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 March 31, 2001

                                       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)



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



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 May 10, 2001:  49,885,084


<PAGE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                                      INDEX




                                                                         Page
PART I.        FINANCIAL INFORMATION

  Item 1.      Financial Statements.

               Consolidated Balance Sheets - March 31, 2001
                 and December 31, 2000                                    3-4

               Consolidated Statements of Income - Three
                 months ended March 31, 2001 and 2000                      5

               Consolidated Statements of Comprehensive Income
                 - Three months ended March 31, 2001 and 2000              6
               Consolidated Statement of Shareholders' Equity
                 - Three months ended March 31, 2001                       7

               Consolidated Statements of Cash Flows - Three
                 months ended March 31, 2001 and 2000                     8-9

               Notes to Consolidated Financial Statements                10-24

  Item 2.      Management's Discussion and Analysis of Financial
                 Condition and Results of Operations                     25-31


PART II.       OTHER INFORMATION

  Item 1.      Legal Proceedings                                         31-32

  Item 4.      Submission of Matters to a Vote of Security Holders        32

  Item 6.      Exhibits and Reports on Form 8-K                           32


                                      - 2 -

<PAGE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                 (In thousands)




              ASSETS                                      March 31, December 31,
                                                            2001        2000
                                                         ---------- ------------

Current assets:
    Cash and cash equivalents ........................   $   99,709   $  120,378
    Restricted cash equivalents ......................       74,782       69,242
    Accounts and notes receivable ....................      161,994      131,540
    Receivable from affiliates .......................        1,522          214
    Refundable income taxes ..........................       13,694       12,302
    Inventories ......................................      186,811      205,973
    Prepaid expenses .................................        3,694        2,458
    Deferred income taxes ............................       12,735       11,673
                                                         ----------   ----------

        Total current assets .........................      554,941      553,780
                                                         ----------   ----------

Other assets:
    Marketable securities ............................       41,338       47,186
    Receivable from affiliate ........................       12,400         --
    Investment in TiO2 manufacturing joint venture ...      148,241      150,002
    Prepaid pension cost .............................       22,392       22,789
    Restricted cash equivalents ......................       11,289       17,942
    Other ............................................        4,440        4,707
                                                         ----------   ----------

        Total other assets ...........................      240,100      242,626
                                                         ----------   ----------

Property and equipment:
    Land .............................................       23,975       24,978
    Buildings ........................................      123,489      129,019
    Machinery and equipment ..........................      507,932      530,920
    Mining properties ................................       65,777       67,134
    Construction in progress .........................        8,946        4,586
                                                         ----------   ----------
                                                            730,119      756,637
    Less accumulated depreciation and depletion ......      421,076      432,255
                                                         ----------   ----------

        Net property and equipment ...................      309,043      324,382
                                                         ----------   ----------

                                                         $1,104,084   $1,120,788
                                                         ==========   ==========


                                      - 3 -

<PAGE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)

                                 (In thousands)




    LIABILITIES AND SHAREHOLDERS' EQUITY               March 31,   December 31,
                                                         2001         2000
                                                    ------------   -------------

Current liabilities:
    Notes payable ..............................    $    67,096     $    69,970
    Current maturities of long-term debt .......            693             730
    Accounts payable and accrued liabilities ...        129,871         147,877
    Payable to affiliates ......................          9,354          10,634
    Accrued environmental costs ................         59,132          53,307
    Income taxes ...............................         12,223          13,616
    Deferred income taxes ......................          1,271           1,822
                                                    -----------     -----------

        Total current liabilities ..............        279,640         297,956
                                                    -----------     -----------

Noncurrent liabilities:
    Long-term debt .............................        195,168         195,363
    Deferred income taxes ......................        149,880         145,673
    Accrued environmental costs ................         51,655          57,133
    Accrued pension cost .......................         19,574          21,220
    Accrued postretirement benefits cost .......         28,887          29,404
    Other ......................................         22,439          23,272
                                                    -----------     -----------

        Total noncurrent liabilities ...........        467,603         472,065
                                                    -----------     -----------


Minority interest ..............................          6,851           6,279
                                                    -----------     -----------

Shareholders' equity:
    Common stock ...............................          8,355           8,355
    Additional paid-in capital .................        777,595         777,528
    Retained earnings ..........................        165,615         141,073
    Accumulated other comprehensive loss .......       (201,572)       (181,872)
    Treasury stock .............................       (400,003)       (400,596)
                                                    -----------     -----------

        Total shareholders' equity .............        349,990         344,488
                                                    -----------     -----------

                                                    $ 1,104,084     $ 1,120,788
                                                    ===========     ===========

Commitments and contingencies (Note 14)

          See accompanying notes to consolidated financial statements.
                                      - 4 -


<PAGE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

                   Three months ended March 31, 2001 and 2000

                      (In thousands, except per share data)




                                                               2001       2000
                                                             --------   --------

Revenues and other income:
    Net sales ............................................   $226,060   $231,009
    Litigation settlement gains, net .....................     10,582       --
    Other, net ...........................................      4,849      4,500
                                                             --------   --------

                                                              241,491    235,509
                                                             --------   --------
Costs and expenses:
    Cost of sales ........................................    149,902    159,265
    Selling, general and administrative ..................     32,322     33,390
    Interest .............................................      6,976      7,856
                                                             --------   --------

                                                              189,200    200,511
                                                             --------   --------

        Income before income taxes and minority interest .     52,291     34,998

Income tax expense .......................................     17,146     11,199
                                                             --------   --------

        Income before minority interest ..................     35,145     23,799

Minority interest ........................................        586         91
                                                             --------   --------

        Net income .......................................   $ 34,559   $ 23,708
                                                             ========   ========


Earnings per share:
    Basic ................................................   $    .69   $    .47
                                                             ========   ========
    Diluted ..............................................   $    .69   $    .46
                                                             ========   ========

Weighted average shares used in the calculation
 of earnings per share:
    Basic ................................................     50,079     50,920
    Dilutive impact of stock options .....................        270        234
                                                             --------   --------

    Diluted ..............................................     50,349     51,154
                                                             ========   ========


          See accompanying notes to consolidated financial statements.
                                      - 5 -


<PAGE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

                   Three months ended March 31, 2001 and 2000

                                 (In thousands)




                                                           2001          2000
                                                         --------      --------

Net income .........................................     $ 34,559      $ 23,708
                                                         --------      --------

Other comprehensive income (loss), net of tax:
    Marketable securities adjustment ...............       (3,802)           58
    Currency translation adjustment ................      (15,898)      (15,309)
                                                         --------      --------

        Total other comprehensive loss .............      (19,700)      (15,251)
                                                         --------      --------

            Comprehensive income ...................     $ 14,859      $  8,457
                                                         ========      ========


          See accompanying notes to consolidated financial statements.
                                      - 6 -


<PAGE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                        Three months ended March 31, 2001

                                 (In thousands)

<TABLE>
<CAPTION>

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

<S>                                     <C>          <C>          <C>           <C>           <C>           <C>           <C>
Balance at December 31, 2000 .........  $   8,355    $ 777,528    $ 141,073     $(190,757)    $   8,885     $(400,596)    $ 344,488

Net income ...........................       --           --         34,559          --            --            --          34,559

Other comprehensive loss, net ........       --           --           --         (15,898)       (3,802)         --         (19,700)

Dividends ............................       --           --        (10,017)         --            --            --         (10,017)

Tax benefit of stock options exercised       --             67         --            --            --            --              67

Treasury stock - reissued (35 shares)        --           --           --            --            --             593           593
                                        ---------    ---------    ---------     ---------     ---------     ---------     ---------

Balance at March 31, 2001 ............  $   8,355    $ 777,595    $ 165,615     $(206,655)    $   5,083     $(400,003)    $ 349,990
                                        =========    =========    =========     =========     =========     =========     =========

</TABLE>


          See accompanying notes to consolidated financial statements.
                                      - 7 -


<PAGE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                   Three months ended March 31, 2001 and 2000

                                 (In thousands)


