SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

                  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934





For the quarter ended   June 30, 2006           Commission file number 1-640
                        -------------                                  -----




                               NL INDUSTRIES, INC.
-------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)




          New Jersey                                            13-5267260
-------------------------------                            --------------------
(State or other jurisdiction of                               (IRS Employer
 incorporation or organization)                            Identification No.)


            5430 LBJ Freeway, Suite 1700, Dallas, Texas  75240-2697
-------------------------------------------------------------------------------
            (Address of principal executive offices)     (Zip Code)



Registrant's telephone number, including area code:             (972)233-1700




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

Indicate by check mark whether the Registrant is a large  accelerated  filer, an
accelerated  filer or a  non-accelerated  filer (as defined in Rule 12b-2 of the
Securities  Exchange  Act  of  1934).  Large  accelerated filer    Accelerated
filer X   Non-accelerated filer                                ---
     ---                       ---

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

Number of shares of the Registrant's  common stock outstanding on July 31, 2006:
48,569,034.



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                                      INDEX




                                                                           Page
                                                                          number

Part I.     FINANCIAL INFORMATION

  Item 1.   Financial Statements

            Condensed Consolidated Balance Sheets -
             December 31, 2005;
              June 30, 2006 (unaudited)                                      1

            Condensed Consolidated Statements of Income -
             Three and six months ended June 30, 2005 and 2006
             (unaudited)                                                     3

            Condensed Consolidated Statements of Comprehensive Income -
             Six months ended June 30, 2005 and 2006
             (unaudited)                                                     4

            Condensed Consolidated Statements of Cash Flows -
             Six months ended June 30, 2005 and 2006
             (unaudited)                                                     5

            Condensed Consolidated Statement of Stockholders' Equity -
             Six months ended June 30, 2006 (unaudited)                      7

            Notes to Condensed Consolidated Financial Statements
             (unaudited)                                                     8

  Item 2.   Management's Discussion and Analysis of Financial
             Condition and Results of Operations                            21

  Item 3.   Quantitative and Qualitative Disclosure About
             Market Risk                                                    33

  Item 4.   Controls and Procedures                                         33

Part II.    OTHER INFORMATION

  Item 1.   Legal Proceedings                                               35

  Item 1A.  Risk Factors                                                    36

  Item 4.   Submission of Matters to a Vote of Security Holders             36

  Item 6.   Exhibits                                                        36

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





                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                 (In thousands)

<TABLE>

               ASSETS                                           December 31,           June 30,
                                                                    2005                 2006
                                                                ------------          ----------
                                                                                      (Unaudited)

 Current assets:
<S>                                                               <C>                  <C>
   Cash and cash equivalents                                      $  76,912            $ 51,230
   Marketable securities                                              9,265               9,198
   Restricted cash and cash equivalents                               4,327               5,850
   Accounts and other receivables, net                               23,392              24,222
   Refundable income taxes                                              424               1,749
   Receivable from affiliates                                         3,291               3,902
   Inventories, net                                                  22,538              23,483
   Prepaid expenses                                                   1,718               1,372
   Deferred income taxes                                              7,295               7,073
                                                                  ---------            --------

       Total current assets                                         149,162             128,079
                                                                  ---------            --------

 Other assets:
   Marketable equity securities                                      87,120             115,610
   Investment in Kronos Worldwide, Inc.                             146,774             155,896
   Goodwill                                                          27,240              32,327
   Deferred income taxes                                                  4                   -
   Other, net                                                         5,499               7,557
                                                                  ---------            --------

       Total other assets                                           266,637             311,390
                                                                  ---------            --------

 Property and equipment:
   Land                                                               8,511               9,537
   Buildings                                                         28,001              30,166
   Equipment                                                        110,917             115,828
   Construction in progress                                           2,015               5,854
                                                                  ---------            --------
                                                                    149,444             161,385
   Less accumulated depreciation and amortization                    80,540              89,446
                                                                  ---------            --------

       Net property and equipment                                    68,904              71,939
                                                                  ---------            --------

       Total assets                                               $ 484,703            $511,408
                                                                  =========            ========
</TABLE>






                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                 (In thousands)


<TABLE>

    LIABILITIES AND STOCKHOLDERS' EQUITY                         December 31,          June 30,
                                                                     2005                2006
                                                                 ------------         ----------
                                                                                      (Unaudited)

 Current liabilities:
<S>                                                               <C>                  <C>
   Current maturities of long-term debt                           $     171            $      54
   Accounts payable                                                  11,079                7,959
   Accrued liabilities                                               29,859               28,819
   Accrued environmental costs                                       13,302               10,597
   Payable to affiliates                                                982                  391
   Income taxes                                                         599                  257
                                                                  ---------            ---------

       Total current liabilities                                     55,992               48,077
                                                                  ---------            ---------

 Noncurrent liabilities:
   Long-term debt                                                     1,425                   29
   Accrued pension costs                                                942                    -
   Accrued postretirement benefits costs                             10,141                9,261
   Accrued environmental costs                                       41,645               42,064
   Deferred income taxes                                            107,000              124,270
   Other                                                              2,246                1,832
                                                                  ---------            ---------

       Total noncurrent liabilities                                 163,399              177,456
                                                                  ---------            ---------

 Minority interest                                                   45,630               45,312
                                                                  ---------            ---------

 Stockholders' equity:
   Common stock                                                       6,070                6,070
   Additional paid-in capital                                       363,233              360,563
   Retained earnings                                                   -                    -
   Accumulated other comprehensive income (loss):
     Marketable securities                                           34,084               52,511
     Currency translation                                          (141,018)            (135,894)
     Pension liabilities                                            (42,687)             (42,687)
                                                                  ---------            ---------

       Total stockholders' equity                                   219,682              240,563
                                                                  ---------            ---------

       Total liabilities and stockholders' equity                 $ 484,703            $ 511,408
                                                                  =========            =========
</TABLE>



Commitments and contingencies (Note 13)



     See accompanying Notes to Condensed Consolidated Financial Statements.


                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                      (In thousands, except per share data)
<TABLE>

                                                                      Three months ended              Six months ended
                                                                           June 30,                       June 30,
                                                                    ---------------------          ----------------------
                                                                    2005             2006            2005            2006
                                                                    ----             ----            ----            ----
                                                                                         (Unaudited)


<S>                                                               <C>             <C>             <C>            <C>
Net sales                                                         $ 45,730        $ 50,143        $ 92,573       $ 97,172
Cost of sales                                                       35,203          37,794          71,763         73,195
                                                                  --------        --------        --------       --------

    Gross margin                                                    10,527          12,349          20,810         23,977

Selling, general and administrative expense                          5,808           6,441          11,930         13,159
Other operating income (expense):
  Currency transaction gains (losses), net                              39             (70)            (15)          (111)
  Disposition of property and equipment                               -               -                 (4)           (73)
  Insurance recoveries                                               1,200             580           1,200          2,816
  Other income                                                        -                 (9)            243              4
  Corporate expense                                                 (4,245)         (6,420)        (10,060)       (10,516)
                                                                  --------        --------        --------       --------

    Income from operations                                           1,713             (11)            244          2,938

Equity in earnings of Kronos Worldwide, Inc.                        11,766           4,858          19,556         10,239
Other income (expense):
  Trade interest income                                                 23              62              44            137
  Interest and dividend income from affiliates                         620             471           1,239            942
  Other interest income                                                794             758           1,660          1,626
  Securities transactions, net                                         118               7          14,696             64
  Interest expense                                                    (117)            (51)           (197)          (112)
                                                                  --------        --------        --------       --------

    Income from continuing operations before income
      taxes and minority interest                                   14,917           6,094          37,242         15,834

Provision for income taxes                                           4,247           1,935          11,025          4,431

Minority interest in after-tax earnings                                785           1,122           1,516          1,873
                                                                  --------        --------        --------       --------

    Income from continuing operations                                9,885           3,037          24,701          9,530

Discontinued operations, net of tax                                   -               (177)           (326)          (177)
                                                                  --------        --------        --------       --------

    Net income                                                    $  9,885        $  2,860        $ 24,375       $  9,353
                                                                  ========        ========        ========       ========

Earnings per share:

    Basic and diluted net income per share                        $    .20        $    .06        $    .50       $    .19
                                                                  ========        ========        ========       ========

Weighted-average shares used in the calculation of
  net income per share:
    Basic                                                           48,553          48,565          48,522         48,564
    Dilutive impact of stock options                                    40              18              55             21
                                                                  --------        --------        --------       --------

    Diluted                                                         48,593          48,583          48,577         48,585
                                                                  ========        ========        ========       ========
</TABLE>

     See accompanying Notes to Condensed Consolidated Financial Statements.



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                     Six months ended June 30, 2005 and 2006

                                 (In thousands)

<TABLE>

                                                          2005             2006
                                                          ----             ----
                                                               (Unaudited)

<S>                                                     <C>              <C>
Net income                                              $24,375          $ 9,353
                                                        -------          -------

Other comprehensive income, net of tax:

     Marketable securities adjustment                     4,229           18,427

     Currency translation adjustment                      1,600            5,124
                                                        -------          -------

      Total other comprehensive income                    5,829           23,551
                                                        -------          -------

          Comprehensive income                          $30,204          $32,904
                                                        =======          =======
</TABLE>


     See accompanying Notes to Condensed Consolidated Financial Statements.



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                     Six months ended June 30, 2005 and 2006

                                 (In thousands)

<TABLE>

                                                                    2005             2006
                                                                    ----             ----
                                                                         (Unaudited)

 Cash flows from operating activities:
<S>                                                               <C>             <C>
   Net income                                                     $ 24,375        $  9,353
   Depreciation and amortization                                     5,567           5,752
   Deferred income taxes:
     Continuing operations                                         (14,683)          3,934
     Discontinued operations                                          (187)           -
   Minority interest:
     Continuing operations                                           1,516           1,873
     Discontinued operations                                          (151)           (148)
   Equity in earnings of Kronos Worldwide, Inc.                    (19,556)        (10,239)
   Dividends from Kronos Worldwide, Inc.                             8,835           8,758
   Securities transactions, net                                    (14,696)            (64)
   Benefit plan expense less than cash funding:
     Defined benefit pension plans                                    (437)         (1,041)
     Other postretirement benefit plans                               (633)           (881)
   Other, net                                                          927             501
   Change in assets and liabilities:
     Accounts and other receivables                                 (3,542)         (1,208)
     Inventories                                                       756           1,050
     Prepaid expenses                                                 (603)            336
     Accrued environmental costs                                    (2,918)         (2,286)
     Accounts payable and accrued liabilities                         (490)         (4,861)
     Income taxes                                                   (6,837)         (1,622)
     Accounts with affiliates                                        3,777          (1,217)
     Other, net                                                        867          (1,790)
                                                                  --------        --------

         Net cash provided by (used in) operating activities       (18,113)          6,200
                                                                  --------        --------

 Cash flows from investing activities:
   Capital expenditures                                             (7,394)         (5,393)
   Acquisition, net of cash acquired                                  -             (9,832)
   Collection of note receivable                                      -              1,306
   Collection of loans to affiliates                                 2,000            -
   Change in restricted cash equivalents and marketable
    debt securities, net                                             2,381          (1,397)
   Proceeds from disposal of:
     Business unit                                                  18,094            -
     Kronos common stock                                            19,176            -
     Marketable securities                                           4,363           4,640
     Property and equipment                                             12              37
   Purchase of:
     CompX common stock                                               (572)         (1,834)
     Marketable securities                                          (3,626)         (4,786)
   Cash of disposed business unit                                   (4,006)           -
                                                                  --------        --------

         Net cash provided by (used in) investing activities        30,428         (17,259)
                                                                  --------        --------
</TABLE>


     See accompanying Notes to Condensed Consolidated Financial Statements.


