SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-Q


|X|   QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
      EXCHANGE ACT OF 1934 - For the quarter ended September 30, 1996

                                      OR

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

                         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.)



16825 Northchase Drive, Suite 1200, Houston, Texas              77060-2544
     (Address of principal executive offices)                   (Zip Code)



                                (281)423-3300
             (Registrant's telephone number, including area code)



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) had  been  subject  to such  filing
requirements for the past 90 days. Yes X No






Number of shares of common stock outstanding on November 12, 1996:  51,118,014


<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                                     INDEX




                                                                         Page
PART I.     FINANCIAL INFORMATION

  Item 1.   Financial Statements.

            Consolidated Balance Sheets - December 31, 1995
             and September 30, 1996                                       3-4

            Consolidated Statements of Operations - Three months
             and nine months ended September 30, 1995 and 1996             5

            Consolidated Statement of Shareholders' Deficit
             - Nine months ended September 30, 1996                        6

            Consolidated Statements of Cash Flows - Nine
             months ended September 30, 1995 and 1996                     7-8

            Notes to Consolidated Financial Statements                   9-14

  Item 2.   Management's Discussion and Analysis of Financial
             Condition and Results of Operations                         15-19


PART II.    OTHER INFORMATION

  Item 1.   Legal Proceedings                                             20

  Item 6.   Exhibits and Reports on Form 8-K                              21


                                   - 2 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                                (In thousands)

<TABLE>
<CAPTION>



                  ASSETS                              December 31, September 30,
                                                         1995           1996
                                                      ------------ -------------

<S>                                                    <C>            <C>       
Current assets:
  Cash and cash equivalents ......................     $  141,333     $  130,196
  Accounts and notes receivable ..................        147,428        163,236
  Refundable income taxes ........................          4,941          2,643
  Inventories ....................................        251,630        216,280
  Prepaid expenses ...............................          3,217          6,736
  Deferred income taxes ..........................          2,522          1,791
                                                       ----------     ----------

      Total current assets .......................        551,071        520,882
                                                       ----------     ----------


Other assets:
  Marketable securities ..........................         20,944         22,354
  Investment in joint ventures ...................        185,893        181,382
  Prepaid pension cost ...........................         22,576         23,962
  Deferred income taxes ..........................            788           --
  Other ..........................................         31,165         24,712
                                                       ----------     ----------

      Total other assets .........................        261,366        252,410
                                                       ----------     ----------

Property and equipment:
  Land ...........................................         22,902         22,001
  Buildings ......................................        166,349        163,249
  Machinery and equipment ........................        648,458        643,850
  Mining properties ..............................         97,190         95,673
  Construction in progress .......................         11,187         30,520
                                                       ----------     ----------
                                                          946,086        955,293
  Less accumulated depreciation and depletion ....        486,870        489,355
                                                       ----------     ----------

      Net property and equipment .................        459,216        465,938
                                                       ----------     ----------



                                                       $1,271,653     $1,239,230
                                                       ==========     ==========

</TABLE>

                                   - 3 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                    CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                (In thousands)


<TABLE>
<CAPTION>


   LIABILITIES AND SHAREHOLDERS' DEFICIT            December 31,   September 30,
                                                        1995           1996
                                                    ------------   -------------

<S>                                                 <C>             <C>        
Current liabilities:
  Notes payable ................................    $    39,247     $    26,248
  Current maturities of long-term debt .........         43,369          98,573
  Accounts payable and accrued liabilities .....        165,985         159,512
  Payable to affiliates ........................         10,181           9,134
  Income taxes .................................         40,088          36,123
  Deferred income taxes ........................          3,555           2,837
                                                    -----------     -----------

      Total current liabilities ................        302,425         332,427
                                                    -----------     -----------

Noncurrent liabilities:
  Long-term debt ...............................        740,334         711,846
  Deferred income taxes ........................        157,192         145,319
  Accrued pension cost .........................         69,311          57,541
  Accrued postretirement benefits cost .........         60,235          58,107
  Other ........................................        148,511         132,963
                                                    -----------     -----------

      Total noncurrent liabilities .............      1,175,583       1,105,776
                                                    -----------     -----------

Minority interest ..............................          3,066             257
                                                    -----------     -----------

Shareholders' deficit:
  Common stock .................................          8,355           8,355
  Additional paid-in capital ...................        759,281         759,281
  Adjustments:
    Currency translation .......................       (126,934)       (123,702)
    Pension liabilities ........................         (1,908)         (1,908)
    Marketable securities ......................           (525)            391
  Accumulated deficit ..........................       (481,432)       (475,651)
  Treasury stock ...............................       (366,258)       (365,996)
                                                    -----------     -----------

      Total shareholders' deficit ..............       (209,421)       (199,230)
                                                    -----------     -----------

                                                    $ 1,271,653     $ 1,239,230
                                                    ===========     ===========
</TABLE>

Commitments and contingencies (Note 13)

         See accompanying notes to consolidated financial statements.