<TABLE>
<CAPTION>


                                                                     2001         2000
                                                                   --------     --------
<S>                                                                <C>          <C>
Cash flows from operating activities:
    Net income .................................................    $ 34,559     $ 23,708
    Depreciation, depletion and amortization ...................       7,511        7,875
    Deferred income taxes ......................................       7,555        3,368
    Distribution from TiO2 manufacturing joint venture .........       1,500        3,500
    Litigation settlement gain, net included in restricted cash.     (10,307)        --
    Other, net .................................................      (1,606)      (1,428)
                                                                    --------     --------

                                                                      39,212       37,023

    Change in assets and liabilities:
        Accounts and notes receivable ..........................     (24,788)     (12,517)
        Inventories ............................................      11,928       11,092
        Prepaid expenses .......................................      (1,348)        (712)
        Accounts payable and accrued liabilities ...............     (14,578)      (4,145)
        Income taxes ...........................................      (2,404)       4,309
        Other, net .............................................       1,248       (1,287)
                                                                    --------     --------

            Net cash provided by operating activities ..........       9,270       33,763
                                                                    --------     --------

Cash flows from investing activities:
    Capital expenditures .......................................      (5,913)      (6,153)
    Loan to affiliate ..........................................     (13,400)        --
    Purchase of Tremont Corporation common stock ...............        --         (9,520)
    Change in restricted cash equivalents, net .................         615          357
    Other, net .................................................         280           57
                                                                    --------     --------

        Net cash used by investing activities ..................     (18,418)     (15,259)
                                                                    --------     --------
</TABLE>



                                      - 8 -


<PAGE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                   Three months ended March 31, 2001 and 2000

                                 (In thousands)



                                                            2001         2000
                                                         ---------    ---------

Cash flows from financing activities:
    Dividends paid ...................................   $ (10,017)   $  (7,595)
    Treasury stock:
        Purchased ....................................        --        (10,331)
        Reissued .....................................         593          317
    Principal payments on debt .......................        (177)         (89)
                                                         ---------    ---------

        Net cash used by financing activities ........      (9,601)     (17,698)
                                                         ---------    ---------

Cash and cash equivalents:
    Net change from:
        Operating, investing and financing activities.     (18,749)         806
        Currency translation .........................      (1,920)      (1,332)
    Balance at beginning of period ...................     120,378      134,224
                                                         ---------    ---------

    Balance at end of period .........................   $  99,709    $ 133,698
                                                         =========    =========


Supplemental disclosures - cash paid for:
    Interest .........................................   $   1,160    $     141
    Income taxes, net ................................      12,319        3,505




          See accompanying notes to consolidated financial statements.
                                      - 9 -


<PAGE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Organization and basis of presentation:

        NL Industries,  Inc.  conducts its titanium  dioxide  pigments  ("TiO2")
operations through its wholly owned subsidiary,  Kronos, Inc. At March 31, 2001,
Valhi,  Inc. and Tremont  Corporation,  each affiliates of Contran  Corporation,
held approximately 60% and 20%, respectively,  of NL's outstanding common stock.
At March 31,  2001,  Contran  and its  subsidiaries  held  approximately  93% of
Valhi's  outstanding  common  stock,  and a  subsidiary  of  Valhi  and NL  held
approximately 80% of Tremont's  outstanding  common stock.  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, of which Mr. Simmons
is sole trustee.  Mr. Simmons,  the Chairman of the Board of NL and the Chairman
of the Board and Chief Executive  Officer of Contran and Valhi and a director of
Tremont, may be deemed to control each of such companies. See Notes 6 and 15.

        The consolidated  balance sheet of NL Industries,  Inc. and Subsidiaries
(collectively,  the  "Company") at December 31, 2000 has been condensed from the
Company's  audited   consolidated   financial   statements  at  that  date.  The
consolidated balance sheet at March 31, 2001 and the consolidated  statements of
income,  comprehensive  income,  shareholders'  equity  and cash  flows  for the
interim  periods ended March 31, 2001 and 2000 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  current  year  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, 2000 (the "2000 Annual Report").


        The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 133,  Accounting  for  Derivative  Instruments  and Hedging  Activities,  as
amended,  effective  January  1,  2001.  SFAS  No.  133  establishes  accounting
standards for derivative  instruments,  including certain derivative instruments
embedded in other contracts, and for hedging activities. Under SFAS No. 133, all
derivatives  are recognized as either assets or liabilities and measured at fair
value. The accounting for changes in fair value of derivatives is dependent upon
the intended use of the derivative.  As permitted by the transition requirements
of SFAS No. 133, as amended, the Company exempted from the scope of SFAS No. 133
all host contracts containing embedded derivatives which were issued or acquired
prior  to  January  1,  1999.  The  Company  is not a party  to any  significant
derivative or hedging  instrument covered by SFAS No. 133 at March 31, 2001, and
there was no impact on the Company's financial statements from adopting SFAS No.
133.


                                     - 10 -

<PAGE>



Note 2 - Earnings per share:

        Basic  earnings  per share is based on the  weighted  average  number of
common  shares  outstanding  during each period.  Diluted  earnings per share is
based on the  weighted  average  number of  common  shares  outstanding  and the
dilutive impact of outstanding stock options.

Note 3 - Business segment information:

        The  Company's  operations  are  conducted  by Kronos  in one  operating
business segment - the production and sale of TiO2.


                                                        Three months ended
                                                              March 31,
                                                     --------------------------
                                                        2001            2000
                                                     ---------        ---------
                                                           (In thousands)

Net sales ....................................       $ 226,060        $ 231,009
Other income, excluding corporate ............           1,242            1,670
                                                     ---------        ---------
                                                       227,302          232,679

Cost of sales ................................         149,902          159,265
Selling, general and administrative,
 excluding corporate .........................          25,484           27,179
                                                     ---------        ---------

    Operating income .........................          51,916           46,235

General corporate income (expense):
    Securities earnings, net .................           2,606            1,718
    Litigation settlement gains,
     net and other income ....................          11,583            1,112
    Corporate expenses .......................          (6,838)          (6,211)
    Interest expense .........................          (6,976)          (7,856)
                                                     ---------        ---------

        Income before income taxes
         and minority interest ...............       $  52,291        $  34,998
                                                     =========        =========

Note 4 - Inventories:


                                                     March 31,      December 31,
                                                       2001            2000
                                                     ---------      ------------
                                                         (In thousands)

Raw materials ............................           $ 41,065           $ 66,061
Work in process ..........................              8,123              7,117
Finished products ........................            112,676            107,120
Supplies .................................             24,947             25,675
                                                     --------           --------

                                                     $186,811           $205,973
                                                     ========           ========


                                     - 11 -

<PAGE>



Note 5 - Marketable securities:


                                                          March 31, December 31,
                                                            2001        2000
                                                          --------- ------------
                                                             (In thousands)
Available-for-sale marketable equity securities:
    Unrealized gains .................................    $ 11,092     $ 14,912
    Unrealized losses ................................      (3,272)      (1,244)
    Cost .............................................      33,518       33,518
                                                          --------     --------

        Aggregate fair value .........................    $ 41,338     $ 47,186
                                                          ========     ========

Note 6 - Receivable from affiliate:

        A majority-owned  subsidiary of the Company, NL Environmental Management
Services,  Inc.  ("EMS"),  loaned  $13.4  million  to  Tremont  under a reducing
revolving  loan agreement in the first quarter of 2001. See Note 1. The loan was
approved by special  committees  of the  Company's and EMS's Board of Directors.
The loan bears interest at prime plus 2% (10.5% at March 31, 2001), is due March
31, 2003 and is  collateralized  by 10.2 million shares of NL common stock owned
by Tremont. The amount available for borrowing by Tremont is reduced by $250,000
per quarter,  with the first reduction  occurring on June 30, 2001. As a result,
$1 million of the loan is classified as a current asset on March 31, 2001.