                      NL INDUSTRIES, INC. AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                     Six months ended June 30, 2005 and 2006

                                 (In thousands)

<TABLE>

                                                                    2005             2006
                                                                    ----             ----
                                                                         (Unaudited)

 Cash flows from financing activities:
   Indebtedness:
<S>                                                               <C>             <C>
     Principal payments                                           $    (19)       $(1,490)
     Deferred financing costs paid                                     (28)          (105)
   Cash dividends paid                                             (12,139)       (12,142)
   Distributions to minority interest                               (1,203)        (1,144)
   Proceeds from issuance of common stock:
     NL common stock                                                 2,693              9
     CompX common stock                                                217           -
                                                                  --------        --------

         Net cash used in financing activities                     (10,479)        (14,872)
                                                                  --------        --------

 Cash and cash equivalents - net change from:
   Operating, investing and financing activities                     1,836         (25,931)
   Currency translation                                                169             249
 Cash and cash equivalents at beginning of period                   99,185          76,912
                                                                  --------        --------

 Cash and cash equivalents at end of period                       $101,190        $ 51,230
                                                                  ========        ========


 Supplemental disclosures - cash paid for:
     Interest, net of amounts capitalized                         $     82        $    181
     Income taxes, net                                              27,764           3,201

     Noncash investing activity - note receivable
          received upon disposal of business unit                 $  4,179        $   -
</TABLE>




     See accompanying Notes to Condensed Consolidated Financial Statements.




                      NL INDUSTRIES, INC. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                         Six months ended June 30, 2006

                                 (In thousands)
<TABLE>

                                                                            Accumulated other
                                                                       comprehensive income (loss)
                                             Additional            ----------------------------------
                                    Common    paid-in    Retained  Marketable    Currency     Pension
                                    stock     capital    earnings  securities  translation  liabilities    Total
                                    -------  ----------  --------  ----------  -----------  -----------    ------
                                                                       (Unaudited)

<S>                                 <C>      <C>         <C>        <C>        <C>           <C>          <C>
Balance at December 31, 2005        $6,070   $363,233    $  -       $34,084    $(141,018)    $(42,687)    $219,682

Net income                            -          -         9,353       -            -            -           9,353

Issuance of common stock              -            80       -          -            -            -              80

Dividends                             -        (2,788)    (9,353)      -            -            -         (12,141)

Other comprehensive income, net       -          -          -        18,427        5,124         -          23,551

Other                                 -            38       -          -            -            -              38
                                    ------   --------    -------    -------    ---------     --------     --------

Balance at June 30, 2006            $6,070   $360,563    $  -       $52,511    $(135,894)    $(42,687)    $240,563
                                    ======   ========    =======    =======    =========     ========     ========
</TABLE>


     See accompanying Notes to Condensed Consolidated Financial Statements.





                      NL INDUSTRIES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                  June 30, 2006

                                   (Unaudited)


Note 1 - Organization and basis of presentation:

     Organization - We are majority-owned by Valhi, Inc. (NYSE: VHI), which owns
approximately  83% of our  outstanding  common stock at June 30, 2006.  Valhi is
majority-owned   by  Contran   Corporation.   Substantially   all  of  Contran's
outstanding  voting  stock is held by  trusts  established  for the  benefit  of
certain  children and  grandchildren of Harold C. Simmons (for which Mr. Simmons
is the sole  trustee) or is held  directly by Mr.  Simmons or persons or related
companies to Mr.  Simmons.  Consequently,  Mr.  Simmons may be deemed to control
Contran, Valhi and us.

     Basis of  presentation  -  Consolidated  in this  Quarterly  Report are the
results of our majority-owned subsidiary, CompX International,  Inc. We also own
36% of Kronos Worldwide,  Inc. which we account for by the equity method.  CompX
(NYSE:  CIX)  and  Kronos  (NYSE:  KRO)  each  file  periodic  reports  with the
Securities and Exchange Commission ("SEC").

     Our  ownership  of  CompX is  primarily  through  CompX  Group,  Inc.,  our
majority-owned  subsidiary.  CompX  Group's  sole asset  consists  of 83% of the
outstanding  common  stock  of  CompX.  We also  own an  additional  2% of CompX
directly.  During  the first  six  months of 2006,  we  purchased  approximately
117,000  shares of CompX  common stock in market  transactions  for an aggregate
purchase  price  of $1.8  million.  We  accounted  for this  purchase  as a step
acquisition under the purchase method of accounting.

     In April  2006,  CompX  completed  an  acquisition  of a  marine  component
products business for aggregate cash consideration of $9.8 million,  net of cash
acquired.  We completed this acquisition to expand the Marine component products
business  unit of CompX.  We have  included the results of  operations  and cash
flows  of  the  acquired  business  in  our  Condensed   Consolidated  Financial
Statements  starting in April 2006. The purchase price has been allocated  among
the tangible and  intangible  net assets  acquired based upon an estimate of the
fair  value of such net  assets.  The pro  forma  effect  to us,  assuming  this
acquisition had been completed as of January 1, 2005, is not material.

     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, 2005 that we filed with the SEC on March 16, 2006 (the "2005
Annual Report").  In our opinion, we have made all necessary  adjustments (which
include only normal  recurring  adjustments)  in order to state  fairly,  in all
material respects,  our consolidated  financial position,  results of operations
and cash flows as of the dates and for the periods presented.  We have condensed
the Consolidated  Balance Sheet at December 31, 2005 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, 2005)
normally included in financial statements prepared in accordance with accounting
principals  generally  accepted in the United  States of America  ("GAAP").  Our
results of  operations  for the interim  periods  ended June 30, 2006 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 2005 Consolidated Financial Statements contained in
our 2005 Annual Report.

     Unless  otherwise  indicated,  references  in this report to "we",  "us" or
"our" refer to NL Industries  and its  subsidiaries  and  affiliates,  including
Kronos, taken as a whole.

Note 2 - Accounts and other receivables, net:
<TABLE>

                                                                December 31,          June 30,
                                                                    2005                2006
                                                                ------------         ----------
                                                                         (In thousands)

<S>                                                               <C>                 <C>
 Trade receivables                                                $ 20,921            $ 23,083
 Other receivables                                                   2,783               1,493
 Allowance for doubtful accounts                                      (312)               (354)
                                                                  --------            --------

     Total                                                        $ 23,392            $ 24,222
                                                                  ========            ========
</TABLE>

Note 3 - Inventories, net:
<TABLE>

                                                                December 31,          June 30,
                                                                    2005                2006
                                                                ------------         ----------
                                                                         (In thousands)

<S>                                                               <C>                 <C>
 Raw materials                                                    $  7,098            $  8,439
 In process products                                                 9,899               9,642
 Finished products                                                   5,541               5,402
                                                                  --------            --------

     Total                                                        $ 22,538            $ 23,483
                                                                  ========            ========
</TABLE>

Note 4 - Noncurrent marketable equity securities:

     At December 31, 2005 and June 30, 2006, we owned  approximately 4.7 million
shares of Valhi  common  stock.  At June 30,  2006 the quoted  market  price was
$24.55 per share,  or an aggregate of $115.6  million,  and at December 31, 2005
the quoted market price was $18.50 per share, or an aggregate of $87.1 million.





Note 5 - Investment in Kronos:

     At June 30,  2006,  we held 17.5  million  shares  of Kronos  with a quoted
market price of $29.25 per share, or an aggregate market value of $512 million.

     Selected financial information of Kronos is summarized below:
<TABLE>

                                                                December 31,          June 30,
                                                                    2005                2006
                                                                ------------         ----------
                                                                          (In millions)


<S>                                                               <C>                 <C>
 Current assets                                                   $   525.3           $   577.3
 Property and equipment, net                                          418.9               433.3
 Investment in TiO2 joint venture                                     115.3               115.6
 Other noncurrent assets                                              239.4               253.8
                                                                  ---------           ---------

     Total assets                                                 $ 1,298.9            $1,380.0
                                                                  =========           =========


 Current liabilities                                              $   205.1           $   185.7
 Long-term debt                                                       464.4               539.9
 Accrued pension and post retirement benefits                         150.0               148.4
 Other noncurrent liabilities                                          69.4                70.5
 Stockholders' equity                                                 410.0               435.5
                                                                  ---------           ---------


     Total liabilities and stockholders' equity                   $ 1,298.9            $1,380.0
                                                                  =========           =========
</TABLE>

<TABLE>

                                                Three months ended              Six months ended
                                                      June 30,                      June 30,
                                                -------------------            -------------------
                                                2005           2006            2005           2006
                                                ----           ----            ----           ----
                                                                  (In millions)

<S>                                           <C>            <C>             <C>            <C>
Net sales                                     $ 311.7        $ 345.1         $ 603.6        $ 649.4
Cost of sales                                   217.0          263.1           424.7          492.6
Income from operations                           57.7           36.8           104.1           71.1
Net income                                       32.9           13.6            54.3           28.6
</TABLE>


Note 6 - Other noncurrent assets, net:
<TABLE>

                                                                December 31,          June 30,
                                                                    2005                2006
                                                                ------------         ----------
                                                                         (In thousands)

<S>                                                               <C>                 <C>
 Intangible assets, net                                           $  3,432            $  4,423
 Prepaid pension cost                                                 -                     67
 Other                                                               2,067               3,067
                                                                  --------            --------

      Total                                                       $  5,499            $  7,557
                                                                  ========            ========
</TABLE>

Note 7 - Current accrued liabilities:
<TABLE>

                                                                December 31,          June 30,
                                                                    2005                2006
                                                                ------------         ----------
                                                                         (In thousands)

<S>                                                               <C>                 <C>
 Employee benefits                                                $ 10,933            $ 10,176
 Professional fees                                                   5,269               4,130
 Other                                                              13,657              14,513
                                                                  --------            --------

      Total                                                       $ 29,859            $ 28,819
                                                                  ========            ========
</TABLE>

Note 8 - Other noncurrent liabilities:
<TABLE>

                                                                December 31,          June 30,
                                                                    2005                2006
                                                                ------------         ----------
                                                                         (In thousands)

<S>                                                               <C>                 <C>
 Insurance claims and expenses                                    $  2,224            $  1,810
 Other                                                                  22                  22
                                                                  --------            --------

      Total                                                       $  2,246            $  1,832
                                                                  ========            ========
</TABLE>

Note 9 - Minority interest:
<TABLE>

                                                                December 31,          June 30,
                                                                    2005                2006
                                                                ------------         ----------
                                                                         (In thousands)

 Minority interest in net assets -
<S>                                                               <C>                 <C>
   CompX International Inc.                                       $ 45,630            $ 45,312
                                                                  ========            ========
</TABLE>

<TABLE>

                                                Three months ended              Six months ended
                                                      June 30,                      June 30,
                                                -------------------            -------------------
                                                2005           2006            2005           2006
                                                ----           ----            ----           ----
                                                                  (In thousands)