                                   - 4 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF OPERATIONS

                     (In thousands, except per share data)


<TABLE>
<CAPTION>


                                  Three months ended       Nine months ended
                                     September 30,           September 30,
                                ----------------------    ---------------------
                                   1995         1996         1995        1996
                                ---------    ---------    ---------   ---------
<S>                             <C>          <C>          <C>         <C>      
Revenues and other income:
  Net sales .................   $ 255,339    $ 248,462    $ 789,688   $ 752,064
  Other, net ................       7,060        5,013       16,075      25,890
                                ---------    ---------    ---------   ---------

                                  262,399      253,475      805,763     777,954
                                ---------    ---------    ---------   ---------

Costs and expenses:
  Cost of sales .............     169,058      193,271      526,722     557,881
  Selling, general and
   administrative ...........      48,317       45,274      142,937     131,313
  Interest ..................      20,325       18,472       62,053      56,127
                                ---------    ---------    ---------   ---------

                                  237,700      257,017      731,712     745,321
                                ---------    ---------    ---------   ---------

      Income (loss) before
       income taxes and
       minority interest ....      24,699       (3,542)      74,051      32,633

Income tax expense ..........       7,413          698       22,215      11,552
                                ---------    ---------    ---------   ---------

      Income (loss) before
       minority interest ....      17,286       (4,240)      51,836      21,081

Minority interest ...........        (140)           9          346         (33)
                                ---------    ---------    ---------   ---------

      Net income (loss) .....   $  17,426    $  (4,249)   $  51,490   $  21,114
                                =========    =========    =========   =========

Net income (loss) per share
 of common stock ............   $     .34    $    (.08)   $    1.00   $     .41
                                =========    =========    =========   =========

Weighted average common and
 common equivalent shares
 outstanding ................      51,628       51,118       51,522      51,376
                                =========    =========    =========   =========
</TABLE>


         See accompanying notes to consolidated financial statements.

                                   - 5 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENT OF SHAREHOLDERS' DEFICIT

                     Nine months ended September 30, 1996

                                (In thousands)



<TABLE>
<CAPTION>
                                                                                          
                                                                     Adjustments               
                                           Additional  -------------------------------------
                                  Common    paid-in     Currency      Pension     Marketable   Accumulated   Treasury
                                   stock    capital    translation  liabilities   securities     deficit      stock         Total
                                ---------  ----------  -----------  ------------  ----------   -----------  ---------    ---------

<S>                             <C>         <C>         <C>          <C>          <C>          <C>          <C>          <C>       
Balance at December 31, 1995    $   8,355   $ 759,281   $(126,934)   $  (1,908)   $    (525)   $(481,432)   $(366,258)   $(209,421)

Net income ..................        --          --          --           --           --         21,114         --         21,114

Dividends ...................        --          --          --           --           --        (15,333)        --        (15,333)

Adjustments .................        --          --         3,232         --            916         --           --          4,148

Treasury stock reissued .....        --          --          --           --           --           --            262          262
                                ---------   ---------   ---------    ---------    ---------    ---------    ---------    ---------

Balance at September 30, 1996   $   8,355   $ 759,281   $(123,702)   $  (1,908)   $     391    $(475,651)   $(365,996)   $(199,230)
                                =========   =========   =========    =========    =========    =========    =========    =========
</TABLE>



         See accompanying notes to consolidated financial statements.

                                   - 6 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                 Nine months ended September 30, 1995 and 1996

                                (In thousands)


<TABLE>
<CAPTION>


                                                           1995          1996
                                                        ---------     ---------

<S>                                                     <C>           <C>      
Cash flows from operating activities:
  Net income .......................................    $  51,490     $  21,114
  Depreciation, depletion and amortization .........       29,208        30,154
  Noncash interest expense .........................       14,368        15,500
  Deferred income taxes ............................       18,245        (4,864)
  Other, net .......................................       (8,382)      (12,401)
                                                        ---------     ---------

                                                          104,929        49,503
  Change in assets and liabilities:
    Accounts and notes receivable ..................      (23,161)      (21,289)
    Inventories ....................................      (14,067)       26,424
    Prepaid expenses ...............................       (3,302)       (3,863)
    Accounts payable and accrued liabilities .......       (2,905)       (1,363)
    Income taxes ...................................      (18,217)         (166)
    Other, net .....................................       (1,794)      (10,994)
    Marketable trading securities, net .............       26,337          --
                                                        ---------     ---------

      Net cash provided by operating activities ....       67,820        38,252
                                                        ---------     ---------

Cash flows from investing activities:
  Capital expenditures .............................      (42,572)      (52,328)
  Purchase of minority interest ....................         --          (5,168)
  Investment in joint ventures, net ................        1,664         4,123
  Other, net .......................................           68           478
                                                        ---------     ---------

      Net cash used by investing activities ........      (40,840)      (52,895)
                                                        ---------     ---------
</TABLE>


         
                                   - 7 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                 Nine months ended September 30, 1995 and 1996

                                (In thousands)


<TABLE>
<CAPTION>


                                                            1995         1996
                                                         ---------    ---------
<S>                                                      <C>          <C>      
Cash flows from financing activities:
  Indebtedness:
    Borrowings .......................................   $  38,840    $  64,712
    Principal payments ...............................     (47,401)     (43,359)
  Dividends ..........................................        --        (15,333)
  Other, net .........................................         159         (202)
                                                         ---------    ---------