Note 7 - Accounts payable and accrued liabilities:


                                                         March 31,  December 31,
                                                           2001         2000
                                                         --------   ------------
                                                             (In thousands)

Accounts payable .................................       $ 49,831       $ 64,553
                                                         --------       --------
Accrued liabilities:
    Employee benefits ............................         27,067         34,160
    Interest .....................................         10,725          5,019
    Deferred income ..............................          4,000          4,000
    Other ........................................         38,248         40,145
                                                         --------       --------

                                                           80,040         83,324
                                                         --------       --------

                                                         $129,871       $147,877
                                                         ========       ========

Note 8 - Other noncurrent liabilities:


                                                        March 31,   December 31,
                                                          2001         2000
                                                        ---------   ------------
                                                            (In thousands)

Insurance claims and expenses ..................         $10,325         $10,314
Employee benefits ..............................           7,920           7,721
Deferred income ................................           3,333           4,333
Other ..........................................             861             904
                                                         -------         -------

                                                         $22,439         $23,272
                                                         =======         =======


                                     - 12 -

<PAGE>



Note 9 - Notes payable and long-term debt:


                                                        March 31,   December 31,
                                                          2001          2000
                                                        ---------   ------------
                                                            (In thousands)

Notes payable - Kronos ...........................       $ 67,096       $ 69,970
                                                         ========       ========

Long-term debt:
    NL Industries, Inc. - 11.75% Senior
     Secured Notes (See Note 13) .................       $194,000       $194,000
    Kronos .......................................          1,861          2,093
                                                         --------       --------

                                                          195,861        196,093
Less current maturities ..........................            693            730
                                                         --------       --------

                                                         $195,168       $195,363
                                                         ========       ========

        Notes  payable  consists  of euro 51 million and NOK 200 million at both
March 31, 2001 and December 31, 2000.

Note 10 - 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.


                                                            Three months ended
                                                                 March 31,
                                                           --------------------
                                                             2001       2000
                                                           --------    --------
                                                              (In thousands)

Expected tax expense ...................................   $ 18,302    $ 12,249
Non-U.S. tax rates .....................................     (1,443)       (991)
Incremental tax on income of companies not included
 in NL's consolidated U.S. federal income tax return ...        180         281
Valuation allowance ....................................       (653)     (1,291)
U.S. state income taxes ................................        195         141
Other, net .............................................        565         810
                                                           --------    --------

        Income tax expense .............................   $ 17,146    $ 11,199
                                                           ========    ========

Note 11 - Litigation settlement gains, net and other income, net:

  Litigation settlement gains, net

        The Company  reached an  agreement  in January  2001 with the  remaining
members of the second of two principal former insurance carrier groups to settle
certain  insurance  coverage claims related to  environmental  remediation.  The
Company recognized a $10.3 million net pretax gain in the first quarter of 2001.
A majority of the proceeds from this  settlement  was  transferred in April to a
special-purpose  trust  established by the insurance carrier group to pay future
remediation and other environmental expenditures of

                                     - 13 -

<PAGE>



the Company. No further material settlements  relating to litigation  concerning
environmental remediation coverage are expected.

        The Company also recognized a $.3 million pretax gain related to another
litigation settlement in the first quarter of 2001.

  Other income, net


                                                           Three months ended
                                                                 March 31,
                                                         ----------------------
                                                           2001           2000
                                                         -------        -------
                                                              (In thousands)

Corporate interest and dividend income ...........       $ 2,606        $ 1,718
Currency transaction gains, net ..................         1,067          1,241
Noncompete agreement income ......................         1,000          1,000
Disposition of property and equipment ............          (361)          (402)
Trade interest income ............................           593            357
Other, net .......................................           (56)           586
                                                         -------        -------

                                                         $ 4,849        $ 4,500
                                                         =======        =======

Note 12 - Leverkusen fire and insurance claim:

        A fire on March 20, 2001 damaged a section of the Company's  Leverkusen,
Germany 35,000 metric ton sulfate-process TiO2 plant ("Sulfate Plant") and, as a
result,  production of TiO2 at the Leverkusen  facility was halted. The fire did
not enter the Company's adjacent 125,000 metric ton chloride-process  TiO2 plant
("Chloride  Plant"),  but did damage  certain  support  equipment  necessary  to
operate that plant. The damage to the support equipment  resulted in a temporary
shutdown of the Chloride Plant.

        On  April  8,  2001,  repairs  to the  damaged  support  equipment  were
substantially  completed and full  production  resumed at the Chloride Plant. In
April, the undamaged section of the Sulfate Plant resumed limited production (5%
to 20% of capacity)  of an  intermediate  form of TiO2  ("Hydrated  TiO2").  The
Hydrated  TiO2  is  being  transported  to  the  Company's  Nordenham,   Germany
sulfate-process  TiO2 plant to be further  processed  and finished  into certain
grades of TiO2.  The  Company's  ability to  produce  the  Hydrated  TiO2 at the
Sulfate  Plant is limited by the  available  excess  capacity  at its  Nordenham
plant. The Company expects the Sulfate Plant to become 50% to 70% operational in
August 2001 and fully operational in October 2001.

        The  Company  believes  that the  damage to  property  and the  business
interruption losses caused by the fire are covered by insurance,  but the effect
on the  financial  results  of the  Company on a  quarter-to-quarter  basis or a
year-to-year basis will depend on the timing and amount of insurance recoveries.
No insurance  proceeds have been recognized during the first quarter of 2001 for
the  business  interruption  portion  of the loss  because  the  amount  of such
proceeds is presently  not  determinable.  No provision  for  impairment  of the
damaged  fixed  assets has been  recognized  because  the Company  believes  the
insurance proceeds will exceed their carrying value.


                                     - 14 -

<PAGE>



Note 13 - Condensed consolidating financial information:

        The Company's 11.75% Senior Secured Notes are collateralized by a series
of  intercompany  notes  to  NL  (the  "Parent  Issuer").  The  Notes  are  also
collateralized  by a first  priority  lien on the  stock  of  Kronos.  A  second
priority lien on the stock of NL Capital Corporation ("NLCC") collateralized the
notes  until  February  2000,  at which time it was  merged  into KII and became
included in the first priority lien on the stock of Kronos.

        In the event of foreclosure,  the holders of the Notes would have access
to the  consolidated  assets,  earnings and equity of the  Company.  The Company
believes  the  collateralization  of  the  Notes,  as  described  above,  is the
functional  economic  equivalent of a joint and several,  full and unconditional
guarantee of the Notes by Kronos and, prior to its merger into KII, NLCC.

        Management believes that separate financial statements would not provide
additional material  information that would be useful in assessing the financial
position of Kronos and NLCC (the "Guarantor Subsidiaries"). In lieu of providing
separate  financial  statements of the Guarantor  Subsidiaries,  the Company has
included  condensed  consolidating  financial  information of the Parent Issuer,
Guarantor  Subsidiaries and  non-guarantor  subsidiaries in accordance with Rule
3-10  (e) of the  SEC's  Regulation  S-X.  The  Guarantor  Subsidiaries  and the
non-guarantor  subsidiaries comprise all of the direct and indirect subsidiaries
of the Parent Issuer.

        Investments  in  subsidiaries  are  accounted for by NL under the equity
method,  wherein  the parent  company's  share of  earnings  is  included in net
income.   Elimination   entries  eliminate  (i)  the  parent's   investments  in
subsidiaries  and the equity in  earnings  of  subsidiaries,  (ii)  intercompany
payables and receivables and (iii) other transactions between subsidiaries.