 Minority interest in net earnings:
<S>                                            <C>            <C>             <C>            <C>
   CompX International Inc.                    $ 753          $1,122          $1,454         $1,873
   NL Environmental Management Services, Inc.     32            -                 62           -
                                               -----          ------          ------         ------

      Total                                    $ 785          $1,122          $1,516         $1,873
                                               =====          ======          ======         ======
</TABLE>

Note 10 - Provision for income taxes:
<TABLE>

                                                                     Six months ended
                                                                          June 30,
                                                                   ----------------------
                                                                   2005              2006
                                                                   ----              ----
                                                                       (In millions)

<S>                                                               <C>              <C>
 Expected tax expense                                             $13.0            $ 5.5
 Non-U.S. tax rates                                                 (.1)             (.2)
 Incremental placeU.S. tax and rate differences on
  equity in earnings                                               (4.6)            (1.1)
 Nondeductible expenses                                              .2               .1
 placeU.S. state income taxes, net                                   .1               .3
 Excess of book basis over tax basis of Kronos
   common stock sold or distributed                                 2.4               -
 Tax contingency reserve adjustment, net                             .2               .1
 Reduction in Canadian income tax rate                               -               (.2)
 Other, net                                                         (.2)             (.1)
                                                                  -----            -----

      Total                                                       $11.0            $ 4.4
                                                                  =====            =====
</TABLE>

<TABLE>

                                                                     Six months ended
                                                                          June 30,
                                                                   ----------------------
                                                                   2005              2006
                                                                   ----              ----
                                                                       (In millions)
 Comprehensive provision (benefit) for
  income taxes allocable to:
<S>                                                               <C>              <C>
   Income from continuing operations                              $11.0            $ 4.4
   Discontinued operations                                           .3              (.2)
   Retained earnings                                                 -                -
   Other comprehensive income:
     Marketable securities                                          2.3              9.9
     Currency translation                                           (.1)             3.1
                                                                  -----            -----

      Total                                                       $13.5            $17.2
                                                                  =====            =====
</TABLE>

     In June 2006,  placeCanada  enacted a 2% reduction in the Canadian  federal
income tax rate and  eliminated  the federal  surtax.  The 2% reduction  will be
phased in from 2008 through 2010,  and the federal  surtax will be eliminated in
2008. As a result, during the second quarter of 2006 we recognized a $.2 million
income tax benefit  related to the effect of such  reduction  on our  previously
recorded net deferred income tax liability.

Note 11 - Employee benefit plans:

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

<TABLE>

                                                Three months ended              Six months ended
                                                      June 30,                      June 30,
                                                -------------------            -------------------
                                                2005           2006            2005           2006
                                                ----           ----            ----           ----
                                                                  (In thousands)

<S>                                            <C>           <C>             <C>             <C>
 Interest cost                                 $   758       $   718         $ 1,518         $ 1,483
 Expected return on plan assets                 (1,014)       (1,348)         (2,031)         (2,693)
 Amortization of net transition obligations        (18)          (17)            (35)            (33)
 Recognized actuarial losses                        98           102             198             201
                                               -------       -------         -------         -------

     Total                                     $  (176)      $  (545)        $  (350)        $(1,042)
                                               =======       =======         =======         =======
</TABLE>

     Postretirement  benefits - The  components  of net periodic  postretirement
benefits cost are presented in the table below.
<TABLE>

                                                Three months ended              Six months ended
                                                      June 30,                      June 30,
                                                -------------------            -------------------
                                                2005           2006            2005           2006
                                                ----           ----            ----           ----
                                                                  (In thousands)

<S>                                           <C>            <C>             <C>             <C>
 Interest cost                                $   211        $   183         $   422         $   367
 Amortization of prior service credit             (71)           (28)           (143)            (56)
                                               -------       -------         -------         -------

     Total                                    $   140        $   155         $   279         $   311
                                               =======       =======         =======         =======
</TABLE>


     Contributions  - We  expect  our 2006  contributions  for our  pension  and
postretirement  benefit plans to be consistent with the amount  disclosed in our
2005 Annual Report.

Note 12 - Accounts with affiliates:
<TABLE>

                                                                December 31,          June 30,
                                                                    2005                2006
                                                                ------------         ----------
                                                                         (In thousands)

 Current receivables from affiliates:
<S>                                                               <C>                 <C>
   Valhi - federal income taxes                                   $ 3,146             $ 3,801
   Kronos - trade items                                               145                 101
                                                                  -------             -------

         Total                                                    $ 3,291             $ 3,902

                                                                  =======             =======
 Current payables to affiliates:
   Valhi - state income taxes, net                                $   771             $   170
   Tremont Corporation - trade items                                  211                 221
                                                                  -------             -------

         Total                                                    $   982             $   391
                                                                  =======             =======
</TABLE>

Note 13 - Commitments and contingencies:

Lead pigment litigation

     Our former operations  included the manufacture of lead pigments for use in
paint and lead-based paint. We, other former  manufacturers of lead pigments for
use  in  paint   and   lead-based   paint   (together,   the   "former   pigment
manufacturers"), and the Lead Industries Association ("LIA") (which discontinued
business  operations  prior to 2005)  have been named as  defendants  in various
legal  proceedings  seeking  damages for personal  injury,  property  damage and
governmental  expenditures  allegedly  caused by the use of  lead-based  paints.
Certain  of these  actions  have been  filed by or on behalf  of  states,  large
placeU.S.  cities or their public housing  authorities  and school
districts,  and  certain  others  have been  asserted  as class  actions.  These
lawsuits seek recovery under a variety of theories, including public and private
nuisance, negligent product design, negligent failure to warn, strict liability,
breach  of  warranty,   conspiracy/concert   of  action,  aiding  and  abetting,
enterprise liability,  market share or risk contribution liability,  intentional
tort,  fraud and  misrepresentation,  violations  of state  consumer  protection
statutes, supplier negligence and similar claims.

     The plaintiffs in these actions  generally seek to impose on the defendants
responsibility for lead paint abatement and health concerns  associated with the
use of lead-based  paints,  including damages for personal injury,  contribution
and/or  indemnification  for medical expenses,  medical monitoring  expenses and
costs for  educational  programs.  A number of cases are  inactive  or have been
dismissed or  withdrawn.  Most of the remaining  cases are in various  pre-trial
stages.  Some are on appeal  following  dismissal or summary judgment rulings in
favor of either the defendants or plaintiffs.  In addition,  various other cases
are pending (in which we are not a  defendant)  seeking  recovery  for  injuries
allegedly  caused by lead pigment and  lead-based  paint.  Although we are not a
defendant in these cases, the outcome of these cases may have an impact on cases
that might be filed against us in the future.

     We believe these actions are without merit,  and intend to continue to deny
all  allegations  of wrongdoing  and liability and to defend against all actions
vigorously. We have never settled any of these cases, nor have any final adverse
judgments  against us been entered.  We have not accrued any amounts for pending
lead pigment and lead-based  paint  litigation.  We cannot  reasonably  estimate
liability,  if any, that may result. We cannot assure you that NL will not incur
liability  in the future as a result of pending  litigation  due to the inherent
uncertainties  involved in court and jury rulings in pending and possible future
cases.  If future  liabilities  are incurred,  it could have a material  adverse
effect on our  consolidated  financial  statements,  results of  operations  and
liquidity.

     In one of  these  lead  pigment  cases  (State  of  Rhode  Island  v.  Lead
Industries  Association),  a trial before a  StateRhode  Island state court jury
began in  September  2002 on the  question of whether  lead  pigment in paint on
Rhode  Island  buildings is a public  nuisance.  In October 2002,  the
trial judge  declared a mistrial in the case when the jury was unable to reach a
verdict on the question,  with the jury reportedly deadlocked 4-2 in defendants'
favor. In November 2005, the State of Rhode  Island began a retrial of
the  case on the  State's  claims  of  public  nuisance,  indemnity  and  unjust
enrichment.  Following  the State's  presentation  of its case,  the trial court
dismissed  the State's  claims of indemnity  and unjust  enrichment.  The public
nuisance claim was sent to the jury in February 2006, and the jury found that we
and two other defendants  substantially  contributed to the creation of a public
nuisance as a result of the  collective  presence of lead pigments in paints and
coatings on buildings in Rhode Island. The jury also found that we and
the two  other  defendants  should be  ordered  to abate  the  public  nuisance.
Following  the jury  verdict,  the trial court  dismissed  the State's claim for
punitive  damages.  The scope of the abatement  remedy will be determined by the
judge.  The extent,  nature and cost of such remedy are not currently  known and
will be determined only following additional proceedings before the trial court.
Various  matters remain pending before the trial court,  including our motion to
dismiss.  We intend to appeal any  adverse  judgment  which the trial  court may
enter against us.

     The  Rhode  Island  case is unique in that this is the first time
that an adverse verdict in the lead pigment  litigation has been entered against
us. We believe there are a number of meritorious issues which can be appealed in
this  case;  therefore  we  currently  believe it is not  probable  that we will
ultimately  be found liable in this matter.  In addition,  we cannot  reasonably
estimate  potential  liability,  if any, with respect to this and the other lead
pigment  litigation.   However,   legal  proceedings  are  subject  to  inherent
uncertainties,  and we cannot  assure you that any appeal  would be  successful.
Therefore it is  reasonably  possible we could in the near term conclude that it
is probable we have  incurred  some  liability  in this  Rhode  Island
matter  that  would  result  in  recognizing  a loss  contingency  accrual.  The
potential  liability could have a material  adverse impact on net income for the
interim or annual  period  during  which such  liability  is  recognized,  and a
material adverse impact on our financial condition and liquidity.  Various other
cases in which we are a defendant are also pending in other  jurisdictions,  and
new cases could be filed  against us, the  resolution of which could also result
in recognition of a loss contingency  accrual that could have a material adverse
impact on our net income  for the  interim or annual  period  during  which such
liability  is  recognized,  and a  material  adverse  impact  on  our  financial
condition and liquidity.  We cannot reasonably  estimate the potential impact on
our results of  operations,  financial  condition or liquidity  related to these
matters.

Environmental matters and litigation

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

     Certain properties and facilities used in our former businesses,  including
divested  primary and secondary lead smelters and former mining  locations,  are
the subject of civil  litigation,  administrative  proceedings or investigations
arising under federal and state environmental laws. Additionally,  in connection
with past  disposal  practices,  we have been named as a defendant,  potentially
responsible party ("PRP") or both,  pursuant to the Comprehensive  Environmental
Response, Compensation and Liability Act, as amended by the Superfund Amendments
and  Reauthorization   Act  ("CERCLA"),   and  similar  state  laws  in  various
governmental  and private actions  associated with waste disposal sites,  mining
locations, and facilities we or our subsidiaries or their predecessors currently
or previously  owned,  operated or used,  certain of which are on the U.S. EPA's
Superfund  National  Priorities List or similar state lists.  These  proceedings
seek  cleanup  costs,  damages for  personal  injury or property  damage  and/or
damages for injury to natural  resources.  Certain of these proceedings  involve
claims for substantial amounts.  Although we may be jointly and severally liable
for such  costs,  in most cases we are only one of a number of PRPs who may also
be jointly and severally liable.

     Environmental obligations are difficult to assess and estimate for numerous
reasons including:

o    complexity and differing interpretations of governmental regulations,
o    number of PRPs and their ability or willingness to fund such  allocation of
     costs,
o    financial capabilities of the PRPs and the allocation of costs among them,
o    solvency of other PRPs,
o    multiplicity of possible solutions; and
o    number  of  years  of  investigatory,   remedial  and  monitoring  activity
     required.

