allowance associated with our German and Belgian operations, and we ~~expect the remaining valuation allowance of $20 million will be reversed during the third and fourth quarters of~~recognized in 2017.

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, we believe 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~~Any major expansion of ~~relative customer inventory levels during the recent past and the resulting adverse effect on global TiO~~₂ ~~pricing, some industry projects to increase~~ TiO₂ production capacity, ~~have been cancelled or deferred indefinitely, and announcements have been made regarding the closure~~if announced, would take a number of ~~certain facilities. Given the lead time required for~~years before such production ~~capacity expansions, a shortage of TiO~~₂ ~~could occur if economic conditions improve and global demand levels for TiO~~₂ ~~increase sufficiently.~~would become available to meet future growth in demand.

Our expectations for our future operating results are based upon a number of factors beyond our control, including worldwide growth of 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 our expectations, our results of operations could be unfavorably affected.

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

Cash provided by operating activities was ~~$101.6~~$58.2 million in the first ~~six~~three months of ~~2017~~2018 compared to ~~$16.6~~$41.6 million in the first ~~six~~three months of ~~2016.~~2017. This ~~$85.0~~$16.6 million increase in the amount of cash provided was primarily due to the net ~~effects~~effect of the following:

Changes in working capital were affected by accounts receivable and inventory changes. As shown below:

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

Our capital expenditures of ~~$23.7~~$11.9 million and ~~$26.6~~$15.2 million in the first ~~six~~three months of ~~2016~~2017 and ~~2017,~~2018, respectively, were primarily to maintain and improve the cost effectiveness of our manufacturing facilities. In addition, approximately ~~$5.4~~$3.2 million and ~~$8.7~~$1.7 million, respectively, of such capital expenditures relate to the implementation of aour new accounting and manufacturing system.

In addition, during the first quarter of 2018 we loaned $.8 million and subsequently collected $14.4 million under our unsecured revolving demand promissory note with Valhi.

Our North American and European revolvers and our ~~term loan~~Senior Notes contain a number of covenants and restrictions which, among other things, restrict our ability to incur or guarantee additional debt, incur liens, pay dividends or make other restricted payments, or merge or consolidate with, or sell or transfer substantially all of our assets to, another entity, and ~~contains~~contain other provisions and restrictive covenants customary in lending transactions of this type. Certain of our credit agreements contain provisions which could result in the acceleration of indebtedness prior to their stated maturity for reasons other than defaults for failure to comply with typical financial or payment covenants. For example, 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.Our 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. The terms of all of our debt instruments (including revolving lines of credit for which we have no outstanding borrowings at March 31, 2018) are discussed in Note 8 to our Consolidated Financial Statements included in our ~~2016~~2017 Annual Report. We are in compliance with all of our debt covenants at ~~June 30, 2017.~~March 31, 2018. We believe that we will be able to continue to comply with the financial covenants contained in our credit facilities through their maturity.

In January 2017, we extended the maturity date of our North American revolving credit facility to the earlier of (i) January 2022 or (ii) 90 days prior to the maturity date of our existing term loan indebtedness (or 90 days prior to the maturity date of any indebtedness incurred in a permitted refinancing of such existing term loan indebtedness). Our European revolving credit facility matures in September 2017 and we believe we will be able to obtain an extension of this credit facility in the normal course of business on or prior to its maturity date.

Our assets consist primarily of investments in operating subsidiaries, and our ability to service ~~parent-level~~our obligations, including ~~our term loan,~~the Senior Notes, depends in part upon the distribution of earnings of our subsidiaries, whether in the form of dividends, advances or payments on account of intercompany obligations or otherwise. Our ~~term loan is~~Senior Notes are collateralized by, among other things, a first priority lien on (i) 100% of the common stock or other ownership interests of ~~certain~~each existing and future direct domestic subsidiary of ~~our U.S. wholly-owned subsidiaries,~~KII and the guarantors, and (ii) 65% of the voting common stock or other ownership ~~interest~~interests and 100% of ~~our Canadian~~the non-voting common stock or other ownership interests of each non-U.S. subsidiary ~~(Kronos Canada, Inc.) and certain first-tier European subsidiaries (Kronos Titan GmbH and Kronos Denmark ApS) and (iii) a $395.7 million unsecured promissory note issued~~that is directly owned by our wholly-owned subsidiary, Kronos International, Inc. (KII). The term loan is also collateralized by a second priority lien on our U.S. assets which collateralize our North American revolving credit facility.KII or any guarantor. Our North American revolving credit facility is collateralized by, among other things, a first priority lien on the borrower’s trade receivables and inventories. Our European revolving credit facility is collateralized by, among other things, the accounts receivable and inventories of the borrowers plus a limited pledge of all the other assets of the Belgian borrower.