                                     - 15 -

<PAGE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES
                      Condensed Consolidating Balance Sheet
                                 March 31, 2001
                                 (In thousands)

<TABLE>
<CAPTION>



                                                              NL                         Combined
                                                         Industries,                   Non-guarantor
                                                             Inc.       Kronos, Inc.   Subsidiaries     Eliminations    Consolidated
                                                       -------------   -------------   -------------    ------------    ------------
                       ASSETS

<S>                                                    <C>             <C>             <C>              <C>              <C>
Current assets:
    Cash and cash equivalents ....................     $     3,361     $    45,860     $    50,488      $      --        $    99,709
    Restricted cash equivalents ..................          74,782            --              --               --             74,782
    Accounts and notes receivable ................          10,953         150,968              73             --            161,994
    Receivable from affiliates ...................          11,985            --             1,311          (11,774)           1,522
    Refundable income taxes ......................          10,557           3,137            --               --             13,694
    Inventories ..................................            --           186,811            --               --            186,811
    Prepaid expenses .............................             382           3,312            --               --              3,694
    Deferred income taxes ........................           7,315           5,420            --               --             12,735
                                                       -----------     -----------     -----------      -----------      -----------

        Total current assets .....................         119,335         395,508          51,872          (11,774)         554,941
                                                       -----------     -----------     -----------      -----------      -----------

Other assets:
    Investment in subsidiaries ...................         695,105            --               285         (695,390)            --
    Marketable securities ........................             492            --            40,846             --             41,338
    Notes receivable from affiliates .............         194,000         301,695          35,400         (518,695)          12,400
    Investment in TiO2 manufacturing joint venture            --           148,241            --               --            148,241
    Prepaid pension cost .........................           1,879          20,513            --               --             22,392
    Restricted cash equivalents ..................          11,289            --              --               --             11,289
    Other ........................................           1,615           2,825            --               --              4,440
                                                       -----------     -----------     -----------      -----------      -----------
                                                                                       -----------      -----------      -----------

        Total other assets .......................         904,380         473,274          76,531       (1,214,085)         240,100
                                                       -----------     -----------     -----------      -----------      -----------

Property and equipment, net ......................           4,251         304,792            --               --            309,043
                                                       -----------     -----------     -----------      -----------      -----------

                                                       $ 1,027,966     $ 1,173,574     $   128,403      $(1,225,859)     $ 1,104,084
                                                       ===========     ===========     ===========      ===========      ===========
</TABLE>


                                      -16-

<PAGE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES
               Condensed Consolidating Balance Sheet, (Continued)
                                 March 31, 2001
                                 (In thousands)

<TABLE>
<CAPTION>

                                                        NL                           Combined
                                                   Industries,                     Non-guarantor
                                                       Inc.         Kronos, Inc.   Subsidiaries       Eliminations      Consolidated
                                                  ------------     -------------   -------------      ------------      ------------

        LIABILITIES AND SHAREHOLDERS' EQUITY

<S>                                               <C>              <C>              <C>               <C>               <C>
Current liabilities:
    Notes payable ..........................      $      --        $    67,096      $      --         $      --         $    67,096
    Current maturities of long-term debt ...             --                693             --                --                 693
    Accounts payable and accrued liabilities           35,820          101,481           51,702              --             189,003
    Payable to affiliates ..................            9,648           10,859              621           (11,774)            9,354
    Income taxes ...........................             --             12,222                1              --              12,223
    Deferred income taxes ..................             --              1,271             --                --               1,271
                                                  -----------      -----------      -----------       -----------       -----------


        Total current liabilities ..........           45,468          193,622           52,324           (11,774)          279,640
                                                  -----------      -----------      -----------       -----------       -----------

Noncurrent liabilities:
    Long-term debt .........................          194,000            1,168             --                --             195,168
    Notes payable to affiliate .............          324,695          194,000             --            (518,695)             --
    Deferred income taxes ..................           76,361           74,592           (1,073)             --             149,880
    Accrued pension cost ...................            1,442           18,132             --                --              19,574
    Accrued postretirement benefits cost ...           14,983           13,904             --                --              28,887
    Other ..................................           21,027           16,466           36,601              --              74,094
                                                  -----------      -----------      -----------       -----------       -----------

        Total noncurrent liabilities .......          632,508          318,262           35,528          (518,695)          467,603
                                                  -----------      -----------      -----------       -----------       -----------

Minority interest ..........................             --                290            6,561              --               6,851
                                                  -----------      -----------      -----------       -----------       -----------

Shareholders' equity .......................          349,990          661,400           33,990          (695,390)          349,990
                                                  -----------      -----------      -----------       -----------       -----------
                                                  $ 1,027,966      $ 1,173,574      $   128,403       $(1,225,859)      $ 1,104,084
                                                  ===========      ===========      ===========       ===========       ===========
</TABLE>


                                      -17-

<PAGE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES
                      Condensed Consolidating Balance Sheet
                                December 31, 2000
                                 (In thousands)

<TABLE>
<CAPTION>

                                                        NL                           Combined
                                                   Industries,                     Non-guarantor
                                                       Inc.         Kronos, Inc.   Subsidiaries       Eliminations      Consolidated
                                                  ------------     -------------   -------------      ------------      ------------
                       ASSETS

<S>                                               <C>              <C>              <C>               <C>               <C>
Current assets:
    Cash and cash equivalents ..............      $     3,632      $    52,979      $    63,767       $      --         $   120,378
    Restricted cash equivalents ............           69,242             --               --                --              69,242
    Accounts and notes receivable ..........              172          131,295               73              --             131,540
    Receivable from affiliates .............            6,189             --                216            (6,191)              214
    Refundable income taxes ................           10,512            1,790             --                --              12,302
    Inventories ............................             --            205,973             --                --             205,973
    Prepaid expenses .......................              347            2,111             --                --               2,458
    Deferred income taxes ..................            6,394            5,279             --                --              11,673
                                                  -----------      -----------      -----------       -----------       -----------

        Total current assets ...............           96,488          399,427           64,056            (6,191)          553,780
                                                  -----------      -----------      -----------       -----------       -----------

Other assets:
    Investment in subsidiaries .............          687,300             --                285          (687,585)             --
    Marketable securities ..................              452             --             46,734              --              47,186
    Notes receivable from affiliates .......          194,000          301,695           23,000          (518,695)             --
    Investment in TiO2 manufacturing joint venture       --            150,002             --                --             150,002
    Prepaid pension cost ...................            1,772           21,017             --                --              22,789
    Restricted cash equivalents ............           17,942             --               --                --              17,942
    Other ..................................            1,739            2,968             --                --               4,707
                                                  -----------      -----------      -----------       -----------       -----------

        Total other assets .................          903,205          475,682           70,019        (1,206,280)          242,626
                                                  -----------      -----------      -----------       -----------       -----------

Property and equipment, net ................            4,425          319,957             --                --             324,382
                                                  -----------      -----------      -----------       -----------       -----------

                                                  $ 1,004,118      $ 1,195,066      $   134,075       $(1,212,471)      $ 1,120,788
                                                  ===========      ===========      ===========       ===========       ===========
</TABLE>


                                      -18-

<PAGE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES
               Condensed Consolidating Balance Sheet, (Continued)
                                December 31, 2000
                                 (In thousands)

<TABLE>
<CAPTION>

                                                        NL                           Combined
                                                   Industries,                     Non-guarantor
                                                       Inc.         Kronos, Inc.   Subsidiaries       Eliminations      Consolidated
                                                  ------------     -------------   -------------      ------------      ------------

         LIABILITIES AND SHAREHOLDERS' EQUITY

<S>                                               <C>              <C>              <C>               <C>               <C>
Current liabilities:
    Notes payable ..........................      $      --        $    69,970      $      --         $      --         $    69,970
    Current maturities of long-term debt ...             --                730             --                --                 730
    Accounts payable and accrued liabilities           29,144          123,555           48,485              --             201,184
    Payable to affiliates ..................            2,140           14,073              612            (6,191)           10,634
    Income taxes ...........................             --             13,604               12              --              13,616
    Deferred income taxes ..................             --              1,822             --                --               1,822
                                                  -----------      -----------      -----------       -----------       -----------

        Total current liabilities ..........           31,284          223,754           49,109            (6,191)          297,956
                                                  -----------      -----------      -----------       -----------       -----------

Noncurrent liabilities:
    Long-term debt .........................          194,000            1,363             --                --             195,363
    Notes payable to affiliate .............          324,695          194,000             --            (518,695)             --
    Deferred income taxes ..................           70,985           73,699              989              --             145,673
    Accrued pension cost ...................            1,438           19,782             --                --              21,220
    Accrued postretirement benefits cost ...           15,039           14,365             --                --              29,404
    Other ..................................           22,189           16,511           41,705              --              80,405
                                                  -----------      -----------      -----------       -----------       -----------