     In addition,  the  imposition of more stringent  standards or  requirements
under environmental laws or regulations,  new developments or changes respecting
site cleanup  costs or  allocation  of such costs among PRPs,  solvency of other
PRPs,  the results of future  testing and  analysis  undertaken  with respect to
certain sites or a  determination  that we are  potentially  responsible for the
release of hazardous  substances at other sites, could cause our expenditures to
exceed our current estimates. Because we may be jointly and severally liable for
the total remediation cost at certain sites, the amount we are ultimately liable
for may exceed our accruals due to, among other  things,  reallocation  of costs
among  PRPs or the  insolvency  of one or more PRPs.  We cannot  assure you that
actual costs will not exceed  accrued  amounts or the upper end of the range for
sites for which  estimates  have been made,  and no assurance  can be given that
costs  will not be  incurred  with  respect  to  sites  as to which no  estimate
presently can be made,  and we cannot assure you that costs will not be incurred
for  sites  where  no  estimate  presently  can  be  made.  Further,  additional
environmental  matters may arise in the  future.  If we were to incur any future
liability,  this  could  have a  material  adverse  effect  on our  consolidated
financial position, results of operations and liquidity.

     We record liabilities related to environmental remediation obligations when
estimated future expenditures are probable and reasonably  estimable.  We adjust
environmental accruals as further information becomes available or circumstances
change.  We generally do not discount  estimated  future  expenditures  to their
present value due to the  uncertainty of the timing of the pay out. We recognize
recoveries of remediation costs from other parties, if any, as assets when their
receipt is deemed  probable.  At June 30, 2006,  there were no  receivables  for
recoveries.

     We do not know and cannot  estimate the exact time frame over which we will
make  payments  for our  accrued  environmental  costs.  The timing of  payments
depends upon a number of factors including the timing of the actual  remediation
process;  this in turn depends on factors  outside our control.  At each balance
sheet date,  we estimate the amount of our accrued  environmental  costs that we
expect to pay within the next 12 months.  We classify this estimate as a current
liability,  and we  classify  the  remaining  accrued  environmental  costs as a
noncurrent liability on our consolidated balance sheet.

     Changes in the accrued  environmental  costs during the first six months of
2006 are as follows:
<TABLE>

                                                                                    Amount
                                                                                --------------
                                                                                (In thousands)

<S>                                                                                <C>
 Balance at the beginning of the period                                            $54,947
 Additions charged to expense, net                                                     854
 Payments, net                                                                      (3,140)
                                                                                   -------

      Balance at the end of the period                                             $52,661
                                                                                   =======

 Amounts recognized in the balance sheet at the end of the period:
      Current liability                                                            $10,597
      Noncurrent liability                                                          42,064
                                                                                   -------

      Total                                                                        $52,661
                                                                                   =======
</TABLE>

     On a quarterly basis, we evaluate the potential range of liability at sites
where we have been named as a PRP or defendant. At June 30, 2006, we had accrued
$52.7 million for those  environmental  matters which we believe are  reasonably
estimable. We believe that it is not possible to estimate the range of costs for
certain sites. The upper end of the range of reasonably possible costs to us for
sites for which we believe it is possible to estimate costs is approximately $78
million. We have not discounted these estimates to present value.

     At June 30, 2006, there are  approximately 20 sites for which we are unable
to estimate a range of costs. For these sites, generally the investigation is in
the early  stages,  and it is either  unknown as to whether we actually  had any
association  with the site, or if we did have an association  with the site, the
nature of our responsibility,  if any, for the contamination at the site and the
extent of contamination.  We cannot estimate when enough information will become
available to allow us to estimate a range of loss.  The timing and  availability
of information  on these sites is dependent on events outside our control,  such
as when the party  alleging  liability  provides  information  to us. On certain
previously  inactive  sites,  we have  received  general and special  notices of
liability  from the EPA alleging that we, along with other PRPs,  are liable for
past and  future  costs of  remediating  environmental  contamination  allegedly
caused by former  operations  conducted at such sites.  These  notifications may
assert that we, along with other PRPs, are liable for past clean-up costs. These
costs could be material to us if we are ultimately found liable.

Other litigation

     We  have  been  named  as  a  defendant  in  various  lawsuits  in  several
jurisdictions,  alleging personal injuries as a result of occupational  exposure
primarily to products manufactured by our former operations containing asbestos,
silica  and/or  mixed dust.  Approximately  500 of these  types of cases  remain
pending, involving a total of approximately 10,600 plaintiffs and their spouses.
We have not accrued any amounts for this  litigation  because of the uncertainty
of liability  and  inability to reasonably  estimate the  liability,  if any. To
date,  we have not been  adjudicated  liable in any of these  matters.  Based on
information available to us, including facts concerning  historical  operations,
the rate of new claims,  the number of claims from which we have been dismissed,
and our prior  experience in the defense of these  matters,  we believe that the
range of reasonably  possible  outcomes of these matters will be consistent with
our historical costs (which are not material). Furthermore, we do not expect any
reasonably  possible  outcome would involve amounts material to our consolidated
financial  position,  results  of  operations  or  liquidity.  We have  and will
continue to vigorously seek dismissal and/or a finding of no liability from each
claim.  In  addition,  from time to time,  we have  received  notices  regarding
asbestos or silica claims purporting to be brought against former  subsidiaries,
including  notices  provided  to  insurers  with  which  we  have  entered  into
settlements  extinguishing  certain insurance policies.  These insurers may seek
indemnification from us.

     Murphy,  et al. v. NL  Industries,  Inc., et al.  (United  States  District
Court,  District of New Jersey, Case No.  2:06-cv-01535-WHW-SDW).  In June 2006,
the  plaintiffs  filed an  amended  complaint.  In July 2006,  defendants  filed
motions to disqualify plaintiffs' counsel, compel arbitration, transfer venue to
the Northern  District of Texas,  to dismiss the claims  against the  individual
defendants for lack of personal jurisdiction and to dismiss the complaint.

     For a discussion of other legal proceedings to which we are a party,  refer
to the financial statements included in our 2005 Annual Report and our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2006.

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

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

Insurance coverage claims

     For a complete discussion of certain litigation involving us and certain of
our former insurance carriers, refer to our 2005 Annual Report and our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2006. Additional information
regarding such litigation, or new litigation, is below.

     NL  Industries,  Inc.  v.  OneBeacon  America  Insurance  Company,  et. al.
(District Court for Dallas County, StateTexas, Case No. 05-11347). In June 2006,
the federal  court  granted  our motion to remand the action to  placeStateTexas
state court.

     The issue of whether  insurance  coverage for defense costs or indemnity or
both  will be found to exist  for our lead  pigment  litigation  depends  upon a
variety of factors,  and there can be no assurance that insurance  coverage will
be available. We have not considered any potential insurance recoveries for lead
pigment or environmental litigation matters in determining related accruals.

Income tax matters

     Tax authorities are examining  certain of our  placeU.S.  and
non-U.S.  tax  returns  and  have or may  propose  tax  deficiencies,  including
penalties and interest. For example:

o    Kronos  received  a  preliminary  tax  assessment  related to 1993 from the
     Belgian tax  authorities  proposing  tax  deficiencies,  including  related
     interest,  of approximately euro 6 million ($7.2 million at June 30, 2006).
     The  Belgian  tax  authorities  have filed a lien on Kronos'  Belgian  TiO2
     operation's  fixed assets in connection  with their  assessment.  This lien
     does not interfere with on-going operations at the facility. Kronos filed a
     protest to this  assessment and in July 2006,  the Belgian tax  authorities
     withdrew the assessment. We believe the lien will be released by the end of
     2006.

o    The  Norwegian  tax  authorities  have  notified  Kronos of their intent to
     assess tax deficiencies of approximately kroner 12 million ($2.4 million at
     June 30, 2006) relating to the years 1998 through 2000.  Kronos objected to
     this proposed  assessment  and in May 2006 the  Norwegian  tax  authorities
     withdrew the assessment.

     Other income tax examinations  related to our operations  continue,  and we
cannot guarantee that these tax matters will be resolved in our favor due to the
inherent  uncertainties  involved in  settlement  initiatives  and court and tax
proceedings.  We believe we have  adequate  accruals  for  additional  taxes and
related interest expense which could ultimately result from tax examinations. We
believe the ultimate  disposition of tax examinations should not have a material
adverse effect on our consolidated financial position,  results of operations or
liquidity.

Note 14 - Discontinued operations, net of tax:

     Discontinued  operations relates to CompX's former Thomas Regout operations
in the placeNetherlands. Prior to December 2004, the Thomas Regout
European  operations  were classified as held for use. A formal plan of disposal
adopted  by  CompX's  board  of  directors  in  December  2004  resulted  in the
reclassification  of the  operations to held for sale.  Based upon the estimated
realizable  value (or fair value less costs to sell) of the net assets disposed,
we  determined  that the goodwill  associated  with the assets held for sale was
partially impaired.  In determining the estimated realizable value of the Thomas
Regout  operations  as of December 31, 2004,  when we  classified it as held for
sale, we used the sales price inherent in the definitive  agreement reached with
the purchaser in January 2005 and our estimate of the related  transaction costs
(or costs to sell).  In January 2005, we completed the sale of Thomas Regout for
net proceeds that were  approximately  $864,000 less than  previously  estimated
(primarily due to higher expenses  associated with the sale).  These  additional
expenses  reflect a refinement of our previous  estimate of the realizable value
of the  Thomas  Regout  operations  and  accordingly  we  recognized  a  further
impairment of goodwill. As a result,  discontinued  operations for the first six
months of 2005 includes a charge for the additional expenses  ($326,000,  net of
income tax benefit and minority interest). Discontinued operations in the second
quarter of 2006 represents an expense of $500,000  ($177,000,  net of income tax
benefit  and  minority   interest)   for  our  change  in  estimate  of  certain
indemnification  obligations  we had  to the  purchaser  of  the  Thomas  Regout
operations.

Note 15 - Recent accounting pronouncements:

     Inventory costs - Statement of Financial  Accounting Standards ("SFAS") No.
151,  Inventory  Costs, an amendment of ARB No. 43, Chapter 4, became  effective
for inventory  costs incurred on or after January 1, 2006. SFAS No. 151 requires
that  allocation  of fixed  production  overhead  costs to inventory be based on
normal capacity of the production  facilities,  as defined by SFAS No. 151. SFAS
No. 151 also  clarifies  the  accounting  for abnormal  amounts of idle facility
expense,  freight handling costs and wasted material,  requiring the recognition
of those items as current period charges.  Our existing production cost policies
complied with the  requirements of SFAS No. 151,  therefore the adoption of SFAS
No. 151 did not affect our Consolidated Financial Statements.