      Net cash provided (used) by financing
       activities ....................................      (8,402)       5,818
                                                         ---------    ---------

Cash and cash equivalents:
  Net change from:
    Operating, investing and financing activities ....      18,578       (8,825)
    Currency translation .............................       3,093       (2,312)
  Balance at beginning of period .....................     131,124      141,333
                                                         ---------    ---------

  Balance at end of period ...........................   $ 152,795    $ 130,196
                                                         =========    =========


Supplemental disclosures - cash paid for:
  Interest, net of amounts capitalized ...............   $  37,079    $  31,485
  Income taxes .......................................      22,388       16,652

</TABLE>



         See accompanying notes to consolidated financial statements.

                                   - 8 -

<PAGE>



                     NL INDUSTRIES, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Note 1 - Organization and basis of presentation:

      NL Industries,  Inc. conducts its operations primarily through its wholly-
owned  subsidiaries,  Kronos,  Inc.  (titanium dioxide pigments,  or "TiO2") and
Rheox, Inc. (specialty  chemicals).  Valhi, Inc. and Tremont  Corporation,  each
affiliates  of  Contran  Corporation,  hold 55% and 18%,  respectively,  of NL's
outstanding  common  stock.  Contran  holds,  directly or through  subsidiaries,
approximately 91% of Valhi's and 44% of Tremont's outstanding common stock.

      The  consolidated  balance sheet of NL Industries,  Inc. and  Subsidiaries
(collectively,  the  "Company") at December 31, 1995 has been condensed from the
Company's  audited   consolidated   financial   statements  at  that  date.  The
consolidated balance sheet at September 30, 1996 and the consolidated statements
of  operations,  shareholders'  deficit and cash flows for the  interim  periods
ended  September  30, 1995 and 1996 have been  prepared by the Company,  without
audit. In the opinion of management, all adjustments,  consisting only of normal
recurring  adjustments  necessary to present fairly the  consolidated  financial
position,  results of operations  and cash flows have been made.  The results of
operations  for the  interim  periods  are  not  necessarily  indicative  of the
operating results for a full year or of future operations.

      Certain  information  and  footnote   disclosures   normally  included  in
financial  statements  prepared in accordance with generally accepted accounting
principles have been condensed or omitted.  Certain prior-year amounts have been
reclassified to conform to the 1996 presentation.  The accompanying consolidated
financial  statements  should  be  read in  conjunction  with  the  consolidated
financial  statements  included in the Company's  Annual Report on Form 10-K for
the year ended December 31, 1995 (the "1995 Annual Report").


Note 2 - Net income (loss) per share of common stock:

      Net  income  (loss)  per  share of common  stock is based on the  weighted
average  number of common  shares  and  equivalents  outstanding.  Common  stock
equivalents,  consisting of  nonqualified  stock options,  are excluded from the
computation when their effect is antidilutive.


                                   - 9 -

<PAGE>



Note 3 - Business segment information:

      The Company's  operations  are  conducted in two business  segments - TiO2
conducted by Kronos and specialty chemicals conducted by Rheox.
<TABLE>
<CAPTION>


                                 Three months ended         Nine months ended
                                    September 30,             September 30,
                               ----------------------    ----------------------
                                  1995         1996         1995        1996
                               ---------    ---------    ---------    ---------
                                               (In thousands)
<S>                            <C>          <C>          <C>          <C>      
Net sales:
  Kronos ...................   $ 222,799    $ 215,038    $ 689,520    $ 649,635
  Rheox ....................      32,540       33,424      100,168      102,429
                               ---------    ---------    ---------    ---------

                               $ 255,339    $ 248,462    $ 789,688    $ 752,064
                               =========    =========    =========    =========

Operating income:
  Kronos ...................   $  40,828    $   9,640    $ 120,381    $  64,555
  Rheox ....................       9,762        9,831       29,726       32,952
                               ---------    ---------    ---------    ---------
                                  50,590       19,471      150,107       97,507
General corporate income
 (expense):
  Securities earnings, net .       1,489        1,190        5,884        3,631
  Expenses, net ............      (7,055)      (5,731)     (19,887)     (12,378)
  Interest expense .........     (20,325)     (18,472)     (62,053)     (56,127)
                               ---------    ---------    ---------    ---------

                               $  24,699    $  (3,542)   $  74,051    $  32,633
                               =========    =========    =========    =========
</TABLE>


Note 4 - Inventories:


                                                    December 31,   September 30,
                                                        1995            1996
                                                    ------------   -------------
                                                           (In thousands)
<TABLE>
<CAPTION>

<S>                                                  <C>                <C>     
Raw materials ............................           $ 35,075           $ 34,548
Work in process ..........................              9,132              7,556
Finished products ........................            172,330            138,169
Supplies .................................             35,093             36,007
                                                     --------           --------