        Total noncurrent liabilities .......          628,346          319,720           42,694          (518,695)          472,065
                                                  -----------      -----------      -----------       -----------       -----------

Minority interest ..........................             --                299            5,980              --               6,279
                                                  -----------      -----------      -----------       -----------       -----------

Shareholders' equity .......................          344,488          651,293           36,292          (687,585)          344,488
                                                  -----------      -----------      -----------       -----------       -----------

                                                  $ 1,004,118      $ 1,195,066      $   134,075       $(1,212,471)      $ 1,120,788
                                                  ===========      ===========      ===========       ===========       ===========
</TABLE>


                                      -19-

<PAGE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES
                   Condensed Consolidating Statement of Income
                        Three months ended March 31, 2001
                                 (In thousands)

<TABLE>
<CAPTION>
                                                        NL                           Combined
                                                   Industries,                     Non-guarantor
                                                       Inc.         Kronos, Inc.   Subsidiaries       Eliminations      Consolidated
                                                  ------------     -------------   -------------      ------------      ------------

<S>                                               <C>              <C>              <C>               <C>               <C>
Revenues and other income:
    Net sales ..............................      $      --        $   226,060      $      --         $      --         $   226,060
    Interest and dividends .................            7,140            6,595            1,559           (12,095)            3,199
    Equity in income of subsidiaries .......           37,477             --               --             (37,477)             --
    Litigation settlement gains, net .......           10,582             --               --                --              10,582
    Other income, net ......................            1,001              649             --                --               1,650
                                                  -----------      -----------      -----------       -----------       -----------

                                                       56,200          233,304            1,559           (49,572)          241,491
                                                  -----------      -----------      -----------       -----------       -----------
Costs and expenses:
    Cost of sales ..........................             --            149,902             --                --             149,902
    Selling, general and administrative ....            6,641           26,215             (534)             --              32,322
    Interest ...............................           12,162            6,909             --             (12,095)            6,976
                                                  -----------      -----------      -----------       -----------       -----------

                                                       18,803          183,026             (534)          (12,095)          189,200
                                                  -----------      -----------      -----------       -----------       -----------

        Income before income taxes and minority
         interest ..........................           37,397           50,278            2,093           (37,477)           52,291
Income tax expense .........................            2,838           14,308             --                --              17,146
                                                  -----------      -----------      -----------       -----------       -----------

        Income before minority interest ....           34,559           35,970            2,093           (37,477)           35,145

Minority interest ..........................             --                  5              581              --                 586
                                                  -----------      -----------      -----------       -----------       -----------

        Net income .........................      $    34,559      $    35,965      $     1,512       $   (37,477)      $    34,559
                                                  ===========      ===========      ===========       ===========       ===========

</TABLE>

                                      -20-

<PAGE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES
                   Condensed Consolidating Statement of Income
                        Three months ended March 31, 2000
                                 (In thousands)


<TABLE>
<CAPTION>

                                                       NL            Combined       Combined
                                                   Industries,       Guarantor     Non-guarantor
                                                       Inc.         Subsidiaries   Subsidiaries       Eliminations      Consolidated
                                                  ------------     -------------   -------------      ------------      ------------

<S>                                               <C>              <C>              <C>               <C>               <C>
Revenues and other income:
    Net sales ..............................      $      --        $   231,009      $      --         $      --         $   231,009
    Interest and dividends .................            7,634            5,800            1,400           (12,759)            2,075
    Equity in income of subsidiaries .......           73,153             --               --             (73,153)             --
    Other income, net ......................            1,112            1,313             --                --               2,425
                                                  -----------      -----------      -----------       -----------       -----------

                                                       81,899          238,122            1,400           (85,912)          235,509
                                                  -----------      -----------      -----------       -----------       -----------

Costs and expenses:
    Cost of sales ..........................             --            159,265             --                --             159,265
    Selling, general and administrative ....            5,031           27,942              417              --              33,390
    Interest ...............................           12,567            8,048             --             (12,759)            7,856
                                                  -----------      -----------      -----------       -----------       -----------

                                                       17,598          195,255              417           (12,759)          200,511
                                                  -----------      -----------      -----------       -----------       -----------

        Income before income taxes and minority
         interest ..........................           64,301           42,867              983           (73,153)           34,998

Income tax expense (benefit) ...............           40,593          (29,394)            --                --              11,199
                                                  -----------      -----------      -----------       -----------       -----------

        Income before minority interest ....           23,708           72,261              983           (73,153)           23,799

Minority interest ..........................             --                 21               70              --                  91
                                                  -----------      -----------      -----------       -----------       -----------

        Net income .........................      $    23,708      $    72,240      $       913       $   (73,153)      $    23,708
                                                  ===========      ===========      ===========       ===========       ===========
</TABLE>


                                      -21-

<PAGE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES
                 Condensed Consolidating Statement of Cash Flows
                        Three months ended March 31, 2001
                                 (In thousands)

<TABLE>
<CAPTION>


                                                        NL                           Combined
                                                   Industries,                     Non-guarantor
                                                       Inc.         Kronos, Inc.   Subsidiaries       Eliminations      Consolidated
                                                  ------------     -------------   -------------      ------------      ------------

<S>                                               <C>              <C>              <C>               <C>               <C>
Net cash provided (used) by operating
 activities ................................      $     6,896      $    10,608      $       124       $    (8,358)      $     9,270
                                                  -----------      -----------      -----------       -----------       -----------

Cash flows from investing activities:
    Capital expenditures ...................             --             (5,913)            --                --              (5,913)
    Loan to Tremont Corporation ............             --               --            (13,400)             --             (13,400)
    Change in restricted cash ..............            2,257             --               --              (1,642)              615
    Other, net .............................             --                280             --                --                 280
                                                  -----------      -----------      -----------       -----------       -----------
        Net cash provided (used) by investing
         activities ........................            2,257           (5,633)         (13,400)           (1,642)          (18,418)
                                                  -----------      -----------      -----------       -----------       -----------

Cash flows from financing activities:
    Treasury stock reissued ................              593             --               --                --                 593
    Dividends, net .........................          (10,017)         (10,000)            --              10,000           (10,017)
    Principal payments on debt .............             --               (177)            --                --                (177)
                                                  -----------      -----------      -----------       -----------       -----------
        Net cash provided (used) by financing
         activities ........................           (9,424)         (10,177)            --              10,000            (9,601)
                                                  -----------      -----------      -----------       -----------       -----------

Cash and cash equivalents:
    Net change from:
        Operating, investing and financing
         activities ........................             (271)          (5,202)         (13,276)             --             (18,749)
        Currency translation ...............             --             (1,917)              (3)             --              (1,920)
                                                  -----------      -----------      -----------       -----------       -----------
                                                         (271)          (7,119)         (13,279)             --             (20,669)
    Balance at beginning of year ...........            3,632           52,979           63,767              --             120,378
                                                  -----------      -----------      -----------       -----------       -----------

    Balance at end of year .................      $     3,361      $    45,860      $    50,488       $      --         $    99,709
                                                  ===========      ===========      ===========       ===========       ===========
</TABLE>


                                      -22-

<PAGE>



                      NL INDUSTRIES, INC. AND SUBSIDIARIES
                 Condensed Consolidating Statement of Cash Flows
                        Three months ended March 31, 2000
                                 (In thousands)

<TABLE>
<CAPTION>


                                                       NL            Combined       Combined
                                                   Industries,       Guarantor     Non-guarantor
                                                       Inc.         Subsidiaries   Subsidiaries       Eliminations      Consolidated
                                                  ------------     -------------   -------------      ------------      ------------

<S>                                               <C>              <C>              <C>               <C>               <C>
Net cash provided (used) by operating
 activities ................................      $    25,429      $    36,104      $       230       $   (28,000)      $    33,763
                                                  -----------      -----------      -----------       -----------       -----------