     Stock  options - We adopted  the fair value  provisions  of SFAS No.  123R,
Share-Based   Payment,  on  January  1,  2006  using  the  modified  prospective
application  method.  SFAS No. 123R,  among other  things,  requires the cost of
employee  compensation paid with equity  instruments to be measured based on the
grant date fair value.  That cost is then  recognized  over the vesting  period.
Using the  modified  prospective  method,  we will apply the  provisions  of the
standard to all new equity  compensation  granted  after January 1, 2006 and any
existing  awards which are modified,  repurchased or cancelled  after January 1,
2006. The number of non-vested  equity awards we or our  subsidiaries had issued
as of  December  31, 2005 was not  material.  Before  adopting  SFAS No. 123R we
accounted  for our equity  compensation  under the  variable  accounting  method
whereby the equity  awards were revalued  based on the current  trading price at
each balance  sheet date.  We now account for these  awards using the  liability
method under SFAS No.  123R,  which is  substantially  identical to the variable
accounting  method we previously used. Net compensation  expense for stock-based
employee  compensation  was  immaterial in both the first six months of 2005 and
2006. If we or our subsidiaries  grant a significant  number of equity awards or
modify, repurchase or cancel existing equity awards in the future, the amount of
equity compensation  expense in our Consolidated  Financial  Statements could be
material.

     Effective  January 1, 2006,  SFAS No.  123R  requires  the cash  income tax
benefit resulting from the exercise of stock options in excess of the cumulative
income tax benefit previously  recognized for GAAP financial  reporting purposes
(which for us did not represent a significant  amount in the first six months of
2006) to be reflected as a component of cash flows from financing  activities in
our  Consolidated  Financial  Statements.  SFAS No. 123R also  requires  certain
expanded  disclosures  regarding  equity  compensation,  and we  provided  these
expanded disclosures in our 2005 Annual Report.

     Uncertain  tax  positions  - In the second  quarter  of 2006 the  Financial
Accounting  Standards Board ("FASB") issued FASB  Interpretation No. ("FIN") 48,
Accounting  for Uncertain Tax Positions,  which will become  effective for us on
January  1,  2007.  FIN No. 48  clarifies  when and how much of a benefit we can
recognize in our Consolidated  Financial  Statements for certain positions taken
in our income tax returns under SFAS No. 109,  Accounting for Income Taxes,  and
enhances the disclosure  requirements  for our income tax policies and reserves.
Among other things, FIN No. 48 will prohibit us from recognizing the benefits of
a tax position  unless we believe it is  more-likely-than-not  our position will
prevail with the applicable tax authorities and limits the amount of the benefit
to the largest  amount for which we believe the  likelihood  of  realization  is
greater than 50%. FIN No. 48 also  requires  companies to accrue  penalties  and
interest on the difference  between tax positions taken on their tax returns and
the amount of benefit recognized for financial  reporting purposes under the new
Standard.  Our current income tax accounting policies comply with this aspect of
the new Standard.  We will also be required to  reclassify  any reserves we have
for uncertain tax positions from deferred income tax liabilities, where they are
currently recognized,  to a separate current or noncurrent liability,  depending
on the nature of the tax position. We are currently evaluating the impact of FIN
No. 48 on our Consolidated Financial Statements.

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

--------------------------------------------------------------------------------

RESULTS OF OPERATIONS

Business and results of operations overview

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

     CompX is a leading manufacturer of precision ball bearing slides,  security
products  and  ergonomic  computer  support  systems  used in office  furniture,
transportation,  tool storage and a variety of other industries.  CompX has also
recently  entered  the  performance  marine  components   industry  through  the
acquisition of two performance marine manufacturers.

     In addition,  we account for our 36% non-controlling  interest in Kronos by
the  equity  method.  Kronos  is a  leading  global  producer  and  marketer  of
value-added  titanium dioxide pigments  ("TiO2").  TiO2 is used for a variety of
manufacturing   applications   including  plastics,   paints,  paper  and  other
industrial products.

Forward-looking information

     This report contains  forward-looking  statements within the meaning of the
Private Securities  Litigation Reform Act of 1995.  Statements in this Quarterly
Report on Form 10-Q that are not historical facts are forward-looking in nature.
Statements  found in this report  including,  but not limited to, the statements
found in Item 2 - "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations,"  are  forward-looking  statements that represent our
beliefs and assumptions based on currently available information.  In some cases
you can identify  these  forward-looking  statements by the use of words such as
"believes,"  "intends," "may," "should," "could,"  "anticipates,"  "expected" 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. Forward-looking statements
by  their  nature  involve   substantial  risks  and  uncertainties  that  could
significantly  impact  expected  results.  Actual  future  results  could differ
materially  from those  predicted.  While it is not  possible  to  identify  all
factors,  we  continue to face many risks and  uncertainties.  Among 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 not limited to, the following:

o    Future supply and demand for our products,
o    The extent of the dependence of certain of our businesses on certain market
     sectors,
o    The cyclicality of our businesses (such as Kronos' TiO2 operations),
o    The impact of certain long-term contracts on certain of our businesses,
o    Customer  inventory  levels (such as the extent to which Kronos'  customers
     may,  from  time to  time,  accelerate  purchases  of TiO2  in  advance  of
     anticipated  price  increases  or defer  purchases  of TiO2 in  advance  of
     anticipated price decreases),
o    Changes in raw material and other operating costs (such as energy costs),
o    The possibility of labor disruptions,
o    General global  economic and political  conditions  (such as changes in the
     level of gross  domestic  product in  various  regions of the world and the
     impact of such changes on demand for TiO2),
o    Demand for office furniture,
o    Competitive   products  and  substitute   products,   including   increased
     competition from low-cost manufacturing sources (such as China),
o    Customer and competitor strategies,
o    The impact of pricing and production decisions,
o    Competitive technology positions,
o    Service industry employment levels,
o    Possible  disruption  of our  business  or  increases  in the cost of doing
     business resulting from terrorist activities or global conflicts,
o    The introduction of trade barriers,
o    Fluctuations  in currency  exchange  rates (such as changes in the exchange
     rate between the U.S. dollar and each of the euro, the Norwegian kroner and
     the Canadian dollar),
o    Operating  interruptions  (including,  but not limited to, labor  disputes,
     leaks,  natural  disasters,  fires,  explosions,  unscheduled  or unplanned
     downtime and transportation interruptions),
o    The timing and amounts of insurance recoveries,
o    The ability to renew or refinance credit facilities,
o    The  extent  to which  our  subsidiaries  were to  become  unable to pay us
     dividends,
o    Uncertainties associated with new product development,
o    The ultimate  outcome of income tax audits,  tax settlement  initiatives or
     other tax matters,
o    The ultimate ability to utilize income tax attributes, the benefit of which
     has been recognized under the "more likely than not"  recognition  criteria
     (such  as  Kronos'  ability  to  utilize  its  German  net  operating  loss
     carryforwards),
o    Environmental matters (such as those requiring compliance with emission and
     discharge  standards for existing and new facilities,  or new  developments
     regarding  environmental   remediation  at  sites  related  to  our  former
     operations),
o    Government  laws and  regulations  and possible  changes  therein  (such as
     changes in government regulations which might impose various obligations on
     present  and  former  manufacturers,  including  us,  of lead  pigment  and
     lead-based paint, with respect to asserted health concerns  associated with
     the use of such products),
o    The ultimate resolution of pending litigation (such as our lead pigment and
     environmental litigation and litigation), and
o    Possible future litigation.

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

Results of Operations

Quarter Ended June 30, 2006 Compared to Quarter Ended June 30, 2005 -

Net Income

     Our income from continuing operations was $3.0 million, or $.06 per diluted
share, in the second quarter of 2006 compared to income of $9.9 million, or $.20
per diluted share, in the second quarter of 2005.

     The  decrease  in our diluted  earnings  per share from 2005 to 2006 is due
primarily to the net effects of:
     o    lower equity in net income of Kronos in 2006,
     o    higher component products income from operations at CompX in 2006, and
     o    higher environmental and legal defense costs of NL in 2006.

Our income from continuing operations in 2006 includes:
     o    a charge  included  in our  equity in  earnings  of Kronos of $.11 per
          diluted share,  net of tax benefit,  related to Kronos'  redemption of
          its 8.875% Senior Secured Notes,
     o    income  included  in our  equity  in  earnings  of  Kronos of $.06 per
          diluted share, net of income tax, related to Kronos'  aggregate income
          tax  benefit  associated  with the  withdrawal  of certain  income tax
          assessments   previously   made  by  the  Belgian  and  Norwegian  tax
          authorities,  favorable  developments  with certain  income tax issues
          related to Belgium and the  enactment  of a reduction  in the Canadian
          federal income tax rate, and
     o    Income  of  $.01  per  diluted  share  related  to  certain  insurance
          recoveries we received.

Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005 -

Net Income

     Our  consolidated  income from continuing  operations was $9.5 million,  or
$.19 per diluted  share,  in the first six months of 2006  compared to income of
$24.7 million, or $.50 per diluted share, in the first six months of 2005.

     The  decrease  in our diluted  earnings  per share from 2005 to 2006 is due
primarily to the net effects of:
     o    lower equity in net income of Kronos in 2006,
     o    higher component products income from operations at CompX in 2006, and
     o    certain securities transactions gains in 2005.

     We  currently  believe net income for the full year 2006 will be lower than
2005 primarily due to lower expected equity in earnings of Kronos in 2006 and to
the securities transaction gains we recognized in 2005.

Our income from continuing operations in 2005 includes:
     o    gains  from our sales of shares  of  Kronos  common  stock of $.17 per
          diluted share, net of income tax,
     o    income  included  in our  equity  in  earnings  of  Kronos of $.03 per
          diluted  share  related to Kronos'  sale of its passive  interest in a
          Norwegian smelting operation.

Our income from continuing operations in 2006 includes:
     o    a charge  included  in our  equity in  earnings  of Kronos of $.11 per
          diluted  share,  net  of  income  tax  benefit,   related  to  Kronos'
          redemption of its 8.875% Senior Secured Notes,
     o    income  included  in our  equity  in  earnings  of  Kronos of $.06 per
          diluted  share  related  to  Kronos'   aggregate  income  tax  benefit
          associated  with the  withdrawal  of certain  income  tax  assessments
          previously  made  by  the  Belgian  and  Norwegian  tax   authorities,
          favorable  developments  with  certain  income tax  issues  related to
          Belgium and Germany and the  enactment  of a reduction in the Canadian
          federal income tax rate, and
     o    income  of  $.04  per  diluted  share  related  to  certain  insurance
          recoveries we received.

Income from Operations

     The following table shows the components of our income from operations.
<TABLE>

                                        Three months ended                      Six months ended
                                             June 30,                                June 30,
                                        ------------------         %           -------------------        %
                                        2005          2006       Change        2005           2006      Change
                                        ----          ----       ------        ----           ----      ------
                                           (In millions)                          (In millions)

<S>                                    <C>           <C>           <C>        <C>            <C>          <C>
CompX                                  $ 4.7         $ 5.8         23%        $ 8.9          $10.6        19%
Insurance recoveries                     1.2            .6        -50%          1.2            2.8       133%
Corporate expense and other, net        (4.2)         (6.4)        52%         (9.9)         (10.5)        6%
                                       -----         -----                    -----          -----

Income from operations                 $ 1.7         $  -                     $  .2          $ 2.9
                                       =====         =====                    =====          =====
</TABLE>

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

CompX International Inc.
<TABLE>

                                        Three months ended                      Six months ended
                                             June 30,                                June 30,
                                        ------------------         %           -------------------        %
                                        2005          2006       Change        2005           2006      Change
                                        ----          ----       ------        ----           ----      ------
                                           (In millions)                          (In millions)

<S>                                    <C>           <C>           <C>        <C>            <C>           <C>
Net sales                              $45.7         $50.1         10%        $92.6          $97.2         5%
Cost of sales                           35.2          37.8          7%         71.8           73.2         2%
                                       -----         -----                    -----          -----
Gross margin                           $10.5         $12.3                    $20.8          $24.0
                                       =====         =====                    =====          =====

Income from operations                 $ 4.7         $ 5.8         23%        $ 8.9          $10.6        19%
                                       =====         =====                    =====          =====

Percentage of net
 sales:
  Cost of sales                          77%           75%                      78%            75%
  Income from operations                 10%           12%                      10%            11%
</TABLE>

     Net sales - Our component product sales increased in the second quarter and
first six months of 2006 as compared to the second  quarter and first six months
of 2005 due mainly to the net effects of sales volumes generated from the August
2005 and April 2006 acquisitions of two marine component  businesses,  a general
increase in sales volume to new and existing  security  products  customers  and
lower sales volumes for certain  furniture  component  products  resulting  from
increased  Asian  competition  and an unfavorable  Canadian dollar exchange rate
which  has  caused  operational   difficulties  for  many  of  CompX's  Canadian
customers.