                                                     $251,630           $216,280
                                                     ========           ========
</TABLE>


                                   - 10 -

<PAGE>



Note 5 - Marketable securities and securities transactions:
<TABLE>
<CAPTION>


                                                      December 31, September 30,
                                                          1995         1996
                                                      ------------ -------------
                                                            (In thousands)
<S>                                                      <C>           <C>     
Available-for-sale securities - noncurrent
 marketable equity securities:
  Unrealized gains .................................     $  1,962      $  2,183
  Unrealized losses ................................       (2,770)       (1,581)
  Cost .............................................       21,752        21,752
                                                         --------      --------

      Aggregate market .............................     $ 20,944      $ 22,354
                                                         ========      ========

</TABLE>

      Net gains from trading securities transactions are composed of:

<TABLE>
<CAPTION>

                                      Three months ended       Nine months ended
                                         September 30,           September 30,
                                      -------------------      -----------------
                                       1995         1996         1995      1996
                                      ------       ------       ------     -----
                                                     (In thousands)

<S>                                   <C>          <C>          <C>          <C>
Unrealized gains ..............       $    7       $   --       $1,122       $--
Realized gains ................           --           --           50        --
                                      ------       ------       ------       ---

                                      $    7       $   --       $1,172       $--
                                      ======       ======       ======       ===
</TABLE>


Note 6 - Investment in joint ventures:
<TABLE>
<CAPTION>
                                                    December 31,   September 30,
                                                        1995           1996
                                                    ------------   -------------
                                                           (In thousands)

<S>                                                     <C>             <C>     
TiO2 manufacturing joint venture ...............        $183,129        $179,423
Other ..........................................           2,764           1,959
                                                        --------        --------

                                                        $185,893        $181,382
                                                        ========        ========
</TABLE>


                                   - 11 -

<PAGE>



Note 7 - Other noncurrent assets:

<TABLE>
<CAPTION>

                                                      December 31, September 30,
                                                          1995         1996
                                                      ------------ -------------
                                                            (In thousands)

<S>                                                      <C>             <C>    
Intangible assets, net .........................         $11,803         $ 8,849
Deferred financing costs, net ..................          13,199          10,534
Other ..........................................           6,163           5,329
                                                         -------         -------

                                                         $31,165         $24,712
                                                         =======         =======
</TABLE>


Note 8 - Accounts payable and accrued liabilities:
<TABLE>
<CAPTION>


                                                   December 31,    September 30,
                                                       1995             1996
                                                   ------------    -------------
                                                            (In thousands)

<S>                                                  <C>                <C>     
Accounts payable .........................           $ 68,734           $ 58,568
                                                     --------           --------
Accrued liabilities:
  Employee benefits ......................             49,884             37,627
  Environmental costs ....................              6,000              6,000
  Interest ...............................              6,633             15,718
  Miscellaneous taxes ....................              2,557              2,274
  Other ..................................             32,177             39,325
                                                     --------           --------

                                                       97,251            100,944
                                                     --------           --------

                                                     $165,985           $159,512
                                                     ========           ========
</TABLE>


Note 9 - Other noncurrent liabilities:
<TABLE>
<CAPTION>


                                                     December 31,  September 30,
                                                         1995             1996
                                                     ------------  -------------
                                                           (In thousands)

<S>                                                    <C>              <C>     
Environmental costs ..........................         $112,827         $107,322
Insurance claims and expenses ................           12,088           11,405
Employee benefits ............................           13,148           12,096
Deferred technology fee income ...............            8,456              463
Other ........................................            1,992            1,677
                                                       --------         --------

                                                       $148,511         $132,963
                                                       ========         ========
</TABLE>



                                   - 12 -

<PAGE>



Note 10 - Notes payable and long-term debt:

<TABLE>
<CAPTION>

                                                      December 31, September 30,
                                                           1995        1996
                                                      ------------ -------------
                                                               (In thousands)

<S>                                                        <C>          <C>     
Notes payable - Kronos (DM 56,000 and DM 40,000,
 respectively) .......................................     $ 39,247     $ 26,248
                                                           ========     ========

Long-term debt:
  NL Industries:
    11.75% Senior Secured Notes ......................     $250,000     $250,000
    13% Senior Secured Discount Notes ................      132,034      145,064
                                                           --------     --------

                                                            382,034      395,064
  Kronos:
    DM bank credit facility (DM 397,609 and
     DM 490,609, respectively) .......................      276,895      321,938
    Joint venture term loan ..........................       73,286       61,714
    Other ............................................       13,672       11,094
                                                           --------     --------

                                                            363,853      394,746
                                                           --------     --------
  Rheox:
    Bank term loan ...................................       37,263       20,284
    Other ............................................          553          325
                                                           --------     --------

                                                             37,816       20,609
                                                           --------     --------

                                                            783,703      810,419

  Less current maturities ............................       43,369       98,573
                                                           --------     --------

                                                           $740,334     $711,846
                                                           ========     ========
</TABLE>


Note 11 - Income taxes:

      The difference  between the provision for income tax expense  attributable
to income before income taxes and minority interest and the amount that would be
expected using the U.S.  federal  statutory  income tax rate of 35% is presented
below.
<TABLE>
<CAPTION>