Our primary source of liquidity on an ongoing basis is cash flows from operating activities which is generally used to (i) fund capital expenditures, (ii) repay any short-term indebtedness incurred for working capital purposes and (iii) provide for the payment of dividends. From time-to-time we will incur indebtedness, generally to (i) fund short-term working capital needs, (ii) refinance existing indebtedness or (iii) fund major capital expenditures or the acquisition of other assets outside the ordinary course of business. We will also from time-to-time sell assets outside the ordinary course of business and use the proceeds to (i) repay existing indebtedness, (ii) make investments in marketable and other securities, (iii) fund major capital expenditures or the acquisition of other assets outside the ordinary course of business or (iv) pay dividends.

The TiO₂ industry is cyclical, and changes in industry economic conditions significantly impact earnings and operating cash flows. Changes in TiO₂ pricing, production volumes and customer demand, among other things, could significantly affect our liquidity.

We routinely evaluate our liquidity requirements, alternative uses of capital, capital needs and availability of resources in view of, among other things, our dividend policy, our debt service and capital expenditure requirements and estimated future operating cash flows. As a result of this process, we have in the past and may in the future seek to reduce, refinance, repurchase or restructure

indebtedness, raise additional capital, repurchase shares of our common stock, modify our dividend policy, restructure ownership interests, sell interests in our subsidiaries or other assets, or take a combination of these steps or other steps to manage our liquidity and capital resources. Such activities have in the past and may in the future involve related companies. In the normal course of our business, we may investigate, evaluate, discuss and engage in acquisition, joint venture, strategic relationship and other business combination opportunities in the TiO₂industry. In the event of any future acquisition or joint venture opportunity, we may consider using then-available liquidity, issuing our equity securities or incurring additional indebtedness.

At ~~June 30, 2017,~~March 31, 2018, we had aggregate cash, cash equivalents and restricted cash on hand of ~~$115.4~~$365.9 million, of which ~~$115.1~~$218.1 million was held by non-U.S. subsidiaries. Following implementation of a territorial tax system under the 2017 Tax Act, repatriation of any cash and cash equivalents held by our non-U.S. subsidiaries would not be expected to result in any material income tax liability as a result of such repatriation. At ~~June 30, 2017,~~March 31, 2018, we had approximately ~~$91.4~~$115.2 million available for additional borrowing under our North American revolving credit facility. Based on the terms of our European revolving credit facility (including the net debt to EBITDA financial test discussed above) and the borrowers’ EBITDA over the last twelve months ended ~~June 30, 2017,~~March 31, 2018, the full ~~€120.0~~€90.0 million amount of the credit facility ($~~137.1~~110.8 million) iswas available for borrowing at ~~June 30, 2017.~~March 31, 2018. We could borrow all available amounts under each of our credit facilities without violating our existing debt covenants. Based upon our expectation for the TiO₂industry and anticipated demands on cash resources, we expect to have sufficient liquidity to meet our short term obligations (defined as the twelve-month period ending ~~June 30, 2018)~~March 31, 2019) and our long-term obligations (defined as the five-year

period ending ~~June 30, 2022,~~March 31, 2023, our time period for long-term budgeting). If actual developments differ from our expectations, our liquidity could be adversely affected.

We currently estimate that we will invest approximately ~~$65~~$67 million in capital expenditures primarily to maintain and improve our existing facilities during ~~2017,~~2018, including the ~~$26.6~~$15.2 million we have spent through ~~June 30, 2017. As noted above, a portion of planned capital expenditures in 2017 relates to the implementation of a new accounting and manufacturing system.~~March 31, 2018.

At ~~June 30, 2017,~~March 31, 2018, we have 1,951,000 shares available for repurchase under a stock repurchase program authorized by our board of directors.

We do not have any off-balance sheet financing agreements other than the operating leases discussed in our ~~2016~~2017 Annual Report.

See Notes 11 and 13 to the Condensed Consolidated Financial Statements for a description of certain income tax ~~examinations currently underway~~contingencies and legal proceedings.

For a discussion of our critical accounting policies, refer to Part I, Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our ~~2016~~2017 Annual Report. There have been no changes in our critical accounting policies during the first ~~six~~three months of ~~2017.~~2018.