Cash flows from investing activities:
    Capital expenditures ...................             --             (6,153)            --                --              (6,153)
    Purchase of Tremont Corporation common stock       (9,520)            --               --                --              (9,520)
    Change in restricted cash ..............              357             --               --                --                 357
    Loans to affiliates ....................             --            (64,277)          68,000            (3,723)             --
    Other, net .............................             --                 57             --                --                  57
                                                  -----------      -----------      -----------       -----------       -----------

        Net cash provided (used) by investing
         activities ........................           (9,163)         (70,373)          68,000            (3,723)          (15,259)
                                                  -----------      -----------      -----------       -----------       -----------

Cash flows from financing activities:
    Treasury stock:
        Purchased ..........................          (10,331)            --               --                --             (10,331)
        Reissued ...........................              317             --               --                --                 317
    Dividends, net .........................           (7,595)         (28,000)            --              28,000            (7,595)
    Principal payments on debt .............             --                (89)            --                --                 (89)
    Loans from affiliates ..................           (3,723)            --               --               3,723              --
                                                                   -----------      -----------       -----------       -----------

        Net cash provided (used) by financing
         activities ........................          (21,332)         (28,089)            --              31,723           (17,698)
                                                  -----------      -----------      -----------       -----------       -----------

Cash and cash equivalents:
    Net change from:
        Operating, investing and financing
         activities ........................           (5,066)         (62,358)          68,230              --                 806
        Currency translation ...............             --             (1,329)              (3)             --              (1,332)
                                                  -----------      -----------      -----------       -----------       -----------
                                                       (5,066)         (63,687)          68,227              --                (526)
    Balance at beginning of year ...........           13,415          113,062            7,747              --             134,224
                                                  -----------      -----------      -----------       -----------       -----------

    Balance at end of year .................      $     8,349      $    49,375      $    75,974       $      --         $   133,698
                                                  ===========      ===========      ===========       ===========       ===========
</TABLE>


                                      -23-

<PAGE>



Note 14 - 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)
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations, (ii) Part II, Item 1 - "Legal Proceedings" and (iii) the 2000 Annual
Report.

Note 15 - Subsequent event:

        In May 2001, a wholly owned  subsidiary of EMS loaned $20 million to the
Harold C. Simmons Family Trust #2 (the "Trust"),  one of the trusts described in
Note 1,  under a new $25  million  revolving  credit  agreement.  The Trust owns
16,855 shares,  or approximately  43%, of Contran's  outstanding  Class A voting
common stock.  The loan was approved by special  committees of the Company's and
EMS's Board of Directors.  The loan bears interest at prime (7.5% at the time of
the loan), is due on demand with 60 days notice and is  collateralized by 15,768
shares of the Contran Class A common stock held by the Trust.



                                      -24-

<PAGE>



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


RESULTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                            Three months ended    %
                                                                March 31,       Change
                                                            ------------------  ------
                                                             2001      2000
                                                             ----      ----
                                                           (In millions, except
                                                             percentages and
                                                               metric tons)
<S>                                                         <C>       <C>        <C>
Net sales and operating income
    Net sales ..........................................    $226.1    $231.0      -2%
    Operating income ...................................    $ 51.9    $ 46.2     +12%
    Operating income margin percentage .................       23%       20%

TiO2 operating statistics
    Percent change in average selling prices
     (in billing currencies) ...........................                          +5%
    Sales volume (metric tons in thousands) ............       103       111      -7%
    Production volume (metric tons in thousands) .......       108       106      +2%

</TABLE>

        Kronos'  operating  income in the first quarter of 2001  increased  $5.7
million  or 12% from the first  quarter  of 2000 due to higher  average  selling
prices in billing currencies and higher production  volume,  partially offset by
lower sales volume.

        Kronos' average selling price in billing  currencies (which excludes the
effects of foreign currency translation) during the first quarter of 2001 was 5%
higher  than the first  quarter of 2000 and 1% lower than the fourth  quarter of
2000.  Compared  to the fourth  quarter of 2000,  prices were lower in all major
markets.  The average selling price in billing  currencies in March was 1% lower
than the average  selling price during the first quarter.  Market  conditions in
the TiO2  industry  have  generally  stalled the  Company's  efforts to increase
prices.  The Company  believes  worldwide  economic  conditions  will  determine
whether any price increases will be realized during the remainder of the year.

        Kronos'  first-quarter  2001 sales  volume  decreased 7% from the record
first quarter of 2000 and increased 11% from the fourth  quarter of 2000.  Sales
volume in the  first  quarter  of 2001 was 7% and 11% lower in Europe  and North
America, respectively, compared to the first quarter of 2000 while export volume
increased by 7%. Compared to the fourth quarter of 2000,  sales volume increased
by more than 10% in each of Kronos'  major  markets.  Finished  goods  inventory
levels at the end of March  increased  slightly  from  December  2000 levels and
represent about two months of sales.

        First-quarter  2001 production  volume was 2% higher than the comparable
2000 period with operating rates near full capacity in both periods.  Production
at the Company's  Leverkusen  facility was adversely  affected late in the first
quarter by a fire on March 20, 2001. See Note 12 to the  Consolidated  Financial
Statements.  Production rates at the Company's Leverkusen chloride-process plant
returned  to  full  capacity  on  April  8th,  and  the   Company's   Leverkusen
sulfate-process  plant is expected to be 50% to 70%  operational  in August 2001
and fully operational in October 2001.

        The  Company  believes  that the  damage to  property  and the  business
interruption losses caused by the fire are covered by insurance,  but the effect
on the  financial  results  of the  Company on a  quarter-to-quarter  basis or a
year-to-year basis will depend on the timing and amount of insurance recoveries.
No insurance

                                      -25-

<PAGE>



proceeds have been recognized  during the first quarter of 2001 for the business
interruption  portion  of the  loss  because  the  amount  of such  proceeds  is
presently not  determinable.  No provision  for  impairment of the damaged fixed
assets has been recognized  because the Company believes the insurance  proceeds
will exceed their carrying value.

        Kronos  anticipates its TiO2 sales and production  volumes for full-year
2001  will be lower  than that of 2000,  in part due to the  effect of the fire.
Kronos  expects its full-year  2001 operating  income,  excluding  fire- related
insurance  recoveries,  will be lower than 2000 primarily because of lower sales
and production volumes and higher costs,  particularly for energy.  Although the
Company believes its average selling price in billing  currencies could continue
a downward  trend  throughout  the rest of 2001, it expects its average  selling
price for full-year 2001 to be only slightly  below the full-year  average price
in 2000.

        Kronos'  cost of sales as a  percentage  of net sales  decreased  in the
first quarter of 2001 primarily due to higher average  selling prices in billing
currencies  and  higher  production  volume.  Excluding  the  effects of foreign
currency  translation,  which  decreased  the  Company's  expenses  in the first
quarter of 2001 compared to year-earlier period, the Company's selling,  general
and administrative expenses,  excluding corporate expenses, in the first quarter
of 2001 were comparable to the first quarter of 2000.

        A  significant   amount  of  Kronos'  sales  and  operating   costs  are
denominated in currencies other than the U.S. dollar.  Fluctuations in the value
of the U.S.  dollar  relative to other  currencies,  primarily  a stronger  U.S.
dollar compared to the euro in the first quarter of 2001 versus the year-earlier
period,  decreased  the dollar value of sales in the first  quarter of 2001 by a
net $11 million  compared to the first  quarter of 2000.  When  translated  from
billing  currencies to U.S.  dollars using currency  exchange  rates  prevailing
during the respective periods,  Kronos' first-quarter 2001 average selling price
in U.S.  dollars was  approximately  1% higher than in the first quarter of 2000
and 2% higher than the fourth  quarter of 2000.  The effect of the stronger U.S.
dollar on Kronos'  operating  costs  that are not  denominated  in U.S.  dollars
reduced operating costs in the 2001 period compared to the year-earlier  period.
In addition,  sales to export markets are typically  denominated in U.S. dollars
and a stronger  U.S.  dollar  improves  margins on these sales at the  Company's
non-U.S.  subsidiaries. The favorable margin on export sales tends to offset the
unfavorable  effect of translating  local currency  profits to U.S. dollars when
the dollar is stronger.  As a result,  the net impact of currency  exchange rate
fluctuations  on  operating  income  in  the  first  quarter  of  2001  was  not
significant when compared to the first quarter of 2000.