                                                            Nine months ended
                                                              September 30,
                                                           --------------------
                                                             1995        1996
                                                           --------    --------
                                                              (In thousands)

<S>                                                        <C>         <C>     
Expected tax expense ...................................   $ 25,918    $ 11,422
Non-U.S. tax rates .....................................     (1,501)       (273)
Incremental tax on income of companies not included
 in NL's consolidated U.S. federal income tax return ...      1,007         870
Valuation allowance ....................................     (3,183)     (1,150)
U.S. state income taxes ................................        898       1,350
Other, net .............................................       (924)       (667)
                                                           --------    --------

      Income tax expense ...............................   $ 22,215    $ 11,552
                                                           ========    ========
</TABLE>


                                   - 13 -

<PAGE>


Note 12 - Other income, net:
<TABLE>
<CAPTION>


                                      Three months ended      Nine months ended
                                         September 30,          September 30,
                                      -------------------   --------------------
                                         1995       1996      1995        1996
                                      --------   --------   --------    --------
                                                    (In thousands)

<S>                                   <C>        <C>        <C>         <C>     
Securities earnings:
  Interest and dividends ..........   $  1,482   $  1,190   $  4,712    $  3,631
  Securities transactions .........          7       --        1,172        --
                                      --------   --------   --------    --------

                                         1,489      1,190      5,884       3,631
Pension curtailment gain ..........       --         --         --         4,791
Technology fee income .............      2,685      2,606      7,990       8,280
Litigation settlement gain ........       --         --         --         2,756
Currency transaction gains,
 (losses), net ....................      1,122        624       (795)      4,491
Other, net ........................      1,764        593      2,996       1,941
                                      --------   --------   --------    --------

                                      $  7,060   $  5,013   $ 16,075    $ 25,890
                                      ========   ========   ========    ========
</TABLE>


Note 13 - Commitments and contingencies:

      For  descriptions  of  certain  legal  proceedings,  income  tax and other
commitments and contingencies  related to the Company,  reference is made to (i)
Part II, Item 1 -"Legal  Proceedings,"  (ii) the Company's  Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996, and (iii) the
1995 Annual Report.

                                   - 14 -

<PAGE>



MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION AND RESULTS OF
OPERATIONS

RESULTS OF OPERATIONS

      The Company's chemical operations are conducted in two business segments -
TiO2 conducted by Kronos and specialty chemicals conducted by Rheox.
<TABLE>
<CAPTION>


                      Three months ended      %      Nine months ended      %
                         September 30,      Change      September 30,     Change
                      ------------------    ------   -----------------    ------ 
                        1995      1996                 1995       1996     
                       ------    ------               ------     ------    
                         (In millions)                  (In millions)

<S>                    <C>        <C>        <C>      <C>        <C>        <C>
Net sales:
  Kronos .........     $222.8     $215.1     -3%      $689.5     $649.7     -6%
  Rheox ..........       32.5       33.4     +3%       100.2      102.4     +2%
                       ------     ------              ------     ------       

                       $255.3     $248.5     -3%      $789.7     $752.1     -5%
                       ======     ======              ======     ======     

Operating income:
  Kronos .........     $ 40.8     $  9.7     -76%     $120.4     $ 64.6     -46%
  Rheox ..........        9.8        9.8     N/C        29.7       32.9     +11%
                       ------     ------              ------     ------       

                       $ 50.6     $ 19.5     -62%     $150.1     $ 97.5     -35%
                       ======     ======              ======     ======     


Percent changes in TiO2:
  Sales volume ...............               +17%                           +3%
  Average selling prices (in
   billing currencies) .......               -15%                           -6%
</TABLE>

      Kronos' TiO2  operating  income in the third quarter and first nine months
of 1996  decreased  from the  comparable  periods in 1995  primarily  due to the
decline in average TiO2  selling  prices.  Average  TiO2 selling  prices for the
third quarter of 1996 were 15% lower than the third quarter of 1995 and 6% lower
than the second quarter of 1996.  Selling prices at the end of the third quarter
of 1996  were 15% lower  than  prices at the end of 1995.  The  Company  expects
average TiO2 prices in the fourth quarter to be below the third quarter average.
While prices have  declined,  demand for TiO2 has grown.  Kronos'  third quarter
sales  volumes  increased  17%  compared  with the  third  quarter  of 1995 with
improved  sales  volumes  worldwide.  Sales volumes for the first nine months in
1996 were 3% higher than the comparable period in 1995 primarily due to improved
sales volumes in the U.S.

      Rheox's operating income of $9.8 million for the third quarter of 1996 was
even with the year-earlier  period.  Rheox's  operating income in the first nine
months of 1996  includes  a  first-quarter  $2.7  million  gain  related  to the
curtailment of certain U.S. employee pension benefits.

      Based on the  continuing  decline in TiO2 selling  prices during the third
quarter and the current TiO2 industry pricing  outlook,  the Company expects its
fourth-quarter  net loss will exceed  that of the third  quarter of 1996 and the
Board of Directors has suspended the regular quarterly dividend.