We are exposed to market risk, including currency exchange rates, interest rates, ~~and~~equity security ~~prices,~~ and raw material prices. There have been no material changes in these market risks since we filed our ~~2016~~2017 Annual ~~Report, and refer you to~~Report. See also Part I, Item 7A. - “Quantitative and Qualitative Disclosure About Market Risk” in our ~~2016~~2017 Annual ~~Report. See also~~Report, and Note 14 to our Condensed Consolidated Financial Statements.

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)~~“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 ~~June 30, 2017.~~March 31, 2018. Based upon their evaluation, these executive officers have concluded that our disclosure controls and procedures are effective as of the date of such evaluation.

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 our 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 our equity method investees did include our controls over the recording of amounts related to our investment that are recorded in our Condensed 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.

In January ~~2017,~~2018, we implemented a new enterprise resource planning system covering ~~certain finance processes (principally general ledger, accounts receivable~~sales, procurement, manufacturing and ~~accounts payable).~~plant maintenance. We believe we have maintained appropriate internal control over financial reporting during such implementation period. There has been no other change to our internal control over financial reporting during the quarter ended ~~June 30, 2017~~March 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Implementation of the remaining portion of such enterprise resource planning system covering sales, procurement, manufacturing and plant maintenance is not expected to occur until January 2018 at the earliest.

Refer to Note 13 to our Condensed Consolidated Financial Statements and our ~~2016~~2017 Annual Report ~~and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2017~~ for descriptions of certain legal proceedings.

For a discussion of other risk factors related to our businesses, refer to Part I, Item 1A, “Risk Factors,” in our ~~2016~~2017 Annual report. There have been no material changes to such risk factors during the three months ended ~~June 30, 2017.~~March 31, 2018.

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.


Large accelerated filer	☐	Accelerated filer ☒
Non-accelerated filer (Do not check if a smaller reporting company)	~~Emerging growth company~~ ☐	Smaller reporting company ☐
Emerging growth company	☐

		Page number
Part I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets - December 31, ~~2016; June 30, 2017~~2017; March 31, 2018 (unaudited)	3
	Condensed Consolidated Statements of ~~Operations~~Income (unaudited) - Three ~~and six~~ months ended ~~June 30, 2016~~March 31, 2017 and ~~2017~~2018	5
	Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~ (unaudited) - Three ~~and six~~ months ended ~~June 30, 2016~~March 31, 2017 and ~~2017~~2018	6
	Condensed Consolidated Statement of Stockholders’ Equity (unaudited) - ~~Six~~Three months ended ~~June 30, 2017~~March 31, 2018	7
	Condensed Consolidated Statements of Cash Flows (unaudited) - ~~Six~~Three months ended ~~June 30, 2016~~March 31, 2017 and ~~2017~~2018	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3.	Quantitative and Qualitative Disclosure About Market Risk		3129
Item 4.	Controls and Procedures		3229
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings		3331
Item 1A.	Risk Factors		3331
Item 6.	Exhibits	3331
Items 2, 3, 4 and 5 of Part II are omitted because there is no information to report.




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

		Kronos Worldwide, Inc.
		(Registrant)



Date: ~~August 7, 2017~~May 8, 2018		/s/ Gregory M. Swalwell
		Gregory M. Swalwell
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)



Date: ~~August 7, 2017~~May 8, 2018		/s/ Tim C. Hafer
		Tim C. Hafer
		Vice President and Controller (Principal Accounting Officer)

	December 31, 2016				June 30, 2017
	Carrying amount		Fair value		Carrying amount		Fair value
	(In millions)
Cash, cash equivalents and restricted cash	$	52.3	$	52.3	$	115.4	$	115.4
Long-term debt:
Variable rate:
Term loan		335.9		334.6		334.9		340.3
North American revolving credit facility		-		-		16.3		16.3
Common stockholders' equity		395.0		1,383.8		620.8		2,111.7

	Production Capacity Utilization Rates
	2016	2017
First quarter	97%	100%
Second quarter	95%	100%

	Six months ended June 30,
	2016				2017
		(Dollars in millions)
Net sales	$	674.5	100	%	$	811.2		100	%
Cost of sales		578.6	86			578.0		71
Gross margin		95.9	14			233.2		29
Other operating income and expense, net		85.7	12			110.8		14
Income from operations	$	10.2	2	%	$	122.4		15	%

							% Change
TiO₂ operating statistics:
Sales volumes*		287				300		5	%
Production volumes*		262				286		9	%
Percentage change in net sales:
TiO₂ product pricing								19	%
TiO₂ sales volumes								5
TiO₂ product mix/other								(2	)
Changes in currency exchange rates								(2	)
Total								20	%