  General corporate

        The following  table sets forth certain  information  regarding  general
corporate income (expense).

<TABLE>
<CAPTION>

                                              Three months ended
                                                  March 31,            Difference
                                            ---------------------      ----------
                                              2001           2000
                                              ----           ----
                                                 (In millions)

<S>                                         <C>            <C>            <C>
Securities earnings ...............         $   2.6        $   1.7        $    .9
Corporate income ..................            11.6            1.1           10.5
Corporate expense .................            (6.8)          (6.1)           (.7)
Interest expense ..................            (7.0)          (7.9)            .9
                                            -------        -------        -------

                                            $    .4        $ (11.2)       $  11.6
                                            =======        =======        =======

</TABLE>

                                      -26-

<PAGE>



        Corporate  income in the first quarter of 2001 includes $10.6 million of
net  insurance  settlement  gains,  including  a $10.3  million  net gain from a
settlement  with the  remaining  members  of the  second  of the  Company's  two
principal  former  insurance  carrier  groups.  See Note 11 to the  Consolidated
Financial  Statements.  No further material  settlements  relating to litigation
concerning environmental remediation coverage are expected.

        Corporate  expense was higher in the first quarter of 2001 primarily due
to higher environmental remediation accruals and higher legal fees.

        Interest  expense in the first  quarter of 2001  decreased  11% from the
comparable  period in 2000  primarily due to lower average  interest  rates as a
result of the December 2000  refinancing  of $50 million of the  Company's  high
fixed-rate  public debt with lower  variable-rate  bank debt and lower levels of
outstanding  debt. The Company expects its full-year 2001 interest  expense will
be lower than 2000.

  Provision for income taxes

        The Company reduced its deferred  income tax valuation  allowance by $.7
million in the first  quarter of 2001 and $1.3  million in the first  quarter of
2000  primarily as a result of  utilization  of certain tax attributes for which
the benefit had not been previously recognized under the  "more-likely-than-not"
recognition criteria.

  Other

        Minority  interest  primarily  relates to the  Company's  majority-owned
environmental management subsidiary,  NL Environmental Management Services, Inc.
("EMS").

LIQUIDITY AND CAPITAL RESOURCES

        The  Company's  consolidated  cash flows from  operating,  investing and
financing  activities  for the three  months  ended  March 31, 2001 and 2000 are
presented below.

<TABLE>
<CAPTION>

                                                              Three months ended
                                                                   March 31,
                                                              -------------------
                                                               2001        2000
                                                              -------     -------
                                                                 (In millions)

<S>                                                           <C>         <C>
Net cash provided (used) by:
    Operating activities:
        Before changes in assets and liabilities .......      $  39.2     $  37.0
        Changes in assets and liabilities ..............        (29.9)       (3.2)
                                                              -------     -------
                                                                  9.3        33.8
  Investing activities .................................        (18.4)      (15.3)
  Financing activities .................................         (9.6)      (17.7)
                                                              -------     -------

      Net cash provided (used) by operating,
       investing,  and financing activies ..............      $ (18.7)    $    .8
                                                              =======     =======

</TABLE>

  Operating activities

        The TiO2 industry is cyclical and changes in economic  conditions within
the industry  significantly  affect the earnings and operating cash flows of the
Company. Cash flow from operations, before changes in assets

                                      -27-

<PAGE>



and  liabilities,  in the 2001 period  increased  slightly  from the  comparable
period in 2000 primarily due to higher  operating  income,  partially  offset by
lower cash distributions  from the Company's TiO2  manufacturing  joint venture.
The net cash used to fund changes in the Company's inventories,  receivables and
payables (excluding the effect of currency  translation) in the first quarter of
2001 was  significantly  higher  than the  first  quarter  of 2000 due to higher
accounts  receivable  balances  and  decreases  in accounts  payable and accrued
liabilities in the first quarter of 2001.

  Investing activities

        In February  2001,  EMS loaned $13.4 million to Tremont under a reducing
revolving loan agreement.  See Note 1 to the Consolidated  Financial Statements.
The loan was approved by special  committees of the Company's and EMS's Board of
Directors.  The maximum amount  available  under the agreement is $13.4 million,
which will decrease by $250,000 each quarter  beginning  June 30, 2001. The loan
bears interest at prime plus 2% (10.5% at March 31, 2001), is due March 31, 2003
and is  collateralized  by 10.2  million  shares  of NL  common  stock  owned by
Tremont.

        In May 2001, a wholly owned  subsidiary of EMS loaned $20 million to the
Harold C. Simmons Family Trust #2 (the "Trust"),  one of the trusts described in
Note 1 to  the  Consolidated  Financial  Statements,  under  a new  $25  million
revolving credit agreement.  The Trust owns 16,855 shares, or approximately 43%,
of Contran's  outstanding  Class A voting common stock. The loan was approved by
special committees of the Company's and EMS's Board of Directors. The loan bears
interest at prime (7.5% at the time of the loan),  is due on demand with 60 days
notice and is  collateralized  by 15,768  shares of the  Contran  Class A common
stock held by the Trust.

  Financing activities

        In the first  quarter  of 2001,  the  Company  paid a regular  quarterly
dividend to shareholders of $.20 per share,  aggregating $10 million.  On May 9,
2001, the Company's Board of Directors  declared a regular quarterly dividend of
$.20 per share to  shareholders of record as of June 13, 2001 to be paid on June
27, 2001.


  Cash, cash equivalents, restricted cash equivalents and borrowing availability

        At March 31, 2001, the Company had cash and cash equivalents aggregating
$100 million ($39 million held by non-U.S.  subsidiaries)  and an additional $86
million of restricted cash equivalents held by U.S.  subsidiaries,  of which $11
million was classified as a noncurrent asset. The Company's subsidiaries had $15
million available for borrowing at March 31, 2001 under existing non-U.S. credit
facilities.

  Income tax contingencies

        Certain  of the  Company's  tax  returns in various  U.S.  and  non-U.S.
jurisdictions  are being  examined  and tax  authorities  have  proposed  or may
propose tax deficiencies, including interest.

        The  Company  has  received  tax  assessments  from  the  Norwegian  tax
authorities   proposing  tax  deficiencies,   including  related  interest,   of
approximately NOK 40 million ($4.3 million at March 31, 2001) pertaining to 1994
and 1996.  The Company is currently  litigating the primary issue related to the
1994 assessment, and in February 2001 the Norwegian Appeals Court ruled in favor
of the Norwegian tax authorities.

                                      -28-

<PAGE>



The Company has appealed the case to the  Norwegian  Supreme  Court and believes
that the outcome of the 1996 case is dependent  on the  eventual  outcome of the
1994 case. The Company has granted a lien on its Fredrikstad,  Norway TiO2 plant
in favor of the Norwegian tax authorities.

        The Company has received  preliminary tax assessments for the years 1991
to 1997 from the Belgian tax authorities  proposing tax deficiencies,  including
related interest, of approximately euro 12.9 million ($11.4 million at March 31,
2001).  The Company has filed protests to the  assessments for the years 1991 to
1996 and expects to file a protest for 1997. The Company is in discussions  with
the Belgian tax  authorities  and  believes  that a  significant  portion of the
assessments are without merit.

        No  assurance  can be  given  that the  Company's  tax  matters  will be
favorably resolved due to the inherent  uncertainties  involved in court and tax
proceedings.  The Company  believes that it has provided  adequate  accruals for
additional 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.

  Environmental matters and litigation

        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,  mining  locations  and  facilities
currently or previously owned, operated or used by the Company, certain of which
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,   including  sites  for  which  EMS  has
contractually  assumed the  Company's  obligation.  The Company  believes it has
adequate  accruals  ($111  million at March 31, 2001) for  reasonably  estimable
costs of such matters, but the Company's ultimate liability may be affected by a
number of factors,  including changes in remedial alternatives and costs and the
allocations  of such costs among PRPs.  It is not possible to estimate the range
of costs for certain  sites.  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 $170 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  either  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.  The  imposition  of  more  stringent   standards  or  requirements  under
environmental  laws or regulations,  new developments or changes with respect to
site cleanup costs or  allocation  of such costs among PRPs, or a  determination
that the  Company  is  potentially  responsible  for the  release  of  hazardous
substances  at other sites,  could result in  expenditures  in excess of amounts
currently estimated by the Company to be required for such matters. Furthermore,
there can be no assurance that additional  environmental  matters will not arise
in the future.