      A significant amount of sales are denominated in currencies other than the
U.S. dollar,  and fluctuations in the value of the U.S. dollar relative to other
currencies  decreased  the dollar value of sales for the third quarter and first
nine months of 1996 by $4 million and $7 million, respectively,  compared to the
comparable 1995 periods.

                                   - 15 -

<PAGE>



      The  following  table sets forth  certain  information  regarding  general
corporate income (expense).
<TABLE>
<CAPTION>


                               Three months ended               Nine months ended
                                  September 30,    Difference     September 30,     Difference
                               ------------------  ----------   -----------------   ----------
                                1995        1996                 1995       1996
                                -----       -----                ----       ----
                                                          (In millions)

<S>                            <C>        <C>        <C>        <C>        <C>        <C>     
Securities earnings ......     $   1.5    $   1.2    $   (.3)   $   5.9    $   3.6    $  (2.3)
Corporate expenses, net ..        (7.1)      (5.7)       1.4      (19.9)     (12.4)       7.5
Interest expense .........       (20.3)     (18.5)       1.8      (62.1)     (56.1)       6.0
                               -------    -------    -------    -------    -------    -------

                               $ (25.9)   $ (23.0)   $   2.9    $ (76.1)   $ (64.9)   $  11.2
                               =======    =======    =======    =======    =======    =======
</TABLE>

      Securities earnings were lower due to lower average balances available for
investment.  Net  corporate  expenses  were lower in the third quarter and first
nine  months  of  1996  compared  to the  same  periods  in  1995  due to  lower
environmental  remediation  costs.  Interest  expense was lower primarily due to
lower variable interest rates.

      Income tax expense for the third  quarter of 1996 differs from a normally-
expected  effective tax rate because of losses in certain countries for which no
tax benefit is currently  available and for which  recognition of a deferred tax
asset is not appropriate.

LIQUIDITY AND CAPITAL RESOURCES

      The  Company's  consolidated  cash flows  from  operating,  investing  and
financing  activities for the nine months ended  September 30, 1995 and 1996 are
presented below.

<TABLE>
<CAPTION>

                                                           Nine months ended
                                                              September 30,
                                                           ------------------
                                                             1995       1996
                                                           -------    -------
                                                              (In millions)
<S>                                                        <C>        <C>    
Net cash provided (used) by:
  Operating activities ...............................     $  67.8    $  38.3
  Investing activities ...............................       (40.8)     (52.9)
  Financing activities ...............................        (8.4)       5.8
                                                           -------    -------

      Net cash provided (used) by operating, investing
       and financing activities ......................     $  18.6    $  (8.8)
                                                           =======    =======
</TABLE>

      The TiO2  industry is cyclical and changes in economic  conditions  within
the industry  significantly  impact the earnings and operating cash flows of the
Company.  During the first nine months of 1996,  declining  TiO2 selling  prices
unfavorably  impacted  Kronos'  operating  income and cash flows from operations
compared to the 1995 period.  Average  selling  prices began a downward trend in
the last half of 1995 and the Company expects the trend to continue at least for
the  remainder of the year.  The Company  expects  prices will begin to increase
during 1997;  however,  no assurance can be given that price trends will conform
to the Company's  expectations and future cash flows will be adversely  affected
should price trends be lower than the Company's expectations.

      The Company's cash flows from  operations  also declined in the first nine
months of 1995 due to an increase in working capital of $43 million, while


                                   - 16 -

<PAGE>



working  capital  remained  about  the same in the  first  nine  months of 1996,
excluding  the effect of currency  translation.  Net changes in working  capital
used less cash in the 1996 period primarily due to TiO2 production  curtailments
and higher sales volumes reducing inventory levels during 1996.

      Certain of the  Company's  income tax returns in various U.S. and non-U.S.
jurisdictions  are being  examined  and tax  authorities  have  proposed  or may
propose tax  deficiencies.  The Company has reached an agreement with the German
tax authorities  regarding  examinations which resolves certain  significant tax
contingencies  for years  through 1990.  The Company has received  certain final
assessments and expects to pay tax  deficiencies of  approximately DM 49 million
($32 million at September 30, 1996),  including interest,  in the fourth quarter
of 1996 in final  settlement  of the agreed  issues.  Certain  other  German tax
contingencies remain outstanding and will continue to be litigated. Although the
Company believes that it will ultimately  prevail,  the Company has granted a DM
100 million ($66 million at September 30, 1996) lien on its  Nordenham,  Germany
TiO2  plant in favor of the  German  tax  authorities  until the  litigation  is
resolved. No assurance can be given that this litigation will be resolved in the
Company's favor in view of the inherent uncertainties involved in court rulings.
The Company  believes that it has  adequately  provided  accruals for additional
income taxes and related interest  expense which may ultimately  result from all
such   examinations   and  believes  that  the  ultimate   disposition  of  such
examinations  should  not  have a  material  adverse  effect  on  the  Company's
consolidated financial position, results of operations or liquidity.

         Rheox acquired the minority interests of its non-U.S.  subsidiaries for
$5.2 million in the first quarter of 1996.