     Cost of sales - Our component products cost of goods sold increased in 2006
as compared to 2005,  due to a more  favorable  product mix. As a percentage  of
sales,  component  products  cost of goods sold was lower in 2006 as compared to
2005 due  primarily  to an improved  product mix as the decline in lower  margin
furniture  components  sales were  offset by  increased  sales of  higher-margin
security and marine  component  products.  Component  products  gross margin and
income from  operations  increased in 2006 due  primarily to the increase in net
sales  and more  favorable  product  mix as well as the  favorable  impact  of a
continuous focus on reducing costs across all product lines, partially offset by
the negative impact of currency exchange rates as discussed below.

     Currency - CompX has substantial  operations and assets located outside the
United   States  (in   Canada   and  Taiwan).  Sales
generated  from CompX's  non-U.S.  operations  are  denominated in both the U.S.
dollar and in currencies  other than the U.S.  dollar,  principally the Canadian
dollar and the New Taiwan dollar. Most raw materials, labor and other production
costs  for  these  non-U.S.   operations  are  denominated  primarily  in  local
currencies.  Consequently,  the translated U.S. dollar values of CompX's foreign
sales and operating  results are subject to currency  exchange rate fluctuations
which may  favorably  or  unfavorably  impact  reported  earnings and may affect
comparability of period-to-period  operating results.  Overall,  fluctuations in
foreign  currency  exchange rates had the following  effects on sales and income
from operations in 2006 as compared to 2005.
<TABLE>

                                                Three months ended            Six months ended
                                                  June 30, 2006                 June 30, 2006
                                                     vs. 2005                     vs. 2005
                                                ------------------            ----------------
                                                      (Increase (decrease), in thousands)
Impact on:
<S>                                                    <C>                          <C>
  Sales                                                $ 496                        $744
  Income from operations                               $(709)                       $(952)
</TABLE>

     Outlook - The  component  product  markets in which we  operate  are highly
competitive in terms of product  pricing and features.  Our strategy is to focus
on areas  where we can provide  products  that have  value-added,  user-oriented
features  which  enable our  customers  to  compete  more  effectively  in their
markets.  One of the focal  points of this  strategy  is to replace  low margin,
commodity  type  products  with higher margin  user-oriented  feature  products.
Additionally,  we believe  that our focus on  collaborating  with  customers  to
identify  solutions and our ability to provide a high level of customer  service
enable us to compete  effectively.  In response to competitive pricing pressure,
we continually focus on reducing production cost through product  reengineering,
improvement  in  manufacturing  processes  or moving  production  to lower  cost
facilities.

     Raw  material  prices,  especially  steel,  zinc and copper  continue to be
volatile putting pressure on our component products margins. We actively seek to
mitigate the margin  impact by entering into raw material  supply  agreements in
order to stabilize the cost for a period of time, execute larger volume tactical
spot  purchases at prices that are  expected to be favorable  compared to future
prices and, if necessary,  pass on the cost  increases to our customers  through
surcharges and price increases.




Equity in earnings of Kronos Worldwide, Inc.
<TABLE>

                                        Three months ended                      Six months ended
                                             June 30,                                June 30,
                                        ------------------         %           -------------------        %
                                        2005          2006       Change        2005           2006      Change
                                        ----          ----       ------        ----           ----      ------
                                           (In millions)                          (In millions)
 Kronos historical:
<S>                                    <C>           <C>           <C>        <C>            <C>            <C>
   Net sales                           $311.7        $345.1        11%        $603.5         $649.4         8%
   Cost of sales                        217.1         263.1        21%         424.7          492.6        16%
                                       ------        ------                   ------         ------

     Gross margin                      $ 94.6        $ 82.0                   $178.8         $156.8
                                       ======        ======                   ======         ======

   Income from operations              $ 57.7        $ 36.8       -36%        $104.1         $ 71.1       -32%
   Other general corporate, net           5.9           1.3                      6.3            1.9
   Loss on prepayment of debt              -          (22.3)                      -           (22.3)
   Interest expense                     (11.6)        (13.1)                   (23.4)         (23.8)
                                       ------        ------                   ------         ------
                                         52.0           2.7                     87.0           26.9
   Income tax expense (benefit)          19.1         (10.9)                    32.8           (1.7)
                                       ------        ------                   ------         ------

     Net income                        $ 32.9        $ 13.6                   $ 54.2         $ 28.6
                                       ======        ======                   ======         ======

 Percentage of net sales:
    Cost of sales                         70%           76%                      70%            76%
    Income from operations                18%           11%                      18%            11%

 Equity in earnings of Kronos
    Worldwide, Inc.                    $ 11.8        $  4.9                   $ 19.5         $ 10.2
                                       ======        ======                   ======         ======

 TiO2 operating statistics:
   Sales volumes*                         122           139        14%           237            264       11%
   Production volumes*                    127           130         2%           249            257        3%

 Change in Ti02 net sales:
   Ti02 product pricing                                            -1%                                     1%
   Ti02 sales volume                                               14%                                    11%
   Ti02 product mix                                                -1%                                    -1%
   Changes in currency exchange rates                              -1%                                    -3%
                                                                   ---                                    ---

     Total                                                         11%                                     8%
                                                                   ===                                    ===
</TABLE>

_______________________________


* Thousands of metric tons

     The key  performance  indicators for Kronos are TiO2 average selling prices
and TiO2 sales and production volumes.

     Net sales - Kronos'  sales  increased  $33.4  million  (11%) in the  second
quarter of 2006 compared to the second  quarter of 2005 due  principally  to the
net effects of (i) a 14% increase in TiO2 sales  volumes,  (ii) a 1% decrease in
average TiO2 selling prices and (iii) the unfavorable  effect of fluctuations in
foreign  currency  exchange rates,  which decreased  sales by  approximately  $4
million,  or 1%.  Kronos' sales  increased  $45.9 million (8%) in the six months
ended  June  30,  2006  compared  to the six  months  ended  June  30,  2005 due
principally  to an 11% increase in TiO2 sales  volumes,  somewhat  offset by the
unfavorable  effect of changes in currency exchange rates, which decreased sales
by approximately $19 million, or 3%. We expect selling prices will remain stable
or decrease slightly in the second half of 2006 as compared to the first half of
the year.

     Kronos'  increase in TiO2 sales volumes in 2006 was due primarily to higher
sales volumes in the United  States, Europe and in export markets,
which were somewhat  offset by lower sales  volumes in Canada.  We believe sales
volumes in Canada have  decreased  as customer  demand has been  affected by the
effects of the weakened Canadian dollar. Kronos' sales volumes in the first half
of 2006 were a new record for Kronos.  Because we believe our relative  share of
the  worldwide  TiO2  market did not change  significantly  during the first six
months of 2006,  we believe the strong TiO2 sales  volume  achieved in the first
half of 2006 is due in part to relative changes in customer inventory levels. We
expect demand will continue to remain high for the remainder of the year.

     Cost of sales - Kronos' cost of sales  increased  in 2006 due  primarily to
the impact of higher sales volumes and higher operating costs.  Cost of sales as
a  percentage  of sales  increased  in 2006  primarily  due to  increases in raw
material and other operating costs (including energy costs). The negative impact
of the increase in raw  materials  and energy costs on Kronos'  gross margin and
income from operations comparisons was somewhat offset by higher TiO2 production
volumes.  Kronos'  production  volumes in the first half of 2006 were also a new
record for Kronos.

     Kronos  continued  to  gain  operational  efficiencies  at  their  existing
production  facilities by  debottlenecking  production to meet long-term demand.
Such  debottlenecking  efforts  include,  among other  things,  the  addition of
finishing  capacity  in the  German  chloride  process  facility  and  equipment
upgrades and enhancements in several locations to allow for reduced downtime for
maintenance  activities.  Our production capacity has increased by approximately
30% over the past ten years with only moderate capital expenditures.  We believe
our annual  attainable  production  capacity for 2006 is  approximately  510,000
metric  tons,  with some  additional  capacity  expected to be available in 2007
through its continued debottlenecking efforts.

     Currency - Kronos has substantial operations and assets located outside the
United  States  (primarily in Germany,  Belgium,  Norway and  placeCanada).  The
majority of our sales  generated  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  non-U.S.  operations  are  denominated  in the U.S.  dollar.  Certain  raw
materials,  primarily  titanium-containing  feedstocks,  are  purchased  in U.S.
dollars,  while labor and other  production  costs are denominated  primarily in
local currencies.  Consequently, the translated U.S. dollar value of our foreign
sales and operating  results are subject to currency  exchange rate fluctuations
which may  favorably or adversely  impact  reported  earnings and may affect the
comparability of period-to-period  operating results.  Overall,  fluctuations in
foreign currency  exchange rates had the following  effects on Kronos' sales and
income from operations in 2006 as compared to 2005.
<TABLE>

                                                Three months ended            Six months ended
                                                  June 30, 2006                 June 30, 2006
                                                     vs. 2005                     vs. 2005
                                                ------------------            ----------------
                                                      (Increase (decrease), in millions)
Impact on:
<S>                                                  <C>                           <C>
  Sales                                              $ (4)                         $(19)
  Income from operations                             $(11)                         $(16)
</TABLE>

     Interest expense - On May 11, 2006, Kronos  International,  Inc. ("KII"), a
wholly-owned  subsidiary of Kronos,  redeemed its 8.875% Senior Secured Notes at
104.437% of their aggregate  principal  amount of euro 375 million (an aggregate
of $470.5  million).  Funds for the redemption were provided by KII's April 2006
issuance of an aggregate  euro 400 million  principal  amount of new 6.5% Senior
Secured Notes due April 2013.  Kronos  recognized a $22.3 million pre-tax charge
in the second quarter of 2006 related to the early  extinguishment of the 8.875%
Senior  Secured  Notes,  consisting of the call premium on the Notes and the net
write-off of deferred  financing  costs and  unamortized  premium related to the
Notes.

     Kronos'  interest expense in the second quarter of 2006 was higher than the
same period in 2005 because the 8.875% Senior  Secured Notes and the 6.5% Senior
Secured  Notes  were both  outstanding  for 30 days  during  the  quarter.  This
additional interest expense was partially offset by changes in currency exchange
rates in 2006 compared to 2005.