  Lead pigment litigation

        The Company is also a defendant in a number of legal proceedings seeking
damages for personal  injury and property damage arising out of the sale of lead
pigments and lead-based paints.  There is no assurance that the Company will not
incur  future  liability in respect of this  pending  litigation  in view of the
inherent  uncertainties  involved  in court  and jury  rulings  in  pending  and
possible  future cases.  However,  based on, among other things,  the results of
such litigation to date, the Company believes that the pending lead

                                      -29-

<PAGE>



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
reasonably be estimated.  In addition,  various  legislation and  administrative
regulations  have,  from time to time, been enacted or proposed that seek to (a)
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 (b)  effectively  overturn court decisions in which
the Company 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.  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. See Item 1 - "Legal Proceedings."

  Other

        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  in the  past  has  sought,  and in the  future  may  seek,  to  reduce,
refinance,  repurchase or restructure  indebtedness;  raise additional  capital;
issue additional  securities;  repurchase shares of its common stock; 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 review opportunities for the acquisition, divestiture, joint venture
or other business combinations in the chemicals or other industries,  as well as
the acquisition of interests in, and loans to, related  companies.  In the event
of any acquisition or joint venture 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.

  Special note regarding forward-looking statements

        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  represent
management's  beliefs and assumptions based on currently available  information.
Forward-looking  statements  can be  identified  by the  use of  words  such  as
"believes,"  "intends,"  "may," "will," "should,"  "anticipates,"  "expects," or
comparable  terminology or by  discussions  of strategy or trends.  Although the
Company  believes  that  the  expectations  reflected  in  such  forward-looking
statements are reasonable, it cannot give any assurances that these expectations
will prove to be correct.  Such  statements  by their nature  involve  risks and
uncertainties,  including,  but not limited to, the  cyclicality of the titanium
dioxide industry,  global economic and political  conditions,  global productive
capacity,  customer  inventory  levels,  changes in product pricing,  changes in
product  costing,  changes  in  foreign  currency  exchange  rates,  competitive
technology positions,  operating interruptions  (including,  but not limited to,
labor   disputes,   leaks,   fires,   explosions,   unscheduled   downtime   and
transportation  interruptions),  recoveries from insurance claims and the timing
thereof,  the  ultimate  resolution  of pending or possible  future lead pigment
litigation and legislative  developments  related to the lead paint  litigation,
the outcome of other litigation,  and other risks and uncertainties  included in
this Quarterly Report and in the 2000 Annual Report,  and the  uncertainties set
forth from time to time in the  Company's  other  public  reports  and  filings.
Should one or more of these risks  materialize  (or the  consequences  of such a
development worsen), or should the underlying

                                      -30-

<PAGE>



assumptions  prove incorrect,  actual results could differ materially from those
forecasted  or expected.  The Company  disclaims  any intention or obligation to
update  publicly  or  revise  such  statements   whether  as  a  result  of  new
information, future events or otherwise.


                           PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

           Reference  is made to the 2000  Annual  Report  for  descriptions  of
certain previously reported legal proceedings.

           Jackson,  et al. v. The Glidden  Co., et al. (No.  236835).  In March
2001 the trial court denied plaintiffs' motion for class certification.

           State of Rhode  Island v. Lead  Industries  Association,  et al. (No.
99-5226).  In April  2001 the trial  court  dismissed  all  claims  for  special
education  costs;   granted   defendants'  motions  to  dismiss  the  equitable-
relief-to-children claim, the Unfair Trade Practices Act claim except insofar as
it seeks to recover  damages for post-1970  conduct,  and the strict  liability,
negligence  and  misrepresentation  claims  except  insofar  as they  relate  to
state-owned  buildings;  and denied  defendants'  motions to dismiss  the public
nuisance, civil conspiracy, unjust enrichment, and indemnity claims.

           City  of St.  Louis  v.  Lead  Industries  Association,  et al.  (No.
002-245). In March 2001 the federal court remanded the case to state court.

           County of Santa  Clara v.  Atlantic  Richfield  Company,  et al. (No.
CV788657).  In March 2001  defendants  renewed  their  demurrers  and motions to
strike all claims. The court has not ruled.

           Lewis, et al. v. Lead Industries  Association,  et al. (No. CH09800).
In March 2001 defendants moved to dismiss all claims. The court has not ruled.

           Borden,  et  al.  v.  The  Sherwin  Williams  Company,  et  al.  (No.
2000-587).  In March  2001  defendants  removed  to  Federal  court and moved to
dismiss the fraudulent  concealment and misrepresentation and negligence claims.
In April 2001 plaintiffs moved to remand to State court.

           In  April  2001 a  complaint  was  filed in City of  Milwaukee  v. NL
Industries,  Inc. and Mautz Paint  (Circuit  Court,  Civil  Division,  Milwaukee
County,  Wisconsin,  Case No.  01CV003066).  Plaintiff  seeks  compensatory  and
equitable relief for lead hazards in Milwaukee homes, restitution for amounts it
has spent to abate lead,  and punitive  damages.  The complaint  asserts  public
nuisance,  restitution,  and conspiracy claims against the Company.  The Company
has not been served.  The Company  intends to deny all allegations of wrongdoing
and liability and to defend itself vigorously.

           In April 2001 a complaint was filed in Harris  County,  Texas v. Lead
Industries Association, et al. (No. 2001-21413).  The complaint seeks actual and
punitive damages and asserts the Company, six other former manufacturers of lead
pigment and a trade  association  are jointly and severally  liable for past and
future damages due to the presence of lead paint in County-owned buildings.  The
Complaint   asserts  claims  for  strict   liability,   negligence,   fraudulent
misrepresentation, negligent misrepresentation, concert of action, public

                                      -31-

<PAGE>



nuisance,  restitution,  and  conspiracy.  The Company has not been served.  The
Company  intends to deny all  allegations  of  wrongdoing  and  liability and to
defend itself vigorously.

           It is possible that other  governmental  entities or other plaintiffs
may file claims  related to lead  pigment and paint  similar to those  described
above and in the 2000 Annual Report.


ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

           The Company held its Annual Meeting of  Shareholders  on May 9, 2001.
All the nominees for director  were elected with the voting  results for each as
follows:


           Director                           Shares For       Shares Withheld
           --------                           ----------       ---------------

Mr. J. Landis Martin                          48,783,251            406,332
Mr. Kenneth R. Peak                           48,891,042            298,541
Mr. Glenn R. Simmons                          48,777,982            411,601
Mr. Harold C. Simmons                         48,813,024            376,559
General Thomas P. Stafford                    48,855,904            333,679
Mr. Steven L. Watson                          48,795,275            394,308
Dr. Lawrence A. Wigdor                        48,828,367            361,216

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           (a)  Exhibits

                10.1 - Intercorporate  Services Agreement by and between Contran
                Corporation and the Registrant effective as of January 1, 2001.

                10.2 - Intercorporate  Services Agreement by and between Tremont
                Corporation and the Registrant effective as of January 1, 2001.

           (b)  Reports on Form 8-K

                There were no Reports on Form 8-K filed during the quarter ended
                March 31, 2001 and through the date of this report:





                                      -32-

<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:  May 10, 2001                     By    /s/ Susan E. Alderton
-------------------                           ----------------------------------
                                              Susan E. Alderton
                                               Vice President and
                                               Chief Financial Officer
                                               (Principal Financial Officer)



Date:  May 10, 2001                     By    /s/ Robert D. Hardy
-------------------                           ----------------------------------
                                              Robert D. Hardy
                                               Vice President and Controller
                                               (Principal Accounting Officer)

                                      -33-