      The Company  borrowed DM 95 million ($64 million when borrowed)  under its
DM credit  facility  during the first nine months of 1996 and used the  proceeds
primarily to fund  operations.  During October 1996, the Company  borrowed DM 49
million  ($32 million when  borrowed)  under the DM credit  facility to fund the
German tax settlement  payments  described above.  Repayments of indebtedness in
the first nine months of 1996  included  payments of $17.2  million on the Rheox
bank term loan,  $11.6  million on the joint venture term loan and DM 16 million
($10.4 million when repaid) on DM-denominated notes payable.

      In the third  quarter of 1996,  the Company  paid a quarterly  dividend of
$.10 per share to shareholders  aggregating $5.1 million.  Dividends paid during
the first nine  months of 1996  totaled  $15.3  million.  In October  1996,  the
Company's Board of Directors suspended the Company's regular quarterly dividend.

      At  September  30,  1996,  the  Company  had  cash  and  cash  equivalents
aggregating  $130  million  (36%  held  by  non-U.S.   subsidiaries)   including
restricted cash and cash equivalents of $11 million. The Company's  subsidiaries
had $5 million and $119 million  available  for  borrowing at September 30, 1996
under existing U.S. and non-U.S. credit facilities,  respectively,  of which $82
million of the non-U.S.  amount is available only for (i)  permanently  reducing
the DM term  loan or (ii)  paying  future  German  income  tax  assessments,  as
described  above.  In October  1996,  the borrowing  availability  to pay German
income tax  assessments  under the DM credit facility was reduced by $32 million
related to the October 1996 borrowings  described  above. The Company is engaged
in discussions with its

                                   - 17 -

<PAGE>



lenders  to  modify  the  repayment  terms  and  covenants  of  certain  of  its
indebtedness and to refinance certain other indebtedness.

      The Company has been named as a defendant,  potentially  responsible party
("PRP"), or both, in a number of legal proceedings associated with environmental
matters,  including  waste  disposal  sites or facilities  currently or formerly
owned,  operated  or used  by the  Company,  many of  which  disposal  sites  or
facilities are on the U.S.  Environmental  Protection  Agency's (the "U.S. EPA")
Superfund National Priorities List or similar state lists. On a quarterly basis,
the Company evaluates the potential range of its liability at sites where it has
been named as a PRP or defendant.  The Company believes it has adequate accruals
($114  million at September  30, 1996) for  reasonably  estimable  costs of such
matters.  It is not possible to estimate  the range of costs for certain  sites.
The Company has estimated that the upper end of the range of reasonably possible
costs to the Company  for sites for which it is  possible  to estimate  costs is
approximately $175 million. The Company's estimates of such liabilities have not
been  discounted  to present  value,  and the  Company  has not  recognized  any
potential insurance recoveries. No assurance can be given 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.
Further,  there can be no assurance that additional  environmental  matters will
not arise in the future.

      The Company is also a defendant in a number of legal  proceedings  seeking
damages for personal  injury and property  damage  arising from the sale of lead
pigments and  lead-based  paints.  Although no  assurance  can be given that the
Company will not incur future liability in respect of this litigation, based on,
among other things, the results of such litigation to date, the Company believes
that the pending lead pigment and paint litigation is without merit. The Company
has not  accrued any amounts for such  pending  litigation.  Liability  that may
result, if any, cannot be reasonably estimated. In addition, various legislation
and  administrative  regulations are, from time to time,  enacted or proposed at
the state,  local and federal levels  seeking to impose  various  obligations on
present  and former  manufacturers  of lead  pigment and  lead-based  paint with
respect to asserted health concerns associated with the use of such products and
to effectively  overturn court  decisions in which the Company and other pigment
manufacturers   have  been  successful.   The  Company  currently  believes  the
disposition  of all  claims and  disputes,  individually  and in the  aggregate,
should  not  have  a  material  adverse  effect  on the  Company's  consolidated
financial  position,  results  of  operations  or  liquidity.  There  can  be no
assurance that additional matters of these types will not arise in the future.

      The Company periodically evaluates its liquidity requirements, alternative
uses of capital,  capital needs and  availability of resources in view of, among
other  things,  its  debt  service  and  capital  expenditure  requirements  and
estimated future operating cash flows. As a result of this process,  the Company
has in the past and may in the future seek to reduce,  refinance,  repurchase or
restructure indebtedness,  raise additional capital, modify its dividend policy,
restructure ownership interests, sell interests in subsidiaries or other assets,
or take a  combination  of such steps or other steps to manage its liquidity and
capital  resources.  In the normal course of its business,  the Company may also
review

                                   - 18 -

<PAGE>



opportunities  for acquisitions or other business  combinations in the chemicals
industry.  In the event of any such transaction,  the Company may consider using
available cash,  issuing equity securities or increasing its indebtedness to the
extent permitted by the agreements governing the Company's existing debt.

      The statements  contained in this Report on Form 10-Q ("Quarterly Report")
which are not historical facts, including,  but not limited to, statements found
under the captions "Results of Operations" and "Liquidity and Capital Resources"
above,  are  forward-looking  statements  that  involve  a number  of risks  and
uncertainties.  The  actual  results  of the  future  events  described  in such
forward-looking statements in this Quarterly Report could differ materially from
those stated in such  forward-looking  statements.  Among the factors that could
cause  actual  results  to differ  materially  are the  risks and  uncertainties
discussed in this  Quarterly  Report and in the 1995 Annual  Report,  including,
without  limitation,  the portions of such reports under the captions referenced
above,  and the  uncertainties  set  forth  from  time to time in the  Company's
filings  with  the  Securities  and  Exchange   Commission,   and  other  public
statements.