     Income taxes - Kronos  recognized an income tax benefit of $10.9 million in
the second  quarter of 2006  compared to expense of $19.1  million in the second
quarter of 2005.  For the first six months of  2006,Kronos  recognized an income
tax benefit of $1.7 million  compared to an income tax expense of $32.8  million
in the same period last year.  The income tax benefits in the second quarter and
first six months of 2006 are  primarily  due to a $9.5 million  reduction in our
tax  contingency  reserves  related to  favorable  developments  with income tax
audits for our  Belgian  and  Norwegian  operations,  a $2 million  benefit  ($1
million in the second  quarter)  associated  with  favorable  developments  with
certain  income tax issues  related to our Belgium and German  operations  and a
$1.1 million second quarter benefit  resulting from the enactment of a reduction
in Canadian income tax rates.

     Other - On September 22, 2005, the chloride-process  TiO2 facility operated
by  Kronos'   50%-owned  joint  venture,   Louisiana  Pigment  Company  ("LPC"),
temporarily halted production due to Hurricane Rita.  Although there was minimal
storm damage to core processing facilities, a variety of factors, including loss
of utilities,  limited access and  availability  of employees and raw materials,
prevented the  resumption of partial  operations  until October 9, 2005 and full
operations  until late 2005. LPC expects the majority of its property damage and
unabsorbed  fixed costs for periods in which normal  production  levels were not
achieved will be covered by insurance,  and we believe  insurance will cover its
lost profits (subject to applicable deductibles) resulting from its share of the
lost  production  at LPC.  Both  Kronos  and LPC have  filed  claims  with their
insurers.  We expect to recover  their losses  through the insurer in the second
half of 2006,  although the amount and timing of the  insurance  recovery is not
yet known.  Accordingly,  Kronos has not accrued a receivable  for the amount of
the insurance claim and will not record the claim until  negotiations with their
insurer are  finalized.  The effect on our financial  results will depend on the
timing and amount of insurance recoveries.

     Outlook - Kronos  expects its income from  operations in 2006 will continue
to be somewhat lower than 2005. Kronos'  expectations as to the future prospects
of Kronos  and the TiO2  industry  are based  upon a number  of  factors  beyond
Kronos'  control,   including   worldwide  growth  of  gross  domestic  product,
competition in the  marketplace,  unexpected or  earlier-than-expected  capacity
additions and technological advances. If actual developments differ from Kronos'
expectations, Kronos' results of operations could be unfavorably affected.

     Insurance Recoveries,  Corporate Expense,  Interest Expense,  Provision for
Income Taxes,  Minority Interest and Discontinued  Operations - 2006 Compared to
2005

     Insurance recoveries - We have reached an agreement with a former insurance
carrier in which the  carrier  will  reimburse  us for a portion of our past and
future lead pigment  litigation  defense costs. We received  approximately  $1.1
million  during  the first six  months of 2006  under the  agreement  (including
$300,000 in the second  quarter).  We are not able to determine how much we will
ultimately  recover  from the  carrier  for the past  defense  costs we incurred
because the carrier has certain  discretion  regarding  which past defense costs
qualify for reimbursement.

     We also  received  $1.7  million in insurance  recoveries  in the first six
months of 2006 in  settlements  with  certain of our former  insurance  carriers
(including approximately $300,000 in the second quarter). These settlements,  as
well as similar  settlements  we reached in the past few years  (including  $1.2
million in the second quarter of 2005),  resolved court  proceedings in which we
sought  reimbursement  from  carriers  for legal  defense  costs  and  indemnity
coverage for certain of our environmental  remediation  expenditures.  We do not
expect to  receive  any  further  material  insurance  settlements  relating  to
litigation concerning environmental remediation coverages.

     While we continue to seek additional insurance  recoveries,  we do not know
if we will be successful in obtaining  reimbursement for either defense costs or
indemnity.  We have not considered any additional potential insurance recoveries
in  determining  accruals for lead pigment  litigation  matters.  Any additional
insurance  recoveries  would be recognized  when the receipt is probable and the
amount is determinable.

     Corporate  expense -  Corporate  expenses  were $6.4  million in the second
quarter of 2006,  $2.2 million or 51% higher than in the second  quarter of 2005
primarily due to higher litigation and related expenses and higher environmental
remediation  expenses.  Corporate expenses were $10.5 million, 5% higher, in the
first six months of 2006  compared to the first six months of 2005 due mainly to
the  higher  litigation  and  related   expenses,   partially  offset  by  lower
environmental  remediation  expenses. We expect corporate expenses in 2006 to be
higher  than in 2005,  in part due to higher  expected  litigation  and  related
expenses.  However,  obligations for environmental  remediation  obligations are
difficult  to assess and  estimate,  and it is possible  that  actual  costs for
environmental  remediation  will  exceed  accrued  amounts or that costs will be
incurred  in the  future  for sites in which we cannot  currently  estimate  our
liability. See Note 13 to the Condensed Consolidated Financial Statements.

     Interest  expense -  Substantially  all of our interest  expense relates to
CompX.  Interest  expense declined in the first quarter and the first six months
of 2006 compared to 2005 due primarily to lower average debt levels.

     Provision  for  income  taxes - See Note 10 to the  Condensed  Consolidated
Financial  Statements for a tabular  reconciliation of our statutory tax expense
to our actual tax benefit.

     In  accordance  with  GAAP,  we  recognize  deferred  income  taxes  on our
undistributed equity in earnings of Kronos. We do not recognize,  and we are not
required to pay,  income taxes to the extent we receive  dividends  from Kronos.
Because we and Kronos are part of the same  placeU.S.  federal income tax group,
we are  entitled to a 100%  dividends  received  deduction  on the  dividends we
receive from Kronos.  Therefore, our effective income tax rate will generally be
lower than the placeU.S. federal statutory income tax rate.

     Our  provision  for income taxes in the second  quarter of 2006  includes a
$159,000  income  tax  benefit  related to the  effect of the  reduction  in the
Canadian  federal  income tax rate on our net deferred  income tax  liability we
have recognized with respect to CompX's Canadian operations.

     Minority interest - Minority interest in earnings increased slightly in the
first six months of 2006 to $1.9 million  from $1.5  million in 2005,  primarily
due to higher income of CompX, partially offset by the increase in our ownership
of CompX. See Note 9 to the Condensed Consolidated Financial Statements.

     Discontinued  operations  - See  Note  14  to  the  Condensed  Consolidated
Financial Statements.




LIQUIDITY AND CAPITAL RESOURCES

Consolidated cash flows

Operating activities

     Trends in cash flows from  operating  activities  (excluding  the impact of
significant   securities   transactions  and  relative  changes  in  assets  and
liabilities) are generally similar to trends in our earnings.  However,  certain
items included in the  determination  of net income are non-cash,  and therefore
have no impact on cash flows from operating activities.  Non-cash items included
in  the  determination  of  net  income  include  equity  in  Kronos'  earnings,
depreciation and amortization expense and deferred income taxes.

     Cash flows from operating  activities  increased from $18.1 million used in
operating  activities  in the first six  months of 2005 to $6.2  million of cash
provided by  operating  activities  in the first six months of 2006.  This $24.3
million  increase  was  primarily  due to a lower amount of cash paid for income
taxes in 2006 as compared to 2005.  Cash paid for income taxes was $24.6 million
lower in 2006,  primarily  due to a $21  million  tax payment we made in 2005 to
settle a previously-reported income tax audit in the placeU.S.

     Relative  changes in working  capital  (primarily  in accounts  receivable,
payables,  and inventories) can have a significant effect on our cash flows from
operating  activities.  Our average days sales  outstanding  ("DSO")  related to
continuing  operations increased from 40 days at December 31, 2005 to 41 days at
June 30, 2006, due to the timing of collections on our slightly  higher accounts
receivable balance at the end of June. For comparative purposes, our average DSO
increased  from 38 days at December  31, 2004 to 42 days at June 30,  2005.  Our
average number of days in inventory ("DII") was 59 days at December 31, 2005 and
57 days at June 30, 2006.  The decrease in days in inventory is primarily due to
a lower commodity raw materials  balance at June 30, 2006. We held a higher than
normal  commodity raw material  inventory  balance in the latter part of 2005 as
part of our strategy to mitigate the significant volatility in commodity prices.
For comparative  purposes,  our average DII was 52 days at December 31, 2004 and
June 30, 2005  primarily as a result of lower  commodity raw materials  balances
held in the first six months of 2005.

     We do not have complete  access to CompX's cash flows in part because we do
not own 100% of CompX.  A detail of our  consolidated  cash flows from operating
activities  is presented in the table below.  Intercompany  dividends  have been
eliminated.
<TABLE>

                                                                       Six months ended
                                                                          June 30,
                                                                   -----------------------
                                                                   2005               2006
                                                                   ----               ----
                                                                         (In millions)

Cash provided (used) by operating activities:
<S>                                                               <C>                <C>
  CompX                                                           $  8.7             $ 11.3
  NL Parent and wholly-owned subsidiaries                          (24.2)              (2.4)
  Eliminations                                                      (2.6)              (2.7)
                                                                  ------             ------

                                                                  $(18.1)            $  6.2
                                                                  ======             ======
</TABLE>

Investing and financing activities

     Substantially all of our consolidated capital expenditures relate to CompX.
During the first six months of 2006:
     o    CompX completed an acquisition of a Marine component  products company
          for $8.8 million, net of cash acquired,
     o    We  purchased  approximately  117,000  shares of CompX common stock in
          market transactions for $1.8 million,
     o    CompX prepaid $1.5 million of  indebtedness  assumed in prior business
          acquisitions, and
     o    We paid aggregate cash dividends of $12.1 million ($.125 per share per
          quarter).

     Distributions  to minority  interests  consist of CompX  dividends  paid to
shareholders  other than us. Other cash flows from financing  activities  relate
primarily  to  proceeds  from the  issuance  of NL and CompX  common  stock upon
exercise of stock options.

     At June 30,  2006,  there were no amounts  outstanding  under  CompX's  $50
million revolving credit facility that matures in January 2009. We do not expect
to use any cash flow from operating  activities  generated  during 2006 to repay
indebtedness.

     Provisions  contained in certain of CompX's and Kronos'  credit  agreements
could result in the  acceleration  of the applicable  indebtedness  prior to its
stated  maturity  for reasons  other than  defaults  from failing to comply with
typical financial  covenants.  For example,  certain credit agreements allow the
lender to accelerate the maturity of the  indebtedness  upon a change of control
(as defined) 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.

Future cash requirements

     Our primary  source of liquidity on an ongoing  basis is our cash flow from
operating  activities,  including the dividends  Kronos pays to us. We generally
use  these  amounts  to  (i)  fund  capital   expenditures,   (ii)  pay  ongoing
environmental  remediation  and legal expenses and (iii) provide for the payment
of dividends.