                                   - 19 -

<PAGE>



                          PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         Reference is made to the 1995 Annual Report and the Company's Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996 for
descriptions of certain previously-reported legal proceedings.

         Frank D. Seinfeld v. Harold C. Simmons,  et al.  (Superior Court of New
York, Bergen County,  Chancery Division,  No. C-336-96).  Plaintiff brought this
action in September 1996 on behalf of himself and derivatively, on behalf of NL,
against  the  Company,  Valhi and  certain  current  and  former  members of the
Company's Board of Directors.  The complaint alleges,  among other things,  that
the  Company's  August  1991  "Dutch  auction"  tender  offer was an unfair  and
wasteful  expenditure  of the  Company's  funds.  Plaintiff  seeks,  among other
things, to rescind the Company's  purchase of approximately  10.9 million shares
of its common  stock from  Valhi  pursuant  to the Dutch  auction.  The  Company
believes,  and  understands  that each of the  other  defendants  believes,  the
complaint is without merit. The Company  intends,  and believes that each of the
other defendants intends, to defend the action vigorously.

         Ritchie v. NL Industries,  et al.  (Circuit  Court of Marshall  County,
West Virginia, No. 96-C-179M).  In September 1996, the Company was served with a
complaint  filed in West  Virginia  state  court  that  seeks  compensatory  and
punitive  damages for alleged  personal  injury caused by lead paint and asserts
causes of action against the Company and five other former manufacturers of lead
pigment for negligence, strict liability, breach of warranty, fraud, conspiracy,
market share liability and alternative  liability.  In October 1996,  defendants
removed the case to federal court and filed motions to dismiss.

         The City of New York, et al. v. Lead Industries  Association,  Inc., et
al. (No.  89-4617).  In September  1996,  defendants'  request for permission to
appeal was denied.

         Skipworth v. Sherwin-Williams Co., et al. (No. 92-3069).  Oral argument
was held in this matter in the Pennsylvania Supreme Court in October 1996.

         Wright, et al. v. Lead Industries  Association,  Inc., et al. (Nos. 94-
363042 and 94-363043).  In September 1996, the remaining  defendants' motion for
summary judgment was granted. Plaintiffs have appealed as to all defendants.

         Gates v. American  Cyanamid  Co., et al. (I1996 - 2114).  In July 1996,
the Company filed an answer denying plaintiff's allegations.

         Hines  v.  Gates,  et  al.  (96-616161).   In  July  1996,   plaintiffs
voluntarily dismissed the complaint without prejudice.

         NL Industries,  Inc. v.  Commercial  Union  Insurance  Cos., et al. The
Company is seeking  interlocutory  appellate  review of the  previously-reported
ruling regarding contribution.

                                   - 20 -

<PAGE>



         Granite City, Illinois smelter site. In August 1996, the district court
denied Granite City's and the PRP's motion for a temporary restraining order and
preliminary  injunction  seeking to enjoin the U.S. EPA from proceeding with the
residential component of the cleanup.

         Wagner, et al. v. Anzon, Inc. and NL Industries, Inc. (No. 87-4420). In
September 1996, the Superior Court of Pennsylvania  affirmed the judgment of the
jury  verdict  for  the  Company.  Plaintiffs  have  filed  an  application  for
reargument in the Superior Court, which the Company has opposed. The application
is pending before the Superior Court.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits

             10.1 - Eighth  amendment to the Credit  Agreement,  dated September
             17, 1996, between Rheox, Inc. and Subsidiaries,  Guarantors and the
             Chase Manhattan Bank (National  Association)  and the Nippon Credit
             Bank, Ltd. as Co-Agents.

             10.2 - Executive  Severance  Agreement effective as of February 16,
             1994 by and between the Registrant and Joseph S. Compofelice.

             10.3 - Executive  Severance Agreement effective as of March 9, 1995
             by and between the Registrant and Lawrence A. Wigdor.

             27.1 - Financial Data Schedule for the nine months ended  September
             30, 1996.

         (b) Reports on Form 8-K

             Reports on Form 8-K for the quarter  ended  September  30, 1996 and
             through the date of this report:

                     July 25, 1996 - reported  Items 5 and 7. 
                     October 23, 1996 - reported Items 5 and 7.

                                   - 21 -

<PAGE>


                                  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:  November 12, 1996                  By   /s/ Joseph S. Compofelice
------------------------                       -------------------------
                                               Joseph S. Compofelice
                                                Vice President and
                                                Chief Financial Officer



Date:  November 12, 1996                  By   /s/ Dennis G. Newkirk
------------------------                       ---------------------
                                               Dennis G. Newkirk
                                                Vice President and Controller
                                                (Principal Accounting Officer)

                                   - 22 -

<PAGE>