     At June 30, 2006, we had an aggregate of $66.3  million of  restricted  and
unrestricted  cash, cash equivalents and debt securities.  A detail by entity is
presented in the table below.
<TABLE>

<S>                                                               <C>
  CompX                                                           $22.8
  NL Parent and wholly-owned subsidiaries                          43.5
                                                                  -----

                                                                  $66.3
                                                                  =====
</TABLE>

     Because our operations are conducted  primarily  through  subsidiaries  and
affiliates,  our  long-term  ability  to meet  parent  company  level  corporate
obligations  is  largely   dependent  on  the  receipt  of  dividends  or  other
distributions  from our  subsidiaries  and affiliates.  Kronos  currently pays a
regular  quarterly  cash dividend of $.25 per share.  At that rate, and based on
the 17.5  million  shares of Kronos we held at June 30, 2006,  we would  receive
annual  dividends from Kronos of $17.5 million.  CompX  currently pays a regular
quarterly  dividend of $.125 per share rate. At that rate, and based on the 10.7
million  shares of CompX we held directly or indirectly  June 30, 2006, we would
receive annual  dividends from CompX of $5.4 million.  If our  subsidiaries  and
affiliates  were to become  unable to make  sufficient  cash  dividends or other
distributions,  our  ability to service our  liabilities  and pay  dividends  on
common stock could be adversely affected.  In addition, a significant portion of
our assets consists of ownership  interests in our  subsidiaries and affiliates.
If we were  required  to  liquidate  securities  in order to  generate  funds to
satisfy our liabilities,  we may be required to sell such securities on the open
market and may not be able to realize the book value of the assets.

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

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

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

     Based  upon  our  expectations  of  our  operating  performance,   and  the
anticipated demands on our cash resources we expect to have sufficient liquidity
to meet our short-term  obligations  (defined as the twelve-month  period ending
June 30, 2007) and our long-term  obligations  (defined as the five-year  period
ending  December 31, 2010, our time period for long-term  budgeting).  If actual
developments  differ from our  expectations,  our  liquidity  could be adversely
affected.

     There have been no material changes in our contractual obligations since we
filed our 2005  Annual  Report,  and we refer you to the  report  for a complete
description of these commitments.

Off-balance sheet financing arrangements

     We do not have any off-balance  sheet financing  agreements  other than the
operating leases discussed in our 2005 Annual Report.

Commitments and Contingencies

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

Recent Accounting Pronouncements

         See Note 15 to the Condensed Consolidated Financial Statements.

Critical Accounting Policies

     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 2005  Annual  Report.  There  have  been no  changes  in our
critical accounting policies during the first six months of 2006.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     We are exposed to market risk,  including  foreign currency exchange rates,
interest rates and security prices.  For a discussion of such market risk items,
refer to Part I,  Item 7A. -  "Quantitative  and  Qualitative  Disclosure  About
Market Risk" in our 2005 Annual Report.  There have been no material  changes in
these market risks during the first six months of 2006.

     Certain  of  CompX's  sales   generated  by  our  foreign   operations  are
denominated in U.S. dollars.  CompX periodically uses currency forward contracts
to manage a portion of  currency  exchange  rate  market  risk  associated  with
receivables,  or  similar  exchange  rate risk  associated  with  future  sales,
denominated in a currency other than the holder's functional currency. CompX has
not entered  into these  contracts  for trading or  speculative  purposes in the
past,  nor do they  anticipate  entering  into such  contracts  for  trading  or
speculative purposes in the future. A majority of the currency forward contracts
CompX  enters into meet the  criteria  for hedge  accounting  under GAAP and are
designated as cash flow hedges. For these currency forward contracts,  gains and
losses  representing  the  effective  portion of the hedges  are  deferred  as a
component  of  accumulated  other  comprehensive  income,  and are  subsequently
recognized   in  earnings  at  the  time  the  hedged  item  affects   earnings.
Occasionally   CompX  enters  into  currency  forward   contracts  for  specific
transactions  which  do not  meet  the  criteria  for  hedge  accounting,  CompX
marks-to-market the estimated fair value of such contracts at each balance sheet
date, with any resulting gain or loss recognized in income  currently as part of
net currency transactions. At June 30, 2006, CompX held a series of contracts to
manage  exchange  rate risk to exchange an  aggregate  of U.S.  $2.8 million for
Canadian  dollars  at an  exchange  rate of Cdn.  $1.12 per U.S.  dollar.  These
contracts  qualify for hedge  accounting  and mature  through  August 2006.  The
exchange  rate was Cdn.  $1.12 per U.S.  dollar at June 30, 2006.  The estimated
fair value of the contracts is not material at June 30, 2006.

ITEM 4.  CONTROLS AND PROCEDURES

     Evaluation of Disclosure  Controls and Procedures - We maintain a system of
disclosure   controls  and  procedures.   The  term  "disclosure   controls  and
procedures,"  as defined by  regulations  of the SEC,  means  controls and other
procedures that are designed to ensure that information required to be disclosed
in the reports we file or submit to the SEC under the Securities Exchange Act of
1934, as amended (the "Act"),  is recorded,  processed,  summarized and reported
within the time  periods  specified  in the SEC's  rules and  forms.  Disclosure
controls and procedures  include,  without  limitation,  controls and procedures
designed to ensure that  information  we are required to disclose in the reports
we file or submit to the SEC under the Act is accumulated  and  communicated  to
our  management,  including  our principal  executive  officer and our principal
financial officer,  or persons  performing similar functions,  as appropriate to
allow timely decisions to be made regarding required disclosure.  Each of Harold
C. Simmons,  our Chief  Executive  Officer,  and Gregory M.  Swalwell,  our Vice
President,  Finance and Chief  Financial  Officer,  have evaluated the Company's
disclosure  controls  and  procedures  as of June 30,  2006.  Based  upon  their
evaluation,   these  executive   officers  have  concluded  that  the  Company's
disclosure controls and procedures are effective as of June 30, 2006.

     Internal  Control  Over  Financial  Reporting - We also  maintain  internal
control over  financial  reporting.  The term  "internal  control over financial
reporting," as defined by SEC regulations, 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 our 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 GAAP, and includes those policies and
procedures that:

o    Pertain to the maintenance of records that in reasonable  detail accurately
     and fairly reflect our transactions and dispositions of our assets,
o    Provide reasonable assurance that transactions are recorded as necessary to
     permit  preparation  of financial  statements in accordance  with GAAP, and
     that our  receipts  and  expenditures  are  made  only in  accordance  with
     authorizations of our management and directors, and
o    Provide reasonable  assurance  regarding  prevention or timely detection of
     unauthorized acquisition,  use or disposition of our assets that could have
     a material effect on our Condensed Consolidated Financial Statements.

     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 our financial
statement  schedules  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.

     Changes in Internal  Control Over  Financial  Reporting - There has been no
change to our internal control over financial reporting during the quarter ended
June  30,  2006  that  has  materially  affected,  or is  reasonably  likely  to
materially affect, our internal control over financial reporting.




                           PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     In  addition  to the  matters  discussed  below,  refer  to  Note 13 to the
Condensed  Consolidated  Financial  Statements and to our 2005 Annual Report and
our Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.

     Lewis, et al. v. Lead Industries Association, et al. (Circuit Court of Cook
County, StateIllinois, County Department, Chancery Division, Case No.00CH09800).
In May 2006, defendants' petition seeking review of the appellate court's ruling
was denied by the Illinois Supreme Court.

     Jones v. NL  Industries,  Inc., et al.  (Circuit  Court of LeFlore  County,
StateMississippi,  Civil  Action  No.  2002-0241-CICI).  In May 2006,  the court
granted  defendants' summary judgment motion with respect to the failure to warn
and  fraudulent  concealment  claims,  but denied the rest of the motion.  Trial
began before a Mississippi  federal court jury in July 2006,  and in August 2006
the jury returned a verdict in favor of the defendants on all counts.

     Terry, et al. v. NL Industries, Inc., et al. (United States District Court,
Southern  District  of  Mississippi,   Case  No.  4:04  CV  269  PB).  Following
plaintiffs'  re-pleading  the fraud claim,  defendants  answered  the  non-fraud
counts  of the  complaint  and  moved to  dismiss  the  fraud  claim for lack of
sufficiency;  however,  the court has stayed the case pending trial in the Jones
case.

     Evans v. Atlantic  Richfield  Company,  et. al. (Circuit Court,  Milwaukee,
Wisconsin,  Case No. 05-CV-9281).  In April 2006, the court allowed plaintiff to
amend the complaint to avoid  defendants'  motion to dismiss.  Plaintiff amended
the complaint; however, in July 2006, defendants renewed their motion to dismiss
the defective product claims.

     Hess, et. al. v. NL Industries,  Inc., et al. (StateMissouri  Circuit Court
22nd  Judicial  Circuit,   placePlaceNameSt.   Louis  PlaceTypeCity,  Cause  No.
052-11799).  In May  2006,  plaintiffs  moved to  remand  the case back to state
court, and in June 2006, the court remanded the case.

     In July 2006, we began work on an additional removal action with respect to
ponds  located  within a residential  area at the site of a formerly  owned lead
smelting  facility  located in  Collinsville,  Illinois.  We anticipate that the
removal action will be completed in the fourth quarter of 2006.

     Brown et. al. v. NL Industries,  Inc. et. al.  (Circuit Court Wayne County,
Michigan,  Case No.  06-602096 CZ). In April 2006,  defendants filed a motion to
dismiss  the   plaintiffs'   claims  for  trespass  and  violations  of  certain
placeStateMichigan state laws.

     In  June  2006,   we  and  several   other  PRPs   received  a   Unilateral
Administrative  Order from the U.S.  EPA  regarding  a  formerly  owned mine and
smelting facility located in Park Hills,  StateMissouri.  The Doe Run Company is
the current owner of the site, and its predecessor purchased the site from us in
approximately 1948. Doe Run is also named in the Order. We intend to comply with
the Order and are  negotiating  with Doe Run an appropriate  allocation of costs
for the remediation.

     In June 2006,  we were served with a complaint  in Donnelly and Donnelly v.
NL Industries, Inc. (State of StateNew York Supreme Court,  placePlaceTypeCounty
of placeRensselaer,  Cause No. 218149). The plaintiff,  a man who claims to have
worked near one of our former sites in placeNew  York,  and his wife allege that
he suffered  injuries  (which are not described in the complaint) as a result of
exposure  to harmful  levels of toxic  substances  as a result of NL's  conduct.
Plaintiffs claim damages for negligence, product liability and derivative losses
on the part of the wife.  We believe  that these  claims are  without  merit and
intend to deny all of the  allegations  and to defend  against all of the claims
vigorously.

Item 1A. Risk Factors

     For a discussion of the risk factors  related to our  businesses,  refer to
Part I, Item 1A., "Risk Factors," in our 2005 Annual report.  There have been no
material changes to such risk factors during the six months ended June 30, 2006.

Item 4. Submission of Matters to a Vote of Security Holders

     Our 2006 Annual Meeting of Shareholders  was held on May 24, 2006. Cecil H.
Moore, Jr., Glenn R. Simmons, Harold C. Simmons,  Thomas P. Stafford,  Steven L.
Watson and Terry N. Worrell  were elected as  directors,  each  receiving  votes
"For" their  election  from at least  95.8% of the 48.6  million  common  shares
eligible to vote at the Annual Meeting.

Item 6.  Exhibits

     31.1 - Certification

     31.2 - Certification

     32.1 - Certification


                                   SIGNATURES


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.



                                                 NL INDUSTRIES, INC.
                                          -------------------------------
                                                    (Registrant)



Date August 4, 2006                       By /s/ Gregory M. Swalwell
     --------------                          -------------------------
                                              Gregory M. Swalwell
                                               Vice President, Finance
                                               and Chief Financial Officer
                                               (Principal Financial Officer)


Date August4, 2006                        By /s/ Tim C. Hafer
     --------------                          -------------------------
                                              Tim C. Hafer
                                               Vice President and Controller
                                               (Principal Accounting Officer)